[Congressional Record Volume 149, Number 170 (Friday, November 21, 2003)]
[Senate]
[Pages S15408-S15475]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. JEFFORDS (for himself, Ms. Snowe, and Mr. Hatch):
  S. 1912. A bill to amend the Internal Revenue Code of 1986 to expand 
pension coverage and savings opportunities and to provide other pension 
reforms; to the Committee on Finance.
  Mr. JEFFORDS. Mr. President, today, together with Senators Hatch and 
Snowe, I am introducing, the Retirement Account Portability and 
Improvement Act of 2003. This legislation improves the portability of 
retirement savings by eliminating unnecessary complexities and barriers 
in the retirement savings system, and helps preserve retirement savings 
by giving American workers tools that will help them consolidate their 
retirement savings into one easily managed account.
  In brief, this bill will make a number of improvements in the 
retirement savings system to help families preserve retirement assets. 
It will, for example, enhance the portability of retirement savings by 
expanding rollover options in traditional IRAs, Roth IRAs, and SIMPLE 
Plans. The bill also clarifies that when employees are permitted to 
make after-tax contributions to retirement plans, those after-tax 
amounts may be rolled over into other retirement plans eligible to 
receive such rollovers. This clarification will make it easier for 
workers to move all elements of their 401(k) of 403(b) savings when 
they change jobs and move between private sector and the tax-exempt 
sector.
  In addition, the bill builds on defined contribution plan reforms 
enacted in 2001 by requiring a shortened vesting schedule for employer 
non-elective contributions, such as profit-sharing contributions, to 
defined contribution plans. As a result, employer contributions will 
become employee property more quickly, helping workers to build more 
meaningful retirement benefits. This new vesting schedule corresponds 
to rules for 401(k) matching contributions enacted in 2001.
  Another provision in the bill would end an unfair tax penalty faced 
by non-spouse beneficiaries. Today, when an employee dies, the benefits 
in that employee's retirement account are paid out to a non-spouse 
beneficiary in one payment. The beneficiary must pay tax on the entire 
amount, and is often forced into a higher tax bracket as a result of 
the payment. A provision in this bill would allow non-spouse 
beneficiaries--siblings, children, domestic partners, parents--to roll 
over the money from the plan to an IRA. This will prevent an immediate 
tax bite to grieving beneficiaries and allow them to withdraw the money 
from their IRA over five years or over their own life expectancy.
  The bill also helps preserve retirement savings by allowing plans to 
designate default IRAs or annuity contracts to which employee rollovers 
may be directed. Employers should be more willing to establish default 
IRA and annuity rollover options as a result, making it easier for 
employees to keep savings in the retirement system when they change 
jobs.
  For workers who leave a job without claiming their retirement 
benefits, the bill improves on the automatic rollover provisions 
enacted in 2001, by allowing certain small distributions from 
retirement plans to be sent to the Pension Benefit Guaranty Corporation 
(PBGC), ensuring that participants are ultimately reunited with their 
earned benefits. The bill also expands the scope of the PBGC's 
successful Missing Participants program that matches workers with lost 
pension benefits.
  Employees of state and local governments, including teachers, will 
benefit from a number of this bill's technical corrections that will 
facilitate the purchase of service credits in public pension programs, 
allowing state and local employees to more easily attain a full pension 
in the jurisdiction where they conclude their career. The bill also 
contains provisions that would clarify eligibility rights of certain 
state and local employees who participate in a Section 457 deferred 
compensation plan.
  Congress must take every opportunity to encourage American workers 
not only to save for retirement, but also to preserve those hard-earned 
retirement savings. These portability improvements offer one set of 
tools for making it easier to navigate the retirement savings system 
and reach retirement with an adequate nest egg. There are many pressing 
and complex retirement issues that demand attention, but I am hopeful 
that this legislation, narrowly focused on portability, can be 
considered quickly and on its own merits.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1912

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

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF 
                   CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Retirement 
     Acount Portability Act of 2003''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.

[[Page S15409]]

       (c) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

   TITLE I--BUILDING AND PRESERVING RETIREMENT ASSETS AND ENHANCING 
                              PORTABILITY

Sec. 101. Allow rollovers by nonspouse beneficiaries of certain 
              retirement plan distributions.
Sec. 102. Facilitation under fiduciary rules of certain rollovers and 
              annuity distributions.
Sec. 103. Faster vesting of employer nonelective contributions.
Sec. 104. Allow rollover of after-tax amounts in annuity contracts.

  TITLE II--EXPANDING RETIREMENT PLAN COVERAGE TO EMPLOYEES OF SMALL 
                               BUSINESSES

Sec. 201. Elimination of higher penalty on certain Simple 
              distributions.
Sec. 202. Simple plan portability.

TITLE III--EXPANDING RETIREMENT SAVINGS FOR TAX-EXEMPT ORGANIZATION AND 
                          GOVERNMENT EMPLOYEES

Sec. 301. Clarifications regarding purchase of permissive service 
              credit.
Sec. 302. Eligibility for participation in retirement plans.

                  TITLE IV--SIMPLIFICATION AND EQUITY

Sec. 401. Allow direct rollovers from retirement plans to Roth IRAs.
Sec. 402. Transfers to the PBGC.

   TITLE I--BUILDING AND PRESERVING RETIREMENT ASSETS AND ENHANCING 
                              PORTABILITY

     SEC. 101. ALLOW ROLLOVERS BY NONSPOUSE BENEFICIARIES OF 
                   CERTAIN RETIREMENT PLAN DISTRIBUTIONS.

       (a) In General.--
       (1) Qualified plans.--Section 402(c) (relating to rollovers 
     from exempt trusts) is amended by adding at the end the 
     following new paragraph:
       ``(11) Distributions to inherited individual retirement 
     plan of nonspouse beneficiary.--
       ``(A) In general.--If, with respect to any portion of a 
     distribution from an eligible retirement plan of a deceased 
     employee, a direct trustee-to-trustee transfer is made to an 
     individual retirement plan described in clause (i) or (ii) of 
     paragraph (8)(B) established for the purposes of receiving 
     the distribution on behalf of an individual who is a 
     designated beneficiary (as defined by section 401(a)(9)(E)) 
     of the employee and who is not the surviving spouse of the 
     employee--
       ``(i) the transfer shall be treated as an eligible rollover 
     distribution for purposes of this subsection,
       ``(ii) the individual retirement plan shall be treated as 
     an inherited individual retirement account or individual 
     retirement annuity (within the meaning of section 
     408(d)(3)(C)) for purposes of this title, and
       ``(iii) section 401(a)(9)(B) (other than clause (iv) 
     thereof) shall apply to such plan.
       ``(B) Certain trusts treated as beneficiaries.--For 
     purposes of this paragraph, to the extent provided in rules 
     prescribed by the Secretary, a trust maintained for the 
     benefit of one or more designated beneficiaries shall be 
     treated in the same manner as a trust designated 
     beneficiary.''.
       (2) Section 403(a) plans.--Subparagraph (B) of section 
     403(a)(4) (relating to rollover amounts) is amended by 
     inserting ``and (11)'' after ``(7)''.
       (3) Section 403(b) plans.--Subparagraph (B) of section 
     403(b)(8) (relating to rollover amounts) is amended by 
     striking ``and (9)'' and inserting ``, (9), and (11)''.
       (4) Section 457 plans.--Subparagraph (B) of section 
     457(e)(16) (relating to rollover amounts) is amended by 
     striking ``and (9)'' and inserting ``, (9), and (11)''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2003.

     SEC. 102. FACILITATION UNDER FIDUCIARY RULES OF CERTAIN 
                   ROLLOVERS AND ANNUITY DISTRIBUTIONS.

       (a) In General.--Section 404(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by 
     adding at the end the following new paragraph:
       ``(4)(A) In the case of a pension plan which makes a 
     transfer under section 401(a)(31)(A) of the Internal Revenue 
     Code of 1986 to an individual retirement plan (as defined in 
     section 7701(a)(37) of such Code) in connection with a 
     participant or beneficiary or makes a distribution to a 
     participant or beneficiary of an annuity contract described 
     in subparagraph (B), the participant or beneficiary shall, 
     for purposes of paragraph (1), be treated as exercising 
     control over the transfer or distribution if--
       ``(i) the participant or beneficiary elected such transfer 
     or distribution, and
       ``(ii) in connection with such election, the participant or 
     beneficiary was given an opportunity to elect any other 
     individual retirement plan (in the case of a transfer) or any 
     other annuity contract described in subparagraph (B) (in the 
     case of a distribution).
       ``(B) An annuity contract is described in this subparagraph 
     if it provides, either on an immediate or deferred basis, a 
     series of substantially equal periodic payments (not less 
     frequently than annually) for the life of the participant or 
     beneficiary or the joint lives of the participant or 
     beneficiary and such individual's designated beneficiary. 
     Annuity payments shall not fail to be treated as part of a 
     series of substantially equal periodic payments because the 
     amount of the periodic payments may vary in accordance with 
     investment experience, reallocations among investment 
     options, actuarial gains or losses, cost of living indices, 
     or similar fluctuating criteria. The availability of a 
     commutation benefit, a minimum period of payments certain, or 
     a minimum amount to be paid in any event shall not affect the 
     treatment of an annuity contract as an annuity contract 
     described in this subparagraph.
       ``(C) Under regulations prescribed by the Secretary, this 
     paragraph shall apply without regard to whether the 
     particular individual retirement plan receiving the transfer 
     or the particular annuity contract being distributed is 
     specifically identified by the pension plan as available to 
     the participant or beneficiary.
       ``(D) Notwithstanding the preceding provisions of this 
     paragraph, paragraph (1)(B) shall not apply with respect to 
     liability under section 406 in connection with the specific 
     identification of any individual retirement plan or annuity 
     contract as being available to the participant or 
     beneficiary.''.
       (b) Effective Date and Related Rules.--
       (1) Effective date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.
       (2) Issuance of final regulations.--Final regulations under 
     section 404(c)(4) of the Employee Retirement Income Security 
     Act of 1974 (added by this section) shall be issued no later 
     than 1 year after the date of the enactment of this Act.

     SEC. 103. FASTER VESTING OF EMPLOYER NONELECTIVE 
                   CONTRIBUTIONS.

       (a) Amendments to the Internal Revenue Code of 1986.--
       (1) In general.--Paragraph (2) of section 411(a) (relating 
     to employer contributions) is amended to read as follows:
       ``(2) Employer contributions.--
       ``(A) Defined benefit plans.--
       ``(i) In general.--In the case of a defined benefit plan, a 
     plan satisfies the requirements of this paragraph if it 
     satisfies the requirements of clause (ii) or (iii).
       ``(ii) 5-year vesting.--A plan satisfies the requirements 
     of this clause if an employee who has completed at least 5 
     years of service has a nonforfeitable right to 100 percent of 
     the employee's accrued benefit derived from employer 
     contributions.
       ``(iii) 3 to 7 year vesting.--A plan satisfies the 
     requirements of this clause if an employee has a 
     nonforfeitable right to a percentage of the employee's 
     accrued benefit derived from employer contributions 
     determined under the following table:

                                                     The nonforfeitable
    ``Years of service:                                percentage is:  
      3.............................................................20 
      4.............................................................40 
      5.............................................................60 
      6.............................................................80 
      7 or more....................................................100.

       ``(B) Defined contribution plans.--
       ``(i) In general.--In the case of a defined contribution 
     plan, a plan satisfies the requirements of this paragraph if 
     it satisfies the requirements of clause (ii) or (iii).
       ``(ii) 3-year vesting.--A plan satisfies the requirements 
     of this clause if an employee who has completed at least 3 
     years of service has a nonforfeitable right to 100 percent of 
     the employee's accrued benefit derived from employer 
     contributions.
       ``(iii) 2 to 6 year vesting.--A plan satisfies the 
     requirements of this clause if an employee has a 
     nonforfeitable right to a percentage of the employee's 
     accrued benefit derived from employer contributions 
     determined under the following table:

                                                     The nonforfeitable
    ``Years of service:                                percentage is:  
      2.............................................................20 
      3.............................................................40 
      4.............................................................60 
      5.............................................................80 
      6.........................................................100.''.

       (2) Conforming amendment.--Section 411(a) (relating to 
     general rule for minimum vesting standards) is amended by 
     striking paragraph (12).
       (b) Amendments to the Employee Retirement Income Security 
     Act of 1974.--
       (1) In general.--Paragraph (2) of section 203(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1053(a)(2)) is amended to read as follows:
       ``(2)(A)(i) In the case of a defined benefit plan, a plan 
     satisfies the requirements of this paragraph if it satisfies 
     the requirements of clause (ii) or (iii).
       ``(ii) A plan satisfies the requirements of this clause if 
     an employee who has completed at least 5 years of service has 
     a nonforfeitable right to 100 percent of the employee's 
     accrued benefit derived from employer contributions.
       ``(iii) A plan satisfies the requirements of this clause if 
     an employee has a nonforfeitable right to a percentage of the 
     employee's accrued benefit derived from employer 
     contributions determined under the following table:

                                                     The nonforfeitable
    ``Years of service:                                percentage is:  
      3.............................................................20 
      4.............................................................40 
      5.............................................................60 
      6.............................................................80 
      7 or more....................................................100.

       ``(B)(i) In the case of an individual account plan, a plan 
     satisfies the requirements of this paragraph if it satisfies 
     the requirements of clause (ii) or (iii).
       ``(ii) A plan satisfies the requirements of this clause if 
     an employee who has completed at least 3 years of service has 
     a nonforfeitable right to 100 percent of the employee's 
     accrued benefit derived from employer contributions.

[[Page S15410]]

       ``(iii) A plan satisfies the requirements of this clause if 
     an employee has a nonforfeitable right to a percentage of the 
     employee's accrued benefit derived from employer 
     contributions determined under the following table:

                                                     The nonforfeitable
    ``Years of service:                                percentage is:  
      2.............................................................20 
      3.............................................................40 
      4.............................................................60 
      5.............................................................80 
      6.........................................................100.''.

       (2) Conforming amendment.--Section 203(a) of such Act is 
     amended by striking paragraph (4).
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     for plan years beginning after December 31, 2003.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to one or more collective bargaining 
     agreements between employee representatives and one or more 
     employers ratified before the date of the enactment of this 
     Act, the amendments made by this section shall not apply to 
     contributions on behalf of employees covered by any such 
     agreement for plan years beginning before the earlier of--
       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of the 
     enactment); or
       (ii) January 1, 2004; or
       (B) January 1, 2006.
       (3) Service required.--With respect to any plan, the 
     amendments made by this section shall not apply to any 
     employee before the date that such employee has 1 hour of 
     service under such plan in any plan year to which the 
     amendments made by this section apply.

     SEC. 104. ALLOW ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY 
                   CONTRACTS.

       (a) In General.--Subparagraph (A) of section 402(c)(2) 
     (maximum amount which may be rolled over) is amended by 
     striking ``and which'' and inserting ``or to an annuity 
     contract described in section 403(b) and such plan or 
     contract''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2003.

  TITLE II--EXPANDING RETIREMENT PLAN COVERAGE TO EMPLOYEES OF SMALL 
                               BUSINESSES

     SEC. 201. ELIMINATION OF HIGHER PENALTY ON CERTAIN SIMPLE 
                   DISTRIBUTIONS.

       (a) In General.--Subsection (t) of section 72 (relating to 
     10-percent additional tax on early distributions from 
     qualified retirement plans) is amended by striking paragraph 
     (6) and redesignating paragraphs (7), (8), and (9) as 
     paragraphs (6), (7), and (8), respectively.
       (b) Conforming Amendments.--
       (1) Section 72(t)(2)(E) is amended by striking ``paragraph 
     (7)'' and inserting ``paragraph (6)''.
       (2) Section 72(t)(2)(F) is amended by striking ``paragraph 
     (8)'' and inserting ``paragraph (7)''.
       (3) Section 408(d)(3)(G) is amended by striking ``applies'' 
     and inserting ``applied on the day before the date of the 
     enactment of the Retirement Account Portability Act of 
     2003)''.
       (4) Section 457(a)(2) is amended by striking ``section 
     72(t)(9)'' and inserting ``section 72(t)(8)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2003.

     SEC. 202. SIMPLE PLAN PORTABILITY.

       (a) Repeal of Limitation.--Paragraph (3) of section 408(d) 
     (relating to rollover contributions), as amended by this Act, 
     is amended by striking subparagraph (G) and redesignating 
     subparagraph (H) as subparagraph (G).
       (b) Section 402(c)(8)(B) is amended by adding at the end 
     the following new sentence: ``Individual retirement accounts 
     and individual retirement annuities described in clauses (i) 
     and (ii) shall be treated as eligible retirement plans 
     without regard to whether they are part of a simplified 
     employee pension (within the meaning of section 408(k)) or a 
     simplified retirement account (within the meaning of section 
     408(p)).''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2003.

TITLE III--EXPANDING RETIREMENT SAVINGS FOR TAX-EXEMPT ORGANIZATION AND 
                          GOVERNMENT EMPLOYEES

     SEC. 301. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE 
                   SERVICE CREDIT.

       (a) In General.--Subparagraph (A) of section 457(e)(17) 
     (relating to trustee-to-trustee transfers to purchase 
     permissive service credit), and subparagraph (A) of section 
     403(b)(13) (relating to trustee-to-trustee transfers to 
     purchase permissive service credit), are both amended by 
     striking ``section 415(n)(3)(A)'' and inserting ``section 
     415(n)(3) (without regard to subparagraphs (B) and (C) 
     thereof)''.
       (b) Distribution Requirements.--Section 457(e)(17) and 
     section 403(b)(13) are both amended by adding at the end the 
     following sentence: ``Amounts transferred under this 
     paragraph shall be distributed solely in accordance with 
     section 401(a) as applicable to such defined benefit plan.''.
       (c) Service Credit.--Clause (ii) of section 415(n)(3)(A) is 
     amended to read as follows:
       ``(ii) which relates to benefits with respect to which such 
     -participant is not otherwise entitled, and''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     section 647 of the Economic Growth and Tax Relief 
     Reconciliation Act of 2001.

     SEC. 302. ELIGIBILITY FOR PARTICIPATION IN RETIREMENT PLANS.

       An individual shall not be precluded from participating in 
     an eligible deferred compensation plan by reason of having 
     received a distribution under section 457(e)(9) of the 
     Internal Revenue Code of 1986, as in effect prior to the 
     enactment of the Small Business Job Protection Act of 1996.

                  TITLE IV--SIMPLIFICATION AND EQUITY

     SEC. 401. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO 
                   ROTH IRAS.

       (a) In General.--Subsection (e) of section 408A (defining 
     qualified rollover contribution) is amended to read as 
     follows:
       ``(e) Qualified Rollover Contribution.--For purposes of 
     this section, the term `qualified rollover contribution' 
     means a rollover contribution--
       ``(1) to a Roth IRA from another such account,
       ``(2) from an eligible retirement plan, but only if--
       ``(A) in the case of an individual retirement plan, such 
     rollover contribution meets the requirements of section 
     408(d)(3), and
       ``(B) in the case of any eligible retirement plan (as 
     defined in section 402(c)(8)(B) other than clauses (i) and 
     (ii) thereof), such rollover contribution meets the 
     requirements of section 402(c), 403(b)(8), or 457(e)(16), as 
     applicable.

     For purposes of section 408(d)(3)(B), there shall be 
     disregarded any qualified rollover contribution from an 
     individual retirement plan (other than a Roth IRA) to a Roth 
     IRA.''.
       (b) Conforming Amendments.--
       (1) Section 408A(c)(3)(B) is amended--
       (A) in the text by striking ``individual retirement plan'' 
     and inserting ``an eligible retirement plan (as defined by 
     section 402(c)(8)(B))'', and
       (B) in the heading by striking ``IRA'' and inserting 
     ``eligible retirement plan''.
       (2) Section 408A(d)(3) is amended--
       (A) in subparagraph (A) by striking ``section 408(d)(3)'' 
     inserting ``sections 402(c), 403(b)(8), 408(d)(3), and 
     457(e)(16)'',
       (B) in subparagraph (B) by striking ``individual retirement 
     plan'' and inserting ``eligible retirement plan (as defined 
     by section 402(c)(8)(B))'',
       (C) in subparagraph (D) by striking ``or 6047'' after 
     ``408(i)'',
       (D) in subparagraph (D) by striking ``or both'' and 
     inserting ``persons subject to section 6047(d)(1), or all of 
     the foregoing persons'', and
       (E) in the heading by striking ``IRA'' and inserting 
     ``eligible retirement plan''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2003.

     SEC. 402. TRANSFERS TO THE PBGC.

       (a) Mandatory Distributions to PBGC.--Clause (i) of section 
     401(a)(31)(B) (relating to general rule for certain mandatory 
     distributions) is amended by inserting ``to the Pension 
     Benefit Guaranty Corporation in accordance with section 
     4050(e) of the Employee Retirement Income Security Act of 
     1974 or'' after ``such transfer''.
       (b) Tax Treatment of Distributions.--Subparagraph (B) of 
     section 401(a)(31) is amended by adding at the end the 
     following new clause:
       ``(iii) Income tax treatment of transfers to pbgc.--For 
     purposes of determining the income tax treatment relating to 
     transfers to the Pension Benefit Guaranty Corporation under 
     clause (i)--

       ``(I) the transfer of amounts to the Pension Benefit 
     Guaranty Corporation pursuant to clause (i) shall be treated 
     as a transfer to an individual retirement plan under such 
     clause, and
       ``(II) the distribution of such amounts from the Pension 
     Benefit Guaranty Corporation shall be treated as a 
     distribution from an individual retirement plan.''.

       (c) Missing participants and beneficiaries.--
       (1) In general.--Section 4050 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1350) is amended by 
     redesignating subsection (c) as subsection (f) and by 
     inserting after subsection (b) the following new subsections:
       ``(c) Multiemployer Plans.--The corporation shall prescribe 
     rules similar to the rules in subsection (a) for 
     multiemployer plans covered by this title that terminate 
     under section 4041A.
       ``(d) Plans Not Otherwise Subject to Title.--
       ``(1) Transfer to corporation.--The plan administrator of a 
     plan described in paragraph (4) may elect to transfer the 
     benefits of a missing participant or beneficiary to the 
     corporation upon termination of the plan.
       ``(2) Information to the corporation.--To the extent 
     provided in regulations, the plan administrator of a plan 
     described in paragraph (4) shall, upon termination of the 
     plan, provide the corporation information with respect to 
     benefits of a missing participant or beneficiary if the plan 
     transfers such benefits--
       ``(A) to the corporation, or
       ``(B) to an entity other than the corporation or a plan 
     described in paragraph (4)(B)(ii).

[[Page S15411]]

       ``(3) Payment by the corporation.--If benefits of a missing 
     participant or beneficiary were transferred to the 
     corporation under paragraph (1), the corporation shall, upon 
     location of the participant or beneficiary, pay to the 
     participant or beneficiary the amount transferred (or the 
     appropriate survivor benefit) either--
       ``(A) in a single sum (plus interest), or
       ``(B) in such other form as is specified in regulations of 
     the corporation.
       ``(4) Plans described.--A plan is described in this 
     paragraph if--
       ``(A) the plan is a pension plan (within the meaning of 
     section 3(2))--
       ``(i) to which the provisions of this section do not apply 
     (without regard to this subsection), and
       ``(ii) which is not a plan described in paragraphs (2) 
     through (11) of section 4021(b), and
       ``(B) at the time the assets are to be distributed upon 
     termination, the plan--
       ``(i) has one or more missing participants or 
     beneficiaries, and
       ``(ii) has not provided for the transfer of assets to pay 
     the benefits of all missing participants and beneficiaries to 
     another pension plan (within the meaning of section 3(2)).
       ``(5) Certain provisions not to apply.--Subsections (a)(1) 
     and (a)(3) shall not apply to a plan described in paragraph 
     (4).
       ``(e) Involuntary Cashouts.--
       ``(1) Payment by the corporation.--If benefits under a plan 
     described in paragraph (2) were transferred to the 
     corporation under section 401(a)(31)(B) of the Internal 
     Revenue Code of 1986, the corporation shall, upon application 
     filed by the participant or beneficiary with the corporation 
     in such form and manner as may be prescribed in regulations 
     of the corporation, pay to the participant or beneficiary the 
     amount transferred (or the appropriate survivor benefit) 
     either--
       ``(A) in a single sum (plus interest), or
       ``(B) in such other form as is specified in regulations of 
     the corporation.
       ``(2) Information to the corporation.--To the extent 
     provided in regulations, the plan administrator of a plan 
     described in paragraph (3) shall, upon transferred to the 
     corporation under section 401(a)(31)(B) of such Code, provide 
     the corporation information with respect to benefits of the 
     participant or beneficiary so transferred.
       ``(3) Plans described.--A plan is described in this 
     paragraph if the plan is a pension plan (within the meaning 
     of section 3(2))--
       ``(A) which provides for mandatory distributions under 
     section 401(a)(31)(B) of the Internal Revenue Code of 1986, 
     and
       ``(B) which is not a plan described in paragraphs (2) 
     through (11) of section 4021(b).
       ``(4) Certain provisions not to apply.--Subsections (a)(1) 
     and (a)(3) shall not apply to a plan described in paragraph 
     (2).''.
       (2) Conforming amendments.--Section 206(f) of such Act (29 
     U.S.C. 1056(f)) is amended--
       (A) by striking ``title IV'' and inserting ``section 
     4050''; and
       (B) by striking ``the plan shall provide that,''.
       (d) Effective Date.--
       (1) Internal revenue code of 1986 provisions.--The 
     amendments made by subsections (a) and (b) shall take effect 
     as if included in the amendments made by section 657 of the 
     Economic Growth and Tax Relief Reconciliation Act of 2001.
       (2) Employee retirement income security act of 1974 
     provisions.--The amendments made by subsection (c) shall 
     apply to distributions made after final regulations 
     implementing subsections (c), (d), and (e) of section 4050 of 
     the Employee Retirement Income Security Act of 1974 (as added 
     by subsection (c)), respectively, are prescribed.
       (3) Regulations.--The Pension Benefit Guaranty Corporation 
     shall issue regulations necessary to carry out the amendments 
     made by subsection (c) not later than December 31, 2004.
                                 ______
                                 
      By Mr. McCAIN (for himself and Mr. Feingold):
  S. 1913. A bill to amend the Internal Revenue Code of 1986 to reform 
the system of public financing for Presidential elections, and for 
other purposes; to the Committee on Finance.
  Mr. McCAIN. Mr. President, along with Senator Russ Feingold, I am 
proud today to introduce the Presidential Funding Act of 2003. This 
legislation will improve and reform the presidential public financing 
system. With major presidential candidates opting out of public 
financing for their 2004 primary campaigns, reform of the system of 
financing presidential nominations is needed more than ever.
  The presidential public financing system has been in place for three 
decades and has achieved broad public acceptance. From 1976 to 2000, 
every major party presidential nominee has accepted public financing 
for the general election and, nearly all of the nominees have also 
accepted it for their primary elections. A total of 46 Democrats and 29 
Republicans have accepted public financing for the presidential 
primaries during this period.
  Since its creation, the presidential financing system has worked non-
ideologically, with victories for three Republicans and two Democrats. 
It has also provided for competitive elections. In the five races that 
have been run under the system involving an incumbent president, 
challengers have won in three of those elections. This system of 
voluntary spending limits in exchange for public funding has been a 
nonpartisan success.
  Last year's enactment of a ban on soft money addressed what had 
become a basic problem for the effectiveness and credibility of the 
presidential system. For the system to continue serving the nation 
effectively, its remaining problems now must be solved. This 
legislation will repair and revitalize the presidential campaign 
finance system in the following ways.
  First, our legislation increases the overall spending limit for the 
presidential primaries and provide more public matching funds for 
presidential primary candidates.
  The overall spending limit in the primaries for publicly financed 
candidates has failed to keep pace with reality. This was demonstrated 
when in 2000, public financing and spending limits for the primaries 
were rejected and a record $100 million in private contributions was 
spent to gain the Republican party's nomination--more than twice the 
amount that the publicly financed candidates were allowed to spend. 
During the 2004 presidential primary period, it is expected that 
Republicans will raise and spend as much as $200 million.
  Our legislation increases the individual contribution limit from 
$1,000 to $2,000. Therefore, it will be easier over time for other 
candidates to reject public financing and raise private money in excess 
of the overall primary spending limit, thereby worsening the 
competitive disadvantage of publicly-financed candidates.
  In addition, the ``front-loading'' of presidential primaries has 
created a much shorter nominating period--now likely to end by early 
March--and a longer actual general election period than existed when 
the presidential financing system was created in 1974. As a result, a 
potential ``gap'' exists in funds available for a publicly financed 
nominee to spend between gaining the party nomination in March and the 
party's summer nominating convention, when the nominee receives public 
funds for the general election. This creates a further competitive 
disadvantage.
  To address these problems, our legislation increases the overall 
spending limit for the presidential primaries to $75 million from the 
$45 million limit in effect for the 2004 presidential election. This 
would equal the $75 million spending limit in effect for the general 
election, which applies to a much shorter period than the primaries.
  The amount of public matching funds for individual contributions in 
the primaries is also increased from the current one-to-one match to a 
four-to-one match for up to $250 of each individual contribution. This 
would greatly increase the value of smaller contributions in the 
presidential nominating process, as was intended by the presidential 
financing system. It would decrease the reliance on larger 
contributions, provide more public funds to meet the higher spending 
limit, and improve the ability of publicly financed candidates to run 
competitive elections.
  When the $1000 individual contribution limit was doubled last year, 
increasing the potential role of private contributions in the 
presidential financing system, no similar adjustment was made to 
increase the role of public matching funds. A new four-to-one multiple 
match for up to $250 of each individual contribution would accomplish 
that goal.
  In addition, the threshold for qualifying for matching public funds 
in the primary has not changed since the system was established. Our 
legislation increases the qualifying threshold should be increased by 
more than doubling the threshold to require candidates to raise $15,000 
in each of 20 states in amounts of no more than $250 per individual 
donor. Although the existing threshold has worked well during the 
history of the current system, a higher qualifying amount is 
appropriate for the future, especially since candidates would now be 
eligible to receive greater amounts of matching funds.
  Second, our legislation requires a candidate to opt in or out of the 
public financing system for the entire presidential election, including 
both the primary and general election.

[[Page S15412]]

  The purpose of the presidential public financing system is to allow 
candidates to run competitive races for the presidency without becoming 
dependent on or obligated to campaign donors. That purpose is 
undermined when a candidate opts out of the system to raise and spend 
large amounts of private money for a primary or general election race. 
Such candidates should not be able to reject public financing and then 
get the system's benefits when it suits their tactical advantage. A 
candidate should have to opt in or out of the system for the whole 
election.
  Third, our legislation repeals the state-by-state primary spending 
limits and allows publicly financed primary candidates to receive their 
public matching funds before January 1st of the presidential election 
year.
  The State-by-State primary spending limits have not worked. The 
limits have proven to be ineffective and have served to unjustifiably 
micromanage presidential campaigns.
  Under current law, primary candidates can begin to raise private 
contributions eligible to be matched beginning on January 1 of the year 
before a presidential election year. They are not eligible, however, to 
receive any of the matching public funds until January 1 of the 
presidential election year. With the current ``front-loaded'' primary 
system, and with the nomination likely to be decided in the early 
months of a presidential election year, primary candidates need to be 
able to spend more funds at an earlier period than before. As a result, 
under our legislation, presidential primary candidates will be eligible 
to start receiving matching public funds on July 1 of the year before a 
presidential election year.
  Fourth, our legislation provides additional public funds in the 
presidential general election for a publicly financed candidate facing 
a privately financed candidate who has substantially outspent the 
combined primary and general election spending limits.
  As more wealthy individuals decide to spend their personal wealth to 
run for public office, the potential grows for an individual to spend 
an enormous amount of personal wealth to seek the presidency. There 
already have been candidates for the U.S. Senate and in mayoral races, 
for example, who have spent as much in personal wealth on their races 
as each major party presidential nominee received in public funds in 
2000 to run their general election campaign.
  In addition, with the increased individual contribution limit, a 
presidential candidate could decide to forgo public funding and raise 
and spend private contributions far in excess of the spending limits 
for publicly financed candidates.
  To address this potential problem, our legislation makes a publicly 
financed major party nominee eligible to receive an additional $75 
million for the general election race, when a privately financed 
general election candidate has spent more than 50 percent above the 
total primary and general election spending limit for the publicly 
financed candidate.
  In other words, once a presidential general election candidate has 
spent more than a total of $225 million to seek the presidency, a 
publicly financed major party nominee, subject to a spending limit of 
$75 million for the primaries and $75 million for the general election, 
would receive an additional $75 million for the general election race.
  Fifth, our legislation increases the funds available to finance the 
presidential public financing system.
  Currently, the public financing system is funded by a voluntary $3 
check-off available to taxpayers on their tax forms on an annual basis. 
This mechanism will not raise sufficient resources in the long term to 
finance the costs of a revised presidential system.
  The $3 tax check-off is increased to $6 and indexed for inflation to 
help ensure there are sufficient funds available for future 
presidential elections. In addition, the Federal Election Commission 
(FEC) is authorized to conduct a public education campaign to explain 
to citizens why the check-off exists and how it works, including the 
fact that it does not increase the tax liability of taxpayers.
  The current presidential public financing law creates a priority 
system that allocates available public funds from the check-off to the 
nomination conventions, the presidential general election and the 
presidential primaries in that order. This order of priority does not 
make sense.
  Our legislation revises the order of priority for use of public funds 
to make funding of the general election candidates the first priority, 
funding of the primary election candidates the second priority, and 
funding of the nomination conventions the third priority.
  Furthermore, a U.S. Department of the Treasury ruling prohibits 
taking into account the tax check-off revenues that will be received in 
April of the presidential election year in determining at the start of 
each presidential election year the total amount of funds available to 
be given to eligible candidates from the fund. This has had the effect 
of artificially lowering the amount of funds available and creating 
temporary shortfalls for primary candidates during the opening months 
of the presidential election year at the time when they need the funds 
the most.
  Our legislation revises the law to require the U.S. Department of the 
Treasury (as it used to do) to estimate at the end of the year prior to 
a presidential election year the amount of check-off funds that will be 
received in the presidential election year and to take these funds into 
account in determining the total amount of funds available under the 
presidential system.
  Finally, our legislation implements the soft money ban to ensure that 
the parties and federal officeholders and candidates do not raise or 
spend soft money in connection with the presidential nominating 
conventions.
  Despite the passage of the new campaign finance law and its ban on 
soft money, federal officeholders and national party officials have 
continued to raise soft money to finance the national nomination 
conventions on the fictional premise that such funds are not in 
connection with a ``federal election'' but rather are for municipal or 
civic purposes.
  The reality is that a presidential nominating convention is defined 
as a ``federal election'' election under the campaign finance law. 
Furthermore, federal officeholders and candidates and national party 
officials who raise soft money for the conventions are subject to 
precisely the same kind of problems of corruption and the appearance of 
corruption that the new law prevents by banning soft money.
  To reaffirm that the soft money ban applies to the presidential 
nominating conventions, our legislation explicitly prohibits the 
national parties and federal officeholders and candidates from raising 
and spending soft money to pay for the presidential nominating 
conventions, including for a host committee, civic committee or 
municipality.
  The highly expensive, front-loaded, nationalized, primary system 
requires that we more than ever fix the presidential public funding 
system. We must continue to promote competition in order to give voters 
choices. Our legislation not only saves the existing system but 
improves it as well. It not only shores up the financial foundations of 
the system but it would also bring more donors into the system, making 
financial participation more democratic. It would give our citizens a 
stake in their government. It is our hope that with the enactment of 
this legislation, candidates will no longer take small donors for 
granted and finally hear their voices. In return, all of our citizens 
will feel reconnected to the presidential financing process that at 
times, has left them behind.
  Mr. FEINGOLD. Mr. President, it is pleasure to join my friend and 
colleague Senator McCain in introducing a bill to repair and strengthen 
the presidential public financing system. The Presidential Funding Act 
of 2003 will ensure that this system that has served our country so 
well for over a generation will continue to fulfill its promise in the 
21st century.
  The presidential public financing system was put into place in the 
wake of the Watergate scandals as part of the Federal Election Campaign 
Act of 1974. It was held to be constitutional by the Supreme Court in 
Buckley v. Valeo. Every major party nominee for President since 1976 
has participated in the

[[Page S15413]]

system for the general election. The system, of course, is voluntary, 
as the Supreme Court required. In the last election, then-Governor 
George W. Bush opted out of the system for the presidential primaries, 
but elected to take the taxpayer funded grant in the general election. 
He appears ready to make the same choice in this election, and so far 
two of the Democratic presidential candidates have decided not to seek 
federal matching funds in the primaries. Before 2000, almost all 
serious candidates for President had participated in the system.
  It is unfortunate that the matching funds system for the primaries is 
becoming less viable. The system reduces the fundraising pressures on 
candidates and levels the playing field between candidates. It allows 
candidates to run viable campaigns without becoming overly dependent on 
private donors. The system has worked well in the past, and its 
advantages for candidates and for the country make it worth repairing 
so that it can work in the future. If we don't repair it, the pressures 
on candidates to opt out because their opponents are opting out will 
increase until the system collapse from disuse.
  At the outset, I want to emphasize that this bill is not designed to 
have any impact on the ongoing presidential race. It will take effect 
only after the 2004 elections. Therefore, there is no partisan purpose 
here. Once again, Senator McCain and I are working together to try to 
improve the campaign finance system, regardless of any partisan impact 
that these reforms might have. Second, we do not expect Congress to 
take action on this bill during an election year. Instead, our hope is 
that by introducing a bill now we can begin a conversation with our 
colleagues and with the public that will allow us to take quick action 
beginning in 2005 so that a new system can be in place for the 2008 
election.
  The bill makes changes to both the primary and general election 
system to address the weaknesses and problems that have been identified 
by both participants in the system and experts on the presidential 
election financing process. First and most important, it eliminates the 
state-by-state spending limits in the current law and substantially 
increases the overall spending limit from the current limit of 
approximately $45 million to $75 million. This should make the system 
more viable for serious candidates facing opponents who are capable of 
raising significant sums outside the system. The bill also makes 
available significantly more public money for participating candidates 
by increasing the match of small contributions from 1:1 to 4:1. Thus, 
significantly more public money will be available to those candidates 
who choose to participate in the system.
  One very important provision of this bill ties the primary and 
general election systems together and requires candidates to make a 
single decision on whether to participate. Candidates who opt out of 
the primary system and decide to rely solely on private money cannot 
return to the system for the general election. And candidates must 
commit to participate in the system in the general election if they 
want to receive federal matching funds in the primaries. The bill also 
increases the spending limits for participating candidates in the 
primaries who face a non-participating opponent if that opponent raises 
more than 33 percent more than the spending limit. This provides some 
protection against being far outspent by a non-participating opponent.
  The bill also sets the general election spending limit at $75 
million, indexed for inflation, which is about what it is projected to 
be in 2008. And if a general election candidate does not participate in 
the system and spends more than 33 percent more than the combined 
primary and general election spending limits, a participating candidate 
will receive a grant equal to twice the general election spending 
limit.
  This bill also addresses what some have called the ``gap'' between 
the primary and general election seasons. Presumptive presidential 
nominees have emerged earlier in the election year over the life of the 
public financing system. This had led to some nominees being 
essentially out of money between the time that they nail down the 
nomination and the convention where they are formally nominated and 
become eligible for the general election grant. For a few cycles, soft 
money raised by the parties filled in that gap, but the Bipartisan 
Campaign Reform Act of 2002 thankfully has now closed that loophole. 
This bill doubles the amount of hard money that parties can spend in 
coordination with their candidates, allowing them to fill the gap once 
the party has a presumptive nominee.
  Fixing the presidential public financing system will obviously cost 
money, but our best calculations at the present time indicate that the 
changes to the system in this bill can be paid for by doubling the 
income tax check-off on an individual return from $3 to just $6. The 
total cost of the changes to the system is projected to be around $175 
million over the four-year election cycle. Of course, these projections 
may change as we get more data from the 2004 elections. But even a 
somewhat larger cost would be a very small investment to make to 
protect the health of our democracy and integrity of our presidential 
elections. The American people do not want to see a return to the pre-
Watergate days of unlimited spending on presidential elections and 
candidates entirely beholden to private donors. We must act now to 
preserve the crown jewel of the Watergate reforms and assure the 
fairness of our elections and the confidence of our citizens in the 
process.
                                 ______
                                 
      By Ms. STABENOW (for herself and Mr. Levin):
  S. 1914. A bill to prohibit the closure or realignment of inpatient 
services at the Aleda E. Lutz Department of Veterans Affairs Medical 
Center in Saginaw, Michigan, as proposed under the Capital Asset 
Realignment for Enhanced Services initiatives; to the Committee on 
Veterans' Affairs.
  Ms. STABENOW. Mr. President, I rise today to introduce legislation 
that would prevent the closure of the Saginaw Veterans Administration 
Medical Center in Saginaw, MI.
  As of August 2003, there were almost one million veterans in lower 
Michigan and Northwestern Ohio. These one million veterans are served 
by four V.A. Medical Centers--Saginaw, Detroit, Ann Arbor and Battle 
Creek--and 12 Community Based Outpatient Clinics (CBOCs), all located 
in lower Michigan or Toledo, OH.
  Regrettably, the Department of Veterans Affairs' Capitol Asset 
Realignment for Enhanced Services (CARES) Commission is recommending 
closing all acute care beds at the Aleda E. Lutz Department of Veterans 
Affairs Medical Center in Saginaw, MI. The geographic range for the 
acute services in Saginaw is vast. The facility essentially covers half 
of Michigan's Lower Peninsula. Therefore, closing these inpatient beds 
in Saginaw would have a devastating impact on veterans who live in 
Central and Northern Michigan.
  If the Saginaw facility were to close, a veteran who lived in 
Mackinaw City would have to drive 281 miles to the Detroit facility or 
272 miles to the Ann Arbor facility for medical care. Under ideal 
conditions these trips would take six hours instead of the current two 
hour trip that it would take to reach the existing Saginaw facility. 
Asking a veteran to go from Mackinaw City to Detroit is like asking a 
veteran to go from southeast Michigan to Buffalo, New York to get acute 
care.
  How can we ask veterans, many of whom are sick and frail, to travel 
six hours to get necessary inpatient services? Going through a major 
illness is tough enough for our veterans. The closing of this hospital 
would add insult to injury.
  This bill seeks to stop this closure and ensure that the thousands of 
veterans who live in central and northern Michigan have access to the 
medical services they deserve. I urge my colleagues to support this 
bill.
  Mr. President, 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:

                                S. 1914

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

[[Page S15414]]

     SECTION 1. PROHIBITION ON CLOSURE OR REALIGNMENT OF INPATIENT 
                   SERVICES AT ALEDA E. LUTZ DEPARTMENT OF 
                   VETERANS AFFAIRS MEDICAL CENTER IN SAGINAW, 
                   MICHIGAN.

       The Secretary of Veterans Affairs shall not carry out the 
     closure or realignment of inpatient services at the Aleda E. 
     Lutz Department of Veterans Affairs Medical Center in 
     Saginaw, Michigan, as proposed under the Capital Asset 
     Realignment for Enhanced Services (CARES) initiative.
                                 ______
                                 
      By Mrs. HUTCHISON:
  S. 1917. A bill to amend the Internal Revenue Code of 1986 to permit 
the issuance of tax-exempt bonds for certain air and water pollution 
control facilities, and to provide that the volume cap for private 
activity bonds shall not apply to bonds for facilities for the 
furnishing of water, sewage facilities, and air or water pollution 
control facilities; to the Committee on Finance.
  Mrs. HUTCHISON. Mr. President, I am proud to offer the Clean Air and 
Water Investment and Infrastructure Act.
  Texas, like many States, faces increasingly difficult challenges in 
improving air and water quality.
  The Clean Air Act requires the Environmental Protection Agency to set 
air quality standards and establishes deadlines for State and local 
governments to achieve those levels. Today, more than 90 communities 
across the country are out of compliance with the Clean Air Act. These 
so-called ``non-attainment'' areas are threated with regulatory 
sanctions, such as loss of federal highway funding, if they do not meet 
mandated ozone levels by 2007.
  Texas has four non-attainment areas: Beaumont-Port Arthur, Dallas-
Fort Worth, El Paso and Houston. The Houston area alone needs an 
estimated $4.1 billion annually in order to meet Federal air quality 
standards.
  These communities will not achieve compliance without assistance. Too 
many industrial plants need to install expensive equipment. If these 
environmental investments do not become more affordable, communities 
will either suffer sanctions or force industrial facilities to close 
and move offshore, causing substantial economic hardship.
  Texas and many areas of the country, especially in the Southwest and 
West, also face critical water and wastewater problems. Investments in 
sources of clean water must be made or we will face shortages in the 
coming decades. However, necessary water infrastructure improvements 
are extremely expensive. According to the Texas State water plan, the 
cost of water supply acquisition projects, water and wastewater 
treatment, and other infrastructure projects in Texas through 2050 will 
be more than $100 billion.
  Currently, air and water pollution control facilities cannot be 
financed by tax-exempt bonds. Even if they could, they would be limited 
by a cap which sets the total amount of tax-exempt private activity 
bonds issued by a state. Given the demands of other projects, such as 
housing, relatively few of the air and water pollution projects would 
have an opportunity to access this financing option.
  In order to help us meet the challenges, I am introducing the Clear 
Air and Water Investment and Infrastructure Act. My bill will allow 
federal tax-exempt bonds to be used by private firms for air and water 
pollution control projects. Given the importance of these critical 
projects, these bonds also would be issued outside the constraints of 
the private-activity bond caps. The Texas Water Development Board 
estimates this could save 30 percent in financing costs for water 
projects.
  For example, this bill would allow tax-exempt debt to be used to 
finance private systems along the Gulf Coast that desalinate seawater 
and brackish groundwater, and to install air pollution facilities on 
electric utility plants. States and communities would have an important 
new tool for addressing air and water pollution control needs.
  Pollution control is a problem for all of us. It is to everyone's 
benefit to develop ways to promote public and private partnerships 
which can finance projects to improve air and water quality. I hope my 
colleagues will support this effort.
  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:

                                S. 1917

       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 ``Clean Air and Water 
     Investment and Infrastructure Act''.

     SEC. 2. TAX-EXEMPT BONDS FOR AIR AND WATER POLLUTION CONTROL 
                   FACILITIES.

       (a) In General.--Subsection (a) of section 142 of the 
     Internal Revenue Code of 1986 (defining exempt facility bond) 
     is amended by striking ``or'' at the end of paragraph (12), 
     by striking the period at the end of paragraph (13) and 
     inserting ``, or'', and by adding at the end the following 
     new paragraph:
       ``(14) air or water pollution control facilities.''.
       (b) Air or Water Pollution Control Facilities.--Section 142 
     of the Internal Revenue Code of 1986 (relating to exempt 
     facility bond) is amended by adding at the end the following 
     new subsection:
       ``(l) Pollution Control Facilities Acquired by Regional 
     Pollution Control Authorities.--
       ``(1) In general.--For purposes of paragraph (14) of 
     subsection (a), a bond shall be treated as described in such 
     paragraph if it is part of an issue substantially all of the 
     proceeds of which are used by a qualified regional pollution 
     control authority to acquire existing air or water pollution 
     control facilities which the authority itself will operate in 
     order to maintain or improve the control of pollutants.
       ``(2) Restrictions.--Paragraph (1) shall apply only if--
       ``(A) the amount paid, directly or indirectly, for a 
     facility does not exceed the fair market value of the 
     facility,
       ``(B) the fees or charges imposed, directly or indirectly, 
     on the seller for any use of the facility after the sale of 
     such facility are not less than the amounts that would be 
     charged if the facility were financed with obligations the 
     interest on which is not exempt from tax, and
       ``(C) no person other than the qualified regional pollution 
     control authority is considered after the sale as the owner 
     of the facility for the purposes of Federal income taxes.
       ``(3) Qualified regional pollution control authority.--For 
     purposes of this subsection, the term `qualified regional 
     pollution control authority' means an authority which--
       ``(A) is a political subdivision created by State law to 
     control air or water pollution,
       ``(B) has within its jurisdictional boundaries all or part 
     of at least 2 counties (or equivalent political 
     subdivisions), and
       ``(C) operates air or water pollution control 
     facilities.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.

     SEC. 3. EXEMPTION FROM VOLUME CAP FOR FACILITIES FURNISHING 
                   WATER, SEWAGE FACILITIES, AND AIR OR WATER 
                   POLLUTION CONTROL FACILITIES.

       (a) In General.--Paragraph (3) of section 146(g) of the 
     Internal Revenue Code of 1986 (relating to exception for 
     certain bonds) is amended--
       (1) by inserting ``(4), (5),'' after ``(2),'',
       (2) by striking ``or (13)'' and inserting ``(13), or 
     (14)'',
       (3) by inserting ``facilities for the furnishing of water, 
     sewage facilities,'' after ``wharves,'',
       (4) by striking ``and'' before ``qualified'', and
       (5) by inserting ``, and air or water pollution control 
     facilities'' after ``educational facilities''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after the date of the enactment 
     of this Act.
                                 ______
                                 
      By Mr. SANTORUM (for himself and Mrs. Feinstein):
  S. 1918. A bill to amend the Internal Revenue Code of 1986 to provide 
that qualified homeowner downpayment assistance is a charitable 
purpose; to the Committee on Finance.
  Mr. SANTORUM. Mr. President, I am please to introduce today, along 
with my colleague from California, Senator Feinstein, legislation that 
will further one of the most important public policy goals we have as a 
Nation--the goal of homeownership. Homeownership is a significant part 
of the American dream. It has been called the backbone of our economy. 
It is widely considered the primary means by which American families 
create middle-class wealth and build financial security.
  Homeownership is all those things and more. It is the cornerstone of 
healthy communities across our Nation. It is good for families, good 
for our schools, good for our neighborhoods. Equity in homes is the 
leading source for collateral for small business start-up borrowing, 
and home equity loans are the leading provider of funds for a college 
education. Some experts even say home owners are more likely to vote.
  Despite the many benefits, there are still too many Americans for 
whom the

[[Page S15415]]

American dream of homeownership is unreachable. There are too many 
American families who pay rent month after month, never accumulating 
equity, never experiencing the joy of raising their children in a home 
they own, and look forward to passing along to future generations. That 
is especially true among Americans from minority populations. Though 
nationwide nearly 70 percent of Americans own their own home, 
homeownership rates among African-Americans and Hispanics is less than 
50 percent.
  There are any number of obstacles to homeownership, but there is one 
problem that is widely considered the single biggest obstacle: the lack 
of funds for a down payment. Again, this is disproportionately true 
among minority families, which frequently have less accumulated wealth 
that can be used for a down payment.
  President Bush has proposed creating the American Dream Down Payment 
Fund, which would provide down payment assistance to 40,000 families 
every year. I support that effort, and I applaud President Bush for 
proposing this bold new initiative. The President has set a goal of 
increasing the number of minority homeowners by at least 5.5 million by 
the end of this decade, which the Department of Housing and Urban 
Development estimates would create $256 billion in economic activity. I 
believe that is an important goal for us as a Nation.
  I also believe that as we work to find ways for the Federal 
Government to increase homeownership, we need to encourage the private 
sector to do the same. There are a number of non-profit organizations 
in our country doing just that by providing a gift of down payment 
assistance to potential homeowners. These gifts of down payment 
assistance go to families and individuals who have the income to afford 
a mortgage, but who would otherwise be prevented from buying a home 
because they lack funds for a down payment. Last year non-profit 
organizations provided gifts of down payment assistance to over 85,000 
home buyers--and the number will likely be much higher this year. One 
organization alone has helped over 160,000 individuals and families 
become homeowners, by providing a gift of funds for a down payment. And 
all without collecting a single dime of government funding.

  That is why I am so pleased to be introducing this legislation today. 
I want to be sure the private sector can continue playing such a vital 
role in increasing homeownership by providing down payment assistance. 
Although many charities holding tax exemptions under section 501(c)(3) 
of the Internal Revenue Code provide down payment assistance, IRS 
regulations do not clearly address down payment assistance programs.
  Our legislation will clarify that, under certain circumstances, the 
provision of down payment assistance to American families for use in 
purchasing low or moderate price homes constitutes charitable activity. 
Rather than developing our own standard for eligible home purchases, we 
have relied on the National Housing Act rule for FHA-insured loans. Our 
provision applies to purchases of a principal residence if the amount 
of the mortgage is less than the maximum mortgage amount eligible for 
FHA insurance in the geographic area in which the home is located. That 
will ensure that a charitable down payment assistance program is not 
used to support the purchase of rental properties or expensive homes.
  Our legislation also includes one other provision designed to protect 
the Treasury. Home sellers often contribute to charitable down payment 
assistance providers in connection with the sale of a home. Those 
contributions are used to replenish the pool to make available gift 
assistance for other home buyers. Although the contributions are being 
made to a charity, they are not charitable in nature; they are expenses 
of selling a home. The legislation clarifies that a party to a home 
sale transaction may not claim a charitable contribution deduction for 
a contribution to a down payment assistance provider made in connection 
with the sale.
  Although IRS regulations do not clearly address down payment 
assistance programs, our legislation merely codifies current practice. 
As a result, I do not anticipate that the legislation will result in a 
significant change in tax revenues.
  Non-profit providers of down payment assistance help tens of 
thousands of Americans every year become homeowners. These 
organizations are changing lives, changing families, changing our 
communities--and they are doing it all without a single dime of 
taxpayer funds. I am pleased my colleague from California, Senator 
Feinstein, has joined me in introducing this legislation. I ask all of 
my colleagues to join us in this important effort.
  Mrs. FEINSTEIN. Mr. President, I am pleased to join with the 
distinguished Senator from Pennsylvania, Senator Santorum, to introduce 
legislation that will promote the American dream of homeownership.
  Our legislation will specify that providing homeownership down 
payment assistance to American families constitutes a charitable 
activity under the regulations of the Internal Revenue Service.
  As the cornerstone of middle-class wealth in our nation, we should be 
doing everything possible to promote broad investment in owner-occupied 
housing. Today, we have that chance.
  It should not be a surprise that homeownership among low to moderate 
income families is lower than for those with higher incomes. The single 
biggest obstacle to achieving this dream is the lack of a downpayment.
  Across America there are organizations that assist low to moderate 
income families with that first important step toward homeownership. In 
California, one of these groups, the Nehemiah Corporation, helps 
literally thousands of families each year by providing down payments.
  While the Federal Government provides tax incentives for increased 
homeownership, we should make it easier for the private sector to 
provide their own brand of incentives. Importantly, this legislation 
will do several things to ensure that the private sector continues to 
have the tools it needs to provide this important assistance.
  One, our legislation will specify that homeownership down payment 
assistance to American families constitutes a charitable activity.
  Currently, Internal Revenue Service regulations do not clearly 
address the special circumstances of those organizations that provide 
downpayment assistance to families.
  Two, our bill is structured to ensure that a charitable down payment 
assistance program is not used to support the purchase of rental 
properties or expensive homes.
  Three, our legislation is designed so that the taxpayers do not pick-
up the tab. Since, home sellers often contribute to charitable down 
payment assistance providers in connection with the sale of a home, 
those contributions are not charitable in nature; they are an expense 
related to selling a home.
  This legislation clarifies that a party to a home sale transaction 
may not claim a charitable contribution deduction for a contribution to 
a down payment assistance organization made in connection with the 
sale.
  And, although Internal Revenue Service regulations do not 
specifically address down payment assistance programs, our legislation 
merely codifies current practice.
  This legislation will ensure the continued growth of this essential 
segment of the financial services market at no cost to the taxpayers.
  And, as my friend from Pennsylvania has said, equity in homes is the 
leading source for collateral for small business start-up borrowing.
  At a time when the economy still fails to produce jobs, the expansion 
of small business and the employment they provide is essential to the 
health of our economy.
  It is a win-win situation in the truest sense of the term and I urge 
my colleagues to support it.
                                 ______
                                 
      By Mr. SMITH (for himself and Mr. Breaux):
  S. 1922. A bill to amend the Internal Revenue Code of 1986 to comply 
with the World Trade Organization rulings on the FSC/ETI benefit in a 
manner that preserves manufacturing jobs and production activities in 
the United States, and for other purposes; to the Committee on Finance.
  Mr. SMITH. Mr. President, I rise today to introduce The American 
Manufacturing Jobs Bill of 2003--which will

[[Page S15416]]

provide a tax rate cut for all manufacturers who employ American 
workers. I am pleased to be joined in this effort by Senator John 
Breaux. On October 1, 2003, the Senate Finance Committee approved on a 
bipartisan basis S. 1673, the centerpiece of which resolves the FSC/ETI 
issue by replacing the export tax benefit with a reduction in the tax 
burden on domestic manufacturing companies.
  I applaud S. 1673, a balanced piece of legislation crafted by 
Chairman Charles Grassley, R-IA, and ranking member Senator Max Baucus, 
D-MT. I am, however, concerned that the domestic manufacturing benefit 
in S. 1673 is not applied equally to all U.S. manufacturers. This bill 
includes a provision--a ``haircut''--that provides less of a benefit to 
companies that also manufacture abroad.
  For example, a company that has 55 percent of its manufacturing in 
the United States and 45 percent abroad will calculate its benefit 
under the bill and then reduce that benefit by a fraction--the 
numerator of which is the gross receipts from domestic manufacturing 
over the same derived from worldwide manufacturing.
  This company thus suffers twice. First, the domestic manufacturing 
benefit in S. 1673 is less valuable than the benefit currently provided 
under FSC/ETI. Second, this company's manufacturing benefit is further 
reduced by the ``haircut'' merely because it also has overseas 
manufacturing operations in order to be closer to their markets.
  The ``haircut'' is a discriminatory measure that hurts both foreign-
owned and U.S.-owned companies alike. It is structured so that the more 
a company manufactures abroad, the less of a manufacturing rate cut it 
gets. The ``haircut'' makes the United States a less competitive 
location for current and future investment because multinational 
companies will believe they are being ``cheated'' and discriminated 
against.
  At a time when American manufacturing jobs are leaving our country in 
record numbers, Congress should support all companies that employ 
Americans. U.S. companies with global operations employ more than 23 
million Americans--9 million of which are in manufacturing jobs--this 
is tantamount to three out of every five manufacturing jobs in this 
country. Foreign-owned companies with U.S. operations employ more than 
2 million manufacturing workers in the United States. It is these many 
of millions of manufacturing workers who will suffer if the ``haircut'' 
remains and companies are therefore discouraged to invest in the United 
States.
  Moreover, the ``haircut'' is inconsistent with historic tax and trade 
policies to encourage U.S. companies to open up facilities outside the 
United States. In fact, there is an entire department--the Department 
of Commerce--set up to assist U.S. companies going global and then to 
promote and facilitate those same companies' efforts once they have 
established themselves in-country. I am also concerned that the 
``haircut'' invites mirror legislation in other countries and may 
invite another WTO challenge to this legislation.
  I believe we have a duty to encourage the retention and creation of 
manufacturing jobs in the United States. We must not treat U.S. jobs 
created by multinational companies as ``less worthy'' than U.S. jobs 
created by strictly domestic manufacturers. Congress should be in the 
business of rewarding all well-paid, manufacturing jobs that are 
created in the United States, not just those created by domestic 
manufacturers. I believe that by eliminating the ``haircut'' and 
providing a tax rate cut for all manufacturers who employ American 
workers, we can help to revitalize the U.S. manufacturing sector. I ask 
unanimous consent that the full text of this important legislation be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1922

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

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

       (a) Short Title.--This Act may be cited as the ``American 
     Manufacturing Jobs Act of 2003''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.

     SEC. 2. REPEAL OF EXCLUSION FOR EXTRATERRITORIAL INCOME.

       (a) In General.--Section 114 is hereby repealed.
       (b) Conforming Amendments.--
       (1)(A) Subpart E of part III of subchapter N of chapter 1 
     (relating to qualifying foreign trade income) is hereby 
     repealed.
       (B) The table of subparts for such part III is amended by 
     striking the item relating to subpart E.
       (2) The table of sections for part III of subchapter B of 
     chapter 1 is amended by striking the item relating to section 
     114.
       (3) The second sentence of section 56(g)(4)(B)(i) is 
     amended by striking ``or under section 114''.
       (4) Section 275(a) is amended--
       (A) by inserting ``or'' at the end of paragraph (4)(A), by 
     striking ``or'' at the end of paragraph (4)(B) and inserting 
     a period, and by striking subparagraph (C), and
       (B) by striking the last sentence.
       (5) Paragraph (3) of section 864(e) is amended--
       (A) by striking:
       ``(3) Tax-exempt assets not taken into account.--
       ``(A) In general.--For purposes of''; and inserting:
       ``(3) Tax-exempt assets not taken into account.--For 
     purposes of'', and
       (B) by striking subparagraph (B).
       (6) Section 903 is amended by striking ``114, 164(a),'' and 
     inserting ``164(a)''.
       (7) Section 999(c)(1) is amended by striking 
     ``941(a)(5),''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to transactions occurring after the date of the 
     enactment of this Act.
       (2) Binding contracts.--The amendments made by this section 
     shall not apply to any transaction in the ordinary course of 
     a trade or business which occurs pursuant to a binding 
     contract--
       (A) which is between the taxpayer and a person who is not a 
     related person (as defined in section 943(b)(3) of such Code, 
     as in effect on the day before the date of the enactment of 
     this Act), and
       (B) which is in effect on September 17, 2003, and at all 
     times thereafter.
       (d) Revocation of Section 943(e) Elections.--
       (1) In general.--In the case of a corporation that elected 
     to be treated as a domestic corporation under section 943(e) 
     of the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of this Act)--
       (A) the corporation may, during the 1-year period beginning 
     on the date of the enactment of this Act, revoke such 
     election, effective as of such date of enactment, and
       (B) if the corporation does revoke such election--
       (i) such corporation shall be treated as a domestic 
     corporation transferring (as of such date of enactment) all 
     of its property to a foreign corporation in connection with 
     an exchange described in section 354 of such Code, and
       (ii) no gain or loss shall be recognized on such transfer.
       (2) Exception.--Subparagraph (B)(ii) of paragraph (1) shall 
     not apply to gain on any asset held by the revoking 
     corporation if--
       (A) the basis of such asset is determined in whole or in 
     part by reference to the basis of such asset in the hands of 
     the person from whom the revoking corporation acquired such 
     asset,
       (B) the asset was acquired by transfer (not as a result of 
     the election under section 943(e) of such Code) occurring on 
     or after the 1st day on which its election under section 
     943(e) of such Code was effective, and
       (C) a principal purpose of the acquisition was the 
     reduction or avoidance of tax (other than a reduction in tax 
     under section 114 of such Code, as in effect on the day 
     before the date of the enactment of this Act).
       (e) General Transition.--
       (1) In general.--In the case of a taxable year ending after 
     the date of the enactment of this Act and beginning before 
     January 1, 2007, for purposes of chapter 1 of such Code, a 
     current FSC/ETI beneficiary shall be allowed a deduction 
     equal to the transition amount determined under this 
     subsection with respect to such beneficiary for such year.
       (2) Current fsc/eti beneficiary.--The term ``current FSC/
     ETI beneficiary'' means any corporation which entered into 
     one or more transactions during its taxable year beginning in 
     calendar year 2002 with respect to which FSC/ETI benefits 
     were allowable.
       (3) Transition amount.--For purposes of this subsection--
       (A) In general.--The transition amount applicable to any 
     current FSC/ETI beneficiary for any taxable year is the 
     phaseout percentage of the base period amount.
       (B) Phaseout percentage.--
       (i) In general.--In the case of a taxpayer using the 
     calendar year as its taxable year, the phaseout percentage 
     shall be determined under the following table:

      The phaseout
      percentage is:
         80 ...........................................................

[[Page S15417]]

         80 ...........................................................
         60............................................................

       (ii) Special rule for 2003.--The phaseout percentage for 
     2003 shall be the amount that bears the same ratio to 100 
     percent as the number of days after the date of the enactment 
     of this Act bears to 365.
       (iii) Special rule for fiscal year taxpayers.--In the case 
     of a taxpayer not using the calendar year as its taxable 
     year, the phaseout percentage is the weighted average of the 
     phaseout percentages determined under the preceding 
     provisions of this paragraph with respect to calendar years 
     any portion of which is included in the taxpayer's taxable 
     year. The weighted average shall be determined on the basis 
     of the respective portions of the taxable year in each 
     calendar year.
       ``(C) Short taxable year.--The Secretary shall prescribe 
     guidance for the computation of the transition amount in the 
     case of a short taxable year.
       (4) Base period amount.--For purposes of this subsection, 
     the base period amount is the FSC/ETI benefit for the 
     taxpayer's taxable year beginning in calendar year 2002.
       (5) FSC/ETI benefit.--For purposes of this subsection, the 
     term ``FSC/ETI benefit'' means--
       (A) amounts excludable from gross income under section 114 
     of such Code, and
       (B) the exempt foreign trade income of related foreign 
     sales corporations from property acquired from the taxpayer 
     (determined without regard to section 923(a)(5) of such Code 
     (relating to special rule for military property), as in 
     effect on the day before the date of the enactment of the FSC 
     Repeal and Extraterritorial Income Exclusion Act of 2000).

     In determining the FSC/ETI benefit there shall be excluded 
     any amount attributable to a transaction with respect to 
     which the taxpayer is the lessor unless the leased property 
     was manufactured or produced in whole or in significant part 
     by the taxpayer.
       (6) Special rule for agricultural and horticultural 
     cooperatives.--Determinations under this subsection with 
     respect to an organization described in section 943(g)(1) of 
     such Code, as in effect on the day before the date of the 
     enactment of this Act, shall be made at the cooperative level 
     and the purposes of this subsection shall be carried out in a 
     manner similar to section 199(h)(2) of such Code, as added by 
     this Act. Such determinations shall be in accordance with 
     such requirements and procedures as the Secretary may 
     prescribe.
       (7) Certain rules to apply.--Rules similar to the rules of 
     section 41(f) of such Code shall apply for purposes of this 
     subsection.
       (8) Coordination with binding contract rule.--The deduction 
     determined under paragraph (1) for any taxable year shall be 
     reduced by the phaseout percentage of any FSC/ETI benefit 
     realized for the taxable year by reason of subsection (c)(2) 
     or section 5(c)(1)(B) of the FSC Repeal and Extraterritorial 
     Income Exclusion Act of 2000, except that for purposes of 
     this paragraph the phaseout percentage for 2003 shall be 
     treated as being equal to 100 percent.
       (9) Special rule for taxable year which includes date of 
     enactment.--In the case of a taxable year which includes the 
     date of the enactment of this Act, the deduction allowed 
     under this subsection to any current FSC/ETI beneficiary 
     shall in no event exceed--
       (A) 100 percent of such beneficiary's base period amount 
     for calendar year 2003, reduced by
       (B) the FSC/ETI benefit of such beneficiary with respect to 
     transactions occurring during the portion of the taxable year 
     ending on the date of the enactment of this Act.

     SEC. 3. DEDUCTION RELATING TO INCOME ATTRIBUTABLE TO UNITED 
                   STATES PRODUCTION ACTIVITIES.

       (a) In General.--Part VI of subchapter B of chapter 1 
     (relating to itemized deductions for individuals and 
     corporations) is amended by adding at the end the following 
     new section:

     ``SEC. 199. INCOME ATTRIBUTABLE TO DOMESTIC PRODUCTION 
                   ACTIVITIES.

       ``(a) Allowance of Deduction.--
       ``(1) In general.--There shall be allowed as a deduction an 
     amount equal to 9 percent of the qualified production 
     activities income of the taxpayer for the taxable year.
       ``(2) Phasein.--In the case of taxable years beginning in 
     2003, 2004, 2005, 2006, 2007, or 2008, paragraph (1) shall be 
     applied by substituting for the percentage contained therein 
     the transition percentage determined under the following 
     table:

      The transitions
      percentage is:
        1  or 2004.....................................................
        2 .............................................................
        3 .............................................................
        6. or 2008.....................................................

       ``(b) Deduction Limited to Wages Paid.--
       ``(1) In general.--The amount of the deduction allowable 
     under subsection (a) for any taxable year shall not exceed 50 
     percent of the W-2 wages of the employer for the taxable 
     year.
       ``(2) W-2 wages.--For purposes of paragraph (1), the term 
     `W-2 wages' means the sum of the aggregate amounts the 
     taxpayer is required to include on statements under 
     paragraphs (3) and (8) of section 6051(a) with respect to 
     employment of employees of the taxpayer during the taxpayer's 
     taxable year.
       ``(3) Special rules.--
       ``(A) Pass-thru entities.--In the case of an S corporation, 
     partnership, estate or trust, or other pass-thru entity, the 
     limitation under this subsection shall apply at the entity 
     level.
       ``(B) Acquisitions and dispositions.--The Secretary shall 
     provide for the application of this subsection in cases where 
     the taxpayer acquires, or disposes of, the major portion of a 
     trade or business or the major portion of a separate unit of 
     a trade or business during the taxable year.
       ``(c) Qualified Production Activities Income.--For purposes 
     of this section, the term `qualified production activities 
     income' means an amount equal to the portion of the modified 
     taxable income of the taxpayer which is attributable to 
     domestic production activities.
       ``(d) Determination of Income Attributable to Domestic 
     Production Activities.--For purposes of this section--
       ``(1) In general.--The portion of the modified taxable 
     income which is attributable to domestic production 
     activities is so much of the modified taxable income for the 
     taxable year as does not exceed--
       ``(A) the taxpayer's domestic production gross receipts for 
     such taxable year, reduced by
       ``(B) the sum of--
       ``(i) the costs of goods sold that are allocable to such 
     receipts,
       ``(ii) other deductions, expenses, or losses directly 
     allocable to such receipts, and
       ``(iii) a proper share of other deductions, expenses, and 
     losses that are not directly allocable to such receipts or 
     another class of income.
       ``(2) Allocation method.--The Secretary shall prescribe 
     rules for the proper allocation of items of income, 
     deduction, expense, and loss for purposes of determining 
     income attributable to domestic production activities.
       ``(3) Special rules for determining costs.--
       ``(A) In general.--For purposes of determining costs under 
     clause (i) of paragraph (1)(B), any item or service brought 
     into the United States shall be treated as acquired by 
     purchase, and its cost shall be treated as not less than its 
     fair market value immediately after it entered the United 
     States. A similar rule shall apply in determining the 
     adjusted basis of leased or rented property where the lease 
     or rental gives rise to domestic production gross receipts.
       ``(B) Exports for further manufacture.--In the case of any 
     property described in subparagraph (A) that had been exported 
     by the taxpayer for further manufacture, the increase in cost 
     or adjusted basis under subparagraph (A) shall not exceed the 
     difference between the value of the property when exported 
     and the value of the property when brought back into the 
     United States after the further manufacture.
       ``(4) Modified taxable income.--The term `modified taxable 
     income' means taxable income computed without regard to the 
     deduction allowable under this section.
       ``(e) Domestic Production Gross Receipts.--For purposes of 
     this section--
       ``(1) In general.--The term `domestic production gross 
     receipts' means the gross receipts of the taxpayer which are 
     derived from--
       ``(A) any sale, exchange, or other disposition of, or
       ``(B) any lease, rental, or license of,
     qualifying production property which was manufactured, 
     produced, grown, or extracted in whole or in significant part 
     by the taxpayer within the United States.
       ``(2) Special rules for certain property.--In the case of 
     any qualifying production property described in subsection 
     (f)(1)(C)--
       ``(A) such property shall be treated for purposes of 
     paragraph (1) as produced in significant part by the taxpayer 
     within the United States if more than 50 percent of the 
     aggregate development and production costs are incurred by 
     the taxpayer within the United States, and
       ``(B) if a taxpayer acquires such property before such 
     property begins to generate substantial gross receipts, any 
     development or production costs incurred before the 
     acquisition shall be treated as incurred by the taxpayer for 
     purposes of subparagraph (A) and paragraph (1).
       ``(f) Qualifying Production Property.--For purposes of this 
     section--
       ``(1) In general.--Except as otherwise provided in this 
     paragraph, the term `qualifying production property' means--
       ``(A) any tangible personal property,
       ``(B) any computer software, and
       ``(C) any property described in section 168(f) (3) or (4), 
     including any underlying copyright or trademark.
       ``(2) Exclusions from qualifying production property.--The 
     term `qualifying production property' shall not include--
       ``(A) consumable property that is sold, leased, or licensed 
     by the taxpayer as an integral part of the provision of 
     services,
       ``(B) oil or gas,
       ``(C) electricity,
       ``(D) water supplied by pipeline to the consumer,
       ``(E) utility services, or
       ``(F) any film, tape, recording, book, magazine, newspaper, 
     or similar property the market for which is primarily topical 
     or otherwise essentially transitory in nature.
       ``(g) Definitions and Special Rules.--
       ``(1) Application of section to pass-thru entities.--In the 
     case of an S corporation, partnership, estate or trust, or 
     other pass-thru entity--

[[Page S15418]]

       ``(A) subject to the provisions of paragraph (2) and 
     subsection (b)(3)(A), this section shall be applied at the 
     shareholder, partner, or similar level, and
       ``(B) the Secretary shall prescribe rules for the 
     application of this section, including rules relating to--
       ``(i) restrictions on the allocation of the deduction to 
     taxpayers at the partner or similar level, and
       ``(ii) additional reporting requirements.
       ``(2) Exclusion for patrons of agricultural and 
     horticultural cooperatives.--
       ``(A) In general.--If any amount described in paragraph (1) 
     or (3) of section 1385(a)--
       ``(i) is received by a person from an organization to which 
     part I of subchapter T applies which is engaged in the 
     marketing of agricultural or horticultural products, and
       ``(ii) is allocable to the portion of the qualified 
     production activities income of the organization which is 
     deductible under subsection (a) and designated as such by the 
     organization in a written notice mailed to its patrons during 
     the payment period described in section 1382(d),

     then such person shall be allowed an exclusion from gross 
     income with respect to such amount. The taxable income of the 
     organization shall not be reduced under section 1382 by the 
     portion of any such amount with respect to which an exclusion 
     is allowable to a person by reason of this paragraph.
       ``(B) Special rules.--For purposes of applying subparagraph 
     (A), in determining the qualified production activities 
     income of the organization under this section--
       ``(i) there shall not be taken into account in computing 
     the organization's modified taxable income any deduction 
     allowable under subsection (b) or (c) of section 1382 
     (relating to patronage dividends, per-unit retain 
     allocations, and nonpatronage distributions), and
       ``(ii) the organization shall be treated as having 
     manufactured, produced, grown, or extracted in whole or 
     significant part any qualifying production property marketed 
     by the organization which its patrons have so manufactured, 
     produced, grown, or extracted.
       ``(3) Special rule for affiliated groups.--
       ``(A) In general.--All members of an expanded affiliated 
     group shall be treated as a single corporation for purposes 
     of this section.
       ``(B) Expanded affiliated group.--The term `expanded 
     affiliated group' means an affiliated group as defined in 
     section 1504(a), determined--
       ``(i) by substituting `50 percent' for `80 percent' each 
     place it appears, and
       ``(ii) without regard to paragraphs (2) and (4) of section 
     1504(b).
       ``(4) Coordination with minimum tax.--The deduction under 
     this section shall be allowed for purposes of the tax imposed 
     by section 55; except that for purposes of section 55, 
     alternative minimum taxable income shall be taken into 
     account in determining the deduction under this section.
       ``(5) Ordering rule.--The amount of any other deduction 
     allowable under this chapter shall be determined as if this 
     section had not been enacted.
       ``(6) Trade or business requirement.--This section shall be 
     applied by only taking into account items which are 
     attributable to the actual conduct of a trade or business.
       ``(7) Possessions, etc.--
       ``(A) In general.--For purposes of subsections (d) and (e), 
     the term `United States' includes the Commonwealth of Puerto 
     Rico, Guam, American Samoa, the Commonwealth of the Northern 
     Mariana Islands, and the Virgin Islands of the United States.
       ``(B) Special rules for applying wage limitation.--For 
     purposes of applying the limitation under subsection (b) for 
     any taxable year--
       ``(i) the determination of W-2 wages of a taxpayer shall be 
     made without regard to any exclusion under section 3401(a)(8) 
     for remuneration paid for services performed in a 
     jurisdiction described in subparagraph (A), and
       ``(ii) in determining the amount of any credit allowable 
     under section 30A or 936 for the taxable year, there shall 
     not be taken into account any wages which are taken into 
     account in applying such limitation.
       ``(8) Coordination with transition rules.--For purposes of 
     this section--
       ``(A) domestic production gross receipts shall not include 
     gross receipts from any transaction if the binding contract 
     transition relief of section 2(c)(2) of the American 
     Manufacturing Jobs Act of 2003 applies to such transaction, 
     and
       ``(B) any deduction allowed under section 2(e) of such Act 
     shall be disregarded in determining the portion of the 
     taxable income which is attributable to domestic production 
     gross receipts.''.
       (b) Minimum Tax.--Section 56(g)(4)(C) (relating to 
     disallowance of items not deductible in computing earnings 
     and profits) is amended by adding at the end the following 
     new clause:
       ``(v) Deduction for domestic production.--Clause (i) shall 
     not apply to any amount allowable as a deduction under 
     section 199.''.
       (c) Clerical Amendment.--The table of sections for part VI 
     of subchapter B of chapter 1 is amended by adding at the end 
     the following new item:

``Sec. 199. Income attributable to domestic production activities.''.
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years ending after the date of the enactment 
     of this Act.
       (2) Application of section 15.--Section 15 of the Internal 
     Revenue Code of 1986 shall apply to the amendments made by 
     this section as if they were changes in a rate of tax.
                                 ______
                                 
      By Mr. LEAHY:
  S. 1923. A bill to reauthorize and amend the National Film 
Preservation Act of 1996; to the Committee on the Judiciary.
  Mr. LEAHY. Mr. President, I call attention today to a part of 
American heritage that is literally disintegrating faster than can be 
saved. Motion pictures are an important part of our American experience 
and provide an extraordinary record of our history, our dreams, and our 
aspirations. The National Film Preservation Board and the National Film 
Preservation Foundation were created by Congress under the auspices of 
the Library of Congress, to help save America's film heritage. Today, I 
am introducing the ``National Film Preservation Act of 2003,'' which 
will reauthorize and extend the ``National Film Preservation Act of 
1996.''
  We first acted in 1988 in order to recognize both the educational, 
cultural, and historical importance of our film heritage, and its 
inherently fragile nature. The ``National Film Preservation Act of 
2003'' will allow the Library of Congress to continue its important 
work in preserving America's fading treasures, as well as providing 
grants that will help libraries, museums, and archives preserve films, 
and make those works available for study and research. These continued 
efforts are more critical today than ever before. Fewer than 20 percent 
of the features of the 1920s exist in complete form and less than 10 
percent of the features of the 1910s have survived into the new 
millennium.
  The films saved by the National Film Preservation Board are precisely 
those types of films that would be unlikely to survive without public 
support. At-risk documentaries, silent-era films, avant-garde works, 
ethnic films, newsreels, and home movies are in many ways more 
illuminating on the question of who we are as a society than the 
Hollywood sound features kept and preserved by major studios. What is 
more, in many cases only one copy of these ``orphaned'' works exists. 
As the Librarian of Congress, Dr. James H. Billington, has noted, ``Our 
film heritage is America's living past.'' I encourage my colleagues to 
support the ``Film Preservation Act of 2003'' so that America's past 
can survive in order to enlighten and entertain future generations.
  I ask unanimous consent that the text of this bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1923

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

    TITLE I--REAUTHORIZATION OF THE NATIONAL FILM PRESERVATION BOARD

     SEC. 101. SHORT TITLE.

       This title may be cited as the ``National Film Preservation 
     Act of 2003''.

     SEC. 102. REAUTHORIZATION AND AMENDMENT.

       (a) Duties of the Librarian of Congress.--Section 103 of 
     the National Film Preservation Act of 1996 (2 U.S.C. 179m) is 
     amended:
       (1) in subsection (b)--
       (A) by striking ``film copy'' each place that term appears 
     and inserting ``film or other approved copy'';
       (B) by striking ``film copies'' each place that term 
     appears and inserting ``film or other approved copies''; and
       (C) in the third sentence, by striking ``copyrighted'' and 
     inserting ``copyrighted, mass distributed, broadcast, or 
     published'' ; and
       (2) by adding at the end the following:
       ``(c) Coordination of Program With Other Collection, 
     Preservation, and Accessibility Activities.--In carrying out 
     the comprehensive national film preservation program for 
     motion pictures established under the National Film 
     Preservation Act of 1992, the Librarian, in consultation with 
     the Board established pursuant to section 104, shall--
       ``(1) carry out activities to make films included in the 
     National Film registry more broadly accessible for research 
     and educational purposes, and to generate public awareness 
     and support of the Registry and the comprehensive national 
     film preservation program;
       ``(2) review the comprehensive national film preservation 
     plan, and amend it to the

[[Page S15419]]

     extent necessary to ensure that it addresses technological 
     advances in the preservation and storage of, and access to 
     film collections in multiple formats; and
       ``(3) wherever possible, undertake expanded initiatives to 
     ensure the preservation of the moving image heritage of the 
     United States, including film, videotape, television, and 
     born digital moving image formats, by supporting the work of 
     the National Audio-Visual Conservation Center of the Library 
     of Congress, and other appropriate nonprofit archival and 
     preservation organizations.''.
       (b) National Film Preservation Board.--Section 104 of the 
     National Film Preservation Act of 1996 (2 U.S.C. 179n) is 
     amended--
       (1) in subsection (a)(1) by striking ``20'' and inserting 
     ``22'';
       (2) in subsection (a) (2) by striking ``three'' and 
     inserting ``5'';
       (3) in subsection (d) by striking ``11'' and inserting 
     ``12''; and
       (4) by striking subsection (e) and inserting the following:
       ``(e) Reimbursement of Expenses.--Members of the Board 
     shall serve without pay, but may receive travel expenses, 
     including per diem in lieu of subsistence, in accordance with 
     sections 5702 and 5703 of title 5, United States Code.''.
       (c) Responsibilities and Powers of Board.--Section 105(c) 
     of the National Film Preservation Act of 1996 (2 U.S.C. 179o) 
     is amended by adding at the end the following:
       ``(3) Review and approval of special foundation projects.--
     The Board shall review special projects submitted for its 
     approval by the National Film Preservation Foundation under 
     section 151711 of title 36, United States Code.''.
       (d) National Film Registry.--Section 106 of the National 
     Film Preservation Act of 1996 (2 U.S.C. 179q) is amended by 
     adding at the end the following:
       ``(e) National Audio-Visual Conservation Center.--The 
     Librarian shall utilize the National Audio-Visual 
     Conservation Center of the Library of Congress at Culpeper, 
     Virginia, to ensure that preserved films included in the 
     National Film Registry are stored in a proper manner, and 
     disseminated to researchers, scholars, and the public as may 
     be appropriate in accordance with--
       ``(1) title 17 of the United States Code; and
       ``(2) the terms of any agreements between the Librarian and 
     persons who hold copyrights to such audiovisual works.''.
       (e) Use of Seal.--Section 107 (a) of the National Film 
     Preservation Act of 1996 (2 U.S.C. 179q) is amended--
       (1) in paragraph (1), by inserting ``in any format'' after 
     ``or any copy''; and
       (2) in paragraph (2), by striking ``or film copy'' and 
     inserting ``in any format''.
       (f) Effective Date.--Section 113 of the National Film 
     Preservation Act of 1996 (2 U.S.C. 179w) is amended by 
     striking ``7'' and inserting ``17''.

 TITLE II--REAUTHORIZATION OF THE NATIONAL FILM PRESERVATION FOUNDATION

     SEC. 201. SHORT TITLE.

       This title may be cited as the ``National Film Preservation 
     Foundation Reauthorization Act of 2003''.

     SEC. 202. REAUTHORIZATION AND AMENDMENT.

       (a) Board of Directors.--Section 151703 of title 36, United 
     States Code, is amended--
       (1) in subsection (b)(2)(A), by striking ``nine'' and 
     inserting ``12''; and
       (2) in subsection (b)(4), by striking the second sentence 
     and inserting ``There shall be no limit to the number of 
     terms to which any individual may be appointed.''.
       (b) Powers.--Section 151705 of title 36, United States 
     Code, is amended in subsection (b) by striking ``District of 
     Columbia'' and inserting ``the jurisdiction in which the 
     principal office of the corporation is located''.
       (c) Principal Office.--Section 151706 of title 36, United 
     States Code, is amended by inserting ``, or another place as 
     determined by the board of directors'' after ``District of 
     Columbia''.
       (d) Authorization of Appropriations.--Section 151711 of 
     title 36, United States Code, is amended by striking 
     subsections (a) and (b) and inserting the following:
       ``(a) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Library of Congress 
     amounts necessary to carry out this chapter, not to exceed 
     $500,000 for each of the fiscal years 2004 and 2005, and not 
     to exceed $1,000,000 for each of the fiscal years 2006 
     through 2013. These amounts are to be made available to the 
     corporation to match any private contributions (whether in 
     currency, services, or property) made to the corporation by 
     private persons and State and local governments.
       ``(b) Limitation Related to Administrative Expenses.--
     Amounts authorized under this section may not be used by the 
     corporation for management and general or fundraising 
     expenses as reported to the Internal Revenue Service as part 
     of an annual information return required under the Internal 
     Revenue Code of 1986.''.
       (e) Cooperative film preservation.--
       (1) In general.--Chapter 1517 of title 36, United States 
     Code, is amended--
       (A) by redesignating sections 151711 and 151712 as sections 
     151712 and 151713, respectively; and
       (B) by adding at the end the following:

     ``Sec. 151711. Cooperative film preservation

       ``(a) Cooperative film preservation.--
       ``(1) In general.--The corporation shall design and support 
     cooperative national film preservation and access 
     initiatives. Such initiatives shall be approved by the 
     corporation, the Librarian of Congress, and the National Film 
     Preservation Board of the Library of Congress under section 
     105(c)(3) of the National Film Preservation Act of 1996.
       ``(2) Scope.--Cooperative initiatives authorized under 
     paragraph (1) may include--
       ``(A) the repatriation and preservation of American films 
     that may be found in archives outside of the United States;
       ``(B) the exhibition and dissemination via broadcast or 
     other means of ``orphan'' films;
       ``(C) the production of educational materials in various 
     formats to encourage film preservation, preservation 
     initiatives undertaken by 3 or more archives jointly; and
       ``(D) other activities undertaken in light of significant 
     unfunded film preservation and access needs.
       ``(b) Authorization of Appropriations.--
       ``(1) In general.--There are authorized to be appropriated 
     to the Library of Congress amounts not to exceed $1,000,000 
     for each of the fiscal years 2006 through 2013, to carry out 
     the purposes of this section.
       ``(2) Matching.--The amounts made available under paragraph 
     (1) are to be made available to the corporation to match any 
     private contributions (whether in currency, services, or 
     property) made to the corporation by private persons and 
     State and local governments.
       ``(3) Limitation Related to Administrative Expenses.--
     Amounts authorized under this section may not be used by the 
     corporation for management and general or fundraising 
     expenses as reported to the Internal Revenue Service as part 
     of an annual information return required under the Internal 
     Revenue Code of 1986.''.
       (2) Technical and Conforming Amendment.--The table of 
     sections for chapter 1517 of title 36, United States Code, is 
     amended by striking the matter relating to section 151711 and 
     151712 and inserting the following:

``151711. Cooperative film preservation.
``151712. Authorization of appropriations.
``151713. Annual report.''.
                                 ______
                                 
      By Mr. JEFFORDS:
  S. 1924. A bill to provide for the coverage of milk production under 
the H-2A nonimmigrant worker program; to the Committee on the 
Judiciary.
  Mr. JEFFORDS. Mr. President, today I rise to introduce the Dairy Farm 
Workers Fairness Act.
  Family dairy farms are critically important to our agricultural 
economy and to the rural way of life in many parts of the country. 
These farms support the rural economy by supporting the local tax base 
and many local businesses. The working landscape created by our farms, 
especially a patchwork of small farms, is also the best antidote for 
the urban sprawl that is overtaking so much of the country. And, of 
course, the availability of fresh, locally produced milk is an amenity 
that we have come to take for granted. To support our rural economies, 
the working landscape and our local food supply systems we need to help 
small family dairy farms survive and thrive.
  The most difficult challenge to the family dairy farm, after the 
volatility in milk price, is finding and hiring workers. In my home 
State of Vermont, dairy farms are not only an important part of our 
economy; they are an institution that has come to define our landscape. 
Vermont's beauty lies in the green fields, the red barns and the cows 
grazing on the hillside. When a farm family sells their land, which in 
many cases may have been worked by them and their ancestors for 5 or 
more generations, the decision is often driven by the non-stop, 7 day a 
week, 365 days a year work schedule. As fewer rural residents choose to 
work in agriculture, these farmers have been forced to take on more 
themselves. The whole family can end up working without vacations, sick 
leave or having weekends off. Although dairy farming might not seem 
seasonal, the burden becomes particularly heavy during the growing 
season when planting, haying, harvesting and storage of feed must all 
occur.
  Dairy farmers are being forced to explore other options to find a 
predictable source of qualified labor. While other agricultural 
businesses in the country benefit from the temporary workers qualified 
under the H2A Work Visa Program, dairy farms do not. The job of milking 
cows on dairy farms has been judged under the current H2A program to 
not meet the definition of temporary or seasonal and is thus excluded. 
The largest labor need on dairy farms during the growing season, 
remains the need for assistance with milking. The cows must be milked 
two or three times a day by hired help so the farmer is able to take on 
the more complex and specialized work of operating large machinery to 
plant and harvest. While the work of milking is not seasonal or 
temporary, the need for additional labor to accomplish the

[[Page S15420]]

work is seasonal and temporary. I believe the exclusion of dairy 
farming under the H2A program is an unintended problem in definitions, 
and our legislation is designed to fix that glitch. We must do this out 
of fairness, so that dairy farms can benefit from the same access to 
labor that other farms have, and more importantly to help our farms 
survive.
  Recently, I heard from a farmer who owns and operates, along with his 
wife, a small dairy farm in central Vermont. The couple is nearing 
retirement age and have no children of their own. They had attempted to 
find a farm hand that could live on the farm and help with milking and 
some of the heavier chores. After placing ads in the paper and working 
with the state of Vermont's Department of Employment and Training, it 
became clear that their best option was to hire a family friend who had 
a strong desire to learn farming. Since the young man was from Honduras 
they began the visa process only to have their request for 
certification by the U.S. Department of Labor denied because their need 
was considered neither temporary nor seasonal. This farm plays such an 
important role in their rural Vermont community that I heard from 
several other constituents who asked for my assistance on this family's 
behalf. The couple continues to work their land but in doing so they 
are straining their health and pushing themselves harder than they 
should. They continue to operate their farm because they do not want to 
sell it since it is land that has been farmed for generations.
  The legislation I am introducing today would allow this family farm, 
and so many others like it, to avail themselves of a labor source that 
exists for virtually every other farm in this country. By creating a 
period based on the summer growing season, dairy farms will be able to 
bring on extra help during the busiest part of the year, providing much 
needed relief for our farm families. I urge my colleagues to join me in 
supporting dairy farms across the United States by cosponsoring this 
important legislation. 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:

                                S. 1924

       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 ``Dairy Farm Workers Fairness 
     Act''.

     SEC. 2. COVERAGE OF MILK PRODUCTION UNDER H-2A NONIMMIGRANT 
                   WORKER PROGRAM.

       (a) In General.--For purposes of the administration of the 
     H-2A worker program in a year, work performed in the 
     production of milk for commercial use not earlier than April 
     15 or later than October 15 of that year shall qualify as 
     agriculture labor or services of a seasonal nature.
       (b) Definitions.--In this section:
       (1) H-2A nonimmigrant worker program.--The term ``H-2A 
     nonimmigrant worker program'' means the program for the 
     admission to the United States of H-2A nonimmigrant workers.
       (2) H-2A nonimmigrant workers.--The term ``H-2A worker'' 
     means a nonimmigrant alien described in section 
     101(a)(15)(H)(ii)(a) of the Immigration and Nationality Act 
     (8 U.S.C. 1101(a)(15)(H)(ii)(a)).
                                 ______
                                 
      By Ms. STABENOW (for herself, Mr. Graham of Florida, Mrs. 
        Clinton, Mrs. Murray, Mr. Leahy, Mr. Daschle, Mr. Pryor, Mr. 
        Levin, Mr. Schumer, and Ms. Cantwell):
  S. 1926. A bill to amend title XVIII of the Social Security Act to 
restore the medicare program and for other purposes; to the Committee 
on Finance.
  Ms. STABENOW. Mr. President, I rise today to introduce legislation 
that would allow us to help our providers and patients now.
  If we immediately pass this bill, we can make our providers whole and 
then go back to the drawing board to get a better Medicare prescription 
drug benefit bill.
  The bill includes all of the provider givebacks in the Conference 
Report accompanying H.R. 1, the Medicare Prescription Drug and 
Modernization Act of 2003.
  It includes all adjustments, word for word, for the rural provisions, 
physician updates, graduate medical education, GME, and home health 
services.
  It does not add new language.
  It does not include any provider cuts or premium increases in H.R.1.
  Congress should pass these provisions on their own to help hospitals, 
physicians, and patients and not hold them hostage to a prescription 
drug bill that privatizes Medicare and provides a mediocre benefit to 
most seniors.
  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:

                                S. 1926

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

     SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; 
                   REFERENCES TO BIPA AND SECRETARY; TABLE OF 
                   CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Support 
     Our Health Care Providers Act of 2003''.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in division A of this Act an 
     amendment is expressed in terms of an amendment to or repeal 
     of a section or other provision, the reference shall be 
     considered to be made to that section or other provision of 
     the Social Security Act.
       (c) BIPA; Secretary.--In this Act:
       (1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid, 
     and SCHIP Benefits Improvement and Protection Act of 2000, as 
     enacted into law by section 1(a)(6) of Public Law 106-554.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (d) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                       TITLE I--RURAL PROVISIONS

             Subtitle A--Provisions Relating to Part A Only

Sec. 101. Equalizing urban and rural standardized payment amounts under 
              the medicare inpatient hospital prospective payment 
              system.
Sec. 102. Enhanced disproportionate share hospital (DSH) treatment for 
              rural hospitals and urban hospitals with fewer than 100 
              beds.
Sec. 103. Adjustment to the medicare inpatient hospital prospective 
              payment system wage index to revise the labor-related 
              share of such index.
Sec. 104. More frequent update in weights used in hospital market 
              basket.
Sec. 105. Improvements to critical access hospital program.
Sec. 106. Medicare inpatient hospital payment adjustment for low-volume 
              hospitals.
Sec. 107. Treatment of missing cost reporting periods for sole 
              community hospitals.
Sec. 108. Recognition of attending nurse practitioners as attending 
              physicians to serve hospice patients.
Sec. 109. Rural hospice demonstration project.
Sec. 110. Exclusion of certain rural health clinic and federally 
              qualified health center services from the prospective 
              payment system for skilled nursing facilities.
Sec. 110A. Rural community hospital demonstration program.

             Subtitle B--Provisions Relating to Part B Only

Sec. 111. 2-year extension of hold harmless provisions for small rural 
              hospitals and sole community hospitals under the 
              prospective payment system for hospital outpatient 
              department services.
Sec. 112. Establishment of floor on work geographic adjustment.
Sec. 113. Medicare incentive payment program improvements for physician 
              scarcity.
Sec. 114. Payment for rural and urban ambulance services.
Sec. 115. Providing appropriate coverage of rural air ambulance 
              services.
Sec. 116. Treatment of certain clinical diagnostic laboratory tests 
              furnished to hospital outpatients in certain rural areas.
Sec. 117. Extension of telemedicine demonstration project.
Sec. 118. Report on demonstration project permitting skilled nursing 
              facilities to be originating telehealth sites; authority 
              to implement.

            Subtitle C--Provisions Relating to Parts A and B

Sec. 121. 1-year increase for home health services furnished in a rural 
              area.
Sec. 122. Redistribution of unused resident positions.

                      Subtitle D--Other Provisions

Sec. 131. Providing safe harbor for certain collaborative efforts that 
              benefit medically underserved populations.
Sec. 132. Office of rural health policy improvements.

[[Page S15421]]

Sec. 133. MedPac study on rural hospital payment adjustments.
Sec. 134. Frontier extended stay clinic demonstration project.

                TITLE II--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

Sec. 201. Revision of acute care hospital payment updates.
Sec. 202. Revision of the indirect medical education (IME) adjustment 
              percentage.
Sec. 203. Recognition of new medical technologies under inpatient 
              hospital prospective payment system.
Sec. 204. Increase in Federal rate for hospitals in Puerto Rico.
Sec. 205. Wage index adjustment reclassification reform.
Sec. 206. Limitation on charges for inpatient hospital contract health 
              services provided to Indians by medicare participating 
              hospitals.
Sec. 207. Clarifications to certain exceptions to medicare limits on 
              physician referrals.
Sec. 208. 1-time appeals process for hospital wage index 
              classification.

                      Subtitle B--Other Provisions

Sec. 211. Payment for covered skilled nursing facility services.
Sec. 212. Coverage of hospice consultation services.
Sec. 213. Study on portable diagnostic ultrasound services for 
              beneficiaries in skilled nursing facilities.

                TITLE III--PROVISIONS RELATING TO PART B

        Subtitle A--Provisions Relating to Physicians' Services

Sec. 301. Revision of updates for physicians' services.
Sec. 302. Treatment of physicians' services furnished in Alaska.
Sec. 303. Inclusion of podiatrists, dentists, and optometrists under 
              private contracting authority.
Sec. 304. GAO study on access to physicians' services.
Sec. 305. Collaborative demonstration-based review of physician 
              practice expense geographic adjustment data.
Sec. 306. MedPac report on payment for physicians' services.

                    Subtitle B--Preventive Services

Sec. 311. Coverage of an initial preventive physical examination.
Sec. 312. Coverage of cardiovascular screening blood tests.
Sec. 313. Coverage of diabetes screening tests.
Sec. 314. Improved payment for certain mammography services.

                      Subtitle C--Other Provisions

Sec. 321. Hospital outpatient department (HOPD) payment reform.
Sec. 322. Limitation of application of functional equivalence standard.
Sec. 323. Payment for renal dialysis services.
Sec. 324. 2-year moratorium on therapy caps; provisions relating to 
              reports.
Sec. 325. Waiver of part B late enrollment penalty for certain military 
              retirees; special enrollment period.
Sec. 326. Payment for services furnished in ambulatory surgical 
              centers.
Sec. 327. Payment for certain shoes and inserts under the fee schedule 
              for orthotics and prosthetics.
Sec. 328. 5-year authorization of reimbursement for all medicare part B 
              services furnished by certain Indian hospitals and 
              clinics.

  Subtitle D--Additional Demonstrations, Studies, and Other Provisions

Sec. 341. Demonstration project for coverage of certain prescription 
              drugs and biologicals.
Sec. 342. Extension of coverage of intravenous immune globulin (IVIG) 
              for the treatment of primary immune deficiency diseases 
              in the home.
Sec. 343. MedPac study of coverage of surgical first assisting services 
              of certified registered nurse first assistants.
Sec. 344. MedPac study of payment for cardio-thoracic surgeons.
Sec. 345. Studies relating to vision impairments.
Sec. 346. Medicare health care quality demonstration programs.
Sec. 347. MedPac study on direct access to physical therapy services.
Sec. 348. Demonstration project for consumer-directed chronic 
              outpatient services.
Sec. 349. Medicare care management performance demonstration.
Sec. 350. GAO study and report on the propagation of concierge care.
Sec. 351. Demonstration of coverage of chiropractic services under 
              medicare.

             TITLE IV--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

Sec. 401. Demonstration project to clarify the definition of homebound.
Sec. 402. Demonstration project for medical adult day-care services.
Sec. 403. Temporary suspension of oasis requirement for collection of 
              data on non-medicare and non-medicaid patients.
Sec. 404. MedPac study on medicare margins of home health agencies.
Sec. 405. Coverage of religious nonmedical health care institution 
              services furnished in the home.

                 Subtitle B--Graduate Medical Education

Sec. 411. Exception to initial residency period for geriatric residency 
              or fellowship programs. 
Sec. 412. Treatment of volunteer supervision.

                  Subtitle C--Chronic Care Improvement

Sec. 421. Voluntary chronic care improvement under traditional fee-for-
              service.
Sec. 422. Medicare advantage quality improvement programs.
Sec. 423. Chronically ill medicare beneficiary research, data, 
              demonstration strategy.

                      Subtitle D--Other Provisions

Sec. 431. Improvements in national and local coverage determination 
              process to respond to changes in technology.
Sec. 432. Extension of treatment of certain physician pathology 
              services under medicare.
Sec. 433. Payment for pancreatic islet cell investigational transplants 
              for medicare beneficiaries in clinical trials.
Sec. 434. Restoration of medicare trust funds.
Sec. 435. Modifications to Medicare Payment Advisory Commission 
              (MedPac).
Sec. 436. Technical amendments.

    TITLE V--ADMINISTRATIVE IMPROVEMENTS, REGULATORY REDUCTION, AND 
                           CONTRACTING REFORM

Sec. 500. Administrative improvements within the Centers for Medicare & 
              Medicaid Services (CMS).

                     Subtitle A--Regulatory Reform

Sec. 501. Construction; definition of supplier.
Sec. 502. Issuance of regulations.
Sec. 503. Compliance with changes in regulations and policies.
Sec. 504. Reports and studies relating to regulatory reform.

                     Subtitle B--Contracting Reform

Sec. 511. Increased flexibility in medicare administration.
Sec. 512. Requirements for information security for medicare 
              administrative contractors.

                   Subtitle C--Education and Outreach

Sec. 521. Provider education and technical assistance.
Sec. 522. Small provider technical assistance demonstration program.
Sec. 523. Medicare beneficiary ombudsman.
Sec. 524. Beneficiary outreach demonstration program.
Sec. 525. Inclusion of additional information in notices to 
              beneficiaries about skilled nursing facility benefits.
Sec. 526. Information on medicare-certified skilled nursing facilities 
              in hospital discharge plans.

                    Subtitle D--Appeals and Recovery

Sec. 531. Transfer of responsibility for medicare appeals.
Sec. 532. Process for expedited access to review.
Sec. 533. Revisions to medicare appeals process.
Sec. 534. Prepayment review.
Sec. 535. Recovery of overpayments.
Sec. 536. Provider enrollment process; right of appeal.
Sec. 537. Process for correction of minor errors and omissions without 
              pursuing appeals process.
Sec. 538. Prior determination process for certain items and services; 
              advance beneficiary notices.
Sec. 539. Appeals by providers when there is no other party available.
Sec. 540. Revisions to appeals timeframes and amounts.
Sec. 540A. Mediation process for local coverage determinations.

                  Subtitle E--Miscellaneous Provisions

Sec. 541. Policy development regarding evaluation and management (E & 
              M) documentation guidelines.
Sec. 542. Improvement in oversight of technology and coverage.
Sec. 543. Treatment of hospitals for certain services under medicare 
              secondary payor (MSP) provisions.
Sec. 544. EMTALA improvements.
Sec. 545. Emergency Medical Treatment and Labor Act (EMTALA) Technical 
              Advisory Group.
Sec. 546. Authorizing use of arrangements to provide core hospice 
              services in certain circumstances.
Sec. 547. Application of osha bloodborne pathogens standard to certain 
              hospitals.
Sec. 548. Bipa-related technical amendments and corrections.
Sec. 549. Conforming authority to waive a program exclusion.
Sec. 550. Treatment of certain dental claims.
Sec. 551. Furnishing hospitals with information to compute DSH formula.

[[Page S15422]]

Sec. 552. Revisions to reassignment provisions.
Sec. 553. Other provisions.

            TITLE VI--MEDICAID AND MISCELLANEOUS PROVISIONS

                    Subtitle A--Medicaid Provisions

Sec. 601. Medicaid disproportionate share hospital (DSH) payments.
Sec. 602. Clarification of inclusion of inpatient drug prices charged 
              to certain public hospitals in the best price exemptions 
              for the medicaid drug rebate program.
Sec. 603. Extension of moratorium.

                  Subtitle B--Miscellaneous Provisions

Sec. 611. Federal reimbursement of emergency health services furnished 
              to undocumented aliens.
Sec. 612. Commission on Systemic Interoperability.
Sec. 613. Research on outcomes of health care items and services.
Sec. 614. Health care that works for all Americans: Citizens Health 
              Care Working Group.
Sec. 615. Funding start-up administrative costs for medicare reform.
Sec. 616. Health care infrastructure improvement program.

                       TITLE I--RURAL PROVISIONS

             Subtitle A--Provisions Relating to Part A Only

     SEC. 101. EQUALIZING URBAN AND RURAL STANDARDIZED PAYMENT 
                   AMOUNTS UNDER THE MEDICARE INPATIENT HOSPITAL 
                   PROSPECTIVE PAYMENT SYSTEM.

       (a) In General.--Section 1886(d)(3)(A)(iv) (42 U.S.C. 
     1395ww(d)(3)(A)(iv)) is amended--
       (1) by striking ``(iv) For discharges'' and inserting 
     ``(iv)(I) Subject to subclause (II), for discharges''; and
       (2) by adding at the end the following new subclause:
       ``(II) For discharges occurring in a fiscal year (beginning 
     with fiscal year 2004), the Secretary shall compute a 
     standardized amount for hospitals located in any area within 
     the United States and within each region equal to the 
     standardized amount computed for the previous fiscal year 
     under this subparagraph for hospitals located in a large 
     urban area (or, beginning with fiscal year 2005, for all 
     hospitals in the previous fiscal year) increased by the 
     applicable percentage increase under subsection (b)(3)(B)(i) 
     for the fiscal year involved.''.
       (b) Conforming Amendments.--
       (1) Computing drg-specific rates.--Section 1886(d)(3)(D) 
     (42 U.S.C. 1395ww(d)(3)(D)) is amended--
       (A) in the heading, by striking ``in different areas'';
       (B) in the matter preceding clause (i), by striking ``, 
     each of'';
       (C) in clause (i)--
       (i) in the matter preceding subclause (I), by inserting 
     ``for fiscal years before fiscal year 2004,'' before ``for 
     hospitals''; and
       (ii) in subclause (II), by striking ``and'' after the 
     semicolon at the end;
       (D) in clause (ii)--
       (i) in the matter preceding subclause (I), by inserting 
     ``for fiscal years before fiscal year 2004,'' before ``for 
     hospitals''; and
       (ii) in subclause (II), by striking the period at the end 
     and inserting ``; and''; and
       (E) by adding at the end the following new clause:
       ``(iii) for a fiscal year beginning after fiscal year 2003, 
     for hospitals located in all areas, to the product of--
       ``(I) the applicable standardized amount (computed under 
     subparagraph (A)), reduced under subparagraph (B), and 
     adjusted or reduced under subparagraph (C) for the fiscal 
     year; and
       ``(II) the weighting factor (determined under paragraph 
     (4)(B)) for that diagnosis-related group.''.
       (2) Technical conforming sunset.--Section 1886(d)(3) (42 
     U.S.C. 1395ww(d)(3)) is amended--
       (A) in the matter preceding subparagraph (A), by inserting 
     ``, for fiscal years before fiscal year 1997,'' before ``a 
     regional adjusted DRG prospective payment rate''; and
       (B) in subparagraph (D), in the matter preceding clause 
     (i), by inserting ``, for fiscal years before fiscal year 
     1997,'' before ``a regional DRG prospective payment rate for 
     each region,''.
       (3) Additional technical amendment.--Section 
     1886(d)(3)(A)(iii) (42 U.S.C. 1395ww(d)(3)(A)(iii)) is 
     amended by striking ``in an other urban area'' and inserting 
     ``in an urban area''.
       (c) Equalizing Urban and Rural Standardized Payment Amounts 
     Under the Medicare Inpatient Hospital Prospective Payment 
     System for Hospitals in Puerto Rico.--
       (1) In general.--Section 1886(d)(9)(A) (42 U.S.C. 
     1395ww(d)(9)(A)), as amended by section 204, is amended--
       (A) in clause (i), by striking ``and'' after the comma at 
     the end; and
       (B) by striking clause (ii) and inserting the following new 
     clause:
       ``(ii) the applicable Federal percentage (specified in 
     subparagraph (E)) of--
       ``(I) for discharges beginning in a fiscal year beginning 
     on or after October 1, 1997, and before October 1, 2003, the 
     discharge-weighted average of--
       ``(aa) the national adjusted DRG prospective payment rate 
     (determined under paragraph (3)(D)) for hospitals located in 
     a large urban area,
       ``(bb) such rate for hospitals located in other urban 
     areas, and
       ``(cc) such rate for hospitals located in a rural area,

     for such discharges, adjusted in the manner provided in 
     paragraph (3)(E) for different area wage levels; and
       ``(II) for discharges in a fiscal year beginning on or 
     after October 1, 2003, the national DRG prospective payment 
     rate determined under paragraph (3)(D)(iii) for hospitals 
     located in any area for such discharges, adjusted in the 
     manner provided in paragraph (3)(E) for different area wage 
     levels.
     (2) Application of puerto rico standardized amount based on 
     large urban areas.--The authority of the Secretary referred 
     to in paragraph (1) shall apply with respect to the 
     amendments made by subsection (c) (2) of this section in the 
     same manner as that authority applies with respect to the 
     extension of provisions equalizing urban and rural 
     standardized inpatient hospital payments under subsection (a) 
     of such section 402, except that any reference in subsection 
     (b)(2)(A) of such section 402 is deemed to be a reference to 
     April 1, 2004.

     SEC. 102 ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) 
                   TREATMENT FOR RURAL HOSPITALS AND URBAN 
                   HOSPITALS WITH FEWER THAN 100 BEDS.

       (a) Doubling the Cap.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended by adding at the end the 
     following new clause:
       ``(xiv)(I) In the case of discharges occurring on or after 
     April 1, 2004, subject to subclause (II), there shall be 
     substituted for the disproportionate share adjustment 
     percentage otherwise determined under clause (iv) (other than 
     subclause (I)) or under clause (viii), (x), (xi), (xii), or 
     (xiii), the disproportionate share adjustment percentage 
     determined under clause (vii) (relating to large, urban 
     hospitals).
       ``(II) Under subclause (I,) the disproportionate share 
     adjustment percentage shall not exceed 12 percent for a 
     hospital that is not classified as a rural referral center 
     under subparagraph (C).''.
       (b) Conforming Amendments.--Section 1886(d) (42 U.S.C. 
     1395ww(d)) is amended--
     (1) in paragraph (5)(F)--
     (A) in each of subclauses (II), (III), (IV), (V), and (VI) of 
     clause (iv), by inserting ``subject to clause (xiv) and'' 
     before ``for discharges occurring'';
     (B) in clause (vi), by striking ``The Formula'' and inserting 
     ``Subject to clause (xiv), the formula''; and
     As used in this section, the term `subsection (d) Puerto Rico 
     hospital' means a hospital that is located in Puerto Rico and 
     that would be a subsection (d) hospital (as defined in 
     paragraph (1)(B)) if it were located in one of the 50 
     States.''.
       (2) Application of puerto rico standardized amount based on 
     large urban areas.--Section 1886(d)(9)(C) (42 U.S.C. 
     1395ww(d)(9)(C)) is amended--
       (A) in clause (i)--
       (i) by striking ``(i) The Secretary'' and inserting 
     ``(i)(I) For discharges in a fiscal year after fiscal year 
     1988 and before fiscal year 2004, the Secretary''; and
       (ii) by adding at the end the following new subclause:
       ``(II) For discharges occurring in a fiscal year (beginning 
     with fiscal year 2004), the Secretary shall compute an 
     average standardized amount for hospitals located in any area 
     of Puerto Rico that is equal to the average standardized 
     amount computed under subclause (I) for fiscal year 2003 for 
     hospitals in a large urban area (or, beginning with fiscal 
     year 2005, for all hospitals in the previous fiscal year) 
     increased by the applicable percentage increase under 
     subsection (b)(3)(B) for the fiscal year involved.'';
       (B) in clause (ii), by inserting ``(or for fiscal year 2004 
     and thereafter, the average standardized amount)'' after 
     ``each of the average standardized amounts''; and
       (C) in clause (iii)(I), by striking ``for hospitals located 
     in an urban or rural area, respectively''.
       (d) Implementation.--
       (1) In general.--The amendments made by subsections (a), 
     (b), and (c)(1) of this section shall have no effect on the 
     authority of the Secretary, under subsection (b)(2) of 
     section 402 of Public Law 108-89, to delay implementation of 
     the extension of provisions equalizing urban and rural 
     standardized inpatient hospital payments under subsection (a) 
     of such section 402.
       (2) Application of puerto rico standardized amount based on 
     large urban areas.--The authority of the Secretary referred 
     to in paragraph (1) shall apply with respect to the 
     amendments made by subsection (c)(2) of this section in the 
     same manner as that authority applies with respect to the 
     extension of provisions equalizing urban and rural 
     standardized inpatient hospital payments under subsection (a) 
     of such section 402, except that any reference in subsection 
     (b)(2)(A) of such section 402 is deemed to be a reference to 
     April 1, 2004.

     SEC. 102. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) 
                   TREATMENT FOR RURAL HOSPITALS AND URBAN 
                   HOSPITALS WITH FEWER THAN 100 BEDS.

       (a) Doubling the Cap.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended by adding at the end the 
     following new clause:
       ``(xiv)(I) In the case of discharges occurring on or after 
     April 1, 2004, subject to subclause (II), there shall be 
     substituted for the disproportionate share adjustment 
     percentage otherwise determined under clause (iv) (other than 
     subclause (I)) or under clause

[[Page S15423]]

     (viii), (x), (xi), (xii), or (xiii), the disproportionate 
     share adjustment percentage determined under clause (vii) 
     (relating to large, urban hospitals).
       ``(II) Under subclause (I), the disproportionate share 
     adjustment percentage shall not exceed 12 percent for a 
     hospital that is not classified as a rural referral center 
     under subparagraph (C).''.
       (b) Conforming Amendments.--Section 1886(d) (42 U.S.C. 
     1395ww(d)) is amended--
       (1) in paragraph (5)(F)--
       (A) in each of subclauses (II), (III), (IV), (V), and (VI) 
     of clause (iv), by inserting ``subject to clause (xiv) and'' 
     before ``for discharges occurring'';
       (B) in clause (viii), by striking ``The formula'' and 
     inserting ``Subject to clause (xiv), the formula''; and
       (C) in each of clauses (x), (xi), (xii), and (xiii), by 
     striking ``For purposes'' and inserting ``Subject to clause 
     (xiv), for purposes''; and
       (2) in paragraph (2)(C)(iv)--
       (A) by striking ``or'' before ``the enactment of section 
     303''; and
       (B) by inserting before the period at the end the 
     following: ``, or the enactment of section 402(a)(1) of the 
     Medicare Provider Restoration Act of 2003''.

     SEC. 103. ADJUSTMENT TO THE MEDICARE INPATIENT HOSPITAL 
                   PROSPECTIVE PAYMENT SYSTEM WAGE INDEX TO REVISE 
                   THE LABOR-RELATED SHARE OF SUCH INDEX.

       (a) Adjustment.--
       (1) In general.--Section 1886(d)(3)(E) (42 U.S.C. 
     1395ww(d)(3)(E)) is amended--
       (A) by striking ``wage levels.--The Secretary'' and 
     inserting ``wage levels.--
       ``(i) In general.--Except as provided in clause (ii), the 
     Secretary''; and
       (B) by adding at the end the following new clause:
       ``(ii) Alternative proportion to be adjusted beginning in 
     fiscal year 2005.--For discharges occurring on or after 
     October 1, 2004, the Secretary shall substitute `62 percent' 
     for the proportion described in the first sentence of clause 
     (i), unless the application of this clause would result in 
     lower payments to a hospital than would otherwise be made.''.
       (2) Waiving budget neutrality.--Section 1886(d)(3)(E) (42 
     U.S.C. 1395ww(d)(3)(E)), as amended by subsection (a), is 
     amended by adding at the end of clause (i) the following new 
     sentence: ``The Secretary shall apply the previous sentence 
     for any period as if the amendments made by section 103(a)(1) 
     of the Medicare Provider Restoration Act of 2003 had not been 
     enacted.''.
       (b) Application to Puerto Rico Hospitals.--Section 
     1886(d)(9)(C)(iv) (42 U.S.C. 1395ww(d)(9)(C)(iv)) is 
     amended--
       (1) by inserting ``(I)'' after ``(iv)'';
       (2) by striking ``paragraph (3)(E)'' and inserting 
     ``paragraph (3)(E)(i)''; and
       (3) by adding at the end the following new subclause:
       ``(II) For discharges occurring on or after October 1, 
     2004, the Secretary shall substitute `62 percent' for the 
     proportion described in the first sentence of clause (i), 
     unless the application of this subclause would result in 
     lower payments to a hospital than would otherwise be made.''.

     SEC. 104. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL 
                   MARKET BASKET.

       (a) More Frequent Updates in Weights.--After revising the 
     weights used in the hospital market basket under section 
     1886(b)(3)(B)(iii) of the Social Security Act (42 U.S.C. 
     1395ww(b)(3)(B)(iii)) to reflect the most current data 
     available, the Secretary shall establish a frequency for 
     revising such weights, including the labor share, in such 
     market basket to reflect the most current data available more 
     frequently than once every 5 years.
       (b) Incorporation of Explanation in Rulemaking.--The 
     Secretary shall include in the publication of the final rule 
     for payment for inpatient hospital services under section 
     1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)) for 
     fiscal year 2006, an explanation of the reasons for, and 
     options considered, in determining frequency established 
     under subsection (a).

     SEC. 105. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

       (a) Increase in Payment Amounts.--
       (1) In general.--Sections 1814(l), 1834(g)(1), and 
     1883(a)(3) (42 U.S.C. 1395f(l), 1395m(g)(1), and 
     1395tt(a)(3)) are each amended by inserting ``equal to 101 
     percent of'' before ``the reasonable costs''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to payments for services furnished during cost 
     reporting periods beginning on or after January 1, 2004.
       (b) Coverage of Costs for Certain Emergency Room On-Call 
     Providers.--
       (1) In general.--Section 1834(g)(5) (42 U.S.C. 1395m(g)(5)) 
     is amended--
       (A) in the heading--
       (i) by inserting ``certain'' before ``emergency''; and
       (ii) by striking ``physicians'' and inserting 
     ``providers'';
       (B) by striking ``emergency room physicians who are on-call 
     (as defined by the Secretary)'' and inserting ``physicians, 
     physician assistants, nurse practitioners, and clinical nurse 
     specialists who are on-call (as defined by the Secretary) to 
     provide emergency services''; and
       (C) by striking ``physicians' services'' and inserting 
     ``services covered under this title''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply with respect to costs incurred for services 
     furnished on or after January 1, 2005.
       (c) Authorization of Periodic Interim Payment (PIP).--
       (1) In general.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) 
     is amended--
       (A) in the matter before subparagraph (A), by inserting ``, 
     in the cases described in subparagraphs (A) through (D)'' 
     after ``1986'';
       (B) by striking ``and'' at the end of subparagraph (C);
       (C) by adding ``and'' at the end of subparagraph (D); and
       (D) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) inpatient critical access hospital services;''.
       (2) Development of alternative timing methods of periodic 
     interim payments.--With respect to periodic interim payments 
     to critical access hospitals for inpatient critical access 
     hospital services under section 1815(e)(2)(E) of the Social 
     Security Act, as added by paragraph (1), the Secretary shall 
     develop alternative methods for the timing of such payments.
       (3) Authorization of pip.--The amendments made by paragraph 
     (1) shall apply to payments made on or after July 1, 2004.
       (d) Condition for Application of Special Professional 
     Service Payment Adjustment.--
       (1) In general.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) 
     is amended by adding after and below subparagraph (B) the 
     following:
     ``The Secretary may not require, as a condition for applying 
     subparagraph (B) with respect to a critical access hospital, 
     that each physician or other practitioner providing 
     professional services in the hospital must assign billing 
     rights with respect to such services, except that such 
     subparagraph shall not apply to those physicians and 
     practitioners who have not assigned such billing rights.''.
       (2) Effective date.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendment made by paragraph (1) shall apply to cost 
     reporting periods beginning on or after July 1, 2004.
       (B) Rule of application.--In the case of a critical access 
     hospital that made an election under section 1834(g)(2) of 
     the Social Security Act (42 U.S.C. 1395m(g)(2)) before 
     November 1, 2003, the amendment made by paragraph (1) shall 
     apply to cost reporting periods beginning on or after July 1, 
     2001.
       (e) Revision of Bed Limitation for Hospitals.--
       (1) In general.--Section 1820(c)(2)(B)(iii) (42 U.S.C. 
     1395i-4(c)(2)(B)(iii)) is amended by striking ``15 (or, in 
     the case of a facility under an agreement described in 
     subsection (f), 25)'' and inserting ``25''.
       (2) Conforming amendment.--Section 1820(f) (42 U.S.C. 
     1395i-4(f)) is amended by striking ``and the number of beds 
     used at any time for acute care inpatient services does not 
     exceed 15 beds''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to designations made before, on, or after January 
     1, 2004, but any election made pursuant to regulations 
     promulgated to carry out such amendments shall only apply 
     prospectively.
       (f) Provisions Relating to FLEX Grants.--
       (1) Additional 4-year period of funding.--Section 1820(j) 
     (42 U.S.C. 1395i-4(j)) is amended by inserting before the 
     period at the end the following: ``, and for making grants to 
     all States under paragraphs (1) and (2) of subsection (g), 
     $35,000,000 in each of fiscal years 2005 through 2008''.
       (2) Additional requirements and administration.--Section 
     1820(g) (42 U.S.C. 1395i-4(g)) is amended by adding at the 
     end the following new paragraphs:
       ``(4) Additional requirements with respect to flex 
     grants.--With respect to grants awarded under paragraph (1) 
     or (2) from funds appropriated for fiscal year 2005 and 
     subsequent fiscal years--
       ``(A) Consultation with the state hospital association and 
     rural hospitals on the most appropriate ways to use grants.--
     A State shall consult with the hospital association of such 
     State and rural hospitals located in such State on the most 
     appropriate ways to use the funds under such grant.
       ``(B) Limitation on use of grant funds for administrative 
     expenses.--A State may not expend more than the lesser of--
       ``(i) 15 percent of the amount of the grant for 
     administrative expenses; or
       ``(ii) the State's federally negotiated indirect rate for 
     administering the grant.
       ``(5) Use of funds for federal administrative expenses.--Of 
     the total amount appropriated for grants under paragraphs (1) 
     and (2) for a fiscal year (beginning with fiscal year 2005), 
     up to 5 percent of such amount shall be available to the 
     Health Resources and Services Administration for purposes of 
     administering such grants.''.
       (g) Authority To Establish Psychiatric and Rehabilitation 
     Distinct Part Units.--
       (1) In general.--Section 1820(c)(2) (42 U.S.C. 1395i-
     4(c)(2)) is amended by adding at the end the following:
       ``(E) Authority to establish psychiatric and rehabilitation 
     distinct part units.--
       ``(i) In general.--Subject to the succeeding provisions of 
     this subparagraph, a critical access hospital may establish--

       ``(I) a psychiatric unit of the hospital that is a distinct 
     part of the hospital; and
       ``(II) a rehabilitation unit of the hospital that is a 
     distinct part of the hospital,


[[Page S15424]]



     if the distinct part meets the requirements (including 
     conditions of participation) that would otherwise apply to 
     the distinct part if the distinct part were established by a 
     subsection (d) hospital in accordance with the matter 
     following clause (v) of section 1886(d)(1)(B), including any 
     regulations adopted by the Secretary under such section.
       ``(ii) Limitation on number of beds.--The total number of 
     beds that may be established under clause (i) for a distinct 
     part unit may not exceed 10.
       ``(iii) Exclusion of beds from bed count.--In determining 
     the number of beds of a critical access hospital for purposes 
     of applying the bed limitations referred to in subparagraph 
     (B)(iii) and subsection (f), the Secretary shall not take 
     into account any bed established under clause (i).
       ``(iv) Effect of failure to meet requirements.--If a 
     psychiatric or rehabilitation unit established under clause 
     (i) does not meet the requirements described in such clause 
     with respect to a cost reporting period, no payment may be 
     made under this title to the hospital for services furnished 
     in such unit during such period. Payment to the hospital for 
     services furnished in the unit may resume only after the 
     hospital has demonstrated to the Secretary that the unit 
     meets such requirements.''.
       (2) Payment on a prospective payment basis.--Section 
     1814(l) (42 U.S.C. 1395f(l)) is amended--
       (A) by striking ``(l) The amount'' and inserting ``(l)(1) 
     Except as provided in paragraph (2), the amount''; and
       (B) by adding at the end the following new paragraph:
       ``(2) In the case of a distinct part psychiatric or 
     rehabilitation unit of a critical access hospital described 
     in section 1820(c)(2)(E), the amount of payment for inpatient 
     critical access hospital services of such unit shall be equal 
     to the amount of the payment that would otherwise be made if 
     such services were inpatient hospital services of a distinct 
     part psychiatric or rehabilitation unit, respectively, 
     described in the matter following clause (v) of section 
     1886(d)(1)(B).''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to cost reporting periods beginning on or after 
     October 1, 2004.
       (h) Waiver Authority.--
       (1) In general.--Section 1820(c)(2)(B)(i)(II) (42 U.S.C. 
     1395i-4(c)(2)(B)(i)(II)) is amended by inserting ``before 
     January 1, 2006,'' after ``is certified''.
       (2) Grandfathering waiver authority for certain 
     facilities.--Section 1820(h) (42 U.S.C. 1395i-4(h)) is 
     amended--
       (A) in the heading preceding paragraph (1), by striking 
     ``of Certain Facilities'' and inserting ``Provisions''; and
       (B) by adding at the end the following new paragraph:
       ``(3) State authority to waive 35-mile rule.--In the case 
     of a facility that was designated as a critical access 
     hospital before January 1, 2006, and was certified by the 
     State as being a necessary provider of health care services 
     to residents in the area under subsection (c)(2)(B)(i)(II), 
     as in effect before such date, the authority under such 
     subsection with respect to any redesignation of such facility 
     shall continue to apply notwithstanding the amendment made by 
     section 105(h)(1) of the Medicare Provider Restoration Act of 
     2003.''.

     SEC. 106. MEDICARE INPATIENT HOSPITAL PAYMENT ADJUSTMENT FOR 
                   LOW-VOLUME HOSPITALS.

       (a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)) is 
     amended by adding at the end the following new paragraph:
       ``(12) Payment adjustment for low-volume hospitals.--
       ``(A) In general.--In addition to any payments calculated 
     under this section for a subsection (d) hospital, for 
     discharges occurring during a fiscal year (beginning with 
     fiscal year 2005), the Secretary shall provide for an 
     additional payment amount to each low-volume hospital (as 
     defined in subparagraph (C)(i)) for discharges occurring 
     during that fiscal year that is equal to the applicable 
     percentage increase (determined under subparagraph (B) for 
     the hospital involved) in the amount paid to such hospital 
     under this section for such discharges (determined without 
     regard to this paragraph).
       ``(B) Applicable percentage increase.--The Secretary shall 
     determine an applicable percentage increase for purposes of 
     subparagraph (A) as follows:
       ``(i) The Secretary shall determine the empirical 
     relationship for subsection (d) hospitals between the 
     standardized cost-per-case for such hospitals and the total 
     number of discharges of such hospitals and the amount of the 
     additional incremental costs (if any) that are associated 
     with such number of discharges.
       ``(ii) The applicable percentage increase shall be 
     determined based upon such relationship in a manner that 
     reflects, based upon the number of such discharges for a 
     subsection (d) hospital, such additional incremental costs.
       ``(iii) In no case shall the applicable percentage increase 
     exceed 25 percent.
       ``(C) Definitions.--
       ``(i) Low-volume hospital.--For purposes of this paragraph, 
     the term `low-volume hospital' means, for a fiscal year, a 
     subsection (d) hospital (as defined in paragraph (1)(B)) that 
     the Secretary determines is located more than 25 road miles 
     from another subsection (d) hospital and has less than 800 
     discharges during the fiscal year.
       ``(ii) Discharge.--For purposes of subparagraph (B) and 
     clause (i), the term `discharge' means an inpatient acute 
     care discharge of an individual regardless of whether the 
     individual is entitled to benefits under part A.''.
       (b) Judicial Review.--Section 1886(d)(7)(A) (42 U.S.C. 
     1395ww(d)(7)(A)) is amended by inserting after ``to 
     subsection (e)(1)'' the following: ``or the determination of 
     the applicable percentage increase under paragraph 
     (12)(A)(ii)''.

     SEC. 107. TREATMENT OF MISSING COST REPORTING PERIODS FOR 
                   SOLE COMMUNITY HOSPITALS.

       (a) In General.--Section 1886(b)(3)(I) (42 U.S.C. 
     1395ww(b)(3)(I)) is amended by adding at the end the 
     following new clause:
       ``(iii) In no case shall a hospital be denied treatment as 
     a sole community hospital or payment (on the basis of a 
     target rate as such as a hospital) because data are 
     unavailable for any cost reporting period due to changes in 
     ownership, changes in fiscal intermediaries, or other 
     extraordinary circumstances, so long as data for at least one 
     applicable base cost reporting period is available.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to cost reporting periods beginning on or after 
     January 1, 2004.

     SEC. 108. RECOGNITION OF ATTENDING NURSE PRACTITIONERS AS 
                   ATTENDING PHYSICIANS TO SERVE HOSPICE PATIENTS.

       (a) In General.--Section 1861(dd)(3)(B) (42 U.S.C. 
     1395x(dd)(3)(B)) is amended by inserting ``or nurse 
     practitioner (as defined in subsection (aa)(5))'' after ``the 
     physician (as defined in subsection (r)(1))''.
       (b) Clarification of Hospice Role of Nurse Practitioners.--
     Section 1814(a)(7) (A)(i)(I) (42 U.S.C. 1395f(a)(7)(A) 
     (i)(I)) is amended by inserting ``(which for purposes of this 
     subparagraph does not include a nurse practitioner)'' after 
     ``attending physician (as defined in section 
     1861(dd)(3)(B))''.

     SEC. 109. RURAL HOSPICE DEMONSTRATION PROJECT.

       (a) In General.--The Secretary shall conduct a 
     demonstration project for the delivery of hospice care to 
     medicare beneficiaries in rural areas. Under the project 
     medicare beneficiaries who are unable to receive hospice care 
     in the facility for lack of an appropriate caregiver are 
     provided such care in a facility of 20 or fewer beds which 
     offers, within its walls, the full range of services provided 
     by hospice programs under section 1861(dd) of the Social 
     Security Act (42 U.S.C. 1395x(dd)).
       (b) Scope of Project.--The Secretary shall conduct the 
     project under this section with respect to no more than 3 
     hospice programs over a period of not longer than 5 years 
     each.
       (c) Compliance with Conditions.--Under the demonstration 
     project--
       (1) the hospice program shall comply with otherwise 
     applicable requirements, except that it shall not be required 
     to offer services outside of the home or to meet the 
     requirements of section 1861(dd)(2)(A)(iii) of the Social 
     Security Act; and
       (2) payments for hospice care shall be made at the rates 
     otherwise applicable to such care under title XVIII of such 
     Act.

     The Secretary may require the program to comply with such 
     additional quality assurance standards for its provision of 
     services in its facility as the Secretary deems appropriate.
       (d) Report.--Upon completion of the project, the Secretary 
     shall submit a report to Congress on the project and shall 
     include in the report recommendations regarding extension of 
     such project to hospice programs serving rural areas.

     SEC. 110. EXCLUSION OF CERTAIN RURAL HEALTH CLINIC AND 
                   FEDERALLY QUALIFIED HEALTH CENTER SERVICES FROM 
                   THE PROSPECTIVE PAYMENT SYSTEM FOR SKILLED 
                   NURSING FACILITIES.

       (a) In General.--Section 1888(e)(2)(A) (42 U.S.C. 
     1395yy(e)(2)(A)) is amended--
       (1) in clause (i)(II), by striking ``clauses (ii) and 
     (iii)'' and inserting ``clauses (ii), (iii), and (iv)''; and
       (2) by adding at the end the following new clause:
       ``(iv) Exclusion of certain rural health clinic and 
     federally qualified health center services.--Services 
     described in this clause are--

       ``(I) rural health clinic services (as defined in paragraph 
     (1) of section 1861(aa)); and
       ``(II) Federally qualified health center services (as 
     defined in paragraph (3) of such section);

     that would be described in clause (ii) if such services were 
     furnished by an individual not affiliated with a rural health 
     clinic or a Federally qualified health center.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to services furnished on or after January 1, 
     2005.

     SEC. 110A. RURAL COMMUNITY HOSPITAL DEMONSTRATION PROGRAM.

       (a) Establishment of Rural Community Hospital (RCH) 
     Demonstration Program.--
       (1) In general.--The Secretary shall establish a 
     demonstration program to test the feasibility and 
     advisability of the establishment of rural community 
     hospitals (as defined in subsection (f)(1)) to furnish 
     covered inpatient hospital services (as defined in subsection 
     (f)(2)) to medicare beneficiaries.
       (2) Demonstration areas.--The program shall be conducted in 
     rural areas selected by

[[Page S15425]]

     the Secretary in States with low population densities, as 
     determined by the Secretary.
       (3) Application.--Each rural community hospital that is 
     located in a demonstration area selected under paragraph (2) 
     that desires to participate in the demonstration program 
     under this section shall submit an application to the 
     Secretary at such time, in such manner, and containing such 
     information as the Secretary may require.
       (4) Selection of hospitals.--The Secretary shall select 
     from among rural community hospitals submitting applications 
     under paragraph (3) not more than 15 of such hospitals to 
     participate in the demonstration program under this section.
       (5) Duration.--The Secretary shall conduct the 
     demonstration program under this section for a 5-year period.
       (6) Implementation.--The Secretary shall implement the 
     demonstration program not later than January 1, 2005, but may 
     not implement the program before October 1, 2004.
       (b) Payment.--
       (1) In general.--The amount of payment under the 
     demonstration program for covered inpatient hospital services 
     furnished in a rural community hospital, other than such 
     services furnished in a psychiatric or rehabilitation unit of 
     the hospital which is a distinct part, is--
       (A) for discharges occurring in the first cost reporting 
     period beginning on or after the implementation of the 
     demonstration program, the reasonable costs of providing such 
     services; and
       (B) for discharges occurring in a subsequent cost reporting 
     period under the demonstration program, the lesser of--
       (i) the reasonable costs of providing such services in the 
     cost reporting period involved; or
       (ii) the target amount (as defined in paragraph (2), 
     applicable to the cost reporting period involved.
       (2) Target amount.--For purposes of paragraph (1)(B)(ii), 
     the term ``target amount'' means, with respect to a rural 
     community hospital for a particular 12-month cost reporting 
     period--
       (A) in the case of the second such reporting period for 
     which this subsection is in effect, the reasonable costs of 
     providing such covered inpatient hospital services as 
     determined under paragraph (1)(A), and
       (B) in the case of a later reporting period, the target 
     amount for the preceding 12-month cost reporting period,

     increased by the applicable percentage increase (under clause 
     (i) of section 1886(b)(3)(B) of the Social Security Act (42 
     U.S.C. 1395ww(b)(3)(B))) in the market basket percentage 
     increase (as defined in clause (iii) of such section) for 
     that particular cost reporting period.
       (c) Funding.--
       (1) In general.--The Secretary shall provide for the 
     transfer from the Federal Hospital Insurance Trust Fund under 
     section 1817 of the Social Security Act (42 U.S.C. 1395i) of 
     such funds as are necessary for the costs of carrying out the 
     demonstration program under this section.
       (2) Budget neutrality.--In conducting the demonstration 
     program under this section, the Secretary shall ensure that 
     the aggregate payments made by the Secretary do not exceed 
     the amount which the Secretary would have paid if the 
     demonstration program under this section was not implemented.
       (d) Waiver Authority.--The Secretary may waive such 
     requirements of title XVIII of the Social Security Act (42 
     U.S.C. 1395 et seq.) as may be necessary for the purpose of 
     carrying out the demonstration program under this section.
       (e) Report.--Not later than 6 months after the completion 
     of the demonstration program under this section, the 
     Secretary shall submit to Congress a report on such program, 
     together with recommendations for such legislation and 
     administrative action as the Secretary determines to be 
     appropriate.
       (f) Definitions.--In this section:
       (1) Rural community hospital defined.--
       (A) In general.--The term ``rural community hospital'' 
     means a hospital (as defined in section 1861(e) of the Social 
     Security Act (42 U.S.C. 1395x(e))) that--
       (i) is located in a rural area (as defined in section 
     1886(d)(2)(D) of such Act (42 U.S.C. 1395ww(d)(2)(D))) or 
     treated as being so located pursuant to section 1886(d)(8)(E) 
     of such Act (42 U.S.C. 1395ww(d)(8)(E));
       (ii) subject to paragraph (2), has fewer than 51 acute care 
     inpatient beds, as reported in its most recent cost report;
       (iii) makes available 24-hour emergency care services; and
       (iv) is not eligible for designation, or has not been 
     designated, as a critical access hospital under section 1820.
       (B) Treatment of psychiatric and rehabilitation units.--For 
     purposes of paragraph (1)(B), beds in a psychiatric or 
     rehabilitation unit of the hospital which is a distinct part 
     of the hospital shall not be counted.
       (2) Covered inpatient hospital services.--The term 
     ``covered inpatient hospital services'' means inpatient 
     hospital services, and includes extended care services 
     furnished under an agreement under section 1883 of the Social 
     Security Act (42 U.S.C. 1395tt).

             Subtitle B--Provisions Relating to Part B Only

     SEC. 111. 2-YEAR EXTENSION OF HOLD HARMLESS PROVISIONS FOR 
                   SMALL RURAL HOSPITALS AND SOLE COMMUNITY 
                   HOSPITALS UNDER THE PROSPECTIVE PAYMENT SYSTEM 
                   FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES.

       (a) Hold Harmless Provisions.--
       (1) In general.--Section 1833(t)(7)(D)(i) (42 U.S.C. 
     1395l(t)(7)(D)(i)) is amended--
       (A) in the heading, by striking ``small'' and inserting 
     ``certain'';
       (B) by inserting ``or a sole community hospital (as defined 
     in section 1886(d)(5)(D)(iii)) located in a rural area'' 
     after ``100 beds''; and
       (C) by striking ``2004'' and inserting ``2006''.
       (2) Effective date.--The amendment made by paragraph (1)(B) 
     shall apply with respect to cost reporting periods beginning 
     on and after January 1, 2004.
       (b) Study; Authorization of Adjustment.--Section 1833(t) 
     (42 U.S.C. 1395l(t)) is amended--
       (1) by redesignating paragraph (13) as paragraph (16); and
       (2) by inserting after paragraph (12) the following new 
     paragraph:
       ``(13) Authorization of adjustment for rural hospitals.--
       ``(A) Study.--The Secretary shall conduct a study to 
     determine if, under the system under this subsection, costs 
     incurred by hospitals located in rural areas by ambulatory 
     payment classification groups (APCs) exceed those costs 
     incurred by hospitals located in urban areas.
       ``(B) Authorization of adjustment.--Insofar as the 
     Secretary determines under subparagraph (A) that costs 
     incurred by hospitals located in rural areas exceed those 
     costs incurred by hospitals located in urban areas, the 
     Secretary shall provide for an appropriate adjustment under 
     paragraph (2)(E) to reflect those higher costs by January 1, 
     2006.''.

     SEC. 112. ESTABLISHMENT OF FLOOR ON WORK GEOGRAPHIC 
                   ADJUSTMENT.

       Section 1848(e)(1) (42 U.S.C. 1395w-4(e)(1)) is amended--
       (1) in subparagraph (A), by striking ``subparagraphs (B) 
     and (C)'' and inserting ``subparagraphs (B), (C), and (E)''; 
     and
       (2) by adding at the end the following new subparagraph:
       ``(E) Floor at 1.0 on work geographic index.--After 
     calculating the work geographic index in subparagraph 
     (A)(iii), for purposes of payment for services furnished on 
     or after January 1, 2004, and before January 1, 2007, the 
     Secretary shall increase the work geographic index to 1.00 
     for any locality for which such work geographic index is less 
     than 1.00.''.

     SEC. 113. MEDICARE INCENTIVE PAYMENT PROGRAM IMPROVEMENTS FOR 
                   PHYSICIAN SCARCITY.

       (a) Additional Incentive Payment for Certain Physician 
     Scarcity Areas.--Section 1833 (42 U.S.C. 1395l) is amended by 
     adding at the end the following new subsection:
       ``(u) Incentive Payments for Physician Scarcity Areas.--
       ``(1) In general.--In the case of physicians' services 
     furnished on or after January 1, 2005, and before January 1, 
     2008--
       ``(A) by a primary care physician in a primary care 
     scarcity county (identified under paragraph (4)); or
       ``(B) by a physician who is not a primary care physician in 
     a specialist care scarcity county (as so identified),

     in addition to the amount of payment that would otherwise be 
     made for such services under this part, there also shall be 
     paid an amount equal to 5 percent of the payment amount for 
     the service under this part.
       ``(2) Determination of ratios of physicians to medicare 
     beneficiaries in area.--Based upon available data, the 
     Secretary shall establish for each county or equivalent area 
     in the United States, the following:
       ``(A) Number of physicians practicing in the area.--The 
     number of physicians who furnish physicians' services in the 
     active practice of medicine or osteopathy in that county or 
     area, other than physicians whose practice is exclusively for 
     the Federal Government, physicians who are retired, or 
     physicians who only provide administrative services. Of such 
     number, the number of such physicians who are--
       ``(i) primary care physicians; or
       ``(ii) physicians who are not primary care physicians.
       ``(B) Number of medicare beneficiaries residing in the 
     area.--The number of individuals who are residing in the 
     county and are entitled to benefits under part A or enrolled 
     under this part, or both (in this subsection referred to as 
     `individuals').
       ``(C) Determination of ratios.--
       ``(i) Primary care ratio.--The ratio (in this paragraph 
     referred to as the `primary care ratio') of the number of 
     primary care physicians (determined under subparagraph 
     (A)(i)), to the number of individuals determined under 
     subparagraph (B).
       ``(ii) Specialist care ratio.--The ratio (in this paragraph 
     referred to as the `specialist care ratio') of the number of 
     other physicians (determined under subparagraph (A)(ii)), to 
     the number of individuals determined under subparagraph (B).
       ``(3) Ranking of counties.--The Secretary shall rank each 
     such county or area based separately on its primary care 
     ratio and its specialist care ratio.
       ``(4) Identification of counties.--
       ``(A) In general.--The Secretary shall identify--
       ``(i) those counties and areas (in this paragraph referred 
     to as `primary care scarcity counties') with the lowest 
     primary care ratios that represent, if each such county or 
     area were weighted by the number of individuals determined 
     under paragraph (2)(B), an

[[Page S15426]]

     aggregate total of 20 percent of the total of the individuals 
     determined under such paragraph; and
       ``(ii) those counties and areas (in this subsection 
     referred to as `specialist care scarcity counties') with the 
     lowest specialist care ratios that represent, if each such 
     county or area were weighted by the number of individuals 
     determined under paragraph (2)(B), an aggregate total of 20 
     percent of the total of the individuals determined under such 
     paragraph.
       ``(B) Periodic revisions.--The Secretary shall periodically 
     revise the counties or areas identified in subparagraph (A) 
     (but not less often than once every three years) unless the 
     Secretary determines that there is no new data available on 
     the number of physicians practicing in the county or area or 
     the number of individuals residing in the county or area, as 
     identified in paragraph (2).
       ``(C) Identification of counties where service is 
     furnished.--For purposes of paying the additional amount 
     specified in paragraph (1), if the Secretary uses the 5-digit 
     postal ZIP Code where the service is furnished, the dominant 
     county of the postal ZIP Code (as determined by the United 
     States Postal Service, or otherwise) shall be used to 
     determine whether the postal ZIP Code is in a scarcity county 
     identified in subparagraph (A) or revised in subparagraph 
     (B).
       ``(D) Judicial review.--There shall be no administrative or 
     judicial review under section 1869, 1878, or otherwise, 
     respecting--
       ``(i) the identification of a county or area;
       ``(ii) the assignment of a specialty of any physician under 
     this paragraph;
       ``(iii) the assignment of a physician to a county under 
     paragraph (2); or
       ``(iv) the assignment of a postal ZIP Code to a county or 
     other area under this subsection.
       ``(5) Rural census tracts.--To the extent feasible, the 
     Secretary shall treat a rural census tract of a metropolitan 
     statistical area (as determined under the most recent 
     modification of the Goldsmith Modification, originally 
     published in the Federal Register on February 27, 1992 (57 
     Fed. Reg. 6725)), as an equivalent area for purposes of 
     qualifying as a primary care scarcity county or specialist 
     care scarcity county under this subsection.
       ``(6) Physician Defined.--For purposes of this paragraph, 
     the term `physician' means a physician described in section 
     1861(r)(1) and the term `primary care physician' means a 
     physician who is identified in the available data as a 
     general practitioner, family practice practitioner, general 
     internist, or obstetrician or gynecologist.
       ``(7) Publication of list of counties; posting on 
     website.--With respect to a year for which a county or area 
     is identified or revised under paragraph (4), the Secretary 
     shall identify such counties or areas as part of the proposed 
     and final rule to implement the physician fee schedule under 
     section 1848 for the applicable year. The Secretary shall 
     post the list of counties identified or revised under 
     paragraph (4) on the Internet website of the Centers for 
     Medicare & Medicaid Services.''.
       (b) Improvement to Medicare Incentive Payment Program.--
       (1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
     amended--
       (A) by inserting ``(1)'' after ``(m)'';
       (B) in paragraph (1), as designated by subparagraph (A)--
       (i) by inserting ``in a year'' after ``In the case of 
     physicians' services furnished''; and
       (ii) by inserting ``as identified by the Secretary prior to 
     the beginning of such year'' after ``as a health professional 
     shortage area''; and
       (C) by adding at the end the following new paragraphs:
       ``(2) For each health professional shortage area identified 
     in paragraph (1) that consists of an entire county, the 
     Secretary shall provide for the additional payment under 
     paragraph (1) without any requirement on the physician to 
     identify the health professional shortage area involved. The 
     Secretary may implement the previous sentence using the 
     method specified in subsection (u)(4)(C).
       ``(3) The Secretary shall post on the Internet website of 
     the Centers for Medicare & Medicaid Services a list of the 
     health professional shortage areas identified in paragraph 
     (1) that consist of a partial county to facilitate the 
     additional payment under paragraph (1) in such areas.
       ``(4) There shall be no administrative or judicial review 
     under section 1869, section 1878, or otherwise, respecting--
       ``(A) the identification of a county or area;
       ``(B) the assignment of a specialty of any physician under 
     this paragraph;
       ``(C) the assignment of a physician to a county under this 
     subsection; or
       ``(D) the assignment of a postal zip code to a county or 
     other area under this subsection.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to physicians' services furnished on or after 
     January 1, 2005.
       (c) GAO Study of Geographic Differences in Payments for 
     Physicians' Services.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study of differences in payment amounts under 
     the physician fee schedule under section 1848 of the Social 
     Security Act (42 U.S.C. 1395w-4) for physicians' services in 
     different geographic areas. Such study shall include--
       (A) an assessment of the validity of the geographic 
     adjustment factors used for each component of the fee 
     schedule;
       (B) an evaluation of the measures used for such adjustment, 
     including the frequency of revisions;
       (C) an evaluation of the methods used to determine 
     professional liability insurance costs used in computing the 
     malpractice component, including a review of increases in 
     professional liability insurance premiums and variation in 
     such increases by State and physician specialty and methods 
     used to update the geographic cost of practice index and 
     relative weights for the malpractice component; and
       (D) an evaluation of the effect of the adjustment to the 
     physician work geographic index under section 1848(e)(1)(E) 
     of the Social Security Act, as added by section 112, on 
     physician location and retention in areas affected by such 
     adjustment, taking into account--
       (i) differences in recruitment costs and retention rates 
     for physicians, including specialists, between large urban 
     areas and other areas; and
       (ii) the mobility of physicians, including specialists, 
     over the last decade.
       (2) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under paragraph 
     (1). The report shall include recommendations regarding the 
     use of more current data in computing geographic cost of 
     practice indices as well as the use of data directly 
     representative of physicians' costs (rather than proxy 
     measures of such costs).

     SEC. 114. PAYMENT FOR RURAL AND URBAN AMBULANCE SERVICES.

       (a) Phase-In Providing Floor Using Blend of Fee Schedule 
     and Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 
     1395m(l)) is amended--
       (1) in paragraph (2)(E), by inserting ``consistent with 
     paragraph (11)'' after ``in an efficient and fair manner''; 
     and
       (2) by redesignating paragraph (8), as added by section 
     221(a) of BIPA (114 Stat. 2763A-486), as paragraph (9); and
       (3) by adding at the end the following new paragraph:
       ``(10) Phase-in providing floor using blend of fee schedule 
     and regional fee schedules.--In carrying out the phase-in 
     under paragraph (2)(E) for each level of ground service 
     furnished in a year, the portion of the payment amount that 
     is based on the fee schedule shall be the greater of the 
     amount determined under such fee schedule (without regard to 
     this paragraph) or the following blended rate of the fee 
     schedule under paragraph (1) and of a regional fee schedule 
     for the region involved:
       ``(A) For 2004 (for services furnished on or after July 1, 
     2004), the blended rate shall be based 20 percent on the fee 
     schedule under paragraph (1) and 80 percent on the regional 
     fee schedule.
       ``(B) For 2005, the blended rate shall be based 40 percent 
     on the fee schedule under paragraph (1) and 60 percent on the 
     regional fee schedule.
       ``(C) For 2006, the blended rate shall be based 60 percent 
     on the fee schedule under paragraph (1) and 40 percent on the 
     regional fee schedule.
       ``(D) For 2007, 2008, and 2009, the blended rate shall be 
     based 80 percent on the fee schedule under paragraph (1) and 
     20 percent on the regional fee schedule.
       ``(E) For 2010 and each succeeding year, the blended rate 
     shall be based 100 percent on the fee schedule under 
     paragraph (1).

     For purposes of this paragraph, the Secretary shall establish 
     a regional fee schedule for each of the nine census divisions 
     (referred to in section 1886(d)(2)) using the methodology 
     (used in establishing the fee schedule under paragraph (1)) 
     to calculate a regional conversion factor and a regional 
     mileage payment rate and using the same payment adjustments 
     and the same relative value units as used in the fee schedule 
     under such paragraph.''.
       (b) Adjustment in Payment for Certain Long Trips.--Section 
     1834(l), as amended by subsection (a), is amended by adding 
     at the end the following new paragraph:
       ``(11) Adjustment in payment for certain long trips.--In 
     the case of ground ambulance services furnished on or after 
     July 1, 2004, and before January 1, 2009, regardless of where 
     the transportation originates, the fee schedule established 
     under this subsection shall provide that, with respect to the 
     payment rate for mileage for a trip above 50 miles the per 
     mile rate otherwise established shall be increased by \1/4\ 
     of the payment per mile otherwise applicable to miles in 
     excess of 50 miles in such trip.''.
       (c) Improvement in Payments To Retain Emergency Capacity 
     for Ambulance Services in Rural Areas.--
       (1) In general.--Section 1834(l) (42 U.S.C. 1395m(l)), as 
     amended by subsections (a) and (b), is amended by adding at 
     the end the following new paragraph:
       ``(12) Assistance for rural providers furnishing services 
     in low population density areas.--
       ``(A) In general.--In the case of ground ambulance services 
     furnished on or after July 1, 2004, and before January 1, 
     2010, for which the transportation originates in a qualified 
     rural area (identified under subparagraph (B)(iii)), the 
     Secretary shall provide for a percent increase in the base 
     rate of the fee schedule for a trip established under this 
     subsection. In establishing such percent increase, the 
     Secretary shall estimate the

[[Page S15427]]

     average cost per trip for such services (not taking into 
     account mileage) in the lowest quartile as compared to the 
     average cost per trip for such services (not taking into 
     account mileage) in the highest quartile of all rural county 
     populations.
       ``(B) Identification of qualified rural areas.--
       ``(i) Determination of population density in area.--Based 
     upon data from the United States decennial census for the 
     year 2000, the Secretary shall determine, for each rural 
     area, the population density for that area.
       ``(ii) Ranking of areas.--The Secretary shall rank each 
     such area based on such population density.
       ``(iii) Identification of qualified rural areas.--The 
     Secretary shall identify those areas (in subparagraph (A) 
     referred to as `qualified rural areas') with the lowest 
     population densities that represent, if each such area were 
     weighted by the population of such area (as used in computing 
     such population densities), an aggregate total of 25 percent 
     of the total of the population of all such areas.
       ``(iv) Rural area.--For purposes of this paragraph, the 
     term `rural area' has the meaning given such term in section 
     1886(d)(2)(D). If feasible, the Secretary shall treat a rural 
     census tract of a metropolitan statistical area (as 
     determined under the most recent modification of the 
     Goldsmith Modification, originally published in the Federal 
     Register on February 27, 1992 (57 Fed. Reg. 6725) as a rural 
     area for purposes of this paragraph.
       ``(v) Judicial review.--There shall be no administrative or 
     judicial review under section 1869, 1878, or otherwise, 
     respecting the identification of an area under this 
     subparagraph.''.
       (2) Use of data.--In order to promptly implement section 
     1834(l)(12) of the Social Security Act, as added by paragraph 
     (1), the Secretary may use data furnished by the Comptroller 
     General of the United States.
       (d) Temporary Increase for Ground Ambulance Services.--
     Section 1834(l) (42 U.S.C. 1395m(l)), as amended by 
     subsections (a), (b), and (c), is amended by adding at the 
     end the following new paragraph:
       ``(13) Temporary increase for ground ambulance services.--
       ``(A) In general.--After computing the rates with respect 
     to ground ambulance services under the other applicable 
     provisions of this subsection, in the case of such services 
     furnished on or after July 1, 2004, and before January 1, 
     2007, for which the transportation originates in--
       ``(i) a rural area described in paragraph (9) or in a rural 
     census tract described in such paragraph, the fee schedule 
     established under this section shall provide that the rate 
     for the service otherwise established, after the application 
     of any increase under paragraphs (11) and (12), shall be 
     increased by 2 percent; and
       ``(ii) an area not described in clause (i), the fee 
     schedule established under this subsection shall provide that 
     the rate for the service otherwise established, after the 
     application of any increase under paragraph (11), shall be 
     increased by 1 percent.
       ``(B) Application of increased payments after 2006.--The 
     increased payments under subparagraph (A) shall not be taken 
     into account in calculating payments for services furnished 
     after the period specified in such subparagraph.''.
       (e) Implementation.--The Secretary may implement the 
     amendments made by this section, and revise the conversion 
     factor applicable under section 1834(l) of the Social 
     Security Act (42 U.S.C. 1395m(l)) for purposes of 
     implementing such amendments, on an interim final basis, or 
     by program instruction.
       (f) GAO Report on Costs and Access.--Not later than 
     December 31, 2005, the Comptroller General of the United 
     States shall submit to Congress an initial report on how 
     costs differ among the types of ambulance providers and on 
     access, supply, and quality of ambulance services in those 
     regions and States that have a reduction in payment under the 
     medicare ambulance fee schedule (under section 1834(l) of the 
     Social Security Act, as amended by this Act). Not later than 
     December 31, 2007, the Comptroller General shall submit to 
     Congress a final report on such access and supply.
       (g) Technical Amendments.--(1) Section 221(c) of BIPA (114 
     Stat. 2763A-487) is amended by striking ``subsection (b)(2)'' 
     and inserting ``subsection (b)(3)''.
       (2) Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended 
     by moving subparagraph (U) 4 ems to the left.

     SEC. 115. PROVIDING APPROPRIATE COVERAGE OF RURAL AIR 
                   AMBULANCE SERVICES.

       (a) Coverage.--Section 1834(l) (42 U.S.C. 1395m(l)), as 
     amended by subsections (a), (b), (c), and (d) of section 114, 
     is amended by adding at the end the following new paragraph:
       ``(14) Providing appropriate coverage of rural air 
     ambulance services.--
       ``(A) In general.--The regulations described in section 
     1861(s)(7) shall provide, to the extent that any ambulance 
     services (whether ground or air) may be covered under such 
     section, that a rural air ambulance service (as defined in 
     subparagraph (C)) is reimbursed under this subsection at the 
     air ambulance rate if the air ambulance service--
       ``(i) is reasonable and necessary based on the health 
     condition of the individual being transported at or 
     immediately prior to the time of the transport; and
       ``(ii) complies with equipment and crew requirements 
     established by the Secretary.
       ``(B) Satisfaction of requirement of medically necessary.--
     The requirement of subparagraph (A)(i) is deemed to be met 
     for a rural air ambulance service if--
       ``(i) subject to subparagraph (D), such service is 
     requested by a physician or other qualified medical personnel 
     (as specified by the Secretary) who reasonably determines or 
     certifies that the individual's condition is such that the 
     time needed to transport the individual by land or the 
     instability of transportation by land poses a threat to the 
     individual's survival or seriously endangers the individual's 
     health; or
       ``(ii) such service is furnished pursuant to a protocol 
     that is established by a State or regional emergency medical 
     service (EMS) agency and recognized or approved by the 
     Secretary under which the use of an air ambulance is 
     recommended, if such agency does not have an ownership 
     interest in the entity furnishing such service.
       ``(C) Rural air ambulance service defined.--For purposes of 
     this paragraph, the term `rural air ambulance service' means 
     fixed wing and rotary wing air ambulance service in which the 
     point of pick up of the individual occurs in a rural area (as 
     defined in section 1886(d)(2)(D)) or in a rural census tract 
     of a metropolitan statistical area (as determined under the 
     most recent modification of the Goldsmith Modification, 
     originally published in the Federal Register on February 27, 
     1992 (57 Fed. Reg. 6725)).
       ``(D) Limitation.--
       ``(i) In general.--Subparagraph (B)(i) shall not apply if 
     there is a financial or employment relationship between the 
     person requesting the rural air ambulance service and the 
     entity furnishing the ambulance service, or an entity under 
     common ownership with the entity furnishing the air ambulance 
     service, or a financial relationship between an immediate 
     family member of such requester and such an entity.
       ``(ii) Exception.--Where a hospital and the entity 
     furnishing rural air ambulance services are under common 
     ownership, clause (i) shall not apply to remuneration 
     (through employment or other relationship) by the hospital of 
     the requester or immediate family member if the remuneration 
     is for provider-based physician services furnished in a 
     hospital (as described in section 1887) which are reimbursed 
     under part A and the amount of the remuneration is unrelated 
     directly or indirectly to the provision of rural air 
     ambulance services.''.
       (b) Conforming Amendment.--Section 1861(s)(7) (42 U.S.C. 
     1395x(s)(7)) is amended by inserting ``, subject to section 
     1834(l)(14),'' after ``but''.
       (c) Effective Date.--The amendments made by this subsection 
     shall apply to services furnished on or after January 1, 
     2005.

     SEC. 116. TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC LABORATORY 
                   TESTS FURNISHED TO HOSPITAL OUTPATIENTS IN 
                   CERTAIN RURAL AREAS.

       (a) In General.--Notwithstanding subsections (a), (b), and 
     (h) of section 1833 of the Social Security Act (42 U.S.C. 
     1395l) and section 1834(d)(1) of such Act (42 U.S.C. 
     1395m(d)(1)), in the case of a clinical diagnostic laboratory 
     test covered under part B of title XVIII of such Act that is 
     furnished during a cost reporting period described in 
     subsection (b) by a hospital with fewer than 50 beds that is 
     located in a qualified rural area (identified under paragraph 
     (12)(B)(iii) of section 1834(l) of the Social Security Act 
     (42 U.S.C. 1395m(l)), as added by section 114(c)) as part of 
     outpatient services of the hospital, the amount of payment 
     for such test shall be 100 percent of the reasonable costs of 
     the hospital in furnishing such test.
       (b) Application.--A cost reporting period described in this 
     subsection is a cost reporting period beginning during the 2-
     year period beginning on July 1, 2004.
       (c) Provision as Part of Outpatient Hospital Services.--For 
     purposes of subsection (a), in determining whether clinical 
     diagnostic laboratory services are furnished as part of 
     outpatient services of a hospital, the Secretary shall apply 
     the same rules that are used to determine whether clinical 
     diagnostic laboratory services are furnished as an outpatient 
     critical access hospital service under section 1834(g)(4) of 
     the Social Security Act (42 U.S.C. 1395m(g)(4)).

     SEC. 117. EXTENSION OF TELEMEDICINE DEMONSTRATION PROJECT.

       Section 4207 of the Balanced Budget Act of 1997 (Public Law 
     105-33) is amended--
       (1) in subsection (a)(4), by striking ``4-year'' and 
     inserting ``8-year''; and
       (2) in subsection (d)(3), by striking ``$30,000,000'' and 
     inserting ``$60,000,000''.

     SEC. 118. REPORT ON DEMONSTRATION PROJECT PERMITTING SKILLED 
                   NURSING FACILITIES TO BE ORIGINATING TELEHEALTH 
                   SITES; AUTHORITY TO IMPLEMENT.

       (a) Evaluation.--The Secretary, acting through the 
     Administrator of the Health Resources and Services 
     Administration in consultation with the Administrator of the 
     Centers for Medicare & Medicaid Services, shall evaluate 
     demonstration projects conducted by the Secretary under which 
     skilled nursing facilities (as defined in section 1819(a) of 
     the Social Security Act (42 U.S.C. 1395i-3(a)) are treated as 
     originating sites for telehealth services.
       (b) Report.--Not later than January 1, 2005, the Secretary 
     shall submit to Congress a report on the evaluation conducted 
     under subsection (a). Such report shall include 
     recommendations on mechanisms to ensure that permitting a 
     skilled nursing facility to

[[Page S15428]]

     serve as an originating site for the use of telehealth 
     services or any other service delivered via a 
     telecommunications system does not serve as a substitute for 
     in-person visits furnished by a physician, or for in-person 
     visits furnished by a physician assistant, nurse practitioner 
     or clinical nurse specialist, as is otherwise required by the 
     Secretary.
       (c) Authority to Expand Originating Telehealth Sites to 
     Include Skilled Nursing Facilities.--Insofar as the Secretary 
     concludes in the report required under subsection (b) that is 
     advisable to permit a skilled nursing facility to be an 
     originating site for telehealth services under section 
     1834(m) of the Social Security Act (42 U.S.C. 1395m(m)), and 
     that the Secretary can establish the mechanisms to ensure 
     such permission does not serve as a substitute for in-person 
     visits furnished by a physician, or for in-person visits 
     furnished by a physician assistant, nurse practitioner or 
     clinical nurse specialist, the Secretary may deem a skilled 
     nursing facility to be an originating site under paragraph 
     (4)(C)(ii) of such section beginning on January 1, 2006.

            Subtitle C--Provisions Relating to Parts A and B

     SEC. 121. 1-YEAR INCREASE FOR HOME HEALTH SERVICES FURNISHED 
                   IN A RURAL AREA.

       (a) In General.--With respect to episodes and visits ending 
     on or after April 1, 2004, and before April 1, 2005, in the 
     case of home health services furnished in a rural area (as 
     defined in section 1886(d)(2)(D) of the Social Security Act 
     (42 U.S.C. 1395ww(d)(2)(D))), the Secretary shall increase 
     the payment amount otherwise made under section 1895 of such 
     Act (42 U.S.C. 1395fff ) for such services by 5 percent.
       (b) Waiving Budget Neutrality.--The Secretary shall not 
     reduce the standard prospective payment amount (or amounts) 
     under section 1895 of the Social Security Act (42 U.S.C. 
     1395fff ) applicable to home health services furnished during 
     a period to offset the increase in payments resulting from 
     the application of subsection (a).
       (c) No Effect on Subsequent Periods.--The payment increase 
     provided under subsection (a) for a period under such 
     subsection--
       (1) shall not apply to episodes and visits ending after 
     such period; and
       (2) shall not be taken into account in calculating the 
     payment amounts applicable for episodes and visits occurring 
     after such period.

     SEC. 122. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

       (a) In General.--Section 1886(h) (42 U.S.C. 1395ww(h)(4)) 
     is amended--
       (1) in paragraph (4)(F)(i), by inserting ``subject to 
     paragraph (7),'' after ``October 1, 1997,'';
       (2) in paragraph (4)(H)(i), by inserting ``and subject to 
     paragraph (7),'' after ``subparagraphs (F) and (G)''; and
       (3) by adding at the end the following new paragraph:
       ``(7) Redistribution of unused resident positions.--
       ``(A) Reduction in limit based on unused positions.--
       ``(i) Programs subject to reduction.--

       ``(I) In general.--Except as provided in subclause (II), if 
     a hospital's reference resident level (specified in clause 
     (ii)) is less than the otherwise applicable resident limit 
     (as defined in subparagraph (C)(ii)), effective for portions 
     of cost reporting periods occurring on or after July 1, 2005, 
     the otherwise applicable resident limit shall be reduced by 
     75 percent of the difference between such otherwise 
     applicable resident limit and such reference resident level.
       ``(II) Exception for small rural hospitals.--This 
     subparagraph shall not apply to a hospital located in a rural 
     area (as defined in subsection (d)(2)(D)(ii)) with fewer than 
     250 acute care inpatient beds.

       ``(ii) Reference resident level.--

       ``(I) In general.--Except as otherwise provided in 
     subclauses (II) and (III), the reference resident level 
     specified in this clause for a hospital is the resident level 
     for the most recent cost reporting period of the hospital 
     ending on or before September 30, 2002, for which a cost 
     report has been settled (or, if not, submitted (subject to 
     audit)), as determined by the Secretary.
       ``(II) Use of most recent accounting period to recognize 
     expansion of existing programs.--If a hospital submits a 
     timely request to increase its resident level due to an 
     expansion of an existing residency training program that is 
     not reflected on the most recent settled cost report, after 
     audit and subject to the discretion of the Secretary, the 
     reference resident level for such hospital is the resident 
     level for the cost reporting period that includes July 1, 
     2003, as determined by the Secretary.
       ``(III) Expansions under newly approved programs.--Upon the 
     timely request of a hospital, the Secretary shall adjust the 
     reference resident level specified under subclause (I) or 
     (II) to include the number of medical residents that were 
     approved in an application for a medical residency training 
     program that was approved by an appropriate accrediting 
     organization (as determined by the Secretary) before January 
     1, 2002, but which was not in operation during the cost 
     reporting period used under subclause (I) or (II), as the 
     case may be, as determined by the Secretary.

       ``(iii) Affiliation.--The provisions of clause (i) shall be 
     applied to hospitals which are members of the same affiliated 
     group (as defined by the Secretary under paragraph 
     (4)(H)(ii)) as of July 1, 2003.
       ``(B) Redistribution.--
       ``(i) In general.--The Secretary is authorized to increase 
     the otherwise applicable resident limit for each qualifying 
     hospital that submits a timely application under this 
     subparagraph by such number as the Secretary may approve for 
     portions of cost reporting periods occurring on or after July 
     1, 2005. The aggregate number of increases in the otherwise 
     applicable resident limits under this subparagraph may not 
     exceed the Secretary's estimate of the aggregate reduction in 
     such limits attributable to subparagraph (A).
       ``(ii) Considerations in redistribution.--In determining 
     for which hospitals the increase in the otherwise applicable 
     resident limit is provided under clause (i), the Secretary 
     shall take into account the demonstrated likelihood of the 
     hospital filling the positions within the first 3 cost 
     reporting periods beginning on or after July 1, 2005, made 
     available under this subparagraph, as determined by the 
     Secretary.
       ``(iii) Priority for rural and small urban areas.--In 
     determining for which hospitals and residency training 
     programs an increase in the otherwise applicable resident 
     limit is provided under clause (i), the Secretary shall 
     distribute the increase to programs of hospitals located in 
     the following priority order:

       ``(I) First, to hospitals located in rural areas (as 
     defined in subsection (d)(2)(D)(ii)).
       ``(II) Second, to hospitals located in urban areas that are 
     not large urban areas (as defined for purposes of subsection 
     (d)).
       ``(III) Third, to other hospitals in a State if the 
     residency training program involved is in a specialty for 
     which there are not other residency training programs in the 
     State.

     Increases of residency limits within the same priority 
     category under this clause shall be determined by the 
     Secretary.
       ``(iv) Limitation.--In no case shall more than 25 full-time 
     equivalent additional residency positions be made available 
     under this subparagraph with respect to any hospital.
       ``(v) Application of locality adjusted national average per 
     resident amount.--With respect to additional residency 
     positions in a hospital attributable to the increase provided 
     under this subparagraph, notwithstanding any other provision 
     of this subsection, the approved FTE resident amount is 
     deemed to be equal to the locality adjusted national average 
     per resident amount computed under paragraph (4)(E) for that 
     hospital.
       ``(vi) Construction.--Nothing in this subparagraph shall be 
     construed as permitting the redistribution of reductions in 
     residency positions attributable to voluntary reduction 
     programs under paragraph (6), under a demonstration project 
     approved as of October 31, 2003, under the authority of 
     section 402 of Public Law 90-248, or as affecting the ability 
     of a hospital to establish new medical residency training 
     programs under paragraph (4)(H).
       ``(C) Resident level and limit defined.--In this paragraph:
       ``(i) Resident level.--The term `resident level' means, 
     with respect to a hospital, the total number of full-time 
     equivalent residents, before the application of weighting 
     factors (as determined under paragraph (4)), in the fields of 
     allopathic and osteopathic medicine for the hospital.
       ``(ii) Otherwise applicable resident limit.--The term 
     `otherwise applicable resident limit' means, with respect to 
     a hospital, the limit otherwise applicable under 
     subparagraphs (F)(i) and (H) of paragraph (4) on the resident 
     level for the hospital determined without regard to this 
     paragraph.
       ``(D) Judicial review.--There shall be no administrative or 
     judicial review under section 1869, 1878, or otherwise, with 
     respect to determinations made under this paragraph.''.
       (b) Conforming Provisions.--(1) Section 1886(d)(5)(B) (42 
     U.S.C. 1395ww(d)(5)(B)) is amended--
       (A) in the second sentence of clause (ii), by striking 
     ``For discharges'' and inserting ``Subject to clause (ix), 
     for discharges''; and
       (B) in clause (v), by adding at the end the following: 
     ``The provisions of subsection (h)(7) shall apply with 
     respect to the first sentence of this clause in the same 
     manner as it applies with respect to subsection 
     (h)(4)(F)(i).''; and
       (C) by adding at the end the following new clause:
       ``(ix) For discharges occurring on or after July 1, 2005, 
     insofar as an additional payment amount under this 
     subparagraph is attributable to resident positions 
     redistributed to a hospital under subsection (h)(7)(B), in 
     computing the indirect teaching adjustment factor under 
     clause (ii) the adjustment shall be computed in a manner as 
     if `c' were equal to 0.66 with respect to such resident 
     positions.''.
       (2) Chapter 35 of title 44, United States Code, shall not 
     apply with respect to applications under section 1886(h)(7) 
     of the Social Security Act, as added by subsection (a)(3).
       (c) Report on Extension of Applications Under 
     Redistribution Program.--Not later than July 1, 2005, the 
     Secretary shall submit to Congress a report containing 
     recommendations regarding whether to extend the deadline for 
     applications for an increase in resident limits under section 
     1886(h)(4)(I)(ii)(II) of the Social Security Act (as added by 
     subsection (a)).

[[Page S15429]]

                      Subtitle D--Other Provisions

     SEC. 131. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE 
                   EFFORTS THAT BENEFIT MEDICALLY UNDERSERVED 
                   POPULATIONS.

       (a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-
     7(b)(3)), as amended by section 101(e)(2), is amended--
       (1) in subparagraph (F), by striking ``and'' after the 
     semicolon at the end;
       (2) in subparagraph (G), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(H) any remuneration between a health center entity 
     described under clause (i) or (ii) of section 1905(l)(2)(B) 
     and any individual or entity providing goods, items, 
     services, donations, loans, or a combination thereof, to such 
     health center entity pursuant to a contract, lease, grant, 
     loan, or other agreement, if such agreement contributes to 
     the ability of the health center entity to maintain or 
     increase the availability, or enhance the quality, of 
     services provided to a medically underserved population 
     served by the health center entity.''.
       (b) Rulemaking for Exception for Health Center Entity 
     Arrangements.--
       (1) Establishment.--
       (A) In general.--The Secretary shall establish, on an 
     expedited basis, standards relating to the exception 
     described in section 1128B(b)(3)(H) of the Social Security 
     Act, as added by subsection (a), for health center entity 
     arrangements to the antikickback penalties.
       (B) Factors to consider.--The Secretary shall consider the 
     following factors, among others, in establishing standards 
     relating to the exception for health center entity 
     arrangements under subparagraph (A):
       (i) Whether the arrangement between the health center 
     entity and the other party results in savings of Federal 
     grant funds or increased revenues to the health center 
     entity.
       (ii) Whether the arrangement between the health center 
     entity and the other party restricts or limits an 
     individual's freedom of choice.
       (iii) Whether the arrangement between the health center 
     entity and the other party protects a health care 
     professional's independent medical judgment regarding 
     medically appropriate treatment.

     The Secretary may also include other standards and criteria 
     that are consistent with the intent of Congress in enacting 
     the exception established under this section.
       (2) Deadline.--Not later than 1 year after the date of the 
     enactment of this Act the Secretary shall publish final 
     regulations establishing the standards described in paragraph 
     (1).

     SEC. 132. OFFICE OF RURAL HEALTH POLICY IMPROVEMENTS.

       Section 711(b) (42 U.S.C. 912(b)) is amended--
       (1) in paragraph (3), by striking ``and'' after the comma 
     at the end;
       (2) in paragraph (4), by striking the period at the end and 
     inserting ``, and''; and
       (3) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) administer grants, cooperative agreements, and 
     contracts to provide technical assistance and other 
     activities as necessary to support activities related to 
     improving health care in rural areas.''.

     SEC. 133. MEDPAC STUDY ON RURAL HOSPITAL PAYMENT ADJUSTMENTS.

       (a) In General.--The Medicare Payment Advisory Commission 
     shall conduct a study of the impact of sections 401 through 
     406, 411, 416, and 505. The Commission shall analyze the 
     effect on total payments, growth in costs, capital spending, 
     and such other payment effects under those sections.
       (b) Reports.--
       (1) Interim report.--Not later than 18 months after the 
     date of the enactment of this Act, the Commission shall 
     submit to Congress an interim report on the matters studied 
     under subsection (a) with respect only to changes to the 
     critical access hospital provisions under section 105.
       (2) Final report.--Not later than 3 years after the date of 
     the enactment of this Act, the Commission shall submit to 
     Congress a final report on all matters studied under 
     subsection (a).

     SEC. 134. FRONTIER EXTENDED STAY CLINIC DEMONSTRATION 
                   PROJECT.

       (a) Authority To Conduct Demonstration Project.--The 
     Secretary shall waive such provisions of the medicare program 
     established under title XVIII of the Social Security Act (42 
     U.S.C. 1395 et seq.) as are necessary to conduct a 
     demonstration project under which frontier extended stay 
     clinics described in subsection (b) in isolated rural areas 
     are treated as providers of items and services under the 
     medicare program.
       (b) Clinics Described.--A frontier extended stay clinic is 
     described in this subsection if the clinic--
       (1) is located in a community where the closest short-term 
     acute care hospital or critical access hospital is at least 
     75 miles away from the community or is inaccessible by public 
     road; and
       (2) is designed to address the needs of--
       (A) seriously or critically ill or injured patients who, 
     due to adverse weather conditions or other reasons, cannot be 
     transferred quickly to acute care referral centers; or
       (B) patients who need monitoring and observation for a 
     limited period of time.
       (c) Specification of Codes.--The Secretary shall determine 
     the appropriate life-safety codes for such clinics that treat 
     patients for needs referred to in subsection (b)(2).
       (d) Funding.--
       (1) In general.--Subject to paragraph (2), there are 
     authorized to be appropriated, in appropriate part from the 
     Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund, such sums as are 
     necessary to conduct the demonstration project under this 
     section.
       (2) Budget Neutral Implementation.--In conducting the 
     demonstration project under this section, the Secretary shall 
     ensure that the aggregate payments made by the Secretary 
     under the medicare program do not exceed the amount which the 
     Secretary would have paid under the medicare program if the 
     demonstration project under this section was not implemented.
       (e) 3-Year Period.--The Secretary shall conduct the 
     demonstration under this section for a 3-year period.
       (f) Report.--Not later than the date that is 1 year after 
     the date on which the demonstration project concludes, the 
     Secretary shall submit to Congress a report on the 
     demonstration project, together with such recommendations for 
     legislation or administrative action as the Secretary 
     determines appropriate.
       (g) Definitions.--In this section, the terms ``hospital'' 
     and ``critical access hospital'' have the meanings given such 
     terms in subsections (e) and (mm), respectively, of section 
     1861 of the Social Security Act (42 U.S.C. 1395x).

                TITLE II--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

     SEC. 201. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.

       (a) In General.--Section 1886(b)(3)(B)(i) (42 U.S.C. 
     1395ww(b)(3)(B)(i)) is amended--
       (1) by striking ``and'' at the end of subclause (XVIII);
       (2) by striking subclause (XIX); and
       (3) by inserting after subclause (XVIII) the following new 
     subclauses:
       ``(XIX) for each of fiscal years 2004 through 2007, subject 
     to clause (vii), the market basket percentage increase for 
     hospitals in all areas; and
       ``(XX) for fiscal year 2008 and each subsequent fiscal 
     year, the market basket percentage increase for hospitals in 
     all areas.''.
       (b) Submission of Hospital Quality Data.--Section 
     1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B)) is amended by 
     adding at the end the following new clause:
       ``(vii)(I) For purposes of clause (i)(XIX) for each of 
     fiscal years 2005 through 2007, in a case of a subsection (d) 
     hospital that does not submit data to the Secretary in 
     accordance with subclause (II) with respect to such a fiscal 
     year, the applicable percentage increase under such clause 
     for such fiscal year shall be reduced by 0.4 percentage 
     points. Such reduction shall apply only with respect to the 
     fiscal year involved, and the Secretary shall not take into 
     account such reduction in computing the applicable percentage 
     increase under clause (i)(XIX) for a subsequent fiscal year.
       ``(II) Each subsection (d) hospital shall submit to the 
     Secretary quality data (for a set of 10 indicators 
     established by the Secretary as of November 1, 2003) that 
     relate to the quality of care furnished by the hospital in 
     inpatient settings in a form and manner, and at a time, 
     specified by the Secretary for purposes of this clause, but 
     with respect to fiscal year 2005, the Secretary shall provide 
     for a 30-day grace period for the submission of data by a 
     hospital.''.
       (c) GAO Study and Report on Appropriateness of Payments 
     Under the Prospective Payment System for Inpatient Hospital 
     Services.--
       (1) Study.--The Comptroller General of the United States, 
     using the most current data available, shall conduct a study 
     to determine--
       (A) the appropriate level and distribution of payments in 
     relation to costs under the prospective payment system under 
     section 1886 of the Social Security Act (42 U.S.C. 1395ww) 
     for inpatient hospital services furnished by subsection (d) 
     hospitals (as defined in subsection (d)(1)(B) of such 
     section); and
       (B) whether there is a need to adjust such payments under 
     such system to reflect legitimate differences in costs across 
     different geographic areas, kinds of hospitals, and types of 
     cases.
       (2) Report.--Not later than 24 months after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report on the study 
     conducted under paragraph (1) together with such 
     recommendations for legislative and administrative action as 
     the Comptroller General determines appropriate.

     SEC. 202. REVISION OF THE INDIRECT MEDICAL EDUCATION (IME) 
                   ADJUSTMENT PERCENTAGE.

       (a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
     1395ww(d)(5)(B)(ii)) is amended--
       (1) in subclause (VI), by striking ``and'' after the 
     semicolon at the end;
       (2) in subclause (VII)--
       (A) by inserting ``and before April 1, 2004,'' after ``on 
     or after October 1, 2002,''; and
       (B) by striking the period at the end and inserting a 
     semicolon; and
       (3) by adding at the end the following new subclauses:
       ``(VIII) on or after April 1, 2004, and before October 1, 
     2004, `c' is equal to 1.47;
       ``(IX) during fiscal year 2005, `c' is equal to 1.42;
       ``(X) during fiscal year 2006, `c' is equal to 1.37;
       ``(XI) during fiscal year 2007, `c' is equal to 1.32; and

[[Page S15430]]

       ``(XII) on or after October 1, 2007, `c' is equal to 
     1.35.''.
       (b) Conforming Amendment Relating to Determination of 
     Standardized Amount.--Section 1886(d)(2)(C)(i) (42 U.S.C. 
     1395ww(d)(2)(C)(i)) is amended--
       (1) by striking ``1999 or'' and inserting ``1999,''; and
       (2) by inserting ``, or the Medicare Provider Restoration 
     Act of 2003'' after ``2000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to discharges occurring on or after April 1, 
     2004.

     SEC. 203. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER 
                   INPATIENT HOSPITAL PROSPECTIVE PAYMENT SYSTEM.

       (a) Improving Timeliness of Data Collection.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is amended by 
     adding at the end the following new clause:
       ``(vii) Under the mechanism under this subparagraph, the 
     Secretary shall provide for the addition of new diagnosis and 
     procedure codes in April 1 of each year, but the addition of 
     such codes shall not require the Secretary to adjust the 
     payment (or diagnosis-related group classification) under 
     this subsection until the fiscal year that begins after such 
     date.''.
       (b) Eligibility Standard for Technology Outliers.--
       (1) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) 
     (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 
     ``(applying a threshold specified by the Secretary that is 
     the lesser of 75 percent of the standardized amount 
     (increased to reflect the difference between cost and 
     charges) or 75 percent of one standard deviation for the 
     diagnosis-related group involved)'' after ``is inadequate''.
       (2) Process for public input.--Section 1886(d)(5)(K) (42 
     U.S.C. 1395ww(d)(5)(K)), as amended by subsection (a), is 
     amended--
       (A) in clause (i), by adding at the end the following: 
     ``Such mechanism shall be modified to meet the requirements 
     of clause (viii).''; and
       (B) by adding at the end the following new clause:
       ``(viii) The mechanism established pursuant to clause (i) 
     shall be adjusted to provide, before publication of a 
     proposed rule, for public input regarding whether a new 
     service or technology represents an advance in medical 
     technology that substantially improves the diagnosis or 
     treatment of individuals entitled to benefits under part A as 
     follows:
       ``(I) The Secretary shall make public and periodically 
     update a list of all the services and technologies for which 
     an application for additional payment under this subparagraph 
     is pending.
       ``(II) The Secretary shall accept comments, 
     recommendations, and data from the public regarding whether 
     the service or technology represents a substantial 
     improvement.
       ``(III) The Secretary shall provide for a meeting at which 
     organizations representing hospitals, physicians, such 
     individuals, manufacturers, and any other interested party 
     may present comments, recommendations, and data to the 
     clinical staff of the Centers for Medicare & Medicaid 
     Services before publication of a notice of proposed 
     rulemaking regarding whether service or technology represents 
     a substantial improvement.''.
       (c) Preference for Use of DRG Adjustment.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)), as amended by 
     subsections (a) and (b), is amended by adding at the end the 
     following new clause:
       ``(ix) Before establishing any add-on payment under this 
     subparagraph with respect to a new technology, the Secretary 
     shall seek to identify one or more diagnosis-related groups 
     associated with such technology, based on similar clinical or 
     anatomical characteristics and the cost of the technology. 
     Within such groups the Secretary shall assign an eligible new 
     technology into a diagnosis-related group where the average 
     costs of care most closely approximate the costs of care of 
     using the new technology. No add-on payment under this 
     subparagraph shall be made with respect to such new 
     technology and this clause shall not affect the application 
     of paragraph (4)(C)(iii).''.
       (d) Establishment of New Funding for Hospital Inpatient 
     Technology.--
       (1) In general.--Section 1886(d)(5)(K)(ii)(III) (42 U.S.C. 
     1395ww(d)(5)(K)(ii)(III)) is amended by striking ``subject to 
     paragraph (4)(C)(iii),''.
       (2) Not budget neutral.--There shall be no reduction or 
     other adjustment in payments under section 1886 of the Social 
     Security Act because an additional payment is provided under 
     subsection (d)(5)(K)(ii)(III) of such section.
       (e) Effective Date.--
       (1) In general.--The Secretary shall implement the 
     amendments made by this section so that they apply to 
     classification for fiscal years beginning with fiscal year 
     2005.
       (2) Reconsiderations of applications for fiscal year 2004 
     that are denied.--In the case of an application for a 
     classification of a medical service or technology as a new 
     medical service or technology under section 1886(d)(5)(K) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
     filed for fiscal year 2004 and that is denied--
       (A) the Secretary shall automatically reconsider the 
     application as an application for fiscal year 2005 under the 
     amendments made by this section; and
       (B) the maximum time period otherwise permitted for such 
     classification of the service or technology shall be extended 
     by 12 months.

     SEC. 204. INCREASE IN FEDERAL RATE FOR HOSPITALS IN PUERTO 
                   RICO.

       Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
       (1) in subparagraph (A)--
       (A) in clause (i), by striking ``for discharges beginning 
     on or after October 1, 1997, 50 percent (and for discharges 
     between October 1, 1987, and September 30, 1997, 75 
     percent)'' and inserting ``the applicable Puerto Rico 
     percentage (specified in subparagraph (E))''; and
       (B) in clause (ii), by striking ``for discharges beginning 
     in a fiscal year beginning on or after October 1, 1997, 50 
     percent (and for discharges between October 1, 1987, and 
     September 30, 1997, 25 percent)'' and inserting ``the 
     applicable Federal percentage (specified in subparagraph 
     (E))''; and
       (2) by adding at the end the following new subparagraph:
       ``(E) For purposes of subparagraph (A), for discharges 
     occurring--
       ``(i) on or after October 1, 1987, and before October 1, 
     1997, the applicable Puerto Rico percentage is 75 percent and 
     the applicable Federal percentage is 25 percent;
       ``(ii) on or after October 1, 1997, and before April 1, 
     2004, the applicable Puerto Rico percentage is 50 percent and 
     the applicable Federal percentage is 50 percent;
       ``(iii) on or after April 1, 2004, and before October 1, 
     2004, the applicable Puerto Rico percentage is 37.5 percent 
     and the applicable Federal percentage is 62.5 percent; and
       ``(iv) on or after October 1, 2004, the applicable Puerto 
     Rico percentage is 25 percent and the applicable Federal 
     percentage is 75 percent.''.

     SEC. 205. WAGE INDEX ADJUSTMENT RECLASSIFICATION REFORM.

       (a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)), as 
     amended by section 106, is amended by adding at the end the 
     following new paragraph:
       ``(13)(A) In order to recognize commuting patterns among 
     geographic areas, the Secretary shall establish a process 
     through application or otherwise for an increase of the wage 
     index applied under paragraph (3)(E) for subsection (d) 
     hospitals located in a qualifying county described in 
     subparagraph (B) in the amount computed under subparagraph 
     (D) based on out-migration of hospital employees who reside 
     in that county to any higher wage index area.
       ``(B) The Secretary shall establish criteria for a 
     qualifying county under this subparagraph based on the out-
     migration referred to in subparagraph (A) and differences in 
     the area wage indices. Under such criteria the Secretary 
     shall, utilizing such data as the Secretary determines to be 
     appropriate, establish--
       ``(i) a threshold percentage, established by the Secretary, 
     of the weighted average of the area wage index or indices for 
     the higher wage index areas involved;
       ``(ii) a threshold (of not less than 10 percent) for 
     minimum out-migration to a higher wage index area or areas; 
     and
       ``(iii) a requirement that the average hourly wage of the 
     hospitals in the qualifying county equals or exceeds the 
     average hourly wage of all the hospitals in the area in which 
     the qualifying county is located.
       ``(C) For purposes of this paragraph, the term `higher wage 
     index area' means, with respect to a county, an area with a 
     wage index that exceeds that of the county.
       ``(D) The increase in the wage index under subparagraph (A) 
     for a qualifying county shall be equal to the percentage of 
     the hospital employees residing in the qualifying county who 
     are employed in any higher wage index area multiplied by the 
     sum of the products, for each higher wage index area of--
       ``(i) the difference between--
       ``(I) the wage index for such higher wage index area, and
       ``(II) the wage index of the qualifying county; and
       ``(ii) the number of hospital employees residing in the 
     qualifying county who are employed in such higher wage index 
     area divided by the total number of hospital employees 
     residing in the qualifying county who are employed in any 
     higher wage index area.
       ``(E) The process under this paragraph may be based upon 
     the process used by the Medicare Geographic Classification 
     Review Board under paragraph (10). As the Secretary 
     determines to be appropriate to carry out such process, the 
     Secretary may require hospitals (including subsection (d) 
     hospitals and other hospitals) and critical access hospitals, 
     as required under section 1866(a)(1)(T), to submit data 
     regarding the location of residence, or the Secretary may use 
     data from other sources.
       ``(F) A wage index increase under this paragraph shall be 
     effective for a period of 3 fiscal years, except that the 
     Secretary shall establish procedures under which a subsection 
     (d) hospital may elect to waive the application of such wage 
     index increase.
       ``(G) A hospital in a county that has a wage index increase 
     under this paragraph for a period and that has not waived the 
     application of such an increase under subparagraph (F) is not 
     eligible for reclassification under paragraph (8) or (10) 
     during that period.
       ``(H) Any increase in a wage index under this paragraph for 
     a county shall not be taken into account for purposes of--
       ``(i) computing the wage index for portions of the wage 
     index area (not including the county) in which the county is 
     located; or
       ``(ii) applying any budget neutrality adjustment with 
     respect to such index under paragraph (8)(D).

[[Page S15431]]

       ``(I) The thresholds described in subparagraph (B), data on 
     hospital employees used under this paragraph, and any 
     determination of the Secretary under the process described in 
     subparagraph (E) shall be final and shall not be subject to 
     judicial review.''.
       (b) Conforming Amendments.--Section 1866(a)(1) (42 U.S.C. 
     1395cc(a)(1)) is amended--
       (1) in subparagraph (R), by striking ``and'' at the end;
       (2) in subparagraph (S), by striking the period at the end 
     and inserting ``, and''; and
       (3) by inserting after subparagraph (S) the following new 
     subparagraph:
       ``(T) in the case of hospitals and critical access 
     hospitals, to furnish to the Secretary such data as the 
     Secretary determines appropriate pursuant to subparagraph (E) 
     of section 1886(d)(12) to carry out such section.''.
       (c) Effective Date.--The amendments made by this section 
     shall first apply to the wage index for discharges occurring 
     on or after October 1, 2004. In initially implementing such 
     amendments, the Secretary may modify the deadlines otherwise 
     applicable under clauses (ii) and (iii)(I) of section 
     1886(d)(10)(C) of the Social Security Act (42 U.S.C. 
     1395ww(d)(10)(C)), for submission of, and actions on, 
     applications relating to changes in hospital geographic 
     reclassification.

     SEC. 206. LIMITATION ON CHARGES FOR INPATIENT HOSPITAL 
                   CONTRACT HEALTH SERVICES PROVIDED TO INDIANS BY 
                   MEDICARE PARTICIPATING HOSPITALS.

       (a) In General.--Section 1866(a)(1) (42 U.S.C. 
     1395cc(a)(1)), as amended by section 205(b), is amended--
       (1) in subparagraph (S), by striking ``and'' at the end;
       (2) in subparagraph (T), by striking the period and 
     inserting ``, and''; and
       (3) by inserting after subparagraph (T) the following new 
     subparagraph:
       ``(U) in the case of hospitals which furnish inpatient 
     hospital services for which payment may be made under this 
     title, to be a participating provider of medical care both--
       ``(i) under the contract health services program funded by 
     the Indian Health Service and operated by the Indian Health 
     Service, an Indian tribe, or tribal organization (as those 
     terms are defined in section 4 of the Indian Health Care 
     Improvement Act), with respect to items and services that are 
     covered under such program and furnished to an individual 
     eligible for such items and services under such program; and
       ``(ii) under any program funded by the Indian Health 
     Service and operated by an urban Indian organization with 
     respect to the purchase of items and services for an eligible 
     urban Indian (as those terms are defined in such section 4),

     in accordance with regulations promulgated by the Secretary 
     regarding admission practices, payment methodology, and rates 
     of payment (including the acceptance of no more than such 
     payment rate as payment in full for such items and 
     services.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply as of a date specified by the Secretary of Health 
     and Human Services (but in no case later than 1 year after 
     the date of enactment of this Act) to medicare participation 
     agreements in effect (or entered into) on or after such date.
       (c) Promulgation of Regulations.--The Secretary shall 
     promulgate regulations to carry out the amendments made by 
     subsection (a).

     SEC. 207. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO MEDICARE 
                   LIMITS ON PHYSICIAN REFERRALS.

       (a) Limits on Physician Referrals.--
       (1) Ownership and investment interests in whole 
     hospitals.--
       (A) In general.--Section 1877(d)(3) (42 U.S.C. 
     1395nn(d)(3)) is amended--
       (i) by striking ``, and'' at the end of subparagraph (A) 
     and inserting a semicolon; and
       (ii) by redesignating subparagraph (B) as subparagraph (C) 
     and inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) effective for the 18-month period beginning on the 
     date of the enactment of the Medicare Provider Restoration 
     Act of 2003, the hospital is not a specialty hospital (as 
     defined in subsection (h)(7)); and''.
       (B) Definition.--Section 1877(h) (42 U.S.C. 1395nn(h)) is 
     amended by adding at the end the following:
       ``(7) Specialty hospital.--
       ``(A) In general.--For purposes of this section, except as 
     provided in subparagraph (B), the term `specialty hospital' 
     means a subsection (d) hospital (as defined in section 
     1886(d)(1)(B)) that is primarily or exclusively engaged in 
     the care and treatment of one of the following categories:
       ``(i) Patients with a cardiac condition.
       ``(ii) Patients with an orthopedic condition.
       ``(iii) Patients receiving a surgical procedure.
       ``(iv) Any other specialized category of services that the 
     Secretary designates as inconsistent with the purpose of 
     permitting physician ownership and investment interests in a 
     hospital under this section.
       ``(B) Exception.--For purposes of this section, the term 
     `specialty hospital' does not include any hospital--
       ``(i) determined by the Secretary--

       ``(I) to be in operation before November 18, 2003; or
       ``(II) under development as of such date;

       ``(ii) for which the number of physician investors at any 
     time on or after such date is no greater than the number of 
     such investors as of such date;
       ``(iii) for which the type of categories described in 
     subparagraph (A) at any time on or after such date is no 
     different than the type of such categories as of such date;
       ``(iv) for which any increase in the number of beds occurs 
     only in the facilities on the main campus of the hospital and 
     does not exceed 50 percent of the number of beds in the 
     hospital as of November 18, 2003, or 5 beds, whichever is 
     greater; and
       ``(v) that meets such other requirements as the Secretary 
     may specify.''.
       (2) Ownership and investment interests in a rural 
     provider.--Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is 
     amended to read as follows:
       ``(2) Rural providers.--In the case of designated health 
     services furnished in a rural area (as defined in section 
     1886(d)(2)(D)) by an entity, if--
       ``(A) substantially all of the designated health services 
     furnished by the entity are furnished to individuals residing 
     in such a rural area; and
       ``(B) effective for the 18-month period beginning on the 
     date of the enactment of the Medicare Provider Restoration 
     Act of 2003, the entity is not a specialty hospital (as 
     defined in subsection (h)(7)).''.
       (b) Application of Exception for Hospitals Under 
     Development.--For purposes of section 1877(h)(7)(B)(i)(II) of 
     the Social Security Act, as added by subsection (a)(1)(B), in 
     determining whether a hospital is under development as of 
     November 18, 2003, the Secretary shall consider--
       (1) whether architectural plans have been completed, 
     funding has been received, zoning requirements have been met, 
     and necessary approvals from appropriate State agencies have 
     been received; and
       (2) any other evidence the Secretary determines would 
     indicate whether a hospital is under development as of such 
     date.
       (c) Studies.--
       (1) MedPAC study.--The Medicare Payment Advisory 
     Commission, in consultation with the Comptroller General of 
     the United States, shall conduct a study to determine--
       (A) any differences in the costs of health care services 
     furnished to patients by physician-owned specialty hospitals 
     and the costs of such services furnished by local full-
     service community hospitals within specific diagnosis-related 
     groups;
       (B) the extent to which specialty hospitals, relative to 
     local full-service community hospitals, treat patients in 
     certain diagnosis-related groups within a category, such as 
     cardiology, and an analysis of the selection;
       (C) the financial impact of physician-owned specialty 
     hospitals on local full-service community hospitals;
       (D) how the current diagnosis-related group system should 
     be updated to better reflect the cost of delivering care in a 
     hospital setting; and
       (E) the proportions of payments received, by type of payer, 
     between the specialty hospitals and local full-service 
     community hospitals.
       (2) HHS study.--The Secretary shall conduct a study of a 
     representative sample of specialty hospitals--
       (A) to determine the percentage of patients admitted to 
     physician-owned specialty hospitals who are referred by 
     physicians with an ownership interest;
       (B) to determine the referral patterns of physician owners, 
     including the percentage of patients they referred to 
     physician-owned specialty hospitals and the percentage of 
     patients they referred to local full-service community 
     hospitals for the same condition;
       (C) to compare the quality of care furnished in physician-
     owned specialty hospitals and in local full-service community 
     hospitals for similar conditions and patient satisfaction 
     with such care; and
       (D) to assess the differences in uncompensated care, as 
     defined by the Secretary, between the specialty hospital and 
     local full-service community hospitals, and the relative 
     value of any tax exemption available to such hospitals.
       (3) Reports.--Not later than 15 months after the date of 
     the enactment of this Act, the Commission and the Secretary, 
     respectively, shall each submit to Congress a report on the 
     studies conducted under paragraphs (1) and (2), respectively, 
     and shall include any recommendations for legislation or 
     administrative changes.

     SEC. 208. 1-TIME APPEALS PROCESS FOR HOSPITAL WAGE INDEX 
                   CLASSIFICATION.

       (a) Establishment of Process.--
       (1) In general.--The Secretary shall establish not later 
     than January 1, 2004, by instruction or otherwise a process 
     under which a hospital may appeal the wage index 
     classification otherwise applicable to the hospital and 
     select another area within the State (or, at the discretion 
     of the Secretary, within a contiguous State) to which to be 
     reclassified.
       (2) Process requirements.--The process established under 
     paragraph (1) shall be consistent with the following:
       (A) Such an appeal may be filed as soon as possible after 
     the date of the enactment of this Act but shall be filed by 
     not later than February 15, 2004.
       (B) Such an appeal shall be heard by the Medicare 
     Geographic Reclassification Review Board.
       (C) There shall be no further administrative or judicial 
     review of a decision of such Board.

[[Page S15432]]

       (3) Reclassification upon successful appeal.--If the 
     Medicare Geographic Reclassification Review Board determines 
     that the hospital is a qualifying hospital (as defined in 
     subsection (c)), the hospital shall be reclassified to the 
     area selected under paragraph (1). Such reclassification 
     shall apply with respect to discharges occurring during the 
     3-year period beginning with April 1, 2004.
       (4) Inapplicability of certain provisions.--Except as the 
     Secretary may provide, the provisions of paragraphs (8) and 
     (10) of section 1886(d) of the Social Security Act (42 U.S.C. 
     1395ww(d)) shall not apply to an appeal under this section.
       (b) Application of Reclassification.--In the case of an 
     appeal decided in favor of a qualifying hospital under 
     subsection (a), the wage index reclassification shall not 
     affect the wage index computation for any area or for any 
     other hospital and shall not be effected in a budget neutral 
     manner. The provisions of this section shall not affect 
     payment for discharges occurring after the end of the 3-year-
     period referred to in subsection (a).
       (c) Qualifying Hospital Defined.--For purposes of this 
     section, the term ``qualifying hospital'' means a subsection 
     (d) hospital (as defined in section 1886(d)(1)(B) of the 
     Social Security Act, 42 U.S.C. 1395ww(d)(1)(B)) that--
       (1) does not qualify for a change in wage index 
     classification under paragraph (8) or (10) of section 1886(d) 
     of the Social Security Act (42 U.S.C. 1395ww(d)) on the basis 
     of requirements relating to distance or commuting; and
       (2) meets such other criteria, such as quality, as the 
     Secretary may specify by instruction or otherwise.

     The Secretary may modify the wage comparison guidelines 
     promulgated under section 1886(d)(10)(D) of such Act (42 
     U.S.C. 1395ww(d)(10)(D)) in carrying out this section.
       (d) Wage Index Classification.--For purposes of this 
     section, the term ``wage index classification'' means the 
     geographic area in which it is classified for purposes of 
     determining for a fiscal year the factor used to adjust the 
     DRG prospective payment rate under section 1886(d) of the 
     Social Security Act (42 U.S.C. 1395ww(d)) for area 
     differences in hospital wage levels that applies to such 
     hospital under paragraph (3)(E) of such section.
       (e) Limitation on Expenditures.--The aggregate amount of 
     additional expenditures resulting from the application of 
     this section shall not exceed $900,000,000.
       (f) Transitional Extension.--Any reclassification of a 
     county or other area made by Act of Congress for purposes of 
     making payments under section 1886(d) of the Social Security 
     Act (42 U.S.C. 1395ww(d)) that expired on September 30, 2003, 
     shall be deemed to be in effect during the period beginning 
     on January 1, 2004, and ending on September 30, 2004.

                      Subtitle B--Other Provisions

     SEC. 211. PAYMENT FOR COVERED SKILLED NURSING FACILITY 
                   SERVICES.

       (a) Adjustment to RUGs for AIDS Residents.--Paragraph (12) 
     of section 1888(e) (42 U.S.C. 1395yy(e)) is amended to read 
     as follows:
       ``(12) Adjustment for residents with aids.--
       ``(A) In general.--Subject to subparagraph (B), in the case 
     of a resident of a skilled nursing facility who is afflicted 
     with acquired immune deficiency syndrome (AIDS), the per diem 
     amount of payment otherwise applicable (determined without 
     regard to any increase under section 101 of the Medicare, 
     Medicaid, and SCHIP Balanced Budget Refinement Act of 1999, 
     or under section 314(a) of Medicare, Medicaid, and SCHIP 
     Benefits Improvement and Protection Act of 2000), shall be 
     increased by 128 percent to reflect increased costs 
     associated with such residents.
       ``(B) Sunset.--Subparagraph (A) shall not apply on and 
     after such date as the Secretary certifies that there is an 
     appropriate adjustment in the case mix under paragraph 
     (4)(G)(i) to compensate for the increased costs associated 
     with residents described in such subparagraph.''.
       (b) Effective Date.--The amendment made by paragraph (1) 
     shall apply to services furnished on or after October 1, 
     2004.

     SEC. 212. COVERAGE OF HOSPICE CONSULTATION SERVICES.

       (a) Coverage of Hospice Consultation Services.--Section 
     1812(a) (42 U.S.C. 1395d(a)) is amended--
       (1) by striking ``and'' at the end of paragraph (3);
       (2) by striking the period at the end of paragraph (4) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) for individuals who are terminally ill, have not made 
     an election under subsection (d)(1), and have not previously 
     received services under this paragraph, services that are 
     furnished by a physician (as defined in section 1861(r)(1)) 
     who is either the medical director or an employee of a 
     hospice program and that--
       ``(A) consist of--
       ``(i) an evaluation of the individual's need for pain and 
     symptom management, including the individual's need for 
     hospice care; and
       ``(ii) counseling the individual with respect to hospice 
     care and other care options; and
       ``(B) may include advising the individual regarding 
     advanced care planning.''.
       (b) Payment.--Section 1814(i) (42 U.S.C. 1395f(i)) is 
     amended by adding at the end the following new paragraph:
       ``(4) The amount paid to a hospice program with respect to 
     the services under section 1812(a)(5) for which payment may 
     be made under this part shall be equal to an amount 
     established for an office or other outpatient visit for 
     evaluation and management associated with presenting problems 
     of moderate severity and requiring medical decisionmaking of 
     low complexity under the fee schedule established under 
     section 1848(b), other than the portion of such amount 
     attributable to the practice expense component.''.
       (c) Conforming Amendment.--Section 1861(dd)(2)(A)(i) (42 
     U.S.C. 1395x(dd)(2)(A)(i)) is amended by inserting before the 
     comma at the end the following: ``and services described in 
     section 1812(a)(5)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to services provided by a hospice program on or 
     after January 1, 2005.

     SEC. 213. STUDY ON PORTABLE DIAGNOSTIC ULTRASOUND SERVICES 
                   FOR BENEFICIARIES IN SKILLED NURSING 
                   FACILITIES.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study of portable diagnostic ultrasound 
     services furnished to medicare beneficiaries in skilled 
     nursing facilities. Such study shall consider the following:
       (1) Types of equipment; training.--The types of portable 
     diagnostic ultrasound services furnished to such 
     beneficiaries, the types of portable ultrasound equipment 
     used to furnish such services, and the technical skills, or 
     training, or both, required for technicians to furnish such 
     services.
       (2) Clinical appropriateness.--The clinical appropriateness 
     of transporting portable diagnostic ultrasound diagnostic and 
     technicians to patients in skilled nursing facilities as 
     opposed to transporting such patients to a hospital or other 
     facility that furnishes diagnostic ultrasound services.
       (3) Financial impact.--The financial impact if Medicare 
     were make a separate payment for portable ultrasound 
     diagnostic services, including the impact of separate 
     payments--
       (A) for transportation and technician services for 
     residents during a resident in a part A stay, that would 
     otherwise be paid for under the prospective payment system 
     for covered skilled nursing facility services (under section 
     1888(e) of the Social Security Act (42 U.S.C. 1395yy(e)); and
       (B) for such services for residents in a skilled nursing 
     facility after a part A stay.
       (4) Credentialing requirements.--Whether the Secretary 
     should establish credentialing or other requirements for 
     technicians that furnish diagnostic ultrasound services to 
     medicare beneficiaries.
       (b) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under subsection 
     (a), and shall include any recommendations for legislation or 
     administrative change as the Comptroller General determines 
     appropriate.

                TITLE III--PROVISIONS RELATING TO PART B

        Subtitle A--Provisions Relating to Physicians' Services

     SEC. 301. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.

       (a) Update for 2004 and 2005.--
       (1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is 
     amended by adding at the end the following new paragraph:
       ``(5) Update for 2004 and 2005.--The update to the single 
     conversion factor established in paragraph (1)(C) for each of 
     2004 and 2005 shall be not less than 1.5 percent.''.
       (2) Conforming amendment.--Paragraph (4)(B) of such section 
     is amended, in the matter before clause (i), by inserting 
     ``and paragraph (5)'' after ``subparagraph (D)''.
       (3) Not treated as change in law and regulation in 
     sustainable growth rate determination.--The amendments made 
     by this subsection shall not be treated as a change in law 
     for purposes of applying section 1848(f)(2)(D) of the Social 
     Security Act (42 U.S.C. 1395w-4(f)(2)(D)).
       (b) Use of 10-Year Rolling Average in Computing Gross 
     Domestic Product.--
       (1) In general.--Section 1848(f)(2)(C) (42 U.S.C. 1395w-
     4(f)(2)(C)) is amended--
       (A) by striking ``projected'' and inserting ``annual 
     average''; and
       (B) by striking ``from the previous applicable period to 
     the applicable period involved'' and inserting ``during the 
     10-year period ending with the applicable period involved''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to computations of the sustainable growth rate 
     for years beginning with 2003.

     SEC. 302. TREATMENT OF PHYSICIANS' SERVICES FURNISHED IN 
                   ALASKA.

       Section 1848(e)(1) (42 U.S.C. 1395w-4(e)(1)), as amended by 
     section 121, is amended--
       (1) in subparagraph (A), by striking ``subparagraphs (B), 
     (C), (E), and (F)'' and inserting ``subparagraphs (B), (C), 
     (E), (F) and (G)''; and
       (2) by adding at the end the following new subparagraph:
       ``(G) Floor for practice expense, malpractice, and work 
     geographic indices for services furnished in alaska.--For 
     purposes of payment for services furnished in Alaska on or 
     after January 1, 2004, and before

[[Page S15433]]

     January 1, 2006, after calculating the practice expense, 
     malpractice, and work geographic indices in clauses (i), 
     (ii), and (iii) of subparagraph (A) and in subparagraph (B), 
     the Secretary shall increase any such index to 1.67 if such 
     index would otherwise be less than 1.67.''.

     SEC. 303. INCLUSION OF PODIATRISTS, DENTISTS, AND 
                   OPTOMETRISTS UNDER PRIVATE CONTRACTING 
                   AUTHORITY.

       Section 1802(b)(5)(B) (42 U.S.C. 1395a(b)(5)(B)) is amended 
     by striking ``section 1861(r)(1)'' and inserting ``paragraphs 
     (1), (2), (3), and (4) of section 1861(r)''.

     SEC. 304. GAO STUDY ON ACCESS TO PHYSICIANS' SERVICES.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study on access of medicare beneficiaries to 
     physicians' services under the medicare program. The study 
     shall include--
       (1) an assessment of the use by beneficiaries of such 
     services through an analysis of claims submitted by 
     physicians for such services under part B of the medicare 
     program;
       (2) an examination of changes in the use by beneficiaries 
     of physicians' services over time; and
       (3) an examination of the extent to which physicians are 
     not accepting new medicare beneficiaries as patients.
       (b) Report.--Not later than 18 months after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under subsection 
     (a). The report shall include a determination whether--
       (1) data from claims submitted by physicians under part B 
     of the medicare program indicate potential access problems 
     for medicare beneficiaries in certain geographic areas; and
       (2) access by medicare beneficiaries to physicians' 
     services may have improved, remained constant, or 
     deteriorated over time.

     SEC. 305. COLLABORATIVE DEMONSTRATION-BASED REVIEW OF 
                   PHYSICIAN PRACTICE EXPENSE GEOGRAPHIC 
                   ADJUSTMENT DATA.

       (a) In General.--Not later than January 1, 2005, the 
     Secretary shall, in collaboration with State and other 
     appropriate organizations representing physicians, and other 
     appropriate persons, review and consider alternative data 
     sources than those currently used in establishing the 
     geographic index for the practice expense component under the 
     medicare physician fee schedule under section 
     1848(e)(1)(A)(i) of the Social Security Act (42 U.S.C. 1395w-
     4(e)(1)(A)(i)).
       (b) Sites.--The Secretary shall select two physician 
     payment localities in which to carry out subsection (a). One 
     locality shall include rural areas and at least one locality 
     shall be a statewide locality that includes both urban and 
     rural areas.
       (c) Report and Recommendations.--
       (1) Report.--Not later than January 1, 2006, the Secretary 
     shall submit to Congress a report on the review and 
     consideration conducted under subsection (a). Such report 
     shall include information on the alternative developed data 
     sources considered by the Secretary under subsection (a), 
     including the accuracy and validity of the data as measures 
     of the elements of the geographic index for practice expenses 
     under the medicare physician fee schedule as well as the 
     feasibility of using such alternative data nationwide in lieu 
     of current proxy data used in such index, and the estimated 
     impacts of using such alternative data.
       (2) Recommendations.--The report submitted under paragraph 
     (1) shall contain recommendations on which data sources 
     reviewed and considered under subsection (a) are appropriate 
     for use in calculating the geographic index for practice 
     expenses under the medicare physician fee schedule.

     SEC. 306. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.

       (a) Practice Expense Component.--Not later than 1 year 
     after the date of the enactment of this Act, the Medicare 
     Payment Advisory Commission shall submit to Congress a report 
     on the effect of refinements to the practice expense 
     component of payments for physicians' services, after the 
     transition to a full resource-based payment system in 2002, 
     under section 1848 of the Social Security Act (42 U.S.C. 
     1395w-4). Such report shall examine the following matters by 
     physician specialty:
       (1) The effect of such refinements on payment for 
     physicians' services.
       (2) The interaction of the practice expense component with 
     other components of and adjustments to payment for 
     physicians' services under such section.
       (3) The appropriateness of the amount of compensation by 
     reason of such refinements.
       (4) The effect of such refinements on access to care by 
     medicare beneficiaries to physicians' services.
       (5) The effect of such refinements on physician 
     participation under the medicare program.
       (b) Volume of Physicians' Services.--Not later than 1 year 
     after the date of the enactment of this Act, the Medicare 
     Payment Advisory Commission shall submit to Congress a report 
     on the extent to which increases in the volume of physicians' 
     services under part B of the medicare program are a result of 
     care that improves the health and well-being of medicare 
     beneficiaries. The study shall include the following:
       (1) An analysis of recent and historic growth in the 
     components that the Secretary includes under the sustainable 
     growth rate (under section 1848(f) of the Social Security Act 
     (42 U.S.C. 1395w-4(f))).
       (2) An examination of the relative growth of volume in 
     physicians' services between medicare beneficiaries and other 
     populations.
       (3) An analysis of the degree to which new technology, 
     including coverage determinations of the Centers for Medicare 
     & Medicaid Services, has affected the volume of physicians' 
     services.
       (4) An examination of the impact on volume of demographic 
     changes.
       (5) An examination of shifts in the site of service or 
     services that influence the number and intensity of services 
     furnished in physicians' offices and the extent to which 
     changes in reimbursement rates to other providers have 
     effected these changes.
       (6) An evaluation of the extent to which the Centers for 
     Medicare & Medicaid Services takes into account the impact of 
     law and regulations on the sustainable growth rate.

                    Subtitle B--Preventive Services

     SEC. 311. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL 
                   EXAMINATION.

       (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) 
     is amended--
       (1) in subparagraph (U), by striking ``and'' at the end;
       (2) in subparagraph (V)(iii), by inserting ``and'' at the 
     end; and
       (3) by adding at the end the following new subparagraph:
       ``(W) an initial preventive physical examination (as 
     defined in subsection (ww));''.
       (b) Services Described.--Section 1861 (42 U.S.C. 1395x) is 
     amended by adding at the end the following new subsection:

               ``Initial Preventive Physical Examination

       ``(ww)(1) The term `initial preventive physical 
     examination' means physicians' services consisting of a 
     physical examination (including measurement of height, 
     weight, and blood pressure, and an electrocardiogram) with 
     the goal of health promotion and disease detection and 
     includes education, counseling, and referral with respect to 
     screening and other preventive services described in 
     paragraph (2), but does not include clinical laboratory 
     tests.
       ``(2) The screening and other preventive services described 
     in this paragraph include the following:
       ``(A) Pneumococcal, influenza, and hepatitis B vaccine and 
     administration under subsection (s)(10).
       ``(B) Screening mammography as defined in subsection (jj).
       ``(C) Screening pap smear and screening pelvic exam as 
     defined in subsection (nn).
       ``(D) Prostate cancer screening tests as defined in 
     subsection (oo).
       ``(E) Colorectal cancer screening tests as defined in 
     subsection (pp).
       ``(F) Diabetes outpatient self-management training services 
     as defined in subsection (qq)(1).
       ``(G) Bone mass measurement as defined in subsection (rr).
       ``(H) Screening for glaucoma as defined in subsection (uu).
       ``(I) Medical nutrition therapy services as defined in 
     subsection (vv).
       ``(J) Cardiovascular screening blood tests as defined in 
     subsection (xx)(1).
       ``(K) Diabetes screening tests as defined in subsection 
     (yy).''.
       (c) Payment as Physicians' Services.--Section 1848(j)(3) 
     (42 U.S.C. 1395w-4(j)(3)) is amended by inserting ``(2)(W),'' 
     after ``(2)(S),''.
       (d) Other Conforming Amendments.--(1) Section 1862(a) (42 
     U.S.C. 1395y(a)), as amended by section 303(i)(3)(B), is 
     amended--
       (A) in paragraph (1)--
       (i) by striking ``and'' at the end of subparagraph (I);
       (ii) by striking the semicolon at the end of subparagraph 
     (J) and inserting ``, and''; and
       (iii) by adding at the end the following new subparagraph:
       ``(K) in the case of an initial preventive physical 
     examination, which is performed not later than 6 months after 
     the date the individual's first coverage period begins under 
     part B;''; a
       (B) in paragraph (7), by striking ``or (H)'' and inserting 
     ``(H), or (K)''.
       (2) Clauses (i) and (ii) of section 1861(s)(2)(K) (42 
     U.S.C. 1395x(s)(2)(K)) are each amended by inserting ``and 
     services described in subsection (ww)(1)'' after ``services 
     which would be physicians' services''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     2005, but only for individuals whose coverage period under 
     part B begins on or after such date.

     SEC. 312. COVERAGE OF CARDIOVASCULAR SCREENING BLOOD TESTS.

       (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), 
     as amended by section 311(a), is amended--
       (1) in subparagraph (V)(iii), by striking ``and'' at the 
     end;
       (2) in subparagraph (W), by inserting ``and'' at the end; 
     and
       (3) by adding at the end the following new subparagraph:
       ``(X) cardiovascular screening blood tests (as defined in 
     subsection (xx)(1));''.
       (b) Services Described.--Section 1861 (42 U.S.C. 1395x) is 
     amended by adding at the end the following new subsection:

                 ``Cardiovascular Screening Blood Test

       ``(xx)(1) The term `cardiovascular screening blood test' 
     means a blood test for the early detection of cardiovascular 
     disease (or abnormalities associated with an elevated

[[Page S15434]]

     risk of cardiovascular disease) that tests for the following:
       ``(A) Cholesterol levels and other lipid or triglyceride 
     levels.
       ``(B) Such other indications associated with the presence 
     of, or an elevated risk for, cardiovascular disease as the 
     Secretary may approve for all individuals (or for some 
     individuals determined by the Secretary to be at risk for 
     cardiovascular disease), including indications measured by 
     noninvasive testing.

     The Secretary may not approve an indication under 
     subparagraph (B) for any individual unless a blood test for 
     such is recommended by the United States Preventive Services 
     Task Force.
       ``(2) The Secretary shall establish standards, in 
     consultation with appropriate organizations, regarding the 
     frequency for each type of cardiovascular screening blood 
     tests, except that such frequency may not be more often than 
     once every 2 years.''.
       (c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), 
     as amended by section 311(d), is amended--
       (1) by striking ``and'' at the end of subparagraph (K);
       (2) by striking the semicolon at the end of subparagraph 
     (L) and inserting ``, and''; and
       (3) by adding at the end the following new subparagraph:
       ``(M) in the case of cardiovascular screening blood tests 
     (as defined in section 1861(xx)(1)), which are performed more 
     frequently than is covered under section 1861(xx)(2);''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to tests furnished on or after January 1, 2005.

     SEC. 313. COVERAGE OF DIABETES SCREENING TESTS.

       (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), 
     as amended by section 312(a), is amended--
       (1) in subparagraph (W), by striking ``and'' at the end;
       (2) in subparagraph (X), by adding ``and'' at the end; and
       (3) by adding at the end the following new subparagraph:
       ``(Y) diabetes screening tests (as defined in subsection 
     (yy));''.
       (b) Services Described.--Section 1861 (42 U.S.C. 1395x), as 
     amended by section 312(b), is amended by adding at the end 
     the following new subsection:

                       ``Diabetes Screening Tests

       ``(yy)(1) The term `diabetes screening tests' means testing 
     furnished to an individual at risk for diabetes (as defined 
     in paragraph (2)) for the purpose of early detection of 
     diabetes, including--
       ``(A) a fasting plasma glucose test; and
       ``(B) such other tests, and modifications to tests, as the 
     Secretary determines appropriate, in consultation with 
     appropriate organizations.
       ``(2) For purposes of paragraph (1), the term `individual 
     at risk for diabetes' means an individual who has any of the 
     following risk factors for diabetes:
       ``(A) Hypertension.
       ``(B) Dyslipidemia.
       ``(C) Obesity, defined as a body mass index greater than or 
     equal to 30 kg/m2.
       ``(D) Previous identification of an elevated impaired 
     fasting glucose.
       ``(E) Previous identification of impaired glucose 
     tolerance.
       ``(F) A risk factor consisting of at least 2 of the 
     following characteristics:
       ``(i) Overweight, defined as a body mass index greater than 
     25, but less than 30, kg/m2.
       ``(ii) A family history of diabetes.
       ``(iii) A history of gestational diabetes mellitus or 
     delivery of a baby weighing greater than 9 pounds.
       ``(iv) 65 years of age or older.
       ``(3) The Secretary shall establish standards, in 
     consultation with appropriate organizations, regarding the 
     frequency of diabetes screening tests, except that such 
     frequency may not be more often than twice within the 12-
     month period following the date of the most recent diabetes 
     screening test of that individual.''.
       (c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), 
     as amended by section 312(c), is amended--
       (1) by striking ``and'' at the end of subparagraph (L);
       (2) by striking the semicolon at the end of subparagraph 
     (M) and inserting ``, and''; and
       (3) by adding at the end the following new subparagraph:
       ``(N) in the case of a diabetes screening test (as defined 
     in section 1861(yy)(1)), which is performed more frequently 
     than is covered under section 1861(yy)(3);''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to tests furnished on or after January 1, 2005.

     SEC. 314. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

       (a) Exclusion From OPD Fee Schedule.--Section 
     1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv)) is amended 
     by inserting before the period at the end the following: 
     ``and does not include screening mammography (as defined in 
     section 1861(jj)) and diagnostic mammography''.
       (b) Conforming Amendment.--Section 1833(a)(2)(E)(i) (42 
     U.S.C. 1395l(a)(2)(E)(i)) is amended by inserting ``and, for 
     services furnished on or after January 1, 2005, diagnostic 
     mammography'' after ``screening mammography''.
       (c) Effective Date.--The amendments made by this section 
     shall apply--
       (1) in the case of screening mammography, to services 
     furnished on or after the date of the enactment of this Act; 
     and
       (2) in the case of diagnostic mammography, to services 
     furnished on or after January 1, 2005.

                      Subtitle C--Other Provisions

     SEC. 321. HOSPITAL OUTPATIENT DEPARTMENT (HOPD) PAYMENT 
                   REFORM.

       (a) Payment for Drugs.--
       (1) Special rules for certain drugs and biologicals.--
     Section 1833(t) (42 U.S.C. 1395l(t)), as amended by section 
     111(b), is amended by inserting after paragraph (13) the 
     following new paragraphs:
       ``(14) Drug apc payment rates.--
       ``(A) In general.--The amount of payment under this 
     subsection for a specified covered outpatient drug (defined 
     in subparagraph (B)) that is furnished as part of a covered 
     OPD service (or group of services)--
       ``(i) in 2004, in the case of--

       ``(I) a sole source drug shall in no case be less than 88 
     percent, or exceed 95 percent, of the reference average 
     wholesale price for the drug;
       ``(II) an innovator multiple source drug shall in no case 
     exceed 68 percent of the reference average wholesale price 
     for the drug; or
       ``(III) a noninnovator multiple source drug shall in no 
     case exceed 46 percent of the reference average wholesale 
     price for the drug;

       ``(ii) in 2005, in the case of--

       ``(I) a sole source drug shall in no case be less than 83 
     percent, or exceed 95 percent, of the reference average 
     wholesale price for the drug;
       ``(II) an innovator multiple source drug shall in no case 
     exceed 68 percent of the reference average wholesale price 
     for the drug; or
       ``(III) a noninnovator multiple source drug shall in no 
     case exceed 46 percent of the reference average wholesale 
     price for the drug; or

       ``(iii) in a subsequent year, shall be equal, subject to 
     subparagraph (E)--

       ``(I) to the average acquisition cost for the drug for that 
     year (which, at the option of the Secretary, may vary by 
     hospital group (as defined by the Secretary based on volume 
     of covered OPD services or other relevant characteristics)), 
     as determined by the Secretary taking into account the 
     hospital acquisition cost survey data under subparagraph (D); 
     or
       ``(II) if hospital acquisition cost data are not available, 
     the average price for the drug in the year established under 
     section 1842(o), section 1847A, or section 1847B, as the case 
     may be, as calculated and adjusted by the Secretary as 
     necessary for purposes of this paragraph.

       ``(B) Specified covered outpatient drug defined.--
       ``(i) In general.--In this paragraph, the term `specified 
     covered outpatient drug' means, subject to clause (ii), a 
     covered outpatient drug (as defined in section 1927(k)(2)) 
     for which a separate ambulatory payment classification group 
     (APC) has been established and that is--

       ``(I) a radiopharmaceutical; or
       ``(II) a drug or biological for which payment was made 
     under paragraph (6) (relating to pass-through payments) on or 
     before December 31, 2002.

       ``(ii) Exception.--Such term does not include--

       ``(I) a drug or biological for which payment is first made 
     on or after January 1, 2003, under paragraph (6);
       ``(II) a drug or biological for which a temporary HCPCS 
     code has not been assigned; or
       ``(III) during 2004 and 2005, an orphan drug (as designated 
     by the Secretary).

       ``(C) Payment for designated orphan drugs during 2004 and 
     2005.--The amount of payment under this subsection for an 
     orphan drug designated by the Secretary under subparagraph 
     (B)(ii)(III) that is furnished as part of a covered OPD 
     service (or group of services) during 2004 and 2005 shall 
     equal such amount as the Secretary may specify.
       ``(D) Acquisition cost survey for hospital outpatient 
     drugs.--
       ``(i) Annual gao surveys in 2004 and 2005.--

       ``(I) In general.--The Comptroller General of the United 
     States shall conduct a survey in each of 2004 and 2005 to 
     determine the hospital acquisition cost for each specified 
     covered outpatient drug. Not later than April 1, 2005, the 
     Comptroller General shall furnish data from such surveys to 
     the Secretary for use in setting the payment rates under 
     subparagraph (A) for 2006.
       ``(II) Recommendations.--Upon the completion of such 
     surveys, the Comptroller General shall recommend to the 
     Secretary the frequency and methodology of subsequent surveys 
     to be conducted by the Secretary under clause (ii).

       ``(ii) Subsequent secretarial surveys.--The Secretary, 
     taking into account such recommendations, shall conduct 
     periodic subsequent surveys to determine the hospital 
     acquisition cost for each specified covered outpatient drug 
     for use in setting the payment rates under subparagraph (A).
       ``(iii) Survey requirements.--The surveys conducted under 
     clauses (i) and (ii) shall have a large sample of hospitals 
     that is sufficient to generate a statistically significant 
     estimate of the average hospital acquisition cost for each 
     specified covered outpatient drug. With respect to the 
     surveys conducted under clause (i), the Comptroller General 
     shall report to Congress on the justification for the size of 
     the sample used in order to assure the validity of such 
     estimates.
       ``(iv) Differentiation in cost.--In conducting surveys 
     under clause (i), the Comptroller General shall determine and 
     report to

[[Page S15435]]

     Congress if there is (and the extent of any) variation in 
     hospital acquisition costs for drugs among hospitals based on 
     the volume of covered OPD services performed by such 
     hospitals or other relevant characteristics of such hospitals 
     (as defined by the Comptroller General).
       ``(v) Comment on proposed rates.--Not later than 30 days 
     after the date the Secretary promulgated proposed rules 
     setting forth the payment rates under subparagraph (A) for 
     2006, the Comptroller General shall evaluate such proposed 
     rates and submit to Congress a report regarding the 
     appropriateness of such rates based on the surveys the 
     Comptroller General has conducted under clause (i).
       ``(E) Adjustment in payment rates for overhead costs.--
       ``(i) Medpac report on drug apc design.--The Medicare 
     Payment Advisory Commission shall submit to the Secretary, 
     not later than July 1, 2005, a report on adjustment of 
     payment for ambulatory payment classifications for specified 
     covered outpatient drugs to take into account overhead and 
     related expenses, such as pharmacy services and handling 
     costs. Such report shall include--

       ``(I) a description and analysis of the data available with 
     regard to such expenses;
       ``(II) a recommendation as to whether such a payment 
     adjustment should be made; and
       ``(III) if such adjustment should be made, a recommendation 
     regarding the methodology for making such an adjustment.

       ``(ii) Adjustment authorized.--The Secretary may adjust the 
     weights for ambulatory payment classifications for specified 
     covered outpatient drugs to take into account the 
     recommendations contained in the report submitted under 
     clause (i).
       ``(F) Classes of drugs.--For purposes of this paragraph:
       ``(i) Sole source drugs.--The term `sole source drug' 
     means--

       ``(I) a biological product (as defined under section 
     1861(t)(1)); or
       ``(II) a single source drug (as defined in section 
     1927(k)(7)(A)(iv)).

       ``(ii) Innovator multiple source drugs.--The term 
     `innovator multiple source drug' has the meaning given such 
     term in section 1927(k)(7)(A)(ii).
       ``(iii) Noninnovator multiple source drugs.--The term 
     `noninnovator multiple source drug' has the meaning given 
     such term in section 1927(k)(7)(A)(iii).
       ``(G) Reference average wholesale price.--The term 
     `reference average wholesale price' means, with respect to a 
     specified covered outpatient drug, the average wholesale 
     price for the drug as determined under section 1842(o) as of 
     May 1, 2003.
       ``(H) Inapplicability of expenditures in determining 
     conversion, weighting, and other adjustment factors.--
     Additional expenditures resulting from this paragraph shall 
     not be taken into account in establishing the conversion, 
     weighting, and other adjustment factors for 2004 and 2005 
     under paragraph (9), but shall be taken into account for 
     subsequent years.
       ``(15) Payment for new drugs and biologicals until hcpcs 
     code assigned.--With respect to payment under this part for 
     an outpatient drug or biological that is covered under this 
     part and is furnished as part of covered OPD services for 
     which a HCPCS code has not been assigned, the amount provided 
     for payment for such drug or biological under this part shall 
     be equal to 95 percent of the average wholesale price for the 
     drug or biological.''.
       (2) Reduction in threshold for separate apcs for drugs.--
     Section 1833(t)(16), as redesignated section 111(b), is 
     amended by adding at the end the following new subparagraph:
       ``(B) Threshold for establishment of separate apcs for 
     drugs.--The Secretary shall reduce the threshold for the 
     establishment of separate ambulatory payment classification 
     groups (APCs) with respect to drugs or biologicals to $50 per 
     administration for drugs and biologicals furnished in 2005 
     and 2006.''.
       (3) Exclusion of separate drug apcs from outlier 
     payments.--Section 1833(t)(5) is amended by adding at the end 
     the following new subparagraph:
       ``(E) Exclusion of separate drug and biological apcs from 
     outlier payments.--No additional payment shall be made under 
     subparagraph (A) in the case of ambulatory payment 
     classification groups established separately for drugs or 
     biologicals.''.
       (4) Payment for pass through drugs.--Section 
     1833(t)(6)(D)(i) (42 U.S.C. 1395l(t)(6)(D)(i)) is amended by 
     inserting after ``under section 1842(o)'' the following: 
     ``(or if the drug or biological is covered under a 
     competitive acquisition contract under section 1847B, an 
     amount determined by the Secretary equal to the average price 
     for the drug or biological for all competitive acquisition 
     areas and year established under such section as calculated 
     and adjusted by the Secretary for purposes of this 
     paragraph)''.
       (5) Conforming amendment to budget neutrality 
     requirement.--Section 1833(t)(9)(B) (42 U.S.C. 
     1395l(t)(9)(B)) is amended by adding at the end the 
     following: ``In determining adjustments under the preceding 
     sentence for 2004 and 2005, the Secretary shall not take into 
     account under this subparagraph or paragraph (2)(E) any 
     expenditures that would not have been made but for the 
     application of paragraph (14).''.
       (6) Effective date.--The amendments made by this subsection 
     shall apply to items and services furnished on or after 
     January 1, 2004.
       (b) Special Payment for Brachytherapy.--
       (1) In general.--Section 1833(t)(16), as redesignated by 
     section 111(b) and as amended by subsection (a)(2), is 
     amended by adding at the end the following new subparagraph:
       ``(C) Payment for devices of brachytherapy at charges 
     adjusted to cost.--Notwithstanding the preceding provisions 
     of this subsection, for a device of brachytherapy consisting 
     of a seed or seeds (or radioactive source) furnished on or 
     after January 1, 2004, and before January 1, 2007, the 
     payment basis for the device under this subsection shall be 
     equal to the hospital's charges for each device furnished, 
     adjusted to cost. Charges for such devices shall not be 
     included in determining any outlier payment under this 
     subsection.''.
       (2) Specification of groups for brachytherapy devices.--
     Section 1833(t)(2) (42 U.S.C. 1395l(t)(2)) is amended--
       (A) in subparagraph (F), by striking ``and'' at the end;
       (B) in subparagraph (G), by striking the period at the end 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraph:
       ``(H) with respect to devices of brachytherapy consisting 
     of a seed or seeds (or radioactive source), the Secretary 
     shall create additional groups of covered OPD services that 
     classify such devices separately from the other services (or 
     group of services) paid for under this subsection in a manner 
     reflecting the number, isotope, and radioactive intensity of 
     such devices furnished, including separate groups for 
     palladium-103 and iodine-125 devices.''.
       (3) GAO report.--The Comptroller General of the United 
     States shall conduct a study to determine appropriate payment 
     amounts under section 1833(t)(16)(C) of the Social Security 
     Act, as added by paragraph (1), for devices of brachytherapy. 
     Not later than January 1, 2005, the Comptroller General shall 
     submit to Congress and the Secretary a report on the study 
     conducted under this paragraph, and shall include specific 
     recommendations for appropriate payments for such devices.

     SEC. 322. LIMITATION OF APPLICATION OF FUNCTIONAL EQUIVALENCE 
                   STANDARD.

       Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) is amended by 
     adding at the end the following new subparagraph:
       ``(F) Limitation of application of functional equivalence 
     standard.--
       ``(i) In general.--The Secretary may not publish 
     regulations that apply a functional equivalence standard to a 
     drug or biological under this paragraph.
       ``(ii) Application.--Clause (i) shall apply to the 
     application of a functional equivalence standard to a drug or 
     biological on or after the date of enactment of the Medicare 
     Provider Restoration Act of 2003 unless--

       ``(I) such application was being made to such drug or 
     biological prior to such date of enactment; and
       ``(II) the Secretary applies such standard to such drug or 
     biological only for the purpose of determining eligibility of 
     such drug or biological for additional payments under this 
     paragraph and not for the purpose of any other payments under 
     this title.

       ``(iii) Rule of construction.--Nothing in this subparagraph 
     shall be construed to effect the Secretary's authority to 
     deem a particular drug to be identical to another drug if the 
     2 products are pharmaceutically equivalent and bioequivalent, 
     as determined by the Commissioner of Food and Drugs.''.

     SEC. 323. PAYMENT FOR RENAL DIALYSIS SERVICES.

       (a) Increase in Renal Dialysis Composite Rate for Services 
     Furnished.--The last sentence of section 1881(b)(7) (42 
     U.S.C. 1395rr(b)(7)) is amended--
       (1) by striking ``and'' before ``for such services'' the 
     second place it appears;
       (2) by inserting ``and before January 1, 2005,'' after 
     ``January 1, 2001,''; and
       (3) by inserting before the period at the end the 
     following: ``, and for such services furnished on or after 
     January 1, 2005, by 1.6 percent above such composite rate 
     payment amounts for such services furnished on December 31, 
     2004''.
       (b) Restoring Composite Rate Exceptions for Pediatric 
     Facilities.--
       (1) In general.--Section 422(a)(2) of BIPA is amended--
       (A) in subparagraph (A), by striking ``and (C)'' and 
     inserting ``, (C), and (D)'';
       (B) in subparagraph (B), by striking ``In the case'' and 
     inserting ``Subject to subparagraph (D), in the case''; and
       (C) by adding at the end the following new subparagraph:
       ``(D) Inapplicability to pediatric facilities.--
     Subparagraphs (A) and (B) shall not apply, as of October 1, 
     2002, to pediatric facilities that do not have an exception 
     rate described in subparagraph (C) in effect on such date. 
     For purposes of this subparagraph, the term `pediatric 
     facility' means a renal facility at least 50 percent of whose 
     patients are individuals under 18 years of age.''.
       (2) Conforming amendment.--The fourth sentence of section 
     1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by striking 
     ``The Secretary'' and inserting ``Subject to section 
     422(a)(2) of the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000, the Secretary''.
       (c) Inspector General Studies on ESRD Drugs.--
       (1) In general.--The Inspector General of the Department of 
     Health and Human Services shall conduct two studies with 
     respect

[[Page S15436]]

     to drugs and biologicals (including erythropoietin) furnished 
     to end-stage renal disease patients under the medicare 
     program which are separately billed by end stage renal 
     disease facilities.
       (2) Studies on esrd drugs.--
       (A) Existing drugs.--The first study under paragraph (1) 
     shall be conducted with respect to such drugs and biologicals 
     for which a billing code exists prior to January 1, 2004.
       (B) New drugs.--The second study under paragraph (1) shall 
     be conducted with respect to such drugs and biologicals for 
     which a billing code does not exist prior to January 1, 2004.
       (3) Matters studied.--Under each study conducted under 
     paragraph (1), the Inspector General shall--
       (A) determine the difference between the amount of payment 
     made to end stage renal disease facilities under title XVIII 
     of the Social Security Act for such drugs and biologicals and 
     the acquisition costs of such facilities for such drugs and 
     biologicals and which are separately billed by end stage 
     renal disease facilities, and
       (B) estimate the rates of growth of expenditures for such 
     drugs and biologicals billed by such facilities.
       (4) Reports.--
       (A) Existing esrd drugs.--Not later than April 1, 2004, the 
     Inspector General shall report to the Secretary on the study 
     described in paragraph (2)(A).
       (B) New esrd drugs.--Not later than April 1, 2006, the 
     Inspector General shall report to the Secretary on the study 
     described in paragraph (2)(B).
       (d) Basic Case-Mix Adjusted Composite Rate for Renal 
     Dialysis Facility Services.--(1) Section 1881(b) (42 U.S.C. 
     1395rr(b)) is amended by adding at the end the following new 
     paragraphs:
       ``(12)(A) In lieu of payment under paragraph (7) beginning 
     with services furnished on January 1, 2005, the Secretary 
     shall establish a basic case-mix adjusted prospective payment 
     system for dialysis services furnished by providers of 
     services and renal dialysis facilities in a year to 
     individuals in a facility and to such individuals at home. 
     The case-mix under such system shall be for a limited number 
     of patient characteristics.
       ``(B) The system described in subparagraph (A) shall 
     include--
       ``(i) the services comprising the composite rate 
     established under paragraph (7); and
       ``(ii) the difference between payment amounts under this 
     title for separately billed drugs and biologicals (including 
     erythropoietin) and acquisition costs of such drugs and 
     biologicals, as determined by the Inspector General reports 
     to the Secretary as required by section 323(c) of the 
     Medicare Provider Restoration Act of 2003--
       ``(I) beginning with 2005, for such drugs and biologicals 
     for which a billing code exists prior to January 1, 2004; and
       ``(II) beginning with 2007, for such drugs and biologicals 
     for which a billing code does not exist prior to January 1, 
     2004,

     adjusted to 2005, or 2007, respectively, as determined to be 
     appropriate by the Secretary.
       ``(C)(i) In applying subparagraph (B)(ii) for 2005, such 
     payment amounts under this title shall be determined using 
     the methodology specified in paragraph (13)(A)(i).
       ``(ii) For 2006, the Secretary shall provide for an 
     adjustment to the payments under clause (i) to reflect the 
     difference between the payment amounts using the methodology 
     under paragraph (13)(A)(i) and the payment amount determined 
     using the methodology applied by the Secretary under 
     paragraph (13)(A)(iii) of such paragraph, as estimated by the 
     Secretary.
       ``(D) The Secretary shall adjust the payment rates under 
     such system by a geographic index as the Secretary determines 
     to be appropriate. If the Secretary applies a geographic 
     index under this paragraph that differs from the index 
     applied under paragraph (7) the Secretary shall phase-in the 
     application of the index under this paragraph over a 
     multiyear period.
       ``(E)(i) Such system shall be designed to result in the 
     same aggregate amount of expenditures for such services, as 
     estimated by the Secretary, as would have been made for 2005 
     if this paragraph did not apply.
       ``(ii) The adjustment made under subparagraph (B)(ii)(II) 
     shall be done in a manner to result in the same aggregate 
     amount of expenditures after such adjustment as would 
     otherwise have been made for such services for 2006 or 2007, 
     respectively, as estimated by the Secretary, if this 
     paragraph did not apply.
       ``(F) Beginning with 2006, the Secretary shall annually 
     increase the basic case-mix adjusted payment amounts 
     established under this paragraph, by an amount determined 
     by--
       ``(i) applying the estimated growth in expenditures for 
     drugs and biologicals (including erythropoietin) that are 
     separately billable to the component of the basic case-mix 
     adjusted system described in subparagraph (B)(ii); and
       ``(ii) converting the amount determined in clause (i) to an 
     increase applicable to the basic case-mix adjusted payment 
     amounts established under subparagraph (B).

     Nothing in this paragraph shall be construed as providing for 
     an update to the composite rate component of the basic case-
     mix adjusted system under subparagraph (B).
       ``(G) There shall be no administrative or judicial review 
     under section 1869, section 1878, or otherwise, of the case-
     mix system, relative weights, payment amounts, the geographic 
     adjustment factor, or the update for the system established 
     under this paragraph, or the determination of the difference 
     between medicare payment amounts and acquisition costs for 
     separately billed drugs and biologicals (including 
     erythropoietin) under this paragraph and paragraph (13).
       ``(13)(A) The payment amounts under this title for 
     separately billed drugs and biologicals furnished in a year, 
     beginning with 2004, are as follows:
       ``(i) For such drugs and biologicals (other than 
     erythropoietin) furnished in 2004, the amount determined 
     under section 1842(o)(1)(A)(v) for the drug or biological.
       ``(ii) For such drugs and biologicals (including 
     erythropoietin) furnished in 2005, the acquisition cost of 
     the drug or biological, as determined by the Inspector 
     General reports to the Secretary as required by section 
     323(c) of the Medicare Provider Restoration Act of 2003. 
     Insofar as the Inspector General has not determined the 
     acquisition cost with respect to a drug or biological, the 
     Secretary shall determine the payment amount for such drug or 
     biological.
       ``(iii) For such drugs and biologicals (including 
     erythropoietin) furnished in 2006 and subsequent years, such 
     acquisition cost or the amount determined under section 1847A 
     for the drug or biological, as the Secretary may specify.
       ``(B)(i) Drugs and biologicals (including erythropoietin) 
     which were separately billed under this subsection on the day 
     before the date of the enactment of the Medicare Provider 
     Restoration Act of 2003 shall continue to be separately 
     billed on and after such date.
       ``(ii) Nothing in this paragraph, section 1842(o), section 
     1847A, or section 1847B shall be construed as requiring or 
     authorizing the bundling of payment for drugs and biologicals 
     into the basic case-mix adjusted payment system under this 
     paragraph.''.
       (2) Paragraph (7) of such section is amended in the first 
     sentence by striking ``The Secretary'' and inserting 
     ``Subject to paragraph (12), the Secretary''.
       (3) Paragraph (11)(B) of such section is amended by 
     inserting ``subject to paragraphs (12) and (13)'' before 
     ``payment for such item''.
       (e) Demonstration of Bundled Case-Mix Adjusted Payment 
     System for ESRD Services.--
       (1) In general.--The Secretary shall establish a 
     demonstration project of the use of a fully case-mix adjusted 
     payment system for end stage renal disease services under 
     section 1881 of the Social Security Act (42 U.S.C. 1395rr) 
     for patient characteristics identified in the report under 
     subsection (f) that bundles into such payment rates amounts 
     for--
       (A) drugs and biologicals (including erythropoietin) 
     furnished to end-stage renal disease patients under the 
     medicare program which are separately billed by end stage 
     renal disease facilities (as of the date of the enactment of 
     this Act); and
       (B) clinical laboratory tests related to such drugs and 
     biologicals.
       (2) Facilities included in the demonstration.--In 
     conducting the demonstration under this subsection, the 
     Secretary shall ensure the participation of a sufficient 
     number of providers of dialysis services and renal dialysis 
     facilities, but in no case to exceed 500. In selecting such 
     providers and facilities, the Secretary shall ensure that the 
     following types of providers are included in the 
     demonstration:
       (A) Urban providers and facilities.
       (B) Rural providers and facilities.
       (C) Not-for-profit providers and facilities.
       (D) For-profit providers and facilities.
       (E) Independent providers and facilities.
       (F) Specialty providers and facilities, including pediatric 
     providers and facilities and small providers and facilities.
       (3) Temporary add-on payment for dialysis services 
     furnished under the demonstration.--
       (A) In general.--During the period of the demonstration 
     project, the Secretary shall increase payment rates that 
     would otherwise apply under section 1881(b) of such Act (42 
     U.S.C. 1395rr(b)) by 1.6 percent for dialysis services 
     furnished in facilities in the demonstration site.
       (B) Rules of construction.--Nothing in this subsection 
     shall be construed as--
       (i) as an annual update under section 1881(b) of the Social 
     Security Act (42 U.S.C. 1395rr(b));
       (ii) as increasing the baseline for payments under such 
     section; or
       (iii) requiring the budget neutral implementation of the 
     demonstration project under this subsection.
       (4) 3-year period.--The Secretary shall conduct the 
     demonstration under this subsection for the 3-year period 
     beginning on January 1, 2006.
       (5) Use of advisory board.--
       (A) In general.--In carrying out the demonstration under 
     this subsection, the Secretary shall establish an advisory 
     board comprised of representatives described in subparagraph 
     (B) to provide advice and recommendations with respect to the 
     establishment and operation of such demonstration.
       (B) Representatives.--Representatives referred to in 
     subparagraph (A) include representatives of the following:
       (i) Patient organizations.
       (ii) Individuals with expertise in end-stage renal dialysis 
     services, such as clinicians, economists, and researchers.
       (iii) The Medicare Payment Advisory Commission, established 
     under section 1805 of the Social Security Act (42 U.S.C. 
     1395b-6).

[[Page S15437]]

       (iv) The National Institutes of Health.
       (v) Network organizations under section 1881(c) of the 
     Social Security Act (42 U.S.C. 1395rr(c)).
       (vi) Medicare contractors to monitor quality of care.
       (vii) Providers of services and renal dialysis facilities 
     furnishing end-stage renal disease services.
       (C) Termination of advisory panel.--The advisory panel 
     shall terminate on December 31, 2008.
       (6) Authorization of appropriations.--There are authorized 
     to be appropriated, in appropriate part from the Federal 
     Hospital Insurance Trust Fund and the Federal Supplementary 
     Medical Insurance Trust Fund, $5,000,000 in fiscal year 2006 
     to conduct the demonstration under this subsection.
       (f) Report on a Bundled Prospective Payment System for End 
     Stage Renal Disease Services.--
       (1) Report.--
       (A) In general.--Not later than October 1, 2005, the 
     Secretary shall submit to Congress a report detailing the 
     elements and features for the design and implementation of a 
     bundled prospective payment system for services furnished by 
     end stage renal disease facilities including, to the maximum 
     extent feasible, bundling of drugs, clinical laboratory 
     tests, and other items that are separately billed by such 
     facilities. The report shall include a description of the 
     methodology to be used for the establishment of payment 
     rates, including components of the new system described in 
     paragraph (2).
       (B) Recommendations.--The Secretary shall include in such 
     report recommendations on elements, features, and methodology 
     for a bundled prospective payment system or other issues 
     related to such system as the Secretary determines to be 
     appropriate.
       (2) Elements and features of a bundled prospective payment 
     system.--The report required under paragraph (1) shall 
     include the following elements and features of a bundled 
     prospective payment system:
       (A) Bundle of items and services.--A description of the 
     bundle of items and services to be included under the 
     prospective payment system.
       (B) Case mix.--A description of the case-mix adjustment to 
     account for the relative resource use of different types of 
     patients.
       (C) Wage index.--A description of an adjustment to account 
     for geographic differences in wages.
       (D) Rural areas.--The appropriateness of establishing a 
     specific payment adjustment to account for additional costs 
     incurred by rural facilities.
       (E) Other adjustments.--Such other adjustments as may be 
     necessary to reflect the variation in costs incurred by 
     facilities in caring for patients with end stage renal 
     disease.
       (F) Update framework.--A methodology for appropriate 
     updates under the prospective payment system.
       (G) Additional recommendations.--Such other matters as the 
     Secretary determines to be appropriate.

     SEC. 324. 2-YEAR MORATORIUM ON THERAPY CAPS; PROVISIONS 
                   RELATING TO REPORTS.

       (a) Additional Moratorium on Therapy Caps.--
       (1) 2004 and 2005.--Section 1833(g)(4) (42 U.S.C. 
     1395l(g)(4)) is amended by striking ``and 2002'' and 
     inserting ``2002, 2004, and 2005''.
       (2) Remainder of 2003.--For the period beginning on the 
     date of the enactment of this Act and ending of December 31, 
     2003, the Secretary shall not apply the provisions of 
     paragraphs (1), (2), and (3) of section 1833(g) to expenses 
     incurred with respect to services described in such 
     paragraphs during such period. Nothing in the preceding 
     sentence shall be construed as affecting the application of 
     such paragraphs by the Secretary before the date of the 
     enactment of this Act.
       (b) Prompt Submission of Overdue Reports on Payment and 
     Utilization of Outpatient Therapy Services.--Not later than 
     March 31, 2004, the Secretary shall submit to Congress the 
     reports required under section 4541(d)(2) of the Balanced 
     Budget Act of 1997 (Public Law 105-33; 111 Stat. 457) 
     (relating to alternatives to a single annual dollar cap on 
     outpatient therapy) and under section 221(d) of the Medicare, 
     Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 
     (Appendix F, 113 Stat. 1501A-352), as enacted into law by 
     section 1000(a)(6) of Public Law 106-113 (relating to 
     utilization patterns for outpatient therapy).
       (c) GAO Report Identifying Conditions and Diseases 
     Justifying Waiver of Therapy Cap.--
       (1) Study.--The Comptroller General of the United States 
     shall identify conditions or diseases that may justify 
     waiving the application of the therapy caps under section 
     1833(g) of the Social Security Act (42 U.S.C. 1395l(g)) with 
     respect to such conditions or diseases.
       (2) Report to congress.--Not later than October 1, 2004, 
     the Comptroller General shall submit to Congress a report on 
     the conditions and diseases identified under paragraph (1), 
     and shall include a recommendation of criteria, with respect 
     to such conditions and disease, under which a waiver of the 
     therapy caps would apply.

     SEC. 325. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR 
                   CERTAIN MILITARY RETIREES; SPECIAL ENROLLMENT 
                   PERIOD.

       (a) Waiver of Penalty.--
       (1) In general.--Section 1839(b) (42 U.S.C. 1395r(b)) is 
     amended by adding at the end the following new sentence: ``No 
     increase in the premium shall be effected for a month in the 
     case of an individual who enrolls under this part during 
     2001, 2002, 2003, or 2004 and who demonstrates to the 
     Secretary before December 31, 2004, that the individual is a 
     covered beneficiary (as defined in section 1072(5) of title 
     10, United States Code). The Secretary of Health and Human 
     Services shall consult with the Secretary of Defense in 
     identifying individuals described in the previous 
     sentence.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to premiums for months beginning with January 
     2004. The Secretary shall establish a method for providing 
     rebates of premium penalties paid for months on or after 
     January 2004 for which a penalty does not apply under such 
     amendment but for which a penalty was previously collected.
       (b) Medicare Part B Special Enrollment Period.--
       (1) In general.--In the case of any individual who, as of 
     the date of the enactment of this Act, is eligible to enroll 
     but is not enrolled under part B of title XVIII of the Social 
     Security Act and is a covered beneficiary (as defined in 
     section 1072(5) of title 10, United States Code), the 
     Secretary of Health and Human Services shall provide for a 
     special enrollment period during which the individual may 
     enroll under such part. Such period shall begin as soon as 
     possible after the date of the enactment of this Act and 
     shall end on December 31, 2004.
       (2) Coverage period.--In the case of an individual who 
     enrolls during the special enrollment period provided under 
     paragraph (1), the coverage period under part B of title 
     XVIII of the Social Security Act shall begin on the first day 
     of the month following the month in which the individual 
     enrolls.

     SEC. 326. PAYMENT FOR SERVICES FURNISHED IN AMBULATORY 
                   SURGICAL CENTERS.

       (a) Reductions in Payment Updates.--Section 1833(i)(2)(C) 
     (42 U.S.C. 1395l(i)(2)(C)) is amended to read as follows:
       ``(C)(i) Notwithstanding the second sentence of each of 
     subparagraphs (A) and (B), except as otherwise specified in 
     clauses (ii), (iii), and (iv), if the Secretary has not 
     updated amounts established under such subparagraphs or under 
     subparagraph (D), with respect to facility services furnished 
     during a fiscal year (beginning with fiscal year 1986 or a 
     calendar year (beginning with 2006)), such amounts shall be 
     increased by the percentage increase in the Consumer Price 
     Index for all urban consumers (U.S. city average) as 
     estimated by the Secretary for the 12-month period ending 
     with the midpoint of the year involved.
       ``(ii) In each of the fiscal years 1998 through 2002, the 
     increase under this subparagraph shall be reduced (but not 
     below zero) by 2.0 percentage points.
       ``(iii) In fiscal year 2004, beginning with April 1, 2004, 
     the increase under this subparagraph shall be the Consumer 
     Price Index for all urban consumers (U.S. city average) as 
     estimated by the Secretary for the 12-month period ending 
     with March 31, 2003, minus 3.0 percentage points.
       ``(iv) In fiscal year 2005, the last quarter of calendar 
     year 2005, and each of calendar years 2006 through 2009, the 
     increase under this subparagraph shall be 0 percent.''.
       (b) Repeal of Survey Requirement and Implementation of New 
     System.--Section 1833(i)(2) (42 U.S.C. 1395l(i)(2)) is 
     amended--
       (1) in subparagraph (A)--
       (A) in the matter preceding clause (i), by striking ``The'' 
     and inserting ``For services furnished prior to the 
     implementation of the system described in subparagraph (D), 
     the''; and
       (B) in clause (i), by striking ``taken not later than 
     January 1, 1995, and every 5 years thereafter,''; and
       (2) by adding at the end the following new subparagraph:
       ``(D)(i) Taking into account the recommendations in the 
     report under section 326(d) of Medicare Provider Restoration 
     Act of 2003, the Secretary shall implement a revised payment 
     system for payment of surgical services furnished in 
     ambulatory surgical centers.
       ``(ii) In the year the system described in clause (i) is 
     implemented, such system shall be designed to result in the 
     same aggregate amount of expenditures for such services as 
     would be made if this subparagraph did not apply, as 
     estimated by the Secretary.
       ``(iii) The Secretary shall implement the system described 
     in clause (i) for periods in a manner so that it is first 
     effective beginning on or after January 1, 2006, and not 
     later than January 1, 2008.
       ``(iv) There shall be no administrative or judicial review 
     under section 1869, 1878, or otherwise, of the classification 
     system, the relative weights, payment amounts, and the 
     geographic adjustment factor, if any, under this 
     subparagraph.''.
       (c) Conforming Amendment.--Section 1833(a)(1) (42 U.S.C. 
     1395l(a)(1)) is amended by adding the following new 
     subparagraph:
       ``(G) with respect to facility services furnished in 
     connection with a surgical procedure specified pursuant to 
     subsection (i)(1)(A) and furnished to an individual in an 
     ambulatory surgical center described in such subsection, for 
     services furnished beginning with the implementation date of 
     a revised payment system for such services in such facilities 
     specified in subsection (i)(2)(D), the amounts paid shall be 
     80 percent of the lesser of the actual charge for the 
     services or the

[[Page S15438]]

     amount determined by the Secretary under such revised payment 
     system,''.
       (d) GAO Study of Ambulatory Surgical Center Payments.--
       (1) Study.--
       (A) In general.--The Comptroller General of the United 
     States shall conduct a study that compares the relative costs 
     of procedures furnished in ambulatory surgical centers to the 
     relative costs of procedures furnished in hospital outpatient 
     departments under section 1833(t) of the Social Security Act 
     (42 U.S.C. 1395l(t)). The study shall also examine how 
     accurately ambulatory payment categories reflect procedures 
     furnished in ambulatory surgical centers.
       (B) Consideration of asc data.--In conducting the study 
     under paragraph (1), the Comptroller General shall consider 
     data submitted by ambulatory surgical centers regarding the 
     matters described in clauses (i) through (iii) of paragraph 
     (2)(B).
       (2) Report and recommendations.--
       (A) Report.--Not later than January 1, 2005, the 
     Comptroller General shall submit to Congress a report on the 
     study conducted under paragraph (1).
       (B) Recommendations.--The report submitted under 
     subparagraph (A) shall include recommendations on the 
     following matters:
       (i) The appropriateness of using the groups of covered 
     services and relative weights established under the 
     outpatient prospective payment system as the basis of payment 
     for ambulatory surgical centers.
       (ii) If the relative weights under such hospital outpatient 
     prospective payment system are appropriate for such purpose--

       (I) whether the payment rates for ambulatory surgical 
     centers should be based on a uniform percentage of the 
     payment rates or weights under such outpatient system; or
       (II) whether the payment rates for ambulatory surgical 
     centers should vary, or the weights should be revised, based 
     on specific procedures or types of services (such as 
     ophthalmology and pain management services).

       (iii) Whether a geographic adjustment should be used for 
     payment of services furnished in ambulatory surgical centers, 
     and if so, the labor and nonlabor shares of such payment.

     SEC. 327. PAYMENT FOR CERTAIN SHOES AND INSERTS UNDER THE FEE 
                   SCHEDULE FOR ORTHOTICS AND PROSTHETICS.

       (a) In General.--Section 1833(o) (42 U.S.C. 1395l(o)) is 
     amended--
       (1) in paragraph (1)(B), by striking ``no more than the 
     limits established under paragraph (2)'' and inserting ``no 
     more than the amount of payment applicable under paragraph 
     (2)''; and
       (2) in paragraph (2), to read as follows:
       ``(2)(A) Except as provided by the Secretary under 
     subparagraphs (B) and (C), the amount of payment under this 
     paragraph for custom molded shoes, extra-depth shoes, and 
     inserts shall be the amount determined for such items by the 
     Secretary under section 1834(h).
       ``(B) The Secretary may establish payment amounts for shoes 
     and inserts that are lower than the amount established under 
     section 1834(h) if the Secretary finds that shoes and inserts 
     of an appropriate quality are readily available at or below 
     the amount established under such section.
       ``(C) In accordance with procedures established by the 
     Secretary, an individual entitled to benefits with respect to 
     shoes described in section 1861(s)(12) may substitute 
     modification of such shoes instead of obtaining one (or more, 
     as specified by the Secretary) pair of inserts (other than 
     the original pair of inserts with respect to such shoes). In 
     such case, the Secretary shall substitute, for the payment 
     amount established under section 1834(h), a payment amount 
     that the Secretary estimates will assure that there is no net 
     increase in expenditures under this subsection as a result of 
     this subparagraph.''.
       (b) Conforming Amendments.--(1) Section 1834(h)(4)(C) (42 
     U.S.C. 1395m(h)(4)(C)) is amended by inserting ``(and 
     includes shoes described in section 1861(s)(12))'' after ``in 
     section 1861(s)(9)''.
       (2) Section 1842(s)(2) (42 U.S.C. 1395u(s)(2)) is amended 
     by striking subparagraph (C).
       (c) Effective Date.--The amendments made by this section 
     shall apply to items furnished on or after January 1, 2005.

     SEC. 329. 5-YEAR AUTHORIZATION OF REIMBURSEMENT FOR ALL 
                   MEDICARE PART B SERVICES FURNISHED BY CERTAIN 
                   INDIAN HOSPITALS AND CLINICS.

       Section 1880(e)(1)(A) (42 U.S.C. 1395qq(e)(1)(A)) is 
     amended by inserting ``(and for items and services furnished 
     during the 5-year period beginning on January 1, 2005, all 
     items and services for which payment may be made under part 
     B)'' after ``for services described in paragraph (2)''.

  Subtitle D--Additional Demonstrations, Studies, and Other Provisions

     SEC. 341. DEMONSTRATION PROJECT FOR COVERAGE OF CERTAIN 
                   PRESCRIPTION DRUGS AND BIOLOGICALS.

       (a) Demonstration Project.--The Secretary shall conduct a 
     demonstration project under part B of title XVIII of the 
     Social Security Act under which payment is made for drugs or 
     biologicals that are prescribed as replacements for drugs and 
     biologicals described in section 1861(s)(2)(A) or 
     1861(s)(2)(Q) of such Act (42 U.S.C. 1395x(s)(2)(A), 
     1395x(s)(2)(Q)), or both, for which payment is made under 
     such part. Such project shall provide for cost-sharing 
     applicable with respect to such drugs or biologicals.
       (b) Demonstration Project Sites.--The project established 
     under this section shall be conducted in sites selected by 
     the Secretary.
       (c) Duration.--The Secretary shall conduct the 
     demonstration project for the 2-year period beginning on the 
     date that is 90 days after the date of the enactment of this 
     Act, but in no case may the project extend beyond December 
     31, 2005.
       (d) Limitation.--Under the demonstration project over the 
     duration of the project, the Secretary may not provide--
       (1) coverage for more than 50,000 patients; and
       (2) more than $500,000,000 in funding.
       (e) Report.--Not later than July 1, 2006, the Secretary 
     shall submit to Congress a report on the project. The report 
     shall include an evaluation of patient access to care and 
     patient outcomes under the project, as well as an analysis of 
     the cost effectiveness of the project, including an 
     evaluation of the costs savings (if any) to the medicare 
     program attributable to reduced physicians' services and 
     hospital outpatient departments services for administration 
     of the biological.

     SEC. 342. EXTENSION OF COVERAGE OF INTRAVENOUS IMMUNE 
                   GLOBULIN (IVIG) FOR THE TREATMENT OF PRIMARY 
                   IMMUNE DEFICIENCY DISEASES IN THE HOME.

       (a) In General.--Section 1861 (42 U.S.C. 1395x), as amended 
     by sections 611(a) and 612(a) is amended--
       (1) in subsection (s)(2)--
       (A) by striking ``and'' at the end of subparagraph (X);
       (B) by adding ``and'' at the end of subparagraph (Y); and
       (C) by adding at the end the following new subparagraph:
       ``(Z) intravenous immune globulin for the treatment of 
     primary immune deficiency diseases in the home (as defined in 
     subsection (zz));''; and
       (2) by adding at the end the following new subsection:

                     ``Intravenous Immune Globulin

       ``(zz) The term `intravenous immune globulin' means an 
     approved pooled plasma derivative for the treatment in the 
     patient's home of a patient with a diagnosed primary immune 
     deficiency disease, but not including items or services 
     related to the administration of the derivative, if a 
     physician determines administration of the derivative in the 
     patient's home is medically appropriate.''.
       (b) Payment as a Drug or Biological.--Section 1833(a)(1)(S) 
     (42 U.S.C. 1395l(a)(1)(S)) is amended by inserting 
     ``(including intravenous immune globulin (as defined in 
     section 1861(zz)))'' after ``with respect to drugs and 
     biologicals''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items furnished administered on or after 
     January 1, 2004.

     SEC. 343. MEDPAC STUDY OF COVERAGE OF SURGICAL FIRST 
                   ASSISTING SERVICES OF CERTIFIED REGISTERED 
                   NURSE FIRST ASSISTANTS.

       (a) Study.--The Medicare Payment Advisory Commission (in 
     this section referred to as the ``Commission'') shall conduct 
     a study on the feasibility and advisability of providing for 
     payment under part B of title XVIII of the Social Security 
     Act for surgical first assisting services furnished by a 
     certified registered nurse first assistant to medicare 
     beneficiaries.
       (b) Report.--Not later than January 1, 2005, the Commission 
     shall submit to Congress a report on the study conducted 
     under subsection (a) together with recommendations for such 
     legislation or administrative action as the Commission 
     determines to be appropriate.
       (c) Definitions.--In this section:
       (1) Surgical First Assisting Services.--The term ``surgical 
     first assisting services'' means services consisting of first 
     assisting a physician with surgery and related preoperative, 
     intraoperative, and postoperative care (as determined by the 
     Secretary) furnished by a certified registered nurse first 
     assistant (as defined in paragraph (2)) which the certified 
     registered nurse first assistant is legally authorized to 
     perform by the State in which the services are performed.
       (2) Certified Registered Nurse First Assistant.--The term 
     ``certified registered nurse first assistant'' means an 
     individual who--
       (A) is a registered nurse and is licensed to practice 
     nursing in the State in which the surgical first assisting 
     services are performed;
       (B) has completed a minimum of 2,000 hours of first 
     assisting a physician with surgery and related preoperative, 
     intraoperative, and postoperative care; and
       (C) is certified as a registered nurse first assistant by 
     an organization recognized by the Secretary.

     SEC. 344. MEDPAC STUDY OF PAYMENT FOR CARDIO-THORACIC 
                   SURGEONS.

       (a) Study.--The Medicare Payment Advisory Commission (in 
     this section referred to as the ``Commission'') shall conduct 
     a study on the practice expense relative values established 
     by the Secretary of Health and Human Services under the 
     medicare physician fee schedule under section 1848 of the 
     Social Security Act (42 U.S.C. 1395w-4) for physicians in the 
     specialties of thoracic and cardiac surgery to determine 
     whether such values adequately take into account the 
     attendant costs that such physicians incur in providing 
     clinical staff for patient care in hospitals.
       (b) Report.--Not later than January 1, 2005, the Commission 
     shall submit to Congress a report on the study conducted 
     under

[[Page S15439]]

     subsection (a) together with recommendations for such 
     legislation or administrative action as the Commission 
     determines to be appropriate.

     SEC. 345. STUDIES RELATING TO VISION IMPAIRMENTS.

       (a) Coverage of Outpatient Vision Services Furnished by 
     Vision Rehabilitation Professionals Under Part B.--
       (1) Study.--The Secretary shall conduct a study to 
     determine the feasibility and advisability of providing for 
     payment for vision rehabilitation services furnished by 
     vision rehabilitation professionals.
       (2) Report.--Not later than January 1, 2005, the Secretary 
     shall submit to Congress a report on the study conducted 
     under paragraph (1) together with recommendations for such 
     legislation or administrative action as the Secretary 
     determines to be appropriate.
       (3) Vision Rehabilitation Professional Defined.--In this 
     subsection, the term ``vision rehabilitation professional'' 
     means an orientation and mobility specialist, a 
     rehabilitation teacher, or a low vision therapist.
       (b) Report on Appropriateness of a Demonstration Project To 
     Test Feasibility of Using PPO Networks To Reduce Costs of 
     Acquiring Eyeglasses for Medicare Beneficiaries After 
     Cataract Surgery.--Not later than 1 year after the date of 
     the enactment of this Act, the Secretary shall submit to 
     Congress a report on the feasibility of establishing a two-
     year demonstration project under which the Secretary enters 
     into arrangements with vision care preferred provider 
     organization networks to furnish and pay for conventional 
     eyeglasses subsequent to each cataract surgery with insertion 
     of an intraocular lens on behalf of Medicare beneficiaries. 
     In such report, the Secretary shall include an estimate of 
     potential cost savings to the Medicare program through the 
     use of such networks, taking into consideration quality of 
     service and beneficiary access to services offered by vision 
     care preferred provider organization networks.

     SEC. 346. MEDICARE HEALTH CARE QUALITY DEMONSTRATION 
                   PROGRAMS.

       Title XVIII (42 U.S.C. 1395 et seq.) is amended by 
     inserting after section 1866B the following new section:

     ``SEC. 1866C. HEALTH CARE QUALITY DEMONSTRATION PROGRAM.

       ``Sec. (a) Definitions.--In this section:
       ``(1) Beneficiary.--The term `beneficiary' means an 
     individual who is entitled to benefits under part A and 
     enrolled under part B, including any individual who is 
     enrolled in a Medicare Advantage plan under part C.
       ``(2) Health care group.--
       ``(A) In general.--The term `health care group' means--
       ``(i) a group of physicians that is organized at least in 
     part for the purpose of providing physician's services under 
     this title;
       ``(ii) an integrated health care delivery system that 
     delivers care through coordinated hospitals, clinics, home 
     health agencies, ambulatory surgery centers, skilled nursing 
     facilities, rehabilitation facilities and clinics, and 
     employed, independent, or contracted physicians; or
       ``(iii) an organization representing regional coalitions of 
     groups or systems described in clause (i) or (ii).
       ``(B) Inclusion.--As the Secretary determines appropriate, 
     a health care group may include a hospital or any other 
     individual or entity furnishing items or services for which 
     payment may be made under this title that is affiliated with 
     the health care group under an arrangement structured so that 
     such hospital, individual, or entity participates in a 
     demonstration project under this section.
       ``(3) Physician.--Except as otherwise provided for by the 
     Secretary, the term `physician' means any individual who 
     furnishes services that may be paid for as physicians' 
     services under this title.
       ``(b) Demonstration Projects.--The Secretary shall 
     establish a 5-year demonstration program under which the 
     Secretary shall approve demonstration projects that examine 
     health delivery factors that encourage the delivery of 
     improved quality in patient care, including--
       ``(1) the provision of incentives to improve the safety of 
     care provided to beneficiaries;
       ``(2) the appropriate use of best practice guidelines by 
     providers and services by beneficiaries;
       ``(3) reduced scientific uncertainty in the delivery of 
     care through the examination of variations in the utilization 
     and allocation of services, and outcomes measurement and 
     research;
       ``(4) encourage shared decision making between providers 
     and patients;
       ``(5) the provision of incentives for improving the quality 
     and safety of care and achieving the efficient allocation of 
     resources;
       ``(6) the appropriate use of culturally and ethnically 
     sensitive health care delivery; and
       ``(7) the financial effects on the health care marketplace 
     of altering the incentives for care delivery and changing the 
     allocation of resources.
       ``(c) Administration by Contract.--
       ``(1) In general.--Except as otherwise provided in this 
     section, the Secretary may administer the demonstration 
     program established under this section in a manner that is 
     similar to the manner in which the demonstration program 
     established under section 1866A is administered in accordance 
     with section 1866B.
       ``(2) Alternative payment systems.--A health care group 
     that receives assistance under this section may, with respect 
     to the demonstration project to be carried out with such 
     assistance, include proposals for the use of alternative 
     payment systems for items and services provided to 
     beneficiaries by the group that are designed to--
       ``(A) encourage the delivery of high quality care while 
     accomplishing the objectives described in subsection (b); and
       ``(B) streamline documentation and reporting requirements 
     otherwise required under this title.
       ``(3) Benefits.--A health care group that receives 
     assistance under this section may, with respect to the 
     demonstration project to be carried out with such assistance, 
     include modifications to the package of benefits available 
     under the original medicare fee-for-service program under 
     parts A and B or the package of benefits available through a 
     Medicare Advantage plan under part C. The criteria employed 
     under the demonstration program under this section to 
     evaluate outcomes and determine best practice guidelines and 
     incentives shall not be used as a basis for the denial of 
     medicare benefits under the demonstration program to patients 
     against their wishes (or if the patient is incompetent, 
     against the wishes of the patient's surrogate) on the basis 
     of the patient's age or expected length of life or of the 
     patient's present or predicted disability, degree of medical 
     dependency, or quality of life.
       ``(d) Eligibility Criteria.--To be eligible to receive 
     assistance under this section, an entity shall--
       ``(1) be a health care group;
       ``(2) meet quality standards established by the Secretary, 
     including--
       ``(A) the implementation of continuous quality improvement 
     mechanisms that are aimed at integrating community-based 
     support services, primary care, and referral care;
       ``(B) the implementation of activities to increase the 
     delivery of effective care to beneficiaries;
       ``(C) encouraging patient participation in preference-based 
     decisions;
       ``(D) the implementation of activities to encourage the 
     coordination and integration of medical service delivery; and
       ``(E) the implementation of activities to measure and 
     document the financial impact on the health care marketplace 
     of altering the incentives of health care delivery and 
     changing the allocation of resources; and
       ``(3) meet such other requirements as the Secretary may 
     establish.
       ``(e) Waiver Authority.--The Secretary may waive such 
     requirements of titles XI and XVIII as may be necessary to 
     carry out the purposes of the demonstration program 
     established under this section.
       ``(f) Budget Neutrality.--With respect to the 5-year period 
     of the demonstration program under subsection (b), the 
     aggregate expenditures under this title for such period shall 
     not exceed the aggregate expenditures that would have been 
     expended under this title if the program established under 
     this section had not been implemented.
       ``(g) Notice Requirements.--In the case of an individual 
     that receives health care items or services under a 
     demonstration program carried out under this section, the 
     Secretary shall ensure that such individual is notified of 
     any waivers of coverage or payment rules that are applicable 
     to such individual under this title as a result of the 
     participation of the individual in such program.
       ``(h) Participation and Support by Federal Agencies.--In 
     carrying out the demonstration program under this section, 
     the Secretary may direct--
       ``(1) the Director of the National Institutes of Health to 
     expand the efforts of the Institutes to evaluate current 
     medical technologies and improve the foundation for evidence-
     based practice;
       ``(2) the Administrator of the Agency for Healthcare 
     Research and Quality to, where possible and appropriate, use 
     the program under this section as a laboratory for the study 
     of quality improvement strategies and to evaluate, monitor, 
     and disseminate information relevant to such program; and
       ``(3) the Administrator of the Centers for Medicare & 
     Medicaid Services and the Administrator of the Center for 
     Medicare Choices to support linkages of relevant medicare 
     data to registry information from participating health care 
     groups for the beneficiary populations served by the 
     participating groups, for analysis supporting the purposes of 
     the demonstration program, consistent with the applicable 
     provisions of the Health Insurance Portability and 
     Accountability Act of 1996.''.

     SEC. 347. MEDPAC STUDY ON DIRECT ACCESS TO PHYSICAL THERAPY 
                   SERVICES.

       (a) Study.--The Medicare Payment Advisory Commission (in 
     this section referred to as the ``Commission'') shall conduct 
     a study on the feasibility and advisability of allowing 
     medicare fee-for-service beneficiaries direct access to 
     outpatient physical therapy services and physical therapy 
     services furnished as comprehensive rehabilitation facility 
     services.
       (b) Report.--Not later than January 1, 2005, the Commission 
     shall submit to Congress a report on the study conducted 
     under subsection (a) together with recommendations for such 
     legislation or administrative action as the Commission 
     determines to be appropriate.
       (c) Direct Access Defined.--The term ``direct access'' 
     means, with respect to outpatient physical therapy services 
     and physical therapy services furnished as comprehensive 
     outpatient rehabilitation facility

[[Page S15440]]

     services, coverage of and payment for such services in 
     accordance with the provisions of title XVIII of the Social 
     Security Act, except that sections 1835(a)(2), 1861(p), and 
     1861(cc) of such Act (42 U.S.C. 1395n(a)(2), 1395x(p), and 
     1395x(cc), respectively) shall be applied--
       (1) without regard to any requirement that--
       (A) an individual be under the care of (or referred by) a 
     physician; or
       (B) services be provided under the supervision of a 
     physician; and
       (2) by allowing a physician or a qualified physical 
     therapist to satisfy any requirement for--
       (A) certification and recertification; and
       (B) establishment and periodic review of a plan of care.

     SEC. 348. DEMONSTRATION PROJECT FOR CONSUMER-DIRECTED CHRONIC 
                   OUTPATIENT SERVICES.

       (a) Establishment.--
       (1) In general.--Subject to the succeeding provisions of 
     this section, the Secretary shall establish demonstration 
     projects (in this section referred to as ``demonstration 
     projects'') under which the Secretary shall evaluate methods 
     that improve the quality of care provided to individuals with 
     chronic conditions and that reduce expenditures that would 
     otherwise be made under the medicare program on behalf of 
     such individuals for such chronic conditions, such methods to 
     include permitting those beneficiaries to direct their own 
     health care needs and services.
       (2) Individuals with chronic conditions defined.--In this 
     section, the term ``individuals with chronic conditions'' 
     means an individual entitled to benefits under part A of 
     title XVIII of the Social Security Act, and enrolled under 
     part B of such title, but who is not enrolled under part C of 
     such title who is diagnosed as having one or more chronic 
     conditions (as defined by the Secretary), such as diabetes.
       (b) Design of Projects.--
       (1) Evaluation before implementation of project.--
       (A) In general.--In establishing the demonstration projects 
     under this section, the Secretary shall evaluate best 
     practices employed by group health plans and practices under 
     State plans for medical assistance under the medicaid program 
     under title XIX of the Social Security Act, as well as best 
     practices in the private sector or other areas, of methods 
     that permit patients to self-direct the provision of personal 
     care services. The Secretary shall evaluate such practices 
     for a 1-year period and, based on such evaluation, shall 
     design the demonstration project.
       (B) Requirement for estimate of budget neutral costs.--As 
     part of the evaluation under subparagraph (A), the Secretary 
     shall evaluate the costs of furnishing care under the 
     projects. The Secretary may not implement the demonstration 
     projects under this section unless the Secretary determines 
     that the costs of providing care to individuals with chronic 
     conditions under the project will not exceed the costs, in 
     the aggregate, of furnishing care to such individuals under 
     title XVIII of the Social Security Act, that would otherwise 
     be paid without regard to the demonstration projects for the 
     period of the project.
       (2) Scope of services.--The Secretary shall determine the 
     appropriate scope of personal care services that would apply 
     under the demonstration projects.
       (c) Voluntary Participation.--Participation of providers of 
     services and suppliers, and of individuals with chronic 
     conditions, in the demonstration projects shall be voluntary.
       (d) Demonstration Projects Sites.--Not later than 2 years 
     after the date of the enactment of this Act, the Secretary 
     shall conduct a demonstration project in at least one area 
     that the Secretary determines has a population of individuals 
     entitled to benefits under part A of title XVIII of the 
     Social Security Act, and enrolled under part B of such title, 
     with a rate of incidence of diabetes that significantly 
     exceeds the national average rate of all areas.
       (e) Evaluation and Report.--
       (1) Evaluations.--The Secretary shall conduct evaluations 
     of the clinical and cost effectiveness of the demonstration 
     projects.
       (2) Reports.--Not later than 2 years after the commencement 
     of the demonstration projects, and biannually thereafter, the 
     Secretary shall submit to Congress a report on the 
     evaluation, and shall include in the report the following:
       (A) An analysis of the patient outcomes and costs of 
     furnishing care to the individuals with chronic conditions 
     participating in the projects as compared to such outcomes 
     and costs to other individuals for the same health 
     conditions.
       (B) Evaluation of patient satisfaction under the 
     demonstration projects.
       (C) Such recommendations regarding the extension, 
     expansion, or termination of the projects as the Secretary 
     determines appropriate.
       (f) Waiver Authority.--The Secretary shall waive compliance 
     with the requirements of title XVIII of the Social Security 
     Act (42 U.S.C. 1395 et seq.) to such extent and for such 
     period as the Secretary determines is necessary to conduct 
     demonstration projects.
       (g) Authorization of Appropriations.--(1) Payments for the 
     costs of carrying out the demonstration project under this 
     section shall be made from the Federal Supplementary Medical 
     Insurance Trust Fund under section 1841 of such Act (42 
     U.S.C. 1395t).
       (2) There are authorized to be appropriated from such Trust 
     Fund such sums as may be necessary for the Secretary to enter 
     into contracts with appropriate organizations for the deign, 
     implementation, and evaluation of the demonstration project.
       (3) In no case may expenditures under this section exceed 
     the aggregate expenditures that would otherwise have been 
     made for the provision of personal care services.

     SEC. 349. MEDICARE CARE MANAGEMENT PERFORMANCE DEMONSTRATION.

       (a) Establishment.--
       (1) In general.--The Secretary shall establish a pay-for-
     performance demonstration program with physicians to meet the 
     needs of eligible beneficiaries through the adoption and use 
     of health information technology and evidence-based outcomes 
     measures for--
       (A) promoting continuity of care;
       (B) helping stabilize medical conditions;
       (C) preventing or minimizing acute exacerbations of chronic 
     conditions; and
       (D) reducing adverse health outcomes, such as adverse drug 
     interactions related to polypharmacy.
       (2) Sites.--The Secretary shall designate no more than 4 
     sites at which to conduct the demonstration program under 
     this section, of which--
       (A) 2 shall be in an urban area;
       (B) 1 shall be in a rural area; and
       (C) 1 shall be in a State with a medical school with a 
     Department of Geriatrics that manages rural outreach sites 
     and is capable of managing patients with multiple chronic 
     conditions, one of which is dementia.
       (3) Duration.--The Secretary shall conduct the 
     demonstration program under this section for a 3-year period.
       (4) Consultation.--In carrying out the demonstration 
     program under this section, the Secretary shall consult with 
     private sector and non-profit groups that are undertaking 
     similar efforts to improve quality and reduce avoidable 
     hospitalizations for chronically ill patients.
       (b) Participation.--
       (1) In general.--A physician who provides care for a 
     minimum number of eligible beneficiaries (as specified by the 
     Secretary) may participate in the demonstration program under 
     this section if such physician agrees, to phase-in over the 
     course of the 3-year demonstration period and with the 
     assistance provided under subsection (d)(2)--
       (A) the use of health information technology to manage the 
     clinical care of eligible beneficiaries consistent with 
     paragraph (3); and
       (B) the electronic reporting of clinical quality and 
     outcomes measures in accordance with requirements established 
     by the Secretary under the demonstration program.
       (2) Special rule.--In the case of the sites referred to in 
     subparagraphs (B) and (C) of subsection (a)(2), a physician 
     who provides care for a minimum number of beneficiaries with 
     two or more chronic conditions, including dementia (as 
     specified by the Secretary), may participate in the program 
     under this section if such physician agrees to the 
     requirements in subparagraphs (A) and (B) of paragraph (1).
       (3) Practice standards.--Each physician participating in 
     the demonstration program under this section must demonstrate 
     the ability--
       (A) to assess each eligible beneficiary for conditions 
     other than chronic conditions, such as impaired cognitive 
     ability and co-morbidities, for the purposes of developing 
     care management requirements;
       (B) to serve as the primary contact of eligible 
     beneficiaries in accessing items and services for which 
     payment may be made under the medicare program;
       (C) to establish and maintain health care information 
     system for such beneficiaries;
       (D) to promote continuity of care across providers and 
     settings;
       (E) to use evidence-based guidelines and meet such clinical 
     quality and outcome measures as the Secretary shall require;
       (F) to promote self-care through the provision of patient 
     education and support for patients or, where appropriate, 
     family caregivers;
       (G) when appropriate, to refer such beneficiaries to 
     community service organizations; and
       (H) to meet such other complex care management requirements 
     as the Secretary may specify.

     The guidelines and measures required under subparagraph (E) 
     shall be designed to take into account beneficiaries with 
     multiple chronic conditions.
       (c) Payment Methodology.--Under the demonstration program 
     under this section the Secretary shall pay a per beneficiary 
     amount to each participating physician who meets or exceeds 
     specific performance standards established by the Secretary 
     with respect to the clinical quality and outcome measures 
     reported under subsection (b)(1)(B). Such amount may vary 
     based on different levels of performance or improvement.
       (d) Administration.--
       (1) Use of quality improvement organizations.--The 
     Secretary shall contract with quality improvement 
     organizations or such other entities as the Secretary deems 
     appropriate to enroll physicians and evaluate their 
     performance under the demonstration program under this 
     section.
       (2) Technical assistance.--The Secretary shall require in 
     such contracts that the contractor be responsible for 
     technical assistance and education as needed to physicians

[[Page S15441]]

     enrolled in the demonstration program under this section for 
     the purpose of aiding their adoption of health information 
     technology, meeting practice standards, and implementing 
     required clinical and outcomes measures.
       (e) Funding.--
       (1) In general.--The Secretary shall provide for the 
     transfer from the Federal Supplementary Medical Insurance 
     Trust Fund established under section 1841 of the Social 
     Security Act (42 U.S.C. 1395t) of such funds as are necessary 
     for the costs of carrying out the demonstration program under 
     this section.
       (2) Budget neutrality.--In conducting the demonstration 
     program under this section, the Secretary shall ensure that 
     the aggregate payments made by the Secretary do not exceed 
     the amount which the Secretary estimates would have been paid 
     if the demonstration program under this section was not 
     implemented.
       (f) Waiver Authority.--The Secretary may waive such 
     requirements of titles XI and XVIII of the Social Security 
     Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be 
     necessary for the purpose of carrying out the demonstration 
     program under this section.
       (g) Report.--Not later than 12 months after the date of 
     completion of the demonstration program under this section, 
     the Secretary shall submit to Congress a report on such 
     program, together with recommendations for such legislation 
     and administrative action as the Secretary determines to be 
     appropriate.
       (h) Definitions.--In this section:
       (1) Eligible beneficiary.--The term ``eligible 
     beneficiary'' means any individual who--
       (A) is entitled to benefits under part A and enrolled for 
     benefits under part B of title XVIII of the Social Security 
     Act and is not enrolled in a plan under part C of such title; 
     and
       (B) has one or more chronic medical conditions specified by 
     the Secretary (one of which may be cognitive impairment).
       (2) Health information technology.--The term ``health 
     information technology'' means email communication, clinical 
     alerts and reminders, and other information technology that 
     meets such functionality, interoperability, and other 
     standards as prescribed by the Secretary.

     SEC. 350. GAO STUDY AND REPORT ON THE PROPAGATION OF 
                   CONCIERGE CARE.

       (a) Study.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study on concierge care (as defined in 
     paragraph (2)) to determine the extent to which such care--
       (A) is used by medicare beneficiaries (as defined in 
     section 1802(b)(5)(A) of the Social Security Act (42 U.S.C. 
     1395a(b)(5)(A))); and
       (B) has impacted upon the access of medicare beneficiaries 
     (as so defined) to items and services for which reimbursement 
     is provided under the medicare program under title XVIII of 
     the Social Security Act (42 U.S.C. 1395 et seq.).
       (2) Concierge care.--In this section, the term ``concierge 
     care'' means an arrangement under which, as a prerequisite 
     for the provision of a health care item or service to an 
     individual, a physician, practitioner (as described in 
     section 1842(b)(18)(C) of the Social Security Act (42 U.S.C. 
     1395u(b)(18)(C))), or other individual--
       (A) charges a membership fee or another incidental fee to 
     an individual desiring to receive the health care item or 
     service from such physician, practitioner, or other 
     individual; or
       (B) requires the individual desiring to receive the health 
     care item or service from such physician, practitioner, or 
     other individual to purchase an item or service.
       (b) Report.--Not later than the date that is 12 months 
     after the date of enactment of this Act, the Comptroller 
     General of the United States shall submit to Congress a 
     report on the study conducted under subsection (a)(1) 
     together with such recommendations for legislative or 
     administrative action as the Comptroller General determines 
     to be appropriate.

     SEC. 351. DEMONSTRATION OF COVERAGE OF CHIROPRACTIC SERVICES 
                   UNDER MEDICARE.

       (a) Definitions.--In this section:
       (1) Chiropractic services.--The term ``chiropractic 
     services'' has the meaning given that term by the Secretary 
     for purposes of the demonstration projects, but shall 
     include, at a minimum--
       (A) care for neuromusculoskeletal conditions typical among 
     eligible beneficiaries; and
       (B) diagnostic and other services that a chiropractor is 
     legally authorized to perform by the State or jurisdiction in 
     which such treatment is provided.
       (2) Demonstration project.--The term ``demonstration 
     project'' means a demonstration project established by the 
     Secretary under subsection (b)(1).
       (3) Eligible beneficiary.--The term ``eligible 
     beneficiary'' means an individual who is enrolled under part 
     B of the medicare program.
       (4) Medicare program.--The term ``medicare program'' means 
     the health benefits program under title XVIII of the Social 
     Security Act (42 U.S.C. 1395 et seq.).
       (b) Demonstration of Coverage of Chiropractic Services 
     Under Medicare.--
       (1) Establishment.--The Secretary shall establish 
     demonstration projects in accordance with the provisions of 
     this section for the purpose of evaluating the feasibility 
     and advisability of covering chiropractic services under the 
     medicare program (in addition to the coverage provided for 
     services consisting of treatment by means of manual 
     manipulation of the spine to correct a subluxation described 
     in section 1861(r)(5) of the Social Security Act (42 U.S.C. 
     1395x(r)(5))).
       (2) No physician approval required.--In establishing the 
     demonstration projects, the Secretary shall ensure that an 
     eligible beneficiary who participates in a demonstration 
     project, including an eligible beneficiary who is enrolled 
     for coverage under a Medicare+Choice plan (or, on and after 
     January 1, 2006, under a Medicare Advantage plan), is not 
     required to receive approval from a physician or other health 
     care provider in order to receive a chiropractic service 
     under a demonstration project.
       (3) Consultation.--In establishing the demonstration 
     projects, the Secretary shall consult with chiropractors, 
     organizations representing chiropractors, eligible 
     beneficiaries, and organizations representing eligible 
     beneficiaries.
       (4) Participation.--Any eligible beneficiary may 
     participate in the demonstration projects on a voluntary 
     basis.
       (c) Conduct of Demonstration Projects.--
       (1) Demonstration sites.--
       (A) Selection of demonstration sites.--The Secretary shall 
     conduct demonstration projects at 4 demonstration sites.
       (B) Geographic diversity.--Of the sites described in 
     subparagraph (A)--
       (i) 2 shall be in rural areas; and
       (ii) 2 shall be in urban areas.
       (C) Sites located in hpsas.--At least 1 site described in 
     clause (i) of subparagraph (B) and at least 1 site described 
     in clause (ii) of such subparagraph shall be located in an 
     area that is designated under section 332(a)(1)(A) of the 
     Public Health Service Act (42 U.S.C. 254e(a)(1)(A)) as a 
     health professional shortage area.
       (2) Implementation; duration.--
       (A) Implementation.--The Secretary shall not implement the 
     demonstration projects before October 1, 2004.
       (B) Duration.--The Secretary shall complete the 
     demonstration projects by the date that is 2 years after the 
     date on which the first demonstration project is implemented.
       (d) Evaluation and Report.--
       (1) Evaluation.--The Secretary shall conduct an evaluation 
     of the demonstration projects--
       (A) to determine whether eligible beneficiaries who use 
     chiropractic services use a lesser overall amount of items 
     and services for which payment is made under the medicare 
     program than eligible beneficiaries who do not use such 
     services;
       (B) to determine the cost of providing payment for 
     chiropractic services under the medicare program;
       (C) to determine the satisfaction of eligible beneficiaries 
     participating in the demonstration projects and the quality 
     of care received by such beneficiaries; and
       (D) to evaluate such other matters as the Secretary 
     determines is appropriate.
       (2) Report.--Not later than the date that is 1 year after 
     the date on which the demonstration projects conclude, the 
     Secretary shall submit to Congress a report on the evaluation 
     conducted under paragraph (1) together with such 
     recommendations for legislation or administrative action as 
     the Secretary determines is appropriate.
       (e) Waiver of Medicare Requirements.--The Secretary shall 
     waive compliance with such requirements of the medicare 
     program to the extent and for the period the Secretary finds 
     necessary to conduct the demonstration projects.
       (f) Funding.--
       (1) Demonstration projects.--
       (A) In general.--Subject to subparagraph (B) and paragraph 
     (2), the Secretary shall provide for the transfer from the 
     Federal Supplementary Insurance Trust Fund under section 1841 
     of the Social Security Act (42 U.S.C. 1395t) of such funds as 
     are necessary for the costs of carrying out the demonstration 
     projects under this section.
       (B) Limitation.--In conducting the demonstration projects 
     under this section, the Secretary shall ensure that the 
     aggregate payments made by the Secretary under the medicare 
     program do not exceed the amount which the Secretary would 
     have paid under the medicare program if the demonstration 
     projects under this section were not implemented.
       (2) Evaluation and report.--There are authorized to be 
     appropriated such sums as are necessary for the purpose of 
     developing and submitting the report to Congress under 
     subsection (d).

             TITLE IV--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

     SEC. 401. DEMONSTRATION PROJECT TO CLARIFY THE DEFINITION OF 
                   HOMEBOUND.

       (a) Demonstration Project.--Not later than 180 days after 
     the date of the enactment of this Act, the Secretary shall 
     conduct a 2-year demonstration project under part B of title 
     XVIII of the Social Security Act under which medicare 
     beneficiaries with chronic conditions described in subsection 
     (b) are deemed to be homebound for purposes of receiving home 
     health services under the medicare program.

[[Page S15442]]

       (b) Medicare Beneficiary Described.--For purposes of 
     subsection (a), a medicare beneficiary is eligible to be 
     deemed to be homebound, without regard to the purpose, 
     frequency, or duration of absences from the home, if--
       (1) the beneficiary has been certified by one physician as 
     an individual who has a permanent and severe, disabling 
     condition that is not expected to improve;
       (2) the beneficiary is dependent upon assistance from 
     another individual with at least 3 out of the 5 activities of 
     daily living for the rest of the beneficiary's life;
       (3) the beneficiary requires skilled nursing services for 
     the rest of the beneficiary's life and the skilled nursing is 
     more than medication management;
       (4) an attendant is required to visit the beneficiary on a 
     daily basis to monitor and treat the beneficiary's medical 
     condition or to assist the beneficiary with activities of 
     daily living;
       (5) the beneficiary requires technological assistance or 
     the assistance of another person to leave the home; and
       (6) the beneficiary does not regularly work in a paid 
     position full-time or part-time outside the home.
       (c) Demonstration Project Sites.--The demonstration project 
     established under this section shall be conducted in 3 States 
     selected by the Secretary to represent the Northeast, 
     Midwest, and Western regions of the United States.
       (d) Limitation on Number of Participants.--The aggregate 
     number of such beneficiaries that may participate in the 
     project may not exceed 15,000.
       (e) Data.--The Secretary shall collect such data on the 
     demonstration project with respect to the provision of home 
     health services to medicare beneficiaries that relates to 
     quality of care, patient outcomes, and additional costs, if 
     any, to the medicare program.
       (f) Report to Congress.--Not later than 1 year after the 
     date of the completion of the demonstration project under 
     this section, the Secretary shall submit to Congress a report 
     on the project using the data collected under subsection (e). 
     The report shall include the following:
       (1) An examination of whether the provision of home health 
     services to medicare beneficiaries under the project has had 
     any of the following effects:
       (A) Has adversely affected the provision of home health 
     services under the medicare program.
       (B) Has directly caused an increase of expenditures under 
     the medicare program for the provision of such services that 
     is directly attributable to such clarification.
       (2) The specific data evidencing the amount of any increase 
     in expenditures that is directly attributable to the 
     demonstration project (expressed both in absolute dollar 
     terms and as a percentage) above expenditures that would 
     otherwise have been incurred for home health services under 
     the medicare program.
       (3) Specific recommendations to exempt permanently and 
     severely disabled homebound beneficiaries from restrictions 
     on the length, frequency, and purpose of their absences from 
     the home to qualify for home health services without 
     incurring additional costs to the medicare program.
       (g) Waiver Authority.--The Secretary shall waive compliance 
     with the requirements of title XVIII of the Social Security 
     Act (42 U.S.C. 1395 et seq.) to such extent and for such 
     period as the Secretary determines is necessary to conduct 
     demonstration projects.
       (h) Construction.--Nothing in this section shall be 
     construed as waiving any applicable civil monetary penalty, 
     criminal penalty, or other remedy available to the Secretary 
     under title XI or title XVIII of the Social Security Act for 
     acts prohibited under such titles, including penalties for 
     false certifications for purposes of receipt of items or 
     services under the medicare program.
       (i) Authorization of Appropriations.--Payments for the 
     costs of carrying out the demonstration project under this 
     section shall be made from the Federal Supplementary Medical 
     Insurance Trust Fund under section 1841 of such Act (42 
     U.S.C. 1395t).
       (j) Definitions.--In this section:
       (1) Medicare beneficiary.--The term ``medicare 
     beneficiary'' means an individual who is enrolled under part 
     B of title XVIII of the Social Security Act.
       (2) Home health services.--The term ``home health 
     services'' has the meaning given such term in section 1861(m) 
     of the Social Security Act (42 U.S.C. 1395x(m)).
       (3) Activities of daily living defined.--The term 
     ``activities of daily living'' means eating, toileting, 
     transferring, bathing, and dressing.

     SEC. 402. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY-CARE 
                   SERVICES.

       (a) Establishment.--Subject to the succeeding provisions of 
     this section, the Secretary shall establish a demonstration 
     project (in this section referred to as the ``demonstration 
     project'') under which the Secretary shall, as part of a plan 
     of an episode of care for home health services established 
     for a medicare beneficiary, permit a home health agency, 
     directly or under arrangements with a medical adult day-care 
     facility, to provide medical adult day-care services as a 
     substitute for a portion of home health services that would 
     otherwise be provided in the beneficiary's home.
       (b) Payment.--
       (1) In general.--Subject to paragraph (2), the amount of 
     payment for an episode of care for home health services, a 
     portion of which consists of substitute medical adult day-
     care services, under the demonstration project shall be made 
     at a rate equal to 95 percent of the amount that would 
     otherwise apply for such home health services under section 
     1895 of the Social Security Act (42 U.S.C. 1395fff). In no 
     case may a home health agency, or a medical adult day-care 
     facility under arrangements with a home health agency, 
     separately charge a beneficiary for medical adult day-care 
     services furnished under the plan of care.
       (2) Adjustment in case of overutilization of substitute 
     adult day-care services to ensure budget neutrality.--The 
     Secretary shall monitor the expenditures under the 
     demonstration project and under title XVIII of the Social 
     Security Act for home health services. If the Secretary 
     estimates that the total expenditures under the demonstration 
     project and under such title XVIII for home health services 
     for a period determined by the Secretary exceed expenditures 
     that would have been made under such title XVIII for home 
     health services for such period if the demonstration project 
     had not been conducted, the Secretary shall adjust the rate 
     of payment to medical adult day-care facilities under 
     paragraph (1) in order to eliminate such excess.
       (c) Demonstration Project Sites.--The demonstration project 
     established under this section shall be conducted in not more 
     than 5 sites in States selected by the Secretary that license 
     or certify providers of services that furnish medical adult 
     day-care services.
       (d) Duration.--The Secretary shall conduct the 
     demonstration project for a period of 3 years.
       (e) Voluntary Participation.--Participation of medicare 
     beneficiaries in the demonstration project shall be 
     voluntary. The total number of such beneficiaries that may 
     participate in the project at any given time may not exceed 
     15,000.
       (f) Preference in Selecting Agencies.--In selecting home 
     health agencies to participate under the demonstration 
     project, the Secretary shall give preference to those 
     agencies that are currently licensed or certified through 
     common ownership and control to furnish medical adult day-
     care services.
       (g) Waiver Authority.--The Secretary may waive such 
     requirements of title XVIII of the Social Security Act as may 
     be necessary for the purposes of carrying out the 
     demonstration project, other than waiving the requirement 
     that an individual be homebound in order to be eligible for 
     benefits for home health services.
       (h) Evaluation and Report.--The Secretary shall conduct an 
     evaluation of the clinical and cost-effectiveness of the 
     demonstration project. Not later than 6 months after the 
     completion of the project, the Secretary shall submit to 
     Congress a report on the evaluation, and shall include in the 
     report the following:
       (1) An analysis of the patient outcomes and costs of 
     furnishing care to the medicare beneficiaries participating 
     in the project as compared to such outcomes and costs to 
     beneficiaries receiving only home health services for the 
     same health conditions.
       (2) Such recommendations regarding the extension, 
     expansion, or termination of the project as the Secretary 
     determines appropriate.
       (i) Definitions.--In this section:
       (1) Home health agency.--The term ``home health agency'' 
     has the meaning given such term in section 1861(o) of the 
     Social Security Act (42 U.S.C. 1395x(o)).
       (2) Medical adult day-care facility.--The term ``medical 
     adult day-care facility'' means a facility that--
       (A) has been licensed or certified by a State to furnish 
     medical adult day-care services in the State for a continuous 
     2-year period;
       (B) is engaged in providing skilled nursing services and 
     other therapeutic services directly or under arrangement with 
     a home health agency;
       (C) is licensed and certified by the State in which it 
     operates or meets such standards established by the Secretary 
     to assure quality of care and such other requirements as the 
     Secretary finds necessary in the interest of the health and 
     safety of individuals who are furnished services in the 
     facility; and
       (D) provides medical adult day-care services.
       (3) Medical adult day-care services.--The term ``medical 
     adult day-care services'' means--
       (A) home health service items and services described in 
     paragraphs (1) through (7) of section 1861(m) furnished in a 
     medical adult day-care facility;
       (B) a program of supervised activities furnished in a group 
     setting in the facility that--
       (i) meet such criteria as the Secretary determines 
     appropriate; and
       (ii) is designed to promote physical and mental health of 
     the individuals; and
       (C) such other services as the Secretary may specify.
       (4) Medicare beneficiary.--The term ``medicare 
     beneficiary'' means an individual entitled to benefits under 
     part A of this title, enrolled under part B of this title, or 
     both.

     SEC. 403. TEMPORARY SUSPENSION OF OASIS REQUIREMENT FOR 
                   COLLECTION OF DATA ON NON-MEDICARE AND NON-
                   MEDICAID PATIENTS.

       (a) In General.--During the period described in subsection 
     (b), the Secretary may

[[Page S15443]]

     not require, under section 4602(e) of the Balanced Budget Act 
     of 1997 (Public Law 105-33; 111 Stat. 467) or otherwise under 
     OASIS, a home health agency to gather or submit information 
     that relates to an individual who is not eligible for 
     benefits under either title XVIII or title XIX of the Social 
     Security Act (such information in this section referred to as 
     ``non-medicare/medicaid OASIS information'').
       (b) Period of Suspension.--The period described in this 
     subsection--
       (1) begins on the date of the enactment of this Act; and
       (2) ends on the last day of the second month beginning 
     after the date as of which the Secretary has published final 
     regulations regarding the collection and use by the Centers 
     for Medicare & Medicaid Services of non-medicare/medicaid 
     OASIS information following the submission of the report 
     required under subsection (c).
       (c) Report.--
       (1) Study.--The Secretary shall conduct a study on how non-
     medicare/medicaid OASIS information is and can be used by 
     large home health agencies. Such study shall examine--
       (A) whether there are unique benefits from the analysis of 
     such information that cannot be derived from other 
     information available to, or collected by, such agencies; and
       (B) the value of collecting such information by small home 
     health agencies compared to the administrative burden related 
     to such collection.

     In conducting the study the Secretary shall obtain 
     recommendations from quality assessment experts in the use of 
     such information and the necessity of small, as well as 
     large, home health agencies collecting such information.
       (2) Report.--The Secretary shall submit to Congress a 
     report on the study conducted under paragraph (1) by not 
     later than 18 months after the date of the enactment of this 
     Act.
       (d) Construction.--Nothing in this section shall be 
     construed as preventing home health agencies from collecting 
     non-medicare/medicaid OASIS information for their own use.

     SEC. 404. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH 
                   AGENCIES.

       (a) Study.--The Medicare Payment Advisory Commission shall 
     conduct a study of payment margins of home health agencies 
     under the home health prospective payment system under 
     section 1895 of the Social Security Act (42 U.S.C. 1395fff). 
     Such study shall examine whether systematic differences in 
     payment margins are related to differences in case mix (as 
     measured by home health resource groups (HHRGs)) among such 
     agencies. The study shall use the partial or full-year cost 
     reports filed by home health agencies.
       (b) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Commission shall submit to 
     Congress a report on the study under subsection (a).

     SEC. 405. COVERAGE OF RELIGIOUS NONMEDICAL HEALTH CARE 
                   INSTITUTION SERVICES FURNISHED IN THE HOME.

       (a) In General.--Section 1821(a) (42 U.S.C. 1395i-5(a)) is 
     amended--
       (1) in the matter preceding paragraph (1), by inserting 
     ``and for home health services furnished an individual by a 
     religious nonmedical health care institution'' after 
     ``religious nonmedical health care institution''; and
       (2) in paragraph (2)--
       (A) by striking ``or extended care services'' and inserting 
     ``, extended care services, or home health services''; and
       (B) by inserting ``, or receiving services from a home 
     health agency,'' after ``skilled nursing facility''.
       (b) Definition.--Section 1861 (42 U.S.C. 1395x), as amended 
     by section 342, is amended by adding at the end the following 
     new section:

    ``Extended Care in Religious Nonmedical Health Care Institutions

       ``(aaa)(1) The term `home health agency' also includes a 
     religious nonmedical health care institution (as defined in 
     subsection (ss)(1)), but only with respect to items and 
     services ordinarily furnished by such an institution to 
     individuals in their homes, and that are comparable to items 
     and services furnished to individuals by a home health agency 
     that is not religious nonmedical health care institution.
       ``(2)(A) Subject to subparagraphs (B), payment may be made 
     with respect to services provided by such an institution only 
     to such extent and under such conditions, limitations, and 
     requirements (in addition to or in lieu of the conditions, 
     limitations, and requirements otherwise applicable) as may be 
     provided in regulations consistent with section 1821.
       ``(B) Notwithstanding any other provision of this title, 
     payment may not be made under subparagraph (A)--
       ``(i) in a year insofar as such payments exceed $700,000; 
     and
       ``(ii) after December 31, 2006.''.

                 Subtitle B--Graduate Medical Education

     SEC. 411. EXCEPTION TO INITIAL RESIDENCY PERIOD FOR GERIATRIC 
                   RESIDENCY OR FELLOWSHIP PROGRAMS.

       (a) Clarification of Congressional Intent.--Congress 
     intended section 1886(h)(5)(F)(ii) of the Social Security Act 
     (42 U.S.C. 1395ww(h)(5)(F)(ii)), as added by section 9202 of 
     the Consolidated Omnibus Budget Reconciliation Act of 1985 
     (Public Law 99-272), to provide an exception to the initial 
     residency period for geriatric residency or fellowship 
     programs such that, where a particular approved geriatric 
     training program requires a resident to complete 2 years of 
     training to initially become board eligible in the geriatric 
     specialty, the 2 years spent in the geriatric training 
     program are treated as part of the resident's initial 
     residency period, but are not counted against any limitation 
     on the initial residency period.
       (b) Interim Final Regulatory Authority and Effective 
     Date.--The Secretary shall promulgate interim final 
     regulations consistent with the congressional intent 
     expressed in this section after notice and pending 
     opportunity for public comment to be effective for cost 
     reporting periods beginning on or after October 1, 2003.

     SEC. 412. TREATMENT OF VOLUNTEER SUPERVISION.

       (a) Moratorium on Changes in Treatment.--During the 1-year 
     period beginning on January 1, 2004, for purposes of applying 
     subsections (d)(5)(B) and (h) of section 1886 of the Social 
     Security Act (42 U.S.C. 1395ww), the Secretary shall allow 
     all hospitals to count residents in osteopathic and 
     allopathic family practice programs in existence as of 
     January 1, 2002, who are training at non-hospital sites, 
     without regard to the financial arrangement between the 
     hospital and the teaching physician practicing in the non-
     hospital site to which the resident has been assigned.
       (b) Study and Report.--
       (1) Study.--The Inspector General of the Department of 
     Health and Human Services shall conduct a study of the 
     appropriateness of alternative payment methodologies under 
     such sections for the costs of training residents in non-
     hospital settings.
       (2) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Inspector General shall submit to 
     Congress a report on the study conducted under paragraph (1), 
     together with such recommendations as the Inspector General 
     determines appropriate.

                  Subtitle C--Chronic Care Improvement

     SEC. 421. VOLUNTARY CHRONIC CARE IMPROVEMENT UNDER 
                   TRADITIONAL FEE-FOR-SERVICE.

       (a) In General.--Title XVIII is amended by inserting after 
     section 1806 the following new section:


                       ``chronic care improvement

       ``Sec. 1807. (a) Implementation of Chronic Care Improvement 
     Programs.--
       ``(1) In general.--The Secretary shall provide for the 
     phased-in development, testing, evaluation, and 
     implementation of chronic care improvement programs in 
     accordance with this section. Each such program shall be 
     designed to improve clinical quality and beneficiary 
     satisfaction and achieve spending targets with respect to 
     expenditures under this title for targeted beneficiaries with 
     one or more threshold conditions.
       ``(2) Definitions.--For purposes of this section:
       ``(A) Chronic care improvement program.--The term `chronic 
     care improvement program' means a program described in 
     paragraph (1) that is offered under an agreement under 
     subsection (b) or (c).
       ``(B) Chronic care improvement organization.--The term 
     `chronic care improvement organization' means an entity that 
     has entered into an agreement under subsection (b) or (c) to 
     provide, directly or through contracts with subcontractors, a 
     chronic care improvement program under this section. Such an 
     entity may be a disease management organization, health 
     insurer, integrated delivery system, physician group 
     practice, a consortium of such entities, or any other legal 
     entity that the Secretary determines appropriate to carry out 
     a chronic care improvement program under this section.
       ``(C) Care management plan.--The term `care management 
     plan' means a plan established under subsection (d) for a 
     participant in a chronic care improvement program.
       ``(D) Threshold condition.--The term `threshold condition' 
     means a chronic condition, such as congestive heart failure, 
     diabetes, chronic obstructive pulmonary disease (COPD), or 
     other diseases or conditions, as selected by the Secretary as 
     appropriate for the establishment of a chronic care 
     improvement program.
       ``(E) Targeted beneficiary.--The term `targeted 
     beneficiary' means, with respect to a chronic care 
     improvement program, an individual who--
       ``(i) is entitled to benefits under part A and enrolled 
     under part B, but not enrolled in a plan under part C;
       ``(ii) has one or more threshold conditions covered under 
     such program; and
       ``(iii) has been identified under subsection (d)(1) as a 
     potential participant in such program.
       ``(3) Construction.--Nothing in this section shall be 
     construed as--
       ``(A) expanding the amount, duration, or scope of benefits 
     under this title;
       ``(B) providing an entitlement to participate in a chronic 
     care improvement program under this section;
       ``(C) providing for any hearing or appeal rights under 
     section 1869, 1878, or otherwise, with respect to a chronic 
     care improvement program under this section; or
       ``(D) providing benefits under a chronic care improvement 
     program for which a claim may be submitted to the Secretary 
     by any provider of services or supplier (as defined in 
     section 1861(d)).
       ``(b) Developmental Phase (Phase I).--

[[Page S15444]]

       ``(1) In general.--In carrying out this section, the 
     Secretary shall enter into agreements consistent with 
     subsection (f) with chronic care improvement organizations 
     for the development, testing, and evaluation of chronic care 
     improvement programs using randomized controlled trials. The 
     first such agreement shall be entered into not later than 12 
     months after the date of the enactment of this section.
       ``(2) Agreement period.--The period of an agreement under 
     this subsection shall be for 3 years.
       ``(3) Minimum participation.--
       ``(A) In general.--The Secretary shall enter into 
     agreements under this subsection in a manner so that chronic 
     care improvement programs offered under this section are 
     offered in geographic areas that, in the aggregate, consist 
     of areas in which at least 10 percent of the aggregate number 
     of medicare beneficiaries reside.
       ``(B) Medicare beneficiary defined.--In this paragraph, the 
     term `medicare beneficiary' means an individual who is 
     entitled to benefits under part A, enrolled under part B, or 
     both, and who resides in the United States.
       ``(4) Site selection.--In selecting geographic areas in 
     which agreements are entered into under this subsection, the 
     Secretary shall ensure that each chronic care improvement 
     program is conducted in a geographic area in which at least 
     10,000 targeted beneficiaries reside among other individuals 
     entitled to benefits under part A, enrolled under part B, or 
     both to serve as a control population.
       ``(5) Independent evaluations of phase i programs.--The 
     Secretary shall contract for an independent evaluation of the 
     programs conducted under this subsection. Such evaluation 
     shall be done by a contractor with knowledge of chronic care 
     management programs and demonstrated experience in the 
     evaluation of such programs. Each evaluation shall include an 
     assessment of the following factors of the programs:
       ``(A) Quality improvement measures, such as adherence to 
     evidence-based guidelines and rehospitalization rates.
       ``(B) Beneficiary and provider satisfaction.
       ``(C) Health outcomes.
       ``(D) Financial outcomes, including any cost savings to the 
     program under this title.
       ``(c) Expanded Implementation Phase (Phase II).--
       ``(1) In general.--With respect to chronic care improvement 
     programs conducted under subsection (b), if the Secretary 
     finds that the results of the independent evaluation 
     conducted under subsection (b)(6) indicate that the 
     conditions specified in paragraph (2) have been met by a 
     program (or components of such program), the Secretary shall 
     enter into agreements consistent with subsection (f) to 
     expand the implementation of the program (or components) to 
     additional geographic areas not covered under the program as 
     conducted under subsection (b), which may include the 
     implementation of the program on a national basis. Such 
     expansion shall begin not earlier than 2 years after the 
     program is implemented under subsection (b) and not later 
     than 6 months after the date of completion of such program.
       ``(2) Conditions for expansion of programs.--The conditions 
     specified in this paragraph are, with respect to a chronic 
     care improvement program conducted under subsection (b) for a 
     threshold condition, that the program is expected to--
       ``(A) improve the clinical quality of care;
       ``(B) improve beneficiary satisfaction; and
       ``(C) achieve targets for savings to the program under this 
     title specified by the Secretary in the agreement within a 
     range determined to be appropriate by the Secretary, subject 
     to the application of budget neutrality with respect to the 
     program and not taking into account any payments by the 
     organization under the agreement under the program for risk 
     under subsection (f)(3)(B).
       ``(3) Independent evaluations of phase ii programs.--The 
     Secretary shall carry out evaluations of programs expanded 
     under this subsection as the Secretary determines 
     appropriate. Such evaluations shall be carried out in the 
     similar manner as is provided under subsection (b)(5).
       ``(d) Identification and Enrollment of Prospective Program 
     Participants.--
       ``(1) Identification of prospective program participants.--
     The Secretary shall establish a method for identifying 
     targeted beneficiaries who may benefit from participation in 
     a chronic care improvement program.
       ``(2) Initial contact by secretary.--The Secretary shall 
     communicate with each targeted beneficiary concerning 
     participation in a chronic care improvement program. Such 
     communication may be made by the Secretary and shall include 
     information on the following:
       ``(A) A description of the advantages to the beneficiary in 
     participating in a program.
       ``(B) Notification that the organization offering a program 
     may contact the beneficiary directly concerning such 
     participation.
       ``(C) Notification that participation in a program is 
     voluntary.
       ``(D) A description of the method for the beneficiary to 
     participate or for declining to participate and the method 
     for obtaining additional information concerning such 
     participation.
       ``(3) Voluntary participation.--A targeted beneficiary may 
     participate in a chronic care improvement program on a 
     voluntary basis and may terminate participation at any time.
       ``(e) Chronic Care Improvement Programs.--
       ``(1) In general.--Each chronic care improvement program 
     shall--
       ``(A) have a process to screen each targeted beneficiary 
     for conditions other than threshold conditions, such as 
     impaired cognitive ability and co-morbidities, for the 
     purposes of developing an individualized, goal-oriented care 
     management plan under paragraph (2);
       ``(B) provide each targeted beneficiary participating in 
     the program with such plan; and
       ``(C) carry out such plan and other chronic care 
     improvement activities in accordance with paragraph (3).
       ``(2) Elements of care management plans.--A care management 
     plan for a targeted beneficiary shall be developed with the 
     beneficiary and shall, to the extent appropriate, include the 
     following:
       ``(A) A designated point of contact responsible for 
     communications with the beneficiary and for facilitating 
     communications with other health care providers under the 
     plan.
       ``(B) Self-care education for the beneficiary (through 
     approaches such as disease management or medical nutrition 
     therapy) and education for primary caregivers and family 
     members.
       ``(C) Education for physicians and other providers and 
     collaboration to enhance communication of relevant clinical 
     information.
       ``(D) The use of monitoring technologies that enable 
     patient guidance through the exchange of pertinent clinical 
     information, such as vital signs, symptomatic information, 
     and health self-assessment.
       ``(E) The provision of information about hospice care, pain 
     and palliative care, and end-of-life care.
       ``(3) Conduct of programs.--In carrying out paragraph 
     (1)(C) with respect to a participant, the chronic care 
     improvement organization shall--
       ``(A) guide the participant in managing the participant's 
     health (including all co-morbidities, relevant health care 
     services, and pharmaceutical needs) and in performing 
     activities as specified under the elements of the care 
     management plan of the participant;
       ``(B) use decision-support tools such as evidence-based 
     practice guidelines or other criteria as determined by the 
     Secretary; and
       ``(C) develop a clinical information database to track and 
     monitor each participant across settings and to evaluate 
     outcomes.
       ``(4) Additional responsibilities.--
       ``(A) Outcomes report.--Each chronic care improvement 
     organization offering a chronic care improvement program 
     shall monitor and report to the Secretary, in a manner 
     specified by the Secretary, on health care quality, cost, and 
     outcomes.
       ``(B) Additional requirements.--Each such organization and 
     program shall comply with such additional requirements as the 
     Secretary may specify.
       ``(5) Accreditation.--The Secretary may provide that 
     chronic care improvement programs and chronic care 
     improvement organizations that are accredited by qualified 
     organizations (as defined by the Secretary) may be deemed to 
     meet such requirements under this section as the Secretary 
     may specify.
       ``(f) Terms of Agreements.--
       ``(1) Terms and conditions.--
       ``(A) In general.--An agreement under this section with a 
     chronic care improvement organization shall contain such 
     terms and conditions as the Secretary may specify consistent 
     with this section.
       ``(B) Clinical, quality improvement, and financial 
     requirements.--The Secretary may not enter into an agreement 
     with such an organization under this section for the 
     operation of a chronic care improvement program unless--
       ``(i) the program and organization meet the requirements of 
     subsection (e) and such clinical, quality improvement, 
     financial, and other requirements as the Secretary deems to 
     be appropriate for the targeted beneficiaries to be served; 
     and
       ``(ii) the organization demonstrates to the satisfaction of 
     the Secretary that the organization is able to assume 
     financial risk for performance under the agreement (as 
     applied under paragraph (3)(B)) with respect to payments made 
     to the organization under such agreement through available 
     reserves, reinsurance, withholds, or such other means as the 
     Secretary determines appropriate.
       ``(2) Manner of payment.--Subject to paragraph (3)(B), the 
     payment under an agreement under--
       ``(A) subsection (b) shall be computed on a per-member per-
     month basis; or
       ``(B) subsection (c) may be on a per-member per-month basis 
     or such other basis as the Secretary and organization may 
     agree.
       ``(3) Application of performance standards.--
       ``(A) Specification of performance standards.--Each 
     agreement under this section with a chronic care improvement 
     organization shall specify performance standards for each of 
     the factors specified in subsection (c)(2), including 
     clinical quality and spending targets under this title, 
     against which the performance of the chronic care improvement 
     organization under the agreement is measured.
       ``(B) Adjustment of payment based on performance.--
       ``(i) In general.--Each such agreement shall provide for 
     adjustments in payment

[[Page S15445]]

     rates to an organization under the agreement insofar as the 
     Secretary determines that the organization failed to meet the 
     performance standards specified in the agreement under 
     subparagraph (A).
       ``(ii) Financial risk for performance.--In the case of an 
     agreement under subsection (b) or (c), the agreement shall 
     provide for a full recovery for any amount by which the fees 
     paid to the organization under the agreement exceed the 
     estimated savings to the programs under this title 
     attributable to implementation of such agreement.
       ``(4) Budget neutral payment condition.--Under this 
     section, the Secretary shall ensure that the aggregate sum of 
     medicare program benefit expenditures for beneficiaries 
     participating in chronic care improvement programs and funds 
     paid to chronic care improvement organizations under this 
     section, shall not exceed the medicare program benefit 
     expenditures that the Secretary estimates would have been 
     made for such targeted beneficiaries in the absence of such 
     programs.
       ``(g) Funding.--(1) Subject to paragraph (2), there are 
     appropriated to the Secretary, in appropriate part from the 
     Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund, such sums as may 
     be necessary to provide for agreements with chronic care 
     improvement programs under this section.
       ``(2) In no case shall the funding under this section 
     exceed $100,000,000 in aggregate increased expenditures under 
     this title (after taking into account any savings 
     attributable to the operation of this section) over the 3-
     fiscal-year period beginning on October 1, 2003.''.
       (b) Reports.--The Secretary shall submit to Congress 
     reports on the operation of section 1807 of the Social 
     Security Act, as added by subsection (a), as follows:
       (1) Not later than 2 years after the date of the 
     implementation of such section, the Secretary shall submit to 
     Congress an interim report on the scope of implementation of 
     the programs under subsection (b) of such section, the design 
     of the programs, and preliminary cost and quality findings 
     with respect to those programs based on the following 
     measures of the programs:
       (A) Quality improvement measures, such as adherence to 
     evidence-based guidelines and rehospitalization rates.
       (B) Beneficiary and provider satisfaction.
       (C) Health outcomes.
       (D) Financial outcomes.
       (2) Not later than 3 years and 6 months after the date of 
     the implementation of such section the Secretary shall submit 
     to Congress an update to the report required under paragraph 
     (1) on the results of such programs.
       (3) The Secretary shall submit to Congress 2 additional 
     biennial reports on the chronic care improvement programs 
     conducted under such section. The first such report shall be 
     submitted not later than 2 years after the report is 
     submitted under paragraph (2). Each such report shall include 
     information on--
       (A) the scope of implementation (in terms of both regions 
     and chronic conditions) of the chronic care improvement 
     programs;
       (B) the design of the programs; and
       (C) the improvements in health outcomes and financial 
     efficiencies that result from such implementation.

     SEC. 422. MEDICARE ADVANTAGE QUALITY IMPROVEMENT PROGRAMS.

       (a) In General.--Section 1852(e) (42 U.S.C. 1395w-22(e)) is 
     amended--
       (1) in the heading, by striking ``Assurance'' and inserting 
     ``Improvement'';
       (2) by amending paragraphs (1) through (3) to read as 
     follows:
       ``(1) In general.--Each MA organization shall have an 
     ongoing quality improvement program for the purpose of 
     improving the quality of care provided to enrollees in each 
     MA plan offered by such organization (other than an MA 
     private fee-for-service plan or an MSA plan).
       ``(2) Chronic care improvement programs.--As part of the 
     quality improvement program under paragraph (1), each MA 
     organization shall have a chronic care improvement program. 
     Each chronic care improvement program shall have a method for 
     monitoring and identifying enrollees with multiple or 
     sufficiently severe chronic conditions that meet criteria 
     established by the organization for participation under the 
     program.
       ``(3) Data.--
       ``(A) Collection, analysis, and reporting.--
       ``(i) In general.--Except as provided in clauses (ii) and 
     (iii) with respect to plans described in such clauses and 
     subject to subparagraph (B), as part of the quality 
     improvement program under paragraph (1), each MA organization 
     shall provide for the collection, analysis, and reporting of 
     data that permits the measurement of health outcomes and 
     other indices of quality.
       ``(ii) Application to ma regional plans.--The Secretary 
     shall establish as appropriate by regulation requirements for 
     the collection, analysis, and reporting of data that permits 
     the measurement of health outcomes and other indices of 
     quality for MA organizations with respect to MA regional 
     plans. Such requirements may not exceed the requirements 
     under this subparagraph with respect to MA local plans that 
     are preferred provider organization plans.
       ``(iii) Application to preferred provider organizations.--
     Clause (i) shall apply to MA organizations with respect to MA 
     local plans that are preferred provider organization plans 
     only insofar as services are furnished by providers or 
     services, physicians, and other health care practitioners and 
     suppliers that have contracts with such organization to 
     furnish services under such plans.
       ``(iv) Definition of preferred provider organization 
     plan.--In this subparagraph, the term `preferred provider 
     organization plan' means an MA plan that--

       ``(I) has a network of providers that have agreed to a 
     contractually specified reimbursement for covered benefits 
     with the organization offering the plan;
       ``(II) provides for reimbursement for all covered benefits 
     regardless of whether such benefits are provided within such 
     network of providers; and
       ``(III) is offered by an organization that is not licensed 
     or organized under State law as a health maintenance 
     organization.

       ``(B) Limitations.--
       ``(i) Types of data.--The Secretary shall not collect under 
     subparagraph (A) data on quality, outcomes, and beneficiary 
     satisfaction to facilitate consumer choice and program 
     administration other than the types of data that were 
     collected by the Secretary as of November 1, 2003.
       ``(ii) Changes in types of data.--Subject to subclause 
     (iii), the Secretary may only change the types of data that 
     are required to be submitted under subparagraph (A) after 
     submitting to Congress a report on the reasons for such 
     changes that was prepared in consultation with MA 
     organizations and private accrediting bodies.
       ``(iii) Construction.--Nothing in the subsection shall be 
     construed as restricting the ability of the Secretary to 
     carry out the duties under section 1851(d)(4)(D).'';
       (3) in paragraph (4)(B), by amending clause (i) to read as 
     follows:
       ``(i) Paragraphs (1) through (3) of this subsection 
     (relating to quality improvement programs).''; and
       (4) by striking paragraph (5).
       (b) Conforming Amendment.--Section 1852(c)(1)(I) (42 U.S.C. 
     1395w-22(c)(1)(I)) is amended to read as follows:
       ``(I) Quality improvement program.--A description of the 
     organization's quality improvement program under subsection 
     (e).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to contract years beginning on and 
     after January 1, 2006.

     SEC. 423. CHRONICALLY ILL MEDICARE BENEFICIARY RESEARCH, 
                   DATA, DEMONSTRATION STRATEGY.

       (a) Development of Plan.--Not later than 6 months after the 
     date of the enactment of this Act, the Secretary shall 
     develop a plan to improve quality of care and reduce the cost 
     of care for chronically ill medicare beneficiaries.
       (b) Plan Requirements.--The plan will utilize existing data 
     and identify data gaps, develop research initiatives, and 
     propose intervention demonstration programs to provide better 
     health care for chronically ill medicare beneficiaries. The 
     plan shall--
       (1) integrate existing data sets including, the Medicare 
     Current Beneficiary Survey (MCBS), Minimum Data Set (MDS), 
     Outcome and Assessment Information Set (OASIS), data from 
     Quality Improvement Organizations (QIO), and claims data;
       (2) identify any new data needs and a methodology to 
     address new data needs;
       (3) plan for the collection of such data in a data 
     warehouse; and
       (4) develop a research agenda using such data.
       (c) Consultation.--In developing the plan under this 
     section, the Secretary shall consult with experts in the 
     fields of care for the chronically ill (including 
     clinicians).
       (d) Implementation.--Not later than 2 years after the date 
     of the enactment of this Act, the Secretary shall implement 
     the plan developed under this section. The Secretary may 
     contract with appropriate entities to implement such plan.
       (e) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary such sums as may be 
     necessary in fiscal years 2004 and 2005 to carry out this 
     section.

                      Subtitle D--Other Provisions

     SEC. 431. IMPROVEMENTS IN NATIONAL AND LOCAL COVERAGE 
                   DETERMINATION PROCESS TO RESPOND TO CHANGES IN 
                   TECHNOLOGY.

       (a) National and Local Coverage Determination Process.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y), as amended 
     by sections 948 and 950, is amended--
       (A) in the third sentence of subsection (a), by inserting 
     ``consistent with subsection (l)'' after ``the Secretary 
     shall ensure''; and
       (B) by adding at the end the following new subsection:
       ``(l) National and Local Coverage Determination Process.--
       ``(1) Factors and evidence used in making national coverage 
     determinations.--The Secretary shall make available to the 
     public the factors considered in making national coverage 
     determinations of whether an item or service is reasonable 
     and necessary. The Secretary shall develop guidance documents 
     to carry out this paragraph in a manner similar to the 
     development of guidance documents under section 701(h) of the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 371(h)).
       ``(2) Timeframe for decisions on requests for national 
     coverage determinations.--In

[[Page S15446]]

     the case of a request for a national coverage determination 
     that--
       ``(A) does not require a technology assessment from an 
     outside entity or deliberation from the Medicare Coverage 
     Advisory Committee, the decision on the request shall be made 
     not later than 6 months after the date of the request; or
       ``(B) requires such an assessment or deliberation and in 
     which a clinical trial is not requested, the decision on the 
     request shall be made not later than 9 months after the date 
     of the request.
       ``(3) Process for public comment in national coverage 
     determinations.--
       ``(A) Period for proposed decision.--Not later than the end 
     of the 6-month period (or 9-month period for requests 
     described in paragraph (2)(B)) that begins on the date a 
     request for a national coverage determination is made, the 
     Secretary shall make a draft of proposed decision on the 
     request available to the public through the Internet website 
     of the Centers for Medicare & Medicaid Services or other 
     appropriate means.
       ``(B) 30-day period for public comment.--Beginning on the 
     date the Secretary makes a draft of the proposed decision 
     available under subparagraph (A), the Secretary shall provide 
     a 30-day period for public comment on such draft.
       ``(C) 60-day period for final decision.--Not later than 60 
     days after the conclusion of the 30-day period referred to 
     under subparagraph (B), the Secretary shall--
       ``(i) make a final decision on the request;
       ``(ii) include in such final decision summaries of the 
     public comments received and responses to such comments;
       ``(iii) make available to the public the clinical evidence 
     and other data used in making such a decision when the 
     decision differs from the recommendations of the Medicare 
     Coverage Advisory Committee; and
       ``(iv) in the case of a final decision under clause (i) to 
     grant the request for the national coverage determination, 
     the Secretary shall assign a temporary or permanent code 
     (whether existing or unclassified) and implement the coding 
     change.
       ``(4) Consultation with outside experts in certain national 
     coverage determinations.--With respect to a request for a 
     national coverage determination for which there is not a 
     review by the Medicare Coverage Advisory Committee, the 
     Secretary shall consult with appropriate outside clinical 
     experts.
       ``(5) Local coverage determination process.--
       ``(A) Plan to promote consistency of coverage 
     determinations.--The Secretary shall develop a plan to 
     evaluate new local coverage determinations to determine which 
     determinations should be adopted nationally and to what 
     extent greater consistency can be achieved among local 
     coverage determinations.
       ``(B) Consultation.--The Secretary shall require the fiscal 
     intermediaries or carriers providing services within the same 
     area to consult on all new local coverage determinations 
     within the area.
       ``(C) Dissemination of information.--The Secretary should 
     serve as a center to disseminate information on local 
     coverage determinations among fiscal intermediaries and 
     carriers to reduce duplication of effort.
       ``(6) National and local coverage determination defined.--
     For purposes of this subsection--
       ``(A) National coverage determination.--The term `national 
     coverage determination' means a determination by the 
     Secretary with respect to whether or not a particular item or 
     service is covered nationally under this title.
       ``(B) Local coverage determination.--The term `local 
     coverage determination' has the meaning given that in section 
     1869(f)(2)(B).''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to national coverage determinations as of January 
     1, 2004, and section 1862(l)(5) of the Social Security Act, 
     as added by such paragraph, shall apply to local coverage 
     determinations made on or after July 1, 2004.
       (b) Medicare Coverage of Routine Costs Associated With 
     Certain Clinical Trials of Category A Devices.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y), as amended 
     by subsection (a), is amended by adding at the end the 
     following new subsection:
       ``(m) Coverage of Routine Costs Associated With Certain 
     Clinical Trials of Category A Devices.--
       ``(1) In general.--In the case of an individual entitled to 
     benefits under part A, or enrolled under part B, or both who 
     participates in a category A clinical trial, the Secretary 
     shall not exclude under subsection (a)(1) payment for 
     coverage of routine costs of care (as defined by the 
     Secretary) furnished to such individual in the trial.
       ``(2) Category a clinical trial.--For purposes of paragraph 
     (1), a `category A clinical trial' means a trial of a medical 
     device if--
       ``(A) the trial is of an experimental/investigational 
     (category A) medical device (as defined in regulations under 
     section 405.201(b) of title 42, Code of Federal Regulations 
     (as in effect as of September 1, 2003));
       ``(B) the trial meets criteria established by the Secretary 
     to ensure that the trial conforms to appropriate scientific 
     and ethical standards; and
       ``(C) in the case of a trial initiated before January 1, 
     2010, the device involved in the trial has been determined by 
     the Secretary to be intended for use in the diagnosis, 
     monitoring, or treatment of an immediately life-threatening 
     disease or condition.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to routine costs incurred on and after January 1, 
     2005, and, as of such date, section 411.15(o) of title 42, 
     Code of Federal Regulations, is superseded to the extent 
     inconsistent with section 1862(m) of the Social Security Act, 
     as added by such paragraph.
       (3) Rule of construction.--Nothing in the amendment made by 
     paragraph (1) shall be construed as applying to, or 
     affecting, coverage or payment for a nonexperimental/
     investigational (category B) device.
       (c) Issuance of Temporary National Codes.--Not later than 
     July 1, 2004, the Secretary shall implement revised 
     procedures for the issuance of temporary national HCPCS codes 
     under part B of title XVIII of the Social Security Act.

     SEC. 432. EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN 
                   PATHOLOGY SERVICES UNDER MEDICARE.

       Section 542(c) of BIPA (114 Stat. 2763A-551) is amended by 
     inserting ``, and for services furnished during 2005 and 
     2006'' before the period at the end.

     SEC. 433. PAYMENT FOR PANCREATIC ISLET CELL INVESTIGATIONAL 
                   TRANSPLANTS FOR MEDICARE BENEFICIARIES IN 
                   CLINICAL TRIALS.

       (a) Clinical Trial.--
       (1) In general.--The Secretary, acting through the National 
     Institute of Diabetes and Digestive and Kidney Disorders, 
     shall conduct a clinical investigation of pancreatic islet 
     cell transplantation which includes medicare beneficiaries.
       (2) Authorization of appropriations.--There are authorized 
     to be appropriated to the Secretary such sums as may be 
     necessary to conduct the clinical investigation under 
     paragraph (1).
       (b) Medicare Payment.--Not earlier than October 1, 2004, 
     the Secretary shall pay for the routine costs as well as 
     transplantation and appropriate related items and services 
     (as described in subsection (c)) in the case of medicare 
     beneficiaries who are participating in a clinical trial 
     described in subsection (a) as if such transplantation were 
     covered under title XVIII of such Act and as would be paid 
     under part A or part B of such title for such beneficiary.
       (c) Scope of Payment.--For purposes of subsection (b):
       (1) The term ``routine costs'' means reasonable and 
     necessary routine patient care costs (as defined in the 
     Centers for Medicare & Medicaid Services Coverage Issues 
     Manual, section 30-1), including immunosuppressive drugs and 
     other followup care.
       (2) The term ``transplantation and appropriate related 
     items and services'' means items and services related to the 
     acquisition and delivery of the pancreatic islet cell 
     transplantation, notwithstanding any national noncoverage 
     determination contained in the Centers for Medicare & 
     Medicaid Services Coverage Issues Manual.
       (3) The term ``medicare beneficiary'' means an individual 
     who is entitled to benefits under part A of title XVIII of 
     the Social Security Act, or enrolled under part B of such 
     title, or both.
       (d) Construction.--The provisions of this section shall not 
     be construed--
       (1) to permit payment for partial pancreatic tissue or 
     islet cell transplantation under title XVIII of the Social 
     Security Act other than payment as described in subsection 
     (b); or
       (2) as authorizing or requiring coverage or payment 
     conveying--
       (A) benefits under part A of such title to a beneficiary 
     not entitled to such part A; or
       (B) benefits under part B of such title to a beneficiary 
     not enrolled in such part B.

     SEC. 434. RESTORATION OF MEDICARE TRUST FUNDS.

       (a) Definitions.--In this section:
       (1) Clerical error.--The term ``clerical error'' means a 
     failure that occurs on or after April 15, 2001, to have 
     transferred the correct amount from the general fund of the 
     Treasury to a Trust Fund.
       (2) Trust fund.--The term ``Trust Fund'' means the Federal 
     Hospital Insurance Trust Fund established under section 1817 
     of the Social Security Act (42 U.S.C. 1395i) and the Federal 
     Supplementary Medical Insurance Trust Fund established under 
     section 1841 of such Act (42 U.S.C. 1395t).
       (b) Correction of Trust Fund Holdings.--
       (1) In general.--The Secretary of the Treasury shall take 
     the actions described in paragraph (2) with respect to the 
     Trust Fund with the goal being that, after such actions are 
     taken, the holdings of the Trust Fund will replicate, to the 
     extent practicable in the judgment of the Secretary of the 
     Treasury, in consultation with the Secretary, the holdings 
     that would have been held by the Trust Fund if the clerical 
     error involved had not occurred.
       (2) Obligations issued and redeemed.--The Secretary of the 
     Treasury shall--
       (A) issue to the Trust Fund obligations under chapter 31 of 
     title 31, United States Code, that bear issue dates, interest 
     rates, and maturity dates that are the same as those for the 
     obligations that--
       (i) would have been issued to the Trust Fund if the 
     clerical error involved had not occurred; or
       (ii) were issued to the Trust Fund and were redeemed by 
     reason of the clerical error involved; and
       (B) redeem from the Trust Fund obligations that would have 
     been redeemed from

[[Page S15447]]

     the Trust Fund if the clerical error involved had not 
     occurred.
       (c) Appropriation.--There is appropriated to the Trust 
     Fund, out of any money in the Treasury not otherwise 
     appropriated, an amount determined by the Secretary of the 
     Treasury, in consultation with the Secretary, to be equal to 
     the interest income lost by the Trust Fund through the date 
     on which the appropriation is being made as a result of the 
     clerical error involved.
       (d) Congressional Notice.--In the case of a clerical error 
     that occurs after April 15, 2001, the Secretary of the 
     Treasury, before taking action to correct the error under 
     this section, shall notify the appropriate committees of 
     Congress concerning such error and the actions to be taken 
     under this section in response to such error.
       (e) Deadline.--With respect to the clerical error that 
     occurred on April 15, 2001, not later than 120 days after the 
     date of the enactment of this Act--
       (1) the Secretary of the Treasury shall take the actions 
     under subsection (b)(1); and
       (2) the appropriation under subsection (c) shall be made.

     SEC. 435. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY 
                   COMMISSION (MEDPAC).

       (a) Examination of Budget Consequences.--Section 1805(b) 
     (42 U.S.C. 1395b-6(b)) is amended by adding at the end the 
     following new paragraph:
       ``(8) Examination of budget consequences.--Before making 
     any recommendations, the Commission shall examine the budget 
     consequences of such recommendations, directly or through 
     consultation with appropriate expert entities.''.
       (b) Consideration of Efficient Provision of Services.--
     Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is 
     amended by inserting ``the efficient provision of'' after 
     ``expenditures for''.
       (c) Application of Disclosure Requirements.--
       (1) In general.--Section 1805(c)(2)(D) (42 U.S.C. 1395b-
     6(c)(2)(D)) is amended by adding at the end the following: 
     ``Members of the Commission shall be treated as employees of 
     Congress for purposes of applying title I of the Ethics in 
     Government Act of 1978 (Public Law 95-521).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on January 1, 2004.
       (d) Additional Reports.--
       (1) Data needs and sources.--The Medicare Payment Advisory 
     Commission shall conduct a study, and submit a report to 
     Congress by not later than June 1, 2004, on the need for 
     current data, and sources of current data available, to 
     determine the solvency and financial circumstances of 
     hospitals and other medicare providers of services.
       (2) Use of tax-related returns.--Using return information 
     provided under Form 990 of the Internal Revenue Service, the 
     Commission shall submit to Congress, by not later than June 
     1, 2004, a report on the following:
       (A) Investments, endowments, and fundraising of hospitals 
     participating under the medicare program and related 
     foundations.
       (B) Access to capital financing for private and for not-
     for-profit hospitals.
       (e) Representation of Experts in Prescription Drugs.--
       (1) In general.--Section 1805(c)(2)(B) (42 U.S.C. 1395b-
     6(c)(2)(B)) is amended by inserting ``experts in the area of 
     pharmaco-economics or prescription drug benefit programs,'' 
     after ``other health professionals,''.
       (2) Appointment.--The Comptroller General of the United 
     States shall ensure that the membership of the Commission 
     complies with the amendment made by paragraph (1) with 
     respect to appointments made on or after the date of the 
     enactment of this Act.

     SEC. 436. TECHNICAL AMENDMENTS.

       (a) Part A.--(1) Section 1814(a) (42 U.S.C. 1395f(a)) is 
     amended--
       (A) by striking the seventh sentence, as added by section 
     322(a)(1) of BIPA (114 Stat. 2763A-501); and
       (B) in paragraph (7)(A)--
       (i) in clause (i), by inserting before the comma at the end 
     the following: ``based on the physician's or medical 
     director's clinical judgment regarding the normal course of 
     the individual's illness''; and
       (ii) in clause (ii), by inserting before the semicolon at 
     the end the following: ``based on such clinical judgment''.
       (2) Section 1814(b) (42 U.S.C. 1395f(b)), in the matter 
     preceding paragraph (1), is amended by inserting a comma 
     after ``1813''.
       (3) Section 1815(e)(1)(B) (42 U.S.C. 1395g(e)(1)(B)), in 
     the matter preceding clause (i), is amended by striking ``of 
     hospital'' and inserting ``of a hospital''.
       (4) Section 1816(c)(2)(B)(ii) (42 U.S.C. 
     1395h(c)(2)(B)(ii)) is amended--
       (A) by striking ``and'' at the end of subclause (III); and
       (B) by striking the period at the end of subclause (IV) and 
     inserting ``, and''.
       (5) Section 1817(k)(3)(A) (42 U.S.C. 1395i(k)(3)(A)) is 
     amended--
       (A) in clause (i)(I), by striking the comma at the end and 
     inserting a semicolon; and
       (B) in clause (ii), by striking ``the Medicare and medicaid 
     programs'' and inserting ``the programs under this title and 
     title XIX''.
       (6) Section 1817(k)(6)(B) (42 U.S.C. 1395i(k)(6)(B)) is 
     amended by striking ``Medicare program under title XVIII'' 
     and inserting ``program under this title''.
       (7) Section 1818 (42 U.S.C. 1395i-2) is amended--
       (A) in subsection (d)(6)(A) is amended by inserting ``of 
     such Code'' after ``3111(b)''; and
       (B) in subsection (g)(2)(B) is amended by striking 
     ``subsection (b).'' and inserting ``subsection (b)''.
       (8) Section 1819 (42 U.S.C. 1395i-3) is amended--
       (A) in subsection (b)(4)(C)(i), by striking ``at least at 
     least'' and inserting ``at least'';
       (B) in subsection (d)(1)(A), by striking ``physical 
     mental'' and inserting ``physical, mental''; and
       (C) in subsection (f)(2)(B)(iii), by moving the last 
     sentence 2 ems to the left.
       (9) Section 1886(b)(3)(I)(i)(I) (42 U.S.C. 
     1395ww(b)(3)(I)(i)(I)) is amended by striking ``the the'' and 
     inserting ``the''.
       (10) The heading of subsection (mm) of section 1861 (42 
     U.S.C. 1395x) is amended to read as follows:

    ``Critical Access Hospital; Critical Access Hospital Services''.

       (11) Paragraphs (1) and (2) of section 1861(tt) (42 U.S.C. 
     1395x(tt)) are each amended by striking ``rural primary 
     care'' and inserting ``critical access''.
       (12) Section 1865(b)(3)(B) (42 U.S.C. 1395bb(b)(3)(B)) is 
     amended by striking ``section 1819 and 1861(j)'' and 
     inserting ``sections 1819 and 1861(j)''.
       (13) Section 1866(b)(2) (42 U.S.C. 1395cc(b)(2)) is amended 
     by moving subparagraph (D) 2 ems to the left.
       (14) Section 1867 (42 U.S.C. 1395dd) is amended--
       (A) in the matter following clause (ii) of subsection 
     (d)(1)(B), by striking ``is is'' and inserting ``is'';
       (B) in subsection (e)(1)(B), by striking ``a pregnant 
     women'' and inserting ``a pregnant woman''; and
       (C) in subsection (e)(2), by striking ``means hospital'' 
     and inserting ``means a hospital''.
       (15) Section 1886(g)(3)(B) (42 U.S.C. 1395ww(g)(3)(B)) is 
     amended by striking ``(as defined in subsection 
     (d)(5)(D)(iii)'' and inserting ``(as defined in subsection 
     (d)(5)(D)(iii))''.
       (b) Part B.--(1) Section 1833(h)(5)(D) (42 U.S.C. 
     1395l(h)(5)(D)) is amended by striking ``clinic,,'' and 
     inserting ``clinic,''.
       (2) Section 1833(t)(3)(C)(ii) (42 U.S.C. 
     1395l(t)(3)(C)(ii)) is amended by striking ``clause (iii)'' 
     and inserting ``clause (iv)''.
       (3) Section 1861(v)(1)(S)(ii)(III) (42 U.S.C. 
     1395x(v)(1)(S)(ii)(III)) is amended by striking ``(as defined 
     in section 1886(d)(5)(D)(iii)'' and inserting ``(as defined 
     in section 1886(d)(5)(D)(iii))''.
       (4) Section 1834(b)(4)(D)(iv) (42 U.S.C. 
     1395m(b)(4)(D)(iv)) is amended by striking ``clauses (vi)'' 
     and inserting ``clause (vi)''.
       (5) Section 1834(m)(4)(C)(ii)(III) (42 U.S.C. 
     1395m(m)(4)(C)(ii)(III)) is amended by striking 
     ``1861(aa)(s)'' and inserting ``1861(aa)(2)''.
       (6) Section 1838(a)(1) (42 U.S.C. 1395q(a)(1)) is amended 
     by inserting a comma after ``1966''.
       (7) The second sentence of section 1839(a)(4) (42 U.S.C. 
     1395r(a)(4)) is amended by striking ``which will'' and 
     inserting ``will''.
       (8) Section 1842(c)(2)(B)(ii) (42 U.S.C. 
     1395u(c)(2)(B)(ii)) is amended--
       (A) by striking ``and'' at the end of subclause (III); and
       (B) by striking the period at the end of subclause (IV) and 
     inserting ``, and''.
       (9) Section 1842(i)(2) (42 U.S.C. 1395u(i)(2)) is amended 
     by striking ``services, a physician'' and inserting 
     ``services, to a physician''.
       (10) Section 1848(i)(3)(A) (42 U.S.C. 1395w-4(i)(3)(A)) is 
     amended by striking ``a comparable services'' and inserting 
     ``comparable services''.
       (11) Section 1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)) 
     is amended by striking ``; and but'' and inserting ``, but''.
       (12) Section 1861(aa)(1)(B) (42 U.S.C. 1395x(aa)(1)(B)) is 
     amended by striking ``,,'' and inserting a comma.
       (13) Section 128(b)(2) of BIPA (114 Stat. 2763A-480) is 
     amended by striking ``Not later that'' and inserting ``Not 
     later than'' each place it appears.
       (c) Parts A and B.--(1) Section 1812(a)(3) (42 U.S.C. 
     1395d(a)(3)) is amended--
       (A) by striking ``for individuals not'' and inserting ``in 
     the case of individuals not''; and
       (B) by striking ``for individuals so'' and inserting ``in 
     the case of individuals so''.
       (2)(A) Section 1814(a) (42 U.S.C. 1395f(a)) is amended in 
     the sixth sentence by striking ``leave home,'' and inserting 
     ``leave home and''.
       (B) Section 1835(a) (42 U.S.C. 1395n(a)) is amended in the 
     seventh sentence by striking ``leave home,'' and inserting 
     ``leave home and''.
       (3) Section 1891(d)(1) (42 U.S.C. 1395bbb(d)(1)) is amended 
     by striking ``subsection (c)(2)(C)(I)'' and inserting 
     ``subsection (c)(2)(C)(i)(I)''.
       (4) Section 1861(v) (42 U.S.C. 1395x(v)) is amended by 
     moving paragraph (8) (including clauses (i) through (v) of 
     such paragraph) 2 ems to the left.
       (5) Section 1866B(b)(7)(D) (42 U.S.C. 1395cc-2(b)(7)(D)) is 
     amended by striking ``(c)(2)(A)(ii)'' and inserting 
     ``(c)(2)(B)''.
       (6) Section 1886(h)(3)(D)(ii)(III) (42 U.S.C. 
     1395ww(h)(3)(D)(ii)(III)) is amended by striking ``and'' 
     after the comma at the end.
       (7) Section 1893(a) (42 U.S.C. 1395ddd(a)) is amended by 
     striking ``Medicare program'' and inserting ``medicare 
     program''.
       (8) Section 1896(b)(4) (42 U.S.C. 1395ggg(b)(4)) is amended 
     by striking ``701(f)'' and inserting ``712(f)''.
       (d) Part C.--(1) Section 1853 (42 U.S.C. 1395w-23), as 
     amended by section 307 of BIPA (114 Stat. 2763A-558), is 
     amended--
       (A) in subsection (a)(3)(C)(ii), by striking ``clause 
     (iii)'' and inserting ``clause (iv)'';

[[Page S15448]]

       (B) in subsection (a)(3)(C), by redesignating the clause 
     (iii) added by such section 307 as clause (iv); and
       (C) in subsection (c)(5), by striking ``(a)(3)(C)(iii)'' 
     and inserting ``(a)(3)(C)(iv)''.
       (2) Section 1876 (42 U.S.C. 1395mm) is amended--
       (A) in subsection (c)(2)(B), by striking ``signifcant'' and 
     inserting ``significant''; and
       (B) in subsection (j)(2), by striking ``this setion'' and 
     inserting ``this section''.
       (e) Medigap.--Section 1882 (42 U.S.C. 1395ss) is amended--
       (1) in subsection (d)(3)(A)(i)(II), by striking ``plan a 
     medicare supplemental policy'' and inserting ``plan, a 
     medicare supplemental policy'';
       (2) in subsection (d)(3)(B)(iii)(II), by striking ``to the 
     best of the issuer or seller's knowledge'' and inserting ``to 
     the best of the issuer's or seller's knowledge'';
       (3) in subsection (g)(2)(A), by striking ``medicare 
     supplement policies'' and inserting ``medicare supplemental 
     policies'';
       (4) in subsection (p)(2)(B), by striking ``, and'' and 
     inserting ``; and''; and
       (5) in subsection (s)(3)(A)(iii), by striking ``pre-
     existing'' and inserting ``preexisting''.

    TITLE V--ADMINISTRATIVE IMPROVEMENTS, REGULATORY REDUCTION, AND 
                           CONTRACTING REFORM

     SEC. 500. ADMINISTRATIVE IMPROVEMENTS WITHIN THE CENTERS FOR 
                   MEDICARE & MEDICAID SERVICES (CMS).

       (a) Coordinated Administration of Medicare Prescription 
     Drug and Medicare Advantage Programs.--Title XVIII (42 U.S.C. 
     1395 et seq.), as amended by section 421, is amended by 
     inserting after 1807 the following new section:


                ``provisions relating to administration

       ``Sec. 1808. (a) Coordinated Administration of Medicare 
     Prescription Drug and Medicare Advantage Programs.--
       ``(1) In general.--There is within the Centers for Medicare 
     & Medicaid Services a center to carry out the duties 
     described in paragraph (3).
       ``(2) Director.--Such center shall be headed by a director 
     who shall report directly to the Administrator of the Centers 
     for Medicare & Medicaid Services.
       ``(3) Duties.--The duties described in this paragraph are 
     the following:
       ``(A) The administration of parts C and D.
       ``(B) The provision of notice and information under section 
     1804.
       ``(C) Such other duties as the Secretary may specify.
       ``(4) Deadline.--The Secretary shall ensure that the center 
     is carrying out the duties described in paragraph (3) by not 
     later than January 1, 2008.''.
       (b) Management Staff for the Centers for Medicare & 
     Medicaid Services.--Such section is further amended by adding 
     at the end the following new subsection:
       ``(b) Employment of Management Staff.--
       ``(1) In general.--The Secretary may employ, within the 
     Centers for Medicare & Medicaid Services, such individuals as 
     management staff as the Secretary determines to be 
     appropriate. With respect to the administration of parts C 
     and D, such individuals shall include individuals with 
     private sector expertise in negotiations with health benefits 
     plans.
       ``(2) Eligibility.--To be eligible for employment under 
     paragraph (1) an individual shall be required to have 
     demonstrated, by their education and experience (either in 
     the public or private sector), superior expertise in at least 
     one of the following areas:
       ``(A) The review, negotiation, and administration of health 
     care contracts.
       ``(B) The design of health care benefit plans.
       ``(C) Actuarial sciences.
       ``(D) Compliance with health plan contracts.
       ``(E) Consumer education and decision making.
       ``(F) Any other area specified by the Secretary that 
     requires specialized management or other expertise.
       ``(3) Rates of payment.--
       ``(A) Performance-related pay.--Subject to subparagraph 
     (B), the Secretary shall establish the rate of pay for an 
     individual employed under paragraph (1). Such rate shall take 
     into account expertise, experience, and performance.
       ``(B) Limitation.--In no case may the rate of compensation 
     determined under subparagraph (A) exceed the highest rate of 
     basic pay for the Senior Executive Service under section 
     5382(b) of title 5, United States Code.''.
       (c) Requirement for Dedicated Actuary for Private Health 
     Plans.--Section 1117(b) (42 U.S.C. 1317(b)) is amended by 
     adding at the end the following new paragraph:
       ``(3) In the office of the Chief Actuary there shall be an 
     actuary whose duties relate exclusively to the programs under 
     parts C and D of title XVIII and related provisions of such 
     title.''.
       (d) Increase in Grade to Executive Level III for the 
     Administrator of the Centers for Medicare & Medicaid 
     Services.--
       (1) In general.--Section 5314 of title 5, United States 
     Code, is amended by adding at the end the following:
       ``Administrator of the Centers for Medicare & Medicaid 
     Services.''.
       (2) Conforming amendment.--Section 5315 of such title is 
     amended by striking ``Administrator of the Health Care 
     Financing Administration.''.
       (3) Effective date.--The amendments made by this subsection 
     take effect on January 1, 2004.
       (e) Conforming Amendments Relating to Health Care Financing 
     Administration.--
       (1) Amendments to the social security act.--The Social 
     Security Act is amended--
       (A) in section 1117 (42 U.S.C. 1317)--
       (i) in the heading to read as follows:


``appointment of the administrator and chief actuary of the centers for 
                    medicare & medicaid services'';

       (ii) in subsection (a), by striking ``Health Care Financing 
     Administration'' and inserting ``Centers for Medicare & 
     Medicaid Services''; and
       (iii) in subsection (b)(1)--

       (I) by striking ``Health Care Financing Administration'' 
     and inserting ``Centers for Medicare & Medicaid Services''; 
     and
       (II) by striking ``Administration'' and inserting 
     ``Centers'';

       (B) in section 1140(a) (42 U.S.C. 1320b-10(a))--
       (i) in paragraph (1), by striking ``Health Care Financing 
     Administration'' both places it appears in the

     matter following subparagraph (B) and inserting ``Centers for 
     Medicare & Medicaid Services'';
       (ii) in paragraph (1)(A)--

       (I) by striking ``Health Care Financing Administration'' 
     and inserting ``Centers for Medicare & Medicaid Services''; 
     and
       (II) by striking ``HCFA'' and inserting ``CMS''; and

       (iii) in paragraph (1)(B), by striking ``Health Care 
     Financing Administration'' both places it appears and 
     inserting ``Centers for Medicare & Medicaid Services'';
       (C) in section 1142(b)(3) (42 U.S.C. 1320b-12(b)(3)), by 
     striking ``Health Care Financing Administration'' and 
     inserting ``Centers for Medicare & Medicaid Services'';
       (D) in section 1817(b) (42 U.S.C. 1395i(b))--
       (i) by striking ``Health Care Financing Administration'', 
     both in the fifth sentence of the matter preceding paragraph 
     (1) and in the second sentence of the

     matter following paragraph (4), and inserting ``Centers for 
     Medicare & Medicaid Services''; and
       (ii) by striking ``Chief Actuarial Officer'' in the second 
     sentence of the

     matter following paragraph (4) and inserting ``Chief 
     Actuary'';
       (E) in section 1841(b) (42 U.S.C. 1395t(b))--
       (i) by striking ``Health Care Financing Administration'', 
     both in the fifth sentence of the matter preceding paragraph 
     (1) and in the second sentence of the

     matter following paragraph (4), and inserting ``Centers for 
     Medicare & Medicaid Services''; and
       (ii) by striking ``Chief Actuarial Officer'' in the second 
     sentence of the

     matter following paragraph (4) and inserting ``Chief 
     Actuary'';
       (F) in section 1852(a)(5) (42 U.S.C. 1395w-22(a)(5)), by 
     striking ``Health Care Financing Administration'' in the

     matter following subparagraph (B) and inserting ``Centers for 
     Medicare & Medicaid Services'';
       (G) in section 1853 (42 U.S.C. 1395w-23)--
       (i) in subsection (b)(4), by striking ``Health Care 
     Financing Administration'' in the first sentence and 
     inserting ``Centers for Medicare & Medicaid Services''; and
       (ii) in subsection (c)(7), by striking ``Health Care 
     Financing Administration'' in the last sentence and inserting 
     ``Centers for Medicare & Medicaid Services'';
       (H) in section 1854(a)(5)(A) (42 U.S.C. 1395w-24(a)(5)(A)), 
     by striking ``Health Care Financing Administration''and 
     inserting ``Centers for Medicare & Medicaid Services'';
       (I) in section 1857(d)(4)(A)(ii) (42 U.S.C. 1395w-
     27(d)(4)(A)(ii)), by striking ``Health Care Financing 
     Administration'' and inserting ``Secretary'';
       (J) in section 1862(b)(5)(A)(ii) (42 U.S.C. 
     1395y(b)(5)(A)(ii)), by striking ``Health Care Financing 
     Administration'' and inserting ``Centers for Medicare & 
     Medicaid Services'';
       (K) in section 1927(e)(4) (42 U.S.C. 1396r-8(e)(4)), by 
     striking ``HCFA'' and inserting ``The Secretary'';
       (L) in section 1927(f)(2) (42 U.S.C. 1396r-8(f)(2)), by 
     striking ``HCFA'' and inserting ``The Secretary''; and
       (M) in section 2104(g)(3) (42 U.S.C. 1397dd(g)(3)) by 
     inserting ``or CMS Form 64 or CMS Form 21, as the case may 
     be,'' after ``HCFA Form 64 or HCFA Form 21''
       (2) Amendments to the public health service act.--The 
     Public Health Service Act is amended--
       (A) in section 501(d)(18) (42 U.S.C. 290aa(d)(18)), by 
     striking ``Health Care Financing Administration'' and 
     inserting ``Centers for Medicare & Medicaid Services'';
       (B) in section 507(b)(6) (42 U.S.C. 290bb(b)(6)), by 
     striking ``Health Care Financing Administration'' and 
     inserting ``Centers for Medicare & Medicaid Services'';
       (C) in section 916 (42 U.S.C. 299b-5)--
       (i) in subsection (b)(2), by striking ``Health Care 
     Financing Administration'' and inserting ``Centers for 
     Medicare & Medicaid Services''; and
       (ii) in subsection (c)(2), by striking ``Health Care 
     Financing Administration'' and inserting ``Centers for 
     Medicare & Medicaid Services'';
       (D) in section 921(c)(3)(A) (42 U.S.C. 299c(c)(3)(A)), by 
     striking ``Health Care Financing Administration'' and 
     inserting ``Centers for Medicare & Medicaid Services'';
       (E) in section 1318(a)(2) (42 U.S.C. 300e-17(a)(2)), by 
     striking ``Health Care Financing

[[Page S15449]]

     Administration'' and inserting ``Centers for Medicare & 
     Medicaid Services'';
       (F) in section 2102(a)(7) (42 U.S.C. 300aa-2(a)(7)), by 
     striking ``Health Care Financing Administration'' and 
     inserting ``Centers for Medicare & Medicaid Services''; and
       (G) in section 2675(a) (42 U.S.C. 300ff-75(a)), by striking 
     ``Health Care Financing Administration'' in the first 
     sentence and inserting ``Centers for Medicare & Medicaid 
     Services''.
       (3) Amendments to the internal revenue code of 1986.--
     Section 6103(l)(12) of the Internal Revenue Code of 1986 is 
     amended--
       (A) in subparagraph (B), by striking ``Health Care 
     Financing Administration'' in the matter preceding clause (i) 
     and inserting ``Centers for Medicare & Medicaid Services''; 
     and
       (B) in subparagraph (C)--
       (i) by striking ``health care financing administration'' in 
     the heading and inserting ``centers for medicare & medicaid 
     services''; and
       (ii) by striking ``Health Care Financing Administration'' 
     in the matter preceding clause (i) and inserting ``Centers 
     for Medicare & Medicaid Services''.
       (4) Amendments to title 10, united states code.--Title 10, 
     United States Code, is amended--
       (A) in section 1086(d)(4), by striking ``administrator of 
     the Health Care Financing Administration'' in the last 
     sentence and inserting ``Administrator of the Centers for 
     Medicare & Medicaid Services''; and
       (B) in section 1095(k)(2), by striking ``Health Care 
     Financing Administration'' in the second sentence and 
     inserting ``Centers for Medicare & Medicaid Services''.
       (5) Amendments to the alzheimer's disease and related 
     dementias services research act of 1992.--The Alzheimer's 
     Disease and Related Dementias Research Act of 1992 (42 U.S.C. 
     11271 et seq.) is amended--
       (A) in the heading of subpart 3 of part D to read as 
     follows:

 ``Subpart 3--Responsibilities of the Centers for Medicare & Medicaid 
                              Services'';

       (B) in section 937 (42 U.S.C. 11271)--
       (i) in subsection (a), by striking ``National Health Care 
     Financing Administration'' and inserting ``Centers for 
     Medicare & Medicaid Services'';
       (ii) in subsection (b)(1), by striking ``Health Care 
     Financing Administration'' and inserting ``Centers for 
     Medicare & Medicaid Services'';
       (iii) in subsection (b)(2), by striking ``Health Care 
     Financing Administration'' and inserting ``Centers for 
     Medicare & Medicaid Services''; and
       (iv) in subsection (c), by striking ``Health Care Financing 
     Administration'' and inserting ``Centers for Medicare & 
     Medicaid Services''; and
       (C) in section 938 (42 U.S.C. 11272), by striking ``Health 
     Care Financing Administration'' and inserting ``Centers for 
     Medicare & Medicaid Services''.
       (6) Miscellaneous amendments.--
       (A) Rehabilitation act of 1973.--Section 202(b)(8) of the 
     Rehabilitation Act of 1973 (29 U.S.C. 762(b)(8)) is amended 
     by striking ``Health Care Financing Administration'' and 
     inserting ``Centers for Medicare & Medicaid Services''.
       (B) Indian health care improvement act.--Section 405(d)(1) 
     of the Indian Health Care Improvement Act (25 U.S.C. 
     1645(d)(1)) is amended by striking ``Health Care Financing 
     Administration'' in the matter preceding subparagraph (A) and 
     inserting ``Centers for Medicare & Medicaid Services''.
       (C) Individuals with disabilities education act.--Section 
     644(b)(5) of the Individuals with Disabilities Education Act 
     (20 U.S.C. 1444(b)(5)) is amended by striking ``Health Care 
     Financing Administration'' and inserting ``Centers for 
     Medicare & Medicaid Services''.
       (D) The home health care and alzheimer's disease amendments 
     of 1990.--Section 302(a)(9) of the Home Health Care and 
     Alzheimer's Disease Amendments of 1990 (42 U.S.C. 242q-
     1(a)(9)) is amended by striking ``Health Care Financing 
     Administration'' and inserting ``Centers for Medicare & 
     Medicaid Services''.
       (E) The children's health act of 2000.--Section 2503(a) of 
     the Children's Health Act of 2000 (42 U.S.C. 247b-3a(a)) is 
     amended by striking ``Health Care Financing Administration'' 
     and inserting ``Centers for Medicare & Medicaid Services''.
       (F) The national institutes of health revitalization act of 
     1993.--Section 1909 of the National Institutes of Health 
     Revitalization Act of 1993 (42 U.S.C. 299a note) is amended 
     by striking ``Health Care Financing Administration'' and 
     inserting ``Centers for Medicare & Medicaid Services''.
       (G) The omnibus budget reconciliation act of 1990.--Section 
     4359(d) of the Omnibus Budget Reconciliation Act of 1990 (42 
     U.S.C. 1395b-3(d)) is amended by striking ``Health Care 
     Financing Administration'' and inserting ``Centers for 
     Medicare & Medicaid Services''.
       (H) The medicare, medicaid, and schip benefits improvement 
     and protection act of 2000.--Section 104(d)(4) of the 
     Medicare, Medicaid, and SCHIP Benefits Improvement and 
     Protection Act of 2000 (42 U.S.C. 1395m note) is amended by 
     striking ``Health Care Financing Administration'' and 
     inserting ``Health Care''.
       (7) Additional amendment.--Section 403 of the Act entitled, 
     ``An Act to authorize certain appropriations for the 
     territories of the United States, to amend certain Acts 
     relating thereto, and for other purposes'', enacted October 
     15, 1977 (48 U.S.C. 1574-1; 48 U.S.C. 1421q-1), is amended by 
     striking ``Health Care Financing Administration'' and 
     inserting ``Centers for Medicare & Medicaid Services''.

                     Subtitle A--Regulatory Reform

     SEC. 501. CONSTRUCTION; DEFINITION OF SUPPLIER.

       (a) Construction.--Nothing in this title shall be 
     construed--
       (1) to compromise or affect existing legal remedies for 
     addressing fraud or abuse, whether it be criminal 
     prosecution, civil enforcement, or administrative remedies, 
     including under sections 3729 through 3733 of title 31, 
     United States Code (commonly known as the ``False Claims 
     Act''); or
       (2) to prevent or impede the Department of Health and Human 
     Services in any way from its ongoing efforts to eliminate 
     waste, fraud, and abuse in the medicare program.

     Furthermore, the consolidation of medicare administrative 
     contracting set forth in this division does not constitute 
     consolidation of the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund or 
     reflect any position on that issue.
       (b) Definition of Supplier.--Section 1861 (42 U.S.C. 1395x) 
     is amended by inserting after subsection (c) the following 
     new subsection:

                               ``Supplier

       ``(d) The term `supplier' means, unless the context 
     otherwise requires, a physician or other practitioner, a 
     facility, or other entity (other than a provider of services) 
     that furnishes items or services under this title.''.

     SEC. 502. ISSUANCE OF REGULATIONS.

       (a) Regular Timeline for Publication of Final Rules.--
       (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)) is 
     amended by adding at the end the following new paragraph:
       ``(3)(A) The Secretary, in consultation with the Director 
     of the Office of Management and Budget, shall establish and 
     publish a regular timeline for the publication of final 
     regulations based on the previous publication of a proposed 
     regulation or an interim final regulation.
       ``(B) Such timeline may vary among different regulations 
     based on differences in the complexity of the regulation, the 
     number and scope of comments received, and other relevant 
     factors, but shall not be longer than 3 years except under 
     exceptional circumstances. If the Secretary intends to vary 
     such timeline with respect to the publication of a final 
     regulation, the Secretary shall cause to have published in 
     the Federal Register notice of the different timeline by not 
     later than the timeline previously established with respect 
     to such regulation. Such notice shall include a brief 
     explanation of the justification for such variation.
       ``(C) In the case of interim final regulations, upon the 
     expiration of the regular timeline established under this 
     paragraph for the publication of a final regulation after 
     opportunity for public comment, the interim final regulation 
     shall not continue in effect unless the Secretary publishes 
     (at the end of the regular timeline and, if applicable, at 
     the end of each succeeding 1-year period) a notice of 
     continuation of the regulation that includes an explanation 
     of why the regular timeline (and any subsequent 1-year 
     extension) was not complied with. If such a notice is 
     published, the regular timeline (or such timeline as 
     previously extended under this paragraph) for publication of 
     the final regulation shall be treated as having been extended 
     for 1 additional year.
       ``(D) The Secretary shall annually submit to Congress a 
     report that describes the instances in which the Secretary 
     failed to publish a final regulation within the applicable 
     regular timeline under this paragraph and that provides an 
     explanation for such failures.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act. 
     The Secretary shall provide for an appropriate transition to 
     take into account the backlog of previously published interim 
     final regulations.
       (b) Limitations on New Matter in Final Regulations.--
       (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as 
     amended by subsection (a), is amended by adding at the end 
     the following new paragraph:
       ``(4) If the Secretary publishes a final regulation that 
     includes a provision that is not a logical outgrowth of a 
     previously published notice of proposed rulemaking or interim 
     final rule, such provision shall be treated as a proposed 
     regulation and shall not take effect until there is the 
     further opportunity for public comment and a publication of 
     the provision again as a final regulation.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to final regulations published on or after the 
     date of the enactment of this Act.

     SEC. 503. COMPLIANCE WITH CHANGES IN REGULATIONS AND 
                   POLICIES.

       (a) No Retroactive Application of Substantive Changes.--
       (1) In general.--Section 1871 (42 U.S.C. 1395hh), as 
     amended by section 502(a), is amended by adding at the end 
     the following new subsection:
       ``(e)(1)(A) A substantive change in regulations, manual 
     instructions, interpretative rules, statements of policy, or 
     guidelines of general applicability under this title shall

[[Page S15450]]

     not be applied (by extrapolation or otherwise) retroactively 
     to items and services furnished before the effective date of 
     the change, unless the Secretary determines that--
       ``(i) such retroactive application is necessary to comply 
     with statutory requirements; or
       ``(ii) failure to apply the change retroactively would be 
     contrary to the public interest.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to substantive changes issued on or after the 
     date of the enactment of this Act.
       (b) Timeline for Compliance With Substantive Changes After 
     Notice.--
       (1) In general.--Section 1871(e)(1), as added by subsection 
     (a), is amended by adding at the end the following:
       ``(B)(i) Except as provided in clause (ii), a substantive 
     change referred to in subparagraph (A) shall not become 
     effective before the end of the 30-day period that begins on 
     the date that the Secretary has issued or published, as the 
     case may be, the substantive change.
       ``(ii) The Secretary may provide for such a substantive 
     change to take effect on a date that precedes the end of the 
     30-day period under clause (i) if the Secretary finds that 
     waiver of such 30-day period is necessary to comply with 
     statutory requirements or that the application of such 30-day 
     period is contrary to the public interest. If the Secretary 
     provides for an earlier effective date pursuant to this 
     clause, the Secretary shall include in the issuance or 
     publication of the substantive change a finding described in 
     the first sentence, and a brief statement of the reasons for 
     such finding.
       ``(C) No action shall be taken against a provider of 
     services or supplier with respect to noncompliance with such 
     a substantive change for items and services furnished before 
     the effective date of such a change.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to compliance actions undertaken on or after the 
     date of the enactment of this Act.
       (c) Reliance on Guidance.--
       (1) In general.--Section 1871(e), as added by subsection 
     (a), is further amended by adding at the end the following 
     new paragraph:
       ``(2)(A) If--
       ``(i) a provider of services or supplier follows the 
     written guidance (which may be transmitted electronically) 
     provided by the Secretary or by a medicare contractor (as 
     defined in section 1889(g)) acting within the scope of the 
     contractor's contract authority, with respect to the 
     furnishing of items or services and submission of a claim for 
     benefits for such items or services with respect to such 
     provider or supplier;
       ``(ii) the Secretary determines that the provider of 
     services or supplier has accurately presented the 
     circumstances relating to such items, services, and claim to 
     the contractor in writing; and
       ``(iii) the guidance was in error;

     the provider of services or supplier shall not be subject to 
     any penalty or interest under this title or the provisions of 
     title XI insofar as they relate to this title (including 
     interest under a repayment plan under section 1893 or 
     otherwise) relating to the provision of such items or service 
     or such claim if the provider of services or supplier 
     reasonably relied on such guidance.
       ``(B) Subparagraph (A) shall not be construed as preventing 
     the recoupment or repayment (without any additional penalty) 
     relating to an overpayment insofar as the overpayment was 
     solely the result of a clerical or technical operational 
     error.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act 
     and shall only apply to a penalty or interest imposed with 
     respect to guidance provided on or after July 24, 2003.

     SEC. 504. REPORTS AND STUDIES RELATING TO REGULATORY REFORM.

       (a) GAO Study on Advisory Opinion Authority.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study to determine the feasibility and 
     appropriateness of establishing in the Secretary authority to 
     provide legally binding advisory opinions on appropriate 
     interpretation and application of regulations to carry out 
     the medicare program under title XVIII of the Social Security 
     Act. Such study shall examine the appropriate timeframe for 
     issuing such advisory opinions, as well as the need for 
     additional staff and funding to provide such opinions.
       (2) Report.--The Comptroller General shall submit to 
     Congress a report on the study conducted under paragraph (1) 
     by not later than 1 year after the date of the enactment of 
     this Act.
       (b) Report on Legal and Regulatory Inconsistencies.--
     Section 1871 (42 U.S.C. 1395hh), as amended by section 
     503(a)(1), is amended by adding at the end the following new 
     subsection:
       ``(f)(1) Not later than 2 years after the date of the 
     enactment of this subsection, and every 3 years thereafter, 
     the Secretary shall submit to Congress a report with respect 
     to the administration of this title and areas of 
     inconsistency or conflict among the various provisions under 
     law and regulation.
       ``(2) In preparing a report under paragraph (1), the 
     Secretary shall collect--
       ``(A) information from individuals entitled to benefits 
     under part A or enrolled under part B, or both, providers of 
     services, and suppliers and from the Medicare Beneficiary 
     Ombudsman with respect to such areas of inconsistency and 
     conflict; and
       ``(B) information from medicare contractors that tracks the 
     nature of written and telephone inquiries.
       ``(3) A report under paragraph (1) shall include a 
     description of efforts by the Secretary to reduce such 
     inconsistency or conflicts, and recommendations for 
     legislation or administrative action that the Secretary 
     determines appropriate to further reduce such inconsistency 
     or conflicts.''.

                     Subtitle B--Contracting Reform

     SEC. 511. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

       (a) Consolidation and Flexibility in Medicare 
     Administration.--
       (1) In general.--Title XVIII is amended by inserting after 
     section 1874 the following new section:


          ``contracts with medicare administrative contractors

       ``Sec. 1874A. (a) Authority.--
       ``(1) Authority to enter into contracts.--The Secretary may 
     enter into contracts with any eligible entity to serve as a 
     medicare administrative contractor with respect to the 
     performance of any or all of the functions described in 
     paragraph (4) or parts of those functions (or, to the extent 
     provided in a contract, to secure performance thereof by 
     other entities).
       ``(2) Eligibility of entities.--An entity is eligible to 
     enter into a contract with respect to the performance of a 
     particular function described in paragraph (4) only if--
       ``(A) the entity has demonstrated capability to carry out 
     such function;
       ``(B) the entity complies with such conflict of interest 
     standards as are generally applicable to Federal acquisition 
     and procurement;
       ``(C) the entity has sufficient assets to financially 
     support the performance of such function; and
       ``(D) the entity meets such other requirements as the 
     Secretary may impose.
       ``(3) Medicare administrative contractor defined.--For 
     purposes of this title and title XI--
       ``(A) In general.--The term `medicare administrative 
     contractor' means an agency, organization, or other person 
     with a contract under this section.
       ``(B) Appropriate medicare administrative contractor.--With 
     respect to the performance of a particular function in 
     relation to an individual entitled to benefits under part A 
     or enrolled under part B, or both, a specific provider of 
     services or supplier (or class of such providers of services 
     or suppliers), the `appropriate' medicare administrative 
     contractor is the medicare administrative contractor that has 
     a contract under this section with respect to the performance 
     of that function in relation to that individual, provider of 
     services or supplier or class of provider of services or 
     supplier.
       ``(4) Functions described.--The functions referred to in 
     paragraphs (1) and (2) are payment functions (including the 
     function of developing local coverage determinations, as 
     defined in section 1869(f)(2)(B)), provider services 
     functions, and functions relating to services furnished to 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, as follows:
       ``(A) Determination of payment amounts.--Determining 
     (subject to the provisions of section 1878 and to such review 
     by the Secretary as may be provided for by the contracts) the 
     amount of the payments required pursuant to this title to be 
     made to providers of services, suppliers and individuals.
       ``(B) Making payments.--Making payments described in 
     subparagraph (A) (including receipt, disbursement, and 
     accounting for funds in making such payments).
       ``(C) Beneficiary education and assistance.--Providing 
     education and outreach to individuals entitled to benefits 
     under part A or enrolled under part B, or both, and providing 
     assistance to those individuals with specific issues, 
     concerns, or problems.
       ``(D) Provider consultative services.--Providing 
     consultative services to institutions, agencies, and other 
     persons to enable them to establish and maintain fiscal 
     records necessary for purposes of this title and otherwise to 
     qualify as providers of services or suppliers.
       ``(E) Communication with providers.--Communicating to 
     providers of services and suppliers any information or 
     instructions furnished to the medicare administrative 
     contractor by the Secretary, and facilitating communication 
     between such providers and suppliers and the Secretary.
       ``(F) Provider education and technical assistance.--
     Performing the functions relating to provider education, 
     training, and technical assistance.
       ``(G) Additional functions.--Performing such other 
     functions, including (subject to paragraph (5)) functions 
     under the Medicare Integrity Program under section 1893, as 
     are necessary to carry out the purposes of this title.
       ``(5) Relationship to mip contracts.--
       ``(A) Nonduplication of duties.--In entering into contracts 
     under this section, the Secretary shall assure that functions 
     of medicare administrative contractors in carrying out 
     activities under parts A and B do not duplicate activities 
     carried out under a contract entered into under the Medicare 
     Integrity Program under section 1893. The previous sentence 
     shall not apply with respect to the activity described in 
     section 1893(b)(5)

[[Page S15451]]

     (relating to prior authorization of certain items of durable 
     medical equipment under section 1834(a)(15)).
       ``(B) Construction.--An entity shall not be treated as a 
     medicare administrative contractor merely by reason of having 
     entered into a contract with the Secretary under section 
     1893.
       ``(6) Application of federal acquisition regulation.--
     Except to the extent inconsistent with a specific requirement 
     of this section, the Federal Acquisition Regulation applies 
     to contracts under this section.
       ``(b) Contracting Requirements.--
       ``(1) Use of competitive procedures.--
       ``(A) In general.--Except as provided in laws with general 
     applicability to Federal acquisition and procurement or in 
     subparagraph (B), the Secretary shall use competitive 
     procedures when entering into contracts with medicare 
     administrative contractors under this section, taking into 
     account performance quality as well as price and other 
     factors.
       ``(B) Renewal of contracts.--The Secretary may renew a 
     contract with a medicare administrative contractor under this 
     section from term to term without regard to section 5 of 
     title 41, United States Code, or any other provision of law 
     requiring competition, if the medicare administrative 
     contractor has met or exceeded the performance requirements 
     applicable with respect to the contract and contractor, 
     except that the Secretary shall provide for the application 
     of competitive procedures under such a contract not less 
     frequently than once every 5 years.
       ``(C) Transfer of functions.--The Secretary may transfer 
     functions among medicare administrative contractors 
     consistent with the provisions of this paragraph. The 
     Secretary shall ensure that performance quality is considered 
     in such transfers. The Secretary shall provide public notice 
     (whether in the Federal Register or otherwise) of any such 
     transfer (including a description of the functions so 
     transferred, a description of the providers of services and 
     suppliers affected by such transfer, and contact information 
     for the contractors involved).
       ``(D) Incentives for quality.--The Secretary shall provide 
     incentives for medicare administrative contractors to provide 
     quality service and to promote efficiency.
       ``(2) Compliance with requirements.--No contract under this 
     section shall be entered into with any medicare 
     administrative contractor unless the Secretary finds that 
     such medicare administrative contractor will perform its 
     obligations under the contract efficiently and effectively 
     and will meet such requirements as to financial 
     responsibility, legal authority, quality of services 
     provided, and other matters as the Secretary finds pertinent.
       ``(3) Performance requirements.--
       ``(A) Development of specific performance requirements.--
       ``(i) In general.--The Secretary shall develop contract 
     performance requirements to carry out the specific 
     requirements applicable under this title to a function 
     described in subsection (a)(4) and shall develop standards 
     for measuring the extent to which a contractor has met such 
     requirements.
       ``(ii) Consultation.--In developing such performance 
     requirements and standards for measurement, the Secretary 
     shall consult with providers of services, organizations 
     representative of beneficiaries under this title, and 
     organizations and agencies performing functions necessary to 
     carry out the purposes of this section with respect to such 
     performance requirements.
       ``(iii) Publication of standards.--The Secretary shall make 
     such performance requirements and measurement standards 
     available to the public.
       ``(B) Considerations.--The Secretary shall include, as one 
     of the standards developed under subparagraph (A), provider 
     and beneficiary satisfaction levels.
       ``(C) Inclusion in contracts.--All contractor performance 
     requirements shall be set forth in the contract between the 
     Secretary and the appropriate medicare administrative 
     contractor. Such performance requirements--
       ``(i) shall reflect the performance requirements published 
     under subparagraph (A), but may include additional 
     performance requirements;
       ``(ii) shall be used for evaluating contractor performance 
     under the contract; and
       ``(iii) shall be consistent with the written statement of 
     work provided under the contract.
       ``(4) Information requirements.--The Secretary shall not 
     enter into a contract with a medicare administrative 
     contractor under this section unless the contractor agrees--
       ``(A) to furnish to the Secretary such timely information 
     and reports as the Secretary may find necessary in performing 
     his functions under this title; and
       ``(B) to maintain such records and afford such access 
     thereto as the Secretary finds necessary to assure the 
     correctness and verification of the information and reports 
     under subparagraph (A) and otherwise to carry out the 
     purposes of this title.
       ``(5) Surety bond.--A contract with a medicare 
     administrative contractor under this section may require the 
     medicare administrative contractor, and any of its officers 
     or employees certifying payments or disbursing funds pursuant 
     to the contract, or otherwise participating in carrying out 
     the contract, to give surety bond to the United States in 
     such amount as the Secretary may deem appropriate.
       ``(c) Terms and Conditions.--
       ``(1) In general.--A contract with any medicare 
     administrative contractor under this section may contain such 
     terms and conditions as the Secretary finds necessary or 
     appropriate and may provide for advances of funds to the 
     medicare administrative contractor for the making of payments 
     by it under subsection (a)(4)(B).
       ``(2) Prohibition on mandates for certain data 
     collection.--The Secretary may not require, as a condition of 
     entering into, or renewing, a contract under this section, 
     that the medicare administrative contractor match data 
     obtained other than in its activities under this title with 
     data used in the administration of this title for purposes of 
     identifying situations in which the provisions of section 
     1862(b) may apply.
       ``(d) Limitation on Liability of Medicare Administrative 
     Contractors and Certain Officers.--
       ``(1) Certifying officer.--No individual designated 
     pursuant to a contract under this section as a certifying 
     officer shall, in the absence of the reckless disregard of 
     the individual's obligations or the intent by that individual 
     to defraud the United States, be liable with respect to any 
     payments certified by the individual under this section.
       ``(2) Disbursing officer.--No disbursing officer shall, in 
     the absence of the reckless disregard of the officer's 
     obligations or the intent by that officer to defraud the 
     United States, be liable with respect to any payment by such 
     officer under this section if it was based upon an 
     authorization (which meets the applicable requirements for 
     such internal controls established by the Comptroller General 
     of the United States) of a certifying officer designated as 
     provided in paragraph (1) of this subsection.
       ``(3) Liability of medicare administrative contractor.--
       ``(A) In general.--No medicare administrative contractor 
     shall be liable to the United States for a payment by a 
     certifying or disbursing officer unless, in connection with 
     such payment, the medicare administrative contractor acted 
     with reckless disregard of its obligations under its medicare 
     administrative contract or with intent to defraud the United 
     States.
       ``(B) Relationship to false claims act.--Nothing in this 
     subsection shall be construed to limit liability for conduct 
     that would constitute a violation of sections 3729 through 
     3731 of title 31, United States Code.
       ``(4) Indemnification by secretary.--
       ``(A) In general.--Subject to subparagraphs (B) and (D), in 
     the case of a medicare administrative contractor (or a person 
     who is a director, officer, or employee of such a contractor 
     or who is engaged by the contractor to participate directly 
     in the claims administration process) who is made a party to 
     any judicial or administrative proceeding arising from or 
     relating directly to the claims administration process under 
     this title, the Secretary may, to the extent the Secretary 
     determines to be appropriate and as specified in the contract 
     with the contractor, indemnify the contractor and such 
     persons.
       ``(B) Conditions.--The Secretary may not provide 
     indemnification under subparagraph (A) insofar as the 
     liability for such costs arises directly from conduct that is 
     determined by the judicial proceeding or by the Secretary to 
     be criminal in nature, fraudulent, or grossly negligent. If 
     indemnification is provided by the Secretary with respect to 
     a contractor before a determination that such costs arose 
     directly from such conduct, the contractor shall reimburse 
     the Secretary for costs of indemnification.
       ``(C) Scope of indemnification.--Indemnification by the 
     Secretary under subparagraph (A) may include payment of 
     judgments, settlements (subject to subparagraph (D)), awards, 
     and costs (including reasonable legal expenses).
       ``(D) Written approval for settlements or compromises.--A 
     contractor or other person described in subparagraph (A) may 
     not propose to negotiate a settlement or compromise of a 
     proceeding described in such subparagraph without the prior 
     written approval of the Secretary to negotiate such 
     settlement or compromise. Any indemnification under 
     subparagraph (A) with respect to amounts paid under a 
     settlement or compromise of a proceeding described in such 
     subparagraph are conditioned upon prior written approval by 
     the Secretary of the final settlement or compromise.
       ``(E) Construction.--Nothing in this paragraph shall be 
     construed--
       ``(i) to change any common law immunity that may be 
     available to a medicare administrative contractor or person 
     described in subparagraph (A); or
       ``(ii) to permit the payment of costs not otherwise 
     allowable, reasonable, or allocable under the Federal 
     Acquisition Regulation.''.
       (2) Consideration of incorporation of current law 
     standards.--In developing contract performance requirements 
     under section 1874A(b) of the Social Security Act, as 
     inserted by paragraph (1), the Secretary shall consider 
     inclusion of the performance standards described in sections 
     1816(f)(2) of such Act (relating to timely processing of 
     reconsiderations and applications for exemptions) and section 
     1842(b)(2)(B) of such Act (relating to timely review of 
     determinations and fair hearing requests), as such sections 
     were in effect before the date of the enactment of this Act.

[[Page S15452]]

       (b) Conforming Amendments to Section 1816 (Relating to 
     Fiscal Intermediaries).--Section 1816 (42 U.S.C. 1395h) is 
     amended as follows:
       (1) The heading is amended to read as follows:


        ``provisions relating to the administration of part a''.

       (2) Subsection (a) is amended to read as follows:
       ``(a) The administration of this part shall be conducted 
     through contracts with medicare administrative contractors 
     under section 1874A.''.
       (3) Subsection (b) is repealed.
       (4) Subsection (c) is amended--
       (A) by striking paragraph (1); and
       (B) in each of paragraphs (2)(A) and (3)(A), by striking 
     ``agreement under this section'' and inserting ``contract 
     under section 1874A that provides for making payments under 
     this part''.
       (5) Subsections (d) through (i) are repealed.
       (6) Subsections (j) and (k) are each amended--
       (A) by striking ``An agreement with an agency or 
     organization under this section'' and inserting ``A contract 
     with a medicare administrative contractor under section 1874A 
     with respect to the administration of this part''; and
       (B) by striking ``such agency or organization'' and 
     inserting ``such medicare administrative contractor'' each 
     place it appears.
       (7) Subsection (l) is repealed.
       (c) Conforming Amendments to Section 1842 (Relating to 
     Carriers).--Section 1842 (42 U.S.C. 1395u) is amended as 
     follows:
       (1) The heading is amended to read as follows:


        ``provisions relating to the administration of part b''.

       (2) Subsection (a) is amended to read as follows:
       ``(a) The administration of this part shall be conducted 
     through contracts with medicare administrative contractors 
     under section 1874A.''.
       (3) Subsection (b) is amended--
       (A) by striking paragraph (1);
       (B) in paragraph (2)--
       (i) by striking subparagraphs (A) and (B);
       (ii) in subparagraph (C), by striking ``carriers'' and 
     inserting ``medicare administrative contractors''; and
       (iii) by striking subparagraphs (D) and (E);
       (C) in paragraph (3)--
       (i) in the matter before subparagraph (A), by striking 
     ``Each such contract shall provide that the carrier'' and 
     inserting ``The Secretary'';
       (ii) by striking ``will'' the first place it appears in 
     each of subparagraphs (A), (B), (F), (G), (H), and (L) and 
     inserting ``shall'';
       (iii) in subparagraph (B), in the matter before clause (i), 
     by striking ``to the policyholders and subscribers of the 
     carrier'' and inserting ``to the policyholders and 
     subscribers of the medicare administrative contractor'';
       (iv) by striking subparagraphs (C), (D), and (E);
       (v) in subparagraph (H)--

       (I) by striking ``if it makes determinations or payments 
     with respect to physicians' services,'' in the matter 
     preceding clause (i); and
       (II) by striking ``carrier'' and inserting ``medicare 
     administrative contractor'' in clause (i);

       (vi) by striking subparagraph (I);
       (vii) in subparagraph (L), by striking the semicolon and 
     inserting a period;
       (viii) in the first sentence, after subparagraph (L), by 
     striking ``and shall contain'' and all that follows through 
     the period; and
       (ix) in the seventh sentence, by inserting ``medicare 
     administrative contractor,'' after ``carrier,'';
       (D) by striking paragraph (5);
       (E) in paragraph (6)(D)(iv), by striking ``carrier'' and 
     inserting ``medicare administrative contractor''; and
       (F) in paragraph (7), by striking ``the carrier'' and 
     inserting ``the Secretary'' each place it appears.
       (4) Subsection (c) is amended--
       (A) by striking paragraph (1);
       (B) in paragraph (2)(A), by striking ``contract under this 
     section which provides for the disbursement of funds, as 
     described in subsection (a)(1)(B),'' and inserting ``contract 
     under section 1874A that provides for making payments under 
     this part'';
       (C) in paragraph (3)(A), by striking ``subsection 
     (a)(1)(B)'' and inserting ``section 1874A(a)(3)(B)'';
       (D) in paragraph (4), in the matter preceding subparagraph 
     (A), by striking ``carrier'' and inserting ``medicare 
     administrative contractor''; and
       (E) by striking paragraphs (5) and (6).
       (5) Subsections (d), (e), and (f) are repealed.
       (6) Subsection (g) is amended by striking ``carrier or 
     carriers'' and inserting ``medicare administrative contractor 
     or contractors''.
       (7) Subsection (h) is amended--
       (A) in paragraph (2)--
       (i) by striking ``Each carrier having an agreement with the 
     Secretary under subsection (a)'' and inserting ``The 
     Secretary''; and
       (ii) by striking ``Each such carrier'' and inserting ``The 
     Secretary'';
       (B) in paragraph (3)(A)--
       (i) by striking ``a carrier having an agreement with the 
     Secretary under subsection (a)'' and inserting ``medicare 
     administrative contractor having a contract under section 
     1874A that provides for making payments under this part''; 
     and
       (ii) by striking ``such carrier'' and inserting ``such 
     contractor'';
       (C) in paragraph (3)(B)--
       (i) by striking ``a carrier'' and inserting ``a medicare 
     administrative contractor'' each place it appears; and
       (ii) by striking ``the carrier'' and inserting ``the 
     contractor'' each place it appears; and
       (D) in paragraphs (5)(A) and (5)(B)(iii), by striking 
     ``carriers'' and inserting ``medicare administrative 
     contractors'' each place it appears.
       (8) Subsection (l) is amended--
       (A) in paragraph (1)(A)(iii), by striking ``carrier'' and 
     inserting ``medicare administrative contractor''; and
       (B) in paragraph (2), by striking ``carrier'' and inserting 
     ``medicare administrative contractor''.
       (9) Subsection (p)(3)(A) is amended by striking ``carrier'' 
     and inserting ``medicare administrative contractor''.
       (10) Subsection (q)(1)(A) is amended by striking 
     ``carrier''.
       (d) Effective Date; Transition Rule.--
       (1) Effective date.--
       (A) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall take 
     effect on October 1, 2005, and the Secretary is authorized to 
     take such steps before such date as may be necessary to 
     implement such amendments on a timely basis.
       (B) Construction for current contracts.--Such amendments 
     shall not apply to contracts in effect before the date 
     specified under subparagraph (A) that continue to retain the 
     terms and conditions in effect on such date (except as 
     otherwise provided under this Act, other than under this 
     section) until such date as the contract is let out for 
     competitive bidding under such amendments.
       (C) Deadline for competitive bidding.--The Secretary shall 
     provide for the letting by competitive bidding of all 
     contracts for functions of medicare administrative 
     contractors for annual contract periods that begin on or 
     after October 1, 2011.
       (2) General transition rules.--
       (A) Authority to continue to enter into new agreements and 
     contracts and waiver of provider nomination provisions during 
     transition.--Prior to October 1, 2005, the Secretary may, 
     consistent with subparagraph (B), continue to enter into 
     agreements under section 1816 and contracts under section 
     1842 of the Social Security Act (42 U.S.C. 1395h, 1395u). The 
     Secretary may enter into new agreements under section 1816 
     prior to October 1, 2005, without regard to any of the 
     provider nomination provisions of such section.
       (B) Appropriate transition.--The Secretary shall take such 
     steps as are necessary to provide for an appropriate 
     transition from agreements under section 1816 and contracts 
     under section 1842 of the Social Security Act (42 U.S.C. 
     1395h, 1395u) to contracts under section 1874A, as added by 
     subsection (a)(1).
       (3) Authorizing continuation of mip functions under current 
     contracts and agreements and under transition contracts.--
     Notwithstanding the amendments made by this section, the 
     provisions contained in the exception in section 1893(d)(2) 
     of the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall 
     continue to apply during the period that begins on the date 
     of the enactment of this Act and ends on October 1, 2011, and 
     any reference in such provisions to an agreement or contract 
     shall be deemed to include a contract under section 1874A of 
     such Act, as inserted by subsection (a)(1), that continues 
     the activities referred to in such provisions.
       (e) References.--On and after the effective date provided 
     under subsection (d)(1), any reference to a fiscal 
     intermediary or carrier under title XI or XVIII of the Social 
     Security Act (or any regulation, manual instruction, 
     interpretative rule, statement of policy, or guideline issued 
     to carry out such titles) shall be deemed a reference to a 
     medicare administrative contractor (as provided under section 
     1874A of the Social Security Act).
       (f) Secretarial Submission of Legislative Proposal.--Not 
     later than 6 months after the date of the enactment of this 
     Act, the Secretary shall submit to the appropriate committees 
     of Congress a legislative proposal providing for such 
     technical and conforming amendments in the law as are 
     required by the provisions of this section.
       (g) Reports on Implementation.--
       (1) Plan for implementation.--By not later than October 1, 
     2004, the Secretary shall submit a report to Congress and the 
     Comptroller General of the United States that describes the 
     plan for implementation of the amendments made by this 
     section. The Comptroller General shall conduct an evaluation 
     of such plan and shall submit to Congress, not later than 6 
     months after the date the report is received, a report on 
     such evaluation and shall include in such report such 
     recommendations as the Comptroller General deems appropriate.
       (2) Status of implementation.--The Secretary shall submit a 
     report to Congress not later than October 1, 2008, that 
     describes the status of implementation of such amendments and 
     that includes a description of the following:
       (A) The number of contracts that have been competitively 
     bid as of such date.
       (B) The distribution of functions among contracts and 
     contractors.

[[Page S15453]]

       (C) A timeline for complete transition to full competition.
       (D) A detailed description of how the Secretary has 
     modified oversight and management of medicare contractors to 
     adapt to full competition.

     SEC. 512. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE 
                   ADMINISTRATIVE CONTRACTORS.

       (a) In General.--Section 1874A, as added by section 
     511(a)(1), is amended by adding at the end the following new 
     subsection:
       ``(e) Requirements for Information Security.--
       ``(1) Development of information security program.--A 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall implement a contractor-wide information 
     security program to provide information security for the 
     operation and assets of the contractor with respect to such 
     functions under this title. An information security program 
     under this paragraph shall meet the requirements for 
     information security programs imposed on Federal agencies 
     under paragraphs (1) through (8) of section 3544(b) of title 
     44, United States Code (other than the requirements under 
     paragraphs (2)(D)(i), (5)(A), and (5)(B) of such section).
       ``(2) Independent audits.--
       ``(A) Performance of annual evaluations.--Each year a 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall undergo an evaluation of the information 
     security of the contractor with respect to such functions 
     under this title. The evaluation shall--
       ``(i) be performed by an entity that meets such 
     requirements for independence as the Inspector General of the 
     Department of Health and Human Services may establish; and
       ``(ii) test the effectiveness of information security 
     control techniques of an appropriate subset of the 
     contractor's information systems (as defined in section 
     3502(8) of title 44, United States Code) relating to such 
     functions under this title and an assessment of compliance 
     with the requirements of this subsection and related 
     information security policies, procedures, standards and 
     guidelines, including policies and procedures as may be 
     prescribed by the Director of the Office of Management and 
     Budget and applicable information security standards 
     promulgated under section 11331 of title 40, United States 
     Code.
       ``(B) Deadline for initial evaluation.--
       ``(i) New contractors.--In the case of a medicare 
     administrative contractor covered by this subsection that has 
     not previously performed the functions referred to in 
     subparagraphs (A) and (B) of subsection (a)(4) (relating to 
     determining and making payments) as a fiscal intermediary or 
     carrier under section 1816 or 1842, the first independent 
     evaluation conducted pursuant to subparagraph (A) shall be 
     completed prior to commencing such functions.
       ``(ii) Other contractors.--In the case of a medicare 
     administrative contractor covered by this subsection that is 
     not described in clause (i), the first independent evaluation 
     conducted pursuant to subparagraph (A) shall be completed 
     within 1 year after the date the contractor commences 
     functions referred to in clause (i) under this section.
       ``(C) Reports on evaluations.--
       ``(i) To the department of health and human services.--The 
     results of independent evaluations under subparagraph (A) 
     shall be submitted promptly to the Inspector General of the 
     Department of Health and Human Services and to the Secretary.
       ``(ii) To congress.--The Inspector General of the 
     Department of Health and Human Services shall submit to 
     Congress annual reports on the results of such evaluations, 
     including assessments of the scope and sufficiency of such 
     evaluations.
       ``(iii) Agency reporting.--The Secretary shall address the 
     results of such evaluations in reports required under section 
     3544(c) of title 44, United States Code.''.
       (b) Application of Requirements to Fiscal Intermediaries 
     and Carriers.--
       (1) In general.--The provisions of section 1874A(e)(2) of 
     the Social Security Act (other than subparagraph (B)), as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (2) Deadline for initial evaluation.--In the case of such a 
     fiscal intermediary or carrier with an agreement or contract 
     under such respective section in effect as of the date of the 
     enactment of this Act, the first evaluation under section 
     1874A(e)(2)(A) of the Social Security Act (as added by 
     subsection (a)), pursuant to paragraph (1), shall be 
     completed (and a report on the evaluation submitted to the 
     Secretary) by not later than 1 year after such date.

                   Subtitle C--Education and Outreach

     SEC. 521. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

       (a) Coordination of Education Funding.--
       (1) In general.--Title XVIII is amended by inserting after 
     section 1888 the following new section:


             ``provider education and technical assistance

       ``Sec. 1889. (a) Coordination of Education Funding.--The 
     Secretary shall coordinate the educational activities 
     provided through medicare contractors (as defined in 
     subsection (g), including under section 1893) in order to 
     maximize the effectiveness of Federal education efforts for 
     providers of services and suppliers.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.
       (3) Report.--Not later than October 1, 2004, the Secretary 
     shall submit to Congress a report that includes a description 
     and evaluation of the steps taken to coordinate the funding 
     of provider education under section 1889(a) of the Social 
     Security Act, as added by paragraph (1).
       (b) Incentives To Improve Contractor Performance.--
       (1) In general.--Section 1874A, as added by section 
     511(a)(1) and as amended by section 512(a), is amended by 
     adding at the end the following new subsection:
       ``(f) Incentives To Improve Contractor Performance in 
     Provider Education and Outreach.--The Secretary shall use 
     specific claims payment error rates or similar methodology of 
     medicare administrative contractors in the processing or 
     reviewing of medicare claims in order to give such 
     contractors an incentive to implement effective education and 
     outreach programs for providers of services and suppliers.''.
       (2) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(f) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (3) GAO report on adequacy of methodology.--Not later than 
     October 1, 2004, the Comptroller General of the United States 
     shall submit to Congress and to the Secretary a report on the 
     adequacy of the methodology under section 1874A(f) of the 
     Social Security Act, as added by paragraph (1), and shall 
     include in the report such recommendations as the Comptroller 
     General determines appropriate with respect to the 
     methodology.
       (4) Report on use of methodology in assessing contractor 
     performance.--Not later than October 1, 2004, the Secretary 
     shall submit to Congress a report that describes how the 
     Secretary intends to use such methodology in assessing 
     medicare contractor performance in implementing effective 
     education and outreach programs, including whether to use 
     such methodology as a basis for performance bonuses. The 
     report shall include an analysis of the sources of identified 
     errors and potential changes in systems of contractors and 
     rules of the Secretary that could reduce claims error rates.
       (c) Provision of Access to and Prompt Responses From 
     Medicare Administrative Contractors.--
       (1) In general.--Section 1874A, as added by section 
     511(a)(1) and as amended by section 512(a) and subsection 
     (b), is further amended by adding at the end the following 
     new subsection:
       ``(g) Communications With Beneficiaries, Providers of 
     Services and Suppliers.--
       ``(1) Communication strategy.--The Secretary shall develop 
     a strategy for communications with individuals entitled to 
     benefits under part A or enrolled under part B, or both, and 
     with providers of services and suppliers under this title.
       ``(2) Response to written inquiries.--Each medicare 
     administrative contractor shall, for those providers of 
     services and suppliers which submit claims to the contractor 
     for claims processing and for those individuals entitled to 
     benefits under part A or enrolled under part B, or both, with 
     respect to whom claims are submitted for claims processing, 
     provide general written responses (which may be through 
     electronic transmission) in a clear, concise, and accurate 
     manner to inquiries of providers of services, suppliers, and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, concerning the programs under this 
     title within 45 business days of the date of receipt of such 
     inquiries.
       ``(3) Response to toll-free lines.--The Secretary shall 
     ensure that each medicare administrative contractor shall 
     provide, for those providers of services and suppliers which 
     submit claims to the contractor for claims processing and for 
     those individuals entitled to benefits under part A or 
     enrolled under part B, or both, with respect to whom claims 
     are submitted for claims processing, a toll-free telephone 
     number at which such individuals, providers of services, and 
     suppliers may obtain information regarding billing, coding, 
     claims, coverage, and other appropriate information under 
     this title.
       ``(4) Monitoring of contractor responses.--
       ``(A) In general.--Each medicare administrative contractor 
     shall, consistent with standards developed by the Secretary 
     under subparagraph (B)--
       ``(i) maintain a system for identifying who provides the 
     information referred to in paragraphs (2) and (3); and
       ``(ii) monitor the accuracy, consistency, and timeliness of 
     the information so provided.
       ``(B) Development of standards.--

[[Page S15454]]

       ``(i) In general.--The Secretary shall establish and make 
     public standards to monitor the accuracy, consistency, and 
     timeliness of the information provided in response to written 
     and telephone inquiries under this subsection. Such standards 
     shall be consistent with the performance requirements 
     established under subsection (b)(3).
       ``(ii) Evaluation.--In conducting evaluations of individual 
     medicare administrative contractors, the Secretary shall take 
     into account the results of the monitoring conducted under 
     subparagraph (A) taking into account as performance 
     requirements the standards established under clause (i). The 
     Secretary shall, in consultation with organizations 
     representing providers of services, suppliers, and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, establish standards relating to the 
     accuracy, consistency, and timeliness of the information so 
     provided.
       ``(C) Direct monitoring.--Nothing in this paragraph shall 
     be construed as preventing the Secretary from directly 
     monitoring the accuracy, consistency, and timeliness of the 
     information so provided.
       ``(5) Authorization of appropriations.--There are 
     authorized to be appropriated such sums as are necessary to 
     carry out this subsection.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect October 1, 2004.
       (3) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(g) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (d) Improved Provider Education and Training.--
       (1) In general.--Section 1889, as added by subsection (a), 
     is amended by adding at the end the following new 
     subsections:
       ``(b) Enhanced Education and Training.--
       ``(1) Additional resources.--There are authorized to be 
     appropriated to the Secretary (in appropriate part from the 
     Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund) such sums as may 
     be necessary for fiscal years beginning with fiscal year 
     2005.
       ``(2) Use.--The funds made available under paragraph (1) 
     shall be used to increase the conduct by medicare contractors 
     of education and training of providers of services and 
     suppliers regarding billing, coding, and other appropriate 
     items and may also be used to improve the accuracy, 
     consistency, and timeliness of contractor responses.
       ``(c) Tailoring Education and Training Activities for Small 
     Providers or Suppliers.--
       ``(1) In general.--Insofar as a medicare contractor 
     conducts education and training activities, it shall tailor 
     such activities to meet the special needs of small providers 
     of services or suppliers (as defined in paragraph (2)). Such 
     education and training activities for small providers of 
     services and suppliers may include the provision of technical 
     assistance (such as review of billing systems and internal 
     controls to determine program compliance and to suggest more 
     efficient and effective means of achieving such compliance).
       ``(2) Small provider of services or supplier.--In this 
     subsection, the term `small provider of services or supplier' 
     means--
       ``(A) a provider of services with fewer than 25 full-time-
     equivalent employees; or
       ``(B) a supplier with fewer than 10 full-time-equivalent 
     employees.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2004.
       (e) Requirement To Maintain Internet Websites.--
       (1) In general.--Section 1889, as added by subsection (a) 
     and as amended by subsection (d), is further amended by 
     adding at the end the following new subsection:
       ``(d) Internet Websites; FAQs.--The Secretary, and each 
     medicare contractor insofar as it provides services 
     (including claims processing) for providers of services or 
     suppliers, shall maintain an Internet website which--
       ``(1) provides answers in an easily accessible format to 
     frequently asked questions, and
       ``(2) includes other published materials of the contractor,

     that relate to providers of services and suppliers under the 
     programs under this title (and title XI insofar as it relates 
     to such programs).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2004.
       (f) Additional Provider Education Provisions.--
       (1) In general.--Section 1889, as added by subsection (a) 
     and as amended by subsections (d) and (e), is further amended 
     by adding at the end the following new subsections:
       ``(e) Encouragement of Participation in Education Program 
     Activities.--A medicare contractor may not use a record of 
     attendance at (or failure to attend) educational activities 
     or other information gathered during an educational program 
     conducted under this section or otherwise by the Secretary to 
     select or track providers of services or suppliers for the 
     purpose of conducting any type of audit or prepayment review.
       ``(f) Construction.--Nothing in this section or section 
     1893(g) shall be construed as providing for disclosure by a 
     medicare contractor--
       ``(1) of the screens used for identifying claims that will 
     be subject to medical review; or
       ``(2) of information that would compromise pending law 
     enforcement activities or reveal findings of law enforcement-
     related audits.
       ``(g) Definitions.--For purposes of this section, the term 
     `medicare contractor' includes the following:
       ``(1) A medicare administrative contractor with a contract 
     under section 1874A, including a fiscal intermediary with a 
     contract under section 1816 and a carrier with a contract 
     under section 1842.
       ``(2) An eligible entity with a contract under section 
     1893.

     Such term does not include, with respect to activities of a 
     specific provider of services or supplier an entity that has 
     no authority under this title or title IX with respect to 
     such activities and such provider of services or supplier.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.

     SEC. 522. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION 
                   PROGRAM.

       (a) Establishment.--
       (1) In general.--The Secretary shall establish a 
     demonstration program (in this section referred to as the 
     ``demonstration program'') under which technical assistance 
     described in paragraph (2) is made available, upon request 
     and on a voluntary basis, to small providers of services or 
     suppliers in order to improve compliance with the applicable 
     requirements of the programs under medicare program under 
     title XVIII of the Social Security Act (including provisions 
     of title XI of such Act insofar as they relate to such title 
     and are not administered by the Office of the Inspector 
     General of the Department of Health and Human Services).
       (2) Forms of technical assistance.--The technical 
     assistance described in this paragraph is--
       (A) evaluation and recommendations regarding billing and 
     related systems; and
       (B) information and assistance regarding policies and 
     procedures under the medicare program, including coding and 
     reimbursement.
       (3) Small providers of services or suppliers.--In this 
     section, the term ``small providers of services or 
     suppliers'' means--
       (A) a provider of services with fewer than 25 full-time-
     equivalent employees; or
       (B) a supplier with fewer than 10 full-time-equivalent 
     employees.
       (b) Qualification of Contractors.--In conducting the 
     demonstration program, the Secretary shall enter into 
     contracts with qualified organizations (such as peer review 
     organizations or entities described in section 1889(g)(2) of 
     the Social Security Act, as inserted by section 521(f)(1)) 
     with appropriate expertise with billing systems of the full 
     range of providers of services and suppliers to provide the 
     technical assistance. In awarding such contracts, the 
     Secretary shall consider any prior investigations of the 
     entity's work by the Inspector General of Department of 
     Health and Human Services or the Comptroller General of the 
     United States.
       (c) Description of Technical Assistance.--The technical 
     assistance provided under the demonstration program shall 
     include a direct and in-person examination of billing systems 
     and internal controls of small providers of services or 
     suppliers to determine program compliance and to suggest more 
     efficient or effective means of achieving such compliance.
       (d) GAO Evaluation.--Not later than 2 years after the date 
     the demonstration program is first implemented, the 
     Comptroller General, in consultation with the Inspector 
     General of the Department of Health and Human Services, shall 
     conduct an evaluation of the demonstration program. The 
     evaluation shall include a determination of whether claims 
     error rates are reduced for small providers of services or 
     suppliers who participated in the program and the extent of 
     improper payments made as a result of the demonstration 
     program. The Comptroller General shall submit a report to the 
     Secretary and the Congress on such evaluation and shall 
     include in such report recommendations regarding the 
     continuation or extension of the demonstration program.
       (e) Financial Participation by Providers.--The provision of 
     technical assistance to a small provider of services or 
     supplier under the demonstration program is conditioned upon 
     the small provider of services or supplier paying an amount 
     estimated (and disclosed in advance of a provider's or 
     supplier's participation in the program) to be equal to 25 
     percent of the cost of the technical assistance.
       (f) Authorization of Appropriations.--There are authorized 
     to be appropriated, from amounts not otherwise appropriated 
     in the Treasury, such sums as may be necessary to carry out 
     this section.

     SEC. 523. MEDICARE BENEFICIARY OMBUDSMAN.

       (a) In General.--Section 1808, as added and amended by 
     section 500, is amended by adding at the end the following 
     new subsection:
       ``(c) Medicare Beneficiary Ombudsman.--
       ``(1) In general.--The Secretary shall appoint within the 
     Department of Health and

[[Page S15455]]

     Human Services a Medicare Beneficiary Ombudsman who shall 
     have expertise and experience in the fields of health care 
     and education of (and assistance to) individuals entitled to 
     benefits under this title.
       ``(2) Duties.--The Medicare Beneficiary Ombudsman shall--
       ``(A) receive complaints, grievances, and requests for 
     information submitted by individuals entitled to benefits 
     under part A or enrolled under part B, or both, with respect 
     to any aspect of the medicare program;
       ``(B) provide assistance with respect to complaints, 
     grievances, and requests referred to in subparagraph (A), 
     including--
       ``(i) assistance in collecting relevant information for 
     such individuals, to seek an appeal of a decision or 
     determination made by a fiscal intermediary, carrier, MA 
     organization, or the Secretary;
       ``(ii) assistance to such individuals with any problems 
     arising from disenrollment from an MA plan under part C; and
       ``(iii) assistance to such individuals in presenting 
     information under section 1839(i)(4)(C) (relating to income-
     related premium adjustment; and
       ``(C) submit annual reports to Congress and the Secretary 
     that describe the activities of the Office and that include 
     such recommendations for improvement in the administration of 
     this title as the Ombudsman determines appropriate.

     The Ombudsman shall not serve as an advocate for any 
     increases in payments or new coverage of services, but may 
     identify issues and problems in payment or coverage policies.
       ``(3) Working with health insurance counseling programs.--
     To the extent possible, the Ombudsman shall work with health 
     insurance counseling programs (receiving funding under 
     section 4360 of Omnibus Budget Reconciliation Act of 1990) to 
     facilitate the provision of information to individuals 
     entitled to benefits under part A or enrolled under part B, 
     or both regarding MA plans and changes to those plans. 
     Nothing in this paragraph shall preclude further 
     collaboration between the Ombudsman and such programs.''.
       (b) Deadline for Appointment.--By not later than 1 year 
     after the date of the enactment of this Act, the Secretary 
     shall appoint the Medicare Beneficiary Ombudsman under 
     section 1808(c) of the Social Security Act, as added by 
     subsection (a).
       (c) Funding.--There are authorized to be appropriated to 
     the Secretary (in appropriate part from the Federal Hospital 
     Insurance Trust Fund, established under section 1817 of the 
     Social Security Act (42 U.S.C. 1395i), and the Federal 
     Supplementary Medical Insurance Trust Fund, established under 
     section 1841 of such Act (42 U.S.C. 1395t)) to carry out 
     section 1808(c) of such Act (relating to the Medicare 
     Beneficiary Ombudsman), as added by subsection (a), such sums 
     as are necessary for fiscal year 2004 and each succeeding 
     fiscal year.
       (d) Use of Central, Toll-Free Number (1-800-MEDICARE).--
       (1) Phone triage system; listing in medicare handbook 
     instead of other toll-free numbers.--Section 1804(b) (42 
     U.S.C. 1395b-2(b)) is amended by adding at the end the 
     following: ``The Secretary shall provide, through the toll-
     free telephone number 1-800-MEDICARE, for a means by which 
     individuals seeking information about, or assistance with, 
     such programs who phone such toll-free number are transferred 
     (without charge) to appropriate entities for the provision of 
     such information or assistance. Such toll-free number shall 
     be the toll-free number listed for general information and 
     assistance in the annual notice under subsection (a) instead 
     of the listing of numbers of individual contractors.''.
       (2) Monitoring accuracy.--
       (A) Study.--The Comptroller General of the United States 
     shall conduct a study to monitor the accuracy and consistency 
     of information provided to individuals entitled to benefits 
     under part A or enrolled under part B, or both, through the 
     toll-free telephone number 1-800-MEDICARE, including an 
     assessment of whether the information provided is sufficient 
     to answer questions of such individuals. In conducting the 
     study, the Comptroller General shall examine the education 
     and training of the individuals providing information through 
     such number.
       (B) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under 
     subparagraph (A).

     SEC. 524. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

       (a) In General.--The Secretary shall establish a 
     demonstration program (in this section referred to as the 
     ``demonstration program'') under which medicare specialists 
     employed by the Department of Health and Human Services 
     provide advice and assistance to individuals entitled to 
     benefits under part A of title XVIII of the Social Security 
     Act, or enrolled under part B of such title, or both, 
     regarding the medicare program at the location of existing 
     local offices of the Social Security Administration.
       (b) Locations.--
       (1) In general.--The demonstration program shall be 
     conducted in at least 6 offices or areas. Subject to 
     paragraph (2), in selecting such offices and areas, the 
     Secretary shall provide preference for offices with a high 
     volume of visits by individuals referred to in subsection 
     (a).
       (2) Assistance for rural beneficiaries.--The Secretary 
     shall provide for the selection of at least 2 rural areas to 
     participate in the demonstration program. In conducting the 
     demonstration program in such rural areas, the Secretary 
     shall provide for medicare specialists to travel among local 
     offices in a rural area on a scheduled basis.
       (c) Duration.--The demonstration program shall be conducted 
     over a 3-year period.
       (d) Evaluation and Report.--
       (1) Evaluation.--The Secretary shall provide for an 
     evaluation of the demonstration program. Such evaluation 
     shall include an analysis of--
       (A) utilization of, and satisfaction of those individuals 
     referred to in subsection (a) with, the assistance provided 
     under the program; and
       (B) the cost-effectiveness of providing beneficiary 
     assistance through out-stationing medicare specialists at 
     local offices of the Social Security Administration.
       (2) Report.--The Secretary shall submit to Congress a 
     report on such evaluation and shall include in such report 
     recommendations regarding the feasibility of permanently out-
     stationing medicare specialists at local offices of the 
     Social Security Administration.

     SEC. 525. INCLUSION OF ADDITIONAL INFORMATION IN NOTICES TO 
                   BENEFICIARIES ABOUT SKILLED NURSING FACILITY 
                   BENEFITS.

       (a) In General.--The Secretary shall provide that in 
     medicare beneficiary notices provided (under section 1806(a) 
     of the Social Security Act, 42 U.S.C. 1395b-7(a)) with 
     respect to the provision of post-hospital extended care 
     services under part A of title XVIII of the Social Security 
     Act, there shall be included information on the number of 
     days of coverage of such services remaining under such part 
     for the medicare beneficiary and spell of illness involved.
       (b) Effective Date.--Subsection (a) shall apply to notices 
     provided during calendar quarters beginning more than 6 
     months after the date of the enactment of this Act.

     SEC. 526. INFORMATION ON MEDICARE-CERTIFIED SKILLED NURSING 
                   FACILITIES IN HOSPITAL DISCHARGE PLANS.

       (a) Availability of Data.--The Secretary shall publicly 
     provide information that enables hospital discharge planners, 
     medicare beneficiaries, and the public to identify skilled 
     nursing facilities that are participating in the medicare 
     program.
       (b) Inclusion of Information in Certain Hospital Discharge 
     Plans.--
       (1) In general.--Section 1861(ee)(2)(D) (42 U.S.C. 
     1395x(ee)(2)(D)) is amended--
       (A) by striking ``hospice services'' and inserting 
     ``hospice care and post-hospital extended care services''; 
     and
       (B) by inserting before the period at the end the 
     following: ``and, in the case of individuals who are likely 
     to need post-hospital extended care services, the 
     availability of such services through facilities that 
     participate in the program under this title and that serve 
     the area in which the patient resides''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to discharge plans made on or after such date as 
     the Secretary shall specify, but not later than 6 months 
     after the date the Secretary provides for availability of 
     information under subsection (a).

                    Subtitle D--Appeals and Recovery

     SEC. 531. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

       (a) Transition Plan.--
       (1) In general.--Not later than April 1, 2004, the 
     Commissioner of Social Security and the Secretary shall 
     develop and transmit to Congress and the Comptroller General 
     of the United States a plan under which the functions of 
     administrative law judges responsible for hearing cases under 
     title XVIII of the Social Security Act (and related 
     provisions in title XI of such Act) are transferred from the 
     responsibility of the Commissioner and the Social Security 
     Administration to the Secretary and the Department of Health 
     and Human Services.
       (2) Contents.--The plan shall include information on the 
     following:
       (A) Workload.--The number of such administrative law judges 
     and support staff required now and in the future to hear and 
     decide such cases in a timely manner, taking into account the 
     current and anticipated claims volume, appeals, number of 
     beneficiaries, and statutory changes.
       (B) Cost projections and financing.--Funding levels 
     required for fiscal year 2005 and subsequent fiscal years to 
     carry out the functions transferred under the plan.
       (C) Transition timetable.--A timetable for the transition.
       (D) Regulations.--The establishment of specific regulations 
     to govern the appeals process.
       (E) Case tracking.--The development of a unified case 
     tracking system that will facilitate the maintenance and 
     transfer of case specific data across both the fee-for-
     service and managed care components of the medicare program.
       (F) Feasibility of precedential authority.--The feasibility 
     of developing a process to give decisions of the Departmental 
     Appeals Board in the Department of Health and Human Services 
     addressing broad legal issues binding, precedential 
     authority.
       (G) Access to administrative law judges.--The feasibility 
     of--
       (i) filing appeals with administrative law judges 
     electronically; and
       (ii) conducting hearings using tele- or video-conference 
     technologies.

[[Page S15456]]

       (H) Independence of administrative law judges.--The steps 
     that should be taken to ensure the independence of 
     administrative law judges consistent with the requirements of 
     subsection (b)(2).
       (I) Geographic distribution.--The steps that should be 
     taken to provide for an appropriate geographic distribution 
     of administrative law judges throughout the United States to 
     carry out subsection (b)(3).
       (J) Hiring.--The steps that should be taken to hire 
     administrative law judges (and support staff) to carry out 
     subsection (b)(4).
       (K) Performance standards.--The appropriateness of 
     establishing performance standards for administrative law 
     judges with respect to timelines for decisions in cases under 
     title XVIII of the Social Security Act taking into account 
     requirements under subsection (b)(2) for the independence of 
     such judges and consistent with the applicable provisions of 
     title 5, United States Code relating to impartiality.
       (L) Shared resources.--The steps that should be taken to 
     carry out subsection (b)(6) (relating to the arrangements 
     with the Commissioner of Social Security to share office 
     space, support staff, and other resources, with appropriate 
     reimbursement).
       (M) Training.--The training that should be provided to 
     administrative law judges with respect to laws and 
     regulations under title XVIII of the Social Security Act.
       (3) Additional information.--The plan may also include 
     recommendations for further congressional action, including 
     modifications to the requirements and deadlines established 
     under section 1869 of the Social Security Act (42 U.S.C. 
     1395ff) (as amended by this Act).
       (4) GAO evaluation.--The Comptroller General of the United 
     States shall evaluate the plan and, not later than the date 
     that is 6 months after the date on which the plan is received 
     by the Comptroller General, shall submit to Congress a report 
     on such evaluation.
       (b) Transfer of Adjudication Authority.--
       (1) In general.--Not earlier than July 1, 2005, and not 
     later than October 1, 2005, the Commissioner of Social 
     Security and the Secretary shall implement the transition 
     plan under subsection (a) and transfer the administrative law 
     judge functions described in such subsection from the Social 
     Security Administration to the Secretary.
       (2) Assuring independence of judges.--The Secretary shall 
     assure the independence of administrative law judges 
     performing the administrative law judge functions transferred 
     under paragraph (1) from the Centers for Medicare & Medicaid 
     Services and its contractors. In order to assure such 
     independence, the Secretary shall place such judges in an 
     administrative office that is organizationally and 
     functionally separate from such Centers. Such judges shall 
     report to, and be under the general supervision of, the 
     Secretary, but shall not report to, or be subject to 
     supervision by, another officer of the Department of Health 
     and Human Services.
       (3) Geographic distribution.--The Secretary shall provide 
     for an appropriate geographic distribution of administrative 
     law judges performing the administrative law judge functions 
     transferred under paragraph (1) throughout the United States 
     to ensure timely access to such judges.
       (4) Hiring authority.--Subject to the amounts provided in 
     advance in appropriations Acts, the Secretary shall have 
     authority to hire administrative law judges to hear such 
     cases, taking into consideration those judges with expertise 
     in handling medicare appeals and in a manner consistent with 
     paragraph (3), and to hire support staff for such judges.
       (5) Financing.--Amounts payable under law to the 
     Commissioner for administrative law judges performing the 
     administrative law judge functions transferred under 
     paragraph (1) from the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund 
     shall become payable to the Secretary for the functions so 
     transferred.
       (6) Shared resources.--The Secretary shall enter into such 
     arrangements with the Commissioner as may be appropriate with 
     respect to transferred functions of administrative law judges 
     to share office space, support staff, and other resources, 
     with appropriate reimbursement from the Trust Funds described 
     in paragraph (5).
       (c) Increased Financial Support.--In addition to any 
     amounts otherwise appropriated, to ensure timely action on 
     appeals before administrative law judges and the Departmental 
     Appeals Board consistent with section 1869 of the Social 
     Security Act (42 U.S.C. 1395ff) (as amended by this Act), 
     there are authorized to be appropriated (in appropriate part 
     from the Federal Hospital Insurance Trust Fund, established 
     under section 1817 of the Social Security Act (42 U.S.C. 
     1395i), and the Federal Supplementary Medical Insurance Trust 
     Fund, established under section 1841 of such Act (42 U.S.C. 
     1395t)) to the Secretary such sums as are necessary for 
     fiscal year 2005 and each subsequent fiscal year to--
       (1) increase the number of administrative law judges (and 
     their staffs) under subsection (b)(4);
       (2) improve education and training opportunities for 
     administrative law judges (and their staffs); and
       (3) increase the staff of the Departmental Appeals Board.
       (d) Conforming Amendment.--Section 1869(f)(2)(A)(i) (42 
     U.S.C. 1395ff(f)(2)(A)(i)) is amended by striking ``of the 
     Social Security Administration''.

     SEC. 532. PROCESS FOR EXPEDITED ACCESS TO REVIEW.

       (a) Expedited Access to Judicial Review.--
       (1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)) is 
     amended--
       (A) in paragraph (1)(A), by inserting ``, subject to 
     paragraph (2),'' before ``to judicial review of the 
     Secretary's final decision''; and
       (B) by adding at the end the following new paragraph:
       ``(2) Expedited access to judicial review.--
       ``(A) In general.--The Secretary shall establish a process 
     under which a provider of services or supplier that furnishes 
     an item or service or an individual entitled to benefits 
     under part A or enrolled under part B, or both, who has filed 
     an appeal under paragraph (1) (other than an appeal filed 
     under paragraph (1)(F)(i)) may obtain access to judicial 
     review when a review entity (described in subparagraph (D)), 
     on its own motion or at the request of the appellant, 
     determines that the Departmental Appeals Board does not have 
     the authority to decide the question of law or regulation 
     relevant to the matters in controversy and that there is no 
     material issue of fact in dispute. The appellant may make 
     such request only once with respect to a question of law or 
     regulation for a specific matter in dispute in a case of an 
     appeal.
       ``(B) Prompt determinations.--If, after or coincident with 
     appropriately filing a request for an administrative hearing, 
     the appellant requests a determination by the appropriate 
     review entity that the Departmental Appeals Board does not 
     have the authority to decide the question of law or 
     regulations relevant to the matters in controversy and that 
     there is no material issue of fact in dispute, and if such 
     request is accompanied by the documents and materials as the 
     appropriate review entity shall require for purposes of 
     making such determination, such review entity shall make a 
     determination on the request in writing within 60 days after 
     the date such review entity receives the request and such 
     accompanying documents and materials. Such a determination by 
     such review entity shall be considered a final decision and 
     not subject to review by the Secretary.
       ``(C) Access to judicial review.--
       ``(i) In general.--If the appropriate review entity--

       ``(I) determines that there are no material issues of fact 
     in dispute and that the only issues to be adjudicated are 
     ones of law or regulation that the Departmental Appeals Board 
     does not have authority to decide; or
       ``(II) fails to make such determination within the period 
     provided under subparagraph (B),

     then the appellant may bring a civil action as described in 
     this subparagraph.
       ``(ii) Deadline for filing.--Such action shall be filed, in 
     the case described in--

       ``(I) clause (i)(I), within 60 days of the date of the 
     determination described in such clause; or
       ``(II) clause (i)(II), within 60 days of the end of the 
     period provided under subparagraph (B) for the determination.

       ``(iii) Venue.--Such action shall be brought in the 
     district court of the United States for the judicial district 
     in which the appellant is located (or, in the case of an 
     action brought jointly by more than one applicant, the 
     judicial district in which the greatest number of applicants 
     are located) or in the District Court for the District of 
     Columbia.
       ``(iv) Interest on any amounts in controversy.--Where a 
     provider of services or supplier is granted judicial review 
     pursuant to this paragraph, the amount in controversy (if 
     any) shall be subject to annual interest beginning on the 
     first day of the first month beginning after the 60-day 
     period as determined pursuant to clause (ii) and equal to the 
     rate of interest on obligations issued for purchase by the 
     Federal Supplementary Medical Insurance Trust Fund for the 
     month in which the civil action authorized under this 
     paragraph is commenced, to be awarded by the reviewing court 
     in favor of the prevailing party. No interest awarded 
     pursuant to the preceding sentence shall be deemed income or 
     cost for the purposes of determining reimbursement due 
     providers of services or suppliers under this title.
       ``(D) Review entity defined.--For purposes of this 
     subsection, the term `review entity' means an entity of up to 
     three reviewers who are administrative law judges or members 
     of the Departmental Appeals Board selected for purposes of 
     making determinations under this paragraph.''.
       (2) Conforming amendment.--Section 1869(b)(1)(F)(ii) (42 
     U.S.C. 1395ff(b)(1)(F)(ii)) is amended to read as follows:
       ``(ii) Reference to expedited access to judicial review.--
     For the provision relating to expedited access to judicial 
     review, see paragraph (2).''.
       (b) Application to Provider Agreement Determinations.--
     Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
       (1) by inserting ``(A)'' after ``(h)(1)''; and
       (2) by adding at the end the following new subparagraph:
       ``(B) An institution or agency described in subparagraph 
     (A) that has filed for a hearing under subparagraph (A) shall 
     have expedited access to judicial review under this 
     subparagraph in the same manner as providers of services, 
     suppliers, and individuals entitled

[[Page S15457]]

     to benefits under part A or enrolled under part B, or both, 
     may obtain expedited access to judicial review under the 
     process established under section 1869(b)(2). Nothing in this 
     subparagraph shall be construed to affect the application of 
     any remedy imposed under section 1819 during the pendency of 
     an appeal under this subparagraph.''.
       (c) Expedited Review of Certain Provider Agreement 
     Determinations.--
       (1) Termination and certain other immediate remedies.--
     Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1)), as amended by 
     subsection (b), is amended by adding at the end the following 
     new subparagraph:
       ``(C)(i) The Secretary shall develop and implement a 
     process to expedite proceedings under this subsection in 
     which--
       ``(I) the remedy of termination of participation has been 
     imposed;
       ``(II) a remedy described in clause (i) or (iii) of section 
     1819(h)(2)(B) has been imposed, but only if such remedy has 
     been imposed on an immediate basis; or
       ``(III) a determination has been made as to a finding of 
     substandard quality of care that results in the loss of 
     approval of a skilled nursing facility's nurse aide training 
     program.
       ``(ii) Under such process under clause (i), priority shall 
     be provided in cases of termination described in clause 
     (i)(I).
       ``(iii) Nothing in this subparagraph shall be construed to 
     affect the application of any remedy imposed under section 
     1819 during the pendency of an appeal under this 
     subparagraph.''.
       (2) Waiver of disapproval of nurse-aide training 
     programs.--Sections 1819(f)(2) and section 1919(f)(2) (42 
     U.S.C. 1395i-3(f)(2) and 1396r(f)(2)) are each amended--
       (A) in subparagraph (B)(iii), by striking ``subparagraph 
     (C)'' and inserting ``subparagraphs (C) and (D)''; and
       (B) by adding at the end the following new subparagraph:
       ``(D) Waiver of disapproval of nurse-aide training 
     programs.--Upon application of a nursing facility, the 
     Secretary may waive the application of subparagraph 
     (B)(iii)(I)(c) if the imposition of the civil monetary 
     penalty was not related to the quality of care provided to 
     residents of the facility. Nothing in this subparagraph shall 
     be construed as eliminating any requirement upon a facility 
     to pay a civil monetary penalty described in the preceding 
     sentence.''.
       (3) Increased financial support.--In addition to any 
     amounts otherwise appropriated, to reduce by 50 percent the 
     average time for administrative determinations on appeals 
     under section 1866(h) of the Social Security Act (42 U.S.C. 
     1395cc(h)), there are authorized to be appropriated (in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund, established under section 1817 of the Social Security 
     Act (42 U.S.C. 1395i), and the Federal Supplementary Medical 
     Insurance Trust Fund, established under section 1841 of such 
     Act (42 U.S.C. 1395t)) to the Secretary such additional sums 
     for fiscal year 2004 and each subsequent fiscal year as may 
     be necessary. The purposes for which such amounts are 
     available include increasing the number of administrative law 
     judges (and their staffs) and the appellate level staff at 
     the Departmental Appeals Board of the Department of Health 
     and Human Services and educating such judges and staffs on 
     long-term care issues.
       (d) Effective Date.--The amendments made by this section 
     shall apply to appeals filed on or after October 1, 2004.

     SEC. 533. REVISIONS TO MEDICARE APPEALS PROCESS.

       (a) Requiring Full and Early Presentation of Evidence.--
       (1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as 
     amended by section 532(a), is further amended by adding at 
     the end the following new paragraph:
       ``(3) Requiring full and early presentation of evidence by 
     providers.--A provider of services or supplier may not 
     introduce evidence in any appeal under this section that was 
     not presented at the reconsideration conducted by the 
     qualified independent contractor under subsection (c), unless 
     there is good cause which precluded the introduction of such 
     evidence at or before that reconsideration.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2004.
       (b) Use of Patients' Medical Records.--Section 
     1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)) is amended by 
     inserting ``(including the medical records of the individual 
     involved)'' after ``clinical experience''.
       (c) Notice Requirements for Medicare Appeals.--
       (1) Initial determinations and redeterminations.--Section 
     1869(a) (42 U.S.C. 1395ff(a)) is amended by adding at the end 
     the following new paragraphs:
       ``(4) Requirements of notice of determinations.--With 
     respect to an initial determination insofar as it results in 
     a denial of a claim for benefits--
       ``(A) the written notice on the determination shall 
     include--
       ``(i) the reasons for the determination, including whether 
     a local medical review policy or a local coverage 
     determination was used;
       ``(ii) the procedures for obtaining additional information 
     concerning the determination, including the information 
     described in subparagraph (B); and
       ``(iii) notification of the right to seek a redetermination 
     or otherwise appeal the determination and instructions on how 
     to initiate such a redetermination under this section;
       ``(B) such written notice shall be provided in printed form 
     and written in a manner calculated to be understood by the 
     individual entitled to benefits under part A or enrolled 
     under part B, or both; and
       ``(C) the individual provided such written notice may 
     obtain, upon request, information on the specific provision 
     of the policy, manual, or regulation used in making the 
     redetermination.
       ``(5) Requirements of notice of redeterminations.--With 
     respect to a redetermination insofar as it results in a 
     denial of a claim for benefits--
       ``(A) the written notice on the redetermination shall 
     include--
       ``(i) the specific reasons for the redetermination;
       ``(ii) as appropriate, a summary of the clinical or 
     scientific evidence used in making the redetermination;
       ``(iii) a description of the procedures for obtaining 
     additional information concerning the redetermination; and
       ``(iv) notification of the right to appeal the 
     redetermination and instructions on how to initiate such an 
     appeal under this section;
       ``(B) such written notice shall be provided in printed form 
     and written in a manner calculated to be understood by the 
     individual entitled to benefits under part A or enrolled 
     under part B, or both; and
       ``(C) the individual provided such written notice may 
     obtain, upon request, information on the specific provision 
     of the policy, manual, or regulation used in making the 
     redetermination.''.
       (2) Reconsiderations.--Section 1869(c)(3)(E) (42 U.S.C. 
     1395ff(c)(3)(E)) is amended--
       (A) by inserting ``be written in a manner calculated to be 
     understood by the individual entitled to benefits under part 
     A or enrolled under part B, or both, and shall include (to 
     the extent appropriate)'' after ``in writing,''; and
       (B) by inserting ``and a notification of the right to 
     appeal such determination and instructions on how to initiate 
     such appeal under this section'' after ``such decision,''.
       (3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)) is 
     amended--
       (A) in the heading, by inserting ``; Notice'' after 
     ``Secretary''; and
       (B) by adding at the end the following new paragraph:
       ``(4) Notice.--Notice of the decision of an administrative 
     law judge shall be in writing in a manner calculated to be 
     understood by the individual entitled to benefits under part 
     A or enrolled under part B, or both, and shall include--
       ``(A) the specific reasons for the determination 
     (including, to the extent appropriate, a summary of the 
     clinical or scientific evidence used in making the 
     determination);
       ``(B) the procedures for obtaining additional information 
     concerning the decision; and
       ``(C) notification of the right to appeal the decision and 
     instructions on how to initiate such an appeal under this 
     section.''.
       (4) Submission of record for appeal.--Section 
     1869(c)(3)(J)(i) (42 U.S.C. 1395ff(c)(3)(J)(i)) is amended by 
     striking ``prepare'' and inserting ``submit'' and by striking 
     ``with respect to'' and all that follows through ``and 
     relevant policies''.
       (d) Qualified Independent Contractors.--
       (1) Eligibility requirements of qualified independent 
     contractors.--Section 1869(c)(3) (42 U.S.C. 1395ff(c)(3)) is 
     amended--
       (A) in subparagraph (A), by striking ``sufficient training 
     and expertise in medical science and legal matters'' and 
     inserting ``sufficient medical, legal, and other expertise 
     (including knowledge of the program under this title) and 
     sufficient staffing''; and
       (B) by adding at the end the following new subparagraph:
       ``(K) Independence requirements.--
       ``(i) In general.--Subject to clause (ii), a qualified 
     independent contractor shall not conduct any activities in a 
     case unless the entity--

       ``(I) is not a related party (as defined in subsection 
     (g)(5));
       ``(II) does not have a material familial, financial, or 
     professional relationship with such a party in relation to 
     such case; and
       ``(III) does not otherwise have a conflict of interest with 
     such a party.

       ``(ii) Exception for reasonable compensation.--Nothing in 
     clause (i) shall be construed to prohibit receipt by a 
     qualified independent contractor of compensation from the 
     Secretary for the conduct of activities under this section if 
     the compensation is provided consistent with clause (iii).
       ``(iii) Limitations on entity compensation.--Compensation 
     provided by the Secretary to a qualified independent 
     contractor in connection with reviews under this section 
     shall not be contingent on any decision rendered by the 
     contractor or by any reviewing professional.''.
       (2) Eligibility requirements for reviewers.--Section 1869 
     (42 U.S.C. 1395ff) is amended--
       (A) by amending subsection (c)(3)(D) to read as follows:
       ``(D) Qualifications for reviewers.--The requirements of 
     subsection (g) shall be met (relating to qualifications of 
     reviewing professionals).''; and
       (B) by adding at the end the following new subsection:
       ``(g) Qualifications of Reviewers.--
       ``(1) In general.--In reviewing determinations under this 
     section, a qualified independent contractor shall assure 
     that--

[[Page S15458]]

       ``(A) each individual conducting a review shall meet the 
     qualifications of paragraph (2);
       ``(B) compensation provided by the contractor to each such 
     reviewer is consistent with paragraph (3); and
       ``(C) in the case of a review by a panel described in 
     subsection (c)(3)(B) composed of physicians or other health 
     care professionals (each in this subsection referred to as a 
     `reviewing professional'), a reviewing professional meets the 
     qualifications described in paragraph (4) and, where a claim 
     is regarding the furnishing of treatment by a physician 
     (allopathic or osteopathic) or the provision of items or 
     services by a physician (allopathic or osteopathic), a 
     reviewing professional shall be a physician (allopathic or 
     osteopathic).
       ``(2) Independence.--
       ``(A) In general.--Subject to subparagraph (B), each 
     individual conducting a review in a case shall--
       ``(i) not be a related party (as defined in paragraph (5));
       ``(ii) not have a material familial, financial, or 
     professional relationship with such a party in the case under 
     review; and
       ``(iii) not otherwise have a conflict of interest with such 
     a party.
       ``(B) Exception.--Nothing in subparagraph (A) shall be 
     construed to--
       ``(i) prohibit an individual, solely on the basis of a 
     participation agreement with a fiscal intermediary, carrier, 
     or other contractor, from serving as a reviewing professional 
     if--

       ``(I) the individual is not involved in the provision of 
     items or services in the case under review;
       ``(II) the fact of such an agreement is disclosed to the 
     Secretary and the individual entitled to benefits under part 
     A or enrolled under part B, or both, or such individual's 
     authorized representative, and neither party objects; and
       ``(III) the individual is not an employee of the 
     intermediary, carrier, or contractor and does not provide 
     services exclusively or primarily to or on behalf of such 
     intermediary, carrier, or contractor;

       ``(ii) prohibit an individual who has staff privileges at 
     the institution where the treatment involved takes place from 
     serving as a reviewer merely on the basis of having such 
     staff privileges if the existence of such privileges is 
     disclosed to the Secretary and such individual (or authorized 
     representative), and neither party objects; or
       ``(iii) prohibit receipt of compensation by a reviewing 
     professional from a contractor if the compensation is 
     provided consistent with paragraph (3).

     For purposes of this paragraph, the term `participation 
     agreement' means an agreement relating to the provision of 
     health care services by the individual and does not include 
     the provision of services as a reviewer under this 
     subsection.
       ``(3) Limitations on reviewer compensation.--Compensation 
     provided by a qualified independent contractor to a reviewer 
     in connection with a review under this section shall not be 
     contingent on the decision rendered by the reviewer.
       ``(4) Licensure and expertise.--Each reviewing professional 
     shall be--
       ``(A) a physician (allopathic or osteopathic) who is 
     appropriately credentialed or licensed in one or more States 
     to deliver health care services and has medical expertise in 
     the field of practice that is appropriate for the items or 
     services at issue; or
       ``(B) a health care professional who is legally authorized 
     in one or more States (in accordance with State law or the 
     State regulatory mechanism provided by State law) to furnish 
     the health care items or services at issue and has medical 
     expertise in the field of practice that is appropriate for 
     such items or services.
       ``(5) Related party defined.--For purposes of this section, 
     the term `related party' means, with respect to a case under 
     this title involving a specific individual entitled to 
     benefits under part A or enrolled under part B, or both, any 
     of the following:
       ``(A) The Secretary, the medicare administrative contractor 
     involved, or any fiduciary, officer, director, or employee of 
     the Department of Health and Human Services, or of such 
     contractor.
       ``(B) The individual (or authorized representative).
       ``(C) The health care professional that provides the items 
     or services involved in the case.
       ``(D) The institution at which the items or services (or 
     treatment) involved in the case are provided.
       ``(E) The manufacturer of any drug or other item that is 
     included in the items or services involved in the case.
       ``(F) Any other party determined under any regulations to 
     have a substantial interest in the case involved.''.
       (3) Reducing minimum number of qualified independent 
     contractors.--Section 1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is 
     amended by striking ``not fewer than 12 qualified independent 
     contractors under this subsection'' and inserting ``with a 
     sufficient number of qualified independent contractors (but 
     not fewer than 4 such contractors) to conduct 
     reconsiderations consistent with the timeframes applicable 
     under this subsection''.
       (4) Effective date.--The amendments made by paragraphs (1) 
     and (2) shall be effective as if included in the enactment of 
     the respective provisions of subtitle C of title V of BIPA 
     (114 Stat. 2763A-534).
       (5) Transition.--In applying section 1869(g) of the Social 
     Security Act (as added by paragraph (2)), any reference to a 
     medicare administrative contractor shall be deemed to include 
     a reference to a fiscal intermediary under section 1816 of 
     the Social Security Act (42 U.S.C. 1395h) and a carrier under 
     section 1842 of such Act (42 U.S.C. 1395u).

     SEC. 534. PREPAYMENT REVIEW.

       (a) In General.--Section 1874A, as added by section 
     511(a)(1) and as amended by sections 912(b), 921(b)(1), and 
     921(c)(1), is further amended by adding at the end the 
     following new subsection:
       ``(h) Conduct of Prepayment Review.--
       ``(1) Conduct of random prepayment review.--
       ``(A) In general.--A medicare administrative contractor may 
     conduct random prepayment review only to develop a 
     contractor-wide or program-wide claims payment error rates or 
     under such additional circumstances as may be provided under 
     regulations, developed in consultation with providers of 
     services and suppliers.
       ``(B) Use of standard protocols when conducting prepayment 
     reviews.--When a medicare administrative contractor conducts 
     a random prepayment review, the contractor may conduct such 
     review only in accordance with a standard protocol for random 
     prepayment audits developed by the Secretary.
       ``(C) Construction.--Nothing in this paragraph shall be 
     construed as preventing the denial of payments for claims 
     actually reviewed under a random prepayment review.
       ``(D) Random prepayment review.--For purposes of this 
     subsection, the term `random prepayment review' means a 
     demand for the production of records or documentation absent 
     cause with respect to a claim.
       ``(2) Limitations on non-random prepayment review.--
       ``(A) Limitations on initiation of non-random prepayment 
     review.--A medicare administrative contractor may not 
     initiate non-random prepayment review of a provider of 
     services or supplier based on the initial identification by 
     that provider of services or supplier of an improper billing 
     practice unless there is a likelihood of sustained or high 
     level of payment error under section 1893(f)(3)(A).
       ``(B) Termination of non-random prepayment review.--The 
     Secretary shall issue regulations relating to the 
     termination, including termination dates, of non-random 
     prepayment review. Such regulations may vary such a 
     termination date based upon the differences in the 
     circumstances triggering prepayment review.''.
       (b) Effective Date.--
       (1) In general.--Except as provided in this subsection, the 
     amendment made by subsection (a) shall take effect 1 year 
     after the date of the enactment of this Act.
       (2) Deadline for promulgation of certain regulations.--The 
     Secretary shall first issue regulations under section 
     1874A(h) of the Social Security Act, as added by subsection 
     (a), by not later than 1 year after the date of the enactment 
     of this Act.
       (3) Application of standard protocols for random prepayment 
     review.--Section 1874A(h)(1)(B) of the Social Security Act, 
     as added by subsection (a), shall apply to random prepayment 
     reviews conducted on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary shall specify.
       (c) Application to Fiscal Intermediaries and Carriers.--The 
     provisions of section 1874A(h) of the Social Security Act, as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.

     SEC. 535. RECOVERY OF OVERPAYMENTS.

       (a) In General.--Section 1893 (42 U.S.C. 1395ddd) is 
     amended by adding at the end the following new subsection:
       ``(f) Recovery of Overpayments.--
       ``(1) Use of repayment plans.--
       ``(A) In general.--If the repayment, within 30 days by a 
     provider of services or supplier, of an overpayment under 
     this title would constitute a hardship (as described in 
     subparagraph (B)), subject to subparagraph (C), upon request 
     of the provider of services or supplier the Secretary shall 
     enter into a plan with the provider of services or supplier 
     for the repayment (through offset or otherwise) of such 
     overpayment over a period of at least 6 months but not longer 
     than 3 years (or not longer than 5 years in the case of 
     extreme hardship, as determined by the Secretary). Interest 
     shall accrue on the balance through the period of repayment. 
     Such plan shall meet terms and conditions determined to be 
     appropriate by the Secretary.
       ``(B) Hardship.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     repayment of an overpayment (or overpayments) within 30 days 
     is deemed to constitute a hardship if--

       ``(I) in the case of a provider of services that files cost 
     reports, the aggregate amount of the overpayments exceeds 10 
     percent of the amount paid under this title to the provider 
     of services for the cost reporting period covered by the most 
     recently submitted cost report; or
       ``(II) in the case of another provider of services or 
     supplier, the aggregate amount of the overpayments exceeds 10 
     percent of the amount paid under this title to the provider 
     of services or supplier for the previous calendar year.

[[Page S15459]]

       ``(ii) Rule of application.--The Secretary shall establish 
     rules for the application of this subparagraph in the case of 
     a provider of services or supplier that was not paid under 
     this title during the previous year or was paid under this 
     title only during a portion of that year.
       ``(iii) Treatment of previous overpayments.--If a provider 
     of services or supplier has entered into a repayment plan 
     under subparagraph (A) with respect to a specific overpayment 
     amount, such payment amount under the repayment plan shall 
     not be taken into account under clause (i) with respect to 
     subsequent overpayment amounts.
       ``(C) Exceptions.--Subparagraph (A) shall not apply if--
       ``(i) the Secretary has reason to suspect that the provider 
     of services or supplier may file for bankruptcy or otherwise 
     cease to do business or discontinue participation in the 
     program under this title; or
       ``(ii) there is an indication of fraud or abuse committed 
     against the program.
       ``(D) Immediate collection if violation of repayment 
     plan.--If a provider of services or supplier fails to make a 
     payment in accordance with a repayment plan under this 
     paragraph, the Secretary may immediately seek to offset or 
     otherwise recover the total balance outstanding (including 
     applicable interest) under the repayment plan.
       ``(E) Relation to no fault provision.--Nothing in this 
     paragraph shall be construed as affecting the application of 
     section 1870(c) (relating to no adjustment in the cases of 
     certain overpayments).
       ``(2) Limitation on recoupment.--
       ``(A) In general.--In the case of a provider of services or 
     supplier that is determined to have received an overpayment 
     under this title and that seeks a reconsideration by a 
     qualified independent contractor on such determination under 
     section 1869(b)(1), the Secretary may not take any action (or 
     authorize any other person, including any medicare 
     contractor, as defined in subparagraph (C)) to recoup the 
     overpayment until the date the decision on the 
     reconsideration has been rendered. If the provisions of 
     section 1869(b)(1) (providing for such a reconsideration by a 
     qualified independent contractor) are not in effect, in 
     applying the previous sentence any reference to such a 
     reconsideration shall be treated as a reference to a 
     redetermination by the fiscal intermediary or carrier 
     involved.
       ``(B) Collection with interest.--Insofar as the 
     determination on such appeal is against the provider of 
     services or supplier, interest on the overpayment shall 
     accrue on and after the date of the original notice of 
     overpayment. Insofar as such determination against the 
     provider of services or supplier is later reversed, the 
     Secretary shall provide for repayment of the amount recouped 
     plus interest at the same rate as would apply under the 
     previous sentence for the period in which the amount was 
     recouped.
       ``(C) Medicare contractor defined.--For purposes of this 
     subsection, the term `medicare contractor' has the meaning 
     given such term in section 1889(g).
       ``(3) Limitation on use of extrapolation.--A medicare 
     contractor may not use extrapolation to determine overpayment 
     amounts to be recovered by recoupment, offset, or otherwise 
     unless the Secretary determines that--
       ``(A) there is a sustained or high level of payment error; 
     or
       ``(B) documented educational intervention has failed to 
     correct the payment error.

     There shall be no administrative or judicial review under 
     section 1869, section 1878, or otherwise, of determinations 
     by the Secretary of sustained or high levels of payment 
     errors under this paragraph.
       ``(4) Provision of supporting documentation.--In the case 
     of a provider of services or supplier with respect to which 
     amounts were previously overpaid, a medicare contractor may 
     request the periodic production of records or supporting 
     documentation for a limited sample of submitted claims to 
     ensure that the previous practice is not continuing.
       ``(5) Consent settlement reforms.--
       ``(A) In general.--The Secretary may use a consent 
     settlement (as defined in subparagraph (D)) to settle a 
     projected overpayment.
       ``(B) Opportunity to submit additional information before 
     consent settlement offer.--Before offering a provider of 
     services or supplier a consent settlement, the Secretary 
     shall--
       ``(i) communicate to the provider of services or supplier--

       ``(I) that, based on a review of the medical records 
     requested by the Secretary, a preliminary evaluation of those 
     records indicates that there would be an overpayment;
       ``(II) the nature of the problems identified in such 
     evaluation; and
       ``(III) the steps that the provider of services or supplier 
     should take to address the problems; and

       ``(ii) provide for a 45-day period during which the 
     provider of services or supplier may furnish additional 
     information concerning the medical records for the claims 
     that had been reviewed.
       ``(C) Consent settlement offer.--The Secretary shall review 
     any additional information furnished by the provider of 
     services or supplier under subparagraph (B)(ii). Taking into 
     consideration such information, the Secretary shall determine 
     if there still appears to be an overpayment. If so, the 
     Secretary--
       ``(i) shall provide notice of such determination to the 
     provider of services or supplier, including an explanation of 
     the reason for such determination; and
       ``(ii) in order to resolve the overpayment, may offer the 
     provider of services or supplier--

       ``(I) the opportunity for a statistically valid random 
     sample; or
       ``(II) a consent settlement.

     The opportunity provided under clause (ii)(I) does not waive 
     any appeal rights with respect to the alleged overpayment 
     involved.
       ``(D) Consent settlement defined.--For purposes of this 
     paragraph, the term `consent settlement' means an agreement 
     between the Secretary and a provider of services or supplier 
     whereby both parties agree to settle a projected overpayment 
     based on less than a statistically valid sample of claims and 
     the provider of services or supplier agrees not to appeal the 
     claims involved.
       ``(6) Notice of over-utilization of codes.--The Secretary 
     shall establish, in consultation with organizations 
     representing the classes of providers of services and 
     suppliers, a process under which the Secretary provides for 
     notice to classes of providers of services and suppliers 
     served by the contractor in cases in which the contractor has 
     identified that particular billing codes may be overutilized 
     by that class of providers of services or suppliers under the 
     programs under this title (or provisions of title XI insofar 
     as they relate to such programs).
       ``(7) Payment audits.--
       ``(A) Written notice for post-payment audits.--Subject to 
     subparagraph (C), if a medicare contractor decides to conduct 
     a post-payment audit of a provider of services or supplier 
     under this title, the contractor shall provide the provider 
     of services or supplier with written notice (which may be in 
     electronic form) of the intent to conduct such an audit.
       ``(B) Explanation of findings for all audits.--Subject to 
     subparagraph (C), if a medicare contractor audits a provider 
     of services or supplier under this title, the contractor 
     shall--
       ``(i) give the provider of services or supplier a full 
     review and explanation of the findings of the audit in a 
     manner that is understandable to the provider of services or 
     supplier and permits the development of an appropriate 
     corrective action plan;
       ``(ii) inform the provider of services or supplier of the 
     appeal rights under this title as well as consent settlement 
     options (which are at the discretion of the Secretary);
       ``(iii) give the provider of services or supplier an 
     opportunity to provide additional information to the 
     contractor; and
       ``(iv) take into account information provided, on a timely 
     basis, by the provider of services or supplier under clause 
     (iii).
       ``(C) Exception.--Subparagraphs (A) and (B) shall not apply 
     if the provision of notice or findings would compromise 
     pending law enforcement activities, whether civil or 
     criminal, or reveal findings of law enforcement-related 
     audits.
       ``(8) Standard methodology for probe sampling.--The 
     Secretary shall establish a standard methodology for medicare 
     contractors to use in selecting a sample of claims for review 
     in the case of an abnormal billing pattern.''.
       (b) Effective Dates and Deadlines.--
       (1) Use of repayment plans.--Section 1893(f)(1) of the 
     Social Security Act, as added by subsection (a), shall apply 
     to requests for repayment plans made after the date of the 
     enactment of this Act.
       (2) Limitation on recoupment.--Section 1893(f)(2) of the 
     Social Security Act, as added by subsection (a), shall apply 
     to actions taken after the date of the enactment of this Act.
       (3) Use of extrapolation.--Section 1893(f)(3) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     statistically valid random samples initiated after the date 
     that is 1 year after the date of the enactment of this Act.
       (4) Provision of supporting documentation.--Section 
     1893(f)(4) of the Social Security Act, as added by subsection 
     (a), shall take effect on the date of the enactment of this 
     Act.
       (5) Consent settlement.--Section 1893(f)(5) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     consent settlements entered into after the date of the 
     enactment of this Act.
       (6) Notice of overutilization.--Not later than 1 year after 
     the date of the enactment of this Act, the Secretary shall 
     first establish the process for notice of overutilization of 
     billing codes under section 1893A(f)(6) of the Social 
     Security Act, as added by subsection (a).
       (7) Payment audits.--Section 1893A(f)(7) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     audits initiated after the date of the enactment of this Act.
       (8) Standard for abnormal billing patterns.--Not later than 
     1 year after the date of the enactment of this Act, the 
     Secretary shall first establish a standard methodology for 
     selection of sample claims for abnormal billing patterns 
     under section 1893(f)(8) of the Social Security Act, as added 
     by subsection (a).

     SEC. 536. PROVIDER ENROLLMENT PROCESS; RIGHT OF APPEAL.

       (a) In General.--Section 1866 (42 U.S.C. 1395cc) is 
     amended--
       (1) by adding at the end of the heading the following: ``; 
     enrollment processes''; and
       (2) by adding at the end the following new subsection:

[[Page S15460]]

       ``(j) Enrollment Process for Providers of Services and 
     Suppliers.--
       ``(1) Enrollment process.--
       ``(A) In general.--The Secretary shall establish by 
     regulation a process for the enrollment of providers of 
     services and suppliers under this title.
       ``(B) Deadlines.--The Secretary shall establish by 
     regulation procedures under which there are deadlines for 
     actions on applications for enrollment (and, if applicable, 
     renewal of enrollment). The Secretary shall monitor the 
     performance of medicare administrative contractors in meeting 
     the deadlines established under this subparagraph.
       ``(C) Consultation before changing provider enrollment 
     forms.--The Secretary shall consult with providers of 
     services and suppliers before making changes in the provider 
     enrollment forms required of such providers and suppliers to 
     be eligible to submit claims for which payment may be made 
     under this title.
       ``(2) Hearing rights in cases of denial or non-renewal.--A 
     provider of services or supplier whose application to enroll 
     (or, if applicable, to renew enrollment) under this title is 
     denied may have a hearing and judicial review of such denial 
     under the procedures that apply under subsection (h)(1)(A) to 
     a provider of services that is dissatisfied with a 
     determination by the Secretary.''.
       (b) Effective Dates.--
       (1) Enrollment process.--The Secretary shall provide for 
     the establishment of the enrollment process under section 
     1866(j)(1) of the Social Security Act, as added by subsection 
     (a)(2), within 6 months after the date of the enactment of 
     this Act.
       (2) Consultation.--Section 1866(j)(1)(C) of the Social 
     Security Act, as added by subsection (a)(2), shall apply with 
     respect to changes in provider enrollment forms made on or 
     after January 1, 2004.
       (3) Hearing rights.--Section 1866(j)(2) of the Social 
     Security Act, as added by subsection (a)(2), shall apply to 
     denials occurring on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary specifies.

     SEC. 537. PROCESS FOR CORRECTION OF MINOR ERRORS AND 
                   OMISSIONS WITHOUT PURSUING APPEALS PROCESS.

       (a) Claims.--The Secretary shall develop, in consultation 
     with appropriate medicare contractors (as defined in section 
     1889(g) of the Social Security Act, as inserted by section 
     301(a)(1)) and representatives of providers of services and 
     suppliers, a process whereby, in the case of minor errors or 
     omissions (as defined by the Secretary) that are detected in 
     the submission of claims under the programs under title XVIII 
     of such Act, a provider of services or supplier is given an 
     opportunity to correct such an error or omission without the 
     need to initiate an appeal. Such process shall include the 
     ability to resubmit corrected claims.
       (b) Deadline.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall first develop the 
     process under subsection (a).

     SEC. 538. PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND 
                   SERVICES; ADVANCE BENEFICIARY NOTICES.

       (a) In General.--Section 1869 (42 U.S.C. 1395ff(b)), as 
     amended by section 533(d)(2)(B), is further amended by adding 
     at the end the following new subsection:
       ``(h) Prior Determination Process for Certain Items and 
     Services.--
       ``(1) Establishment of process.--
       ``(A) In general.--With respect to a medicare 
     administrative contractor that has a contract under section 
     1874A that provides for making payments under this title with 
     respect to physicians' services (as defined in section 
     1848(j)(3)), the Secretary shall establish a prior 
     determination process that meets the requirements of this 
     subsection and that shall be applied by such contractor in 
     the case of eligible requesters.
       ``(B) Eligible requester.--For purposes of this subsection, 
     each of the following shall be an eligible requester:
       ``(i) A participating physician, but only with respect to 
     physicians' services to be furnished to an individual who is 
     entitled to benefits under this title and who has consented 
     to the physician making the request under this subsection for 
     those physicians' services.
       ``(ii) An individual entitled to benefits under this title, 
     but only with respect to a physicians' service for which the 
     individual receives, from a physician, an advance beneficiary 
     notice under section 1879(a).
       ``(2) Secretarial flexibility.--The Secretary shall 
     establish by regulation reasonable limits on the physicians' 
     services for which a prior determination of coverage may be 
     requested under this subsection. In establishing such limits, 
     the Secretary may consider the dollar amount involved with 
     respect to the physicians' service, administrative costs and 
     burdens, and other relevant factors.
       ``(3) Request for prior determination.--
       ``(A) In general.--Subject to paragraph (2), under the 
     process established under this subsection an eligible 
     requester may submit to the contractor a request for a 
     determination, before the furnishing of a physicians' 
     service, as to whether the physicians' service is covered 
     under this title consistent with the applicable requirements 
     of section 1862(a)(1)(A) (relating to medical necessity).
       ``(B) Accompanying documentation.--The Secretary may 
     require that the request be accompanied by a description of 
     the physicians' service, supporting documentation relating to 
     the medical necessity for the physicians' service, and any 
     other appropriate documentation. In the case of a request 
     submitted by an eligible requester who is described in 
     paragraph (1)(B)(ii), the Secretary may require that the 
     request also be accompanied by a copy of the advance 
     beneficiary notice involved.
       ``(4) Response to request.--
       ``(A) In general.--Under such process, the contractor shall 
     provide the eligible requester with written notice of a 
     determination as to whether--
       ``(i) the physicians' service is so covered;
       ``(ii) the physicians' service is not so covered; or
       ``(iii) the contractor lacks sufficient information to make 
     a coverage determination with respect to the physicians' 
     service.
       ``(B) Contents of notice for certain determinations.--
       ``(i) Noncoverage.--If the contractor makes the 
     determination described in subparagraph (A)(ii), the 
     contractor shall include in the notice a brief explanation of 
     the basis for the determination, including on what national 
     or local coverage or noncoverage determination (if any) the 
     determination is based, and a description of any applicable 
     rights under subsection (a).
       ``(ii) Insufficient information.--If the contractor makes 
     the determination described in subparagraph (A)(iii), the 
     contractor shall include in the notice a description of the 
     additional information required to make the coverage 
     determination.
       ``(C) Deadline to respond.--Such notice shall be provided 
     within the same time period as the time period applicable to 
     the contractor providing notice of initial determinations on 
     a claim for benefits under subsection (a)(2)(A).
       ``(D) Informing beneficiary in case of physician request.--
     In the case of a request by a participating physician under 
     paragraph (1)(B)(i), the process shall provide that the 
     individual to whom the physicians' service is proposed to be 
     furnished shall be informed of any determination described in 
     subparagraph (A)(ii) (relating to a determination of non-
     coverage) and the right (referred to in paragraph (6)(B)) to 
     obtain the physicians' service and have a claim submitted for 
     the physicians' service.
       ``(5) Binding nature of positive determination.--If the 
     contractor makes the determination described in paragraph 
     (4)(A)(i), such determination shall be binding on the 
     contractor in the absence of fraud or evidence of 
     misrepresentation of facts presented to the contractor.
       ``(6) Limitation on further review.--
       ``(A) In general.--Contractor determinations described in 
     paragraph (4)(A)(ii) or (4)(A)(iii) (relating to pre-service 
     claims) are not subject to further administrative appeal or 
     judicial review under this section or otherwise.
       ``(B) Decision not to seek prior determination or negative 
     determination does not impact right to obtain services, seek 
     reimbursement, or appeal rights.--Nothing in this subsection 
     shall be construed as affecting the right of an individual 
     who--
       ``(i) decides not to seek a prior determination under this 
     subsection with respect to physicians' services; or
       ``(ii) seeks such a determination and has received a 
     determination described in paragraph (4)(A)(ii),

     from receiving (and submitting a claim for) such physicians' 
     services and from obtaining administrative or judicial review 
     respecting such claim under the other applicable provisions 
     of this section. Failure to seek a prior determination under 
     this subsection with respect to physicians' service shall not 
     be taken into account in such administrative or judicial 
     review.
       ``(C) No prior determination after receipt of services.--
     Once an individual is provided physicians' services, there 
     shall be no prior determination under this subsection with 
     respect to such physicians' services.''.
       (b) Effective Date; Sunset; Transition.--
       (1) Effective date.--The Secretary shall establish the 
     prior determination process under the amendment made by 
     subsection (a) in such a manner as to provide for the 
     acceptance of requests for determinations under such process 
     filed not later than 18 months after the date of the 
     enactment of this Act.
       (2) Sunset.--Such prior determination process shall not 
     apply to requests filed after the end of the 5-year period 
     beginning on the first date on which requests for 
     determinations under such process are accepted.
       (3) Transition.--During the period in which the amendment 
     made by subsection (a) has become effective but contracts are 
     not provided under section 1874A of the Social Security Act 
     with medicare administrative contractors, any reference in 
     section 1869(g) of such Act (as added by such amendment) to 
     such a contractor is deemed a reference to a fiscal 
     intermediary or carrier with an agreement under section 1816, 
     or contract under section 1842, respectively, of such Act.
       (4) Limitation on application to sgr.--For purposes of 
     applying section 1848(f)(2)(D) of the Social Security Act (42 
     U.S.C. 1395w-4(f)(2)(D)), the amendment made by subsection 
     (a) shall not be considered to be a change in law or 
     regulation.
       (c) Provisions Relating to Advance Beneficiary Notices; 
     Report on Prior Determination Process.--

[[Page S15461]]

       (1) Data collection.--The Secretary shall establish a 
     process for the collection of information on the instances in 
     which an advance beneficiary notice (as defined in paragraph 
     (5)) has been provided and on instances in which a 
     beneficiary indicates on such a notice that the beneficiary 
     does not intend to seek to have the item or service that is 
     the subject of the notice furnished.
       (2) Outreach and education.--The Secretary shall establish 
     a program of outreach and education for beneficiaries and 
     providers of services and other persons on the appropriate 
     use of advance beneficiary notices and coverage policies 
     under the medicare program.
       (3) GAO report on use of advance beneficiary notices.--Not 
     later than 18 months after the date on which section 1869(h) 
     of the Social Security Act (as added by subsection (a)) takes 
     effect, the Comptroller General of the United States shall 
     submit to Congress a report on the use of advance beneficiary 
     notices under title XVIII of such Act. Such report shall 
     include information concerning the providers of services and 
     other persons that have provided such notices and the 
     response of beneficiaries to such notices.
       (4) GAO report on use of prior determination process.--Not 
     later than 36 months after the date on which section 1869(h) 
     of the Social Security Act (as added by subsection (a)) takes 
     effect, the Comptroller General of the United States shall 
     submit to Congress a report on the use of the prior 
     determination process under such section. Such report shall 
     include--
       (A) information concerning--
       (i) the number and types of procedures for which a prior 
     determination has been sought;
       (ii) determinations made under the process;
       (iii) the percentage of beneficiaries prevailing;
       (iv) in those cases in which the beneficiaries do not 
     prevail, the reasons why such beneficiaries did not prevail; 
     and
       (v) changes in receipt of services resulting from the 
     application of such process;
       (B) an evaluation of whether the process was useful for 
     physicians (and other suppliers) and beneficiaries, whether 
     it was timely, and whether the amount of information required 
     was burdensome to physicians and beneficiaries; and
       (C) recommendations for improvements or continuation of 
     such process.
       (5) Advance beneficiary notice defined.--In this 
     subsection, the term ``advance beneficiary notice'' means a 
     written notice provided under section 1879(a) of the Social 
     Security Act (42 U.S.C. 1395pp(a)) to an individual entitled 
     to benefits under part A or enrolled under part B of title 
     XVIII of such Act before items or services are furnished 
     under such part in cases where a provider of services or 
     other person that would furnish the item or service believes 
     that payment will not be made for some or all of such items 
     or services under such title.

     SEC. 539. APPEALS BY PROVIDERS WHEN THERE IS NO OTHER PARTY 
                   AVAILABLE.

       (a) In General.--Section 1870 (42 U.S.C. 1395gg) is amended 
     by adding at the end the following new subsection:
       ``(h) Notwithstanding subsection (f) or any other provision 
     of law, the Secretary shall permit a provider of services or 
     supplier to appeal any determination of the Secretary under 
     this title relating to services rendered under this title to 
     an individual who subsequently dies if there is no other 
     party available to appeal such determination.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act 
     and shall apply to items and services furnished on or after 
     such date.

     SEC. 540. REVISIONS TO APPEALS TIMEFRAMES AND AMOUNTS.

       (a) Timeframes.--Section 1869 (42 U.S.C. 1395ff) is 
     amended--
       (1) in subsection (a)(3)(C)(ii), by striking ``30-day 
     period'' each place it appears and inserting ``60-day 
     period''; and
       (2) in subsection (c)(3)(C)(i), by striking ``30-day 
     period'' and inserting ``60-day period''.
       (b) Amounts.--
       (1) In general.--Section 1869(b)(1)(E) (42 U.S.C. 
     1395ff(b)(1)(E)) is amended by adding at the end the 
     following new clause:
       ``(iii) Adjustment of dollar amounts.--For requests for 
     hearings or judicial review made in a year after 2004, the 
     dollar amounts specified in clause (i) shall be equal to such 
     dollar amounts increased by the percentage increase in the 
     medical care component of the consumer price index for all 
     urban consumers (U.S. city average) for July 2003 to the July 
     preceding the year involved. Any amount determined under the 
     previous sentence that is not a multiple of $10 shall be 
     rounded to the nearest multiple of $10.''.
       (2) Conforming amendments.--(A) Section 1852(g)(5) (42 
     U.S.C. 1395w-22(g)(5)) is amended by adding at the end the 
     following: ``The provisions of section 1869(b)(1)(E)(iii) 
     shall apply with respect to dollar amounts specified in the 
     first 2 sentences of this paragraph in the same manner as 
     they apply to the dollar amounts specified in section 
     1869(b)(1)(E)(i).''.
       (B) Section 1876(b)(5)(B) (42 U.S.C. 1395mm(b)(5)(B)) is 
     amended by adding at the end the following: ``The provisions 
     of section 1869(b)(1)(E)(iii) shall apply with respect to 
     dollar amounts specified in the first 2 sentences of this 
     subparagraph in the same manner as they apply to the dollar 
     amounts specified in section 1869(b)(1)(E)(i).''.

     SEC. 540A. MEDIATION PROCESS FOR LOCAL COVERAGE 
                   DETERMINATIONS.

       (a) In General.--Section 1869 (42 U.S.C. 1395ff), as 
     amended by section 538(a), is amended by adding at the end 
     the following new subsection:
       ``(i) Mediation Process for Local Coverage 
     Determinations.--
       ``(1) Establishment of process.--The Secretary shall 
     establish a mediation process under this subsection through 
     the use of a physician trained in mediation and employed by 
     the Centers for Medicare & Medicaid Services.
       ``(2) Responsibility of mediator.--Under the process 
     established in paragraph (1), such a mediator shall mediate 
     in disputes between groups representing providers of 
     services, suppliers (as defined in section 1861(d)), and the 
     medical director for a medicare administrative contractor 
     whenever the regional administrator (as defined by the 
     Secretary) involved determines that there was a systematic 
     pattern and a large volume of complaints from such groups 
     regarding decisions of such director or there is a complaint 
     from the co-chair of the advisory committee for that 
     contractor to such regional administrator regarding such 
     dispute.''.
       (b) Inclusion in mac contracts.--Section 1874A(b)(3)(A)(i), 
     as added by section 511(a)(1), is amended by adding at the 
     end the following: ``Such requirements shall include specific 
     performance duties expected of a medical director of a 
     medicare administrative contractor, including requirements 
     relating to professional relations and the availability of 
     such director to conduct medical determination activities 
     within the jurisdiction of such a contractor.''.

                  Subtitle E--Miscellaneous Provisions

     SEC. 541. POLICY DEVELOPMENT REGARDING EVALUATION AND 
                   MANAGEMENT (E & M) DOCUMENTATION GUIDELINES.

       (a) In General.--The Secretary may not implement any new or 
     modified documentation guidelines (which for purposes of this 
     section includes clinical examples) for evaluation and 
     management physician services under the title XVIII of the 
     Social Security Act on or after the date of the enactment of 
     this Act unless the Secretary--
       (1) has developed the guidelines in collaboration with 
     practicing physicians (including both generalists and 
     specialists) and provided for an assessment of the proposed 
     guidelines by the physician community;
       (2) has established a plan that contains specific goals, 
     including a schedule, for improving the use of such 
     guidelines;
       (3) has conducted appropriate and representative pilot 
     projects under subsection (b) to test such guidelines;
       (4) finds, based on reports submitted under subsection 
     (b)(5) with respect to pilot projects conducted for such or 
     related guidelines, that the objectives described in 
     subsection (c) will be met in the implementation of such 
     guidelines; and
       (5) has established, and is implementing, a program to 
     educate physicians on the use of such guidelines and that 
     includes appropriate outreach.

     The Secretary shall make changes to the manner in which 
     existing evaluation and management documentation guidelines 
     are implemented to reduce paperwork burdens on physicians.
       (b) Pilot Projects to Test Modified or New Evaluation and 
     Management Documentation Guidelines.--
       (1) In general.--With respect to proposed new or modified 
     documentation guidelines referred to in subsection (a), the 
     Secretary shall conduct under this subsection appropriate and 
     representative pilot projects to test the proposed 
     guidelines.
       (2) Length and consultation.--Each pilot project under this 
     subsection shall--
       (A) be voluntary;
       (B) be of sufficient length as determined by the Secretary 
     (but in no case to exceed 1 year) to allow for preparatory 
     physician and medicare contractor education, analysis, and 
     use and assessment of potential evaluation and management 
     guidelines; and
       (C) be conducted, in development and throughout the 
     planning and operational stages of the project, in 
     consultation with practicing physicians (including both 
     generalists and specialists).
       (3) Range of pilot projects.--Of the pilot projects 
     conducted under this subsection with respect to proposed new 
     or modified documentation guidelines--
       (A) at least one shall focus on a peer review method by 
     physicians (not employed by a medicare contractor) which 
     evaluates medical record information for claims submitted by 
     physicians identified as statistical outliers relative to 
     codes used for billing purposes for such services;
       (B) at least one shall focus on an alternative method to 
     detailed guidelines based on physician documentation of face 
     to face encounter time with a patient;
       (C) at least one shall be conducted for services furnished 
     in a rural area and at least one for services furnished 
     outside such an area; and
       (D) at least one shall be conducted in a setting where 
     physicians bill under physicians' services in teaching 
     settings and at least one shall be conducted in a setting 
     other than a teaching setting.
       (4) Study of impact.--Each pilot project shall examine the 
     effect of the proposed guidelines on--

[[Page S15462]]

       (A) different types of physician practices, including those 
     with fewer than 10 full-time-equivalent employees (including 
     physicians); and
       (B) the costs of physician compliance, including education, 
     implementation, auditing, and monitoring.
       (5) Report on pilot projects.--Not later than 6 months 
     after the date of completion of pilot projects carried out 
     under this subsection with respect to a proposed guideline 
     described in paragraph (1), the Secretary shall submit to 
     Congress a report on the pilot projects. Each such report 
     shall include a finding by the Secretary of whether the 
     objectives described in subsection (c) will be met in the 
     implementation of such proposed guideline.
       (c) Objectives for Evaluation and Management Guidelines.--
     The objectives for modified evaluation and management 
     documentation guidelines developed by the Secretary shall be 
     to--
       (1) identify clinically relevant documentation needed to 
     code accurately and assess coding levels accurately;
       (2) decrease the level of non-clinically pertinent and 
     burdensome documentation time and content in the physician's 
     medical record;
       (3) increase accuracy by reviewers; and
       (4) educate both physicians and reviewers.
       (d) Study of Simpler, Alternative Systems of Documentation 
     for Physician Claims.--
       (1) Study.--The Secretary shall carry out a study of the 
     matters described in paragraph (2).
       (2) Matters described.--The matters referred to in 
     paragraph (1) are--
       (A) the development of a simpler, alternative system of 
     requirements for documentation accompanying claims for 
     evaluation and management physician services for which 
     payment is made under title XVIII of the Social Security Act; 
     and
       (B) consideration of systems other than current coding and 
     documentation requirements for payment for such physician 
     services.
       (3) Consultation with practicing physicians.--In designing 
     and carrying out the study under paragraph (1), the Secretary 
     shall consult with practicing physicians, including 
     physicians who are part of group practices and including both 
     generalists and specialists.
       (4) Application of hipaa uniform coding requirements.--In 
     developing an alternative system under paragraph (2), the 
     Secretary shall consider requirements of administrative 
     simplification under part C of title XI of the Social 
     Security Act.
       (5) Report to congress.--(A) Not later than October 1, 
     2005, the Secretary shall submit to Congress a report on the 
     results of the study conducted under paragraph (1).
       (B) The Medicare Payment Advisory Commission shall conduct 
     an analysis of the results of the study included in the 
     report under subparagraph (A) and shall submit a report on 
     such analysis to Congress.
       (e) Study on Appropriate Coding of Certain Extended Office 
     Visits.--The Secretary shall conduct a study of the 
     appropriateness of coding in cases of extended office visits 
     in which there is no diagnosis made. Not later than October 
     1, 2005, the Secretary shall submit a report to Congress on 
     such study and shall include recommendations on how to code 
     appropriately for such visits in a manner that takes into 
     account the amount of time the physician spent with the 
     patient.
       (f) Definitions.--In this section--
       (1) the term ``rural area'' has the meaning given that term 
     in section 1886(d)(2)(D) of the Social Security Act (42 
     U.S.C. 1395ww(d)(2)(D)); and
       (2) the term ``teaching settings'' are those settings 
     described in section 415.150 of title 42, Code of Federal 
     Regulations.

     SEC. 542. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND 
                   COVERAGE.

       (a) Council for Technology and Innovation.--Section 1868 
     (42 U.S.C. 1395ee), as amended by section 521(a), is amended 
     by adding at the end the following new subsection:
       ``(c) Council for Technology and Innovation.--
       ``(1) Establishment.--The Secretary shall establish a 
     Council for Technology and Innovation within the Centers for 
     Medicare & Medicaid Services (in this section referred to as 
     `CMS').
       ``(2) Composition.--The Council shall be composed of senior 
     CMS staff and clinicians and shall be chaired by the 
     Executive Coordinator for Technology and Innovation 
     (appointed or designated under paragraph (4)).
       ``(3) Duties.--The Council shall coordinate the activities 
     of coverage, coding, and payment processes under this title 
     with respect to new technologies and procedures, including 
     new drug therapies, and shall coordinate the exchange of 
     information on new technologies between CMS and other 
     entities that make similar decisions.
       ``(4) Executive coordinator for technology and 
     innovation.--The Secretary shall appoint (or designate) a 
     noncareer appointee (as defined in section 3132(a)(7) of 
     title 5, United States Code) who shall serve as the Executive 
     Coordinator for Technology and Innovation. Such executive 
     coordinator shall report to the Administrator of CMS, shall 
     chair the Council, shall oversee the execution of its duties, 
     and shall serve as a single point of contact for outside 
     groups and entities regarding the coverage, coding, and 
     payment processes under this title.''.
       (b) Methods for Determining Payment Basis for New Lab 
     Tests.--Section 1833(h) (42 U.S.C. 1395l(h)) is amended by 
     adding at the end the following:
       ``(8)(A) The Secretary shall establish by regulation 
     procedures for determining the basis for, and amount of, 
     payment under this subsection for any clinical diagnostic 
     laboratory test with respect to which a new or substantially 
     revised HCPCS code is assigned on or after January 1, 2005 
     (in this paragraph referred to as `new tests').
       ``(B) Determinations under subparagraph (A) shall be made 
     only after the Secretary--
       ``(i) makes available to the public (through an Internet 
     website and other appropriate mechanisms) a list that 
     includes any such test for which establishment of a payment 
     amount under this subsection is being considered for a year;
       ``(ii) on the same day such list is made available, causes 
     to have published in the Federal Register notice of a meeting 
     to receive comments and recommendations (and data on which 
     recommendations are based) from the public on the appropriate 
     basis under this subsection for establishing payment amounts 
     for the tests on such list;
       ``(iii) not less than 30 days after publication of such 
     notice convenes a meeting, that includes representatives of 
     officials of the Centers for Medicare & Medicaid Services 
     involved in determining payment amounts, to receive such 
     comments and recommendations (and data on which the 
     recommendations are based);
       ``(iv) taking into account the comments and recommendations 
     (and accompanying data) received at such meeting, develops 
     and makes available to the public (through an Internet 
     website and other appropriate mechanisms) a list of proposed 
     determinations with respect to the appropriate basis for 
     establishing a payment amount under this subsection for each 
     such code, together with an explanation of the reasons for 
     each such determination, the data on which the determinations 
     are based, and a request for public written comments on the 
     proposed determination; and
       ``(v) taking into account the comments received during the 
     public comment period, develops and makes available to the 
     public (through an Internet website and other appropriate 
     mechanisms) a list of final determinations of the payment 
     amounts for such tests under this subsection, together with 
     the rationale for each such determination, the data on which 
     the determinations are based, and responses to comments and 
     suggestions received from the public.
       ``(C) Under the procedures established pursuant to 
     subparagraph (A), the Secretary shall--
       ``(i) set forth the criteria for making determinations 
     under subparagraph (A); and
       ``(ii) make available to the public the data (other than 
     proprietary data) considered in making such determinations.
       ``(D) The Secretary may convene such further public 
     meetings to receive public comments on payment amounts for 
     new tests under this subsection as the Secretary deems 
     appropriate.
       ``(E) For purposes of this paragraph:
       ``(i) The term `HCPCS' refers to the Health Care Procedure 
     Coding System.
       ``(ii) A code shall be considered to be `substantially 
     revised' if there is a substantive change to the definition 
     of the test or procedure to which the code applies (such as a 
     new analyte or a new methodology for measuring an existing 
     analyte-specific test).''.
       (c) GAO Study on Improvements in External Data Collection 
     for Use in the Medicare Inpatient Payment System.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study that analyzes which external data can 
     be collected in a shorter timeframe by the Centers for 
     Medicare & Medicaid Services for use in computing payments 
     for inpatient hospital services. The study may include an 
     evaluation of the feasibility and appropriateness of using 
     quarterly samples or special surveys or any other methods. 
     The study shall include an analysis of whether other 
     executive agencies, such as the Bureau of Labor Statistics in 
     the Department of Commerce, are best suited to collect this 
     information.
       (2) Report.--By not later than October 1, 2004, the 
     Comptroller General shall submit a report to Congress on the 
     study under paragraph (1).

     SEC. 543. TREATMENT OF HOSPITALS FOR CERTAIN SERVICES UNDER 
                   MEDICARE SECONDARY PAYOR (MSP) PROVISIONS.

       (a) In General.--The Secretary shall not require a hospital 
     (including a critical access hospital) to ask questions (or 
     obtain information) relating to the application of section 
     1862(b) of the Social Security Act (relating to medicare 
     secondary payor provisions) in the case of reference 
     laboratory services described in subsection (b), if the 
     Secretary does not impose such requirement in the case of 
     such services furnished by an independent laboratory.
       (b) Reference Laboratory Services Described.--Reference 
     laboratory services described in this subsection are clinical 
     laboratory diagnostic tests (or the interpretation of such 
     tests, or both) furnished without a face-to-face encounter 
     between the individual entitled to benefits under part A or 
     enrolled under part B, or both, and the hospital involved and 
     in which the hospital submits a claim only for such test or 
     interpretation.

[[Page S15463]]

     SEC. 544. EMTALA IMPROVEMENTS.

       (a) Payment for EMTALA-Mandated Screening and Stabilization 
     Services.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) For purposes of subsection (a)(1)(A), in the case of 
     any item or service that is required to be provided pursuant 
     to section 1867 to an individual who is entitled to benefits 
     under this title, determinations as to whether the item or 
     service is reasonable and necessary shall be made on the 
     basis of the information available to the treating physician 
     or practitioner (including the patient's presenting symptoms 
     or complaint) at the time the item or service was ordered or 
     furnished by the physician or practitioner (and not on the 
     patient's principal diagnosis). When making such 
     determinations with respect to such an item or service, the 
     Secretary shall not consider the frequency with which the 
     item or service was provided to the patient before or after 
     the time of the admission or visit.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to items and services furnished on or after 
     January 1, 2004.
       (b) Notification of Providers When EMTALA Investigation 
     Closed.--Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Notice upon closing an investigation.--The Secretary 
     shall establish a procedure to notify hospitals and 
     physicians when an investigation under this section is 
     closed.''.
       (c) Prior Review by Peer Review Organizations in EMTALA 
     Cases Involving Termination of Participation.--
       (1) In general.--Section 1867(d)(3) (42 U.S.C. 
     1395dd(d)(3)) is amended--
       (A) in the first sentence, by inserting ``or in terminating 
     a hospital's participation under this title'' after ``in 
     imposing sanctions under paragraph (1)''; and
       (B) by adding at the end the following new sentences: 
     ``Except in the case in which a delay would jeopardize the 
     health or safety of individuals, the Secretary shall also 
     request such a review before making a compliance 
     determination as part of the process of terminating a 
     hospital's participation under this title for violations 
     related to the appropriateness of a medical screening 
     examination, stabilizing treatment, or an appropriate 
     transfer as required by this section, and shall provide a 
     period of 5 days for such review. The Secretary shall provide 
     a copy of the organization's report to the hospital or 
     physician consistent with confidentiality requirements 
     imposed on the organization under such part B.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to terminations of participation initiated on or 
     after the date of the enactment of this Act.

     SEC. 545. EMERGENCY MEDICAL TREATMENT AND LABOR ACT (EMTALA) 
                   TECHNICAL ADVISORY GROUP.

       (a) Establishment.--The Secretary shall establish a 
     Technical Advisory Group (in this section referred to as the 
     ``Advisory Group'') to review issues related to the Emergency 
     Medical Treatment and Labor Act (EMTALA) and its 
     implementation. In this section, the term ``EMTALA'' refers 
     to the provisions of section 1867 of the Social Security Act 
     (42 U.S.C. 1395dd).
       (b) Membership.--The Advisory Group shall be composed of 19 
     members, including the Administrator of the Centers for 
     Medicare & Medicaid Services and the Inspector General of the 
     Department of Health and Human Services and of which--
       (1) 4 shall be representatives of hospitals, including at 
     least one public hospital, that have experience with the 
     application of EMTALA and at least 2 of which have not been 
     cited for EMTALA violations;
       (2) 7 shall be practicing physicians drawn from the fields 
     of emergency medicine, cardiology or cardiothoracic surgery, 
     orthopedic surgery, neurosurgery, pediatrics or a pediatric 
     subspecialty, obstetrics-gynecology, and psychiatry, with not 
     more than one physician from any particular field;
       (3) 2 shall represent patients;
       (4) 2 shall be staff involved in EMTALA investigations from 
     different regional offices of the Centers for Medicare & 
     Medicaid Services; and
       (5) 1 shall be from a State survey office involved in 
     EMTALA investigations and 1 shall be from a peer review 
     organization, both of whom shall be from areas other than the 
     regions represented under paragraph (4).
     In selecting members described in paragraphs (1) through (3), 
     the Secretary shall consider qualified individuals nominated 
     by organizations representing providers and patients.
       (c) General Responsibilities.--The Advisory Group--
       (1) shall review EMTALA regulations;
       (2) may provide advice and recommendations to the Secretary 
     with respect to those regulations and their application to 
     hospitals and physicians;
       (3) shall solicit comments and recommendations from 
     hospitals, physicians, and the public regarding the 
     implementation of such regulations; and
       (4) may disseminate information on the application of such 
     regulations to hospitals, physicians, and the public.
       (d) Administrative Matters.--
       (1) Chairperson.--The members of the Advisory Group shall 
     elect a member to serve as chairperson of the Advisory Group 
     for the life of the Advisory Group.
       (2) Meetings.--The Advisory Group shall first meet at the 
     direction of the Secretary. The Advisory Group shall then 
     meet twice per year and at such other times as the Advisory 
     Group may provide.
       (e) Termination.--The Advisory Group shall terminate 30 
     months after the date of its first meeting.
       (f) Waiver of Administrative Limitation.--The Secretary 
     shall establish the Advisory Group notwithstanding any 
     limitation that may apply to the number of advisory 
     committees that may be established (within the Department of 
     Health and Human Services or otherwise).

     SEC. 546. AUTHORIZING USE OF ARRANGEMENTS TO PROVIDE CORE 
                   HOSPICE SERVICES IN CERTAIN CIRCUMSTANCES.

       (a) In General.--Section 1861(dd)(5) (42 U.S.C. 
     1395x(dd)(5)) is amended by adding at the end the following:
       ``(D) In extraordinary, exigent, or other non-routine 
     circumstances, such as unanticipated periods of high patient 
     loads, staffing shortages due to illness or other events, or 
     temporary travel of a patient outside a hospice program's 
     service area, a hospice program may enter into arrangements 
     with another hospice program for the provision by that other 
     program of services described in paragraph (2)(A)(ii)(I). The 
     provisions of paragraph (2)(A)(ii)(II) shall apply with 
     respect to the services provided under such arrangements.
       ``(E) A hospice program may provide services described in 
     paragraph (1)(A) other than directly by the program if the 
     services are highly specialized services of a registered 
     professional nurse and are provided non-routinely and so 
     infrequently so that the provision of such services directly 
     would be impracticable and prohibitively expensive.''.
       (b) Conforming Payment Provision.--Section 1814(i) (42 
     U.S.C. 1395f(i)), as amended by section 212(b), is amended by 
     adding at the end the following new paragraph:
       ``(5) In the case of hospice care provided by a hospice 
     program under arrangements under section 1861(dd)(5)(D) made 
     by another hospice program, the hospice program that made the 
     arrangements shall bill and be paid for the hospice care.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to hospice care provided on or after the date of 
     the enactment of this Act.

     SEC. 547. APPLICATION OF OSHA BLOODBORNE PATHOGENS STANDARD 
                   TO CERTAIN HOSPITALS.

       (a) In General.--Section 1866 (42 U.S.C. 1395cc), as 
     amended by section 206, is amended--
       (1) in subsection (a)(1)--
       (A) in subparagraph (T), by striking ``and'' at the end;
       (B) in subparagraph (U), by striking the period at the end 
     and inserting ``, and''; and
       (C) by inserting after subparagraph (U) the following new 
     subparagraph:
       ``(V) in the case of hospitals that are not otherwise 
     subject to the Occupational Safety and Health Act of 1970 (or 
     a State occupational safety and health plan that is approved 
     under 18(b) of such Act), to comply with the Bloodborne 
     Pathogens standard under section 1910.1030 of title 29 of the 
     Code of Federal Regulations (or as subsequently 
     redesignated).''; and
       (2) by adding at the end of subsection (b) the following 
     new paragraph:
       ``(4)(A) A hospital that fails to comply with the 
     requirement of subsection (a)(1)(V) (relating to the 
     Bloodborne Pathogens standard) is subject to a civil money 
     penalty in an amount described in subparagraph (B), but is 
     not subject to termination of an agreement under this 
     section.
       ``(B) The amount referred to in subparagraph (A) is an 
     amount that is similar to the amount of civil penalties that 
     may be imposed under section 17 of the Occupational Safety 
     and Health Act of 1970 for a violation of the Bloodborne 
     Pathogens standard referred to in subsection (a)(1)(U) by a 
     hospital that is subject to the provisions of such Act.
       ``(C) A civil money penalty under this paragraph shall be 
     imposed and collected in the same manner as civil money 
     penalties under subsection (a) of section 1128A are imposed 
     and collected under that section.''.
       (b) Effective Date.--The amendments made by this subsection 
     (a) shall apply to hospitals as of July 1, 2004.

     SEC. 548. BIPA-RELATED TECHNICAL AMENDMENTS AND CORRECTIONS.

       (a) Technical Amendments Relating to Advisory Committee 
     Under BIPA Section 522.--(1) Subsection (i) of section 1114 
     (42 U.S.C. 1314)--
       (A) is transferred to section 1862 and added at the end of 
     such section; and
       (B) is redesignated as subsection (j).
       (2) Section 1862 (42 U.S.C. 1395y) is amended--
       (A) in the last sentence of subsection (a), by striking 
     ``established under section 1114(f)''; and
       (B) in subsection (j), as so transferred and redesignated--
       (i) by striking ``under subsection (f)''; and
       (ii) by striking ``section 1862(a)(1)'' and inserting 
     ``subsection (a)(1)''.
       (b) Terminology Corrections.--(1) Section 1869(c)(3)(I)(ii) 
     (42 U.S.C. 1395ff(c)(3)(I)(ii)) is amended--
       (A) in subclause (III), by striking ``policy'' and 
     inserting ``determination''; and
       (B) in subclause (IV), by striking ``medical review 
     policies'' and inserting ``coverage determinations''.
       (2) Section 1852(a)(2)(C) (42 U.S.C. 1395w-22(a)(2)(C)) is 
     amended by striking ``policy''

[[Page S15464]]

     and ``policy'' and inserting ``determination'' each place it 
     appears and ``determination'', respectively.
       (c) Reference Corrections.--Section 1869(f)(4) (42 U.S.C. 
     1395ff(f)(4)) is amended--
       (1) in subparagraph (A)(iv), by striking ``subclause (I), 
     (II), or (III)'' and inserting ``clause (i), (ii), or 
     (iii)'';
       (2) in subparagraph (B), by striking ``clause (i)(IV)'' and 
     ``clause (i)(III)'' and inserting ``subparagraph (A)(iv)'' 
     and ``subparagraph (A)(iii)'', respectively; and
       (3) in subparagraph (C), by striking ``clause (i)'', 
     ``subclause (IV)'' and ``subparagraph (A)'' and inserting 
     ``subparagraph (A)'', ``clause (iv)'' and ``paragraph 
     (1)(A)'', respectively each place it appears.
       (d) Other Corrections.--Effective as if included in the 
     enactment of section 221(c) of BIPA, section 1154(e) (42 
     U.S.C. 1320c-3(e)) is amended by striking paragraph (5).
       (e) Effective Date.--Except as otherwise provided, the 
     amendments made by this section shall be effective as if 
     included in the enactment of BIPA.

     SEC. 549. CONFORMING AUTHORITY TO WAIVE A PROGRAM EXCLUSION.

       The first sentence of section 1128(c)(3)(B) (42 U.S.C. 
     1320a-7(c)(3)(B)) is amended to read as follows: ``Subject to 
     subparagraph (G), in the case of an exclusion under 
     subsection (a), the minimum period of exclusion shall be not 
     less than five years, except that, upon the request of the 
     administrator of a Federal health care program (as defined in 
     section 1128B(f)) who determines that the exclusion would 
     impose a hardship on individuals entitled to benefits under 
     part A of title XVIII or enrolled under part B of such title, 
     or both, the Secretary may, after consulting with the 
     Inspector General of the Department of Health and Human 
     Services, waive the exclusion under subsection (a)(1), 
     (a)(3), or (a)(4) with respect to that program in the case of 
     an individual or entity that is the sole community physician 
     or sole source of essential specialized services in a 
     community.''.

     SEC. 550. TREATMENT OF CERTAIN DENTAL CLAIMS.

       (a) In General.--Section 1862 (42 U.S.C. 1395y) is amended 
     by adding at the end, after the subsection transferred and 
     redesignated by section 548(a), the following new subsection:
       ``(k)(1) Subject to paragraph (2), a group health plan (as 
     defined in subsection (a)(1)(A)(v)) providing supplemental or 
     secondary coverage to individuals also entitled to services 
     under this title shall not require a medicare claims 
     determination under this title for dental benefits 
     specifically excluded under subsection (a)(12) as a condition 
     of making a claims determination for such benefits under the 
     group health plan.
       ``(2) A group health plan may require a claims 
     determination under this title in cases involving or 
     appearing to involve inpatient dental hospital services or 
     dental services expressly covered under this title pursuant 
     to actions taken by the Secretary.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date that is 60 days after the date 
     of the enactment of this Act.

     SEC. 551. FURNISHING HOSPITALS WITH INFORMATION TO COMPUTE 
                   DSH FORMULA.

       Beginning not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall arrange to furnish 
     to subsection (d) hospitals (as defined in section 
     1886(d)(1)(B) of the Social Security Act, 42 U.S.C. 
     1395ww(d)(1)(B)) the data necessary for such hospitals to 
     compute the number of patient days used in computing the 
     disproportionate patient percentage under such section for 
     that hospital for the current cost reporting year. Such data 
     shall also be furnished to other hospitals which would 
     qualify for additional payments under part A of title XVIII 
     of the Social Security Act on the basis of such data.

     SEC. 552. REVISIONS TO REASSIGNMENT PROVISIONS.

       (a) In General.--Section 1842(b)(6)(A) (42 U.S.C. 
     1395u(b)(6)(A)) is amended by striking ``or (ii) (where the 
     service was provided in a hospital, critical access hospital, 
     clinic, or other facility) to the facility in which the 
     service was provided if there is a contractual arrangement 
     between such physician or other person and such facility 
     under which such facility submits the bill for such 
     service,'' and inserting ``or (ii) where the service was 
     provided under a contractual arrangement between such 
     physician or other person and an entity, to the entity if, 
     under the contractual arrangement, the entity submits the 
     bill for the service and the contractual arrangement meets 
     such program integrity and other safeguards as the Secretary 
     may determine to be appropriate,''.
       (b) Conforming Amendment.--The second sentence of section 
     1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended by striking 
     ``except to an employer or facility as described in clause 
     (A)'' and inserting ``except to an employer or entity as 
     described in subparagraph (A)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to payments made on or after the date of the 
     enactment of this Act.

     SEC. 553. OTHER PROVISIONS.

       (a) GAO Reports on the Physician Compensation.--
       (1) Sustainable growth rate and updates.--Not later than 6 
     months after the date of the enactment of this Act, the 
     Comptroller General of the United States shall submit to 
     Congress a report on the appropriateness of the updates in 
     the conversion factor under subsection (d)(3) of section 1848 
     of the Social Security Act (42 U.S.C. 1395w-4), including the 
     appropriateness of the sustainable growth rate formula under 
     subsection (f) of such section for 2002 and succeeding years. 
     Such report shall examine the stability and predictability of 
     such updates and rate and alternatives for the use of such 
     rate in the updates.
       (2) Physician compensation generally.--Not later than 12 
     months after the date of the enactment of this Act, the 
     Comptroller General shall submit to Congress a report on all 
     aspects of physician compensation for services furnished 
     under title XVIII of the Social Security Act, and how those 
     aspects interact and the effect on appropriate compensation 
     for physician services. Such report shall review alternatives 
     for the physician fee schedule under section 1848 of such 
     title (42 U.S.C. 1395w-4).
       (b) Annual Publication of List of National Coverage 
     Determinations.--The Secretary shall provide, in an 
     appropriate annual publication available to the public, a 
     list of national coverage determinations made under title 
     XVIII of the Social Security Act in the previous year and 
     information on how to get more information with respect to 
     such determinations.
       (c) GAO Report on Flexibility in Applying Home Health 
     Conditions of Participation to Patients Who Are Not Medicare 
     Beneficiaries.--Not later than 6 months after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report on the implications 
     if there were flexibility in the application of the medicare 
     conditions of participation for home health agencies with 
     respect to groups or types of patients who are not medicare 
     beneficiaries. The report shall include an analysis of the 
     potential impact of such flexible application on clinical 
     operations and the recipients of such services and an 
     analysis of methods for monitoring the quality of care 
     provided to such recipients.
       (d) OIG Report on Notices Relating to Use of Hospital 
     Lifetime Reserve Days.--Not later than 1 year after the date 
     of the enactment of this Act, the Inspector General of the 
     Department of Health and Human Services shall submit a report 
     to Congress on--
       (1) the extent to which hospitals provide notice to 
     medicare beneficiaries in accordance with applicable 
     requirements before they use the 60 lifetime reserve days 
     described in section 1812(a)(1) of the Social Security Act 
     (42 U.S.C. 1395d(a)(1)); and
       (2) the appropriateness and feasibility of hospitals 
     providing a notice to such beneficiaries before they 
     completely exhaust such lifetime reserve days.

            TITLE VI--MEDICAID AND MISCELLANEOUS PROVISIONS

                    Subtitle A--Medicaid Provisions

     SEC. 601. MEDICAID DISPROPORTIONATE SHARE HOSPITAL (DSH) 
                   PAYMENTS.

       (a) Temporary Increase.--Section 1923(f)(3) (42 U.S.C. 
     1396r-4(f)(3)) is amended--
       (1) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B) and (C)''; and
       (2) by adding at the end the following new subparagraphs:
       ``(C) Special, temporary increase in allotments on a one-
     time, non-cumulative basis.--The DSH allotment for any State 
     (other than a State with a DSH allotment determined under 
     paragraph (5))--
       ``(i) for fiscal year 2004 is equal to 116 percent of the 
     DSH allotment for the State for fiscal year 2003 under this 
     paragraph, notwithstanding subparagraph (B); and
       ``(ii) for each succeeding fiscal year is equal to the DSH 
     allotment for the State for fiscal year 2004 or, in the case 
     of fiscal years beginning with the fiscal year specified in 
     subparagraph (D) for that State, the DSH allotment for the 
     State for the previous fiscal year increased by the 
     percentage change in the consumer price index for all urban 
     consumers (all items; U.S. city average), for the previous 
     fiscal year.
       ``(D) Fiscal year specified.--For purposes of subparagraph 
     (C)(ii), the fiscal year specified in this subparagraph for a 
     State is the first fiscal year for which the Secretary 
     estimates that the DSH allotment for that State will equal 
     (or no longer exceed) the DSH allotment for that State under 
     the law as in effect before the date of the enactment of this 
     subparagraph.''.
       (b) Increase in Floor for Treatment as a Low DSH State.--
     Section 1923(f)(5) (42 U.S.C. 1396r-4(f)(5)) is amended to 
     read as follows:
       ``(5) Special rule for low dsh states.--In the case of a 
     State in which the total expenditures under the State plan 
     (including Federal and State shares) for disproportionate 
     share hospital adjustments under this section for fiscal year 
     2000, as reported to the Administrator of the Centers for 
     Medicare & Medicaid Services as of August 31, 2003, is 
     greater than 0 but less than 3 percent of the State's total 
     amount of expenditures under the State plan for medical 
     assistance during the fiscal year, the DSH allotment for the 
     State with respect to--
       ``(A) fiscal year 2004 shall be the DSH allotment for the 
     State for fiscal year 2003 increased by 16 percent;
       ``(B) each succeeding fiscal year before fiscal year 2009 
     shall be the DSH allotment for the State for the previous 
     fiscal year increased by 16 percent; and
       ``(C) fiscal year 2009 and any subsequent fiscal year, 
     shall be the DSH allotment for

[[Page S15465]]

     the State for the previous year subject to an increase for 
     inflation as provided in paragraph (3)(A).''.
       (c) Allotment Adjustment.--Section 1923(f) (42 U.S.C. 
     1396r-4(f)) is amended--
       (1) in paragraph (3)(A), by striking ``The DSH'' and 
     inserting ``Except as provided in paragraph (6), the DSH'';
       (2) by redesignating paragraph (6) as paragraph (7); and
       (3) by inserting after paragraph (5) the following:
       ``(6) Allotment adjustment.--Only with respect to fiscal 
     year 2004 or 2005, if a statewide waiver under section 1115 
     is revoked or terminated before the end of either such fiscal 
     year and there is no DSH allotment for the State, the 
     Secretary shall--
       ``(A) permit the State whose waiver was revoked or 
     terminated to submit an amendment to its State plan that 
     would describe the methodology to be used by the State (after 
     the effective date of such revocation or termination) to 
     identify and make payments to disproportionate share 
     hospitals, including children's hospitals and institutions 
     for mental diseases or other mental health facilities (other 
     than State-owned institutions or facilities), on the basis of 
     the proportion of patients served by such hospitals that are 
     low-income patients with special needs; and
       ``(B) provide for purposes of this subsection for 
     computation of an appropriate DSH allotment for the State for 
     fiscal year 2004 or 2005 (or both) that would not exceed the 
     amount allowed under paragraph (3)(B)(ii) and that does not 
     result in greater expenditures under this title than would 
     have been made if such waiver had not been revoked or 
     terminated.

     In determining the amount of an appropriate DSH allotment 
     under subparagraph (B) for a State, the Secretary shall take 
     into account the level of DSH expenditures for the State for 
     the fiscal year preceding the fiscal year in which the waiver 
     commenced.''.
       (d) Increased Reporting and Other Requirements To Ensure 
     the Appropriate Use of Medicaid DSH Payment Adjustments.--
     Section 1923 (42 U.S.C. 1396r-4) is amended by adding at the 
     end the following new subsection:
       ``(j) Annual Reports and Other Requirements Regarding 
     Payment Adjustments.--With respect to fiscal year 2004 and 
     each fiscal year thereafter, the Secretary shall require a 
     State, as a condition of receiving a payment under section 
     1903(a)(1) with respect to a payment adjustment made under 
     this section, to do the following:
       ``(1) Report.--The State shall submit an annual report that 
     includes the following:
       ``(A) An identification of each disproportionate share 
     hospital that received a payment adjustment under this 
     section for the preceding fiscal year and the amount of the 
     payment adjustment made to such hospital for the preceding 
     fiscal year.
       ``(B) Such other information as the Secretary determines 
     necessary to ensure the appropriateness of the payment 
     adjustments made under this section for the preceding fiscal 
     year.
       ``(2) Independent certified audit.--The State shall 
     annually submit to the Secretary an independent certified 
     audit that verifies each of the following:
       ``(A) The extent to which hospitals in the State have 
     reduced their uncompensated care costs to reflect the total 
     amount of claimed expenditures made under this section.
       ``(B) Payments under this section to hospitals that comply 
     with the requirements of subsection (g).
       ``(C) Only the uncompensated care costs of providing 
     inpatient hospital and outpatient hospital services to 
     individuals described in paragraph (1)(A) of such subsection 
     are included in the calculation of the hospital-specific 
     limits under such subsection.
       ``(D) The State included all payments under this title, 
     including supplemental payments, in the calculation of such 
     hospital-specific limits.
       ``(E) The State has separately documented and retained a 
     record of all of its costs under this title, claimed 
     expenditures under this title, uninsured costs in determining 
     payment adjustments under this section, and any payments made 
     on behalf of the uninsured from payment adjustments under 
     this section.''.
       (e) Clarification Regarding Non-Regulation of Transfers.--
       (1) In general.--Nothing in section 1903(w) of the Social 
     Security Act (42 U.S.C. 1396b(w)) shall be construed by the 
     Secretary as prohibiting a State's use of funds as the non-
     Federal share of expenditures under title XIX of such Act 
     where such funds are transferred from or certified by a 
     publicly-owned regional medical center located in another 
     State and described in paragraph (2), so long as the 
     Secretary determines that such use of funds is proper and in 
     the interest of the program under title XIX.
       (2) Center described.--A center described in this paragraph 
     is a publicly-owned regional medical center that--
       (A) provides level 1 trauma and burn care services;
       (B) provides level 3 neonatal care services;
       (C) is obligated to serve all patients, regardless of State 
     of origin;
       (D) is located within a Standard Metropolitan Statistical 
     Area (SMSA) that includes at least 3 States, including the 
     States described in paragraph (1);
       (E) serves as a tertiary care provider for patients 
     residing within a 125 mile radius; and
       (F) meets the criteria for a disproportionate share 
     hospital under section 1923 of such Act in at least one State 
     other than the one in which the center is located.
       (3) Effective period.--This subsection shall apply through 
     December 31, 2005.

     SEC. 602. CLARIFICATION OF INCLUSION OF INPATIENT DRUG PRICES 
                   CHARGED TO CERTAIN PUBLIC HOSPITALS IN THE BEST 
                   PRICE EXEMPTIONS FOR THE MEDICAID DRUG REBATE 
                   PROGRAM.

       (a) In General.--Section 1927(c)(1)(C)(i)(I) (42 U.S.C. 
     1396r-8(c)(1)(C)(i)(I)) is amended by inserting before the 
     semicolon the following: ``(including inpatient prices 
     charged to hospitals described in section 340B(a)(4)(L) of 
     the Public Health Service Act)''.
       (b) Anti-Diversion Protection.--Section 1927(c)(1)(C) (42 
     U.S.C. 1396r-8(c)(1)(C)) is amended by adding at the end the 
     following:
       ``(iii) Application of auditing and recordkeeping 
     requirements.--With respect to a covered entity described in 
     section 340B(a)(4)(L) of the Public Health Service Act, any 
     drug purchased for inpatient use shall be subject to the 
     auditing and recordkeeping requirements described in section 
     340B(a)(5)(C) of the Public Health Service Act.''.

     SEC. 603. EXTENSION OF MORATORIUM.

       (a) In General.--Section 6408(a)(3) of the Omnibus Budget 
     Reconciliation Act of 1989, as amended by section 13642 of 
     the Omnibus Budget Reconciliation Act of 1993 and section 
     4758 of the Balanced Budget Act of 1997, is amended--
       (1) by striking ``until December 31, 2002'', and
       (2) by striking ``Kent Community Hospital Complex in 
     Michigan or.''
       (b) Effective Dates.--
       (1) Permanent extension.--The amendment made by subsection 
     (a)(1) shall take effect as if included in the amendment made 
     by section 4758 of the Balanced Budget Act of 1997.
       (2) Modification.--The amendment made by subsection (a)(2) 
     shall take effect on the date of enactment of this Act.

                  Subtitle B--Miscellaneous Provisions

     SEC. 611. FEDERAL REIMBURSEMENT OF EMERGENCY HEALTH SERVICES 
                   FURNISHED TO UNDOCUMENTED ALIENS.

       (a) Total Amount Available for Allotment.--
       (1) In general.--Out of any funds in the Treasury not 
     otherwise appropriated, there are appropriated to the 
     Secretary $250,000,000 for each of fiscal years 2005 through 
     2008 for the purpose of making allotments under this section 
     for payments to eligible providers in States described in 
     paragraph (1) or (2) of subsection (b).
       (2) Availability.--Funds appropriated under paragraph (1) 
     shall remain available until expended.
       (b) State Allotments.--
       (1) Based on percentage of undocumented aliens.--
       (A) In general.--Out of the amount appropriated under 
     subsection (a) for a fiscal year, the Secretary shall use 
     $167,000,000 of such amount to make allotments for such 
     fiscal year in accordance with subparagraph (B).
       (B) Formula.--The amount of the allotment for payments to 
     eligible providers in each State for a fiscal year shall be 
     equal to the product of--
       (i) the total amount available for allotments under this 
     paragraph for the fiscal year; and
       (ii) the percentage of undocumented aliens residing in the 
     State as compared to the total number of such aliens residing 
     in all States, as determined by the Statistics Division of 
     the Immigration and Naturalization Service, as of January 
     2003, based on the 2000 decennial census.
       (2) Based on number of undocumented alien apprehension 
     states.--
       (A) In general.--Out of the amount appropriated under 
     subsection (a) for a fiscal year, the Secretary shall use 
     $83,000,000 of such amount to make allotments, in addition to 
     amounts allotted under paragraph (1), for such fiscal year 
     for each of the 6 States with the highest number of 
     undocumented alien apprehensions for such fiscal year.
       (B) Determination of allotments.--The amount of the 
     allotment for each State described in subparagraph (A) for a 
     fiscal year shall be equal to the product of--
       (i) the total amount available for allotments under this 
     paragraph for the fiscal year; and
       (ii) the percentage of undocumented alien apprehensions in 
     the State in that fiscal year as compared to the total of 
     such apprehensions for all such States for the preceding 
     fiscal year.
       (C) Data.--For purposes of this paragraph, the highest 
     number of undocumented alien apprehensions for a fiscal year 
     shall be based on the apprehension rates for the 4-
     consecutive-quarter period ending before the beginning of the 
     fiscal year for which information is available for 
     undocumented aliens in such States, as reported by the 
     Department of Homeland Security.
       (c) Use of Funds.--
       (1) Authority to make payments.--From the allotments made 
     for a State under subsection (b) for a fiscal year, the 
     Secretary shall pay the amount (subject to the total amount 
     available from such allotments) determined under paragraph 
     (2) directly to eligible providers located in the State for 
     the provision of eligible services to aliens described in 
     paragraph (5) to the extent that

[[Page S15466]]

     the eligible provider was not otherwise reimbursed (through 
     insurance or otherwise) for such services during that fiscal 
     year.
       (2) Determination of payment amounts.--
       (A) In general.--Subject to subparagraph (B), the payment 
     amount determined under this paragraph shall be an amount 
     determined by the Secretary that is equal to the lesser of--
       (i) the amount that the provider demonstrates was incurred 
     for the provision of such services; or
       (ii) amounts determined under a methodology established by 
     the Secretary for purposes of this subsection.
       (B) Pro-rata reduction.--If the amount of funds allotted to 
     a State under subsection (b) for a fiscal year is 
     insufficient to ensure that each eligible provider in that 
     State receives the amount of payment calculated under 
     subparagraph (A), the Secretary shall reduce that amount of 
     payment with respect to each eligible provider to ensure that 
     the entire amount allotted to the State for that fiscal year 
     is paid to such eligible providers.
       (3) Methodology.--In establishing a methodology under 
     paragraph (2)(A)(ii), the Secretary--
       (A) may establish different methodologies for types of 
     eligible providers;
       (B) may base payments for hospital services on estimated 
     hospital charges, adjusted to estimated cost, through the 
     application of hospital-specific cost-to-charge ratios;
       (C) shall provide for the election by a hospital to receive 
     either payments to the hospital for--
       (i) hospital and physician services; or
       (ii) hospital services and for a portion of the on-call 
     payments made by the hospital to physicians; and
       (D) shall make quarterly payments under this section to 
     eligible providers.

     If a hospital makes the election under subparagraph (C)(i), 
     the hospital shall pass on payments for services of a 
     physician to the physician and may not charge any 
     administrative or other fee with respect to such payments.
       (4) Limitation on use of funds.--Payments made to eligible 
     providers in a State from allotments made under subsection 
     (b) for a fiscal year may only be used for costs incurred in 
     providing eligible services to aliens described in paragraph 
     (5).
       (5) Aliens described.--For purposes of paragraphs (1) and 
     (2), aliens described in this paragraph are any of the 
     following:
       (A) Undocumented aliens.
       (B) Aliens who have been paroled into the United States at 
     a United States port of entry for the purpose of receiving 
     eligible services.
       (B) Mexican citizens permitted to enter the United States 
     for not more than 72 hours under the authority of a biometric 
     machine readable border crossing identification card (also 
     referred to as a ``laser visa'') issued in accordance with 
     the requirements of regulations prescribed under section 
     101(a)(6) of the Immigration and Nationality Act (8 U.S.C. 
     1101(a)(6)).
       (d) Applications; Advance Payments.--
       (1) Deadline for establishment of application process.--
       (A) In general.--Not later than September 1, 2004, the 
     Secretary shall establish a process under which eligible 
     providers located in a State may request payments under 
     subsection (c).
       (B) Inclusion of measures to combat fraud and abuse.--The 
     Secretary shall include in the process established under 
     subparagraph (A) measures to ensure that inappropriate, 
     excessive, or fraudulent payments are not made from the 
     allotments determined under subsection (b), including 
     certification by the eligible provider of the veracity of the 
     payment request.
       (2) Advance payment; retrospective adjustment.--The process 
     established under paragraph (1) may provide for making 
     payments under this section for each quarter of a fiscal year 
     on the basis of advance estimates of expenditures submitted 
     by applicants for such payments and such other investigation 
     as the Secretary may find necessary, and for making 
     reductions or increases in the payments as necessary to 
     adjust for any overpayment or underpayment for prior quarters 
     of such fiscal year.
       (e) Definitions.--In this section:
       (1) Eligible provider.--The term ``eligible provider'' 
     means a hospital, physician, or provider of ambulance 
     services (including an Indian Health Service facility whether 
     operated by the Indian Health Service or by an Indian tribe 
     or tribal organization).
       (2) Eligible services.--The term ``eligible services'' 
     means health care services required by the application of 
     section 1867 of the Social Security Act (42 U.S.C. 1395dd), 
     and related hospital inpatient and outpatient services and 
     ambulance services (as defined by the Secretary).
       (3) Hospital.--The term ``hospital'' has the meaning given 
     such term in section 1861(e) of the Social Security Act (42 
     U.S.C. 1395x(e)), except that such term shall include a 
     critical access hospital (as defined in section 1861(mm)(1) 
     of such Act (42 U.S.C. 1395x(mm)(1)).
       (4) Physician.--The term ``physician'' has the meaning 
     given that term in section 1861(r) of the Social Security Act 
     (42 U.S.C. 1395x(r)).
       (5) Indian tribe; tribal organization.--The terms ``Indian 
     tribe'' and ``tribal organization'' have the meanings given 
     such terms in section 4 of the Indian Health Care Improvement 
     Act (25 U.S.C. 1603).
       (6) State.--The term ``State'' means the 50 States and the 
     District of Columbia.

     SEC. 612. COMMISSION ON SYSTEMIC INTEROPERABILITY.

       (a) Establishment.--The Secretary shall establish a 
     commission to be known as the ``Commission on Systemic 
     Interoperability'' (in this section referred to as the 
     ``Commission'').
       (b) Duties.--
       (1) In general.--The Commission shall develop a 
     comprehensive strategy for the adoption and implementation of 
     health care information technology standards, that includes a 
     timeline and prioritization for such adoption and 
     implementation.
       (2) Considerations.--In developing the comprehensive health 
     care information technology strategy under paragraph (1), the 
     Commission shall consider--
       (A) the costs and benefits of the standards, both financial 
     impact and quality improvement;
       (B) the current demand on industry resources to implement 
     this Act and other electronic standards, including HIPAA 
     standards; and
       (C) the most cost-effective and efficient means for 
     industry to implement the standards.
       (3) Noninterference.--In carrying out this section, the 
     Commission shall not interfere with any standards development 
     of adoption processes underway in the private or public 
     sector and shall not replicate activities related to such 
     standards or the national health information infrastructure 
     underway within the Department of Health and Human Services.
       (4) Report.--Not later than October 31, 2005, the 
     Commission shall submit to the Secretary and to Congress a 
     report describing the strategy developed under paragraph (1), 
     including an analysis of the matters considered under 
     paragraph (2).
       (c) Membership.--
       (1) Number and appointment.--The Commission shall be 
     composed of 11 members appointed as follows:
       (A) The President shall appoint 3 members, one of whom the 
     President shall designate as Chairperson.
       (B) The Majority Leader of the Senate shall appoint 2 
     members.
       (C) The Minority Leader of the Senate shall appoint 2 
     members.
       (D) The Speaker of the House of Representatives shall 
     appoint 2 members.
       (E) The Minority Leader of the House of Representatives 
     shall appoint 2 members.
       (2) Qualifications.--The membership of the Commission shall 
     include individuals with national recognition for their 
     expertise in health finance and economics, health plans and 
     integrated delivery systems, reimbursement of health 
     facilities, practicing physicians, practicing pharmacists, 
     and other providers of health services, health care 
     technology and information systems, and other related fields, 
     who provide a mix of different professionals, broad 
     geographic representation, and a balance between urban and 
     rural representatives.
       (d) Terms.--Each member shall be appointed for the life of 
     the Commission.
       (e) Compensation.--
       (1) Rates of pay.--Members shall each be paid at a rate not 
     to exceed the daily equivalent of the rate of basic pay for 
     level IV of the Executive Schedule for each day (including 
     travel time) during which they are engaged in the actual 
     performance of duties vested in the Commission.
       (2) Prohibition of compensation of federal employees.--
     Members of the Commission who are full-time officers or 
     employees of the United States or Members of Congress may not 
     receive additional pay, allowances, or benefits by reason of 
     their service on the Commission.
       (3) Travel expenses.--Each member shall receive travel 
     expenses, including per diem in lieu of subsistence, in 
     accordance with applicable provisions under subchapter I of 
     chapter 57 of title 5, United States Code.
       (f) Quorum.--A majority of the members of the Commission 
     shall constitute a quorum but a lesser number may hold 
     hearings.
       (g) Director and Staff of Commission; Experts and 
     Consultants.--
       (1) Director.--The Commission shall have a Director who 
     shall be appointed by the Chairperson. The Director shall be 
     paid at a rate not to exceed the rate of basic pay for level 
     IV of the Executive Schedule.
       (2) Staff.--With the approval of the Commission, the 
     Director may appoint and fix the pay of such additional 
     personnel as the Director considers appropriate.
       (3) Applicability of certain civil service laws.--The 
     Director and staff of the Commission may be appointed without 
     regard to the provisions of title 5, United States Code, 
     governing appointments in the competitive service, and may be 
     paid without regard to the provisions of chapter 51 and 
     subchapter III of chapter 53 of that title relating to 
     classification and General Schedule pay rates, except that an 
     individual so appointed may not receive pay in excess of 
     level IV of the Executive Schedule.
       (4) Experts and consultants.--With the approval of the 
     Commission, the Director may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code.
       (5) Staff of federal agencies.--Upon request of the 
     Chairperson, the head of any Federal department or agency may 
     detail, on a reimbursable basis, any of the personnel of

[[Page S15467]]

     that department or agency to the Commission to assist it in 
     carrying out its duties under this Act.
       (h) Powers of Commission.--
       (1) Hearings and sessions.--The Commission may, for the 
     purpose of carrying out this Act, hold hearings, sit and act 
     at times and places, take testimony, and receive evidence as 
     the Commission considers appropriate.
       (2) Powers of members and agents.--Any member or agent of 
     the Commission may, if authorized by the Commission, take any 
     action which the Commission is authorized to take by this 
     section.
       (3) Obtaining official data.--The Commission may secure 
     directly from any department or agency of the United States 
     information necessary to enable it to carry out this Act. 
     Upon request of the Chairperson of the Commission, the head 
     of that department or agency shall furnish that information 
     to the Commission.
       (4) Gifts, bequests, and devises.--The Commission may 
     accept, use, and dispose of gifts, bequests, or devises of 
     services or property, both real and personal, for the purpose 
     of aiding or facilitating the work of the Commission. Gifts, 
     bequests, or devises of money and proceeds from sales of 
     other property received as gifts, bequests, or devises shall 
     be deposited in the Treasury and shall be available for 
     disbursement upon order of the Commission. For purposes of 
     Federal income, estate, and gift taxes, property accepted 
     under this subsection shall be considered as a gift, bequest, 
     or devise to the United States.
       (5) Mails.--The Commission may use the United States mails 
     in the same manner and under the same conditions as other 
     departments and agencies of the United States.
       (6) Administrative support services.--Upon the request of 
     the Commission, the Administrator of General Services shall 
     provide to the Commission, on a reimbursable basis, the 
     administrative support services necessary for the Commission 
     to carry out its responsibilities under this Act.
       (7) Contract authority.--The Commission may enter into 
     contracts or make other arrangements, as may be necessary for 
     the conduct of the work of the Commission (without regard to 
     section 3709 of the Revised Statutes (41 U.S.C. 5)).
       (i) Termination.--The Commission shall terminate on 30 days 
     after submitting its report pursuant to subsection (b)(3).
       (j) Authorization of Appropriations.--There is authorized 
     to be appropriated such sums as may be necessary to carry out 
     this section.

     SEC. 613. RESEARCH ON OUTCOMES OF HEALTH CARE ITEMS AND 
                   SERVICES.

       (a) Research, Demonstrations, and Evaluations.--
       (1) Improvement of effectiveness and efficiency.--
       (A) In general.--To improve the quality, effectiveness, and 
     efficiency of health care delivered pursuant to the programs 
     established under titles XVIII, XIX, and XXI of the Social 
     Security Act, the Secretary acting through the Director of 
     the Agency for Healthcare Research and Quality (in this 
     section referred to as the ``Director''), shall conduct and 
     support research to meet the priorities and requests for 
     scientific evidence and information identified by such 
     programs with respect to--
       (i) the outcomes, comparative clinical effectiveness, and 
     appropriateness of health care items and services (including 
     prescription drugs); and
       (ii) strategies for improving the efficiency and 
     effectiveness of such programs, including the ways in which 
     such items and services are organized, managed, and delivered 
     under such programs.
       (B) Specification.--To respond to priorities and 
     information requests in subparagraph (A), the Secretary may 
     conduct or support, by grant, contract, or interagency 
     agreement, research, demonstrations, evaluations, technology 
     assessments, or other activities, including the provision of 
     technical assistance, scientific expertise, or methodological 
     assistance.
       (2) Priorities.--
       (A) In general.--The Secretary shall establish a process to 
     develop priorities that will guide the research, 
     demonstrations, and evaluation activities undertaken pursuant 
     to this section.
       (B) Initial list.--Not later than 6 months after the date 
     of the enactment of this Act, the Secretary shall establish 
     an initial list of priorities for research related to health 
     care items and services (including prescription drugs).
       (C) Process.--In carrying out subparagraph (A), the 
     Secretary--
       (i) shall ensure that there is broad and ongoing 
     consultation with relevant stakeholders in identifying the 
     highest priorities for research, demonstrations, and 
     evaluations to support and improve the programs established 
     under titles XVIII, XIX, and XXI of the Social Security Act;
       (ii) may include health care items and services which 
     impose a high cost on such programs, as well as those which 
     may be underutilized or overutilized and which may 
     significantly improve the prevention, treatment, or cure of 
     diseases and conditions (including chronic conditions) which 
     impose high direct or indirect costs on patients or society; 
     and
       (iii) shall ensure that the research and activities 
     undertaken pursuant to this section are responsive to the 
     specified priorities and are conducted in a timely manner.
       (3) Evaluation and synthesis of scientific evidence.--
       (A) In general.--The Secretary shall--
       (i) evaluate and synthesize available scientific evidence 
     related to health care items and services (including 
     prescription drugs) identified as priorities in accordance 
     with paragraph (2) with respect to the comparative clinical 
     effectiveness, outcomes, appropriateness, and provision of 
     such items and services (including prescription drugs);
       (ii) identify issues for which existing scientific evidence 
     is insufficient with respect to such health care items and 
     services (including prescription drugs);
       (iii) disseminate to prescription drug plans and MA-PD 
     plans under part D of title XVIII of the Social Security Act, 
     other health plans, and the public the findings made under 
     clauses (i) and (ii); and
       (iv) work in voluntary collaboration with public and 
     private sector entities to facilitate the development of new 
     scientific knowledge regarding health care items and services 
     (including prescription drugs).
       (B) Initial research.--The Secretary shall complete the 
     evaluation and synthesis of the initial research required by 
     the priority list developed under paragraph (2)(B) not later 
     than 18 months after the development of such list.
       (C) Dissemination.--
       (i) In general.--To enhance patient safety and the quality 
     of health care, the Secretary shall make available and 
     disseminate in appropriate formats to prescription drugs 
     plans under part D, and MA-PD plans under part C, of title 
     XVIII of the Social Security Act, other health plans, and the 
     public the evaluations and syntheses prepared pursuant to 
     subparagraph (A) and the findings of research conducted 
     pursuant to paragraph (1). In carrying out this clause the 
     Secretary, in order to facilitate the availability of such 
     evaluations and syntheses or findings at every decision point 
     in the health care system, shall--

       (I) present such evaluations and syntheses or findings in a 
     form that is easily understood by the individuals receiving 
     health care items and services (including prescription drugs) 
     under such plans and periodically assess that the 
     requirements of this subclause have been met; and
       (II) provide such evaluations and syntheses or findings and 
     other relevant information through easily accessible and 
     searchable electronic mechanisms, and in hard copy formats as 
     appropriate.

       (ii) Rule of construction.--Nothing in this section shall 
     be construed as--

       (I) affecting the authority of the Secretary or the 
     Commissioner of Food and Drugs under the Federal Food, Drug, 
     and Cosmetic Act or the Public Health Service Act; or
       (II) conferring any authority referred to in subclause (I) 
     to the Director.

       (D) Accountability.--In carrying out this paragraph, the 
     Secretary shall implement activities in a manner that--
       (i) makes publicly available all scientific evidence relied 
     upon and the methodologies employed, provided such evidence 
     and method are not protected from public disclosure by 
     section 1905 of title 18, United States Code, or other 
     applicable law so that the results of the research, analyses, 
     or syntheses can be evaluated or replicated; and
       (ii) ensures that any information needs and unresolved 
     issues identified in subparagraph (A)(ii) are taken into 
     account in priority-setting for future research conducted by 
     the Secretary.
       (4) Confidentiality.--
       (A) In general.--In making use of administrative, clinical, 
     and program data and information developed or collected with 
     respect to the programs established under titles XVIII, XIX, 
     and XXI of the Social Security Act, for purposes of carrying 
     out the requirements of this section or the activities 
     authorized under title IX of the Public Health Service Act 
     (42 U.S.C. 299 et seq.), such data and information shall be 
     protected in accordance with the confidentiality requirements 
     of title IX of the Public Health Service Act.
       (B) Rule of construction.--Nothing in this section shall be 
     construed to require or permit the disclosure of data 
     provided to the Secretary that is otherwise protected from 
     disclosure under the Federal Food, Drug, and Cosmetic Act, 
     section 1905 of title 18, United States Code, or other 
     applicable law.
       (5) Evaluations.--The Secretary shall conduct and support 
     evaluations of the activities carried out under this section 
     to determine the extent to which such activities have had an 
     effect on outcomes and utilization of health care items and 
     services.
       (6) Improving information available to health care 
     providers, patients, and policymakers.--Not later than 18 
     months after the date of enactment of this Act, the Secretary 
     shall identify options that could be undertaken in voluntary 
     collaboration with private and public entities (as 
     appropriate) for the--
       (A) provision of more timely information through the 
     programs established under titles XVIII, XIX, and XXI of the 
     Social Security Act, regarding the outcomes and quality of 
     patient care, including clinical and patient-reported 
     outcomes, especially with respect to interventions and 
     conditions for which clinical trials would not be feasible or 
     raise ethical concerns that are difficult to address;
       (B) acceleration of the adoption of innovation and quality 
     improvement under such programs; and
       (C) development of management tools for the programs 
     established under titles XIX

[[Page S15468]]

     and XXI of the Social Security Act, and with respect to the 
     programs established under such titles, assess the 
     feasibility of using administrative or claims data, to--
       (i) improve oversight by State officials;
       (ii) support Federal and State initiatives to improve the 
     quality, safety, and efficiency of services provided under 
     such programs; and
       (iii) provide a basis for estimating the fiscal and 
     coverage impact of Federal or State program and policy 
     changes.
       (b) Recommendations.--
       (1) Disclaimer.--In carrying out this section, the Director 
     shall--
       (A) not mandate national standards of clinical practice or 
     quality health care standards; and
       (B) include in any recommendations resulting from projects 
     funded and published by the Director, a corresponding 
     reference to the prohibition described in subparagraph (A).
       (2) Requirement for implementation.--Research, evaluation, 
     and communication activities performed pursuant to this 
     section shall reflect the principle that clinicians and 
     patients should have the best available evidence upon which 
     to make choices in health care items and services, in 
     providers, and in health care delivery systems, recognizing 
     that patient subpopulations and patient and physician 
     preferences may vary.
       (3) Rule of construction.--Nothing in this section shall be 
     construed to provide the Director with authority to mandate a 
     national standard or require a specific approach to quality 
     measurement and reporting.
       (c) Research With Respect to Dissemination.--The Secretary, 
     acting through the Director, may conduct or support research 
     with respect to improving methods of disseminating 
     information in accordance with subsection (a)(3)(C).
       (d) Limitation on CMS.--The Administrator of the Centers 
     for Medicare & Medicaid Services may not use data obtained in 
     accordance with this section to withhold coverage of a 
     prescription drug.
       (e) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out this section, $50,000,000 for 
     fiscal year 2004, and such sums as may be necessary for each 
     fiscal year thereafter.

     SEC. 614. HEALTH CARE THAT WORKS FOR ALL AMERICANS: CITIZENS 
                   HEALTH CARE WORKING GROUP.

       (a) Findings.--Congress finds the following:
       (1) In order to improve the health care system, the 
     American public must engage in an informed national public 
     debate to make choices about the services they want covered, 
     what health care coverage they want, and how they are willing 
     to pay for coverage.
       (2) More than a trillion dollars annually is spent on the 
     health care system, yet--
       (A) 41,000,000 Americans are uninsured;
       (B) insured individuals do not always have access to 
     essential, effective services to improve and maintain their 
     health; and
       (C) employers, who cover over 170,000,000 Americans, find 
     providing coverage increasingly difficult because of rising 
     costs and double digit premium increases.
       (3) Despite increases in medical care spending that are 
     greater than the rate of inflation, population growth, and 
     Gross Domestic Product growth, there has not been a 
     commensurate improvement in our health status as a nation.
       (4) Health care costs for even just 1 member of a family 
     can be catastrophic, resulting in medical bills potentially 
     harming the economic stability of the entire family.
       (5) Common life occurrences can jeopardize the ability of a 
     family to retain private coverage or jeopardize access to 
     public coverage.
       (6) Innovations in health care access, coverage, and 
     quality of care, including the use of technology, have often 
     come from States, local communities, and private sector 
     organizations, but more creative policies could tap this 
     potential.
       (7) Despite our Nation's wealth, the health care system 
     does not provide coverage to all Americans who want it.
       (b) Purposes.--The purposes of this section are--
       (1) to provide for a nationwide public debate about 
     improving the health care system to provide every American 
     with the ability to obtain quality, affordable health care 
     coverage; and
       (2) to provide for a vote by Congress on the 
     recommendations that result from the debate.
       (c) Establishment.--The Secretary, acting through the 
     Agency for Healthcare Research and Quality, shall establish 
     an entity to be known as the Citizens' Health Care Working 
     Group (referred to in this section as the ``Working Group'').
       (d) Membership.--
       (1) Number and appointment.--The Working Group shall be 
     composed of 15 members. One member shall be the Secretary. 
     The Comptroller General of the United States shall appoint 14 
     members.
       (2) Qualifications.--
       (A) In general.--The membership of the Working Group shall 
     include--
       (i) consumers of health services that represent those 
     individuals who have not had insurance within 2 years of 
     appointment, that have had chronic illnesses, including 
     mental illness, are disabled, and those who receive insurance 
     coverage through medicare and medicaid; and
       (ii) individuals with expertise in financing and paying for 
     benefits and access to care, business and labor perspectives, 
     and providers of health care.

     The membership shall reflect a broad geographic 
     representation and a balance between urban and rural 
     representatives.
       (B) Prohibited appointments.--Members of the Working Group 
     shall not include Members of Congress or other elected 
     government officials (Federal, State, or local). Individuals 
     appointed to the Working Group shall not be paid employees or 
     representatives of associations or advocacy organizations 
     involved in the health care system.
       (e) Period of Appointment.--Members of the Working Group 
     shall be appointed for a life of the Working Group. Any 
     vacancies shall not affect the power and duties of the 
     Working Group but shall be filled in the same manner as the 
     original appointment.
       (f) Designation of the Chairperson.--Not later than 15 days 
     after the date on which all members of the Working Group have 
     been appointed under subsection (d)(1), the Comptroller 
     General shall designate the chairperson of the Working Group.
       (g) Subcommittees.--The Working Group may establish 
     subcommittees if doing so increases the efficiency of the 
     Working Group in completing its tasks.
       (h) Duties.--
       (1) Hearings.--Not later than 90 days after the date of the 
     designation of the chairperson under subsection (f), the 
     Working Group shall hold hearings to examine--
       (A) the capacity of the public and private health care 
     systems to expand coverage options;
       (B) the cost of health care and the effectiveness of care 
     provided at all stages of disease;
       (C) innovative State strategies used to expand health care 
     coverage and lower health care costs;
       (D) local community solutions to accessing health care 
     coverage;
       (E) efforts to enroll individuals currently eligible for 
     public or private health care coverage;
       (F) the role of evidence-based medical practices that can 
     be documented as restoring, maintaining, or improving a 
     patient's health, and the use of technology in supporting 
     providers in improving quality of care and lowering costs; 
     and
       (G) strategies to assist purchasers of health care, 
     including consumers, to become more aware of the impact of 
     costs, and to lower the costs of health care.
       (2) Additional hearings.--The Working Group may hold 
     additional hearings on subjects other than those listed in 
     paragraph (1) so long as such hearings are determined to be 
     necessary by the Working Group in carrying out the purposes 
     of this section. Such additional hearings do not have to be 
     completed within the time period specified in paragraph (1) 
     but shall not delay the other activities of the Working Group 
     under this section.
       (3) The health report to the american people.--Not later 
     than 90 days after the hearings described in paragraphs (1) 
     and (2) are completed, the Working Group shall prepare and 
     make available to health care consumers through the Internet 
     and other appropriate public channels, a report to be 
     entitled, ``The Health Report to the American People''. Such 
     report shall be understandable to the general public and 
     include--
       (A) a summary of--
       (i) health care and related services that may be used by 
     individuals throughout their life span;
       (ii) the cost of health care services and their medical 
     effectiveness in providing better quality of care for 
     different age groups;
       (iii) the source of coverage and payment, including 
     reimbursement, for health care services;
       (iv) the reasons people are uninsured or underinsured and 
     the cost to taxpayers, purchasers of health services, and 
     communities when Americans are uninsured or underinsured;
       (v) the impact on health care outcomes and costs when 
     individuals are treated in all stages of disease;
       (vi) health care cost containment strategies; and
       (vii) information on health care needs that need to be 
     addressed;
       (B) examples of community strategies to provide health care 
     coverage or access;
       (C) information on geographic-specific issues relating to 
     health care;
       (D) information concerning the cost of care in different 
     settings, including institutional-based care and home and 
     community-based care;
       (E) a summary of ways to finance health care coverage; and
       (F) the role of technology in providing future health care 
     including ways to support the information needs of patients 
     and providers.
       (4) Community meetings.--
       (A) In general.--Not later than 1 year after the date on 
     which all the members of the Working Group have been 
     appointed under subsection (d)(1) and appropriations are 
     first made available to carry out this section, the Working 
     Group shall initiate health care community meetings 
     throughout the United States (in this paragraph referred to 
     as ``community meetings''). Such community meetings may be 
     geographically or regionally based and shall be completed 
     within 180 days after the initiation of the first meeting.
       (B) Number of meetings.--The Working Group shall hold a 
     sufficient number of community meetings in order to receive 
     information that reflects--

[[Page S15469]]

       (i) the geographic differences throughout the United 
     States;
       (ii) diverse populations; and
       (iii) a balance among urban and rural populations.
       (C) Meeting requirements.--
       (i) Facilitator.--A State health officer may be the 
     facilitator at the community meetings.
       (ii) Attendance.--At least 1 member of the Working Group 
     shall attend and serve as chair of each community meeting. 
     Other members may participate through interactive technology.
       (iii) Topics.--The community meetings shall, at a minimum, 
     address the following questions:

       (I) What health care benefits and services should be 
     provided?
       (II) How does the American public want health care 
     delivered?
       (III) How should health care coverage be financed?
       (IV) What trade-offs are the American public willing to 
     make in either benefits or financing to ensure access to 
     affordable, high quality health care coverage and services?

       (iv) Interactive technology.--The Working Group may 
     encourage public participation in community meetings through 
     interactive technology and other means as determined 
     appropriate by the Working Group.
       (D) Interim requirements.--Not later than 180 days after 
     the date of completion of the community meetings, the Working 
     Group shall prepare and make available to the public through 
     the Internet and other appropriate public channels, an 
     interim set of recommendations on health care coverage and 
     ways to improve and strengthen the health care system based 
     on the information and preferences expressed at the community 
     meetings. There shall be a 90-day public comment period on 
     such recommendations.
       (i) Recommendations.--Not later than 120 days after the 
     expiration of the public comment period described in 
     subsection (h)(4)(D), the Working Group shall submit to 
     Congress and the President a final set of recommendations.
       (j) Administration.--
       (1) Executive director.--There shall be an Executive 
     Director of the Working Group who shall be appointed by the 
     chairperson of the Working Group in consultation with the 
     members of the Working Group.
       (2) Compensation.--While serving on the business of the 
     Working Group (including travel time), a member of the 
     Working Group shall be entitled to compensation at the per 
     diem equivalent of the rate provided for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code, and while so serving away from home and the 
     member's regular place of business, a member may be allowed 
     travel expenses, as authorized by the chairperson of the 
     Working Group. For purposes of pay and employment benefits, 
     rights, and privileges, all personnel of the Working Group 
     shall be treated as if they were employees of the Senate.
       (3) Information from federal agencies.--The Working Group 
     may secure directly from any Federal department or agency 
     such information as the Working Group considers necessary to 
     carry out this section. Upon request of the Working Group, 
     the head of such department or agency shall furnish such 
     information.
       (4) Postal services.--The Working Group may use the United 
     States mails in the same manner and under the same conditions 
     as other departments and agencies of the Federal Government.
       (k) Detail.--Not more than 10 Federal Government employees 
     employed by the Department of Labor and 10 Federal Government 
     employees employed by the Department of Health and Human 
     Services may be detailed to the Working Group under this 
     section without further reimbursement. Any detail of an 
     employee shall be without interruption or loss of civil 
     service status or privilege.
       (l) Temporary and Intermittent Services.--The chairperson 
     of the Working Group may procure temporary and intermittent 
     services under section 3109(b) of title 5, United States 
     Code, at rates for individuals which do not exceed the daily 
     equivalent of the annual rate of basic pay prescribed for 
     level V of the Executive Schedule under section 5316 of such 
     title.
       (m) Annual Report.--Not later than 1 year after the date of 
     enactment of this Act, and annually thereafter during the 
     existence of the Working Group, the Working Group shall 
     report to Congress and make public a detailed description of 
     the expenditures of the Working Group used to carry out its 
     duties under this section.
       (n) Sunset of Working Group.--The Working Group shall 
     terminate on the date that is 2 years after the date on which 
     all the members of the Working Group have been appointed 
     under subsection (d)(1) and appropriations are first made 
     available to carry out this section.
       (o) Administration Review and Comments.--Not later than 45 
     days after receiving the final recommendations of the Working 
     Group under subsection (i), the President shall submit a 
     report to Congress which shall contain--
       (1) additional views and comments on such recommendations; 
     and
       (2) recommendations for such legislation and administrative 
     actions as the President considers appropriate.
       (p) Required Congressional Action.--Not later than 45 days 
     after receiving the report submitted by the President under 
     subsection (o), each committee of jurisdiction of Congress, 
     the Committee on Finance of the Senate, the Committee on 
     Health, Education, Labor, and Pensions of the Senate, the 
     Committee on Ways and Means of the House of Representatives, 
     the Committee on Energy and Commerce of the House of 
     Representatives, Committee on Education and the Workforce of 
     the House of Representatives, shall hold at least 1 hearing 
     on such report and on the final recommendations of the 
     Working Group submitted under subsection (i).
       (q) Authorization of Appropriations.--
       (1) In general.--There are authorized to be appropriated to 
     carry out this section, other than subsection (h)(3), 
     $3,000,000 for each of fiscal years 2005 and 2006.
       (2) Health report to the american people.--There are 
     authorized to be appropriated for the preparation and 
     dissemination of the Health Report to the American People 
     described in subsection (h)(3), such sums as may be necessary 
     for the fiscal year in which the report is required to be 
     submitted.

     SEC. 615. FUNDING START-UP ADMINISTRATIVE COSTS FOR MEDICARE 
                   REFORM.

       (a) In General.--There are appropriated to carry out this 
     Act (including the amendments made by this Act), to be 
     transferred from the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund--
       (1) not to exceed $1,000,000,000 for the Centers for 
     Medicare & Medicaid Services; and
       (2) not to exceed $500,000,000 for the Social Security 
     Administration.
       (b) Availability.--Amounts provided under subsection (a) 
     shall remain available until September 30, 2005.
       (c) Application.--From amounts provided under subsection 
     (a)(2), the Social Security Administration may reimburse the 
     Internal Revenue Service for expenses in carrying out this 
     Act (and the amendments made by this Act).
       (d) Transfer.--The President may transfer amounts provided 
     under subsection (a) between the Centers for Medicare & 
     Medicaid Services and the Social Security Administration. 
     Notice of such transfers shall be transmitted within 15 days 
     to the authorizing committees of the House of Representatives 
     and of the Senate.

     SEC. 616. HEALTH CARE INFRASTRUCTURE IMPROVEMENT PROGRAM.

       Title XVIII is amended by adding at the end the following 
     new section:


            ``health care infrastructure improvement program

       ``Sec. 1897. (a) Establishment.--The Secretary shall 
     establish a loan program that provides loans to qualifying 
     hospitals for payment of the capital costs of projects 
     described in subsection (d).
       ``(b) Application.--No loan may be provided under this 
     section to a qualifying hospital except pursuant to an 
     application that is submitted and approved in a time, manner, 
     and form specified by the Secretary. A loan under this 
     section shall be on such terms and conditions and meet such 
     requirements as the Secretary determines appropriate.
       ``(c) Selection Criteria.--
       ``(1) In general.--The Secretary shall establish criteria 
     for selecting among qualifying hospitals that apply for a 
     loan under this section. Such criteria shall consider the 
     extent to which the project for which loan is sought is 
     nationally or regionally significant, in terms of expanding 
     or improving the health care infrastructure of the United 
     States or the region or in terms of the medical benefit that 
     the project will have.
       ``(2) Qualifying hospital defined.--For purposes of this 
     section, the term `qualifying hospital' means a hospital 
     that--
       ``(A) is engaged in research in the causes, prevention, and 
     treatment of cancer; and
       ``(B) is designated as a cancer center for the National 
     Cancer Institute or is designated by the State as the 
     official cancer institute of the State.
       ``(d) Projects.--A project described in this subsection is 
     a project of a qualifying hospital that is designed to 
     improve the health care infrastructure of the hospital, 
     including construction, renovation, or other capital 
     improvements.
       ``(e) State and Local Permits.--The provision of a loan 
     under this section with respect to a project shall not--
       ``(1) relieve any recipient of the loan of any obligation 
     to obtain any required State or local permit or approval with 
     respect to the project;
       ``(2) limit the right of any unit of State or local 
     government to approve or regulate any rate of return on 
     private equity invested in the project; or
       ``(3) otherwise supersede any State or local law (including 
     any regulation) applicable to the construction or operation 
     of the project.
       ``(f) Forgiveness of Indebtedness.--The Secretary may 
     forgive a loan provided to a qualifying hospital under this 
     section under terms and conditions that are analogous to the 
     loan forgiveness provision for student loans under part D of 
     title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a 
     et seq.), except that the Secretary shall condition such 
     forgiveness on the establishment by the hospital of--
       ``(A) an outreach program for cancer prevention, early 
     diagnosis, and treatment that provides services to a 
     substantial majority of the residents of a State or region, 
     including residents of rural areas;
       ``(B) an outreach program for cancer prevention, early 
     diagnosis, and treatment that

[[Page S15470]]

     provides services to multiple Indian tribes; and
       ``(C)(i) unique research resources (such as population 
     databases); or
       ``(ii) an affiliation with an entity that has unique 
     research resources.
       ``(g) Funding.--
       ``(1) In general.--There are appropriated, out of amounts 
     in the Treasury not otherwise appropriated, to carry out this 
     section, $200,000,000, to remain available during the period 
     beginning on July 1, 2004, and ending on September 30, 2008.
       ``(2) Administrative costs.--From funds made available 
     under paragraph (1), the Secretary may use, for the 
     administration of this section, not more than $2,000,000 for 
     each of fiscal years 2004 through 2008.
       ``(3) Availability.--Amounts appropriated under this 
     section shall be available for obligation on July 1, 2004.
       ``(h) Report to Congress.--Not later than 4 years after the 
     date of the enactment of this section, the Secretary shall 
     submit to Congress a report on the projects for which loans 
     are provided under this section and a recommendation as to 
     whether the Congress should authorize the Secretary to 
     continue loans under this section beyond fiscal year 2008.''.
                                 ______
                                 
      By Mrs. CLINTON:
  S. 1927. A bill to establish an award program to encourage the 
development of effective bomb-scanning technology; to the Committee on 
Commerce, Science, and Transportation.
  Mrs. CLINTON. Mr. President, ever since the events of September 11, 
2001 awakened this Nation to the very real dangers of the world we live 
in, we have been struggling to defend ourselves against terrorism. Our 
aviation system remains a primary target for terrorists, and we must be 
every vigilant in the fight to keep that system safe. The economic 
viability, not to mention safety and security, of our country is at 
stake in that fight.
  Nowhere is this more obvious than in New York. Not only did we bear 
the brunt of the worst terrorist attack in our Nation's history, but we 
also depend on our airports to fuel our state economy. John F. Kennedy 
Airport in Queens is the Nation's premier international gateway and 
contributes approximately $30 billion to the regional economy while 
employing 35,000 people. LaGuardia Airport, also in Queens, handles 
over 20 million passengers a year despite having only two 7000-foot 
runways on 680 acres. Our airports in Albany, Syracuse, Rochester, and 
Buffalo have seen strong growth in recent years with the arrival of 
low-cost carriers.
  Unfortunately, our economic and physical security remains at risk 
because we still have not developed a way to effectively scan each 
piece of passenger luggage for explosives. We have recognized that in 
the current world environment, we must scan each bag, but technology 
has not kept up with our needs. The current technology used in most 
airports in this country is known to have a false-positive rate of 
approximately 20 percent. This means that machines incorrectly identify 
20 percent of all bags going through them as containing explosives, 
thus slowing down the process considerably as well as costing time and 
money. Even more dangerous is the false-negative rate of these 
machines. This number, the percentage of bags going undetected through 
these machines with bombs inside of them during test runs, should be 
close to zero. The actual false-negative rate is not publicized for 
obvious reasons, but it is known to be well above zero.
  I am proposing a bill today that seeks to create a major incentive 
for firms to invent a bomb-scanning technology that actually works. It 
will award $20 million to any firm that can successfully produce a 
machine that has a false-positive rate less than 10 percent, a false 
negative rate less than 2 percent, and is feasible for deployment en 
masse at our Nation's airports. Although we are currently spending 
money on researching this technology, that funding is clearly not 
getting us there fast enough. This new award will help to spur the 
private sector to develop new technology that will make a major 
difference in the safety of our aviation system.
                                 ______
                                 
      By Mr. SARBANES (for himself, Mr. Schumer, Ms. Stabenow, Mr. 
        Corzine, Mr. Durbin, Mr. Kerry, Ms. Mikulski, Mrs. Clinton, Mr. 
        Levin, Mr. Leahy, Mr. Akaka, Mr. Kennedy, Mr. Lautenberg, Mr. 
        Dayton, and Mr. Dodd):
  S. 1928. A bill to amend the Truth in Lending Act to protect 
consumers against predatory practices in connection with high cost 
mortgage transactions, to strengthen the civil remedies available to 
consumers under existing law, and for other purposes; to the Committee 
on Banking, Housing, and Urban Affairs.
  Mr. SARBANES. Mr. President, in July of 2001, and continuing through 
January of the following year, the Committee on Banking, Housing, and 
Urban Affairs held a series of hearings to shine a bright light on the 
deceptive and destructive practices of predatory mortgage lenders. At 
those hearings, the Committee heard from housing experts, community 
groups, legal advocates, industry representatives and victims of 
predatory lending in an effort to determine how best to address this 
terrible problem. Today, I am introducing legislation, the ``Predatory 
Lending Consumer Protection Act of 2003,'' along with a number of my 
colleagues, that would begin to address the problems that came to light 
in those hearings.
  Homeownership is the American Dream. Indeed, the Committee has 
already passed legislation this year that would authorize a new $200 
million downpayment assistance program to ensure that more people can 
achieve this goal.
  We have taken this step because homeownership is the best opportunity 
for most Americans to put down roots and start creating equity for 
themselves and their families. Homeownership has been the path to 
building wealth for generations of Americans, wealth that can be tapped 
to send children to college, pay for a secure retirement, or simply 
work as a reserve against unexpected emergencies. It has been the key 
to ensuring stable communities, good schools, and safe streets. Common 
sense tells us, and the evidence confirms, that homeowners are more 
engaged citizens and more active in their communities.
  Little wonder, then, that so many Americans, young and old, aspire to 
achieve this dream.
  Unhappily, predatory lenders cynically play on these hopes and dreams 
to cheat people out of their wealth. These lenders target lower income, 
elderly, and, often, uneducated homeowners for their abusive practices. 
Study after study has shown that predatory lenders also target 
minorities, driving a wedge between these families and the hope of a 
productive life in the economic and financial mainstream of America.
  We owe it to these hardworking families to provide protections 
against these unscrupulous players.
  Let me share with you one of the stories we heard at our hearings. 
Mary Ann Podelco, a widowed waitress from West Virginia, used $19,000 
from her husband's life insurance to pay off the balance on her 
mortgage, thus owning her home free and clear. Before her husband's 
death, she had never had a checking account or a credit card. She then 
took out a $11,921 loan for repairs. At the time, her monthly income 
from Social Security was $458, and her loan payments were more than 
half this amount. Ms. Podelco, who has a sixth grade education, 
testified that after her first refinancing, ``I began getting calls 
from people trying to refinance my mortgage all hours of the day and 
night.'' Within 2 years, having been advised to refinance seven times--
each time seeing high points and fees being financed into her new 
loan--she owed $64,000, and lost her home to foreclosure.
  Ms. Podelco's story is all too typical. Unfortunately, most of the 
sharp practices used by unscrupulous lenders and brokers, while 
unethical and clearly abusive, are not illegal. This bill is designed 
to address that problem by tightening the interest rate and fee 
triggers that define high cost loans; the bill improves protections for 
borrowers receiving such loans by prohibiting the financing of 
exorbitant fees, ``packing'' in of unnecessary and costly products, 
such as single premium credit insurance, and limiting prepayment 
penalties. Finally, it protects these consumers' rights to seek redress 
by prohibiting mandatory arbitration, as the Federal Trade Commission 
(FTC) proposed unanimously in 2000.We often hear about the importance 
of improved enforcement as a way to combat this

[[Page S15471]]

problem. As the FTC pointed out, mandatory arbitration prevents 
homeowners from exercising any of their rights to enforce existing law.
  We cannot extol the virtues of homeownership, as we so often do, 
without seeking at the same time to preserve this benefit for so many 
elderly, minority, and unsophisticated Americans who are the targets of 
unscrupulous lenders and brokers. This legislation will help achieve 
this important goal. This bill has been endorsed by the Leadership 
Conference on Civil Rights, the U.S. Conference of Mayors, the National 
Council of La Raza, the National Consumer Law Center, ACORN, National 
Consumer Reinvestment Coalition, Consumer Federation of America, the 
NAACP, the Self-Help Credit Union, the National Association of Local 
Housing Finance Agencies, the National Community Development 
Association, the National Association of Consumer Advocates, and the 
National League of Cities, among others.
  Mr. President, 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:

                                S. 1928

       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 ``Predatory Lending Consumer 
     Protection Act of 2003''.

     SEC. 2. TRUTH IN LENDING ACT DEFINITIONS.

       (a) High Cost Mortgages.--
       (1) In general.--The portion of section 103(aa) of the 
     Truth in Lending Act (15 U.S.C. 1602(aa)) that precedes 
     paragraph (2) is amended to read as follows:
       ``(aa) Mortgage Referred to in This Subsection.--
       ``(1) Definition.--
       ``(A) In general.--A mortgage referred to in this 
     subsection means a consumer credit transaction--
       ``(i) that is secured by the principal dwelling of the 
     consumer, other than a reverse mortgage transaction; and
       ``(ii) the terms of which provide that--

       ``(I) the transaction is secured by a first mortgage on the 
     principal dwelling of the consumer, and the annual percentage 
     rate on the credit, at the consummation of the transaction, 
     will exceed by more than 6 percentage points the yield on 
     Treasury securities having comparable periods of maturity on 
     the 15th day of the month immediately preceding the month in 
     which the application for the extension of credit is received 
     by the creditor;
       ``(II) the transaction is secured by a junior or 
     subordinate mortgage on the principal dwelling of the 
     consumer, and the annual percentage rate on the credit, at 
     the consummation of the transaction, will exceed by more than 
     8 percentage points the yield on Treasury securities having 
     comparable periods of maturity on the 15th day of the month 
     immediately preceding the month in which the application for 
     the extension of credit is received by the creditor; or
       ``(III) the total points and fees payable on the 
     transaction will exceed the greater of 5 percent of the total 
     loan amount, or $1,000, excluding not more than 2 bona fide 
     discount points.

       ``(B) Introductory rates not taken into account.--For 
     purposes of subparagraph (A)(ii), the annual percentage rate 
     of interest shall be determined--
       ``(i) in the case of a fixed-rate loan in which the annual 
     percentage rate will not vary during the term of the loan, as 
     the rate in effect on the date of consummation of the 
     transaction;
       ``(ii) in the case of a loan in which the rate of interest 
     varies according to an index, or is less than the rate of 
     interest which will apply after the end of an initial or 
     introductory period, by adding the index rate in effect on 
     the date of consummation of the transaction to the maximum 
     margin permitted at any time during the loan agreement; and
       ``(iii) in the case of any other loan in which the rate may 
     vary at any time during the term of the loan for any reason, 
     by including in the finance charge component of the annual 
     percentage rate--

       ``(I) the interest charged on the loan at the maximum rate 
     that may be charged during the term of the loan; and
       ``(II) any other applicable charges that would otherwise be 
     included in accordance with section 106.''.

       (2) Technical and conforming amendment.--Section 103(aa)(2) 
     of the Truth in Lending Act (15 U.S.C. 1602(aa)(2)) is 
     amended--
       (A) by striking subparagraph (B); and
       (B) by redesignating subparagraph (C) as subparagraph (B).
       (b) Points and Fees.--Section 103(aa)(4) of the Truth in 
     Lending Act (15 U.S.C. 1602(aa)(4)) is amended--
       (1) by striking subparagraph (B) and inserting the 
     following:
       ``(B) all compensation paid directly or indirectly by a 
     consumer or a creditor to a mortgage broker;'';
       (2) by redesignating subparagraph (D) as subparagraph (G); 
     and
       (3) by striking subparagraph (C) and inserting the 
     following:
       ``(C) each of the charges listed in section 106(e) (except 
     an escrow for future payment of taxes and insurance);
       ``(D) the cost of all premiums financed by the lender, 
     directly or indirectly, for any credit  life, credit 
     disability, credit unemployment or credit property 
     insurance, or any other life or health insurance, or any 
     payments financed by the lender, directly or indirectly, 
     for any debt cancellation or suspension agreement or 
     contract, except that, for purposes of this subparagraph, 
     insurance premiums or debt cancellation or suspension fees 
     calculated and paid on a monthly basis shall not be 
     considered financed by the lender;
       ``(E) the maximum prepayment penalties that may be charged 
     or collected under the terms of the loan documents;
       ``(F) all prepayment fees or penalties that are charged to 
     the borrower if the loan refinances a previous loan made by 
     the same creditor or an affiliate of that creditor; and''.
       (c) High Cost Mortgage Lender.--Section 103(f) of the Truth 
     in Lending Act (15 U.S.C. 1602(f)) is amended by striking the 
     last sentence and inserting ``Any person who originates 2 or 
     more mortgages referred to in subsection (aa) in any 12-month 
     period, any person who originates 1 or more such mortgages 
     through a mortgage broker or acted as a mortgage broker 
     between originators and consumers on more than 5 mortgages 
     referred to in subsection (aa) within the preceding 12-month 
     period, and any creditor-affiliated party shall be considered 
     to be a creditor for purposes of this title.''.
       (d) Bona Fide Discount Points and Benchmark Rate Defined.--
     Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is 
     amended by adding at the end the following:
       ``(cc) Other Interest Rate Related Terms.--
       ``(1) Benchmark rate.--The term `benchmark rate' means an 
     interest rate that the borrower may reduce by paying bona 
     fide discount points, not to exceed the weekly average yield 
     of United States Treasury securities having a maturity of 5 
     years, on the 15th day of the month immediately preceding the 
     month in which the loan is made, plus 5 percentage points.
       ``(2) Bona fide discount points.--The term `bona fide 
     discount points' means loan discount points which are--
       ``(A) knowingly paid by the borrower;
       ``(B) paid for the express purpose of lowering the 
     benchmark rate;
       ``(C) in fact reducing the interest rate or time-price 
     differential applicable to the loan from an interest rate 
     which does not exceed the benchmark rate; and
       ``(D) recouped within the first 4 years of the scheduled 
     loan payments.
       ``(3) Recoupment.--For purposes of paragraph (2)(D), loan 
     discount points shall be considered to be recouped within the 
     first 4 years of the scheduled loan payments if the reduction 
     in the interest rate that is achieved by the payment of the 
     loan discount points reduces the interest charged on the 
     scheduled payments, such that the dollar amount of savings in 
     payments made by the borrower over the first 4 years is equal 
     to or exceeds the dollar amount of loan discount points paid 
     by the borrower.''.

     SEC. 3. AMENDMENTS TO EXISTING REQUIREMENTS FOR HIGH COST 
                   CONSUMER MORTGAGES.

       (a) Additional Disclosures.--Section 129(a)(1) of the Truth 
     in Lending Act (15 U.S.C. 1639(a)(1)) is amended by adding at 
     the end the following:
       ``(C) `The interest rate on this loan is much higher than 
     most people pay. This means the chance that you will lose 
     your home is much higher if you do not make all payments 
     under the loan.'.
       ``(D) `You may be able to get a loan with a much lower 
     interest rate. Before you sign any papers, you have the right 
     to go see a housing or consumer credit counseling agency, as 
     well as to consult other lenders to find ways to get a 
     cheaper loan.'.
       ``(E) `If you are taking out this loan to repay other 
     loans, look to see how many months it will take to pay for 
     this loan and what the total amount is that you will have to 
     pay before this loan is repaid. Even though the total amount 
     you will have to pay each month for this loan may be less 
     than the total amount you are paying each month for those 
     other loans, you may have to pay on this loan for many more 
     months than those other loans which will cost you more money 
     in the end.' ''.
       (b) Prepayment Penalty Provisions.--Section 129(c) of the 
     Truth in Lending Act (15 U.S.C. 1639(c)) is amended to read 
     as follows:
       ``(c) Prepayment Penalty Provisions.--
       ``(1) No prepayment penalties after end of 24-month 
     period.--A mortgage referred to in section 103(aa) may not 
     contain terms under which a consumer must pay any prepayment 
     penalty for  any payment made after the end of the 24-month 
     period beginning on the date the mortgage is consummated.
       ``(2) No prepayment penalties if more than 3 percent of 
     points and fees were financed.--Subject to subsection (l)(1), 
     a mortgage referred to in section 103(aa) may not contain 
     terms under which a consumer must pay any prepayment penalty 
     for any payment made at or before the end of the 24-month 
     period referred to in paragraph (1) if

[[Page S15472]]

     the creditor financed points or fees in connection with the 
     consumer credit transaction in an amount equal to or greater 
     than 3 percent of the total amount of credit extended in the 
     transaction.
       ``(3) Limited prepayment penalty for early repayment under 
     certain circumstances.--Subject to paragraph (2), the terms 
     of a mortgage referred to in section 103(aa) may contain 
     terms under which a consumer must pay a prepayment penalty 
     for any payment made at or before the end of the 24-month 
     period referred to in paragraph (1) to the extent that the 
     sum of the total amount of points or fees financed by the 
     creditor, if any, in connection with the consumer credit 
     transaction and the total amount payable as a prepayment 
     penalty does not exceed the amount which is equal to 3 
     percent of the total amount of credit extended in the 
     transaction.
       ``(4) Construction.--For purposes of this subsection, any 
     method of computing a refund of unearned scheduled interest 
     is a prepayment penalty if it is less favorable to the 
     consumer than the actuarial method (as that term is defined 
     in section 933(d) of the Housing and Community Development 
     Act of 1992).
       ``(5) Prepayment penalty defined.--The term `prepayment 
     penalty' means any monetary penalty imposed on a consumer for 
     paying all or part of the principal with respect to a 
     consumer credit transaction before the date on which the 
     principal is due.''.
       (c) All Balloon Payments Prohibited.--Section 129(e) of the 
     Truth in Lending Act (15 U.S.C. 1639(e)) is amended by 
     striking ``having a term of less than 5 years''.
       (d) Assessment of Ability To Repay.--Section 129(h) of the 
     Truth in Lending Act (15 U.S.C. 1639(h)) is amended--
       (1) by striking ``Consumer.--A creditor'' and inserting 
     ``Consumer.--
       ``(1) Prohibition on patterns and practices.--A creditor''; 
     and
       (2) by adding at the end the following:
       ``(2) Case-by-case assessments of consumer ability to pay 
     required.--
       ``(A) In general.--In addition to the prohibition in 
     paragraph (1) on engaging in certain patterns and practices, 
     a creditor may not extend any credit in connection with any 
     mortgage referred to in section 103(aa) unless the creditor 
     has determined, at the time such credit is extended, that 1 
     or more of the resident obligors, when considered 
     individually and collectively, will be able to make the 
     scheduled payments under the terms of the transaction based 
     on a consideration of the current and expected income, 
     current obligations, employment status, and other financial 
     resources of any such obligor, without taking into account 
     any equity of any such obligor in the dwelling which is the 
     security for the credit.
       ``(B) Regulations.--The Board shall prescribe, by 
     regulation, the appropriate format for determining the 
     ability of a consumer to make payments and the criteria to be 
     considered in making that determination.
       ``(C) Resident obligor.--For purposes of this paragraph, 
     the term `resident obligor' means an obligor for whom the 
     dwelling securing the extension of credit is, or upon the 
     consummation of the transaction will be, the principal 
     residence.
       ``(3) Verification.--The requirements of paragraphs (1) and 
     (2) shall not be deemed to have been met unless any 
     information relied upon by the creditor for purposes of any 
     such paragraph has been verified by the creditor 
     independently of information provided by any resident 
     obligor.''.
       (e) Requirements Relating to Home Improvement Contracts.--
     Section 129(i) of the Truth in Lending Act (15 U.S.C. 
     1639(i)) is amended--
       (1) by striking ``Improvement Contracts.--A creditor'' and 
     inserting ``Improvement Contracts.--
       ``(1) In general.--A creditor''; and
       (2) by adding at the end the following:
       ``(2) Affirmative claims and defenses.--Notwithstanding any 
     other provision of law, any assignee or holder, in any 
     capacity, of a mortgage referred to in section 103(aa) which 
     was made, arranged, or assigned by a person financing home 
     improvements to the dwelling of a consumer shall be subject 
     to all affirmative claims and defenses which the consumer may 
     have against the seller, home improvement contractor, broker, 
     or creditor with respect to such mortgage or home 
     improvements.''.
       (f) Clarification of Rescission Rights.--Section 129(j) of 
     the Truth in Lending Act (15 U.S.C. 1639(j)) is amended to 
     read as follows:
       ``(j) Consequence of Failure To Comply.--
       ``(1) In general.--The consummation of a consumer credit 
     transaction resulting in a mortgage referred to in section 
     103(aa) shall be treated as a failure to deliver the material 
     disclosures required under this title for the purpose of 
     section 125, if--
       ``(A) the mortgage contains a provision prohibited by this 
     section or does not contain a provision required by this 
     section; or
       ``(B) a creditor or other person fails to comply with the 
     provisions of this section, whether by an act or omission, 
     with regard to such mortgage at any time.
       ``(2) Rule of application.--In any application of section 
     125 to a mortgage described in section 103(aa) under 
     circumstances described in paragraph (1), paragraphs (2) and 
     (4) of section 125(e) shall not apply or be taken into 
     account.''.

     SEC. 4. ADDITIONAL REQUIREMENTS FOR HIGH COST CONSUMER 
                   MORTGAGES.

       (a) Single Premium Credit Insurance.--Section 129 of the 
     Truth in Lending Act (15 U.S.C. 1639) is amended--
       (1) by redesignating subsections (k) and (l) as subsections 
     (s) and (t), respectively; and
       (2) by inserting after subsection (j), the following:
       ``(k) Single Premium Credit Insurance.--
       ``(1) In general.--The terms of a mortgage referred to in 
     section 103(aa) may not require, and no creditor or other 
     person may require or allow in connection with any such 
     mortgage, whether paid directly by the consumer or financed 
     by the consumer through such mortgage--
       ``(A) the advance collection of a premium, on a single 
     premium basis, for any credit life, credit disability, credit 
     unemployment, or credit property insurance, and any analogous 
     product; or
       ``(B) the advance collection of a fee for any debt 
     cancellation or suspension agreement or contract.
       ``(2) Rule of construction.--Paragraph (1) shall not be 
     construed as affecting the right of a creditor to collect 
     premium payments on insurance or debt cancellation or 
     suspension fees referred to in paragraph (1) that are 
     calculated and paid on a regular monthly basis, if the 
     insurance transaction is conducted separately from the 
     mortgage transaction, the insurance may be canceled by the 
     consumer at any time, and the insurance policy is 
     automatically canceled upon repayment or other termination of 
     the mortgage referred to in paragraph (1).''.
       (b) Restriction on Financing Points and Fees.--Section 129 
     of the Truth in Lending Act (15 U.S.C. 1639) is amended by 
     inserting after subsection (k) (as added by subsection (a) of 
     this section) the following:
       ``(l) Restriction on Financing Points and Fees.--
       ``(1) Limit on amount of points and fees that may be 
     financed.--Subject to paragraphs (2) and (3) of subsection 
     (c), no creditor may, in connection with the formation or 
     consummation of a mortgage referred to in section 103(aa), 
     finance, directly or indirectly, any portion of the points, 
     fees, or other charges payable to the creditor or any third 
     party in an amount in excess of the greater of 3 percent of 
     the total loan amount or $600.
       ``(2) Prohibition on financing certain points, fees, or 
     charges.--No creditor may, in connection with the formation 
     or consummation of a mortgage referred to in section 103(aa), 
     finance, directly or indirectly, any of the following fees or 
     other charges payable to the creditor or any third party:
       ``(A) Any prepayment fee or penalty required to be paid by 
     the consumer in connection with a loan or other extension of 
     credit which is being refinanced by such mortgage if the 
     creditor, with respect to such mortgage, or any affiliate of 
     the creditor, is the creditor with respect to the loan or 
     other extension of credit being refinanced.
       ``(B) Any points, fees, or other charges required to be 
     paid by the consumer in connection with such mortgage if--
       ``(i) the mortgage is being entered into in order to 
     refinance an existing mortgage of the consumer that is 
     referred to in section 103(aa); and
       ``(ii) if the creditor, with respect to such new mortgage, 
     or any affiliate of the creditor, is the creditor with 
     respect to the existing mortgage which is being 
     refinanced.''.
       (c) Creditor Call Provision.--Section 129 of the Truth in 
     Lending Act (15 U.S.C. 1639) is amended by inserting after 
     subsection (l) (as added by subsection (b) of this section) 
     the following:
       ``(m) Creditor Call Provision.--
       ``(1) In general.--A mortgage referred to in section 
     103(aa) may not include terms under which the indebtedness 
     may be accelerated by the creditor, in the sole discretion of 
     the creditor.
       ``(2) Exception.--Paragraph (1) shall not apply when 
     repayment of the loan has been accelerated as a result of a 
     bona fide default.''.
       (d) Prohibition on Actions Encouraging Default.--Section 
     129 of the Truth in Lending Act (15 U.S.C. 1639) is amended 
     by inserting after subsection (m) (as added by subsection (c) 
     of this section) the following:
       ``(n) Prohibition on Actions Encouraging Default.--No 
     creditor may make any statement, take any action, or fail to 
     take any action before or in connection with the formation or 
     consummation of any mortgage referred to in section 103(aa) 
     to refinance all or any portion of an existing loan or other 
     extension of credit, if the statement, action, or failure to 
     act has the effect of encouraging or recommending the 
     consumer to default on the existing loan or other extension 
     of credit at any time before, or in connection with, the 
     closing or any scheduled closing on such mortgage.''.
       (e) Modification or Deferral Fees.--Section 129 of the 
     Truth in Lending Act (15 U.S.C. 1639) is amended by inserting 
     after subsection (n) (as added by subsection (d) of this 
     section) the following:
       ``(o) Modification or Deferral Fees.--
       ``(1) In general.--Except as provided in paragraph (2), a 
     creditor may not charge any consumer with respect to a 
     mortgage referred to in section 103(aa) any fee or other 
     charge--
       ``(A) to modify, renew, extend, or amend such mortgage, or 
     any provision of the terms of the mortgage; or
       ``(B) to defer any payment otherwise due under the terms of 
     the mortgage.
       ``(2) Exception for modifications for the benefit of the 
     consumer.--Paragraph (1) shall not apply with respect to any 
     fee imposed in connection with any action described in 
     subparagraph (A) or (B) if--

[[Page S15473]]

       ``(A) the action provides a material benefit to the 
     consumer; and
       ``(B) the amount of the fee or charge does not exceed--
       ``(i) an amount equal to 0.5 percent of the total loan 
     amount; or
       ``(ii) in any case in which the total loan amount of the 
     mortgage does not exceed $60,000, an amount in excess of 
     $300.''.
       (f) Consumer Counseling Requirements.--Section 129 of the 
     Truth in Lending Act (15 U.S.C. 1639) is amended by inserting 
     after subsection (o) (as added by subsection (e) of this 
     section) the following:
       ``(p) Consumer Counseling Requirement.--
       ``(1) In general.--A creditor may not extend any credit in 
     the form of a mortgage referred to in section 103(aa) to any 
     consumer, unless the creditor has provided to the consumer, 
     at such time before the consummation of the mortgage and in 
     such manner as the Board shall provide by regulation--
       ``(A) all warnings and disclosures regarding the risks of 
     the mortgage to the consumer;
       ``(B) a separate written statement recommending that the 
     consumer take advantage of available home ownership or credit 
     counseling services before agreeing to the terms of any 
     mortgage referred to in section 103(aa); and
       ``(C) a written statement containing the names, addresses, 
     and telephone numbers of counseling agencies or programs 
     reasonably available to the consumer that have been certified 
     or approved by the Secretary of Housing and Urban 
     Development, a State housing finance authority (as defined in 
     section 1301 of the Financial Institutions Reform, Recovery, 
     and Enforcement Act of 1989), or the agency referred to in 
     subsection (a) or (c) of section 108 with jurisdiction over 
     the creditor as qualified to provide counseling on--
       ``(i) the advisability of a high cost loan transaction; and
       ``(ii) the appropriateness of a high cost loan for the 
     consumer.
       ``(2) Complete and updated lists required.--Any failure to 
     provide as complete or updated a list under paragraph (1)(C) 
     as is reasonably possible shall constitute a violation of 
     this section.''.
       (g) Arbitration.--Section 129 of the Truth in Lending Act 
     (15 U.S.C. 1639) is amended by inserting after subsection (p) 
     (as added by subsection (f) of this section) the following:
       ``(q) Arbitration.--
       ``(1) In general.--A mortgage referred to in section 
     103(aa) may not include terms which require arbitration or 
     any other nonjudicial procedure as the method for resolving 
     any controversy or settling any claims arising out of the 
     transaction.
       ``(2) Post-controversy agreements.--Subject to paragraph 
     (3), paragraph (1) shall not be construed as limiting the 
     right of the consumer and the creditor to agree to 
     arbitration or any other nonjudicial procedure as the method 
     for resolving any controversy at any time after a dispute or 
     claim under the transaction arises.
       ``(3) No waiver of statutory cause of action.--No provision 
     of any mortgage referred to in section 103(aa) or any 
     agreement between the consumer and the creditor shall be 
     applied or interpreted so as to bar a consumer from bringing 
     an action in an appropriate district court of the United 
     States, or any other court of competent jurisdiction, 
     pursuant to section 130 or any other provision of law, for 
     damages or other relief in connection with any alleged 
     violation of this section, any other provision of this title, 
     or any other Federal law.''.
       (h) Prohibition on Evasions.--Section 129 of the Truth in 
     Lending Act (15 U.S.C. 1639) is amended by inserting after 
     subsection (q) (as added by subsection (g) of this section) 
     the following:
       ``(r) Prohibitions on Evasions, Structuring of 
     Transactions, and Reciprocal Arrangements.--
       ``(1) In general.--A creditor may not take any action--
       ``(A) for the purpose or with the intent to circumvent or 
     evade any requirement of this title, including entering into 
     a reciprocal arrangement with any other creditor or affiliate 
     of another creditor or dividing a transaction into separate 
     parts, for the purpose of evading or circumventing any such 
     requirement; or
       ``(B) with regard to any other loan or extension of credit 
     for the purpose or with the intent to evade the requirements 
     of this title, including structuring or restructuring a 
     consumer credit transaction as another form of loan, such as 
     a business loan.
       ``(2) Other actions.--In addition to the actions prohibited 
     under paragraph (1), a creditor may not take any action which 
     the Board determines, by regulation, constitutes a bad faith 
     effort to evade or circumvent any requirement of this section 
     with regard to a consumer credit transaction.
       ``(3) Regulations.--The Board shall prescribe such 
     regulations as the Board determines to be appropriate to 
     prevent circumvention or evasion of the requirements of this 
     section or to facilitate compliance with the requirements of 
     this section.''.

     SEC. 5. AMENDMENTS RELATING TO RIGHT OF RESCISSION.

       (a) Timing of Waiver by Consumer.--Section 125(a) of the 
     Truth in Lending Act (15 U.S.C. 1635(a)) is amended--
       (1) by striking ``(a) Except as otherwise provided'' and 
     inserting ``(a) Right Established.--
       ``(1) In general.--Except as otherwise provided''; and
       (2) by adding at the end the following:
       ``(2) Timing of election of waiver by consumer.--No 
     election by a consumer to waive the right established under 
     paragraph (1) to rescind a transaction shall be effective 
     if--
       ``(A) the waiver was required by the creditor as a 
     condition for the transaction;
       ``(B) the creditor advised or encouraged the consumer to 
     waive such right of the consumer; or
       ``(C) the creditor had any discussion with the consumer 
     about a waiver of such right during the period beginning when 
     the consumer provides written acknowledgement of the receipt 
     of the disclosures and the delivery of forms and information 
     required to be provided to the consumer under paragraph (1) 
     and ending at such time as the Board determines, by 
     regulation, to be appropriate.''.
       (b) Noncompliance With Requirements as Recoupment in 
     Foreclosure Proceeding.--Section 130(e) of the Truth in 
     Lending Act (15 U.S.C. 1640(e)) is amended by inserting after 
     the second sentence the following: ``This subsection also 
     does not bar a person from asserting a rescission under 
     section 125, in an action to collect the debt as a defense to 
     a judicial or nonjudicial foreclosure after the expiration of 
     the time periods for affirmative actions set forth in this 
     section and section 125.''.

     SEC. 6. AMENDMENTS TO CIVIL LIABILITY PROVISIONS.

       (a) Increase in Amount of Civil Money Penalties for Certain 
     Violations.--Section 130(a) of the Truth in Lending Act (15 
     U.S.C. 1640(a)) is amended--
       (1) in paragraph (2)(A)(iii), by striking ``$2,000'' and 
     inserting ``$10,000''; and
       (2) in paragraph (2)(B), by striking ``lesser of $500,000 
     or 1 percentum of the net worth of the creditor'' and 
     inserting ``the greater of--
       ``(i) the amount determined by multiplying the maximum 
     amount of liability under subparagraph (A) for such failure 
     to comply in an individual action by the number of members in 
     the certified class; or
       ``(ii) the amount equal to 2 percent of the net worth of 
     the creditor.''.
       (b) Statute of Limitations Extended for Section 129 
     Violations.--Section 130(e) of the Truth in Lending Act (15 
     U.S.C. 1640(e)) (as amended by section 5(b) of this Act) is 
     amended--
       (1) in the first sentence, by striking ``Any action'' and 
     inserting ``Except as provided in the subsequent sentence, 
     any action''; and
       (2) by inserting after the first sentence the following: 
     ``Any action under this section with respect to any violation 
     of section 129 may be brought in any United States district 
     court, or in any other court of competent jurisdiction, 
     before the end of the 3-year period beginning on the date of 
     the occurrence of the violation.''.

     SEC. 7. AMENDMENT TO FAIR CREDIT REPORTING ACT.

       Section 623 of the Fair Credit Reporting Act (15 U.S.C. 
     1681s-2) is amended by adding at the end the following:
       ``(e) Duty of Creditors With Respect to High Cost 
     Mortgages.--
       ``(1) In general.--Each creditor who enters into a consumer 
     credit transaction which is a mortgage referred to in section 
     103(aa), and each successor to such creditor with respect to 
     such transaction, shall report the complete payment history, 
     favorable and unfavorable, of the obligor with respect to 
     such transaction to a consumer reporting agency that compiles 
     and maintains files on consumers on a nationwide basis at 
     least quarterly, or more frequently as required by regulation 
     or in guidelines established by participants in the secondary 
     mortgage market, while such transaction is in effect.
       ``(2) Definitions.--For purposes of paragraph (1), the term 
     `credit' and `creditor' have the same meanings as in section 
     103 of the Truth in Lending Act (15 U.S.C. 1602).''.

     SEC. 8. REGULATIONS.

       The Board of Governors of the Federal Reserve System shall 
     publish regulations implementing this Act and the amendments 
     made by this Act in final form before the end of the 6-month 
     period beginning on the date of enactment of this Act.
                                 ______
                                 
      By Mr. BROWNBACK (for himself, Mr. Ensign, Mr. Enzi, Mr. Hagel, 
        Mr. Inhofe, Mr. Nickles, Mr. Santorum, and Mr. Sessions):
  S. 1930. A bill to provide that the approved application under the 
Federal Food, Drug and Cosmetic Act for the drug commonly known as RU-
486 is deemed to have been withdrawn, to provide for the review by the 
Comptroller General of the United States of the process by which the 
Food and Drug Administration approved such drug, and for other 
purposes; to the Committee on Health, Education, Labor, and Pensions.
  Mr. BROWNBACK. Mr. President, I rise today to introduce a very 
important piece of legislation, the RU-486 Suspension and Review Act of 
2003. The abortion drug RU-486 increases in infamy as its lethal nature 
continues to reveal itself. As my colleagues may remember, in 
September, RU-486 claimed two more lives, one of whom was an 18-year-
old woman. Holly Patterson, a resident of the San Francisco suburb of 
Livermore, died from an infection caused by fragments of her baby left 
in

[[Page S15474]]

her uterus after she was administered RU-486 at a Planned Parenthood 
facility. This tragedy underscores the dangerous nature of this drug.
  The available data from the U.S. trials of RU-486 raises serious 
questions in my mind as to whether or not this drug truly is ``safe'' 
for the women who use it. Women who participated in the U.S. trials of 
this drug were carefully screened, and only those who were in the most 
physically ideal condition were accepted. Even so, among these 
physically ideal participants, troubling results emerged. Two-percent 
of the women participating hemorrhaged; one-percent had to be 
hospitalized; several others required surgery to stop the bleeding--
some of whom needed blood transfusions; and one woman in Iowa, after 
losing between one-half to two-thirds of her total blood volume, would 
have died if she had not undergone emergency surgery. If these side-
effects occurred in the most physically ideal candidates, what about 
those who are not in the physically ideal category? Is this drug 
``safe'' for women? I believe medical results suggest it is not.
  The bill I am introducing today will require the suspension of the 
Food and Drug Administration's approval of RU-486. Following this 
suspension, the General Accounting Office is directed to review the 
process the FDA used to approve RU-486 and to determine whether the FDA 
followed its own guidelines. If it is determined that the FDA violated 
its guidelines, RU-486 will be suspended indefinitely. Monty and Helen 
Patterson, the parents of Holly Patterson, have expressed their firm 
support for this legislation and have requested that it be known as 
``Holly's Law'' in honor of their daughter whose life was prematurely 
ended. I ask that their open letter on this subject be printed in the 
Record.
  The Food and Drug Administration should not have authorized this 
dangerous drug. RU-486 is perilous both to the baby and to the woman 
who uses it. I urgently call on my colleagues in this Chamber to 
support ``Holly's Law'' to prevent more unnecessary deaths.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:


                                                Livermore, CA,

                                                November 20, 2003.
       Dear Sir or Madam: The Alameda County Coroner's report has 
     validated what we already believed to be true. Holly has died 
     from an RU-486 chemical induced abortion. There are no quick 
     fixes for a pregnancy or magical pills that will make it go 
     away. Our family, friends and community are all deeply 
     saddened and forever marred by Holly's tragic and preventable 
     death.
       Holly lived as an adult by law for only 19 days, yet she 
     became pregnant when she was just 17 years old. We now know 
     that she learned about her pregnancy in the second week of 
     August and was so distraught over her unplanned pregnancy 
     that she sought help for depression from her family doctor on 
     September 10, 2003--the very day that she began the drug 
     induced abortion process.
       Holly was a strong, healthy, intelligent and ambitious 
     teenager who fell victim of a process that wholly failed her, 
     beginning with the 24-year-old man who had unprotected sex 
     with her, impregnated her, and then proceeded to facilitate 
     the secrecy that surrounded her pregnancy and abortion. Under 
     this conspiracy of silence, Holly suffered and depended on 
     the safety of the FDA approved pill administered by Planned 
     Parenthood and emergency room treatment by Valley Care 
     Medical Center where she received pain killers for severe 
     cramping and was sent home. On Saturday and Sunday, Holly 
     cried and complained of severe cramping and constipation, and 
     even allowed us to comfort her but could not tell us what she 
     was really going through. On September 17, 2003, she 
     succumbed to septic shock and died while many members of our 
     family waited anxiously, yet expectantly in the Critical Care 
     Unit for her to recover until we were forced behind the 
     curtain when it was clear that she was dying.
       And in those last moments of her life feeling utter 
     disbelief and desperation we formed a circle just beyond the 
     curtain and prayed aloud, cried and screamed, ``We love you, 
     Holly'' hoping beyond hope that those words would ring out 
     and save her life. And the other members of our family who 
     drove and flew from all over the country to be by her side 
     did not make it in time to say, ``I love you'' just one last 
     time. Holly was not alone, unloved, unprotected or 
     unsupported; she had a large family who willingly supported 
     her throughout her short life and tragic death.
       In the weeks since we buried Holly's body we are now able 
     to recall and share the memories of our daughter's brilliant 
     blue eyes, engaging smile, laughter, unwavering determination 
     and sheer gentle beauty that invoked our natural instinct to 
     protect and love her, but we will never be able to forget 
     those last moments of her life when she was too weak to talk 
     and could barely squeeze our hands in acknowledgement of our 
     words of encouragement. ``We love you, Holly'', ``Just hang 
     in there, the whole family is coming,'' ``You fight this 
     Holly, you can do it.''
       Because Holly has died this way, we have educated ourselves 
     about the grave dangers of this drug, become conscious of the 
     current lack of parental notification/consent laws in 
     California and now recognize the critical need for accurate, 
     impartial sources of information and resources for parents, 
     teenagers and young women who want to learn about the real 
     dangers and risks of unplanned pregnancy and abortion and the 
     dire need for a national movement to encourage prevention and 
     open dialogue in the home about unplanned pregnancy and 
     abortion.
       We will actively support ``Holly's Law'' in Congress by 
     Reps. DeMint, Bartlett and Senator Brownback to suspend and 
     review the abortion drug RU-486, the Tell-A-Parent (TAP) 
     bill, which requires parental notification laws in California 
     and a campaign to encourage prevention and open dialogue 
     about unplanned pregnancy and abortion in the home.
       As parents, we cannot allow our beautiful Holly's horrible 
     death to be in vain. RU-486 has caused serious injury and has 
     been implicated in the deaths of other young women. Now it 
     has killed our daughter. We have learned that the initial 
     trials were rushed and the drug was lumped in and approved 
     with drugs designed for life threatening illnesses such as 
     cancer and AIDS. Pregnancy is a natural process that a 
     woman's body is designed to support and has never been 
     classified as a life threatening illness. We need help to 
     develop a website and provide a place for teenagers and women 
     to report their stories and testimonials of their experience 
     on the serious and adverse affects using RU-486.
       The FDA has failed to carry out its mission of ensuring RU-
     486 is a safe and effective abortion drug regimen. According 
     to the FDA, it is ``responsible for protecting the public 
     health by assuring the safety, efficacy, and security of 
     human and veterinary drugs, biological products, medical 
     devices, our nation's food supply, cosmetics, and products 
     that emit radiation.'' Holly has already paid the ultimate 
     price. The RU-486 abortion drug should not be either a Pro 
     Life or Pro Choice issue. The most primary concern here must 
     be the health and welfare of our children and young women. 
     Hopefully, all parents can learn from Holly's horrible death 
     and our loss.
       According to Danco Laboratories, the abortion drug's 
     distributor, the RU-486 regimen fails to work 7-8 percent of 
     the time. Over a year ago the FDA received 400 reports of 
     adverse reactions to the drug including several deaths.
       Holly is yet another victim who was subject to an 
     unacceptable risk to a drug that has a significant failure 
     rate. And we demand that FDA Commissioner Mark McClellan and 
     Health and Human services Secretary, Tommy Thompson take RU-
     486 off the market immediately pending an extensive 
     investigation by the Comptroller General of the United States 
     before more parents suffer and women die.
       We respectfully request the name of the bill that is to be 
     presented to the House of Representatives, an Act as the 
     ``[RU-486 Approval and Review Act of 2003]'' to be known as 
     ``Holly's Law.'' With actively support a bill that halts the 
     use of the drug that took Holly's young life.
       We demand an investigation by the FDA and the California 
     State Health Department as to why abortion clinics like 
     Planned Parenthood are not following FDA approved regulations 
     to administer the drug. We question the purity of the drugs 
     they administer, especially when they are made in foreign 
     countries, such as China.
       In addition to the dangers of this drug and its 
     administration, we believe that health care providers such as 
     Valley Medical Center don't appear to be fully prepared to 
     evaluate and treat patients with RU-486 complications in 
     emergency situations. Holly was in the hospital twice and 
     died within 20 minutes before her follow up appointment with 
     Planned Parenthood.
       FDA Commissioner Mark McClellan and Health and Human 
     Services Secretary, Tommy Thompson should now have enough 
     evidence to pull this drug from the market. How many more 
     teenagers and young women will have to pay the price with 
     their health or with their life, before the FDA decides to 
     act?
       Currently in California, teenage girls under the age of 18 
     can't get their ears pierced or go on a school trip, but they 
     can have a medical or surgical abortion without parental 
     knowledge or consent. This prevents parents from being able 
     to talk to their children about a pregnancy that would allow 
     them to keep a baby or to be able to follow the abortion 
     process.
       The first line of defense for a child is a parent. Kids 
     wouldn't be walking into clinics under a veil of secrey if 
     parents were notified first hand where they could talk to 
     their children about abortion risks. We have now learned that 
     Holly first sought a pregnancy test in the months leading up 
     to her pregnancy while she was still 17 years old. We know 
     now that a parental notification law would have brought 
     Holly's activity to our attention and her needless death 
     could have been prevented if we had been aware and 
     intervened.
       We actively support the Tell-A-Parent (TAP) ballot 
     initative sponsored by Life on

[[Page S15475]]

     The Ballot www.LifeontheBallot.org. With enough petitions, 
     this initiative will be on the 2004 ballot and requires 
     parental notification 48 hours prior to an abortion in 
     California. As parents, we are concerned about the health and 
     welfare of all daughters; we are ``Pro Holly'' and look to 
     our California Senators Barbara Boxer and Dianne Feinstein to 
     support this initiative for the safety and protection of all 
     young women in California.
       Finally, we have suffered greatly with the realization that 
     it's not enough to avoid the issue or talk to our children 
     about why we don't want them to be involved in an unplanned 
     pregnancy or abortion, but as parents, we must also talk 
     about the tragic realities of unwanted pregnancy and abortion 
     and reassure both, our daughters and sons that while we don't 
     want this to happen, we will support them. We must focus on 
     prevention and they must be told that they are not alone in 
     this or any other unfortunate circumstances, regardless of 
     the outcome.
       We feel strongly that this country needs a national 
     campaign to promote open and frank discussions in the home 
     about unplanned pregnancy and the options that are available 
     to our daughters who find themselves in this unfortunate 
     predicament. We are eager to support such a campaign designed 
     to bring about awareness, encourage parental involvement, and 
     provide accurate information to minors, women, and parents 
     about abstinence, birth control, unplanned pregnancy, 
     abortion, parenting, and adoption options.
       While parents would prefer that their daughters abstain 
     from sex and many do, we must deal with the reality that many 
     don't. In addition to unplanned pregnancy, girls can contract 
     HIV and other STIs. As parents we need to prevent unplanned 
     pregnancy instead of relying upon abortion clinics and 
     agencies to educate our children and provide them with 
     inaccurate information. No parent wants to see his or her 
     teenage or college age daughter in the unfortunate situation 
     that Holly was faced with.
       We have lost our daughter, Holly, but we can still help to 
     prevent this terrible tragedy from happening in other 
     families. Holly's drive and determination to accomplish her 
     goals gives us strength to pursue these critical issues in 
     her name. Holly's memory and light will live on in our 
     hearts, family, friends and our work. We will actively 
     support the bill to suspend and review ``Holly's Law'' in 
     Congress by Reps. DeMint and Bartlett and Senator Brownback 
     to suspend and review the abortion drug RU-486, the Tell-A-
     Parent (TAP) bill, which requires parental notification laws 
     in California and a campaign to encourage prevention and open 
     dialogue about unplanned pregnancy and abortion in the home. 
     Please contact us with any questions or requests for support 
     of these very important issues.
           Sincerely,
     Monty and Helen Patterson.

                          ____________________