[Congressional Record (Bound Edition), Volume 152 (2006), Part 18]
[Senate]
[Pages 23546-23558]
[From the U.S. Government Publishing Office, www.gpo.gov]




            NATIONAL INSTITUTES OF HEALTH REFORM ACT OF 2006

  Mr. FRIST. Mr. President, I ask unanimous consent that the Committee 
on Health, Education, Labor and Pensions be discharged from further 
consideration of H.R. 6164, and the Senate proceed to its immediate 
consideration.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will report the bill by title.
  The legislative clerk read as follows:

       A bill (H.R. 6164) to amend title IV of the Public Health 
     Service Act to revise and extend the authorities of the 
     National Institutes of Health, and for other purposes.


[[Page 23547]]


  There being no objection, the Senate proceeded to consider the bill.


                           enrollment periods

  Mr. GRASSLEY. I wish to engage my colleague Senator Baucus in a 
colloquy concerning the Tax Relief and Health Care Act of 2006. This 
bill contains a provision that would allow certain Medicare Advantage 
plans to enroll individuals at any time during the year. I am concerned 
about this provision for two reasons: No. 1, the effect it will have on 
the Medicare Advantage program, and No. 2, the process by which it was 
included in this package.
  Mr. BAUCUS. I thank you for bringing this provision up for 
discussion. I have concerns as well.
  Mr. GRASSLEY. Under current law, beneficiaries can decide to stay in 
the traditional fee-for-service program or enroll in Medicare Advantage 
plans during the annual open period, which lasts from November 15 to 
December 31. They can also make certain changes one time between 
January and March of the following year. I remember how much time and 
effort we spent designing these enrollment policies when we worked 
together on the Medicare Modernization Act of 2003. Wouldn't you agree 
this provision is a significant policy change?
  Mr. BAUCUS. That is an understatement. This provision would allow 
some but not all types of Medicare Advantage plans to enroll 
individuals throughout the year. Only those plans that do not offer 
prescription drug coverage will be given this special treatment. This 
may sound like a small change because it only affects a certain type of 
Medicare Advantage plan. But it creates an unlevel playing field 
between plans with no drug coverage and Medicare Advantage plans that 
have decided to offer prescription drug coverage.
  Mr. GRASSLEY. That is exactly my concern, too. I am also disappointed 
in the process that led to the provision being included in the final 
bill. We had an understanding that we would only include agreed-upon 
extensions and must-do health items in the package and not make major 
policy decisions that had not gone through the regular process. This 
provision does not meet that standard.
  Mr. BAUCUS. No, it does not. In fact, I soundly rejected the proposal 
during the negotiations with our House colleagues. They were clearly 
informed of my position on the matter. Our final agreement did not 
include this provision.
  Mr. GRASSLEY. It disturbs me, that this major policy change--one that 
treats some plans unfairly--was included at last minute by the House 
rules committee. I do not operate like that, and I know you do not, 
either. Unfortunately, we are stuck with this provision for the time 
being. But I assure of my commitment to working with you as soon as 
possible next year to revisit this provision.
  Mr. BAUCUS. I thank my colleague and good friend from Iowa. I look 
forward to working with you next year on this and all of the business 
we will have before our committee.


                  children's health insurance program

  Mr. ROCKEFELLER. Chairman Grassley and Ranking Member Baucus, I would 
like to begin by thanking you for your efforts to address the impending 
Children's Health Insurance Program, CHIP, shortfalls as part of this 
end-of-the-year package. As many as 17 States face the prospect of not 
having enough Federal CHIP dollars to cover the children currently 
enrolled in their programs. Estimates by the Congressional Research 
Service and others indicate that these shortfalls will total 
approximately $920 million next year and could put the health care 
coverage of as many as 630,000 children in jeopardy. This compromise, 
struck between you, Congressman Barton, and Congressman Dingell, while 
not 100 percent of what everybody wanted, takes a significant step 
toward addressing that problem.
  Mr. GRASSLEY. Thank you, Senator Rockefeller. We share an interest in 
making sure that States have adequate Federal funding to cover children 
through CHIP. No one wants to see children lose coverage, and we hope 
the provisions in this bill will help States on a temporary basis until 
we have time to work out a more permanent solution to the CHIP 
financing structure. Now I know that there are a lot of concerns about 
this package. And I want to make it clear that Senator Baucus and I 
thought this was what we could pass right now. We are hopeful that we 
can pass this package here in the Senate and then get House agreement 
tonight or tomorrow so that we can forestall these shortfalls for the 
first part of the year.
  I want to make it clear, however, that nothing in this package binds 
us for CHIP reauthorization next year. There is discomfort with the 
CHIP provisions on both sides of the aisle. But Senators are willing to 
compromise in order to get something done for children before we go 
home. Therefore, we should put aside our differences and individual 
gripes in order to get something productive passed.
  Mr. BAUCUS. I want to associate myself with the remarks of the 
chairman. This bill is so important, so vital to the lives of hundreds 
of thousands of children who need health coverage. I am so proud that 
the Senate and the House were able to get together and work out a deal 
to get this done this year. I was disappointed we weren't able to 
include this in the tax extenders package that Senator Grassley and I 
worked on, so it is very gratifying to know we were able to do this. I 
want to especially thank Chairman Grassley and his staff, Becky Shipp, 
for their dedication to this effort and commitment to the program. I 
would also like to thank Chairman Barton and his staff, Ryan Long, for 
their willingness to help in this process, and Congressman Dingell and 
his staff, Bridgett Taylor and Amy Hall, for their dogged determination 
to get this done. I also agree with Chairman Grassley in his view that 
the CHIP provisions in this bill will not set a precedent for 
reauthorization next year. Instead, this is a temporary fix--a 
downpayment toward addressing a long-term problem of increasing demand 
for CHIP and not enough Federal funds to go around. In an ideal world, 
Senator Grassley and I would have liked to put new money on the table 
to fully fund the shortfalls. However, we are operating under 
significant budget constraints. This package represents what we think 
we can do now, despite those constraints. We know we will need to 
revisit this issue next year, either as part of the reauthorization of 
the CHIP program, or apart from that, to address the remaining CHIP 
shortfalls so that no State has insufficient funds to provide health 
coverage for children. I am heartened by Senator Grassley's strong 
commitment to the program that we will be able to work together in this 
critical effort to shore up our Nation's safety net for low-income 
children.
  Mr. ROCKEFELLER. Your comments are helpful because I think Members 
are concerned that accepting this CHIP shortfalls proposal means they 
will be giving tacit approval to other provisions in the bill that they 
don't really support--such as decreasing the CHIP allotment from 3 
years to 2\1/2\ years, or putting restrictions on how States can use 
the redistributed money, for example. But what I hear both of you 
saying, I think, is that the CHIP provisions in this package are 
causing a little bit of pain for everyone, but that the benefits of 
getting something done now far outweigh the downsides and that nothing 
in this CHIP package binds us as we move to reauthorize the program 
next year.
  Mr. GRASSLEY. I understand the concerns of our colleagues. Certainly, 
there are those who think we should have gone further in this proposal. 
There are Senators who support going from a 3-year allotment structure 
to a 2-year allotment structure immediately. And there are Senators who 
want to put greater limits on how CHIP dollars can be spent, to ensure 
program spending prioritizes children first. Senator Baucus and I 
developed a CHIP proposal that is somewhere in between but is a 
proposal that meets our ultimate objective of keeping children covered. 
We can have a policy debate about the merits of various proposals when 
we reauthorize the program next year. Nothing in this package precludes 
us from doing that.

[[Page 23548]]


  Mr. BAUCUS. I expect the Finance Committee to have a deliberative 
process on CHIP reauthorization early next year, where we can hear from 
Members, Governors, CHIP directors, families and others about the CHIP 
financing structure, the allotment timeframe, populations covered and 
any other relevant issues of concern. As far as I'm concerned, we come 
to this process with a clean slate and we will have an honest dialogue 
about the future of this vital program. For right now, however, I hope 
that we can pass this legislation, so that no child loses coverage 
before we have a chance to reauthorize the program next year.
  Mr. ROCKEFELLER. I thank my colleagues for their tireless efforts on 
behalf of children, and I look forward to working with both of them to 
address the remaining shortfalls early next year.
  Mr. ENZI. Mr. President, today the Senate has once again affirmed its 
commitment to strengthen the National Institutes of Health and its 
important research to find better treatments and cures for all 
diseases. Today, the Senate passed H.R. 6164, the National Institutes 
of Health Reform Act of 2006. This important piece of legislation 
provides needed reforms to the crown jewel of the Nation's biomedical 
research enterprise, the National Institutes of Health.
  This reauthorization builds upon the great initiatives and vision of 
Dr. Zerhouni, the Director of NIH, by creating a common fund to support 
cross-cutting trans-NIH research initiatives, such as those initiated 
as part of Dr. Zerhouni's ``roadmap initiative''. This reform bill also 
brings more transparency to the spending of this important agency. As 
we recently doubled the NIH budget, it is important that the NIH and 
Congress can plan and evaluate the efficiency and effectiveness of that 
spending.
  NIH is the steward of this Nation's biomedical research enterprise 
and it is important we reevaluate the inner-workings of the agency to 
ensure they are meeting this responsibility. The legislation passed 
today is a fulfillment of our critical obligation to evaluate, 
strengthen, and improve the NIH so that they can shoulder this burden.
  This bill also includes the substance of the NIH Foundation 
Improvement Act, which ensures the foundation has the resources and 
ability to aid researchers in fulfilling NIH's mission to find better 
treatments and cures for our most serious diseases. Most significantly, 
these provisions clarify membership in the foundation's board of 
directors and assures that the foundation receives funds to support its 
operating expenses.
  Every member of the House and Senate takes pride in the NIH and its 
grantees. Through their work and vision, America has become the world 
leader in biomedical research, and Americans benefit from the fruits of 
these labors every day. I am confident that this legislation will help 
NIH continue to be the engine that drives our understanding of 
biomedical science and continue to be a source of pride.
  Before closing, I would like to take this opportunity to acknowledge, 
thank, and congratulate the people who have worked hard to craft, 
draft, and pass this legislation. First, I would like to thank my 
colleagues in the House and their staff for their hard work in passing 
this critical legislation. It is hard to overstate their dedication and 
work in getting this bill done.
  Specifically, Chairman Barton and Representative Dingell worked 
tirelessly crafting this legislation for months and getting the House 
to pass it nearly unanimously. They have continued to work for the last 
3 months to address every concern from Members here in the Senate. 
Their staffs, Cheryl Jaeger, Katherine Martin, Ryan Long, John Ford and 
Jessica McNiece, have worked patiently and persistently to reach 
consensus that this bill is right policy at the right time. We 
appreciate their dedication and cooperative work.
  Further, I would like to acknowledge the Senate and House Legislative 
Counsels, who worked hand in hand with staff to draft language as the 
House and Senate worked to accommodate concerns. They worked many long 
hours and all through the night last night to draft this language. In 
particular, I would like to express my gratitude to Pete Goodlowe, 
Warren Berg, and Bill Baird for their dedication and hard work which 
enabled us to pass this bill.
  I want to thank all the members of the Senate Committee on Health, 
Education, Labor, and Pensions, especially my friend and ranking 
member, Senator Kennedy, for his hard work and determination in seeing 
this bill become law. I would also like to thank all of the staff, 
without whom much of our progress would not have been possible.
  I would also like to thank David Noll, Derrick Scholls, Caya Lewis, 
and David Bowen of Senator Kennedy's staff for their hard work and late 
nights.
  Finally, I would like to thank my own staff, including Katherine 
McGuire, my staff director, Ilyse Schuman, Greg Dean, Stephen Northrup, 
Dave Schmickel, and Shana Christrup for their diligence and 
determination as we worked to reach consensus on this important and 
essential bill.
  We anticipate the House will pass this bill later today, after which 
it will be sent to the President's desk. I look forward to the exciting 
biomedical breakthroughs that will result from the continued commitment 
of the NIH to critical, lifesaving research.
  Mr. CRAPO. Mr. President, I rise to comment briefly on the Tax Relief 
and Health Care Act of 2006. This bill includes a number of important 
provisions, including tax relief and reforms to the Medicare system. I 
wish simply to highlight two sections for the record.
  Section 103 contains an update of the composite rate component of the 
basic case-mix adjusted prospective payment system for dialysis 
services. The intent of this section is to provide an update of 1.6% 
for a period of 1 year to the current composite rate for dialysis care. 
This section does not address any other payment system modifications 
for the ESRD Program. The GAO report is intended to explore the cost of 
home dialysis and how to more effectively educate dialysis patients 
about the possible advantages of home dialysis.
  Section 110 relates to the reporting of anemia quality indicators for 
Medicare Part B cancer anti-anemia drugs. The intent of this section is 
to require the Secretary to develop a process through full notice and 
comment rulemaking that requires providers to report hemoglobin or 
hematocrit levels for patients being treated with cancer chemotherapy. 
Nothing in this section is intended to require the Secretary to change 
the coverage or payment rules for any products under Part B.
  Mr. McCONNELL. Mr. President, I rise to express my concerns about 
section 206 of the Tax Relief and Health Care Act of 2006. Under 
current law, Medicare beneficiaries are only permitted to enroll in a 
Medicare Advantage plan from November 15 to March 31. This provision 
would allow Medicare fee-for-service beneficiaries to enroll in certain 
Medicare Advantage plans at any time during 2007 or 2008, but only into 
those Medicare Advantage plans that do not cover prescription drugs. 
This is a significant change in policy, and I am concerned that this 
could provide incentives for seniors to join plans that do not offer 
prescription drug coverage. I am also troubled that this provision 
could distort the thriving Medicare Advantage marketplace that is 
serving seniors well today.
  I also am concerned about the process by which this provision was 
added to the underlying legislation. While the vast majority of the 
Medicare provisions of the Tax Relief and Health Care Act of 2006 were 
discussed and agreed to by the appropriate committees in the House and 
Senate, it is my understanding that this provision was added to the 
final package without the consent of the Finance Committee members who 
negotiated on the Senate's behalf.
  I want to make certain that our seniors are able to choose the 
Medicare option that best meets their health

[[Page 23549]]

care needs and I look forward to working with my colleagues to ensure 
this provision does not harm our Nation's Medicare beneficiaries.
  Mr. LEVIN. Mr. President, this bill covers a number of important 
areas. The so-called ``tax extenders'' provisions will continue a 
number of expired or expiring tax incentives that are important to our 
economy. These include the critical tax credit for research and 
development done here in the U.S. The bill also extends the Welfare to 
Work and the Work Opportunity Tax Credits, which encourage employers to 
hire certain long-term family assistance recipients and members of 
targeted groups such as high risk youth, families receiving food 
stamps, SSI recipients, and qualified veterans. Another important 
extension is the deduction for the out-of-pocket expenses of elementary 
and secondary school teachers of up to $250 for books and other 
supplies. And there is a deduction of up to $4,000 for qualified 
tuition and related expenses. There is also a provision to provide 
equity to the U.S.-flag ships operating in the Great Lakes.
  I am also pleased that this Congress is addressing the annual dilemma 
of appropriate reimbursement for physicians treating Medicare patients. 
The current Medicare reimbursement system is flawed, and without 
action, doctors treating Medicare patients would have faced a 5% 
reduction in reimbursement. I am pleased that this legislation will 
halt those cuts and I urge the 110th Congress to take a serious look at 
overall Medicare reimbursement so that we do not make this an annual 
affair. I am also pleased that this legislation contains a six month 
extension of the Medicare hospital wage index reclassification, 
bringing additional temporary financial relief to over 100 Michigan 
hospitals.
  This bill also includes the permanent extension of Normal Trade 
Relations (PNTR) to Vietnam which Congress has been granting on an 
annual basis since December 2001. Vietnam is joining the WTO and the 
United States is obligated to grant Vietnam permanent normal trade 
relations in order to receive the market opening commitments that were 
made by Vietnam as a condition of joining the WTO. As a member of the 
WTO Vietnam will be subject to all of the WTO's international trade 
rules. Currently, the United States provides PNTR to most countries, 
but not Vietnam.
  I also support the inclusion of the provisions of S. 3711, the Gulf 
of Mexico Energy Security Act of 2006, in this package. I supported 
this bill when it passed the Senate because I believe we need to move 
forward to open up more areas for natural gas exploration to address 
the increasingly tight natural gas supply in the U.S and its resulting 
high prices.
  Over the past six years, the tight natural gas supply and increasing 
costs of natural gas has had a significant impact on consumers and 
particularly on the U.S. manufacturing sector, which depends on natural 
gas as both a fuel source and a feedstock and raw material. With U.S. 
natural gas prices the highest in the industrialized world, many 
companies have made decisions to move their manufacturing operations 
offshore. Millions of manufacturing jobs have outsourced overseas 
during this period.
  Mr. President, I will support this bill because it contains many 
important provisions. I do hope, however, that in the next Congress we 
can take up legislation in a timely manner allowing for more study and 
deliberation on important far-reaching provisions and avoid these last 
minute omnibus packages. The process by which this omnibus package was 
pulled together and unveiled at the eleventh hour is seriously flawed. 
Pushing through an un-amendable, take-it-or-leave it package of 
otherwise unrelated bills is not the way Congress should legislate. But 
at least we are finally coming to address a number of important 
provisions that we should have dealt with long ago.
  Mr. REED. Mr. President, I have been a longtime supporter of these 
tax credits and I am pleased that they are extended by this long 
overdue bill before us tonight.
  The tax credits included in this bill are significant both for 
families and for businesses; these credits will help families send 
their children to college, encourage businesses to hire individuals 
working to get off welfare, and support research and development. The 
IRS indicates that 19 million taxpayers will benefit from this relief. 
Our economy benefits from these provisions and many taxpayers have 
grown to rely on them. And those who benefit from these provisions need 
certainty.
  I am disappointed, however, by critical omissions and the inclusion 
of some provisions about which I have serious concerns.
  For starters, this package does not address the Alternative Minimum 
Tax, AMT; a tax provision that, with no Congressional intervention, 
will affect 37.1 million tax returns by 2010. Households are more 
likely to pay the AMT if they have children or live in a high-tax state 
because the AMT does not allow taxpayers to claim an exemption for 
dependents as an itemized deduction for state taxes. By 2010, nearly 90 
percent of married couples with two or more children and incomes 
between $75,000 and $100,000 will pay the AMT.
  The AMT is complicated, unfair, and no longer meets its intended 
purpose. That is why in her 2003 annual report to Congress, National 
Taxpayer Advocate Nina Olson identified the AMT as the most serious 
problem encountered by taxpayers. According to Olson ``. . . that is 
how the AMT appears to function--randomly, no longer with any logical 
basis in sound tax administration or any connection with its original 
purpose of taxing the very wealthy who escape taxation. Congress must 
address the AMT before it bogs down tax administration and increases 
taxpayers' cynicism to such a level that overall compliance declines.''
  Also, the bill includes many ill-conceived provisions. I strongly 
oppose the bill's inclusion of an expanded voucher program for the 
District of Columbia. There is no doubt that our nation's capital faces 
severe educational challenges. However, this expansion is an 
unnecessary action that subverts the program's original intent to serve 
solely low-income students, and continues federal government 
subsidization of private and religious schools at the expense of public 
education.
  This is another attempt by the President and Republican leadership to 
expand private school voucher programs, while reneging on our 
fundamental commitment to public schools, where 90 percent of American 
children receive their education. Instead of private school vouchers, 
we should spend the dollars necessary to make the No Child Left Behind 
reforms work. We should be focusing on educational issues that touch 
the lives of all American students, not just a select few.
  Also inserted in the bill is a considerable expansion of Health 
Savings Accounts, HSAs. The provisions, which were never given full 
consideration by either the Senate or House of Representatives, provide 
yet another mechanism for high income individuals to shelter taxable 
income under the guise of health care. An August Government 
Accountability Office, GAO, report on tax filers who reported making 
HSA contributions had an average income of $133,000 in 2004. The annual 
survey of health care consumers by the Employee Benefit Research 
Institute and the Commonwealth Fund found virtually no change in 
enrollment in HSAs, nor did they find any measurable impact on the 
rates of the uninsured in this country. While those who support these 
extensions, which will cost taxpayers close to a billion dollars over 
the next decade, will argue that they will help expand these insurance 
products to more Americans, in reality they will benefit only those 
Americans wealthy enough to take advantage of them.
  The bill does contain some essential health-related provisions. 
Specifically, it includes another temporary update in the reimbursement 
rate for physicians under Medicare. While this package reverses the 
projected 5.1 percent cut for 2007, this Congress must take action next 
year to bring greater stability and predictability to the Medicare 
physician payment formula than currently exists. Nevertheless, this 
provision ensures that elderly and disabled Medicare patients will 
continue to have access to their providers.

[[Page 23550]]

  While this bill provides a 1-year extension of the moratorium on 
Medicare therapy caps, many other needed Medicare and Medicaid 
provisions have been omitted. For instance, the bill does not include a 
moratorium on impending reductions in reimbursements for imaging 
services.
  However, I would commend the architects of the legislation for 
carving out unexpended monies available in the Medicare advantage 
stabilization fund to finance the provisions that were included instead 
of resorting to cuts in reimbursements to individual Medicare providers 
groups.
  I am further disappointed that this bill allows for exploration of 
the outer continental shelf. This provision will not provide energy 
security to the United States. Our nation needs a comprehensive energy 
policy that reduces dependency on fossil fuels through increased energy 
efficiency, greater investment in renewable energy, and development of 
alternative fuels to replace oil. This provision is also unsound fiscal 
policy. It would mandate that almost 38 percent of revenue from federal 
resources generated by new leases in the Gulf of Mexico be given to 
four states--Alabama, Louisiana, Mississippi, and Texas. These are 
revenues that currently would be provided to the United States Treasury 
for the benefit of the Nation as a whole. Reducing revenue to the 
Treasury means that we, as a nation, will have fewer resources 
available in the future to respond to a call for help should there be 
another devastating natural disaster or terrorism attack.
  Unfortunately, the majority played political games to get us to this 
point. We should have passed this legislation long ago. Instead, we are 
now faced with passing a bill that contains important provisions but 
also a number of others that I would have opposed had they been offered 
on their own merits. Despite this bill's shortcomings, I will support 
it because it extends tax credits that will truly benefit countless 
Americans and contains an important physician reimbursement fix. I will 
work in the new Congress to address the bill's shortcomings.
  Mr. FRIST. I ask unanimous consent the amendment at the desk be 
agreed to, the bill, as amended, be read the third time and passed, the 
motion to reconsider be laid upon the table, and any statements be 
printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 5238) was agreed to.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  The amendment was ordered to be engrossed and the bill to be read a 
third time.
  The bill (H.R. 6164), as amended, was read the third time and passed.


                         statement of managers

  Mr. GRASSEY. Mr. President, I ask unanimous consent that a manager's 
statement be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                         Statement of Managers

            DIVISION B--MEDICARE AND OTHER HEALTH PROVISIONS


                   section 1. short title of division

     Current law
       No Provision.
     Explanation of provision
       This division may be cited as the ``Medicare Improvements 
     and Expansion Act of 2006''.

        Title I--Medicare Improved Quality and Provider Payments


         section 101. Physician payment and quality improvement

     Current law
       Medicare payments for services of physicians and certain 
     nonphysician practitioners are made on the basis of a fee 
     schedule. The fee schedule assigns relative values to 
     services that reflect physician work (i.e., the time, skill, 
     and intensity it takes to provide the service), practice 
     expenses, and malpractice costs. The relative values are 
     adjusted for geographic variations in costs. The adjusted 
     relative values are then converted into a dollar payment 
     amount by a conversion factor. The conversion factor for 2006 
     is $37.8975.
       The conversion factor is the same for all services. It is 
     updated each year according to a formula specified in law. 
     The intent of the formula is to place a restraint on overall 
     spending for physicians' services. Several factors enter into 
     the calculation of the formula. These include: (1) the 
     sustainable growth rate (SGR) which is essentially a 
     cumulative target for Medicare spending growth over time 
     (with 1996 serving as the base period); (2) the Medicare 
     economic index (MEI) which measures inflation in the inputs 
     needed to produce physicians services; and (3) the update 
     adjustment factor which modifies the update, which would 
     otherwise be allowed by the MEI, to bring spending in line 
     with the SGR target. In no case can the adjustment factor be 
     less than minus seven percent or more than plus three 
     percent.
       The law specifies a formula for calculating the SGR. It is 
     based on changes in four factors: (1) estimated changes in 
     fees; (2) estimated change in the average number of Part B 
     enrollees (excluding Medicare Advantage beneficiaries); (3) 
     estimated projected growth in real gross domestic product 
     (GDP) growth per capita; and (4) estimated change in 
     expenditures due to changes in law or regulations. In order 
     to even out large fluctuations, MMA changed the GDP 
     calculation from an annual change to an annual average change 
     over the preceding 10 years (a ``10-year rolling average'').
       The SGR target is not a limit on expenditures. Rather, the 
     fee schedule update reflects the success or failure in 
     meeting the target. If expenditures exceed the target, the 
     update for a future year is reduced. This is what occurred 
     for 2002. It was also slated to in subsequent years; however, 
     legislation kept this from occurring. Most recently, the 
     Deficit Reduction Act froze the 2006 conversion factor at the 
     2005 level. A negative 5% percent update is slated to occur 
     in 2007.
     Explanation of provision
       The conversion factor for 2007 would be the conversion 
     factor otherwise applicable for 2007 divided by the product 
     of: (i) 1 plus the Secretary's estimate of the percentage 
     increase in the MEI for 2007 (divided by 100), and (ii) 1 
     plus the Secretary's estimate of the update adjustment factor 
     for 2007. These changes would not be considered in the 
     computation of the conversion factor for 2008.
       The provision would also implement a voluntary quality 
     reporting system for Medicare payments for covered 
     professional services tied to the reporting of claims data. 
     Physicians and other eligible professionals (including 
     physician assistants, nurse practitioners, clinical nurse 
     specialists, certified registered nurse anesthetists, 
     certified nurse-midwives, clinical social workers, clinical 
     psychologists, registered dietitians or nutritional 
     professionals as defined under current law, physical 
     therapists, occupational therapists, and qualified speech-
     language pathologists) who report the quality information 
     would be eligible for a bonus incentive payment for services. 
     For 2008, the Secretary would address a mechanism whereby an 
     eligible professional could provide data on quality measures 
     through an appropriate medical registry (such as the Society 
     of Thoracic Surgeons National Database) as identified by the 
     Secretary.
       For covered professional services furnished beginning July 
     1, 2007 and ending December 31, 2007, the quality reporting 
     measures are those identified as physician quality measures 
     under the CMS Physician Voluntary Reporting Program (PVRP) as 
     published on the CMS public website as of the date of 
     enactment of this provision. The Secretary may modify these 
     quality measures if changes are based on the results of a 
     consensus-process meeting in January of 2007 and if such 
     changes are published on the CMS website by April 1, 2007. 
     The Secretary may subsequently refine the quality measures 
     (without notice or opportunity for public comment) up until 
     July 1, 2007 by publishing modifications or refinements to 
     previously published quality measures but may not change the 
     quality measures.
       Eligible professionals who (1) furnish services for which 
     there are established quality measures as determined by this 
     provision and (2) satisfactorily submit quality measures 
     would be paid a single additional bonus payment amount equal 
     to 1.5% of the allowed charges for covered professional 
     services furnished during the reporting period. The bonus 
     incentive payments would be paid from the Supplemental 
     Medical Insurance Trust Fund (Part B). These bonus incentive 
     payments would not be taken into account in the calculations 
     and determination of payments for providers in health 
     professional shortage areas or Physician Scarcity Areas, nor 
     would these bonus payments be taken into account in computing 
     allowable charges under this subsection.
       The Secretary would presume that if an eligible 
     professional submits data for a measure, then the measure is 
     applicable to the professional. However, the Secretary may 
     validate (by sampling or other means as the Secretary 
     determines to be appropriate) to determine if an eligible 
     professional reports measures applicable to such professional 
     services. If the Secretary determines that an eligible 
     professional has not successfully reported applicable 
     measures, the Secretary would not pay that professional the 
     bonus.
       Satisfactory reporting of data determines whether the 
     provider is eligible for the bonus payment. If there are no 
     more than 3 quality measures that are applicable to the 
     professional services furnished, the provider must report 
     each measure for at least 80% of the

[[Page 23551]]

     cases to meet the criteria. If there are 4 or more quality 
     measures that are applicable, the provider must report at 
     least 3 of the quality measures for at least 80% of the 
     cases.
       The provision also places a limit on bonus payments. No 
     provider would receive payments in excess of the product of 
     the total number of quality measures for which data are 
     submitted and three times the average per measure payment 
     amount. The average per measure payment amount would be 
     estimated by the Secretary and would equal the total amount 
     of allowed charges under Medicare part B for all covered 
     professional services furnished during the reporting period 
     on claims for which quality measures are reported divided by 
     the total number of quality measure for which data are 
     reported during the reporting period under the physician 
     reporting system.
       The Secretary would provide for education and outreach to 
     eligible professionals regarding these changes. The Secretary 
     would implement these provisions acting through the 
     Administrator of the Centers for Medicare and Medicaid 
     services.
       This provision would allow no administrative or judicial 
     review, under the existing Medicare appeals process or 
     through a Provider Reimbursement Review Board as currently 
     codified in statute, of the determination of measures, 
     satisfactory reporting, payment limitation, or bonus 
     incentive payment. A determination under the provisions of 
     this section would not be treated as a determination under 
     current appeals processes for Medicare.
       For 2008, the quality measures would be selected from 
     measures adopted or endorsed by a consensus organization 
     (such as the National Quality Forum or AQA, originally known 
     as the Ambulatory Care Quality Alliance) that includes 
     measures that have been submitted by a physician specialty 
     developed through a consensus-based process as identified by 
     the Secretary. Such measures shall include structural 
     measures, such as the use of electronic health records and 
     electronic prescribing technology. The CMS administrator 
     would publish a proposed set of quality measures for 2008 in 
     the Federal Register no later than August 15, 2007 with a 
     public comment period. The final set of measures appropriate 
     for eligible professionals to use to submit quality data in 
     2008 would be published no later than November 15, 2007.
       The Secretary would be required to establish a Physician 
     Assistance and Quality Initiative Fund which would be 
     available to the Secretary for physician payment and quality 
     improvement initiatives. Such initiatives may include 
     application of an adjustment to the update to the conversion 
     factor. The amount available to the Fund would be $1.35 
     billion for 2008. The Secretary would be required to provide 
     for expenditures from the Fund for the obligation of the 
     entire amount (to the maximum extent feasible) for payment 
     for physicians services furnished in 2008. The specified 
     amount available to the Fund would be made to the Fund from 
     the Part B trust fund as expenditures are made from the Fund. 
     The amounts in the Fund are to be available in advance of 
     appropriations, but only if the total amount obligated to the 
     Fund does not exceed the amount available to it. The 
     Secretary may obligate funds from the Fund only if the 
     Secretary determines (and the CMS Chief actuary and the 
     appropriate budget officer certifies) that there are 
     sufficient amounts available in the Fund. If the expenditures 
     from the fund affect the conversion factor for a year, this 
     would not affect the computation of the conversion factor for 
     a subsequent year.
       The Secretary would be required to transfer $60 million 
     from the Part B trust fund to the CMS Program Management 
     Account for the period of FY 2007, FY 2008, and FY 2009 for 
     the purposes of implementing this section.


 Section 102. Extension of floor on Medicare work geographic adjustment

     Current law
       Medicare's physician fee schedule assigns relative values 
     to services that reflect physician work (i.e., the time, 
     skill, and intensity it takes to provide the service), 
     practice expenses, and malpractice costs. The relative values 
     are adjusted for geographic variations in costs. The adjusted 
     relative values are then converted into a dollar payment 
     amount by a conversion factor.
       The geographic adjustment factors are indices that reflect 
     the relative cost difference in a given area in comparison to 
     a national average. An area with costs above the national 
     average would have an index greater than 1.00 while an area 
     with costs below the average would have an index below 1.00. 
     The physician work geographic adjustment factor is based on a 
     sample of median hourly earnings in six professional 
     specialty occupational categories. Unlike the other 
     geographic adjustments, the work adjustment factor reflects 
     only one-quarter of the cost differences in an area. The 
     practice expense adjustment factor is based on employee 
     wages, office rents, medical equipment and supplies. The 
     malpractice adjustment factor reflects differences in 
     malpractice insurance costs. The Secretary is required to 
     periodically review and adjust the geographic indices.
       MMA required the Secretary to increase the value of any 
     work geographic index that was below 1.00 to 1.00 for 
     services furnished on or after January 1, 2004 and before 
     January 1, 2007.
     Explanation of provision
       The requirement is extended for an additional year, for 
     services provided before January 1, 2008.


 Section 103. Update of the composite rate component of the basic case-
     mix adjusted prospective payment system for dialysis services

     Current law
       The Medicare Prescription Drug, Improvement, and 
     Modernization Act of 2003 (MMA) required the Secretary to 
     establish a basic case-mix adjusted prospective payment 
     system for dialysis services furnished either at a facility 
     or in a patient's home, for services furnished beginning on 
     January 1, 2005. The basic case-mix adjusted system has two 
     components: (1) the composite rate, which covers services, 
     including dialysis; and (2) a drug add-on adjustment for the 
     difference between the payment amounts for separately 
     billable drugs and biologicals and their acquisition costs, 
     as determined by Inspector General Reports.
       The Secretary is required to update the basic case-mix 
     adjusted payment amounts annually beginning with 2006, but 
     only for that portion of the case-mix adjusted system that is 
     represented by the add-on adjustment and not for the portion 
     represented by the composite rate. The DRA increased the 
     composite rate component of the basic case-mix adjusted 
     system for services beginning January 1, 2006 by 1.6%, over 
     the amount paid in 2005. For 2006, the base composite rate is 
     $130.40 for independent ESRD facilities and $134.53 for 
     hospital-based ESRD facilities. The total drug add-on 
     adjustment, with inflation, is 14.5%.
     Explanation of provision
       The composite rate component of the basic case-mix adjusted 
     system shall be increased by 1.6 percent above the 2005 rate, 
     for services furnished on or after January 1, 2006 and before 
     April 1, 2007. For services furnished on or after April 1, 
     2007, the composite rate component of the basic case-mix 
     adjusted system shall by increased by 1.6 percent, above the 
     amount of such rate for services furnished on March 31, 2007.
       Not later than January 1, 2009, GAO shall submit a report 
     to Congress on the costs for home hemodialysis treatment and 
     patient training for both home hemodialysis and peritoneal 
     dialysis. The report shall include recommendations for a 
     payment methodology that measures, and is based on, the cost 
     of providing such services and takes into account the case 
     mix of patients.


  Section 104. Extension of Treatment of certain physician pathology 
                        services under Medicare

     Current law
       In general, independent laboratories cannot directly bill 
     for the technical component of pathology services provided to 
     Medicare beneficiaries who are inpatients or outpatients of 
     acute care hospitals. The Medicare, Medicaid, and SCHIP 
     Benefits Improvement and Protection Act of 2000 (BIPA) 
     permitted independent laboratories with existing arrangements 
     with acute care hospitals to bill Medicare separately for the 
     technical component of pathology services provided to 
     inpatients and outpatients. The arrangement between the 
     hospital and the independent laboratory had to be in effect 
     as of July 22, 1999. The direct payments for these services 
     applied to services furnished during 2001 and 2002. MMA 
     applied the provision to services furnished during 2005 and 
     2006.
     Explanation of provision
       The provision is extended through 2007.


   Section 105. Extension of Medicare reasonable costs payments for 
  certain clinical diagnostic laboratory tests furnished to hospital 
                    patients in certain rural areas

     Current law
       Generally, hospitals that provide clinical diagnostic 
     laboratory tests under Part B are reimbursed under a fee 
     schedule. MMA specified that hospitals with under 50 beds in 
     qualified rural areas (low density population rural areas) 
     would receive 100% reasonable cost reimbursement for clinical 
     diagnostic tests covered under Part B that are provided as 
     outpatient services. The provision applied to services 
     furnished during a cost-reporting period beginning during the 
     2-year period starting July, 1, 2004.
     Explanation of provision
       The provision is modified to apply to services furnished 
     during a cost-reporting period beginning during the 3-year 
     period starting July 1, 2004. The provision is effective as 
     if included in the enactment of MMA.


       Section 106. Hospital Medicare reports and clarifications

       (a) Correction of mid-year reclassification expiration
     Current law
       Section 508 of the Medicare Prescription Drug, Improvement 
     and Modernization Act of 2003 (MMA) established a one-time-
     only appeals procedure to provide relief for certain 
     hospitals that could not meet the existing reclassification 
     criteria used by the

[[Page 23552]]

     Medicare Geographic Classification Review Board (MGCRB). The 
     Section 508 reclassifications appeals were heard by the MGCRB 
     and were not subject to further administrative or judicial 
     review. The Section 508 reclassifications are effective for 3 
     years, beginning on April 1, 2004 and ending on March 31, 
     2007. Congress allocated $900 million over 3 years to fund 
     this provision. Generally speaking, unless otherwise 
     specified by law, the MGCRB's classification decisions are 
     required to have a budget neutral effect in the inpatient 
     prospective payment system (IPPS).
     Explanation of provision
       The provision would extend wage index reclassifications 
     that expire on March 31, 2007 until September 30, 2007. This 
     provision would not be implemented in a budget neutral 
     fashion.
       (b) Revision of the Medicare wage index classification 
           system
     Current law
       As directed by Medicare statute, the amount of a hospital's 
     operating and capital payments will vary according to the 
     relative level of hospital wages in its geographic area 
     compared to the national average. The geographic areas or 
     hospital labor markets that have been used by Medicare are 
     urban areas as established by the Office of Management and 
     Budget (OMB). Essentially, a hospital's payment will depend 
     upon whether it is in an urban area (and if so, which one) 
     and the wage data reported by the hospitals in that area. 
     Counties that are not in an urban area are grouped into one 
     statewide rural labor market. Also, with modifications, the 
     hospital wage data are used to adjust for geographic cost 
     differences in Medicare's payment systems for other services, 
     such as inpatient rehabilitation facility (IRF), long-term 
     care hospital (LTCH), home health agency (HHA), skilled 
     nursing facility (SNF), and hospice care. Unlike these other 
     providers, IPPS hospitals have an administrative process, 
     through appeals to the Board (the Board), to reclassify to 
     different geographic areas. Other statutory provisions 
     affecting hospital's geographic designation also have been 
     established.
     Explanation of provision
       The Medicare Payment Advisory Commission (MedPAC) would be 
     required to submit a report to Congress no later than June 
     30, 2007 on the wage index classification system used in 
     Medicare's prospective payment systems, including IPPS. This 
     report would include recommendations for alternatives to the 
     current methods used to compute the wage index. $2 million in 
     funds in the Treasury would be appropriated to MedPAC for FY 
     2007 for these activities. The Secretary would be required to 
     include in the proposed rule making process for FY 2009 one 
     or more proposals to revise the IPPS wage adjustment, after 
     taking into account MedPAC's recommendations. The proposals 
     would consider problems associated with labor market 
     definitions; modification or elimination of geographic 
     reclassifications and other adjustments; the use of Bureau of 
     Labor Statistics data to calculate relative wages; minimizing 
     variations in wage index adjustments between and within 
     metropolitan statistical areas and rural areas; the 
     feasibility of applying all components of the proposal to 
     other settings, including HHAs and SNFs; methods to minimize 
     the volatility of wage index adjustments while maintaining 
     the budget neutrality; the effect on health care providers 
     and on each region of the country; implementation of 
     proposal, including the transition methods; and occupational 
     mix issues such as staffing practices, effect on quality of 
     care and alternative recommendations.
       (c) Elimination of unnecessary report
       The Secretary is required to submit a report to Congress 
     that includes an initial estimate of the percentage update 
     (change factor) in the per discharge payment amounts. The 
     Secretary's estimate is required to take into consideration 
     the recommendations of MedPAC and may vary for hospitals in 
     different geographic areas.
     Explanation of provision
       This provision would eliminate the requirement that the 
     Secretary include recommendations with respect to the update 
     factors no later than March 1 before the beginning of the 
     fiscal year.


        section 107. extension of payment rule for brachytherapy

     Current law
       The Medicare Prescription Drug, Improvement and 
     Modernization Act of 2003 (MMA) established that 
     brachytherapy devices consisting of radioactive sources (or 
     seeds) would be paid on the basis of a hospital's cost for 
     such device (computed by reducing a hospital's charges to 
     costs) for services furnished starting January 1, 2004 until 
     January 1, 2007. The Secretary was directed to create 
     additional groups of covered OPD services that classify such 
     devices separately from other services (or group of services) 
     in a manner that reflects the number, isotope, and 
     radioactive intensity, including separate groups for 
     palladium-103 and iodine-125 devices. Starting January 1, 
     2007, CMS will continue to pay separately for brachytherapy 
     sources, but will base payment on the source-specific median 
     costs. CMS declined to create new brachytherapy source codes 
     to differentiate stranded from unstranded brachytherapy 
     sources.
     Explanation of provision
       This provision would extend payment for brachytherapy 
     sources on the basis of a hospital's charges adjusted to cost 
     until January 1, 2008. The provision also directs the 
     Secretary to create additional groups of covered OPD services 
     for stranded and nonstranded brachytherapy devices furnished 
     on or after July 1, 2007. These provisions may be implemented 
     by program instruction or otherwise.


section 108. payment process under the competitive acquisition program 
                                 (cap)

     Current law
       MMA revised the way Medicare pays for Part B drugs. 
     Beginning in 2005, payments for these drugs are based on an 
     average sales price (ASP) payment methodology, which sets 
     payments at the weighted average ASP plus 6%; the Secretary 
     has the authority to reduce the ASP payment amount if the 
     widely available market price is significantly below the ASP. 
     Alternatively, beginning in 2006, drugs can be provided 
     through a newly established competitive acquisition program 
     (CAP). The intent of the program is to enable physicians to 
     acquire certain drugs from an approved CAP vendor thereby 
     enabling them to reduce the time they spend buying and 
     billing for drugs.
     Explanation of provision
       The provision deletes the requirement that payments to CAP 
     contractors are conditioned upon the administration of the 
     drugs and biologicals. The provision specifies that payment 
     may only be made to the contractor upon receipt of a claim 
     for a drug or biological supplied by the contractor for 
     administration to a beneficiary. Further, the Secretary is 
     required to establish a post-payment review process to assure 
     that payment is made for a drug or biological only if it has 
     been administered. The process of postpayment review may be 
     established by program instruction or otherwise and may 
     include the use of statistical sampling. The Secretary is 
     required to recoup, offset or collect any overpayments 
     determined by the Secretary under this process.
       The section further clarifies that nothing in this 
     provision is to be construed as requiring any additional 
     competition by entities under the CAP program. Further the 
     provision is not to be construed as requiring any additional 
     process for elections by physicians under the program or 
     additional selection by a selecting physician of a CAP 
     contractor. The provision applies to payments for drugs and 
     biologicals supplied on or after April 1, 2007. Additionally, 
     the provision applies on or after July 1, 2006 and before 
     April 1, 2007, for claims that are paid before April 1, 2007.


  section 109. quality reporting for hospital outpatient services and 
                  ambulatory surgical center services

       (a) Outpatient hospital services
     Current law
       Each year the hospital outpatient department (OPD) fee 
     schedule is increased by a factor that is generally based on 
     the hospital market basket (MB) percentage increase. In 
     certain years, the MB has been reduced by percentage points 
     as specified by statute.
     Explanation of provision
       Starting in 2009 and for each subsequent year, a hospital 
     paid under the inpatient prospective payment system (IPPS) 
     that does not submit required measures will receive an OPD 
     fee schedule increase of the MB minus 2.0 percentage points. 
     A reduction under this provision would only apply to payments 
     for the year involved and would not be taken into account 
     when computing the OPD fee schedule increase in a subsequent 
     year.
       Each IPPS hospital is required to submit data on measures 
     under this section in the form, manner, and timing specified 
     by the Secretary. The Secretary would be required to develop 
     appropriate measures for the measurement of the quality of 
     care (including medication errors) furnished by hospitals in 
     outpatient settings and that reflect consensus among affected 
     parties. To the extent feasible and practicable, the measures 
     shall include those set forth by one or more national 
     consensus building entities. Nothing would prevent the 
     Secretary from selecting the IPPS quality measures or a 
     subset of such measures. The Secretary would be able to 
     replace any measures as appropriate, such as where all 
     hospitals are effectively in compliance or the measures have 
     subsequently been shown not to represent the best clinical 
     practice.
       The Secretary would be required to establish procedures for 
     making the submitted data available to the public. These 
     procedures would ensure that a hospital has the opportunity 
     to review data prior to being made available to the public. 
     The Secretary would be required to report quality measures of 
     process, structure, outcome, patients' perspective on care, 
     efficiency, and costs of care on the Internet website of the 
     Centers for Medicare and Medicaid Services. Other conforming 
     amendments would also be established.

[[Page 23553]]


       (b) Application to ambulatory surgical centers
     Current law
       Presently, Medicare pays for surgery-related facility 
     services in an ambulatory surgical center (ASC) based on a 
     fee schedule. The Medicare Prescription Drug, Improvement, 
     and Modernization Act of 2006 (MMA) required the Secretary to 
     implement a revised payment system for ASCs no later than 
     January 1, 2008, taking into account recommendations issued 
     by a required report from the Government Accountability 
     Office (GAO). The GAO report, which has just been issued, was 
     required to examine the relative costs of ASC services to 
     those in hospital outpatient departments. GAO was also 
     required to recommend whether CMS should use the outpatient 
     prospective payment system as the basis for the revised ASC 
     system. Total payments under the new system should be equal 
     to total projected payments under the old system.
     Explanation of provision
       In the revised payment system, the Secretary would be able 
     to provide for a reduction in any annual update of 2.0 
     percentage points for failure to report required quality 
     measures. A reduction under this provision would only apply 
     to payments for the year involved and would not be taken into 
     account when computing any annual increase factor in 
     subsequent years. Except as otherwise provided by the 
     Secretary, the provisions of subparagraphs (B), (C), (D), and 
     (E) of the newly established Section 1833(t)(17) concerning 
     the form and submission of data, the development of 
     outpatient measures, the replacement of measures, and the 
     availability of quality measures in a hospital outpatient 
     setting would apply to ASC services.
       (c) Effective date
     Current law
       No provision.
     Explanation of provision
       The amendments made by the section would apply to payment 
     for services furnished starting January 1, 2009.


section 110. reporting of anemia quality indicators for medicare part b 
                        cancer anti-anemia drugs

     Current law
       Medicare Part B covers certain drugs used as anticancer 
     chemotherapeutic agents, and certain oral anti-emetic drugs 
     and biologicals used as part of an anticancer 
     chemotherapeutic regimen. Medicare also covers certain drugs 
     and biologicals to counter anemia for chronic kidney disease 
     and cancer patients. At present, Medicare Part B requires 
     hemoglobin or hematocrit levels to be reported only for 
     certain chronic kidney disease (dialysis) patients, but not 
     for cancer patients. MedPAC has recommended that the 
     hemoglobin or hematocrit levels be reported for patients 
     receiving anti-anemia drugs.
     Explanation of provision
       The provision requires that all Part B claims submitted for 
     drugs for treatment of anemia in connection with cancer 
     chemotherapy include the hemoglobin or hematocrit levels for 
     the individual. The information is to be submitted in the 
     form and manner specified by the Secretary after full notice-
     and-comment rulemaking as part of the physician fee schedule 
     update rule in 2007. The provision applies to drugs and 
     biologicals furnished on or after January 1, 2008.


      section 111. clarification of hospice satellite designation

     Current law
       Section 1814(i)(2)(A) of the Social Security Act limits 
     total Medicare payment amounts to individual hospice 
     providers by an absolute dollar amount, or ``cap amount.'' 
     This amount is based on the number of Medicare patients the 
     agency serves and is calculated by dividing total payments to 
     a hospice per year by the total number of beneficiaries 
     served to get the per beneficiary payment amount. If the per 
     beneficiary payment amount does not exceed the cap amount, 
     the hospice may retain all payments. If the result exceeds 
     the cap amount, the hospice must repay excess funds to the 
     Medicare program. For purposes of calculating whether or not 
     a hospice exceeds the cap amount, increasing the number of 
     beneficiaries a hospice serves reduces the per beneficiary 
     payment amount. A lower per beneficiary payment amount 
     reduces the likelihood that a hospice will exceed the annual 
     hospice cap and be required to repay excess funds to the 
     Medicare program.
     Explanation of provision
       For purposes of calculating the hospice cap for 2004, 2005 
     and 2006 and for hospice care provided after November 1, 2003 
     and before December 27, 2005, this provision would designate 
     hospice with provider number 290-1511 as a multiple location 
     of hospice with provider number 29-1500.

               Title II--Medicare Beneficiary Protections


 Section 201. Extension of exceptions process for Medicare therapy caps

     Current law
       The Balanced Budget Act of 1997 established annual per 
     beneficiary payment limits for all outpatient therapy 
     services provided by non-hospital providers. The limits 
     applied to services provided by independent therapists as 
     well as to those provided by comprehensive outpatient 
     rehabilitation facilities (CORFs) and other rehabilitation 
     agencies. The limits did not apply to outpatient services 
     provided by hospitals.
       Beginning in 1999, there were two beneficiary limits. The 
     first was a $1,500 per beneficiary annual cap for all 
     outpatient physical therapy services and speech language 
     pathology services. The second was a $1,500 per beneficiary 
     annual cap for all outpatient occupational therapy services. 
     Beginning in 2002, the amount would increase by the Medicare 
     economic index (MEI) rounded to the nearest multiple of $10.
       The Balanced Budget Refinement Act of 1999 (BBRA) suspended 
     application of the limits for 2000 and 2001. The Medicare, 
     Medicaid, and SCHIP Benefits Improvement and Protection Act 
     of 2000 (BIPA) extended the suspension through 2002. 
     Implementation of the provision was delayed until September 
     2003. The caps were implemented from September 1, 2003 
     through December 7, 2003. MMA reinstated the moratorium from 
     December 8, 2003 through December 31, 2005.
       The caps went into effect again beginning January 1, 2006. 
     The 2006 caps are each $1,740. However, DRA required the 
     Secretary to implement an exceptions process for expenses 
     incurred in 2006. Under the process, a part B enrollee, or a 
     person acting on behalf of the enrollee, can request an 
     exception from the physical therapy and occupational therapy 
     caps. The individual may obtain such exception if the 
     provision of services is determined medically necessary. The 
     exceptions process only applies for 2006.
     Explanation of provision
       The provision extends the exceptions process through 2007.


       Section 202. Payment for administration of part D vaccines

     Current Law
       Medicare Part B covers pneumoccoccal vaccine and its 
     administration, influenza vaccine and its administration, and 
     hepatitis B vaccine and its administration when furnished to 
     a high or intermediate risk individual. Medicare Part D 
     covers other vaccines licensed under the Public Health 
     Service Act.
     Explanation of provision
       The provision specifies that during 2007, the 
     administration costs for a vaccine paid under Part D are to 
     be paid under Part B as if it were the administration of a 
     hepatitis B drug covered under Part B. Beginning in 2008, 
     Part D coverage will include the administration costs.


                 Section 203. OIG study of never events

     Current law
       No provision.
     Explanation of provision
       The Office of the Inspector General (OIG) in the Department 
     of Health and Human Services would be required to conduct a 
     study on the incidence of never events for Medicare 
     beneficiaries, including types of such events and payments by 
     any party, including beneficiaries, of such events. This 
     study would also include the extent to which Medicare paid, 
     denied or recouped payment for such services as well as the 
     administrative processes of the Centers for Medicare and 
     Medicaid Services (CMS) to identify such events and to deny 
     or recoup associated payments. The OIG would be required to 
     audit a representative sample of claims and medical records 
     of the events; would be able to request access to claims and 
     records from any Medicare contractor; and would not be able 
     to release individually identifiable or facility specific 
     information. The OIG would be required to submit a report to 
     Congress no later than two years from enactment. This report 
     would include recommendations for legislative or 
     administrative action on the processes to identify, deny or 
     recoup payments for never events. The report will also 
     provide a recommendation on a potential process for public 
     disclosure of never events that ensures patient privacy and 
     permits the use of disclosed information for root cause 
     analysis. $3 million of funds in the Treasury will be 
     appropriated which will be available until January 1, 2010. 
     Never events are those that are listed and endorsed as 
     ``serious reportable events'' by the National Quality Forum 
     as of November 16, 2006.


        Section 204. Medicare medical home demonstration project

     Current law
       No provision.
     Explanation of provision
       The Secretary is required to establish a medical home 
     demonstration project in Medicare law for the purpose of 
     redesigning the healthcare delivery system to provide 
     targeted, accessible, continuous and coordinated, family-
     centered care to high-need populations (i.e., those with 
     multiple chronic illnesses that require regular monitoring, 
     advising, or treatment).
       Under the project, case management fees would be paid to 
     personal physicians, and incentive payments would be paid to 
     physicians participating in practices that provide ``medical 
     home'' services. Medical homes are physician practices in 
     charge of targeting beneficiaries for project participation. 
     They are responsible for: (1) providing safe and secure 
     technology to promote patient access to

[[Page 23554]]

     personal health information; (2) developing a health 
     assessment tool for the targeted individuals; and (3) 
     providing training for personnel involved in the coordination 
     of care.
       The project is to operate for three years in urban, rural, 
     and underserved areas in up to 8 states and would include 
     physician practices with fewer than three full-time 
     equivalent physicians, as well as larger practices, 
     particularly in rural and underserved areas.
       In addition to meeting Medicare requirements for 
     physicians, personal physicians who provide first contact and 
     continuous care for their patients must be board certified. 
     Personal physicians must also have staff and resources to 
     manage the comprehensive and coordinated health care of each 
     of their patients. Participating physicians may be 
     specialists or subspecialists for patients requiring ongoing 
     care for specific conditions, multiple chronic conditions 
     (e.g., severe asthma, complex diabetes, cardiovascular 
     disease, and rheumatologic disorder), or for those with a 
     prolonged illness.
       Personal physicians must perform (or provide for the 
     performance of): (1) advocates for and provides ongoing 
     support, oversight, and guidance to implement a plan of care; 
     that provides an integrated, coherent, cross discipline plan 
     for ongoing medical care developed in partnership with 
     patients and including all other physicians furnishing care 
     to the patient involved and other appropriate medical 
     personnel or agencies (such as home health agencies); (2) 
     uses evidence-based medicine and clinical decision support 
     tools to guide decision-making at the point-of-care (based on 
     patient-specific factors); (3) uses health information 
     technology that may include remote monitoring and patient 
     registries; and (4) encourages patients to engage in 
     management of their own health through education and support 
     systems.
       Payments for care management to personal physicians are to 
     be provided under a care management fee under section 1848 of 
     the Social Security Act. The Secretary would be required to 
     develop a care management fee code and a value for these 
     payments using the relative value scale update committee 
     (RUC) process.
       Payments for a medical home shall be based on the payment 
     methodology applied to physician group practices under 
     section 1866A of the Social Security Act. Under this 
     methodology, 80% of Medicare reductions (determined by using 
     assumptions with respect to the reductions in the occurrence 
     of health complications, hospitalization rates, medical 
     errors, and adverse drug reactions) resulting from the 
     medical home participation (as reduced by the total project-
     related care management fees), would be paid to the medical 
     home. Project payments are to be paid from part B.
       The Secretary would be required to provide a yearly project 
     evaluation and submit it to Congress on a date specified by 
     the Secretary. In addition, the Secretary would be required 
     to submit to Congress a project evaluation no later than one 
     year after project completion.


            Section 205. Medicare DRA technical corrections

       (a) PACE clarification
     Current law
       The Secretary appropriated $10 million for FY2006 for the 
     outlier funds for rural PACE providers. Outlier costs are 
     those inpatient and other costs in excess of $50,000 incurred 
     within a given 12-month period by a PACE provider for an 
     eligible participant who resides in a rural area. These 
     appropriated funds would remain available for expenditure 
     through FY2010.
     Explanation of provision
       The amendment clarifies that the appropriated $10 million 
     would be applied to fiscal years 2006 through 2010, rather 
     than only for FY2006. It also specifies that the funds would 
     remain available for obligation, rather than for expenditure, 
     through FY2010.
       (b) Miscellaneous technical corrections
       (1) Correction of margin (section 5001)
     Current law
       No provision.
     Explanation of provision
       Section 1886(b)(3)(B) of the Social Security Act (42 U.S.C. 
     1395ww(b)(3)(B)), as amended by section 5001(a) of the 
     Deficit Reduction Act of 2005 (Public Law 109-171), is 
     amended by moving clause (viii) (including subclauses (I) 
     through (VII) of such clause) 6 ems to the left.
       (2) Reference Correction (Section 5114)
     Current law
       This P.L. 109-171 provision modified the first sentence of 
     section 1842(b)(6)(F) of the Social Security Act to add a new 
     paragraph H to 1842(b)(6) so that a federally qualified 
     health center (FQHC) would be paid directly for FQHC services 
     provided by a health care professional under contract with 
     that FQHC.
     Explanation of provision
       Instead of modifying section 1842(b)(6)(F) to add paragraph 
     H, the amendment would modify section 1842(b)(6) of the 
     Social Security Act.
       (c) Effective date
       These amendments would become effective as if they had been 
     included in DRA 2005, enacted on February 8, 2006.


 Sec. 206. Continuous Open Enrollment into Certain Medicare Advantage 
                                 Plans

     Current law
       Individuals entitled to Medicare part A or enrolled in part 
     B can choose to receive Medicare benefits by enrolling in a 
     Medicare Advantage plan. Individuals enrolled in a Medicare 
     Advantage (MA) plan who also want to receive Medicare 
     prescription drug coverage may obtain prescription drug 
     coverage through that MA plan. MA enrollees may not also 
     enroll in a stand-alone prescription drug plan under part D, 
     except for: (1) enrollees in private fee-for-service MA plans 
     that do not offer qualified prescription drug coverage or (2) 
     enrollees in Medical Savings Accounts MA plans.
       In general, individuals can make a coverage election during 
     the annual election period, which in 2006 and beyond, begins 
     on November 15 and ends on December 31. During this time, 
     beneficiaries can elect to receive benefits through original 
     Medicare fee-for-service (FFS) program or an MA plan. 
     Individuals also can elect to enroll in a stand-alone 
     prescription drug plan or an MA plan that offers drug 
     coverage. Under certain circumstances, an individual may be 
     afforded a special election period outside of the annual 
     election period, during which time they can change their 
     coverage election.
       Beginning in 2007, individuals can change their coverage 
     elections one time between January 1 and March 31. 
     Permissible election changes during this period include: FFS 
     to an MA plan; MA plan to FFS; MA plan to a different MA 
     plan; FFS with stand-alone prescription drug coverage to an 
     MA-PD; MA-PD to a different MA-PD; and MA-PD to FFS with a 
     stand-alone prescription drug plan. With respect to PFFS 
     plans, the permissible election changes include FFS with a 
     stand-alone PDP to a PFFS or MSA plan with the same stand-
     alone PDP or FFS with a stand-alone PDP to a PFFS-PD. 
     Individuals who did not elect prescription drug coverage 
     during the annual election period cannot elect prescription 
     drug coverage during this one-time change period.
     Explanation of provision
       For 2007 and 2008, the provision modifies current law such 
     that an unenrolled fee-for-service individual can make a one-
     time change to their coverage election on any date during the 
     year. An unenrolled individual is defined as an individual 
     who is receiving benefits under original Medicare FFS, is not 
     enrolled in an MA plan on such date; and as of such date is 
     not otherwise eligible to elect to enroll in an MA plan. 
     Permissible coverage election changes for an unenrolled 
     individual include: (1) FFS to an MA plan with no drug 
     coverage and (2) FFS with a stand-alone prescription drug 
     plan to an MA plan with the same stand-alone prescription 
     drug plan. As such, this provision effectively permits only 
     MA plans with no drug coverage to enroll individuals 
     throughout the year. MA plans that integrate prescription 
     drug coverage into their benefit packages would be kept under 
     the current law provision, that is, they would not be allowed 
     to enroll individuals throughout the year.

             Title III--Medicare Program Integrity Efforts


Section 301. Offsetting adjustment in Medicare Advantage Stabilization 
                                  Fund

     Current law
       The Medicare Prescription Drug, Improvement, and 
     Modernization Act of 2003 established a stabilization fund to 
     provide incentives for plans to enter into and to remain in 
     the Medicare Advantage regional program. Money in the fund is 
     available to the Secretary for expenditures from January 1, 
     2007 to December 31, 2013. Initially $10 billion is to be 
     provided to the stabilization fund and additional amounts are 
     to be added to the fund from a portion of any average per 
     capita monthly savings amounts. The secretary is responsible 
     for determining the amounts that may be given to MA plans 
     from this fund, based on statutory requirements. For example, 
     the national bonus payment will be available to an MA 
     organization that offers an MA regional plan in every MA 
     region in the year, but only if there was no national plan in 
     the previous year.
     Explanation of provision
       This provision would delay the initial availability of the 
     stabilization fund until January 1, 2012, and reduce the 
     amount of the fund to $3.5 billion.


   Section 302. Extension and expansion of recovery audit contractor 
              program under the Medicare Integrity Program

       (a) Use of recovery audit contractors
     Current law
       The Medicare Prescription Drug, Improvement, and 
     Modernization Act of 2003 (PL 108-73) authorized a 3-year 
     demonstration project using recovery audit contractors to 
     identify both under- and overpayments made to Part A and B 
     Medicare providers and recoup overpayments in the Medicare 
     program. The demonstration is being conducted as part of the 
     Medicare Integrity Program, created by section 1893 of the 
     Social Security Act, which enables the Secretary to enter 
     into contracts with entities to carry out a range of 
     activities designed to prevent health care fraud and abuse in 
     Parts A and B

[[Page 23555]]

     of the Medicare program. The Medicare Integrity Program was 
     established by the Health Insurance Portability and 
     Accountability Act of 1996 along with the Health Care Fraud 
     and Abuse Control Program. The program is financed via the 
     Federal Hospital Insurance Trust Fund.
     Explanation of provision
       Section 302 would allow the Centers for Medicare and 
     Medicaid Services (CMS) to continue using recovery audit 
     contractors to identify both under and overpayments made 
     under Medicare Parts A and B and recoup any overpayments made 
     to providers. To pay the contractors, the Secretary would be 
     required to use only those funds recovered by the 
     contractors. From these recoveries, the bill would require 
     the Secretary to pay the contractors in two ways: (1) on a 
     contingent basis for collecting overpayments; and (2) in 
     amounts that the Secretary may specify for identifying 
     underpayments. A portion of the recovered funds would be 
     available to the CMS program management account for 
     activities conducted under the recovery audit contractor 
     program. Any remaining recovered amounts--those recoveries 
     that are not paid to the contractors or applied to the CMS 
     program management account--would be used to reduce 
     expenditures under Medicare Parts A and B. It is also 
     expected that CMS will rectify any identified underpayments. 
     Each contract would be required to provide that audit and 
     recovery activities be conducted during the fiscal year and 
     retrospectively for not more than 4 fiscal years. The 
     Secretary would be allowed to waive Medicare statutory 
     provisions to pay for the services of the recovery audit 
     contractors.
       By January 1, 2010, the Secretary would be required to 
     contract with enough recovery audit contractors to cover 
     Medicare activities in all states. When awarding contracts, 
     the Secretary would be required to contract only with 
     recovery audit contractors that have the staff with the 
     appropriate clinical knowledge of and experience with 
     Medicare payment rules and regulations, or recovery audit 
     contractors that will contract with another entity that has 
     the staff with the appropriate knowledge of and experience 
     with Medicare payment rules and regulations. The Secretary 
     shall give preference to entities with more than 3 years 
     direct management experience and a demonstrated proficiency 
     in audits with private insurers, health care providers, 
     health plans, state Medicaid programs or Medicare. Recovery 
     audit contractors cannot be fiscal intermediaries, carriers, 
     or Medicare Administrative Contractors, and the recovery of 
     overpayments by these contractors would not prohibit the 
     Secretary or the Attorney General from prosecuting 
     allegations of fraud and abuse arising from these 
     overpayments.
       Finally, the Secretary would be required to submit a report 
     to Congress annually on the use of these recovery audit 
     contractors. Specifically the report would include 
     information on the performance of these contractors as it 
     relates to identifying over and underpayments and in 
     collecting overpayments. The report would also be required to 
     include an evaluation of the comparative performance of these 
     contractors and any Medicare savings that have accrued as a 
     result of their activities.
       (b) Access to Coordination of Benefits Contractor database
     Current law
       The Coordination of Benefits (COB) Contractor consolidates 
     the activities that support the collection, management, and 
     reporting of other insurance coverage for Medicare 
     beneficiaries. The purposes of the COB program are to 
     identify the health benefits available to a Medicare 
     beneficiary and to coordinate the payment process to prevent 
     mistaken payment of Medicare benefits.
     Explanation of provision
       For the purpose of carrying out their audit and recovery 
     activities, the Secretary of HHS would provide recovery audit 
     contractors with access to the database of the Coordination 
     of Benefits Contractors of the Centers for Medicare and 
     Medicaid Services during the current fiscal year and for a 
     period of up to 4 fiscal years prior to the current fiscal 
     year.
       (c) Conforming amendments to current demonstration project
     Current law
       Section 306 of the Medicare Prescription Drug, Improvement, 
     and Modernization Act of 2003 requires that the Secretary's 
     demonstration project using recovery audit contractors last 
     for no longer than 3 years. After the completion of the 
     program, the Secretary shall submit to Congress a report on 
     the project and its impact on savings to the Medicare 
     program.
     Explanation of provision
       The provision would continue the use of recovery audit 
     contractors under the demonstration until all contracts could 
     be entered into. The provision would also eliminate the 
     requirement that the Secretary submit to Congress a report 
     not later than 6 months after the project's completion on the 
     impact of recovery audit contractors' activities on Medicare 
     savings.


   Section 303. Funding for the Health Care Fraud and Abuse Control 
                                Account

       (a) Departments of Health and Human Services and Justice
     Current law
       The Health Insurance Portability and Accountability Act of 
     1996 (HIPAA, P.L. 104-91) established section 1128C of the 
     Social Security Act, which authorized the creation of a 
     national health care fraud and abuse control program headed 
     by the Secretary of HHS and the Attorney General. In section 
     1817(k) of the Social Security Act, HIPAA created an 
     expenditure account within the Medicare Federal Hospital 
     Insurance Trust Fund called the Health Care Fraud and Abuse 
     Control (HCFAC) Account. Within the HFCFAC account, the 
     legislation appropriated funds to HHS and DOJ at an amount of 
     $104 million in FY97 and for FY98 through FY03 at annual 
     increases of 15% above the preceding year. For each fiscal 
     year after 2003, the annual appropriation available to HHS 
     and DOJ was to be capped at the FY2003 level of $240.6 
     million. The legislation also established a separate funding 
     stream within the HCFAC account to support activities 
     undertaken by the FBI. Funding for the FBI was increased from 
     $47 million in FY97 to $114 million in FY03. The legislation 
     capped FBI funding at the FY03 level for FY03 and beyond.
     Explanation of provision
       Section 303 would extend appropriations for the Health Care 
     Fraud and Abuse Control Program through FY06 and beyond. For 
     FY98 through FY03, the annual appropriation to HHS and DOJ is 
     the limit for the preceding fiscal year increased by 15%. For 
     fiscal years 2007 through 2010, the annual appropriation 
     would be the limit for the preceding year plus the percentage 
     increase in the consumer price index for all urban consumers. 
     For each fiscal year beyond 2010, the legislation would cap 
     the appropriation at the FY10 level.
       For the Office of the Inspector General of HHS, Section 303 
     would extend the annual appropriation of $160 million through 
     FY06. For FY07, the bill would increase the FY06 
     appropriation to OIG by the percentage increase in the 
     consumer price index. For fiscal years 2008, 2009, and 2010, 
     the annual appropriation would increase by the limit for the 
     preceding year plus the percentage increase in the consumer 
     price index for all urban consumers. For each fiscal year 
     after FY10, the legislation would cap the appropriation at 
     the FY10 level.
       (b) Federal Bureau of Investigations
     Current law
       The Health Insurance Portability and Accountability Act of 
     1996 (HIPAA, P.L. 104-91) established section 1128C of the 
     Social Security Act, which authorized the creation of a 
     national health care fraud and abuse control program headed 
     by the Secretary of HHS and the Attorney General. In Section 
     1817(k) of the Social Security Act, HIPAA created an 
     expenditure account within the Medicare Federal Hospital 
     Insurance Trust Fund called the Health Care Fraud and Abuse 
     Control (HCFAC) Account. Within the HFCFAC account, the 
     legislation appropriated funds to HHS and DOJ at an amount of 
     $104 million in FY97 and for FY98 through FY03 at annual 
     increases of 15% above the preceding year. For each fiscal 
     year after 2003, the annual appropriation available to HHS 
     and DOJ was to be capped at the FY2003 level of $240.6 
     million. The legislation also established a separate funding 
     stream within the HCFAC account to support activities 
     undertaken by the FBI. Funding for the FBI was increased from 
     $47 million in FY97 to $114 million in FY03. The legislation 
     capped FBI funding at the FY03 level for FY03 and beyond.
     Explanation of provision
       Section 303 would extend the annual appropriation to the 
     Federal Bureau of Investigations (FBI). For fiscal years 2007 
     through 2010, the annual appropriation would be the limit for 
     the preceding year plus the percentage increase in the 
     consumer price index for all urban consumers. For each fiscal 
     year after 2010, the legislation would cap the appropriation 
     at the FY2010 level.


                  section 304. implementation funding

     Current law
       No current law.
     Explanation of provision
       For implementation of provisions and amendments made by 
     this title and titles I and II of this division, other than 
     the section requiring the Inspector General in the Department 
     of Health and Human Services to conduct a study of newer 
     events, the provision would require the Secretary of Health 
     and Human Services to transfer $45,000,000 to the CMS Program 
     Management Account for FY2007 and FY2008, from the Federal 
     Insurance Trust Fund, and the Federal Supplementary Medical 
     Insurance Trust, in appropriate proportions.

             Title IV--Medicaid and Other Health Provisions


  section 401. extension of transitional medical assistance (tma) and 
                      abstinence education program

     Current law
       States are required to continue Medicaid benefits for 
     certain low-income families who would otherwise lose coverage 
     because of changes in their income. This continuation is 
     known as transitional medical assistance (TMA). Federal law 
     permanently requires four months of TMA for families who lose

[[Page 23556]]

     Medicaid eligibility due to increased child or spousal 
     support collections, as well as those who lose eligibility 
     due to an increase in earned income or hours of employment. 
     Congress expanded work-related TMA under Section 1925 of the 
     Social Security Act in 1988, requiring states to provide TMA 
     to families who lose Medicaid for work-related reasons for at 
     least six, and up to 12, months. The sunset date for Section 
     1925 has been extended a number of times, most recently 
     through December 31, 2006 by the Deficit Reduction Act of 
     2005.
       Under Section 510 of the Social Security Act, federal law 
     appropriated $50 million annually for each of the fiscal 
     years 1998-2003 for matching grants to states to provide 
     abstinence education and, at state option, mentoring, 
     counseling, and adult supervision to promote abstinence from 
     sexual activity, with a focus on groups that are most likely 
     to bear children out-of-wedlock. Funds must be requested by 
     states when they apply for Maternal and Child Health Services 
     (MCH) Block Grant funds and must be used exclusively for the 
     teaching of abstinence. States must match every $4 in federal 
     funds with $3 in state funds.
       A state's allotment of abstinence education block grant 
     program funding is based on the proportion of low-income 
     children in the state as compared to the national total. 
     Funding for the abstinence education block grant has been 
     extended a number of times, most recently through December 
     31, 2006 by the Deficit Reduction Act of 2005.
     Explanation of provision
       The provision would extend TMA under Section 1925 of the 
     Social Security Act through June 30, 2007. It would also fund 
     the abstinence education block grant program through June 30, 
     2007 at the level provided through the third quarter of 
     FY2006.


    section 402. grants for research on vaccine against valley fever

     Current law
       Under existing National Institutes of Health (NIH) 
     authority, the National Institute on Allergy and Infectious 
     Diseases has supported projects to study coccidioidomycosis, 
     known as Valley Fever. Grants have included projects to study 
     the organism that causes Valley Fever; to improve the ability 
     to evaluate vaccine candidates; to support the clinical 
     development of potential drug therapies; and to support 
     acquisition of equipment and facilities for research on the 
     disease, among others.
     Explanation of provision
       The Secretary is required to conduct research on the 
     development of a vaccine against coccidioidomycosis, known as 
     Valley Fever. Grants may not be made on or after October 1, 
     2012. This does not have any legal effect on payments for 
     grants for which amounts appropriated under this section were 
     obligated prior to October 1, 2012.
       To carry out this section, $40 million is authorized for 
     fiscal years 2007-2012.


 section 403. change in threshold for medicaid indirect hold harmless 
               provision of broad-based health care taxes

     Current law
       Under federal law and regulations, a state's ability to use 
     provider-specific taxes to fund their state share of Medicaid 
     expenditures is limited. If states establish provider 
     specific taxes, those taxes cannot generally exceed 25% of 
     the state (or non-federal) share of Medicaid expenditures and 
     the state cannot provide a guarantee to the providers that 
     the taxes will be returned to them. However, there is what is 
     referred to as a ``safe harbor.'' If the taxes returned to a 
     provider are less than 6% of the provider's revenues, the 
     prohibition on guaranteeing the return of tax funds is not 
     violated. Those taxes do not have to undergo the process, 
     defined in section 433.68 of Title 42 of the Code of Federal 
     Regulations, of determining if a guarantee exists. The 
     President's FY2006 budget proposes to phase the 6% ``safe 
     harbor'' for provider taxes down to 3% although no new 
     regulation has been issued on this subject to date.
     Explanation of provision
       Beginning on the date of enactment, the provider tax ``safe 
     harbor'' upper limit is codified at 6%. For the fiscal 
     periods beginning on or after January 1, 2008 and ending 
     before October 1, 2011, the ``safe harbor'' percentage will 
     be reduced from 6% to 5.5%. After October 1, 2011, the 
     provider tax ``safe harbor'' percentage will return to 6%.


  section 404. dsh allotments for fiscal year 2007 for tennessee and 
                                 hawaii

       (A) Tennessee
     Current law
       Tennessee operates its Medicaid program under a 
     comprehensive statewide waiver, the terms and conditions of 
     which have been negotiated by the state and CMS. Medicaid 
     demonstration waivers, authorized under Section 1115 of the 
     Social Security Act, allow states a great deal of flexibility 
     on how eligibility for Medicaid is determined, how Medicaid 
     services are provided, and what those services are comprised 
     of. States operating under a waiver are subject to a budget 
     neutrality requirement intended to hold program spending 
     under the waiver to estimates of amounts that would have been 
     spent in the absence of the waiver. Because Tennessee 
     receives its Medicaid funds under the provisions of the 
     waiver, it does not receive federal matching for Medicaid 
     payments to disproportionate share (DSH) hospitals nor do 
     they receive an allotment for DSH payments (state by state 
     allotments are calculated based on a formula in Medicaid law 
     and represent a federal cap on the amount that the federal 
     government will provide in DSH matching payments to any 
     state.) DSH payments, however, continue to be counted as a 
     component in Tennessee's budget neutrality calculation since, 
     in the period prior to the waiver approval, the state was 
     required to make DSH payments, and if the waiver had not been 
     granted, the requirement to make those payments would 
     continue to have applied.
     Explanation of provision
       The provision would establish a DSH allotment for the state 
     of Tennessee for fiscal year 2007 equal to the greater of the 
     amount that is reflected in the budget neutrality provision 
     for the TennCare demonstration year ending in 2006 and $280 
     million. Federal matching payments to the state for DSH 
     hospitals for fiscal year 2007 would, however, be limited to 
     one-third of the DSH allotment. Those amounts would be 
     considered TennCare project expenditures and would be 
     subtracted from TennCare demonstration payments for Essential 
     Access Hospital supplemental pool payments. The sum of the 
     DSH payments and the Essential Access Hospital supplemental 
     pool payments would be prohibited from exceeding the 
     allotment amount. The state would be permitted to submit a 
     state plan amendment describing the methodology to be used to 
     identify DSH hospitals and to make payments to such 
     hospitals. However, the Secretary may not approve the plan 
     amendment unless the methodology is consistent with the 
     requirements under Section 1923 of the Medicaid Act for 
     making payment adjustments for DSH hospitals.
       (B) Hawaii
     Current law
       Like Tennessee, Hawaii operates its Medicaid program under 
     a statewide waiver, the terms and conditions of which have 
     been negotiated by the state and CMS. The state does not make 
     DSH payment under their waiver program and does not have a 
     DSH allotment in Medicaid law.
     Explanation of provision
       The provision would set a DSH allotment for Hawaii for 
     fiscal year 2007 at $10 million. The Secretary shall permit 
     Hawaii to submit an amendment to its State plan under this 
     title that describes the methodology to be used by the State 
     to identify and make payments to disproportionate share 
     hospitals, including children's hospitals and institutions 
     for mental diseases or other mental health facilities. The 
     Secretary may not approve such plan amendment unless the 
     methodology described in the amendment is consistent with the 
     requirements under this section for making payment 
     adjustments to disproportionate share hospitals.


        section 405. certain medicaid dra technical corrections

       (a) Technical corrections relating to state option for 
           alternative premiums and cost sharing (sections 6041 
           through 6043)
     Current law
       P.L. 109-171 allows states to impose premiums and cost-
     sharing for any group of individuals for any type of service 
     (except prescribed drugs which are treated separately), 
     through Medicaid state plan amendments (rather than waivers), 
     subject to specific restrictions. Preferred drugs are defined 
     as those that are the least (or less) costly effective 
     prescription drugs within a class of drugs (as defined by the 
     state). Premium and cost-sharing rules for workers with 
     disabilities were not changed in P.L. 109-171.
       Individuals in families with income below 100% of the 
     federal poverty line (FPL). Premiums and service-related 
     cost-sharing imposed under this option are allowed to vary 
     among classes or groups of individuals, or types of service. 
     Explicit rules are provided by income level for those with 
     income between 100-150% FPL and for those with income over 
     150% FPL.
       States are allowed to condition the provision of medical 
     assistance on the payment of premiums, and to terminate 
     Medicaid eligibility on the basis of failure to pay a premium 
     if that failure continues for at least 60 days. States may 
     apply this provision to some or all groups of beneficiaries, 
     and may waive premium payments in cases where such payments 
     would be an undue hardship. In addition, the provision allows 
     states to permit providers participating in Medicaid to 
     require a Medicaid beneficiary to pay authorized cost-sharing 
     as a condition of receiving care or services. Providers may 
     be allowed to reduce or waive cost-sharing amounts on a case-
     by-case basis.
       For the purposes of cost-sharing, two income-related groups 
     are identified: (1) individuals in families with income 
     between 100 and 150% FPL, and (2) individuals in families 
     with income over 150% FPL. For both groups, the total 
     aggregate amount of all cost-sharing (including special cost 
     sharing rules for prescribed drugs and emergency room 
     copayments for non-emergency care)

[[Page 23557]]

     cannot exceed 5% of family income as applied on a quarterly 
     or monthly basis as specified by the state.
       Treatment of non-preferred drug cost-sharing. Special cost-
     sharing for prescribed drugs is subject to the general 5% 
     aggregate cap on cost-sharing for individuals with income 
     between 100-150% FPL and for individuals with income over 
     150% FPL who are not otherwise exempt from service-related 
     cost-sharing.
       Treatment of non-emergency cost-sharing. Individuals exempt 
     from premiums or service-related cost-sharing under other 
     provisions of P.L. 109-171 may be subject to nominal 
     copayments for non-emergency services in an ER, only when no 
     cost-sharing is imposed for care in hospital outpatient 
     departments or by other alternative providers in the area 
     served by the hospital ER. For non-exempt populations with 
     income between 100-150% FPL, cost-sharing for non-emergency 
     services in an ER cannot exceed twice the nominal amounts. 
     For non-exempt populations with income exceeding 150% FPL, no 
     cost-sharing limit is specified for non-emergency care in an 
     ER. Aggregate caps on cost-sharing (described above) still 
     apply.
       Definition of non-emergency services. The term ``non-
     emergency services'' means any care or services furnished in 
     an emergency department of a hospital that the physician 
     determines do not constitute an appropriate medical screening 
     examination or stabilizing examination and treatment required 
     to be provided by the hospital under Medicare law (Section 
     1867 of the Social Security Act).
       Exemption from cost-sharing for newly eligible children 
     with disabilities. Section 6062 of P.L. 109-171 created a new 
     optional Medicaid eligibility group for children with 
     disabilities under age 19 who meet the severity of disability 
     required under the Supplemental Security Income program (SSI) 
     without regard to any income or asset eligibility 
     requirements applicable under SSI for children, and whose 
     family income does not exceed 300% FPL. (States can exceed 
     300% FPL, without federal matching funds for such coverage.) 
     Special premium and cost-sharing rules apply to this new 
     group of eligibles.
     Explanation of provision
       The definition of preferred drugs would be amended to 
     include those that are the most (or more) cost effective 
     prescription drugs within a class of drugs (as defined by the 
     state). In addition to separate cost-sharing provisions for 
     prescribed drugs, the amendment would clarify that separate 
     cost-sharing provisions also apply to non-emergency services 
     provided in an emergency room.
       Individuals in families with income below 100% of the 
     federal poverty line (FPL). The provision would exempt from 
     the general cost-sharing rules in new Section 1916A (a) all 
     individuals in families with income below 100% of the federal 
     poverty line (FPL). However, Section 1916 of Title XIX 
     (nominal cost-sharing provisions) would still apply to this 
     income group, as would the comparability rule regarding 
     amount, duration and scope of available benefits (Section 
     1902(a)(10)(B)). States would still have the option to impose 
     the special cost-sharing rules for prescribed drugs and 
     nonemergency care provided in an emergency room to 
     individuals in families with income below 100% FPL.
       The provision would exempt individuals in families with 
     income below 100% FPL from the provisions defining 
     enforceability of premiums and other cost-sharing. 
     Protections regarding payment of premiums and cost-sharing in 
     Section 1916(c)(3) and Section 1916(e) would continue to 
     apply to this income group.
       The provision would apply the total aggregate cap of 5% of 
     family income to individuals in families with income below 
     100% FPL for applicable cost-sharing with respect to nominal 
     amounts (as defined in Section 1916), and prescribed drugs 
     and emergency room copayments for non-emergency care (as 
     defined in new Sections 1916A(c) and 1916A(e)).
       Treatment of non-preferred drug cost-sharing. The 
     definition of preferred drugs would be amended to include 
     those that are the most (or more) cost effective prescription 
     drugs within a class of drugs (as defined by the state). In 
     addition to separate cost-sharing provisions for prescribed 
     drugs, the provision would clarify that separate cost-sharing 
     provisions also apply to non-emergency services provided in 
     an emergency room. The provision would clarify that no cost-
     sharing for preferred drugs can be imposed on individuals 
     exempt from service-related cost-sharing under the general 
     cost-sharing provisions (identified in new Section 1916A(a)). 
     It would also clarify that no more than nominal cost-sharing 
     amounts may be imposed for non-preferred drugs on individuals 
     exempt from services-related cost-sharing under the general 
     cost-sharing provisions.
       Treatment of non-emergency cost-sharing. The provision 
     would clarify that for non-exempt persons with income between 
     100-150% FPL, cost-sharing for non-emergency care in an ER 
     may not exceed twice the applicable nominal amount (up to the 
     5% aggregate cap). For persons with income below 100% FPL or 
     who are exempt from service-related cost-sharing, cost-
     sharing for non-emergency care in an ER may not exceed the 
     applicable nominal amount when no cost-sharing is imposed by 
     the outpatient department or alternative providers. The 5% 
     aggregate cap on all service-related costsharing for all 
     income groups remains in effect.
       Definition of non-emergency services. The provision would 
     strike the phrase ``the physician determines'' from the 
     definition of non-emergency services as provided in P.L. 109-
     171.
       Exemption from cost-sharing for newly eligible children 
     with disabilities. The provision would exempt this new 
     optional eligibility group for children with disabilities 
     established under P.L. 109-171 from the premium and service-
     related cost-sharing rules under new Section 1916A.
       Correction of IV-B References. Among the groups explicitly 
     exempted from the general cost-sharing provisions for 
     premiums and cost-sharing, the provision would change 
     references to Title IV-B to mean child welfare services made 
     available under Title IV-B on the basis of being a child in 
     foster care.
       Effective Date. The provision specifies that all changes 
     made are effective as if included in the affected sections 
     and subsections of P.L. 109-171.
       (b) Clarifying treatment of certain annuities (section 
           6012)
     Current law
       Under Section 6012(b) of P.L. 109-171, the purchase of an 
     annuity is treated as a disposal of an asset for less than 
     fair market value unless certain criteria are met. One of 
     these criteria is that the state be named as the remainder 
     beneficiary in the first position for at least the total 
     amount of Medicaid expenditures paid on behalf of the 
     annuitant or be named in the second position after the 
     community spouse or minor or disabled child and such spouse 
     or a representative of such child does not dispose of any 
     such remainder for less than fair market value.
     Explanation of provision
       The provision would strike the term ``annuitant'' and 
     replace it with ``institutionalized individual.'' This change 
     would become effective as if it had been included in DRA 
     2005, enacted on February 8, 2006.
       (c) Additional miscellaneous technical corrections
       (1) Documentation (section 6036)
     Current law
       Under Section 6036 of P.L. 109-171, states are prohibited 
     from receiving federal Medicaid reimbursement for an 
     individual who has not provided satisfactory documentary 
     evidence of citizenship or nationality. Documents that 
     provide satisfactory evidence are described in the law, as 
     are exceptions to the documentation requirement.
       Section 6036(a)(2) of the law specifies that the 
     documentation requirements do not apply to an alien who is 
     eligible for Medicaid: and is entitled to or enrolled for 
     Medicare benefits; on the basis of receiving Supplemental 
     Security Income (SSI) benefits; or on such other basis as the 
     Secretary may specify that satisfactory documentary evidence 
     had been previously presented.
       The provision applies to initial determinations and to 
     redeterminations of eligibility for Medicaid made on or after 
     July 1, 2006.
     Explanation of provision
       The provision would specify that the documentation 
     requirements do not apply to an individual declaring to be a 
     citizen or national of the United States who is eligible for 
     Medicaid: and is entitled to or enrolled for Medicare 
     benefits; and is receiving (1) Social Security benefits on 
     the basis of a disability or (2) SSI benefits; and with 
     respect to whom (1) child welfare services are made available 
     under Title IV-B of the Social Security Act or (2) adoption 
     or foster care assistance is made available under Title IV-E; 
     or on such basis as the Secretary may specify that 
     satisfactory documentary evidence has been previously 
     presented.
       The provision would also make reference corrections. These 
     changes would be effective as if included in the Deficit 
     Reduction Act of 2005.
       In addition, effective 6 months after enactment, the 
     provision would (1) require states to have procedures in 
     effect for verifying the citizenship or immigration status of 
     children in foster care under the responsibility of the state 
     under Title IV-E or IV-B of the Social Security Act and (2) 
     specify that in reviews of state programs under IV-E and IV-
     B, the requirements subject to review shall include 
     determining whether the state program is in conformity with 
     the requirement to verify citizenship or immigration status.
       (2) Miscellaneous technical corrections
     Current law
       Section 5114(a)(2). This P.L. 109-171 provision modified 
     the first sentence of Section 1842(b)(6)(F) of the Social 
     Security Act to add a new paragraph H to 1842(b)(6) so that a 
     federally qualified health center (FQHC) would be paid 
     directly for FQHC services provided by a health care 
     professional under contract with that FQHC.
       Section 6003(b)(2). This P.L. 109-171 provision modified 
     Section 1927 of the Social Security Act by referencing 
     subsection (k) relating to Section 505(c) drugs.
       Section 6031(b), 6032(b), and 6035(c). These sections 
     referenced Section 6035(e) of P.L. 109-171, which does not 
     exist, to provide exceptions to effective dates.
       Section 6034(b). Section 6034 of P.L. 109-171 establishes 
     the Medicaid Integrity Program.

[[Page 23558]]

     It references modifications made to the Social Security Act 
     by Section 6033(a).
       Section 6036(b). Section 6036 of P.L. 109-171 deals with 
     improved enforcement of documentation requirements. Section 
     6036(b) references Section 1903(z) of the Social Security 
     Act. This section does not exist.
       Section 6015(a)(1). Section 6015 of P.L. 109-171 pertains 
     to continuing care retirement community admissions contracts. 
     It makes reference to clause (v) of Section 
     1919(c)(5)(A)(i)(II) of the Social Security Act.
     Explanation of provision
       Section 5114(a)(2). Instead of modifying Section 
     1842(b)(6)(F) to add paragraph H, the amendment would modify 
     Section 1842(b)(6) of the Social Security Act.
       Section 6003(b)(2). Instead of referencing subsection (k) 
     of Section 1927 of the Social Security Act, the amendment 
     would reference subsection (k)(1).
       Section 6031(b), 6032(b), and 6035(c). Instead of 
     referencing Section 6035(e), the amendment would reference 
     the effective date exception in Section 6034(e) of P.L. 109-
     171.
       Section 6034(b). Instead of referencing modifications made 
     by Section 6033(a) of P.L. 109-171, the amendment would 
     reference Section 6032(a).
       Section 6036(b). Instead of referencing Section 1903(z) of 
     the Social Security Act, the amendment would reference 
     Section 1903(x).
       Section 6015(a)(1). Instead of referencing clause (v) of 
     Section 1919(c)(5)(A)(i)(II) of the Social Security Act, the 
     amendment would reference subparagraph (B)(v).

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