[Senate Report 110-474]
[From the U.S. Government Publishing Office]



                                                      Calendar No. 1035
110th Congress                                                   Report
                                 SENATE
 2d Session                                                     110-474

======================================================================



 
                PATIENT SAFETY AND ABUSE PREVENTION ACT

                                _______
                                

  September 22 (legislative day, September 17), 2008.--Ordered to be 
                                printed

                                _______
                                

   Mr. Baucus, from the Committee on Finance, submitted the following

                              R E P O R T

                         [To accompany S. 1577]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(S. 1577) to amend titles XVIII and XIX of the Social Security 
Act to require screening, including national criminal history 
background checks, of direct patient access employees of 
skilled nursing facilities, nursing facilities, and other long-
term care facilities and providers, and to provide for 
nationwide expansion of the pilot program for national and 
State background checks on direct patient access employees of 
long-term care facilities or providers, reports favorably 
thereon with an amendment in the nature of a substitute and 
recommends the bill, as amended, do pass.

                             I. BACKGROUND

    Background checks\1\ for job applicants have long been used 
as an important tool to help reduce the rates of abuse among 
vulnerable populations. During the 1990s, the National Child 
Protection Act was enacted to allow states to conduct 
background checks and suitability reviews of employees or 
volunteers of entities that provide services to children, the 
elderly and disabled persons. At the State level, many states 
routinely require individuals seeking to work with children to 
undergo background checks as part of the pre-employment 
process.
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    \1\In this report, the term ``background check'' refers to 
comprehensive pre-employment screening of long-term care workers using 
a combination of State-based registries, state-based criminal history 
checks (name-based, fingerprint-based, or both), and FBI criminal 
history checks (fingerprint-based).
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    MILLIONS OF ELDERLY AND DISABLED INDIVIDUALS ARE NOT ADEQUATELY 
                               PROTECTED

    Although national surveys often exclude institutional 
settings such as nursing homes and adult day care centers, 
evidence shows that abuse in institutions is ``extensive and 
alarming.''\2\ A recent analysis of Medicaid Fraud Control Unit 
cases of elder abuse concluded that among 801 cases of nursing 
home abuse analyzed, about two-thirds were due to physical 
abuse.\3\ Elder abuse can take the form of physical abuse 
(battery, assault and rape), neglect (withholding or failure to 
provide adequate food, shelter and health care) and financial 
exploitation (theft, predatory lending and other illegal misuse 
or taking of funds, property or assets).
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    \2\Payne, Brian and Gainey, Randy. ``The Criminal Justice Response 
to Elder Abuse in Nursing Homes: A Routine Activities Perspective.'' 
Western Criminology Review. 7(3). 67-81 (2006).
    \3\Ibid.
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    In addition, because the demand for home-based care is 
expected to grow rapidly in the coming decades, policy to 
prevent and address elder abuse in home-based care settings is 
needed.\4\ A recent investigation published in the Wall Street 
Journal examined cases of abuse and neglect by home health 
aides, noting that ``in tiny Lake County, California 
[population <66,000 in 2006], 80 percent of the 74 prosecutions 
of elder abuse in the past year involved home health 
aides.''\5\
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    \4\Goldberg, Lee. ``Everything You Wanted to Know About Long Term 
Care . . . But Were Afraid to Ask.'' Presentation to the National 
Academy of Social Insurance. July 22, 2008.
    \5\Shishkin, Philip. ``Cases of Abuse by Home Aides Draw 
Scrutiny.'' The Wall Street Journal. 15 July 2008.
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    Most States now have significant gaps and loopholes in the 
procedures they use to check applicants. For example, 
registries and databases established for different sectors of 
the workforce are often poorly coordinated, causing lengthy 
clearance times. While nursing homes are required under Federal 
law to conduct registry checks on all Certified Nurse Aides 
(CNAs), they may not conduct State and Federal criminal history 
checks on all employees who have direct access to residents. 
And in many states, requirements for pre-employment checks do 
not extend to workers in other long-term care settings. This 
allows individuals with a history of substantiated abuse or a 
serious criminal history to avoid detection, frequently by 
crossing State lines.
    A 2002 Government Accountability Office (GAO) report 
requested by members of the Senate Special Committee on Aging 
(Committee) recommended that individuals applying to work in 
all long-term care settings also undergo background checks 
because the elderly, like children, are a highly vulnerable 
population.\6\ The Department of Health and Human Services 
Office of Inspector General has made similar recommendations in 
several reports.
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    \6\U.S. Government Accountability Office, ``Nursing Homes: More Can 
Be Done to Protect Residents from Abuse.'' GAO-02-312. March 2002.
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    To date, without broad-based Federal requirements and 
funding, only a few States have moved to incorporate these 
efficiency-improving system changes. Instead, many states 
continue to use slower, less accurate paper-based systems that 
can result in long processing times for providers. In turn, 
slow processing times increase the risk of abuse by allowing 
employees with disqualifying crimes to work for several months 
before background checks are completed. In turn, this 
contributes to a practice of ``job-hopping,'' in which workers 
switch jobs frequently, before their criminal history checks 
can be processed.

SCREENING OF LONG-TERM CARE WORKFORCE INVOLVES MULTIPLE TYPES OF CHECKS

    Three different types of databases are typically used to 
conduct background checks:
           Registry checks cross-reference an 
        individual's name with public databases, such as the 
        National Sex Offender Registry, or with lists of 
        workers found to have a record of substantiated abuse 
        in a particular field, such as the state CNA 
        registries;
           State name-based and fingerprint criminal 
        checks are searches of state police records using a 
        person's name and other identifying information, or 
        their fingerprints;
           Federal criminal history checks are 
        conducted by the FBI through its all-state biometric 
        repository, the Integrated Automated Fingerprint 
        Identification System (IAFIS), which uses fingerprints 
        to identify whether an individual has been arrested or 
        convicted.
    Because no single database is complete, a comprehensive 
background check process that uses many different databases 
promises to be most effective.
    Recent technological improvements are helping to streamline 
the different types and levels of background check processes. 
For example, ``Livescan'' fingerprint technology, which records 
an electronic copy of a fingerprint, is less prone to error and 
is faster to process than paper-based inked fingerprints. 
Another innovation is the ``rap-back'' system, which ensures 
that any new disqualifying crimes an individual commits after 
an initial clearance are flagged in a state's database and can 
be reported back to the current employer--so that the 
individual can be terminated. The FBI is now working to create 
a parallel federal rap-back capability as part of the agency's 
``Next Generation Identification'' (NGI) System initiative.\7\ 
Rap-back systems also have the potential to reduce costs by 
avoiding the need for duplicative checks.
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    \7\U.S. Department of Justice. ``The Attorney General's Report on 
Criminal History Background Checks.'' June 2006.
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    Absent focused state initiatives to refine, improve and 
expand existing background check procedures and implementation 
of other innovations, such as abuse prevention training and 
related measures to prevent and detect elder abuse, experts 
warn that mistreatment and exploitation of frail elders will 
rise further during the first half of the 21st century as the 
number of older adults grows. Today, conservative estimates are 
that elder abuse affects hundreds of thousands of seniors each 
year.\8\
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    \8\Colello, Kirsten. ``Background on Elder Abuse Legislation and 
Issues.'' Congressional Research Service. 25 January 2007.
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    To address this, for States electing to participate, the 
Patient Safety and Abuse Prevention Act will:
     Provide the opportunity to improve their existing 
background check infrastructure for employees who work one-on-
one with frail elders and individuals with disabilities in 
long-term care facilities and other settings. To accomplish 
this, the bill makes available up to $3 million in grant 
funding to each participating state, provided over three years, 
contingent on a 25 percent state match.
     Enable recipient states to create a comprehensive 
background check system for long-term care job applicants by 
making needed investments in their databases, creating 
workforce background check units, updating applicable laws and 
regulations, and offering additional training to long-term care 
providers.
     Establish mechanisms for workers who are denied 
employment to dispute the results through an independent 
external process, and develop procedures aimed at reducing 
unnecessary repeat fingerprint checks for workers who change 
jobs frequently.
     Significantly improve the ability of states across 
the country to design cost-effective and efficient background 
check systems that would reduce the risk of elder abuse in the 
thousands of facilities and other settings where many of the 
frailest Americans receive health and long-term care.

                        II. LEGISLATIVE HISTORY

    One of the first major congressional actions taken to 
combat elder abuse was the creation of the Long-Term Care 
Ombudsman Program (LTCOP) in order to investigate and resolve 
complaints in nursing homes and other residential care 
settings. This program was created in 1972 as a Public Health 
Service demonstration project in five states. As a result of 
the pilot program's success, the LTCOP was expanded to all 
states and included as an amendment to the Older Americans Act 
(OAA) in 1978.\9\ In 1992, the program become incorporated into 
a new title VII of the OAA that authorized elder rights 
protection activities and required the Administration on Aging 
(AoA) to create a permanent National Ombudsman Resource Center.
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    \9\P.L. 95-478.
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    Other federal resources aimed at preventing elder abuse 
include the Social Services Block Grant (SSBG) program 
authorized by title XX of the Social Security Act, which 
includes Adult Protective Services (APS), and some programs of 
the Violence Against Women Act.
    Although Congress has passed several laws that address 
child abuse and domestic violence, less attention has been paid 
to combating elder abuse at the Federal level. However, in 
addition to the Elder Justice Act, there have been several 
legislative proposals introduced in the Senate during the last 
several Congresses to combat elder abuse.
    During the 105th Congress, Senator Herb Kohl (D-WI) 
introduced the Patient Abuse Prevention Act, S. 1122, on July 
31, 1997, and the Long-Term Care Patient Protection Act of 
1998, S. 2570, on October 7, 1998. Both bills were referred to 
the Senate Finance Committee.
    Senator Kohl introduced the Patient Abuse Prevention Act, 
S. 1445, again on July 27, 1999, in the 106th Congress, and the 
bill was referred to the Senate Finance Committee.
    Also during the 106th Congress, Senator Charles E. Grassley 
(R-IA) introduced the Home Health Integrity Preservation Act, 
S. 255, on January 20, 1999, and Senator John Ashcroft (R-MO) 
introduced the Senior Care Safety Act of 2000, S. 3066, on 
September 19, 2000. Both bills were referred to the Senate 
Finance Committee.
    Senator Kohl introduced the Patient Abuse Prevention Act, 
S. 3091, again on October 10, 2002, in the 107th Congress, and 
the bill was referred to the Senate Finance Committee.
    The Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, H.R. 1, was introduced by 
Representative Dennis Hastert (R-IL) on June 25, 2003, during 
the 108th Congress. The bill became Public Law 108-173 on 
December 8, 2003. This law established a pilot program for 
national and state background checks on direct patient access 
employees of long-term care (LTC) facilities and providers. The 
Secretary of Health and Human Services, in consultation with 
the Attorney General, was required to establish the pilot 
program in no more than 10 states. The purpose of the pilot 
program was to identify efficient, effective, and economical 
procedures for these background checks.
    Also in the 108th Congress, on April 30, 2003, Senator Kohl 
introduced the Patient Abuse Prevention Act, S. 958, and the 
bill was referred to the Senate Finance Committee.
    During the 110th Congress, Senator Kohl introduced the 
Patient Safety and Abuse Prevention Act of 2007, S. 1577, on 
June 7, 2007, and the bill was referred to the Senate Finance 
Committee. Under the leadership of Chairman Max Baucus (D-MT), 
the Senate Finance Committee considered the bill in Executive 
Session on September 10, 2008, after postponement of an 
Executive Session scheduled for August 1, 2008. On September 
10, 2008, the Senate Finance Committee unanimously reported the 
bill as an amendment in the nature of a substitute.

                    III. SECTION-BY-SECTION ANALYSIS


             SHORT TITLE (SECTION 1 OF THE COMMITTEE BILL)

Present law

    No provision.

Committee bill

    The Committee Bill sets forth the title of the Act as the 
Patient Safety and Abuse Prevention Act of 2008.

             FINDINGS (SECTION 2(A) OF THE COMMITTEE BILL)

Present law

    No provision.

Committee bill

    The Committee Bill describes the following findings of 
Congress:
    (1) Frail elders are a highly vulnerable population who 
often lack the ability to give consent or defend themselves. 
Since the best predictor of future behavior is past behavior, 
individuals with histories of abuse pose a definite risk to 
patients and residents of long-term care facilities.
    (2) Every month, there are stories in the media of health 
care employees who commit criminal misconduct on the job and 
are later found, through a background check conducted after the 
fact, to have a history of convictions for similar crimes.
    (3) A 2006 study conducted by the Department of Health and 
Human Services determined that--
          (A) criminal background checks are a valuable tool 
        for employers during the hiring process;
          (B) the use of criminal background checks during the 
        hiring process does not limit the pool of potential job 
        applicants;
          (C) ``a correlation exists between criminal history 
        and incidences of abuse''; and
          (D) the long-term care industry supports the practice 
        of conducting background checks on potential employees 
        in order to reduce the likelihood of hiring someone who 
        has potential to harm residents.
    (4) In 2004, the staffs of State Adult Protective Services 
agencies received more than 500,000 reports of elder and 
vulnerable adult abuse, and an ombudsman report concluded that 
more than 15,000 nursing home complaints involved abuse, 
including nearly 4,000 complaints of physical abuse, more than 
800 complaints of sexual abuse, and nearly 1,000 complaints of 
financial exploitation.
    (5) The Department of Health and Human Services has 
determined that while 41 States now require criminal background 
checks on certified nurse aides prior to employment, only half 
of those (22) require criminal background checks at the Federal 
level.

             PURPOSES (SECTION 2(B) OF THE COMMITTEE BILL)

Present law

    No provision.

Committee bill

    The Committee Bill defines the purposes of the Patient 
Safety and Abuse Prevention Act, as follows:
          (1) to lay the foundation for a coordinated, 
        nationwide system of State criminal background checks 
        that would greatly enhance the chances of identifying 
        individuals with problematic backgrounds who move 
        across State lines;
          (2) to stop individuals who have a record of 
        substantiated abuse, or a serious criminal record, from 
        preying on helpless elders and individuals with 
        disabilities; and
          (3) to provide assurance to long-term care employers 
        and the residents they care for that potentially 
        abusive workers will not be hired into positions of 
        providing services to the extremely vulnerable 
        residents of our Nation's long-term care facilities.

 NATIONWIDE PROGRAM FOR NATIONAL AND STATE BACKGROUND CHECKS ON DIRECT 
  PATIENT ACCESS EMPLOYEES OF LONG-TERM CARE FACILITIES AND PROVIDERS 
                   (SECTION 3 OF THE COMMITTEE BILL)

Present law

    Background Checks of FBI Records for Nursing Homes and Home 
Health Agencies. The Omnibus Consolidated and Emergency 
Supplemental Appropriations Act of 1999 (P.L. 105-277) allowed 
nursing homes and home health agencies to request, through 
their State agencies, that the Federal Bureau of Investigation 
(FBI) search its all-state national data bank of arrests and 
convictions for the criminal histories of job applicants who 
would provide direct patient care, as long as states establish 
mechanisms for processing these requests. Most states have 
enacted laws that require or allow nursing homes and home 
health agencies to conduct these criminal background checks for 
certain categories of potential employees. The Attorney General 
may charge nursing homes and home health agencies fees no 
greater than $50 per request.
    To conduct a criminal background check of FBI records, 
nursing homes and home health agencies must provide a copy of 
applicants' fingerprints, a statement signed by the applicant 
authorizing the search, and other information to the 
appropriate state agency. Such information must be provided no 
later than 7 days after its acquisition by the nursing home or 
home health agency. Nursing facilities or home health care 
agencies that deny employment based on reasonable reliance on 
information from the Attorney General are exempt from liability 
for any action brought by the applicant. The information 
received from either the state or Attorney General may be used 
only for the purpose of determining the suitability of the 
applicant for employment by the agency in a position involved 
in direct patient care.
    Healthcare Integrity and Protection Data Bank/Health Care 
Fraud and Abuse Data Collection Program. The U.S. Department of 
Health and Human Services (HHS) maintains a national health 
care fraud and abuse data base, the Healthcare Integrity and 
Protection Data Bank (HIPDB), for the reporting of final 
adverse actions, including health care related civil judgments 
and criminal convictions of health care practitioners, 
providers and suppliers. This information is currently 
available for self-query by government agencies, health plans, 
health care providers, suppliers and practitioners. All states 
also maintain their own registries of persons who have 
completed nurse aide training and competency evaluation 
programs and other persons whom the state determines meet the 
requirements to work as a nurse aide. Included in these 
registries are data describing state findings of resident 
neglect, abuse and/or the misappropriation of resident 
property.
    Long-Term Care Background Check Pilot Program. The Medicare 
Modernization Act of 2003 (MMA, P.L. 108-173) established a 
pilot program for national and state background checks on 
direct patient access employees of long-term care (LTC) 
facilities and providers. Specifically, the Secretary of HHS, 
in consultation with the Attorney General, was required to 
establish the pilot program in no more than 10 states.
    The purpose of the pilot program was to identify efficient, 
effective, and economical procedures for these background 
checks. LTC facilities or providers are defined as certain 
facilities or providers that receive Medicare and/or Medicaid 
payment, including nursing homes, home health agencies, 
hospices, LTC hospitals, providers of personal care services, 
certain residential care providers, and intermediate care 
facilities for the mentally retarded (ICF/MRs). States in the 
pilot project may choose to require other LTC providers to also 
conduct background checks; however, providers paid through 
self-directed arrangements, or in arrangements in which 
patients employ the provider of services directly, are not 
included.
    States that agreed to participate in the pilot project were 
responsible for (1) monitoring compliance, (2) establishing 
procedures for workers to appeal or dispute the findings of the 
background checks, (3) agreeing to review the results of State 
or national criminal background checks to determine whether the 
employee was convicted of a relevant crime, (4) reporting the 
results of the review to the provider, and (5) reporting any 
employees with relevant convictions to the HIPDB database. The 
Secretary established criteria for selecting those states 
seeking to participate to ensure geographic diversity, the 
inclusion of a variety of LTC providers, the evaluation of a 
variety of payment mechanisms, and the evaluation of 
enforcement penalties. In addition, the Secretary was required 
to select at least one state that permits providers to hire 
provisional employees; at least one state that does not permit 
hiring of provisional employees; at least one state that 
establishes procedures for contracting with an employment 
agency to conduct background checks; and at least one state 
that includes training for managers and employees to prevent 
patient abuse.
    Procedures established in the participating states were 
designed to: (1) give notice to prospective employees about the 
background check requirement, (2) require the employee to 
produce a written statement disclosing any conviction for a 
relevant crime or finding of patient or resident abuse, (3) 
require the employee to authorize a criminal background check 
in writing, (4) require the employee to provide the facility 
with a rolled set of finger prints, (5) require any other 
information specified by the state, (6) require the provider to 
conduct checks of available registries that would be likely to 
contain disqualifying information about convictions for 
relevant crimes or findings of abuse, and (7) permit the 
provider to obtain criminal histories on prospective employees 
using a 10-fingerprint check from state criminal records and 
the Integrated Automated Fingerprint Identification system of 
the Federal Bureau of Investigation. Disqualifying information 
for employment included any federal or state conviction for 
program-related crimes (those related to the delivery of an 
item or service under Medicare or under any other state health 
care program), a Federal or State conviction for patient or 
resident abuse, a federal or state felony conviction related to 
health care fraud or a controlled substance, or an act of 
patient or resident abuse or neglect or misappropriation of 
patient or resident property, or other acts specified by 
states.
    Under this pilot program, states were permitted to 
establish procedures for facilitating background checks through 
employment agencies. States could also impose penalties to 
enforce the requirements of the pilot program conducted in that 
state.
    LTC providers were not permitted to knowingly employ any 
direct patient access employee who has any disqualifying 
information; however, participating states could permit 
providers to provisionally employ workers pending completion of 
the national and state criminal history background checks 
subject to supervisory requirements established by the state. 
These supervisory requirements were designed to take into 
account the cost or other burdens associated with small rural 
providers as well as the nature of care delivered by home 
health or hospice providers. Further, the information obtained 
from the check could only be used for the purpose of 
determining the suitability of the applicant for employment. 
States were required to ensure that providers were protected 
from liability for denying employment based on reasonable 
reliance on information from the background checks.
    The Secretary, in consultation with the Attorney General, 
was required to conduct an evaluation of this pilot program. 
The evaluation should (1) review and identify those state 
procedures that are most efficient, effective, and economical; 
(2) assess the costs of conducting the checks; (3) consider the 
benefits and problems associated with requiring employees or 
provider to pay the costs of conducting background checks; (4) 
consider whether the costs should be allocated between the 
Medicare and Medicaid programs and how to do so; (5) determine 
the extent to which the background checks may lead to 
unintended consequences, including a reduction in the available 
workforce; (6) review forms used by participating States to 
conduct a model form for background checks; (7) determine the 
effectiveness of background checks conducted by employment 
agencies; and (8) recommend appropriate procedures and payment 
mechanisms for implementing a national criminal background 
check program.
    The Secretary was required to pay participating states out 
of funds in the Treasury for the costs of conducting the pilot 
program (reserving 4 percent of the payments for the program's 
evaluation). For fiscal years 2004 through 2007, $25 million 
was appropriated from funds not otherwise appropriated.
    Seven states were selected by the Secretary to participate 
in the pilot. They are Alaska, Idaho, Illinois, Michigan, 
Nevada, New Mexico and Wisconsin. All but Illinois and 
Wisconsin extended the program Statewide. Pilots in each of 
these states concluded on September 30, 2007. The final 
evaluation of a three-year pilot has not yet been released by 
CMS.

Committee bill

    The Secretary would be required to expand the pilot program 
authorized under Section 307 of MMA. The program prohibited 
providers from knowingly employing any direct patient access 
employees with any disqualifying information as revealed by the 
background checks, and authorized participating states to 
impose penalties, as they deemed appropriate, to enforce the 
program's requirements.
    State Agreements with the Secretary. States that are not 
already in the pilot would have the option to enter into 
agreements with the Secretary of Health and Human Services 
(HHS) to conduct background checks under the program on a 
statewide basis and to submit an application to the Secretary 
according to the Secretary's guidelines.
    The Secretary would be required to enter into agreements 
with each state that participated in the pilot program that: 
(1) did not conduct background checks on a statewide basis; (2) 
agrees to conduct background checks under the new terms of the 
program on a statewide basis; and (3) submits an application to 
the Secretary containing such information and at such time as 
the Secretary may specify.
    Section 307 of the MMA is modified per the following:
    Required Fingerprint Check. Prior to employing a direct 
patient access employee that is first hired on or after the 
commencement date of the nationwide program, providers (or 
their designated agents) would be required to obtain state and 
national criminal history background checks on prospective 
employees using a search of state-based abuse and neglect 
registries and databases. These searches would include state-
based abuse and neglect registries and databases of states in 
which a prospective employee previously resided; state criminal 
history records; records of proceedings in the state that might 
contain disqualifying information (such as those of 
professional licensing and disciplinary boards and Medicaid 
Fraud Control Units); and Federal criminal history records, 
including fingerprint checks using the FBI's Integrated 
Automated Fingerprint Identification System.
    Additionally, a ``rap back'' capability by the State would 
also be required to be developed such that, if a direct patient 
access employee is convicted of a crime after the initial 
background check is conducted and the employee's fingerprints 
match the prints on file with the state law enforcement 
department, the department would immediately inform the state 
and the state would immediately inform the provider of the 
conviction.
    State Requirements. States participating in the program 
would be required to monitor compliance with the requirements 
of the nationwide program and have procedures to: (1) conduct 
screening and criminal history background checks under the 
nationwide program; (2) monitor the compliance of LTC 
facilities and providers; (3) provide, as appropriate, for a 
provisional period (not to exceed 30 days) of employment of a 
direct patient access employee--pending completion of the 
required criminal background checks, or completion of an 
employee's appeal process regarding the results of the 
background check--during which the employee will be directly 
supervised on-site according to procedures established by the 
state; and (4) provide an independent appeals process by which 
provisional or other employees may dispute the accuracy of the 
information obtained in the background check, including 
specified criteria (which would be required to include 
consideration of the passage of time, extenuating 
circumstances, demonstration of rehabilitation, and relevancy 
of the particular disqualifying information with respect to the 
current employment of the individual) for appeals by employees 
found to have disqualifying information.
    Further, states would be required to have procedures in 
place to designate a single state agency responsible for: (1) 
overseeing the coordination of state and national criminal 
history background checks requested by LTC facilities or 
providers (or their designated agents) using a search of state 
and federal criminal history records, including a fingerprint 
check of such records; (2) overseeing the design of privacy and 
security safeguards for use in the review of background check 
results regarding a prospective direct patient access employee 
to determine whether the employee has any conviction for a 
relevant crime; (3) immediately reporting the results of the 
background check reviews to the LTC facility or provider; and 
(4) reporting the existence of an employee's conviction for a 
relevant crime to the Health Care Fraud and Abuse Data 
Collection Program.
    States would also need written procedures for determining 
which individuals are direct patient access employees; 
specifying offenses, including convictions for violent crimes, 
for purposes of the nationwide program; and developing and 
implementing the above-defined ``rap back'' capability such 
that the state agency will immediately inform the facility or 
provider when an employee is found to have a criminal 
conviction, and will provide, or require the provider to 
supply, the employee with a copy of the results of the criminal 
history background check at no charge should the employee 
request such a copy.
    Payments. As a condition of receiving the Federal matching 
payment, newly participating states and previously 
participating states would be required to guarantee, as part of 
their application, that the state would make available 
(directly or through donations from public or private entities) 
a particular amount of non-Federal contributions for costs 
incurred by the state in carrying out the nationwide program. 
The Secretary would agree to provide Federal matching payments 
for newly participating states that would be three times the 
guaranteed state amount, not to exceed $3 million to each 
state. In addition, the Secretary would agree to provide 
Federal matching payments for previously participating states 
that would be three times the guaranteed state amount, not to 
exceed $1.5 million to each state.
    Evaluation and Report. The Inspector General of the 
Department of Health and Human Services (HHS) would be required 
to conduct an evaluation and/or audit of the nationwide program 
and to submit a report to Congress with results of the 
evaluation and/or audit no later than 180 days after completion 
of the nationwide program.
    Funding. The Secretary of HHS would be required to notify 
the Secretary of the Treasury of the amount necessary to carry 
out the nationwide program for fiscal years (FYs) 2009 through 
2011, except that in no case would such amount exceed $160 
million. Out of any Treasury funds not otherwise appropriated, 
the Secretary of the Treasury would be required to provide for 
the transfer to the Secretary of the amount specified as 
necessary to carry out the nationwide program.

MANDATORY STATE USE OF NATIONAL CORRECT CODING INITIATIVE (SECTION 4 OF 
                          THE COMMITTEE BILL)

Present law

    The Federal Government pays a share of every State's 
spending on Medicaid services and program administration. The 
federal match for administrative expenditures does not vary by 
state and is generally 50 percent, but certain functions 
receive a higher amount. Section 1903(a)(3) of the Social 
Security Act authorizes a 90 percent match for expenditures 
attributable to the design, development, or installation of 
mechanized claims processing and information retrieval 
systems--referred to as Medicaid Management Information Systems 
(MMISs)--and a 75 percent match for the operation of MMISs that 
are approved by the Secretary of Health and Human Services 
(HHS). A 50 percent match is available for non-approved MMISs 
under section 1903(a)(7). In order to receive payments under 
section 1903(a) for the use of automated data systems in the 
administration of their Medicaid programs, states are required 
under section 1903(r) to have an MMIS that meets specified 
requirements and that the Secretary has found (among other 
things) is compatible with the claims processing and 
information retrieval systems used in the administration of the 
Medicare program.
    The National Correct Coding Initiative (NCCI) is an editing 
system developed for the Medicare program by the Centers for 
Medicare and Medicaid Services within HHS to promote national 
correct coding methodologies and to prevent improper payment 
when incorrect code combinations are reported in Medicare Part 
B claims. It is based on coding conventions defined in the 
American Medical Association's CPT manual, national and local 
policies and edits, coding guidelines developed by national 
societies, analysis of standard medical and surgical practices, 
and a review of current coding practices. Although the use of 
NCCI edits is mandatory in Medicare, state Medicaid agencies 
are not required to use these edits in processing their claims. 
In 2004, the HHS Office of Inspector General released a report 
indicating that most states do not use the Medicare NCCI edits 
and that 39 states paid $54 million in 2001 for services that 
would have been denied based on those edits.

Committee bill

    The Committee Bill would amend section 1903(r) of the 
Social Security Act to require states to have an MMIS that, 
effective for claims filed on or after October 1, 2009, 
incorporates compatible elements of the NCCI (or any successor 
initiative) and such other elements of that Initiative (or such 
other national correct coding methodologies) as the Secretary 
identifies in accordance with specified requirements. Not later 
than September 1, 2009, the Secretary would be required to:
          --identify those methodologies of the NCCI (or any 
        successor initiative to promote correct coding and to 
        control improper coding leading to inappropriate 
        payment) which are compatible to claims filed under 
        Medicaid;
          --identify those methodologies of such Initiative (or 
        such other national correct coding methodologies) that 
        should be incorporated into claims filed under Medicaid 
        with respect to items and services for which no 
        national correct coding methodologies have been 
        established under such Initiative with respect to 
        Medicare;
          --notify States of the elements identified (and of 
        any other national correct coding methodologies 
        identified) and how states are to incorporate such 
        elements (and methodologies) into claims filed under 
        Medicaid;
          --submit a report to Congress that includes the 
        notice to states and an analysis supporting the 
        identification of the elements (or methodologies).
    If the Secretary determines that state legislation is 
required in order for a Medicaid state plan to meet the 
additional requirements imposed by the provision, the state 
plan would not be regarded as failing to comply before the 
first day of the first calendar quarter beginning after the 
close of the first regular session of the state legislature 
that begins after the date of enactment. In the case of a state 
that has a 2-year legislative session, each year of the session 
would be considered a separate regular session of the state 
legislature.

 FUNDING FOR THE MEDICARE IMPROVEMENT FUND (SECTION 5 OF THE COMMITTEE 
                                 BILL)

Present law

    The Secretary will establish a Medicare Improvement Fund 
that will be available to the Secretary to make improvements 
under the original fee-for-service program under parts A and B 
for Medicare beneficiaries. The Medicare Improvements for 
Patients and Providers Act of 2008 (P.L. 110-275, MIPPA), 
together with a provision in the Supplemental Appropriations 
Act, 2008 (P.L. 110-252), makes $2.22 billion from the part A 
and B Trust Funds available for services furnished during 
FY2014 and an additional $19.9 billion available for fiscal 
years 2014 through 2017.
    For purposes of carrying out the provisions of, and 
amendments made by MIPPA in addition to any other amounts 
provided in such provisions and amendments, additional funds 
will be made available to CMS. For fiscal years 2009 through 
2013, the Secretary of Health and Human Services will transfer 
$140 million from the Federal Hospital Insurance Trust Fund and 
the Federal Supplementary Medical Insurance Trust Fund to the 
CMS Program Management Account. The amounts drawn from the 
funds will be in the same proportion as for Medicare managed 
care payments (Medicare Advantage), that is, in a proportion 
that reflects the relative weight that benefits under part A 
and under part B represent of the actuarial value of the total 
benefits.

Committee bill

    The Committee Bill would continue to make $2.22 billion 
available to the Fund for expenditures from the Fund for 
services furnished during FY 2014, but would increase the 
amount of funds available for FYs 2014 through 2017 by $300 
million, from $19.9 billion to $20.2 billion. The $300 million 
is unspent savings from the offset identified in section 4 of 
the Committee Bill.

                IV. REGULATORY IMPACT AND OTHER MATTERS


                          A. REGULATORY IMPACT

    Pursuant to paragraph 11(b) of rule XXVI of the Standing 
Rules of the Senate, the Committee makes the following 
statement concerning the regulatory impact that might be 
incurred in carrying out the provisions of the bill as amended.

Impact on individuals and businesses

    The provisions of the bill are not expected to impose 
additional administrative requirements or regulatory burdens on 
individuals or businesses.

Impact on personal privacy and paperwork

    The provisions of the bill do not reduce personal privacy.
    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (P.L. 104-4).
    The Committee has determined that the provisions of the 
bill contain no Federal private sector mandates.
    The Committee has determined that the provisions of the 
bill do not impose a Federal intergovernmental mandate on 
State, local, or tribal governments.

                            V. COST ESTIMATE

                                                September 17, 2008.
Hon. Max Baucus,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1577, the Patient 
Safety and Abuse Prevention Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mindy Cohen.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

S. 1577--Patient Safety and Abuse Prevention Act

    Summary: S. 1577 would direct the Secretary of Health and 
Human Services (HHS) to provide funding to States that 
participate in a program to enforce a requirement that long-
term care facilities and providers conduct criminal background 
checks on employees who have direct access to patients. The 
bill also would require that state Medicaid programs adopt 
systems to identify, and deny payment for, claims for 
inappropriate services and claims that are incorrectly coded. 
In addition, S. 1577 would provide funding for the Secretary to 
make improvements in Medicare part A and part B benefits during 
fiscal years 2014 through 2017.
    In total, CBO estimates that the net impact on direct 
spending of enacting S. 1577 would be negligible over both the 
2009-2013 and 2009-2018 periods. Enacting the bill would not 
affect federal revenues or spending subject to appropriation.
    S. 1577 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
The bill would place new requirements on state Medicaid 
programs that would reduce state spending for the program by 
about $80 million over the 2009-2013 period.
    The estimated budgetary impact of S. 1577 is shown in the 
following table. The costs of this legislation fall within 
budget functions 550 (health) and 570 (Medicare).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Outlays, by fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2009    2010    2011    2012    2013    2014    2015    2016    2017    2018   2009-2013  2009-2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING

Background Checks on Employees of Long-Term Care
 Facilities:
    Estimated Budget Authority....................       0      50      45       5       0       0       0       0       0       0       100        100
    Estimated Outlays.............................       0      50      45       5       0       0       0       0       0       0       100        100
National Correct Coding Initiative:
    Estimated Budget Authority....................       0     -10     -20     -30     -40     -50     -60     -75     -85     -90      -100       -460
    Estimated Outlays.............................       0     -10     -20     -30     -40     -50     -60     -75     -85     -90      -100       -460
Medicare Improvement Fund:
    Estimated Budget Authority....................       0       0       0       0       0      90      90      90      90       0         0        360
    Estimated Outlays.............................       0       0       0       0       0      90      90      90      90       0         0        360
Total Changes:
    Estimated Budget Authority....................       0      40      25     -25     -40      40      30      15       5     -90         0          0
    Estimated Outlays.............................       0      40      25     -25     -40      40      30      15       5     -90         0          0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Basis of estimate: The bill contains provisions that would 
both increase and decrease direct spending. CBO estimates the 
net budgetary impact of the legislation would be negligible 
over both the 2009-2013 and 2009-2018 periods.

Background checks on employees of long-term care facilities

    S. 1577 would expand a pilot program created by the 
Medicare Prescription Drug, Improvement and Modernization Act 
of 2003 (Public Law 108-173) for background checks on certain 
employees of long-term care facilities or providers. The 
expanded pilot program would be available to any state that did 
not implement a Statewide program under the previous authority. 
In the states that decide to participate under the expanded 
pilot program, long-term care providers that participate in 
Medicare or Medicaid would be required to obtain state and 
national criminal histories on all prospective employees. 
Participating states also would be required to monitor 
compliance with these requirements. Newly participating states 
would be eligible to receive up to $3 million for these 
activities; previously participating states would be eligible 
to receive $1.5 million. S. 1577 would appropriate the amount 
necessary to operate this program during fiscal years 2009 
through 2011, up to a limit of $160 million over those three 
years. Based on spending under the original pilot program, CBO 
estimates that provision would increase direct spending by $100 
million over the 2009-2013 and 2009-2018 periods.

National Correct Coding Initiative

    The National Correct Coding Initiative (NCCI) consists of 
automated procedures to identify Medicare claims that are 
inaccurately coded or seek payment for inappropriate services. 
Although the use of NCCI procedures to check claims is 
mandatory in the Medicare program, State Medicaid agencies are 
not required to use those edits in processing Medicaid claims. 
S. 1577 would require that state Medicaid programs adopt 
certain NCCI procedures by October 1, 2009. CBO estimates that 
use of the NCCI checks would lead to the denial of certain 
Medicaid claims and therefore save Medicaid $100 million over 
the 2009-2013 period and $460 million over the 2009-2018 
period.

Medicare Improvement Fund

    The Medicare Improvement Fund was created by the Medicare 
Improvements for Patients and Providers Act of 2008 (Public Law 
110-275). The fund is available to the Secretary of HHS to make 
improvements in Part A and Part B benefits. S. 1577 would 
increase the amounts available in the fund for the 2014-2017 
period. CBO estimates that those changes in funding would 
increase outlays by $360 million over that period.
    Estimated impact on state, local, and tribal governments: 
S. 1577 contains no intergovernmental mandates as defined in 
UMRA. To reduce inappropriate payments in the Medicaid program, 
the bill would require states to incorporate the National 
Correct Coding Initiative when processing provider claims. The 
requirement to comply with the initiative, however, would not 
impose an intergovernmental mandate as defined in UMRA because 
the Medicaid program provides states with significant 
flexibility to make programmatic adjustments to accommodate the 
changes. Incorporating the initiative would ultimately reduce 
state spending in the program by about $80 million over the 
2009-2013 period. States also would benefit from funding 
provided by the bill for background checks of prospective 
employees of long-term care facilities or providers. Any costs 
states incur, including matching funds, would be incurred 
voluntarily.
    Estimated impact on the private sector: S. 1577 contains no 
private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal Costs: Mindy Cohen and Rob 
Stewart; Impact on State, Local and Tribal Governments: Lisa 
Ramirez-Branum; Impact on the Private Sector: Patrick 
Bernhardt.
    Estimate approved by: Keith J. Fontenot, Deputy Assistant 
Director for Health and Human Resources, Budget Analysis 
Division.

                       VI. VOTE OF THE COMMITTEE

    In compliance with paragraph 7(b) of rule XXVI of the 
Standing Rules of the Senate, the following statements are made 
concerning the vote in the Committee's consideration of the 
bill.

Motion to report the bill

    The bill was ordered favorably reported by a unanimous 
voice vote on September 10, 2008. A quorum was present. No 
amendments were voted upon.

                      VII. CHANGES IN EXISTING LAW

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

SOCIAL SECURITY ACT

           *       *       *       *       *       *       *



TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *


PART E--MISCELLANEOUS PROVISIONS

           *       *       *       *       *       *       *



                       MEDICARE IMPROVEMENT FUND

    Sec. 1898. (a) Establishment.--The Secretary shall 
establish under this title a Medicare Improvement Fund (in this 
section referred to as the ``Fund'') which shall be available 
to the Secretary to make improvements under the original fee-
for-service program under parts A and B for individuals 
entitled to, or enrolled for, benefits under part A or enrolled 
under part B.
    (b) Funding.--
          [(1) In general.--There shall be available to the 
        Fund, for expenditures from the Fund for services 
        furnished during fiscal year 2014, $2,220,000,000 and, 
        in addition for services furnished during fiscal years 
        2014 through 2017, $19,900,000,000.]
          (1) In general.--There shall be available to the 
        Fund, for expenditures from the Fund for services 
        furnished during--
                  (A) fiscal year 2014, $2,220,000,000; and
                  (B) fiscal years 2014 through 2017, 
                $20,200,000,000.

           *       *       *       *       *       *       *


TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

           *       *       *       *       *       *       *


                           PAYMENT TO STATES

    Sec. 1903. (a) From the sums appropriated therefor, the 
Secretary (except as otherwise provided in this section) shall 
pay to each State which has a plan approved under this title, 
for each quarter, beginning with the quarter commencing January 
1, 1966--

           *       *       *       *       *       *       *

    (r)(1) In order to receive payments under subsection (a) 
for use of automated data systems in administration of the 
State plan under this title, a State must have in operation 
mechanized claims processing and information retrieval systems 
that meet the requirements of this subsection and that the 
Secretary has found--
          (A) are adequate to provide efficient, economical, 
        and effective administration of such State plan;
          (B) are compatible with the claims processing and 
        information retrieval systems used in the 
        administration of title XVIII, and for this purpose--
                  (i) have a uniform identification coding 
                system for providers, other payees, and 
                beneficiaries under this title or title XVIII;
                  (ii) provide liaison between States and 
                carriers and intermediaries with agreements 
                under title XVIII to facilitate timely exchange 
                of appropriate data; [and]
                  (iii) provide for exchange of data between 
                the States and the Secretary with respect to 
                persons sanctioned under this title or title 
                XVIII; and
                  (iv) effective for claims filed on or after 
                October 1, 2009, incorporate compatible 
                methodologies of the National Correct Coding 
                Initiative administered by the Secretary (or 
                any successor initiative to promote correct 
                coding and to control improper coding leading 
                to inappropriate payment) and such other 
                methodologies of that Initiative (or such other 
                national correct coding methodologies) as the 
                Secretary identifies in accordance with 
                paragraph (3);

           *       *       *       *       *       *       *

    (3) Not later than September 1, 2009, the Secretary shall 
do the following:
          (A) Identify those methodologies of the National 
        Correct Coding Initiative administered by the Secretary 
        (or any successor initiative to promote correct coding 
        and to control improper coding leading to inappropriate 
        payment) which are compatible to claims filed under 
        this title.
          (B) Identify those methodologies of such Initiative 
        (or such other national correct coding methodologies) 
        that should be incorporated into claims filed under 
        this title with respect to items or services for which 
        States provide medical assistance under this title and 
        no national correct coding methodologies have been 
        established under such Initiative with respect to title 
        XVIII.
          (C) Notify States of--
                  (i) the methodologies identified under 
                subparagraphs (A) and (B) (and of any other 
                national correct coding methodologies 
                identified under subparagraph (B)); and
                  (ii) how States are to incorporate such 
                methodologies into claims filed under this 
                title.
          (D) Submit a report to Congress that includes the 
        notice to States under subparagraph (C) and an analysis 
        supporting the identification of the methodologies made 
        under subparagraphs (A) and (B).

           *       *       *       *       *       *       *


                                  
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