Title IV MEDICARE AND MEDICAID Table of Contents Section 4000 References in title Subtitle A Medicare and the Alliance System Part 1 Enrollment of Medicare Beneficiaries in Regional Alliance Plans Section 4001 Optional State integration of medicare beneficiaries into regional alliance plans Section 4002 Individual election to remain in certain health plans Section 4003 Payments to regional alliances on behalf of certain medicare-eligible individuals Section 4004 Prohibiting employers from taking into account status as medicare beneficiary on any grounds Part 2 Encouraging Managed Care Under Medicare Program; Coordination With Medigap Plans Section 4011 Enrollment and termination of enrollment Section 4012 Uniform informational materials Section 4013 Outlier payments Section 4014 Point of service option Part 3 Medicare Coverage Expansions Section 4021 Reference to coverage of outpatient prescription drugs Section 4022 Expanded coverage for physician assistants, nurse practitioners, and clinical nurse specialists Part 4 Coordination With Administrative Simplification and Quality Management Initiatives Section 4031 Repeal of separate medicare peer review program Section 4032 Mandatory assignment for all part B services Section 4033 Elimination of complexities caused by dual funding sources and rules for payment of claims Section 4034 Repeal of pro precertification requirement for certain surgical procedures Section 4035 Requirements for changes in billing procedures Part 5 Amendments to Anti-fraud and Abuse Provisions Section 4041 Anti-kickback provisions Section 4042 Revisions to limitations on physician self-referral Section 4043 Civil monetary penalties Section 4044 Exclusions from program participation Section 4045 Sanctions against practitioners and persons for failure to comply with statutory obligations relating to quality of care Section 4046 Effective date Part 6 Funding of Graduate Medical Education and Academic Health Centers Section 4051 Transfers from medicare trust funds for graduate medical education Section 4052 Transfers from Hospital Insurance Trust Fund for academic health centers Part 7 Coverage of Services Provided by Facilities and Plans of Departments of Defense and Veterans Affairs Section 4061 Treatment of uniformed services health plan as eligible organization under medicare Section 4062 Coverage of services provided to medicare beneficiaries by plans and facilities of Department of Veterans Affairs Section 4063 Conforming amendments Subtitle B Savings in Medicare Program Part 1 Savings Relating to Part A Section 4101 Reduction in update for inpatient hospital services Section 4102 Reduction in adjustment for indirect medical education Section 4103 Reduction in payments for capital-related costs for inpatient hospital services Section 4104 Revisions to payment adjustments for disproportionate share hospitals in participating States Section 4105 Moratorium on designation of additional long-term care hospitals Section 4106 Extension of freeze on updates to routine service costs of skilled nursing facilities Part 2 Savings Relating to Part B Section 4111 Establishment of cumulative expenditure goals for physician services Section 4112 Use of real GDP to adjust for volume and intensity; repeal of restriction on maximum reduction permitted in default update Section 4113 Reduction in conversion factor for physician fee schedule for 1995 Section 4114 Limitations on payment for physicians' services furnished by high-cost hospital medical staffs Section 4115 Medicare incentives for physicians to provide primary care Section 4116 Elimination of formula-driven overpayments for certain outpatient hospital services Section 4117 Imposition of coinsurance on laboratory services Section 4118 Application of competitive acquisition process for part B items and services Section 4119 Application of competitive acquisition procedures for laboratory services Part 3 Savings Relating to Parts a and B Section 4131 Medicare secondary payer changes Section 4132 Payment limits for HMOs and CMPs with risk-sharing contracts Section 4133 Reduction in routine cost limits for home health services Section 4134 Imposition of copayment for certain home health visits Section 4135 Expansion of centers of excellence Part 4 Part B Premium Section 4141 General part B premium Part 5 Report on Medicare Savings for Fiscal Years 2000 Through 2003 Section 4151 Report on savings Subtitle C Medicaid Part 1 Comprehensive Benefit Package Section 4201 Limiting coverage under medicaid of items and services covered under comprehensive benefit package Part 2 Expanding Eligibility for Nursing Facility Services; Long-term Care Integration Option Section 4211 Spenddown eligibility for nursing facility residents Section 4212 Increased income and resource disregards for nursing facility residents Section 4213 Informing nursing home residents about availability of assistance for home and community-based services Part 3 Other Benefits Section 4221 Treatment of items and services not covered under the comprehensive benefit package Section 4222 Establishment of program for poverty-level children with special needs Part 4 Discontinuation of Certain Payment Policies Section 4231 Discontinuation of medicaid DSH payments Section 4232 Discontinuation of reimbursement standards for inpatient hospital services Part 5 Coordination With Administrative Simplification and Quality Management Initiatives Section 4241 Requirements for changes in billing procedures Part 6 Medicaid Commission Section 4251 Medicaid Commission Subtitle D Increase in SSI Personal Needs Allowance Section 4301 Increase in SSI personal needs allowance Section 4000 REFERENCES IN TITLE. (a) Amendments to Social Security Act.Except as otherwise specifically provided, whenever in this title an amendment is expressed in terms of an amendment to or repeal of a section or other provision, the reference shall be considered to be made to that section or other provision of the Social Security Act. (b) References to OBRA.In this title, the terms ``OBRA091986'', ``OBRA091987'', ``OBRA091989'', ``OBRA091990'', and ``OBRA091993'' refer to the Omnibus Budget Reconciliation Act of 1986 (Public Law 9909509), the Omnibus Budget Reconciliation Act of 1987 (Public Law 10009203), the Omnibus Budget Reconciliation Act of 1989 (Public Law 10109239), the Omnibus Budget Reconciliation Act of 1990 (Public Law 10109508), and the Omnibus Budget Reconciliation Act of 1993 (Public Law 1030966), respectively. Subtitle A Medicare and the Alliance System Part 1 ENROLLMENT OF MEDICARE BENEFICIARIES IN REGIONAL ALLIANCE PLANS Section 4001 OPTIONAL STATE INTEGRATION OF MEDICARE BENEFICIARIES INTO REGIONAL ALLIANCE PLANS. Title XVIII is amended by adding at the end the following: ``integration of medicare into state health security programs ``Sec. 1893. (a) Payment to States.The Secretary shall pay a participating State that has submitted an application, as specified by subsection (b) which the Secretary has approved under subsection (c), the amount specified by subsection (d) for the period specified by subsection (e) for covered medicare beneficiaries. This section shall apply without regard to whether or not a State is a single-payer State. ``(b) Application by State.An application submitted by a participating State shall contain the following assurances: ``(1) Coverage of all medicare-eligible individuals.The State's application shall assure that the provisions of the succeeding paragraphs of this subsection shall apply to all medicare-eligible individuals who are residents of the State.''. ``(2) Enrollment in and selection of health plans. ``(A) Enrollment.Each medicare-eligible individual (within a class of medicare beneficiaries covered under the application) who is a resident of the State will be enrolled in a regional alliance health plan serving the area in which the individual resides (or, in the case of an individual who is a resident of a single-payer State, in the Statewide single-payer system operated under part 2 of subtitle C of title I of the Health Security Act). ``(B) Selection.Each such individual will have the same choice among applicable health plans as other individuals in the State who are eligible individuals under the Health Security Act. ``(C) Offer of fee-for-service plan.Each such individual shall be offered enrollment in at least one health plan that is a fee-for-service plan (or, in the case of an individual who is a resident of a single-payer State, the Statewide single-payer system under part 2 of subtitle C of title I of the Health Security Act) that meets the following requirements: ``(i) The plan's premium rate, and the actuarial value of the plan's deductibles, coinsurance, and copayments, charged to the individual do not exceed the actuarial value of the coinsurance and deductibles that would be applicable on the average if this section did not apply to those individuals. ``(ii) The plan's payment rates for covered items and services are accepted as payment in full for such items and services. ``(3) Coverage of full medicare benefits.For each health plan providing coverage under this section ``(A) the plan shall cover at least the items and services for which payment would otherwise be made under this title (including payments under section 1862(b)(4)), and ``(B) coverage determinations under the plan are made under rules that are no more restrictive than otherwise applicable under this title. ``(4) Premium.During the period for which payments are made to a State under this section, the requirements of the Health Security Act relating to premiums that are otherwise applicable with respect to individuals enrolled in health plans in a State shall not apply with respect to medicare-eligible individuals in the State who are covered under the State's application under this section. Nothing in the previous sentence shall operate to permit a State or health plans in a State to charge different premiums among medicare-eligible individuals within the same premium class under the Health Security Act. ``(5) Quality assurance.For each health plan providing coverage under this section there are quality assurance mechanisms for covered medicare individuals that equal, or exceed, such mechanisms otherwise applicable under this title. ``(6) Review rights.Covered medicare individuals have review, reconsideration, and appeal rights (including appeals to courts of the State) that equal or exceed such rights otherwise applicable under this title. ``(7) Data reporting and access to documents.The State will ``(A) provide such utilization and statistical data as the Secretary determines are needed for purposes of the programs established under this title, and ``(B) the State will ensure access by the Secretary or the Comptroller General to relevant documents. ``(8) Use of payments.Payments made to the State under subsection (a) will be used only to carry out the purposes of this section. ``(c) Approval by Secretary.The Secretary shall approve an application under subsection (b) if the Secretary finds ``(1) that the individuals covered under the State's application shall receive at least the benefits provided under this title (including cost sharing); ``(2) that the amount of expenditures that will be made under this title will not exceed the amount of expenditures that will be made if the State's application is not accepted; and ``(3) that the State is able and willing to carry out the assurances provided in its application. ``(d) Amount and Source of Payment. ``(1) Amount of payment.For purposes of subsection (a), the amount of payments to a State ``(A) for the first year for which payments are made to the State under this section shall be determined by the applicable rate specified in section 1876(a)(1)(C) (but at 100 percent, rather than 95 percent, of the applicable amount) for each medicare-eligible individual who is a resident of the State (but without regard to any reduction based on payments to be made under section 1876(a)(1)(G)), and ``(B) for each succeeding year, shall be determined by the applicable rate determined under subparagraph (A) or this subparagraph for the preceding year for each such individual, adjusted by the regional alliance inflation factor applicable to regional alliances in the State (as determined in accordance with section 6001(a) of the Health Security Act) for the year. ``(2) Source of payment.Payment shall be made from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund as provided under paragraph (5) of section 1876(a) (other than as provided under subparagraph (B) of that paragraph). ``(e) Period for Which Payment Made.The period for which payment may be made under subsection (a) to a State ``(1) begins with January 1 of the first calendar year for which the Secretary approves under subsection (c) the application of the State; and ``(2) ends ``(A) on December 31 of the year in which the State notifies the Secretary (before April of that year) that the State no longer intends to receive payments under this section, or ``(B) if the Secretary finds that the State is no longer in substantial compliance with the requirements under paragraphs (2) or (3) of subsection (c), at the time specified by the Secretary. No termination is effective under paragraph (2) unless notice has been provided to medicare covered individuals, health providers, and health plans affected by the termination. ``(f) Payments Under this Section as Sole Medicare Benefits.Payments to a State under subsection (a) shall be instead of the amounts that would otherwise be payable, pursuant to sections 1814(b) and 1833(a), for services furnished to medicare-eligible residents of the State covered under the application. ``(g) Evaluation.The Secretary shall evaluate on an ongoing basis the compliance of a State with the requirements of this section. ``(h) Definitions.In this section the terms `applicable health plan', `fee-for-service plan', `health plan', `medicare-eligible individual', `participating State', `single-payer State', and `Statewide single-payer system' have the meanings of those terms in the Health Security Act.''. Section 4002 INDIVIDUAL ELECTION TO REMAIN IN CERTAIN HEALTH PLANS. (a) In General.Section 1876 (42 U.S.C. 1395mm) is amended by adding at the end the following new subsection: ``(k)(1) Notwithstanding any other provision of this section, each eligible organization with a risk-sharing contract (or which is eligible to enter into such a contract, as determined by the Secretary) that is the sponsor of a health plan under subtitle E of title I of the Health Security Act shall provide each individual who meets the requirements of paragraph (2) with the opportunity to elect (by submitting an application at such time and in such manner as specified by the Secretary) to continue enrollment in such plan (for the same benefits as alliance-eligible individuals) and to have payments made by the Secretary to the plan on the individual's behalf in accordance with paragraph (3). The premium imposed with respect to such an individual by the plan shall be in an amount (determined in accordance with rules of the Secretary and notwithstanding other provisions of such Act) which reflects the difference between the premium otherwise established (adjusted by a factor to reflect the actuarial difference between medicare beneficiaries and other plan enrollees) and the amount payable under paragraph (3). ``(2) An individual meets the requirements of this paragraph if the individual is ``(A) enrolled in the health plan of an eligible organization in a month in which the individual is either not entitled to benefits under part A, or is an eligible employee (as defined in the Health Security Act) or the spouse or dependent of an eligible employee, ``(B) entitled to benefits under part A and enrolled under part B in the succeeding month, ``(C) an eligible individual under the Health Security Act in that succeeding month, and ``(D) not an eligible employee (as defined in the Health Security Act) or the spouse or dependent of an eligible employee in that succeeding month. ``(3) The Secretary shall make a payment to an eligible organization on behalf of each individual enrolled with the organization for whom an election is in effect under this subsection in an amount determined by the rate specified by subsection (a)(1)(C) (notwithstanding the second sentence of paragraph (1)). Such payment shall be made from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund as provided under subsection (a)(5) (other than as provided under subparagraph (B) of that paragraph). ``(4) The period for which payment may be made under paragraph (3) ``(A) begins with the first month for which the individual meets the requirements of paragraph (2) (or a later month, in the case of a late application, as may be specified by the Secretary); and ``(B) ends with the earliest of ``(i) the month following the month ``(I) in which the individual notifies the Secretary that the individual no longer wishes to be enrolled in the health plan of the eligible organization and to have payment made on the individual's behalf under this subsection; and ``(II) which is a month specified by the Secretary as a uniform open enrollment period under subsection (c)(3)(A)(i), or ``(ii) the month in which the individual ceases to meet the requirements of paragraph (2). ``(5) Notwithstanding any other provision of this title, payments to an eligible organization under this subsection on behalf of an individual shall be the sole payments made with respect to items and services furnished to the individual during the period for which the individual's election under this subsection is in effect.''. (b) Conforming Amendment.Section 1838(b) (42 U.S.C. 1395q(b)) is amended by inserting after ``section 1843(e)'' the following: ``,201876(c)(3)(B), 1876(k)(4)(B), or 1890(j)(1)(B)(iv)''. Section 4003 PAYMENTS TO REGIONAL ALLIANCES ON BEHALF OF CERTAIN MEDICARE-ELIGIBLE INDIVIDUALS. Title XVIII, as amended by section 4001, is further amended by adding at the end the following new section: ``payments to regional alliances on behalf of certain medicare-eligible individuals under health security act ``Sec. 1894. The Secretary shall provide for a transfer from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, in appropriate proportions, to each regional alliance in each year of the amount of the reductions in liability owed to the alliance in the year resulting from the application of section 6115 of the Health Security Act. In the case of an individual to whom such section applies, unless all the members of the family would be medicare-eligible individuals (but for section 1012(a) of such Act), the reductions in liability under section 6115 of such Act shall be based upon the alliance credit amount for an individual class of enrollment (as defined in section 1011(c)(1)(A) of such Act).''. Section 4004 PROHIBITING EMPLOYERS FROM TAKING INTO ACCOUNT STATUS AS MEDICARE BENEFICIARY ON ANY GROUNDS. (a) Extension of Protections for Working Aged to Group Health Plans of All Employers.Section 1862(b)(1)(A) (42 U.S.C. 1395y(b)(1)(A)) is amended by striking clauses (ii) and (iii). (b) Extension of Protections for Disabled Individuals to All Group Health Plans. (1) In general.Section 1862(b)(1)(B) (42 U.S.C. 1395y(b)(1)(B)), as amended by section 13561(e) of OBRA091993, is amended (A) in clause (i), by striking ``large group health plans (as defined in clause (iv))'' and inserting ``group health plan (as defined in subparagraph (A)(v), taking into account the exceptions described in clauses (ii) and (iii) of subparagraph (A))''; and (B) by striking clause (iv). (2) Conforming amendment.Section 1862(b)(1)(A)(v) (42 U.S.C. 1395y(b)(1)(A)(v)) is amended by striking ``this subparagraph, and subparagraph (C)'' and inserting ``this paragraph''. (c) Repeal of Limitation on Period of Protection for Individuals With End Stage Renal Disease. (1) In general.Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)), as amended by section 13561(c) of OBRA091993, is amended (A) in clause (i), by striking ``an individual is entitled'' and all that follows through ``such benefits'' and inserting ``an individual (or a member of the individual's family) who is covered under the plan by virtue of the individual's current employment status with an employer is entitled to benefits under this title under section 226A''; (B) in clause (ii), by striking the semicolon at the end and inserting a period; and (C) by striking the matter following clause (ii). (2) Conforming amendment.Section 1862(b)(1) is amended (A) in subparagraph (A), by striking clause (iv); and (B) in subparagraph (B), by striking clause (ii). (d) No Primary Payment for Services Under a Health Plan.Section 1862(b)(2)(A) (42 U.S.C. 1395y(b)(2)(A)(i)) is amended (1) by striking ``or'' at the end of clause (i); (2) by striking the period at the end of clause (ii) and inserting ``, or''; (3) by inserting after clause (ii) the following new clause: ``(iii) payment has been made, or can reasonably be expected to be made, with respect to the item or service under any health plan under the Health Security Act.''; and (4) in the second sentence (A) by striking ``and'' after ``applies'', and (B) by inserting before the period at the end the following: ``, and a health plan under the Health Security Act to the extent that clause (iii) applies''. (e) Simplification of Coordination of Benefits.Section 1862(b)(4) (42 U.S.C. 1395y(b)(4)) is amended by adding after and below subparagraph (B) the following: ``Notwithstanding the previous sentence, where payment is made for an item or service by a primary plan that is a health plan (within the meaning of section 1400 of the Health Security Act) and for which payment would be made under this title but for this subsection, payment may be made under this title (without regard to deductibles and coinsurance) in the amount of the cost sharing imposed under such primary plan (consistent with such Act).''. (f) Effective Date.The amendments made by this section shall apply with respect to medicare-eligible individuals residing in a participating State as of January 1 of the first year for which the State is a participating State. I73PART 2ENCOURAGING MANAGED CARE UNDER MEDICARE PROGRAM; COORDINATION WITH MEDIGAP PLANS Section 4011 ENROLLMENT AND TERMINATION OF ENROLLMENT. (a) Uniform Open Enrollment Periods. (1) For capitated plans.The first sentence of section 1876(c)(3)(A)(i) (42 U.S.C. 1395mm(c)(3)(A)(i)) is amended by inserting ``(which may be specified by the Secretary)'' after ``open enrollment period''. (2) For medigap plans.Section 1882(s) (42 U.S.C. 1395ss(s)) is amended (A) in paragraph (3), by striking ``paragraphs (1) and (2)'' and inserting ``paragraph (1), (2), or (3)'', (B) by redesignating paragraph (3) as paragraph (4), and (C) by inserting after paragraph (2) the following new paragraph: ``(3) Each issuer of a medicare supplemental policy shall have an open enrollment period (which shall be the period specified by the Secretary under section 1876(c)(3)(A)(i)), of at least 30 days duration every year, during which the issuer may not deny or condition the issuance or effectiveness of a medicare supplemental policy, or discriminate in the pricing of the policy, because of age, health status, claims experience, receipt of health care, or medical condition. The policy may not provide any time period applicable to pre-existing conditions, waiting periods, elimination periods, and probationary periods (except as provided by paragraph (2)(B)). The Secretary may require enrollment through a third party designated under section 1876(c)(3)(B).''. (b) Enrollments for New Medicare Beneficiaries and Those Who Move.Section 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) is amended (1) in clause (i), by striking ``clause (ii)'' and inserting ``clauses (ii) through (iv)'', and (2) by adding at the end the following: ``(iii) Each eligible organization shall have an open enrollment period for each individual eligible to enroll under subsection (d) during any enrollment period specified by section 1837 that applies to that individual. Enrollment under this clause shall be effective as specified by section 1838. ``(iv) Each eligible organization shall have an open enrollment period for each individual eligible to enroll under subsection (d) who has previously resided outside the geographic area which the organization serves. The enrollment period shall begin with the beginning of the month that precedes the month in which the individual becomes a resident of that geographic area and shall end at the end of the following month. Enrollment under this clause shall be effective as of the first of the month following the month in which the individual enrolls.''. (c) Enrollment Through Third Party; Uniform Termination of Enrollment.The first sentence of section 1876(c)(3)(B) (42 U.S.C. 1395mm(c)(3)(B)) is amended (1) by inserting ``(including enrollment through a third party)'' after ``regulations'', and (2) by striking everything after ``with the eligible organization'' and inserting ``during an annual period as prescribed by the Secretary, and as specified by the Secretary in the case of financial insolvency of the organization, if the individual moves from the geographic area served by the organization, or in other special circumstances that the Secretary may prescribe.''. (d) Effective Date.The amendments made by the previous subsections apply to enrollments and terminations of enrollments occurring after 1995 (but only after the Secretary of Health and Human Services has prescribed the relevant annual period), except that the amendments made by subsection (a)(2) apply to enrollments for a medicare supplemental policy made after 1995. Section 4012 UNIFORM INFORMATIONAL MATERIALS. (a) For Capitated Plans.Section 1876(c)(3)(C) (42 U.S.C. 1395mm(c)(3)(C)) is amended by adding at the end the following: ``In addition, the Secretary shall develop and distribute comparative materials about all eligible organizations. Each eligible organization shall reimburse the Secretary for its pro rata share (as determined by the Secretary) of the costs incurred by the Secretary in carrying out the requirements of the preceding sentence and other enrollment activities.''. (b) For Medigap Plans.Paragraph (1) of section 1882(f) (42 U.S.C. 1395ss(f)) is amended to read as follows: ``(f)(1) The Secretary shall develop and distribute comparative materials about all medicare supplemental policies issued in a State. Each issuer of such a policy shall reimburse the Secretary for its pro rata share (as determined by the Secretary for purposes of section 1876(c)(3)(C)) of the costs incurred by the Secretary in carrying out the requirements of the preceding sentence and other enrollment activities, or the issuer shall no longer be considered as meeting the requirements of this section.''. (c) Effective Date.The amendments made by this section shall apply with respect to materials for enrollment in years after 1995. Section 4013 OUTLIER PAYMENTS. (a) General Rule.Section 1876(a)(1) (42 U.S.C. 1395mm(a)(1)) is amended by adding at the end the following: ``(G)(i) In the case of an eligible organization with a risk-sharing contract, the Secretary may make additional payments to the organization equal to not more than 50 percent of the imputed reasonable cost (or, if so requested by the organization, the reasonable cost) above the threshold amount of services covered under parts A and B and provided (or paid for) in a year by the organization to any individual enrolled with the organization under this section. ``(ii) For purposes of clause (i), the `imputed reasonable cost' is an amount determined by the Secretary on a national, regional, or other basis that is related to the reasonable cost of services. ``(iii) For purposes of clause (i), the `threshold amount' is an amount determined by the Secretary from time to time, adjusted by the geographic factor utilized in determining payments to the organization under subparagraph (C) and rounded to the nearest multiple of $100, such that the total amount to be paid under this subparagraph for a year is estimated to be 5 percent or less of the total amount to be paid under risk-sharing contracts for services furnished for that year. ``(iv) An eligible organization shall submit a claim for additional payments under subsection (i) within such time as the Secretary may specify. ``(v) To the extent that total payments under clause (i) in a year ``(I) exceed the payment set aside as a result of the reduction under subparagraph (C) for the year, the Secretary shall increase the percentage reduction under such subparagraph for the following year by such percentage as will result in an increase in the reduction equal to such excess in previous payments, or ``(II) are less than the payment set aside as a result of the reduction under subparagraph (C) for the year, the amount of such difference shall remain available in the succeeding years for additional payments under this subparagraph and the Secretary may take such difference into account in establishing the percentage reduction under subparagraph (C) for the following year.''. (b) Conforming Amendment.Section 1876(a)(1)(C)(i) (42 U.S.C. 1395mm(a)(1)(C)(i)), as amended by section 4132(a), is further amended by inserting ``,20and reduced by a uniform percentage (determined by the Secretary for a year, subject to adjustment under subparagraph (G)(v)) so that the total reduction is estimated to equal the amount to be paid under subparagraph (G)'' before the period. (c) Effective Date.The amendments made by the preceding subsections apply to services furnished after 1994. Section 4014 POINT OF SERVICE OPTION. (a) Point of Service Contracts.Part C of title XVIII is amended by inserting after section 1889 the following: ``point of service option ``Sec. 1890. (a) Establishment of Program.Not later than July 1, 1995, the Secretary shall promulgate regulations establishing a point-of-service program under which individuals entitled to benefits under this title (other than individuals enrolled with an eligible organization with a risk-sharing contract under section 1876(g)) may obtain such benefits through providers and suppliers who are members of a point-of-service network established by the Secretary in accordance with the criteria described in subsection (b). ``(b) Criteria for Networks.In establishing criteria for point-of-service networks under the program under this section, the Secretary shall ``(1) designate an appropriate geographic service area for each such network to ensure that each network has a sufficient number of participating members to provide items and services under this title to beneficiaries, except that no such service area may be served by more than one such network; ``(2) establish requirements for participating members; ``(3) establish a schedule of payments for services furnished by networks, including a schedule of bundled payment arrangements for selected medical and surgical procedures; ``(4) delineate permissible incentives to encourage physicians and other suppliers to join the network, and to encourage individuals to receive services under this title through the network; ``(5) specify the rules under which carriers under section 1842 may administer the program; ``(6) establish procedures to used for the provision of case management services and criteria for determining whether (and under which circumstances) services which would otherwise not be covered under this title would be covered by the network under such case management; ``(7) establish standards for the processing and payment of claims for payment for services furnished by the network, including standards for the apportionment of payments among the Trust Funds established under this title; ``(8) establish standards for the selection of physicians for the network based on practice patterns and a demonstration of effective quality assurance; ``(9) develop standards to ensure that the point-of-service option does not result in a net financial loss to the medicare program under this title after the implementation of the option in an area, taking into account administrative costs, the costs of services (which would otherwise not be covered under this title) provided to beneficiaries under case management, and the costs of incentives for physicians, other providers, and beneficiaries; and ``(10) apply such other criteria as the Secretary considers appropriate. ``(c) Bonus Payments Permitted. ``(1) In general.Notwithstanding any other provision of this title, the Secretary may increase the amount of payment otherwise provided under this title for items and services furnished by individuals who are members of a point-of-service network under this section by a bonus payment (in such amount as the Secretary may determine). ``(2) Criteria for receiving payment.The Secretary may make a bonus payment under this subsection to members of a point-of-service network if the Secretary determines that the members of the network have reduced the costs to the medicare program of the items and services furnished by the network without adversely affecting the quality of care provided to beneficiaries.''. (b) Conforming Amendments. (1) Section 1812(a) (42 U.S.C. 1395d(a)) is amended (A) by striking ``and'' at the end of paragraph (3), (B) by substituting ``; and'' for the period at the end of paragraph (4), and (C) by adding at the end the following: ``(5) such additional items and services furnished by a provider of services to an individual subject to case management as may be specified under a point-of-service network arrangement under section 1890.''. (2) (A) Section 1814(b) (42 U.S.C. 1395f(b)) is amended (i) in paragraph (1), by inserting ``or (4)'' after ``paragraph (3)'', (ii) by striking ``or'' at the end of paragraph (2), (iii) by substituting ``; and'' for the period at the end of paragraph (3), and (iv) by inserting after paragraph (3) the following: ``(4) in the case of items and services furnished through a point of service network (as described in section 1890), the payment basis specified under the arrangement established for such network, plus any bonus payments as determined under subsection (c) of that section.''. (B) The matter in section 1886(d)(1)(A) (42 U.S.C. 1395ww(d)(1)(A)) preceding clause (i) is amended by inserting ``(other than paragraph (4))'' after ``1814(b)''. (3) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended (A) by striking ``and'' at the end of subparagraph (I), (B) by substituting ``; and'' for the period at the end of subparagraph (J), and (C) by adding at the end the following: ``(K) such additional items and services (other than inpatient services furnished by providers of services) as may be specified under a point-of-service network arrangement under section 1890.''. (4) Section 1833 (42 U.S.C. 1395l), as amended by section 4032, is amended by adding at the end the following new subsection: ``(u) In the case of items and services furnished through a point of service network (as described in section 1890), there shall be paid (subject to subsection (b)) amounts equal to 80 percent of the payment basis specified in an agreement entered into pursuant to that section, plus any bonus payments as determined under subsection (c) of that section.''. (5) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by sections 4034(b)(4), 4118(b), and 2003(b), is further amended (A) in paragraph (7), by striking ``or under paragraph (1)(F)'' and inserting ``, under paragraph (1)(F), or under a contract under section 1890'', (B) by striking ``or'' at the end of paragraph (16), (C) by striking the period at the end of paragraph (17) and inserting ``; or'', and (D) by inserting after paragraph (17) the following new paragraph: ``(18) which are furnished to an individual and related to a health condition with respect to which the individual is subject to case management through a point-of-service network under section 1890 but which are not included in the plan of care developed for such individual and agreed to by the individual and the case manager.''. (c) Effective Date.The amendments made by this subsection shall take effect January 1, 1996. Part 3 MEDICARE COVERAGE EXPANSIONS Section 4021 REFERENCE TO COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS. For provisions adding a new outpatient prescription drug benefit to the medicare program, see subtitle A of title II. Section 4022 EXPANDED COVERAGE FOR PHYSICIAN ASSISTANTS, NURSE PRACTITIONERS, AND CLINICAL NURSE SPECIALISTS. (a) Physician Assistants.Section 1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)) is amended by striking ``(I) in a hospital'' and all that follows through ``shortage area''. (b) Nurse Practitioners and Clinical Nurse Specialists.Section 1861(s)(2)(K)(iii) (42 U.S.C. 1395x(s)(2)(K)(iii)) is amended (1) by inserting ``(I)'' before ``in a rural area'', and (2) by inserting ``, (II) in any other area, in the case of services furnished by nurse practitioners other than services furnished to an inpatient of a hospital, or (III) in any other area, in the case of services furnished by clinical nurse specialists other than services furnished to an inpatient of a hospital, skilled nursing facility or nursing facility (as defined in section 1919(a)), and'' after ``section 1886(d)(2)(D))''. (c) Conforming Amendments.(1) Section 1832(a)(2)(B)(iv) (42 U.S.C. 1395k(a)(2)(B)(iv)) is amended by striking ``provided in a rural area (as defined in section 1886(d)(2)(D))'' and inserting ``described in section 1861(s)(2)(K)(iii)''. (2) Section 1833(a)(1)(O) (42 U.S.C. 1395l(a)(1)(O)) is amended by striking ``provided in a rural area''. (3) Section 1833(r)(1) (42 U.S.C. 1395l(r)(1)) is amended by striking ``provided in a rural area''. (d) Effective Date.The amendments made by this section shall apply to services furnished on or after January 1, 1996. Part 4 COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND QUALITY MANAGEMENT INITIATIVES Section 4031 REPEAL OF SEPARATE MEDICARE PEER REVIEW PROGRAM. Part B of title XI of the Social Security Act (42 U.S.C. 1301 et seq.) is amended by adding at the end the following new section: ``termination ``Sec. 1165. The provisions of this part shall terminate effective upon the adoption of the National Quality Management Program under subtitle A of title V of the Health Security Act. Any reference to this part or any section in this part shall not be effective after such date.''. Section 4032 MANDATORY ASSIGNMENT FOR ALL PART B SERVICES. Section 1833 (42 U.S.C. 1395l) is amended (1) by redesignating the subsection (r) added by section 4206(b)(2) of OBRA091990 as subsection (s); and (2) by adding at the end the following new subsection: ``(t)(1) Notwithstanding any other provision of this part, payment under this part for any item or service furnished on or after January 1, 1996, may only be made on an assignment-related basis. ``(2) Except for deductible, coinsurance, or copayment amounts applicable under this part, no physician, supplier, or other person may bill or collect any amount from an individual enrolled under this part or other person for an item or service for which payment may be made under this part. No such individual or person is liable for payment of any amounts billed in violation of the previous sentence. ``(3) If a physician, supplier, or other person knowingly and willfully bills or collects an amount in violation of paragraph (2), the Secretary may apply sanctions against such physician, supplier, or other person in accordance with section 1842(j)(2). Paragraph (4) of section 1842(j) shall apply in this paragraph in the same manner as such paragraph applies to such section.''. Section 4033 ELIMINATION OF COMPLEXITIES CAUSED BY DUAL FUNDING SOURCES AND RULES FOR PAYMENT OF CLAIMS. (a) In General.The Secretary of Health and Human Services shall take such steps as may be necessary to consolidate the administration (including processing systems) of parts A and B of the medicare program (under title XVIII of the Social Security Act). (b) Combination of Intermediary and Carrier Functions.In taking such steps, the Secretary shall contract with a single entity that combines the fiscal intermediary and carrier functions in each area except where the Secretary finds that special regional or national contracts are appropriate. (c) Superseding Conflicting Requirements.The provisions of sections 1816 and 1842 of the Social Security Act (including provider nominating provisions in such section 1816) are superseded to the extent required to carry out this section. Section 4034 REPEAL OF PRO PRECERTIFICATION REQUIREMENT FOR CERTAIN SURGICAL PROCEDURES. (a) In General.Section 1164 (42 U.S.C. 1320c0913) is repealed. (b) Conforming Amendments. (1) Section 1154 (42 U.S.C. 1320c093) is amended (A) in subsection (a), by striking paragraph (12), and (B) in subsection (d), by striking ``(and except as provided in section 1164)''. (2) Section 1833 (42 U.S.C. 1395l) is amended (A) in subsection (a)(1)(D)(i), by striking ``, or for tests furnished in connection with obtaining a second opinion required under section 1164(c)(2) (or a third opinion, if the second opinion was in disagreement with the first opinion)''; (B) in subsection (a)(1), by striking clause (G); (C) in subsection (a)(2)(A), by striking ``, to items and services (other than clinical diagnostic laboratory tests) furnished in connection with obtaining a second opinion required under section 1164(c)(2) (or a third opinion, if the second opinion was in disagreement with the first opinion),''; (D) in subsection (a)(2)(D)(i) (i) by striking ``basis,'' and inserting ``basis or'', and (ii) by striking ``, or for tests furnished in connection with obtaining a second opinion required under section 1164(c)(2) (or a third opinion, if the second opinion was in disagreement with the first opinion)''; (E) in subsection (a)(3), by striking ``and for items and services furnished in connection with obtaining a second opinion required under section 1164(c)(2), or a third opinion, if the second opinion was in disagreement with the first opinion)''; and (F) in the first sentence of subsection (b), by striking ``(4)'' and all that follows through ``and (5)'' and inserting and ``(4)''. (3) Section 1834(g)(1)(B) (42 U.S.C. 1395m(g)(1)(B)) is amended by striking ``and for items and services furnished in connection with obtaining a second opinion required under section 1164(c)(2), or a third opinion, if the second opinion was in disagreement with the first opinion)''. (4) Section 1862(a) (42 U.S.C. 1395y(a)) is amended (A) by adding ``or'' at the end of paragraph (14), (B) by striking ``; or'' at the end of paragraph (15) and inserting a period, and (C) by striking paragraph (16). (5) The third sentence of section 1866(a)(2)(A) (42 U.S.C. 1395w(a)(2)(A)) is amended by striking ``, with respect to items and services furnished in connection with obtaining a second opinion required under section 1164(c)(2) (or a third opinion, if the second opinion was in disagreement with the first opinion),''. (c) Effective Date.The amendments made by this section shall apply to services provided on or after the date of the enactment of this Act. Section 4035 REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES. (a) Limitation on Frequency of System Changes.The Secretary of Health and Human Services may not implement any change in the system used for the billing and processing of claims for payment for items and services furnished under title XVIII of the Social Security Act within 6 months of implementing any previous change in such system. (b) Advance Notification to Providers as Requirement for Carriers and Fiscal Intermediaries. (1) Fiscal intermediaries.Section 1816(c) (42 U.S.C. 1395h(c)) is amended by adding at the end the following new paragraph: ``(4) Each agreement with an agency or organization under this section shall provide that the agency or organization shall notify providers of services of any major change in the procedures for billing for services furnished under this part at least 120 days before such change is to take effect.''. (2) Carriers.Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended (A) by striking ``and'' at the end of subparagraph (G) and the end of subparagraph (H); and (B) by inserting after subparagraph (H) the following new subparagraph: ``(I) will notify individuals and entities furnishing items and services for which payment may be made under this part of any major change in the procedures for billing for such items and services at least 120 days before such change is to take effect; and''. (3) Effective date.The amendments made by paragraphs (1) and (2) shall apply to agreements with fiscal intermediaries under section 1816 of the Social Security Act and to contracts with carriers under section 1842 of such Act for years beginning after the expiration of the 9-month period beginning on the date of the enactment of this Act. Part 5 AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS Section 4041 ANTI-KICKBACK PROVISIONS. (a) Revision to Penalties. (1) Permitting secretary to impose civil monetary penalty.Section 1128A(a) (42 U.S.C. 1320a097a(a)) is amended (A) by striking ``or'' at the end of paragraphs (1) and (2); (B) by striking the semicolon at the end of paragraph (3) and inserting ``; or''; and (C) by inserting after paragraph (3) the following new paragraph: ``(4) carries out any activity in violation of paragraph (1) or (2) of section 1128B(b);''. (2) Description of civil monetary penalty applicable.Section 1128A(a) (42 U.S.C. 1320a097a(a)) is amended (A) by striking ``given).'' at the end of the first sentence and inserting the following: ``given or, in cases under paragraph (4), $50,000 for each such violation).''; and (B) by striking ``claim.'' at the end of the second sentence and inserting the following: ``claim (or, in cases under paragraph (4), damages of not more than three times the total amount of remuneration offered, paid, solicited, or received, without regard to whether a portion of such remuneration was offered, paid, solicited, or received for a lawful purpose).''. (3) Increase in criminal penalty.Paragraphs (1) and (2) of section 1128B(b) (42 U.S.C. 1320a097b(b)) are each amended (A) by striking ``$25,000'' and inserting ``$50,000''; and (B) by striking the period at the end and inserting the following: ``, and shall be subject to damages of not more than three times the total remuneration offered, paid, solicited, or received, without regard to whether a portion of such remuneration was offered, paid, solicited, or received for a lawful purpose.''. (b) Revisions to Exceptions. (1) Exception for discounts.Section 1128B(b)(3)(A) (42 U.S.C. 1320a097b(b)(3)(A)) is amended by striking ``program;'' and inserting ``program and is not ``(i) for the furnishing of one item or service without charge or at a reduced charge in exchange for any agreement to buy a different item or service; ``(ii) applicable to one payor but not to providers of services or other entities under title XVIII or a State health care program; or ``(iii) in the form of a cash payment;''. (2) Exception for payments to employees.Section 1128B(b)(3)(B) (42 U.S.C. 1320a097b(b)(3)(B)) is amended by inserting at the end ``if the amount of remuneration under the arrangement is consistent with the fair market value of the services and is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals, except that such employee can be paid remuneration in the form of a productivity bonus based on services personally performed by the employee.''. (3) Exception for waiver of coinsurance by certain providers.Section 1128B(b)(3)(D) (42 U.S.C. 1320a097b(b)(3)(D)) is amended to read as follows: ``(D) a waiver or reduction of any coinsurance or other copayment if the waiver or reduction is made pursuant to a public schedule of discounts which the person is obligated as a matter of law to apply to certain individuals.''. (4) New exception for certain providers.Section 1128B(b)(3) (42 U.S.C. 1320a097b(b)(3)) is amended (A) by striking ``and'' at the end of subparagraph (D); (B) by striking the period at the end of subparagraph (E) and inserting ``; and''; and (C) by adding at the end the following new subparagraph: ``(F) any remuneration obtained by or given to an individual or entity who receives assistance under a grant or cooperative agreement for the provision of health care services under title V, title XX, or the Public Health Service Act, or is obligated as a matter of law to provide services according to a schedule which provides for discounts based on the ability of the individual services to pay, if ``(i) in the case of an individual or entity who receives assistance under a grant or cooperative agreement for the provision of health care services under title V, title XX, or the Public Health Service Act, the remuneration is directly and primarily related to the activity supported by the grant or cooperative agreement; and ``(ii) the remuneration is pursuant to a written arrangement for the use or procurement of space, equipment, goods, or services for the referral of patients that ``(I) does not result in private inurement to any current employee, officer, member of the Board of Directors, or agent of the recipient or any other person involved in recommending or negotiating the arrangement; and ``(II) does not preclude the referral of patients to other providers of service of the patient's own choosing and does not interfere with the ability of health professionals to refer patients to providers of services they believe are the most appropriate, except to the extent such choices or referrals are limited by the terms of a health plan in which the patient has enrolled or the terms of a grant or cooperative agreement described in clause (i).''. (5) New exception for capitated payments.Section 1128B(b)(3) (42 U.S.C. 1320a097b(b)(3)), as amended by paragraph (4), is further amended (A) by striking ``and'' at the end of subparagraph (E); (B) by striking the period at the end of subparagraph (F) and inserting ``; and''; and (C) by adding at the end the following new subparagraph ``(G) any reduction in cost sharing or increased benefits given to an individual, any amounts paid to a provider of services for items or services furnished to an individual, or any discount or reduction in price given by the provider for such items or services, if the individual is enrolled with and such items and services are covered under any of the following: ``(i) A health plan which is furnishing items or services under title XVIII or a State health care program to individuals on an at-risk, prepaid, capitated basis pursuant to a written agreement with the Secretary or a State health care program. ``(ii) An organization receiving payments on a prepaid basis, under a demonstration project under section 402(a) of the Social Security Amendments of 1967 or under section 222(a) of the Social Security Amendments of 1972. ``(iii) Any other plan or insurer under which each participating provider is paid wholly on an at-risk, prepaid, capitated basis for such items or services pursuant to a written arrangement between the plan and the provider.''. (c) Clarification of Coverage of Employers and Employees.Section 1128B(b) (42 U.S.C. 1320a097b(b)), as amended by subsection (a)(4), is further amended by adding at the end the following new paragraph: ``(5) In this subsection, the term `referral' includes the referral by an employee to his or her employer of any item or service for which payment may be made in whole or in part under title XVIII or a State health care program.'' (d) Authorization for the Secretary To Issue Regulations.Section 1128B(b) (42 U.S.C. 1320a097b(b)), as amended by subsections (a)(4) and (c), is further amended by adding at the end the following new paragraph: ``(6) The Secretary is authorized to impose by regulation such other requirements as needed to protect against program or patient abuse with respect to any of the exceptions described in paragraph (3).''. (e) Clarification of Other Elements of Offense.Section 1128B(b) (42 U.S.C. 1320a097b(b)) is amended (1) in paragraph (1) in the matter preceding subparagraph (A), by striking ``kind'' and inserting ``kind with intent to be influenced''; (2) in paragraph (1)(A), by striking ``in return for referring'' and inserting ``to refer''; (3) in paragraph (1)(B), by striking ``in return for purchasing, leasing, ordering, or arranging for or recommending'' and inserting ``to purchase, lease, order, or arrange for or recommend''; (4) in paragraph (2) in the matter preceding subparagraph (A), by striking ``to induce such person'' and inserting ``with intent to influence such person''; and (5) by adding at the end of paragraphs (1) and (2) the following sentence: ``A violation exists under this paragraph if one or more purposes of the remuneration is unlawful under this paragraph.''. Section 4042 REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRAL. (a) Clarification of Payment Ban.Section 1877(a)(1)(B) (42 U.S.C. 1395nn(a)(1)(B)) is amended to read as follows: ``(B) no physician or entity may present or cause to be presented a claim under this title or bill to any third party payor or other entity for designated health services furnished pursuant to a referral prohibited under subparagraph (A).''. (b) Clarification of Coverage of Holding Company Type Arrangements and Loans.The last sentence of section 1877(a)(2) (42 U.S.C. 1395nn(a)(2)) is amended by striking ``an interest in an entity that holds an ownership or investment interest in any entity providing the designated health service'' and inserting the following: ``a loan from the entity, and an interest held indirectly through means such as (but not limited to) having a family member hold such investment interest or holding a legal or beneficial interest in another entity (such as a trust or holding company) that holds such investment interest''. (c) Revisions to General Exceptions to Both Ownership and Compensation Arrangement Prohibitions. (1) Repeal of exception for physicians' services.Section 1877(b) (42 U.S.C. 1395nn(b)) is amended (A) by striking paragraph (1); and (B) by redesignating paragraphs (2) and (3) as paragraphs (1) and (2). (2) Revision to in-office ancillary services exception.Section 1877(b)(1) (42 U.S.C. 1395nn(b)(1)), as redesignated by paragraph (1), is amended (A) in the matter preceding subparagraph (A), by striking ``services (other than durable medical equipment (excluding infusion pumps) and parenteral and enteral nutrients, equipment, and supplies)'' and inserting ``clinical laboratory services, x-ray and ultrasound services that are provided at low-cost (as determined in accordance with regulations of the Secretary)''; and (B) in subparagraph (A) (i) in clause (ii)(I), by striking ``(or another physician who is a member of the same group practice)'', (ii) in clause (ii)(II) by inserting ``the same or'' before ``another building'', and (iii) in clause (ii)(II)(bb), by inserting ``all of'' after ``centralized provision of''. (3) Revision to prepaid plan exception.Section 1877(b)(2), (42 U.S.C. 1395nn(b)(2)), as redesignated by paragraph (1), is amended to read as follows: ``(2) Prepaid plans.In the case of designated health services furnished by an organization ``(A) with a risk sharing contract under section 1876(g) to an individual enrolled with the organization, ``(B) receiving payments on a prepaid basis, under a demonstration project under section 402(a) of the Social Security Amendments of 1967 or under section 222(a) of the Social Security Amendments of 1972, to an individual enrolled with the organization, or ``(C) that is a qualified health maintenance organization (within the meaning of section 1310(d) of the Public Health Service Act) to an individual enrolled with the organization.''. (4) New exception for capitated payments.Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by paragraph (1), is amended by inserting after paragraph (2) the following new paragraph: ``(3) Other capitated payments.In the case of a designated health service, if the designated health service is included in the services for which a physician or physician group is paid wholly on an at-risk, prepaid, capitated basis by a health plan or insurer pursuant to a written arrangement between the plan or insurer and the physician or physician group.''. (d) Revision to Publicly Traded Securities Exception.Section 1877(c)(1) (42 U.S.C. 1395nn(c)(1)) is amended by inserting ``at the time acquired by the physician'' after ``which may be purchased on terms generally available to the public''. (e) Revision to Rural Provider Exception.Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is amended by striking ``substantially all'' and inserting ``not less than 85 percent (as determined in accordance with regulations of the Secretary)''. (f) Revisions to Exceptions Relating to Other Compensation Arrangements. (1) Exception for personal services arrangements.(A) Section 1877(e)(3)(B)(i)(II) (42 U.S.C. 1395nn(e)(3)(B)(i)(II)) is amended to read as follows: ``(II) If the plan places a physician or physician group at substantial financial risk (as determined by the Secretary pursuant to section 1876(i)(8)(A)(ii)), for services not provided by the physician, the entity complies with the provisions of subclauses (I) and (II) of section 1876(i)(8)(A)(ii).''; (B) Section 1877(e)(3)(B)(ii), 42 U.S.C. 1395nn(e)(3)(B)(ii) is amended by striking ``may directly or indirectly have the effect of'' and inserting ``has the purpose of''. (2) Repeal of exception for remuneration unrelated to the provision of designated health services.Section 1877(e) (42 U.S.C. 1395nn(e)) is amended (A) by striking paragraph (4); and (B) by redesignating paragraphs (5), (6), (7), and (8) as paragraphs (4), (5), (6), and (7). (3) Exception for certain physician recruitment.Section 1877(e)(4) (42 U.S.C. 1395nn(e)(4)), as redesignated by paragraph (2), is amended to read as follows: ``(4) Physician recruitment.In the case of remuneration which is provided by an entity located in a rural area (as defined in section 1886(d)(2)(D)) or a health professional shortage areas (designated under section 332 of the Public Health Service Act), or an entity for which 85 percent of the patients are members of a medically underserved population designated under section 330 of the Public Health Service Act (as determined in accordance with regulations of the Secretary), in order to induce a physician who has been practicing within the physician's current specialty for less than one year to establish staff privileges at the entity, or to induce any other physician to relocate his or her primary place of practice to the geographic area served by the entity, if the following standards are met: ``(A) The arrangement is set forth in a written agreement that specifies the benefits provided by the entity to the physician, the terms under which the benefits are to be provided, and the obligations of each party. ``(B) If a physician is leaving an established practice, the physical location of the new primary place of practice must be not less than 100 miles from the location of the established primary place of practice and at least 85 percent of the revenues of the physician's new practice must be generated from new patients for whom the physician did not previously provide services at the former practice. ``(C) The benefits are provided by the entity for a period not in excess of 3 years, and the terms of the agreement are not renegotiated during this 3-year period in any substantial aspect, unless the physician's new primary place of practice is designated as a health professional shortage area (pursuant to section 332 of the Public Health Service Act) for the physician's specialty category during the entire duration of the relationship between the physician and the entity. ``(D) There is no requirement that the physician make referrals to, be in a position to make or influence referrals to, or otherwise generate business for the entity as a condition for receiving the benefits. ``(E) The physician is not restricted from establishing staff privileges at, referring any service to, or otherwise generating any business for any other entity of the physician's choosing. ``(F) The amount or value of the benefits provided by the entity may not vary (or be adjusted or renegotiated) in any manner based on the volume or value of any expected referrals to or business otherwise generated for the entity by the physician for which payment may be made in whole or in part under this title or a State health care program (as defined in section 1128(h)). ``(G) The physician agrees to treat patients entitled to benefits under this title or enrolled in a State plan for medical assistance under title XIX.''. (4) Exception for isolated transactions.Section 1877(e)(5) (42 U.S.C. 1395nn(e)(6)), as redesignated by paragraph (2), is amended (A) by redesignating subparagraph (B) as subparagraph (C); (B) by striking ``and'' at the end of subparagraph (A); and (C) by inserting after subparagraph (A) the following new subparagraph: ``(B) there is no financing of the sale between the parties, and''. (5) Exception for payments by a physician.Section 1877(e)(7) (42 U.S.C. 1395nn(e)(7)), as redesignated by paragraph (2), is amended to read as follows: ``(7) Payments by a physician for items and services.Payments made by a physician to an individual or entity as compensation for items or services if the items or services are furnished at a price that is consistent with fair market value.''. (6) Additional exception for discounts or other reductions in price.Section 1877(e) (42 U.S.C. 1395nn(e)), as amended by paragraph (2), is amended by adding at the end the following new paragraph: ``(8) Discounts or other reductions in price.Discounts or other reductions in price between a physician and an entity for items or services for which payment may be made under this title so long as the discount or other reduction in price is properly disclosed and appropriately reflected in the costs claimed or charges made by the physician or entity under this title and is not ``(A) for the furnishing of one item or service without charge or at a reduced charge in exchange for any agreement to buy a different item or service, ``(B) applicable to one or more payers but not to all individuals and entities providing services for which payment may be made under this title, or ``(C) in the form of a cash payment.''. (g) Clarification of Sanction Authority.Section 1877(g)(4) (42 U.S.C. 1395nn(g)(4)) is amended by striking ``Any physician'' and all that follows through ``to such entity,'' and inserting the following: ``Any physician or other entity that enters into an arrangement or scheme (such as a cross-referral arrangement or an arrangement with multiple leases overlapping in time for the same or similar rental space or equipment) which the physician or entity knows or should know has a principal purpose of inducing referrals to another entity, which referrals, if made directly by the physician or entity to such other entity,''. (h) Clarification of Definition of Remuneration.Section 1877(h)(1)(B) (42 U.S.C. 1395nn(h)(1)(B)) is amended to read as follows: ``(B) The term `remuneration' includes any payment, discount or other reduction in price, forgiveness of debt or other benefit made directly or indirectly, overtly or covertly, in cash or in kind.''. (i) Revision to Definition of Group Practice.Section 1877(h)(4) (42 U.S.C. 1395nn(h)(4)) is amended (1) in subparagraph (A)(vi), by striking the period at the end and inserting the following: ``, including a requirement for the physical grouping of physician practices as may be reasonably required to prevent the abuse of any exceptions provided to group practices under this section.''; and (2) in subparagraph (B)(i), by striking ``or services incident to such personally performed services''. (j) Expansion to Cover Additional Items and Services.Section 1877(h)(6) (42 U.S.C. 1395nn(h)(6)), as amended by section 2005(c)(3), is amended (1) in subparagraph (D), by striking ``or other''; and (2) by adding at the end the following new subparagraphs: ``(M) Diagnostic services. ``(N) Any other item or service not rendered by the physician personally or by a person under the physician's direct supervision.''. (k) Authorization for the Secretary to Issue Regulations.Section 1877 (42 U.S.C. 1395nn) is amended by adding the following new subsection: ``(i) Additional Requirements.The Secretary is authorized to impose by regulation such other requirements as needed to protect against program or patient abuse with respect to any of the exceptions under this section.''. (l) Incorporation of Amendments Made Under OBRA091993.In this section, any reference to section 1877 of the Social Security Act shall be considered a reference to such section as amended by section 13562(a) of OBRA091993. Section 4043 CIVIL MONETARY PENALTIES. (a) Prohibition Against Offering Inducements to Individuals Enrolled Under Plans. (1) Offer of remuneration.Section 1128A(a) (42 U.S.C. 1320a097a(a)) (as amended by section 4041(a)(1)) is amended (A) by striking ``; or'' at the end of paragraph (3) and inserting a semicolon; (B) by striking the semicolon at the end of paragraph (4) and inserting ``; or''; and (C) by inserting after paragraph (4) the following new paragraph: ``(5) offers, pays, or transfers remuneration to any individual eligible for benefits under title XVIII of this Act, or under a State health care program (as defined in section 1128(h)) that such person knows or should know is likely to influence such individual to order or receive from a particular provider, practitioner, or supplier any item or service for which payment may be made, in whole or in part, under title XVIII, or a State health care program;''. (2) Remuneration defined.Section 1128A(i) (42 U.S.C. 1320a097a(i)) is amended by adding at the end the following new paragraph: ``(6) The term `remuneration' includes the waiver of coinsurance and deductible amounts (or any part thereof), and transfers of items or services for free or for other than fair market value, except that such term does not include the waiver of coinsurance or deductible amounts by a person or entity, if ``(A) the waiver is not offered as part of any advertisement or solicitation; ``(B) the person does not routinely waive coinsurance or deductible amounts; and ``(C) the person ``(i) waives the coinsurance and deductible amounts after determining in good faith that the individual is indigent; ``(ii) fails to collect coinsurance or deductible amounts after making reasonable collection efforts; or ``(iii) provides for any permissible waiver as specified in section 1128B(b)(3) or in regulations issued by the Secretary.''. (b) Claim for Item or Service Based on Incorrect Coding or Medically Unnecessary Services.Section 1128A(a)(1) (42 U.S.C. 1320a097a(a)(1)) is amended (1) in subparagraph (A), by striking ``claimed,'' and inserting the following: ``claimed, including any person who presents or causes to be presented a claim for an item or service which includes a procedure or diagnosis code that the person knows or should know will result in a greater payment to the person than the code applicable to the item or service actually provided or actual patient medical condition,''; (2) in subparagraph (C), by striking ``or'' at the end; (3) in subparagraph (D), by striking ``; or'' and inserting ``, or''; and (4) by inserting after subparagraph (D) the following new subparagraph: ``(E) is for a medical or other item or service that a person knows or should know is not medically necessary; or''. (c) Excluded Individual Retaining Ownership or Control Interest in Participating Entity.Section 1128A(a) of such Act, as amended by section 4041(a)(1) and subsection (a)(1), is further amended (1) by striking ``or'' at the end of paragraph (4); (2) by striking the semicolon at the end of paragraph (5) and inserting ``; or''; and (3) by inserting after paragraph (5) the following new paragraph: ``(6) in the case of a person who is not an organization, agency, or other entity, who is excluded from participating in a program under title XVIII or a State health care program in accordance with this section, section 1128, or section 1156 and who, during the period of exclusion, retains either a direct or indirect ownership or control interest of 5 percent or more in, or an ownership or control interest (as defined in section 1124(a)(3)) in, or who is an officer, director, agent, or managing employee (as defined in section 1126(b)) of, an entity that is participating in a program under title XVIII or a State health care program;''. (d) Additional Offenses Relating to Alliance System.Section 1128A(a) of such Act, as amended by section 4041(a)(1) and subsections (a)(1) and (c), is further amended (1) by striking ``or'' at the end of paragraph (5); (2) by striking the semicolon at the end of paragraph (6) and inserting ``; or''; and (3) by inserting after paragraph (6) the following new paragraphs: ``(7) engages in a practice that circumvents a payment methodology intended to reimburse for two or more discreet medical items or services at a single or fixed amount, including but not limited to, multiple admissions or readmission to hospitals and other institutions reimbursed on a diagnosis reimbursement grouping basis; ``(8) engages in a practice which has the effect of limiting or discouraging (as compared to other plan enrollees) the utilization of health care services covered by law or under the service contract by title XIX or other publicly subsidized patients, including but not limited to differential standards for the location and hours of service offered by providers participating in the plan; ``(9) substantially fails to cooperate with a quality assurance program or a utilization review activity; ``(10) fails substantially to provide or authorize medically necessary items and services that are required to be provided to an individual covered under a health plan under the Health Security Act or public program for the delivery of or payment for health care items or services, if the failure has adversely affected (or had a substantial likelihood of adversely affecting) the individual; ``(11) employs or contracts with any individual or entity who is excluded from participating in a program under title XVIII or a State health care program in accordance with this section, section 1128, or section 1156, for the provision of any services (including but not limited to health care, utilization review, medical social work, or administrative), or employs or contracts with any entity for the direct or indirect provision of such services, through such an excluded individual or entity; or ``(12) submits false or fraudulent statements, data or information or claims to the National Health Board established under part 1 of subtitle F of title I of the Health Security Act, any other Federal agency, a State health care agency, a health alliance (under subtitle D of title I of such Act), or any other Federal, State or local agency charged with implementation or oversight of a health plan under such Act or a public program that the person knows or should know is fraudulent;''. (e) Modifications of Amounts of Penalties and Assessments.Section 1128A(a) (42 U.S.C. 1320a097a(a)), as amended by section 4041(a), subsection (a)(1), subsection (c), and subsection (d), is amended in the matter following paragraph (12) (1) by striking ``$2,000'' and inserting ``$10,000''; (2) by inserting after ``under paragraph (4), $50,000 for each such violation'' the following: ``; in cases under paragraph (5), $10,000 for each such offer, payment, or transfer; in cases under paragraph (6), $10,000 for each day the prohibited relationship occurs; in cases under paragraphs (7) through (12), an amount not to exceed $50,000 for each such determination by the Secretary''; and (3) by striking ``twice the amount'' and inserting ``three times the amount''. (f) Interest on Penalties.Section 1128A(f) (42 U.S.C. 1320a097a(f)) is amended by adding after the first sentence the following: ``Interest shall accrue on the penalties and assessments imposed by a final determination of the Secretary in accordance with an annual rate established by the Secretary under the Federal Claims Collection Act. The rate of interest charged shall be the rate in effect on the date the determination becomes final and shall remain fixed at that rate until the entire amount due is paid. In addition, the Secretary is authorized to recover the costs of collection in any case where the penalties and assessments are not paid within 30 days after the determination becomes final, or in the case of a compromised amount, where payments are more than 90 days past due. In lieu of actual costs, the Secretary is authorized to impose a charge of up to 10 percent of the amount of penalties and assessments owed to cover the costs of collection.''. (g) Authorization To Act. (1) In general.The first sentence of section 1128A(c)(1) (42 U.S.C. 1320a097a(c)(1)) is amended by striking all that follows ``(b)'' and inserting the following: ``unless, within one year after the date the Secretary presents a case to the Attorney General for consideration, the Attorney General brings an action in a district court of the United States.''. (2) Effective date.The amendment made by this paragraph (1) shall apply to cases presented by the Secretary of Health and Human Services for consideration on or after the date of the enactment of this Act. (h) Deposit of Penalties Collected into All-Payer Account.Section 1128A(f)(3) (42 U.S.C. 1320a097a(f)(3)) is amended by striking ``as miscellaneous receipts of the Treasury of the United States'' and inserting ``in the All-Payer Health Care Fraud and Abuse Control Account established under section 5402 of the Health Security Act''. (i) Clarification of Penalty Imposed on Excluded Provider Furnishing Services.Section 1128A(a)(1)(D) (42 U.S.C. 1320a097a(a)(1)(D)) is amended by inserting ``who furnished the service'' after ``in which the person''. Section 4044 EXCLUSIONS FROM PROGRAM PARTICIPATION. (a) Mandatory Exclusion for Individual Convicted of Criminal Offense Related to Health Care Fraud.Section 1128 (42 U.S.C. 1320a097) is amended (1) by amending paragraph (1) of subsection (a) to read as follows: ``(1) Convictions of program-related crimes and health care fraud. ``(A) Any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under title XVIII or under any State health care program; or ``(B) Any individual or entity that has been convicted, under Federal or State law, in connection with the delivery of a health care item or service of a criminal offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.''; and (2) in subsection (b)(1), by striking ``in connection with the delivery of a health care item or service or''. (b) Establishment of Minimum Period of Exclusion for Certain Individuals and Entities Subject to Permissive Exclusion From Medicare and State Health Care Programs.Section 1128(c)(3) (42 U.S.C. 1320a097(c)(3)) is amended by adding at the end the following new subparagraphs: ``(D) In the case of an exclusion of an individual or entity under paragraphs (1), (2), or (3) of subsection (b), the period of exclusion shall be a minimum of 3 years, unless the Secretary determines that a longer period is appropriate because of aggravating circumstances. ``(E) In the case of an exclusion of an individual or entity under paragraph (4) or (5) of subsection (b), the period of the exclusion shall not be less than the period during which the individual's or entity's license to provide health care is revoked, suspended, or surrendered, or the individual or the entity is excluded or suspended from a Federal or State health care program. ``(F) In the case of an exclusion of an individual or entity under subsection (b)(6)(B), the period of the exclusion shall be not less than 1 year.''. (c) Revision to Exclusion for Default on Health Education Loan or Scholarship Obligations.Section 1128(b)(14) (42 U.S.C. 1320a097(b)(14)) is amended by striking ``all reasonable steps'' and inserting ``reasonable steps''. (d) Permissive Exclusion of Individuals With Ownership or Control Interest in Sanctioned Entities.Section 1128(b) (42 U.S.C. 1320a097(b)) is amended by adding at the end the following new paragraph: ``(15) Individuals controlling a sanctioned entity.Any individual who has a direct or indirect ownership or control interest of 5 percent or more, or an ownership or control interest (as defined in section 1124(a)(3)) in, or who is an officer, director, agent, or managing employee (as defined in section 1126(b)) of, an entity ``(A) that has been convicted of any offense described in subsection (a) or in paragraph (1), (2), or (3) of this subsection; ``(B) against which a civil monetary penalty has been assessed under section 1128A; or ``(C) that has been excluded from participation under a program under title XVIII or under a State health care program.''. (e) Exclusions Based on Actions Under Alliance System.Section 1128 (42 U.S.C. 1320a097), as amended by subsections (a) and (d), is amended (1) in subsection (a)(1)(A), by striking ``XVIII or under a State health care program'' and inserting ``XVIII, a State health care program, or under an applicable health plan (as defined in section 1902(6) of the Health Security Act)''; (2) in subsection (b)(5) (A) by striking ``or'' at the end of subparagraph (A), (B) by adding ``or'' at the end of subparagraph (B), and (C) by inserting after subparagraph (B) the following new subparagraph: ``(C) an applicable health plan (as defined in section 1902(6) of the Health Security Act) under section 5411 or 5412(b)(3) of such Act,''; (3) in subsection (b)(6)(B), by striking ``XVIII or under a State health care program'' and inserting ``XVIII, a State health care program, or an applicable health plan (as defined in section 1902(6) of the Health Security Act)''; (4) in subsection (b)(7), by striking the period at the end and inserting ``, or in section 5412 of the Health Security Act.''; (5) in subsection (b)(8)(B) (A) in clause (ii), by striking ``1128A'' and inserting ``1128A or under section 5412 of the Health Security Act'', and (B) in clause (iii), by striking ``XVIII or under a State health care program'' and inserting ``XVIII, a State health care program, or under an applicable health plan (as defined in section 1902(6) of the Health Security Act)''; (6) in subsection (b)(9), by striking the period at the end and inserting ``, or provide any information requested by the Inspector General of the Department of Health and Human Services to carry out the All-Payer Health Care Fraud and Abuse Control Program established under section 5401 of the Health Security Act.''; (7) in subsection (b)(11) (A) by striking ``title XVIII or a State health care program'' and inserting ``title XVIII, a State health care program, or an applicable health plan (as defined in section 1902(6) of the Health Security Act)'', (B) by striking ``Secretary or the appropriate State agency'' and inserting ``Secretary, the appropriate State agency, or plan sponsor'', and (C) by striking ``Secretary or that agency'' and inserting ``Secretary, that agency, or that sponsor''; (8) in subsection (b)(12), by adding at the end the following new subparagraph: ``(E) Any entity authorized by law to (i) conduct on-site health, safety or patient care reviews and surveys or (ii) to investigate whether any violations of law have occurred, including violations under this section, section 1128A, section 1128B, or part 2 of subtitle E of title V of the Health Security Act.''; (9) in subsection (b)(14), by striking ``XVIII or XIX'' and inserting ``XVIII, a State health care program, or an applicable health plan (as defined in section 1902(6) of the Health Security Act)''; and (10) in subsection (b)(15) (A) in subparagraph (B), by striking ``1128A'' and inserting ``1128A or section 5412 of the Health Security Act'', and (B) in subparagraph (C), by striking ``title XVIII or under a State health care program'' and inserting ``title XVIII, a State health care program, or an applicable health plan (as defined in section 1902(6) of the Health Security Act''. (f) Appeal of Exclusions to Court of Appeals.Section 1128(f)(1) (42 U.S.C. 1320a097(f)(1)) is amended by striking the period at the end and inserting the following: ``, except that any action brought to appeal such decision shall be brought in the United States Court of Appeals for the judicial circuit in which the individual or entity resides or has a principal place of business (or, if the individual or entity does not reside or have a principal place of business within any such judicial circuit, in the United States Court of Appeals for the District of Columbia Circuit).''. Section 4045 SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO COMPLY WITH STATUTORY OBLIGATIONS RELATING TO QUALITY OF CARE. (a) Minimum Period of Exclusion for Practitioners and Persons Failing To Meet Statutory Obligations. (1) In general.The second sentence of section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may prescribe)'' and inserting ``may prescribe, except that such period may not be less than one year)''. (2) Conforming amendment.Section 1156(b)(2) (42 U.S.C. 1320c-5(b)(2)) is amended by striking ``shall remain'' and inserting ``shall (subject to the minimum period specified in the second sentence of paragraph (1)) remain''. (b) Repeal of ``Unwilling or Unable'' Condition for Imposition of Sanction.Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended (1) in the second sentence, by striking ``and determines'' and all that follows through ``such obligations,'' and (2) by striking the third sentence. (c) Amount of Civil Money Penalty.Section 1156(b)(3) (42 U.S.C. 1320c-5(b)(3)) is amended by striking ``the actual or estimated cost'' and inserting the following: ``$50,000 for each instance''. Section 4046 EFFECTIVE DATE. The amendments made by this part shall take effect January 1, 1995. Part 6 FUNDING OF GRADUATE MEDICAL EDUCATION AND ACADEMIC HEALTH CENTERS Section 4051 TRANSFERS FROM MEDICARE TRUST FUNDS FOR GRADUATE MEDICAL EDUCATION. (a) In General.For purposes of complying with section 3034(a), there shall be transferred to the Secretary from the Federal Hospital Insurance Trust Fund (established under section 1817 of the Social Security Act) and the Federal Supplementary Medical Insurance Trust Fund (established under section 1841 of such Act) the following amount (in the aggregate), as applicable to a fiscal year: (1) In the case of fiscal year 1996, $1,500,000,000. (2) In the case of each of the fiscal years 1997 and 1998, $1,600,000,000. (3) In the case of each subsequent fiscal year, the amount specified in paragraph (2) increased by the Secretary's estimate of the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with the midpoint of the previous fiscal year. (b) Allocation of Amount Among Funds.With respect to the amount required under subsection (a) to be transferred for a year from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, the Secretary shall determine an equitable allocation of such amount among the funds. (c) Termination of Graduate Medical Education Payments Under Medicare. (1) In General. Section 1886(h) (42 U.S.C. 1395ww(h)) is amended by adding at the end the following new paragraph: ``(6) Termination of payments attributable to costs of training physicians.Notwithstanding any other provision of this section or section 1861(v), no payment may be made under this title for direct graduate medical education costs attributable to an approved medical residency training program for any cost reporting period (or portion thereof) beginning on or after October 1, 1995.''. (2) Prohibition against recognition of costs.Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at the end the following new subparagraph: ``(T) Such regulations shall not include any provision for specific recognition of the costs of graduate medical education for hospitals for any cost reporting period (or portion thereof) beginning on or after October 1, 1995. Nothing in the previous sentence shall be construed to affect in any way payments to hospitals for the costs of any approved educational activities that are not described in such sentence.''. Section 4052 TRANSFERS FROM HOSPITAL INSURANCE TRUST FUND FOR ACADEMIC HEALTH CENTERS. (a) In General.For purposes of complying with section 3104(a), there shall be transferred to the Secretary from the Federal Hospital Insurance Trust Fund (established under section 1817 of the Social Security Act) the following amount (in the aggregate), as applicable to a fiscal year: (1) In the case of fiscal year 1996, $2,100,000,000. (2) In the case of each of the fiscal years 1997 and 1998, $2,000,000,000. (3) In the case of each subsequent fiscal year, the amount specified in paragraph (2) increased by the Secretary's estimate of the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with the midpoint of the previous fiscal year. (b) Termination of Payments Under Medicare. (1) In general.Section 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)) is amended in the matter preceding clause (i) by striking ``The Secretary'' and inserting ``For discharges occurring before October 1, 1995, the Secretary''. (2) Adjustment to standardized amounts.Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ``excluding'' and inserting ``for discharges occurring before October 1, 1995, excluding''. Part 7 COVERAGE OF SERVICES PROVIDED BY FACILITIES AND PLANS OF DEPARTMENTS OF DEFENSE AND VETERANS AFFAIRS Section 4061 TREATMENT OF UNIFORMED SERVICES HEALTH PLAN AS ELIGIBLE ORGANIZATION UNDER MEDICARE. (a) In General.Section 1876 (42 U.S.C. 1395mm), as amended by section 4002(a), is further amended by adding at the end the following new subsection: ``(l) Notwithstanding any other provision of this section, a Uniformed Services Health Plan of the Department of Defense under chapter 55 of title 10, United States Code, shall be considered an eligible organization under this section, and the Secretary shall make payments to such Plan during a year on behalf of any individuals entitled to benefits under this title who are enrolled with such a Plan during the year in the same amounts and under the same terms and conditions under which the Secretary makes payments to eligible organizations with risk-sharing contracts under section 1876.''. (b) Effective Date.The amendment made by subsection (a) shall apply to items and services furnished under title XVIII of the Social Security Act on or after October 1, 1995. Section 4062 COVERAGE OF SERVICES PROVIDED TO MEDICARE BENEFICIARIES BY PLANS AND FACILITIES OF DEPARTMENT OF VETERANS AFFAIRS. (a) In General.Title XVIII, as amended by sections 4001 and 4003, is further amended by adding at the end the following new section: ``treatment of plans and facilities of department of veterans affairs as providers ``Sec. 1895. (a) In General.Notwithstanding any other provision of this title ``(1) a VA health plan (as defined in section 1801(2) of title 38, United States Code) shall be considered an eligible organization for purposes of section 1876; and ``(2) a health care facility of the Department of Veterans Affairs shall be considered a provider of services under section 1861(u). ``(b) Eligibility for Payments. ``(1) VA health plans.The Secretary shall make payments to a VA health plan during a year on behalf of any veteran, other than a veteran described in section 1831(b) during the year (other than any individuals described in section 1831(b) of title 38, United States Code) in the same amounts and under the same terms and conditions under which the Secretary makes payments to eligible organizations with a risk-sharing contract under section 1876. ``(2) Health care facilities.The Secretary shall make payments to a health care facility of the Department of Veterans Affairs for services provided to an individual entitled to benefits under this title in the same amounts and under the same terms and conditions under which the Secretary makes payments to provider of services under this title.''. (b) Effective Date.The amendment made by subsection (a) shall apply to items and services furnished under title XVIII of the Social Security Act on or after January 1, 1998. Section 4063 CONFORMING AMENDMENTS. (a) Part A.Section 1814 (42 U.S.C. 1395f) is amended by striking subsection (c). (b) Part B.Section 1835 (42 U.S.C. 1395n) is amended by striking subsection (d). (c) Additional Conforming Amendment.Section 1880(a) (42 U.S.C. 1395qq(a)) is amended by striking ``, notwithstanding sections 1814(c) and 1835(d),''. (d) Effective Date.The amendments made by this section shall take effect January 1, 1998. Title IV, Subtitle B Subtitle B Savings in Medicare Program Part 1 SAVINGS RELATING TO PART A Section 4101 REDUCTION IN UPDATE FOR INPATIENT HOSPITAL SERVICES. Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)), as amended by section 13501(a)(1) of OBRA091993, is amended (1) in subclause (XII) (A) by striking ``fiscal year 1997'' and inserting ``for each of the fiscal years 1997 through 2000'', and (B) by striking ``0.5 percentage point'' and inserting ``2.0 percentage points''; and (2) in subclause (XIII), by striking ``fiscal year 1998'' and inserting ``fiscal year 2003''. Section 4102 REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL EDUCATION. (a) In General.Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as follows: ``(ii) For purposes of clause (i)(II), the indirect teaching adjustment factor is equal to c * (((1+r) to the nth power) - 1), where `r' is the ratio of the hospital's full-time equivalent interns and residents to beds and `n' equals .405. For discharges occurring on or after ``(I) May 1, 1986, and before October 1, 1995, `c' is equal to 1.89, and ``(II) October 1, 1995, `c' is equal to 0.74.''. (b) No Restandardization of Payment Amounts Required.Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ``of 1985'' and inserting ``of 1985, but not taking into account the amendments made by section 4102(a) of the Health Security Act''. Section 4103 REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS FOR INPATIENT HOSPITAL SERVICES. (a) PPS Hospitals. (1) Reduction in base payment rates.Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)), as amended by section 13501(a)(3) of OBRA091993, is amended by adding at the end the following new sentence: ``In addition to the reduction described in the preceding sentence, for discharges occurring after September 30, 1995, the Secretary shall reduce by 7.31 percent the unadjusted standard Federal capital payment rate (as described in 42 CFR 412.308(c), as in effect on the date of the enactment of the Health Security Act) and shall reduce by 10.41 percent the unadjusted hospital-specific rate (as described in 42 CFR 412.328(e)(1), as in effect on the date of the enactment of the Health Security Act).''. (2) Reduction in update.Section 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended (A) in subparagraph (B)(i) (i) by striking ``and (II)'' and inserting ``(II)'', and (ii) by striking the semicolon at the end and inserting the following: ``, and (III) an annual update factor established for the prospective payment rates applicable to discharges in a fiscal year which (subject to reduction under subparagraph (C)) will be based upon such factor as the Secretary determines appropriate to take into account amounts necessary for the efficient and effective delivery of medically appropriate and necessary care of high quality;''; (B) by redesignating subparagraph (C) as subparagraph (D); and (C) by inserting after subparagraph (B) the following new subparagraph: ``(C)(i) With respect to payments attributable to portions of cost reporting periods or discharges occurring during each of the fiscal years 1996 through 2003, the Secretary shall include a reduction in the annual update factor established under subparagraph (B)(i)(III) for discharges in the year equal to the applicable update reduction described in clause (ii) to adjust for excessive increases in capital costs per discharge for fiscal years prior to fiscal year 1992 (but in no event may such reduction result in an annual update factor less than zero). ``(ii) In clause (i), the term `applicable update reduction' means, with respect to the update factor for a fiscal year ``(I) 4.9 percentage points; or ``(II) if the annual update factor for the previous fiscal year was less than the applicable update reduction for the previous year, the sum of 4.9 percentage points and the difference between the annual update factor for the previous year and the applicable update reduction for the previous year.''. (b) PPS-Exempt Hospitals.Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by section 4051(c)(2), is further amended by adding at the end the following new subparagraph: ``(U) Such regulations shall provide that, in determining the amount of the payments that may be made under this title with respect to the capital-related costs of inpatient hospital services furnished by a hospital that is not a subsection (d) hospital (as defined in section 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital (as defined in section 1886(d)(9)(A)), the Secretary shall reduce the amounts of such payments otherwise established under this title by 15 percent for payments attributable to portions of cost reporting periods occurring during each of the fiscal years 1996 through 2003.''. Section 4104 REVISIONS TO PAYMENT ADJUSTMENTS FOR DISPROPORTIONATE SHARE HOSPITALS IN PARTICIPATING STATES. (a) Application of Alternative Adjustments.Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is amended (1) by redesignating subparagraphs (H) and (I) as subparagraphs (I) and (J); and (2) by inserting after subparagraph (G) the following new subparagraph: ``(H)(i) In accordance with this subparagraph, the Secretary shall provide for an additional payment for each subsection (d) hospital that is located in a participating State under the Health Security Act during a cost reporting period and that meets the eligibility requirements described in clause (iii). ``(ii) The amount of the additional payment made under clause (i) for each discharge shall be determined by multiplying ``(I) the sum of the amount determined under paragraph (1)(A)(ii)(II) (or, if applicable, the amount determined under paragraph (1)(A)(iii)) and the amount paid to the hospital under subparagraph (A) for the discharge, by ``(II) the SSI adjustment percentage for the cost reporting period in which the discharge occurs (as defined in clause (iv)). ``(iii) A hospital meets the eligibility requirements described in this clause with respect to a cost reporting period if ``(I) in the case of a hospital that is located in an urban area and that has more than 100 beds, the hospital's SSI patient percentage (as defined in clause (v)) for the cost reporting period is not less than 5.5 percent; ``(II) in the case of a hospital that is located in an urban area and that has less than 100 beds, the hospital's SSI patient percentage is not less than 17 percent; ``(III) in the case of a hospital that is classified as a rural referral center under subparagraph (C) or a sole community hospital under subparagraph (D), the hospital's SSI patient percentage for the cost reporting period is not less than 23 percent; and ``(IV) in the case of any other hospital, the hospital's SSI patient percentage is not less than 23 percent. ``(iv) For purposes of clause (ii), the `SSI adjustment percentage' applicable to a hospital for a cost reporting period is equal to ``(I) in the case of a hospital described in clause (iii)(I), the percentage determined in accordance with the following formula: e to the nth power - 1, where `e' is the natural antilog of 1 and where `n' is equal to (.5642 * (the hospital's SSI patient percentage for the cost reporting period - .055)); ``(II) in the case of a hospital described in clause (iii)(II) or clause (iii)(IV), 2 percent; and ``(III) in the case of a hospital described in clause (iii)(III), the sum of 2 percent and .30 percent of the difference between the hospital's SSI patient percentage for the cost reporting period and 23 percent. ``(v) In this subparagraph, a hospital's `SSI patient percentage' with respect to a cost reporting period is equal to the fraction (expressed as a percentage) ``(I) the numerator of which is the number of the hospital's patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A and were entitled to supplementary security income benefits (excluding State supplementation) under title XVI; and ``(II) the denominator of which is the number of the hospital's patient days for such period which were made up of patients who (for such days) were entitled to benefits under part A.''. (b) No Standardization Resulting From Reduction.Section 1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is amended (1) by striking ``exclude additional payments'' and inserting ``adjust such estimate for changes in payments''; (2) by striking ``1989 or'' and inserting ``1989,''; and (3) by striking the period at the end and inserting the following: ``, or the enactment of section 4104 of the Health Security Act.''. (c) Conforming Amendment.Section 1886(d)(5)(F)(i) (42 U.S.C. 1395ww(d)(5)(F)(i)) is amended in the matter preceding subclause (I) by inserting after ``hospital'' the following: ``that is not located in a State that is a participating State under the Health Security Act''. Section 4105 MORATORIUM ON DESIGNATION OF ADDITIONAL LONG-TERM CARE HOSPITALS. Notwithstanding clause (iv) of section 1886(d)(1)(B) of the Social Security Act, a hospital which has an average inpatient length of stay (as determined by the Secretary of Health and Human Services) of greater than 25 days shall not be treated as a hospital described in such clause for purposes of title XVIII of such Act unless the hospital was treated as a hospital described in such clause for purposes of such title as of the date of the enactment of this Act. Section 4106 EXTENSION OF FREEZE ON UPDATES TO ROUTINE SERVICE COSTS OF SKILLED NURSING FACILITIES. (a) Payments Based on Cost Limits.Section 1888(a) (42 U.S.C. 1395yy(a)) is amended by striking ``112 percent'' each place it appears and inserting ``100 percent (adjusted by such amount as the Secretary determines to be necessary to preserve the savings resulting from the enactment of section 13503(a)(1) of the Omnibus Budget Reconciliation Act of 1993)''. (b) Payments Determined on Prospective Basis.Section 1888(d)(2)(B) (42 U.S.C. 1395yy(d)(2)(B)) is amended by striking ``105 percent'' and inserting ``100 percent (adjusted by such amount as the Secretary determines to be necessary to preserve the savings resulting from the enactment of section 13503(b) of the Omnibus Budget Reconciliation Act of 1993)''. (c) Effective Date.The amendments made by subsections (a) and(b) shall apply to cost reporting periods beginning on or after October 1, 1995. Part 2 SAVINGS RELATING TO PART B Section 4111 ESTABLISHMENT OF CUMULATIVE EXPENDITURE GOALS FOR PHYSICIAN SERVICES. (a) Use of Cumulative Performance Standard.Section 1848(f)(2) (42 U.S.C. 1395w0@4(f)(2)) is amended (1) in subparagraph (A) (A) in the heading, by striking ``In general'' and inserting ``Fiscal years 1991 through 1994.--'', (B) in the matter preceding clause (i), by striking ``a fiscal year (beginning with fiscal year 1991)'' and inserting ``fiscal years 1991, 1992, 1993, and 1994'', and (C) in the matter following clause (iv), by striking ``subparagraph (B)'' and inserting ``subparagraph (C)''; (2) in subparagraph (B), by striking ``subparagraph (A)'' and inserting ``subparagraphs (A) and (B)''; (3) by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D); and (4) by inserting after subparagraph (A) the following new subparagraph: ``(B) Fiscal years beginning with fiscal year 1995.Unless Congress otherwise provides, the performance standard rate of increase, for all physicians' services and for each category of physicians' services, for a fiscal year beginning with fiscal year 1995 shall be equal to the performance standard rate of increase determined under this paragraph for the previous fiscal year, increased by the product of ``(i) 1 plus the Secretary's estimate of the weighted average percentage increase (divided by 100) in the fees for all physicians' services or for the category of physicians' services, respectively, under this part for portions of calendar years included in the fiscal year involved, ``(ii) 1 plus the Secretary's estimate of the percentage increase or decrease (divided by 100) in the average number of individuals enrolled under this part (other than HMO enrollees) from the previous fiscal year to the fiscal year involved, ``(iii) 1 plus the Secretary's estimate of the average annual percentage growth (divided by 100) in volume and intensity of all physicians' services or of the category of physicians' services, respectively, under this part for the 5-fiscal-year period ending with the preceding fiscal year (based upon information contained in the most recent annual report made pursuant to section 1841(b)(2)), and ``(iv) 1 plus the Secretary's estimate of the percentage increase or decrease (divided by 100) in expenditures for all physicians' services or of the category of physicians' services, respectively, in the fiscal year (compared with the previous fiscal year) which are estimated to result from changes in law or regulations affecting the percentage increase described in clause (i) and which is not taken into account in the percentage increase described in clause (i), minus 1, multiplied by 100, and reduced by the performance standard factor (specified in subparagraph (C)).''. (b) Treatment of Default Update. (1) In general.Section 1848(d)(3)(B) (42 U.S.C. 1395w0@4(d)(3)(B)) is amended (A) in clause (i) (i) in the heading, by striking ``In general'' and inserting ``1992 through 1996'', and (ii) by striking ``for a year'' and inserting ``for 1992, 1993, 1994, 1995, and 1996''; and (B) by adding after clause (ii) the following new clause: ``(iii) Years beginning with 1997. ``(I) In general.The update for a category of physicians' services for a year beginning with 1997 provided under subparagraph (A) shall be increased or decreased by the same percentage by which the cumulative percentage increase in actual expenditures for such category of physicians' services for such year was less or greater, respectively, than the performance standard rate of increase (established under subsection (f)) for such category of services for such year. ``(II) Cumulative percentage increase defined.In subclause (I), the `cumulative percentage increase in actual expenditures' for a year shall be equal to the product of the adjusted increases for each year beginning with 1995 up to and including the year involved, minus 1 and multiplied by 100. In the previous sentence, the `adjusted increase' for a year is equal to 1 plus the percentage increase in actual expenditures for the year.''. (2) Conforming amendment.Section 1848(d)(3)(A)(i) (42 U.S.C. 1395w0@4(d)(3)(A)(i)) is amended by striking ``subparagraph (B)'' and inserting ``subparagraphs (B) and (C)''. Section 4112 USE OF REAL GDP TO ADJUST FOR VOLUME AND INTENSITY; REPEAL OF RESTRICTION ON MAXIMUM REDUCTION PERMITTED IN DEFAULT UPDATE. (a) Use of Real GDP to Adjust for Volume and Intensity.Section 1848(f)(2)(B)(iii) (42 U.S.C. 1395w0@4(f)(2)(B)(iii)), as added by section 4111(a), is amended to read as follows: ``(iii) 1 plus the average per capita growth in the real gross domestic product (divided by 100) for the 5-fiscal-year period ending with the previous fiscal year (increased by 1.5 percentage points for the category of services consisting of primary care services), and''. (b) Repeal of Restriction on Maximum Reduction.Section 1848(d)(3)(B)(ii) (42 U.S.C. 1395w0@4(d)(3)(B)(ii)), as amended by section 13512(b) of OBRA091993, is amended (1) in the heading, by inserting ``in certain years'' after ``adjustment''; (2) in the matter preceding subclause (I), by striking ``for a year''; (3) in subclause (I), by adding ``and'' at the end; (4) in subclause (II), by striking ``, and'' and inserting a period; and (5) by striking subclause (III). (c) Repeal of Performance Standard Factor. (1) In general.Section 1842(f)(2), as amended by section 4111(a)(3), is amended by striking subparagraph (C) and redesignating subparagraph (D) as subparagraph (C). (2) Conforming amendment.Section 1842(f)(2)(B), as added by section 4111(a), is amended in the matter following clause (iv) by striking ``1, multiplied by 100'' and all that follows through ``subparagraph (C))'' and inserting ``1 and multiplied by 100''. Section 4113 REDUCTION IN CONVERSION FACTOR FOR PHYSICIAN FEE SCHEDULE FOR 1995. Section 1848(d)(1) (42 U.S.C. 1395w0@4(d)(1)) is amended (1) in subparagraph (A), by inserting after ``subparagraph (B)'' the following: ``, and, in the case of 1995, specified in subparagraph (C)''; (2) by redesignating subparagraph (C) as subparagraph (D); and (3) by inserting after subparagraph (B) the following new subparagraph: ``(C) Special provision for 1995.For purposes of subparagraph (A), the conversion factor specified in this subparagraph for 1995 is ``(i) in the case of physicians' services included in the category of primary care services (as defined in subsection (j)(1)), the conversion factor established under this subsection for 1994 adjusted by the update established under paragraph (3) for 1995; and ``(ii) in the case of any other physicians' services, the conversion factor established under this subsection for 1994 reduced by 3 percent and adjusted by the update established under paragraph (3) for 1995.''. Section 4114 LIMITATIONS ON PAYMENT FOR PHYSICIANS' SERVICES FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS. (a) In General. (1) Limitations described.Part B of title XVIII, as amended by section 2003(a), is amended by inserting after section 1848 the following new section: ``limitations on payment for physicians' services furnished by high-cost hospital medical staffs ``Sec. 1849. (a) Services Subject to Reduction. ``(1) Determination of hospital-specific per admission relative value.Not later than October 1 of each year (beginning with 1997), the Secretary shall determine for each hospital ``(A) the hospital-specific per admission relative value under subsection (b)(2) for the following year; and ``(B) whether such hospital-specific relative value is projected to exceed the allowable average per admission relative value applicable to the hospital for the following year under subsection (b)(1). ``(2) Reduction for services at hospitals exceeding allowable average per admission relative value.If the Secretary determines (under paragraph (1)) that a medical staff's hospital-specific per admission relative value for a year (beginning with 1998) is projected to exceed the allowable average per admission relative value applicable to the medical staff for the year, the Secretary shall reduce (in accordance with subsection (c)) the amount of payment otherwise determined under this part for each physician's service furnished during the year to an inpatient of the hospital by an individual who is a member of the hospital's medical staff. ``(3) Timing of determination; notice to hospitals and carriers.Not later than October 1 of each year (beginning with 1997), the Secretary shall notify the medical executive committee of each hospital (as set forth in the Standards of the Joint Commission on the Accreditation of Health Organizations) of the determinations made with respect to the medical staff under paragraph (1). ``(b) Determination of Allowable Average Per Admission Relative Value and Hospital-Specific Per Admission Relative Values. ``(1) Allowable average per admission relative value. ``(A) Urban hospitals.In the case of a hospital located in an urban area, the allowable average per admission relative value established under this subsection for a year is equal to 125 percent (or 120 percent for years after 1999) of the median of 1996 hospital-specific per admission relative values determined under paragraph (2) for all hospital medical staffs. ``(B) Rural hospitals.In the case of a hospital located in a rural area, the allowable average per admission relative value established under this subsection for 1998 and each succeeding year, is equal to 140 percent of the median of the 1996 hospital-specific per admission relative values determined under paragraph (2) for all hospital medical staffs. ``(2) Hospital-specific per admission relative value. ``(A) In general.The hospital-specific per admission relative value projected for a hospital (other than a teaching hospital) for a calendar year, shall be equal to the average per admission relative value (as determined under section 1848(c)(2)) for physicians' services furnished to inpatients of the hospital by the hospital's medical staff (excluding interns and residents) during the second year preceding such calendar year, adjusted for variations in case-mix and disproportionate share status among hospitals (as determined by the Secretary under subparagraph (C)). ``(B) Special rule for teaching hospitals.The hospital-specific relative value projected for a teaching hospital in a calendar year shall be equal to the sum of ``(i) the average per admission relative value (as determined under section 1848(c)(2)) for physicians' services furnished to inpatients of the hospital by the hospital's medical staff (excluding interns and residents) during the second year preceding such calendar year; and ``(ii) the equivalent per admission relative value (as determined under section 1848(c)(2)) for physicians' services furnished to inpatients of the hospital by interns and residents of the hospital during the second year preceding such calendar year, adjusted for variations in case-mix, disproportionate share status, and teaching status among hospitals (as determined by the Secretary under subparagraph (C)). The Secretary shall determine such equivalent relative value unit per admission for interns and residents based on the best available data for teaching hospitals and may make such adjustment in the aggregate. ``(C) Adjustment for teaching and disproportionate share hospitals.The Secretary shall adjust the allowable per admission relative values otherwise determined under this paragraph to take into account the needs of teaching hospitals and hospitals receiving additional payments under subparagraphs (F) and (G) of section 1886(d)(5). The adjustment for teaching status or disproportionate share shall not be less than zero. ``(c) Amount of Reduction.The amount of payment otherwise made under this part for a physician's service that is subject to a reduction under subsection (a) during a year shall be reduced 15 percent, in the case of a service furnished by a member of the medical staff of the hospital for which the Secretary determines under subsection (a)(1) that the hospital medical staff's projected relative value per admission exceeds the allowable average per admission relative value. ``(d) Reconciliation of Reductions Based on Hospital-Specific Relative Value Per Admission With Actual Relative Values. ``(1) Determination of actual average per admission relative value.Not later than October 1 of each year (beginning with 1999), the Secretary shall determine the actual average per admission relative value (as determined pursuant to section 1848(c)(2)) for the physicians' services furnished by members of a hospital's medical staff to inpatients of the hospital during the previous year, on the basis of claims for payment for such services that are submitted to the Secretary not later than 90 days after the last day of such previous year. The actual average per admission shall be adjusted by the appropriate case-mix, disproportionate share factor, and teaching factor for the hospital medical staff (as determined by the Secretary under subsection (b)(2)(C)). Notwithstanding any other provision of this title, no payment may be made under this part for any physician's service furnished by a member of a hospital's medical staff to an inpatient of the hospital during a year unless the hospital submits a claim to the Secretary for payment for such service not later than 90 days after the last day of the year. ``(2) Reconciliation with reductions taken.In the case of a hospital for which the payment amounts for physicians' services furnished by members of the hospital's medical staff to inpatients of the hospital were reduced under this section for a year ``(A) if the actual average per admission relative value for such hospital's medical staff during the year (as determined by the Secretary under paragraph (1)) did not exceed the allowable average per admission relative value applicable to the hospital's medical staff under subsection (b)(1) for the year, the Secretary shall reimburse the fiduciary agent for the medical staff by the amount by which payments for such services were reduced for the year under subsection (c), including interest at an appropriate rate determined by the Secretary; ``(B) if the actual average per admission relative value for such hospital's medical staff during the year is less than 15 percentage points above the allowable average per admission relative value applicable to the hospital's medical staff under subsection (b)(1) for the year, the Secretary shall reimburse the fiduciary agent for the medical staff, as a percent of the total allowed charges for physicians' services performed in such hospital (prior to the withhold), the difference between 15 percentage points and the actual number of percentage points that the staff exceeds the limit allowable average per admission relative value, including interest at an appropriate rate determined by the Secretary; and ``(C) if the actual average per admission relative value for such hospital's medical staff during the year exceeded the allowable average per admission relative value applicable to the hospital's medical staff by 15 percentage points or more, none of the withhold is paid to the fiduciary agent for the medical staff. ``(3) Medical executive committee of a hospital.Each medical executive committee of a hospital whose medical staff is projected to exceed the allowable relative value per admission for a year, shall have one year from the date of notification that such medical staff is projected to exceed the allowable relative value per admission to designate a fiduciary agent for the medical staff to receive and disburse any appropriate withhold amount made by the carrier. ``(4) Alternative reimbursement to members of staff.At the request of a fiduciary agent for the medical staff, if the fiduciary agent for the medical staff is owed the reimbursement described in paragraph (2)(B) for excess reductions in payments during a year, the Secretary shall make such reimbursement to the members of the hospital's medical staff, on a pro-rata basis according to the proportion of physicians' services furnished to inpatients of the hospital during the year that were furnished by each member of the medical staff. ``(e) Definitions.In this section, the following definitions apply: ``(1) Medical staff.An individual furnishing a physician's service is considered to be on the medical staff of a hospital ``(A) if (in accordance with requirements for hospitals established by the Joint Commission on Accreditation of Health Organizations) ``(i) the individual is subject to bylaws, rules, and regulations established by the hospital to provide a framework for the self-governance of medical staff activities; ``(ii) subject to such bylaws, rules, and regulations, the individual has clinical privileges granted by the hospital's governing body; and ``(iii) under such clinical privileges, the individual may provide physicians' services independently within the scope of the individual's clinical privileges, or ``(B) if such physician provides at least one service to a medicare beneficiary in such hospital. ``(2) Rural area; urban area.The terms `rural area' and `urban area' have the meaning given such terms under section 1886(d)(2)(D). ``(3) Teaching hospital.The term `teaching hospital' means a hospital which has a teaching program approved as specified in section 1861(b)(6).''. (2) Conforming amendments.(A) Section 1833(a)(1)(N) (42 U.S.C. 1395l(a)(1)(N)) is amended by inserting ``(subject to reduction under section 1849)'' after ``1848(a)(1)''. (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w0@4(a)(1)(B)) is amended by striking ``this subsection,'' and inserting ``this subsection and section 1849,''. (b) Requiring Physicians to Identify Hospital at Which Service Furnished.Section 1848(g)(4)(A)(i) (42 U.S.C. 1395w0@4(g)(4)(A)(i)) is amended by striking ``beneficiary,'' and inserting ``beneficiary (and, in the case of a service furnished to an inpatient of a hospital, report the hospital identification number on such claim form),''. (c) Effective Date.The amendments made by this section shall apply to services furnished on or after January 1, 1998. Section 4115 MEDICARE INCENTIVES FOR PHYSICIANS TO PROVIDE PRIMARY CARE. (a) Resource-Based Practice Expense Relative Value Units. (1) Increase in practice expense relative value units for certain services.Section 1848(c)(2) (42 U.S.C. 1395w0@4(c)(2)), as amended by sections 13513 and 13514 of OBRA0993, is amended by adding at the end the following new subparagraph: ``(G) Increase in practice expense relative value units for certain services.The Secretary shall increase the practice expense relative value units applied in primary care services, as defined in section 1842(i)(4), by 10 percent, beginning with 1996.''. (2) Assuring budget neutrality.Section 1842(c)(2)(F) (42 U.S.C. 1395u(c)(2)(F)), as added by section 13513 and amended by section 13514 of OBRA0993, is amended by adding at the end the following new clause: ``(iii) shall reduce the relative values for all services (other than anesthesia services and primary care services, as defined in section 1842(i)(4)) established under this paragraph (and, in the case of anesthesia services, the conversion factor established by the Secretary for such services) by such percentage as the Secretary determines to be necessary so that, beginning in 1996, the amendment made by section 4115(a)(1) of the Health Security Act would not result in expenditures under this section that exceed the amount of such expenditures that would have been made if such amendment had not been made.''. (3) Study.The Secretary of Health and Human Services shall (A) develop a methodology for implementing in 1997 a resource-based system for determining practice expense relative values unit for each physician's service, and (B) transmit a report by June 30, 1996, on the methodology developed under paragraph (1) to the Committees on Ways and Means and Energy and Commerce of the House of Representatives and the Committee on Fiance of the Senate. The reported shall include a presentation of the data utilized in developing the methodology and an explanation of the methodology. (b) Office Visit Pre- and Post-Time. (1) Increase in work relative value units for office visits.Section 1848(c)(2) (42 U.S.C. 1395w0@4(c)(2)), as amended by subsection (a)(1), is amended by adding at the end the following new subparagraph: ``(H) Increase in work relative value units for certain services.The Secretary shall increase the work relative value units applied to office visits by 10 percent, beginning with 1996.''. (2) Assuring budget neutrality.Section 1842(c)(2)(F)(iii) (42 U.S.C. 1395u(c)(2)(F)(iii)), as added by subsection (a)(2), is amended by striking ``section 4115(a)(1)'' and substituting ``sections 4115(a)(1) and (b)(1)''. (c) Office Consultations.Section 1848(c)(2) (42 U.S.C. 1395w0@4(c)(2)), as amended by subsections (a)(1) and (b)(1), is amended by adding at the end the following new subparagraph: ``(I) Amendment in relative values for office consultations.The Secretary shall reduce the work, practice expense and malpractice relative value components of office consultations to be equal to the work, practice expense and malpractice relative value components for comparable office visits beginning with 1996. In making such adjustment, the Secretary shall apply the savings from such reduction to increase each of the relative value components for office visits in a manner that would not result in expenditures under this section that exceed the amount of such expenditures that would have been made if such amendment had not been made.''. (d) Outlier Intensity Relative Value Adjustments. (1) Adjustment of outlier intensity of relative values.Section 1848(c)(2) (42 U.S.C. 1395w0@4(c)(2)), as amended by subsections (a)(1), (b)(1), and (c), is amended by adding at the end the following new subparagraph: ``(J) Adjustment of outlier intensity of relative values.Beginning with 1996, the Secretary shall reduce the work relative value components of procedures, or classes of procedures, where the intensity exceeds thresholds established by the Secretary. In the previous sentence, intensity shall mean the work relative value units for the procedure divided by the time for the procedure. The Secretary shall apply the savings from such reductions to increase the work relative value components of primary care services, as defined in section 1842(i)(4), such that the changes made by this subsection would not result in expenditures under this section that exceed the amount of such expenditures that would have been made if such amendment had not been made.''. (e) Changes In Underserved Area Bonus Payments. (1) In general.Section 1833(m) (42 U.S.C. 1395l(m)) is amended (A) by striking ``10 percent'' and inserting ``a percent'', (B) by striking ``service'' the last place it appears and inserting ``services'', and (C) by adding the following new sentence: ``The percent referred to in the previous sentence is 20 percent in the case of primary care services, as defined in section 1842(i)(4), and 10 percent for services other than primary care services furnished in health professional shortage areas located in rural areas as defined in section 1886(d)(2)(D).''. (2) The amendments made by paragraph (1) are effective for services furnished on or after January 1, 1996. Section 4116 ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN OUTPATIENT HOSPITAL SERVICES. (a) Ambulatory Surgical Center Procedures.Section 1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended (1) by striking ``of 80 percent''; and (2) by striking the period at the end and inserting the following: ``, less the amount a provider may charge as described in clause (ii) of section 1866(a)(2)(A).''. (b) Radiology Services and Diagnostic Procedures.Section 1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended (1) by striking ``of 80 percent''; and (2) by striking the period at the end and inserting the following: ``, less the amount a provider may charge as described in clause (ii) of section 1866(a)(2)(A).''. (c) Effective Date.The amendments made by this section shall apply to services furnished during portions of cost reporting periods occurring on or after July 1, 1994. Section 4117 IMPOSITION OF COINSURANCE ON LABORATORY SERVICES. (a) In General.Paragraphs (1)(D) and (2)(D) of section 1833(a) (42 U.S.C. 1395l(a)) are each amended (1) by striking ``(or 100 percent'' and all that follows through ``the first opinion))''; and (2) by striking ``100 percent of such negotiated rate'' and inserting ``80 percent of such negotiated rate''. (b) Effective Date.The amendments made by subsection (a) shall apply to tests furnished on or after January 1, 1995. SEC. 4118. APPLICATION OF COMPETITIVE ACQUISITION PROCESS FOR PART B ITEMS AND SERVICES. (a) General Rule.Part B of title XVIII of the Social Security Act is amended by inserting after section 1846 the following: ``competition acquisition for items and services ``Sec. 1847. (a) Establishment of Bidding Areas. ``(1) In general.The Secretary shall establish competitive acquisition areas for the purpose of awarding a contract or contracts for the furnishing under this part of the items and services described in subsection (c) on or after January 1, 1995. The Secretary may establish different competitive acquisition areas under this subsection for different classes of items and services under this part. ``(2) Criteria for establishment.The competitive acquisition areas established under paragraph (1) shall ``(A) initially be, or be within, metropolitan statistical areas; and ``(B) be chosen based on the availability and accessibility of suppliers and the probable savings to be realized by the use of competitive bidding in the furnishing of items and services in the area. ``(b) Awarding of Contracts in Areas. ``(1) In general.The Secretary shall conduct a competition among individuals and entities supplying items and services under this part for each competitive acquisition area established under subsection (a) for each class of items and services. ``(2) Conditions for awarding contract.The Secretary may not award a contract to any individual or entity under the competition conducted pursuant to paragraph (1) to furnish an item or service under this part unless the Secretary finds that the individual or entity ``(A) meets quality standards specified by the Secretary for the furnishing of such item or service; and ``(B) offers to furnish a total quantity of such item or service that is sufficient to meet the expected need within the competitive acquisition area. ``(3) Contents of contract.A contract entered into with an individual or entity under the competition conducted pursuant to paragraph (1) shall specify (for all of the items and services within a class) ``(A) the quantity of items and services the entity shall provide; and ``(B) such other terms and conditions as the Secretary may require. ``(c) Services Described.The items and services to which the provisions of this section shall apply are as follows: ``(1) Magnetic resonance imaging tests and computerized axial tomography scans, including a physician's interpretation of the results of such tests and scans. ``(2) Oxygen and oxygen equipment. ``(3) Such other items and services for which the Secretary determines that the use of competitive acquisition under this section will be appropriate and cost-effective.''. (b) Items and Services To Be Furnished Only Through Competitive Acquisition.Section 1862(a) (42 U.S.C. 1395y(a)), as amended by section 4034(b)(4), is amended (1) by striking ``or'' at the end of paragraph (14); (2) by striking the period at the end of paragraph (15) and inserting ``; or''; and (3) by inserting after paragraph (15) the following new paragraph: ``(16) where such expenses are for an item or service furnished in a competitive acquisition area (as established by the Secretary under section 1847(a)) by an individual or entity other than the supplier with whom the Secretary has entered into a contract under section 1847(b) for the furnishing of such item or service in that area, unless the Secretary finds that such expenses were incurred in a case of urgent need.''. (c) Reduction in Payment Amounts if Competitive Acquisition Fails to Achieve Minimum Reduction in Payments.Notwithstanding any other provision of title XVIII of the Social Security Act, if the establishment of competitive acquisition areas under section 1847 of such Act (as added by subsection (a)) and the limitation of coverage for items and services under part B of such title to items and services furnished by providers with competitive acquisition contracts under such section does not result in a reduction of at least 10 percent in the projected payment amount that would have applied to the item or service under part B if the item or service had not been furnished through competitive acquisition under such section, the Secretary shall reduce the payment amount by such percentage as the Secretary determines necessary to result in such a reduction. (d) Effective Date.The amendments made by this section shall apply to items and services furnished under part B of title XVIII of the Social Security Act on or after January 1, 1995. Section 4119 APPLICATION OF COMPETITIVE ACQUISITION PROCEDURES FOR LABORATORY SERVICES. (a) In General.Section 1847(c), as added by section 4118, is amended (1) by redesignating paragraph (4) as paragraph (5); and (2) by inserting after paragraph (3) the following new paragraph: ``(4) Clinical diagnostic laboratory tests.''. (b) Reduction in Fee Schedule Amounts if Competitive Acquisition Fails to Achieve Savings.Section 1833(h) (42 U.S.C. 1395l(h)) is amended by adding at the end the following new paragraph: ``(7) Notwithstanding any other provision of this subsection, if the Secretary applies the authority provided under section 1847 to establish competitive acquisition areas for the furnishing of clinical diagnostic laboratory tests in a year and the application of such authority does not result in a reduction of at least 10 percent in the projected payment amount that would have applied to such tests under this section if the tests had not been furnished through competitive acquisition under section 1847, the Secretary shall reduce each payment amount otherwise determined under the fee schedules and negotiated rates established under this subsection by such percentage as the Secretary determines necessary to result in such a reduction.''. Part 3 SAVINGS RELATING TO PARTS A AND B Section 4131 MEDICARE SECONDARY PAYER CHANGES. (a) Extension of Data Match. (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is amended by striking clause (iii). (2) Section 6103(l)(12) of the Internal Revenue Code of 1986 is amended by striking subparagraph (F). (b) Repeal of Sunset on Application to Disabled Employees of Employers with More than 100 Employees.Section 1862(b)(1)(B)(iii) (42 U.S.C. 1395y(b)(1)(B)(iii)), as amended by section 13561(b) of OBRA091993, is amended (1) in the heading, by striking ``Sunset'' and inserting ``Effective date''; and (2) by striking ``, and before October 1, 1998''. (c) Extension of Period for End Stage Renal Disease Beneficiaries.Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)), as amended by section 13561(c) of OBRA091993, is amended in the second sentence by striking ``and on or before October 1, 1998,''. Section 4132 PAYMENT LIMITS FOR HMOS AND CMPS WITH RISK-SHARING CONTRACTS. (a) In General.Section 1876(a)(1)(C) (42 U.S.C. 1395mm(a)(1)(C)) is amended (1) by inserting ``, subject to adjustment to take into account the provisions of the succeeding clauses'' before the period, (2) by striking ``(C)'' and inserting ``(C)(i)'', and (3) by adding at the end the following new clauses: ``(ii) The portion of the annual per capita rate of payment for each such class attributable to payments made from the Federal Supplementary Medical Insurance Trust Fund may not exceed 95 percent of the following amount (unless the portion of the annual per capita rate of payment for each such class attributable to payments made from the Federal Hospital Insurance Trust Fund is less than 95 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from the Federal Hospital Insurance Trust Fund): ``(I) For 1995, 150 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, plus 80 percent of the amount by which (if any) the adjusted average per capita cost for that class exceeds 150 percent of that weighted national average. ``(II) For 1996, 150 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, plus 60 percent of the amount by which (if any) the adjusted average per capita cost for that class exceeds 150 percent of that weighted national average. ``(III) For 1997, 150 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, plus 40 percent of the amount by which (if any) the adjusted average per capita cost for that class exceeds 150 percent of that weighted national average. ``(IV) For 1998, 150 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, plus 20 percent of the amount by which (if any) the adjusted average per capita cost for that class exceeds 150 percent of that weighted national average. ``(V) For 1999 and each succeeding year (subject to the establishment by the Secretary of alternative limits under clause (vi)), 150 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund. ``(iii) The portion of the annual per capita rate of payment for each such class attributable to payments made from the Federal Hospital Insurance Trust Fund may not exceed 95 percent of the following amount (unless the portion of the annual per capita rate of payment for each such class attributable to payments made from the Federal Supplementary Medical Insurance Trust Fund is less than 95 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from the Federal Supplementary Medical Insurance Trust Fund): ``(I) For 1995, 170 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, plus 80 percent of the amount by which (if any) the adjusted average per capita cost for that class exceeds 170 percent of that weighted national average. ``(II) For 1996, 170 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, plus 60 percent of the amount by which (if any) the adjusted average per capita cost for that class exceeds 170 percent of that weighted national average. ``(III) For 1997, 170 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, plus 40 percent of the amount by which (if any) the adjusted average per capita cost for that class exceeds 170 percent of that weighted national average. ``(IV) For 1998, 170 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, plus 20 percent of the amount by which (if any) the adjusted average per capita cost for that class exceeds 170 percent of that weighted national average. ``(V) For 1999 and each succeeding year (subject to the establishment by the Secretary of alternative limits under clause (vi)), 170 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund. ``(iv) For 1995 and succeeding years, the portion of the annual per capita rate of payment for each such class attributable to payments made from the Federal Supplementary Medical Insurance Trust Fund may not be less than 80 percent of 95 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, unless the portion of the annual per capita rate of payment for each such class attributable to payments made from the Federal Hospital Insurance Trust Fund is greater than 95 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from the Federal Hospital Insurance Trust Fund. ``(v) For 1995 and succeeding years, the portion of the annual per capita rate of payment for each such class attributable to payments made from the Federal Hospital Insurance Trust Fund may not be less than 80 percent of 95 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from such Trust Fund, unless the portion of the annual per capita rate of payment for each such class attributable to payments made from the Federal Supplementary Medical Insurance Trust Fund is greater than 95 percent of the weighted national average of all adjusted average per capita costs determined under paragraph (4) for that class that are attributable to payments made from the Federal Supplementary Medical Insurance Trust Fund. ``(vi) For 2000 and succeeding years, the Secretary may revise any of the percentages otherwise applicable during a year under the preceding clauses (other than clause (i)), but only if the aggregate payments made under this title to eligible organizations under risk-sharing contracts during the year is not greater than the aggregate payments that would have been made under this title to such organizations during the year if the Secretary had not revised the percentages. ``(vii) For purposes of clauses (ii) through (v), in determining the weighed average of all adjusted average per capita costs determined under paragraph (4) for a class, the Secretary shall not take into account any costs associated with individuals entitled to benefits under this title under section 226A.''. (b) Conforming Amendment.Section 1876(a)(5)(A) (42 U.S.C. 1395mm(a)(5)(A)) is amended by inserting ``, adjusted to take into account the limitations imposed by clauses (ii) through (vi) of paragraph (1)(C)'' before the period. Section 4133 REDUCTION IN ROUTINE COST LIMITS FOR HOME HEALTH SERVICES. (a) Reduction in Update to Maintain Freeze in 1996.Section 1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amended (1) in subclause (II), by striking ``or'' at the end; (2) in subclause (III), by striking ``112 percent,'' and inserting ``and before July 1, 1996, 112 percent, or''; and (3) by inserting after subclause (III) the following new subclause: ``(IV) July 1, 1996, 100 percent (adjusted by such amount as the Secretary determines to be necessary to preserve the savings resulting from the enactment of section 13564(a)(1) of the Omnibus Budget Reconciliation Act of 1993),''. (b) Basing Limits in Subsequent Years on Median of Costs. (1) In general.Section 1861(v)(1)(L)(i) (U.S.C. 1395x(v)(1)(L)(i)), as amended by subsection (a), is amended in the matter following subclause (IV) by striking ``the mean'' and inserting ``the median''. (2) Effective date.The amendment made by paragraph (1) shall apply to cost reporting periods beginning on or after July 1, 1997. Section 4134 IMPOSITION OF COPAYMENT FOR CERTAIN HOME HEALTH VISITS. (a) In General. (1) Part a.Section 1813(a) (42 U.S.C. 1395e(a)) is amended by adding at the end the following new paragraph: ``(5) The amount payable for home health services furnished to an individual under this part shall be reduced by a copayment amount equal to 10 percent of the average of all per visit costs for home health services furnished under this title determined under section 1861(v)(1)(L) (as determined by the Secretary on a prospective basis for services furnished during a calendar year), unless such services were furnished to the individual during the 30-day period that begins on the date the individual is discharged as an inpatient from a hospital.''. (2) Part b.Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is amended (A) in subparagraph (A), by striking ``to home health services,'' and by striking the comma after ``opinion)''; (B) in subparagraph (D), by striking ``and'' at the end; (C) in subparagraph (E), by striking the semicolon at the end and inserting ``; and''; and (D) by adding at the end the following new subparagraph: ``(F) with respect to home health services ``(i) the lesser of ``(I) the reasonable cost of such services, as determined under section 1861(v), or ``(II) the customary charges with respect to such services, less the amount a provider may charge as described in clause (ii) of section 1866(a)(2)(A), ``(ii) if such services are furnished by a public provider of services, or by another provider which demonstrates to the satisfaction of the Secretary that a significant portion of its patients are low-income (and requests that payment be made under this clause), free of charge or at nominal charges to the public, the amount determined in accordance with section 1814(b)(2), or ``(iii) if (and for so long as) the conditions described in section 1814(b)(3) are met, the amounts determined under the reimbursement system described in such section, less a copayment amount equal to 10 percent of the average of all per visit costs for home health services furnished under this title determined under section 1861(v)(1)(L) (as determined by the Secretary on a prospective basis for services furnished during a calendar year), unless such services were furnished to the individual during the 30-day period that begins on the date the individual is discharged as an inpatient from a hospital;''. (3) Provider charges.Section 1866(a)(2)(A)(i) (42 U.S.C. 1395cc(a)(2)(A)(i)) is amended (A) by striking ``deduction or coinsurance'' and inserting ``deduction, coinsurance, or copayment''; and (B) by striking ``or (a)(4)'' and inserting ``(a)(4), or (a)(5)''. (b) Effective Date.The amendments made by subsection (a) shall apply to home health services furnished on or after July 1, 1995. Section 4135 EXPANSION OF CENTERS OF EXCELLENCE. (a) In General.The Secretary of Health and Human Services shall use a competitive process to contract with centers of excellence for cataract surgery, coronary artery by-pass surgery, and such other services as the Secretary determines to be appropriate. Payment under title XVIII of the Social Security Act will be made for services subject to such contracts on the basis of negotiated or all-inclusive rates as follows: (1) The center shall cover services provided in an urban area (as defined in section 1886(d)(2)(D) of the Social Security Act) for years beginning with fiscal year 1995. (2) The amount of payment made by the Secretary to the center under title XVIII of the Social Security Act for services covered under the project shall be less than the aggregate amount of the payments that the Secretary would have made to the center for such services had the project not been in effect. (3) The Secretary shall make payments to the center on such a basis for the following services furnished to individuals entitled to benefits under such title: (A) Facility, professional, and related services relating to cataract surgery. (B) Coronary artery bypass surgery and related services. (C) Such other services as the Secretary and the center may agree to cover under the agreement. (b) Rebate of Portion of Savings.In the case of any services provided under a demonstration project conducted under subsection (a), the Secretary shall make a payment to each individual to whom such services are furnished (at such time and in such manner as the Secretary may provide) in an amount equal to 10 percent of the amount by which (1) the amount of payment that would have been made by the Secretary under title XVIII of the Social Security Act to the center for such services if the services had not been provided under the project, exceeds (2) the amount of payment made by the Secretary under such title to the center for such services. Part 4 PART B PREMIUM Section 4141 GENERAL PART B PREMIUM. Section 1839(e) (42 U.S.C. 1395r(e)), as amended by section 13571 of OBRA091993, is amended (1) in paragraph (1)(A), by striking ``and prior to January 1999''; and (2) in paragraph (2), by striking ``prior to January 1998''. Part 5 REPORT ON MEDICARE SAVINGS FOR FISCAL YEARS 2000 THROUGH 2003 Section 4151 REPORT ON SAVINGS. (a) In General.The Secretary shall submit to Congress, by January 30, 1999, a report that contains (1) a determination of whether the average, annual rate of growth in spending under the medicare program (taking into account savings under this subtitle) in the 4-fiscal-year period beginning with fiscal year 2000 will exceed the rate of growth described in subsection (b); and (2) if so, recommendations as to how to achieve the rate of growth specified in subsection (b). (b) Rate of Growth Described.The rate of growth described in this subsection is the sum of the following: (1) CPI.The average annual percentage change in the CPI. (2) Medicare population.The average, annual percentage change in the number of medicare-eligible individuals. (3) Real gdp per capita.The average, annual percentage change in the real, per capita gross domestic product of the United States, and (4) 1 percent.1 percentage point. Title IV, Subtitle C Subtitle C Medicaid Part 1 COMPREHENSIVE BENEFIT PACKAGE Section 4201 LIMITING COVERAGE UNDER MEDICAID OF ITEMS AND SERVICES COVERED UNDER COMPREHENSIVE BENEFIT PACKAGE. (a) Removal of Comprehensive Benefits Package from State Plan.Title XIX is amended by redesignating section 1931 as section 1932 and by inserting after section 1930 the following new section: ``treatment of comprehensive benefit package under health security act ``Sec. 1931. (a) Items and Services Covered Under Comprehensive Benefit Package.If a State plan for medical assistance under this title provides for payment in accordance with section 1902(a)(63) for a year, notwithstanding any other provision of this title, the State plan under this title is not required to provide medical assistance consisting of payment for items and services in the comprehensive benefit package under subtitle B of title I of the Health Security Act for alliance eligible individuals (as defined in section 1902(5) of such Act). ``(b) Construction.(1) Payment under section 1902(a)(63) shall not constitute medical assistance for purposes of section 1903(a). ``(2) This section shall not be construed as affecting the provision of medical assistance under this title for items and services included in the comprehensive benefit package for ``(A) medicare-eligible individuals, or ``(B) certain emergency services to certain aliens under section 1903(v)(2).''. (b) Substitute Requirement of State Payment.Section 1902(a) (42 U.S.C. 1396a(a)), as amended by section 13631(a)(3) of OBRA091993, is amended (1) by striking ``and'' at the end of paragraph (61), (2) by striking the period at the end of paragraph (62) and inserting ``; and'', and (3) by inserting after paragraph (62) the following new paragraph: ``(63) provide for payment to regional alliances of the amounts required under subtitle A of title IX of the Health Security Act.''. (c) No Federal Financial Participation.Section 1903(i) (42 U.S.C. 1396b(i)), as amended by section 13631(h)(1)(C) of OBRA091993, is amended (1) by striking ``or'' at the end of paragraph (14), (2) by striking the period at the end of paragraph (15) and inserting ``; or'', and (3) by inserting after paragraph (15) the following new paragraph: ``(16) with respect to items and services covered under the comprehensive benefit package under subtitle B of title I of the Health Security Act for alliance eligible individuals (as defined in section 1902(5) of such Act).''. (d) Effective Date.The amendments made by this section shall apply with respect to items or services furnished in a State on or after January 1 of the first year (as defined in section 1902(17)) for the State. Part 2 EXPANDING ELIGIBILITY FOR NURSING FACILITY SERVICES; LONG-TERM CARE INTEGRATION OPTION Section 4211 SPENDDOWN ELIGIBILITY FOR NURSING FACILITY RESIDENTS. (a) In General.Section 1902(a)(10)(A)(i) (42 U.S.C. 1396a(a)(10)(A)(i)) is amended (1) by striking ``or'' at the end of subclause (VI); (2) by striking the semicolon at the end of subclause (VII) and inserting ``, or''; and (3) by inserting after subclause (VII) the following new subclause: ``(VIII) who are individuals who would meet the income and resource requirements of the appropriate State plan described in subclause (I) or the supplemental security income program (as the case may be), if incurred expenses for medical care as recognized under State law were deducted from income;''. (b) Limitation to Benefits for Nursing Facility Services.Section 1902(a)(10) of such Act (42 U.S.C. 1396a(a)(10)), as amended by section 13603(c)(1) of OBRA091993, is amended in the matter following subparagraph (F) (1) by striking ``and (XIII)'' and inserting ``(XIII)''; and (2) by inserting before the semicolon at the end the following: ``, and (XIV) the medical assistance made available to an individual described in subparagraph (A)(i)(VIII) shall be limited to medical assistance for nursing facility services, except to the extent that assistance is provided in accordance with the election described in section 1932 in the case of a State making such election''. (c) Effective Date.The amendments made by subsections (a) and (b) shall apply with respect to a State as of January 1, 1996. Section 4212 INCREASED INCOME AND RESOURCE DISREGARDS FOR NURSING FACILITY RESIDENTS. (a) Increased Disregards for Personal Needs Allowance; Resources.Section 1902(a)(10) (42 U.S.C. 1396a(a)(1)) is amended (1) by striking ``and'' at the end of paragraph (F); and (2) by adding at the end the following new paragraph: ``(G) that, in determining the eligibility of any individual who is an inpatient in a nursing facility or intermediate care facility for the mentally retarded ``(i) the first $50 of income for each month shall be disregarded; and ``(ii) in the case of an unmarried individual, the first $12,000 of resources may, at the option of the State, be disregarded;''. (b) Conforming SSI Personal Needs Allowance.For provision increasing SSI personal needs allowance, see section 4301. (c) Federal Reimbursement for Reductions in State Funds Attributable to Increased Disregard.Section 1903(a) (42 U.S.C. 1396b(a)) is amended (1) by striking ``plus'' at the end of paragraph (6); (2) by striking the period at the end of paragraph (7) and inserting ``; plus''; and (3) by adding at the end the following new paragraph: ``(8) an amount equal to 100 percent of the difference between the amount of expenditures made by the State for nursing facility services and services in an intermediate care facility for the mentally retarded during the quarter and the amount of expenditures that would have been made by the State for such services during the quarter based on the personal needs allowance in effect in the State as of September 30, 1993.''. (d) Effective Date.The amendments made by subsection (a) shall apply with respect to months beginning with January 1996. Section 4213 INFORMING NURSING HOME RESIDENTS ABOUT AVAILABILITY OF ASSISTANCE FOR HOME AND COMMUNITY-BASED SERVICES. (a) In General.Section 1902(a) (42 U.S.C. 1396a(a)), as amended by section 4201(b), is amended (1) by striking ``and'' at the end of paragraph (62), (2) by striking the period at the end of paragraph (63) and inserting ``; and'', and (3) by inserting after paragraph (63) the following new paragraph: ``(64) provide, in the case of an individual who is a resident (or who is applying to become a resident) of a nursing facility or intermediate care facility for the mentally retarded, at the time of application for medical assistance and periodically thereafter, the individual (or a designated representative) with information on the range of home and community-based services for which assistance is available in the State either under the plan under this title, under the program under part 1 of subtitle B of title II of the Health Security Act, or any other public program.''. (b) Effective Date.The amendments made by this section shall apply to quarters beginning on or after January 1, 1996. Part 3 OTHER BENEFITS Section 4221 TREATMENT OF ITEMS AND SERVICES NOT COVERED UNDER THE COMPREHENSIVE BENEFIT PACKAGE. (a) Continuation of Eligibility for Assistance for AFDC and SSI Recipients.With respect to an individual who is described in section 1933(b) of the Social Security Act (as added by subsection (b)(1)), nothing in this Act shall be construed as (1) changing the eligibility of the individual for medical assistance under title XIX of the Social Security Act for items and services not covered under the comprehensive benefit package, or (2) subject to the amendments made by this subtitle, changing the amount, duration, or scope of medical assistance required (or permitted) to be provided to the individual under such title. (b) Limitation on Scope of Assistance for Other Medicaid Beneficiaries. (1) In general.Title XIX, as amended by sections 4201(a) and 4213, is amended by redesignating section 1933 as section 1934 and by inserting after section 1932 the following new section: ``limitation on scope of assistance for most non-cash beneficiaries ``Sec 1933. (a) Limitation.Notwithstanding any other provision of this title, the medical assistance made available under section 1902(a) to an individual not described in subsection (b) shall be limited to medical assistance for ``(1) long-term care services (as defined in subsection (c)); and ``(2) medicare cost-sharing (as defined in section 1905(p)(3)), in accordance with the requirements of section 1902(a)(10)(E). ``(b) Individuals Exempt from Limitation.The individuals described in this subsection are the following: ``(1) AFDC recipients (as defined in section 1902(3) of the Health Security Act). ``(2) SSI recipients (as defined in section 1902(33) of the Health Security Act). ``(3) Individuals entitled to benefits under title XVIII. ``(4) Children under 18 years of age (or, at the option of the State, under age 19, 20, or 21). ``(c) Long-Term Care Services Defined.In subsection (a), the term `long-term care services' means the following items and services, but only to the extent they are not included as an item or service under the comprehensive benefit package under the Health Security Act: ``(1) Nursing facility services and intermediate care facility services for the mentally retarded (including items and services that may be included in such services pursuant to regulations in effect as of October 26, 1993). ``(2) Personal care services. ``(3) Home or community-based services provided under a waiver granted under subsection (c), (d), or (e) of section 1915. ``(4) Home and community care provided to functionally disabled elderly individuals under section 1929. ``(5) Community supported living arrangements services provided under section 1930. ``(6) Case-management services (as described in section 1915(g)(2)). ``(7) Home health care services, clinic services, and rehabilitation services that are furnished to an individual who has a condition or disability that qualifies the individual to receive any of the services described in paragraphs (1) through (6).''. (2) Conforming amendment.Section 1902(a)(10) of such Act (42 U.S.C. 1396a(a)(10)), as amended by section 13603(c)(1) of OBRA091993 and section 4211(b), is amended in the matter following subparagraph (G) (as inserted by section 4212(a)) (A) by striking ``and (XIV)'' and inserting ``(XIV)''; and (B) by inserting before the semicolon at the end the following: ``, and (XV) the medical assistance made available to an individual who is not described in section 1933(b) shall be limited in accordance with section 1933''. (c) Conforming Amendments Relating to Secondary Payer.(1) Section 1902(a)(25)(A) (42 U.S.C. 1396a(a)(25)(A)), as amended by section 13622(a) of OBRA091993, is amended by inserting ``health plans (as defined in section 1400 of the Health Security Act),'' after ``of 1974),''. (2) Section 1903(o) (42 U.S.C. 1396b(o)), as so amended, is amended by inserting ``and a health plan (as defined in section 1400 of the Health Security Act)'' after ``of 1974)''. (d) Effective Date.The amendments made by this section shall apply to items and services furnished in a State on or after January 1 of the first year for which the State is a participating State under the Health Security Act. Section 4222 ESTABLISHMENT OF PROGRAM FOR POVERTY-LEVEL CHILDREN WITH SPECIAL NEEDS. (a) Establishment of Program.Title XIX, as amended by sections 4201, 4213, and 4221(b), is amended by redesignating section 1934 as section 1935 and by inserting after section 1933 the following new section: ``services for poverty-level children with special needs ``Sec 1934. (a) Establishment of Program.There is hereby established a program under which the Secretary shall provide for payment on behalf of each qualified child (as defined in subsection (b)) during a year for all medically necessary or appropriate items and services described in section 1905(a) (including items and services described in section 1905(r) but excluding long-term care services described in section 1933(c)) that are not included in the comprehensive benefit package under subtitle B of title I of the Health Security Act. ``(b) Qualified Child Defined. ``(1) In general.In this section, a `qualified child' is an eligible individual (as defined in section 1001(c) of the Health Security Act) who ``(A) for years prior to 1998, is a resident of a participating State under the Health Security Act; ``(B) is under the age of 19; and ``(C) meets the requirements relating to financial eligibility described in paragraph (2). ``(2) Requirements relating to financial eligibility.An individual meets the requirements of this paragraph if ``(A) the individual is an AFDC recipient or an SSI recipient (as such terms are defined in section 1902 of the Health Security Act); ``(B) the individual is eligible to receive medical assistance under the State plan under section 1902(a)(10)(C); or ``(C) the individual is ``(i) under one year of age and has adjusted family income at or below 133 percent of the income official poverty line (as defined by the Office of Management and Budget, and revised annually in accordance with section 673(2) of the Omnibus Budget Reconciliation Act of 1981, applicable to a family of the size involved) (or, in the case of a State that established an income level greater than 133 percent for individuals under 1 year of age for purposes of section 1902(l)(2)(A) as of October 1, 1993, an income level which is a percentage of such level not greater than 185 percent), ``(ii) the individual has attained 1 year of age but is under 6 years of age and has adjusted family income at or below 133 percent of such income official poverty line, or ``(iii) the individual was born after September 30, 1983, has attained 6 years of age, and has adjusted family income at or below 100 percent of such income official poverty line. ``(3) Enrollment procedures. ``(A) In general.Not later than July 1, 1995, the Secretary shall establish procedures for the enrollment of qualified children in the program under this section under which ``(i) essential community providers certified by the Secretary under subpart B of part 2 of subtitle F of title I of the Health Security Act serve as enrollment sites for the program; and ``(ii) any forms used for enrollment purposes are designed to make the enrollment as simple as practicable. ``(B) Individuals under alliance plans automatically enrolled.The Secretary shall establish a process under which an individual who is a qualified child under paragraph (1) and is enrolled in a health plan (as defined in section 1400(a) of the Health Security Act) shall automatically be deemed to have met any enrollment requirements established under paragraph (1). ``(c) Additional Responsibilities of Secretary.Not later than July 1, 1995, the Secretary shall promulgate such regulations as are necessary to establish and operate the program under this section, including regulations with respect to the following: ``(1) The benefits to be provided and the circumstances under which such benefits shall be considered medically necessary. ``(2) Procedures for the periodic redetermination of an individual's eligibility for benefits. ``(3) Qualification criteria for providers participating in the program. ``(4) Payment amounts for services provided under the program, the methodology used to determine such payment amounts, and the procedures for making payments to providers. ``(5) Standards to ensure the quality of services and the coordination of services under the program with services under the comprehensive benefit package, as well as services under parts B and H of the Individuals With Disabilities Education Act, title V, and any other program providing health care, remedial, educational, and social services to qualified children as the Secretary may identify. ``(6) Hearing and appeals for individuals adversely affected by any determination by the Secretary under the program. ``(7) Such other requirements as the Secretary determines to be necessary for the proper and efficient administration of the program. ``(d) Federal Payment for Program. ``(1) In general.Subject to paragraph (2), the Secretary shall pay 100 percent of the costs of providing benefits under this program in a year, including all administrative expenses. ``(2) Annual limit on expenditures.The total amount of Federal expenditures that may be made under this section in a year may not exceed ``(A) for a year prior to 1998, an amount equal to total expenditures for medical assistance under State plans under this title during fiscal year 1993 for services described in subsection (a) furnished to qualified children that are attributable to States in which the program is in operation during the year (adjusted to take into account the operation of the program under this section on a calendar year basis) ``(i) adjusted to take into account any increases or decreases in the number of qualified children under the most recent decennial census, as adjusted by the most recent current population survey for the year in question, and ``(ii) adjusted by the applicable percentage applied to the State non-cash, non-DSH baseline amount for the year under section 9003(a) of the Health Security Act; ``(B) for 1998, the total expenditures for medical assistance under State plans under this title during 1993 for services described in subsection (a) furnished to qualified children (adjusted to take into account the operation of the program under this section on a calendar year basis) ``(i) adjusted to take into account any increases or decreases in the number of qualified children under the most recent decennial census, as adjusted by the most recent current population survey for the year in question, and ``(ii) adjusted by the update applied to the State non-cash, non-DSH baseline amount for the year under section 9003(b) of the Health Security Act; and ``(C) for each succeeding year, the limit established under this paragraph for the previous year (adjusted to take into account the operation of the program under this section on a calendar year basis), adjusted by the update applied to the State non-cash baseline amount for the year under section 9003(b) of the Health Security Act.''. (b) Repeal of Alternative Eligibility Standards for Children in Participating States.Section 1902(r)(2) (42 U.S.C. 1396a(r)(2)) is amended by adding at the end the following new subparagraph: ``(C) Subparagraph (A) shall not apply with respect to the determination of income and resources for children under age 18 under the State plan of a State (other than under the State plan of a State that utilized an alternative methodology pursuant to such subparagraph as of October 1, 1993) ``(i) in the case of a State that is a participating State under the Health Security Act for a year prior to 1998, for quarters beginning on or after January 1 of the first year for which the State is such a participating State; and ``(ii) in the case of any State not described in clause (i), for quarters beginning on or after January 1, 1998.''. Part 4 DISCONTINUATION OF CERTAIN PAYMENT POLICIES Section 4231 DISCONTINUATION OF MEDICAID DSH PAYMENTS. (a) Elimination of Specific Obligation.Section 1923(a) (42 U.S.C. 1396r094(a)) is amended by adding at the end the following new paragraph: ``(5) Notwithstanding any other provision of this title, the requirement of this subsection shall not apply ``(A) with respect to a State for any portion of a fiscal year during which the State is a participating State under the Health Security Act; or ``(B) with respect to any State for any months beginning on or after January 1, 1998.''. (b) Elimination of State Plan Requirement.Section 1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)) is amended by inserting after ``special needs'' the following: ``(but only with respect to any quarters during which the State is not a participating State under the Health Security Act or with respect to any quarters ending on or before December 31, 1997)''. (c) Elimination of State DSH Allotments and Federal Financial Participation.Section 1923(f) (42 U.S.C. 1396r094(f)) is amended (1) in paragraph (2), by inserting ``and paragraph (5)'' after ``subparagraph (B)'', and (2) by adding at the end the following new paragraph: ``(5) Elimination of allotments for participating States and sunset for all States. ``(A) In general.Notwithstanding any other provision of this section , the State DSH allotment shall be zero with respect to ``(i) any participating State under the Health Security Act; and ``(ii) any State for any portion of a fiscal year that occurs on or after January 1, 1998. ``(B) No redistribution of reductions.In the computation of State supplemental amounts under paragraph (3), the State DSH allotments shall be determined under subparagraph (A)(ii) of such paragraph as if this paragraph did not apply.''. Section 4232 DISCONTINUATION OF REIMBURSEMENT STANDARDS FOR INPATIENT HOSPITAL SERVICES. Section 1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)), as amended by section 4231(b), is amended by inserting ``(in the case of services other than hospital services in a State that is a participating State under the Health Security Act)'' before ``are reasonable and adequate''. Part 5 COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND QUALITY MANAGEMENT INITIATIVES Section 4241 REQUIREMENTS FOR CHANGES IN BILLING PROCEDURES. (a) Limitation on Frequency of System Changes; Advance Notification to Providers.Section 1902(a) (42 U.S.C. 1396a(a)), as amended by sections 4201(b) and 4214(a), is amended (1) by striking ``and'' at the end of paragraph (63), (2) by striking the period at the end of paragraph (64) and inserting ``; and'', and (3) by inserting after paragraph (64) the following new paragraph: ``(65) provide that the State ``(A) will not implement any change in the system used for the billing and processing of claims for payment for items and services furnished under the State plan within 6 months of implementing any previous change in such system; and ``(B) shall notify individuals and entities providing medical assistance under the State plan of any major change in the procedures for billing for services furnished under the plan at least 120 days before such change is to take effect.''. (b) Effective Date.The amendments made by subsection (a) shall apply to a State as of January 1 of the first year for which the State is a participating State. Part 6 MEDICAID COMMISSION Section 4251 MEDICAID COMMISSION. (a) Establishment.There is established a commission to be known as the ``Medicaid Commission'' (in this section referred to as the ``Commission''). (b) Membership.(1) The Commission shall be composed of 15 members appointed by the Secretary for the life of the Commission. (2) Members shall include representatives of the Federal Government and State Governments. (3) The Administrator of the Health Care Financing Administration shall be an ex officio member of the Commission. (4) Individuals, while serving as members of the Commission, shall not be entitled to compensation, other than travel expenses, including per diem in lieu of subsistence, in accordance with sections 5702 and 5703 of title 5, United States Code. (c) Study.The Commission shall study options with respect to each of the following in relation to the medicaid program under title XIX of the Social Security Act: (1) Use of block grant.Whether, and (if so) how, to convert payments for services not covered in the comprehensive benefit package (for all recipients, including AFDC and SSI recipients defined in section 1902) into new financing mechanisms that give the States greater flexibility in targeting and delivering needed services. (2) Integration of acute and long-term care services for health plans.Whether, and (if so) how, to integrate long-term care services and the home and community-based services program under part 1 of subtitle B of title II with the services covered under the comprehensive benefit package offered by health plans. (3) Consolidating institutional and home and community-based long-term care.Whether, and (if so) how, to offer States an option to combine together expenditures under the home and community-based services program (under part 1 of subtitle B of title II) with continuing home and community-based services and institutional care under the medicaid program into a global budget for long-term care services, and how such a combined program could be implemented. (d) Report and Recommendations.The Commission shall submit to the Secretary and the National Health Board, not later than 1 year after the date of the enactment of this Act, a report on its study under subsection (c). The Commission shall include in such report such recommendations for changes in the medicaid program, and the programs under this Act, as it deems appropriate. (e) Operations.(1) The Commission shall appoint a chair from among its members. (2) Upon request of the Chair of the Commission, the head of any Federal department or agency may detail, on a reimbursable basis, any of the personnel of that department or agency to the Commission to assist it in carrying out its duties under this section. (3) The Commission may secure directly from any department or agency of the United States information necessary to enable it to carry out this section. Upon request of the Chair of the Commission, the head of that department or agency shall furnish that information to the Commission. (4) Upon the request of the Commission, the Administrator of General Services shall provide to the Commission, on a reimbursable basis, the administrative support services necessary for the Commission to carry out its responsibilities under this section. (e) Termination.The Commission shall terminate 90 days after the date of submission of its report under subsection (d). (f) Authorization of Appropriations.There are authorized to be appropriate such sums as may be necessary to carry out this section. Title IV, Subtitle D Subtitle D Increase in SSI Personal Needs Allowance Section 4301 INCREASE IN SSI PERSONAL NEEDS ALLOWANCE. (a) In General.Section 1611(e)(1)(B) (42 U.S.C. 1382(e)(1)(B)) is amended (1) in clauses (i) and (ii)(I), by striking ``$360'' and inserting ``$600''; and (2) in clause (iii), by striking ``$720'' and inserting ``$1,200''. (b) Effective Date.The amendments made by subsection (a) shall apply with respect to months beginning with January 1996.