Order Code RL32005
CRS Report for Congress
Received through the CRS Web
Medicare Fee-for-Service Modifications and
Medicaid Provisions of S. 1, as Passed by the
Senate, and H.R. 1, as Passed by the House
July 17, 2003
Sibyl Tilson, Jennifer Boulanger, Jean Hearne,
Evelyne Baumrucker, and Julie Stone
Specialists and Analysts in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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Medicare Fee-for-Service Modifications and Medicaid
Provisions of S. 1, as Passed by the Senate,
and H.R. 1, as Passed by the House
Summary
On June 27, 2003, the Senate passed the Prescription Drug and Medicare
Improvement Act of 2003 by a vote of 76-21. Later that same evening, the House
passed the Medicare Modernization and Prescription Drug Act of 2003 by a recorded
vote of 216-215 with one voting present.
Each of the bills contain significant payment increases, certain payment
reductions, expansion of covered benefits, establishment of demonstration projects,
as well as new beneficiary cost-sharing provisions in the Medicare fee-for-service
(FFS) program. Provisions affecting the Medicaid program are included as well. The
majority of Medicare’s FFS payment and benefit changes in S. 1 are in Title V and
Title VI. Medicaid and other health-related provisions are also included in Title VI.
In H.R. 1, comparable Medicare FFS changes are in Title III through Title VII; the
Medicaid provisions in H.R. 1 are in Title X. Where applicable, selected provisions
in other parts of the legislation that affect FFS Medicare are also included in the
side-by-side comparison.
There are significant differences in many of the provisions contained in S. 1 and
H.R. 1. Using changes to beneficiary cost-sharing amounts as an example, both bills
increase beneficiary cost-sharing amounts in traditional Medicare in different
fashions. Although both provide for annual increases in the Part B deductible
amount that must be met before program payments will be made for covered Part B
services, S. 1 would set the deductible amount at $125 in 2006 with subsequent
annual increases based on changes in the consumer price index for urban consumers
(CPI-U) each year thereafter. H.R. 1 would increase the Part B deductible annually
as well, but would do so beginning in 2004 off the current base of $100 and would
use the same percentage amount traditionally used to increase the Part B premium.
This update would be the annual percentage increase in the monthly actuarial value
of benefits payable from the Federal Supplementary Medical Insurance Trust Fund
(rounded to the nearest dollar). S. 1 establishes beneficiary coinsurance and
deductible requirements for clinical laboratory services; the House bill establishes a
beneficiary copayment for each 60-day episode of home-health care.
This report provides a detailed side-by-side comparison of the fee-for service
provisions of both bills. It will be updated as events warrant.

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Contents
Modifications to Fee-for-Service Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Provisions Relating to Part A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Hospital Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Allied Health and Graduate Medical Education Payments . . . . . . . . . 13
Skilled Nursing Facility (SNF) and Hospice Services . . . . . . . . . . . . . 16
Other Part A Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Provisions Relating to Part B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Physician and Practitioner Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Hospital Outpatient Department (HOPD), Ambulatory Surgery
Center (ASC), and Clinic Services . . . . . . . . . . . . . . . . . . . . . . . 28
Covered Part B Outpatient Drugs (Not Provided by a HOPD) . . . . . . 32
Covered Drugs and Services at a Dialysis Facility . . . . . . . . . . . . . . . 38
Durable Medical Equipment (DME) and Related Outpatient Drugs . . 39
Ambulance Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Other Part B Services and Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 43
Provisions Relating to Parts A and B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Home Health Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Chronic Care Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Medicare Secondary Payor (MSP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Other Medicare A and B Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Medicare Demonstration Projects and Studies . . . . . . . . . . . . . . . . . . 56
Beneficiary Issues: Cost-Sharing Amounts and Provision of Information . 62
Other Health-Related Studies, Commissions or Committees . . . . . . . . . . . 65
Medicaid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Miscellaneous Financial Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

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Medicare Fee-for-Service Modifications
and Medicaid Provisions of S. 1,
as Passed by the Senate, and H.R. 1,
as Passed by the House
On June 27, 2003, the Senate passed the Prescription Drug and Medicare
Improvement Act of 2003 by a vote of 76-21. Later that same evening, the House
passed the Medicare Modernization and Prescription Drug Act of 2003 by a recorded
vote of 216-215 with one voting present.
Each of the bills contain significant payment increases, certain payment
reductions, expansion of covered benefits, establishment of demonstration projects
as well as new beneficiary cost-sharing provisions in the Medicare fee-for-service
(FFS) program. Provisions affecting the Medicaid program are included also. The
majority of Medicare’s FFS payment and benefit changes in S. 1 are in Title IV and
Title VI. Medicaid and other health-related provisions are also included in Title VI.
Comparable Medicare FFS changes are in Title III through Title VII of H.R. 1; the
Medicaid provisions in H.R. 1 are in Title X. Where applicable, selected provisions
that affect FFS Medicare in other parts of the Senate and House legislation have been
included in the following side-by-side comparison.
Several general points regarding the Medicare FFS modifications can be made:
! The actual monetary benefit accruing to the various providers,
physicians, or suppliers will vary depending upon the specific
structure of the payment adjustment; these payment adjustments are
different in S. 1 and H.R. 1. Of course, the actual benefit accruing
to any individual provider or physician will depend upon a myriad
of unique circumstances, such as the characteristics of the provider
or physician, including urban or rural location, as well as the amount
and types of services provided to the Medicare beneficiaries who are
served;
! Both bills have spending reductions for particular providers or
suppliers. S. 1 would freeze certain durable medical equipment
(DME) fee schedules. H.R. 1 proposes reductions in the updates for
hospitals, ambulatory surgery centers, and home health services, and
would also freeze per resident payment amounts for direct graduate
education reimbursement to high cost hospitals. To some extent,
however, reductions in either bill are counterbalanced by other
payment changes that increase Medicare payments to particular
subsets of the affected providers or suppliers.

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CRS-2
! Both bills increase beneficiary cost-sharing amounts in traditional
Medicare, but in different fashions and for different services. Both
bills schedule annual increases in the Part B deductible amount that
must be met before program payments will be made for covered Part
B services. S. 1 sets the deductible amount at $125 in 2006 and
provides for annual increases based on changes in the consumer
price index for urban consumers (CPI-U) each year thereafter. H.R.
1 would increase the Part B deductible annually as well, but would
do so beginning in 2004 off the current base of $100 and would use
the same percentage amount traditionally used to increase the Part
B premium. This update would be the annual percentage increase in
the monthly actuarial value of benefits payable from the Federal
Supplementary Medical Insurance Trust Fund (rounded to the
nearest dollar). S. 1 establishes beneficiary coinsurance and
deductible requirements for clinical laboratory services in most
settings; H.R. 1 establishes a beneficiary copayment for each 60-day
episode of home-health care at 1.5% of the national average payment
rate per episode. Absent timely regulatory action, the copayment
would be set at $40.
! H.R. 1 provides for improved coverage of preventive services,
including an initial preventive examination, and waives the
deductible for certain cancer screening tests. S. 1 provides for
increased Part B coverage of self-injected drugs.
The following general points can be made about the Medicaid provisions:
! Both bills temporarily increase states’ disproportionate share
hospital (DSH) allotments to erase the decline in these Medicaid
amounts that occurred after a special rule for their calculation
expired.
! S. 1 includes several other Medicaid provisions, including raising
the floor on DSH allotments for “extremely low DSH states”,
increasing the federal matching share of certain Medicaid payments
in the state of Hawaii, and allowing states to cover certain lawfully
residing aliens under the Medicaid program.
This report contains a detailed side-by-side comparison of the relevant
provisions of S. 1 and H.R. 1. Certain of the provisions have duplicate entries. For
example, the home health deductible established in H.R. 1 is listed in as a home
health provision and as a beneficiary cost-sharing provision.

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CRS-3
Modifications to Fee-for-Service Medicare
Provisions Relating to Part A
Hospital Services.
Provisions
Current Law
S. 1
H.R. 1
Inpatient Prospective Payment System (IPPS) Hospitals
Increase standardized amounts
Medicare pays for inpatient services in acute
Section 401. Medicare would pay hospitals
Section 402. Similar provision with respect
for small urban and rural
hospitals in large urban areas using a
in rural and small urban areas in the fifty
to discharges in the fifty states. Two
hospitals in Medicare’s
standardized amount that is 1.6% larger than the
states using the standardized amount used to
standardized amounts would still be used for
inpatient hospital prospective
standardized amount used to reimburse hospitals
pay hospitals in large urban areas starting for
hospitals in Puerto Rico; one federal amount
payment system (IPPS)
in other areas (both rural areas and smaller
discharges in FY2004. The Secretary would
would be used in the calculation of these 2
urban areas). PL.108-7 provided that all
compute one standardized amount for
rates
Medicare discharges from April 1, 2003, to
hospitals in Puerto Rico equal to that for other
December 31, 2003, will be paid on the basis of
areas. (There seems to be a drafting problem.
the large urban area amount.
There is no 1886(3)(D)(iii) in statute. If the
reference is to 1886(3)(A)(iii), there will be
Under Medicare’s IPPS, separate urban
one standardized amount which will be the
and rural standardized amounts are used for
other area standardized amount).
hospitals in Puerto Rico. These standardized
amounts are currently a blend based on 25% of
the national amount and 75% of the local
amounts.
Increase payments to hospitals
IPPS payments are adjusted, either increased or
Section 402. For cost reporting periods
Section 416. Same provision except that the
in areas with wage index
decreased as appropriate, by the hospital wage
beginning October 1, 2004, the Secretary
effective date is October 1, 2003.
values below one (by lowering
index of the area where the hospital is located or
would be required to decrease the labor-
Medicare’s IPPS labor-related
where it has been reassigned. Presently,
related share to 62% of the standardized
share which is the proportion
approximately 71% of the standardized amount
amount only if such change would result in
of the standardized amount
is adjusted by the area wage index.
higher total payments to the hospital. This
multiplied by the wage index).
provision would be applied without regard to
certain budget neutrality requirements.
Increase Medicare IPPS
Medicare pays inpatient acute hospital services
Section 403. The Secretary would be
No provision.
payments for low-volume
for each discharge from the hospital without
required to develop a graduated adjustment to
hospitals
regard for the number of beneficiaries
Medicare’s inpatient payment rates to account

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CRS-4
Provisions
Current Law
S. 1
H.R. 1
discharged from any given hospital. Under
for the higher unit costs associated with low-
certain circumstances, however, sole community
volume hospitals. Certain hospitals with
hospitals (SCHs) and Medicare dependent
fewer than 2,000 total discharges during the
hospitals with more than a 5% decline in total
three most recent cost reporting periods
discharges from one period to the next may
would be eligible for up to a 25% increase in
apply for an adjustment to their payment rates to
their Medicare payment amount starting with
partially account for higher costs associated with
cost reports that begin during FY2005.
a drop in patient volume due to circumstances
Eligible hospitals would be located at least 15
beyond its control.
miles from a similar hospital or those
determined by the Secretary to be so located
due to factors such as weather conditions,
travel conditions, or travel time to the nearest
alternative source of appropriate inpatient
care. Certain budget neutrality requirements
would not apply to this provision.
Increase disproportionate share
Medicare makes additional payments to certain
Section 404. Starting for discharges after
Section 401. Starting for discharges after
hospital (DSH) payments for
acute hospitals that serve a large number of low-
October 1, 2004, a hospital that qualifies for
October 1, 2003, a hospital that is not a large
small urban and rural hospitals
income Medicare and Medicaid patients.
a DSH adjustment when its DSH patient
urban hospital that qualifies for a DSH
Although a SCH or rural referral center (RRC)
percentage exceeds the 15% DSH threshold
adjustment would receive its DSH payments
can qualify for a higher DSH adjustment,
would receive the DSH payments using the
using the current DSH adjustment formula for
generally, the DSH adjustment that a small
current formula that establishes the DSH
large urban hospitals, subject to a limit. The
urban or rural hospital can receive is limited to
adjustment for a large urban hospital.
DSH adjustment for any of these hospitals,
5.25%. Large (100 beds and more) urban
except for RRCs, would be capped at 10%.
hospitals and large rural hospitals (500 beds and
more) are eligible for a higher adjustment that
can be significantly greater; the amount of the
DSH adjustment received by these larger
hospitals will depend upon its DSH percentage.
Require MedPAC report on
No provision
Section 404A. MedPAC would be required
No provision.
Medicare DSH adjustments
to conduct a study to determine (1) whether
DSH payments should be made in the same
manner as Medicare’s graduate medical
education payments; (2) the extent that
hospitals receiving Medicaid DSH payments
also receive Medicare DSH payments; and (3)
whether uncompensated care costs should be

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CRS-5
Provisions
Current Law
S. 1
H.R. 1
added to the Medicare DSH formula. The
report, including recommendations, would be
due to Congress within 1 year from
enactment.
Exclude wage data of hospitals
Certain qualified small hospitals are converting
Section 405(e). The Secretary would be
No provision.
that convert to critical access
to CAHs. After conversion, these facilities are
required to exclude wage data from hospitals
hospitals (CAHs) from IPPS
paid on a reasonable cost basis and are not paid
that have converted to CAHs from the IPPS
wage index
under IPPS. Medicare’s IPPS payments to acute
wage index calculation starting for cost
hospitals are adjusted by the wage index of the
reporting periods beginning January 1, 2004.
area where the hospital is located or has been
reassigned. Although the hospital wage index is
recalculated annually, the wage index for any
given fiscal year is based on data submitted as
part of a hospital’s cost report from 4 years
previously. Presently wage data from hospitals
that have converted to CAHs are included in the
IPPS wage index calculation.
Increase DSH for “Pickle”
Most DSH hospitals receive additional Medicare
Section 420A. Hospitals that qualify for the
No provision.
hospitals
payments because they serve a disproportionate
DSH adjustment under the Pickle amendment
share of poor Medicare and Medicaid patients.
would receive a DSH operating and capital
A few urban hospitals receive DSH payments
adjustment of 40% for discharges beginning
under an alternative Pickle formula. If a
October 1, 2003.
hospital receives at least 30% of its patient care
revenue from indigent care funds, it will get a
35% increase in its Medicare operating
payments. The Pickle hospitals receive a
capital DSH adjustment of 14.16%, the amount
that other non-Pickle hospitals with a 35%
operating DSH adjustment would receive.

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CRS-6
Provisions
Current Law
S. 1
H.R. 1
Increase payments for
Under Medicare’s IPPS, separate standardized
Section 409. Hospitals in Puerto Rico would
Section 503. Hospitals in Puerto Rico would
hospitals in Puerto Rico
amounts are used to establish payments for
receive Medicare payments based on a 50/50
receive Medicare payments based on a split
discharges from short-term general hospitals in
split between national and local amounts
between federal and local amounts before
Puerto Rico. Balanced Budget Act of 1997
before October 1, 2004. These hospitals
October 1, 2003. From FY2004 though
(BBA 97) provides for an adjustment of the
would receive Medicare payments based on
FY2007, an increasing amount of the
Puerto Rico rates from blended amounts based
100% of the federal rate for discharges
payment rate would be based on national
on 25% of the national amounts and 75% of the
beginning October 1, 2004 and before
rates as follows: during FY2004, payment
local amounts to blended amounts based on a
October 1, 2009. The rate for hospitals in
would be 59% national and 41% local; this
50/50 split between national and local amounts.
Puerto Rico would revert to a 50/50 split after
would change to 67% national and 33% local
October 1, 2009.
during FY2005 and 75% national and 25%
local during FY2006 and subsequently.
Require GAO report on
No provision.
Section 413. Using the most current data,
No provision.
appropriateness of IPPS
GAO would be required to report to Congress
payments
within 18 months of enactment on: (1) the
appropriate level and distribution of IPPS
Medicare payments to short-term general
hospitals; and (2) the need for geographic
adjustments to reflect legitimate differences
in hospital costs.
Calculate wage indices for
IPPS hospitals may apply to the Medicare
Section 419. The Secretary would be able to
No provision.
hospitals
Geographic Classification Review Board
waive established reclassification criteria in
(MGCRB) for a change in classification to a
calculating the wage index in a state when
different area. If reclassification is granted, the
making payments for hospital discharges in
new wage index will be used to calculating
FY2004.
Medicare’s payment for inpatient and outpatient
services. The reclassification standards are
established by regulation.
Update hospital market basket
IPPS standardized amounts are increased
No provision
Section 404. The Secretary would be
more frequently
annually using an update factor which is
required to revise the market basket cost
determined in part by the projected increase in
weights to reflect the most currently available
the hospital market basket (MB), an input price
data and to establish a schedule for revising
index which measures the average change in the
the weights more often than once every 5
price of goods and services hospitals purchased
years. The Secretary would be required to
in order to furnish inpatient care. Centers for
submit a report to Congress by October 1,

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CRS-7
Provisions
Current Law
S. 1
H.R. 1
Medicare and Medicaid Services (CMS) revises
2004 on the reasons for and the options
the category weights, reevaluates the price
considered in establishing such a schedule.
proxies for such categories, and rebases the MB
every 5 years.
Reduce hospital update factor
Each year, Medicare’s operating payments to
No provision.
Section 501. Acute hospitals would receive
hospitals are increased or updated by a factor
an operating update of the MB minus 0.4
that is determined in part by the projected
percentage points for FY2004 through
annual change in the hospital MB. Congress
FY2006. The operating update would be the
establishes the update for Medicare’s IPSS for
MB increase in FY2007 and subsequently.
operating costs, often several years in advance.
Currently, acute hospitals will receive the MB as
an update for FY2004 and subsequently.
Increase pass-through
The Medicare, Medicaid, and SCHIP Benefits
No provision.
Section 502. New diagnosis and procedure
payments for new inpatient
Improvement and Protection Act of 2000
codes would be added in April 1 of each year
technology
(BIPA) established that Medicare’s IPPS should
that would affect Medicare’s IPPS starting the
recognize the costs of new medical services and
following October. The Secretary would not
technologies beginning October 1, 2001. The
be able to deny new technology status
additional hospital payments can be made by the
because an item has been used prior to the 2-
means of new technology groups, an add-on
to-3 year period before it was issued a billing
payment, a payment adjustment, or other
code. When establishing whether DRG
mechanism, but cannot be a separate fee
payments are inadequate, the Secretary would
schedule and must be budget neutral. CMS
be required to apply a threshold that is the
established that a technology that provided a
lesser of 75% of the standardized amount
substantial improvement to existing treatments
(adjusted to reflect the difference between
would qualify for additional payments. The
costs and charges) or 75% of one standard
add-on payment for an eligible new technology
deviation for DRG involved. The Secretary
would occur when the standard diagnosis related
would be required to provide additional
group (DRG) payment was inadequate. This
regulatory guidance on the new technology
threshold was established as one standard
criteria. The Secretary would be required to
deviation above the mean standardized DRG;
deem that a technology provides a substantial
the add-on payment for new technology would
improvement on an existing treatment if it is
be the lesser of: (a) 50% of the costs of the new
designated under section 506 of the FDA Act,
technology; or (b) 50% of the amount by which
approved under certain sections of Title 21,
the costs exceeded the standard DRG payment.
designated for priority review, is an exempt
However, if the new technology payments are
medical device under section 520(m) of such
estimated to exceed the budgeted target amount
Act, or receives expedited review under

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CRS-8
Provisions
Current Law
S. 1
H.R. 1
of 1% of the total operating inpatient payments,
section 515(d)(5). Other requirements
the add-on payments are reduced prospectively.
requiring the process for public input would
CMS has proposed to reduce the threshold to
be imposed. A preference fo use of a DRG
75% of one standard deviation beyond the
adjustment would be established. Add-on
geometric mean standardized charge for all
payments would be increased to the
cases in the DRG to which the new service is
percentage that Medicare reimburses inpatient
assigned.
outlier cases. Funding for this new
technology would no longer be budget
neutral.
Increase hospitals’ wage index
Unlike other providers, IPPS hospitals may
No provision.
Section 504. The Secretary would be
values to reflect commuting
apply to the Medicare Geographic Classification
required to establish an application process
patterns from higher wage
Review Board (MGCRB) for reassignment to
and payment adjustment to recognize the
index areas
another area. The MGCRB was created to
commuting patterns of hospital employees. A
determine whether a hospital should be
hospital that qualified for such a payment
redesignated to an area with which it has close
adjustment would have average hourly wages
proximity for purposes of using the other area’s
that exceed the average wages of the area in
wage index. A hospital can establish proximity
which it is located and have at least 10% of
to the new area by documenting that at least
its employees living in one or more areas that
50% of its employees reside there. Other cost
have higher wage index values. The process
criteria must be met before a hospital will be
would be based on the MGCRB
reclassified. If reclassification is granted, the
reclassification process and schedule with
wage index for the new area will be used to
respect to data submitted. Such an
calculate Medicare’s payment for inpatient and
adjustment would be effective for 3 years
outpatient services provided by the hospital.
unless a hospital withdraws or elects to
terminate its payment. It would also be
exempt from certain budget neutrality
requirements.
Permit hospitals with missing
SCHs are hospitals that, because of factors such
No provision.
Section 414. Beginning January 1, 2004, a
cost reports to be SCHs
as isolated location, weather conditions, travel
hospital would not be able to be denied
conditions, or absence of other hospitals, are the
treatment as a SCH or receive payment as a
sole source of inpatient services reasonably
SCH because data are unavailable for any
available in a geographic area, or are located
cost reporting period due to changes in
more than 35 road miles from another hospital.
ownership, changes in fiscal intermediaries,
An SCH receives the higher of the following
or other extraordinary circumstances, so long
payment rates: the current IPPS base payment
as data from at least one applicable base cost
rate, or its hospital-specific per discharge costs
reporting period is available.

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CRS-9
Provisions
Current Law
S. 1
H.R. 1
from either FY 1982, 1987 or 1996 updated to
the current year. The FY1996 base year option
will be fully implemented beginning in FY2004.
Provide hospitals with data on
A hospital’s DSH payments under IPPS are
No provision.
Section 951. The Secretary would arrange to
patient days for DSH
calculated using a formula that includes data on
furnish necessary patient day information for
adjustment
the number of total patient days as well as days
the Medicare DSH computation for the
provided to those eligible for Medicaid and to
current cost reporting year.
Medicare b eneficiaries who receive
Supplemental Security Income.
Permit adoption of new coding
The Secretary is required to rely on the
No provision.
Section 942(d). The new coding standards,
standard
recommendations from the National Committee
International Classification of Diseases 10th
on Vital and Health Statistics (NCVHS) before
Revision (IDC-10) could be adopted within
adopting health information standards and
1-year of enactment without receiving a
codes.
recommendation from NCVHS.
Require GAO report on use of
No provision.
No provision.
Section 942(c). GAO would study which
external data for IPPS
external data can be collected in a shorter
payments
time frame by CMS to use in calculating IPPS
payments. GAO could evaluate feasibility and
appropriateness of using quarterly samples or
special surveys and would include an analysis
of whether other executive agencies are best
suited to collect this information. The report
would be due to Congress no later than
October 1, 2004.

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CRS-10
Provisions
Current Law
S. 1
H.R. 1
Critical Access Hospital Services
Eliminate 35-mile requirement
Ambulance services provided by a CAH or
Section 405(b). The requirement that the
Section 405(c). The 35-mile requirement
for cost-based reimbursement
provided by an entity that is owned or operated
CAH or the related entity be the only
would not apply to a provider or supplier of
of CAH ambulance services
by a CAH is paid on a reasonable cost basis and
ambulance provider within a 35-mile drive in
ambulance services who is a first responder to
not the ambulance fee schedule, if the CAH or
order to receive reasonable cost
emergencies for services furnished after the
entity is the only provider or supplier of
reimbursement for the ambulance services
first cost reporting period beginning after the
ambulance services that is located within a 35-
would be dropped for services furnished
date of enactment.
mile drive of the CAH.
beginning January 1, 2005.
Expand payment for
BIPA required the Secretary to include the costs
Section 405(c). Reimbursement for on-call
Section 405(b). Same provision but would
emergency room on-call
of compensation (and related costs) of on-call
emergency room providers would be
be effective January 1, 2004.
providers
emergency room physicians who are not present
expanded to include physician assistants,
on the premises of a CAH, are not otherwise
nurse practitioners, and clinical nurse
furnishing services, and are not on-call at any
specialists as well as emergency room
other provider or facility when determining the
physicians for covered Medicare services
allowable, reasonable cost of outpatient CAH
provided beginning January 1, 2005.
services.
Increase critical access
A CAH is a limited service facility that must
Section 405(a) A CAH would be able to
Section 405(f). For designations beginning
hospital (CAH) bed limit
provide 24-hour emergency services and operate
operate up to 25 swing beds or acute care
January 1, 2004, the Secretary would specify
a limited number of inpatient beds in which
beds, subject to the 96-hour average length of
standards for establishing seasonal variations
hospital stays can average no more than 96
stay for acute care patients. The requirement
in a CAH’s patient admissions that would
hours. A CAH is limited to 15 acute-care beds,
that only 15 of the 25 beds be used for acute
justify a five-bed increase in the number of
but can have an additional 10 swing beds that
care at any time would be dropped. This
beds it can maintain (and still retain its
are set up for skilled nursing facility level care.
provision would be effective for designations
classification as a CAH). CAHs with swing
While all 25 beds in a CAH can be used as
made beginning October 1, 2004.
beds would be able to use up to 25 beds for
swing beds, only 15 of the 25 can be used for
acute care services as long as no more than 10
acute care at any time.
beds at any time are used for non-acute
services. Those CAHs with swing beds that
made this election would not be eligible for
the five-bed seasonal adjustment. A CAH
with swing beds that elects to operate 15 of its
25 beds as acute care beds would be eligible
for the five-bed seasonal adjustment.

---

CRS-11
Provisions
Current Law
S. 1
H.R. 1
Authorize periodic interim
Eligible hospitals, skilled nursing facilities, and
Section 405(d). Starting with payments
Section 405(d). Same provision but would
payments for eligible CAHs
hospices which meet certain requirements
made beginning January 1, 2005, an eligible
be effective January 1, 2004. Also, the
receive Medicare periodic interim payments
CAH would be able to receive payments
Secretary would be required to develop
(PIP) every 2 weeks; these payments are based
made on a PIP basis for inpatient services.
alternative methods based on the expenditures
on estimated annual costs without regard to the
of the hospital for these PIP payments.
submission of individual claims. At the end of
the year, a settlement is made to account for any
difference between the estimated PIP payment
and the actual amount owed. A CAH is not
eligible for PIP payments.
Exclude beds in distinct-part
Beds in distinct-part skilled nursing facility units
Section 405(g). The Secretary would not be
No provision.
units from CAH bed count
do not count toward the CAH bed limit. Beds in
able to count any beds in a distinct-part
distinct-part psychiatric or rehabilitation units
psychiatric or rehabilitation unit operated by
operated by an entity seeking to become a CAH
the entity seeking to become a CAH for
count toward the bed limit.
designations beginning October 1, 2003. The
total number of beds in these distinct-part
units would not be able to exceed 25. A CAH
would be able to establish a such a distinct-
part unit.
Establish CAH improvement
No provision.
Section 415. The Secretary would be
No provision.
demonstration program
required to establish a budget neutral 5-year
CAH demonstration program in four areas
including Kansas and Nebraska to test various
methods to improve the CAH program.
Services would be paid either on the basis of
its reasonable costs (without regard to
customary charges) or using the relevant PPS
for those services. In this instance,
reasonable cost reimbursement of capital
would include a return on equity payment of
150% of the average rate of interest paid by
the Hospital Insurance (HI) Trust Fund.

---

CRS-12
Provisions
Current Law
S. 1
H.R. 1
Modify CAHs’ billing
As specified by Balanced Budget Refinement
No provision.
Section 405(e). The Secretary would not be
requirements for physician
Act of 1999 (BBRA), CAHs can elect to be paid
able to require that all physicians providing
services
for outpatient services using cost-based
services in a CAH assign their billing rights to
reimbursement for its facility fee and at 115% of
the entity in order for the CAH to be able to
the fee schedule for professional services
be paid on the basis of 115% of the fee
otherwise included within its outpatient critical
schedule for the professional services
access hospital services for cost reporting
provided by the physicians. However, a CAH
periods starting October 1, 2000.
would not receive such payment for any
physician who did not assign billing rights to
the CAH.
Increase CAH payments for
Generally, a CAH receives reasonable, cost-
No provision.
Section 405(a). Beginning October 1, 2003,
inpatient, outpatient, and
based reimbursement for care rendered to
inpatient services, outpatient services, and
swing bed services
Medicare beneficiaries. CAHs may elect either
covered skilled nursing facility services
a cost-based hospital outpatient service payment
furnished in swing beds by a CAH would be
or an all-inclusive rate which is equal to a
reimbursed at 102% of reasonable costs of
reasonable cost payment for facility services
services furnished to Medicare beneficiaries.
plus 115% of the fee schedule payment for
professional services.
Other Hospitals
Create essential rural hospital
Generally, a hospital designated as a CAH is
No provision.
Section 403. The definition of CAH hospital
category
exempt from IPPS and receives reasonable, cost-
and services would be amended to add an
based reimbursement for care rendered to
essential rural hospital. An eligible hospital
Medicare beneficiaries. Certain acute general
would apply for such a classification, have
hospitals receive special treatment under IPPS,
more than 25 licensed acute care beds, and
particularly those facilities identified as isolated
be located in a rural area as defined by IPPS.
or essential hospitals primarily located in rural
The Secretary would have to determine that
areas, including RRCs and SCHs.
the closure of this hospital would
significantly diminish the ability of
beneficiaries to obtain essential health care
services based on certain criteria. Such
hospitals would not be able to change such
classification and would not be able to be
treated as a SCH, Medicare dependent
hospital or RRC under IPPS and would be

---

CRS-13
Provisions
Current Law
S. 1
H.R. 1
reimbursed 102% of its reasonable costs for
inpatient and outpatient services beginning
October 1, 2004. Beneficiary cost-sharing
amounts would not be affected and required
billing for such services would not be waived.
Allied Health and Graduate Medical Education Payments.
Provisions
Current Law
S. 1
H.R. 1
Pay hospitals for training
Medicare pays hospitals for its share of direct
Section 408. Beginning October 1, 2004,
No provision.
costs of psychologists
costs associated with approved hospital-based
Medicare would reimburse its share of the
training programs for nurses and certain other
reasonable costs of approved education activities
allied health professionals including inhalation
of psychologists under the allied health
therapists, nurse anesthetists, occupational and
professional training provisions.
physical therapists. Medicare does not pay for
such costs associated with psychologists’
training.
Increase initial residency
Medicare counts residents in their initial
Section 410. The Secretary would be required
No provision.
period for geriatricians
residency period (the lesser of the minimum
to promulgate interim final regulations after
number of years required for board eligibility in
notice and comment that would establish full
the physician’s specialty or 5 years) as 1.0 FTE.
GME payment for 2 years as a 2-year initial
Residents whose training has extended beyond
residency program for certain geriatric training
their initial residency period count as 0.5 FTE.
programs effective for cost reporting periods
Geriatrics is a subspecialty of family practice,
beginning October 1, 2003.
internal medicine and psychiatry. A 1-year
fellowship is required for certification in
geriatrics, following an initial residency in one
of those three areas.
Increase indirect medical
A hospital’s IME payment is based on a
Section 418. The IME multiplier in FY2004
No provision.
education (IME)
percentage add-on to its IPPS rate that is
and in FY 2005 would be 1.36; the multiplier
payments
established by a complicated curvilinear formula
would be 1.355 in FY2006 and in subsequent
that currently provides a payment increase of
years. This would provide an IME adjustment
approximately 5.5% for each 10% increase in
of 5.508% for each 10% increase in a hospital’s
the hospital’s intern and resident-to-bed (IRB)
IRB ratio for FY2004 and FY2005. This change
ratio. The statutory formula is multiplied by a
has been projected to increase payments to
hospital’s base payment rate for each Medicare
teaching hospitals by $300 million over 10
discharge to determine the IME payments: 1.35
years.

---

CRS-14
Provisions
Current Law
S. 1
H.R. 1
X [(1+ IRB)0.405 - 1]. The multiplier of 1.35
increases the level of the IME adjustment to the
existing target level of 5.5%. Congress has
periodically changed the multiplier to decrease
or increase IME payments to teaching hospitals.
Count residents in a non-
Medicare has different resident limits for the
Section 411. The Secretary would be required
No provision.
provider setting; drop
IME adjustment and direct medical education
to reimburse teaching hospitals for residents in
dentists and podiatrists
(DGME) payment. Generally, the resident
non-hospital locations, when hospitals incur all,
from the 3-year rolling
counts for both IME and DGME payments are
or substantially all, the costs of the training in
limit on IME payments
based on the number of residents in approved
that site starting from the effective date of a
allopathic and osteopathic teaching programs
written agreement between the hospital and the
reported by the hospital in calendar year 1996.
entity owning or operating the non-hospital site.
The DGME limit may differ from the IME limit
The effective date of the written agreement
because in 1996 residents training in non-
would be determined according to generally
hospital sites were eligible for DGME payments
accepted accounting principles. The Secretary
but not for IME payments. Prior to BBA 1997,
would not be able to take into account the fact
the number of residents that could be counted
that the hospital costs incurred are lower than
for IME purposes included only those in the
actual Medicare reimbursement. Starting with
hospital inpatient and outpatient departments.
FY2005, dental and podiatric residents would be
Effective October 1, 1997, under certain
removed from the 3-year rolling average
circumstances, a hospital may now count
calculation for IME and DGME reimbursements.
residents in non-hospital sites for the purposes of
IME. Subject to these resident limits, a teaching
hospital’s IME and DGME payments are based
on a 3-year rolling average of resident counts.
The rolling average calculation includes podiatry
and dental residents. CMS has proposed
regulations that limit Medicare’s medical
education payments when existing residents are
transferred from a non-hospital entity to a
teaching hospital, particularly when the non-
hospital entity has historically paid for the
training costs without hospital funding.

---

CRS-15
Provisions
Current Law
S. 1
H.R. 1
Extend update limitation
“Hospitals with per resident amounts between
No provision.
Section 711. Hospitals with per resident
on high cost programs
85% and 140% of the geographically-adjusted
amounts above 140% of the geographically-
national average would continue to receive
adjusted national average amount would not get
payments based on their hospital-specific per
an update from FY2004 through FY2013.
resident amounts updated for inflation.
Redistribute unused
Medicare has different resident limits for the
No provision.
Section 406. A teaching hospital’s total number
residency positions
IME adjustment and DGME payment.
of Medicare-reimbursed resident positions
Generally, the resident counts for both IME and
would be reduced by a portion of its unused
DGME payments are based on the number of
residency slots for cost reporting periods starting
residents in approved allopathic and osteopathic
January 1, 2004 if its resident reference level is
teaching programs that were reported by the
less than its applicable resident limit. If so, the
hospital for the cost reporting period ending in
reduction would be equal to 75% of the
calendar year 1996. The DGME resident limit is
difference between the hospital’s limit and its
based on the unweighted resident counts. It may
resident reference level upon the timely request
differ from the IME limit because in 1996
for such an adjustment, for the cost reporting
residents training in non-hospital sites were
period that includes July 1, 2003. A hospital’s
eligible for DGME payments but not for IME
reference period would be the three most recent
payments. Generally, a hospital’s IME
settled or submitted consecutive cost reporting
adjustment and increased IPPS payments
periods on or before September 30, 2002. The
depends on a hospital’s teaching intensity as
need for an increase in the physician specialty
measured by the ratio of the number of interns
and the location involved would be considered.
and residents per bed. Medicare’s DGME
Positions would be distributed to programs in
payment to teaching hospitals is based on its
rural areas and those not in large urban areas on
updated cost per resident (subject to a locality
a first-come-first-served basis. The hospital
adjustment and certain payment corridors), the
would have to demonstrate that the resident
weighted number of approved full-time
positions would be filled; not more than 25
equivalent (FTE) residents, and Medicare’s
positions would be given to any hospital. These
share of inpatient days in the hospital.
hospitals would be reimbursed for DGME for
the increase in resident positions at the locality-
adjusted national average per resident amount.
IME payments would also be affected. The
Secretary would be required to submit a report to
Congress, no later than July 1, 2005, on whether
to extend the application deadline for increases
in resident limits.

---

CRS-16
Skilled Nursing Facility (SNF) and Hospice Services.
Provisions
Current Law
S. 1
H.R. 1
Skilled Nursing Facility Services (SNF)
Increase skilled nursing
Under PPS, SNFs are paid a daily rate that varies
No provision.
Section 511. Starting October 1, 2003, the per
facility (SNF) payments
depending on the care needs of the beneficiary.
diem RUG payment for a SNF resident with
for AIDS patients
There are 44 resource utilization groups (RUGs)
acquired immune deficiency syndrome (AIDS)
used to adjust payment for care needs; each
would be increased by 128%. This increase
group reflects the intensity of services, such as
would not apply after such date when the
skilled nursing care and/or various therapy and
Secretary certifies that the case-mix adjustment
other services needed by a beneficiary.
adequately compensates for the facility’s
increased costs associated with caring for a
resident with AIDS.
Exclude certain clinic
Under Medicare’s PPS, SNFs are paid a
Section 429. Services provided by a rural health
Section 408. Provision is limited to RHCs and
visits from skilled
predetermined amount to cover all services
clinic (RHC) and a federally qualified health
FQHC services provided after January 1, 2004
nursing facility (SNF)
provided in a day, including the costs associated
center (FQHC) after January 1, 2005 would be
and does not extend to outpatient services that
prospective payment
with room and board, nursing, therapy, and
excluded from SNF-PPS if such services would
are beyond the general scope of SNF
system (PPS)
drugs; the daily payment varies depending upon
have been excluded if furnished by an physician
comprehensive care plans.
a patient’s therapy, nursing and special care
or practitioner who was not affiliated with a
needs as established by one of 44 RUGs. Certain
RHC or FQHC. Outpatient services that are
services and items provided a SNF resident, such
beyond the general scope of SNF
as physicians’ services, specified ambulance
comprehensive care plans that are provided by
services, specified chemotherapy items and
an entity that is 100% owned as a joint venture
services, and certain outpatient services provided
by two Medicare-participating hospitals or
by a Medicare-participating hospital or CAH,
critical access hospitals would be excluded from
are excluded from the SNF-PPS and paid
the SNF-PPS.
separately under Part B.
Require background
All nursing homes and home health agencies
Section 636. Nursing homes, home health
No provision.
check on workers for
may access FBI records to conduct background
agencies, hospices and other entities providing
certain Medicare and
checks for only those applicants who would
long-term care services to Medicare and
Medicaid health and
provide direct patient care. Background checks
Medicaid beneficiaries would be required to
long-term care providers
may only be conducted in those states that
initiate background checks when hiring non-
choose to establish a mechanism for processing
licensed and licensed workers. States would be
these requests. Most states have enacted laws
required to check state, and if appropriate,
that require or allow nursing homes and home
request the FBI to check criminal history records
health agencies to conduct these checks for
on behalf of providers that are required to
certain categories of potential employees. The
conduct these background checks. Providers
Attorney General may charge a fee of no greater
would be permitted to provisionally employ

---

CRS-17
Provisions
Current Law
S. 1
H.R. 1
than $50 per request to any nursing home or
workers pending completion of the criminal
home health agency requesting the background
background checks as long as they comply with
check. Section 1819(c) and 1919(c) of the Social
supervisory requirements. Nursing homes that
Security Act (SSA) requires the state to maintain
are found to have violated these requirements
a registry of nurse aides that includes
would face civil penalties of $2,000 for a first-
information about their having completed
time violation and $5,000 for subsequent
training and competency evaluation programs
violations within 5 years. Nursing homes that
and findings of neglect or abuse.
knowingly retain workers in violation of the
requirements in this provision would face civil
penalties of $5,000 for a first-time violation and
$10,000 for subsequent violations within 5
years. Rules pertaining to allowable charges for
conducting background checks and penalties for
non-compliance would be specified. The nurse
aide registry would be expanded to include non-
licensed workers and renamed “employee
registry.” Survey and certification agencies
would investigate abuse and neglect allegations
and misappropriation of resident property.
Grants would be available to public or private
non-profit entities to develop information on
best practices in patient abuse prevention
training (including behavior training and
interventions) for managers and staff of hospital
and health care facilities. $10.2 million would
be authorized to be appropriated for FY 2004.
Hospice Services
Permit hospices to
Medicare requires a hospice to provide certain
Section 406. Beginning October 1, 2004, a
Section 946. Same provision.
provide core hospice
core services directly. These core services
hospice would be permitted to enter into
services under
include nursing care, medical social services, and
arrangements with another hospice program to
arrangement
counseling services.
provide core service in extraordinary
circumstances.

---

CRS-18
Provisions
Current Law
S. 1
H.R. 1
Permit nurse
Medicare covers hospice services to care for the
Section 407. Beginning October 1, 2004, a
Section 409. Nurse practitioners would be
practitioners, clinical
terminal illness of the beneficiary. Reasonable
terminally ill beneficiary under hospice care
permitted to be identified as a beneficiary’s
nurse specialists, and
and necessary medical and support services for
would be able to designate a physician assistant,
attending physician and would be able to
physician assistants to
the management of the terminal illness are
nurse practitioner, or clinical nurse specialist
establish and review the written plan-of-care as
attend hospice patients
furnished under a written plan-of-care
(who is not an employee of the hospice
well as provide other services, but would not be
established and periodically reviewed by the
program) as his or her attending physician. The
able to certify that a beneficiary is terminally ill.
patient’s attending physician and the hospice.
written plan-of-care would be able to be
The attending physician may be employed by the
established by these professionals who would be
hospice and is identified by the beneficiary as
able to periodically review the beneficiary’s
having the most significant role in the
written plan-of-care.
determination and delivery of medical care to the
beneficiary at the time that hospice care is
elected.
Pay for physician
Current law authorizes coverage of hospice
No provision.
Section 512. As of January 1, 2004, Medicare
consultation services in
services, in lieu of certain other Medicare
would pay for a hospice-employed physician’s
certain instances
benefits, for terminally ill beneficiaries who elect
consultation with a terminally ill beneficiary
such coverage. The hospice can be paid by
who has not elected the hospice benefit.
Medicare only after the beneficiary has elected
the hospice benefit.
Establish rural hospice
Medicare’s hospice services are provided
No provision.
Section 418. The Secretary would establish a 5-
demonstration program
primarily in a patient’s home to beneficiaries
year demonstration project in three hospice
who are terminally ill and who elect such
programs to deliver hospice care to Medicare
services. Medicare law prescribes that the
beneficiaries in rural areas. Those Medicare
aggregate number of days of inpatient care
beneficiaries who lack an appropriate caregiver
provided to Medicare beneficiaries who elect
and are unable to receive home-based hospice
hospice care in any 12-month period cannot
care would be able to receive hospice care in a
exceed 20% of the total number of days of
facility of 20 or fewer beds that offers a full
hospice coverage provided to these persons.
range of hospice services within its walls. The
facility would not be required to offer services
outside of the home and the limit on the
aggregate number of inpatient days provided to
Medicare beneficiaries who elect hospice care
would be waived.

---

CRS-19
Other Part A Provisions.
Provisions
Current Law
S. 1
H.R. 1
Make grants to States
The Secretary is able to make grants for specified
Section 405(f). Under this program, the
Section 405(g). The authorization to award
and certain rural
purposes to states or eligible small rural hospitals
Secretary would be able to award grants of up to
grants under the existing Rural Hospital
hospitals
that apply for such awards. Funding for the
$50,000 to hospitals to assist eligible small rural
Flexibility Program would be established from
Rural Hospital Flexibility Grant Program was
hospitals in reducing medical errors and
FY2004 through FY2008 from the Federal HI
$25 million from 1999 through 2001; $40
increasing patient safety under the new Small
Trust Fund at amounts of up $25 million each
million in FY2002; and $25 million in 2003.
Rural Hospital Improvement Program.
year.
The authorization to award the grants expired in
Appropriations of $25 million each year from
FY2002.
the Treasury from FY2004 through FY2008
would be authorized for this purpose.
Appropriations of $40 million each year from
FY2004 through FY2008 from the HI Trust
Fund for grants to states for specified purposes
would be authorized. States that are awarded
grants would be required to consult with the
hospital associations and rural hospitals in the
state.
Establish health care
No provision
Section 608. A loan program would be
No provision.
infrastructure loan
established to improve the cancer-related health
program
care infrastructure in states with a population of
less than 3 million. In order to receive
assistance, the applicant would be required to:
(1) be engaged in cancer research; and (2) be
designated as a cancer center for the National
Cancer Institute (NCI) or be similarly designated
by the state. $49 million in budget authority
would be authorized for July 1, 2004 through
FY2008 to carry out the loan program, $2
million for program administration.
Establish capital
The Public Health Services Act establishes a
Section 609. The Secretary would be able to
No provision.
infrastructure revolving
fund in the Treasury from which the Secretary of
make loans to any rural entity including rural
loan program
HHS can make loans or loan guarantees in the
health clinics, a medical facility with less than
amounts that have been specified in
50 beds in non- MSA counties or in rural
appropriations acts from time to time. Under the
census tracts of MSAs, rural referral centers or
Medicare Rural Hospital Flexibility Program
sole community hospitals for various purposes.
established as part of Title XVIII, the Secretary
An geographically reclassified entity would be
may award grants to rural hospitals to cover the
eligible for these loans and loan guarantees. The

---

CRS-20
Provisions
Current Law
S. 1
H.R. 1
implementation costs associated with data
government’s total exposure for this program
systems needed to meet the BBA 97
would not exceed $50 million per year and the
requirements.
principal amount of all loans directly made or
guaranteed in any year is not to exceed $250
million per year. In addition, rural providers
could apply to receive $50,000 planning grants
to help assess capital and infrastructure needs.
The grants awarded in any year would not
exceed $2.5 million. The program would expire
after September 30, 2008.
Establish rural
No provision.
Section 414. The Secretary would be required
No provision.
community hospital
to establish a 5-year rural community hospital
demonstration program
(RCH) demonstration program in four areas
including Kansas and Nebraska that will pay for
acute inpatient services, outpatient services, and
certain home health services in qualifying
hospitals either on the basis of its reasonable
costs (without regard to the amount of
customary charges) or using the respective
prospective payment systems for those services.
In this instance, reasonable cost reimbursement
of capital costs would include a return on equity
payment of 150% of the average rate of interest
paid by the HI Trust Fund. The project would
be budget neutral. Certain limits on beneficiary
cost-sharing would be imposed.

---

CRS-21
Provisions
Current Law
S. 1
H.R. 1
Ensure status as long-
A hospital-in-a-hospital is a long-term hospital
Section 416. The Secretary would not be able
No provision.
term hospitals for
that is physically located in an acute care
to impose any special conditions on the
certain hospital-in-
hospital. CMS has established certain
operation, size, number of beds, or location of
hospitals
requirements for these entities to be excluded
an existing long-term hospital in order to
from the IPPS and be paid as a long-term
continue participating in Medicare or Medicaid
hospital and exempted existing entities (those
or to continue being classified as a long-term
that were in existence on or before September
hospital. The Secretary would not be able to
30, 1995) when these requirements were
adopt a proposed regulation that would
established. On May 19, 2003, CMS proposed
implement such conditions or any revision to
that a grandfathered hospital-in-a hospital would
such regulation that have a comparable effect.
only be exempt from the existing requirements if
[Duplicate provision is at Section 420B]
it continues to operate within the same terms and
conditions that were in effect as of September
30, 1995.
E s t a b l i s h s p e c i a l
Unlike other providers, acute hospitals may
Section 417. Starting October 1, 2003, Iredell
No provision.
treatment for certain
apply to the Medicare Geographic Classification
County and Rowan County, North Carolina
entities
Review Board (MGCRB) for a change in
would be deemed to be located in the Charlotte-
classification from a rural area to an urban area,
Gastonia-Rock Hill, NC-SC Metropolitan
or reassignment from one urban area to another
Statistical Area for the purpose of Medicare’s
urban area. Hospital reclassifications are
inpatient and outpatient acute hospital payments
established on a budget neutral basis so
as well as SNF and home health payments. The
aggregate inpatient prospective payment system
Secretary would be required to adjust the wage
expenditures will not increase as a result. Aside
index values of all hospitals in North Carolina to
from reclassifications through the MGCRB,
assure that aggregate payments for hospital
hospitals have also been reclassified by law.
inpatient operating costs are not greater than
they would have been without such a change:
also aggregate payments for SNF and home
health services in North Carolina would not be
greater than they would have been without such
a change.
Limit charges for contract
The Indian Health Service (IHS) provides health
Section 412. The amendment would prohibit
No provision.
health services provided
care both directly, through tribes and tribal
Medicare providers from charging the Indian
to Indians by participating
consortia, and through urban Indian
Health Service more than the Medicare-
hospitals
organizations.
established rates for inpatient hospital services.
Pay interest on clerical
An incorrect amount of income was transferred
Section 623. After consultation with the
Section 513. Same provision.
error into HI Trust Fund
into the HI Trust Fund in April 2001, because of
Secretary of HHS, the Secretary of the Treasury
a clerical error. An additional amount was
would be required to transfer into the HI Trust
transferred into the HI Trust Fund in December,
fund an amount that would have been held by

---

CRS-22
Provisions
Current Law
S. 1
H.R. 1
2001 to correct for the principal amount
that fund if the clerical error had not occurred
associated with the error. Correction of the
within 120 days of enactment.
interest associated with the clerical error requires
legislation.
Apply the Occupational
Section 1866 establishes certain conditions of
No provision.
Section 947. As of July 1, 2004, public
Safety and Health Act of
participation that hospitals must meet in order to
hospitals that are not otherwise subject to
1970 (OSHA) bloodborne
participate in Medicare.
OSHA would be required to comply with the
pathogens standard to
Bloodborne Pathogens standard under Section
public hospitals
1910.1030 of Title 29 of the Code of Federal
Regulations. A hospital that fails to comply
with the requirement would be subject to a civil
monetary penalty, but would not be terminated
from participating in Medicare.
Provisions Relating to Part B
Physician and Practitioner Services.
Provisions
Current Law
S. 1
H.R. 1
Establish floor on
Medicare’s payment for physicians’ services
Section 421. For services furnished after
Section 605(a). For services furnished after
geographic adjustment
under a fee schedule has three components: the
January 1, 2004, the Secretary would be
January 1, 2004 and before January 1, 2006, the
for physician fee
relative value for the service, geographic
required to increase the value of any work
Secretary would be required to increase the
schedule
adjustment factors and a conversion factor into a
geographic index that is below .980 to .980.
value of any work geographic index that is
dollar amount. The geographic adjustment
The values for work index would be raised to
below 1.00. to 1.00 unless the Secretary
factors are indices that reflect the relative cost
1.0 for services furnished in 2005, 2006, and
determines, based on the subsequent GAO study
difference in a given area in comparison to the
2007. The practice expense and malpractice
which is due by September 1, 2004, that there is
national average.
geographic indices in low value localities areas
no sound economic rationale for such change.
would be raised to 1.00 for services furnished in
2005 until 2008.
Increase practice
The relative value associated with a particular
Section 432(b)(1). The Secretary would
Section 303(a) The Secretary would increase
expense payments for
physician service is the sum of three components
establish the practice expense relative values for
the practice expense relative values for the
certain specialists
one of which is practice expense. Practice
the CY2004 fee schedule using the survey data
physician fee schedule in CY2005 using
expense includes both direct costs (such as a
from a physician specialty group as of January
appropriate survey data on the expenses
clinician’s time and the medical supplies to
1, 2003 if the data appropriately covers the
associated with drug administration provided by
provide a specific service to a patient) and
practice expenses for oncology administration
entities and organizations that are submitted by
indirect costs (such as rent and utilities). BBRA
services. The Secretary would review and
December 31, 2004. Using existing processes
required the Secretary to establish a data
appropriately modify payments for the
for coding considerations, the Secretary would

---

CRS-23
Provisions
Current Law
S. 1
H.R. 1
collection process and standards for determining
administration of more than one anti-cancer
evaluate existing codes for drug administration
practice expense relative values as well as to use
agent to a patient in a day. The resulting
to ensure accurate reporting and billing for these
data collected or developed outside HHS, to the
increase in spending would be exempt from the
services. Any resulting CY2005 payment
maximum extent practicable, consistent with
budget neutrality requirement. Also, the
increase would not be subject to budget
sound data collection practices. The relative
Secretary would change the non-physician work
neutrality provisions, would be exempt from
values are periodically reviewed and adjusted to
pool method so that associated payments are not
administrative and judicial review, and would be
account for various factors; changes that cause
inordinately reduced. These adjustments would
treated as a change in law and regulation in the
more than $20 million in spending trigger a
not be implemented unless other outpatient drug
sustainable growth rate determination.
budget neutrality adjustment.
pricing changes in the section are implemented.
Subsequent budget neutrality adjustments would
be permitted. The same non-physician work
pool methodology provision as in S. 1 is
included.
Change Medicare
Physicians providing services in a health
Section 422. The Secretary would be required
Section 417. Same provision with respect to
Incentive Program
professional shortage area (HPSA) are entitled to
to establish procedures to determine when a
Secretary developing procedures to identify
an incentive payment from the Medicare
physician in a HPSA is eligible for a bonus
physicians eligible for bonus payments. Also,
program. This incentive payment is a 10%
payment. The Secretary would also be required
physicians in newly-created scarcity areas as
increase over the amount which would otherwise
to establish an ongoing education program, an
well as other physicians would be eligible for an
be paid under the physician fee schedule.
ongoing study and submit annual reports. A
additional 5% increase in their fee schedule
GAO report would be required no later than 1
payment amounts. The Secretary would also be
year from enactment.
required to publish a list of all areas that qualify
as a HPSA each year in the proposed and final
rule implementing the physician fee schedule.
Revise reassignment
Generally, beneficiaries are the parties who are
Section 434. Staffing companies (individuals or
Section 952. Same provision with some
provisions
entitled to receive Medicare payments under the
entities) would be able to submit claims to
drafting differences.
Medicare statute. However, beneficiaries can
Medicare for physician services provided under
assign these rights to participating physicians,
contractual arrangement between the company
suppliers, and other providers who directly
and the physician, if the arrangement meets
provide the care and then submit claims for
appropriate program integrity and other
Medicare payment. Although Medicare permits
safeguards established by the Secretary.
physicians to reassign their right to payment to
certain other entities, they cannot reassign their
right to payment to staffing companies (entities
that retain physicians on a contractual basis).

---

CRS-24
Provisions
Current Law
S. 1
H.R. 1
Extend provision for
In general, independent laboratories cannot
Section 435. Direct payments for the technical
Section 734. Similar provision except Medicare
separate payments of
directly bill for the technical component of
component for these pathology services would
would make direct payments for the technical
certain inpatient
pathology services provided to Medicare
be made for services furnished during 2005.
component of pathology services from 2004
pathology services
beneficiaries who are inpatients or outpatients of
though 2008. Would also specify that a change
acute care hospitals. BIPA permitted certain
in hospital ownership would not affect these
independent laboratories with existing
direct billing arrangements.
arrangements with acute hospitals to do so if the
arrangement had been in effect as of July 22,
1999. The direct payments for these services
apply to services furnished during a 2-year period
starting on January 1, 2001 and ending December
31, 2002.
Pay Alaskan physicians
Physicians that provide services to Medicare
Section 450K. For 2004, physicians in Alaska
No provision.
based on Department of
beneficiaries are paid based on Medicare’s
would be paid 90% of the VA physician fee
Veterans Affairs (VA)
physician fee schedule that is adjusted to account
schedule used for FY2001. In 2005, this amount
fee schedule
for geographic variations in practice expenses.
would be increased by the update amount for the
Medicare physician fee schedule for 2005. If no
VA fee schedule amount exists for a service, the
payment amount would be an adjustment to the
Medicare payment. The adjustment would equal
90% of the overall percentage difference
between the two fee schedules weighted by the
distribution of Medicare claims in 2001.
Establish update to
Medicare pays for services of physicians and
No provision.
Section 601. The update to the conversion
physician fee schedule
certain non-physician practitioners on the basis of
factor for 2004 and 2005 would be not less than
a fee schedule. The law provides a specific
1.5% and would be exempt from the budget
formula for calculating the annual update to the
neutrality adjustment.
conversion factor.

---

CRS-25
Provisions
Current Law
S. 1
H.R. 1
Change the sustainable
Medicare pays for services of physicians and
Section 464. The provision expresses a sense of
Section 601. The formula for calculating the
growth rate formula
certain non-physician practitioners on the basis of
the Senate that Medicare beneficiary access to
sustainable growth rate would be modified.
a fee schedule. The law provides a specific
quality care may be compromised if Congress
Starting with the SGR for 2003, the GDP factor
formula for calculating the annual update to the
does not prevent cuts in 2004 and following
would be based on the annual average change
conversion factor which regulates overall
years that stem from the SGR formula.
over the preceding 10 years (a 10-year rolling
spending for physicians’ services. Several
[Duplicate of Section 622]
average). This calculation would replace the
factors enter into the calculation of the formula.
current GDP factor which measures the 1-year
One of those factors is the sustainable growth
change from the preceding year.
rate (SGR) which is essentially a target for
Section 629. The provision provides a sense of
Medicare spending growth in physicians’
the Senate that the reductions in Medicare’s
services. If expenditures exceed the target, the
physician fee schedule are destabilizing,
update for a future year is reduced. If
primarily caused by the sustainable growth rate
expenditures are less than the target, the update is
calculation, and that CMS should use its
increased. The recent negative update adjustment
discretion to make certain exclusions and
factors reflect the application of the SGR system.
adjustments to the SGR calculation.
Require GAO report on
No provision.
No provision.
Section 953(a). No later than six months from
physician compensation
enactment, GAO would report to Congress on
the appropriateness of the updates in the
conversion factor including the appropriateness
of the SGR formula for 2002 and subsequently;
the stability and the predictability of the updates;
and alternatives to the SGR in the update. No
later than 12 months from enactment, GAO
would be required to report to Congress on all
aspects of physician compensation for Medicare
services. The report would review alternatives
to the physician fee schedule.

---

CRS-26
Provisions
Current Law
S. 1
H.R. 1
Extend Medicare’s
Private contracting allows a physician and
No provision.
Section 604. Doctors of dental surgery or of
private contracting
Medicare beneficiary not to submit a claim for a
dental medicine and doctors of podiatric
authority to dentists and
service which would otherwise be covered and
medicine would be able to enter into private
podiatrists
paid for by Medicare. Under private contracting,
contracts with Medicare beneficiaries.
physicians (not podiatrists or dentists) can bill
patients at their discretion without being subject
to upper payment limits specified by Medicare.
If a physician decides to enter a private contract
with a Medicare beneficiary, that physician must
agree to forego any reimbursement by Medicare
for all Medicare beneficiaries for 2 years.
Require GAO report on
No provision.
Section 444. GAO would be required to study
Section 413. Same provision.
geographic differences
geographic differences in payment amounts in
in physician payments
the physician fee schedule and report to
Congress within 1 year of enactment.
Require GAO report on
Periodic analyses by the Physician Payment
Section 447. GAO would study concierge care
Section 602(a). GAO would be required to
beneficiary access to
Review Commission, and subsequently
provided to Medicare beneficiaries and its effect
conduct a study on access of Medicare
services including
MedPAC, as well as CMS showed that access to
on their access to Medicare covered services and
beneficiaries to physicians’ services under
concierge care and
physicians’ services generally remained good for
submit a report to Congress, including
Medicare including beneficiaries’ use of services
impact of these
most beneficiaries through 1999. Detailed data
recommendations, no later than 12 months from
through an analysis of claims data and the extent
mandatory fees and/or
is not available for a subsequent period; however,
enactment. In this instance, concierge care
to which physicians are not accepting new
services on access
several surveys have showed a decline in the
would be an arrangement where a physician or
Medicare beneficiaries as patients.
percentage of physicians accepting new Medicare
practitioner charges an individual a membership
patients.
fee or other fee or requires the purchase of an
item or service as a prerequisite for providing
the care.
Require Institute of
No provision.
No provision.
Section 602(b). The Secretary would be
Medicine (IOM) study
required to request that IOM study the adequacy
on supply of physicians
of the supply of physicians (including
specialists) in the country and the factors that
affect supply. The Secretary would be required
to submit the results of the study in a report to
Congress no later than 2 years from the date of
enactment.

---

CRS-27
Provisions
Current Law
S. 1
H.R. 1
Require MedPAC report
No provision.
No provision.
Section 603. MedPAC would be required to
on payment for
report to Congress on the effects of refinements
physician services
to the practice expense component of payments
fo r physicians’ services after full
implementation of the resource-based payment
in 2002.
Require consultative
Initial E&M documentation guidelines were
Section 553. The Secretary, before making
Section 941. The Secretary would be prohibited
process before
issued in 1995 with revisions issued in 1997;
changes in documentation guidelines for,
from implementing new E&M documentation
establishing new
both remain in force today. Approximately 40%
providing clinical examples of, or changing
guidelines unless the Secretary developed the
evaluation and
of Medicare payments for physician services are
codes for reporting E&M physician services,
guidelines in collaboration with practicing
management (E&M)
for services which are classified as evaluation
would be required to ensure that the process
physicians; established a plan with goals;
codes
and management services (i.e., physician visits).
used in developing the guidelines, examples, or
conducted pilot projects; established and
The Secretary stopped work on the current re-
codes was widely consultative among
implemented an education program on the use of
draft of E&M codes in order to reassess the entire
physicians, reflects a broad consensus among
the guidelines with appropriate outreach.
effort.
specialties, and would allow verification of
Changes to E&M guidelines would reduce
reported and furnished services.
paperwork burden on physicians.
Pay for additional
Screening mammography coverage includes the
Section 445. Unilateral and bilateral diagnostic
Section 614. Same provision except effective
hospital out patient
radiological procedure as well as the physician’s
mammography as well as screening
date would be January 1, 2004.
department (HOPD)
interpretation of the results of the procedure. The
mammography services would be paid for under
mammography services
usual Part B deductible is waived for tests.
the physician fee schedule beginning January 1,
using physician fee
Payment is made under the physician fee
2005.
schedule
schedule. Certain services paid under fee
schedules or other payment systems are excluded
from Medicare’s HOPD-PPS. For diagnostic
mammography services provided in an HOPD,
the technical component of the fee is paid under
the HOPD PPS.
Pay the physician for
No provision.
No provision.
Section 303(g). The Secretary would be
pharmacy management
required to provide for separate payments in the
services
physician fee schedule to cover the
administration and acquisition costs associated
with covered drugs and biologicals furnished by
a contractor under the competitive acquisition
program.

---

CRS-28
Hospital Outpatient Department (HOPD), Ambulatory Surgery Center (ASC), and Clinic Services.
Provisions
Current Law
S. 1
H.R. 1
Hospital Outpatient Department (HOPD) Services
Extend hold- harmless
The HOPD-PPS was implemented in August
Section 423. The hold-harmless provisions
Section 407. The hold-harmless provision
provisions for small rural
2000 for most acute care hospitals. Under hold-
governing OPD reimbursement for small rural
would be extended to January 1, 2006. The
hospitals
harmless provisions, rural hospitals with no more
hospitals would be re-established in 2006.
Secretary would be required to conduct a study
than 100 beds are paid no less under this PPS
to determine if the costs by ambulatory
system than they would have received under the
payment classification (APC) groups incurred
prior reimbursement system for covered OPD
by rural providers exceeds those costs incurred
services provided before January 1, 2004.
by urban providers and provide an appropriate
payment adjustment to reflect the higher costs
of rural providers by January 1, 2005.
Establish hold-harmless
No provision.
Section 423. HOPD-PPS
hold-harmless
Section 407. The hold-harmless provisions
provision for sole
provisions would be extended to SCHs located in
would be extended to SCHs for 2004 and 2005.
community hospitals
rural areas for services provided in 2006.
(SCH)
Change hold-harmless
HOPD-PPS contains a permanent hold- harmless
Section 450J. These provisions for children’s
No provision.
provision for children’s
for cancer hospitals and children’s hospitals
hospitals would be modified so that those in
hospitals
where payments to these hospitals cannot fall
Maryland (which has a Medicare waiver) that are
below what these hospitals would have received
paid less under HOPD-PPS than what would
under the payment system in place before HOPD-
have been received under the prior system or
PPS.
using hospital’s reasonable operating and capital
costs receive additional payments after October
1, 2003.
Increase HOPD
Under the HOPD-PPS, which was implemented
Section 424. Medicare’s fee schedule payments
No provision.
payments to small rural
in August, 2000, Medicare pays for covered
would be increased by 5% for covered outpatient
hospitals
services using a fee schedule based on APCs.
clinic and emergency room visits that are
Beneficiary copayments are established as a
provided by rural hospitals with up to 100 beds
percentage of Medicare’s fee schedule payment
beginning January 1, 2005 and before January
and differ by APC. Certain hospitals, including
1, 2008. Beneficiary copayment amounts would
rural hospitals with no more than 100 beds, are
not be affected. The increased Medicare
protected, either on a temporary or on a
payments would not be considered when
permanent basis, from financial losses that result
calculating a rural hospital’s hold-harmless
from implementation of HOPD-PPS under hold-
payment. Budget neutrality provisions for
harmless provisions.
Medicare’s HOPD-PPS would not apply.
Finally, these increased payments would not

---

CRS-29
Provisions
Current Law
S. 1
H.R. 1
affect Medicare payments for covered outpatient
services after January 1, 2008.
Increase SCH payments
Generally, hospitals that provide clinical
Section 427. SCHs that provide clinical
No provision.
for clinical diagnostic
diagnostic laboratory tests under Part B are
diagnostic laboratory tests covered under Part B
laboratory tests
reimbursed using a fee schedule. SCHs that
in 2005 and 2006 would be reimbursed their
provide some clinical diagnostic tests 24 hours a
reasonable costs of furnishing the tests. No
day qualify for a 2% increase in the amounts
beneficiary cost-sharing amounts would apply to
established in the outpatient laboratory fee
these services.
schedule; no beneficiary cost-sharing amounts are
imposed.
Limit application of
Starting in 2003, CMS decided that a new
Section 437. The Secretary would not be able to
Section 621(c). The Secretary would be
functional equivalence
anemia treatment for cancer patients was no
apply this standard to a drug or biological for
prohibited from applying a “functional
standards when
longer eligible for pass-though payments, because
transitional pass-through payments under
equivalence” standard or any similar standard
determining a drug’s
it was functionally equivalent (although not
HOPD-PPS. This prohibition would apply,
in order to deem a particular drug or biological
eligibility for transitional
structurally identical or therapeutically
unless such a standard was made prior to
to be similar or functionally equivalent to
pass though payments
equivalent) to an existing treatment. The
enactment and only for the purposes of
another drug unless the Commissioner of FDA
transitional pass-through rate for the drug was
transitional pass-through payments. The
establishes such a standard and certifies that the
reduced to zero starting for services in 2003.
Secretary would still be able to deem a particular
two products are functionally equivalent. The
drug as identical to another drug if the two
Secretary would be able to implement this
products are pharmaceutically equivalent and
standard after meeting applicable rulemaking
bioequivalent, as determined by FDA.
requirements. The provision prohibits the
application of this standard to a drug or
biological prior to June 13, 2003.
Establish new payment
Under HOPD-PPS, Medicare pays for covered
Section 436. A new payment method for certain
Section 621(a). Starting for services furnished
method for certain
outpatient drugs in one of three ways: (1) as a
HOPD drugs and biologicals would be
beginning January 1, 2004, certain covered
HOPD drugs and
transitional pass-through payment; (2) as a
established for 2005 and 2006. The drugs and
OPD drugs would be paid no more than 95%
biologicals
separate APC payment; or (3) as packaged APC
biologicals would be those for which hospitals
of AWP or less than the transition percentage
payment with other services. Transitional pass-
received transitional pass-through payments
of the AWP from CY2004 through CY2006.
through payments are extra payments to cover the
prior to January 1, 2005 that have been assigned
In subsequent years, payment would be equal
incremental cost associated with certain medical
to drug-specific APCs beginning the date of
to average price for the drug in the area and
devices, drugs and biologicals that are inputs to
enactment. Or those that would have been paid
year established by the competitive acquisition
an existing service. The additional payment for a
in such a manner but for the application of this
program under 1847A. The covered OPD
given item is established for 2 or 3 years and then
provision. Payments made under this provision
drugs affected by this provision are
the costs are incorporated into the APC relative
would be exempt from the budget neutrality
radiopharmceuticals and outpatient drugs that
weights. BBRA specified that pass-through
requirement in FY2005 and FY2006. In 2005,
were paid on a pass-through basis on or before
payments would be made for current orphan
these drugs would be paid as follows: a single
December 31, 2002. These would not include

---

CRS-30
Provisions
Current Law
S. 1
H.R. 1
drugs; current cancer therapy drugs, biologicals,
source or orphan product would be paid at 94%
drugs for which pass-through payments are first
and brachytherapy; current radiophamaceutical
of the AWP existing on May 1, 2003; a multiple
made beginning January 1, 2003 or those drugs
drugs and biological products; and new drugs and
source drug would be paid at 91% of that
for which a temporary HCPCS code has not
biological agents. Generally, CMS has
existing average wholesale price (AWP); and a
been assigned. Drugs for which a temporary
established that a pass-through payment for an
drug with generic versions would be paid at 71%
HCPCS code has not been assigned would be
eligible drug is based on the difference between
of that existing AWP. Those items furnished as
reimbursed at 95% of the AWP. The transition
95% of its average wholesale price and the
part of other OPD services would be paid using
percentage to AWP for sole-source drugs
portion of the otherwise applicable APC payment
the same applicable percentage of the AWP that
manufactured by one entity is 83% in CY2004,
rate attributable to the existing drug, subject to a
would have been determined on May 1, 2003 if
77% in CY2005, and 71% in CY2006. The
budget neutrality provision.
such payment were to have been made on that
transition percentage to AWP for innovator
date. For 2006, these payment amounts would be
multiple source drugs is 81.5% in CY2004,
increased by CPI-U. A private non-profit
75% in CY2005, and 68% in CY2006. The
organization under contract would determine the
transition percentage to AWP for multiple
hospital acquisition, pharmacy services, and
source drugs with generic drug competitors is
handling costs for each of the drugs paid in this
46% in CY2004 through CY2006. The
fashion to set payments in 2007 and beyond.
additional expenditures resulting from these
This analysis would be accurate within 3% of
provisions would not be subject to the budget
the true mean hospital acquisition and handling
neutrality requirement. Starting in CY2004,
costs at a 95% confidence level; begin by
the Secretary would be required to lower the
January 1, 2005; and be updated annually.
threshold for establishing a separate APC group
Starting January 1, 2006, a report would be due
for higher costs drugs from $150 to $50 per
to Congress each year.
administration. These separate drug APC
groups would not be eligible for outlier
payments. Starting in CY2004, Medicare’s
transitional pass-through payments for drugs
and biologicals covered under a competitive
acquisition contract would reflect the amount
paid under that contract, not 95% of AWP.

---

CRS-31
Provisions
Current Law
S. 1
H.R. 1
Establish demonstration
In Medicare’s HOPD-PPS, current drugs and
Section 450A. The Secretary would be required
Section 621(b). From 2004 through 2006,
project to pay for
biologicals that have been in transitional pass-
to conduct a budget neutral, 3-year
payments for brachytherapy devices would
brachytherapy devices
through status on or prior to January 1, 2000,
demonstration project that would exclude
equal the hospital’s charges adjusted to cost.
separately from HOPD-
were removed from that payment status effective
brachytherapy devices from the HOPD-PPS and
The Secretary would be required to create
PPS in S. 1; establish
January 1, 2003. CMS established separate APC
make payment on the basis of the hospital’s
separate APCs to pay for these devices that
separate payments for
payments for certain of these drugs. Other drugs
charges for each device, adjusted to cost. The
reflect the number, isotope, and radioactive
such devices in H.R. 1
such as brachytherapy seeds (radioactive isotopes
Secretary would be required to create separate,
intensity of such devices. This would include
used in cancer treatments) were packaged into
additional groups of covered HOPD services for
separate groups for palladium-103 and iodine-
payments for brachytherapy procedures.
brachytherapy devices to reflect the number,
125 devices. GAO would submit a report to
isotope, and radioactive intensity of such
Congress on the appropriateness of such
devices.
payments no later than January 1, 2005.
Require hospital
No provision.
No provision.
Section 621(d). The Secretary would study the
acquisition study
hospital acquisition costs related to covered
outpatient drugs that cost $50 per
administration and more that are reimbursed
under the HOPD-PPS.
Ambulatory Surgery Center Services (ASCs)
Reduce ambulatory
Medicare uses a fee schedule to pay for the
No provision.
Section 625. The reduction in the update
surgery center (ACS)
facility services related to a surgery provided in
would be reestablished for FY 2004 - FY 2008.
update
an ACS. From FY1998 through FY2002, the
ASCs would get an increase calculated as the
update was established as the CPI-U minus 2.0
CPI-U minus 2.0 percentage points (but not less
percentage points, but not less than zero. In 2003
than zero) in each of the fiscal years from 2004
and subsequent years, the update is CPI-U.
through 2008.
Rural Health Clinics (RHCs) and Federally Qualified Health Clinics (FQHCs) Services
Increase payments for
BBA 1997 extended the per visit payment limits
Section 428. The RHC upper payment would be
No provision.
rural health clinics
that had existed for independent rural health
increased to $80.00 for calendar year 2005. The
clinics to provider-based rural health clinics
MEI applicable to primary care services would
(RHC) except for those clinics based in small
be used to increase the payment limit in
rural hospitals with fewer than 50 beds. For
subsequent years.
services rendered from January 1, 2003 through
February 28, 2003, the RHC upper payment limit
is $66.46, which reflects a 2.6% increase in 2002
payment limit as established by the 2002
Medicare Economic Index (MEI). For services

---

CRS-32
Provisions
Current Law
S. 1
H.R. 1
rendered from March 1, 2003 through December
31, 2003, the Medicare RHC upper payment limit
is $66.72, which reflects a 3.0% increase in the
2002 payment limit as established by the 2003
MEI. The 2002 MEI was used as an update for 3
months because of the delayed implementation.
Establish conforming
Medicare pays FQHCs for their services on a
Section 420. Medicare would exclude the costs
No provision.
changes regarding
reasonable cost basis.
incurred by a FQHC for providing services and
federally qualified health
receiving payments through a contract with a
centers (FQHCs)
eligible entity operating a Medicare prescription
drug plan.
Increase payments to
Services provided by FQHCs and RHCs to
Section 615. FQHCs and RHCs would receive
No provision.
FQHCs and RHCs
Medicare enrollees are reimbursed at no more
a wrap-around payment for the reasonable costs
providing Medicare
than 80% of the reasonable costs of providing
of care provided to Medicare managed care
managed care services
such services less any beneficiary cost sharing
patients served at such centers. The provision
amounts collected.
would raise reimbursements to FQHCs and
RHCs, so that when they are combined with
Medicare+Choice payments and cost-sharing
payments from beneficiaries, to 100% of the
reasonable costs of providing such services.
Covered Part B Outpatient Drugs (Not Provided by a HOPD).
Provisions
Current Law
S. 1
H.R. 1
Pay for existing
“Although Medicare does not currently have an
Section 432(a). In 2004, existing drugs
Section 303(b). Physicians who opt out of the
outpatient drugs
outpatient prescription drug benefit, it covers
(available by April 1, 2003) would be paid the
competitive acquisition program (which is
provided incident to a
approximately 450 outpatient drugs and
lower of the widely available market price or
described subsequently) would be paid under a
physician’s services
biologicals authorized by statute, including those:
85% of the listed AWP as of April 1, 2003 as
new, separate 1847B payment method. Subject
(1) that are covered if they are usually not self-
subsequently increased by the CPI for medical
to the beneficiary cost-sharing, non-generic
administered and are provided incident to a
care as of June. The Secretary would be
drugs would be paid 112% of the applicable
physician’s services; (2) those that are necessary
required to determine whether the widely
price in 2005 and 2006 and 100% of the price
for the effective use of covered durable medical
available market price is different from the AWP
subsequently. The multiple source drug
equipment; (3) certain self-administered oral
amounts using any HHS-IG or GAO report
applicable price would be the reported volume-
cancer and anti-nausea drugs (those with injectable
issued in 2000 and later as well as other data
weighted average of the average sales price; the
equivalents; (4) erythropoietin (used to treat
from purchaser, supplier and manufacturers. If
applicable price for a single source drug would
anemia); (5) immunosuppressive drugs after
different, the widely available market price
be the lesser of the manufacturer’s average

---

CRS-33
Provisions
Current Law
S. 1
H.R. 1
covered Medicare organ transplants; (6)
would be treated as the AWP amount in 2004
sales price (ASP) for the NDC code or the
hemophilia clotting factors; and (7) vaccines for
and subsequently. However, if that difference is
reported wholesale acquisition cost (WAC).
influenza, pneumonia, and hepatitis B. Payments
more than 15%, payments would be reduced in
Payments would not account for special
are based on 95% of the average wholesale price
15% increments of Medicare’s prior year
packaging, labeling or identifiers on the dosage
(AWP) published in industry reference
payment. This transition would not apply to
form or product or package. By April 1, 2004,
publications. AWP does not account for discounts
those with generic versions in the market
the ASP would be calculated by NDC each
routinely offered to providers and physicians.
beginning 2004. After January 1, 2004,
calendar quarter by dividing a manufacturer’s
Current Medicare payment rates are 95% of AWP
payments for covered vaccines would be equal
total sales by the units sold in that quarter with
for brand name drugs produced by a single
to the AWP.
certain adjustments to account for volume
manufacturer (or single source drugs). Medicare
discounts and other rebates. Certain sales
will pay 95% of the lower of (a) the median AWP
would be exempt from the calculation. The
of all generic drugs or (b) the lowest brand-name
WAC would be the manufacturer’s list price to
product AWP for drugs with two or more
wholesalers or direct purchasers for the most
competing brand names (or multiple source drugs)
recent available month, not including discounts
or those drugs with available generic equivalents.
or other price reductions, as reported in
Although Medicare uses the Healthcare Common
wholesale price guides or other pricing
Procedure Coding System (HCPCS) codes to pay
publications. Payment rates would be updated
for physician administered drugs, the AWPs are
on a quarterly basis. Certain contractors would
established for national drug codes (NDC) which
determine the payment amounts. Certain
provides data on chemical molecule, drug
standards would define multiple and single
manufacturer, dosage, dosage form and package
source drugs and establish pharmaceutical
size.
equivalence. There would be no administrative
or judicial review of the ASP.
Pay for new outpatient
See above.
Section 432(a) continued. New
drugs
Section 303(b) continued. New drugs. The
drugs provided incident
(available after April 1, 2003) would be paid
Secretary would be able to disregard the
to a physician’s services
based on the manufacturer’s estimated price
average sales price during the first quarter of a
data. During the first and second years, the
new drug’s sales if the price data is not
manufacturer would provide data on the actual
sufficient to determine an average amount
market prices paid by physicians or suppliers
payable.
which would be equal to the lesser of the AWP
or the original estimate. Subsequently, payments
would be equal to the lesser of the AWP or the
widely available market price established for
existing drugs. If no market price exists, the
prior year’s payment is increased by June’s CPI
for medical care. Other payment changes for the
administration of drugs would be contingent on
the implementation of these provisions.

---

CRS-34
Provisions
Current Law
S. 1
H.R. 1
Establish competitive
See above.
See above.
Section 303(b). Under new section 1847A, the
pricing program;
Secretary would establish a competitive
establish alternative
acquisition program to acquire and pay for
pricing method for
covered outpatient drugs. Under this program,
physicians who elect
at least two contractors would be established in
not to participate in
each competitive acquisition area (which would
competitive bidding
be defined as an appropriate geographic region)
program
throughout the United States. Each year, a
physician would be able to select a contractor
who would deliver covered drugs and
biologicals to the physician; as discussed
above, a physician would be able to elect
payment under the ASP payment methodology
established by 1847B. Blood clotting factors,
drugs and biologicals furnished as treatment for
e n d - s t a g e r e n a l d i s e a s e ( E S R D ) ,
radiopharmaceuticals, and vaccines would not
be considered covered drugs under the
competitive acquisition program.
Establish contracting
No provision.
No provision.
Section 303(b). The 1847A program would
requirements for
have two drug categories: the oncology drugs
competitive acquisition
which would be implemented by 2005 and the
program
non-oncology drugs which would be
implemented by 2006. Certain contractor
selection and contracting requirements for the
program would be established. Specifically, the
Secretary would establish an annual selection
process for a contractor in each area for each of
the two categories of drugs. The Secretary may
not award the 2-year contract to any entity that
does not meet capacity, quality, service,
financial performance, solvency standards,
conduct standards or disclosure requirements
(to reflect changes in reasonable, net
acquisition costs) established by the Secretary.
The Secretary would be able to limit the
number of qualified entities in each category
and area, but not below two. The Secretary

---

CRS-35
Provisions
Current Law
S. 1
H.R. 1
would be required to base selection on bid
prices for covered drugs, bid prices for
distribution of those drugs as well as other
quality factors. As part of the awarded
contract, the selected contractor would be
required to disclose the reasonable, net
acquisition costs regularly (but not more often
than once a quarter) as specified by the
Secretary. Contract offers could be rejected if
the aggregate average bid price exceeds the
ASP under the 1847B process. The amount of
the bid price would be required to be the same
for all portions of the area. The appropriate
contractor, as selected by the physician, would
supply covered drugs directly to the physician,
except under the circumstances when a
beneficiary is presently able to receive a drug at
home or at other specified non-physician office
settings where a beneficiary would be able to
receive a covered drug directly. However, the
contractor would not be able to deliver drugs to
a physician without first receiving a
prescription or other necessary, specified
information. However, a prescription for each
individual treatment would not be required
from the physician. Adequate safeguards
against fraud and abuse and consistent with
safe drug practices, in order for a physician to
maintain a supply of drugs that may be needed
in emergency situations, would be established.
Pay separately for the
Medicare will pay for blood clotting factors for
Section 432(b)(4). The Secretary would be
Section 303(f). MedPAC would be required to
administration of blood
hemophilia patients who are competent to use such
required to review a GAO report and provide a
submit to Congress specific recommendations
clotting factors
factors to control bleeding without medical
separate payment for the administration of these
with respect to payment for blood clotting
supervision as well as the items related to the
factors. These payments in CY2004 would not
factors and its administration in its 2004 annual
administration of such factors.
exceed the amount that would have otherwise
report.
been expended. In CY2005 and subsequently,
the separate payment amount would be updated
by June’s CPI for medical care.

---

CRS-36
Provisions
Current Law
S. 1
H.R. 1
Pay the physician a
Medicare pays for certain outpatient prescription
Section 432(b)(8). Medicare would pay a
No provision.
pharmacy dispensing
drugs and biologicals. For instance, Medicare
dispensing fee (less applicable cost-sharing
fee
pays a dispensing fee in conjunction with
amounts) to licensed approved pharmacies for
inhalation therapy drugs used in nebulizers.
covered immunosuppressive drugs, oral anti-
Medicare does not pay a dispensing fee to
cancer drugs, and oral anti- nausea drugs used as
pharmacists or providers who supply oral drugs.
part of an anti-cancer chemotherapeutic regimen.
Medicare would be able to pay a dispensing fee
(less the applicable deductible and coinsurance
amounts) to licensed approved pharmacies for
other drugs and biologicals.
Pay for discarded
Medicare does not pay for chemotherapy drugs
Section 432(b)(9). The Secretary would be able
No provision.
chemotherapy drugs
that are purchased by physicians, are not
to pay a physician for chemotherapy drugs that
dispensed, and must be discarded.
are purchased with a reasonable intent to
administer to a Medicare beneficiary but which
cannot be administered despite the physician’s
reasonable efforts and must be discarded.
Payment amounts for all covered chemotherapy
drugs could be increased, subject to a 1% cap.
The beneficiary’s cost-sharing amounts would
not be affected.
Cover intravenous
Intravenous immune globulin (IVIG) is a blood
No provision.
Section 629. By January 1, 2004, IVIG for the
immune globulin
product prepared from the pooled plasma of
treatment of primary immune deficiency
(IVIG) for the treatment
donors. It has been used to treat a variety of
diseases in the home would be included as a
of primary immune
autoimmune diseases, including mucocutaneous
covered medical service, if a physician
deficiency diseases in
blistering diseases. It has fewer side effects than
determines administration of the derivative in
the home
steroids or immunosuppressive agents. Effective
the patient’s home is medically appropriate.
October 1, 2002, IVIG is covered for the treatment
This would not include items or services related
of certain conditions for certain subpopulations.
to the administration of the derivative.
IVIG for the treatment of autoimmune
Intravenous immune globulin would be paid at
mococutateous blistering diseases must be used
80% of the lesser of actual charge or the
only for short term therapy, but not as a
payment amount.
maintenance therapy, for those who where
conventional therapy has failed.
Establish demonstration
No provision.
No provision.
Section 631. The Secretary would conduct a
project to cover
2-year demonstration project in three states
outpatient drugs
covering more than 10,000 patients under Part

---

CRS-37
Provisions
Current Law
S. 1
H.R. 1
B that would pay for drugs and biologicals that
are prescribed as replacements for existing
covered drugs that are furnished incident to a
physician’s professional service and which are
not usually self-administered including oral
anti-cancer chemotheraputic agents. The
project would not extend beyond December 31,
2005 and would not cost more than $100
million.
Require GAO report on
No provision.
Section 432(e). GAO would examine the impact
Section 303(e). Same provision except report
impact of drug
of the drug provisions on the access of Medicare
would be due 2 years after the implementation
provisions on
beneficiaries’ to covered drugs and biologicals
of the competitive acquisition program
beneficiary access to
which would be due to Congress no later than
(January 1, 2007).
covered drugs
January 1, 2006.
Require HHS-IG
No provision.
Section 432(e). The HHS IG would be required
No provision.
reports on market prices
to conduct one or more studies that compare the
for drugs
market prices to Medicare payments for drugs
that represent the largest portion of Medicare
spending on such items.
Require study on non-
No provision.
No provision.
Section 303(h). The Secretary would be
oncology codes
required to submit a study to Congress within 1
year of enactment that examines the
appropriateness of establishing and
implementing separate codes for non-oncology
infusions that address the level of complexity
and resource consumption. If deemed
appropriate, the Secretary would be able to
implement appropriate changes in the payment
methodology.
Self-Injected Drugs and Biologicals
Pay for selected self-
Coverage of certain outpatient drugs and
Section 450E. In 2004 and 2005, Medicare
No provision.
injected drugs and
biologicals is authorized by statute. Under
would cover FDA approved self-injected
biologicals
Medicare Part B, these items are covered if they
biologicals that are prescribed as complete
are usually not self-administered and are provided
replacements for currently covered drugs in

---

CRS-38
Provisions
Current Law
S. 1
H.R. 1
incident to a physician’s services. Generally,
physicians’ offices or as usually self-
Medicare will cover an outpatient drug as usually
administered outpatient hospital services and
self-administered if it is delivered by
other self-injected drugs that are used to treat
intramuscular injection, but not if it is injected
multiple sclerosis.
subcutaneously.
Covered Drugs and Services at a Dialysis Facility.
Provisions
Current Law
S. 1
H.R. 1
Establish the composite
Dialysis facilities providing care to end stage
Section 432(b)(5). In 2004 the composite rate
Section 623(c). The ESRD composite payment
rate and payments for
renal disease (ESRD) beneficiaries receive a fixed
would be increased so that the sum of these
rate would increase by 1.6% for 2004.
covered drugs and
prospectively determined payment amount (the
payments plus the payments for non-EPO drugs
services in a dialysis
composite rate) for each dialysis treatment,
and biologicals billed separately equal payments
facility
regardless of whether services are provided at the
that would have been made without enactment of
facility or in the patient’s home. Medicare pays
the drug pricing provisions in this legislation.
separately for erythropoietin (EPO) which is used
During 2005, the ESRD rate would be increased
to treat anemia for persons with chronic renal
by 0.05% and further increased by 1.6%. During
failure who are on dialysis. Congress has set
2006, the rate would be increased by 0.05% and
Medicare’s payment for EPO at $10 per 1,000
then further increased by 1.6%. During 2007 and
units whether it is administered intravenously or
subsequently, the ESRD rate of the previous year
subcutaneously in dialysis facilities or in patients’
would be increased by 0.05%. In any year after
homes. Providers receive 95% of the AWP for
2004, the Secretary would be required to provide
separately billable injectable medications other
for additional increases in the composite rate to
than EPO administered during treatments at the
account for any payment reductions for
facility.
separately administered drugs (but not EPO) in
the same manner as in 2004. These payment
amounts, methods or adjustments would not be
subject to administrative or judicial review.
Restore composite rate
Prior to BIPA, an increase in the composite rate
No provision
Section 623(b). The prohibition on exceptions
exception for pediatric
would trigger an opportunity for ESRD facilities
would not apply to pediatric ESRD facilities as
facilities
to request a rate exception in order to receive
of October 1, 2002. Pediatric facilities would
higher payments. BIPA required the Secretary to
be defined as a renal facility with 50% of its
develop an new ESRD payment system and
patients under 18 years old.
prohibited the granting of new exceptions with
respect to applications received after July 1, 2001.

---

CRS-39
Provisions
Current Law
S. 1
H.R. 1
Change requirements for
The Secretary announced a demonstration project
No provision.
Section 623(a). The provision would require
existing end-stage renal
establishing a disease-management program that
the Secretary to establish an advisory board for
disease demonstration
will allow organizations experienced with treating
the ESRD disease management demonstration.
project
ESRD patients to develop financing and delivery
approaches to better meet the needs of
beneficiaries with ESRD.
Durable Medical Equipment (DME) and Related Outpatient Drugs.
Provisions
Current Law
S. 1
H.R. 1
Pay for home infusion
Medicare will cover outpatient prescription drugs
Section 432(b)(6). The Secretary would be able
Section 302. Infusion drugs would be covered
drugs
and biologicals if they are necessary for the
to make separate payments for infusion drugs
under the competitive bidding project.
effective use of covered durable medical
and biologicals furnished through covered DME
equipment (DME), including those drugs which
beginning January 1, 2004 if such payments are
must be put directly into the equipment such as
determined to be appropriate. Total amount of
tumor chemotherapy agents used with infusion
payments for the infusion drugs in the year could
pump (home infusion drugs).
not exceed the total amount of spending that
would have occurred without enactment of this
legislation.
Pay for inhalation
Medicare will cover outpatient prescription drugs
Section 432(b)(7). The Secretary would be able
Section 302. The competitive acquisition
therapy
and biologicals if they are necessary for the
to increase payments for covered DME
program would include drugs and supplies used
effective use of covered durable medical
associated with inhalation drugs and biologicals
in conjunction with DME, including inhalation
equipment (DME), including those drugs which
and make separate payments, if appropriate, for
therapy.
must be put directly into the equipment such as
those furnished through covered DME beginning
Section 302. The competitive acquisition
respiratory drugs given through a nebulizer
January 1, 2004. The associated spending in any
program would include drugs and supplies used
(inhalation drugs).
year would not exceed the 10% of the difference
in conjunction with DME, including inhalation
of the savings for these drugs attributed to this
therapy. Section 602(c). GAO would be
legislation.
required to conduct a study to examine the
adequacy of current reimbursements for
inhalation therapy under the Medicare program
and submit the results of the study in a report to
Congress no later than May 1, 2004.
Freeze DME and
Medicare pays for DME and PO, using different
Section 430. Medicare would not increase the
Section 302. Competitive acquisition programs
prosthetics and orthotics
fee schedules for each class of covered item that
DME fee schedule amounts in any of the years
for durable medical equipment, medical
(PO) fee schedule
are subject to different floors and ceilings,
from 2004 through 2010 and would update the
supplies, items used in infusion, drugs and
payments under S. 1;
calculated either on a state, regional, or national
amounts by the CPI-U in each subsequent year.
supplies used in conjunction with durable

---

CRS-40
Provisions
Current Law
S. 1
H.R. 1
Establish competitive
basis. BBA 1997 amended Medicare law to
Payments for orthotic devices that have not been
medical equipment, medical supplies, home
bidding program under
freeze DME fee schedule allowances for 5 years,
custom-fabricated would be similarly affected.
dialysis supplies, blood products, parental
H.R. 1
beginning in 1998. PO were subject to a 1%
Class III medical devices would be exempt from
nutrition, and off-the-shelf orthotics (requiring
increase for 5 years, beginning in 1998. BBA 97
the freeze in DME payments. Prosthetics,
minimal self-adjustment for appropriate use)
also required the Secretary to undertake a
prosthetic devices, and custom-fabricated
would replace the fee schedule payments.
competitive bidding demonstration for DME
orthotics would be updated by the percentage
Enteral nutrients and class III devices would
which occurred at two sites: Polk County, Florida
change in the CPI-U.
not be covered by the program. Rural areas and
and San Antonio, Texas. Class III medical
areas with low population density within urban
devices are devices that sustain or support life, are
areas would be able to be exempt, unless a
implanted, or present potential unreasonable risk
significant national market exists through mail
(e.g., implantable infusion pumps and heart valve
order for a particular item or service. The
replacements) and are subject to premarket
programs would be phased-in over 3 years with
approval, the most stringent regulatory control.
at least one-third of the areas implemented in
2005 and two-thirds of the areas implemented
in 2006. High-cost items and services would
be required to be phased-in first. Certain
requirements for the competitive acquisition
program would be established. A Program
Advisory and Oversight Committee would be
established. The Secretary would be able to
use this payment information to adjust the
payment amounts for DME not in a competitive
acquisition area. In this instance, the inherent
reasonableness rule would not be applied.
Establish accreditation
Medicare law requires DME suppliers to meet
Section 430(c). DME companies and suppliers
Section 302. The competitive bidding project
standards and process for
certain requirements in order to participate in the
would be subject to an accreditation and quality
would establish certain quality standards for
DME suppliers
program. Medicare law does not authorize the
assurance process. The Secretary would be
DME products no later than July 1, 2004.
Secretary to deem accreditation by an
required to designate independent accreditation
independent entity as a substitute for onsite
organizations no later than 6 months from
inspection by CMS.
enactment after consultation with an expert
outside advisory panel. The application of
quality standards would be phased in over a 3-
year period.
Cover total body orthotic
Orthotics are rigid devices, or braces, which are
Section 450B. Medicare would pay for qualified
No provision.
management services for
applied to the outside of the body to support or
total body orthotic management devices
certain nursing home
restrict movement in a body part. Orthotics are
provided by qualified practitioners and suppliers
residents
covered Part B benefits when furnished in an
no later than 60 days from enactment. These

---

CRS-41
Provisions
Current Law
S. 1
H.R. 1
institutional setting, such as in a hospital or
medically prescribed devices would consist of
skilled nursing facility, while durable medical
custom fitted individual braces that are attached
equipment (DME) is not covered in those
to a frame that is integral to the device for a full-
settings, because Medicare law requires that
time patient of a skilled nursing facility who
covered DME be appropriate for use in home.
requires such medical care.
Pay for certain custom
Subject to specified limits and under certain
No provision.
Section 626. As of January 1, 2004, diabetic
shoes for diabetic
circumstances, Medicare will pay for extra-depth
shoes would be paid as is if they were
patients
shoes with inserts or custom molded shoes with
considered to be a prosthetic or orthotic device.
inserts for an individual with severe diabetic foot
The Secretary or a carrier would be able to
disease. Diabetic shoes are neither considered
establish lower payment limits than these
DME nor orthotics, but a separate category of
amounts if shoes and inserts of an appropriate
coverage under Medicare Part B.
quality are readily available at lower amounts.
The Secretary would be required to establish a
payment amount for an individual substituting
modifications to the covered shoe that would
assure that there is no net increase in Medicare
expenditures.

---

CRS-42
Ambulance Services.
Provisions
Current Law
S. 1
H.R. 1
Increase ambulance fee
Traditionally, Medicare has paid suppliers of
Section 425. Payments for ground ambulance
Section 410. The base rate for ground
schedule
ambulance services on a reasonable charge basis
services originating in a rural area or a rural
ambulance services that originate in a qualified
and paid provider-based ambulances on a
census tract would be increased by 5% for
rural area would be increased after January 1,
reasonable cost basis. BBA 1997 provided for
services furnished January 1, 2005 through
2004 by the average costs per trip for the base
a national fee schedule which was to be
December 31, 2007. The fee schedule for other
rate in the lowest quartile as compared to the
implemented in phases. The required fee
areas would be increased by 2%. These
average cost for the base rate in the highest
schedule became effective April 1, 2002 with
increased payments would not affect subsequent
quartile of all rural counties. A qualified rural
full implementation by January, 2006. In the
periods. The ambulance conversion factor
county is a rural area (a county not assigned to
transition period, a gradually decreasing portion
would not be adjusted downward because of the
a metropolitan statistical area) with a
of the payment is to be based on the prior
evaluation of the prior year’s conversion factor.
population density of Medicare beneficiaries in
payment methodology.
the lowest quartile of all rural counties.
Change ambulance fee
In the transition period from 2002-2006,
No provision.
Section 622. Payments would be incorporate
schedule
payment is based on a blend with a gradually
a regional fee schedule, if that would result in
increasing portion of the payment based on the
a larger payment to the ambulance provider or
fee schedule and a decreasing portion on the
supplier. The blended rate from 2004 through
former payment method (of either reasonable
2010 would incorporate a decreasing portion of
costs for ambulance providers or reasonable
the regional fee schedules calculated for each
charges for ambulance suppliers.) In 2003, the
of nine census regions. Full phase-in to the
blend is 40% of the fee schedule and 60% of the
existing fee schedule would occur by 2010.
cost or charge rates.
Medicare’s payments for ground ambulance
services would be increased by one quarter of
the amount otherwise established for trips
longer than 50 miles occurring beginning
January 1, 2004 and before January 1 2009.
A GAO report would be required.
Increase coverage for air
Medicare pays for ambulance services under a
Section 426. For services furnished beginning
No provision.
ambulance services
fee schedule. Seven categories of ground
January 1, 2005, the regulations governing
ambulance services, ranging from basic life
ambulance services would be required to ensure
support to specialty care transport, and two
that air ambulance services be covered if: (1)
categories of air ambulance services are
the air ambulance service is medically necessary
established. Payment for ambulance services
based on the health condition of the patient being
can only be made if other methods of
transported at or immediately prior to the time of
transportation are contraindicated by the
the transport service; and (2) the air ambulance
patient’s medical conditions, but only to the
service complies with the equipment and crew
extent provided in regulations.
requirements established by the Secretary. These
services would be a fixed wing or rotary wing
air ambulance services.

---

CRS-43
Other Part B Services and Provisions.
Provisions
Current Law
S. 1
H.R. 1
Establish 1-year
BBA 97 established annual payment limits per
No provision.
Section 624. Application of the therapy caps
moratorium on therapy
beneficiary for all outpatient therapy services
would be suspended in 2004. Provisions with
caps
provided by non-hospital providers. The therapy
respect to existing report requirements are
caps are not yet being enforced. BIPA postponed
included.
implementation until January 1, 2003; the

Secretary delayed enforcement until July 1, 2003
and, again more recently, until September 1,
2003.
Cover routine costs
Currently, Medicare covers the routine costs of
Section 438. After January 1, 2005, the routine
Section 733. The routine costs of care for
associated with clinical
qualifying clinical trials without explicit statutory
costs of care for Medicare beneficiaries
Medicare beneficiaries participating in clinical
trials
instruction. However, Medicare does not pay for
participating in clinical trials would be covered
trials that are conducted in accordance with an
certain aspects of the clinical trial including: the
by statute. The Secretary would not be required
investigational device exemption approved
investigational item or service, items and services
to modify the existing regulations. Total
under Section 530(g) of the Federal Food,
not used in the direct clinical management of the
Medicare expenditures associated with this
Drug, and Cosmetic Act would be covered.
patient, and items and services customarily
provision would not exceed specified limits that
Any clinical trial established on the date of
provided by the research sponsor free of charge
start at $32 million in 2005 and increase
enactment or after would be covered. Services
for any enrollee in the trial.
gradually to $50 million in 2013.
provided on or after enactment would be
covered.
Cover certain vision
Medicare does not cover routine eye care or
Section 446. Medicare Part B would cover
No provision.
rehabilitation services
related services and will not pay for eyeglasses;
vision rehabilitation services furnished to a
most contact lenses; eye examinations for the
beneficiary who is diagnosed with certain vision
purpose of prescribing, fitting, or changing
impairments. Covered services would be
eyeglasses or contact lenses; and most procedures
established by a plan of care developed by a
performed to determine the refractive state of the
qualified physician or qualified occupational
eyes. A CMS program memorandum issued May
therapist whose plan of care is periodically
29, 2002, clarified that Medicare beneficiaries
reviewed by a qualified physician. Medicare
who are blind or visually impaired are eligible for
would pay for the services under the physician
physician-prescribed rehabilitation services from
fee schedule.
approved health care professionals on the same
basis as beneficiaries with other medical
conditions that result in reduced physical
functioning.

---

CRS-44
Provisions
Current Law
S. 1
H.R. 1
Cover marriage
Medicare will cover services connected with the
Section 448. Starting January 1, 2004, Medicare
No provision.
counseling and family
treatment of a mental, psychoneurotic, or
would cover marriage and family therapist
therapy
personality disorder of an individual who is not
services and mental health counselor services for
an inpatient of a hospital at the time such
the diagnosis and treatment of mental illness.
expenses are incurred. The term “treatment” does
Payment amounts would be 80% of the lesser of
not include brief office visits for the sole purpose
the actual charge or 75% of the amount paid to
of monitoring or changing drug prescriptions
a psychologist. These services would be subject
used in the treatment of such disorders or partial
to assignment. Rural health clinics, federally
hospitalization services that are not directly
qualified health centers, and hospice programs
provided by the physician. Family counseling
would be authorized to provide such services.
services with members of the household are
Marriage and family therapists would be
covered only where the primary purpose of such
authorized to develop post hospital discharge
counseling is the treatment of the patient’s
plans for patients.
condition.
Cover all Part B services
Medicare will cover specific Part B services
Section 450C. All Medicare Part B items and
No provision.
provided by Indian
provided by a hospital, skilled nursing facility, or
services provided by hospitals, skilled nursing
hospitals and clinics
ambulatory care clinic (whether provider-based or
facilities, or ambulatory care clinics operated by
freestanding) that is operated by the Indian Health
the Indian Health Service or by an Indian tribe or
Service or by an Indian tribe or tribal
organization beginning October 1, 2004 would
organization.
be reimbursed.
Cover cardiovascular
Medicare covers a number of preventive services.
Section 450D. Beginning January 1, 2005,
Section 612. Medicare coverage of cholesterol
screening tests
However, it does not cover cardiovascular
Medicare would cover cardiovascular diagnostic
and blood lipid screening would be authorized.
screening tests.
testing including tests for cholesterol levels, lipid
The Secretary would be required to establish
levels of the blood, and other tests identified
standards regarding the frequency and type of
after consultation with appropriate organizations
these screening tests, but not more often than
to establish the frequency and type of these
once every 2 years.
screening tests which could occur no more often
than once every 2 years.
Cover initial
Medicare covers a number of preventive services.
No provision.
Section 611. Medicare coverage of an initial
preventative physical
However, it does not cover routine physical
preventive physical examination would be
examination
examinations.
authorized and paid for using the physician fee
schedule. No beneficiary cost-sharing would
be imposed.

---

CRS-45
Provisions
Current Law
S. 1
H.R. 1
Cover diabetes
On July 1, 1998, Medicare began covering
No provision.
Section 630. Starting 90 days from enactment,
laboratory diagnostic
diabetes self-management training services. These
diabetes screening tests and services would be
tests
educational and training services are provided on
included as a covered medical service for
an outpatient basis by physicians or other
individuals at high-risk for developing diabetes.
certified providers who have experience in
diabetes self-management training services.
Cover kidney disease
No provision.
Section 456. Kidney disease education services
No provision.
education services
would be covered under Medicare. Starting
January 1, 2004, these services would be paid
using the physician fee schedule on an
assignment-related basis (and thus prohibiting
balance billing) outside the ESRD composite
rate. The Secretary would be required to report
to Congress by April 1, 2004.
Increase providers
Medicare pays for telehealth services that are
Section 450H. Other types of providers would
No provision.
eligible for payments for
provided in specified “originating sites.” These
be added to the list of originating sites that can
telehealth services
originating sites are: physician or practitioner
bill Medicare for telehealth services. In addition,
office, a critical access hospital, a rural health
the Secretary would be required to encourage
clinic, a Federally-qualified health center, or a
and facilitate the adoption of state provisions
hospital.
allowing for multi-state practitioner licensure
across state boundaries.
Prohibit private insurers
The Medicare benefit does not include most
Section 555. A group health plan providing
Section 950. Same provision.
from requiring prior
dental services. Some insurers may require a
supplemental or secondary coverage to Medicare
Medicare processing of
claim denial from Medicare before accepting the
beneficiaries would not be able to require
dental claims
dental claim for payment review, even if the
dentists to obtain a claim denial from Medicare
service is not covered by Medicare.
for non-covered dental services before paying
the claim.

---

CRS-46
Provisions Relating to Parts A and B
Home Health Services.
Provisions
Current Law
S. 1
H.R. 1
Increase for home health
BIPA increased PPS payments by 10% for
Section 451. A 5% increase in payments for
Section 411. A 5% additional payment for
services furnished in a rural
home health services furnished in the home of
home health care services furnished in a rural
home health care services furnished in a rural
area
beneficiaries living in rural areas during the 2-
area would be provided during FY 2005 and
area would be provided during 2004 and 2005
year period beginning April 1, 2001, through
FY2006 without regard to certain budget
without regard to certain budget neutrality
March 31, 2003. The temporary additional
neutrality requirements. The temporary
requirements.
payment was not included in the base for
additional payment would not be considered
determination of payment updates.
when determining future home health payment
amounts.
Increase for home health
BIPA increased PPS payments by 10% for
Section 459. A 10% additional payment for
No provision.
services furnished in a rural
home health services furnished in the home of
home health care services furnished in a rural
area
beneficiaries living in rural areas during the 2-
area during FY2005 and FY2006 would be
year period beginning April 1, 2001, through
provided without regard to certain budget
March 31, 2003. Home health PPS is required
neutrality requirements. The total amount of
to make payments for extraordinarily costly
outlier payments would be reduced to no more
cases. The total amount of the outlier payment
than 3% of total payments in FY 2004 and 4%
may not exceed 5% of the total payment
for FYs 2005 and 2006. [Duplicate provision is
estimated to be made for the fiscal year.
at Section 451].
Limit reduction in area wage
In calculating PPS payment, the portion of the
Section 452. The provision would limit any
No provision.
adjustment factors under
base payment amount that is attributable to
reduction in the home health area wage
home health PPS
wages and wage-related costs is required to be
adjustment factor for fiscal years 2005 and
adjusted for those costs. The Secretary is
2006. Any reduction could be no more than 3%
required to calculate an area wage adjustment
less than the area wage adjustment factor
factor that is actually used to adjust the base
applicable to home health services for the area
payment amount. The factors change annually
in the previous year.
as new wage data are reported and areas change
in relative costliness.

---

CRS-47
Provisions
Current Law
S. 1
H.R. 1
Reduce update for home
Home health service payments are increased on
No provision.
Section 701. Home health agency payments
health services
a federal fiscal year basis that begins in
would be increased by the home health MB
October. The FY2004 statutory update will be
minus 0.4 percentage points for 2004 through
the full increase in the market basket (MB)
2006. The update for subsequent years would
index.
be the full MB increase. The provision would
also change the time frame for the update from
the federal fiscal year to a calendar year basis.
The home health prospective payment rates
would not increase for the October 1 through
December 31, 2003 period.
Establish demonstration
A Medicare beneficiary must be confined to the
Section 450. A 2-year demonstration project
Section 704. Substantially similar provision,
project to clarify definition
home (or homebound) in addition to other
where beneficiaries with chronic conditions
however, would also require beneficiaries to
of homebound
criteria in order to qualify for the home health
would be deemed to be homebound in order to
permanently need skilled nursing services
benefit.
receive home health services under Medicare
(other than medication management) and the
would be established.
skilled nursing services would need to be
provided on a daily basis or an attendant
would be needed during the day to monitor
and treat the beneficiary’s medical condition.
Establish adult day care
No provision.
Section 454. A demonstration would be
Section 732. Same provision.
demonstration project
established where a home health agency,
directly or under arrangement with a medical
adult day care facility, would provide medical
adult day care services as a substitute for a
portion of home health services otherwise
provided in a beneficiary’s home.
Require MedPAC study on
No provision.
No provision.
Section 703. MedPAC would study payment
home health agency (HHA)
margins of HHAs paid under PPS to examine
margins
whether systematic differences in payment
margins were related to differences in case
mix, as measured by home health resource
groups (HHRGs).

---

CRS-48
Provisions
Current Law
S. 1
H.R. 1
Require GAO report on
No provision.
No provision.
Section 953(d). GAO would report to
flexibility in applying home
Congress on the implications if Medicare’s
health conditions of
COPs for home health agencies were applied
participation (COP) to
flexibly with respect to groups or types of
patients who are not
patients who are not Medicare beneficiaries,
Medicare beneficiaries
include an analysis of the potential impact of
this flexibility on clinical operations and the
recipients of such services and analyze
methods for monitoring the quality of care
provided to these recipients. The report would
be due no later than 6 months after enactment.
Establish beneficiary cost-
The home health benefit does not have any
No provision.
Section 702. A beneficiary copayment for
sharing for home health
cost-sharing requirement.
each 60-day episode of care beginning January
services
1, 2004 would be established. The copayment
amount would be 1.5% of the national average
payment per episode in a calendar year,
rounded to the nearest multiple of $5. For
2004, the copayment would be $40 unless
otherwise calculated on a timely basis by the
Secretary. Medicare payments would be
reduced to reflect copayments. Qualified
Medicare beneficiaries, beneficiaries dually
eligible for Medicare and Medicaid, and
beneficiaries receiving four or fewer home
health visits in an episode of care would not
face any cost-sharing requirements.
Administrative and judicial review of the
calculated copayment amounts would be
prohibited.
Suspend OASIS
Medicare is required to monitor the quality of
Section 630. The requirement that home health
Section 954. Same provision.
requirement for non-
home health care and services for all patients as
agencies must collect OASIS data on private
Medicare, non-Medicaid
part of the survey process with a standardized,
pay (non-Medicare, non-Medicaid) patients
patients
reproducible assessment instrument. OASIS is
would be suspended until the Secretary reported
the instrument that is used.
to Congress on the benefits of these data.

---

CRS-49
Chronic Care Improvement.
Provisions
Current Law
S. 1
H.R. 1
Cover chronic care
No provision.
Section 443. The Secretary would be required
Section 721. Specified chronic care
improvement services under
to establish a 5-year budget neutral
improvement services would be provided to
traditional fee-for-service
demonstration program that uses qualified care
certain beneficiaries with chronic conditions as
management organizations to provide health
a Medicare benefit, not as a demonstration
risk assessment and care management services
project.
to high-risk Medicare beneficiaries including
those with multiple sclerosis or other disabling
chronic conditions, nursing home residents or
those at risk for placement, or high-risk dual
eligible beneficiaries.
Cover chronic care
No provision.
Section 442. The Secretary would be required
Section 722. Comparable chronic care
improvement services under
to establish a 3-year budget neutral
improvement services would be provided to
Medicare Advantage and
demonstration program to promote continuity
beneficiaries in MedicareAdvantage and
Enhanced fee-for-service
of care, help stabilize medical conditions,
Enhanced FFS as a Medicare benefit, not as a
prevent or minimize acute exacerbations of
demonstration project.
chronic conditions, and reduce adverse health
outcomes before October 1, 2004. Six sites
would be designated for the demonstration,
three in urban areas and at least one in a rural
area. One site would be required to be located
in Arkansas. The Secretary would pay each
principal care physician a monthly complex
care management fee developed by the
Secretary. The fee would be the full payment
for all the functions performed.

---

CRS-50
Provisions
Current Law
S. 1
H.R. 1
Establish consumer-
No provision. Medicare coverage requires that
No provision.
Section 736. The Secretary would establish no
directed chronic outpatient
a beneficiary need medically necessary care. In
fewer than three demonstration projects to
services.
general, Medicare pays the provider that
evaluate method to improve the care and
delivers skilled health care services.
reduce the cost of care provided to Medicare
beneficiaries with chronic conditions including
methods that would permit beneficiaries to
direct their own health care needs and services.
The Secretary would establish the
demonstrations located in an urban area, a rural
area, and an area that has a Medicare
population with a diabetes rate that
significantly exceeds the national average rate
within 2 years of enactment. The Secretary
would evaluate and submit reports to Congress
on the cost and clinical effectiveness of the
projects biannually beginning 2 years after their
start.
Require Institute of
No provision.
No provision.
Section 723. The Secretary would contract
Medicine (IOM) report
with the IOM to study the barriers to effective
related to chronic conditions
integrated care improvement for Medicare
beneficiaries with multiple or severe chronic
conditions across settings and over time. The
study would examine the statutory and
regulatory barriers to coordinating care across
settings for Medicare beneficiaries in transition
from one setting to another.
Require MedPAC report
No provision.
No provision.
Section 724. MedPAC would evaluate the
related to chronic care
chronic care improvement program established
improvement program
in Section 721. The evaluation would include
a description of the status of the
implementation of the program, the quality of
health care services provided to individuals
participating in the program, and the cost
savings attributed to the implementation of the
program.

---

CRS-51
Medicare Secondary Payor (MSP).
Provisions
Current Law
S. 1
H.R. 1
Modify MSP provisions
In certain instances, Medicare is prohibited
Section 461. The provision would clarify that
Section 301. Same provision.
from making payment for a health care claim if
the Secretary could make a conditional
payment is expected to be made promptly by a
payment if a primary plan did not make a
primary plan. The definition of a primary plan
prompt payment or could not have reasonably
includes a workmen’s compensation law or
been expected to make a prompt payment (as
plan, under automobile or liability insurance
determined by regulations). Payment would be
(including a self-insured plan) or under no-fault
contingent on reimbursement by the primary
insurance on behalf of a beneficiary.
plan to the Medicare Trust Funds. An entity
engaging in a business, trade, or profession
would be deemed as having a self-insured plan
if it carried its own risk. Failure to obtain
insurance would be considered evidence of
carrying risk.
Extend MSP rules for
The MSP provisions apply to group health
Section 450F. This provision would extend the
No provision.
individuals with end-stage
plans for the working aged, large group health
limited time period that employer health plans
renal disease (ESRD)
plans for the disabled, and, for 30 months,
are primary payer for beneficiaries with end-
employer health plans for the ESRD
stage renal disease to 36 months.
population.
Revise Medicare secondary
In certain instances when a beneficiary has
No provision.
Section 943. The Secretary would not be able
payor requirements for
other insurance coverage, Medicare becomes
to require that a hospital obtain information on
diagnostic laboratory
the secondary insurance. An entity furnishing
other insurance coverage for reference
services
a Part B service is required to obtain
laboratory services, if the Secretary does not
information from the beneficiary on whether
impose such requirements in the case of
other insurance coverage is available.
services furnished by independent laboratories.
Other Medicare A and B Provisions.
Provisions
Current Law
S. 1
H.R. 1
Establish self-referral
People who knowingly and willfully offer or
No provision.
Section 412. Remuneration between a public
exemption for certain
pay a kickback, a bribe, or rebate to directly or
or non-profit private health center and an entity
arrangements in
indirectly induce referrals or the provision of
providing goods or services to the health center
underserved areas
services under a federal program may be
would not be a violation of the anti-kickback
subject to financial penalties and imprisonment.
statute if such an agreement would contribute to
Certain exceptions or safe harbors that are not
the ability of the health center to maintain or
considered violations of the anti-kickback
increase the availability or quality of services
statute have been established.
provided to a medically underserved

---

CRS-52
Provisions
Current Law
S. 1
H.R. 1
population. The Secretary would be required to
establish standards, on an expedited basis,
related to this safe harbor.
Change self-referral
Physicians are generally prohibited from
Section 453. The exception for physician
Section 505. MedPAC would be required to
provision as applied to
referring Medicare patients to facilities in
investment and self-referral would not extend
conduct a study of specialty hospitals compared
specialty hospitals
which they (or their immediate family member)
to specialty hospitals. In this instance, a
with other similar general acute hospitals and
have financial interests. Physicians, however,
specialty hospital would be one that is
r e p o r t t o C o n g r e s s , i n c l u d i n g
are not prohibited from referring patients to
primarily or exclusively engaged in the cardiac,
recommendations, no later than 1 year from
hospitals where they have ownership or
orthopedic, surgical care, or other specialized
enactment.
investment interest in the whole hospital itself
categories of patients or cases deemed
(and not merely in a subdivision of the
appropriate. A specialty hospital would not
hospital). Certain rural providers that provide
include any hospital that is determined by the
substantially all of the designated health
Secretary to be in operation before June 12,
services to individuals residing in the rural area
2003, under development as of such date, with
are also exempt from the self-referral
the same number of beds and physician
restriction.
investors as of such date. The Secretary would
consider certain factors in determining whether
a hospital is under development. The rural
provider exception would be modified. These
rural providers would not include specialty
hospitals and the Secretary would determine,
with respect to the entity, that such services
would not be available in such area but for the
ownership or investment interest.
Change in national coverage
No provision.
Section 458. The provision would establish the
Section 733. Similar provision. The routine
determination process to
following time frame for national coverage
costs of care for Medicare beneficiaries
respond to changes in
determinations — 6 months when a technology
participating in clinical trials that are conducted
technology
assessment is not required and 9 months when
in accordance with an investigational device
a technology assessment is required and in
exemption approved under Section 530(g) of
which a clinical trial is not requested. After the
the Federal Food, Drug, and Cosmetic Act
6- or 9-month period, the draft proposed
would be covered. Also, the Secretary would
decision would be available on the HHS
be required to implement revised procedures
website or by other means to provide a 30-day
for the issuance of temporary national HCPCS
public comment period. The final decision on
codes by January 1, 2004.
the request must be made 60 days following the
end of the public comment period.

---

CRS-53
Provisions
Current Law
S. 1
H.R. 1
Publish annual list of
No provision.
No provision.
Section 953(b). The Secretary would publish
national coverage
an annual list of national coverage
determinations
determinations made under Medicare in the
previous year. Information on how to get more
information about the determinations would be
included. The list would be published in an
appropriate annual publication that is publically
available.
Establish pancreatic islet
No explicit statutory authorization. Under
Section 462. The Secretary would be required
Section 735. Medicare would be required to
cell transplant
existing authorities, Medicare covers the
to establish a 5-year demonstration project to
pay the routine costs for items and services that
demonstration project
routine costs of qualifying clinical trials which
pay for pancreatic islet cell transplantation and
beneficiaries receive as part of a clinical
includes items or services typically provided
related items and services for Medicare
investigation of pancreatic islet cell transplants
absent a clinical trial and items or services
beneficiaries who have type 1 diabetes and end-
conducted by the National Institute of Health.
needed for the diagnosis or treatment of
stage renal disease.
The transplant would not be covered.
complications. Routine costs include items and
services that are typically provided absent a
clinical trial (such as conventional care) and
needed for reasonable and necessary care (such
as diagnosis or treatment of complications) that
arises from the provision of an investigational
item or service. Medicare does not pay for
certain aspects of the clinical trial including: the
investigational item or service, items and
services not used in the direct clinical
management of the patient, and items and
services customarily provided by the research
sponsor free of charge for any enrollee in the
trial.
Establish funding for
The Omnibus Budget Reconciliation Act of
Section 606. A Consumer Ombudsman
No provision.
consumer ombudsman
1990 established State Health Insurance
Account would be established in the Medicare
Counseling Assistance grants to states to
Trust Fund and $1 for every Medicare
provide education and information to Medicare
beneficiary would be appropriated to the
beneficiaries. Funding has been subject to
account from the Trust Fund beginning with
annual appropriations.
fiscal year 2005. The account would be used to
make grants to State Health Insurance
Counseling Programs.

---

CRS-54
Provisions
Current Law
S. 1
H.R. 1
Increase funding for the
The Health Insurance Portability and
Section 611. Additional appropriations to
No provision.
Health Care Fraud and
Accountability Act of 1996 (HIPAA, PL.104-
HCFAC would be authorized. In FY2004, the
Abuse Control (HCFAC)
91) established the HCFAC Program which is
increase would be $10 million over the FY2003
Program and the Office of
administered by the HHS-OIG and the
appropriation limit; in FY2005 the increase
the Inspector General (OIG)
Department of Justice. Funds for the HCFAC
would be $15 million over the FY2003 limit; in
in Health and Human
program are appropriated from the Federal
FY2006 the increase would be $25 million
Services
Hospital Insurance Trust Fund. HIPAA
above the FY2003 limit. Subsequent years’
provided for annual increases of 15% in
appropriations would be at the 2003 limit. The
HCFAC funding through 2003, after which the
HHS-OIG earmarked appropriations would
appropriation for HCFAC and the amount
increase as well: to $170 million in FY2004,
earmarked for HHS-OIG remains the same. In
$175 million in FY2005, $185 million in
FY2003 the available appropriation for
FY2006. In subsequent years, it would be not
HCFAC was $240,558,320 of which $150
less than $150 million and not more than $160
million to $160 million was available to the
million.
HHS-OIG.
Increase the civil monetary
The False Claims Act imposes a liability on
Section 612. For violations occurring
No provision.
penalties in the False Claims
those who knowingly present or cause to be
beginning January 1, 2004, the minimum
Act
presented a false or fraudulent claim for
amount of the civil penalty would be increased
payment by the government. In certain
from $5,000 to $7,500 and the maximum
instances, the person may be liable for a civil
amount would increase from $10,000 to
penalty of not less than $5,000 and not more
$15,000.
than $10,000, plus treble damages.
Increase the civil monetary
OIG has the authority to impose CMPs on any
Section 613. The amount of penalties would
No provision.
penalties (CMP) in the
person (including an organization or other
be increased for violations that occur beginning
Social Security Act
entity, but not a beneficiary) who knowingly
January 1, 2004. Penalties that are limited to
presents, or causes to be presented, to a state or
$10,000 would be increased to $12,500; those
federal government employee or agent, certain
penalties that are limited to $15,000 would be
false or improper claims for medical or other
increased to $18,750; and those that are limited
items or services. CMPs may also be imposed
to $50,000 would be increased to $62,500.
for other fraudulent activities such as inflating
charges or soliciting remuneration to influence
the provision of services. Depending upon the
violation, Section 1128A of the SSA authorizes
CMPs up to $10,000 for each item or service,
up to $15,000 for individuals who provide false
or misleading information in certain instances,
and up to $50,000 per act in other instances as
well as treble damages.

---

CRS-55
Provisions
Current Law
S. 1
H.R. 1
Require MedPAC to
The Medicare Payment Advisory Commission
No provision.
Section 731. MedPAC would be required to
examine financial
is a 17-member body that reports and makes
examine the budgetary consequences of a
consequences associated
recommendations to Congress regarding
recommendation and review the factors
with its recommendations
Medicare payment policies. The Comptroller
affecting the efficient provision of expenditures
and impose other reporting
General is required to establish a public
for services in different health care sectors.
requirements
disclosure system for Commissioners to
Two additional MedPAC reports would be
disclose financial and other potential conflicts
submitted no later than June 1, 2004: the first
of interest.
would study the solvency and financial
circumstances of hospitals and other Medicare
providers, including uncompensated care
accounted for by the treatment of illegal aliens;
the second would address investments, capital
financing and access to capital of hospitals
participating under Medicare. Members of the
Commission would be treated as employees of
Congress for purposes of financial disclosure
requirements.
Change Emergency Medical
Medicare participating hospitals that operate an
No provision.
Section 944. For EMTALA-required services
Treatment and Active Labor
emergency room (ER) are required to provide
provided to a Medicare beneficiary,
Act (EMTALA)
necessary screening and stabilization services
determinations about medical necessity would
requirements
to any patient who comes to an ER requesting
be required to be made on the basis of the
examination or treatment for a medical
information available to the treating physician
condition, in order to determine whether an
or practitioner at the time the item or service
emergency medical situation exists. Hospitals
was ordered or furnished and not on the
found in violation of EMTALA may face civil
patient’s principal diagnosis. The Secretary
money penalties and termination of their
would establish a procedure to notify hospitals
provider agreement.
and physicians when an EMTALA
investigation is closed. Except where a delay
would jeopardize the health and safety of
individuals, the Secretary would be required to
request a peer review organization (PRO)
review before making a determination to
terminate a hospital’s Medicare participation
because of an EMTALA violation. Other
requirements would apply.

---

CRS-56
Provisions
Current Law
S. 1
H.R. 1
Establish an EMTALA
No explicit statutory instruction.
No provision.
Section 945. The Secretary would be required
technical advisory group
to establish a technical advisory group
comprised of the CMS Administrator, the
Inspector General of HHS, hospital, physician
and patient representatives, CMS staff
investigating EMTALA cases and a state
survey office representative to review issues
related to EMTALA.
Permit the Secretary to
The Secretary has the authority to waive
Section 544. The Secretary would be permitted
Section 949. Same provision.
waive a program exclusion
exclusion from participation in any Federal
to waive a program exclusion at the request of
health program when the provider is the sole
an administrator of a federal health care
source of care in a community, at the request of
program (which includes state health care
a state.
programs).
Medicare Demonstration Projects and Studies.
Provisions
Current Law
S. 1
H.R. 1
Demonstration Projects
Establish demonstration
A Medicare beneficiary must be confined to the
Section 450. The Secretary would establish a
Section 704. Same provision.
project to clarify
home (or homebound) in addition to other criteria
2 -year demonstration project where
definition of homebound
in order to qualify for the home health benefit.
beneficiaries with chronic conditions would be
deemed to be homebound in order to receive
home health services under Medicare.
Establish health care
No provision.
Section 441. The Secretary would be required
No provision.
quality demonstration
to establish a 5-year, budget neutral
projects
demonstration program that examines the health
delivery factors which encourage the delivery of
improved quality patient care.
Establish adult day care
No provision.
Section 454. A demonstration project under
Section 732. Same provision.
demonstration projects
which a home health agency, directly or under
arrangement with a medical adult day care
facility, would provide medical adult day care
services as a substitute for a portion of home
health services otherwise provided in a
beneficiary’s home would be established.
Establish complex
No provision.
Section 442. The Secretary would be required
Section 721. Chronic care improvement
clinical care
to establish a 3-year budget neutral
services to certain beneficiaries with chronic
management
demonstration program to promote continuity of
conditions would be provided as a Medicare

---

CRS-57
Provisions
Current Law
S. 1
H.R. 1
demonstration projects
care, help stabilize medical conditions, prevent
benefit, not a demonstration project.
or minimize acute exacerbations of chronic
conditions, and reduce adverse health outcomes
before October 1, 2004. Six sites would be
designated for the demonstration, three in urban
areas and at least one in a rural area. One site
would be required to be located in Arkansas.
The Secretary would pay each principal care
physician a monthly management fee developed
by the Secretary that would be the full payment
for all the functions performed.
Establish care
No provision.
Section 443. The Secretary would be required
Section 722. Comparable services to
coordination
to establish a 5-year, budget neutral
beneficiaries in MedicareAdvantage and
demonstration projects
demonstration program that uses qualified care
Enhanced FFS would be established as a
management organizations to provide health risk
Medicare benefit, not as a demonstration
assessment and care management services to
project.
high-risk Medicare beneficiaries including those
with multiple sclerosis or other disabling chronic
conditions, nursing home residents (or those at
risk for placement), or high-risk, dual-eligible
beneficiaries.
Establish frontier
No provision.
Section 457. The Secretary would conduct a
No provision.
extended stay clinic
demonstration project that would treat frontier
demonstration projects
extended stay clinics as a Medicare provider. A
frontier extended stay clinic is one that is located
in a community where the closest acute care
hospital or critical access hospital is at least 75
miles away or is inaccessible by public road and
is designed to address the needs of seriously or
critically ill or injured patients who, due to
adverse weather conditions or other reasons,
cannot be transferred quickly to acute care
referral centers; or patients who need monitoring
and observation for a limited period of time.
[Duplicate provision at Section 460].

---

CRS-58
Provisions
Current Law
S. 1
H.R. 1
Establish chiropractor
No specific provision with respect to a
Section 440. The Secretary would establish a
No provision.
demonstration projects
demonstration project. Medicare covers limited
3-year budget neutral demonstration program at
chiropractic services, specifically manual
six sites to evaluate the feasibility and
manipulation for correction of a dislocated or
desirability of covering additional chiropractic
misaligned vertebra or subluxation.
services under the Medicare program. These
projects may not be implemented before
October 1, 2004. Voluntary participation by
eligible beneficiaries would occur at six sites,
equally split between rural and urban areas with
one being a HPSA. Requirements would be
waived. Reports would be required.
Physical therapy services
No provision.
Section 449. The Secretary would be required
Section 624. The GAO would be required to
to establish a budget neutral 3-year
conduct a study of patient access to physical
demonstration project in at least five states to
therapist services in states authorizing such
examine the costs and patient satisfaction
services without a physician referral compared
associated with allowing Medicare fee-for-
to that in states requiring such referral. The
service beneficiaries direct access to outpatient
study would be due to Congress within 1
physical therapy services and comprehensive
month of enactment.
outpatient rehabilitation facility (CORF)
services. In this instance, the beneficiary would
not be required to be under the care of or
referred by a physician to receive physical
therapy services.
Establish certified
No provision.
Section 450I. The Secretary would be required
No provision.
registered nurses as
to conduct a 3-year budget neutral
surgical first assistants
demonstration in five states that would pay for
demonstration projects
“surgical first assisting services” to Medicare
beneficiaries furnished by a certified registered
nurse first assistant.

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CRS-59
Provisions
Current Law
S. 1
H.R. 1
Establish weight loss
No provision regarding the demonstration.
Section 450L. The Secretary would be required
No provision.
program demonstration
Medicare covers medical nutrition therapy
to establish a demonstration project that would
projects
services for beneficiaries with diabetes or a renal
provide group weight loss management services
disease who (1) have not received diabetes
for Medicare beneficiaries who are obese and
outpatient self-management training services
have impaired glucose tolerance and who have
within a time period to be determined by the
been diagnosed and referred by a physician for
Secretary, (2) are not receiving maintenance
assessment and treatment based on individual
dialysis, and (3) meet other criteria to be
needs to a specific program or method that has
established by the Secretary. Nutrition therapy
demonstrated efficacy to produce and maintain
services are nutritional diagnostic, therapy, and
weight loss through results published in peer-
counseling services for the purpose of disease
reviewed scientific journals. Services include
management. The services must be provided by a
current body weight measurement and recording
registered dietitian or nutritional professional
of weight status at each meeting session;
pursuant to a referral by a physician. Payment is
provision of a healthy eating plan; provision of
based on the lower of actual charges or 85% of the
an activity plan; provision of a behavior
physician fee schedule on an assignment-related
modification plan; and a weekly group support
basis.
meeting.
Extend the telehealth
BBA 1997 established a single 4-year
No provision.
Section 415. The demonstration project would
project at Columbia
demonstration project where an eligible health
be extended for 4 years and total funding
University consortium
care provider telemedicine network would use
would be increased from $30 million to $60
high-capacity computer systems and medical
million.
infomatics to improve primary care and prevent
health complications in Medicare beneficiaries
with diabetes mellitus.
Extend the municipal
Under the Consolidated Omnibus Budget
Section 618. Demonstration projects would be
Section 236. Same provision, but would
demonstration projects
Reconciliation Act of 1985, as amended, the
extended to December 31, 2006, for individuals
extend until December 31, 2009.
Municipal Health Service Demonstration projects
who reside in the city in which the project is
will expire on December 31, 2004. The project is
operated.
a multi-site demonstration intended to improve
access to primary care services in underserved
urban areas and to reduce the cost of health care.
BBA 1997 authorized the Secretary to extend the
project through December 31, 2000, but only with
respect to persons who had received at least one
service for the period of January 1, 1996-August
7, 1997 (the enactment date of BBA 97). Sites
who wanted the demonstration project extended
were required to submit plans for the orderly
transition of participants to a non-demonstration

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CRS-60
Provisions
Current Law
S. 1
H.R. 1
health care delivery system. Subsequent
legislation extended the project through December
31, 2004.
Establish consumer
No provision. Medicare coverage requires that a
No provision.
Section 736. The Secretary would establish
directed chronic
beneficiary need medically necessary care. In
no fewer than three demonstration projects to
outpatient services
general, Medicare pays the provider that delivers
evaluate method to improve the care and
demonstration projects
skilled health care services.
reduce the cost of care provided to Medicare
beneficiaries with chronic conditions including
methods that would permit beneficiaries to
direct their own health care needs and services.
The Secretary would establish the
demonstrations located in an urban area, a rural
area, and an area that has a Medicare
population with a diabetes rate that
significantly exceeds the national average rate
within 2 years of enactment. The Secretary
would evaluate and submit reports to Congress
on the cost and clinical effectiveness of the
projects biannually beginning 2 years after
their start.
Required Studies
Require MedPAC study
No provision.
No provision.
Section 703. MedPAC would study payment
on HHA margins
margins of home health agencies paid under
PPS to examine whether systematic differences
in payment margins were related to differences
in case mix, as measured by home health
resource groups (HHRGs).
Require Institute of
No provision.
No provision.
Section 723. The Secretary would contract
Medicine (IOM) report
with the IOM to study the barriers to effective
related to chronic
integrated care improvement for Medicare
conditions
beneficiaries with multiple or severe chronic
conditions across settings and over time. The
study would examine the statutory and
regulatory barriers to coordinating care across
settings for Medicare beneficiaries in transition
from one setting to another.

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CRS-61
Provisions
Current Law
S. 1
H.R. 1
Require MedPAC report
No provision.
No provision.
Section 724. MedPAC would evaluate the
related to chronic care
chronic care improvement program established
improvement program
in Section 721. The evaluation would include
a description of the status of the
implementation of the program, the quality of
health care services provided to individuals
participating in the program, and the cost
savings attributed to the implementation of the
program.
Require GAO study on
No provision.
“Section 607. GAO would determine the extent
No provision.
impact of assets test on
to which drug utilization and access to covered
low-income beneficiaries
drugs differs between: (1) individuals who
qualify for the transitional assistance
prescription drug card program or for subsidies
available to certain low-income beneficiaries
and (2) individuals who do not qualify for these
types of assistance solely because of an assets
test to the income eligibility requirements of
such individuals. The final report (including
recommendations for legislation) would be due
no later than September 30, 2007.
Require MedPAC study
No provision.
Section 455. MedPAC would recommend to
No provision.
on Medicare payments
Congress ways to recognize and reward
and efficiencies in the
efficiencies and lower utilization of services
health care system
created by the practice of medicine in
historically efficient and low-cost areas. The
recommendations would be made within
established Medicare payment methodologies
for hospitals and physicians.

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CRS-62
Beneficiary Issues: Cost-Sharing Amounts and Provision of Information
Provisions
Current Law
S. 1
H.R. 1
Beneficiary Cost-Sharing Amounts
Establish beneficiary cost-
Medicare pays laboratories directly for
Section 431. Beginning January 1, 2004,
No provision.
sharing for clinical
laboratory services provided to ambulatory
Medicare would pay all clinical laboratories
diagnostic services not
patients in an outpatient setting. Clinical lab
80% of the applicable fee schedule amount.
provided by a sole
services are paid on the basis of area-wide fee
Hospital-based, physician office and
community hospital
schedules. The fee schedule amounts are
independent laboratories would be able to
periodically updated. Assignment is
charge beneficiaries a 20% coinsurance
mandatory. No beneficiary cost-sharing is
amount. The Medicare Part B deductible
imposed.
would apply to clinical diagnostic laboratory
tests furnished across all settings. SCHs would
be exempt from this provision. (see Section
427).
Increase Part B deductible
Under Part B, Medicare generally pays 80% of
Section 433. The Medicare Part B deductible
Section 628. Starting January 1, 2004, the
amount annually
the approved amount for covered services after
would be set at $100 through 2005 and then
Medicare Part B deductible would be increased
the beneficiary pays an annual deductible of
increased to $125 in 2006. Effective January 1
by the same percentage as the Part B premium
$100. The Part B deductible has been $100
of subsequent years, the deductible would be
increase. Specifically, the annual percentage
since 1991.
increased annually by the percentage change in
increase in the monthly actuarial value of
the CPI-U for the previous year ending in June.
benefits payable from the Federal
The amount would be rounded to the nearest
Supplementary Medical Insurance Trust Fund
dollar.
would be used as the update. The amount
would be rounded to the nearest dollar.
Establish beneficiary cost-
The home health benefit does not have any
No provision.
Section 702. A beneficiary copayment for each
sharing for home health
cost-sharing requirement.
60-day episode of care beginning January 1,
services
2004 would be established. The copayment
amount would be 1.5% of the national average
payment per episode in a calendar year,
rounded to the nearest multiple of $5. For
2004, the copayment would be $40 unless
otherwise calculated on a timely basis by the
Secretary. Medicare payments would be
reduced to reflect copayments. Qualified
Medicare beneficiaries, beneficiaries dually
eligible for Medicare and Medicaid, and
beneficiaries receiving four or fewer home
health visits in an episode of care would not

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CRS-63
Provisions
Current Law
S. 1
H.R. 1
face any cost-sharing requirements.
Administrative and judicial review of the
calculated copayment amounts would be
prohibited.
Waive Part B enrollment fee
A late enrollment penalty is required to be
Section 439. Beginning January 2005, the late
Section 627. Similar provision, except that the
for certain Medicare
imposed on beneficiaries who do not enroll in
enrollment penalty would be waived for certain
waiver would apply beginning January 1, 2004,
beneficiaries who are
Medicare part B upon becoming eligible for
military retirees who enrolled in Part B during,
and the special enrollment period would begin
military retirees
Medicare.
2002, 2003, 2004 or 2005 and a special
as soon as possible after enactment and end
enrollment period, beginning 1 year after
December 31, 2004.
enactment and ending December 31, 2005,
would be provided.
Waive deductible for
Unless otherwise specified, Part B services are
No provision.
Section 613. The Part B deductible would be
colorectal cancer screening
subject to beneficiary cost-sharing amounts,
waived for colorectal cancer screening tests.
tests
including an annual deductible and coinsurance
amount.
Provision of Information to Beneficiaries
Include additional
Although the statute requires that beneficiaries
Section 551. Beneficiary notices for those
Section 925. Similar provision. Would require
information in notices to
receive a statement listing the items and
beneficiaries in SNFs and hospital would be
information for beneficiaries in a SNF stay
beneficiaries about SNF and
services for which payment has been made,
required to include information about the
only.
hospital benefits
there is no explicit statutory instruction that
number of days of coverage remaining under
requires the notice to include information about
the SNF benefit and the spell of illness
the number of days of coverage remaining in
involved.
either the hospital or SNF benefit.
Provide information on
The hospital discharge planning process
Section 552. The Secretary would be required
Section 926. Same provision.
Medicare-certified SNF in
requires evaluation of a patient’s likely need for
to make information publically available
hospital discharge plans
post-hospital services including hospice and
regarding whether SNFs were participating in
home care.
the Medicare program. Hospital discharge
planning would be required to include
evaluating a patient’s need for SNF care.

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CRS-64
Provisions
Current Law
S. 1
H.R. 1
Require information on
Information about advance directives is
Section 616. The Secretary would be required
No provision.
advance directives
required to be given to patients in hospitals,
to provide information on advance directives in
skilled nursing facilities, and served by home
the Medicare and You handbook. The
health agencies. The Secretary is required to
information would be required to be presented
provide Medicare beneficiaries annual
in a separate section on advance directives and
information about Medicare benefits,
would include specific information about living
limitations on payment, and a description of the
wills and durable power of attorney for health
limited benefits for long-term care. This
care. The Secretary would further be required
information is provided to Medicare
to note the inclusion of this information in the
beneficiaries in the Medicare and You
introductory letter that accompanies the
handbook that is mailed annually to all
handbook.
beneficiaries.
Require OIG report on
No provision.
No provision.
Section 953(d). The OIG would report to
notices concerning use of
Congress on the extent to which hospitals
hospital lifetime reserve
provide notice to Medicare beneficiaries, in
days.
accordance with applicable requirements,
before they use the 60 lifetime reserve days
under the hospital benefit as well as the
appropriateness and feasibility of hospitals
providing a notice to beneficiaries before they
exhaust the lifetime reserve days. The report
would be due no later than 1 year after
enactment.

---

CRS-65
Other Health-Related Studies, Commissions or Committees
Provisions
Current Law
S. 1
H.R. 1
Pay emergency health
BBA 1997 provided $25 million in funding for
Section 610. $250 million in additional federal
No provision.
services provided to
state emergency health services furnished to
funding for emergency health services furnished
undocumented aliens
undocumented aliens for each of FY1998 through
to undocumented aliens would be appropriated
2001. Funds were distributed among the 12 states
for each year from FY2005-FY2008. Of this
with the highest number of undocumented aliens.
amount, $167 million would be allocated among
In a fiscal year, each state’s portion of the total
all states according to a specified formula, the
funds available was based on its share of total
remaining money would be distributed to the six
undocumented aliens in all of the eligible states
states with the highest number of undocumented
based on the estimates provided by the
alien apprehensions for such fiscal year
Immigration and Naturalization Service (INS).
according to specified formulas. Other
provisions would apply.
Express sense of the
No provision.
Section 617. The provision expresses a sense of
No provision.
Senate that Senate
the Senate that the Committee on Finance
Finance should hold
should hold at least four hearings to monitor
meeting to monitor the
implementation of the Prescription Drug and
implementation of this
Medicare Improvement Act of 2003. The first
legislation
hearing should be held within 60 days after
enactment of the Act, the remaining hearings
should be held May 2004, October 2004, and
May 2005.
Require study on making
No provision.
Section 619. The Secretary would study how to
No provision.
prescription drug
make prescription drug information, including
information accessible to
drug labels and usage instructions, accessible to
the sight impaired
blind and visually impaired individuals with a
report due within 18 months of enactment.
Establish Citizens’
No provision.
Section 620. The Secretary would use the
No provision.
Health Care Working
Agency for Healthcare Research and Quality to
Group
establish a 25-member Citizens’ Health Care
Working Group. This group would be
appointed by Congressional leaders to provide
recommendations on ways to improve and
strengthen health care coverage and the health
care system.

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CRS-66
Provisions
Current Law
S. 1
H.R. 1
Require GAO report on
No provision.
S e c t i o n s 6 2 1 . GAO wo uld
stu d y
No provision.
price controls in different
pharmaceutical price controls in France,
countries
Germany, Italy, Japan, the United Kingdom, and
Canada and review their impact on consumers,
including American consumers, as well as on
medical innovations. [Duplicate of Section 634]
Establish Safety Net
No provision.
Section 624. The Safety Net Organizations and
No provision.
Advisory Commission
Patient Advisory Commission would be
established to conduct an ongoing review of the
health care safety net programs including
Medicaid, the State Children’s Health Insurance
Program (SCHIP), and Maternal and Child
Health Services Block Grant Programs, among
other programs and payments. The appointment
process would be similar to that for MedPAC.
Annual reports would be required. [Duplicate of
Section 635]
Establish Committee on
No provision.
Section 626. The Secretary would establish a
No provision.
Drug Compounding
committee on Drug Compounding within the
FDA to ensure that patients are receiving
necessary, safe, and accurate dosages of
compounded drugs. Members would be
appointed by the Secretary and would include
representatives from associations, advocates and
other interested parties. The Committee would
submit a report with recommendations to
improve and protect patient safety within 1 year
of enactment whereupon the Committee would
terminate.

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CRS-67
Provisions
Current Law
S. 1
H.R. 1
Express sense of Senate
No provision.
Section 627. The provision provides a sense of
No provision.
regarding structure of
the Senate that Medicare reform should be
Medicare reform
developed according to nine principles. For
instance, prescription drug coverage should be
directed to those who need it most; should
incorporate private sector market based
elements; should cost no more than $400 billion;
and should preserve employer sponsored retiree
plans among other things.
Express sense of Senate
No provision.
Section 628. The provision provides a sense of
No provision.
regarding establishment
the Senate that coronary disease is expensive,
of national lifestyle
the Medicare Lifestyle Modification Program
modification program
has been operating in 12 states as a
demonstration program, and this program of
behavior modification should be conducted on a
national basis for those beneficiaries who elect
to participate.
Emphasize employer
No provision.
Section 631. The provision would clarify that
No provision.
flexibility in providing
nothing in the newly-created Part D, which
health coverage for
would add a new Medicare prescription drug
retirees
benefit, would be construed as preventing
employment-based retiree health coverage from
providing coverage that was supplemental to
benefits provided under a Medicare Prescription
Drug Plan or a MedicareAdvantage plan.
Expand responsibilities
ORHP advises the Secretary on the effects of
Section 637. The list of explicit responsibilities
No provision.
of the Office of Rural
current policies and proposed statutory,
of the Office is expanded to include
Health Policy (ORHP) in
regulatory, administrative, and budgetary changes
administering grants, cooperative agreements,
HHS
in the Medicare and Medicaid programs on the
and contracts to provide technical assistance and
financial viability of small rural hospitals, the
other activities as necessary to support activities
ability of rural areas to attract and retain
related to improving health care in rural areas.
physicians and other health professionals, and
access to and the quality of health care in rural
areas. In addition to advising the Secretary, the
Office has other responsibilities including
coordinating the activities within HHS that relate
to rural health care.

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CRS-68
Medicaid Provisions
Provisions
Current Law
S. 1
H.R. 1
Increase Medicaid
Hospitals that serve a large number of uninsured
Section 601. The special DSH rule established
Section 1001. Temporary increase in DSH
Disproportionate Share
patients and Medicaid enrollees receive additional
by BIPA that raised DSH allotments, subject to
allotments, subject to the current law limit of
Hospital (DSH)
Medicaid disproportionate share hospital (DSH)
the current law limit of 12% of spending for
12% of spending for medical assistance,
allotments
payments. BBA 1997 capped the federal share of
medical assistance, would be extended for
would be established for FY2004 and for
Medicaid DSH payments at specified amounts for
FY2004 and FY2005. Allotments for FY2004
certain subsequent fiscal years. Allotments
each state for FY1998 through FY2002. For most
would be calculated to be equal to FY2004
for FY2004 would be set at 120% of FY2003
states, those specified amounts declined over the
allotments as established by BBA 1997 increased
allotments as under BIPA. Allotments for
5-year period. A state’s allotment for FY2003 and
by the product of 0.50 and the difference
subsequent years would be equal to the
for later years is equal to its allotment for the
between: (a) FY2002 allotments as established
allotments for FY 2004 unless the Secretary
previous year increased by the percentage change
by BIPA 2000 increased by the percentage
determines that the allotments as would have
in CPI-U for the previous year. In addition, each
change in the CPI-U for each of fiscal years
been calculated prior to the enactment of this
state’s DSH payment for FY2003 and subsequent
2002 and 2003, and (b) FY2004 allotments as
bill would equal or exceed the FY 2004
years is limited to no more than 12% of spending
established by BBA 1997. Allotments for
amounts. For such fiscal years, allotments
for medical assistance in each state for that year.
FY2005 would be calculated to be equal to
would be equal to allotments for the prior
BIPA provided states with a temporary reprieve
FY2005 allotments as established by BBA 1997
fiscal year increased by the CPI-U for the
from the declining allotments by establishing a
increased by the product of 0.50; and the
previous fiscal year.
special rule for the calculation of DSH allotments
difference between: (a) FY2002 allotments as
for 2 years, raising allotments for FY2001 and for
established by the BIPA 2000 increased by the
FY2002. The provision also clarified that the
percentage change in the CPI-U for each of
FY2003 allotments were to be calculated as
fiscal years 2002, 2003, and 2004, and (b)
specified above, using the lower, pre-BIPA levels
FY2005 allotments as established by BBA 1997.
for FY2002 in those calculations.
For FY2006 and thereafter, DSH allotments
would be calculated based on the previous years’
amount as established by BBA 1997 and subject
to the current law limit of 12% of spending for
medical assistance increased by the CPI-U for
the previous fiscal year. All allotments would be
subject to the existing limit of 12% of medical
assistance spending. A separate calculation of
the DSH allotment for the District of Columbia
for FY2004 would be specified.
Increase in floor for state
Extremely low DSH states are those states whose
Section 602. Allotments for certain extremely
No provision.
with low DSH allotments
FY1999 federal and state DSH expenditures (as
low DSH states for FY2004 and FY2005 would
reported to CMS on August 31, 2000) are greater
be increased. For states with DSH expenditures
than zero but less than 1% of the state’s total
for FY2000 (as reported to CMS as of August
medical assistance expenditures during that fiscal
31, 2003) that are greater than zero but less than

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CRS-69
Provisions
Current Law
S. 1
H.R. 1
year. DSH allotments for the extremely low DSH
3% of the state’s total medical assistance
states for FY2001 would be equal to 1% of the
expenditures during that fiscal year, the
state’s total amount of expenditures under their
provision would raise the DSH allotments for
plan for such assistance during that fiscal year.
FY2004 to 3% of the state’s total amount of
For subsequent fiscal years, the allotments for
expenditures for such assistance during that
extremely low DSH states would be equal to their
fiscal year. States with DSH expenditures for
allotment for the previous year, increased by the
FY2001 (as reported to CMS as of August 31,
percentage change in the CPI-U for the previous
2004) that are greater than zero but less than 3%
year, subject to a ceiling of 12% of that state’s
of the state’s total medical assistance
total medical assistance payments in that year.
expenditures during that fiscal year would have
the DSH allotments for FY2005 equal to such
state’s DSH allotment for FY2004 increased by
the percentage change in the CPI-U for FY2004.
A special DSH allotment for Tennessee would
be specified in FY2004 and FY2005 under
certain circumstances.
Increase DSH reporting
BBA 1997 required each state to submit to the
Section 603. As a condition of receiving federal
No provision.
requirements
Secretary an annual report describing the
Medicaid payments for FY2004 and each fiscal
disproportionate share payments made to each
year thereafter, the provision would require each
disproportionate share hospital (DSH) and the
state to submit to the Secretary an annual report
methodology used by the state for prioritizing
(for the previous fiscal year) identifying each
payments to such hospitals.
disproportionate share hospital that received a
payment, the amount such hospital received, as
well as other information the Secretary
determines necessary to ensure the
appropriateness of the DSH payments for the
previous fiscal year.
Exempt prices of drugs
Medicaid drug rebates are calculated based on the
Section 604. Effective October 1, 2003, the
Section 1002. Same provision but would be
provided to certain safety
difference between the Average Manufacturer’s
definition of “best price” for the purpose of
effective on the date of enactment.
net hospitals from
Price and the manufacturer’s “best price”. In
calculating Medicaid drug rebates, would be
Medicaid best price drug
determining a drug’s best price, certain
modified to also exclude the discounted inpatient
program
discounted prices and fee schedules are excluded.
drug prices charged to certain public safety net
Discounted prices for outpatient drugs negotiated
hospitals. Those hospitals would also be subject
by the Office of Pharmacy Affairs (of HHS) with
to the same auditing and record keeping
drug manufacturers on behalf of certain clinics and
requirements as other providers with similar
safety net providers are one example of such
exemptions from Medicaid’s “best price”
exclusion. Because of this exclusion, the discounts
determination.

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CRS-70
Provisions
Current Law
S. 1
H.R. 1
available to safety net providers have no bearing
on the calculation of Medicaid drug rebates which
allows those providers to negotiate better rates
with manufacturers — since Medicaid rebates will
not change with the size of their negotiated
discounts. Discounted prices for inpatient drugs
for many safety net providers, however, are
included in the Medicaid best price.
Assist legal immigrants
“Qualified aliens” who entered the United States
Section 605. The provision would lift the 5-year
No provision.
in Medicaid and SCHIP
after the enactment of the Personal Responsibility
ban and would allow states the option to provide
programs
and Work Opportunity Reconciliation Act of 1996
medical assistance to certain lawfully residing
(PRWORA, August 22, 1996) are not eligible to
individuals under Medicaid (including under a
receive federally funded benefits under Medicaid
waiver authorized by the Secretary) or SCHIP
or SCHIP for 5 years. Qualified aliens who
for any of fiscal years 2005 through 2007.
entered the United States prior to the enactment of
Those eligible would include lawfully residing
PRWORA are eligible for federally funded
women during pregnancy and the 60-day period
Medicaid coverage at state option, as are qualified
after delivery, and children otherwise eligible for
aliens arriving after August 22, 1996 who have
Medicaid or SCHIP as defined by the state plan.
been present in the United States for more than 5
States opting to provide coverage to such
years. A person who executed an affidavit of
lawfully residing individuals under SCHIP must
support for an alien under Section 213A of the
also provide coverage to such individuals under
Immigration and Nationality Act (INA) is liable to
Medicaid. If services are provided under the
reimburse the federal or state government for the
Medicaid program, the alien’s sponsor would not
public benefits received by the sponsored alien
be liable to reimburse the federal or state
until the alien naturalizes or has accumulated 40
government for the cost of such services.
quarters of work. Section 213A was enacted as a
part of PRWORA on August 22, 1996.
Extend special DSH
Hospital-specific limits on DSH payments as well
Section 625. DSH payments made to hospitals
No provision.
treatment for certain
as overall state-wide DSH allotment have been
that are owned and operated by the state of
urban providers
established. DSH payments to hospitals are
Indiana and located in Marion County would be
limited to some percentage of each hospital’s costs
made without regard to the state’s DSH
of providing inpatient and outpatient services to
allotment limitation so long as those payment
Medicaid and uninsured patients net of payments
amounts, for FY2004 and each fiscal year
received from or on behalf of these patients
thereafter do not exceed 175% of the
(“unreimbursed costs”). DSH payments to public
“unreimbursed costs” of furnishing hospital
hospitals are limited to 100% of unreimbursed
services.
costs except in FY2003 and FY2004 when that

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CRS-71
Provisions
Current Law
S. 1
H.R. 1
limit rises to 175% of unreimbursed costs. DSH
payments to private hospitals are limited to 100%
of these costs; certain public hospitals in California
have a permanent DSH limit of 175%.
Increase Medicaid
The Medicaid program is jointly financed by the
Section 632. For services provided to a Native
No provision.
payments for certain
states and the federal government. The federal
Hawaiian by a federally qualified health center
Hawaiian providers
government share is based on each state’s federal
or a Native Hawaiian health care system, the
medical assistance percentage (FMAP). The
FMAP would be 100%. Services qualifying for
FMAP for a state is calculated using a formula
the 100% FMAP would include those provided
reflecting the state per capita income relative to the
by referral, and under contract or other
average U.S. per capita income. The formula is
arrangement between a health care provider and
designed to give a higher FMAP to states with a
the federally qualified health center or Native
per capita income below the U.S. average. No
Hawaiian health care system.
state can have an FMAP of less than 50% or more
than 83%. Certain services including family
planning are paid at alternative FMAP rate, as are
administrative expenses. In addition, the law
provides that services provided through an Indian
Health Service facility operated by the Indian
Health Service or an Indian tribe or tribal
organization have an FMAP of 100%. The Jobs
and Growth Tax Relief Reconciliation Act of 2003
(JEGTRRA, P.L. 108-026) altered the statutory
calculation of the FMAPs by providing a hold
harmless for declines from the prior year for each
state FMAP, and a temporary increase of 2.95
percentage points for the last two quarters of fiscal
year 2003 and the first three quarters of fiscal year
2004. The calculated statutory FMAPs for Hawaii
would be 58.77% for fiscal year 2003 and 58.90%
for fiscal year 2004. The JEGTRRA changes
result in an FMAP for Hawaii of 61.75% for the
last two quarters of fiscal year 2003, and 61.85%
for the first three quarters of fiscal year 2004. The
FMAP for services provided to a Native Hawaiian
is the same as for services provided to other
Medicaid beneficiaries in Hawaii.

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CRS-72
Provisions
Current Law
S. 1
H.R. 1
Extend special treatment
Medicaid payment for services provided by an
Section 633. The moratorium on the
No provision.
for a specific provider
institution for mental disease (IMD) may be made
determination of Saginaw Community Hospital
only for beneficiaries who are under age 21 or
as an IMD would be permanently extended as if
over 65. IMD means a hospital, nursing facility,
included in BBA 1997.
or other institution of more than 16 beds, that is
primarily engaged in providing diagnosis,
treatment, or care of persons with mental diseases,
including medical attention, nursing care, and
related services. For two facilities in Michigan —
Kent Community Hospital Complex and Saginaw
Community Hospital — previous legislation has
imposed a moratorium on determination of the
facilities as IMDs through December 31, 2002.
Miscellaneous Financial Provisions
Provisions
Current Law
S. 1
H.R. 1
Extend authority to
The U.S. Customs Service, the federal
Section 614. The authority would be
No provision.
collect Customs fees
government’s oldest revenue collecting
extended until September 30, 2013.
agency is responsible for regulating the
movement of persons, carriers,
merchandise, and commodities between
the United States and other countries. Its
authority to impose user fees for certain
services will lapse on September 30, 2003.

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CRS-73
Provisions
Current Law
S. 1
H.R. 1
Require the Internal
The Secretary of the Treasury was granted
Section 450G. The Secretary of the
No provision.
Revenue Service
the authority by Section 3 of the
Treasury must deposit any fees collected
(IRS) to deposit
Administrative Provisions of the Internal
under the authority provided by Section
certain receipts
Revenue Service of Public Law 103-286,
3 of the Administrative Provisions of the
the Treasury, Postal Service and General
Internal Revenue Service of Public Law
Government Appropriations Act of 1995
103-286, the Treasury, Postal Service
to establish new fees (if the fee is
and General Government Appropriations
authorized by another law) or raise fees
Act of 1995 into the Treasury as
for services provided by the IRS to
miscellaneous receipts. The fees
supplement appropriations made available
collected are only available to the IRS if
to the IRS. The fees must be based on the
authority is provided in advance in an
costs of providing the specific services (to
appropriations Act.
the persons paying the fees), and the
Secretary must report quarterly to the
Congress on the collection of such fees
and how they are spent.

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