Order Code RL32005
CRS Report for Congress
Received through the CRS Web
Medicare Fee-for-Service Modifications and
Medicaid Provisions of H.R. 1 as Enacted
Updated December 8, 2003
Sibyl Tilson, Jennifer Boulanger, Jean Hearne
Steve Redhead, Evelyne Baumrucker, Julie Stone
Bernadette Fernandez, and Karen Tritz
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 H.R. 1 as Enacted
Summary
On November 22, the House of Representatives voted 220 to 215 to approve
the conference report on H.R. 1, the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003. The Senate, on November 24, voted 54 to 44 to approve
the conference report. Earlier, the conferees of the Medicare prescription drug and
modernization legislation announced an agreement on November 16 and the
legislative text was released November 20.
The legislative language can be
downloaded from the House Committee on Ways and Means website at:
[http://waysandmeans.house.gov]. The bill was signed into law by the President on
December 8, 2003.
As well as establishing a prescription drug benefit for Medicare beneficiaries,
the legislation contains provisions that involving significant payment increases,
payment reductions, an expansion of covered benefits, new demonstration projects
and new beneficiary cost-sharing provisions for the traditional Medicare fee-for-
service (FFS) program. The bill includes a measure that would require congressional
consideration of legislation if general revenue funding for the entire Medicare
program exceeds 45%. Provisions affecting the State Childrens’ Health Insurance
Program (SCHIP) and Medicaid programs are included in the legislation as well.
Earlier this year, under Congress’ FY2004 budget resolution, $400 billion was
reserved for Medicare modernization, creation of a prescription drug benefit, and, in
the Senate, to promote geographic equity payment. The Congressional Budget Office
(CBO) has estimated that the legislation for H.R. 1 would increase direct (or
mandatory) spending by $394.3 billion from FY2004 through FY2013. Prescription
drug spending is estimated at $409.8 billion over the 10-year period and Medicare
Advantage spending at $14.2 billion. Overall, the fee-for-service provisions which
change traditional Medicare are estimated to save $21.5 billion over the 10-year
period and adjusting the Part B premium to beneficiaries’ income is estimated to save
$13.3 billion over the period. Some fee-for-service provisions will increase spending
over this 10-year period including the provisions affecting hospitals and physician.
Other fee-for-service provisions are projected to save money over the period
including those affecting durable medical equipment, clinical laboratories and home
health agencies.
The CBO estimate is available on the CBO website at
[ftp://ftp.cbo.gov/48xx/doc4808/11-20-MedicareLetter.pdf].

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Contents
Changes to Medicare’s Fee for Service Program . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Selected Rural Provider Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Selected Acute Hospital Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Selected Physician Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Selected Provisions Affecting Other Providers and Practitioners . . . . . 5
Selected Fee-for Service Demonstration Projects . . . . . . . . . . . . . . . . . 6
Expansion of Covered Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Beneficiary Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Income-Relating the Part B Premium . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Indexing the Part B Deductible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Medicaid and Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Modifications to Fee-for-Service Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Provisions Relating to Part A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Hospital Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Allied Health and Graduate Medical Education Payments . . . . . . . . . 22
Skilled Nursing Facility (SNF) and Hospice Services . . . . . . . . . . . . . 25
Other Part A Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Provisions Relating to Part B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Physician and Practitioner Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Hospital Outpatient Department (HOPD), Ambulatory Surgery
Center (ASC), and Clinic Services . . . . . . . . . . . . . . . . . . . . . . . 42
Covered Part B Outpatient Drugs (Not Provided by a HOPD) . . . . . . 49
Covered Drugs and Services at a Dialysis Facility . . . . . . . . . . . . . . . 58
Durable Medical Equipment (DME) and Related Outpatient Drugs . . 59
Ambulance Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Other Part B Services and Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 66
Provisions Relating to Parts A and B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Home Health Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Chronic Care Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Medicare Secondary Payor (MSP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Other Medicare A and B Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Medicare Demonstration Projects and Studies . . . . . . . . . . . . . . . . . . 83
Beneficiary Issues: Cost-Sharing Amounts and Provision of Information . 91
Other Health-Related Studies, Commissions or Committees . . . . . . . . . . . 95
Medicaid and State Children’s Health Insurance Program (SCHIP)
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Cost Containment and Miscellaneous Financial Provisions . . . . . . . . . . . 108

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Medicare Fee-for-Service Modifications
and Medicaid Provisions of
H.R. 1 as Enacted
On November 22, 2003, the House of Representatives voted 220 to 215 to
approve the conference report on H.R. 1, the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003. The Senate, on November 24th,
voted 54 to 44 to approve the conference report. The bill was signed by the President
in a ceremony on December 8th. The legislation adds a prescription drug benefit to
Medicare and replaces the existing Medicare+Choice program with a new
MedicareAdvantage program that establishes managed care payments based on a
system of bids and benchmarks. The bill also contains numerous provisions that
would generally increase fee-for-service payments within Medicare’s Part A and Part
B program (also known as traditional Medicare), especially for rural health care
providers; numerous regulatory and administrative practices will also be modified.
This report discusses the fee-for-service (FFS) provisions of the legislation, those
affecting Medicaid as well as the Medicare cost containment provisions1.
It
compares the provisions in the bill as enacted with those in the Medicare reform bills
that were originally passed by the Senate and the House.
The Medicare FFS provisions in the bill are found primarily in Titles GGIII
through VIII; some FFS provisions are included in Titles VIII through X as noted.
The cost containment provisions are in Title VIII and the Medicaid and other
provisions are in Title X. An overview of the entire legislation can be found in CRS
Report RL31966.
Changes to Medicare’s Fee for Service Program
The legislation contains extensive changes to Medicare’s FFS program,
including payment increases and, in certain instances, decreases; development of
competitive acquisition programs; implementation or refinement of other prospective
payment systems (notably, the development of an end-stage renal disease (ESRD)
basic payment system); expansion of covered preventive benefits; establishment of
demonstration programs; and required studies. The anticipated financial impact of
these changes on any individual provider, physician, or supplier will vary depending
on many factors, such as the unique characteristics of the individual or entity
participating in Medicare as well as the number and type of services provided to the
1 Cost containment provisions require an analysis of general tax revenue financing of the
Medicare program as well as a Presidential and Congressional response when “excess
general revenue financing of Medicare” exceeds a threshold of 45%.

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CRS-2
Medicare beneficiaries they serve.
Selected highlights of the FFS payment
provisions and those establishing preventive care benefits and demonstration
programs will be briefly described.
Selected Rural Provider Provisions.
Generally, Medicare payments to certain rural providers are expected to
increase; many of the rural provisions will benefit urban providers as well. CBO
estimates that the rural provisions in Title IV of the bill will increase Medicare’s
direct spending by $9.3 billion from 2004 through 2008 and by $19.9 billion from
2004 though 2013. It should be noted that other provider payment provisions in H.R.
1 can impact rural providers, but their effect on Medicare payments to rural providers
has not been specifically identified.
! Hospitals in rural areas and those in small urban areas will receive
a permanent 1.6% increase to Medicare’s base rate or per discharge
payment; the payment limit for rural and small urban hospitals that
qualify for disproportionate share hospital (DSH) adjustment will
increase from 5.25% to 12%; hospitals in low-wage areas (those
with wage index values below 1) will receive additional payments
through a decrease from 71% to 62% in the labor-related portion of
the base payment rate; and small rural hospitals with less than 50
beds will receive cost reimbursement for outpatient clinical
laboratory tests. In addition, rural hospitals with less than 100 beds
will be protected from payment declines associated with the hospital
outpatient prospective payment system (OPPS) for an additional 2
years; these OPPS hold harmless provisions will be extended to sole
community hospitals for services from 2004 through 2006. CBO
estimates that these provisions will increase direct Medicare
spending by $15.6 billion over the 10-year period.
! Critical access hospitals (CAHs) will have their bed limit increased
from 15 to 25; there will be no restriction on the number of these
beds that can be used for acute care services at any one time. CAHs
will be able to establish distinct part rehabilitation and psychiatric
units of up to 10 beds that will not be included in the CAH bed
count. Cost reimbursement of CAH services will increase to 101%
of reasonable costs, starting January 1, 2004. Periodic interim
payments for CAHs will be authorized. State authority to waive the
35-mile requirement for new entities to qualify as a CAH will be
eliminated as of January 1, 2006.
CBO estimates that these
provisions will increase direct Medicare spending by $900 million
over the 10-year period.
! Physicians in newly established scarcity areas will receive a 5%
increase in Medicare payments. Physicians in certain low-cost areas
with geographic adjustment factors below 1 will receive payment
increases so as to increase this factor to 1, starting in 2004 through
2006. CBO estimates that these provisions will increase direct
Medicare spending by $1.7 billion over the 10-year period.
! Practitioners in rural health clinics and federally qualified health
centers will be able to bill separately for services provided to

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CRS-3
beneficiaries in skilled nursing facilities. CBO estimates that these
provisions will increase direct Medicare spending by $100 million
over the 10-year period.
! Home health providers in rural areas will receive a 5% increase in
Medicare payments for one year beginning April 1, 2004. CBO
estimates that this one-year increase will increase direct Medicare
spending by $100 million over the 10-year period.
Selected Acute Hospital Provisions.
Generally, Medicare payments to hospitals will increase under the conference
report. Specifically,
! Acute hospitals paid under the inpatient prospective payment system
(IPPS) will receive the full increase in the market basket (MB) index
as an update in 2004. From 2005 through 2007, hospitals that
submit data on specified quality indicators will receive the MB as an
update; those hospitals that do not submit such data will receive the
MB minus 0.4 percentage points for the year in question. CBO
expects that this provision will reduce direct spending 0.2 billion
from 2004 through 2008.
! Teaching hospitals will receive an increase in their indirect medical
education adjustment from 2004 through 2006 that CBO projects
will increase spending by $400 million.
! A one-time, geographic reclassification process to increase
hospitals’ wage index values for 3 years that is expected to increase
payments by $900 million from 2004 through 2008 is established.
! Low volume hospitals with fewer than 800 discharges that are 25
road miles away from similar hospitals may qualify for up to a 25%
increase in Medicare payments for an expected cost of $100 million
from 2004-2013.
! Changes in payment methods for covered prescription drugs
provided in outpatient hospital departments is expected to increase
payments by $700 million from FY2004 through FY2008.
! A redistribution of unused resident positions will increase both
direct and indirect graduate medical education spending by an
anticipated $200 million from FY2004 thought FY2008 and by $600
million from FY2004 through FY2013.
! Certain teaching hospitals with high per resident payments will not
receive a payment increase from FY2004 through FY2013; this
provision was scored by CBO as a reduction in Medicare spending
of $500 million from FY2004 through FY2008 and $1.3 billion from
FY2004 through FY2013.
! For 18 months from the date of enactment, physicians will not be
able to refer Medicare patients to specialty hospitals in which they
have an investment interest.
This provision will not apply to
hospitals that are in operation or under development before
November 18, 2003. Both MedPAC and HHS are to complete
required studies on specialty hospitals within 15 months of
enactment.

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CRS-4
Selected Physician Provisions.
The impact of the legislation on Medicare’s spending for physician spending is
difficult to determine. Although physicians will receive a 1.5% update in 2004 and
2005 which is expected to increase spending by $2.8 billion from FY2004 through
FY2007; subsequently, from FY2008 through FY2012, the provision is expected to
result in a decline of $2.8 billion in Medicare spending. Over the 10 year period
from 2004 through 2013, CBO expects the update provisions to increase Medicare
spending by $200 million.
Medicare’s payments for some practice expenses, particularly the administration
of covered drugs, will increase starting in 2004. A transitional adjustment to the drug
administration payments of 32% in 2004 and 3% in 2005 is also established. These
payment increases are expected to be counterbalanced by a decrease in Medicare’s
payments for covered outpatient drugs provided in a doctor’s office.
Medicare’s payment for covered outpatient drugs furnished incident to a
physician’s service will change during 2004 as follows:
! Many covered outpatient drugs furnished in 2004 will be reimbursed
at 85% of the average wholesale price (AWP). Certain of these
drugs may be paid as low as 80% of the AWP (in effect as of April
1, 2003).
! Blood clotting factors and other blood products, drugs or biologicals
(drug products) that were not available for payment by April 1,
2003, covered vaccinations, drug products furnished in during 2004
in connection with renal dialysis services, drugs provided through
covered durable medical equipment will be paid at a higher rate
during 2004.
The decline in payments for covered outpatient drugs in 2004 can only be
implemented concurrently with the increased payments for the administration of the
drugs.
Starting in 2005, Medicare’s payment for many covered outpatient drugs will
be based on average sales price methodology, that uses different pricing and cost
data, depending on the prescription drug. Generally, multiple source drugs will be
paid 106% of the average sales price; single source drugs will be paid 106% of the
lower of the average sales price or the wholesale acquisition costs, unless the widely
available market price or the average manufacturer price for those drugs exceeds a
certain threshold. Starting in 2006, physicians will have the option of obtaining
covered Part B drugs from selected entities awarded contracts for competitively
biddable drug products under a newly established competitive acquisition program.

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CRS-5
Selected Provisions Affecting Other Providers and Practitioners.
The follow provisions affecting other providers and practitioners are included
in the legislation:
Ambulatory Surgical Centers. Payments to ambulatory surgical centers
(ASCs) are expected to be lower by $800 million from FY2004 through FY2008 and
by $3.1 billion from FY2004 through FY2013 as a result of the legislation. ASCs
will receive an update of the consumer price index for all urban consumers (CPI-U)
minus 3.0 percentage points starting April 1, 2004 and will receive a O percent
update for services provided starting October 1, 2004 through December 31, 2009.
Therapy Caps. Application of the caps on outpatient therapy services
provided by non-hospital providers is suspended from the date of enactment and for
the remainder of 2003, in 2004 and 2005. CBO estimates that the therapy cap
moratorium will increase direct Medicare spending by $700 million over the 10-year
period.
Durable Medical Equipment (DME). Competitive bidding for DME will
be phased-in beginning in 2007 in 10 of the largest metropolitan statistical areas and
may be phased in first for the highest cost and highest volume items and services.
The update for most DME items and services and for prosthetics and orthotics is 0
in 2004, 2005, 2006, 2007, and 2008. For 2005, payment for certain items, oxygen
and oxygen equipment, standard wheelchairs, nebulizers, diabetic lancets and testing
strips, hospital beds and air mattresses will be reduced by an amount calculated using
2002 payment amounts and the median price paid by the Federal Employees Health
Benefit Program.2 Beginning January 1, 2009, items and services included in the
competitive acquisition program will be paid as determined under that program and
the Secretary can use this information to adjust the payment amounts for DME, off-
the-shelf orthotics, and other items and services that are supplied in an area that is not
a competitive acquisition area. Class III items (devices that sustain or support life,
are implanted, or present potential unreasonable risk, e.g., implantable infusion
pumps and heart valve replacements, and are subject to premarket approval, the most
stringent regulatory control) receive the full increase in the consumer price index for
all urban consumers (CPI-U) in 2004, 2005, 2006 , 2008 and subsequent years. The
Secretary will determine the update in 2007. CBO scored the DME provisions of
the bill as reducing spending by $6.8 billion over the 10-year period.
Home Health. Home health agency payments are increased by the full market
basket percentage for the last quarter of 2003 (October, November, and December)
and for the first quarter of 2004 (January, February, and March). The update for the
remainder of 2004 and for 2005 and 2006 is the home health market basket
percentage increase minus 0.8 percentage points. CBO estimates that this provision
2 Section 302 specifies that the reduction uses the “Median FEHP Price” in the table entitled
“Summary of Medicare Prices Compared to VA, Medicaid, Retail, and FEHB Prices for 16
Items” that was included in testimony of the Health and Human Services Inspector General
before the Senate Committee on Appropriations, June 12, 2002, or any subsequent report
by the Inspector General.

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CRS-6
will reduce direct Medicare spending by $6.5 billion over the 10-year period. The
legislation suspends the requirement that home health agencies must collect the
Outcome and Assessment Information Set (OASIS) data on private pay (non-
Medicare, non-Medicaid) until the Secretary reports to Congress and publishes final
regulations regarding the collection and use of OASIS.
Selected Fee-for Service Demonstration Projects.
The legislation establishes numerous demonstration projects for the Medicare
program.
Several demonstrations address aspects of disease management for
beneficiaries with chronic conditions.
Chronic Care Improvement under Fee-For-Service. The legislation
requires the Secretary to establish and implement chronic care improvement
programs under fee-for-service Medicare to improve clinical quality and beneficiary
satisfaction and achieve spending targets specified by the Secretary for Medicare for
beneficiaries with certain chronic health conditions. Participation by beneficiaries
is voluntary. The contractors are required to assume financial risk for performance
under the contract. CBO has estimated that this demonstration will increase direct
Medicare spending by $500 million over the 10-year period.
Chronically Ill Beneficiary Research, Demonstration. The legislation
requires the Secretary to develop a plan to improve quality of care and to reduce the
cost of care for chronically ill Medicare beneficiaries within 6 months after
enactment. The plan is required to use existing data and identify data gaps, develop
research initiatives, and propose intervention demonstration programs to provide
better health care for chronically ill Medicare beneficiaries. The Secretary is required
to implement the plan no later than 2 years after enactment.
Coverage of Certain Drugs and Biologicals Demonstration. The
Secretary is required to conduct a 2-year demonstration where payment is made for
certain drugs and biologicals that are currently provided as “incident to” a physician’s
services under Part B. The demonstration is required to provide for cost-sharing in
the same manner as applies under Part D of Medicare. The demonstration is required
to begin within 90 days of enactment and is limited to 50,000 Medicare beneficiaries
in sites selected by the Secretary.
Homebound Demonstration. The Secretary is required to conduct a 2-year
demonstration project where beneficiaries with chronic conditions would be deemed
to be homebound in order to receive home health services under Medicare.
Adult Day Care. The Secretary is required to establish a demonstration where
beneficiaries could receive adult day care services as a substitute for a portion of
home health services otherwise provided in a beneficiary’s home.
Expansion of Covered Benefits.
The legislation contains a number of provisions that expand coverage beginning
January 1, 2005, including the following:

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CRS-7
Initial Physical Examination. Medicare coverage of an initial preventive
physical examination is authorized for those individuals whose Medicare coverage
begins on or after January 1, 2005. CBO estimates that this provision will increase
direct Medicare spending by $1.7 billion over the 10-year period.
Cardiovascular Screening Blood Tests. Medicare coverage of
cardiovascular screening blood tests is authorized. CBO estimates that this provision
will increase direct Medicare spending by $300 million over the 10-year period.
Diabetes Screening Tests.
Diabetes screening tests furnished to an
individual at risk for diabetes for the purpose of early detection of diabetes are
included as a covered medical service. In this instance, diabetes screening tests
include fasting plasma glucose tests as well as other tests and modifications to those
tests deemed appropriate by the Secretary. CBO estimates that this provision will
increase direct Medicare spending less than $50 million over the 10-year period.
Screening and Diagnostic Mammography. Screening mammography
and diagnostic mammography will be excluded from OPPS and paid separately.
CBO estimates that this provision will increase direct Medicare spending by $200
million over the 10-year period.
Intravenous Immune Globulin. The bill includes intravenous immune
globulin for the treatment in the home of primary immune deficiency diseases as a
covered medical service under Medicare. CBO estimates that this provision will
increase direct Medicare spending by $100 million over the 10-year period.
Beneficiary Payments
The bill contains two provisions which change the beneficiary premiums and
deductibles.
Income-Relating the Part B Premium.
The legislation increases the monthly Part B premiums for higher income
enrollees beginning in 2007. Beneficiaries whose modified adjusted gross income
exceed $80,000 and couples filing joint returns whose modified adjusted gross
income exceeds $160,000 will be subject to higher premium amounts. The increase
will be calculated on a sliding scale basis and will be phased-in over a five-year
period. The highest category on the sliding scale is for beneficiaries whose modified
adjusted gross income is more than $200,000 ($400,000 for a couple filing jointly).
Those amounts are increased beginning in 2007 by the percentage change in the
consumer price index. CBO estimates that direct Medicare spending will be reduced
by $13.3 billion over the 10-year period 2004 through 2013.
Indexing the Part B Deductible.
The Medicare Part B deductible will remain $100 through 2004, increase to
$110 for 2005, and in subsequent years the deductible will be increased by the same

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CRS-8
percentage as the Part B premium increase. Specifically, the annual percentage
increase in the monthly actuarial value of benefits payable from the Federal
Supplementary Medical Insurance Trust Fund will be used as the index.
Medicaid and Miscellaneous Provisions
Title X of the legislation makes some changes to Medicaid and other programs.
Omitted from the agreement were two provisions contained in S. 1, including a
provision to amend the Age Discrimination in Employment Act of 1967 to allow an
employee benefit plan to offer different benefits to their Medicare eligible employees
than to their non-Medicare eligible employees, and a provision to allow states to
cover certain lawfully residing aliens under the Medicaid program.
CBO estimates the Medicaid and other provisions included in the bill to increase
direct spending by $5.7 billion between FY2004 and FY2013. The following general
points can be made about the Medicaid and Miscellaneous provisions included in
Title X of the bill:
! The legislation temporarily increases states’ disproportionate share
hospital (DSH) allotments to erase the decline in these Medicaid
amounts that occurred after a special rule for their calculation
expired.
! The legislation includes several other Medicaid provisions, including
raising the floor on DSH allotments for “extremely low DSH states,”
providing DSH allotment adjustments impacting Hawaii and/or
Tennessee, increasing reporting requirements for DSH hospitals, and
exempting prices of drugs provided to certain safety net hospitals
from Medicaid’s best price drug program.
! Miscellaneous provisions in Title X of the legislation include
funding federal reimbursement of emergency health services
furnished to undocumented aliens, and funding administrative start-
up costs for Medicare reform, various research projects, work groups
and infrastructure improvement programs for the health care system.
This report contains a detailed side-by-side comparison of the relevant
provisions of the legislation, S. 1, as passed the Senate, and H.R. 1, as passed the
House. Certain of the provisions can be found in one or more of the sections. For
example, the home health homebound demonstration (section 702) is listed in the
home health section and the demonstration projects section. Also included in this
side-by-side, are provision that were included in the House and/or Senate bill which
were dropped in conference.

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CRS-9
Modifications to Fee-for-Service Medicare
Provisions Relating to Part A
Hospital Services.
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Inpatient Prospective Payment System (IPPS) Hospitals
Increase standardized amounts for small
Section 401. Medicare will pay hospitals
Section 401.
Medicare would pay
Section 402.
Similar provision with
urban and rural hospitals in Medicare’s
in rural and small urban areas in the 50
hospitals in rural and small urban areas in
respect to discharges in the fifty states.
inpatient hospital prospective payment
states using the standardized amount that
the fifty states using the standardized
Two standardized amounts would still be
system (IPPS).
Medicare pays for
would be used to pay hospitals in large
amount used to pay hospitals in large
used for hospitals in Puerto Rico; one
inpatient services in acute hospitals in
urban areas starting for discharges in
urban areas starting for discharges in
federal amount would be used in the
large urban areas using a standardized
FY2004.
The existing authority of the
FY2004. The Secretary would compute
calculation of these 2 rates.
amount that is 1.6% larger than the
Secretary to delay implementation of this
one standardized amount for hospitals in
standardized amount used to reimburse
increase until November 1, 2003 for
Puerto Rico equal to that for other areas.
hospitals in other areas (both rural areas
hospitals that are not in Puerto Rico is not
and smaller urban areas).
P.L. 108-7
affected. The Secretary will compute one
provided that all Medicare discharges from
local standardized amount for all hospitals
April 1, 2003 to September 30, 2003, will
in Puerto Rico equal to that for hospitals in
be paid on the basis of the large urban area
large urban areas in Puerto Rico starting
amount. The Secretary is authorized to
for discharges in FY2004. Hospitals in
delay implementation of this payment
Puerto Rico will receive the legislated
increase until November 1, 2003, if
payment increase starting for discharges on
necessary.
April 1, 2004.
Under
Medicare’s
IPPS,
two
different standardized amounts are used for
hospitals in Puerto Rico, one for hospitals
in large urban areas and one for other
hospitals.
Increase payments to hospitals in areas
Section 403. For discharges on or after
Section 402. For cost reporting periods
Section 416. Same provision except that
with wage index values below one (by
October 1, 2004, the Secretary is required
beginning October 1, 2004, the Secretary
the effective date is October 1, 2003.
lowering Medicare’s IPPS labor-related
to decrease the labor-related share to 62%
would be required to decrease the labor-
share which is the proportion of the
of the standardized amount when such
related share to 62% of the standardized
standardized amount multiplied by the
change will result in higher total payments
amount only if such change would result in
wage index). IPPS payments are adjusted,
to the hospital. This provision is to be
higher total payments to the hospital. This

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CRS-10
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
either
increased
or
decreased
as
applied without regard to certain budget-
provision would be applied without regard
appropriate, by the hospital wage index of
neutrality requirements. For discharges on
to certain budget neutrality requirements.
the area where the hospital is located or
or after October 1, 2004, the Secretary is
where it has been reassigned. Presently,
also required to decrease the labor-related
approximately 71% of the standardized
share to 62% of the standardized amount
amount is adjusted by the area wage index.
for hospitals in Puerto Rico when such
change results in higher total payments to
the hospital.
Increase Medicare IPPS payments for
Section 406. The Secretary is required to
Section 403.
The Secretary would be
No provision.
low-volume hospitals.
Medicare pays
provide for a graduated adjustment of up to
required to develop a graduated adjustment
inpatient acute hospital services for each
25% of Medicare’s inpatient payment rates
of up to 25% of Medicare’s inpatient
discharge from the hospital without regard
to account for the empirically established
payment rates to account for the higher
to the number of beneficiaries discharged
higher unit costs associated with low-
unit costs in low-volume hospitals. Certain
from any given hospital. Under certain
volume hospitals starting for discharges
hospitals with fewer than 2,000 total
circumstances, however, sole community
occurring in FY2005.
A low-volume
discharges during the three most recent
hospitals (SCHs) and Medicare dependent
hospital is a short-term general hospital
cost reporting periods would be eligible for
hospitals with more than a 5% decline in
that is located more than 25 road miles
up to a 25% increase in their Medicare
total discharges from one period to the
from another such hospital and that has
payment amount starting with cost reports
next may apply for an adjustment to their
less than 800 discharges during the fiscal
that begin during FY2005.
Eligible
payment rates to partially account for
year.
Certain
bud get
neutrality
hospitals would be located at least 15 miles
higher costs associated with a drop in
requirements would not apply to this
from a similar hospital or those determined
patient volume due to circumstances
provision.
The determination of the
by the Secretary to be so located due to
beyond their control.
percentage payment increase is not subject
factors such as weather conditions, travel
to administrative or judicial review.
conditions, or travel time to the nearest
alternative source of appropriate inpatient
care.
Certain
b ud get
neutrality
requirements would not apply.
Increase disproportionate share hospital
Section 402. Starting for discharges after
Section 404. Starting for discharges after
Section 401. Starting for discharges after
(DSH) payments for small urban and
April 1, 2004, a hospital that is not a large
October 1, 2004, a hospital that qualifies
October 1, 2003, a hospital that is not a
rural
hospitals.
Medicare
makes
urban hospital that qualifies for a DSH
for a DSH adjustment when its DSH
large urban hospital that qualifies for a
additional payments to certain acute
adjustment will receive its DSH payments
patient percentage exceeds the 15% DSH
DSH adjustment would receive its DSH
hospitals that serve a large number of low-
using the current DSH adjustment formula
threshold would receive the DSH payments
payments
using
the
current
DSH
income Medicare and Medicaid patients.
for large urban hospitals, subject to a limit.
using the current formula that establishes
adjustment
formula
for
large
urban
Although a SCH or rural referral center
The DSH adjustment for any of these
the DSH adjustment for a large urban
hospitals, subject to a limit.
The DSH
(RRC) can qualify for a higher DSH
hospitals, except for rural referral centers,
hospital.
adjustment for any of these hospitals,
adjustment, generally, the DSH adjustment
will be capped at 12%. A Pickle hospital
except for RRCs, would be capped at 10%.

---

CRS-11
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
that a small urban or rural hospital can
receiving a DSH adjustment under the
receive is limited to a maximum of a
alternative formula will not be affected by
5.25% increase to its IPPS payment. Large
this provision. (For a description of Pickle
(100 beds and more) urban hospitals and
hospitals, see page 12 column 1.)
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
patient percentage (the percentage of low-
income Medicare or Medicaid patients
served).
Require MedPAC report on Medicare
No provision.
Section 404A.
MedPAC would be
No provision.
DSH adjustments.
No provision in
required to conduct a study to determine
current law.
(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 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 that
No provision.
Section 405(e). The Secretary would be
No provision.
convert to critical access hospitals
required to exclude wage data from
(CAHs) from IPPS wage index. Certain
hospitals that have converted to CAHs
qualified small hospitals are converting to
from the IPPS wage index calculation
CAHs. After conversion, these facilities
starting
for
cost
reporting
periods
are paid on a reasonable cost basis and are
beginning January 1, 2004.
not paid under IPPS. Medicare’s IPPS
payments to acute hospitals are adjusted by
the wage index of the area where the
hospital is located or has been reassigned.
Although the hospital wage index is

---

CRS-12
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
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. As of FY2004,
wage data from hospitals that have
converted to CAHs were excluded from
the IPPS wage index calculation.
Increase DSH for “Pickle” hospitals.
No provision.
Section 420A. Hospitals that qualify for
No provision.
Most DSH hospitals receive additional
the DSH adjustment under the Pickle
Medicare payments because they serve a
amendment
would
receive
a
DSH
disproportionate share of poor Medicare
operating and capital adjustment of 40%
and Medicaid patients. A few urban
for discharges beginning October 1, 2003.
hospitals receive DSH payments under an
alternative Pickle formula. If a 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.
Increase payments for hospitals in
Section 504. Hospitals in Puerto Rico will
Section 409.
Hospitals in Puerto Rico
Section 503.
From FY2004 though
Puerto Rico.
Under Medicare’s IPPS,
receive Medicare payments based on a
would receive Medicare payments based
FY2007, hospitals in Puerto Rico would
separate standardized amounts are used to
50/50 split between federal and local
on a 50/50 split between national and local
receive an increasing amount of the
pay short-term general hospitals in Puerto
amounts before April 1, 2004. Starting
amounts before October 1, 2004. These
payment rate based on national rates as
Rico. The Balanced Budget Act of 1997
April 1, 2004 through September 30, 2004,
hospitals
would
receive
Medicare
follows: during FY2004, payment would
(BBA 97) provides for an adjustment of
payment will be based on 62.5% national
payments based on 100% of the federal
be 59% national and 41% local; during
the Puerto Rico rates from blended
amount and 37.5% local amount; this will
rate for discharges beginning October 1,
2005, payment would be 67% national
amounts based on 25% of the national
change to 75% national and 25% local
2004 and before October 1, 2009. The rate
and 33% local and 75% national and 25%
amounts and 75% of the local amounts to
after October 1, 2004 and in subsequent
for hospitals in Puerto Rico would revert to
local during FY2006 and subsequently.
blended amounts based on a 50/50 split
years.
a 50/50 split after October 1, 2009.
between national and local amounts.

---

CRS-13
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Require GAO report on appropriateness
No provision.
Section 413. Using the most current data,
No provision.
of IPPS payments.
No provision in
the Comptroller General (GAO) would be
current law.
required to report to Congress 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 hospitals.
Section 508. The Secretary will establish
Section 419. The Secretary would be able
No provision.
IPPS hospitals may apply to the Medicare
a wage index appeals process by January 1,
to
waive
established
reclassification
Geographic Classification Review Board
2004. A hospital seeking to be reclassified
criteria in calculating the wage index in a
(MGCRB) for a change in classification to
must submit an appeal to the MGCRB no
state when making payments for hospital
a different area.
If reclassification is
later
than
February
15,
2 0 0 4 .
discharges in FY2004.
granted, the new wage index will be used
Reclassifications will be effective for a 3-
to calculating Medicare’s payment for
year period starting April 1, 2004. There
inpatient and outpatient services.
The
will be no further administrative or judicial
reclassification standards are established
review of these decisions. The additional
by regulation.
spending associated with this provision
cannot exceed $900 million.
Update hospital market basket more
Section 404. The Secretary is required to
No provision
Section 404.
The Secretary would be
frequently. IPPS standardized amounts
revise the market basket weights to reflect
required to revise the market basket cost
are increased annually using an update
the most currently available data and to
weights to reflect the most currently
factor which is determined in part by the
establish a schedule for revising the cost
available data and to establish a schedule
projected increase in the hospital market
category weights more often than once
for revising the weights more often than
basket (MB), an input price index which
every 5 years. The Secretary is required to
once every 5 years. The Secretary would
measures the average change in the price
publish the reasons for and the options
be required to submit a report to Congress
of goods and services hospitals purchased
considered in establishing such a schedule
by October 1, 2004 on the reasons for and
in order to furnish inpatient care. Centers
in the final rule establishing FY2006
the options considered in establishing such
for Medicare and Medicaid Services
inpatient hospital payments.
a schedule.
(CMS) revises the category weights,
reevaluates the price proxies for such
categories, and rebases the MB every 5
years.

---

CRS-14
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Reduce hospital update factor.
Each
No provision.
No provision.
Section 501.
Acute hospitals would
year, Medicare’s operating payments to
receive an operating update of the MB
hospitals are increased or updated by a
minus 0.4 percentage points for FY2004
factor that is determined in part by the
through FY2006. The operating update
projected annual change in the hospital
would be the MB increase in FY2007 and
MB. Congress establishes the update for
subsequently.
Medicare’s IPPS for operating costs, often
several years in advance. Currently, acute
care hospitals will receive the MB as an
update for FY2004 and subsequently.
Increase pass-through payments for new
Section 503. The Secretary is required to
No provision.
Section 502. New diagnosis and procedure
inpatient technology.
The Medicare,
add new diagnosis and procedure codes in
codes would be added in April 1 of each
Medicaid,
and
SCHIP
Benefits
April 1 of each year but is not required to
year that would affect Medicare’s IPPS
Improvement and Protection Act of 2000
change Medicare’s payment or DRG
starting the following October.
The
(BIPA) established that Medicare’s IPPS
classification as a result of these additions
Secretary would not be able to deny new
should recognize the costs of new medical
until the fiscal year that begins after that
technology status because an item has been
services
and
technologies
beginning
date.
When establishing whether DRG
used prior to the 2-to-3 year period before
October 1, 2001. The additional hospital
payments are inadequate, the Secretary is
it was issued a billing code.
When
payments can be made by the means of
required to apply a threshold that is the
establishing whether DRG payments are
new
technology
groups,
an
add-on
lesser of 75% of the standardized amount
inadequate,
the
Secretary
would
be
payment, a payment adjustment, or other
(increased to reflect the difference between
required to apply a threshold that is the
mechanism, but cannot be a separate fee
costs and charges) or 75% of one standard
lesser of 75% of the standardized amount
schedule and must be budget neutral. CMS
deviation for the DRG involved.
The
(adjusted to reflect the difference between
established that a technology that provided
Secretary is required to: (1) maintain a
costs and charges) or 75% of one standard
a substantial improvement to existing
current public list of pending applications
deviation
for
DRG
involved.
The
treatments would qualify for additional
for this additional payment; (2) accept
Secretary would be required to provide
payments.
The add-on payment for an
public comment, recommendations, and
additional regulatory guidance on the new
eligible new technology would occur when
data regarding whether a service or
technology criteria. The Secretary would
the standard diagnosis related group
technology
represents
a
substantial
be required to deem that a technology
(DRG) payment was inadequate.
This
improvement; and (3) provide for a public
provides a substantial improvement on an
threshold was established as one standard
meeting with the clinical staff at CMS and
existing treatment if it is designated under
deviation above the mean standardized
organizations
representing
physicians,
section 506 of the FDA Act, approved
DRG; the add-on payment for new
beneficiaries,
manufacturers
or
other
under
certain
sections
of
Title
21,
technology would be the lesser of: (a) 50%
interested parties. These actions will occur
designated for priority review, is an
of the costs of the new technology; or (b)
prior to the publication of a proposed
exempt medical device under section
50% of the amount by which the costs
regulation. Before establishing an add-on
520(m) of such Act, or receives expedited

---

CRS-15
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
exceeded the standard DRG payment.
payment as the appropriate reimbursement
review under section 515(d)(5). Other
However, if the new technology payments
mechanism, the Secretary is directed to
requirements requiring the process for
are estimated to exceed the budgeted target
identify one or more DRGs and assign the
public input would be imposed.
A
amount of 1% of the total operating
technology to that DRG.
When such
preference fo use of a DRG adjustment
inpatient payments, the add-on payments
assignment to a DRG occurs, no add-on
would be established. Add-on payments
are reduced prospectively.
CMS has
payment would be made; the budget-
would be increased to the percentage that
proposed to reduce the threshold to 75% of
neutrality requirement with respect to
Medicare reimburses inpatient outlier
one
standard
deviation
beyond
the
annual
DRG
reclassifications
and
cases. Funding for this new technology
geometric mean standardized charge for all
recalculation will apply. Funding for new
would no longer be budget neutral.
cases in the DRG to which the new service
technology is no longer required to be
is assigned.
budget neutral. The provisions will apply
to
new
technology
determinations
beginning in FY2005. Applications that
were
denied
in
FY2005
will
be
reconsidered under these provisions; if
granted,
the
maximum
time
period
otherwise permitted for such classification
as a new technology is extended by 12
months.
Increase hospitals’ wage index values to
Section 505. The Secretary is required to
No provision.
Section 504.
The Secretary would be
reflect commuting patterns from higher
establish an application process and 3-year
required to establish an application process
wage index areas. Unlike other providers,
payment adjustment to recognize the out-
and payment adjustment to recognize the
IPPS hospitals may apply to the Medicare
migration of hospital employees who
commuting patterns of hospital employees.
Geographic Classification Review Board
reside in a county and work in a different
A hospital that qualified for such a
(MGCRB) for reassignment to another
area with a higher wage index. A hospital
payment adjustment would have average
area.
The MGCRB was created to
that receives such a payment adjustment
hourly wages that exceed the average
determine whether a hospital should be
will be located in a qualifying county that
wages of the area in which it is located and
redesignated to an area with which it has
meets certain criteria including (1) a
have at least 10% of its employees living
close proximity for purposes of using the
threshold of no less than 10% for
in one or more areas that have higher wage
other area’s wage index. A hospital can
minimum out-migration to a higher wage
index values. The process would be based
establish proximity to the new area by
index area or areas, and (2) a requirement
on the MGCRB reclassification process
documenting that at least 50% of its
that the average hourly wage of the
and
schedule
with
respect
to
data
employees reside there. Other cost criteria
hospitals in the qualifying county equals or
submitted. Such an adjustment would be
must be met before a hospital will be
exceeds the average hourly wage of all the
effective for 3 years unless a hospital
reclassified. If reclassification is granted,
hospitals in the area where the county is
withdraws or elects to terminate its
the wage index for the new area will be
located. The Secretary may require acute
payment. It would also be exempt from

---

CRS-16
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
used to calculate Medicare’s payment for
hospitals and other hospitals as well as
certain budget neutrality requirements.
inpatient and outpatient services provided
critical access hospitals to submit data
by the hospital.
regarding the location of their employees’
residence or the Secretary may use data
from other sources. A hospital that receives
a commuting wage adjustment is not
eligible for reclassification into another
area by the MCGRB. This adjustment is
exempt from certain budget neutrality
requirements. The thresholds and other
qualifying criteria for the commuting wage
adjustment are not subject to judicial
review. The provisions apply to discharges
on or after October 1, 2004.
Permit hospitals with missing cost
Section 407. A hospital will not be able to
No provision.
Section 414. Beginning January 1, 2004,
reports to be SCHs. SCHs are hospitals
be denied treatment as a SCH or receive
a hospital would not be able to be denied
that, because of factors such as isolated
payment as a SCH because data are
treatment as a SCH or receive payment as
location,
weather
conditions,
travel
unavailable for any cost reporting period
a SCH because data are unavailable for any
conditions, or absence of other hospitals,
due to changes in ownership, changes in
cost reporting period due to changes in
are the sole source of inpatient services
fi s c a l
i n termed ia r i e s ,
o r
o t h e r
o w n e r s h i p ,
c h a n g e s
i n
f i s c a l
reasonably available in a geographic area,
extraordinary circumstances, so long as
intermediaries, or other extraordinary
or are located more than 35 road miles
data from at least one applicable base cost
circumstances, so long as data from at least
from another hospital. An SCH receives
reporting period is available. The provision
one applicable base cost reporting period is
the higher of the following payment rates:
applies to cost reporting periods beginning
available.
the current IPPS base payment rate, or its
on or after January 1, 2004.
hospital-specific per discharge costs 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 patient
Section 951. The Secretary is required to
No provision.
Section 951. The Secretary would arrange
days for DSH adjustment. A hospital’s
provide information that hospitals need to
to
furnish
necessary
patient
day
DSH payments under IPPS are calculated
calculate the number of Medicaid patient
information
for
the
Medicare
DSH
using a formula that includes data on the
days used in the Medicare DSH payment
computation for the current cost reporting
number of total patient days as well as
formula not later than 1 year after
year.
days provided to those eligible for
enactment.

---

CRS-17
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Medicaid and to Medicare beneficiaries
who
receive
Supplemental
Security
Income.
Permit adoption of new coding standard.
No provision.
No provision.
S e c t i o n
9 4 2 ( d ) . T h e new c o d i n g
The Secretary is required to rely on the
standards, International Classification of
recommendations
from
the
National
Diseases 10th Revision (IDC-10) could be
Committee on Vital and Health Statistics
adopted
within
1-year
of
enactment
(NCVHS)
before
adopting
health
without receiving a recommendation from
information standards and codes.
NCVHS.
Require GAO report on use of external
Section 942(c). GAO is required to study
No provision.
Section 942(c). GAO would study which
data for IPPS payments. No provision in
which external data can be collected in a
external data can be collected in a shorter
current law.
shorter time frame by CMS to use in
time frame by CMS to use in calculating
calculating IPPS payments. GAO may
IPPS payments. GAO could evaluate
evaluate feasibility and appropriateness of
feasibility and appropriateness of using
using quarterly samples or special surveys
quarterly samples or special surveys and
and would include an analysis of whether
would include an analysis of whether other
other executive agencies are best suited to
executive agencies are best suited to
collect this information. The report is due
collect this information. The report would
to Congress no later than October 1, 2004.
be due to Congress no later than October 1,
2004.
Critical Access Hospital Services
Increase payments to CAHs. Generally,
Section 405(b). Inpatient, outpatient, and
No provision.
Section 405(a). Inpatient, outpatient, and
a critical access hospital (CAH) receives
covered skilled nursing facility services
covered skilled nursing facility services
reasonable cost reimbursement for care
provided by a CAH will be reimbursed at
provided by a CAH would be reimbursed
rendered to Medicare beneficiaries. CAHs
101% of reasonable costs of services
at 102% of reasonable costs of services
may elect either a cost-based hospital
furnished to Medicare beneficiaries. This
furnished to Medicare beneficiaries. This
outpatient service reimbursement or an all-
provision applies to cost reporting periods
provision would apply to cost reporting
inclusive rate which is equal to a
beginning on or after January 1, 2004.
periods beginning on or after October 1,
reasonable cost reimbursement for facility
2003.
services plus 115% of the fee schedule
payment for professional services.

---

CRS-18
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Eliminate 35-mile requirement for cost-
No provision.
Section 405(b). The requirement that the
Section 405(c). The 35-mile requirement
based
reimbursement
of
CAH
CAH or the related entity be the only
would not apply to a provider or supplier
ambulance services. Ambulance services
ambulance provider within a 35-mile drive
of ambulance services who is a first
provided by a CAH or provided by an
in order to receive reasonable cost
responder to emergencies for services
entity that is owned or operated by a CAH
reimbursement for the ambulance services
furnished after the first cost reporting
are paid on a reasonable cost basis and not
would be dropped for services furnished
period
beginning
after
the
date
of
the ambulance fee schedule, if the CAH or
beginning January 1, 2005.
enactment.
entity is the only provider or supplier of
ambulance services that is located within a
35-mile drive of the CAH.
Expand payment for emergency room
Section 405(b). The provision expands
Section 405(c). Reimbursement for on-call
Section 405(b). Same provision but would
on-call providers.
BIPA required the
reimbursement of on-call emergency room
emergency room providers would be
be effective January 1, 2004.
Secretary
to
include
the
costs
of
providers to include not just emergency
expanded to include physician assistants,
compensation (and related costs) of on-call
room
physicians
but
also
physician
nurse practitioners, and clinical nurse
emergency room physicians who are not
assistants, nurse practitioners, and clinical
specialists as well as emergency room
present on the premises of a CAH, are not
nurse specialists for the costs associated
physicians for covered Medicare services
otherwise furnishing services, and are not
with covered Medicare services provided
provided beginning January 1, 2005.
on-call at any other provider or facility
beginning January 1, 2005.
when
determining
the
allowable,
reasonable
cost
of
outpatient
CAH
services.
Increase critical access hospital (CAH)
Section 405(e). A CAH will be able to
Section 405(a) A CAH would be able to
Section
405(f).
For
designations
bed limit. A CAH is a limited service
operate up to 25 beds. The requirement
operate up to 25 swing beds or acute care
beginning January 1, 2004, the Secretary
facility that
must provide 24-hour
that only 15 of the 25 beds be used for
beds, subject to the 96-hour average length
would specify standards for establishing
emergency services and operate a limited
acute care at any time is dropped. The
of stay for acute care patients.
The
seasonal variations in a CAH’s patient
number of inpatient beds in which hospital
provision applies to CAH designations
requirement that only 15 of the 25 beds be
admissions that would justify a five-bed
stays can average no more than 96 hours.
made before, on, or after January 1, 2004,
used for acute care at any time would be
increase in the number of beds it can
A CAH is limited to 15 acute-care beds,
but any election made pursuant to the
dropped.
This provision would be
maintain (and still retain its classification
but can have an additional 10 swing beds
regulations promulgated to implement this
effective for designations made beginning
as a CAH). CAHs with swing beds would
that are set up for skilled nursing facility
provision will only apply prospectively.
October 1, 2004.
be able to use up to 25 beds for acute care
level care. While all 25 beds in a CAH can
services as long as no more than 10 beds at
be used as swing beds, only 15 of the 25
any time are used for non-acute services.
can be used for acute care at any time.
Those CAHs with swing beds that made
this election would not be eligible for the

---

CRS-19
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
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.
Authorize periodic interim payments for
Section 405(c). An eligible CAH will be
Section 405(d). Starting with payments
Section 405(d). Same provision but would
eligible CAHs. Eligible hospitals, skilled
able to receive payments made on a PIP
made beginning January 1, 2005, an
be effective January 1, 2004. Also, the
nursing facilities, and hospices which meet
basis for its inpatient services.
The
eligible CAH would be able to receive
Secretary would be required to develop
certain requirements receive Medicare
Secretary is required to develop alternative
payments made on a PIP basis for inpatient
alternative
methods
based
on
the
periodic interim payments (PIP) every 2
methods for the timing of PIP payments to
services.
expenditures of the hospital for these PIP
weeks; these payments are based on
these CAHs.
This provision applies to
payments.
estimated annual costs without regard to
payments made on or after July 1, 2004.
the 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 units from
Section 405(g). A CAH can establish a
Section 405(g). The Secretary would not
No provision.
CAH bed count Beds in distinct-part
distinct part psychiatric or rehabilitation
be able to count any beds in a distinct-part
skilled nursing facility units do not count
unit that meets the applicable requirements
psychiatric or rehabilitation unit operated
toward the CAH bed limit.
Beds in
for such beds. If the units do not meet
by the entity seeking to become a CAH for
distinct-part psychiatric or rehabilitation
these requirements during a cost reporting
designations beginning October 1, 2003.
units operated by an entity seeking to
period, then no Medicare payment will be
The total number of beds in these distinct-
become a CAH count toward the bed limit.
made to the CAH for services furnished in
part units would not be able to exceed 25.
the unit during the period in question.
A CAH would be able to establish a such a
Payments for services provided in these
distinct-part unit.
units will equal payments that are made on
a prospective payment basis to distinct part
units of short term general hospitals. The
beds in the distinct part psychiatric or
rehabilitation units will not count toward
the CAH bed limit. The total number of
beds in these distinct part units cannot

---

CRS-20
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
exceed 10. The provision will apply to cost
reporting periods starting October 1, 2004
E s t a b l i s h
C A H
i m p r o v e m e n t
No provision.
Section 415.
The Secretary would be
No provision.
demonstration program. No provision in
required to establish a budget neutral 5-
current law.
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.
Modify CAHs’ billing requirements for
Section 405(d). The requirement that all
No provision.
Section 405(e). The Secretary would not
physician services. As specified by
physicians
or
practitioners
providing
be able to require that all physicians
Balanced Budget Refinement Act of 1999
services in a CAH assign their billing
providing services in a CAH assign their
(BBRA), CAHs can elect to be paid for
rights to the entity in order for the CAH to
billing rights to the entity in order for the
outpatient
services
using
cost-based
be able to be paid 115% of the fee
CAH to be able to be paid on the basis of
reimbursement for its facility fee and at
schedule cannot be imposed. However, a
115% of the fee schedule for the
115% of the fee schedule for professional
CAH will not receive payment based on
professional services provided by the
services otherwise included within its
115% of the fee schedule for any
physicians. However, a CAH would not
outpatient critical access hospital services
individual who does not assign billing
receive such payment for any physician
for cost reporting periods starting October
rights to the CAH. This provision applies
who did not assign billing rights to the
1, 2000.
to cost report periods starting on or after
CAH.
July 1, 2004 except for those CAHs that
have already elected payment for physician
services on this basis before November 1,
2003; this provision will apply to those
CAHs starting for cost reporting periods on
or after July 1, 2003.

---

CRS-21
Provision and Current Law Description
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Eliminate state authority to waive CAH
Section 405(h). The State will no longer
No provision.
No provision.
mileage requirements.
Currently, to
be able to waive the mileage standards and
qualify as a CAH, the rural, for-profit,
designate a facility seeking to become a
nonprofit, or public hospital must be
CAH as a necessary provider of care after
located more than 35 miles from another
January 1, 2004. A facility designated as
hospital or 15 miles in areas with
CAH before January 1, 2006 and certified
mountainous terrain or those where only
as a necessary provider of care will be able
secondary roads are available.
These
retain such designation.
mileage standards may be waived if the
hospital has been designated by the State
as a necessary provider of health care.
Other Hospitals
Create essential rural hospital category.
No provision.
No provision.
Section 403.
The definition of CAH
Generally, a hospital designated as a CAH
hospital and services would be amended to
is
exempt
from IPPS
and
receives
add an essential rural hospital. An eligible
reasonable, cost-based reimbursement for
hospital
would
apply
for
such
a
care rendered to Medicare beneficiaries.
classification, have more than 25 licensed
Certain acute general hospitals receive
acute care beds, and be located in a rural
special treatment under IPPS, particularly
area as defined by IPPS. The Secretary
those facilities identified as isolated or
would have to determine that the closure of
essential hospitals primarily located in
this hospital would significantly diminish
rural areas, including RRCs and SCHs.
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 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.

---

CRS-22
Allied Health and Graduate Medical Education Payments.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Pay hospitals for training costs of
No provision. Discussion of congressional
Section 408. Beginning October 1, 2004,
No provision.
psychologists. Medicare pays hospitals
intent regarding this payment can be found
Medicare would reimburse its share of the
for its share of direct costs associated with
on p. 276 of the Conference Report
reasonable costs of approved education
approved hospital-based training programs
activities of psychologists under the allied
for nurses and certain other allied health
health professional training provisions.
professionals
including
inhalation
therapists, nurse anesthetists, occupational
and physical therapists.
Medicare does
not pay for such costs associated with
psychologists’ training.
Increase initial residency period for
Section 712.
The bill clarifies that
Section 410.
The Secretary would be
No provision.
geriatricians. Medicare counts residents
Congress intended to provide an exception
required to promulgate interim final
in their initial residency period (the lesser
to the initial residency period for geriatric
regulations after notice and comment that
of the minimum number of years required
fellowship programs to accommodate
would establish full GME payment for 2
for board eligibility in the physician’s
programs that require 2 years of training to
years as a 2-year initial residency program
specialty or 5 years) as 1.0 FTE. Residents
initially become board eligible in the
for certain geriatric training programs
whose training has extended beyond their
geriatric
specialty.
The
Secretary
is
effective
for
cost
reporting
periods
initial residency period count as 0.5 FTE.
required to promulgate interim final
beginning October 1, 2003.
Geriatrics is a subspecialty of family
regulations consistent with this expressed
practice, internal medicine and psychiatry.
intent after notice and subject to public
A 1-year fellowship is required for
comment. The regulations will be effective
certification in geriatrics, following an
for cost reporting periods on or after
initial residency in one of those three areas.
October 1, 2003.
Increase indirect medical education
Section 502. From April 1, 2004 until
Section 418.
The IME multiplier in
No provision.
(IME) payments.
A hospital’s IME
September 30, 2004, the IME multiplier is
FY2004 and in FY 2005 would be 1.36;
payment is based on a percentage add-on
equal to 1.47; during FY2005, the IME
the multiplier would be 1.355 in FY2006
to its IPPS rate that is established by a
multiplier is 1.42;
during FY2006, the
and in subsequent years.
This would
complicated
curvilinear
formula
that
IME multiplier is 1.37; during FY2007, the
provide an IME adjustment of 5.508% for
currently provides a payment increase of
IME multiplier is 1.32; and, starting
each 10% increase in a hospital’s IRB ratio
approximately 5.5% for each 10% increase
October 1, 2007, the IME multiplier is
for FY2004 and FY2005. This change has
in the hospital’s intern and resident-to-bed
equal to 1.35. This provision applies to
been projected to increase payments to
(IRB) ratio.
The statutory
formula is
discharges on or after April 1, 2004.
teaching hospitals by $300 million over 10
multiplied by a hospital’s base payment
years.

---

CRS-23
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
rate for each Medicare discharge to
determine the IME payments: 1.35 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-provider
Section 713.
For a 12-month period
Section 411.
The Secretary would be
No provision.
setting; drop dentists and podiatrists
starting January 1, 2004 hospitals will be
required to reimburse teaching hospitals
from the 3-year rolling limit on IME
able to count residents in osteopathic and
for residents in non-hospital locations,
payments. Medicare has different resident
allopathic family practice programs in
when hospitals incur all, or substantially
limits for the IME adjustment and direct
existence as of January 1, 2002 who are
all, the costs of the training in that site
medical education (DGME) payment.
training at non-hospital setting without
starting from the effective date of a written
Generally, the resident counts for both
regard
to
the
financial
arrangement
agreement between the hospital and the
IME and DGME payments are based on
between the hospital and the teaching
entity owning or operating the non-hospital
the number of
residents in approved
physician practicing in the non hospital
site.
The effective date of the written
allopathic
and
osteopathic
teaching
site. The Inspector General of Health And
agreement would be determined according
programs
reported by the hospital in
Human Services (HHS-IG) will submit a
to
generally
accepted
accounting
calendar year 1996. The DGME limit may
study including recommendations on the
principles. The Secretary would not be
differ from the IME limit because in 1996
appropriateness
of
the
payment
able to take into account the fact that the
residents training in non-hospital sites were
methodology for the volunteer supervision.
hospital costs incurred are lower than
eligible for DGME payments but not for
actual Medicare reimbursement. Starting
IME payments. Prior to BBA 1997, the
with
FY2005,
dental
and
podiatric
number of residents that could be counted
residents would be removed from the 3-
for IME purposes included only those in
year rolling average calculation for IME
the hospital inpatient and outpatient
and DGME reimbursements.
departments. Effective October 1, 1997,
under certain circumstances, a hospital
may now count 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

---

CRS-24
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
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.
Extend update limitation on high cost
Section 711. Hospitals with per resident
No provision.
Section 711. Hospitals with per resident
programs.
Hospitals with per resident
amounts above 140% of the geographically
a mo u n t s
a b o v e
1 4 0 %
o f
t h e
amounts between 85% and 140% of the
adjusted national average amount will not
geographically-adjusted national average
geographically-adjusted national average
get an update from FY2004 through
amount would not get an update from
would continue to receive payments based
FY2013.
FY2004 through FY2013.
on their hospital-specific per resident
amounts updated for inflation.
Redistribute unused residency positions.
Section 422.
A teaching hospital’s total
No provision.
Section 406. A teaching hospital’s total
Medicare has different resident limits for
number of resident positions will be
number of Medicare-reimbursed resident
the IME adjustment and DGME payment.
reduced for cost reporting periods starting
positions would be reduced by a portion of
Generally, the resident counts for both
July 1, 2005 if its reference resident level
its unused residency slots for cost reporting
IME and DGME payments are based on
is less than its applicable resident limit.
periods starting January 1, 2004 if its
the number of residents in approved
Rural hospitals with less than 250 acute
resident reference level is less than its
allopathic
and
osteopathic
teaching
care inpatient beds would be exempt from
applicable resident limit.
If so, the
programs that were reported by the
these reductions. The reduction for other
reduction would be equal to 75% of the
hospital for the cost reporting period
hospitals will equal 75% of the difference
difference between the hospital’s limit and
ending in calendar year 1996. The DGME
between the hospital’s limit and its
its resident reference level upon the timely
resident limit is based on the unweighted
reference resident level.
The reference
request for such an adjustment, for the cost
resident counts. It may differ from the
resident level is the highest number of
reporting period that includes July 1, 2003.
IME limit because in 1996 residents
allopathic
and
osteopathic
resident
A hospital’s reference period would be the
training in non-hospital sites were eligible
positions (before the application of any
three most recent settled or submitted
for DGME payments but not for IME
weighting factors) for the hospital during
consecutive cost reporting periods on or
payments.
Generally, a hospital’s IME
the reference period. This reference period
before September 30, 2002. The need for
adjustment and increased IPPS payments
is either (1) the resident level of the most
an increase in the physician specialty and
depends on a hospital’s teaching intensity
recent cost reporting period of the hospital
the location involved would be considered.
as measured by the ratio of the number of
for which a cost report has been settled (or
Positions would be distributed to programs

---

CRS-25
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
interns and residents per bed. Medicare’s
submitted, subject to audit) on or before
in rural areas and those not in large urban
DGME payment to teaching hospitals is
September 30, 2002 or (2) the resident
areas on a first-come-first-served basis.
based on its updated cost per resident
level for the cost reporting period that
The hospital would have to demonstrate
(subject to a locality adjustment and
includes July 1, 2003 subject to audit. A
that the resident positions would be filled;
certain payment corridors), the weighted
hospital’s reference level may be adjusted
not more than 25 positions would be given
number of approved full-time equivalent
under certain circumstances. The increase
to any hospital. These hospitals would be
(FTE) residents, and Medicare’s share of
in applicable resident limits applies to
reimbursed for DGME for the increase in
inpatient days in the hospital.
portions
of
cost
reporting
periods
resident positions at the locality-adjusted
occurring on or after July 1, 2005. The
national average per resident amount. IME
aggregate increase may not exceed the
payments would also be affected.
The
overall reduction in such limits.
The
Secretary would be required to submit a
Secretary is directed to take several factors
report to Congress, no later than July 1,
into account when distributing the resident
2005, on whether to extend the application
positions to hospitals. No more than 25
deadline for increases in resident limits.
additional FTEs will be given to any
hospital.
These
hospitals
will
be
reimbursed for DGME for the increase in
resident positions at the locality adjusted
national average per resident amount and
will receive increased IME payments as
well for discharges after July 1, 2005.
The Secretary is 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.
Skilled Nursing Facility (SNF) and Hospice Services.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Skilled Nursing Facility Services (SNF)
Increase skilled nursing facility (SNF)
Section 511. Starting October 1, 2004, the
No provision.
Section 511. Starting October 1, 2003, the
payments for AIDS patients. Under PPS,
per diem RUG payment for a SNF resident
per diem RUG payment for a SNF resident
SNFs are paid a daily rate that varies
with
acquired
immune
deficiency
with
acquired
immune
deficiency
depending on the care needs of the
syndrome (AIDS) will be increased by
syndrome (AIDS) would be increased by

---

CRS-26
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
beneficiary.
There
are
44
resource
128%. This increase does not apply after
128%. This increase would not apply after
utilization groups (RUGs) used to adjust
the date that the Secretary certifies that the
the date that the Secretary certifies that the
payment for care needs; each group
case-mix
adj us t me n t
a dequately
case-mix
adj us t me n t
a dequately
reflects the intensity of services, such as
compensates for the increased costs
compensates for the increased costs
skilled nursing care and/or various therapy
associated with caring for residents with
associated with caring for residents with
and other services needed by a beneficiary.
AIDS.
AIDS.
Exclude certain clinic visits from skilled
Section 410. Services provided to a SNF
Section 429. Services provided by a RHC
Section 408. Provision is limited to RHCs
nursing
facility
(SNF)
prospective
resident by a rural health clinic (RHC) and
and a FQHC after January 1, 2005 would
and FQHC services provided after January
payment system (PPS) Under Medicare’s
a federally qualified health center (FQHC)
be excluded from SNF-PPS if these
1, 2004 and does not extend to outpatient
PPS, SNFs are paid a predetermined
after January 1, 2005 are excluded from
services would have been excluded if
services that are beyond the general scope
amount to cover all services provided in a
SNF-PPS if these services would have
furnished by a physician or practitioner
of SNF comprehensive care plans.
day adjusted for the care needs of the
been excluded if furnished by a physician
who was not affiliated with
a RHC or
patient.
Certain
services
and
items
or practitioner who was not affiliated with
FQHC.
Outpatient services that are
provided
a
SNF
resident,
such
as
a RHC or FQHC.
beyond
the
general
scope
of
SNF
physicians’ services, specified ambulance
comprehensive care plans that are provided
services, specified chemotherapy items and
by an entity that is 100% owned as a joint
services, and certain outpatient services
venture by two Medicare-participating
provided by a Medicare-participating
hospitals or critical access hospitals would
hospital or CAH, are excluded from the
be excluded from the SNF-PPS.
SNF-PPS and paid separately under Part B.
Require background check on workers
Section 306. The Secretary, in consultation
Section 636. All providers of long-term
No provision.
for certain Medicare and Medicaid
with the Attorney General, is required to
care services that participate in Medicare
health and long-term care providers.
establish pilot projects on background
and/or Medicaid would be required to
Nursing homes and home health agencies
checks for certain long-term care workers
initiate background checks for certain
may request the Federal Bureau of
with direct access to patients or residents in
workers with access to a patient or
Investigation (FBI) to search its all-state
no more than 10 states. The Secretary is
resident.
Procedures
for
conducting
national
data
bank
of
arrest
and
required to establish criteria for selecting
background checks would be specified,
convictions for the criminal histories of
those states that volunteer to participate.
and would include searches of state and
applicants who would provide direct
The
bill
specifies
procedures
for
FBI criminal records. Violators of these
patient care, as long as states establish
conducting
background
checks,
and
requirements would be subject to criminal
mechanisms for processing these requests
includes searches of state and FBI criminal
penalty
fines
and/or
imprisonment.
(most states require checks for certain
records.
At least one state in the pilot
Providers
would
be
permitted
to
groups of employees). Providers follow
project would be allowed to establish
provisionally employ workers pending
certain procedures to conduct these checks.
procedures for using employment agencies
completion of the checks and would be

---

CRS-27
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
HHS maintains a national health care
to conduct these checks. Providers may
reimbursed for their costs of conducting
fraud and abuse data base, the Healthcare
provisionally employ workers pending
these checks.
Integrity
and
Protection
Data
Bank
completion of the checks.
(HIPDB). Self-queries of HIPDB are
The nurse aide registry would be expanded
allowed by government agencies, health
The Secretary is required to pay those
to include all employees of long-term care
plans, health care providers, suppliers and
states for the costs of conducting the pilot
providers
and
renamed
“employee
practitioners. All states also maintain their
program (reserving 4% of the payments for
registry.” The investigatory responsibilities
own registries of those persons that the
the program’s evaluation). A sum of $25
of survey and certification agencies would
state determines meet the requirements to
million is appropriated from funds in the
be expanded. $10.2 million would be
work as nurse aides.
Included in these
Treasury not otherwise appropriated, for
authorized to be appropriated for FY 2004,
registries are data describing state findings
fiscal years 2004 through 2007.
with compliance deadlines varying by
of resident neglect, abuse and/or the
provider group.
misappropriation of resident property.
Grants would be available to develop
State survey agencies are required to
information on best practices in patient
investigate allegations of resident neglect,
abuse prevention training and for other
abuse and/or the misappropriation of
purposes.
resident property in nursing homes.
Long-term care providers could access the
HIPDB data bank and more information
would be required to be included. A report
on background checks would be due to
Congress no later than 2 years after
enactment.
Hospice Services
Permit hospices to provide core hospice
Section 946.
Beginning with the date of
Section 406. Beginning with the date of
Section 946. Same provision.
services under arrangement. Medicare
enactment, a hospice is permitted to enter
enactment, a hospice would be permitted
requires a hospice to provide certain core
into arrangements with another hospice
to enter into arrangements with another
services directly.
These core services
program to provide core services in
hospice program to provide core service in
include nursing care, medical social
extraordinary circumstances.
extraordinary circumstances.
services, and counseling services.

---

CRS-28
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Permit
nurse
practitioners,
clinical
Section 408. The definition of an attending
Section 407. Beginning October 1, 2004,
Section 409. Nurse practitioners would be
nurse
specialists,
and
physician
physician in hospice is expanded to include
a terminally ill beneficiary under hospice
permitted to be identified as a beneficiary’s
assistants to attend hospice patients.
a nurse practitioner. A nurse practitioner is
care would be able to designate a physician
attending physician and would be able to
Medicare covers hospice services to care
not permitted to certify a beneficiary as
assistant, nurse practitioner, or clinical
establish and review the written plan-of-
for the terminal illness of a beneficiary.
terminally ill for the purposes of receiving
nurse specialist (who is not an employee of
care as well as provide other services, but
Reasonable and necessary medical and
the hospice benefit.
The provision is
the hospice program) as his or her
would not be able to certify that a
support services for the management of the
effective upon enactment.
attending physician. The written plan-of-
beneficiary is terminally ill.
terminal illness are furnished under a
care would be able to be established by
written
plan-of-care
established
and
these professionals who would be able to
periodically reviewed by the patient’s
periodically
review
the
beneficiary’s
attending physician and the hospice. The
written plan-of-care.
attending physician may be employed by
the hospice and is identified by the
beneficiary as having the most significant
role in the determination and delivery of
medical care to the beneficiary at the time
that hospice care is elected.
Pay for physician consultation services
Section 512. Beginning January 1, 2005,
No provision.
Section 512.
As of January 1, 2004,
in certain instances.
Current law
Medicare will pay for a hospice-employed
Medicare would pay for a hospice-
authorizes coverage of hospice services, in
physician’s consultation with a terminally
employed physician’s consultation with a
lieu of certain other Medicare benefits, for
ill beneficiary who has not elected the
terminally ill beneficiary who has not
terminally ill beneficiaries who elect such
hospice benefit.
elected the hospice benefit.
coverage.
The hospice can be paid by
Medicare only after the beneficiary has
elected the hospice benefit
Establish rural hospice demonstration
Section 409. The Secretary is required to
No provision.
Section 418.
The Secretary would
program.
Medicare’s hospice services
establish a demonstration project in 3
establish a 5-year demonstration project in
are provided primarily in a patient’s home
hospice programs to deliver hospice care to
three hospice programs to deliver hospice
to beneficiaries who are terminally ill and
Medicare beneficiaries in rural areas. A
care to Medicare beneficiaries in rural
who elect such services.
Medicare law
project is not permitted to last longer than
areas. Those Medicare beneficiaries who
prescribes that the aggregate number of
5 years. Those Medicare beneficiaries who
lack an appropriate caregiver and are
days
of
inpatient
care
provided
to
lack an appropriate caregiver and are
unable to receive home-based hospice care
Medicare beneficiaries who elect hospice
unable to receive home-based hospice care
would be able to receive hospice care in a
care in any 12-month period
cannot
could receive hospice care in a facility of
facility of 20 or fewer beds that offers a

---

CRS-29
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
exceed 20% of the total number of days of
20 or fewer beds that offers a full range of
full range of hospice services within its
hospice
coverage
provided
to
these
hospice services within its walls.
walls. The facility would not be required
persons.
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.
Other Part A Provisions.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Make grants to States and certain
Section
405(f).
The
rural
hospital
Section 405(f). Under this program, the
Section 405(g).
The authorization to
rural hospitals. The Secretary is able to
flexibility grant program is authorized at
Secretary would be able to award grants of
award grants under the existing Rural
make grants for specified purposes to
$35 million each year from FY2005
up to $50,000 to hospitals to assist eligible
Hospital Flexibility Program would be
States or eligible small rural hospitals
through FY2008. Starting in FY2005, a
small rural hospitals in reducing medical
established from FY2004 through FY2008
that apply for such awards under the
state is required to consult with the hospital
errors and increasing patient safety under
from the Federal HI Trust Fund at amounts
Medicare Hospital Flexibility Program.
association and rural hospitals in the state
the
new
Small
Rural
Hospital
of up $25 million each year.
The Secretary may also award grants to
on the most appropriate way to use such
Improvement Program. Appropriations of
hospitals to assist eligible small rural
funds. A state may not spend more than
$25 million each year from the Treasury
hospitals (with less than 50 beds) in
the lesser of 15% of the grant amount or
from FY2004 through FY2008 would be
implementing data systems required
the States’ federally negotiated indirect
a u t h o r i z e d
f o r
t h i s
p u r p o s e .
under BBA 1997. Annual funding for the
rate
for
administrative
purposes.
Appropriations of $40 million each year
Rural Hospital Flexibility Grant Program
Beginning with FY2005, up to 5% of the
from FY2004 through FY2008 from the HI
was $25 million from 1999 through
total amount appropriated for grants will
Trust Fund for grants to states for specified
2001; $40 million in FY2002; and $25
be available to the Health Resources and
purposes would be authorized. States that
million in 2003. The authorization to
Services Administration for administering
are awarded grants would be required to
award the grants expired in FY2002.
these grants.
consult with the hospital associations and
rural hospitals in the state.
Establish health care infrastructure loan
Section 1016. A loan program will be
Section 608. A loan program would be
No provision.
program. No provision in current law.
established to improve the cancer-related
established to improve the cancer-related
health care infrastructure.
In order to
health care infrastructure in states with a
receive assistance, the applicant will be
population of less than 3 million. In order
required to: (1) be engaged in cancer
to receive assistance, the applicant would
research; and
(2)
be designated as a
be required to: (1) be engaged in cancer

---

CRS-30
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
cancer center for the National Cancer
research; and (2) be designated as a cancer
Institute (NCI) or be similarly designated
center for the NCI or be similarly
by the state.
$200 million in budget
designated by the state. $49 million in
authority is authorized for July 1, 2004
budget authority would be authorized for
through FY2008 to carry out the loan
July 1, 2004 through FY2008 to carry out
program,
$2
million
for
program
the loan program, $2 million for program
administration. By 4 years from enactment,
administration.
the Secretary will submit a report to
Congress on continuing the program.
Establish
capital
infrastructure
No provision.
Section 609. The Secretary would be able
No provision.
revolving loan program
The Public
to make loans to any rural entity including
Health Services Act establishes a fund in
rural health clinics, a medical facility with
the Treasury from which the Secretary of
less than 50 beds in non- MSA counties or
HHS can make loans or loan guarantees in
in
rural census tracts of MSAs,
rural
the amounts that have been specified in
referral
centers
or
sole
community
appropriations acts from time to time.
hospitals
for
various
purposes.
An
Under
the
Medicare
Rural
Hospital
geographically reclassified entity would be
Flexibility Program established as part of
eligible
for
these
loans
and
loan
Title XVIII, the Secretary may award
guarantees.
The government’s total
grants to rural hospitals to cover the
exposure for this program would not
implementation costs associated with data
exceed $50 million per year and the
systems needed to meet the BBA 97
principal amount of all loans directly made
requirements.
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 community hospital
Section 410A. The Secretary will establish
Section 414.
The Secretary would be
No provision.
demonstration program. No provision
a 5-year rural community hospital (RCH)
required to establish a 5-year RCH
in current law.
demonstration program in selected rural
demonstration
program
in
4
areas
areas with low population densities. Under
including Kansas and Nebraska to pay for

---

CRS-31
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
the program, up to 15 hospitals with 50
acute
inpatient
services,
outpatient
acute care beds will receive payment for
services, and certain home health services
inpatient services either on the basis of its
in qualifying hospitals either on the basis
reasonable costs (without regard to the
of its reasonable costs (without regard to
amount of customary charges) or using a
the amount of customary charges) or using
target amount.
The project will be
the
respective
prospective
payment
implemented not later than January 1, 2005
systems for those services. In this instance,
and not before October 1, 2004.
The
reasonable cost reimbursement of capital
project would be budget neutral. Certain
costs would include a return on equity
limits on beneficiary cost-sharing will be
payment of 150% of the average rate of
imposed.
The Secretary will submit a
interest paid by the HI Trust Fund. The
report with recommendations to Congress
project would be budget neutral. Certain
no later than 6 months after completion of
limits on beneficiary cost-sharing would be
the project
imposed.
Ensure status as long-term hospitals
No provision.
Section 416. The Secretary would not be
No provision.
for certain hospital-in-hospitals. A
able to impose any special conditions on
hospital-in-a-hospital is a long-term care
the operation, size, number of beds, or
hospital that is physically located in an
location of an existing long-term hospital
acute care hospital. CMS has established
in order to continue participating in
certain requirements for these entities to
Medicare or Medicaid or to continue being
be excluded from the IPPS and be paid as
classified as a long-term hospital.
The
a long-term hospital. It exempted
Secretary would not be able to adopt a
existing entities (those that were in
proposed regulation that would implement
existence on or before September 30,
such conditions or any revision to such
1995) when these requirements were
regulation that have a comparable effect.
established. On May 19, 2003, CMS
[Duplicate provision is at Section 420B]
proposed that a grandfathered hospital-
in-a hospital would only be exempt from
the existing requirements if it continues
to operate within the same terms and
conditions that were in effect as of
September 30, 1995.
Establish special treatment for certain
Section 508(f).
Reclassifications of a
Section 417. Starting October 1, 2003,
No provision.
entities.
Unlike other providers, acute
county or area made by an Act of Congress
Iredell County and Rowan County, North
hospitals may apply to the Medicare
that expired on September 30, 2003 shall
Carolina would be deemed to be located in

---

CRS-32
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Geographic Classification Review Board
be reinstated starting on January 1, 2004
the Charlotte-Gastonia-Rock Hill, NC-SC
(MGCRB) for a change in classification
through September 30, 2004.
Metropolitan Statistical Area for the
from a rural area to an urban area, or
purpose of Medicare’s inpatient and
reassignment from one urban area to
outpatient acute hospital payments as well
a n o t h e r
u r b a n
a r e a .
H o s p i t a l
as SNF and home health payments. The
reclassifications are established on a
Secretary would be required to adjust the
budget neutral basis so aggregate inpatient
wage index values of all hospitals in North
prospective payment system expenditures
Carolina to assure that aggregate payments
will not increase as a result. Aside from
for hospital inpatient operating costs are
reclassifications through the MGCRB,
not greater than they would have been
hospitals have also been reclassified by
without such a change:
also aggregate
law.
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
health
Section 506. Hospitals that participate in
Section 412.
The amendment would
No provision.
services
provided
to
Indians
by
Medicare and that provide Medicare
prohibit Medicare providers from charging
participating hospitals.
The Indian
covered inpatient hospital services under
the Indian Health Service more than the
Health Service (IHS) provides health care
the contract health services program
Medicare-established rates for inpatient
both directly, through tribes and tribal
funded by the Indian Health Services and
hospital services.
consortia, and through urban Indian
operated by the Indian Health Service, an
organizations.
Indian tribe, an Indian tribal organization,
or an urban Indian organization will be
paid
in
accordance
with
regulations
promulgated by the Secretary regarding
a d m i s s i o n
p r a c t i c e s ,
p a y m e n t
methodologies, and rates of payments.
This will include the requirement to accept
these rates as payment in full except for the
payment rates for neonatal care. This
provision
will
apply
to
Medicare
participation agreements in effect or
entered into by a date specified by the
Secretary. In no case will this date be later
than 1 year after the date of enactment.

---

CRS-33
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Pay interest on clerical error into HI
Section 734. The Secretary of the Treasury
Section 623. After consultation with the
Section 513. Same provision.
Trust Fund. An incorrect amount of
is required to transfer into the HI Trust
Secretary of HHS, the Secretary of the
income was transferred into the HI Trust
Fund an amount that would have been held
Treasury would be required to transfer into
Fund in April 2001, because of a clerical
by that fund if the clerical error had not
the HI Trust fund an amount that would
error.
An
additional
amount
was
occurred. The appropriation is to be made
have been held by that fund if the clerical
transferred into the HI Trust Fund in
and transfer is required within 120 days of
error had not occurred within 120 days of
December, 2001 to correct for the principal
enactment of this Act. In the case of a
enactment.
amount
associated
with
the
error.
clerical error that occurs after April 15,
Correction of the interest associated with
2001, the Secretary of the Treasury is
the clerical error requires legislation.
required
to
notify
the
appropriate
committees of Congress about the error
and the actions to be taken, before such
action is taken.
Apply the Occupational Safety and
Section
947.
Public
hospitals,
not
No provision.
Section 947. As of July 1, 2004, public
Health Act of 1970 (OSHA) bloodborne
otherwise subject to the Occupational
hospitals that are not otherwise subject to
pathogens standard to public hospitals.
Safety and Health Act of 1970, are
OSHA would be required to comply with
Section 1866 of the Social Security Act
required to comply with the Bloodborne
the Bloodborne Pathogens standard under
establishes
certain
conditions
of
Pathogens
standard
under
section
Section 1910.1030 of Title 29 of the Code
participation that hospitals must meet in
1910.1030 of title 29 of the Code of
of Federal Regulations. A hospital that
order to participate in Medicare.
Federal Regulations. A hospital that fails
fails to comply with the requirement would
to comply with the requirement will be
be subject to a civil monetary penalty, but
subject to a civil monetary penalty, but
would not be terminated from participating
cannot be terminated from participating in
in Medicare.
Medicare.
The provision applies to
hospitals as of July 1, 2004.

---

CRS-34
Provisions Relating to Part B
Physician and Practitioner Services.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish
floor
on
geographic
Section 412. The Secretary is required to
Section 421. For services furnished after
Section 605(a).
For services furnished
adjustment for physician fee schedule.
increase the value of any work geographic
January 1, 2004, the Secretary would be
after January 1, 2004 and before January 1,
Medicare’s
payment
for
physicians’
index that is below 1.0 to 1.0 for services
required to increase the value of any work
2006, the Secretary would be required to
services under a fee schedule has three
furnished on or after January 1, 2004 and
geographic index that is below .980 to
increase the value of any work geographic
components: the relative value for the
before January 1, 2007
.980. The values for work index would be
index that is below 1.00. to 1.00 unless the
service, geographic adjustment factors and
raised to 1.0 for services furnished in 2005,
Secretary
determines,
based
on
the
a conversion factor into a dollar amount.
2006, and 2007. The practice expense and
subsequent GAO study which is due by
The geographic adjustment factors are
malpractice geographic indices in low
September 1, 2004, that there is no sound
indices that reflect the relative cost
value localities areas would be raised to
economic rationale for such change.
difference in a given area in comparison to
1.00 for services furnished in 2005 until
the national average
2008.
Increase practice expense payments for
Sections 303(a) and 304. Beginning in
Section 432(b)(1). The Secretary would
Section 303(a)
The Secretary would
certain specialists.
The relative value
2004, the practice expense relative value
establish the practice expense relative
increase the practice expense relative
associated with a particular physician
units for oncology administration services
values for the CY2004 fee schedule using
values for the physician fee schedule in
service is the sum of three components one
will be adjusted using survey data that was
the survey data from a physician specialty
CY2005 using appropriate survey data on
of which is practice expense.
Practice
collected as of January 1, 2003 (this data
group as of January 1, 2003 if the data
the
expenses
associated
with
drug
expense includes both direct costs (such as
was submitted by the American Society of
appropriately covers the practice expenses
administration provided by entities and
a clinician’s time and the medical supplies
Clinical
Oncologists);
the
additional
for oncology administration services. The
organizations
that
are
submitted
by
to provide a specific service to a patient)
expenditures will be exempt from the
Secretary would review and appropriately
December 31, 2004.
Using existing
and indirect costs (such as rent and
budget neutrality requirement in 2004. The
modify payments for the administration of
processes for coding considerations, the
utilities). BBRA required the Secretary to
work
relative
value
units
for
drug
more than one anti-cancer agent to a
Secretary would evaluate existing codes
establish a data collection process and
administration services furnished on or
patient in a day. The resulting increase in
for drug administration to ensure accurate
standards for determining practice expense
after January 1, 2004 will be equal to the
spending would be exempt from the
reporting and billing for these services.
relative values as well as to use data
work relative value units for a level 1
budget neutrality requirement. Also, the
Any resulting CY2005 payment increase
collected or developed outside HHS, to the
office medical visit for an established
Secretary would change the non-physician
would not be subject to budget neutrality
maximum extent practicable, consistent
patient. Starting in 2005 through 2006, the
work pool method so that associated
provisions,
would
be
exempt
from
with sound data collection practices. The
practice expense relative values for other
payments are not inordinately reduced.
administrative and judicial review, and
relative values are periodically reviewed
drug administration services will be
These
adjustments
would
not
be
would be treated as a change in law and
and adjusted to account for various factors;
increased in the physician fee schedule
implemented unless other outpatient drug
regulation in the sustainable growth rate
changes that cause more than $20 million
using appropriate supplemental survey data
pricing
changes
in
the
section
are
determination.
Subsequent
budget
in spending trigger a budget neutrality
submitted by March 1, 2004, for 2005, or
implemented.
neutrality adjustments would be permitted.
adjustment.
March 1, 2005 for 2006. Data will be
The
same
non-physician
work
pool

---

CRS-35
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
accepted from those specialists who
methodology provision as in S. 1 is
received 40% or more of their Medicare
included.
payments
in
2002
from
drugs
and
b i ologicals.
T he
e xi st i n g
d r u g
administration codes will be evaluated
under existing processes after consultation
with interested parties. These adjustments
in practice expense relative value units for
certain drug administration services are
exempt
from
the
budget
neutrality
requirements in 2005, 2006, and 2007.
The Secretary can adjust practice expense
payments in subsequent years, subject to
the budget neutrality provisions.
The
effect of the nonphysician workpool
methodology
will
not
be
changed.
Medicare’s payment policy in effect on
October 1, 2003, for the administration of
more than one drug or biological to an
individual on a single day through the push
technique will be modified and the
increased payments will be exempt from
the budget-neutrality requirement in 2004.
A transitional adjustment (or additional
payment) of 32% in 2004 and 3% in 2005
will be made.
Increase payments to physicians in
Section 413.
Certain physicians, both
Section 422.
The Secretary would be
Section 417. Same provision with respect
newly created scarcity areas; change
primary care and specialists, in scarcity
required
to
establish
procedures
to
to Secretary developing procedures to
Medicare Incentive Program (MIP).
areas are eligible for an additional 5%
determine when a physician in a HPSA is
identify physicians eligible for bonus
Physicians providing services in a health
increase in payments starting on January 1,
eligible for a bonus payment.
The
payments.
Also, physicians in newly-
professional shortage area (HPSA) are
2005 and ending by January 1, 2008. To
Secretary would also be required to
created scarcity areas as well as other
entitled to an incentive payment from the
determine the scarcity areas, the Secretary
establish an ongoing education program,
physicians would be eligible for an
Medicare
program.
This
incentive
will calculate ratios of practicing primary
an ongoing study and submit annual
additional 5% increase in their fee
payment is a 10% increase over the
care physicians and specialists to Medicare
reports. A GAO report would be required
schedule payment amounts. The Secretary
amount which would otherwise be paid
beneficiaries,
rank
each
county
(or
no later than 1 year from enactment.
would also be required to publish a list of
under the physician fee schedule.
equivalent area) according to each ratio,
all areas that qualify as a HPSA each year

---

CRS-36
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
and then identify those areas with the
in
the
proposed
and
final
rule
lowest ratios which collectively represent
implementing the physician fee schedule.
20% of the total Medicare beneficiary
population in those areas.
The list of
counties will be revised no less often than
once every 3 years unless there are no new
data. There will be no administrative or
judicial review of the designation of the
county or area as a scarcity area, the
designation of an individual physician’s
specialty, or the assignment of a postal zip
code to the county or other area. MIP
payments to physicians in HPSAs that
consist of entire counties will be made
without requiring the physician to identify
the HPSA when requesting payment.
Revise
reassignment
provisions.
Section 952. The bill permits Medicare
Section
434.
Staffing
companies
Section 952. Same provision with some
Beneficiaries are the parties who are
payment for Part B services to be made to
(individuals or entities) would be able to
drafting differences.
entitled to receive Medicare payments
an entity, as defined by the Secretary, that
submit claims to Medicare for physician
under the Medicare statute. However, most
has a contractual arrangement with the
services
provided
under
contractual
beneficiaries
assign
these
rights
to
physician or other person who provided
arrangement between the company and the
participating physicians, suppliers, and
the service. In order to bill for the service,
physician,
if
the
arrangement
meets
other providers who directly provide the
the entity and the contractual arrangement
appropriate program integrity and other
care and then submit claims for Medicare
will have to meet program integrity and
safeguards established by the Secretary.
payment.
Although
Medicare permits
other
safeguards
specified
by
the
physicians to reassign their right to
Secretary.
payment to certain other entities, they
cannot reassign their right to payment to
staffing companies (entities that retain
physicians on a contractual basis).
Extend provision for separate payments
Section 732.
Direct payments for the
Section 435.
Direct payments for the
Section 734.
Similar provision except
of certain inpatient pathology services.
technical component for these pathology
technical component for these pathology
Medicare would make direct payments for
In general, independent laboratories cannot
services
will
be
made
for
services
services would be made for services
the technical component of pathology
directly bill for the technical component of
furnished during 2005 and 2006.
furnished during 2005.
services from 2004 though 2008. Would
pathology services provided to Medicare
also specify that a change in hospital

---

CRS-37
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
beneficiaries
who
are
inpatients
or
ownership would not affect these direct
outpatients of acute care hospitals. BIPA
billing arrangements.
permitted certain independent laboratories
with existing 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.
Increase
Medicare
payments
to
Section 602.
Physicians in Alaska with
Section 450K. For 2004, physicians in
No provision.
physicians in Alaska.
Physicians that
values of practice expense, malpractice,
Alaska would be paid 90% of the VA
provide services to Medicare beneficiaries
and work geographic index below 1.67
physician fee schedule used for FY2001.
are paid based on Medicare’s physician fee
will have these values raised to 1.67
In 2005, this amount would be increased
schedule that is adjusted to account for
starting January 1, 2004 and before
by the update amount for the Medicare
geographic variations in practice expenses.
January 1, 2006.
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
physician
fee
Section 601. The update to the conversion
No provision.
Section 601. The update to the conversion
schedule. Medicare pays for services of
factor for 2004 and 2005 will not be less
factor for 2004 and 2005 would be not less
physicians
and
certain
non-physician
than 1.5% and will be exempt from the
than 1.5% and would be exempt from the
practitioners on the basis of a fee schedule.
budget neutrality adjustment.
budget neutrality adjustment.
The law provides a specific formula for
calculating the annual update to the
conversion factor.

---

CRS-38
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Change the sustainable growth rate
Section 601. The formula for calculating
Section 464. The provision expresses a
Section 601. The formula for calculating
formula. Medicare pays for services of
the sustainable growth rate will be
sense
of
the
Senate
that
Medicare
the sustainable growth rate would be
physicians
and
certain
non-physician
modified. Starting in 2003, the GDP factor
beneficiary access to quality care may be
modified. Starting with the SGR for 2003,
practitioners on the basis of a fee schedule.
will be based on the annual average change
compromised if Congress does not prevent
the GDP factor would be based on the
The law provides a specific formula for
over the preceding 10 years (a 10-year
cuts in 2004 and following years that stem
annual average change over the preceding
calculating the annual update to the
rolling average).
The 10-year rolling
from the SGR formula. [Duplicate of
10 years (a 10-year rolling average). This
conversion factor which regulates overall
average calculation of the GDP will apply
Section 622]
calculation would replace the current GDP
spending for physicians’ services. Several
to computations of the SGR starting in
factor which measures the 1-year change
factors enter into the calculation of the
2003.
from the preceding year.
formula.
One of those factors is the
sustainable growth rate (SGR) which is
essentially a target for Medicare spending
Section 629. The provision provides a
growth in physicians’ services.
One
sense of the Senate that the reductions in
measure used to calculate the SGR is the
Medicare’s physician fee schedule are
annual
percentage
change
in
gross
destabilizing, primarily caused by the
domestic product (GDP). If expenditures
sustainable growth rate calculation, and
exceed the target, the update for a future
that CMS should use its discretion to make
year is reduced.
If expenditures are less
certain exclusions and adjustments to the
than the target, the update is increased.
SGR calculation.
The recent negative update adjustment
factors reflect the application of the SGR
system.
Require GAO report on physician
No provision.
No provision.
Section 953(a). No later than six months
compensation. No provision in current
from enactment, GAO would report to
law.
Congress on the appropriateness of the
conversion factor updates and 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-39
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Extend Medicare’s private contracting
Section 603. Doctors of dental surgery or
No provision.
Section 604. Doctors of dental surgery or
authority to dentists and podiatrists.
of dental medicine, doctors of podiatric
of dental medicine and doctors of podiatric
Private contracting allows a physician and
medicine, and doctors of optometry will be
medicine would be able to enter into
Medicare beneficiary not to submit a claim
able to enter into private contracts with
private
contracts
with
Medicare
for a service which would otherwise be
Medicare beneficiaries. The provision will
beneficiaries.
covered and paid for by Medicare. Under
be effective upon enactment.
private
contracting,
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 geographic
Section 413(c). GAO will study payment
Section 444. GAO would be required to
Section 413. Same provision.
differences in physician payments. No
differences
under
the
physician
fee
study geographic differences in payment
provision in current law.
schedule for different geographic areas.
amounts in the physician fee schedule and
The study, including recommendations
report to Congress within 1 year of
concerning use of more current data and
enactment.
use of cost data rather than price proxies, is
due to Congress within 1 year of the
enactment date.
Require GAO report
on beneficiary
Section 604. GAO is required to conduct
Section 447. GAO would submit a report
Section 602(a). GAO would be required
access to services including concierge
a study on access of Medicare beneficiaries
to Congress, including recommendations,
to conduct a study on access of Medicare
care and impact of these mandatory fees
to physicians’ services under Medicare and
regarding the effect of concierge care on
beneficiaries to physicians’ services under
and/or
services
on
access Periodic
submit a report to Congress on this study
beneficiaries’ access to Medicare covered
Medicare including beneficiaries’ use of
analyses by the Physician Payment Review
within 18 months of enactment.
services by 12 months from enactment. In
services through an analysis of claims data
Commission, and subsequently MedPAC,
Section 650. GAO would study concierge
this instance, concierge care would be an
and the extent to which physicians are not
as well as CMS showed that access to
care provided to Medicare beneficiaries
arrangement
where
a
physician
or
accepting new Medicare beneficiaries as
physicians’ services generally remained
and its effect on their access to Medicare
practitioner
charges
an
individual
a
patients.
good for most beneficiaries through 1999.
covered services and submit a report to
membership fee or other fee or requires the
More recent surveys convey a more mixed
Congress, including recommendations, no
purchase of an item or service as a
picture however.
later than 12 months from enactment.
prerequisite for providing the care.

---

CRS-40
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Require Institute of Medicine (IOM)
No provision.
No provision.
Section 602(b). The Secretary would be
study on supply of physicians. No
required to request that IOM study the
provision in current law.
adequacy 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.
Require MedPAC report on payment
Section 303(a). MedPAC is required to
No provision.
Section 603. MedPAC would be required
for physician services. No provision in
review the payment changes as they affect
to report to Congress on the effects of
current law.
payments for items and services furnished
refinements
to
the
practice
expense
by oncologists and for drug administration
component of payments for physicians’
services furnished by other specialists and
services after full implementation of the
submit a report to the Secretary.
The
resource-based payment in 2002.
MedPAC report on oncologists’ payments
is due to Congress by January 1, 2006 and
the report on drug administration services
furnished by other specialists is due by
January 1, 2007.
The Secretary could
make appropriate adjustments to payments
as part of the rulemaking for physician
payments for 2006.
Section 606.
MedPAC is required to
report to Congress on the effects of
refinements
to
the
practice
expense
component, by specialty within 1 year of
enactment.
A MedPAC report on the
effect of increased physician services on
the well-being of Medicare beneficiaries
and other factors is due within 1 year of
enactment as well.

---

CRS-41
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Require consultative process before
Section 941. The Secretary is prohibited
Section 553.
The Secretary, before
Section 941.
The Secretary would be
establishing
new
evaluation
and
f r o m
i mp l e me n t i n g
n e w
E & M
making
changes
in
documentation
prohibited from implementing new E&M
management (E&M) codes. Initial E&M
documentation
guidelines
unless
the
guidelines for, providing clinical examples
documentation
guidelines
unless
the
documentation guidelines were issued in
Secretary developed the guidelines in
of, or changing codes for reporting E&M
Secretary developed the guidelines in
1995 with revisions issued in 1997; both
collaboration with practicing physicians,
physician services, would be required to
collaboration with practicing physicians;
remain in force today. Approximately 40%
established a plan with goals, conducted
ensure that the process used in developing
established a plan with goals; conducted
of Medicare payments for physician
pilot
projects,
and
established
and
the guidelines, examples, or codes was
pilot
projects;
established
and
services are for services which are
implemented an education program on the
widely consultative among physicians,
implemented an education program on the
classified as evaluation and management
use of the guidelines with appropriate
reflects
a
broad
consensus
among
use of the guidelines with appropriate
services
(i.e.,
physician
visits).
The
outreach. Any changes to E&M guidelines
specialties, and would allow verification of
outreach.
Changes to E&M guidelines
Secretary stopped work on the current re-
are required to reduce paperwork burden
reported and furnished services.
would be required to reduce paperwork
draft of E&M codes in order to reassess the
on physicians.
burden on physicians.
entire effort.
Pay for additional hospital outpatient
Section 614.
Screening mammography
Section 445.
Unilateral and bilateral
Section 614.
Same provision except
department (HOPD)
mammography
and diagnostic mammography will be
diagnostic mammography as well as
effective date would be January 1, 2004.
services using physician fee schedule.
excluded from OPPS. This provision will
screening mammography services would
Screening
mammography
coverage
apply to screening mammography services
be paid for under the physician fee
includes the radiological procedure as well
furnished on or after the date of enactment
schedule beginning January 1, 2005.
as the physician’s interpretation of the
a n d
wi l l
a p p l y
t o
d i a g n o s t i c
results of the procedure. The usual Part B
mammography services furnished on or
deductible is waived for tests. Payment is
after January 1, 2005.
made under the physician fee schedule.
Certain services paid under fee schedules
or other payment systems are excluded
from
Medicare’s
OPPS-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
pharmacy
Section 303(e)(2). The Secretary will pay
No provision.
Section 303(g). The Secretary would be
management services. No provision in
a dispensing fee (less the applicable
required to provide for separate payments
current law.
deductible and coinsurance amounts) to
in the physician fee schedule to cover the
licensed approved pharmacies for covered
administration
and
acquisition
costs
immunosuppressive drugs, oral anti-cancer
associated
with
covered
drugs
and
drugs, and oral anti-nausea drugs used as
biologicals furnished by a contractor under
part of a chemotherapeutic regimen.
the competitive acquisition program.

---

CRS-42
Hospital Outpatient Department (HOPD), Ambulatory Surgery Center (ASC), and Clinic Services.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Hospital Outpatient Department (HOPD) Services
Extend hold-harmless provisions for
Section 411. The hold-harmless provisions
Section 423. The hold-harmless provisions
Section 407. The hold-harmless provision
small rural hospitals.
The outpatient
governing OPPS for small rural hospitals
governing OPPS reimbursement for small
would be extended to January 1, 2006.
prospective payment system (OPPS) was
are extended until January 1, 2006. The
rural hospitals would be re-established in
The Secretary would be required to
implemented in August 2000 for most
Secretary is required to conduct a study to
2006.
conduct a study to determine if the costs by
acute care hospitals. Under hold-harmless
determine if the costs, by ambulatory
ambulatory payment classification (APC)
provisions, rural hospitals with no more
payment classification (APC) groups,
groups incurred by rural providers exceeds
than 100 beds are paid no less under this
incurred by rural providers exceed those
those costs incurred by urban providers
PPS system than they would have received
costs incurred by urban providers.
If
and provide an appropriate payment
under the prior reimbursement system for
appropriate, the Secretary will provide for
adjustment to reflect the higher costs of
covered HOPD services provided before
a payment adjustment to reflect the higher
rural providers by January 1, 2005.
January 1, 2004.
costs of rural providers by January 1, 2006
Establish hold-harmless provision for
Section 411. The hold harmless provisions
Section
423.
OPPS
hold-harmless
Section 407. The hold-harmless provisions
sole community hospitals (SCHs). No
are extended to SCHs located in a rural
provisions would be extended to SCHs
would be extended to SCHs for 2004 and
provision in current law.
area starting for services furnished on or
located in rural areas for services provided
2005.
after January 1, 2004 until January 1,
in 2006.
2006.
Change hold-harmless provision
for
No provision.
Section 450J.
These provisions for
No provision.
children’s hospitals.
OPPS contains a
children’s hospitals would be modified so
permanent
hold-harmless
for
cancer
that those in Maryland (which has a
hospitals and children’s hospitals where
Medicare waiver) that are paid less under
payments to these hospitals cannot fall
OPPS than what would have been received
below what these hospitals would have
under the prior system or using hospital’s
received under the payment system in
reasonable operating and capital costs
place before OPPS.
receive additional payments after October
1, 2003.
Increase HOPD payments to small rural
No provision.
Section 424.
Medicare’s
fee schedule
No provision.
hospitals.
Under OPPS, which was
payments would be increased by 5% for
implemented in August, 2000, Medicare
covered outpatient clinic and emergency
pays for covered services using a fee
room visits that are provided by rural
schedule based on APCs. Beneficiary
hospitals with up to 100 beds beginning

---

CRS-43
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
copayments are established as a percentage
January 1, 2005 and before January 1,
of Medicare’s fee schedule payment and
2008.
Beneficiary copayment amounts
differ by APC. Certain hospitals, including
would not be affected. The increased
rural hospitals with no more than 100 beds,
Medicare
payments
would
not
be
are protected, either on a temporary or on
considered
when
calculating
a
rural
a permanent basis, from financial losses
hospital’s hold-harmless payment. Budget
that result from implementation of OPPS
neutrality provisions for Medicare’s OPPS
under hold-harmless provisions
would not apply. Finally, these increased
payments would not affect Medicare
payments for covered outpatient services
after January 1, 2008.
Increase payments to sole community
No provision.
Section 427. SCHs that provide clinical
No provision.
hospitals (SCHs) for clinical diagnostic
diagnostic laboratory tests covered under
laboratory tests. Generally, hospitals that
Part B in 2005 and
2006 would be
provide clinical diagnostic laboratory tests
reimbursed their reasonable costs of
under Part B are reimbursed using a fee
furnishing the tests. No beneficiary cost-
schedule. SCHs that provide some clinical
sharing amounts would apply to these
diagnostic tests 24 hours a day qualify for
services.
a 2% increase in the amounts established in
the outpatient laboratory fee schedule; no
beneficiary
cost-sharing
amounts
are
imposed.
Establish new payment method for
Section 621. Starting January 1, 2004,
Section 436. A new payment method for
Section 621(a).
Starting for services
certain HOPD drugs and biologicals.
specified covered HOPD drugs will be
certain HOPD drugs and biologicals would
furnished beginning January 1, 2004,
Under OPPS, Medicare pays for covered
paid based on a percentage of the reference
be established for 2005 and 2006. The
certain covered HOPD drugs would be
outpatient drugs in one of three ways: (1)
average wholesale price for the drug. The
drugs and biologicals would be those for
paid no more than 95% of AWP or less
as a transitional pass-through payment; (2)
percentage of the reference price for sole-
which hospitals received transitional pass-
than the transition percentage of the AWP
as a separate APC
payment; or (3) as
source drugs manufactured by one entity
through payments prior to January 1, 2005
from CY2004 through CY2006.
In
packaged
APC
payment
with
other
can be no less than 88% and no greater
that have been assigned to drug-specific
subsequent years, payment would be equal
services.
Transitional
pass-through
than 95% in CY2004 and no less than 83%
APCs beginning the date of enactment. Or
to average price for the drug in the area
payments are extra payments to cover the
and no greater than 95% in CY2005. The
those that would have been paid in such a
and year established by the competitive
incremental cost associated with certain
percentage of the reference price for
manner but for the application of this
acquisition program under 1847A.
The
medical devices, drugs and biologicals that
innovator multiple source drugs can be no
provision.
Payments made under this
covered HOPD drugs affected by this
are inputs to an existing service.
The
greater than 68% in CY2004 and CY2005.
provision would be exempt from the
provision are radiopharmaceuticals and

---

CRS-44
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
additional payment for a given item is
The percentage of the reference price for
budget neutrality requirement in FY2005
outpatient drugs that were paid on a pass-
established for 2 or 3 years and then the
noninnovator multiple source drugs can be
and FY2006. In 2005, these drugs would
through basis on or before December 31,
costs are incorporated into the APC
no greater than
46% in CY2004 and
be paid as follows: a single source or
2002. These would not include drugs for
relative weights.
BBRA specified that
CY2005. The reference average wholesale
orphan product would be paid at 94% of
which pass-through payments are first
pass-through payments would be made for
price is the average wholesale price for the
the AWP existing on May 1, 2003; a
made beginning January 1, 2003 or those
current orphan drugs; current cancer
drug as of May 1, 2003. In subsequent
multiple source drug would be paid at 91%
drugs for which a temporary HCPCS code
therapy
drugs,
biologicals,
and
years, payment will equal to the average
of that existing average wholesale price
has not been assigned. Drugs for which a
brachytherapy; current radiophamaceutical
acquisition cost for the drug for that year
(AWP); and a drug with generic versions
temporary HCPCS code has not been
drugs and biological products; and new
(which may vary by hospital group taking
would be paid at 71% of that existing
assigned would be reimbursed at 95% of
drugs and biological agents.
Generally,
into account hospital volume or other
AWP. Those items furnished as part of
the AWP. The transition percentage to
CMS has established that a pass-through
hospital characteristics) or if hospital
other HOPD services would be paid using
AWP for sole-source drugs manufactured
payment for an eligible drug is based on
acquisition cost data are not available, the
the same applicable percentage of the
by one entity is 83% in CY2004, 77% in
the difference between 95% of its average
average price for the drug in the year
AWP that would have been determined on
CY2005, and 71% in CY2006.
The
wholesale price and the portion of the
established under Sections 1842(o), 1847A
May 1, 2003 if such payment were to have
transition percentage to AWP for innovator
otherwise applicable APC payment rate
or
1847B
(which
specify
Medicare
been made on that date. For 2006, these
multiple source drugs is 81.5% in CY2004,
attributable to the existing drug, subject to
payments for outpatient drugs covered
payment amounts would be increased by
75% in CY2005, and 68% in CY2006. The
a budget neutrality provision.
under Part B) as calculated and adjusted by
CPI-U. A private non-profit organization
transition percentage to AWP for multiple
the Secretary. The covered HOPD drugs
under
contract
would
determine
the
source drugs with generic drug competitors
affected by this provision are outpatient
hospital acquisition, pharmacy services,
is 46% in CY2004 through CY2006. The
drugs that were paid on a pass-through
and handling costs for each of the drugs
additional expenditures resulting from
basis on or before December 31, 2002.
paid in this fashion to set payments in 2007
these provisions would not be subject to
These would not include drugs for which
and beyond.
This analysis
would be
the budget neutrality requirement. Starting
pass-through payments are first made on or
accurate within 3% of the true mean
in CY2004, the Secretary would be
after January 1, 2003; those drugs for
hospital acquisition and handling costs at a
required to lower the threshold for
which a temporary HCPCS code has not
95% confidence level; begin by January 1,
establishing a separate APC group for
been assigned; or, during 2004 and 2005,
2005; and be updated annually. Starting
higher costs drugs from $150 to $50 per
orphan drugs.
Drugs for which a
January 1, 2006, a report would be due to
administration. These separate drug APC
temporary HCPCS code has not been
Congress each year.
groups would not be eligible for outlier
assigned will be reimbursed at 95% of the
payments.
Starting
in
CY2004,
AWP. Orphan drugs during this 2-year
Medicare’s
transitional
pass-through
time period will be paid at an amount
payments
for
drugs
and
biologicals
specified by the Secretary.
covered under a competitive acquisition
contract would reflect the amount paid
MedPAC will submit a report to the
under that contract, not 95% of AWP.
Secretary on the payment adjustment to
ambulatory payment classifications for

---

CRS-45
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
specified covered outpatient drugs that
takes into account overhead and related
expenses (such as pharmacy services and
handling
costs).
The
Secretary
is
authorized to adjust the weights for
ambulatory payment classification based
on such a recommendation. The additional
expenditures that result from the previous
changes will not be taken into account in
establishing the conversion, weighting and
other adjustment factors for 2004 and
2005, but will be taken into account in
subsequent years.
For drugs and biologicals furnished in
2004 and 2005, the Secretary is required
to lower the threshold for establishing a
separate APC group for higher cost drugs
from $150 to $50 per administration.
These separate drug APC groups are not
eligible for outlier payments. Starting in
CY2004,
Medicare’s transitional pass-
through
payments
for
drugs
and
biologicals covered under a competitive
acquisition contract will equal the average
price for the drug or biological for all
competitive acquisition areas calculated
and adjusted by the Secretary for that year.

---

CRS-46
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Limit
application
of
functional
Section 622. The Secretary is prohibited
Section 437. The Secretary would not be
Section 621(c). The Secretary would be
equivalence standards when determining
from publishing regulations that apply a
able to apply this standard to a drug or
prohibited from applying a “functional
a drug’s eligibility for transitional pass
functional equivalence standard to a drug
biological for transitional pass-through
equivalence” standard or any similar
though payments.
Starting in
2003,
or biological for transitional pass-through
payments under OPPS. This prohibition
standard in order to deem a particular drug
CMS decided that a new anemia treatment
payments under OPPS. This prohibition
would apply, unless such a standard was
or biological to be similar or functionally
for cancer patients was no longer eligible
applies to the application of the functional
made prior to enactment and only for the
equivalent to another drug unless the
for pass-though payments under OPPS,
equivalence standard on or after the date of
purposes
of
transitional
pass-through
Commissioner of FDA establishes such a
because it was functionally equivalent
enactment, unless such application was
payments. The Secretary would still be
standard and certifies that the two products
(although not structurally identical or
made prior to enactment and the Secretary
able to deem a particular drug as identical
are functionally equivalent. The Secretary
therapeutically equivalent) to an existing
applies such standard to the drug only for
to another drug if the two products are
would be able to implement this standard
treatment. The transitional pass-through
the purposes of transitional pass-through
pharmaceutically
equivalent
and
after
meeting
applicable
rulemaking
rate for the drug was reduced to zero
payments. This provision does not affect
bioequivalent, as determined by FDA.
requirements. The provision prohibits the
starting for services in 2003.
the Secretary’s authority to deem a
application of this standard to a drug or
particular drug to be identical to another
biological prior to June 13, 2003.
drug if the 2 products are pharmaceutically
equivalent
and
bioequivalent,
as
determined by the Commissioner of the
Food and Drug Administration.

---

CRS-47
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish separate payments for certain
Section 421(b).
From January 1, 2004
Section 450A. The Secretary would be
Section 621(b).
From
2004 through
brachytherapy devices.
In Medicare’s
through December 31, 2006, Medicare’s
required to conduct a budget neutral, 3-
2006, payments for brachytherapy devices
OPPS, current drugs and biologicals that
payments for brachytherapy devices will
year demonstration project that would
would equal the hospital’s charges adjusted
were eligible for transitional pass-through
equal the hospital’s charges adjusted to
exclude brachytherapy devices from the
to cost. The Secretary would be required
payments on or prior to January 1, 2000,
cost. Charges for such devices will not be
OPPS and make payment on the basis of
to create separate APCs to pay for these
were removed from that payment status
included
in
determining
any
outlier
the hospital’s charges for each device,
devices that reflect the number, isotope,
effective
January
1,
2003.
CMS
payments. The Secretary is required to
adjusted to cost. The Secretary would be
and radioactive intensity of such devices.
established separate APC payments for
create separate APCs to pay for these
required to create separate, additional
This would include separate groups for
certain of these drugs. Other drugs such as
devices that reflect the number, isotope,
groups of covered HOPD services for
palladium-103 and iodine-125 devices.
brachytherapy seeds (radioactive isotopes
and radioactive intensity of such devices.
brachytherapy devices
to
reflect
the
GAO would submit a report to Congress
used in cancer treatments) were packaged
This
includes
separate
groups
for
number, isotope, and radioactive intensity
on the appropriateness of such payments
into
payments
for
brachytherapy
palladium-103 and iodine-125 devices.
of such devices.
no later than January 1, 2005.
procedures.
GAO
is
required
to
study
the
appropriateness
of
payments
for
brachytherapy devices and submit a report
including recommendations to Congress
and to the Secretary no later than January
1, 2005.
Require hospital acquisition study. No
Section 621(a).
GAO will conduct an
No provision.
Section 621(d).
The Secretary would
provision in current law
acquisition cost survey for each specified
study the hospital acquisition costs related
covered drug in 2004 and 2005. No later
to covered outpatient drugs that cost $50
than April 1, 2005, GAO will furnish this
per administration and more that are
survey data to set 2006 payment rates.
reimbursed under the OPPS.
GAO will submit a report to Congress on
2006 rates no later than 30 days after
issuance of the proposed rule setting forth
these
rates.
GAO
will
submit
recommendations regarding the survey
methodology and
frequency to the
Secretary who will conduct periodic
surveys to set subsequent payment rates.

---

CRS-48
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Ambulatory Surgery Center Services (ASCs)
Reduce
ambulatory
surgery
center
Section 626. In FY2004, starting April 1,
No provision.
Section 625. The reduction in the update
(ASC) update.
Medicare uses a fee
2004, the ASC update will be the CPI-U
would be reestablished for FY 2004 - FY
schedule to pay for the facility services
(estimated as of March 31, 2003) minus
2008.
ASCs would get an increase
related to a surgery provided in an ASC.
3.0 percentage points. In FY2005, the last
calculated as the CPI-U minus 2.0
From FY1998 through FY2002, the update
quarter of calendar year 2005, and each of
percentage points (but not less than zero)
was established as the CPI-U minus 2.0
the calendar years 2006 through 2009 the
in each of the fiscal years from 2004
percentage points, but not less than zero.
update will be 0%. A revised payment
through 2008.
In 2003 and subsequent years, the update is
system for surgical services furnished in an
CPI-U.
ASC will be implemented on or after
January 1, 2006 and not later than January
1, 2008. It will be budget neutral in its
implementation year.
There will be no
administrative or judicial review of the
ASC
classification
system,
relative
weights,
payment
amounts
and
any
geographic adjustment factor. GAO will
study the relative costs of ASC procedures.
Rural Health Clinics (RHCs) and Federally Qualified Health Clinics (FQHCs) Services
Increase payments for rural health
No provision.
Section 428. The RHC upper payment
No provision.
clinics. BBA 1997 extended the per visit
would be increased to $80.00 for calendar
payment limits that had existed for
year 2005. The MEI applicable to primary
independent
rural
health
clinics
to
care services would be used to increase the
provider-based rural health clinics (RHC)
payment limit in subsequent years.
except for those clinics based in small rural
hospitals with fewer than 50 beds. For
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

---

CRS-49
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Economic Index (MEI).
For services
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.
Covered Part B Outpatient Drugs (Not Provided by a HOPD).
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Pay
for
existing
outpatient
drugs
Section 303(b) In general, payments for
Section 432(a). In 2004, existing drugs
Section 303(b). Physicians who opt out of
provided incident to a physician’s
most covered Part B drugs, including
(available by April 1, 2003) would be paid
the
competitive
acquisition
program
services.
Although Medicare does not
intravenous immune globulin, furnished in
the lower of the widely available market
(which is described subsequently) would
currently have an outpatient prescription
2004 will equal 85% of the average
price or 85% of the listed AWP as of Apr.
be paid under a new, separate 1847B
drug benefit, it covers approximately 450
wholesale price (determined as of April 1,
1, 2003 as subsequently increased by the
payment
method.
Subject
to
the
outpatient drugs and biologicals authorized
2003). Certain categories of drugs and
CPI for medical care as of June. The
beneficiary cost-sharing, non-generic drugs
by statute, including those: (1) that are
biologicals (drug products) will continue to
Secretary would be required to determine
would be paid 112% of the applicable
covered if they are usually not self-
be paid at 95% of the AWP including
whether the widely available market price
price in 2005 and 2006 and 100% of the
administered and are provided incident to
blood
products
and
clotting
factors
is different from the AWP amounts using
price subsequently. The multiple source
a physician’s services; (2) those that are
furnished during 2004; a drug product
any HHS-IG or GAO report issued in 2000
drug applicable price would be the
necessary for the effective use of covered
furnished during 2004 that was not
and later as well as other data from
reported volume-weighted average of the
durable medical equipment; (3) certain
available for Part B payment as of April 1,
purchaser, supplier and manufacturers. If
average sales price; the applicable price for
self-administered oral cancer and anti-
2003;
pneumococcal,
influenza,
and
different, the widely available market price
a single source drug would be the lesser of
nausea
drugs
(those
with
injectable
hepatitis B vaccines; and a drug or
would be treated as the AWP amount in
the manufacturer’s average sales price
equivalents; (4) erythropoietin (used to
biological
(other
than
erythropoietin)
2004 and subsequently. However, if that
(ASP) for the NDC code or the reported
treat anemia); (5) immunosuppressive
furnished in connection with renal dialysis
difference is more than 15%, payments
wholesale
acquisition
cost
(WAC).
drugs after covered Medicare organ
services that are separately billed by renal
would be reduced in 15% increments of
Payments would not account for special
transplants; (6) hemophilia clotting factors;
dialysis facilities. Drug products paid at
Medicare’s prior year payment. This
packaging, labeling or identifiers on the
and (7) vaccines for influenza, pneumonia,
85% of AWP in 2004 may be paid a
transition would not apply to those with
dosage form or product or package. By
and hepatitis B. Payments are based on
different amount if the widely available
generic versions in the market beginning
April 1, 2004, the ASP would be
95% of the average wholesale price (AWP)
market price is different than the payment
2004. After Jan. 1, 2004, payments for
calculated by NDC each calendar quarter
published
in
industry
reference
amount for the year. Also payments may
covered vaccines would be equal to the
by dividing a manufacturer’s total sales by
publications. AWP does not account for
be adjusted because of data submitted by
AWP.
the units sold in that quarter with certain
discounts routinely offered to providers
the manufacturer or by another entity by
adjustments
to
account
for
volume

---

CRS-50
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
and
physicians.
Current
Medicare
October 15, 2003. In no case will payment
discounts and other rebates. Certain sales
payment rates are 95% of AWP for brand
be less than 80% of AWP.
would be exempt from the calculation.
name
drugs
produced
by
a
single
The WAC would be the manufacturer’s list
manufacturer (or single source drugs).
Section 303(c) Beginning in 2005, drug
price to wholesalers or direct purchasers
Medicare will pay 95% of the lower of (a)
products,
except
for
pneumococcal,
for the most recent available month, not
the median AWP of all generic drugs or (b)
influenza, and hepatitis B vaccines, those
including
discounts
or
other
price
the lowest brand-name product AWP for
associated with certain renal dialysis
reductions, as reported in wholesale price
drugs with two or more competing brand
services, blood products and clotting
guides or other pricing publications.
names (or multiple source drugs) or those
factors and radiopharmaceuticals, will be
Payment rates would be updated on a
drugs with available generic equivalents.
paid using either the average sales price
quarterly basis. Certain contractors would
Although Medicare uses the Healthcare
methodology or through the competitive
determine the payment amounts. Certain
Common
Procedure
Coding
System
acquisition program. Medicare’s payment
standards would define multiple and single
(HCPCS) codes to pay for physician
under the average sales price (ASP)
source drugs and establish pharmaceutical
administered
drugs,
the
AWPs
are
methodology will equal 106% of the
equivalence.
There
would
be
no
established for national drug codes (NDC)
applicable price for a multiple source drug
administrative or judicial review of the
which provides data on chemical molecule,
or single source drug subject to beneficiary
ASP.
drug manufacturer, dosage, dosage form
deductible and coinsurance amounts. The
and package size.
applicable price for multiple source drugs
is the volume-weighted average of the
average sale price calculated by NDC code
for each calendar quarter. The applicable
price for single source drugs is the lesser of
the average sales price or the wholesale
acquisition cost.
Certain sales such as
those to the Medicaid drug rebate program
are exempt from the calculation, but the
ASP
will take into account certain
discounts (not including Medicaid rebates).
After 2004, the Secretary may include
other price concessions recommended by
the HHS-IG who will conduct market
surveys. If the ASP exceeds the market
price or average manufacturer price by a
threshold percentage, the ASP may be
disregarded. In 2005 the threshold is 5%;
in
2006
and
subsequent
years,
the

---

CRS-51
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
percentage threshold will be specified by
the Secretary. The payment amount will
then be equal to the lesser of the widely
available market price or 103% of the
average manufacturer price. For drugs
furnished in a year after 2004, the widely
available market price is the price that a
prudent physician or supplier would pay
for a drug product, taking into account
certain routinely available discounts. The
wholesale
acquisition
cost
or
other
reasonable measure may be used instead of
the manufacturer’s average sale price in
the case of certain public emergencies.
There will be no administrative or judicial
review of determinations of payment
amounts; the identification of units and
package size; or the method used to
allocate price concessions to a specific
quarter among other items.
Pay for new outpatient drugs provided
Section 303(c). Drug products during an
Section 432(a) continued.
New drugs
Section 303(b) continued. New drugs.
incident to a physician’s services. See
initial period (not to exceed a full calendar
(available after April 1, 2003) would be
The Secretary would be able to disregard
above.
quarter) when data on the prices for sales is
paid based on the manufacturer’s estimated
the average sales price during the first
not sufficiently available to compute ASP
price data. During the first and second
quarter of a new drug’s sales if the price
will be paid based on the wholesale
years, the manufacturer would provide data
data is not sufficient to determine an
acquisition cost or on the payment methods
on the actual market prices paid by
average amount payable.
in effect as of November 1, 2003.
physicians or suppliers 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

---

CRS-52
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
the administration of drugs would be
contingent on the implementation of these
provisions.
Establish competitive pricing program
Section 303(d). Under the new Section
See above.
Section 303(b).
Under new section
as an
establish alternative pricing
1847B, the Secretary is required to
1847A, the Secretary would establish a
method for physicians who elect not to
establish
a
competitive
acquisition
competitive acquisition program to acquire
participate
in
competitive
bidding
program
to
acquire
and
pay
for
and pay for covered outpatient drugs.
program. See above
competitively biddable drug products. The
Under
this
program,
at
least
two
Secretary is required to compute an area
contractors would be established in each
average of the bid prices submitted, in
competitive acquisition area (which would
contract offers accepted for the category
be defined as an appropriate geographic
and the area, for each year or other
region) throughout the United States. Each
contract period.
Medicare’s program
year, a physician would be able to select a
payment for these drugs will equal 80% of
contractor who would deliver covered
the average bid price after the Medicare
drugs and biologicals to the physician; as
beneficiary
meets
the
applicable
discussed above, a physician would be able
deductible.
Generally, coinsurance and
to elect payment under the ASP payment
deductible amounts will be collected by the
methodology established by 1847B. Blood
contractor that supplies the drug product.
clotting factors, drugs and biologicals
There shall be no administrative or judicial
furnished as treatment for end-stage renal
review with respect to the establishment of
disease (ESRD), radiopharmaceuticals, and
payment
amounts,
contract
awards,
vaccines would not be considered covered
establishment of competitive acquisition
drugs under the competitive acquisition
areas, the phased-in implementation, the
program.
selection of categories of competitively
biddable
drugs
and
biologicals
for
competitive acquisition, or the bidding
structure or number of contractors who are
selected.
No later than July 1, 2008, the
Secretary is required to report to Congress
on savings, reductions in cost-sharing,
access to competitively biddable drugs and
biologicals, the range of choices of
contractors available to providers as well
as beneficiary and provider satisfaction
under the competitive acquisition program.

---

CRS-53
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish contracting requirements for
Section
303(d)
Certain
contractor
No provision.
Section 303(b).
The 1847A program
competitive acquisition program.
No
selection and contracting requirements for
would have two drug categories:
the
provision in current law.
the competitive acquisition program are
oncology
drugs
which
would
be
established. Specifically, the Secretary is
implemented by 2005 and the non-
required to establish an annual selection
oncology
drugs
which
would
be
process for a contractor in each area for
implemented by 2006. Certain contractor
each category of drugs and biologicals.
selection and contracting requirements for
The Secretary may not award the 3-year
the
program
would
be
established.
contract to any entity that does not have
Specifically, the Secretary would establish
the capacity to supply the drug products or
an annual selection process for a contractor
does not meet established quality, service,
in each area for each of the two categories
financial
performance
and
solvency
of drugs. The Secretary may not award the
standards. The
number
of
qualified
2-year contract to any entity that does not
entities selected in each category and area
meet capacity, quality, service, financial
may be limited but will not be less than 2.
performance, solvency standards, conduct
All
drugs
and
biological
products
standards or disclosure requirements. The
distributed by a contractor must be
number of qualified entities selected in
acquired directly from the manufacturer or
each category and area may be limited but
from a distributor that has acquired the
will not be less than 2. As part of the
products directly from the manufacturer.
awarded contract, the selected contractor
The amount of the bid price will be
would
be
required
to
disclose
the
required to be the same for all portions of
reasonable, net acquisition costs regularly
the area. The appropriate contractor, as
(but not more often than once a quarter) as
selected by the physician, will supply drug
specified by the Secretary. Contract offers
products directly to the physician, except
could be rejected if the aggregate average
in situations
when a
beneficiary is
bid price exceeds the ASP under e 1847B
presently able to receive a drug at home or
process. The bid price would be required
other appropriate non-physician office
to be the same for all portions of the area.
settings. Rules will be established relating
The appropriate contractor, as selected by
to resupply of inventories, consistent with
the physician, would supply covered drugs
safe drug practices and with adequate
directly to the physician, except under the
safeguards against fraud and abuse. No
circumstances when a beneficiary is
applicable State requirements relating to
presently able to receive a drug at home or
the licensing of pharmacies are waived.
at other specified non-physician office
settings. Adequate safeguards against fraud
and abuse and consistent with safe drug
practices, in order for a physician to

---

CRS-54
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
maintain a supply of drugs that may be
needed in emergency situations, would be
established.
Pay separately for the administration of
Section 303(e)(1).
The Secretary is
Section 432(b)(4). The Secretary would
Section 303(f).
MedPAC would be
blood clotting factors. Medicare will pay
required to review a GAO report and
be required to review a GAO report and
required to submit to Congress specific
for blood clotting factors for hemophilia
provide a separate payment for the
provide a separate payment for the
recommendations with respect to payment
patients who are competent to use such
administration of these factors. The total
administration of these factors.
These
for
blood
clotting
factors
and
its
factors to control bleeding without medical
amount of payments for blood clotting
payments in CY2004 would not exceed the
administration in its 2004 annual report.
supervision as well as the items related to
factors furnished in CY2005 can not
amount that would have otherwise been
the administration of such factors.
exceed the amount that would have
expended. In CY2005 and subsequently,
otherwise been expended. In CY2006 and
the separate payment amount would be
subsequently,
this
separate
payment
updated by June’s CPI for medical care.
amount would be updated by the change in
the CPI for medical care for the previous
year ending in June.
Pay
the
physician
a
pharmacy
Section
303(e)(2).
The
Secretary is
Section 432(b)(8). Medicare would pay a
No provision.
dispensing fee. Medicare pays for certain
required to pay a dispensing fee (less the
dispensing fee (less applicable cost-sharing
outpatient
prescription
drugs
and
applicable deductible and coinsurance
amounts) to licensed approved pharmacies
biologicals. For instance, Medicare pays a
amounts) to licensed approved pharmacies
for covered immunosuppressive drugs, oral
dispensing
fee
in
conjunction
with
for covered immunosuppressive drugs, oral
anti-cancer drugs, and oral anti- nausea
inhalation
therapy
drugs
used
in
anti-cancer drugs, and oral anti-nausea
drugs used as part of an anti-cancer
nebulizers.
Medicare does not pay a
drugs used as part of an anti-cancer
chemotherapeutic regimen.
Medicare
dispensing fee to pharmacists or providers
chemotherapeutic regimen.
would be able to pay a dispensing fee (less
who supply oral drugs.
the applicable deductible and coinsurance
amounts) to licensed approved pharmacies
for other drugs and biologicals.

---

CRS-55
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Pay for discarded chemotherapy drugs.
No provision.
Section 432(b)(9). The Secretary would
No provision.
Medicare does not pay for chemotherapy
be
able
to
pay
a
physician
for
drugs that are purchased by physicians, are
chemotherapy drugs that are purchased
not dispensed, and must be discarded.
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 immune globulin
Section
642.
The
provision
covers
No provision.
Section 629. By January 1, 2004, IVIG
(IVIG) for the treatment of primary
intravenous immune globulin (IVIG) for
for the treatment of primary immune
immune deficiency diseases in the home.
the treatment in the home of primary
deficiency diseases in the home would be
Intravenous immune globulin (IVIG) is a
immune
deficiency
diseases
under
included as a covered medical service, if a
blood product prepared from the pooled
Medicare. IVIG is defined as an approved
physician determines administration of the
plasma of donors. It has been used to treat
pooled plasma derivative for the treatment,
derivative
in
the
patient’s
home
is
a
variety
of
autoimmune
diseases,
in the patient’s home, of a patient with a
medically appropriate.
This would not
including
mucocutaneous
blistering
diagnosed primary immune deficiency
include items or services related to the
diseases. It has fewer side effects than
disease,
if
a
physician
determines
administration
of
the
derivative.
steroids or immunosuppressive agents.
administration of the derivative in the
Intravenous immune globulin would be
Effective October 1, 2002, IVIG is covered
patient’s home is medically appropriate.
paid at 80% of the lesser of actual charge
for the treatment of certain conditions for
Items
or
services
related
to
the
or the payment amount.
certain subpopulations. IVIG for the
administration of the derivative are not
treatment of autoimmune mococutateous
included. IVIG will be paid at 80% of the
blistering diseases must be used only for
lesser of actual charge or the payment
short
term
therapy,
but
not
as
a
amount beginning January 1, 2004.
maintenance therapy, for those for whom
conventional therapy has failed.
Establish demonstration project to cover
Section 641. A 2-year demonstration
No provision.
Section 631.
The Secretary would
outpatient drugs. No provision in current
project will be established that will cover
conduct a 2-year demonstration project in
law.
more than 50,000 patients and will pay for
three states covering more than 10,000
drug products that are prescribed as
patients under Part B that would pay for
replacements for existing covered Part B
drugs and biologicals that are prescribed as

---

CRS-56
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
drugs that are furnished incident to a
replacements for existing covered drugs
physician’s service which are not usually
that are furnished incident to a physician’s
self-administered, including oral anticancer
professional service and which are not
chemotheraputic agents. The project is not
usually self-administered including oral
permitted to cost more than $500 million.
anti-cancer chemotheraputic agents. The
The Secretary is required to submit an
project would not extend beyond Dec. 31,
evaluation to Congress no later than July 1,
2005 and would not cost more than $100
2006. The project will begin 90 days from
million.
enactment and end no later than December
31, 2005.
Require GAO report on impact of drug
No provision.
Section 432(e). GAO would examine the
Section 303(e). Same provision except
provisions on beneficiary access to
impact of the drug provisions on the access
report would be due 2 years after the
covered drugs. No provision in current
of Medicare beneficiaries’ to covered
implementation
of
the
competitive
law.
drugs and biologicals which would be due
acquisition program (January 1, 2007).
to Congress no later than January 1, 2006.
Require HHS-IG reports on market
Section 303(c). The HHS-IG will submit
Section 432(e). The HHS IG would be
No provision.
prices for drugs. No provision in current
a study to Congress on the adequacy of
required to conduct one or more studies
law.
ASP payments for cancer treatments by
that compare the
market prices to
October 1, 2005.
The Secretary will
Medicare
payments
for
drugs
that
submit a report to Congress by January 1,
represent the largest portion of Medicare
2006 on the sales of drugs and biologicals
spending on such items.
to large volume purchasers to determine
whether the price at which drugs and
biologicals are sold to these purchasers
represent the price made available to
physicians and recommend whether these
sales should be excluded from the ASP
computation.

---

CRS-57
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Require study on non-oncology codes.
No provision.
No provision.
Section 303(h). The Secretary would be
No provision in current law.
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-injected drugs and
No provision.
Section 450E.
In 2004 and 2005,
No provision.
biologicals. Coverage of certain outpatient
Medicare would cover FDA approved self-
drugs and biologicals is authorized by
injected biologicals that are prescribed as
statute.
Under Medicare Part B, these
complete replacements for
currently
items are covered if they are usually not
covered drugs in physicians’ offices or as
self-administered and are provided incident
usually
self-administered
outpatient
to a physician’s services.
Generally,
hospital services and other self-injected
Medicare will cover an outpatient drug as
drugs that are used to treat multiple
usually self-administered if it is delivered
sclerosis.
by intramuscular injection, but not if it is
injected subcutaneously.

---

CRS-58
Covered Drugs and Services at a Dialysis Facility.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish
the
composite
rate
and
Section 623.
The bill increases the
Section 432(b)(5). In 2004 the composite
Section 623(c).
The ESRD composite
payments for covered drugs and services
composite rate for renal dialysis by 1.6%
rate would be increased so that the sum of
payment rate would increase by 1.6% for
in a dialysis facility. Dialysis facilities
for 2005. The bill requires the Secretary
these payments plus the payments for non-
2004.
providing care to end stage renal disease
to establish a basic case-mix adjusted
EPO
drugs
and
biologicals
billed
(ESRD) beneficiaries receive a fixed
prospective payment system for dialysis
separately equal payments that would have
prospectively determined payment amount
services.
The basic case-mix adjusted
been made without enactment of the drug
(the composite rate) for each dialysis
system is required to begin for services
pricing provisions in this legislation.
treatment, regardless of whether services
furnished beginning January 1, 2005. The
During 2005, the ESRD rate would be
are provided at the facility or in the
system is required to adjust for a limited
increased by 0.05% and further increased
patient’s home. Medicare pays separately
number of patient characteristics (the case-
by 1.6%. During 2006, the rate would be
for erythropoietin (EPO) which is used to
mix). The basic case-mix adjusted system
increased by 0.05% and then further
treat anemia for persons with chronic renal
is composed of two components: (1) those
increased by 1.6%. During 2007 and
failure who are on dialysis. Congress has
services which currently comprise the
subsequently, the ESRD rate of the
set Medicare’s payment for EPO at $10 per
composite
rate
(including
the
1.6%
previous year would be increased by
1,000 units whether it is administered
increase in 2005), and (2) the spread on
0.05%.
In any year after 2004, the
intravenously or subcutaneously in dialysis
separately billed drugs and biologicals
Secretary would be required to provide for
facilities or in patients’ homes. Providers
(including
erythropoietin
and
as
additional increases in the composite rate
receive 95% of the AWP for separately
determined by the HHS-IG reports).
to account for any payment reductions for
billable injectable medications other than
separately administered drugs (but not
EPO administered during treatments at the
Drugs
and
biologicals
(including
EPO) in the same manner as in 2004.
facility.
erythropoietin) currently billed separately,
These payment amounts, methods or
will continue to be billed separately under
adjustments would not be subject to
the basic case-mix adjusted system. They
administrative or judicial review.
cannot be bundled into the new system.
Restore composite rate exception for
Section 623. The prohibition on exceptions
No provision
Section
623(b).
The
prohibition on
pediatric facilities.
Prior to BIPA, an
contained in BIPA section 422(a)(2) does
exceptions would not apply to pediatric
increase in the composite rate would
not apply to pediatric ESRD facilities as of
ESRD facilities as of October 1, 2002.
trigger an opportunity for ESRD facilities
October 1, 2002. Pediatric ESRD facilities
Pediatric facilities would be defined as a
to request a rate exception in order to
are defined as renal facilities with 50% of
renal facility with 50% of its patients under
receive higher payments. BIPA required
their patients under 18 years old.
The
18 years old.
the Secretary to develop an new ESRD
provision is effective upon enactment.
payment
system
and
prohibited
the
granting of new exceptions with respect to
applications received after July 1, 2001.

---

CRS-59
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Change requirements for existing end-
Section 623.
By October 1, 2005, the
No provision.
Section 623(a).
The provision would
stage
renal
disease
demonstration
Secretary is required to report to Congress
require the Secretary to establish an
project.
The Secretary announced a
on the elements and features for the design
advisory board for the ESRD disease
demonstration
project
establishing
a
and implementation of a fully case-mix
management demonstration.
disease-management program that will
adjusted, bundled prospective payment
allow organizations experienced with
system for services furnished by ESRD
treating
ESRD
patients
to
develop
facilities.
The Secretary is required to
financing and delivery approaches to better
establish a 3-year demonstration project of
meet the needs of beneficiaries with
the fully case-mix adjusted payment
ESRD.
system for ESRD services, beginning
January 1, 2006 and consult with a
required advisory board in carrying out the
demonstration.
Durable Medical Equipment (DME) and Related Outpatient Drugs.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Pay for home infusion drugs. Medicare
Section 303(b). Infusion drugs furnished
Section 432(b)(6). The Secretary would
Section 302.
Infusion drugs would be
will cover outpatient prescription drugs
through
covered
durable
medical
be able to make separate payments for
covered under the competitive bidding
and biologicals if they are necessary for
equipment starting January 1, 2004 will be
infusion drugs and biologicals furnished
project.
the effective use of covered durable
paid 95% of the AWP in effect on October
through covered DME beginning January
medical equipment (DME), including
1, 2003; starting January 1, 2007, infusion
1, 2004 if such payments are determined to
those drugs which must be put directly into
drugs furnished in any area covered by the
be appropriate. Total amount of payments
the
eq uip me n t
s u c h
a s
t u mo r
DME competitive acquisition program will
for the infusion drugs in the year could not
chemotherapy agents used with infusion
be paid at the competitive price.
exceed the total amount of spending that
pump (home infusion drugs).
would have occurred without enactment of
this legislation.
Payment for inhalation therapy.
As
Section
305.
Inhalation
drugs
or
Section 432(b)(7). The Secretary would
Section 302. The competitive acquisition
mentioned above, Medicare will cover
biologicals furnished through covered
be able to increase payments for covered
program would include drugs and supplies
outpatient
prescription
drugs
and
durable medical equipment will be paid at
DME associated with inhalation drugs and
used in conjunction with DME, including
biologicals if they are necessary for the
85% of the AWP (determined as of April
biologicals and make separate payments, if
inhalation therapy.
effective use of covered durable medical
1, 2003) in 2004 and by the amount
appropriate, for those furnished through
Section 302. The competitive acquisition
equipment (DME), including those drugs
provided under the average sales price
covered DME beginning January 1, 2004.
program would include drugs and supplies
which must be put directly into the
methodology in 2005 and subsequently.
The associated spending in any year would
used in conjunction with DME, including
equipment such as respiratory drugs given
not exceed the 10% of the difference of the
inhalation therapy. Section 602(c). GAO
through a nebulizer (inhalation drugs).
GAO is be required to conduct a study to
savings for these drugs attributed to this
would be required to conduct a study to

---

CRS-60
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
examine
the
adequacy
of
current
legislation.
examine
the
adequacy
of
current
reimbursements for inhalation therapy
reimbursements for inhalation therapy
under the Medicare program and submit
under the Medicare program and submit
the results of the study in a report to
the results of the study in a report to
Congress no later than 1 year from the
Congress no later than May 1, 2004.
enactment date of this legislation.
Establish payments for durable medical
Section 302(b). The bill establishes a
Section 430. Medicare would not increase
Section 302.
Competitive acquisition
equipment (DME). Medicare pays for
competitive acquisition program for DME
the DME fee schedule amounts in any of
programs for durable medical equipment,
DME and PO, using different fee schedules
(including items used in infusion and
the years from 2004 through 2010 and
medical supplies, items used in infusion,
for each class of covered item that are
drugs), medical supplies, home dialysis
would update the amounts by the CPI-U in
drugs and supplies used in conjunction
subject to different floors and ceilings,
supplies,
therapeutic
shoes,
enteral
each subsequent year.
Payments for
with durable medical equipment, medical
calculated either on a state, regional, or
nutrients,
equipment,
and
supplies,
orthotic devices that have not been custom-
supplies, home dialysis supplies, blood
national basis.
BBA 1997 amended
electromyogram
devices,
salivation
fabricated would be similarly affected.
products, parental nutrition, and off-the-
Medicare law to freeze DME fee schedule
devices, blood products, and transfusion
Class III medical devices would be exempt
shelf orthotics (requiring minimal self-
allowances for 5 years, beginning in 1998.
medicine,
and
off-the-shelf
orthotics
from the freeze in DME payments.
adjustment for appropriate use)
would
POs were subject to a 1% increase for 5
(requiring minimal self-adjustment for
Prosthetics,
prosthetic
devices,
and
replace the fee schedule payments. Enteral
years, beginning in 1998. BBA 97 also
appropriate use).
This program will
custom-fabricated
orthotics
would
be
nutrients and class III devices would not be
required the Secretary to undertake a
replace
the
Medicare
fee
schedule
updated by the percentage change in the
covered by the program. Rural areas and
competitive bidding demonstration for
payments. Exclusions from the competitive
CPI-U.
areas with low population density within
DME which occurred at two sites: Polk
acquisition are: inhalation drugs; parenteral
urban areas would be able to be exempt,
County, Florida and San Antonio, Texas.
nutrients, equipment, and supplies; and
unless a significant national market exists
Class III medical devices are devices that
class III devices (those that sustain or
through mail order for a particular item or
sustain or support life, are implanted, or
support life, are implanted, or present
service. The programs would be phased-in
present potential unreasonable risk (e.g.,
potential unreasonable risk and are subject
over 3 years with at least one-third of the
implantable infusion pumps and heart
to premarket approval by the Food and
areas implemented in 2005 and two-thirds
valve replacements) and are subject to
Drug Administration). In starting the
of the areas implemented in 2006. High-
premarket approval, the most stringent
programs, the Secretary is required to
cost items and services would be required
regulatory control.
establish competitive acquisition areas, but
to be phased-in first. Certain requirements
would be able to exempt rural areas and
for the competitive acquisition program
areas with low population density within
would be established. A Program Advisory
urban areas that are not competitive, unless
and
Oversight
Committee
would
be
a significant national market exists through
established. The Secretary would be able
mail order for a particular item or service.
to use this payment information to adjust
The programs will be phased-in so that
the payment amounts for DME not in a
competition under the programs occurs in
competitive acquisition area.
In this
10 of the largest metropolitan statistical
instance, the inherent reasonableness rule
areas in 2007. The Secretary is permitted
would not be applied.

---

CRS-61
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
to phase-in first items and services with the
highest cost and highest volume, or those
items and services that the Secretary
determines
have
the
largest
savings
potential. The Secretary is required to
report to Congress by July 1, 2009, on
savings, reductions in cost-sharing, access
to items and services, and beneficiary
satisfaction
under
the
competitive
acquisition program.
Establish accreditation standards and
Section 302(a).
DME companies and
Section 430(c).
DME companies and
Section 302.
The competitive bidding
process for DME suppliers. Medicare
suppliers will be subject to an accreditation
suppliers
would
be
subject
to
an
project would establish certain quality
law requires DME suppliers to meet
and
quality
assurance
process.
The
accreditation
and
quality
assurance
standards for DME products no later than
certain requirements in order to participate
Secretary
is
required
to
designate
process. The Secretary would be required
July 1, 2004.
in the program. Medicare law does not
independent accreditation organizations no
to designate independent accreditation
authorize
the
Secretary
to
deem
later than 1 year from enactment.
The
organizations no later than 6 months from
accreditation by an independent entity as a
Secretary is required to establish standards
enactment after consultation with an expert
substitute for onsite inspection by CMS.
for clinical conditions for payment for
outside advisory panel. The application of
covered durable medical equipment that
quality standards would be phased-inover
include the specification of types or classes
a 3-year period.
of covered items that require, as a
condition of payment, a face-to-face
examination and a prescription for the
item.
Beginning with the date of
enactment, payment may not be made for
motorized or power wheelchairs unless a
physician,
physician
assistant,
nurse
practitioner, or a clinical nurse specialist
has conducted a face-to-face examination
of the individual and written a prescription
for the item.
Medicare payment is not
permitted unless the item meets the
standards established for clinical condition
of coverage.

---

CRS-62
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Cover total body orthotic management
No provision.
Section 450B. Medicare would pay for
No provision.
services
for
certain
nursing
home
qualified total body orthotic management
residents . Orthotics are rigid devices, or
devices provided by qualified practitioners
braces, which are applied to the outside of
and suppliers no later than 60 days from
the body to support or restrict movement in
enactment.
These medically prescribed
a body part. Orthotics are covered Part B
devices would consist of custom fitted
benefits when furnished in an institutional
individual braces that are attached to a
setting, such as in a hospital or skilled
frame that is integral to the device for a
nursing facility, while durable medical
full-time patient of a skilled nursing
equipment (DME) is not covered in those
facility who requires such medical care.
settings, because Medicare law requires
that covered DME be appropriate for use
in home.
Pay for certain custom shoes for diabetic
Section 627.
Starting January 1, 2005,
No provision.
Section 626.
As of January 1, 2004,
patients. Subject to specified limits and
payment for diabetic shoes is limited to the
diabetic shoes would be paid as is if they
under certain circumstances, Medicare will
amount that would be paid if they were
were considered to be a prosthetic or
pay for extra-depth shoes with inserts or
considered to be a prosthetic or orthotic
orthotic device. The Secretary or a carrier
custom molded shoes with inserts for an
device. The Secretary may establish lower
would be able to establish lower payment
individual
with
severe
diabetic
foot
payment limits than these amount if shoes
limits than these amounts if shoes and
disease.
Diabetic
shoes
are
neither
and inserts of an appropriate quality are
inserts of an appropriate quality are readily
considered DME nor orthotics, but a
readily available at lower amounts. The
available at lower amounts. The Secretary
separate category of coverage under
Secretary is required to establish a
would be required to establish a payment
Medicare Part B.
payment
amount
for
an
individual
amount for an individual substituting
substituting modifications to the covered
modifications to the covered shoe that
shoe that would assure that there is no net
would assure that there is no net increase
increase in Medicare expenditures.
in Medicare expenditures.

---

CRS-63
Ambulance Services.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Increase
ambulance
fee
schedule.
Section 414 (b). Medicare’s payments
Section 425.
Payments for ground
Section 410.
The base rate for ground
Traditionally, Medicare has paid suppliers of
for ground ambulance services will be
ambulance services originating in a
ambulance services that originate in a qualified
ambulance services on a reasonable charge
increased by one quarter of the
rural area or a rural census tract would
rural area would be increased after January 1,
basis and paid provider-based ambulances on
payment per mile rate otherwise
be increased by 5% for services
2004 by the average costs per trip for the base
a reasonable cost basis. BBA 1997 provided
established for trips longer than 50
furnished January 1, 2005 through
rate in the lowest quartile as compared to the
for a national fee schedule which was to be
miles occurring on or after July 1,
December 31, 2007. The fee schedule
average cost for the base rate in the highest
implemented in phases.
The required fee
2004 and before January 1, 2009. The
for other areas would be increased by
quartile of all rural counties. A qualified rural
schedule became effective April 1, 2002 with
payment increase applies regardless of
2%. These increased payments would
county is a rural area (a county not assigned to
full implementation by January, 2006. In the
where the transportation originates.
not affect subsequent periods.
The
a metropolitan statistical area)
with a
transition period, a gradually decreasing
Section 414(c).
The Secretary will
ambulance conversion factor would
population density of Medicare beneficiaries in
portion of the payment is to be based on the
provide a percentage increase in the
not be adjusted downward because of
the lowest quartile of all rural counties.
prior payment methodology.
base rate of the fee schedule for
the evaluation of the prior year’s
ground ambulance services furnished
conversion factor.
on or after July 1, 2004 and before
January 1, 2010 that originate in a
qualified rural area.
The qualified
rural areas are those with lowest
populations densities that collectively
represent a total of 25% of the
population in those areas.
To the
extent
feasible,
the
Secretary
is
required to treat certain rural census
tracts in metropolitan statistical areas
as rural areas.
There will be no
administrative or judicial review under
Sections 1869 and 1878 of the SSA or
otherwise
with
respect
to
the
identification of a qualified rural area.
In order to promptly implement this
provision, the Secretary may use data
furnished by GAO.
Section 414(c).
The payments for
ground ambulance services originating
in a rural area or a rural census tract
will
be
increased
by 2%
(after

---

CRS-64
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
application of the long trip and low
density payment increases) for services
furnished on or after July 1, 2004
through December 31, 2007. The fee
schedule for ambulances in other areas
(after application of the long trip
adjustment) will increase by 1%.
These increased payments will not
affect Medicare payments for covered
ambulance services after 2006.
A
GAO report is required.
Change ambulance fee schedule.
In the
Section
414(a).
Payments
for
No provision.
Section 622. Payments would be incorporate a
transition period from 2002-2006, payment is
ambulance services will be based on
regional fee schedule, if that would result in a
based on a blend with a gradually increasing
either the national fee schedule amount
larger payment to the ambulance provider or
portion of the payment based on the fee
or a blended rate of the national fee
supplier. The blended rate from 2004 through
schedule and a decreasing portion on the
schedule and a regional fee schedule,
2010 would incorporate a decreasing portion of
former payment method (of either reasonable
whichever
results
in
the
larger
the regional fee schedules calculated for each
costs for ambulance providers or reasonable
payment. The blended rate during the
of nine census regions. Full phase-in to the
charges for ambulance suppliers.)
In 2003,
phase-in period will incorporate a
existing fee schedule would occur by 2010.
the blend is 40% of the fee schedule and 60%
decreasing portion of the payment
Medicare’s payments for ground ambulance
of the cost or charge rates.
based
on regional
fee
schedules
services would be increased by one quarter of
calculated for each of nine census
the amount otherwise established for trips
regions. For 2004, starting for services
longer than 50 miles occurring beginning
on July 1, 2004, the blended rate is
January 1, 2004 and before January 1 2009.
based on 20% of the national fee
A GAO report would be required.
schedule and 80% of the regional fee
schedule; for 2005, the blended rate is
based on a 40% national and 60%
regional split; in 2006, the blended rate
is based on a 60% national and 40%
regional split; in 2007, 2008 and 2009,
the blended rate is based on a 80%
national and 20% regional split; and in
2010 and subsequently, the ambulance
fee schedule is based on the national
fee schedule.

---

CRS-65
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Increase
coverage
for
air
ambulance
Section 415. Regulations will provide
Section 426. For services furnished
No provision.
services.
Medicare pays for ambulance
that air ambulance services will be
beginning
January
1,
2005,
the
services under a fee schedule.
Seven
covered
if:
(1)
such
service
is
regulations
governing
ambulance
categories of ground ambulance services,
reasonable and necessary based on the
services would be required to ensure
ranging from basic life support to specialty
patient’s
health
condition
at
or
that air ambulance services be covered
care transport, and two categories of air
immediately prior to the time of the
if: (1) the air ambulance service is
ambulance services are established. Payment
transport service; and (2) the air
medically necessary based on the
for ambulance services can only be made if
ambulance
service
complies
with
health condition of the patient being
other
methods
of
transportation
are
established
equipment
and
crew
transported at or immediately prior to
contraindicated by the patient’s medical
requirements.
An air ambulance
the time of the transport service; and
conditions, but only to the extent provided in
service is considered reasonable and
(2) the air ambulance service complies
regulations.
necessary when requested: (1) by a
with
the
equipment
and
crew
physician or other qualified medical
requirements
established
by
the
personnel who reasonably determines
Secretary. These services would be a
that the time need to transport by land
fixed
wing
or
rotary
wing
air
or the instability of such transport
ambulance services.
threatens
the
patient’s
health
or
survival; or (2) such services are
furnished pursuant to a protocol that is
established by a state or regional
emergency medical services (EMS)
agency and approved by the Secretary.
The EMS agency cannot have an
ownership
interest
in
the
entity
furnishing such service. Also, there
cannot be a financial, employment or
ownership relationship between the
person (or immediate family member)
requesting
the
service
and
the
furnishing entity.
This prohibition
does not apply to certain instances
when
a
hospital
and
an
entity
furnishing the rural air ambulance
services are under common ownership.
A rural air ambulance service is
defined as a fixed wing or rotary wing

---

CRS-66
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
air ambulance service where the
patient pick up occurs in a rural area or
rural census tract. The provision
applies to services on or after January
1, 2005.
Other Part B Services and Provisions.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish 2-year moratorium on therapy
Section 624. Application of the therapy
No provision.
Section 624. Application of the therapy
caps. BBA 97 established annual payment
caps is suspended for the remainder of
caps would be suspended in 2004.
limits per beneficiary for all outpatient
2003 (after enactment), in 2004 and 2005.
Provisions with respect to existing report
therapy services provided by non-hospital
The Secretary is required to submit the
requirements are included.
providers.
The cap applied in 19999.
reports required by BBA 97 and BIPA by
BBRA and BIPA suspended application
March 31, 2004 relating to the alternatives
for 2000 through 2002. Enforcement was
to a single annual dollar cap on outpatient
delayed until September 1, 2003.
therapy and the utilization patterns for
outpatient therapy. The GAO is required
to identify conditions or diseases that may
justify waiving the application of the
therapy caps and report to Congress by
October 1, 2004.
Cover routine costs associated with
Section 731. The Secretary is prohibited
Section 438. After January 1, 2005, the
Section 733. The routine costs of care for
clinical trials. Currently, Medicare covers
from excluding from Medicare coverage
routine
costs
of care
for
Medicare
Medicare beneficiaries participating in
the routine costs of qualifying clinical
the routine costs of care incurred by a
beneficiaries participating in clinical trials
clinical trials that are conducted in
trials without explicit statutory instruction.
Medicare beneficiary participating in a
would be covered by statute. The Secretary
accordance with an investigational device
However, Medicare does not pay for
category A clinical trial, beginning with
would not be required to modify the
exemption approved under Section 530(g)
certain
aspects
of
the
clinical
trial
routine costs incurred on and after January
existing regulations.
Total Medicare
of the Federal Food, Drug, and Cosmetic
including:
the investigational item or
1, 2005. This provision does not apply to,
expenditures associated with this provision
Act would be covered. Any clinical trial
service, items and services not used in the
or affect, Medicare coverage or payment
would not exceed specified limits that start
established on the date of enactment or
direct clinical management of the patient,
for
a
non-experimental/investigational
at $32 million in 2005 and increase
after would be covered. Services provided
and
items
and
services
customarily
(category B) device.
gradually to $50 million in 2013.
on or after enactment would be covered.
provided by the research sponsor free of
charge for any enrollee in the trial.

---

CRS-67
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Cover
certain
vision
rehabilitation
Section 645. The Secretary is required to
Section 446. Medicare Part B would cover
No provision.
services. Medicare does not cover routine
study the feasibility and advisability of
vision rehabilitation services furnished to
eye care or related services and will not
providing
for
payment
for
vision
a beneficiary who is diagnosed with certain
pay for eyeglasses; most contact lenses;
rehabilitation services furnished by vision
vision impairments.
Covered services
eye examinations for the purpose of
rehabilitation professionals. The report is
would be established by a plan of care
prescribing, fitting, or changing eyeglasses
due to Congress by January 1, 2005.
developed by a qualified physician or
or contact lenses; and most procedures
qualified occupational therapist whose plan
performed to determine the refractive state
of care is periodically reviewed by a
of the eyes. A CMS program memorandum
qualified physician. Medicare would pay
issued May 29, 2002, clarified that
for the services under the physician fee
Medicare beneficiaries who are blind or
schedule.
visually
impaired
are
eligible
for
physician-prescribed rehabilitation services
from approved health care professionals on
the same basis as beneficiaries with other
medical conditions that result in reduced
physical functioning.
Cover marriage counseling and family
No provision.
Section 448. Starting January 1, 2004,
No provision.
therapy.
Medicare will cover services
Medicare would cover marriage and family
connected with the treatment of a mental,
therapist
services
and
mental
health
psychoneurotic, or personality disorder of
counselor services for the diagnosis and
an individual who is not an inpatient of a
treatment of mental illness.
Payment
hospital at the time such expenses are
amounts would be 80% of the lesser of the
incurred. The term “treatment” does not
actual charge or 75% of the amount paid to
include brief office visits for the sole
a psychologist. These services would be
purpose of monitoring or changing drug
subject to assignment. Rural health clinics,
prescriptions used in the treatment of such
federally qualified health centers, and
disorders or partial hospitalization services
hospice programs would be authorized to
that are not directly provided by the
provide such services.
Marriage and
physician.
Family counseling services
family therapists would be authorized to
with members of the household are
develop post hospital discharge plans for
covered only where the primary purpose of
patients.
such counseling is the treatment of the
patient’s condition.

---

CRS-68
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Cover all Part B services provided by
Section 630. The bill provides a 5-year
Section 450C. All Medicare Part B items
No provision.
Indian hospitals and clinics. Medicare
expansion of the items and services
and services provided by hospitals, skilled
covers specific Part B services provided by
covered under Medicare Part B when
nursing facilities, or ambulatory care
a
hospital, skilled nursing facility, or
furnished
in
Indian
hospitals
and
clinics operated by the Indian Health
ambulatory care clinic (whether provider-
ambulatory care clinics. The bill applies to
Service
or
by
an
Indian
tribe
or
based or freestanding) that is operated by
items and services furnished on or after
organization beginning October 1, 2004
the Indian Health Service or by an Indian
January 1, 2005.
would be paid.
tribe or tribal organization.
Cover cardiovascular screening tests.
Section 612.
Medicare will cover
Section 450D. Beginning January 1, 2005,
Section 612.
Medicare coverage of
Medicare covers a number of preventive
cardiovascular
screening
blood
tests
Medicare would cover cardiovascular
cholesterol and blood lipid screening
services.
However, it does not cover
beginning January 1, 2005. The Secretary
diagnostic testing including tests for
would be authorized. The Secretary would
cardiovascular screening tests.
is required to establish standards regarding
cholesterol levels, lipid levels of the blood,
be
required
to
establish
standards
the frequency of these screening tests, but
and other tests identified after consultation
regarding the frequency and type of these
not more often than once every 2 years.
with appropriate organizations to establish
screening tests, but not more often than
the frequency and type of these screening
once every 2 years.
tests which could occur no more often than
once every 2 years.
Cover
initial
preventative
physical
Section 611.
Medicare will cover an
No provision.
Section 611.
Medicare coverage of an
examination. Medicare covers a number
initial preventive physical examination
initial preventive physical examination
of preventive services. However, it does
beginning January 1, 2005 for newly
would be authorized and paid for using the
not cover routine physical examinations.
enrolling beneficiaries within 6 months of
physician fee schedule.
No beneficiary
enrollment.
Beneficiary cost sharing
cost-sharing would be imposed.
applies to initial preventive physical
examinations.
Cover diabetes laboratory diagnostic
Section 613. Medicare will cover diabetes
No provision.
Section 630.
Starting 90 days from
tests. On July 1, 1998, Medicare began
screening tests furnished to individuals at
enactment, diabetes screening tests and
covering
diabetes
self-management
risk for developing diabetes, beginning
services would be included as a covered
training services. These educational and
January 1, 2005.
medical service for individuals at high-risk
training services are provided on an
for developing diabetes.
outpatient basis by physicians or other
certified providers who have experience in
diabetes
self-management
training
services.

---

CRS-69
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Cover kidney disease education services.
No provision.
Section 456.
Starting January 1, 2004,
No provision.
No provision in current law.
kidney disease education services would be
covered
and
paid
using
Medicare’s
physician fee schedule on an assignment-
related basis (and thus prohibiting balance
billing) outside the ESRD composite rate.
A report from the Secretary would be due
to Congress by April 1, 2004.
Increase providers eligible for payments
Section 418.
The Administrator of the
Section 450H. Other types of providers
No provision.
for telehealth services. Medicare pays for
Health
Resources
and
Services
would be added to the list of originating
telehealth services that are provided in
Administration is required to evaluate
sites that can bill Medicare for telehealth
specified
“originating
sites.”
These
demonstration projects under which a
services. In addition, the Secretary would
originating
sites
are:
physician
or
skilled nursing facility is treated as an
be required to encourage and facilitate the
practitioner
office,
a
critical
access
originating site for telehealth services. The
adoption of state provisions allowing for
hospital, a rural health clinic, a Federally-
report to Congress is due by January 1,
multi-state practitioner licensure across
qualified health center, or a hospital.
2005.
state boundaries.
Prohibit private insurers from requiring
Section 950. Group health plans providing
Section 555.
A group health plan
Section 950. Same provision.
prior Medicare processing of dental
supplemental or secondary coverage to
providing
supplemental
or
secondary
claims. The Medicare benefit does not
Medicare beneficiaries cannot
require
coverage to Medicare beneficiaries would
include
most
dental
services.
Some
dentists to obtain a claim denial from
not be able to require dentists to obtain a
insurers may require a claim denial from
Medicare for dental services that are not
claim denial from Medicare for non-
Medicare before accepting the dental claim
covered by Medicare before paying the
covered dental services before paying the
for payment review, even if the service is
claim, beginning 60 days after enactment.
claim.
not covered by Medicare.

---

CRS-70
Provisions Relating to Parts A and B
Home Health Services.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Increase
for
home
health
services
Section 421. Home health agencies will
Section 451. A 5% increase in payments
Section 411. A 5% additional payment for
furnished in a rural area.
BIPA
recive a 1 year, 5% additional payment for
for home health care services furnished in
home health care services furnished in a
increased PPS payments by 10% for home
home health care services furnished in a
a rural area would be provided during FY
rural area would be provided during 2004
health services furnished in the home of
rural area without regard to certain budget-
2005 and FY2006 without regard to certain
and 2005 without regard to certain budget
beneficiaries living in rural areas during
neutrality requirements.
The temporary
budget neutrality requirements.
The
neutrality requirements.
the 2-year period beginning April 1, 2001,
additional payment begins for episodes and
temporary additional payment would not
through March 31, 2003. The temporary
visits ending on or after April 1, 2004 and
be considered when determining future
additional payment was not included in the
before April 1, 2005 and cannot to be used
home health payment amounts.
base for determination of payment updates.
in calculating future home health payment
amounts.
Reduce update for home health services.
Section 701. Home health agency (HHA)
No provision.
Section 701. HHA payments would be
Home
health
service
payments
are
payments are increased by the full market
increased by the home health market
increased on a federal fiscal year basis that
basket percentage for the last quarter of
basket minus 0.4 percentage points for
begins in October. The FY2004 statutory
2003 (October, November, and December)
2004 through 2006.
The update for
update will be the full increase in the
and for the first quarter of 2004 (January,
subsequent years would be the full market
market basket index.
February, and March). The update for the
basket increase. The provision would also
remainder of 2004 and for 2005 and 2006
change the time frame for the update from
is
the
home
health
market
basket
the federal fiscal year to a calendar year
percentage increase minus 0.8 percentage
basis. The home health PPS rates would
points. HHA payment updates are moved
not increase for the October 1 through
from the federal fiscal year to a calendar
December 31, 2003 period.
year basis beginning with 2004.
Establish
demonstration
project
to
Section 702.
A 2-year demonstration
Section 450.
A 2-year demonstration
Section
704.
Substantially
similar
clarify definition of homebound.
A
project where beneficiaries enrolled in
project where beneficiaries with chronic
provision, however, beneficiaries would
Medicare beneficiary must be confined to
Medicare Part B with a permanent and
conditions would be deemed to be
permanently need skilled nursing services
the home (or homebound) in addition to
severe
disabling
condition
and
with
homebound in order to receive home
(other than medication management); these
other criteria in order to qualify for the
specified care needs would be deemed to
health services under Medicare would be
skilled nursing services would need to be
home health benefit.
be homebound in order to receive home
established.
provided each day or an attendant would
health services under Medicare.
The
be needed during the day to monitor and
number of participants is limited to 15,000.
treat the beneficiary’s medical condition.

---

CRS-71
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish adult day care demonstration
Section 703. A demonstration project is
Section 454. A demonstration would be
Section 732. Same provision.
project. No provision in current law.
required where a HHA, directly or under
established where a HHA, directly or under
arrangement with a medical adult day care
arrangement with a medical adult day care
facility, will provide medical adult day
facility, would provide medical adult day
care services as a substitute for a portion of
care services as a substitute for a portion of
home health services otherwise provided in
home health services otherwise provided in
a beneficiary’s home.
a beneficiary’s home.
Suspend the requirement that Outcome
Section 704. The requirement that HHAs
Section 630. The requirement that HHAs
Section 954. Same provision.
and
Assessment
Information
Set
must collect OASIS data on private pay
must collect OASIS data on private pay
(OASIS) data be submitted for non-
(non-Medicare, non-Medicaid) patients is
(non-Medicare, non-Medicaid) patients
Medicare,
non-Medicaid
patients.
suspended until the Secretary reports to
would be suspended until the Secretary
Medicare is required to monitor the quality
Congress on the benefits of these data.
reported to Congress on the benefits of
of home health care and services for all
these data.
patients as part of the survey process with
a standardized, reproducible assessment
instrument. OASIS is the data collection
instrument that is used.
Require MedPAC study on home health
Section 705. MedPAC is required to study
No provision.
Section 703.
MedPAC would study
agency (HHA) margins. No provision in
payment margins of HHAs paid under
payment margins of HHAs paid under PPS
current law.
PPS, to examine whether systematic
to examine whether systematic differences
differences in payment margins are related
in payment margins were related to
to differences in case mix, as measured by
differences in case mix, as measured by
home health resource groups (HHRGs),
HHRGs.
among agencies.

---

CRS-72
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Coverage of religious nonmedical health
Section 706. The definition of a home
No provision.
No provision.
care institution services furnished in the
health agency is expanded to include a
home.
Under
specified
conditions,
religious
nonmedical
health
care
Medicare will make payment for services
institution, but only with respect to items
furnished to a beneficiary in a religious
and services ordinarily furnished by this
nonmedical health care institution.
institution to individuals in their homes
and that are comparable to items and
services furnished to individuals by HHAs.
Payments are prohibited from exceeding
$700,000 in a year and are prohibited after
December 31, 2006.
Increase
for
home
health
services
No provision.
Section 459. A 10% additional payment
No provision.
furnished in a rural area.
BIPA
for home health care services furnished in
increased PPS payments by 10% for home
a rural area during FY2005 and FY2006
health services furnished in the home of
would be provided without regard to
beneficiaries living in rural areas during
certain budget neutrality requirements.
the 2-year period beginning April 1, 2001,
The total amount of outlier payments
through March 31, 2003.
Home health
would be reduced to no more than 3% of
PPS makes additional outlier payments for
total payments in FY 2004 and 4% for FYs
extraordinarily
costly
cases;
outlier
2005 and 2006. [Duplicate provision is at
payments may not exceed 5% of the total
Section 463].
estimated payments for the fiscal year.
Limit
reduction
in
area
wage
No provision.
Section 452. The provision would limit
No provision.
adjustment factors under home health
any
reduction in the home health area
PPS.
In calculating PPS payment, the
wage adjustment factor for fiscal years
portion of the base payment amount that is
2005 and 2006. Any reduction could be
attributable to wages and wage-related
no more than 3% less than the area wage
costs is required to be adjusted for those
adjustment factor applicable to home
costs.
The Secretary is required to
health services for the area in the previous
calculate an area wage adjustment factor
year.
that is actually used to adjust the base
payment amount.
The factors change
annually as new wage data are reported
and areas change in relative costliness.

---

CRS-73
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Require GAO report on flexibility in
No provision.
No provision.
Section 953(d).
GAO would report to
applying home health conditions of
Congress
on
the
implications
if
participation (COP) to patients who are
Medicare’s COPs for home health agencies
not Medicare beneficiaries. No provision
were applied flexibly with respect to
in current law.
groups or types of patients who are not
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-sharing for
No provision
No provision.
Section 702. A beneficiary copayment for
home health services. The home health
each 60-day episode of care beginning
benefit does not have any cost-sharing
January 1, 2004 would be established. The
requirement.
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.

---

CRS-74
Chronic Care Improvement.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Cover
chronic
care
improvement
Section 721. The Secretary is required to
Section 443.
The Secretary would be
Section 721.
Specified chronic care
services
under
traditional
fee-for-
establish and implement chronic care
required to establish a 5-year budget
improvement services would be provided
service. No provision in current law.
improvement programs for Medicare fee-
neutral demonstration program that uses
to certain beneficiaries with chronic
for-service.
The programs must be
qualified care management organizations
conditions as a Medicare benefit, not as a
designed to improve clinical quality and
to provide health risk assessment and care
demonstration project.
beneficiary
satisfaction
and
achieve
management
services
to
high-risk
spending
targets
for
Medicare
for
Medicare beneficiaries including those
beneficiaries with certain chronic health
with multiple sclerosis or other disabling
conditions.
chronic conditions, nursing home residents
or those at risk for placement, or high-risk
dual eligible beneficiaries.
Cover
chronic
care
improvement
Section 722. Each Medicare Advantage
Section 442.
The Secretary would be
Section 722.
Comparable chronic care
services under Medicare Advantage. No
organization is required to have an on-
required to establish a 3-year budget
improvement services would be provided
provision in current law.
going quality improvement program for
neutral demonstration program to promote
to beneficiaries in MedicareAdvantage and
improving the quality of care provided to
continuity of care, help stabilize medical
Enhanced FFS as a Medicare benefit, not
enrollees (except for private fee-for-service
conditions, prevent or minimize acute
as a demonstration project.
plans or MSA plans) effective for contract
exacerbations of chronic conditions, and
years beginning January 1, 2006. As part
reduce adverse health outcomes before
of the quality improvement program, each
October 1, 2004.
Six sites would be
MA organization is required to have a
designated for the demonstration, three in
chronic care improvement program. Each
urban areas and at least one in a rural area.
chronic care improvement program is
One site would be required to be located in
required to have a method for monitoring
Arkansas. The Secretary would pay each
and identifying enrollees with multiple or
principal
care
physician
a
monthly
sufficiently severe chronic conditions that
complex care management fee developed
meet
criteria
established
by
the
by the Secretary. The fee would be the full
organization for participation under the
payment for all the functions performed.
program.
Establish consumer- directed chronic
Section 648. The Secretary is required to
No provision.
Section 736.
The Secretary would
outpatient services.
No provision in
establish no fewer than 3 demonstration
establish
no
fewer
than
three
current law. Medicare coverage requires
projects that evaluate methods to improve
demonstration projects to evaluate method
that a beneficiary need medically necessary
the quality of care provided to Medicare
to improve the care and reduce the cost of
care.
In general, Medicare pays the
beneficiaries with chronic conditions and
care provided to Medicare beneficiaries

---

CRS-75
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
provider that delivers skilled health care
that
reduce
expenditures
that
would
with chronic conditions including methods
services.
otherwise be made on their behalf by
that would permit beneficiaries to direct
Medicare. The methods are required to
their own health care needs and services.
include permitting beneficiaries to direct
The
Secretary
would
establish
the
their own health care needs and services.
demonstrations located in an urban area, a
In designing the demonstrations, the
rural area, and an area that has a Medicare
Secretary is required to evaluate practices
population with a diabetes rate that
used by group health plans and practices
significantly exceeds the national average
under State Medicaid programs that permit
rate within 2 years of enactment.
The
patients to self-direct the provision of
Secretary would evaluate and submit
personal care services and to determine the
reports to Congress on the cost and clinical
appropriate scope of personal care services
effectiveness of the projects biannually
that
apply
under
the
demonstration
beginning 2 years after their start.
projects.
Require Institute of Medicine (IOM)
No provision.
No provision.
Section
723.
The Secretary would
report related to chronic conditions. No
contract with the IOM to study the barriers
provision in current law.
to effective integrated care improvement
across
settings
and
over
time
for
beneficiaries with multiple or severe
chronic conditions in transition from one
setting to another.
Require MedPAC report related to
No provision.
No provision.
Section 724. MedPAC would evaluate the
chronic care improvement program. No
chronic
care
improvement
program
provision in current law.
established 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-76
Medicare Secondary Payor (MSP).
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Modify MSP provisions.
In certain
Section 301. The provision clarifies that
Section 461. The provision would clarify
Section 301. Same provision.
instances, Medicare is prohibited from
the Secretary can make a conditional
that the Secretary could make a conditional
making payment for a health care claim if
payment if a primary plan did not make a
payment if a primary plan did not make a
payment is expected to be made promptly
prompt payment or could not have
prompt payment or could not have
by a primary plan. The definition of a
reasonably been expected to make a
reasonably been expected to make a
primary
plan
includes
a
workmen’s
prompt
payment
(as
determined
by
prompt
payment
(as
determined
by
compensation
law
or
plan,
under
regulations).
Payment is contingent on
regulations).
Payment
would
be
automobile or liability insurance (including
reimbursement by the primary plan to the
contingent on reimbursement by the
a self-insured plan) or under no-fault
Medicare Trust Funds. An entity engaging
primary plan to the Medicare Trust Funds.
insurance on behalf of a beneficiary.
in a business, trade, or profession is
An entity engaging in a business, trade, or
deemed as having a self-insured plan if it
profession would be deemed as having a
carried its own risk.
Failure to obtain
self-insured plan if it carried its own risk.
insurance is considered
evidence of
Failure to obtain insurance would be
carrying risk.
considered evidence of carrying risk.
Extend MSP rules for individuals with
No provision.
Section 450F.
This provision would
No provision.
end-stage renal disease (ESRD).
The
extend the limited time period that
MSP provisions apply to group health
employer health plans are primary payer
plans for the working aged, large group
for beneficiaries with end-stage renal
health plans for the disabled, and, for 30
disease to 36 months.
months, employer health plans for the
ESRD population.
Revise
Medicare
secondary
payor
Section 943.
The Secretary is not
No provision.
Section 943. The Secretary would not be
requirements for diagnostic laboratory
permitted to require that a hospital obtain
able to require that a hospital obtain
services.
In certain instances when a
information on other insurance coverage
information on other insurance coverage
beneficiary has other insurance coverage,
for reference laboratory services, if such
for reference laboratory services, if the
Medicare
becomes
the
secondary
requirements are not imposed in the case
Secretary
does
not
impose
such
insurance. An entity furnishing a Part B
of services furnished by independent
requirements in the case of services
service is required to obtain information
laboratories.
furnished by independent laboratories.
from the beneficiary on whether other
insurance coverage is available.

---

CRS-77
Other Medicare A and B Provisions.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish self-referral exemption for
Section 431.
Remuneration between a
No provision.
Section 412.
Remuneration between a
certain arrangements in underserved
public or non-profit private health center
public or non-profit private health center
areas.
People who knowingly and
and an entity providing goods or services
and an entity providing goods or services
willfully offer or pay a kickback, a bribe,
to the health center is not a violation of the
to the health center would not be a
or rebate to directly or indirectly induce
anti-kickback statute if such an agreement
violation of the anti-kickback statute if
referrals or the provision of services under
would contribute to the ability of the health
such an agreement would contribute to the
a federal program may be subject to
center
to
maintain
or
increase
the
ability of the health center to maintain or
financial penalties and imprisonment.
availability or quality of services provided
increase the availability or quality of
Certain exceptions or safe harbors that are
to a medically underserved population.
services
provided
to
a
medically
not considered violations of the anti-
The Secretary is required to establish
underserved population.
The Secretary
kickback statute have been established.
standards, on an expedited basis, related to
would be required to establish standards,
this safe harbor with final regulations due
on an expedited basis, related to this safe
within 1 year from enactment.
harbor with final regulations due within 1
year from enactment.
CHECK.
Change self-referral provision as applied
Section 507. The exception for physician
Section 453. The exception for physician
Section 505. MedPAC would be required
to specialty hospitals.
Physicians are
investment and self-referral will not extend
investment and self-referral would not
to conduct a study of specialty hospitals
generally
prohibited
from
referring
to specialty hospitals for 18 months from
extend to specialty hospitals.
In this
compared with other similar general acute
Medicare patients to facilities in which
the enactment date. A specialty hospital is
instance, a specialty hospital would be one
hospitals and report to Congress, including
they (or their immediate family member)
one that
primarily or exclusively treats
that is primarily or exclusively engaged in
recommendations, no later than 1 year
have financial interests.
Physicians,
patients with a cardiac condition, an
the cardiac, orthopedic, surgical care, or
from enactment.
however, are not prohibited from referring
orthopedic condition, those receiving a
other specialized categories of patients or
patients to hospitals where they have
surgical procedure, or other cases that the
cases deemed appropriate.
A specialty
ownership or investment interest in the
Secretary designates. A specialty hospital
hospital would not include any hospital
whole hospital itself (and not merely in a
does not include any hospital that is
that is determined by the Secretary to be in
subdivision of the hospital). Certain rural
determined by the Secretary to be in
operation before June 12, 2003, under
providers that provide substantially all of
operation or under development as of
development as of such date, with the same
the
designated
health
services
to
November 18, 2003, with the same number
number of beds and physician investors as
individuals residing in the rural area are
of physician investors, categories of care,
of such date.
The Secretary would
also
exempt
from
the
self-referral
or limited increase in beds as of such date.
consider certain factors in determining
restriction
Certain
factors,
such
as
whether
whether a hospital is under development.
architectural plans are done, will be
The rural provider exception would be
considered when determining whether a
modified. These rural providers would not
hospital is under development. During this
include
specialty
hospitals
and
the
18-month period, the exception will apply
Secretary would determine, with respect to

---

CRS-78
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
if substantially all of the designated
the entity, that such services would not be
services provided by the entity are
available in such area but for the
furnished to individuals residing in the
ownership or investment interest.
rural area and the entity is not a specialty
hospital as defined previously.
Reports
from MedPAC and the Secretary on
various aspects of specialty hospitals are
due to Congress within 15 months of
enactment.
C h a n g e
i n
n a t i o na l
c o ve ra g e
Section 731. The Secretary is required to
Section 458.
The provision would
Section 733.
Similar provision. The
determination process to respond to
make public the factors considered in
establish the following time frame for
routine
costs
of care
for
Medicare
changes in technology. The Secretary has
making national coverage determinations.
national coverage determinations — 6
beneficiaries participating in clinical trials
established procedures and timeframes for
The following time frame for national
months when a technology assessment is
that are conducted in accordance with an
making national coverage decisions.
coverage determinations is established —
not required and 9 months when a
investigational device exemption approved
6 months when a technology assessment is
technology assessment is required and in
under Section 530(g) of the Federal Food,
not required and 9 months when a
which a clinical trial is not requested.
Drug, and Cosmetic Act would be covered.
technology assessment is required and in
After the 6- or 9-month period, the draft
Also, the Secretary would be required to
which a clinical trial is not requested.
proposed decision would be available on
implement revised procedures for the
After the 6- or 9-month period, the draft
the HHS website or by other means to
issuance of temporary national HCPCS
proposed decision is to be available on the
provide a 30-day public comment period.
codes by January 1, 2004.
HHS website or by other means to provide
The final decision on the request must be
a 30-day public comment period.
The
made 60 days following the end of the
final decision on the request must be made
public comment period.
60 days following the end of the public
comment period.
The Secretary is prohibited from excluding
from Medicare coverage the routine costs
of care incurred by a Medicare beneficiary
participating in a category A clinical trial,
beginning with routine costs incurred on
and after January 1, 2005. This provision
does not apply to, or affect, Medicare
coverage
or
payment
for
a
non-
experimental/investigational (category B)

---

CRS-79
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
device. Also, the Secretary is required to
implement revised procedures for the
issuance of temporary national HCPCS
codes by July 1, 2004.
Publish annual list of national coverage
Section 953(b). The Secretary is required
No provision.
Section 953(b).
The Secretary would
determinations.
The CMS website
to publish an annual list of national
publish an annual list of national coverage
provides
public
information
about
coverage
determinations
made
under
determinations made under Medicare in
decisions in the national coverage process.
Medicare
in
the
previous
year.
the previous year. Information on how to
Information
on
how
to
get
more
get
more
information
about
the
information about the determinations is
determinations would be included. The list
required to be included in the publication.
would be published in an appropriate
The list and the information is required to
annual publication that is publically
be published in an appropriate annual
available.
publication that is publically available
Establish pancreatic islet cell transplant
Section 733. The Secretary, acting through
Section 462.
The Secretary would be
Section 735. Medicare would be required
demonstration project.
No explicit
the National Institute of Diabetes and
required
to
establish
a
5 -year
to pay the routine costs for items and
statutory authorization. Under existing
Digestive
and
Kidney
Disorders,
is
demonstration project to pay for pancreatic
services that beneficiaries receive as part
authorities, Medicare covers the routine
required to conduct a clinical investigation
islet cell transplantation and related items
of a clinical investigation of pancreatic
costs of qualifying clinical trials which
of pancreatic islet cell transplantation
and services for Medicare beneficiaries
islet cell transplants conducted by the
includes
items
or
services
typically
which includes Medicare beneficiaries.
who have type 1 diabetes and end-stage
National
Institute
of
Health.
The
provided absent a clinical trial and items or
Beginning no earlier than October 1, 2004,
renal disease.
transplant would not be covered.
services needed for the diagnosis or
the Secretary is required to pay for the
treatment of complications. Routine costs
routine costs as well as transplantation and
include items and services that are
appropriate related items and services for
typically provided absent a clinical trial
Medicare
beneficiaries
who
are
(such as conventional care) and needed for
participating in such a trial or a trial
reasonable and necessary care (such as
i n v e s t i g a t i n g
o r g a n
o r
t i s s u e
diagnosis or treatment of complications)
transplantation for which the Secretary has
that arises from the provision of an
made a non-coverage decision.
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

---

CRS-80
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
patient, and items and services customarily
provided by the research sponsor free of
charge for any enrollee in the trial.
Establish
funding
for
consumer
No provision. (A beneficiary ombudsman
Section 606. A Consumer Ombudsman
No provision.
ombudsman
The Omnibus Budget
is established in section 923.)
Account would be established in the
Reconciliation Act of 1990 established
Medicare Trust Fund and $1 for every
State
Health
Insurance
Counseling
Medicare
beneficiary
would
be
Assistance grants to states to provide
appropriated to the account from the Trust
education and information to Medicare
Fund beginning with fiscal year 2005. The
beneficiaries. Funding has been subject to
account would be used to make grants to
annual appropriations.
State
Health
Insurance
Counseling
Programs.
Increase funding for the Health Care
No provision.
Section 611. Additional appropriations to
No provision.
Fraud and Abuse Control (HCFAC)
HCFAC would be authorized. In FY2004,
Program and the HHS-IG The Health
the increase would be $10 million over the
Insurance Portability and Accountability
FY2003 appropriation limit; in FY2005 the
Act
of
1996
(HIPAA,
PL.104-91)
increase would be $15 million over the
established the HCFAC Program which is
FY2003 limit; in FY2006 the increase
administered by the HHS-OIG and the
would be $25 million above the FY2003
Department of Justice. Funds for the
limit. Subsequent years’ appropriations
HCFAC program are appropriated from
would be at the 2003 limit. The HHS-OIG
the Federal Hospital Insurance Trust Fund.
earmarked appropriations would increase
HIPAA provided for annual increases of
as well: to $170 million in FY2004, $175
15% in HCFAC funding through 2003,
million in FY2005, $185 million in
after which the appropriation for HCFAC
FY2006. In subsequent years, it would be
and the amount earmarked for HHS-OIG
not less than $150 million and not more
remains the same. In FY2003 the available
than $160 million.
a p p r o p r i a t i o n
fo r
HCFAC
wa s
$240,558,320 of which $150 million to
$160 million was available to the HHS-
OIG.

---

CRS-81
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Increase the civil monetary penalties in
No provision.
Section 612.
For violations occurring
No provision.
the False Claims Act The False Claims
beginning January 1, 2004, the minimum
Act imposes a liability on those who
amount of the civil penalty would be
knowingly present or cause
to be
increased from $5,000 to $7,500 and the
presented a false or fraudulent claim for
maximum amount would increase from
payment by the government. In certain
$10,000 to $15,000.
instances, the person may be liable for a
civil penalty of not less than $5,000 and
not more than $10,000, plus treble
damages.
Increase the civil monetary penalties
No provision.
Section 613.
The amount of penalties
No provision.
(CMP) in the Social Security Act OIG
would be increased for violations that
has the authority to impose CMPs on any
occur
beginning
January
1,
2004.
person (including an organization or other
Penalties that are limited to $10,000 would
entity,
but
not
a
beneficiary)
who
be increased to $12,500; those penalties
knowingly presents, or causes to be
that are limited to $15,000 would be
presented, to a state or federal government
increased to $18,750; and those that are
employee or agent, certain false or
limited to $50,000 would be increased to
improper claims for medical or other items
$62,500.
or services. CMPs may also be imposed
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.
Require MedPAC to examine financial
Section 735. MedPAC is to examine the
No provision.
Section 731. MedPAC would be required
consequences
associated
with
its
b u d g e t a r y
c o n s e q u e n c e s
o f
a
to examine the budgetary consequences of
r e c o m m e n d a t i o n s
a n d
o t h e r
recommendation
before
making
the
a recommendation and review the factors
requirements.
The Medicare Payment
recommendation and to review the factors
affecting
the
efficient
provision
of

---

CRS-82
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Advisory Commission is a 17-member
affecting
the
efficient
provision
of
expenditures for services in different
b o d y
t h a t
r e p o r t s
a n d
ma k e s
expenditures for services in different
health care sectors.
Two additional
recommendations to Congress regarding
health care sectors under Medicare fee-for-
MedPAC reports would be submitted no
Medicare payment policies. GAO is
service. GAO is required to appoint experts
later than June 1, 2004: the first would
required to establish a public disclosure
in the area of pharmaco-economics or
study
the
solvency
and
financial
system for Commissioners to disclose
prescription drug benefit programs to
circumstances of hospitals and other
financial and other potential conflicts of
MedPAC.
In addition, members of the
M e d i c a r e
p r o v i d e r s ,
i n c l u d i n g
interest.
Commission are required to be treated as
uncompensated care accounted for by the
employees of Congress for purposes of
treatment of illegal aliens; the second
financial disclosure requirements and GAO
would
address
investments,
capital
is required to ensure compliance with this
financing and access to capital of hospitals
requirement.
participating under Medicare. Members of
the Commission
would be treated as
employees of Congress for purposes of
financial disclosure requirements.
Change Emergency Medical Treatment
Section 944. Emergency room services
No provision.
Section 944.
For EMTALA-required
and Active Labor Act (EMTALA)
provided to screen and stabilize a Medicare
services
provided
to
a
Medicare
requirements.
Medicare participating
beneficiary furnished after January 1,
beneficiary, determinations about medical
hospitals that operate an emergency room
2004, are required to be evaluated for
necessity would be required to be made on
(ER) are required to provide necessary
Medicare’s “reasonable and necessary”
the basis of the information available to the
screening and stabilization services to any
requirement on the basis of the information
treating physician or practitioner at the
patient who comes to an ER requesting
available to the treating physician or
time the item or service was ordered or
examination or treatment for a medical
practitioner at the time the services were
furnished and not on the patient’s principal
condition, in order to determine whether an
ordered.
The Secretary is required
to
diagnosis. The Secretary would establish a
emergency
medical
situation
exists.
establish a procedure to notify hospitals
procedure
to
notify
hospitals
and
Hospitals found in violation of EMTALA
and
physicians
when
an
EMTALA
p h y s i c i a n s
wh e n
a n
E M T ALA
may face civil money penalties and
investigation is closed. Except in the case
investigation is closed. Except where a
termination of their provider agreement.
where a delay would jeopardize the health
delay would jeopardize the health and
and safety of individuals, the Secretary is
safety of individuals, the Secretary would
required
to
request
a
peer
review
be required to request a PRO review before
organization (PRO) review before making
making a determination to terminate a
a compliance determination that would
hospital’s Medicare participation because
terminate
a
hospital’s
Medicare
of
an
EMTALA
violation.
Other
participation because of an EMTALA
requirements would apply.
violation. Other requirements would apply.

---

CRS-83
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish
an
EMTALA
technical
Section 945. The Secretary is required to
No provision.
Section 945.
The Secretary would be
advisory group.
No explicit statutory
establish a
technical advisory group
required to establish a technical advisory
instruction.
comprised of the CMS Administrator, the
group
comprised
of
the
C M S
HHS-IG of HHS, hospital, physician and
Administrator, the HHS-IG of HHS,
patient
representatives,
CMS
staff
ho sp ital,
p hysician
and
patient
investigating EMTALA cases and a state
representatives, CMS staff investigating
survey office representative
to review
EMTALA cases and a state survey office
issues related to EMTALA.
representative to review issues related to
EMTALA.
Permit
the
Secretary
to
waive
a
Section 949. The Secretary is permitted to
Section 544.
The Secretary would be
Section 949. Same provision.
program exclusion. The Secretary has the
waive a program exclusion at the request
permitted to waive a program exclusion at
authority
to
waive
exclusion
from
of an administrator of a federal health care
the request of an administrator of a federal
participation in any Federal health program
program (which includes state health care
health care program (which includes state
when the provider is the sole source of care
programs).
health care programs).
in a community, at the request of a state.
Medicare Demonstration Projects and Studies.
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Demonstration Projects
Establish
demonstration
project
to
Section 702.
A 2-year demonstration
Section
450.
The
Secretary
would
Section 704. Same provision.
clarify definition of homebound.
A
project where beneficiaries enrolled in
establish a 2-year demonstration project
Medicare beneficiary must be confined to
Medicare Part B with a permanent and
where
beneficiaries
with
chronic
the home (or homebound) in addition to
severe
disabling
condition
and
with
conditions would be deemed to be
other criteria in order to qualify for the
specified care needs would be deemed to
homebound in order to receive home
home health benefit.
be homebound in order to receive home
health services under Medicare.
health services under Medicare.
The
number of participants is limited to 15,000.

---

CRS-84
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Esta blish
hea lth
ca re
qua lity
Section 646. The Secretary is required to
Section 441.
The Secretary would be
No provision.
demonstration projects. No provision in
establish a 5-year demonstration program
required to establish a 5-year, budget
current law.
that examines factors that encourage
neutral
demonstration
program
that
improved patient care quality, including
examines the health delivery factors which
incentives to improve the safety of care;
encourage the delivery of improved quality
examination of service variation and
patient care.
outcomes measurement; shared decision
making between providers and patients;
among others. Under this program, certain
physician groups, integrated health care
delivery systems, or regional coalitions
may
implement
alternative
payment
systems, streamline documentation and
reporting requirements, and offer benefit
packages distinct from those currently
available under the Medicare program.
This program is subject to budget-
neutrality requirements.
Establish adult day care demonstration
Section 703. A demonstration project is
Section 454.
A demonstration project
Section 732. Same provision.
project. No provision in current law.
required where a HHA, directly or under
under which a home health agency,
arrangement with a medical adult day care
directly or under arrangement with a
facility, will provide medical adult day
medical adult day care facility, would
care services as a substitute for a portion of
provide medical adult day care services as
home health services otherwise provided in
a substitute for a portion of home health
a beneficiary’s home.
services
otherwise
provided
in
a
beneficiary’s home would be established.
Establish
complex
clinical
care
Section 721. The Secretary is required to
Section 442.
The Secretary would be
Section 721. Chronic care improvement
improvement program. No provision in
establish and implement chronic care
required to establish a 3-year budget
services to certain beneficiaries with
current law.
improvement programs for Medicare fee-
neutral demonstration program to promote
chronic conditions would be provided as a
for-service (not a demonstration). The
continuity of care, help stabilize medical
Medicare benefit, not a demonstration
programs must be designed to improve
conditions, prevent or minimize acute
project.
clinical quality and beneficiary satisfaction
exacerbations of chronic conditions, and
and achieve spending targets for Medicare
reduce adverse health outcomes before
beneficiaries with certain chronic health
October 1, 2004.
Six sites would be
conditions.
designated for the demonstration, three in
urban areas and at least one in a rural area.

---

CRS-85
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
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 MA chronic care improvement
Section 722. Each Medicare Advantage
Section 443.
The Secretary would be
Section 722.
Comparable services to
program. No provision in current law.
organization is required to have an on-
required to establish a 5-year, budget
beneficiaries in MedicareAdvantage and
going quality improvement program for
neutral demonstration program that uses
Enhanced FFS would be established as a
improving the quality of care provided to
qualified care management organizations
Medicare benefit, not as a demonstration
enrollees (except for private fee-for-service
to provide health risk assessment and care
project.
plans or MSA plans) effective for contract
management
services
to
high-risk
years beginning January 1, 2006. As part
Medicare beneficiaries including those
of the quality improvement program, each
with multiple sclerosis or other disabling
MA organization is required to have a
chronic conditions, nursing home residents
chronic care improvement program. Each
(or those at risk for placement), or high-
chronic care improvement program is
risk, dual-eligible beneficiaries.
required to have a method for monitoring
and identifying enrollees with multiple or
sufficiently severe chronic conditions that
meet
criteria
established
by
the
organization for participation under the
program.
Establish frontier extended stay clinic
Section 434. The Secretary is to conduct
Section 457. The Secretary would conduct
No provision.
demonstration project. No provision in
a 3-year budget-neutral demonstration
a 3-year demonstration project that would
current law.
project that treats frontier extended stay
treat frontier extended stay clinics as a
clinics as Medicare providers. A frontier
Medicare provider. A frontier extended
extended stay clinic is one that is located in
stay clinic is one that is located in a
a community where the closest acute care
community where the closest acute care
hospital or critical access hospital is at
hospital or critical access hospital is at
least 75 miles away or is inaccessible by
least 75 miles away or is inaccessible by
public road and is designed to address the
public road and is designed to address the
needs of seriously or critically ill or injured
needs of seriously or critically ill or injured
patients who, due to adverse weather
patients who, due to adverse weather
conditions or other reasons, cannot be
conditions or other reasons, cannot be
transferred quickly to acute care referral
transferred quickly to acute care referral

---

CRS-86
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
centers; or patients who need monitoring
centers; or patients who need monitoring
and observation for a limited period of
and observation for a limited period of
time.
A report to Congress from the
time. [Duplicate provision at Section 460].
Secretary is due within 1 year of the
project’s conclusion.
Establish chiropractor demonstration
Section 651. Requires the Secretary to
Section 440.
The Secretary would
No provision.
project.
No specific provision with
establish a 2-year demonstration project to
establish
a
3-year
budget
neutral
respect
to
a
demonstration
project.
evaluate the feasibility and advisability of
demonstration program at 6 sites to
Medicare
covers
limited
chiropractic
covering additional chiropractic services
evaluate the feasibility and desirability of
services, specifically manual manipulation
under Medicare in 4 sites.
covering additional chiropractic services
for correction of a subluxation.
under the Medicare program.
Physical therapy service demonstration
Section 647. MedPAC is required to study
Section 449.
The Secretary would be
Section 624. The GAO would be required
project . No provision in current law.
the feasibility and advisability of allowing
required to establish a budget neutral 3-
to conduct a study of patient access to
Medicare beneficiaries in fee-for-service
year demonstration project in at least five
physical therapist services in
states
direct access to outpatient physical therapy
states to examine the costs and patient
authorizing
such
services
without
a
services
and
those
physical
therapy
satisfaction
associated
with
allowing
physician referral compared to that in
services
that
are
furnished
as
Medicare
fee-for-service
beneficiaries
states requiring such referral. The study
comprehensive
rehabilitation
facility
direct access to outpatient physical therapy
would be due to Congress within 1 month
services. For the purposes of the study,
services and comprehensive outpatient
of enactment.
direct access is defined as access to
rehabilitation facility (CORF) services. In
physical therapy services without the
this instance, the beneficiary would not be
requirement that beneficiaries be under the
required to be under the care of or referred
care of, or referred by, a physician.
by a physician to receive physical therapy
Further, the services provided are not
services.
required to be under the supervision of a
physician. The study is due by January 1,
2005.

---

CRS-87
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish certified registered nurses as
Section 643. MedPAC is required to study
Section 450I.
The Secretary would be
No provision.
surgical first assistants demonstration
the feasibility and advisability of Medicare
required to conduct a 3-year budget neutral
project. No provision in current law.
Part B payment for surgical first assisting
demonstration in five states that would pay
services furnished by a certified registered
for “surgical first assisting services” to
nurse
first
assistants
to
Medicare
Medicare beneficiaries furnished by a
beneficiaries. The report is due by January
certified registered nurse first assistant.
1, 2005.
Section 644. MedPAC is required to study
the practice expense relative values in the
Medicare physician fee schedule for the
specialty of thoracic surgery to determine
whether such values adequately take into
account the attendant costs of nurse
assistants at surgery. The study is due by
January 1, 2005.
Establish
weight
loss
program
No provision.
Section 450L. The Secretary would be
No provision.
demonstration project. No provision in
required to establish a demonstration
current law.
Medicare covers medical
project that would provide group weight
nutrition therapy services for beneficiaries
loss management services for Medicare
with diabetes or renal disease who (1) have
beneficiaries who are obese and have
not received diabetes outpatient self-
impaired glucose tolerance and who have
management training services within a
been diagnosed and referred by a physician
time period to be determined by the
for assessment and treatment based on
Secretary,
(2)
are
not
receiving
individual needs to a specific program or
maintenance dialysis, and (3) meet other
method that has demonstrated efficacy to
criteria that will be established. Nutrition
produce and maintain weight loss through
therapy services are nutritional diagnostic,
results
published
in
peer-reviewed
therapy, and counseling services for the
scientific journals. Services include current
purpose of disease management.
The
body weight measurement and recording
services must be provided by a registered
of weight status at each meeting session;
dietitian
or
nutritional
professional
provision of a healthy eating plan;
pursuant to a referral by a physician.
provision of an activity plan; provision of
Payment is based on the lower of actual
a behavior modification plan; and a weekly
charges or 85% of the physician fee
group support meeting.
schedule on an assignment-related basis.

---

CRS-88
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Extend
the
telehealth
project
at
Section 417. The demonstration project
No provision.
Section 415. The demonstration project
Columbia University consortium. BBA
will be extended for 4 years and total
would be extended for 4 years and total
1997
established
a
single
4-year
funding will be increased from $30 million
funding would be increased from $30
demonstration project where an eligible
to $60 million.
million to $60 million.
health care provider telemedicine network
would use high-capacity computer systems
and medical infomatics
to improve
primary
care
and
prevent
health
complications in Medicare beneficiaries
with diabetes mellitus.
Extend the municipal demonstration
No provision.
Section 618.
Demonstration projects
Section 236.
Demonstration projects
projects Under the Consolidated Omnibus
would be extended until December 31,
would be extended until December 31,
Budget Reconciliation Act of 1985, as
2006, for individuals who reside in the city
2009, for individuals who reside in the city
amended, the Municipal Health Service
in which the project is operated.
in which the project is operated.
Demonstration projects will expire on
December 31, 2004. The project is 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
that
wanted
the
demonstration
project
extended
were
required to submit plans for the orderly
transition of participants
to
a
non-
demonstration health care delivery system.
Subsequent legislation extended the project
through December 31, 2004.

---

CRS-89
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Establish consumer directed chronic
Section 648. The Secretary is required to
No provision.
Section
736.
The
Secretary would
outpatient
services
demonstration
establish no fewer than 3 demonstration
establish
no
fewer
than
three
project. No provision. Medicare coverage
projects that evaluate methods to improve
demonstration projects to evaluate method
requires that a beneficiary need medically
the quality of care provided to Medicare
to improve the care and reduce the cost of
necessary care. In general, Medicare pays
beneficiaries with chronic conditions and
care provided to Medicare beneficiaries
the provider that delivers skilled health
that
reduce
expenditures
that
would
with chronic conditions including methods
care services.
otherwise be made on their behalf by
that would permit beneficiaries to direct
Medicare. The methods are required to
their own health care needs and services.
include permitting beneficiaries to direct
The
Secretary
would
establish
the
their own health care needs and services.
demonstrations located in an urban area, a
In designing the demonstrations, the
rural area, and an area that has a Medicare
Secretary is required to evaluate practices
population with a diabetes rate that
used by group health plans and practices
significantly exceeds the national average
under State Medicaid programs that permit
rate within 2 years of enactment.
The
patients to self-direct the provision of
Secretary would evaluate and submit
personal care services and to determine the
reports to Congress on the cost and clinical
appropriate scope of personal care services
effectiveness of the projects biannually
that
apply
under
the
demonstration
beginning 2 years after their start.
projects.
Required Studies
Require MedPAC study on home health
Section 705. MedPAC is required to study
No provision.
Section 703.
MedPAC would study
agency (HHA) margins No provision in
payment margins of HHAs paid under
payment margins of home health agencies
current law.
PPS, to examine whether systematic
paid under PPS to examine whether
differences in payment margins are related
systematic differences in payment margins
to differences in case mix, as measured by
were related to differences in case mix, as
home health resource groups (HHRGs),
measured by HHRGs.
among agencies.
Require Institute of Medicine (IOM)
No provision.
No provision.
Section
723.
The Secretary would
report related to chronic conditions No
contract with the IOM to study the barriers
provision in current law.
to effective integrated care improvement
for Medicare beneficiaries with multiple or
severe chronic conditions across settings
and over time. The study would examine

---

CRS-90
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
the statutory and regulatory barriers to
coordinating care across settings for
Medicare beneficiaries in transition from
one setting to another.
Require MedPAC report related to
No provision.
No provision.
Section 724. MedPAC would evaluate the
chronic care improvement program No
chronic
care
improvement
program
provision in current law.
established 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 impact of assets
Section 107(e).
GAO is required to
Section 607. GAO would determine the
No provision.
test on low-income beneficiaries.
No
determine the extent to which drug
extent to which drug utilization and access
provision in current law.
utilization and access to covered drugs
to covered drugs differs between: (1)
differs between: (1) individuals who
individuals who qualify for the transitional
qualify as subsidy eligible individuals, and
assistance prescription drug card program
(2) individuals who do not qualify for this
or for subsidies available to certain low-
type of assistance solely because of an
income beneficiaries and (2) individuals
assets test.
The final report (including
who do not qualify for these types of
recommendations for legislation) is due no
assistance solely because of an assets test
later than September 30, 2007.
to the income eligibility requirements of
such individuals.
The
final
report
( i n clud ing
reco mmend atio ns
fo r
legislation) would be due no later than
September 30, 2007.
Require MedPAC study on Medicare
No provision.
Section 455.
MedPAC is required to
No provision.
payments and efficiencies in the health
recommend to Congress ways to recognize
care system No provision in current law.
and reward the practice of medicine in
historically efficient and low-cost areas.
The recommendations would be made
within established Medicare payment
methods for hospitals and physicians.

---

CRS-91
Beneficiary Issues: Cost-Sharing Amounts and Provision of Information
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Beneficiary Cost-Sharing Amounts
Indexing Part B deductible to inflation.
Section 629.
The Medicare Part B
Section 433.
The Medicare Part B
Section 628. Starting January 1, 2004, the
Under Part B, Medicare generally pays
deductible will remain $100 through 2004.
deductible would be set at $100 through
Medicare Part B deductible would be
80% of the approved amount for covered
The deductible will be $110 for 2005, and
2005 and then increased to $125 in 2006.
increased by the same percentage as the
services after the beneficiary pays an
in subsequent years the deductible will be
Effective January 1 of subsequent years,
Part B premium increase. Specifically, the
annual deductible of $100. The Part B
increased by the same percentage as the
the deductible would be increased annually
annual percentage increase in the monthly
deductible has been $100 since 1991.
Part B premium increase, rounded to the
by the percentage change in the CPI-U for
actuarial value of benefits payable from the
nearest dollar.
the previous year ending in June.
The
Federal Supplementary Medical Insurance
amount would be rounded to the nearest
Trust Fund would be used as the update.
dollar.
The amount would be rounded to the
nearest dollar.
Income-relating the Part B premium.
Section 811. The Part B premiums for
No provision.
No provision.
Beneficiaries pay a monthly Part B
higher income enrollees will be increased
premium equal to 25% of program costs.
beginning in 2007.
Individuals whose
The remaining 75% is financed from
modified adjusted gross income exceeds
federal general revenues. The premium
$80,000 and couples filing joint returns
amount is the same for all enrollees. In
whose modified adjusted gross income
general, the premium amount is subtracted
exceeds $160,000 will be subject to higher
from the beneficiary’s social security
premium amounts. The increase will be
check. A beneficiary’s social security
calculated on a sliding scale basis and be
check can not go down from one year to
phased-in over a five-year period.
The
the next as a result of the annual Part B
prohibition
against
a
drop
in
an
premium increase.
individual’s social security check will not
apply to this population group.
Waive Part B enrollment fee for certain
Section 625. The late enrollment penalty
Section 439. Beginning January 2005, the
Medicare beneficiaries who are military
is waived for certain military retirees who
late enrollment penalty would be waived
retirees.
A late enrollment penalty is
enrolled in part B during 2001, 2002,
for certain military retirees who enrolled in
required to be imposed on beneficiaries
2003, or 2004. The Secretary is required to
Part B during, 2002, 2003, 2004 or 2005
who do not enroll in Medicare part B upon
provide a special Part B enrollment period
and a special enrollment period, beginning
becoming eligible for Medicare.
for these military retirees beginning as
1
year
after
enactment
and
ending
soon as possible after enactment and
December
31,
2005,
would
be
ending December 31, 2004. The provision
provided.Section 627. Similar provision,

---

CRS-92
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
applies to premiums for months beginning
except that the waiver would apply
January 2004. The Secretary is required to
beginning January 1, 2004, and the special
rebate premium penalties paid for months
enrollment period would begin as soon as
on or after January 2004 for which a
possible
after
enactment
and
end
penalty does not apply as a result of this
December 31, 2004.
provision, but for which a penalty was
collected.
Establish beneficiary cost-sharing for
No provision.
No provision.
Section 702. A beneficiary copayment for
home health services. The home health
each 60-day episode of care beginning
benefit does not have any cost-sharing
January 1, 2004 would be established. The
requirement.
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.
Establish beneficiary cost-sharing for
No provision.
Section 431. Beginning January 1, 2004,
No provision.
clinical diagnostic services not provided
Medicare
would
pay
all
clinical
by a sole community hospital. Medicare
laboratories 80% of the applicable fee
pays laboratories directly for laboratory
schedule
amount.
Hospital-based,
services provided to ambulatory patients in
physician
office
and
independent
an outpatient setting. Clinical lab services
laboratories would be able to charge
are paid on the basis of area-wide fee
beneficiaries a 20% coinsurance amount.

---

CRS-93
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
schedules. The fee schedule amounts are
The Medicare Part B deductible would
periodically updated.
Assignment is
apply to clinical diagnostic laboratory tests
mandatory. No beneficiary cost-sharing is
furnished across all settings. SCHs would
imposed.
be exempt from this provision.
(see
Section 427).
Waive deductible for colorectal cancer
No provision.
No provision.
Section 613. The Part B deductible would
screening
tests.
Unless
otherwise
be waived for colorectal cancer screening
specified, Part B services are subject to
tests.
beneficiary
cost-sharing
amounts,
including
an
annual
deductible
and
coinsurance amount.
Provision of Information to Beneficiaries
Include additional information in notices
Section 925. Beneficiary notices for those
Section 551. Beneficiary notices for those
Section 925. Similar provision. Would
to beneficiaries about SNF and hospital
beneficiaries in SNFs are required to
beneficiaries in SNFs and hospital would
require information for beneficiaries in a
benefits. Although the statute requires that
include information about the number of
be required to include information about
SNF stay only.
beneficiaries receive a statement listing the
days of coverage remaining under the SNF
the number of days of coverage remaining
items and services for which payment has
benefit and the spell of illness involved.
under the SNF benefit and the spell of
been made, there is no explicit statutory
illness involved.
instruction that requires the notice to
include information about the number of
days of coverage remaining in either the
hospital or SNF benefit.
Provide
information
on
Medicare-
Section 926. The Secretary is required to
Section 552.
The Secretary would be
Section 926. Same provision.
certified SNF in hospital discharge
make
information
publicly
available
required to make information publically
plans.
The hospital discharge planning
regarding whether SNFs are participating
available regarding whether SNFs were
process requires evaluation of a patient’s
in
the
Medicare
program.
Hospital
participating in the Medicare program.
likely need for post-hospital services
discharge planning is required to evaluate
Hospital discharge planning would be
including hospice and home care.
a patient’s need for SNF care.
required to include evaluating a patient’s
need for SNF care.

---

CRS-94
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Require
information
on
advance
No provision.
Section 616.
The Secretary would be
No provision.
directives.
Information about advance
required
to
provide
information
on
directives is required to be given to
advance directives in the Medicare and
patients
in hospitals, skilled nursing
You handbook. The information would be
facilities, and served by home health
required to be presented in a separate
agencies.
The Secretary is required to
section on advance directives and would
provide Medicare beneficiaries annual
include specific information about living
information
about
Medicare
benefits,
wills and durable power of attorney for
limitations on payment, and a description
health care. The Secretary would further be
of the limited benefits for long-term care.
required to note the inclusion of this
This information is provided to Medicare
information in the introductory letter that
beneficiaries in the Medicare and You
accompanies the handbook.
handbook that is mailed annually to all
beneficiaries.
Require OIG report on
notices
No provision.
No provision.
Section 953(d). The OIG would report to
concerning use of hospital lifetime
Congress on the extent to which hospitals
reserve days. No provision in current law.
provide notice to Medicare beneficiaries,
in
a c c o r d a n c e
wi t h
a p p l i c a b le
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-95
Other Health-Related Studies, Commissions or Committees
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Pay emergency health services provided
Section 1011. The bill appropriates $250
Section 610.
$250 million in additional
No provision.
to undocumented aliens
BBA 1997
million in additional federal funding for
federal funding for emergency health
provided $25 million in funding for state
emergency health services furnished to
services furnished to undocumented aliens
emergency health services furnished to
undocumented aliens for each year from
would be appropriated for each year from
undocumented aliens for each of FY1998
FY2005-FY2008. Of this amount, $167
FY2005-FY2008. Of this amount, $167
through 2001.
Funds were distributed
million will be allocated among eligible
million would be allocated among all states
among the 12 states with the highest
providers in all states according to a
according to a specified formula, the
number of undocumented aliens.
In a
specified formula, the remaining money
remaining money would be distributed to
fiscal year, each state’s portion of the total
will
be
distributed
among
eligible
the six states with the highest number of
funds available was based on its share of
providers in the six states with the highest
undocumented alien apprehensions for
total undocumented aliens in all of the
numb er
of
undocumented
alien
such fiscal year according to specified
eligible states based on the estimates
apprehensions
for
such
fiscal
year
formulas. Other provisions would apply.
provided
by
the
Immigration
and
according to a specified formula.
Naturalization Service (INS).
From the $250 million in state allotments
described above, the Secretary will pay
directly
to
eligible
providers
for
unreimbursed costs incurred by providing
emergency health care services during that
fiscal year to certain specified groups of
undocumented aliens. The Secretary shall
determine the payment amount for each
eligible provider and if necessary will
reduce the amount of payment to eligible
providers to ensure that each eligible
provider is paid. Other provisions would
also apply and funds will remain available
until they are expended. The provision
will be effective upon enactment.
C o m m i s s i o n
o f
s y s t e m a t i c
Section 1012. The Secretary is required to
No provision.
No provision.
interoperability. No provision in current
establish a Commission on Systemic
law.
I n t e r o p e r a b i l i t y
t o
d e v e l o p
a
comprehensive strategy for the adoption

---

CRS-96
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
and
implementation
of
health
care
information
technology
standards.
Members of the Commission are to be
appointed by the President, the Senate
Majority and Minority Leaders, and the
House Speaker and Minority Leader. In
developing its strategy, the Commission
must consider the costs and benefits of the
standards, the current demand on industry
resources to implement these and other
electronic standards (including the HIPAA
Administrative Simplification standards),
and the most cost-effective and efficient
means for industry to implement the
standards.
Not later than October 31,
2005, the Commission must submit a
report to the Secretary and the Congress
describing its strategy. The Commission
shall terminate 30 days after submitting its
report to the Secretary and the Congress.
The bill authorizes to be appropriated such
sums as may be necessary to carry out this
Section.
Research on outcomes of health care
Section 1013.
The bill authorizes and
No provision.
No provision.
items and services.
The Agency for
appropriates $50 million for the Secretary
Healthcare Research and Quality (AHRQ)
through
the
Agency
for
Healthcare
is an agency within the Department of
Research and Quality to conduct research
Health and Human Services.
AHRQ’s
to address the scientific information needs
mission is to support, conduct, and
and priorities identified by the Medicare,
disseminate research that improves access
Medicaid, and State Children Health
to care an the outcomes, quality, cost, and
Insurance Programs.
The information
utilization of health care services.
needs and priorities will relate to the
clinical effectiveness and appropriateness
of specified health services and treatments,
and the health outcomes associated with

---

CRS-97
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
such services and treatments. The needs
and priorities also will address strategies
for
improving
the
efficiency
and
effectiveness
of
those
health
care
programs.
Express sense of the Senate that the
No provision.
Section 617. The provision expresses a
No provision.
Senate Finance Committee should hold
sense of the Senate that the Committee on
meeting to monitor the implementation
Finance should hold at least four hearings
of this legislation. No provision in current
to
monitor
implementation
of
the
law.
Prescription
Drug
and
Medicare
Improvement Act of 2003.
The first
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 prescription
No provision.
Section 619. The Secretary would study
No provision.
drug information accessible to the sight
how
to
make
prescription
drug
impaired. No provision in current law.
information, including drug labels and
usage instructions, accessible to blind and
visually impaired individuals with a report
due within 18 months of enactment.
Establish citizens’ health care working
Section 1014.
The bill authorizes the
Section 620. The Secretary would use the
No provision.
group. No provision in current law.
Secretary of HHS, acting through the
Agency for Healthcare Research and
Agency for Healthcare Research and
Quality to establish a 25-member Citizens’
Quality, to establish a group called the
Health Care Working Group. This group
“Citizens’ Health Care Working Group.”
would be appointed by Congressional
The 15-member group will include the
leaders to provide recommendations on
Secretary and individuals appointed by
ways to improve and strengthen health care
GAO.
The Working Group will hold
coverage and the health care system.
hearings and produce public reports about
expanding coverage options, the cost of
health
care,
innovative
state
and
community strategies to expand coverage

---

CRS-98
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
or reduce costs, and the role of evidence-
based
medicine
and
technology
in
improving quality and lowering costs. In
addition to hearings, the Working Group
will hold community meetings and develop
recommendations on health care coverage,
and ways to improve and strengthen the
health
care
system
based
on
the
information and preferences expressed at
the community meetings.
Require GAO report on price controls in
No provision.
Sections
621.
GAO
would study
No provision.
different countries.
No provision in
pharmaceutical price controls in France,
current law.
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
Advisory
No provision.
Section 624. The Safety Net Organizations
No provision.
Commission. No provision in current law.
and 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
Drug
No provision.
Section 626.
The Secretary would
No provision.
Compounding. No provision in current
establish
a
committee
on
Drug
law.
Compounding within the FDA to ensure
that patients are receiving necessary, safe,

---

CRS-99
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
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.
Express sense of Senate regarding
No provision.
Section 627.
The provision provides a
No provision.
structure of Medicare reform.
No
sense of the Senate that Medicare reform
provision in current law.
should be 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 regarding
No provision.
Section 628.
The provision provides a
No provision.
establishment
of
national
lifestyle
sense of the Senate that coronary disease is
modification program.
The Medicare
expensive,
the
Medicare
Lifestyle
Lifestyle
Modification
Demonstration
Modification Program has been operating
Program has been operating in 12 states.
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
flexibility
in
No provision.
Section
631.
The
provision allow
No provision.
providing health coverage for retirees.
employers to provide different health
No provision in current law.
insurance benefits to various groups of
their retirees, without being in violation of
the Age Discrimination and Employment
Act (ADEA).

---

CRS-100
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Expand responsibilities of the Office of
No provision.
Section
637.
The
list of explicit
No provision.
Rural Health Policy (ORHP) in HHS
responsibilities of the Office is expanded
ORHP advises the Secretary on the effects
to
include
administering
grants,
of current policies and proposed statutory,
cooperative agreements, and contracts to
regulatory, administrative, and budgetary
provide technical assistance and other
changes in the Medicare and Medicaid
activities as necessary to support activities
programs on the financial viability of small
related to improving health care in rural
rural hospitals, the ability of rural areas to
areas.
attract and retain 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.
Medicaid and State Children’s Health Insurance Program (SCHIP) Provisions
Provisions
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Increase
Medicaid
disproportionate
Section 1001(a). The bill establishes a
Section 1001. Temporary increase in DSH
share
hospital
(DSH)
allotments
temporary increase in DSH allotments for
allotments, subject to the current law limit
Hospitals that serve a large number of
FY2004 and for certain subsequent fiscal
of 12% of spending for medical assistance,
uninsured patients and Medicaid enrollees
years. Allotments for FY2004 are to be set
would be established for FY2004 and for
r e c e i v e
a d d i t i o n a l
M e d i c a i d
at 116% of FY2003 allotments as under
certain subsequent fiscal years. Allotments
disproportionate share hospital (DSH)
BIPA and will not be subject to the ceiling
for FY2004 would be set at 120% of
payments. BBA 1997 capped the federal
capping states’ allotments at 12% of
FY2003
allotments
as
under
BIPA.
share of Medicaid DSH payments at
medical assistance payments. Allotments
Allotments for subsequent years would be
specified amounts for each state for
for subsequent years will be equal to the
equal to the allotments for FY 2004 unless
FY1998 through FY2002. For most states,
allotments for FY2004 unless the Secretary
the
Secretary
determines
that
the
those specified amounts declined over the
determines that the allotments as would
allotments as would have been calculated
5-year period.
A state’s allotment for
have been calculated prior to the enactment
prior to the enactment of this bill would
FY2003 and for later years is equal to its
of this bill would equal or no longer
equal or exceed the FY 2004 amounts. For
allotment for the previous year increased
exceed the FY2004 amounts. For such
such fiscal years, allotments would be
by the percentage change in CPI-U for the
fiscal years, allotments will be equal to
equal to allotments for the prior fiscal year
previous year. In addition, each state’s
allotments for
the prior fiscal year
increased by the CPI-U for the previous
DSH payment for FY2003 and subsequent
increased by the percentage change in the
fiscal year.

---

CRS-101
Provisions
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
years is limited to no more than 12% of
consumer price index for all urban
spending for medical assistance in each
consumers for the previous fiscal year.
state for that year. BIPA provided states
The provision is effective upon enactment.
with a temporary reprieve from the
Section 601.
The special DSH rule
declining allotments by establishing a
established by BIPA that raised DSH
special rule for the calculation of DSH
allotments, subject to the current law limit
allotments for 2 years, raising allotments
of 12% of spending for medical assistance,
for FY2001 and for FY2002.
The
will be extended for FY2004 and FY2005.
provision also clarified that the FY2003
Allotments for FY2004 will be calculated
allotments were to be calculated as
to be equal to FY2004 allotments as
specified above, using the lower, pre-BIPA
established by BBA 1997 increased by the
levels for FY2002 in those calculations.
product of 0.50 and the difference
between:
(a) FY2002 allotments as
established by BIPA 2000 increased by the
percentage change in the CPI-U for each of
fiscal years 2002 and 2003, and (b)
FY2004 allotments as established by BBA
1997. Allotments for FY2005 will be
calculated
to
be
equal
to
FY2005
allotments as established by BBA 1997
increased by the product of 0.50; and the
difference between: (a) FY2002 allotments
as established by the BIPA 2000 increased
by the percentage change in the CPI-U for
each of fiscal years 2002, 2003, and 2004,
and (b) FY2005 allotments as established
by BBA 1997.
For FY2006 and
thereafter,
DSH
allotments
will
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.

---

CRS-102
Provisions
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Increase in floor for state with low DSH
Section 1001(b). Allotments for low DSH
Section 602.
Allotments for certain
No provision.
allotments. Extremely low DSH states are
states for FY2004 and subsequent years
extremely low DSH states for FY2004 and
those states whose FY1999 federal and
will be increased. For states with DSH
FY2005 would be increased. For states
state DSH expenditures (as reported to
expenditures for FY2000 (as reported to
with DSH expenditures for FY2000 (as
CMS on August 31, 2000) are greater than
CMS as of August 31, 2003) that were
reported to CMS as of August 31, 2003)
zero but less than 1% of the state’s total
greater than zero but less than 3% of the
that are greater than zero but less than 3%
medical assistance expenditures during that
state’s
total
medical
assistance
of the state’s total medical assistance
fiscal year.
DSH allotments for the
expenditures during that fiscal year, the
expenditures during that fiscal year, the
extremely low DSH states for FY2001
provision would raise the DSH allotments
provision would raise the DSH allotments
were equal to 1% of the state’s total
for FY2004 by 16% over the state’s
for FY2004 to 3% of the state’s total
amount of expenditures under their plan
allotment for fiscal year 2003. For each of
amount of expenditures for such assistance
for such assistance during that fiscal year.
FY 2005 through 2008, those states would
during that fiscal year.
States with
For subsequent fiscal years, the allotments
receive allotments that are increased by
expenditures for FY2001 (as reported to
for extremely low DSH states would be
16% over the previous year’s amount. For
CMS as of August 31, 2004) that are
equal to their allotment for the previous
FY 2009 and all subsequent fiscal years,
greater than zero but less than 3% of the
year, increased by the percentage change
DSH allotments for those states will be
state’s
to tal
medical
assistance
in the CPI-U for the previous year, subject
equal to the prior year’s amount increased
expenditures during that fiscal year would
to a ceiling of 12% of that state’s total
by inflation as for all other states.
have the DSH allotments for FY2005 equal
medical assistance payments in that year.
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.
Allotment adjustment. No provision in
Section 1101(c). The bill establishes a
No provision.
No provision.
current law.
contingent DSH allotment for states for
fiscal years 2004 and 2005 that have a
statewide waiver under section 1115 that is
revoked or terminated before the end of
either fiscal year and that have an
allotment of zero under current law. The
provision would permit the state to submit
an amendment to its state plan describing
the methodology to identify DSH hospitals
and to make payments to those hospitals,
including
children’s
hospitals
and
institutions for mental diseases or other

---

CRS-103
Provisions
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
mental health facilities, on the basis of
their proportion of patients that are low-
income with special needs. The provision
directs the Secretary of HHS to compute a
DSH allotment for the state that provides
for an appropriate amount subject to the
current law limit of 12% of medical
assistance payments, and up to a ceiling
such that Medicaid spending in the state
would not exceed the spending that would
have been made if such waiver had not
been
revoked
or
terminated.
In
determining the amount of an appropriate
DSH allotment, the Secretary shall take
into account the level of DSH spending for
the State for the fiscal year preceding the
year in which the waiver commenced.
Increase DSH reporting requirements
Section 1001(d).
As a condition of
Section 603. As a condition of receiving
No provision.
BBA 1997 required each state to submit to
receiving federal Medicaid payments for
federal Medicaid payments for FY2004
the Secretary an annual report describing
FY2004 and each fiscal year thereafter,
and each fiscal year thereafter, the
the disproportionate share payments made
states are required to submit to the
provision would require each state to
to each disproportionate share hospital
Secretary an annual report (for the
submit to the Secretary an annual report
(DSH) and the methodology used by the
previous fiscal year) identifying each
(for the previous fiscal year) identifying
state for prioritizing payments to such
disproportionate
share
hospital
that
each disproportionate share hospital that
hospitals.
received a payment, the amount such
received a payment, the amount such
hospital
received,
as
well
as
other
hospital
received,
as
well
as
other
information
the
Secretary
determines
information
the
Secretary
determines
necessary to ensure the appropriateness of
necessary to ensure the appropriateness of
the DSH payments for the previous fiscal
the DSH payments for the previous fiscal
year. In addition, states are required to
year.
submit annually to the Secretary an
independent certified audit verifying: the
extent to which hospitals receiving DSH
p a y m e n t s
h a v e
r e d u c e d
t h e i r
uncompensated care costs to reflect DSH
payments received; the states’ compliance
with
the
hospital-specific
payment

---

CRS-104
Provisions
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
ceilings; the methodology used to calculate
those ceilings; and the documentation
maintained by the states regarding claimed
costs, expenditures and payments under
this section.
The provision is effective
upon enactment.
Clarification regarding non-regulation
Section 1001(e). The provision clarifies
No provision.
No provision.
of transfers States are required to provide
that the non-federal share of Medicaid
not less than 40% of the non-federal share
funds transferred from, or certified by a
of matching funds toward their Medicaid
specified
publically-owned
regional
expenditures. The Medicaid Voluntary
medical center may be used as the non-
Contribution and Provider-Specific Tax
federal share of Medicaid expenditures as
Amendments of 1991 (P.L. 102-234)
long as the Secretary determines that such
prohibited the use of health care related
donations are proper and in the interest of
taxes that were not broad based, and
the Medicaid program. The provision
certain provider-related donations for the
targets, but is not limited to a medical
purpose of claiming federal matching
center located in Memphis, Tennessee, and
payments. The law also limits HHS'
that meets certain other specified criteria.
authority to restrict a state's inclusions of
This provision is effective for the period
tax-derived funds transferred from or
between enactment and December 31,
certified by different levels of governments
2005.
or governmental entities to the state
government
as
the
state's
share
of
Medicaid funding.
Exempt prices of drugs provided to
Section 1002.
The definition of “best
Section 604. Effective October 1, 2003,
Section 1002. Effective on the data of
certain
safety
net
hospitals
from
price” is modified for the purpose of
the definition of “best price” for the
enactment, the definition of “best price”
Medicaid best price drug program
calculating Medicaid drug rebates, to also
purpose of calculating Medicaid drug
for the purpose of calculating Medicaid
Medicaid drug rebates are calculated based
exclude the discounted inpatient drug
rebates, would be modified to also exclude
drug rebates, would be modified to also
on the difference between the Average
prices charged to certain public safety net
the discounted inpatient drug prices
exclude the discounted inpatient drug
M a n u f a c t u r e r ’ s
P r i c e
a n d
t h e
hospitals.
Those hospitals will also be
charged to certain public safety net
prices charged to certain public safety net
manufacturer’s
“best
price”.
In
subject to the same auditing and record
hospitals. Those hospitals would also be
hospitals. Those hospitals would also be
determining a drug’s best price, certain
keeping requirements as other providers
subject to the same auditing and record
subject to the same auditing and record
discounted prices and fee schedules are
with similar exemptions from Medicaid’s
keeping requirements as other providers
keeping requirements as other providers
excluded. Discounted prices for outpatient
“best price” determination. The provision
with similar exemptions from Medicaid’s
with similar exemptions from Medicaid’s
drugs
negotiated
by
the
Office
of
is effective upon enactment.
“best price” determination.
“best price” determination.
Pharmacy Affairs (of HHS) with drug

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CRS-105
Provisions
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
manufacturers on behalf of certain clinics
and safety net providers are one example
of such exclusion.
Because
of
this
exclusion, the discounts 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 in Medicaid and
No provision.
Section 605. The provision would lift the
No provision.
SCHIP programs “Qualified aliens” who
5-year ban and would allow states the
entered the United States after enactment
option to provide medical assistance to
of the Personal Responsibility and Work
certain lawfully residing individuals under
Opportunity Reconciliation Act of 1996
Medicaid (including under a waiver
(PRWORA, Aug. 22, 1996) are not eligible
authorized by the Secretary) or SCHIP for
to receive federally funded benefits under
any of fiscal years 2005 through 2007.
Medicaid or SCHIP for 5 years. Qualified
Those eligible would include lawfully
aliens who entered the United States prior
residing women during pregnancy and the
to the enactment of PRWORA are eligible
60-day period after delivery, and children
for federally funded Medicaid coverage at
otherwise eligible for Medicaid or SCHIP
state option, as are qualified aliens arriving
as defined by the state plan. States opting
after Aug. 22, 1996 who have been present
to provide coverage to such lawfully
in the United States for more than 5 years.
residing individuals under SCHIP must
A person who executed an affidavit of
also provide coverage to such individuals
support for an alien under Section 213A of
under Medicaid. If services are provided
the Immigration and Nationality Act (INA)
under the Medicaid program, the alien’s
is liable to reimburse the federal or state
sponsor would not be liable to reimburse
government
for
the
public
benefits
the federal or state government for the cost
received by the sponsored alien until the
of such services.
alien naturalizes or has accumulated 40
quarters of work. Section 213A was
enacted as a part of PRWORA on Aug. 22,
1996.

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CRS-106
Provisions
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Extend special DSH treatment for
No provision.
Section 625.
DSH payments made to
No provision.
certain urban providers.
Hospital-
hospitals that are owned and operated by
specific limits on DSH payments as well as
the state of Indiana and located in Marion
overall state-wide DSH allotments have
County would be made without regard to
been established.
DSH payments to
the state’s DSH allotment limitation so
hospitals are limited to some percentage of
long as those payment amounts, for
each hospital’s costs of providing inpatient
FY2004 and each fiscal year thereafter do
and outpatient services to Medicaid and
not exceed 175% of the “unreimbursed
uninsured
patients
net
of
payments
costs” of furnishing hospital services.
received from or on behalf of these
patients
(“unreimbursed costs”).
DSH
payments to public hospitals are limited to
100% of unreimbursed costs except in
FY2003 and FY2004 when that 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 payments for certain
No provision.
Section 632. For services provided to a
No provision.
Hawaiian providers.
The Medicaid
Native Hawaiian by a federally qualified
program is jointly financed by the states
health center or a Native Hawaiian health
and the federal government with the
care system, the FMAP would be 100%.
federal government share based on each
Services qualifying for the 100% FMAP
state’s
federal
medical
assistance
would include those provided by referral,
percentage (FMAP).
The FMAP for a
and under contract or other arrangement
state is calculated using a formula designed
between a health care provider and the
to give a higher FMAP to states with a per
federally qualified health center or Native
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,
certain services provided through an Indian
Health Service facility, Indian tribe or
organization have an FMAP of 100%. The

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CRS-107
Provisions
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
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.
Extend special treatment for a specific
Section 1003.
The moratorium on the
Section 633.
The moratorium on the
No provision.
provider Medicaid payment for services
determination of Saginaw Community
determination of Saginaw Community
provided by an institution for mental
Hospital as an IMD is permanently
Hospital as an IMD would be permanently
disease (IMD) may be made only for
extended as if this provision were included
extended as if included in BBA 1997.
beneficiaries who are under age 21 or over
in Section 4758 of the Balanced Budget
65.
IMD means a hospital, nursing
Act of 1997 (BBA 1997).
facility, 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.

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CRS-108
Cost Containment and Miscellaneous Financial Provisions
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Status of Medicare trust funds in annual
Section 801.
Beginning with the 2005
Section 131.
The Trustees would be
The Trustees would be required to submit
trustees report. The Medicare Board of
report, the Trustees annual report is
required to submit a combined report on
a combined report on the status of the two
Trustees was established under the Social
required
to
include
a
determination
the status of the two trust funds including
trust funds and the Prescription Drug Trust
Security Act to oversee the financial
whether there is projected to be “excess
the Prescription Drug Account. The report
Fund.
The
report
would
include
a
operations of the Medicare Hospital
general revenue Medicare funding” for the
would include a statement of the total
statement of the total amounts obligated
Insurance (HI) trust fund and the Medicare
fiscal year or any of the succeeding 6 fiscal
amounts obligated during the preceding
during the preceding fiscal year from the
Supplementary Medical Insurance (SMI)
years. Excess general revenue Medicare
fiscal year from the General Revenues of
General Revenues of the Treasury for
trust fund. The Trustees are required to
funding is when general revenue Medicare
the Treasury and the percentage such
payment of benefits and the percentage
submit annual reports to the Congress.
funding expressed as a percentage of total
amount bore to all other obligations of the
such amount bore to all other general
Medicare outlays for the fiscal year
Treasury in that year.
revenue obligations of the Treasury in that
exceeds 45%.
When excess general
Section 132. The 2004 reports would be
year.
revenue funding of Medicare is projected
required to include an analysis of the total
for 2 consecutive annual reports this is to
amount
of
unfunded
obligation
of
be treated as a “funding warning” for the
Medicare. The analysis would compare
purpose of requiring the President to
long-term
obligations,
including
the
submit legislation to Congress.
combined obligations of the HI and SMI
trust funds, to the dedicated funding
Section 802. The President is required to
sources for the program (not including
submit proposed legislation to Congress to
transfers of general revenue)
respond to the warning of excess general
revenue funding of Medicare within
specified timeframes.
Section 803. The provision sets out the
procedures for House consideration of the
President’s legislative proposal.
Section 804. The provision provides for
some limited special procedures in the
Senate for consideration of legislation
arising from the Trustees determination of
excess general revenue Medicare funding.

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CRS-109
Provision and Current Law
H.R. 1 as enacted
S. 1 (as passed the Senate)
H.R. 1 (as passed the House)
Extend authority to collect Customs fees
No provision.
Section 614.
The authority would be
No provision.
The U.S. Customs Service, the federal
extended until September 30, 2013.
government’s oldest revenue collecting
agency is responsible for regulating the
mo vement
of
persons,
carriers,
merchandise, and commodities between
the United States and other countries. Its
authority to impose user fees for certain
services lapsed on September 30, 2003.
Require the Internal Revenue Service
No provision.
Section 450G.
The Secretary of the
No provision.
(IRS) to deposit certain receipts The
Treasury must deposit any fees collected
Secretary of the Treasury was granted the
under the authority provided by Section 3
authority
by
Section
3
of
the
of the Administrative Provisions of the
Administrative Provisions of the Internal
Internal Revenue Service of Public Law
Revenue Service of Public Law 103-286,
103-286, the Treasury, Postal Service and
the Treasury, Postal Service and General
General Government Appropriations Act
Government Appropriations Act of 1995 to
of 1995 into the Treasury as miscellaneous
establish new fees (if the fee is authorized
receipts.
The fees collected are only
by another law) or raise fees for services
available to the IRS if authority is provided
provided by the IRS to supplement
in advance in an appropriations Act.
appropriations made available to the IRS.
The fees must be based on the costs of
providing the specific services (to 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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