Major Provisions of S. 1 as Passed by the Senate, and H.R. 1, as Passed by the House

Major Provisions of S. 1 as Passed by the Senate, and H.R. 1, as Passed by the House

Order Code RL31901
CRS Report for Congress
Received through the CRS Web
Regulatory Reform Provisions of S. 1,
as Passed by the Senate, and
H.R. 1, as Passed by the House
Updated July 23, 2003
Jennifer Boulanger and Sibyl Tilson
Specialists in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

Regulatory Reform Provisions of S. 1, as Passed by the
Senate, and H.R. 1, as Passed by the House
Summary
On June 27, 2003, the Senate passed the Prescription Drug and Medicare
Improvement Act of 2003 by a vote of 76-21. Later that same evening, the House
passed the Medicare modernization and Prescription Drug Act of 2003 by a recorded
vote of 216-215 with one voting present.
Each of the bills contain numerous provisions regarding the Medicare
prescription drug benefit, the new MedicareAdvantage program, Medicare payment
and benefit changes, Medicare program administration, and regulatory reform,
appeals and contracting reform. This report provides a detailed side-by-side
comparison of the regulatory reform, appeals, and contracting reform provisions of
both S. 1 and H.R. 1.
Title V of S. 1 and Title IX of H.R. 1 would modify how Medicare regulations
and guidance are communicated; would modify the procedures used to resolve
payment disputes; and would establish various provider appeal processes, particularly
for those who face termination of Medicare participation or denial of their application
to participate in the program. As well as attempting to minimize Medicare’s
administrative burden, the bills address appeals issues; change Medicare’s authority
to contract for claims processing services; establish that these contracts be
competitively bid at least every 5 years in H.R. 1 and every 6 years in S. 1; and place
new requirements on the Medicare claims processing contractors, including an
increased emphasis on provider education. Other program changes, demonstration
projects, and mandated studies are also included in these titles. Many of the
provisions of these titles codify initiatives underway within the Centers for Medicare
and Medicaid Services (CMS), the agency that administers Medicare, under its
current authority. The proposed legislation authorizes increased funding but action
by the appropriations committees would be required for CMS to receive additional
money.
The Congressional Budget Office (CBO) has estimated that the added
administrative costs to the government in implementing the regulatory reform
provisions of S. 1 and H.R. 1 would be $4 billion over the FY2004 through FY2013
period. However, these are administrative costs that are subject to the appropriations
process rather than mandatory benefit spending. As a result, the appropriations
committees have discretion to determine the actual level at which any of the new
requirements would actually be funded. CBO also estimates that mandatory benefit
spending would be increased in S. 1 by almost $1 billion over the FY2004 through
FY2013 period (due to the change in procedures for appealing local coverage
determinations and the inclusion of additional funding in the mandatory Medicare
Integrity Program funding for provider education). Those provisions are not in H.R.
1 and CBO estimated that there was no increase in direct funding in that bill.
This report will be updated as events warrant.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Side-by-Side Comparison of S. 1 and H.R. 1 Regulatory Reform Provisions . . . . 4
Subtitle A. Regulatory Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Subtitle B. Appeals Process Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Subtitle C. Contracting Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Subtitle D. Education and Outreach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Subtitle E. Review, Recovery, and Enforcement Review . . . . . . . . . . . . . . 16
Subtitle F. Other Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Regulatory Reform Provisions of S. 1,
as Passed by the Senate, and H.R. 1,
as Passed by the House
Introduction
Overview
For some time, observers have expressed concern over the way in which
Medicare has been administered. Some believe that the Centers for Medicare and
Medicaid Services (CMS, formerly the Health Care Financing Administration or
HCFA) has not been provided with sufficient resources, both staff and funding, or
management flexibility to enable it to carry out its ever increasing responsibilities.
Others believe that organizational shortcomings are exacerbated by a bureaucratic
approach emphasizing regulatory controls that adversely affect program
administration. The General Accounting Office (GAO) describes the agency as a
lightning rod attracting the criticism from those discontented with program policies
because of the number and diverse interests of its stakeholders (which run the gamut
from providers, including general and specialty physicians; hospitals; practitioners;
and medical suppliers, to beneficiaries and taxpayers), its responsibility to ensure
fiscal prudence, Medicare’s market dominance, and its very nature as a public
program. Moreover, Medicare, because of its sheer size and fragmented,
decentralized operations, is seen as highly vulnerable to fraud, waste, and abuse.1
One of the central issues driving the debate over the effectiveness of Medicare’s
administration is the perception that the enforcement of Medicare’s payment rules
imposes too great a burden on health care providers and confuses Medicare
beneficiaries. Essentially, complaints about unreasonable demands for claims
documentation, contradictory billing instructions, excessive paperwork, and the sense
that providers and physicians are being unfairly investigated, if not prosecuted, over
purportedly innocent billing errors have prompted efforts to provide regulatory relief.
Title V of S. 1 and Title IX H.R. 1 would modify how Medicare regulations and
guidance are communicated; would modify the procedures used to resolve payment
disputes; and would establish various provider appeal processes, particularly for
those who face termination of Medicare participation or denial of their application
to participate in the program. As well as attempting to minimize Medicare’s
administrative burden, the bill would address appeals issues and would provide for
1 U.S. General Accounting Office, Medicare: Successful Reform Requires Meeting Key
Management Challenges, GAO-01-1006, July 25, 2001 and Regulatory Issues for Medicare
Providers, GAO-01-802R, June 11, 2001 for additional information.

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more competition in the way Medicare claims processing contractors are chosen.
Many of the provisions of the bill codify initiatives underway within the Centers for
Medicare and Medicaid Services (CMS), the agency that administers Medicare, under
its current authority.
The regulatory reform titles in these bills came from S. 3018 introduced at the
close of the 107th Congress and H.R. 810 which was reported out of the House
Committee on Ways and Means and the Committee on Energy and Commerce. The
provisions of both those bills comprise Title V in S. 1 and Title IX of H.R. 1. A
number of bills were developed in the 107th Congress. The precursor of all the
legislation was the Medicare Education and Regulatory Fairness Act (MERFA or
H.R. 868). MERFA was criticized by the Office of the Inspector General (OIG) in
HHS as potentially encouraging fraud, in part, because it would have granted
physicians immunity if they voluntarily returned overpayments when potentially
facing investigation. That provision was dropped in later legislation that passed the
House December 4, 2001, the Medicare Regulatory and Contracting Reform Act of
2001(H.R. 3391), which also incorporated changes suggested by the OIG, GAO and
the Department of Justice to ensure that the government’s ability to address Medicare
fraud, waste, and abuse would not be significantly weakened. Selected provisions
of H.R. 3391 were also incorporated into the Medicare Modernization and
Prescription Drug Act of 2002 (H.R. 4954) which passed the House on June 28,
2002. Similar legislation was introduced in the Senate: S. 452, the Medicare
Education and Regulatory Fairness Act of 2001 which was very similar to the
original House bill; S. 1738, the Medicare Appeals, Regulatory, and Contracting
Improvement Act of 2001 which incorporated similar concerns regarding the
government’s ability to address Medicare program integrity issues; and S. 3018, the
Beneficiary Access to Care and Medicare Equity Act of 2002 which contained
selected provisions from S. 1738. None of these bills came to a vote by the Senate.
H.R. 810 was introduced during the beginning of the 108th Congress and was based
on H.R. 4954. The House Energy and Commerce Committee and the House Ways
and Means Committee reported out slightly different versions of Medicare regulatory
relief legislation on March 26, 2003 and on April 11, 2003, respectively.
A major feature of both S. 1 and H.R. 1 (and one ardently supported by the
Secretary of HHS) is contracting reform. The contracting reform provisions would
change Medicare’s authority to contract for claims processing services, another
central issue seen to complicate effective program administration. Presently there are
statutory limits on which entities may process Medicare claims. Generally, fiscal
intermediaries process claims from institutional providers and carriers process Part
B claims, including those submitted by physicians, durable medical equipment
suppliers, laboratories and other practitioners. The Medicare statute’s provider
nomination provision allows professional associations of hospitals and certain other
providers to choose claims processing intermediaries on behalf of their members; the
statute requires that CMS choose only health insurance companies as carriers.
Medicare regulations coupled with long-standing agency practices have limited the
way that contracts for claims administration services can be established. For
example, the contracts are cost-based and lack incentives for quality performance.
Both bills would generally allow for greater flexibility in contracting for Medicare
claims processing functions by permitting the Secretary to enter into contracts with

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any qualified entity for any or all functions of a Medicare claims processing
contractor.2
The Congressional Budget Office (CBO) has estimated that the added
administrative costs to the government in implementing the regulatory reform
provisions of S. 1 and H.R. 1 would be $4 billion over the FY2004 through FY2013
period. However, these are administrative costs that are subject to the appropriations
process rather than mandatory benefit spending. As a result, the appropriations
committees have discretion to determine the actual level at which any of the new
requirements would actually be funded. CBO also estimates that mandatory benefit
spending would be increased in S. 1 by almost $1 billion over the FY2004 through
FY2013 period (due to the change in procedures for appealing local coverage
determinations and the inclusion of additional funding in the mandatory Medicare
Integrity Program funding for provider education). Those provisions are not in H.R.
1 and CBO estimated that there was no increase in direct funding in that bill.
This report provides a detailed side-by-side comparison of the regulatory reform,
appeals, education, and contracting reform provisions of both bills. It will be updated
as events warrant.
2 For additional information, see U.S. General Accounting Office, Medicare Contracting
Reform: Opportunities and Challenges in Contracting for Claims Administration Services,
GAO-01-918, June 28, 2001 and Medicare: Comments on HHS’ Claims Administration
Contracting Reform Proposal, GAO-01-1046, Aug. 17, 2001. OIG testimony on the need
for contractor reform can be found at [http://oig.hhs.gov/testimony/2001/062801mm.pdf].

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Side-by-Side Comparison of S. 1 and H.R. 1 Regulatory Reform Provisions
Subtitle A. Regulatory Reform
Provisions
Current Law
S. 1
H.R. 1
Construction;
Section 1861 of the Social Security Act contains
No provision.
Section 901. Would clarify that “supplier”
definition of supplier
definitions of services, institutions, and so forth
means a physician or other practitioner, a
under Medicare. Supplier is not explicitly defined.
facility or other entity (other than a provider
of services) furnishing items or services
under Medicare.
Publication of a final
The Secretary is required to prescribe regulations
Section 501. The Secretary would be required to
Section 902. Would require the Secretary
regulation based on the
that are necessary to administer the Medicare
publish a final regulation within 12 months of the
to establish and publish a timeline for the
previous publication of
program. The Secretary must publish proposed
publication of the interim final regulation or the
publication of final regulations based on the
an interim final
regulations in the Federal Register, with at least 30
interim final regulation would no longer be
publication of a proposed or interim final
regulation
days to solicit public comment before issuing the
effective. Subject to appropriate notice, the
regulation. The timeline for publishing the
final regulation except in the following
Secretary could extend this deadline for up to 12
final regulation would be allowed to vary
circumstances: (1) the statute permits the
additional months.
but could not exceed 3 years except for
regulation to be issued in interim final form or
exceptional circumstances. Any variation
provides for a shorter public comment period; (2)
of the timeline would have to be explained
the statutory deadline for implementing a provision
by the Secretary in the Federal Register.
is less than 150 days after the date of enactment of
Within 6 months of enactment, the Secretary would
Has similar requirement to S. 1 regarding
the statute containing the provision; (3) under the
be required to publish a notice in the Federal
publishing a final regulation after an interim
good cause exception contained in the rule-making
Register that provides the status of each interim
final regulation.
provision of Title 5 of the United States Code,
final regulation published before enactment for
notice and public comment procedures are deemed
which no final regulation has been issued as well as
impracticable, unnecessary or contrary to the
the date by which the Secretary plans to publish the
public interest.
final regulation.
Also would require that the Secretary report
to Congress annually describing instances in
which a final regulation was not published
within the applicable regular time line and
the reasons the time frame was not met.
Any provision in a final regulation that was
not a logical outgrowth of a previously
published notice of proposed rule making or
interim final rule would be required to be
treated as a proposed regulation and would

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Provisions
Current Law
S. 1
H.R. 1
not take effect until there is opportunity for
public comment and the provision is
published again as a final rule.
Compliance with
No explicit statutory instruction. As a result of
Section 502. Would bar retroactive application of
Section 903. Same provisions.
changes in regulations
case law, there is a strong presumption against
any substantive changes in regulation, manual
and policies
retroactive rulemaking. In Bowen v. Georgetown
instructions, interpretative rules, statements of
University Hospital, the Supreme Court ruled that
policy, or guidelines unless the Secretary
there must be explicit statutory authority to engage
determines retroactive application is needed to
in retroactive rulemaking.
comply with the statute or is in the public interest.
Any substantive changes would not be able to take
effect until 30 days after the issuance of the
substantive change unless needed to comply with
statutory requirements or the 30-day period is
contrary to the public interest.
Report on legal and
No provision.
Section 503. The Secretary would be required to
Section 904. Same provision but
regulatory
report to Congress every 2 years on the
additionally would require the Comptroller
inconsistencies
administration of Title XVIII and areas of
General to determine the feasibility and
inconsistency or conflict among various provisions
appropriateness of giving the Secretary the
under law and regulation and recommendations for
authority to provide legally binding
legislation or administrative action that the
advisory opinions on interpretation and
Secretary determined appropriate to further reduce
application of Medicare regulations.
such inconsistency or conflicts.
Streamlining and
No provision.
Section 504. The Secretary would be required to
No provision.
simplification of
analyze Medicare regulations for the purposes of
Medicare regulations
determining how to streamline the regulations and
reduce the number of words in the regulations by
two-thirds by October 1, 2004. If the Secretary
determines that the two-thirds reduction is
infeasible, he would be required to inform
Congress in writing by July 1, 2004 of the reasons
and then establish a feasible reduction to be
achieved by January 1, 2005.

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Subtitle B. Appeals Process Reform
Provisions
Current Law
S. 1
H.R. 1
Transfer of
Denials of claims for Medicare payment may be
Section 511. The Secretary and Commissioner of
Section 931. Similar provision regarding
responsibility for
appealed by beneficiaries (or providers who are
Social Security would be required to develop and
plan submission, but also would transfer the
Medicare appeals
representing the beneficiary) or in certain
transmit to Congress a plan for transferring the
ALJ function from SSA to HHS within a
circumstances, providers or suppliers directly. The
functions of administrative law judges (ALJs)
prescribed timeframe. The Commissioner of
third level of appeal is to an administrative law
responsible for hearing cases under Title XVIII
SSA and the Secretary would be required to
judge (ALJ). The ALJs that hear Medicare cases
from the Social Security Administration to HHS no
develop a plan to transfer the functions of the
are employed by the Social Security
later than April 1, 2004. The plan would include
ALJs who are responsible for hearing
Administration — a legacy from the inception of
information on: workload, cost projections and
Medicare cases from SSA to HHS. This plan
the Medicare program when Medicare was part of
financing, transition timetable, regulations,
would be due to Congress not later than
Social Security.
development of a case tracking system, feasibility
October 1, 2004. A GAO evaluation of the
of precedential authority, feasibility of electronic
plan would be due within 6 months of the
appeals filings and teleconference, steps needed to
plan’s submission. ALJ functions would be
ensure the independence of ALJs (including
transferred no earlier than July 1, 2005 and
ensuring the ALJs are in an office functionally and
no later than October 1, 2005.
operationally separate from the Centers for
Medicare & Medicaid Services and the Center for
The Secretary would be required to place the
Medicare Choices), geographic distribution of
ALJs in an administrative office that is
ALJs, hiring of ALJs, performance standards of
organizationally and functionally separate
ALJs, sharing resources with Social Security
from the Centers for Medicare & Medicaid
regarding ALJs, training and recommendations for
Services. Would further require that the
further Congressional action. The GAO would be
ALJs report to, and be supervised by, the
required to evaluate the Secretary’s and
Secretary or Deputy Secretary and no other
Commissioner’s plan. Further, the Secretary and
official within the Department.
Commissioner could not implement the plan to
transfer the ALJ function until at least 6 months
Would authorize to be appropriated such
after the GAO report
sums as are necessary for FY2005 and each
subsequent fiscal year to increase the number
of ALJs, improve education and training of
ALJs and to increase the staff of the
Departmental Appeals Board (the final level
of appeal).

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Provisions
Current Law
S. 1
H.R. 1
Expedited access to
In general, administrative appeals must be
Section 512. The Secretary would be required to
Section 932. Same provision except review
judicial review
exhausted prior to judicial review.
establish a process where a provider, supplier, or a
entity would be defined as a 3-member panel
beneficiary may obtain access to judicial review
consisting of ALJs, members of the
when a review entity (of up to three qualified
Departmental Appeals Board (DAB), or
reviewers drawn from appeals levels other than the
qualified individuals associated with a
redetermination level) determines, within 60 days
qualified independent contractor.
of a complete written request, that it does not have
the authority to decide the question of law or
regulation and where material facts are not in
dispute. The decision would not be subject to
review by the Secretary. Interest would be
assessed on any amount in controversy and would
be awarded by the reviewing court in favor of the
prevailing party. This expedited access to judicial
review would be permitted for cases where the
Secretary did not enter into or renew provider
agreements.
GAO would be required to report to Congress on
No provision regarding Illinois Council case.
the access of Medicare beneficiaries and health
care providers to judicial review of actions of the
Secretary and HHS after February 29, 2000 (the
date of the decision of Shalala v. Illinois Council
on Long Term Care, Inc. (529 U.S. 1 (2000)).
Expedited review of
No provision.
Section 513. The Secretary would be required to
Section 932(d). Substantially similar
certain provider
develop and implement a process to expedite
provision although drafted differently;
agreement
review for certain remedies imposed against skilled
however, this provision would not include
determinations
nursing facilities (SNFs) including termination of
suspension of nurse aide training programs.
participation, immediate denial of payments,
immediate imposition of temporary management,
and suspension of nurse aide training programs.

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Provisions
Current Law
S. 1
H.R. 1
The appropriation of such sums as needed for
FY2005 and subsequent years to reduce by 50%
the average time for administrative determinations,
to increase the number of ALJs and appellate staff
at the DAB, and to educate these judges and their
staffs on long-term care issues would be
authorized.
Process for
The statute prohibits approval of nurse aide
No provision.
Section 932(e). The Secretary would be
reinstatement of
training programs in skilled nursing facilities that
required to develop a process for reinstating
approval of nurse aide
have been subject to extended survey (that is,
approval of nurse aide training programs that
training programs
found to provide substandard care), have had
have been terminated (before the end of the
serious sanctions imposed such as large civil
mandatory 2-year disapproval period) if the
money penalties, or have waivers for required
facility has come into compliance with the
licensed nurse staffing. The statute mandates a 2-
applicable requirements. This provision
year loss of nurse aide training program in the case
would apply only if the basis for the loss of
of any of the above violations.
training was the assessment of a civil money
penalty of $5,000 or more.
Revisions to Medicare
Section 514(a). A 90-day timeframe for
No provision.
appeals process:
completing the record in a hearing before an ALJ
or the DAB (with extensions for good cause)
would be established.
— completing the
record

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Provisions
Current Law
S. 1
H.R. 1
— use of medical
Section 514(b). Beneficiaries’ medical records
Section 933(b). Same provision.
records
would be able to be used in qualified independent
contractors (QIC) reconsiderations.
— notice requirements
Section 514(c). Notice of and decisions from
Section 933(c). Substantially the same
for Medicare appeals
determinations, redeterminations, reconsiderations,
provision, with minor differences in process
ALJ appeals, and DAB appeals would be required
and requirements, although there are drafting
to be written in a manner understandable to a
differences.
beneficiary and that includes, as appropriate,
reasons for the determination or decision, for a
redetermination an explanation of the medical or
scientific rationale for the decision, and the process
for further appeal.
— eligibility
Section 514(d). Eligibility requirements would be
Section 933(d). Substantially the same
requirements of QICs
clarified for qualified independent contractors and
provision, although there are drafting
their reviewer employees including medical and
differences. The provision would not change
legal expertise, independence requirements,
the eligibility requirements of QICs to
prohibition on compensation being linked to
explicitly permit peer review organizations to
decisions rendered. Peer review organizations
serve.
would be explicitly permitted to be QICs. Would
reduce the required number of QICs from 12 to
four.
— implementation of
Section 514(e). The effective date of certain
No provision.
certain Benefits
appeals provisions would be delayed until
Improvement and
December 1, 2004. Expedited determinations
Protection Act of 2000
would be delayed until October 1, 2003. Peer
(BIPA) reforms
review organizations (now called quality
improvement organizations by the Secretary)
would, on a transitional basis, conduct expedited
determinations until the QICs are operational.
— requiring full and
New evidence can be presented at any stage of the
No provision.
Section 933(a). A provider or supplier
early presentation of
appeals process.
would be prohibited from presenting any
evidence
evidence in appeals that was not presented at
the qualified independent contractor level,
unless there was good cause for not
presenting the evidence.

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Provisions
Current Law
S. 1
H.R. 1
— effective dates
Section 514(g). Section 514 provisions are
Section 933(d)(4). QIC eligibility
effective as if enacted in BIPA.
requirements and reviewer eligibility
requirements would be effective as if enacted
in BIPA
Hearing rights related
Under administrative authorities, CMS has
Section 515. The Secretary would be required to
Section 936. Same provision, although there
to decisions by the
established provider enrollment processes in
develop a timeline for action on Medicare
are drafting differences.
Secretary to deny or
instructions to the contractors. A provider denied
enrollment applications and a process for providers
not renew a Medicare
a provider agreement is entitled to a hearing by the
to appeal denials or non-renewals of enrollment
enrollment agreement;
Secretary.
applications. The Secretary would be required to
consultation before
consult with providers and suppliers before
changing provider
changing the provider enrollment forms.
enrollment agreement
Appeals by providers
No provision.
Section 516. Would require the Secretary to
No provision.
when there is no other
permit a provider or supplier to appeal in the case
party available
where a beneficiary dies before assigning appeal
rights.
Provider access to
Only beneficiaries have standing to appeal local
Section 517. The parties that have standing to
No provision.
review of local
coverage decisions by Medicare contractors.
appeal local coverage decisions would be expanded
coverage
to include providers or suppliers adversely affected
determinations
by the determination. The Secretary would be
required to establish a process whereby a provider
or supplier may request a local coverage
determination under certain circumstances. The
provision would authorize to be appropriated such
sums as necessary to carry out the provisions
above. Also the Secretary would be required to
study and report to Congress on the feasibility and
advisability of requiring Medicare contractors to
track the subject and status of claims denials that
are appealed and final determinations.

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Provisions
Current Law
S. 1
H.R. 1
Revisions to appeals
BIPA revised the time frames for Medicare
Section 518. This provision would add 30 days to
No provision.
time frames
appeals. For the first level of appeal, the
the time frame for deciding an appeal at each of the
“redetermination” level, the time frame for
four levels of appeal.
decisions was reduced from 90 days for a part A
appeal and 45 days for a part B appeal to 30 days;
for the second level, the “reconsideration” level,
the time frame was reduced from 120 days for a
part B appeal to 30 days (this is a new level of
appeal for part A appeals); for the third level,
appeals before administrative law judges, the time
frame was reduced from no time limit to 90 days;
and the fourth level, appeals before the Department
Appeals Board, the time frame was reduced from
no time limit to 90 days. BIPA also provided that
a beneficiary could “escalate” his or her appeal to
the next level if the appeal was not decided in a
timely fashion.
Elimination of
BIPA Section 522 requires that appeals of local
Section 519. The statutory language that requires
No provision.
requirement to use
coverage determinations be heard by ALJs of the
SSA ALJs be used to hear appeals of local
Social Security
Social Security Administration (SSA). As a result,
coverage determinations would be eliminated. The
Administration
if the ALJ function were moved from SSA to HHS,
requirement that these appeals be heard by ALJs
administrative law
these local coverage determination appeals would
would be retained.
judges
still need to be heard by SSA ALJs.
Elimination of
BIPA Section 521 requires that the Departmental
Section 520. The DAB would be required to
No provision.
requirement for de
Appeals Board, the fourth level of appeal, review
conduct a review of the decision and make a
novo review by the
appeals cases de novo. Prior to BIPA, the DAB
decision or remand the appeal to the ALJ within
Departmental Appeals
reviewed appeals based on the record established
the 90-day period.
Board
during the previous three levels of appeal.

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Subtitle C. Contracting Reform
Provisions
Current Law
S. 1
H.R. 1
Increased flexibility in
The Secretary is required to contract with health
Section 521. Adds Section 1874A to the Social
Section 911. Same provisions, except
Medicare
insurance companies to process and pay Medicare
Security Act permitting the Secretary to
contracts must be recompeted at least once
administration
Part B claims and may accept the nomination of
competitively contract with any eligible entity to
every 5 years. Competitive bidding for the
hospitals for entities to process and pay their
serve as a Medicare contractor (called “Medicare
MACs must begin for annual contract periods
Medicare claims.
Administrative Contractors” (MACs)) and
that begin on or after October 1, 2010.
eliminates the distinction between Part A
contractors and Part B contractors. The Secretary
may renew these contracts annually for up to 6
years. All contracts must be recompeted at least
every 6 years. Federal Acquisition Regulations
(FAR) would apply to these contracts except to the
extent any provisions are inconsistent with a
specific Medicare requirement, including incentive
contracts. Competitive bidding for the MACs must
begin for annual contract periods that begin on or
after October 1, 2011.
Certain terms and conditions of the contracting
Liability of certifying and disbursing officers and
agreements for fiscal intermediaries (FIs) and
the Medicare Administrative Contractors would be
carriers are specified in the Medicare statute.
limited except in cases of reckless disregard or the
Medicare regulations coupled with long-standing
intent to defraud the United States. This limitation
agency practices have further limited the way that
on liability does not limit liability under the False
contracts for claims administration services can be
Claims Act.
established. The certifying and disbursing officers
Circumstances where contractors and their
of contractors and the contractors, as entities, are
employees would be indemnified would be
protected from liability for payments, except in the
established, both in the contract and as the
case of gross negligence or intent to defraud the
Secretary determines appropriate.
United States.
Information security
No provision.
No provision.
Section 912. Medicare contractors would be
requirements for
required to implement an information
Medicare
security program that meets the same
administrative
requirements as those imposed on federal
contractors.
agencies.

CRS-13
Subtitle D. Education and Outreach
Provisions
Current Law
S. 1
H.R. 1
Provider education and
Medicare’s provider education activities are funded
Section 531(a). The Secretary would be required
Section 921 (a). Same provision except it
technical assistance
through the program management appropriation
to coordinate the educational activities through the
also would require the Secretary to submit a
and through Education and Training component of
Medicare contractors to maximize the effectiveness
report to Congress by October 1, 2004
the Medicare Integrity Program (MIP). The statute
of education efforts for providers and suppliers.
describing and evaluating the steps taken to
requires toll-free lines that beneficiaries can call
coordinate the funding of provider education.
— coordination of
with questions or to report suspicious bills. Under
education funding
administrative authority, CMS requires the
contractors to have internet sites and to respond to
written inquiries.
— incentives to
Section 531(b). The Secretary would be required
Section 921(b). Same provision.
improve contractor
to use specific claims payment error rates (or
performance
similar methodology) to provide incentives for
contractors to implement effective education and
outreach programs for providers and suppliers.
The GAO would study the adequacy of the
methodology and make recommendations to the
Secretary. The Secretary would be required to
report to the Congress on how he intends to use the
methodology in improving education and outreach
and whether the methodology is a basis for
performance bonuses.
improved provider
Section 531(c). Increased funding would be
Section 921(d). Would authorize to be
education and training
provided for the Medicare Integrity Program of
appropriated $25 million for fiscal years
$35 million beginning with FY2004 for increased
2005 and 2006 and such sums as necessary
provider and supplier education. Also would
for succeeding fiscal years to increase
require Medicare contractors to take into
education and training of providers and
consideration the special needs of small providers
suppliers. Funds would also be able to be
or suppliers when conducting education and
used to improve the accuracy, consistency,
training activities and permits provision of
and timeliness of contractor responses.
technical assistance.
Medicare contractors would be required to
tailor education and training activities to meet
the needs of small providers or suppliers.

CRS-14
Provisions
Current Law
S. 1
H.R. 1
additional provider
Section 531(d). Medicare contractors would be
Section 921(f). Same provision.
education provisions
prohibited from using a record of attendance (or
non-attendance) at educational activities to select
or track providers or suppliers in conducting any
type of audit or prepayment review.
Access to and prompt
No specific statutory provision. The Medicare
Section 532. The Secretary would be required to
Section 921(c). Same provision.
responses from
statute generally requires that the Medicare
develop a process for Medicare contractors to
Medicare contractors
contractors communicate information about
communicate with beneficiaries and with providers
Medicare administration.
and suppliers. Also requires a clear, concise
written response to inquiries within 45 business
days. The Secretary would ensure that Medicare
contractors provide a toll-free number where
beneficiaries, providers and suppliers can obtain
billing, coding, claims, coverage and other
information. The Medicare contractors would be
required to maintain a system for identifying the
staff person who provided information and
monitoring the accuracy, consistency and
timeliness of information provided. The Secretary
would establish standards regarding accuracy,
consistency, and timeliness and would evaluate the
Medicare contractors on these standards. Would
authorize to be appropriated such sums as
necessary.
Reliance on guidance
As a general principle of law, that has been
Section 533. If a provider or supplier follows
Section 903(c). Same provision.
sustained by the Supreme Court, a Federal
written guidance provided by the Secretary or a
government agent cannot undo Federal
Medicare contractor when furnishing items or
government statutory or regulatory law.
services or submitting a claim and the guidance
was inaccurate, the provider or supplier would not
be required to repay the overpayment (unless the
inaccurate information was due to a clerical or
technical operational error).

CRS-15
Provisions
Current Law
S. 1
H.R. 1
Medicare provider
No provision.
Section 534. The Secretary would be directed to
Section 923. Substantially similar provision,
ombudsman
create a Medicare Provider Ombudsman within the
although would not require staff to be
Department of Health and Human Services and to
provided. Also would establish a Beneficiary
provide staff to the Ombudsman. The Ombudsman
Ombudsman to provide confidential
would provide assistance to providers on a
assistance to Medicare beneficiaries. Section
confidential basis. Authorizes such sums as
1 would establish a Beneficiary Ombudsman
necessary be appropriated for FY2004 and
in Section 301.
subsequent years.
Beneficiary outreach
No explicit statutory instruction for demonstration.
Section 535. The Secretary would be required to
Section 924. Same provision.
demonstration program
Assistance is currently available to beneficiaries
establish a demonstration program where Medicare
through 1-800-Medicare and through the State
specialists provided assistance to beneficiaries in at
Health Insurance Counseling Programs which are
least six local Social Security offices (two of which
mandated by the statute.
would be located in rural areas).
Prior determination of
Medicare law prohibits payment for items and
Section 535 (b). A demonstration project would
Section 938. The Secretary would be
coverage
services that are not medically reasonable and
be established by the Secretary to test the
required to establish a process where
necessary for the diagnosis or treatment of an
administrative feasibility of providing a process for
physicians and beneficiaries can establish if
illness or an injury. Under certain circumstances,
beneficiaries and providers to request and receive
Medicare covers certain items and services
however, Medicare will pay for noncovered
a determination as to whether the item or service is
before the services are provided. A GAO
services that have been provided if both the
covered under Medicare by reasons of medical
report would be required within 18 months of
beneficiary and the provider of the services did not
necessity, before the item or service involved is
program implementation.
know and could not have reasonably been expected
furnished to the beneficiary.
to know that Medicare payment would not be made
for these services.

CRS-16
Provisions
Current Law
S. 1
H.R. 1
Small provider
No provision.
No provision.
Section 922. A demonstration program
technical assistance
would be established for the contractors to
demonstration program
provide technical assistance to small
providers and suppliers, when requested, to
improve compliance with Medicare
requirements. If errors were found, the
contractors would be barred from recovering
any overpayments if certain requirements are
met and barring evidence of fraud. A GAO
study would be required not later than 2 years
after the demonstration program begins.
Would authorize $1 million in FY2005 and
$6 million in FY2006 to conduct the
demonstration.
Subtitle E. Review, Recovery, and Enforcement Review
Provisions
Current Law
S. 1
H.R. 1
Prepayment review
No explicit statutory instruction.
Under
Section 541. The conduct of random prepayment
Section 934. The use of random prepayment
administrative authorities, CMS has instructed the
review would be limited to only those done in
reviews by Medicare contractors would be
contractors to use random prepayment reviews to
accordance with standard protocol developed by
limited to only developing a contractor-wide
develop contractor-wide and program-wide error
the Secretary. Non-random reviews would be
or program-wide error rate or under such
rates. Non-random payment reviews are permitted
prohibited unless there is a likelihood of sustained
additional circumstances provided under
in certain circumstances laid out in instructions to
or high level of payment error (as defined by the
regulation and in accordance with standard
the contractors.
Secretary) and would require the Secretary to
protocol developed by the Secretary.
establish protocols for terminating the non-random
Nonrandom payment reviews would be
reviews.
permitted only under certain circumstances.
Recovery of
No explicit statutory instruction. Under
Section 542. Would add new subsection to 1874A
Section 935. Would add new subsection to
overpayments
administrative authorities, CMS negotiates
that: (h)(1) Would require establishment of at least
1893 that: (f)(1) Similar provision. Would
— extended repayment
extended repayment plans with providers that need
a 1-year repayment plan — but not longer than 3
require that, in cases of hardship, extended
plans
additional time to repay Medicare overpayments.
years — when a provider requests a repayment
repayment plans be given ranging from 6
plan, unless the Secretary believes the provider
months and up to 5 years. In cases of
may declare bankruptcy. If a provider or supplier
extreme hardship, 6-year repayment plans
fails to make a scheduled payment, the Secretary
would be permitted. If the provider or
may immediately offset or recover the outstanding
supplier had previous repayment plans, those

CRS-17
Provisions
Current Law
S. 1
H.R. 1
balance. The Secretary would be required to
could not to be considered in determining
develop standards for the recovery of
hardship.
overpayments.
— limitation on
(h)(2) The Secretary would be prohibited from
(f)(2) Similar provision. Would provide for
recoupment
recoup ing any overpayments until a
redetermination by a Medicare contractor in
reconsideration-level appeal is decided (if one was
the event that qualified independent
requested). Interest would be paid to the provider
contractors have not been established.
if the appeal is successful (beginning from the time
the overpayment is recouped) or that interest shall
be paid to the Secretary if the appeal is
unsuccessful (and if the overpayment is not paid to
the Secretary).
— payment audits
(h)(3) If post-payment audits were conducted, the
(f)(7) Similar provision. Also would require
Medicare contractor would be required to provide
the Medicare contractor to consider the
the provider or supplier with written notice of the
information provided by the provider or
intent to conduct the audit. The contractor would
supplier.
further be required to give the provider or supplier
a full and understandable explanation of the
findings of the audit and permit the development of
an appropriate corrective action plan, inform the
provider or supplier of appeal rights and consent
settlement options, and give the provider or
supplier the opportunity to provide additional
information to the contractor, unless notice or
findings would compromise any law enforcement
activities.
— notice of over-
(h)(4) The Secretary would be required to
(f)(6) Same provision.
utilization of codes
establish a process to provide notice to certain
providers and suppliers in cases where billing
codes are over-utilized by members of that class in
certain areas, in consultation with organizations
that represent the affected provider or supplier
class.

CRS-18
Provisions
Current Law
S. 1
H.R. 1
— standard
(h)(5) The Secretary would be required to
(f)(8) Same provision.
methodology for probe
establish a standard methodology for Medicare
sampling
contractors to use in selecting a sample of claims
for review in cases of abnormal billing patterns.
— consent settlement
(h)(6) Would permit the Secretary to use a consent
(f)(5) Substantially similar provision (minor
reforms
settlement process to settle projected overpayments
differences).
under certain specified conditions.
— extrapolation
No provision.
(f)(3) The use of extrapolation would be
limited unless there was a high level of
payment error or documented educational
intervention had failed to correct the payment
error.
Process for correction
No explicit statutory instruction. Administratively,
Section 543. The Secretary would be required to
Section 937. Same provision relating to
of minor errors and
the Medicare contractors send a claims denial
establish a process so providers and suppliers can
correcting minor errors. Contains additional
omissions
when a claim has been submitted lacking required
correct minor errors in claims that have been
provision that would require the Secretary to
information. Amendments to cost reports are not
submitted for payment.
permit hospitals to correct wage data errors
allowed once a cost report is settled.
that affect geographic reclassification even if
the cost report has been settled. For FY2004
alone, the resubmittal of the application for
geographic reclassification would be
permitted.
Authority to waive
The Secretary has the authority to waive exclusion
Section 544. The Secretary would be permitted to
Section 949. Same provision.
program exclusion
from participation in any federal health program
waive a program exclusion at the request of an
when the provider is the sole source of care in a
administrator of a federal health care program
community, at the request of a state.
(which includes state health care programs).

CRS-19
Subtitle F. Other Improvements
Provisions
Current Law
S. 1
H.R. 1
Inclusion of additional
Although the statute requires that beneficiaries
Section 551. Beneficiary notices for those
Section 925. Similar provision. Would
information in notices
receive a statement listing the items and services
beneficiaries in SNFs and hospital would be
require information for beneficiaries in a SNF
to beneficiaries about
for which payment has been made, there is no
required to include information about the number
stay only.
skilled nursing facility
explicit statutory instruction that requires the notice
of days of coverage remaining under the SNF
(SNF) and hospital
to include information about the number of days of
benefit and the spell of illness involved.
benefits
coverage remaining in either the hospital or SNF
benefit.
Information on
The hospital discharge planning process requires
Section 552. The Secretary would be required to
Section 926. Same provision.
Medicare-certified SNF
evaluation of a patient’s likely need for post-
make information publicly available regarding
in hospital discharge
hospital services including hospice and home care.
whether SNFs were participating in the Medicare
plans
program. Hospital discharge planning would be
required to include evaluating a patient’s need for
SNF care.
Physician evaluation
Initial E&M guidelines were issued in 1995 with
Section 553. The Secretary would be required to
Section 941. Would bar the Secretary from
and management
revisions issued in 1997 and both remain in force
ensure, before making changes in documentation
implementing new E and M documentation
(E&M) documentation
today. Approximately 40% of Medicare payments
guidelines for, or clinical examples of, or codes to
guidelines unless the Secretary followed the
guidelines
for physician services are for services which are
report E and M physician services, that the
criteria laid out in the provision.
classified as evaluation and management services
process used in developing the guidelines,
(i.e., physician visits). The Secretary announced
examples, or codes was widely consultative
that HHS was stopping work on the current re-
among physicians, reflects a broad consensus
draft of E and M codes in order to reassess the
among specialties, and would allow verification
entire effort.
of reported and furnished services.
Improvement in
(a) No explicit statutory provision on the Council.
Section 554. Would require the Secretary to
Section 942. Same provision on the Council.
oversight of technology
Under administrative authorities, CMS announced
establish a Council for Technology and
Also would require the Secretary to establish
and coverage
in March 2003 the establishment of a technology
Innovation composed of senior CMS staff and
procedures for determining the basis for and
council charged with improving Medicare
clinicians to coordinate coverage, coding, and
amount of payment for a new clinical
coverage, coding and payment for emerging
payment processes under Title XVIII and the
diagnostic laboratory test that has been
technologies. Council membership includes senior
exchange of information on new technologies
assigned a new (or substantially revised)
CMS staff. The Health Care Procedure Coding
between CMS and other entities that make similar
Health Care Procedure Coding System
System (HCPCS) is the procedure coding system
decisions.
(HCPCS) code after January 1, 2005. Would
used for Part B items and services. No statutory
require a GAO study analyzing which external
provision regarding the GAO study. The Secretary
data could be collected in a shorter time frame
is required to rely on recommendations of the
than that currently used in computing inpatient
National Committee on Vital and Health Statistics
hospital payments. Would permit the Secretary
(NCVHS) in adopting standards under HIPAA.
to adopt the International Classification of

CRS-20
Provisions
Current Law
S. 1
H.R. 1
The current standard for diagnosis codes is the
Diseases, 10th Revision, Procedure Coding
International Classification of Diseases, 9th
System (ICD-10-PCS) and the ICD-10-
Revision, Clinical Modification (ICD-9-CM). ICD-
Clinical Modification (CM) without receiving
9-CM is the basis of the Medicare inpatient
a recommendation from the National
hospital PPS payment system.) The NCVHS has
Committee on Vital and Health Statistics
not made a recommendation to the Secretary about
(NCVHS).
ICD-10-PCS (the 10th revision, procedure coding
system) or ICD-10-CM.
Dental claims
The statute does not authorize dental benefits in
Section 555. Starting 60 days after enactment, a
Section 950. Same provision.
Medicare. Apparently, some insurers may require
group health plan providing supplemental or
a claim denial from Medicare before accepting the
secondary coverage to Medicare beneficiaries
claim for payment review, even if the service is not
would not be able to require dentists to obtain a
covered by Medicare.
claim denial from Medicare for noncovered dental
services prior to paying the claim.
Medicare secondary
In certain instances when a beneficiary has other
No provision.
Section 943. The Secretary would not be able
payor
insurance coverage, Medicare becomes the
to require that a hospital obtain information on
secondary insurance. An entity furnishing a Part B
other insurance coverage for reference
service is required to obtain information from the
laboratory services, if the Secretary does not
beneficiary on whether other insurance coverage is
impose such requirements in the case of
available.
services furnished b y independent
laboratories.
Emergency Medical
Medicare participating hospitals that operate an
No provision.
Section 944. For EMTALA-required services
Treatment and Active
emergency room are required to provide necessary
provided to a Medicare beneficiary,
Labor Act (EMTALA)
screening and stabilization services to any patient
determinations about medical necessity would
improvements
who comes to an emergency department requesting
be required to be made on the basis of the
examination or treatment for a medical condition,
information available to the treating physician
in order to determine whether an emergency
or practitioner at the time the item or service
medical situation exists. Hospitals found in
was ordered or furnished and not on the
violation of EMTALA may face civil money
patient’s principal diagnosis. The Secretary
penalties and termination of their provider
would be required to establish a procedure to
agreement.
notify hospitals and physicians when an
EMTALA investigation is closed.

CRS-21
Provisions
Current Law
S. 1
H.R. 1
Except in the case where a delay would
jeopardize the health and safety of individuals,
the Secretary would be required to request a
PRO review before making a compliance
determination that would terminate a
hospital’s Medicare participation because of
EMTALA violation. The period of 5 business
days would apply to such a PRO review. The
Secretary would be required to provide a copy
of the report to the hospital or physician,
consistent with existing confidentiality
requirements. This provision would apply to
terminations initiated on or after enactment.
The requirement for a hospital to conduct an
appropriate medical screening examination for
a patient presenting in the emergency
department would not include cases where an
individual comes to an emergency department
and the individual (or another person on the
individual’s behalf) does not specifically
request an examination or treatment for an
emergency medical condition.
EMTALA technical
No explicit statutory instruction.
No provision.
Section 945. The Secretary would be required
advisory group
to establish a technical advisory group
comprised of the CMS Administrator, the
Inspector General of HHS, hospital, physician
and patient representatives, CMS staff
investigating EMTALA cases and a state
survey office representative to review issues
related to EMTALA.

CRS-22
Provisions
Current Law
S. 1
H.R. 1
Core hospice services
A hospice must ensure that substantially all its core
Section 406. A hospice would be permitted to
Section 946. Same provision.
services are routinely provided directly by hospice
enter into arrangements with another hospice
employees (including volunteers) or, during peak
program to provide core service in extraordinary
patient loads or under extraordinary circumstances,
circumstances, such as unanticipated high patient
by contract staff. Certain hospices in non-
loads, staffing shortages due to illness or
urbanized areas can receive waivers to this
temporary travel by a patient outside the hospice’s
requirement.
service area; and bill and be paid for the hospice
care provided under these arrangements.
OSHA bloodborne
Section 1866 establishes certain conditions of
No provision.
Section 947. As of July 1, 2004, public
pathogens standards
participation that hospitals must meet in order to
hospitals that are not otherwise subject to the
participate in Medicare.
Occupational Safety and Health Act of 1970
would be required to comply with the
Bloodborne Pathogens standard under Section
1910.1030 of Title 29 of the Code of Federal
Regulations. A hospital that fails to comply
with the requirement would be subject to a
civil monetary penalty, but would not be
terminated from participating in Medicare.
BIPA-related technical
BIPA Section 522 contained several technical
No provision.
Section 948. Technical corrections would be
amendments and
errors.
made to BIPA Section 522.
corrections
Revisions to
Under certain circumstances, a person or entity
Section 434. Entities, as defined by the
Section 952. Same provision.
Reassignment
other than the individual providing the service may
Secretary, could receive Medicare payments for
Provisions
receive Medicare payments.
services provided by a physician or other person
if the service was provided under a contractual
arrangement and if the arrangement includes joint
and “several liability” (liability for several parties)
for overpayment and the entities’ meet program
integrity specifications determined by the
Secretary.