SubtitleG — Health Hippo

SubtitleG

Note: this is a hand enrollment pursuant to Public Law 105-32.
H.R.2015
One Hundred Fifth Congress
of the
United States of America
AT THE FIRST SESSION

Begun and held at the City of Washington on Tuesday, the
seventh day of January, one thousand nine hundred and ninety-seven

An Act

Subtitle G–Provisions Relating to
Parts A and B

CHAPTER 1–HOME HEALTH SERVICES AND
BENEFITS

Subchapter A–Payments For Home Health Services

SEC. 4601. RECAPTURING SAVINGS RESULTING FROM TEMPORARY FREEZE ON
PAYMENT INCREASES FOR HOME HEALTH SERVICES.

(a) Basing Updates to Per Visit Cost Limits on Limits for Fiscal
Year 1993.–Section 1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is
amended by adding at the end the following: (iv) In establishing
limits under this subparagraph for cost reporting periods beginning
after September 30, 1997, the Secretary shall not take into account
any changes in the home health market basket, as determined by the
Secretary, with respect to cost reporting periods which began on or
after July 1, 1994, and before July 1, 1996.”.

(b) No Exceptions Permitted Based on Amendment.–The Secretary of
Health and Human Services shall not consider the amendment made by
subsection (a) in making any exemptions and exceptions pursuant to
section 1861(v)(1)(L)(ii) of the Social Security Act (42 U.S.C.
1395x(v)(1)(L)(ii)).

SEC. 4602. INTERIM PAYMENTS FOR HOME HEALTH SERVICES.

(a) Reductions in Cost Limits.–Section 1861(v)(1)(L)(i) (42
U.S.C.

1395x(v)(1)(L)(i)) is amended– (1) by moving the indentation of
subclauses (I) through (III) 2-ems to the left; (2) in subclause (I),
by inserting “of the mean of the labor- related and nonlabor per
visit costs for freestanding home health agencies” before the comma
at the end; (3) in subclause (II), by striking “, or and inserting
“of such mean,”; (4) in subclause (III)– (A) by inserting “and
before October 1, 1997,” after “July 1, 1987,”, and (B) by striking
the comma at the end and inserting “of such mean, or”; and (5) by
striking the matter following subclause (III) and inserting the
following: (IV) October 1, 1997, 105 percent of the median of the
labor- related and nonlabor per visit costs for freestanding home
health agencies.

(b) Delay in Updates.–Section 1861(v)(1)(L)(iii) (42 U.S.C.
1395x(v)(1)(L)(iii)) is amended by inserting, “or on or after July 1,
1997, and before October 1, 1997” after “July 1, 1996”.

(c) Additions to Cost Limits.–Section 1861(v)(1)(L) (42 U.S.C.
1395x(v)(1)(L)) (as amended by section 4601(a)) is amended by adding
at the end the following new clauses: (v) For services furnished by
home health agencies for cost reporting periods beginning on or after
October 1, 1997, the Secretary shall provide for an interim system of
limits. Payment shall not exceed the costs determined under the
preceding provisions of this subparagraph or, if lower, the product
of– (I) an agency-specific per beneficiary annual limitation
calculated based 75 percent on 98 percent of the reasonable costs
(including nonroutine medical supplies) for the agency’s 12-month
cost reporting period ending during fiscal year 1994, and based 25
percent on 98 percent of the standardized regional average of such
costs for the agency’s census division, as applied to such agency,
for cost reporting periods ending during fiscal year 1994, such costs
updated by the home health market basket index; and (II) the agency’s
unduplicated census count of patients (entitled to benefits under
this title) for the cost reporting period subject to the limitation.

(vi) For services furnished by home health agencies for cost
reporting periods beginning on or after October 1, 1997, the
following rules apply: (I) For new providers and those providers
without a 12-month cost reporting period ending in fiscal year 1994,
the per beneficiary limitation shall be equal to the median of these
limits (or the Secretary’s best estimates thereof) applied to other
home health agencies as determined by the Secretary. A home health
agency that has altered its corporate structure or name shall not be
considered a new provider for this purpose.

(II) For beneficiaries who use services furnished by more than one
home health agency, the per beneficiary limitations shall be prorated
among the agencies.

(vii)(I) Not later than January 1, 1998, the Secretary shall
establish per visit limits applicable for fiscal year 1998, and not
later than April 1, 1998, the Secretary shall establish per
beneficiary limits under clause (v)(I) for fiscal year 1998.

(II) Not later than August 1 of each year (beginning in 1998) the
Secretary shall establish the limits applicable under this
subparagraph for services furnished during the fiscal year beginning
October 1 of the year.”.

(d) Development of Case Mix System.–The Secretary of Health and
Human Services shall expand research on a prospective payment system
for home health agencies under the medicare program that ties
prospective payments to a unit of service, including an intensive
effort to develop a reliable case mix adjuster that explains a
significant amount of the variances in costs.

(e) Submission of Data for Case Mix System.–Effective for cost
reporting periods beginning on or after October 1, 1997, the
Secretary of Health and Human Services may require all home health
agencies to submit additional information that the Secretary
considers necessary for the development of a reliable case mix
system.

SEC. 4603. PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.

(a) In General.–Title XVIII (42 U.S.C. 1395 et seq.) (as amended
by section 4801) is amended by adding at the end the following:

~
prospective payment for home health services ~

Sec. 1895. (a) In General.–Notwithstanding section 1861(v), the
Secretary shall provide, for cost reporting periods beginning on or
after October 1, 1999, for payments for home health services in
accordance with a prospective payment system established by the
Secretary under this section.

(b) System of Prospective Payment for Home Health Services.– (1)
In general.–The Secretary shall establish under this subsection a
prospective payment system for payment for all costs of home health
services. Under the system under this subsection all services covered
and paid on a reasonable cost basis under the medicare home health
benefit as of the date of the enactment of the this section,
including medical supplies, shall be paid for on the basis of a
prospective payment amount determined under this subsection and
applicable to the services involved. In implementing the system, the
Secretary may provide for a transition (of not longer than 4 years)
during which a portion of such payment is based on agency-specific
costs, but only if such transition does not result in aggregate
payments under this title that exceed the aggregate payments that
would be made if such a transition did not occur.

(2) Unit of payment.–In defining a prospective payment amount
under the system under this subsection, the Secretary shall consider
an appropriate unit of service and the number, type, and duration of
visits provided within that unit, potential changes in the mix of
services provided within that unit and their cost, and a general
system design that provides for continued access to quality services.

(3) Payment basis.– (A) Initial basis.– (i) In general.–Under
such system the Secretary shall provide for computation of a standard
prospective payment amount (or amounts). Such amount (or amounts)
shall initially be based on the most current audited cost report data
available to the Secretary and shall be computed in a manner so that
the total amounts payable under the system for fiscal year 2000 shall
be equal to the total amount that would have been made if the system
had not been in effect but if the reduction in limits described in
clause (ii) had been in effect. Such amount shall be standardized in
a manner that eliminates the effect of variations in relative case
mix and wage levels among different home health agencies in a budget
neutral manner consistent with the case mix and wage level
adjustments provided under paragraph (4)(A). Under the system, the
Secretary may recognize regional differences or differences based
upon whether or not the services or agency are in an urbanized area.

(ii) Reduction.–The reduction described in this clause is a
reduction by 15 percent in the cost limits and per beneficiary limits
described in section 1861(v)(1)(L), as those limits are in effect on
September 30, 1999.

(B) Annual update.– (i) In general.–The standard prospective
payment amount (or amounts) shall be adjusted for each fiscal year
(beginning with fiscal year 2001) in a prospective manner specified
by the Secretary by the home health market basket percentage increase
applicable to the fiscal year involved.

(ii) Home health market basket percentage increase.– For purposes
of this subsection, the term ‘home health market basket percentage
increase’ means, with respect to a fiscal year, a percentage
(estimated by the Secretary before the beginning of the fiscal year)
determined and applied with respect to the mix of goods and services
included in home health services in the same manner as the market
basket percentage increase under section 1886(b)(3)(B)(iii) is
determined and applied to the mix of goods and services comprising
inpatient hospital services for the fiscal year.

(C) Adjustment for outliers.–The Secretary shall reduce the
standard prospective payment amount (or amounts) under this paragraph
applicable to home health services furnished during a period by such
proportion as will result in an aggregate reduction in payments for
the period equal to the aggregate increase in payments resulting from
the application of paragraph (5) (relating to outliers).

(4) Payment computation.– (A) In general.–The payment amount for
a unit of home health services shall be the applicable standard
prospective payment amount adjusted as follows: (i) Case mix
adjustment.–The amount shall be adjusted by an appropriate case mix
adjustment factor (established under subparagraph (B)).

(ii) Area wage adjustment.–The portion of such amount that the
Secretary estimates to be attributable to wages and wage-related
costs shall be adjusted for geographic differences in such costs by
an area wage adjustment factor (established under subparagraph (C))
for the area in which the services are furnished or such other area
as the Secretary may specify.

(B) Establishment of case mix adjustment factors.–The Secretary
shall establish appropriate case mix adjustment factors for home
health services in a manner that explains a significant amount of the
variation in cost among different units of services.

(C) Establishment of area wage adjustment factors.–The Secretary
shall establish area wage adjustment factors that reflect the
relative level of wages and wage-related costs applicable to the
furnishing of home health services in a geographic area compared to
the national average applicable level. Such factors may be the
factors used by the Secretary for purposes of section 1886(d)(3)(E).

(5) Outliers.–The Secretary may provide for an addition or
adjustment to the payment amount otherwise made in the case of
outliers because of unusual variations in the type or amount of
medically necessary care. The total amount of the additional payments
or payment adjustments made under this paragraph with respect to a
fiscal year may not exceed 5 percent of the total payments projected
or estimated to be made based on the prospective payment system under
this subsection in that year.

(6) Proration of prospective payment amounts.–If a beneficiary
elects to transfer to, or receive services from, another home health
agency within the period covered by the prospective payment amount,
the payment shall be prorated between the home health agencies
involved.

(c) Requirements for Payment Information.–With respect to home
health services furnished on or after October 1, 1998, no claim for
such a service may be paid under this title unless– (1) the claim
has the unique identifier (provided under section 1842(r)) for the
physician who prescribed the services or made the certification
described in section 1814(a)(2) or 1835(a)(2)(A); and (2) in the case
of a service visit described in paragraph (1), (2), (3), or (4) of
section 1861(m), the claim contains a code (or codes) specified by
the Secretary that identifies the length of time of the service
visit, as measured in 15 minute increments.

(d) Limitation on Review.–There shall be no administrative or
judicial review under section 1869, 1878, or otherwise of– (1) the
establishment of a transition period under subsection (b)(1); (2) the
definition and application of payment units under subsection (b)(2);
(3) the computation of initial standard prospective payment amounts
under subsection (b)(3)(A) (including the reduction described in
clause (ii) of such subsection); (4) the establishment of the
adjustment for outliers under subsection (b)(3)(C); (5) the
establishment of case mix and area wage adjustments under subsection
(b)(4); and (6) the establishment of any adjustments for outliers
under subsection (b)(5).”.

(b) Elimination of Periodic Interim Payments for Home Health
Agencies.–Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is amended–
(1) by inserting “and” at the end of subparagraph (C), (2) by
striking subparagraph (D), and (3) by redesignating subparagraph (E)
as subparagraph (D).

(c) Conforming Amendments.– (1) Payments under part a.–Section
1814(b) (42 U.S.C. 1395f(b)) is amended in the matter preceding
paragraph (1) by striking “and 1886” and inserting “1886, and 1895”.

(2) Treatment of items and services paid under part b.– (A)
Payments under part b.–Section 1833(a)(2) (42 U.S.C. 1395l(a)(2)) is
amended– (i) by amending subparagraph (A) to read as follows: (A)
with respect to home health services (other than a covered
osteoporosis drug) (as defined in section 1861(kk)), the amount
determined under the prospective payment system under section 1895;”;
(ii) by striking “and” at the end of subparagraph (E); (iii) by
adding “and” at the end of subparagraph (F); and (iv) by adding at
the end the following new subparagraph: (G) with respect to items and
services described in section 1861(s)(10)(A), the lesser of– (i) the
reasonable cost of such services, as determined under section
1861(v), or (ii) the customary charges with respect to such services,
or, if such services are furnished by a public provider of services,
or by another provider which demonstrates to the satisfaction of the
Secretary that a significant portion of its patients are low-income
(and requests that payment be made under this provision), free of
charge or at nominal charges to the public, the amount determined in
accordance with section 1814(b)(2);

(B) Requiring payment for all items and services to be made to
agency.– (i) In general.–The first sentence of section 1842(b)(6)
(42 U.S.C. 1395u(b)(6)) (as amended by section 4432(b)(2)) is
amended–

(I) by striking “and (E)” and inserting “(E)”; and (II) by
striking the period at the end and inserting the following: , and (F)
in the case of home health services furnished to an individual who
(at the time the item or service is furnished) is under a plan of
care of a home health agency, payment shall be made to the agency
(without regard to whether or not the item or service was furnished
by the agency, by others under arrangement with them made by the
agency, or when any other contracting or consulting arrangement, or
otherwise).

(ii) Conforming amendment.–Section 1832(a)(1) (42 U.S.C.
1395k(a)(1)) (as amended by section 4432(b)(5)(B)) is amended by
striking section 1842(b)(6)(E); and inserting subparagraphs (E) and
(F) of section 1842(b)(6);”.

(C) Exclusions from coverage.–Section 1862(a) (42 U.S.C.
1395y(a)) (as amended by sections 4319(b), 4432(b), 4507(a)(2)(B) and
4541(b)) is amended– (i) by striking “or” at the end of paragraph
(19); (ii) by striking the period at the end of paragraph (20) and
inserting “; or”; and (iii) by inserting after paragraph (20) the
following: (21) where such expenses are for home health services
furnished to an individual who is under a plan of care of the home
health agency if the claim for payment for such services is not
submitted by the agency.

(d) Effective Date.–Except as otherwise provided, the amendments
made by this section shall apply to cost reporting periods beginning
on or after October 1, 1999.

(e) Contingency.–If the Secretary of Health and Human Services
for any reason does not establish and implement the prospective
payment system for home health services described in section 1895(b)
of the Social Security Act (as added by subsection (a)) for cost
reporting periods described in subsection (d), for such cost
reporting periods the Secretary shall provide for a reduction by 15
percent in the cost limits and per beneficiary limits described in
section 1861(v)(1)(L) of such Act, as those limits would otherwise be
in effect on September 30, 1999.

SEC. 4604. PAYMENT BASED ON LOCATION WHERE HOME HEALTH SERVICE IS
FURNISHED.

(a) Conditions of Participation.–Section 1891 (42 U.S.C. 1395bbb)
is amended by adding at the end the following: (g) Payment on Basis
of Location of Service.–A home health agency shall submit claims for
payment for home health services under this title only on the basis
of the geographic location at which the service is furnished, as
determined by the Secretary.

(b) Wage Adjustment.–Section 1861(v)(1)(L)(iii) (42 U.S.C.
1395x(v)(1)(L)(iii)) is amended by striking “agency is located” and
inserting “service is furnished”.

(c) Effective Date.–The amendments made by this section apply to
cost reporting periods beginning on or after October 1, 1997.

Subchapter B–Home Health Benefits

SEC. 4611. MODIFICATION OF PART A HOME HEALTH BENEFIT FOR
INDIVIDUALS ENROLLED UNDER PART B.

(a) In General.–Section 1812 (42 U.S.C. 1395d) is amended– (1)
in subsection (a)(3), by striking “home health services” and
inserting “for individuals not enrolled in part B, home health
services, and for individuals so enrolled, post-institutional home
health services furnished during a home health spell of illness for
up to 100 visits during such spell of illness”; and (2) in subsection
(b), by adding after and below paragraph (3) the following: Payment
under this part for post-institutional home health services furnished
an individual during a home health spell of illness may not be made
for such services beginning after such services have been furnished
for a total of 100 visits such spell.

(b) Post-Institutional Home Health Services Defined.–Section 1861
(42 U.S.C. 1395x), as amended by sections 4103(a), 4104(a), 4105(a),
4106(a), and 4454, is amended by adding at the end the following:

~
Post-Institutional Home Health Services; Home Health Spell of
Illness ~

(tt)(1) The term ‘post-institutional home health services’ means
home health services furnished to an individual– (A) after discharge
from a hospital or rural primary care hospital in which the
individual was an inpatient for not less than 3 consecutive days
before such discharge if such home health services were initiated
within 14 days after the date of such discharge; or (B) after
discharge from a skilled nursing facility in which the individual was
provided post-hospital extended care services if such home health
services were initiated within 14 days after the date of such
discharge.

(2) The term ‘home health spell of illness’ with respect to any
individual means a period of consecutive days– (A) beginning with
the first day (not included in a previous home health spell of
illness) (i) on which such individual is furnished post-institutional
home health services, and (ii) which occurs in a month for which the
individual is entitled to benefits under part A, and (B) ending with
the close of the first period of 60 consecutive days thereafter on
each of which the individual is neither an inpatient of a hospital or
rural primary care hospital nor an inpatient of a facility described
in section 1819(a)(1) or subsection (y)(1) nor provided home health
services.”.

(c) Maintaining Appeal Rights for Home Health Services.–Section
1869(b)(2)(B) (42 U.S.C. 1395ff(b)(2)(B)) is amended by inserting
“(or $100 in the case of home health services)” after “$500”.

(d) Maintaining Seamless Administration Through Fiscal
Intermediaries.–Section 1842(b)(2) (42 U.S.C. 1395u(b)(2)) is
amended by adding at the end the following: (E) With respect to the
payment of claims for home health services under this part that, but
for the amendments made by section 4611 of the Balanced Budget Act of
1997, would be payable under part A instead of under this part, the
Secretary shall continue administration of such claims through fiscal
intermediaries under section 1816.”.

(e) Transition.– (1) In general.–Notwithstanding any provision
of title XVIII of the Social Security Act, the Secretary of Health
and Human Services shall establish a transition for the aggregate
amount of expenditures that are transferred from part A, to part B,
of title XVIII of the Social Security Act, as a result of the
amendments made by this section, during each of the years during the
period beginning with 1998 and ending with 2002 according to this
subsection. Under the transition for each such year, the Secretary
shall effect such transfer, between the trust funds under such parts,
as will result in only the proportion (specified in paragraph (2)) of
such aggregate expenditures for the year being transferred from such
part A to such part B.

(2) Proportion specified.–The proportion specified in this
paragraph for– (A) 1998 is \1/6\, (B) 1999 is \1/3\, (C) 2000 is
\1/2\, (D) 2001 is \2/3\, and (E) 2002 is \5/6\.

(3) Application in establishing monthly premiums for 1998 through
2003.– (A) In general.–For purposes only of computing the monthly
premium under section 1839 of the Social Security Act (42 U.S.C.
1395r), the monthly actuarial rate for enrollees age 65 and over
shall be computed as though any reference in paragraph (1) of this
subsection to 2002 were a reference to 2003 and as if the following
proportions were substituted for the proportions specified in
paragraph (2): (i) For 1998, \1/7\.

(ii) For 1999, \2/7\.

(iii) For 2000, \3/7\.

(iv) For 2001, \4/7\.

(v) For 2002, \5/7\.

(vi) For 2003, \6/7\.

(B) No impact on government contribution.–Subparagraph (A) does
not apply in determining the amount of the Government contribution
under section 1844 of the Social Security Act (42 U.S.C. 1395w).

(f) Effective Date.–The amendments made by this section apply to
services furnished on or after January 1, 1998. For purpose of
applying such amendments, any home health spell of illness that
began, but not did not end, before such date shall be considered to
have begun as of such date.

SEC. 4612. CLARIFICATION OF PART-TIME OR INTERMITTENT NURSING CARE.

(a) In General.–Section 1861(m) (42 U.S.C. 1395x(m)) is amended
by adding at the end the following: For purposes of paragraphs (1)
and (4), the term ‘part-time or intermittent services’ means skilled
nursing and home health aide services furnished any number of days
per week as long as they are furnished (combined) less than 8 hours
each day and 28 or fewer hours each week (or, subject to review on a
case- by-case basis as to the need for care, less than 8 hours each
day and 35 or fewer hours per week). For purposes of sections
1814(a)(2)(C) and 1835(a)(2)(A), ‘intermittent’ means skilled nursing
care that is either provided or needed on fewer than 7 days each
week, or less than 8 hours of each day for periods of 21 days or less
(with extensions in exceptional circumstances when the need for
additional care is finite and predictable).”.

(b) Effective Date.–The amendment made by subsection (a) applies
to services furnished on or after October 1, 1997.

SEC. 4613. STUDY ON DEFINITION OF HOMEBOUND.

(a) Study.–The Secretary of Health and Human Services shall
conduct a study of the criteria that should be applied, and the
method of applying such criteria, in the determination of whether an
individual is homebound for purposes of qualifying for receipt of
benefits for home health services under the medicare program. Such
criteria shall include the extent and circumstances under which a
person may be absent from the home but nonetheless qualify.

(b) Report.–Not later than October 1, 1998, the Secretary shall
submit a report to Congress on the study conducted under subsection
(a). The report shall include specific recommendations on such
criteria and methods.

SEC. 4614. NORMATIVE STANDARDS FOR HOME HEALTH CLAIMS DENIALS.

(a) In General.–Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)) (as
amended by section 4104(c)) is amended– (1) by striking “and” at the
end of subparagraph (G), (2) by striking the semicolon at the end of
subparagraph (H) and inserting “, and”, and (3) by inserting after
subparagraph (H) the following new subparagraph: (I) the frequency
and duration of home health services which are in excess of normative
guidelines that the Secretary shall establish by regulation;”.

(b) Notification.–The Secretary of Health and Human Services may
establish a process for notifying a physician in cases in which the
number of home health visits, furnished under title XVIII of the
Social Security Act pursuant to a prescription or certification of
the physician, significantly exceeds such threshold (or thresholds)
as the Secretary specifies. The Secretary may adjust such threshold
to reflect demonstrated differences in the need for home health
services among different beneficiaries.

SEC. 4615. NO HOME HEALTH BENEFITS BASED SOLELY ON DRAWING BLOOD.

(a) In General.–Sections 1814(a)(2)(C) and 1835(a)(2)(A) (42
U.S.C. 1395f(a)(2)(C), 1395n(a)(2)(A)) are each amended by inserting
“(other than solely venipuncture for the purpose of obtaining a blood
sample)” after “skilled nursing care”.

(b) Effective Date.–The amendments made by subsection (a) apply
to home health services furnished after the 6-month period beginning
after the date of enactment of this Act.

SEC. 4616. REPORTS TO CONGRESS REGARDING HOME HEALTH COST
CONTAINMENT.

(a) Estimate.–Not later than October 1, 1997, the Secretary of
Health and Human Services shall submit to the Committees on Commerce
and Ways and Means of the House of Representatives and the Committee
on Finance of the Senate a report that includes an estimate of the
outlays that will be made under parts A and B of title XVIII of the
Social Security Act for the provision of home health services during
each of fiscal years 1998 through 2002.

(b) Annual Report.–Not later than the end of each of years 1999
through 2002, the Secretary shall submit to such Committees a report
that compares the actual outlays under such parts for such services
during the fiscal year ending in the year, to the outlays estimated
under subsection (a) for such fiscal year. If the Secretary finds
that such actual outlays were greater than such estimated outlays for
the fiscal year, the Secretary shall include in the report
recommendations regarding beneficiary copayments for home health
services provided under the medicare program or such other methods as
will reduce the growth in outlays for home health services under the
medicare program.

CHAPTER 2–GRADUATE MEDICAL EDUCATION

Subchapter A–Indirect Medical Education

SEC. 4621. INDIRECT GRADUATE MEDICAL EDUCATION PAYMENTS.

(a) Multiyear Transition Regarding Percentages.– (1) In
general.–Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii))
is amended to read as follows: (ii) For purposes of clause (i)(II),
the indirect teaching adjustment factor is equal to c <greek-e>
(((1+r) to the nth power) – 1), where ‘r’ is the ratio of the
hospital’s full-time equivalent interns and residents to beds and ‘n’
equals .405. For discharges occurring– (I) on or after October 1,
1988, and before October 1, 1997, ‘c’ is equal to 1.89; (II) during
fiscal year 1998, ‘c’ is equal to 1.72; (III) during fiscal year
1999, ‘c’ is equal to 1.6; (IV) during fiscal year 2000, ‘c’ is equal
to 1.47; and (V) on or after October 1, 2000, ‘c’ is equal to 1.35.

(2) Conforming amendment relating to determination of standardized
amount.–Section 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is
amended by adding at the end the following: except that the Secretary
shall not take into account any reduction in the amount of additional
payments under paragraph (5)(B)(ii) resulting from the amendment made
by section 4621(a)(1) of the Balanced Budget Act of 1997.

(b) Limitation on Number of Residents for Certain Fiscal Years.–
(1) In general.–Section 1886(d)(5)(B) (42 U.S.C. 1395ww(d)(5)(B)) is
amended by adding after clause (iv) the following: (v) In determining
the adjustment with respect to a hospital for discharges occurring on
or after October 1, 1997, the total number of full-time equivalent
interns and residents in the fields of allopathic and osteopathic
medicine in either a hospital or nonhospital setting may not exceed
the number of such full-time equivalent interns and residents in the
hospital with respect to the hospital’s most recent cost reporting
period ending on or before December 31, 1996.

(vi) For purposes of clause (ii)– (I) ‘r’ may not exceed the
ratio of the number of interns and residents, subject to the limit
under clause (v), with respect to the hospital for its most recent
cost reporting period to the hospital’s available beds (as defined by
the Secretary) during that cost reporting period, and (II) for the
hospital’s cost reporting periods beginning on or after October 1,
1997, subject to the limits described in clauses (iv) and (v), the
total number of full-time equivalent residents for payment purposes
shall equal the average of the actual full-time equivalent resident
count for the cost reporting period and the preceding two cost
reporting periods.

In the case of the first cost reporting period beginning on or
after October 1, 1997, subclause (II) shall be applied by using the
average for such period and the preceding cost reporting period.

(vii) If any cost reporting period beginning on or after October
1, 1997, is not equal to twelve months, the Secretary shall make
appropriate modifications to ensure that the average full-time
equivalent residency count pursuant to subclause (II) of clause (vi)
is based on the equivalent of full twelve-month cost reporting
periods.

(viii) Rules similar to the rules of subsection (h)(4)(H) shall
apply for purposes of clauses (v) and (vi).

(2) Payment for interns and residents providing off-site
services.–Section 1886(d)(5)(B)(iv) (42 U.S.C. 1395ww(d)(5)(B)(iv))
is amended to read as follows: (iv) Effective for discharges
occurring on or after October 1, 1997, all the time spent by an
intern or resident in patient care activities under an approved
medical residency training program at an entity in a nonhospital
setting shall be counted towards the determination of full-time
equivalency if the hospital incurs all, or substantially all, of the
costs for the training program in that setting.

SEC. 4622. PAYMENT TO HOSPITALS OF INDIRECT MEDICAL EDUCATION COSTS
FOR MEDICARE+CHOICE ENROLLEES.

Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by adding at the
end the following: (11) Additional payments for managed care
enrollees.– (A) In general.–For portions of cost reporting periods
occurring on or after January 1, 1998, the Secretary shall provide
for an additional payment amount for each applicable discharge of any
subsection (d) hospital that has an approved medical residency
training program.

(B) Applicable discharge.–For purposes of this paragraph, the
term ‘applicable discharge’ means the discharge of any individual who
is enrolled under a risk-sharing contract with an eligible
organization under section 1876 and who is entitled to benefits under
part A or any individual who is enrolled with a Medicare+Choice
organization under part C.

(C) Determination of amount.–The amount of the payment under this
paragraph with respect to any applicable discharge shall be equal to
the applicable percentage (as defined in subsection (h)(3)(D)(ii)) of
the estimated average per discharge amount that would otherwise have
been paid under paragraph (5)(B) if the individuals had not been
enrolled as described in subparagraph (B).

(D) Special rule for hospitals under reimbursement system.–The
Secretary shall establish rules for the application of this paragraph
to a hospital reimbursed under a reimbursement system authorized
under section 1814(b)(3) in the same manner as it would apply to the
hospital if it were not reimbursed under such section.”.

Subchapter B–Direct Graduate Medical Education

SEC. 4623. LIMITATION ON NUMBER OF RESIDENTS AND ROLLING AVERAGE
FTE COUNT.

Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by adding
after subparagraph (E) the following: (F) Limitation on number of
residents in allopathic and osteopathic medicine.–Such rules shall
provide that for purposes of a cost reporting period beginning on or
after October 1, 1997, the total number of full-time equivalent
residents before application of weighting factors (as determined
under this paragraph) with respect to a hospital’s approved medical
residency training program in the fields of allopathic medicine and
osteopathic medicine may not exceed the number of such full-time
equivalent residents for the hospital’s most recent cost reporting
period ending on or before December 31, 1996.

(G) Counting interns and residents for fy 1998 and subsequent
years.– (i) In general.–For cost reporting periods beginning during
fiscal years beginning on or after October 1, 1997, subject to the
limit described in subparagraph (F), the total number of full-time
equivalent residents for determining a hospital’s graduate medical
education payment shall equal the average of the actual full-time
equivalent resident counts for the cost reporting period and the
preceding two cost reporting periods.

(ii) Adjustment for short periods.–If any cost reporting period
beginning on or after October 1, 1997, is not equal to twelve months,
the Secretary shall make appropriate modifications to ensure that the
average full- time equivalent resident counts pursuant to clause (i)
are based on the equivalent of full twelve-month cost reporting
periods.

(iii) Transition rule for 1998.–In the case of a hospital’s first
cost reporting period beginning on or after October 1, 1997, clause
(i) shall be applied by using the average for such period and the
preceding cost reporting period.

(H) Special rules for application of subparagraphs (f) and (g).–
(i) New facilities.–The Secretary shall, consistent with the
principles of subparagraphs (F) and (G), prescribe rules for the
application of such subparagraphs in the case of medical residency
training programs established on or after January 1, 1995. In
promulgating such rules for purposes of subparagraph (F), the
Secretary shall give special consideration to facilities that meet
the needs of underserved rural areas.

(ii) Aggregation.–The Secretary may prescribe rules which allow
institutions which are members of the same affiliated group (as
defined by the Secretary) to elect to apply the limitation of
subparagraph (F) on an aggregate basis.

(iii) Data collection.–The Secretary may require any entity that
operates a medical residency training program and to which
subparagraphs (F) and (G) apply to submit to the Secretary such
additional information as the Secretary considers necessary to carry
out such subparagraphs.”.

SEC. 4624. PAYMENTS TO HOSPITALS FOR DIRECT COSTS OF GRADUATE MEDICAL
EDUCATION OF MEDICARE+CHOICE ENROLLEES.

Section 1886(h)(3) (42 U.S.C. 1395ww(h)(3)) is amended by adding
after subparagraph (C) the following: (D) Payment for managed care
enrollees.– (i) In general.–For portions of cost reporting periods
occurring on or after January 1, 1998, the Secretary shall provide
for an additional payment amount under this subsection for services
furnished to individuals who are enrolled under a risk-sharing
contract with an eligible organization under section 1876 and who are
entitled to part A or with a Medicare+Choice organization under part
C. The amount of such a payment shall equal the applicable percentage
of the product of–

(I) the aggregate approved amount (as defined in subparagraph (B))
for that period; and (II) the fraction of the total number of
inpatient-bed days (as established by the Secretary) during the
period which are attributable to such enrolled individuals.

(ii) Applicable percentage.–For purposes of clause (i), the
applicable percentage is–

(I) 20 percent in 1998, (II) 40 percent in 1999, (III) 60 percent
in 2000, and (IV) 80 percent in 2001, and (V) 100 percent in 2002 and
subsequent years.

(iii) Special rule for hospitals under reimbursement system.–The
Secretary shall establish rules for the application of this
subparagraph to a hospital reimbursed under a reimbursement system
authorized under section 1814(b)(3) in the same manner as it would
apply to the hospital if it were not reimbursed under such section.”.

SEC. 4625. PERMITTING PAYMENT TO NONHOSPITAL PROVIDERS.

(a) In General.–Section 1886 (42 U.S.C. 1395ww), as amended by
section 4421(a), is amended by adding at the end the following: (k)
Payment to Nonhospital Providers.– (1) In general.–For cost
reporting periods beginning on or after October 1, 1997, the
Secretary may establish rules for payment to qualified nonhospital
providers for their direct costs of medical education, if those costs
are incurred in the operation of an approved medical residency
training program described in subsection (h). Such rules shall
specify the amounts, form, and manner in which such payments will be
made and the portion of such payments that will be made from each of
the trust funds under this title.

(2) Qualified nonhospital providers.–For purposes of this
subsection, the term ‘qualified nonhospital providers’ means– (A) a
Federally qualified health center, as defined in section 1861(aa)(4);
(B) a rural health clinic, as defined in section 1861(aa)(2); (C)
Medicare+Choice organizations; and (D) such other providers (other
than hospitals) as the Secretary determines to be appropriate.”.

(b) Prohibition on Double Payments.–Section 1886(h)(3)(B) (42
U.S.C. 1395ww(h)(3)(B)) is amended by adding at the end the
following: The Secretary shall reduce the aggregate approved amount
to the extent payment is made under subsection (k) for residents
included in the hospital’s count of full-time equivalent residents.”.

SEC. 4626. INCENTIVE PAYMENTS UNDER PLANS FOR VOLUNTARY REDUCTION IN
NUMBER OF RESIDENTS.

(a) In General.–Section 1886(h) (42 U.S.C. 1395ww(h)) is amended
by adding at the end the following new paragraph: (6) Incentive
payment under plans for voluntary reduction in number of residents.–
(A) In general.–In the case of a voluntary residency reduction plan
for which an application is approved under subparagraph (B), subject
to subparagraph (F), each hospital which is part of the qualifying
entity submitting the plan shall be paid an applicable hold harmless
percentage (as specified in subparagraph (E)) of the sum of– (i) the
amount (if any) by which–

(I) the amount of payment which would have been made under this
subsection if there had been a 5- percent reduction in the number of
full-time equivalent residents in the approved medical education
training programs of the hospital as of June 30, 1997, exceeds (II)
the amount of payment which is made under this subsection, taking
into account the reduction in such number effected under the
reduction plan; and

(ii) the amount of the reduction in payment under subsection
(d)(5)(B) for the hospital that is attributable to the reduction in
number of residents effected under the plan below 95 percent of the
number of full-time equivalent residents in such programs of the
hospital as of June 30, 1997.

The determination of the amounts under clauses (i) and (ii) for
any year shall be made on the basis of the provisions of this title
in effect on the application deadline date for the first calendar
year to which the reduction plan applies.

(B) Approval of plan applications.–The Secretary may not approve
the application of an qualifying entity unless– (i) the application
is submitted in a form and manner specified by the Secretary and by
not later than November 1, 1999, (ii) the application provides for
the operation of a plan for the reduction in the number of full-time
equivalent residents in the approved medical residency training
programs of the entity consistent with the requirements of
subparagraph (D); (iii) the entity elects in the application the
period of residency training years (not greater than 5) over which
the reduction will occur; (iv) the entity will not reduce the
proportion of its residents in primary care (to the total number of
residents) below such proportion as in effect as of the applicable
time described in subparagraph (D)(v); and (v) the Secretary
determines that the application and the entity and such plan meet
such other requirements as the Secretary specifies in regulations.

(C) Qualifying entity.–For purposes of this paragraph, any of the
following may be a qualifying entity: (i) Individual hospitals
operating one or more approved medical residency training programs.

(ii) Two or more hospitals that operate such programs and apply
for treatment under this paragraph as a single qualifying entity.

(iii) A qualifying consortium (as described in section 4628 of the
Balanced Budget Act of 1997).

(D) Residency reduction requirements.– (i) Individual hospital
applicants.–In the case of a qualifying entity described in
subparagraph (C)(i), the number of full-time equivalent residents in
all the approved medical residency training programs operated by or
through the entity shall be reduced as follows:

(I) If the base number of residents exceeds 750 residents, by a
number equal to at least 20 percent of such base number.

(II) Subject to subclause (IV), if the base number of residents
exceeds 600 but is less than 750 residents, by 150 residents.

(III) Subject to subclause (IV), if the base number of residents
does not exceed 600 residents, by a number equal to at least 25
percent of such base number.

(IV) In the case of a qualifying entity which is described in
clause (v) and which elects treatment under this subclause, by a
number equal to at least 20 percent of the base number.

(ii) Joint applicants.–In the case of a qualifying entity
described in subparagraph (C)(ii), the number of full-time equivalent
residents in the aggregate for all the approved medical residency
training programs operated by or through the entity shall be reduced
as follows:

(I) Subject to subclause (II), by a number equal to at least 25
percent of the base number.

(II) In the case of such a qualifying entity which is described in
clause (v) and which elects treatment under this subclause, by a
number equal to at least 20 percent of the base number.

(iii) Consortia.–In the case of a qualifying entity described in
subparagraph (C)(iii), the number of full-time equivalent residents
in the aggregate for all the approved medical residency training
programs operated by or through the entity shall be reduced by a
number equal to at least 20 percent of the base number.

(iv) Manner of reduction.–The reductions specified under the
preceding provisions of this subparagraph for a qualifying entity
shall be below the base number of residents for that entity and shall
be fully effective not later than the 5th residency training year in
which the application under subparagraph (B) is effective.

(v) Entities providing assurance of increase in primary care
residents.–An entity is described in this clause if–

(I) the base number of residents for the entity is less than 750
or the entity is described in subparagraph (C)(ii); and (II) the
entity represents in its application under subparagraph (B) that it
will increase the number of full-time equivalent residents in primary
care by at least 20 percent (from such number included in the base
number of residents) by not later than the 5th residency training
year in which the application under subparagraph (B) is effective.

If a qualifying entity fails to comply with the representation
described in subclause (II) by the end of such 5th residency training
year, the entity shall be subject to repayment of all amounts paid
under this paragraph, in accordance with procedures established to
carry out subparagraph (F).

(vi) Base number of residents defined.–For purposes of this
paragraph, the term ‘base number of residents’ means, with respect to
a qualifying entity (or its participating hospitals) operating
approved medical residency training programs, the number of full-time
equivalent residents in such programs (before application of
weighting factors) of the entity as of the most recent residency
training year ending before June 30, 1997, or, if less, for any
subsequent residency training year that ends before the date the
entity makes application under this paragraph.

(E) Applicable hold harmless percentage.–For purposes of
subparagraph (A), the ‘applicable hold harmless percentage’ for the–
(i) first and second residency training years in which the reduction
plan is in effect, 100 percent, (ii) third such year, 75 percent,
(iii) fourth such year, 50 percent, and (iv) fifth such year, 25
percent.

(F) Penalty for noncompliance.– (i) In general.–No payment may
be made under this paragraph to a hospital for a residency training
year if the hospital has failed to reduce the number of full-time
equivalent residents (in the manner required under subparagraph (D))
to the number agreed to by the Secretary and the qualifying entity in
approving the application under this paragraph with respect to such
year.

(ii) Increase in number of residents in subsequent years.–If
payments are made under this paragraph to a hospital, and if the
hospital increases the number of full- time equivalent residents
above the number of such residents permitted under the reduction plan
as of the completion of the plan, then, as specified by the
Secretary, the entity is liable for repayment to the Secretary of the
total amounts paid under this paragraph to the entity.

(G) Treatment of rotating residents.–In applying this paragraph,
the Secretary shall establish rules regarding the counting of
residents who are assigned to institutions the medical residency
training programs in which are not covered under approved
applications under this paragraph.”.

(b) Relation to Demonstration Projects and Authority.– (1)
Section 1886(h)(6) of the Social Security Act, added by subsection
(a), other than subparagraph (F)(ii) thereof, shall not apply to any
residency training program with respect to which a demonstration
project described in paragraph (3) has been approved by the Health
Care Financing Administration as of May 27, 1997.

(2) Effective May 27, 1997, the Secretary of Health and Human
Services is not authorized to approve any demonstration project
described in paragraph (3) for any residency training year beginning
before July 1, 2006.

(3) A demonstration project described in this paragraph is a
project that primarily provides for additional payments under title
XVIII of the Social Security Act in connection with a reduction in
the number of residents in a medical residency training program.

(c) Interim, Final Regulations.–In order to carry out the
amendment made by subsection (a) in a timely manner, the Secretary of
Health and Human Services may first promulgate regulations, that take
effect on an interim basis, after notice and pending opportunity for
public comment, by not later than 6 months after the date of the
enactment of this Act.

SEC. 4627. MEDICARE SPECIAL REIMBURSEMENT RULE FOR PRIMARY CARE
COMBINED RESIDENCY PROGRAMS.

(a) In General.–Section 1886(h)(5)(G) of the Social Security Act
(42 U.S.C. 1395ww(h)(5)(G)) is amended– (1) in clause (i), by
striking “and (iii)” and inserting “, (iii), and (iv)”; and (2) by
adding at the end the following: (iv) Special rule for certain
primary care combined residency programs.–(I) In the case of a
resident enrolled in a combined medical residency training program in
which all of the individual programs (that are combined) are for
training a primary care resident (as defined in subparagraph (H)),
the period of board eligibility shall be the minimum number of years
of formal training required to satisfy the requirements for initial
board eligibility in the longest of the individual programs plus one
additional year.

(II) A resident enrolled in a combined medical residency training
program that includes an obstetrics and gynecology program shall
qualify for the period of board eligibility under subclause (I) if
the other programs such resident combines with such obstetrics and
gynecology program are for training a primary care resident.”.

(b) Effective Date.–The amendments made by subsection (a) apply
to combined medical residency training programs in effect for
residency years beginning on or after July 1, 1997.

SEC. 4628. DEMONSTRATION PROJECT ON USE OF CONSORTIA.

(a) In General.–The Secretary of Health and Human Services (in
this section referred to as the Secretary”) shall establish a
demonstration project under which, instead of making payments to
teaching hospitals pursuant to section 1886(h) of the Social Security
Act, the Secretary shall make payments under this section to each
consortium that meets the requirements of subsection (b) and that
applies to be included under the project.

(b) Qualifying Consortia.–For purposes of subsection (a), a
consortium meets the requirements of this subsection if the
consortium is in compliance with the following: (1) The consortium
consists of a teaching hospital with one or more approved medical
residency training programs and one or more of the following
entities: (A) A school of allopathic medicine or osteopathic
medicine.

(B) Another teaching hospital, which may be a children’s hospital.

(D) A medical group practice.

(E) A managed care entity.

(F) An entity furnishing outpatient services.

(G) Such other entity as the Secretary determines to be
appropriate.

(2) The members of the consortium have agreed to participate in
the programs of graduate medical education that are operated by the
entities in the consortium.

(3) With respect to the receipt by the consortium of payments made
pursuant to this section, the members of the consortium have agreed
on a method for allocating the payments among the members.

(4) The consortium meets such additional requirements as the
Secretary may establish.

(c) Amount and Source of Payment.–The total of payments to a
qualifying consortium for a fiscal year pursuant to subsection (a)
shall not exceed the amount that would have been paid under section
1886 (h) or (k) of the Social Security Act for the teaching hospital
(or hospitals) in the consortium. Such payments shall be made in such
proportion from each of the trust funds established under title XVIII
of such Act as the Secretary specifies.

SEC. 4629. RECOMMENDATIONS ON LONG-TERM POLICIES REGARDING TEACHING
HOSPITALS AND GRADUATE MEDICAL EDUCATION.

(a) In General.–The Medicare Payment Advisory Commission
(established under section 1805 of the Social Security Act and in
this section referred to as the Commission”) shall examine and
develop recommendations on whether and to what extent medicare
payment policies and other Federal policies regarding teaching
hospitals and graduate medical education should be changed. Such
recommendations shall include recommendations regarding each of the
following: (1) Possible methodologies for making payments for
graduate medical education and the selection of entities to receive
such payments. Matters considered under this paragraph shall
include– (A) issues regarding children’s hospitals and approved
medical residency training programs in pediatrics, and (B) whether
and to what extent payments are being made (or should be made) for
training in the nursing and other allied health professions.

(2) Federal policies regarding international medical graduates.

(3) The dependence of schools of medicine on service-generated
income.

(4) Whether and to what extent the needs of the United States
regarding the supply of physicians, in the aggregate and in different
specialties, will change during the 10-year period beginning on
October 1, 1997, and whether and to what extent any such changes will
have significant financial effects on teaching hospitals.

(5) Methods for promoting an appropriate number, mix, and
geographical distribution of health professionals.

(b) Consultation.–In conducting the study under subsection (a),
the Commission shall consult with the Council on Graduate Medical
Education and individuals with expertise in the area of graduate
medical education, including– (1) deans from allopathic and
osteopathic schools of medicine; (2) chief executive officers (or
equivalent administrative heads) from academic health centers,
integrated health care systems, approved medical residency training
programs, and teaching hospitals that sponsor approved medical
residency training programs; (3) chairs of departments or divisions
from allopathic and osteopathic schools of medicine, schools of
dentistry, and approved medical residency training programs in oral
surgery; (4) individuals with leadership experience from
representative fields of non-physician health professionals; (5)
individuals with substantial experience in the study of issues
regarding the composition of the health care workforce of the United
States; and (6) individuals with expertise in health care payment
policies.

(c) Report.–Not later than 2 years after the date of the
enactment of this Act, the Commission shall submit to the Congress a
report providing its recommendations under this section and the
reasons and justifications for such recommendations.

SEC. 4630. STUDY OF HOSPITAL OVERHEAD AND SUPERVISORY PHYSICIAN
COMPONENTS OF DIRECT MEDICAL EDUCATION COSTS.

(a) In General.–The Secretary of Health and Human Services shall
conduct a study with respect to– (1) variations among hospitals in
the hospital overhead and supervisory physician components of their
direct medical education costs taken into account under section
1886(h) of the Social Security Act, and (2) the reasons for such
variations.

(b) Report.–Not later than 1 year after the date of the enactment
of this Act, the Secretary shall report the results of the study
conducted under subsection (a) to the appropriate committees of
Congress, including recommendations for legislation reducing
variations described in subsection (a) that the Secretary finds
inappropriate.

CHAPTER 3–PROVISIONS RELATING TO MEDICARE
SECONDARY PAYER

SEC. 4631. PERMANENT EXTENSION AND REVISION OF CERTAIN SECONDARY
PAYER PROVISIONS.

(a) Application to Disabled Individuals in Large Group Health
Plans.– (1) In general.–Section 1862(b)(1)(B) (42 U.S.C.
1395y(b)(1)(B)) is amended– (A) in clause (i), by striking “clause
(iv)” and inserting clause (iii)”; (B) by striking clause (iii); and
(C) by redesignating clause (iv) as clause (iii).

(2) Conforming amendments.–Paragraphs (1) through (3) of section
1837(i) (42 U.S.C. 1395p(i)) and the second sentence of section
1839(b) (42 U.S.C. 1395r(b)) are each amended by striking
“1862(b)(1)(B)(iv)” each place it appears and inserting
“1862(b)(1)(B)(iii)”.

(b) Individuals With End Stage Renal Disease.–Section
1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended– (1) in the last
sentence by striking “October 1, 1998” and inserting “the date of
enactment of the Balanced Budget Act of 1997″; and (2) by adding at
the end the following: Effective for items and services furnished on
or after the date of enactment of the Balanced Budget Act of 1997,
(with respect to periods beginning on or after the date that is 18
months prior to such date), clauses (i) and (ii) shall be applied by
substituting ’30-month’ for ’12- month’ each place it appears.”

(c) IRS-SSA-HCFA Data Match.– (1) Social security act.–Section
1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is amended by striking
clause (iii).

(2) Internal revenue code.–Section 6103(l)(12) of the Internal
Revenue Code of 1986 is amended by striking subparagraph (F).

SEC. 4632. CLARIFICATION OF TIME AND FILING LIMITATIONS.

(a) Extension of Claims Filing Period.–Section 1862(b)(2)(B) (42
U.S.C. 1395y(b)(2)(B)) is amended by adding at the end the following
new clause: (v) Claims-filing period.–Notwithstanding any other time
limits that may exist for filing a claim under an employer group
health plan, the United States may seek to recover conditional
payments in accordance with this subparagraph where the request for
payment is submitted to the entity required or responsible under this
subsection to pay with respect to the item or service (or any portion
thereof) under a primary plan within the 3-year period beginning on
the date on which the item or service was furnished.”.

(b) Effective Date.–The amendments made by this section apply to
items and services furnished on or after the date of the enactment of
this Act.

SEC. 4633. PERMITTING RECOVERY AGAINST THIRD PARTY ADMINISTRATORS.

(a) Permitting Recovery Against Third Party Administrators of
Primary Plans.–Section 1862(b)(2)(B)(ii) (42 U.S.C.
1395y(b)(2)(B)(ii)) is amended– (1) by striking “under this
subsection to pay” and inserting “(directly, as a third-party
administrator, or otherwise) to make payment”; and (2) by adding at
the end the following: The United States may not recover from a
third-party administrator under this clause in cases where the
third-party administrator would not be able to recover the amount at
issue from the employer or group health plan and is not employed by
or under contract with the employer or group health plan at the time
the action for recovery is initiated by the United States or for whom
it provides administrative services due to the insolvency or
bankruptcy of the employer or plan.

(b) Clarification of Beneficiary Liability.–Section 1862(b)(1)
(42 U.S.C. 1395y(b)(1)) is amended by adding at the end the following
new subparagraph: (F) Limitation on beneficiary liability.–An
individual who is entitled to benefits under this title and is
furnished an item or service for which such benefits are incorrectly
paid is not liable for repayment of such benefits under this
paragraph unless payment of such benefits was made to the
individual.”.

(c) Effective Date.–The amendments made by this section apply to
items and services furnished on or after the date of the enactment of
this Act.

CHAPTER 4–OTHER PROVISIONS

SEC. 4641. PLACEMENT OF ADVANCE DIRECTIVE IN MEDICAL RECORD.

(a) In General.–Section 1866(f)(1)(B) (42 U.S.C. 1395cc(f)(1)(B))
is amended by striking “in the individual’s medical record” and
inserting “in a prominent part of the individual’s current medical
record”.

(b) Effective Date.–The amendment made by subsection (a) shall
apply to provider agreements entered into, renewed, or extended on or
after such date (not later than 1 year after the date of the
enactment of this Act) as the Secretary of Health and Human Services
specifies.

SEC. 4642. INCREASED CERTIFICATION PERIOD FOR CERTAIN ORGAN
PROCUREMENT ORGANIZATIONS.

Section 1138(b)(1)(A)(ii) (42 U.S.C. 1320b-8(b)(1)(A)(ii)) is
amended by striking “two years” and inserting “2 years (4 years if
the Secretary determines appropriate for an organization on the basis
of its past practices)”.

SEC. 4643. OFFICE OF THE CHIEF ACTUARY IN THE HEALTH CARE FINANCING
ADMINISTRATION.

Section 1117 (42 U.S.C. 1317) is amended– (1) in the heading, by
inserting “and chief actuary” after “the administrator”; (2) by
inserting “(a)” before “The Administrator”; and (3) by adding at the
end the following: (b)(1) There is established in the Health Care
Financing Administration the position of Chief Actuary. The Chief
Actuary shall be appointed by, and in direct line of authority to,
the Administrator of such Administration. The Chief Actuary shall be
appointed from among individuals who have demonstrated, by their
education and experience, superior expertise in the actuarial
sciences. The Chief Actuary shall exercise such duties as are
appropriate for the office of the Chief Actuary and in accordance
with professional standards of actuarial independence. The Chief
Actuary may be removed only for cause.

(2) The Chief Actuary shall be compensated at the highest rate of
basic pay for the Senior Executive Service under section 5382(b) of
title 5, United States Code.”.

SEC. 4644. CONFORMING AMENDMENTS TO COMPLY WITH CONGRESSIONAL REVIEW
OF AGENCY RULEMAKING.

(a) DRG Prospective Payment Rate Methodology.– (1) In
general.–Section 1886(d)(6) (42 U.S.C. 1395ww(d)(6)) is amended by
striking “September 1” and inserting “August 1”.

(2) Transition rule for fiscal year 1998.–With respect to the
publication in the Federal Register of the DRG prospective payment
rate methodology under such section for fiscal year 1998, the term
“60 days” in section 801(a)(3)(A) and section 802(a) of title 5,
United States Code, is deemed to be a reference to “30 days.

(b) Hospital Payment Updates.– (1) In general.–Section 1886(e)
(42 U.S.C. 1395ww(e) is amended– (A) in paragraph (5)(A) by striking
“May 1” and inserting “April 1”; and (B) in paragraph (5)(B) by
striking “September 1” and inserting “August 1”.

(2) Transition rule for fiscal year 1998.–With respect to the
publication in the Federal Register of the appropriate change factor
for inpatient hospital services for discharges in fiscal year 1998
under section 1886(e)(5)(B) (42 U.S.C. 1395ww(e)(5)(B)), the term “60
days” in section 801(a)(3)(A) and section 802(a) of title 5, United
States Code, is deemed to be a reference to “30 days”.

(c) Applications for Geographic Reclassification.– (1) In
general.–Section 1886(d)(10)(C) (42 U.S.C. 1395ww(d)(10)(C)) is
amended in clause (ii), by striking “the first day of the preceding
fiscal year.” and inserting “the first day of the 13-month period
ending on September 30 of the preceding fiscal year.” (2) Special
rule for applications received in fiscal year 1997.–In the case of
an application for a change in geographic classification under such
section for fiscal year 1999, the Secretary of Health and Human
Services shall shorten the deadlines under such section so as to
permit completion of a final decision by the Secretary by June 15,
1998.

(d) Physician Fee Schedule.–Section 1848(b)(1) (42 U.S.C. 1395w-
4(b)(1)) is amended by striking “Before January 1 of each year
beginning with 1992” and inserting “Before November 1 of the
preceding year, for each year beginning with 1998”.