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SubtitleF

SubtitleF

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 F–Provisions Relating to
Part B Only

CHAPTER 1–SERVICES OF HEALTH
PROFESSIONALS

Subchapter A–Physicians’ Services

SEC. 4501. ESTABLISHMENT OF SINGLE CONVERSION FACTOR FOR 1998.

(a) In General.–Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) is
amended– (1) by redesignating subparagraph (C) as subparagraph (D),
and (2) by inserting after subparagraph (B) the following: (C)
Special rules for 1998.–The single conversion factor for 1998 under
this subsection shall be the conversion factor for primary care
services for 1997, increased by the Secretary’s estimate of the
weighted average of the three separate updates that would otherwise
occur were it not for the enactment of chapter 1 of subtitle F of
title IV of the Balanced Budget Act of 1997.”.

(b) Conforming Amendments.–Section 1848 (42 U.S.C. 1395w-4) is
amended– (1) by striking “(or factors)” each place it appears in
subsection (d)(1)(A) and (d)(1)(D)(ii) (as redesignated by subsection
(a)(1)), (2) in subsection (d)(1)(A), by striking “or updates”, (3)
in subsection (d)(1)(D) (as redesignated by subsection (a)(1)), by
striking “(or updates)” each place it appears, and (4) in subsection
(j)(1), by striking “The term” and inserting “For services furnished
before January 1, 1998, the term”.

SEC. 4502. ESTABLISHING UPDATE TO CONVERSION FACTOR TO MATCH SPENDING
UNDER SUSTAINABLE GROWTH RATE.

(a) Update.– (1) In general.–Section 1848(d)(3) (42 U.S.C.
1395w-4(d)(3)) is amended to read as follows: (3) Update.– (A) In
general.–Unless otherwise provided by law, subject to subparagraph
(D) and the budget-neutrality factor determined by the Secretary
under subsection (c)(2)(B)(ii), the update to the single conversion
factor established in paragraph (1)(C) for a year beginning with 1999
is equal to the product of– (i) 1 plus the Secretary’s estimate of
the percentage increase in the MEI (as defined in section 1842(i)(3))
for the year (divided by 100), and (ii) 1 plus the Secretary’s
estimate of the update adjustment factor for the year (divided by
100), minus 1 and multiplied by 100.

(B) Update adjustment factor.–For purposes of subparagraph
(A)(ii), the ‘update adjustment factor’ for a year is equal (as
estimated by the Secretary) to– (i) the difference between (I) the
sum of the allowed expenditures for physicians’ services (as
determined under subparagraph (C)) for the period beginning April 1,
1997, and ending on March 31 of the year involved, and (II) the
amount of actual expenditures for physicians’ services furnished
during the period beginning April 1, 1997, and ending on March 31 of
the preceding year; divided by (ii) the actual expenditures for
physicians’ services for the 12-month period ending on March 31 of
the preceding year, increased by the sustainable growth rate under
subsection (f) for the fiscal year which begins during such 12-month
period.

(C) Determination of allowed expenditures.–For purposes of this
paragraph, the allowed expenditures for physicians’ services for the
12-month period ending with March 31 of– (i) 1997 is equal to the
actual expenditures for physicians’ services furnished during such
12-month period, as estimated by the Secretary; or (ii) a subsequent
year is equal to the allowed expenditures for physicians’ services
for the previous year, increased by the sustainable growth rate under
subsection (f) for the fiscal year which begins during such 12-month
period.

(D) Restriction on variation from medicare economic
index.–Notwithstanding the amount of the update adjustment factor
determined under subparagraph (B) for a year, the update in the
conversion factor under this paragraph for the year may not be– (i)
greater than 100 times the following amount: (1.03 + (MEI
percentage/100)) -1; or (ii) less than 100 times the following
amount: (0.93 + (MEI percentage/100)) -1, where ‘MEI percentage’
means the Secretary’s estimate of the percentage increase in the MEI
(as defined in section 1842(i)(3)) for the year involved.”.

(2) Effective date.–The amendment made by this subsection shall
apply to the update for years beginning with 1999.

(b) Elimination of Report.–Section 1848(d) (42 U.S.C. 1395w-4(d))
is amended by striking paragraph (2).

SEC. 4503. REPLACEMENT OF VOLUME PERFORMANCE STANDARD WITH
SUSTAINABLE GROWTH RATE.

(a) In General.–Section 1848(f) (42 U.S.C. 1395w-4(f)) is amended
by striking paragraphs (2) through (5) and inserting the following:
(2) Specification of growth rate.–The sustainable growth rate for
all physicians’ services for a fiscal year (beginning with fiscal
year 1998) shall be equal to the product of– (A) 1 plus the
Secretary’s estimate of the weighted average percentage increase
(divided by 100) in the fees for all physicians’ services in the
fiscal year involved, (B) 1 plus the Secretary’s estimate of the
percentage change (divided by 100) in the average number of
individuals enrolled under this part (other than Medicare+Choice plan
enrollees) from the previous fiscal year to the fiscal year involved,
(C) 1 plus the Secretary’s estimate of the projected percentage
growth in real gross domestic product per capita (divided by 100)
from the previous fiscal year to the fiscal year involved, and (D) 1
plus the Secretary’s estimate of the percentage change (divided by
100) in expenditures for all physicians’ services in the fiscal year
(compared with the previous fiscal year) which will result from
changes in law and regulations, determined without taking into
account estimated changes in expenditures resulting from the update
adjustment factor determined under subsection (d)(3)(B), minus 1 and
multiplied by 100.

(3) Definitions.–In this subsection: (A) Services included in
physicians’ services.–The term ‘physicians’ services’ includes other
items and services (such as clinical diagnostic laboratory tests and
radiology services), specified by the Secretary, that are commonly
performed or furnished by a physician or in a physician’s office, but
does not include services furnished to a Medicare+Choice plan
enrollee.

(B) Medicare+choice plan enrollee.–The term ‘Medicare+Choice plan
enrollee’ means, with respect to a fiscal year, an individual
enrolled under this part who has elected to receive benefits under
this title for the fiscal year through a Medicare+Choice plan offered
under part C, and also includes an individual who is receiving
benefits under this part through enrollment with an eligible
organization with a risk-sharing contract under section 1876.”.

(b) Conforming Amendment.–So much of section 1848(f) (42 U.S.C.
1395w-4(f)) as precedes paragraph (2) is amended to read as follows:
(f) Sustainable Growth Rate.– (1) Publication.–The Secretary shall
cause to have published in the Federal Register the sustainable
growth rate for each fiscal year beginning with fiscal year 1998.
Such publication shall occur by not later than August 1 before each
fiscal year, except that such rate for fiscal year 1998 shall be
published not later than November 1, 1997.”.

SEC. 4504. PAYMENT RULES FOR ANESTHESIA SERVICES.

(a) In General.–Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)), as
amended by section 4501(a), is amended– (1) in subparagraph (C), by
striking “The single” and inserting “Except as provided in
subparagraph (D), the single”; (2) by redesignating subparagraph (D)
as subparagraph (E); and (3) by inserting after subparagraph (C) the
following new subparagraph: (D) Special rules for anesthesia
services.–The separate conversion factor for anesthesia services for
a year shall be equal to 46 percent of the single conversion factor
established for other physicians’ services, except as adjusted for
changes in work, practice expense, or malpractice relative value
units.”.

(b) Effective Date.–The amendments made by subsection (a) shall
apply to services furnished on or after January 1, 1998.

SEC. 4505. IMPLEMENTATION OF RESOURCE-BASED METHODOLOGIES.

(a) 1-Year Delay in Implementation.–Section 1848(c) (42 U.S.C.
1395w-4(c)) is amended– (1) in paragraph (2)(C)(ii), in the matter
before subclause (I) and after subclause (II), by striking “1998” and
inserting “1999” each place it appears; and (2) in paragraph
(3)(C)(ii), by striking “1998” and inserting “1999”.

(b) Phased-in Implementation.– (1) In general.–Section
1848(c)(2)(C)(ii) (42 U.S.C. 1395w- 4(c)(2)(C)(ii)) is further
amended– (A) by striking the comma at the end of clause (ii) and
inserting a period and the following: For 1999, such number of units
shall be determined based 75 percent on such product and based 25
percent on the relative practice expense resources involved in
furnishing the service. For 2000, such number of units shall be
determined based 50 percent on such product and based 50 percent on
such relative practice expense resources. For 2001, such number of
units shall be determined based 25 percent on such product and based
75 percent on such relative practice expense resources. For a
subsequent year, such number of units shall be determined based
entirely on such relative practice expense resources.”.

(2) Conforming amendment.–Section 1848(c)(3)(C)(ii) (42 U.S.C.
1395w-4(c)(3)(C)(ii)), as amended by subsection (a)(2), is amended by
striking “1999” and inserting “2002”.

(c) Review by Comptroller General.–The Comptroller General of the
United States shall review and evaluate the proposed rule on
resource- based methodology for practice expenses issued by the
Secretary of Health and Human Services. The Comptroller General
shall, within 6 months of the date of the enactment of this Act,
report to the Committees on Commerce and Ways and Means of the House
of Representatives and the Committee on Finance of the Senate the
results of its evaluation, including an analysis of– (1) the
adequacy of the data used in preparing the rule, (2) categories of
allowable costs, (3) methods for allocating direct and indirect
expenses, (4) the potential impact of the rule on beneficiary access
to services, and (5) any other matters related to the appropriateness
of resource-based methodology for practice expenses.

The Comptroller General shall consult with representatives of
physicians’ organizations with respect to matters of both data and
methodology.

(d) Requirements for Developing New Resource-Based Practice
Expense Relative Value Units.– (1) Development.–For purposes of
section 1848(c)(2)(C)(ii) of the Social Security Act, the Secretary
of Health and Human Services shall develop new resource-based
relative value units. In developing such units the Secretary shall–
(A) utilize, to the maximum extent practicable, generally accepted
cost accounting principles which (i) recognize all staff, equipment,
supplies, and expenses, not just those which can be tied to specific
procedures, and (ii) use actual data on equipment utilization and
other key assumptions; (B) consult with organizations representing
physicians regarding methodology and data to be used; and (C) develop
a refinement process to be used during each of the 4 years of the
transition period.

(2) Report.–The Secretary shall transmit a report by March 1,
1998, on the development of resource-based relative value units under
paragraph (1) to the Committee on Ways and Means and the Committee on
Commerce of the House of Representatives and the Committee on Finance
of the Senate. The report shall include a presentation of data to be
used in developing the value units and an explanation of the
methodology.

(3) Notice of proposed rulemaking.–The Secretary shall publish a
notice of proposed rulemaking with the new resource-based relative
value units on or before May 1, 1998, and shall allow for a 90-day
public comment period.

(4) Items included.–The new proposed rule shall consider the
following: (A) Impact projections which compare new proposed payment
amounts on data on actual physician practice expenses.

(B) Impact projections for hospital-based and other specialties,
geographic payment localities, and urban versus rural localities.

(e) Adjustments to Relative Value Units for 1998.–Section
1848(c)(2) (42 U.S.C. 1395w-4(c)(2)) is amended by adding at the end
the following new subparagraph: (G) Adjustments in relative value
units for 1998.–

(i) In general.–The Secretary shall– (I) subject to clauses (iv)
and (v), reduce the practice expense relative value units applied to
any services described in clause (ii) furnished in 1998 to a number
equal to 110 percent of the number of work relative value units, and
(II) increase the practice expense relative value units for office
visit procedure codes during 1998 by a uniform percentage which the
Secretary estimates will result in an aggregate increase in payments
for such services equal to the aggregate decrease in payments by
reason of subclause (I).

(ii) Services covered.–For purposes of clause (i), the services
described in this clause are physicians’ services that are not
described in clause (iii) and for which– (I) there are work relative
value units, and (II) the number of practice expense relative value
units (determined for 1998) exceeds 110 percent of the number of work
relative value units (determined for such year).

(iii) Excluded services.–For purposes of clause (ii), the
services described in this clause are services which the Secretary
determines at least 75 percent of which are provided under this title
in an office setting.

(iv) Limitation on aggregate reallocation.–If the application of
clause (i)(I) would result in an aggregate amount of reductions under
such clause in excess of $390,000,000, such clause shall be applied
by substituting for 110 percent such greater percentage as the
Secretary estimates will result in the aggregate amount of such
reductions equaling $390,000,000.

(v) No reduction for certain services.–Practice expense relative
value units for a procedure performed in an office or in a setting
out of an office shall not be reduced under clause (i) if the
in-office or out-of-office practice expense relative value,
respectively, for the procedure would increase under the proposed
rule on resource-based practice expenses issued by the Secretary on
June 18, 1997 (62 Federal Register 33158 et seq.).”.

(f) Application of Resource-Based Methodology to Malpractice
Relative Value Units.– (1) In general.–Section 1848(c)(2)(C)(iii)
(42 U.S.C. 1395w- 4(c)(2)(C)(iii)) is amended– (A) in paragraph
(2)(C)(iii)– (i) by inserting “for the service for years before
2000” before “equal”, and (ii) by striking the period at the end and
inserting a comma and by adding at the end the following flush
matter: and for years beginning with 2000 based on the malpractice
expense resources involved in furnishing the service.”; and (B) in
paragraph (3)(C)(iii), by striking “The malpractice” and inserting
“For years before 1999, the malpractice”.

(2) Application of certain budget neutrality provisions.–In
implementing the amendment made by paragraph (1)(A)(ii), the
provisions of clauses (ii)(II) and (iii) of section 1848(c)(2)(B) of
the Social Security Act (42 U.S.C. 1395w-4(c)(2)(B)) shall apply in
the same manner as they apply to adjustments under clause (ii)(I) of
such section.

SEC. 4506. DISSEMINATION OF INFORMATION ON HIGH PER DISCHARGE
RELATIVE VALUES FOR IN-HOSPITAL PHYSICIANS’ SERVICES.

(a) Determination and Notice Concerning Hospital-Specific Per
Discharge Relative Values.– (1) In general.–For 1999 and 2001 the
Secretary of Health and Human Services shall determine for each
hospital– (A) the hospital-specific per discharge relative value
under subsection (b); and (B) whether the hospital-specific relative
value is projected to be excessive (as determined based on such value
represented as a percentage of the median of hospital-specific per
discharge relative values determined under subsection (b)).

(2) Notice to subset of medical staffs; evaluation of
responses.–The Secretary shall notify the medical executive
committee of a subset of the hospitals identified under paragraph
(1)(B) as having an excessive hospital-specific relative value, of
the determinations made with respect to the medical staff under
paragraph (1). The Secretary shall evaluate the responses of the
hospitals so notified with the responses of other hospitals so
identified that were not so notified.

(b) Determination of Hospital-Specific Per Discharge Relative
Values.– (1) In general.–For purposes of this section, the
hospital- specific per discharge relative value for the medical staff
of a hospital (other than a teaching hospital) for a year shall be
equal to the average per discharge relative value (as determined
under section 1848(c)(2) of the Social Security Act (42 U.S.C. 1395w-
4(c)(2)) for physicians’ services furnished to inpatients of the
hospital by the hospital’s medical staff (excluding interns and
residents) during the second year preceding that calendar year,
adjusted for variations in case-mix among hospitals and
disproportionate share status and teaching status among hospitals (as
determined by the Secretary under paragraph (3)).

(2) Special rule for teaching hospitals.–The hospital-specific
relative value projected for a teaching hospital in a year shall be
equal to the sum of– (A) the average per discharge relative value
(as determined under section 1848(c)(2) of such Act) for physicians’
services furnished to inpatients of the hospital by the hospital’s
medical staff (excluding interns and residents) during the second
year preceding that calendar year, and (B) the equivalent per
discharge relative value (as determined under such section) for
physicians’ services furnished to inpatients of the hospital by
interns and residents of the hospital during the second year
preceding that calendar year, adjusted for variations in case-mix
among hospitals, and in disproportionate share status and teaching
status among hospitals (as determined by the Secretary under
paragraph (3)).

The Secretary shall determine the equivalent relative value unit
per discharge for interns and residents based on the best available
data and may make such adjustment in the aggregate.

(3) Adjustment for teaching and disproportionate share
hospitals.–The Secretary shall adjust the allowable per discharge
relative values otherwise determined under this subsection to take
into account the needs of teaching hospitals and hospitals receiving
additional payments under subparagraphs (F) and (G) of section
1886(d)(5) of the Social Security Act (42 U.S.C. 1395ww(d)(5)). The
adjustment for teaching status or disproportionate share shall not be
less than zero.

(c) Definitions.–For purposes of this section: (1) Hospital.–The
term hospital” means a subsection (d) hospital as defined in section
1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)) .

(2) Medical staff.–An individual furnishing a physician’s service
is considered to be on the medical staff of a hospital– (A) if (in
accordance with requirements for hospitals established by the Joint
Commission on Accreditation of Health Organizations)– (i) the
individual is subject to bylaws, rules, and regulations established
by the hospital to provide a framework for the self-governance of
medical staff activities, (ii) subject to the bylaws, rules, and
regulations, the individual has clinical privileges granted by the
hospital’s governing body, and (iii) under the clinical privileges,
the individual may provide physicians’ services independently within
the scope of the individual’s clinical privileges, or (B) if the
physician provides at least one service to an individual entitled to
benefits under this title in that hospital.

(3) Physicians’ services.–The term physicians’ services” means
the services described in section 1848(j)(3) of the Social Security
Act (42 U.S.C. 1395w-4(j)(3)).

(4) Rural area; urban area.–The terms rural area” and urban area”
have the meaning given those terms under section 1886(d)(2)(D) of
such Act (42 U.S.C. 1395ww(d)(2)(D)).

(5) Secretary.–The term Secretary” means the Secretary of Health
and Human Services.

(6) Teaching hospital.–The term teaching hospital” means a
hospital which has a teaching program approved as specified in
section 1861(b)(6) of the Social Security Act (42 U.S.C.
1395x(b)(6)).

SEC. 4507. USE OF PRIVATE CONTRACTS BY MEDICARE BENEFICIARIES.

(a) Items or Services Provided Through Private Contracts.– (1) In
general.–Section 1802 (42 U.S.C. 1395a) is amended by adding at the
end the following new subsection: (b) Use of Private Contracts by
Medicare Beneficiaries.– (1) In general.–Subject to the provisions
of this subsection, nothing in this title shall prohibit a physician
or practitioner from entering into a private contract with a medicare
beneficiary for any item or service– (A) for which no claim for
payment is to be submitted under this title, and (B) for which the
physician or practitioner receives– (i) no reimbursement under this
title directly or on a capitated basis, and (ii) receives no amount
for such item or service from an organization which receives
reimbursement for such item or service under this title directly or
on a capitated basis.

(2) Beneficiary protections.– (A) In general.–Paragraph (1)
shall not apply to any contract unless– (i) the contract is in
writing and is signed by the medicare beneficiary before any item or
service is provided pursuant to the contract; (ii) the contract
contains the items described in subparagraph (B); and (iii) the
contract is not entered into at a time when the medicare beneficiary
is facing an emergency or urgent health care situation.

(B) Items required to be included in contract.–Any contract to
provide items and services to which paragraph (1) applies shall
clearly indicate to the medicare beneficiary that by signing such
contract the beneficiary– (i) agrees not to submit a claim (or to
request that the physician or practitioner submit a claim) under this
title for such items or services even if such items or services are
otherwise covered by this title; (ii) agrees to be responsible,
whether through insurance or otherwise, for payment of such items or
services and understands that no reimbursement will be provided under
this title for such items or services; (iii) acknowledges that no
limits under this title (including the limits under section 1848(g))
apply to amounts that may be charged for such items or services; (iv)
acknowledges that Medigap plans under section 1882 do not, and other
supplemental insurance plans may elect not to, make payments for such
items and services because payment is not made under this title; and
(v) acknowledges that the medicare beneficiary has the right to have
such items or services provided by other physicians or practitioners
for whom payment would be made under this title.

Such contract shall also clearly indicate whether the physician or
practitioner is excluded from participation under the medicare
program under section 1128.

(3) Physician or practitioner requirements.– (A) In
general.–Paragraph (1) shall not apply to any contract entered into
by a physician or practitioner unless an affidavit described in
subparagraph (B) is in effect during the period any item or service
is to be provided pursuant to the contract.

(B) Affidavit.–An affidavit is described in this subparagraph
if– (i) the affidavit identifies the physician or practitioner and
is in writing and is signed by the physician or practitioner; (ii)
the affidavit provides that the physician or practitioner will not
submit any claim under this title for any item or service provided to
any medicare beneficiary (and will not receive any reimbursement or
amount described in paragraph (1)(B) for any such item or service)
during the 2-year period beginning on the date the affidavit is
signed; and (iii) a copy of the affidavit is filed with the Secretary
no later than 10 days after the first contract to which such
affidavit applies is entered into.

(C) Enforcement.–If a physician or practitioner signing an
affidavit under subparagraph (B) knowingly and willfully submits a
claim under this title for any item or service provided during the
2-year period described in subparagraph (B)(ii) (or receives any
reimbursement or amount described in paragraph (1)(B) for any such
item or service) with respect to such affidavit– (i) this subsection
shall not apply with respect to any items and services provided by
the physician or practitioner pursuant to any contract on and after
the date of such submission and before the end of such period; and
(ii) no payment shall be made under this title for any item or
service furnished by the physician or practitioner during the period
described in clause (i) (and no reimbursement or payment of any
amount described in paragraph (1)(B) shall be made for any such item
or service).

(4) Limitation on actual charge and claim submission requirement
not applicable.–Section 1848(g) shall not apply with respect to any
item or service provided to a medicare beneficiary under a contract
described in paragraph (1).

(5) Definitions.–In this subsection: (A) Medicare
beneficiary.–The term ‘medicare beneficiary’ means an individual who
is entitled to benefits under part A or enrolled under part B.

(B) Physician.–The term ‘physician’ has the meaning given such
term by section 1861(r)(1).

(C) Practitioner.–The term ‘practitioner’ has the meaning given
such term by section 1842(b)(18)(C).” (2) Conforming amendments.–
(A) Section 1802 (42 U.S.C. 1395a) is amended by striking “Any” and
inserting “(a) Basic Freedom of Choice.–Any”.

(B) Section 1862(a) (42 U.S.C. 1395y(a)), as amended by sections
4319(b) and 4432, is amended by striking “or” at the end of paragraph
(17), by striking the period at the end of paragraph (18) and
inserting “; or”, and by adding after paragraph (18) the following
new paragraph: (19) which are for items or services which are
furnished pursuant to a private contract described in section
1802(b).”.

(b) Report.–Not later than October 1, 2001, the Secretary of
Health and Human Services shall submit a report to Congress on the
effect on the program under this title of private contracts entered
into under the amendment made by subsection (a). Such report shall
include– (1) analyses regarding– (A) the fiscal impact of such
contracts on total Federal expenditures under title XVIII of the
Social Security Act and on out-of-pocket expenditures by medicare
beneficiaries for health services under such title; and (B) the
quality of the health services provided under such contracts; and (2)
recommendations as to whether medicare beneficiaries should continue
to be able to enter private contracts under section 1802(b) of such
Act (as added by subsection (a)) and if so, what legislative changes,
if any should be made to improve such contracts.

(c) Effective Date.–The amendment made by subsection (a) shall
apply with respect to contracts entered into on and after January 1,
1998.

Subchapter B–Other Health Care Professionals

SEC. 4511. INCREASED MEDICARE REIMBURSEMENT FOR NURSE
PRACTITIONERS AND CLINICAL NURSE SPECIALISTS.

(a) Removal of Restrictions on Settings.– (1) In general.–Clause
(ii) of section 1861(s)(2)(K) (42 U.S.C. 1395x(s)(2)(K)) is amended
to read as follows: (ii) services which would be physicians’ services
if furnished by a physician (as defined in subsection (r)(1)) and
which are performed by a nurse practitioner or clinical nurse
specialist (as defined in subsection (aa)(5)) working in
collaboration (as defined in subsection (aa)(6)) with a physician (as
defined in subsection (r)(1)) which the nurse practitioner or
clinical nurse specialist is legally authorized to perform by the
State in which the services are performed, and such services and
supplies furnished as an incident to such services as would be
covered under subparagraph (A) if furnished incident to a physician’s
professional service, but only if no facility or other provider
charges or is paid any amounts with respect to the furnishing of such
services;”.

(2) Conforming amendments.–(A) Section 1861(s)(2)(K) (42 U.S.C.
1395x(s)(2)(K)) is further amended– (i) in clause (i), by inserting
“and such services and supplies furnished as incident to such
services as would be covered under subparagraph (A) if furnished
incident to a physician’s professional service; and” after “are
performed,”; and (ii) by striking clauses (iii) and (iv).

(B) Section 1861(b)(4) (42 U.S.C. 1395x(b)(4)) is amended by
striking “clauses (i) or (iii) of subsection (s)(2)(K)” and inserting
“subsection (s)(2)(K)”.

(C) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended by
striking “section 1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)” and
inserting “section 1861(s)(2)(K)”.

(D) Section 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is amended
by striking “section 1861(s)(2)(K)(i) or 1861(s)(2)(K)(iii)” and
inserting “section 1861(s)(2)(K)”.

(E) Section 1888(e)(2)(A)(ii) (42 U.S.C. 1395yy(e)(2)(A)(ii)), as
added by section 4432(a) (relating to prospective payment system for
rehabilitation hospitals), is amended by striking “through (iii)” and
inserting “and (ii)”.

(b) Increased Payment.– (1) Fee schedule amount.–Subparagraph
(O) of section 1833(a)(1) (42 U.S.C. 1395l(a)(1)) is amended to read
as follows: (O) with respect to services described in section
1861(s)(2)(K)(ii) (relating to nurse practitioner or clinical nurse
specialist services), the amounts paid shall be equal to 80 percent
of (i) the lesser of the actual charge or 85 percent of the fee
schedule amount provided under section 1848, or (ii) in the case of
services as an assistant at surgery, the lesser of the actual charge
or 85 percent of the amount that would otherwise be recognized if
performed by a physician who is serving as an assistant at surgery;
and”.

(2) Conforming amendments.–Section 1833(r) (42 U.S.C. 1395l(r))
is amended– (A) in paragraph (1), by striking “section
1861(s)(2)(K)(iii) (relating to nurse practitioner or clinical nurse
specialist services provided in a rural area)” and inserting “section
1861(s)(2)(K)(ii) (relating to nurse practitioner or clinical nurse
specialist services)”; (B) by striking paragraph (2); (C) in
paragraph (3), by striking “section 1861(s)(2)(K)(iii)” and inserting
“section 1861(s)(2)(K)(ii)”; and (D) by redesignating paragraph (3)
as paragraph (2).

(c) Direct Payment for Nurse Practitioners and Clinical Nurse
Specialists.–Section 1832(a)(2)(B)(iv) (42 U.S.C.
1395k(a)(2)(B)(iv)) is amended by striking “provided in a rural area
(as defined in section 1886(d)(2)(D))” and inserting “but only if no
facility or other provider charges or is paid any amounts with
respect to the furnishing of such services”.

(d) Definition of Clinical Nurse Specialist Clarified.–Section
1861(aa)(5) (42 U.S.C. 1395x(aa)(5)) is amended– (1) by inserting
“(A)” after “(5)”; (2) by striking “The term ‘physician assistant’
and all that follows through “who performs” and inserting “The term
‘physician assistant’ and the term ‘nurse practitioner’ mean, for
purposes of this title, a physician assistant or nurse practitioner
who performs”; and (3) by adding at the end the following new
subparagraph: (B) The term ‘clinical nurse specialist’ means, for
purposes of this title, an individual who– (i) is a registered nurse
and is licensed to practice nursing in the State in which the
clinical nurse specialist services are performed; and (ii) holds a
master’s degree in a defined clinical area of nursing from an
accredited educational institution.”.

(e) Effective Date.–The amendments made by this section shall
apply with respect to services furnished and supplies provided on and
after January 1, 1998.

SEC. 4512. INCREASED MEDICARE REIMBURSEMENT FOR PHYSICIAN ASSISTANTS.

(a) Removal of Restriction on Settings.–Section 1861(s)(2)(K)(i)
(42 U.S.C. 1395x(s)(2)(K)(i)), as amended by section 4511, is
amended– (1) by striking “(I) in a hospital” and all that follows
through “shortage area,”, and (2) by adding at the end the following:
but only if no facility or other provider charges or is paid any
amounts with respect to the furnishing of such services,”.

(b) Increased Payment.– (1) Fee schedule amount.–Section
1833(a)(1)(O) (42 U.S.C. 1395l(a)(1)(O)), as amended by section 4511,
is further amended– (A) by striking “section 1861(s)(2)(K)(ii)” and
inserting “1861(s)(2)(K)”, and (B) by striking “nurse practitioner or
clinical nurse specialist services” and inserting “services furnished
by physician assistants, nurse practitioners, or clinic nurse
specialists”.

(2) Conforming amendment.–Paragraph (12) of section 1842(b) (42
U.S.C. 1395u(b)) is repealed.

(c) Removal of Restriction on Employment Relationship.–Section
1842(b)(6) (42 U.S.C. 1395u(b)(6)), as amended by section 4205, is
amended by adding at the end the following new sentence: For purposes
of subparagraph (C) of the first sentence of this paragraph, an
employment relationship may include any independent contractor
arrangement, and employer status shall be determined in accordance
with the law of the State in which the services described in such
clause are performed.”.

(d) Effective Date.–The amendments made by this section shall
apply with respect to services furnished and supplies provided on and
after January 1, 1998.

SEC. 4513. NO X-RAY REQUIRED FOR CHIROPRACTIC SERVICES.

(a) In General.–Section 1861(r)(5) (42 U.S.C. 1395x(r)(5)) is
amended by striking “demonstrated by X-ray to exist”.

(b) Effective Date.–The amendment made by subsection (a) applies
to services furnished on or after January 1, 2000.

(c) Utilization Guidelines.–The Secretary of Health and Human
Services shall develop and implement utilization guidelines relating
to the coverage of chiropractic services under part B of title XVIII
of the Social Security Act in cases in which a subluxation has not
been demonstrated by X-ray to exist.

CHAPTER 2–PAYMENT FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES

SEC. 4521. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS (FDO) FOR
CERTAIN OUTPATIENT HOSPITAL SERVICES.

(a) Elimination of FDO for Ambulatory Surgical Center
Procedures.– Section 1833(i)(3)(B)(i)(II) (42 U.S.C.
1395l(i)(3)(B)(i)(II)) is amended– (1) by striking “of 80 percent”;
and (2) by striking the period at the end and inserting the
following: , less the amount a provider may charge as described in
clause (ii) of section 1866(a)(2)(A).”.

(b) Elimination of FDO for Radiology Services and Diagnostic
Procedures.–Section 1833(n)(1)(B)(i) (42 U.S.C. 1395l(n)(1)(B)(i))
is amended– (1) by striking “of 80 percent”, and (2) by inserting
before the period at the end the following: , less the amount a
provider may charge as described in clause (ii) of section
1866(a)(2)(A)”.

(c) Effective Date.–The amendments made by this section shall
apply to services furnished during portions of cost reporting periods
occurring on or after October 1, 1997.

SEC. 4522. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF HOSPITAL
OUTPATIENT SERVICES.

(a) Reduction in Payments for Capital-Related Costs.–Section
1861(v)(1)(S)(ii)(I) (42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is amended by
striking “through 1998” and inserting “through 1999 and during fiscal
year 2000 before January 1, 2000”.

(b) Reduction in Payments for Other Costs.–Section
1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is amended
by striking “through 1998” and inserting “through 1999 and during
fiscal year 2000 before January 1, 2000”.

SEC. 4523. PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES.

(a) In General.–Section 1833 (42 U.S.C. 1395l) is amended by
adding at the end the following: (t) Prospective Payment System for
Hospital Outpatient Department Services.– (1) Amount of payment.–
(A) In general.–With respect to covered OPD services (as defined in
subparagraph (B)) furnished during a year beginning with 1999, the
amount of payment under this part shall be determined under a
prospective payment system established by the Secretary in accordance
with this subsection.

(B) Definition of covered opd services.–For purposes of this
subsection, the term ‘covered OPD services’– (i) means hospital
outpatient services designated by the Secretary; (ii) subject to
clause (iii), includes inpatient hospital services designated by the
Secretary that are covered under this part and furnished to a
hospital inpatient who (I) is entitled to benefits under part A but
has exhausted benefits for inpatient hospital services during a spell
of illness, or (II) is not so entitled; but (iii) does not include
any therapy services described in subsection (a)(8) or ambulance
services, for which payment is made under a fee schedule described in
section 1834(k) or section 1834(l).

(2) System requirements.–Under the payment system– (A) the
Secretary shall develop a classification system for covered OPD
services; (B) the Secretary may establish groups of covered OPD
services, within the classification system described in subparagraph
(A), so that services classified within each group are comparable
clinically and with respect to the use of resources; (C) the
Secretary shall, using data on claims from 1996 and using data from
the most recent available cost reports, establish relative payment
weights for covered OPD services (and any groups of such services
described in subparagraph (B)) based on median hospital costs and
shall determine projections of the frequency of utilization of each
such service (or group of services) in 1999; (D) the Secretary shall
determine a wage adjustment factor to adjust the portion of payment
and coinsurance attributable to labor-related costs for relative
differences in labor and labor-related costs across geographic
regions in a budget neutral manner; (E) the Secretary shall establish
other adjustments, in a budget neutral manner, as determined to be
necessary to ensure equitable payments, such as outlier adjustments
or adjustments for certain classes of hospitals; and (F) the
Secretary shall develop a method for controlling unnecessary
increases in the volume of covered OPD services.

(3) Calculation of base amounts.– (A) Aggregate amounts that
would be payable if deductibles were disregarded.–The Secretary
shall estimate the sum of– (i) the total amounts that would be
payable from the Trust Fund under this part for covered OPD services
in 1999, determined without regard to this subsection, as though the
deductible under section 1833(b) did not apply, and (ii) the total
amounts of copayments estimated to be paid under this subsection by
beneficiaries to hospitals for covered OPD services in 1999, as
though the deductible under section 1833(b) did not apply.

(B) Unadjusted copayment amount.– (i) In general.–For purposes
of this subsection, subject to clause (ii), the ‘unadjusted copayment
amount’ applicable to a covered OPD service (or group of such
services) is 20 percent of the national median of the charges for the
service (or services within the group) furnished during 1996, updated
to 1999 using the Secretary’s estimate of charge growth during the
period.

(ii) Adjusted to be 20 percent when fully phased in.–If the
pre-deductible payment percentage for a covered OPD service (or group
of such services) furnished in a year would be equal to or exceed 80
percent, then the unadjusted copayment amount shall be 20 percent of
amount determined under subparagraph (D).

(iii) Rules for new services.–The Secretary shall establish rules
for establishment of an unadjusted copayment amount for a covered OPD
service not furnished during 1996, based upon its classification
within a group of such services.

(C) Calculation of conversion factors.– (i) For 1999.–

(I) In general.–The Secretary shall establish a 1999 conversion
factor for determining the medicare OPD fee schedule amounts for each
covered OPD service (or group of such services) furnished in 1999.
Such conversion factor shall be established on the basis of the
weights and frequencies described in paragraph (2)(C) and in such a
manner that the sum for all services and groups of the products
(described in subclause (II) for each such service or group) equals
the total projected amount described in subparagraph (A).

(II) Product described.–The Secretary shall determine for each
service or group the product of the medicare OPD fee schedule amounts
(taking into account appropriate adjustments described in paragraphs
(2)(D) and (2)(E)) and the estimated frequencies for such service or
group.

(ii) Subsequent years.–Subject to paragraph (8)(B), the Secretary
shall establish a conversion factor for covered OPD services
furnished in subsequent years in an amount equal to the conversion
factor established under this subparagraph and applicable to such
services furnished in the previous year increased by the OPD fee
schedule increase factor specified under clause (iii) for the year
involved.

(iii) OPD fee schedule increase factor.–For purposes of this
subparagraph, the ‘OPD fee schedule increase factor’ for services
furnished in a year is equal to the market basket percentage increase
applicable under section 1886(b)(3)(B)(iii) to hospital discharges
occurring during the fiscal year ending in such year, reduced by 1
percentage point for such factor for services furnished in each of
2000, 2001, and 2002. In applying the previous sentence for years
beginning with 2000, the Secretary may substitute for the market
basket percentage increase an annual percentage increase that is
computed and applied with respect to covered OPD services furnished
in a year in the same manner as the market basket percentage increase
is determined and applied to inpatient hospital services for
discharges occurring in a fiscal year.

(D) Calculation of medicare opd fee schedule amounts.– The
Secretary shall compute a medicare OPD fee schedule amount for each
covered OPD service (or group of such services) furnished in a year,
in an amount equal to the product of– (i) the conversion factor
computed under subparagraph (C) for the year, and (ii) the relative
payment weight (determined under paragraph (2)(C)) for the service or
group.

(E) Pre-deductible payment percentage.–The pre- deductible
payment percentage for a covered OPD service (or group of such
services) furnished in a year is equal to the ratio of– (i) the
medicare OPD fee schedule amount established under subparagraph (D)
for the year, minus the unadjusted copayment amount determined under
subparagraph (B) for the service or group, to (ii) the medicare OPD
fee schedule amount determined under subparagraph (D) for the year
for such service or group.

(4) Medicare payment amount.–The amount of payment made from the
Trust Fund under this part for a covered OPD service (and such
services classified within a group) furnished in a year is determined
as follows: (A) Fee schedule adjustments.–The medicare OPD fee
schedule amount (computed under paragraph (3)(D)) for the service or
group and year is adjusted for relative differences in the cost of
labor and other factors determined by the Secretary, as computed
under paragraphs (2)(D) and (2)(E).

(B) Subtract applicable deductible.–Reduce the adjusted amount
determined under subparagraph (A) by the amount of the deductible
under section 1833(b), to the extent applicable.

(C) Apply payment proportion to remainder.–The amount of payment
is the amount so determined under subparagraph (B) multiplied by the
pre-deductible payment percentage (as determined under paragraph
(3)(E)) for the service or group and year involved.

(5) Copayment amount.– (A) In general.–Except as provided in
subparagraph (B), the copayment amount under this subsection is the
amount by which the amount described in paragraph (4)(B) exceeds the
amount of payment determined under paragraph (4)(C).

(B) Election to offer reduced copayment amount.–The Secretary
shall establish a procedure under which a hospital, before the
beginning of a year (beginning with 1999), may elect to reduce the
copayment amount otherwise established under subparagraph (A) for
some or all covered OPD services to an amount that is not less than
20 percent of the medicare OPD fee schedule amount (computed under
paragraph (3)(D)) for the service involved. Under such procedures,
such reduced copayment amount may not be further reduced or increased
during the year involved and the hospital may disseminate information
on the reduction of copayment amount effected under this
subparagraph.

(C) No impact on deductibles.–Nothing in this paragraph shall be
construed as affecting a hospital’s authority to waive the charging
of a deductible under section 1833(b).

(6) Periodic review and adjustments components of prospective
payment system.– (A) Periodic review.–The Secretary may
periodically review and revise the groups, the relative payment
weights, and the wage and other adjustments described in paragraph
(2) to take into account changes in medical practice, changes in
technology, the addition of new services, new cost data, and other
relevant information and factors.

(B) Budget neutrality adjustment.–If the Secretary makes
adjustments under subparagraph (A), then the adjustments for a year
may not cause the estimated amount of expenditures under this part
for the year to increase or decrease from the estimated amount of
expenditures under this part that would have been made if the
adjustments had not been made.

(C) Update factor.–If the Secretary determines under
methodologies described in paragraph (2)(F) that the volume of
services paid for under this subsection increased beyond amounts
established through those methodologies, the Secretary may
appropriately adjust the update to the conversion factor otherwise
applicable in a subsequent year.

(7) Special rule for ambulance services.–The Secretary shall pay
for hospital outpatient services that are ambulance services on the
basis described in the matter in subsection (a)(1) preceding
subparagraph (A), or, if applicable, the fee schedule established
under section 1834(l).

(8) Special rules for certain hospitals.–In the case of hospitals
described in section 1886(d)(1)(B)(v)– (A) the system under this
subsection shall not apply to covered OPD services furnished before
January 1, 2000; and (B) the Secretary may establish a separate
conversion factor for such services in a manner that specifically
takes into account the unique costs incurred by such hospitals by
virtue of their patient population and service intensity.

(9) Limitation on review.–There shall be no administrative or
judicial review under section 1869, 1878, or otherwise of– (A) the
development of the classification system under paragraph (2),
including the establishment of groups and relative payment weights
for covered OPD services, of wage adjustment factors, other
adjustments, and methods described in paragraph (2)(F); (B) the
calculation of base amounts under paragraph (3); (C) periodic
adjustments made under paragraph (6); and (D) the establishment of a
separate conversion factor under paragraph (8)(B).”.

(b) Coinsurance.–Section 1866(a)(2)(A)(ii) (42 U.S.C.
1395cc(a)(2)(A)(ii)) is amended by adding at the end the following:
In the case of items and services for which payment is made under
part B under the prospective payment system established under section
1833(t), clause (ii) of the first sentence shall be applied by
substituting for 20 percent of the reasonable charge, the applicable
copayment amount established under section 1833(t)(5).”.

(c) Treatment of Reduction in Copayment Amount.–Section
1128A(i)(6) (42 U.S.C. 1320a-7a(i)(6)) is amended– (1) by striking
“or” at the end of subparagraph (B), (2) by striking the period at
the end of subparagraph (C) and inserting “; or”, and (3) by adding
at the end the following new subparagraph: (D) a reduction in the
copayment amount for covered OPD services under section
1833(t)(5)(B).”.

(d) Conforming Amendments.– (1) Approved asc procedures performed
in hospital outpatient departments.– (A)(i) Section 1833(i)(3)(A)
(42 U.S.C. 1395l(i)(3)(A)) is amended– (I) by inserting “before
January 1, 1999,” after “furnished”, and (II) by striking “in a cost
reporting period”.

(ii) The amendment made by clause (i) shall apply to services
furnished on or after January 1, 1999.

(B) Section 1833(a)(4) (42 U.S.C. 1395l(a)(4)) is amended by
inserting “or subsection (t)” before the semicolon.

(2) Radiology and other diagnostic procedures.– (A) Section
1833(n)(1)(A) (42 U.S.C. 1395l(n)(1)(A)) is amended by inserting “and
before January 1, 1999,” after “October 1, 1988,” and after “October
1, 1989,”.

(B) Section 1833(a)(2)(E) (42 U.S.C. 1395l(a)(2)(E)) is amended by
inserting “or, for services or procedures performed on or after
January 1, 1999, subsection (t)” before the semicolon.

(3) Other hospital outpatient services.–Section 1833(a)(2)(B) (42
U.S.C. 1395l(a)(2)(B)) is amended– (A) in clause (i), by inserting
“furnished before January 1, 1999,” after “(i)”, (B) in clause (ii),
by inserting “before January 1, 1999,” after “furnished”, (C) by
redesignating clause (iii) as clause (iv), and (D) by inserting after
clause (ii), the following new clause: (iii) if such services are
furnished on or after January 1, 1999, the amount determined under
subsection (t), or”.

CHAPTER 3–AMBULANCE SERVICES

SEC. 4531. PAYMENTS FOR AMBULANCE SERVICES.

(a) Interim Reductions.– (1) Payments determined on reasonable
cost basis.–Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended
by section 4451, is amended by adding at the end the following new
subparagraph: (U) In determining the reasonable cost of ambulance
services (as described in subsection (s)(7)) provided during fiscal
year 1998, during fiscal year 1999, and during so much of fiscal year
2000 as precedes January 1, 2000, the Secretary shall not recognize
the costs per trip in excess of costs recognized as reasonable for
ambulance services provided on a per trip basis during the previous
fiscal year (after application of this subparagraph), increased by
the percentage increase in the consumer price index for all urban
consumers (U.S. city average) as estimated by the Secretary for the
12- month period ending with the midpoint of the fiscal year involved
reduced by 1.0 percentage point. For ambulance services provided
after June 30, 1998, the Secretary may provide that claims for such
services must include a code (or codes) under a uniform coding system
specified by the Secretary that identifies the services furnished.”.

(2) Payments determined on reasonable charge basis.–Section
1842(b) (42 U.S.C. 1395u(b)) is amended by adding at the end the
following new paragraph: (19) For purposes of section 1833(a)(1), the
reasonable charge for ambulance services (as described in section
1861(s)(7)) provided during calendar year 1998 and calendar year 1999
may not exceed the reasonable charge for such services provided
during the previous calendar year (after application of this
paragraph), increased by the percentage increase in the consumer
price index for all urban consumers (U.S. city average) as estimated
by the Secretary for the 12-month period ending with the midpoint of
the year involved reduced by 1.0 percentage point.”.

(b) Establishment of Prospective Fee Schedule.– (1) Payment in
accordance with fee schedule.–Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)), as amended by section 4315(b), is amended– (A) by
striking “and (Q)” and inserting “(Q)”; and (B) by striking the
semicolon at the end and inserting the following: , and (R) with
respect to ambulance service, the amounts paid shall be 80 percent of
the lesser of the actual charge for the services or the amount
determined by a fee schedule established by the Secretary under
section 1834(l);”.

(2) Establishment of schedule.–Section 1834 (42 U.S.C. 1395m), as
amended by section 4541, is amended by adding at the end the
following new subsection: (l) Establishment of Fee Schedule for
Ambulance Services.– (1) In general.–The Secretary shall establish
a fee schedule for payment for ambulance services whether provided
directly by a supplier or provider or under arrangement with a
provider under this part through a negotiated rulemaking process
described in title 5, United States Code, and in accordance with the
requirements of this subsection.

(2) Considerations.–In establishing such fee schedule, the
Secretary shall– (A) establish mechanisms to control increases in
expenditures for ambulance services under this part; (B) establish
definitions for ambulance services which link payments to the type of
services provided; (C) consider appropriate regional and operational
differences; (D) consider adjustments to payment rates to account for
inflation and other relevant factors; and (E) phase in the
application of the payment rates under the fee schedule in an
efficient and fair manner.

(3) Savings.–In establishing such fee schedule, the Secretary
shall– (A) ensure that the aggregate amount of payments made for
ambulance services under this part during 2000 does not exceed the
aggregate amount of payments which would have been made for such
services under this part during such year if the amendments made by
section 4531(a) of the Balanced Budget Act of 1997 continued in
effect, except that in making such determination the Secretary shall
assume an update in such payments for 2002 equal to percentage
increase in the consumer price index for all urban consumers (U.S.
city average) for the 12-month period ending with June of the
previous year reduced in the case of 2001 and 2002 by 1.0 percentage
points; and (B) set the payment amounts provided under the fee
schedule for services furnished in 2001 and each subsequent year at
amounts equal to the payment amounts under the fee schedule for
services furnished during the previous year, increased by the
percentage increase in the consumer price index for all urban
consumers (U.S. city average) for the 12- month period ending with
June of the previous year reduced in the case of 2001 and 2002 by 1.0
percentage points.

(4) Consultation.–In establishing the fee schedule for ambulance
services under this subsection, the Secretary shall consult with
various national organizations representing individuals and entities
who furnish and regulate ambulance services and share with such
organizations relevant data in establishing such schedule.

(5) Limitation on review.–There shall be no administrative or
judicial review under section 1869 or otherwise of the amounts
established under the fee schedule for ambulance services under this
subsection, including matters described in paragraph (2).

(6) Restraint on billing.–The provisions of subparagraphs (A) and
(B) of section 1842(b)(18) shall apply to ambulance services for
which payment is made under this subsection in the same manner as
they apply to services provided by a practitioner described in
section 1842(b)(18)(C).

(7) Coding system.–The Secretary may require the claim for any
services for which the amount of payment is determined under this
subsection to include a code (or codes) under a uniform coding system
specified by the Secretary that identifies the services furnished.”.

(3) Effective date.–The amendments made by this subsection shall
apply to services furnished on or after January 1, 2000.

(c) Authorizing Payment for Paramedic Intercept Service Providers
in Rural Communities.–In promulgating regulations to carry out
section 1861(s)(7) of the Social Security Act (42 U.S.C. 1395x(s)(7))
with respect to the coverage of ambulance service, the Secretary of
Health and Human Services may include coverage of advanced life
support services (in this subsection referred to as ALS intercept
services”) provided by a paramedic intercept service provider in a
rural area if the following conditions are met: (1) The ALS intercept
services are provided under a contract with one or more volunteer
ambulance services and are medically necessary based on the health
condition of the individual being transported.

(2) The volunteer ambulance service involved– (A) is certified as
qualified to provide ambulance service for purposes of such section,
(B) provides only basic life support services at the time of the
intercept, and (C) is prohibited by State law from billing for any
services.

(3) The entity supplying the ALS intercept services– (A) is
certified as qualified to provide such services under the medicare
program under title XVIII of the Social Security Act, and (B) bills
all recipients who receive ALS intercept services from the entity,
regardless of whether or not such recipients are medicare
beneficiaries.

SEC. 4532. DEMONSTRATION OF COVERAGE OF AMBULANCE SERVICES UNDER
MEDICARE THROUGH CONTRACTS WITH UNITS OF LOCAL GOVERNMENT.

(a) Demonstration Project Contracts with Local Governments.–The
Secretary of Health and Human Services shall establish up to 3
demonstration projects under which, at the request of a unit of local
government, the Secretary enters into a contract with the unit of
local government under which– (1) the unit of local government
furnishes (or arranges for the furnishing of) ambulance services for
which payment may be made under part B of title XVIII of the Social
Security Act for individuals residing in the unit of local government
who are enrolled under such part, except that the unit of local
government may not enter into the contract unless the contract covers
at least 80 percent of the individuals residing in the unit of local
government who are enrolled under such part but not in a
Medicare+Choice plan; (2) any individual or entity furnishing
ambulance services under the contract meets the requirements
otherwise applicable to individuals and entities furnishing such
services under such part; and (3) for each month during which the
contract is in effect, the Secretary makes a capitated payment to the
unit of local government in accordance with subsection (b).

The projects may extend over a period of not to exceed 3 years
each.

(b) Amount of Payment.– (1) In general.–The amount of the
monthly payment made for months occurring during a calendar year to a
unit of local government under a demonstration project contract under
subsection (a) shall be equal to the product of– (A) the Secretary’s
estimate of the number of individuals covered under the contract for
the month; and (B) \1/12\ of the capitated payment rate for the year
established under paragraph (2).

(2) Capitated payment rate defined.–In this subsection, the
capitated payment rate” applicable to a contract under this
subsection for a calendar year is equal to 95 percent of– (A) for
the first calendar year for which the contract is in effect, the
average annual per capita payment made under part B of title XVIII of
the Social Security Act with respect to ambulance services furnished
to such individuals during the 3 most recent calendar years for which
data on the amount of such payment is available; and (B) for a
subsequent year, the amount provided under this paragraph for the
previous year increased by the percentage increase in the consumer
price index for all urban consumers (U.S. city average) for the
12-month period ending with June of the previous year.

(c) Other Terms of Contract.–The Secretary and the unit of local
government may include in a contract under this section such other
terms as the parties consider appropriate, including– (1) covering
individuals residing in additional units of local government (under
arrangements entered into between such units and the unit of local
government involved); (2) permitting the unit of local government to
transport individuals to non-hospital providers if such providers are
able to furnish quality services at a lower cost than hospital
providers; or (3) implementing such other innovations as the unit of
local government may propose to improve the quality of ambulance
services and control the costs of such services.

(d) Contract Payments in Lieu of Other Benefits.–Payments under a
contract to a unit of local government under this section shall be
instead of the amounts which (in the absence of the contract) would
otherwise be payable under part B of title XVIII of the Social
Security Act for the services covered under the contract which are
furnished to individuals who reside in the unit of local government.

(e) Report on Effects of Capitated Contracts.– (1) Study.–The
Secretary shall evaluate the demonstration projects conducted under
this section. Such evaluation shall include an analysis of the
quality and cost-effectiveness of ambulance services furnished under
the projects.

(2) Report.–Not later than January 1, 2000, the Secretary shall
submit a report to Congress on the study conducted under paragraph
(1), and shall include in the report such recommendations as the
Secretary considers appropriate, including recommendations regarding
modifications to the methodology used to determine the amount of
payments made under such contracts and extending or expanding such
projects.

CHAPTER 4–PROSPECTIVE PAYMENT FOR OUTPATIENT
REHABILITATION SERVICES

SEC. 4541. PROSPECTIVE PAYMENT FOR OUTPATIENT REHABILITATION
SERVICES.

(a) Payment Based on Fee Schedule.– (1) Special payment
rules.–Section 1833(a) (42 U.S.C. 1395l(a)) is amended– (A) in
paragraph (2) in the matter before subparagraph (A), by inserting
“(C),” before (D)”; (B) in paragraph (3), by striking “subparagraphs
(D) and (E) of section 1832(a)(2)” and inserting “section
1832(a)(2)(D)”; (C) in paragraph (6), by striking “and” at the end;
(D) in paragraph (7), by striking the period at the end and inserting
a semicolon; and (E) by adding at the end the following new
paragraphs: (8) in the case of– (A) outpatient physical therapy
services (which includes outpatient speech-language pathology
services) and outpatient occupational therapy services furnished–
(i) by a rehabilitation agency, public health agency, clinic,
comprehensive outpatient rehabilitation facility, or skilled nursing
facility, (ii) by a home health agency to an individual who is not
homebound, or (iii) by another entity under an arrangement with an
entity described in clause (i) or (ii); and (B) outpatient physical
therapy services (which includes outpatient speech-language pathology
services) and outpatient occupational therapy services furnished–
(i) by a hospital to an outpatient or to a hospital inpatient who is
entitled to benefits under part A but has exhausted benefits for
inpatient hospital services during a spell of illness or is not so
entitled to benefits under part A, or (ii) by another entity under an
arrangement with a hospital described in clause (i), the amounts
described in section 1834(k); and (9) in the case of services
described in section 1832(a)(2)(E) that are not described in
paragraph (8), the amounts described in section 1834(k).”.

(2) Payment rates.–Section 1834 (42 U.S.C. 1395m) is amended by
adding at the end the following new subsection: (k) Payment for
Outpatient Therapy Services and Comprehensive Outpatient
Rehabilitation Services.– (1) In general.–With respect to services
described in section 1833(a)(8) or 1833(a)(9) for which payment is
determined under this subsection, the payment basis shall be– (A)
for services furnished during 1998, the amount determined under
paragraph (2); or (B) for services furnished during a subsequent
year, 80 percent of the lesser of– (i) the actual charge for the
services, or (ii) the applicable fee schedule amount (as defined in
paragraph (3)) for the services.

(2) Payment in 1998 based upon adjusted reasonable costs.– The
amount under this paragraph for services is the lesser of– (A) the
charges imposed for the services, or (B) the adjusted reasonable
costs (as defined in paragraph (4)) for the services, less 20 percent
of the amount of the charges imposed for such services.

(3) Applicable fee schedule amount.–In this subsection, the term
‘applicable fee schedule amount’ means, with respect to services
furnished in a year, the amount determined under the fee schedule
established under section 1848 for such services furnished during the
year or, if there is no such fee schedule established for such
services, the amount determined under the fee schedule established
for such comparable services as the Secretary specifies.

(4) Adjusted reasonable costs.–In paragraph (2), the term
‘adjusted reasonable costs’ means, with respect to any services,
reasonable costs determined for such services, reduced by 10 percent.
The 10-percent reduction shall not apply to services described in
section 1833(a)(8)(B) (relating to services provided by hospitals).

(5) Uniform coding.–For claims for services submitted on or after
April 1, 1998, for which the amount of payment is determined under
this subsection, the claim shall include a code (or codes) under a
uniform coding system specified by the Secretary that identifies the
services furnished.

(6) Restraint on billing.–The provisions of subparagraphs (A) and
(B) of section 1842(b)(18) shall apply to therapy services for which
payment is made under this subsection in the same manner as they
apply to services provided by a practitioner described in section
1842(b)(18)(C).”.

(3) Conforming change in billing.–Section 1866(a)(2)(A)(ii) (42
U.S.C. 1395cc(a)(2)(A)(ii)) is amended by adding at the end the
following: In the case of services described in section 1833(a)(8) or
section 1833(a)(9) for which payment is made under part B under
section 1834(k), clause (ii) of the first sentence shall be applied
by substituting for 20 percent of the reasonable charge for such
services 20 percent of the lesser of the actual charge or the
applicable fee schedule amount (as defined in such section) for such
services.”.

(b) Application of Standards to Outpatient Occupational and
Physical Therapy Services Provided As an Incident to a Physician’s
Professional Services.–Section 1862(a), as amended by sections
4319(b), 4432(b), and 4507(a)(2)(B), (42 U.S.C. 1395y(a)) is
amended– (1) by striking “or” at the end of paragraph (18); (2) by
striking the period at the end of paragraph (19) and inserting “;
or”; and (3) by inserting after paragraph (19) the following: (20) in
the case of outpatient occupational therapy services or outpatient
physical therapy services furnished as an incident to a physician’s
professional services (as described in section 1861(s)(2)(A)), that
do not meet the standards and conditions (other than any licensing
requirement specified by the Secretary) under the second sentence of
section 1861(p) (or under such sentence through the operation of
section 1861(g)) as such standards and conditions would apply to such
therapy services if furnished by a therapist.”.

(c) Applying Financial Limitation to All Rehabilitation
Services.– Section 1833(g) (42 U.S.C. 1395l(g)) is amended– (1) in
the first sentence, by striking “services described in the second
sentence of section 1861(p)” and inserting “physical therapy services
of the type described in section 1861(p), but not described in
section 1833(a)(8)(B), and physical therapy services of such type
which are furnished by a physician or as incident to physicians’
services”, and (2) in the second sentence, by striking “outpatient
occupational therapy services which are described in the second
sentence of section 1861(p) through the operation of section 1861(g)”
and inserting “occupational therapy services (of the type that are
described in section 1861(p) (but not described in section
1833(a)(8)(B)) through the operation of section 1861(g) and of such
type which are furnished by a physician or as incident to physicians’
services)”.

(d) Indexing Limitation.– (1) In general.–Section 1833(g) (42
U.S.C. 1395l(g)), as amended by subsection (c), is further amended–
(A) by striking “$900” each place it appears and inserting “the
amount specified in paragraph (2) for the year”, (B) by inserting
“(1)” after “(g)”, (C) by designating the last sentence as a
paragraph (3), and (D) by inserting before paragraph (3), as so
designated, the following: (2) The amount specified in this
paragraph– (A) for 1999, 2000, and 2001, is $1,500, and (B) for a
subsequent year is the amount specified in this paragraph for the
preceding year increased by the percentage increase in the MEI (as
defined in section 1842(i)(3)) for such subsequent year; except that
if an increase under subparagraph (B) for a year is not a multiple of
$10, it shall be rounded to the nearest multiple of $10.”.

(2) Report.–By not later than January 1, 2001, the Secretary of
Health and Human Services shall submit to Congress a report that
includes recommendations on the establishment of a revised coverage
policy of outpatient physical therapy services and outpatient
occupational therapy services under the Social Security Act based on
classification of individuals by diagnostic category and prior use of
services, in both inpatient and outpatient settings, in place of the
uniform dollar limitations specified in section 1833(g) of such Act,
as amended by paragraph (1). The recommendations shall include how
such a system of durational limits by diagnostic category might be
implemented in a budget- neutral manner.

(e) Effective Dates.– (1) The amendments made by subsections
(a)(1), (a)(2), and (b) apply to services furnished on or after
January 1, 1998, including portions of cost reporting periods
occurring on or after such date, except that section 1834(k) of the
Social Security Act (as added by subsection (a)(2)) shall not apply
to services described in section 1833(a)(8)(B) of such Act (as added
by subsection (a)(1)) that are furnished during 1998.

(2) The amendments made by subsections (a)(3) and (c) apply to
services furnished on or after January 1, 1999.

(3) The amendments made by subsection (d)(1) apply to expenses
incurred on or after January 1, 1999.

CHAPTER 5–OTHER PAYMENT PROVISIONS

SEC. 4551. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

(a) Reduction in Payment Amounts for Items of Durable Medical
Equipment.– (1) Freeze in update for covered items.–Section
1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended– (A) in subparagraph
(A), by striking “and” at the end; (B) in subparagraph (B)– (i) by
striking “a subsequent year” and inserting “1993, 1994, 1995, 1996,
and 1997″, and (ii) by striking the period at the end and inserting a
semicolon; and (C) by adding at the end the following new
subparagraphs: (C) for each of the years 1998 through 2002, 0
percentage points; and (D) for a subsequent year, the percentage
increase in the consumer price index for all urban consumers (U.S.
urban average) for the 12-month period ending with June of the
previous year.”.

(2) Update for orthotics and prosthetics.–Section 1834(h)(4)(A)
(42 U.S.C. 1395m(h)(4)(A)) is amended– (A) in clause (iii), by
striking “, and” at the end and inserting a semicolon; (B) in clause
(iv), by striking “a subsequent year” and inserting “1996 and 1997″;
and (C) by adding at the end the following new clauses: (v) for each
of the years 1998 through 2002, 1 percent, and (vi) for a subsequent
year, the percentage increase in the consumer price index for all
urban consumers (United States city average) for the 12-month period
ending with June of the previous year;”.

(b) Payment Freeze for Parenteral and Enteral Nutrients, Supplies,
and Equipment.–In determining the amount of payment under part B of
title XVIII of the Social Security Act with respect to parenteral and
enteral nutrients, supplies, and equipment during each of the years
1998 through 2002, the charges determined to be reasonable with
respect to such nutrients, supplies, and equipment may not exceed the
charges determined to be reasonable with respect to such nutrients,
supplies, and equipment during 1995.

(c) Upgraded Durable Medical Equipment.– (1) In general.–Section
1834(a) (42 U.S.C. 1395m(a)), as amended by section 4312(a), is
amended by inserting after paragraph (16) the following new
paragraph: (17) Certain upgraded items.– (A) Individual’s right to
choose upgraded item.– Notwithstanding any other provision of this
title, the Secretary may issue regulations under which an individual
may purchase or rent from a supplier an item of upgraded durable
medical equipment for which payment would be made under this
subsection if the item were a standard item.

(B) Payments to supplier.–In the case of the purchase or rental
of an upgraded item under subparagraph (A)– (i) the supplier shall
receive payment under this subsection with respect to such item as if
such item were a standard item; and (ii) the individual purchasing or
renting the item shall pay the supplier an amount equal to the
difference between the supplier’s charge and the amount under clause
(i).

In no event may the supplier’s charge for an upgraded item exceed
the applicable fee schedule amount (if any) for such item.

(C) Consumer protection safeguards.–Any regulations under
subparagraph (A) shall provide for consumer protection standards with
respect to the furnishing of upgraded equipment under subparagraph
(A). Such regulations shall provide for– (i) determination of fair
market prices with respect to an upgraded item; (ii) full disclosure
of the availability and price of standard items and proof of receipt
of such disclosure information by the beneficiary before the
furnishing of the upgraded item; (iii) conditions of participation
for suppliers in the billing arrangement; (iv) sanctions of suppliers
who are determined to engage in coercive or abusive practices,
including exclusion; and (v) such other safeguards as the Secretary
determines are necessary.”.

(2) Effective date.–The amendment made by paragraph (1) shall
apply to purchases or rentals after the effective date of any
regulations issued pursuant to such amendment.

SEC. 4552. OXYGEN AND OXYGEN EQUIPMENT.

(a) In General.–Section 1834(a)(9)(B) (42 U.S.C. 1395m(a)(9)(B))
is amended– (1) in clause (iii), by striking “and” at the end; (2)
in clause (iv)– (A) by striking “each subsequent year” and inserting
“1995, 1996, and 1997″, and (B) by striking the period at the end and
inserting a semicolon; and (3) by adding at the end the following new
clauses: (v) for 1998, 75 percent of the amount determined under this
subparagraph for 1997; and (vi) for 1999 and each subsequent year, 70
percent of the amount determined under this subparagraph for 1997.”.

(b) Establishment of Classes for Payment.–Section 1848(a)(9) (42
U.S.C. 1395m(a)(9)) is amended by adding at the end the following new
subparagraph: (D) Authority to create classes.– (i) In
general.–Subject to clause (ii), the Secretary may establish
separate classes for any item of oxygen and oxygen equipment and
separate national limited monthly payment rates for each of such
classes.

(ii) Budget neutrality.–The Secretary may take actions under
clause (i) only to the extent such actions do not result in
expenditures for any year to be more or less than the expenditures
which would have been made if such actions had not been taken.”.

(c) Standards.–The Secretary shall as soon as practicable
establish service standards for persons seeking payment under part B
of title XVIII of the Social Security Act for the providing of oxygen
and oxygen equipment to beneficiaries within their homes.

(d) Access to Home Oxygen Equipment.– (1) Study.–The Comptroller
General of the United States shall study issues relating to access to
home oxygen equipment and shall, within 18 months after the date of
the enactment of this Act, report to the Committees on Commerce and
Ways and Means of the House of Representatives and the Committee on
Finance of the Senate the results of the study, including
recommendations (if any) for legislation.

(2) Peer review evaluation.–The Secretary of Health and Human
Services shall arrange for peer review organizations established
under section 1154 of the Social Security Act to evaluate access to,
and quality of, home oxygen equipment.

(e) Effective Date.– (1) Oxygen.–The amendments made by
subsection (a) shall apply to items furnished on and after January 1,
1998.

(2) Other provisions.–The amendments made by this section other
than subsection (a) shall take effect on the date of the enactment of
this Act.

SEC. 4553. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR CLINICAL
DIAGNOSTIC LABORATORY TESTS; STUDY ON LABORATORY TESTS.

(a) Change in Update.–Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C.
1395l(h)(2)(A)(ii)(IV)) is amended by inserting “and 1998 through
2002” after “1995”.

(b) Lowering Cap on Payment Amounts.–Section 1833(h)(4)(B) (42
U.S.C. 1395l(h)(4)(B)) is amended– (1) in clause (vi), by striking
“and” at the end; (2) in clause (vii)– (A) by inserting “and before
January 1, 1998,” after “1995,”, and (B) by striking the period at
the end and inserting “, and”; and (3) by adding at the end the
following new clause: (viii) after December 31, 1997, is equal to 74
percent of such median.”.

(c) Study and Report on Clinical Laboratory Tests.– (1) In
general.–The Secretary shall request the Institute of Medicine of
the National Academy of Sciences to conduct a study of payments under
part B of title XVIII of the Social Security Act for clinical
laboratory tests. The study shall include a review of the adequacy of
the current methodology and recommendations regarding alternative
payment systems. The study shall also analyze and discuss the
relationship between such payment systems and access to high quality
laboratory tests for medicare beneficiaries, including availability
and access to new testing methodologies.

(2) Report to congress.–The Secretary shall, not later than 2
years after the date of enactment of this section, report to the
Committees on Ways and Means and Commerce of the House of
Representatives and the Committee on Finance of the Senate the
results of the study described in paragraph (1), including any
recommendations for legislation.

SEC. 4554. IMPROVEMENTS IN ADMINISTRATION OF LABORATORY TESTS
BENEFIT.

(a) Selection of Regional Carriers.– (1) In general.–The
Secretary of Health and Human Services (in this section referred to
as the Secretary”) shall– (A) divide the United States into no more
than 5 regions, and (B) designate a single carrier for each such
region, for the purpose of payment of claims under part B of title
XVIII of the Social Security Act with respect to clinical diagnostic
laboratory tests furnished on or after such date (not later than July
1, 1999) as the Secretary specifies.

(2) Designation.–In designating such carriers, the Secretary
shall consider, among other criteria– (A) a carrier’s timeliness,
quality, and experience in claims processing, and (B) a carrier’s
capacity to conduct electronic data interchange with laboratories and
data matches with other carriers.

(3) Single data resource.–The Secretary shall select one of the
designated carriers to serve as a central statistical resource for
all claims information relating to such clinical diagnostic
laboratory tests handled by all the designated carriers under such
part.

(4) Allocation of claims.–The allocation of claims for clinical
diagnostic laboratory tests to particular designated carriers shall
be based on whether a carrier serves the geographic area where the
laboratory specimen was collected or other method specified by the
Secretary.

(5) Secretarial exclusion.–Paragraph (1) shall not apply with
respect to clinical diagnostic laboratory tests furnished by
physician office laboratories if the Secretary determines that such
offices would be unduly burdened by the application of billing
responsibilities with respect to more than one carrier.

(b) Adoption of National Policies for Clinical Laboratory Tests
Benefit.– (1) In general.–Not later than January 1, 1999, the
Secretary shall first adopt, consistent with paragraph (2), national
coverage and administrative policies for clinical diagnostic
laboratory tests under part B of title XVIII of the Social Security
Act, using a negotiated rulemaking process under subchapter III of
chapter 5 of title 5, United States Code.

(2) Considerations in design of national policies.–The policies
under paragraph (1) shall be designed to promote program integrity
and national uniformity and simplify administrative requirements with
respect to clinical diagnostic laboratory tests payable under such
part in connection with the following: (A) Beneficiary information
required to be submitted with each claim or order for laboratory
tests.

(B) The medical conditions for which a laboratory test is
reasonable and necessary (within the meaning of section 1862(a)(1)(A)
of the Social Security Act).

(C) The appropriate use of procedure codes in billing for a
laboratory test, including the unbundling of laboratory services.

(D) The medical documentation that is required by a medicare
contractor at the time a claim is submitted for a laboratory test in
accordance with section 1833(e) of the Social Security Act.

(E) Recordkeeping requirements in addition to any information
required to be submitted with a claim, including physicians’
obligations regarding such requirements.

(F) Procedures for filing claims and for providing remittances by
electronic media.

(G) Limitation on frequency of coverage for the same tests
performed on the same individual.

(3) Changes in laboratory policies pending adoption of national
policy.–During the period that begins on the date of the enactment
of this Act and ends on the date the Secretary first implements
national policies pursuant to regulations promulgated under this
subsection, a carrier under such part may implement changes relating
to requirements for the submission of a claim for clinical diagnostic
laboratory tests.

(4) Use of interim policies.–After the date the Secretary first
implements such national policies, the Secretary shall permit any
carrier to develop and implement interim policies of the type
described in paragraph (1), in accordance with guidelines established
by the Secretary, in cases in which a uniform national policy has not
been established under this subsection and there is a demonstrated
need for a policy to respond to aberrant utilization or provision of
unnecessary tests. Except as the Secretary specifically permits, no
policy shall be implemented under this paragraph for a period of
longer than 2 years.

(5) Interim national policies.–After the date the Secretary first
designates regional carriers under subsection (a), the Secretary
shall establish a process under which designated carriers can
collectively develop and implement interim national policies of the
type described in paragraph (1). No such policy shall be implemented
under this paragraph for a period of longer than 2 years.

(6) Biennial review process.–Not less often than once every 2
years, the Secretary shall solicit and review comments regarding
changes in the national policies established under this subsection.

As part of such biennial review process, the Secretary shall
specifically review and consider whether to incorporate or supersede
interim policies developed under paragraph (4) or (5).

Based upon such review, the Secretary may provide for appropriate
changes in the national policies previously adopted under this
subsection.

(7) Requirement and notice.–The Secretary shall ensure that any
policies adopted under paragraph (3), (4), or (5) shall apply to all
laboratory claims payable under part B of title XVIII of the Social
Security Act, and shall provide for advance notice to interested
parties and a 45-day period in which such parties may submit comments
on the proposed change.

(c) Inclusion of Laboratory Representative on Carrier Advisory
Committees.–The Secretary shall direct that any advisory committee
established by a carrier to advise such carrier with respect to
coverage and administrative policies under part B of title XVIII of
the Social Security Act shall include an individual to represent the
independent clinical laboratories and such other laboratories as the
Secretary deems appropriate. The Secretary shall consider
recommendations from national and local organizations that represent
independent clinical laboratories in such selection.

SEC. 4555. UPDATES FOR AMBULATORY SURGICAL SERVICES.

Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended by
inserting at the end the following new sentence: In each of the
fiscal years 1998 through 2002, the increase under this subparagraph
shall be reduced (but not below zero) by 2.0 percentage points.”.

SEC. 4556. REIMBURSEMENT FOR DRUGS AND BIOLOGICALS.

(a) In General.–Section 1842 (42 U.S.C. 1395u) is amended by
inserting after subsection (n) the following new subsection: (o)(1)
If a physician’s, supplier’s, or any other person’s bill or request
for payment for services includes a charge for a drug or biological
for which payment may be made under this part and the drug or
biological is not paid on a cost or prospective payment basis as
otherwise provided in this part, the amount payable for the drug or
biological is equal to 95 percent of the average wholesale price.

(2) If payment for a drug or biological is made to a licensed
pharmacy approved to dispense drugs or biologicals under this part,
the Secretary may pay a dispensing fee (less the applicable
deductible and coinsurance amounts) to the pharmacy.”.

(b) Conforming Amendment.–Section 1833(a)(1) (42 U.S.C.
1395l(a)(1)), as amended by sections 4315(b) and 4531(b)(1), is
amended– (1) by striking “and (R)” and inserting “(R)”; and (2) by
striking the semicolon at the end and inserting the following: , and
(S) with respect to drugs and biologicals not paid on a cost or
prospective payment basis as otherwise provided in this part (other
than items and services described in subparagraph (B)), the amounts
paid shall be 80 percent of the lesser of the actual charge or the
payment amount established in section 1842(o);”.

(c) Study and report.–The Secretary of Health and Human Services
shall study the effect on the average wholesale price of drugs and
biologicals of the amendments made by subsection (a) and shall report
to the Committees on Ways and Means and Commerce of the House of
Representatives and the Committee on Finance of the Senate the result
of such study not later than July 1, 1999.

(d) Effective Date.–The amendments made by subsections (a) and
(b) shall apply to drugs and biologicals furnished on or after
January 1, 1998.

SEC. 4557. COVERAGE OF ORAL ANTI-NAUSEA DRUGS UNDER CHEMOTHERAPEUTIC
REGIMEN.

(a) In General.–Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as
amended by sections 4104 and 4105, is amended– (1) by striking “and”
at the end of subparagraph (R); and (2) by inserting after
subparagraph (S) the following new subparagraph: (T) an oral drug
(which is approved by the Federal Food and Drug Administration)
prescribed for use as an acute anti-emetic used as part of an
anticancer chemotherapeutic regimen if the drug is administered by a
physician (or as prescribed by a physician)– (i) for use immediately
before, at, or within 48 hours after the time of the administration
of the anticancer chemotherapeutic agent; and (ii) as a full
replacement for the anti-emetic therapy which would otherwise be
administered intravenously.”.

(b) Effective Date.–The amendments made by subsection (a) shall
apply to items and services furnished on or after January 1, 1998.

SEC. 4558. RENAL DIALYSIS-RELATED SERVICES.

(a) Auditing of Cost Reports.–Beginning with cost reports for
1996, the Secretary shall audit cost reports of each renal dialysis
provider at least once every 3 years.

(b) Implementation of Quality Standards.–The Secretary of Health
and Human Services shall develop, by not later than January 1, 1999,
and implement, by not later than January 1, 2000, a method to measure
and report quality of renal dialysis services provided under the
medicare program under title XVIII of the Social Security Act.

SEC. 4559. TEMPORARY COVERAGE RESTORATION FOR PORTABLE
ELECTROCARDIOGRAM TRANSPORTATION.

(a) In General.–Effective only for electrocardiogram tests
furnished during 1998, the Secretary of Health and Human Services
shall restore separate payment, under part B of title XVIII of the
Social Security Act, for the transportation of electrocardiogram
equipment (HCPCS code R0076) based upon payment methods in effect for
such service as of December 31, 1996.

(b) Determination.–By not later than July 1, 1998, the Secretary
of Health and Human Services shall make a recommendation to the
Committees on Commerce and Ways and Means of the House of
Representatives and the Committee on Finance of the Senate as to
whether coverage of portable electrocardiogram transportation should
be provided under part B of title XVIII of the Social Security Act.
In making such recommendation, the Secretary shall take into account
the study of coverage of portable electrocardiogram transportation
conducted by the Comptroller General of the United States and other
relevant information, including information submitted by interested
parties.

CHAPTER 6–PART B PREMIUM AND RELATED PROVISIONS

Subchapter A–Determination of Part B Premium Amount

SEC. 4571. PART B PREMIUM.

(a) In General.–Section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) is
amended by striking the first 3 sentences and inserting the
following: The Secretary, during September of each year, shall
determine and promulgate a monthly premium rate for the succeeding
calendar year that is equal to 50 percent of the monthly actuarial
rate for enrollees age 65 and over, determined according to paragraph
(1), for that succeeding calendar year.”.

(b) Conforming and Technical Amendments.– (1) Section
1839.–Section 1839 (42 U.S.C. 1395r) is amended– (A) in subsection
(a)(2), by striking “(b) and (e)” and inserting “(b), (c), and (f)”;
(B) in the last sentence of subsection (a)(3)– (i) by inserting
“rate” after “premium”, and (ii) by striking “and the derivation of
the dollar amounts specified in this paragraph”; (C) in the first
sentence of subsection (b), by striking “or (e)”; (D) by striking
subsection (e); and (E) by redesignating subsection (g) as subsection
(e) and inserting that subsection after subsection (d).

(2) Section 1844.–Subparagraphs (A)(i) and (B)(i) of section
1844(a)(1) (42 U.S.C. 1395w(a)(1)) are each amended by striking “or
1839(e), as the case may be”.

Subchapter B–Other Provisions Related to Part B Premium

SEC. 4581. PROTECTIONS UNDER THE MEDICARE PROGRAM FOR DISABLED
WORKERS WHO LOSE BENEFITS UNDER A GROUP HEALTH PLAN.

(a) No Premium Penalty for Late Enrollment.–The first sentence of
section 1839(b) (42 U.S.C. 1395r(b)) is amended by inserting “and not
pursuant to a special enrollment period under section 1837(i)(4)”
after “section 1837)”.

(b) Special Medicare Enrollment Period.– (1) In general.–Section
1837(i) (42 U.S.C. 1395p(i)) is amended by adding at the end the
following new paragraph: (4)(A) In the case of an individual who is
entitled to benefits under part A pursuant to section 226(b) and–
(i) who at the time the individual first satisfies paragraph (1) of
section 1836– (I) is enrolled in a group health plan described in
section 1862(b)(1)(A)(v) by reason of the individual’s current or
former employment or by reason of the current or former employment
status of a member of the individual’s family, and (II) has elected
not to enroll (or to be deemed enrolled) under this section during
the individual’s initial enrollment period; and (ii) whose continuous
enrollment under such group health plan is involuntarily terminated
at a time when the enrollment under the plan is not by reason of the
individual’s current employment or by reason of the current
employment of a member of the individual’s family, there shall be a
special enrollment period described in subparagraph (B).

(B) The special enrollment period referred to in subparagraph (A)
is the 6-month period beginning on the first day of the month which
includes the date of the enrollment termination described in
subparagraph (A)(ii).”.

(2) Coverage period.–Section 1838(e) (42 U.S.C. 1395q(e)) is
amended– (A) by inserting “or 1837(i)(4)(B)” after “1837(i)(3)” the
first place it appears, and (B) by inserting “or specified in section
1837(i)(4)(A)(i)” after “1837(i)(3)” the second place it appears.

(c) Effective Date.–The amendments made by this section shall
apply to involuntary terminations of coverage under a group health
plan occurring on or after the date of the enactment of this Act.

SEC. 4582. GOVERNMENTAL ENTITIES ELIGIBLE TO ELECT TO PAY PART B
PREMIUMS FOR ELIGIBLE INDIVIDUALS.

Section 1839(e)(1) (as amended by section 4571(b)) is amended–
(1) by inserting “(or any appropriate State or local governmental
entity specified by the Secretary)” after “State” the first place it
appears, and (2) by inserting “(or such entity)” after “State” the
second and third place it appears.

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