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SubtitleA

SubtitleA

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 A–Medicare+Choice
Program

CHAPTER 1–MEDICARE+CHOICE PROGRAM

Subchapter A–Medicare+Choice Program

SEC. 4001. ESTABLISHMENT OF MEDICARE+CHOICE PROGRAM.

Title XVIII is amended by redesignating part C as part D and by
inserting after part B the following new part:

Part C–Medicare+Choice Program

~ eligibility,
election, and enrollment ~

Sec. 1851. (a) Choice of Medicare Benefits Through Medicare+Choice
Plans.– (1) In general.–Subject to the provisions of this section,
each Medicare+Choice eligible individual (as defined in paragraph
(3)) is entitled to elect to receive benefits under this title– (A)
through the original medicare fee-for-service program under parts A
and B, or (B) through enrollment in a Medicare+Choice plan under this
part.

(2) Types of medicare+choice plans that may be available.–A
Medicare+Choice plan may be any of the following types of plans of
health insurance: (A) Coordinated care plans.–Coordinated care plans
which provide health care services, including but not limited to
health maintenance organization plans (with or without point of
service options), plans offered by provider-sponsored organizations
(as defined in section 1855(d)), and preferred provider organization
plans.

(B) Combination of msa plan and contributions to medicare+choice
msa.–An MSA plan, as defined in section 1859(b)(3), and a
contribution into a Medicare+Choice medical savings account (MSA).

(C) Private fee-for-service plans.–A Medicare+Choice private
fee-for-service plan, as defined in section 1859(b)(2).

(3) Medicare+choice eligible individual.– (A) In general.–In
this title, subject to subparagraph (B), the term ‘Medicare+Choice
eligible individual’ means an individual who is entitled to benefits
under part A and enrolled under part B.

(B) Special rule for end-stage renal disease.–Such term shall not
include an individual medically determined to have end-stage renal
disease, except that an individual who develops end-stage renal
disease while enrolled in a Medicare+Choice plan may continue to be
enrolled in that plan.

(b) Special Rules.– (1) Residence requirement.– (A) In
general.–Except as the Secretary may otherwise provide, an
individual is eligible to elect a Medicare+Choice plan offered by a
Medicare+Choice organization only if the plan serves the geographic
area in which the individual resides.

(B) Continuation of enrollment permitted.–Pursuant to rules
specified by the Secretary, the Secretary shall provide that a plan
may offer to all individuals residing in a geographic area the option
to continue enrollment in the plan, notwithstanding that the
individual no longer resides in the service area of the plan, so long
as the plan provides that individuals exercising this option have, as
part of the basic benefits described in section 1852(a)(1)(A),
reasonable access within that geographic area to the full range of
basic benefits, subject to reasonable cost sharing liability in
obtaining such benefits.

(2) Special rule for certain individuals covered under fehbp or
eligible for veterans or military health benefits, veterans.– (A)
FEHBP.–An individual who is enrolled in a health benefit plan under
chapter 89 of title 5, United States Code, is not eligible to enroll
in an MSA plan until such time as the Director of the Office of
Management and Budget certifies to the Secretary that the Office of
Personnel Management has adopted policies which will ensure that the
enrollment of such individuals in such plans will not result in
increased expenditures for the Federal Government for health benefit
plans under such chapter.

(B) VA and dod.–The Secretary may apply rules similar to the
rules described in subparagraph (A) in the case of individuals who
are eligible for health care benefits under chapter 55 of title 10,
United States Code, or under chapter 17 of title 38 of such Code.

(3) Limitation on eligibility of qualified medicare beneficiaries
and other medicaid beneficiaries to enroll in an msa plan.–An
individual who is a qualified medicare beneficiary (as defined in
section 1905(p)(1)), a qualified disabled and working individual
(described in section 1905(s)), an individual described in section
1902(a)(10)(E)(iii), or otherwise entitled to medicare cost-sharing
under a State plan under title XIX is not eligible to enroll in an
MSA plan.

(4) Coverage under msa plans on a demonstration basis.– (A) In
general.–An individual is not eligible to enroll in an MSA plan
under this part– (i) on or after January 1, 2003, unless the
enrollment is the continuation of such an enrollment in effect as of
such date; or (ii) as of any date if the number of such individuals
so enrolled as of such date has reached 390,000.

Under rules established by the Secretary, an individual is not
eligible to enroll (or continue enrollment) in an MSA plan for a year
unless the individual provides assurances satisfactory to the
Secretary that the individual will reside in the United States for at
least 183 days during the year.

(B) Evaluation.–The Secretary shall regularly evaluate the impact
of permitting enrollment in MSA plans under this part on selection
(including adverse selection), use of preventive care, access to
care, and the financial status of the Trust Funds under this title.

(C) Reports.–The Secretary shall submit to Congress periodic
reports on the numbers of individuals enrolled in such plans and on
the evaluation being conducted under subparagraph (B). The Secretary
shall submit such a report, by not later than March 1, 2002, on
whether the time limitation under subparagraph (A)(i) should be
extended or removed and whether to change the numerical limitation
under subparagraph (A)(ii).

(c) Process for Exercising Choice.– (1) In general.–The
Secretary shall establish a process through which elections described
in subsection (a) are made and changed, including the form and manner
in which such elections are made and changed. Such elections shall be
made or changed only during coverage election periods specified under
subsection (e) and shall become effective as provided in subsection
(f).

(2) Coordination through medicare+choice organizations.– (A)
Enrollment.–Such process shall permit an individual who wishes to
elect a Medicare+Choice plan offered by a Medicare+Choice
organization to make such election through the filing of an
appropriate election form with the organization.

(B) Disenrollment.–Such process shall permit an individual, who
has elected a Medicare+Choice plan offered by a Medicare+Choice
organization and who wishes to terminate such election, to terminate
such election through the filing of an appropriate election form with
the organization.

(3) Default.– (A) Initial election.– (i) In general.–Subject to
clause (ii), an individual who fails to make an election during an
initial election period under subsection (e)(1) is deemed to have
chosen the original medicare fee-for-service program option.

(ii) Seamless continuation of coverage.–The Secretary may
establish procedures under which an individual who is enrolled in a
health plan (other than Medicare+Choice plan) offered by a
Medicare+Choice organization at the time of the initial election
period and who fails to elect to receive coverage other than through
the organization is deemed to have elected the Medicare+Choice plan
offered by the organization (or, if the organization offers more than
one such plan, such plan or plans as the Secretary identifies under
such procedures).

(B) Continuing periods.–An individual who has made (or is deemed
to have made) an election under this section is considered to have
continued to make such election until such time as– (i) the
individual changes the election under this section, or (ii) the
Medicare+Choice plan with respect to which such election is in effect
is discontinued or, subject to subsection (b)(1)(B), no longer serves
the area in which the individual resides.

(d) Providing Information To Promote Informed Choice.– (1) In
general.–The Secretary shall provide for activities under this
subsection to broadly disseminate information to medicare
beneficiaries (and prospective medicare beneficiaries) on the
coverage options provided under this section in order to promote an
active, informed selection among such options.

(2) Provision of notice.– (A) Open season notification.–At least
15 days before the beginning of each annual, coordinated election
period (as defined in subsection (e)(3)(B)), the Secretary shall mail
to each Medicare+Choice eligible individual residing in an area the
following: (i) General information.–The general information
described in paragraph (3).

(ii) List of plans and comparison of plan options.–A list
identifying the Medicare+Choice plans that are (or will be) available
to residents of the area and information described in paragraph (4)
concerning such plans. Such information shall be presented in a
comparative form.

(iii) Additional information.–Any other information that the
Secretary determines will assist the individual in making the
election under this section.

The mailing of such information shall be coordinated, to the
extent practicable, with the mailing of any annual notice under
section 1804.

(B) Notification to newly eligible medicare+choice eligible
individuals.–To the extent practicable, the Secretary shall, not
later than 30 days before the beginning of the initial
Medicare+Choice enrollment period for an individual described in
subsection (e)(1), mail to the individual the information described
in subparagraph (A).

(C) Form.–The information disseminated under this paragraph shall
be written and formatted using language that is easily understandable
by medicare beneficiaries.

(D) Periodic updating.–The information described in subparagraph
(A) shall be updated on at least an annual basis to reflect changes
in the availability of Medicare+Choice plans and the benefits and
Medicare+Choice monthly basic and supplemental beneficiary premiums
for such plans.

(3) General information.–General information under this
paragraph, with respect to coverage under this part during a year,
shall include the following: (A) Benefits under original medicare
fee-for-service program option.–A general description of the
benefits covered under the original medicare fee-for-service program
under parts A and B, including– (i) covered items and services, (ii)
beneficiary cost sharing, such as deductibles, coinsurance, and
copayment amounts, and (iii) any beneficiary liability for balance
billing.

(B) Election procedures.–Information and instructions on how to
exercise election options under this section.

(C) Rights.–A general description of procedural rights (including
grievance and appeals procedures) of beneficiaries under the original
medicare fee-for-service program and the Medicare+Choice program and
the right to be protected against discrimination based on health
status-related factors under section 1852(b).

(D) Information on medigap and medicare select.–A general
description of the benefits, enrollment rights, and other
requirements applicable to medicare supplemental policies under
section 1882 and provisions relating to medicare select policies
described in section 1882(t).

(E) Potential for contract termination.–The fact that a
Medicare+Choice organization may terminate its contract, refuse to
renew its contract, or reduce the service area included in its
contract, under this part, and the effect of such a termination,
nonrenewal, or service area reduction may have on individuals
enrolled with the Medicare+Choice plan under this part.

(4) Information comparing plan options.–Information under this
paragraph, with respect to a Medicare+Choice plan for a year, shall
include the following: (A) Benefits.–The benefits covered under the
plan, including the following: (i) Covered items and services beyond
those provided under the original medicare fee-for-service program.

(ii) Any beneficiary cost sharing.

(iii) Any maximum limitations on out-of-pocket expenses.

(iv) In the case of an MSA plan, differences in cost sharing,
premiums, and balance billing under such a plan compared to under
other Medicare+Choice plans.

(v) In the case of a Medicare+Choice private fee-for- service
plan, differences in cost sharing, premiums, and balance billing
under such a plan compared to under other Medicare+Choice plans.

(vi) The extent to which an enrollee may obtain benefits through
out-of-network health care providers.

(vii) The extent to which an enrollee may select among in-network
providers and the types of providers participating in the plan’s
network.

(viii) The organization’s coverage of emergency and urgently
needed care.

(B) Premiums.–The Medicare+Choice monthly basic beneficiary
premium and Medicare+Choice monthly supplemental beneficiary premium,
if any, for the plan or, in the case of an MSA plan, the
Medicare+Choice monthly MSA premium.

(C) Service area.–The service area of the plan.

(D) Quality and performance.–To the extent available, plan
quality and performance indicators for the benefits under the plan
(and how they compare to such indicators under the original medicare
fee-for-service program under parts A and B in the area involved),
including– (i) disenrollment rates for medicare enrollees electing
to receive benefits through the plan for the previous 2 years
(excluding disenrollment due to death or moving outside the plan’s
service area), (ii) information on medicare enrollee satisfaction,
(iii) information on health outcomes, and (iv) the recent record
regarding compliance of the plan with requirements of this part (as
determined by the Secretary).

(E) Supplemental benefits.–Whether the organization offering the
plan includes mandatory supplemental benefits in its base benefit
package or offers optional supplemental benefits and the terms and
conditions (including premiums) for such coverage.

(5) Maintaining a toll-free number and internet site.–The
Secretary shall maintain a toll-free number for inquiries regarding
Medicare+Choice options and the operation of this part in all areas
in which Medicare+Choice plans are offered and an Internet site
through which individuals may electronically obtain information on
such options and Medicare+Choice plans.

(6) Use of non-federal entities.–The Secretary may enter into
contracts with non-Federal entities to carry out activities under
this subsection.

(7) Provision of information.–A Medicare+Choice organization
shall provide the Secretary with such information on the organization
and each Medicare+Choice plan it offers as may be required for the
preparation of the information referred to in paragraph (2)(A).

(e) Coverage Election Periods.– (1) Initial choice upon
eligibility to make election if medicare+choice plans available to
individual.–If, at the time an individual first becomes entitled to
benefits under part A and enrolled under part B, there is one or more
Medicare+Choice plans offered in the area in which the individual
resides, the individual shall make the election under this section
during a period specified by the Secretary such that if the
individual elects a Medicare+Choice plan during the period, coverage
under the plan becomes effective as of the first date on which the
individual may receive such coverage.

(2) Open enrollment and disenrollment opportunities.–Subject to
paragraph (5)– (A) Continuous open enrollment and disenrollment
through 2001.–At any time during 1998, 1999, 2000, and 2001, a
Medicare+Choice eligible individual may change the election under
subsection (a)(1).

(B) Continuous open enrollment and disenrollment for first 6
months during 2002.– (i) In general.–Subject to clause (ii), at any
time during the first 6 months of 2002, or, if the individual first
becomes a Medicare+Choice eligible individual during 2002, during the
first 6 months during 2002 in which the individual is a
Medicare+Choice eligible individual, a Medicare+Choice eligible
individual may change the election under subsection (a)(1).

(ii) Limitation of one change.–An individual may exercise the
right under clause (i) only once. The limitation under this clause
shall not apply to changes in elections effected during an annual,
coordinated election period under paragraph (3) or during a special
enrollment period under the first sentence of paragraph (4).

(C) Continuous open enrollment and disenrollment for first 3
months in subsequent years.– (i) In general.–Subject to clause
(ii), at any time during the first 3 months of a year after 2002, or,
if the individual first becomes a Medicare+Choice eligible individual
during a year after 2002, during the first 3 months of such year in
which the individual is a Medicare+Choice eligible individual, a
Medicare+Choice eligible individual may change the election under
subsection (a)(1).

(ii) Limitation of one change during open enrollment period each
year.–An individual may exercise the right under clause (i) only
once during the applicable 3-month period described in such clause in
each year. The limitation under this clause shall not apply to
changes in elections effected during an annual, coordinated election
period under paragraph (3) or during a special enrollment period
under paragraph (4).

(3) Annual, coordinated election period.– (A) In
general.–Subject to paragraph (5), each individual who is eligible
to make an election under this section may change such election
during an annual, coordinated election period.

(B) Annual, coordinated election period.–For purposes of this
section, the term ‘annual, coordinated election period’ means, with
respect to a calendar year (beginning with 2000), the month of
November before such year.

(C) Medicare+choice health information fairs.–In the month of
November of each year (beginning with 1999), in conjunction with the
annual coordinated election period defined in subparagraph (B), the
Secretary shall provide for a nationally coordinated educational and
publicity campaign to inform Medicare+Choice eligible individuals
about Medicare+Choice plans and the election process provided under
this section.

(D) Special information campaign in 1998.–During November 1998
the Secretary shall provide for an educational and publicity campaign
to inform Medicare+Choice eligible individuals about the availability
of Medicare+Choice plans, and eligible organizations with
risk-sharing contracts under section 1876, offered in different areas
and the election process provided under this section.

(4) Special election periods.–Effective as of January 1, 2002, an
individual may discontinue an election of a Medicare+Choice plan
offered by a Medicare+Choice organization other than during an
annual, coordinated election period and make a new election under
this section if– (A) the organization’s or plan’s certification
under this part has been terminated or the organization has
terminated or otherwise discontinued providing the plan in the area
in which the individual resides; (B) the individual is no longer
eligible to elect the plan because of a change in the individual’s
place of residence or other change in circumstances (specified by the
Secretary, but not including termination of the individual’s
enrollment on the basis described in clause (i) or (ii) of subsection
(g)(3)(B)); (C) the individual demonstrates (in accordance with
guidelines established by the Secretary) that– (i) the organization
offering the plan substantially violated a material provision of the
organization’s contract under this part in relation to the individual
(including the failure to provide an enrollee on a timely basis
medically necessary care for which benefits are available under the
plan or the failure to provide such covered care in accordance with
applicable quality standards); or (ii) the organization (or an agent
or other entity acting on the organization’s behalf) materially
misrepresented the plan’s provisions in marketing the plan to the
individual; or (D) the individual meets such other exceptional
conditions as the Secretary may provide.

Effective as of January 1, 2002, an individual who, upon first
becoming eligible for benefits under part A at age 65, enrolls in a
Medicare+Choice plan under this part, the individual may discontinue
the election of such plan, and elect coverage under the original
fee-for-service plan, at any time during the 12-month period
beginning on the effective date of such enrollment.

(5) Special rules for msa plans.–Notwithstanding the preceding
provisions of this subsection, an individual– (A) may elect an MSA
plan only during– (i) an initial open enrollment period described in
paragraph (1), (ii) an annual, coordinated election period described
in paragraph (3)(B), or (iii) the month of November 1998; (B) subject
to subparagraph (C), may not discontinue an election of an MSA plan
except during the periods described in clause (ii) or (iii) of
subparagraph (A) and under the first sentence of paragraph (4); and
(C) who elects an MSA plan during an annual, coordinated election
period, and who never previously had elected such a plan, may revoke
such election, in a manner determined by the Secretary, by not later
than December 15 following the date of the election.

(6) Open enrollment periods.–Subject to paragraph (5), a
Medicare+Choice organization– (A) shall accept elections or changes
to elections during the initial enrollment periods described in
paragraph (1), during the month of November 1998 and each subsequent
year (as provided in paragraph (3)), and during special election
periods described in the first sentence of paragraph (4); and (B) may
accept other changes to elections at such other times as the
organization provides.

(f) Effectiveness of Elections and Changes of Elections.– (1)
During initial coverage election period.–An election of coverage
made during the initial coverage election period under subsection
(e)(1)(A) shall take effect upon the date the individual becomes
entitled to benefits under part A and enrolled under part B, except
as the Secretary may provide (consistent with section 1838) in order
to prevent retroactive coverage.

(2) During continuous open enrollment periods.–An election or
change of coverage made under subsection (e)(2) shall take effect
with the first day of the first calendar month following the date on
which the election is made.

(3) Annual, coordinated election period.–An election or change of
coverage made during an annual, coordinated election period (as
defined in subsection (e)(3)(B)) in a year shall take effect as of
the first day of the following year.

(4) Other periods.–An election or change of coverage made during
any other period under subsection (e)(4) shall take effect in such
manner as the Secretary provides in a manner consistent (to the
extent practicable) with protecting continuity of health benefit
coverage.

(g) Guaranteed Issue and Renewal.– (1) In general.–Except as
provided in this subsection, a Medicare+Choice organization shall
provide that at any time during which elections are accepted under
this section with respect to a Medicare+Choice plan offered by the
organization, the organization will accept without restrictions
individuals who are eligible to make such election.

(2) Priority.–If the Secretary determines that a Medicare+Choice
organization, in relation to a Medicare+Choice plan it offers, has a
capacity limit and the number of Medicare+Choice eligible individuals
who elect the plan under this section exceeds the capacity limit, the
organization may limit the election of individuals of the plan under
this section but only if priority in election is provided– (A) first
to such individuals as have elected the plan at the time of the
determination, and (B) then to other such individuals in such a
manner that does not discriminate, on a basis described in section
1852(b), among the individuals (who seek to elect the plan).

The preceding sentence shall not apply if it would result in the
enrollment of enrollees substantially nonrepresentative, as
determined in accordance with regulations of the Secretary, of the
medicare population in the service area of the plan.

(3) Limitation on termination of election.– (A) In
general.–Subject to subparagraph (B), a Medicare+Choice organization
may not for any reason terminate the election of any individual under
this section for a Medicare+Choice plan it offers.

(B) Basis for termination of election.–A Medicare+Choice
organization may terminate an individual’s election under this
section with respect to a Medicare+Choice plan it offers if– (i) any
Medicare+Choice monthly basic and supplemental beneficiary premiums
required with respect to such plan are not paid on a timely basis
(consistent with standards under section 1856 that provide for a
grace period for late payment of such premiums), (ii) the individual
has engaged in disruptive behavior (as specified in such standards),
or (iii) the plan is terminated with respect to all individuals under
this part in the area in which the individual resides.

(C) Consequence of termination.– (i) Terminations for cause.–Any
individual whose election is terminated under clause (i) or (ii) of
subparagraph (B) is deemed to have elected the original medicare
fee-for-service program option described in subsection (a)(1)(A).

(ii) Termination based on plan termination or service area
reduction.–Any individual whose election is terminated under
subparagraph (B)(iii) shall have a special election period under
subsection (e)(4)(A) in which to change coverage to coverage under
another Medicare+Choice plan. Such an individual who fails to make an
election during such period is deemed to have chosen to change
coverage to the original medicare fee-for-service program option
described in subsection (a)(1)(A).

(D) Organization obligation with respect to election
forms.–Pursuant to a contract under section 1857, each
Medicare+Choice organization receiving an election form under
subsection (c)(2) shall transmit to the Secretary (at such time and
in such manner as the Secretary may specify) a copy of such form or
such other information respecting the election as the Secretary may
specify.

(h) Approval of Marketing Material and Application Forms.– (1)
Submission.–No marketing material or application form may be
distributed by a Medicare+Choice organization to (or for the use of)
Medicare+Choice eligible individuals unless– (A) at least 45 days
before the date of distribution the organization has submitted the
material or form to the Secretary for review, and (B) the Secretary
has not disapproved the distribution of such material or form.

(2) Review.–The standards established under section 1856 shall
include guidelines for the review of any material or form submitted
and under such guidelines the Secretary shall disapprove (or later
require the correction of) such material or form if the material or
form is materially inaccurate or misleading or otherwise makes a
material misrepresentation.

(3) Deemed approval (1-stop shopping).–In the case of material or
form that is submitted under paragraph (1)(A) to the Secretary or a
regional office of the Department of Health and Human Services and
the Secretary or the office has not disapproved the distribution of
marketing material or form under paragraph (1)(B) with respect to a
Medicare+Choice plan in an area, the Secretary is deemed not to have
disapproved such distribution in all other areas covered by the plan
and organization except with regard to that portion of such material
or form that is specific only to an area involved.

(4) Prohibition of certain marketing practices.–Each
Medicare+Choice organization shall conform to fair marketing
standards, in relation to Medicare+Choice plans offered under this
part, included in the standards established under section 1856.

Such standards– (A) shall not permit a Medicare+Choice
organization to provide for cash or other monetary rebates as an
inducement for enrollment or otherwise, and (B) may include a
prohibition against a Medicare+Choice organization (or agent of such
an organization) completing any portion of any election form used to
carry out elections under this section on behalf of any individual.

(i) Effect of Election of Medicare+Choice Plan Option.– (1)
Payments to organizations.–Subject to sections 1852(a)(5), 1853(g),
1853(h), 1886(d)(11), and 1886(h)(3)(D), payments under a contract
with a Medicare+Choice organization under section 1853(a) with
respect to an individual electing a Medicare+Choice plan offered by
the organization shall be instead of the amounts which (in the
absence of the contract) would otherwise be payable under parts A and
B for items and services furnished to the individual.

(2) Only organization entitled to payment.–Subject to sections
1853(e), 1853(g), 1853(h), 1857(f)(2), and 1886(d)(11), and
1886(h)(3)(D), only the Medicare+Choice organization shall be
entitled to receive payments from the Secretary under this title for
services furnished to the individual.

~ benefits and
beneficiary protections ~

Sec. 1852. (a) Basic Benefits.– (1) In general.–Except as
provided in section 1859(b)(3) for MSA plans, each Medicare+Choice
plan shall provide to members enrolled under this part, through
providers and other persons that meet the applicable requirements of
this title and part A of title XI– (A) those items and services
(other than hospice care) for which benefits are available under
parts A and B to individuals residing in the area served by the plan,
and (B) additional benefits required under section 1854(f)(1)(A).

(2) Satisfaction of requirement.– (A) In general.–A
Medicare+Choice plan (other than an MSA plan) offered by a
Medicare+Choice organization satisfies paragraph (1)(A), with respect
to benefits for items and services furnished other than through a
provider or other person that has a contract with the organization
offering the plan, if the plan provides payment in an amount so
that– (i) the sum of such payment amount and any cost sharing
provided for under the plan, is equal to at least (ii) the total
dollar amount of payment for such items and services as would
otherwise be authorized under parts A and B (including any balance
billing permitted under such parts).

(B) Reference to related provisions.–For provision relating to–
(i) limitations on balance billing against Medicare+Choice
organizations for non-contract providers, see sections 1852(k) and
1866(a)(1)(O), and (ii) limiting actuarial value of enrollee
liability for covered benefits, see section 1854(e).

(3) Supplemental benefits.– (A) Benefits included subject to
secretary’s approval.– Each Medicare+Choice organization may provide
to individuals enrolled under this part, other than under an MSA
plan, (without affording those individuals an option to decline the
coverage) supplemental health care benefits that the Secretary may
approve. The Secretary shall approve any such supplemental benefits
unless the Secretary determines that including such supplemental
benefits would substantially discourage enrollment by Medicare+Choice
eligible individuals with the organization.

(B) At enrollees’ option.– (i) In general.–Subject to clause
(ii), a Medicare+Choice organization may provide to individuals
enrolled under this part supplemental health care benefits that the
individuals may elect, at their option, to have covered.

(ii) Special rule for msa plans.–A Medicare+Choice organization
may not provide, under an MSA plan, supplemental health care benefits
that cover the deductible described in section 1859(b)(2)(B). In
applying the previous sentence, health benefits described in section
1882(u)(2)(B) shall not be treated as covering such deductible.

(C) Application to Medicare+Choice private fee-for- service
plans.–Nothing in this paragraph shall be construed as preventing a
Medicare+Choice private fee-for-service plan from offering
supplemental benefits that include payment for some or all of the
balance billing amounts permitted consistent with section 1852(k) and
coverage of additional services that the plan finds to be medically
necessary.

(4) Organization as secondary payer.–Notwithstanding any other
provision of law, a Medicare+Choice organization may (in the case of
the provision of items and services to an individual under a
Medicare+Choice plan under circumstances in which payment under this
title is made secondary pursuant to section 1862(b)(2)) charge or
authorize the provider of such services to charge, in accordance with
the charges allowed under a law, plan, or policy described in such
section– (A) the insurance carrier, employer, or other entity which
under such law, plan, or policy is to pay for the provision of such
services, or (B) such individual to the extent that the individual
has been paid under such law, plan, or policy for such services.

(5) National coverage determinations.–If there is a national
coverage determination made in the period beginning on the date of an
announcement under section 1853(b) and ending on the date of the next
announcement under such section and the Secretary projects that the
determination will result in a significant change in the costs to a
Medicare+Choice organization of providing the benefits that are the
subject of such national coverage determination and that such change
in costs was not incorporated in the determination of the annual
Medicare+Choice capitation rate under section 1853 included in the
announcement made at the beginning of such period, then, unless
otherwise required by law– (A) such determination shall not apply to
contracts under this part until the first contract year that begins
after the end of such period, and (B) if such coverage determination
provides for coverage of additional benefits or coverage under
additional circumstances, section 1851(i)(1) shall not apply to
payment for such additional benefits or benefits provided under such
additional circumstances until the first contract year that begins
after the end of such period.

(b) Antidiscrimination.– (1) Beneficiaries.– (A) In general.–A
Medicare+Choice organization may not deny, limit, or condition the
coverage or provision of benefits under this part, for individuals
permitted to be enrolled with the organization under this part, based
on any health status- related factor described in section 2702(a)(1)
of the Public Health Service Act.

(B) Construction.–Subparagraph (A) shall not be construed as
requiring a Medicare+Choice organization to enroll individuals who
are determined to have end-stage renal disease, except as provided
under section 1851(a)(3)(B).

(2) Providers.–A Medicare+Choice organization shall not
discriminate with respect to participation, reimbursement, or
indemnification as to any provider who is acting within the scope of
the provider’s license or certification under applicable State law,
solely on the basis of such license or certification. This paragraph
shall not be construed to prohibit a plan from including providers
only to the extent necessary to meet the needs of the plan’s
enrollees or from establishing any measure designed to maintain
quality and control costs consistent with the responsibilities of the
plan.

(c) Disclosure Requirements.– (1) Detailed description of plan
provisions.–A Medicare+Choice organization shall disclose, in clear,
accurate, and standardized form to each enrollee with a
Medicare+Choice plan offered by the organization under this part at
the time of enrollment and at least annually thereafter, the
following information regarding such plan: (A) Service area.–The
plan’s service area.

(B) Benefits.–Benefits offered under the plan, including
information described in section 1851(d)(3)(A) and exclusions from
coverage and, if it is an MSA plan, a comparison of benefits under
such a plan with benefits under other Medicare+Choice plans.

(C) Access.–The number, mix, and distribution of plan providers,
out-of-network coverage (if any) provided by the plan, and any
point-of-service option (including the supplemental premium for such
option).

(D) Out-of-area coverage.–Out-of-area coverage provided by the
plan.

(E) Emergency coverage.–Coverage of emergency services,
including– (i) the appropriate use of emergency services, including
use of the 911 telephone system or its local equivalent in emergency
situations and an explanation of what constitutes an emergency
situation; (ii) the process and procedures of the plan for obtaining
emergency services; and (iii) the locations of (I) emergency
departments, and (II) other settings, in which plan physicians and
hospitals provide emergency services and post-stabilization care.

(F) Supplemental benefits.–Supplemental benefits available from
the organization offering the plan, including– (i) whether the
supplemental benefits are optional, (ii) the supplemental benefits
covered, and (iii) the Medicare+Choice monthly supplemental
beneficiary premium for the supplemental benefits.

(G) Prior authorization rules.–Rules regarding prior
authorization or other review requirements that could result in
nonpayment.

(H) Plan grievance and appeals procedures.–All plan appeal or
grievance rights and procedures.

(I) Quality assurance program.–A description of the
organization’s quality assurance program under subsection (e).

(2) Disclosure upon request.–Upon request of a Medicare+Choice
eligible individual, a Medicare+Choice organization must provide the
following information to such individual: (A) The general coverage
information and general comparative plan information made available
under clauses (i) and (ii) of section 1851(d)(2)(A).

(B) Information on procedures used by the organization to control
utilization of services and expenditures.

(C) Information on the number of grievances, redeterminations, and
appeals and on the disposition in the aggregate of such matters.

(D) An overall summary description as to the method of
compensation of participating physicians.

(d) Access to Services.– (1) In general.–A Medicare+Choice
organization offering a Medicare+Choice plan may select the providers
from whom the benefits under the plan are provided so long as– (A)
the organization makes such benefits available and accessible to each
individual electing the plan within the plan service area with
reasonable promptness and in a manner which assures continuity in the
provision of benefits; (B) when medically necessary the organization
makes such benefits available and accessible 24 hours a day and 7
days a week; (C) the plan provides for reimbursement with respect to
services which are covered under subparagraphs (A) and (B) and which
are provided to such an individual other than through the
organization, if– (i) the services were not emergency services (as
defined in paragraph (3)), but (I) the services were medically
necessary and immediately required because of an unforeseen illness,
injury, or condition, and (II) it was not reasonable given the
circumstances to obtain the services through the organization, (ii)
the services were renal dialysis services and were provided other
than through the organization because the individual was temporarily
out of the plan’s service area, or (iii) the services are maintenance
care or post- stabilization care covered under the guidelines
established under paragraph (2); (D) the organization provides access
to appropriate providers, including credentialed specialists, for
medically necessary treatment and services; and (E) coverage is
provided for emergency services (as defined in paragraph (3)) without
regard to prior authorization or the emergency care provider’s
contractual relationship with the organization.

(2) Guidelines respecting coordination of post-stabilization
care.–A Medicare+Choice plan shall comply with such guidelines as
the Secretary may prescribe relating to promoting efficient and
timely coordination of appropriate maintenance and post-
stabilization care of an enrollee after the enrollee has been
determined to be stable under section 1867.

(3) Definition of emergency services.–In this subsection– (A) In
general.–The term ’emergency services’ means, with respect to an
individual enrolled with an organization, covered inpatient and
outpatient services that– (i) are furnished by a provider that is
qualified to furnish such services under this title, and (ii) are
needed to evaluate or stabilize an emergency medical condition (as
defined in subparagraph (B)).

(B) Emergency medical condition based on prudent layperson.–The
term ’emergency medical condition’ means a medical condition
manifesting itself by acute symptoms of sufficient severity
(including severe pain) such that a prudent layperson, who possesses
an average knowledge of health and medicine, could reasonably expect
the absence of immediate medical attention to result in– (i) placing
the health of the individual (or, with respect to a pregnant woman,
the health of the woman or her unborn child) in serious jeopardy,
(ii) serious impairment to bodily functions, or (iii) serious
dysfunction of any bodily organ or part.

(4) Assuring access to services in medicare+choice private
fee-for-service plans.–In addition to any other requirements under
this part, in the case of a Medicare+Choice private fee-for-service
plan, the organization offering the plan must demonstrate to the
Secretary that the organization has sufficient number and range of
health care professionals and providers willing to provide services
under the terms of the plan. The Secretary shall find that an
organization has met such requirement with respect to any category of
health care professional or provider if, with respect to that
category of provider– (A) the plan has established payment rates for
covered services furnished by that category of provider that are not
less than the payment rates provided for under part A, part B, or
both, for such services, or (B) the plan has contracts or agreements
with a sufficient number and range of providers within such category
to provide covered services under the terms of the plan, or a
combination of both. The previous sentence shall not be construed as
restricting the persons from whom enrollees under such a plan may
obtain covered benefits.

(e) Quality Assurance Program.– (1) In general.–Each
Medicare+Choice organization must have arrangements, consistent with
any regulation, for an ongoing quality assurance program for health
care services it provides to individuals enrolled with
Medicare+Choice plans of the organization.

(2) Elements of program.– (A) In general.–The quality assurance
program of an organization with respect to a Medicare+Choice plan
(other than a Medicare+Choice private fee-for-service plan or a
non-network MSA plan) it offers shall– (i) stress health outcomes
and provide for the collection, analysis, and reporting of data (in
accordance with a quality measurement system that the Secretary
recognizes) that will permit measurement of outcomes and other
indices of the quality of Medicare+Choice plans and organizations;
(ii) monitor and evaluate high volume and high risk services and the
care of acute and chronic conditions; (iii) evaluate the continuity
and coordination of care that enrollees receive; (iv) be evaluated on
an ongoing basis as to its effectiveness; (v) include measures of
consumer satisfaction; (vi) provide the Secretary with such access to
information collected as may be appropriate to monitor and ensure the
quality of care provided under this part; (vii) provide review by
physicians and other health care professionals of the process
followed in the provision of such health care services; (viii)
provide for the establishment of written protocols for utilization
review, based on current standards of medical practice; (ix) have
mechanisms to detect both underutilization and overutilization of
services; (x) after identifying areas for improvement, establish or
alter practice parameters; (xi) take action to improve quality and
assesses the effectiveness of such action through systematic
followup; and (xii) make available information on quality and
outcomes measures to facilitate beneficiary comparison and choice of
health coverage options (in such form and on such quality and
outcomes measures as the Secretary determines to be appropriate).

(B) Elements of program for organizations offering medicare+choice
private fee-for-service plans and non-network msa plans.–The quality
assurance program of an organization with respect to a
Medicare+Choice private fee-for-service plan or a non-network MSA
plan it offers shall– (i) meet the requirements of clauses (i)
through (vi) of subparagraph (A); (ii) insofar as it provides for the
establishment of written protocols for utilization review, base such
protocols on current standards of medical practice; and (iii) have
mechanisms to evaluate utilization of services and inform providers
and enrollees of the results of such evaluation.

(C) Definition of non-network msa plan.–In this subsection, the
term ‘non-network MSA plan’ means an MSA plan offered by a
Medicare+Choice organization that does not provide benefits required
to be provided by this part, in whole or in part, through a defined
set of providers under contract, or under another arrangement, with
the organization.

(3) External review.– (A) In general.–Each Medicare+Choice
organization shall, for each Medicare+Choice plan it operates, have
an agreement with an independent quality review and improvement
organization approved by the Secretary to perform functions of the
type described in sections 1154(a)(4)(B) and 1154(a)(14) with respect
to services furnished by Medicare+Choice plans for which payment is
made under this title. The previous sentence shall not apply to a
Medicare+Choice private fee-for-service plan or a non-network MSA
plan that does not employ utilization review.

(B) Nonduplication of accreditation.–Except in the case of the
review of quality complaints, and consistent with subparagraph (C),
the Secretary shall ensure that the external review activities
conducted under subparagraph (A) are not duplicative of review
activities conducted as part of the accreditation process.

(C) Waiver authority.–The Secretary may waive the requirement
described in subparagraph (A) in the case of an organization if the
Secretary determines that the organization has consistently
maintained an excellent record of quality assurance and compliance
with other requirements under this part.

(4) Treatment of accreditation.–The Secretary shall provide that
a Medicare+Choice organization is deemed to meet requirements of
paragraphs (1) and (2) of this subsection and subsection (h)
(relating to confidentiality and accuracy of enrollee records) if the
organization is accredited (and periodically reaccredited) by a
private organization under a process that the Secretary has
determined assures that the organization, as a condition of
accreditation, applies and enforces standards with respect to the
requirements involved that are no less stringent than the standards
established under section 1856 to carry out the respective
requirements.

(f) Grievance Mechanism.–Each Medicare+Choice organization must
provide meaningful procedures for hearing and resolving grievances
between the organization (including any entity or individual through
which the organization provides health care services) and enrollees
with Medicare+Choice plans of the organization under this part.

(g) Coverage Determinations, Reconsiderations, and Appeals.– (1)
Determinations by organization.– (A) In general.–A Medicare+Choice
organization shall have a procedure for making determinations
regarding whether an individual enrolled with the plan of the
organization under this part is entitled to receive a health service
under this section and the amount (if any) that the individual is
required to pay with respect to such service. Subject to paragraph
(3), such procedures shall provide for such determination to be made
on a timely basis.

(B) Explanation of determination.–Such a determination that
denies coverage, in whole in part, shall be in writing and shall
include a statement in understandable language of the reasons for the
denial and a description of the reconsideration and appeals
processes.

(2) Reconsiderations.– (A) In general.–The organization shall
provide for reconsideration of a determination described in paragraph
(1)(B) upon request by the enrollee involved. The reconsideration
shall be within a time period specified by the Secretary, but shall
be made, subject to paragraph (3), not later than 60 days after the
date of the receipt of the request for reconsideration.

(B) Physician decision on certain reconsiderations.–A
reconsideration relating to a determination to deny coverage based on
a lack of medical necessity shall be made only by a physician with
appropriate expertise in the field of medicine which necessitates
treatment who is other than a physician involved in the initial
determination.

(3) Expedited determinations and reconsiderations.– (A) Receipt
of requests.– (i) Enrollee requests.–An enrollee in a
Medicare+Choice plan may request, either in writing or orally, an
expedited determination under paragraph (1) or an expedited
reconsideration under paragraph (2) by the Medicare+Choice
organization.

(ii) Physician requests.–A physician, regardless whether the
physician is affiliated with the organization or not, may request,
either in writing or orally, such an expedited determination or
reconsideration.

(B) Organization procedures.– (i) In general.–The
Medicare+Choice organization shall maintain procedures for expediting
organization determinations and reconsiderations when, upon request
of an enrollee, the organization determines that the application of
the normal time frame for making a determination (or a
reconsideration involving a determination) could seriously jeopardize
the life or health of the enrollee or the enrollee’s ability to
regain maximum function.

(ii) Expedition required for physician requests.–In the case of a
request for an expedited determination or reconsideration made under
subparagraph (A)(ii), the organization shall expedite the
determination or reconsideration if the request indicates that the
application of the normal time frame for making a determination (or a
reconsideration involving a determination) could seriously jeopardize
the life or health of the enrollee or the enrollee’s ability to
regain maximum function (iii) Timely response.–In cases described in
clauses (i) and (ii), the organization shall notify the enrollee (and
the physician involved, as appropriate) of the determination or
reconsideration under time limitations established by the Secretary,
but not later than 72 hours of the time of receipt of the request for
the determination or reconsideration (or receipt of the information
necessary to make the determination or reconsideration), or such
longer period as the Secretary may permit in specified cases.

(4) Independent review of certain coverage denials.–The Secretary
shall contract with an independent, outside entity to review and
resolve in a timely manner reconsiderations that affirm denial of
coverage, in whole or in part.

(5) Appeals.–An enrollee with a Medicare+Choice plan of a
Medicare+Choice organization under this part who is dissatisfied by
reason of the enrollee’s failure to receive any health service to
which the enrollee believes the enrollee is entitled and at no
greater charge than the enrollee believes the enrollee is required to
pay is entitled, if the amount in controversy is $100 or more, to a
hearing before the Secretary to the same extent as is provided in
section 205(b), and in any such hearing the Secretary shall make the
organization a party. If the amount in controversy is $1,000 or more,
the individual or organization shall, upon notifying the other party,
be entitled to judicial review of the Secretary’s final decision as
provided in section 205(g), and both the individual and the
organization shall be entitled to be parties to that judicial review.
In applying subsections (b) and (g) of section 205 as provided in
this paragraph, and in applying section 205(l) thereto, any reference
therein to the Commissioner of Social Security or the Social Security
Administration shall be considered a reference to the Secretary or
the Department of Health and Human Services, respectively.

(h) Confidentiality and Accuracy of Enrollee Records.–Insofar as
a Medicare+Choice organization maintains medical records or other
health information regarding enrollees under this part, the
Medicare+Choice organization shall establish procedures– (1) to
safeguard the privacy of any individually identifiable enrollee
information; (2) to maintain such records and information in a manner
that is accurate and timely, and (3) to assure timely access of
enrollees to such records and information.

(i) Information on Advance Directives.–Each Medicare+Choice
organization shall meet the requirement of section 1866(f) (relating
to maintaining written policies and procedures respecting advance
directives).

(j) Rules Regarding Provider Participation.– (1)
Procedures.–Insofar as a Medicare+Choice organization offers
benefits under a Medicare+Choice plan through agreements with
physicians, the organization shall establish reasonable procedures
relating to the participation (under an agreement between a physician
and the organization) of physicians under such a plan. Such
procedures shall include– (A) providing notice of the rules
regarding participation, (B) providing written notice of
participation decisions that are adverse to physicians, and (C)
providing a process within the organization for appealing such
adverse decisions, including the presentation of information and
views of the physician regarding such decision.

(2) Consultation in medical policies.–A Medicare+Choice
organization shall consult with physicians who have entered into
participation agreements with the organization regarding the
organization’s medical policy, quality, and medical management
procedures.

(3) Prohibiting interference with provider advice to enrollees.–
(A) In general.–Subject to subparagraphs (B) and (C), a
Medicare+Choice organization (in relation to an individual enrolled
under a Medicare+Choice plan offered by the organization under this
part) shall not prohibit or otherwise restrict a covered health care
professional (as defined in subparagraph (D)) from advising such an
individual who is a patient of the professional about the health
status of the individual or medical care or treatment for the
individual’s condition or disease, regardless of whether benefits for
such care or treatment are provided under the plan, if the
professional is acting within the lawful scope of practice.

(B) Conscience protection.–Subparagraph (A) shall not be
construed as requiring a Medicare+Choice plan to provide, reimburse
for, or provide coverage of a counseling or referral service if the
Medicare+Choice organization offering the plan– (i) objects to the
provision of such service on moral or religious grounds; and (ii) in
the manner and through the written instrumentalities such
Medicare+Choice organization deems appropriate, makes available
information on its policies regarding such service to prospective
enrollees before or during enrollment and to enrollees within 90 days
after the date that the organization or plan adopts a change in
policy regarding such a counseling or referral service.

(C) Construction.–Nothing in subparagraph (B) shall be construed
to affect disclosure requirements under State law or under the
Employee Retirement Income Security Act of 1974.

(D) Health care professional defined.–For purposes of this
paragraph, the term ‘health care professional’ means a physician (as
defined in section 1861(r)) or other health care professional if
coverage for the professional’s services is provided under the
Medicare+Choice plan for the services of the professional. Such term
includes a podiatrist, optometrist, chiropractor, psychologist,
dentist, physician assistant, physical or occupational therapist and
therapy assistant, speech-language pathologist, audiologist,
registered or licensed practical nurse (including nurse practitioner,
clinical nurse specialist, certified registered nurse anesthetist,
and certified nurse-midwife), licensed certified social worker,
registered respiratory therapist, and certified respiratory therapy
technician.

(4) Limitations on physician incentive plans.– (A) In
general.–No Medicare+Choice organization may operate any physician
incentive plan (as defined in subparagraph (B)) unless the following
requirements are met: (i) No specific payment is made directly or
indirectly under the plan to a physician or physician group as an
inducement to reduce or limit medically necessary services provided
with respect to a specific individual enrolled with the organization.

(ii) If the plan places a physician or physician group at
substantial financial risk (as determined by the Secretary) for
services not provided by the physician or physician group, the
organization–

(I) provides stop-loss protection for the physician or group that
is adequate and appropriate, based on standards developed by the
Secretary that take into account the number of physicians placed at
such substantial financial risk in the group or under the plan and
the number of individuals enrolled with the organization who receive
services from the physician or group, and (II) conducts periodic
surveys of both individuals enrolled and individuals previously
enrolled with the organization to determine the degree of access of
such individuals to services provided by the organization and
satisfaction with the quality of such services.

(iii) The organization provides the Secretary with descriptive
information regarding the plan, sufficient to permit the Secretary to
determine whether the plan is in compliance with the requirements of
this subparagraph.

(B) Physician incentive plan defined.–In this paragraph, the term
‘physician incentive plan’ means any compensation arrangement between
a Medicare+Choice organization and a physician or physician group
that may directly or indirectly have the effect of reducing or
limiting services provided with respect to individuals enrolled with
the organization under this part.

(5) Limitation on provider indemnification.–A Medicare+Choice
organization may not provide (directly or indirectly) for a health
care professional, provider of services, or other entity providing
health care services (or group of such professionals, providers, or
entities) to indemnify the organization against any liability
resulting from a civil action brought for any damage caused to an
enrollee with a Medicare+Choice plan of the organization under this
part by the organization’s denial of medically necessary care.

(6) Special rules for medicare+choice private fee-for-service
plans.–For purposes of applying this part (including subsection
(k)(1)) and section 1866(a)(1)(O), a hospital (or other provider of
services), a physician or other health care professional, or other
entity furnishing health care services is treated as having an
agreement or contract in effect with a Medicare+Choice organization
(with respect to an individual enrolled in a Medicare+Choice private
fee-for-service plan it offers), if– (A) the provider, professional,
or other entity furnishes services that are covered under the plan to
such an enrollee; and (B) before providing such services, the
provider, professional, or other entity — (i) has been informed of
the individual’s enrollment under the plan, and (ii) either–

(I) has been informed of the terms and conditions of payment for
such services under the plan, or (II) is given a reasonable
opportunity to obtain information concerning such terms and
conditions, in a manner reasonably designed to effect informed
agreement by a provider.

The previous sentence shall only apply in the absence of an
explicit agreement between such a provider, professional, or other
entity and the Medicare+Choice organization.

(k) Treatment of Services Furnished by Certain Providers.– (1) In
general.–Except as provided in paragraph (2), a physician or other
entity (other than a provider of services) that does not have a
contract establishing payment amounts for services furnished to an
individual enrolled under this part with a Medicare+Choice
organization described in section 1851(a)(2)(A) shall accept as
payment in full for covered services under this title that are
furnished to such an individual the amounts that the physician or
other entity could collect if the individual were not so enrolled.
Any penalty or other provision of law that applies to such a payment
with respect to an individual entitled to benefits under this title
(but not enrolled with a Medicare+Choice organization under this
part) also applies with respect to an individual so enrolled.

(2) Application to medicare+choice private fee-for-service
plans.– (A) Balance billing limits under medicare+choice private
fee-for-service plans in case of contract providers.– (i) In
general.–In the case of an individual enrolled in a Medicare+Choice
private fee-for-service plan under this part, a physician, provider
of services, or other entity that has a contract (including through
the operation of subsection (j)(6)) establishing a payment rate for
services furnished to the enrollee shall accept as payment in full
for covered services under this title that are furnished to such an
individual an amount not to exceed (including any deductibles,
coinsurance, copayments, or balance billing otherwise permitted under
the plan) an amount equal to 115 percent of such payment rate.

(ii) Procedures to enforce limits.–The Medicare+Choice
organization that offers such a plan shall establish procedures,
similar to the procedures described in section 1848(g)(1)(A), in
order to carry out the previous sentence.

(iii) Assuring enforcement.–If the Medicare+Choice organization
fails to establish and enforce procedures required under clause (ii),
the organization is subject to intermediate sanctions under section
1857(g).

(B) Enrollee liability for noncontract providers.–For provision–
(i) establishing minimum payment rate in the case of noncontract
providers under a Medicare+Choice private fee- for-service plan, see
section 1852(a)(2); or (ii) limiting enrollee liability in the case
of covered services furnished by such providers, see paragraph (1)
and section 1866(a)(1)(O).

(C) Information on beneficiary liability.– (i) In general.–Each
Medicare+Choice organization that offers a Medicare+Choice private
fee-for-service plan shall provide that enrollees under the plan who
are furnished services for which payment is sought under the plan are
provided an appropriate explanation of benefits (consistent with that
provided under parts A and B and, if applicable, under medicare
supplemental policies) that includes a clear statement of the amount
of the enrollee’s liability (including any liability for balance
billing consistent with this subsection) with respect to payments for
such services.

(ii) Advance notice before receipt of inpatient hospital services
and certain other services.–In addition, such organization shall, in
its terms and conditions of payments to hospitals for inpatient
hospital services and for other services identified by the Secretary
for which the amount of the balancing billing under subparagraph (A)
could be substantial, require the hospital to provide to the
enrollee, before furnishing such services and if the hospital imposes
balance billing under subparagraph (A)–

(I) notice of the fact that balance billing is permitted under
such subparagraph for such services, and (II) a good faith estimate
of the likely amount of such balance billing (if any), with respect
to such services, based upon the presenting condition of the
enrollee.

~
payments to medicare+choice
organizations ~

Sec. 1853. (a) Payments to Organizations.– (1) Monthly
payments.– (A) In general.–Under a contract under section 1857 and
subject to subsections (e) and (f) and section 1859(e)(4), the
Secretary shall make monthly payments under this section in advance
to each Medicare+Choice organization, with respect to coverage of an
individual under this part in a Medicare+Choice payment area for a
month, in an amount equal to \1/12\ of the annual Medicare+Choice
capitation rate (as calculated under subsection (c)) with respect to
that individual for that area, adjusted for such risk factors as age,
disability status, gender, institutional status, and such other
factors as the Secretary determines to be appropriate, so as to
ensure actuarial equivalence. The Secretary may add to, modify, or
substitute for such factors, if such changes will improve the
determination of actuarial equivalence.

(B) Special rule for end-stage renal disease.–The Secretary shall
establish separate rates of payment to a Medicare+Choice organization
with respect to classes of individuals determined to have end-stage
renal disease and enrolled in a Medicare+Choice plan of the
organization. Such rates of payment shall be actuarially equivalent
to rates paid to other enrollees in the Medicare+Choice payment area
(or such other area as specified by the Secretary). In accordance
with regulations, the Secretary shall provide for the application of
the seventh sentence of section 1881(b)(7) to payments under this
section covering the provision of renal dialysis treatment in the
same manner as such sentence applies to composite rate payments
described in such sentence.

(2) Adjustment to reflect number of enrollees.– (A) In
general.–The amount of payment under this subsection may be
retroactively adjusted to take into account any difference between
the actual number of individuals enrolled with an organization under
this part and the number of such individuals estimated to be so
enrolled in determining the amount of the advance payment.

(B) Special rule for certain enrollees.– (i) In general.–Subject
to clause (ii), the Secretary may make retroactive adjustments under
subparagraph (A) to take into account individuals enrolled during the
period beginning on the date on which the individual enrolls with a
Medicare+Choice organization under a plan operated, sponsored, or
contributed to by the individual’s employer or former employer (or
the employer or former employer of the individual’s spouse) and
ending on the date on which the individual is enrolled in the
organization under this part, except that for purposes of making such
retroactive adjustments under this subparagraph, such period may not
exceed 90 days.

(ii) Exception.–No adjustment may be made under clause (i) with
respect to any individual who does not certify that the organization
provided the individual with the disclosure statement described in
section 1852(c) at the time the individual enrolled with the
organization.

(3) Establishment of risk adjustment factors.– (A) Report.–The
Secretary shall develop, and submit to Congress by not later than
March 1, 1999, a report on the method of risk adjustment of payment
rates under this section, to be implemented under subparagraph (C),
that accounts for variations in per capita costs based on health
status. Such report shall include an evaluation of such method by an
outside, independent actuary of the actuarial soundness of the
proposal.

(B) Data collection.–In order to carry out this paragraph, the
Secretary shall require Medicare+Choice organizations (and eligible
organizations with risk-sharing contracts under section 1876) to
submit data regarding inpatient hospital services for periods
beginning on or after July 1, 1997, and data regarding other services
and other information as the Secretary deems necessary for periods
beginning on or after July 1, 1998. The Secretary may not require an
organization to submit such data before January 1, 1998.

(C) Initial implementation.–The Secretary shall first provide for
implementation of a risk adjustment methodology that accounts for
variations in per capita costs based on health status and other
demographic factors for payments by no later than January 1, 2000.

(D) Uniform application to all types of plans.–Subject to section
1859(e)(4), the methodology shall be applied uniformly without regard
to the type of plan.

(b) Annual Announcement of Payment Rates.– (1) Annual
announcement.–The Secretary shall annually determine, and shall
announce (in a manner intended to provide notice to interested
parties) not later than March 1 before the calendar year concerned–
(A) the annual Medicare+Choice capitation rate for each
Medicare+Choice payment area for the year, and (B) the risk and other
factors to be used in adjusting such rates under subsection (a)(1)(A)
for payments for months in that year.

(2) Advance notice of methodological changes.–At least 45 days
before making the announcement under paragraph (1) for a year, the
Secretary shall provide for notice to Medicare+Choice organizations
of proposed changes to be made in the methodology from the
methodology and assumptions used in the previous announcement and
shall provide such organizations an opportunity to comment on such
proposed changes.

(3) Explanation of assumptions.–In each announcement made under
paragraph (1), the Secretary shall include an explanation of the
assumptions and changes in methodology used in the announcement in
sufficient detail so that Medicare+Choice organizations can compute
monthly adjusted Medicare+Choice capitation rates for individuals in
each Medicare+Choice payment area which is in whole or in part within
the service area of such an organization.

(c) Calculation of Annual Medicare+Choice Capitation Rates.– (1)
In general.–For purposes of this part, subject to paragraphs (6)(C)
and (7), each annual Medicare+Choice capitation rate, for a
Medicare+Choice payment area for a contract year consisting of a
calendar year, is equal to the largest of the amounts specified in
the following subparagraph (A), (B), or (C):

(A) Blended capitation rate.–The sum of–

(i) the area-specific percentage (as specified under
paragraph (2) for the year) of the annual area-specific
Medicare+Choice capitation rate for the Medicare+Choice payment area,
as determined under paragraph (3) for the year, and

(ii) the national percentage (as specified under paragraph (2) for
the year) of the input-price-adjusted annual national Medicare+Choice
capitation rate, as determined under paragraph (4) for the year,
multiplied by the budget neutrality adjustment factor determined
under paragraph (5).

(B) Minimum amount.–12 multiplied by the following amount:

(i) For 1998, $367 (but not to exceed, in the case of
an area outside the 50 States and the District of Columbia, 150
percent of the annual per capita rate of payment for 1997 determined
under section 1876(a)(1)(C) for the area).

(ii) For a succeeding year, the minimum amount specified in this
clause (or clause (i)) for the preceding year increased by the
national per capita Medicare+Choice growth percentage, described in
paragraph (6)(A) for that succeeding year.

(C) Minimum percentage increase.–

(i) For 1998, 102 percent of the annual per capita
rate of payment for 1997 determined under section 1876(a)(1)(C) for
the Medicare+Choice payment area.

(ii) For a subsequent year, 102 percent of the annual
Medicare+Choice capitation rate under this paragraph for the area for
the previous year.

(2) Area-specific and national percentages.–For purposes of
paragraph (1)(A)–

YEAR

AREA-SPECIFIC %

NATIONAL %

1998

90

10

1999

82

18

2000

74

26

2001

66

34

2002

58

42

2003+

50

50

(3) Annual area-specific medicare+choice capitation rate.– (A) In
general.–For purposes of paragraph (1)(A), subject to subparagraph
(B), the annual area-specific Medicare+Choice capitation rate for a
Medicare+Choice payment area–

(i) for 1998 is, subject to subparagraph (D), the
annual per capita rate of payment for 1997 determined under section
1876(a)(1)(C) for the area, increased by the national per capita
Medicare+Choice growth percentage for 1998 (described in paragraph
(6)(A)); or

(ii) for a subsequent year is the annual area- specific
Medicare+Choice capitation rate for the previous year determined
under this paragraph for the area, increased by the national per
capita Medicare+Choice growth percentage for such subsequent year.

(B) Removal of medical education from calculation of adjusted
average per capita cost.–

(i) In general.–In determining the area-specific
Medicare+Choice capitation rate under subparagraph (A) for a year
(beginning with 1998), the annual per capita rate of payment for 1997
determined under section 1876(a)(1)(C) shall be adjusted to exclude
from the rate the applicable percent (specified in clause (ii)) of
the payment adjustments described in subparagraph (C).

(ii) Applicable percent.–For purposes of clause (i), the
applicable percent for–

(I) 1998 is 20 percent,

(II) 1999 is 40 percent,

(III) 2000 is 60 percent,

(IV) 2001 is 80 percent, and

(V) a succeeding year is 100 percent.

(C) Payment adjustment.– (i) In general.–Subject to clause (ii),
the payment adjustments described in this subparagraph are payment
adjustments which the Secretary estimates were payable during 1997–

(I) for the indirect costs of medical education under section
1886(d)(5)(B), and (II) for direct graduate medical education costs
under section 1886(h).

(ii) Treatment of payments covered under state hospital
reimbursement system.–To the extent that the Secretary estimates
that an annual per capita rate of payment for 1997 described in
clause (i) reflects payments to hospitals reimbursed under section
1814(b)(3), the Secretary shall estimate a payment adjustment that is
comparable to the payment adjustment that would have been made under
clause (i) if the hospitals had not been reimbursed under such
section.

(D) Treatment of areas with highly variable payment rates.–In the
case of a Medicare+Choice payment area for which the annual per
capita rate of payment determined under section 1876(a)(1)(C) for
1997 varies by more than 20 percent from such rate for 1996, for
purposes of this subsection the Secretary may substitute for such
rate for 1997 a rate that is more representative of the costs of the
enrollees in the area.

(4) Input-price-adjusted annual national medicare+choice
capitation rate.– (A) In general.–For purposes of paragraph (1)(A),
the input-price-adjusted annual national Medicare+Choice capitation
rate for a Medicare+Choice payment area for a year is equal to the
sum, for all the types of medicare services (as classified by the
Secretary), of the product (for each such type of service) of– (i)
the national standardized annual Medicare+Choice capitation rate
(determined under subparagraph (B)) for the year, (ii) the proportion
of such rate for the year which is attributable to such type of
services, and (iii) an index that reflects (for that year and that
type of services) the relative input price of such services in the
area compared to the national average input price of such services.

In applying clause (iii), the Secretary may, subject to
subparagraph (C), apply those indices under this title that are used
in applying (or updating) national payment rates for specific areas
and localities.

(B) National standardized annual medicare+choice capitation
rate.–In subparagraph (A)(i), the ‘national standardized annual
Medicare+Choice capitation rate’ for a year is equal to– (i) the sum
(for all Medicare+Choice payment areas) of the product of–

(I) the annual area-specific Medicare+Choice capitation rate for
that year for the area under paragraph (3), and (II) the average
number of medicare beneficiaries residing in that area in the year,
multiplied by the average of the risk factor weights used to adjust
payments under subsection (a)(1)(A) for such beneficiaries in such
area; divided by

(ii) the sum of the products described in clause (i)(II) for all
areas for that year.

(C) Special rules for 1998.–In applying this paragraph for 1998–
(i) medicare services shall be divided into 2 types of services: part
A services and part B services; (ii) the proportions described in
subparagraph (A)(ii)–

(I) for part A services shall be the ratio (expressed as a
percentage) of the national average annual per capita rate of payment
for part A for 1997 to the total national average annual per capita
rate of payment for parts A and B for 1997, and (II) for part B
services shall be 100 percent minus the ratio described in subclause
(I);

(iii) for part A services, 70 percent of payments attributable to
such services shall be adjusted by the index used under section
1886(d)(3)(E) to adjust payment rates for relative hospital wage
levels for hospitals located in the payment area involved; (iv) for
part B services–

(I) 66 percent of payments attributable to such services shall be
adjusted by the index of the geographic area factors under section
1848(e) used to adjust payment rates for physicians’ services
furnished in the payment area, and (II) of the remaining 34 percent
of the amount of such payments, 40 percent shall be adjusted by the
index described in clause (iii); and

(v) the index values shall be computed based only on the
beneficiary population who are 65 years of age or older and who are
not determined to have end stage renal disease.

The Secretary may continue to apply the rules described in this
subparagraph (or similar rules) for 1999.

(5) Payment adjustment budget neutrality factor.–For purposes of
paragraph (1)(A), for each year, the Secretary shall determine a
budget neutrality adjustment factor so that the aggregate of the
payments under this part shall equal the aggregate payments that
would have been made under this part if payment were based entirely
on area-specific capitation rates.

(6) National per capita medicare+choice growth percentage
defined.– (A) In general.–In this part, the ‘national per capita
Medicare+Choice growth percentage’ for a year is the percentage
determined by the Secretary, by March 1st before the beginning of the
year involved, to reflect the Secretary’s estimate of the projected
per capita rate of growth in expenditures under this title for an
individual entitled to benefits under part A and enrolled under part
B, reduced by the number of percentage points specified in
subparagraph (B) for the year. Separate determinations may be made
for aged enrollees, disabled enrollees, and enrollees with end-stage
renal disease.

(B) Adjustment.–The number of percentage points specified in this
subparagraph is– (i) for 1998, 0.8 percentage points, (ii) for 1999,
0.5 percentage points, (iii) for 2000, 0.5 percentage points, (iv)
for 2001, 0.5 percentage points, (v) for 2002, 0.5 percentage points,
and (vi) for a year after 2002, 0 percentage points.

(C) Adjustment for over or under projection of national per capita
medicare+choice growth percentage.–Beginning with rates calculated
for 1999, before computing rates for a year as described in paragraph
(1), the Secretary shall adjust all area-specific and national
Medicare+Choice capitation rates (and beginning in 2000, the minimum
amount) for the previous year for the differences between the
projections of the national per capita Medicare+Choice growth
percentage for that year and previous years and the current estimate
of such percentage for such years.

(7) Adjustment for national coverage determinations.–If the
Secretary makes a determination with respect to coverage under this
title that the Secretary projects will result in a significant
increase in the costs to Medicare+Choice of providing benefits under
contracts under this part (for periods after any period described in
section 1852(a)(5)), the Secretary shall adjust appropriately the
payments to such organizations under this part.

(d) Medicare+Choice Payment Area Defined.– (1) In general.–In
this part, except as provided in paragraph (3), the term
‘Medicare+Choice payment area’ means a county, or equivalent area
specified by the Secretary.

(2) Rule for esrd beneficiaries.–In the case of individuals who
are determined to have end stage renal disease, the Medicare+Choice
payment area shall be a State or such other payment area as the
Secretary specifies.

(3) Geographic adjustment.– (A) In general.–Upon written request
of the chief executive officer of a State for a contract year
(beginning after 1998) made by not later than February 1 of the
previous year, the Secretary shall make a geographic adjustment to a
Medicare+Choice payment area in the State otherwise determined under
paragraph (1)– (i) to a single statewide Medicare+Choice payment
area, (ii) to the metropolitan based system described in subparagraph
(C), or (iii) to consolidating into a single Medicare+Choice payment
area noncontiguous counties (or equivalent areas described in
paragraph (1)) within a State.

Such adjustment shall be effective for payments for months
beginning with January of the year following the year in which the
request is received.

(B) Budget neutrality adjustment.–In the case of a State
requesting an adjustment under this paragraph, the Secretary shall
initially (and annually thereafter) adjust the payment rates
otherwise established under this section for Medicare+Choice payment
areas in the State in a manner so that the aggregate of the payments
under this section in the State shall not exceed the aggregate
payments that would have been made under this section for
Medicare+Choice payment areas in the State in the absence of the
adjustment under this paragraph.

(C) Metropolitan based system.–The metropolitan based system
described in this subparagraph is one in which– (i) all the portions
of each metropolitan statistical area in the State or in the case of
a consolidated metropolitan statistical area, all of the portions of
each primary metropolitan statistical area within the consolidated
area within the State, are treated as a single Medicare+Choice
payment area, and (ii) all areas in the State that do not fall within
a metropolitan statistical area are treated as a single
Medicare+Choice payment area.

(D) Areas.–In subparagraph (C), the terms ‘metropolitan
statistical area’, ‘consolidated metropolitan statistical area’, and
‘primary metropolitan statistical area’ mean any area designated as
such by the Secretary of Commerce.

(e) Special Rules for Individuals Electing MSA Plans.– (1) In
general.–If the amount of the Medicare+Choice monthly MSA premium
(as defined in section 1854(b)(2)(C)) for an MSA plan for a year is
less than \1/12\ of the annual Medicare+Choice capitation rate
applied under this section for the area and year involved, the
Secretary shall deposit an amount equal to 100 percent of such
difference in a Medicare+Choice MSA established (and, if applicable,
designated) by the individual under paragraph (2).

(2) Establishment and designation of medicare+choice medical
savings account as requirement for payment of contribution.–In the
case of an individual who has elected coverage under an MSA plan, no
payment shall be made under paragraph (1) on behalf of an individual
for a month unless the individual– (A) has established before the
beginning of the month (or by such other deadline as the Secretary
may specify) a Medicare+Choice MSA (as defined in section 138(b)(2)
of the Internal Revenue Code of 1986), and (B) if the individual has
established more than one such Medicare+Choice MSA, has designated
one of such accounts as the individual’s Medicare+Choice MSA for
purposes of this part.

Under rules under this section, such an individual may change the
designation of such account under subparagraph (B) for purposes of
this part.

(3) Lump-sum deposit of medical savings account contribution.–In
the case of an individual electing an MSA plan effective beginning
with a month in a year, the amount of the contribution to the
Medicare+Choice MSA on behalf of the individual for that month and
all successive months in the year shall be deposited during that
first month. In the case of a termination of such an election as of a
month before the end of a year, the Secretary shall provide for a
procedure for the recovery of deposits attributable to the remaining
months in the year.

(f) Payments From Trust Fund.–The payment to a Medicare+Choice
organization under this section for individuals enrolled under this
part with the organization and payments to a Medicare+Choice MSA
under subsection (e)(1) shall be made from the Federal Hospital
Insurance Trust Fund and the Federal Supplementary Medical Insurance
Trust Fund in such proportion as the Secretary determines reflects
the relative weight that benefits under part A and under part B
represents of the actuarial value of the total benefits under this
title. Monthly payments otherwise payable under this section for
October 2000 shall be paid on the first business day of such month.
Monthly payments otherwise payable under this section for October
2001 shall be paid on the last business day of September 2001.
Monthly payments otherwise payable under this section for October
2006 shall be paid on the first business day of October 2006.

(g) Special Rule for Certain Inpatient Hospital Stays.–In the
case of an individual who is receiving inpatient hospital services
from a subsection (d) hospital (as defined in section 1886(d)(1)(B))
as of the effective date of the individual’s– (1) election under
this part of a Medicare+Choice plan offered by a Medicare+Choice
organization– (A) payment for such services until the date of the
individual’s discharge shall be made under this title through the
Medicare+Choice plan or the original medicare fee-for- service
program option described in section 1851(a)(1)(A) (as the case may
be) elected before the election with such organization, (B) the
elected organization shall not be financially responsible for payment
for such services until the date after the date of the individual’s
discharge, and (C) the organization shall nonetheless be paid the
full amount otherwise payable to the organization under this part; or
(2) termination of election with respect to a Medicare+Choice
organization under this part– (A) the organization shall be
financially responsible for payment for such services after such date
and until the date of the individual’s discharge, (B) payment for
such services during the stay shall not be made under section 1886(d)
or by any succeeding Medicare+Choice organization, and (C) the
terminated organization shall not receive any payment with respect to
the individual under this part during the period the individual is
not enrolled.

(h) Special Rule for Hospice Care.– (1) Information.–A contract
under this part shall require the Medicare+Choice organization to
inform each individual enrolled under this part with a
Medicare+Choice plan offered by the organization about the
availability of hospice care if– (A) a hospice program participating
under this title is located within the organization’s service area;
or (B) it is common practice to refer patients to hospice programs
outside such service area.

(2) Payment.–If an individual who is enrolled with a
Medicare+Choice organization under this part makes an election under
section 1812(d)(1) to receive hospice care from a particular hospice
program– (A) payment for the hospice care furnished to the
individual shall be made to the hospice program elected by the
individual by the Secretary; (B) payment for other services for which
the individual is eligible notwithstanding the individual’s election
of hospice care under section 1812(d)(1), including services not
related to the individual’s terminal illness, shall be made by the
Secretary to the Medicare+Choice organization or the provider or
supplier of the service instead of payments calculated under
subsection (a); and (C) the Secretary shall continue to make monthly
payments to the Medicare+Choice organization in an amount equal to
the value of the additional benefits required under section
1854(f)(1)(A).

~ premiums ~

Sec. 1854. (a) Submission of Proposed Premiums and Related
Information.– (1) In general.–Not later than May 1 of each year,
each Medicare+Choice organization shall submit to the Secretary, in a
form and manner specified by the Secretary and for each
Medicare+Choice plan for the service area in which it intends to be
offered in the following year– (A) the information described in
paragraph (2), (3), or (4) for the type of plan involved; and (B) the
enrollment capacity (if any) in relation to the plan and area.

(2) Information required for coordinated care plans.–For a
Medicare+Choice plan described in section 1851(a)(2)(A), the
information described in this paragraph is as follows: (A) Basic (and
additional) benefits.–For benefits described in 1852(a)(1)(A)– (i)
the adjusted community rate (as defined in subsection (f)(3)); (ii)
the Medicare+Choice monthly basic beneficiary premium (as defined in
subsection (b)(2)(A)); (iii) a description of deductibles,
coinsurance, and copayments applicable under the plan and the
actuarial value of such deductibles, coinsurance, and copayments,
described in subsection (e)(1)(A); and (iv) if required under
subsection (f)(1), a description of the additional benefits to be
provided pursuant to such subsection and the value determined for
such proposed benefits under such subsection.

(B) Supplemental benefits.–For benefits described in 1852(a)(3)–
(i) the adjusted community rate (as defined in subsection (f)(3));
(ii) the Medicare+Choice monthly supplemental beneficiary premium (as
defined in subsection (b)(2)(B)); and (iii) a description of
deductibles, coinsurance, and copayments applicable under the plan
and the actuarial value of such deductibles, coinsurance, and
copayments, described in subsection (e)(2).

(3) Requirements for msa plans.–For an MSA plan described, the
information described in this paragraph is as follows: (A) Basic (and
additional) benefits.–For benefits described in 1852(a)(1)(A), the
amount of the Medicare+Choice monthly MSA premium.

(B) Supplemental benefits.–For benefits described in 1852(a)(3),
the amount of the Medicare+Choice monthly supplementary beneficiary
premium.

(4) Requirements for private fee-for-service plans.–For a
Medicare+Choice plan described in section 1851(a)(2)(C) for benefits
described in 1852(a)(1)(A), the information described in this
paragraph is as follows: (A) Basic (and additional) benefits.–For
benefits described in 1852(a)(1)(A)– (i) the adjusted community rate
(as defined in subsection (f)(3)); (ii) the amount of the
Medicare+Choice monthly basic beneficiary premium; (iii) a
description of the deductibles, coinsurance, and copayments
applicable under the plan, and the actuarial value of such
deductibles, coinsurance, and copayments, as described in subsection
(e)(4)(A); and (iv) if required under subsection (f)(1), a
description of the additional benefits to be provided pursuant to
such subsection and the value determined for such proposed benefits
under such subsection.

(B) Supplemental benefits.–For benefits described in 1852(a)(3),
the amount of the Medicare+Choice monthly supplemental beneficiary
premium (as defined in subsection (b)(2)(B)).

(5) Review.– (A) In general.–Subject to subparagraph (B), the
Secretary shall review the adjusted community rates, the amounts of
the basic and supplemental premiums, and values filed under this
subsection and shall approve or disapprove such rates, amounts, and
value so submitted.

(B) Exception.–The Secretary shall not review, approve, or
disapprove the amounts submitted under paragraph (3) or subparagraphs
(A)(ii) and (B) of paragraph (4).

(b) Monthly Premium Charged.– (1) In general.– (A) Rule for
other than msa plans.–The monthly amount of the premium charged to
an individual enrolled in a Medicare+Choice plan (other than an MSA
plan) offered by a Medicare+Choice organization shall be equal to the
sum of the Medicare+Choice monthly basic beneficiary premium and the
Medicare+Choice monthly supplementary beneficiary premium (if any).

(B) MSA plans.–The monthly amount of the premium charged to an
individual enrolled in an MSA plan offered by a Medicare+Choice
organization shall be equal to the Medicare+Choice monthly
supplemental beneficiary premium (if any).

(2) Premium terminology defined.–For purposes of this part: (A)
The Medicare+Choice monthly basic beneficiary premium.–The term
‘Medicare+Choice monthly basic beneficiary premium’ means, with
respect to a Medicare+Choice plan, the amount authorized to be
charged under subsection (e)(1) for the plan, or, in the case of a
Medicare+Choice private fee-for- service plan, the amount filed under
subsection (a)(4)(A)(ii).

(B) Medicare+Choice monthly supplemental beneficiary premium.–The
term ‘Medicare+Choice monthly supplemental beneficiary premium’
means, with respect to a Medicare+Choice plan, the amount authorized
to be charged under subsection (e)(2) for the plan or, in the case of
a MSA plan or Medicare+Choice private fee-for-service plan, the
amount filed under paragraph (3)(B) or (4)(B) of subsection (a).

(C) Medicare+Choice monthly MSA premium.–The term
‘Medicare+Choice monthly MSA premium’ means, with respect to a
Medicare+Choice plan, the amount of such premium filed under
subsection (a)(3)(A) for the plan.

(c) Uniform Premium.–The Medicare+Choice monthly basic and
supplemental beneficiary premium, the Medicare+Choice monthly MSA
premium charged under subsection (b) of a Medicare+Choice
organization under this part may not vary among individuals enrolled
in the plan.

(d) Terms and Conditions of Imposing Premiums.–Each
Medicare+Choice organization shall permit the payment of
Medicare+Choice monthly basic and supplemental beneficiary premiums
on a monthly basis, may terminate election of individuals for a
Medicare+Choice plan for failure to make premium payments only in
accordance with section 1851(g)(3)(B)(i), and may not provide for
cash or other monetary rebates as an inducement for enrollment or
otherwise.

(e) Limitation on Enrollee Liability.– (1) For basic and
additional benefits.–In no event may– (A) the Medicare+Choice
monthly basic beneficiary premium (multiplied by 12) and the
actuarial value of the deductibles, coinsurance, and copayments
applicable on average to individuals enrolled under this part with a
Medicare+Choice plan described in section 1851(a)(2)(A) of an
organization with respect to required benefits described in section
1852(a)(1)(A) and additional benefits (if any) required under
subsection (f)(1)(A) for a year, exceed (B) the actuarial value of
the deductibles, coinsurance, and copayments that would be applicable
on average to individuals entitled to benefits under part A and
enrolled under part B if they were not members of a Medicare+Choice
organization for the year.

(2) For supplemental benefits.–If the Medicare+Choice
organization provides to its members enrolled under this part in a
Medicare+Choice plan described in section 1851(a)(2)(A) with respect
to supplemental benefits described in section 1852(a)(3), the sum of
the Medicare+Choice monthly supplemental beneficiary premium
(multiplied by 12) charged and the actuarial value of its
deductibles, coinsurance, and copayments charged with respect to such
benefits may not exceed the adjusted community rate for such benefits
(as defined in subsection (f)(3)).

(3) Determination on other basis.–If the Secretary determines
that adequate data are not available to determine the actuarial value
under paragraph (1)(A) or (2), the Secretary may determine such
amount with respect to all individuals in same geographic area, the
State, or in the United States, eligible to enroll in the
Medicare+Choice plan involved under this part or on the basis of
other appropriate data.

(4) Special rule for private fee-for-service plans.–With respect
to a Medicare+Choice private fee-for-service plan (other than a plan
that is an MSA plan), in no event may– (A) the actuarial value of
the deductibles, coinsurance, and copayments applicable on average to
individuals enrolled under this part with such a plan of an
organization with respect to required benefits described in section
1852(a)(1), exceed (B) the actuarial value of the deductibles,
coinsurance, and copayments that would be applicable on average to
individuals entitled to benefits under part A and enrolled under part
B if they were not members of a Medicare+Choice organization for the
year.

(f) Requirement for Additional Benefits.– (1) Requirement.– (A)
In general.–Each Medicare+Choice organization (in relation to a
Medicare+Choice plan, other than an MSA plan, it offers) shall
provide that if there is an excess amount (as defined in subparagraph
(B)) for the plan for a contract year, subject to the succeeding
provisions of this subsection, the organization shall provide to
individuals such additional benefits (as the organization may
specify) in a value which the Secretary determines is at least equal
to the adjusted excess amount (as defined in subparagraph (C)).

(B) Excess amount.–For purposes of this paragraph, the ‘excess
amount’, for an organization for a plan, is the amount (if any) by
which– (i) the average of the capitation payments made to the
organization under section 1853 for the plan at the beginning of
contract year, exceeds (ii) the actuarial value of the required
benefits described in section 1852(a)(1)(A) under the plan for
individuals under this part, as determined based upon an adjusted
community rate described in paragraph (3) (as reduced for the
actuarial value of the coinsurance, copayments, and deductibles under
parts A and B).

(C) Adjusted excess amount.–For purposes of this paragraph, the
‘adjusted excess amount’, for an organization for a plan, is the
excess amount reduced to reflect any amount withheld and reserved for
the organization for the year under paragraph (2).

(D) Uniform application.–This paragraph shall be applied
uniformly for all enrollees for a plan.

(E) Construction.–Nothing in this subsection shall be construed
as preventing a Medicare+Choice organization from providing
supplemental benefits (described in section 1852(a)(3)) that are in
addition to the health care benefits otherwise required to be
provided under this paragraph and from imposing a premium for such
supplemental benefits.

(2) Stabilization fund.–A Medicare+Choice organization may
provide that a part of the value of an excess amount described in
paragraph (1) be withheld and reserved in the Federal Hospital
Insurance Trust Fund and in the Federal Supplementary Medical
Insurance Trust Fund (in such proportions as the Secretary determines
to be appropriate) by the Secretary for subsequent annual contract
periods, to the extent required to stabilize and prevent undue
fluctuations in the additional benefits offered in those subsequent
periods by the organization in accordance with such paragraph. Any of
such value of the amount reserved which is not provided as additional
benefits described in paragraph (1)(A) to individuals electing the
Medicare+Choice plan of the organization in accordance with such
paragraph prior to the end of such periods, shall revert for the use
of such trust funds.

(3) Adjusted community rate.–For purposes of this subsection,
subject to paragraph (4), the term ‘adjusted community rate’ for a
service or services means, at the election of a Medicare+Choice
organization, either– (A) the rate of payment for that service or
services which the Secretary annually determines would apply to an
individual electing a Medicare+Choice plan under this part if the
rate of payment were determined under a ‘community rating system’ (as
defined in section 1302(8) of the Public Health Service Act, other
than subparagraph (C)), or (B) such portion of the weighted aggregate
premium, which the Secretary annually estimates would apply to such
an individual, as the Secretary annually estimates is attributable to
that service or services, but adjusted for differences between the
utilization characteristics of the individuals electing coverage
under this part and the utilization characteristics of the other
enrollees with the plan (or, if the Secretary finds that adequate
data are not available to adjust for those differences, the
differences between the utilization characteristics of individuals
selecting other Medicare+Choice coverage, or Medicare+Choice eligible
individuals in the area, in the State, or in the United States,
eligible to elect Medicare+Choice coverage under this part and the
utilization characteristics of the rest of the population in the
area, in the State, or in the United States, respectively).

(4) Determination based on insufficient data.–For purposes of
this subsection, if the Secretary finds that there is insufficient
enrollment experience to determine an average of the capitation
payments to be made under this part at the beginning of a contract
period or to determine (in the case of a newly operated
provider-sponsored organization or other new organization) the
adjusted community rate for the organization, the Secretary may
determine such an average based on the enrollment experience of other
contracts entered into under this part and may determine such a rate
using data in the general commercial marketplace.

(g) Prohibition of State Imposition of Premium Taxes.–No State
may impose a premium tax or similar tax with respect to payments to
Medicare+Choice organizations under section 1853.

~
organizational and financial requirements for medicare+choice
organizations;

provider-sponsored organizations
~

Sec. 1855. (a) Organized and Licensed Under State Law.– (1) In
general.–Subject to paragraphs (2) and (3), a Medicare+Choice
organization shall be organized and licensed under State law as a
risk-bearing entity eligible to offer health insurance or health
benefits coverage in each State in which it offers a Medicare+Choice
plan.

(2) Special exception for provider-sponsored organizations.– (A)
In general.–In the case of a provider-sponsored organization that
seeks to offer a Medicare+Choice plan in a State, the Secretary shall
waive the requirement of paragraph (1) that the organization be
licensed in that State if– (i) the organization files an application
for such waiver with the Secretary by not later than November 1,
2002, and (ii) the Secretary determines, based on the application and
other evidence presented to the Secretary, that any of the grounds
for approval of the application described in subparagraph (B), (C),
or (D) has been met.

(B) Failure to act on licensure application on a timely
basis.–The ground for approval of such a waiver application
described in this subparagraph is that the State has failed to
complete action on a licensing application of the organization within
90 days of the date of the State’s receipt of a substantially
complete application. No period before the date of the enactment of
this section shall be included in determining such 90-day period.

(C) Denial of application based on discriminatory treatment.–The
ground for approval of such a waiver application described in this
subparagraph is that the State has denied such a licensing
application and– (i) the standards or review process imposed by the
State as a condition of approval of the license imposes any material
requirements, procedures, or standards (other than solvency
requirements) to such organizations that are not generally applicable
to other entities engaged in a substantially similar business, or
(ii) the State requires the organization, as a condition of
licensure, to offer any product or plan other than a Medicare+Choice
plan.

(D) Denial of application based on application of solvency
requirements.–With respect to waiver applications filed on or after
the date of publication of solvency standards under section 1856(a),
the ground for approval of such a waiver application described in
this subparagraph is that the State has denied such a licensing
application based (in whole or in part) on the organization’s failure
to meet applicable solvency requirements and– (i) such requirements
are not the same as the solvency standards established under section
1856(a); or (ii) the State has imposed as a condition of approval of
the license documentation or information requirements relating to
solvency or other material requirements, procedures, or standards
relating to solvency that are different from the requirements,
procedures, and standards applied by the Secretary under subsection
(d)(2).

For purposes of this paragraph, the term ‘solvency requirements’
means requirements relating to solvency and other matters covered
under the standards established under section 1856(a).

(E) Treatment of waiver.–In the case of a waiver granted under
this paragraph for a provider-sponsored organization with respect to
a State– (i) Limitation to state.–The waiver shall be effective
only with respect to that State and does not apply to any other
State.

(ii) Limitation to 36-month period.–The waiver shall be effective
only for a 36-month period and may not be renewed.

(iii) Conditioned on compliance with consumer protection and
quality standards.–The continuation of the waiver is conditioned
upon the organization’s compliance with the requirements described in
subparagraph (G).

(iv) Preemption of state law.–Any provisions of law of that State
which relate to the licensing of the organization and which prohibit
the organization from providing coverage pursuant to a contract under
this part shall be superseded.

(F) Prompt action on application.–The Secretary shall grant or
deny such a waiver application within 60 days after the date the
Secretary determines that a substantially complete waiver application
has been filed. Nothing in this section shall be construed as
preventing an organization which has had such a waiver application
denied from submitting a subsequent waiver application.

(G) Application and enforcement of state consumer protection and
quality standards.– (i) In general.–A waiver granted under this
paragraph to an organization with respect to licensing under State
law is conditioned upon the organization’s compliance with all
consumer protection and quality standards insofar as such standards–

(I) would apply in the State to the organization if it were
licensed under State law; (II) are generally applicable to other
Medicare+Choice organizations and plans in the State; and (III) are
consistent with the standards established under this part.

Such standards shall not include any standard preempted under
section 1856(b)(3)(B).

(ii) Incorporation into contract.–In the case of such a waiver
granted to an organization with respect to a State, the Secretary
shall incorporate the requirement that the organization (and
Medicare+Choice plans it offers) comply with standards under clause
(i) as part of the contract between the Secretary and the
organization under section 1857.

(iii) Enforcement.–In the case of such a waiver granted to an
organization with respect to a State, the Secretary may enter into an
agreement with the State under which the State agrees to provide for
monitoring and enforcement activities with respect to compliance of
such an organization and its Medicare+Choice plans with such
standards. Such monitoring and enforcement shall be conducted by the
State in the same manner as the State enforces such standards with
respect to other Medicare+Choice organizations and plans, without
discrimination based on the type of organization to which the
standards apply. Such an agreement shall specify or establish
mechanisms by which compliance activities are undertaken, while not
lengthening the time required to review and process applications for
waivers under this paragraph.

(H) Report.–By not later than December 31, 2001, the Secretary
shall submit 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 a report regarding whether the waiver process under
this paragraph should be continued after December 31, 2002. In making
such recommendation, the Secretary shall consider, among other
factors, the impact of such process on beneficiaries and on the
long-term solvency of the program under this title.

(3) Licensure does not substitute for or constitute
certification.–The fact that an organization is licensed in
accordance with paragraph (1) does not deem the organization to meet
other requirements imposed under this part.

(b) Assumption of Full Financial Risk.–The Medicare+Choice
organization shall assume full financial risk on a prospective basis
for the provision of the health care services for which benefits are
required to be provided under section 1852(a)(1), except that the
organization– (1) may obtain insurance or make other arrangements
for the cost of providing to any enrolled member such services the
aggregate value of which exceeds such aggregate level as the
Secretary specifies from time to time, (2) may obtain insurance or
make other arrangements for the cost of such services provided to its
enrolled members other than through the organization because medical
necessity required their provision before they could be secured
through the organization, (3) may obtain insurance or make other
arrangements for not more than 90 percent of the amount by which its
costs for any of its fiscal years exceed 115 percent of its income
for such fiscal year, and (4) may make arrangements with physicians
or other health care professionals, health care institutions, or any
combination of such individuals or institutions to assume all or part
of the financial risk on a prospective basis for the provision of
basic health services by the physicians or other health professionals
or through the institutions.

(c) Certification of Provision Against Risk of Insolvency for
Unlicensed PSOs.– (1) In general.–Each Medicare+Choice organization
that is a provider-sponsored organization, that is not licensed by a
State under subsection (a), and for which a waiver application has
been approved under subsection (a)(2), shall meet standards
established under section 1856(a) relating to the financial solvency
and capital adequacy of the organization.

(2) Certification process for solvency standards for psos.– The
Secretary shall establish a process for the receipt and approval of
applications of a provider-sponsored organization described in
paragraph (1) for certification (and periodic recertification) of the
organization as meeting such solvency standards. Under such process,
the Secretary shall act upon such a certification application not
later than 60 days after the date the application has been received.

(d) Provider-Sponsored Organization Defined.– (1) In general.–In
this part, the term ‘provider-sponsored organization’ means a public
or private entity– (A) that is established or organized, and
operated, by a health care provider, or group of affiliated health
care providers, (B) that provides a substantial proportion (as
defined by the Secretary in accordance with paragraph (2)) of the
health care items and services under the contract under this part
directly through the provider or affiliated group of providers, and
(C) with respect to which the affiliated providers share, directly or
indirectly, substantial financial risk with respect to the provision
of such items and services and have at least a majority financial
interest in the entity.

(2) Substantial proportion.–In defining what is a ‘substantial
proportion’ for purposes of paragraph (1)(B), the Secretary– (A)
shall take into account the need for such an organization to assume
responsibility for providing– (i) significantly more than the
majority of the items and services under the contract under this
section through its own affiliated providers; and (ii) most of the
remainder of the items and services under the contract through
providers with which the organization has an agreement to provide
such items and services, in order to assure financial stability and
to address the practical considerations involved in integrating the
delivery of a wide range of service providers; (B) shall take into
account the need for such an organization to provide a limited
proportion of the items and services under the contract through
providers that are neither affiliated with nor have an agreement with
the organization; and (C) may allow for variation in the definition
of substantial proportion among such organizations based on relevant
differences among the organizations, such as their location in an
urban or rural area.

(3) Affiliation.–For purposes of this subsection, a provider is
‘affiliated’ with another provider if, through contract, ownership,
or otherwise– (A) one provider, directly or indirectly, controls, is
controlled by, or is under common control with the other, (B) both
providers are part of a controlled group of corporations under
section 1563 of the Internal Revenue Code of 1986, (C) each provider
is a participant in a lawful combination under which each provider
shares substantial financial risk in connection with the
organization’s operations, or (D) both providers are part of an
affiliated service group under section 414 of such Code.

(4) Control.–For purposes of paragraph (3), control is presumed
to exist if one party, directly or indirectly, owns, controls, or
holds the power to vote, or proxies for, not less than 51 percent of
the voting rights or governance rights of another.

(5) Health care provider defined.–In this subsection, the term
‘health care provider’ means– (A) any individual who is engaged in
the delivery of health care services in a State and who is required
by State law or regulation to be licensed or certified by the State
to engage in the delivery of such services in the State, and (B) any
entity that is engaged in the delivery of health care services in a
State and that, if it is required by State law or regulation to be
licensed or certified by the State to engage in the delivery of such
services in the State, is so licensed.

(6) Regulations.–The Secretary shall issue regulations to carry
out this subsection.

~ establishment of
standards ~

Sec. 1856. (a) Establishment of Solvency Standards for Provider-
Sponsored Organizations.– (1) Establishment.– (A) In general.–The
Secretary shall establish, on an expedited basis and using a
negotiated rulemaking process under subchapter III of chapter 5 of
title 5, United States Code, standards described in section
1855(c)(1) (relating to the financial solvency and capital adequacy
of the organization) that entities must meet to qualify as
provider-sponsored organizations under this part.

(B) Factors to consider for solvency standards.–In establishing
solvency standards under subparagraph (A) for provider-sponsored
organizations, the Secretary shall consult with interested parties
and shall take into account– (i) the delivery system assets of such
an organization and ability of such an organization to provide
services directly to enrollees through affiliated providers, (ii)
alternative means of protecting against insolvency, including
reinsurance, unrestricted surplus, letters of credit, guarantees,
organizational insurance coverage, partnerships with other licensed
entities, and valuation attributable to the ability of such an
organization to meet its service obligations through direct delivery
of care, and (iii) any standards developed by the National
Association of Insurance Commissioners specifically for risk-based
health care delivery organizations.

(C) Enrollee protection against insolvency.–Such standards shall
include provisions to prevent enrollees from being held liable to any
person or entity for the Medicare+Choice organization’s debts in the
event of the organization’s insolvency.

(2) Publication of notice.–In carrying out the rulemaking process
under this subsection, the Secretary, after consultation with the
National Association of Insurance Commissioners, the American Academy
of Actuaries, organizations representative of medicare beneficiaries,
and other interested parties, shall publish the notice provided for
under section 564(a) of title 5, United States Code, by not later
than 45 days after the date of the enactment of this section.

(3) Target date for publication of rule.–As part of the notice
under paragraph (2), and for purposes of this subsection, the ‘target
date for publication’ (referred to in section 564(a)(5) of such
title) shall be April 1, 1998.

(4) Abbreviated period for submission of comments.–In applying
section 564(c) of such title under this subsection, ’15 days’ shall
be substituted for ’30 days’.

(5) Appointment of negotiated rulemaking committee and
facilitator.–The Secretary shall provide for– (A) the appointment
of a negotiated rulemaking committee under section 565(a) of such
title by not later than 30 days after the end of the comment period
provided for under section 564(c) of such title (as shortened under
paragraph (4)), and (B) the nomination of a facilitator under section
566(c) of such title by not later than 10 days after the date of
appointment of the committee.

(6) Preliminary committee report.–The negotiated rulemaking
committee appointed under paragraph (5) shall report to the
Secretary, by not later than January 1, 1998, regarding the
committee’s progress on achieving a consensus with regard to the
rulemaking proceeding and whether such consensus is likely to occur
before 1 month before the target date for publication of the rule.

If the committee reports that the committee has failed to make
significant progress towards such consensus or is unlikely to reach
such consensus by the target date, the Secretary may terminate such
process and provide for the publication of a rule under this
subsection through such other methods as the Secretary may provide.

(7) Final committee report.–If the committee is not terminated
under paragraph (6), the rulemaking committee shall submit a report
containing a proposed rule by not later than 1 month before the
target date of publication.

(8) Interim, final effect.–The Secretary shall publish a rule
under this subsection in the Federal Register by not later than the
target date of publication. Such rule shall be effective and final
immediately on an interim basis, but is subject to change and
revision after public notice and opportunity for a period (of not
less than 60 days) for public comment. In connection with such rule,
the Secretary shall specify the process for the timely review and
approval of applications of entities to be certified as
provider-sponsored organizations pursuant to such rules and
consistent with this subsection.

(9) Publication of rule after public comment.–The Secretary shall
provide for consideration of such comments and republication of such
rule by not later than 1 year after the target date of publication.

(b) Establishment of Other Standards.– (1) In general.–The
Secretary shall establish by regulation other standards (not
described in subsection (a)) for Medicare+Choice organizations and
plans consistent with, and to carry out, this part. The Secretary
shall publish such regulations by June 1, 1998. In order to carry out
this requirement in a timely manner, the Secretary may promulgate
regulations that take effect on an interim basis, after notice and
pending opportunity for public comment.

(2) Use of current standards.–Consistent with the requirements of
this part, standards established under this subsection shall be based
on standards established under section 1876 to carry out analogous
provisions of such section.

(3) Relation to state laws.– (A) In general.–The standards
established under this subsection shall supersede any State law or
regulation (including standards described in subparagraph (B)) with
respect to Medicare+Choice plans which are offered by Medicare+Choice
organizations under this part to the extent such law or regulation is
inconsistent with such standards.

(B) Standards specifically superseded.–State standards relating
to the following are superseded under this paragraph: (i) Benefit
requirements.

(ii) Requirements relating to inclusion or treatment of providers.

(iii) Coverage determinations (including related appeals and
grievance processes).

~ contracts with
medicare+choice organizations ~

Sec. 1857. (a) In General.–The Secretary shall not permit the
election under section 1851 of a Medicare+Choice plan offered by a
Medicare+Choice organization under this part, and no payment shall be
made under section 1853 to an organization, unless the Secretary has
entered into a contract under this section with the organization with
respect to the offering of such plan. Such a contract with an
organization may cover more than 1 Medicare+Choice plan. Such
contract shall provide that the organization agrees to comply with
the applicable requirements and standards of this part and the terms
and conditions of payment as provided for in this part.

(b) Minimum Enrollment Requirements.– (1) In general.–Subject to
paragraph (2), the Secretary may not enter into a contract under this
section with a Medicare+Choice organization unless the organization
has– (A) at least 5,000 individuals (or 1,500 individuals in the
case of an organization that is a provider-sponsored organization)
who are receiving health benefits through the organization, or (B) at
least 1,500 individuals (or 500 individuals in the case of an
organization that is a provider-sponsored organization) who are
receiving health benefits through the organization if the
organization primarily serves individuals residing outside of
urbanized areas.

(2) Application to msa plans.–In applying paragraph (1) in the
case of a Medicare+Choice organization that is offering an MSA plan,
paragraph (1) shall be applied by substituting covered lives for
individuals.

(3) Allowing transition.–The Secretary may waive the requirement
of paragraph (1) during the first 3 contract years with respect to an
organization.

(c) Contract Period and Effectiveness.– (1) Period.–Each
contract under this section shall be for a term of at least 1 year,
as determined by the Secretary, and may be made automatically
renewable from term to term in the absence of notice by either party
of intention to terminate at the end of the current term.

(2) Termination authority.–In accordance with procedures
established under subsection (h), the Secretary may at any time
terminate any such contract if the Secretary determines that the
organization– (A) has failed substantially to carry out the
contract; (B) is carrying out the contract in a manner inconsistent
with the efficient and effective administration of this part; or (C)
no longer substantially meets the applicable conditions of this part.

(3) Effective date of contracts.–The effective date of any
contract executed pursuant to this section shall be specified in the
contract, except that in no case shall a contract under this section
which provides for coverage under an MSA plan be effective before
January 1999 with respect to such coverage.

(4) Previous terminations.–The Secretary may not enter into a
contract with a Medicare+Choice organization if a previous contract
with that organization under this section was terminated at the
request of the organization within the preceding 5-year period,
except in circumstances which warrant special consideration, as
determined by the Secretary.

(5) Contracting authority.–The authority vested in the Secretary
by this part may be performed without regard to such provisions of
law or regulations relating to the making, performance, amendment, or
modification of contracts of the United States as the Secretary may
determine to be inconsistent with the furtherance of the purpose of
this title.

(d) Protections Against Fraud and Beneficiary Protections.– (1)
Periodic auditing.–The Secretary shall provide for the annual
auditing of the financial records (including data relating to
medicare utilization, costs, and computation of the adjusted
community rate) of at least one-third of the Medicare+Choice
organizations offering Medicare+Choice plans under this part. The
Comptroller General shall monitor auditing activities conducted under
this subsection.

(2) Inspection and audit.–Each contract under this section shall
provide that the Secretary, or any person or organization designated
by the Secretary– (A) shall have the right to inspect or otherwise
evaluate (i) the quality, appropriateness, and timeliness of services
performed under the contract, and (ii) the facilities of the
organization when there is reasonable evidence of some need for such
inspection, and (B) shall have the right to audit and inspect any
books and records of the Medicare+Choice organization that pertain
(i) to the ability of the organization to bear the risk of potential
financial losses, or (ii) to services performed or determinations of
amounts payable under the contract.

(3) Enrollee notice at time of termination.–Each contract under
this section shall require the organization to provide (and pay for)
written notice in advance of the contract’s termination, as well as a
description of alternatives for obtaining benefits under this title,
to each individual enrolled with the organization under this part.

(4) Disclosure.– (A) In general.–Each Medicare+Choice
organization shall, in accordance with regulations of the Secretary,
report to the Secretary financial information which shall include the
following: (i) Such information as the Secretary may require
demonstrating that the organization has a fiscally sound operation.

(ii) A copy of the report, if any, filed with the Health Care
Financing Administration containing the information required to be
reported under section 1124 by disclosing entities.

(iii) A description of transactions, as specified by the
Secretary, between the organization and a party in interest. Such
transactions shall include–

(I) any sale or exchange, or leasing of any property between the
organization and a party in interest; (II) any furnishing for
consideration of goods, services (including management services), or
facilities between the organization and a party in interest, but not
including salaries paid to employees for services provided in the
normal course of their employment and health services provided to
members by hospitals and other providers and by staff, medical group
(or groups), individual practice association (or associations), or
any combination thereof; and (III) any lending of money or other
extension of credit between an organization and a party in interest.

The Secretary may require that information reported respecting an
organization which controls, is controlled by, or is under common
control with, another entity be in the form of a consolidated
financial statement for the organization and such entity.

(B) Party in interest defined.–For the purposes of this
paragraph, the term ‘party in interest’ means– (i) any director,
officer, partner, or employee responsible for management or
administration of a Medicare+Choice organization, any person who is
directly or indirectly the beneficial owner of more than 5 percent of
the equity of the organization, any person who is the beneficial
owner of a mortgage, deed of trust, note, or other interest secured
by, and valuing more than 5 percent of the organization, and, in the
case of a Medicare+Choice organization organized as a nonprofit
corporation, an incorporator or member of such corporation under
applicable State corporation law; (ii) any entity in which a person
described in clause (i)–

(I) is an officer or director; (II) is a partner (if such entity
is organized as a partnership); (III) has directly or indirectly a
beneficial interest of more than 5 percent of the equity; or (IV) has
a mortgage, deed of trust, note, or other interest valuing more than
5 percent of the assets of such entity;

(iii) any person directly or indirectly controlling, controlled
by, or under common control with an organization; and (iv) any
spouse, child, or parent of an individual described in clause (i).

(C) Access to information.–Each Medicare+Choice organization
shall make the information reported pursuant to subparagraph (A)
available to its enrollees upon reasonable request.

(5) Loan information.–The contract shall require the organization
to notify the Secretary of loans and other special financial
arrangements which are made between the organization and
subcontractors, affiliates, and related parties.

(e) Additional Contract Terms.– (1) In general.–The contract
shall contain such other terms and conditions not inconsistent with
this part (including requiring the organization to provide the
Secretary with such information) as the Secretary may find necessary
and appropriate.

(2) Cost-sharing in enrollment-related costs.– (A) In general.–A
Medicare+Choice organization shall pay the fee established by the
Secretary under subparagraph (B).

(B) Authorization.–The Secretary is authorized to charge a fee to
each Medicare+Choice organization with a contract under this part
that is equal to the organization’s pro rata share (as determined by
the Secretary) of the aggregate amount of fees which the Secretary is
directed to collect in a fiscal year. Any amounts collected are
authorized to be appropriated only for the purpose of carrying out
section 1851 (relating to enrollment and dissemination of
information) and section 4360 of the Omnibus Budget Reconciliation
Act of 1990 (relating to the health insurance counseling and
assistance program).

(C) Contingency.–For any fiscal year, the fees authorized under
subparagraph (B) are contingent upon enactment in an appropriations
act of a provision specifying the aggregate amount of fees the
Secretary is directed to collect in a fiscal year. Fees collected
during any fiscal year under this paragraph shall be deposited and
credited as offsetting collections.

(D) Limitation.–In any fiscal year the fees collected by the
Secretary under subparagraph (B) shall not exceed the lesser of– (i)
the estimated costs to be incurred by the Secretary in the fiscal
year in carrying out the activities described in section 1851 and
section 4360 of the Omnibus Budget Reconciliation Act of 1990; or
(ii)(I) $200,000,000 in fiscal year 1998; (II) $150,000,000 in fiscal
year 1999; and (III) $100,000,000 in fiscal year 2000 and each
subsequent fiscal year.

(f) Prompt Payment by Medicare+Choice Organization.– (1)
Requirement.–A contract under this part shall require a
Medicare+Choice organization to provide prompt payment (consistent
with the provisions of sections 1816(c)(2) and 1842(c)(2)) of claims
submitted for services and supplies furnished to enrollees pursuant
to the contract, if the services or supplies are not furnished under
a contract between the organization and the provider or supplier (or
in the case of a Medicare+Choice private fee-for-service plan, if a
claim is submitted to such organization by an enrollee).

(2) Secretary’s option to bypass noncomplying organization.– In
the case of a Medicare+Choice eligible organization which the
Secretary determines, after notice and opportunity for a hearing, has
failed to make payments of amounts in compliance with paragraph (1),
the Secretary may provide for direct payment of the amounts owed to
providers and suppliers (or, in the case of a Medicare+Choice private
fee-for-service plan, amounts owed to the enrollees) for covered
services and supplies furnished to individuals enrolled under this
part under the contract. If the Secretary provides for the direct
payments, the Secretary shall provide for an appropriate reduction in
the amount of payments otherwise made to the organization under this
part to reflect the amount of the Secretary’s payments (and the
Secretary’s costs in making the payments).

(g) Intermediate Sanctions.– (1) In general.–If the Secretary
determines that a Medicare+Choice organization with a contract under
this section– (A) fails substantially to provide medically necessary
items and services that are required (under law or under the
contract) to be provided to an individual covered under the contract,
if the failure has adversely affected (or has substantial likelihood
of adversely affecting) the individual; (B) imposes premiums on
individuals enrolled under this part in excess of the amount of the
Medicare+Choice monthly basic and supplemental beneficiary premiums
permitted under section 1854; (C) acts to expel or to refuse to
re-enroll an individual in violation of the provisions of this part;
(D) engages in any practice that would reasonably be expected to have
the effect of denying or discouraging enrollment (except as permitted
by this part) by eligible individuals with the organization whose
medical condition or history indicates a need for substantial future
medical services; (E) misrepresents or falsifies information that is
furnished– (i) to the Secretary under this part, or (ii) to an
individual or to any other entity under this part; (F) fails to
comply with the applicable requirements of section 1852(j)(3) or
1852(k)(2)(A)(ii); or (G) employs or contracts with any individual or
entity that is excluded from participation under this title under
section 1128 or 1128A for the provision of health care, utilization
review, medical social work, or administrative services or employs or
contracts with any entity for the provision (directly or indirectly)
through such an excluded individual or entity of such services; the
Secretary may provide, in addition to any other remedies authorized
by law, for any of the remedies described in paragraph (2).

(2) Remedies.–The remedies described in this paragraph are– (A)
civil money penalties of not more than $25,000 for each determination
under paragraph (1) or, with respect to a determination under
subparagraph (D) or (E)(i) of such paragraph, of not more than
$100,000 for each such determination, plus, with respect to a
determination under paragraph (1)(B), double the excess amount
charged in violation of such paragraph (and the excess amount charged
shall be deducted from the penalty and returned to the individual
concerned), and plus, with respect to a determination under paragraph
(1)(D), $15,000 for each individual not enrolled as a result of the
practice involved, (B) suspension of enrollment of individuals under
this part after the date the Secretary notifies the organization of a
determination under paragraph (1) and until the Secretary is
satisfied that the basis for such determination has been corrected
and is not likely to recur, or (C) suspension of payment to the
organization under this part for individuals enrolled after the date
the Secretary notifies the organization of a determination under
paragraph (1) and until the Secretary is satisfied that the basis for
such determination has been corrected and is not likely to recur.

(3) Other intermediate sanctions.–In the case of a
Medicare+Choice organization for which the Secretary makes a
determination under subsection (c)(2) the basis of which is not
described in paragraph (1), the Secretary may apply the following
intermediate sanctions: (A) Civil money penalties of not more than
$25,000 for each determination under subsection (c)(2) if the
deficiency that is the basis of the determination has directly
adversely affected (or has the substantial likelihood of adversely
affecting) an individual covered under the organization’s contract.

(B) Civil money penalties of not more than $10,000 for each week
beginning after the initiation of civil money penalty procedures by
the Secretary during which the deficiency that is the basis of a
determination under subsection (c)(2) exists.

(C) Suspension of enrollment of individuals under this part after
the date the Secretary notifies the organization of a determination
under subsection (c)(2) and until the Secretary is satisfied that the
deficiency that is the basis for the determination has been corrected
and is not likely to recur.

(4) Civil money penalties.–The provisions of section 1128A (other
than subsections (a) and (b)) shall apply to a civil money penalty
under paragraph (2) or (3) in the same manner as they apply to a
civil money penalty or proceeding under section 1128A(a).

(h) Procedures for Termination.– (1) In general.–The Secretary
may terminate a contract with a Medicare+Choice organization under
this section in accordance with formal investigation and compliance
procedures established by the Secretary under which– (A) the
Secretary provides the organization with the reasonable opportunity
to develop and implement a corrective action plan to correct the
deficiencies that were the basis of the Secretary’s determination
under subsection (c)(2); and (B) the Secretary provides the
organization with reasonable notice and opportunity for hearing
(including the right to appeal an initial decision) before
terminating the contract.

(2) Exception for imminent and serious risk to health.– Paragraph
(1) shall not apply if the Secretary determines that a delay in
termination, resulting from compliance with the procedures specified
in such paragraph prior to termination, would pose an imminent and
serious risk to the health of individuals enrolled under this part
with the organization.

~ definitions;
miscellaneous provisions ~

Sec. 1859. (a) Definitions Relating to Medicare+Choice
Organizations.–In this part– (1) Medicare+choice organization.–The
term ‘Medicare+Choice organization’ means a public or private entity
that is certified under section 1856 as meeting the requirements and
standards of this part for such an organization.

(2) Provider-sponsored organization.–The term ‘provider-
sponsored organization’ is defined in section 1855(d)(1).

(b) Definitions Relating to Medicare+Choice Plans.– (1)
Medicare+choice plan.–The term ‘Medicare+Choice plan’ means health
benefits coverage offered under a policy, contract, or plan by a
Medicare+Choice organization pursuant to and in accordance with a
contract under section 1857.

(2) Medicare+Choice private fee-for-service plan.–The term
‘Medicare+Choice private fee-for-service plan’ means a
Medicare+Choice plan that– (A) reimburses hospitals, physicians, and
other providers at a rate determined by the plan on a fee-for-service
basis without placing the provider at financial risk; (B) does not
vary such rates for such a provider based on utilization relating to
such provider; and (C) does not restrict the selection of providers
among those who are lawfully authorized to provide the covered
services and agree to accept the terms and conditions of payment
established by the plan.

(3) MSA plan.– (A) In general.–The term ‘MSA plan’ means a
Medicare+Choice plan that– (i) provides reimbursement for at least
the items and services described in section 1852(a)(1) in a year but
only after the enrollee incurs countable expenses (as specified under
the plan) equal to the amount of an annual deductible (described in
subparagraph (B)); (ii) counts as such expenses (for purposes of such
deductible) at least all amounts that would have been payable under
parts A and B, and that would have been payable by the enrollee as
deductibles, coinsurance, or copayments, if the enrollee had elected
to receive benefits through the provisions of such parts; and (iii)
provides, after such deductible is met for a year and for all
subsequent expenses for items and services referred to in clause (i)
in the year, for a level of reimbursement that is not less than–

(I) 100 percent of such expenses, or (II) 100 percent of the
amounts that would have been paid (without regard to any deductibles
or coinsurance) under parts A and B with respect to such expenses,
whichever is less.

(B) Deductible.–The amount of annual deductible under an MSA
plan– (i) for contract year 1999 shall be not more than $6,000; and
(ii) for a subsequent contract year shall be not more than the
maximum amount of such deductible for the previous contract year
under this subparagraph increased by the national per capita
Medicare+Choice growth percentage under section 1853(c)(6) for the
year.

If the amount of the deductible under clause (ii) is not a
multiple of $50, the amount shall be rounded to the nearest multiple
of $50.

(c) Other References to Other Terms.– (1) Medicare+choice
eligible individual.–The term ‘Medicare+Choice eligible individual’
is defined in section 1851(a)(3).

(2) Medicare+choice payment area.–The term ‘Medicare+Choice
payment area’ is defined in section 1853(d).

(3) National per capita medicare+choice growth percentage.– The
‘national per capita Medicare+Choice growth percentage’ is defined in
section 1853(c)(6).

(4) Medicare+choice monthly basic beneficiary premium;
medicare+choice monthly supplemental beneficiary premium.–The terms
‘Medicare+Choice monthly basic beneficiary premium’ and
‘Medicare+Choice monthly supplemental beneficiary premium’ are
defined in section 1854(a)(2).

(d) Coordinated Acute and Long-Term Care Benefits Under a
Medicare+Choice Plan.–Nothing in this part shall be construed as
preventing a State from coordinating benefits under a medicaid plan
under title XIX with those provided under a Medicare+Choice plan in a
manner that assures continuity of a full-range of acute care and
long- term care services to poor elderly or disabled individuals
eligible for benefits under this title and under such plan.

(e) Restriction on Enrollment for Certain Medicare+Choice Plans.–
(1) In general.–In the case of a Medicare+Choice religious fraternal
benefit society plan described in paragraph (2), notwithstanding any
other provision of this part to the contrary and in accordance with
regulations of the Secretary, the society offering the plan may
restrict the enrollment of individuals under this part to individuals
who are members of the church, convention, or group described in
paragraph (3)(B) with which the society is affiliated.

(2) Medicare+choice religious fraternal benefit society plan
described.–For purposes of this subsection, a Medicare+Choice
religious fraternal benefit society plan described in this paragraph
is a Medicare+Choice plan described in section 1851(a)(2)(A) that–
(A) is offered by a religious fraternal benefit society described in
paragraph (3) only to members of the church, convention, or group
described in paragraph (3)(B); and (B) permits all such members to
enroll under the plan without regard to health status-related
factors.

Nothing in this subsection shall be construed as waiving any plan
requirements relating to financial solvency.

(3) Religious fraternal benefit society defined.–For purposes of
paragraph (2)(A), a ‘religious fraternal benefit society’ described
in this section is an organization that– (A) is described in section
501(c)(8) of the Internal Revenue Code of 1986 and is exempt from
taxation under section 501(a) of such Act; (B) is affiliated with,
carries out the tenets of, and shares a religious bond with, a church
or convention or association of churches or an affiliated group of
churches; (C) offers, in addition to a Medicare+Choice religious
fraternal benefit society plan, health coverage to individuals not
entitled to benefits under this title who are members of such church,
convention, or group; and (D) does not impose any limitation on
membership in the society based on any health status-related factor.

(4) Payment adjustment.–Under regulations of the Secretary, in
the case of individuals enrolled under this part under a
Medicare+Choice religious fraternal benefit society plan described in
paragraph (2), the Secretary shall provide for such adjustment to the
payment amounts otherwise established under section 1854 as may be
appropriate to assure an appropriate payment level, taking into
account the actuarial characteristics and experience of such
individuals.”.

SEC. 4002. TRANSITIONAL RULES FOR CURRENT
MEDICARE HMO PROGRAM.

(a) Authorizing Transitional Waiver of 50:50 Rule.–Section
1876(f) (42 U.S.C. 1395mm(f)) is amended– (1) in paragraph (1)– (A)
by striking “Each” and inserting “For contract periods beginning
before January 1, 1999, each”; and (B) by striking “or under a State
plan approved under title XIX”; (2) in paragraph (2), by striking
“The Secretary” and inserting “Subject to paragraph (4), the
Secretary”, and (3) by adding at the end the following: (4) Effective
for contract periods beginning after December 31, 1996, the Secretary
may waive or modify the requirement imposed by paragraph (1) to the
extent the Secretary finds that it is in the public interest.”.

(b) Transition.– (1) Risk-sharing contracts.–Section 1876 (42
U.S.C. 1395mm) is amended by adding at the end the following new
subsections: (k)(1) Except as provided in paragraph (2)– (A) on or
after the date standards for Medicare+Choice organizations and plans
are first established under section 1856(b)(1), the Secretary shall
not enter into any risk-sharing contract under this section with an
eligible organization; and (B) for any contract year beginning on or
after January 1, 1999, the Secretary shall not renew any such
contract.

(2) An individual who is enrolled in part B only and is enrolled
in an eligible organization with a risk-sharing contract under this
section on December 31, 1998, may continue enrollment in such
organization in accordance with regulations described in section
1856(b)(1).

(3) Notwithstanding subsection (a), the Secretary shall provide
that payment amounts under risk-sharing contracts under this section
for months in a year (beginning with January 1998) shall be
computed– (A) with respect to individuals entitled to benefits under
both parts A and B, by substituting payment rates under section
1853(a) for the payment rates otherwise established under section
1876(a), and (B) with respect to individuals only entitled to
benefits under part B, by substituting an appropriate proportion of
such rates (reflecting the relative proportion of payments under this
title attributable to such part) for the payment rates otherwise
established under subsection (a).

(4) The following requirements shall apply to eligible
organizations with risk-sharing contracts under this section in the
same manner as they apply to Medicare+Choice organizations under part
C: (A) Data collection requirements under section 1853(a)(3)(B).

(B) Restrictions on imposition of premium taxes under section
1854(g) in relating to payments to such organizations under this
section.

(C) The requirement to accept enrollment of new enrollees during
November 1998 under section 1851(e)(6).

(D) Payments under section 1857(e)(2).”.

(2) Reasonable cost contracts.– (A) Phase out of
contracts.–Section 1876(h) (42 U.S.C.1395mm(h)) is amended by adding
at the end the following: (5)(A) After the date of the enactment of
this paragraph, the Secretary may not enter into a reasonable cost
reimbursement contract under this subsection (if the contract is not
in effect as of such date), except for a contract with an eligible
organization which, immediately previous to entering into such
contract, had an agreement in effect under section 1833(a)(1)(A).

(B) The Secretary may not extend or renew a reasonable cost
reimbursement contract under this subsection for any period beyond
December 31, 2002.”.

(B) Report on impact.–By not later than January 1, 2001, the
Secretary of Health and Human Services shall submit to Congress a
report that analyzes the potential impact of termination of
reasonable cost reimbursement contracts, pursuant to the amendment
made by subparagraph (A), on medicare beneficiaries enrolled under
such contracts and on the medicare program. The report shall include
such recommendations regarding any extension or transition with
respect to such contracts as the Secretary deems appropriate.

(c) Enrollment Transition Rule.–An individual who is enrolled on
December 31, 1998, with an eligible organization under section 1876
of the Social Security Act (42 U.S.C. 1395mm) shall be considered to
be enrolled with that organization on January 1, 1999, under part C
of title XVIII of such Act if that organization has a contract under
that part for providing services on January 1, 1999 (unless the
individual has disenrolled effective on that date).

(d) Advance Directives.–Section 1866(f) (42 U.S.C. 1395cc(f)) is
amended– (1) in paragraph (1)– (A) by inserting “1855(i),” after
“1833(s),”, and (B) by inserting “, Medicare+Choice organization,”
after “provider of services”; and (2) in paragraph (2)(E), by
inserting “or a Medicare+Choice organization” after “section
1833(a)(1)(A)”.

(e) Extension of Provider Requirement.–Section 1866(a)(1)(O) (42
U.S.C. 1395cc(a)(1)(O)) is amended– (1) by striking “in the case of
hospitals and skilled nursing facilities,”; (2) by striking
“inpatient hospital and extended care”; (3) by inserting “with a
Medicare+Choice organization under part C or” after “any individual
enrolled”; (4) by striking “(in the case of hospitals) or limits (in
the case of skilled nursing facilities)”; and (5) by inserting “(less
any payments under sections 1886(d)(11) and 1886(h)(3)(D))” after
“under this title”.

(f) Additional Conforming Changes.– (1) Conforming references to
previous part C.–Any reference in law (in effect before the date of
the enactment of this Act) to part C of title XVIII of the Social
Security Act is deemed a reference to part D of such title (as in
effect after such date).

(2) Secretarial submission of legislative proposal.–Not later
than 6 months after the date of the enactment of this Act, the
Secretary of Health and Human Services shall submit to the
appropriate committees of Congress a legislative proposal providing
for such technical and conforming amendments in the law as are
required by the provisions of this chapter.

(g) Immediate Effective Date for Certain Requirements for
Demonstrations.–Section 1857(e)(2) of the Social Security Act
(requiring contribution to certain costs related to the enrollment
process comparative materials) applies to demonstrations with respect
to which enrollment is effected or coordinated under section 1851 of
such Act.

(h) Transition Rule for PSO Enrollment.–In applying subsection
(g)(1) of section 1876 of the Social Security Act (42 U.S.C. 1395mm)
to a risk-sharing contract entered into with an eligible organization
that is a provider-sponsored organization (as defined in section
1855(d)(1) of such Act, as inserted by section 5001) for a contract
year beginning on or after January 1, 1998, there shall be
substituted for the minimum number of enrollees provided under such
section the minimum number of enrollees permitted under section
1857(b)(1) of such Act (as so inserted).

(i) Publication of New Capitation Rates.–Not later than 4 weeks
after the date of the enactment of this Act, the Secretary of Health
and Human Services shall announce the annual Medicare+Choice
capitation rates for 1998 under section 1853(b) of the Social
Security Act.

(j) Elimination of Health Care Prepayment Plan Option for Entities
Eligible to Participate As Managed Care Organization.– (1)
Elimination of option.– (A) In general.–Section 1833(a)(1)(A) (42
U.S.C. 1395l(a)(1)(A)) is amended by inserting “(and either is
sponsored by a union or employer, or does not provide, or arrange for
the provision of, any inpatient hospital services)” after “prepayment
basis”.

(B) Effective date.–The amendment made by subparagraph (A)
applies to new contracts entered into after the date of enactment of
this Act and, with respect to contracts in effect as of such date,
shall apply to payment for services furnished after December 31,
1998.

(2) Medigap conforming amendment.–Effective January 1, 1999,
section 1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended by striking “,
during the period beginning on the date specified in subsection
(p)(1)(C) and ending on December 31, 1995,”.

SEC. 4003. CONFORMING CHANGES IN MEDIGAP
PROGRAM.

(a) Conforming Amendments to Medicare+Choice Changes.– (1) In
general.–Section 1882(d)(3)(A)(i) (42 U.S.C.1395ss(d)(3)(A)(i)) is
amended– (A) in the matter before subclause (I), by inserting
“(including an individual electing a Medicare+Choice plan under
section 1851)” after “of this title”; and (B) in subclause (II)– (i)
by inserting “in the case of an individual not electing a
Medicare+Choice plan” after “(II)”, and (ii) by inserting before the
comma at the end the following: or in the case of an individual
electing a Medicare+Choice plan, a medicare supplemental policy with
knowledge that the policy duplicates health benefits to which the
individual is otherwise entitled under the Medicare+Choice plan or
under another medicare supplemental policy”.

(2) Conforming amendments.–Section 1882(d)(3)(B)(i)(I) (42 U.S.C.
1395ss(d)(3)(B)(i)(I)) is amended by inserting “(including any
Medicare+Choice plan)” after “health insurance policies”.

(3) Medicare+choice plans not treated as medicare supplementary
policies.–Section 1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended by
inserting “or a Medicare+Choice plan or” after “does not include”.

(b) Additional Rules Relating to Individuals Enrolled in MSA Plans
and Private Fee-for-Service Plans.–Section 1882 (42 U.S.C. 1395ss)
is further amended by adding at the end the following new subsection:
(u)(1) It is unlawful for a person to sell or issue a policy
described in paragraph (2) to an individual with knowledge that the
individual has in effect under section 1851 an election of an MSA
plan or a Medicare+Choice private fee-for-service plan.

(2)(A) A policy described in this subparagraph is a health
insurance policy (other than a policy described in subparagraph (B))
that provides for coverage of expenses that are otherwise required to
be counted toward meeting the annual deductible amount provided under
the MSA plan.

(B) A policy described in this subparagraph is any of the
following: (i) A policy that provides coverage (whether through
insurance or otherwise) for accidents, disability, dental care,
vision care, or long-term care.

(ii) A policy of insurance to which substantially all of the
coverage relates to– (I) liabilities incurred under workers’
compensation laws, (II) tort liabilities, (III) liabilities relating
to ownership or use of property, or (IV) such other similar
liabilities as the Secretary may specify by regulations.

(iii) A policy of insurance that provides coverage for a specified
disease or illness.

(iv) A policy of insurance that pays a fixed amount per day (or
other period) of hospitalization.”.

Subchapter B–Special Rules for Medicare+Choice
Medical Savings Accounts

SEC. 4006. MEDICARE+CHOICE MSA.

(a) In General.–Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to amounts specifically
excluded from gross income) is amended by redesignating section 138
as section 139 and by inserting after section 137 the following new
section:

SEC. 138. MEDICARE+CHOICE MSA.

(a) Exclusion.–Gross income shall not include any payment to the
Medicare+Choice MSA of an individual by the Secretary of Health and
Human Services under part C of title XVIII of the Social Security
Act.

(b) Medicare+Choice MSA.–For purposes of this section, the term
‘Medicare+Choice MSA’ means a medical savings account (as defined in
section 220(d))– (1) which is designated as a Medicare+Choice MSA,
(2) with respect to which no contribution may be made other than–
(A) a contribution made by the Secretary of Health and Human Services
pursuant to part C of title XVIII of the Social Security Act, or (B)
a trustee-to-trustee transfer described in subsection (c)(4), (3) the
governing instrument of which provides that trustee- to-trustee
transfers described in subsection (c)(4) may be made to and from such
account, and (4) which is established in connection with an MSA plan
described in section 1859(b)(3) of the Social Security Act.

(c) Special Rules for Distributions.– (1) Distributions for
qualified medical expenses.–In applying section 220 to a
Medicare+Choice MSA– (A) qualified medical expenses shall not
include amounts paid for medical care for any individual other than
the account holder, and (B) section 220(d)(2)(C) shall not apply.

(2) Penalty for distributions from medicare+choice msa not used
for qualified medical expenses if minimum balance not maintained.–
(A) In general.–The tax imposed by this chapter for any taxable year
in which there is a payment or distribution from a Medicare+Choice
MSA which is not used exclusively to pay the qualified medical
expenses of the account holder shall be increased by 50 percent of
the excess (if any) of– (i) the amount of such payment or
distribution, over (ii) the excess (if any) of–

(I) the fair market value of the assets in such MSA as of the
close of the calendar year preceding the calendar year in which the
taxable year begins, over (II) an amount equal to 60 percent of the
deductible under the Medicare+Choice MSA plan covering the account
holder as of January 1 of the calendar year in which the taxable year
begins.

Section 220(f)(4) shall not apply to any payment or distribution
from a Medicare+Choice MSA.

(B) Exceptions.–Subparagraph (A) shall not apply if the payment
or distribution is made on or after the date the account holder– (i)
becomes disabled within the meaning of section 72(m)(7), or (ii)
dies.

(C) Special rules.–For purposes of subparagraph (A)– (i) all
Medicare+Choice MSAs of the account holder shall be treated as 1
account, (ii) all payments and distributions not used exclusively to
pay the qualified medical expenses of the account holder during any
taxable year shall be treated as 1 distribution, and (iii) any
distribution of property shall be taken into account at its fair
market value on the date of the distribution.

(3) Withdrawal of erroneous contributions.–Section 220(f)(2) and
paragraph (2) of this subsection shall not apply to any payment or
distribution from a Medicare+Choice MSA to the Secretary of Health
and Human Services of an erroneous contribution to such MSA and of
the net income attributable to such contribution.

(4) Trustee-to-trustee transfers.–Section 220(f)(2) and paragraph
(2) of this subsection shall not apply to any trustee-to- trustee
transfer from a Medicare+Choice MSA of an account holder to another
Medicare+Choice MSA of such account holder.

(d) Special Rules for Treatment of Account After Death of Account
Holder.–In applying section 220(f)(8)(A) to an account which was a
Medicare+Choice MSA of a decedent, the rules of section 220(f) shall
apply in lieu of the rules of subsection (c) of this section with
respect to the spouse as the account holder of such Medicare+Choice
MSA.

(e) Reports.–In the case of a Medicare+Choice MSA, the report
under section 220(h)– (1) shall include the fair market value of the
assets in such Medicare+Choice MSA as of the close of each calendar
year, and (2) shall be furnished to the account holder– (A) not
later than January 31 of the calendar year following the calendar
year to which such reports relate, and (B) in such manner as the
Secretary prescribes in such regulations.

(f) Coordination With Limitation on Number of Taxpayers Having
Medical Savings Accounts.–Subsection (i) of section 220 shall not
apply to an individual with respect to a Medicare+Choice MSA, and
Medicare+Choice MSA’s shall not be taken into account in determining
whether the numerical limitations under section 220(j) are
exceeded.”.

(b) Technical Amendments.– (1) The last sentence of section
4973(d) of such Code is amended by inserting “or section 138(c)(3)”
after “section 220(f)(3)”.

(2) Subsection (b) of section 220 of such Code is amended by
adding at the end the following new paragraph: (7) Medicare eligible
individuals.–The limitation under this subsection for any month with
respect to an individual shall be zero for the first month such
individual is entitled to benefits under title XVIII of the Social
Security Act and for each month thereafter.”.

(3) The table of sections for part III of subchapter B of chapter
1 of such Code is amended by striking the last item and inserting the
following: Sec. 138. Medicare+Choice MSA.

Sec. 139. Cross references to other Acts.”.

(c) Effective Date.–The amendments made by this section shall
apply to taxable years beginning after December 31, 1998.

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