H.R. 3162: Provisions in the Children’s Health and Medicare Protection Act of 2007

Order Code RL34122

H.R. 3162: Provisions in the Children’s Health and

Medicare Protection Act of 2007

Updated August 14, 2007

Richard Rimkunas, Coordinator

Health Insurance and Financing Team

Domestic Social Policy Division

H.R. 3162: Provisions in the Children’s Health and

Medicare Protection Act of 2007

Summary

On August 1, 2007, the House passed H.R. 3162, the Children’s Health and

Medicare Protection (CHAMP) Act of 2007. The bill would reauthorize and increase

funding levels and state grant distributions for the State Children’s Health Insurance

Program (SCHIP) and make changes to the Medicare and Medicaid programs. The

major SCHIP provisions would provide authorized program appropriations in

perpetuity and would make changes to the Medicare and Medicaid programs. Other

major SCHIP provisions would provide more options and incentives to states to

increase the number of children covered by SCHIP and Medicaid, modify the

citizenship verification process, and change minimum benefit requirements.

The bill’s Medicare provisions would implement a 0.5% increase in Medicare

physician fees for 2008 and 2009 while creating six categories of physician services

for which annual updates would be considered separately, establish bonus payments

for physicians practicing in counties with low Medicare per capita expenditures,

require the Secretary to implement a resource use feedback program for physicians

to identify efficient providers, expand a medical home demonstration project, and

require the Centers for Medicare and Medicaid Services (CMS) to modify physician

payment localities, beginning with California. Other Medicare provisions would

reduce payments to Medicare Advantage plans, eliminate Medicare cost-sharing for

certain preventive benefits, eliminate the market basket update for FY2008 for

Medicare payments for skilled nursing facilities, home health agencies, and long-term

care hospitals and reduce the annual update for certain hospitals. It would also

establish a bundled payment system for Medicare renal dialysis services and would

make a number of changes to the Low-Income Subsidy Program for Medicare Part

D, including eliminating cost-sharing requirements for certain full benefit dual

eligibles receiving Medicaid-covered long-term care services.

Medicaid provisions in the bill would make changes to rebate payments for

certain drugs, prohibit the implementation of the new health opportunity account

demonstration authorized under the Deficit Reduction Act of 2005 (DRA, P.L. 109171), and make other changes. Additional miscellaneous provisions would establish

a Center for Comparative Effectiveness Research within the Agency for Healthcare

Research and Quality (AHRQ), — funded by public contributions from the Medicare

Part A, B, and D trust fund accounts and fees imposed on private health insurance

plans, require CMS to develop a plan for the implementation of health information

technology under Medicare, and establish a national entity to coordinate development

of health care measures.

The Congressional Budget Office (CBO) estimates that H.R. 3162 would result

in a net increase of $25.6 billion in Federal spending between 2008 and 2012. The

Joint Committee on Taxation estimates a revenue offset of $26.9 billion for the same

period from increases in the excise tax rate on tobacco-related products, a

modification to the definition of roll-your-own tobacco, with an extension of an

exemption from fuel excise tax for use in ambulances. This report provides short

descriptions of the major provisions contained in H.R. 3162.

Key Policy Staff: Children’s Health and Medicare Protection Act of 2007

Area of Expertise

Name

Phone

E-mail

Coordinator

Richard Rimkunas

7-7334

rrimkunas@crs.loc.gov

Title I, Children’s Health

Insurance Program

Chris Peterson

Evelyne Baumrucker

Elicia Herz

April Grady

7-4681

7-8913

7-1377

7-9578

cpeterson@crs.loc.gov

ebaumrucker@crs.loc.gov

eherz@crs.loc.gov

agrady@crs.loc.gov

Title II, Medicare Beneficiary

Improvements

Jennifer O’Sullivan

Jim Hahn

Gretchen Jacobson

7-7359

7-4914

7-1686

josullivan@crs.loc.gov

jhahn@crs.loc.gov

gjacobson@crs.loc.gov

Title III, Physicians’ Service

Payment Reform

Jim Hahn

7-4914

jhahn@crs.loc.gov

Title IV, Medicare Advantage

Reform

Paulette Morgan

Hinda Chaikind

Holly Stockdale

7-7317

7-7569

7-9553

pcmorgan@crs.loc.gov

hchaikind@crs.loc.gov

hstockdale@crs.loc.gov

Title V, Provisions Relating to

Medicare Part A

Sibyl Tilson

Julie Stone

Holly Stockdale

7-7368

7-1386

7-9533

stilson@crs.loc.gov

jstone@crs.loc.gov

hstockdale@crs.loc.gov

Title VI, Other Provisions

Relating to Medicare Part B

Jennifer O’Sullivan

Sibyl Tilson

Paulette Morgan

Jim Hahn

Hinda Chaikind

Gretchen Jacobson

7-7359

7-7368

7-7317

7-4914

7-7569

7-1686

josullivan@crs.loc.gov

stilson@crs.loc.gov

pcmorgan@crs.loc.gov

jhahn@crs.loc.gov

hchaikind@crs.loc.gov

gjacobson@crs.loc.gov

Title VII, Provisions Relating

to Medicare Parts A and B

Julie Stone

Sibyl Tilson

Hinda Chaikind

7-1386

7-7368

7-7569

jstone@crs.loc.gov

stilson@crs.loc.gov

hchaikind@crs.loc.gov

April Grady

Jean Hearne

Julie Stone

Elicia Herz

Evelyne Baumrucker

7-9578

7-7362

7-1386

7-1377

7-8913

agrady@crs.loc.gov

jhearne@crs.loc.gov

jstone@crs.loc.gov

eherz@crs.lo.gov

ebaumrucker@crs.loc.gov

Hinda Chaikind

Jim Hahn

Jennifer O’Sullivan

Gretchen Jacobson

7-7569

7-4914

7-7359

7-1686

hchaikind@crs.loc.gov

jhahn@crs.loc.gov

josullivan@crs.loc.gov

gjacobson@crs.loc.gov

Title VIII, Medicaid

Title IX, Miscellaneous

Contents

A Brief Description of the Current Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

SCHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Summary of Provisions in H.R. 3162 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Title I — Children’s Health Insurance Program . . . . . . . . . . . . . . . . . . . . . . 4

Section 100. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Subtitle A — Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Section 101. Establishment of new base CHIP allotments . . . . . . . . . . 4

Section 102. 2-year initial availability of CHIP allotments . . . . . . . . . 5

Section 103. Redistribution of unused allotments to address State funding

shortfalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Section 104. Extension of option for qualifying States . . . . . . . . . . . . 6

Subtitle B — Improving Enrollment and Retention of Eligible Children . . . 7

Section 111. CHIP performance bonus payment to offset additional

enrollment costs resulting from enrollment and retention efforts

....................................................7

Section 112. State option to rely on findings from an express lane agency

to conduct simplified eligibility determinations . . . . . . . . . . . . . . 7

Section 113. Application of Medicaid outreach procedures to all children

and pregnant women . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Section 114. Encouraging culturally appropriate enrollment and retention

practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Section 115. Continuous coverage under SCHIP . . . . . . . . . . . . . . . . . 8

Subtitle C — Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Section 121. Ensuring child-centered coverage . . . . . . . . . . . . . . . . . . . 9

Section 122. Improving benchmark coverage options . . . . . . . . . . . . . 9

Section 123. Premium grace period . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Subtitle D — Populations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Section 131. Optional coverage of children up to age 21 under CHIP

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Section 132. Optional coverage of legal immigrants under the Medicaid

program and CHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Section 133. State option to expand or add coverage of certain pregnant

women under CHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Section 134. Limitation on waiver authority to cover adults . . . . . . . . 11

Section 135. No federal funding for illegal aliens . . . . . . . . . . . . . . . 11

Section 136. Auditing requirement to enforce citizenship restrictions on

eligibility for Medicaid and CHIP benefits . . . . . . . . . . . . . . . . . 11

Subtitle E — Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Section 141. Children’s Access, Payment, and Equality Commission

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Section 142. Model of Interstate coordinated enrollment and coverage

process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Section 143. Medicaid citizenship documentation requirements . . . . 13

Section 144. Access to dental care for children . . . . . . . . . . . . . . . . . . 13

Section 145. Prohibiting initiation of new health opportunity account

demonstration programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Subtitle F — Quality and Program Integrity . . . . . . . . . . . . . . . . . . . . . . . . 14

Section 151. Pediatric health quality measurement program . . . . . . . 14

Section 152. Application of certain managed care quality safeguards to

CHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Section 153. Updated federal evaluation of CHIP . . . . . . . . . . . . . . . 15

Section 154. Access to records for IG and GAO audits . . . . . . . . . . . 16

Section 155. References to XXI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Section 156. Reliance on law; exception for state legislation . . . . . . 16

Title II — Medicare Beneficiary Improvements . . . . . . . . . . . . . . . . . . . . . 16

Subtitle A — Improvements in Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Section 201. Coverage and Waiver of Cost-Sharing for Preventive

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Section 202. Waiver of Deductible for Colorectal Cancer Screening Tests

Regardless of Coding, Subsequent Diagnosis, or Ancillary Tissue

Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Section 203. Parity for Mental Health Coinsurance . . . . . . . . . . . . . . 17

Subtitle B — Improving, Clarifying, and Simplifying Financial Assistance for

Low-Income Medicare Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Section 211. Improving Assets Tests for Medicare Savings Program and

Low-Income Subsidy Program . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Section 212. Making QI-1 Program Permanent and Expanding Eligibility

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Section 213. Eliminating Barriers to Enrollment . . . . . . . . . . . . . . . . . 18

Section 214. Eliminating Application of Estate Recovery . . . . . . . . . 18

Section 215. Elimination of Part D Cost-Sharing for Certain NonInstitutionalized Full-Benefit Dual Eligible Individuals . . . . . . . 18

Section 216. Exemptions From Income and Resources For Determination

of Eligibility for Low-Income Subsidy . . . . . . . . . . . . . . . . . . . . 18

Section 217. Cost-Sharing Protections for Low-Income Subsidy Eligible

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Section 218. Intelligent Assignment in Enrollment . . . . . . . . . . . . . . 19

Subtitle C — Part D Beneficiary Improvements . . . . . . . . . . . . . . . . . . . . . 19

Section 221. Including Costs Incurred By Aids Drug Assistance Programs

and Indian Health Service in Providing Prescription Drugs Toward

the Annual Out of Pocket Threshold Under Part D . . . . . . . . . . . 19

Section 222. Permitting Mid-Year Changes in Enrollment for Formulary

Changes Adversely Impacting an Enrollee . . . . . . . . . . . . . . . . . 19

Section 223. Removal of Exclusion of Benzodiazepines From Required

Coverage Under the Medicare Prescription Drug Program . . . . . 20

Section 224. Permitting Updating Drug Compendia under Part D Using

Part B Update Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Section 225. Codification of Special Protections for Six Protected Drug

Classifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Section 226. Elimination of Medicare Part D Late Enrollment Penalties

Paid by Low-Income Subsidy-Eligible Individuals . . . . . . . . . . . 20

Section 227. Special Enrollment Period for Low-Income Subsidy Eligible

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Subtitle D — Reducing Health Disparities . . . . . . . . . . . . . . . . . . . . . . . . . 20

Section 231. Medicare Data on Race, Ethnicity, and Primary Language

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Section 232. Ensuring effective communication by the CMS . . . . . . 21

Section 233. Demonstration to promote access for Medicare beneficiaries

with limited English proficiency by providing reimbursement for

culturally and linguistically appropriate services . . . . . . . . . . . . . 21

Section 234. Demonstration to improve care to previously uninsured

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Section 235. Office of the Inspector General report on compliance with

and enforcement of national standards on Culturally and

Linguistically Appropriate Services (CLAS) in Medicare . . . . . . 22

Section 236. IOM report on impact of language access services . . . . 23

Section 237. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Title III — Physicians’ Service Payment Reform . . . . . . . . . . . . . . . . . . . . 23

Section 301. Establishment of Separate Target Growth Rates for Service

Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Section 302. Improving accuracy of relative values under the Medicare

physician fee schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Section 303. Physician feedback mechanism on practice patterns . . . 25

Section 304. Payments for Efficient Physicians . . . . . . . . . . . . . . . . . 26

Section 305. Recommendations on refining the physician fee schedule

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Section 306. Improved and Expanded Medical Home Demonstration

Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Section 307. Repeal of Physician Assistance and Quality Initiative Fund

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Section 308. Adjustment to Medicare Payment Localities . . . . . . . . . 28

Section 309. Payment for Imaging Services . . . . . . . . . . . . . . . . . . . . 29

Section 310. Reducing Frequency of Meetings of the Practicing Physicians

Advisory Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Title IV — Medicare Advantage Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Subtitle A — Payment Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Section 401. Equalizing payments between Medicare Advantage Plans and

fee-for-service Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Subtitle B — Beneficiary Protections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Section 411. NAIC development of marketing, advertising, and related

protections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Section 412. Limitation on out-of-pocket costs for individual health

services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Section 413. MA plan enrollment modifications . . . . . . . . . . . . . . . . . 31

Section 414. Information for beneficiaries on MA plan administrative

costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Subtitle C — Quality and Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 31

Section 421. Requiring all MA plans to meet equal standards . . . . . . 31

Section 422. Development of new quality reporting measures on racial

disparities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Section 423. Strengthening Audit Authority . . . . . . . . . . . . . . . . . . . . 32

Section 424. Improving risk adjustment for MA plans . . . . . . . . . . . . 32

Section 425. Eliminating special treatment for private fee-for-service plans

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Section 426. Renaming of Medicare Advantage program . . . . . . . . . . 32

Subtitle D — Extension of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Section 431. Extension and revision of authority for special needs plans

(SNPs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Section 432. Extension and revision of authority for Medicare reasonable

cost contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Title V — Provisions Relating to Medicare Part A . . . . . . . . . . . . . . . . . . . 33

Section 501. Inpatient Hospital Payment Updates . . . . . . . . . . . . . . . . 33

Section 502. Payment for Inpatient Rehabilitation Facility (IRF) Services

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Section 503. Long-Term Care Hospitals . . . . . . . . . . . . . . . . . . . . . . . 33

Section 504. Increasing the DSH Adjustment Cap . . . . . . . . . . . . . . . 35

Section 505. PPS-Exempt Cancer Hospitals . . . . . . . . . . . . . . . . . . . . 35

Section 506. Skilled Nursing Facility Payment Update . . . . . . . . . . . . 35

Section 507. Revocation of Unique Deeming Authority of the Joint

Commission for the Accreditation of Healthcare Organizations

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Section 508. Treatment of Medicare Hospital Reclassifications . . . . 36

Section 509. Medicare Critical Access Hospital Designations . . . . . . 37

Title VI — Other Provisions Relating to Medicare Part B . . . . . . . . . . . . . 37

Subtitle A — Payment and Coverage Improvements . . . . . . . . . . . . . . . . . 37

Section 601. Payment for Therapy Services . . . . . . . . . . . . . . . . . . . . 37

Section 602. Medicare Separate Definition of Outpatient Speech Language

Pathology Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Section 603. Increased Reimbursement Rate for Certified Nurse Midwives

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Section 604. Adjustment in Outpatient Hospital Fee Schedule Increase

Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Section 605. Exception to 60-Day Limit on Medicare Reciprocal Billing

Arrangements in Case of Physicians Ordered to Active Duty in the

Armed Forces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Section 606. Excluding clinical social worker services from coverage

under the Medicare skilled nursing facility prospective payment

system and consolidated payment . . . . . . . . . . . . . . . . . . . . . . . . 38

Section 607. Coverage of Marriage and Family Therapists and Mental

Health Counselor Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Section 608. Rental and Purchase of Power-Driven Wheelchairs . . . . 39

Section 609. Rental and Purchase of Oxygen Equipment . . . . . . . . . . 39

Section 610. Adjustment for Medicare Mental Health Services . . . . . 39

Section 611. Extension of Brachytherapy Special Rule . . . . . . . . . . . 39

Section 612. Payment for Part B Drugs . . . . . . . . . . . . . . . . . . . . . . . . 39

Subtitle B — Extension of Medicare Rural Access Protections . . . . . . . . . 40

Section 621. 2-Year Extension of Floor on Medicare Work Geographic

Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Section 622. 2-Year Extension of Special Treatment of Certain Physician

Pathology Services Under Medicare . . . . . . . . . . . . . . . . . . . . . . 40

Section 623. 2-Year Extension of Medicare Reasonable Cost Payments

for Certain Clinical Diagnostic Laboratory Tests Furnished to

Hospital Patients in Certain Rural Areas . . . . . . . . . . . . . . . . . . . 40

Section 624. 2-Year Extension of Medicare Incentive Payment Program

for Physician Scarcity Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Section 625. 2-Year Extension of Medicare Increase Payments for

Ground Ambulance Services in Rural Areas . . . . . . . . . . . . . . . . 40

Section 626. Extending Hold Harmless for Small Rural Hospitals under

the HOPD Prospective Payment System . . . . . . . . . . . . . . . . . . . 40

Subtitle C — End Stage Renal Disease Program . . . . . . . . . . . . . . . . . . . . . 41

Section 631. Chronic Kidney Disease Demonstration Projects . . . . . . 41

Section 632. Medicare Coverage of Kidney Disease Patient Education

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Section 633. Required Training for Patient Care Dialysis Technicians

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Section 634. MedPAC Report on Treatment Modalities for Patients with

Kidney Failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Section 635. Adjustment for Erythropoietin Stimulating Agents (ESAs)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Section 636. Site Neutral Composite Rate . . . . . . . . . . . . . . . . . . . . . . 43

Section 637. Development of ESRD Bundling System and Quality

Incentive Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Section 638. MedPAC Report on ESRD Bundling System . . . . . . . . . 44

Section 639. OIG Study and Report on Erythropoietin . . . . . . . . . . . . 44

Subtitle D — Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Sec. 651. Limitation on Exception to the Prohibition of Certain Physician

Referrals for Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Title VII — Provisions Relating to Medicare Parts A and B . . . . . . . . . . . . 45

Section 701. Home Health Payment Update for 2008 . . . . . . . . . . . . 45

Section 702. 2-Year extension of temporary Medicare payment increase

for home health services furnished in rural areas . . . . . . . . . . . . 45

Section 703. Extension off Medicare Secondary Payer for beneficiaries

with End Stage Renal Disease for Large Group Plans . . . . . . . . 45

Section 704. Plan for Medicare Payment Adjustment for Never Events

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Section 705. Reinstatement of Residency Slots . . . . . . . . . . . . . . . . . 46

Section 706. Studies Relating to Home Health . . . . . . . . . . . . . . . . . . 47

Section 707. Rural Home Health Quality Demonstration Projects . . . 47

Title VIII — Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Subtitle A — Protecting Existing Coverage . . . . . . . . . . . . . . . . . . . . . . . . 47

Section 801. Modernizing transitional Medicaid . . . . . . . . . . . . . . . . 47

Section 802. Family planning services . . . . . . . . . . . . . . . . . . . . . . . . 48

Section 803. Authority to continue providing adult day health services

approved under a State Medicaid plan . . . . . . . . . . . . . . . . . . . . . 49

Section 804. State option to protect community spouses of individuals

with disabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Section 805. County Medicaid health insuring organizations . . . . . . . 49

Subtitle B — Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Section 811. Payments for Puerto Rico and the territories . . . . . . . . . 50

Section 812. Medicaid Drug Rebate . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Section 813. Adjustment in computation of Medicaid FMAP to disregard

an extraordinary employer pension contribution . . . . . . . . . . . . . 51

Section 814. Moratorium on certain payment restrictions . . . . . . . . . 51

Section 815. Tennessee DSH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Section 816. Clarification treatment of regional medical center . . . . . 52

Section 817. Extension of SSI web-based asset demonstration project to

the Medicaid program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Subtitle C — Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Section 821. Demonstration project for employer buy-in . . . . . . . . . . 53

Section 822. Diabetes grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Section 823. Technical correction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Title IX — Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Section 901. Medicare Payment Advisory Commission Status . . . . . . 54

Section 902. Repeal of Trigger Provision . . . . . . . . . . . . . . . . . . . . . . 54

Section 903. Repeal of Comparative Cost Adjustment (CCA) Program

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Section 904. Comparative Effectiveness Research . . . . . . . . . . . . . . . 54

Section 905. Implementation of Health Information Technology (IT)

Under Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Section 906. Development, Reporting, and Use of Health Care Measures

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Section 907. Improvements to the Medigap Program . . . . . . . . . . . . . 57

Section 908. Implementation Funding . . . . . . . . . . . . . . . . . . . . . . . . 57

Section 909. Access to Data on Prescription Drug Plans and Medicare

Advantage Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Section 910. Abstinence Education . . . . . . . . . . . . . . . . . . . . . . . . . . 58

H.R. 3162: Provisions in the Children’s

Health and Medicare Protection Act of 2007

On July 27, 2007, the House Committee on Ways and Means ordered reported

H.R. 3162, the Children’s Health and Medicare Protection (CHAMP) Act of 2007.

On the same day, the House Committee on Energy and Commerce adjourned without

completing the markup. The Committee on Rules discharged the Committee on

Energy and Commerce from further consideration of the bill, amended the legislative

language, and ordered reported H.R. 3162 on August 1, 2007. The House passed the

bill later that day. This report describes provisions in the bill as passed by the House.

The bill would reauthorize and increase funding levels and state grant

distributions for the State Children’s Health Insurance Program (SCHIP) and make

changes to the Medicare and Medicaid programs. The major SCHIP provisions

would provide authorized program appropriations in perpetuity and would make

changes to the Medicare and Medicaid programs. Other major SCHIP provisions

would provide more options and incentives to states to increase the number of

children covered by SCHIP and Medicaid, modify the citizenship verification

process, and change minimum benefit requirements.

The bill’s Medicare provisions would address a number of issues. The bill

would make many changes to Medicare physician payments, including implementing

a 0.5% increase in Medicare physician fees for 2008 and 2009 while making

substantive changes to the calculation of updates to the Medicare physician fee

schedule in future years by creating six categories of physician services for which

annual updates would be considered separately, establish bonus payments for

physicians practicing in counties with low Medicare per capita expenditures, require

the Secretary to implement a resource use feedback program for physicians to

identify efficient providers, expand a medical home demonstration project, repeal the

Physician Assistance and Quality Initiative fund, and require the Centers for

Medicare and Medicaid Services (CMS) to modify physician payment localities,

beginning with California.

Other Medicare provisions of the bill would reduce payments to Medicare

Advantage plans, eliminate Medicare cost-sharing for certain preventive benefits, and

repeal the Medicare trigger requirement. In addition, the bill would eliminate the

market basket update for FY2008 for Medicare payments for skilled nursing

facilities, home health agencies, and long-term care hospitals and reduce the annual

update for certain hospitals. It would also establish a bundled payment system for

Medicare renal dialysis services and would make a number of changes to the LowIncome Subsidy Program for Medicare Part D, including eliminating cost-sharing

requirements for certain full benefit dual eligibles receiving Medicaid-covered longterm care services.

CRS-2

Regarding Medicaid, the bill would make changes to rebate payments for certain

drugs, and prohibit the implementation of the new health opportunity account

demonstration authorized under the Deficit Reduction Act of 2005 (DRA, P.L. 109171), among other things.

Additional miscellaneous provisions would establish a Center for Comparative

Effectiveness Research within the Agency for Healthcare Research and Quality

(AHRQ), — funded by a combination of public contributions from the Medicare Part

A, B, and D trust fund accounts and fees imposed on private health insurance plans,

require CMS to develop a plan for the implementation of health information

technology under Medicare, and establish a national entity to coordinate development

of health care measures.

The Congressional Budget Office (CBO) estimates that H.R. 3162 would result

in a net increase of $25.6 billion in Federal spending between 2008 and 2012.1 The

Joint Committee on Taxation estimates a revenue offset of $26.9 billion for the same

period from increases in the excise tax rate on tobacco-related products, a

modification to the definition of roll-your-own tobacco, with an extension of an

exemption from fuel excise tax for use in ambulances.2

This report provides short descriptions of the major provisions contained in H.R.

3162.

A Brief Description of the Current Programs

H.R. 3162 would make changes to the SCHIP, Medicare, and Medicaid

programs, briefly described below. More complete and detailed descriptions are

available from CRS.3

SCHIP

SCHIP is authorized under Title XXI of the Social Security Act. In general, this

program allows states to cover targeted low-income children with no health insurance

in families with income that is above Medicaid eligibility levels. As of July 2006, the

highest upper-income eligibility limit under SCHIP had reached 350% of the federal

poverty level (FPL) in one state. States may enroll targeted low-income children in

an SCHIP-financed expansion of Medicaid, create a new separate state SCHIP

program, or devise a combination of both approaches. States choosing the Medicaid

1

CBO, “Estimated Effect on Direct Spending and Revenues of H.R. 3162, the Children’s

Health and Medicare Protection Act, for the Rules Committee,” August 1, 2007.

2

The Joint Committee on Taxation estimate for H.R. 3162, as scheduled for consideration

by the House on August 1, 2007. [http://www.house.gov/jct/x-59-07.pdf]

3

See, for example, CRS Report RL33712, Medicare: A Primer, by Jennifer O’Sullivan,

April 30, 2007, CRS Report RL33202, Medicaid: A Primer, by Elicia J. Herz, January 24,

2007, and CRS Report RL30473, State Children’s Health Insurance Program (SCHIP): A

Brief Overview, by Elicia J. Herz and Chris L. Peterson, January 30, 2007.

CRS-3

option must provide all mandatory benefits and all optional services covered under

the state plan, and must follow the nominal Medicaid cost-sharing rules (with some

exceptions). In general, separate state programs must follow certain coverage and

benefit options outlined in SCHIP law. While some cost-sharing provisions vary by

family income, the total annual aggregate cost-sharing (including premiums,

copayments, and other similar charges) for a family may not exceed 5% of total

income in a year. Preventive services are exempt from cost-sharing.

In the Balanced Budget Act of 1997, nearly $40 billion was appropriated for

SCHIP for FY1998 to FY2007. Appropriations for FY2007 equaled about $5.7

billion.4 Annual allotments among the states are determined by a formula that is

based on a combination of the number of low-income children and low-income

uninsured children in the state, and includes a cost factor that represents the average

health service industry wages in the state compared to the national average. Like

Medicaid, SCHIP is a federal-state matching program. While the Medicaid federal

medical assistance percentage (FMAP) ranged from 50% to 75.89% in FY2007, the

enhanced SCHIP FMAP ranged from 65% to 83.12% across states.

All states, the District of Columbia, and five territories have SCHIP programs.

As of November 2006, 17 use Medicaid expansions, 18 use separate state programs,

and 21 use a combination approach. Approximately 6.7 million children were

enrolled in SCHIP during FY2006. In addition, 12 states reported enrolling about

700,000 adults in SCHIP through program waivers.

Medicare

Medicare is the nation’s health insurance program for persons aged 65 and over

and certain disabled persons. In FY2008, the program will cover an estimated 44.6

million persons (37.3 million aged and 7.3 million disabled) at a total cost of $456.3

billion. Federal costs (after deduction of beneficiary premiums and other offsetting

receipts) will total $389.7 billion. In FY2007, federal Medicare spending will

represent approximately 13% of the total federal budget and 3% of GDP. Medicare

is an entitlement program, which means that it is required to pay for all covered

services provided to eligible persons, so long as specific criteria are met.

Medicare consists of four distinct parts: Part A (Hospital Insurance, or HI); Part

B (Supplementary Medical Insurance, or SMI); Part C (Medicare Advantage, or

MA); and Part D (the new prescription drug benefit added by the Medicare

Prescription Drug, Improvement, and Modernization Act of 2003, or MMA). The

program is administered by CMS.

4

In addition to the original appropriation level of $5.04 billion this appropriation amount

includes supplemental funding up to $650 million. In some years, there were unspent prior

year funds that were available for a state’s use. As a result, relying on appropriation

amounts alone may not accurately reflect total funds available in any given year.

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Medicaid

Medicaid is a means-tested entitlement program that finances the delivery of

primary and acute medical services as well as long-term care to more than 63 million

people at an estimated cost to the federal and state governments of roughly $317

billion. Each state designs and administers its own version of Medicaid under broad

federal rules. State variability in eligibility, covered services, and how those services

are reimbursed and delivered is the rule rather than the exception. In the federal

budget, Medicaid is an entitlement program that constitutes a large share of

mandatory spending. Federal Medicaid spending is open-ended, with total outlays

dependent on the spending levels of state Medicaid programs.

Summary of Provisions in H.R. 3162

Title I — Children’s Health Insurance Program

Section 100. Purpose. The House bill states that the purpose of the title is

to provide dependable and stable funding for children’s health insurance under titles

XXI (SCHIP) and XIX (Medicaid) of the Social Security Act in order to enroll all six

million children who are eligible, but not enrolled, for coverage today through such

titles.

Subtitle A — Funding

Section 101. Establishment of new base CHIP allotments. No

specific national appropriation amounts would be specified for FY2008 onward. The

annual appropriation would be determined automatically as the sum total of the

allotments calculated for all the states (including the District of Columbia) and

territories and commonwealths. No end year would be specified; the program would

receive annual appropriations in perpetuity.

Generally, a state’s FY2008 federal SCHIP allotment would be the greater of

(1) its own projection of federal SCHIP expenditures in FY2008, based on the state’s

May 2007 submission of projections provided to the Centers for Medicare and

Medicaid Services (CMS), and (2) the state’s FY2007 SCHIP allotment multiplied

by the allotment increase factor (described below). If the state enacted legislation

during 2007 that would expand eligibility or improve benefits (including reduction

of out-of-pocket expenditures) in its SCHIP program, the state may use its August

2007 submission of projections instead.

The allotment increase factor would be calculated annually as the product of the

following two components: (1) the per capita health care growth factor, and (2) the

child population growth factor. The per capita health care growth factor would be

equal to 1 plus the percentage increase in the projected per capita amount of National

Health Expenditures over the prior year’s. The child population growth factor would

be equal to 1.01 plus the percentage increase (if any) in the population of children

under 19 years of age in the state from July 1 in the previous fiscal year to July 1 in

the fiscal year involved.

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Computation of future allotments would depend on the year. For FY2009 and

every future odd-numbered fiscal year, a state’s federal SCHIP allotment would be

equal to the prior year’s allotment multiplied by the allotment increase factor. For

FY2010 and every future even-numbered fiscal year, a state’s federal SCHIP

allotment would be “rebased.” In these years, the state’s allotment would be the prior

year’s federal SCHIP expenditures multiplied by the allotment increase factor.

Beginning with FY2008, the allotment to a territory or commonwealth would be

equal to its prior year federal SCHIP expenditures multiplied by the per capita health

care growth factor (described above) and by 1.01 plus the percentage increase (if any)

in the population of children under 19 years of age in the United States.

A state’s allotment as determined above may be increased through a

“performance-based shortfall adjustment.” To qualify for this adjustment, a state

would have to meet the following two requirements: (1) its federal SCHIP

expenditures in a fiscal year (beginning with FY2008) exceed the amount of federal

SCHIP allotments available to the state in the previous fiscal year (not including any

available SCHIP funds redistributed from other states), and (2) its average monthly

enrollment of children in SCHIP must have exceeded the target number for the year,

which is the prior year’s average monthly SCHIP enrollment increased by 1% and by

the state’s child population growth.

For the states that qualify, the performance-based shortfall adjustment would be

added to the state’s allotment at the start of the subsequent fiscal year. For example,

if a state experienced a shortfall in FY2008, a shortfall adjustment (if the state

qualified) would be added to the state’s FY2009 allotment. However, the legislation

also instructs the Secretary to “develop a process to administer the

performance-based shortfall adjustment in a manner so it is applied to (and before the

end of) the fiscal year (rather than the subsequent fiscal year) involved for a State that

the Secretary estimates will be in shortfall and will exceed its enrollment target for

that fiscal year.” The adjustment would be calculated as the product of (1) the

amount by which the actual average monthly caseload exceeded the target number

of enrollees, and (2) the state’s projected per capita SCHIP expenditures (state and

federal) multiplied by the enhanced FMAP for the state for the fiscal year involved.

Section 102. 2-year initial availability of CHIP allotments. SCHIP

allotments through FY2007 are available for three years. SCHIP allotments

beginning with FY2008 would be available for two years. Unspent FY2007

allotments and unspent FY2008 allotments would both be available for redistribution

in FY2010.

Redistributed funds would be available only for the fiscal year in which they are

provided. Redistributed funds that are unspent at the end of the fiscal year may then

be used for subsequent redistribution.

Section 103. Redistribution of unused allotments to address State

funding shortfalls. Only shortfall states would be eligible to receive redistributed

funds, in the amount of their projected shortfall for the fiscal year. If the amounts

available for redistribution exceed the amount of applicable shortfalls, the remaining

funds would be available for redistribution in the next fiscal year.

CRS-6

A shortfall state would be defined as a state in which its projected federal

SCHIP spending for the year exceeds the state’s available balances from (1) its own

remaining prior-year allotments, (2) the performance-based shortfall adjustment, and

(3) the current fiscal year’s allotment. If the estimated shortfalls exceed the funds

available for redistribution, the amounts to be redistributed to the shortfall states

would be reduced proportionally.

Section 104. Extension of option for qualifying States. Under current

law, §2105(g) of the Social Security Act permits qualifying states to apply federal

SCHIP funds toward the coverage of certain children already enrolled in regular

Medicaid (that is, not SCHIP-funded expansions of Medicaid). Specifically, these

federal SCHIP funds are used to pay the difference between SCHIP’s enhanced

FMAP and the Medicaid FMAP that the state is already receiving for these children.

Funds under this provision may only be claimed for expenditures occurring after

August 15, 2003.

Under current law, qualifying states are limited in the amount they can claim for

this purpose to the lesser of the following two amounts:

!

!

20% of the state’s original SCHIP allotment amounts (if available)

from FY1998-FY2001 and FY2004-FY2007 (hence the terms “20%

allowance” and “20% spending”); and

the state’s available balances of those allotments. If there is no

balance, states may not claim Section 2105(g) spending.

The statutory definitions for qualifying states capture most of those that had

expanded their upper-income eligibility levels for children in their Medicaid

programs to 185% of the federal poverty level or higher prior to the enactment of

SCHIP. Based on statutory definitions, 11 states were determined to be qualifying

states: Connecticut, Hawaii, Maryland, Minnesota, New Hampshire, New Mexico,

Rhode Island, Tennessee, Vermont, Washington and Wisconsin.

Under current law, SCHIP spending under §2105(g) can be used by qualifying

states only for Medicaid enrollees (excluding those covered by an SCHIP-funded

expansion of Medicaid) who are under age 19 and whose family income exceeds

150% of poverty, to pay the difference between the SCHIP enhanced FMAP and the

regular Medicaid FMAP.

In addition to the current-law provisions, qualifying states would be able to use

all of any allotment from FY2008 onward for SCHIP spending under §2105(g).

Subtitle B — Improving Enrollment and Retention of Eligible

Children

Section 111. CHIP performance bonus payment to offset additional

enrollment costs resulting from enrollment and retention efforts.

Beginning in FY2008 and ending with FY2013, the provision would establish an

additional performance bonus payment to offset Medicaid and SCHIP child

CRS-7

enrollment costs resulting from implementing specified enrollment and retention

efforts, and enrolling eligible children above specified target growth percentages.

States that implement at least 4 out of 7 specified enrollment and retention

efforts would receive a single bonus payment in a given fiscal year in an amount

equal to the weighted sum of the number of enrollees that exceed tiered target

enrollment growth levels in Medicaid and SCHIP multiplied by a share of projected

Medicaid and SCHIP per capita costs.

For such calculations, costs would be defined as projected average per capita

Federal and State Medicaid and SCHIP expenditures for children for the most recent

fiscal year, increased by the annual percentage increase in per capita amounts of

National Health Expenditures for the respective subsequent fiscal year, and

multiplied by a state matching percentage equal to 100% minus each such state’s

FMAP rate for the fiscal year involved. The bill also requires the Government

Accountability Office (GAO) to submit a report for Congress not later than January

1, 2013, regarding the effectiveness of the performance bonus payment program in

enrolling and retaining uninsured children in Medicaid and SCHIP.

Section 112. State option to rely on findings from an express lane

agency to conduct simplified eligibility determinations. Beginning in

January 2008, the provision would allow states the option to rely on a finding made

within a state-defined period from an Express Lane Agency to determine whether a

child under age 19 (or up to age 21 at state option) has met one or more of the

eligibility requirements (e.g., income, assets or resources, citizenship, or other

criteria) necessary to determine an individual’s initial eligibility, eligibility

redetermination, or renewal of eligibility for medical assistance under Medicaid.

If a finding from an Express Lane Agency results in a child not being found

eligible for Medicaid or SCHIP, the state would be required to determine Medicaid

or SCHIP eligibility using its regular procedures and the state would be required to

inform the family that they may qualify for lower premium payments if the family’s

income were directly evaluated for an eligibility determination by the state using its

regular policies. States may initiate an eligibility determination (and determine

program eligibility) without a program application based on findings from an Express

Lane Agency and information from sources other than the child only if the family has

affirmatively consented to being enrolled in Medicaid or SCHIP.

Signatures under penalty of perjury would not be required on a Medicaid

application form attesting to any element of the application for which eligibility is

based on information received from an Express Lane Agency or from another public

agency. The provision would authorize federal or state agencies or private entities

in possession of potentially pertinent data relevant for the determination of eligibility

under Medicaid to share such information with the Medicaid agency for the purposes

of child enrollment in Medicaid, and would impose criminal penalties for entities

who engage in unauthorized activities with such data.

Section 113. Application of Medicaid outreach procedures to all

children and pregnant women. Under current law, a Medicaid state plan must

provide for the receipt and initial processing of applications for medical assistance

CRS-8

for low-income pregnant women, infants, and children under age 19 at outstation

locations other than Temporary Assistance for Needy Families (TANF) offices such

as, disproportionate share hospitals, and Federally-qualified health centers. State

eligibility workers assigned to outstation locations perform initial processing of

Medicaid applications including taking applications, assisting applicants in

completing the application, providing information and referrals, obtaining required

documentation to complete processing of the application, assuring that the

information contained on the application form is complete, and conducting any

necessary interviews.

Effective January 1, 2008, the provision would provide for the receipt and initial

processing of applications for medical assistance for children and pregnant women

under any provision of this title, and would allow for such application forms to vary

across outstation locations.

Section 114. Encouraging culturally appropriate enrollment and

retention practices. The federal and state governments share in the costs of both

Medicaid and SCHIP, based on formulas defining the federal contribution in federal

law. The federal match for administrative expenditures does not vary by state and

is generally 50%, but certain administrative functions have a higher federal matching

rate.

The provision would permit states to receive Medicaid federal matching

payments for translation or interpretation services in connection with the enrollment

and use of services by individuals for whom English is not their primary language.

Payments for this activity would be matched at 75%.

Section 115. Continuous coverage under SCHIP. States are required

to redetermine Medicaid and SCHIP eligibility at least every 12 months with respect

to circumstances that may change and affect eligibility. Continuous eligibility allows

a child to remain enrolled for a set period of time regardless of whether the child’s

circumstances change (e.g., the family’s income rises above the eligibility threshold),

thus making it easier for a child to stay enrolled. Not all states offer it, but among

those that do the period of continuous eligibility ranges from 6 months to 12 months.

The provision would require separate SCHIP programs (or SCHIP programs

operating under the Section 1115 waiver authority) to implement 12 months of

continuous eligibility for targeted low-income children whose annual family income

is less than 200% FPL.

Subtitle C — Coverage

Section 121. Ensuring child-centered coverage. The provision would

make dental services, and services provided by federally qualified health centers

(FQHCs) and rural health clinics (RHCs) required benefits under SCHIP. States

would also be required to assure access to these services. The provision would

require that payments for FQHC and RHC services provided under SCHIP follow the

prospective payment system for such services under Medicaid, which provides

adjusted, per-visit cost-based reimbursement for such services. With respect to

benchmark-equivalent coverage, the provision would increase the minimum actuarial

CRS-9

value for mental health services from 75% to 100%. Benchmark coverage would

also be required to be at least equivalent to the benchmark benefit packages specified

in statute. These provisions would apply to coverage provided on or after October

1, 2008.

For the parallel benchmark package option available under Medicaid, as allowed

under the Deficit Reduction Act of 2005 (P.L. 109-171), the provision would require

coverage of the “Early and Periodic Screening, Diagnosis, and Treatment” (EPSDT)

benefit for individuals under age 21, whether such persons are enrolled in benchmark

plans, benchmark-equivalent plans, or otherwise. The effective date of this provision

would be March 31, 2006 (the date of enactment of the related DRA provisions).

The provision would also add “school-based health center services” to the

“clinic services” benefit category in SCHIP statute, and would apply this change to

services furnished on or after the date of enactment of this Act.

Section 122. Improving benchmark coverage options. The provision

would continue to allow Secretary-approved coverage under both SCHIP and under

the DRA option for Medicaid, but only if such coverage is at least equivalent to a

benchmark benefit package. The provision would also more explicitly define state

employees benchmark coverage for both SCHIP and the DRA option for Medicaid

to include the state employee plan that has been selected the most frequently, by

employees seeking dependent coverage, among such plans that provide dependent

coverage, in either of the previous two years. The provision would apply to health

benefits coverage provided on or after October 1, 2008.

Section 123. Premium grace period. States would have to provide

SCHIP enrollees with a grace period of at least 30 days from the beginning of a new

coverage period to make premium payments before the individual’s coverage may

be terminated. Within seven days after the first day of the grace period, the state

would have to provide the individual with notice that failure to make a premium

payment within the grace period will result in termination of coverage and that the

individual has the right to challenge the proposed termination pursuant to the

applicable federal regulations. This provision would be effective for new coverage

periods beginning on or after January 1, 2009.

Subtitle D — Populations

Section 131. Optional coverage of children up to age 21 under

CHIP. Generally, eligibility for children under Medicaid is limited to persons under

the age of 19 (or in some cases, persons under 18 or 21, for example). Under SCHIP,

children are defined as individuals under the age of 19. The provision would expand

the definition of child under SCHIP to include individuals under age 20 or 21, at state

option. The effective date would be January 1, 2008.

Section 132. Optional coverage of legal immigrants under the

Medicaid program and CHIP. States may provide full Medicaid coverage to

legal immigrants who meet applicable categorical and financial eligibility

requirements after such persons have been in the United States for a minimum of five

CRS-10

years. Sponsors can be held liable for the costs of public benefits (such as Medicaid

and SCHIP) provided to legal immigrants.

The provision would allow states to cover legal immigrants who are pregnant

women and/or children under age 21 (or such higher age as the state has elected)

under Medicaid or SCHIP before the five-year bar is met effective upon the date of

enactment. Sponsors would not be held liable for the costs associated with providing

benefits to such legal immigrants, and the cost of such assistance would not be

considered an unreimbursed cost.

Section 133. State option to expand or add coverage of certain

pregnant women under CHIP. Currently under SCHIP, states can cover

pregnant women ages 19 and older through waiver authority or by providing

coverage to unborn children as permitted through regulation. In the latter case,

coverage includes prenatal and delivery services only. The provision would allow

states to provide optional coverage to pregnant women under SCHIP through a state

plan amendment only if (1) the state has established an income eligibility level of at

least 185% FPL under Medicaid, but in no case a percentage that is lower than the

percentage in effect for certain coverage groups for pregnant women as of July 1,

2007, (2) the state has established an income eligibility level of at least 200% FPL

for children under SCHIP or Medicaid, and (3) the state does not impose certain

enrollment limitations for children under SCHIP.

For the new group of pregnant women under SCHIP, the lower income limit

would exceed 185% FPL (i.e., or the applicable Medicaid threshold, if higher) and

the upper income limit could be up to the level for coverage of SCHIP children in the

state. Other limitations on eligibility for children under SCHIP would also apply to

the new coverage group for pregnant women. States would not be permitted to

impose pre-existing condition exclusions or waiting periods, and all cost-sharing

incurred by pregnant women under SCHIP would be capped at 5% of annual income,

as is the case for SCHIP children. States adopting this new coverage group for

pregnant women under SCHIP would receive an adjustment to their annual SCHIP

allotments to cover these additional costs. (Different adjustments would apply

depending on whether a state did or did not cover pregnant women in SCHIP prior

to FY2008 through waiver or regulatory authority.) Pregnancy-related assistance

would include all services covered for children under SCHIP (excluding EPSDT),

and the period of coverage would be during pregnancy through the end of the month

in which the 60-day postpartum period ends.

Additional provisions would: (1) deem infants born to the new group of

pregnant women under SCHIP to be eligible for Medicaid or SCHIP, as applicable,

up to age one (without regard to whether the infant lives with the mother or whether

the mother remains eligible), (2) allow presumptive eligibility determinations for

pregnant women and children under SCHIP, and (3) allow entities that make

presumptive eligibility determinations for children under Medicaid to make such

determinations for pregnant women under SCHIP.

Section 134. Limitation on waiver authority to cover adults. Under

current law, Section 1115 of the Social Security Act gives the Secretary of Health and

Human Services (HHS) broad authority to modify virtually all aspects of the

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Medicaid and SCHIP programs including expanding eligibility to populations who

are not otherwise eligible for Medicaid or SCHIP (e.g., childless adults). Approved

SCHIP Section 1115 waivers are deemed to be part of a state’s SCHIP state plan for

purposes of federal reimbursement. Costs associated with waiver programs are

subject to each state’s enhanced-FMAP. Under SCHIP Section 1115 waivers, states

must meet an “allotment neutrality test” where combined federal expenditures for the

state’s regular SCHIP program and for the state’s SCHIP demonstration program are

capped at the state’s individual SCHIP allotment.

The provision would prohibit the Secretary from allowing federal SCHIP

allotments to be used to provide health care services (under the Section 1115 waiver

authority) to individuals who are not targeted low-income children or pregnant

women (e.g., non-pregnant childless adults or parents of Medicaid or SCHIP eligible

children) unless the Secretary determines that no SCHIP-eligible child in the state

would be denied SCHIP coverage because of such eligibility. The provision would

require states to assure that they have not instituted a waiting list for their SCHIP

program, and that they have an outreach program to reach all targeted low-income

children in families with annual income less than 200% FPL.

Section 135. No federal funding for illegal aliens. Under the Medicaid

program, unauthorized aliens who meet all other program criteria are only eligible

for emergency coverage. Under SCHIP, states may opt to cover unauthorized aliens

who are pregnant, but covered services must be related to the pregnancy or to

conditions that could complicate the pregnancy or threaten the health of the unborn

child (who will be a U.S. citizen if he or she is born in the United States). The House

bill would specify that nothing in the bill allows federal payment for individuals who

are not legal residents.

Section 136.

Auditing requirement to enforce citizenship

restrictions on eligibility for Medicaid and CHIP benefits. Federal

Medicaid law and associated Medicaid Eligibility Quality Control (MEQC)

regulations specify an allowable error rate (3%) for erroneous excess payments that

are due to eligibility errors, as well as a methodology for determining a state’s error

rate. Since error rates discovered through MEQC programs were consistently below

3% as of the mid-1990s, states were offered the option to develop alternative ways

to identify and reduce erroneous payments. The Improper Payments Information Act

of 2002 (IPIA, P.L. 107-300) also requires federal agencies to identify programs that

are susceptible to significant improper payments, estimate the amount of

overpayments, and report annually to Congress on those figures and on the steps

being taken to reduce such payments. To comply with IPIA, a new regulation on

Payment Error Rate Measurement (PERM) for Medicaid and SCHIP became

effective on October 1, 2006. With respect to these two programs, a subset of states

selected for review in a given year are reviewed using a statistically valid random

sample of claims and eligibility determinations to determine error rates. States must

submit a corrective action plan based on the error rate analysis, and must return

overpayments of federal funds.

Under the House bill, each state would be required to audit a statistically based

sample of individuals whose Medicaid or SCHIP eligibility is determined under one

of the following: (1) optional citizenship documentation rules for children (specified

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in section 143 of the bill) or (2) optional coverage rules for legal immigrant pregnant

women and children (specified in section 132 of the bill) to demonstrate to the

satisfaction of the Secretary that federal Medicaid and SCHIP funds are not

unlawfully spent on individuals who are not legal residents. In conducting such

audits, a state may rely on MEQC or PERM eligibility reviews. States would be

required to remit the federal share of any unlawful expenditures which are identified

under the required audit.

Subtitle E — Access

Section 141. Children’s Access, Payment, and Equality

Commission. Among many tasks, this new Commission to be established by the

provision would review (1) factors affecting expenditures for services in different

sectors, payment methodologies, and their relationship to access and quality of care

for Medicaid and CHIP beneficiaries, (2) the impact of Medicaid and SCHIP policies

on the overall financial stability of safety net providers (e.g., FQHCs, school-based

clinics, disproportionate share hospitals), and (3) the extent to which the operation

of Medicaid and CHIP ensures access comparable to access under

employer-sponsored or other private health insurance.

This Commission would be required to make recommendations to Congress and

to submit two annual reports, the first focusing on results of reviews and related

policy recommendations and the second examining issues affecting these programs.

The Commission would also comment on any reports submitted to Congress by the

Secretary of HHS on Medicaid or SCHIP payment policies. The provision requires

that the Commission recommendations be voted on by all members, and the voting

results be included in each report. Recommendations would be required to consider

budget consequences. Certain provisions governing the Medicare Payment Advisory

Commission would apply to this new commission (i.e., relating to membership with

the addition of Medicaid and CHIP beneficiary representatives, staff and consultants,

and powers). The provision would authorize to be appropriated such sums as

necessary to carry out the duties of the new Commission.

Section 142. Model of Interstate coordinated enrollment and

coverage process. The provision would require the Comptroller General, in

consultation with State Medicaid, CHIP directors, and organizations representing

program beneficiaries to develop a model process (and report for Congress) for the

coordination of enrollment, retention, and coverage of children who frequently

change their residency due to migration of families, emergency evacuations,

educational needs, etc. The provision would require that such model process be

disseminated not later than 18 months after the date of enactment of this Act.

Section 143. Medicaid citizenship documentation requirements.

Under current law, noncitizens who apply for full Medicaid benefits have been

required since 1986 to present documentation that indicates a “satisfactory

immigration status.” Due to recent changes, citizens and nationals also must present

documentation that proves citizenship and documents personal identity in order for

states to receive federal Medicaid reimbursement for services provided to them. This

citizenship documentation requirement was included in the Deficit Reduction Act of

2005 (DRA, P.L. 109-171) and modified by the Tax Relief and Health Care Act of

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2006 (P.L. 109-432). Before the DRA, states could accept self-declaration of

citizenship for Medicaid, although some chose to require additional supporting

evidence. The citizenship documentation requirement is outlined under Section

1903(x) of the Social Security Act and applies to Medicaid eligibility determinations

and redeterminations made on or after July 1, 2006. The law specifies documents

that are acceptable for this purpose and exempts certain groups from the requirement.

It does not apply to SCHIP. However, since some states use the same enrollment

procedures for all Medicaid and SCHIP applicants, it is possible that some SCHIP

enrollees would be asked to present evidence of citizenship.

The House bill would make Medicaid citizenship documentation for children

under age 21 a state option, using criteria that are no more stringent than the existing

documentation specified in section 1903(x)(3) of the Social Security Act. Groups

that are exempt from the citizenship documentation requirement would remain the

same as under current law, except for the inclusion of an additional permanent

exemption for children who are deemed eligible for Medicaid coverage by virtue of

being born to a woman on Medicaid. The provision would require additional

documentation options for federally recognized Indian tribes. It would also specify

that states must provide citizens with the same reasonable opportunity to present

evidence that is provided under section 1137(d)(4)(A) of the Social Security Act to

noncitizens who are required to present evidence of satisfactory immigration status

and must not deny medical assistance on the basis of failure to provide such

documentation until the individual has had such an opportunity. These changes

would be effective as if included in the Deficit Reduction Act of 2005, and states

would be allowed to provide retroactive eligibility for certain individuals who had

been determined ineligible under previous citizenship documentation rules.

Section 144. Access to dental care for children. The provision would

require the Secretary of HHS to develop and implement, through entities that fund

or provide perinatal care to CHIP children, a program to deliver oral health education

materials that inform new parents about risks for, and prevention of, early childhood

caries and the need for a dental visit within a newborn’s first year of life. The

provision also specifies that states may not prevent a federally qualified health center

(FQHC) from entering into contractual relationships with private practice dental

providers in the provision of FQHC services under both the Medicaid and CHIP

programs. The effective date of these provisions would be January 1, 2008.

The provision would also require that the data states submit on the CMS-416

form for Medicaid, documenting the receipt of EPSDT services in each fiscal year,

include parallel information on the receipt of dental services among CHIP children.

In addition, each annual CHIP report submitted by states to the Secretary of HHS

would be required to include similar information. These data would also be required

to include information on such children enrolled in managed care plans, other private

health plans, and contracts with such plans under CHIP. These amendments would

be effective for annual state CHIP reports submitted for years beginning after the date

of enactment of this Act.

Finally, the provision would also require GAO to conduct a study to examine

access to dental services by children in under-served areas and the feasibility and

appropriateness of using qualified mid-level dental health providers, in coordination

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with dentists, to improve access for children to oral health services and public health

overall. The GAO would submit a report to Congress based on the findings of this

study not later than one year after the date of enactment of this Act.

Section 145. Prohibiting initiation of new health opportunity

account demonstration programs. The Deficit Reduction Act of 2005 allowed

the Secretary of HHS to establish no more then 10 demonstration programs within

Medicaid for health opportunity accounts (HOAs). HOAs are used to pay (via

electronic funds transfers) health care expenses specified by the state. As of July

2007, South Carolina was the only state to receive CMS approval for a Health

Opportunity Account Demonstration. The provision would prohibit the Secretary of

HHS from approving any new Health Opportunity Account demonstrations as of the

date of enactment of this Act.

Subtitle F — Quality and Program Integrity

Section 151. Pediatric health quality measurement program. The

Centers for Medicare and Medicaid Services (CMS) and the Agency for Healthcare

Research and Quality (AHRQ) are both actively involved in funding and

implementing an array of quality improvement initiatives, though only AHRQ has

engaged in activities specific to children.

The provision would require the Secretary of HHS to establish a child health

care quality measurement program. The purpose would be to develop and implement

pediatric quality measures on children’s health care that may be used by public and

private health care purchasers (and a system for reporting such measures), and

measures of overall program performance that may be used by public and private

sector health care purchasers. Not later than September 30, 2009, the Secretary

would be required to publish the recommended measures under this program for

years beginning with 2010. In developing and implementing this program, the

Secretary would be required to consult with a number of entities. The Secretary

would have the option to award grants and contracts to develop, test, validate, update,

and disseminate quality measures. The Secretary would also be required to provide

technical assistance to states to establish reporting of quality measures under both

Medicaid and CHIP.

Not later than January 1, 2009, and annually thereafter, the Secretary would be

required to collect, analyze, and make publicly available in an on-line format a

complete list of all measures in use by states to measure the quality of medical and

dental health services provided to Medicaid and SCHIP children by participating

providers, managed care entities, and plan issurers, and other information. Also, not

later than January 1, 2010, and every two years thereafter, the Secretary would be

required to report to Congress on the quality of health care for children enrolled in

Medicaid and SCHIP, and patterns of health care utilization by pediatric

characteristics.

Section 152. Application of certain managed care quality

safeguards to CHIP. A number of sections of the Social Security Act apply to

states under title XXI (SCHIP) in the same manner as they apply to a state under title

XIX (Medicaid). These include the following: section 1902(a)(4)(C) (relating to

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conflict of interest standards); paragraphs (2), (16), and (17) of section 1903(i)

(relating to limitations on payment); section 1903(w) (relating to limitations on

provider taxes and donations); and section 1920A (relating to presumptive eligibility

for children). The House bill would add subsections (a)(4), (a)(5), (b), (c), (d), and

(e) of section 1932 (relating to requirements for managed care) to the list of title XIX

provisions that apply under title XXI. It would apply to contract years for health

plans beginning on or after July 1, 2008.

Section 153. Updated federal evaluation of CHIP. Under prior law, the

Secretary was required to conduct an independent evaluation of 10 states with

approved CHIP plans, and to submit a report on that study to Congress by December

31, 2001. Ten million dollars was appropriated for this purpose in FY2000 and was

available for expenditure through FY2002. The 10 states chosen for the evaluation

were to be ones that utilized diverse approaches to providing CHIP coverage,

represented various geographic areas (including a mix of rural and urban areas), and

contained a significant portion of uninsured children. (The 10 states ultimately

chosen for the evaluation were California, Colorado, Florida, Illinois, Louisiana,

Missouri, New Jersey, New York, North Carolina and Texas.)

In addition to the information states were required to provide to the Secretary

in their own evaluations by March 31, 2000, the federal evaluation of the 10 states

was to include the following matters: (1) surveys of the target population (enrollees,

disenrollees, and individuals eligible for but not enrolled in CHIP); (2) an evaluation

of effective and ineffective outreach and enrollment practices, and identification of

enrollment barriers and key elements of effective outreach and enrollment practices,

including practices that have successfully enrolled hard-to-reach populations; (3) an

evaluation of the extent to which state Medicaid eligibility practices and procedures

are a barrier to the enrollment of children, and the extent to which coordination (or

lack of coordination) between Medicaid and CHIP affects enrollment; (4) an

assessment of the effect of cost-sharing on utilization, enrollment, and coverage

retention; and (5) an evaluation of disenrollment or other retention issues, such as

switching to private coverage, failure to pay premiums, or barriers in the

recertification process.

As before, directly or through contracts or interagency agreements, the provision

would require the Secretary to conduct an independent evaluation of 10 states with

approved CHIP plans. The new evaluation would be submitted to Congress by

December 31, 2010. Ten million dollars would be appropriated for this purpose in

FY2009 and made available for expenditure through FY2011. The current-law

language for the types of states to be chosen and the matters included in the

evaluation would also apply to this new evaluation.

Section 154. Access to records for IG and GAO audits. Every third

fiscal year (beginning with FY2000), the Secretary (through the Inspector General of

the Department of Health and Human Services) must audit a sample from among the

states with an approved SCHIP state plan that does not, as part of such plan, provide

health benefits coverage under Medicaid. The Comptroller General of the United

States must monitor these audits and, not later than March 1 of each fiscal year after

a fiscal year in which an audit is conducted, submit a report to Congress on the

results of the audit conducted during the prior fiscal year. Under the House bill, for

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the purpose of evaluating and auditing the SCHIP program, the Secretary, the Office

of Inspector General, and the Comptroller General would have access to any books,

accounts, records, correspondence, and other documents that are related to the

expenditure of federal SCHIP funds and that are in the possession, custody, or control

of states, political subdivisions of states, or their grantees or contractors.

Section 155. References to XXI. The provision would repeal the section

in P.L. 106-113 that directed the Secretary of HHS or any other federal officer or

employee, with respect to references to the program under Title XXI, in any

publication or official communication to use the term “SCHIP” instead of “CHIP”

and to use the term “State children’s health insurance program” instead of “children’s

health insurance program.” Thus, for official publication and communication

purposes, the provision would reinstate “CHIP” and “children’s health insurance

program,” as applicable, when referencing Title XXI.

Section 156. Reliance on law; exception for state legislation. This

provision states that with respect to amendments made by title I or title VIII of the

House bill that become effective as of a date, the following would apply: (1) that

such amendments are effective as of such date whether or not regulations

implementing such amendments have been issued, and (2) that federal financial

participation for medical or child health assistance furnished under Medicaid or

SCHIP on or after such date by a state in good faith reliance on such amendments

before the date of promulgation of final regulations (if any) to carry out such

amendments, or the date of guidance (if any) regarding the implementation of such

amendments shall not be denied on the basis of the state’s failure to comply with

such regulations or guidance. The provision also provides a grace period for states

that require state legislation in order to meet certain requirements imposed by the

House bill.

Title II — Medicare Beneficiary Improvements

Subtitle A — Improvements in Benefits

Section 201. Coverage and Waiver of Cost-Sharing for Preventive

Services. Medicare Part B generally pays 80% of the approved amount for covered

services in excess of the annual deductible ($131 in 2007). The beneficiary is liable

for the remaining 20%. The deductible and/or coinsurance are waived for certain

services, primarily preventive services. The provision would add a new category of

additional preventive services (including mental health services) that the Secretary

determined to be reasonable and necessary for the prevention or early detection of an

illness or disability. No coinsurance would apply for such services or for services

provided in a hospital outpatient department or for sigmoidoscopies and

colonoscopies. The deductible would be waived for all preventive services. All

preventive services, including the new additional preventive services category, would

be included within the definition of the initial preventive physical exam. The

provision would apply to services furnished on or after January 1, 2008.

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Section 202. Waiver of Deductible for Colorectal Cancer Screening

Tests Regardless of Coding, Subsequent Diagnosis, or Ancillary Tissue

Removal. The Medicare Part B deductible does not apply to colorectal cancer

screening tests. Effective January 1, 2008, the provision would specify that the

waiver of the deductible would apply regardless of the coding, subsequent diagnosis,

or the removal of tissue or other matter or procedure performed in connection with

and as a result of the screening test.

Section 203. Parity for Mental Health Coinsurance. Medicare Part B

generally pays 80% of the approved amount (generally a fee schedule or other

predetermined amount) for covered services in excess of the annual deductible.

However, it pays 62 ½% of covered expenses incurred in connection with the

treatment of mental, psychoneurotic, and personality disorders of a person who is not

a hospital inpatient. As a result it generally pays 50% rather than 80% of Medicare’s

recognized amount. The provision would eliminate the limitation effective January

1, 2008.

Subtitle B — Improving, Clarifying, and Simplifying Financial

Assistance for Low-Income Medicare Beneficiaries

Section 211. Improving Assets Tests for Medicare Savings Program

and Low-Income Subsidy Program. The law includes assets tests for

determining eligibility for both the low-income subsidy (LIS) assistance program for

Part D drug benefits and the Medicare Savings Program (MSP). In 2007, the

maximum LIS level is $10,210 for an individual and $20,410 for a couple (increased

in future years by the percentage increase in the CPI). The maximum MSP level is

$4,000 for an individual and $6,000 for a couple. The provision would increase the

maximum resources levels, effective January 1, 2009, to $17,000 for an individual

and $34,000 for a couple. In subsequent years, it would be the previous year’s level

increased by the consumer price index.

Section 212. Making QI-1 Program Permanent and Expanding

Eligibility. Certain low-income individuals are eligible to have their Medicare Part

B premiums paid for by Medicaid under the Medicare Savings Program (MSP). One

eligible group is Qualifying Individuals (QI-1s). These persons have incomes

between 120% and 135% of poverty. Federal spending under the QI-I program is

subject to annual limits. The program is currently slated to terminate September 30,

2007. The provision would make the program permanent, eliminate the current

federal funding limitation, provide 100% federal matching for payments under the

program, and increase the income standard to 150% of poverty, effective January 1,

2008.

Section 213. Eliminating Barriers to Enrollment. Effective January 1,

2009, the provision would permit applicants for the low-income subsidy (LIS)

program to qualify on the basis of self-certification of income and resources. Matters

attested to in the application would be subject to appropriate verification without a

requirement for additional documentation except in unusual circumstances. These

persons would continue to remain eligible without the need for any annual or periodic

application until they notified a federal or state official of a change in circumstances.

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The provision would require the Secretary to take all reasonable steps to encourage

states to provide, under the MSP program, for administrative verification of income

and automatic reenrollment. The provision would extend the outreach requirements

currently applicable for the Commissioner of Social Security. It would require the

Secretary to translate the model application form into at least 10 languages and to

make such translated forms available to the states and to the Commissioner of Social

Security. For two years the Commissioner of Social Security would be allowed to

obtain information from the IRS to identify persons potentially eligible for LIS.

Section 214. Eliminating Application of Estate Recovery. Medicaid

law requires states to recover, from the estate of the beneficiary, amounts paid by the

program for certain long-term care, related services, and other services at state

option. Effective January 1, 2008, the provision would exempt from estate recovery

any Medicaid payments for premiums, deductibles, and coinsurance made on behalf

of an individual eligible under the Medicare Savings Program.

Section 215. Elimination of Part D Cost-Sharing for Certain

Non-Institutionalized Full-Benefit Dual Eligible Individuals. Full benefit

dual eligibles who are residents of a medical institution or nursing facility have no

Part D cost-sharing. Effective January 1, 2009, the provision would extend the costsharing exemption to persons who would otherwise require institutional care paid for

by Medicaid except for the fact that they are receiving care under a home- and

community-based care waiver.

Section 216. Exemptions From Income and Resources For

Determination of Eligibility for Low-Income Subsidy. The definitions of

income and assets used for making eligibility determinations for low-income

subsidies generally follow that used for determining eligibility under the Medicare

Savings program. Certain items are excluded from the calculations. Effective

January 1, 2009, the provision would exclude support and maintenance furnished in

kind from the definition of income. It would also exclude the following from the

definition of resources: (1) any part of the value of any life insurance policy; and (2)

any balance in any pension or retirement plan.

Section 217. Cost-Sharing Protections for Low-Income Subsidy

Eligible Individuals. Non-institutionalized persons who are low-income subsidy

individuals are required to pay nominal cost-sharing charges. The provision would

limit aggregate cost-sharing in a year to 5% of income, effective January 1, 2009.

Section 218. Intelligent Assignment in Enrollment. The law requires

automatic enrollment for full benefit dual eligibles who failed to enroll in a Part D

plan. Individuals are enrolled with the plan in the region that has a premium not

exceeding the premium subsidy amount. If more than one such plan is available,

enrollment among these plans is made on a random basis. The provision would

specify that for enrollments effected on or after November 15, 2009, no Part D full

benefit dual eligible individual could be enrolled in a plan unless one of the following

apply: (1) the formulary covered 95% of the 100 most commonly prescribed generic

covered Part D drugs and 95% of the 100 most commonly prescribed brand name

covered Part D drugs for the Medicare population; (2) the plan had a network of

pharmacies that substantially exceeded the minimum requirements for plans in the

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state and that provided access in areas where lower income individuals resided; (3)

the plan (except for a new plan) had an above average score on quality ratings made

by the Secretary; (4) the total cost of providing coverage under the plan (consistent

with the new requirements)was among the lowest 25th percentile of prescription

plans under Part D in the state.

Subtitle C — Part D Beneficiary Improvements

Section 221. Including Costs Incurred By Aids Drug Assistance

Programs and Indian Health Service in Providing Prescription Drugs

Toward the Annual Out of Pocket Threshold Under Part D. Beneficiaries

enrolled in prescription drug plans under Part D are required to incur a certain level

in out-of-pocket costs in connection with the purchase of covered drugs before

catastrophic coverage begins. Costs are treated as incurred, and thus treated as true

out-of-pocket (TROOP) costs only if they are paid by the individual (or by another

family member on behalf of the individual), paid on behalf of a low-income

individual under the subsidy provisions, or under a state pharmaceutical assistance

program. Any costs for which the individual is reimbursed by insurance or otherwise

do not count toward the TROOP amount. Beginning January 1, 2009, the provision

would count toward TROOP costs paid by the Indian Health Service, Indian tribe or

tribal organization or an urban Indian organization and costs paid under an AIDS

Drug Assistance Program under Part B of Title XXVI of the Public Health Service

Act.

Section 222. Permitting Mid-Year Changes in Enrollment for

Formulary Changes Adversely Impacting an Enrollee. Part D plans can

change their formularies at the beginning of a year; during the year, plans can make

changes only after giving notice. CMS policy specifies that plans should make

formulary changes (such as removing drugs from the formulary, moving drugs to a

less preferred tier status, or adding utilization management requirements) during the

year only if enrollees currently taking the affected drugs are exempted from the

change for the remainder of the plan year. The provision would establish a special

open enrollment period, beginning January 1, 2009, for an individual to change plans

during a period (other than during the annual open enrollment period) if the

formulary of their existing plan materially changed (other than at the end of the

contract year) such as to reduce coverage or change the cost-sharing of the drug.

Section 223. Removal of Exclusion of Benzodiazepines From

Required Coverage Under the Medicare Prescription Drug Program. The

provision would remove, effective January 1, 2013, the existing exclusion of

benzodiazepines from those drugs that prescription drug plans are required to include

in their formularies.

Section 224. Permitting Updating Drug Compendia under Part D

Using Part B Update Process. The provision would permit the Secretary to

update drug compendia used under Part D using a process similar to that used for

Part B.

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Section 225. Codification of Special Protections for Six Protected

Drug Classifications. Part D plans are required to include in their formularies

drugs within each therapeutic category and class of covered Part D drugs, although

not necessarily all drugs within such categories and classes. CMS has required plans

to cover all or substantially all drugs in the following six classes: anticonvulsants,

antineoplastics, antiretrovirals, antidepressants, antipsychotics, and

immunosuppressives. The provision would codify this requirement effective January

1, 2009. A plan sponsor would only be permitted to use prior authorization or step

therapy for the initiation of medications within one of these classifications if

approved by the Secretary. However, such prior authorization or step therapy could

not be used in the case of antiretrovirals or in the case of individuals already

stabilized on a drug treatment regimen.

Section 226. Elimination of Medicare Part D Late Enrollment

Penalties Paid by Low-Income Subsidy-Eligible Individuals. A late

enrollment penalty is assessed on persons who go for 63 days or longer after the close

of their initial Part D enrollment period without creditable coverage and subsequently

enroll in Part D. CMS waived this penalty for 2006 and 2007 for persons deemed

eligible for a low-income subsidy after the close of their initial enrollment period.

The provision would eliminate the late enrollment penalties for low-income subsidy

eligible individuals, beginning January 2008.

Section 227. Special Enrollment Period for Low-Income Subsidy

Eligible Individuals. CMS established special enrollment periods for 2006 and

2007 for persons determined eligible for a low-income subsidy outside of the annual

open enrollment period. The provision would establish, beginning January 1, 2008,

a special 90- day enrollment period for such persons beginning on the date the

individual received notification that they were subsidy eligible. The Secretary would

be required to provide for a facilitated enrollment in a plan for persons deemed low

income subsidy eligible but who failed to enroll in a plan.

Subtitle D — Reducing Health Disparities

Section 231. Medicare Data on Race, Ethnicity, and Primary

Language. The provision would require the Secretary to collect and annually

analyze data on race, ethnicity and the primary language of Medicare applicants and

beneficiaries to be used in analyses related to health disparities. The Secretary would

report the results of these analyses annually to the Director of the Office for Civil

Rights and the appropriate committees of Congress. The Secretary would be required

to develop and implement a plan to improve the collection, analysis, and reporting

of racial, ethnic, and primary language data within the Medicare program. In

consultation with the National Committee on Vital Health Statistics, the Office of

Minority Health, and other public and private entities, the Secretary would be

required to make recommendations on racial, ethnic, and primary language data

collection, awareness, quality, analysis, access, and use. Within one year of the

enactment of the Act, the Director of the Office of Minority Health, in consultation

with the Office for Civil Rights of the Department of HHS, would be required to

develop and disseminate Standards for the Classification of Federal Data on Preferred

Written and Spoken Language. The Secretary would be allowed to provide direct or

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indirect technical assistance to enable a Medicare health care provider or plan to

comply with racial, ethnic, and primary language data collection. The Secretary,

acting through the Director of the Agency for Health Care Research and Quality

(AHRQ) and the Administrator of the Centers for Medicare and Medicaid Services

(CMS) would be required to (1) identify appropriate quality assurance mechanisms

to monitor for health disparities under Medicare, (2) specify the measures that should

be monitored, (3) develop new quality measures for racial and ethnic disparities in

health and health care, (4) identify the level at which data analysis should be

conducted, and (5) share data with external organizations for research and quality

improvement purposes, in compliance with applicable federal privacy laws. Not later

than two years after the date of enactment, and biennially thereafter, the Secretary

would submit to the appropriate committees of Congress a report on the effectiveness

of data collection, analysis, and reporting on race, ethnicity, and primary language

under the Medicare program. An applicant or recipient of assistance could not be

denied or otherwise adversely affected because of the failure of the applicant or

recipient to provide data. The data collected for these purposes would be protected

under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The Secretary would also ensure that the data is protected from all inappropriate

internal use by any entity. The provision authorizes to be appropriated such sums as

may be necessary for FY2008 to 2012.

Section 232. Ensuring effective communication by the CMS. The

provision would require the Secretary to conduct a study examining ways that

Medicare should pay for language services, using the results from the demonstration

program described in Section 233. In considering payment methods, the Secretary

could vary the types of service providers, available delivery methods, and costs for

providing language services. The Secretary would be required to submit a report on

the study to the appropriate committees of Congress within one year of the expiration

of the demonstration program. If a Medicare Part C organization failed substantially

to provide language services to limited English proficient beneficiaries enrolled in

the plan, then the Secretary would be allowed to place sanctions on the organization.

Section 233. Demonstration to promote access for Medicare

beneficiaries with limited English proficiency by providing

reimbursement for culturally and linguistically appropriate services.

The provision would require the Secretary, acting through the CMS, to award 24

three-year demonstration grants to eligible Medicare service providers within one

year of the enactment of the Act. The purpose of the demonstrations would be to

improve communication between Medicare service providers and Medicare

beneficiaries who are living in communities where racial and ethnic minorities,

including populations that face language barriers, are underserved with respect to

such services. Each three-year grant must be less than or equal to $500,000. Only

service providers under Medicare Part A, B, C, or D would be eligible for the grants.

To the extent feasible, the Secretary would be required to award the grants to an

equal number of service providers under each part of Medicare (Parts A, B, C, and

D), such that 6 providers, sponsors, or organizations under each of the 4 parts would

receive grants. The Secretary would be required to ensure that variation exists among

grantees, giving priority consideration to applicants that have developed partnerships

with community organizations or with agencies with experience in language access.

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A grantee would be allowed to use the grant funds to pay for the provision of

competent language and translation services to Medicare beneficiaries who are

limited English proficient. Grantees who are also Medicare Part C organizations or

Part D sponsors would be required to ensure that their network providers, including

physicians and pharmacies, receive at least 50% of the grant funds to pay for the

provision of competent language services to Medicare beneficiaries who are limited

English proficient. The limited English proficient beneficiaries would not be

required to pay cost-sharing or co-pays for language services provided through the

demonstration.

Payments to grantees would be required to be calculated based on the estimated

number of limited English proficient Medicare beneficiaries in a grantee’s service

area. Payments would be contingent on grantees reporting their costs of providing

language services and utilizing competent bilingual staff, or competent interpretation

or translation services. Grantees would be required to provide, at the conclusion of

each grant year, reports to the Secretary.

The Secretary would be required to conduct an evaluation of the demonstration

program and submit a report to the appropriate committees of Congress within one

year after completion of the program. There would be authorized to be appropriated

$10,000,000 for each fiscal year of the demonstration.

Section 234. Demonstration to improve care to previously

uninsured. The provision would require the Secretary to establish, within one year

of the date of enactment of the provision, a two-year demonstration project to

determine the greatest needs and most effective methods of outreach to Medicare

beneficiaries who were previously uninsured. The demonstration would be required

to include at least 10 sites, as well as state health insurance assistance programs,

community health centers, and other service providers under Medicare Parts A, B,

and C. The Secretary would be required to conduct an evaluation of the

demonstration, and submit a report to Congress within one year of the completion of

the project.

Section 235. Office of the Inspector General report on compliance

with and enforcement of national standards on Culturally and

Linguistically Appropriate Services (CLAS) in Medicare. This provision

would require the Inspector General of the Department of HHS to prepare and

publish a report, within two years of the date of enactment of the Act, that examines

the extent to which Medicare providers and plans are complying with the Office of

Civil Rights’ Guidance to Federal Financial Assistance Recipients Regarding Title

VI Prohibition Against National Origin Discrimination Affecting Limited English

Proficient Persons and the Office of Minority Health’s Culturally and Linguistically

Appropriate Services Standards in health care. The report must also describe the

costs or savings related to the provision of language services and recommend ways

of improving compliance with and enforcement of Culturally and Linguistically

Appropriate Services (CLAS) Standards. Within one year of the report’s publication

date, the Department of HHS would be required to implement any changes resulting

from any deficiencies identified in the report.

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Section 236. IOM report on impact of language access services.

This provision would require the Institute of Medicine to prepare and publish a

report, within three years, on the impact of language access services on the health and

health care of limited English proficient populations.

Section 237. Definitions. The provision defines the terms bilingual,

competent interpreter services, competent translation services, effective

communication, interpreting/interpretation, health care services, health care-related

services, language access, language services, limited English proficient, Medicare

program, and service provider.

Title III — Physicians’ Service Payment Reform

Section 301. Establishment of Separate Target Growth Rates for

Service Categories. Medicare pays for services of physicians and certain

nonphysician practitioners on the basis of a fee schedule. With a few exceptions,

most physicians’ services are considered together in the calculation of the fee

schedules, related expenditure targets and annual updates. In some instances, special

rules apply to the calculation of Medicare fees for some services including

anesthesia, radiology, and nuclear medicine. The Medicare physician fee schedule

assigns relative values to services that reflect physician work (i.e., the time, skill, and

intensity it takes to provide the service), practice expenses, and malpractice costs.

The relative values are adjusted for geographic variations in costs. The adjusted

relative values are then converted into a dollar payment amount by a conversion

factor. The single conversion factor for 2007 is $37.8975, the same level as in 2005

and 2006.

The physician fee schedule places a limit on payment per service but not on

overall volume of services. The formula for calculating the annual update to the

conversion factor responds to changes in volume. If the overall volume of services

increases, the update is lower; if the overall volume is reduced, the update is higher.

The intent of the formula is to place a restraint on overall increases in Medicare

spending for physicians’ services.

Several factors enter into the current calculation of the annual update (and

increase or decrease) of Medicare physician fees. These include (1) the Medicare

economic index (MEI), which measures inflation in the inputs needed to produce

physicians’ services; (2) the sustainable growth rate (SGR), which is essentially a

target for Medicare spending growth for physicians’ services; and (3) an adjustment

that modifies the update, which would otherwise be allowed by the MEI, to bring

spending in line with the SGR target. The SGR target is not a limit on expenditures.

Rather, the fee schedule update reflects the success or failure in meeting the target.

If expenditures exceed the target, the update for a future year is reduced. This is what

occurred for 2002. Fee reductions were also slated to occur in subsequent years;

however, legislation has prevented this from occurring through 2007. Most recently,

the Tax Relief and Health Care Act of 2006 (TRHCA, P.L.109-432) kept the 2007

conversion factor at the 2006 level.

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The performance adjustment factor sets the conversion factor at a level so that

projected spending for the year will meet allowed spending by the end of the year.

Current law restrictions prevent the adjustment factor from being less than minus 7%

or more than plus 3%. Under the current update formula, a reduction in the

conversion factor will occur for the next several years. In the absence of legislation,

payment rates will be reduced by about 10% in 2008 and around 5% annually for at

least several years thereafter. The 2008 estimate reflects the fact that TRHCA

specified that the 2007 override of the statutory formula was to be treated as if it did

not occur. Therefore, the starting base for the calculation is 5% below the actual

2007 conversion factor. Further, for the six-month period from July 1, 2007 to

December 31, 2007, physicians who voluntarily report certain quality measures that

meet the reporting criteria can receive bonus payments of 1.5%.

The provision would create six new categories of physicians’ services beginning

January 1, 2008: (1) evaluation and management services for primary care and for

preventive services; (2) evaluation and management services not included in (1); (3)

imaging services and diagnostic tests (other than clinical diagnostic laboratory tests);

(4) major procedures; (5) anesthesia services; and (6) minor procedures and any other

physicians’ services not described above. The provision would eliminate the single

conversion factor currently applied to all physician services and establish a separate

conversion factor for each of the six newly created service categories.

Beginning with 2008, the conversion factors would be computed and updated

separately for each of the six service categories, as would be the target growth rate

and the allocation of the cumulative adjustment component, or overhang. However,

in the calculation of the target growth rate, the rate would be increased by 2.5% for

the primary and preventive health care category. The provision would establish a

floor for updates equal to 0.5% for 2008 and 2009. However, the restriction on the

update adjustment factor for 2010 and 2011 would be changed from -7% to -14%,

and for 2013 and each succeeding year the update conversion factor for each of the

service categories would be 0%.

Section 302. Improving accuracy of relative values under the

Medicare physician fee schedule. Medicare pays for services of physicians and

certain nonphysician practitioners on the basis of a fee schedule. The fee schedule

assigns relative values to services that reflect physician work (i.e., the time, skill, and

intensity it takes to provide the service), practice expenses, and malpractice costs.

The work relative value units (RVUs) incorporated in the initial fee schedule were

developed after extensive input from the physician community. Refinements in

existing values and establishment of values for new services have been included in

the annual fee schedule updates. This refinement and update process is based in part

on recommendations made by the American Medical Association/ Specialty Society

Relative Value Update Committee (RUC) which receives input from over 100

specialty societies.

Traditionally, the five-year review has led to more increases in work RVUs than

decreases. MedPAC and other observers have stated that more attention needs to be

given to overvalued services in order to maintain the integrity of the fee schedule.

The most recent five-year review resulted in significant increases in values for

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evaluation and management services; however, the impact was reduced by the budget

neutrality adjustment.

This provision would require the Secretary to establish an expert panel to

identify misvalued physicians’ services. The panel would conduct data analysis to

identify physicians’ services for which the relative value is potentially misvalued,

particularly those which are overvalued, and assess whether those misvalued services

warrant review through existing processes. The panel would also advise the Secretary

as part of the periodic review (not less than every five years) and adjustments in

relative values.

The Secretary would consult with the expert panel and would also perform the

following: (1) in conjunction with the RUC five-year review, conduct a five-year

review of physicians’ services that have experienced substantial changes in length of

stay, site of service, volume, practice expense, or other factors that may indicate

changes in physician work; (2) identify new services to determine if they are likely

to experience a reduction in value over time and forward a list of the services

identified to the RUC for review in the next five-year review cycle; and (3) for

physicians’ services that are otherwise unreviewed by the RUC, periodically review

a sample of relative value units within different types of services to ensure the

accuracy of the relative values contained in the Medicare physician fee schedule.

The provision would give the Secretary the authority to reduce the work

component for services with accelerated volume growth without using the RUC

process beginning January 1, 2009. In consultation with the expert panel described

above, the Secretary would be able to reduce the work value units for a particular

physicians’ service if the annual rate of growth in expenditures for the service

provided under Medicare for 2006 or a subsequent year exceeds the average annual

rate of growth in expenditures for all Medicare physicians’ services by more than 10

percentage points. The Secretary would take into account clinical evidence

supporting or refuting the merits of such accelerated growth. The Secretary would

also be granted the authority to adjust payments for efficiency gains for new

procedures. The Secretary may apply a methodology, based on supporting evidence,

under which there is imposed a reduction over a period of years in specified value

units in the case of a new (or newer) procedure to take into account inherent

efficiencies that are typically or likely to be gained during the period of initial

increased application of the procedure.

Section 303. Physician feedback mechanism on practice patterns.

Both MedPAC and GAO have recently recommended providing information to

physicians on their resource use. MedPAC asserts that physicians would be able to

assess their practice styles, evaluate whether they tend to use more resources than

their peers or what evidence-based research (if available) recommends, and revise

practice styles as appropriate. MedPAC notes that in certain instances, the private

sector use of feedback has led to a small downward trend in resource use. According

to MedPAC, Medicare has the potential to be more successful since it is the single

largest purchaser of health care and therefore its reports should command more

attention. MedPAC states that using the results for physician education would

provide CMS and physicians with experience with the measurement tool and allow

for refinements. With more experience and confidence in the approach, physician

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feedback on resource use could be used for payment purposes or to create other

incentives.

In an April 2007 report (Focus on Physician Practice Patterns Can Lead to

Greater Program Efficiency), GAO explored linking physician compensation to

efficiency - defined as providing and ordering a level of services sufficient to meet

a patient’s needs but not excessive given a patient’s health status. The analysis

focused on generalists, namely physicians who defined their specialty as general

practice, internal medicine, or family practice. The report categorized physicians

who treated a disproportionate share of overly expensive patients as outlier

generalists. The report found outlier generalist physicians in all twelve metropolitan

areas studied. GAO found that Medicare patients who saw outlier generalists were

more likely to have been hospitalized, more likely to have been hospitalized multiple

times, and more likely to have used home health services. They were however, less

likely to have been admitted to a skilled nursing home.

The GAO report noted that certain public and private health care purchasers

routinely evaluate physicians in their networks using measures of efficiency and other

factors. It noted that the purchasers it studied linked their evaluation results to a

range of incentives, from steering patients toward the most efficient providers to

excluding physicians from the provider’s network because of inefficient practice

patterns. GAO noted that while CMS has the tools available to evaluate physician

practices it may not have the flexibility that other purchasers have to link physician

profiling results to a range of incentives to encourage efficiency.

The provision would require the Secretary of Health and Human Services to

develop and implement a mechanism to measure resource use on a per capita and an

episode basis by June 1, 2008. This activity is meant to provide feedback to

physicians who participate in the Medicare program on how their practice patterns

compare to physicians generally, both in the same locality as well as nationally. This

feedback would not be subject to disclosure under the Freedom of Information Act.

Section 304. Payments for Efficient Physicians. MMA provided for an

additional 5% in payments for certain physicians in scarcity areas for the period

January 1, 2005 through December 31, 2007. The Secretary was required to

calculate, separately for practicing primary care physicians and specialists, the ratios

of such physicians to Medicare beneficiaries in the county, rank each county (or

equivalent area) according to its ratio for primary care and specialists separately, and

then identify those scarcity areas with the lowest ratios which collectively represented

20% of the total Medicare beneficiary population in those areas. The list of counties

was to be revised no less often than once every three years unless there were no new

data. The listing of counties appeared in Appendix I and Appendix J of the 2005

physician fee schedule update.

This provision would create incentive payments under the Medicare program

for physicians practicing in areas identified as an efficient area. From January 1,

2009 through December 31, 2010, physicians practicing in counties or equivalent

areas that are in the lowest fifth percentile based on per capita spending for Medicare

Part A and Part B, standardized to eliminate the effect of geographic adjustments in

payment rates, would receive an amount equal to 5% of the Medicare payment

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amount. For each year, the Secretary would identify and post low volume areas as

part of the proposed and final rule to implement the annual physician fee schedule.

The Secretary would post the list of counties identified on the CMS website.

Section 305. Recommendations on refining the physician fee

schedule. The provision would modify the physician fee schedule by requiring the

Secretary to analyze and recommend ways to consolidate coding for procedures and

to increase use of bundled payments. No later than December 31, 2008, the Secretary

of Health and Human Services would be required to complete an analysis of those

procedures under the Medicare physician fee schedule for which there is no global

payment methodology being applied for which a bundled payment methodology

would be appropriate, and submit a report on such analysis and recommendations on

increasing the use of bundled payments under the Medicare physician fee schedule.

Section 306. Improved and Expanded Medical Home Demonstration

Project. Advocates of the advanced medical home concept propose a vision of

health care focused on physician-guided, patient-centered care through the promotion

of continuous care relationships and the delivery of care in a variety of settings

according to the needs of the patient and skills of the medical provider. In theory, the

advanced medical home model emphasizes patient-centered, physician-guided,

cost-efficient, longitudinal care over episodic, illness-oriented, complaint-based care.

The personal physician would coordinate and facilitate care and provide guidance,

insight, and advice to help the patients. In most cases, primary care physicians, with

their office care team, would be best suited to provide principal care and be a

patient’s care coordinator, or personal physician, in the advanced medical home

model. However, a medical specialist with his or her office care team could also

fulfill the role of personal physician. Proponents of this model claim that a personal

physician would be able to coordinate and facilitate the care of patients and would

be directly accountable to each patient, in contrast to a “gatekeeper” who is

sometimes viewed as an impediment, restricting patient access to services.

Section 204 of the Tax Relief and Health Care Act of 2006 mandated a

Medicare medical home demonstration project. The demonstration is to be

conducted in up to 8 states to provide targeted, accessible, continuous and

coordinated family-centered care to Medicare beneficiaries who are deemed to be

high need (with multiple chronic or prolonged illnesses that require regular medical

monitoring, advising or treatment.) CMS anticipates selecting a contractor to provide

assistance in the design of the Medical Home Demonstration by September, 2007.

Implementation is expected by late September, 2008.

The provision would require the Secretary to establish an expanded medical

home Medicare demonstration project (“expanded project”), which would supersede

the project initiated under section 204 of the Tax Relief and Health Care Act of 2006.

The expanded project’s purposes would be as follows: (1) to guide the redesign of

the health care delivery system to provide accessible, continuous, comprehensive,

and coordinated care to Medicare beneficiaries; and (2) to provide care management

fees to personal physicians delivering continuous and comprehensive care in

qualified medical homes.

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Under the expanded Medicare medical home project, the Secretary would

provide a monthly medical home care management fee payment to the personal

physician of each participating beneficiary. In determining the amount of the fee, the

Secretary would consider the operating expenses, the added value services, a risk

adjustment, a HIT adjustment, and a performance-based payment.

The expanded project would be funded through monies for the original

demonstration as well as $500,000,000 of additional funds from the Federal

Supplementary Medical Insurance Trust Fund (Part B). This would include the

payments of the monthly medical home care management fees described above,

reductions in coinsurance for participating beneficiaries, and funds for the design,

implementation, and evaluation of the expanded project. The Secretary would

monitor the expenditures under the expanded project and could terminate the project

early so that expenditures would not exceed the amount of funding provided for the

project. The Secretary would provide and submit to Congress an annual report on the

project and an evaluation of the project, by a date specified by the Secretary. The

Secretary would also provide for an evaluation of the expanded project and would

submit to Congress, not later than 18 months after the date of completion of the

project, a report on the project and on the evaluation of the project.

Section 307. Repeal of Physician Assistance and Quality Initiative

Fund. The provision would repeal the Physician Assistance and Quality Initiative

Fund established by TRHCA. TRHCA authorized $1.35 billion for 2008 for the

fund, which is to be available to the Secretary for physician payment and quality

improvement initiatives.

Section 308. Adjustment to Medicare Payment Localities. Medicare

payments to physicians vary according to geographic areas called Medicare payment

localities or fee schedule geographic areas. There are currently 89 localities; some

are statewide, while others are substate areas. Medicare makes a separate geographic

adjustment to each component of the physician fee schedule: a work adjustment, a

practice expense adjustment, and a malpractice adjustment. These adjustments are

intended to reflect the variation in the costs of providing services in different parts

of the country. These three components are weighted and then added together to

produce an indexed relative value unit for the service for the locality. The payment

locality structure for the current Medicare’s physician fee schedule was established

in 1996 and took effect January 1, 1997. The objective was to ensure that the

localities had relatively homogenous resource costs. Currently, there are 89 separate

payment localities of which 34 are statewide.

MMA made temporary changes to the geographic adjusters. From 2004 - 2006,

the geographic adjustment for the work component of the fee schedule was increased

to 1.000 in any area where the multiplier would otherwise be less. The Tax Relief

and Health Care Act of 2006 extended the provision for an additional year, through

2007. MMA further directed the GAO to conduct a study of the geographic

adjusters. A GAO report issued in March 2005 concluded that all three adjusters were

valid in their fundamental design, and appropriately reflected broad patterns of

geographic differences in running a practice. The report made several

recommendations for improving the data and methods used to construct the data.

CMS has stated that any changes must be made in a budget-neutral fashion for the

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state. Thus, if higher geographic practice cost indices (and thus payments) are

applied in one part of the state, they must be offset by lower indices (and payments)

in other parts of the state.

Two counties in California (Santa Cruz and Sonoma) are assigned to a larger

payment locality (“rest of California”), but in the years since the payment localities

were initially established, the cost and expenditure measures used to calculate

geographic adjusters for Medicare physician payment have increased more quickly

in those areas than in the “rest of California” payment locality. In the July 12, 2007,

proposed rule for the 2008 physician fee schedule (72 Federal Register 38122, July

12, 2007), CMS proposed three options for addressing the situation.

The provision would require the Secretary to revise the fee schedule areas for

California using the county-based geographic adjustment factor as specified in option

3 (table 9) in the proposed rule for Medicare physician services beginning January

1, 2008. This approach would group counties within a state into localities based on

similarity of GAFs even if the counties were not geographically contiguous and

would reduce the number of payment localities in California from 9 to 6, each based

on counties or aggregates of counties, with the resulting localities reflecting similar

geographic adjustment factors (GAFs). CMS claims that this option would be the

most administratively burdensome option to implement because of the significant

systems changes and provider education that would be required to reconfigure the

California localities in this manner. It would also place a greater burden on

practicing physicians who are more likely to experience a change in his or her

practice’s locality. The county-by-county impact of this option is detailed in table

9, 72 Federal Register 38141 (July 12, 2007). In the transition from the existing

payment localities to the new payment localities, for services provided January 1,

2009, through December 31, 2010, the new GAF would apply unless there is a loss,

in which case the old GAF would apply. In other words, the higher of the two GAFs

as calculated under the existing or the new methodology would apply.

No later than January 1, 2011, the Secretary would review and make revisions

to fee schedule areas in all states where there is more than one Medicare physician

payment fee schedule area. The Secretary may revise the fee schedule areas in these

states using the same methodology used for California. Any such revisions would

be made effective concurrently with the application of the periodic (3-year) review

of geographic adjustment factors required by law for 2011.

Section 309. Payment for Imaging Services. The provision would

establish an accreditation process for facilities that provide diagnostic imaging

services; the process would be modeled on that used for mammography facilities

under Section 354 of the Public Health Service Act. Effective January 1. 2010,

imaging services could only be paid for if provided in accredited facilities, except

that this limitation would not apply with respect to the technical component if the

imaging equipment meets certification standards and the professional component of

a diagnostic imaging service that is furnished by a physician. (The provision would

apply to ultrasound services on January 1, 2012.) Effective January 1, 2008, The

provision would require separate billing for the technical component and professional

component of imaging services. It would require CMS to increase the assumption

regarding the time equipment is in use from 50% to 75%. It would also require CMS

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to assume the interest rate for capital purchases reflects the prevailing rate, but in no

case higher than 11%.

Section 310. Reducing Frequency of Meetings of the Practicing

Physicians Advisory Council. The provision would modify the frequency of

meetings of the Physicians Advisory Council, as established under Section 1868(a)

of the Social Security Act, from quarterly to once each year (“and at such other times

as the Secretary may specify”). The Council’s duties are to discuss certain proposed

changes in regulations and carrier manual instructions related to physician services

identified by the Secretary. The council members are appointed by the Secretary,

based upon nominations submitted by medical organizations representing physicians.

The Council is composed of 15 physicians, each of whom has submitted at least 250

Medicare claims for physicians’ services in the previous year. At least 11 of the

members of the Council are doctors of medicine or osteopathy (not doctors of

dentistry or dental surgery, podiatry, optometry, or chiropractic) and the members of

the Council include both physicians participating in Medicare as well as

nonparticipating physicians and physicians practicing in rural areas and underserved

urban areas.

Title IV — Medicare Advantage Reforms

Subtitle A — Payment Reform

Section 401. Equalizing payments between Medicare Advantage

Plans and fee-for-service Medicare. The provision would phase-in Medicare

Advantage benchmarks equal to per capita fee-for-service (FFS) spending in each

county; this would result in decreased MA benchmarks in some areas. Plans bidding

a specified percent above per capita FFS would not be allowed to enroll new

enrollees. The calculation of per capita FFS would be altered to exclude costs

attributable to indirect medical education. The stabilization fund would be repealed.

Subtitle B — Beneficiary Protections

Section 411. NAIC development of marketing, advertising, and

related protections. Currently, MA plans are required to conform to fair

marketing standards. This provision would request the National Association of

Insurance Commissioners (NAIC), in consultation with a working group of MA plan

representatives, consumer groups, beneficiaries, and others, to develop new

marketing and advertising standards for Medicare Part C and Prescription Drug Plans

(PDPs). Model regulations would be required to address the sales and advertising

techniques used by plans, beneficiary education, training by sales agents and brokers,

and agent and broker commissions. Plans would be required to comply with the new

marketing standards by January 1, 2011. In addition, the provision would double the

penalties for violations of the new marketing standards and expand the state’s role

in oversight of MA plans. The Secretary would be required to publicly disclose all

MA plan violations. The provision would also increase funding for the State Health

Insurance Assistance Program (SHIPs), which provides community-based counseling

and outreach assistance to beneficiaries on Medicare-related issues.

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Section 412. Limitation on out-of-pocket costs for individual health

services. All MA plans can impose cost sharing on Medicare beneficiaries that is

equal to the cost sharing required under traditional Medicare or equal to an

actuarially equivalent level of cost sharing under traditional Medicare. Beginning

January 1, 2009 this provision would prohibit plans from imposing cost sharing

amounts that were greater than the cost sharing amounts for the same service in FFS

Medicare. Additionally, beginning January 1, 2008, cost-sharing amounts for dual

eligibles and Qualified Medicare Beneficiaries (QMBs) would be required to be at

a minimum equivalent to the cost sharing amounts imposed under a state’s Medicaid

program.

Section 413. MA plan enrollment modifications. This provision would

provide continuous open enrollment to full benefit dual-eligibles and qualified

Medicare beneficiaries (QMBs). Specified Low-Income Beneficiaries (SLMBs)

would be eligible to participate in special election periods and change their

enrollment in a MA plan outside of the annual coordinated election period.

Beneficiaries that disenroll from MA plans would have two years instead of one to

re-enroll in their previous Medigap plan. Further, the Secretary would be prohibited

from enrolling Medicaid-eligible individuals as dual-eligibles or QMBs in a MA plan

without explicit permission from the beneficiary.

Section 414. Information for beneficiaries on MA plan

administrative costs. This provision would require MA plans to submit certain

financial information to the Secretary, including the plan’s medical loss ratio,

adjusted per enrollee payment amount, average risk score, and other data elements.

Beginning in 2009, the Secretary would be required to publicly report this data. By

2010, the data submitted related to a plan’s medical loss ratio, would be based on

standardized definitions and data elements developed by the Secretary in consultation

with the National Association of Health Insurance Commissioners (NAIC), MA plan

representatives, and experts on health plan accounting systems. Plans that did not

have a minimum medical loss ratio of at least 0.85 would face a reduced benchmark

amount the following year, limits on new enrollment after three consecutive years,

and termination from the Medicare program after five years. The provision would

also require MedPAC to conduct a study on the feasibility of providing for different

medical loss ratios for different types of MA plans.

Subtitle C — Quality and Other Provisions

Section 421. Requiring all MA plans to meet equal standards. The

provision would require Medicare Part C private fee-for-service plans and medical

savings accounts to submit the same performance measure information as preferred

provider plans in 2009 and the same performance measure information as other Part

C plans starting in 2010. The Secretary’s authority to waive or modify requirements

for Part C plans sponsored by employers and unions would be limited beginning in

January 2009.

Section 422. Development of new quality reporting measures on

racial disparities. The Secretary would be required to develop quality measures

that measure disparities in the amount and quality of health services provided to

racial and ethnic minorities. Plans would be required to submit data on the new

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measures. The Secretary would be required to submit a report to Congress based on

this data.

Section 423. Strengthening Audit Authority. The audits of Medicare

Part C plans that the Secretary currently conducts would be expanded to include

information on risk adjustment. The Secretary would be authorized to pursue

financial recoveries necessary to address deficiencies identified in the audit or other

activities. These provision would apply to Medicare Part D plans as well.

Section 424. Improving risk adjustment for MA plans. No later than

one year after enactment, the Secretary would be required to submit a report to

Congress that evaluated the adequacy of risk adjustment under Medicare Part C.

Section 425. Eliminating special treatment for private fee-forservice plans. In 2009, this provision would eliminate a provider’s ability to bill

enrollees in private FFS plans more than the fee schedule amount. The Secretary

would have the authority to review and negotiate the bid amounts from private FFS

plans in the same manner as with all other Part C plans.

Section 426. Renaming of Medicare Advantage program. The

Medicare Advantage program would be renamed the Medicare Part C program.

Subtitle D — Extension of Authorities

Section 431. Extension and revision of authority for special needs

plans (SNPs). The authority to limit SNP enrollment to only special needs

beneficiaries would be extended from January 1, 2009 to January 1, 2012. As of

January 1, 2009, the definition of SNPs would be changed to include MA plans in

which at least 90% of enrollees were institutionalized, dually-eligible, or had one of

six specific chronic conditions as indicated by MA risk-adjustment data. Chronic

care SNPs would have to meet additional requirements such as having an average

risk score of 1.35 or greater and maintaining a sufficient network of providers. The

Secretary would be required to develop new quality measures appropriate for all

types of SNPs. Effective January 1, 2009, the provision would repeal the special

authority granted to the Secretary by Section 231 of MMA to designate MA plans

that disproportionately serve special needs individuals as SNPs.

Section 432. Extension and revision of authority for Medicare

reasonable cost contracts. The provision would extend for three additional

years - from January 1, 2008 to January 1, 2011 - the length of time a cost-based plan

could continue operating in an area where either 2 local or 2 regional Medicare

Advantage plans had entered. Any reasonable cost plan contract that was extended

or renewed on or after enactment would be required to comply with substantially

similar requirements as other Medicare Part C organizations.

Title V — Provisions Relating to Medicare Part A

Section 501. Inpatient Hospital Payment Updates. Medicare increases

hospital payments each year. The legislation would establish that acute care hospitals

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paid under Medicare’s inpatient prospective payment system (IPPS) would receive

a smaller payment update. Instead of the hospital market basket (MB), hospitals

would receive the MB minus 0.25 percentage points as their payment update. Other

hospitals, including cancer hospitals, that are paid on the basis of reasonable costs

subject to certain limits or hospital-specific target amounts, would also receive a

smaller payment increase. Target amounts for certain IPPS exempt hospitals would

be increased by the MB minus 0.25 percentage points in FY2008.

Section 502. Payment for Inpatient Rehabilitation Facility (IRF)

Services. Starting January 1, 2002, payments to inpatient rehabilitation facilities

(IRFs) are made under a discharge-based prospective payment system where one

payment covers capital and operating costs. Each year, the per discharge payment

amount is increased by an update factor based on the increase in the market basket

index. The provision would establish the IRF update factor at 1% in FY2008,

starting for discharges on January 1, 2008. The IRF compliance threshold (that

determines if a facility is an IRF or an acute care hospital) would be established as

no greater than the 60% compliance rate that became effective for cost reporting

periods beginning July 1, 2006; comorbidities would be included as qualifying

conditions.

The provision would create a special payment rule for patients in IRFs admitted

for three applicable medical conditions: unilateral knee replacement, unilateral hip

replacement, and unilateral hip fracture. Instead of the IRF standardized amount,

starting October 1, 2008, discharges with applicable medical conditions would be

paid based on a modified standardized amount, generally based on the SNF payment

rate. These provisions would apply until the Secretary implements an integrated,

site-neutral payment methodology for post acute care. These provisions would not

be subject to administrative or judicial review. For discharges from April 1, 2008

through September 30, 2008, the standardized payment amount would be $9,507 for

unilateral knee replacements; $10,398 for unilateral hip replacements; and $10,958

for unilateral hip fractures.

Not later than one year after this legislation is enacted, the Secretary, in

consultation with interested parties, would submit a report to appropriate

Congressional committees on the IRF compliance criteria and beneficiary access to

IRF care among other issues.

Section 503. Long-Term Care Hospitals. A long-term care hospital

(LTCH) is an acute care general hospital that has a Medicare inpatient average length

of stay greater than 25 days. Since 2002, LTCHs have been paid under their own

prospective payment system (PPS). This provision would establish 1886(m) of the

Social Security Act (SSA) entitled “Prospective Payment for Long-Term Care

Hospitals.” The base rate for LTCH’s rate year (RY) 2008 would be the same as that

used for discharges in the previous rate year, starting January 1, 2008. This

legislation would also establish section 1861(ccc) in the SSA that would define an

LTCH as an institution which qualifies as one of the following: 1) the institution is

primarily engaged in providing inpatient services by or under the supervision of a

physician to Medicare beneficiaries whose medically complex conditions require a

long hospital stay and LTCH services; 2) the institution has a Medicare inpatient

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average length of stay greater than 25 days; 3) the institution satisfies Medicare’s

hospital definition; or 4) the institution meets certain facility criteria.

An LTCH would be required to have a patient review process prior to admission

and other established procedures to ensure the patient’s continued need for LTCH

care. Other LTCH staffing and care requirements, including patient criteria, would

be imposed, starting for discharges occurring on January 1, 2008. If rehabilitation

services are not included as one of the patient criteria, then the Secretary would be

required to approve distinct part rehabilitation units in certain LTCHs (those

classified as such by October 1, 2004 with specified accreditation). The one-year

waiting period applicable to the conversion of hospital beds into distinct-part IRFs

would not apply. The above provisions would apply to discharges on or after January

1, 2008.

No later than one year from enactment, the Secretary would be required to

submit a report to the appropriate Congressional committees that contained

recommendations regarding the promulgation of national LTCH facility and patient

criteria. Starting October 1, 2007, the Secretary would be required to contract with

one or more appropriate Medicare administrative contractors to review the medical

necessity of LTCH admissions and continued LTCH stays. The reviews would be

funded by the aggregate overpayments recouped by the Secretary from LTCHs for

medically unnecessary care.

The Secretary would impose a four-year moratorium on the certification of new

LTCHs and satellite facilities as well as LTCH beds and satellite facility beds. The

moratorium would not apply to an LTCH hospital, satellite facility or additional beds

that are under development (according to criteria specified in the legislation) as of the

enactment date. Certain exceptions to the moratorium would be established. There

would be no administrative or judicial review of these exceptions.

Certain LTCH payment policies would be precluded for specific periods. CMS

limits the proportion of patients who can be admitted to an LTCH from an acute care

hospital during a cost reporting period and be paid under the LTCH-PPS. Under this

policy (referred to as the “25% rule”), after the threshold is reached, the LTCH is

paid the lesser of the LTCH PPS rate or the acute hospital IPPS rate. During a

five-year period beginning with enactment, the existing 25% rule would not apply to

freestanding LTCHs or certain LTCH hospitals-with-hospital (or HwHs) referred to

as “grandfathered LTCHs” that have been considered to be freestanding. The existing

50% threshold would be increased to 75% for applicable LTCHs (HwHs or satellite

facilities) in rural areas or LTCHs that are co-located with an urban single or MSA

dominant hospital. For other HwHs or satellite facilities, the admission threshold

from a co-located hospital would be established at 50%. Also, the Secretary would

not be able to apply the new short-stay outlier policy during a five-year period. The

Secretary would not be able to make the one-time prospective adjustment to LTCH

prospective payments during a five-year moratorium period. These changes would

apply to discharges starting October 1, 2007 and before October 1, 2012.

As established by the Balanced Budget Act of 1997 (BBA), there is one

“subclause II” long term care hospital identified in 1886(d)(1)(B)(iv)(II) of the Social

Security Act (SSA). A separate classification for this hospital as a long-stay cancer

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hospital would be created in Section 1886(d)(1)(B)(vi) of the SSA. Starting for cost

reporting periods after the date of enactment, Medicare payments to this hospital

would be based on the rates in effect for the cost reporting period for the hospital

during FY2001 increased by the applicable update factor. This hospital would

include satellite or remote site locations that met the applicable Medicare provider

based regulations and other applicable state licensure and certification requirements.

Section 504. Increasing the DSH Adjustment Cap. Medicare will

increase its payments to hospitals that qualify for a disproportionate share hospital

(DSH) adjustment. Small urban hospitals and many rural hospitals have their DSH

adjustment capped at 12%. The provision would raise the DSH adjustment cap for

these hospitals to 16% for discharges occurring in FY2008 and to 18% for discharges

in FY2009. For discharges starting October 1, 2009, the DSH adjustment cap would

revert to 12%. The DSH adjustment formula for hospitals in Puerto Rico would

change.

Section 505. PPS-Exempt Cancer Hospitals. Certain specialty hospitals

were exempt from IPPS. Historically, they were paid on a reasonable cost basis,

subject to TEFRA payment limitations which establishes a ceiling or target amount

that serves as an upper limit on operating costs. Children’s and cancer hospitals are

still paid on a reasonable cost basis, subject to TEFRA limits. Psychiatric hospitals,

inpatient rehabilitation, and long-term care hospitals have separate prospective

payment systems.

A hospital receiving reasonable cost reimbursement during cost reporting

periods before October 1, 1999 would be able to request a new target amount.

Beginning during FY2008, the target amount would be based on the five most recent

settled cost reporting periods prior to the enactment of this clause. This recalculation

(or re-basing) would not apply to long-term care hospitals.

Presently there are 11 freestanding IPPS exempt cancer hospitals. Other cancer

hospitals (exempt from IPPS) would be established starting for cost reporting periods

on or after January 1, 2006. Certain hospitals would have this IPPS exempt

classification apply to cost reporting periods beginning on or after January 1, 2006.

One would take effect on January 1, 2008. Other provisions would apply.

No later than March 1, 2009, MedPAC would be required to evaluate the

following: (1) measures of payment adequacy and Medicare margins for PPS-exempt

cancer hospitals; (2) margin information for PPS cancer hospitals that were

previously affiliated with another hospital; and (3) payment adequacy for cancer

discharges paid for under Medicare’s IPPS.

Section 506. Skilled Nursing Facility Payment Update. Skilled Nursing

Facilities (SNFs) are paid through a prospective payment system (PPS) which is

composed of a daily (“per-diem”) urban or rural base payment amount that is then

adjusted for case mix and area wages. The urban and rural federal per diem payment

rates are increased annually by an update factor that is determined, in part, by the

projected increase in the SNF market basket (MB) index, a measure of the changes

in the costs of goods and services purchased by SNFs. The provision would eliminate

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the MB update for FY2008, effective for payments for days on or after January 1,

2008.

Section 507. Revocation of Unique Deeming Authority of the Joint

Commission for the Accreditation of Healthcare Organizations. In order

to receive Medicare payments, healthcare providers and suppliers must meet certain

conditions of participation established by the Secretary. A hospital is deemed to have

met these conditions of participation if it has been accredited by the Joint

Commission of Healthcare Organizations (JCAHO). This provision would revoke

the unique authority granted the Joint Commission of Healthcare Organizations

(JCAHO) to accredit hospitals for participation in Medicare. Hospitals, like other

Medicare provider entities, would be accredited by national accrediting organizations

approved by the Secretary. The Secretary would have the authority to recognize

JCAHO as a national accreditation body. The provision would take effect 18 months

after the enactment date.

Section 508. Treatment of Medicare Hospital Reclassifications.

Under IPPS, a hospital (or group of hospitals) can increase its Medicare payments

though administrative reclassification (by the Medicare Geographic Classification

Review Board or MGCRB) to a different area with a higher wage index value. These

reclassifications are budget neutral. Other hospitals have been reclassified by

legislation. Section 508 of MMA provided $900 million for a one-time, three-year

geographic reclassification of certain hospitals who were otherwise unable to qualify

for administrative reclassification to areas with higher wage index values. These

reclassifications were extended from March 31, 2006, to September 30, 2007, by the

Tax Relief and Health Care Act of 2006. This extension was exempt from any

budget neutrality requirements.

The provision would extend the Section 508 reclassifications until September

30, 2009. Hospitals that were reclassified through the Secretary’s authority to make

exceptions and adjustments during the FY2005 rulemaking process would have their

reclassification extended until September 30, 2009. A hospital that has been

reclassified under Section 508 (as extended) would not prevent the group

reclassification of otherwise eligible hospitals.

Special treatment was established for other hospitals or groups of hospitals for

a three-year period starting October 1, 2008 as follows:

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Hospitals located in Putnam County, TN, with a reclassified wage

index that would expire on September 30, 2007, would have such

reclassification extended through September 30, 2008;

Any hospital in Orange County, NY, that received a Section 508

reclassification would be reclassified into New York-White

Plains-Wayne NY-NJ urban area;

The large urban area of New York, NY, would include hospitals

required by state law to have a single governance structure if certain

requirements are met;

The large urban area of Buffalo-Niagara Falls, NY, would include

Chautaugua County, NY. There would be no reduction in the

hospital wage index for Erie County, NY, or any adjoining county

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as a result of this provision except for that associated with the

budget neutrality requirements associated with a MGCRB

reclassification;

A hospital in Burlington County, NJ, would be reclassified into the

New York-White Plans NY-NJ urban area if certain criteria are met;

A hospital that is located in a core-based statistical area with certain

characteristics would be reclassified to a urban area that is within the

same state and is adjacent to the area where the hospital is located

with an average hourly wage that is closest to, but does not exceed

its own average hourly wage. This provision would apply to

hospitals in Orange County, NY, that were described above;

Albany, Schenectady, and Rensselaer counties are deemed to be part

of the Hartford, CT, urban area;

Cumberland County, TN, is deemed to be part of the NashvilleDavidson-Murfreesboro urban area;

Hospitals that are colocated in Marinette, WI, and Meominee, MI,

are deemed to be located in Chicago, IL;

A hospital in Massachusetts or Clinton County, NY, that is

reclassified into an area that uses the higher rural wage index would

receive the rural wage index;

A hospital in Toledo, OH, and one in Adrian, MI, would treated as

if they are located in Ann Arbor, MI.

A hospital in Columbia County, NY, with less than 250 beds is

deemed to be in the New York-White Plains-Wayne, NY-NY urban

area.

Generally, these reclassifications would be treated as MGCRB decisions and would

be subject to budget neutrality requirements.

Section 509. Medicare Critical Access Hospital Designations.

Critical access hospitals (CAHs) are limited-service facilities that are located more

than 35 miles from another hospital or 15 miles in certain circumstances; offer

24-hour emergency care; have no more than 25 acute care inpatient beds and have a

96-hour average length of stay. Until January 1, 2006, states could waive the CAH

mileage requirements and designate an entity as a necessary provider of health care

and qualify as a CAH. The State of Minnesota would be able to designate one

hospital in Cass County, MN, as a necessary provider of health care on or after

January 1, 2006. A hospital in the county seat of Butler, AL, with a 32-mile drive

would be deemed to meet the CAH mileage requirement. These provisions would

apply to cost reporting periods beginning on or after enactment date.

Title VI — Other Provisions Relating to Medicare Part B

Subtitle A — Payment and Coverage Improvements

Section 601. Payment for Therapy Services. The law places an annual

per beneficiary payment limit on outpatient physical therapy services and speech

language pathology services. A second annual per beneficiary payment limit applies

to outpatient occupational therapy services. A temporary exceptions process applies

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for certain specified conditions or complex situations. The provision would extend

the exceptions process for two years, through 2009. It would also require the

Secretary to conduct a study on refined and alternative payment systems for therapy

services.

Section 602. Medicare Separate Definition of Outpatient Speech

Language Pathology Services. The provision would permit, effective January

1, 2008, speech language pathologists practicing independently to bill Part B subject

to the same conditions applicable to physical and occupational therapists in

independent practice.

Section 603. Increased Reimbursement Rate for Certified Nurse

Midwives. The provision would remove the current law provision which specifies

that the fee schedule amount for a service furnished by a certified nurse midwife can

in no case exceed 65% of the fee schedule amount for the same service performed by

a physician.

Section 604. Adjustment in Outpatient Hospital Fee Schedule

Increase Factor. Each year, the hospital outpatient department conversion factor

is increased by an amount that is loosely based on increases in the hospital market

basket index. Under this provision, Medicare’s increase in hospital outpatient

department payments for services furnished in 2008 would be established as the

market basket increase reduced by 0.25 percentage points.

Section 605. Exception to 60-Day Limit on Medicare Reciprocal

Billing Arrangements in Case of Physicians Ordered to Active Duty in

the Armed Forces. Medicare payment may be made to a physician for services

furnished by a second physician to patients of the first physician provided certain

conditions are met. The services cannot be provided by the second physician for more

than 60 days. The provision would permit reciprocal billing over a longer period in

cases where the first physician has been called or ordered to active duty as a member

of a reserve component of the Armed Forces.

Section 606. Excluding clinical social worker services from

coverage under the Medicare skilled nursing facility prospective

payment system and consolidated payment. Skilled Nursing Facilities

(SNFs) are paid through a prospective payment system (PPS) that is composed of a

daily (“per-diem”) urban or rural base payment and is adjusted for case mix and area

wages. The PPS provides a bundled payment for services provided to the beneficiary

that day. Services provided to residents by certain types of providers, such as

physicians, are excluded from the bundled payment. The provision would exclude

clinical social worker services from the SNF PPS; to be effective for items and

services furnished on or after January 2008.

Section 607. Coverage of Marriage and Family Therapists and

Mental Health Counselor Services. The provision would add coverage,

effective January 1, 2008, for state-licensed or certified marriage and family

therapists and mental health counselors. Payment would equal the lesser of 80% of

the actual charge for the service or 75% of the amount paid to a psychologist for such

services.

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Section 608. Rental and Purchase of Power-Driven Wheelchairs.

On or after January 1, 2008, the provision would eliminate the option to purchase a

power-driven wheelchair with a lump sum payment. The provision would not apply

to the Durable Medical Equipment Competitive Acquisition Program.

Section 609. Rental and Purchase of Oxygen Equipment. The

provision would require the Secretary to conduct a study on oxygen services and

equipment provided to beneficiaries. The provision would reduce the length of time

that Medicare rented oxygen equipment from 36 months to 18 months, but would

exempt oxygen generating portable equipment and equipment offered through the

DME Competitive Acquisition Program.

Section 610. Adjustment for Medicare Mental Health Services. The

provision would provide for a temporary increase of 5% over the amount otherwise

payable for certain specified mental health services for the period beginning January

1, 2008, and ending December 31 of the year before the effective date of the first five

year review of relative values conducted after January 1, 2008.

Section 611. Extension of Brachytherapy Special Rule. MMA

required Medicare’s outpatient prospective payment system to make separate

payments for specified brachytherapy sources As mandated by TRHCA, until

January 1, 2008, this separate payment will be made using hospitals’ charges adjusted

to their costs. The provision would extend cost reimbursement for brachytherapy

services until January 1, 2009.

Section 612. Payment for Part B Drugs. Payments for most Part B drugs

are based on an average sales price (ASP) payment methodology. Alternatively, drugs

can be provided through the competitive acquisition program (CAP); each year, each

physician is given the opportunity either to receive payment using the ASP

methodology or to obtain drugs and biologicals through the CAP. The provision

would require the Secretary to use consistent volume weighting in the computation

of the ASP. The provision would modify the CAP program as follows: permit

continuous open enrollment and selection of a CAP vendor; specify that an election

and selection would continue to be effective without the need for any periodic

reelection or reapplication or selection; specify that vendors would not be prevented

from delivering drugs to a satellite office designated by the prescribing physician or

allowing a physician to transport drugs to the site of administration consistent with

state law; and require the Secretary to conduct an outreach and education program

on the CAP. The provision would also establish, beginning January 1, 2008, a

special rule for the payment calculation for inhalation drugs furnished through items

of durable medical equipment to specify that the payment for both single source and

multiple source drugs would be the lower of the current or historic level.

Subtitle B — Extension of Medicare Rural Access Protections

Section 621. 2-Year Extension of Floor on Medicare Work

Geographic Adjustment. Current law includes a temporary provision under

which the value of any work geographic index under the physician fee schedule that

is below 1.00 is increased to 1.00 for services furnished on or after January 1, 2004,

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and before January 1, 2008. The provision would extend the floor through December

31, 2009.

Section 622. 2-Year Extension of Special Treatment of Certain

Physician Pathology Services Under Medicare. The provision would extend

through December 31, 2009, the temporary provision that allows independent

laboratories providing services to hospitals to continue to bill directly for such

services. The provision is limited to labs that had agreements with hospitals on July

22, 1999, to bill directly for the technical component of pathology services.

Section 623. 2-Year Extension of Medicare Reasonable Cost

Payments for Certain Clinical Diagnostic Laboratory Tests Furnished

to Hospital Patients in Certain Rural Areas. Generally, hospitals that provide

clinical diagnostic laboratory services under Part B are reimbursed using a fee

schedule. Hospitals with under 50 beds in qualified rural areas (certain rural areas

with low population densities) receive 100% of reasonable cost reimbursement for

the clinical diagnostic laboratories covered under Part B that are provided as

outpatient hospital services. Reasonable cost reimbursement for laboratory services

provided by these hospitals will end July 1, 2007. This provision would extend

reasonable cost reimbursement for clinical laboratory services provided by qualified

rural hospitals until July 1, 2009.

Section 624. 2-Year Extension of Medicare Incentive Payment

Program for Physician Scarcity Areas. Current law provides a 5% bonus

payment for certain physicians in scarcity areas for the period January 1, 2005,

through December 31, 2007. The provision would extend the add-on payments

through December 31, 2009. During 2008 and 2009, the Secretary would be required

to use the primary care scarcity areas and specialty care scarcity areas that the

Secretary was using on December 31, 2007.

Section 625. 2-Year Extension of Medicare Increase Payments for

Ground Ambulance Services in Rural Areas. Ambulance services are paid

on the basis of a national fee schedule, which is being phased-in. For the period July

2004 through December 2006, the law provided for a temporary increase in payments

for ground ambulance services. The increase was 2% in rural areas and 1% in other

areas. The provision would reinstate the bonus payments for rural areas for 2008 and

2009.

Section 626. Extending Hold Harmless for Small Rural Hospitals

under the HOPD Prospective Payment System. Small rural hospitals (with

no more than 100 beds) that are not sole community hospitals can receive additional

Medicare payments if their outpatient payments under the prospective payment

system are less than under the prior reimbursement system. For calendar year (CY)

2006, these hospitals will receive 95% of the difference between payments under the

prospective payment system and those that would have been made under the prior

reimbursement system. The hospitals will receive 90% of the difference in CY2007

and 85% of the difference in CY2008. The provision would establish that these

small rural hospitals would receive 90% of the payment difference for service

furnished after CY2006.

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Subtitle C — End Stage Renal Disease Program

Section 631. Chronic Kidney Disease Demonstration Projects. The

Secretary, acting through the Director of the National Institutes of Health (NIH),

would be required to establish demonstration projects to do the following: (1)

increase public and medical community awareness about the causal factors,

prevention, diagnosis, and treatment of chronic kidney disease; (2) increase screening

and use of prevention techniques for chronic kidney disease for Medicare

beneficiaries and the general public; and, (3) enhance surveillance systems and

expand research to better assess the prevalence and incidence of chronic kidney

disease, building on work of the Centers for Disease Control and Prevention (CDC).

The Secretary would be required to conduct an evaluation of the demonstration

projects. Within 12 months after completion of the projects, the Secretary would be

required to submit a report to Congress including the evaluation and

recommendations for appropriate legislative and administrative action.

Section 632. Medicare Coverage of Kidney Disease Patient

Education Services. Medicare coverage would be expanded to include coverage

for kidney disease education services, defined as education services that are (1)

furnished to an individual with stage IV chronic kidney disease who, according to

accepted clinical guidelines identified by the Secretary, would require dialysis or a

kidney transplant; (2) furnished, upon the referral of the physician managing the

individual’s kidney condition, by a qualified person; (

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