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

CRS Report for Congress
Regulatory Reform Provisions of S. 1,
as Passed by the Senate, and
H.R. 1, as Passed by the House
Updated July 23, 2003
Jennifer Boulanger and Sibyl Tilson
Specialists in Social Legislation
Domestic Social Policy Division

Congressional Research Service ˜ The Library of Congress

Regulatory Reform Provisions of S. 1, as Passed by the
Senate, and H.R. 1, as Passed by the House
On June 27, 2003, the Senate passed the Prescription Drug and Medicare
Improvement Act of 2003 by a vote of 76-21. Later that same evening, the House
passed the Medicare modernization and Prescription Drug Act of 2003 by a recorded
vote of 216-215 with one voting present.
Each of the bills contain numerous provisions regarding the Medicare
prescription drug benefit, the new MedicareAdvantage program, Medicare payment
and benefit changes, Medicare program administration, and regulatory reform,
appeals and contracting reform. This report provides a detailed side-by-side
comparison of the regulatory reform, appeals, and contracting reform provisions of
both S. 1 and H.R. 1.
Title V of S. 1 and Title IX of H.R. 1 would modify how Medicare regulations
and guidance are communicated; would modify the procedures used to resolve
payment disputes; and would establish various provider appeal processes, particularly
for those who face termination of Medicare participation or denial of their application
to participate in the program. As well as attempting to minimize Medicare’s
administrative burden, the bills address appeals issues; change Medicare’s authority
to contract for claims processing services; establish that these contracts be
competitively bid at least every 5 years in H.R. 1 and every 6 years in S. 1; and place
new requirements on the Medicare claims processing contractors, including an
increased emphasis on provider education. Other program changes, demonstration
projects, and mandated studies are also included in these titles. Many of the
provisions of these titles codify initiatives underway within the Centers for Medicare
and Medicaid Services (CMS), the agency that administers Medicare, under its
current authority. The proposed legislation authorizes increased funding but action
by the appropriations committees would be required for CMS to receive additional
The Congressional Budget Office (CBO) has estimated that the added
administrative costs to the government in implementing the regulatory reform
provisions of S. 1 and H.R. 1 would be $4 billion over the FY2004 through FY2013
period. However, these are administrative costs that are subject to the appropriations
process rather than mandatory benefit spending. As a result, the appropriations
committees have discretion to determine the actual level at which any of the new
requirements would actually be funded. CBO also estimates that mandatory benefit
spending would be increased in S. 1 by almost $1 billion over the FY2004 through
FY2013 period (due to the change in procedures for appealing local coverage
determinations and the inclusion of additional funding in the mandatory Medicare
Integrity Program funding for provider education). Those provisions are not in H.R.

1 and CBO estimated that there was no increase in direct funding in that bill.

This report will be updated as events warrant.

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

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

1 U.S. General Accounting Office, Medicare: Successful Reform Requires Meeting Key
Management Challenges, GAO-01-1006, July 25, 2001 and Regulatory Issues for Medicare
Providers, GAO-01-802R, June 11, 2001 for additional information.

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

any qualified entity for any or all functions of a Medicare claims processing
contractor. 2
The Congressional Budget Office (CBO) has estimated that the added
administrative costs to the government in implementing the regulatory reform
provisions of S. 1 and H.R. 1 would be $4 billion over the FY2004 through FY2013
period. However, these are administrative costs that are subject to the appropriations
process rather than mandatory benefit spending. As a result, the appropriations
committees have discretion to determine the actual level at which any of the new
requirements would actually be funded. CBO also estimates that mandatory benefit
spending would be increased in S. 1 by almost $1 billion over the FY2004 through
FY2013 period (due to the change in procedures for appealing local coverage
determinations and the inclusion of additional funding in the mandatory Medicare
Integrity Program funding for provider education). Those provisions are not in H.R.

1 and CBO estimated that there was no increase in direct funding in that bill.

This report provides a detailed side-by-side comparison of the regulatory reform,
appeals, education, and contracting reform provisions of both bills. It will be updated
as events warrant.

2 For additional information, see U.S. General Accounting Office, Medicare Contracting
Reform: Opportunities and Challenges in Contracting for Claims Administration Services,
GAO-01-918, June 28, 2001 and Medicare: Comments on HHS’ Claims Administration
Contracting Reform Proposal, GAO-01-1046, Aug. 17, 2001. OIG testimony on the need
for contractor reform can be found at [].

Side-by-Side Comparison of S. 1 and H.R. 1 Regulatory Reform Provisions
tle A. Regulatory Reform
ProvisionsCurrent LawS. 1H.R. 1
truction;Section 1861 of the Social Security Act containsNo provision.Section 901. Would clarify that supplier
inition of supplierdefinitions of services, institutions, and so forthmeans a physician or other practitioner, a
under Medicare. Supplier is not explicitly defined.facility or other entity (other than a provider
of services) furnishing items or services
under Medicare.
ication of a finalThe Secretary is required to prescribe regulationsSection 501. The Secretary would be required toSection 902. Would require the Secretary
gulation based on thethat are necessary to administer the Medicarepublish a final regulation within 12 months of theto establish and publish a timeline for the
evious publication ofprogram. The Secretary must publish proposedpublication of the interim final regulation or thepublication of final regulations based on the
interim finalregulations in the Federal Register, with at least 30interim final regulation would no longer bepublication of a proposed or interim final
iki/CRS-RL31901gulationdays to solicit public comment before issuing thefinal regulation except in the followingeffective. Subject to appropriate notice, theSecretary could extend this deadline for up to 12regulation. The timeline for publishing thefinal regulation would be allowed to vary
g/wcircumstances: (1) the statute permits theadditional months.but could not exceed 3 years except for
s.orregulation to be issued in interim final form orexceptional circumstances. Any variation
leakprovides for a shorter public comment period; (2)of the timeline would have to be explained
://wikithe statutory deadline for implementing a provisionis less than 150 days after the date of enactment ofby the Secretary in the Federal Register.
httpthe statute containing the provision; (3) under theWithin 6 months of enactment, the Secretary wouldbe required to publish a notice in the FederalHas similar requirement to S. 1 regardingpublishing a final regulation after an interim
good cause exception contained in the rule-makingRegister that provides the status of each interimfinal regulation.
provision of Title 5 of the United States Code,final regulation published before enactment for
notice and public comment procedures are deemedwhich no final regulation has been issued as well as
impracticable, unnecessary or contrary to thethe date by which the Secretary plans to publish the
public regulation.Also would require that the Secretary report
to Congress annually describing instances in
which a final regulation was not published
within the applicable regular time line and
the reasons the time frame was not met.
Any provision in a final regulation that was
not a logical outgrowth of a previously
published notice of proposed rule making or
interim final rule would be required to be
treated as a proposed regulation and would

ProvisionsCurrent LawS. 1H.R. 1
not take effect until there is opportunity for
public comment and the provision is
published again as a final rule.
mpliance withNo explicit statutory instruction. As a result ofSection 502. Would bar retroactive application ofSection 903. Same provisions.
in regulationscase law, there is a strong presumption againstany substantive changes in regulation, manual
iciesretroactive rulemaking. In Bowen v. Georgetowninstructions, interpretative rules, statements of
University Hospital, the Supreme Court ruled thatpolicy, or guidelines unless the Secretary
there must be explicit statutory authority to engagedetermines retroactive application is needed to
in retroactive rulemaking.comply with the statute or is in the public interest.
Any substantive changes would not be able to take
effect until 30 days after the issuance of the
substantive change unless needed to comply with
iki/CRS-RL31901statutory requirements or the 30-day period iscontrary to the public interest.
g/wt on legal andNo provision.Section 503. The Secretary would be required toSection 904. Same provision but
s.orgulatoryreport to Congress every 2 years on theadditionally would require the Comptroller
leaknsistenciesadministration of Title XVIII and areas ofGeneral to determine the feasibility and
://wikiinconsistency or conflict among various provisionsunder law and regulation and recommendations forappropriateness of giving the Secretary theauthority to provide legally binding
httplegislation or administrative action that theadvisory opinions on interpretation and
Secretary determined appropriate to further reduceapplication of Medicare regulations.
such inconsistency or conflicts.
eamlining andNo provision. Section 504. The Secretary would be required toNo provision.

lification ofanalyze Medicare regulations for the purposes of
edicare regulationsdetermining how to streamline the regulations and
reduce the number of words in the regulations by
two-thirds by October 1, 2004. If the Secretary
determines that the two-thirds reduction is
infeasible, he would be required to inform
Congress in writing by July 1, 2004 of the reasons
and then establish a feasible reduction to be
achieved by January 1, 2005.

ppeals Process Reform
ProvisionsCurrent LawS. 1H.R. 1
ansfer ofDenials of claims for Medicare payment may beSection 511. The Secretary and Commissioner ofSection 931. Similar provision regarding
sponsibility forappealed by beneficiaries (or providers who areSocial Security would be required to develop andplan submission, but also would transfer the
edicare appealsrepresenting the beneficiary) or in certaintransmit to Congress a plan for transferring theALJ function from SSA to HHS within a
circumstances, providers or suppliers directly. Thefunctions of administrative law judges (ALJs)prescribed timeframe. The Commissioner of
third level of appeal is to an administrative lawresponsible for hearing cases under Title XVIIISSA and the Secretary would be required to
judge (ALJ). The ALJs that hear Medicare casesfrom the Social Security Administration to HHS nodevelop a plan to transfer the functions of the
are employed by the Social Securitylater than April 1, 2004. The plan would includeALJs who are responsible for hearing
Administration — a legacy from the inception ofinformation on: workload, cost projections andMedicare cases from SSA to HHS. This plan
the Medicare program when Medicare was part offinancing, transition timetable, regulations,would be due to Congress not later than
Social Security.development of a case tracking system, feasibilityOctober 1, 2004. A GAO evaluation of the
of precedential authority, feasibility of electronicplan would be due within 6 months of the
appeals filings and teleconference, steps needed toplans submission. ALJ functions would be
iki/CRS-RL31901ensure the independence of ALJs (includingtransferred no earlier than July 1, 2005 and
g/wensuring the ALJs are in an office functionally andno later than October 1, 2005.
s.oroperationally separate from the Centers forThe Secretary would be required to place the
leakMedicare & Medicaid Services and the Center forALJs in an administrative office that is
Medicare Choices), geographic distribution of
://wikiALJs, hiring of ALJs, performance standards ofALJs, sharing resources with Social Securityorganizationally and functionally separatefrom the Centers for Medicare & Medicaid
httpregarding ALJs, training and recommendations forServices. Would further require that the
further Congressional action. The GAO would beALJs report to, and be supervised by, the
required to evaluate the Secretarys andSecretary or Deputy Secretary and no other
Commissioners plan. Further, the Secretary andofficial within the Department.
Commissioner could not implement the plan to
transfer the ALJ function until at least 6 monthsWould authorize to be appropriated such
after the GAO reportsums as are necessary for FY2005 and each
subsequent fiscal year to increase the number
of ALJs, improve education and training of
ALJs and to increase the staff of the
Departmental Appeals Board (the final level
of appeal).

ProvisionsCurrent LawS. 1H.R. 1
ted access toIn general, administrative appeals must beSection 512. The Secretary would be required toSection 932. Same provision except review
eviewexhausted prior to judicial review.establish a process where a provider, supplier, or aentity would be defined as a 3-member panel
beneficiary may obtain access to judicial reviewconsisting of ALJs, members of the
when a review entity (of up to three qualifiedDepartmental Appeals Board (DAB), or
reviewers drawn from appeals levels other than thequalified individuals associated with a
redetermination level) determines, within 60 daysqualified independent contractor.
of a complete written request, that it does not have
the authority to decide the question of law or
regulation and where material facts are not in
dispute. The decision would not be subject to
review by the Secretary. Interest would be
assessed on any amount in controversy and would
be awarded by the reviewing court in favor of the
iki/CRS-RL31901prevailing party. This expedited access to judicialreview would be permitted for cases where the
g/wSecretary did not enter into or renew provider
s.or agreements.
GAO would be required to report to Congress onNo provision regarding Illinois Council case.
://wikithe access of Medicare beneficiaries and health
httpcare providers to judicial review of actions of the
Secretary and HHS after February 29, 2000 (the
date of the decision of Shalala v. Illinois Council
on Long Term Care, Inc. (529 U.S. 1 (2000)).
ted review ofNo provision.Section 513. The Secretary would be required toSection 932(d). Substantially similar
in providerdevelop and implement a process to expediteprovision although drafted differently;
eementreview for certain remedies imposed against skilledhowever, this provision would not include
erminationsnursing facilities (SNFs) including termination ofsuspension of nurse aide training programs.

participation, immediate denial of payments,
immediate imposition of temporary management,
and suspension of nurse aide training programs.

ProvisionsCurrent LawS. 1H.R. 1
The appropriation of such sums as needed for
FY2005 and subsequent years to reduce by 50%
the average time for administrative determinations,
to increase the number of ALJs and appellate staff
at the DAB, and to educate these judges and their
staffs on long-term care issues would be
ocess forThe statute prohibits approval of nurse aideNo provision.Section 932(e). The Secretary would be
instatement oftraining programs in skilled nursing facilities thatrequired to develop a process for reinstating
oval of nurse aidehave been subject to extended survey (that is,approval of nurse aide training programs that
ning programsfound to provide substandard care), have hadhave been terminated (before the end of the
serious sanctions imposed such as large civilmandatory 2-year disapproval period) if the
iki/CRS-RL31901money penalties, or have waivers for requiredlicensed nurse staffing. The statute mandates a 2-facility has come into compliance with theapplicable requirements. This provision
g/wyear loss of nurse aide training program in the casewould apply only if the basis for the loss of
s.orof any of the above violations. training was the assessment of a civil money
leakpenalty of $5,000 or more.
://wikisions to MedicareSection 514(a). A 90-day timeframe forNo provision.
https process:completing the record in a hearing before an ALJ
or the DAB (with extensions for good cause)
would be established.
mpleting the

ProvisionsCurrent LawS. 1H.R. 1
e of medicalSection 514(b). Beneficiaries medical recordsSection 933(b). Same provision.
dswould be able to be used in qualified independent
contractors (QIC) reconsiderations.
ice requirementsSection 514(c). Notice of and decisions fromSection 933(c). Substantially the same
Medicare appealsdeterminations, redeterminations, reconsiderations,provision, with minor differences in process
ALJ appeals, and DAB appeals would be requiredand requirements, although there are drafting
to be written in a manner understandable to adifferences.
beneficiary and that includes, as appropriate,
reasons for the determination or decision, for a
redetermination an explanation of the medical or
scientific rationale for the decision, and the process
for further appeal.
iki/CRS-RL31901ibilitySection 514(d). Eligibility requirements would beSection 933(d). Substantially the same
g/wquirements of QICsclarified for qualified independent contractors andprovision, although there are drafting
s.ortheir reviewer employees including medical anddifferences. The provision would not change
leaklegal expertise, independence requirements,the eligibility requirements of QICs to
prohibition on compensation being linked toexplicitly permit peer review organizations to
://wikidecisions rendered. Peer review organizationsserve.
httpwould be explicitly permitted to be QICs. Would
reduce the required number of QICs from 12 to
fo ur .
mplementation ofSection 514(e). The effective date of certainNo provision.
in Benefitsappeals provisions would be delayed until
provement andDecember 1, 2004. Expedited determinations
otection Act of 2000would be delayed until October 1, 2003. Peer
IPA) reformsreview organizations (now called quality
improvement organizations by the Secretary)
would, on a transitional basis, conduct expedited
determinations until the QICs are operational.
equiring full andNew evidence can be presented at any stage of theNo provision.Section 933(a). A provider or supplier
ly presentation ofappeals process.would be prohibited from presenting any
denceevidence in appeals that was not presented at
the qualified independent contractor level,
unless there was good cause for not
presenting the evidence.

ProvisionsCurrent LawS. 1H.R. 1
Section 514(g). Section 514 provisions areSection 933(d)(4). QIC eligibility
effective as if enacted in BIPA.requirements and reviewer eligibility
requirements would be effective as if enacted
aring rights relatedUnder administrative authorities, CMS hasSection 515. The Secretary would be required toSection 936. Same provision, although there
sions by theestablished provider enrollment processes indevelop a timeline for action on Medicareare drafting differences.
etary to deny orinstructions to the contractors. A provider deniedenrollment applications and a process for providers
renew a Medicarea provider agreement is entitled to a hearing by theto appeal denials or non-renewals of enrollment
ollment agreement;Secretary.applications. The Secretary would be required to
ultation beforeconsult with providers and suppliers before
ng providerchanging the provider enrollment forms.
ollment agreement
iki/CRS-RL31901s by providersNo provision.Section 516. Would require the Secretary toNo provision.
g/wen there is no otherpermit a provider or supplier to appeal in the case
s.orty availablewhere a beneficiary dies before assigning appeal
leak r i ght s.
://wikiovider access toOnly beneficiaries have standing to appeal localSection 517. The parties that have standing toNo provision.

http of localagecoverage decisions by Medicare contractors.appeal local coverage decisions would be expandedto include providers or suppliers adversely affected
erminationsby the determination. The Secretary would be
required to establish a process whereby a provider
or supplier may request a local coverage
determination under certain circumstances. The
provision would authorize to be appropriated such
sums as necessary to carry out the provisions
above. Also the Secretary would be required to
study and report to Congress on the feasibility and
advisability of requiring Medicare contractors to
track the subject and status of claims denials that
are appealed and final determinations.

ProvisionsCurrent LawS. 1H.R. 1
sions to appealsBIPA revised the time frames for MedicareSection 518. This provision would add 30 days toNo provision.
mesappeals. For the first level of appeal, thethe time frame for deciding an appeal at each of the
redetermination level, the time frame forfour levels of appeal.
decisions was reduced from 90 days for a part A
appeal and 45 days for a part B appeal to 30 days;
for the second level, the “reconsideration level,
the time frame was reduced from 120 days for a
part B appeal to 30 days (this is a new level of
appeal for part A appeals); for the third level,
appeals before administrative law judges, the time
frame was reduced from no time limit to 90 days;
and the fourth level, appeals before the Department
Appeals Board, the time frame was reduced from
no time limit to 90 days. BIPA also provided that
iki/CRS-RL31901a beneficiary could “escalate” his or her appeal to
g/wthe next level if the appeal was not decided in a
s.ortimely fashion.
leakimination ofBIPA Section 522 requires that appeals of localSection 519. The statutory language that requiresNo provision.
quirement to usecoverage determinations be heard by ALJs of theSSA ALJs be used to hear appeals of local
://wikicial SecuritySocial Security Administration (SSA). As a result,coverage determinations would be eliminated. The
httpministrationif the ALJ function were moved from SSA to HHS,requirement that these appeals be heard by ALJs
ministrative lawthese local coverage determination appeals wouldwould be retained.
still need to be heard by SSA ALJs.
imination ofBIPA Section 521 requires that the DepartmentalSection 520. The DAB would be required toNo provision.

quirement for deAppeals Board, the fourth level of appeal, reviewconduct a review of the decision and make a
eview by theappeals cases de novo. Prior to BIPA, the DABdecision or remand the appeal to the ALJ within
partmental Appealsreviewed appeals based on the record establishedthe 90-day period.
dduring the previous three levels of appeal.

tle C. Contracting Reform
ProvisionsCurrent LawS. 1H.R. 1
creased flexibility inThe Secretary is required to contract with healthSection 521. Adds Section 1874A to the SocialSection 911. Same provisions, except
icareinsurance companies to process and pay MedicareSecurity Act permitting the Secretary tocontracts must be recompeted at least once
ministrationPart B claims and may accept the nomination ofcompetitively contract with any eligible entity toevery 5 years. Competitive bidding for the
hospitals for entities to process and pay theirserve as a Medicare contractor (called “MedicareMACs must begin for annual contract periods
Medicare claims.Administrative Contractors (MACs)) andthat begin on or after October 1, 2010.
eliminates the distinction between Part A
contractors and Part B contractors. The Secretary
may renew these contracts annually for up to 6
years. All contracts must be recompeted at least
every 6 years. Federal Acquisition Regulations
(FAR) would apply to these contracts except to the
extent any provisions are inconsistent with a
iki/CRS-RL31901specific Medicare requirement, including incentivecontracts. Competitive bidding for the MACs must
g/wbegin for annual contract periods that begin on or
s.orafter October 1, 2011.
leakCertain terms and conditions of the contractingLiability of certifying and disbursing officers and
://wikiagreements for fiscal intermediaries (FIs) andcarriers are specified in the Medicare statute.the Medicare Administrative Contractors would belimited except in cases of reckless disregard or the
httpMedicare regulations coupled with long-standingintent to defraud the United States. This limitation
agency practices have further limited the way thaton liability does not limit liability under the False
contracts for claims administration services can beClaims Act.
established. The certifying and disbursing officersCircumstances where contractors and their
of contractors and the contractors, as entities, areemployees would be indemnified would be
protected from liability for payments, except in theestablished, both in the contract and as the
case of gross negligence or intent to defraud theSecretary determines appropriate.
United States.
formation securityNo provision.No provision.Section 912. Medicare contractors would be
quirements forrequired to implement an information
icaresecurity program that meets the same
ministrativerequirements as those imposed on federal
n t ra c t o rs. agencies.

ProvisionsCurrent LawS. 1H.R. 1
ovider education andMedicares provider education activities are fundedSection 531(a). The Secretary would be requiredSection 921 (a). Same provision except it
cal assistancethrough the program management appropriationto coordinate the educational activities through thealso would require the Secretary to submit a
and through Education and Training component ofMedicare contractors to maximize the effectivenessreport to Congress by October 1, 2004
the Medicare Integrity Program (MIP). The statuteof education efforts for providers and suppliers.describing and evaluating the steps taken to
requires toll-free lines that beneficiaries can callcoordinate the funding of provider education.
with questions or to report suspicious bills. Underdination of
administrative authority, CMS requires theion funding
contractors to have internet sites and to respond to
written inquiries.
toSection 531(b). The Secretary would be requiredSection 921(b). Same provision.
prove contractorto use specific claims payment error rates (or
iki/CRS-RL31901formancesimilar methodology) to provide incentives for
g/wcontractors to implement effective education andoutreach programs for providers and suppliers.
s.orThe GAO would study the adequacy of the
leakmethodology and make recommendations to the
://wikiSecretary. The Secretary would be required toreport to the Congress on how he intends to use the
httpmethodology in improving education and outreach
and whether the methodology is a basis for
performance bonuses.
proved providerSection 531(c). Increased funding would beSection 921(d). Would authorize to be
ion and trainingprovided for the Medicare Integrity Program ofappropriated $25 million for fiscal years
$35 million beginning with FY2004 for increased2005 and 2006 and such sums as necessary
provider and supplier education. Also wouldfor succeeding fiscal years to increase
require Medicare contractors to take intoeducation and training of providers and
consideration the special needs of small providerssuppliers. Funds would also be able to be
or suppliers when conducting education andused to improve the accuracy, consistency,
training activities and permits provision ofand timeliness of contractor responses.
technical assistance.Medicare contractors would be required to
tailor education and training activities to meet
the needs of small providers or suppliers.

ProvisionsCurrent LawS. 1H.R. 1
tional providerSection 531(d). Medicare contractors would beSection 921(f). Same provision.
ion provisionsprohibited from using a record of attendance (or
non-attendance) at educational activities to select
or track providers or suppliers in conducting any
type of audit or prepayment review.
s to and promptNo specific statutory provision. The MedicareSection 532. The Secretary would be required toSection 921(c). Same provision.
sponses fromstatute generally requires that the Medicaredevelop a process for Medicare contractors to
edicare contractorscontractors communicate information aboutcommunicate with beneficiaries and with providers
Medicare administration.and suppliers. Also requires a clear, concise
written response to inquiries within 45 business
days. The Secretary would ensure that Medicare
contractors provide a toll-free number where
iki/CRS-RL31901beneficiaries, providers and suppliers can obtainbilling, coding, claims, coverage and other
g/winformation. The Medicare contractors would be
s.orrequired to maintain a system for identifying the
leakstaff person who provided information and
monitoring the accuracy, consistency and
://wikitimeliness of information provided. The Secretary
httpwould establish standards regarding accuracy,
consistency, and timeliness and would evaluate the
Medicare contractors on these standards. Would
authorize to be appropriated such sums as
iance on guidanceAs a general principle of law, that has beenSection 533. If a provider or supplier followsSection 903(c). Same provision.

sustained by the Supreme Court, a Federalwritten guidance provided by the Secretary or a
government agent cannot undo FederalMedicare contractor when furnishing items or
government statutory or regulatory law. services or submitting a claim and the guidance
was inaccurate, the provider or supplier would not
be required to repay the overpayment (unless the
inaccurate information was due to a clerical or
technical operational error).

ProvisionsCurrent LawS. 1H.R. 1
edicare providerNo provision.Section 534. The Secretary would be directed toSection 923. Substantially similar provision,
budsmancreate a Medicare Provider Ombudsman within thealthough would not require staff to be
Department of Health and Human Services and toprovided. Also would establish a Beneficiary
provide staff to the Ombudsman. The OmbudsmanOmbudsman to provide confidential
would provide assistance to providers on aassistance to Medicare beneficiaries. Section
confidential basis. Authorizes such sums as1 would establish a Beneficiary Ombudsman
necessary be appropriated for FY2004 andin Section 301.
subsequent years.
iciary outreachNo explicit statutory instruction for demonstration.Section 535. The Secretary would be required toSection 924. Same provision.
onstration programAssistance is currently available to beneficiariesestablish a demonstration program where Medicare
through 1-800-Medicare and through the Statespecialists provided assistance to beneficiaries in at
Health Insurance Counseling Programs which areleast six local Social Security offices (two of which
iki/CRS-RL31901mandated by the statute.would be located in rural areas).
s.orior determination ofMedicare law prohibits payment for items andSection 535 (b). A demonstration project wouldSection 938. The Secretary would be
leakageservices that are not medically reasonable andbe established by the Secretary to test therequired to establish a process where
necessary for the diagnosis or treatment of anadministrative feasibility of providing a process forphysicians and beneficiaries can establish if
://wikiillness or an injury. Under certain circumstances,beneficiaries and providers to request and receiveMedicare covers certain items and services
httphowever, Medicare will pay for noncovereda determination as to whether the item or service isbefore the services are provided. A GAO
services that have been provided if both thecovered under Medicare by reasons of medicalreport would be required within 18 months of
beneficiary and the provider of the services did notnecessity, before the item or service involved isprogram implementation.

know and could not have reasonably been expectedfurnished to the beneficiary.
to know that Medicare payment would not be made
for these services.

ProvisionsCurrent LawS. 1H.R. 1
all providerNo provision.No provision.Section 922. A demonstration program
cal assistancewould be established for the contractors to
onstration programprovide technical assistance to small
providers and suppliers, when requested, to
improve compliance with Medicare
requirements. If errors were found, the
contractors would be barred from recovering
any overpayments if certain requirements are
met and barring evidence of fraud. A GAO
study would be required not later than 2 years
after the demonstration program begins.
Would authorize $1 million in FY2005 and
iki/CRS-RL31901$6 million in FY2006 to conduct thedemonstration.
leakbtitle E. Review, Recovery, and Enforcement Review
://wikiProvisionsCurrent LawS. 1H.R. 1
httpepayment reviewNo explicit statutory instruction. Underadministrative authorities, CMS has instructed theSection 541. The conduct of random prepaymentreview would be limited to only those done inSection 934. The use of random prepaymentreviews by Medicare contractors would be
contractors to use random prepayment reviews toaccordance with standard protocol developed bylimited to only developing a contractor-wide
develop contractor-wide and program-wide errorthe Secretary. Non-random reviews would beor program-wide error rate or under such
rates. Non-random payment reviews are permittedprohibited unless there is a likelihood of sustainedadditional circumstances provided under
in certain circumstances laid out in instructions toor high level of payment error (as defined by theregulation and in accordance with standard
the contractors.Secretary) and would require the Secretary toprotocol developed by the Secretary.
establish protocols for terminating the non-randomNonrandom payment reviews would be
reviews.permitted only under certain circumstances.
y ofNo explicit statutory instruction. UnderSection 542. Would add new subsection to 1874ASection 935. Would add new subsection to
paymentsadministrative authorities, CMS negotiatesthat: (h)(1) Would require establishment of at least1893 that: (f)(1) Similar provision. Would
ended repaymentextended repayment plans with providers that needa 1-year repayment plan — but not longer than 3require that, in cases of hardship, extended
additional time to repay Medicare overpayments.years — when a provider requests a repaymentrepayment plans be given ranging from 6
plan, unless the Secretary believes the providermonths and up to 5 years. In cases of
may declare bankruptcy. If a provider or supplierextreme hardship, 6-year repayment plans
fails to make a scheduled payment, the Secretarywould be permitted. If the provider or
may immediately offset or recover the outstandingsupplier had previous repayment plans, those

ProvisionsCurrent LawS. 1H.R. 1
balance. The Secretary would be required tocould not to be considered in determining
develop standards for the recovery ofhardship.
tion on(h)(2) The Secretary would be prohibited from(f)(2) Similar provision. Would provide for
entrecouping any overpayments until aredetermination by a Medicare contractor in
reconsideration-level appeal is decided (if one wasthe event that qualified independent
requested). Interest would be paid to the providercontractors have not been established.
if the appeal is successful (beginning from the time
the overpayment is recouped) or that interest shall
be paid to the Secretary if the appeal is
unsuccessful (and if the overpayment is not paid to
the Secretary).
ent audits(h)(3) If post-payment audits were conducted, the(f)(7) Similar provision. Also would require
iki/CRS-RL31901Medicare contractor would be required to providethe provider or supplier with written notice of thethe Medicare contractor to consider theinformation provided by the provider or
g/wintent to conduct the audit. The contractor wouldsupplier.
s.orfurther be required to give the provider or supplier
leaka full and understandable explanation of the
://wikifindings of the audit and permit the development ofan appropriate corrective action plan, inform the
httpprovider or supplier of appeal rights and consent
settlement options, and give the provider or
supplier the opportunity to provide additional
information to the contractor, unless notice or
findings would compromise any law enforcement
-(h)(4) The Secretary would be required to(f)(6) Same provision.

tion of codesestablish a process to provide notice to certain
providers and suppliers in cases where billing
codes are over-utilized by members of that class in
certain areas, in consultation with organizations
that represent the affected provider or supplier

ProvisionsCurrent LawS. 1H.R. 1
tandard(h)(5) The Secretary would be required to(f)(8) Same provision.
thodology for probeestablish a standard methodology for Medicare
mplingcontractors to use in selecting a sample of claims
for review in cases of abnormal billing patterns.
nsent settlement(h)(6) Would permit the Secretary to use a consent(f)(5) Substantially similar provision (minor
formssettlement process to settle projected overpaymentsdifferences).
under certain specified conditions.
rapolationNo provision.(f)(3) The use of extrapolation would be
limited unless there was a high level of
payment error or documented educational
intervention had failed to correct the payment
iki/CRS-RL31901ocess for correctionNo explicit statutory instruction. Administratively,Section 543. The Secretary would be required toSection 937. Same provision relating to
g/winor errors andthe Medicare contractors send a claims denialestablish a process so providers and suppliers cancorrecting minor errors. Contains additional
s.orissionswhen a claim has been submitted lacking requiredcorrect minor errors in claims that have beenprovision that would require the Secretary to
leakinformation. Amendments to cost reports are notsubmitted for payment.permit hospitals to correct wage data errors
allowed once a cost report is settled.that affect geographic reclassification even if
://wikithe cost report has been settled. For FY2004
httpalone, the resubmittal of the application forgeographic reclassification would be
p e r mitted .
thority to waiveThe Secretary has the authority to waive exclusionSection 544. The Secretary would be permitted toSection 949. Same provision.

ogram exclusionfrom participation in any federal health programwaive a program exclusion at the request of an
when the provider is the sole source of care in aadministrator of a federal health care program
community, at the request of a state.(which includes state health care programs).

tle F. Other Improvements
ProvisionsCurrent LawS. 1H.R. 1
usion of additionalAlthough the statute requires that beneficiariesSection 551. Beneficiary notices for thoseSection 925. Similar provision. Would
rmation in noticesreceive a statement listing the items and servicesbeneficiaries in SNFs and hospital would berequire information for beneficiaries in a SNF
iciaries aboutfor which payment has been made, there is norequired to include information about the numberstay only.
nursing facilityexplicit statutory instruction that requires the noticeof days of coverage remaining under the SNF
NF) and hospitalto include information about the number of days ofbenefit and the spell of illness involved.
nefitscoverage remaining in either the hospital or SNF
b e ne fit.
ormation onThe hospital discharge planning process requiresSection 552. The Secretary would be required toSection 926. Same provision.
icare-certified SNFevaluation of a patients likely need for post-make information publicly available regarding
pital dischargehospital services including hospice and home care.whether SNFs were participating in the Medicare
program. Hospital discharge planning would be
required to include evaluating a patients need for
iki/CRS-RL31901SNF care.
g/wysician evaluationInitial E&M guidelines were issued in 1995 withSection 553. The Secretary would be required toSection 941. Would bar the Secretary from
s.oranagementrevisions issued in 1997 and both remain in forceensure, before making changes in documentationimplementing new E and M documentation
leak&M) documentationtoday. Approximately 40% of Medicare paymentsguidelines for, or clinical examples of, or codes toguidelines unless the Secretary followed the
delinesfor physician services are for services which arereport E and M physician services, that thecriteria laid out in the provision.
://wikiclassified as evaluation and management servicesprocess used in developing the guidelines,
http(i.e., physician visits). The Secretary announcedexamples, or codes was widely consultative
that HHS was stopping work on the current re-among physicians, reflects a broad consensus
draft of E and M codes in order to reassess theamong specialties, and would allow verification
entire effort.of reported and furnished services.
ovement in(a) No explicit statutory provision on the Council.Section 554. Would require the Secretary toSection 942. Same provision on the Council.
sight of technologyUnder administrative authorities, CMS announcedestablish a Council for Technology andAlso would require the Secretary to establish
agein March 2003 the establishment of a technologyInnovation composed of senior CMS staff andprocedures for determining the basis for and
council charged with improving Medicareclinicians to coordinate coverage, coding, andamount of payment for a new clinical
coverage, coding and payment for emergingpayment processes under Title XVIII and thediagnostic laboratory test that has been
technologies. Council membership includes seniorexchange of information on new technologiesassigned a new (or substantially revised)
CMS staff. The Health Care Procedure Codingbetween CMS and other entities that make similarHealth Care Procedure Coding System
System (HCPCS) is the procedure coding systemdecisions.(HCPCS) code after January 1, 2005. Would
used for Part B items and services. No statutoryrequire a GAO study analyzing which external
provision regarding the GAO study. The Secretarydata could be collected in a shorter time frame
is required to rely on recommendations of thethan that currently used in computing inpatient
National Committee on Vital and Health Statisticshospital payments. Would permit the Secretary
(NCVHS) in adopting standards under adopt the International Classification of

ProvisionsCurrent LawS. 1H.R. 1
The current standard for diagnosis codes is thethDiseases, 10th Revision, Procedure Coding
International Classification of Diseases, 9System (ICD-10-PCS) and the ICD-10-
Revision, Clinical Modification (ICD-9-CM). ICD-Clinical Modification (CM) without receiving
9-CM is the basis of the Medicare inpatienta recommendation from the National
hospital PPS payment system.) The NCVHS hasCommittee on Vital and Health Statistics
not made a recommendation to the Secretary aboutth(NCVHS).
ICD-10-PCS (the 10 revision, procedure coding
system) or ICD-10-CM.
ntal claimsThe statute does not authorize dental benefits inSection 555. Starting 60 days after enactment, aSection 950. Same provision.
Medicare. Apparently, some insurers may requiregroup health plan providing supplemental or
a claim denial from Medicare before accepting thesecondary coverage to Medicare beneficiaries
claim for payment review, even if the service is notwould not be able to require dentists to obtain a
covered by Medicare.claim denial from Medicare for noncovered dental
iki/CRS-RL31901services prior to paying the claim.edicare secondaryIn certain instances when a beneficiary has otherNo provision.Section 943. The Secretary would not be able
g/winsurance coverage, Medicare becomes theto require that a hospital obtain information on
s.orsecondary insurance. An entity furnishing a Part Bother insurance coverage for reference
leakservice is required to obtain information from thelaboratory services, if the Secretary does not
://wikibeneficiary on whether other insurance coverage isavailable.impose such requirements in the case ofservices furnished by independent
http laboratories.
gency MedicalMedicare participating hospitals that operate anNo provision.Section 944. For EMTALA-required services
eatment and Activeemergency room are required to provide necessaryprovided to a Medicare beneficiary,
Act (EMTALA)screening and stabilization services to any patientdeterminations about medical necessity would
ovementswho comes to an emergency department requestingbe required to be made on the basis of the
examination or treatment for a medical condition,information available to the treating physician
in order to determine whether an emergencyor practitioner at the time the item or service
medical situation exists. Hospitals found inwas ordered or furnished and not on the
violation of EMTALA may face civil moneypatients principal diagnosis. The Secretary
penalties and termination of their providerwould be required to establish a procedure to
agreement. notify hospitals and physicians when an
EMTALA investigation is closed.

ProvisionsCurrent LawS. 1H.R. 1
Except in the case where a delay would
jeopardize the health and safety of individuals,
the Secretary would be required to request a
PRO review before making a compliance
determination that would terminate a
hospital’s Medicare participation because of
EMTALA violation. The period of 5 business
days would apply to such a PRO review. The
Secretary would be required to provide a copy
of the report to the hospital or physician,
consistent with existing confidentiality
requirements. This provision would apply to
terminations initiated on or after enactment.
iki/CRS-RL31901The requirement for a hospital to conduct anappropriate medical screening examination for
g/wa patient presenting in the emergency
s.ordepartment would not include cases where an
leakindividual comes to an emergency department
and the individual (or another person on the
://wikiindividuals behalf) does not specifically
httprequest an examination or treatment for an
emergency medical condition.
TALA technicalNo explicit statutory instruction.No provision.Section 945. The Secretary would be required
sory groupto establish a technical advisory group
comprised of the CMS Administrator, the
Inspector General of HHS, hospital, physician
and patient representatives, CMS staff
investigating EMTALA cases and a state
survey office representative to review issues
related to EMTALA.

ProvisionsCurrent LawS. 1H.R. 1
re hospice servicesA hospice must ensure that substantially all its coreSection 406. A hospice would be permitted toSection 946. Same provision.
services are routinely provided directly by hospiceenter into arrangements with another hospice
employees (including volunteers) or, during peakprogram to provide core service in extraordinary
patient loads or under extraordinary circumstances,circumstances, such as unanticipated high patient
by contract staff. Certain hospices in non-loads, staffing shortages due to illness or
urbanized areas can receive waivers to thistemporary travel by a patient outside the hospice’s
requirement.service area; and bill and be paid for the hospice
care provided under these arrangements.
HA bloodborneSection 1866 establishes certain conditions ofNo provision.Section 947. As of July 1, 2004, public
hogens standardsparticipation that hospitals must meet in order tohospitals that are not otherwise subject to the
participate in Medicare. Occupational Safety and Health Act of 1970
would be required to comply with the
Bloodborne Pathogens standard under Section
iki/CRS-RL319011910.1030 of Title 29 of the Code of FederalRegulations. A hospital that fails to comply
g/wwith the requirement would be subject to a
s.orcivil monetary penalty, but would not be
leakterminated from participating in Medicare.
://wikielated technicalendments andBIPA Section 522 contained several technicalerrors.No provision.Section 948. Technical corrections would bemade to BIPA Section 522.
ions toUnder certain circumstances, a person or entitySection 434. Entities, as defined by theSection 952. Same provision.

signmentother than the individual providing the service maySecretary, could receive Medicare payments for
ovisionsreceive Medicare provided by a physician or other person
if the service was provided under a contractual
arrangement and if the arrangement includes joint
andseveral liability” (liability for several parties)
for overpayment and the entities’ meet program
integrity specifications determined by the