Medicare Fee-for-Service Modifications and Medicaid Provisions of H.R. 1 as Enacted

CRS Report for Congress
Medicare Fee-for-Service Modifications and
Medicaid Provisions of H.R. 1 as Enacted
Updated January 16, 2004
Sibyl Tilson, Jennifer Boulanger, Jean Hearne,
Steve Redhead, Evelyne Baumrucker, Julie Stone,
Bernadette Fernandez, and Karen Tritz
Specialists and Analysts in Social Legislation
Domestic Social Policy Division

Congressional Research Service ˜ The Library of Congress

Medicare Fee-for-Service Modifications and
Medicaid Provisions of H.R. 1 as Enacted
On November 22, the House of Representatives voted 220 to 215 to approve
the conference report on H.R. 1, the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003. The Senate, on November 24, voted 54 to 44 to approve
the conference report. Earlier, the conferees of the Medicare prescription drug and
modernization legislation announced an agreement on November 16 and the
legislative text was released November 20. The legislative language can be
downloaded from the House Committee on Ways and Means website at:
[]. The bill was signed into law by the President on
December 8, 2003.
As well as establishing a prescription drug benefit for Medicare beneficiaries,
the legislation contains provisions that involving significant payment increases,
payment reductions, an expansion of covered benefits, new demonstration projects
and new beneficiary cost-sharing provisions for the traditional Medicare fee-for-
service (FFS) program. The bill includes a measure that would require congressional
consideration of legislation if general revenue funding for the entire Medicare
program exceeds 45%. Provisions affecting the State Childrens’ Health Insurance
Program (SCHIP) and Medicaid programs are included in the legislation as well.
Earlier this year, under Congress’ FY2004 budget resolution, $400 billion was
reserved for Medicare modernization, creation of a prescription drug benefit, and, in
the Senate, to promote geographic equity payment. The Congressional Budget Office
(CBO) has estimated that the legislation for H.R. 1 would increase direct (or
mandatory) spending by $394.3 billion from FY2004 through FY2013. Prescription
drug spending is estimated at $409.8 billion over the 10-year period and Medicare
Advantage spending at $14.2 billion. Overall, the fee-for-service provisions which
change traditional Medicare are estimated to save $21.5 billion over the 10-year
period and adjusting the Part B premium to beneficiaries’ income is estimated to save
$13.3 billion over the period. Some fee-for-service provisions will increase spending
over this 10-year period including the provisions affecting hospitals and physician.
Other fee-for-service provisions are projected to save money over the period
including those affecting durable medical equipment, clinical laboratories and home
health agencies. The CBO estimate is available on the CBO website at
[ x / doc4808/ 11-20-MedicareLetter.pdf] .

Changes to Medicare’s Fee for Service Program..........................1
Selected Rural Provider Provisions............................2
Selected Acute Hospital Provisions............................3
Selected Physician Provisions................................4
Selected Provisions Affecting Other Providers and Practitioners.....5
Selected Fee-for Service Demonstration Projects.................6
Expansion of Covered Benefits...............................6
Beneficiary Payments...............................................7
Income-Relating the Part B Premium..........................7
Indexing the Part B Deductible...............................7
Medicaid and Miscellaneous Provisions................................8
Modifications to Fee-for-Service Medicare..............................9
Provisions Relating to Part A.....................................9
Hospital Services..........................................9
Allied Health and Graduate Medical Education Payments.........22
Skilled Nursing Facility (SNF) and Hospice Services.............25
Other Part A Provisions...................................29
Provisions Relating to Part B....................................34
Physician and Practitioner Services...........................34
Hospital Outpatient Department (HOPD), Ambulatory Surgery
Center (ASC), and Clinic Services.......................42
Covered Part B Outpatient Drugs (Not Provided by a HOPD)......48
Covered Drugs and Services at a Dialysis Facility...............57
Durable Medical Equipment (DME) and Related Outpatient Drugs..58
Ambulance Services.......................................62
Other Part B Services and Provisions.........................65
Provisions Relating to Parts A and B..............................69
Home Health Services.....................................69
Chronic Care Improvement.................................73
Medicare Secondary Payor (MSP)............................75
Other Medicare A and B Provisions..........................76
Medicare Demonstration Projects and Studies..................82
Beneficiary Issues: Cost-Sharing Amounts and Provision of Information.90
Other Health-Related Studies, Commissions or Committees...........94
Medicaid and State Children’s Health Insurance Program (SCHIP)
Provisions ...............................................99
Cost Containment and Miscellaneous Financial Provisions...........106

Medicare Fee-for-Service Modifications
and Medicaid Provisions of
H.R. 1 as Enacted
On November 22, 2003, the House of Representatives voted 220 to 215 to
approve the conference report on H.R. 1, the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003. The Senate, on November 24th,
voted 54 to 44 to approve the conference report. The bill was signed by the President
in a ceremony on December 8th. The legislation adds a prescription drug benefit to
Medicare and replaces the existing Medicare+Choice program with a new
MedicareAdvantage program that establishes managed care payments based on a
system of bids and benchmarks. The bill also contains numerous provisions that
would generally increase fee-for-service payments within Medicare’s Part A and Part
B program (also known as traditional Medicare), especially for rural health care
providers; numerous regulatory and administrative practices will also be modified.
This report discusses the fee-for-service (FFS) provisions of the legislation, those
affecting Medicaid as well as the Medicare cost containment provisions1. It
compares the provisions in the bill as enacted with those in the Medicare reform bills
that were originally passed by the Senate and the House.
The Medicare FFS provisions in the bill are found primarily in Titles GGIII
through VIII; some FFS provisions are included in Titles VIII through X as noted.
The cost containment provisions are in Title VIII and the Medicaid and other
provisions are in Title X. An overview of the entire legislation can be found in CRS
Report RL31966.
Changes to Medicare’s Fee for Service Program
The legislation contains extensive changes to Medicare’s FFS program,
including payment increases and, in certain instances, decreases; development of
competitive acquisition programs; implementation or refinement of other prospective
payment systems (notably, the development of an end-stage renal disease (ESRD)
basic payment system); expansion of covered preventive benefits; establishment of
demonstration programs; and required studies. The anticipated financial impact of
these changes on any individual provider, physician, or supplier will vary depending
on many factors, such as the unique characteristics of the individual or entity
participating in Medicare as well as the number and type of services provided to the

1 Cost containment provisions require an analysis of general tax revenue financing of the
Medicare program as well as a Presidential and Congressional response when “excess
general revenue financing of Medicare” exceeds a threshold of 45%.

Medicare beneficiaries they serve. Selected highlights of the FFS payment
provisions and those establishing preventive care benefits and demonstration
programs will be briefly described.
Selected Rural Provider Provisions.
Generally, Medicare payments to certain rural providers are expected to
increase; many of the rural provisions will benefit urban providers as well. CBO
estimates that the rural provisions in Title IV of the bill will increase Medicare’s
direct spending by $9.3 billion from 2004 through 2008 and by $19.9 billion from

2004 though 2013. It should be noted that other provider payment provisions in H.R.

1 can impact rural providers, but their effect on Medicare payments to rural providers
has not been specifically identified.
!Hospitals in rural areas and those in small urban areas will receive
a permanent 1.6% increase to Medicare’s base rate or per discharge
payment; the payment limit for rural and small urban hospitals that
qualify for disproportionate share hospital (DSH) adjustment will
increase from 5.25% to 12%; hospitals in low-wage areas (those
with wage index values below 1) will receive additional payments
through a decrease from 71% to 62% in the labor-related portion of
the base payment rate; and small rural hospitals with less than 50
beds will receive cost reimbursement for outpatient clinical
laboratory tests. In addition, rural hospitals with less than 100 beds
will be protected from payment declines associated with the hospital
outpatient prospective payment system (OPPS) for an additional 2
years; these OPPS hold harmless provisions will be extended to sole
community hospitals for services from 2004 through 2006. CBO
estimates that these provisions will increase direct Medicare
spending by $15.6 billion over the 10-year period.
!Critical access hospitals (CAHs) will have their bed limit increased
from 15 to 25; there will be no restriction on the number of these
beds that can be used for acute care services at any one time. CAHs
will be able to establish distinct part rehabilitation and psychiatric
units of up to 10 beds that will not be included in the CAH bed
count. Cost reimbursement of CAH services will increase to 101%
of reasonable costs, starting January 1, 2004. Periodic interim
payments for CAHs will be authorized. State authority to waive the
35-mile requirement for new entities to qualify as a CAH will be
eliminated as of January 1, 2006. CBO estimates that these
provisions will increase direct Medicare spending by $900 million
over the 10-year period.
!Physicians in newly established scarcity areas will receive a 5%
increase in Medicare payments. Physicians in certain low-cost areas
with geographic adjustment factors below 1 will receive payment
increases so as to increase this factor to 1, starting in 2004 through
2006. CBO estimates that these provisions will increase direct
Medicare spending by $1.7 billion over the 10-year period.
!Practitioners in rural health clinics and federally qualified health
centers will be able to bill separately for services provided to

beneficiaries in skilled nursing facilities. CBO estimates that these
provisions will increase direct Medicare spending by $100 million
over the 10-year period.
!Home health providers in rural areas will receive a 5% increase in
Medicare payments for one year beginning April 1, 2004. CBO
estimates that this one-year increase will increase direct Medicare
spending by $100 million over the 10-year period.
Selected Acute Hospital Provisions.
Generally, Medicare payments to hospitals will increase under the conference
report. Specifically,
!Acute hospitals paid under the inpatient prospective payment system
(IPPS) will receive the full increase in the market basket (MB) index
as an update in 2004. From 2005 through 2007, hospitals that
submit data on specified quality indicators will receive the MB as an
update; those hospitals that do not submit such data will receive the
MB minus 0.4 percentage points for the year in question. CBO
expects that this provision will reduce direct spending 0.2 billion
from 2004 through 2008.
!Teaching hospitals will receive an increase in their indirect medical
education adjustment from 2004 through 2006 that CBO projects
will increase spending by $400 million.
!A one-time, geographic reclassification process to increase
hospitals’ wage index values for 3 years that is expected to increase
payments by $900 million from 2004 through 2008 is established.
!Low volume hospitals with fewer than 800 discharges that are 25
road miles away from similar hospitals may qualify for up to a 25%
increase in Medicare payments for an expected cost of $100 million
from 2004-2013.
!Changes in payment methods for covered prescription drugs
provided in outpatient hospital departments is expected to increase
payments by $700 million from FY2004 through FY2008.
!A redistribution of unused resident positions will increase both
direct and indirect graduate medical education spending by an
anticipated $200 million from FY2004 thought FY2008 and by $600
million from FY2004 through FY2013.
!Certain teaching hospitals with high per resident payments will not
receive a payment increase from FY2004 through FY2013; this
provision was scored by CBO as a reduction in Medicare spending
of $500 million from FY2004 through FY2008 and $1.3 billion from
FY2004 through FY2013.
!For 18 months from the date of enactment, physicians will not be
able to refer Medicare patients to specialty hospitals in which they
have an investment interest. This provision will not apply to
hospitals that are in operation or under development before
November 18, 2003. Both MedPAC and HHS are to complete
required studies on specialty hospitals within 15 months of

Selected Physician Provisions.
The impact of the legislation on Medicare’s spending for physician spending is
difficult to determine. Although physicians will receive a 1.5% update in 2004 and
2005 which is expected to increase spending by $2.8 billion from FY2004 through
FY2007; subsequently, from FY2008 through FY2012, the provision is expected to
result in a decline of $2.8 billion in Medicare spending. Over the 10 year period
from 2004 through 2013, CBO expects the update provisions to increase Medicare
spending by $200 million.
Medicare’s payments for some practice expenses, particularly the administration
of covered drugs, will increase starting in 2004. A transitional adjustment to the drug
administration payments of 32% in 2004 and 3% in 2005 is also established. These
payment increases are expected to be counterbalanced by a decrease in Medicare’s
payments for covered outpatient drugs provided in a doctor’s office.
Medicare’s payment for covered outpatient drugs furnished incident to a
physician’s service will change during 2004 as follows:
!Many covered outpatient drugs furnished in 2004 will be reimbursed
at 85% of the average wholesale price (AWP). Certain of these
drugs may be paid as low as 80% of the AWP (in effect as of April

1, 2003).

!Blood clotting factors and other blood products, drugs or biologicals
(drug products) that were not available for payment by April 1,
2003, covered vaccinations, drug products furnished in during 2004
in connection with renal dialysis services, drugs provided through
covered durable medical equipment will be paid at a higher rate
during 2004.
The decline in payments for covered outpatient drugs in 2004 can only be
implemented concurrently with the increased payments for the administration of the
Starting in 2005, Medicare’s payment for many covered outpatient drugs will
be based on average sales price methodology, that uses different pricing and cost
data, depending on the prescription drug. Generally, multiple source drugs will be
paid 106% of the average sales price; single source drugs will be paid 106% of the
lower of the average sales price or the wholesale acquisition costs, unless the widely
available market price or the average manufacturer price for those drugs exceeds a
certain threshold. Starting in 2006, physicians will have the option of obtaining
covered Part B drugs from selected entities awarded contracts for competitively
biddable drug products under a newly established competitive acquisition program.

Selected Provisions Affecting Other Providers and Practitioners.
The follow provisions affecting other providers and practitioners are included
in the legislation:
Ambulatory Surgical Centers. Payments to ambulatory surgical centers
(ASCs) are expected to be lower by $800 million from FY2004 through FY2008 and
by $3.1 billion from FY2004 through FY2013 as a result of the legislation. ASCs
will receive an update of the consumer price index for all urban consumers (CPI-U)
minus 3.0 percentage points starting April 1, 2004 and will receive a O percent
update for services provided starting October 1, 2004 through December 31, 2009.
Therapy Caps. Application of the caps on outpatient therapy services
provided by non-hospital providers is suspended from the date of enactment and for
the remainder of 2003, in 2004 and 2005. CBO estimates that the therapy cap
moratorium will increase direct Medicare spending by $700 million over the 10-year
Durable Medical Equipment (DME). Competitive bidding for DME will
be phased-in beginning in 2007 in 10 of the largest metropolitan statistical areas and
may be phased in first for the highest cost and highest volume items and services.
The update for most DME items and services and for prosthetics and orthotics is 0
in 2004, 2005, 2006, 2007, and 2008. For 2005, payment for certain items, oxygen
and oxygen equipment, standard wheelchairs, nebulizers, diabetic lancets and testing
strips, hospital beds and air mattresses will be reduced by an amount calculated using
2002 payment amounts and the median price paid by the Federal Employees Health
Benefit Program.2 Beginning January 1, 2009, items and services included in the
competitive acquisition program will be paid as determined under that program and
the Secretary can use this information to adjust the payment amounts for DME, off-
the-shelf orthotics, and other items and services that are supplied in an area that is not
a competitive acquisition area. Class III items (devices that sustain or support life,
are implanted, or present potential unreasonable risk, e.g., implantable infusion
pumps and heart valve replacements, and are subject to premarket approval, the most
stringent regulatory control) receive the full increase in the consumer price index for
all urban consumers (CPI-U) in 2004, 2005, 2006 , 2008 and subsequent years. The
Secretary will determine the update in 2007. CBO scored the DME provisions of
the bill as reducing spending by $6.8 billion over the 10-year period.
Home Health. Home health agency payments are increased by the full market
basket percentage for the last quarter of 2003 (October, November, and December)
and for the first quarter of 2004 (January, February, and March). The update for the
remainder of 2004 and for 2005 and 2006 is the home health market basket
percentage increase minus 0.8 percentage points. CBO estimates that this provision

2 Section 302 specifies that the reduction uses the “Median FEHP Price” in the table entitled
“Summary of Medicare Prices Compared to VA, Medicaid, Retail, and FEHB Prices for 16
Items” that was included in testimony of the Health and Human Services Inspector General
before the Senate Committee on Appropriations, June 12, 2002, or any subsequent report
by the Inspector General.

will reduce direct Medicare spending by $6.5 billion over the 10-year period. The
legislation suspends the requirement that home health agencies must collect the
Outcome and Assessment Information Set (OASIS) data on private pay (non-
Medicare, non-Medicaid) until the Secretary reports to Congress and publishes final
regulations regarding the collection and use of OASIS.
Selected Fee-for Service Demonstration Projects.
The legislation establishes numerous demonstration projects for the Medicare
program. Several demonstrations address aspects of disease management for
beneficiaries with chronic conditions.
Chronic Care Improvement under Fee-For-Service. The legislation
requires the Secretary to establish and implement chronic care improvement
programs under fee-for-service Medicare to improve clinical quality and beneficiary
satisfaction and achieve spending targets specified by the Secretary for Medicare for
beneficiaries with certain chronic health conditions. Participation by beneficiaries
is voluntary. The contractors are required to assume financial risk for performance
under the contract. CBO has estimated that this demonstration will increase direct
Medicare spending by $500 million over the 10-year period.
Chronically Ill Beneficiary Research, Demonstration. The legislation
requires the Secretary to develop a plan to improve quality of care and to reduce the
cost of care for chronically ill Medicare beneficiaries within 6 months after
enactment. The plan is required to use existing data and identify data gaps, develop
research initiatives, and propose intervention demonstration programs to provide
better health care for chronically ill Medicare beneficiaries. The Secretary is required
to implement the plan no later than 2 years after enactment.
Coverage of Certain Drugs and Biologicals Demonstration. The
Secretary is required to conduct a 2-year demonstration where payment is made for
certain drugs and biologicals that are currently provided as “incident to” a physician’s
services under Part B. The demonstration is required to provide for cost-sharing in
the same manner as applies under Part D of Medicare. The demonstration is required
to begin within 90 days of enactment and is limited to 50,000 Medicare beneficiaries
in sites selected by the Secretary.
Homebound Demonstration. The Secretary is required to conduct a 2-year
demonstration project where beneficiaries with chronic conditions would be deemed
to be homebound in order to receive home health services under Medicare.
Adult Day Care. The Secretary is required to establish a demonstration where
beneficiaries could receive adult day care services as a substitute for a portion of
home health services otherwise provided in a beneficiary’s home.
Expansion of Covered Benefits.
The legislation contains a number of provisions that expand coverage beginning
January 1, 2005, including the following:

Initial Physical Examination. Medicare coverage of an initial preventive
physical examination is authorized for those individuals whose Medicare coverage
begins on or after January 1, 2005. CBO estimates that this provision will increase
direct Medicare spending by $1.7 billion over the 10-year period.
Cardiovascular Screening Blood Tests. Medicare coverage of
cardiovascular screening blood tests is authorized. CBO estimates that this provision
will increase direct Medicare spending by $300 million over the 10-year period.
Diabetes Screening Tests. Diabetes screening tests furnished to an
individual at risk for diabetes for the purpose of early detection of diabetes are
included as a covered medical service. In this instance, diabetes screening tests
include fasting plasma glucose tests as well as other tests and modifications to those
tests deemed appropriate by the Secretary. CBO estimates that this provision will
increase direct Medicare spending less than $50 million over the 10-year period.
Screening and Diagnostic Mammography. Screening mammography
and diagnostic mammography will be excluded from OPPS and paid separately.
CBO estimates that this provision will increase direct Medicare spending by $200
million over the 10-year period.
Intravenous Immune Globulin. The bill includes intravenous immune
globulin for the treatment in the home of primary immune deficiency diseases as a
covered medical service under Medicare. CBO estimates that this provision will
increase direct Medicare spending by $100 million over the 10-year period.
Beneficiary Payments
The bill contains two provisions which change the beneficiary premiums and
Income-Relating the Part B Premium.
The legislation increases the monthly Part B premiums for higher income
enrollees beginning in 2007. Beneficiaries whose modified adjusted gross income
exceed $80,000 and couples filing joint returns whose modified adjusted gross
income exceeds $160,000 will be subject to higher premium amounts. The increase
will be calculated on a sliding scale basis and will be phased-in over a five-year
period. The highest category on the sliding scale is for beneficiaries whose modified
adjusted gross income is more than $200,000 ($400,000 for a couple filing jointly).
Those amounts are increased beginning in 2007 by the percentage change in the
consumer price index. CBO estimates that direct Medicare spending will be reduced
by $13.3 billion over the 10-year period 2004 through 2013.
Indexing the Part B Deductible.
The Medicare Part B deductible will remain $100 through 2004, increase to
$110 for 2005, and in subsequent years the deductible will be increased by the same

percentage as the Part B premium increase. Specifically, the annual percentage
increase in the monthly actuarial value of benefits payable from the Federal
Supplementary Medical Insurance Trust Fund will be used as the index.
Medicaid and Miscellaneous Provisions
Title X of the legislation makes some changes to Medicaid and other programs.
Omitted from the agreement were two provisions contained in S. 1, including a
provision to amend the Age Discrimination in Employment Act of 1967 to allow an
employee benefit plan to offer different benefits to their Medicare eligible employees
than to their non-Medicare eligible employees, and a provision to allow states to
cover certain lawfully residing aliens under the Medicaid program.
CBO estimates the Medicaid and other provisions included in the bill to increase
direct spending by $5.7 billion between FY2004 and FY2013. The following general
points can be made about the Medicaid and Miscellaneous provisions included in
Title X of the bill:
!The legislation temporarily increases states’ disproportionate share
hospital (DSH) allotments to erase the decline in these Medicaid
amounts that occurred after a special rule for their calculation
!The legislation includes several other Medicaid provisions, including
raising the floor on DSH allotments for “extremely low DSH states,”
providing DSH allotment adjustments impacting Hawaii and/or
Tennessee, increasing reporting requirements for DSH hospitals, and
exempting prices of drugs provided to certain safety net hospitals
from Medicaid’s best price drug program.
!Miscellaneous provisions in Title X of the legislation include
funding federal reimbursement of emergency health services
furnished to undocumented aliens, and funding administrative start-
up costs for Medicare reform, various research projects, work groups
and infrastructure improvement programs for the health care system.
This report contains a detailed side-by-side comparison of the relevant
provisions of the legislation, S. 1, as passed the Senate, and H.R. 1, as passed the
House. Certain of the provisions can be found in one or more of the sections. For
example, the home health homebound demonstration (section 702) is listed in the
home health section and the demonstration projects section. Also included in this
side-by-side, are provision that were included in the House and/or Senate bill which
were dropped in conference.

Modifications to Fee-for-Service Medicare
ovisions Relating to Part A
Hospital Services.
ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
Inpatient Prospective Payment System (IPPS) Hospitals
crease standardized amounts for smallSection 401. Medicare will pay hospitalsSection 401. Medicare would paySection 402. Similar provision with
n and rural hospitals in Medicare’sin rural and small urban areas in the 50hospitals in rural and small urban areas inrespect to discharges in the fifty states.
tient hospital prospective paymentstates using the standardized amount thatthe fifty states using the standardizedTwo standardized amounts would still be
stem (IPPS). Medicare pays forwould be used to pay hospitals in largeamount used to pay hospitals in largeused for hospitals in Puerto Rico; one
atient services in acute hospitals inurban areas starting for discharges inurban areas starting for discharges infederal amount would be used in the
e urban areas using a standardizedFY2004. The existing authority of theFY2004. The Secretary would computecalculation of these 2 rates.
iki/CRS-RL32005ount that is 1.6% larger than theSecretary to delay implementation of thisone standardized amount for hospitals in
g/wdardized amount used to reimburseincrease until November 1, 2003 forPuerto Rico equal to that for other areas.
s.orspitals in other areas (both rural areashospitals that are not in Puerto Rico is not
leakd smaller urban areas). P.L. 108-7affected. The Secretary will compute one
ided that all Medicare discharges fromlocal standardized amount for all hospitals
://wikiril 1, 2003 to September 30, 2003, willin Puerto Rico equal to that for hospitals in
httpd on the basis of the large urban areaount. The Secretary is authorized tolarge urban areas in Puerto Rico startingfor discharges in FY2004. Hospitals in
lay implementation of this paymentPuerto Rico will receive the legislated
e until November 1, 2003, ifpayment increase starting for discharges on
sary.April 1, 2004.
Under Medicare’s IPPS, two
ferent standardized amounts are used for
spitals in Puerto Rico, one for hospitals
e urban areas and one for other
sp itals.
crease payments to hospitals in areasSection 403. For discharges on or afterSection 402. For cost reporting periodsSection 416. Same provision except that
th wage index values below one (byOctober 1, 2004, the Secretary is requiredbeginning October 1, 2004, the Secretarythe effective date is October 1, 2003.

ering Medicare’s IPPS labor-relatedto decrease the labor-related share to 62%would be required to decrease the labor-
re which is the proportion of theof the standardized amount when suchrelated share to 62% of the standardized
ndardized amount multiplied by thechange will result in higher total paymentsamount only if such change would result in
ndex). IPPS payments are adjusted,to the hospital. This provision is to behigher total payments to the hospital. This

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
er increased or decreased asapplied without regard to certain budget-provision would be applied without regard
propriate, by the hospital wage index ofneutrality requirements. For discharges onto certain budget neutrality requirements.
here the hospital is located oror after October 1, 2004, the Secretary is
ere it has been reassigned. Presently,also required to decrease the labor-related
imately 71% of the standardizedshare to 62% of the standardized amount
ount is adjusted by the area wage index.for hospitals in Puerto Rico when such
change results in higher total payments to
the hospital.
crease Medicare IPPS payments forSection 406. The Secretary is required toSection 403. The Secretary would beNo provision.
-volume hospitals. Medicare paysprovide for a graduated adjustment of up torequired to develop a graduated adjustment
t acute hospital services for each25% of Medicare’s inpatient payment ratesof up to 25% of Medicare’s inpatient
arge from the hospital without regardto account for the empirically establishedpayment rates to account for the higher
e number of beneficiaries dischargedhigher unit costs associated with low-unit costs in low-volume hospitals. Certain
iki/CRS-RL32005m any given hospital. Under certainmstances, however, sole communityvolume hospitals starting for dischargesoccurring in FY2005. A low-volumehospitals with fewer than 2,000 totaldischarges during the three most recent
g/wspitals (SCHs) and Medicare dependenthospital is a short-term general hospitalcost reporting periods would be eligible for
s.orspitals with more than a 5% decline inthat is located more than 25 road milesup to a 25% increase in their Medicare
leakal discharges from one period to thefrom another such hospital and that haspayment amount starting with cost reports
xt may apply for an adjustment to theirless than 800 discharges during the fiscalthat begin during FY2005. Eligible
://wikiyment rates to partially account foryear. Certain budget neutralityhospitals would be located at least 15 miles
httpher costs associated with a drop inrequirements would not apply to thisfrom a similar hospital or those determined
t volume due to circumstancesprovision. The determination of theby the Secretary to be so located due to
ond their control. percentage payment increase is not subjectfactors such as weather conditions, travel
to administrative or judicial review. conditions, or travel time to the nearest
alternative source of appropriate inpatient
care. Certain budget neutrality
requirements would not apply.
crease disproportionate share hospitalSection 402. Starting for discharges afterSection 404. Starting for discharges afterSection 401. Starting for discharges after
H) payments for small urban andApril 1, 2004, a hospital that is not a largeOctober 1, 2004, a hospital that qualifiesOctober 1, 2003, a hospital that is not a
pitals. Medicare makesurban hospital that qualifies for a DSHfor a DSH adjustment when its DSHlarge urban hospital that qualifies for a
ditional payments to certain acuteadjustment will receive its DSH paymentspatient percentage exceeds the 15% DSHDSH adjustment would receive its DSH
spitals that serve a large number of low-using the current DSH adjustment formulathreshold would receive the DSH paymentspayments using the current DSH
e Medicare and Medicaid patients.for large urban hospitals, subject to a limit.using the current formula that establishesadjustment formula for large urban
though a SCH or rural referral centerThe DSH adjustment for any of thesethe DSH adjustment for a large urbanhospitals, subject to a limit. The DSH
RC) can qualify for a higher DSHhospitals, except for rural referral centers,hospital.adjustment for any of these hospitals,
justment, generally, the DSH adjustmentwill be capped at 12%. A Pickle hospitalexcept for RRCs, would be capped at 10%.

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
all urban or rural hospital canreceiving a DSH adjustment under the
e is limited to a maximum of aalternative formula will not be affected by
crease to its IPPS payment. Largethis provision. (For a description of Pickle
eds and more) urban hospitals andhospitals, see page 12 column 1.)
e rural hospitals (500 beds and more)
ible for a higher adjustment that
be significantly greater; the amount of
adjustment received by these
ger hospitals will depend upon its DSH
tient percentage (the percentage of low-
me Medicare or Medicaid patients
edPAC report on MedicareNo provision.Section 404A. MedPAC would beNo provision.
iki/CRS-RL32005djustments. No provision inrrent law.required to conduct a study to determine(1) whether DSH payments should be
g/wmade in the same manner as Medicare’s
s.orgraduate medical education payments; (2)
leakthe extent that hospitals receiving
Medicaid DSH payments also receive
://wikiMedicare DSH payments; and (3) whether
httpuncompensated care costs should be added
to the Medicare DSH formula. The report,
including recommendations, would be due
to Congress within 1 year from enactment.
clude wage data of hospitals thatNo provision.Section 405(e). The Secretary would beNo provision.

l access hospitalsrequired to exclude wage data from
AHs) from IPPS wage index. Certainhospitals that have converted to CAHs
alified small hospitals are converting tofrom the IPPS wage index calculation
Hs. After conversion, these facilitiesstarting for cost reporting periods
paid on a reasonable cost basis and arebeginning January 1, 2004.
t paid under IPPS. Medicare’s IPPS
ments to acute hospitals are adjusted by
age index of the area where the
spital is located or has been reassigned.
though the hospital wage index is

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
annually, the wage index for
y given fiscal year is based on data
bmitted as part of a hospital’s cost report
4 years previously. As of FY2004,
ge data from hospitals that have
nverted to CAHs were excluded from
PPS wage index calculation.
crease DSH for Pickle” hospitals.No provision.Section 420A. Hospitals that qualify forNo provision.
st DSH hospitals receive additionalthe DSH adjustment under the Pickle
payments because they serve aamendment would receive a DSH
proportionate share of poor Medicareoperating and capital adjustment of 40%
d Medicaid patients. A few urbanfor discharges beginning October 1, 2003.
spitals receive DSH payments under an
iki/CRS-RL32005native Pickle formula. If a hospital
g/wes at least 30% of its patient care
s.ornue from indigent care funds, it will
leakcrease in its Medicare
erating payments. The Pickle hospitals
://wikie a capital DSH adjustment of
http, the amount that other non-Picklespitals with a 35% operating DSH
ustment would receive.
crease payments for hospitals inSection 504. Hospitals in Puerto Rico willSection 409. Hospitals in Puerto RicoSection 503. From FY2004 though
. Under Medicare’s IPPS,receive Medicare payments based on awould receive Medicare payments basedFY2007, hospitals in Puerto Rico would
parate standardized amounts are used to50/50 split between federal and localon a 50/50 split between national and localreceive an increasing amount of the
y short-term general hospitals in Puertoamounts before April 1, 2004. Startingamounts before October 1, 2004. Thesepayment rate based on national rates as
co. The Balanced Budget Act of 1997April 1, 2004 through September 30, 2004,hospitals would receive Medicarefollows: during FY2004, payment would
BA 97) provides for an adjustment ofpayment will be based on 62.5% nationalpayments based on 100% of the federalbe 59% national and 41% local; during
uerto Rico rates from blendedamount and 37.5% local amount; this willrate for discharges beginning October 1,2005, payment would be 67% national
ounts based on 25% of the nationalchange to 75% national and 25% local2004 and before October 1, 2009. The rateand 33% local and 75% national and 25%
ounts and 75% of the local amounts toafter October 1, 2004 and in subsequentfor hospitals in Puerto Rico would revert tolocal during FY2006 and subsequently.

ded amounts based on a 50/50 splityears. a 50/50 split after October 1, 2009.
een national and local amounts.

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
quire GAO report on appropriatenessNo provision.Section 413. Using the most current data,No provision.
IPPS payments. No provision inthe Comptroller General (GAO) would be
rrent law.required to report to Congress within 18
months of enactment on: (1) the
appropriate level and distribution of IPPS
Medicare payments to short-term general
hospitals; and (2) the need for geographic
adjustments to reflect legitimate
differences in hospital costs.
ulate wage indices for hospitals.Section 508. The Secretary will establishSection 419. The Secretary would be ableNo provision.
PS hospitals may apply to the Medicarea wage index appeals process by January 1,to waive established reclassification
raphic Classification Review Board2004. A hospital seeking to be reclassifiedcriteria in calculating the wage index in a
iki/CRS-RL32005RB) for a change in classification toferent area. If reclassification ismust submit an appeal to the MGCRB nolater than February 15, 2004.state when making payments for hospitaldischarges in FY2004.
g/wanted, the new wage index will be usedReclassifications will be effective for a 3-
s.orlating Medicare’s payment foryear period starting April 1, 2004. There
leakatient and outpatient services. Thewill be no further administrative or judicial
sification standards are establishedreview of these decisions. The additional
://wiki regulation.spending associated with this provision
httpcannot exceed $900 million.
pital market basket moreSection 404. The Secretary is required toNo provisionSection 404. The Secretary would be
ly. IPPS standardized amountsrevise the market basket weights to reflectrequired to revise the market basket cost
increased annually using an updatethe most currently available data and toweights to reflect the most currently
r which is determined in part by theestablish a schedule for revising the costavailable data and to establish a schedule
ojected increase in the hospital marketcategory weights more often than oncefor revising the weights more often than
sket (MB), an input price index whichevery 5 years. The Secretary is required toonce every 5 years. The Secretary would
ures the average change in the pricepublish the reasons for and the optionsbe required to submit a report to Congress
goods and services hospitals purchasedconsidered in establishing such a scheduleby October 1, 2004 on the reasons for and
rder to furnish inpatient care. Centersin the final rule establishing FY2006the options considered in establishing such
r Medicare and Medicaid Servicesinpatient hospital payments. a schedule.

MS) revises the category weights,
aluates the price proxies for such
ories, and rebases the MB every 5

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
spital update factor. EachSection 501. Acute hospitals will receiveNo provision.Section 501. Acute hospitals would
icare’s operating payments tothe MB as the operating update forreceive an operating update of the MB
spitals are increased or updated by aFY2004. From FY2005 through FY2007,minus 0.4 percentage points for FY2004
r that is determined in part by thehospitals that submit required quality datathrough FY2006. The operating update
ojected annual change in the hospitalwill receive the MB as an update;would be the MB increase in FY2007 and
. Congress establishes the update forhospitals that do not submit such data willsubsequently.
s IPPS for operating costs, oftenreceive the MB minus 0.4 percentage
veral years in advance. Currently, acutepoints. The reduction would apply to the
ospitals will receive the MB as anyear in question only and would not be
e for FY2004 and subsequently.taken into account in subsequent years.
The operating update will be the MB in
FY2008 and in subsequent years.
crease pass-through payments for newSection 503. The Secretary is required toNo provision.Section 502. New diagnosis and procedure
iki/CRS-RL32005patient technology. The Medicare,edicaid, and SCHIP Benefitsadd new diagnosis and procedure codes inApril 1 of each year but is not required tocodes would be added in April 1 of eachyear that would affect Medicares IPPS
g/wprovement and Protection Act of 2000change Medicare’s payment or DRGstarting the following October. The
s.orIPA) established that Medicare’s IPPSclassification as a result of these additionsSecretary would not be able to deny new
leakould recognize the costs of new medicaluntil the fiscal year that begins after thattechnology status because an item has been
rvices and technologies beginningdate. When establishing whether DRGused prior to the 2-to-3 year period before
://wikihe additional hospitalpayments are inadequate, the Secretary isit was issued a billing code. When
httpments can be made by the means ofrequired to apply a threshold that is theestablishing whether DRG payments are
w technology groups, an add-onlesser of 75% of the standardized amountinadequate, the Secretary would be
ment, a payment adjustment, or other(increased to reflect the difference betweenrequired to apply a threshold that is the
anism, but cannot be a separate feecosts and charges) or 75% of one standardlesser of 75% of the standardized amount
hedule and must be budget neutral. CMSdeviation for the DRG involved. The(adjusted to reflect the difference between
lished that a technology that providedSecretary is required to: (1) maintain acosts and charges) or 75% of one standard
substantial improvement to existingcurrent public list of pending applicationsdeviation for DRG involved. The
ents would qualify for additionalfor this additional payment; (2) acceptSecretary would be required to provide
ments. The add-on payment for anpublic comment, recommendations, andadditional regulatory guidance on the new
ible new technology would occur whendata regarding whether a service ortechnology criteria. The Secretary would
tandard diagnosis related grouptechnology represents a substantialbe required to deem that a technology
RG) payment was inadequate. Thisimprovement; and (3) provide for a publicprovides a substantial improvement on an
hold was established as one standardmeeting with the clinical staff at CMS andexisting treatment if it is designated under
iation above the mean standardizedorganizations representing physicians,section 506 of the FDA Act, approved
G; the add-on payment for newbeneficiaries, manufacturers or otherunder certain sections of Title 21,
nology would be the lesser of: (a) 50%interested parties. These actions will occurdesignated for priority review, is an

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
the costs of the new technology; or (b)prior to the publication of a proposedexempt medical device under section
of the amount by which the costsregulation. Before establishing an add-on520(m) of such Act, or receives expedited
ceeded the standard DRG payment.payment as the appropriate reimbursementreview under section 515(d)(5). Other
wever, if the new technology paymentsmechanism, the Secretary is directed torequirements requiring the process for
timated to exceed the budgeted targetidentify one or more DRGs and assign thepublic input would be imposed. A
ount of 1% of the total operatingtechnology to that DRG. When suchpreference fo use of a DRG adjustment
ient payments, the add-on paymentsassignment to a DRG occurs, no add-onwould be established. Add-on payments
ced prospectively. CMS haspayment would be made; the budget-would be increased to the percentage that
ed to reduce the threshold to 75% ofneutrality requirement with respect toMedicare reimburses inpatient outlier
e standard deviation beyond theannual DRG reclassifications andcases. Funding for this new technology
ometric mean standardized charge for allrecalculation will apply. Funding for newwould no longer be budget neutral.
in the DRG to which the new servicetechnology is no longer required to be
ssigned. budget neutral. The provisions will apply
to new technology determinations
iki/CRS-RL32005beginning in FY2005. Applications that
g/wwere denied in FY2005 will be
s.orreconsidered under these provisions; if
leakgranted, the maximum time period
otherwise permitted for such classification
://wikias a new technology is extended by 12
crease hospitals wage index values toSection 505. The Secretary is required toNo provision.Section 504. The Secretary would be
muting patterns from higherestablish an application process and 3-yearrequired to establish an application process
ndex areas. Unlike other providers,payment adjustment to recognize the out-and payment adjustment to recognize the
PS hospitals may apply to the Medicaremigration of hospital employees whocommuting patterns of hospital employees.
raphic Classification Review Boardreside in a county and work in a differentA hospital that qualified for such a
GCRB) for reassignment to anotherarea with a higher wage index. A hospitalpayment adjustment would have average
he MGCRB was created tothat receives such a payment adjustmenthourly wages that exceed the average
termine whether a hospital should bewill be located in a qualifying county thatwages of the area in which it is located and
esignated to an area with which it hasmeets certain criteria including (1) ahave at least 10% of its employees living
e proximity for purposes of using thethreshold of no less than 10% forin one or more areas that have higher wage
r areas wage index. A hospital canminimum out-migration to a higher wageindex values. The process would be based
blish proximity to the new area byindex area or areas, and (2) a requirementon the MGCRB reclassification process
menting that at least 50% of itsthat the average hourly wage of theand schedule with respect to data
ployees reside there. Other cost criteriahospitals in the qualifying county equals orsubmitted. Such an adjustment would be
st be met before a hospital will beexceeds the average hourly wage of all theeffective for 3 years unless a hospital

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
sified. If reclassification is granted,hospitals in the area where the county iswithdraws or elects to terminate its
age index for the new area will belocated. The Secretary may require acutepayment. It would also be exempt from
ed to calculate Medicare’s payment forhospitals and other hospitals as well ascertain budget neutrality requirements.
ient and outpatient services providedcritical access hospitals to submit data
the hospital.regarding the location of their employees
residence or the Secretary may use data
from other sources. A hospital that receives
a commuting wage adjustment is not
eligible for reclassification into another
area by the MCGRB. This adjustment is
exempt from certain budget neutrality
requirements. The thresholds and other
qualifying criteria for the commuting wage
adjustment are not subject to judicial
iki/CRS-RL32005review. The provisions apply to discharges
g/won or after October 1, 2004.
s.orrmit hospitals with missing costSection 407. A hospital will not be able toNo provision.Section 414. Beginning January 1, 2004,
leakrts to be SCHs. SCHs are hospitalsbe denied treatment as a SCH or receivea hospital would not be able to be denied
cause of factors such as isolatedpayment as a SCH because data aretreatment as a SCH or receive payment as
://wikication, weather conditions, travelunavailable for any cost reporting perioda SCH because data are unavailable for any
httpnditions, or absence of other hospitals,due to changes in ownership, changes incost reporting period due to changes in
he sole source of inpatient servicesfiscal intermediaries, or otherownership, changes in fiscal
onably available in a geographic area,extraordinary circumstances, so long asintermediaries, or other extraordinary
ore than 35 road milesdata from at least one applicable base costcircumstances, so long as data from at least
another hospital. An SCH receivesreporting period is available. The provisionone applicable base cost reporting period is
igher of the following payment rates:applies to cost reporting periods beginningavailable.
rrent IPPS base payment rate, or itson or after January 1, 2004.
spital-specific per discharge costs from
her FY 1982, 1987 or 1996 updated to
rrent year. The FY1996 base year
tion will be fully implemented
inning in FY2004.
ovide hospitals with data on patientSection 951. The Secretary is required toNo provision.Section 951. The Secretary would arrange
for DSH adjustment. A hospital’sprovide information that hospitals need toto furnish necessary patient day
ments under IPPS are calculatedcalculate the number of Medicaid patientinformation for the Medicare DSH
ing a formula that includes data on thedays used in the Medicare DSH paymentcomputation for the current cost reporting

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
mber of total patient days as well asformula not later than 1 year afteryear.
ys provided to those eligible forenactment.
d to Medicare beneficiaries
o receive Supplemental Security
it adoption of new coding standard.No provision. No provision.Section 942(d). The new coding
e Secretary is required to rely on thestandards, International Classification ofth
mmendations from the NationalDiseases 10 Revision (IDC-10) could be
mmittee on Vital and Health Statisticsadopted within 1-year of enactment
CVHS) before adopting healthwithout receiving a recommendation from
ormation standards and codes.NCVHS.
AO report on use of externalSection 942(c). GAO is required to studyNo provision.Section 942(c). GAO would study which
ta for IPPS payments. No provision inwhich external data can be collected in aexternal data can be collected in a shorter
iki/CRS-RL32005rrent law.shorter time frame by CMS to use incalculating IPPS payments. GAO maytime frame by CMS to use in calculatingIPPS payments. GAO could evaluate
g/wevaluate feasibility and appropriateness offeasibility and appropriateness of using
s.orusing quarterly samples or special surveysquarterly samples or special surveys and
leakand would include an analysis of whetherwould include an analysis of whether other
://wikiother executive agencies are best suited tocollect this information. The report is dueexecutive agencies are best suited tocollect this information. The report would
httpto Congress no later than October 1, due to Congress no later than October 1,
Critical Access Hospital Services
crease payments to CAHs. Generally,Section 405(a). Inpatient, outpatient, andNo provision.Section 405(a). Inpatient, outpatient, and
s hospital (CAH) receivescovered skilled nursing facility servicescovered skilled nursing facility services
asonable cost reimbursement for careprovided by a CAH in its swing beds willprovided by a CAH in its swing beds
dered to Medicare beneficiaries. CAHsbe reimbursed at 101% of reasonable costswould be reimbursed at 102% of
y elect either a cost-based hospitalof services furnished to Medicarereasonable costs of services furnished to
tpatient service reimbursement or an all-beneficiaries. This provision applies toMedicare beneficiaries. This provision
sive rate which is equal to acost reporting periods beginning on orwould apply to cost reporting periods
nable cost reimbursement for facilityafter January 1, 2004.beginning on or after October 1, 2003.

rvices plus 115% of the fee schedule
ment for professional services.

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
inate 35-mile requirement for cost-No provision.Section 405(b). The requirement that theSection 405(c). The 35-mile requirement
sed reimbursement of CAHCAH or the related entity be the onlywould not apply to a provider or supplier
bulance services. Ambulance servicesambulance provider within a 35-mile driveof ambulance services who is a first
ided by a CAH or provided by anin order to receive reasonable costresponder to emergencies for services
tity that is owned or operated by a CAHreimbursement for the ambulance servicesfurnished after the first cost reporting
a reasonable cost basis and notwould be dropped for services furnishedperiod beginning after the date of
bulance fee schedule, if the CAH orbeginning January 1, 2005.enactment.
tity is the only provider or supplier of
bulance services that is located within a
mile drive of the CAH.
pand payment for emergency roomSection 405(b). The provision expandsSection 405(c). Reimbursement for on-callSection 405(b). Same provision but would
call providers. BIPA required thereimbursement of on-call emergency roomemergency room providers would bebe effective January 1, 2004.
iki/CRS-RL32005retary to include the costs ofpensation (and related costs) of on-callproviders to include not just emergencyroom physicians but also physicianexpanded to include physician assistants,nurse practitioners, and clinical nurse
g/wergency room physicians who are notassistants, nurse practitioners, and clinicalspecialists as well as emergency room
s.orent on the premises of a CAH, are notnurse specialists for the costs associatedphysicians for covered Medicare services
leakerwise furnishing services, and are notwith covered Medicare services providedprovided beginning January 1, 2005.
-call at any other provider or facilitybeginning January 1, 2005.
://wikien determining the allowable,
httponable cost of outpatient CAH
crease critical access hospital (CAH)Section 405(e). A CAH will be able toSection 405(a) A CAH would be able toSection 405(f). For designations
it. A CAH is a limited serviceoperate up to 25 beds. The requirementoperate up to 25 swing beds or acute carebeginning January 1, 2004, the Secretary
that must provide 24-hourthat only 15 of the 25 beds be used forbeds, subject to the 96-hour average lengthwould specify standards for establishing
ergency services and operate a limitedacute care at any time is dropped. Theof stay for acute care patients. Theseasonal variations in a CAH’s patient
mber of inpatient beds in which hospitalprovision applies to CAH designationsrequirement that only 15 of the 25 beds beadmissions that would justify a five-bed
s can average no more than 96 hours.made before, on, or after January 1, 2004,used for acute care at any time would beincrease in the number of beds it can
AH is limited to 15 acute-care beds,but any election made pursuant to thedropped. This provision would bemaintain (and still retain its classification
t can have an additional 10 swing bedsregulations promulgated to implement thiseffective for designations made beginningas a CAH). CAHs with swing beds would
e set up for skilled nursing facilityprovision will only apply prospectively. October 1, able to use up to 25 beds for acute care
el care. While all 25 beds in a CAH canservices as long as no more than 10 beds at
used as swing beds, only 15 of the 25any time are used for non-acute services.
be used for acute care at any time.Those CAHs with swing beds that made
this election would not be eligible for the

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
five-bed seasonal adjustment. A CAH
with swing beds that elects to operate 15 of
its 25 beds as acute care beds would be
eligible for the five-bed seasonal
thorize periodic interim payments forSection 405(c). An eligible CAH will beSection 405(d). Starting with paymentsSection 405(d). Same provision but would
ible CAHs. Eligible hospitals, skilledable to receive payments made on a PIPmade beginning January 1, 2005, anbe effective January 1, 2004. Also, the
rsing facilities, and hospices which meetbasis for its inpatient services. Theeligible CAH would be able to receiveSecretary would be required to develop
requirements receive MedicareSecretary is required to develop alternativepayments made on a PIP basis for inpatientalternative methods based on the
terim payments (PIP) every 2methods for the timing of PIP payments toservices.expenditures of the hospital for these PIP
s; these payments are based onthese CAHs. This provision applies topayments.
timated annual costs without regard topayments made on or after July 1, 2004.
iki/CRS-RL32005ubmission of individual claims. Atd of the year, a settlement is made to
g/wnt for any difference between the
s.ortimated PIP payment and the actual
leakount owed. A CAH is not eligible for
P payments.
httpbeds in distinct-part units fromSection 405(g). A CAH can establish aSection 405(g). The Secretary would notNo provision.

bed count Beds in distinct-partdistinct part psychiatric or rehabilitationbe able to count any beds in a distinct-part
illed nursing facility units do not countunit that meets the applicable requirementspsychiatric or rehabilitation unit operated
ard the CAH bed limit. Beds infor such beds. If the units do not meetby the entity seeking to become a CAH for
ct-part psychiatric or rehabilitationthese requirements during a cost reportingdesignations beginning October 1, 2003.
its operated by an entity seeking toperiod, then no Medicare payment will beThe total number of beds in these distinct-
me a CAH count toward the bed limit.made to the CAH for services furnished inpart units would not be able to exceed 25.
the unit during the period in question.A CAH would be able to establish a such a
Payments for services provided in thesedistinct-part unit.
units will equal payments that are made on
a prospective payment basis to distinct part
units of short term general hospitals. The
beds in the distinct part psychiatric or
rehabilitation units will not count toward
the CAH bed limit. The total number of
beds in these distinct part units cannot

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
exceed 10. The provision will apply to cost
reporting periods starting October 1, 2004
ablish CAH improvementNo provision.Section 415. The Secretary would beNo provision.
onstration program. No provision inrequired to establish a budget neutral 5-
rrent law.year CAH demonstration program in four
areas including Kansas and Nebraska to
test various methods to improve the CAH
program. Services would be paid either on
the basis of its reasonable costs (without
regard to customary charges) or using the
relevant PPS for those services. In this
instance, reasonable cost reimbursement of
iki/CRS-RL32005capital would include a return on equitypayment of 150% of the average rate of
g/winterest paid by the Hospital Insurance (HI)
s.orTrust Fund.
odify CAHs’ billing requirements forSection 405(d). The requirement that allNo provision.Section 405(e). The Secretary would not
://wikiician services. As specified byphysicians or practitioners providingbe able to require that all physicians
httpanced Budget Refinement Act of 1999services in a CAH assign their billingproviding services in a CAH assign their
BRA), CAHs can elect to be paid forrights to the entity in order for the CAH tobilling rights to the entity in order for the
tpatient services using cost-basedbe able to be paid 115% of the feeCAH to be able to be paid on the basis of
bursement for its facility fee and atschedule cannot be imposed. However, a115% of the fee schedule for the
of the fee schedule for professionalCAH will not receive payment based onprofessional services provided by the
vices otherwise included within its115% of the fee schedule for anyphysicians. However, a CAH would not
tpatient critical access hospital servicesindividual who does not assign billingreceive such payment for any physician
r cost reporting periods starting Octoberrights to the CAH. This provision applieswho did not assign billing rights to the
to cost report periods starting on or afterCAH.

July 1, 2004 except for those CAHs that
have already elected payment for physician
services on this basis before November 1,
2003; this provision will apply to those
CAHs starting for cost reporting periods on
or after July 1, 2003.

ion and Current Law DescriptionH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
iminate state authority to waive CAHSection 405(h). The State will no longerNo provision.No provision.
ileage requirements. Currently, tobe able to waive the mileage standards and
alify as a CAH, the rural, for-profit,designate a facility seeking to become a
nprofit, or public hospital must beCAH as a necessary provider of care after
ore than 35 miles from anotherJanuary 1, 2004. A facility designated as
spital or 15 miles in areas withCAH before January 1, 2006 and certified
untainous terrain or those where onlyas a necessary provider of care will be able
dary roads are available. Theseretain such designation.
e standards may be waived if the
spital has been designated by the State
a necessary provider of health care.
Other Hospitals
iki/CRS-RL32005sential rural hospital category.erally, a hospital designated as a CAHNo provision.No provision.Section 403. The definition of CAHhospital and services would be amended to
g/wempt from IPPS and receivesadd an essential rural hospital. An eligible
s.oronable, cost-based reimbursement forhospital would apply for such a
leakdered to Medicare beneficiaries.classification, have more than 25 licensed
://wikirtain acute general hospitals receiveecial treatment under IPPS, particularlyacute care beds, and be located in a ruralarea as defined by IPPS. The Secretary
httpse facilities identified as isolated orwould have to determine that the closure of
tial hospitals primarily located inthis hospital would significantly diminish
ral areas, including RRCs and SCHs.the ability of beneficiaries to obtain
essential health care services based on
certain criteria. Such hospitals would not
be able to change such classification and
would not be able to be treated as a SCH,
Medicare dependent hospital or RRC
under IPPS and would be reimbursed
102% of its reasonable costs for inpatient
and outpatient services beginning October
1, 2004. Beneficiary cost-sharing amounts
would not be affected and required billing
for such services would not be waived.

Allied Health and Graduate Medical Education Payments.
Provision and Current Law H.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
y hospitals for training costs ofNo provision. Discussion of congressionalSection 408. Beginning October 1, 2004,No provision.
ychologists. Medicare pays hospitalsintent regarding this payment can be foundMedicare would reimburse its share of the
r its share of direct costs associated withon p. 276 of the Conference Reportreasonable costs of approved education
ed hospital-based training programsactivities of psychologists under the allied
r nurses and certain other allied healthhealth professional training provisions.
ofessionals including inhalation
apists, nurse anesthetists, occupational
d physical therapists. Medicare does
t pay for such costs associated with
ychologists’ training.
crease initial residency period forSection 712. The bill clarifies thatSection 410. The Secretary would beNo provision.
iki/CRS-RL32005. Medicare counts residentsheir initial residency period (the lesserCongress intended to provide an exceptionto the initial residency period for geriatricrequired to promulgate interim finalregulations after notice and comment that
g/w the minimum number of years requiredfellowship programs to accommodatewould establish full GME payment for 2
s.orr board eligibility in the physiciansprograms that require 2 years of training toyears as a 2-year initial residency program
leakecialty or 5 years) as 1.0 FTE. Residentsinitially become board eligible in thefor certain geriatric training programs
://wikiose training has extended beyond theiresidency period count as 0.5 FTE.geriatric specialty. The Secretary isrequired to promulgate interim finaleffective for cost reporting periodsbeginning October 1, 2003.
httpiatrics is a subspecialty of familyregulations consistent with this expressed
internal medicine and psychiatry.intent after notice and subject to public
year fellowship is required forcomment. The regulations will be effective
rtification in geriatrics, following anfor cost reporting periods on or after
esidency in one of those three areas.October 1, 2003.
crease indirect medical educationSection 502. From April 1, 2004 untilSection 418. The IME multiplier inNo provision.

E) payments. A hospital’s IMESeptember 30, 2004, the IME multiplier isFY2004 and in FY 2005 would be 1.36;
ment is based on a percentage add-onequal to 1.47; during FY2005, the IMEthe multiplier would be 1.355 in FY2006
PPS rate that is established by amultiplier is 1.42; during FY2006, theand in subsequent years. This would
mplicated curvilinear formula thatIME multiplier is 1.37; during FY2007, theprovide an IME adjustment of 5.508% for
rrently provides a payment increase ofIME multiplier is 1.32; and, startingeach 10% increase in a hospital’s IRB ratio
imately 5.5% for each 10% increaseOctober 1, 2007, the IME multiplier isfor FY2004 and FY2005. This change has
e hospital’s intern and resident-to-bedequal to 1.35. This provision applies tobeen projected to increase payments to
B) ratio. The statutory formula isdischarges on or after April 1, 2004.teaching hospitals by $300 million over 10
ltiplied by a hospital’s base paymentyears.

Provision and Current Law H.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
e for each Medicare discharge to
ermine the IME payments: 1.35 X [(1+0.405
B)- 1]. The multiplier of 1.35
es the level of the IME adjustment
the existing target level of 5.5%.
ngress has periodically changed the
ltiplier to decrease or increase IME
ments to teaching hospitals.
unt residents in a non-providerSection 713. For a 12-month periodSection 411. The Secretary would beNo provision.

ting; drop dentists and podiatristsstarting January 1, 2004 hospitals will berequired to reimburse teaching hospitals
m the 3-year rolling limit on IMEable to count residents in osteopathic andfor residents in non-hospital locations,
ents. Medicare has different residentallopathic family practice programs inwhen hospitals incur all, or substantially
iki/CRS-RL32005its for the IME adjustment and directdical education (DGME) payment.existence as of January 1, 2002 who aretraining at non-hospital setting withoutall, the costs of the training in that sitestarting from the effective date of a written
g/wnerally, the resident counts for bothregard to the financial arrangementagreement between the hospital and the
s.ord DGME payments are based onbetween the hospital and the teachingentity owning or operating the non-hospital
leaknumber of residents in approvedphysician practicing in the non hospitalsite. The effective date of the written
ic and osteopathic teachingsite. The Inspector General of Health Andagreement would be determined according
://wikiograms reported by the hospital inHuman Services (HHS-IG) will submit ato generally accepted accounting
httpendar year 1996. The DGME limit maystudy including recommendations on theprinciples. The Secretary would not be
fer from the IME limit because in 1996appropriateness of the paymentable to take into account the fact that the
dents training in non-hospital sites weremethodology for the volunteer costs incurred are lower than
ible for DGME payments but not foractual Medicare reimbursement. Starting
ments. Prior to BBA 1997, thewith FY2005, dental and podiatric
mber of residents that could be countedresidents would be removed from the 3-
r IME purposes included only those inyear rolling average calculation for IME
ospital inpatient and outpatientand DGME reimbursements.
ments. Effective October 1, 1997,
der certain circumstances, a hospital
y now count residents in non-hospital
es for the purposes of IME. Subject to
e resident limits, a teaching hospital’s
and DGME payments are based on a
year rolling average of resident counts.
e rolling average calculation includes

Provision and Current Law H.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
atry and dental residents. CMS has
ed regulations that limit Medicare’s
dical education payments when existing
idents are transferred from a non-
spital entity to a teaching hospital,
rticularly when the non-hospital entity
s historically paid for the training costs
out hospital funding.
end update limitation on high costSection 711. Hospitals with per residentNo provision.Section 711. Hospitals with per resident
ograms. Hospitals with per residentamounts above 140% of the geographicallyamounts above 140% of the
ounts between 85% and 140% of theadjusted national average amount will notgeographically-adjusted national average
ographically-adjusted national averageget an update from FY2004 throughamount would not get an update from
iki/CRS-RL32005uld continue to receive payments based their hospital-specific per residentFY2013.FY2004 through FY2013.
g/wounts updated for inflation.
leakribute unused residency positions.Section 422. A teaching hospital’s totalNo provision.Section 406. A teaching hospitals total
care has different resident limits fornumber of resident positions will benumber of Medicare-reimbursed resident
://wikiustment and DGME payment.reduced for cost reporting periods startingpositions would be reduced by a portion of
httpnerally, the resident counts for bothJuly 1, 2005 if its reference resident levelits unused residency slots for cost reporting
d DGME payments are based onis less than its applicable resident limit.periods starting January 1, 2004 if its
umber of residents in approvedRural hospitals with less than 250 acuteresident reference level is less than its
ic and osteopathic teachingcare inpatient beds would be exempt fromapplicable resident limit. If so, the
rams that were reported by thethese reductions. The reduction for otherreduction would be equal to 75% of the
spital for the cost reporting periodhospitals will equal 75% of the differencedifference between the hospital’s limit and
ding in calendar year 1996. The DGMEbetween the hospital’s limit and itsits resident reference level upon the timely
ent limit is based on the unweightedreference resident level. The referencerequest for such an adjustment, for the cost
ident counts. It may differ from theresident level is the highest number ofreporting period that includes July 1, 2003.
it because in 1996 residentsallopathic and osteopathic residentA hospitals reference period would be the
ing in non-hospital sites were eligiblepositions (before the application of anythree most recent settled or submitted
r DGME payments but not for IMEweighting factors) for the hospital duringconsecutive cost reporting periods on or
yments. Generally, a hospital’s IMEthe reference period. This reference periodbefore September 30, 2002. The need for
ustment and increased IPPS paymentsis either (1) the resident level of the mostan increase in the physician specialty and
ds on a hospital’s teaching intensityrecent cost reporting period of the hospitalthe location involved would be considered.
measured by the ratio of the number offor which a cost report has been settled (orPositions would be distributed to programs

Provision and Current Law H.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
erns and residents per bed. Medicaressubmitted, subject to audit) on or beforein rural areas and those not in large urban
ment to teaching hospitals isSeptember 30, 2002 or (2) the residentareas on a first-come-first-served basis.
ed on its updated cost per residentlevel for the cost reporting period thatThe hospital would have to demonstrate
bject to a locality adjustment andincludes July 1, 2003 subject to audit. Athat the resident positions would be filled;
payment corridors), the weightedhospital’s reference level may be adjustednot more than 25 positions would be given
mber of approved full-time equivalentunder certain circumstances. The increaseto any hospital. These hospitals would be
E) residents, and Medicare’s share ofin applicable resident limits applies toreimbursed for DGME for the increase in
atient days in the hospital.portions of cost reporting periodsresident positions at the locality-adjusted
occurring on or after July 1, 2005. Thenational average per resident amount. IME
aggregate increase may not exceed thepayments would also be affected. The
overall reduction in such limits. TheSecretary would be required to submit a
Secretary is directed to take several factorsreport to Congress, no later than July 1,
into account when distributing the resident2005, on whether to extend the application
iki/CRS-RL32005positions to hospitals. No more than 25additional FTEs will be given to anydeadline for increases in resident limits.
g/whospital. These hospitals will be
s.orreimbursed for DGME for the increase in
leakresident positions at the locality adjusted
national average per resident amount and
://wikiwill receive increased IME payments as
httpwell for discharges after July 1, 2005.
The Secretary is required to submit a
report to Congress no later than July 1,
2005 on whether to extend the application
deadline for increases in resident limits.
Skilled Nursing Facility (SNF) and Hospice Services.
Provision and Current Law H.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
Skilled Nursing Facility Services (SNF)
se skilled nursing facility (SNF)Section 511. Starting October 1, 2004, theNo provision.Section 511. Starting October 1, 2003, the
ents for AIDS patients. Under PPS,per diem RUG payment for a SNF residentper diem RUG payment for a SNF resident
are paid a daily rate that varieswith acquired immune deficiencywith acquired immune deficiency
ding on the care needs of thesyndrome (AIDS) will be increased bysyndrome (AIDS) would be increased by

Provision and Current Law H.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
eficiary. There are 44 resource128%. This increase does not apply after128%. This increase would not apply after
tion groups (RUGs) used to adjustthe date that the Secretary certifies that thethe date that the Secretary certifies that the
ment for care needs; each groupcase-mix adjustment adequatelycase-mix adjustment adequately
lects the intensity of services, such ascompensates for the increased costscompensates for the increased costs
illed nursing care and/or various therapyassociated with caring for residents withassociated with caring for residents with
d other services needed by a beneficiary.AIDS.AIDS.
clude certain clinic visits from skilledSection 410. Services provided to a SNFSection 429. Services provided by a RHCSection 408. Provision is limited to RHCs
ing facility (SNF) prospectiveresident by a rural health clinic (RHC) andand a FQHC after January 1, 2005 wouldand FQHC services provided after January
yment system (PPS) Under Medicare’sa federally qualified health center (FQHC)be excluded from SNF-PPS if these1, 2004 and does not extend to outpatient
S, SNFs are paid a predeterminedafter January 1, 2005 are excluded fromservices would have been excluded ifservices that are beyond the general scope
ount to cover all services provided in aSNF-PPS if these services would havefurnished by a physician or practitionerof SNF comprehensive care plans.
adjusted for the care needs of thebeen excluded if furnished by a physicianwho was not affiliated with a RHC or
iki/CRS-RL32005t. Certain services and itemsided a SNF resident, such asor practitioner who was not affiliated witha RHC or FQHC.FQHC. Outpatient services that arebeyond the general scope of SNF
g/wysicians services, specified ambulancecomprehensive care plans that are provided
s.orrvices, specified chemotherapy items andby an entity that is 100% owned as a joint
leakvices, and certain outpatient servicesventure by two Medicare-participating
ided by a Medicare-participatinghospitals or critical access hospitals would
://wikispital or CAH, are excluded from thebe excluded from the SNF-PPS.
httpF-PPS and paid separately under Part B.
ckground check on workersSection 306. The Secretary, in consultationSection 636. All providers of long-termNo provision.

edicare and Medicaidwith the Attorney General, is required tocare services that participate in Medicare
lth and long-term care providers.establish pilot projects on backgroundand/or Medicaid would be required to
rsing homes and home health agencieschecks for certain long-term care workersinitiate background checks for certain
y request the Federal Bureau ofwith direct access to patients or residents inworkers with access to a patient or
vestigation (FBI) to search its all-stateno more than 10 states. The Secretary isresident. Procedures for conducting
ional data bank of arrest andrequired to establish criteria for selectingbackground checks would be specified,
nvictions for the criminal histories ofthose states that volunteer to participate.and would include searches of state and
icants who would provide directThe bill specifies procedures forFBI criminal records. Violators of these
t care, as long as states establishconducting background checks, andrequirements would be subject to criminal
anisms for processing these requestsincludes searches of state and FBI criminalpenalty fines and/or imprisonment.
ost states require checks for certainrecords. At least one state in the pilotProviders would be permitted to
oups of employees). Providers followproject would be allowed to establishprovisionally employ workers pending
procedures to conduct these checks.procedures for using employment agenciescompletion of the checks and would be

Provision and Current Law H.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
aintains a national health careto conduct these checks. Providers mayreimbursed for their costs of conducting
d and abuse data base, the Healthcareprovisionally employ workers pendingthese checks.
tegrity and Protection Data Bankcompletion of the checks.
DB). Self-queries of HIPDB are The nurse aide registry would be expanded
ed by government agencies, healthThe Secretary is required to pay thoseto include all employees of long-term care
s, health care providers, suppliers andstates for the costs of conducting the pilotproviders and renamed “employee
actitioners. All states also maintain theirprogram (reserving 4% of the payments forregistry. The investigatory responsibilities
n registries of those persons that thethe programs evaluation). A sum of $25of survey and certification agencies would
ines meet the requirements tomillion is appropriated from funds in thebe expanded. $10.2 million would be
rk as nurse aides. Included in theseTreasury not otherwise appropriated, forauthorized to be appropriated for FY 2004,
istries are data describing state findingsfiscal years 2004 through 2007.with compliance deadlines varying by
resident neglect, abuse and/or theprovider group.
sappropriation of resident property.
iki/CRS-RL32005urvey agencies are required toGrants would be available to developinformation on best practices in patient
g/wstigate allegations of resident neglect,abuse prevention training and for other
s.orse and/or the misappropriation ofpurposes.
leakdent property in nursing homes.
Long-term care providers could access the
://wikiHIPDB data bank and more information
httpwould be required to be included. A report
on background checks would be due to
Congress no later than 2 years after
enactme nt.
Hospice Services
it hospices to provide core hospiceSection 946. Beginning with the date ofSection 406. Beginning with the date ofSection 946. Same provision.

under arrangement. Medicareenactment, a hospice is permitted to enterenactment, a hospice would be permitted
ires a hospice to provide certain coreinto arrangements with another hospiceto enter into arrangements with another
rvices directly. These core servicesprogram to provide core services inhospice program to provide core service in
de nursing care, medical socialextraordinary circumstances.extraordinary circumstances.
rvices, and counseling services.

Provision and Current Law H.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
it nurse practitioners, clinicalSection 408. The definition of an attendingSection 407. Beginning October 1, 2004,Section 409. Nurse practitioners would be
rse specialists, and physicianphysician in hospice is expanded to includea terminally ill beneficiary under hospicepermitted to be identified as a beneficiarys
sistants to attend hospice patients.a nurse practitioner. A nurse practitioner iscare would be able to designate a physicianattending physician and would be able to
ers hospice services to carenot permitted to certify a beneficiary asassistant, nurse practitioner, or clinicalestablish and review the written plan-of-
r the terminal illness of a beneficiary.terminally ill for the purposes of receivingnurse specialist (who is not an employee ofcare as well as provide other services, but
asonable and necessary medical andthe hospice benefit. The provision isthe hospice program) as his or herwould not be able to certify that a
pport services for the management of theeffective upon enactment.attending physician. The written plan-of-beneficiary is terminally ill.
minal illness are furnished under acare would be able to be established by
itten plan-of-care established andthese professionals who would be able to
odically reviewed by the patientsperiodically review the beneficiarys
ding physician and the hospice. Thewritten plan-of-care.
ending physician may be employed by
ospice and is identified by the
iki/CRS-RL32005neficiary as having the most significantle in the determination and delivery of
g/wdical care to the beneficiary at the time
s.orospice care is elected.
ician consultation servicesSection 512. Beginning January 1, 2005,No provision.Section 512. As of January 1, 2004,
://wikitances. Current lawMedicare will pay for a hospice-employedMedicare would pay for a hospice-
httpthorizes coverage of hospice services, inphysicians consultation with a terminallyemployed physicians consultation with a
of certain other Medicare benefits, forill beneficiary who has not elected theterminally ill beneficiary who has not
minally ill beneficiaries who elect suchhospice benefit.elected the hospice benefit.
erage. The hospice can be paid by
ly after the beneficiary has
e hospice benefit
ablish rural hospice demonstrationSection 409. The Secretary is required toNo provision.Section 418. The Secretary would
ogram. Medicare’s hospice servicesestablish a demonstration project in 3establish a 5-year demonstration project in
provided primarily in a patients homehospice programs to deliver hospice care tothree hospice programs to deliver hospice
eneficiaries who are terminally ill andMedicare beneficiaries in rural areas. Acare to Medicare beneficiaries in rural
o elect such services. Medicare lawproject is not permitted to last longer thanareas. Those Medicare beneficiaries who
cribes that the aggregate number of5 years. Those Medicare beneficiaries wholack an appropriate caregiver and are
ys of inpatient care provided tolack an appropriate caregiver and areunable to receive home-based hospice care
eficiaries who elect hospiceunable to receive home-based hospice carewould be able to receive hospice care in a
any 12-month period cannotcould receive hospice care in a facility offacility of 20 or fewer beds that offers a

Provision and Current Law H.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
ceed 20% of the total number of days of20 or fewer beds that offers a full range offull range of hospice services within its
spice coverage provided to thesehospice services within its walls. walls. The facility would not be required offer services outside of the home and
the limit on the aggregate number of
inpatient days provided to Medicare
beneficiaries who elect hospice care would
be waived.
Other Part A Provisions.
Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
ake grants to States and certainSection 405(f). The rural hospitalSection 405(f). Under this program, theSection 405(g). The authorization to
iki/CRS-RL32005pitals. The Secretary is able toke grants for specified purposes toflexibility grant program is authorized at$35 million each year from FY2005Secretary would be able to award grants ofup to $50,000 to hospitals to assist eligibleaward grants under the existing RuralHospital Flexibility Program would be
g/wr eligible small rural hospitalsthrough FY2008. Starting in FY2005, asmall rural hospitals in reducing medicalestablished from FY2004 through FY2008
s.or for such awards under thestate is required to consult with the hospitalerrors and increasing patient safety underfrom the Federal HI Trust Fund at amounts
leakicare Hospital Flexibility Program.association and rural hospitals in the statethe new Small Rural Hospitalof up $25 million each year.
://wikie Secretary may also award grants tospitals to assist eligible small ruralon the most appropriate way to use suchfunds. A state may not spend more thanImprovement Program. Appropriations of$25 million each year from the Treasury
httpspitals (with less than 50 beds) inthe lesser of 15% of the grant amount orfrom FY2004 through FY2008 would be
plementing data systems requiredthe States’ federally negotiated indirectauthorized for this purpose.
der BBA 1997. Annual funding for therate for administrative purposes.Appropriations of $40 million each year
ral Hospital Flexibility Grant ProgramBeginning with FY2005, up to 5% of thefrom FY2004 through FY2008 from the HI
s $25 million from 1999 throughtotal amount appropriated for grants willTrust Fund for grants to states for specified
illion in FY2002; and $25be available to the Health Resources andpurposes would be authorized. States that
in 2003. The authorization toServices Administration for administeringare awarded grants would be required to
ard the grants expired in FY2002.these grants. consult with the hospital associations and
rural hospitals in the state.
tablish health care infrastructure loanSection 1016. A loan program will beSection 608. A loan program would beNo provision.

ogram. No provision in current law.established to improve the cancer-relatedestablished to improve the cancer-related
health care infrastructure. In order tohealth care infrastructure in states with a
receive assistance, the applicant will bepopulation of less than 3 million. In order
required to: (1) be engaged in cancerto receive assistance, the applicant would
research; and (2) be designated as abe required to: (1) be engaged in cancer

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
cancer center for the National Cancerresearch; and (2) be designated as a cancer
Institute (NCI) or be similarly designatedcenter for the NCI or be similarly
by the state. $200 million in budgetdesignated by the state. $49 million in
authority is authorized for July 1, 2004budget authority would be authorized for
through FY2008 to carry out the loanJuly 1, 2004 through FY2008 to carry out
program, $2 million for programthe loan program, $2 million for program
administration. By 4 years from enactment,administration.
the Secretary will submit a report to
Congress on continuing the program.
tablish capital infrastructureNo provision.Section 609. The Secretary would be ableNo provision.
ving loan program The Publicto make loans to any rural entity including
Services Act establishes a fund inrural health clinics, a medical facility with
iki/CRS-RL32005reasury from which the Secretary ofcan make loans or loan guarantees inless than 50 beds in non- MSA counties orin rural census tracts of MSAs, rural
g/wounts that have been specified inreferral centers or sole community
s.orpropriations acts from time to time.hospitals for various purposes. An
leakder the Medicare Rural Hospitalgeographically reclassified entity would be
ibility Program established as part ofeligible for these loans and loan
://wikiII, the Secretary may awardguarantees. The government’s total
httpants to rural hospitals to cover theexposure for this program would not
plementation costs associated with dataexceed $50 million per year and the
stems needed to meet the BBA 97principal amount of all loans directly made
irements.or guaranteed in any year is not to exceed
$250 million per year. In addition, rural
providers could apply to receive $50,000
planning grants to help assess capital and
infrastructure needs. The grants awarded
in any year would not exceed $2.5 million.
The program would expire after September
30, 2008.
ablish rural community hospitalSection 410A. The Secretary will establishSection 414. The Secretary would beNo provision.

onstration program. No provisiona 5-year rural community hospital (RCH)required to establish a 5-year RCH
rrent law.demonstration program in selected ruraldemonstration program in 4 areas
areas with low population densities. Underincluding Kansas and Nebraska to pay for

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
the program, up to 15 hospitals with 50acute inpatient services, outpatient
acute care beds will receive payment forservices, and certain home health services
inpatient services either on the basis of itsin qualifying hospitals either on the basis
reasonable costs (without regard to theof its reasonable costs (without regard to
amount of customary charges) or using athe amount of customary charges) or using
target amount. The project will bethe respective prospective payment
implemented not later than January 1, 2005systems for those services. In this instance,
and not before October 1, 2004. Thereasonable cost reimbursement of capital
project would be budget neutral. Certaincosts would include a return on equity
limits on beneficiary cost-sharing will bepayment of 150% of the average rate of
imposed. The Secretary will submit ainterest paid by the HI Trust Fund. The
report with recommendations to Congressproject would be budget neutral. Certain
no later than 6 months after completion oflimits on beneficiary cost-sharing would be
iki/CRS-RL32005the projectimposed.
g/wsure status as long-term hospitalsNo provision.Section 416. The Secretary would not beNo provision.
s.orpital-in-hospitals. Aable to impose any special conditions on
leakspital-in-a-hospital is a long-term carethe operation, size, number of beds, or
spital that is physically located in anlocation of an existing long-term hospital
://wikite care hospital. CMS has establishedin order to continue participating in
httptain requirements for these entities toMedicare or Medicaid or to continue being
cluded from the IPPS and be paid asclassified as a long-term hospital. The
ng-term hospital. It exemptedSecretary would not be able to adopt a
isting entities (those that were inproposed regulation that would implement
istence on or before September 30,such conditions or any revision to such
hen these requirements wereregulation that have a comparable effect.
tablished. On May 19, 2003, CMS[Duplicate provision is at Section 420B]
ed that a grandfathered hospital-
a hospital would only be exempt from
isting requirements if it continues
perate within the same terms and
nditions that were in effect as of
ptember 30, 1995.
tablish special treatment for certainSection 508(f). Reclassifications of aSection 417. Starting October 1, 2003,No provision.

tities. Unlike other providers, acutecounty or area made by an Act of CongressIredell County and Rowan County, North
spitals may apply to the Medicarethat expired on September 30, 2003 shallCarolina would be deemed to be located in

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
raphic Classification Review Boardbe reinstated starting on January 1, 2004the Charlotte-Gastonia-Rock Hill, NC-SC
RB) for a change in classificationthrough September 30, 2004.Metropolitan Statistical Area for the
a rural area to an urban area, orpurpose of Medicare’s inpatient and
ssignment from one urban area tooutpatient acute hospital payments as well
other urban area. Hospitalas SNF and home health payments. The
sifications are established on aSecretary would be required to adjust the
dget neutral basis so aggregate inpatientwage index values of all hospitals in North
pective payment system expendituresCarolina to assure that aggregate payments
ot increase as a result. Aside fromfor hospital inpatient operating costs are
lassifications through the MGCRB,not greater than they would have been
spitals have also been reclassified bywithout such a change: also aggregate
.payments for SNF and home health
services in North Carolina would not be
greater than they would have been without
iki/CRS-RL32005such a change.
g/wmit charges for contract healthSection 506. Hospitals that participate inSection 412. The amendment wouldNo provision.

s.or provided to Indians byMedicare and that provide Medicareprohibit Medicare providers from charging
leakrticipating hospitals. The Indiancovered inpatient hospital services underthe Indian Health Service more than the
Service (IHS) provides health carethe contract health services programMedicare-established rates for inpatient
://wikith directly, through tribes and tribalfunded by the Indian Health Services andhospital services.
httpnsortia, and through urban Indianoperated by the Indian Health Service, an
ganizations.Indian tribe, an Indian tribal organization,
or an urban Indian organization will be
paid in accordance with regulations
promulgated by the Secretary regarding
admission practices, payment
methodologies, and rates of payments.
This will include the requirement to accept
these rates as payment in full except for the
payment rates for neonatal care. This
provision will apply to Medicare
participation agreements in effect or
entered into by a date specified by the
Secretary. In no case will this date be later
than 1 year after the date of enactment.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
t on clerical error into HISection 734. The Secretary of the TreasurySection 623. After consultation with theSection 513. Same provision.
Fund. An incorrect amount ofis required to transfer into the HI TrustSecretary of HHS, the Secretary of the
me was transferred into the HI TrustFund an amount that would have been heldTreasury would be required to transfer into
nd in April 2001, because of a clericalby that fund if the clerical error had notthe HI Trust fund an amount that would
or. An additional amount wasoccurred. The appropriation is to be madehave been held by that fund if the clerical
sferred into the HI Trust Fund inand transfer is required within 120 days oferror had not occurred within 120 days of
ber, 2001 to correct for the principalenactment of this Act. In the case of aenactment.
ount associated with the error.clerical error that occurs after April 15,
rrection of the interest associated with2001, the Secretary of the Treasury is
ires legislation.required to notify the appropriate
committees of Congress about the error
and the actions to be taken, before such
action is taken.
iki/CRS-RL32005 the Occupational Safety andth Act of 1970 (OSHA) bloodborneSection 947. Public hospitals, nototherwise subject to the OccupationalNo provision.Section 947. As of July 1, 2004, publichospitals that are not otherwise subject to
g/wthogens standard to public hospitals.Safety and Health Act of 1970, areOSHA would be required to comply with
s.orion 1866 of the Social Security Actrequired to comply with the Bloodbornethe Bloodborne Pathogens standard under
leaktablishes certain conditions ofPathogens standard under sectionSection 1910.1030 of Title 29 of the Code
rticipation that hospitals must meet in1910.1030 of title 29 of the Code ofof Federal Regulations. A hospital that
://wikider to participate in Medicare.Federal Regulations. A hospital that failsfails to comply with the requirement would
httpto comply with the requirement will bebe subject to a civil monetary penalty, but
subject to a civil monetary penalty, butwould not be terminated from participating
cannot be terminated from participating inin Medicare.

Medicare. The provision applies to
hospitals as of July 1, 2004.

ovisions Relating to Part B
Physician and Practitioner Services.
Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
tablish floor on geographicSection 412. The Secretary is required toSection 421. For services furnished afterSection 605(a). For services furnished
justment for physician fee schedule.increase the value of any work geographicJanuary 1, 2004, the Secretary would beafter January 1, 2004 and before January 1,
edicares payment for physicians’index that is below 1.0 to 1.0 for servicesrequired to increase the value of any work2006, the Secretary would be required to
rvices under a fee schedule has threefurnished on or after January 1, 2004 andgeographic index that is below .980 toincrease the value of any work geographic
mponents: the relative value for thebefore January 1, 2007 .980. The values for work index would beindex that is below 1.00. to 1.00 unless the
rvice, geographic adjustment factors andraised to 1.0 for services furnished in 2005,Secretary determines, based on the
version factor into a dollar amount.2006, and 2007. The practice expense andsubsequent GAO study which is due by
e geographic adjustment factors aremalpractice geographic indices in lowSeptember 1, 2004, that there is no sound
that reflect the relative costvalue localities areas would be raised toeconomic rationale for such change.
ference in a given area in comparison to1.00 for services furnished in 2005 until
iki/CRS-RL32005ational average2008.
g/wcrease practice expense payments forSections 303(a) and 304. Beginning inSection 432(b)(1). The Secretary wouldSection 303(a) The Secretary would
s.orpecialists. The relative value2004, the practice expense relative valueestablish the practice expense relativeincrease the practice expense relative
leaksociated with a particular physicianunits for oncology administration servicesvalues for the CY2004 fee schedule usingvalues for the physician fee schedule in
://wikirvice is the sum of three components one which is practice expense. Practicewill be adjusted using survey data that wascollected as of January 1, 2003 (this datathe survey data from a physician specialtygroup as of January 1, 2003 if the dataCY2005 using appropriate survey data onthe expenses associated with drug
httppense includes both direct costs (such aswas submitted by the American Society ofappropriately covers the practice expensesadministration provided by entities and
icians time and the medical suppliesClinical Oncologists); the additionalfor oncology administration services. Theorganizations that are submitted by
vide a specific service to a patient)expenditures will be exempt from theSecretary would review and appropriatelyDecember 31, 2004. Using existing
d indirect costs (such as rent andbudget neutrality requirement in 2004. Themodify payments for the administration ofprocesses for coding considerations, the
. BBRA required the Secretary towork relative value units for drugmore than one anti-cancer agent to aSecretary would evaluate existing codes
lish a data collection process andadministration services furnished on orpatient in a day. The resulting increase infor drug administration to ensure accurate
dards for determining practice expenseafter January 1, 2004 will be equal to thespending would be exempt from thereporting and billing for these services.
e values as well as to use datawork relative value units for a level 1budget neutrality requirement. Also, theAny resulting CY2005 payment increase
lected or developed outside HHS, to theoffice medical visit for an establishedSecretary would change the non-physicianwould not be subject to budget neutrality
ximum extent practicable, consistentpatient. Starting in 2005 through 2006, thework pool method so that associatedprovisions, would be exempt from
th sound data collection practices. Thepractice expense relative values for otherpayments are not inordinately reduced.administrative and judicial review, and
e values are periodically revieweddrug administration services will beThese adjustments would not bewould be treated as a change in law and
d adjusted to account for various factors;increased in the physician fee scheduleimplemented unless other outpatient drugregulation in the sustainable growth rate
anges that cause more than $20 millionusing appropriate supplemental survey datapricing changes in the section aredetermination. Subsequent budget
ending trigger a budget neutralitysubmitted by March 1, 2004, for 2005, orimplemented.neutrality adjustments would be permitted.
ustment.March 1, 2005 for 2006. Data will beThe same non-physician work pool

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
accepted from those specialists whomethodology provision as in S. 1 is
received 40% or more of their Medicareincluded.
payments in 2002 from drugs and
biologicals. The existing drug
administration codes will be evaluated
under existing processes after consultation
with interested parties.These adjustments
in practice expense relative value units for
certain drug administration services are
exempt from the budget neutrality
requirements in 2005, 2006, and 2007.
The Secretary can adjust practice expense
payments in subsequent years, subject to
iki/CRS-RL32005the budget neutrality provisions. Theeffect of the nonphysician workpool
g/wmethodology will not be changed.
s.orMedicare’s payment policy in effect on
leakOctober 1, 2003, for the administration of
more than one drug or biological to an
://wikiindividual on a single day through the push
httptechnique will be modified and the
increased payments will be exempt from
the budget-neutrality requirement in 2004.
A transitional adjustment (or additional
payment) of 32% in 2004 and 3% in 2005
will be made.
crease payments to physicians inSection 413. Certain physicians, bothSection 422. The Secretary would beSection 417. Same provision with respect
ly created scarcity areas; changeprimary care and specialists, in scarcityrequired to establish procedures toto Secretary developing procedures to
edicare Incentive Program (MIP).areas are eligible for an additional 5%determine when a physician in a HPSA isidentify physicians eligible for bonus
ysicians providing services in a healthincrease in payments starting on January 1,eligible for a bonus payment. Thepayments. Also, physicians in newly-
essional shortage area (HPSA) are2005 and ending by January 1, 2008. ToSecretary would also be required tocreated scarcity areas as well as other
titled to an incentive payment from thedetermine the scarcity areas, the Secretaryestablish an ongoing education program,physicians would be eligible for an
ram. This incentivewill calculate ratios of practicing primaryan ongoing study and submit annualadditional 5% increase in their fee
ment is a 10% increase over thecare physicians and specialists to Medicarereports. A GAO report would be requiredschedule payment amounts. The Secretary
ount which would otherwise be paidbeneficiaries, rank each county (orno later than 1 year from enactment.would also be required to publish a list of
der the physician fee schedule.equivalent area) according to each ratio,all areas that qualify as a HPSA each year

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
and then identify those areas with thein the proposed and final rule
lowest ratios which collectively representimplementing the physician fee schedule.
20% of the total Medicare beneficiary
population in those areas. The list of
counties will be revised no less often than
once every 3 years unless there are no new
data. There will be no administrative or
judicial review of the designation of the
county or area as a scarcity area, the
designation of an individual physicians
specialty, or the assignment of a postal zip
code to the county or other area. MIP
payments to physicians in HPSAs that
iki/CRS-RL32005consist of entire counties will be madewithout requiring the physician to identify
g/wthe HPSA when requesting payment.
leakvise reassignment provisions.Section 952. The bill permits MedicareSection 434. Staffing companiesSection 952. Same provision with some
neficiaries are the parties who arepayment for Part B services to be made to(individuals or entities) would be able todrafting differences.
://wikititled to receive Medicare paymentsan entity, as defined by the Secretary, thatsubmit claims to Medicare for physician
httpder the Medicare statute. However, mosthas a contractual arrangement with theservices provided under contractual
neficiaries assign these rights tophysician or other person who providedarrangement between the company and the
rticipating physicians, suppliers, andthe service. In order to bill for the service,physician, if the arrangement meets
er providers who directly provide thethe entity and the contractual arrangementappropriate program integrity and other
nd then submit claims for Medicarewill have to meet program integrity andsafeguards established by the Secretary.
yment. Although Medicare permitsother safeguards specified by the
ysicians to reassign their right toSecretary.
yment to certain other entities, they
not reassign their right to payment to
fing companies (entities that retain
ysicians on a contractual basis).
end provision for separate paymentsSection 732. Direct payments for theSection 435. Direct payments for theSection 734. Similar provision except
certain inpatient pathology services.technical component for these pathologytechnical component for these pathologyMedicare would make direct payments for
general, independent laboratories cannotservices will be made for servicesservices would be made for servicesthe technical component of pathology
ectly bill for the technical component offurnished during 2005 and 2006.furnished during from 2004 though 2008. Would
hology services provided to Medicarealso specify that a change in hospital

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
ficiaries who are inpatients orownership would not affect these direct
tpatients of acute care hospitals. BIPAbilling arrangements.
rmitted certain independent laboratories
existing arrangements with acute
spitals to do so if the arrangement had
in effect as of July 22, 1999. The
payments for these services apply to
rvices furnished during a 2-year period
ing on January 1, 2001 and ending
ber 31, 2002.
crease Medicare payments toSection 602. Physicians in Alaska withSection 450K. For 2004, physicians inNo provision.
sicians in Alaska. Physicians thatvalues of practice expense, malpractice,Alaska would be paid 90% of the VA
iki/CRS-RL32005ide services to Medicare beneficiariesd based on Medicare’s physician feeand work geographic index below 1.67will have these values raised to 1.67physician fee schedule used for FY2001.In 2005, this amount would be increased
g/whedule that is adjusted to account forstarting January 1, 2004 and beforeby the update amount for the Medicare
s.orographic variations in practice expenses.January 1, 2006.physician fee schedule for 2005. If no VA
leakfee schedule amount exists for a service,
the payment amount would be an
://wikiadjustment to the Medicare payment. The
httpadjustment would equal 90% of the overall
percentage difference between the two fee
schedules weighted by the distribution of
Medicare claims in 2001.
ablish update to physician feeSection 601. The update to the conversionNo provision.Section 601. The update to the conversion
. Medicare pays for services offactor for 2004 and 2005 will not be lessfactor for 2004 and 2005 would be not less
ysicians and certain non-physicianthan 1.5% and will be exempt from thethan 1.5% and would be exempt from the
actitioners on the basis of a fee schedule.budget neutrality adjustment. budget neutrality adjustment.

e law provides a specific formula for
lculating the annual update to the
nversion factor.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
ange the sustainable growth rateSection 601. The formula for calculatingSection 464. The provision expresses aSection 601. The formula for calculating
ula. Medicare pays for services ofthe sustainable growth rate will besense of the Senate that Medicarethe sustainable growth rate would be
ysicians and certain non-physicianmodified. Starting in 2003, the GDP factorbeneficiary access to quality care may bemodified. Starting with the SGR for 2003,
actitioners on the basis of a fee schedule.will be based on the annual average changecompromised if Congress does not preventthe GDP factor would be based on the
e law provides a specific formula forover the preceding 10 years (a 10-yearcuts in 2004 and following years that stemannual average change over the preceding
lculating the annual update to therolling average). The 10-year rollingfrom the SGR formula. [Duplicate of10 years (a 10-year rolling average). This
version factor which regulates overallaverage calculation of the GDP will applySection 622]calculation would replace the current GDP
ending for physicians’ services. Severalto computations of the SGR starting infactor which measures the 1-year change
enter into the calculation of the2003.from the preceding year.
rmula. One of those factors is the
stainable growth rate (SGR) which is
sentially a target for Medicare spendingSection 629. The provision provides a
owth in physicians services. Onesense of the Senate that the reductions in
iki/CRS-RL32005ure used to calculate the SGR is thenual percentage change in grossMedicare’s physician fee schedule are
g/wmestic product (GDP). If expendituresdestabilizing, primarily caused by the
s.orceed the target, the update for a futuresustainable growth rate calculation, and
leak reduced. If expenditures are lessthat CMS should use its discretion to make
the target, the update is increased.certain exclusions and adjustments to theSGR calculation.
://wikie recent negative update adjustment
httptors reflect the application of the SGR
re GAO report on physicianNo provision.No provision.Section 953(a). No later than six months
mpensation. No provision in currentfrom enactment, GAO would report to
.Congress on the appropriateness of the
conversion factor updates and the SGR
formula for 2002 and subsequently; the
stability and the predictability of the
updates; and alternatives to the SGR in the
update. No later than 12 months from
enactment, GAO would be required to
report to Congress on all aspects of
physician compensation for Medicare
services. The report would review
alternatives to the physician fee schedule.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
end Medicare’s private contractingSection 603. Doctors of dental surgery orNo provision.Section 604. Doctors of dental surgery or
thority to dentists and podiatrists.of dental medicine, doctors of podiatricof dental medicine and doctors of podiatric
ivate contracting allows a physician andmedicine, and doctors of optometry will bemedicine would be able to enter into
eficiary not to submit a claimable to enter into private contracts withprivate contracts with Medicare
r a service which would otherwise beMedicare beneficiaries. The provision willbeneficiaries.
ered and paid for by Medicare. Underbe effective upon enactment.
ivate contracting, physicians (not
ts or dentists) can bill patients at
discretion without being subject to
per payment limits specified by
If a physician decides to enter a
ate contract with a Medicare
eficiary, that physician must agree to
iki/CRS-RL32005rego any reimbursement by Medicare foreficiaries for 2 years.
s.orquire GAO report on geographicSection 413(c). GAO will study paymentSection 444. GAO would be required toSection 413. Same provision.
leak in physician payments. Nodifferences under the physician feestudy geographic differences in payment
ovision in current law.schedule for different geographic areas.amounts in the physician fee schedule and
://wikiThe study, including recommendationsreport to Congress within 1 year of
httpconcerning use of more current data andenactment.
use of cost data rather than price proxies, is
due to Congress within 1 year of the
enactment date.
AO report on beneficiarySection 604. GAO is required to conductSection 447. GAO would submit a reportSection 602(a). GAO would be required
s to services including conciergea study on access of Medicare beneficiariesto Congress, including recommendations,to conduct a study on access of Medicare
pact of these mandatory feesto physicians services under Medicare andregarding the effect of concierge care onbeneficiaries to physicians services under
ervices on access Periodicsubmit a report to Congress on this studybeneficiaries access to Medicare coveredMedicare including beneficiaries use of
alyses by the Physician Payment Reviewwithin 18 months of enactment. services by 12 months from enactment. Inservices through an analysis of claims data
mmission, and subsequently MedPAC,Section 650. GAO would study conciergethis instance, concierge care would be anand the extent to which physicians are not
well as CMS showed that access tocare provided to Medicare beneficiariesarrangement where a physician oraccepting new Medicare beneficiaries as
ysicians services generally remainedand its effect on their access to Medicarepractitioner charges an individual apatients.

for most beneficiaries through 1999.covered services and submit a report tomembership fee or other fee or requires the
t surveys convey a more mixedCongress, including recommendations, nopurchase of an item or service as a
ture however. later than 12 months from enactment.prerequisite for providing the care.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
uire Institute of Medicine (IOM)No provision.No provision.Section 602(b). The Secretary would be
on supply of physicians. Norequired to request that IOM study the
ovision in current law. adequacy of the supply of physicians
(including specialists) in the country and
the factors that affect supply. The
Secretary would be required to submit the
results of the study in a report to Congress
no later than 2 years from the date of
enactme nt.
uire MedPAC report on paymentSection 303(a). MedPAC is required toNo provision.Section 603. MedPAC would be required
ician services. No provision inreview the payment changes as they affectto report to Congress on the effects of
rrent law.payments for items and services furnishedrefinements to the practice expense
iki/CRS-RL32005by oncologists and for drug administrationservices furnished by other specialists andcomponent of payments for physiciansservices after full implementation of the
g/wsubmit a report to the Secretary. Theresource-based payment in 2002.

s.orMedPAC report on oncologists payments
leakis due to Congress by January 1, 2006 and
the report on drug administration services
://wikifurnished by other specialists is due by
httpJanuary 1, 2007. The Secretary could
make appropriate adjustments to payments
as part of the rulemaking for physician
payments for 2006.
Section 606. MedPAC is required to
report to Congress on the effects of
refinements to the practice expense
component, by specialty within 1 year of
enactment. A MedPAC report on the
effect of increased physician services on
the well-being of Medicare beneficiaries
and other factors is due within 1 year of
enactment as well.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
nsultative process beforeSection 941. The Secretary is prohibitedSection 553. The Secretary, beforeSection 941. The Secretary would be
tablishing new evaluation andfrom implementing new E&Mmaking changes in documentationprohibited from implementing new E&M
anagement (E&M) codes. Initial E&Mdocumentation guidelines unless theguidelines for, providing clinical examplesdocumentation guidelines unless the
cumentation guidelines were issued inSecretary developed the guidelines inof, or changing codes for reporting E&MSecretary developed the guidelines in
ith revisions issued in 1997; bothcollaboration with practicing physicians,physician services, would be required tocollaboration with practicing physicians;
ain in force today. Approximately 40%established a plan with goals, conductedensure that the process used in developingestablished a plan with goals; conducted
Medicare payments for physicianpilot projects, and established andthe guidelines, examples, or codes waspilot projects; established and
rvices are for services which areimplemented an education program on thewidely consultative among physicians,implemented an education program on the
sified as evaluation and managementuse of the guidelines with appropriatereflects a broad consensus amonguse of the guidelines with appropriate
vices (i.e., physician visits). Theoutreach. Any changes to E&M guidelinesspecialties, and would allow verification ofoutreach. Changes to E&M guidelines
ary stopped work on the current re-are required to reduce paperwork burdenreported and furnished services.would be required to reduce paperwork
t of E&M codes in order to reassess theon physicians.burden on physicians.
tire effort.
iki/CRS-RL32005 additional hospital outpatientSection 614. Screening mammographySection 445. Unilateral and bilateralSection 614. Same provision except
g/wrtment (HOPD) mammographyand diagnostic mammography will bediagnostic mammography as well aseffective date would be January 1, 2004.
s.orices using physician fee schedule.excluded from OPPS. This provision willscreening mammography services would
leakreening mammography coverageapply to screening mammography servicesbe paid for under the physician fee
des the radiological procedure as wellfurnished on or after the date of enactmentschedule beginning January 1, 2005.
://wikie physicians interpretation of theand will apply to diagnostic
httpults of the procedure. The usual Part Bmammography services furnished on or
ductible is waived for tests. Payment isafter January 1, 2005.
de under the physician fee schedule.
rtain services paid under fee schedules
er payment systems are excluded
Medicare’s OPPS-PPS. For
agnostic mammography services
ided in an HOPD, the technical
mponent of the fee is paid under the
ician for pharmacySection 303(e)(2). The Secretary will payNo provision.Section 303(g). The Secretary would be
anagement services. No provision ina dispensing fee (less the applicablerequired to provide for separate payments
rrent law. deductible and coinsurance amounts) toin the physician fee schedule to cover the
licensed approved pharmacies for coveredadministration and acquisition costs
immunosuppressive drugs, oral anti-cancerassociated with covered drugs and
drugs, and oral anti-nausea drugs used asbiologicals furnished by a contractor under
part of a chemotherapeutic regimen.the competitive acquisition program.

Hospital Outpatient Department (HOPD), Ambulatory Surgery Center (ASC), and Clinic Services.
Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
Hospital Outpatient Department (HOPD) Services
end hold-harmless provisions forSection 411. The hold-harmless provisionsSection 423. The hold-harmless provisionsSection 407. The hold-harmless provision
all rural hospitals. The outpatientgoverning OPPS for small rural hospitalsgoverning OPPS reimbursement for smallwould be extended to January 1, 2006.
pective payment system (OPPS) wasare extended to HOPD services providedrural hospitals would be re-established inThe Secretary would be required to
plemented in August 2000 for mostbefore January 1, 2006. The Secretary is2006.conduct a study to determine if the costs by
te care hospitals. Under hold-harmlessrequired to conduct a study to determine ifambulatory payment classification (APC)
ovisions, rural hospitals with no morethe costs, by ambulatory paymentgroups incurred by rural providers exceeds
100 beds are paid no less under thisclassification (APC) groups, incurred bythose costs incurred by urban providers
S system than they would have receivedrural providers exceed those costs incurredand provide an appropriate payment
der the prior reimbursement system forby urban providers. If appropriate, theadjustment to reflect the higher costs of
ered HOPD services provided beforeSecretary will provide for a paymentrural providers by January 1, 2005.
iki/CRS-RL32005uary 1, 2004.adjustment to reflect the higher costs ofrural providers by January 1, 2006
s.orablish hold-harmless provision forSection 411. The hold harmless provisionsSection 423. OPPS hold-harmlessSection 407. The hold-harmless provisions
leakle community hospitals (SCHs). Noare extended to SCHs located in a ruralprovisions would be extended to SCHswould be extended to SCHs for 2004 and
ovision in current law.area starting for cost reporting periodslocated in rural areas for services provided2005.
://wikibeginning on and after January 1, 2004 andin 2006.
httpending for HOPD services furnished
before January 1,2006.
ange hold-harmless provision forNo provision.Section 450J. These provisions forNo provision.
s hospitals. OPPS contains achildrens hospitals would be modified so
anent hold-harmless for cancerthat those in Maryland (which has a
spitals and children’s hospitals whereMedicare waiver) that are paid less under
yments to these hospitals cannot fallOPPS than what would have been received
low what these hospitals would haveunder the prior system or using hospitals
ed under the payment system inreasonable operating and capital costs
ore OPPS.receive additional payments after October
1, 2003.
crease HOPD payments to small ruralNo provision.Section 424. Medicare’s fee scheduleNo provision.

spitals. Under OPPS, which waspayments would be increased by 5% for
plemented in August, 2000, Medicarecovered outpatient clinic and emergency

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
s for covered services using a feeroom visits that are provided by rural
hedule based on APCs. Beneficiaryhospitals with up to 100 beds beginning
ments are established as a percentageJanuary 1, 2005 and before January 1,
Medicare’s fee schedule payment and2008. Beneficiary copayment amounts
fer by APC. Certain hospitals, includingwould not be affected. The increased
ral hospitals with no more than 100 beds,Medicare payments would not be
er on a temporary or onconsidered when calculating a rural
ermanent basis, from financial losseshospital’s hold-harmless payment. Budget
esult from implementation of OPPSneutrality provisions for Medicare’s OPPS
er hold-harmless provisionswould not apply. Finally, these increased
payments would not affect Medicare
payments for covered outpatient services
after January 1, 2008.
iki/CRS-RL32005crease payments to sole communityNo provision.Section 427. SCHs that provide clinicalNo provision.
g/wspitals (SCHs) for clinical diagnosticdiagnostic laboratory tests covered under
s.orts. Generally, hospitals thatPart B in 2005 and 2006 would be
leakovide clinical diagnostic laboratory testsreimbursed their reasonable costs of
er Part B are reimbursed using a feefurnishing the tests. No beneficiary cost-
://wikiedule. SCHs that provide some clinicalsharing amounts would apply to these
httpnostic tests 24 hours a day qualify forservices.
crease in the amounts established in
utpatient laboratory fee schedule; no
neficiary cost-sharing amounts are
ablish new payment method forSection 621. Starting January 1, 2004,Section 436. A new payment method forSection 621(a). Starting for services
and biologicals.specified covered HOPD drugs will becertain HOPD drugs and biologicals wouldfurnished beginning January 1, 2004,
der OPPS, Medicare pays for coveredpaid based on a percentage of the referencebe established for 2005 and 2006. Thecertain covered HOPD drugs would be
tpatient drugs in one of three ways: (1)average wholesale price for the drug. Thedrugs and biologicals would be those forpaid no more than 95% of AWP or less
a transitional pass-through payment; (2)percentage of the reference price for sole-which hospitals received transitional pass-than the transition percentage of the AWP
a separate APC payment; or (3) assource drugs manufactured by one entitythrough payments prior to January 1, 2005from CY2004 through CY2006. In
kaged APC payment with othercan be no less than 88% and no greaterthat have been assigned to drug-specificsubsequent years, payment would be equal
vices. Transitional pass-throughthan 95% in CY2004 and no less than 83%APCs beginning the date of enactment. Orto average price for the drug in the area
ments are extra payments to cover theand no greater than 95% in CY2005. Thethose that would have been paid in such aand year established by the competitive
ental cost associated with certainpercentage of the reference price formanner but for the application of thisacquisition program under 1847A. The

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
dical devices, drugs and biologicals thatinnovator multiple source drugs can be noprovision. Payments made under thiscovered HOPD drugs affected by this
puts to an existing service. Thegreater than 68% in CY2004 and CY2005.provision would be exempt from theprovision are radiopharmaceuticals and
ditional payment for a given item isThe percentage of the reference price forbudget neutrality requirement in FY2005outpatient drugs that were paid on a pass-
tablished for 2 or 3 years and then thenoninnovator multiple source drugs can beand FY2006. In 2005, these drugs wouldthrough basis on or before December 31,
ts are incorporated into the APCno greater than 46% in CY2004 andbe paid as follows: a single source or2002. These would not include drugs for
e weights. BBRA specified thatCY2005. The reference average wholesaleorphan product would be paid at 94% ofwhich pass-through payments are first
ss-through payments would be made forprice is the average wholesale price for thethe AWP existing on May 1, 2003; amade beginning January 1, 2003 or those
rrent orphan drugs; current cancerdrug as of May 1, 2003. In subsequentmultiple source drug would be paid at 91%drugs for which a temporary HCPCS code
erapy drugs, biologicals, andyears, payment will equal to the averageof that existing average wholesale pricehas not been assigned. Drugs for which a
ytherapy; current radiophamaceuticalacquisition cost for the drug for that year(AWP); and a drug with generic versionstemporary HCPCS code has not been
gs and biological products; and new(which may vary by hospital group takingwould be paid at 71% of that existingassigned would be reimbursed at 95% of
gs and biological agents. Generally,into account hospital volume or otherAWP. Those items furnished as part ofthe AWP. The transition percentage to
as established that a pass-throughhospital characteristics) or if hospitalother HOPD services would be paid usingAWP for sole-source drugs manufactured
iki/CRS-RL32005ment for an eligible drug is based onference between 95% of its averageacquisition cost data are not available, theaverage price for the drug in the yearthe same applicable percentage of theAWP that would have been determined onby one entity is 83% in CY2004, 77% inCY2005, and 71% in CY2006. The
g/wale price and the portion of theestablished under Sections 1842(o), 1847AMay 1, 2003 if such payment were to havetransition percentage to AWP for innovator
s.orerwise applicable APC payment rateor 1847B (which specify Medicarebeen made on that date. For 2006, thesemultiple source drugs is 81.5% in CY2004,
leakibutable to the existing drug, subject topayments for outpatient drugs coveredpayment amounts would be increased by75% in CY2005, and 68% in CY2006. The
udget neutrality provision.under Part B) as calculated and adjusted byCPI-U. A private non-profit organizationtransition percentage to AWP for multiple
://wikithe Secretary. The covered HOPD drugsunder contract would determine thesource drugs with generic drug competitors
httpaffected by this provision are outpatienthospital acquisition, pharmacy services,is 46% in CY2004 through CY2006. The
drugs that were paid on a pass-throughand handling costs for each of the drugsadditional expenditures resulting from
basis on or before December 31, 2002.paid in this fashion to set payments in 2007these provisions would not be subject to
These would not include drugs for whichand beyond. This analysis would bethe budget neutrality requirement. Starting
pass-through payments are first made on oraccurate within 3% of the true meanin CY2004, the Secretary would be
after January 1, 2003; those drugs forhospital acquisition and handling costs at arequired to lower the threshold for
which a temporary HCPCS code has not95% confidence level; begin by January 1,establishing a separate APC group for
been assigned; or, during 2004 and 2005,2005; and be updated annually. Startinghigher costs drugs from $150 to $50 per
orphan drugs. Drugs for which aJanuary 1, 2006, a report would be due toadministration. These separate drug APC
temporary HCPCS code has not beenCongress each year.groups would not be eligible for outlier
assigned will be reimbursed at 95% of thepayments. Starting in CY2004,
AWP. Orphan drugs during this 2-yearMedicares transitional pass-through
time period will be paid at an amountpayments for drugs and biologicals
specified by the Secretary.covered under a competitive acquisition
contract would reflect the amount paid
MedPAC will submit a report to theunder that contract, not 95% of AWP.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
Secretary on the payment adjustment to
ambulatory payment classifications for
specified covered outpatient drugs that
takes into account overhead and related
expenses (such as pharmacy services and
handling costs). The Secretary is
authorized to adjust the weights for
ambulatory payment classification based
on such a recommendation. The additional
expenditures that result from the previous
changes will not be taken into account in
establishing the conversion, weighting and
other adjustment factors for 2004 and
iki/CRS-RL320052005, but will be taken into account insubsequent years.
s.orFor drugs and biologicals furnished in
leak2005 and 2006, the Secretary is required
to lower the threshold for establishing a
://wikiseparate APC group for higher cost drugs
httpfrom $150 to $50 per administration.
These separate drug APC groups are not
eligible for outlier payments. Starting in
CY2004, Medicares transitional pass-
through payments for drugs and
biologicals covered under a competitive
acquisition contract will equal the average
price for the drug or biological for all
competitive acquisition areas calculated
and adjusted by the Secretary for that year.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
mit application of functionalSection 622. The Secretary is prohibitedSection 437. The Secretary would not beSection 621(c). The Secretary would be
uivalence standards when determiningfrom publishing regulations that apply aable to apply this standard to a drug orprohibited from applying a “functional
s eligibility for transitional passfunctional equivalence standard to a drugbiological for transitional pass-throughequivalence” standard or any similar
ough payments. Starting in 2003,or biological for transitional pass-throughpayments under OPPS. This prohibitionstandard in order to deem a particular drug
S decided that a new anemia treatmentpayments under OPPS. This prohibitionwould apply, unless such a standard wasor biological to be similar or functionally
r cancer patients was no longer eligibleapplies to the application of the functionalmade prior to enactment and only for theequivalent to another drug unless the
r pass-though payments under OPPS,equivalence standard on or after the date ofpurposes of transitional pass-throughCommissioner of FDA establishes such a
se it was functionally equivalentenactment, unless such application waspayments. The Secretary would still bestandard and certifies that the two products
though not structurally identical ormade prior to enactment and the Secretaryable to deem a particular drug as identicalare functionally equivalent. The Secretary
tically equivalent) to an existingapplies such standard to the drug only forto another drug if the two products arewould be able to implement this standard
ent. The transitional pass-throughthe purposes of transitional pass-throughpharmaceutically equivalent andafter meeting applicable rulemaking
or the drug was reduced to zeropayments. This provision does not affectbioequivalent, as determined by FDA.requirements. The provision prohibits the
ing for services in 2003.the Secretarys authority to deem aapplication of this standard to a drug or
iki/CRS-RL32005particular drug to be identical to anotherdrug if the 2 products are pharmaceuticallybiological prior to June 13, 2003.
g/wequivalent and bioequivalent, as
s.ordetermined by the Commissioner of the
leakFood and Drug Administration.
://wikitablish separate payments for certainSection 421(b). From January 1, 2004Section 450A. The Secretary would beSection 621(b). From 2004 through
httpchytherapy devices. In Medicare’sthrough December 31, 2006, Medicare’srequired to conduct a budget neutral, 3-2006, payments for brachytherapy devices
PS, current drugs and biologicals thatpayments for brachytherapy devices willyear demonstration project that wouldwould equal the hospital’s charges adjusted
re eligible for transitional pass-throughequal the hospital’s charges adjusted toexclude brachytherapy devices from theto cost. The Secretary would be required
ments on or prior to January 1, 2000,cost. Charges for such devices will not beOPPS and make payment on the basis ofto create separate APCs to pay for these
re removed from that payment statusincluded in determining any outlierthe hospital’s charges for each device,devices that reflect the number, isotope,
ective January 1, 2003. CMSpayments. The Secretary is required toadjusted to cost. The Secretary would beand radioactive intensity of such devices.
lished separate APC payments forcreate separate APCs to pay for theserequired to create separate, additionalThis would include separate groups for
of these drugs. Other drugs such asdevices that reflect the number, isotope,groups of covered HOPD services forpalladium-103 and iodine-125 devices.
hytherapy seeds (radioactive isotopesand radioactive intensity of such devices,brachytherapy devices to reflect theGAO would submit a report to Congress
ed in cancer treatments) were packagedincluding separate groups for palladium-number, isotope, and radioactive intensityon the appropriateness of such payments
to payments for brachytherapy103 and iodine-125 devices. GAO isof such later than January 1, 2005.

res.required to study the appropriateness of
payments for brachytherapy devices and
submit a report including
recommendations to Congress and to the
Secretary no later than January 1, 2005.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
spital acquisition study. NoSection 621(a). GAO will conduct anNo provision.Section 621(d). The Secretary would
ovision in current lawacquisition cost survey for each specifiedstudy the hospital acquisition costs related
covered drug in 2004 and 2005. No laterto covered outpatient drugs that cost $50
than April 1, 2005, GAO will furnish thisper administration and more that are
survey data to set 2006 payment rates.reimbursed under the OPPS.
GAO will submit a report to Congress on
2006 rates no later than 30 days after
issuance of the proposed rule setting forth
these rates. GAO will submit
recommendations regarding the survey
methodology and frequency to the
Secretary who will conduct periodic
surveys to set subsequent payment rates.
leakAmbulatory Surgery Center Services (ASCs)
://wikiduce ambulatory surgery centerSection 626. In FY2004, starting April 1,No provision.Section 625. The reduction in the update
httpSC) update. Medicare uses a fee2004, the ASC update will be the CPI-Uwould be reestablished for FY 2004 - FY
edule to pay for the facility services(estimated as of March 31, 2003) minus2008. ASCs would get an increase
to a surgery provided in an ASC.3.0 percentage points. In FY2005, the lastcalculated as the CPI-U minus 2.0
om FY1998 through FY2002, the updatequarter of calendar year 2005, and each ofpercentage points (but not less than zero)
s established as the CPI-U minus 2.0the calendar years 2006 through 2009 thein each of the fiscal years from 2004
tage points, but not less than zero.update will be 0%. A revised paymentthrough 2008.

2003 and subsequent years, the update issystem for surgical services furnished in an
I-U.ASC will be implemented on or after
January 1, 2006 and not later than January
1, 2008. It will be budget neutral in its
implementation year. There will be no
administrative or judicial review of the
ASC classification system, relative
weights, payment amounts and any
geographic adjustments. GAO will study
the relative costs of ASC procedures.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
Rural Health Clinics (RHCs) and Federally Qualified Health Clinics (FQHCs) Services
crease payments for rural healthNo provision.Section 428. The RHC upper paymentNo provision.
. BBA 1997 extended the per visitwould be increased to $80.00 for calendar
yment limits that had existed foryear 2005. The MEI applicable to primary
ependent rural health clinics tocare services would be used to increase the
ovider-based rural health clinics (RHC)payment limit in subsequent years.
cept for those clinics based in small rural
spitals with fewer than 50 beds. For
rvices rendered from January 1, 2003
ough February 28, 2003, the RHC upper
ment limit is $66.46, which reflects a
iki/CRS-RL32005 increase in 2002 payment limit astablished by the 2002 Medicare
g/womic Index (MEI). For services
s.ordered from March 1, 2003 through
leakber 31, 2003, the Medicare RHC
ment limit is $66.72, which
://wikilects a 3.0% increase in the 2002
httpment limit as established by the 2003
EI. The 2002 MEI was used as an
for 3 months because of the delayed
p lementatio n.
Covered Part B Outpatient Drugs (Not Provided by a HOPD).
Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
y for existing outpatient drugsSection 303(b) In general, payments forSection 432(a). In 2004, existing drugsSection 303(b). Physicians who opt out of
vided incident to a physiciansmost covered Part B drugs, including(available by April 1, 2003) would be paidthe competitive acquisition program
. Although Medicare does notintravenous immune globulin, furnished inthe lower of the widely available market(which is described subsequently) would
rrently have an outpatient prescription2004 will equal 85% of the averageprice or 85% of the listed AWP as of paid under a new, separate 1847B
g benefit, it covers approximately 450wholesale price (determined as of April 1,1, 2003 as subsequently increased by thepayment method. Subject to the
tpatient drugs and biologicals authorized2003). Certain categories of drugs andCPI for medical care as of June. Thebeneficiary cost-sharing, non-generic drugs
statute, including those: (1) that arebiologicals (drug products) will continue toSecretary would be required to determinewould be paid 112% of the applicable

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
vered if they are usually not self-be paid at 95% of the AWP includingwhether the widely available market priceprice in 2005 and 2006 and 100% of the
inistered and are provided incident toblood products and clotting factorsis different from the AWP amounts usingprice subsequently. The multiple source
hysicians services; (2) those that arefurnished during 2004; a drug productany HHS-IG or GAO report issued in 2000drug applicable price would be the
sary for the effective use of coveredfurnished during 2004 that was notand later as well as other data fromreported volume-weighted average of the
rable medical equipment; (3) certainavailable for Part B payment as of April 1,purchaser, supplier and manufacturers. Ifaverage sales price; the applicable price for
lf-administered oral cancer and anti-2003; pneumococcal, influenza, anddifferent, the widely available market pricea single source drug would be the lesser of
usea drugs (those with injectablehepatitis B vaccines; and a drug orwould be treated as the AWP amount inthe manufacturer’s average sales price
ivalents; (4) erythropoietin (used tobiological (other than erythropoietin)2004 and subsequently. However, if that(ASP) for the NDC code or the reported
emia); (5) immunosuppressivefurnished in connection with renal dialysisdifference is more than 15%, paymentswholesale acquisition cost (WAC).
gs after covered Medicare organservices that are separately billed by renalwould be reduced in 15% increments ofPayments would not account for special
splants; (6) hemophilia clotting factors;dialysis facilities. Drug products paid atMedicare’s prior year payment. Thispackaging, labeling or identifiers on the
d (7) vaccines for influenza, pneumonia,85% of AWP in 2004 may be paid atransition would not apply to those withdosage form or product or package. By
d hepatitis B. Payments are based ondifferent amount if the widely availablegeneric versions in the market beginningApril 1, 2004, the ASP would be
iki/CRS-RL32005 the average wholesale price (AWP)blished in industry referencemarket price is different than the paymentamount for the year. Also payments may2004. After Jan. 1, 2004, payments forcovered vaccines would be equal to thecalculated by NDC each calendar quarterby dividing a manufacturer’s total sales by
g/wblications. AWP does not account forbe adjusted because of data submitted byAWP.the units sold in that quarter with certain
s.orcounts routinely offered to providersthe manufacturer or by another entity byadjustments to account for volume
leakd physicians. Current MedicareOctober 15, 2003. In no case will paymentdiscounts and other rebates. Certain sales
ment rates are 95% of AWP for brandbe less than 80% of AWP. would be exempt from the calculation.
://wikime drugs produced by a singleThe WAC would be the manufacturer’s list
httpnufacturer (or single source drugs).Section 303(c) Beginning in 2005, drugprice to wholesalers or direct purchasers
icare will pay 95% of the lower of (a)products, except for pneumococcal,for the most recent available month, not
edian AWP of all generic drugs or (b)influenza, and hepatitis B vaccines, thoseincluding discounts or other price
owest brand-name product AWP forassociated with certain renal dialysisreductions, as reported in wholesale price
gs with two or more competing brandservices, blood products and clottingguides or other pricing publications.
mes (or multiple source drugs) or thosefactors and radiopharmaceuticals, will bePayment rates would be updated on a
ugs with available generic equivalents.paid using either the average sales pricequarterly basis. Certain contractors would
though Medicare uses the Healthcaremethodology or through the competitivedetermine the payment amounts. Certain
mmon Procedure Coding Systemacquisition program. Medicare’s paymentstandards would define multiple and single
CPCS) codes to pay for physicianunder the average sales price (ASP)source drugs and establish pharmaceutical
inistered drugs, the AWPs aremethodology will equal 106% of theequivalence. There would be no
lished for national drug codes (NDC)applicable price for a multiple source drugadministrative or judicial review of the
ich provides data on chemical molecule,or single source drug subject to beneficiaryASP.

g manufacturer, dosage, dosage formdeductible and coinsurance amounts. The
d package size.applicable price for multiple source drugs
is the volume-weighted average of the
average sale price calculated by NDC code

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
for each calendar quarter. The applicable
price for single source drugs is the lesser of
the average sales price or the wholesale
acquisition cost. Certain sales such as
those to the Medicaid drug rebate program
are exempt from the calculation, but the
ASP will take into account certain
discounts (not including Medicaid rebates).
After 2004, the Secretary may include
other price concessions recommended by
the HHS-IG who will conduct market
surveys. If the ASP exceeds the market
price or average manufacturer price by a
iki/CRS-RL32005threshold percentage, the ASP may bedisregarded. In 2005 the threshold is 5%;
g/win 2006 and subsequent years, the
s.orpercentage threshold will be specified by
leakthe Secretary. The payment amount will
then be equal to the lesser of the widely
://wikiavailable market price or 103% of the
httpaverage manufacturer price. For drugs
furnished in a year after 2004, the widely
available market price is the price that a
prudent physician or supplier would pay
for a drug product, taking into account
certain routinely available discounts. The
wholesale acquisition cost or other
reasonable measure may be used instead of
the manufacturer’s average sale price in
the case of certain public emergencies.
There will be no administrative or judicial
review of determinations of payment
amounts; the identification of units and
package size; or the method used to
allocate price concessions to a specific
quarter among other items.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
y for new outpatient drugs providedSection 303(c). Drug products during anSection 432(a) continued. New drugsSection 303(b) continued. New drugs.
t to a physician’s services. Seeinitial period (not to exceed a full calendar(available after April 1, 2003) would beThe Secretary would be able to disregard
e.quarter) when data on the prices for sales ispaid based on the manufacturer’s estimatedthe average sales price during the first
not sufficiently available to compute ASPprice data. During the first and secondquarter of a new drugs sales if the price
will be paid based on the wholesaleyears, the manufacturer would provide datadata is not sufficient to determine an
acquisition cost or on the payment methodson the actual market prices paid byaverage amount payable.
in effect as of November 1, 2003.physicians or suppliers which would be
equal to the lesser of the AWP or the
original estimate. Subsequently, payments
would be equal to the lesser of the AWP or
the widely available market price
established for existing drugs. If no
market price exists, the prior year’s
iki/CRS-RL32005payment is increased by Junes CPI formedical care. Other payment changes for
g/wthe administration of drugs would be
s.orcontingent on the implementation of these
leak provisio ns.
://wikiablish competitive pricing programSection 303(d). Under the new SectionSee above.Section 303(b). Under new section
http an establish alternative pricing1847B, the Secretary is required to1847A, the Secretary would establish a
ethod for physicians who elect not toestablish a competitive acquisitioncompetitive acquisition program to acquire
rticipate in competitive biddingprogram to acquire and pay forand pay for covered outpatient drugs.
ogram. See abovecompetitively biddable drug products. TheUnder this program, at least two
Secretary is required to compute an areacontractors would be established in each
average of the bid prices submitted, incompetitive acquisition area (which would
contract offers accepted for the categorybe defined as an appropriate geographic
and the area, for each year or otherregion) throughout the United States. Each
contract period. Medicares programyear, a physician would be able to select a
payment for these drugs will equal 80% ofcontractor who would deliver covered
the average bid price after the Medicaredrugs and biologicals to the physician; as
beneficiary meets the applicablediscussed above, a physician would be able
deductible. Generally, coinsurance andto elect payment under the ASP payment
deductible amounts will be collected by themethodology established by 1847B. Blood
contractor that supplies the drug product.clotting factors, drugs and biologicals
There shall be no administrative or judicialfurnished as treatment for end-stage renal
review with respect to the establishment ofdisease (ESRD), radiopharmaceuticals, and

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
payment amounts, contract awards,vaccines would not be considered covered
establishment of competitive acquisitiondrugs under the competitive acquisition
areas, the phased-in implementation, theprogram.
selection of categories of competitively
biddable drugs and biologicals for
competitive acquisition, or the bidding
structure or number of contractors who are
selected. No later than July 1, 2008, the
Secretary is required to report to Congress
on savings, reductions in cost-sharing,
access to competitively biddable drugs and
biologicals, the range of choices of
contractors available to providers as well
iki/CRS-RL32005as beneficiary and provider satisfactionunder the competitive acquisition program.
s.orablish contracting requirements forSection 303(d) Certain contractorNo provision.Section 303(b). The 1847A program
leakpetitive acquisition program. Noselection and contracting requirements forwould have two drug categories: the
ovision in current law.the competitive acquisition program areoncology drugs which would be
://wikiestablished. Specifically, the Secretary isimplemented by 2005 and the non-
httprequired to establish an annual selectiononcology drugs which would be
process for a contractor in each area forimplemented by 2006. Certain contractor
each category of drugs and biologicals.selection and contracting requirements for
The Secretary may not award the 3-yearthe program would be established.
contract to any entity that does not haveSpecifically, the Secretary would establish
the capacity to supply the drug products oran annual selection process for a contractor
does not meet established quality, service,in each area for each of the two categories
financial performance and solvencyof drugs. The Secretary may not award the
standards.The number of qualified2-year contract to any entity that does not
entities selected in each category and areameet capacity, quality, service, financial
may be limited but will not be less than 2.performance, solvency standards, conduct
All drugs and biological productsstandards or disclosure requirements. The
distributed by a contractor must benumber of qualified entities selected in
acquired directly from the manufacturer oreach category and area may be limited but
from a distributor that has acquired thewill not be less than 2. As part of the
products directly from the manufacturer.awarded contract, the selected contractor
The amount of the bid price will bewould be required to disclose the

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
required to be the same for all portions ofreasonable, net acquisition costs regularly
the area. The appropriate contractor, as(but not more often than once a quarter) as
selected by the physician, will supply drugspecified by the Secretary. Contract offers
products directly to the physician, exceptcould be rejected if the aggregate average
in situations when a beneficiary isbid price exceeds the ASP under e 1847B
presently able to receive a drug at home orprocess. The bid price would be required
other appropriate non-physician officeto be the same for all portions of the area.
settings. Rules will be established relatingThe appropriate contractor, as selected by
to resupply of inventories, consistent withthe physician, would supply covered drugs
safe drug practices and with adequatedirectly to the physician, except under the
safeguards against fraud and abuse. Nocircumstances when a beneficiary is
applicable State requirements relating topresently able to receive a drug at home or
the licensing of pharmacies are other specified non-physician office
iki/CRS-RL32005settings. Adequate safeguards against fraudand abuse and consistent with safe drug
g/wpractices, in order for a physician to
s.ormaintain a supply of drugs that may be
leakneeded in emergency situations, would be
estab lishe d .
httpeparately for the administration ofSection 303(e)(1). The Secretary isSection 432(b)(4). The Secretary wouldSection 303(f). MedPAC would be
ood clotting factors. Medicare will payrequired to review a GAO report andbe required to review a GAO report andrequired to submit to Congress specific
r blood clotting factors for hemophiliaprovide a separate payment for theprovide a separate payment for therecommendations with respect to payment
ts who are competent to use suchadministration of these factors. The totaladministration of these factors. Thesefor blood clotting factors and its
to control bleeding without medicalamount of payments for blood clottingpayments in CY2004 would not exceed theadministration in its 2004 annual report.
pervision as well as the items related tofactors furnished in CY2005 can notamount that would have otherwise been
inistration of such factors.exceed the amount that would haveexpended. In CY2005 and subsequently,
otherwise been expended. In CY2006 andthe separate payment amount would be
subsequently, this separate paymentupdated by Junes CPI for medical care.
amount would be updated by the change in
the CPI for medical care for the previous
year ending in June.
e physician a pharmacySection 303(e)(2). The Secretary isSection 432(b)(8). Medicare would pay aNo provision.

pensing fee. Medicare pays for certainrequired to pay a dispensing fee (less thedispensing fee (less applicable cost-sharing
tpatient prescription drugs andapplicable deductible and coinsuranceamounts) to licensed approved pharmacies
icals. For instance, Medicare pays aamounts) to licensed approved pharmaciesfor covered immunosuppressive drugs, oral

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
ensing fee in conjunction withfor covered immunosuppressive drugs, oralanti-cancer drugs, and oral anti- nausea
halation therapy drugs used inanti-cancer drugs, and oral anti-nauseadrugs used as part of an anti-cancer
bulizers. Medicare does not pay adrugs used as part of an anti-cancerchemotherapeutic regimen. Medicare
pensing fee to pharmacists or providerschemotherapeutic regimen. would be able to pay a dispensing fee (less
o supply oral drugs.the applicable deductible and coinsurance
amounts) to licensed approved pharmacies
for other drugs and biologicals.
y for discarded chemotherapy drugs.No provision.Section 432(b)(9). The Secretary wouldNo provision.
care does not pay for chemotherapybe able to pay a physician for
gs that are purchased by physicians, arechemotherapy drugs that are purchased
t dispensed, and must be discarded.with a reasonable intent to administer to a
Medicare beneficiary but which cannot be
iki/CRS-RL32005administered despite the physiciansreasonable efforts and must be discarded.
g/wPayment amounts for all covered
s.orchemotherapy drugs could be increased,
leaksubject to a 1% cap. The beneficiarys
cost-sharing amounts would not be
://wiki affected.
ver intravenous immune globulinSection 642. The provision coversNo provision.Section 629. By January 1, 2004, IVIG
G) for the treatment of primaryintravenous immune globulin (IVIG) forfor the treatment of primary immune
mune deficiency diseases in the home.the treatment in the home of primarydeficiency diseases in the home would be
travenous immune globulin (IVIG) is aimmune deficiency diseases underincluded as a covered medical service, if a
product prepared from the pooledMedicare. IVIG is defined as an approvedphysician determines administration of the
ma of donors. It has been used to treatpooled plasma derivative for the treatment,derivative in the patients home is
ariety of autoimmune diseases,in the patients home, of a patient with amedically appropriate. This would not
cluding mucocutaneous blisteringdiagnosed primary immune deficiencyinclude items or services related to the
seases. It has fewer side effects thandisease, if a physician determinesadministration of the derivative.
ds or immunosuppressive agents.administration of the derivative in theIntravenous immune globulin would be
fective October 1, 2002, IVIG is coveredpatients home is medically appropriate.paid at 80% of the lesser of actual charge
r the treatment of certain conditions forItems or services related to theor the payment amount.

ain subpopulations. IVIG for theadministration of the derivative are not
ent of autoimmune mococutateousincluded. IVIG will be paid at 80% of the
stering diseases must be used only forlesser of actual charge or the payment
ort term therapy, but not as aamount beginning January 1, 2004.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
intenance therapy, for those for whom
nventional therapy has failed.
ablish demonstration project to coverSection 641. A 2-year demonstrationNo provision.Section 631. The Secretary would
tpatient drugs. No provision in currentproject will be established that will coverconduct a 2-year demonstration project in
.more than 50,000 patients and will pay forthree states covering more than 10,000
drug products that are prescribed aspatients under Part B that would pay for
replacements for existing covered Part Bdrugs and biologicals that are prescribed as
drugs that are furnished incident to areplacements for existing covered drugs
physicians service which are not usuallythat are furnished incident to a physicians
self-administered, including oral anticancerprofessional service and which are not
chemotheraputic agents. The project is notusually self-administered including oral
permitted to cost more than $500 million.anti-cancer chemotheraputic agents. The
iki/CRS-RL32005The Secretary is required to submit anevaluation to Congress no later than July 1,project would not extend beyond Dec. 31,2005 and would not cost more than $100
g/w2006. The project will begin 90 days frommillion.
s.orenactment and end no later than December
leak31, 2005.
://wikiAO report on impact of drugNo provision.Section 432(e). GAO would examine theSection 303(e). Same provision except
httpovisions on beneficiary access toimpact of the drug provisions on the accessreport would be due 2 years after the
. No provision in currentof Medicare beneficiaries to coveredimplementation of the competitive
.drugs and biologicals which would be dueacquisition program (January 1, 2007).
to Congress no later than January 1, 2006.
G reports on marketSection 303(c). The HHS-IG will submitSection 432(e). The HHS IG would beNo provision.

or drugs. No provision in currenta study to Congress on the adequacy ofrequired to conduct one or more studies
.ASP payments for cancer treatments bythat compare the market prices to
October 1, 2005. The Secretary willMedicare payments for drugs that
submit a report to Congress by January 1,represent the largest portion of Medicare
2006 on the sales of drugs and biologicalsspending on such items.
to large volume purchasers to determine
whether the price at which drugs and
biologicals are sold to these purchasers
represent the price made available to
physicians and recommend whether these
sales should be excluded from the ASP
c o mp ut a t i o n.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
quire study on non-oncology codes.No provision.No provision.Section 303(h). The Secretary would be
provision in current law.required to submit a study to Congress
within 1 year of enactment that examines
the appropriateness of establishing and
implementing separate codes for non-
oncology infusions that address the level of
complexity and resource consumption. If
deemed appropriate, the Secretary would
be able to implement appropriate changes
in the payment methodology.
Self-Injected Drugs and Biologicals
elected self-injected drugs andNo provision.Section 450E. In 2004 and 2005,No provision.

iki/CRS-RL32005ologicals. Coverage of certain outpatientMedicare would cover FDA approved self-
g/wgs and biologicals is authorized byinjected biologicals that are prescribed as
s.orte. Under Medicare Part B, thesecomplete replacements for currently
leaks are covered if they are usually notcovered drugs in physicians offices or as
lf-administered and are provided incidentusually self-administered outpatient
://wikihysicians services. Generally,hospital services and other self-injected
httpill cover an outpatient drug asdrugs that are used to treat multiple
ually self-administered if it is deliveredsclerosis.
intramuscular injection, but not if it is
ected subcutaneously.

Covered Drugs and Services at a Dialysis Facility.
Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
tablish the composite rate andSection 623. The bill increases theSection 432(b)(5). In 2004 the compositeSection 623(c). The ESRD composite
ents for covered drugs and servicescomposite rate for renal dialysis by 1.6%rate would be increased so that the sum ofpayment rate would increase by 1.6% for
dialysis facility. Dialysis facilitiesfor 2005. The bill requires the Secretarythese payments plus the payments for non-2004.
iding care to end stage renal diseaseto establish a basic case-mix adjustedEPO drugs and biologicals billed
D) beneficiaries receive a fixedprospective payment system for dialysisseparately equal payments that would have
pectively determined payment amountservices. The basic case-mix adjustedbeen made without enactment of the drug
e composite rate) for each dialysissystem is required to begin for servicespricing provisions in this legislation.
ment, regardless of whether servicesfurnished beginning January 1, 2005. TheDuring 2005, the ESRD rate would be
provided at the facility or in thesystem is required to adjust for a limitedincreased by 0.05% and further increased
ients home. Medicare pays separatelynumber of patient characteristics (the case-by 1.6%. During 2006, the rate would be
r erythropoietin (EPO) which is used tomix). The basic case-mix adjusted systemincreased by 0.05% and then further
anemia for persons with chronic renalis composed of two components: (1) thoseincreased by 1.6%. During 2007 and
iki/CRS-RL32005re who are on dialysis. Congress hast Medicare’s payment for EPO at $10 perservices which currently comprise thecomposite rate (including the 1.6%subsequently, the ESRD rate of theprevious year would be increased by
g/wnits whether it is administeredincrease in 2005), and (2) the spread on0.05%. In any year after 2004, the
s.orenously or subcutaneously in dialysisseparately billed drugs and biologicalsSecretary would be required to provide for
leakr in patients’ homes. Providers(including erythropoietin and asadditional increases in the composite rate
e 95% of the AWP for separatelydetermined by the HHS-IG reports). to account for any payment reductions for
://wikile injectable medications other thanseparately administered drugs (but not
httpO administered during treatments at theDrugs and biologicals (includingEPO) in the same manner as in 2004.
.erythropoietin) currently billed separately,These payment amounts, methods or
will continue to be billed separately underadjustments would not be subject to
the basic case-mix adjusted system. Theyadministrative or judicial review.
cannot be bundled into the new system.
tore composite rate exception forSection 623. The prohibition on exceptionsNo provisionSection 623(b). The prohibition on
tric facilities. Prior to BIPA, ancontained in BIPA section 422(a)(2) doesexceptions would not apply to pediatric
e in the composite rate wouldnot apply to pediatric ESRD facilities as ofESRD facilities as of October 1, 2002.
ger an opportunity for ESRD facilitiesOctober 1, 2002. Pediatric ESRD facilitiesPediatric facilities would be defined as a
request a rate exception in order toare defined as renal facilities with 50% ofrenal facility with 50% of its patients under
e higher payments. BIPA requiredtheir patients under 18 years old. The18 years old.

to develop an new ESRDprovision is effective upon enactment.
yment system and prohibited the
anting of new exceptions with respect to
s received after July 1, 2001.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
ents for existing end-Section 623. By October 1, 2005, theNo provision.Section 623(a). The provision would
al disease demonstrationSecretary is required to report to Congressrequire the Secretary to establish an
. The Secretary announced aon the elements and features for the designadvisory board for the ESRD disease
monstration project establishing aand implementation of a fully case-mixmanagement demonstration.
ease-management program that willadjusted, bundled prospective payment
organizations experienced withsystem for services furnished by ESRD
g ESRD patients to developfacilities. The Secretary is required to
ancing and delivery approaches to betterestablish a 3-year demonstration project of
e needs of beneficiaries withthe fully case-mix adjusted payment
RD.system for ESRD services, beginning
January 1, 2006 and consult with a
required advisory board in carrying out the
d e mo nstr atio n.
g/wDurable Medical Equipment (DME) and Related Outpatient Drugs.
s.orProvision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
y for home infusion drugs. MedicareSection 303(b). Infusion drugs furnishedSection 432(b)(6). The Secretary wouldSection 302. Infusion drugs would be
://wikiver outpatient prescription drugsthrough covered durable medicalbe able to make separate payments forcovered under the competitive bidding
httpd biologicals if they are necessary forequipment starting January 1, 2004 will beinfusion drugs and biologicals furnishedproject.
e use of covered durablepaid 95% of the AWP in effect on Octoberthrough covered DME beginning January
dical equipment (DME), including1, 2003; starting January 1, 2007, infusion1, 2004 if such payments are determined to
se drugs which must be put directly intodrugs furnished in any area covered by thebe appropriate. Total amount of payments
e equipment such as tumorDME competitive acquisition program willfor the infusion drugs in the year could not
emotherapy agents used with infusionbe paid at the competitive price.exceed the total amount of spending that
mp (home infusion drugs).would have occurred without enactment of
this legislation.
yment for inhalation therapy. AsSection 305. Inhalation drugs orSection 432(b)(7). The Secretary wouldSection 302. The competitive acquisition
ntioned above, Medicare will coverbiologicals furnished through coveredbe able to increase payments for coveredprogram would include drugs and supplies
tpatient prescription drugs anddurable medical equipment will be paid atDME associated with inhalation drugs andused in conjunction with DME, including
icals if they are necessary for the85% of the AWP (determined as of Aprilbiologicals and make separate payments, ifinhalation therapy.
ective use of covered durable medical1, 2003) in 2004 and by the amountappropriate, for those furnished throughSection 302. The competitive acquisition
uipment (DME), including those drugsprovided under the average sales pricecovered DME beginning January 1, 2004.program would include drugs and supplies
ich must be put directly into themethodology in 2005 and subsequently.The associated spending in any year wouldused in conjunction with DME, including
ipment such as respiratory drugs givennot exceed the 10% of the difference of theinhalation therapy. Section 602(c). GAO
ough a nebulizer (inhalation drugs).GAO is be required to conduct a study tosavings for these drugs attributed to thiswould be required to conduct a study to

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
examine the adequacy of currentlegislation.examine the adequacy of current
reimbursements for inhalation therapyreimbursements for inhalation therapy
under the Medicare program and submitunder the Medicare program and submit
the results of the study in a report tothe results of the study in a report to
Congress no later than 1 year from theCongress no later than May 1, 2004.
enactment date of this legislation.
ablish payments for durable medicalSection 302(b). The bill establishes aSection 430. Medicare would not increaseSection 302. Competitive acquisition
ent (DME). Medicare pays forcompetitive acquisition program for DMEthe DME fee schedule amounts in any ofprograms for durable medical equipment,
E and PO, using different fee schedules(including items used in infusion andthe years from 2004 through 2010 andmedical supplies, items used in infusion,
r each class of covered item that aredrugs), medical supplies, home dialysiswould update the amounts by the CPI-U indrugs and supplies used in conjunction
bject to different floors and ceilings,supplies, therapeutic shoes, enteraleach subsequent year. Payments forwith durable medical equipment, medical
lated either on a state, regional, ornutrients, equipment, and supplies,orthotic devices that have not been custom-supplies, home dialysis supplies, blood
iki/CRS-RL32005tional basis. BBA 1997 amendedlaw to freeze DME fee scheduleelectromyogram devices, salivationdevices, blood products, and transfusionfabricated would be similarly affected.Class III medical devices would be exemptproducts, parental nutrition, and off-the-shelf orthotics (requiring minimal self-
g/wowances for 5 years, beginning in 1998.medicine, and off-the-shelf orthoticsfrom the freeze in DME payments.adjustment for appropriate use) would
s.ors were subject to a 1% increase for 5(requiring minimal self-adjustment forProsthetics, prosthetic devices, andreplace the fee schedule payments. Enteral
leak, beginning in 1998. BBA 97 alsoappropriate use). This program willcustom-fabricated orthotics would benutrients and class III devices would not be
ired the Secretary to undertake areplace the Medicare fee scheduleupdated by the percentage change in thecovered by the program. Rural areas and
://wikimpetitive bidding demonstration forpayments. Exclusions from the competitiveCPI-U.areas with low population density within
httphich occurred at two sites: Polkacquisition are: inhalation drugs; parenteralurban areas would be able to be exempt,
unty, Florida and San Antonio, Texas.nutrients, equipment, and supplies; andunless a significant national market exists
ass III medical devices are devices thatclass III devices (those that sustain orthrough mail order for a particular item or
stain or support life, are implanted, orsupport life, are implanted, or presentservice. The programs would be phased-in
ent potential unreasonable risk (e.g.,potential unreasonable risk and are subjectover 3 years with at least one-third of the
plantable infusion pumps and heartto premarket approval by the Food andareas implemented in 2005 and two-thirds
lve replacements) and are subject toDrug Administration). In starting theof the areas implemented in 2006. High-
arket approval, the most stringentprograms, the Secretary is required tocost items and services would be required
atory control.establish competitive acquisition areas, butto be phased-in first. Certain requirements
would be able to exempt rural areas andfor the competitive acquisition program
areas with low population density withinwould be established. A Program Advisory
urban areas that are not competitive, unlessand Oversight Committee would be
a significant national market exists throughestablished. The Secretary would be able
mail order for a particular item or use this payment information to adjust
The programs will be phased-in so thatthe payment amounts for DME not in a
competition under the programs occurs incompetitive acquisition area. In this
10 of the largest metropolitan statisticalinstance, the inherent reasonableness rule
areas in 2007. The Secretary is permittedwould not be applied.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
to phase-in first items and services with the
highest cost and highest volume, or those
items and services that the Secretary
determines have the largest savings
potential. The Secretary is required to
report to Congress by July 1, 2009, on
savings, reductions in cost-sharing, access
to items and services, and beneficiary
satisfaction under the competitive
acquisition program.
tablish accreditation standards andSection 302(a). DME companies andSection 430(c). DME companies andSection 302. The competitive bidding
ocess for DME suppliers. Medicaresuppliers will be subject to an accreditationsuppliers would be subject to anproject would establish certain quality
iki/CRS-RL32005 requires DME suppliers to meettain requirements in order to participateand quality assurance process. TheSecretary is required to designateaccreditation and quality assuranceprocess. The Secretary would be requiredstandards for DME products no later thanJuly 1, 2004.

g/whe program. Medicare law does notindependent accreditation organizations noto designate independent accreditation
s.orthorize the Secretary to deemlater than 1 year from enactment. Theorganizations no later than 6 months from
leakitation by an independent entity as aSecretary is required to establish standardsenactment after consultation with an expert
bstitute for onsite inspection by CMS.for clinical conditions for payment foroutside advisory panel. The application of
://wikicovered durable medical equipment thatquality standards would be phased-in over
httpinclude the specification of types or classesa 3-year period.
of covered items that require, as a
condition of payment, a face-to-face
examination and a prescription for the
item. Beginning with the date of
enactment, payment may not be made for
motorized or power wheelchairs unless a
physician, physician assistant, nurse
practitioner, or a clinical nurse specialist
has conducted a face-to-face examination
of the individual and written a prescription
for the item. Medicare payment is not
permitted unless the item meets the
standards established for clinical condition
of coverage.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
body orthotic managementNo provision.Section 450B. Medicare would pay forNo provision.
for certain nursing homequalified total body orthotic management
idents . Orthotics are rigid devices, ordevices provided by qualified practitioners
, which are applied to the outside ofand suppliers no later than 60 days from
to support or restrict movement inenactment. These medically prescribed
part. Orthotics are covered Part Bdevices would consist of custom fitted
nefits when furnished in an institutionalindividual braces that are attached to a
tting, such as in a hospital or skilledframe that is integral to the device for a
rsing facility, while durable medicalfull-time patient of a skilled nursing
uipment (DME) is not covered in thosefacility who requires such medical care.
ttings, because Medicare law requires
covered DME be appropriate for use
o me.
iki/CRS-RL32005tom shoes for diabeticSection 627. Starting January 1, 2005,No provision.Section 626. As of January 1, 2004,
g/wtients. Subject to specified limits andpayment for diabetic shoes is limited to thediabetic shoes would be paid as is if they
s.order certain circumstances, Medicare willamount that would be paid if they werewere considered to be a prosthetic or
leak for extra-depth shoes with inserts orconsidered to be a prosthetic or orthoticorthotic device. The Secretary or a carrier
stom molded shoes with inserts for andevice. The Secretary may establish lowerwould be able to establish lower payment
://wikividual with severe diabetic footpayment limits than these amount if shoeslimits than these amounts if shoes and
httpease. Diabetic shoes are neitherand inserts of an appropriate quality areinserts of an appropriate quality are readily
nsidered DME nor orthotics, but areadily available at lower amounts. Theavailable at lower amounts. The Secretary
parate category of coverage underSecretary is required to establish awould be required to establish a payment
art B.payment amount for an individualamount for an individual substituting
substituting modifications to the coveredmodifications to the covered shoe that
shoe that would assure that there is no netwould assure that there is no net increase
increase in Medicare expenditures. in Medicare expenditures.

Ambulance Services.
Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
crease ambulance fee schedule.Section 414 (b). Medicare’s paymentsSection 425. Payments for groundSection 410. The base rate for ground
aditionally, Medicare has paid suppliers offor ground ambulance services will beambulance services originating in aambulance services that originate in a qualified
bulance services on a reasonable chargeincreased by one quarter of therural area or a rural census tract wouldrural area would be increased after January 1,
is and paid provider-based ambulances onpayment per mile rate otherwisebe increased by 5% for services2004 by the average costs per trip for the base
onable cost basis. BBA 1997 providedestablished for trips longer than 50furnished January 1, 2005 throughrate in the lowest quartile as compared to the
r a national fee schedule which was to bemiles occurring on or after July 1,December 31, 2007. The fee scheduleaverage cost for the base rate in the highest
plemented in phases. The required fee2004 and before January 1, 2009. Thefor other areas would be increased byquartile of all rural counties. A qualified rural
hedule became effective April 1, 2002 withpayment increase applies regardless of2%. These increased payments wouldcounty is a rural area (a county not assigned to
ll implementation by January, 2006. In thewhere the transportation originates. not affect subsequent periods. Thea metropolitan statistical area) with a
sition period, a gradually decreasingSection 414(c). The Secretary willambulance conversion factor wouldpopulation density of Medicare beneficiaries in
tion of the payment is to be based on theprovide a percentage increase in thenot be adjusted downward because ofthe lowest quartile of all rural counties.

or payment methodology.base rate of the fee schedule forthe evaluation of the prior year’s
iki/CRS-RL32005ground ambulance services furnishedon or after July 1, 2004 and beforeconversion factor.
g/wJanuary 1, 2010 that originate in a
s.orqualified rural area. The qualified
leakrural areas are those with lowest
populations densities that collectively
://wikirepresent a total of 25% of the
httppopulation in those areas. To the
extent feasible, the Secretary is
required to treat certain rural census
tracts in metropolitan statistical areas
as rural areas. There will be no
administrative or judicial review under
Sections 1869 and 1878 of the SSA or
otherwise with respect to the
identification of a qualified rural area.
In order to promptly implement this
provision, the Secretary may use data
furnished by GAO.
Section 414(c). The payments for
ground ambulance services originating
in a rural area or a rural census tract
will be increased by 2% (after

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
application of the long trip and low
density payment increases) for services
furnished on or after July 1, 2004
through December 31, 2007. The fee
schedule for ambulances in other areas
(after application of the long trip
adjustment) will increase by 1%.
These increased payments will not
affect Medicare payments for covered
ambulance services after 2006. A
GAO report is required.
mbulance fee schedule. In theSection 414(a). Payments forNo provision.Section 622. Payments would be incorporate a
iki/CRS-RL32005sition period from 2002-2006, payment ised on a blend with a gradually increasingambulance services will be based oneither the national fee schedule amountregional fee schedule, if that would result in alarger payment to the ambulance provider or
g/wion of the payment based on the feeor a blended rate of the national feesupplier. The blended rate from 2004 through
s.orhedule and a decreasing portion on theschedule and a regional fee schedule,2010 would incorporate a decreasing portion of
leakrmer payment method (of either reasonablewhichever results in the largerthe regional fee schedules calculated for each
ts for ambulance providers or reasonablepayment. The blended rate during theof nine census regions. Full phase-in to the
://wikiarges for ambulance suppliers.) In 2003,phase-in period will incorporate aexisting fee schedule would occur by 2010.
httpblend is 40% of the fee schedule and 60%decreasing portion of the paymentMedicare’s payments for ground ambulance
the cost or charge rates.based on regional fee schedulesservices would be increased by one quarter of
calculated for each of nine censusthe amount otherwise established for trips
regions. For 2004, starting for serviceslonger than 50 miles occurring beginning
on July 1, 2004, the blended rate isJanuary 1, 2004 and before January 1 2009.
based on 20% of the national feeA GAO report would be required.

schedule and 80% of the regional fee
schedule; for 2005, the blended rate is
based on a 40% national and 60%
regional split; in 2006, the blended rate
is based on a 60% national and 40%
regional split; in 2007, 2008 and 2009,
the blended rate is based on a 80%
national and 20% regional split; and in
2010 and subsequently, the ambulance
fee schedule is based on the national
fee schedule.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
crease coverage for air ambulanceSection 415. Regulations will provideSection 426. For services furnishedNo provision.

. Medicare pays for ambulancethat air ambulance services will bebeginning January 1, 2005, the
rvices under a fee schedule. Sevencovered if: (1) such service isregulations governing ambulance
ories of ground ambulance services,reasonable and necessary based on theservices would be required to ensure
ing from basic life support to specialtypatients health condition at orthat air ambulance services be covered
sport, and two categories of airimmediately prior to the time of theif: (1) the air ambulance service is
bulance services are established. Paymenttransport service; and (2) the airmedically necessary based on the
r ambulance services can only be made ifambulance service complies withhealth condition of the patient being
her methods of transportation areestablished equipment and crewtransported at or immediately prior to
raindicated by the patients medicalrequirements. An air ambulancethe time of the transport service; and
nditions, but only to the extent provided inservice is considered reasonable and(2) the air ambulance service complies
ations.necessary when requested: (1) by awith the equipment and crew
physician or other qualified medicalrequirements established by the
iki/CRS-RL32005personnel who reasonably determinesthat the time need to transport by landSecretary. These services would be afixed wing or rotary wing air
g/wor the instability of such transportambulance services.
s.orthreatens the patients health or
leaksurvival; or (2) such services are
furnished pursuant to a protocol that is
://wikiestablished by a state or regional
httpemergency medical services (EMS)
agency and approved by the Secretary.
The EMS agency cannot have an
ownership interest in the entity
furnishing such service. Also, there
cannot be a financial, employment or
ownership relationship between the
person (or immediate family member)
requesting the service and the
furnishing entity. This prohibition
does not apply to certain instances
when a hospital and an entity
furnishing the rural air ambulance
services are under common ownership.
A rural air ambulance service is
defined as a fixed wing or rotary wing

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
air ambulance service where the
patient pick up occurs in a rural area or
rural census tract. The provision
applies to services on or after January
1, 2005.
Other Part B Services and Provisions.
Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
tablish 2-year moratorium on therapySection 624. Application of the therapyNo provision.Section 624. Application of the therapy
. BBA 97 established annual paymentcaps is suspended for the remainder ofcaps would be suspended in 2004.
its per beneficiary for all outpatient2003 (after enactment), in 2004 and 2005.Provisions with respect to existing report
services provided by non-hospitalThe Secretary is required to submit therequirements are included.
iki/CRS-RL32005iders. The cap applied in 19999.reports required by BBA 97 and BIPA by
g/wA and BIPA suspended applicationMarch 31, 2004 relating to the alternatives
s.orr 2000 through 2002. Enforcement wasto a single annual dollar cap on outpatient
leaked until September 1, 2003.therapy and the utilization patterns for
outpatient therapy. The GAO is required
://wikito identify conditions or diseases that may
httpjustify waiving the application of the
therapy caps and report to Congress by
October 1, 2004.
ts associated withSection 731. The Secretary is prohibitedSection 438. After January 1, 2005, theSection 733. The routine costs of care for
l trials. Currently, Medicare coversfrom excluding from Medicare coverageroutine costs of care for MedicareMedicare beneficiaries participating in
routine costs of qualifying clinicalthe routine costs of care incurred by abeneficiaries participating in clinical trialsclinical trials that are conducted in
without explicit statutory instruction.Medicare beneficiary participating in awould be covered by statute. The Secretaryaccordance with an investigational device
wever, Medicare does not pay forcategory A clinical trial, beginning withwould not be required to modify theexemption approved under Section 530(g)
aspects of the clinical trialroutine costs incurred on and after Januaryexisting regulations. Total Medicareof the Federal Food, Drug, and Cosmetic
ding: the investigational item or1, 2005. This provision does not apply to,expenditures associated with this provisionAct would be covered. Any clinical trial
vice, items and services not used in theor affect, Medicare coverage or paymentwould not exceed specified limits that startestablished on the date of enactment or
rect clinical management of the patient,for a non-experimental/investigationalat $32 million in 2005 and increaseafter would be covered. Services provided
d items and services customarily(category B) device.gradually to $50 million in 2013.on or after enactment would be covered.

ided by the research sponsor free of
arge for any enrollee in the trial.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
ver certain vision rehabilitationSection 645. The Secretary is required toSection 446. Medicare Part B would coverNo provision.
. Medicare does not cover routinestudy the feasibility and advisability ofvision rehabilitation services furnished to
e care or related services and will notproviding for payment for visiona beneficiary who is diagnosed with certain
for eyeglasses; most contact lenses;rehabilitation services furnished by visionvision impairments. Covered services
e examinations for the purpose ofrehabilitation professionals. The report iswould be established by a plan of care
escribing, fitting, or changing eyeglassesdue to Congress by January 1, 2005.developed by a qualified physician or
tact lenses; and most proceduresqualified occupational therapist whose plan
rformed to determine the refractive stateof care is periodically reviewed by a
the eyes. A CMS program memorandumqualified physician. Medicare would pay
ued May 29, 2002, clarified thatfor the services under the physician fee
edicare beneficiaries who are blind orschedule.
sually impaired are eligible for
ysician-prescribed rehabilitation services
iki/CRS-RL32005 approved health care professionals on same basis as beneficiaries with other
g/wdical conditions that result in reduced
s.orysical functioning.
arriage counseling and familyNo provision.Section 448. Starting January 1, 2004,No provision.

://wikiMedicare will cover servicesMedicare would cover marriage and family
httpnected with the treatment of a mental,therapist services and mental health
ychoneurotic, or personality disorder ofcounselor services for the diagnosis and
individual who is not an inpatient of atreatment of mental illness. Payment
spital at the time such expenses areamounts would be 80% of the lesser of the
rred. The termtreatment” does notactual charge or 75% of the amount paid to
de brief office visits for the solea psychologist. These services would be
rpose of monitoring or changing drugsubject to assignment. Rural health clinics,
criptions used in the treatment of suchfederally qualified health centers, and
rders or partial hospitalization serviceshospice programs would be authorized to
ot directly provided by theprovide such services. Marriage and
ysician. Family counseling servicesfamily therapists would be authorized to
members of the household aredevelop post hospital discharge plans for
ered only where the primary purpose ofpatients.
ch counseling is the treatment of the
tients condition.

Provision and Current LawH.R. 1 as enactedS. 1 (as passed the Senate)H.R. 1 (as passed the House)
services provided bySection 630. The bill provides a 5-yearSection 450C. All Medicare Part B itemsNo provision.
n hospitals and clinics. Medicareexpansion of the items and servicesand services provided by hospitals, skilled
ers specific Part B services provided bycovered under Medicare Part B whennursing facilities, or ambulatory care
ospital, skilled nursing facility, orfurnished in Indian hospitals andclinics operated by the Indian Health
bulatory care clinic (whether provider-ambulatory care clinics. The bill applies toService or by an Indian tribe or
ed or freestanding) that is operated byitems and services furnished on or afterorganization beginning October 1, 2004
dian Health Service or by an IndianJanuary 1, 2005.would be paid.
e or tribal organization.
scular screening tests.Section 612. Medicare will coverSection 450D. Beginning January 1, 2005,Section 612. Medicare coverage of
ers a number of preventivecardiovascular screening blood testsMedicare would cover cardiovascularcholesterol and blood lipid screening
rvices. However, it does not coverbeginning