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                                                        Calendar No. 98
109th Congress                                                   Report
                                 SENATE
 1st Session                                                     109-66

======================================================================
 
        CHILDREN'S HOSPITALS EDUCATIONAL EQUITY AND RESEARCH ACT

                                _______
                                

                  May 11, 2005.--Ordered to be printed

                                _______
                                

Mr. Enzi, from the Committee on Health, Education, Labor, and Pensions, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 285]

    The Committee on Health, Education, Labor, and Pensions, to 
which was referred the bill (S. 285) to reauthorize the 
Children's Hospitals Education Medical Education Program, 
having considered the same, reports favorably thereon with an 
amendment in the nature of a substitute and recommends that the 
bill (as amended) do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and need for legislation.................................1
 II. Summary..........................................................2
III. History of legislation and votes in committee....................2
 IV. Explanation of bill and committee views..........................2
  V. Cost estimate....................................................3
 VI. Regulatory impact statement......................................4
VII. Application of law to the legislative branch.....................4
VIII.Section-by-section analysis......................................4

 IX. Changes in existing law..........................................5

                  I. Purpose and Need for Legislation

    First enacted as part of the Healthcare Research and 
Quality Act of 1999 (P.L. 106-129), the Children's Hospitals 
Education and Research Act of 1999 authorized the Children's 
Hospitals Graduate Medical Education (CHGME) program for 2 
years. The program was reauthorized for an additional 5 years 
as part of the Children's Health Act of 2000 (P.L. 106-310).
    Graduate medical education is funded through Medicare 
payments to full service teaching hospitals. Prior to the 
enactment of this program, the independent children's teaching 
hospitals did not have a similar program to fund resident 
training programs for physicians. Congress recognized this 
inequity and the financial disadvantage it was placing on 
children's hospitals.
    The Children's Hospitals Educational Equity and Research 
Act extends the authorization of the Children's Hospitals 
Graduate Medical Education Program to fiscal year 2010 and 
provides independent children's hospitals with Federal 
assistance similar to that provided to other teaching hospitals 
through Medicare.

                              II. Summary

    S. 285 reauthorizes the Children's Hospitals Graduate 
Medical Education Program from 2006 to 2010 and increases the 
authorization level in fiscal year 2006 to $330 million. In 
fiscal year 2007 to fiscal year 2010 the legislation authorizes 
such sums as are necessary. The bill also makes technical 
changes to the underlying statute including reversing an 
oversight in the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 with regard to resident physician 
allotments.

           III. History of Legislation and Votes in Committee

    On February 3, 2005, Senator Bond, for himself and Senators 
Kennedy, DeWine, and Murray, introduced S. 285 to reauthorize 
the Children's Hospitals Graduate Medical Education Program.
    On February 9, 2005, the committee held an executive 
session and approved S. 285, with an amendment in the nature of 
a substitute, by unanimous voice vote.

              IV. Explanation of Bill and Committee Views

    S. 285 as amended reauthorizes the Children's Hospitals 
Graduate Medical Education Program for 5 years through 2010 and 
authorizes $330 million to fund residency programs in 
children's hospitals in fiscal year 2006 and such sums as are 
necessary in fiscal year 2007 through fiscal year 2010.
    The committee made a few small technical changes to the 
program and includes one provision necessary to reflect 
Congressional intent by clarifying that the provision for 
redistribution of unused residency positions included in the 
Medicare Modernization Act (P.L. 108-173) does not apply to the 
CHGME program. The committee does not believe the original 
provision was appropriately applied to the CHGME program. The 
CHGME program is separate and distinct from the Medicare-
financed GME programs. In addition, pediatrics is experiencing 
significant shortages in many pediatric subspecialties.
    The committee believes that children's hospitals should 
have more time to grow their programs, as well as to have the 
opportunity to redistribute any unused resident slots within 
the CHGME program.
    The committee corrects an unintended error in the 
underlying statute to allow direct medical education payments 
under CHGME to be adjusted by the current area wage index 
adjustment, for discharges in the preceding year. The statute 
now provides for no area wage index adjustment beyond fiscal 
year 2000. The committee also corrects other small technical 
errors in the statute.

                            V. Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 6, 2005.
Hon. Michael Enzi,
Chairman, Committee on Health, Education, Labor, and Pensions,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 285, the Children's 
Hospitals Educational Equity and Research Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Tim 
Gronniger.
            Sincerely,
                                     Elizabeth M. Robinson,
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

S. 285--Children's Hospitals Educational Equity and Research Act

    Summary: S. 285 would amend the Public Health Service Act 
to authorize payments to children's hospitals that operate 
graduate medical education programs. Payments would be made to 
such hospitals for both ``direct'' and ``indirect'' costs 
related to graduate medical education. Direct costs are related 
to the cost of operating a medical education program, such as 
the salaries of medical residents, while indirect costs are 
intended to compensate hospitals for patient care costs that 
are expected to be higher in teaching hospitals than in non-
teaching hospitals.
    CBO estimates that implementing the bill would cost $248 
million in 2006 and $1.6 billion over the 2006-2010 period, 
assuming the appropriation of the necessary amounts.
    S. 285 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 285 is shown in the following table. The 
costs of this legislation fall within budget function 550 
(health).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2005     2006     2007     2008     2009     2010
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law:
    Budget Authority \1\..................................      303        0        0        0        0        0
    Estimated Outlays.....................................      303       76        0        0        0        0
Proposed Changes:
    Estimated Authorization Level.........................        0      330      335      342      348      354
    Estimated Outlays.....................................        0      248      334      340      347      353
Spending Under S. 285:
    Estimated Authorization Level \1\.....................      303      330      335      342      348      354
    Estimated Outlays.....................................      303      324      334      340      347      353
----------------------------------------------------------------------------------------------------------------
\1\ The 2005 level is the amount appropriated for that year for payments to children's hospitals that operate
  graduate medical education programs.

    Basis of estimate: The Health Resources and Services 
Administration (HRSA) administers a program that provides 
payments to children's hospitals that operate graduate medical 
education programs. Authorization for that program will expire 
in 2005.
    S. 285 would reauthorize funding for that program through 
2010. The bill would authorize the appropriation of specific 
amounts in 2006 and such sums as may be necessary for 2007 
through 2010. For this estimate, CBO assumes that S. 285 will 
be enacted before the end of this fiscal year, that the 
appropriated amount in the years 2007 through 2010 will be the 
2006 authorization level adjusted for expected inflation, and 
that the estimated amounts will be appropriated for each year.
    S. 285 would authorize appropriation of $110 million in 
2006 and such sums as are necessary for 2007 through 2010 for 
payment towards the direct costs of graduate medical education 
in children's hospitals. Those funds would be allocated across 
eligible hospitals according to a formula that takes into 
account the number of residents each hospital employs and its 
cost per resident as reported in 1997.
    The bill also would authorize $220 million in 2006 and such 
sums as are necessary for 2007 through 2010 for payment towards 
the indirect costs of graduate medical education programs. 
Those payments would be made to hospitals on the basis of a 
formula that takes into account the hospital's number of 
discharges, the relative costliness of those cases as measured 
by a case-mix index, and the number of residents at the 
hospital.
    Based on historical patterns of spending for graduate 
medical education programs, CBO estimates that implementing the 
bill would cost $248 million in 2006 and $1.6 billion over the 
2006-2010 period, assuming appropriation of the necessary 
amounts.
    Intergovernmental and private-sector impact: S. 285 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal Costs: Tim Gronniger. Impact 
on State, Local, and Tribal Governments: Leo Lex. Impact on the 
Private Sector: Meena Fernandes.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                    VI. Regulatory Impact Statement

    The committee has determined that there will be de minimus 
changes in the regulatory burden imposed by the bill.

           VII. Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1, the Congressional 
Accountability Act (CAA) requires a description of the 
application of this bill to the legislative branch. This bill 
does not amend any act that applies to the legislative branch.

                   VIII. Section-by-Section Analysis


Section 1. Short title

    Section 1 provides the short title of the bill, the 
``Children's Hospitals Educational Equity and Research Act'' or 
the ``CHEER Act.''

Section 2. Reauthorization of Children's Hospitals Graduate Medical 
        Education Program

    a. Amends Section 340E of the Public Health Service Act to 
extend the authorization of the CHGME program from fiscal year 
2006 through fiscal year 2010.
    b. Provides that the redistribution of unused residency 
positions provision in the Medicare Modernization Act (P.L. 
108-173) shall not apply to the CHGME program. It also provides 
that the direct medical education payments under CHGME be 
adjusted by the hospitals current area wage adjustment, as 
applied under Medicare for discharges occurring in the 
preceding fiscal year.
    c. Corrects a technical error in the underlying statute.
    d. Provides authorization of appropriations for direct 
medical education (DME) payments and indirect medical education 
(IME) payments under CHGME through fiscal year 2010, providing 
$110,000,000 for DME and $220,000,000 for IME for fiscal year 
2006 and such sums as may be necessary for remaining fiscal 
years.
    e. Deletes a repeated sentence in the underlying statute.

Section 3. Sense of the Senate

    Section 3 recognizes the importance of perinatal hospitals 
in both treating seriously ill newborns and training the 
providers who are essential to their care, as well as to the 
care of healthy mothers and babies.

                      IX. Changes in Existing Law

    In compliance with rule XXVI paragraph 12 of the Standing 
Rules of the Senate, the following provides a print of the 
statute or the part or section thereof to be amended or 
replaced (existing law proposed to be omitted is enclosed in 
black brackets, new matter is printed in italic, existing law 
in which no change is proposed is shown in roman):

PUBLIC HEALTH SERVICE ACT

           *       *       *       *       *       *       *



     Subpart IX--Support of Graduate Medical Education Programs in 
                          Children's Hospitals


SEC. 340E. PROGRAM OF PAYMENTS TO CHILDREN'S HOSPITALS THAT OPERATE 
                    GRADUATE MEDICAL EDUCATION PROGRAMS.

    (a) Payments.--The Secretary shall make two payments under 
this section to each children's hospital for each of fiscal 
years 2000 through [2005] 2010, one for the direct expenses and 
the other for indirect expenses associated with operating 
approved graduate medical residency training programs. The 
Secretary shall promulgate regulations pursuant to the 
rulemaking requirements of title 5, United States Code, which 
shall govern payments made under this subpart.
    (b) Amount of Payments.--
          (1) In general.--* * *

           *       *       *       *       *       *       *

    (c) Amount of Payment for Direct Graduate Medical 
Education.--
          (1) In general.--* * *
                  (A) * * *
                  (B) the average number of full-time 
                equivalent residents in the hospital's graduate 
                approved medical residency training programs 
                (as determined under section 1886(h)(4) of the 
                Social Security Act but without giving effect 
                to section 1886(h)(7) of such Act) during the 
                fiscal year.
          (2) Updated per resident amount for direct graduate 
        medical education.--* * *
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Application to individual hospitals.--* * 
                *
                          (i) * * *
                          (ii) by multiplying the wage-related 
                        portion by the factor [described in 
                        subparagraph (C)(ii)] applied under 
                        section 1886(d)(3)(E) of the Social 
                        Security Act for discharges occurring 
                        during the preceding fiscal year for 
                        the hospitals area; and

           *       *       *       *       *       *       *

    (e) Making of Payments.--
          (1) Interim payments.--* * *
          (2) Withholding.--[The Secretary shall withhold up to 
        25 percent from each interim installment for direct and 
        indirect graduate medical education paid under 
        paragraph (1).] The Secretary shall withhold up to 25 
        percent from each interim installment for direct and 
        indirect graduate medical education paid under 
        paragraph (1) as necessary to ensure a hospital will 
        not be overpaid on an interim basis.
          (3) Reconciliation.--Prior to the end of each fiscal 
        year, the Secretary shall determine any changes to the 
        number of residents reported by a hospital in the 
        application of the hospital for the current fiscal year 
        to determine the final amount payable to the hospital 
        for the current fiscal year for both direct expense and 
        indirect expense amounts. Based on such determination, 
        the Secretary shall recoup any overpayments [made to 
        pay] made and pay any balance due to the extent 
        possible. The final amount so determined shall be 
        considered a final intermediary determination for the 
        purposes of section 1878 of the Social Security Act and 
        shall be subject to administrative and judicial review 
        under that section in the same manner as the amount of 
        payment under section 1186(d) of such Act is subject to 
        review under such section.
    (f) Authorization of Appropriations.--
          (1) Direct Graduate Medical Education.--
                  (A) In general.--There are hereby authorized 
                to be appropriated, out of any money in the 
                Treasury not otherwise appropriated, for 
                payments under subsection (b)(1)(A)--
                          (i) for fiscal year 2000, 
                        $90,000,000;
                          (ii) for fiscal year 2001, 
                        $95,000,000; [and]
                          (iii) for each of the fiscal years 
                        2002 through 2005, such sums as may be 
                        necessary[.];
                          (iv) for fiscal year 2006, 
                        $110,000,000; and
                          (v) for each of fiscal years 2007 
                        through 2010, such sums as may be 
                        necessary.

           *       *       *       *       *       *       *

          (2) Indirect medical education.--[There are hereby 
        authorized] There are authorized to be appropriated, 
        out of any money in the Treasury not otherwise 
        appropriated, for payments under subsection 
        [(b)(1)(A)--] (b)(1)(B)--
                  (A) for fiscal year 2000, $190,000,000;
                  (B) for fiscal year 2001, $190,000,000; [and]
                  (C) for each of the fiscal years 2002 through 
                2005, such sums as may be necessary[.];
                  (D) for fiscal year 2006, $220,000,000; and
                  (E) for each of fiscal years 2007 through 
                2010, such sums as may be necessary.

           *       *       *       *       *       *       *