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110th Congress                                            Rept. 110-284
 1st Sessio          HOUSE OF REPRESENTATIVES                 Part 1
_______________________________________________________________________

         CHILDREN'S HEALTH AND MEDICARE PROTECTION ACT OF 2007

                               __________

                              R E P O R T

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3162]




  Filed on August 1 (legislative day, July 31), 2007.--Ordered to be 
                                printed


                                 ------


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110th Congress                                            Rept. 110-284
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================
 
         CHILDREN'S HEALTH AND MEDICARE PROTECTION ACT OF 2007

                                _______
                                

  Filed on August 1 (legislative day, July 31), 2007.--Ordered to be 
                                printed

                                _______
                                

    Mr. Rangel, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3162]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3162) to amend titles XVIII, XIX, and XXI of the 
Social Security Act to extend and improve the children's health 
insurance program, to improve beneficiary protections under the 
Medicare, Medicaid, and the CHIP program, and for other 
purposes, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.

                            C O N T E N T S

                                                                   Page
  I. Introduction...................................................121
   A. Purpose and Summary...........................................121
   B. Background and Need for Legislation...........................121
   C. Legislative History...........................................124
 II. Explanation of Provisions......................................127
   A. Title II--Medicare Beneficiary Improvements...................127
   B. Title III--Physician's Service Payment Reform.................158
   C. Title IV--Medicare Advantage Reforms..........................178
   D. Title V--Provisions Relating to Medicare Part A...............200
   E. Title VI--Other Provisions Relating to Medicare Part B........215
   F. Title VII--Provisions Relating to Medicare Parts A and B......244
   G. Title IX--Miscellaneous.......................................249
   H. Title X--Revenues.............................................264
III. Votes of the Committee.........................................271
 IV. Budget Effects of the Bill.....................................284
  V. Other Matters Required to be Discussed Under House Rules.......298
 VI. Changes in Existing Law Made by the Bill, as Reported..........299
VII. Views..........................................................553

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Children's Health 
and Medicare Protection Act of 2007''.
  (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.

              TITLE I--CHILDREN'S HEALTH INSURANCE PROGRAM

Sec. 100.  Purpose.

                          Subtitle A--Funding

Sec. 101. Establishment of new base CHIP allotments.
Sec. 102. 2-year initial availability of CHIP allotments.
Sec. 103. Redistribution of unused allotments to address State funding 
shortfalls.
Sec. 104. Extension of option for qualifying States.

  Subtitle B--Improving Enrollment and Retention of Eligible Children

Sec. 111. CHIP performance bonus payment to offset additional 
enrollment costs resulting from enrollment and retention efforts.
Sec. 112. State option to rely on findings from an express lane agency 
to conduct simplified eligibility determinations.
Sec. 113. Application of medicaid outreach procedures to all children 
and pregnant women.
Sec. 114. Encouraging culturally appropriate enrollment and retention 
practices.

                          Subtitle C--Coverage

Sec. 121. Ensuring child-centered coverage.
Sec. 122. Improving benchmark coverage options.
Sec. 123. Premium grace period.

                        Subtitle D--Populations

Sec. 131. Optional coverage of older children under Medicaid and CHIP.
Sec. 132. Optional coverage of legal immigrants under the Medicaid 
program and CHIP.
Sec. 133. State option to expand or add coverage of certain pregnant 
women under CHIP.
Sec. 134. Limitation on waiver authority to cover adults.

                           Subtitle E--Access

Sec. 141. Children's Access, Payment, and Equality Commission.
Sec. 142. Model of Interstate coordinated enrollment and coverage 
process.
Sec. 143. Medicaid citizenship documentation requirements.
Sec. 144. Access to dental care for children.
Sec. 145. Prohibiting initiation of new health opportunity account 
demonstration programs.

               Subtitle F--Quality and Program Integrity

Sec. 151. Pediatric health quality measurement program.
Sec. 152. Application of certain managed care quality safeguards to 
CHIP.
Sec. 153. Updated Federal evaluation of CHIP.
Sec. 154. Access to records for IG and GAO audits and evaluations.
Sec. 155. References to title XXI.
Sec. 156. Reliance on law; exception for State legislation.

              TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS

                  Subtitle A--Improvements in Benefits

Sec. 201. Coverage and waiver of cost-sharing for preventive services.
Sec. 202. Waiver of deductible for colorectal cancer screening tests 
regardless of coding, subsequent diagnosis, or ancillary tissue 
removal.
Sec. 203. Parity for mental health coinsurance.

Subtitle B--Improving, Clarifying, and Simplifying Financial Assistance 
                 for Low Income Medicare Beneficiaries

Sec. 211. Improving assets tests for Medicare Savings Program and low-
income subsidy program.
Sec. 212. Making QI program permanent and expanding eligibility.
Sec. 213. Eliminating barriers to enrollment.
Sec. 214. Eliminating application of estate recovery.
Sec. 215. Elimination of part D cost-sharing for certain non-
institutionalized full-benefit dual eligible individuals.
Sec. 216. Exemptions from income and resources for determination of 
eligibility for low-income subsidy.
Sec. 217. Cost-sharing protections for low-income subsidy-eligible 
individuals.
Sec. 218. Intelligent assignment in enrollment.

              Subtitle C--Part D Beneficiary Improvements

Sec. 221. Including costs incurred by AIDS drug assistance programs and 
Indian Health Service in providing prescription drugs toward the annual 
out of pocket threshold under Part D.
Sec. 222. Permitting mid-year changes in enrollment for formulary 
changes adversely impact an enrollee.
Sec. 223. Removal of exclusion of benzodiazepines from required 
coverage under the Medicare prescription drug program.
Sec. 224. Permitting updating drug compendia under part D using part B 
update process.
Sec. 225. Codification of special protections for six protected drug 
classifications.
Sec. 226. Elimination of Medicare part D late enrollment penalties paid 
by low-income subsidy-eligible individuals.
Sec. 227. Special enrollment period for subsidy eligible individuals.

                Subtitle D--Reducing Health Disparities

Sec. 231. Medicare data on race, ethnicity, and primary language.
Sec. 232. Ensuring effective communication in Medicare.
Sec. 233. Demonstration to promote access for Medicare beneficiaries 
with limited English proficiency by providing reimbursement for 
culturally and linguistically appropriate services.
Sec. 234. Demonstration to improve care to previously uninsured.
Sec. 235. Office of the Inspector General report on compliance with and 
enforcement of national standards on culturally and linguistically 
appropriate services (CLAS) in medicare.
Sec. 236. IOM report on impact of language access services.
Sec. 237. Definitions.

             TITLE III--PHYSICIANS' SERVICE PAYMENT REFORM

Sec. 301. Establishment of separate target growth rates for service 
categories.
Sec. 302. Improving accuracy of relative values under the Medicare 
physician fee schedule.
Sec. 303. Feedback mechanism on practice patterns.
Sec. 304. Payments for efficient areas.
Sec. 305. Recommendations on refining the physician fee schedule.
Sec. 306. Improved and expanded medical home demonstration project.
Sec. 307. Repeal of Physician Assistance and Quality Initiative Fund.
Sec. 308. Adjustment to Medicare payment localities.
Sec. 309. Payment for imaging services.
Sec. 310. Reducing frequency of meetings of the Practicing Physicians 
Advisory Council.

                  TITLE IV--MEDICARE ADVANTAGE REFORMS

                       Subtitle A--Payment Reform

Sec. 401. Equalizing payments between Medicare Advantage plans and fee-
for-service Medicare.

                  Subtitle B--Beneficiary Protections

Sec. 411. NAIC development of marketing, advertising, and related 
protections.
Sec. 412. Limitation on out-of-pocket costs for individual health 
services.
Sec. 413. MA plan enrollment modifications.
Sec. 414. Information for beneficiaries on MA plan administrative 
costs.

                Subtitle C--Quality and Other Provisions

Sec. 421. Requiring all MA plans to meet equal standards.
Sec. 422. Development of new quality reporting measures on racial 
disparities.
Sec. 423. Strengthening audit authority.
Sec. 424. Improving risk adjustment for MA payments.
Sec. 425. Eliminating special treatment of private fee-for-service 
plans.
Sec. 426. Renaming of Medicare Advantage program.

                  Subtitle D--Extension of Authorities

Sec. 431. Extension and revision of authority for special needs plans 
(SNPs).
Sec. 432. Extension and revision of authority for Medicare reasonable 
cost contracts.

            TITLE V--PROVISIONS RELATING TO MEDICARE PART A

Sec. 501. Inpatient hospital payment updates.
Sec. 502. Payment for inpatient rehabilitation facility (IRF) services.
Sec. 503. Long-term care hospitals.
Sec. 504. Increasing the DSH adjustment cap.
Sec. 505. PPS-exempt cancer hospitals.
Sec. 506. Skilled nursing facility payment update.
Sec. 507. Revocation of unique deeming authority of the Joint 
Commission for the Accreditation of Healthcare Organizations.
Sec. 508. Treatment of Medicare hospital reclassifications.
Sec. 509. Medicare critical access hospital designations.

         TITLE VI--OTHER PROVISIONS RELATING TO MEDICARE PART B

             Subtitle A--Payment and Coverage Improvements

Sec. 601. Payment for therapy services.
Sec. 602. Medicare separate definition of outpatient speech-language 
pathology services.
Sec. 603. Increased reimbursement rate for certified nurse-midwives.
Sec. 604. Adjustment in outpatient hospital fee schedule increase 
factor.
Sec. 605. Exception to 60-day limit on Medicare substitute billing 
arrangements in case of physicians ordered to active duty in the Armed 
Forces.
Sec. 606. Excluding clinical social worker services from coverage under 
the medicare skilled nursing facility prospective payment system and 
consolidated payment.
Sec. 607. Coverage of marriage and family therapist services and mental 
health counselor services.
Sec. 608. Rental and purchase of power-driven wheelchairs.
Sec. 609. Rental and purchase of oxygen equipment.
Sec. 610. Adjustment for Medicare mental health services.
Sec. 611. Extension of brachytherapy special rule.
Sec. 612. Payment for part B drugs.

       Subtitle B--Extension of Medicare Rural Access Protections

Sec. 621. 2-year extension of floor on medicare work geographic 
adjustment.
Sec. 622. 2-year extension of special treatment of certain physician 
pathology services under Medicare.
Sec. 623. 2-year extension of medicare reasonable costs payments for 
certain clinical diagnostic laboratory tests furnished to hospital 
patients in certain rural areas.
Sec. 624. 2-year extension of Medicare incentive payment program for 
physician scarcity areas.
Sec. 625. 2-year extension of medicare increase payments for ground 
ambulance services in rural areas.
Sec. 626. Extending hold harmless for small rural hospitals under the 
HOPD prospective payment system.

              Subtitle C--End Stage Renal Disease Program

Sec. 631. Chronic kidney disease demonstration projects.
Sec. 632. Medicare coverage of kidney disease patient education 
services.
Sec. 633. Required training for patient care dialysis technicians.
Sec. 634. MedPAC report on treatment modalities for patients with 
kidney failure.
Sec. 635. Adjustment for erythropoietin stimulating agents (ESAs).
Sec. 636. Site neutral composite rate.
Sec. 637. Development of ESRD bundling system and quality incentive 
payments.
Sec. 638. MedPAC report on ESRD bundling system.
Sec. 639. OIG study and report on erythropoietin.

                       Subtitle D--Miscellaneous

Sec. 651. Limitation on exception to the prohibition on certain 
physician referrals for hospitals.

        TITLE VII--PROVISIONS RELATING TO MEDICARE PARTS A AND B

Sec. 701. Home health payment update for 2008.
Sec. 702. 2-year extension of temporary Medicare payment increase for 
home health services furnished in a rural area.
Sec. 703. Extension of Medicare secondary payer for beneficiaries with 
end stage renal disease for large group plans.
Sec. 704. Plan for Medicare payment adjustments for never events.
Sec. 705. Reinstatement of residency slots.

                          TITLE VIII--MEDICAID

                Subtitle A--Protecting Existing Coverage

Sec. 801. Modernizing transitional Medicaid.
Sec. 802. Family planning services.
Sec. 803. Authority to continue providing adult day health services 
approved under a State Medicaid plan.
Sec. 804. State option to protect community spouses of individuals with 
disabilities.
Sec. 805. County medicaid health insuring organizations .

                          Subtitle B--Payments

Sec. 811. Payments for Puerto Rico and territories.
Sec. 812. Medicaid drug rebate.
Sec. 813. Adjustment in computation of Medicaid FMAP to disregard an 
extraordinary employer pension contribution.
Sec. 814. Moratorium on certain payment restrictions.
Sec. 815. Tennessee DSH.
Sec. 816. Clarification treatment of regional medical center.

                       Subtitle C--Miscellaneous

Sec. 821. Demonstration project for employer buy-in.
Sec. 822. Diabetes grants.
Sec. 823. Technical correction.

                        TITLE IX--MISCELLANEOUS

Sec. 901.  Medicare Payment Advisory Commission status.
Sec. 902. Repeal of trigger provision.
Sec. 903. Repeal of comparative cost adjustment (CCA) program.
Sec. 904. Comparative effectiveness research.
Sec. 905. Implementation of Health information technology (IT) under 
Medicare.
Sec. 906. Development, reporting, and use of health care measures.
Sec. 907. Improvements to the Medigap program.
Sec. 908. Implementation funding.

                           TITLE X--REVENUES

Sec. 1001. Increase in rate of excise taxes on tobacco products and 
cigarette papers and tubes.
Sec. 1002. Exemption for emergency medical services transportation.

              TITLE I--CHILDREN'S HEALTH INSURANCE PROGRAM

SEC. 100. PURPOSE.

  It is the purpose of this title to provide dependable and stable 
funding for children's health insurance under titles XXI and XIX of the 
Social Security Act in order to enroll all six million uninsured 
children who are eligible, but not enrolled, for coverage today through 
such titles.

                          Subtitle A--Funding

SEC. 101. ESTABLISHMENT OF NEW BASE CHIP ALLOTMENTS.

  Section 2104 of the Social Security Act (42 U.S.C. 1397dd) is 
amended--
          (1) in subsection (a)--
                  (A) in paragraph (9), by striking ``and'' at the end;
                  (B) in paragraph (10), by striking the period at the 
                end and inserting ``; and''; and
                  (C) by adding at the end the following new paragraph:
          ``(11) for fiscal year 2008 and each succeeding fiscal year, 
        the sum of the State allotments provided under subsection (i) 
        for such fiscal year.''; and
          (2) in subsections (b)(1) and (c)(1), by striking 
        ``subsection (d)'' and inserting ``subsections (d) and (i)''; 
        and
          (3) by adding at the end the following new subsection:
  ``(i) Allotments for States and Territories Beginning With Fiscal 
Year 2008.--
          ``(1) General allotment computation.--Subject to the 
        succeeding provisions of this subsection, the Secretary shall 
        compute a State allotment for each State for each fiscal year 
        as follows:
                  ``(A) For fiscal year 2008.--For fiscal year 2008, 
                the allotment of a State is equal to the greater of--
                          ``(i) the State projection (in its submission 
                        on forms CMS--21B and CMS--37 for May 2007) of 
                        Federal payments to the State under this title 
                        for such fiscal year, except that, in the case 
                        of a State that has enacted legislation to 
                        modify its State child health plan during 2007, 
                        the State may substitute its projection in its 
                        submission on forms CMS--21B and CMS--37 for 
                        August 2007, instead of such forms for May 
                        2007; or
                          ``(ii) the allotment of the State under this 
                        section for fiscal year 2007 multiplied by the 
                        allotment increase factor under paragraph (2) 
                        for fiscal year 2008.
                  ``(B) Inflation update for fiscal year 2009 and each 
                second succeeding fiscal year.--For fiscal year 2009 
                and each second succeeding fiscal year, the allotment 
                of a State is equal to the amount of the State 
                allotment under this paragraph for the previous fiscal 
                year multiplied by the allotment increase factor under 
                paragraph (2) for the fiscal year involved.
                  ``(C) Rebasing in fiscal year 2010 and each second 
                succeeding fiscal year.--For fiscal year 2010 and each 
                second succeeding fiscal year, the allotment of a State 
                is equal to the Federal payments to the State that are 
                attributable to (and countable towards) the total 
                amount of allotments available under this section to 
                the State (including allotments made available under 
                paragraph (3) as well as amounts redistributed to the 
                State) in the previous fiscal year multiplied by the 
                allotment increase factor under paragraph (2) for the 
                fiscal year involved.
                  ``(D) Special rules for territories.--Notwithstanding 
                the previous subparagraphs, the allotment for a State 
                that is not one of the 50 States or the District of 
                Columbia for fiscal year 2008 and for a succeeding 
                fiscal year is equal to the Federal payments provided 
                to the State under this title for the previous fiscal 
                year multiplied by the allotment increase factor under 
                paragraph (2) for the fiscal year involved (but 
                determined by applying under paragraph (2)(B) as if the 
                reference to `in the State' were a reference to `in the 
                United States').
          ``(2) Allotment increase factor.--The allotment increase 
        factor under this paragraph for a fiscal year is equal to the 
        product of the following:
                  ``(A) Per capita health care growth factor.--1 plus 
                the percentage increase in the projected per capita 
                amount of National Health Expenditures from the 
                calendar year in which the previous fiscal year ends to 
                the calendar year in which the fiscal year involved 
                ends, as most recently published by the Secretary 
                before the beginning of the fiscal year.
                  ``(B) Child population growth factor.--1 plus the 
                percentage increase (if any) in the population of 
                children under 19 years of age in the State from July 1 
                in the previous fiscal year to July 1 in the fiscal 
                year involved, as determined by the Secretary based on 
                the most recent published estimates of the Bureau of 
                the Census before the beginning of the fiscal year 
                involved, plus 1 percentage point
          ``(3) Performance-based shortfall adjustment.--
                  ``(A) In general.--If a State's expenditures under 
                this title in a fiscal year (beginning with fiscal year 
                2008) exceed the total amount of allotments available 
                under this section to the State in the fiscal year 
                (determined without regard to any redistribution it 
                receives under subsection (f) that is available for 
                expenditure during such fiscal year, but including any 
                carryover from a previous fiscal year) and if the 
                average monthly unduplicated number of children 
                enrolled under the State plan under this title 
                (including children receiving health care coverage 
                through funds under this title pursuant to a waiver 
                under section 1115) during such fiscal year exceeds its 
                target average number of such enrollees (as determined 
                under subparagraph (B)) for that fiscal year, the 
                allotment under this section for the State for the 
                subsequent fiscal year (or, pursuant to subparagraph 
                (F), for the fiscal year involved) shall be increased 
                by the product of--
                          ``(i) the amount by which such average 
                        monthly caseload exceeds such target number of 
                        enrollees; and
                          ``(ii) the projected per capita expenditures 
                        under the State child health plan (as 
                        determined under subparagraph (C) for the 
                        original fiscal year involved), multiplied by 
                        the enhanced FMAP (as defined in section 
                        2105(b)) for the State and fiscal year involved
                  ``(B) Target average number of child enrollees.--In 
                this subsection, the target average number of child 
                enrollees for a State--
                          ``(i) for fiscal year 2008 is equal to the 
                        monthly average unduplicated number of children 
                        enrolled in the State child health plan under 
                        this title (including such children receiving 
                        health care coverage through funds under this 
                        title pursuant to a waiver under section 1115) 
                        during fiscal year 2007 increased by the 
                        population growth for children in that State 
                        for the year ending on June 30, 2006 (as 
                        estimated by the Bureau of the Census) plus 1 
                        percentage point; or
                          ``(ii) for a subsequent fiscal year is equal 
                        to the target average number of child enrollees 
                        for the State for the previous fiscal year 
                        increased by the population growth for children 
                        in that State for the year ending on June 30 
                        before the beginning of the fiscal year (as 
                        estimated by the Bureau of the Census) plus 1 
                        percentage point.
                  ``(C) Projected per capita expenditures.--For 
                purposes of subparagraph (A)(ii), the projected per 
                capita expenditures under a State child health plan--
                          ``(i) for fiscal year 2008 is equal to the 
                        average per capita expenditures (including both 
                        State and Federal financial participation) 
                        under such plan for the targeted low-income 
                        children counted in the average monthly 
                        caseload for purposes of this paragraph during 
                        fiscal year 2007, increased by the annual 
                        percentage increase in the per capita amount of 
                        National Health Expenditures (as estimated by 
                        the Secretary) for 2008; or
                          ``(ii) for a subsequent fiscal year is equal 
                        to the projected per capita expenditures under 
                        such plan for the previous fiscal year (as 
                        determined under clause (i) or this clause) 
                        increased by the annual percentage increase in 
                        the per capita amount of National Health 
                        Expenditures (as estimated by the Secretary) 
                        for the year in which such subsequent fiscal 
                        year ends.
                  ``(D) Availability.--Notwithstanding subsection (e), 
                an increase in allotment under this paragraph shall 
                only be available for expenditure during the fiscal 
                year in which it is provided.
                  ``(E) No redistribution of performance-based 
                shortfall adjustment.--In no case shall any increase in 
                allotment under this paragraph for a State be subject 
                to redistribution to other States.
                  ``(F) Interim allotment adjustment.--The Secretary 
                shall develop a process to administer the performance-
                based shortfall adjustment in a manner so it is applied 
                to (and before the end of) the fiscal year (rather than 
                the subsequent fiscal year) involved for a State that 
                the Secretary estimates will be in shortfall and will 
                exceed its enrollment target for that fiscal year.
                  ``(G) Periodic auditing.--The Comptroller General of 
                the United States shall periodically audit the accuracy 
                of data used in the computation of allotment 
                adjustments under this paragraph. Based on such audits, 
                the Comptroller General shall make such recommendations 
                to the Congress and the Secretary as the Comptroller 
                General deems appropriate.
          ``(4) Continued reporting.--For purposes of paragraph (3) and 
        subsection (f), the State shall submit to the Secretary the 
        State's projected Federal expenditures, even if the amount of 
        such expenditures exceeds the total amount of allotments 
        available to the State in such fiscal year.''.

SEC. 102. 2-YEAR INITIAL AVAILABILITY OF CHIP ALLOTMENTS.

  Section 2104(e) of the Social Security Act (42 U.S.C. 1397dd(e)) is 
amended to read as follows:
  ``(e) Availability of Amounts Allotted.--
          ``(1) In general.--Except as provided in paragraph (2) and 
        subsection (i)(3)(D), amounts allotted to a State pursuant to 
        this section--
                  ``(A) for each of fiscal years 1998 through 2007, 
                shall remain available for expenditure by the State 
                through the end of the second succeeding fiscal year; 
                and
                  ``(B) for fiscal year 2008 and each fiscal year 
                thereafter, shall remain available for expenditure by 
                the State through the end of the succeeding fiscal 
                year.
          ``(2) Availability of amounts redistributed.--Amounts 
        redistributed to a State under subsection (f) shall be 
        available for expenditure by the State through the end of the 
        fiscal year in which they are redistributed, except that funds 
        so redistributed to a State that are not expended by the end of 
        such fiscal year shall remain available after the end of such 
        fiscal year and shall be available in the following fiscal year 
        for subsequent redistribution under such subsection.''.

SEC. 103. REDISTRIBUTION OF UNUSED ALLOTMENTS TO ADDRESS STATE FUNDING 
                    SHORTFALLS.

  Section 2104(f) of the Social Security Act (42 U.S.C. 1397dd(f)) is 
amended--
          (1) by striking ``The Secretary'' and inserting the 
        following:
          ``(1) In general.--The Secretary'';
          (2) by striking ``States that have fully expended the amount 
        of their allotments under this section.'' and inserting 
        ``States that the Secretary determines with respect to the 
        fiscal year for which unused allotments are available for 
        redistribution under this subsection, are shortfall States 
        described in paragraph (2) for such fiscal year, but not to 
        exceed the amount of the shortfall described in paragraph 
        (2)(A) for each such State (as may be adjusted under paragraph 
        (2)(C)). The amount of allotments not expended or redistributed 
        under the previous sentence shall remain available for 
        redistribution in the succeeding fiscal year.''; and
          (3) by adding at the end the following new paragraph:
          ``(2) Shortfall states described.--
                  ``(A) In general.--For purposes of paragraph (1), 
                with respect to a fiscal year, a shortfall State 
                described in this subparagraph is a State with a State 
                child health plan approved under this title for which 
                the Secretary estimates on the basis of the most recent 
                data available to the Secretary, that the projected 
                expenditures under such plan for the State for the 
                fiscal year will exceed the sum of--
                          ``(i) the amount of the State's allotments 
                        for any preceding fiscal years that remains 
                        available for expenditure and that will not be 
                        expended by the end of the immediately 
                        preceding fiscal year;
                          ``(ii) the amount (if any) of the performance 
                        based adjustment under subsection (i)(3)(A); 
                        and
                          ``(iii) the amount of the State's allotment 
                        for the fiscal year.
                  ``(B) Proration rule.--If the amounts available for 
                redistribution under paragraph (1) for a fiscal year 
                are less than the total amounts of the estimated 
                shortfalls determined for the year under subparagraph 
                (A), the amount to be redistributed under such 
                paragraph for each shortfall State shall be reduced 
                proportionally.
                  ``(C) Retrospective adjustment.--The Secretary may 
                adjust the estimates and determinations made under 
                paragraph (1) and this paragraph with respect to a 
                fiscal year as necessary on the basis of the amounts 
                reported by States not later than November 30 of the 
                succeeding fiscal year, as approved by the 
                Secretary.''.

SEC. 104. EXTENSION OF OPTION FOR QUALIFYING STATES.

  Section 2105(g)(1)(A) of the Social Security Act (42 U.S.C. 
1397ee(g)(1)(A)) is amended by inserting after ``or 2007'' the 
following: ``or 30 percent of any allotment under section 2104 for any 
subsequent fiscal year''.

  Subtitle B--Improving Enrollment and Retention of Eligible Children

SEC. 111. CHIP PERFORMANCE BONUS PAYMENT TO OFFSET ADDITIONAL 
                    ENROLLMENT COSTS RESULTING FROM ENROLLMENT AND 
                    RETENTION EFFORTS.

  Section 2105(a) of the Social Security Act (42 U.S.C. 1397ee(a)) is 
amended by adding at the end the following new paragraphs:
          ``(3) Performance bonus payment to offset additional medicaid 
        and chip child enrollment costs resulting from enrollment and 
        retention efforts.--
                  ``(A) In general.--In addition to the payments made 
                under paragraph (1), for each fiscal year (beginning 
                with fiscal year 2008) the Secretary shall pay to each 
                State that meets the condition under paragraph (4) for 
                the fiscal year, an amount equal to the amount 
                described in subparagraph (B) for the State and fiscal 
                year. The payment under this paragraph shall be made, 
                to a State for a fiscal year, as a single payment not 
                later than the last day of the first calendar quarter 
                of the following fiscal year.
                  ``(B) Amount.--The amount described in this 
                subparagraph for a State for a fiscal year is equal to 
                the sum of the following amounts:
                          ``(i) For above baseline medicaid child 
                        enrollment costs.--
                                  ``(I) First tier above baseline 
                                medicaid enrollees.--An amount equal to 
                                the number of first tier above baseline 
                                child enrollees (as determined under 
                                subparagraph (C)(i)) under title XIX 
                                for the State and fiscal year 
                                multiplied by 35 percent of the 
                                projected per capita State Medicaid 
                                expenditures (as determined under 
                                subparagraph (D)(i)) for the State and 
                                fiscal year under title XIX.
                                  ``(II) Second tier above baseline 
                                medicaid enrollees .--An amount equal 
                                to the number of second tier above 
                                baseline child enrollees (as determined 
                                under subparagraph (C)(ii)) under title 
                                XIX for the State and fiscal year 
                                multiplied by 90 percent of the 
                                projected per capita State Medicaid 
                                expenditures (as determined under 
                                subparagraph (D)(i)) for the State and 
                                fiscal year under title XIX.
                          ``(ii) For above baseline chip enrollment 
                        costs.--
                                  ``(I) First tier above baseline chip 
                                enrollees.--An amount equal to the 
                                number of first tier above baseline 
                                child enrollees under this title (as 
                                determined under subparagraph (C)(i)) 
                                for the State and fiscal year 
                                multiplied by 5 percent of the 
                                projected per capita State CHIP 
                                expenditures (as determined under 
                                subparagraph (D)(ii)) for the State and 
                                fiscal year under this title.
                                  ``(II) Second tier above baseline 
                                chip enrollees.--An amount equal to the 
                                number of second tier above baseline 
                                child enrollees under this title (as 
                                determined under subparagraph (C)(ii)) 
                                for the State and fiscal year 
                                multiplied by 75 percent of the 
                                projected per capita State CHIP 
                                expenditures (as determined under 
                                subparagraph (D)(ii)) for the State and 
                                fiscal year under this title.
                  ``(C) Number of first and second tier above baseline 
                child enrollees; baseline number of child enrollees.--
                For purposes of this paragraph:
                          ``(i) First tier above baseline child 
                        enrollees.--The number of first tier above 
                        baseline child enrollees for a State for a 
                        fiscal year under this title or title XIX is 
                        equal to the number (if any, as determined by 
                        the Secretary) by which--
                                  ``(I) the monthly average 
                                unduplicated number of qualifying 
                                children (as defined in subparagraph 
                                (E)) enrolled during the fiscal year 
                                under the State child health plan under 
                                this title or under the State plan 
                                under title XIX, respectively; exceeds
                                  ``(II) the baseline number of 
                                enrollees described in clause (iii) for 
                                the State and fiscal year under this 
                                title or title XIX, respectively;
                        but not to exceed 3 percent (in the case of 
                        title XIX) or 7.5 percent (in the case of this 
                        title) of the baseline number of enrollees 
                        described in subclause (II).
                          ``(ii) Second tier above baseline child 
                        enrollees.--The number of second tier above 
                        baseline child enrollees for a State for a 
                        fiscal year under this title or title XIX is 
                        equal to the number (if any, as determined by 
                        the Secretary) by which--
                                  ``(I) the monthly average 
                                unduplicated number of qualifying 
                                children (as defined in subparagraph 
                                (E)) enrolled during the fiscal year 
                                under this title or under title XIX, 
                                respectively, as described in clause 
                                (i)(I); exceeds
                                  ``(II) the sum of the baseline number 
                                of child enrollees described in clause 
                                (iii) for the State and fiscal year 
                                under this title or title XIX, 
                                respectively, as described in clause 
                                (i)(II), and the maximum number of 
                                first tier above baseline child 
                                enrollees for the State and fiscal year 
                                under this title or title XIX, 
                                respectively, as determined under 
                                clause (i).
                          ``(iii) Baseline number of child enrollees.--
                        The baseline number of child enrollees for a 
                        State under this title or title XIX--
                                  ``(I) for fiscal year 2008 is equal 
                                to the monthly average unduplicated 
                                number of qualifying children enrolled 
                                in the State child health plan under 
                                this title or in the State plan under 
                                title XIX, respectively, during fiscal 
                                year 2007 increased by the population 
                                growth for children in that State for 
                                the year ending on June 30, 2006 (as 
                                estimated by the Bureau of the Census) 
                                plus 1 percentage point; or
                                  ``(II) for a subsequent fiscal year 
                                is equal to the baseline number of 
                                child enrollees for the State for the 
                                previous fiscal year under this title 
                                or title XIX, respectively, increased 
                                by the population growth for children 
                                in that State for the year ending on 
                                June 30 before the beginning of the 
                                fiscal year (as estimated by the Bureau 
                                of the Census) plus 1 percentage point.
                  ``(D) Projected per capita state expenditures.--For 
                purposes of subparagraph (B)--
                          ``(i) Projected per capita state medicaid 
                        expenditures.--The projected per capita State 
                        Medicaid expenditures for a State and fiscal 
                        year under title XIX is equal to the average 
                        per capita expenditures (including both State 
                        and Federal financial participation) for 
                        children under the State plan under such title, 
                        including under waivers but not including such 
                        children eligible for assistance by virtue of 
                        the receipt of benefits under title XVI, for 
                        the most recent fiscal year for which actual 
                        data are available (as determined by the 
                        Secretary), increased (for each subsequent 
                        fiscal year up to and including the fiscal year 
                        involved) by the annual percentage increase in 
                        per capita amount of National Health 
                        Expenditures (as estimated by the Secretary) 
                        for the calendar year in which the respective 
                        subsequent fiscal year ends and multiplied by a 
                        State matching percentage equal to 100 percent 
                        minus the Federal medical assistance percentage 
                        (as defined in section 1905(b)) for the fiscal 
                        year involved.
                          ``(ii) Projected per capita state chip 
                        expenditures.--The projected per capita State 
                        CHIP expenditures for a State and fiscal year 
                        under this title is equal to the average per 
                        capita expenditures (including both State and 
                        Federal financial participation) for children 
                        under the State child health plan under this 
                        title, including under waivers, for the most 
                        recent fiscal year for which actual data are 
                        available (as determined by the Secretary), 
                        increased (for each subsequent fiscal year up 
                        to and including the fiscal year involved) by 
                        the annual percentage increase in per capita 
                        amount of National Health Expenditures (as 
                        estimated by the Secretary) for the calendar 
                        year in which the respective subsequent fiscal 
                        year ends and multiplied by a State matching 
                        percentage equal to 100 percent minus the 
                        enhanced FMAP (as defined in section 2105(b)) 
                        for the fiscal year involved.
                  ``(E) Qualifying children defined.--For purposes of 
                this subsection, the term `qualifying children' means, 
                with respect to this title or title XIX, children who 
                meet the eligibility criteria (including income, 
                categorical eligibility, age, and immigration status 
                criteria) in effect as of July 1, 2007, for enrollment 
                under this title or title XIX, respectively, taking 
                into account crtieria applied as of such date under 
                this title or title XIX, respectively, pursuant to a 
                waiver under section 1115.
          ``(4) Enrollment and retention provisions for children.--For 
        purposes of paragraph (3)(A), a State meets the condition of 
        this paragraph for a fiscal year if it is implementing at least 
        4 of the following enrollment and retention provisions 
        (treating each subparagraph as a separate enrollment and 
        retention provision) throughout the entire fiscal year:
                  ``(A) Continuous eligibility.--The State has elected 
                the option of continuous eligibility for a full 12 
                months for all children described in section 
                1902(e)(12) under title XIX under 19 years of age, as 
                well as applying such policy under its State child 
                health plan under this title.
                  ``(B) Liberalization of asset requirements.--The 
                State meets the requirement specified in either of the 
                following clauses:
                          ``(i) Elimination of asset test.--The State 
                        does not apply any asset or resource test for 
                        eligibility for children under title XIX or 
                        this title.
                          ``(ii) Administrative verification of 
                        assets.--The State--
                                  ``(I) permits a parent or caretaker 
                                relative who is applying on behalf of a 
                                child for medical assistance under 
                                title XIX or child health assistance 
                                under this title to declare and certify 
                                by signature under penalty of perjury 
                                information relating to family assets 
                                for purposes of determining and 
                                redetermining financial eligibility; 
                                and
                                  ``(II) takes steps to verify assets 
                                through means other than by requiring 
                                documentation from parents and 
                                applicants except in individual cases 
                                of discrepancies or where otherwise 
                                justified.
                  ``(C) Elimination of in-person interview 
                requirement.--The State does not require an application 
                of a child for medical assistance under title XIX (or 
                for child health assistance under this title), 
                including an application for renewal of such 
                assistance, to be made in person nor does the State 
                require a face-to-face interview, unless there are 
                discrepancies or individual circumstances justifying an 
                in-person application or face-to-face interview.
                  ``(D) Use of joint application for medicaid and 
                chip.--The application form and supplemental forms (if 
                any) and information verification process is the same 
                for purposes of establishing and renewing eligibility 
                for children for medical assistance under title XIX and 
                child health assistance under this title.
                  ``(E) Automatic renewal (use of administrative 
                renewal).--
                          ``(i) In general.--The State provides, in the 
                        case of renewal of a child's eligibility for 
                        medical assistance under title XIX or child 
                        health assistance under this title, a pre-
                        printed form completed by the State based on 
                        the information available to the State and 
                        notice to the parent or caretaker relative of 
                        the child that eligibility of the child will be 
                        renewed and continued based on such information 
                        unless the State is provided other information. 
                        Nothing in this clause shall be construed as 
                        preventing a State from verifying, through 
                        electronic and other means, the information so 
                        provided.
                          ``(ii) Satisfaction through demonstrated use 
                        of ex parte process.--A State shall be treated 
                        as satisfying the requirement of clause (i) if 
                        renewal of eligibility of children under title 
                        XIX or this title is determined without any 
                        requirement for an in-person interview, unless 
                        sufficient information is not in the State's 
                        possession and cannot be acquired from other 
                        sources (including other State agencies) 
                        without the participation of the applicant or 
                        the applicant's parent or caretaker relative.
                  ``(F) Presumptive eligibility for children.--The 
                State is implementing section 1920A under title XIX as 
                well as, pursuant to section 2107(e)(1), under this 
                title .
                  ``(G) Express lane.--The State is implementing the 
                option described in section 1902(e)(13) under title XIX 
                as well as, pursuant to section 2107(e)(1), under this 
                title.''.

SEC. 112. STATE OPTION TO RELY ON FINDINGS FROM AN EXPRESS LANE AGENCY 
                    TO CONDUCT SIMPLIFIED ELIGIBILITY DETERMINATIONS.

  (a) Medicaid.--Section 1902(e) of the Social Security Act (42 U.S.C. 
1396a(e)) is amended by adding at the end the following:
  ``(13) Express Lane Option.--
          ``(A) In general.--
                  ``(i) Option to use a finding from an express lane 
                agency.--At the option of the State, the State plan may 
                provide that in determining eligibility under this 
                title for a child (as defined in subparagraph (F)), the 
                State may rely on a finding made within a reasonable 
                period (as determined by the State) from an Express 
                Lane agency (as defined in subparagraph (E)) when it 
                determines whether a child satisfies one or more 
                components of eligibility for medical assistance under 
                this title. The State may rely on a finding from an 
                Express Lane agency notwithstanding sections 
                1902(a)(46)(B), 1903(x), and 1137(d) and any 
                differences in budget unit, disregard, deeming or other 
                methodology, if the following requirements are met:
                          ``(I) Prohibition on determining children 
                        ineligible for coverage.--If a finding from an 
                        Express Lane agency would result in a 
                        determination that a child does not satisfy an 
                        eligibility requirement for medical assistance 
                        under this title and for child health 
                        assistance under title XXI, the State shall 
                        determine eligibility for assistance using its 
                        regular procedures.
                          ``(II) Notice requirement.--For any child who 
                        is found eligible for medical assistance under 
                        the State plan under this title or child health 
                        assistance under title XXI and who is subject 
                        to premiums based on an Express Lane agency's 
                        finding of such child's income level, the State 
                        shall provide notice that the child may qualify 
                        for lower premium payments if evaluated by the 
                        State using its regular policies and of the 
                        procedures for requesting such an evaluation.
                          ``(III) Compliance with screen and enroll 
                        requirement.--The State shall satisfy the 
                        requirements under (A) and (B) of section 
                        2102(b)(3) (relating to screen and enroll) 
                        before enrolling a child in child health 
                        assistance under title XXI. At its option, the 
                        State may fulfill such requirements in 
                        accordance with either option provided under 
                        subparagraph (C) of this paragraph.
                  ``(ii) Option to apply to renewals and 
                redeterminations.--The State may apply the provisions 
                of this paragraph when conducting initial 
                determinations of eligibility, redeterminations of 
                eligibility, or both, as described in the State plan.
          ``(B) Rules of construction.--Nothing in this paragraph shall 
        be construed--
                  ``(i) to limit or prohibit a State from taking any 
                actions otherwise permitted under this title or title 
                XXI in determining eligibility for or enrolling 
                children into medical assistance under this title or 
                child health assistance under title XXI; or
                  ``(ii) to modify the limitations in section 
                1902(a)(5) concerning the agencies that may make a 
                determination of eligibility for medical assistance 
                under this title.
          ``(C) Options for satisfying the screen and enroll 
        requirement.--
                  ``(i) In general.--With respect to a child whose 
                eligibility for medical assistance under this title or 
                for child health assistance under title XXI has been 
                evaluated by a State agency using an income finding 
                from an Express Lane agency, a State may carry out its 
                duties under subparagraphs (A) and (B) of section 
                2102(b)(3) (relating to screen and enroll) in 
                accordance with either clause (ii) or clause (iii).
                  ``(ii) Establishing a screening threshold.--
                          ``(I) In general.--Under this clause, the 
                        State establishes a screening threshold set as 
                        a percentage of the Federal poverty level that 
                        exceeds the highest income threshold applicable 
                        under this title to the child by a minimum of 
                        30 percentage points or, at State option, a 
                        higher number of percentage points that 
                        reflects the value (as determined by the State 
                        and described in the State plan) of any 
                        differences between income methodologies used 
                        by the program administered by the Express Lane 
                        agency and the methodologies used by the State 
                        in determining eligibility for medical 
                        assistance under this title.
                          ``(II) Children with income not above 
                        threshold.--If the income of a child does not 
                        exceed the screening threshold, the child is 
                        deemed to satisfy the income eligibility 
                        criteria for medical assistance under this 
                        title regardless of whether such child would 
                        otherwise satisfy such criteria.
                          ``(III) Children with income above 
                        threshold.--If the income of a child exceeds 
                        the screening threshold, the child shall be 
                        considered to have an income above the Medicaid 
                        applicable income level described in section 
                        2110(b)(4) and to satisfy the requirement under 
                        section 2110(b)(1)(C) (relating to the 
                        requirement that CHIP matching funds be used 
                        only for children not eligible for Medicaid). 
                        If such a child is enrolled in child health 
                        assistance under title XXI, the State shall 
                        provide the parent, guardian, or custodial 
                        relative with the following:
                                  ``(aa) Notice that the child may be 
                                eligible to receive medical assistance 
                                under the State plan under this title 
                                if evaluated for such assistance under 
                                the State's regular procedures and 
                                notice of the process through which a 
                                parent, guardian, or custodial relative 
                                can request that the State evaluate the 
                                child's eligibility for medical 
                                assistance under this title using such 
                                regular procedures.
                                  ``(bb) A description of differences 
                                between the medical assistance provided 
                                under this title and child health 
                                assistance under title XXI, including 
                                differences in cost-sharing 
                                requirements and covered benefits.
                  ``(iii) Temporary enrollment in chip pending screen 
                and enroll.--
                          ``(I) In general.--Under this clause, a State 
                        enrolls a child in child health assistance 
                        under title XXI for a temporary period if the 
                        child appears eligible for such assistance 
                        based on an income finding by an Express Lane 
                        agency.
                          ``(II) Determination of eligibility.--During 
                        such temporary enrollment period, the State 
                        shall determine the child's eligibility for 
                        child health assistance under title XXI or for 
                        medical assistance under this title in 
                        accordance with this clause.
                          ``(III) Prompt follow up.--In making such a 
                        determination, the State shall take prompt 
                        action to determine whether the child should be 
                        enrolled in medical assistance under this title 
                        or child health assistance under title XXI 
                        pursuant to subparagraphs (A) and (B) of 
                        section 2102(b)(3) (relating to screen and 
                        enroll).
                          ``(IV) Requirement for simplified 
                        determination.--In making such a determination, 
                        the State shall use procedures that, to the 
                        maximum feasible extent, reduce the burden 
                        imposed on the individual of such 
                        determination. Such procedures may not require 
                        the child's parent, guardian, or custodial 
                        relative to provide or verify information that 
                        already has been provided to the State agency 
                        by an Express Lane agency or another source of 
                        information unless the State agency has reason 
                        to believe the information is erroneous.
                          ``(V) Availability of chip matching funds 
                        during temporary enrollment period.--Medical 
                        assistance for items and services that are 
                        provided to a child enrolled in title XXI 
                        during a temporary enrollment period under this 
                        clause shall be treated as child health 
                        assistance under such title.
          ``(D) Option for automatic enrollment.--
                  ``(i) In general.--At its option, a State may 
                initiate an evaluation of an individual's eligibility 
                for medical assistance under this title without an 
                application and determine the individual's eligibility 
                for such assistance using findings from one or more 
                Express Lane agencies and information from sources 
                other than a child, if the requirements of clauses (ii) 
                and (iii) are met.
                  ``(ii) Individual choice requirement.--The 
                requirement of this clause is that the child is 
                enrolled in medical assistance under this title or 
                child health assistance under title XXI only if the 
                child (or a parent, caretaker relative, or guardian on 
                the behalf of the child) has affirmatively assented to 
                such enrollment.
                  ``(iii) Information requirement.--The requirement of 
                this clause is that the State informs the parent, 
                guardian, or custodial relative of the child of the 
                services that will be covered, appropriate methods for 
                using such services, premium or other cost sharing 
                charges (if any) that apply, medical support 
                obligations (under section 1912(a)) created by 
                enrollment (if applicable), and the actions the parent, 
                guardian, or relative must take to maintain enrollment 
                and renew coverage.
          ``(E) Express lane agency defined.--In this paragraph, the 
        term `express lane agency' means an agency that meets the 
        following requirements:
                  ``(i) The agency determines eligibility for 
                assistance under the Food Stamp Act of 1977, the 
                Richard B. Russell National School Lunch Act, the Child 
                Nutrition Act of 1966, or the Child Care and 
                Development Block Grant Act of 1990.
                  ``(ii) The agency notifies the child (or a parent, 
                caretaker relative, or guardian on the behalf of the 
                child)--
                          ``(I) of the information which shall be 
                        disclosed;
                          ``(II) that the information will be used by 
                        the State solely for purposes of determining 
                        eligibility for and for providing medical 
                        assistance under this title or child health 
                        assistance under title XXI; and
                          ``(III) that the child, or parent, caretaker 
                        relative, or guardian, may elect to not have 
                        the information disclosed for such purposes.
                  ``(iii) The agency and the State agency are subject 
                to an interagency agreement limiting the disclosure and 
                use of such information to such purposes.
                  ``(iv) The agency is determined by the State agency 
                to be capable of making the determinations described in 
                this paragraph and is identified in the State plan 
                under this title or title XXI.
        For purposes of this subparagraph, the term `State agency' 
        refers to the agency determining eligibility for medical 
        assistance under this title or child health assistance under 
        title XXI.
          ``(F) Child defined.--For purposes of this paragraph, the 
        term `child' means an individual under 19 years of age, or, at 
        the option of a State, such higher age, not to exceed 21 years 
        of age, as the State may elect.''.
  (b) CHIP.--Section 2107(e)(1) of such Act (42 U.S.C. 1397gg(e)(1)) is 
amended by redesignating subparagraphs (B), (C), and (D) as 
subparagraphs (E), (H), and (I), respectively, and by inserting after 
subparagraph (A) the following new subparagraph:
                  ``(C) Section 1902(e)(13) (relating to the State 
                option to rely on findings from an Express Lane agency 
                to help evaluate a child's eligibility for medical 
                assistance).''.
  (c) Electronic Transmission of Information.--Section 1902 of such Act 
(42 U.S.C. 1396a) is amended by adding at the end the following new 
subsection:
  ``(dd) Electronic Transmission of Information.--If the State agency 
determining eligibility for medical assistance under this title or 
child health assistance under title XXI verifies an element of 
eligibility based on information from an Express Lane Agency (as 
defined in subsection (e)(13)(F)), or from another public agency, then 
the applicant's signature under penalty of perjury shall not be 
required as to such element. Any signature requirement for an 
application for medical assistance may be satisfied through an 
electronic signature, as defined in section 1710(1) of the Government 
Paperwork Elimination Act (44 U.S.C. 3504 note). The requirements of 
subparagraphs (A) and (B) of section 1137(d)(2) may be met through 
evidence in digital or electronic form.''.
  (d) Authorization of Information Disclosure.--
          (1) In general.--Title XIX of the Social Security Act is 
        amended--
                  (A) by redesignating section 1939 as section 1940; 
                and
                  (B) by inserting after section 1938 the following new 
                section:

``SEC. 1939. AUTHORIZATION TO RECEIVE PERTINENT INFORMATION.

  ``(a) In General.--Notwithstanding any other provision of law, a 
Federal or State agency or private entity in possession of the sources 
of data potentially pertinent to eligibility determinations under this 
title (including eligibility files maintained by Express Lane agencies 
described in section 1902(e)(13)(F), information described in paragraph 
(2) or (3) of section 1137(a), vital records information about births 
in any State, and information described in sections 453(i) and 
1902(a)(25)(I)) is authorized to convey such data or information to the 
State agency administering the State plan under this title, to the 
extent such conveyance meets the requirements of subsection (b).
  ``(b) Requirements for Conveyance.--Data or information may be 
conveyed pursuant to subsection (a) only if the following requirements 
are met:
          ``(1) The individual whose circumstances are described in the 
        data or information (or such individual's parent, guardian, 
        caretaker relative, or authorized representative) has either 
        provided advance consent to disclosure or has not objected to 
        disclosure after receiving advance notice of disclosure and a 
        reasonable opportunity to object.
          ``(2) Such data or information are used solely for the 
        purposes of--
                  ``(A) identifying individuals who are eligible or 
                potentially eligible for medical assistance under this 
                title and enrolling or attempting to enroll such 
                individuals in the State plan; and
                  ``(B) verifying the eligibility of individuals for 
                medical assistance under the State plan.
          ``(3) An interagency or other agreement, consistent with 
        standards developed by the Secretary--
                  ``(A) prevents the unauthorized use, disclosure, or 
                modification of such data and otherwise meets 
                applicable Federal requirements safeguarding privacy 
                and data security; and
                  ``(B) requires the State agency administering the 
                State plan to use the data and information obtained 
                under this section to seek to enroll individuals in the 
                plan.
  ``(c) Criminal Penalty.--A private entity described in the subsection 
(a) that publishes, discloses, or makes known in any manner, or to any 
extent not authorized by Federal law, any information obtained under 
this section shall be fined not more than $1,000 or imprisoned not more 
than 1 year, or both, for each such unauthorized publication or 
disclosure.
  ``(d) Rule of Construction.--The limitations and requirements that 
apply to disclosure pursuant to this section shall not be construed to 
prohibit the conveyance or disclosure of data or information otherwise 
permitted under Federal law (without regard to this section).''.
          (2) Conforming amendment to title xxi.--Section 2107(e)(1) of 
        such Act (42 U.S.C. 1397gg(e)(1)), as amended by subsection 
        (b), is amended by adding at the end the following new 
        subparagraph:
                  ``(J) Section 1939 (relating to authorization to 
                receive data potentially pertinent to eligibility 
                determinations).''.
          (3) Conforming amendment to provide access to data about 
        enrollment in insurance for purposes of evaluating applications 
        and for chip.--Section 1902(a)(25)(I)(i) of such Act (42 U.S.C. 
        1396a(a)(25)(I)(i)) is amended--
                  (A) by inserting ``(and, at State option, individuals 
                who are potentially eligible or who apply)'' after 
                ``with respect to individuals who are eligible''; and
                  (B) by inserting ``under this title (and, at State 
                option, child health assistance under title XXI)'' 
                after ``the State plan''.
  (e) Effective Date.--The amendments made by this section are 
effective on January 1, 2008.

SEC. 113. APPLICATION OF MEDICAID OUTREACH PROCEDURES TO ALL CHILDREN 
                    AND PREGNANT WOMEN.

  (a) In General.--Section 1902(a)(55) of the Social Security Act (42 
U.S.C. 1396a(a)(55)) is amended--
          (1) in the matter before subparagraph (A), by striking 
        ``individuals for medical assistance under subsection 
        (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), or 
        (a)(10)(A)(ii)(IX)'' and inserting ``children and pregnant 
        women for medical assistance under any provision of this 
        title''; and
          (2) in subparagraph (B), by inserting before the semicolon at 
        the end the following: ``, which need not be the same 
        application form for all such individuals''.
  (b) Effective Date.--The amendments made by subsection (a) take 
effect on January 1, 2008.

SEC. 114. ENCOURAGING CULTURALLY APPROPRIATE ENROLLMENT AND RETENTION 
                    PRACTICES.

  (a) Use of Medicaid Funds.--Section 1903(a)(2) of the Social Security 
Act (42 U.S.C. 1396b(a)(2)) is amended by adding at the end the 
following new subparagraph:
          ``(E) an amount equal to 75 percent of so much of the sums 
        expended during such quarter (as found necessary by the 
        Secretary for the proper and efficient administration of the 
        State plan) as are attributable to translation or 
        interpretation services in connection with the enrollment and 
        retention under this title of children of families for whom 
        English is not the primary language; plus''.
  (b) Use of Community Health Workers for Outreach Activities.--
          (1) In general.--Section 2102(c)(1) of such Act (42 U.S.C. 
        1397bb(c)(1)) is amended by inserting ``(through community 
        health workers and others)'' after ``Outreach''.
          (2) In federal evaluation.--Section 2108(c)(3)(B) of such Act 
        (42 U.S.C. 1397hh(c)(3)(B)) is amended by inserting ``(such as 
        through community health workers and others)'' after 
        ``including practices''.

                          Subtitle C--Coverage

SEC. 121. ENSURING CHILD-CENTERED COVERAGE.

  (a) Additional Required Services.--
          (1) Child-centered coverage.--Section 2103 of the Social 
        Security Act (42 U.S.C. 1397cc) is amended----
                  (A) in subsection (a)--
                          (i) in the matter before paragraph (1), by 
                        striking ``subsection (c)(5)'' and inserting 
                        ``paragraphs (5) and (6) of subsection (c)''; 
                        and
                          (ii) in paragraph (1), by inserting ``at 
                        least'' after ``that is''; and
                  (B) in subsection (c)--
                          (i) by redesignating paragraph (5) as 
                        paragraph (6); and
                          (ii) by inserting after paragraph (4), the 
                        following:
          ``(5) Dental, fqhc, and rhc services.--The child health 
        assistance provided to a targeted low-income child (whether 
        through benchmark coverage or benchmark-equivalent coverage or 
        otherwise) shall include coverage of the following:
                  ``(A) Dental services necessary to prevent disease 
                and promote oral health, restore oral structures to 
                health and function, and treat emergency conditions.
                  ``(B) Federally-qualified health center services (as 
                defined in section 1905(l)(2)) and rural health clinic 
                services (as defined in section 1905(l)(1)).
        Nothing in this section shall be construed as preventing a 
        State child health plan from providing such services as part of 
        benchmark coverage or in addition to the benefits provided 
        through benchmark coverage.''.
          (2) Required payment for fqhc and rhc services.--Section 
        2107(e)(1) of such Act (42 U.S.C. 1397gg(e)(1)), as amended by 
        sections 112(b) and 112(d)(2), is amended by inserting after 
        subparagraph (C) the following new subparagraph:
                  ``(D) Section 1902(bb) (relating to payment for 
                services provided by Federally-qualified health centers 
                and rural health clinics).''.
          (3) Mental health parity.--Section 2103(a)(2)(C) of such Act 
        (42 U.S.C. 1397aa(a)(2)(C)) is amended by inserting ``(or 100 
        percent in the case of the category of services described in 
        subparagraph (B) of such subsection)'' after ``75 percent''.
          (4) Effective date.--The amendments made by this subsection 
        and subsection (d) shall apply to health benefits coverage 
        provided on or after October 1, 2008.
  (b) Clarification of Requirement to Provide EPSDT Services for All 
Children in Benchmark Benefit Packages Under Medicaid .--
          (1) In general.--Section 1937(a)(1) of the Social Security 
        Act (42 U.S.C. 1396u-7(a)(1)) is amended--
                  (A) in subparagraph (A)--
                          (i) in the matter before clause (i), by 
                        striking ``Notwithstanding any other provision 
                        of this title'' and inserting ``Subject to 
                        subparagraph (E)''; and
                          (ii) by striking ``enrollment in coverage 
                        that provides'' and all that follows and 
                        inserting ``benchmark coverage described in 
                        subsection (b)(1) or benchmark equivalent 
                        coverage described in subsection (b)(2).'';
                  (B) by striking subparagraph (C) and inserting the 
                following new subparagraph:
                  ``(C) State option to provide additional benefits.--A 
                State, at its option, may provide such additional 
                benefits to benchmark coverage described in subsection 
                (b)(1) or benchmark equivalent coverage described in 
                subsection (b)(2) as the State may specify.''; and
                  (C) by adding at the end the following new 
                subparagraph:
                  ``(E) Requiring coverage of epsdt services.--Nothing 
                in this paragraph shall be construed as affecting a 
                child's entitlement to care and services described in 
                subsections (a)(4)(B) and (r) of section 1905 and 
                provided in accordance with section 1902(a)(43) whether 
                provided through benchmark coverage, benchmark 
                equivalent coverage, or otherwise.''.
          (2) Effective date.--The amendments made by paragraph (1) 
        shall take effect as if included in the amendment made by 
        section 6044(a) of the Deficit Reduction Act of 2005.
  (c) Clarification of Coverage of Services in School-Based Health 
Centers Included as Child Health Assistance.--
          (1) In general.--Section 2110(a)(5) of such Act (42 U.S.C. 
        1397jj(a)(5)) is amended by inserting after ``health center 
        services'' the following: ``and school-based health center 
        services for which coverage is otherwise provided under this 
        title when furnished by a school-based health center that is 
        authorized to furnish such services under State law''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to child health assistance furnished on or after 
        the date of the enactment of this Act.
  (d) Assuring Access to Care.--
          (1) State child health plan requirement.--Section 
        2102(a)(7)(B) of such Act (42 U.S.C. 1397bb(c)(2)) is amended 
        by inserting ``and services described in section 2103(c)(5)'' 
        after ``emergency services''.
          (2) Reference to effective date.--For the effective date for 
        the amendments made by this subsection, see subsection (a)(5).

SEC. 122. IMPROVING BENCHMARK COVERAGE OPTIONS.

  (a) Limitation on Secretary-Approved Coverage.--
          (1) Under chip.--Section 2103(a)(4) of the Social Security 
        Act (42 U.S.C. 1397cc(a)(4)) is amended by inserting before the 
        period at the end the following: ``if the health benefits 
        coverage is at least equivalent to the benefits coverage in a 
        benchmark benefit package described in subsection (b)''.
          (2) Under medicaid.--Section 1937(b)(1)(D) of the Social 
        Security Act (42 U.S.C. 1396u-7(b)(1)(D)) is amended by 
        inserting before the period at the end the following: ``if the 
        health benefits coverage is at least equivalent to the benefits 
        coverage in benchmark coverage described in subparagraph (A), 
        (B), or (C)''.
  (b) Requirement for Most Popular Family Coverage for State Employee 
Coverage Benchmark.--
          (1) CHIP.--Section 2103(b)(2) of such Act (42 U.S.C. 
        1397(b)(2)) is amended by inserting ``and that has been 
        selected most frequently by employees seeking dependent 
        coverage, among such plans that provide such dependent 
        coverage, in either of the previous 2 plan years'' before the 
        period at the end.
          (2) Medicaid.--Section 1937(b)(1)(B) of such Act is amended 
        by inserting ``and that has been selected most frequently, by 
        employees seeking dependent coverage, among such plans that 
        provide such dependent coverage, in either of the previous 2 
        plan years'' before the period at the end.
  (c) Effective Date.--The amendments made by this section shall apply 
to health benefits coverage provided on or after October 1, 2008.

SEC. 123. PREMIUM GRACE PERIOD.

  (a) In General.--Section 2103(e)(3) of the Social Security Act (42 
U.S.C. 1397cc(e)(3)) is amended by adding at the end the following new 
subparagraph:
                  ``(C) Premium grace period.--The State child health 
                plan--
                          ``(i) shall afford individuals enrolled under 
                        the plan a grace period of at least 30 days 
                        from the beginning of a new coverage period to 
                        make premium payments before the individual's 
                        coverage under the plan may be terminated; and
                          ``(ii) shall provide to such an individual, 
                        not later than 7 days after the first day of 
                        such grace period, notice--
                                  ``(I) that failure to make a premium 
                                payment within the grace period will 
                                result in termination of coverage under 
                                the State child health plan; and
                                  ``(II) of the individual's right to 
                                challenge the proposed termination 
                                pursuant to the applicable Federal 
                                regulations.
                For purposes of clause (i), the term `new coverage 
                period' means the month immediately following the last 
                month for which the premium has been paid.''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to new coverage periods beginning on or after January 1, 2009.

                        Subtitle D--Populations

SEC. 131. OPTIONAL COVERAGE OF OLDER CHILDREN UNDER MEDICAID AND CHIP.

  (a) Medicaid.--
          (1) In general.--Section 1902(l)(1)(D) of the Social Security 
        Act (42 U.S.C. 1396a(l)(1)(D)) is amended by striking ``but 
        have not attained 19 years of age'' and inserting ``but is 
        under 19 years of age (or, at the option of a State and subject 
        to section 131(d) of the Children's Health and Medicare 
        Protection Act of 2007, under such higher age, not to exceed 25 
        years of age, as the State may elect)''.
          (2) Conforming amendments.--
                  (A) Section 1902(e)(3)(A) of such Act (42 U.S.C. 
                1396a(e)(3)(A)) is amended by striking ``18 years of 
                age or younger'' and inserting ``under 19 years of age 
                (or under such higher age as the State has elected 
                under subsection (l)(1)(D))''.
                  (B) Section 1902(e)(12) of such Act (42 U.S.C. 
                1396a(e)(12)) is amended by inserting ``or such higher 
                age as the State has elected under subsection 
                (l)(1)(D)'' after ``19 years of age''.
                  (C) Section 1905(a) of such Act (42 U.S.C. 1396d(a)) 
                is amended, in clause (i), by inserting ``or under such 
                higher age as the State has elected under subsection 
                (l)(1)(D)'' after ``as the State may choose''.
                  (D) Section 1920A(b)(1) of such Act (42 U.S.C. 1396r-
                1a(b)(1)) is amended by inserting ``or under such 
                higher age as the State has elected under section 
                1902(l)(1)(D)'' after ``19 years of age''.
                  (E) Section 1928(h)(1) of such Act (42 U.S.C. 
                1396s(h)(1)) is amended by striking ``18 years of age 
                or younger'' and inserting ``under 19 years of age or 
                under such higher age as the State has elected under 
                section 1902(l)(1)(D)''.
                  (F) Section 1932(a)(2)(A) of such Act (42 U.S.C. 
                1396u-2(a)(2)(A)) is amended by inserting ``(or under 
                such higher age as the State has elected under section 
                1902(l)(1)(D))'' after ``19 years of age''.
  (b) Title XXI.--Section 2110(c)(1) of such Act (42 U.S.C. 
1397jj(c)(1)) is amended by inserting ``(or, at the option of the State 
and subject to section 131(d) of the Children's Health and Medicare 
Protection Act of 2007, under such higher age as the State has elected 
under section 1902(l)(1)(D))'' after ``19 years of age'' .
  (c) Effective Date.--Subject to subsection (d), the amendments made 
by this section take effect on January 1, 2010.
  (d) Transition.--In carrying out the amendments made by subsections 
(a) and (b)--
          (1) for 2010, a State election under section 1902(l)(1)(D) 
        shall only apply with respect to title XXI of such Act and the 
        age elected may not exceed 21 years of age;
          (2) for 2011, a State election under section 1902(l)(1)(D) 
        may apply under titles XIX and XXI of such Act and the age 
        elected may not exceed 23 years of age;
          (3) for 2012, a State election under section 1902(l)(1)(D) 
        may apply under titles XIX and XXI of such Act and the age 
        elected may not exceed 24 years of age; and
          (4) for 2013 and each subsequent year, a State election under 
        section 1902(l)(1)(D) may apply under titles XIX and XXI of 
        such Act and the age elected may not exceed 25 years of age.

SEC. 132. OPTIONAL COVERAGE OF LEGAL IMMIGRANTS UNDER THE MEDICAID 
                    PROGRAM AND CHIP.

  (a) Medicaid Program.--Section 1903(v) of the Social Security Act (42 
U.S.C. 1396b(v)) is amended--
          (1) in paragraph (1), by striking ``paragraph (2)'' and 
        inserting ``paragraphs (2) and (4)''; and
          (2) by adding at the end the following new paragraph:
  ``(4)(A) A State may elect (in a plan amendment under this title) to 
provide medical assistance under this title, notwithstanding sections 
401(a), 402(b), 403, and 421 of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996, for aliens who are lawfully 
residing in the United States (including battered aliens described in 
section 431(c) of such Act) and who are otherwise eligible for such 
assistance, within either or both of the following eligibility 
categories:
          ``(i) Pregnant women.--Women during pregnancy (and during the 
        60-day period beginning on the last day of the pregnancy).
          ``(ii) Children.--Individuals under age 19 (or such higher 
        age as the State has elected under section 1902(l)(1)(D)), 
        including optional targeted low-income children described in 
        section 1905(u)(2)(B).
  ``(B) In the case of a State that has elected to provide medical 
assistance to a category of aliens under subparagraph (A), no debt 
shall accrue under an affidavit of support against any sponsor of such 
an alien on the basis of provision of medical assistance to such 
category and the cost of such assistance shall not be considered as an 
unreimbursed cost.''.
  (b) CHIP.--Section 2107(e)(1) of such Act (42 U.S.C. 1397gg(e)(1)), 
as amended by section 112(b), 112(d)(2),and 121(a)(2), is amended by 
inserting after subparagraph (E) the following new subparagraphs:
                  ``(F) Section 1903(v)(4)(A) (relating to optional 
                coverage of certain categories of lawfully residing 
                immigrants), insofar as it relates to the category of 
                pregnant women described in clause (i) of such section, 
                but only if the State has elected to apply such section 
                with respect to such women under title XIX and the 
                State has elected the option under section 2111 to 
                provide assistance for pregnant women under this title.
                  ``(G) Section 1903(v)(4)(A) (relating to optional 
                coverage of categories of lawfully residing 
                immigrants), insofar as it relates to the category of 
                children described in clause (ii) of such section, but 
                only if the State has elected to apply such section 
                with respect to such children under title XIX.''.
  (c) Effective Date.--The amendments made by this section take effect 
on the date of the enactment of this Act.

SEC. 133. STATE OPTION TO EXPAND OR ADD COVERAGE OF CERTAIN PREGNANT 
                    WOMEN UNDER CHIP.

  (a) CHIP.--
          (1) Coverage.--Title XXI (42 U.S.C. 1397aa et seq.) of the 
        Social Security Act is amended by adding at the end the 
        following new section:

``SEC. 2111. OPTIONAL COVERAGE OF TARGETED LOW-INCOME PREGNANT WOMEN.

  ``(a) Optional Coverage.--Notwithstanding any other provision of this 
title, a State may provide for coverage, through an amendment to its 
State child health plan under section 2102, of assistance for pregnant 
women for targeted low-income pregnant women in accordance with this 
section, but only if--
          ``(1) the State has established an income eligibility level--
                  ``(A) for pregnant women, under any of clauses 
                (i)(III), (i)(IV), or (ii)(IX) of section 
                1902(a)(10)(A), that is at least 185 percent (or such 
                higher percent as the State has in effect for pregnant 
                women under this title) of the poverty line applicable 
                to a family of the size involved, but in no case a 
                percent lower than the percent in effect under any such 
                clause as of July 1, 2007; and
                  ``(B) for children under 19 years of age under this 
                title (or title XIX) that is at least 200 percent of 
                the poverty line applicable to a family of the size 
                involved; and
          ``(2) the State does not impose, with respect to the 
        enrollment under the State child health plan of targeted low-
        income children during the quarter, any enrollment cap or other 
        numerical limitation on enrollment, any waiting list, any 
        procedures designed to delay the consideration of applications 
        for enrollment, or similar limitation with respect to 
        enrollment.
  ``(b) Definitions.--For purposes of this title:
          ``(1) Assistance for pregnant women.--The term `assistance 
        for pregnant women' has the meaning given the term child health 
        assistance in section 2110(a) as if any reference to targeted 
        low-income children were a reference to targeted low-income 
        pregnant women.
          ``(2) Targeted low-income pregnant woman.--The term `targeted 
        low-income pregnant woman' means a woman--
                  ``(A) during pregnancy and through the end of the 
                month in which the 60-day period (beginning on the last 
                day of her pregnancy) ends;
                  ``(B) whose family income exceeds 185 percent (or, if 
                higher, the percent applied under subsection (a)(1)(A)) 
                of the poverty level applicable to a family of the size 
                involved, but does not exceed the income eligibility 
                level established under the State child health plan 
                under this title for a targeted low-income child; and
                  ``(C) who satisfies the requirements of paragraphs 
                (1)(A), (1)(C), (2), and (3) of section 2110(b), 
                applied as if any reference to a child was a reference 
                to a pregnant woman.
  ``(c) References to Terms and Special Rules.--In the case of, and 
with respect to, a State providing for coverage of assistance for 
pregnant women to targeted low-income pregnant women under subsection 
(a), the following special rules apply:
          ``(1) Any reference in this title (other than in subsection 
        (b)) to a targeted low-income child is deemed to include a 
        reference to a targeted low-income pregnant woman.
          ``(2) Any reference in this title to child health assistance 
        (other than with respect to the provision of early and periodic 
        screening, diagnostic, and treatment services) with respect to 
        such women is deemed a reference to assistance for pregnant 
        women.
          ``(3) Any such reference (other than in section 2105(d)) to a 
        child is deemed a reference to a woman during pregnancy and the 
        period described in subsection (b)(2)(A).
          ``(4) In applying section 2102(b)(3)(B), any reference to 
        children found through screening to be eligible for medical 
        assistance under the State medicaid plan under title XIX is 
        deemed a reference to pregnant women.
          ``(5) There shall be no exclusion of benefits for services 
        described in subsection (b)(1) based on any preexisting 
        condition and no waiting period (including any waiting period 
        imposed to carry out section 2102(b)(3)(C)) shall apply.
          ``(6) In applying section 2103(e)(3)(B) in the case of a 
        pregnant woman provided coverage under this section, the 
        limitation on total annual aggregate cost-sharing shall be 
        applied to such pregnant woman.
          ``(7) In applying section 2104(i)--
                  ``(A) in the case of a State which did not provide 
                for coverage for pregnant women under this title (under 
                a waiver or otherwise) during fiscal year 2007, the 
                allotment amount otherwise computed for the first 
                fiscal year in which the State elects to provide 
                coverage under this section shall be increased by an 
                amount (determined by the Secretary) equal to the 
                enhanced FMAP of the expenditures under this title for 
                such coverage, based upon projected enrollment and per 
                capita costs of such enrollment; and
                  ``(B) in the case of a State which provided for 
                coverage of pregnant women under this title for the 
                previous fiscal year--
                          ``(i) in applying paragraph (2)(B) of such 
                        section, there shall also be taken into account 
                        (in an appropriate proportion) the percentage 
                        increase in births in the State for the 
                        relevant period; and
                          ``(ii) in applying paragraph (3), pregnant 
                        women (and per capita expenditures for such 
                        women) shall be accounted for separately from 
                        children, but shall be included in the total 
                        amount of any allotment adjustment under such 
                        paragraph.
  ``(d) Automatic Enrollment for Children Born to Women Receiving 
Assistance for Pregnant Women.--If a child is born to a targeted low-
income pregnant woman who was receiving assistance for pregnant women 
under this section on the date of the child's birth, the child shall be 
deemed to have applied for child health assistance under the State 
child health plan and to have been found eligible for such assistance 
under such plan or to have applied for medical assistance under title 
XIX and to have been found eligible for such assistance under such 
title on the date of such birth, based on the mother's reported income 
as of the time of her enrollment under this section and applicable 
income eligibility levels under this title and title XIX, and to remain 
eligible for such assistance until the child attains 1 year of age. 
During the period in which a child is deemed under the preceding 
sentence to be eligible for child health or medical assistance, the 
assistance for pregnant women or medical assistance eligibility 
identification number of the mother shall also serve as the 
identification number of the child, and all claims shall be submitted 
and paid under such number (unless the State issues a separate 
identification number for the child before such period expires).''.
          (2) Additional amendment.--Section 2107(e)(1)(I) of such Act 
        (42 U.S.C. 1397gg(e)(1)(H)), as redesignated by section 112(b), 
        is amended to read as follows:
                  ``(I) Sections 1920 and 1920A (relating to 
                presumptive eligibility for pregnant women and 
                children).''.
  (b) Amendments to Medicaid.--
          (1) Eligibility of a newborn.--Section 1902(e)(4) of the 
        Social Security Act (42 U.S.C. 1396a(e)(4)) is amended in the 
        first sentence by striking ``so long as the child is a member 
        of the woman's household and the woman remains (or would remain 
        if pregnant) eligible for such assistance''.
          (2) Application of qualified entities to presumptive 
        eligibility for pregnant women under medicaid.--Section 1920(b) 
        of the Social Security Act (42 U.S.C. 1396r-1(b)) is amended by 
        adding after paragraph (2) the following flush sentence:
``The term `qualified provider' also includes a qualified entity, as 
defined in section 1920A(b)(3).''.

SEC. 134. LIMITATION ON WAIVER AUTHORITY TO COVER ADULTS.

  Section 2102 of the Social Security Act (42 U.S.C. 1397bb) is amended 
by adding at the end the following new subsection:
  ``(d) Limitation on Coverage of Adults.--Notwithstanding any other 
provision of this title, the Secretary may not, through the exercise of 
any waiver authority on or after January 1, 2008, provide for Federal 
financial participation to a State under this title for health care 
services for individuals who are not targeted low-income children or 
pregnant women unless the Secretary determines that no eligible 
targeted low-income child in the State would be denied coverage under 
this title for health care services because of such eligibility. In 
making such determination, the Secretary must receive assurances that--
          ``(1) there is no waiting list under this title in the State 
        for targeted low-income children to receive child health 
        assistance under this title; and
          ``(2) the State has in place an outreach program to reach all 
        targeted low-income children in families with incomes less than 
        200 percent of the poverty line.''.

                           Subtitle E--Access

SEC. 141. CHILDREN'S ACCESS, PAYMENT, AND EQUALITY COMMISSION.

  Title XIX of the Social Security Act is amended by inserting before 
section 1901 the following new section:
         ``children's access, payment, and equality commission
  ``Sec. 1900.  (a) Establishment.--There is hereby established as an 
agency of Congress the Children's Access, Payment, and Equality 
Commission (in this section referred to as the `Commission').
  ``(b) Duties.--
          ``(1) Review of payment policies and annual reports.--The 
        Commission shall--
                  ``(A) review Federal and State payment policies of 
                the Medicaid program established under this title (in 
                this section referred to as `Medicaid') and the State 
                Children's Health Insurance Program established under 
                title XXI (in this section referred to as `CHIP'), 
                including topics described in paragraph (2);
                  ``(B) review access to, and affordability of, 
                coverage and services for enrollees under Medicaid and 
                CHIP;
                  ``(C) make recommendations to Congress concerning 
                such policies;
                  ``(D) by not later than March 1 of each year, submit 
                to Congress a report containing the results of such 
                reviews and its recommendations concerning such 
                policies; and
                  ``(E) by not later than June 1 of each year, submit 
                to Congress a report containing an examination of 
                issues affecting Medicaid and CHIP, including the 
                implications of changes in health care delivery in the 
                United States and in the market for health care 
                services on such programs.
          ``(2) Specific topics to be reviewed.--Specifically, the 
        Commission shall review the following:
                  ``(A) The factors affecting expenditures for services 
                in different sectors (such as physician, hospital and 
                other sectors), payment methodologies, and their 
                relationship to access and quality of care for Medicaid 
                and CHIP beneficiaries.
                  ``(B) The impact of Federal and State Medicaid and 
                CHIP payment policies on access to services (including 
                dental services) for children (including children with 
                disabilities) and other Medicaid and CHIP populations.
                  ``(C) The impact of Federal and State Medicaid and 
                CHIP policies on reducing health disparities, including 
                geographic disparities and disparities among minority 
                populations.
                  ``(D) The overall financial stability of the health 
                care safety net, including Federally-qualified health 
                centers, rural health centers, school-based clinics, 
                disproportionate share hospitals, public hospitals, 
                providers and grantees under section 2612(a)(5) of the 
                Public Health Service Act (popularly known as the Ryan 
                White CARE Act), and other providers that have a 
                patient base which includes a disproportionate number 
                of uninsured or low-income individuals and the impact 
                of CHIP and Medicaid policies on such stability.
                  ``(E) The relation (if any) between payment rates for 
                providers and improvement in care for children as 
                measured under the children's health quality 
                measurement program established under section 151 of 
                the Children's Health and Medicare Protection Act of 
                2007.
                  ``(F) The affordability, cost effectiveness, and 
                accessibility of services needed by special populations 
                under Medicaid and CHIP as compared with private-sector 
                coverage.
                  ``(G) The extent to which the operation of Medicaid 
                and CHIP ensures access, comparable to access under 
                employer-sponsored or other private health insurance 
                coverage (or in the case of federally-qualified health 
                center services (as defined in section 1905(l)(2)) and 
                rural health clinic services (as defined in section 
                1905(l)(1)), access comparable to the access to such 
                services under title XIX), for targeted low-income 
                children.
                  ``(H) The effect of demonstrations under section 
                1115, benchmark coverage under section 1937, and other 
                coverage under section 1938, on access to care, 
                affordability of coverage, provider ability to achieve 
                children's health quality performance measures, and 
                access to safety net services.
          ``(3) Comments on certain secretarial reports.--If the 
        Secretary submits to Congress (or a committee of Congress) a 
        report that is required by law and that relates to payment 
        policies under Medicaid or CHIP, the Secretary shall transmit a 
        copy of the report to the Commission. The Commission shall 
        review the report and, not later than 6 months after the date 
        of submittal of the Secretary's report to Congress, shall 
        submit to the appropriate committees of Congress written 
        comments on such report. Such comments may include such 
        recommendations as the Commission deems appropriate.
          ``(4) Agenda and additional reviews.--The Commission shall 
        consult periodically with the Chairmen and Ranking Minority 
        Members of the appropriate committees of Congress regarding the 
        Commission's agenda and progress towards achieving the agenda. 
        The Commission may conduct additional reviews, and submit 
        additional reports to the appropriate committees of Congress, 
        from time to time on such topics relating to the program under 
        this title or title XXI as may be requested by such Chairmen 
        and Members and as the Commission deems appropriate.
          ``(5) Availability of reports.--The Commission shall transmit 
        to the Secretary a copy of each report submitted under this 
        subsection and shall make such reports available to the public.
          ``(6) Appropriate committee of congress.--For purposes of 
        this section, the term `appropriate committees of Congress' 
        means the Committees on Energy and Commerce of the House of 
        Representatives and the Committee on Finance of the Senate.
          ``(7) Voting and reporting requirements.--With respect to 
        each recommendation contained in a report submitted under 
        paragraph (1), each member of the Commission shall vote on the 
        recommendation, and the Commission shall include, by member, 
        the results of that vote in the report containing the 
        recommendation.
          ``(8) Examination of budget consequences.--Before making any 
        recommendations, the Commission shall examine the budget 
        consequences of such recommendations, directly or through 
        consultation with appropriate expert entities.
  ``(c) Application of Provisions.--The following provisions of section 
1805 shall apply to the Commission in the same manner as they apply to 
the Medicare Payment Advisory Commission:
          ``(1) Subsection (c) (relating to membership), except that 
        the membership of the Commission shall also include 
        representatives of children, pregnant women, individuals with 
        disabilities, seniors, low-income families, and other groups of 
        CHIP and Medicaid beneficiaries.
          ``(2) Subsection (d) (relating to staff and consultants).
          ``(3) Subsection (e) (relating to powers).
  ``(d) Authorization of Appropriations.--
          ``(1) Request for appropriations.--The Commission shall 
        submit requests for appropriations in the same manner as the 
        Comptroller General submits requests for appropriations, but 
        amounts appropriated for the Commission shall be separate from 
        amounts appropriated for the Comptroller General.
          ``(2) Authorization.--There are authorized to be appropriated 
        such sums as may be necessary to carry out the provisions of 
        this section.''.

SEC. 142. MODEL OF INTERSTATE COORDINATED ENROLLMENT AND COVERAGE 
                    PROCESS.

  (a) In General.--In order to assure continuity of coverage of low-
income children under the Medicaid program and the State Children's 
Health Insurance Program (CHIP), not later than 18 months after the 
date of the enactment of this Act, the Comptroller General of the 
United States, in consultation with State Medicaid and CHIP directors 
and organizations representing program beneficiaries, shall develop a 
model process for the coordination of the enrollment, retention, and 
coverage under such programs of children who, because of migration of 
families, emergency evacuations, educational needs, or otherwise, 
frequently change their State of residency or otherwise are temporarily 
located outside of the State of their residency.
  (b) Report to Congress.--After development of such model process, the 
Comptroller General shall submit to Congress a report describing 
additional steps or authority needed to make further improvements to 
coordinate the enrollment, retention, and coverage under CHIP and 
Medicaid of children described in subsection (a).

SEC. 143. MEDICAID CITIZENSHIP DOCUMENTATION REQUIREMENTS.

  (a) State Option to Require Children to Present Satisfactory 
Documentary Evidence of Proof of Citizenship or Nationality for 
Purposes of Eligibility for Medicaid; Requirement for Auditing.--
          (1) In general.--Section 1902 of the Social Security Act (42 
        U.S.C. 1396a) is amended--
                  (A) in subsection (a)(46)--
                          (i) by inserting ``(A)'' after ``(46)''; and
                          (ii) by adding at the end the following new 
                        subparagraphs:
          ``(B) at the option of the State, require that, with respect 
        to a child under 21 years of age (other than an individual 
        described in section 1903(x)(2)) who declares to be a citizen 
        or national of the United States for purposes of establishing 
        initial eligibility for medical assistance under this title 
        (or, at State option, for purposes of renewing or redetermining 
        such eligibility to the extent that such satisfactory 
        documentary evidence of citizenship or nationality has not yet 
        been presented), there is presented satisfactory documentary 
        evidence of citizenship or nationality of the individual (using 
        criteria determined by the State, which shall be no more 
        restrictive than the documentation specified in section 
        1903(x)(3)); and
          ``(C) comply with the auditing requirements of section 
        1903(x)(4);''; and
                  (B) in subsection (b)(3), by inserting ``or any 
                citizenship documentation requirement for a child under 
                21 years of age that is more restrictive than what a 
                State may provide under section 1903(x)'' before the 
                period at the end.
          (2) Auditing requirement.--Section 1903(x) of such Act (as 
        amended by section 405(c)(1)(A) of division B of the Tax Relief 
        and Health Care Act of 2006 (Public Law 109-432)) is amended by 
        adding at the end the following new paragraph:
  ``(4)(A) Regardless of whether a State has chosen to take the option 
specified in section 1902(a)(46)(B), each State shall audit a 
statistically-based sample of cases of children under 21 years of age 
in order to demonstrate to the satisfaction of the Secretary that the 
percentage of Federal Medicaid funds being spent for non-emergency 
benefits for aliens described in subsection (v)(1) who are under 21 
years of age does not exceed 3 percent of total expenditures for 
medical assistance under the plan for items and services for 
individuals under 21 years of age for the period for which the sample 
is taken. In conducting such audits, a State may rely on case reviews 
regularly conducted pursuant to their Medicaid Quality Control or 
Payment Error Rate Measurement (PERM) eligibility reviews under 
subsection (u).
  ``(B) In conducting audits under subparagraph (A), payments for non-
emergency benefits shall be treated as erroneous if the audit could not 
confirm the citizenship of the individual based either on documentation 
in the case file or on documentation obtained independently during the 
audit.
  ``(C) If the erroneous error rate described in subparagraph (A)--
          ``(i) exceeds 3 percent, the State shall--
                  ``(I) remit to the Secretary the Federal share of 
                improper expenditures in excess of the 3 percent level 
                described in such subparagraph;
                  ``(II) shall develop a corrective action plan; and
                  ``(III) shall conduct another audit the following 
                fiscal year, after the corrective action plan is 
                implemented; or
          ``(ii) does not exceed 3 percent, the State is not required 
        to conduct another audit under subparagraph (A) until the third 
        fiscal year succeeding the fiscal year for which the audit was 
        conducted.'';
          (3) Elimination of denial of payments for children.--Section 
        1903(i)(22) of such Act (42 U.S.C. 1396b(i)(22)) is amended by 
        inserting ``(other than a child under the age of 21)'' after 
        ``for an individual''.
  (b) Clarification of Rules for Children Born in the United States to 
Mothers Eligible for Medicaid.--Section 1903(x)(2) of such Act (42 
U.S.C. 1396b(x)(2)) is amended--
          (1) in subparagraph (C), by striking ``or'' at the end;
          (2) by redesignating subparagraph (D) as subparagraph (E); 
        and
          (3) by inserting after subparagraph (C) the following new 
        subparagraph:
          ``(D) pursuant to the application of section 1902(e)(4) (and, 
        in the case of an individual who is eligible for medical 
        assistance on such basis, the individual shall be deemed to 
        have provided satisfactory documentary evidence of citizenship 
        or nationality and shall not be required to provide further 
        documentary evidence on any date that occurs during or after 
        the period in which the individual is eligible for medical 
        assistance on such basis; or''.
  (c) Documentation for Native Americans.--Section 1903(x)(3)(B) of 
such Act is amended--
          (1) by redesignating clause (v) as clause (vi); and
          (2) by inserting after clause (iv) the following new clause:
          ``(v) For an individual who is a member of, or enrolled in or 
        affiliated with, a federally-recognized Indian tribe, a 
        document issued by such tribe evidencing such membership, 
        enrollment, or affiliation with the tribe (such as a tribal 
        enrollment card or certificate of degree of Indian blood), and, 
        only with respect to those federally-recognized Indian tribes 
        located within States having an international border whose 
        membership includes individuals who are not citizens of the 
        United States, such other forms of documentation (including 
        tribal documentation, if appropriate) as the Secretary, after 
        consulting with such tribes, determines to be satisfactory 
        documentary evidence of citizenship or nationality for purposes 
        of satisfying the requirement of this subparagraph.''.
  (d) Reasonable Opportunity.--Section 1903(x) of such Act, as amended 
by subsection (a)(2), is further amended by adding at the end the 
following new paragraph:
  ``(5) In the case of an individual declaring to be a citizen or 
national of the United States with respect to whom a State requires the 
presentation of satisfactory documentary evidence of citizenship or 
nationality under section 1902(a)(46)(B), the individual shall be 
provided at least the reasonable opportunity to present satisfactory 
documentary evidence of citizenship or nationality under this 
subsection as is provided under clauses (i) and (ii) of section 
1137(d)(4)(A) to an individual for the submittal to the State of 
evidence indicating a satisfactory immigration status and shall not be 
denied medical assistance on the basis of failure to provide such 
documentation until the individual has had such an opportunity.''.
  (e) Effective Date.--
          (1) Retroactive application.--The amendments made by this 
        section shall take effect as if included in the enactment of 
        the Deficit Reduction Act of 2005 (Public Law 109-171; 120 
        Stat. 4).
          (2) Restoration of eligibility.--In the case of an individual 
        who, during the period that began on July 1, 2006, and ends on 
        the date of the enactment of this Act, was determined to be 
        ineligible for medical assistance under a State Medicaid 
        program solely as a result of the application of subsections 
        (i)(22) and (x) of section 1903 of the Social Security Act (as 
        in effect during such period), but who would have been 
        determined eligible for such assistance if such subsections, as 
        amended by this section, had applied to the individual, a State 
        may deem the individual to be eligible for such assistance as 
        of the date that the individual was determined to be ineligible 
        for such medical assistance on such basis.

SEC. 144. ACCESS TO DENTAL CARE FOR CHILDREN.

  (a) Dental Education for Parents of Newborns.--The Secretary of 
Health and Human Services shall develop and implement, through entities 
that fund or provide perinatal care services to targeted low-income 
children under a State child health plan under title XXI of the Social 
Security Act, a program to deliver oral health educational materials 
that inform new parents about risks for, and prevention of, early 
childhood caries and the need for a dental visit within their newborn's 
first year of life.
  (b) Provision of Dental Services Through FQHCs.--
          (1) Medicaid.--Section 1902(a) of the Social Security Act (42 
        U.S.C. 1396a(a)) is amended--
                  (A) by striking ``and'' at the end of paragraph (69);
                  (B) by striking the period at the end of paragraph 
                (70) and inserting ``; and''; and
                  (C) by inserting after paragraph (70) the following 
                new paragraph:
          ``(71) provide that the State will not prevent a Federally-
        qualified health center from entering into contractual 
        relationships with private practice dental providers in the 
        provision of Federally-qualified health center services.''.
          (2) CHIP.--Section 2107(e)(1) of such Act (42 U.S.C. 
        1397g(e)(1)), as amended by section 112(b), is amended by 
        inserting after subparagraph (A) the following new 
        subparagraph:
                  ``(B) Section 1902(a)(71) (relating to limiting FQHC 
                contracting for provision of dental services).''.
          (3) Effective date.--The amendments made by this subsection 
        shall take effect on January 1, 2008.
  (c) Reporting Information on Dental Health.--
          (1) Medicaid.--Section 1902(a)(43)(D)(iii) of such Act (42 
        U.S.C. 1396a(a)(43)(D)(iii)) is amended by inserting ``and 
        other information relating to the provision of dental services 
        to such children described in section 2108(e)'' after 
        ``receiving dental services,''.
          (2) CHIP.--Section 2108 of such Act (42 U.S.C. 1397hh) is 
        amended by adding at the end the following new subsection:
  ``(e) Information on Dental Care for Children.--
          ``(1) In general.--Each annual report under subsection (a) 
        shall include the following information with respect to care 
        and services described in section 1905(r)(3) provided to 
        targeted low-income children enrolled in the State child health 
        plan under this title at any time during the year involved:
                  ``(A) The number of enrolled children by age grouping 
                used for reporting purposes under section 1902(a)(43).
                  ``(B) For children within each such age grouping, 
                information of the type contained in questions 12(a)-
                (c) of CMS Form 416 (that consists of the number of 
                enrolled targeted low income children who receive any, 
                preventive, or restorative dental care under the State 
                plan).
                  ``(C) For the age grouping that includes children 8 
                years of age, the number of such children who have 
                received a protective sealant on at least one permanent 
                molar tooth.
          ``(2) Inclusion of information on enrollees in managed care 
        plans.--The information under paragraph (1) shall include 
        information on children who are enrolled in managed care plans 
        and other private health plans and contracts with such plans 
        under this title shall provide for the reporting of such 
        information by such plans to the State.''.
          (3) Effective date.--The amendments made by this subsection 
        shall be effective for annual reports submitted for years 
        beginning after date of enactment.
  (d) GAO Study and Report.--
          (1) Study.--The Comptroller General of the United States 
        shall provide for a study that examines--
                  (A) access to dental services by children in 
                underserved areas; and
                  (B) the feasibility and appropriateness of using 
                qualified mid-level dental health providers, in 
                coordination with dentists, to improve access for 
                children to oral health services and public health 
                overall.
          (2) Report.--Not later than 1 year after the date of the 
        enactment of this Act, the Comptroller General shall submit to 
        Congress a report on the study conducted under paragraph (1).

SEC. 145. PROHIBITING INITIATION OF NEW HEALTH OPPORTUNITY ACCOUNT 
                    DEMONSTRATION PROGRAMS.

  After the date of the enactment of this Act, the Secretary of Health 
and Human Services may not approve any new demonstration programs under 
section 1938 of the Social Security Act (42 U.S.C. 1396u-8).

               Subtitle F--Quality and Program Integrity

SEC. 151. PEDIATRIC HEALTH QUALITY MEASUREMENT PROGRAM.

  (a) Quality Measurement of Children's Health.--
          (1) Establishment of program to develop quality measures for 
        children's health.--The Secretary of Health and Human Services 
        (in this section referred to as the ``Secretary'') shall 
        establish a child health care quality measurement program (in 
        this subsection referred to as the ``children's health quality 
        measurement program'') to develop and implement--
                  (A) pediatric quality measures on children's health 
                care that may be used by public and private health care 
                purchasers (and a system for reporting such measures); 
                and
                  (B) measures of overall program performance that may 
                be used by public and private health care purchasers.
        The Secretary shall publish, not later than September 30, 2009, 
        the recommended measures under the program for application 
        under the amendments made by subsection (b) for years beginning 
        with 2010.
          (2) Measures.--
                  (A) Scope.--The measures developed under the 
                children's health quality measurement program shall--
                          (i) provide comprehensive information with 
                        respect to the provision and outcomes of health 
                        care for young children, school age children, 
                        and older children.
                          (ii) be designed to identify disparities by 
                        pediatric characteristics (including, at a 
                        minimum, those specified in subparagraph (C)) 
                        in child health and the provision of health 
                        care;
                          (iii) be designed to ensure that the data 
                        required for such measures is collected and 
                        reported in a standard format that permits 
                        comparison at a State, plan, and provider 
                        level, and between insured and uninsured 
                        children;
                          (iv) take into account existing measures of 
                        child health quality and be periodically 
                        updated;
                          (v) include measures of clinical health care 
                        quality which meet the requirements for 
                        pediatric quality measures in paragraph (1);
                          (vi) improve and augment existing measures of 
                        clinical health care quality for children's 
                        health care and develop new and emerging 
                        measures; and
                          (vii) increase the portfolio of evidence-
                        based pediatric quality measures available to 
                        public and private purchasers, providers, and 
                        consumers.
                  (B) Specific measures.--Such measures shall include 
                measures relating to at least the following aspects of 
                health care for children:
                          (i) The proportion of insured (and uninsured) 
                        children who receive age-appropriate preventive 
                        health and dental care (including age 
                        appropriate immunizations) at each stage of 
                        child health development.
                          (ii) The proportion of insured (and 
                        uninsured) children who receive dental care for 
                        restoration of teeth, relief of pain and 
                        infection, and maintenance of dental health.
                          (iii) The effectiveness of early health care 
                        interventions for children whose assessments 
                        indicate the presence or risk of physical or 
                        mental conditions that could adversely affect 
                        growth and development.
                          (iv) The effectiveness of treatment to 
                        ameliorate the effects of diagnosed physical 
                        and mental health conditions, including chronic 
                        conditions.
                          (v) The proportion of children under age 21 
                        who are continuously insured for a period of 12 
                        months or longer.
                          (vi) The effectiveness of health care for 
                        children with disabilities.
                In carrying out clause (vi), the Secretary shall 
                develop quality measures and best practices relating to 
                cystic fibrosis.
                  (C) Reporting methodology for analysis by pediatric 
                characteristics.--The children's health quality 
                measurement program shall describe with specificity 
                such measures and the process by which such measures 
                will be reported in a manner that permits analysis 
                based on each of the following pediatric 
                characteristics:
                          (i) Age.
                          (ii) Gender.
                          (iii) Race.
                          (iv) Ethnicity.
                          (v) Primary language of the child's parents 
                        (or caretaker relative).
                          (vi) Disability or chronic condition 
                        (including cystic fibrosis).
                          (vii) Geographic location.
                          (viii) Coverage status under public and 
                        private health insurance programs.
                  (D) Pediatric quality measure.--In this subsection, 
                the term ``pediatric quality measure'' means a 
                measurement of clinical care that assesses one or more 
                aspects of pediatric health care quality (in various 
                settings) including the structure of the clinical care 
                system, the process and outcome of care, or patient 
                experience in such care.
          (3) Consultation in developing quality measures for 
        children's health services.--In developing and implementing the 
        children's health quality measurement program, the Secretary 
        shall consult with--
                  (A) States;
                  (B) pediatric hospitals, pediatricians, and other 
                primary and specialized pediatric health care 
                professionals (including members of the allied health 
                professions) who specialize in the care and treatment 
                of children, particularly children with special 
                physical, mental, and developmental health care needs;
                  (C) dental professionals;
                  (D) health care providers that furnish primary health 
                care to children and families who live in urban and 
                rural medically underserved communities or who are 
                members of distinct population sub-groups at heightened 
                risk for poor health outcomes;
                  (E) national organizations representing children, 
                including children with disabilities and children with 
                chronic conditions;
                  (F) national organizations and individuals with 
                expertise in pediatric health quality performance 
                measurement; and
                  (G) voluntary consensus standards setting 
                organizations and other organizations involved in the 
                advancement of evidence based measures of health care.
          (4) Use of grants and contracts.--In carrying out the 
        children's health quality measurement program, the Secretary 
        may award grants and contracts to develop, test, validate, 
        update, and disseminate quality measures under the program.
          (5) Technical assistance.--The Secretary shall provide 
        technical assistance to States to establish for the reporting 
        of quality measures under titles XIX and XXI of the Social 
        Security Act in accordance with the children's health quality 
        measurement program.
  (b) Dissemination of Information on the Quality of Program 
Performance.--Not later than January 1, 2009, and annually thereafter, 
the Secretary shall collect, analyze, and make publicly available on a 
public website of the Department of Health and Human Services in an 
online format--
          (1) a complete list of all measures in use by States as of 
        such date and used to measure the quality of medical and dental 
        health services furnished to children enrolled under title XIX 
        of XXI of the Social Security Act by participating providers, 
        managed care entities, and plan issuers; and
          (2) information on health care quality for children contained 
        in external quality review reports required under section 
        1932(c)(2) of such Act (42 U.S.C. 1396u-2) or produced by 
        States that administer separate plans under title XXI of such 
        Act.
  (c) Reports to Congress on Program Performance.--Not later than 
January 1, 2010, and every 2 years thereafter, the Secretary shall 
report to Congress on--
          (1) the quality of health care for children enrolled under 
        title XIX and XXI of the Social Security Act under the 
        children's health quality measurement program; and
          (2) patterns of health care utilization with respect to the 
        measures specified in subsection (a)(2)(B) among children by 
        the pediatric characteristics listed in subsection (a)(2)(C).

SEC. 152. APPLICATION OF CERTAIN MANAGED CARE QUALITY SAFEGUARDS TO 
                    CHIP.

  (a) In General.--Section 2103(f) of Social Security Act (42 U.S.C. 
1397bb(f)) is amended by adding at the end the following new paragraph:
          ``(3) Compliance with managed care requirements.--The State 
        child health plan shall provide for the application of 
        subsections (a)(4), (a)(5), (b), (c), (d), and (e) of section 
        1932 (relating to requirements for managed care) to coverage, 
        State agencies, enrollment brokers, managed care entities, and 
        managed care organizations under this title in the same manner 
        as such subsections apply to coverage and such entities and 
        organizations under title XIX.''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to contract years for health plans beginning on or after July 1, 2008.

SEC. 153. UPDATED FEDERAL EVALUATION OF CHIP.

  Section 2108(c) of the Social Security Act (42 U.S.C. 1397hh(c)) is 
amended by striking paragraph (5) and inserting the following:
          ``(5) Subsequent evaluation using updated information.--
                  ``(A) In general.--The Secretary, directly or through 
                contracts or interagency agreements, shall conduct an 
                independent subsequent evaluation of 10 States with 
                approved child health plans.
                  ``(B) Selection of states and matters included.--
                Paragraphs (2) and (3) shall apply to such subsequent 
                evaluation in the same manner as such provisions apply 
                to the evaluation conducted under paragraph (1).
                  ``(C) Submission to congress.--Not later than 
                December 31, 2010, the Secretary shall submit to 
                Congress the results of the evaluation conducted under 
                this paragraph.
                  ``(D) Funding.--Out of any money in the Treasury of 
                the United States not otherwise appropriated, there are 
                appropriated $10,000,000 for fiscal year 2009 for the 
                purpose of conducting the evaluation authorized under 
                this paragraph. Amounts appropriated under this 
                subparagraph shall remain available for expenditure 
                through fiscal year 2011.'' .

SEC. 154. ACCESS TO RECORDS FOR IG AND GAO AUDITS AND EVALUATIONS.

  Section 2108(d) of the Social Security Act (42 U.S.C. 1397hh(d)) is 
amended to read as follows:
  ``(d) Access to Records for IG and GAO Audits and Evaluations.--For 
the purpose of evaluating and auditing the program established under 
this title, the Secretary, the Office of Inspector General, and the 
Comptroller General shall have access to any books, accounts, records, 
correspondence, and other documents that are related to the expenditure 
of Federal funds under this title and that are in the possession, 
custody, or control of States receiving Federal funds under this title 
or political subdivisions thereof, or any grantee or contractor of such 
States or political subdivisions.''.

SEC. 155. REFERENCES TO TITLE XXI.

  Section 704 of the Medicare, Medicaid, and SCHIP Balanced Budget 
Refinement Act of 1999 (Appendix F, 113 Stat. 1501A-321), as enacted 
into law by section 1000(a)(6) of Public Law 106-113) is repealed and 
the item relating to such section in the table of contents of such Act 
is repealed.

SEC. 156. RELIANCE ON LAW; EXCEPTION FOR STATE LEGISLATION.

  (a) Reliance on Law.--With respect to amendments made by this title 
or title VIII that become effective as of a date--
          (1) such amendments are effective as of such date whether or 
        not regulations implementing such amendments have been issued; 
        and
          (2) Federal financial participation for medical assistance or 
        child health assistance furnished under title XIX or XXI, 
        respectively, of the Social Security Act on or after such date 
        by a State in good faith reliance on such amendments before the 
        date of promulgation of final regulations, if any, to carry out 
        such amendments (or before the date of guidance, if any, 
        regarding the implementation of such amendments) shall not be 
        denied on the basis of the State's failure to comply with such 
        regulations or guidance.
  (b) Exception for State Legislation.--In the case of a State plan 
under title XIX or State child health plan under XXI of the Social 
Security Act, which the Secretary of Health and Human Services 
determines requires State legislation in order for respective plan to 
meet one or more additional requirements imposed by amendments made by 
this title or title VIII, the respective State plan shall not be 
regarded as failing to comply with the requirements of such title 
solely on the basis of its failure to meet such an additional 
requirement before the first day of the first calendar quarter 
beginning after the close of the first regular session of the State 
legislature that begins after the date of enactment of this Act. For 
purposes of the previous sentence, in the case of a State that has a 2-
year legislative session, each year of the session shall be considered 
to be a separate regular session of the State legislature.

              TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS

                  Subtitle A--Improvements in Benefits

SEC. 201. COVERAGE AND WAIVER OF COST-SHARING FOR PREVENTIVE SERVICES.

  (a) Preventive Services Defined; Coverage of Additional Preventive 
Services.--Section 1861 of the Social Security Act (42 U.S.C. 1395x) is 
amended--
          (1) in subsection (s)(2)--
                  (A) in subparagraph (Z), by striking ``and'' after 
                the semicolon at the end;
                  (B) in subparagraph (AA), by adding ``and'' after the 
                semicolon at the end; and
                  (C) by adding at the end the following new 
                subparagraph:
                                                  ``(BB) additional 
                                                preventive services 
                                                (described in 
                                                subsection 
                                                (ccc)(1)(M));''; and
          (2) by adding at the end the following new subsection:

                         ``Preventive Services

  ``(ccc)(1) The term `preventive services' means the following:
                  ``(A) Prostate cancer screening tests (as defined in 
                subsection (oo)).
                  ``(B) Colorectal cancer screening tests (as defined 
                in subsection (pp)).
                  ``(C) Diabetes outpatient self-management training 
                services (as defined in subsection (qq)).
                  ``(D) Screening for glaucoma for certain individuals 
                (as described in subsection (s)(2)(U)).
                  ``(E) Medical nutrition therapy services for certain 
                individuals (as described in subsection (s)(2)(V)).
                  ``(F) An initial preventive physical examination (as 
                defined in subsection (ww)).
                  ``(G) Cardiovascular screening blood tests (as 
                defined in subsection (xx)(1)).
                  ``(H) Diabetes screening tests (as defined in 
                subsection described in subsection (s)(2)(Y)).
                  ``(I) Ultrasound screening for abdominal aortic 
                aneurysm for certain individuals (as described in 
                described in subsection (s)(2)(AA)).
                  ``(J) Pneumococcal and influenza vaccine and their 
                administration (as described in subsection (s)(10)(A)).
                  ``(K) Hepatitis B vaccine and its administration for 
                certain individuals (as described in subsection 
                (s)(10)(B)).
                  ``(L) Screening mammography (as defined in subsection 
                (jj)).
                  ``(M) Screening pap smear and screening pelvic exam 
                (as described in subsection (s)(14)).
                  ``(N) Bone mass measurement (as defined in subsection 
                (rr)).
                  ``(O) Additional preventive services (as determined 
                under paragraph (2)).
          ``(2)(A) The term `additional preventive services' means 
        items and services, including mental health services, not 
        described in subparagraphs (A) through (N) of paragraph (1) 
        that the Secretary determines to be reasonable and necessary 
        for the prevention or early detection of an illness or 
        disability.
          ``(B) In making determinations under subparagraph (1), the 
        Secretary shall--
                  ``(i) take into account evidence-based 
                recommendations by the United States Preventive 
                Services Task Force and other appropriate 
                organizations; and
                  ``(ii) use the process for making national coverage 
                determinations (as defined in section 1869(f)(1)(B)) 
                under this title.''.
  (b) Payment and Elimination of Cost-Sharing.--
          (1) In general.--
                  (A) In general.--Section 1833(a)(1) of the Social 
                Security Act (42 U.S.C. 1395l(a)(1)) is amended--
                          (i) in clause (T), by striking ``80 percent'' 
                        and inserting ``100 percent''; and
                          (ii) by striking ``and'' before ``(V)''; and
                          (iii) by inserting before the semicolon at 
                        the end the following: ``, and (W) with respect 
                        to additional preventive services (as defined 
                        in section 1861(ccc)(2)) and other preventive 
                        services for which a payment rate is not 
                        otherwise established under this section, the 
                        amount paid shall be 100 percent of the lesser 
                        of the actual charge for the services or the 
                        amount determined under a fee schedule 
                        established by the Secretary for purposes of 
                        this clause''.
                  (B) Application to sigmoidoscopies and 
                colonoscopies.--Section 1834(d) of such Act (42 U.S.C. 
                1395m(d)) is amended--
                          (i) in paragraph (2)(C), by amending clause 
                        (ii) to read as follows:
                          ``(ii) No coinsurance.--In the case of a 
                        beneficiary who receives services described in 
                        clause (i), there shall be no coinsurance 
                        applied.''; and.
                          (ii) in paragraph (3)(C), by amending clause 
                        (ii) to read as follows:
                          ``(ii) No coinsurance.--In the case of a 
                        beneficiary who receives services described in 
                        clause (i), there shall be no coinsurance 
                        applied.''.
          (2) Elimination of coinsurance in outpatient hospital 
        settings.--
                  (A) Exclusion from opd fee schedule.--Section 
                1833(t)(1)(B)(iv) of the Social Security Act (42 U.S.C. 
                1395l(t)(1)(B)(iv)) is amended by striking ``screening 
                mammography (as defined in section 1861(jj)) and 
                diagnostic mammography'' and inserting ``diagnostic 
                mammography and preventive services (as defined in 
                section 1861(ccc)(1))''.
                  (B) Conforming amendments.--Section 1833(a)(2) of the 
                Social Security Act (42 U.S.C. 1395l(a)(2)) is 
                amended--
                          (i) in subparagraph (F), by striking ``and'' 
                        after the semicolon at the end;
                          (ii) in subparagraph (G)(ii), by adding 
                        ``and''at the end; and
                          (iii) by adding at the end the following new 
                        subparagraph:
                  ``(H) with respect to additional preventive services 
                (as defined in section 1861(ccc)(2)) furnished by an 
                outpatient department of a hospital, the amount 
                determined under paragraph (1)(W);''.
          (3) Waiver of application of deductible for all preventive 
        services.--The first sentence of section 1833(b) of the Social 
        Security Act (42 U.S.C. 1395l(b)) is amended--
                  (A) in clause (1), by striking ``items and services 
                described in section 1861(s)(10)(A)'' and inserting 
                ``preventive services (as defined in section 
                1861(ccc)(1))'';
                  (B) by inserting ``and'' before ``(4)''; and
                  (C) by striking clauses (5) through (8).
  (c) Inclusion as Part of Initial Preventive Physical Examination.--
Section 1861(ww)(2) of the Social Security Act (42 U.S.C. 1395x(ww)(2)) 
is amended by adding at the end the following new subparagraph:
                  ``(M) Additional preventive services (as defined in 
                subsection (ccc)(2)).''.
  (d) Effective Date.--The amendments made by this section shall apply 
to services furnished on or after January 1, 2008.

SEC. 202. WAIVER OF DEDUCTIBLE FOR COLORECTAL CANCER SCREENING TESTS 
                    REGARDLESS OF CODING, SUBSEQUENT DIAGNOSIS, OR 
                    ANCILLARY TISSUE REMOVAL.

  (a) In General.--Section 1833(b) of the Social Security Act (42 
U.S.C. 1395l(b)), as amended by section 201(b), is amended by adding at 
the end the following new sentence: ``Clause (1) of the first sentence 
of this subsection shall apply with respect to a colorectal cancer 
screening test regardless of the code applied, of the establishment of 
a diagnosis as a result of the test, or of the removal of tissue or 
other matter or other procedure that is performed in connection with 
and as a result of the screening test.''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to items and services furnished on or after January 1, 2008.

SEC. 203. PARITY FOR MENTAL HEALTH COINSURANCE.

  Section 1833(c) of the Social Security Act (42 U.S.C. 1395l(c)) is 
amended by inserting ``before 2008'' after ``in any calendar year''.

Subtitle B--Improving, Clarifying, and Simplifying Financial Assistance 
                 for Low Income Medicare Beneficiaries

SEC. 211. IMPROVING ASSETS TESTS FOR MEDICARE SAVINGS PROGRAM AND LOW-
                    INCOME SUBSIDY PROGRAM.

  (a) Application of Highest Level Permitted Under LIS.--
          (1) To full-premium subsidy eligible individuals.--Section 
        1860D-14(a) of the Social Security Act (42 U.S.C. 1395w-114(a)) 
        is amended--
                  (A) in paragraph (1), in the matter before 
                subparagraph (A), by inserting ``(or, beginning with 
                2009, paragraph (3)(E))'' after ``paragraph (3)(D)''; 
                and
                  (B) in paragraph (3)(A)(iii), by striking ``(D) or''.
          (2) Annual increase in lis resource test.--Section 1860D-
        14(a)(3)(E)(i) of such Act (42 U.S.C. 1395w-114(a)(3)(E)(i)) is 
        amended--
                  (A) by striking ``and'' at the end of subclause (I);
                  (B) in subclause (II), by inserting ``(before 2009)'' 
                after ``subsequent year'';
                  (C) by striking the period at the end of subclause 
                (II) and inserting a semicolon; and
                  (D) by inserting after subclause (II) the following 
                new subclauses:
                                  ``(III) for 2009, $17,000 (or $34,000 
                                in the case of the combined value of 
                                the individual's assets or resources 
                                and the assets or resources of the 
                                individual's spouse); and
                                  ``(IV) for a subsequent year, the 
                                dollar amounts specified in this 
                                subclause (or subclause (III)) for the 
                                previous year increased by $1,000 (or 
                                $2,000 in the case of the combined 
                                value referred to in subclause 
                                (III)).''.
          (3) Application of lis test under medicare savings program.--
        Section 1905(p)(1)(C) of such Act (42 U.S.C. 1396d(p)(1)(C)) is 
        amended by inserting before the period at the end the 
        following: ``or, effective beginning with January 1, 2009, 
        whose resources (as so determined) do not exceed the maximum 
        resource level applied for the year under section 1860D-
        14(a)(3)(E) applicable to an individual or to the individual 
        and the individual's spouse (as the case may be)''.
  (b) Effective Date.--The amendments made by subsection (a) shall 
apply to eligibility determinations for income-related subsidies and 
medicare cost-sharing furnished for periods beginning on or after 
January 1, 2009.

SEC. 212. MAKING QI PROGRAM PERMANENT AND EXPANDING ELIGIBILITY.

  (a) Making Program Permanent.--
          (1) In general.--Section 1902(a)(10)(E)(iv) of the Social 
        Security Act (42 U.S.C. 1396b(a)(10)(E)(iv)) is amended--
                  (A) by striking ``sections 1933 and'' and by 
                inserting ``section''; and
                  (B) by striking ``(but only for'' and all that 
                follows through ``September 2007)''.
          (2) Elimination of funding limitation.--
                  (A) In general.--Section 1933 of such Act (42 U.S.C. 
                1396u-3) is amended--
                          (i) in subsection (a), by striking ``who are 
                        selected to receive such assistance under 
                        subsection (b)''
                          (ii) by striking subsections (b), (c), (e), 
                        and (g);
                          (iii) in subsection (d), by striking 
                        ``furnished in a State'' and all that follows 
                        and inserting ``the Federal medical assistance 
                        percentage shall be equal to 100 percent.''; 
                        and
                          (iv) by redesignating subsections (d) and (f) 
                        as subsections (b) and (c), respectively.
                  (B) Conforming amendment.--Section 1905(b) of such 
                Act (42 U.S.C. 1396d(b)) is amended by striking 
                ``1933(d)'' and inserting ``1933(b)''.
                  (C) Effective date.--The amendments made by 
                subparagraph (A) shall take effect on October 1, 2007.
  (b) Increase in Eligibility to 150 Percent of the Federal Poverty 
Level.--Section 1902(a)(10)(E)(iv) of such Act is further amended by 
inserting ``(or, effective January 1, 2008, 150 percent)'' after ``135 
percent''.

SEC. 213. ELIMINATING BARRIERS TO ENROLLMENT.

  (a) Administrative Verification of Income and Resources Under the 
Low-Income Subsidy Program.--Section 1860D-14(a)(3) of the Social 
Security Act (42 U.S.C. 1395w-114(a)(3)) is amended by adding at the 
end the following new subparagraph:
                  ``(G) Self-certification of income and resources.--
                For purposes of applying this section, an individual 
                shall be permitted to qualify on the basis of self-
                certification of income and resources without the need 
                to provide additional documentation.''.
  (b) Automatic Reenrollment Without Need to Reapply Under Low-Income 
Subsidy Program.--Section 1860D-14(a)(3) of such Act (42 U.S.C. 1395w-
114(a)(3)), as amended by subsection (a), is further amended by adding 
at the end the following new subparagraph:
                  ``(H) Automatic reenrollment.--For purposes of 
                applying this section, in the case of an individual who 
                has been determined to be a subsidy eligible individual 
                (and within a particular class of such individuals, 
                such as a full-subsidy eligible individual or a partial 
                subsidy eligible individual), the individual shall be 
                deemed to continue to be so determined without the need 
                for any annual or periodic application unless and until 
                the individual notifies a Federal or State official 
                responsible for such determinations that the 
                individual's eligibility conditions have changed so 
                that the individual is no longer a subsidy eligible 
                individual (or is no longer within such class of such 
                individuals).''.
  (c) Encouraging Application of Procedures Under Medicare Savings 
Program.--Section 1905(p) of such Act (42 U.S.C. 1396d(p)) is amended 
by adding at the end the following new paragraph:
  ``(7) The Secretary shall take all reasonable steps to encourage 
States to provide for administrative verification of income and 
automatic reenrollment (as provided under clauses (iii) and (iv) of 
section 1860D-14(a)(3)(C) in the case of the low-income subsidy 
program).''.
  (d) SSA Assistance With Medicare Savings Program and Low-Income 
Subsidy Program Applications.--Section 1144 of such Act (42 U.S.C. 
1320b-14) is amended by adding at the end the following new subsection:
  ``(c) Assistance With Medicare Savings Program and Low-Income Subsidy 
Program Applications.--
          ``(1) Distribution of applications to applicants for 
        medicare.--In the case of each individual applying for hospital 
        insurance benefits under section 226 or 226A, the Commissioner 
        shall provide the following:
                  ``(A) Information describing the low-income subsidy 
                program under section 1860D-14 and the medicare savings 
                program under title XIX.
                  ``(B) An application for enrollment under such low-
                income subsidy program as well as an application form 
                (developed under section 1905(p)(5)) for medical 
                assistance for medicare cost-sharing under title XIX.
                  ``(C) Information on how the individual may obtain 
                assistance in completing such applications, including 
                information on how the individual may contact the State 
                health insurance assistance program (SHIP) for the 
                State in which the individual is located.
        The Commissioner shall make such application forms available at 
        local offices of the Social Security Administration.
          ``(2) Training personnel in assisting in completing 
        applications.--The Commissioner shall provide training to those 
        employees of the Social Security Administration who are 
        involved in receiving applications for benefits described in 
        paragraph (1) in assisting applicants in completing a medicare 
        savings program application described in paragraph (1). Such 
        employees who are so trained shall provide such assistance upon 
        request.
          ``(3) Transmittal of completed application.--If such an 
        employee assists in completing such an application, the 
        employee, with the consent of the applicant, shall transmit the 
        completed application to the appropriate State medicaid agency 
        for processing.
          ``(4) Coordination with outreach.--The Commissioner shall 
        coordinate outreach activities under this subsection with 
        outreach activities conducted by States in connection with the 
        low-income subsidy program and the medicare savings program.''.
  (e) Medicaid Agency Consideration of Applications.--Section 1935(a) 
of such Act (42 U.S.C. 1396u-5(a)) is amended by adding at the end the 
following new paragraph:
          ``(4) Consideration of msp applications.--The State shall 
        accept medicare savings program applications transmitted under 
        section 1144(c)(3) and act on such applications in the same 
        manner and deadlines as if they had been submitted directly by 
        the applicant.''.
  (f) Translation of Model Form.--Section 1905(p)(5)(A) of the Social 
Security Act (42 U.S.C. 1396d(p)(5)(A)) is amended by adding at the end 
the following: ``The Secretary shall provide for the translation of 
such application form into at least the 10 languages (other than 
English) that are most often used by individuals applying for hospital 
insurance benefits under section 226 or 226A and shall make the 
translated forms available to the States and to the Commissioner of 
Social Security.''.
  (g) Disclosure of Tax Return Information for Purposes of Providing 
Low-Income Subsidies Under Medicare.--
          (1) In general.--Subsection (l) of section 6103 of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following new paragraph:
          ``(21) Disclosure of return information for purposes of 
        providing low-income subsidies under medicare.--
                  ``(A) Return information from internal revenue 
                service to social security administration.--The 
                Secretary, upon written request from the Commissioner 
                of Social Security, shall disclose to the officers and 
                employees of the Social Security Administration with 
                respect to any individual identified by the 
                Commissioner as potentially eligible (based on 
                information other than return information) for low-
                income subsidies under section 1860D-14 of the Social 
                Security Act--
                          ``(i) whether the adjusted gross income for 
                        the applicable year is less than 135 percent of 
                        the poverty line (as specified by the 
                        Commissioner in such request),
                          ``(ii) whether such adjusted gross income is 
                        between 135 percent and 150 percent of the 
                        poverty line (as so specified),
                          ``(iii) whether any designated distributions 
                        (as defined in section 3405(e)(1)) were 
                        reported with respect to such individual under 
                        section 6047(d) for the applicable year, and 
                        the amount (if any) of the distributions so 
                        reported,
                          ``(iv) whether the return was a joint return 
                        for the applicable year, and
                          ``(v) the applicable year.
                  ``(B) Applicable year.--
                          ``(i) In general.--For the purposes of this 
                        paragraph, the term `applicable year' means the 
                        most recent taxable year for which information 
                        is available in the Internal Revenue Service's 
                        taxpayer data information systems, or, if there 
                        is no return filed for the individual for such 
                        year, the prior taxable year.
                          ``(ii) No return.--If no return is filed for 
                        such individual for both taxable years referred 
                        to in clause (i), the Secretary shall disclose 
                        the fact that there is no return filed for such 
                        individual for the applicable year in lieu of 
                        the information described in subparagraph (A).
                  ``(C) Restriction on use of disclosed information.--
                Return information disclosed under this paragraph may 
                be used only for the purpose of improving the efforts 
                of the Social Security Administration to contact and 
                assist eligible individuals for, and administering, 
                low-income subsidies under section 1860D-14 of the 
                Social Security Act.
                  ``(D) Termination.--No disclosure shall be made under 
                this paragraph after the 2-year period beginning on the 
                date of the enactment of this paragraph.''.
          (2) Procedures and recordkeeping related to disclosures.--
        Paragraph (4) of section 6103(p) of such Code is amended by 
        striking ``or (17)'' each place it appears and inserting 
        ``(17), or (21)''.
          (3) Report.--Not later than 18 months after the date of the 
        enactment of this Act, the Secretary of the Treasury, after 
        consultation with the Commissioner of Social Security, shall 
        submit a written report to Congress regarding the use of 
        disclosures made under section 6103(l)(21) of the Internal 
        Revenue Code of 1986, as added by this subsection, in 
        identifying individuals eligible for the low-income subsidies 
        under section 1860D-14 of the Social Security Act.
          (4) Effective date.--The amendment made by this subsection 
        shall apply to disclosures made after the date of the enactment 
        of this Act.
  (h) Effective Date.--Except as otherwise provided, the amendments 
made by this section shall take effect on January 1, 2009.

SEC. 214. ELIMINATING APPLICATION OF ESTATE RECOVERY.

  (a) In General.--Section 1917(b)(1)(B)(ii) of the Social Security Act 
(42 U.S.C. 1396p(b)(1)(B)(ii)) is amended by inserting ``(but not 
including medical assistance for medicare cost-sharing or for benefits 
described in section 1902(a)(10)(E))'' before the period at the end.
  (b) Effective Date.--The amendment made by subsection (a) shall take 
effect as of January 1, 2008.

SEC. 215. ELIMINATION OF PART D COST-SHARING FOR CERTAIN NON-
                    INSTITUTIONALIZED FULL-BENEFIT DUAL ELIGIBLE 
                    INDIVIDUALS.

  (a) In General.--Section 1860D-14(a)(1)(D)(i) of the Social Security 
Act (42 U.S.C. 1395w-114(a)(1)(D)(i)) is amended--
          (1) by striking ``Institutionalized individuals.--In'' and 
        inserting ``Elimination of cost-sharing for certain full-
        benefit dual eligible individuals.--
                                  ``(I) Institutionalized 
                                individuals.--In''; and
          (2) by adding at the end the following new subclause:
                                  ``(II) Certain other individuals.--In 
                                the case of an individual who is a 
                                full-benefit dual eligible individual 
                                and with respect to whom there has been 
                                a determination that but for the 
                                provision of home and community based 
                                care (whether under section 1915 or 
                                under a waiver under section 1115) the 
                                individual would require the level of 
                                care provided in a hospital or a 
                                nursing facility or intermediate care 
                                facility for the mentally retarded the 
                                cost of which could be reimbursed under 
                                the State plan under title XIX, the 
                                elimination of any beneficiary 
                                coinsurance described in section 1860D-
                                2(b)(2) (for all amounts through the 
                                total amount of expenditures at which 
                                benefits are available under section 
                                1860D-2(b)(4)).''.
  (b) Effective Date.--The amendments made by subsection (a) shall 
apply to drugs dispensed on or after January 1, 2009.

SEC. 216. EXEMPTIONS FROM INCOME AND RESOURCES FOR DETERMINATION OF 
                    ELIGIBILITY FOR LOW-INCOME SUBSIDY.

  (a) In General.--Section 1860D-14(a)(3) of the Social Security Act 
(42 U.S.C. 1395w-114(a)(3)), as amended by subsections (a) and (b) of 
section 213, is further amended--
          (1) in subparagraph (C)(i), by inserting ``and except that 
        support and maintenance furnished in kind shall not be counted 
        as income'' after ``section 1902(r)(2)'';
          (2) in subparagraph (D), in the matter before clause (i), by 
        inserting ``subject to the additional exclusions provided under 
        subparagraph (G)'' before ``)'';
          (3) in subparagraph (E)(i), in the matter before subclause 
        (I), by inserting ``subject to the additional exclusions 
        provided under subparagraph (G)'' before ``)''; and
          (4) by adding at the end the following new subparagraph:
                  ``(I) Additional exclusions.--In determining the 
                resources of an individual (and the eligible spouse of 
                the individual, if any) under section 1613 for purposes 
                of subparagraphs (D) and (E) the following additional 
                exclusions shall apply:
                          ``(i) Life insurance policy.--No part of the 
                        value of any life insurance policy shall be 
                        taken into account.
                          ``(ii) Pension or retirement plan.--No 
                        balance in any pension or retirement plan shall 
                        be taken into account.''.
  (b) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2009, and shall apply to determinations of 
eligibility for months beginning with January 2009.

SEC. 217. COST-SHARING PROTECTIONS FOR LOW-INCOME SUBSIDY-ELIGIBLE 
                    INDIVIDUALS.

  (a) In General.--Section 1860D-14(a) of the Social Security Act (42 
U.S.C. 1395w-114(a)) is amended--
          (1) in paragraph (1)(D), by adding at the end the following 
        new clause:
                          ``(iv) Overall limitation on cost-sharing.--
                        In the case of all such individuals, a 
                        limitation on aggregate cost-sharing under this 
                        part for a year not to exceed 2.5 percent of 
                        income.''; and
          (2) in paragraph (2), by adding at the end the following new 
        subparagraph:
                  ``(F) Overall limitation on cost-sharing.--A 
                limitation on aggregate cost-sharing under this part 
                for a year not to exceed 2.5 percent of income.''.
  (b) Effective Date.--The amendments made by subsection (a) shall 
apply as of January 1, 2009.

SEC. 218. INTELLIGENT ASSIGNMENT IN ENROLLMENT.

  (a) In General.--Section 1860D-1(b)(1) of the Social Security Act (42 
U.S.C. 1395w-101(b)(1)) is amended--
          (1) in the second sentence of subparagraph (C), by inserting 
        ``, subject to subparagraph (D),'' before ``on a random 
        basis''; and
          (2) by adding at the end the following new subparagraph:
                  ``(D) Intelligent assignment.--In the case of any 
                auto-enrollment under subparagraph (C), no part D 
                eligible individual described in such subparagraph 
                shall be enrolled in a prescription drug plan which 
                does not meet the following requirements:
                          ``(i) Formulary.--The plan has a formulary 
                        that covers at least--
                                  ``(I) 95 percent of the 100 most 
                                commonly prescribed non-duplicative 
                                generic covered part D drugs for the 
                                population of individuals entitled to 
                                benefits under part A or enrolled under 
                                part B; and
                                  ``(II) 95 percent of the 100 most 
                                commonly prescribed non-duplicative 
                                brand name covered part D drugs for 
                                such population.
                          ``(ii) Pharmacy network.--The plan has a 
                        network of pharmacies that substantially 
                        exceeds the minimum requirements for 
                        prescription drug plans in the State and that 
                        provides access in areas where lower income 
                        individuals reside.
                          ``(iii) Quality.--
                                  ``(I) In general.--Subject to 
                                subclause (I), the plan has an above 
                                average score on quality ratings of the 
                                Secretary of prescription drug plans 
                                under this part.
                                  ``(II) Exception.--Subclause (I) 
                                shall not apply to a plan that is a new 
                                plan (as defined by the Secretary), 
                                with respect to the plan year involved.
                          ``(iv) Low cost.--The total cost under this 
                        title of providing prescription drug coverage 
                        under the plan consistent with the previous 
                        clauses of this subparagraph is among the 
                        lowest 25th percentile of prescription drug 
                        plans under this part in the State.
                In the case that no plan meets the requirements under 
                clauses (i) through (iv), the Secretary shall implement 
                this subparagraph to the greatest extent possible with 
                the goal of protecting beneficiary access to drugs 
                without increasing the cost relative to the enrollment 
                process under subparagraph (C) as in existence before 
                the date of the enactment of this subparagraph.''.
  (b) Effective Date.--The amendment made by subsection (a) shall take 
effect for enrollments effected on or after November 15, 2009.

              Subtitle C--Part D Beneficiary Improvements

SEC. 221. INCLUDING COSTS INCURRED BY AIDS DRUG ASSISTANCE PROGRAMS AND 
                    INDIAN HEALTH SERVICE IN PROVIDING PRESCRIPTION 
                    DRUGS TOWARD THE ANNUAL OUT OF POCKET THRESHOLD 
                    UNDER PART D.

  (a) In General.--Section 1860D-2(b)(4)(C) of the Social Security Act 
(42 U.S.C. 1395w-102(b)(4)(C)) is amended--
          (1) in clause (i), by striking ``and'' at the end;
          (2) in clause (ii)--
                  (A) by striking ``such costs shall be treated as 
                incurred only if'' and inserting ``subject to clause 
                (iii), such costs shall be treated as incurred only 
                if'';
                  (B) by striking ``, under section 1860D-14, or under 
                a State Pharmaceutical Assistance Program''; and
                  (C) by striking the period at the end and inserting 
                ``; and''; and
          (3) by inserting after clause (ii) the following new clause:
                          ``(iii) such costs shall be treated as 
                        incurred and shall not be considered to be 
                        reimbursed under clause (ii) if such costs are 
                        borne or paid--
                                  ``(I) under section 1860D-14;
                                  ``(II) under a State Pharmaceutical 
                                Assistance Program;
                                  ``(III) by the Indian Health Service, 
                                an Indian tribe or tribal organization, 
                                or an urban Indian organization (as 
                                defined in section 4 of the Indian 
                                Health Care Improvement Act); or
                                  ``(IV) under an AIDS Drug Assistance 
                                Program under part B of title XXVI of 
                                the Public Health Service Act.''.
  (b) Effective Date.--The amendments made by subsection (a) shall 
apply to costs incurred on or after January 1, 2009.

SEC. 222. PERMITTING MID-YEAR CHANGES IN ENROLLMENT FOR FORMULARY 
                    CHANGES ADVERSELY IMPACT AN ENROLLEE.

  (a) In General.--Section 1860D-1(b)(3) of the Social Security Act (42 
U.S.C. 1395w-101(b)(3)) is amended by adding at the end the following 
new subparagraph:
                  ``(F) Change in formulary resulting in increase in 
                cost-sharing.--
                          ``(i) In general.--Except as provided in 
                        clause (ii), in the case of an individual 
                        enrolled in a prescription drug plan (or MA-PD 
                        plan) who has been prescribed a covered part D 
                        drug while so enrolled, if the formulary of the 
                        plan is materially changed (other than at the 
                        end of a contract year) so to reduce the 
                        coverage (or increase the cost-sharing) of the 
                        drug under the plan.
                          ``(ii) Exception.--Clause (i) shall not apply 
                        in the case that a drug is removed from the 
                        formulary of a plan because of a recall or 
                        withdrawal of the drug issued by the Food and 
                        Drug Administration.''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to contract years beginning on or after January 1, 2009.

SEC. 223. REMOVAL OF EXCLUSION OF BENZODIAZEPINES FROM REQUIRED 
                    COVERAGE UNDER THE MEDICARE PRESCRIPTION DRUG 
                    PROGRAM.

  (a) In General.--Section 1860D-2(e)(2)(A) of the Social Security Act 
(42 U.S.C. 1395w-102(e)(2)(A)) is amended--
          (1) by striking ``subparagraph (E)'' and inserting 
        ``subparagraphs (E) and (J)''; and
          (2) by inserting ``and benzodiazepines, respectively'' after 
        ``smoking cessation agents''.
  (b) Effective Date.--The amendments made by subsection (a) shall 
apply to prescriptions dispensed on or after January 1, 2009.

SEC. 224. PERMITTING UPDATING DRUG COMPENDIA UNDER PART D USING PART B 
                    UPDATE PROCESS.

  Section 1860D-4(b)(3)(C) of the Social Security Act (42 U.S.C. 1395w-
104(b)(3)(C)) is amended by adding at the end the following new clause:
                          ``(iv) Updating drug compendia using part b 
                        process.--The Secretary may apply under this 
                        subparagraph the same process for updating drug 
                        compendia that is used for purposes of section 
                        1861(t)(2)(B)(ii).''.

SEC. 225. CODIFICATION OF SPECIAL PROTECTIONS FOR SIX PROTECTED DRUG 
                    CLASSIFICATIONS.

  (a) In General.--Section 1860D-4(b)(3) of the Social Security Act (42 
U.S.C. 1395w-104(b)(3)) is amended--
          (1) in subparagraph (C)(i), by inserting ``, except as 
        provided in subparagraph (G),'' after ``although''; and
          (2) by inserting after subparagraph (F) the following new 
        subparagraph:
                  ``(G) Required inclusion of drugs in certain 
                therapeutic classes.--
                          ``(i) In general.--The formulary must include 
                        all or substantially all covered part D drugs 
                        in each of the following therapeutic classes of 
                        covered part D drugs:
                                  ``(I) Anticonvulsants.
                                  ``(II) Antineoplastics.
                                  ``(III) Antiretrovirals.
                                  ``(IV) Antidepressants.
                                  ``(V) Antipsychotics.
                                  ``(VI) Immunosuppresessants.
                          ``(ii) Use of utilization management tools.--
                        A PDP sponsor of a prescription drug plan may 
                        use prior authorization or step therapy for the 
                        initiation of medications within one of the 
                        classifications specified in clause (i) but 
                        only when approved by the Secretary, except 
                        that such prior authorization or step therapy 
                        may not be used in the case of antiretrovirals 
                        and in the case of individuals who already are 
                        stabilized on a drug treatment regimen.''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
for plan years beginning on or after January 1, 2009.

SEC. 226. ELIMINATION OF MEDICARE PART D LATE ENROLLMENT PENALTIES PAID 
                    BY LOW-INCOME SUBSIDY-ELIGIBLE INDIVIDUALS.

  (a) Individuals With Income Below 135 Percent of Poverty Line.--
Paragraph (1)(A)(ii) of section 1860D-14(a) of the Social Security Act 
(42 U.S.C. 1395w-114(a)) is amended to read as follows:
                          ``(ii) 100 percent of any late enrollment 
                        penalties imposed under section 1860D-13(b) for 
                        such individual.''.
  (b) Individuals With Income Between 135 and 150 Percent of Poverty 
Line.--Paragraph (2)(A) of such section is amended--
          (1) by inserting ``equal to (i) an amount'' after ``premium 
        subsidy'';
          (2) by striking ``paragraph (1)(A)'' and inserting ``clause 
        (i) of paragraph (1)(A)''; and
          (3) by adding at the end before the period the following: ``, 
        plus (ii) 100 percent of the amount described in clause (ii) of 
        such paragraph for such individual''.
  (c) Effective Date.--The amendments made by this section shall apply 
to subsidies for months beginning with January 2008.

SEC. 227. SPECIAL ENROLLMENT PERIOD FOR SUBSIDY ELIGIBLE INDIVIDUALS.

  (a) In General.--Section 1860D-1(b)(3) of the Social Security Act (42 
U.S.C. 1395w-101(b)(3)), as amended by section 222(a), is further 
amended by adding at the end the following new subparagraph:
                  ``(G) Eligibility for low-income subsidy.--
                          ``(i) In general.--In the case of an 
                        applicable subsidy eligible individual (as 
                        defined in clause (ii)), the special enrollment 
                        period described in clause (iii).
                          ``(ii) Applicable subsidy eligible individual 
                        defined.--For purposes of this subparagraph, 
                        the term `applicable subsidy eligible 
                        individual' means a part D eligible individual 
                        who is determined under subparagraph (B) of 
                        section 1860D-14(a)(3) to be a subsidy eligible 
                        individual (as defined in subparagraph (A) of 
                        such section), and includes such an individual 
                        who was enrolled in a prescription drug plan or 
                        an MA-PD plan on the date of such 
                        determination.
                          ``(iii) Special enrollment period 
                        described.--The special enrollment period 
                        described in this clause, with respect to an 
                        applicable subsidy eligible individual, is the 
                        90-day period beginning on the date the 
                        individual receives notification that such 
                        individual has been determined under section 
                        1860D-14(a)(3)(B) to be a subsidy eligible 
                        individual (as so defined).''.
  (b) Automatic Enrollment Process for Certain Subsidy Eligible 
Individuals.--Section 1860D-1(b)(1) of the Social Security Act (42 
U.S.C. 1395w-101(b)(1)), as amended by section 218(a)(2), is further 
amended by adding at the end the following new subparagraph:
                  ``(E) Special rule for subsidy eligible 
                individuals.--The process established under 
                subparagraph (A) shall include, in the case of an 
                applicable subsidy eligible individual (as defined in 
                clause (ii) of paragraph (3)(F)) who fails to enroll in 
                a prescription drug plan or an MA-PD plan during the 
                special enrollment period described in clause (iii) of 
                such paragraph applicable to such individual, a process 
                for the facilitated enrollment of the individual in the 
                prescription drug plan or MA-PD plan that is most 
                appropriate for such individual (as determined by the 
                Secretary). Nothing in the previous sentence shall 
                prevent an individual described in such sentence from 
                declining enrollment in a plan determined appropriate 
                by the Secretary (or in the program under this part) or 
                from changing such enrollment.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to subsidy determinations made for months beginning with January 2008.

                Subtitle D--Reducing Health Disparities

SEC. 231. MEDICARE DATA ON RACE, ETHNICITY, AND PRIMARY LANGUAGE.

  (a) Requirements.--
          (1) In general.--The Secretary of Health and Human Services 
        (in this subtitle referred to as the ``Secretary'') shall--
                  (A) collect data on the race, ethnicity, and primary 
                language of each applicant for and recipient of 
                benefits under title XVIII of the Social Security Act--
                          (i) using, at a minimum, the categories for 
                        race and ethnicity described in the 1997 Office 
                        of Management and Budget Standards for 
                        Maintaining, Collecting, and Presenting Federal 
                        Data on Race and Ethnicity;
                          (ii) using the standards developed under 
                        subsection (e) for the collection of language 
                        data;
                          (iii) where practicable, collecting data for 
                        additional population groups if such groups can 
                        be aggregated into the minimum race and 
                        ethnicity categories; and
                          (iv) where practicable, through self-
                        reporting;
                  (B) with respect to the collection of the data 
                described in subparagraph (A) for applicants and 
                recipients who are minors or otherwise legally 
                incapacitated, require that--
                          (i) such data be collected from the parent or 
                        legal guardian of such an applicant or 
                        recipient; and
                          (ii) the preferred language of the parent or 
                        legal guardian of such an applicant or 
                        recipient be collected;
                  (C) systematically analyze at least annually such 
                data using the smallest appropriate units of analysis 
                feasible to detect racial and ethnic disparities in 
                health and health care and when appropriate, for men 
                and women separately;
                  (D) report the results of analysis annually to the 
                Director of the Office for Civil Rights, the Committee 
                on Health, Education, Labor, and Pensions and the 
                Committee on Finance of the Senate, and the Committee 
                on Energy and Commerce and the Committee on Ways and 
                Means of the House of Representatives; and
                  (E) ensure that the provision of assistance to an 
                applicant or recipient of assistance is not denied or 
                otherwise adversely affected because of the failure of 
                the applicant or recipient to provide race, ethnicity, 
                and primary language data.
          (2) Rules of construction.--Nothing in this subsection shall 
        be construed--
                  (A) to permit the use of information collected under 
                this subsection in a manner that would adversely affect 
                any individual providing any such information; and
                  (B) to require health care providers to collect data.
  (b) Protection of Data.--The Secretary shall ensure (through the 
promulgation of regulations or otherwise) that all data collected 
pursuant to subsection (a) is protected--
          (1) under the same privacy protections as the Secretary 
        applies to other health data under the regulations promulgated 
        under section 264(c) of the Health Insurance Portability and 
        Accountability Act of 1996 (Public Law 104-191; 110 Stat. 2033) 
        relating to the privacy of individually identifiable health 
        information and other protections; and
          (2) from all inappropriate internal use by any entity that 
        collects, stores, or receives the data, including use of such 
        data in determinations of eligibility (or continued 
        eligibility) in health plans, and from other inappropriate 
        uses, as defined by the Secretary.
  (c) Collection Plan.--In carrying out the duties specified in 
subsection (a), the Secretary shall develop and implement a plan to 
improve the collection, analysis, and reporting of racial, ethnic, and 
primary language data within the programs administered under title 
XVIII of the Social Security Act, and, in consultation with the 
National Committee on Vital Health Statistics, the Office of Minority 
Health, and other appropriate public and private entities, shall make 
recommendations on how to--
          (1) implement subsection (a) while minimizing the cost and 
        administrative burdens of data collection and reporting;
          (2) expand awareness that data collection, analysis, and 
        reporting by race, ethnicity, and primary language is legal and 
        necessary to assure equity and non-discrimination in the 
        quality of health care services;
          (3) ensure that future patient record systems have data code 
        sets for racial, ethnic, and primary language identifiers and 
        that such identifiers can be retrieved from clinical records, 
        including records transmitted electronically;
          (4) improve health and health care data collection and 
        analysis for more population groups if such groups can be 
        aggregated into the minimum race and ethnicity categories;
          (5) provide researchers with greater access to racial, 
        ethnic, and primary language data, subject to privacy and 
        confidentiality regulations; and
          (6) safeguard and prevent the misuse of data collected under 
        subsection (a).
  (d) Compliance With Standards.--Data collected under subsection (a) 
shall be obtained, maintained, and presented (including for reporting 
purposes and at a minimum) in accordance with the 1997 Office of 
Management and Budget Standards for Maintaining, Collecting, and 
Presenting Federal Data on Race and Ethnicity.
  (e) Language Collection Standards.--Not later than 1 year after the 
date of enactment of this Act, the Director of the Office of Minority 
Health, in consultation with the Office for Civil Rights of the 
Department of Health and Human Services, shall develop and disseminate 
Standards for the Classification of Federal Data on Preferred Written 
and Spoken Language.
  (f) Technical Assistance for the Collection and Reporting of Data.--
          (1) In general.--The Secretary may, either directly or 
        through grant or contract, provide technical assistance to 
        enable a health care provider or plan operating under the 
        Medicare program to comply with the requirements of this 
        section.
          (2) Types of assistance.--Assistance provided under this 
        subsection may include assistance to--
                  (A) enhance or upgrade computer technology that will 
                facilitate racial, ethnic, and primary language data 
                collection and analysis;
                  (B) improve methods for health data collection and 
                analysis including additional population groups beyond 
                the Office of Management and Budget categories if such 
                groups can be aggregated into the minimum race and 
                ethnicity categories;
                  (C) develop mechanisms for submitting collected data 
                subject to existing privacy and confidentiality 
                regulations; and
                  (D) develop educational programs to raise awareness 
                that data collection and reporting by race, ethnicity, 
                and preferred language are legal and essential for 
                eliminating health and health care disparities.
  (g) Analysis of Racial and Ethnic Data.--The Secretary, acting 
through the Director of the Agency for Health Care Research and Quality 
and in coordination with the Administrator of the Centers for Medicare 
& Medicaid Services, shall--
          (1) identify appropriate quality assurance mechanisms to 
        monitor for health disparities under the Medicare program;
          (2) specify the clinical, diagnostic, or therapeutic measures 
        which should be monitored;
          (3) develop new quality measures relating to racial and 
        ethnic disparities in health and health care;
          (4) identify the level at which data analysis should be 
        conducted; and
          (5) share data with external organizations for research and 
        quality improvement purposes, in compliance with applicable 
        Federal privacy laws.
  (h) Report.--Not later than 2 years after the date of enactment of 
this Act, and biennially thereafter, the Secretary shall submit to the 
appropriate committees of Congress a report on the effectiveness of 
data collection, analysis, and reporting on race, ethnicity, and 
primary language under the programs administered through title XVIII of 
the Social Security Act. The report shall evaluate the progress made 
with respect to the plan under subsection (c) or subsequent revisions 
thereto.
  (i) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section, such sums as may be necessary 
for each of fiscal years 2008 through 2012.

SEC. 232. ENSURING EFFECTIVE COMMUNICATION IN MEDICARE.

  (a) Ensuring Effective Communication by the Centers for Medicare & 
Medicaid Services.--
          (1) Study on medicare payments for language services.--The 
        Secretary of Health and Human Services shall conduct a study 
        that examines ways that Medicare should develop payment systems 
        for language services using the results of the demonstration 
        program conducted under section 233.
          (2) Analyses.--The study shall include an analysis of each of 
        the following:
                  (A) How to develop and structure appropriate payment 
                systems for language services for all Medicare service 
                providers.
                  (B) The feasibility of adopting a payment methodology 
                for on-site interpreters, including interpreters who 
                work as independent contractors and interpreters who 
                work for agencies that provide on-site interpretation, 
                pursuant to which such interpreters could directly bill 
                Medicare for services provided in support of physician 
                office services for an LEP Medicare patient.
                  (C) The feasibility of Medicare contracting directly 
                with agencies that provide off-site interpretation 
                including telephonic and video interpretation pursuant 
                to which such contractors could directly bill Medicare 
                for the services provided in support of physician 
                office services for an LEP Medicare patient.
                  (D) The feasibility of modifying the existing 
                Medicare resource-based relative value scale (RBRVS) by 
                using adjustments (such as multipliers or add-ons) when 
                a patient is LEP.
                  (E) How each of options described in a previous 
                paragraph would be funded and how such funding would 
                affect physician payments, a physician's practice, and 
                beneficiary cost-sharing.
          (3) Variation in payment system described.--The payment 
        systems described in subsection (b) may allow variations based 
        upon types of service providers, available delivery methods, 
        and costs for providing language services including such 
        factors as--
                  (A) the type of language services provided (such as 
                provision of health care or health care related 
                services directly in a non-English language by a 
                bilingual provider or use of an interpreter);
                  (B) type of interpretation services provided (such as 
                in-person, telephonic, video interpretation);
                  (C) the methods and costs of providing language 
                services (including the costs of providing language 
                services with internal staff or through contract with 
                external independent contractors and/or agencies);
                  (D) providing services for languages not frequently 
                encountered in the United States; and
                  (E) providing services in rural areas.
          (4) Report.--The Secretary shall submit a report on the study 
        conducted under subsection (a) to appropriate committees of 
        Congress not later than 1 year after the expiration of the 
        demonstration program conducted under section 3.
  (b) Health Plans.--Section 1857(g)(1) of the Social Security Act (42 
U.S.C. 1395w-27(g)(1)) is amended--
          (1) by striking ``or'' at the end of subparagraph (F);
          (2) by adding ``or'' at the end of subparagraph (G); and
          (3) by inserting after subparagraph (G) the following new 
        subparagraph:
                  ``(H) fails substantially to provide language 
                services to limited English proficient beneficiaries 
                enrolled in the plan that are required under law;''.

SEC. 233. DEMONSTRATION TO PROMOTE ACCESS FOR MEDICARE BENEFICIARIES 
                    WITH LIMITED ENGLISH PROFICIENCY BY PROVIDING 
                    REIMBURSEMENT FOR CULTURALLY AND LINGUISTICALLY 
                    APPROPRIATE SERVICES.

  (a) In General.--Within one year after the date of the enactment of 
this Act the Secretary, acting through the Centers for Medicare & 
Medicaid Services, shall award 24 3-year demonstration grants to 
eligible Medicare service providers to improve effective communication 
between such providers and Medicare beneficiaries who are limited 
English proficient. The Secretary shall not authorize a grant larger 
than $500,000 over three years for any grantee.
  (b) Eligibility; Priority.--
          (1) Eligibility.--To be eligible to receive a grant under 
        subsection (1) an entity shall--
                  (A) be--
                          (i) a provider of services under part A of 
                        title XVIII of the Social Security Act;
                          (ii) a service provider under part B of such 
                        title;
                          (iii) a part C organization offering a 
                        Medicare part C plan under part C of such 
                        title; or
                          (iv) a PDP sponsor of a prescription drug 
                        plan under part D of such title; and
                  (B) prepare and submit to the Secretary an 
                application, at such time, in such manner, and 
                accompanied by such additional information as the 
                Secretary may require.
          (2) Priority.--
                  (A) Distribution.--To the extent feasible, in 
                awarding grants under this section, the Secretary shall 
                award--
                          (i) 6 grants to providers of services 
                        described in paragraph (1)(A)(i);
                          (ii) 6 grants to service providers described 
                        in paragraph (1)(A)(ii);
                          (iii) 6 grants to organizations described in 
                        paragraph (1)(A)(iii); and
                          (iv) 6 grants to sponsors described in 
                        paragraph (1)(A)(iv).
                  (B) For community organizations.--The Secretary shall 
                give priority to applicants that have developed 
                partnerships with community organizations or with 
                agencies with experience in language access.
                  (C) Variation in grantees.--The Secretary shall also 
                ensure that the grantees under this section represent, 
                among other factors, variations in--
                          (i) different types of service providers and 
                        organizations under parts A through D of title 
                        XVIII of the Social Security Act;
                          (ii) languages needed and their frequency of 
                        use;
                          (iii) urban and rural settings;
                          (iv) at least two geographic regions; and
                          (v) at least two large metropolitan 
                        statistical areas with diverse populations.
  (c) Use of Funds.--
          (1) In general.--A grantee shall use grant funds received 
        under this section to pay for the provision of competent 
        language services to Medicare beneficiaries who are limited 
        English proficient. Competent interpreter services may be 
        provided through on-site interpretation, telephonic 
        interpretation, or video interpretation or direct provision of 
        health care or health care related services by a bilingual 
        health care provider. A grantee may use bilingual providers, 
        staff, or contract interpreters. A grantee may use grant funds 
        to pay for competent translation services. A grantee may use up 
        to 10 percent of the grant funds to pay for administrative 
        costs associated with the provision of competent language 
        services and for reporting required under subsection (E).
          (2) Organizations.--Grantees that are part C organizations or 
        PDP sponsors must ensure that their network providers receive 
        at least 50 percent of the grant funds to pay for the provision 
        of competent language services to Medicare beneficiaries who 
        are limited English proficient, including physicians and 
        pharmacies.
          (3) Determination of payments for language services.--
        Payments to grantees shall be calculated based on the estimated 
        numbers of LEP Medicare beneficiaries in a grantee's service 
        area utilizing--
                  (A) data on the numbers of limited English proficient 
                individuals who speak English less than ``very well'' 
                from the most recently available data from the Bureau 
                of the Census or other State-based study the Secretary 
                determines likely to yield accurate data regarding the 
                number of LEP individuals served by the grantee; or
                  (B) the grantee's own data if the grantee routinely 
                collects data on Medicare beneficiaries' primary 
                language in a manner determined by the Secretary to 
                yield accurate data and such data shows greater numbers 
                of LEP individuals than the data listed in subparagraph 
                (A).
          (4) Limitations.--
                  (A) Reporting.--Payments shall only be provided under 
                this section to grantees that report their costs of 
                providing language services as required under 
                subsection (e). If a grantee fails to provide the 
                reports under such section for the first year of a 
                grant, the Secretary may terminate the grant and 
                solicit applications from new grantees to participate 
                in the subsequent two years of the demonstration 
                program.
                  (B) Type of services.--
                          (i) In general.--Subject to clause (ii), 
                        payments shall be provided under this section 
                        only to grantees that utilize competent 
                        bilingual staff or competent interpreter or 
                        translation services which--
                                  (I) if the grantee operates in a 
                                State that has statewide health care 
                                interpreter standards, meet the State 
                                standards currently in effect; or
                                  (II) if the grantee operates in a 
                                State that does not have statewide 
                                health care interpreter standards, 
                                utilizes competent interpreters who 
                                follow the National Council on 
                                Interpreting in Health Care's Code of 
                                Ethics and Standards of Practice.
                          (ii) Exemptions.--The requirements of clause 
                        (i) shall not apply--
                                  (I) in the case of a Medicare 
                                beneficiary who is limited English 
                                proficient (who has been informed in 
                                the beneficiary's primary language of 
                                the availability of free interpreter 
                                and translation services) and who 
                                requests the use of family, friends, or 
                                other persons untrained in 
                                interpretation or translation and the 
                                grantee documents the request in the 
                                beneficiary's record; and
                                  (II) in the case of a medical 
                                emergency where the delay directly 
                                associated with obtaining a competent 
                                interpreter or translation services 
                                would jeopardize the health of the 
                                patient.
                        Nothing in clause (ii)(II) shall be construed 
                        to exempt an emergency rooms or similar 
                        entities that regularly provide health care 
                        services in medical emergencies from having in 
                        place systems to provide competent interpreter 
                        and translation services without undue delay.
  (d) Assurances.--Grantees under this section shall--
          (1) ensure that appropriate clinical and support staff 
        receive ongoing education and training in linguistically 
        appropriate service delivery; ensure the linguistic competence 
        of bilingual providers;
          (2) offer and provide appropriate language services at no 
        additional charge to each patient with limited English 
        proficiency at all points of contact, in a timely manner during 
        all hours of operation;
          (3) notify Medicare beneficiaries of their right to receive 
        language services in their primary language;
          (4) post signage in the languages of the commonly encountered 
        group or groups present in the service area of the 
        organization; and
          (5) ensure that--
                  (A) primary language data are collected for 
                recipients of language services; and
                  (B) consistent with the privacy protections provided 
                under the regulations promulgated pursuant to section 
                264(c) of the Health Insurance Portability and 
                Accountability Act of 1996 (42 U.S.C. 1320d-2 note), if 
                the recipient of language services is a minor or is 
                incapacitated, the primary language of the parent or 
                legal guardian is collected and utilized.
  (e) Reporting Requirements.--Grantees under this section shall 
provide the Secretary with reports at the conclusion of the each year 
of a grant under this section. each report shall include at least the 
following information:
          (1) The number of Medicare beneficiaries to whom language 
        services are provided.
          (2) The languages of those Medicare beneficiaries.
          (3) The types of language services provided (such as 
        provision of services directly in non-English language by a 
        bilingual health care provider or use of an interpreter).
          (4) Type of interpretation (such as in-person, telephonic, or 
        video interpretation).
          (5) The methods of providing language services (such as staff 
        or contract with external independent contractors or agencies).
          (6) The length of time for each interpretation encounter.
          (7) The costs of providing language services (which may be 
        actual or estimated, as determined by the Secretary).
  (f) No Cost Sharing.--LEP Beneficiaries shall not have to pay cost-
sharing or co-pays for language services provided through this 
demonstration program.
  (g) Evaluation and Report.--The Secretary shall conduct an evaluation 
of the demonstration program under this section and shall submit to the 
appropriate committees of Congress a report not later than 1 year after 
the completion of the program. The report shall include the following:
          (1) An analysis of the patient outcomes and costs of 
        furnishing care to the LEP Medicare beneficiaries participating 
        in the project as compared to such outcomes and costs for 
        limited English proficient Medicare beneficiaries not 
        participating.
          (2) The effect of delivering culturally and linguistically 
        appropriate services on beneficiary access to care, utilization 
        of services, efficiency and cost-effectiveness of health care 
        delivery, patient satisfaction, and select health outcomes.
          (3) Recommendations regarding the extension of such project 
        to the entire Medicare program.
  (h) General Provisions.--Nothing in this section shall be construed 
to limit otherwise existing obligations of recipients of Federal 
financial assistance under title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000(d) et seq.) or any other statute.
  (i) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section $10,000,000 for each fiscal year 
of the demonstration.

SEC. 234. DEMONSTRATION TO IMPROVE CARE TO PREVIOUSLY UNINSURED.

  (a) Establishment.--Within one year after the date of enactment of 
this Act, the Secretary shall establish a demonstration project to 
determine the greatest needs and most effective methods of outreach to 
medicare beneficiaries who were previously uninsured.
  (b) Scope.--The demonstration shall be in no fewer than 10 sites, and 
shall include state health insurance assistance programs, community 
health centers, community-based organizations, community health 
workers, and other service providers under parts A, B, and C of title 
XVIII of the Social Security Act. Grantees that are plans operating 
under part C shall document that enrollees who were previously 
uninsured receive the ``Welcome to Medicare'' physical exam.
  (c) Duration.--The Secretary shall conduct the demonstration project 
for a period of 2 years.
  (d) Report and Evaluation.--The Secretary shall conduct an evaluation 
of the demonstration and not later than 1 year after the completion of 
the project shall submit to Congress a report including the following:
          (1) An analysis of the effectiveness of outreach activities 
        targeting beneficiaries who were previously uninsured, such as 
        revising outreach and enrollment materials (including the 
        potential for use of video information), providing one-on-one 
        counseling, working with community health workers, and amending 
        the Medicare and You handbook.
          (2) The effect of such outreach on beneficiary access to 
        care, utilization of services, efficiency and cost-
        effectiveness of health care delivery, patient satisfaction, 
        and select health outcomes.

SEC. 235. OFFICE OF THE INSPECTOR GENERAL REPORT ON COMPLIANCE WITH AND 
                    ENFORCEMENT OF NATIONAL STANDARDS ON CULTURALLY AND 
                    LINGUISTICALLY APPROPRIATE SERVICES (CLAS) IN 
                    MEDICARE.

  (a) Report.--Not later than two years after the date of the enactment 
of this Act, the Inspector General of the Department of Health and 
Human Services shall prepare and publish a report on--
          (1) the extent to which Medicare providers and plans are 
        complying with the Office for Civil Rights' Guidance to Federal 
        Financial Assistance Recipients Regarding Title VI Prohibition 
        Against National Origin Discrimination Affecting Limited 
        English Proficient Persons and the Office of Minority Health's 
        Culturally and Linguistically Appropriate Services Standards in 
        health care; and
          (2) a description of the costs associated with or savings 
        related to the provision of language services.
Such report shall include recommendations on improving compliance with 
CLAS Standards and recommendations on improving enforcement of CLAS 
Standards.
  (b) Implementation.--Not later than one year after the date of 
publication of the report under subsection (a), the Department of 
Health and Human Services shall implement changes responsive to any 
deficiencies identified in the report.

SEC. 236. IOM REPORT ON IMPACT OF LANGUAGE ACCESS SERVICES.

  (a) In General.--The Secretary of Health and Human Services shall 
seek to enter into an arrangement with the Institute of Medicine under 
which the Institute will prepare and publish, not later than 3 years 
after the date of the enactment of this Act, a report on the impact of 
language access services on the health and health care of limited 
English proficient populations.
  (b) Contents.--Such report shall include--
          (1) recommendations on the development and implementation of 
        policies and practices by health care organizations and 
        providers for limited English proficient patient populations;
          (2) a description of the effect of providing language access 
        services on quality of health care and access to care and 
        reduced medical error; and
          (3) a description of the costs associated with or savings 
        related to provision of language access services.

SEC. 237. DEFINITIONS.

  In this subtitle:
          (1) Bilingual.--The term ``bilingual'' with respect to an 
        individual means a person who has sufficient degree of 
        proficiency in two languages and can ensure effective 
        communication can occur in both languages.
          (2) Competent interpreter services.--The term ``competent 
        interpreter services'' means a trans-language rendition of a 
        spoken message in which the interpreter comprehends the source 
        language and can speak comprehensively in the target language 
        to convey the meaning intended in the source language. The 
        interpreter knows health and health-related terminology and 
        provides accurate interpretations by choosing equivalent 
        expressions that convey the best matching and meaning to the 
        source language and captures, to the greatest possible extent, 
        all nuances intended in the source message.
          (3) Competent translation services.--The term ``competent 
        translation services'' means a trans-language rendition of a 
        written document in which the translator comprehends the source 
        language and can write comprehensively in the target language 
        to convey the meaning intended in the source language. The 
        translator knows health and health-related terminology and 
        provides accurate translations by choosing equivalent 
        expressions that convey the best matching and meaning to the 
        source language and captures, to the greatest possible extent, 
        all nuances intended in the source document.
          (4) Effective communication.--The term ``effective 
        communication'' means an exchange of information between the 
        provider of health care or health care-related services and the 
        limited English proficient recipient of such services that 
        enables limited English proficient individuals to access, 
        understand, and benefit from health care or health care-related 
        services.
          (5) Interpreting/interpretation.--The terms ``interpreting'' 
        and ``interpretation'' mean the transmission of a spoken 
        message from one language into another, faithfully, accurately, 
        and objectively.
          (6) Health care services.--The term ``health care services'' 
        means services that address physical as well as mental health 
        conditions in all care settings.
          (7) Health care-related services.--The term ``health care-
        related services'' means human or social services programs or 
        activities that provide access, referrals or links to health 
        care.
          (8) Language access.--The term ``language access'' means the 
        provision of language services to an LEP individual designed to 
        enhance that individual's access to, understanding of or 
        benefit from health care or health care-related services.
          (9) Language services.--The term ``language services'' means 
        provision of health care services directly in a non-English 
        language, interpretation, translation, and non-English signage.
          (10) Limited english proficient.--The term ``limited English 
        proficient'' or ``LEP'' with respect to an individual means an 
        individual who speaks a primary language other than English and 
        who cannot speak, read, write or understand the English 
        language at a level that permits the individual to effectively 
        communicate with clinical or nonclinical staff at an entity 
        providing health care or health care related services.
          (11) Medicare program.--The term ``Medicare program'' means 
        the programs under parts A through D of title XVIII of the 
        Social Security Act.
          (12) Service provider.--The term ``service provider'' 
        includes all suppliers, providers of services, or entities 
        under contract to provide coverage, items or services under any 
        part of title XVIII of the Social Security Act.

             TITLE III--PHYSICIANS' SERVICE PAYMENT REFORM

SEC. 301. ESTABLISHMENT OF SEPARATE TARGET GROWTH RATES FOR SERVICE 
                    CATEGORIES.

  (a) Establishment of Service Categories.--Subsection (j) of section 
1848 of the Social Security Act (42 U.S.C. 1395w-4) is amended by 
adding at the end the following new paragraph:
          ``(5) Service categories.--For services furnished on or after 
        January 1, 2008, each of the following categories of 
        physicians' services shall be treated as a separate `service 
        category':
                  ``(A) Evaluation and management services for primary 
                care (including new and established patient office 
                visits delivered by physicians who the Secretary 
                determines provide accessible, continuous, coordinated, 
                and comprehensive care for Medicare beneficiaries, 
                emergency department visits, and home visits), and for 
                preventive services (including screening mammography, 
                colorectal cancer screening, and other services as 
                defined by the Secretary, limited to the 
                recommendations of the United States Preventive 
                Services Task Force).
                  ``(B) Evaluation and management services not 
                described in subparagraph (A).
                  ``(C) Imaging services (as defined in subsection 
                (b)(4)(B)) and diagnostic tests (other than clinical 
                diagnostic laboratory tests) not described in 
                subparagraph (A).
                  ``(D) Procedures that are subject (under regulations 
                promulgated to carry out this section) to a 10-day or 
                90-day global period (in this paragraph referred to as 
                `major procedures'), except that the Secretary may 
                reclassify as minor procedures under subparagraph (F) 
                any procedures that would otherwise be included in this 
                category if the Secretary determines that such 
                procedures are not major procedures.
                  ``(E) Anesthesia services that are paid on the basis 
                of the separate conversion factor for anesthesia 
                services determined under subsection (d)(1)(D).
                  ``(F) Minor procedures and any other physicians' 
                services that are not described in a preceding 
                subparagraph.''.
  (b) Establishment of Separate Conversion Factors for Each Service 
Category.--Subsection (d)(1) of section 1848 of the Social Security Act 
(42 U.S.C. 1395w-4) is amended--
          (1) in subparagraph (A)--
                  (A) by designating the sentence beginning ``The 
                conversion factor'' as clause (i) with the heading 
                ``Application of single conversion factor.--'' and with 
                appropriate indentation;
                  (B) by striking ``The conversion factor'' and 
                inserting ``Subject to clause (ii), the conversion 
                factor''; and
                  (C) by adding at the end the following new clause:
                          ``(ii) Application of multiple conversion 
                        factors beginning with 2008.--
                                  ``(I) In general.--In applying clause 
                                (i) for years beginning with 2008, 
                                separate conversion factors shall be 
                                established for each service category 
                                of physicians' services (as defined in 
                                subsection (j)(5)) and any reference in 
                                this section to a conversion factor for 
                                such years shall be deemed to be a 
                                reference to the conversion factor for 
                                each of such categories.
                                  ``(II) Initial conversion factors; 
                                special rule for anesthesia services.--
                                Such factors for 2008 shall be based 
                                upon the single conversion factor for 
                                2007 multiplied by the update 
                                established under paragraph (8) for 
                                such category for 2008. In the case of 
                                the service category described in 
                                subsection (j)(5)(F) (relating to 
                                anesthesia services), the conversion 
                                factor for 2008 shall be based on the 
                                separate conversion factor specified in 
                                subparagraph (D) for 2007 multiplied by 
                                the update established under paragraph 
                                (8) for such category for 2008.
                                  ``(III) Updating of conversion 
                                factors.--Such factor for a service 
                                category for a subsequent year shall be 
                                based upon the conversion factor for 
                                such category for the previous year and 
                                adjusted by the update established for 
                                such category under paragraph (8) for 
                                the year involved.''; and
          (2) in subparagraph (D), by inserting ``(before 2008)'' after 
        ``for a year''.
  (c) Establishing Updates for Conversion Factors for Service 
Categories.--Section 1848(d) of the Social Security Act (42 U.S.C. 
1395w-4(d)) is amended--
          (1) in paragraph (4)(B), by striking ``and (6)'' and 
        inserting ``, (6), and (8)'';
          (2) in paragraph (4)(C)(iii), by striking ``The allowed'' and 
        inserting ``Subject to paragraph (8)(B), the allowed'';
          (3) in paragraph (4)(D), by striking ``The update'' and 
        inserting ``Subject to paragraph (8)(E), the update''; and
          (4) by adding at the end the following new paragraph:
          ``(8) Updates for service categories beginning with 2008.--
                  ``(A) In general.--In applying paragraph (4) for a 
                year beginning with 2008, the following rules apply:
                          ``(i) Application of separate update 
                        adjustments for each service category.--
                        Pursuant to paragraph (1)(A)(ii)(I), the update 
                        shall be made to the conversion factor for each 
                        service category (as defined in subsection 
                        (j)(5)) based upon an update adjustment factor 
                        for the respective category and year and the 
                        update adjustment factor shall be computed, for 
                        a year, separately for each service category.
                          ``(ii) Computation of allowed and actual 
                        expenditures based on service categories.--In 
                        computing the prior year adjustment component 
                        and the cumulative adjustment component under 
                        clauses (i) and (ii) of paragraph (4)(B), the 
                        following rules apply:
                                  ``(I) Application based on service 
                                categories.--The allowed expenditures 
                                and actual expenditures shall be the 
                                allowed and actual expenditures for the 
                                service category, as determined under 
                                subparagraph (B).
                                  ``(II) Limitation to physician fee-
                                schedule services.--Actual expenditures 
                                shall only take into account 
                                expenditures for services furnished 
                                under the physician fee schedule.
                                  ``(III) Application of category 
                                specific target growth rate.--The 
                                growth rate applied under clause 
                                (ii)(II) of such paragraph shall be the 
                                target growth rate for the service 
                                category involved under subsection 
                                (f)(5).
                                  ``(IV) Allocation of cumulative 
                                overhang.--There shall be substituted 
                                for the difference described in 
                                subparagraph (B)(ii)(I) of such 
                                paragraph the amount described in 
                                subparagraph (C)(i) for the service 
                                category involved.
                  ``(B) Determination of allowed expenditures.--In 
                applying paragraph (4) for a year beginning with 2008, 
                notwithstanding subparagraph (C)(iii) of such 
                paragraph, the allowed expenditures for a service 
                category for a year is an amount computed by the 
                Secretary as follows:
                          ``(i) For 2008.--For 2008:
                                  ``(I) Total 2007 allowed 
                                expenditures.--Compute the total 
                                allowed expenditures for services 
                                furnished under the physician fee 
                                schedule under such paragraph for 2007.
                                  ``(II) Increase by growth rate.--
                                Increase the total under subclause (I) 
                                by the target growth rate for such 
                                category under subsection (f) for 2008.
                                  ``(III) Allocation to service 
                                category.--Multiply the increased total 
                                under subclause (II) by the overhang 
                                allocation factor for the service 
                                category (as defined in subparagraph 
                                (C)(iii)).
                          ``(ii) For subsequent years.--For a 
                        subsequent year, take the amount of allowed 
                        expenditures for such category for the 
                        preceding year (under clause (i) or this 
                        clause) and increase it by the target growth 
                        rate determined under subsection (f) for such 
                        category and year.
                  ``(C) Computation and application of cumulative 
                overhang among categories.--
                          ``(i) In general.--For purposes of applying 
                        paragraph (4)(B)(ii)(II) under clause (ii)(IV), 
                        the amount described in this clause for a year 
                        (beginning with 2008) is the sum of the 
                        following:
                                  ``(I) Pre-2008 cumulative overhang.--
                                The amount of the pre-2008 cumulative 
                                excess spending (as defined in clause 
                                (ii)) multiplied by the overhang 
                                allocation factor for the service 
                                category (under clause (iii)).
                                  ``(II) Post-2007 cumulative 
                                amounts.--For a year beginning with 
                                2009, the difference (which may be 
                                positive or negative) between the 
                                amount of the allowed expenditures for 
                                physicians' services (as determined 
                                under paragraph (4)(C)) in the service 
                                category from January 1, 2008, through 
                                the end of the prior year and the 
                                amount of the actual expenditures for 
                                such services in such category during 
                                that period.
                          ``(ii) Pre-2008 cumulative excess spending 
                        defined.--For purposes of clause (i)(I), the 
                        term `pre-2008 cumulative excess spending' 
                        means the difference described in paragraph 
                        (4)(B)(ii)(I) as determined for the year 2008, 
                        taking into account expenditures through 
                        December 31, 2007. Such difference takes into 
                        account expenditures included in subsection 
                        (f)(4)(A).
                          ``(iii) Overhang allocation factor.--For 
                        purposes of this paragraph, the term `overhang 
                        allocation factor' means, for a service 
                        category, the proportion, as determined by the 
                        Secretary of total actual expenditures under 
                        this part for items and services in such 
                        category during 2007 to the total of such 
                        actual expenditures for all the service 
                        categories. In calculating such proportion, the 
                        Secretary shall only take into account services 
                        furnished under the physician fee schedule.
                  ``(D) Floor for updates for 2008 and 2009.--The 
                update to the conversion factors for each service 
                category for each of 2008 and 2009 shall be not less 
                than 0.5 percent.
                  ``(E) Change in restriction on update adjustment 
                factor for 2010 and 2011.--The update adjustment factor 
                determined under subparagraph (4)(B), as modified by 
                this paragraph, for a service category for a year 
                (beginning with 2010 and ending with 2011) may be less 
                than -0.07, but may not be less than -0.14.''.
  (d) Application of Separate Target Growth Rates for Each Category.--
          (1) In general.--Section 1848(f) of the Social Security Act 
        (42 U.S.C. 1395w-4(f)) is amended by adding at the end the 
        following new paragraph:
          ``(5) Application of separate target growth rates for each 
        service category beginning with 2008.--The target growth rate 
        for a year beginning with 2008 shall be computed and applied 
        separately under this subsection for each service category (as 
        defined in subsection (j)(5)) and shall be computed using the 
        same method for computing the sustainable growth rate except 
        for the following:
                  ``(A) The reference in paragraphs (2)(A) and (2)(D) 
                to `all physicians' services' is deemed a reference to 
                the physicians' services included in such category but 
                shall not take into account items and services included 
                in physicians' services through the operation of 
                paragraph (4)(A).
                  ``(B) The factor described in paragraph (2)(C) for 
                the service category described in subsection (j)(5)(A) 
                shall be increased by 0.03.
                  ``(C) A national coverage determination (as defined 
                in section 1869(f)(1)(B)) shall be treated as a change 
                in regulation described in paragraph (2)(D).''.
          (2) Use of target growth rates.--Section 1848 of such Act is 
        further amended--
                  (A) in subsection (d)--
                          (i) in paragraph (1)(E)(ii), by inserting 
                        ``or target'' after ``sustainable''; and
                          (ii) in paragraph (4)(B)(ii)(II), by 
                        inserting ``or target'' after ``sustainable''; 
                        and
                  (B) in subsection (f)--
                          (i) in the heading by inserting ``; Target 
                        Growth Rate'' after ``Sustainable Growth Rate''
                          (ii) in paragraph (1)--
                                  (I) by striking ``and'' at the end of 
                                subparagraph (A);
                                  (II) in subparagraph (B), by 
                                inserting ``before 2008'' after ``each 
                                succeeding year'' and by striking the 
                                period at the end and inserting ``; 
                                and''; and
                                  (III) by adding at the end the 
                                following new subparagraph:
                  ``(C) November 1 of each succeeding year the target 
                growth rate for such succeeding year and each of the 2 
                preceding years.''; and
                          (iii) in paragraph (2), in the matter before 
                        subparagraph (A), by inserting after 
                        ``beginning with 2000'' the following: ``and 
                        ending with 2007'' .
  (e) Reports on Expenditures for Part B Drugs and Clinical Diagnostic 
Laboratory Tests.--
          (1) Reporting requirement.--The Secretary of Health and Human 
        Services shall include information in the annual physician fee 
        schedule proposed rule on the change in the annual rate of 
        growth of actual expenditures for clinical diagnostic 
        laboratory tests or drugs, biologicals, and 
        radiopharmaceuticals for which payment is made under part B of 
        title XVIII of the Social Security Act.
          (2) Recommendations.--The report submitted under paragraph 
        (1) shall include an analysis of the reasons for such excess 
        expenditures and recommendations for addressing them in the 
        future.

SEC. 302. IMPROVING ACCURACY OF RELATIVE VALUES UNDER THE MEDICARE 
                    PHYSICIAN FEE SCHEDULE.

  (a) Use of Expert Panel to Identify Misvalued Physicians' Services.--
Section 1848(c) of the Social Security Act (42 U.S.C. 1395w(c)) is 
amended by adding at the end the following new paragraph:
          ``(7) Use of expert panel to identify misvalued physicians' 
        services.--
                  ``(A) In general.--The Secretary shall establish an 
                expert panel (in this paragraph referred to as the 
                `expert panel')--
                          ``(i) to identify, through data analysis, 
                        physicians' services for which the relative 
                        value under this subsection is potentially 
                        misvalued, particularly those services for 
                        which such relative value may be overvalued;
                          ``(ii) to assess whether those misvalued 
                        services warrant review using existing 
                        processes (referred to in paragraph (2)(J)(ii)) 
                        for the consideration of coding changes; and
                          ``(iii) to advise the Secretary concerning 
                        the exercise of authority under clauses 
                        (ii)(III) and (vi) of paragraph (2)(B).
                  ``(B) Composition of panel.--The expert panel shall 
                be appointed by the Secretary and composed of--
                          ``(i) members with expertise in medical 
                        economics and technology diffusion;
                          ``(ii) members with clinical expertise;
                          ``(iii) physicians, particularly physicians 
                        (such as a physician employed by the Veterans 
                        Administration or a physician who has a full 
                        time faculty appointment at a medical school) 
                        who are not directly affected by changes in the 
                        physician fee schedule under this section;
                          ``(iv) carrier medical directors; and
                          ``(v) representatives of private payor health 
                        plans.
                  ``(C) Appointment considerations.--In appointing 
                members to the expert panel, the Secretary shall assure 
                racial and ethnic diversity on the panel and may 
                consider appointing a liaison from organizations with 
                experience in the consideration of coding changes to 
                the panel.''.
  (b) Examination of Services With Substantial Changes.--Such section 
is further amended by adding at the end the following new paragraph:
          ``(8) Examination of services with substantial changes.--The 
        Secretary, in consultation with the expert panel under 
        paragraph (7), shall--
                  ``(A) conduct a five-year review of physicians' 
                services in conjunction with the RUC 5-year review, 
                particularly for services that have experienced 
                substantial changes in length of stay, site of service, 
                volume, practice expense, or other factors that may 
                indicate changes in physician work;
                  ``(B) identify new services to determine if they are 
                likely to experience a reduction in relative value over 
                time and forward a list of the services so identified 
                for such five-year review; and
                  ``(C) for physicians' services that are otherwise 
                unreviewed under the process the Secretary has 
                established, periodically review a sample of relative 
                value units within different types of services to 
                assess the accuracy of the relative values contained in 
                the Medicare physician fee schedule.''.
  (c) Authority to Reduce Work Component for Services With Accelerated 
Volume Growth.--
          (1) In general.--Paragraph (2)(B) of such section is 
        amended--
                  (A) in clause (v), by adding at the end the following 
                new subclause:
                                  ``(III) Reductions in work value 
                                units for services with accelerated 
                                volume growth.--Effective January 1, 
                                2009, reduced expenditures attributable 
                                to clause (vi).''; and
                  (B) by adding at the end the following new clauses:
                          ``(vi) Authorizing reduction in work value 
                        units for services with accelerated volume 
                        growth.--The Secretary may provide (without 
                        using existing processes the Secretary has 
                        established for review of relative value) for a 
                        reduction in the work value units for a 
                        particular physician's service if the annual 
                        rate of growth in the expenditures for such 
                        service for which payment is made under this 
                        part for individuals for 2006 or a subsequent 
                        year exceeds the average annual rate of growth 
                        in expenditures of all physicians' services for 
                        which payment is made under this part by more 
                        than 10 percentage points for such year.
                          ``(vii) Consultation with expert panel and 
                        based on clinical evidence.--The Secretary 
                        shall exercise authority under clauses 
                        (ii)(III) and (vi) in consultation with the 
                        expert panel established under paragraph (7) 
                        and shall take into account clinical evidence 
                        supporting or refuting the merits of such 
                        accelerated growth.''.
          (2) Effective date.--The amendments made by paragraph (1) 
        shall apply with respect to payment for services furnished on 
        or after January 1, 2009.
  (d) Adjustment Authority for Efficiency Gains for New Procedures.--
Paragraph (2)(B)(ii) of such section is amended by adding at the end 
the following new subclause:
                                  ``(III) Adjustment authority for 
                                efficiency gains for new procedures.--
                                In carrying out subclauses (I) and 
                                (II), the Secretary may apply a 
                                methodology, based on supporting 
                                evidence, under which there is imposed 
                                a reduction over a period of years in 
                                specified relative value units in the 
                                case of a new (or newer) procedure to 
                                take into account inherent efficiencies 
                                that are typically or likely to be 
                                gained during the period of initial 
                                increased application of the 
                                procedure.''.

SEC. 303. FEEDBACK MECHANISM ON PRACTICE PATTERNS.

  By not later than July 1, 2008, the Secretary of Health and Human 
Services shall develop and implement a mechanism to measure resource 
use on a per capita and an episode basis in order to provide 
confidential feedback to physicians in the Medicare program on how 
their practice patterns compare to physicians generally, both in the 
same locality as well as nationally. Such feedback shall not be subject 
to disclosure under section 552 of title 5, United States Code). The 
Secretary shall consider extending such mechanism to other suppliers as 
necessary.

SEC. 304. PAYMENTS FOR EFFICIENT AREAS.

  Section 1833 of the Social Security Act (42 U.S.C. 1395l) is amended 
by adding at the end the following new subsection:
  ``(v) Incentive Payments for Efficient Areas.--
          ``(1) In general.--In the case of services furnished under 
        the physician fee schedule under section 1848 on or after 
        January 1, 2009, and before January 1, 2011, by a supplier that 
        is paid under such fee schedule in an efficient area (as 
        identified under paragraph (2)), in addition to the amount of 
        payment that would otherwise be made for such services under 
        this part, there also shall be paid an amount equal to 5 
        percent of the payment amount for the services under this part.
          ``(2) Identification of efficient areas.--
                  ``(A) In general.--Based upon available data, the 
                Secretary shall identify those counties or equivalent 
                areas in the United States in the lowest fifth 
                percentile of utilization based on per capita spending 
                for services provided in 2007 under this part and part 
                A.
                  ``(B) Identification of counties where service is 
                furnished..--For purposes of paying the additional 
                amount specified in paragraph (1), if the Secretary 
                uses the 5-digit postal ZIP Code where the service is 
                furnished, the dominant county of the postal ZIP Code 
                (as determined by the United States Postal Service, or 
                otherwise) shall be used to determine whether the 
                postal ZIP Code is in a county described in 
                subparagraph (A).
                  ``(C) Judicial review.--There shall be no 
                administrative or judicial review under section 1869, 
                1878, or otherwise, respecting--
                          ``(i) the identification of a county or other 
                        area under subparagraph (A); or
                          ``(ii) the assignment of a postal ZIP Code to 
                        a county or other area under subparagraph (B).
                  ``(D) Publication of list of counties; posting on 
                website.--With respect to a year for which a county or 
                area is identified under this paragraph, the Secretary 
                shall identify such counties or areas as part of the 
                proposed and final rule to implement the physician fee 
                schedule under section 1848 for the applicable year. 
                The Secretary shall post the list of counties 
                identified under this paragraph on the Internet website 
                of the Centers for Medicare & Medicaid Services.''.

SEC. 305. RECOMMENDATIONS ON REFINING THE PHYSICIAN FEE SCHEDULE.

  (a) Recommendations on Consolidated Coding for Services Commonly 
Performed Together.--Not later than December 31, 2008, the Comptroller 
General of the United States shall--
          (1) complete an analysis of codes paid under the Medicare 
        physician fee schedule to determine whether the codes for 
        procedures that are commonly furnished together should be 
        combined; and
          (2) submit to Congress a report on such analysis and include 
        in the report recommendations on whether an adjustment should 
        be made to the relative value units for such combined code.
  (b) Recommendations on Increased Use of Bundled Payments.--Not later 
than December 31, 2008, the Comptroller General of the United States 
shall--
          (1) complete an analysis of those procedures under the 
        Medicare physician fee schedule for which no global payment 
        methodology is applied but for which a ``bundled'' payment 
        methodology would be appropriate; and
          (2) submit to Congress a report on such analysis and include 
        in the report recommendations on increasing the use of 
        ``bundled'' payment methodology under such schedule.
  (c) Medicare Physician Fee Schedule.--In this section, the term 
``Medicare physician fee schedule'' means the fee schedule established 
under section 1848 of the Social Security Act (42 U.S.C. 1395w4).

SEC. 306. IMPROVED AND EXPANDED MEDICAL HOME DEMONSTRATION PROJECT.

  (a) In General.--The Secretary of Health and Human Services (in this 
section referred to as the ``Secretary'') shall establish under title 
XVIII of the Social Security Act an expanded medical home demonstration 
project (in this section referred to as the ``expanded project'') under 
this section. The expanded project supersedes the project that was 
initiated under section 204 of the Medicare Improvement and Extension 
Act of 2006 (division B of Public Law 109-432). The purpose of the 
expanded project is--
          (1) to guide the redesign of the health care delivery system 
        to provide accessible, continuous, comprehensive, and 
        coordinated, care to Medicare beneficiaries; and
          (2) to provide care management fees to personal physicians 
        delivering continuous and comprehensive care in qualified 
        medical homes.
  (b) Nature and Scope of Project.--
          (1) Duration; scope.--The expanded project shall operate 
        during a period of three years, beginning not later than 
        October 1, 2009, and shall include a nationally representative 
        sample of physicians serving urban, rural, and underserved 
        areas throughout the United States.
          (2) Encouraging participation of small physician practices.--
                  (A) In general.--The expanded project shall be 
                designed to include the participation of physicians in 
                practices with fewer than four full-time equivalent 
                physicians, as well as physicians in larger practices 
                particularly in rural and underserved areas.
                  (B) Technical assistance.--In order to facilitate the 
                participation under the expanded project of physicians 
                in such practices, the Secretary shall make available 
                additional technical assistance to such practices 
                during the first year of the expanded project.
          (3) Selection of homes to participate.--The Secretary shall 
        select up to 500 medical homes to participate in the expanded 
        project and shall give priority to--
                  (A) the selection of up to 100 HIT-enhanced medical 
                homes; and
                  (B) the selection of other medical homes that serve 
                communities whose populations are at higher risk for 
                health disparities,
          (4) Beneficiary participation.--The Secretary shall establish 
        a process for any Medicare beneficiary who is served by a 
        medical home participating in the expanded project to elect to 
        participate in the project. Each beneficiary who elects to so 
        participate shall be eligible--
                  (A) for enhanced medical home services under the 
                project with no cost sharing for the additional 
                services; and
                  (B) for a reduction of up to 50 percent in the 
                coinsurance for services furnished under the physician 
                fee schedule under section 1848 of the Social Security 
                Act by the medical home.
        The Secretary shall develop standard recruitment materials and 
        election processes for Medicare beneficiaries who are electing 
        to participate in the expanded project.
  (c) Standards for Medical Homes, HIT-Enhanced Medical Homes.--
          (1) Standard setting and certification process.--The 
        Secretary shall establish a process for selection of a 
        qualified standard setting and certification organization--
                  (A) to establish standards, consistent with this 
                section, for medical practices to qualify as medical 
                homes or as HIT-enhanced medical homes; and
                  (B) to provide for the review and certification of 
                medical practices as meeting such standards.
          (2) Basic standards for medical homes.--For purposes of this 
        subsection, the term ``medical home'' means a physician-
        directed practice that has been certified, under paragraph (1), 
        as meeting the following standards:
                  (A) Access and communication with patients.--The 
                practice applies standards for access to care and 
                communication with participating beneficiaries.
                  (B) Managing patient information and using 
                information in management to support patient care.--The 
                practice has readily accessible, clinically useful 
                information on participating beneficiaries that enables 
                the practice to treat such beneficiaries 
                comprehensively and systematically.
                  (C) Managing and coordinating care according to 
                individual needs.--The practice maintains continuous 
                relationships with participating beneficiaries by 
                implementing evidence-based guidelines and applying 
                them to the identified needs of individual 
                beneficiaries over time and with the intensity needed 
                by such beneficiaries.
                  (D) Providing ongoing assistance and encouragement in 
                patient self-management.--The practice--
                          (i) collaborates with participating 
                        beneficiaries to pursue their goals for optimal 
                        achievable health; and
                          (ii) assesses patient-specific barriers to 
                        communication and conducts activities to 
                        support patient self-management.
                  (E) Resources to manage care.--The practice has in 
                place the resources and processes necessary to achieve 
                improvements in the management and coordination of care 
                for participating beneficiaries.
                  (F) Monitoring performance.--The practice monitors 
                its clinical process and performance (including outcome 
                measures) in meeting the applicable standards under 
                this subsection and provides information in a form and 
                manner specified by the Secretary with respect to such 
                process and performance.
          (3) Additional standards for hit-enhanced medical home.--For 
        purposes of this subsection, the term ``HIT-enhanced medical 
        home'' means a medical home that has been certified, under 
        paragraph (1), as using a health information technology system 
        that includes at least the following elements:
                  (A) Electronic health record (ehr).--The system uses, 
                for participating beneficiaries, an electronic health 
                record that meets the following standards:
                          (i) In general.--The record--
                                  (I) has the capability of 
                                interoperability with secure data 
                                acquisition from health information 
                                technology systems of other health care 
                                providers in the area served by the 
                                home; or
                                  (II) the capability to securely 
                                acquire clinical data delivered by such 
                                other health care providers to a secure 
                                common data source.
                          (ii) The record protects the privacy and 
                        security of health information.
                          (iii) The record has the capability to 
                        acquire, manage, and display all the types of 
                        clinical information commonly relevant to 
                        services furnished by the medical home, such as 
                        complete medical records, radiographic image 
                        retrieval, and clinical laboratory information.
                          (iv) The record is integrated with decision 
                        support capacities that facilitate the use of 
                        evidence-based medicine and clinical decision 
                        support tools to guide decision-making at the 
                        point-of-care based on patient-specific 
                        factors.
                  (B) E-prescribing.--The system supports e-prescribing 
                and computerized physician order entry.
                  (C) Outcome measurement.--The system supports the 
                secure, confidential provision of clinical process and 
                outcome measures approved by the National Quality Forum 
                to the Secretary for use in confidential manner for 
                provider feedback and peer review and for outcomes and 
                clinical effectiveness research.
                  (D) Patient education capability.--The system 
                actively facilitates participating beneficiaries 
                engaging in the management of their own health through 
                education and support systems and tools for shared 
                decision-making.
                  (E) Support of basic standards.--The elements of such 
                system, such as the electronic health record, email 
                communications, patient registries, and clinical-
                decision support tools, are integrated in a manner to 
                better achieve the basic standards specified in 
                paragraph (2) for a medical home.
          (4) Use of data.--The Secretary shall use the data submitted 
        under paragraph (1)(F) in a confidential manner for feedback 
        and peer review for medical homes and for outcomes and clinical 
        effectiveness research. After the first two years of the 
        expanded project, these data may be used for adjustment in the 
        monthly medical home care management fee under subsection 
        (d)(2)(E).
  (d) Monthly Medical Home Care Management Fee.--
          (1) In general.--Under the expanded project, the Secretary 
        shall provide for payment to the personal physician of each 
        participating beneficiary of a monthly medical home care 
        management fee.
          (2) Amount of payment.--In determining the amount of such 
        fee, the Secretary shall consider the following:
                  (A) Operating expenses.--The additional practice 
                expenses for the delivery of services through a medical 
                home, taking into account the additional expenses for 
                an HIT-enhanced medical home. Such expenses include 
                costs associated with--
                          (i) structural expenses, such as equipment, 
                        maintenance, and training costs;
                          (ii) enhanced access and communication 
                        functions;
                          (iii) population management and registry 
                        functions;
                          (iv) patient medical data and referral 
                        tracking functions;
                          (v) provision of evidence-based care;
                          (vi) implementation and maintenance of health 
                        information technology;
                          (vii) reporting on performance and 
                        improvement conditions; and
                          (viii) patient education and patient decision 
                        support, including print and electronic patient 
                        education materials.
                  (B) Added value services.--The value of additional 
                physician work, such as augmented care plan oversight, 
                expanded e-mail and telephonic consultations, extended 
                patient medical data review (including data stored and 
                transmitted electronically), and physician supervision 
                of enhanced self management education, and expanded 
                follow-up accomplished by non-physician personnel, in a 
                medical home that is not adequately taken into account 
                in the establishment of the physician fee schedule 
                under section 1848 of the Social Security Act.
                  (C) Risk adjustment.--The development of an 
                appropriate risk adjustment mechanism to account for 
                the varying costs of medical homes based upon 
                characteristics of participating beneficiaries.
                  (D) HIT adjustment.--Variation of the fee based on 
                the extensiveness of use of the health information 
                technology in the medical home.
                  (E) Performance-based.--After the first two years of 
                the expanded project, an adjustment of the fee based on 
                performance of the medical home in achieving quality or 
                outcomes standards.
          (3) Personal physician defined.--For purposes of this 
        subsection, the term ``personal physician'' means, with respect 
        to a participating Medicare beneficiary, a physician (as 
        defined in section 1861(r)(1) of the Social Security Act (42 
        U.S.C. 1395x(r)(1)) who provides accessible, continuous, 
        coordinated, and comprehensive care for the beneficiary as part 
        of a medical practice that is a qualified medical home. Such a 
        physician may be a specialist for a beneficiary requiring 
        ongoing care for a chronic condition or multiple chronic 
        conditions (such as severe asthma, complex diabetes, 
        cardiovascular disease, rheumatologic disorder) or for a 
        beneficiary with a prolonged illness.
  (e) Funding.--
          (1) Use of current project funding.--Funds otherwise applied 
        to the demonstration under section 204 of the Medicare 
        Improvement and Extension Act of 2006 (division B of Public Law 
        109-432) shall be available to carry out the expanded project
          (2) Additional funding from smi trust fund.--
                  (A) In general.--In addition to the funds provided 
                under paragraph (1), there shall be available, from the 
                Federal Supplementary Medical Insurance Trust Fund 
                (under section 1841 of the Social Security Act), the 
                amount of $500,000,000 to carry out the expanded 
                project, including payments to of monthly medical home 
                care management fees under subsection (d), reductions 
                in coinsurance for participating beneficiaries under 
                subsection (b)(4)(B), and funds for the design, 
                implementation, and evaluation of the expanded project.
                  (B) Monitoring expenditures; early termination.--The 
                Secretary shall monitor the expenditures under the 
                expanded project and may terminate the project early in 
                order that expenditures not exceed the amount of 
                funding provided for the project under subparagraph 
                (A).
  (f) Evaluations and Reports.--.
          (1) Annual interim evaluations and reports.--For each year of 
        the expanded project, the Secretary shall provide for an 
        evaluation of the project and shall submit to Congress, by a 
        date specified by the Secretary, a report on the project and on 
        the evaluation of the project for each such year.
          (2) Final evaluation and report.--The Secretary shall provide 
        for an evaluation of the expanded project and shall submit to 
        Congress, not later than 18 months after the date of completion 
        of the project, a report on the project and on the evaluation 
        of the project.

SEC. 307. REPEAL OF PHYSICIAN ASSISTANCE AND QUALITY INITIATIVE FUND.

  Subsection (l) of section 1848 of the Social Security Act (42 U.S.C. 
1395w-4) is repealed.

SEC. 308. ADJUSTMENT TO MEDICARE PAYMENT LOCALITIES.

  Section 1848(e) of the Social Security Act (42 U.S.C.1395w-4(e)) is 
amended by adding at the end the following new paragraph:
          ``(6) Fee schedule geographic areas.--
                  ``(A) In general.--
                          ``(i) Revision.--Subject to clause (ii), for 
                        services furnished on or after January 1, 2008, 
                        the Secretary shall revise the fee schedule 
                        areas used for payment under this section 
                        applicable to the State of California using the 
                        county-based geographic adjustment factor as 
                        specified in option 3 (table 9) in the proposed 
                        rule for the 2008 physician fee schedule 
                        published at 72 Fed. Reg. 38,122 (July 12, 
                        2007).
                          ``(ii) Transition.--For services furnished 
                        during the period beginning January 1, 2008, 
                        and ending December 31, 2010, after calculating 
                        the work, practice expense, and malpractice 
                        geographic indices described in clauses (i), 
                        (ii), and (iii) of paragraph (1)(A) that would 
                        otherwise apply, the Secretary shall increase 
                        any such geographic index for any county in 
                        California that is lower than the geographic 
                        index used for payment for services under this 
                        section as of December 31, 2007, in such county 
                        to such geographic index level.
                  ``(B) Subsequent revisions.--
                          ``(i) Timing.--Not later than January 1, 
                        2011, the Secretary shall review and make 
                        revisions to fee schedule areas in all States 
                        for which more than one fee schedule area is 
                        used for payment of services under this 
                        section. The Secretary may revise fee schedule 
                        areas in States in which a single fee schedule 
                        area is used for payment for services under 
                        this section using the same methodology applied 
                        in the previous sentence.
                          ``(ii) Link with geographic index data 
                        revision.--The revision described in clause (i) 
                        shall be made effective concurrently with the 
                        application of the periodic review of 
                        geographic adjustment factors required under 
                        paragraph (1)(C) for 2011 and subsequent 
                        periods.''.

SEC. 309. PAYMENT FOR IMAGING SERVICES.

  (a) Payment Under Part B of the Medicare Program for Diagnostic 
Imaging Services Furnished in Facilities Conditioned on Accreditation 
of Facilities.--
          (1) Special payment rule.--
                  (A) In general.--Section 1848(b)(4) of the Social 
                Security Act (42 U.S.C. 1395w-4(b)(4)) is amended--
                          (i) in the heading, by striking ``rule'' and 
                        inserting ``rules'';
                          (ii) in subparagraph (A), by striking ``In 
                        general'' and inserting ``Limitation''; and
                          (iii) by adding at the end the following new 
                        subparagraph:
                  ``(C) Payment only for services provided in 
                accredited facilities.--
                          ``(i) In general.--In the case of imaging 
                        services that are diagnostic imaging services 
                        described in clause (ii), the payment amount 
                        for the technical component and the 
                        professional component of the services 
                        established for a year under the fee schedule 
                        described in paragraph (1) shall each be zero, 
                        unless the services are furnished at a 
                        diagnostic imaging services facility that meets 
                        the certificate requirement described in 
                        section 354(b)(1) of the Public Health Service 
                        Act, as applied under subsection (m). The 
                        previous sentence shall not apply with respect 
                        to the technical component if the imaging 
                        equipment meets certification standards and the 
                        professional component of a diagnostic imaging 
                        service that is furnished by a physician.
                          ``(ii) Diagnostic imaging services.--For 
                        purposes of clause (i) and subsection (m), the 
                        term `diagnostic imaging services' means all 
                        imaging modalities, including diagnostic 
                        magnetic resonance imaging (`MRI'), computed 
                        tomography (`CT'), positron emission tomography 
                        (`PET'), nuclear medicine procedures, x-rays, 
                        sonograms, ultrasounds, echocardiograms, and 
                        such emerging diagnostic imaging technologies 
                        as specified by the Secretary.''.
                  (B) Effective date.--
                          (i) In general.--Subject to clause (ii), the 
                        amendments made by subparagraph (A) shall apply 
                        to diagnostic imaging services furnished on or 
                        after January 1, 2010.
                          (ii) Extension for ultrasound services.--The 
                        amendments made by subparagraph (A) shall apply 
                        to diagnostic imaging services that are 
                        ultrasound services on or after January 1, 
                        2012.
          (2) Certification of facilities that furnish diagnostic 
        imaging services.--Section 1848 of the Social Security Act (42 
        U.S.C. 1395w-4) is amended by adding at the end the following 
        new subsection:
  ``(m) Certification of Facilities That Furnish Diagnostic Imaging 
Services.--
          ``(1) In general.--For purposes of subsection (b)(4)(C)(i), 
        except as provided under paragraphs (2) through (8), the 
        provisions of section 354 of the Public Health Service Act (as 
        in effect as of June 1, 2007), relating to the certification of 
        mammography facilities, shall apply, with respect to the 
        provision of diagnostic imaging services (as defined in 
        subsection (b)(4)(C)(ii)) and to a diagnostic imaging services 
        facility defined in paragraph (8) (and to the process of 
        accrediting such facilities) in the same manner that such 
        provisions apply, with respect to the provision of mammograms 
        and to a facility defined in subsection (a)(3) of such section 
        (and to the process of accrediting such mammography 
        facilities).
          ``(2) Terminology and references.--For purposes of applying 
        section 354 of the Public Health Service Act under paragraph 
        (1)--
                  ``(A) any reference to `mammography', or `breast 
                imaging' is deemed a reference to `diagnostic imaging 
                services (as defined in section 1848(b)(4)(C)(ii) of 
                the Social Security Act)';
                  ``(B) any reference to a mammogram or film is deemed 
                a reference to an image, as defined in paragraph (8);
                  ``(C) any reference to `mammography facility' or to a 
                `facility' under such section 354 is deemed a reference 
                to a diagnostic imaging services facility, as defined 
                in paragraph (8);
                  ``(D) any reference to radiological equipment used to 
                image the breast is deemed a reference to medical 
                imaging equipment used to provide diagnostic imaging 
                services;
                  ``(E) any reference to radiological procedures or 
                radiological is deemed a reference to medical imaging 
                services, as defined in paragraph (8) or medical 
                imaging, respectively;
                  ``(F) any reference to an inspection (as defined in 
                subsection (a)(4) of such section) or inspector is 
                deemed a reference to an audit (as defined in paragraph 
                (8)) or auditor, respectively;
                  ``(G) any reference to a medical physicist (as 
                described in subsection (f)(1)(E) of such section) is 
                deemed to include a reference to a magnetic resonance 
                scientist or the appropriate qualified expert as 
                determined by the accrediting body;
                  ``(H) in applying subsection (d)(1)(A)(i) of such 
                section, the reference to `type of each x-ray machine, 
                image receptor, and processor' is deemed a reference to 
                `type of imaging equipment';
                  ``(I) in applying subsection (d)(1)(B) of such 
                section, the reference that `the person or agent 
                submits to the Secretary' is deemed a reference that 
                `the person or agent submits to the Secretary, through 
                the appropriate accreditation body';
                  ``(J) in applying subsection (d)(1)(B)(i) of such 
                section, the reference to standards established by the 
                Secretary is deemed a reference to standards 
                established by an accreditation body and approved by 
                the Secretary;
                  ``(K) in applying subsection (e) of such section, 
                relating to an accreditation body--
                          ``(i) in paragraph (1)(A), the reference to 
                        `may' is deemed a reference to `shall';
                          ``(ii) in paragraph (1)(B)(i)(II), the 
                        reference to `a random sample of clinical 
                        images from such facilities' is deemed a 
                        reference to `a statistically significant 
                        random sample of clinical images from a 
                        statistically significant random sample of 
                        facilities';
                          ``(iii) in paragraph (3)(A) of such section--
                                  ``(I) the reference to `paragraph 
                                (1)(B)' in such subsection is deemed to 
                                be a reference to `paragraph (1)(B) and 
                                subsection (f)'; and
                                  ``(II) the reference to the 
                                `Secretary' is deemed a reference to 
                                `an accreditation body, with the 
                                approval of the Secretary'; and
                          ``(iv) in paragraph (6)(B), the reference to 
                        the Committee on Labor and Human Resources of 
                        the Senate is deemed to be the Committee on 
                        Finance of the Senate and the reference to the 
                        Committee on Energy and Commerce of the House 
                        of Representatives is deemed to include a 
                        reference to the Committee on Ways and Means of 
                        the House of Representatives;
                  ``(L) in applying subsection (f), relating to quality 
                standards--
                          ``(i) each reference to standards established 
                        by the Secretary is deemed a reference to 
                        standards established by an accreditation body 
                        involved and approved by the Secretary under 
                        subsection (d)(1)(B)(i) of such section;
                          ``(ii) in paragraph (1)(A), the reference to 
                        `radiation dose' is deemed a reference to 
                        `radiation dose, as appropriate';
                          ``(iii) in paragraph (1)(B), the reference to 
                        `radiological standards' is deemed a reference 
                        to `medical imaging standards, as appropriate';
                          ``(iv) in paragraphs (1)(D)(ii) and 
                        (1)(E)(iii), the reference to `the Secretary' 
                        is deemed a reference to `an accreditation body 
                        with the approval of the Secretary';
                          ``(v) in each of subclauses (III) and (IV) of 
                        paragraph (1)(G)(ii), each reference to 
                        `patient' is deemed a reference to `patient, if 
                        requested by the patient'; and
                  ``(M) in applying subsection (g), relating to 
                inspections--
                          ``(i) each reference to the `Secretary or 
                        State or local agency acting on behalf of the 
                        Secretary' is deemed to include a reference to 
                        an accreditation body involved;
                          ``(ii) in the first sentence of paragraph 
                        (1)(F), the reference to `annual inspections 
                        required under this paragraph' is deemed a 
                        reference to `the audits carried out in 
                        facilities at least every three years from the 
                        date of initial accreditation under this 
                        paragraph'; and
                          ``(iii) in the second sentence of paragraph 
                        (1)(F), the reference to `inspections carried 
                        out under this paragraph' is deemed a reference 
                        to `audits conducted under this paragraph 
                        during the previous year'.
          ``(3) Dates and periods.--For purposes of paragraph (1), in 
        applying section 354 of the Public Health Service Act, the 
        following applies:
                  ``(A) In general.--Except as provided in subparagraph 
                (B)--
                          ``(i) any reference to `October 1, 1994' 
                        shall be deemed a reference to `January 1, 
                        2010';
                          ``(ii) the reference to `the date of the 
                        enactment of this section' in each of 
                        subsections (e)(1)(D) and (f)(1)(E)(iii) is 
                        deemed to be a reference to `the date of the 
                        enactment of the Children's Health and Medicare 
                        Protection Act of 2007';
                          ``(iii) the reference to `annually' in 
                        subsection (g)(1)(E) is deemed a reference to 
                        `every three years';
                          ``(iv) the reference to `October 1, 1996' in 
                        subsection (l) is deemed to be a reference to 
                        `January 1, 2011';
                          ``(v) the reference to `October 1, 1999' in 
                        subsection (n)(3)(H) is deemed to be a 
                        reference to `January 1, 2012'; and
                          ``(vi) the reference to `October 1, 1993' in 
                        the matter following paragraph (3)(J) of 
                        subsection (n) is deemed to be a reference 
                        `January 1, 2010'.
                  ``(B) Ultrasound services.--With respect to 
                diagnostic imaging services that are ultrasounds--
                          ``(i) any reference to `October 1, 1994' 
                        shall be deemed a reference to `January 1, 
                        2012';
                          ``(ii) the reference to `the date of the 
                        enactment of this section' in subsection 
                        (f)(1)(E)(iii) is deemed to be a reference to 
                        `7 years after the date of the enactment of the 
                        Children's Health and Medicare Protection Act 
                        of 2007';
                          ``(iii) the reference to `October 1, 1996' in 
                        subsection (l) is deemed to be a reference to 
                        `January 1, 2013';
          ``(4) Provisions not applicable.--For purposes of paragraph 
        (1), in applying section 354 of the Public Health Service Act, 
        the following provision shall not apply:
                  ``(A) Subsections (e) and (f) of such section, in so 
                far as the respective subsection imposes any 
                requirement for a physician to be certified, 
                accredited, or otherwise meet requirements, with 
                respect to the provision of any diagnostic imaging 
                services, as a condition of payment under subsection 
                (b)(4)(C)(i), with respect to the professional or 
                technical component, for such service.
                  ``(B) Subsection (e)(1)(B)(iv) of such section, 
                insofar as it applies to a facility with respect to the 
                provision of ultrasounds.
                  ``(C) Subsection (e)(1)(B)(v).
                  ``(D) Subsection (f)(1)(H) of such section, relating 
                to standards for special techniques for mammograms of 
                patients with breast implants.
                  ``(E) Subsection (g)(6) of such section, relating to 
                an inspection demonstration program.
                  ``(F) Subsection (n)(3)(G) of such section, relating 
                to the national advisory committee.
                  ``(G) Subsection (p) of such section, relating to 
                breast cancer screening surveillance research grants.
                  ``(H) Paragraphs (1)(B) and (2) of subsection (r) of 
                such section, related to funding.
          ``(5) Accreditation bodies.--For purposes of paragraph (1), 
        in applying section 354(e)(1) of the Public Health Service, the 
        following shall apply:
                  ``(A) Approval of two accreditation bodies for each 
                treatment modality.--In the case that there is more 
                than one accreditation body for a treatment modality 
                that qualifies for approval under this subsection, the 
                Secretary shall approve at least two accreditation 
                bodies for such treatment modality.
                  ``(B) Additional accreditation body standards.--In 
                addition to the standards described in subparagraph (B) 
                of such section for accreditation bodies, the Secretary 
                shall establish standards that require--
                          ``(i) the timely integration of new 
                        technology by accreditation bodies for purposes 
                        of accrediting facilities under this 
                        subsection; and
                          ``(ii) the accreditation body involved to 
                        evaluate the annual medical physicist survey 
                        (or annual medical survey of another 
                        appropriate qualified expert chosen by the 
                        accreditation body) of a facility upon onsite 
                        review of such facility.
          ``(6) Additional quality standards.--For purposes of 
        paragraph (1), in applying subsection (f)(1) of section 354 of 
        the Public Health Service--
                  ``(A) the quality standards under such subsection 
                shall, with respect to a facility include--
                          ``(i) standards for qualifications of medical 
                        personnel who are not physicians and who 
                        perform diagnostic imaging services at the 
                        facility that require such personnel to ensure 
                        that individuals, prior to performing medical 
                        imaging, demonstrate compliance with the 
                        standards established under subsection (a) 
                        through successful completion of certification 
                        by a nationally recognized professional 
                        organization, licensure, completion of an 
                        examination, pertinent coursework or degree 
                        program, verified pertinent experience, or 
                        through other ways determined appropriate by an 
                        accreditation body (with the approval of the 
                        Secretary, or through some combination 
                        thereof);
                          ``(ii) standards requiring the facility to 
                        maintain records of the credentials of 
                        physicians and other medical personnel 
                        described in clause (i);
                          ``(iii) standards for qualifications and 
                        responsibilities of medical directors and other 
                        personnel with supervising roles at the 
                        facility;
                          ``(iv) standards that require the facility 
                        has procedures to ensure the safety of patients 
                        of the facility; and
                          ``(v) standards for the establishment of a 
                        quality control program at the facility to be 
                        implemented as described in subparagraph (E) of 
                        such subsection;
                  ``(B) the quality standards described in subparagraph 
                (B) of such subsection shall be deemed to include 
                standards that require the establishment and 
                maintenance of a quality assurance and quality control 
                program at each facility that is adequate and 
                appropriate to ensure the reliability, clarity, and 
                accuracy of the technical quality of diagnostic images 
                produced at such facilities; and
                  ``(C) the quality standard described in subparagraph 
                (C) of such subsection, relating to a requirement for 
                personnel who perform specified services, shall include 
                in such requirement that such personnel must meet 
                continuing medical education standards as specified by 
                an accreditation body (with the approval of the 
                Secretary) and update such standards at least once 
                every three years.
          ``(7) Additional requirements.--Notwithstanding any provision 
        of section 354 of the Public Health Service Act, the following 
        shall apply to the accreditation process under this subsection 
        for purposes of subsection (b)(4)(C)(i):
                  ``(A) Any diagnostic imaging services facility 
                accredited before January 1, 2010 (or January 1, 2012 
                in the case of ultrasounds), by an accrediting body 
                approved by the Secretary shall be deemed a facility 
                accredited by an approved accreditation body for 
                purposes of such subsection as of such date if the 
                facility submits to the Secretary proof of such 
                accreditation by transmittal of the certificate of 
                accreditation, including by electronic means.
                  ``(B) The Secretary may require the accreditation 
                under this subsection of an emerging technology used in 
                the provision of a diagnostic imaging service as a 
                condition of payment under subsection (b)(4)(C)(i) for 
                such service at such time as the Secretary determines 
                there is sufficient empirical and scientific 
                information to properly carry out the accreditation 
                process for such technology.
          ``(8) Definitions.--For purposes of this subsection:
                  ``(A)  Audit.--The term `audit' means an onsite 
                evaluation, with respect to a diagnostic imaging 
                services facility, by the Secretary, State or local 
                agency on behalf of the Secretary, or accreditation 
                body approved under this subsection that includes the 
                following:
                          ``(i) Equipment verification.
                          ``(ii) Evaluation of policies and procedures 
                        for compliance with accreditation requirements.
                          ``(iii) Evaluation of personnel 
                        qualifications and credentialing.
                          ``(iv) Evaluation of the technical quality of 
                        images.
                          ``(v) Evaluation of patient reports.
                          ``(vi) Evaluation of peer-review mechanisms 
                        and other quality assurance activities.
                          ``(vii) Evaluation of quality control 
                        procedures, results, and follow-up actions.
                          ``(viii) Evaluation of medical physicists (or 
                        other appropriate professionals chosen by the 
                        accreditation body) and magnetic resonance 
                        scientist surveys.
                          ``(ix) Evaluation of consumer complaint 
                        mechanisms.
                          ``(x) Provision of recommendations for 
                        improvement based on findings with respect to 
                        clauses (i) through (ix).
                  ``(B) Diagnostic imaging services facility.--The term 
                `diagnostic imaging services facility' has the meaning 
                given the term `facility' in section 354(a)(3) of the 
                Public Health Service Act (42 U.S.C. 263b(a)(3)) 
                subject to the reference changes specified in paragraph 
                (2), but does not include any facility that does not 
                furnish diagnostic imaging services for which payment 
                may be made under this section.
                  ``(C) Image.--The term `image' means the portrayal of 
                internal structures of the human body for the purpose 
                of detecting and determining the presence or extent of 
                disease or injury and may be produced through various 
                techniques or modalities, including radiant energy or 
                ionizing radiation and ultrasound and magnetic 
                resonance. Such term does not include image guided 
                procedures.
                  ``(D) Medical imaging service.--The term `medical 
                imaging service' means a service that involves the 
                science of an image.''.
  (b) Adjustment in Practice Expense to Reflect Higher Presumed 
Utilization.--Section 1848 of the Social Security Act (42 U.S.C. 1395w) 
is amended--
          (1) in subsection (b)(4)--
                  (A) in subparagraph (B), by striking ``subparagraph 
                (A)'' and inserting ``this paragraph''; and
                  (B) by adding at the end the following new 
                subparagraph:
                  ``(D) Adjustment in practice expense to reflect 
                higher presumed utilization.--In computing the number 
                of practice expense relative value units under 
                subsection (c)(2)(C)(ii) with respect to imaging 
                services described in subparagraph (B), the Secretary 
                shall adjust such number of units so it reflects a 75 
                percent (rather than 50 percent) presumed rate of 
                utilization of imaging equipment.''; and
          (2) in subsection (c)(2)(B)(v)(II), by inserting ``and other 
        provisions'' after ``OPD payment cap''
  (c) Adjustment in Technical Component ``discount'' on Single-Session 
Imaging to Consecutive Body Parts.--Section 1848(b)(4) of such Act is 
further amended by adding at the end the following new subparagraph:
                  ``(E) Adjustment in technical component discount on 
                single-session imaging involving consecutive body 
                parts.--The Secretary shall increase the reduction in 
                expenditures attributable to the multiple procedure 
                payment reduction applicable to the technical component 
                for imaging under the final rule published by the 
                Secretary in the Federal Register on November 21, 2005 
                (42 CFR 405, et al.) from 25 percent to 50 percent.''.
  (d) Adjustment in Assumed Interest Rate for Capital Purchases.--
Section 1848(b)(4) of such Act is further amended by adding at the end 
the following new subparagraph:
                  ``(F) Adjustment in assumed interest rate for capital 
                purchases.--In computing the practice expense component 
                for imaging services under this section, the Secretary 
                shall change the interest rate assumption for capital 
                purchases of imaging devices to reflect the prevailing 
                rate in the market, but in no case higher than 11 
                percent.''.
  (e) Disallowance of Global Billing.--Effective for claims filed for 
imaging services (as defined in subsection (b)(4)(B) of section 1848 of 
the Social Security Act) furnished on or after the first day of the 
first month that begins more than 1 year after the date of the 
enactment of this Act, the Secretary of Health and Human Services shall 
not accept (or pay) a claim under such section unless the claim is made 
separately for each component of such services.
  (f) Effective Date.--Except as otherwise provided, this section, and 
the amendments made by this section, shall apply to services furnished 
on or after January 1, 2008.

SEC. 310. REDUCING FREQUENCY OF MEETINGS OF THE PRACTICING PHYSICIANS 
                    ADVISORY COUNCIL.

  Section 1868(a)(2) of the Social Security Act (42 U.S.C. 
1395ee(a)(2)) is amended by striking ``once during each calendar 
quarter'' and inserting ``once each year (and at such other times as 
the Secretary may specify)''.

                  TITLE IV--MEDICARE ADVANTAGE REFORMS

                       Subtitle A--Payment Reform

SEC. 401. EQUALIZING PAYMENTS BETWEEN MEDICARE ADVANTAGE PLANS AND FEE-
                    FOR-SERVICE MEDICARE.

  (a) Phase in of Payment Based on Fee-for-Service Costs.--Section 1853 
of the Social Security Act (42 U.S.C. 1395w-23) is amended--
          (1) in subsection (j)(1)(A)--
                  (A) by striking ``beginning with 2007'' and inserting 
                ``for 2007 and 2008''; and
                  (B) by inserting after ``(k)(1)'' the following: ``, 
                or, beginning with 2009, \1/12\ of the blended 
                benchmark amount determined under subsection (l)(1)''; 
                and
          (2) by adding at the end the following new subsection:
  ``(l) Determination of Blended Benchmark Amount.--
          ``(1) In general.--For purposes of subsection (j), subject to 
        paragraphs (2) and (3), the term `blended benchmark amount' 
        means for an area--
                  ``(A) for 2009 the sum of--
                          ``(i) \2/3\ of the applicable amount (as 
                        defined in subsection (k)(1)) for the area and 
                        year; and
                          ``(ii) \1/3\ of the amount specified in 
                        subsection (c)(1)(D)(i) for the area and year;
                  ``(B) for 2010 the sum of--
                          ``(i) \1/3\ of the applicable amount for the 
                        area and year; and
                          ``(ii) \2/3\ of the amount specified in 
                        subsection (c)(1)(D)(i) for the area and year; 
                        and
                  ``(C) for a subsequent year the amount specified in 
                subsection (c)(1)(D)(i) for the area and year.
          ``(2) Fee-for-service payment floor.--In no case shall the 
        blended benchmark amount for an area and year be less than the 
        amount specified in subsection (c)(1)(D)(i) for the area and 
        year.
          ``(3) Exception for pace plans.--This subsection shall not 
        apply to payments to a PACE program under section 1894.''.
  (b) Phase in of Payment Based on IME Costs.--
          (1) In general.--Section 1853(c)(1)(D)(i) of such Act (42 
        U.S.C. 1395w-23(c)(1)(D)(i)) is amended by inserting ``and 
        costs attributable to payments under section 1886(d)(5)(B)'' 
        after ``1886(h)''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to the capitation rate for years beginning with 
        2009.
  (c) Limitation on Plan Enrollment in Cases of Excess Bids for 2009 
and 2010.--
          (1) In general.--In the case of a Medicare Part C 
        organization that offers a Medicare Part C plan in the 50 
        States or the District of Columbia for which--
                  (A) bid amount described in paragraph (2) for a 
                Medicare Part C plan for 2009 or 2010, exceeds
                  (B) the percent specified in paragraph (4) of the 
                fee-for-service amount described in paragraph (3),
        the Medicare Part C plan may not enroll any new enrollees in 
        the plan during the annual, coordinated election period (under 
        section 1851(e)(3)(B) of such Act (42 U.S.C. 1395w-21(e)(3)(B)) 
        for the year or during the year (if the enrollment becomes 
        effective during the year).
          (2) Bid amount for part a and b services.--
                  (A) In general.--Except as provided in subparagraph 
                (B), the bid amount described in this paragraph is the 
                unadjusted Medicare Part C statutory non-drug monthly 
                bid amount (as defined in section 1854(b)(2)(E) of the 
                Social Security Act (42 U.S.C. 1395w-24(b)(2)(E)).
                  (B) Treatment of msa plans.--In the case of an MSA 
                plan (as defined in section 1859(b)(3) of the Social 
                Security Act, 42 U.S.C. 1935w-28(b)(3)), the bid amount 
                described in this paragraph is the amount described in 
                section 1854(a)(3)(A) of such Act (42 U.S.C. 1395w-
                24(a)(3)(A)).
          (3) Fee-for-service amount described.--
                  (A) In general.--Subject to subparagraph (B), the 
                fee-for-service amount described in this paragraph for 
                an Medicare Part C local area is the amount described 
                in section 1853(c)(1)(D)(i) of the Social Security Act 
                (42 U.S.C. 1395w-23) for such area.
                  (B) Treatment of multi-county plans.--In the case of 
                an MA plan the service area for which covers more than 
                one Medicare Part C local area, the fee-for-service 
                amount described in this paragraph is the amount 
                described in section 1853(c)(1)(D)(i) of the Social 
                Security Act for each such area served, weighted for 
                each such area by the proportion of the enrollment of 
                the plan that resides in the county (as determined 
                based on amounts posted by the Administrator of the 
                Centers for Medicare & Medicaid Services in the April 
                bid notice for the year involved).
          (4) Percentage phase down.--For purposes of paragraph (1), 
        the percentage specified in this paragraph--
                  (A) for 2009 is 106 percent; and
                  (B) for 2010 is 103 percent.
          (5) Exemption of age-ins.--For purposes of paragraph (1), the 
        term ``new enrollee'' with respect to a Medicare Part C plan 
        offered by a Medicare Part C organization, does not include an 
        individual who was enrolled in a plan offered by the 
        organization in the month immediately before the month in which 
        the individual was eligible to enroll in such a Medicare Part C 
        plan offered by the organization.
  (d) Annual Rebasing of Fee-for-Service Rates.--Section 
1853(c)(1)(D)(ii) of the Social Security Act (42 U.S.C. 1395w-
23(c)(1)(D)(ii)) is amended--
          (1) by inserting ``(before 2009)'' after ``for subsequent 
        years''; and
          (2) by inserting before the period at the end the following: 
        ``and for each year beginning with 2009''.
  (e) Repeal of PPO Stabilization Fund.--Section 1858 of the Social 
Security Act (42 U.S.C. 1395) is amended--
          (1) by striking subsection (e); and
          (2) in subsection (f)(1), by striking ``subject to subsection 
        (e),''.

                  Subtitle B--Beneficiary Protections

SEC. 411. NAIC DEVELOPMENT OF MARKETING, ADVERTISING, AND RELATED 
                    PROTECTIONS.

  (a) In General.--Section 1852 of the Social Security Act (42 U.S.C. 
1395w-22) is amended by adding at the end the following new subsection:
  ``(m) Application of Model Marketing and Enrollment Standards.--
          ``(1) In general.--The National Association of Insurance 
        Commissioners (in this subsection referred to as the `NAIC') is 
        requested to develop, and to submit to the Secretary of Health 
        and Human Services not later than 12 months after the date of 
        the enactment of this Act, model regulations (in this section 
        referred to as `model regulations') regarding Medicare plan 
        marketing, enrollment, broker and agent training and 
        certification, agent and broker commissions, and market conduct 
        by plans, agents and brokers for implementation (under 
        paragraph (7)) under this part and part D, including for 
        enforcement by States under section 1856(b)(3).
          ``(2) Marketing guidelines.--
                  ``(A) In general.--The model regulations shall 
                address the sales and advertising techniques used by 
                Medicare private plans, agents and brokers in selling 
                plans, including defining and prohibiting cold calls, 
                unsolicited door-to-door sales, cross-selling, and co-
                branding.
                  ``(B) Special considerations.--The model regulations 
                shall specifically address the marketing--
                          ``(i) of plans to full benefit dual-eligible 
                        individuals and qualified medicare 
                        beneficiaries;
                          ``(ii) of plans to populations with limited 
                        English proficiency;
                          ``(iii) of plans to beneficiaries in senior 
                        living facilities; and
                          ``(iv) of plans at educational events.
          ``(3) Enrollment guidelines.--
                  ``(A) In general.--The model regulations shall 
                address the disclosures Medicare private plans, agents, 
                and brokers must make when enrolling beneficiaries, and 
                a process--
                          ``(i) for affirmative beneficiary sign off 
                        before enrollment in a plan; and
                          ``(ii) in the case of Medicare Part C plans, 
                        for plans to conduct a beneficiary call-back to 
                        confirm beneficiary sign off and enrollment.
                  ``(B) Specific considerations.--The model regulations 
                shall specially address beneficiary understanding of 
                the Medicare plan through required disclosure (or 
                beneficiary verification) of each of the following:
                          ``(i) The type of Medicare private plan 
                        involved.
                          ``(ii) Attributes of the plan, including 
                        premiums, cost sharing, formularies (if 
                        applicable), benefits, and provider access 
                        limitations in the plan.
                          ``(iii) Comparative quality of the plan.
                          ``(iv) The fact that plan attributes may 
                        change annually.
          ``(4) Appointment, certification and training of agents and 
        brokers.--The model regulations shall establish procedures and 
        requirements for appointment, certification (and periodic 
        recertification), and training of agents and brokers that 
        market or sell Medicare private plans consistent with existing 
        State appointment and certification procedures and with this 
        paragraph.
          ``(5) Agent and broker commissions.--
                  ``(A) In general.--The model regulations shall 
                establish standards for fair and appropriate 
                commissions for agents and brokers consistent with this 
                paragraph.
                  ``(B) Limitation on types of commission.--The model 
                regulations shall specifically prohibit the following:
                          ``(i) Differential commissions--
                                  ``(I) for Medicare Part C plans based 
                                on the type of Medicare private plan; 
                                or
                                  ``(II) prescription drug plans under 
                                part D based on the type of 
                                prescription drug plan.
                          ``(ii) Commissions in the first year that are 
                        more than 200 percent of subsequent year 
                        commissions.
                          ``(iii) The payment of extra bonuses or 
                        incentives (such as trips, gifts, and other 
                        non-commission cash payments).
                  ``(C) Agent disclosure.--In developing the model 
                regulations, the NAIC shall consider requiring agents 
                and brokers to disclose commissions to a beneficiary 
                upon request of the beneficiary before enrollment.
                  ``(D) Prevention of fraud.--The model regulations 
                shall consider the opportunity for fraud and abuse and 
                beneficiary steering in setting standards under this 
                paragraph and shall provide for the ability of State 
                commissioners to investigate commission structures.
          ``(6) Market conduct.--
                  ``(A) In general.--The model regulations shall 
                establish standards for the market conduct of 
                organizations offering Medicare private plans, and of 
                agents and brokers selling such plans, and for State 
                review of plan market conduct.
                  ``(B) Matters to be included.--Such standards shall 
                include standards for--
                          ``(i) timely payment of claims;
                          ``(ii) beneficiary complaint reporting and 
                        disclosure; and
                          ``(iii) State reporting of market conduct 
                        violations and sanctions.
          ``(7) Implementation.--
                  ``(A) Publication of naic model regulations.--If the 
                model regulations are submitted on a timely basis under 
                paragraph (1)--
                          ``(i) the Secretary shall publish them in the 
                        Federal Register upon receipt and request 
                        public comment on the issue of whether such 
                        regulations are consistent with the 
                        requirements established in this subsection for 
                        such regulations;
                          ``(ii) not later than 6 months after the date 
                        of such publication, the Secretary shall 
                        determine whether such regulations are so 
                        consistent with such requirements and shall 
                        publish notice of such determination in the 
                        Federal Register; and
                          ``(iii) if the Secretary makes the 
                        determination under clause (ii) that such 
                        regulations are consistent with such 
                        requirements, in the notice published under 
                        clause (ii) the Secretary shall publish notice 
                        of adoption of such model regulations as 
                        constituting the marketing and enrollment 
                        standards adopted under this subsection to be 
                        applied under this title; and
                          ``(iv) if the Secretary makes the 
                        determination under such clause that such 
                        regulations are not consistent with such 
                        requirements, the procedures of clauses (ii) 
                        and (iii) of subparagraph (B) shall apply (in 
                        relation to the notice published under clause 
                        (ii)), in the same manner as such clauses would 
                        apply in the case of publication of a notice 
                        under subparagraph (B)(i).
                  ``(B) No model regulations.--If the model regulations 
                are not submitted on a timely basis under paragraph 
                (1)--
                          ``(i) the Secretary shall publish notice of 
                        such fact in the Federal Register;
                          ``(ii) not later than 6 months after the date 
                        of publication of such notice, the Secretary 
                        shall propose regulations that provide for 
                        marketing and enrollment standards that 
                        incorporate the requirements of this subsection 
                        for the model regulations and request public 
                        comments on such proposed regulations; and
                          ``(iii) not later than 6 months after the 
                        date of publication of such proposed 
                        regulations, the Secretary shall publish final 
                        regulations that shall constitute the marketing 
                        and enrollment standards adopted under this 
                        subsection to be applied under this title.
                  ``(C) References to marketing and enrollment 
                standards.--In this title, a reference to marketing and 
                enrollment standards adopted under this subsection is 
                deemed a reference to the regulations constituting such 
                standards adopted under subparagraph (A) or (B), as the 
                case may be.
                  ``(D) Effective date of standards.--In order to 
                provide for the orderly and timely implementation of 
                marketing and enrollment standards adopted under this 
                subsection, the Secretary, in consultation with the 
                NAIC, shall specify (by program instruction or 
                otherwise) effective dates with respect to all 
                components of such standards consistent with the 
                following:
                          ``(i) In the case of components that relate 
                        predominantly to operations in relation to 
                        Medicare private plans, the effective date 
                        shall be for plan years beginning on or after 
                        such date (not later than 1 year after the date 
                        of promulgation of the standards) as the 
                        Secretary specifies.
                          ``(ii) In the case of other components, the 
                        effective date shall be such date, not later 
                        than 1 year after the date of promulgation of 
                        the standards, as the Secretary specifies.
                  ``(E) Consultation.--In promulgating marketing and 
                enrollment standards under this paragraph, the NAIC or 
                Secretary shall consult with a working group composed 
                of representatives of issuers of Medicare private 
                plans, consumer groups, medicare beneficiaries, State 
                Health Insurance Assistance Programs, and other 
                qualified individuals. Such representatives shall be 
                selected in a manner so as to assure balanced 
                representation among the interested groups.
          ``(8) Enforcement.--
                  ``(A) In general.--Any Medicare private plan that 
                violates marketing and enrollment standards is subject 
                to sanctions under section 1857(g).
                  ``(B) State responsibilities.--Nothing in this 
                subsection or section 1857(g) shall prohibit States 
                from imposing sanctions against Medicare private plans, 
                agents, or brokers for violations of the marketing and 
                enrollment standards adopted under section 1852(m). 
                States shall have the sole authority to regulate agents 
                and brokers.
          ``(9) Medicare private plan defined.--In this subsection, the 
        term `Medicare private plan' means a Medicare Part C plan and a 
        prescription drug plan under part D.''.
  (b) Expansion of Exception to Preemption of State Role.--
          (1) In general.--Section 1856(b)(3) of the Social Security 
        Act (42 U.S.C. 1395w-26(b)(3)) is amended by striking ``(other 
        than State licensing laws or State laws relating to plan 
        solvency)'' and inserting ``(other than State laws relating to 
        licensing or plan solvency and State laws or regulations 
        adopting the marketing and enrollment standards adopted under 
        section 1852(m))''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to plans offered on or after July 1, 2008.
  (c) Application to Prescription Drug Plans.--
          (1) In general.--Section 1860D-1 of such Act is amended by 
        adding at the end the following new subsection:
  ``(d) Application of Marketing and Enrollment Standards.--The 
marketing and enrollment standards adopted under section 1852(m) shall 
apply to prescription drug plans (and sponsors of such plans) in the 
same manner as they apply to Medicare Part C plans and organizations 
offering such plans.''.
          (2) Reference to current law provisions.--The amendment made 
        by subsection (a) and (b) apply, pursuant to section 1860D-
        1(b)(1)(B)(ii) of the Social Security Act (42 U.S.C. 1395w-
        101(b)(1)(B)(ii)), to prescription drug plans under part D of 
        title XVIII of such Act.
  (d) Contract Requirement to Meet Marketing and Advertising 
Standards.--
          (1) In general.--Section 1857(d) of the Social Security Act 
        (42 U.S.C. 1395w-27(d)), as amended by subsection (b)(1), is 
        further amended by adding at the end the following new 
        paragraph:
          ``(7) Marketing and advertising standards.--The contract 
        shall require the organization to meet all standards adopted 
        under section 1852(m) (including those enforced by the State 
        involved pursuant to section 1856(b)(3)) relating to marketing 
        and advertising conduct.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to contracts for plan years beginning on or after 
        January 1, 2011.
  (e) Application of Sanctions.--
          (1) Application to violation of marketing and enrollment 
        standards.--Section 1857(g)(1) of such Act (42 U.S.C. 1395w-
        27(g)(1)), as amended by the preceding provisions of this Act, 
        is further amended--
                  (A) by striking ``and'' at the end of subparagraph 
                (G);
                  (B) by adding ``and'' at the end of subparagraph (H); 
                and
                  (C) by inserting after subparagraph (H) the following 
                new subparagraph:
                  ``(I) violates marketing and enrollment standards 
                adopted under section 1852(m);''.
          (2) Enhanced civil money sanctions.--Such section is further 
        amended--
                  (A) in paragraph (2)(A), by striking ``$25,000'', 
                ``$100,000'', and ``$15,000'' and inserting 
                ``$50,000'', ``$200,000'', and ``$30,000'', 
                respectively; and
                  (B) in subparagraphs (A), (B), and (D) of paragraph 
                (3), by striking ``$25,000'', ``$10,000'', and 
                ``$100,000'', respectively, and inserting ``$50,000'', 
                ``$20,000'', and ``$200,000'', respectively.
          (3) Effective date.--The amendments made by paragraph (2) 
        shall apply to violations occurring on or after the date of the 
        enactment of this Act.
  (f) Disclosure of Market and Advertising Contract Violations and 
Imposed Sanctions.--Section 1857 of such Act is amended by adding at 
the end the following new subsection
  ``(j) Disclosure of Market and Advertising Contract Violations and 
Imposed Sanctions.--For years beginning with 2009, the Secretary shall 
post on its public website for the Medicare program an annual report 
that--
          ``(1) lists each MA organization for which the Secretary made 
        during the year a determination under subsection (c)(2) the 
        basis of which is described in paragraph (1)(E); and
          ``(2) that describes any applicable sanctions under 
        subsection (g) applied to such organization pursuant to such 
        determination.''.
  (g) Standard Definitions of Benefits and Formats for Use in Marketing 
Materials.--Section 1851(h) of such Act (42 U.S.C. 1395w-21(h)) is 
amended by adding at the end the following new paragraph:
          ``(6) Standard definitions of benefits and formats for use in 
        marketing materials.--
                  ``(A) In general.--Not later than January 1, 2010, 
                the Secretary, in consultation with the National 
                Association of Insurance Commissioners and a working 
                group of the type described in section 1852(m)(7)(E), 
                shall develop standard descriptions and definitions for 
                benefits under this title for use in marketing material 
                distributed by Medicare Part C organizations and 
                formats for including such descriptions in such 
                marketing material.
                  ``(B) Required use of standard definitions.--For plan 
                years beginning on or after January 1, 2011, the 
                Secretary shall disapprove the distribution of 
                marketing material under paragraph (1)(B) if such 
                marketing material does not use, without modification, 
                the applicable descriptions and formats specified under 
                subparagraph (A).''.
  (h) Support for State Health Insurance Assistance Programs (SHIPs).--
Section 1857(e)(2) of the Social Security Act (42 U.S.C. 1395w-
27(e)(2)) is amended--
          (1) in subparagraph (B), by adding at the end the following: 
        ``Of the amounts so collected, no less than $55,000,000 for 
        fiscal year 2009, $65,000,000 for fiscal year 2010, $75,000,000 
        for fiscal year 2011, and $85,000,000 for fiscal year 2012 and 
        each succeeding fiscal year shall be used to support Medicare 
        Part C and Part D counseling and assistance provided by State 
        Health Insurance Assistance Programs.'';
          (2) in subparagraph (C)--
                  (A) by striking ``and'' after ``$100,000,000,'';
                  (B) by striking ``an amount equal to $200,000,000'' 
                and inserting ``and ending with fiscal year 2008 an 
                amount equal to $200,000,000, for fiscal year 2009 an 
                amount equal to $255,000,000, for fiscal year 2010 an 
                amount equal to $265,000,000, for fiscal year 2011 an 
                amount equal to $275,000,000, and for fiscal year 2012 
                and each succeeding fiscal year an amount equal to 
                $285,000,000''; and
                  (C) by adding at the end the following: ``The amounts 
                in excess of $200,000,000 in any fiscal year shall be 
                used to support State Health Insurance Assistance 
                Programs under subparagraph (B) and the remaining 
                amount used to support activities related to enrollment 
                and dissemination of information.''; and
          (3) in subparagraph (D)(ii)--
                  (A) by striking ``and'' at the end of subclause (IV);
                  (B) in subclause (V), by striking the period at the 
                end and inserting ``before fiscal year 2009; and''; and
                  (C) by adding at the end the following new subclause:
                          ``(VI) for fiscal year 2009 and each 
                        succeeding fiscal year the applicable portion 
                        (as so defined) of the amount specified in 
                        subparagraph (C) for that fiscal year.''.

SEC. 412. LIMITATION ON OUT-OF-POCKET COSTS FOR INDIVIDUAL HEALTH 
                    SERVICES.

  (a) In General.--Section 1852(a)(1) of the Social Security Act (42 
U.S.C. 1395w-22(a)(1)) is amended--
          (1) in subparagraph (A), by inserting before the period at 
        the end the following: ``with cost-sharing that is no greater 
        (and may be less) than the cost-sharing that would otherwise be 
        imposed under such program option'';
          (2) in subparagraph (B)(i), by striking ``or an actuarially 
        equivalent level of cost-sharing as determined in this part''; 
        and
          (3) by amending clause (ii) of subparagraph (B) to read as 
        follows:
                          ``(ii) Permitting use of flat copayment or 
                        per diem rate.--Nothing in clause (i) shall be 
                        construed as prohibiting a Medicare part C plan 
                        from using a flat copayment or per diem rate, 
                        in lieu of the cost-sharing that would be 
                        imposed under part A or B, so long as the 
                        amount of the cost-sharing imposed does not 
                        exceed the amount of the cost-sharing that 
                        would be imposed under the respective part if 
                        the individual were not enrolled in a plan 
                        under this part.''.
  (b) Limitation for Dual Eligibles and Qualified Medicare 
Beneficiaries.--Section 1852(a) of such Act is amended by adding at the 
end the following new paragraph:
          ``(7) Limitation on cost-sharing for dual eligibles and 
        qualified medicare beneficiaries.--In the case of a individual 
        who is a full-benefit dual eligible individual (as defined in 
        section 1935(c)(6)) or a qualified medicare beneficiary (as 
        defined in section 1905(p)(1)) who is enrolled in a Medicare 
        Part C plan, the plan may not impose cost-sharing that exceeds 
        the amount of cost-sharing that would be permitted with respect 
        to the individual under this title and title XIX if the 
        individual were not enrolled with such plan.''.
  (c) Effective Dates.--
          (1) The amendments made by subsection (a) shall apply to plan 
        years beginning on or after January 1, 2009.
          (2) The amendments made by subsection (b) shall apply to plan 
        years beginning on or after January 1, 2008.

SEC. 413. MA PLAN ENROLLMENT MODIFICATIONS.

  (a) Improved Plan Enrollment, Disenrollment, and Change of 
Enrollment.--
          (1) Continuous open enrollment for full-benefit dual eligible 
        individuals and qualified medicare beneficiaries (qmb).--
        Section 1851(e)(2)(D) of the Social Security Act (42 U.S.C. 
        1395w-21(e)(2)(D)) is amended--
                  (A) in the heading, by inserting``, full-benefit dual 
                eligible individuals, and qualified medicare 
                beneficiaries'' after ``institutionalized 
                individuals''; and
                  (B) in the matter before clause (i), by inserting ``, 
                a full-benefit dual eligible individual (as defined in 
                section 1935(c)(6)), or a qualified medicare 
                beneficiary (as defined in section 1905(p)(1))'' after 
                ``institutionalized (as defined by the Secretary)''; 
                and
                  (C) in clause (i), by inserting ``or disenroll'' 
                after ``enroll''.
          (2) Special election periods for additional categories of 
        individuals.--Section 1851(e)(4) of such Act (42 U.S.C. 
        1395w(e)(4)) is amended--
                  (A) in subparagraph (C), by striking at the end 
                ``or'';
                  (B) in subparagraph (D), by inserting ``, taking into 
                account the health or well-being of the individual'' 
                before the period and redesignating such subparagraph 
                as subparagraph (F); and
                  (C) by inserting after subparagraph (C) the following 
                new subparagraphs:
                  ``(D) the individual is described in section 
                1902(a)(10)(E)(iii) (relating to specified low-income 
                medicare beneficiaries);
                  ``(E) the individual is enrolled in an MA plan and 
                enrollment in the plan is suspended under paragraph 
                (2)(B) or (3)(C) of section 1857(g) because of a 
                failure of the plan to meet applicable requirements; 
                or''.
          (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.
  (b) Access to Medigap Coverage for Individuals Who Leave MA Plans.--
          (1) In general.--Section 1882(s)(3) of the Social Security 
        Act (42 U.S.C. 1395ss(s)(3)) is amended--
                  (A) in each of clauses (v)(III) and (vi) of 
                subparagraph (B), by striking ``12 months'' and 
                inserting ``24 months''; and
                  (B) in each of subclauses (I) and (II) of 
                subparagraph (F)(i), by striking ``12 months'' and 
                inserting ``24 months''.
          (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to terminations of enrollments in MA plans 
        occurring on or after the date of the enactment of this Act.
  (c) Improved Enrollment Policies.--
          (1) No auto-enrollment of medicaid beneficiaries.--
                  (A) In general.--Section 1851(e) of such Act (42 
                U.S.C. 1395w-21(e)) is amended by adding at the end the 
                following new paragraph:
          ``(7) No auto-enrollment of medicaid beneficiaries.--In no 
        case may the Secretary provide for the enrollment in a MA plan 
        of a Medicare Advantage eligible individual who is eligible to 
        receive medical assistance under title XIX as a full-benefit 
        dual eligible individual or a qualified medicare beneficiary, 
        without the affirmative application of such individual (or 
        authorized representative of the individual) to be enrolled in 
        such plan.''.
                  (B) No application to prescription drug plans.--
                Section 1860D-1(b)(1)(B)(iii) of such Act (42 U.S.C. 
                1395w-101(b)(1)(B)(iii)) is amended--
                          (i) by striking ``paragraph (2) and'' and by 
                        inserting ``paragraph (2),''; and
                          (ii) by inserting ``, and paragraph (7),'' 
                        after ``paragraph (4)''.
                  (C) Effective date.--The amendments made by this 
                paragraph shall apply to enrollments that are effective 
                on or after the date of the enactment of this Act.

SEC. 414. INFORMATION FOR BENEFICIARIES ON MA PLAN ADMINISTRATIVE 
                    COSTS.

  (a) Disclosure of Medical Loss Ratios and Other Expense Data.--
Section 1851 of the Social Security Act (42 U.S.C. 1395w-21) is amended 
by adding at the end the following new subsection:
  ``(j) Publication of Medical Loss Ratios and Other Cost-Related 
Information.--
          ``(1) In general.--The Secretary shall publish, not later 
        than October 1 of each year (beginning with 2009), for each 
        Medicare Part C plan contract, the following:
                  ``(A) The medical loss ratio of the plan in the 
                previous year.
                  ``(B) The per enrollee payment under this part to the 
                plan, as adjusted to reflect a risk score (based on 
                factors described in section 1853(a)(1)(C)(i)) of 1.0.
                  ``(C) The average risk score (as so based).
          ``(2) Submission of data.--
                  ``(A) In general.--Each Medicare Part C organization 
                shall submit to the Secretary, in a form and manner 
                specified by the Secretary, data necessary for the 
                Secretary to publish the information described in 
                paragraph (1) on a timely basis, including the 
                information described in paragraph (3).
                  ``(B) Data for 2008 and 2009.--The data submitted 
                under subparagraph (A) for 2008 and for 2009 shall be 
                consistent in content with the data reported as part of 
                the Medicare Part C plan bid in June 2007 for 2008.
                  ``(C) Medical loss ratio data.--The data to be 
                submitted under subparagraph (A) relating to medical 
                loss ratio for a year--
                          ``(i) shall be submitted not later than June 
                        1 of the following year; and
                          ``(ii) beginning with 2010, shall be 
                        submitted based on the standardized elements 
                        and definitions developed under paragraph (4).
                  ``(D) Audited data.--Data submitted under this 
                paragraph shall be data that has been audited by an 
                independent third party auditor.
          ``(3) MLR information.--The information described in this 
        paragraph with respect to a Medicare Part C plan for a year is 
        as follows:
                  ``(A) The costs for the plan in the previous year for 
                each of the following:
                          ``(i) Total medical expenses, separately 
                        indicated for benefits for the original 
                        medicare fee-for-service program option and for 
                        supplemental benefits.
                          ``(ii) Non-medical expenses, shown separately 
                        for each of the following categories of 
                        expenses:
                                  ``(I) Marketing and sales.
                                  ``(II) Direct administration.
                                  ``(III) Indirect administration.
                                  ``(IV) Net cost of private 
                                reinsurance.
                  ``(B) Gain or loss margin.
                  ``(C) Total revenue requirement, computed as the 
                total of medical and nonmedical expenses and gain or 
                loss margin, multiplied by the gain or loss margin.
                  ``(D) Percent of revenue ratio, computed as the total 
                revenue requirement expressed as a percentage of 
                revenue.
          ``(4) Development of data reporting standards.--
                  ``(A) In general.--The Secretary shall develop and 
                implement standardized data elements and definitions 
                for reporting under this subsection, for contract years 
                beginning with 2010, of data necessary for the 
                calculation of the medical loss ratio for Medicare Part 
                C plans. Not later than December 31, 2008, the 
                Secretary shall publish a report describing the 
                elements and definitions so developed.
                  ``(B) Consultation.--The Secretary shall consult with 
                representatives of Medicare Part C organizations, 
                experts on health plan accounting systems, and 
                representatives of the National Association of 
                Insurance Commissioners, in the development of such 
                data elements and definitions
          ``(5) Medical loss ratio defined.--For purposes of this part, 
        the term `medical loss ratio' means, with respect to an MA plan 
        for a year, the ratio of--
                  ``(A) the aggregate benefits (excluding nonmedical 
                expenses described in paragraph (3)(A)(ii)) paid under 
                the plan for the year, to
                  ``(B) the aggregate amount of premiums (including 
                basic and supplemental beneficiary premiums) and 
                payments made under sections 1853 and 1860D-15) 
                collected for the plan and year.
        Such ratio shall be computed without regard to whether the 
        benefits or premiums are for required or supplemental benefits 
        under the plan.''.
  (b) Audit of Administrative Costs and Compliance With the Federal 
Acquisition Regulation.--
          (1) In general.--Section 1857(d)(2)(B) of such Act (42 U.S.C. 
        1395w-27(d)(2)(B)) is amended--
                  (A) by striking ``or (ii)'' and inserting ``(ii)''; 
                and
                  (B) by inserting before the period at the end the 
                following: ``, or (iii) to compliance with the 
                requirements of subsection (e)(4) and the extent to 
                which administrative costs comply with the applicable 
                requirements for such costs under the Federal 
                Acquisition Regulation''.
          (2) Effective date.--The amendments made by this subsection 
        shall apply for contract years beginning after the date of the 
        enactment of this Act.
  (c) Minimum Medical Loss Ratio.--Section 1857(e) of the Social 
Security Act (42 U.S.C. 1395w-27(e)) is amended by adding at the end 
the following new paragraph:
          ``(4) Requirement for minimum medical loss ratio.--If the 
        Secretary determines for a contract year (beginning with 2010) 
        that an MA plan has failed to have a medical loss ratio (as 
        defined in section 1851(j)(4)) of at least .85--
                  ``(A) for that contract year, the Secretary shall 
                reduce the blended benchmark amount under subsection 
                (l) for the second succeeding contract year by the 
                numer of percentage points by which such loss ratio was 
                less than 85 percent;
                  ``(B) for 3 consecutive contract years, the Secretary 
                shall not permit the enrollment of new enrollees under 
                the plan for coverage during the second succeeding 
                contract year; and
                  ``(C) the Secretary shall terminate the plan contract 
                if the plan fails to have such a medical loss ratio for 
                5 consecutive contract years.''.
  (d) Information on Medicare Part C Plan Enrollment and Services.--
Section 1851 of such Act, as amended by subsection (a), is further 
amended by adding at the end the following new subsection:
  ``(k) Publication of Enrollment and Other Information.--
          ``(1) Monthly publication of plan-specific enrollment data.--
        The Secretary shall publish (on the public website of the 
        Centers for Medicare & Medicaid Services or otherwise) not 
        later than 30 days after the end of each month (beginning with 
        January 2008) on the actual enrollment in each Medicare Part C 
        plan by contract and by county.
          ``(2) Availability of other information.--The Secretary shall 
        make publicly available data and other information in a format 
        that may be readily used for analysis of the Medicare Part C 
        program under this part and will contribute to the 
        understanding of the organization and operation of such 
        program.''.
  (e) MedPAC Report on Varying Minimum Medical Loss Ratios.--
          (1) Study.--The Medicare Payment Advisory Commission shall 
        conduct a study of the need and feasibility ofproviding for 
        different minimum medical loss ratios for different types of 
        Medicare Part C plans, including coordinated care plans, group 
        model plans, coordinated care independent practice association 
        plans, preferred provider organization plans, and private fee-
        for-services plans.
          (2) Report.--Not later than 1 year after the date of the 
        enactment of this Act, submit to Congress a report on the study 
        conducted under paragraph (1).

                Subtitle C--Quality and Other Provisions

SEC. 421. REQUIRING ALL MA PLANS TO MEET EQUAL STANDARDS.

  (a) Collection and Reporting of Information.--
          (1) In general.--Section 1852(e)(1) of the Social Security 
        Act (42 U.S.C. 1395w-112(e)(1)) is amended by striking ``(other 
        than an MA private fee-for-service plan or an MSA plan)''.
          (2) Reporting for private fee-for-services and msa plans.--
        Section 1852(e)(3) of such Act is amended by adding at the end 
        the following new subparagraph:
                  ``(C) Data collection requirements by private fee-
                for-service plans and msa plans.--
                          ``(i) Using measures for ppos for contract 
                        year 2009.--For contract year 2009, the 
                        Medicare Part C organization offering a private 
                        fee-for-service plan or an MSA plan shall 
                        submit to the Secretary for such plan the same 
                        information on the same performance measures 
                        for which such information is required to be 
                        submitted for Medicare Part C plans that are 
                        preferred provider organization plans for that 
                        year.
                          ``(ii) Application of same measures as 
                        coordinated care plans beginning in contract 
                        year 2010.--For a contract year beginning with 
                        2010, a Medicare Part C organization offering a 
                        private fee-for-service plan or an MSA plan 
                        shall submit to the Secretary for such plan the 
                        same information on the same performance 
                        measures for which such information is required 
                        to be submitted for such contract year Medicare 
                        Part C plans described in section 
                        1851(a)(2)(A)(i) for contract year such 
                        contract year.''.
          (3) Effective date.--The amendment made by paragraph (1) 
        shall apply to contract years beginning on or after January 1, 
        2009.
  (b) Employer Plans.--
          (1) In general.--The first sentence of paragraph (2) of 
        section 1857(i) of such Act (42 U.S.C. 1395w-27(i)) is amended 
        by inserting before the period at the end the following: ``, 
        but only if 90 percent of the Medicare part C eligible 
        individuals enrolled under such plan reside in a county in 
        which the Medicare Part C organization offers a Medicare Part C 
        local plan''.
          (2) Limitation on application of waiver authority.--
        Paragraphs (1) and (2) of such section are each amended by 
        inserting ``that were in effect before the date of the 
        enactment of the Children's Health and Medicare Protection Act 
        of 2007'' after ``waive or modify requirements''.
          (3) Effective dates.--The amendment made by paragraph (1) 
        shall apply for plan years beginning on or after January 1, 
        2009, and the amendments made by paragraph (2) shall take 
        effect on the date of the enactment of this Act.

SEC. 422. DEVELOPMENT OF NEW QUALITY REPORTING MEASURES ON RACIAL 
                    DISPARITIES.

  (a) New Quality Reporting Measures.--
          (1) In general.--Section 1852(e)(3) of the Social Security 
        Act (42 U.S.C. 1395w-22(e)(3)), as amended by section 
        421(a)(2), is amended--
                  (A) in subparagraph (B)--
                          (i) in clause (i), by striking ``The 
                        Secretary'' and inserting ``Subject to 
                        subparagraph (D), the Secretary''; and
                          (ii) in clause (ii), by striking ``subclause 
                        (iii)'' and inserting ``clause (iii) and 
                        subparagraph (C)'' ; and
                  (B) by adding at the end the following new 
                subparagraph:
                  ``(D) Additional quality reporting measures.--
                          ``(i) In general.--The Secretary shall 
                        develop by October 1, 2009, quality measures 
                        for Medicare Part C plans that measure 
                        disparities in the amount and quality of health 
                        services provided to racial and ethnic 
                        minorities.
                          ``(ii) Data to measure racial and ethnic 
                        disparities in the amount and quality of care 
                        provided to enrollees.--The Secretary shall 
                        provide for Medicare Part C organizations to 
                        submit data under this paragraph, including 
                        data similar to those submitted for other 
                        quality measures, that permits analysis of 
                        disparities among racial and ethnic minorities 
                        in health services, quality of care, and health 
                        status among Medicare Part C plan enrollees for 
                        use in submitting the reports under paragraph 
                        (5).''.
          (2) Effective date.--The amendments made by this subsection 
        shall apply to reporting of quality measures for plan years 
        beginning on or after January 1, 2010.
  (b) Biennial Report on Racial and Ethnic Minorities.--Section 1852(e) 
of such Act (42 U.S.C. 1395w 22(e)) is amended by adding at the end the 
following new paragraph:
          ``(5) Report to congress.--
                  ``(A) In general.--Not later than 2 years after the 
                date of the enactment of this paragraph, and biennially 
                thereafter, the Secretary shall submit to Congress a 
                report regarding how quality assurance programs 
                conducted under this subsection measure and report on 
                disparities in the amount and quality of health care 
                services furnished to racial and ethnic minorities.
                  ``(B) Contents of report.--Each such report shall 
                include the following:
                          ``(i) A description of the means by which 
                        such programs focus on such racial and ethnic 
                        minorities.
                          ``(ii) An evaluation of the impact of such 
                        programs on eliminating health disparities and 
                        on improving health outcomes, continuity and 
                        coordination of care, management of chronic 
                        conditions, and consumer satisfaction.
                          ``(iii) Recommendations on ways to reduce 
                        clinical outcome disparities among racial and 
                        ethnic minorities.
                          ``(iv) Data for each MA plan from HEDIS and 
                        other source reporting the disparities in the 
                        amount and quality of health services furnished 
                        to racial and ethnic minorities.''.

SEC. 423. STRENGTHENING AUDIT AUTHORITY.

  (a) For Part C Payments Risk Adjustment.--Section 1857(d)(1) of the 
Social Security Act (42 U.S.C. 1395w-27(d)(1)) is amended by inserting 
after ``section 1858(c))'' the following: ``, and data submitted with 
respect to risk adjustment under section 1853(a)(3)''.
  (b) Enforcement of Audits and Deficiencies.--
          (1) In general.--Section 1857(e) of such Act is amended by 
        adding at the end the following new paragraph:
          ``(5) Enforcement of audits and deficiencies.--
                  ``(A) Information in contract.--The Secretary shall 
                require that each contract with a Medicare Part C 
                organization under this section shall include terms 
                that inform the organization of the provisions in 
                subsection (d).
                  ``(B) Enforcement authority.--The Secretary is 
                authorized, in connection with conducting audits and 
                other activities under subsection (d), to take such 
                actions, including pursuit of financial recoveries, 
                necessary to address deficiencies identified in such 
                audits or other activities.''.
          (2) Application under part d.--For provision applying the 
        amendment made by paragraph (1) to prescription drug plans 
        under part D, see section 1860D-12(b)(3)(D) of the Social 
        Security Act.
  (c) Effective Date.--The amendments made by this section shall take 
effect the date of the enactment of this Act and shall apply to audits 
and activities conducted for contract years beginning on or after 
January 1, 2009.

SEC. 424. IMPROVING RISK ADJUSTMENT FOR MA PAYMENTS.

  (a) In General.--Not later than 1 year after the date of the 
enactment of this Act, the Secretary of Health and Human Services shall 
submit to Congress a report that evaluates the adequacy of the Medicare 
Advantage risk adjustment system under section 1853(a)(1)(C) of the 
Social Security Act (42 U.S.C. 1395-23(a)(1)(C)).
  (b) Particulars.--The report under subsection (a) shall include an 
evaluation of at least the following:
          (1) The need and feasibility of improving the adequacy of the 
        risk adjustment system in predicting costs for beneficiaries 
        with co-morbid conditions and associated cognitive impairments.
          (2) The need and feasibility of including further gradations 
        of diseases and conditions (such as the degree of severity of 
        congestive heart failure).
          (3) The feasibility of measuring difference in coding over 
        time between Medicare part C plans and the medicare traditional 
        fee-for-service program and, to the extent this difference 
        exists, the options for addressing it.
          (4) The feasibility and value of including part D and other 
        drug utilization data in the risk adjustment model.

SEC. 425. ELIMINATING SPECIAL TREATMENT OF PRIVATE FEE-FOR-SERVICE 
                    PLANS.

  (a) Elimination of Extra Billing Provision.--Section 1852(k)(2) of 
the Social Security Act (42 U.S.C. 1395w-22(k)(2)) is amended--
          (1) in subparagraph (A)(i), by striking ``115 percent'' and 
        inserting ``100 percent''; and
          (2) in subparagraph (C)(i), by striking ``including any 
        liability for balance billing consistent with this 
        subsection)''.
  (b) Review of Bid Information.--Section 1854(a)(6)(B) of such Act (42 
U.S.C. 1395w-24(a)(6)(B)) is amended--
          (1) in clause (i), by striking ``clauses (iii) and (iv)'' and 
        inserting ``clause (iii)''; and
          (2) by striking clause (iv).
  (c) Effective Date.--The amendments made by this section shall apply 
to contract years beginning with 2009.

SEC. 426. RENAMING OF MEDICARE ADVANTAGE PROGRAM.

  (a) In General.--The program under part C of title XVIII of the 
Social Security Act is henceforth to be known as the ``Medicare Part C 
program''.
  (b) Change in References.--
          (1) Amending social security act.--The Social Security Act is 
        amended by striking ``Medicare Advantage'', ``MA'', and 
        ``Medicare+Choice'' and inserting ``Medicare Part C'' each 
        place it appears, with the appropriate, respective typographic 
        formatting, including typeface and capitalization.
          (2) Additional references.--Notwithstanding section 201(b) of 
        the Medicare Prescription Drug, Improvement, and Modernization 
        Act of 2003 (Public Law 108-173), any reference to the program 
        under part C of title XVIII of the Social Security Act shall be 
        deemed a reference to the ``Medicare Part C'' program and, with 
        respect to such part, any reference to ``Medicare+Choice''. 
        ``Medicare Advantage'', or ``MA'' is deemed a reference to the 
        program under such part.

                  Subtitle D--Extension of Authorities

SEC. 431. EXTENSION AND REVISION OF AUTHORITY FOR SPECIAL NEEDS PLANS 
                    (SNPS).

  (a) Extending Restriction on Enrollment Authority for SNPs for 3 
Years.--Subsection (f) of section 1859 of the Social Security Act (42 
U.S.C. 1395w-28) is amended by striking ``2009'' and inserting 
``2012''.
  (b) Structure of Authority for SNPs.--
          (1) In general.--Such section is further amended--
                  (A) in subsection (b)(6)(A), by striking all that 
                follows ``means'' and inserting the following: ``an MA 
                plan--
                          ``(i) that serves special needs individuals 
                        (as defined in subparagraph (B));
                          ``(ii) as of January 1, 2009, either--
                                  ``(I) at least 90 percent of the 
                                enrollees in which are described in 
                                subparagraph (B)(i), as determined 
                                under regulations in effect as of July 
                                1, 2007; or
                                  ``(II) at least 90 percent of the 
                                enrollees in which are described in 
                                subparagraph (B)(ii) and are full-
                                benefit dual eligible individuals (as 
                                defined in section 1935(c)(6)) or 
                                qualified medicare beneficiaries (as 
                                defined in section 1905(p)(1)); and
                          ``(iii) as of January 1, 2009, meets the 
                        applicable requirements of paragraph (2) or (3) 
                        of subsection (f), as the case may be.'';
                  (B) in subsection (b)(6)(B)(iii), by inserting ``only 
                for contract years beginning before January 1, 2009,'' 
                after ``(iii)''; and
                  (C) in subsection (f)--
                          (i) by amending the heading to read as 
                        follows: ``Requirements for Enrollment in Part 
                        C Plans for Special Needs Beneficiaries'';
                          (ii) by designating the sentence beginning 
                        ``In the case of'' as paragraph (1) with the 
                        heading ``Requirements for enrollment.--'' and 
                        with appropriate indentation; and
                          (iii) by adding at the end the following new 
                        paragraphs:
          ``(2) Additional requirements for institutional snps.--In the 
        case of a specialized MA plan for special needs individuals 
        described in subsection (b)(6)(A)(ii)(I), the applicable 
        requirements of this subsection are as follows:
                  ``(A) The plan has an agreement with the State that 
                includes provisions regarding cooperation on the 
                coordination of care for such individuals. Such 
                agreement shall include a description of the manner 
                that the State Medicaid program under title XIX will 
                pay for the costs of services for individuals eligible 
                under such title for medical assistance for acute care 
                and long-term care services.
                  ``(B) The plan has a contract with long-term care 
                facilities and other providers in the area sufficient 
                to provide care for enrollees described in subsection 
                (b)(6)(B)(i).
                  ``(C) The plan reports to the Secretary information 
                on additional quality measures specified by the 
                Secretary under section 1852(e)(3)(D)(iv)(I) for such 
                plans.
          ``(3) Additional requirements for dual snps.--In the case of 
        a specialized MA plan for special needs individuals described 
        in subsection (b)(6)(A)(ii)(II), the applicable requirements of 
        this subsection are as follows:
                  ``(A) The plan has an agreement with the State 
                Medicaid agency that--
                          ``(i) includes provisions regarding 
                        cooperation on the coordination of the 
                        financing of care for such individuals;
                          ``(ii) includes a description of the manner 
                        that the State Medicaid program under title XIX 
                        will pay for the costs of cost-sharing and 
                        supplemental services for individuals enrolled 
                        in the plan eligible under such title for 
                        medical assistance for acute and long-term care 
                        services; and
                          ``(iii) effective January 1, 2011, provides 
                        for capitation payments to cover costs of 
                        supplemental benefits for individuals described 
                        in subsection (b)(6)(A)(ii)(II).
                  ``(B) The out-of-pocket costs for services under 
                parts A and B that are charged to enrollees may not 
                exceed the out-of-pocket costs for same services 
                permitted for such individuals under title XIX.
                  ``(C) The plan reports to the Secretary information 
                on additional quality measures specified by the 
                Secretary under section 1852(e)(3)(D)(iv)(II) for such 
                plans.''.
          (2) Quality standards and quality reporting.--Section 
        1852(e)(3) of such Act (42 U.S.C. 1395w-22(e)(3) is amended--
                  (A) in subparagraph (A)(i), by adding at the end the 
                following: ``In the case of a specialized Medicare Part 
                C plan for special needs individuals described in 
                paragraph (2) or (3) of section 1859(f), the 
                organization shall provide for the reporting on quality 
                measures developed for the plan under subparagraph 
                (D)(iii).''; and
                  (B) in subparagraph (D), as added by section 
                422(a)(1), by adding at the end the following new 
                clause:
                          ``(iii) Specification of additional quality 
                        measurements for specialized part c plans.--For 
                        implementation for plan years beginning not 
                        later than January 1, 2010, the Secretary shall 
                        develop new quality measures appropriate to 
                        meeting the needs of--
                                  ``(I) beneficiaries enrolled in 
                                specialized Medicare Part C plans for 
                                special needs individuals (described in 
                                section 1859(b)(6)(A)(ii)(I)) that 
                                serve predominantly individuals who are 
                                dual-eligible individuals eligible for 
                                medical assistance under title XIX by 
                                measuring the special needs for care of 
                                individuals who are both Medicare and 
                                Medicaid beneficiaries; and
                                  ``(II) beneficiaries enrolled in 
                                specialized Medicare Part C plans for 
                                special needs individuals (described in 
                                section 1859(b)(6)(A)(ii)(II)) that 
                                serve predominantly institutionalized 
                                individuals by measuring the special 
                                needs for care of individuals who are a 
                                resident in long-term care 
                                institution.''.
          (3) Effective date; grandfather.--The amendments made by 
        paragraph (1) shall take effect for enrollments occurring on or 
        after January 1, 2009, and shall not apply--
                  (A) to plans with a contract with a State Medicaid 
                agency to operate an integrated Medicaid-Medicare 
                program, that had been approved by Centers for Medicare 
                & Medicaid Services on January 1, 2004; and
                  (B) to plans that are operational as of the date of 
                the enactment of this Act as approved Medicare 
                demonstration projects and that provide services 
                predominantly to individuals with end-stage renal 
                disease.
          (4) Transition for non-qualifying snps.--
                  (A) Restrictions in 2008 for chronic care snps.--In 
                the case of a specialized MA plan for special needs 
                individuals (as defined in section 1859(b)(6)(A) of the 
                Social Security Act (42 U.S.C. 1395w-28(b)(6)(A)) that, 
                as of December 31, 2007, is not described in either 
                subclause (I) or subclause (II) of clause (ii) of such 
                section, as amended by paragraph (1), then as of 
                January 1, 2008--
                          (i) the plan may not be offered unless it was 
                        offered before such date;
                          (ii) no new members may be enrolled with the 
                        plan; and
                          (iii) there may be no expansion of the 
                        service area of such plan.
                  (B) Transition of enrollees.--The Secretary of Health 
                and Human Services shall provide for an orderly 
                transition of those specialized MA plans for special 
                needs individuals (as defined in section 1859(b)(6)(A) 
                of the Social Security Act (42 U.S.C. 1395w-
                28(b)(6)(A)), as of the date of the enactment of this 
                Act), and their enrollees, that no longer qualify as 
                such plans under such section, as amended by this 
                subsection.

SEC. 432. EXTENSION AND REVISION OF AUTHORITY FOR MEDICARE REASONABLE 
                    COST CONTRACTS.

  (a) Extension for 3 Years of Period Reasonable Cost Plans Can Remain 
in the Market.--Section 1876(h)(5)(C)(ii) of the Social Security Act 
(42 U.S.C. 1395mm(h)(5)(C)(ii)) is amended, in the matter preceding 
subclause (I), by striking ``January 1, 2008'' and inserting ``January 
1, 2011''.
  (b) Application of Certain Medicare Advantage Requirements to Cost 
Contracts Extended or Renewed After Enactment.--Section 1876(h) of such 
Act (42 U.S.C. 1395mm(h)), as amended by subsection (a), is amended--
          (1) by redesignating paragraph (5) as paragraph (6); and
          (2) by inserting after paragraph (4) the following new 
        paragraph:
          ``(5)(A) Any reasonable cost reimbursement contract with an 
        eligible organization under this subsection that is extended or 
        renewed on or after the date of enactment of the Children's 
        Health and Medicare Protection Act of 2007 shall provide that 
        the provisions of the Medicare Part C program described in 
        subparagraph (B) shall apply to such organization and such 
        contract in a substantially similar manner as such provisions 
        apply to Medicare Part C organizations and Medicare Part C 
        plans under part C.
                  ``(B) The provisions described in this subparagraph 
                are as follows:
                          ``(i) Section 1851(h) (relating to the 
                        approval of marketing material and application 
                        forms).
                          ``(ii) Section 1852(e) (relating to the 
                        requirement of having an ongoing quality 
                        improvement program and treatment of 
                        accreditation in the same manner as such 
                        provisions apply to Medicare Part C local plans 
                        that are preferred provider organization 
                        plans).
                          ``(iii) Section 1852(f) (relating to 
                        grievance mechanisms).
                          ``(iv) Section 1852(g) (relating to coverage 
                        determinations, reconsiderations, and appeals).
                          ``(v) Section 1852(j)(4) (relating to 
                        limitations on physician incentive plans).
                          ``(vi) Section 1854(c) (relating to the 
                        requirement of uniform premiums among 
                        individuals enrolled in the plan).
                          ``(vii) Section 1854(g) (relating to 
                        restrictions on imposition of premium taxes 
                        with respect to payments to organizations).
                          ``(viii) Section 1856(b)(3) (relating to 
                        relation to State laws).
                          ``(ix) The provisions of part C relating to 
                        timelines for contract renewal and beneficiary 
                        notification.''.

            TITLE V--PROVISIONS RELATING TO MEDICARE PART A

SEC. 501. INPATIENT HOSPITAL PAYMENT UPDATES.

  (a) For Acute Hospitals.--Clause (i) of section 1886(b)(3)(B) of the 
Social Security Act (42 U.S.C. 1395ww(b)(3)(B)) is amended--
          (1) in subclause (XIX), by striking ``and'';
          (2) by redesignating subclause (XX) as subclause (XXII); and
          (3) by inserting after subclause (XIX) the following new 
        subclauses:
          ``(XX) for fiscal year 2007, subject to clause (viii), the 
        market basket percentage increase for hospitals in all areas,
          ``(XXI) for fiscal year 2008, subject to clause (viii), the 
        market basket percentage increase minus 0.25 percentage point 
        for hospitals in all areas, and''.
  (b) For Other Hospitals.--Clause (ii) of such section is amended--
          (1) in subclause (VII) by striking ``and'';
          (2) by redesignating subclause (VIII) as subclause (X); and
          (3) by inserting after subclause (VII) the following new 
        subclauses:
          ``(VIII) fiscal years 2003 through 2007, is the market basket 
        percentage increase,
          ``(IX) fiscal year 2008, is the market basket percentage 
        increase minus 0.25 percentage point, and''.
  (c) Delayed Effective Date.--
          (1) Acute care hospitals.--The amendments made by subsection 
        (a) shall not apply to discharges occurring before January 1, 
        2008.
          (2) Other hospitals.--The amendments made by subsection (b) 
        shall be applied, only with respect to cost reporting periods 
        beginning during fiscal year 2008 and not with respect to the 
        computation for any succeeding cost reporting period, by 
        substituting ``0.1875 percentage point'' for ``0.25 percentage 
        point''.

SEC. 502. PAYMENT FOR INPATIENT REHABILITATION FACILITY (IRF) SERVICES.

  (a) Payment Update.--
          (1) In general.--Section 1886(j)(3)(C) of the Social Security 
        Act (42 U.S.C. 1395ww(j)(3)(C)) is amended by adding at the end 
        the following: ``The increase factor to be applied under this 
        subparagraph for fiscal year 2008 shall be 1 percent.''
          (2) Delayed effective date.--The amendment made by paragraph 
        (1) shall not apply to payment units occurring before January 
        1, 2008.
  (b) Inpatient Rehabilitation Facility Classification Criteria.--
          (1) In general.--Section 5005 of the Deficit Reduction Act of 
        2005 (Public Law 109-171) is amended--
                  (A) in subsection (a), by striking ``apply the 
                applicable percent specified in subsection (b)'' and 
                inserting ``require a compliance rate that is no 
                greater than the 60 percent compliance rate that became 
                effective for cost reporting periods beginning on or 
                after July 1, 2006,''; and
                  (B) by amending subsection (b) to read as follows:
  ``(b) Continued Use of Comorbidities.--For portions of cost reporting 
periods occurring on or after the date of the enactment of the 
Children's Health and Medicare Protection Act of 2007, the Secretary 
shall include patients with comorbidities as described in section 
412.23(b)(2)(i) of title 42, Code of Federal Regulations (as in effect 
as of January 1, 2007), in the inpatient population that counts towards 
the percent specified in subsection (a).''.
          (2) Effective date.--The amendment made by paragraph (1)(A) 
        shall apply to portions of cost reporting periods beginning on 
        or after the date of the enactment of this Act.
  (c) Payment for Certain Medical Conditions Treated in Inpatient 
Rehabilitation Facilities.--
          (1) In general.--Section 1886(j) of the Social Security Act 
        (42 U.S.C. 1395ww(j)) is amended--
                  (A) by redesignating paragraph (7) as paragraph (8);
                  (B) by inserting after paragraph (6) the following 
                new paragraph:
          ``(7) Special payment rule for certain medical conditions.--
                  ``(A) In general.--Subject to subparagraph (H), in 
                the case of discharges occurring on or after October 1, 
                2008, in lieu of the standardized payment amount (as 
                determined pursuant to the preceding provisions of this 
                subsection) that would otherwise be applicable under 
                this subsection, the Secretary shall substitute, for 
                payment units with respect to an applicable medical 
                condition (as defined in subparagraph (G)(i)) that is 
                treated in an inpatient rehabilitation facility, the 
                modified standardized payment amount determined under 
                subparagraph (B).
                  ``(B) Modified standardized payment amount.--The 
                modified standardized payment amount for an applicable 
                medical condition shall be based on the amount 
                determined under subparagraph (C) for such condition, 
                as adjusted under subparagraphs (D), (E), and (F).
                  ``(C) Amount determined.--
                          ``(i) In general.--The amount determined 
                        under this subparagraph for an applicable 
                        medical condition shall be based on the sum of 
                        the following:
                                  ``(I) An amount equal to the average 
                                per stay skilled nursing facility 
                                payment rate for the applicable medical 
                                condition (as determined under clause 
                                (ii)).
                                  ``(II) An amount equal to 25 percent 
                                of the difference between the overhead 
                                costs (as defined in subparagraph 
                                (G)(ii)) component of the average 
                                inpatient rehabilitation facility per 
                                stay payment amount for the applicable 
                                medical condition (as determined under 
                                the preceding paragraphs of this 
                                subsection) and the overhead costs 
                                component of the average per stay 
                                skilled nursing facility payment rate 
                                for such condition (as determined under 
                                clause (ii)).
                                  ``(III) An amount equal to 33 percent 
                                of the difference between the patient 
                                care costs (as defined in subparagraph 
                                (G)(iii)) component of the average 
                                inpatient rehabilitation facility per 
                                stay payment amount for the applicable 
                                medical condition (as determined under 
                                the preceding paragraphs of this 
                                subsection) and the patient care costs 
                                component of the average per stay 
                                skilled nursing facility payment rate 
                                for such condition (as determined under 
                                clause (ii)).
                          ``(ii) Determination of average per stay 
                        skilled nursing facility payment rate.--For 
                        purposes of clause (i), the Secretary shall 
                        convert skilled nursing facility payment rates 
                        for applicable medical conditions, as 
                        determined under section 1888(e), to average 
                        per stay skilled nursing facility payment rates 
                        for each such condition.
                  ``(D) Adjustments.--The Secretary shall adjust the 
                amount determined under subparagraph (C) for an 
                applicable medical condition using the adjustments to 
                the prospective payment rates for inpatient 
                rehabilitation facilities described in paragraphs (2), 
                (3), (4), and (6).
                  ``(E) Update for inflation.--Except in the case of a 
                fiscal year for which the Secretary rebases the amounts 
                determined under subparagraph (C) for applicable 
                medical conditions pursuant to subparagraph (F), the 
                Secretary shall annually update the amounts determined 
                under subparagraph (C) for each applicable medical 
                condition by the increase factor for inpatient 
                rehabilitation facilities (as described in paragraph 
                (3)(C)).
                  ``(F) Rebasing.--The Secretary shall periodically 
                (but in no case less than once every 5 years) rebase 
                the amounts determined under subparagraph (C) for 
                applicable medical conditions using the methodology 
                described in such subparagraph and the most recent and 
                complete cost report and claims data available.
                  ``(G) Definitions.--In this paragraph:
                          ``(i) Applicable medical condition.--The term 
                        `applicable medical condition' means--
                                  ``(I) unilateral knee replacement;
                                  ``(II) unilateral hip replacement; 
                                and
                                  ``(III) unilateral hip fracture.
                          ``(ii) Overhead costs.--The term `overhead 
                        costs' means those Medicare-allowable costs 
                        that are contained in the General Service cost 
                        centers of the Medicare cost reports for 
                        inpatient rehabilitation facilities and for 
                        skilled nursing facilities, respectively, as 
                        determined by the Secretary.
                          ``(iii) Patient care costs.--The term 
                        `patient care costs' means total Medicare-
                        allowable costs minus overhead costs.
                  ``(H) Sunset.--The provisions of this paragraph shall 
                cease to apply as of the date the Secretary implements 
                an integrated, site-neutral payment methodology under 
                this title for post-acute care.''; and
                  (C) in paragraph (8), as redesignated by paragraph 
                (1)--
                          (i) in subparagraph (C), by striking ``and'' 
                        at the end;
                          (ii) in subparagraph (D), by striking the 
                        period at the end and inserting ``, and''; and
                          (iii) by adding at the end the following new 
                        subparagraph:
                  ``(E) modified standardized payment amounts under 
                paragraph (7).''.
          (2) Special rule for discharges occurring in the second half 
        of fiscal year 2008.--
                  (A) In general.--In the case of discharges from an 
                inpatient rehabilitation facility occurring during the 
                period beginning on April 1, 2008, and ending on 
                September 30, 2008, for applicable medical conditions 
                (as defined in paragraph (7)(G)(i) of section 1886(j) 
                of the Social Security Act (42 U.S.C. 1395ww(j)), as 
                inserted by paragraph (1)(B), in lieu of the 
                standardized payment amount determined pursuant to such 
                section, the standardized payment amount shall be 
                $9,507 for unilateral knee replacement, $10,398 for 
                unilateral hip replacement, and $10,958 for unilateral 
                hip fracture. Such amounts are the amounts that are 
                estimated would be determined under paragraph (7)(C) of 
                such section 1886(j) for such conditions if such 
                paragraph applied for such period. Such standardized 
                payment amounts shall be multiplied by the relative 
                weights for each case-mix group and tier, as published 
                in the final rule of the Secretary of Health and Human 
                Services for inpatient rehabilitation facility services 
                prospective payment for fiscal year 2008, to obtain the 
                applicable payment amounts for each such condition for 
                each case-mix group and tier.
                  (B) Implementation.--Notwithstanding any other 
                provision of law, the Secretary of Health and Human 
                Services may implement this subsection by program 
                instruction or otherwise. Paragraph (8)(E) of such 
                section 1886(j) of the Social Security Act, as added by 
                paragraph (1)(C), shall apply for purposes of this 
                subsection in the same manner as such paragraph applies 
                for purposes of paragraph (7) of such section 1886(j).
  (d) Recommendations for Classifying Inpatient Rehabilitation 
Hospitals and Units.--
          (1) Report to congress.--Not later than 12 months after the 
        date of the enactment of this Act, the Secretary of Health and 
        Human Services, in consultation with physicians (including 
        geriatricians and physiatrists), administrators of inpatient 
        rehabilitation, acute care hospitals, skilled nursing 
        facilities, and other settings providing rehabilitation 
        services, Medicare beneficiaries, trade organizations 
        representing inpatient rehabilitation hospitals and units and 
        skilled nursing facilities, and the Medicare Payment Advisory 
        Commission, shall submit to the Committee on Ways and Means of 
        the House of Representatives and the Committee on Finance of 
        the Senate a report that includes--
                  (A) an examination of Medicare beneficiaries' access 
                to medically necessary rehabilitation services;
                  (B) alternatives or refinements to the 75 percent 
                rule policy for determining exclusion criteria for 
                inpatient rehabilitation hospital and unit designation 
                under the Medicare program, including determining 
                clinical appropriateness of inpatient rehabilitation 
                hospital and unit admissions and alternative criteria 
                which would consider a patient's functional status, 
                diagnosis, co-morbidities, and other relevant factors; 
                and
                  (C) an examination that identifies any condition for 
                which individuals are commonly admitted to inpatient 
                rehabilitation hospitals that is not included as a 
                condition described in section 412.23(b)(2)(iii) of 
                title 42, Code of Federal Regulations, to determine the 
                appropriate setting of care, and any variation in 
                patient outcomes and costs, across settings of care, 
                for treatment of such conditions.
        For the purposes of this subsection, the term ``75 percent 
        rule'' means the requirement of section 412.23(b)(2) of title 
        42, Code of Federal Regulations, that 75 percent of the 
        patients of a rehabilitation hospital or converted 
        rehabilitation unit are in 1 or more of 13 listed treatment 
        categories.
          (2) Considerations.--In developing the report described in 
        paragraph (1), the Secretary shall include the following:
                  (A) The potential effect of the 75 percent rule on 
                access to rehabilitation care by Medicare beneficiaries 
                for the treatment of a condition, whether or not such 
                condition is described in section 412.23(b)(2)(iii) of 
                title 42, Code of Federal Regulations.
                  (B) An analysis of the effectiveness of 
                rehabilitation care for the treatment of conditions, 
                whether or not such conditions are described in section 
                412.23(b)(2)(iii) of title 42, Code of Federal 
                Regulations, available to Medicare beneficiaries in 
                various health care settings, taking into account 
                variation in patient outcomes and costs across 
                different settings of care, and which may include 
                whether the Medicare program and Medicare beneficiaries 
                may incur higher costs of care for the entire episode 
                of illness due to readmissions, extended lengths of 
                stay, and other factors.

SEC. 503. LONG-TERM CARE HOSPITALS.

  (a) Long-Term Care Hospital Payment Update.--
          (1) In general.--Section 1886 of the Social Security Act (42 
        U.S.C. 1395ww) is amended by adding at the end the following 
        new subsection:
  ``(m) Prospective Payment for Long-Term Care Hospitals.--
          ``(1) Reference to establishment and implementation of 
        system.--For provisions related to the establishment and 
        implementation of a prospective payment system for payments 
        under this title for inpatient hospital services furnished by a 
        long-term care hospital described in subsection (d)(1)(B)(iv), 
        see section 123 of the Medicare, Medicaid, and SCHIP Balanced 
        Budget Refinement Act of 1999 and section 307(b) of Medicare, 
        Medicaid, and SCHIP Benefits Improvement and Protection Act of 
        2000.
          ``(2) Update for rate year 2008.--In implementing the system 
        described in paragraph (1) for discharges occurring during the 
        rate year ending in 2008 for a hospital, the base rate for such 
        discharges for the hospital shall be the same as the base rate 
        for discharges for the hospital occurring during the previous 
        rate year.''.
          (2) Delayed effective date.--Subsection (m)(2) of section 
        1886 of the Social Security Act, as added by paragraph (1), 
        shall not apply to discharges occurring on or after July 1, 
        2007, and before January 1, 2008.
  (b) Payment for Long-Term Care Hospital Services; Patient and 
Facility Criteria.--
          (1) Definition of long-term care hospital.--
                  (A) Definition.--Section 1861 of the Social Security 
                Act (42 U.S.C. 1395x), as amended by section 201(a)(2), 
                is amended by adding at the end the following new 
                subsection:

                       ``Long-Term Care Hospital

  ``(ddd) The term `long-term care hospital' means an institution 
which--
          ``(1) is primarily engaged in providing inpatient services, 
        by or under the supervision of a physician, to Medicare 
        beneficiaries whose medically complex conditions require a long 
        hospital stay and programs of care provided by a long-term care 
        hospital;
          ``(2) has an average inpatient length of stay (as determined 
        by the Secretary) for Medicare beneficiaries of greater than 25 
        days, or as otherwise defined in section 1886(d)(1)(B)(iv);
          ``(3) satisfies the requirements of subsection (e);
          ``(4) meets the following facility criteria:
                  ``(A) the institution has a patient review process, 
                documented in the patient medical record, that screens 
                patients prior to admission for appropriateness of 
                admission to a long-term care hospital, validates 
                within 48 hours of admission that patients meet 
                admission criteria for long-term care hospitals, 
                regularly evaluates patients throughout their stay for 
                continuation of care in a long-term care hospital, and 
                assesses the available discharge options when patients 
                no longer meet such continued stay criteria;
                  ``(B) the institution has active physician 
                involvement with patients during their treatment 
                through an organized medical staff, physician-directed 
                treatment with physician on-site availability on a 
                daily basis to review patient progress, and consulting 
                physicians on call and capable of being at the 
                patient's side within a moderate period of time, as 
                determined by the Secretary;
                  ``(C) the institution has interdisciplinary team 
                treatment for patients, requiring interdisciplinary 
                teams of health care professionals, including 
                physicians, to prepare and carry out an individualized 
                treatment plan for each patient; and
          ``(5) meets patient criteria relating to patient mix and 
        severity appropriate to the medically complex cases that long-
        term care hospitals are designed to treat, as measured under 
        section 1886(n).''.
                  (B) New patient criteria for long-term care hospital 
                prospective payment.--Section 1886 of such Act (42 
                U.S.C. 1395ww), as amended by subsection (a), is 
                further amended by adding at the end the following new 
                subsection:
  ``(n) Patient Criteria for Prospective Payment to Long-Term Care 
Hospitals.--
          ``(1) In general.--To be eligible for prospective payment 
        under this section as a long-term care hospital, a long-term 
        care hospital must admit not less than a majority of patients 
        who have a high level of severity, as defined by the Secretary, 
        and who are assigned to one or more of the following major 
        diagnostic categories:
                  ``(A) Circulatory diagnoses.
                  ``(B) Digestive, endocrine, and metabolic diagnoses.
                  ``(C) Infection disease diagnoses.
                  ``(D) Neurological diagnoses.
                  ``(E) Renal diagnoses.
                  ``(F) Respiratory diagnoses.
                  ``(G) Skin diagnoses.
                  ``(H) Other major diagnostic categories as selected 
                by the Secretary.
          ``(2) Major diagnostic category defined.--In paragraph (1), 
        the term `major diagnostic category' means the medical 
        categories formed by dividing all possible principle diagnosis 
        into mutually exclusive diagnosis areas which are referred to 
        in 67 Federal Register 49985 (August 1, 2002).''.
                  (C) Establishment of rehabilitation units within 
                certain long-term care hospitals.--If the Secretary of 
                Health and Human Services does not include 
                rehabilitation services within a major diagnostic 
                category under section 1886(n)(2) of the Social 
                Security Act, as added by subparagraph (B), the 
                Secretary shall approve for purposes of title XVIII of 
                such Act distinct part inpatient rehabilitation 
                hospital units in long-term care hospitals consistent 
                with the following:
                          (i) A hospital that, on or before October 1, 
                        2004, was classified by the Secretary as a 
                        long-term care hospital, as described in 
                        section 1886(d)(1)(B)(iv)(I) of such Act (42 
                        U.S.C. 1395ww(d)(1)(V)(iv)(I)), and was 
                        accredited by the Commission on Accreditation 
                        of Rehabilitation Facilities, may establish a 
                        hospital rehabilitation unit that is a distinct 
                        part of the long-term care hospital, if the 
                        distinct part meets the requirements (including 
                        conditions of participation) that would 
                        otherwise apply to a distinct-part 
                        rehabilitation unit if the distinct part were 
                        established by a subsection (d) hospital in 
                        accordance with the matter following clause (v) 
                        of section 1886(d)(1)(B) of such Act, including 
                        any regulations adopted by the Secretary in 
                        accordance with this section, except that the 
                        one-year waiting period described in section 
                        412.30(c) of title 42, Code of Federal 
                        Regulations, applicable to the conversion of 
                        hospital beds into a distinct-part 
                        rehabilitation unit shall not apply to such 
                        units.
                          (ii) Services provided in inpatient 
                        rehabilitation units established under clause 
                        (i) shall not be reimbursed as long-term care 
                        hospital services under section 1886 of such 
                        Act and shall be subject to payment policies 
                        established by the Secretary to reimburse 
                        services provided by inpatient hospital 
                        rehabilitation units.
                  (D) Effective date.--The amendments made by 
                subparagraphs (A) and (B), and the provisions of 
                subparagraph (C), shall apply to discharges occurring 
                on or after January 1, 2008.
          (2) Implementation of facility and patient criteria.--
                  (A) Report.--No later than 1 year after the date of 
                the enactment of this Act, the Secretary of Health and 
                Human Services (in this section referred to as the 
                ``Secretary'') shall submit to the appropriate 
                committees of Congress a report containing 
                recommendations regarding the promulgation of the 
                national long-term care hospital facility and patient 
                criteria for application under paragraphs (4) and (5) 
                of section 1861(ccc) and section 1886(n) of the Social 
                Security Act, as added by subparagraphs (A) and (B), 
                respectively, of paragraph (1). In the report, the 
                Secretary shall consider recommendations contained in a 
                report to Congress by the Medicare Payment Advisory 
                Commission in June 2004 for long-term care hospital-
                specific facility and patient criteria to ensure that 
                patients admitted to long-term care hospitals are 
                medically complex and appropriate to receive long-term 
                care hospital services.
                  (B) Implementation.--No later than 1 year after the 
                date of submittal of the report under subparagraph (A), 
                the Secretary shall, after rulemaking, implement the 
                national long-term care hospital facility and patient 
                criteria referred to in such subparagraph. Such long-
                term care hospital facility and patient criteria shall 
                be used to screen patients in determining the medical 
                necessity and appropriateness of a Medicare 
                beneficiary's admission to, continued stay at, and 
                discharge from, long-term care hospitals under the 
                Medicare program and shall take into account the 
                medical judgment of the patient's physician, as 
                provided for under sections 1814(a)(3) and 
                1835(a)(2)(B) of the Social Security Act (42 U.S.C. 
                1395f(a)(3), 1395n(a)(2)(B)).
          (3) Expanded review of medical necessity.--
                  (A) In general.--The Secretary of Health and Human 
                Services shall provide, under contracts with one or 
                more appropriate fiscal intermediaries or medicare 
                administrative contractors under section 1874A(a)(4)(G) 
                of the Social Security Act (42 U.S.C. 1395kk(a)(4)(G)), 
                for reviews of the medical necessity of admissions to 
                long-term care hospitals (described in section 
                1886(d)(1)(B)(iv) of such Act) and continued stay at 
                such hospitals, of individuals entitled to, or enrolled 
                for, benefits under part A of title XVIII of such Act 
                on a hospital-specific basis consistent with this 
                paragraph. Such reviews shall be made for discharges 
                occurring on or after October 1, 2007.
                  (B) Review methodology.--The medical necessity 
                reviews under paragraph (A) shall be conducted for each 
                such long-term care hospital on an annual basis in 
                accordance with rules (including a sample methodology) 
                specified by the Secretary. Such sample methodology 
                shall--
                          (i) provide for a statistically valid and 
                        representative sample of admissions of such 
                        individuals sufficient to provide results at a 
                        95 percent confidence interval; and
                          (ii) guarantee that at least 75 percent of 
                        overpayments received by long-term care 
                        hospitals for medically unnecessary admissions 
                        and continued stays of individuals in long-term 
                        care hospitals will be identified and recovered 
                        and that related days of care will not be 
                        counted toward the length of stay requirement 
                        contained in section 1886(d)(1)(B)(iv) of the 
                        Social Security Act (42 U.S.C. 
                        1395ww(d)(1)(B)(iv)).
                  (C) Continuation of reviews.--Under contracts under 
                this paragraph, the Secretary shall establish a denial 
                rate with respect to such reviews that, if exceeded, 
                could require further review of the medical necessity 
                of admissions and continued stay in the hospital 
                involved.
                  (D) Termination of required reviews.--
                          (i) In general.--Subject to clause (iii), the 
                        previous provisions of this subsection shall 
                        cease to apply as of the date specified in 
                        clause (ii).
                          (ii) Date specified.--The date specified in 
                        this clause is the later of January 1, 2013, or 
                        the date of implementation of national long-
                        term care hospital facility and patient 
                        criteria under section paragraph (2)(B).
                          (iii) Continuation.--As of the date specified 
                        in clause (ii), the Secretary shall determine 
                        whether to continue to guarantee, through 
                        continued medical review and sampling under 
                        this paragraph, recovery of at least 75 percent 
                        of overpayments received by long-term care 
                        hospitals due to medically unnecessary 
                        admissions and continued stays.
                  (E) Funding.--The costs to fiscal intermediaries or 
                medicare administrative contractors conducting the 
                medical necessity reviews under subparagraph (A) shall 
                be funded from the aggregate overpayments recouped by 
                the Secretary of Health and Human Services from long-
                term care hospitals due to medically unnecessary 
                admissions and continued stays. The Secretary may use 
                an amount not in excess of 40 percent of the 
                overpayments recouped under this paragraph to 
                compensate the fiscal intermediaries or Medicare 
                administrative contractors for the costs of services 
                performed.
          (4) Limited, qualified moratorium of long-term care 
        hospitals.--
                  (A) In general.--Subject to subparagraph (B), the 
                Secretary shall impose a temporary moratorium on the 
                certification of new long-term care hospitals (and 
                satellite facilities), and new long-term care hospital 
                and satellite facility beds, for purposes of the 
                Medicare program under title XVIII of the Social 
                Security Act. The moratorium shall terminate at the end 
                of the 4-year period beginning on the date of the 
                enactment of this Act.
                  (B) Exceptions.--
                          (i) In general.--The moratorium under 
                        subparagraph (A) shall not apply as follows:
                                  (I) To a long-term care hospital, 
                                satellite facility, or additional beds 
                                under development as of the date of the 
                                enactment of this Act.
                                  (II) To an existing long-term care 
                                hospital that requests to increase its 
                                number of long-term care hospital beds, 
                                if the Secretary determines there is a 
                                need at the long-term care hospital for 
                                additional beds to accommodate--
                                          (aa) infectious disease 
                                        issues for isolation of 
                                        patients;
                                          (bb) bedside dialysis 
                                        services;
                                          (cc) single-sex accommodation 
                                        issues;
                                          (dd) behavioral issues; or
                                          (ee) any requirements of 
                                        State or local law.
                                  (III) To an existing long-term care 
                                hospital that requests an increase in 
                                beds because of the closure of a long-
                                term care hospital or significant 
                                decrease in the number of long-term 
                                care hospital beds, in a State where 
                                there is only one other long-term care 
                                hospital.
                        There shall be no administrative or judicial 
                        review from a decision of the Secretary under 
                        this subparagraph.
                          (ii) ``Under development'' defined.--For 
                        purposes of clause (i)(I), a long-term care 
                        hospital or satellite facility is considered to 
                        be ``under development'' as of a date if any of 
                        the following have occurred on or before such 
                        date :
                                  (I) The hospital or a related party 
                                has a binding written agreement with an 
                                outside, unrelated party for the 
                                construction, reconstruction, lease, 
                                rental, or financing of the long-term 
                                care hospital and the hospital has 
                                expended, before the date of the 
                                enactment of this Act, at least 10 
                                percent of the estimated cost of the 
                                project (or, if less, $2,500,000).
                                  (II) Actual construction, renovation 
                                or demolition for the long-term care 
                                hospital has begun and the hospital has 
                                expended, before the date of the 
                                enactment of this Act, at least 10 
                                percent of the estimated cost of the 
                                project (or, if less, $2,500,000).
                                  (III) A certificate of need has been 
                                approved in a State where one is 
                                required or other necessary approvals 
                                from appropriate State agencies have 
                                been received for the operation of the 
                                hospital.
                                  (IV) The hospital documents that, 
                                within 3 months after the date of the 
                                enactment of this Act, it is within a 
                                6-month long-term care hospital 
                                demonstration period required by 
                                section 412.23(e)(1)-(3) of title 42, 
                                Code of Federal Regulations, to 
                                demonstrate that it has a greater than 
                                25 day average length of stay.
          (5) No application of 25 percent patient threshold payment 
        adjustment to freestanding and grandfathered ltchs.--The 
        Secretary shall not apply, during the 5-year period beginning 
        on the date of the enactment of this Act, section 412.536 of 
        title 42, Code of Federal Regulations, or any similar 
        provision, to freestanding long-term care hospitals and the 
        Secretary shall not apply such section or section 412.534 of 
        title 42, Code of Federal Regulations, or any similar 
        provisions, to a long-term care hospital identified by section 
        4417(a) of the Balanced Budget Act of 1997 (Public Law 105-33). 
        A long-term care hospital identified by such section 4417(a) 
        shall be deemed to be a freestanding long-term care hospital 
        for the purpose of this section. Section 412.536 of title 42, 
        Code of Federal Regulations, shall be void and of no effect.
          (6) Payment for hospitals-within-hospitals.--
                  (A) In general.--Payments to an applicable long-term 
                care hospital or satellite facility which is located in 
                a rural area or which is co-located with an urban 
                single or MSA dominant hospital under paragraphs 
                (d)(1), (e)(1), and (e)(4) of section 412.534 of title 
                42, Code of Federal Regulations, shall not be subject 
                to any payment adjustment under such section if no more 
                than 75 percent of the hospital's Medicare discharges 
                (other than discharges described in paragraphs (d)(2) 
                or (e)(3) of such section) are admitted from a co-
                located hospital.
                  (B) Co-located long-term care hospitals and satellite 
                facilities.--
                          (i) In general.--Payment to an applicable 
                        long-term care hospital or satellite facility 
                        which is co-located with another hospital shall 
                        not be subject to any payment adjustment under 
                        section 412.534 of title 42, Code of Federal 
                        Regulations, if no more than 50 percent of the 
                        hospital's Medicare discharges (other than 
                        discharges described in section 412.534(c)(3) 
                        of such title) are admitted from a co-located 
                        hospital.
                          (ii) Applicable long-term care hospital or 
                        satellite facility defined.--In this paragraph, 
                        the term ``applicable long-term care hospital 
                        or satellite facility'' means a hospital or 
                        satellite facility that is subject to the 
                        transition rules under section 412.534(g) of 
                        title 42, Code of Federal Regulations.
                  (C) Effective date.--Subparagraphs (A) and (B) shall 
                apply to discharges occurring on or after October 1, 
                2007, and before October 1, 2012.
          (7) No application of very short-stay outlier policy.--The 
        Secretary shall not apply, during the 5-year period beginning 
        on the date of the enactment of this Act, the amendments 
        finalized on May 11, 2007 (72 Federal Register 26904) made to 
        the short-stay outlier payment provision for long-term care 
        hospitals contained in section 412.529(c)(3)(i) of title 42, 
        Code of Federal Regulations, or any similar provision.
          (8) No application of one time adjustment to standard 
        amount.--The Secretary shall not, during the 5-year period 
        beginning on the date of the enactment of this Act, make the 
        one-time prospective adjustment to long-term care hospital 
        prospective payment rates provided for in section 412.523(d)(3) 
        of title 42, Code of Federal Regulations, or any similar 
        provision.
  (c) Separate Classification for Certain Long-Stay Cancer Hospitals.--
          (1) In general.--Subsection (d)(1)(B) of section 1886 of the 
        Social Security Act (42 U.S.C. 1395ww) is amended--
                  (A) in clause (iv)--
                          (i) in subclause (I), by striking ``(iv)(I)'' 
                        and inserting ``(iv)'' and by striking ``or'' 
                        at the end; and
                          (ii) in subclause (II)--
                                  (I) by striking ``, or'' at the end 
                                and inserting a semicolon; and
                                  (II) by redesignating such subclause 
                                as clause (vi) and by moving it to 
                                immediately follow clause (v); and
                  (B) in clause (v), by striking the semicolon at the 
                end and inserting ``, or''.
          (2) Conforming payment references.--Subsection (b) of such 
        section is amended--
                  (A) in paragraph (2)(E)(ii), by adding at the end the 
                following new subclause:
          ``(III) Hospitals described in clause (vi) of such 
        subsection.'';
                  (B) in paragraph (3)(F)(iii), by adding at the end 
                the following new subclause:
          ``(VI) Hospitals described in clause (vi) of such 
        subsection.'';
                  (C) in paragraphs (3)(G)(ii), (3)(H)(i), and 
                (3)(H)(ii)(I), by inserting ``or (vi)'' after ``clause 
                (iv)'' each place it appears;
                  (D) in paragraph (3)(H)(iv), by adding at the end the 
                following new subclause:
          ``(IV) Hospitals described in clause (vi) of such 
        subsection.'';
                  (E) in paragraph (3)(J), by striking ``subsection 
                (d)(1)(B)(iv)'' and inserting ``clause (iv) or (vi) of 
                subsection (d)(1)(B)''; and
                  (F) in paragraph (7)(B), by adding at the end the 
                following new clause:
          ``(iv) Hospitals described in clause (vi) of such 
        subsection.''.
          (3) Additional conforming amendments.--The second sentence of 
        subsection (d)(1)(B) of such section is amended--
                  (A) by inserting ``(as in effect as of such date)'' 
                after ``clause (iv)''; and
                  (B) by inserting ``(or, in the case of a hospital 
                classified under clause (iv)(II), as so in effect, 
                shall be classified under clause (vi) on and after the 
                effective date of such clause)'' after ``so 
                classified''.
          (4) Transition rule.--In the case of a hospital that is 
        classified under clause (iv)(II) of section 1886(d)(1)(B) of 
        the Social Security Act immediately before the date of the 
        enactment of this Act and which is classified under clause (vi) 
        of such section after such date of enactment, payments under 
        section 1886 of such Act for cost reporting periods beginning 
        after the date of the enactment of this Act shall be based upon 
        payment rates in effect for the cost reporting period for such 
        hospital beginning during fiscal year 2001, increased for each 
        succeeding cost reporting period (beginning before the date of 
        the enactment of this Act) by the applicable percentage 
        increase under section 1886(b)(3)(B)(ii) of such Act.
          (5) Clarification of treatment of satellite facilities and 
        remote locations.--A long-stay cancer hospital described in 
        section 1886(d)(1)(B)(vi) of the Social Security Act, as 
        designated under paragraph (1), shall include satellites or 
        remote site locations for such hospital established before or 
        after the date of the enactment of this Act if the provider-
        based requirements under section 413.65 of title 42, Code of 
        Federal Regulations, applicable certification requirements 
        under title XVIII of the Social Security, and such other 
        applicable State licensure and certificate of need requirements 
        are met with respect to such satellites or remote site 
        locations.

SEC. 504. INCREASING THE DSH ADJUSTMENT CAP.

  Section 1886(d)(5)(F)(xiv) of the Social Security Act (42 U.S.C. 
1395ww(d)(5)(F)(xiv)) is amended--
          (1) in subclause (II), by striking ``12 percent'' and 
        inserting ``the percent specified in subclause (III)''; and
          (2) by adding at the end the following new subclause:
  ``(III) The percent specified in this subclause is, in the case of 
discharges occurring--
          ``(a) before October 1, 2007, 12 percent;
          ``(b) during fiscal year 2008, 16 percent;
          ``(c) during fiscal year 2009, 18 percent; and
          ``(d) on or after October 1, 2009, 12 percent.''.

SEC. 505. PPS-EXEMPT CANCER HOSPITALS.

  (a) Authorizing Rebasing for PPS-Exempt Cancer Hospitals.--Section 
1886(b)(3)(F) of the Social Security Act (42 U.S.C. 1395ww(b)(3)(F)) is 
amended by adding at the end the following new clause:
                          ``(iv) In the case of a hospital (or unit 
                        described in the matter following clause (v) of 
                        subsection (d)(1)(B)) that received payment 
                        under this subsection for inpatient hospital 
                        services furnished during cost reporting 
                        periods beginning before October 1, 1999, that 
                        is within a class of hospital described in 
                        clause (iii) (other than subclause (IV), 
                        relating to long-term care hospitals, and that 
                        requests the Secretary (in a form and manner 
                        specified by the Secretary) to effect a 
                        rebasing under this clause for the hospital, 
                        the Secretary may compute the target amount for 
                        the hospital's 12-month cost reporting period 
                        beginning during fiscal year 2008 as an amount 
                        equal to the average described in clause (ii) 
                        but determined as if any reference in such 
                        clause to `the date of the enactment of this 
                        subparagraph' were a reference to `the date of 
                        the enactment of this clause'.''.
  (b) Additional Cancer Hospital Provisions.--
          (1) In general.--Section 1886(d)(1) of the Social Security 
        Act (42 U.S.C. 1395ww(d)(1)) is amended--
                  (A) in subparagraph (B)(v)--
                          (i) by striking ``or'' at the end of 
                        subclause (II); and
                          (ii) by adding at the end the following:
          ``(IV) a hospital that is a nonprofit corporation, the sole 
        member of which is affiliated with a university that has been 
        the recipient of a cancer center support grant from the 
        National Cancer Institute of the National Institutes of Health, 
        and which sole member (or its predecessors or such university) 
        was recognized as a comprehensive cancer center by the National 
        Cancer Institute of the National Institutes of Health as of 
        April 20, 1983, if the hospital's articles of incorporation 
        specify that at least 50 percent of its total discharges have a 
        principal finding of neoplastic disease (as defined in 
        subparagraph (E)) and if, of December 31, 2005, the hospital 
        was licensed for less than 150 acute care beds, or
          ``(V) a hospital (aa) that the Secretary has determined to 
        be, at any time on or before December 31, 2011, a hospital 
        involved extensively in treatment for, or research on, cancer, 
        (bb) that is (as of the date of such determination) a free-
        standing facility, (cc) for which the hospital's predecessor 
        provider entity was University Hospitals of Cleveland with 
        medicare provider number 36-0137;''; and
                  (B) in subparagraph (B), by inserting after clause 
                (vi), as redesignated by section 503(c)(1)(A)(ii)(II), 
                the following new clause:
          ``(vii) a hospital that--
                  ``(I) is located in a State which ranks (according to 
                the National Cancer Institute's statistics published in 
                May of 2005) among the top ten States in the incidence 
                of non-Hodgkins lymphoma, ovarian cancer, thyroid 
                cancer, and cervical cancer and among the top ten 
                States with the highest death rate for breast cancer 
                and uterine cancer;
                  ``(II) is located in a State that as of December 31, 
                2006, had only one center under section 414 of the 
                Public Health Service Act that has been designated by 
                the National Cancer Institute as a comprehensive center 
                currently serving all 21 counties in the most densely 
                populated State in the nation (U.S. Census estimate for 
                2005: 8,717,925 persons; 1,134.5 persons per square 
                mile), serving more than 70,000 patient visits 
                annually;
                  ``(III) as of December 31, 2006, served as the 
                teaching and clinical care, research and training 
                hospital for the Center described in subclause (II), 
                providing significant financial and operational support 
                to such Center;
                  ``(IV) as of December 31, 2006, served as a core and 
                essential element in such Center which conducts more 
                than 130 clinical trial activities, national 
                cooperative group studies, investigator-initiated and 
                peer review studies and has received as of 2005 at 
                least $93,000,000 in research grant awards;
                  ``(V) as of December 31, 2006, can demonstrate that 
                it has been a unique and an integral component of such 
                Center since such Center's inception;
                  ``(VI) as of December 31, 2006, includes dedicated 
                patient care units organized primarily for the 
                treatment of and research on cancer with approximately 
                125 beds, 75 percent of which are dedicated to cancer 
                patients, and contains a radiation oncology department 
                as well as specialized emergency services for oncology 
                patients;
                  ``(VII) as of December 31, 2004, is identified as the 
                focus of the Center's inpatient activities in the 
                Center's application as a NCI-designated comprehensive 
                cancer center and shares the NCI comprehensive cancer 
                designation with the Center; and
                  ``(VIII) as of December 31, 2006, has been recognized 
                with a certificate of approval with commendation by the 
                American College of Surgeons Commission on Cancer;''; 
                and
                  (D) in subparagraph (E)--
                          (i) by striking ``subclauses (II) and (III)'' 
                        and inserting ``subclauses (II), (III), and 
                        (IV)''; and
                          (ii) by inserting ``and subparagraph 
                        (B)(vi)'' after ``subparagraph (B)(v)''.
          (2) Effective dates; payments.--
                  (A) Application to cost reporting periods.--
                          (i) Any classification by reason of section 
                        1886(d)(1)(B)(vi) of the Social Security Act 
                        (42 U.S.C. 1395ww(d)(1)(B)(vi)), as inserted by 
                        paragraph (1), shall apply to cost reporting 
                        periods beginning on or after January 1, 2006.
                          (ii) The provisions of section 
                        1886(d)(1)(B)(v)(IV) of the Social Security 
                        Act, as added by paragraph (1), shall take 
                        effect on January 1, 2008.
                  (B) Base target amount.--Notwithstanding subsection 
                (b)(3)(E) of section 1886 of the Social Security Act 
                (42 U.S.C. 1395ww), in the case of a hospital described 
                in subsection (d)(1)(B)(vi) of such section, as 
                inserted by paragraph (1)--
                          (i) the hospital shall be permitted to 
                        resubmit the 2006 Medicare 2552 cost report 
                        incorporating a cancer hospital sub-provider 
                        number and to apply the Medicare ratio-of-cost-
                        to-charge settlement methodology for outpatient 
                        cancer services; and
                          (ii) the hospital's target amount under 
                        subsection (b)(3)(E)(i) of such section for the 
                        first cost reporting period beginning on or 
                        after January 1, 2006, shall be the allowable 
                        operating costs of inpatient hospital services 
                        (referred to in subclause (I) of such 
                        subsection) for such first cost reporting 
                        period.
                  (C) Deadline for payments.--Any payments owed to a 
                hospital as a result of this subsection for periods 
                occurring before the date of the enactment of this Act 
                shall be made expeditiously, but in no event later than 
                1 year after such date of enactment.
          (3) Application to certain hospitals.--
                  (A) Inapplicability of certain requirements.--The 
                provisions of section 412.22(e) of title 42, Code of 
                Federal Regulations, shall not apply to a hospital 
                described in section 1886(d)(1)(B)(v)(V) of the Social 
                Security Act, as added by paragraph (1).
                  (B) Application to cost reporting periods.--If the 
                Secretary makes a determination that a hospital is 
                described in section 1886(d)(1)(B)(v)(V) of the Social 
                Security Act, as added by paragraph (1), such 
                determination shall apply as of the first cost 
                reporting period beginning on or after the date of such 
                determination.
                  (C) Base period.--Notwithstanding the provisions of 
                section 1886(b)(3)(E) of the Social Security Act (42 
                U.S.C. 1395ww(b)(3)(E)) or any other provision of law, 
                the base cost reporting period for purposes of 
                determining the target amount for any hospital for 
                which a determination described in subparagraph (B) has 
                been made shall be the first full 12-month cost 
                reporting period beginning on or after the date of such 
                determination.
                  (D) Rule.--A hospital described in subclause (V) of 
                section 1886(b)(1)(B)(v) of the Social Security Act, as 
                added by paragraph (1), shall not qualify as a hospital 
                described in such subclause for any cost reporting 
                period in which less than 50 percent of its total 
                discharges have a principal finding of neoplastic 
                disease. With respect to the first cost reporting 
                period for which a determination described in 
                subparagraph (B) has been made, the Secretary shall 
                accept a self-certification by the hospital, which 
                shall be applicable to such first cost reporting 
                period, that the hospital intends to have total 
                discharges during such first cost reporting period of 
                which 50 percent or more have a principal finding of 
                neoplastic disease.
  (c) MedPAC Report on PPS-Exempt Cancer Hospitals.--Not later than 
March 1, 2009, the Medicare Payment Advisory Commission (established 
under section 1805 of the Social Security Act (42 U.S.C. 1395b-6)) 
shall submit to the Secretary and Congress a report evaluating the 
following:
          (1) Measures of payment adequacy and Medicare margins for 
        PPS-exempt cancer hospitals, as established under section 
        1886(d)(1)(B)(v) of the Social Security Act (42 U.S.C. 
        1395ww(d)(1)(B)(v)).
          (2) To the extent a PPS-exempt cancer hospital was previously 
        affiliated with another hospital, the margins of the PPS-exempt 
        hospital and the other hospital as separate entities and the 
        margins of such hospitals that existed when the hospitals were 
        previously affiliated.
          (3) Payment adequacy for cancer discharges under the Medicare 
        inpatient hospital prospective payment system.

SEC. 506. SKILLED NURSING FACILITY PAYMENT UPDATE.

  (a) In General.--Section 1888(e)(4)(E)(ii) of the Social Security Act 
(42 U.S.C. 1395yy(e)(4)(E)(ii)) is amended--
          (1) in subclause (III), by striking ``and'' at the end;
          (2) by redesignating subclause (IV) as subclause (VI); and
          (3) by inserting after subclause (III) the following new 
        subclauses:
                                  ``(IV) for each of fiscal years 2004, 
                                2005, 2006, and 2007, the rate computed 
                                for the previous fiscal year increased 
                                by the skilled nursing facility market 
                                basket percentage change for the fiscal 
                                year involved;
                                  ``(V) for fiscal year 2008, the rate 
                                computed for the previous fiscal year; 
                                and''.
  (b) Delayed Effective Date.--Section 1888(e)(4)(E)(ii)(V) of the 
Social Security Act, as inserted by subsection (a)(3), shall not apply 
to payment for days before January 1, 2008.

SEC. 507. REVOCATION OF UNIQUE DEEMING AUTHORITY OF THE JOINT 
                    COMMISSION FOR THE ACCREDITATION OF HEALTHCARE 
                    ORGANIZATIONS.

  (a) Revocation.--Section 1865 of the Social Security Act (42 U.S.C. 
1395bb) is amended--
          (1) by striking subsection (a); and
          (2) by redesignating subsections (b), (c), (d), and (e) as 
        subsections (a), (b), (c), and (d), respectively.
  (b) Conforming Amendments.--(1) Such section is further amended--
                  (A) in subsection (a)(1), as so redesignated, by 
                striking ``In addition, if'' and inserting ``If'';
                  (B) in subsection (b), as so redesignated--
                          (i) by striking ``released to him by the 
                        Joint Commission on Accreditation of 
                        Hospitals,'' and inserting ``released to the 
                        Secretary by''; and
                          (ii) by striking the comma after 
                        ``Association'';
                  (C) in subsection (c), as so redesignated, by 
                striking ``pursuant to subsection (a) or (b)(1)'' and 
                inserting ``pursuant to subsection (a)(1)''; and
                  (D) in subsection (d), as so redesignated, by 
                striking ``pursuant to subsection (a) or (b)(1)'' and 
                inserting ``pursuant to subsection (a)(1)''.
          (2) Section 1861(e) of such Act (42 U.S.C. 1395x(e)) is 
        amended in the fourth sentence by striking ``and (ii) is 
        accredited by the Joint Commission on Accreditation of 
        Hospitals, or is accredited by or approved by a program of the 
        country in which such institution is located if the Secretary 
        finds the accreditation or comparable approval standards of 
        such program to be essentially equivalent to those of the Joint 
        Commission on Accreditation of Hospitals.'' and inserting ``and 
        (ii) is accredited by a national accreditation body recognized 
        by the Secretary under section 1865(a), or is accredited by or 
        approved by a program of the country in which such institution 
        is located if the Secretary finds the accreditation or 
        comparable approval standards of such program to be essentially 
        equivalent to those of such a national accreditation body.''.
          (3) Section 1864(c) of such Act (42 U.S.C. 1395aa(c)) is 
        amended by striking ``pursuant to subsection (a) or (b)(1) of 
        section 1865'' and inserting ``pursuant to section 
        1865(a)(1)''.
          (4) Section 1875(b) of such Act (42 U.S.C. 1395ll(b)) is 
        amended by striking ``the Joint Commission on Accreditation of 
        Hospitals,'' and inserting ``national accreditation bodies 
        under section 1865(a)''.
          (5) Section 1834(a)(20)(B) of such Act (42 U.S.C. 
        1395m(a)(20)(B)) is amended by striking ``section 1865(b)'' and 
        inserting ``section 1865(a)''.
          (6) Section 1852(e)(4)(C) of such Act (42 U.S.C. 1395w-
        22(e)(4)(C)) is amended by striking ``section 1865(b)(2)'' and 
        inserting ``section 1865(a)(2)''.
  (c) Authority to Recognize JCAHO as a National Accreditation Body.--
The Secretary of Health and Human Services may recognize the Joint 
Commission on Accreditation of Healthcare Organizations as a national 
accreditation body under section 1865 of the Social Security Act (42 
U.S.C. 1395bb), as amended by this section, upon such terms and 
conditions, and upon submission of such information, as the Secretary 
may require.
  (d) Effective Date; Transition Rule.--(1) Subject to paragraph (2), 
the amendments made by this section shall apply with respect to 
accreditations of hospitals granted on or after the date that is 18 
months after the date of the enactment of this Act.
  (2) For purposes of title XVIII of the Social Security Act (42 U.S.C. 
1395 et seq.), the amendments made by this section shall not effect the 
accreditation of a hospital by the Joint Commission on Accreditation of 
Healthcare Organizations, or under accreditation or comparable approval 
standards found to be essentially equivalent to accreditation or 
approval standards of the Joint Commission on Accreditation of 
Healthcare Organizations, for the period of time applicable under such 
accreditation.

SEC. 508. TREATMENT OF MEDICARE HOSPITAL RECLASSIFICATIONS.

  (a) Extending Certain Medicare Hospital Wage Index Reclassifications 
Through Fiscal Year 2009.--
          (1) In general.--Section 106(a) of the Medicare Improvements 
        and Extension Act of 2006 (division B of Public Law 109-432) is 
        amended by striking ``September 30, 2007'' and inserting 
        ``September 30, 2009''.
          (2) Special exception reclassifications.--The Secretary of 
        Health and Human Services shall extend for discharges occurring 
        through September 30, 2009, the special exception 
        reclassification made under the authority of section 
        1886(d)(5)(I)(i) of the Social Security Act (42 U.S.C. 
        1395ww(d)(5)(I)(i)) and contained in the final rule promulgated 
        by the Secretary in the Federal Register on August 11, 2004 (69 
        Fed. Reg. 49105, 49107).
  (b) Disregarding Section 508 Hospital Reclassifications for Purposes 
of Group Reclassifications.--Section 508 of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173, 
42 U.S.C. 1395ww note) is amended by adding at the end the following 
new subsection:
  ``(g) Disregarding Hospital Reclassifications for Purposes of Group 
Reclassifications.--For purposes of the reclassification of a group of 
hospitals in a geographic area under section 1886(d), a hospital 
reclassified under this section (including any such reclassification 
which is extended under section 106(a) of the Medicare Improvements and 
Extension Act of 2006) shall not be taken into account and shall not 
prevent the other hospitals in such area from establishing such a group 
for such purpose.''.
  (c) Application of Medicare Rural Minimum Hospital Wage Index of Non-
Location States to Hospitals Reclassified to Urban Areas in Such 
States.--Section 1886(d)(8)(C) of the Social Security Act (42 U.S.C. 
1395ww(d)(8)(C)) is amended--
          (1) by redesignating clause (v) as clause (vi); and
          (2) by inserting after clause (iv) the following new clause:
  ``(v) Notwithstanding the previous provisions of this subparagraph, 
in the case that the application of subparagraph (B) or a decision of 
the Medicare Geographic Classification Review Board or the Secretary 
under paragraph (10) results in the redesignation of a rural hospital 
that is classified as a rural referral center under paragraph (5)(C) 
and sole community hospital under paragraph (5)(D)(iii) and that has at 
least 250 beds to an urban area that is in a non-location State, for 
which the combined average hourly wage of all hospitals located in such 
area is less than the combined average hourly wage of all hospitals 
located in the rural area of such State, and which was not reclassified 
under section 508 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, the wage index applicable to such hospital 
may not be less than the area wage index otherwise applicable to a 
hospital located in the rural area in the non-location State (or, if 
the non-location State has no rural area, the minimum wage index that 
the Secretary establishes for such State). For purposes of this clause, 
the term `non-location State' means, with respect to a hospital, a 
State other than the State in which the hospital is located.''.
  (d) Application of Floor on Area Wage Index in Case of Reclassified 
Hospitals.--
          (1) In general.--Section 4410 of the Balanced Budget Act of 
        1997 (Public Law 105-33) is amended by adding at the end the 
        following new subsection:
  ``(d) Application to Reclassified Hospitals.--In the case of a 
hospital that is reclassified based on wages under paragraph (8) or 
(10) of section 1886(d) of the Social Security Act into an area the 
area wage index for which is increased under subsection (a), such 
increased area wage index shall also apply to such hospital.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to payments for discharges occurring on or after 
        October 1, 2008.
  (e) Other Hospital Reclassification Provisions.--Notwithstanding any 
other provision of law--
          (1) In the case of a subsection (d) hospital (as defined for 
        purposes of section 1886 of the Social Security Act (42 U.S.C. 
        1395ww)) located in Putnam County, Tennessee with respect to 
        which a reclassification of its wage index for purposes of such 
        section would (but for this subsection) expire on September 30, 
        2007, such reclassification of such hospital shall be extended 
        through September 30, 2008.
          (2) For purposes of making payments under section 1886(d) of 
        the Social Security Act (42 U.S.C. 1395ww(d)), the Secretary of 
        Health and Human Services shall classify any hospital located 
        in Orange County, New York that was reclassified under the 
        authority of section 508 of the the Medicare Prescription Drug, 
        Improvement and Modernization Act of 2003 (Public Law 108-173) 
        as being located in the New York-White Plains-Wayne, NY-NJ Core 
        Based Statistical Area. Any reclassification under this 
        subsection shall be treated as a reclassification under section 
        1886(d)(8) of such Act.
          (3) For purposes of making payments under section 1886(d) of 
        the Social Security Act (42 U.S.C. 1395ww(d)), the large urban 
        area of New York, New York is deemed to include hospitals, 
        required by State law enacted prior to June 30, 2007, to join 
        under a single unified governance structure if--
                  (A) such hospitals are located in a city with a 
                population of no less than 20,000 and no than 30,000; 
                and
                  (B) such hospitals are less than \3/4\ miles apart.
          (4) For purposes of making payments under section 1886(d) of 
        the Social Security Act (42 U.S.C. 1395ww(d)) the large urban 
        area of Buffalo-Niagara Falls, New York is deemed to include 
        Chautauqua County, New York. Notwithstanding paragraph (6), in 
        no case shall there be a reduction in the hospital wage index 
        for Erie County, New York, or any adjoining county, as a result 
        of the application of this section (other than as a result of a 
        general reduction required to carry out paragraph (8)(D) of 
        that section).
          (5) For purposes of making payments under section 1886(d) of 
        the Social Security Act (42 U.S.C. 1395ww(d)) a hospital shall 
        be reclassified into the New York-White Plains-Wayne, New York-
        New Jersey core based statistical area (CBSA code 35644) if the 
        hospital is a subsection (d) hospital (as defined in section 
        1886(d)(1)(B) of the Social Security Act (42 U.S.C. 
        1395ww(d)(1)(B)) that--
                  (A) is licensed by the State in which it is located 
                as a specialty hospital;
                  (B) specializes in the treatment of cardiac, 
                vascular, and pulmonary diseases;
                  (C) provides at least 100 beds; and
                  (D) is located in Burlington County, New Jersey.
          (6)(A) Any hospital described in subparagraph (B) shall be 
        treated as located in the core based statistical area described 
        in subparagraph (C) for purposes of making payments under 
        section 1886(d) of the Social Security Act (42 U.S.C. 
        1395ww(d)).
          (B) A hospital described in this subparagraph is any hospital 
        that--
                  (i) is located in a core based statistical area 
                (CBSA) that--
                          (I) had a population (as reported in the 
                        decennial census for the year 2000) of at least 
                        500,000, but not more than 750,000;
                          (II) had a population (as reported in such 
                        census) that was at least 10,000 below the 
                        population for the area as reported in the 
                        previous decennial census; and
                          (III) has as of January 1, 2006, at least 5, 
                        and no more than 7, subsection (d) hospitals; 
                        and
                  (ii) demonstrates that its average hourly wage amount 
                (as determined consistent with section 
                1886(d)(10)(D)(vi) of the Social Security Act is not 
                less than 96 percent of such average hourly wage amount 
                rate for all subsection (d) hospitals located in same 
                core base statistical area of the hospital.
          (C) The area described in this subparagraph, with respect to 
        a hospital described in subparagraph (B), is the core based 
        statistical area that--
                  (i) is within the same State as, and is adjacent to, 
                the core based statistical area in which the hospital 
                is located; and
                  (ii) has an average hourly wage amount (described in 
                subparagraph (B)(ii)) that is closest to (but does not 
                exceed) such average hourly wage amount of the 
                hospital.
          (7) For purposes of making payments under section 1886(d) of 
        the Social Security Act (42 U.S.C. 1395ww(d)), the large urban 
        area of Hartford, Connecticut is deemed to include Albany, 
        Schenectady, and Rensselaer Counties, New York.
          (8) For purposes of the previous provisions of this 
        subsection (other than paragraph (1))--
                  (A) any reclassification effected under such 
                provisions shall be treated as a decision of the 
                Medicare Geographic Classification Review Board under 
                section 1886(d) of the Social Security Act and subject 
                to budget neutrality under paragraph (8)(D) of such 
                section.; and
                  (B) such provisions shall only apply to discharges 
                occurring on or after October 1, 2008, during the 3-
                year reclassification period beginning on such date.

SEC. 509. MEDICARE CRITICAL ACCESS HOSPITAL DESIGNATIONS.

  (a) In General.--
          (1) Section 405(h) of the Medicare Prescription Drug, 
        Improvement, and Modernization Act of 2003 (Public Law 108-173; 
        117 Stat. 2269) is amended by adding at the end the following 
        new paragraph:
          ``(3) Exception.--
                  ``(A) In general.--The amendment made by paragraph 
                (1) shall not apply to the certification by the State 
                of Minnesota on or after January 1, 2006, under section 
                1820(c)(2)(B)(i)(II) of the Social Security Act (42 
                U.S.C. 1395i-4(c)(2)(B)(i)(II)) of one hospital that 
                meets the criteria described in subparagraph (B) and is 
                located in Cass County, Minnesota, as a necessary 
                provider of health care services to residents in the 
                area of the hospital.
                  ``(B) Criteria described.--A hospital meets the 
                criteria described in this subparagraph if the hospital
                          ``(i) has been granted an exception by the 
                        State to an otherwise applicable statutory 
                        restriction on hospital construction or 
                        licensing prior to the date of enactment of 
                        this subparagraph; and
                          ``(ii) is located on property which the State 
                        has approved for conveyance to a county within 
                        the State prior to such date of enactment.''.
          (2) Section 1820(c)(2)(B)(i)(I) of the Social Security Act 
        (42 U.S.C. 1395i-4(c)(2)(B)(i)(I)) is amended by striking 
        ``or,'' and inserting ``or, in the case of a hospital that is 
        located in the county seat of Butler, Alabama, a 32-mile drive, 
        or,''.
  (b) Effective Date.--The amendment made by subsection (a)(2) shall 
apply to cost reporting periods beginning on or after the date of the 
enactment of this Act.

         TITLE VI--OTHER PROVISIONS RELATING TO MEDICARE PART B

             Subtitle A--Payment and Coverage Improvements

SEC. 601. PAYMENT FOR THERAPY SERVICES.

  (a) Extension of Exceptions Process for Medicare Therapy Caps.--
Section 1833(g)(5) of the Social Security Act (42 U.S.C. 1395l(g)(5)), 
as amended by section 201 of the Medicare Improvements and Extension 
Act of 2006 (division B of Public Law 109-432), is amended by striking 
``2007'' and inserting ``2009''.
  (b) Study and Report.--
          (1) Study.--The Secretary of Health and Human Services, in 
        consultation with appropriate stakeholders, shall conduct a 
        study on refined and alternative payment systems to the 
        Medicare payment cap under section 1833(g) of the Social 
        Security Act (42 U.S.C. 1395l(g)) for physical therapy services 
        and speech-language pathology services, described in paragraph 
        (1) of such section and occupational therapy services described 
        in paragraph (3) of such section. Such study shall consider, 
        with respect to payment amounts under Medicare, the following:
                  (A) The creation of multiple payment caps for such 
                services to better reflect costs associated with 
                specific health conditions.
                  (B) The development of a prospective payment system, 
                including an episode-based system of payments, for such 
                services.
                  (C) The data needed for the development of a system 
                of multiple payment caps (or an alternative payment 
                methodology) for such services and the availability of 
                such data.
          (2) Report.--Not later than January 1, 2009, the Secretary 
        shall submit to Congress a report on the study conducted under 
        paragraph (1).

SEC. 602. MEDICARE SEPARATE DEFINITION OF OUTPATIENT SPEECH-LANGUAGE 
                    PATHOLOGY SERVICES.

  (a) In General.--Section 1861(ll) of the Social Security Act (42 
U.S.C. 1395x(ll)) is amended--
          (1) by redesignating paragraphs (2) and (3) as paragraphs (3) 
        and (4), respectively; and
          (2) by inserting after paragraph (1) the following new 
        paragraph:
  ``(2) The term `outpatient speech-language pathology services' has 
the meaning given the term `outpatient physical therapy services' in 
subsection (p), except that in applying such subsection--
          ``(A) `speech-language pathology' shall be substituted for 
        `physical therapy' each place it appears; and
          ``(B) `speech-language pathologist' shall be substituted for 
        `physical therapist' each place it appears.''.
  (b) Conforming Amendments.--
          (1) Section 1832(a)(2)(C) of the Social Security Act (42 
        U.S.C. 1395k(a)(2)(C)) is amended--
                  (A) by striking ``and outpatient'' and inserting ``, 
                outpatient''; and
                  (B) by inserting before the semicolon at the end the 
                following: ``, and outpatient speech-language pathology 
                services (other than services to which the second 
                sentence of section 1861(p) applies through the 
                application of section 1861(ll)(2))''.
          (2) Subparagraphs (A) and (B) of section 1833(a)(8) of such 
        Act (42 U.S.C. 1395l(a)(8)) are each amended by striking 
        ``(which includes outpatient speech-language pathology 
        services)'' and inserting ``, outpatient speech-language 
        pathology services,''.
          (3) Section 1833(g)(1) of such Act (42 U.S.C. 1395l(g)(1)) is 
        amended--
                  (A) by inserting ``and speech-language pathology 
                services of the type described in such section through 
                the application of section 1861(ll)(2)'' after 
                ``1861(p)''; and
                  (B) by inserting ``and speech-language pathology 
                services'' after ``and physical therapy services''.
          (4) The second sentence of section 1835(a) of such Act (42 
        U.S.C. 1395n(a)) is amended--
                  (A) by striking ``section 1861(g)'' and inserting 
                ``subsection (g) or (ll)(2) of section 1861'' each 
                place it appears; and
                  (B) by inserting ``or outpatient speech-language 
                pathology services, respectively'' after ``occupational 
                therapy services''.
          (5) Section 1861(p) of such Act (42 U.S.C. 1395x(p)) is 
        amended by striking the fourth sentence.
          (6) Section 1861(s)(2)(D) of such Act (42 U.S.C. 
        1395x(s)(2)(D)) is amended by inserting ``, outpatient speech-
        language pathology services,'' after ``physical therapy 
        services''.
          (7) Section 1862(a)(20) of such Act (42 U.S.C. 1395y(a)(20)) 
        is amended--
                  (A) by striking ``outpatient occupational therapy 
                services or outpatient physical therapy services'' and 
                inserting ``outpatient physical therapy services, 
                outpatient speech-language pathology services, or 
                outpatient occupational therapy services''; and
                  (B) by striking ``section 1861(g)'' and inserting 
                ``subsection (g) or (ll)(2) of section 1861''.
          (8) Section 1866(e)(1) of such Act (42 U.S.C. 1395cc(e)(1)) 
        is amended--
                  (A) by striking ``section 1861(g)'' and inserting 
                ``subsection (g) or (ll)(2) of section 1861'' the first 
                two places it appears;
                  (B) by striking ``defined) or'' and inserting 
                ``defined),''; and
                  (C) by inserting before the semicolon at the end the 
                following: ``, or (through the operation of section 
                1861(ll)(2)) with respect to the furnishing of 
                outpatient speech-language pathology''.
  (c) Effective Date.--The amendments made by this section shall apply 
to services furnished on or after January 1, 2008.
  (d) Construction.--Nothing in this section shall be construed to 
affect existing regulations and policies of the Centers for Medicare & 
Medicaid Services that require physician oversight of care as a 
condition of payment for speech-language pathology services under part 
B of the medicare program.

SEC. 603. INCREASED REIMBURSEMENT RATE FOR CERTIFIED NURSE-MIDWIVES.

  (a) In General.--Section 1833(a)(1)(K) of the Social Security Act (42 
U.S.C.1395l(a)(1)(K)) is amended by striking ``(but in no event'' and 
all that follows through ``performed by a physician)''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to services furnished on or after April 1, 2008.

SEC. 604. ADJUSTMENT IN OUTPATIENT HOSPITAL FEE SCHEDULE INCREASE 
                    FACTOR.

  The first sentence of section 1833(t)(3)(C)(iv) of the Social 
Security Act (42 U.S.C. 1395l(t)(3)(C)(iv)) is amended by inserting 
before the period at the end the following: ``and reduced by 0.25 
percentage point for such factor for such services furnished in 2008''.

SEC. 605. EXCEPTION TO 60-DAY LIMIT ON MEDICARE SUBSTITUTE BILLING 
                    ARRANGEMENTS IN CASE OF PHYSICIANS ORDERED TO 
                    ACTIVE DUTY IN THE ARMED FORCES.

  (a) In General.--Section 1842(b)(6)(D)(iii) of the Social Security 
Act (42 U.S.C. 1395u(b)(6)(D)(iii)) is amended by inserting after ``of 
more than 60 days'' the following: ``or are provided over a longer 
continuous period during all of which the first physician has been 
called or ordered to active duty as a member of a reserve component of 
the Armed Forces''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to services furnished on or after the date of the enactment of this 
section.

SEC. 606. EXCLUDING CLINICAL SOCIAL WORKER SERVICES FROM COVERAGE UNDER 
                    THE MEDICARE SKILLED NURSING FACILITY PROSPECTIVE 
                    PAYMENT SYSTEM AND CONSOLIDATED PAYMENT.

  (a) In General.--Section 1888(e)(2)(A)(ii) of the Social Security Act 
(42 U.S.C. 1395yy(e)(2)(A)(ii)) is amended by inserting ``clinical 
social worker services,'' after ``qualified psychologist services,''.
  (b) Conforming Amendment.--Section 1861(hh)(2) of the Social Security 
Act (42 U.S.C. 1395x(hh)(2)) is amended by striking ``and other than 
services furnished to an inpatient of a skilled nursing facility which 
the facility is required to provide as a requirement for 
participation''.
  (c) Effective Date.--The amendments made by this section shall apply 
to items and services furnished on or after January 1, 2008.

SEC. 607. COVERAGE OF MARRIAGE AND FAMILY THERAPIST SERVICES AND MENTAL 
                    HEALTH COUNSELOR SERVICES.

  (a) Coverage of Marriage and Family Therapist Services.--
          (1) Coverage of services.--Section 1861(s)(2) of the Social 
        Security Act (42 U.S.C. 1395x(s)(2)), as amended by section 
        201(a)(1), is amended--
                  (A) in subparagraph (AA), by striking ``and'' at the 
                end;
                  (B) in subparagraph (BB), by adding ``and'' at the 
                end; and
                  (C) by adding at the end the following new 
                subparagraph:
          ``(CC) marriage and family therapist services (as defined in 
        subsection (eee));''.
          (2) Definition.--Section 1861 of the Social Security Act (42 
        U.S.C. 1395x), as amended by sections 201(a)(2) and 503(b)(1), 
        is amended by adding at the end the following new subsection:

                ``Marriage and Family Therapist Services

  ``(eee)(1) The term `marriage and family therapist services' means 
services performed by a marriage and family therapist (as defined in 
paragraph (2)) for the diagnosis and treatment of mental illnesses, 
which the marriage and family therapist is legally authorized to 
perform under State law (or the State regulatory mechanism provided by 
State law) of the State in which such services are performed, provided 
such services are covered under this title, as would otherwise be 
covered if furnished by a physician or as incident to a physician's 
professional service, but only if no facility or other provider charges 
or is paid any amounts with respect to the furnishing of such services.
  ``(2) The term `marriage and family therapist' means an individual 
who--
          ``(A) possesses a master's or doctoral degree which qualifies 
        for licensure or certification as a marriage and family 
        therapist pursuant to State law;
          ``(B) after obtaining such degree has performed at least 2 
        years of clinical supervised experience in marriage and family 
        therapy; and
          ``(C) is licensed or certified as a marriage and family 
        therapist in the State in which marriage and family therapist 
        services are performed.''.
          (3) Provision for payment under part b.--Section 
        1832(a)(2)(B) of the Social Security Act (42 U.S.C. 
        1395k(a)(2)(B)) is amended by adding at the end the following 
        new clause:
                          ``(v) marriage and family therapist 
                        services;''.
          (4) Amount of payment.--
                  (A) In general.--Section 1833(a)(1) of the Social 
                Security Act (42 U.S.C. 1395l(a)(1)), as amended by 
                section 201(b)(1), is amended--
                          (i) by striking ``and'' before ``(W)''; and
                          (ii) by inserting before the semicolon at the 
                        end the following: ``, and (X) with respect to 
                        marriage and family therapist services under 
                        section 1861(s)(2)(CC), the amounts paid shall 
                        be 80 percent of the lesser of (i) the actual 
                        charge for the services or (ii) 75 percent of 
                        the amount determined for payment of a 
                        psychologist under subparagraph (L)''.
                  (B) Development of criteria with respect to 
                consultation with a physician.--The Secretary of Health 
                and Human Services shall, taking into consideration 
                concerns for patient confidentiality, develop criteria 
                with respect to payment for marriage and family 
                therapist services for which payment may be made 
                directly to the marriage and family therapist under 
                part B of title XVIII of the Social Security Act (42 
                U.S.C. 1395j et seq.) under which such a therapist must 
                agree to consult with a patient's attending or primary 
                care physician in accordance with such criteria.
          (5) Exclusion of marriage and family therapist services from 
        skilled nursing facility prospective payment system.--Section 
        1888(e)(2)(A)(ii) of the Social Security Act (42 U.S.C. 
        1395yy(e)(2)(A)(ii)), is amended by inserting ``marriage and 
        family therapist services (as defined in subsection 
        (eee)(1)),'' after ``qualified psychologist services,''.
          (6) Coverage of marriage and family therapist services 
        provided in rural health clinics and federally qualified health 
        centers.--Section 1861(aa)(1)(B) of the Social Security Act (42 
        U.S.C. 1395x(aa)(1)(B)) is amended by striking ``or by a 
        clinical social worker (as defined in subsection (hh)(1)),'' 
        and inserting ``, by a clinical social worker (as defined in 
        subsection (hh)(1)), or by a marriage and family therapist (as 
        defined in subsection (eee)(2)),''.
          (7) Inclusion of marriage and family therapists as 
        practitioners for assignment of claims.--Section 1842(b)(18)(C) 
        of the Social Security Act (42 U.S.C. 1395u(b)(18)(C)) is 
        amended by adding at the end the following new clause:
          ``(vii) A marriage and family therapist (as defined in 
        section 1861(eee)(2)).''.
  (b) Coverage of Mental Health Counselor Services.--
          (1) Coverage of services.--Section 1861(s)(2) of the Social 
        Security Act (42 U.S.C. 1395x(s)(2)), as amended by subsection 
        (a)(1), is further amended--
                  (A) in subparagraph (BB), by striking ``and'' at the 
                end;
                  (B) in subparagraph (CC), by inserting ``and'' at the 
                end; and
                  (C) by adding at the end the following new 
                subparagraph:
          ``(DD) mental health counselor services (as defined in 
        subsection (fff)(2));''.
          (2) Definition.--Section 1861 of the Social Security Act (42 
        U.S.C. 1395x), as amended by sections 201(a)(2) and 503(b)(1) 
        and subsection (a)(2), is amended by adding at the end the 
        following new subsection:

      ``Mental Health Counselor; Mental Health Counselor Services

  ``(fff)(1) The term `mental health counselor' means an individual 
who--
          ``(A) possesses a master's or doctor's degree which qualifies 
        the individual for licensure or certification for the practice 
        of mental health counseling in the State in which the services 
        are performed;
          ``(B) after obtaining such a degree has performed at least 2 
        years of supervised mental health counselor practice; and
          ``(C) is licensed or certified as a mental health counselor 
        or professional counselor by the State in which the services 
        are performed.
  ``(2) The term `mental health counselor services' means services 
performed by a mental health counselor (as defined in paragraph (1)) 
for the diagnosis and treatment of mental illnesses which the mental 
health counselor is legally authorized to perform under State law (or 
the State regulatory mechanism provided by the State law) of the State 
in which such services are performed, provided such services are 
covered under this title, as would otherwise be covered if furnished by 
a physician or as incident to a physician's professional service, but 
only if no facility or other provider charges or is paid any amounts 
with respect to the furnishing of such services.''.
          (3) Provision for payment under part b.--Section 
        1832(a)(2)(B) of the Social Security Act (42 U.S.C. 
        1395k(a)(2)(B)), as amended by subsection (a)(3), is further 
        amended by adding at the end the following new clause:
                          ``(vi) mental health counselor services;''.
          (4) Amount of payment.--
                  (A) In general.--Section 1833(a)(1) of the Social 
                Security Act (42 U.S.C. 1395l(a)(1)), as amended by 
                subsection (a)(4), is further amended--
                          (i) by striking ``and'' before ``(X)''; and
                          (ii) by inserting before the semicolon at the 
                        end the following: ``, and (Y) with respect to 
                        mental health counselor services under section 
                        1861(s)(2)(DD), the amounts paid shall be 80 
                        percent of the lesser of (i) the actual charge 
                        for the services or (ii) 75 percent of the 
                        amount determined for payment of a psychologist 
                        under subparagraph (L)''.
                  (B) Development of criteria with respect to 
                consultation with a physician.--The Secretary of Health 
                and Human Services shall, taking into consideration 
                concerns for patient confidentiality, develop criteria 
                with respect to payment for mental health counselor 
                services for which payment may be made directly to the 
                mental health counselor under part B of title XVIII of 
                the Social Security Act (42 U.S.C. 1395j et seq.) under 
                which such a counselor must agree to consult with a 
                patient's attending or primary care physician in 
                accordance with such criteria.
          (5) Exclusion of mental health counselor services from 
        skilled nursing facility prospective payment system.--Section 
        1888(e)(2)(A)(ii) of the Social Security Act (42 U.S.C. 
        1395yy(e)(2)(A)(ii)), as amended by subsection (a)(5), is 
        amended by inserting ``mental health counselor services (as 
        defined in section 1861(ddd)(2)),'' after ``marriage and family 
        therapist services (as defined in subsection (eee)(1)),''.
          (6) Coverage of mental health counselor services provided in 
        rural health clinics and federally qualified health centers.--
        Section 1861(aa)(1)(B) of the Social Security Act (42 U.S.C. 
        1395x(aa)(1)(B)), as amended by subsection (a)(6), is amended 
        by striking ``or by a marriage and family therapist (as defined 
        in subsection (eee)(2)),'' and inserting ``by a marriage and 
        family therapist (as defined in subsection (eee)(2)), or a 
        mental health counselor (as defined in subsection (fff)(1)),''.
          (7) Inclusion of mental health counselors as practitioners 
        for assignment of claims.--Section 1842(b)(18)(C) of the Social 
        Security Act (42 U.S.C. 1395u(b)(18)(C)), as amended by 
        subsection (a)(7), is amended by adding at the end the 
        following new clause:
          ``(viii) A mental health counselor (as defined in section 
        1861(fff)(1)).''.
  (c) Effective Date.--The amendments made by this section shall apply 
to items and services furnished on or after January 1, 2008.

SEC. 608. RENTAL AND PURCHASE OF POWER-DRIVEN WHEELCHAIRS.

  (a) In General.--Section 1834(a)(7) of the Social Security Act (42 
U.S.C. 1395m(a)(7)) is amended--
          (1) in subparagraph (A)--
                  (A) in clause (i)(I), by striking ``Except as 
                provided in clause (iii), payment'' and inserting 
                ``Payment'';
                  (B) by striking clause (iii); and
                  (C) in clause (iv)--
                          (i) by redesignating such clause as clause 
                        (iii); and
                          (ii) by striking ``or in the case of a power-
                        driven wheelchair for which a purchase 
                        agreement has been entered into under clause 
                        (iii)''; and
          (2) in subparagraph (C)(ii)(II), by striking ``or (A)(iii)''.
  (b) Effective Date.--
          (1) In general.--Subject to paragraph (1), the amendments 
        made by subsection (a) shall take effect on January 1, 2008, 
        and shall apply to power-driven wheelchairs furnished on or 
        after such date.
          (2) Application to competitive acquisition.--The amendments 
        made by subsection (a) shall not apply to contracts entered 
        into under section 1847 of the Social Security Act (42 U.S.C. 
        1395w-3) pursuant to a bid submitted under such section before 
        July 21, 2007.

SEC. 609. RENTAL AND PURCHASE OF OXYGEN EQUIPMENT.

  (a) In General.--Section 1834(a)(5)(F) of the Social Security Act (42 
U.S.C. 1395m(a)(5)(F)) is amended--
          (1) in clause (i)--
                  (A) by striking ``Payment'' and inserting ``Subject 
                to clause (iii), payment''; and
                  (B) by striking ``36 months'' and inserting ``18 
                months'';
          (2) in clause (ii)(I), by striking ``36th continuous month'' 
        and inserting ``18th continuous month''; and
          (3) by adding at the end the following new clause:
                          ``(iii) Special rule for oxygen generating 
                        portable equipment.--In the case of oxygen 
                        generating portable equipment referred to in 
                        the final rule published in the Federal 
                        Register on November 9, 2006 (71 Fed. Reg. 
                        65897-65899), in applying clauses (i) and 
                        (ii)(I) each reference to `18 months' is deemed 
                        a reference to `36 months'.''.
  (b) Effective Date.--
          (1) In general.--Subject to paragraph (3), the amendments 
        made by subsection (a) shall apply to oxygen equipment 
        furnished on or after January 1, 2008.
          (2) Transition.--In the case of an individual receiving 
        oxygen equipment on December 31, 2007, for which payment is 
        made under section 1834(a) of the Social Security Act (42 
        U.S.C. 1395m(a)), the 18-month period described in paragraph 
        (5)(F)(i) of such section, as amended by subsection (a), shall 
        begin on January 1, 2008, but in no case shall the rental 
        period for such equipment exceed 36 months.
          (3) Application to competitive acquisition.--The amendments 
        made by subsection (a) shall not apply to contracts entered 
        into under section 1847 of the Social Security Act (42 U.S.C. 
        1395w-3) pursuant to a bid submitted under such section before 
        July 21, 2007.
  (c) Study and Report.--
          (1) Study.--The Secretary of Health and Human Services shall 
        conduct a study to examine the service component and the 
        equipment component of the provision of oxygen to Medicare 
        beneficiaries. The study shall assess--
                  (A) the type of services provided and variation 
                across suppliers in providing such services;
                  (B) whether the services are medically necessary or 
                affect patient outcomes;
                  (C) whether the Medicare program pays appropriately 
                for equipment in connection with the provision of 
                oxygen;
                  (D) whether such program pays appropriately for 
                necessary services;
                  (E) whether such payment in connection with the 
                provision of oxygen should be divided between equipment 
                and services, and if so, how; and
                  (F) how such payment rate compares to a competitively 
                bid rate.
          (2) Report.--Not later than 18 months after the date of the 
        enactment of this Act, the Secretary of Health and Human 
        Services shall submit to Congress a report on the study 
        conducted under paragraph (1).

SEC. 610. ADJUSTMENT FOR MEDICARE MENTAL HEALTH SERVICES.

  (a) In General.--For purposes of payment for services furnished under 
the physician fee schedule under section 1848 of the Social Security 
Act (42 U.S.C. 1395w-4) during the applicable period, the Secretary of 
Health and Human Services shall increase the amount otherwise payable 
for applicable services by 5 percent.
  (b) Definitions.--For purposes of subsection (a):
          (1) Applicable period.--The term ``applicable period'' means 
        the period beginning on January 1, 2008, and ending on December 
        31 of the year before the effective date of the first review 
        after January 1, 2008, of work relative value units conducted 
        under section 1848(c)(2)(B)(i) of the Social Security Act.
          (2) Applicable services.--The term ``applicable services'' 
        means procedure codes for services--
                  (A) in the categories of psychiatric therapeutic 
                procedures furnished in office or other outpatient 
                facility settings, or inpatient hospital, partial 
                hospital or residential care facility settings; and
                  (B) which cover insight oriented, behavior modifying, 
                or supportive psychotherapy and interactive 
                psychotherapy services in the Healthcare Common 
                Procedure Coding System established by the Secretary of 
                Health and Human Services under section 1848(c)(5) of 
                such Act.
  (c) Implementation.--Notwithstanding any other provision of law, the 
Secretary of Health and Human Services may implement this section by 
program instruction or otherwise.

SEC. 611. EXTENSION OF BRACHYTHERAPY SPECIAL RULE.

  Section 1833(t)(16)(C) of the Social Security Act (42 U.S.C. 
1395l(t)(16)(C)) is amended by striking ``2008'' and inserting 
``2009''.

SEC. 612. PAYMENT FOR PART B DRUGS.

  (a) Application of Consistent Volume Weighting in Computation of 
ASP.--In order to assure that payments for drugs and biologicals under 
section 1847A of the Social Security Act (42 U.S.C. 1395w-3a) are 
correct and consistent with law, the Secretary of Health and Human 
Services shall, for payment for drugs and biologicals furnished on or 
after July 1, 2008, compute the volume-weighted average sales price 
using equation #2 (specified in appendix A of the report of the 
Inspector General of the Department of Health and Human Services on 
``Calculation of Volume-Weighted Average Sales Price for Medicare Part 
B Prescription Drugs'' (February 2006; OEI-03-05-00310)) used by the 
Office of Inspector General to calculate a volume-weighted ASP.
  (b) Improvements in the Competitive Acquisition Program (CAP).--
          (1) Continuous open enrollment; automatic reenrollment 
        without need for reapplication.--Subsection (a)(1)(A) of 
        section 1847B of the Social Security Act (42 U.S.C. 1395w-3b) 
        is amended--
                  (A) in clause (ii), by striking ``annually'' and 
                inserting ``on an ongoing basis'';
                  (B) in clause (iii), by striking ``an annual 
                selection'' and inserting ``a selection (which may be 
                changed on an annual basis)'' ; and
                  (C) by adding at the end the following: ``An election 
                and selection described in clauses (ii) and (iii) shall 
                continue to be effective without the need for any 
                periodic reelection or reapplication or selection.''.
          (2) Permitting vender to deliver drugs to site of 
        administration.--Subsection (b)(4)(E) of such section is 
        amended--
                  (A) by striking ``or'' at the end of clause (i);
                  (B) by striking the period at the end of clause (ii) 
                and inserting ``; or''; and
                  (C) by adding at the end the following new clause:
                          ``(iii) prevent a contractor from delivering 
                        drugs and biologicals to the site in which the 
                        drugs or biologicals will be administered.''.
          (3) Physician outreach and education.--Subsection (a)(1) of 
        such section is amended by adding at the end the following new 
        subparagraph:
                  ``(E) Physician outreach and education.--The 
                Secretary shall conduct a program of outreach to 
                education physicians concerning the program and the 
                ongoing opportunity of physicians to elect to obtain 
                drugs and biologicals under the program.''.
          (4) Rebidding of contracts.--The Secretary of Health and 
        Human Services shall provide for the rebidding of contracts 
        under section 1847B(c) of the Social Security Act (42 U.S.C. 
        1395w-3b(c)) only for periods on or after the expiration of the 
        contract in effect under such section as of the date of the 
        enactment of this Act.
  (c) Treatment of Certain Drugs.--Section 1847A(b) of the Social 
Security Act (42 U.S.C. 1395w-3a(b)) is amended--
          (1) in paragraph (1), by inserting ``paragraph (6) and'' 
        after ``Subject to''; and
          (2) by adding at the end the following new paragraph:
          ``(6) Special rule.--In applying subsection (c)(6)(C)(ii), 
        beginning with January 1, 2008, the average sales price for 
        drugs or biologicals described in section 1842(o)(1)(G) is the 
        lower of the average sales price calculated including drugs or 
        biologicals to which such subsection applies and the average 
        sales price that would have been calculated if such subsection 
        were not applied.''.
  (d) Effective Date.--Except as otherwise provided, the amendments 
made by this section shall apply to drugs furnished on or after January 
1, 2008.

       Subtitle B--Extension of Medicare Rural Access Protections

SEC. 621. 2-YEAR EXTENSION OF FLOOR ON MEDICARE WORK GEOGRAPHIC 
                    ADJUSTMENT.

  Section 1848(e)(1)(E) of such Act (42 U.S.C. 1395w-4(e)(1)(E)) is 
amended by striking ``2008'' and inserting ``2010''.

SEC. 622. 2-YEAR EXTENSION OF SPECIAL TREATMENT OF CERTAIN PHYSICIAN 
                    PATHOLOGY SERVICES UNDER MEDICARE.

  Section 542(c) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000, as amended by section 732 of 
the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003, and section 104 of the Medicare Improvements and Extension Act of 
2006 (division B of Public Law 109-432), is amended by striking ``and 
2007'' and inserting ``2007, 2008, and 2009''.

SEC. 623. 2-YEAR EXTENSION OF MEDICARE REASONABLE COSTS PAYMENTS FOR 
                    CERTAIN CLINICAL DIAGNOSTIC LABORATORY TESTS 
                    FURNISHED TO HOSPITAL PATIENTS IN CERTAIN RURAL 
                    AREAS.

  Section 416(b) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2282; 42 
U.S.C. 1395l-4(b)), as amended by section 105 of the Medicare 
Improvement and Extension Act of 2006 (division B of Public Law 109-
432), is amended by striking ``3-year'' and inserting ``5-year''.

SEC. 624. 2-YEAR EXTENSION OF MEDICARE INCENTIVE PAYMENT PROGRAM FOR 
                    PHYSICIAN SCARCITY AREAS.

  (a) In General.--Section 1833(u)(1) of the Social Security Act (42 
U.S.C. 1395l(u)(1)) is amended by striking ``2008'' and inserting 
``2010''.
  (b) Transition.--With respect to physicians' services furnished 
during 2008 and 2009, for purposes of subsection (a), the Secretary of 
Health and Human Services shall use the primary care scarcity areas and 
the specialty care scarcity areas (as identified in section 1833(u)(4)) 
that the Secretary was using under such subsection with respect to 
physicians' services furnished on December 31, 2007.

SEC. 625. 2-YEAR EXTENSION OF MEDICARE INCREASE PAYMENTS FOR GROUND 
                    AMBULANCE SERVICES IN RURAL AREAS.

  Section 1834(l)(13) of the Social Security Act (42 U.S.C. 
1395m(l)(13)) is amended--
          (1) in subparagraph (A)--
                  (A) in the matter before clause (i), by striking 
                ``furnished on or after July 1, 2004, and before 
                January 1, 2007,'';
                  (B) in clause (i), by inserting ``for services 
                furnished on or after July 1, 2004, and before January 
                1, 2007, and on or after January 1, 2008, and before 
                January 1, 2010,'' after ``in such paragraph,''; and
                  (C) in clause (ii), by inserting ``for services 
                furnished on or after July 1, 2004, and before January 
                1, 2007,'' after ``in clause (i),''; and
          (2) in subparagraph (B)--
                  (A) in the heading, by striking ``after 2006'' and 
                inserting ``for subsequent periods'';
                  (B) by inserting ``clauses (i) and (ii) of'' before 
                ``subparagraph (A)''; and
                  (C) by striking ``in such subparagraph'' and 
                inserting ``in the respective clause''.

SEC. 626. EXTENDING HOLD HARMLESS FOR SMALL RURAL HOSPITALS UNDER THE 
                    HOPD PROSPECTIVE PAYMENT SYSTEM.

  Section 1833(t)(7)(D)(i)(II) of the Social Security Act (42 U.S.C. 
1395l(t)(7)(D)(I)(II)) is amended--
          (1) by striking ``January 1, 2009'' and inserting ``January 
        1, 2010'';
          (2) by striking ``2007, or 2008,''; and
          (3) by striking ``90 percent, and 85 percent, respectively.'' 
        and inserting ``and with respect to such services furnished 
        after 2006 the applicable percentage shall be 90 percent.''.

              Subtitle C--End Stage Renal Disease Program

SEC. 631. CHRONIC KIDNEY DISEASE DEMONSTRATION PROJECTS.

  (a) In General.--The Secretary of Health and Human Services (in this 
section referred to as the ``Secretary''), acting through the Director 
of the National Institutes of Health, shall establish demonstration 
projects to--
          (1) increase public and medical community awareness 
        (particularly of those who treat patients with diabetes and 
        hypertension) about the factors that lead to chronic kidney 
        disease, how to prevent it, how to diagnose it, and how to 
        treat it;
          (2) increase screening and use of prevention techniques for 
        chronic kidney disease for Medicare beneficiaries and the 
        general public (particularly among patients with diabetes and 
        hypertension, where prevention techniques are well established 
        and early detection makes prevention possible); and
          (3) enhance surveillance systems and expand research to 
        better assess the prevalence and incidence of chronic kidney 
        disease, (building on work done by Centers for Disease Control 
        and Prevention).
  (b) Scope and Duration.--
          (1) Scope.--The Secretary shall select at least 3 States in 
        which to conduct demonstration projects under this section. In 
        selecting the States under this paragraph, the Secretary shall 
        take into account the size of the population of individuals 
        with end-stage renal disease who are enrolled in part B of 
        title XVIII of the Social Security Act and ensure the 
        participation of individuals who reside in rural and urban 
        areas.
          (2) Duration.--The demonstration projects under this section 
        shall be conducted for a period that is not longer than 5 years 
        and shall begin on January 1, 2009.
  (c) Evaluation and Report.--
          (1) Evaluation.--The Secretary shall conduct an evaluation of 
        the demonstration projects conducted under this section.
          (2) Report.--Not later than 12 months after the date on which 
        the demonstration projects under this section are completed, 
        the Secretary shall submit to Congress a report on the 
        evaluation conducted under paragraph (1) together with 
        recommendations for such legislation and administrative action 
        as the Secretary determines appropriate.

SEC. 632. MEDICARE COVERAGE OF KIDNEY DISEASE PATIENT EDUCATION 
                    SERVICES.

  (a) Coverage of Kidney Disease Education Services.--
          (1) Coverage.--Section 1861(s)(2) of the Social Security Act 
        (42 U.S.C. 1395x(s)(2)), as amended by sections 201(a)(1), 
        607(a)(1), and 607(b)(1), is amended--
                  (A) in subparagraph (CC), by striking ``and'' after 
                the semicolon at the end;
                  (B) in subparagraph (DD), by adding ``and'' after the 
                semicolon at the end; and
                  (C) by adding at the end the following new 
                subparagraph:
          ``(EE) kidney disease education services (as defined in 
        subsection (ggg));''.
          (2) Services described.--Section 1861 of the Social Security 
        Act (42 U.S.C. 1395x), as amended by sections 201(a)(2), 
        503(b)(1), 607(a)(2), and 607(b)(2), is amended by adding at 
        the end the following new subsection:

                  ``Kidney Disease Education Services

  ``(ggg)(1) The term `kidney disease education services' means 
educational services that are--
          ``(A) furnished to an individual with stage IV chronic kidney 
        disease who, according to accepted clinical guidelines 
        identified by the Secretary, will require dialysis or a kidney 
        transplant;
          ``(B) furnished, upon the referral of the physician managing 
        the individual's kidney condition, by a qualified person (as 
        defined in paragraph (2)); and
          ``(C) designed--
                  ``(i) to provide comprehensive information 
                (consistent with the standards developed under 
                paragraph (3)) regarding--
                          ``(I) the management of comorbidities, 
                        including for purposes of delaying the need for 
                        dialysis;
                          ``(II) the prevention of uremic 
                        complications; and
                          ``(III) each option for renal replacement 
                        therapy (including hemodialysis and peritoneal 
                        dialysis at home and in-center as well as 
                        vascular access options and transplantation);
                  ``(ii) to ensure that the individual has the 
                opportunity to actively participate in the choice of 
                therapy; and
                  ``(iii) to be tailored to meet the needs of the 
                individual involved.
  ``(2) The term `qualified person' means a physician, physician 
assistant, nurse practitioner, or clinical nurse specialist who 
furnishes services for which payment may be made under the fee schedule 
established under section 1848. Such term does not include a renal 
dialysis facility.
  ``(3) The Secretary shall set standards for the content of such 
information to be provided under paragraph (1)(C)(i) after consulting 
with physicians, other health professionals, health educators, 
professional organizations, accrediting organizations, kidney patient 
organizations, dialysis facilities, transplant centers, network 
organizations described in section 1881(c)(2), and other knowledgeable 
persons. To the extent possible the Secretary shall consult with a 
person or entity described in the previous sentence, other than a 
dialysis facility, that has not received industry funding from a drug 
or biological manufacturer or dialysis facility.
  ``(4) In promulgating regulations to carry out this subsection, the 
Secretary shall ensure that each individual who is eligible for 
benefits for kidney disease education services under this title 
receives such services in a timely manner to maximize the benefit of 
those services.
  ``(5) The Secretary shall monitor the implementation of this 
subsection to ensure that individuals who are eligible for benefits for 
kidney disease education services receive such services in the manner 
described in paragraph (4).
  ``(6) No individual shall be eligible to be provided more than 6 
sessions of kidney disease education services under this title.''.
          (3) Payment under the physician fee schedule.--Section 
        1848(j)(3) of the Social Security Act (42 U.S.C. 1395w-4(j)(3)) 
        is amended by inserting ``(2)(DD),'' after ``(2)(AA),''.
          (4) Limitation on number of sessions.--Section 1862(a)(1) of 
        the Social Security Act (42 U.S.C. 1395y(a)(1)) is amended--
                  (A) in subparagraph (M), by striking ``and'' at the 
                end;
                  (B) in subparagraph (N), by striking the semicolon at 
                the end and inserting ``, and''; and
                  (C) by adding at the end the following new 
                subparagraph:
          ``(O) in the case of kidney disease education services (as 
        defined in section 1861(ggg)), which are furnished in excess of 
        the number of sessions covered under such section;''.
          (5) GAO report.--Not later than September 1, 2010, the 
        Comptroller General of the United States shall submit to 
        Congress a report on the following:
                  (A) The number of Medicare beneficiaries who are 
                eligible to receive benefits for kidney disease 
                education services (as defined in section 1861(ggg) of 
                the Social Security Act, as added by paragraph (2)) 
                under title XVIII of such Act and who receive such 
                services.
                  (B) The extent to which there is a sufficient amount 
                of physicians, physician assistants, nurse 
                practitioners, and clinical nurse specialists to 
                furnish kidney disease education services (as so 
                defined) under such title and whether or not renal 
                dialysis facilities (and appropriate employees of such 
                facilities) should be included as an entity eligible 
                under such section to furnish such services.
                  (C) Recommendations, if appropriate, for renal 
                dialysis facilities (and appropriate employees of such 
                facilities) to structure kidney disease education 
                services (as so defined) in a manner that is objective 
                and unbiased and that provides a range of options and 
                alternative locations for renal replacement therapy and 
                management of co-morbidities that may delay the need 
                for dialysis.
  (b) Effective Date.--The amendments made by this section shall apply 
to services furnished on or after January 1, 2009.

SEC. 633. REQUIRED TRAINING FOR PATIENT CARE DIALYSIS TECHNICIANS.

  Section 1881 of the Social Security Act (42 U.S.C. 1395rr) is amended 
by adding the following new subsection:
  ``(h)(1) Except as provided in paragraph (2), a provider of services 
or a renal dialysis facility may not use, for more than 12 months 
during 2009, or for any period beginning on January 1, 2010, any 
individual as a patient care dialysis technician unless the 
individual--
          ``(A) has completed a training program in the care and 
        treatment of an individual with chronic kidney failure who is 
        undergoing dialysis treatment; and
          ``(B) has been certified by a nationally recognized 
        certification entity for dialysis technicians.
  ``(2)(A) A provider of services or a renal dialysis facility may 
permit an individual enrolled in a training program described in 
paragraph (1)(A) to serve as a patient care dialysis technician while 
they are so enrolled.
  ``(B) The requirements described in subparagraphs (A), (B), and (C) 
of paragraph (1) do not apply to an individual who has performed 
dialysis-related services for at least 5 years.
  ``(3) For purposes of paragraph (1), if, since the most recent 
completion by an individual of a training program described in 
paragraph (1)(A), there has been a period of 24 consecutive months 
during which the individual has not furnished dialysis-related services 
for monetary compensation, such individual shall be required to 
complete a new training program or become recertified as described in 
paragraph (1)(B).
  ``(4) A provider of services or a renal dialysis facility shall 
provide such regular performance review and regular in-service 
education as assures that individuals serving as patient care dialysis 
technicians for the provider or facility are competent to perform 
dialysis-related services.''.

SEC. 634. MEDPAC REPORT ON TREATMENT MODALITIES FOR PATIENTS WITH 
                    KIDNEY FAILURE.

  (a) Evaluation.--
          (1) In general.--Not later than March 1, 2009, the Medicare 
        Payment Advisory Commission (established under section 1805 of 
        the Social Security Act) shall submit to the Secretary and 
        Congress a report evaluating the barriers that exist to 
        increasing the number of individuals with end-stage renal 
        disease who elect to receive home dialysis services under the 
        Medicare program under title XVIII of the Social Security Act 
        (42 U.S.C. 1395 et seq.).
          (2) Report details.--The report shall include the following:
                  (A) A review of Medicare home dialysis demonstration 
                projects initiated before the date of the enactment of 
                this Act, and the results of such demonstration 
                projects and recommendations for future Medicare home 
                dialysis demonstration projects or Medicare program 
                changes that will test models that can improve Medicare 
                beneficiary access to home dialysis.
                  (B) A comparison of current Medicare home dialysis 
                costs and payments with current in-center and hospital 
                dialysis costs and payments.
                  (C) An analysis of the adequacy of Medicare 
                reimbursement for patient training for home dialysis 
                (including hemodialysis and peritoneal dialysis) and 
                recommendations for ensuring appropriate payment for 
                such home dialysis training.
                  (D) A catalogue and evaluation of the incentives and 
                disincentives in the current reimbursement system that 
                influence whether patients receive home dialysis 
                services or other treatment modalities.
                  (E) An evaluation of patient education services and 
                how such services impact the treatment choices made by 
                patients.
                  (F) Recommendations for implementing incentives to 
                encourage patients to elect to receive home dialysis 
                services or other treatment modalities under the 
                Medicare program
          (3) Scope of review.--In preparing the report under paragraph 
        (1), the Medicare Payment Advisory Commission shall consider a 
        variety of perspectives, including the perspectives of 
        physicians, other health care professionals, hospitals, 
        dialysis facilities, health plans, purchasers, and patients.

SEC. 635. ADJUSTMENT FOR ERYTHROPOIETIN STIMULATING AGENTS (ESAS).

  (a) In General.--Subsection (b)(13) of section 1881 of the Social 
Security Act (42 U.S.C. 1395rr) is amended--
          (1) in subparagraph (A)(iii), by striking ``For such drugs'' 
        and inserting ``Subject to subparagraph (C), for such drugs''; 
        and
          (2) by adding at the end the following new subparagraph:
  ``(C)(i) The payment amounts under this title for erythropoietin 
furnished during 2008 or 2009 to an individual with end stage renal 
disease by a large dialysis facility (as defined in subparagraph (D)) 
(whether to individuals in the facility or at home), in an amount equal 
to $8.75 per thousand units (rounded to the nearest 100 units) or, if 
less, 102 percent of the average sales price (as determined under 
section 1847A) for such drug or biological.
  ``(ii) The payment amounts under this title for darbepoetin alfa 
furnished during 2008 or 2009 to an individual with end stage renal 
disease by a large dialysis facility (as defined in clause (iii)) 
(whether to individuals in the facility or at home), in an amount equal 
to $2.92 per microgram or, if less, 102 percent of the average sales 
price (as determined under section 1847A) for such drug or biological.
  ``(iii) For purposes of this subparagraph, the term `large dialysis 
facility' means a provider of services or renal dialysis facility that 
is owned or managed by a corporate entity that, as of July 24, 2007, 
owns or manages 300 or more such providers or facilities, and includes 
a successor to such a corporate entity.''.
  (b) No Impact on Drug Add-on Payment.--Nothing in the amendments made 
by subsection (a) shall be construed to affect the amount of any 
payment adjustment made under section 1881(b)(12)(B)(ii) of the Social 
Security Act (42 U.S.C. 1395rr(b)(12)(B)(ii)).

SEC. 636. SITE NEUTRAL COMPOSITE RATE.

  Subsection (b)(12)(A) of section 1881 of the Social Security Act (42 
U.S.C. 1395rr) is amended by adding at the end the following new 
sentence: ``Under such system the payment rate for dialysis services 
furnished on or after January 1, 2008, by providers of such services 
for hospital-based facilities shall be the same as the payment rate 
(computed without regard to this sentence) for such services furnished 
by renal dialysis facilities that are not hospital-based, except that 
in applying the geographic index under subparagraph (D) to hospital-
based facilities, the labor share shall be based on the labor share 
otherwise applied for such facilities.''.

SEC. 637. DEVELOPMENT OF ESRD BUNDLING SYSTEM AND QUALITY INCENTIVE 
                    PAYMENTS.

  (a) Development of ESRD Bundling System.--Subsection (b) of section 
1881 of the Social Security Act (42 U.S.C. 1395rr) is further amended--
          (1) in paragraph (12)(A), by striking ``In lieu of payment'' 
        and inserting ``Subject to paragraph (14), in lieu of 
        payment'';
          (2) in the second sentence of paragraph (12)(F)--
                  (A) by inserting ``or paragraph (14)'' after ``this 
                paragraph''; and
                  (B) by inserting ``or under the system under 
                paragraph (14)'' after ``subparagraph (B)'';
          (3) in paragraph (12)(H)--
                  (A) by inserting ``or paragraph (14)'' after ``under 
                this paragraph'' the first place it appears; and
                  (B) by inserting before the period at the end the 
                following: ``or, under paragraph (14), the 
                identification of renal dialysis services included in 
                the bundled payment, the adjustment for outliers, the 
                identification of facilities to which the phase-in may 
                apply, and the determination of payment amounts under 
                subparagraph (A) under such paragraph, and the 
                application of paragraph (13)(C)(iii)'';
          (4) in paragraph (13)--
                  (A) in subparagraph (A), by striking ``The payment 
                amounts'' and inserting ``subject to paragraph (14), 
                the payment amounts''; and
                  (B) in subparagraph (B)--
                          (i) in clause (i), by striking ``(i)'' after 
                        ``(B)'' and by inserting ``, subject to 
                        paragraph (14)'' before the period at the end; 
                        and
                          (ii) by striking clause (ii); and
          (5) by adding at the end the following new paragraph:
  ``(14)(A) Subject to subparagraph (E), for services furnished on or 
after January 1, 2010, the Secretary shall implement a payment system 
under which a single payment is made under this title for renal 
dialysis services (as defined in subparagraph (B)) in lieu of any other 
payment (including a payment adjustment under paragraph (12)(B)(ii)) 
for such services and items furnished pursuant to paragraph (4). In 
implementing the system the Secretary shall ensure that the estimated 
total amount of payments under this title for 2010 for renal dialysis 
services shall equal 96 percent of the estimated amount of payments for 
such services, including payments under paragraph (12)(B)(ii), that 
would have been made if such system had not been implemented.
  ``(B) For purposes of this paragraph, the term `renal dialysis 
services' includes--
                  ``(i) items and services included in the composite 
                rate for renal dialysis services as of December 31, 
                2009;
                  ``(ii) erythropoietin stimulating agents furnished to 
                individuals with end stage renal disease;
                  ``(iii) other drugs and biologicals and diagnostic 
                laboratory tests, that the Secretary identifies as 
                commonly used in the treatment of such patients and for 
                which payment was (before the application of this 
                paragraph) made separately under this title, and any 
                oral equivalent form of such drugs and biologicals or 
                of drugs and biologicals described in clause (ii); and
                  ``(iv) home dialysis training for which payment was 
                (before the application of this paragraph) made 
                separately under this section.
Such term does not include vaccines.
  ``(C) The system under this paragraph may provide for payment on the 
basis of services furnished during a week or month or such other 
appropriate unit of payment as the Secretary specifies.
  ``(D) Such system--
          ``(i) shall include a payment adjustment based on case mix 
        that may take into account patient weight, body mass index, 
        comorbidities, length of time on dialysis, age, race, 
        ethnicity, and other appropriate factors;
          ``(ii) shall include a payment adjustment for high cost 
        outliers due to unusual variations in the type or amount of 
        medically necessary care, including variations in the amount of 
        erythropoietin stimulating agents necessary for anemia 
        management; and
          ``(iii) may include such other payment adjustments as the 
        Secretary determines appropriate, such as a payment 
        adjustment--
                  ``(I) by a geographic index, such as the index 
                referred to in paragraph (12)(D), as the Secretary 
                determines to be appropriate;
                  ``(II) for pediatric providers of services and renal 
                dialysis facilities;
                  ``(III) for low volume providers of services and 
                renal dialysis facilities;
                  ``(IV) for providers of services or renal dialysis 
                facilities located in rural areas; and
                  ``(V) for providers of services or renal dialysis 
                facilities that are not large dialysis facilities.
  ``(E) The Secretary may provide for a phase-in of the payment system 
described in subparagraph (A) for services furnished by a provider of 
services or renal dialysis facility described in any of subclauses (II) 
through (V) of subparagraph (D)(iii), but such payment system shall be 
fully implemented for services furnished in the case of any such 
provider or facility on or after January 1, 2013.
  ``(F) The Secretary shall apply the annual increase that would 
otherwise apply under subparagraph (F) of paragraph (12) to payment 
amounts established under such paragraph (if this paragraph did not 
apply) in an appropriate manner under this paragraph.''.
  (b) Prohibition of Unbundling.--Section 1862(a) of such Act (42 
U.S.C. 1395y(a)) is amended--
          (1) by striking ``or'' at the end of paragraph (21);
          (2) by striking the period at the end of paragraph (22) and 
        inserting ``; or''; and
          (3) by inserting after paragraph (22) the following new 
        paragraph:
          ``(23) where such expenses are for renal dialysis services 
        (as defined in subparagraph (B) of section 1881(b)(14)) for 
        which payment is made under such section (other than under 
        subparagraph (E) of such section) unless such payment is made 
        under such section to a provider of services or a renal 
        dialysis facility for such services.''.
  (c) Quality Incentive Payments.--Section 1881 of such Act is amended 
by adding at the end the following new subsection:
  ``(i) Quality Incentive Payments in the End-Stage Renal Disease 
Program.--
          ``(1) Quality incentive payments for services furnished in 
        2008, 2009, and 2010.--
                  ``(A) In general.--With respect to renal dialysis 
                services furnished during a performance period (as 
                defined in subparagraph (B)) by a provider of services 
                or renal dialysis facility that the Secretary 
                determines meets the applicable performance standard 
                for the period under subparagraph (C) and reports on 
                measures for 2009 and 2010 under subparagraph (D) for 
                such services, in addition to the amount otherwise paid 
                under this section, subject to subparagraph (G), there 
                also shall be paid to the provider or facility an 
                amount equal to the applicable percentage (specified in 
                subparagraph (E) for the period) of the Secretary's 
                estimate (based on claims submitted not later than two 
                months after the end of the performance period) of the 
                amount specified in subparagraph (F) for such period.
                  ``(B) Performance period.--In this paragraph, the 
                term `performance period' means each of the following:
                          ``(i) The period beginning on July 1, 2008, 
                        and ending on December 31, 2008.
                          ``(ii) 2009.
                          ``(iii) 2010.
                  ``(C) Performance standard.--
                          ``(i) 2008.--For the performance period 
                        occurring in 2008, the applicable performance 
                        standards for a provider or facility under this 
                        subparagraph are--
                                  ``(I) 92 percent or more of 
                                individuals with end stage renal 
                                disease receiving erythopoetin 
                                stimulating agents who have an average 
                                hematocrit of 33.0 percent or more; and
                                  ``(II) less than a percentage, 
                                specified by the Secretary, of 
                                individuals with end stage renal 
                                disease receiving erythopoetin 
                                stimulating agents who have an average 
                                hematocrit of 39.0 percent or more.
                          ``(ii) 2009 and 2010.--For the 2009 and 2010 
                        performance periods, the applicable performance 
                        standard for a provider or facility under this 
                        subparagraph is successful performance 
                        (relative to national average) on--
                                  ``(I) such measures of anemia 
                                management as the Secretary shall 
                                specify, including measures of 
                                hemoglobin levels or hematocrit levels 
                                for erythropoietin stimulating agents 
                                that are consistent with the labeling 
                                for dosage of erythropoietin 
                                stimulating agents approved by the Food 
                                and Drug Administration for treatment 
                                of anemia in patients with end stage 
                                renal disease, taking into account 
                                variations in hemoglobin ranges or 
                                hematocrit levels of patients; and
                                  ``(II) such other measures, relating 
                                to subjects described in subparagraph 
                                (D)(i), as the Secretary may specify.
                  ``(D) Reporting performance measures.--The 
                performance measures under this subparagraph to be 
                reported shall include--
                          ``(i) such measures as the Secretary 
                        specifies, before the beginning of the 
                        performance period involved and taking into 
                        account measures endorsed by the National 
                        Quality Forum, including, to the extent 
                        feasible measures on--
                                  ``(I) iron management;
                                  ``(II) dialysis adequacy; and
                                  ``(III) vascular access, including 
                                for maximizing the placement of 
                                arterial venous fistula; and
                          ``(ii) to the extent feasible, such measure 
                        (or measures) of patient satisfaction as the 
                        Secretary shall specify.
                The provider or facility submitting information on such 
                measures shall attest to the completeness and accuracy 
                of such information.
                  ``(E) Applicable percentage.--The applicable 
                percentage specified in this subparagraph for--
                          ``(i) the performance period occurring in 
                        2008, is 1.0 percent;
                          ``(ii) the 2009 performance period, is 2.0 
                        percent; and
                          ``(iii) the 2010 performance period, is 3.0 
                        percent.
                In the case of any performance period which is less 
                than an entire year, the applicable percentage 
                specified in this subparagraph shall be multiplied by 
                the ratio of the number of months in the year to the 
                number of months in such performance period. In the 
                case of 2010, the applicable percentage specified in 
                this subparagraph shall be multiplied by the 
                Secretary's estimate of the ratio of the aggregate 
                payment amount described in subparagraph (F)(i) that 
                would apply in 2010 if paragraph (14) did not apply, to 
                the aggregate payment base under subparagraph (F)(ii) 
                for 2010.
                  ``(F) Payment base.--The payment base described in 
                this subparagraph for a provider or facility is--
                          ``(i) for performance periods before 2010, 
                        the payment amount determined under paragraph 
                        (12) for services furnished by the provider or 
                        facility during the performance period, 
                        including the drug payment adjustment described 
                        in subparagraph (B)(ii) of such paragraph; and
                          ``(ii) for the 2010 performance period is the 
                        amount determined under paragraph (14) for 
                        services furnished by the provider or facility 
                        during the period.
                  ``(G) Limitation on funding.--
                          ``(i) In general.--If the Secretary 
                        determines that the total payments under this 
                        paragraph for a performance period is projected 
                        to exceed the dollar amount specified in clause 
                        (ii) for such period, the Secretary shall 
                        reduce, in a pro rata manner, the amount of 
                        such payments for each provider or facility for 
                        such period to eliminate any such projected 
                        excess for the period.
                          ``(ii) Dollar amount.--The dollar amount 
                        specified in this clause--
                                  ``(I) for the performance period 
                                occurring in 2008, is $50,000,000;
                                  ``(II) for the 2009 performance 
                                period is $100,000,000; and
                                  ``(III) for the 2010 performance 
                                period is $150,000,000.
                  ``(H) Form of payment.--The payment under this 
                paragraph shall be in the form of a single consolidated 
                payment.
          ``(2) Quality incentive payments for facilities and providers 
        for 2011.--
                  ``(A) Increased payment.--For 2011, in the case of a 
                provider or facility that, for the performance period 
                (as defined in subparagraph (B))--
                          ``(i) meets (or exceeds) the performance 
                        standard for anemia management specified in 
                        paragraph (1)(C)(ii)(I);
                          ``(ii) has substantially improved performance 
                        or exceeds a performance standard (as 
                        determined under subparagraph (E)); and
                          ``(iii) reports measures specified in 
                        paragraph (1)(D),
                with respect to renal dialysis services furnished by 
                the provider or facility during the quality bonus 
                payment period (as specified in subparagraph (C)) the 
                payment amount otherwise made to such provider or 
                facility under subsection (b)(14) shall be increased, 
                subject to subparagraph (F), by the applicable 
                percentage specified in subparagraph (D). Payment 
                amounts under paragraph (1) shall not be counted for 
                purposes of applying the previous sentence.
                  ``(B) Performance period.--In this paragraph, the 
                term `performance period' means a multi-month period 
                specified by the Secretary.
                  ``(C) Quality bonus payment period.--In this 
                paragraph, the term `quality bonus payment period' 
                means, with respect to a performance period, a multi-
                month period beginning on January 1, 2011, specified by 
                the Secretary that begins at least 3 months (but not 
                more than 9 months) after the end of the performance 
                period.
                  ``(D) Applicable percentage.--The applicable 
                percentage specified in this subparagraph is a 
                percentage, not to exceed the 4.0 percent, specified by 
                the Secretary consistent with subparagraph (F). Such 
                percentage may vary based on the level of performance 
                and improvement. The applicable percentage specified in 
                this subparagraph shall be multiplied by the ratio 
                applied under the third sentence of paragraph (1)(E) 
                for 2010.
                  ``(E) Performance standard.--Based on performance of 
                a provider of services or a renal dialysis facility on 
                performance measures described in paragraph (1)(D) for 
                a performance period, the Secretary shall determine a 
                composite score for such period.
                  ``(F) Limitation on funding.--If the Secretary 
                determines that the total amount to be paid under this 
                paragraph for a quality bonus payment period is 
                projected to exceed $200,000,000, the Secretary shall 
                reduce, in a uniform manner, the applicable percentage 
                otherwise applied under subparagraph (D) for services 
                furnished during the period to eliminate any such 
                projected excess.
          ``(3) Application.--
                  ``(A) Implementation.--Notwithstanding any other 
                provision of law, the Secretary may implement by 
                program instruction or otherwise this subsection.
                  ``(B) Limitations on review.--
                          ``(i) In general.--There shall be no 
                        administrative or judicial review under section 
                        1869 or 1878 or otherwise of--
                                  ``(I) the determination of 
                                performance measures and standards 
                                under this subsection;
                                  ``(II) the determination of 
                                successful reporting, including a 
                                determination of composite scores; and
                                  ``(III) the determination of the 
                                quality incentive payments made under 
                                this subsection.
                          ``(ii) Treatment of determinations.--A 
                        determination under this subparagraph shall not 
                        be treated as a determination for purposes of 
                        section 1869.
          ``(4) Technical assistance.--The Secretary shall identify or 
        establish an appropriately skilled group or organization, such 
        as the ESRD Networks, to provide technical assistance to 
        consistently low-performing facilities or providers that are in 
        the bottom quintile.
          ``(5) Public reporting.--
                  ``(A) Annual notice.--The Secretary shall provide an 
                annual written notification to each individual who is 
                receiving renal dialysis services from a provider of 
                services or renal dialysis facility that--
                          ``(i) informs such individual of the 
                        composite scores described in subparagraph (A) 
                        and other relevant quality measures with 
                        respect to providers of services or renal 
                        dialysis facilities in the local area;
                          ``(ii) compares such scores and measures to 
                        the average local and national scores and 
                        measures; and
                          ``(iii) provides information on how to access 
                        additional information on quality of such 
                        services furnished and options for alternative 
                        providers and facilities.
                  ``(B) Certificates.--The Secretary shall provide 
                certificates to facilities and providers who provide 
                services to individuals with end-stage renal disease 
                under this title to display in patient areas. The 
                certificate shall indicate the composite score obtained 
                by the facility or provider under the quality 
                initiative.
                  ``(C) Web-based quality list.--The Secretary shall 
                establish a web-based list of facilities and providers 
                who furnish renal dialysis services under this section 
                that indicates their composite score of each provider 
                and facility.
          ``(6) Recommendations for reporting and quality incentive 
        intitiative for physicians.--The Secretary shall develop 
        recommendations for applying quality incentive payments under 
        this subsection to physicians who receive the monthly capitated 
        payment under this title. Such recommendations shall include 
        the following:
                  ``(A) Recommendations to include pediatric specific 
                measures for physicians with at least 50 percent of 
                their patients with end stage renal disease being 
                individuals under 18 years of age.
                  ``(B) Recommendations on how to structure quality 
                incentive payments for physicians who demonstrate 
                improvements in quality or who attain quality 
                standards, as specified by the Secretary.
          ``(7) Reports.--
                  ``(A) Initial report.--Not later than January 1, 
                2013, the Secretary shall submit to Congress a report 
                on the implementation of the bundled payment system 
                under subsection (b)(14) and the quality initiative 
                under this subsection. Such report shall include the 
                following information:
                          ``(i) A comparison of the aggregate payments 
                        under subsection (b)(14) for items and services 
                        to the cost of such items and services.
                          ``(ii) The changes in utilization rates for 
                        erythropoietin stimulating agents.
                          ``(iii) The mode of administering such 
                        agents, including information on the proportion 
                        of such individuals receiving such agents 
                        intravenously as compared to subcutaneously.
                          ``(iv) The frequency of dialysis.
                          ``(v) Other differences in practice patterns, 
                        such as the adoption of new technology, 
                        different modes of practice, and variations in 
                        use of drugs other than drugs described in 
                        clause (iii).
                          ``(vi) The performance of facilities and 
                        providers under paragraph (2).
                          ``(vii) Other recommendations for legislative 
                        and administrative actions determined 
                        appropriate by the Secretary.
                  ``(B) Subsequent report.--Not later than January 1, 
                2015, the Secretary shall submit to Congress a report 
                that contains the information described in each of 
                clauses (ii) through (vii) of subparagraph (A) and a 
                comparison of the results of the payment system under 
                subsection (b)(14) for renal dialysis services 
                furnished during the 2-year period beginning on January 
                1, 2013, and the results of such payment system for 
                such services furnished during the previous two-year 
                period.''.

SEC. 638. MEDPAC REPORT ON ESRD BUNDLING SYSTEM.

  Not later than March 1, 2012, the Medicare Payment Advisory 
Commission (established under section 1805 of the Social Security Act) 
shall submit to Congress a report on the implementation of the payment 
system under section 1881(b)(14) of the Social Security Act (as added 
by section 7) for renal dialysis services and related services (defined 
in subparagraph (B) of such section). Such report shall include, with 
respect to such payment system for such services, an analysis of each 
of the following:
          (1) An analysis of the overall adequacy of payment under such 
        system for all such services.
          (2) An analysis that compares the adequacy of payment under 
        such system for services furnished by--
                  (A) a provider of services or renal dialysis facility 
                that is described in section 1881(b)(13)(C)(iv) of the 
                Social Security Act;
                  (B) a provider of services or renal dialysis facility 
                not described in such section;
                  (C) a hospital-based facility;
                  (D) a freestanding renal dialysis facility;
                  (E) a renal dialysis facility located in an urban 
                area; and
                  (F) a renal dialysis facility located in a rural 
                area.
          (3) An analysis of the financial status of providers of such 
        services and renal dialysis facilities, including access to 
        capital, return on equity, and return on capital.
          (4) An analysis of the adequacy of payment under such method 
        and the adequacy of the quality improvement payments under 
        section 1881(i) of the Social Security Act in ensuring that 
        payments for such services under the Medicare program are 
        consistent with costs for such services.
          (5) Recommendations, if appropriate, for modifications to 
        such payment system.

SEC. 639. OIG STUDY AND REPORT ON ERYTHROPOIETIN.

  (a) Study.--The Inspector General of the Department of Health and 
Human Services shall conduct a study on the following:
          (1) The dosing guidelines, standards, protocols, and 
        alogorithms for erythropoietin stimulating agents recommended 
        or used by providers of services and renal dialysis facilities 
        that are described in section 1881(b)(13)(C)(iv) of the Social 
        Security Act and providers and facilities that are not 
        described in such section.
          (2) The extent to which such guidelines, standards, 
        protocols, and algorithms are consistent with the labeling of 
        the Food and Drug Administration for such agents.
          (3) The extent to which physicians sign standing orders for 
        such agents that are consistent with such guidelines, 
        standards, protocols, and algorithms recommended or used by the 
        provider or facility involved.
          (4) The extent to which the prescribing decisions of 
        physicians, with respect to such agents, are independent of--
                  (A) such relevant guidelines, standards, protocols, 
                and algorithms; or
                  (B) recommendations of an anemia management nurse or 
                other appropriate employee of the provider or facility 
                involved.
          (5) The role of medical directors of providers of services 
        and renal dialysis facilities and the financial relationships 
        between such providers and facilities and the physicians hired 
        as medical directors of such providers and facilities, 
        respectively.
  (b) Report.--Not later than January 1, 2009, the Inspector General of 
the Department of Health and Human Services shall submit to Congress a 
report on the study conducted under subsection (a), together with such 
recommendations as the Inspector General determines appropriate.

                       Subtitle D--Miscellaneous

SEC. 651. LIMITATION ON EXCEPTION TO THE PROHIBITION ON CERTAIN 
                    PHYSICIAN REFERRALS FOR HOSPITALS.

  (a) In General.--Section 1877 of the Social Security Act (42 U.S.C. 
1395) is amended--
          (1) in subsection (d)(2)--
                  (A) in subparagraph (A), by striking ``and'' at the 
                end;
                  (B) in subparagraph (B), by striking the period at 
                the end and inserting ``; and''; and
                  (C) by adding at the end the following new 
                subparagraph:
                  ``(C) if the entity is a hospital, the hospital meets 
                the requirements of paragraph (3)(D).'';
          (2) in subsection (d)(3)--
                  (A) in subparagraph (B), by striking ``and'' at the 
                end;
                  (B) in subparagraph (C), by striking the period at 
                the end and inserting ``; and''; and
                  (C) by adding at the end the following new 
                subparagraph:
                  ``(D) the hospital meets the requirements described 
                in subsection (i)(1) not later than 18 months after the 
                date of the enactment of this subparagraph.''; and
          (3) by adding at the end the following new subsection:
  ``(i) Requirements for Hospitals To Qualify for Hospital Exception to 
Ownership or Investment Prohibition.--
          ``(1) Requirements described.--For purposes of paragraphs 
        subsection (d)(3)(D), the requirements described in this 
        paragraph for a hospital are as follows:
                  ``(A) Provider agreement.--The hospital had a 
                provider agreement under section 1866 in effect on July 
                24, 2007.
                  ``(B) Prohibition of expansion of facility 
                capacity.--The number of operating rooms and beds of 
                the hospital at any time on or after the date of the 
                enactment of this subsection are no greater than the 
                number of operating rooms and beds as of such date.
                  ``(C) Preventing conflicts of interest.--
                          ``(i) The hospital submits to the Secretary 
                        an annual report containing a detailed 
                        description of--
                                  ``(I) the identity of each physician 
                                owner and any other owners of the 
                                hospital; and
                                  ``(II) the nature and extent of all 
                                ownership interests in the hospital.
                          ``(ii) The hospital has procedures in place 
                        to require that any referring physician owner 
                        discloses to the patient being referred, by a 
                        time that permits the patient to make a 
                        meaningful decision regarding the receipt of 
                        care, as determined by the Secretary--
                                  ``(I) the ownership interest of such 
                                referring physician in the hospital; 
                                and
                                  ``(II) if applicable, any such 
                                ownership interest of the treating 
                                physician.
                          ``(iii) The hospital does not condition any 
                        physician ownership interests either directly 
                        or indirectly on the physician owner making or 
                        influencing referrals to the hospital or 
                        otherwise generating business for the hospital.
                  ``(D) Ensuring bona fide investment.--
                          ``(i) Physician owners in the aggregate do 
                        not own more than 40 percent of the total value 
                        of the investment interests held in the 
                        hospital or in an entity whose assets include 
                        the hospital.
                          ``(ii) The investment interest of any 
                        individual physician owner does not exceed 2 
                        percent of the total value of the investment 
                        interests held in the hospital or in an entity 
                        whose assets include the hospital.
                          ``(iii) Any ownership or investment interests 
                        that the hospital offers to a physician owner 
                        are not offered on more favorable terms than 
                        the terms offered to a person who is not a 
                        physician owner.
                          ``(iv) The hospital does not directly or 
                        indirectly provide loans or financing for any 
                        physician owner investments in the hospital.
                          ``(v) The hospital does not directly or 
                        indirectly guarantee a loan, make a payment 
                        toward a loan, or otherwise subsidize a loan, 
                        for any individual physician owner or group of 
                        physician owners that is related to acquiring 
                        any ownership interest in the hospital.
                          ``(vi) Investment returns are distributed to 
                        investors in the hospital in an amount that is 
                        directly proportional to the investment of 
                        capital by the physician owner in the hospital.
                          ``(vii) Physician owners do not receive, 
                        directly or indirectly, any guaranteed receipt 
                        of or right to purchase other business 
                        interests related to the hospital, including 
                        the purchase or lease of any property under the 
                        control of other investors in the hospital or 
                        located near the premises of the hospital.
                          ``(viii) The hospital does not offer a 
                        physician owner the opportunity to purchase or 
                        lease any property under the control of the 
                        hospital or any other investor in the hospital 
                        on more favorable terms than the terms offered 
                        to an individual who is not a physician owner.
                  ``(E) Patient safety.--
                          ``(i) Insofar as the hospital admits a 
                        patient and does not have any physician 
                        available on the premises to provide services 
                        during all hours in which the hospital is 
                        providing services to such patient, before 
                        admitting the patient--
                                  ``(I) the hospital discloses such 
                                fact to a patient; and
                                  ``(II) following such disclosure, the 
                                hospital receives from the patient a 
                                signed acknowledgment that the patient 
                                understands such fact.
                          ``(ii) The hospital has the capacity to--
                                  ``(I) provide assessment and initial 
                                treatment for patients; and
                                  ``(II) refer and transfer patients to 
                                hospitals with the capability to treat 
                                the needs of the patient involved.
          ``(2) Publication of information reported.--The Secretary 
        shall publish, and update on an annual basis, the information 
        submitted by hospitals under paragraph (1)(C)(i) on the public 
        Internet website of the Centers for Medicare & Medicaid 
        Services.
          ``(3) Collection of ownership and investment information.--
        For purposes of clauses (i) and (ii) of paragraph (1)(D), the 
        Secretary shall collect physician ownership and investment 
        information for each hospital as it existed on the date of the 
        enactment of this subsection.
          ``(4) Physician owner defined.--For purposes of this 
        subsection, the term `physician owner' means a physician (or an 
        immediate family member of such physician) with a direct or an 
        indirect ownership interest in the hospital.''.
  (b) Enforcement.--
          (1) Ensuring compliance.--The Secretary of Health and Human 
        Services shall establish policies and procedures to ensure 
        compliance with the requirements described in such section 
        1877(i)(1) of the Social Security Act, as added by subsection 
        (a)(3), beginning on the date such requirements first apply. 
        Such policies and procedures may include unannounced site 
        reviews of hospitals.
          (2) Audits.--Beginning not later than 18 months after the 
        date of the enactment of this Act, the Secretary of Health and 
        Human Services shall conduct audits to determine if hospitals 
        violate the requirements referred to in paragraph (1).

        TITLE VII--PROVISIONS RELATING TO MEDICARE PARTS A AND B

SEC. 701. HOME HEALTH PAYMENT UPDATE FOR 2008.

  Section 1895(b)(3)(B)(ii) of the Social Security Act (42 U.S.C. 
1395fff(b)(3)(B)(ii)) is amended--
          (1) in subclause (IV) at the end, by striking ``and'';
          (2) by redesignating subclause (V) as subclause (VII); and
          (3) by inserting after subclause (IV) the following new 
        subclauses:
                                  ``(V) 2007, subject to clause (v), 
                                the home health market basket 
                                percentage increase;
                                  ``(VI) 2008, subject to clause (v), 0 
                                percent; and''.

SEC. 702. 2-YEAR EXTENSION OF TEMPORARY MEDICARE PAYMENT INCREASE FOR 
                    HOME HEALTH SERVICES FURNISHED IN A RURAL AREA.

  Section 421 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2283; 42 
U.S.C. 1395fff note), as amended by section 5201(b) of the Deficit 
Reduction Act of 2005, is amended--
          (1) in the heading, by striking ``one-year'' and 
        inserting ``temporary''; and
          (2) in subsection (a), by striking ``and episodes and visits 
        beginning on or after January 1, 2006, and before January 1, 
        2007'' and inserting ``episodes and visits beginning on or 
        after January 1, 2006, and before January 1, 2007, and episodes 
        and visits beginning on or after January 1, 2008, and before 
        January 1, 2010''.

SEC. 703. EXTENSION OF MEDICARE SECONDARY PAYER FOR BENEFICIARIES WITH 
                    END STAGE RENAL DISEASE FOR LARGE GROUP PLANS.

  (a) In General.--Section 1862(b)(1)(C) of the Social Security Act (42 
U.S.C. 1395y(b)(1)(C)) is amended--
          (1) by redesignating clauses (i) and (ii) as subclauses (I) 
        and (II), respectively, and indenting accordingly;
          (2) by amending the text preceding subclause (I), as so 
        redesignated, to read as follows:
                  ``(C) Individuals with end stage renal disease.--
                          ``(i) In general.--A group health plan (as 
                        defined in subparagraph (A)(v))--'';
          (3) in the matter following subclause (II), as so 
        redesignated--
                  (A) by striking ``clause (i)'' and inserting 
                ``subclause (I)'';
                  (B) by striking ``clause (ii)'' and inserting 
                ``subclause (II)''; and
                  (C) by striking ``clauses (i) and (ii)'' and 
                inserting ``subclauses (I) and (II)''; and
                  (D) in the last sentence, by striking ``Effective for 
                items'' and inserting ``Subject to clause (ii), 
                effective for items''; and
          (4) by adding at the end the following new clause:
                          ``(ii) Special rule for large group plans.--
                        In applying clause (i) to a large group health 
                        plan (as defined in subparagraph (B)(iii)). 
                        effective for items and services furnished on 
                        or after January 1, 2008, (with respect to 
                        periods beginning on or after the date that is 
                        30 months prior to January 1, 2008), subclauses 
                        (I) and (II) of such clause shall be applied by 
                        substituting `42-month' for `12-month' each 
                        place it appears.''.

SEC. 704. PLAN FOR MEDICARE PAYMENT ADJUSTMENTS FOR NEVER EVENTS.

  (a) In General.--The Secretary of Health and Human Services (in this 
section referred to as the ``Secretary'') shall develop a plan (in this 
section referred to as the ``never events plan'') to implement, 
beginning in fiscal year 2010, a policy to reduce or eliminate payments 
under title XVIII of the Social Security Act for never events.
  (b) Never Event Defined.--For purposes of this section, the term 
``never event'' means an event involving the delivery of (or failure to 
deliver) physicians' services, inpatient or outpatient hospital 
services, or facility services furnished in an ambulatory surgical 
facility in which there is an error in medical care that is clearly 
identifiable, usually preventable, and serious in consequences to 
patients, and that indicates a deficiency in the safety and process 
controls of the services furnished with respect to the physician, 
hospital, or ambulatory surgical center involved.
  (c) Plan Details.--
          (1) Defining never events.--With respect to criteria for 
        identifying never events under the never events plan, the 
        Secretary should consider whether the event meets the following 
        characteristics:
                  (A) Clearly identifiable.--The event is clearly 
                identifiable and measurable and feasible to include in 
                a reporting system for never events.
                  (B) Usually preventable.--The event is usually 
                preventable taking into consideration that, because of 
                the complexity of medical care, certain medical events 
                are not always avoidable.
                  (C) Serious.--The event is serious and could result 
                in death or loss of a body part, disability, or more 
                than transient loss of a body function.
                  (D) Deficiency in safety and process controls.--The 
                event is indicative of a problem in safety systems and 
                process controls used by the physician, hospital, or 
                ambulatory surgical center involved and is indicative 
                of the reliability of the quality of services provided 
                by the physician, hospital, or ambulatory surgical 
                center, respectively.
          (2) Identification and payment issues.--With respect to 
        policies under the never events plan for identifying and 
        reducing (or eliminating) payment for never events, the 
        Secretary shall consider--
                  (A) mechanisms used by hospitals and physicians in 
                reporting and coding of services that would reliably 
                identify never events; and
                  (B) modifications in billing and payment mechanisms 
                that would enable the Secretary to efficiently and 
                accurately reduce or eliminate payments for never 
                events.
          (3) Priorities.--Under the never events plan the Secretary 
        shall identify priorities regarding the services to focus on 
        and, among those, the never events for which payments should be 
        reduced or eliminated.
          (4) Consultation.--In developing the never events plan, the 
        Secretary shall consult with affected parties that are relevant 
        to payment reductions in response to never events.
  (d) Congressional Report.--By not later than June 1, 2008, the 
Secretary shall submit a report to Congress on the never events plan 
developed under this subsection and shall include in the report 
recommendations on specific methods for implementation of the plan on a 
timely basis.

SEC. 705. REINSTATEMENT OF RESIDENCY SLOTS.

  (a) In General.--Section 1886(h) of the Social Security Act (42 
U.S.C. 1395ww(h)) is amended--
          (1) in paragraph (4)(H), by adding at the end the following 
        new clause:
                          ``(v) Increase in resident limit due to 
                        closure of other hospitals.--If one or more 
                        hospitals with approved medical residency 
                        training programs, which are located within the 
                        same metropolitan division of the core based 
                        statistical area as of January 1, 2001, closed, 
                        the Secretary shall increase by not more than 
                        10   (subject to the limitation set forth in 
                        the last sentence of this clause) the otherwise 
                        applicable resident limit under subparagraph 
                        (F) for each hospital within the same 
                        metropolitan division of the core based 
                        statistical area that meets all the following 
                        criteria:
                                  ``(I) The hospital is described in 
                                subsection (d)(5)(F)(i).
                                  ``(II) The hospital instituted a 
                                medical residency training program in 
                                internal medicine that was accredited 
                                by the American Osteopathic Association 
                                on or after January 1, 2004.
                                  ``(III) The hospital had a provider 
                                number and a resident limit as of 
                                January 1, 2000, and remained open as 
                                of October 1, 2007.
                                  ``(IV) The hospital did not receive 
                                an increase in its resident limit under 
                                paragraph (7)(B).
                        In no event may the resident limit for any 
                        hospital be increased above 50 through 
                        application of this clause and in no event may 
                        the total of the residency positions added by 
                        this clause for all hospitals exceed 10.''; and
          (2) in paragraph (7)--
                  (A) by redesignating subparagraph (D) as subparagraph 
                (E); and
                  (B) by inserting after subparagraph (C) the following 
                new subparagraph:
                  ``(D) Adjustment based on settled cost report.--In 
                the case of a hospital with a dual accredited 
                osteopathic and allopathic family practice program for 
                which--
                          ``(i) the otherwise applicable resident limit 
                        was reduced under subparagraph (A)(i)(I); and
                          ``(ii) such reduction was based on a 
                        reference resident level that was determined 
                        using a cost report and where a revised or 
                        corrected notice of program reimbursement was 
                        issued between September 1, 2006 and September 
                        15, 2006, whether as a result of an appeal or 
                        otherwise, and the reference resident level 
                        under such settled cost report is higher than 
                        the level used for the reduction under 
                        subparagraph (A)(i)(I);
                the Secretary shall apply subparagraph (A)(i)(I) using 
                the higher resident reference level and make any 
                necessary adjustments to such reduction. Any such 
                necessary adjustments shall be effective for portions 
                of cost reporting periods occurring on or after July 1, 
                2005.''.
  (b) Effective Dates.--The amendment made by paragraph (1) shall be 
effective for cost reporting periods beginning on or after October 1, 
2007, and the amendments made by paragraph (2) shall take effect as if 
included in the enactment of section 422 of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173).

                          TITLE VIII--MEDICAID

                Subtitle A--Protecting Existing Coverage

SEC. 801. MODERNIZING TRANSITIONAL MEDICAID.

  (a) Two-Year Extension.--
          (1) In general.--Sections 1902(e)(1)(B) and 1925(f) of the 
        Social Security Act (42 U.S.C. 1396a(e)(1)(B), 1396r-6(f)) are 
        each amended by striking ``September 30, 2003'' and inserting 
        ``September 30, 2009''.
          (2) Effective date.--The amendments made by this subsection 
        shall take effect on October 1, 2007.
  (b) State Option of Initial 12-Month Eligibility.--Section 1925 of 
the Social Security Act (42 U.S.C. 1396r-6) is amended--
          (1) in subsection (a)(1), by inserting ``but subject to 
        paragraph (5)'' after ``Notwithstanding any other provision of 
        this title'';
          (2) by adding at the end of subsection (a) the following:
          ``(5) Option of 12-month initial eligibility period.--A State 
        may elect to treat any reference in this subsection to a 6-
        month period (or 6 months) as a reference to a 12-month period 
        (or 12 months). In the case of such an election, subsection (b) 
        shall not apply.''; and
          (3) in subsection (b)(1), by inserting ``but subject to 
        subsection (a)(5)'' after ``Notwithstanding any other provision 
        of this title''.
  (c) Removal of Requirement for Previous Receipt of Medical 
Assistance.--Section 1925(a)(1) of such Act (42 U.S.C. 1396r-6(a)(1)), 
as amended by subsection (b)(1), is further amended--
          (1) by inserting ``subparagraph (B) and'' before ``paragraph 
        (5)'';
          (2) by redesignating the matter after ``Requirement.--'' as a 
        subparagraph (A) with the heading ``In general.--'' and with 
        the same indentation as subparagraph (B) (as added by paragraph 
        (3)); and
          (3) by adding at the end the following:
                  ``(B) State option to waive requirement for 3 months 
                before receipt of medical assistance.--A State may, at 
                its option, elect also to apply subparagraph (A) in the 
                case of a family that was receiving such aid for fewer 
                than three months or that had applied for and was 
                eligible for such aid for fewer than 3 months during 
                the 6 immediately preceding months described in such 
                subparagraph.''.
  (d) CMS Report on Enrollment and Participation Rates Under TMA.--
Section 1925 of such Act (42 U.S.C. 1396r-6), as amended by this 
section, is further amended by adding at the end the following new 
subsection:
  ``(g) Collection and Reporting of Participation Information.--
          ``(1) Collection of information from states.--Each State 
        shall collect and submit to the Secretary (and make publicly 
        available), in a format specified by the Secretary, information 
        on average monthly enrollment and average monthly participation 
        rates for adults and children under this section and of the 
        number and percentage of children who become ineligible for 
        medical assistance under this section whose medical assistance 
        is continued under another eligibility category or who are 
        enrolled under the State's child health plan under title XXI. 
        Such information shall be submitted at the same time and 
        frequency in which other enrollment information under this 
        title is submitted to the Secretary.
          ``(2) Annual reports to congress.--Using the information 
        submitted under paragraph (1), the Secretary shall submit to 
        Congress annual reports concerning enrollment and participation 
        rates described in such paragraph.''.
  (e) Effective Date.--The amendments made by subsections (b) through 
(d) shall take effect on the date of the enactment of this Act.

SEC. 802. FAMILY PLANNING SERVICES.

  (a) Coverage as Optional Categorically Needy Group.--
          (1) In general.--Section 1902(a)(10)(A)(ii) of the Social 
        Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)) is amended--
                  (A) in subclause (XVIII), by striking ``or'' at the 
                end;
                  (B) in subclause (XIX), by adding ``or'' at the end; 
                and
                  (C) by adding at the end the following new subclause:
          ``(XX) who are described in subsection (ee) (relating to 
        individuals who meet certain income standards);''.
          (2) Group described.--Section 1902 of the Social Security Act 
        (42 U.S.C. 1396a), as amended by section 112(c), is amended by 
        adding at the end the following new subsection:
  ``(ee)(1) Individuals described in this subsection are individuals--
                  ``(A) whose income does not exceed an income 
                eligibility level established by the State that does 
                not exceed the highest income eligibility level 
                established under the State plan under this title (or 
                under its State child health plan under title XXI) for 
                pregnant women; and
                  ``(B) who are not pregnant.
          ``(2) At the option of a State, individuals described in this 
        subsection may include individuals who are determined to meet 
        the eligibility requirements referred to in paragraph (1) under 
        the terms, conditions, and procedures applicable to making 
        eligibility determinations for medical assistance under this 
        title under a waiver to provide the benefits described in 
        clause (XV) of the matter following subparagraph (G) of section 
        1902(a)(10) granted to the State under section 1115 as of 
        January 1, 2007.''.
          (3) Limitation on benefits.--Section 1902(a)(10) of the 
        Social Security Act (42 U.S.C. 1396a(a)(10)) is amended in the 
        matter following subparagraph (G)--
                  (A) by striking ``and (XIV)'' and inserting 
                ``(XIV)''; and
                  (B) by inserting ``, and (XV) the medical assistance 
                made available to an individual described in subsection 
                (ee) shall be limited to family planning services and 
                supplies described in section 1905(a)(4)(C) including 
                medical diagnosis or treatment services that are 
                provided pursuant to a family planning service in a 
                family planning setting provided during the period in 
                which such an individual is eligible'' after ``cervical 
                cancer''.
          (4) Conforming amendments.--Section 1905(a) of the Social 
        Security Act (42 U.S.C. 1396d(a)) is amended in the matter 
        preceding paragraph (1)--
                  (A) in clause (xii), by striking ``or'' at the end;
                  (B) in clause (xiii), by adding ``or'' at the end; 
                and
                  (C) by inserting after clause (xiii) the following:
                          ``(xiv) individuals described in section 
                        1902(ee),''.
  (b) Presumptive Eligibility.--
          (1) In general.--Title XIX of the Social Security Act (42 
        U.S.C. 1396 et seq.) is amended by inserting after section 
        1920B the following:
         ``presumptive eligibility for family planning services
  ``Sec. 1920C.  (a) State Option.--State plan approved under section 
1902 may provide for making medical assistance available to an 
individual described in section 1902(ee) (relating to individuals who 
meet certain income eligibility standard) during a presumptive 
eligibility period. In the case of an individual described in section 
1902(ee), such medical assistance shall be limited to family planning 
services and supplies described in 1905(a)(4)(C) and, at the State's 
option, medical diagnosis or treatment services that are provided in 
conjunction with a family planning service in a family planning setting 
provided during the period in which such an individual is eligible.
  ``(b) Definitions.--For purposes of this section:
          ``(1) Presumptive eligibility period.--The term `presumptive 
        eligibility period' means, with respect to an individual 
        described in subsection (a), the period that--
                  ``(A) begins with the date on which a qualified 
                entity determines, on the basis of preliminary 
                information, that the individual is described in 
                section 1902(ee); and
                  ``(B) ends with (and includes) the earlier of--
                          ``(i) the day on which a determination is 
                        made with respect to the eligibility of such 
                        individual for services under the State plan; 
                        or
                          ``(ii) in the case of such an individual who 
                        does not file an application by the last day of 
                        the month following the month during which the 
                        entity makes the determination referred to in 
                        subparagraph (A), such last day.
          ``(2) Qualified entity.--
                  ``(A) In general.--Subject to subparagraph (B), the 
                term `qualified entity' means any entity that--
                          ``(i) is eligible for payments under a State 
                        plan approved under this title; and
                          ``(ii) is determined by the State agency to 
                        be capable of making determinations of the type 
                        described in paragraph (1)(A).
                  ``(B) Rule of construction.--Nothing in this 
                paragraph shall be construed as preventing a State from 
                limiting the classes of entities that may become 
                qualified entities in order to prevent fraud and abuse.
  ``(c) Administration.--
          ``(1) In general.--The State agency shall provide qualified 
        entities with--
                  ``(A) such forms as are necessary for an application 
                to be made by an individual described in subsection (a) 
                for medical assistance under the State plan; and
                  ``(B) information on how to assist such individuals 
                in completing and filing such forms.
          ``(2) Notification requirements.--A qualified entity that 
        determines under subsection (b)(1)(A) that an individual 
        described in subsection (a) is presumptively eligible for 
        medical assistance under a State plan shall--
                  ``(A) notify the State agency of the determination 
                within 5 working days after the date on which 
                determination is made; and
                  ``(B) inform such individual at the time the 
                determination is made that an application for medical 
                assistance is required to be made by not later than the 
                last day of the month following the month during which 
                the determination is made.
          ``(3) Application for medical assistance.--In the case of an 
        individual described in subsection (a) who is determined by a 
        qualified entity to be presumptively eligible for medical 
        assistance under a State plan, the individual shall apply for 
        medical assistance by not later than the last day of the month 
        following the month during which the determination is made.
  ``(d) Payment.--Notwithstanding any other provision of this title, 
medical assistance that--
          ``(1) is furnished to an individual described in subsection 
        (a)--
                  ``(A) during a presumptive eligibility period;
                  ``(B) by a entity that is eligible for payments under 
                the State plan; and
          ``(2) is included in the care and services covered by the 
        State plan, shall be treated as medical assistance provided by 
        such plan for purposes of clause (4) of the first sentence of 
        section 1905(b).''.
          (2) Conforming amendments.--
                  (A) Section 1902(a)(47) of the Social Security Act 
                (42 U.S.C. 1396a(a)(47)) is amended by inserting before 
                the semicolon at the end the following: ``and provide 
                for making medical assistance available to individuals 
                described in subsection (a) of section 1920C during a 
                presumptive eligibility period in accordance with such 
                section''.
                  (B) Section 1903(u)(1)(D)(v) of such Act (42 U.S.C. 
                1396b(u)(1)(D)(v)) is amended--
                          (i) by striking ``or for'' and inserting 
                        ``for''; and
                          (ii) by inserting before the period the 
                        following: ``, or for medical assistance 
                        provided to an individual described in 
                        subsection (a) of section 1920C during a 
                        presumptive eligibility period under such 
                        section''.
  (e) Clarification of Coverage of Family Planning Services and 
Supplies.--Section 1937(b) of the Social Security Act (42 U.S.C. 1396u-
7(b)) is amended by adding at the end the following:
          ``(5) Coverage of family planning services and supplies.--
        Notwithstanding the previous provisions of this section, a 
        State may not provide for medical assistance through enrollment 
        of an individual with benchmark coverage or benchmark-
        equivalent coverage under this section unless such coverage 
        includes for any individual described in section 1905(a)(4)(C), 
        medical assistance for family planning services and supplies in 
        accordance with such section.''.
  (f) Effective Date.--The amendments made by this section take effect 
on October 1, 2007.

SEC. 803. AUTHORITY TO CONTINUE PROVIDING ADULT DAY HEALTH SERVICES 
                    APPROVED UNDER A STATE MEDICAID PLAN.

  (a) In General.--During the period described in subsection (b), the 
Secretary of Health and Human Services shall not--
          (1) withhold, suspend, disallow, or otherwise deny Federal 
        financial participation under section 1903(a) of the Social 
        Security Act (42 U.S.C. 1396b(a)) for the provision of adult 
        day health care services, day activity and health services, or 
        adult medical day care services, as defined under a State 
        Medicaid plan approved during or before 1994, during such 
        period if such services are provided consistent with such 
        definition and the requirements of such plan; or
          (2) withdraw Federal approval of any such State plan or part 
        thereof regarding the provision of such services (by regulation 
        or otherwise).
  (b) Period Described.--The period described in this subsection is the 
period that begins on November 3, 2005, and ends on March 1, 2009.

SEC. 804. STATE OPTION TO PROTECT COMMUNITY SPOUSES OF INDIVIDUALS WITH 
                    DISABILITIES.

   Section 1924(h)(1)(A) of the Social Security Act (42 U.S.C. 1396r-
5(h)(1)(A)) is amended by striking ``is described in section 
1902(a)(10)(A)(ii)(VI)'' and inserting ``is being provided medical 
assistance for home and community-based services under subsection (c), 
(d), (e), (i), or (j) of section 1915 or pursuant to section 1115''.

SEC. 805. COUNTY MEDICAID HEALTH INSURING ORGANIZATIONS .

  (a) In General.--Section 9517(c)(3) of the Consolidated Omnibus 
Budget Reconciliation Act of 1985 (42 U.S.C. 1396b note), as added by 
section 4734 of the Omnibus Budget Reconciliation Act of 1990 and as 
amended by section 704 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000, is amended--
          (1) in subparagraph (A), by inserting ``, in the case of any 
        health insuring organization described in such subparagraph 
        that is operated by a public entity established by Ventura 
        County, and in the case of any health insuring organization 
        described in such subparagraph that is operated by a public 
        entity established by Merced County'' after ``described in 
        subparagraph (B)''; and
          (2) in subparagraph (C), by striking ``14 percent'' and 
        inserting ``16 percent''.
  (b) Effective Date.--The amendments made by subsection (a) shall take 
effect on the date of the enactment of this Act.

                          Subtitle B--Payments

SEC. 811. PAYMENTS FOR PUERTO RICO AND TERRITORIES.

  (a) Payment Ceiling.--Section 1108(g) of the Social Security Act (42 
U.S.C. 1308(g)) is amended--
          (1) in paragraph (2), by striking ``paragraph (3)'' and 
        inserting ``paragraphs (3) and (4)''; and
          (2) by adding at the end the following new paragraph:
          ``(4) Fiscal years 2009 through 2012 for certain insular 
        areas.--The amounts otherwise determined under this subsection 
        for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana 
        Islands, and American Samoa for fiscal years 2009 through 2012 
        shall be increased by the following amounts:
                  ``(A) Puerto rico.--For Puerto Rico, $250,000,000 for 
                fiscal year 2009, $350,000,000 for fiscal year 2010, 
                $500,000,000 for fiscal year 2011, and $600,000,000 for 
                fiscal year 2012.
                  ``(B) Virgin islands.--For the Virgin Islands, 
                $5,000,000 for each of fiscal years 2009 through 2012.
                  ``(C) Guam.--For Guam, $5,000,000 for each of fiscal 
                years 2009 through 2012.
                  ``(D) Northern mariana islands.--For the Northern 
                Mariana Islands, $4,000,000 for each of fiscal years 
                2009 through 2012.
                  ``(E) American samoa.--For American Samoa, $4,000,000 
                for each of fiscal years 2009 through 2012.
        Such amounts shall not be taken into account in applying 
        paragraph (2) for fiscal years 2009 through 2012 but shall be 
        taken into account in applying such paragraph for fiscal year 
        2013 and subsequent fiscal years.''.
  (b) Removal of Federal Matching Payments for Improving Data Reporting 
Systems From the Overall Limit on Payments to Territories Under Title 
XIX.--Such section is further amended by adding at the end the 
following new paragraph:
          ``(5) Exclusion of certain expenditures from payment 
        limits.--With respect to fiscal year 2008 and each fiscal year 
        thereafter, if Puerto Rico, the Virgin Islands, Guam, the 
        Northern Mariana Islands, or American Samoa qualify for a 
        payment under subparagraph (A)(i) or (B) of section 1903(a)(3) 
        for a calendar quarter of such fiscal year with respect to 
        expenditures for improvements in data reporting systems 
        described in such subparagraph, the limitation on expenditures 
        under title XIX for such commonwealth or territory otherwise 
        determined under subsection (f) and this subsection for such 
        fiscal year shall be determined without regard to payment for 
        such expenditures.''.

SEC. 812. MEDICAID DRUG REBATE.

  (a) Brand.--Paragraph (1)(B)(i) of section 1927(c) of the Social 
Security Act (42 U.S.C. 1396r-8(c)) is amended--
          (1) by striking ``and'' at the end of subclause (IV);
          (2) in subclause (V)--
                  (A) by inserting ``and before January 1, 2008,'' 
                after ``December 31, 1995,''; and
                  (B) by striking the period at the end and inserting 
                ``; and''; and
          (3) by adding at the end the following new subclause:
                                  ``(VI) after December 31, 2007, is 
                                20.1 percent.''.
  (b) PBMs to Best Price Definition.--
          (1) In general.--Section 1927(c)(1)(C)(ii)(I) of the Social 
        Security Act (42 U.S.C. 1396r-8(c)(1)(C)(ii)(I)) is amended--
                  (A) by striking ``and'' before ``rebates''; and
                  (B) by inserting before the semicolon at the end the 
                following: ``, and rebates, discounts, and other price 
                concessions to pharmaceutical benefit managers 
                (PBMs)''.
          (2) Effective date.--The amendments made by paragraph (1) 
        shall apply to calendar quarters beginning on or after January 
        1, 2008.

SEC. 813. ADJUSTMENT IN COMPUTATION OF MEDICAID FMAP TO DISREGARD AN 
                    EXTRAORDINARY EMPLOYER PENSION CONTRIBUTION.

  (a) In General.--Only for purposes of computing the Federal medical 
assistance percentage under section 1905(b) of the Social Security Act 
(42 U.S.C. 1396d(b)) for a State for a fiscal year (beginning with 
fiscal year 2006), any significantly disproportionate employer pension 
contribution described in subsection (b) shall be disregarded in 
computing the per capita income of such State, but shall not be 
disregarded in computing the per capita income for the continental 
United States (and Alaska) and Hawaii.
  (b) Significantly Disproportionate Employer Pension Contribution.--
For purposes of subsection (a), a significantly disproportionate 
employer pension contribution described in this subsection with respect 
to a State for a fiscal year is an employer contribution towards 
pensions that is allocated to such State for a period if the aggregate 
amount so allocated exceeds 25 percent of the total increase in 
personal income in that State for the period involved.

SEC. 814. MORATORIUM ON CERTAIN PAYMENT RESTRICTIONS.

  Notwithstanding any other provision of law, the Secretary of Health 
and Human Services shall not, prior to the date that is 1 year after 
the date of enactment of this Act, take any action (through 
promulgation of regulation, issuance of regulatory guidance, use of 
federal payment audit procedures, or other administrative action, 
policy, or practice, including a Medical Assistance Manual transmittal 
or letter to State Medicaid directors) to restrict coverage or payment 
under title XIX of the Social Security Act for rehabilitation services, 
or school-based administration, transportation, or medical services if 
such restrictions are more restrictive in any aspect than those applied 
to such coverage or payment as of July 1, 2007.

SEC. 815. TENNESSEE DSH.

  The DSH allotments for Tennessee for each fiscal year beginning with 
fiscal year 2008 under subsection (f)(3) of section 1923 of the Social 
Security Act (42 U.S.C. 13961396r-4) are deemed to be $30,000,000. The 
Secretary of Health and Human Services may impose a limitation on the 
total amount of payments made to hospitals under the TennCare Section 
1115 waiver only to the extent that such limitation is necessary to 
ensure that a hospital does not receive payment in excess of the 
amounts described in subsection (f) of such section or as necessary to 
ensure that the waiver remains budget neutral.

SEC. 816. CLARIFICATION TREATMENT OF REGIONAL MEDICAL CENTER.

  (a) In General.--Nothing in section 1903(w) of the Social Security 
Act (42 U.S.C. 1396b(w)) shall be construed by the Secretary of Health 
and Human Services as prohibiting a State's use of funds as the non-
Federal share of expenditures under title XIX of such Act where such 
funds are transferred from or certified by a publicly-owned regional 
medical center located in another State and described in subsection 
(b), so long as the Secretary determines that such use of funds is 
proper and in the interest of the program under title XIX.
  (b) Center Described.--A center described in this subsection is a 
publicly-owned regional medical center that--
          (1) provides level 1 trauma and burn care services;
          (2) provides level 3 neonatal care services;
          (3) is obligated to serve all patients, regardless of ability 
        to pay;
          (4) is located within a Standard Metropolitan Statistical 
        Area (SMSA) that includes at least 3 States;
          (5) provides services as a tertiary care provider for 
        patients residing within a 125-mile radius; and
          (6) meets the criteria for a disproportionate share hospital 
        under section 1923 of such Act (42 U.S.C. 1396r-4) in at least 
        one State other than the State in which the center is located.

                       Subtitle C--Miscellaneous

SEC. 821. DEMONSTRATION PROJECT FOR EMPLOYER BUY-IN.

  Title XXI of the Social Security Act, as amended by section 
133(a)(1), is further amended by adding at the end the following new 
section:

``SEC. 2112. DEMONSTRATION PROJECT FOR EMPLOYER BUY-IN.

  ``(a) Authority.--
          ``(1) In general.--The Secretary shall establish a 
        demonstration project under which up to 10 States (each 
        referred to in this section as a `participating State') that 
        meets the conditions of paragraph (2) may provide, under its 
        State child health plan (notwithstanding section 2102(b)(3)(C)) 
        for a period of 5 years, for child health assistance in 
        relation to family coverage described in subsection (d) for 
        children who would be targeted low-income children but for 
        coverage as beneficiaries under a group health plan as the 
        children of participants by virtue of a qualifying employer's 
        contribution under subsection (b)(2).
          ``(2) Conditions.--The conditions described in this paragraph 
        for a State are as follows:
                  ``(A) No waiting lists.--The State does not impose 
                any waiting list, enrollment cap, or similar limitation 
                on enrollment of targeted low-income children under the 
                State child health plan.
                  ``(B) Eligibility of all children under 200 percent 
                of poverty line.--The State is applying an income 
                eligibility level under section 2110(b)(1)(B)(ii)(I) 
                that is at least 200 percent of the poverty line.
          ``(3) Qualifying employer defined.--In this section, the term 
        `qualifying employer' means an employer that has a majority of 
        its workforce composed of full-time workers with family incomes 
        reasonably estimated by the employer (based on wage information 
        available to the employer) at or below 200 percent of the 
        poverty line. In applying the previous sentence, two part-time 
        workers shall be treated as a single full-time worker.
  ``(b) Funding.--A demonstration project under this section in a 
participating State shall be funded, with respect to assistance 
provided to children described in subsection (a)(1), consistent with 
the following:
          ``(1) Limited family contribution.--The family involved shall 
        be responsible for providing payment towards the premium for 
        such assistance of such amount as the State may specify, except 
        that the limitations on cost-sharing (including premiums) under 
        paragraphs (2) and (3) of section 2103(e) shall apply to all 
        cost-sharing of such family under this section.
          ``(2) Minimum employer contribution.--The qualifying employer 
        involved shall be responsible for providing payment to the 
        State child health plan in the State of at least 50 percent of 
        the portion of the cost (as determined by the State) of the 
        family coverage in which the employer is enrolling the family 
        that exceeds the amount of the family contribution under 
        paragraph (1) applied towards such coverage.
          ``(3) Limitation on federal financial participation.--In no 
        case shall the Federal financial participation under section 
        2105 with respect to a demonstration project under this section 
        be made for any portion of the costs of family coverage 
        described in subsection (d) (including the costs of 
        administration of such coverage) that are not attributable to 
        children described in subsection (a)(1).
  ``(c) Uniform Eligibility Rules.--In providing assistance under a 
demonstration project under this section--
          ``(1) a State shall establish uniform rules of eligibility 
        for families to participate; and
          ``(2) a State shall not permit a qualifying employer to 
        select, within those families that meet such eligibility rules, 
        which families may participate.
  ``(d) Terms and Conditions.--The family coverage offered to families 
of qualifying employers under a demonstration project under this 
section in a State shall be the same as the coverage and benefits 
provided under the State child health plan in the State for targeted 
low-income children with the highest family income level permitted.''.

SEC. 822. DIABETES GRANTS.

  Section 2104 of the Social Security Act (42 U.S.C 1397dd), as amended 
by section 101, is further amended--
          (1) in subsection (a)(11), by inserting before the period at 
        the end the following: ``plus for fiscal year 2009 the total of 
        the amount specified in subsection (j)''; and
          (2) by adding at the end the following new subsection:
  ``(j) Funding for Diabetes Grants.--From the amounts appropriated 
under subsection (a)(11), for fiscal year 2009 from the amounts--
          ``(1) $150,000,000 is hereby transferred and made available 
        in such fiscal year for grants under section 330B of the Public 
        Health Service Act; and
          ``(2) $150,000,000 is hereby transferred and made available 
        in such fiscal year for grants under section 330C of such 
        Act.''.

SEC. 823. TECHNICAL CORRECTION.

  (a) Correction of Reference to Children in Foster Care Receiving 
Child Welfare Services.--Section 1937(a)(2)(B)(viii) of the Social 
Security Act (42 U.S.C. 1396u-7(a)(2)(B) is amended by striking ``aid 
or assistance is made available under part B of title IV to children in 
foster care'' and inserting ``child welfare services are made available 
under part B of title IV on the basis of being a child in foster 
care''.
  (b) Effective Date.--The amendment made by subsection (a) shall take 
effect as if included in the amendment made by section 6044(a) of the 
Deficit Reduction Act of 2005.

                        TITLE IX--MISCELLANEOUS

SEC. 901. MEDICARE PAYMENT ADVISORY COMMISSION STATUS.

  Section 1805(a) of the Social Security Act (42 U.S.C. 1395b-6(a)) is 
amended by inserting ``as an agency of Congress'' after 
``established''.

SEC. 902. REPEAL OF TRIGGER PROVISION.

  Subtitle A of title VIII of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (Public Law 108-173) is 
repealed and the provisions of law amended by such subtitle are 
restored as if such subtitle had never been enacted.

SEC. 903. REPEAL OF COMPARATIVE COST ADJUSTMENT (CCA) PROGRAM.

   Section 1860C-1 of the Social Security Act (42 U.S.C. 1395w-29), as 
added by section 241(a) of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (Public Law 108-173), is repealed.

SEC. 904. COMPARATIVE EFFECTIVENESS RESEARCH.

  (a) In General.--Part A of title XVIII of the Social Security Act is 
amended by adding at the end the following new section:
                  ``comparative effectiveness research
  ``Sec. 1822.  (a) Center for Comparative Effectiveness Research 
Established.--
          ``(1) In general.--The Secretary shall establish within the 
        Agency of Healthcare Research and Quality a Center for 
        Comparative Effectiveness Research (in this section referred to 
        as the `Center') to conduct, support, and synthesize research 
        (including research conducted or supported under section 1013 
        of the Medicare Prescription Drug, Improvement, and 
        Modernization Act of 2003) with respect to the outcomes, 
        effectiveness, and appropriateness of health care services and 
        procedures in order to identify the manner in which diseases, 
        disorders, and other health conditions can most effectively and 
        appropriately be prevented, diagnosed, treated, and managed 
        clinically.
          ``(2) Duties.--The Center shall--
                  ``(A) conduct, support, and synthesize research 
                relevant to the comparative clinical effectiveness of 
                the full spectrum of health care treatments, including 
                pharmaceuticals, medical devices, medical and surgical 
                procedures, and other medical interventions;
                  ``(B) conduct and support systematic reviews of 
                clinical research, including original research 
                conducted subsequent to the date of the enactment of 
                this section;
                  ``(C) use methodologies such as randomized controlled 
                clinical trials as well as other various types of 
                clinical research, such as observational studies;
                  ``(D) submit to the Comparative Effectiveness 
                Research Commission, the Secretary, and Congress 
                appropriate relevant reports described in subsection 
                (d)(2);
                  ``(E) encourage, as appropriate, the development and 
                use of clinical registries and the development of 
                clinical effectiveness research data networks from 
                electronic health records, post marketing drug and 
                medical device surveillance efforts, and other forms of 
                electronic health data; and
                  ``(F) not later than 180 days after the date of the 
                enactment of this section, develop methodological 
                standards to be used when conducting studies of 
                comparative clinical effectiveness and value (and 
                procedures for use of such standards) in order to help 
                ensure accurate and effective comparisons and update 
                such standards at least biennially.
  ``(b) Oversight by Comparative Effectiveness Research Commission.--
          ``(1) In general.--The Secretary shall establish an 
        independent Comparative Effectiveness Research Commission (in 
        this section referred to as the `Commission') to oversee and 
        evaluate the activities carried out by the Center under 
        subsection (a) to ensure such activities result in highly 
        credible research and information resulting from such research.
          ``(2) Duties.--The Commission shall--
                  ``(A) determine national priorities for research 
                described in subsection (a) and in making such 
                determinations consult with patients and health care 
                providers and payers;
                  ``(B) monitor the appropriateness of use of the CERTF 
                described in subsection (f) with respect to the timely 
                production of comparative effectiveness research 
                determined to be a national priority under subparagraph 
                (A);
                  ``(C) identify highly credible research methods and 
                standards of evidence for such research to be 
                considered by the Center;
                  ``(D) review and approve the methodological standards 
                (and updates to such standards) developed by the Center 
                under subsection (a)(2)(F);
                  ``(E) enter into an arrangement under which the 
                Institute of Medicine of the National Academy of 
                Sciences shall conduct an evaluation and report on 
                standards of evidence for such research;
                  ``(F) support forums to increase stakeholder 
                awareness and permit stakeholder feedback on the 
                efforts of the Agency of Healthcare Research and 
                Quality to advance methods and standards that promote 
                highly credible research;
                  ``(G) make recommendations for public data access 
                policies of the Center that would allow for access of 
                such data by the public while ensuring the information 
                produced from research involved is timely and credible;
                  ``(H) appoint a clinical perspective advisory panel 
                for each research priority determined under 
                subparagraph (A), which shall frame the specific 
                research inquiry to be examined with respect to such 
                priority to ensure that the information produced from 
                such research is clinically relevant to decisions made 
                by clinicians and patients at the point of care;
                  ``(I) make recommendations for the priority for 
                periodic reviews of previous comparative effectiveness 
                research and studies conducted by the Center under 
                subsection (a);
                  ``(J) routinely review processes of the Center with 
                respect to such research to confirm that the 
                information produced by such research is objective, 
                credible, consistent with standards of evidence 
                established under this section, and developed through a 
                transparent process that includes consultations with 
                appropriate stakeholders;
                  ``(K) at least annually, provide guidance or 
                recommendations to health care providers and consumers 
                for the use of information on the comparative 
                effectiveness of health care services by consumers, 
                providers (as defined for purposes of regulations 
                promulgated under section 264(c) of the Health 
                Insurance Portability and Accountability Act of 1996) 
                and public and private purchasers;
                  ``(L) make recommendations for a strategy to 
                disseminate the findings of research conducted and 
                supported under this section that enables clinicians to 
                improve performance, consumers to make more informed 
                health care decisions, and payers to set medical 
                policies that improve quality and value;
                  ``(M) provide for the public disclosure of relevant 
                reports described in subsection (d)(2); and
                  ``(N) submit to Congress an annual report on the 
                progress of the Center in achieving national priorities 
                determined under subparagraph (A) for the provision of 
                credible comparative effectiveness information produced 
                from such research to all interested parties.
          ``(3) Composition of commission.--
                  ``(A) In general.--The members of the Commission 
                shall consist of--
                          ``(i) the Director of the Agency for 
                        Healthcare Research and Quality;
                          ``(ii) the Chief Medical Officer of the 
                        Centers for Medicare & Medicaid Services; and
                          ``(iii) up to 15 additional members who shall 
                        represent broad constituencies of stakeholders 
                        including clinicians, patients, researchers, 
                        third-party payers, consumers of Federal and 
                        State beneficiary programs.
                  ``(B) Qualifications.--
                          ``(i) Diverse representation of 
                        perspectives.--The members of the Commission 
                        shall represent a broad range of perspectives 
                        and shall collectively have experience in the 
                        following areas:
                                  ``(I) Epidemiology.
                                  ``(II) Health services research.
                                  ``(III) Bioethics.
                                  ``(IV) Decision sciences.
                                  ``(V) Economics.
                          ``(ii) Diverse representation of health care 
                        community.--At least one member shall represent 
                        each of the following health care communities:
                                  ``(I) Consumers.
                                  ``(II) Practicing physicians, 
                                including surgeons.
                                  ``(III) Employers.
                                  ``(IV) Public payers.
                                  ``(V) Insurance plans.
                                  ``(VI) Clinical researchers who 
                                conduct research on behalf of 
                                pharmaceutical or device manufacturers.
          ``(4) Appointment.--The Comptroller General of the United 
        States, in consultation with the chairs of the committees of 
        jurisdiction of the House of Representatives and the Senate, 
        shall appoint the members of the Commission.
          ``(5) Chairman; vice chairman.--The Comptroller General of 
        the United States shall designate a member of the Commission, 
        at the time of appointment of the member, as Chairman and a 
        member as Vice Chairman for that term of appointment, except 
        that in the case of vacancy of the Chairmanship or Vice 
        Chairmanship, the Comptroller General may designate another 
        member for the remainder of that member's term.
          ``(6) Terms.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), each member of the Commission shall be appointed 
                for a term of 4 years.
                  ``(B) Terms of initial appointees.--Of the members 
                first appointed--
                          ``(i) 10 shall be appointed for a term of 4 
                        years; and
                          ``(ii) 9 shall be appointed for a term of 3 
                        years.
          ``(7) Coordination.--To enhance effectiveness and 
        coordination, the Comptroller General is encouraged, to the 
        greatest extent possible, to seek coordination between the 
        Commission and the National Advisory Council of the Agency for 
        Healthcare Research and Quality.
          ``(8) Conflicts of interest.--In appointing the members of 
        the Commission or a clinical perspective advisory panel 
        described in paragraph (2)(H), the Comptroller General of the 
        United States or the Commission, respectively, shall take into 
        consideration any financial conflicts of interest.
          ``(9) Compensation.--While serving on the business of the 
        Commission (including traveltime), a member of the Commission 
        shall be entitled to compensation at the per diem equivalent of 
        the rate provided for level IV of the Executive Schedule under 
        section 5315 of title 5, United States Code; and while so 
        serving away from home and the member's regular place of 
        business, a member may be allowed travel expenses, as 
        authorized by the Director of the Commission.
          ``(10) Availability of reports.--The Commission shall 
        transmit to the Secretary a copy of each report submitted under 
        this subsection and shall make such reports available to the 
        public.
          ``(11) Director and staff; experts and consultants.--Subject 
        to such review as the Secretary, in consultation with the 
        Comptroller General deems necessary to assure the efficient 
        administration of the Commission, the Commission may--
                  ``(A) employ and fix the compensation of an Executive 
                Director (subject to the approval of the Secretary, in 
                consultation with the Comptroller General) and such 
                other personnel as may be necessary to carry out its 
                duties (without regard to the provisions of title 5, 
                United States Code, governing appointments in the 
                competitive service);
                  ``(B) seek such assistance and support as may be 
                required in the performance of its duties from 
                appropriate Federal departments and agencies;
                  ``(C) enter into contracts or make other 
                arrangements, as may be necessary for the conduct of 
                the work of the Commission (without regard to section 
                3709 of the Revised Statutes (41 U.S.C. 5));
                  ``(D) make advance, progress, and other payments 
                which relate to the work of the Commission;
                  ``(E) provide transportation and subsistence for 
                persons serving without compensation; and
                  ``(F) prescribe such rules and regulations as it 
                deems necessary with respect to the internal 
                organization and operation of the Commission.
          ``(12) Powers.--
                  ``(A) Obtaining official data.--The Commission may 
                secure directly from any department or agency of the 
                United States information necessary to enable it to 
                carry out this section. Upon request of the Executive 
                Director, the head of that department or agency shall 
                furnish that information to the Commission on an agreed 
                upon schedule.
                  ``(B) Data collection.--In order to carry out its 
                functions, the Commission shall--
                          ``(i) utilize existing information, both 
                        published and unpublished, where possible, 
                        collected and assessed either by its own staff 
                        or under other arrangements made in accordance 
                        with this section,
                          ``(ii) carry out, or award grants or 
                        contracts for, original research and 
                        experimentation, where existing information is 
                        inadequate, and
                          ``(iii) adopt procedures allowing any 
                        interested party to submit information for the 
                        Commission's use in making reports and 
                        recommendations.
                  ``(C) Access of gao to information.--The Comptroller 
                General shall have unrestricted access to all 
                deliberations, records, and nonproprietary data of the 
                Commission, immediately upon request.
                  ``(D) Periodic audit.--The Commission shall be 
                subject to periodic audit by the Comptroller General.
  ``(c) Research Requirements.--Any research conducted, supported, or 
synthesized under this section shall meet the following requirements:
          ``(1) Ensuring transparency, credibility, and access.--
                  ``(A) The establishment of the agenda and conduct of 
                the research shall be insulated from inappropriate 
                political or stakeholder influence.
                  ``(B) Methods of conducting such research shall be 
                scientifically based.
                  ``(C) All aspects of the prioritization of research, 
                conduct of the research, and development of conclusions 
                based on the research shall be transparent to all 
                stakeholders.
                  ``(D) The process and methods for conducting such 
                research shall be publicly documented and available to 
                all stakeholders.
                  ``(E) Throughout the process of such research, the 
                Center shall provide opportunities for all stakeholders 
                involved to review and provide comment on the methods 
                and findings of such research.
          ``(2) Use of clinical perspective advisory panels.--The 
        research shall meet a national research priority determined 
        under subsection (b)(2)(A) and shall examine the specific 
        research inquiry framed by the clinical perspective advisory 
        panel for the national research priority.
          ``(3) Stakeholder input.--The priorities of the research, the 
        research, and the dissemination of the research shall involve 
        the consultation of patients, health care providers, and health 
        care consumer representatives through transparent mechanisms 
        recommended by the Commission.
  ``(d) Public Access to Comparative Effectiveness Information.--
          ``(1) In general.--Not later than 90 days after receipt by 
        the Center or Commission, as applicable, of a relevant report 
        described in paragraph (2) made by the Center, Commission, or 
        clinical perspective advisory panel under this section, 
        appropriate information contained in such report shall be 
        posted on the official public Internet site of the Center and 
        of the Commission, as applicable.
          ``(2) Relevant reports described.--For purposes of this 
        section, a relevant report is each of the following submitted 
        by a grantee or contractor of the Center:
                  ``(A) An interim progress report.
                  ``(B) A draft final comparative effectiveness review.
                  ``(C) A final progress report on new research 
                submitted for publication by a peer review journal.
                  ``(D) Stakeholder comments.
                  ``(E) A final report.
          ``(3) Access by congress and the commission to the center's 
        information.--Congress and the Commission shall each have 
        unrestricted access to all deliberations, records, and 
        nonproprietary data of the Center, immediately upon request.
  ``(e) Dissemination and Incorporation of Comparative Effectiveness 
Information.--
          ``(1) Dissemination.--The Center shall provide for the 
        dissemination of appropriate findings produced by research 
        supported, conducted, or synthesized under this section to 
        health care providers, patients, vendors of health information 
        technology focused on clinical decision support, appropriate 
        professional associations, and Federal and private health 
        plans.
          ``(2) Incorporation.--The Center shall assist users of health 
        information technology focused on clinical decision support to 
        promote the timely incorporation of the findings described in 
        paragraph (1) into clinical practices and to promote the ease 
        of use of such incorporation.
  ``(f) Reports to Congress.--
          ``(1) Annual reports.--Beginning not later than one year 
        after the date of the enactment of this section, the Director 
        of the Agency of Healthcare Research and Quality and the 
        Commission shall submit to Congress an annual report on the 
        activities of the Center and the Commission, as well as the 
        research, conducted under this section.
          ``(2) Recommendation for fair share per capita amount for 
        all-payer financing.--Beginning not later than December 31, 
        2009, the Secretary shall submit to Congress an annual 
        recommendation for a fair share per capita amount described in 
        subsection (c)(1) of section 9511 of the Internal Revenue Code 
        of 1986 for purposes of funding the CERTF under such section.
          ``(3) Analysis and review.--Not later than December 31, 2011, 
        the Secretary, in consultation with the Commission, shall 
        submit to Congress a report on all activities conducted or 
        supported under this section as of such date. Such report shall 
        include an evaluation of the return on investment resulting 
        from such activities, the overall costs of such activities, and 
        an analysis of the backlog of any research proposals approved 
        by the Commission but not funded. Such report shall also 
        address whether Congress should expand the responsibilities of 
        the Center and of the Commission to include studies of the 
        effectiveness of various aspects of the health care delivery 
        system, including health plans and delivery models, such as 
        health plan features, benefit designs and performance, and the 
        ways in which health services are organized, managed, and 
        delivered.
  ``(g) Coordinating Council for Health Services Research.--
          ``(1) Establishment.--The Secretary shall establish a 
        permanent council (in this section referred to as the 
        `Council') for the purpose of--
                  ``(A) assisting the offices and agencies of the 
                Department of Health and Human Services, the Department 
                of Veterans Affairs, the Department of Defense, and any 
                other Federal department or agency to coordinate the 
                conduct or support of health services research; and
                  ``(B) advising the President and Congress on--
                          ``(i) the national health services research 
                        agenda;
                          ``(ii) strategies with respect to 
                        infrastructure needs of health services 
                        research; and
                          ``(iii) appropriate organizational 
                        expenditures in health services research by 
                        relevant Federal departments and agencies.
          ``(2) Membership.--
                  ``(A) Number and appointment.--The Council shall be 
                composed of 20 members. One member shall be the 
                Director of the Agency for Healthcare Research and 
                Quality. The Director shall appoint the other members 
                not later than 30 days after the enactment of this Act.
                  ``(B) Terms.--
                          ``(i) In general.--Except as provided in 
                        clause (ii), each member of the Council shall 
                        be appointed for a term of 4 years.
                          ``(ii) Terms of initial appointees.--Of the 
                        members first appointed--
                                  ``(I) 8 shall be appointed for a term 
                                of 4 years; and
                                  ``(II) 7 shall be appointed for a 
                                term of 3 years.
                          ``(iii) Vacancies.--Any vacancies shall not 
                        affect the power and duties of the Council and 
                        shall be filled in the same manner as the 
                        original appointment.
                  ``(C) Qualifications.--
                          ``(i) In general.--The members of the Council 
                        shall include one senior official from each of 
                        the following agencies:
                                  ``(I) The Veterans Health 
                                Administration.
                                  ``(II) The Department of Defense 
                                Military Health Care System.
                                  ``(III) The Centers for Disease 
                                Control and Prevention.
                                  ``(IV) The National Center for Health 
                                Statistics.
                                  ``(V) The National Institutes of 
                                Health.
                                  ``(VI) The Center for Medicare & 
                                Medicaid Services.
                                  ``(VII) The Federal Employees Health 
                                Benefits Program.
                          ``(ii) National, philanthropic foundations.--
                        The members of the Council shall include 4 
                        senior leaders from major national, 
                        philanthropic foundations that fund and use 
                        health services research.
                          ``(iii) Stakeholders.--The remaining members 
                        of the Council shall be representatives of 
                        other stakeholders in health services research, 
                        including private purchasers, health plans, 
                        hospitals and other health facilities, and 
                        health consumer groups.
          ``(3) Annual report.--The Council shall submit to Congress an 
        annual report on the progress of the implementation of the 
        national health services research agenda.
  ``(h) Funding of Comparative Effectiveness Research.--For fiscal year 
2008 and each subsequent fiscal year, amounts in the Comparative 
Effectiveness Research Trust Fund (referred to in this section as the 
`CERTF') under section 9511 of the Internal Revenue Code of 1986 shall 
be available to the Secretary to carry out this section.''.
  (b) Comparative Effectiveness Research Trust Fund; Financing for 
Trust Fund.--
          (1) Establishment of trust fund.--
                  (A) In general.--Subchapter A of chapter 98 of the 
                Internal Revenue Code of 1986 (relating to trust fund 
                code) is amended by adding at the end the following new 
                section:

``SEC. 9511. HEALTH CARE COMPARATIVE EFFECTIVENESS RESEARCH TRUST FUND.

  ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Health Care 
Comparative Effectiveness Research Trust Fund' (hereinafter in this 
section referred to as the `CERTF'), consisting of such amounts as may 
be appropriated or credited to such Trust Fund as provided in this 
section and section 9602(b).
  ``(b) Transfers to Fund.--There are hereby appropriated to the Trust 
Fund the following:
          ``(1) For fiscal year 2008, $90,000,000.
          ``(2) For fiscal year 2009, $100,000,000.
          ``(3) For fiscal year 2010, $110,000,000.
          ``(4) For each fiscal year beginning with fiscal year 2011--
                  ``(A) an amount equivalent to the net revenues 
                received in the Treasury from the fees imposed under 
                subchapter B of chapter 34 (relating to fees on health 
                insurance and self-insured plans) for such fiscal year; 
                and
                  ``(B) subject to subsection (c)(2), amounts 
                determined by the Secretary of Health and Human 
                Services to be equivalent to the fair share per capita 
                amount computed under subsection (c)(1) for the fiscal 
                year multiplied by the average number of individuals 
                entitled to benefits under part A, or enrolled under 
                part B, of title XVIII of the Social Security Act 
                during such fiscal year.
The amounts appropriated under paragraphs (1), (2), (3), and (4)(B) 
shall be transferred from the Federal Hospital Insurance Trust Fund and 
from the Federal Supplementary Medical Insurance Trust Fund 
(established under section 1841 of such Act), and from the Medicare 
Prescription Drug Account within such Trust Fund, in proportion (as 
estimated by the Secretary) to the total expenditures during such 
fiscal year that are made under title XVIII of such Act from the 
respective trust fund or account.
  ``(c) Fair Share Per Capita Amount.--
          ``(1) Computation.--
                  ``(A) In general.--Subject to subparagraph (B), the 
                fair share per capita amount under this paragraph for a 
                fiscal year (beginning with fiscal year 2011) is an 
                amount computed by the Secretary of Health and Human 
                Services for such fiscal year that, when applied under 
                this section and subchapter B of chapter 34 of the 
                Internal Revenue Code of 1986, will result in revenues 
                to the CERTF of $375,000,000 for the fiscal year.
                  ``(B) Alternative computation.--
                          ``(i) In general.--If the Secretary is unable 
                        to compute the fair share per capita amount 
                        under subparagraph (A) for a fiscal year, the 
                        fair share per capita amount under this 
                        paragraph for the fiscal year shall be the 
                        default amount determined under clause (ii) for 
                        the fiscal year.
                          ``(ii) Default amount.--The default amount 
                        under this clause for--
                                  ``(I) fiscal year 2011 is equal to 
                                $2; or
                                  ``(II) a subsequent year is equal to 
                                the default amount under this clause 
                                for the preceeding fiscal year 
                                increased by the annual percentage 
                                increase in the medical care component 
                                of the consumer price index (United 
                                States city average) for the 12-month 
                                period ending with April of the 
                                preceding fiscal year.
                        Any amount determined under subclause (II) 
                        shall be rounded to the nearest penny.
          ``(2) Limitation on medicare funding.--In no case shall the 
        amount transferred under subsection (b)(4)(B) for any fiscal 
        year exceed $90,000,000.
  ``(d) Expenditures From Fund.--
          ``(1) In general.--Subject to paragraph (2), amounts in the 
        CERTF are available to the Secretary of Health and Human 
        Services for carrying out section 1822 of the Social Security 
        Act.
          ``(2) Allocation for commission.--Not less than the following 
        amounts in the CERTF for a fiscal year shall be available to 
        carry out the activities of the Comparative Effectiveness 
        Research Commission established under section 1822(b) of the 
        Social Security Act for such fiscal year:
                  ``(A) For fiscal year 2008, $7,000,000.
                  ``(B) For fiscal year 2009, $9,000,000.
                  ``(C) For each fiscal year beginning with 2010, 
                $10,000,000.
        Nothing in this paragraph shall be construed as preventing 
        additional amounts in the CERTF from being made available to 
        the Comparative Effectiveness Research Commission for such 
        activities.
  ``(e) Net Revenues.--For purposes of this section, the term `net 
revenues' means the amount estimated by the Secretary based on the 
excess of--
          ``(1) the fees received in the Treasury under subchapter B of 
        chapter 34, over
          ``(2) the decrease in the tax imposed by chapter 1 resulting 
        from the fees imposed by such subchapter.''.
                  (B) Clerical amendment.--The table of sections for 
                such subchapter A is amended by adding at the end 
                thereof the following new item:

``Sec. 9511. Health Care Comparative Effectiveness Research Trust 
Fund.''.

          (2) Financing for fund from fees on insured and self-insured 
        health plans.--
                  (A) General rule.--Chapter 34 of the Internal Revenue 
                Code of 1986 is amended by adding at the end the 
                following new subchapter:

         ``Subchapter B--Insured and Self-Insured Health Plans

``Sec. 4375. Health insurance
``Sec. 4376. Self-insured health plans
``Sec. 4377. Definitions and special rules

``SEC. 4375. HEALTH INSURANCE.

  ``(a) Imposition of Fee.--There is hereby imposed on each specified 
health insurance policy for each policy year a fee equal to the fair 
share per capita amount determined under section 9511(c)(1) multiplied 
by the average number of lives covered under the policy.
  ``(b) Liability for Fee.--The fee imposed by subsection (a) shall be 
paid by the issuer of the policy.
  ``(c) Specified Health Insurance Policy.--For purposes of this 
section--
          ``(1) In general.--Except as otherwise provided in this 
        section, the term `specified health insurance policy' means any 
        accident or health insurance policy issued with respect to 
        individuals residing in the United States.
          ``(2) Exemption of certain policies.--The term `specified 
        health insurance policy' does not include any insurance policy 
        if substantially all of the coverage provided under such policy 
        relates to--
                  ``(A) liabilities incurred under workers' 
                compensation laws,
                  ``(B) tort liabilities,
                  ``(C) liabilities relating to ownership or use of 
                property,
                  ``(D) credit insurance,
                  ``(E) medicare supplemental coverage, or
                  ``(F) such other similar liabilities as the Secretary 
                may specify by regulations.
          ``(3) Treatment of prepaid health coverage arrangements.--
                  ``(A) In general.--In the case of any arrangement 
                described in subparagraph (B)--
                          ``(i) such arrangement shall be treated as a 
                        specified health insurance policy, and
                          ``(ii) the person referred to in such 
                        subparagraph shall be treated as the issuer.
                  ``(B) Description of arrangements.--An arrangement is 
                described in this subparagraph if under such 
                arrangement fixed payments or premiums are received as 
                consideration for any person's agreement to provide or 
                arrange for the provision of accident or health 
                coverage to residents of the United States, regardless 
                of how such coverage is provided or arranged to be 
                provided.

``SEC. 4376. SELF-INSURED HEALTH PLANS.

  ``(a) Imposition of Fee.--In the case of any applicable self-insured 
health plan for each plan year, there is hereby imposed a fee equal to 
the fair share per capita amount determined under section 9511(c)(1) 
multiplied by the average number of lives covered under the plan.
  ``(b) Liability for Fee.--
          ``(1) In general.--The fee imposed by subsection (a) shall be 
        paid by the plan sponsor.
          ``(2) Plan sponsor.--For purposes of paragraph (1) the term 
        `plan sponsor' means--
                  ``(A) the employer in the case of a plan established 
                or maintained by a single employer,
                  ``(B) the employee organization in the case of a plan 
                established or maintained by an employee organization,
                  ``(C) in the case of--
                          ``(i) a plan established or maintained by 2 
                        or more employers or jointly by 1 or more 
                        employers and 1 or more employee organizations,
                          ``(ii) a multiple employer welfare 
                        arrangement, or
                          ``(iii) a voluntary employees' beneficiary 
                        association described in section 501(c)(9),
                the association, committee, joint board of trustees, or 
                other similar group of representatives of the parties 
                who establish or maintain the plan, or
                  ``(D) the cooperative or association described in 
                subsection (c)(2)(F) in the case of a plan established 
                or maintained by such a cooperative or association.
  ``(c) Applicable Self-Insured Health Plan.--For purposes of this 
section, the term `applicable self-insured health plan' means any plan 
for providing accident or health coverage if--
          ``(1) any portion of such coverage is provided other than 
        through an insurance policy, and
          ``(2) such plan is established or maintained--
                  ``(A) by one or more employers for the benefit of 
                their employees or former employees,
                  ``(B) by one or more employee organizations for the 
                benefit of their members or former members,
                  ``(C) jointly by 1 or more employers and 1 or more 
                employee organizations for the benefit of employees or 
                former employees,
                  ``(D) by a voluntary employees' beneficiary 
                association described in section 501(c)(9),
                  ``(E) by any organization described in section 
                501(c)(6), or
                  ``(F) in the case of a plan not described in the 
                preceding subparagraphs, by a multiple employer welfare 
                arrangement (as defined in section 3(40) of Employee 
                Retirement Income Security Act of 1974), a rural 
                electric cooperative (as defined in section 
                3(40)(B)(iv) of such Act), or a rural telephone 
                cooperative association (as defined in section 
                3(40)(B)(v) of such Act).

``SEC. 4377. DEFINITIONS AND SPECIAL RULES.

  ``(a) Definitions.--For purposes of this subchapter--
          ``(1) Accident and health coverage.--The term `accident and 
        health coverage' means any coverage which, if provided by an 
        insurance policy, would cause such policy to be a specified 
        health insurance policy (as defined in section 4375(c)).
          ``(2) Insurance policy.--The term `insurance policy' means 
        any policy or other instrument whereby a contract of insurance 
        is issued, renewed, or extended.
          ``(3) United states.--The term `United States' includes any 
        possession of the United States.
  ``(b) Treatment of Governmental Entities.--
          ``(1) In general.--For purposes of this subchapter--
                  ``(A) the term `person' includes any governmental 
                entity, and
                  ``(B) notwithstanding any other law or rule of law, 
                governmental entities shall not be exempt from the fees 
                imposed by this subchapter except as provided in 
                paragraph (2).
          ``(2) Treatment of exempt governmental programs.--In the case 
        of an exempt governmental program, no fee shall be imposed 
        under section 4375 or section 4376 on any covered life under 
        such program.
          ``(3) Exempt governmental program defined.--For purposes of 
        this subchapter, the term `exempt governmental program' means--
                  ``(A) any insurance program established under title 
                XVIII of the Social Security Act,
                  ``(B) the medical assistance program established by 
                title XIX or XXI of the Social Security Act,
                  ``(C) any program established by Federal law for 
                providing medical care (other than through insurance 
                policies) to individuals (or the spouses and dependents 
                thereof) by reason of such individuals being--
                          ``(i) members of the Armed Forces of the 
                        United States, or
                          ``(ii) veterans, and
                  ``(D) any program established by Federal law for 
                providing medical care (other than through insurance 
                policies) to members of Indian tribes (as defined in 
                section 4(d) of the Indian Health Care Improvement 
                Act).
  ``(c) Treatment as Tax.--For purposes of subtitle F, the fees imposed 
by this subchapter shall be treated as if they were taxes.
  ``(d) No Cover Over to Possessions.--Notwithstanding any other 
provision of law, no amount collected under this subchapter shall be 
covered over to any possession of the United States.''
                  (B) Clerical amendments.--
                          (i) Chapter 34 of such Code is amended by 
                        striking the chapter heading and inserting the 
                        following:

           ``CHAPTER 34--TAXES ON CERTAIN INSURANCE POLICIES

          ``subchapter a. policies issued by foreign insurers

         ``subchapter b. insured and self-insured health plans

         ``Subchapter A--Policies Issued By Foreign Insurers''.

                          (ii) The table of chapters for subtitle D of 
                        such Code is amended by striking the item 
                        relating to chapter 34 and inserting the 
                        following new item:

          ``Chapter 34--Taxes on Certain Insurance Policies''.

                  (C) Effective date.--The amendments made by this 
                subsection shall apply with respect to policies and 
                plans for portions of policy or plan years beginning on 
                or after October 1, 2010.

SEC. 905. IMPLEMENTATION OF HEALTH INFORMATION TECHNOLOGY (IT) UNDER 
                    MEDICARE.

  (a) In General.--Not later than January 1, 2010, the Secretary of 
Health and Human Services shall submit to Congress a report that 
includes--
          (1) a plan to develop and implement a health information 
        technology (health IT) system for all health care providers 
        under the Medicare program that meets the specifications 
        described in subsection (b); and
          (2) an analysis of the impact, feasibility, and costs 
        associated with the use of health information technology in 
        medically underserved communities.
  (b) Plan Specification.--The specifications described in this 
subsection, with respect to a health information technology system 
described in subsection (a), are the following:
          (1) The system protects the privacy and security of 
        individually identifiable health information.
          (2) The system maintains and provides permitted access to 
        health information in an electronic format (such as through 
        computerized patient records or a clinical data repository).
          (3) The system utilizes interface software that allows for 
        interoperability.
          (4) The system includes clinical decision support.
          (5) The system incorporates e-prescribing and computerized 
        physician order entry.
          (6) The system incorporates patient tracking and reminders.
          (7) The system utilizes technology that is open source (if 
        available) or technology that has been developed by the 
        government.
The report shall include an analysis of the financial and 
administrative resources necessary to develop such system and 
recommendations regarding the level of subsidies needed for all such 
health care providers to adopt the system.

SEC. 906. DEVELOPMENT, REPORTING, AND USE OF HEALTH CARE MEASURES.

  (a) In General.--Part E of title XVIII of the Social Security Act (42 
U.S.C. 1395x et seq.) is amended by inserting after section 1889 the 
following:
       ``development, reporting, and use of health care measures
  ``Sec. 1890.  (a) Fostering Development of Health Care Measures.--The 
Secretary shall designate, and have in effect an arrangement with, a 
single organization (such as the National Quality Forum) that meets the 
requirements described in subsection (c), under which such organization 
provides the Secretary with advice on, and recommendations with respect 
to, the key elements and priorities of a national system for 
establishing health care measures. The arrangement shall be effective 
beginning no sooner than January 1, 2008, and no later than September 
30, 2008.
  ``(b) Duties.--The duties of the organization designated under 
subsection (a) (in this title referred to as the `designated 
organization') shall, in accordance with subsection (d), include--
          ``(1) establishing and managing an integrated national 
        strategy and process for setting priorities and goals in 
        establishing health care measures;
          ``(2) coordinating the development and specifications of such 
        measures;
          ``(3) establishing standards for the development and testing 
        of such measures;
          ``(4) endorsing national consensus health care measures; and
          ``(5) advancing the use of electronic health records for 
        automating the collection, aggregation, and transmission of 
        measurement information.
  ``(c) Requirements Described.--For purposes of subsection (a), the 
requirements described in this subsection, with respect to an 
organization, are the following:
          ``(1) Private nonprofit.--The organization is a private 
        nonprofit entity governed by a board and an individual 
        designated as president and chief executive officer.
          ``(2) Board membership.--The members of the board of the 
        organization include representatives of--
                  ``(A) health care providers or groups representing 
                such providers;
                  ``(B) health plans or groups representing health 
                plans;
                  ``(C) groups representing health care consumers;
                  ``(D) health care purchasers and employers or groups 
                representing such purchasers or employers; and
                  ``(E) health care practitioners or groups 
                representing practitioners.
          ``(3) Other membership requirements.--The membership of the 
        organization is representative of individuals with experience 
        with--
                  ``(A) urban health care issues;
                  ``(B) safety net health care issues;
                  ``(C) rural and frontier health care issues; and
                  ``(D) health care quality and safety issues.
          ``(4) Open and transparent.--With respect to matters related 
        to the arrangement described in subsection (a), the 
        organization conducts its business in an open and transparent 
        manner and provides the opportunity for public comment.
          ``(5) Voluntary consensus standards setting organization.--
        The organization operates as a voluntary consensus standards 
        setting organization as defined for purposes of section 12(d) 
        of the National Technology Transfer and Advancement Act of 1995 
        (Public Law 104-113) and Office of Management and Budget 
        Revised Circular A-119 (published in the Federal Register on 
        February 10, 1998).
          ``(6) Experience.--The organization has at least 7 years 
        experience in establishing national consensus standards.
  ``(d) Requirements for Health Care Measures.--In carrying out its 
duties under subsection (b), the designated organization shall ensure 
the following:
          ``(1) Measures.--The designated organization shall ensure 
        that the measures established or endorsed under subsection (b) 
        are evidence-based, reliable, and valid; and include--
                  ``(A) measures of clinical processes and outcomes, 
                patient experience, efficiency, and equity;
                  ``(B) measures to assess effectiveness, timeliness, 
                patient self-management, patient centeredness, and 
                safety; and
                  ``(C) measures of under use and over use.
          ``(2) Priorities.--
                  ``(A) In general.--The designated organization shall 
                ensure that priority is given to establishing and 
                endorsing--
                          ``(i) measures with the greatest potential 
                        impact for improving the effectiveness and 
                        efficiency of health care;
                          ``(ii) measures that may be rapidly 
                        implemented by group health plans, health 
                        insurance issuers, physicians, hospitals, 
                        nursing homes, long-term care providers, and 
                        other providers;
                          ``(iii) measures which may inform health care 
                        decisions made by consumers and patients; and
                          ``(iv) measures that apply to multiple 
                        services furnished by different providers 
                        during an episode of care.
                  ``(B) Annual report on priorities; secretarial 
                publication and comment.--
                          ``(i) Annual report.--The designated 
                        organization shall issue and submit to the 
                        Secretary a report by March 31 of each year 
                        (beginning with 2009) on the organization's 
                        recommendations for priorities and goals in 
                        establishing and endorsing health care measures 
                        under this section over the next five years.
                          ``(ii) Secretarial review and comment.--After 
                        receipt of the report under clause (i) for a 
                        year, the Secretary shall publish the report in 
                        the Federal Register, including any comments of 
                        the Secretary on the priorities and goals set 
                        forth in the report.
          ``(3) Risk adjustment.--The designated organization, in 
        consultation with health care measure developers and other 
        stakeholders, shall establish procedures to assure that health 
        care measures established and endorsed under this section 
        account for differences in patient health status, patient 
        characteristics, and geographic location, as appropriate.
          ``(4) Maintenance.--The designated organization, in 
        consultation with owners and developers of health care 
        measures, shall require the owners or developers of such 
        measures to update and enhance such measures, including the 
        development of more accurate and precise specifications, and 
        retire existing outdated measures. Such updating shall occur 
        not more often than once during each 12-month period, except in 
        the case of emergent circumstances requiring a more immediate 
        update to a measure.
  ``(e) Use of Health Care Measures; Reporting.--
          ``(1) Use of measures.--For purposes of activities authorized 
        or required under this title, the Secretary shall select from 
        health care measures--
                  ``(A) recommended by multi-stakeholder groups; and
                  ``(B) endorsed by the designated organization under 
                subsection (b)(4).
          ``(2) Reporting.--The Secretary shall implement procedures, 
        consistent with generally accepted standards, to enable the 
        Department of Health and Human Services to accept the 
        electronic submission of data for purposes of--
                  ``(A) effectiveness measurement using the health care 
                measures developed pursuant to this section; and
                  ``(B) reporting to the Secretary measures used to 
                make value-based payments under this title.
  ``(f) Contracts.--The Secretary, acting through the Agency for 
Healthcare Research and Quality, may contract with organizations to 
support the development and testing of health care measures meeting the 
standards established by the designated organization.
  ``(g) Dissemination of Information.--In order to make information on 
health care measures available to health care consumers, health 
professionals, public health officials, oversight organizations, 
researchers, and other appropriate individuals and entities, the 
Secretary shall work with multi-stakeholder groups to provide for the 
dissemination of information developed pursuant to this title.
  ``(h) Funding.--For purposes of carrying out subsections (a), (b), 
(c), and (d), including for expenses incurred for the arrangement under 
subsection (a) with the designated organization, there is payable from 
the Federal Hospital Insurance Trust Fund (established under section 
1817) and the Federal Supplementary Medical Insurance Trust Fund 
(established under section 1841)--
          ``(1) for fiscal year 2008, $15,000,000, multiplied by the 
        ratio of the total number of months in the year to the number 
        of months (and portions of months) of such year during which 
        the arrangement under subsection (a) is effective; and
          ``(2) for each of the fiscal years, 2009 through 2012, 
        $15,000,000.''.

SEC. 907. IMPROVEMENTS TO THE MEDIGAP PROGRAM.

  (a) Implementation of NAIC Recommendations.--The Secretary of Health 
and Human Services shall provide, under subsections (p)(1)(E) of 
section 1882 of the Social Security Act (42 U.S.C. 1395s), for 
implementation of the changes in the NAIC model law and regulations 
recommended by the National Association of Insurance Commissioners in 
its Model #651 (``Model Regulation to Implement the NAIC Medicare 
Supplement Insurance Minimum Standards Model Act'') on March 11, 2007, 
as modified to reflect the changes made under this Act. In carrying out 
the previous sentence, the benefit packages classified as ``K'' and 
``L'' shall be eliminated and such NAIC recommendations shall be 
treated as having been adopted by such Association as of January 1, 
2008.
  (b) Required Offering of a Range of Policies.--
          (1) In general.--Subsection (o) of such section is amended by 
        adding at the end the following new paragraph:
          ``(4) In addition to the requirement of paragraph (2), the 
        issuer of the policy must make available to the individual at 
        least medicare supplemental policies with benefit packages 
        classified as `C' or `F'.''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to medicare supplemental policies issued on or 
        after January 1, 2008.
  (c) Removal of New Benefit Packages.--Such section is further 
amended--
          (1) in subsection (o)(1), by striking ``(p), (v), and (w)'' 
        and inserting ``(p) and (v)'';
          (2) in subsection (v)(3)(A)(i), by striking ``or a benefit 
        package described in subparagraph (A) or (B) of subsection 
        (w)(2)''; and
          (3) in subsection (w)--
                  (A) by striking ``Policies'' and all that follows 
                through ``The Secretary'' and inserting ``Policies.--
                The Secretary'';
                  (B) by striking the second sentence; and
                  (C) by striking paragraph (2) .

SEC. 908. IMPLEMENTATION FUNDING.

  For purposes of implementing the provisions of this Act (other than 
title X), the Secretary of Health and Human Services shall provide for 
the transfer, from the Federal Supplementary Medical Insurance Trust 
Fund established under section 1841 of the Social Security Act (42 
U.S.C. 1395t), of $40,000,000 to the Centers for Medicare & Medicaid 
Services Program Management Account for fiscal year 2008.

                           TITLE X--REVENUES

SEC. 1001. INCREASE IN RATE OF EXCISE TAXES ON TOBACCO PRODUCTS AND 
                    CIGARETTE PAPERS AND TUBES.

  (a) Small Cigarettes.--Paragraph (1) of section 5701(b) of the 
Internal Revenue Code of 1986 is amended by striking ``$19.50 per 
thousand ($17 per thousand on cigarettes removed during 2000 or 2001)'' 
and inserting ``$42 per thousand''.
  (b) Large Cigarettes.--Paragraph (2) of section 5701(b) of such Code 
is amended by striking ``$40.95 per thousand ($35.70 per thousand on 
cigarettes removed during 2000 or 2001)'' and inserting ``$88.20 per 
thousand''.
  (c) Small Cigars.--Paragraph (1) of section 5701(a) of such Code is 
amended by striking ``$1.828 cents per thousand ($1.594 cents per 
thousand on cigars removed during 2000 or 2001)'' and inserting ``$42 
per thousand''.
  (d) Large Cigars.--Paragraph (2) of section 5701(a) of such Code is 
amended--
          (1) by striking ``20.719 percent (18.063 percent on cigars 
        removed during 2000 or 2001)'' and inserting ``44.63 percent'', 
        and
          (2) by striking ``$48.75 per thousand ($42.50 per thousand on 
        cigars removed during 2000 or 2001)'' and inserting ``$1 per 
        cigar''.
  (e) Cigarette Papers.--Subsection (c) of section 5701 of such Code is 
amended by striking ``1.22 cents (1.06 cents on cigarette papers 
removed during 2000 or 2001)'' and inserting ``2.63 cents''.
  (f) Cigarette Tubes.--Subsection (d) of section 5701 of such Code is 
amended by striking ``2.44 cents (2.13 cents on cigarette tubes removed 
during 2000 or 2001)'' and inserting ``5.26 cents''.
  (g) Snuff.--Paragraph (1) of section 5701(e) of such Code is amended 
by striking ``58.5 cents (51 cents on snuff removed during 2000 or 
2001)'' and inserting ``$1.26''.
  (h) Chewing Tobacco.--Paragraph (2) of section 5701(e) of such Code 
is amended by striking ``19.5 cents (17 cents on chewing tobacco 
removed during 2000 or 2001)'' and inserting ``42 cents''.
  (i) Pipe Tobacco.--Subsection (f) of section 5701 of such Code is 
amended by striking ``$1.0969 cents (95.67 cents on pipe tobacco 
removed during 2000 or 2001)'' and inserting ``$2.36''.
  (j) Roll-Your-Own Tobacco.--
          (1) In general.--Subsection (g) of section 5701 of such Code 
        is amended by striking ``$1.0969 cents (95.67 cents on roll-
        your-own tobacco removed during 2000 or 2001)'' and inserting 
        ``$7.4667''.
          (2) Inclusion of cigar tobacco.--Subsection (o) of section 
        5702 of such Code is amended by inserting ``or cigars, or for 
        use as wrappers for making cigars'' before the period at the 
        end.
  (k) Effective Date.--The amendments made by this section shall apply 
to articles removed after December 31, 2007.
  (l) Floor Stocks Taxes.--
          (1) Imposition of tax.--On cigarettes manufactured in or 
        imported into the United States which are removed before 
        January 1, 2008, and held on such date for sale by any person, 
        there is hereby imposed a tax in an amount equal to the excess 
        of--
                  (A) the tax which would be imposed under section 5701 
                of the Internal Revenue Code of 1986 on the article if 
                the article had been removed on such date, over
                  (B) the prior tax (if any) imposed under section 5701 
                of such Code on such article.
          (2) Authority to exempt cigarettes held in vending 
        machines.--To the extent provided in regulations prescribed by 
        the Secretary, no tax shall be imposed by paragraph (1) on 
        cigarettes held for retail sale on January 1, 2008, by any 
        person in any vending machine. If the Secretary provides such a 
        benefit with respect to any person, the Secretary may reduce 
        the $500 amount in paragraph (3) with respect to such person.
          (3) Credit against tax.--Each person shall be allowed as a 
        credit against the taxes imposed by paragraph (1) an amount 
        equal to $500. Such credit shall not exceed the amount of taxes 
        imposed by paragraph (1) for which such person is liable.
          (4) Liability for tax and method of payment.--
                  (A) Liability for tax.--A person holding cigarettes 
                on January 1, 2008, to which any tax imposed by 
                paragraph (1) applies shall be liable for such tax.
                  (B) Method of payment.--The tax imposed by paragraph 
                (1) shall be paid in such manner as the Secretary shall 
                prescribe by regulations.
                  (C) Time for payment.--The tax imposed by paragraph 
                (1) shall be paid on or before April 14, 2008.
          (5) Articles in foreign trade zones.--- Notwithstanding the 
        Act of June 18, 1934 (48 Stat. 998, 19 U.S.C. 81a) and any 
        other provision of law, any article which is located in a 
        foreign trade zone on January 1, 2008, shall be subject to the 
        tax imposed by paragraph (1) if--
                  (A) internal revenue taxes have been determined, or 
                customs duties liquidated, with respect to such article 
                before such date pursuant to a request made under the 
                1st proviso of section 3(a) of such Act, or
                  (B) such article is held on such date under the 
                supervision of a customs officer pursuant to the 2d 
                proviso of such section 3(a).
          (6) Definitions.--For purposes of this subsection--
                  (A) In general.--Terms used in this subsection which 
                are also used in section 5702 of the Internal Revenue 
                Code of 1986 shall have the respective meanings such 
                terms have in such section.
                  (B) Secretary.--The term ``Secretary'' means the 
                Secretary of the Treasury or the Secretary's delegate.
          (7) Controlled groups.--Rules similar to the rules of section 
        5061(e)(3) of such Code shall apply for purposes of this 
        subsection.
          (8) Other laws applicable.--All provisions of law, including 
        penalties, applicable with respect to the taxes imposed by 
        section 5701 of such Code shall, insofar as applicable and not 
        inconsistent with the provisions of this subsection, apply to 
        the floor stocks taxes imposed by paragraph (1), to the same 
        extent as if such taxes were imposed by such section 5701. The 
        Secretary may treat any person who bore the ultimate burden of 
        the tax imposed by paragraph (1) as the person to whom a credit 
        or refund under such provisions may be allowed or made.

SEC. 1002. EXEMPTION FOR EMERGENCY MEDICAL SERVICES TRANSPORTATION.

  (a) In General.--Subsection (l) of section 4041 of the Internal 
Revenue Code of 1986 is amended to read as follows:
  ``(l) Exemption for Certain Uses.--
          ``(1) Certain aircraft.--No tax shall be imposed under this 
        section on any liquid sold for use in, or used in, a helicopter 
        or a fixed-wing aircraft for purposes of providing 
        transportation with respect to which the requirements of 
        subsection (f) or (g) of section 4261 are met.
          ``(2) Emergency medical services.--No tax shall be imposed 
        under this section on any liquid sold for use in, or used in, 
        any ambulance for purposes of providing transportation for 
        emergency medical services. The preceding sentence shall not 
        apply to any liquid used after December 31, 2012.''.
  (b) Fuels Not Used for Taxable Purposes.--Section 6427 of such Code 
is amended by inserting after subsection (e) the following new 
subsection:
  ``(f) Use To Provide Emergency Medical Services.--Except as provided 
in subsection (k), if any fuel on which tax was imposed by section 4081 
or 4041 is used in an ambulance for a purpose described in section 
4041(l)(2), the Secretary shall pay (without interest) to the ultimate 
purchaser of such fuel an amount equal to the aggregate amount of the 
tax imposed on such fuel. The preceding sentence shall not apply to any 
liquid used after December 31, 2012.''.
  (c) Time for Filing Claims; Period Covered.--Paragraphs (1) and 
(2)(A) of section 6427(i) of such Code are each amended by inserting 
``(f),'' after ``(d),''.
  (d) Conforming Amendment.--Section 6427(d) of such Code is amended by 
striking ``4041(l)'' and inserting ``4041(l)(1)''.
  (e) Effective Date.--The amendments made by this section shall apply 
to fuel used in transportation provided in quarters beginning after the 
date of the enactment of this Act.
                            I. INTRODUCTION


                         A. Purpose and Summary

    The bill, H.R. 3162 (the ``Children's Health and Medicare 
Protection Act of 2007''), amends titles XVIII, XIX, and XXI of 
the Social Security Act to extend and improve the CHIP program, 
to improve beneficiary protections under the Medicare, 
Medicaid, and CHIP, and amends the Internal Revenue Code of 
1986 to provide revenue to fund these programs, among other 
purposes.

                 B. Background and Need for Legislation

          Every citizen will be able, in his productive years 
        when he is earning, to insure himself against the 
        ravages of illness in his old age.--President Lyndon B. 
        Johnson

    On July 30, 1965, President Lyndon B. Johnson signed into 
law the legislation creating Medicare. As we celebrate the 42nd 
anniversary of that momentous occasion, the Committee on Ways 
and Means has reported out favorably the Children's Health and 
Medicare Protection (CHAMP) Act of 2007. Indeed, the provisions 
of the CHAMP Act hew true to the promises made at enactment, 
and improve and protect Medicare as the program prepares for 
the forthcoming retirement of the baby boom generation. More 
action will be needed, but the changes contained in this 
legislation are a necessary first step toward getting the 
program back on track.
    Over the last dozen years, and particularly during the last 
six years, Congress has spent little time maintaining and 
overseeing Medicare. The Medicare Modernization Act (MMA) of 
2003, which added the option to purchase subsidized private 
drug coverage, contained a number of provisions that were 
unrelated to drug coverage and designed to privatize Medicare. 
The CHAMP Act reverses these actions, and strengthens the 
program. Medicare was originally designed not as a welfare 
program, but an inter-generational social compact into which 
everyone would pay and all would benefit. The CHAMP Act renews 
the nation's commitment to Medicare as a widely supported and 
valued social insurance program and core component of the 
nation's retirement safety net.
    Perhaps the MMA's most insidious provisions were those that 
arbitrarily and vastly increased subsidies to health 
maintenance organizations (HMOs) and other private insurance 
plans through the Medicare Advantage (MA) program. As a result, 
MA plans are now paid an average of 13% more than it would cost 
to provide care in fee-for-service Medicare. In some areas, the 
overpayments exceed 50 percent of the cost of Medicare. Not 
surprisingly, the government's Chief Actuary has stated that 
under current law it costs more, not less, for the government 
to pay for care through the private plans. And those 
overpayments will continue into perpetuity--at no point under 
current law does the Chief Actuary estimate that private plans 
will actually save money for the Medicare program. Until very 
recently payments for Medicare HMOs were actually five percent 
less than the cost of delivering care through Medicare because 
the plans said they could offer Medicare's benefits at a lower 
cost. It is only in recent years that payments to the plans 
increased so dramatically. For several decades, HMOs existed as 
an option in Medicare without today's substantial overpayments.
    The Medicare Payment Advisory Commission (MedPAC), the HHS 
Inspector General, the Congressional Budget Office, and the 
Administration's own Chief Medicare Actuary agree that MA plans 
are overpaid. These overpayments were designed to help private 
plans lure beneficiaries away from fee-for-service Medicare. 
Eventually, as per the agenda advanced by the former 
Representative Bill Thomas when he lead the Medicare Commission 
following the Balanced Budget Act of 1997, the objective of the 
MMA was to turn Medicare into a voucher program under which 
beneficiaries would be given a fixed amount of money and be 
forced to fend for themselves in a private insurance market. 
This misguided goal ignores the history of Medicare's creation, 
namely that private insurance companies did not want to insure 
elderly patients or people with disabilities.
    The CHAMP Act follows the recommendations of MedPAC to 
level the playing field between Medicare and the private plans 
by eliminating the overpayments over a multi-year period. MA 
plans claim that the overpayments are returned to beneficiaries 
in the form of extra benefits. But private plans often charge 
higher cost-sharing for needed benefits, and there are no data 
proving that overpayments are actually spent on extra benefits. 
Indeed, major MA plans have repeatedly touted the profitability 
of the Medicare business to their investors. We also know that 
MA plans often charge more for vital Medicare benefits home 
health, hospital stays, nursing home stays and chemotherapy.
    Eliminating the excess payments is not just good policy. It 
also protects the Medicare Trust Fund and reduces Part B 
premiums. The Committee has been advised as of the writing of 
this report that the CMS Office of the Actuary projects that 
the CHAMP Act as reported out of the Committee would extend the 
life of the Medicare Trust Fund by three years, largely because 
the MA subsidies are eliminated. In addition, limiting MA 
payments to the Medicare rates will also reduce premiums. Under 
current law, even though fewer than 2 in 10 beneficiaries are 
in MA plans, the overpayments have raised Medicare premiums for 
all beneficiaries by nearly $700 million just in this year.
    The CHAMP Act reinvests the savings from reducing MA 
spending are reinvested in the CHAMP Act to guarantee better 
health care to people instead of additional profits to 
insurance executives and shareholders. The key Medicare 
improvements include benefit improvements, expansions and 
streamlining of programs designed to keep Medicare affordable 
for beneficiaries with limited incomes, an interim proposal to 
address problems in the physician payment formula and 
additional payment policy refinements, including provisions 
that are targeted to maintain access in rural areas.
    Preventive benefits improve health and reduce long-term 
costs. Historically, Congress has had to act to improve 
preventive benefits in Medicare. Under the CHAMP Act, the 
Centers for Medicare and Medicaid Services (CMS) will now be 
allowed to add preventive benefits without Congressional 
action. To promote use of these important benefits, the CHAMP 
Act eliminates cost-sharing and excludes from the deductible 
all current and future preventive benefits.
    The CHAMP Act also improves mental health coverage. For 
years, Medicare beneficiaries with mental illness have been 
treated as second-class citizens, forced to pay a 50 percent 
co-insurance in the outpatient setting when virtually all other 
outpatient services are subject to co-insurance of just 20 
percent. The CHAMP Act ensures mental health parity in Medicare 
by reducing cost-sharing to 20 percent.
    The CHAMP Act will help millions of low-income 
beneficiaries who struggle each month to pay for health care 
costs. The limited income subsidy (LIS) program in Part D and 
the combined Medicare Savings Programs (MSP) for non-drug 
benefits provide help with cost-sharing for beneficiaries who 
meet certain requirements. The CHAMP Act makes real 
improvements in these programs, including the asset tests, 
streamlining application procedures, improving coordination 
between the programs and the agencies that administer them, and 
expanding eligibility. These changes will help ensure that 
beneficiaries with limited income obtain the benefits to which 
they are entitled.
    The CHAMP Act also takes a number of steps to help 
beneficiaries successfully navigate the new drug program. These 
improvements will ensure access to necessary drugs, reduce 
costs for certain beneficiaries, and ensure low-income and 
adversely affected beneficiaries have an opportunity to change 
plans.
    While Medicare provides the same benefits for every 
beneficiary, racial disparities persist in access to those 
benefits. For example, in 2004, two-thirds of whites 65 years 
and older received flu vaccines, compared with just 45 percent 
of African Americans and 55 percent of Hispanics. The CHAMP Act 
will reduce disparities by requiring CMS to collect and report 
new disparities data, improving outreach to limited English 
proficient populations, and improving support for beneficiaries 
entering the program that were previously uninsured.
    The CHAMP Act makes substantial changes to the physician 
payment formula, both to avert fee cuts that will otherwise 
occur in 2008 and 2009, and to plan for the future. With an 
emphasis on primary and preventive care, the groundwork laid in 
the CHAMP Act should help move us toward a better payment 
system for physicians in the future.
    These changes combine to put Medicare back on track to 
meeting the needs of all beneficiaries in a modern world. It 
reverses the most pernicious aspects of the MMA, both in terms 
of privatization and its efforts to arbitrarily limit 
Medicare's funding. And it puts a firm focus on prevention and 
core improvements to the program to ensure it meets the needs 
of all beneficiaries.
    The CHAMP Act is supported by more than 90 organizations 
including the AARP, the AMA, the NAACP and many others 
representing senior citizens, people with disabilities, 
physicians, hospitals, children and others. [See appendix A for 
list of supporters as of this date]
    The bulk of the CHAMP Act is financed through adjusting 
current Federal health spending. The only new funding source in 
this bill is increasing the current Federal excise tax on 
cigarettes by $0.45 a pack. The tobacco tax is sound fiscal and 
health policy. Raising the cost of cigarettes is the best way 
to stop children from starting to smoke in the first place.
    Although title I (relating to the State Children's Health 
Insurance Program or ``S-CHIP'') and title VIII (relating to 
Medicaid), are not technically before the Committee on Ways and 
Means, it is important to note that the Congressional Budget 
Office (CBO) estimates that this legislation provides health 
care for more than 5 million low-income children who were 
previously uninsured, and maintains coverage for six million 
children who are currently covered by S-CHIP. Together, 11 
million children receive health care as a result of the CHAMP 
Act. In contrast, the President's budget would have severely 
under-funded S-CHIP, leading one million children to lose 
coverage. When S-CHIP was created, eligibility levels were set 
at 200 percent of the poverty level or 50 percentage points 
above where a state's Medicaid eligibility level was. This does 
not change in the CHAMP Act. The program remains focused on 
children in low-income working families--and the numbers prove 
it will make a real difference.
    Ensuring affordable comprehensive health care to those in 
need is a core function of our government. The American people 
want our children to have health insurance, and want to 
guarantee Medicare for our senior citizens and people with 
disabilities. The CHAMP Act does both.

                         C. Legislative History


Background

    H.R. 3162 was introduced in the House of Representatives on 
July 24, 2007, and was referred to the Committee on Ways and 
Means and the Committee on Energy and Commerce.

Subcommittee action

    The Subcommittee on Health of the Committee on Ways and 
Means held 15 hearings and made one request for written 
comments for the record in the 110th Congress. These hearings 
explored various aspects of the Medicare program and how it 
could be reformed and strengthened. The following is a list of 
these hearings in chronological order:

February 13, 2007: President's Fiscal Year 2008 Budget with 
        Acting CMS Administrator Norwalk
March 1, 2007: MedPAC's Annual March Report with MedPAC 
        Chairman Glenn M. Hackbarth
March 6, 2007: MedPAC's Report on the Sustainable Growth Rate 
        (SGR)
March 8, 2007: Medicare Program Integrity
March 14, 2007: Genetic Non-Discrimination
March 21, 2007: Medicare Advantage
March 27, 2007: Mental Health and Substance Abuse Parity
April 25, 2007: 2007 Medicare Trustees Report
May 3, 2007: Medicare Programs for Low-Income Beneficiaries
May 10, 2007: Options to Improve Quality and Efficiency Among 
        Medicare Physicians
May 15, 2007: Payments to Certain Medicare Fee-For-Service 
        Providers
May 22, 2007: Medicare Advantage Private Fee-For-Service Plans
June 12, 2007: Strategies to Increase Information on 
        Comparative Clinical Effectiveness
June 21, 2007: Beneficiary Protections in Medicare Part D
June 26, 2007: Ensuring Kidney Patients Receive Safe and 
        Appropriate Anemia Management Care
July 26, 2007: Request for Written Comments on Medicare Therapy 
        Caps and Refined and Alternative Payment Methodologies

Full committee action

    The Committee on Ways and Means marked up the bill on July 
26th, 2007 and ordered the bill, as amended, favorably 
reported.

                               APPENDIX A

List of organizations supporting H.R. 3162, the ``Children's Health and 
        Medicare Protection (CHAMP) Act of 2007''

AARP
Acute Long Term Hospital Association (ALTHA)
AFL-CIO
Alliance for Better Health Care (ABHC)
Alliance for Retired Americans
Alliance of Dedicated Cancer Centers
American Academy of Audiology (AAA)
American Academy of Child and Adolescent Psychiatry
American Academy of Family Physicians (AAFP)
American Academy of Ophthalmology (AAO)
American Academy of Pediatrics (AAP)
American Association for Marriage and Family Therapy
American Association of Geriatric Psychiatry
American Association of Neurological Surgeons
American Association of Orthopaedic Surgeons
American Association of School Administrators
American Cancer Society Cancer Action Network
American Clinical Laboratory Association
American College of Nurse Midwives
Amercian College of Obstetricians and Gynecologists (ACOG)
American College of Osteopathic Family Physicians
American College of Osteopathic Internists
American College of Physicians (ACP)
American College of Surgeons (ACS)
American Counseling Association
American Dental Hygenists' Association
American Diabetes Association
American Dietetic Association
Amercian Federation of State, County, and Municipal Employees
American Federation of Teachers (AFT)
American Gastroenterological Association
American Heart Association
American Hospital Association (AHA)
American Lung Association
American Medical Association (AMA)
American Mental Health Counselors Association
American Nurses Association
American Osteopathic Association (AOA)
American Psychological Association
American Society for Therapeutic Radiology and Oncology (ASTRO)
Amercian Speech-Language Hearing Association
Association of American Medical Colleges
Association of University Centers on Disabilities (AUCD)
Bazelon Center for Mental Health Law
California Medical Association (CMA)
Campaign for Tobacco-Free Kids
Catholic Health Association
Center for Medicare Advocacy
Child Welfare League of America
Children's Dental Health Project
Children's Defense Fund
Clinical Social Work Association
Coalition for Health Services Research
Coalition of Full Service Community Hospitals
Coalition to Preserve Rehabilitation
College of American Pathologists
Congress of Neurological Surgeons
Consortium for Citizens with Disabilities (CCD)
Consumers Union
Disability Policy Collaboration
Easter Seals
Families USA
Federation of American Hospitals (FAH)
First Focus
Friends Committee on National Legislation
Friends of National Quality Forum (Includes 18 Organizations)
Generic Pharmaceutical Association (GPhA)
Genzyme Corporation
HIV Medicaid/Medicare Working Group (Includes 18 Organizations)
HIV Medicine Association
Infectious Diseases Society of America (ISDA)
Juvenile Diabetes Research Foundation International
Lutheran Services in America
March of Dimes
Medicare Cost Contractors Alliance
Medicare Rights Center
Nationial Alliance on Mental Illness (NAMI)
National Association for the Advancement of Colored People 
        (NAACP)
National Association of Insurance Commissioners
National Association of Social Workers
National Association of Urban Hospitals
National Committee to Preserve Social Security and Medicare
Natonal Council for Community Behavioral Health Care
National Council on Aging (NCOA)
National Education Association
National Hispanic Medical Association
National Medical Association
National Partnership for Women and Families
National Rural Health Association
Premier
Society of General Internal Medicine
Society of Thoracic Surgeons
Title II Community AIDS National Network
Washington State Labor Council

                      II. EXPLANATION OF THE BILL


              TITLE II--MEDICARE BENEFICIARY IMPROVEMENTS


                  Subtitle A--Improvement in Benefits


    SECTION 201. COVERAGE AND WAIVER OF COST-SHARING FOR PREVENTIVE 
                                SERVICES

Current law

    Medicare Part B covers physicians' services, outpatient 
hospital services, durable medical equipment, and other medical 
services. The program generally pays 80% of the approved amount 
(generally a fee schedule or other predetermined amount) for 
covered services in excess of the annual deductible ($131 in 
2007). The beneficiary is liable for the remaining 20%. The 
coinsurance for hospital outpatient services can be as high as 
40%. The deductible and/or coinsurance are waived for certain 
services, primarily preventive services.

Explanation of provision

    The provision would define preventive services as: prostate 
cancer screening tests, colorectal cancer screening tests, 
diabetes outpatient self-management training services, 
screening for glaucoma for certain individuals, medical 
nutrition therapy services for certain individuals, an initial 
preventive physical exam, cardiovascular screening blood tests, 
diabetes screening tests, ultrasound screening for abdominal 
aortic aneurysm for certain individuals, pneumococcal and 
influenza vaccine and their administration, hepatitis B vaccine 
and its administration for certain individuals, screening 
mammography, screening pap smear and screening pelvic exam, and 
bone mass measurement as these services are currently defined 
under the program. The term also includes the new category 
additional preventive services.
    The provision would add this new category, additional 
preventive services, to Medicare's list of medical and other 
health services. This term would mean items and services, 
including mental health services, not otherwise covered under 
Medicare that the Secretary determined to be reasonable and 
necessary for the prevention or early detection of an illness 
or disability. In making this determination, the Secretary 
would be required to take into account evidence-based 
recommendations by the United States Preventive Services Task 
Force and other appropriate organizations. The Secretary would 
be further required to use the process for making national 
coverage determinations.
    The provision would eliminate coinsurance for all of 
Medicare's current preventive services for which coinsurance is 
currently applied and waive application of the Medicare Part B 
deductible for these services as well. The provision would 
eliminate the application of coinsurance or the Part B 
deductible to any new preventive services that are added to 
Medicare as well.
    The provision would include all preventive services, 
including the new additional preventive services category, 
within the definition of the initial preventive physical exam.
    The provision would apply to services furnished on or after 
January 1, 2008.

Reason for change

    Preventive benefits are a vital service--the provision of 
which will prevent people from developing illnesses that would 
otherwise prove very costly.
    In order to add new preventive benefits to Medicare today, 
Congress must act on each one. This provision allows the 
Medicare agency, in consultation with the United States 
Preventive Services Task Force--the recognized experts on 
preventive medicine--to add new preventive services to Medicare 
without requiring Congressional action. The goal is to speed 
adoption of preventive services to Medicare beneficiaries and 
to make those determinations based on the best scientific 
evidence.
    Another problem with Medicare's preventive benefits today 
is that utilization rates are very low. To help address that 
problem, the provision eliminates both the coinsurance and 
application of the deductible for preventive services. By 
eliminating all beneficiary cost-sharing for these services, 
more people should utilize the services. This is the same 
rationale used by health insurance companies that rarely charge 
enrollees for well-child visits.
    The Secretary of HHS has the authority to define 
populations at risk of developing glaucoma for the purposes of 
extending Medicare coverage for glaucoma screening to these 
groups. To date, the Secretary has extended glaucoma screening 
benefits to the following groups: individuals with diabetes, 
individuals with a family history of glaucoma, African 
Americans over the age of 50, and Hispanics age 65 and older. 
Evidence indicates that Hispanics have a higher risk for 
glaucoma than those of predominantly European ancestry, and 
that the risk is even higher for Hispanics over the age of 60. 
Given the elevated risk for Hispanics below the age of 65, the 
Committee urges the Secretary to use his authority to expand 
Medicare coverage of glaucoma screening services to Hispanics 
over the age of 50.

SECTION 202. WAIVER OF DEDUCTIBLE FOR COLORECTAL CANCER SCREENING TESTS 
REGARDLESS OF CODING, SUBSEQUENT DIAGNOSIS, OR ANCILLARY TISSUE REMOVAL

Current law

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

Explanation of provision

    The provision would specify that the waiver of the 
deductible would apply regardless of the coding, subsequent 
diagnosis, or the removal of tissue or other matter or 
procedure performed in connection with and as a result of the 
screening test. The provision would apply to items and services 
furnished on or after January 1, 2008.

Reason for change

    Current law prohibits the application of the Medicare Part 
B deductible for screening colonoscopies. However, if a patient 
has a screening colonoscopy and the physician finds polyps that 
need to be removed during the screening exam, it is relabeled a 
diagnostic procedure and the deductible is applied. This policy 
is unfair to beneficiaries who are told that the screening 
colonoscopy would bypass the deductible. This provision would 
therefore ensure that a screening colonoscopy avoids the 
deductible regardless of whether the procedure becomes 
diagnostic.

           SECTION 203. PARITY FOR MENTAL HEALTH COINSURANCE

Current law

    Medicare Part B generally pays 80% of the approved amount 
(generally a fee schedule or other predetermined amount) for 
covered services in excess of the annual deductible. However, 
different rules apply with respect to certain mental health 
services. Medicare pays 62\1/2\% of covered expenses incurred 
in connection with the treatment of mental, psychoneurotic, and 
personality disorders of a person who is not a hospital 
inpatient. As a result Medicare generally pays 50% rather than 
80% of Medicare's recognized amount.

Explanation of provision

    The provision would increase Medicare's payment for 
outpatient mental health services to 80% of Medicare's 
recognized amount. This provision would go into effect in 2008.

Reason for change

    Medicare's current coverage for outpatient mental health 
services is discriminatory in that beneficiaries are required 
to pay 50% of the cost rather than the standard 20% coinsurance 
required for other Part B services. This provision brings 
parity to outpatient mental health services in Medicare.

Subtitle B--Improving, Clarifying, and Simplifying Financial Assistance 
                 for Low-Income Medicare Beneficiaries


 SECTION 211. IMPROVING ASSETS TESTS FOR MEDICARE SAVINGS PROGRAM AND 
                       LOW-INCOME SUBSIDY PROGRAM

Current law

    Federal assistance is provided to certain low-income 
persons to help them meet Medicare Part D premiums and cost-
sharing. Specifically, the low-income subsidy (LIS) is provided 
for persons with incomes below 150% of the federal poverty 
level and assets below specified amounts. The definitions of 
income and assets are linked directly or indirectly to the 
definitions used under current Medicaid law.
    The LIS population is divided into two main groups with the 
first group divided into subgroups for purposes of determining 
cost-sharing requirements. The first group includes all persons 
who: (1) are enrolled in a prescription drug plan (PDP or a 
Medicare Advantage prescription drug plan (MA-PD plan); (2) 
have incomes below 135% of the federal poverty level ($13,783 
for an individual and $18,481 for a couple in 2007); and (3) 
have resources in 2007 below $6,120 for an individual and 
$9,190 for a couple (increased each year by the percentage 
increase in the consumer price index, or CPI). (The 2007 
resource limits are generally publicized as $7,620 and $12,190 
because $1,500 per person is excluded for burial expenses.) The 
first group also includes: (1) dual eligibles (persons entitled 
to the full range of benefits under their state's Medicaid 
program); (2) recipients of Supplemental Security Income (SSI) 
benefits; or (3) enrollees in Medicare Savings Programs.
    The second low-income subsidy group includes all other 
persons who (1) are enrolled in a PDP plan or MA-PD plan; (2) 
have incomes below 150% of poverty ($15,315 for an individual 
and $20,535 for a couple in 2007); and (3) have resources in 
2007 below $10,210 for an individual and $20,410 for a couple 
(increased in future years by the percentage increase in the 
CPI). The publicized resources limits of $11,710 and $23,410 
include a $1,500 per person burial allowance.
    Certain low-income individuals who are aged or have 
disabilities, as defined under SSI, and who are eligible for 
Medicare are also eligible for premium and cost-sharing 
assistance paid for by Medicaid under the Medicare Savings 
Program (MSP). Eligible groups include Qualified Medicare 
Beneficiaries (QMBs), Specified Low-Income Medicare 
Beneficiaries (SLMBs), and Qualifying Individuals (QI-1s). QMBs 
have incomes no greater than 100% of the federal poverty level 
(FPL) and assets no greater than $4,000 for an individual and 
$6,000 for a couple. SLMBs meet QMB criteria, except that their 
incomes are greater than 100% of FPL but do not exceed 120% 
FPL.

Explanation of provision

    The provision would modify the maximum resources levels. 
Beginning in 2009, the level would be the same for both Part D 
low-income subsidy groups. In 2009, the level would be $17,000 
for an individual and $34,000 for a couple. In subsequent 
years, it would be the previous year's level increased by 
$1,000 for an individual and $2,000 for a couple. The provision 
would further specify that these maximum resources levels would 
also apply for determining eligibility for Medicare Savings 
programs. The provision would apply to eligibility 
determinations for periods beginning on or after January 1, 
2009.

Reason for change

    Millions of low-income Medicare beneficiaries do not 
qualify for financial assistance under the Part D low-income 
subsidy or the Medicare Savings Programs because they have a 
small nest egg that exceeds the maximum resource levels allowed 
under the programs' assets tests. The asset test is a barrier 
even for those who do meet its strict limits because it 
requires people to fill out a daunting and invasive application 
form.
    Increasing asset limits allows more people to qualify for 
the LIS, thereby closing the ``doughnut hole'' for those who 
can least afford it. The increase also allows more low-income 
people to qualify for MSP assistance with Medicare premiums and 
cost-sharing. Together these benefits can be worth thousands of 
dollars a year to low-income beneficiaries.

   SECTION 212. MAKING QI PROGRAM PERMANENT AND EXPANDING ELIGIBILITY

Current law

    Certain low-income individuals who are aged or have 
disabilities, as defined under SSI, and who are eligible for 
Medicare are also eligible to have their Medicare Part B 
premiums paid for by Medicaid under the Medicare Savings 
Program (MSP). Eligible groups include Qualified Medicare 
Beneficiaries (QMBs), Specified Low-Income Medicare 
Beneficiaries (SLMBs), and Qualifying Individuals (QIs). QMBs 
have incomes no greater than 100% of the federal poverty level 
(FPL) and assets no greater than $4,000 for an individual and 
$6,000 for a couple. SLMBs meet QMB criteria, except that their 
incomes are greater than 100% of FPL but do not exceed 120% 
FPL.
    QIs meet the QMB criteria, except that their income is 
between 120% and 135% of poverty. Further, they are not 
otherwise eligible for Medicaid. Unlike the QMB and SLMB 
programs, federal spending under the QI program is subject to 
annual limits. The QI program is currently slated to terminate 
September 30, 2007.

Explanation of provision

    The provision would make the QI program permanent. It would 
also eliminate the funding limitation, thereby expanding 
eligibility to all persons meeting the income and resources 
criteria. The provision would provide 100% FMAP for payments 
under the QI 14 program. These provisions would be effective 
October 1, 2007. The provision would also set the resources 
standard for the QI program at 150% of poverty, effective 
January 1, 2008.

Reason for change

    The QI program has never attained maximum enrollment in 
part due to reauthorizations made for short periods of time, 
and often at the very last minute just before the program was 
scheduled to expire. Such instability is less than optimal for 
the states that administer the program and beneficiaries who 
rely on the benefit. It runs counter to the goal of the 
Medicare program of providing health care security to those in 
greatest need. Because health costs increase faster than 
incomes, protections for low income seniors are critical. In 
2007, the Part B premium is approximately $1200 per year per 
senior, which constitutes approximately 8 percent of income for 
a senior at 150% of poverty. Making the QI program permanent 
will ensure all seniors have this protection on an annual 
basis.
    Without this provision, beneficiaries currently receiving 
QI and the Part D low-income subsidy (LIS) would lose QI 
completely in October 2007 and would be required to apply and 
qualify separately for LIS. Increasing the income eligibility 
level to 150% corresponds with the eligibility limit for LIS, 
making administration of the two programs easier.

            SECTION 213. ELIMINATING BARRIERS TO ENROLLMENT

Current law

    In general, federal law stipulates few documentation 
requirements for Medicaid applicants, including persons who 
apply for coverage under the Medicare Savings Program (MSP). 
State policies on this issue vary based on the eligibility 
group, but a considerable amount of documentation may be 
required to determine whether an individual meets financial 
eligibility requirements for Medicaid. Although states have 
flexibility to collect income and asset information through 
self-declaration alone, they also have the ability to require 
supporting documentation.
    Under the low-income subsidy (LIS) program under Part D, 
full benefit dual eligibles, QMBs, SLMBs, QIs, and recipients 
of SSI are deemed subsidy-eligible individuals for up to one 
year. Other persons, or their personal representatives, have to 
apply for assistance. Applicants may apply either at state 
Medicaid offices or Social Security offices. Applicants are 
required to provide information from financial institutions, as 
requested, to support information in the application, and to 
certify as to the accuracy of the information provided.
    State Medicaid programs make LIS eligibility determinations 
for persons applying to the state Medicaid agency. These 
individuals are subject to the same income eligibility 
determination process as is applied to QMBs. Under this 
process, states may not apply income disregards allowed under 
section 1902(r)(2) authority (allows states, with the 
Secretary's approval, to disregard certain income amounts when 
calculating an applicant's income level, among others).
    The Commissioner of the Social Security Administration 
(SSA) is required to make such LIS determinations for persons 
applying at SSA offices. No specific time frame is established 
for these determinations.
    Determinations that the individual is a subsidy eligible 
individual remain in effect for a period specified by the 
Secretary, but not greater than 1 year. Eligibility was 
redetermined in 2006 for 2007; persons were notified in 
September 2006 if their subsidy status was changing. 
Redeterminations and appeals are to be handled by the same 
agency making the initial determination.
    Current law requires the Commissioner of Social Security to 
conduct outreach efforts to identify persons potentially 
eligible for assistance under the MSP program and to notify 
such persons of the availability of assistance. Outreach 
efforts are to be coordinated with the states.

Explanation of provision

    The provision would specify that persons applying for the 
Part D LIS would be permitted to qualify on the basis of self-
certification of income and resources without the need to 
provide additional documentation. A subsidy eligible individual 
(or particular class of such an individual, such as a full 
subsidy individual or partial subsidy individual) would be 
deemed to continue to be eligible without the need for any 
annual or periodic application unless and until the individual 
notified a federal or state official responsible for such 
determinations that the individual's eligibility conditions 
changed so that the individual was no longer a subsidy eligible 
individual or no longer within such class of such individuals.
    The provision would require the Secretary to take all 
reasonable steps to encourage states to provide, under the MSP 
program, for administrative verification of income and 
automatic reenrollment as newly provided for under the low-
income subsidy program.
    The provision would extend the outreach requirements 
currently applicable for the Commissioner of Social Security. 
The Commissioner would be required to provide applicants for 
Medicare Part A benefits information describing the LIS and MSP 
programs, an application for enrollment under the low-income 
subsidy program as well as an application form for MSP 
(developed pursuant to the current requirement for a Model 
Form). The Commissioner would also be required to provide such 
individuals with information on how they could obtain 
assistance in completing the form and how they could contact 
the appropriate State Health Insurance Assistance Program 
(SHIP).
    The Commissioner would be required to make such application 
forms available in local social security offices. The 
Commissioner would be required to provide training to SSA 
employees who were involved in receiving social security and 
Medicare Part A benefit applications; the training would be to 
assist applicants in completing an MSP application. Persons so 
trained would be required to provide such assistance upon 
request. Employees completing such an application would be 
required, subject to the applicant's consent, to transmit it to 
the appropriate State Medicaid agency. The Commissioner would 
be required to coordinate outreach activities with state 
outreach activities.
    States would be required to accept MSP applications and to 
act on them in the same manner, and subject to the same 
deadlines, as if the applicants had submitted them directly.
    The provision would require the Secretary to translate the 
Model Form used for MSP applications into at least 10 languages 
(other than English) that are most often used by persons 
applying for social security or Medicare Part A benefits. The 
Secretary would make such translated forms available to the 
states and to the Commissioner of Social Security.
    The provision would amend the Internal Revenue Code by 
adding a new Section 6103(l)(21) relating to the disclosure of 
return information for purposes of providing low-income 
subsidies under Medicare. The Secretary of the Treasury, upon 
written request from the Commissioner of Social Security, would 
be required to disclose with respect to any taxpayer identified 
by the Commissioner as potentially eligible for low-income 
subsidies (based on information other than return information): 
(1) whether the adjusted gross income of the taxpayer exceeded 
the amounts specified in order to meet the maximum low-income 
subsidy levels of 135% of the federal poverty level; (2) 
whether such gross income was between 135% and 150% of the 
federal poverty level; (3) whether rollover distributions from 
an employer deferred compensation plan, an individual 
retirement plan, or a commercial annuity were reported to the 
Secretary; (4) whether the return was a joint return; and (5) 
the applicable year. The applicable year would be the most 
recent taxable year for which information was available in the 
IRS taxpayer information systems, or if no return was filed 
that year, the prior year. If no return was filed for both 
years, the Secretary of the Treasury would be required to 
notify the Commissioner of such fact. Return information could 
not be disclosed after the date that was two years after 
enactment.
    The provision would include safeguards for information 
disclosure. Within 18 months of enactment, the Secretary of the 
Treasury, after consultation with the Commissioner of Social 
Security, would be required to submit a written report to 
Congress regarding the use of disclosures.

Reason for change

    Administrative barriers often prevent low-income 
beneficiaries from getting the financial help they are eligible 
for under the law. This section requires SSA to 
administratively verify income and assets of individuals 
applying for the LIS--that is, SSA must use available 
information to verify income and assets without requiring the 
beneficiary to present paper documentation. For seniors with 
limited mobility, eliminating in-person documentation will 
greatly facilitate enrollment for millions.
    Most low-income beneficiaries will continue to be low-
income in perpetuity. These beneficiaries also have very low, 
often diminishing assets rather than assets that increase over 
time. Allowing beneficiaries determined eligible for LIS to 
automatically remain in the program without annually 
recertifying income and assets, provides stability and reduces 
the administrative burden on SSA caused by the redetermination 
process. In 2006, SSA rolled over LIS eligibility to 2007 
unless new information came to light showing beneficiaries no 
longer qualified. To ensure such customer-friendly procedures 
continue, this provision generally prohibits SSA from 
conducting LIS redeterminations.
    Enrollment rates for MSP are very low. The Congressional 
Budget Office estimates that only one-third of those eligible 
are enrolled. The Secretary of Health and Human Services will 
encourage states to follow the same best practices being used 
for LIS, for the MSP, allowing states to use administrative 
verification and automatic recertification to improve 
enrollment numbers and stability.
    Many beneficiaries are not signed up for the extra help 
available through the MSP and LIS because they are simply 
unaware that they qualify. For example, many of the more than 2 
million low-income individuals who applied to SSA for the low-
income subsidy likely qualify for Part B assistance under the 
MSP but were never made aware of this important program. 
Beneficiaries will be much more likely to apply for benefits 
when SSA offices make LIS and MSP applications available to 
individuals applying for Medicare benefits. Social Security 
Administration assistance in completing applications and 
coordination with the states will also streamline the 
application process for beneficiaries.
    The MSP application to be provided is the uniform, 
simplified application developed by the Secretary under 
1905(p)(5). Social Security offices throughout the country 
should use this uniform, simplified application (rather than a 
State-specific application) so that SSA can assist individuals 
in completing the application in the most efficient manner, and 
so that SSA does not need to train its employees in the unique 
program rules of a wide range of State programs. It is not the 
intent of the Committee that the administrative costs of this 
new workload be borne by SSA; rather, they should be financed 
by the Medicaid program. States would retain the responsibility 
for the taking of applications that are not nationally uniform 
or for obtaining State-specific supplemental information.
    Medicare beneficiaries with limited English proficiency are 
among the hardest to reach and enroll in MSP. Translation of a 
simplified MSP application form into at least ten of the 
languages most often used by applicants for low-income 
assistance programs will ensure more beneficiaries apply and 
receive the extra help provided by the MSP.
    There are between 3 and 4 million low-income beneficiaries 
who are likely eligible for, but not enrolled in, the Part D 
LIS. The SSA has conducted some outreach to these 
beneficiaries, but has been unable to sufficiently target those 
beneficiaries most likely eligible for help through the LIS. 
Allowing SSA to better target these beneficiaries by obtaining 
limited income and resource data from the Secretary of Treasury 
will increase the effectiveness of outreach efforts, and ensure 
more beneficiaries are enrolled in the LIS.
    The Committee intends that the Social Security 
Administration will take immediate action on the authority 
granted to it to make a request for information from the 
Treasury Secretary. Upon receipt of that information, the 
Commissioner should take immediate action to target notices to 
the population identified as being most likely eligible for the 
LIS. Specifically the Commissioner should send a letter to each 
beneficiary identified who has not already applied for the LIS 
program, or has applied but been determined ineligible based on 
resources. This notice should include: a statement that the 
individual is likely eligible for the LIS; a description of the 
amount of premium and cost-sharing subsidies for which the 
individual would likely be eligible; an application for 
enrollment in the LIS program; and, information on how the 
individual may obtain assistance completing such application, 
including information on how the individual may contact the 
State Health Insurance Assistance Program (SHIP) for the state 
in which the individual is located. If an individual does not 
respond to the initial letter the Commissioner should make 
additional attempts to contact the individual.

        SECTION 214. ELIMINATING APPLICATION OF ESTATE RECOVERY

Current law

    Since 1993, Medicaid law has required states to recover, 
from the estate of the beneficiary, amounts paid by the program 
for certain long-term care, related services and other services 
at state option. Estate recovery applies when: (1) an 
individual age 55 years and older receives Medicaid assistance 
for nursing facility services, home and community-based 
services and related hospital and prescription drug services; 
and (2) an individual of any age is an inpatient in a nursing 
facility or an intermediate care facility for the mentally 
retarded and is not reasonably expected to be discharged from 
the institution and return home. Also included are dual 
eligibles entitled to Medicare Part A and/or Part B and who are 
eligible for full Medicaid benefits.

Explanation of provision

    The provision would exempt from estate recovery any 
Medicaid payments for premiums, deductibles, and coinsurance 
made on behalf of an individual eligible under the Medicare 
Savings Program (MSP). The provision would take effect as of 
January 1, 2008.

Reason for change

    The possibility of having cost-sharing protections received 
during one's lifetime recovered from a beneficiary's estate 
after death has long been identified as a barrier to enrollment 
in MSP in studies commissioned by the Centers for Medicare and 
Medicaid Services, reports from the Government Accountability 
Office and reports of private, non-profit advocacy 
organizations. Although the law does not require states to 
recover Medicare Savings Program benefits, it allows them to do 
so and at least 21 states reported in 2005 that they recover 
some or all of such benefits. Removing this barrier to 
enrollment in MSP opens up the possibility of substantial new 
benefits for those who chose not to enroll in the past out of 
concern about estate recovery.

    SECTION 215. ELIMINATION OF PART D COST-SHARING FOR CERTAIN NON-
        INSTITUTIONALIZED FULL-BENEFIT DUAL ELIGIBLE INDIVIDUALS

Current Law

    Full benefit dual eligibles who are residents of a medical 
institution or nursing facility have no Part D cost-sharing. 
Other full benefit dual eligible individuals with incomes up to 
100% of poverty have cost-sharing for all costs up to the out-
of-pocket threshold of $1 for a generic drug prescription or 
preferred multiple source drug prescription and $3.10 for any 
other drug prescription. These cost-sharing amounts increase 
each year by the Consumer Price Index. Other dual eligibles 
have cost-sharing for all costs up to the out-of-pocket 
threshold of $2.15 for a generic drug or preferred multiple 
source drug and $5.35 for any other drug. These cost-sharing 
amounts increase annually by the annual percentage increase in 
per capita beneficiary expenditures for Part D covered drugs.

Explanation of provision

    The provision would specify that cost-sharing would not 
apply to persons who are full benefit dual eligibles and with 
respect to whom a determination was made that but for the 
provision of home and community based care, the individual 
would require the level of care provided in a hospital or a 
nursing facility or intermediate care facility for the mentally 
retarded and such care would be paid for by Medicaid. Such home 
and community based care would be that provided under Section 
1915 of the Social Security Act or under a waiver under Section 
1115 of such act. The provision would apply to drugs dispensed 
on or after January 1, 2009.

Reason for change

    For decades, policy makers at the state and federal level 
have made efforts to eliminate the bias toward 
institutionalization for those needing long term care services 
by providing benefits for needed health care services in 
community-based settings. Studies have shown that people 
needing long term care prefer to receive benefits in the 
community and that often such benefits can be provided at less 
cost than similar benefits in an institution.
    Most people who receive long-term care services under 
Medicaid are required to pay nearly all their income to their 
care providers, saving only a small personal needs allowance to 
cover costs of clothing and incidentals. This is true whether 
they receive services in an institution or in the community. 
The Medicare Modernization Act for purposes of Part D made a 
distinction between beneficiaries who received care in a 
community setting and those in an institution, or nursing home. 
Beneficiaries in institutions were exempted from Part D cost-
sharing, but those in the community--who were equally poor--
were not. This provision in the Medicare drug bill was a 
setback to decades of federal and state policy to move toward 
care in community settings.
    Extending the protection against cost-sharing to any dually 
eligible beneficiary who, as a condition of receiving services, 
is required to pay all but a small amount of his or her income 
to the care providers, will allow individuals with high drug 
usage to remain in the community for services rather than 
becoming institutionalized as a way of ensuring that they get 
necessary drugs.

SECTION 216. EXEMPTIONS FROM INCOME AND RESOURCES FOR DETERMINATION OF 
                   ELIGIBILITY FOR LOW-INCOME SUBSIDY

Current law

    The definitions of income and assets used for making 
eligibility determinations for the Part D low-income subsidy 
(LIS) generally follow that used for determining eligibility 
under the QMB, SLIMB, and QI programs (which in turn link back 
to the definitions used for purposes of the SSI program). There 
are, however, some differences. For purposes of LIS 
determinations, only liquid resources (or those that could be 
converted to cash within 20 days) and real estate that is not 
the applicant's primary residence is considered. Liquid 
resources include such things as checking and savings accounts, 
stocks, and bonds. Vehicles are excluded because they are not 
considered liquid assets. The first $1,500 of burial expenses 
are also excluded.

Explanation of provision

    The provision would exclude support and maintenance 
furnished in kind from the definition of income. The provision 
would also specify additional items to be excluded when making 
resources determinations. These additional exclusions would be 
any part of the value of any life insurance policy and any 
balance in any pension or retirement plan. The provision would 
take effect on January 1, 2009 and apply to determinations of 
eligibility for months beginning January 2009.

Reason for change

    Many beneficiaries are discouraged from applying for the 
Part D Low-Income Subsidy (LIS) because of the complexity of 
calculating income and resources on the LIS application.
    Beneficiaries currently must report as income the market 
value of in-kind support and maintenance (ISM) they receive 
from family members, charities, and others. For example, if 
their church brings a hot meal once a week or their daughter 
pays their utility bills, it must be reported. This calculation 
includes payments made for food, rent, and utilities, which can 
be very difficult to calculate. The amount of assistance a 
beneficiary gets from family and friends may fluctuate monthly, 
depending on expenses and when bills are due. The fair market 
value of some expenses, such as sewage and garbage collection 
is particularly difficult to calculate. Very few LIS 
applications are denied because of significant ISM income. 
Exempting this assistance from income determinations, and 
removing this difficult question from the LIS application will 
make it easier for beneficiaries to calculate their income and 
remove a real barrier to applying for LIS.
    Applications for the LIS also require reporting of the cash 
surrender value of life insurance for calculation of the assets 
test. Beneficiaries often do not have the information about 
cash surrender value readily available, nor do they know how to 
obtain the information needed. Because they do not have or 
cannot obtain the information, beneficiaries do not complete 
that portion of the LIS application. Removing this information 
from the asset test calculation will simplify the application 
form and will allow more people to qualify for the LIS.
    The current application also requires beneficiaries to 
report the balance of pension or other retirement accounts as 
an asset. These balances are often part of an annuity that 
supplements Social Security income, and are not like cash in 
the bank. Beneficiaries already report distributions from these 
accounts as income. It is not fair to treat the accounts as 
resources as well, since the accounts were intended to provide 
income over the course of retirement. Traditional defined 
benefit pension plans are already treated only as income; the 
pensions themselves do not count as resources. Exempting the 
balance of retirement accounts is a matter of equity. For many 
beneficiaries their 401(k) and other pension and retirement 
savings accounts represent their only retirement savings. 
Periodic distributions during retirement often constitute the 
only income beneficiaries have to supplement their Social 
Security benefits and should not be double counted as income 
and resources.
    Combined, removing the questions from the LIS application 
regarding the value of in-kind support and maintenance, the 
cash surrender value of life insurance, and the value of 
retirement accounts will greatly simplify the application 
process and increase accessibility to this important benefit. 
These questions are difficult to respond to accurately, and 
because of the strongly worded signature page, which mentions 
prison time for false statements, many people are fearful that 
they are completing the application incorrectly, despite the 
fact that they are doing so in good faith. These changes will 
simply the application process, both for the beneficiary and 
for the purposes of administration. Most importantly, 
simplifying the application process will extend access to the 
LIS program for more needy seniors and people with 
disabilities.

 SECTION 217. COST-SHARING PROTECTIONS FOR LOW-INCOME SUBSIDY ELIGIBLE 
                              INDIVIDUALS

Current law 

    Non-institutionalized persons who are low-income subsidy 
(LIS) individuals are required to pay nominal cost-sharing 
charges. Full benefit dual eligible individuals with incomes 
under 100% of poverty are required to pay (in 2007) cost-
sharing charges of $1 per prescription for generic or preferred 
drugs that are multiple source drugs and $3.10 per prescription 
for other drugs. Other persons with incomes under 135% of 
poverty and other Medicaid dual eligibles, MSP recipients and 
SSI recipients are subject to cost-sharing charges (in 2007) of 
$2.15 per prescription for generic or preferred drugs that are 
multiple source drugs and $5.35 per prescription for other 
drugs.
    Low-income subsidy persons not meeting the requirements as 
full subsidy eligible persons have (in 2007) a $53 deductible, 
15% cost-sharing for all costs up to the out-of-pocket 
threshold, and cost-sharing for costs above the out-of-pocket 
threshold of $2.15 per prescription for generic or preferred 
drugs that are multiple source drugs and $5.35 per prescription 
for other drugs.
    Each year, the cost-sharing amounts for full benefit dual 
eligibles below 100% of poverty are increased by the increase 
in the CPI. The cost-sharing amounts for all other persons are 
increased by the annual percentage increase in per capita 
beneficiary expenditures for Part D covered drugs.

Explanation of provision

    The provision would limit aggregate cost-sharing in a year 
to 2.5% of income.

Reason for change 

    Beneficiaries receiving the low-income subsidy (LIS) tend 
to be high utilizers of prescription drugs. The poorest of this 
group, those dually eligible for Medicare and Medicaid, fill, 
on average, 10 more prescriptions than other Medicare 
beneficiaries. As these individuals are sicker and take more 
drugs--the costs add up quickly.
    While Part D cost-sharing for those receiving the LIS--
currently capped at $2.15 and $5.35 for most LIS 
beneficiaries--may seem nominal to some, it is higher than many 
low income beneficiaries previously paid under Medicaid and it 
is indexed to increase each year. Additionally, those who 
receive the partial LIS are required to pay 15% of the drug 
cost as their cost-sharing. For an expensive brand name drug 
like Fuzeon for HIV/AIDS, this amount could be over $300/month, 
or about twenty-five percent of the monthly income of a person 
receiving the partial subsidy.
    Cost-sharing has been shown in studies to be a barrier to 
care: higher co-payments tend to cause low-income people to 
decrease utilization of essential and preventive health care, 
and can trigger the subsequent use of more expensive services 
such as emergency room care or hospitalization. Under this 
provision, those eligible for the lowest cost-sharing will pay 
no more than $255/year out-of-pocket; those with the highest 
cost-sharing requirements will pay no more than about $385/year 
(in 2007 numbers).

           SECTION 218. INTELLIGENT ASSIGNMENT IN ENROLLMENT

Current law 

    The Medicare Modernization Act required the Secretary to 
establish a process for the enrollment, disenrollment, 
termination, and change of enrollment in Part D. As part of the 
process, the law required automatic enrollment for full benefit 
dual eligibles who failed to enroll in a PDP or MA-PDP plan. 
Individuals are enrolled with the plan in the region that has a 
premium not exceeding the premium subsidy amount. If more than 
one such plan is available, enrollment among these plans is 
made on a random basis. Nothing prevents an individual from 
declining such enrollment or disenrolling from the plan in 
which they are enrolled and enrolling in a different plan. 
Further, full benefit dual eligibles can change plan enrollment 
at any time, with enrollment in the new plan effective the 
following month. The auto-enrollment process is ongoing for 
persons newly establishing eligibility. In July 2006, CMS 
announced that it was implementing a process for auto-enrolling 
prospective full benefit dual eligibles.

Explanation of provision 

    The provision would specify that no Part D full benefit 
dual eligible individual could be enrolled in a plan that did 
not meet certain requirements. The plan's formulary would have 
to cover 95 percent of the 100 most commonly prescribed generic 
covered Part D drugs and 95 percent of the 100 most commonly 
prescribed brand name covered Part D drugs for the population 
entitled to Part A or enrolled in Part B. The calculations 
would be based on non-duplicative prescriptions. The plan would 
be required to have a network of pharmacies that substantially 
exceeded the minimum requirements for prescription drug plans 
in the state and that provided access in areas where lower 
income individuals reside. The plan (except for a new plan, as 
defined by the Secretary) would have to have an above average 
score on quality ratings made by the Secretary on prescription 
drugs plans. Further, the total cost of providing coverage 
under the plan (consistent with the new requirements) would 
have to be among the lowest 25th percentile of prescription 
drug plans under Part D in the state. The provision would 
further stipulate that in case no plan met these requirements, 
the Secretary would be required to implement the provision to 
the greatest extent possible. This would be done with the goal 
of protecting beneficiary access to drugs without increasing 
the cost relative to the auto-enrollment process as in 
existence before the date of enactment. The provision would 
take effect for enrollments effected on or after November 15, 
2009.

Reason for change 

    Random assignment is a useful tool to enroll dual eligible 
beneficiaries in the Part D drug program; unfortunately, it has 
turned out to be a bad policy for beneficiaries and taxpayers. 
Enrolling individuals based solely on below average premiums is 
not a good surrogate for either quality or savings. The current 
system assigns many dual-eligible beneficiaries to plans that 
do not cover some or even many of the most commonly prescribed 
drugs, forcing many of these individuals to go without 
necessary drugs or to switch plans.
    Current policy also randomly assigns dual-eligibles to 
plans with widely varying costs to the taxpayer. Often these 
beneficiaries are assigned to plans where the cost of a package 
of commonly-prescribed drugs is higher than it is in plans that 
are not eligible to receive randomly-assigned beneficiaries. 
This provision will help low-income beneficiaries by ensuring 
better coverage of key drugs, while giving more attention to 
the quality of the plans they are assigned to. It will help 
taxpayers by ensuring that assignment decisions consider the 
total cost of providing a package of drugs, not just the 
premium cost.

               Subpart C--Part D Beneficiary Improvements


SECTION 221. INCLUDING COSTS INCURRED BY AIDS DRUG ASSISTANCE PROGRAMS 
 AND INDIAN HEALTH SERVICE IN PROVIDING PRESCRIPTION DRUGS TOWARD THE 
              ANNUAL OUT OF POCKET THRESHOLD UNDER PART D

Current law 

    PDP sponsors and MA-PD plans are required to offer a 
minimum set of benefits, referred to as ``qualified coverage.'' 
``Qualified coverage'' is defined as either ``standard 
prescription drug coverage'' or ``alternative prescription drug 
coverage'' with at least actuarially equivalent benefits (i.e., 
having at least equivalent dollar value). In both cases, access 
must be provided to negotiated prices for drugs.
    For 2007, the ``standard prescription drug coverage'' is 
defined as follows: (1) $265 deductible paid by the 
beneficiary; (2) then 75% of costs paid by the program and 25% 
of costs paid by the beneficiary up to the initial coverage 
limit ($2,400, accounting for $798.75 in total out-of pocket 
costs and $2,400 in total spending); (3) then 100% of costs 
paid by beneficiary for drug spending falling in the coverage 
gap between $2,400 and $5,451.25 ($3,051.25, accounting for 
total beneficiary out-of-pocket spending of $3,850); and (4) 
then all costs paid by program over $5,451.25 in total spending 
except for nominal beneficiary cost-sharing. Each year, the 
dollar amounts are increased by the annual percentage increase 
in average per capita aggregate expenditures for covered 
outpatient drugs for Medicare beneficiaries for the 12-month 
period ending in July of the previous year.
    For purposes of calculating beneficiaries' out-of-pocket 
costs, costs are only considered incurred if they are incurred 
for the deductible, cost-sharing, or benefits not paid because 
they fall in the coverage gap (sometimes referred to as the 
``doughnut hole''). Incurred costs do not include amounts for 
which no benefits are provided because a drug is excluded under 
a particular plan's formulary. Costs are treated as incurred, 
and thus treated as true out-of-pocket (TROOP) costs only if 
they are paid by the individual (or by another family member on 
behalf of the individual), paid on behalf of a low-income 
individual under the low-income subsidy (LIS) provisions, or 
under a state pharmaceutical assistance program. Any costs for 
which the individual is reimbursed by insurance or otherwise do 
not count toward the TROOP amount.

Explanation of provision 

    The provision would include costs paid by the Indian Health 
Service, Indian tribe or tribal organization or an urban Indian 
organization (as defined in Section 4 of the Indian Health Care 
Improvement Act) toward the out-of-pocket threshold. It would 
also include costs paid under an AIDS Drug Assistance Program 
under Part B of Title XXVI of the Public Health Service Act. 
The provision would apply to costs incurred on or after January 
1, 2009.

Reason for change 

    The Medicare Modernization Act (MMA) prevents drug spending 
by other government programs from counting toward the 
calculation of so-called true out-of-pocket costs (TrOOP), with 
one exception, state pharmaceutical assistance programs. The 
law excluded Indian Health Service (IHS) spending, and AIDS 
Drug Assistance Programs (ADAPs) were excluded by regulation.
    Allowing this assistance to count toward a beneficiary's 
out of pocket spending is critical because it determines when 
``catastrophic coverage'' begins. Catastrophic coverage is the 
coverage level that individuals with exceptionally high drug 
costs ($3,850 in out-of-pocket costs in 2007) reach wherein 
their cost sharing falls from roughly 25% of drug costs to 5% 
of drug costs. Under current rules, ADAP and IHS spending does 
not count as out-of-pocket spending, so it does not help 
individuals reach the catastrophic coverage level. Because ADAP 
and IHS spending does not count toward TrOOP, these programs 
cannot stretch their limited funding as far as possible, 
despite unmet need and waiting lists for services.
    Allowing ADAP and IHS assistance to count towards TrOOP 
will allow beneficiaries to get to the catastrophic coverage 
that all other beneficiaries enjoy while freeing up needed 
funds for ADAP and IHS programs to help meet other health care 
needs.

 SECTION 222. PERMITTING MID-YEAR CHANGES IN ENROLLMENT FOR FORMULARY 
                CHANGES ADVERSELY IMPACTING AN ENROLLEE

Current law 

    Plans can change their formularies at the beginning of a 
year. During the year, the law permits plans to remove drugs 
from a formulary or change the preferred or tier status of a 
drug only after giving notice to the Secretary, affected 
enrollees, physicians, pharmacies and pharmacists. Some persons 
expressed concerns that beneficiaries might select an 
individual plan based on its coverage of a particular drug, 
which might be subsequently dropped from the list. In response, 
in April 2006, CMS provided a guidance document to Part D plan 
sponsors outlining its approach to formulary plan changes 
during a plan year. The guidance document noted that both 
industry best practices and the best interests of Medicare 
beneficiaries called for limited formulary changes during the 
plan year. Generally, plans can expand formularies, modify 
therapeutic categories and classes only to account for new 
therapeutic uses and newly approved drugs, and make formulary 
maintenance changes.
    The guidance document stated that plans could make other 
formulary changes, such as removing drugs from the formulary, 
moving drugs to a less preferred tier status, or adding 
utilization management requirements only in accordance with 
specified procedures. The document further stated that plans 
should make such formulary changes during the year only if 
enrollees currently taking the affected drugs were exempted 
from the change for the remainder of the plan year. CMS stated 
its expectation that plans would continue to comply with this 
policy in subsequent years, and would include such assurances 
in plans' future bids and contracts.

Explanation of provision 

    The provision would establish a special open enrollment 
period for an individual to change plans during a period other 
than during the annual open enrollment period. The provision 
would apply to an individual enrolled in a prescription drug 
plan (or a MA-PD plan) who was prescribed a drug while enrolled 
in the plan and the formulary of the plan materially changed 
(other than at the end of the contract year) such as to reduce 
coverage or change the cost-sharing of the drug. The provision 
would not apply in cases where the drug was removed from the 
formulary because of a recall or withdrawal issued by the Food 
and Drug Administration. The provision would apply to contract 
years beginning on or after January 1, 2009.

Reason for change

    Beneficiaries choose prescription drug plans based on a 
number of factors, not the least of which is whether a plan 
covers the drugs they are currently taking. Though CMS has 
imposed certain restrictions on plan formulary changes, there 
is no protection for beneficiaries who are nonetheless harmed 
by a mid-year formulary change. This provision will allow 
adversely affected beneficiaries to choose a new plan, and will 
discourage plans from making mid-year formulary changes for 
highly prescribed drugs.

  SECTION 223. REMOVAL OF EXCLUSION OF BENZODIAZEPINES FROM REQUIRED 
         COVERAGE UNDER THE MEDICARE PRESCRIPTION DRUG PROGRAM

Current law

    Prescription drug plans and MA-PD plans are not allowed to 
include benzodiazepines in their formularies.

Explanation of provision

    The provision would remove the exclusion of benzodiazepines 
from those drugs prescription drug plans are required to 
include in their formularies. The provision would apply to 
prescriptions dispensed on or after January 1, 2009.

Reason for change

    Benzodiazepines are a class of drugs commonly and safely 
used to manage health conditions including anxiety disorders, 
seizures, and other medical conditions. This class of drugs 
includes such frequently prescribed medications as Klonopin and 
Ativan. There is no clinical justification to exclude 
benzodiazepines from Medicare. Eliminating the current law 
exclusion from coverage for benzodiazepines will ensure 
beneficiaries have access to this important class of drugs.

SECTION 224. PERMITTING UPDATING DRUG COMPENDIA UNDER PART D USING PART 
                            B UPDATE PROCESS

Current Law

    Medicare law defines covered drugs and biologicals as those 
included (or approved for inclusion) in specified compendia or 
approved by the pharmacy and drug therapeutics committee of the 
medical staff of the hospital furnishing the drug. The term 
drugs also include drugs or biologicals used in an anticancer 
chemotherapeutic regimen for a medically accepted indication. 
The term medically accepted indication includes any use which 
has been approved by the Food and Drug Administration (FDA). 
The term also includes another use if the drug itself has been 
approved by the FDA and the use has been supported by one or 
more citations (or approved for inclusion) in one or more 
compendia specified in the law or other authoritative compendia 
identified by the Secretary, unless the Secretary determines 
that the use is not medically appropriate or the use is 
identified as not indicated in one or more compendia. The 
Secretary may revise the list of compendia as appropriate. CMS 
has proposed a formal process for accepting and acting on 
requests for changes to the list of compendia.
    Under Medicare Part D, formularies of prescription drug 
plan and MA-PD plans must include drugs within each therapeutic 
category and class of covered Part D drugs, although not 
necessarily all drugs within such categories and classes. The 
Secretary was required to request the United States 
Pharmacopeia to develop a list of categories and classes that 
could be used by prescription drug plans and to revise such 
classifications from time to time to reflect changes in 
therapeutic uses of covered drugs and the additions of new 
covered drugs. A plan sponsor can not change the therapeutic 
categories and classes, other than at the beginning of a year, 
except as the Secretary may permit to take into account new 
therapeutic uses and newly approved covered Part D drugs.

Explanation of provision

    The provision would permit the Secretary to apply the same 
process for updating compendia used under Part D as is used for 
purposes of Part B.

Reason for change

    In Medicare, Part B drugs and biological products are 
covered if listed in one of three compendia. One of the 
compendia, American Medical Association's Drug Evaluation is no 
longer in existence. A second compendium, U.S. Pharmacopeia--
Drug Index, is changing its ownership and name. The third 
compendium, American Hospital Formulary Service--Drug 
Information, is still being utilized. CMS has expressed concern 
about this situation and under its authority to revise the list 
of Part B compendia has issued a proposed rule to make needed 
revisions to the list of Part B compendia utilized by the 
agency.
    It is extremely important for Medicare patients to have 
timely access to drugs and biological products, but the 
Secretary does not currently have the same authority to add 
compendia to Part D as is currently happening in Part B. The 
process for updating Part B compendia at outlined in the 
proposed rule should be used to update Part D compendia as 
well.
    This provision allows the Secretary to use a similar 
process for updating Part D compendia as is currently taking 
place in Part B. The Committee believes that both Part D and 
Part B compendia should be updated simultaneously using this 
process as soon as feasible. The Secretary should take into 
account that compendia that may be appropriate for Part B, may 
not be appropriate for Part D, and vice versa.

SECTION 225. CODIFICATION OF SPECIAL PROTECTIONS FOR SIX PROTECTED DRUG 
                            CLASSIFICATIONS

Current law

    Under Medicare Part D, formularies of prescription drug 
plans and MA-PD plans must include drugs within each 
therapeutic category and class of covered Part D drugs, 
although not necessarily all drugs within such categories and 
classes. CMS has required plans to cover all or substantially 
all drugs in the following six classes: anticonvulsants, 
antineoplastics, antiretrovirals, antidepressants, 
antipsychotics, and immunosuppressives. CMS stated that it 
instituted the policy because it felt it necessary to ensure 
that Medicare beneficiaries reliant on these drugs would not be 
substantially discouraged from enrolling with Part D plans and 
to mitigate the risks and complications associated with 
interruption of therapy for vulnerable populations. Under the 
policy, plan sponsors can not implement prior authorization or 
step therapy requirements that are intended to steer 
beneficiaries to preferred alternatives within classes for 
enrollees already taking a drug.

Explanation of provision

    The provision would codify the CMS requirement. 
Specifically plans would be required to include all or 
substantially all drugs in the following therapeutic classes: 
anticonvulsants, antineoplastics, antiretrovirals, 
antidepressants, antipsychotics, and immunosuppressives. A 
sponsor of a prescription drug plan would only be permitted to 
use prior authorization or step therapy for the initiation of 
medications within one of these classifications if approved by 
the Secretary. However, such prior authorization or step 
therapy could not be used in the case of antiretrovirals or in 
the case of individuals already stabilized on a drug treatment 
regimen. The amendment would apply for plan years beginning on 
or after January 1, 2009.

Reason for change

    The current policy requiring Part D plans to cover ``all or 
substantially all'' drugs in the six classes is sub-regulatory 
and can be changed or eliminated by CMS at anytime. This is an 
essential consumer protection that should not be substantially 
changed or allowed to expire.
    These drug classes were initially selected for extra 
protection because they are critical to some of Medicare's most 
vulnerable beneficiaries including individuals with HIV/AIDS, 
cancer, serious mental illness such as schizophrenia and bi-
polar disorder, epilepsy, autoimmune disorders, and organ 
transplant recipients. Unlike other drug classes, where drugs 
may be chemically similar and it may be safe to substitute one 
drug for another, drugs in these classes are less 
interchangeable. Physicians need the flexibility to prescribe 
all of the drugs within these classes to meet the 
individualized needs of their patients. Coverage of nearly all 
of the drugs in these categories is standard practice among 
state Medicaid programs and private insurers.
    Many of the drugs in these classes are the latest 
generation pharmaceuticals, which remain on patent. This means 
that they can often be among the most costly drugs available. 
This creates added risks that plans will attempt to restrict 
access for financial considerations without due concern for the 
patient's best interests. Overzealous prior authorization and 
cost-sharing requirements imposed on drugs in these classes 
could be used by plans to steer the sickest patients away from 
these drugs or could limit access in ways that are detrimental 
to patient health.

 SECTION 226. ELIMINATION OF MEDICARE PART D LATE ENROLLMENT PENALTIES 
            PAID BY LOW-INCOME SUBSIDY-ELIGIBLE INDIVIDUALS

Current law

    A late enrollment penalty is assessed on persons who go for 
63 days or longer after the close of their initial Part D 
enrollment period without creditable coverage and subsequently 
enroll in Part D. The penalty is based on the number of months 
the individual does not have creditable coverage. The premium 
that would otherwise apply is increased for each month without 
creditable coverage.
    In 2006, CMS established a special enrollment period for 
persons eligible for a low-income subsidy. Specifically, 
persons deemed eligible for a low-income subsidy after the 
close of the initial enrollment period on May 15, 2006, could 
still enroll in a Part D plan in 2006. These late enrollees 
were not subject to the late enrollment penalty otherwise 
applicable to persons who missed the 2006 enrollment deadline. 
This policy was extended for an additional year through 2007.

Explanation of provision

    The provision would eliminate the late enrollment penalties 
for low-income subsidy eligible individuals, beginning January 
2008.

Reason for change

    The Centers for Medicare and Medicaid Services (CMS) 
estimates that 3.2 million low-income Medicare beneficiaries 
remain unenrolled in Part D and have no other drug coverage. 
Though CMS has waived the late enrollment penalty for Low-
Income Subsidy (LIS) recipients for 2006 and 2007, the 
potential for the imposition of a late enrollment penalty may 
hinder efforts by the Social Security Administration and 
community-based organizations to reach out to low-income 
Medicare beneficiaries and enroll them in Part D and the LIS.
    The late enrollment penalty is counter-productive for low-
income beneficiaries. These beneficiaries are the least able to 
afford late penalties and the most likely to be discouraged 
from enrollment in Part D because of a penalty. The principal 
purpose of a late enrollment penalty--to encourage enrollment 
in Part D by beneficiaries with low drug spending who don't 
want to pay premiums does not apply to recipients of the low 
income subsidy who qualify for coverage at no premium.
    Eliminating the Part D late enrollment penalty makes Part D 
consistent with Part B. Enrollees in Medicare Savings Programs, 
which help pay premiums and cost sharing under Part B, are 
exempt from the Part B late enrollment penalty.

SECTION 227. SPECIAL ENROLLMENT PERIOD FOR LOW-INCOME SUBSIDY ELIGIBLE 
                              INDIVIDUALS

Current law

    The law establishes special enrollment periods for 
individuals enrolling in Part D outside of the annual open 
enrollment period. In 2006, CMS established a special 
enrollment period for persons eligible for a low-income 
subsidy. Specifically, persons deemed eligible for a low-income 
subsidy after the close of the initial enrollment period on May 
15, 2006, could still enroll in a Part D plan in 2006. This 
policy was extended for an additional year through 2007.

Explanation of provision

    The provision would establish a new special enrollment 
period for persons deemed to be low-income subsidy eligible 
individuals. The period would be the 90-day period beginning on 
the date the individual received notification that he or she 
was a subsidy eligible individual. The special period could 
apply to individuals currently enrolled in a prescription drug 
plan or an MA-PD plan on the date of such determination.
    The provision would require the Secretary to provide for a 
facilitated enrollment for persons were deemed low income 
subsidy eligible persons but who failed to enroll in a 
prescription drug plan or MA-PD plan during the special 
enrollment period. The process would provide for enrollment in 
the prescription drug plan or MA-PD plan that was most 
appropriate for the individual, as determined by the Secretary. 
Nothing would prevent such individual from declining enrollment 
or changing enrollment.
    The provision would apply with respect to subsidy 
determination made for months beginning with January 2008.

Reason for change

    In 2006 and 2007, CMS allowed Low-Income Subsidy (LIS) 
eligible beneficiaries to sign up for a plan at anytime. Under 
this provision Medicare beneficiaries who qualify for the LIS 
may enroll in a Part D or Medicare Advantage plan with drug 
coverage without waiting for the annual election period 
(November 15 through December 31).
    This section allows immediate access to drug coverage for 
the 3.2 million low-income Medicare beneficiaries who remain 
without drug coverage and unenrolled in the low-income subsidy. 
Providing immediate access to drug coverage will greatly 
facilitate efforts by SSA and community-based organization to 
find and enroll this hard-to-reach population.

                Subtitle D--Reducing Health Disparities


  SECTION 231. MEDICARE DATA ON RACE, ETHNICITY, AND PRIMARY LANGUAGE

Current law

    No provision.

Explanation of provision

    This provision would require the Secretary to collect data 
on race, ethnicity and the primary language of Medicare 
applicants and beneficiaries to be used in analyses related to 
health disparities. The Secretary would: (1) use, at a minimum, 
the categories for race and ethnicity described in the 1997 
Office of Management and Budget Standards for Maintaining, 
Collecting, and Presenting Federal Data on Race and Ethnicity; 
(2) use the standards developed for the collection of language 
data as described below; (3) where practicable, collect data 
for additional population groups if such groups can be 
aggregated into the minimum race and ethnicity categories; and 
(4) where practicable, collect the data through self-reporting.
    In collecting this data for applicants and recipients who 
are minors or otherwise legally incapacitated, the Secretary 
would require that the data be collected from the parent or 
legal guardian of such an applicant or recipient and that the 
preferred language of the parent or legal guardian of such an 
applicant or recipient be collected. The Secretary would also 
be required to systematically analyze the data at least 
annually using the smallest appropriate units of analysis 
feasible to detect racial and ethnic disparities in health and 
health care and when appropriate, for men and women separately. 
The Secretary would report the results of these analyses 
annually to the Director of the Office for Civil Rights, the 
Committee on Health, Education, Labor, and Pensions and the 
Committee on Finance of the Senate, and the Committee on Energy 
and Commerce and the Committee on Ways and Means of the House 
of Representatives. The Secretary would also ensure that the 
provision of assistance to an applicant or recipient of 
assistance is not denied or otherwise adversely affected 
because of the failure of the applicant or recipient to provide 
race, ethnicity, and primary language data.
    This provision specifies that nothing in this subsection 
shall be construed to permit the use of the information 
collected in a manner that would adversely affect any 
individual providing any such information, nor to require 
health care providers to collect data.
    The data collected for these purposes would be protected, 
through the promulgation of regulations by the Secretary or 
otherwise, under the same privacy protections as the Secretary 
applies to other health data under regulations promulgated 
under the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA) relating to the privacy of individually 
identifiable health information and other protections. The 
Secretary would also ensure that the data is protected from all 
inappropriate internal use by any entity that collects, stores, 
or receives the data, including use of such data in 
determinations of eligibility (or continued eligibility) in 
health plans, and from other inappropriate uses, as defined by 
the Secretary.
    In collecting this data, the Secretary would develop and 
implement a plan to improve the collection, analysis, and 
reporting of racial, ethnic and primary language data within 
the Medicare program. In consultation with the National 
Committee on Vital Health Statistics, the Office of Minority 
Health, and other appropriate public and private entities, the 
Secretary would make recommendations on how to: (1) collect the 
aforementioned data while minimizing the cost and 
administrative burdens of data collection and reporting; (2) 
expand awareness that data collection, analysis, and reporting 
by race, ethnicity, and primary language is legal and necessary 
to assure equity and non-discrimination in the quality of 
health care services; (3) ensure that future patient record 
systems have data code sets for racial, ethnic, and primary 
language identifiers and that such identifiers can be retrieved 
from clinical records, including records transmitted 
electronically; (4) improve health and health care data 
collection and analysis for more population groups if such 
groups can be aggregated into the minimum race and ethnicity 
categories; (5) provide researchers with greater access to 
racial, ethnic, and primary language data, subject to privacy 
and confidentiality regulations; and (6) safeguard and prevent 
the misuse of the data collected.
    The data collected on race, ethnicity and primary language 
would be obtained, maintained, and presented (including for 
reporting purposes and at a minimum) in accordance with the 
1997 Office of Management and Budget Standards for Maintaining, 
Collecting, and Presenting Federal Data on Race and Ethnicity. 
Not later than 1 year after the date of enactment, the Director 
of the Office of Minority Health, in consultation with the 
Office for Civil Rights of the Department of Health and Human 
Services, would develop and disseminate Standards for the 
Classification of Federal Data on Preferred Written and Spoken 
Language.
    The Secretary would be able, either directly or through 
grant or contract, to provide technical assistance to enable a 
health care program or an entity operating under the Medicare 
program to comply with the requirements of this section. 
Assistance provided under this subsection may include 
assistance to: (1) enhance or upgrade computer technology that 
will facilitate racial, ethnic, and primary language data 
collection and analysis; (2) improve methods for health data 
collection and analysis including additional population groups 
beyond the Office of Management and Budget categories if such 
groups can be aggregated into the minimum race and ethnicity 
categories; (3) develop mechanisms for submitting collected 
data subject to existing privacy and confidentiality 
regulations; and (4) develop educational programs to raise 
awareness that data collection and reporting by race, 
ethnicity, and preferred language are legal and essential for 
eliminating health and health care disparities.
    Acting through the Director of the Agency for Health Care 
Research and Quality and in coordination with the Administrator 
of the Centers for Medicare and Medicaid Services, the 
Secretary would develop a number of analyses using the racial, 
ethnic and primary language data. These would include: (1) 
identifying appropriate quality assurance mechanisms to monitor 
for health disparities under the Medicare program; (2) 
specifying the clinical, diagnostic, or therapeutic measures 
which should be monitored; (3) developing new quality measures 
relating to racial and ethnic disparities in health and health 
care; (4) identifying the level at which data analysis should 
be conducted; and (5) sharing data with external organizations 
for research and quality improvement purposes, in compliance 
with applicable Federal privacy laws.
    Not later than 2 years after the date of enactment, and 
biennially thereafter, the Secretary would submit to the 
appropriate committees of Congress a report on the 
effectiveness of data collection, analysis, and reporting on 
race, ethnicity, and primary language under the Medicare 
program. The report would evaluate the progress made with 
respect to the data collection, analysis and reporting 
improvement plan described above or subsequent revisions 
thereto. The provision authorizes to be appropriated such sums 
as may be necessary for each of fiscal years 2008 through 2012 
to carry out this section.

Reason for change

    While it is widely recognized that racial and ethnic 
disparities exist in Medicare, it is difficult to determine the 
extent to which disparities exist without having adequate data. 
Collecting such data will help CMS to establish baseline 
information about racial and ethnic disparities within Medicare 
which will assist in the development of interventions to 
address disparities and measure progress toward that goal.

   SECTION 232. ENSURING EFFECTIVE COMMUNICATION BY THE CENTERS FOR 
                     MEDICARE AND MEDICAID SERVICES

Current law

    Congress passed Title VI of the Civil Rights Act of 1964 to 
ensure that federal money is not used to support programs or 
activities that discriminate on the basis of race, color, or 
national origin. The United States Supreme Court has treated 
discrimination based on language as national origin 
discrimination. Therefore, recipients of federal funds 
(including hospitals, nursing homes, state Medicaid agencies, 
managed care organizations, home health agencies, health 
service providers, human service organizations, and any other 
health or human services federal fund recipient, as well as 
subcontractors, vendors, and subrecipients) are required to 
take reasonable steps to ensure that persons with limited 
English proficiency have meaningful access to programs and 
activities. The Department of Health and Human Services has 
issued guidance, including a four-factor analysis, that 
implicates the ``mix'' of language services that should be 
offered, including oral and written interpretation services.

Explanation of provision

    This provision would require the Secretary of Health and 
Human Services to conduct a study examining ways that Medicare 
should pay for language services, using the results from the 
demonstration program described in Section 233. The study would 
be required to include an analysis of the following: (1) how to 
develop and structure appropriate payment systems for language 
services for all Medicare service providers; (2) the 
feasibility of adopting a payment methodology for on-site 
interpreters, including independent contractors and agency 
employees, so that such interpreters could directly bill 
Medicare for services provided in support of physician office 
services for Medicare patients with limited English 
proficiency; (3) the feasibility of Medicare contracting 
directly with agencies that provide off-site interpretation, 
including telephonic and video interpretation, so that such 
contractors would directly bill Medicare for the services 
provided in support of physician office services for Medicare 
patients with limited English proficiency; (4) the feasibility 
of modifying the existing Medicare resource-based relative 
value scale (RBRVS) by using adjustments, such as multipliers 
or add-ons, when a patient has limited English proficiency; and 
(5) how adjustments to the RBRVS for when a patient has limited 
English proficiency would be funded and how such funding would 
affect physician payments, a physician's practice, and 
beneficiary cost-sharing. In considering payment methods, the 
Secretary could allow variations in types of service providers, 
available delivery methods, and costs for providing language 
services. The costs could include (1) the type of language 
services provided, such as the provision of health care or 
health care related services directly in a non-English language 
by a bilingual provider or use of an interpreter; (2) the type 
of interpretation services provided, such as in-person, 
telephonic, or video interpretation; (3) the methods and costs 
of providing language services, including the costs of 
providing language services with internal staff or through 
contract with external independent contractors and/or agencies; 
(4) providing services for languages not frequently encountered 
in the United States; and (5) providing services in rural 
areas. The Secretary would be required to submit a report on 
the study to the appropriate committees of Congress within a 
year of the expiration of the demonstration program.
    If a Medicare Part C organization fails substantially to 
provide language services to limited English proficient 
beneficiaries enrolled in the plan, as required, then the 
Secretary would be allowed to place sanctions on the 
organization.

Reason for change

    In addition to evaluating the effectiveness of culturally 
and linguistically appropriate care, as directed in Section 
233, Medicare needs to determine specific payment modifications 
that should be made in order to reimburse for these services. 
If both of these functions are not performed, CMS will not be 
able to establish an effective program for delivering 
culturally and linguistically appropriate services. 
Furthermore, providing for sanctions against health plans will 
assure greater compliance with the requirements under the law.

SECTION 233. DEMONSTRATION TO PROMOTE ACCESS FOR MEDICARE BENEFICIARIES 
    WITH LIMITED ENGLISH PROFICIENCY BY PROVIDING REIMBURSEMENT FOR 
           CULTURALLY AND LINGUISTICALLY APPROPRIATE SERVICES

Current law

    No provision.

Explanation of provision

    This provision would require the Secretary of Health and 
Human Services (HHS), acting through the Centers for Medicare 
and Medicaid Services (CMS), to award 24 3-year demonstration 
grants to eligible Medicare service providers within one year 
of the enactment of the Act. The purpose of the demonstrations 
would be to improve effective communication between Medicare 
service providers and Medicare beneficiaries who are limited 
English proficient. Each 3-year grant must be less than or 
equal to $500,000.
    To be eligible for a grant, an entity would be required to 
(1) be a service provider under Medicare Part A, B, C, or D, 
and (2) prepare and submit a timely and complete application to 
the Secretary.
    To the extent feasible, the Secretary would be required to 
award the grants to an equal number of service providers under 
each part of Medicare (Parts A, B, C, and D), such that 6 
providers, sponsors, or organizations under each of the 4 parts 
would receive grants. For example, the number of Part D 
sponsors receiving grants would be equal to the number of Part 
C organizations receiving grants, which would be equal to the 
number of part B service providers receiving grants. The 
Secretary would be required to give priority consideration to 
applicants that have developed partnerships with community 
organizations or with agencies with experience in language 
access. The Secretary would be required to ensure that 
variation exists among grantees in the type of service 
provider, and the languages needed and their frequency of use. 
The demonstration projects would be required to be a mix of 
urban and rural settings, be located in at least two geographic 
regions, and in at least two large metropolitan statistical 
areas with diverse populations.
    A grantee would be allowed to use the grant funds to pay 
for the provision of competent language and translation 
services to Medicare beneficiaries who are limited English 
proficient. The grantee could provide either health care (or 
health care related) services through a bilingual health care 
provider or competent interpreter services, such as on-site 
interpretation, telephonic interpretation, or video 
interpretation. The grantee would be permitted to use bilingual 
providers, staff, or contract interpreters. Up to 10% of the 
grant funds could be used to pay for required reporting and 
administration costs associated with the provision of competent 
language services.
    Grantees who are also Medicare Part C organizations or Part 
D sponsors would be required to ensure that their network 
providers, including physicians and pharmacies, receive at 
least 50% of the grant funds to pay for the provision of 
competent language services to Medicare beneficiaries who are 
limited English proficient.
    Payments to grantees would be required to be calculated 
based on the estimated number of limited English proficient 
Medicare beneficiaries in a grantee's service area. These 
calculations would be required to use either (1) the number of 
limited English proficient who speak English less than ``very 
well'' derived from the Bureau of the Census, or other State-
based study the Secretary determines is likely to yield 
accurate data, or (2) the grantee's own data. The grantee's 
data could be used if it is routinely collected in a manner 
that the Secretary deems to be accurate, and if the grantee's 
data shows greater numbers of limited English proficient 
individuals than the data from Bureau of the Census or other 
State-based study.
    Payments would be contingent on grantees reporting their 
costs of providing language services. The Secretary would be 
allowed to terminate the grant, and solicit applications from 
new grantees, if a grant fails to provide such reports.
    Payment would also be contingent on grantees utilizing 
competent bilingual staff, or competent interpretation or 
translation services. The interpretation or translation 
services must meet State standards; if the grantee is operating 
in a state without statewide standards, the grantee would be 
required to utilize interpreters who follow the National 
Council on Interpreting in Health Care's Code of Ethics and 
Standards of Practice. These standards would not be required if 
either (1) a beneficiary, who has been informed of the 
availability of free interpreter and translation services, 
requests the use of family, friends, or other individuals 
untrained in interpretation or translation, or (2) a medical 
emergency arises where the delay directly associated with a 
competent interpreter or translation service would jeopardize 
the health of the patient. In the first case, the grantee would 
be required to document the request in the beneficiary's 
record. The second case would not exempt emergency rooms, or 
similar entities that regularly provide health care services in 
medical emergencies, from having in place systems to provide 
competent interpreter and translation services without undue 
delay.
    Grantees would be required to (1) ensure that appropriate 
staff receive ongoing education and training in linguistically 
appropriate service delivery; (2) ensure the linguistic 
competence of bilingual providers; (3) offer and provide 
appropriate language services at no additional charge to each 
patient with limited English proficiency at all points of 
contact, in a timely manner, and during all hours of operation; 
(4) notify Medicare beneficiaries of their right to receive 
language services in their primary language; (5) post signage 
in the languages of the commonly encountered group or groups 
present in the service area of the organization; and (6) ensure 
that primary language data are collected for recipients of 
language services, in a manner that is consistent with the 
Health Insurance Portability and Accountability Act of 1996 
(HIPAA). If the recipient of language services is a minor or 
incapacitated, then the primary language of the parent or legal 
guardian would be collected and utilized.
    Grantees would be required to provide, at the conclusion of 
each grant year, reports to the Secretary that include the 
following information: (1) the number of Medicare beneficiaries 
to whom language services are provided; (2) the languages of 
those beneficiaries; (3) the types of language services 
provided, such as the use of a bilingual health care provider 
or use of an interpreter; (4) the type of interpretation, such 
as in-person, telephonic, or video interpretation; (5) the 
methods of providing language services, such as staff or 
contracts with external independent contractors or agencies; 
(6) the length of time for each interpretation encounter; (7) 
the costs of providing language services, which may be actual 
or estimated, as determined by the Secretary.
    The limited English proficient beneficiaries would not be 
required to pay cost-sharing or co-pays for language services 
provided through the demonstration.
    The Secretary would be required to conduct an evaluation of 
the demonstration program and submit a report to the 
appropriate committees of Congress within one year after 
completion of the program. The report would be required to 
include: (1) an analysis of the patient outcomes and costs of 
furnishing care to the limited English proficient beneficiaries 
participating in the project as compared to the outcomes and 
costs of those not participating; (2) the effect of delivering 
culturally and linguistically appropriate services on 
beneficiary access to care, utilization of services, efficiency 
and cost-effectiveness of health care delivery, patient 
satisfaction, and select health outcomes; and (3) 
recommendations regarding the extension of the demonstration 
project to the entire Medicare program.
    Nothing in this section of the provision would limit 
otherwise existing obligations of recipients of Federal 
financial assistance under title VI of the Civil Rights Act of 
1964 or any other statute.
    There would be authorized to be appropriated $10,000,000 
for each fiscal year of the demonstration.

Reason for change

    Although recipients of federal funds are required to offer 
language services, Medicare does not reimburse for these 
services. Testing alternative methods of delivering culturally 
and linguistically appropriate services will enable Medicare to 
apply best practices and vastly improve both access to and 
quality of services to beneficiaries with limited English 
proficiency.

   SECTION 234. DEMONSTRATION TO IMPROVE CARE TO PREVIOUSLY UNINSURED

Current law

    No provision.

Explanation of provision

    This provision would require the Secretary of Health and 
Human Services (HHS) to establish, within one year of the date 
of enactment of the Act, a 2-year demonstration project to 
determine the greatest needs and most effective methods of 
outreach to Medicare beneficiaries who were previously 
uninsured. The demonstration would be required to include at 
least 10 sites, and shall include state health insurance 
assistance programs, community health centers, community-based 
organizations, community health workers and other service 
providers under Medicare Parts A, B, and C. Part C grantees 
would be required to document that all previously uninsured 
enrollees receive the ``Welcome to Medicare'' physical exam. 
The Secretary would be required to conduct an evaluation of the 
demonstration, and submit a report to Congress within one year 
of the completion of the project. The report would be required 
to include (1) an analysis of the effectiveness of outreach 
activities targeting beneficiaries who were previously 
uninsured, and (2) the effect of such outreach activities on 
beneficiary access to care, utilization of services, efficiency 
and cost-effectiveness of health care delivery, patient 
satisfaction, and select health outcomes. Examples of outreach 
activities include revising outreach and enrollment materials 
(including the potential for use of video information), 
providing one-on-one counseling, working with community health 
workers and amending the Medicare and You handbook.

Reason for change

    Medicare beneficiaries who were previously uninsured can 
have difficulty acquainting themselves with the program. 
Providing additional outreach and support may help these 
beneficiaries access the benefits they are entitled to, and 
improve their health overall.

SECTION 235. OFFICE OF THE INSPECTOR GENERAL REPORT ON COMPLIANCE WITH 
AND ENFORCEMENT OF NATIONAL STANDARDS ON CULTURALLY AND LINGUISTICALLY 
                APPROPRIATE SERVICES (CLAS) IN MEDICARE

Current law

    Congress passed Title VI of the Civil Rights Act of 1964 to 
ensure that federal money is not used to support programs or 
activities that discriminate on the basis of race, color, or 
national origin. The United States Supreme Court has treated 
discrimination based on language as national origin 
discrimination. Therefore, recipients of federal funds 
(including hospitals, nursing homes, state Medicaid agencies, 
managed care organizations, home health agencies, health 
service providers, human service organizations, and any other 
health or human services federal fund recipient, as well as 
subcontractors, vendors, and subrecipients) are required to 
take reasonable steps to ensure that persons with limited 
English proficiency have meaningful access to programs and 
activities. The Department of Health and Human Services has 
issued guidance, including a four-factor analysis, that 
implicates the ``mix'' of language services that should be 
offered, including oral and written interpretation services.

Explanation of provision

    This provision would require the Inspector General of the 
Department of Health and Human Services (HHS) to prepare and 
publish a report, within two years of the date of enactment of 
the Act, that includes the following: (1) an examination of the 
extent to which Medicare providers and plans are complying with 
the Office of Civil Rights' Guidance to Federal Financial 
Assistance Recipients Regarding Title VI Prohibition Against 
National Origin Discrimination Affecting Limited English 
Proficient Persons and the Office of Minority Health's 
Culturally and Linguistically Appropriate Services Standards in 
health care; (2) a description of the costs or savings related 
to the provision of language services; and (3) recommendations 
on improving compliance with and enforcement of Culturally and 
Linguistically Appropriate Services (CLAS) Standards. Within 
one year of the report's publication date, the Department of 
HHS would be required to implement any changes resulting from 
any deficiencies identified in the report.

     SECTION 236. IOM REPORT ON IMPACT OF LANGUAGE ACCESS SERVICES

Current law

    No provision.

Explanation of provision

    This provision would require the Secretary of Health and 
Human Services to enter into an arrangement with the Institute 
of Medicine for the Institute to prepare and publish a report, 
within three years, on the impact of language access services 
on the health and health care of limited English proficient 
populations. The report would be required to include the 
following: (1) recommendations on the development and 
implementation of policies and practices by health care 
organizations and providers for limited English proficient 
patient populations; (2) a description of the effect of 
providing language access services on the quality of health 
care, access to care, and reduced medical error; and (3) a 
description of the costs or savings related to the provision of 
language access services.

                        SECTION 237. DEFINITIONS

Current law

    No current law.

Explanation of provision

    This provision would define the terms bilingual, competent 
interpreter services, competent translation services, effective 
communication, interpreting/interpretation, health care 
services, health care-related services, language access, 
language services, limited English proficient, Medicare 
program, and service provider. A bilingual individual would be 
defined as one who has sufficient degree of proficiency in two 
languages and can ensure effective communication can occur in 
both languages. Competent interpreter services would be defined 
as a trans-language rendition of a spoken message in which the 
interpreter comprehends the source language and can speak 
comprehensively in the target language to convey the meaning 
intended in the source language. Such an interpreter would know 
health and health-related terminology and provide accurate 
interpretations by choosing equivalent expressions that convey 
the best matching and meaning to the source language and 
captures, to the greatest possible extent, all nuances intended 
in the source message. Competent translation services would be 
defined as a trans-language rendition of a written document in 
which the translator comprehends the source language and can 
write comprehensively in the target language to convey the 
meaning intended in the source language. Such a translator 
would know health and health-related terminology and provide 
accurate translations by choosing equivalent expressions that 
convey the best matching and meaning to the source language and 
captures, to the greatest possible extent, all nuances intended 
in the source document. Effective communication would be 
defined as an exchange of information between the provider of 
health care or health care-related services and the limited 
English proficient recipient of interpretation services that 
enables interpretation service recipients to access, 
understand, and benefit from health care or health care-related 
services. Interpreting or interpretation would be defined as 
the transmission of a spoken message from one language into 
another, faithfully, accurately, and objectively. Health care 
services would be defined as services that address physical as 
well as mental health services in all care settings. Health 
care-related services would be defined as human or social 
services programs or activities that provide access, referrals, 
or links to health care. Language access would be defined as 
the provision of language services to an individual of limited 
English proficiency that are designed to enhance that 
individual's access to, understanding of or benefit from health 
care or health care-related services. Language services would 
be defined as the provision of health care services directly 
while using at least one of the following: a non-English 
language, interpretation, translation, or signage. An 
individual of limited English proficiency would be defined as 
one who speaks a primary language other than English, and who 
cannot speak, read, write or understand the English language at 
a level that permits the individual to effectively communicate 
with clinical or non-clinical staff at an entity providing 
health care or health care related services. The Medicare 
program would be defined as the programs under parts A through 
D of title XVIII of the Social Security Act. A service provider 
would be defined as any supplier, provider of services, or 
entity under contract to provide coverage, items or services 
under any part of title XVIII of the Social Security Act (i.e. 
the Medicare program).

             TITLE III--PHYSICIANS' SERVICE PAYMENT REFORM


SECTION 301. ESTABLISHMENT OF SEPARATE TARGET GROWTH RATES FOR SERVICE 
                               CATEGORIES

Current law

    Medicare pays for services of physicians and certain 
nonphysician practitioners on the basis of a fee schedule. With 
a few exceptions, most physicians' services are considered 
together in the calculation of the fee schedules, related 
expenditure targets and annual updates. In some instances, 
special rules apply to the calculation of Medicare fees for 
some services including anesthesia, radiology, and nuclear 
medicine.
    The Medicare physician fee schedule assigns relative values 
to services that reflect physician work (i.e., the time, skill, 
and intensity it takes to provide the service), practice 
expenses, and malpractice costs. The relative values are 
adjusted for geographic variations in costs. The adjusted 
relative values are then converted into a dollar payment amount 
called the conversion factor. The single conversion factor for 
2007 is $37.8975, the same level as in 2005 and 2006.
    Several factors enter into the current calculation of the 
annual update (and increase or decrease) of Medicare physician 
fees. These include (1) the Medicare economic index (MEI), 
which measures inflation in the inputs needed to produce 
physicians' services; (2) the sustainable growth rate (SGR), 
which is essentially a target for Medicare spending growth for 
physicians' services; and (3) an adjustment that modifies the 
update, which would otherwise be allowed by the MEI, to bring 
spending in line with the SGR target. The SGR target is not a 
limit on expenditures. Rather, the fee schedule update reflects 
the success or failure in meeting the target. If expenditures 
exceed the target, the update for a future year is reduced. 
This is what occurred for 2002. Fee reductions were also slated 
to occur in subsequent years; however, legislation has 
prevented this from occurring through 2007. Most recently, the 
Tax Relief and Health Care Act of 2006 (TRHCA, P.L. 109-432) 
kept the 2007 conversion factor at the 2006 level. Physicians 
who voluntarily report certain quality measures that meet the 
reporting criteria can receive bonus payments of 1.5% for the 
six-month period from July 1, 2007 to December 31, 2007.
    Under the current update formula, a reduction in the 
conversion factor will occur for the next several years. In the 
absence of legislation, payment rates will be reduced by about 
10% in 2008 and around 5% annually for at least several years 
thereafter. The 2008 estimate reflects the fact that TRHCA 
specified that the 2007 override of the statutory formula was 
to be treated as if it did not occur. Therefore, the starting 
base for the calculation is 5% below the actual 2007 conversion 
factor.

Explanation of provision

    The provision would create six new categories of 
physicians' services beginning January 1, 2008: (1) evaluation 
and management services for primary care (including new and 
established patient office visits delivered by physicians who 
the Secretary determines provide accessible, continuous, 
coordinated, and comprehensive care for Medicare beneficiaries, 
emergency department visits, and home visits) and for 
preventive services (including screening mammography, 
colorectal cancer screening, and other services as defined by 
the Secretary, limited to the recommendations of the United 
States Preventive Services Task Force; (2) evaluation and 
management services not described in (1); (3) imaging services 
(defined as imaging and computer-assisted imaging services, 
including X-ray, ultrasound [including echocardiography], 
nuclear medicine [including positron emission tomography], 
magnetic resonance imaging, computed tomography, and 
fluoroscopy, but excluding diagnostic and screening 
mammography) and diagnostic tests (other than clinical 
diagnostic laboratory tests); (4) major procedures; (5) 
anesthesia services; and (6) minor procedures and any other 
physicians' services not described above.
    The provision would eliminate the single conversion factor 
currently applied to all physician services and establish a 
separate conversion factor for each of the six newly created 
service categories. Beginning with 2008, the target growth rate 
for each service category would be computed and applied 
separately using the same method for computing the sustainable 
growth rate except that: (1) ``physicians' services'' would 
refer to the physicians' services included in the appropriate 
service category; (2) the estimate of the annual average 
percentage growth in real gross domestic product per capita 
(divided by 100) during the 10-year period ending with the 
applicable period involved would be increased by 0.03 for the 
primary care and preventive services category; and (3) a 
national coverage determination would be treated as a change in 
regulation and thus incorporated into the Secretary's estimate 
of the percentage change (divided by 100) in expenditures for 
all physicians' services in the fiscal year (compared with the 
previous fiscal year).
    Beginning with 2008, the conversion factors would be 
computed and updated separately for each service category by 
taking into account the amount of actual expenditures 
attributable to the services in a specified category for the 
preceding year increased by the target growth rate for that 
category. Spending on ``incident-to'' services (i.e., clinical 
diagnostic laboratory tests, radiology services, and drugs 
covered under Part B) would not be included in the calculation 
of allowed expenditures for any service category. For 
anesthesia services, the 2008 conversion factor would be based 
on the special conversion factor for anesthesia services (equal 
to 46 percent of the single conversion factor established for 
other physicians' services) multiplied by the update to the 
conversion factor for anesthesia services. In subsequent years, 
the conversion factors would be based on the conversion factor 
for the service category adjusted by the update (see section 
3).
    The cumulative adjustment component--or ``overhang'' (the 
debt remaining from the SGR formula)--would be applied to the 
initial target growth rate for each service category. The 
computation of the cumulative adjustment component is the 
proportion of total actual pre-2008 expenditures for Medicare 
physicians' items and services for the service category to the 
total actual expenditures for all Medicare physicians' 
services. Calculations of the cumulative overhang would be the 
difference (positive or negative) between the amount of the 
allowed expenditures for physicians' services in the service 
category through the end of the prior year and the amount of 
the actual expenditures for physicians' services in the service 
category during that period.
    The provision would establish a floor for updates so that 
the conversion factors for each service category would be no 
less than 0.5% for 2008 and 2009. The limits on the update 
adjustment factors would remain the same as under current law 
for a service category for a year, except that in years 2010 
and 2011 the update may not be less than minus 0.14.
    The Secretary would include information on the change in 
the annual rate of growth of actual Medicare Part B 
expenditures for clinical diagnostic laboratory tests or drugs, 
biologicals, and radiopharmaceuticals in the annual physician 
fee schedule proposed rule. The report would include an 
analysis of the reasons for such excess expenditures and 
recommendations for addressing them in the future.

Reason for change

    For the past several years, Congress has failed to make 
substantive changes to the SGR mechanism. CBO has estimated 
that the accumulated debt from the SGR will be $60 billion by 
the end of CY 2007. While it is widely recognized that 
Medicare's physician reimbursement system is in need of reform, 
solutions are not well developed. Overriding the cuts in 2008 
and 2009 with positive updates will stabilize physician 
spending and provide the time necessary for long term solutions 
to mature.
    Witnesses testified before the Subcommittee on Health in 
March that creating multiple expenditure targets would allow 
CMS to focus provider and policy-maker attention on rapidly 
growing categories of service, and enable Congress to shift 
resources toward services that are underprovided or otherwise 
of greater value to beneficiaries. For example, allowing higher 
growth for primary care and preventive services infuses 
additional resources into these services to encourage their 
use. Furthermore, removing labs, drugs, and other ``incident 
to'' services from the calculation will result in the targets 
being more closely aligned with actual spending for physician 
services, rather than drug price inflation.
    When developing service categories, the Secretary should 
evaluate the merit of including the professional component of 
imaging services to the minor procedures/other services 
category. Such treatment would be consistent with the treatment 
of the professional component for pathology services.
    In addition, the Committee believes that the Secretary 
should classify radiation therapy services that are not paid by 
a global fee in the minor procedures and other services 
category, rather than in the imaging services category. 
Radiation therapy works by damaging the DNA within cancer cells 
and destroying the ability of the cancer cells to reproduce. 
When these damaged cells die, the patients' body naturally 
eliminates them. These radiation oncology procedures are used 
to treat cancer patients. While medical imaging is a component 
of radiation oncology procedures, these services are not 
considered to be imaging services. This recommendation is 
consistent with MedPAC's classification of physician services.

 SECTION 302. IMPROVING ACCURACY OF RELATIVE VALUES UNDER THE MEDICARE 
                         PHYSICIAN FEE SCHEDULE

Current law

    Medicare pays for services of physicians and certain 
nonphysician practitioners on the basis of a fee schedule. The 
fee schedule assigns relative values to services that reflect 
physician work (i.e., the time, skill, and intensity it takes 
to provide the service), practice expenses, and malpractice 
costs. The work relative value units (RVUs) incorporated in the 
initial fee schedule were developed after extensive input from 
the physician community. Refinements in existing values and 
establishment of values for new services have been included in 
the annual fee schedule updates. This refinement and update 
process is based in part on recommendations made by the 
American Medical Association/Specialty Society Relative Value 
Update Committee (RUC) which receives input from over 100 
specialty societies.
    Not less often than every five years, to the extent the 
Secretary determines to be necessary, the relative values are 
adjusted to take into account changes in medical practice, 
coding changes, new data on relative value components, or the 
addition of new procedures. The Secretary is required to 
publish an explanation of the basis for such adjustments and to 
consult with the Medicare Payment Advisory Commission and 
organizations representing physicians. The 2007 fee schedule 
reflects the results of the third five-year review.
    CMS initiates the five-year review process by requesting 
public comments on potentially misvalued RVUs. The majority of 
comments are submitted by physician specialty societies; in 
addition CMS identifies codes that it believes need review. 
These codes are then submitted to the RUC. Specialty societies 
may make presentations on proposed changes to the RUC based on 
approved survey instruments. The RUC assesses the evidence. It 
may approve the specialty society's recommendation, refer it 
back to the society or modify it. Final recommendations are 
submitted to CMS which then conducts its own review. CMS then 
publishes proposed values in the Federal Register for public 
comment. These comments are reviewed before publication of the 
final values. The most recent five-year review resulted in 
significant increases in values for evaluation and management 
services; however, the impact was reduced by the budget 
neutrality adjustment.

Explanation of provision

    This provision would require the Secretary to establish an 
expert panel to identify misvalued physicians' services. The 
panel would conduct data analysis to identify physicians' 
services for which the relative value is potentially misvalued, 
particularly those which are overvalued, and assess whether 
those misvalued services warrant review through existing 
processes. The panel would also advise the Secretary as part of 
the periodic review (not less than every five years) and 
adjustments in relative values.
    The panel would be appointed by the Secretary and be 
composed of members with expertise in medical economics and 
technology diffusion, members with clinical expertise, 
physicians (particularly those not directly affected by changes 
in the Medicare physician fee schedule, such as those employed 
by the Veterans Administration or a physician who has a full 
time faculty appointment at a medical school), carrier medical 
directors, and representatives of private payor health plans. 
In appointing members to the expert panel, the Secretary would 
assure racial and ethnic diversity on the panel and may 
consider appointing a liaison from organizations with 
experience in the consideration of coding changes to the panel.
    The Secretary would consult with the expert panel and: (1) 
in conjunction with the RUC five-year review, conduct a five-
year review of physicians' services that have experienced 
substantial changes in length of stay, site of service, volume, 
practice expense, or other factors that may indicated changes 
in physician work; (2) identify new services to determine if 
they are likely to experience a reduction in value over time 
and forward a list of the services identified to the RUC for 
review in the next five-year review cycle; and (3) for 
physicians' services that are otherwise unreviewed by the RUC, 
periodically review a sample of relative value units within 
different types of services to ensure the accuracy of the 
relative values contained in the Medicare physician fee 
schedule.
    The provision would give the Secretary the authority to 
reduce the work component for services with accelerated volume 
growth without using the RUC process beginning January 1, 2009. 
In consultation with the expert panel described above, the 
Secretary would be able to reduce the work value units for a 
particular physicians' service if the annual rate of growth in 
expenditures for the service provided under Medicare for 2006 
or a subsequent year exceeds the average annual rate of growth 
in expenditures for all Medicare physicians' services by more 
than 10 percentage points. The Secretary would take into 
account clinical evidence supporting or refuting the merits of 
such accelerated growth.
    The Secretary would also be granted the authority to adjust 
payments for efficiency gains for new procedures. The Secretary 
may apply a methodology, based on supporting evidence, under 
which there is imposed a reduction over a period of years in 
specified value units in the case of a new (or newer) procedure 
to take into account inherent efficiencies that are typically 
or likely to be gained during the period of initial increased 
application of the procedure.

Reason for change

    Traditionally the five-year review has led to more 
increases in work RVUs than decreases. MEDPAC and other 
observers have stated that more attention needs to be given to 
overvalued services in order to maintain the integrity of the 
fee schedule.
    Rapid rises in the volume of administratively priced 
services can be a warning sign of incorrect incentives; this 
problem can be addressed by giving the Secretary authority to 
impose a downward adjustment in the price of rapidly rising 
services (after taking into account evidence of clinical 
benefit that would justify growth) to be reconsidered by 
outside consultants during the five year review.

     SECTION 303. PHYSICIAN FEEDBACK MECHANISM ON PRACTICE PATTERNS

Current law

    No provision.

Explanation of provision

    By June 1, 2008, the Secretary of Health and Human Services 
would be required to develop and implement a mechanism to 
measure resource use on a per capita and an episode basis in 
order to provide feedback to physicians who participate in the 
Medicare program on how their practice patterns compare to 
physicians generally, both in the same locality as well as 
nationally. This feedback would not be subject to disclosure 
under the Freedom of Information Act.

Reason for change

    MedPAC has recommended that CMS measure physicians' 
resource use over time and share results with physicians. It 
states that physicians would be able to assess their practice 
styles, evaluate whether they tend to use more resources than 
their peers or what evidence-based research (if available) 
recommends, and revise practice styles as appropriate. It notes 
that in the private sector use of feedback has had a small 
downward trend on resource use. It states that its use by 
Medicare has the potential to be more successful since it is 
the single largest purchaser of health care and therefore its 
reports should command more attention. MedPAC states that using 
the results for physician education would provide CMS and 
physicians with experience with the measurement tool and allow 
for refinements. Once experience and confidence were gained, it 
could be use the results for payment or to create other 
incentives.
    In an April 2007 report (Focus on Physician Practice 
Patterns Can Lead to Greater Program Efficiency), GAO explored 
linking physician compensation to efficiency-defined as 
providing and ordering a level of services sufficient to meet a 
patient's needs but not excessive given a patient's health 
status. The analysis focused on generalists, namely physicians 
who defined their specialty as general practice, internal 
medicine, or family practice. The report categorized physicians 
who treated a disproportionate share of overly expensive 
patients as outlier generalists. The report found outlier 
generalist physicians in all twelve metropolitan areas studied. 
GAO found that Medicare patients who saw outlier generalists 
were more likely to have been hospitalized, more likely to have 
been hospitalized multiple times, and more likely to have used 
home health services. They were, however, less likely to have 
been admitted to a skilled nursing facility.
    The GAO report noted that certain public and private health 
care purchasers routinely evaluate physicians in their networks 
using measures of efficiency and other factors. It noted that 
the purchasers it studied linked their evaluation results to a 
range of incentives, from steering patients toward the most 
efficient providers to excluding physicians from the provider's 
network because of inefficient practice patterns. GAO noted 
that while CMS has the tools available to evaluate physician 
practices it may not have the flexibility that other purchasers 
have to link physician profiling results to a range of 
incentives to encourage efficiency.

             SECTION 304. PAYMENTS FOR EFFICIENT PHYSICIANS

Current law

    No provision.

Explanation of provision

    This provision would create incentive payments under the 
Medicare program for participating physicians practicing in 
areas identified as an efficient area. From January 1, 2009 
through December 31, 2010, physicians practicing in counties or 
equivalent areas that are in the lowest fifth percentile based 
on per capita spending for Medicare Part A and Part B would 
receive an amount equal to 5% of the Medicare payment amount. 
For purposes of paying the additional amount, if the Secretary 
uses the 5-digit postal ZIP code where the services are 
furnished, the dominant county of the postal code shall be used 
in determining if the area entitles the physician for 
additional payment. There would be no administrative or 
judicial review of the designation of the county or area as a 
low per-capita Medicare expenditure area, or the assignment of 
a postal ZIP code to a county or area. For each year, the 
Secretary would identify and post low volume areas as part of 
the proposed and final rule to implement the annual physician 
fee schedule. The Secretary would post the list of counties 
identified on the CMS internet website.

Reason for change

    Certain regions of the country have very low volume of 
services to Medicare beneficiaries. This could be caused by 
problems with access to physician services or highly efficient 
practice by local physicians. The incentive payments would 
either address problems with access or reward efficient 
practice.

  SECTION 305. RECOMMENDATIONS ON REFINING THE PHYSICIAN FEE SCHEDULE

Current law

    No provision.

Explanation of provision

    The provision would modify the physician fee schedule by 
requiring the Secretary to analyze and recommend ways to 
consolidate coding for procedures and to increase use of 
bundled payments. No later than December 31, 2008, the 
Secretary of Health and Human Services would be required to 
complete an analysis of those procedures under the Medicare 
physician fee schedule for which there is no global payment 
methodology being applied for which a ``bundled'' payment 
methodology would be appropriate, and submit a report on such 
analysis and recommendations on increasing the use of 
``bundled'' payments under the Medicare physician fee schedule.

Reason for change

    Long term strategies for refining the physician 
reimbursement system are not well developed. Bundling services 
is one approach recommended by MedPAC and witnesses at two 
separate Subcommittee hearings this year.

 SECTION 306. IMPROVED AND EXPANDED MEDICAL HOME DEMONSTRATION PROJECT

Current law

    Section 204 of the Tax Relief and Health Care Act of 2006 
mandated a Medicare medical home demonstration project. The 
demonstration is to be conducted in up to eight states to 
provide targeted, accessible, continuous and coordinated 
family-centered care to Medicare beneficiaries who are deemed 
to be high need (with multiple chronic or prolonged illnesses 
that require regular medical monitoring, advising or 
treatment). CMS anticipates selecting a contractor to provide 
assistance in the design of the Medical Home Demonstration by 
September, 2007. Implementation is expected by late September, 
2008.

Explanation of provision

    The provision would require the Secretary to establish an 
expanded medical home Medicare demonstration project 
(``expanded project''), which would supersede the project 
initiated under section 204 of the Tax Relief and Health Care 
Act of 2006. The expanded project's purposes are: (1) to guide 
the redesign of the health care delivery system to provide 
accessible, continuous, comprehensive, and coordinated care to 
Medicare beneficiaries; and (2) to provide care management fees 
to personal physicians delivering continuous and comprehensive 
care in qualified medical homes.
    The expanded project would operate for three years, 
beginning not later than October 1, 2009 and would include a 
nationally representative sample of physicians serving urban, 
rural, and underserved areas throughout the United States. The 
project would be designed to encourage the participation of 
physicians in practices with fewer than four full-time 
equivalent physicians, as well as physicians in larger 
practices in rural and underserved areas. To facilitate the 
participation of physicians in such practices, the Secretary 
would provide additional technical assistance to such practices 
during the first year of the expanded project. Up to 500 
medical homes would be selected to participate in the expanded 
project, with priority given to the selection of up to 100 HIT-
enhanced medical homes, and the selection of other medical 
homes that serve communities whose populations are at higher 
risk for health disparities.
    Any Medicare beneficiary who is served by a medical home 
participating in the expanded project would be able to elect to 
participate in the expanded project. Beneficiaries who elect to 
do so would be eligible for enhanced medical home services 
under the project with no cost sharing for the additional 
services, and for a reduction of up to 50 percent in the 
coinsurance for services furnished by the medical home under 
the Medicare physician fee schedule. The Secretary would 
develop standard recruitment materials and election processes 
for Medicare beneficiaries who are electing to participate in 
the expanded project.
    The Secretary would establish a process for selection of a 
qualified standard setting and certification organization for 
this expanded project. This organization would: (1) establish 
standards for medical practices to qualify as medical homes or 
as HIT-enhanced medical homes; and (2) provide for the review 
and certification of medical practices as meeting such 
standards.
    The provision specifies several standards for the 
implementation of the expanded project. The term ``medical 
home'' would mean a physician-directed practice that has been 
certified by the organization described above, as meeting the 
following standards: (1) the practice applies standards for 
access to care and communication with participating 
beneficiaries; (2) the practice has readily accessible, 
clinically useful information on participating beneficiaries 
that enables the practice to treat such beneficiaries 
comprehensively and systematically; (3) the practice maintains 
continuous relationships with participating beneficiaries by 
implementing evidence-based guidelines and applying them to the 
identified needs of individual beneficiaries over time and with 
the intensity needed by such beneficiaries; (4) the practice 
both collaborates with participating beneficiaries to pursue 
their goals for optimal achievable health and assesses patient-
specific barriers to communication and conducts activities to 
support patient self-management; (5) the practice has in place 
the resources and processes necessary to achieve improvements 
in the management and coordination of care for participating 
beneficiaries; and (6) the practice monitors its clinical 
process and performance (including outcome measures) in meeting 
the applicable standards and provides information in a form and 
manner specified by the Secretary with respect to such process 
and performance.
    The term ``HIT-enhanced medical home'' means a medical home 
that has been certified, by the organization described above, 
as using a health information technology system that includes 
at least the following elements: (1) an electronic health 
record system (see below); (2) e-prescribing and computerized 
physician order entry; (3) an outcome measurement system that 
supports the secure, confidential provision of clinical process 
and outcome measures approved by the National Quality Forum to 
the Secretary for use in a confidential manner for provider 
feedback and peer review and for outcomes and clinical 
effectiveness research; (4) the capability for patient 
education through facilitating the engagement of participating 
beneficiaries in the management of their own health through 
education and support systems and providing the tools for 
shared decision-making; (5) support of basic standards, such 
that the electronic health record, e-mail communications, 
patient registries, and clinical-decision support tools, are 
integrated in a manner to better achieve the basic standards 
for a medical home described above.
    The electronic health record (EHR) system must also meet 
the following standards: (i) the EHR system must have the 
capability of interoperability with secure data acquisition 
from health information technology systems of other health care 
providers in the area served by the home; or the capability to 
securely acquire clinical data delivered by such other health 
care providers to a secure common data source; (ii) the EHR 
must protect the privacy and security of health information; 
(iii) the EHR must have the capability to acquire, manage, and 
display all the types of clinical information commonly relevant 
to services furnished by the home, such as complete medical 
records, radiographic image retrieval, and clinical laboratory 
information; and (iv) the record must be integrated with 
decision support capacities that facilitate the use of 
evidence-based medicine and clinical decision support tools to 
guide decision making at the point-of-care based on patient-
specific factors.
    The Secretary would used the clinical process and 
performance measures, including outcome measures, provided by 
the practices to the Secretary in a confidential manner for 
feedback and peer review for medical homes and for outcomes and 
clinical effectiveness research. After the first two years of 
the expanded project, these data may be used for adjustment in 
the monthly medical home care management fee (see below).
    Under the expanded Medicare medical home project, the 
Secretary would provide a monthly medical home care management 
fee payment to the personal physician of each participating 
beneficiary. In determining the amount of the fee, the 
Secretary would consider the operating expenses, the added 
value services, a risk adjustment, a HIT adjustment, and a 
performance-based payment.
    The Secretary would consider the additional practice 
expenses for the delivery of services through a medical home, 
taking into account the additional expenses for an HIT-enhanced 
medical home. Such expenses would include costs associated 
with: (i) structural expenses, such as equipment, maintenance, 
and training costs; (ii) enhanced access and communication 
functions; (iii) population management and registry functions; 
(iv) patient medical data and referral tracking functions; (v) 
provision of evidence-based care; (vi) implementation and 
maintenance of health information technology; (vii) reporting 
on performance and improvement conditions; and (viii) patient 
education and patient decision support, including print and 
electronic patient education materials.
    The value of additional physician work would also be a 
factor in the Secretary's determination of the management fee. 
This includes the value of activities such as augmented care 
plan oversight, expanded e-mail and telephonic consultations, 
extended patient medical data review (including data stored and 
transmitted electronically), and physician supervision of 
enhanced self-management education, and expanded follow-up 
accomplished by nonphysician personnel, in a medical home that 
is not adequately taken into account in the establishment of 
the Medicare physician fee schedule.
    Finally, the Secretary would also take into consideration 
the development of an appropriate risk adjustment mechanism to 
account for the varying costs of medical homes based upon 
characteristics of participating beneficiaries, the variation 
of the fee based on the extensiveness of use of the health 
information technology in the medical home, and a performance-
based adjustment based on performance of the home in achieving 
quality or outcomes standards, to be applied after the first 
two years of the expanded project.
    For the purposes of the expanded project, the term 
``personal physician'' means, with respect to a participating 
Medicare beneficiary, a physician who provides accessible, 
continuous, coordinated and comprehensive care for the 
beneficiary as part of a medical practice that is a qualified 
medical home. Such a physician may be a specialist for a 
beneficiary requiring ongoing care for a chronic condition or 
multiple chronic conditions (such as severe asthma, complex 
diabetes, cardiovascular disease, rheumatologic disorder) or 
for a beneficiary with a prolonged illness.
    The expanded project would be funded through monies for the 
original demonstration as well as $500,000,000 of additional 
funds from the Federal Supplementary Medical Insurance Trust 
Fund (Part B). This would include the payments of the monthly 
medical home care management fees described above, reductions 
in coinsurance for participating beneficiaries, and funds for 
the design, implementation, and evaluation of the expanded 
project. The Secretary would monitor the expenditures under the 
expanded project and could terminate the project early so that 
expenditures would not exceed the amount of funding provided 
for the project.
    The Secretary would provide and submit to Congress an 
annual report on the project and an evaluation of the project, 
by a date specified by the Secretary. The Secretary would also 
provide for an evaluation of the expanded project and would 
submit to Congress, not later than 18 months after the date of 
completion of the project, a report on the project and on the 
evaluation of the project.

Reason for change

    The medical home concept envisions a health care system 
where patient care is coordinated and integrated through a 
physician-guided multidisciplinary team enabled by a radically 
transformed practice setting. The practice would manage 
patient-centered care across a variety of settings according to 
the needs of the patient through the promotion of continuous 
care relationships as well as application of the chronic care 
model, shared decision-making principles, and health 
information technology. The idea has been described as early as 
1967 by the American Academy of Pediatrics' Council on 
Pediatric Practice. The practice management and financing 
innovations relevant to the patient-centered medical home have 
been implemented in a variety of other industrialized countries 
which achieve better primary care, care-coordination, and 
health outcomes than does the US.
    Recent research has shown that patient populations at risk 
for health disparities may particularly benefit from the 
accessible, coordinated, comprehensive care delivered through 
the patient-centered medical home; therefore transforming 
practices serving these populations is a major focus of the 
revised and expanded demonstration. Office applications of 
health information technology offer new opportunities to 
achieve even better care coordination, disease management, and 
patient empowerment; therefore another focus of this revised 
demonstration is to evaluate the effectiveness of the ``HIT-
enhanced medical home.'' While some of these medical home 
concepts have already been applied in the U.S., they are often 
in large pre-paid group practices or academic medical centers. 
Therefore the demonstration retains a focus on recruiting 
smaller physician practices where much of the care occurs for 
Medicare beneficiaries, and adds resources for technical 
assistance to these small practices. The National Committee for 
Quality Assurance (NCQA) has several years experience using its 
``Physician Practice Connections'' process to certify physician 
offices; NCQA has been actively developing an approach for 
multi-component, multi-level certification of the ``Patient-
Centered Medical Home,'' similar to that described in the 
legislation.
    The demonstration requires that to be eligible the personal 
physician must provide accessible, continuous, coordinated and 
comprehensive care. In most cases, primary care physicians 
(e.g. family medicine or general internal medicine), would be 
best suited to the role of personal physician for the medical 
home demonstration. However, a medical specialist with his or 
her office care team could also fulfill the role of personal 
physician, so long as they were committed to providing 
comparable accessibility, continuity, coordination and most 
importantly, comprehensiveness of care.
    In giving the Secretary authority for developing the 
monthly medical home care management fee payment, the Secretary 
can explore alternative formulations, including the possibility 
of bundling some current fee-for-service payments into the 
monthly medical home care management fee. This is consistent 
with Section 305 which directs the Secretary to make 
recommendations on increasing the use of ``bundled'' payments 
under the Medicare physician fee schedule.

SECTION 307. REPEAL OF PHYSICIAN ASSISTANCE AND QUALITY INITIATIVE FUND

Current law

    TRHCA authorized $1.35 billion for 2008 for a Physician 
Assistance and Quality Initiative Fund to be available to the 
Secretary for physician payment and quality improvement 
initiatives. The initiatives may include adjustments to the 
conversion factor.

Explanation of provision

    The provision would repeal the Physician Assistance and 
Quality Initiative Fund established by TRHCA.

Reason for change

    Congress prematurely implemented a quality bonus as part of 
PQRI. Quality measures are not well developed and the cost and 
complexity of implementing this program vary dramatically 
across specialties and practice. Problems with the 
reimbursement system more broadly are a higher priority for 
scarce administrative resources at this time.

         SECTION 308. ADJUSTMENT TO MEDICARE PAYMENT LOCALITIES

Current law

    Medicare payments to physicians vary according to 
geographic areas called Medicare payment localities or fee 
schedule geographic areas. There are currently 89 localities; 
some are statewide, while others are substate areas. Medicare 
makes a separate geographic adjustment to each component of the 
physician fee schedule: a work adjustment, a practice expense 
adjustment, and a malpractice adjustment. These adjustments are 
intended to reflect the variation in the costs of providing 
services in different parts of the country. These three 
components are weighted and then added together to produce an 
indexed relative value unit for the service for the locality.
    The payment locality structure for the current Medicare's 
physician fee schedule was established in 1996 and took effect 
January 1, 1997. Before adoption of the current structure, 
there were 210 existing separate payment localities, of which 
22 were then-existing statewide localities. The statewide 
localities remained statewide localities in the transition. 
Localities were established in the remaining 28 States by 
comparing the area cost differences of the localities within 
these states. The existing localities within these remaining 28 
States were ranked by costs in descending order. The geographic 
adjustment factor (GAF) of the highest cost locality within a 
state was compared to the weighted average GAF of lower price 
localities. If the difference between these GAFs exceeded 5 
percent, the highest locality remained a distinct locality. If 
the GAFs associated with all the localities in a State did not 
vary by at least 5 percent, the State 55 became a statewide 
locality. If the highest-priced locality remained a distinct 
locality, the process was repeated for the second highest price 
locality and so on until the variation among remaining 
localities fell below the 5 percent threshold. The objective 
was to ensure that the statewide or residual state locality has 
relatively homogenous resource costs. Subsequent to this 
process, 3 additional states with multiple localities were 
converted to statewide localities. Currently, there are 89 
separate payment localities of which 34 are statewide.
    MMA made temporary changes to the geographic adjusters. It 
raised the geographic adjustment for the work component of the 
fee schedule to 1.000 in any area where the multiplier would 
otherwise be less. This provision applied from 2004-2006. The 
Tax Relief and Health Care Act of 2006 extended the provision 
for an additional year--through 2007. MMA further directed the 
GAO to conduct a study of the geographic adjusters. A GAO 
report issued in March 2005 concluded that all three adjusters 
were valid in their fundamental design, and appropriately 
reflected broad patterns of geographic differences in running a 
practice. The report made several recommendations for improving 
the data and methods used to construct the data. CMS stated 
that implementing many of the recommendations was not feasible 
at this time.
    Some observers have recommended that changes be made to the 
composition of some of the current localities. In particular, 
some critics argue that costs in a few communities have 
increased significantly faster in the years since the payment 
localities were initially established than in other parts of 
the same locality or when compared with other adjacent 
localities. They argue that the Medicare physician payments are 
inequitable and are based on calculations that are no longer 
appropriate. CMS has stated that it will consider requests for 
locality changes when there is demonstrated consensus within 
the state medical association for the change. CMS has also 
stated that any changes must be made in a budget-neutral 
fashion for the state. Thus, if higher geographic practice cost 
indices (and thus payments) are applied in one part of the 
state, they must be offset by lower indices (and payments) in 
other parts of the state.
    California offers an example of this problem. Two counties 
in California (Santa Cruz and Sonoma) are assigned to a larger 
payment locality (``Rest of California''). In the years since 
the payment localities were initially established, the cost and 
expenditure measures used to calculate geographic adjusters for 
Medicare physician payment have increased more quickly in those 
areas than in the ``Rest of California'' payment locality. In 
addition, the adjusters for these areas are lower than those 
applicable in neighboring counties. In the August 8, 2005 
proposed physician fee schedule, CMS offered a proposal to 
address the problem. However, it failed to win the support of 
the majority stakeholders because offsetting reductions would 
be required in other areas. The final regulation, therefore, 
included no change for 2006.
    More recently, in the July 12, 2007 proposed rule for the 
2008 physician fee schedule, CMS proposed three options for 
addressing the situation. The first option would use the 
existing locality structure and apply a rule whereby if a 
county GAF is more than 5 percent greater than the GAF for the 
locality in which the county resides it would be removed from 
the current locality. A separate locality would be established 
for each county that is removed. Based on the new fully phased-
in GPCI data (for CY 2009), application of this approach in 
California would remove three counties (Santa Cruz, Monterey, 
and Sonoma) from the Rest of California payment locality and 
Marin county from the Marin/Napa/Solano payment locality and 
create separate payment localities for each of these counties. 
This approach would focus on counties for which there is the 
biggest difference between the county GAF and the locality GAF. 
Compared to the fully phased-in CY 2009 GAFs that would occur 
under the current locality structure, under this option, the 
GAFs for Santa Cruz, Monterey and Sonoma would increase by 7.59 
percent, 5.83 percent, and 5.51 percent respectively, and the 
GAF for the Rest of California locality would decrease by 0.49 
percent. The GAF for Marin would increase by 5.19 percent while 
the GAF for Napa/Solano would decrease by 4.33 percent. The 
GAFs for all other California localities would not change.
    The second option is similar to option 1, but the new 
localities would be structured differently. The same 5 percent 
threshold methodology would apply, but instead of creating four 
new localities in which each county becomes its own new 
locality, the three counties that are removed from the Rest of 
California locality would become one new locality. Marin County 
would still be removed from the Marin/Napa/Solano locality to 
become its own locality. This approach would remove three 
counties (Santa Cruz, Sonoma, and Monterey) from the Rest of 
California payment locality, and Marin County from the existing 
Marin/Napa/Solano payment locality. This approach would group 
together counties from the Rest of California locality that 
have the greatest difference between the county and locality 
GAF. These three counties have similar cost structures and 
grouping them together into one new locality would be 
consistent with CMS's goal of homogeneous resource costs within 
a locality. In addition, it would create fewer localities 
making it administratively simpler for both the Medicare 
program and for physicians who might practice in multiple 
localities. Compared to the fully phased-in CY 2009 GAFs that 
would occur under the current locality structure, under this 
option, the GAFs for the new Santa Cruz/Sonoma/Monterey 
locality would increase by 6.3 percent, and the GAF for the 
Marin County locality would increase by 5.19 percent. The GAFs 
would decrease by 0.49 percent for the Rest of California 
locality and by 4.33 percent for the Napa/Solano locality.
    The third option would apply a methodology similar to the 
one used in the 1997 locality revisions but applied at the 
county level rather than the ``existing locality'' level. The 
counties would be sorted by descending GAFs and the highest 
county would be compared to the second highest. If the 
difference is less than 5 percent, the counties were included 
in the same locality. The third highest would then be compared 
to the highest county GAF. This iterative process would 
continue until a county has a GAF difference that is more than 
5 percent. When this occurs, that county becomes the highest 
county in a new payment locality and the process is repeated 
for all counties in the State. This approach would group 
counties within a State into localities based on similarity of 
GAFs even if the counties were not geographically contiguous 
and would reduce the number of payment localities in California 
from 9 to 6, each based on counties or aggregates of counties, 
with the resulting localities reflecting similar geographic 
adjustment factors (GAFs). This option would not address the 
issue of a county or locality having costs very different from 
those of an adjoining county or locality. Under this option, it 
would still be possible for neighboring counties or localities 
to have significantly different cost structures and the 
associated problems such as incentives to relocate across 
county lines would still exist. CMS claims that this option 
would be the most administratively burdensome option to 
implement because of the significant systems changes and 
provider education that would be required to reconfigure the 
California localities in this manner. It would also place a 
greater burden on practicing physicians who are more likely to 
experience a change in his or her practice's locality. The 
county-by-county impact of this option is detailed in Table 9, 
72 Fed. Reg. 38141 (July 12, 2007).

Explanation of provision

    The provision would require the Secretary to revise the fee 
schedule areas for California for services furnished on or 
after January 1, 2008 using the county-based geographic 
adjustment factor as specified in option 3 (table 9) in the 
proposed rule for the 2008 physician fee scheduled published at 
72 Fed. Reg. 38122 (July 12, 2007). In the transition from the 
existing payment localities to the new payment localities, for 
services provided January 1, 2008 through December 31, 2010, 
the new GAF would apply unless there is a loss, in which case 
the old GAF would apply. In other words, the higher of the two 
GAFs as calculated under the existing or the new methodology 
would apply.
    No later than January 1, 2011, the Secretary would review 
and make revisions to fee schedule areas in all states where 
there is more than one Medicare physician payment fee schedule 
area. The Secretary may revise the fee schedule areas in these 
states using the same methodology used for California. Any such 
revisions would be made effective concurrently with the 
application of the periodic (3-year) review of geographic 
adjustment factors required by law for 2011.

Reason for change

    A GAO report issued July 2007 confirmed significant 
problems with inaccurate pricing that result from Medicare's 
current payment localities. Among the methodologies examined to 
revise payment localities, the GAO determined that the county-
based GAF approach achieved the greatest balance between price 
accuracy and administrative feasibility. The Committee believes 
that testing this approach first in California will help guide 
the implementation of revisions in the future. In order to 
minimize the effect of resources shifting from rural to urban 
that result from this change, the Committee provides resources 
to counties in California that would be adjusted downward.

               SECTION 309. PAYMENT FOR IMAGING SERVICES

Current law

    Medicare pays for outpatient imaging services through the 
physician fee schedule. The DRA modified the payment rules for 
certain imaging services. Specifically, the law capped the 
technical component of the payment for services performed in a 
doctor's office at the level paid to hospital outpatient 
departments for such services. The limitation does not apply to 
the professional component (i.e., the physician's 
interpretation). Services subject to the cap are: X-rays, 
ultrasound (including echocardiography), nuclear medicine 
(including positron emission tomography), magnetic resonance 
imaging, computed tomography, and fluoroscopy. Diagnostic and 
screening mammographies are excluded. The provision was 
effective January 1, 2007. DRA also exempted certain reduced 
expenditures from the budget neutrality calculation. 
Specifically these were reduced expenditures attributable to 
the multiple procedure payment reduction under the November 
2005 physician fee schedule regulation. The payment reduction 
is 25% for certain imaging procedures performed on contiguous 
body areas.
    The Mammography Quality Standards Act (MQSA) of 1992 added 
a new Section 354 to the Public Health Service (PHS) Act. The 
section required the Secretary to develop standards for 
equipment and personnel in mammography facilities. Enforcement 
of MQSA standards is achieved through accreditation, 
certification, and annual inspection. All mammography 
facilities must be accredited by an accrediting body (approved 
by HHS) before the facility can gain certification from the 
government. The Food and Drug Administration (FDA) was assigned 
primary responsibility for implementing MQSA. Costs to FDA 
related to annual inspections of mammography facilities are 
covered by user fees collected from the facilities. Other MQSA 
activities are funded by appropriation.

Explanation of provision

    The provision would incorporate certain certification 
standards for imaging services. Specifically, it would specify 
that no Medicare Part B payment could be made for either the 
technical component or the professional component of diagnostic 
imaging services unless the services met the certification 
standards applicable to mammography facilities under Section 
354(b)(1) of the Public Health Service (PHS) Act. The provision 
would not apply to physicians who bill either the technical 
component or the professional component if the service is 
furnished on equipment that has been certified. Diagnostic 
imaging services subject to this requirement would be: all 
imaging modalities including diagnostic magnetic resonance 
imaging (MRI), computed tomography (CT), positron emission 
tomography (PET), nuclear medicine procedures, X-rays, 
sonograms, ultrasounds, echocardiograms, and such emerging 
diagnostic imaging technologies as specified by the Secretary. 
The requirement would apply to diagnostic imaging services 
furnished on or after January 1, 2010. The requirement would 
apply to diagnostic imaging services that are ultrasound 
services furnished on or after January 1, 2012.
    The provision would specify that the provisions of Section 
354 of the PHS Act (as in effect June 1, 2007) would apply with 
respect to the provision of diagnostic imaging services and to 
a diagnostic imaging services facility (and to the process of 
accrediting such facilities) in the same manner that such 
provision applies with respect to mammograms and to a 
mammography facility (and to the process of accrediting such 
mammography facilities). For purposes of applying Section 354 
of the PHS Act, any reference to ``mammography'' or ``breast 
imaging'' would be deemed a reference to ``diagnostic imaging 
services.'' Any reference to mammogram or film would be deemed 
a reference to an image. Any reference to a ``mammography 
facility'' or facility under Section 354 would be deemed a 
reference to a diagnostic imaging services facility. Any 
reference to radiological equipment used to image the breast 
would be deemed a reference to radiological equipment used to 
provide diagnostic imaging services. Any reference to 
radiological procedures or radiological would be deemed a 
reference to medical imaging services or medical imaging. Any 
reference to a medical physicist would be deemed to include a 
reference to a magnetic resonance scientist or the appropriate 
qualified expert as determined by the accrediting body. In 
applying the provision relating to the submission of an 
application, the reference to ``type of each x-ray machine, 
image receptor and processor'' would be deemed a reference to 
type of imaging equipment and the reference to submitting the 
application to the Secretary would be deemed to include through 
the appropriate accreditation body. The reference to standards 
established by the Secretary would be deemed a reference to 
standards established by an accreditation body and approved by 
the Secretary. The Secretary would be required to approve an 
accreditation body meeting the requisite standards. The 
provision would link accreditation by an approved accreditation 
body to applicable quality standards. The required annual 
report would be submitted to the Senate Committee on Finance 
and the House Committees on Energy and Commerce and the 
Committee on Ways and Means.
    The provision would further specify that in applying 
Section 354(f) of the PHS Act relating to quality standards, 
each reference to standards established by the Secretary would 
be deemed a reference to standards established by an 
accreditation body involved and approved by the Secretary; a 
reference to radiation dose would be deemed a reference to a 
radiation dose as appropriate; a reference to radiological 
standards would be deemed a reference to medical imaging 
standards, as appropriate; and each reference to patient would 
be deemed a reference to a patient if requested by the patient.
    The provision would specify that in applying Section 354(g) 
of the PHS Act relating to inspections each reference to the 
Secretary or state or local agency would be deemed to include a 
reference to an accreditation body; a reference to annual 
inspections would be deemed to be a reference to the audits 
carried out in facilities at least every three years, and a 
reference to inspections would be deemed a reference to audits 
conducted during the previous year.
    The provision would clarify application of dates in Section 
354 to the new requirements. The date by which the Secretary 
was required to promulgate regulations for approval of an 
accreditation authority would be nine months after enactment. 
The frequency requirement for inspections would be every three 
years. The date that the Secretary would first be required to 
furnish annual performance information would be January 1, 
2011. For ultrasound services, the date that the Secretary 
would first be required to furnish annual performance 
information would be January 1, 2013.
    The provision would specify that the following provisions 
of Section 354 would not apply: (1) subsections relating to 
accreditation and quality standards to the extent they require 
physicians to meet requirements; (2) certain provisions 
relating to ultrasound; (3) subsection relating to standards 
for special techniques for mammograms of patients with breast 
implants; (4) subsection relating to an inspection 
demonstration program; (5) subsection relating to the national 
advisory committee report on access in rural and health 
professional shortage areas; (6) subsection relating to breast 
cancer screening surveillance research grants; and (7) 
subsections relating to funding.
    The provision would specify that if there were more than 
one accreditation body for a treatment modality that qualified 
for approval, the Secretary would approve at least two such 
bodies. The provision would require the Secretary to establish 
standards for accreditation bodies that require the timely 
integration of new technology by such bodies and that require 
the accreditation body involved to evaluate the annual medical 
physicist survey (or annual medical survey of another 
appropriate qualified expert chosen by the accreditation body) 
of a facility upon onsite review of such facility.
    The provision would require the Secretary to establish 
additional quality standards: (1) for qualifications and 
licensure or certification of nonphysician personnel; (2) that 
require the facility to maintain records of the credentials of 
physicians and nonphysician personnel; (3) for qualifications 
and responsibilities of medical directors and other personnel 
with supervisory roles; (4) that require the facility to have 
procedures ensuring patient safety; and (6) for the 
establishment of a quality control program to be implemented 
under the supervision of a medial physicist.. The equipment 
standards would have to include standards requiring the 
establishment and maintenance of a quality assurance program at 
each facility. The personnel requirement would have to include 
continuing medical education standards, as specified by the 
Secretary and updated at least every three years.
    The provision would specify that any diagnostic imaging 
services facility accredited before January 1, 2010 (or January 
1, 2012 in the case of ultrasounds) by an accrediting body 
approved by the Secretary would be deemed to be an approved 
accreditation body if the facility submitted required proof. 
The Secretary could require that an accreditation of an 
emergency technology used in the provision of a diagnostic 
imaging service as a condition of Medicare payment at such time 
as the Secretary determined there was sufficient empirical and 
scientific information to properly carry out the accreditation 
process for such technology. The provision would further 
include a definition of terms.
    The provision would make several payment adjustments with 
respect to imaging services. It would require the Secretary to 
adjust the number of practice expense relative value units for 
imaging services so that the number of units reflected a 75%, 
rather than 50%, presumed rate of utilization.
    The provision would adjust the technical component discount 
on single session imaging to consecutive body parts. The 
reduction would be increased from 25% to 50%.
    The provision would set a limit on the assumed interest 
rate assumption for capital expenditures used by the Secretary 
when computing the practice expense component. The Secretary 
would be required to reflect the prevailing market rate, but in 
no case higher than 11%.
    The provision would direct the Secretary to not accept or 
pay a claim for imaging unless the claim is made separately for 
each component of such services. The provision would apply to 
claims for imaging services furnished on or after the first day 
of the first month beginning more than one year after 
enactment.

Reason for change

    MedPAC and other observers have expressed concerns that 
sizeable volume increases, particularly for imaging services, 
needed to be addressed. MedPAC has further noted that providers 
vary in their ability to perform quality imaging services. It 
therefore recommended that the Congress direct the Secretary to 
set standards for providers who bill Medicare for performing 
and interpreting diagnostic imaging services.
    MedPAC has also recommended reducing the technical 
component for a second image on a contiguous body part. When a 
second image on an adjacent body part is taken, the clerical 
time, preparation, and supplies needed for the second image are 
significantly reduced. This provision would bring Medicare 
payment policy in line with private payers.
    Recent MedPAC analysis found two problems with the current 
calculation of practice expenses for imaging providers. First, 
CMS assumes that the equipment is used half the time the 
practice is open for business. MedPAC found that most imaging 
equipment is actually in use over 90 percent of the time. Low 
assumptions about equipment use artificially inflate the price 
Medicare pays for imaging services. Second, the CMS assumption 
about the interest rate paid for acquiring capital equipment is 
too high. A recent survey of loans indicated that the average 
annual interest rate over the last five years ranged from 5.3 
percent to 6.0 percent. Assuming a higher interest rate 
artificially inflates Medicare prices. Combined these 
provisions would bring CMS assumptions in line with the current 
market and improve the accuracy of Medicare's prices.
    Finally, disallowing global billing for imaging services is 
necessary to conform to the other changes being made (e.g., 
accreditation, multiple expenditure targets) and enable 
Medicare to better track utilization of imaging services.

     SECTION 310. REDUCING FREQUENCY OF MEETINGS OF THE PRACTICING 
                      PHYSICIANS ADVISORY COUNCIL

Current law

    Section 1868(a) of the Social Security Act established a 
Practicing Physicians Advisory Council (``Council'') to discuss 
certain proposed changes in regulations and carrier manual 
instructions related to physician services identified by the 
Secretary. The council members are appointed by the Secretary, 
based upon nominations submitted by medical organizations 
representing physicians. The Council is composed of 15 
physicians, each of whom has submitted at least 250 Medicare 
claims for physicians' services in the previous year. At least 
11 of the members of the Council are doctors of medicine or 
osteopathy (not doctors of dentistry or dental surgery, 
podiatry, optometry, or chiropractic) and the members of the 
Council include both physicians participating in Medicare as 
well as nonparticipating physicians and physicians practicing 
in rural areas and underserved urban areas. The Council is 
statutorily required to meet quarterly.

Explanation of provision

    The provision would change the statutory requirement for 
the Council to meet at least once a year or as determined 
necessary by the Secretary.

Reason for change

    Staffing the Council's quarterly meetings requires a 
tremendous amount of time and resources. Many observers have 
questioned the effectiveness of the Council's contributions 
given the multitude of other forums for physicians to provide 
guidance to CMS. Limiting the number of Council meetings 
required during the year will free up administrative resources 
for other priorities, such as those being implemented by this 
Act.

                  TITLE IV--MEDICARE ADVANTAGE REFORM


                       Subtitle A--Payment Reform


 SECTION 401. EQUALIZING PAYMENTS BETWEEN MEDICARE ADVANTAGE PLANS AND 
                        FEE-FOR-SERVICE MEDICARE

Current law

    Medicare Advantage (MA) rates for monthly capitation 
payments to the plans are now set by a process based on county 
level benchmarks and MA plan bids.
    County benchmarks are set, for any year, by an update to 
the previous year's payment in a local area by the MA national 
growth percentage increase or, in years when rebasing occurs, 
by 100 percent of Fee-For-Service (FFS) in the county. The 
county payment levels now reflect a variety of historical 
calculations. These calculations include a national floor, a 
large urban floor, a blended rate of county and national FFS 
costs, a minimum update, and 100 percent of FFS costs in the 
county rebased in 2004, 2005 or 2007. Payments for regional 
PPOs and determined by a combination of benchmarks and plan 
bids. Payments for Indirect Medical Education costs for MA 
enrollees treated in teaching hospitals are included both in 
the MA county benchmarks and in payments made directly by 
Medicare to the hospitals. The annual increase in MA payments 
is reduced by a phase-out of budget neutral risk adjustment 
payments through 2010. Programs for All-inclusive Care for the 
Elderly (PACE) programs are paid amounts based on the county 
benchmarks for MA plans.
    Plans submit bids representing their estimated costs for 
providing required Parts A and B benefits in June of each year 
for the next calendar year. If a plan's bid is less than the 
benchmark, its payment equals its bid plus a rebate of 75 
percent of the difference and the remaining 25 percent of the 
difference is retained by the federal government. If a plan's 
bid is equal to or above the benchmark, its payment is the 
benchmark.
    Beginning in 2004 and at a minimum every third year, CMS 
rebases FFS payment rates to reflect more recent county growth 
trends.
    A stabilization fund, with funding of $3.5 billion in 2012 
and 2013, is available to encourage regional PPO MA plans to 
enter into and/or to remain in the MA program. The 
stabilization fund is authorized through December 2013.

Explanation of provision

    This section would phase-out payments to MA plans in excess 
of 100 percent of average FFS costs in each county over four 
years to 100 percent of FFS cost in the county in 2011.
    The calculation of the MA county benchmarks would not 
change for 2008. In 2009, MA plan county benchmarks would be a 
blend of \2/3\ of the 2008 county benchmark inflated to the 
2009 level and \1/3\ of 100 percent projected FFS in the 
county. In 2010, the blend would be \1/3\ of the benchmark and 
\2/3\ of 100 percent FFS in the county. In 2011, and subsequent 
years, all MA benchmarks would be set at the level of 100 
percent of FFS costs in the county.
    If a MA plan bid exceeds 106 percent of the county FFS 
amount for 2009 or 103 percent of the FFS amount in 2010, then 
that MA plan could not enroll any new enrollees for that year 
during the annual coordinated election period or during the 
year. ``New enrollee'' would not include an individual who was 
enrolled in a plan offered by the organization in the month 
immediately before the month in which the individual was 
eligible to enroll in such a Medicare Part C plan offered by 
the organization.
    The phase-out of payments in excess of 100 percent of FFS 
costs would include a change so that the calculation of the 100 
percent FFS amount for a Medicare Part C in a county area would 
exclude costs attributable to indirect medical education 
payments. For a Medicare Part C plan which covers more than one 
MA local area, the FFS amount would be weighted for each area 
by the proportion of enrollees in the plan that reside in the 
county, as posted by the CMS in the April bid notice. PACE 
programs would continue to be paid at current county rates. 
Beginning in 2009, fee-for-service rates would be rebased 
annually.
    The regional PPO stabilization fund would be repealed.

Effective date

    For plan capitation rates beginning with 2009.

Reason for change

    When Medicare Health Maintenance Organizations were first 
paid on a full-risk capitation basis in 1985, they were paid at 
95 percent of the average adjusted per capita costs (AAPCC) in 
fee-for-service Medicare at the county level. New Medicare 
policies enacted in 1997, 2000 and 2003 now pay Medicare 
Advantage (MA) plans an average of 12 percent more than costs 
in fee-for-service Medicare.
    Overpayments to MA plans exceed $1,000 per MA enrollee per 
year. The national total of MA overpayments is $8 billion in 
2007. CBO estimates that overpayments will total $65 billion by 
2012 and $160 billion over the next 10 years. The fact and 
amount of overpayments to MA plans are not in question. The 
Congressional Budget Office, the Medicare Payment Advisory 
Commission and others have documented these amounts in 
testimony before the Committee and in numerous reports.
    The Medicare Payment Advisory Commission (MedPAC) has 
recommended since 2001 that overpayments to MA plans should be 
eliminated. MedPAC recommends a level playing field where MA 
plans are paid the same--not more but not less--than average 
costs in FFS Medicare in the same county.
    This provision provides for a phase-out of overpayments to 
MA plans as a blend of 100 percent of FFS costs and the 
historical benchmarks in each county. This approach to reducing 
overpayments follows an option described by MedPAC in its June 
2007 report. The phase-out of overpayments to MA plans would 
last four years though 2011. This four year phase-out is the 
same length of time that the current increase in MA spending 
has taken place, over four years from 2004 to 2007.
    The phase-out of MA overpayments to 100 percent fee-for-
service costs in each county results in a reduction in Medicare 
costs of $50 billion over five years and $157 billion over 10 
years. These reduced Medicare costs would result in a reduction 
in the Part B premium paid by beneficiaries of $2 per month and 
the extension of the solvency of the Part A trust fund by two 
years.
    CBO now estimates that current 12 percent overpayments to 
MA plans will lead to a large increase in MA enrollment over 
the next 10 years, from 7 million enrollees in 2006 to over 12 
million in 2012. The substantial majority of these 5 million 
projected new MA enrollees would be in the private fee-for-
service (PFFS) and local PPO plans. These plans now certify 
that they cannot provide A & B services at 100 percent of FFS 
by submitting bids at 112 percent and 108 percent of FFS costs 
for 2007.
    The Program for All-Inclusive Care for the Elderly (PACE) 
is a very small program in Medicare that covers the most frail 
elderly beneficiaries who would otherwise be in nursing homes. 
Unlike other MA plans, PACE providers fully integrate Medicare 
and Medicaid benefits, including long-term care. They are also 
unable to alter benefits or raise premiums on their 
beneficiaries. Because of its unique nature, the PACE programs 
would continue to be paid at current levels.
    This section includes a provision intended to limit new 
enrollment in MA plans that indicate that they cannot compete 
in a program moving toward MA payments equal to 100 percent 
fee-for-service costs in 2011. Plans that bid above 106 percent 
of county FFS costs for 2009 or 103 percent of FFS costs for 
2010 could not enroll new beneficiaries in those years.

                  Subtitle B--Beneficiary Protections


 SECTION 411. NAIC DEVELOPMENT OF MARKETING, ADVERTISING, AND RELATED 
                              PROTECTIONS

Current law

    Marketing materials and application forms from MA plans 
cannot be distributed to eligible enrollees unless two 
conditions are met: (1) they have been submitted for the 
Secretary's review at least 45 days prior to distribution, and 
(2) the Secretary has not disapproved their distribution. If an 
MA plan uses model marketing materials developed by the 
Secretary, the review period is reduced from 45 to 10 days.
    Each MA plan is required to conform to fair marketing 
standards. The standards are required to include a prohibition 
against providing cash or other monetary rebates as enrollment 
incentives, and may include a prohibition against an MA plan or 
agent completing an election form on behalf of any individual. 
When applying the standards, the Secretary can disapprove 
materials that are inaccurate or misleading.
    The Secretary has the authority to establish solvency and 
other standards applicable to MA plans. Federal standards 
preempt state laws except in the areas of licensing and 
solvency.
    MA plans enter into contracts with the Secretary to 
participate in the Medicare program. The Secretary has the 
authority to impose sanctions on MA plans that violate the 
terms of the contract. Specifically, there are 7 types of 
violations: (1) failing to provide medically necessary items 
and services; (2) imposing beneficiary premiums in excess of 
those permitted under the law; (3) expelling or refusing to re-
enroll individuals in violation of this part; (4) discouraging 
or denying enrollment among eligible individuals expected to 
require future medical services; (5) misrepresenting or 
falsifying information furnished to the Secretary or an 
individual; (6) failing to abide by rules prohibiting 
interference between a medical provider and patient, or rules 
related to balance billing; and (7) contracting with providers 
excluded from the Medicare program.
    The Secretary can impose civil monetary penalties ranging 
from $25,000 to $100,000 depending on the nature of the 
violation. For each type of violation, the Secretary can impose 
a maximum penalty of $25,000. Specifically, for violations 
related to discouraging enrollment among eligible individuals 
or misrepresenting information furnished to the Secretary, the 
Secretary can impose a maximum penalty of $100,000. For 
violations related to charging excess beneficiary premiums, the 
Secretary can impose an additional $15,000 for each beneficiary 
not enrolled as a result of the practice.
    The Secretary has the authority to charge each MA and PDP 
plan a fee equal to the plan's pro rata share (as determined by 
the Secretary) of the total fees the Secretary collects from MA 
plans in a year. These fees are available, without further 
appropriation, for outreach and enrollment activities related 
to MA, including the State Health Insurance and Assistance 
Program (SHIPs). SHIPs operate in every state and provide 
counseling services to beneficiaries on Medicare-related 
topics. For years 2006 and beyond, the law authorizes 
$200,000,000 minus the fees collected from MA and PDP plans for 
these activities. Also, for years 2006 and beyond, fees cannot 
exceed the lesser of the cost of conducting these outreach and 
enrollment activities or the applicable portion of 
$200,000,000. The applicable portion is defined as: 1) for MA 
plans, the Secretary's estimate of the total proportion of 
expenditures under this title that are attributable to 
expenditures made under this part; or 2) for PDP plans, the 
Secretary's estimate of the total proportion of expenditures 
under this title that are attributable to expenditures made to 
Part D plans.

Explanation of provision

    This section would request NAIC to develop model Medicare 
private plan regulations. This provision would establish new 
marketing and advertising standards for Part C and Prescription 
Drug Plans (PDPs) for state enforcement. Specifically, the 
National Association of Insurance Commissioners (NAIC) would be 
requested to develop model regulations in 5 related areas: (1) 
marketing, (2) enrollment, (3) broker and agent training and 
certification, (4) agent and broker commissions, and (5) market 
conduct. The regulations would be due to the Secretary one year 
after the enactment of this legislation. This provision also 
proposes guidelines for the NAIC to follow in developing these 
regulations.
    In the area of marketing, regulations would be required to 
address the sales and advertising techniques used by private 
plans, their agents, and brokers. Cold calls, unsolicited door-
to-door sales, cross-selling and co-branding would be 
prohibited. The model regulations would be required to address 
the marketing practices of plans that serve dual-eligibles, 
populations with limited English proficiency, and beneficiaries 
in senior living facilities. The regulations would also be 
required to address the plan's marketing practices at 
educational events.
    In the area of enrollment, the regulations would be 
required to address the disclosures Medicare private plans, 
their agents, and brokers make to beneficiaries during 
enrollment as well as a process for affirmative beneficiary 
sign-off before enrollment, and, for Part C plans, for 
beneficiary call-back to confirm enrollment. The regulations 
would also be required to address, either through beneficiary 
disclosure or verification, beneficiary understanding related 
to plan type, plan attributes (i.e. premiums, cost sharing, 
formularies, benefits, and access), plan quality, and the fact 
that plan attributes can change annually.
    In the area of broker and agent training and certification, 
the regulations would be required to establish requirements and 
procedures for the appointment, certification, re-
certification, and training of brokers and agents that market 
and sell Medicare private plans that are consistent with 
existing state appointment and certification procedures.
    In the area of agent and broker commissions, the 
regulations would be required to establish standards for 
setting fair and appropriate commissions. Three types of 
commissions and payments would be prohibited: (1) differential 
commissions based on plan type, (2) first year commissions that 
are greater than 200% of subsequent year commissions, and (3) 
payments of extra bonuses and incentives such as trips, gifts, 
and other types of non-commission cash payments. When 
developing these standards, the NAIC would be required to 
consider the potential for fraud and abuse and beneficiary 
steering, as well as address the ability of state commissioners 
to investigate commission structures. The NAIC would be 
required to also consider requiring agents and brokers to 
disclose commissions to a beneficiary upon request.
    Finally, in the areas of market conduct, the regulations 
would be required to establish standards for Medicare private 
plans, private plan agents and brokers, and state review of 
Medicare private plans. Standards would be required to include 
timely payment of claims, beneficiary complaint reporting and 
disclosure, and state reporting of marketing violations and 
sanctions.
    The provision would set a number of conditions for the 
implementation of the NAIC model regulations. If the 
regulations were submitted on a timely basis--one year after 
the enactment of this legislation--the following would apply: 
(1) the Secretary would be required to publish the regulations 
in the Federal Register and request public comment on whether 
the regulations were consistent with this statute; and (2) not 
later than 6 months after publication, the Secretary would be 
required to publish its determination on whether the 
regulations were consistent with the statute in a 2nd Federal 
Register notice. If they were consistent, the Secretary would 
be required to adopt the regulations as the marketing and 
enrollment standards for Medicare private plans. If the 
Secretary determined that the regulations were not consistent 
with the statute, the Secretary would be required to propose 
marketing and enrollment standards and request public comment. 
Not later than six months after requesting public comment on 
the proposed standards, the Secretary would be required to 
adopt the regulations as the marketing and enrollment standards 
for private plans.
    If the regulations are not submitted on a timely basis, the 
following would apply: (1) the Secretary would publish a notice 
in the Federal Register stating this fact; (2) not later than 6 
months after publication, the Secretary would propose marketing 
and enrollment standards consistent with this statute. The 
regulations would be published in a second Federal Register 
notice with a request for public comments; and (3) not later 
than 6 months after publication of the proposed regulations, 
the Secretary would promulgate final regulations that would 
constitute the marketing and enrollment standards for MA plans.
    When developing these regulations, the NAIC or the 
Secretary would be required to consult with a balanced working 
group composed of issuers of Medicare private plans, consumer 
groups, beneficiaries, State Health Insurance Assistance 
Programs, and others. Finally, the Secretary would be required 
to establish effective dates for implementation consistent with 
the following: (1) the effective date for regulations 
pertaining to the operations of Medicare private plans would be 
plan years beginning on or after such date, but not later than 
one year after the regulations were published; (2) For 
regulations not related to the operations of Medicare private 
plans, the effective date would be any date specified by the 
Secretary provided its not later than one year after the 
regulations were published.
    The provision would require that any plan, agent, or broker 
that violated any of the marketing and enrollment standards 
added by this provision would be subject to sanctions. 
Furthermore, this provision would not prohibit states from 
imposing sanctions against Medicare private plans, agents, and 
brokers for violations of these standards. States would have 
the sole authority to regulate plan agents and brokers.
    This section would expand the exception to the preemption 
of the state role. This provision would add another exception 
to the federal preemption statute. Beginning July 1, 2008, 
standards established by the Secretary would preempt state law 
except those related to licensing, plan solvency, and the 
marketing and enrollment standards adopted under this statute.
    This section requires that the regulations establishing 
marketing and enrollment standards apply to Prescription Drug 
Plans (PDPs). It also provides that MA plan contracts are 
required to include marketing and advertising standards. 
Starting January 1, 2011, this provision would require that 
contracts between Medicare private plan organizations and the 
Secretary meet all marketing and enrollment standards, 
including those enforced by the state.
    This section provides that violations of marketing and 
enrollment standards would become subject to sanctions. Federal 
sanctions for marketing and enrollment violations would apply 
to Medicare private plans. State sanctions would apply to 
private plans, brokers and agents.
    The civil monetary penalties that can be imposed on plans 
that violate terms of their contract would be doubled. This 
would include, but not be limited to violations of the 
marketing and enrollment standards adopted under this section. 
The revised penalties would apply to violations occurring on or 
after the enactment date of this legislation.
    This section provides for the disclosure of market and 
advertising contract violations and imposed sanctions. 
Beginning in 2009, the Secretary would be required to post an 
annual report on its website that lists each Medicare private 
plan organization the Secretary has terminated from 
participation in the program, the basis for the termination, as 
well as any applicable sanctions.
    This section provides for standard definitions of benefits 
and formats for use in marketing materials. By January 1, 2010 
the Secretary, in consultation with NAIC and a working group 
established to consult on marketing and advertising 
requirements, would be required to develop standard 
descriptions and definitions of benefits for use in marketing 
materials. For plan years beginning on January 1, 2011, the 
Secretary would be required to disapprove marketing materials 
that did not use these standard descriptions and definitions.
    This provision would specify funding amounts for SHIPs. For 
FY09, no less than $55,000 would be available for SHIPs, for 
FY10 no less than $65,000, for FY11 no less than $75,000, and 
for FY12 and subsequent years no less than $85,000. This 
provision would also increase funding for Medicare outreach and 
enrollment activities for years 2009 through 2012. In 2009, 
there would be $255,000,000 available for outreach and 
enrollment activities, for 2010 $265,000,000, for 2011 
$275,000,000, and for 2012 and each succeeding year 
$285,000,000. All amounts would be reduced by the fees 
collected from MA and PDP plans by the Secretary. In any year, 
amounts in excess of $200,000,000 would be used to support 
SHIPs and the remaining amount to support activities related to 
outreach and enrollment. For years 2009 and beyond, fees cannot 
exceed the lesser of the cost of conducting these outreach and 
enrollment activities or the applicable portion of the amounts 
specified above.

Effective date

    Upon enactment.

Reason for change

    Thousands of Medicare beneficiaries across the country have 
reported unscrupulous and questionably legal behavior by 
agents, brokers and plans offering Medicare Advantage and Part 
D plans. In spite of warnings and recommendations from the NAIC 
and consumer groups, the CMS marketing guidelines allow 
practices known to be harmful to consumers. Current CMS 
guidelines allow for cross-selling of other insurance products, 
unsolicited phone calls to Medicare beneficiaries and the 
selling of policies near pharmacies. In addition, the 
guidelines provide no limits on commissions and incentives.
    This provision will create strong new marketing and 
enrollment standards as developed by an expert panel of 
stakeholders impaneled by the NAIC. The model regulations will: 
limit unscrupulous marketing activities, ensure appropriate 
beneficiary education, set standards for agent and broker 
appointment training and certification, and limit commissions.
    Under current law, states are preempted from imposing 
strong marketing guidelines against agents, brokers and plans. 
CMS has proven they are unable, and/or unwilling, to take the 
actions necessary to stop the bad actors. In the past states 
have proven they are able and willing to protect beneficiaries 
from bad actors.
    These regulations will protect consumers and give CMS and 
the states the tools they need to adequately enforce consumer 
protections.

 SECTION 412. LIMITATION ON OUT-OF-POCKET COSTS FOR INDIVIDUAL SERVICES

Current law

    Each MA plan must provide all items and services (other 
than hospice) for required benefits under Part A and B to 
individuals entitled to Part A and enrolled in Part B, with 
cost sharing for those services as required under Part A and B, 
or an actuarially equivalent level of cost sharing.
    Dual eligibles are persons entitled to the full range of 
benefits under their state's Medicaid program.
    Qualified Medicare beneficiaries (QMBs) are those aged or 
disabled individuals that are entitled to have some of their 
Medicare cost sharing and Part B premiums paid by the federal-
state Medicaid program, but are not entitled to coverage of 
Medicaid plan services.

Explanation of provision

    Beginning on January 1, 2009, plans would be prohibited 
from offering benefits with cost sharing requirements that are 
greater than the cost sharing requirements imposed under the 
traditional Medicare program. The ``actuarially equivalent'' 
standard included in the statute would be eliminated. Medicare 
private plans would not be prohibited from using flat co-
payments or per diem rates in lieu of the cost sharing amounts 
imposed under Part A and B Medicare, as long as they did not 
exceed the level of cost sharing under traditional Medicare.
    This provision would also prohibit plans from imposing 
cost-sharing for dual-eligible individuals or qualified 
Medicare beneficiaries enrolled in a Medicare Part C plan that 
exceeds the cost-sharing amounts permitted under the Medicare 
and Medicaid statutes. This provision would apply to plan years 
beginning on or after January 1, 2008.

Effective date

    For plan contract years beginning in 2009 and in 2008.

Reason for change

    While Medicare Advantage plans often seek to attract 
beneficiaries with reduced cost-sharing amounts, they rarely 
tell beneficiaries that MA plans are allowed to vary co-
payments and deductibles so that out-of-pocket costs may be 
substantially higher for individual services than in fee-for-
service Medicare.
    For example, a fee-for-service Medicare beneficiary with an 
average seven day hospital stay would pay only the $992 
standard deductible, but in an MA plan could be subject to 
$2,275 in out-of-pocket costs after being charged a $325 co-
payment for each 72 days in the hospital. Fee-for-service 
Medicare charges no co-payments for home health visits while 
some Medicare Advantage plans charge up to 20 percent co-
insurance.
    These examples are merely illustrative. In many MA plans, 
enrollees are charged more not just for home health and 
hospitalizations, but also for skilled nursing facilities, 
durable medical equipment, Part B drugs with cancer 
chemotherapy being the biggest service, and inpatient mental 
health services.
    This provision provides truth-in-advertising for MA plans 
by requiring the plans to cover all of Medicare's benefits with 
no greater cost-sharing than is charged in the fee-for-service 
Medicare program. It would preserve the ability of MA plans to 
use flat co-payments and per diem rates in lieu of deductibles 
and co-insurance charged in traditional Medicare, but it would 
prohibit enrollee out-of-pocket costs from exceeding what their 
costs would have been in fee-for-service Medicare.
    This section also protects Medicare-Medicaid dual-eligible 
beneficiaries by making sure MA plans do not charge these low-
income enrollees more in cost-sharing than they would pay under 
Medicaid in the state.

             SECTION 413. MA PLAN ENROLLMENT MODIFICATIONS

Current law

    Institutionalized MA eligible individuals are allowed 
continuous open enrollment during the year and can change their 
MA election any time.
    Special Election Periods allow beneficiaries the option to 
discontinue or change their enrollment in an MA plan outside of 
the annual coordinated election period. The circumstances in 
which an enrollee can exercise this option include: (1) an MA 
plan terminates its participation in the MA program or in a 
specific area, (2) an individual's place of residence changes, 
(3) the MA plan violates a provision of its contract or 
misrepresents the plan's provisions in marketing the plan, or 
(4) other exceptional conditions as provided by the Secretary. 
CMS has used the exceptional conditions authority to allow 
Medicare-Medicaid dual eligibles to enroll or disenroll from a 
MA plan in any month.
    Certain Medicare beneficiaries may be eligible for 
financial assistance either through one of the Medicare Savings 
programs or through subsidized Part D coverage. Qualified 
Medicare Beneficiaries (QMBs) are aged or disabled persons with 
incomes at or below the federal poverty level, and also meet 
certain requirements. An individual who qualifies as a QMB may 
have their Medicare cost-sharing charges and Part B premium 
paid by the federal-state Medicaid program. Specified Low-
Income Beneficiaries (SLMBs) meet the QMB criteria, except that 
their income is between 100% and 120% of the federal poverty 
level. For SLMBs, their Medicaid protection is limited to 
payment of the Medicare Part B monthly premium. Beneficiaries 
with incomes below 150% of the federal poverty line, and meet 
certain resource requirements as defined in the statute are 
eligible to receive subsidized Part D drug coverage, either 
through a prescription drug plan (PDP) or an MA prescription 
drug plan (MA-PD).
    The law guarantees issuance of specified Medigap policies 
for persons who leave MA plans. First, the law applies to 
individuals who: (1) were enrolled in a Medigap policy; (2) 
subsequently terminated enrollment in that policy and enrolled 
in a MA plan for the first time; and (3) terminated enrollment 
with the MA organization within 12 months. Second, an 
individual upon turning 65 joins a MA plan and subsequently 
leaves the plan within one year.

Explanation of provision

    This provision codifies the current CMS policy by providing 
specific statutory authority for the continuous open enrollment 
option that is now limited to institutionalized individuals, to 
full benefit dual-eligible individuals and qualified Medicare 
beneficiaries (QMBs). The provision would change the continuous 
open enrollment period to allow institutionalized, dual-
eligible individuals, and QMBs to disenroll from MA plans and 
return to traditional Medicare at any time.
    This provision would expand the categories of beneficiaries 
eligible to participate in Special Election Periods to include 
specified low-income Medicare beneficiaries (SLMBs) and 
beneficiaries enrolled in private plans in which enrollment has 
been suspended for not meeting the terms of their contract. The 
Secretary would be required to take into account the health or 
well-being of the individual when determining the exceptional 
conditions in which individuals may be allowed to take 
advantage of a Special Election Period.
    This provision would increase from one year to two years 
the length of time certain categories of individuals who leave 
Part C plans have to enroll in a Medigap plan. The provision 
would apply on or after the enactment date of this legislation.
    The provision would prohibit the Secretary from enrolling 
Medicaid-eligible individuals as dual-eligibles or qualified 
Medicare beneficiaries in a Part C plan without explicit 
permissions from the individual or authorized representative of 
the individual. The provision would not apply to PDPs and would 
apply on or after the enactment date of this legislation.

Effective date

    Upon enactment.

Reason for change

    Dual eligibles and beneficiaries who qualify for assistance 
with their Part B premiums are more likely to suffer from 
mental illness or cognitive impairments, making them vulnerable 
targets for predatory MA marketing schemes. A number of MA 
plans have, in fact, targeted dual eligibles for enrollment in 
their MA plans, disrupting access to providers and resulting in 
higher co-payments for this vulnerable population. This 
provision guarantees these individuals will be able to change 
plans or return to fee-for-service Medicare for their coverage.
    Plans in some states have been allowed, in some instances, 
to automatically enroll dual-eligible beneficiaries in Medicare 
Advantage plans. These plans are not always the best option for 
beneficiaries. This section bars CMS from auto-enrolling dual 
eligibles in Medicare Advantage plans, a practice that can 
subject these individuals to restrictive provider networks and 
higher co-payments.
    Individuals who experience disruptions in their medical 
treatment or are unable to access specific physician 
specialists because of restrictions imposed by their MA plan 
are now barred from dis-enrolling from their MA plans to pursue 
a course of medical treatment. This section requires CMS to 
take account of the health or well being of the individual when 
determining if they can change MA plans or return to fee-for-
service Medicare.
    Plans that commit egregious contract violations--
consistently barring access to medically necessary treatment as 
a matter of policy, failing to have the necessary reserves to 
pay benefits; engaging in widespread predatory marketing 
schemes--can have their enrollment frozen by CMS. This 
provision also allows members of these plans to change plans or 
return to fee-for-service Medicare.
    Beneficiaries should not be disadvantaged when returning to 
fee-for-service Medicare after being a member of a Medicare 
Advantage plan. By extending the time period for guaranteed re-
issue of a Medigap policy, these individuals will be able to 
return to their coverage under fee-for-service Medicare and a 
Medigap policy.

 SECTION 414. INFORMATION FOR BENEFICIARIES ON MA PLAN ADMINISTRATIVE 
                                 COSTS

Current law

    The Secretary must provide for activities to disseminate 
information to current and prospective Medicare beneficiaries 
about MA plans, including, but not limited to benefits, cost 
sharing, service area, access, out-of-area coverage, emergency 
coverage, and supplemental benefits.
    By the first Monday in June, each local MA health plan must 
submit to the Secretary an aggregate monthly bid amount (which 
includes separate bids for required services, any offered 
supplemental benefits, and any offered drug benefits) for each 
MA plan it intends to offer in the upcoming calendar year. The 
bid is based on the average revenue requirements in the payment 
area for an enrollee with a national average risk profile. The 
Secretary has the authority to evaluate and negotiate the 
plan's bid amounts and its proposed benefit packages except for 
PFFS and MSA plans.
    Each contract with an MA organization provides the 
Secretary with the right to audit and inspect any book and 
record of the organization that pertain to: (1) the ability of 
the organization to bear the risk of potential financial 
losses, or (2) services performed or determination of amounts 
payable under the contract.

Explanation of provision

    Beginning in 2009, no later than October 1 of each year, 
the Secretary would be required to publish the following for 
each Medicare Part C plan contract offered: (a) the medical 
loss ratio of the plan in the previous year; (b) per enrollee 
payment as adjusted to reflect a risk score of 1.0, based on 
factors described in statute; and (c) the average risk score.
    Each Medicare Part C organization would be required to 
submit necessary data, including information about the medical 
loss ratio including: (a) the costs for the plan in the 
previous year for total medical expenses, with separate 
calculations for required Medicare benefits and supplemental 
benefits and for non-medical expenses of marketing and sales, 
direct administration, indirect administration, and net cost of 
private reinsurance; (b) gain or loss margin; (c) total revenue 
requirement, computed as the total of medical and non-medical 
expenses and gain or loss margin, multiplied by the gain or 
loss margin; and (d) percent of revenue ratio, computed as the 
total revenue requirement expressed as a percentage of revenue.
    For 2008 and 2009, the data would be required to be 
consistent in content with data reported as part of the 
Medicare Part C plan bid in June 2007. The data submitted 
relating to medical loss ratio for a year would be submitted no 
later than June 1 of the following year. Beginning with 2010, 
the data would be based on the standardized elements and 
definitions. Data would have to be audited by an independent 
third party auditor.
    The Secretary would be required to develop and implement 
standardized data elements and definitions for the calculation 
of the medical loss ratio for Medicare Part C plans, after 
consulting with representatives of Part C organizations, 
experts on health plan accounting systems, and representatives 
of the National Association of Insurance Commissioners. The 
Secretary would publish a report describing the elements and 
definitions no later than December 31, 2008.
    For a Medicare Part C plan, for a year, the Medical Loss 
Ratio would be defined as the ratio of aggregate benefits, 
excluding non-medical expenses, to the aggregate amount of 
basic and supplemental premiums collected for the plan and year 
and payments made by Medicare, including those for prescription 
drugs. The ratio would be computed without regard as to whether 
or not the benefits and premiums were for required or 
supplemental benefits under the plan.
    A contract with a Part C organization would provide the 
Secretary with the right to audit and inspect any book or 
record of a Part C organization that pertains to compliance 
with maintaining the required medical loss ratio and the extent 
to which administrative costs comply with the applicable 
requirements for such costs under the Federal Acquisition 
Regulation.
    Beginning in 2010, if the Secretary determined that an MA 
plan had failed to have a medical loss ratio of at least .85, 
the MA plan would be subject to the following requirements: (1) 
for that contract year, the Secretary would reduce the blended 
benchmark amount for the second succeeding year by the 
percentage point difference between .85 and the plan's medical 
loss ratio; (2) for 3 consecutive years, the plan could not 
enroll new enrollees for coverage during the second succeeding 
year; and (3) the plan would not be allowed to continue if it 
failed to have such a medical loss ratio for 5 consecutive 
years.
    Beginning January 2008, the Secretary would publish, on the 
CMS web site or otherwise, actual enrollment in each Medicare 
Part C plan by county, no later than 30 days after the end of 
each month.
    The Secretary would be required to make publicly available 
data and other information in new formats that could be readily 
used for analysis of the Part C program and would contribute to 
the understanding of the organization and operation of such 
program.
    The Medicare Payment Advisory Commission (MEDPAC) would 
conduct a study related to the need and feasibility of 
providing for different medical loss ratios for different types 
of Part C plans, including coordinated care group plans, 
coordinated care independent practice association plans, 
preferred provider organization plans, and private fee-for-
service plans. A report on the study would be due to Congress 
one year after this legislation is enacted.

Effective date

    Upon enactment.

Reason for change

    Medicare Advantage plans claim to provide significant extra 
benefits, but neither the plans nor CMS can quantify whether 
any of the MA overpayments are actually spent on improved 
benefits. Plans are now reported to spend an average of 13 
percent of their Medicare payments on administrative costs and 
profits.
    The Medical Loss Ratio is the percentage of health plan 
payments actually spent on direct patient care. In the current 
MA bidding process, plans report the data on administrative 
costs and the other factors necessary for the calculation of a 
Medical Loss Ratio as part of their annual bid submission. 
Unfortunately for beneficiaries and policy makers, CMS does not 
disclose the MA plan data and MLRs so beneficiaries do not know 
how much individual plans are spending on administrative costs 
or reaping in profits. Disclosure of these ratios will help 
beneficiaries choose efficient plans and will help policy 
makers make future program improvements.
    MA plans should provide care in an efficient manner. This 
section provides for a minimum MLR of .85 for MA plans 
beginning in 2010 so that beneficiaries and taxpayers would not 
pay more than 15 cents per dollar for administrative costs and 
profits. Plans that are not efficient and cannot meet the 
Medicare Loss Ratio threshold of 0.85 in 2010 or subsequent 
years, would face a reduction in their benchmarks and limits on 
new enrollment. MA plans would eventually be excluded from the 
MA program if they did not meet the requirement for five 
consecutive years.
    Currently the financial and other data reported by MA plans 
are not standardized across plans and plan types and cannot be 
compared on an apples to apples basis. Standardized data 
elements and definitions for the reporting of MA plan data 
regarding Medical Loss Ratios would be developed in 2008. These 
standardized data and definitions would provide beneficiaries 
an improved basis for the comparison of the relative efficiency 
of individual MA plans.
    This section provides for CMS to publish monthly on it's 
web site information on actual MA plan enrollment by plan by 
county. The Committee believes that the MA plan specific data 
published monthly by CMS should include an expansion of the 
current Monthly MA Enrollment by State/County/Contract data 
file that CMS posts on its web site and should include separate 
enrollment for each plan as a subtotal within the contract and 
county. The County/Contact file should be revised to include: 
an additional breakdown within each contact/county of the total 
enrollment by plan. Further, the file should be expanded to 
provide plan codes which allow users to distinguish general MA 
plans by contract type from SNP plans; enrollment of 
individuals identified separately from enrollees in employer 
groups; and those that are Medicaid dually eligible versus 
other enrollees. CMS should provide actual enrollment data for 
all contracts at the county level by discontinuing its current 
practice of excluding data for plans with fewer than 10 
enrollees in the county.
    This section also requires CMS to make publicly available 
data and other information on the MA program in formats that 
can be readily used for analysis. The Committee believes that 
CMS should release data and other information on MA plans 
including: the data on Medicare eligibles at the county level 
that CMS historically released but has not since December 2005. 
The Monthly MA Summary Report should be modified to: breakdown 
enrollment in local CCP plans into HMO, local PPO and local POS 
plans; exclude CMP pilot enrollees; show figures for individual 
versus group enrollment; divide plan enrollment between SNP and 
other types of plans; and indicate the number of enrollees in 
each plan that is dually Medicaid eligible. CMS should also 
modify the Annual Plan Report to include enrollment not just 
for plans but for the contract-county-plan combination.

                Subtitle C--Quality and Other Provisions


      SECTION 421. REQUIRING ALL MA PLANS TO MEET EQUAL STANDARDS

Current law

    All MA plans, except Private Fee-For-Service (PFFS) plans 
and Medical Savings Account (MSA) plans must have a quality 
improvement program. The quality improvement program must have 
a chronic care improvement program and must provide for the 
collection, analysis, and reporting of data that permits the 
measurement of health outcomes.
    The Secretary has the authority to waive or modify 
requirements that hinder the design of, the offering of, or the 
enrollment in MA plans that (1) have contracts between MA 
organizations and employers, labor organizations or the 
trustees of a fund established by one or more employers or 
labor organizations to furnish benefits to the entity's 
employees and/or former employees of the labor organization, or 
(2) are offered by employers, labor organizations or the 
trustees of a fund established by one or more employers or 
labor organizations.

Explanation of provision

    For 2009, a Medicare Part C organization offering a PFFS 
plan or MSA Plan would be required have a quality improvement 
program and to submit the same information on the same 
performance measures as preferred provider organization (PPO) 
plans. Beginning in 2010, a Medicare Part C organization 
offering a PPFS plan or an MSA would be required to submit the 
same information on the same performance measure as Medicare 
HMOs.
    Beginning January 1, 2009, employer sponsored Part C plans 
would be required to have 90 percent of the Medicare 
beneficiaries enrolled in the plan reside in a county in which 
the organization offers a Medicare Part C local plan. With 
respect to employer sponsored Part C plans, the Secretary would 
only be allowed to waive or modify requirements that were in 
effect before the date of enactment of this bill.

Effective date

    Plan contract years beginning in 2009 and upon enactment.

Reason for change

    This section, together with other provisions of Title IV, 
levels the playing field between different types of MA plans.
    MedPAC, in its June 2007 report, indicates that it both 
supports equity between MA plans and FFS Medicare program and 
equity in the treatment of different plan types within the 
private plan sector. The MedPAC June report states ``The 
Commission favors a level planning field for all plan types, 
unless special circumstances dictate otherwise.''
    Medicare HMOs have reported co