TITLE II--MEDICARE ADVANTAGE

Subtitle B--Immediate Improvements

SEC. 211. IMMEDIATE IMPROVEMENTS.

(a) EQUALIZING PAYMENTS WITH FEE-FOR-SERVICE-

(1) IN GENERAL- Section 1853(c)(1) (42 U.S.C. 1395w-23(c)(1)) is amended by adding at the end the following:

`(D) 100 PERCENT OF FEE-FOR-SERVICE COSTS-

`(i) IN GENERAL- For each year specified in clause (ii), the adjusted average per capita cost for the year involved, determined under section 1876(a)(4) and adjusted as appropriate for the purpose of risk adjustment, for the MA payment area for individuals who are not enrolled in an MA plan under this part for the year, but adjusted to exclude costs attributable to payments under section 1886(h).

`(ii) PERIODIC REBASING- The provisions of clause (i) shall apply for 2004 and for subsequent years as the Secretary shall specify (but not less than once every 3 years).

`(iii) INCLUSION OF COSTS OF VA AND DOD MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES- In determining the adjusted average per capita cost under clause (i) for a year, such cost shall be adjusted to include the Secretary's estimate, on a per capita basis, of the amount of additional payments that would have been made in the area involved under this title if individuals entitled to benefits under this title had not received services from facilities of the Department of Defense or the Department of Veterans Affairs.'.

(2) CONFORMING AMENDMENT- Such section is further amended, in the matter before subparagraph (A), by striking `or (C)' and inserting `(C), or (D)'.

(b) CHANGE IN BUDGET NEUTRALITY FOR BLEND- Section 1853(c) (42 U.S.C. 1395w-23(c)) is amended--

(1) in paragraph (1)(A), by inserting `(for a year other than 2004)' after `multiplied'; and

(2) in paragraph (5), by inserting `(other than 2004)' after `for each year'.

(c) INCREASING MINIMUM PERCENTAGE INCREASE TO NATIONAL GROWTH RATE-

(1) IN GENERAL- Section 1853(c)(1) (42 U.S.C. 1395w-23(c)(1)) is amended--

(A) in subparagraph (A), by striking `The sum' and inserting `For a year before 2005, the sum';

(B) in subparagraph (B)(iv), by striking `and each succeeding year' and inserting `, 2003, and 2004';

(C) in subparagraph (C)(iv), by striking `and each succeeding year' and inserting `and 2003'; and

(D) by adding at the end of subparagraph (C) the following new clause:

`(v) For 2004 and each succeeding year, the greater of--

`(I) 102 percent of the annual MA capitation rate under this paragraph for the area for the previous year; or

`(II) the annual MA capitation rate under this paragraph for the area for the previous year increased by the national per capita MA growth percentage, described in paragraph (6) for that succeeding year, but not taking into account any adjustment under paragraph (6)(C) for a year before 2004.'.

(2) CONFORMING AMENDMENT- Section 1853(c)(6)(C) (42 U.S.C. 1395w-23(c)(6)(C)) is amended by inserting before the period at the end the following: `, except that for purposes of paragraph (1)(C)(v)(II), no such adjustment shall be made for a year before 2004'.

(d) INCLUSION OF COSTS OF DOD AND VA MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES IN CALCULATION OF PAYMENT RATES- Section 1853(c)(3) (42 U.S.C. 1395w-23(c)(3)) is amended--

(1) in subparagraph (A), by striking `subparagraph (B)' and inserting `subparagraphs (B) and (E)'; and

(2) by adding at the end the following new subparagraph:

`(E) INCLUSION OF COSTS OF DOD AND VA MILITARY FACILITY SERVICES TO MEDICARE-ELIGIBLE BENEFICIARIES- In determining the area-specific MA capitation rate under subparagraph (A) for a year (beginning with 2004), the annual per capita rate of payment for 1997 determined under section 1876(a)(1)(C) shall be adjusted to include in the rate the Secretary's estimate, on a per capita basis, of the amount of additional payments that would have been made in the area involved under this title if individuals entitled to benefits under this title had not received services from facilities of the Department of Defense or the Department of Veterans Affairs.'.

(e) EXTENDING SPECIAL RULE FOR CERTAIN INPATIENT HOSPITAL STAYS TO REHABILITATION HOSPITALS AND LONG-TERM CARE HOSPITALS-

(1) IN GENERAL- Section 1853(g) (42 U.S.C. 1395w-23(g)) is amended--

(A) in the matter preceding paragraph (1), by inserting `, a rehabilitation hospital described in section 1886(d)(1)(B)(ii) or a distinct part rehabilitation unit described in the matter following clause (v) of section 1886(d)(1)(B), or a long-term care hospital (described in section 1886(d)(1)(B)(iv))' after `1886(d)(1)(B))'; and

(B) in paragraph (2)(B), by inserting `or other payment provision under this title for inpatient services for the type of facility, hospital, or unit involved, described in the matter preceding paragraph (1), as the case may be,' after `1886(d)'.

(2) EFFECTIVE DATE- The amendments made by paragraph (1) shall apply to contract years beginning on or after January 1, 2004.

(f) MEDPAC STUDY OF AAPCC-

(1) STUDY- The Medicare Payment Advisory Commission shall conduct a study that assesses the method used for determining the adjusted average per capita cost (AAPCC) under section 1876(a)(4) of the Social Security Act (42 U.S.C. 1395mm(a)(4)) as applied under section 1853(c)(1)(A) of such Act (as amended by subsection (a)). Such study shall include an examination of--

(A) the bases for variation in such costs between different areas, including differences in input prices, utilization, and practice patterns;

(B) the appropriate geographic area for payment of MA local plans under the Medicare Advantage program under part C of title XVIII of such Act; and

(C) the accuracy of risk adjustment methods in reflecting differences in costs of providing care to different groups of beneficiaries served under such program.

(2) REPORT- Not later than 18 months after the date of the enactment of this Act, the Commission shall submit to Congress a report on the study conducted under paragraph (1).

(g) REPORT ON IMPACT OF INCREASED FINANCIAL ASSISTANCE TO MEDICARE ADVANTAGE PLANS- Not later than July 1, 2006, the Secretary shall submit to Congress a report that describes the impact of additional financing provided under this Act and other Acts (including the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 and BIPA) on the availability of Medicare Advantage plans in different areas and its impact on lowering premiums and increasing benefits under such plans.

(h) MEDPAC STUDY AND REPORT ON CLARIFICATION OF AUTHORITY REGARDING DISAPPROVAL OF UNREASONABLE BENEFICIARY COST-SHARING-

(1) STUDY- The Medicare Payment Advisory Commission, in consultation with beneficiaries, consumer groups, employers, and organizations offering plans under part C of title XVIII of the Social Security Act, shall conduct a study to determine the extent to which the cost-sharing structures under such plans affect access to covered services or select enrollees based on the health status of eligible individuals described in section 1851(a)(3) of the Social Security Act (42 U.S.C. 1395w-21(a)(3)).

(2) REPORT- Not later than December 31, 2004, the Commission shall submit a report to Congress on the study conducted under paragraph (1) together with recommendations for such legislation and administrative actions as the Commission considers appropriate.

(i) IMPLEMENTATION OF PROVISIONS-

(1) ANNOUNCEMENT OF REVISED MEDICARE ADVANTAGE PAYMENT RATES- Within 6 weeks after the date of the enactment of this Act, the Secretary shall determine, and shall announce (in a manner intended to provide notice to interested parties) MA capitation rates under section 1853 of the Social Security Act (42 U.S.C. 1395w-23) for 2004, revised in accordance with the provisions of this section.

(2) TRANSITION TO REVISED PAYMENT RATES- The provisions of section 604 of BIPA (114 Stat. 2763A-555) (other than subsection (a)) shall apply to the provisions of subsections (a) through (d) of this section for 2004 in the same manner as the provisions of such section 604 applied to the provisions of BIPA for 2001.

(3) SPECIAL RULE FOR PAYMENT RATES IN 2004-

(A) JANUARY AND FEBRUARY- Notwithstanding the amendments made by subsections (a) through (d), for purposes of making payments under section 1853 of the Social Security Act (42 U.S.C. 1395w-23) for January and February 2004, the annual capitation rate for a payment area shall be calculated and the excess amount under section 1854(f)(1)(B) of such Act (42 U.S.C. 1395w-24(f)(1)(B)) shall be determined as if such amendments had not been enacted.

(B) MARCH THROUGH DECEMBER- Notwithstanding the amendments made by subsections (a) through (d), for purposes of making payments under section 1853 of the Social Security Act (42 U.S.C. 1395w-23) for March through December 2004, the annual capitation rate for a payment area shall be calculated and the excess amount under section 1854(f)(1)(B) of such Act (42 U.S.C. 1395w-24(f)(1)(B)) shall be determined, in such manner as the Secretary estimates will ensure that the total of such payments with respect to 2004 is the same as the amounts that would have been if subparagraph (A) had not been enacted.

(C) CONSTRUCTION- Subparagraphs (A) and (B) shall not be taken into account in computing such capitation rate for 2005 and subsequent years.

(4) PLANS REQUIRED TO PROVIDE NOTICE OF CHANGES IN PLAN BENEFITS- In the case of an organization offering a plan under part C of title XVIII of the Social Security Act that revises its submission of the information described in section 1854(a)(1) of such Act (42 U.S.C. 1395w-23(a)(1)) for a plan pursuant to the application of paragraph (2), if such revision results in changes in beneficiary premiums, beneficiary cost-sharing, or benefits under the plan, then by not later than 3 weeks after the date the Secretary approves such submission, the organization offering the plan shall provide each beneficiary enrolled in the plan with written notice of such changes.

(5) LIMITATION ON REVIEW- There shall be no administrative or judicial review under section 1869 or section 1878 of the Social Security Act (42 U.S.C. 1395ff and 1395oo), or otherwise of any determination made by the Secretary under this subsection or the application of the payment rates determined pursuant to this subsection.

(j) ADDITIONAL AMENDMENTS- Section 1852(d)(4) (42 U.S.C. 1395w-22(d)(4)) is amended--

(1) in subparagraph (B), by inserting `(other than deemed contracts or agreements under subsection (j)(6))' after `the plan has contracts or agreements'; and

(2) in the last sentence, by inserting before the period at the end the following: `, except that, if a plan entirely meets such requirement with respect to a category of health care professional or provider on the basis of subparagraph (B), it may provide for a higher beneficiary copayment in the case of health care professionals and providers of that category who do not have contracts or agreements (other than deemed contracts or agreements under subsection (j)(6)) to provide covered services under the terms of the plan'.