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[CITE: 42USC1395w-23]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                       CHAPTER 7--SOCIAL SECURITY
 
        SUBCHAPTER XVIII--HEALTH INSURANCE FOR AGED AND DISABLED
 
                     Part C--Medicare+Choice Program
 
Sec. 1395w-23. Payments to Medicare+Choice organizations


(a) Payments to organizations

                        (1) Monthly payments

        (A) In general

            Under a contract under section 1395w-27 of this title and 
        subject to subsections (e), (g), and (i) of this section and 
        section 1395w-28(e)(4) of this title, the Secretary shall make 
        monthly payments under this section in advance to each 
        Medicare+Choice organization, with respect to coverage of an 
        individual under this part in a Medicare+Choice payment area for 
        a month, in an amount equal to \1/12\ of the annual 
        Medicare+Choice capitation rate (as calculated under subsection 
        (c) of this section) with respect to that individual for that 
        area, adjusted for such risk factors as age, disability status, 
        gender, institutional status, and such other factors as the 
        Secretary determines to be appropriate, so as to ensure 
        actuarial equivalence. The Secretary may add to, modify, or 
        substitute for such factors, if such changes will improve the 
        determination of actuarial equivalence.

        (B) Special rule for end-stage renal disease

            The Secretary shall establish separate rates of payment to a 
        Medicare+Choice organization with respect to classes of 
        individuals determined to have end-stage renal disease and 
        enrolled in a Medicare+Choice plan of the organization. Such 
        rates of payment shall be actuarially equivalent to rates paid 
        to other enrollees in the Medicare+Choice payment area (or such 
        other area as specified by the Secretary). In accordance with 
        regulations, the Secretary shall provide for the application of 
        the seventh sentence of section 1395rr(b)(7) of this title to 
        payments under this section covering the provision of renal 
        dialysis treatment in the same manner as such sentence applies 
        to composite rate payments described in such sentence.

            (2) Adjustment to reflect number of enrollees

        (A) In general

            The amount of payment under this subsection may be 
        retroactively adjusted to take into account any difference 
        between the actual number of individuals enrolled with an 
        organization under this part and the number of such individuals 
        estimated to be so enrolled in determining the amount of the 
        advance payment.

        (B) Special rule for certain enrollees

            (i) In general

                Subject to clause (ii), the Secretary may make 
            retroactive adjustments under subparagraph (A) to take into 
            account individuals enrolled during the period beginning on 
            the date on which the individual enrolls with a 
            Medicare+Choice organization under a plan operated, 
            sponsored, or contributed to by the individual's employer or 
            former employer (or the employer or former employer of the 
            individual's spouse) and ending on the date on which the 
            individual is enrolled in the organization under this part, 
            except that for purposes of making such retroactive 
            adjustments under this subparagraph, such period may not 
            exceed 90 days.
            (ii) Exception

                No adjustment may be made under clause (i) with respect 
            to any individual who does not certify that the organization 
            provided the individual with the disclosure statement 
            described in section 1395w-22(c) of this title at the time 
            the individual enrolled with the organization.

            (3) Establishment of risk adjustment factors

        (A) Report

            The Secretary shall develop, and submit to Congress by not 
        later than March 1, 1999, a report on the method of risk 
        adjustment of payment rates under this section, to be 
        implemented under subparagraph (C), that accounts for variations 
        in per capita costs based on health status. Such report shall 
        include an evaluation of such method by an outside, independent 
        actuary of the actuarial soundness of the proposal.

        (B) Data collection

            In order to carry out this paragraph, the Secretary shall 
        require Medicare+Choice organizations (and eligible 
        organizations with risk-sharing contracts under section 1395mm 
        of this title) to submit data regarding inpatient hospital 
        services for periods beginning on or after July 1, 1997, and 
        data regarding other services and other information as the 
        Secretary deems necessary for periods beginning on or after July 
        1, 1998. The Secretary may not require an organization to submit 
        such data before January 1, 1998.

        (C) Initial implementation

            (i) In general

                The Secretary shall first provide for implementation of 
            a risk adjustment methodology that accounts for variations 
            in per capita costs based on health status and other 
            demographic factors for payments by no later than January 1, 
            2000.
            (ii) Phase-in

                Such risk adjustment methodology shall be implemented in 
            a phased-in manner so that the methodology insofar as it 
            makes adjustments to capitation rates for health status 
            applies to--
                    (I) 10 percent of \1/12\ of the annual 
                Medicare+Choice capitation rate in 2000 and 2001; and
                    (II) not more than 20 percent of such capitation 
                rate in 2002.

        (D) Uniform application to all types of plans

            Subject to section 1395w-28(e)(4) of this title, the 
        methodology shall be applied uniformly without regard to the 
        type of plan.

(b) Annual announcement of payment rates

                       (1) Annual announcement

        The Secretary shall annually determine, and shall announce (in a 
    manner intended to provide notice to interested parties) not later 
    than March 1 before the calendar year concerned--
            (A) the annual Medicare+Choice capitation rate for each 
        Medicare+Choice payment area for the year, and
            (B) the risk and other factors to be used in adjusting such 
        rates under subsection (a)(1)(A) of this section for payments 
        for months in that year.

            (2) Advance notice of methodological changes

        At least 45 days before making the announcement under paragraph 
    (1) for a year, the Secretary shall provide for notice to 
    Medicare+Choice organizations of proposed changes to be made in the 
    methodology from the methodology and assumptions used in the 
    previous announcement and shall provide such organizations an 
    opportunity to comment on such proposed changes.

                   (3) Explanation of assumptions

        In each announcement made under paragraph (1), the Secretary 
    shall include an explanation of the assumptions and changes in 
    methodology used in the announcement in sufficient detail so that 
    Medicare+Choice organizations can compute monthly adjusted 
    Medicare+Choice capitation rates for individuals in each 
    Medicare+Choice payment area which is in whole or in part within the 
    service area of such an organization.

    (4) Continued computation and publication of county-specific 
             per capita fee-for-service expenditure information

        The Secretary, through the Chief Actuary of the Health Care 
    Financing Administration, shall provide for the computation and 
    publication, on an annual basis beginning with 2001 at the time of 
    publication of the annual Medicare+Choice capitation rates under 
    paragraph (1), of the following information for the original 
    medicare fee-for-service program under parts A and B of this 
    subchapter (exclusive of individuals eligible for coverage under 
    section 426-1 of this title) for each Medicare+Choice payment area 
    for the second calendar year ending before the date of publication:
            (A) Total expenditures per capita per month, computed 
        separately for part A of this subchapter and for part B of this 
        subchapter.
            (B) The expenditures described in subparagraph (A) reduced 
        by the best estimate of the expenditures (such as graduate 
        medical education and disproportionate share hospital payments) 
        not related to the payment of claims.
            (C) The average risk factor for the covered population based 
        on diagnoses reported for medicare inpatient services, using the 
        same methodology as is expected to be applied in making payments 
        under subsection (a) of this section.
            (D) Such average risk factor based on diagnoses for 
        inpatient and other sites of service, using the same methodology 
        as is expected to be applied in making payments under subsection 
        (a) of this section.

(c) Calculation of annual Medicare+Choice capitation rates

                           (1) In general

        For purposes of this part, subject to paragraphs (6)(C) and (7), 
    each annual Medicare+
    Choice capitation rate, for a Medicare+Choice payment area for a 
    contract year consisting of a calendar year, is equal to the largest 
    of the amounts specified in the following subparagraph (A), (B), or 
    (C):

        (A) Blended capitation rate

            The sum of--
                (i) the area-specific percentage (as specified under 
            paragraph (2) for the year) of the annual area-specific 
            Medicare+Choice capitation rate for the Medicare+Choice 
            payment area, as determined under paragraph (3) for the 
            year, and
                (ii) the national percentage (as specified under 
            paragraph (2) for the year) of the input-price-adjusted 
            annual national Medicare+Choice capitation rate, as 
            determined under paragraph (4) for the year,

        multiplied by the budget neutrality adjustment factor determined 
        under paragraph (5).

        (B) Minimum amount

            12 multiplied by the following amount:
                (i) For 1998, $367 (but not to exceed, in the case of an 
            area outside the 50 States and the District of Columbia, 150 
            percent of the annual per capita rate of payment for 1997 
            determined under section 1395mm(a)(1)(C) of this title for 
            the area).
                (ii) For a succeeding year, the minimum amount specified 
            in this clause (or clause (i)) for the preceding year 
            increased by the national per capita Medicare+Choice growth 
            percentage, described in paragraph (6)(A) for that 
            succeeding year.

        (C) Minimum percentage increase

            (i) For 1998, 102 percent of the annual per capita rate of 
        payment for 1997 determined under section 1395mm(a)(1)(C) of 
        this title for the Medicare+Choice payment area.
            (ii) For a subsequent year, 102 percent of the annual 
        Medicare+Choice capitation rate under this paragraph for the 
        area for the previous year.

             (2) Area-specific and national percentages

        For purposes of paragraph (1)(A)--
            (A) for 1998, the ``area-specific percentage'' is 90 percent 
        and the ``national percentage'' is 10 percent,
            (B) for 1999, the ``area-specific percentage'' is 82 percent 
        and the ``national percentage'' is 18 percent,
            (C) for 2000, the ``area-specific percentage'' is 74 percent 
        and the ``national percentage'' is 26 percent,
            (D) for 2001, the ``area-specific percentage'' is 66 percent 
        and the ``national percentage'' is 34 percent,
            (E) for 2002, the ``area-specific percentage'' is 58 percent 
        and the ``national percentage'' is 42 percent, and
            (F) for a year after 2002, the ``area-specific percentage'' 
        is 50 percent and the ``national percentage'' is 50 percent.

      (3) Annual area-specific Medicare+Choice capitation rate

        (A) In general

            For purposes of paragraph (1)(A), subject to subparagraph 
        (B), the annual area-specific Medicare+Choice capitation rate 
        for a Medicare+Choice payment area--
                (i) for 1998 is, subject to subparagraph (D), the annual 
            per capita rate of payment for 1997 determined under section 
            1395mm(a)(1)(C) of this title for the area, increased by the 
            national per capita Medicare+Choice growth percentage for 
            1998 (described in paragraph (6)(A)); or
                (ii) for a subsequent year is the annual area-specific 
            Medicare+Choice capitation rate for the previous year 
            determined under this paragraph for the area, increased by 
            the national per capita Medicare+Choice growth percentage 
            for such subsequent year.

        (B) Removal of medical education from calculation of adjusted 
                average per capita cost

            (i) In general

                In determining the area-specific Medicare+Choice 
            capitation rate under subparagraph (A) for a year (beginning 
            with 1998), the annual per capita rate of payment for 1997 
            determined under section 1395mm(a)(1)(C) of this title shall 
            be adjusted to exclude from the rate the applicable percent 
            (specified in clause (ii)) of the payment adjustments 
            described in subparagraph (C).
            (ii) Applicable percent

                For purposes of clause (i), the applicable percent for--
                    (I) 1998 is 20 percent,
                    (II) 1999 is 40 percent,
                    (III) 2000 is 60 percent,
                    (IV) 2001 is 80 percent, and
                    (V) a succeeding year is 100 percent.

        (C) Payment adjustment

            (i) In general

                Subject to clause (ii), the payment adjustments 
            described in this subparagraph are payment adjustments which 
            the Secretary estimates were payable during 1997--
                    (I) for the indirect costs of medical education 
                under section 1395ww(d)(5)(B) of this title, and
                    (II) for direct graduate medical education costs 
                under section 1395ww(h) of this title.
            (ii) Treatment of payments covered under State 
                    hospital reimbursement system

                To the extent that the Secretary estimates that an 
            annual per capita rate of payment for 1997 described in 
            clause (i) reflects payments to hospitals reimbursed under 
            section 1395f(b)(3) of this title, the Secretary shall 
            estimate a payment adjustment that is comparable to the 
            payment adjustment that would have been made under clause 
            (i) if the hospitals had not been reimbursed under such 
            section.

        (D) Treatment of areas with highly variable payment rates

            In the case of a Medicare+Choice payment area for which the 
        annual per capita rate of payment determined under section 
        1395mm(a)(1)(C) of this title for 1997 varies by more than 20 
        percent from such rate for 1996, for purposes of this subsection 
        the Secretary may substitute for such rate for 1997 a rate that 
        is more representative of the costs of the enrollees in the 
        area.

      (4) Input-price-adjusted annual national Medicare+Choice 
                               capitation rate

        (A) In general

            For purposes of paragraph (1)(A), the input-price-adjusted 
        annual national Medicare+Choice capitation rate for a 
        Medicare+Choice payment area for a year is equal to the sum, for 
        all the types of medicare services (as classified by the 
        Secretary), of the product (for each such type of service) of--
                (i) the national standardized annual Medicare+Choice 
            capitation rate (determined under subparagraph (B)) for the 
            year,
                (ii) the proportion of such rate for the year which is 
            attributable to such type of services, and
                (iii) an index that reflects (for that year and that 
            type of services) the relative input price of such services 
            in the area compared to the national average input price of 
            such services.

        In applying clause (iii), the Secretary may, subject to 
        subparagraph (C), apply those indices under this subchapter that 
        are used in applying (or updating) national payment rates for 
        specific areas and localities.

        (B) National standardized annual Medicare+
                Choice capitation rate

            In subparagraph (A)(i), the ``national standardized annual 
        Medicare+Choice capitation rate'' for a year is equal to--
                (i) the sum (for all Medicare+Choice payment areas) of 
            the product of--
                    (I) the annual area-specific Medicare+
                Choice capitation rate for that year for the area under 
                paragraph (3), and
                    (II) the average number of medicare beneficiaries 
                residing in that area in the year, multiplied by the 
                average of the risk factor weights used to adjust 
                payments under subsection (a)(1)(A) of this section for 
                such beneficiaries in such area; divided by

                (ii) the sum of the products described in clause (i)(II) 
            for all areas for that year.

        (C) Special rules for 1998

            In applying this paragraph for 1998--
                (i) medicare services shall be divided into 2 types of 
            services: part A services and part B services;
                (ii) the proportions described in subparagraph (A)(ii)--
                    (I) for part A services shall be the ratio 
                (expressed as a percentage) of the national average 
                annual per capita rate of payment for part A of this 
                subchapter for 1997 to the total national average annual 
                per capita rate of payment for parts A and B of this 
                subchapter for 1997, and
                    (II) for part B services shall be 100 percent minus 
                the ratio described in subclause (I);

                (iii) for part A services, 70 percent of payments 
            attributable to such services shall be adjusted by the index 
            used under section 1395ww(d)(3)(E) of this title to adjust 
            payment rates for relative hospital wage levels for 
            hospitals located in the payment area involved;
                (iv) for part B services--
                    (I) 66 percent of payments attributable to such 
                services shall be adjusted by the index of the 
                geographic area factors under section 1395w-4(e) of this 
                title used to adjust payment rates for physicians' 
                services furnished in the payment area, and
                    (II) of the remaining 34 percent of the amount of 
                such payments, 40 percent shall be adjusted by the index 
                described in clause (iii); and

                (v) the index values shall be computed based only on the 
            beneficiary population who are 65 years of age or older and 
            who are not determined to have end stage renal disease.

        The Secretary may continue to apply the rules described in this 
        subparagraph (or similar rules) for 1999.

           (5) Payment adjustment budget neutrality factor

        For purposes of paragraph (1)(A), for each year, the Secretary 
    shall determine a budget neutrality adjustment factor so that the 
    aggregate of the payments under this part (other than those 
    attributable to subsection (i) of this section) shall equal the 
    aggregate payments that would have been made under this part if 
    payment were based entirely on area-specific capitation rates.

          (6) ``National per capita Medicare+Choice growth 
                            percentage'' defined

        (A) In general

            In this part, the ``national per capita Medicare+Choice 
        growth percentage'' for a year is the percentage determined by 
        the Secretary, by March 1st before the beginning of the year 
        involved, to reflect the Secretary's estimate of the projected 
        per capita rate of growth in expenditures under this subchapter 
        for an individual entitled to benefits under part A of this 
        subchapter and enrolled under part B of this subchapter, reduced 
        by the number of percentage points specified in subparagraph (B) 
        for the year. Separate determinations may be made for aged 
        enrollees, disabled enrollees, and enrollees with end-stage 
        renal disease.

        (B) Adjustment

            The number of percentage points specified in this 
        subparagraph is--
                (i) for 1998, 0.8 percentage points,
                (ii) for 1999, 0.5 percentage points,
                (iii) for 2000, 0.5 percentage points,
                (iv) for 2001, 0.5 percentage points,
                (v) for 2002, 0.3 percentage points, and
                (vi) for a year after 2002, 0 percentage points.

        (C) Adjustment for over or under projection of national per 
                capita Medicare+Choice growth percentage

            Beginning with rates calculated for 1999, before computing 
        rates for a year as described in paragraph (1), the Secretary 
        shall adjust all area-specific and national Medicare+Choice 
        capitation rates (and beginning in 2000, the minimum amount) for 
        the previous year for the differences between the projections of 
        the national per capita Medicare+Choice growth percentage for 
        that year and previous years and the current estimate of such 
        percentage for such years.

         (7) Adjustment for national coverage determinations

        If the Secretary makes a determination with respect to coverage 
    under this subchapter that the Secretary projects will result in a 
    significant increase in the costs to Medicare+Choice of providing 
    benefits under contracts under this part (for periods after any 
    period described in section 1395w-22(a)(5) of this title), the 
    Secretary shall adjust appropriately the payments to such 
    organizations under this part.

(d) ``Medicare+Choice payment area'' defined

                           (1) In general

        In this part, except as provided in paragraph (3), the term 
    ``Medicare+Choice payment area'' means a county, or equivalent area 
    specified by the Secretary.

                   (2) Rule for ESRD beneficiaries

        In the case of individuals who are determined to have end stage 
    renal disease, the Medicare+Choice payment area shall be a State or 
    such other payment area as the Secretary specifies.

                      (3) Geographic adjustment

        (A) In general

            Upon written request of the chief executive officer of a 
        State for a contract year (beginning after 1998) made by not 
        later than February 1 of the previous year, the Secretary shall 
        make a geographic adjustment to a Medicare+Choice payment area 
        in the State otherwise determined under paragraph (1)--
                (i) to a single statewide Medicare+Choice payment area,
                (ii) to the metropolitan based system described in 
            subparagraph (C), or
                (iii) to consolidating into a single Medicare+Choice 
            payment area noncontiguous counties (or equivalent areas 
            described in paragraph (1)) within a State.

        Such adjustment shall be effective for payments for months 
        beginning with January of the year following the year in which 
        the request is received.

        (B) Budget neutrality adjustment

            In the case of a State requesting an adjustment under this 
        paragraph, the Secretary shall initially (and annually 
        thereafter) adjust the payment rates otherwise established under 
        this section for Medicare+Choice payment areas in the State in a 
        manner so that the aggregate of the payments under this section 
        in the State shall not exceed the aggregate payments that would 
        have been made under this section for Medicare+Choice payment 
        areas in the State in the absence of the adjustment under this 
        paragraph.

        (C) Metropolitan based system

            The metropolitan based system described in this subparagraph 
        is one in which--
                (i) all the portions of each metropolitan statistical 
            area in the State or in the case of a consolidated 
            metropolitan statistical area, all of the portions of each 
            primary metropolitan statistical area within the 
            consolidated area within the State, are treated as a single 
            Medicare+Choice payment area, and
                (ii) all areas in the State that do not fall within a 
            metropolitan statistical area are treated as a single 
            Medicare+Choice payment area.

        (D) Areas

            In subparagraph (C), the terms ``metropolitan statistical 
        area'', ``consolidated metropolitan statistical area'', and 
        ``primary metropolitan statistical area'' mean any area 
        designated as such by the Secretary of Commerce.

(e) Special rules for individuals electing MSA plans

                           (1) In general

        If the amount of the Medicare+Choice monthly MSA premium (as 
    defined in section 1395w-24(b)(2)(C) of this title) for an MSA plan 
    for a year is less than \1/12\ of the annual Medicare+Choice 
    capitation rate applied under this section for the area and year 
    involved, the Secretary shall deposit an amount equal to 100 percent 
    of such difference in a Medicare+
    Choice MSA established (and, if applicable, designated) by the 
    individual under paragraph (2).

    (2) Establishment and designation of Medicare+Choice medical 
               savings account as requirement for payment of 
                                contribution

        In the case of an individual who has elected coverage under an 
    MSA plan, no payment shall be made under paragraph (1) on behalf of 
    an individual for a month unless the individual--
            (A) has established before the beginning of the month (or by 
        such other deadline as the Secretary may specify) a 
        Medicare+Choice MSA (as defined in section 138(b)(2) of the 
        Internal Revenue Code of 1986), and
            (B) if the individual has established more than one such 
        Medicare+Choice MSA, has designated one of such accounts as the 
        individual's Medicare+Choice MSA for purposes of this part.

    Under rules under this section, such an individual may change the 
    designation of such account under subparagraph (B) for purposes of 
    this part.

    (3) Lump-sum deposit of medical savings account contribution

        In the case of an individual electing an MSA plan effective 
    beginning with a month in a year, the amount of the contribution to 
    the Medicare+Choice MSA on behalf of the individual for that month 
    and all successive months in the year shall be deposited during that 
    first month. In the case of a termination of such an election as of 
    a month before the end of a year, the Secretary shall provide for a 
    procedure for the recovery of deposits attributable to the remaining 
    months in the year.

(f) Payments from Trust Fund

    The payment to a Medicare+Choice organization under this section for 
individuals enrolled under this part with the organization and payments 
to a Medicare+Choice MSA under subsection (e)(1) of this section shall 
be made from the Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund in such proportion as the 
Secretary determines reflects the relative weight that benefits under 
part A of this subchapter and under part B of this subchapter represents 
of the actuarial value of the total benefits under this subchapter. 
Monthly payments otherwise payable under this section for October 2000 
shall be paid on the first business day of such month. Monthly payments 
otherwise payable under this section for October 2001 shall be paid on 
the last business day of September 2001. Monthly payments otherwise 
payable under this section for October 2006 shall be paid on the first 
business day of October 2006.

(g) Special rule for certain inpatient hospital stays

    In the case of an individual who is receiving inpatient hospital 
services from a subsection (d) hospital (as defined in section 
1395ww(d)(1)(B) of this title) as of the effective date of the 
individual's--
        (1) election under this part of a Medicare+
    Choice plan offered by a Medicare+Choice organization--
            (A) payment for such services until the date of the 
        individual's discharge shall be made under this subchapter 
        through the Medicare+Choice plan or the original medicare fee-
        for-service program option described in section 1395w-
        21(a)(1)(A) of this title (as the case may be) elected before 
        the election with such organization,
            (B) the elected organization shall not be financially 
        responsible for payment for such services until the date after 
        the date of the individual's discharge, and
            (C) the organization shall nonetheless be paid the full 
        amount otherwise payable to the organization under this part; or

        (2) termination of election with respect to a Medicare+Choice 
    organization under this part--
            (A) the organization shall be financially responsible for 
        payment for such services after such date and until the date of 
        the individual's discharge,
            (B) payment for such services during the stay shall not be 
        made under section 1395ww(d) of this title or by any succeeding 
        Medicare+Choice organization, and
            (C) the terminated organization shall not receive any 
        payment with respect to the individual under this part during 
        the period the individual is not enrolled.

(h) Special rule for hospice care

                           (1) Information

        A contract under this part shall require the Medicare+Choice 
    organization to inform each individual enrolled under this part with 
    a Medicare+Choice plan offered by the organization about the 
    availability of hospice care if--
            (A) a hospice program participating under this subchapter is 
        located within the organization's service area; or
            (B) it is common practice to refer patients to hospice 
        programs outside such service area.

                             (2) Payment

        If an individual who is enrolled with a Medicare+Choice 
    organization under this part makes an election under section 
    1395d(d)(1) of this title to receive hospice care from a particular 
    hospice program--
            (A) payment for the hospice care furnished to the individual 
        shall be made to the hospice program elected by the individual 
        by the Secretary;
            (B) payment for other services for which the individual is 
        eligible notwithstanding the individual's election of hospice 
        care under section 1395d(d)(1) of this title, including services 
        not related to the individual's terminal illness, shall be made 
        by the Secretary to the Medicare+Choice organization or the 
        provider or supplier of the service instead of payments 
        calculated under subsection (a) of this section; and
            (C) the Secretary shall continue to make monthly payments to 
        the Medicare+Choice organization in an amount equal to the value 
        of the additional benefits required under section 1395w-
        24(f)(1)(A) of this title.

(i) New entry bonus

                           (1) In general

        Subject to paragraphs (2) and (3), in the case of 
    Medicare+Choice payment area in which a Medicare+Choice plan has not 
    been offered since 1997 (or in which all organizations that offered 
    a plan since such date have filed notice with the Secretary, as of 
    October 13, 1999, that they will not be offering such a plan as of 
    January 1, 2000), the amount of the monthly payment otherwise made 
    under this section shall be increased--
            (A) only for the first 12 months in which any 
        Medicare+Choice plan is offered in the area, by 5 percent of the 
        total monthly payment otherwise computed for such payment area; 
        and
            (B) only for the subsequent 12 months, by 3 percent of the 
        total monthly payment otherwise computed for such payment area.

                      (2) Period of application

        Paragraph (1) shall only apply to payment for Medicare+Choice 
    plans which are first offered in a Medicare+Choice payment area 
    during the 2-year period beginning on January 1, 2000.

      (3) Limitation to organization offering first plan in an 
                                    area

        Paragraph (1) shall only apply to payment to the first 
    Medicare+Choice organization that offers a Medicare+Choice plan in 
    each Medicare+Choice payment area, except that if more than one such 
    organization first offers such a plan in an area on the same date, 
    paragraph (1) shall apply to payment for such organizations.

                          (4) Construction

        Nothing in paragraph (1) shall be construed as affecting the 
    calculation of the annual Medicare+Choice capitation rate under 
    subsection (c) of this section for any payment area or as applying 
    to payment for any period not described in such paragraph and 
    paragraph (2).

                         (5) Offered defined

        In this subsection, the term ``offered'' means, with respect to 
    a Medicare+Choice plan as of a date, that a Medicare+Choice eligible 
    individual may enroll with the plan on that date, regardless of when 
    the enrollment takes effect or when the individual obtains benefits 
    under the plan.

(Aug. 14, 1935, ch. 531, title XVIII, Sec. 1853, as added Pub. L. 105-
33, title IV, Sec. 4001, Aug. 5, 1997, 111 Stat. 299; amended Pub. L. 
106-113, div. B, Sec. 1000(a)(6) [title V, Secs. 511(a), 512, 514(a), 
517], Nov. 29, 1999, 113 Stat. 1536, 1501A-380, 1501A-382 to 1501A-384.)

                       References in Text

    Parts A and B of this subchapter, referred to in subsecs. (b)(4), 
(c)(4)(C), (6)(A), and (f), are classified to section 1395c et seq. and 
section 1395j et seq., respectively, of this title.
    The Internal Revenue Code of 1986, referred to in subsec. (e)(2)(A), 
is classified generally to Title 26, Internal Revenue Code.


                               Amendments

    1999--Subsec. (a)(1)(A). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 512(1)], substituted ``subsections (e), (g), and (i) of this 
section'' for ``subsections (e) and (f) of this section''.
    Subsec. (a)(3)(C). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 511(a)], designated existing provisions as cl. (i), inserted 
heading, and added cl. (ii).
    Subsec. (b)(4). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 514(a)], added par. (4).
    Subsec. (c)(5). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 512(2)], inserted ``(other than those attributable to subsection 
(i) of this section)'' after ``payments under this part''.
    Subsec. (c)(6)(B)(v). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 517], substituted ``0.3 percentage points'' for ``0.5 percentage 
points''.
    Subsec. (i). Pub. L. 106-113, Sec. 1000(a)(6) [title V, 
Sec. 512(3)], added subsec. (i).


                         MedPAC Study and Report

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title V, Sec. 511(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-380, provided that:
    ``(1) Study.--The Medicare Payment Advisory Commission shall conduct 
a study that evaluates the methodology used by the Secretary of Health 
and Human Services in developing the risk factors used in adjusting the 
Medicare+Choice capitation rate paid to Medicare+Choice organizations 
under section 1853 of the Social Security Act (42 U.S.C. 1395w-23) and 
includes the issues described in paragraph (2).
    ``(2) Issues to be studied.--The issues described in this paragraph 
are the following:
        ``(A) The ability of the average risk adjustment factor applied 
    to a Medicare+Choice plan to explain variations in plans' average 
    per capita medicare costs, as reported by Medicare+Choice plans in 
    the plans' adjusted community rate filings.
        ``(B) The year-to-year stability of the risk factors applied to 
    each Medicare+Choice plan and the potential for substantial changes 
    in payment for small Medicare+Choice plans.
        ``(C) For medicare beneficiaries newly enrolled in 
    Medicare+Choice plans in a given year, the correspondence between 
    the average risk factor calculated from medicare fee-for-service 
    data for those individuals from the period prior to their enrollment 
    in a Medicare+Choice plan and the average risk factor calculated for 
    such individuals during their initial year of enrollment in a 
    Medicare+Choice plan.
        ``(D) For medicare beneficiaries disenrolling from or switching 
    among Medicare+Choice plans in a given year, the correspondence 
    between the average risk factor calculated from data pertaining to 
    the period prior to their disenrollment from a Medicare+Choice plan 
    and the average risk factor calculated from data pertaining to the 
    period after disenrollment.
        ``(E) An evaluation of the exclusion of `discretionary' 
    hospitalizations from consideration in the risk adjustment 
    methodology.
        ``(F) Suggestions for changes or improvements in the risk 
    adjustment methodology.
    ``(3) Report.--Not later than December 1, 2000, the Commission shall 
submit a report to Congress on the study conducted under paragraph (1), 
together with any recommendations for legislation that the Commission 
determines to be appropriate as a result of such study.''


         Study and Report Regarding Reporting of Encounter Data

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title V, Sec. 511(c)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-381, provided that:
    ``(1) Study.--The Secretary of Health and Human Services shall 
conduct a study on how to reduce the costs and burdens on 
Medicare+Choice organizations of their complying with reporting 
requirements for encounter data imposed by the Secretary in establishing 
and implementing a risk adjustment methodology used in making payments 
to such organizations under section 1853 of the Social Security Act (42 
U.S.C. 1395w-23). The Secretary shall consult with representatives of 
Medicare+Choice organizations in conducting the study. The study shall 
address the following issues:
        ``(A) Limiting the number and types of sites of services (that 
    are in addition to inpatient sites) for which encounter data must be 
    reported.
        ``(B) Establishing alternative risk adjustment methods that 
    would require submission of less data.
        ``(C) The potential for Medicare+Choice organizations to 
    misreport, overreport, or underreport prevalence of diagnoses in 
    outpatient sites of care, the potential for increases in payments to 
    Medicare+Choice organizations from changes in Medicare+Choice plan 
    coding practices (commonly known as `coding creep') and proposed 
    methods for detecting and adjusting for such variations in diagnosis 
    coding as part of the risk adjustment methodology using encounter 
    data from multiple sites of care.
        ``(D) The impact of such requirements on the willingness of 
    insurers to offer Medicare+Choice MSA plans and options for 
    modifying encounter data reporting requirements to accommodate such 
    plans.
        ``(E) Differences in the ability of Medicare+Choice 
    organizations to report encounter data, and the potential for 
    adverse competitive impacts on group and staff model health 
    maintenance organizations or other integrated providers of care 
    based on data reporting capabilities.
    ``(2) Report.--Not later than January 1, 2001, the Secretary shall 
submit a report to Congress on the study conducted under this 
subsection, together with any recommendations for legislation that the 
Secretary determines to be appropriate as a result of such study.''


                          Special Rule for 2001

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title V, Sec. 514(b)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-384, provided that: ``In providing 
for the publication of information under section 1853(b)(4) of the 
Social Security Act (42 U.S.C. 1395w-23(b)(4)), as added by subsection 
(a), in 2001, the Secretary of Health and Human Services shall also 
include the information described in such section for 1998, as well as 
for 1999.''


 Development of Special Payment Rules Under Medicare+Choice Program for 
             Frail Elderly Enrolled in Specialized Programs

    Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title V, Sec. 552(a)], 
Nov. 29, 1999, 113 Stat. 1536, 1501A-392, provided that:
    ``(1) Study.--The Medicare Payment Advisory Commission shall conduct 
a study on the development of a payment methodology under the 
Medicare+Choice program for frail elderly Medicare+Choice beneficiaries 
enrolled in a Medicare+Choice plan under a specialized program for the 
frail elderly that--
        ``(A) accounts for the prevalence, mix, and severity of chronic 
    conditions among such frail elderly Medicare+Choice beneficiaries;
        ``(B) includes medical diagnostic factors from all provider 
    settings (including hospital and nursing facility settings); and
        ``(C) includes functional indicators of health status and such 
    other factors as may be necessary to achieve appropriate payments 
    for plans serving such beneficiaries.
    ``(2) Report.--Not later than 1 year after the date of the enactment 
of this Act [Nov. 29, 1999], the Commission shall submit a report to 
Congress on the study conducted under paragraph (1), together with any 
recommendations for legislation that the Commission determines to be 
appropriate as a result of such study.''


                   Publication of New Capitation Rates

    Section 4002(i) of Pub. L. 105-33 provided that: ``Not later than 4 
weeks after the date of the enactment of this Act [Aug. 5, 1997], the 
Secretary of Health and Human Services shall announce the annual 
Medicare+Choice capitation rates for 1998 under section 1853(b) of the 
Social Security Act [subsec. (b) of this section].''


        Medicare+Choice Competitive Pricing Demonstration Project

    Pub. L. 105-33, title IV, Secs. 4011, 4012, Aug. 5, 1997, 111 Stat. 
334-336, as amended by Pub. L. 106-113, div. B, Sec. 1000(a)(6) [title 
V, Sec. 533], Nov. 29, 1999, 113 Stat. 1536, 1501A-389, provided that:
``SEC. 4011. MEDICARE PREPAID COMPETITIVE PRICING DEMONSTRATION PROJECT.
    ``(a) Establishment of Project.--
        ``(1) In general.--Subject to the succeeding provisions of this 
    subsection, the Secretary of Health and Human Services (in this 
    subchapter [subchapter A (Secs. 4011-4012) of chapter 2 of subtitle 
    A of title IV of Pub. L. 105-33] referred to as the `Secretary') 
    shall establish a demonstration project (in this subchapter referred 
    to as the `project') under which payments to Medicare+Choice 
    organizations in medicare payment areas in which the project is 
    being conducted are determined in accordance with a competitive 
    pricing methodology established under this subchapter.
        ``(2) Delay in implementation.--The Secretary shall not 
    implement the project until January 1, 2002, or, if later, 6 months 
    after the date the Competitive Pricing Advisory Committee has 
    submitted to Congress a report on each of the following topics:
            ``(A) Incorporation of original medicare fee-for-service 
        program into project.--What changes would be required in the 
        project to feasibly incorporate the original medicare fee-for-
        service program into the project in the areas in which the 
        project is operational.
            ``(B) Quality activities.--The nature and extent of the 
        quality reporting and monitoring activities that should be 
        required of plans participating in the project, the estimated 
        costs that plans will incur as a result of these requirements, 
        and the current ability of the Health Care Financing 
        Administration to collect and report comparable data, sufficient 
        to support comparable quality reporting and monitoring 
        activities with respect to beneficiaries enrolled in the 
        original medicare fee-for-service program generally.
            ``(C) Rural project.--The current viability of initiating a 
        project site in a rural area, given the site specific budget 
        neutrality requirements of the project under subsection (g), and 
        insofar as the Committee decides that the addition of such a 
        site is not viable, recommendations on how the project might 
        best be changed so that such a site is viable.
            ``(D) Benefit structure.--The nature and extent of the 
        benefit structure that should be required of plans participating 
        in the project, the rationale for such benefit structure, the 
        potential implications that any benefit standardization 
        requirement may have on the number of plan choices available to 
        a beneficiary in an area designated under the project, the 
        potential implications of requiring participating plans to offer 
        variations on any standardized benefit package the committee 
        might recommend, such that a beneficiary could elect to pay a 
        higher percentage of out-of-pocket costs in exchange for a lower 
        premium (or premium rebate as the case may be), and the 
        potential implications of expanding the project (in conjunction 
        with the potential inclusion of the original medicare fee-for-
        service program) to require medicare supplemental insurance 
        plans operating in an area designated under the project to offer 
        a coordinated and comparable standardized benefit package.
        ``(3) Conforming deadlines.--Any dates specified in the 
    succeeding provisions of this section shall be delayed (as specified 
    by the Secretary) in a manner consistent with the delay effected 
    under paragraph (2).
    ``(b) Designation of 7 Medicare Payment Areas Covered by Project.--
        ``(1) In general.--The Secretary shall designate, in accordance 
    with the recommendations of the Competitive Pricing Advisory 
    Committee under paragraphs (2) and (3), medicare payment areas as 
    areas in which the project under this subchapter will be conducted. 
    In this section, the term `Competitive Pricing Advisory Committee' 
    means the Competitive Pricing Advisory Committee established under 
    section 4012(a).
        ``(2) Initial designation of 4 areas.--
            ``(A) In general.--The Competitive Pricing Advisory 
        Committee shall recommend to the Secretary, consistent with 
        subparagraph (B), the designation of 4 specific areas as 
        medicare payment areas to be included in the project. Such 
        recommendations shall be made in a manner so as to ensure that 
        payments under the project in 2 such areas will begin on January 
        1, 1999, and in 2 such areas will begin on January 1, 2000.
            ``(B) Location of designation.--Of the 4 areas recommended 
        under subparagraph (A), 3 shall be in urban areas and 1 shall be 
        in a rural area.
        ``(3) Designation of additional 3 areas.--Not later than 
    December 31, 2001, the Competitive Pricing Advisory Committee may 
    recommend to the Secretary the designation of up to 3 additional, 
    specific medicare payment areas to be included in the project.
    ``(c) Project Implementation.--
        ``(1) In general.--Subject to paragraph (2), the Secretary shall 
    for each medicare payment area designated under subsection (b)--
            ``(A) in accordance with the recommendations of the 
        Competitive Pricing Advisory Committee--
                ``(i) establish the benefit design among plans offered 
            in such area,
                ``(ii) structure the method for selecting plans offered 
            in such area; and
                ``(iii) establish beneficiary premiums for plans offered 
            in such area in a manner such that a beneficiary who enrolls 
            in an offered plan the per capita bid for which is less than 
            the standard per capita government contribution (as 
            established by the competitive pricing methodology 
            established for such area) may, at the plan's election, be 
            offered a rebate of some or all of the medicare part B 
            premium that such individual must otherwise pay in order to 
            participate in a Medicare+Choice plan under the 
            Medicare+Choice program; and
            ``(B) in consultation with such Committee--
                ``(i) establish methods for setting the price to be paid 
            to plans, including, if the Secretaries determines 
            appropriate, the rewarding and penalizing of Medicare+Choice 
            plans in the area on the basis of the attainment of, or 
            failure to attain, applicable quality standards, and
                ``(ii) provide for the collection of plan information 
            (including information concerning quality and access to 
            care), the dissemination of information, and the methods of 
            evaluating the results of the project.
        ``(2) Consultation.--The Secretary shall take into account the 
    recommendations of the area advisory committee established in 
    section 4012(b), in implementing a project design for any area, 
    except that no modifications may be made in the project design 
    without consultation with the Competitive Pricing Advisory 
    Committee. In no case may the Secretary change the designation of an 
    area based on recommendations of any area advisory committee.
    ``(d) Monitoring and Report.--
        ``(1) Monitoring impact.--Taking into consideration the 
    recommendations of the Competitive Pricing Advisory Committee and 
    the area advisory committees, the Secretary shall closely monitor 
    and measure the impact of the project in the different areas on the 
    price and quality of, and access to, medicare covered services, 
    choice of health plans, changes in enrollment, and other relevant 
    factors.
        ``(2) Report.--Not later than December 31, 2002, the Secretary 
    shall submit to Congress a report on the progress under the project 
    under this subchapter, including a comparison of the matters 
    monitored under paragraph (1) among the different designated areas. 
    The report may include any legislative recommendations for extending 
    the project to the entire medicare population.
    ``(e) Waiver Authority.--The Secretary of Health and Human Services 
may waive such requirements of title XVIII of the Social Security Act 
[this subchapter] (as amended by this Act) as may be necessary for the 
purposes of carrying out the project.
    ``(f) Relationship to Other Authority.--Except pursuant to this 
subchapter, the Secretary of Health and Human Services may not conduct 
or continue any medicare demonstration project relating to payment of 
health maintenance organizations, Medicare+Choice organizations, or 
similar prepaid managed care entities on the basis of a competitive 
bidding process or pricing system described in subsection (a).
    ``(g) No Additional Costs to Medicare Program.--The aggregate 
payments to Medicare+Choice organizations under the project for any 
designated area for a fiscal year may not exceed the aggregate payments 
to such organizations that would have been made under title XVIII of the 
Social Security Act (42 U.S.C. 1395 et seq.), as amended by section 4001 
[enacting this part and redesignating former part C of this subchapter 
as part D], if the project had not been conducted.
    ``(h) Definitions.--Any term used in this subchapter which is also 
used in part C of title XVIII of the Social Security Act [this part], as 
amended by section 4001, shall have the same meaning as when used in 
such part.
``SEC. 4012. ADVISORY COMMITTEES.
    ``(a) Competitive Pricing Advisory Committee.--
        ``(1) In general.--Before implementing the project under this 
    subchapter [subchapter A (Secs. 4011-4012) of chapter 2 of subtitle 
    A of title IV of Pub. L. 105-33], the Secretary shall appoint the 
    Competitive Pricing Advisory Committee, including independent 
    actuaries, individuals with expertise in competitive health plan 
    pricing, and an employee of the Office of Personnel Management with 
    expertise in the administration of the Federal Employees Health 
    Benefit Program, to make recommendations to the Secretary concerning 
    the designation of areas for inclusion in the project and 
    appropriate research design for implementing the project.
        ``(2) Initial recommendations.--The Competitive Pricing Advisory 
    Committee initially shall submit recommendations regarding the area 
    selection, benefit design among plans offered, structuring choice 
    among health plans offered, methods for setting the price to be paid 
    to plans, collection of plan information (including information 
    concerning quality and access to care), information dissemination, 
    and methods of evaluating the results of the project.
        ``(3) Quality recommendation.--The Competitive Pricing Advisory 
    Committee shall study and make recommendations regarding the 
    feasibility of providing financial incentives and penalties to plans 
    operating under the project that meet, or fail to meet, applicable 
    quality standards.
        ``(4) Advice during implementation.--Upon implementation of the 
    project, the Competitive Pricing Advisory Committee shall continue 
    to advise the Secretary on the application of the design in 
    different areas and changes in the project based on experience with 
    its operations.
        ``(5) Sunset.--The Competitive Pricing Advisory Committee shall 
    terminate on December 31, 2004.
    ``(b) Appointment of Area Advisory Committee.--Upon the designation 
of an area for inclusion in the project, the Secretary shall appoint an 
area advisory committee, composed of representatives of health plans, 
providers, and medicare beneficiaries in the area, to advise the 
Secretary concerning how the project will be implemented in the area. 
Such advice may include advice concerning the marketing and pricing of 
plans in the area and other salient factors. The duration of such a 
committee for an area shall be for the duration of the operation of the 
project in the area.
    ``(c) Special application.--Notwithstanding section 9(c) of the 
Federal Advisory Committee Act (5 U.S.C. App.), the Competitive Pricing 
Advisory Commission and any area advisory committee (described in 
subsection (b)) may meet as soon as the members of the commission or 
committee, respectively, are appointed.''

                  Section Referred to in Other Sections

    This section is referred to in sections 1395w-21, 1395w-22, 1395w-
24, 1395w-27, 1395w-28, 1395mm, 1395eee of this title.
