Medicare Managed Care Provisions of Title II of S. 1, as Passed by the Senate, and H.R. 1, as Passed by the House

CRS Report for Congress
Medicare M anaged Care Provisions of Title II
of S. 1, as Passed by the Senate,
and H.R. 1, as Passed by the House
August8,2003
Hinda Ripps Chaikind, Jennifer Boulanger, Sibyl Tilson
Specialists in Social Legislation
Domestic Social Policy Division
PauletteMorgan
Analys t in Social Legislation
Domestic Social Policy Division


Congressional Research Service ˜ The Library of Congress

Medicare Managed Care Provisions of Title II of S . 1,
as Passed by the Senate, and H.R. 1,
as Passed by the House
Summary
On J une 27, 2003, the S enate p assed t h e P r e s c ription Drug and Medicare
Im provement Act o f 2003 (S. 1 ) and the House p assed t he Medicare P rescription
Drug and M oderniz ation Act of 2003 (H.R. 1 ).
Title II of each bill would establish a new M edicare m anaged care p rogram to
replace the current Medicare+C hoice program. Under S . 1, Title II would establish
t h e M edi car eAdvant age (MA) p rogram t o repl ace t h e M +C program . The M A
program would continue to offer coordinated care and other p lans on a county-wide
basis as under current law. The b ill would also establish regional P referred P rovider
Organiz ations (PPOs), t o b e o f fered in regi ons. Beginning in 2008, the b ill would
establish a limited competition program , i n designated highly competitive areas.
Under H.R. 1, Title II would establish t he Medicare Advan t age (MA) program to
replace the M +C program, which would als o continue to offer coordinated care and
other p lans on a county-wide basis as under current law. The b ill would establish t he
M e d i c a re E nhanced Fee-for-Service (E FFS ) p rogram, under which Medicare
benefi ci ari es w oul d b e p rovi ded access t o a range o f regi onal E FFS pl ans t hat coul d
include pr e ferred p rovider n etworks. Begi nning in 2010, it would also u se
competitive bidding, i n t he same styl e of t he Federal Employees Health Benefits
program (FEHBP) for certain EFFS plans and MA plans.
There are consi d erabl e di fferences i n t h e s peci fi cs of t h e M A p rovi si ons i n S .
1 and H.R. 1. These d ifferences are at i ssue i n a pending conference between the t wo
Houses.
This report provides a side-by-side comparison of the Title II provisions of both
bills, and will be updated as n ecessary.



Contents
In troduction ......................................................1
Side by Side Comparison of S. 1 and H.R. 1, Title II MedicareAdvantage
(S.1)orMedicareAdvantage(H.R. 1) ...........................2
Overview of Title II Provisions ...................................2
MedicareAdvantageorMedicareAdvantage .........................2
RegionalPreferredProviderOrganizations/EFFS ........................17
OtherManaged CareReforms .......................................25
Alternative P ayment or Competition R eforms ...........................30



Medicare Managed Care Provisions of
Title II o f S. 1 , a s Passed b y the Senate,
and H.R. 1, as Passed by the House
Introduction
On J une 27, 2003, the S enate p assed t h e P r e s cription Drug and Medicare
Im provement Act o f 2003 (S. 1 ) and the House p assed t he Medicare P rescription
Drug and M oderniz ation Act of 2003 (H.R. 1 ).
Title II of each bill would establish a new M edicare m anaged care p rogram to
replace the current Medicare+C hoice program. Under S . 1, Title II would establish
t h e M edi ca reAdvant age (MA) p rogram t o repl ace t h e M +C program . The M A
program would continue to offer coordinated care and other p lans on a county-wide
basis as under current law. The b ill would also establish regional P referred P rovider
Organiz ations (PPOs), t o b e o ffered i n regions. Begi n n i n g i n 2008, the b ill would
es tablish a limited competition program , i n designated “highly competitive” areas.
Under H.R. 1, Title II would establish t he Medicare Adv an t a ge (MA) program t o
replace the M +C program, which would als o continue to offer coordinated care and
other p lans on a county-wide basis as under current law. The b ill would establish t he
M e d i c are Enhanced Fee-for-Service (EFFS ) p rogram, under which Medicare
benefi ci ari es woul d b e p rovi ded access t o a regi onal E FFS pl ans t hat coul d i ncl ude
preferred p rovider n etworks. Begi nni ng in 2010, it would also use competitive
bidding, s imilar t o t he Federal Employees Health Ben efits program (FEHBP), for
cert ai n EFFS pl ans and MA pl ans.
The C ongressional Budget Office (CBO) has es timated t he costs of Title II, for
both t he House and Senate bills. Title II of H.R. 1 i s estimated t o cost $7.5 billion
over t he 10-year period (2004-2013) and Title II of S. 1 i s estimated t o cost $18.3
billion over t he same time period.
There are consi d erabl e di fferences i n t h e s peci fi cs of t h e M A p rovi si ons i n S .
1 and H.R. 1. These d ifferences are at i ssue i n a pending conference between the t wo
Houses.
This report provides a side-by-side comparison of the Title II provisions of both
bills, and will be updated as n ecessary.



CRS-2
Side by Side Comparison of S. 1 a nd H.R. 1, Title I I
MedicareAdvantage (S. 1 ) or M edicare Advantage (H.R. 1 )
vi ew of Ti tl e I I P r ovi si ons
Provisions Current Law S. 1 H .R. 1
mma ry Health ma intena nc e o r ganizatio ns ( H MOs) a nd T itle I I wo uld e st a b l ish the M ed icar eAd vantage T itle I I wo uld e stab lish, up o n enac tment, the
other typ es of ma na ged care p lans have (MA) program which wo uld r e p l ace the M+C Medi care Advantage (MA) program to r eplace
participated in the M edicare p rogr am, b eginning program, beginning in 2006. T h e M A p rogram the M +C p r o gr a m, which wo uld co ntinue to o ffe r
with private health plan contracts in the 1970s and wo ul d c o n t i nue t o o ffe r c o o r d i na t e d c a r e a nd o t he r coor d i nated care and other p lans on a county-
the Medicare risk co n t r a c t program in the 1980s. plans o n a county-wide basis as und er current law. wi d e b a si s a s und e r c ur r e nt l a w. I t wo ul d
In 1997, Co ngress p assed the B a lanced Budget I t wo ul d a lso e stab lish r egio n a l P P O s, to b e establish the Medicare E nhanced Fee-fo r-Service
Act o f 1997 (BBA 1997, P.L. 105-33), which offered in r egio ns. B eginning in 2008, it wo uld ( E FFS) p rogram, under whic h M ed icar e
iki/CRS-RL32039replaced the r isk contract progr a m with theMedicare+Choice (M+C) p rogr am. M+C p l a n s estab lish a limited c o mp e titio n p r o gr am, i n a r easd e signa ted a shighly c o mp e titive”. beneficiaries would be provided access to a rangeo f regional EFFS plans that could includ e
g/winclud e coordinated care p lans (HMOs, preferred preferred p rovider netwo rks, beginning in 2006.
s.orprovid er organizatio ns or PPOs, and p rovider- B eginning in 2010, it wo ul d a lso use comp etitive
leaksponso red o rganizations or P SOs), private fee fo r b id d ing, in the same style as the Fe d er al
://wikiser vice ( P FFS) p l ans, and , o n a t emp o r ar y b asis,medical savings accounts ( MSAs). Employees Health Benefits program (FEHB P)fo r certain EFFS plans a nd MA plans.
http
di car e Advantage or M e di car eAdvantage
Provisions Current Law S. 1 H .R. 1
B e nef icia r y Elig ibilit y , Inf o rma t io n R equirement s, B enef icia ry Elect io ns a nd Enro llment P erio ds
e ficia ry Med icar e b eneficiar ies who a r e entitled to P ar t A Sectio n 201. [1851(a)(3)] o f t h e So c ial Secur ity Current law wo uld not change. E nr ollment in
ib ility of Medicare and enrolled in Part B may receive Ac t] . I n a d d itio n to c ur r e nt law r eq uir e me nts, Part D would no t b e mandato ry in order to enroll
Medicare b enefits through the o rigi na l M edicare Medicare b enefi c i aries wo uld also b e r equired to in MA o r E FFS, as lo ng as ther e was at least o ne
fee-fo r -ser vice ( FFS) p r o g r a m o r they ma y e nr o l l be enrolle d i n t he new P art D (drug p rogram) in MA plan with prescription d rug c overage o r at
in a M edicare+Choice (M+C) p lan. o r d e r t o e nr o l l i n M A ( excep t fo r P FFS) . least o ne EFFS plan with prescription d rug
coverage available to the beneficiary.
v isio n o f T he Secretary must p rovide info rmation to Sectio n 201. [1851(d)]. In add ition to the Sectio n 231(d). I n ad d itio n to the info r matio n
fo rma tio n o n Medicare b eneficiaries and p rosp ective info r matio n d issemina tio n r eq uir e d und er cur r ent d i sse mi na t i o n r e q ui r e d und e r c ur r e n t l a w, t he
age options beneficiaries o n the coverage optio ns provi ded law, the Secr etar y wo uld b e r e q uir e d to p r o vid e: Secretary would be r e q uired to provide
open seaso n und er the M+C progr a m, includ ing open season ( 1 ) t he M A mo nt hl y b a s i c b e ne fi c i a r y p r e mi um, b e ne ficiar ies with a list o f p lans that ar e o r wo uld



CRS-3
Provisions Current Law S. 1 H .R. 1
no tificatio n, a list o f p lans and o ther ge ne r a l ( 2 ) t he mo nt hl y b e ne fi c i a r y p r e mi um f o r a ny b e a v a ilab le in a n a r ea, to the e xtent the
info r matio n. enha nced me d ical b e ne fits, ( 3 ) the M A mo nthly info r matio n was availab l e a t the time the
b e ne ficiar y o b ligatio n fo r q ualified p r e scr ip tio n materials were p repared for mailing.
drug cover a ge , ( 4) the catastr ophic coverage
amo unt ( inc lud ing the maximum limitatio n o n o ut-
o f-p o c ke t e xp e nse s) a nd uni fi e d d e d uc t i b l e fo r t he
p lan, ( 5 ) the o utp a tient p r escr ip tio n d r ug c o ver age
b e ne fits, ( 6 ) a n y b e neficiar y co st-sha r ing,
includ ing info r ma tio n o n the unified d e d uctib le,
( 7 ) c o mp a r a t i v e info r ma tio n r elating t o
pr e s c r iption d rug coverage, (8) if applicable, any
reduction in the Medicar e P art B premium, (9)
wh e t he r t h e M A mo nt hl y p r e mi um fo r e nha nc e d
benefits was optio nal o r mandat o ry, and (10)
iki/CRS-RL32039 q uality and p er fo r mance i n d icato r s fo rp r escr ip tio n d r ug c o v e r a g e , i n clud ing a
g/w comp arison with FFS Medicare.
s.or
leak [§851(e)(3)] . Ad d itio na lly, the Secr eta r y wo uld
://wiki cond uct a sp ecial info rmation campaign to informMA eligib le b e ne f iciar ies a b o ut p lans b e ginning
http on Novemb er 15, 2005 and end ing o n December
31, 2005.
e ficia ry Si nc e t he b e gi nni ng o f t he M + C p r o gr a m, Sectio n 201. [ § 1 851(e)]. Medicare b eneficiaries Sectio n 231(b) . H.R. 1 wo uld r e tain the c ur r e nt
ections and bene ficiaries have b een able to ma ke and c ha nge wo uld r etain the ir ab ility to ma ke and c ha nge l a w s c he d u l e fo r ma ki ng a nd c ha ngi ng e l e c t i o ns
o llment elect i o n to an M +C plan on an ongo ing b asis. electio ns to an M+C p l a n t hr ough 2005. T he t o p l a ns. T he a nnua l c o o r d i na t e d e l e c t i o n p e r i o d
iods Beginning in 2005, electio ns a n d c hanges to cur r e nt law limitatio n o n c ha nging electio ns that wo ul d b e p e r ma ne nt l y c ha nge d t o N o ve mb e r 1 5
electio ns will b e availab le o n a mo r e limited b asis. begins in 2005, wo ul d b e d elayed until 2006. through December 31.


B eneficiaries can make or change elections during Fur t he r , t he a nnua l c o o r d i na t e d e l e c t i o n p e r i o d fo r
t he a nnua l c o o r d i na t e d e l e c t i o n p e r i o d ( N o ve mb e r 2003 through 2006 wo uld b egin on No vemb er 15
15 through Dec e mb e r 3 1 for 2003 and 2004, and and end on December 31. Beginning in 2007, the
the month of Novemb er, thereafter). Current a nnua l c o o r d i na t e d e l e c t i o n p e r i o d wo ul d b e
Medica r e bene ficiaries may also change their during the month of No vemb er.
e l e c t i o n a t a ny t i me d ur i n g t he fi r s t 6 mo nt hs o f
2005 (or fi r st 3 months o f any subsequent year).
Ad d itio na lly, the r e ar e sp ecial enr o llment r ules fo r
ne wly e ligible aged bene ficiaries a s well a s special

CRS-4
Provisions Current Law S. 1 H .R. 1
enrollment p eriods fo r all enrollees und er li mi ted
situatio ns, suc h a s a n e nr o llee wh o change s p lace
of residence.
Required B e nefits and B eneficiary Protections
red M+C p lans are r equired to include all M edica r e- Sectio n 202. [§1852(a)]. I n ad d itio n to o f f e r ing Title I, Sectio n 102. I n ad d itio n t o o ffe r ing
benefits covered services ( P arts A and B b enefits, except Medicare P arts A and B b enefits (except hospice) M e dicare P arts A and B b enefits (except
ho sp ice care). I n some circumstances, p lans may and a ny ad d itio na l r eq uired b enefi t s , each MA hospice), at least one plan offered by each MA
also b e r e q uir ed to o ffe r a d d itio na l b enefits o r plan (except a n M SA, a nd in the case o f o r ga nizatio n in a n M A a r e a wo uld b e r e q uir ed to
reduced cost-sha ring to their b eneficiaries. T he prescription d rug coverage, P FFS plans) wo uld b e offer q ualified d rug coverage und er P art D. MA
basic benefit p ackage includes all of the M edicare- r e q uir ed to o f f e r : 1 ) q ualified p r e scr ip tio n d r ug plans would be requi r e d to p ay rebates to
covered b enefits (except hospice services) as well coverage und er P art D to b eneficiaries residing in beneficiaries to the extent that program p ayments
as the a d d itio na l b enef its, a s d eter mine d b y a the a r ea, and 2 ) a ma ximum limitatio n o n o ut-o f- to MA plans excee d e d b i d amounts. MA plans
fo r mul a whi c h i s se t i n l a w. T he a d j ust e d p o c ke t e xp e nse s a nd a uni fi e d d e d uc t i b l e . wo uld a lso b e a ble to o ffe r supplemental b enefits
community ra te (ACR) mechanism is the process fo r a d d itio na l p r e mi ums. [ P lans wo ul d no l o nge r
iki/CRS-RL32039thr o ugh which health p lans d eter mine the [ § 1 852(a)(7)]. T he uni fi e d d e d u c t i b l e wo ul d b e b e r e q u ir ed to o ffe r a d d itio na l b enefits, a s the se
g/wminimum a mo unt o f ad d itio na l b enefits, if a ny, d e fi ne d a s a n a nnua l d e d uc t i b l e a mo unt a p p l i e d i n wo uld b e r eplaced by the r ebates discussed
s.orthey are r equired to p rovide to Medicare enr ollees lieu o f the inp a tient ho sp ital d ed uc tib l e and the belo w.]
leakand the cost-sha ring they are p ermitt e d to charge P a r t B d e d uc t i b l e . T hi s wo ul d no t p r e ve nt a n M A
fo r t ho se b e ne fi t s . M e d i c a r e d o e s no t ha ve a o r ga ni z a t i o n fr o m r e q ui r i ng c o i nsur a nc e o r a Al so und e r Title I, Section 102 (a), t he r e wo ul d
://wikicata s t r ophic limit on beneficiary o ut-o f-pocket copayment for inpatient ho sp ital services, after the be exceptions fo r the prescription d rug coverage
httpe x p e nse s a l t h o ugh so me p l a n s o ffe r a n o ut -o f - unif i ed d e d uctib le wa s satisfied , sub j ect to offered b y P FFS plans. PFFS plans would no t b e
pocke t limit as an added b enefit. Als o there is a statuto r y limitatio ns. r e q uir ed to ne go tiate p r ice s o r d isco unts;
P a r t B d ed uc tib le and a sep a r a te P a r t A d ed uc tib le ho we ve r , t o t he e xt e nt a p l a n d i d s o , i t wo ul d b e
fo r inp atient ho sp ital stays. [§1852(a)(2)(D)]. A PFFS plan could choose not r e q uir ed to meet r e lated P ar t D r e q uir ements.


to o ffe r q ua lified p r e scr ip tio n d r ug c o ver age und er
p a r t D. B e ne ficiar ies e nr o lli n g in such a P FFS
p lan c o u l d c ho o se to e nr o ll in a n e ligib le entity
und er part D to r eceive their p r e s c ription d rug
c o ve r a ge . [§1852(d)(4)]. A P FFS p l a n entirely
meeting the access r equirement fo r a category o f
providers thr ough contracts o r agreements (other
than deemed cont r acts) could r equire higher
beneficiary co-payments fo r p roviders who d id no t
ha ve such contracts o r a gr eements.

CRS-5
Provisions Current Law S. 1 H .R. 1
benefits M+C plans may offer supplementa l b enefits in Sectio n 202. [§1852(a)(3)]. M A p l a ns c o ul d Section 221 (a). P lans c o uld includ e
ad d itio n to a ny r e q uir ed b e ne fits und er P a r ts A choose to p rovide beneficiaries with enhanced sup p lemental b enefits in their b id s. T he
and B o f Med icar e a nd any a d d itio na l r e q uir e d medical benefits that the Secretary could approve. Se c r e t a r y’s a ut ho r i t y t o ne go t i a t e b i d s wo ul d
b e ne fits. T he Secretary could d e ny any sub mission fo r includ e the se supplemental b enefits.
enhanced b e ne fits b e lieve d to discourage
enr o llment b y M A e ligib le ind ivid ual s . T he
Secretary could no t approve any enhanced medical
b e ne fi t t ha t p r o vi d e d f o r t h e c o v e r a g e o f a ny
p r e s c r i p t i o n d r ug, o t he r t ha n t ho se r e l a t i ng t o
c o ve r e d p r e sc r i p t i o n d r ugs und e r P a r t D .
a n d i sc lo su re An M+C o rganization must d isclose, in c l e a r , Sectio n 202. [§1852(c)]. I n ad d itio n to Tit l e V II, Se c t i o n 7 2 2 . I n a d d itio n to
quirements accurate and stand ardi z e d fo rm to each new info r matio n tha t p lans mus t d issemina te und er info r matio n tha t p lans must d issemi n a te und er
e nr o l l e e a nd a t l e a s t a nnua l l y t he r e a ft e r , c e r t a i n cur r e nt law, they wo uld a lso b e r eq uir e d to current law, p lans wo uld also b e r equired to
info r matio n r egar d ing the p lan. T he info r ma t i o n p r o vid e the fo llo wing info r matio n: ( 1 ) the d issemina te info r matio n a b o ut the ir chr o nic car e
iki/CRS-RL32039includ es service area, benefits, access, out-of-area ma ximum limitatio n o n o u t-o f-p o c ke t e xp enses improvement p rogr am.
g/wcoverage, emergency coverage, supplemental and the unified d e d uctib l e , ( 2 ) q ualified
s.orbenefits, p rior authorization r ules, g r ievance and prescription d rug covera g e und er P art D, and ( 3)
leakap p eals p r o ced ur es, a d e scr ip tio n o f the q ualitya ssur a nc e p r o gr a m, a nd o t he r i nfo r ma t i o n up o n bene fits und er FFS Medicare.
://wikirequest.
httpa lity a ssu ra n c e M+C p lans must ha ve a q ua lity assur a nc e p r o gr am Sectio n 202. [§1852(e)]. I n a d d itio n to c ur r e nt Sectio n 234(a). T he r e q ui r e me nt t ha t M S As
quirements that: ( 1) s tresses health outcomes and p rovides law r eq uir e me nts fo r q uality assur a nce, the q ua lity ha ve a n o ngo ing q ua lity assur a nc e p r o gr am
d a ta p e r mitting measur emen t o f o utco me s a nd assurance p rogr ams o f an o rganization would also wo uld b e e liminated .
o the r ind ices o f q uality; ( 2 ) mo nito r s and e va luates be required to provi d e access to d isease
high vo lume and high r isk services and the care o f ma na gement and chr onic care services and t o Ti tle VII, Sectio n 722. One year after
acute and c hr o nic co nd itio ns; ( 3 ) evalua tes the provide access t o p reventive b enefits and enactme nt, the q uality assur a nc e p r o gr am
co ntinuity a n d c o o r d ina tio n o f car e tha t e nr o llees info r matio n fo r enr o llees o n such b e ne fits. requirement would be replaced with a
receive ; ( 4) is evalua ted o n a n o ngo ing b asis as to requirement for chronic care imp rovement
its effectiveness; (5) inc ludes measur es of programs design e d t o manage the needs o f
c o nsumer satisfactio n, and ( 6 ) p r o vid es th e enr o llees with multiple seve r e chr o nic c o nd itio ns.
Secr etar y with cer tain info r matio n to mo nito r a nd
evalua te the p lans q ua lity.
Only cer tain co o r d ina ted car e p lans ( no t P FFS o r
P P O p lans) ha ve to co mp ly wi t h o t he r q ua lity
a s sur a nc e r e q ui r e me nt s, suc h a s p r o vi d i ng fo r
inter nal p eer r e view, e stab lishing wr itten p r o to co ls



CRS-6
Provisions Current Law S. 1 H .R. 1
fo r utilizatio n r eview, estab lishing mechanisms to
d e tect und er and o ve r utilizatio n, esta b lishing o r
alter ing p r actice p atter ns b ased o n id entified a r eas
fo r imp r o ve me nt, taking actio n to imp r o ve q uality,
and making q ua lity info r matio n a va ilab le to
beneficiaries.
Payments to M A Organizatio ns
e ra l In general, the Secretary makes mo nthly p ayments Sectio n 203. [§1853(a)]. Each MA organization Sectio n 221(c). Fo r p ayments b efore 2006, t h e
to each M+C o rganization for enrollees, b ased on wo uld r eceive a separate monthly payment for: ( 1) mo nt hl y p a yme nt a mo unt wo ul d e q ua l 1 / 1 2 o f
1 / 1 2 o f t he a nnua l c a p i t a t i o n r a t e , r e d uc e d b y a ny bene fits und er FFS Medicare P art s A a nd B , and t h e a nnua l M A c a p i t a t i o n r a t e , fo r a n e nr o l l e e fo r
P a r t B p r e mi um r e d uc t i o n, a nd a d j ust e d fo r r i sk. (2) b enefit s und er the p rescription d rug p rogr am, that area, reduced by any P art B p r e mi um
T he S e c r e t a r y wi l l a nno unc e t he M + C p a yme ntnd P art D. T he Secretary would ensure that payments reductio n and adj uste d fo r d emographics
rates no later than the 2 M o nd a y i n M a y t hr o ugh fo r each enrollee would equal the MA benchmark includ ing a n a d j ustment fo r health status.
2004, and b y March 1, thereafter. amount fo r the payment area, as adj usted. T he
iki/CRS-RL32039 adj ustments would includ e both a risk adj ustment Sectio n 221(e). Beginning in 2006, the Secretary
g/w and an a dj ustment b ased on the r atio of the wo uld a lso a nno unc e yearly and no later than the
s.or p a yme nt a mo unt t o t he we i ght e d se r vi c e a r e a 2 nd Mond ay in May, the M A a r ea-sp ecific non-
leak b e nc hma r k. d r ug b e nc hma r k a nd t he a d j ust me nt fa c t o r s
r e lating to d emo gr a p hics, end stage r e na l d isease
://wiki Beginning Ap ril 15, 2005 (at the same time as risk (ESRD), a nd health status in each MA plan in the
http adj usters for prescription d rug coverage were area.
a nno unc e d ) , t he S e c r e t a r y wo ul d a nnua l l y
anno unce the benchmark for each MA payment Section 2 4 1 (b) . B eginning in 2010, the
area, and the risk adj ustment factors. Secretary would also anno un c e , as applicable:
( 1 ) the co mp etitive M A no n-d r ug b enchma r k fo r
t he year and the co mp etitive M A a r e a invo l v e d ,
( 2 ) t he na t i o na l FFS ma r ke t sha r e , ( 3 ) t he F F S
area-sp ecific non drug amount, ( 4) the MA area-
wi d e no n-d r ug a mo unt , a nd ( 5 ) t he n u mb e r o f
enrollees in each MA plan in the a rea.
rate Under current law, Medicare+Choice (M+C) p lans Sectio n 203. [§1853(c)]. For p ayme nt s b efore Sectio n 212(a). For 2004, a 4 th payment
d ifica tio n s ar e p aid a n a d minister e d mo nthly p a yment, called 2006, the p ayment wo uld b e calculated in the mechanis m wo uld be added and plans would
the M +C payment r ate, fo r each enrollee. T he p er sa me ma nne r a s und e r c ur r e n t l a w t he hi ghe st receive t he highest of the four p ayment
capita rate fo r a payment a rea is set at the highe st o f the b lend , minimum amo unt ( flo o r ) , o r calculatio ns ( the flo o r , minimum p e r centage
o f o ne o f t hr e e a mo unt s: ( 1 ) a mi ni mum p a yme nt minimum update. However the calculation o f the increase, blend o r the new amo unt). T h e new
(or floor) r ate, (2) a rate calculated as a blend o f an minimum p ercentage increase would change fo r p a yme n t a mo unt wo ul d b e 1 0 0 % o f fe e -fo r -



CRS-7
Provisions Current Law S. 1 H .R. 1
area-sp ecific ( local) r ate and a national r ate, or (3) 2 0 0 5 . T he minimum p e r centage incr ease fo r ser vice ( FFS) . T he FFS p a yment wo uld b e b a sed
a r ate r eflecting a minimum inc rea s e from the 2005 wo uld b e a 3 % increase o ver the rate fo r the o n t he a d j ust e d a ve r a ge p e r c a p i t a c o st fo r t he
previo us year’s rate (currently 2%). area fo r 2003. Fo r 2006 and s ub se q uent years, it year, for an MA payme n t a rea, fo r services
wo uld b e a 2% increase o ver the previous year covered und er P a r ts A and B fo r b eneficiaries
A b ud ge t neutr ality ad j ustme nt is ma d e so that (but calculated as tho ugh the increase in 2005 was entitled to b enefits u nd e r P ar t A, e nr o lled und er
estimated to tal M +C p a yments in a given year will 2 %.) . Ad d itio na lly, b eginning in 2 014, the P a r t B a nd no t e nr o l l e d i n a n M A p l a n. T hi s
b e e q ua l t o t he t o t a l p a yme nt s t ha t wo ul d b e ma d e minimum amo unt (floor) would be increased by payment would be adj usted to remo ve payments
if payments were based solely o n area-sp ecific the p ercentage increase in the C P I for all fo r d irect medical education costs and to include
r a tes. T he b ud ge t neutr ality ad j ustme nt ma y o nly c o nsume r s, fo r t he 1 2 -mo nt h p e r i o d e nd i ng i n th e a d d itio na l p ayme nts tha t wo uld ha ve b een
be applied to the blended r ates because rates J une o f t he p r e vi o us ye a r . ma d e if Me d i car e b eneficiar ies entitled to
c a nno t b e r e d uc e d b e l o w t he fl o o r o r mi ni mu m b e n e fits fr o m facilities o f the Dep a r tme nt o f
increase a mo unts . T he b lend payment is a lso Section 210. T he co sts o f DOD and V A militar y Veter a n Affa ir s ( VA) a nd the D e p ar tment o f
adj usted to remo ve the d irect and ind irect costs o f facility ser v ices wo uld b e inc lud e d in the ar ea Defe nse ( DOD) ha d no t used tho se servic e s
gr a d ua t e me d i c a l e d uc a t i o n. T he b l e nd p a yme nt sp ecific M + C payment and the local fee for (VA/DOD ad j ustme nt).
iki/CRS-RL32039amount is based o n a we i ghted average o f localand nationa l r ates fo r a ll Medicare b eneficiaries. service r ates beginning in 2006. Sec t i o n 212 . Ad d itio na lly, c ha nge s wo uld b e
g/wEach year, the three p ayment amounts are updated made to the b lend calculatio ns fo r 2004. Section
s.orb y fo r mulas set in statute. B o t h t he flo o r and the 212(b). N o a d j ust me nt wo ul d b e ma d e fo r
leakblend are updated each year by a measure of b ud get ne utr a lity, which wo uld fund the b lend
://wikigr o wth in p r o gr a m sp e nd ing, the natio na l g r o wthp e r c e nt a ge . T he mi ni mum i nc r e a s e p r o vi d e s fo r for 2004. Sectio n 212(d) . T he area-sp ecific M Acapitation r ate ( the local component o f the blend)
httpan increase o f at least 2 % o ver the previous year’s wouldbeadjustedtoincludetheVA/DOD
a mo unt . adj ustment.
Sectio n 212(c). T he calculation o f the minimum
percentage increase would also be revised. For
2004 and b eyond, the minimum p ercentage
increase wo ul d b e t he greater of: (1) a 2%
increase o ver the previous year’s pa yment r ate
(as und er current law); or (2) the previous year’s
payment increased by the national p er capita MA
growth percentage. For purposes of calculati ng
the minimum p e r centage incr ease, ther e wo uld b e
no ad j ustme nt to the natio na l gr o wth p er centag e
fo r p rior years errors b efore 2004.



CRS-8
Provisions Current Law S. 1 H .R. 1
In 2005, the p ayments to all plans wo u l d be
based o n their 2004 rate increa sed each
subsequent year by the r evised minimum
percentage increase.
Sectio n 212(e). Beginning January 1, 2004, the
payment r ule for beneficiar i e s in a short-term
ge ne r a l ho sp ital a t the time the y e ither elected to
enr o ll in o r to ter minate the ir enr o llment in a n
M + C p l a n, wo ul d b e e xt e n d e d t o a b e ne fi c i a r y i n
an inp a tient r e ha b ilitatio n facility.
Sectio n 212(h) . T he Secretary would calcul a te
and a nno unc e the ne w M A cap itatio n r ates within
iki/CRS-RL32039 6 weeks o f e nactme nt o f this legislatio n.
g/wto MA See d escription o f p ayment s und er Payment Sectio n 203. [§1853(c&d)]. Beginning in 2006, Sectio n 221. Beginning i n 2006, MA payment
s.organizations mo d ifica tio n s. payments t o MA plans would be determined r a tes wo uld b e d e ter mined b y the Ad mi n i str ato r
leaknning in 2006Payment differently, b ased on a compariso n b etween p l a nbids and the weighted service area b enchmark. by comp aring p lan b id s to the benchmar k. Bidswo uld b e sub mitted b y the p lans, r e flecting the
://wikiculations T he Secretar y would ho wever, continue toc a l c ul a t e t he a nnua l M + C c a p i t a t i o n r a t e s . dollar amo unt and a ctuarial basis for thep r o visio n o f: ( 1 ) a ll statut o r y P a r t A and B
http services, ( 2) statutory p rescription d rug services,
P lans would submit bids to the Secretary b y the and ( 3 ) any no n-statuto r y b e ne fits. B enchma r ks
second Mond ay in September. wo uld equal one-twelfth o f the annua l MA
capitation r ate for an enroll ee in that area, and
T he Secretary would c alculate the benchmark wo uld b e c a lculated b y up d a ting the p r evio us
amo unt s as the gr eater of the minimum amount ye a r ’s c a p i t a t i o n r a t e b y t he a nnua l i nc r e a s e i n
(floor) o r the local FFS rate fo r the area. T he local the minimum p e r centage incr ease ( as d e f i n e d
FFS r a te wo u l d b e calculated similar ly to the above).
adj usted average p er capita cost (AAP CC) ,
adj usted to remo ve the costs of indirect and d irect Section 221 (c). For plans with bids belo w the
gr aduate medical education. benchmark (fo r the provisio n o f non-d rug
b e ne fits) , the p ayme n t wo uld e q ual the
una d j ust e d M A s t a t ut o r y no n-d r ug mo nt hl y b i d
T he Secre tary would calculate the weighted amount, with adj ustments for demo graphic
service area b enchma r k amount equal to the factors (including age, disability, gender, and
we i g ht e d a ve r a ge o f t he b e nc hma r k a mo unt s fo r health status) and the mo nthly rebate.



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Provisions Current Law S. 1 H .R. 1
required services fo r the payment areas includ ed in Co nversely, fo r p lans with bid s a t or above the
the service area of the p lan. b e nc hma r k, t he p a yme nt a mo unt wo ul d e q ua l t he
MA area-sp ecific non-d rug monthly benchmark
T he Secret ary would determine the difference amo unt, with the d e mo g r a p hic and health status
between each plans bid a nd the weighted se rvice a d j ustme nts.
area benchmark amo unt. For plan bids that equal
or exceed the weighted service area b enchmark, Ad d itio na lly, fo r an MA enr o llee who enr o lled in
the M A o r ganiz atio n wo uld b e p a id the weighted P art D and elected prescription d rug coverage
service area b enchmark amount . For plan bids t h r o ugh t h e p l a n, t h e p l a n’s p a yme nt wo ul d
b e l o w t he we i ght e d se r vi c e a r e a b e nc hma r k, t he includ e a direct and a reinsurance sub sidy
p l a n wo ul d b e p a i d t he we i ght e d se r vi c e a r e a payment and reimburse ment for premiums and
b e nc hma r k r e d uc e d b y t h e a mo unt o f a n y co st-sha r ing r e d uctio ns fo r cer tain lo w- i nco me
p r emium r e d u c tio n e lected b y the p lan. T he beneficiaries.
Secretary would adj ust payments using the
iki/CRS-RL32039 comp rehensive risk adj ustment methodology. T he MA monthly bid amount , the MA mo nthlybasic, prescription d rug, and the supplemental
g/w Section 205. T hi s p r o vi si o n wo ul d e st a b l i s h t he beneficiary p remium wo ul d not vary among
s.or ad d itio na l p ayme nts tha t wo uld b e ma d e to the enr o llees in the p lan. Ad d itio na lly, the MA
leak MA plans for the p rescription d rug coverage und er mo nthly M SA p r emium wo uld no t var y within an
://wiki Part D. MSA p lan.
http Sectio n 204. T he p r o vi si o n wo ul d e st a b l i s h t he
r e q u i r e me n t t ha t t he M A mo nt h l y b a s i c
b e ne fi c i a r y p r e mi um, t he M A mo nt hl y b e n e fi c i a r y
o b ligatio n fo r q ualified p r e scription drug
c o ve r a ge , a nd t h e M A mo n t h l y b e ne fi c i a r y
premium for enhanced medical benefits could not
vary among b enefic iaries enrolled in the plan.
A l s o , t he M A M S A p r e mi um wo ul d no t va r y
among b eneficiaries enrolled in the MSA p lan.
sk adjustment M+C p ayments are risk-adjusted to reflect Sectio n 203. [§1853(a]. T he Secretary would I n ad d itio n to the cur r ent l a w r e q uir ements fo r
va r iatio ns in the c o st o f p r o v id ing health car e ap p l y t he c o mp r e he nsi v e r i s k a d j ust ment risk adj ustments for individ u a l enrollees, both
among M edicare b eneficiaries . Currently a r isk methodology to 100% of the amo unt of payments bids and b enchmarks would also be risk adj usted,
a d j u stme nt syste m is b e ing p ha se d -in tha t a d j usts to plans b eginning in 2006. T his wo uld apply t o based o n the fo llo wing methodology.
payments based o n inp atient data using the 15 all typ es of plans. Organizations wo uld b e
principal i npatient diagno stic cost groups (PIP- r e q uir ed to sub mit d a ta and o ther info r ma t i o n, in Sectio n 221. Beginning in 2006 (at the same time
D C G s ) a d j ust e r a nd d e mo gr a p hi c fa c t o r s, so t ha t order to carry out r isk adj ustment. T he Secretary t he p a yme nt r a t e s a r e p r o mul ga t e d ) , t he



CRS-10
Provisions Current Law S. 1 H .R. 1
this system accounts for both d e mographic and c o ul d r e vi s e t he c o mp r e he nsi ve r i s k a d j ust me nt Ad ministrato r would determine, fo r each state,
health-status var iatio ns. U nd er this mechanism, methodology from time to time to imp rove the a ve r a g e o f the r isk a d j ustment facto r s
the p er capita payment made to a plan fo r an payment accuracy. ( inc lud ing age, disab ility status, gend e r ,
enr o llee is a d j usted if tha t e nr o llee had an institutio na l statu s , health status, a nd o the r
inpatient stay during t h e p r evious year. Separate factors the Ad ministrator d etermines to b e
demo gr aphically-b ased payments are us e d for ap p r o p r iate) to b e a p p lied to e n r o llees in that
enr o llees witho ut a p r io r ho sp italizatio n, ne wly state. In the case o f a state in whi c h a p lan was
eligib le aged p e r so ns, ne wly e ligib le d isab led o ffe r e d i n t he p r e vi o us ye a r , t he Ad mi ni st r a t o r
Medicare enr ollees, a nd others without a medical could compute the average based o n factors used
history. T his system will be replaced with a more in the p r e vio us year . I f no M A p lan was o ffe r e d
comp rehe nsive risk adj ustment methodology that in a state in the p r e vio us year , the Ad ministr a to r
uses d a ta fr o m inp a tient ho sp itals and a mb ulato r y wo uld estimate the average and could use
settings, b eginning in 2004. Capitatio n r ates will a v erage r isk adj ustment factors applied to
be risk-adj usted using this ne w method, on a comp arable states or applied o n a national b asis.
iki/CRS-RL32039phased-in b asis, at the rate of 30% in 2004, 50% in2005, and 75% in 2006. Beginning i n 2007, T he Administrator wo uld apply the average r isk
g/wcapitatio n r ates will be 100% risk adj usted. a d j ustors to the MA area-sp ecific non-d rug
s.or mo nt hl y b e nc hma r k a mo unt a nd t he una d j ust e d
leak MA statutory non-d rug monthly bi d amo unt.
://wiki T he Administrator could d e termine and applyrisk adj ustment factors o n the basis o f areas other
http than states.
B ids and P remiums
ission of bids T he P ub lic Health Secur ity and B io t e r r o r ism Sectio n 204. [§1854(a)]. Each MA organization Sectio n 231. T his p r o visio n wo uld p e r manently
asso ciated Preparedness and Response Act o f 2002, P.L. 107- wo ul d b e r e q ui r e d t o s ub mi t i nfo r ma t i o n b y t he mo ve t h e p l a n d e a d l i n e f o r s u b mitting
in es 188, made te mporary changes to reporting d ates second Mond ay in September, i n clud ing: (1) info rmation to no later than the second Mond ay
and d eadlines includ ing the plan deadline for no tice o f intent a nd info r matio n o n the ser vice in September.
sub mitting ACRs and other information. This area of the p lan, ( 2 ) the plan type fo r each plan,
deadline moved from no l ater than J uly 1 to no (3) specific informatio n for coordinated care a nd Sectio n 221(a)(3) . E ach year, b e g i n ning in
l a t e r t ha n t he se c o nd M o nd a y i n Se p t e mb e r fo r P FFS plans, (4) enr o l lment capacity, ( 5) the 2006, an MA organizatio n would be required to
2002, 2003, and 2004. expected mix o f e nr ollees, b y health status, a nd (6) p r o vid e the fo llo wing info r matio n: ( 1 ) the b id
other information specified by the S e c r etary. For amo unt fo r the p r o visio n o f a ll r e q uir ed items
c o o r d i na t e d c a r e p l a ns a nd P FF S p l a ns, t he p l a ns and services, b ased on average costs fo r a typical
wo ul d b e r e q ui r e d t o s ub mi t t he p l a n b i d ( t he t o t a l enrollee r esiding in the area and the actua rial
amo u n t t hat the p lan was willing to accep t fo r bases for determining such amo unt; (2) t he
r e q uir ed P a r ts A and B b e ne fits no t t a king into proportio n o f the bi d attrib uted to the p rovision



CRS-11
Provisions Current Law S. 1 H .R. 1
account the application o f comprehensive risk o f st a t ut o r y no n-d r ug b e ne fi t s , a nd no n-st a t ut o r y
ad j ustme nt) , the a ssump tio ns used in p r ep ar ing the be ne fits (including the actuarial basis for
bid with resp ect to the number o f e nr ollees in each determini n g t he se proportio ns); and (3)
p a yme n t a r e a a nd the mix b y health status, a nd ad d itio na l info r ma tio n a s the Ad ministr a to r may
any r equired information for prescription d rug requir e.
c o ve r a ge . T he p l a n b i d wo ul d a l so ha ve t o b e
b a se d o n a c t ua r i a l e q ui va l e nc e ( se e d e s c r i p t i o n
belo w in Limita tio n o n E n ro llee Lia b ility ).
For any enhanced medical benefit p ackage a p lan
choosesto offer,itwouldberequiredtoprovide
the fo llo wi ng info r matio n: 1 ) the ACR, 2 ) t h e
p o r tio n o f t h e a c tuar ial value o f such b e ne fits
packa g e ( if any) that wo uld b e applied toward
iki/CRS-RL32039 satisfying the r e q uir ement fo r ad d itio na l b enefits,3 ) the M A mo nthly b e ne ficiar y p r e mium fo r
g/w e nha nc e d b e ne fi t s , 4 ) c o s t -sha r i ng r e q ui r e me nt s,
s.or 5 ) the d escr ip tio n o f whe ther the unified
leak d e d uctib le ha d b een lo we r e d o r if the ma ximum
://wiki o ut-o f-p o c ke t limitatio n had b een d ecr e a s ed , a nd6) other information r equired b y the Secretary.
http
[§1854(a)(5)] . Each plan bid would be requir ed to
reasonab l y and equitably r eflect the cost o f
benefits provid ed und er that plan.
th o rity to Each year an M+C o rganization s ub mits an Sec t io n 204. [§1854(a)]. T he Secretary could Sectio n 221(a)(3)(C). T he Ad ministr ato r wo uld
ia te and adj usted community rate (ACR) proposal, disapprove a p lan b id if he or she d etermined that ha ve t he s a me a ut ho r i t y t o ne go t i a t e b i d a mo unt s
ject bid estimating their proposed cost of serving Medicare the d ed uc tib les, co insur a nc e o r c o p a yments that the D ir ecto r o f the O ffi c e o f P e r so nne l
issions beneficiaries for the following contract year. T he discour a ge d access to covered services or were M a na ge me nt ha s wi t h r e sp e c t t o t he F e d e r a l
ACR p rocess is a mechanism thr ough which likely to r esult in f a v o r ab le selectio n o f M A Employee Health Benefits Plan. T he
health plans d etermine the minimum amount of eligib le b e ne ficiar ies. Ad ministr a to r c o uld ne go tiate the b id amo unt and
ad d itio na l b enefits they ar e r eq uir e d to p r o vid e to could also r ej ect a b id amount o r p roportio n o f
Medicare enr o l l ees and the cost-sharing they are t h e b id , if it was no t supported b y the actuari a l
p lanning to char ge fo r tho se b e n e f its, within basis. PFFS plans would b e exempt from this
statutory l i mitations. Und er Medicare’s r ules, a ne go tiatio n. Sectio n 221(d). T he Ad ministr ato r
plan may not earn a higher r etur n from its wo uld not approve a p lan if b enefits wer e



CRS-12
Provisions Current Law S. 1 H .R. 1
Medicare b usiness than it does in the commercial d e signe d to sub stantially d isc o ur a ge enr o llment
ma rket. T he Secretary r eviews t h is info rmation b y cer tain MA eligib le ind ivid uals.
and approves or disapproves the p remiums, cost-
sharing a mo unts, and b enefits. T he Secretary does
no t have the autho r ity to r e view the p r e miums fo r
either MSA p lans o r P FFS p lans.
e ficia ry B eneficiaries share in any p roj ected cost savi ngs Sectio n 204. [§1854(b)]. T he monthly amount of Sectio n 221(d) . F o r p l a ns with a b id amo unt
emiu ms and between Medicare s p er capita payment to a plan t h e p r e mi um, i f a ny, c ha r ge d t o a n M A e nr o l l e e b e lo w the b e nc hmar k, the b asic p r emium wo uld
bates and wha t it wo uld co st the p lan t o p r o vid e wo ul d b e t he s u m o f a ny M A mo nt hl y b a s i c be zero. Fo r p lans wi t h bids above the
Med icar e b enefits to its co mme r c ial e nr o llees. T o beneficiary p remi um, any premium for enhanced b e nc hmar k, the b asic p r emium wo uld b e eq ua l to
accomp lish this, plans must p rovide either reduced medica l b enefits and a ny obligation for the a mo unt the b id exceeded the b enchma rk.
co st-sha r ing o r ad d itio na l b enefits to their prescription d rug coverage.
Medicare enr ollees that are valued at 100% of the Sectio n 221(b) . An MA plan wo uld b e r equired
difference b etween the p roj ected cost of providing [§185 4 ( c ) ] . I f t he we i ght e d se r vi c e a r e a t o p r o vi d e a n e nr o l l e e a mo nt hl y r e b a t e t ha t
iki/CRS-RL32039Medicare-covered services and the expected benchmark exceeded the p lan b id, the Secretary eq ua l e d 75% of any average per capita savings
g/wr e ve n u e fo r M ed icar e e nr o llees. Ad d itio na lly, wo uld r eq uir e the p lan to p r o v i d e ad d itio na l ( t he a mo unt b y whi c h t he r i sk-a d j ust e d
s.orbeginning in 2003, plans may also reduce the bene fits, a nd if the p lan b id exceeded the weighted benchmark exceeded the r isk adj usted b id). T he
leakM e d i c are P art B p remium. P lans can choosewhich a d d itio na l b enefits to o ffe r , ho we ve r , the service area b enchmark, the plan could charge anM A mo nt hl y b a s i c b e ne fi c i a r y p r e mi um e q ua l t o r e b a t e c o ul d b e c r e d i t e d t o wa r d t he M A mo nt hl ysupplemental b eneficiary premium o r the
://wikito tal c o st o f the se b e ne fits must at least e q ual thesavings from M edicare-covered services. P lans the a mo unt the b id exceeded the b enchma rk. p r escr ip tio n d r u g p r e mium; c o uld b e p a idd ir ectly to the b eneficiar y; c o uld b e p r o vid ed b y
httpma y a lso p lace the a d d itio na l fund s in a Sectio n 204. [§1854(g)]. I f the p l a n b id wa s another means approved by the Administr ator; o r
st a b i l i z a t i o n fund o r r e t ur n fund s t o t he T r e a s ur y. l o we r t ha n t he we i ght e d se r vi c e a r e a b e nc hma r k , any combination o f the above. T he r emaining
the p lan c o uld , in a d d itio n to b enefits allo we d 2 5 % o f t he a ve r a ge p e r c a p i t a sa vi ngs wo ul d b e
Alternatively, und er the ACR process, plans may und e r c ur r e nt l a w, a l so l o we r t he a mo unt o f t he retained by the federal go vernment.
also charge a p remium if they demo nstrate highe r unified deductible and d ecrease the maximum
c o st s r a t he r t ha n s a vi ngs f o r p r o vi d i ng t he b a s i c l i mi t a t i o n o n o ut -o f-p o c ke t e xp e nse s. H o we ve r , Sectio n 221(e) . T his p r o visio n wo uld r e p eal
benefit p ackage. plans would be restricted fr om sp ecifying any §1854(e) - r elating to r equi red a dditiona l b enefits
ad d itio na l b enefits that p r o vid ed fo r the co ve r a ge and ACRs. [ Required beneficiary r ebates wo uld
o f a ny p r e sc r i p t i o n d r ug, o t he r t ha n t ha t r e l a t i ng t o r e p lace the r eq uir e me nt fo r a d d itio na l b enefits.]


c o ve r e d d r ugs und e r P a r t D .

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Provisions Current Law S. 1 H .R. 1
tio n o n T he actua rial va lue o f d educ tible s, coinsurance, Sectio n 204. [§1854(f)]. The monthly basic Sectio n 221(e) . T his p r o visio n wo uld r e p eal
ro llee lia b ility and copayments applicable on average to enr ollees b e ne fi c i a r y p r e mi um a n d t he a c t ua r i a l va l u e o f t he §1854(e) r elating to the limitatio n o n enr ollee
in a n M+C p lan fo r r e q uir ed ser vices ma y no t deductib les, coi n sur a nc e a nd c o p a yme nts, liab ility. [ T he info r ma tio n c o llected b y the
exceed the actua rial va lue o f d eductibles, ( c a l c ul a t e d i n t he sa me ma nne r a s t he p l a n b i d a nd Secretary in Sectio n 221(a)(3) wo ul d r e q ui r e t he
coi n s urance, and copayments on average for applicable on average to enr ollees in an MA plan), M A o r ga ni z a t i o n t o s ub mi t t he a c t ua r i a l b a si s fo r
b e ne ficiar ies in tr a d itio n a l M ed icar e. Ho we ve r , wo uld have t o b e e qual to the actua rial va lue o f determining the bid, as well as the p roportio n o f
this average may be achieve d b y having highe r the d ed uc tib les, co insur a nc e a nd co p a yments the b id attr ib uted to the p r o visio n o f statut o r y
copayments fo r some M+C services and lower fo r applicable on average to FFS bene ficiaries no n-d r ug b e ne fits, statuto r y p r escr ip tio n d r ug
other services. (adj usted to account fo r geogr aphic d ifferences b e ne fi t s , a nd no n-st a t ut o r y b e ne fi t s . ]
and fo r the p lan c o st a nd utilizatio n d iffe r e nces) .
Si mi l a r l y, fo r e nha nc e d me d i c a l b e ne fi t s , t he sum
o f the M A mo nthly b e ne ficiar y p r e mium f o r
enha nced me dical bene fits and the actua rial va lue
iki/CRS-RL32039 of the d eductibles, coinsurance, and copayment s,must e q ua l t he AC R fo r suc h b e ne fi t s fo r t he ye a r
g/w mi nus t h e a c t ua r i a l va l ue o f a ny r e q ui r e d
s.or ad d itio na l b enefits.
leakemiu m payment Under current law, Medicare b eneficiaries can No provisio n. Sectio n 221(b) . Enr o llees wo uld b e p er mitted to
://wikiha ve their P art B premium d educ ted from the irmo nthly So c ial Secur ity b e ne fit. ha ve their M A p r e miums d ed uc ted d ir ectly fr o mtheir So c ial Secur ity b e ne fits o r thr o ugh an
http e l e c t r o ni c fund s t r a nsfe r . T h e Ad mi n i s t r a t o r
wo uld b e r equired t o p rovide a mechanism
wher e b y a beneficiary who j o ined an MA plan
and elected P art D coverage thr ough the p lan
wo uld b e a b le to p ay one conso lidated premium
a mo unt .
ted Eac h year an M+C o rganization sub mits an ACR N o p r o vi s i o n, t hus no c ha nge i n t he ACR p r o c e ss. Sectio n 221. T his provisio n would repe al
mmu n ity ra tes proposal, estimating their proposed cost of serving § 1854(e) - r elating to r equired additional b enefits
CR ) Medicare b eneficiaries fo r the fo llowing cont ract and ACRs. P lans wo uld n o t b e r e q uir ed to
ye a r . T he ACR p rocess is a mechanism thr ough submit ACRs beginning in 2006. [Plan b id s
which health p lans d eter mine the minimum wo uld r eplace ACRs.]


amo unt o f ad d itio na l b enefits they ar e r eq uir e d to
provide to Medicare enr ollees and the cost-sharing
they ar e p er mitted to c ha r ge fo r tho se b enefits.

CRS-14
Provisions Current Law S. 1 H .R. 1
red No provisio n. Sectio n 204(b) . T he Secretar y wo u l d cond uct a Section 212(f). No later tha n 1 8 mo nths a fter
es/reports st ud y t o d e t e r mi ne t he e xt e nt t o whi c h M + C c o s t - en actme nt o f this legislatio n, the M ed icar e
n e ficia ry co st- sharing d iscour ages access to covered services or Payment Advi sory Co mmissio n would report to
ing discrimi na tes b ased on the health status of M+C Co ngr e s s p r o vi d i ng a n a s se ssme nt o f t he me t ho d
eligible bene ficiaries. T he Secretary would use d fo r d e t e r mi ni n g t he a d j ust e d a ve r a ge p e r
submit a r e p o r t to Congress, provid ing capita cost (AAP CC) . T he report would examine
recomme nd ations fo r legislati o n and the var iatio n in c o sts b e tween d i f f e r ent a r eas,
administrative action, no later than December 31, includ ing d iffe r e nces in inp ut p r ices, utilizatio n
2004. and p r actice p atter ns; the a p p r o p r iate ge o gr a p hic
area fo r p ayme nt; a nd the accuracy o f t he r isk
ad j ustme nt me tho d s in r e flecting d i f f e r e nces in
the cost o f p roviding care.
Sectio n 212(g). No later than J ul y 1, 2006, the
iki/CRS-RL32039 Ad ministrato r would submit a report to Congressthat d e scr ib e d the imp act o f ad d itio na l financing
g/w p r o vided und er the Act and o ther Ac ts,
s.or (inc luding the B alanced B udget Re fine me nt Ac t
leak of 1999 BBRA and Benefits Improvement and
://wiki P r otection Act of 2000 -B IP A) on the availabilityof MA plans in d ifferent areas and the impact on
http lowe ring premiums and inc reasing b enefits und er
such plans.
Other M A Provisions
al ru les for No provisio n. Sectio n 205. Beginning on January 1, 2006, MA Title I, Sectio n 102. Beginning January 1, 2006,
escrip tio n d ru g plans, other than P FFS and MSA plans, wo uld b e at least o ne MA plan offered b y an M A
n e fits required to offer each enro l l e e q ualified o r ga nizatio n in a n a r e a wo uld b e r e q uir ed to o ffe r
prescription d rug coverage that met the qualified d rug coverage und er P art D; meet the
requirements fo r such coverage und er the M A b e ne ficiar y p r o tectio ns o utlined in the new
program and und er P a r t D o f Medicare. An MA Sectio n 1860D-3 , including requir ements relating
p lan co uld o ffe r q ua lifie d p r e scr ip tio n d r ug to info r matio n d issemina tio n a s well a s gr ievance
coverage that exceeded the coverage r equired and appeal s ; and p rovide the same information
und er P art D, as long as it also offered an M A p lan requir ed fr om prescrip t i o n d rug p lan sponso rs
i n t he a r e a t ha t p r o vi d e d o nl y t he r e q ui r e d when sub mitting a b id unles s waive d b y the
c o v e r a ge . T hi s p r o vi si o n wo ul d a l s o e st a b l i s h Ad mi ni st r a t o r . M A o r ga ni z a t i o ns p r o vi d i ng
payments to each MA organization offering an qualifi ed d rug coverage would receive low-



CRS-15
Provisions Current Law S. 1 H .R. 1
MA p lan that p r o vid ed q ualified p r e scr ip tio n d r ug income subsidy p ayments and direct and
c o ve r a ge , i nc l ud i ng a l o w-i nc o me d r ug s ub si d y. r e i nsur a nc e s u b s i d i e s. A s i ngl e p r e mi um wo ul d
be established for drug and non-d rug coverage.
cilita tin g Employers may sponso r an M+C p lan o r p ay Sectio n 206. T he Ad ministr ato r co uld p er mit a n No provisio n.
premiums fo r r etirees who enr oll in an M +C plan. MA p lan to estab lish a sep a r a te p r emi u m a mo unt
rticip a tio n If an M+C p lan contracts with an employer gr oup fo r enr ollees in an employer or other group health
health plan (EGHP ) that cove rs enrollees in an plan that provides employment-b ased retiree
M+C p lan, the enroll e e s must be provid ed the he a l t h c o ve r a ge . T hi s p r o vi si o n wo ul d a l s o a p p l y
same b e ne fits as a l l o ther enr o llees in the M +C t he c ur r e nt l a w r e q ui r e me nt s t o r e gi o na l P P O s.
p lan, with the E GHP b e ne fits sup p le me nting the
M+C p lan b enefits. T he Secretary may wa i v e o r
modify requirements that hinder the ability of
employer or union gr oup heal t h p lans from
offering a M+C plan optio n.
iki/CRS-RL32039min i stra tio n T he M + C p r o g r a m is currently administered by Sectio n 207. Beginning January 1, 2006, the MA T i t l e V III. T he M edicare B enefits
g/wthe Centers fo r M edicare and Medi c a i d Services program and the P art D prescription d rug p rogr am Ad ministr a tio n ( MB A) , wo uld b e estab lishe d to
s.or(CMS). wo uld b e a d minister e d b y the Center fo r M ed icar e ad minister MA, E FFS, and t h e new M ed icar e
leak Choices, and each reference to the Secretary prescription d rug b enefit.
wo uld b e d eemed to be a r efe r e nce to the
://wiki Ad ministrator o f the Center fo r M edicare Cho ices.
http [ Related p r o gr a m a d ministr atio n p r o visio ns a r e in
Tit l e III a d d r essing the Center for Medicare
Choices.]
Co nf o r ming Amendment s
e for T he Secretary is autho r i z e d to carry out specific Sectio n 208. I n ad d itio n to sp ecificatio ns No comp arable provision.


termed ia te reme dies in the e ve nt that an M+C o rganization: includ ed in curre n t law, the Secretary c ould also
ions ( 1 ) fails sub stantially to p r o vid e me d ically carry out r emedies if an o rganization charged any
ne cessary items and services required to b e Medicare enr ollee an amo unt in excess o f the MA
provided, if the failure adversel y affects the mo nthly b eneficiar y o b ligat io n fo r q ualified
M e d icare enr ollee; (2)imposes premiums on prescription d rug coverage, provided coverage that
enrollees that are in excess o f tho se a l l o wed; wa s no t q ualified p r e s c r ip tio n d r ug c o ver age,
(3)acts to exp el or refuses to r eenroll an enrollee in offered p rescriptio n d rug coverage b ut did not
violation o f Federal requirements; ( 4)engages in make standard prescription d rug coverage
any p r actice tha t wo uld ha ve the e ffect o f d e nying a v a i lable, or provid ed coverage fo r d rugs othe r
o r d isco ur a ging enr o llme n t ( excep t a s p er mitted than that r e lating to p r e scr ip tio n d r u g s co ve r e d
b y law) o f eligib le b e ne f iciar ies who se me d ical und er P a r t D, as an enha nced o r ad d itio na l b enefit.

CRS-16
Provisions Current Law S. 1 H .R. 1
co nd itio n o r h i s t o r y ind icates a need fo r
sub stantial futur e med ical services; (5 )
misr epresents o r falsifies info rmation to the
Secr etar y o r o ther s; ( 6 ) fails to co mp ly with r ules
r e ga r d ing p hysician p a r tici p atio n; o r ( 7 ) e mp lo ys
o r co ntr acts wit h a n y ind ivid ual o r entity that ha s
been exclud ed fr om participation in M edicare.
ica re Med ica l BBA1997 authorized a d e monstratio n for M+C Se ction 201. T he d eadline for enrollment in a n Sectio n 234. T he M edicare M SA demo nstration
ngs Accounts M S As . T he M + C o p t i o n c o mb i ne d a hi gh- MSA would be extend ed until December 31, wo uld b e made a permanent option, the capacity
S A s) d e d uctib le health insur a nc e p lan with an M+C 2003. limit wo uld b e r emoved and the deadline for
MSA. New e nr o llment is no t allo we d a fter enrollment would be eliminated. For enrollees in
January 1, 2003 or after the number o f enrolle e s MSA p lans, p hysicians o r o t her entities ( o the r
reaches 390,000. No private p la ns have than providers o f service s , such as ho sp itals)
establis he d a n M+C MSA for Medicare wo uld b e r equired to accept the Medicare fee-fo r
iki/CRS-RL32039b e ne fi c i a r i e s. M + C p l a ns ( i nc l ud i ng M S As ) must se rvice p ayme nt as a p ayme nt in full (no b alance
g/wha ve an o ngo ing q ua lity assur a nc e p r o g r a m fo r b illing wo uld b e p e r mitted ) . T he q uality
s.orhealth care services provided to Medi c are a ssur a nc e r e q ui r e me nt s fo r M S As wo ul d b e
leakb e ne fi c i a r i e s. T he r e q ui r e d e l e me nt s o f t heprogram are sp ecified in statute. remo ved.
://wikid a te No provisio n. Sectio n 209. Generally effective J anuary 1, 2006. Sect i o n 211(e). T he M A p r o gr a m wo ul d b e
http However, the Secretary would apply p ayment and effective J anuary 1, 2004. Section 221 (g).The
o the r r ules fo r M SA p lans, as if t h i s t itle ha d no t co mp etitio n p r o gr am wo uld b e e ffective J anua r y
been enacted. 1, 2006.



CRS-17
Regional P referred P rovi der Organiz ations/EFFS
Provisions Current Law S. 1 H .R. 1
e ra l P P O s a r e p e r mitted t o b e o ffe r e d a s c o o r d ina ted car e Sectio n 211. [§1858(a)]. B e gi nni ng J a nua r y 1 , Secti o n 201(a). Beginning January 1, 2006,
plans und er the Medicare+Choice program. 2006, a p referred p rovider o rganizatio n (PPO) the Ad ministr ato r wo uld e sta b l i sh the EFFS
p lan wo uld b e o ffe r e d to M A e ligib le ind ivid uals program o ffering plans o n a regional basis.
in preferred p rovider r egions. A P P O wo uld b e [§1860E-1(b)(2)]. EFFS plans woul d b e
an entity with a c o ntr act that me t o ther requir ed to provid e either FFS or prefe r r ed
r e q u i r e me nt s o f t hi s Ac t . A P P O wo ul d ha ve a p r o vi d e r c o ve r a ge . U nd e r FFS c o ve r a ge , p l a ns
network o f p roviders that agreed to contractually wo ul d : ( 1 ) p a y ho sp i t a l s , p hysi c i a ns a nd o t he r
sp ecified rei mb ursements fo r covered benefits p r o vid er s a t a r a te d e ter mined b y the p lan o n a
und e r P a r t s A a n d B . T he P P O wo ul d p a y fo r a l l FFS basis, without p lacing provid ers at r isk, (2)
covered services an enrollee r eceived, whether no t vary r ates based o n the pr o v i d er’s
provid ed in or out o f netwo rk. utilizatio n, and ( 3 ) no t r e s t r i c t the selectio n o f
p r o vid er s fr o m a mo ng tho se who we r e lawfully
iki/CRS-RL32039 Each p lan wo uld b e o ffe r e d to a ny MA eligib le authorized to provi d e covered services and
g/w individual residing in the service area. agreed to accept the plans terms and
s.or co nd itio ns. Und er p r efer r e d p r o vid e r c o ver age,
leak plans wo u l d : (1)have a netwo rk of provid ers
who agr eed to a contractually-specified
://wiki p a yme nt fo r co ve r e d b enefits with the
http organizatio n, and (2) provid e for payment for
all covered benefits regardless of whether they
we r e p r o vid ed within the netwo r k.
Each planwouldbeofferedtoanyEFFS
eligib le b e ne ficiar y r esid ing in the E F FS
region.
tablishing Enr o llment in a ny ind ivi d u al M+C p lan is o p e n o nly Sectio n 211. [§1858(a ) ( 3 )]. T here would be at Sectio n 201(a). [§1860E-1(a)(1 and 2 )]. Plans
gions to those b eneficiaries living in a sp ecific service area. least 1 0 r egions. E ach region wo uld h a ve to wo uld b e o ffered o n a regional basis, in at least
P lans d efine a service a r e a as a set of counties and incl ud e at least o ne state, and could be the entire 1 0 r e gi o ns e st a b l i s he d b y t he Ad mi ni st r a t o r .
co unty p ar ts, id e ntifi e d a t t he zip c o d e leve l. At a Un i t e d States. T he Secr etar y c o uld no t d ivid e B efo re establishi ng t h e r e g i o ns, t he
state’s option, the service area could b e d efined as the states so that p o r tio ns o f the state we r e in d iffe r e nt Ad ministrato r would cond uct a market survey
entire state; however, to d ate, no state has done so. regions. T o the extent p o ssible, the Secretary and a na lysis, includ ing a n e xa mi na tio n o f
wo uld inc lude multi-state metropolitan statistical c urrent insur ance markets, to determine h o w
areas (MSAs) in a single r egion, except tha t he o r the r e g i o ns sho uld b e estab lishe d . Regi o ns
she could divi d e an MSA where necessary to wo ul d b e e st a b l i s he d t o t a ke i nt o c o nsi d e r a t i o n



CRS-18
Provisions Current Law S. 1 H .R. 1
establish a region of such s ize and geogr aphy to ma ximizing full access fo r all E FFS-eligib le
ma ximize the p ar ticip ati o n o f P P O s. T he i ndividuals, especially those r esiding in r ur al
Secretary could use the same regions established areas.
fo r the prescription d rug p rogr am, und er P art D.
T he service area of a P P O wo uld b e the region.
red number No provisio n. Sectio n 211. [§1858(d)]. If there were b i d s f or Sectio n 201(a). [§1860E-3(a)(3)(D)]. The
plans and mo r e than thr e e p lans in a p r e fe r r ed p r o vid er Ad ministr a to r c o uld enter into c o ntr acts fo r up
n e fits in ea ch r e g i o n , the Secr etar y wo uld limit the numb e r o f to 3 E FFS o r ga nizatio ns in any r egio n.
gion p lans to the three lowest-cost credible plans t ha t [§1860E-2]. EFFS plans could only be offered
me t o r e xceeded the q ua lit y o r minimum in a r egio n, if the p lan: ( 1 ) was availab le to a ll
sta nd a r d s. EFFS eligib le ind ivid uals in a n e ntir e r egio n,
(2) complied with statutory access
requir ements, ( 3) unifo rmly provid ed all
required P arts A and B benefits, ( 4) includ ed a
iki/CRS-RL32039 single d educ tible fo r b enefits und er P a rts A and
g/w B , and a c a t astr o p hic limit o n o ut-o f-p o c ke t
s.or expenses, and (5) p rovided p rescriptio n d rug
leak coverage fo r each enrollee electing P art D drugcoverage. AnEFFSwouldalsobeabletooffer
://wiki supplemental b enefits.
http Title VII, Sectio n 722(b) . EFFS plans would
ha ve to offe r c hr onic care management p lans to
enr o llees with multip le o r s u fficiently seve r e
chr o nic c o nd itio ns.
s B o th M+C a nd P FFS p lans must d emo nstr a te to th e Sectio n 211. [§1858(b)].PPOs would be required Sectio n 201(a). [§1860E-2(b)(2)]. E FFS p l ans
Secretary a sufficient number and range of health care t o e s t a b l i s h a suffi c i e n t numb e r a nd r a nge o f wo uld have to c o mp ly wi t h the statuto r y
provid ers who agree to the plans terms. Fo r P FFS health car e p r o fe ssio nals a nd p r o vid er s willing to requir ements in §1852(d)(4) t hat currently
plans this r equir e me nt is considered to be met if the provide se r vi ces und er the p lans terms. T he a p p l y o nl y t o P FFS p l a ns. T he r e q ui r e me nt fo r
plan establishes p ayment rates for covered services Secretary would consider this requirement t o b e establishing a sufficient number o f contracts,
that are not less than Medicare’s fee-fo r-service r ates, me t i f t he o r ga ni z a t i o n h a d a s uffi c i e n t numb e r o f and n o t restricting e nr ollee access to o ther
or if the p lan has contract s o r a gr eements with a contracts a nd agreements with a sufficient number p r o vid er s is similar to p r o visio ns in S. 1 .


suffi c i e nt numb e r a nd r a nge o f p r o v i d e r s. T he s e and r ange of providers. T hese arrangement s
requirements do no t r e s t r ict enr ollees access to o ther wo uld not restrict enrollee access to o ther
providers for covered services. p r o vid er s fo r co ve r e d ser vices . Ad d itio na lly, if
the p lan was in a state wher e 2 5 % o r mo r e o f the

CRS-19
Provisions Current Law S. 1 H .R. 1
populatio n r e s id ed in a health professional
shortage area, these arrangements would also no t
r e strict the categories o f license d healt h
professionals o r p roviders from whom the
enrollee could obtain covered benefits.
tio n d ru g No p r o visio n. Same r e q uir ements as und er the M A p r o gr am. Title I, Sectio n 102. An E FFS o r ga ni z a t i o n i n
n e fits a r egio n wo uld ha ve to o ffe r a least o ne p lan
that includ ed q ualified p r e scr i p tio n d r ug
c o ve r a ge und e r P a r t D ( i . e . , i f t he o r ga ni z a t i o n
o f fered several plans, only one would have to
includ e P ar t D ) . An E F F S o r ga nizatio n c o uld
no t o ffe r p r e sc r i p t i o n d r ug c o ve r a ge ( o t he r t ha n
t he e xisting d rug b enefit und er P a rts A and B )
to an enroll ee unless such coverage was
iki/CRS-RL32039 q ualified p r e scr ip tio n d r ug c o ver age und er P a r t
g/w D.
s.or Payments to Regional Organizatio ns
leakonthly payments See similar d escr ip tio n und er P a yments to MA Sectio n 211. [§1858(c)]. T he Secretary would Section 201. [§1860E-3(c)]. T he Ad ministr ato r
orga nizatio n sectio n a b ove (Payment ra te ma k e sep a r a te mo nthly p ayme nts with r e sp ect to wo ul d make monthly payments to each EFFS
://wikimo d ifica tio n s). required benefits und er P arts A a nd B and organiza t ion with resp ect to coverage of an
http b e ne fi t s und e r t he vo l unt a r y p r e sc r i p t i o n d r ug enrollee inanEFFS region.


program und er P art D. T he Secretary would also
establish a me thodology for adj usting spend ing
va r iatio ns within a r egio n, similar to the me tho d
fo r e q ualizing the fe d e r a l c o ntr ib utio n und er
Sectio n 2 0 3 o f this legislatio n.

CRS-20
Provisions Current Law S. 1 H .R. 1
io n - sp ecific See similar d escr ip tio n und er P a yments to MA Sectio n 211. [§1858(c)(2)]. Beginning in 2006, Sectio n 201. [§1860E-3(b)(3)]. Similar to S. 1 .
arks o r ga ni z a t io n sectio n above (Payment ra te the Secretary would calculate a b enchma rk T he E FF S r egio n-sp ecific no n-d r ug mo nthly
mo d ifica tio n s). amount fo r r equired s e r vices fo r each region b e nc hma r k a mo unt wo u l d b e a n a mo unt e q ua l
equal to the avera g e o f each benchmark amo unt to one-twelfth o f the average ( we ighte d b y the
fo r e a c h M A p ayme nt ar ea within the r egio n, number o f E FFS eligible individuals in each
we igh t e d b y the numb e r o f M A e ligib le p a yme nt a r e a ) o f t he a nnua l M A c a p i t a t i o n r a t e
individuals r esid i ng in the payment area for the c a l culated for that area. T he capitation r ate
year. E ach year, b eginning in 2005, the Secretary wo uld b e calculated b y inc reasing the previous
wo uld p ub lish ( a t the time o f p ub licatio n o f the year payment r ate b y the revise d minimum
r i sk a d j ust o r s und e r P a r t D no l a t e r t ha n Ap r i l percentage increase. (See Sectio n 212.)
15) the b enchmark amount fo r each r e gi on,
factors to b e used f o r adj usting p ayments und er Section 2 31. T he anno uncement o f p ayment
the comprehensive risk adj ustment methodology rates, includ ing r ates fo r E FFS plans, wo uld b e
a nd methodology used for adj ustments fo r permanently mo ve d to no later than the second
iki/CRS-RL32039 ge o gr a p hic va r iatio ns within a r egio n. Mond ay in May.
g/wents to plans No provisio n. Sectio n 211. [§1858(c)(4)]. T he Secretary would Sectio n 201(a). [§1860E-3(c)]. The
s.ored on bids p a y p lans as fo llo ws. No n- drug benef it s:For Ad ministr a to r wo uld p a y p lans as fo llo ws .
leak plans with bids belo w the r egional b enchmark, the No n- drug benef it s: Fo r p lans with b id s belo w
plan wo uld r eceive t he r egional b enchmark the b enchma r k, the payment would equal the
://wiki reduced by the amo unt of any P art B premium unadj usted EFFS statutory non-d rug monthly
http r e d uctio n e lect ed b y the p lan. Fo r b id s at or b i d a mo unt , wi t h a d j ust me nt s fo r d e mo gr a p hi c s
above the r egio na l b enchma r k ( a d j usted using the ( i nc l ud i ng he a l t h st a t us) a s we l l a s i nt r a -
p lans assump tio ns with r e sp ect to the numb e r s o f r e gi o na l ge o gr a p hi c va r i a t i o ns a nd t he mo nt hl y
enr o llees) , the p lan wo uld r e c e ive the r e gio nal rebate. For plans with bids at or ab o v e the
b e nc hma r k a mo unt . P a yme nt s wo ul d b e a d j ust e d b e nc hma r k, t he p a yme nt a mo unt wo ul d e q ua l
fo r r i s k a nd ge o g r a p h i c va r i a t i o n. t he E FFS r e gi o n-sp e c i fi c no n - d r ug mo nt hl y
b e nc hma r k a mo unt , wi t h t he d e mo gr a p hi c
( i nc l ud i ng he a l t h st a t us) a s we l l a s i n t r a -
regional geographic adj ustments.
Drug b e nef it s: T he same methodology for Drug benef it s: Ad d itio na l l y, fo r an EFFS
calculating p r e scr ip tio n d r ug p ayme nts fo r MA enrol lee who enr olled in P art D and elected
plans would be used fo r regio nal PPOs. p r escr ip tio n d r ug c o ver age thr o u g h the p lan,
the p lans p ayme n t wo u ld inc lud e a d ir ect and
a r einsur ance subsidy p a yme nt a n d
reimbursement for premiums and cost-sha r ing
reductio ns fo r cer tain lo w-inco me b e ne ficiar ies.



CRS-21
Provisions Current Law S. 1 H .R. 1
sk adjustment See similar d escriptio n und er P a yments to MA Secti o n 211. [§1858(c)]. T he Secretary would I n a d d itio n to the cur r e nt law r eq uir e me nts fo r
o r ga ni z a t i o ns se c t i o n a b o ve (R isk A d ju stmen t). apply the c o mp r e he nsi v e risk adj ustment r i s k adj ustments for individual enrollees, both
methodology to 100% of the p lan p ayment. bids and b enchmarks would also be risk
adj usted, b ased on the follo wing methodology.
[§1860E-4]. B eginning in 2006, the
Ad ministr a t o r wo uld d e ter mine ( no later tha n
t h e second Mond ay in September), for each
EFFS region, the average o f the risk adj ustment
facto r s ( includ ing a ge , d isab ility status, gend e r ,
institutio n a l status, health status, a nd o the r
factors the Administrator d etermined to b e
ap p r o p r i a te) to b e a p p lied to e nr o llees in that
r e gi o n. I n t he c a s e o f a n E FFS r e gi o n i n whi c h
iki/CRS-RL32039 a p lan was offered in the previous year, theAd ministrator could comp ute the average b ased
g/w o n fa ctors used in the previous year. I n a cas e
s.or of a r egion in which no EFFS plan was o ffered
leak in the p r e v i o us year , the Ad ministr a to r wo uld
://wiki estimate the average a nd could use average r iskadj ustment factors applie d to comparable
http r e gio ns o r a p p lied o n a na tio na l b asis.
T he Administrator wo uld apply the average r isk
adj ustors to the EFFS region-specific non-d rug
mo nt hl y b e nc hma r k a mo unt a nd t he una d j ust e d
EFFS statutory non-d rug monthly bid amo unt.
B ids, P remiums a nd R isk Sha ring
ission of bids See similar d escr ip tio n und er B id s and P r e miums in Sectio n 211.[§1858(d)]. Each plan wo uld sub mit Sectio n 201( a ) . [§1860E-3(a)]. Each year,
asso ciated the M A s e c t io n a b o ve (Submission of bids and a b id fo r c ove r age o f r equired b enefits, with beginning in 2006, an EFFS organizatio n would
in es asso ciated deadlin es). a ssu mp t i o ns a b o ut t he numb e r o f e nr o l l e e s . N o submi t a monthly bid amo unt fo r each plan in
l a t e r t ha n t he se c o nd M o nd a y i n Se p t e mb e r , a each region, r eferred to as theE FFS mo nthly
P P O wo uld have to sub mit no tice o f in t e nt, b i d a mo u n t , i n a f o r m, ma n n e r , a n d t i me
info r matio n o n which r e gio n the p la n i s b id d ing, sp ecified by the Administr ator. T he b i d could
and info r ma tio n similar ly r eq uir e d fo r o the r M A no t var y a mo ng EFFS eligib le ind ivid uals in the
plans. E FFS r e gi o n i nvo l ve d . T he E FFS o r ga ni z a t i o n



CRS-22
Provisions Current Law S. 1 H .R. 1
T he same r ules fo r p r o vid ing ad d itio na l b enefits wo ul d b e r e q ui r e d t o p r o vi d e t he fo l l o wi ng
in MA plans would also apply to the PPOs. If the i n fo r ma t i o n: ( 1 ) t h e b i d a mo unt fo r t he
regional benchmark exceeded the b id, the P P O p r o visio n o f a ll r e q uir ed ite ms and ser vices,
p lan wo uld b e r eq uir e d to p r o vid e ad d itio na l based o n average costs for a typ ical beneficiary
b e ne fi t s i n t h e s a me ma nne r a s r e q ui r e d i n t he r e sid ing in the r egio n a nd the actua r ial b a sis fo r
MA program. determining such amo unt; (2) the p roportio n o f
the b id attr ib u t ed to the p r o visio n o f statuto r y
Unlike o ther MA plans, PPOs would not be n o n-d r ug b e ne fi t s ( t he “una d j ust e d E FFS
p e r mitted to segme nt a r egio n. statutory non-d rug monthly bid amo unt”),
st a t ut o r y p r e sc r i p t i o n d r ug b e ne fi t s , a nd no n-
statutory b enefits (inc luding the actua rial basis
fo r d etermining these p roportio ns); and ( 3)
ad d itio na l info r ma tio n a s the Ad ministr a to r
ma y r e q u i r e .
iki/CRS-RL32039th o rity to See similar d escr ip tio n und er B id s and P r e miums in Sect i o n 211. [§1858(d)]. T he Secretary would Sectio n 201(a). [§1 860E-2(c)(2)]. The
g/wia te and the M A sectio n a b o ve (Authorit y t o n egotia te and r e view the a d j usted c o mmunity r a tes, the a mo unts Ad ministrato r would no t approve an EFFS plan
s.orject bid reject bid submission). o f the M A mo nthly b a sic p r e mium and the MA if b e ne fit s we r e d e signe d to sub stantially
leakissions mo nthl y b eneficiary premium for enhancedmedical benefits and could approve o r d isapprove d isco ur a ge enr o llment b y cer tain e ligib leindividuals.
://wiki t he s e a mo unt s. Sectio n 201(a). [§186 0E-3(a)].The
http [§1858(b)]. T he Secretary could disapprove any Ad mi ni str a to r wo uld ha ve the a ut ho r ity to
PP O b elieved to attract a populatio n that is ne go t i a t e b i d a mo unt s t h a t t he D i r e c t o r o f t he
healthier than the average populatio n o f the Office of P ersonnel M anagement has with
r e gio n ser viced b y the p lan. resp ect to the Federal Employee Health
B e ne fits P lan. T he Ad ministr a to r c o uld
ne go tiate the b id amo unt and c o ul d a l so r e j ect
a b id amount or proportio n, if it was not
supported b y the actuarial basis.



CRS-23
Provisions Current Law S. 1 H .R. 1
e ficia ry See similar d escr ip tio n und er B id s and P r e miums in Sectio n 211. [§1858(d)]. T he mo nthly p r emium Sectio n 201(a). [§1860E-4(a)]. The
emiu ms and the M A sectio n a b o ve ( B en eficia ry p remiu ms a n d c ha r ge d t o a n e nr o l l e e wo ul d e q ua l t he sum o f benefic i a r y monthly premium would be zero
bates rebates). any M A mo nthly b a sic b eneficiar y p r emium, any fo r p lans p r o vid ing r eb ates ( e xp lain e d b e lo w) .
MA mo nthly b eneficiary premium for enhanced Fo r o ther plans it would be the amo unt, if any,
me d ical b e ne fits, a nd any M A mo nthly o b ligatio n b y whi c h t he una d j ust e d E FFS st a t ut o r y no n-
for qualified p rescriptio n d rug coverage. drug mo nthly b id a mount exceeded the E FFS
P r emiums co uld no t va r y amo ng M A e ligib les in re gion-specific non-d rug monthly benchmark
aregion. a mo unt .
[§1860E-3(b)] . T he E FFS p l a n wo ul d p r o vi d e
the e nr o llee a mo nthly r e b a te eq ua l to 7 5 % o f
t h e a ve r a ge p e r c a p i t a sa vi ng, i f a ny. T he
average p er capita mo nthly savings wo uld
e q ua l t he a mo unt b y whi c h t he r i sk-a d j ust e d
benchmark exceeded the r isk-adj usted bid. T he
iki/CRS-RL32039 r e ma ining 2 5 % o f the a ve r a ge p e r cap ita
g/w sa vi ngs wo ul d b e r e t a i ne d b y t he fe d e r a l
s.or go ve r nme nt .
leak T he r eb ate c o uld b e in the fo r m o f a ny
co mb inatio n o f a cr ed it to wa r d s the EFFS
://wiki mo nt hl y p r e sc r i p t i o n d r u g p r e mi um, t he E FFS
http mo nthly supplemental b eneficia ry premium, a
direct mo nthly p ayme nt, o r o ther means
a p p r o v e d b y the Ad ministr ato r , o r a
comb ination o f the above.
sk -sharin g No provisio n. Sectio n 211. [§1858(e)]. T he PPO would notify No provisio n.


rangements the Secretary o f the total amo unt of costs incur red
during 2007 and 2008 in provid ing co v ered
benefits und er P art A a nd B o f Medicare, except
that certain expenses wo uld not be i n c l uded
( a d ministr ative e xp enses o ve r the amo un t
d e ter mined ap p r o p r iate b y the Ad ministr ato r and
a mo unt s e xp e n d e d for enhanced medic a l
b e ne fits) .
T he Secr etar y wo uld b e r e q uir ed to estab lish r isk
corridors for the regio nal PPO plans for 2006 and

CRS-24
Provisions Current Law S. 1 H .R. 1
2007. Medicare would share risk with PPO
o r ga nizatio ns after c o sts fe ll ab o ve o r b elo w a r isk
corridor of 5% as fo llo ws: 1 ) M e d icare would
share 50% of the losses o r p rofits between 105%
and 110% of a target which consists of
Medicare’s M A p ayme nt plus the b eneficiaries
contributio ns; and 2)Medicare would share 90%
of the losses o r p rofits above 110% of the target.
PPOs would be at full risk fo r all e nhanced
me d ical b e ne fits. A b e ne ficiar ys liab ility wo uld
no t b e a ffe c t e d b y t h e s e r i s k c o r r i d o r s i n t he gi ve n
years.
e ficia ry M+C p lans canno t o ffer cash o r monetary r ebates as No provisio n. Section 201(a). [§1860-1(c)].EFSplans
an inducement for enrollment. wo uld have to c o mp ly with existing e ligib ility,
iki/CRS-RL32039 election, and enr ollment p rovis ions ( und er
g/w §1851) includ ing guaranteed issue and renewal,
s.or but coul d offer cash o r monetary r ebates as an
leak inducement for enrollment.
://wiki Se c t io n 221(e) . Fo r MA p lans, the a b ility tooffer cash o r monetary r ebates wo uld b e limited
http to the r e b a t e s ( b ased o n the calculatio n o f
average p er capita mo nthly savings) e stablishe d
und er this b ill.



CRS-25
Other M anaged Care Reforms
Provisions Current Law S. 1 H .R. 1
end reasonable Co st-b ased plans are those p lans that are r eimb ur sed Sectio n 221. Reasonable cost contracts could be Sectio n 235. Reasonable cost contracts could be
t contra cts b y Medicare for the actual cost o f fur nishing extend ed o r renewed until December 31, 2009. extend ed or renewe d t hrough 2007. Beginning
covered services to Medicare b eneficiaries, less the Beginning in 2004, these plans would have to January 1, 2008, cost co ntracts could continue
estimated va lue o f b e n eficiary cost-sha ring. T he co mp ly with cer tain r e q u i r ements o f the M +C unl e s s d ur i ng t he e nt i r e p r e vi o us ye a r , t he se r vi c e
Secretary can no t extend o r r enew a r easonable cost program ( a n d b eginning in 2006 the MA area had two or mo re coordinated care MA p lans
reimbursement contr act fo r any period b e yo nd p r o gr a m) , i nc lud i ng o ngo ing q ua lity assur a nc e or two o r more E FFS plans, each of which met the
December 31, 2004. p r o g r a ms, p hysician incentive p lan limitatio ns, fo l l o wi ng mi ni mum e nr o l l me nt r e q ui r e me nt s: 1 )
uni fo r m p r e mi u m a mo unt r e q u i r e me n t s , p r e mi um at least 5 , 000 enrollees fo r the portion o f the area
tax r estr ictio ns, fed er al p r eemp tio n, a utho r ity o f that is within a metr o p o litan statistical ar ea ha ving
an organization to include supplemental health mo re than 250,000 peopl e and counties
care b enefits, b enefit fill i n g d eadlines, c ontract contiguo us to such an area, and 2 ) at lea st 1,500
r e ne wa ls and b enef iciar y no tificatio ns, a nd enrollees fo r any other portion o f such area.


iki/CRS-RL32039 proposed cost-sharing subj ect to the Secretarys
g/w review.
s.or
leak T he Secreta r y would be requir ed to approve a
ne w a p p licatio n fo r a gr o up p r actice H MO to
://wiki enter into a reasonable cost contract i f t h e group
http me t cer tain r e q uir ements o f the P ub lic Health
Se r vi c e Ac t . T he r e q ui r e me nt s wo ul d b e t ha t t he
group p ractice HMO, as o f J anuary 1, 2004,
provid ed at least 85% of the servi c e s of a
p hysician ( which a r e p r o vid ed as b a sic health
se r vi c e s ) t hr o ugh a me d i c a l gr o up ( o r gr o up s ) ,
and met o the r r eq uir e me nts f o r such entities
sp ecified in statute.

CRS-26
Provisions Current Law S. 1 H .R. 1
b lish One model for provid i n g a sp ecialized M+C p lan, Sectio n 222. A new M+C optio n would be Sectio n 233. Sub sta n t ially the same p r o visio n,
ecialized Ever Car e , o p e r a tes a s a d e mo nstr atio n p r o gr am. establishe d sp ecialized M+C p lans fo r special but these sp ecialized plans would be established
ica re EverCare is designed to s t udy the effectiveness o f needs b eneficiaries (suc h a s the EverCare as new M A p l a ns. Also, the Secretary would be
age plans ma na gi ng a c ut e -c a r e ne e d s o f nur si ng ho me demo nstration) . Special needs b eneficiari e s are p e r mitted to o ffe r sp ecialized MA p lans fo r p lans
b en eficia ries r e sid e nts b y p a ir ing p hysicians and ger iatr ic nur se d e fine d a s tho se M+C e ligib le b e ne fi c i a r ies who that disp roportio nately serve b enefici a r ies with
sp ecial needs practit i o ners. E verCare r eceives a fixed capitated we r e institutio na lized , e ntitled to M ed icaid , o r sp ecial need s who are the fr ail e lderly.
payment, based o n a percentage of the AAP CC, fo r met r equirements d etermined b y the Secretary. Enr o llment c o uld b e limited to sp ecial need s
a l l nur si ng ho me r e si d e nt M e d i c a r e e nr o l l e e s . Enrollment in specialized M+C p lans could b e beneficiaries until J a nuary 1, 2007. Interim
limited to special needs b eneficiaries until J a nua ry r e gulatio ns wo uld b e r eq uir e d within 6 mo nths o f
1 , 2008. No later than December 31, 2006, the enactment. T he required st ud y would be due no
Secretary would be requir ed to submit a r eport to later than December 31, 2005.
Co ngr ess tha t a sse sse d the imp a c t of sp ecialized
M+C p lans fo r special needs b eneficiaries on the
co st and q ua lity o f ser vices p r o vid ed to enr o llees.
iki/CRS-RL32039 No later tha n 1 ye a r after e nactme nt o f this Ac t,the Secr etar y wo uld b e r e q uir ed to issue final
g/w regulati o ns to establish r equirements for sp ecial
s.or needs b eneficiaries.
leakb y P ACE was created as a d emonstration p roj ect in the Section 2 2 3 . For the Medicare p rogr am, No provisio n.
://wikiogram of All-usive Care for O mn ib us B ud ge t Reco nc iliatio n Act ( O B RA 8 6 ) .T he Se c r e t ary was required to gr ant waivers of p r o tectio ns against b alance b illing to P AC Ep r o vid er s a n d b e ne ficiar ies e nr o lled with such
httpE ld erly certain Medic a r e and Medicaid r equirements to a PACE provid ers would apply in the same manner
E) providers maxi mu m o f 1 0 (expand ed to 15 in OB RA90) as applies to M +C. For the M edicaid p rogr am,
Medicare and co mmunity-b ase d o r ga nizatio ns to p r o vid e health with r e sp ect to ser vices co ve r e d und er the S tate
se rv ices and long-term care services on a capitated b as i s t o plan (but no t und er Medicare) that were furnished
n ished b y non- frail e ld er ly p e r so ns a t r isk of being to beneficiary enrolled i n a PACE program, the
ra ct provid ers institutio na lized . B alanced B ud get Ac t 9 7 ( B B A9 7 ) PACE program wo uld no t b e required to p ay a
made PACE a p ermanent part of Medicare and a provider an amount gr eater tha n required und er
state option for the M edicaid p rogr am. the state p lan.
u i re I n stitu te o f No provisio n. Sectio n 224. W ithin 2 mo nths o f e nactme nt, the Sectio n 237. T he Secretary would request t hat
edicine (IOM) Secretary would be required to enter into an t h e I O M c o nd uc t a st ud y t o r e vi e w a nd e va l ua t e
on health ar r a nge me nt with I O M to e va luate lead ing health public and p rivate sector experiences in: 1 )
e performance care p erfo rmance measur es and options to establishing performance measur es and p ayment
asures imp lement p o licies tha t a lig n p er fo r mance with incentives und er the M edicare p rogr am, and 2)
payment und er the Medicare p rogr am. T he l i nki ng p e r f o r ma nc e t o p a yme nt . T he Se c r e t a r y
info rmatio n that would be catalogued, reviewed wo u l d a lso r eq ue st that no later tha n 1 8 mo nths



CRS-27
Provisions Current Law S. 1 H .R. 1
and evaluated by IOM would be sp ecified in after enactment, the Institute submit a report to
statute. A r e p ort would be due to the Secretary t he S e c r e t a r y a nd t he C o ngr e s s t ha t i nc l ud e d a
and the congr essional committees of j urisd iction review and e va luation o f incentives to encour age
wi t hi n 1 8 mo nt hs o f e na c t me nt . T h e r e wo ul d b e q uality p e r fo r ma n c e, as sp ecified in the statute.
$ 1 millio n a u t ho r ized to b e ap p r o p r iated to T he s t ud y wo ul d a l s o e xa mi ne ho w t h e se
c o nd uc t t he e va l ua t i o n a nd p r e p a r e t he r e p o r t . measur es and incentives might be applied in the
Med i car e M A, E FFS, and FFS p r o gr a ms. T he
r e p o r t wo uld includ e r eco mme nd atio ns r e ga r d ing
appropria t e performance measur es fo r use in
a s s e ssing and p aying fo r q uality and wo uld
id en t ify o p tio ns fo r up d a ting p er fo r mance
measur es.
th e work QIOs, formerly kno wn as P eer Review Sectio n 225. T he r esp o nsib ilities o f t h e QI Os No provisio n.
Medicare Organizations (PROs), are responsible for wo rking wo ul d b e e xp a nd e d t o i nc l ud e M + C a nd M A
iki/CRS-RL32039a lity with co nsumer s, p hysicians, ho sp itals, a nd o the r o r ga ni z a t i o ns, p r e sc r i p t i o n d r ug c a r d s p o nso r s ,
g/wovement care-givers to refine care d elivery . and el i g i b le entities b eginning J anuary 1, 2004.
s.organizations Quality imp r o vement a ssistance r e lating to
leakI O s) to in clu d ets C and D p r e s c r i p t i o n d r ug t he r a p y wo ul d b e p r o vi d e d t op r o vid er s, p r actitio ne r s, p r e scr ip tio n d r ug car d
://wiki s p o nso r s, e ligib le entities und er P a r t D, M+Cplans, and MA p lans beginning January 1, 2004.
http
Medicare b eneficiaries with ESRD canno t e nr oll in Sectio n 226. T he Secretary would be required to No provisio n.
onstratio n a managed care p lan. If they deve lop E SRD while exten d the d emo nstr a tio n p r o j ect fo r E SRD
oject fo r end- a member o f a plan they can continue thei r managed c a r e through December 31, 2007. T he
renal disease enrollment i n the plan. T he Deficit Reduction Act terms and cond itions in place during 2002 wo uld
SRD) managed of 1984 established a demo nstr atio n p roj ect fo r ap p ly. T he mo nthly cap itatio n r ate f o r enr o llees
e ESRD managed care, which was subsequently wo uld b e set based o n the reasonable medical and
extend ed b y the O mni b us B ud get Reco nc iliatio n d ir ect ad ministr a tive c o sts o f p r o v id ing the
Act of 1993. b e ne fits to p a r ticip ants.
d duplicative Medicare law currently preempts stat e law o r No provisio n. Sectio n 232. Fed e r a l stand ar d s estab lishe d b y
e regulations r e gulatio n fr o m a p p lying to M+C p lans to the e xtent this leg islatio n wo uld sup e r sed e a ny state law o r
they are inconsistent with fed e r a l r equirements r e gulatio n ( o the r tha n state l i c e n sur e laws and
imposed on M+C p lans, a nd sp ecifically, r elating to state laws r elating to p lan solve nc y) , with resp ect
b e ne fi t r e q ui r e me nt s, t he i nc l usi o n o r t r e a t me nt o f to MA plans o ffered b y M A o rganizations.


providers, and coverage d eterminations (including
r e l a t e d a p p e a l s a nd gr i e va nc e p r o c e sse s) .

CRS-28
Provisions Current Law S. 1 H .R. 1
end Municipal U nd e r t he Co nso l i d a t e d O mn i b us B ud ge t Sectio n 618. Demo ns t r atio n p r o j ects wo uld b e Sectio n 236. Sa me p r o vi s i o n b ut wo ul d e xt e nd
lth S e rvice Reconciliation Act of 1985, as amend ed, the extend ed thr o ugh December 31, 2006, fo r the d emonstration thr ough December 31, 2009.
onstratio n Municip a l H ealth Ser vice d emonstra tio n p r o j ect will b e ne ficiar ies who r e sid e in the c ity in which the
oject expire on December 31, 200 4 . T he p roj ect is a proj ect is operated.
multi-site d e mo nstratio n intend e d to imp ro ve access
to primary care services in und erserved ur ban areas
and to r educe the cost of health care. B B A97
authorized the Secretary to extend t he proj ect
through December 31, 2000, but o nly with resp ect
to persons who had r eceived at least o ne service for
the p erio d o f J anuary 1, 1996-August 7 , 1 9 9 7 ( t he
enactment date of BBA97). Sites that wanted the
d e mo nstr atio n p r o j ect extend ed we r e r e q uir ed to
sub mit p lans fo r the o r d er ly tr ansitio n o f p ar ticip ants
iki/CRS-RL32039to a no n-d emo nstr a tio n health car e d eliver y system.Sub s e q ue nt l e gi sl a t i o n e xt e nd e d t he p r o j e c t t hr o ugh
g/wDecember 31, 2004.
s.or
leakuate fee-fo r- No provisio n. Sectio n 232. T he Secretary would be required to No exp licit p r o visio n. H.R. 1 wo uld e s t a b lish
rv ic e r e view the r esults o f the d emo nstr a tio ns r e q uir ed c h r o ni c c a r e i mp r o ve me nt b e ne fi t s und e r fe e -fo r -
://wikid e rn iza tio n und er Sectio ns 442, 443, and 444 of this bill and service ( Sec t i o n 721) and und er MA and EFFS
httpojects report to Congress b y J anuary 1, 2008. [T hesedemo nstrations are the Medicare health care (Sectio n 722).


q uality d e mo nstr atio n, the M ed icar e c o mp lex
clinical care management p ayme nt demonstr ation,
a n d t he Medicare fee-fo r-s e r v i c e c a r e
coordinatio n d emonstratio n.] B eginning in 2009,
theSecretarywouldberequiredtoestablish
p r oj ects to p rovide Medicare b eneficiaries in
tr ad itio na l M ed icar e c o ver age o f e nha nced
b e ne fi t s o r se r vi c e s ( p r e ve nt i ve s e r vi c e s no t
already covered und er Medicare, c h r o nic care
coordination se r vi ces, d isease management
se r v i c es o r o the r b enefits d e ter mined b y the
Secretary) . T he purpose o f the proj ects would be
t o e v a l ua t e wh e t h e r t he e nha nc e d b e ne fi t s o r
ser vices imp r o ved the q ua lity o f car e, imp r o ved

CRS-29
Provisions Current Law S. 1 H .R. 1
h e a lth car e d eliver y systems, a nd r e d uce d
expend itures und er the M e d icare p rogr am. T he
proj ects would be co nd uc ted in regio ns
co mp ar ab le to the r egio ns d e signa te d a shighly
co mp etitive.” T he Secr etar y wo uld b e r e q uir ed to
sub mi t a nnua l r e p o r t s t o Co ngr e s s a nd t he G AO
beginning no later than April 1, 2010. T he GAO
wo ul d b e r e q ui r e d t o r e p o r t b y J a nua r y 1 , 2 0 1 1
and b iennially ther eafter f o r as lo ng as the
proj ects were b eing cond ucted.
b lish MA No provisio n. Section 241. T his p r o visio n wo uld estab lish a n No provisio n.
o llment goal MA enrollment goal o f at least 15% of Medicare
beneficiaries b y J anuary 1, 2010. If the goal were
no t met, a bipartisan commi s s ion wo uld b e
iki/CRS-RL32039 established as p rovided for in Sectio n 242.
g/wtablish national No provisio n. Sectio n 242. I f the e nr o llment go a l d escr ib ed in No provisio n.


s.ortisan Sectio n 2 4 1 we r e no t met, the Natio na l B ip ar tisan
leakmission on Co mmission on M e d icare Reform would be
d i c a re re fo rm estab lishe d . T he Co mmiss io n wo uld r e view and
://wiki analyz e the lo ng-ter m fina nc ial c o nd itio n o f the
http Medi care p rogr am; identify p roblems that
thr eaten the financial integr ity o f the M ed icar e
T r ust Fund s; and a na lyze p o tential so lutio ns to the
id e ntified p r o b l ems. T he Co mmi ssio n wo ul d b e
r e q ui r e d t o ma ke r e c o mme nd a t i o ns, i nc l ud i ng
i s sues facing Medicare, such as so lvency,
fi na nc i ng o f t he M e d i c a r e T r ust Fund s, a nd
b e ne fi t s . T he Co mmi ssi o n wo ul d h a ve 1 7
memb ers fo ur appointed by the P resident, 1 2
appointed by Co ngr essional l eaders, and o ne
appointed j o intly by the P r e si d e nt a nd
Co ngr essional leaders t o s erve as Chairperso n.
TheCommissionwouldberequiredtosubmita
r e p o r t a nd an imp lementatio n b ill to the P r e sid e nt
and Congr ess no later than Ap ril 1 , 2014.

CRS-30
Provisions Current Law S. 1 H .R. 1
b lish No provisio n. Sectio n 243. Congressional leaders would be No provisio n.
essional r e q uir ed to intr o d uce th e imp leme ntatio n b ill
n sid era tio n o f r equir ed by Sectio n 242. Hearings wo ul d b e
form proposals r e q uir ed b y ap p r o p r iate co mmittee s as we ll as
floor consideration.
horize No provisio n. Sectio n 244. Ap p r o p r i a t i o ns wo ul d b e a ut ho r i z e d No provisio n.
opriations fo r such sums as necessary to carry out the
p r o visio ns r e ga r d ing the Natio na l B ip ar tisan
Co mmission on Medicare Reform for fiscal years
2012 through 2013.
Al ternative P ayment or Competition R eforms
iki/CRS-RL32039
g/wions Current Law S. 1 H .R. 1
s.ore ra l No provisio n. Section 231. 1851 (i)]. Beginning in 2008, the Sectio n 241. B eginning in 2010, comp etitive
leak Secr etar y wo uld estab lish a l imited p r o gr am in bidding wo uld b e i nt roduced fo r d esignated
highly c o mp e titive a r eas, in which p a yments to h i g h ly c o mp e titive a r eas o r r e gio ns. All
://wiki plans is b ased on bids in place of benchmarks. Med icar e b en e f iciar ies r e sid ing in co mp etitive
http ar eas, i nclud i n g t h o se r emaining in FFS, co uld
have their P art B premium p ayment adj usted,
either up or down.
ib le a rea s Und e r e xisting minimu m e n r o llment r eq uir e me nts, Sectio n 231. In 2008, th e S e c r etary would be Sectio n 241. Beginning in 2010, this provisio n
an M+C o rganization must p rovide health care r e q uir ed to d e signa te a limited numb e r , b ut no t less wo ul d p r o vi d e fo r a ne w p a yme n t i n a
benefits to at least 5 ,000 individuals; a p rovider- than 1, of preferred p rovider r egions ash ighlyc o mp e titive E FFS r e gi o n a n d in a
sp o nso r e d o r ganiz a tio n ( P SO) must p r o vid e health co mp e titive.” Fo r each sub seq ue nt year, thec o mp e t itive M A a r ea” ( CMA) d efined as a
care b enefits to 1,500 individuals. M+C Secr etar y c o uld d e signa te a limited numb e r o f region (or in the c a s e o f a MA, an area) that,
o r ga nizatio ns that p r imar ily ser v e ind ivid ua ls ad d itio na l r egio ns as highly c o mp e titive. during open season, o ffered at least 2 EFFS
residing outside o f urban areas must provide health plans ( or in the case o f a C M A, at least 2 MA
care b enefits to 1,500 individuals; such a P SO must I n d e t e r mi ni ng whi c h r e gi o ns t o d e s i gna t e a s hi ghl y plans) by different orga nizations, each meeting
provid e b enefits to 500 individuals. co mp etitive, the Secr etar y wo uld co nsid er whethe r : the c ur r e nt law mi n i mu m e n r o llment
( 1 ) the d e signa tio n wo uld enha nc e p ar ticip atio n o f requirements fo r a plan, as o f March of the
PPO plans in the region, (2) th r e e b i d s would be p r evio us year . Ad d itio na lly, t h e r e wo uld b e a
likely, ( 3 ) M A e ligib le ind iv i d uals wo uld elect minimum p ercentage enrollment r equirement fo r
P P O plans if the area was d e s i gnated, and EFFS eligib le ind ivid uals ( o r MA eligib le



CRS-31
ions Current Law S. 1 H .R. 1
( 4 ) d esigna tio n wo uld p e r mit co mp li a n c e with the ind ivid uals) in the r egio n ( o r ar ea) the lesso r
fund ing limitatio n ( $ 6 b illio n i n a d d itio n to wha t of 20% enrollment o r the percentage enrolled
wo uld ha ve b een exp e nd ed und er this T itle if this fo r E FFS and M A p lans na tio nwid e, as o f Mar c h
subsectio n had no t b een enacted, for 2009 through of the p revious year. For an EFFS region (or for
2013). Beginning in 2014, there would be no a M A a r ea) that wa s c o mp e titive in the p r evio us
ad d itio na l fund ing, b e yo nd the to tal amo unt that year , the Ad ministr a to r c o uld co ntinue to tr eat
wo uld have b een expend ed if this subsection o f the the r egio n o r a r e a a s meeting the r e q uir ement fo r
bill were no t enacted. b e ing c o mp e titive if the r e wa s o nly a d e minimis
r e d uctio n.
T he Secretary would be required to give s p e cial
consideration to r egio ns where no b ids had been
sub mitted in the p r evio us year .
ark rate No provisio n. Sectio n 231. I f a n a r e a wa s d e s i gna t e d a s hi ghl y Sectio n 241(a)(2) . For E FFS regions, the
c o m p e titive co mp etitive, b e nc hmar ks wo uld no t ap p ly. I nstead , co mp etitive E FFS no n-d r ug mo nthly b enchma r k
iki/CRS-RL32039gions a p lan wo uld b id the to tal p ayme nt it wa s willing to a mo unt wo ul d b e e q ua l t o t he s um o t he EFFS
g/w accept ( no t taking into account risk adj ustment) for component and the FFS component.
s.or p r o vid ing r eq uir e d P ar ts A a nd B b ene fits to p lan
leak enrollees residing in the s e r vice area. T heS e c r etar y wo uld sub stitute the seco nd lo we st b id The EFFS component wo uld b e b ased on theweighted average o f the EFFS plan bids,
://wiki fo r the be nc hmark. If there were fewer than threeb id s, the Secr etar y wo uld b e r e q uir ed to sub stitute multip lied b y o ne minus the FFS ma r ketpercentage. ( T he weighted average o f p lan b ids
http t h e l o we s t b i d fo r t he b e nc hma r k. wo ul d e q ua l t he una d j ust e d E FFS st a t ut o r y no n-
d r ug mo nthly b id multip lied b y p er centage
enr o llment o f E FFS enr o llees in the p lan d ur ing
M a r c h o f t he p r e vi o us ye a r . T he o ne mi nus t he
FFS market share component o f this calculation
wo uld b e the proportio n o f EFFS eligib le
individual s enrolled in an EFFS or MA plan in
the r egio n, o r na tio nwid e, if gr eater .)
The FFS component wo uld b e b ased o n the
adj usted average p er capita c o s t (AAP CC)
multip lied b y the FFS ma r ket shar e p er centage .
( T he AAP CC wo ul d i nc l ud e se r vi c e s c o ve r e d
und er Parts A and B of Medicare for individuals
entitled to P ar t A, e nr o lled in P ar t B , who we r e
no t e nr o l l e d i n a n E FFS o r M A p l a n. T hi s



CRS-32
ions Current Law S. 1 H .R. 1
a mo unt wo ul d b e a d j ust e d t o : ( 1 ) e xc l ud e d i r e c t
gr ad ua te me d ical ed ucatio n c o sts, ( 2 ) fully take
into account demo gr aphic a nd health status risk
factors to r e f lect average costs fo r a typical
beneficiary r esiding in t he region, and (3)
i nc l ud e t he V A/ D O D a d j u st me nt . T he FFS
market percentage wo uld equal the p ercent o f
beneficiaries not enrolled in M A o r E FFS plans
in the r egio n, o r na tio nwid e if highe r . )
ark rate No provision. N o p r o v i s i o n, because a n a l t e r n a t i v e p a yme nt Sectio n 241(b)(1). F o r CM As , t he CM A n o n -
c o m p e titive syste m is use d fo r t he se p l a ns. drug benchmark amo unt wo uld b e equal to the
eas sum o f t he M A component a nd the FFS
component.
iki/CRS-RL32039 The M A component wo uld b e b ased o n the
g/w weighted average o f the MA p lan bids fo r the
s.or ar ea a nd year multip lied b y o ne minus the FFS
leak ma rket percentage. ( T he weighted average o fplan bids wo uld equal the una d j usted MA
://wiki statuto r y n o n-d r ug mo nthly b id multip lied b yp e r centage enr o llment o f M A e nr o llees in the
http plan during March o f the pre v i o us year. T he
one minus the FFS market share component o f
this calculatio n would be the p roportio n o f MA
eligib le ind ivid uals e nr o lled in a n E FFS o r MA
plan, o r nationwide, if gr eater.)
The FFS comp o n ent wo uld b e b ased on the
AAP CC ( a d j u s t e d i n t he sa me ma nne r a s t he
AAP CC is a d j usted fo r t he E FFS FFS
co mp o nent) , multip lied b y the FFS ma r ket shar e
percentage. T he FFS market percentage wo uld
eq ua l the p e r cent o f M A e ligib le ind i v id uals
who were not enrolled in M A o r E FFS plans i n
the r egio n, o r na tio nwid e if highe r . )



CRS-33
ions Current Law S. 1 H .R. 1
e ficia ry M+C enr ollees share in any p r o j e c ted cost savings N o sp e c i fi c p r o vi si o n, s o t ha t c ur r e nt l a w Sectio n 241. Fo r p lans with a b i d b e l o w the
emiu ms and between Medicare’s p er capita payment to a plan c a lculatio n o f p r e miums ( o r r e b a tes) wo u l d b e nc hmar k, the b eneficiar y p r emium wo uld b e
bates and what it would cost the p lan to p rovide Medicare co ntinue to r e ma in in effect. zero. Simi l ar to the premium r ebate und er the
bene fits to its comme rcial e nr ollees. T o accomp lish MA o r EFFS p r o gr a ms fo r n o n-c o mp e titive
this, p lans must p r o vid e e ither r e d uced co st-sha r ing areas/regions, e nr ollees in comp etitive
or additio nal benefits to their Medicare enrollees areas/regions wo uld r eceive a r ebate equal to
that ar e valued at 100% of the d ifference b etween 7 5 % o f t he a ve r a ge p e r c a p i t a mo nt hl y s a vi ngs
the p roj ected cost of providing Medicare-covered if the p lan b id we r e b e lo w the b e nc hmar k. T he
services and the expected revenue fo r M e d icare r e ma ining 2 5 % o f the a ve r a ge p e r cap ita savings
enrollees. Additionally, b eginning in 2003, plans woul d b e r etained b y the federal government.
ma y a lso r educe the Medicare P art B premium. Fo r p l a ns wi t h b i d s a b o ve t he b e nc hma r k, t he
P lans can cho o se which ad d itio na l b enefits to o ffe r , premium would be equal to the full amount t h e
ho we ve r, the total cost of these b enefits must at least bid exceeded the b enchmark.
e q ual thesavings from Medicare-covered
iki/CRS-RL32039ser vices. P lans ma y a lso p lace the a d d itio na l fund sin a stab i lizatio n fund o r r e tur n fund s to the A b eneficiar y r e sid ing in a c o mp e titive a r e a o rregion who was covered und er FFS Medicare,
g/wT r easur y. could also have an ad j us tment to their P art B
s.or premium, either as an inc r e a se o r a decrease.
leak Fo r c o mp e titive a r eas o r r e gi o ns, if the FFS
://wiki area/region-specific non-drug amount fo r themo n t h did not exceed the b enchmark fo r the
http co mp etitive a r ea/r e gio n, the P a r t B p r e mium
wo uld b e reduc e d by 75% of the d ifference. If
the FFS area/region sp ecific non-d rug amo unt
fo r t he mo nt h exceeded the b enchmark fo r the
competitive a r ea/r egion, the Medicare
beneficiarys M edicare P art B premium would
increase b y the full amount of the d ifference.
e-in of No provisio n. No provisio n. Sectio n 241. T he c o mp e titive p r o gr ams wo uld
mp etitive be phased-in so that if an area ( or region) had
ogram no t b een d e signa t e d a s c o mp e titive fo r each o f
the last 4 years, the b enchmark fo r p lans wo uld
be calculated b ased on a p hased-i n benchmark.
Dur ing the fir st year o f the p ha se-in , the
b e nc hmar k wo uld b e o ne-fifth c o mp e titive
b e nc hmar k a nd fo ur -fifth n o n-c o mp e titive,
b e nc hmar k, incr easing the co mp etitive sha r e b y



CRS-34
ions Current Law S. 1 H .R. 1
anothe r o ne -fifth each year until the b enchma rk
was 100% comp etitive.
P art B p remium adj ustment s for Medicare
bene ficiarie s c overed und er FFS wo uld a lso b e
phased-in similarly o ver a 5-year period.
e r No provision. No provision. T he Ad mi ni s t r a t o r wo ul d t r a nsmi t t he na me ,
quirements So c i a l S e c ur i t y numb e r a nd P a r t B p r e mi um
ad j ustme nt to t h e Co mmissio ne r o f So c ial
Security at the b eginning of each ye a r a n d
periodically throughout the year, effective
January 1, 2010.
ts No provisio n. Sectio n 231. T he Secretary would b e r e q u ired to No provisio n.


report to Congr ess and the Comptroller General no
iki/CRS-RL32039 later than April 1 o f each year, b eginning 2010.
g/w T he r ep o r t wo uld includ e a d e s c r ip tio n o f ( and
s.or certification o f r easonableness and accuracy by the
leak Chi e f Ac t ua r y f o r C M S ) o f t he t o t a l a mo unt
exp e nd ed und er this p r o visio n c o mp a r e d with what
://wiki otherwise would ha ve been expend ed, the
http p r o j ectio n o f the to tal a mo unt that will b e exp e nd ed
comp ared to the total that wo uld o ther wise be
exp e nd ed , the amo unts r emaining o f the $ 6 b illio n
limitatio n, and the step s the Secr etar y wo uld take to
ensure expe nd i t ures would no t exceed the amo unt
sp ecified.
TheGAOwouldberequiredtosubmit tothe
Se c r e t a r y a nd t he C o ngr e s s a r e p o r t o n t he
d e signa tio n o f highly c o mp e titive r e g io ns no later
than January 1, 2011 and b iennially thereafter. T he
r e p o r t wo uld b e r e q uir ed to includ e a n e va luatio n
of: the quality of care provided to beneficiaries
enr o lled in a n M A p lan in a h ighly c o mp e titive
r e gio n; the satisfactio n o f b en e f iciar ies with
b e ne fits und er the p lan; the c o sts to the M ed icar e

CRS-35
ions Current Law S. 1 H .R. 1
program for payments ma d e to the p lans; any
improvement in the delivery o f health care services
und er a p lan; and o ther info r matio n.
T he Secretary would be r e quired to report to
Co ngr e s s i f s he o r he i nt e nd s t o d e s i gna t e o ne o r
mo re regions as highly c omp e titive in 2014 or
subsequent years. T he report would be required by
Ap r i l 1 o f t he ye a r p r i o r t o t he d e si gna t i o n, a nd
wo uld inc lud e the step s the Secr etar y wo uld take to
ensure that fund ing wo u l d no t e xceed the a mo unt
sp ecified and would contain a certification from the
Chief Act ua r y of CMS that the steps d escribed
wo ul d me e t st a t ut o r y r e q ui r e me nt s.


iki/CRS-RL32039
g/w
s.or
leak
://wiki
http