INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

SEC. 911. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.(a) Consolidation and Flexibility in Medicare Administration.—(1) In general.—Title XVIII is amended by inserting after section 1874 the following new section:“contracts with medicare administrative contractors“Sec. 1874A. (a) Authority.—“(1) Authority to enter into contracts.—The Secretary may enter into contracts with any eligible entity to serve as a medicare administrative contractor with respect to the performance of any or all of the functions described in paragraph (4) or parts of those functions (or, to the extent provided in a contract, to secure performance thereof by other entities). “(2) Eligibility of entities.—An entity is eligible to enter into a contract with respect to the performance of a particular function described in paragraph (4) only if—“(A) the entity has demonstrated capability to carry out such function;“(B) the entity complies with such conflict of interest standards as are generally applicable to Federal acquisition and procurement;“(C) the entity has sufficient assets to financially support the performance of such function; and“(D) the entity meets such other requirements as the Secretary may impose.“(3) Medicare administrative contractor defined.—For purposes of this title and title XI—“(A) In general.—The term ‘medicare administrative contractor’ means an agency, organization, or other person with a contract under this section.“(B) Appropriate medicare administrative contractor.—With respect to the performance of a particular function in relation to an individual entitled to benefits under part A or enrolled under part B, or both, a specific provider of services or supplier (or class of such providers of services or suppliers), the ‘appropriate’ medicare administrative contractor is the medicare administrative contractor that has a contract under this section with respect to the performance of that function in relation to that individual, provider of services or supplier or class of provider of services or supplier.“(4) Functions described.—The functions referred to in paragraphs (1) and (2) are payment functions (including the function of developing local coverage determinations, as defined in section 1869(f)(2)(B)), provider services functions, and functions relating to services furnished to individuals entitled to 117 STAT. 2379 benefits under part A or enrolled under part B, or both, as follows:“(A) Determination of payment amounts.—Determining (subject to the provisions of section 1878 and to such review by the Secretary as may be provided for by the contracts) the amount of the payments required pursuant to this title to be made to providers of services, suppliers and individuals.“(B) Making payments.—Making payments described in subparagraph (A) (including receipt, disbursement, and accounting for funds in making such payments).“(C) Beneficiary education and assistance.—Providing education and outreach to individuals entitled to benefits under part A or enrolled under part B, or both, and providing assistance to those individuals with specific issues, concerns, or problems.“(D) Provider consultative services.—Providing consultative services to institutions, agencies, and other persons to enable them to establish and maintain fiscal records necessary for purposes of this title and otherwise to qualify as providers of services or suppliers.“(E) Communication with providers.—Communicating to providers of services and suppliers any information or instructions furnished to the medicare administrative contractor by the Secretary, and facilitating communication between such providers and suppliers and the Secretary.“(F) Provider education and technical assistance.—Performing the functions relating to provider education, training, and technical assistance.“(G) Additional functions.—Performing such other functions, including (subject to paragraph (5)) functions under the Medicare Integrity Program under section 1893, as are necessary to carry out the purposes of this title.“(5) Relationship to mip contracts.—“(A) Nonduplication of duties.—In entering into contracts under this section, the Secretary shall assure that functions of medicare administrative contractors in carrying out activities under parts A and B do not duplicate activities carried out under a contract entered into under the Medicare Integrity Program under section 1893. The previous sentence shall not apply with respect to the activity described in section 1893(b)(5) (relating to prior authorization of certain items of durable medical equipment under section 1834(a)(15)).“(B) Construction.—An entity shall not be treated as a medicare administrative contractor merely by reason of having entered into a contract with the Secretary under section 1893.“(6) Application of federal acquisition regulation.—Except to the extent inconsistent with a specific requirement of this section, the Federal Acquisition Regulation applies to contracts under this section.“(b) Contracting Requirements.—“(1) Use of competitive procedures.—117 STAT. 2380“(A) In general.—Except as provided in laws with general applicability to Federal acquisition and procurement or in subparagraph (B), the Secretary shall use competitive procedures when entering into contracts with medicare administrative contractors under this section, taking into account performance quality as well as price and other factors.“(B) Renewal of contracts.—The Secretary may renew a contract with a medicare administrative contractor under this section from term to term without regard to section 5 of title 41, United States Code, or any other provision of law requiring competition, if the medicare administrative contractor has met or exceeded the performance requirements applicable with respect to the contract and contractor, except that the Secretary shall provide for the application of competitive procedures under such a contract not less frequently than once every 5 years.“(C) Transfer of functions.—The Secretary may transfer functions among medicare administrative contractors consistent with the provisions of this paragraph. The Secretary shall ensure that performance quality is considered in such transfers. The Secretary shall provide public notice (whether in the Federal Register or otherwise) of any such transfer (including a description of the functions so transferred, a description of the providers of services and suppliers affected by such transfer, and contact information for the contractors involved).“(D) Incentives for quality.—The Secretary shall provide incentives for medicare administrative contractors to provide quality service and to promote efficiency.“(2) Compliance with requirements.—No contract under this section shall be entered into with any medicare administrative contractor unless the Secretary finds that such medicare administrative contractor will perform its obligations under the contract efficiently and effectively and will meet such requirements as to financial responsibility, legal authority, quality of services provided, and other matters as the Secretary finds pertinent. “(3) Performance requirements.—“(A) Development of specific performance requirements.—“(i) In general.—The Secretary shall develop contract performance requirements to carry out the specific requirements applicable under this title to a function described in subsection (a)(4) and shall develop standards for measuring the extent to which a contractor has met such requirements. “(ii) Consultation.—In developing such performance requirements and standards for measurement, the Secretary shall consult with providers of services, organizations representative of beneficiaries under this title, and organizations and agencies performing functions necessary to carry out the purposes of this section with respect to such performance requirements. “(iii) Publication of standards.—The Secretary shall make such performance requirements and measurement standards available to the public.117 STAT. 2381“(B) Considerations.—The Secretary shall include, as one of the standards developed under subparagraph (A), provider and beneficiary satisfaction levels. “(C) Inclusion in contracts.—All contractor performance requirements shall be set forth in the contract between the Secretary and the appropriate medicare administrative contractor. Such performance requirements—“(i) shall reflect the performance requirements published under subparagraph (A), but may include additional performance requirements;“(ii) shall be used for evaluating contractor performance under the contract; and“(iii) shall be consistent with the written statement of work provided under the contract.“(4) Information requirements.—The Secretary shall not enter into a contract with a medicare administrative contractor under this section unless the contractor agrees—“(A) to furnish to the Secretary such timely information and reports as the Secretary may find necessary in performing his functions under this title; and“(B) to maintain such records and afford such access thereto as the Secretary finds necessary to assure the correctness and verification of the information and reports under subparagraph (A) and otherwise to carry out the purposes of this title.“(5) Surety bond.—A contract with a medicare administrative contractor under this section may require the medicare administrative contractor, and any of its officers or employees certifying payments or disbursing funds pursuant to the contract, or otherwise participating in carrying out the contract, to give surety bond to the United States in such amount as the Secretary may deem appropriate.“(c) Terms and Conditions.—“(1) In general.—A contract with any medicare administrative contractor under this section may contain such terms and conditions as the Secretary finds necessary or appropriate and may provide for advances of funds to the medicare administrative contractor for the making of payments by it under subsection (a)(4)(B). “(2) Prohibition on mandates for certain data collection.—The Secretary may not require, as a condition of entering into, or renewing, a contract under this section, that the medicare administrative contractor match data obtained other than in its activities under this title with data used in the administration of this title for purposes of identifying situations in which the provisions of section 1862(b) may apply.“(d) Limitation on Liability of Medicare Administrative Contractors and Certain Officers.—“(1) Certifying officer.—No individual designated pursuant to a contract under this section as a certifying officer shall, in the absence of the reckless disregard of the individual’s obligations or the intent by that individual to defraud the United States, be liable with respect to any payments certified by the individual under this section.“(2) Disbursing officer.—No disbursing officer shall, in the absence of the reckless disregard of the officer’s obligations or the intent by that officer to defraud the United States, 117 STAT. 2382 be liable with respect to any payment by such officer under this section if it was based upon an authorization (which meets the applicable requirements for such internal controls established by the Comptroller General of the United States) of a certifying officer designated as provided in paragraph (1) of this subsection.“(3) Liability of medicare administrative contractor.—“(A) In general.—No medicare administrative contractor shall be liable to the United States for a payment by a certifying or disbursing officer unless, in connection with such payment, the medicare administrative contractor acted with reckless disregard of its obligations under its medicare administrative contract or with intent to defraud the United States.“(B) Relationship to false claims act.—Nothing in this subsection shall be construed to limit liability for conduct that would constitute a violation of sections 3729 through 3731 of title 31, United States Code.“(4) Indemnification by secretary.—“(A) In general.—Subject to subparagraphs (B) and (D), in the case of a medicare administrative contractor (or a person who is a director, officer, or employee of such a contractor or who is engaged by the contractor to participate directly in the claims administration process) who is made a party to any judicial or administrative proceeding arising from or relating directly to the claims administration process under this title, the Secretary may, to the extent the Secretary determines to be appropriate and as specified in the contract with the contractor, indemnify the contractor and such persons.“(B) Conditions.—The Secretary may not provide indemnification under subparagraph (A) insofar as the liability for such costs arises directly from conduct that is determined by the judicial proceeding or by the Secretary to be criminal in nature, fraudulent, or grossly negligent. If indemnification is provided by the Secretary with respect to a contractor before a determination that such costs arose directly from such conduct, the contractor shall reimburse the Secretary for costs of indemnification. “(C) Scope of indemnification.—Indemnification by the Secretary under subparagraph (A) may include payment of judgments, settlements (subject to subparagraph (D)), awards, and costs (including reasonable legal expenses).“(D) Written approval for settlements or compromises.—A contractor or other person described in subparagraph (A) may not propose to negotiate a settlement or compromise of a proceeding described in such subparagraph without the prior written approval of the Secretary to negotiate such settlement or compromise. Any indemnification under subparagraph (A) with respect to amounts paid under a settlement or compromise of a proceeding described in such subparagraph are conditioned upon prior written approval by the Secretary of the final settlement or compromise.“(E) Construction.—Nothing in this paragraph shall be construed—117 STAT. 2383“(i) to change any common law immunity that may be available to a medicare administrative contractor or person described in subparagraph (A); or“(ii) to permit the payment of costs not otherwise allowable, reasonable, or allocable under the Federal Acquisition Regulation.” .(2) Consideration of incorporation of current law standards.—In developing contract performance requirements under section 1874A(b) of the Social Security Act, as inserted by paragraph (1), the Secretary shall consider inclusion of the performance standards described in sections 1816(f)(2) of such Act (relating to timely processing of reconsiderations and applications for exemptions) and section 1842(b)(2)(B) of such Act (relating to timely review of determinations and fair hearing requests), as such sections were in effect before the date of the enactment of this Act.(b) Conforming Amendments to Section 1816 (Relating to Fiscal Intermediaries).—Section 1816 (42 U.S.C. 1395h) is amended as follows:(1) The heading is amended to read as follows:“provisions relating to the administration of part a”.(2) Subsection (a) is amended to read as follows:“(a) The administration of this part shall be conducted through contracts with medicare administrative contractors under section 1874A.”.(3) Subsection (b) is repealed.(4) Subsection (c) is amended—(A) by striking paragraph (1); and(B) in each of paragraphs (2)(A) and (3)(A), by striking “agreement under this section” and inserting “contract under section 1874A that provides for making payments under this part”.(5) Subsections (d) through (i) are repealed.(6) Subsections (j) and (k) are each amended—(A) by striking “An agreement with an agency or organization under this section” and inserting “A contract with a medicare administrative contractor under section 1874A with respect to the administration of this part”; and(B) by striking “such agency or organization” and inserting “such medicare administrative contractor” each place it appears.(7) Subsection (l) is repealed.(c) Conforming Amendments to Section 1842 (Relating to Carriers).—Section 1842 (42 U.S.C. 1395u) is amended as follows:(1) The heading is amended to read as follows:“provisions relating to the administration of part b”.(2) Subsection (a) is amended to read as follows:“(a) The administration of this part shall be conducted through contracts with medicare administrative contractors under section 1874A.”.(3) Subsection (b) is amended—(A) by striking paragraph (1);(B) in paragraph (2)—117 STAT. 2384(i) by striking subparagraphs (A) and (B); (ii) in subparagraph (C), by striking “carriers” and inserting “medicare administrative contractors”; and(iii) by striking subparagraphs (D) and (E);(C) in paragraph (3)—(i) in the matter before subparagraph (A), by striking “Each such contract shall provide that the carrier” and inserting “The Secretary”;(ii) by striking “will” the first place it appears in each of subparagraphs (A), (B), (F), (G), (H), and (L) and inserting “shall”;(iii) in subparagraph (B), in the matter before clause (i), by striking “to the policyholders and subscribers of the carrier” and inserting “to the policyholders and subscribers of the medicare administrative contractor”;(iv) by striking subparagraphs (C), (D), and (E);(v) in subparagraph (H)—(I) by striking “if it makes determinations or payments with respect to physicians’ services,” in the matter preceding clause (i); and(II) by striking “carrier” and inserting “medicare administrative contractor” in clause (i); (vi) by striking subparagraph (I);(vii) in subparagraph (L), by striking the semicolon and inserting a period;(viii) in the first sentence, after subparagraph (L), by striking “and shall contain” and all that follows through the period; and(ix) in the seventh sentence, by inserting “medicare administrative contractor,” after “carrier,”; (D) by striking paragraph (5);(E) in paragraph (6)(D)(iv), by striking “carrier” and inserting “medicare administrative contractor”; and(F) in paragraph (7), by striking “the carrier” and inserting “the Secretary” each place it appears.(4) Subsection (c) is amended—(A) by striking paragraph (1);(B) in paragraph (2)(A), by striking “contract under this section which provides for the disbursement of funds, as described in subsection (a)(1)(B),” and inserting “contract under section 1874A that provides for making payments under this part”;(C) in paragraph (3)(A), by striking “subsection (a)(1)(B)” and inserting “section 1874A(a)(3)(B)”;(D) in paragraph (4), in the matter preceding subparagraph (A), by striking “carrier” and inserting “medicare administrative contractor”; and(E) by striking paragraphs (5) and (6).(5) Subsections (d), (e), and (f) are repealed.(6) Subsection (g) is amended by striking “carrier or carriers” and inserting “medicare administrative contractor or contractors”. (7) Subsection (h) is amended—(A) in paragraph (2)—117 STAT. 2385(i) by striking “Each carrier having an agreement with the Secretary under subsection (a)” and inserting “The Secretary”; and(ii) by striking “Each such carrier” and inserting “The Secretary”;(B) in paragraph (3)(A)—(i) by striking “a carrier having an agreement with the Secretary under subsection (a)” and inserting “medicare administrative contractor having a contract under section 1874A that provides for making payments under this part”; and(ii) by striking “such carrier” and inserting “such contractor”;(C) in paragraph (3)(B)—(i) by striking “a carrier” and inserting “a medicare administrative contractor” each place it appears; and(ii) by striking “the carrier” and inserting “the contractor” each place it appears; and(D) in paragraphs (5)(A) and (5)(B)(iii), by striking “carriers” and inserting “medicare administrative contractors” each place it appears.(8) Subsection (l) is amended—(A) in paragraph (1)(A)(iii), by striking “carrier” and inserting “medicare administrative contractor”; and(B) in paragraph (2), by striking “carrier” and inserting “medicare administrative contractor”.(9) Subsection (p)(3)(A) is amended by striking “carrier” and inserting “medicare administrative contractor”.(10) Subsection (q)(1)(A) is amended by striking “carrier”.(d) Effective Date; Transition Rule.—(1) Effective date.—(A) In general.—Except as otherwise provided in this subsection, the amendments made by this section shall take effect on October 1, 2005, and the Secretary is authorized to take such steps before such date as may be necessary to implement such amendments on a timely basis. (B) Construction for current contracts.—Such amendments shall not apply to contracts in effect before the date specified under subparagraph (A) that continue to retain the terms and conditions in effect on such date (except as otherwise provided under this Act, other than under this section) until such date as the contract is let out for competitive bidding under such amendments.(C) Deadline for competitive bidding.—The Secretary shall provide for the letting by competitive bidding of all contracts for functions of medicare administrative contractors for annual contract periods that begin on or after October 1, 2011.(2) General transition rules.—(A) Authority to continue to enter into new agreements and contracts and waiver of provider nomination provisions during transition.—Prior to October 1, 2005, the Secretary may, consistent with subparagraph (B), continue to enter into agreements under section 1816 and contracts under section 1842 of the Social Security Act (42 U.S.C. 1395h, 1395u). The Secretary may enter into new agreements under section 1816 prior to 117 STAT. 2386 October 1, 2005, without regard to any of the provider nomination provisions of such section.(B) Appropriate transition.—The Secretary shall take such steps as are necessary to provide for an appropriate transition from agreements under section 1816 and contracts under section 1842 of the Social Security Act (42 U.S.C. 1395h, 1395u) to contracts under section 1874A, as added by subsection (a)(1). (3) Authorizing continuation of mip functions under current contracts and agreements and under transition contracts.—Notwithstanding the amendments made by this section, the provisions contained in the exception in section 1893(d)(2) of the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall continue to apply during the period that begins on the date of the enactment of this Act and ends on October 1, 2011, and any reference in such provisions to an agreement or contract shall be deemed to include a contract under section 1874A of such Act, as inserted by subsection (a)(1), that continues the activities referred to in such provisions. (e) References.—On and after the effective date provided under subsection (d)(1), any reference to a fiscal intermediary or carrier under title XI or XVIII of the Social Security Act (or any regulation, manual instruction, interpretative rule, statement of policy, or guideline issued to carry out such titles) shall be deemed a reference to a medicare administrative contractor (as provided under section 1874A of the Social Security Act).(f) Secretarial Submission of Legislative Proposal.—Not later than 6 months after the date of the enactment of this Act, the Secretary shall submit to the appropriate committees of Congress a legislative proposal providing for such technical and conforming amendments in the law as are required by the provisions of this section.(g) Reports on Implementation.—(1) Plan for implementation.—By not later than October 1, 2004, the Secretary shall submit a report to Congress and the Comptroller General of the United States that describes the plan for implementation of the amendments made by this section. The Comptroller General shall conduct an evaluation of such plan and shall submit to Congress, not later than 6 months after the date the report is received, a report on such evaluation and shall include in such report such recommendations as the Comptroller General deems appropriate.(2) Status of implementation.—The Secretary shall submit a report to Congress not later than October 1, 2008, that describes the status of implementation of such amendments and that includes a description of the following:(A) The number of contracts that have been competitively bid as of such date.(B) The distribution of functions among contracts and contractors.(C) A timeline for complete transition to full competition.(D) A detailed description of how the Secretary has modified oversight and management of medicare contractors to adapt to full competition.117 STAT. 2387