SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Home Health Care 
Prospective Payment Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Amendments to the Social Security Act.
Sec. 3. Recapturing savings resulting from temporary freeze on payment 
                            increases for home health services.
Sec. 4. Initial prospective payment for home health services.
Sec. 5. Permanent prospective payment for home health services.
Sec. 6. Payment based on location where home health service is 
                            furnished.
Sec. 7. Elimination of periodic interim payments for home health 
                            agencies.
Sec. 8. Establishment of home health benefit under Part A and transfer 
                            of other home health services to Part B.

SEC. 2. AMENDMENTS TO THE SOCIAL SECURITY ACT.

    Whenever in this title an amendment is expressed in terms of an 
amendment to or repeal of section or other provision, the reference 
shall be considered to be made to that section or other provision of 
the Social Security Act.

SEC. 3. RECAPTURING SAVINGS RESULTING FROM TEMPORARY FREEZE ON PAYMENT 
              INCREASES FOR HOME HEALTH SERVICES.

    (a) Basing Updates to per Visit Cost Limits on Limits for Fiscal 
Year 1993.--Section 1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended 
by adding after subclause (iii) the following:
                            ``(iv) In establishing limits under this 
                        subparagraph for cost reporting periods 
                        beginning after September 30, 1997, the 
                        Secretary shall not take into account any 
                        changes in the home health market basket, as 
                        determined by the Secretary, with respect to 
                        cost reporting periods which began on or after 
                        July 1, 1994, and before July 1, 1996.''.
    (b) No Exceptions Permitted Based on Amendment.--The Secretary of 
Health and Human Services shall not consider the amendment made by 
subsection (a) in making any exemptions and exceptions pursuant to 
section 1861(v)(1)(L)(ii) of the Social Security Act.

SEC. 4. INITIAL PROSPECTIVE PAYMENT SYSTEM FOR HOME HEALTH SERVICES.

    (a) Reductions in Cost Limits.--Section 1861(v)(1)(L)(I) (42 U.S.C. 
1395x(v)(1)(L)(I)) is amended--
            (1) by inserting ``and before October 1, 1997,'' after 
        ``July 1, 1987'' in subclause (III);
            (2) by striking the period at the end of the matter 
        following subclause (III), and inserting ``, and''; and
            (3) by adding at the end the following new subclause:
                            ``(IV) October 1, 1997, 105 percent of the 
                        median of the labor-related and nonlabor per 
                        visit costs for freestanding home health 
                        agencies.''.
    (b) Delay in Updates.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
1395x(v)(1)(L)(iii)) is amended by adding ``, or on or after July 1, 
1997, and before October 1, 1997'' after ``July 1, 1996''.
    (c) Additions to Predetermined Rates.--Section 1861(v)(1)(L) (42 
U.S.C. 1395x(v)(1)(L)) is amended by inserting after clause (iii) the 
following:
                            ``(iv) Rates for fiscal years 1998 through 
                        1999.--For services furnished by home health 
                        agencies for cost reporting periods beginning 
                        on or after October 1, 1997, but before October 
                        1, 1999, the Secretary shall provide for an 
                        interim system of rates. A rate shall be a 
                        payment equal to the lower of--
                                    ``(I) cost determined under the 
                                preceding provisions of this 
                                subparagraph; or
                                    ``(II) an agency-specific per 
                                beneficiary annual limitation 
                                calculated from the agency's 12-month 
                                cost reporting period ending on or 
                                after January 1, 1993, and on or before 
                                December 31, 1993, based on reasonable 
                                costs (including nonroutine medical 
                                supplies), updated by the home health 
                                market basket index. The per 
                                beneficiary limitation shall be 
                                multiplied by the agency's unduplicated 
                                census count of patients (entitled to 
benefits under this title) for the year subject to the limitation or 
such other year determined by the Secretary to be required for the fair 
and efficient implementation of this section to determine the aggregate 
agency-specific per beneficiary limitation.
                            ``(v) Special rules.--For services 
                        furnished by home health agencies for cost 
                        reporting periods beginning on or after October 
                        1, 1997, the following rules apply:
                                    ``(I) For new providers and those 
                                providers without a 12-month cost 
                                reporting period ending in calendar 
                                year 1994, the per beneficiary 
                                limitation shall be equal to the mean 
                                of these limits (or the Secretary's 
                                best estimates thereof) applied to home 
                                health agencies as determined by the 
                                Secretary. Home health agencies that 
                                have altered their corporate structure 
                                or name shall not be considered new 
                                providers for payment purposes.
                                    ``(II) For beneficiaries who use 
                                services furnished by more than 1 home 
                                health agency, the per beneficiary 
                                limitations shall be prorated among the 
                                agencies.''.
                            ``(vi) Incentive payments.--Home health 
                        agencies whose year end reasonable costs are 
                        below the agency's per beneficiary aggregate 
                        limit (including costs and utilization) shall 
                        receive 50 percent of the difference between 
                        the reasonable costs and the aggregate 
                        limit.''.
    (d) Development of Case Mix System.--The Secretary shall expand 
research on a prospective payment system for home health agencies that 
ties prospective payments to a unit of service, including an intensive 
effort to develop a reliable case mix adjuster that explains a 
significant amount of the variances in costs.
    (e) Submission of Data for Case Mix System.--Effective for cost 
reporting periods beginning on or after October 1, 1997, the Secretary 
may require all home health agencies to submit additional information 
that the Secretary considers necessary for the development of a 
reliable case mix system.

SEC. 5. PERMANENT PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.

    Title XVIII (42 U.S.C. 1395 et seq.) is amended by adding after 
section 1893 the following:

``SEC. 1894. PERMANENT PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES.

    ``(a) In General.--Notwithstanding section 1861(v), the Secretary, 
for cost reporting periods beginning on or after October 1, 1999, shall 
provide for payments for home health services in accordance with a 
prospective payment system established by the Secretary.
    ``(b) Elements of System.--Such a system shall include the 
following:
            ``(1) Prospective payment amount.--All services covered and 
        paid on a reasonable cost basis under the medicare home health 
        benefit as of the date of the enactment of the Balanced Budget 
        Act of 1997, including medical supplies, shall be subject to 
        the prospective payment amount. In defining a prospective 
        payment amount, the Secretary shall consider an appropriate 
        unit of service and the number of visits provided within that 
        unit, potential changes in the mix of services provided within 
        that unit and their cost, and a general system design that 
        provides for continued access to quality services. The 
        prospective payment amount shall be based on the most current 
        audited cost report data available to the Secretary or such 
        other year determined by the Secretary to be required for the 
        fair and efficient implementation of this section.
            ``(2) Use of case mix.--The Secretary shall employ an 
        appropriate case mix adjustment that explains a significant 
        amount of the variation in cost.
            ``(3) Annual adjustments.--The prospective payment amount 
        shall be adjusted annually by the home health market basket 
        index. The labor portion of the prospective payment amount 
        shall be adjusted for geographic differences in labor-related 
        costs based on the most current hospital wage index.
            ``(4) Outliers.--The Secretary may designate a payment 
        provision for outliers, recognizing the need to adjust payments 
        because of unusual variations in the type or amount of 
        medically necessary care.
            ``(5) Proration of prospective payment amounts.--If a 
        beneficiary elects to transfer to, or receive services from, 
        another home health agency within the period covered by the 
        prospective payment amount, the payment shall be prorated 
        between home health agencies.
    ``(c) Savings.--Prior to implementing the permanent prospective 
system described in subsections (a) and (b) in a budget neutral 
fashion, the Secretary first shall reduce, up to 15 percent, the rates 
and per beneficiary limits described in section 1861(v)(1)(L), as those 
limits are in effect on September 30, 1999, in order to assure the 
projected scorable savings of this Act.''.

SEC. 6. PAYMENT BASED ON LOCATION WHERE HOME HEALTH SERVICE IS 
              FURNISHED.

    (a) Conditions of Participation.--Section 1891 (42 U.S.C. 1395bbb) 
is amended by adding at the end the following:
    ``(g) Payment on Basis of Location of Service.--A home health 
agency shall submit claims for payment for home health services under 
this title only on the basis of the geographic location at which the 
service is furnished, as determined by the Secretary.''.
    (b) Wage Adjustment.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 
1395x(v)(1)(L)(iii)) is amended by striking ``agency is located'' and 
inserting ``service is furnished''.
    (c) Effective Date.--The amendments made by this section apply to 
cost reporting periods beginning on or after October 1, 1997.

SEC. 7. ELIMINATION OF PERIODIC INTERIM PAYMENTS FOR HOME HEALTH 
              AGENCIES.

    (a) In General.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is 
amended--
            (1) by inserting ``and'' at the end of subparagraph (C);
            (2) by striking subparagraph (D); and
            (3) by redesignating subparagraph (E) as (D).
    (b) Effective Date.--The amendments made by subsection (a) apply to 
payments made on or after the implementation of section 1894 (as added 
by section 11273 of this Act).

SEC. 8. ESTABLISHMENT OF HOME HEALTH BENEFIT UNDER PART A AND TRANSFER 
              OF OTHER HOME HEALTH SERVICES TO PART B.

    (a) In General.--Section 1812(a)(3) (42 U.S.C. 1395d(a)(3)) is 
amended by inserting ``for up to 100 visits'' before the semicolon.
    (b) Conforming Amendments.--Section 1812(b) (42 U.S.C. 1395d(b)) is 
amended--
            (1) by striking ``or'' at the end of paragraph (2);
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``; or''; and
            (3) by adding after paragraph (3) the following:
            ``(4) home health services furnished to the individual 
        beginning after such services have been furnished to the 
        individual for a total of 100 visits.''.
    (c) Clarification of Part-Time or Intermittent Nursing Care.--
Section 1861(m) (42 U.S.C. 1395x(m)) is amended by adding at the end 
the following: ``For purposes of paragraphs (1) and (4), the term 
`part-time or intermittent services' means skilled nursing and home 
health aide services furnished any number of days per week as long as 
they are furnished (combined) less than 8 hours each day and 28 or 
fewer hours each week (or, subject to review on a case-by-case basis as 
to the need for care, less than 8 hours each day and 35 or fewer hours 
per week). For purposes of sections 1814(a)(2)(C) and 1835(a)(2)(A), 
`intermittent' means skilled nursing care that is either provided or 
needed on fewer than 7 days each week, or less than 8 hours of each day 
of skilled nursing and home health aide services combined for periods 
of 21 days or less (with extensions in exceptional circumstances when 
the need for additional care is finite and predictable).''.
    (d) Payments Under Part B.--Subparagraph (A) of section 1833(a)(2) 
(42 U.S.C. 1395l(a)(2)) is amended to read as follows:
                    ``(A) with respect to home health services (other 
                than a covered osteoporosis drug (as defined in section 
                1861(kk)), and to items and services described in 
                section 1861(s)(10)(A), the amounts determined under 
                section 1861(v)(1)(L) or section 1893, or, if the 
                services are furnished by a public provider or 
                services, or by another provider which demonstrates to 
                the satisfaction of the Secretary that a significant 
                portion of its patients are low-income (and requests 
                that payment be made under this provision), free of 
                charge, or at nominal charges to the public, the amount 
                determined in accordance with section 1814(b)(2);''.
    (e) Exclusion of Additional Part B Costs From Determination of Part 
B Monthly Premium.--Section 1839(a) (42 U.S.C. 1395r(a)) is amended--
            (1) in the second sentence of paragraph (3) (as amended by 
        section 11301(a) of this Act), by inserting ``(except as 
        provided in paragraph (5))'' before the period; and
            (2) by adding after paragraph (4) the following:
            ``(5) Exclusion of home health costs.--In estimating (for 
        purposes of determining the monthly premium rate under 
paragraph (3)) the benefits and administrative costs which will be 
payable from the Federal Supplementary Medical Insurance Trust Fund for 
a year, the Secretary shall exclude an estimate of any benefits and 
administrative costs attributable to home health services for which 
payment would have been made under part A during the year but for 
paragraph (4) of section 1812(b).''.
    (f) Definition of Homebound.--Section 1814(a) (42 U.S.C. 1395f(a)) 
and section 1835(a) (42 U.S.C. 1395n(a)) are each amended by adding the 
following at the end: ``With respect to the previous two sentences, the 
individual must have a condition due to an illness or injury that 
restricts the individual's ability to leave the home for more than an 
average of 16 hours per calendar month for purposes other than to 
receive medical treatment that cannot be provided in the home; 
infrequent means an average of 5 or fewer absences per calendar month, 
excluding absences to receive medical treatment that cannot be 
furnished in the home; short duration means an absence from the home of 
3 or fewer hours, on average per absence, within a calendar month 
excluding absences to receive medical treatment that cannot be 
furnished in the home; and medical treatment means services that are 
furnished by the physician or furnished based on and in conformance 
with the physician's order, by or under the supervision of a licensed 
health professional, and for the purpose of diagnosis or treatment of 
an illness or injury.''.
    (g) Normative Standards for Home Health Claims Denials.--Section 
1862(a)(1) (42 U.S.C. 1395y(a)(1)) (as amended by section 
11243(b)(2)(A) of this Act) is further amended--
            (1) by striking ``and'' at the end of subparagraph (F);
            (2) by striking the semicolon at the end of subparagraph 
        (G) and inserting ``, and''; and
            (3) by adding the following after subparagraph (G):
                    ``(H) the frequency and duration of home health 
                services which are in excess of normative guidelines 
                that the Secretary shall establish by regulation;''.
    (h) Effective Date.--
            (1) In general.--The amendments made by this section apply 
        to services furnished on or after October 1, 1997.
            (2) Special rule.--If an individual is entitled to benefits 
        under part A of title XVIII of the Social Security Act (42 
        U.S.C. 1395 et seq.), but is not enrolled in the insurance 
        program established by part B of that title, the individual 
        also shall be entitled under part A of that title to home 
        health services that are not posthospital home health services 
        (as those terms are defined under that title) furnished before 
        the 19th month that begins after the date of enactment of this 
        Act.
Home Health Care Prospective Payment Act - Amends title XVIII (Medicare) of the Social Security Act, with respect to the reasonable cost of home health services, to prohibit the Secretary of Health and Human Services, in establishing reasonable cost limits for cost reporting periods after FY 1997, from taking into account any changes in the home health market basket for cost reporting periods between July 1, 1994, and July 1, 1996 (thus providing for the recapture of savings from the temporary freeze on payments for home health services from 1994 to 1996 in updating home health costs limits for FY 1998 and subsequent fiscal years). 
Reduces the reasonable cost limits for home health services after October 1, 1997, from 112 percent to 105 percent of the median of the labor-related and nonlabor per visit costs for freestanding home health agencies. 
Provides for:  (1) establishment of an interim prospective payment system (PPS) for home health services, with rates calculated according to a specified formula, beginning in FY 1998, with a permanent PPS beginning in FY 2000; (2) reimbursement of home health service costs on the basis of the geographic location where the service is furnished; (3) elimination of periodic interim payments for home health services upon implementation of a permanent PPS; (4) limitation of Medicare part A (Hospital Insurance) coverage of home health services to the first 100 visits following a hospital stay; (5) the definition of coverage of intermittent and part-time nursing care; (6) exclusion of home health service costs from the calculation of Medicare part B (Supplementary Medical Insurance) monthly premiums; (7) further definition of "homebound"; and (8) denial of claims for home health services in excess of normative standards for the frequency and duration of care.
Home Health Care Prospective Payment Act