COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES SUMMARY OF COMMITTEE DECISIONS ON THE SOCIAL SECURITY ACT AMENDMENTS OF 1983 (H.R. 1900)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-00003R000200140002-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 16
• Document Creation Date: December 21, 2016
• Document Release Date: October 30, 2008
• Sequence Number: 2
• Publication Date: March 3, 1983
• Content Type: OPEN SOURCE

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98th Congress
1st Session
COMMITTEE PRINT { WMCP :98-6
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
SUMMARY OF COMMITTEE DECISIONS
ON THE
SOCIAL SECURITY ACT AMENDMENT'S OF 1983
(H.R. 1900)
MARCH 3, 1983
U .S. GOVERNMENT PRINTING OFFICE
17-3310 WASHINGTON: 1983
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COMMITTEE ON WAYS AND MEANS
DAN ROSTENKOWSKI, Illinois, Chairman
SAM M. GIBBONS, Florida
J. J. PICKLE, Texas
CHARLES B. RANGEL, New York
FORTNEY H. (PETE) STARK, California
JAMES R. JONES, Oklahoma
ANDY JACOBS, Ja., Indiana
HAROLD FORD, Tennessee
ED JENKINS, Georgia
RICHARD A. GEPHARDT, Missouri
THOMAS J. DOWNEY, New York
CECIL (CEC) HEFTEL, Hawaii
WYCHE FOWLER, Ja., Georgia
FRANK J. GUARINI, New Jersey
JAMES M. SHANNON, Massachusetts
MARTY RUSSO, Illinois
DON J. PEASE, Ohio
KENT HANCE, Texas
ROBERT T. MATSUI, California
BERYL ANTHONY, JR., Arkansas
RONNIE G. FLIPPO, Alabama
BYRON L. DORGAN, North Dakota
BARBARA B. KENNELLY, Connecticut
BARBER B. CONABLE, JR., New York
JOHN J. DUNCAN, Tennessee
BILL ARCHER, Texas
GUY VANDER JAGT, Michigan
PHILIP M. CRANE, Illinois
BILL FRENZEL, Minnesota
JAMES G. MARTIN, North Carolina
RICHARD T. SCHULZE, Pennsylvania
BILL GRADISON, Ohio
W. HENSON MOORE, Louisiana
CARROLL A. CAMPBELL, JR., South
Carolina
WILLIAM M. THOMAS, California
Jome J. SAUWN, Chief Counsel
Jaws K. Dowucs, Assistant Chief Counsel
Roacrr J. LioNARD, Chief Tax Counsel
A. L. SING roN, Minority Chief of Staff
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C O N T E N T S
TITLE I. - Provisions Affecting the Financing
of the Social Security System ...... I
TITLE II. - Additional Provisions Relating to
Long-Term Financing of the
Social Security System ............. 5
TITLE III. - Miscellaneous and Technical Social
Security Provisions ................ 5
TITLE IV. - Supplemental Security Income Provisions. 7
TITLE V. - Unemployment Compensation Provisions ... 7
TITLE VI. - Prospective Payments for Medicare
Inpatient Hospital Services ........ 8
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SOCIAL SECURITY ACT AMENDMENTS OF 1983
On Thursday, March 3, 1983, the Committee on Ways and Means,
U.S. House of Representatives, approved H.R. 1900, the Social
Security Act Amendments of 1983, by a vote of 32 to 3. This
document is prepared for the use of the Members of Congress and
is intended to serve only as a convenient condensation of the
bill's principal provisions. The Committee report will provide
the official legislative history.
PROVISIONS AFFECTING THE FINANCING OF THE SOCIAL SECURITY SYSTEM
COVERAGE
New Federal Employees ($9.3 billion)*
Provides for coverage under social security of the follow-
ing groups: (1) all Federal employees hired on or after
January 1, 1984, including those with previous periods of Federal
service; (2) legislative branch employees on the same basis, as
well as all current employees of the legislative branch who are
not participating in the Civil Service Retirement System as of
December 31, 1983; (3) all Members of Congress, the President
and the Vice-President effective January 1, 1984; (4) all new
employees of the judicial branch, including judges, on or after
January 1, 1984; (5) all elected officials and political appoin-
tees of all branches of government, including (in addition to
elected officials mentioned above) all sitting Federal judges,
and all executive level and senior executive service political
appointees, as of January 1, 1984. Salaries of Federal judges
under age 70 will be considered wages for purposes of the
social security earnings test.
Nonprofit Employees ($12.5 billion)
Extends social security coverage on a mandatory basis to
all employees of nonprofit organizations as of January 1, 1984.
Nonprofit employees age 55 or older affected by this provision
would be deemed to be fully insured for social security benefits
after acquiring a given number of quarters of coverage, accor-
ding to a sliding scale set in the law (e.g., 20 quarters would
be required for persons age 55 and 56, ranging down to 6 quarters
for those age 60 and over).
* All cost estimates are preliminary, subject to revision by the
Office of the Actuary, Social Security Administration. The
estimates are cumulative for 1983-1989.
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Prohibit Termination by State and ($3.2 billion)
Local Governments
Prohibits state and local governments from terminating
coverage for their employees if the termination has not taken
effect by the date legislation is enacted, and allows State and
local governments which have withdrawn from the social security
system to voluntarily rejoin.
COMPUTATION OF BENEFITS
Delay Cost-Of-Living Adjustment ($39.4 billion)
Delays the June 1983 cost-of-living adjustment until December
(January 1984 check), and provides all subsequent cost-of-living
adjustments in December (January checks). The SMI premium would
not be adjusted until January 1, 1984. A cost-of-living adjust-
ment would be provided in the January 1984 payment even if the
increase in the CPI is less than 3 percent.
Stabilizer
Beginning with 1988, if the fund ratio of the combined OASDI
Trust Funds as of the beginning of a year is less than 20.0 percent,
the automatic cost-of-living (COLA) adjustment of OASDI benefits
would be based on the lower of the CPI increase or the increase
in average wages. A "catch-up" benefit payment would be made in
a subsequent year whenever trust fund reserves reach at least 32
percent.
Windfall Benefits ($0.3 billion)
Modifies the social security benefit formula (substituting
61 percent for the 90 percent in the first bracket of the formula)
so as to reduce social security benefits received by workers who
are eligible for a pension from noncovered work but who have
worked long enough in covered employment to be eligible for
social security benefits. This formula would apply only to
those reaching age 60 after 1983.
Delayed Retirement Credit
Gradually increases the delayed retirement credit from 3 per-
cent to 8 percent per year between 1990 and 2010.
REVENUE PROVISIONS
Taxation of Social Security (OASDI) ($27.3 billion)
Benefits for Higher-Income Persons
Includes in taxable income, beginning in 1984, a portion of
social security benefits and Tier One benefits payable under
the Railroad Retirement Act for taxpayers whose adjusted gross
income combined with 50 percent of their benefits exceeds a base
amount. The base amount would be $25,000 for an individual,
$32,000 for a married couple filing a joint return and zero for
married persons filing separate returns. The amount of benefits
that could be included in taxable income would be the lesser of
one-half of benefits or one-half of the excess of the taxpayers'
combined income (adjusted gross income plus one-half of benefits)
over the base amount.
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The proceeds from the taxation of benefits, as estimated by
the Treasury Department, would be transferred to the appropriate
trust funds.
FICA Tax Rates (OASDI) ($39.4 billion)
Advances the payroll tax increase scheduled for 1985 to 1984
and part of the increase scheduled for 1990 to 1988, as indicated
below. (Conforming changes would be made in the Tier One Railroad
Retirement Tax rates.)
Employer-Employee OASDI Tax Rate
Eachj
[In percent]
Current Law
Proposed
1984
5.40
5.70
1985
5.70
5.70
1986
5.70
5.70
1987
5.70
5.70
1988
5.70
6.06
1989
5.70
6.06
1990
6.20
6.20
Tax Credit for 1984 FICA Taxes
Provides for a one time credit of 0.3 percent of wages to
be allowed against 1984 employee FICA and Tier One Railroad
Retirement taxes. Appropriations to the Old Age and Survivors
and Disability Insurance Trust Funds would be based on a 5.7
percent rate. Conforming changes would be made in Tier One
Railroad Retirement Tax rates.
Tax on Self-Employment Income ($18.5 billion)
Beginning in 1984, the OASDHI rates for self-employed persons
would be equal to the combined employer-employee OASDHI rate. In
addition, self-employed persons would be allowed a SECA tax credit
of 2.1 percent of net self-employment income in 1984, 1.8 percent
from 1985 through 1988 and 1.9 percent thereafter.
BENEFITS FOR CERTAIN SURVIVING, DIVORCED AND DISABLED SPOUSES
Benefits for Certain Widows, (-$1.5 billion)
Divorced and Disabled Women
Four provisions were approved to continue benefits for a
surviving divorced or disabled spouse who remarries, to increase
benefits for disabled widows and widowers and for widows whose
husbands died several years before the widow is eligible for
benefits and to allow divorced spouses to draw spouses' benefits
at age 62 whether or not the former spouse has retired.
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MECHANISMS TO ASSURE CONTINUED BENEFIT PAYMENTS IN UNEXPECTEDLY
ADVERSE CONDITIONS
Interfund Borrowing
Authorizes interfund borrowing between the OASI, DI and HI
trust funds for calendar years 1983-1987, with provision for
repayment of the principal and interest of all such loans
(including amounts borrowed in 1982) at the earliest feasible
time but not later than the end of calendar year 1989.
Fixed Monthly Tax Transfers
Provides for a revision of accounting procedures under which
the Treasury would credit to the OASDHI trust funds, at the
beginning of each month, the amount of payroll tax revenues that
is estimated to be received during the month. These amounts
would be invested by the trust funds as all other assets are
invested, and the trust fund would pay interest to the general
fund on these amounts.
Managing Trustee Report to the Congress Concerning
Trust Fund Shortfalls
Requires the Board of Trustees to report immediately to
Congress whenever the amount in any trust fund is unduly small
and to recommend in that report a -specific legislative plan
to remedy the shortfall. Any plan must be enacted by Congress
before taking effect and would go into effect no earlier than
30 days after enactment.
OTHER FINANCING AMENDMENTS
Reimbursement to Trust Funds for Military Wage Credits
and Uncashed OASDI Checks ($17.2 billion)
Military Wage Credits
Provides for a lump-sum payment to the OASDI trust funds
from the General Fund of the Treasury for: (i) The present value
of the estimated additional benefits arising from the gratuitous
military service wage credits for service before 1957; and
(ii) the amount of the combined employer-employee OASDHI taxes
on the gratuitous military service wage credits for service
approval by Congress of a repayment plan that must be submitted
after 1956 and before 1983.
Uncashed OASDI Checks
Provides for a lump-sum payment to the OASDI trust funds from
the General Fund representing the amount of all uncashed benefit
checks which have been issued in the past, and requires the imple-
mentation of a procedure to credit the trust funds on a regular
basis with an amount equal to the value of all OASDI benefit
checks which have not been negotiated for a period of six months.
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TITLE II.
ADDITIONAL PROVISIONS RELATING TO LONG-TERM
FINANCING OF THE SOCIAL SECURITY SYSTEM
Long-Range Benefit Formula and Tax Rate Changes
Reduces initial benefit levels by 5 percent by decreasing
the factors in the benefit formula by two-thirds of 1 percent
each year for 8 years beginning in the year 2000. Increases the
OASDI tax rate by .24 percentage points for employers and employees
each in the year 2015.
MISCELLANEOUS AND TECHNICAL PROVISIONS
The bill also includes a series of miscellaneous and
technical provisions relating to cash management, elimination of
gender-based distinctions under the social security program,
coverage, and other matters.
Trust Fund Investment Procedures
Several changes would be made in the investment procedures
of the social security trust funds. Most importantly, a new
short-term rate would be added so that the trust funds would
be invested at short-term or long-term rates in order to maximize
return to the funds.
Social Security as a Separate Function in the Unified Budget
Displays the OASI, DI, HI and SMI fund operations as a
separate function 650 within the budget. Beginning with fiscal
year 1988, these trust fund operations would be removed from
the unified budget.
SSA as Independent Agency
Authorizes a feasibility and implementation study with
respect to establishing SSA as an independent agency.
Public Pension Offset
Beginning in July 1983, the amount of a social security
beneficiary's public pension offset would be one-third of the
public pension.
Elective Compensation
Provides that employer contributions to the following elec-
tive compensation arrangements will be includible in the FICA
wage base: cash or deferred compensation (section 401(k) of the
Internal Revenue Code), cafeteria plans (section 125) and tax-
sheltered annuities (section 403(b)).
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FICA Wage Base
Provides that the definition of wages subject to the FICA
tax would be interpreted solely with reference to the FICA
statute, not with reference to income taxes or income tax
withholding. An explicit exclusion from FICA tax would be
provided for meals and lodging excluded from income tax under
section 119 of the Internal Revenue Code.
Simplified Employee Pensions
Provides that employer contributions to a simplified em-
ployee pension (SEP) would be exempt from FICA, but employee
contributions would be subject to FICA. Conforming changes
would be made in the Social Security Act definition of covered
wages.
Income Tax Credit for Elderly and Disabled
The present Federal income tax credit for the elderly is
increased and combined with the disability income exclusion.
The resulting credit would be available for certain individuals
under age 65 who have retired on permanent and total disability
(to the extent of disability income) and individuals age 65 or
over. The credit would no longer be available to those under
age 65 who are not disabled and the disability exclusion is
repealed. The credit would be 15 percent of a base amount equal
to $5,000 for single individuals and $7,500 for joint return.
As under present law, the base amount is reduced by amounts of
social security or railroad retirement benefits and by one-half
of adjusted gross income that exceeds $7,500 for a single return
and $10,000 for a joint return.
Titles I, II and III as approved by the committee produce
savings and additional social security trust fund revenue
through 1989 of $165.3 billion and eliminate the long-term
deficit of 2.09 percent of taxable payroll.
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TITLE IV.
SUPPLEMENTAL SECURITY INCOME BENEFITS
SSI Benefit Increase and Pass-through Requirements
As approved by the Committee, the Federal SSI benefit
payment is increased by $20 per month for individuals and $30
per month for couples, effective July 1, 1983.
The next Federal SSI cost-of-living adjustment (COLA) is
delayed from July 1983 until January 1984, and the current linkage
between the OASDI and the SSI COLA is maintained. Federal SSI
benefits will be adjusted in January 1984, and every January
thereafter, by the same amount and under the same procedures as
OASDI benefits.
The current SSI pass-through law is amended to provide that,
in order to meet the "payment level" pass-through requirement, a
State could not reduce its SSI supplemental payment levels below
the amount that would provide SSI recipients with an increase
in benefits equal to the amount that Federal SSI benefits would
be increased in July 1983 under the current COLA provisions. A
State could continue to comply with Federal pass-through law by
meeting the present "aggregate amount" requirement. In other
words, as under current law, a State would not be required to
spend more in total for State SSI supplemental payments than the
total aggregate amount of State supplementation paid by the
State in the previous 12-month period.
Disregard of Emergency and Other In-Kind Assistance
The committee approved a provision under which, until
September 30, 1984, emergency and other in-kind assistance provided
by a private non-profit organization to an aged, blind or disabled
individual, or to a family with dependent children, would be
disregarded under the SSI and AFDC programs, if the State determines
that such assistance was provided on the basis of need.
Pa+y ent ofsSSI to Temporary Residents of Public Emergency
Shelter
Under current law, aged, blind or disabled individuals who
are residents of private emergency shelters are eligible for
SSI. However, such residents of public shelters cannot receive
SSI. The committee approved a provision under which aged, blind
or disabled individuals who are temporary residents of ublic
emergency shelters could receive SSI payments for a period of
up to three months during any 12-month period.
TITLE V.
UNEMPLOYMENT COMPENSATION PROVISIONS
Extension of Federal Supplemental Compensation (FSC) Program
The Committee bill extends the FSC program for six months,
from April 1, 1983 through September 30, 1983.
Effective April 1, 1983, FSC benefits would be payable
as follows:
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(a) Basic FSC Benefits: individuals who begin receiving FSC
on or after April 1, 1983 could receive up to a maximum
of:
- 14 weeks in States with IUR 6.0 or above
- 13 weeks in States with IUR 5.0 to 5.9
- 11 weeks in States with IUR 4.5 to 4.9
- 10 weeks in States with IUR 3.5 to 4.4
- 8 weeks in all other States
(b) Additional FSC Benefits: Individuals who exhaust FSC on
or before April 1, 1983 could receive additional weeks
equal to three-fourths of their former FSC entitlement,
up to a maximum of:
- 10 weeks in 14 week States
- 8 weeks in 13 and 11 week States
- 6 weeks in 10 and 8 week States
(c) Individuals who begin receiving FSC prior to April 1,
1983, and who have FSC entitlement after that date,
could also receive additional weeks under (b) above.
However, the combination of their basic FSC entitlement
received after April 1, 1983, and the additional weeks
provided in (b), cannot exceed the maximum number of
weeks of basic FSC benefits payable in their State.
Option for Voluntary Health Insurance Program
The committee approved an amendment that provides States
the option of deducting an amount from the unemployment compensa-
tion benefits otherwise payable to an individual and using the
amount deducted to pay for health insurance, if the individual
elects to have such a deduction made from his benefits.
Treatment of Certain Organizations That Were Retroactively
Granted 50 c 3 Status
The committee approved an amendment that allows a nonprofit
organization that elects to switch from the contribution to
the reimbursement method of financing unemployment benefits to
apply any accumulated balance in its State unemployment account
to costs incurred after it switches to the reimbursement method,
under certain conditions.
PROSPECTIVE PAYMENTS FOR MEDICARE INPATIENT
HOSPITAL SERVICES
The Committee has approved a proposal to pay for inpatient
hospital services under the medicare program on the basis of
prospectively determined rates. The new prospective payment
system, which generally follows the outline of an Administration
proposed plan, would reimburse hospitals on a per-case basis.
A single payment amount would be paid for each type of case,
identified by the diagnosis related group (DRG) into which each
case is classified. The proposal, as approved by the Committee,
consists of the elements that follow:
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Setting the Prospective Payment Amount
Under the proposal, the Secretary would be required to
prospectively determine a payment amount for each medicare
hospital discharge. Discharges would be classified into
diagnosis related groups, or DRG's. In order to moderate the
impact of the prospective payment proposal on urban and rural
hospitals and across different regions of the country, separate
payment rates would apply to urban and rural areas in each
of the nine census divisions of the country (the 50 States and
the District of Columbia). The regional adjustment would no
longer apply (i.e., sunsetted) beginning with payments after the
fourth year of the program. The Secretary would also be required
to study and report to Congress for each of the four years during
the transition period on the appropriateness and necessity for
the regional adjustor. In addition, the Secretary would be
required to study and report to Congress, before the end of
1985, on the appropriateness of the urban/rural differential.
The DRG rates would be adjusted for regional differences in
hospital wage levels so that hospitals in high wage areas would
receive somewhat larger payments than hospitals in lower wage
areas. Hospitals would be allowed to keep payment amounts in
excess of costs and would be required to absorb any costs in
excess of the DRG rates. The Secretary would be authorized to
make adjustments in the payment rates to take into account the
unique circumstances of hospitals in Hawaii and Alaska.
Hospitals would not be permitted to charge medicare beneficiaries
for any of their costs in excess of the deductible and coinsurance
amounts now required by law.
The rates established for hospitals would be derived from
historical medicare cost data. These data would be updated
to fiscal year 1983 by the estimated industry-wide increase
in hospital costs. The rates would be further updated for
fiscal years 1984 and 1985 by the increase in a marketbasket
index measure of the changes in the costs of goods and ser-
vices purchased by hospitals, plus one percentage point.
Such increases would be subject to the requirement that expen-
ditures under the prospective plan be no greater than those
under the limits of the Tax Equity and Fiscal Responsibility
Act of 1982. For years beginning with fiscal year 1986, a
panel of independent experts would review the appropriateness
of the update formula, taking into account such factors as
changes in the marketbasket, productivity, technological and
scientific advances, the quality of health care and utilization
of relatively costly though effective methods of care. The
Secretary could revise the update methodology based on the
expert panel's recommendations. The Secretary would be re-
quired to maintain a system of reporting costs during the
period of transition to the new prospective payment system
and for at least two years after full implementation of the new
payment program.
The Secretary would be required to provide additional
payment amounts in cases of exceptionally lengthy stays in
hospitals and, as determined by the Secretary, for other extra-
ordinarily costly cases. Such additional payments would be re-
quired to equal total payments under the prospective payment
system in not less than four percent of medicare cases.
The Secretary is also directed to study and report to Congress,
before the end of 1985, on the appropriateness of the policies
developed for paying for these atypical (or "outlier") cases.
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Transition to the New Prospective Payment System
Implementation of the new prospective payment system would be
phased-in over a 3-year period, starting with each hospital's
first accounting year beginning on or after October 1, 1983.
During the first year, 25 percent of the payment amount would be
determined under the diagnosis related prospective payment
methodology described above; 75 percent of the payment amount
would be determined on each hospital's own cost base. During
the second year, 50 percent of the payment amount would be deter-
mined under the prospective payment methodology and 50 percent
on the basis of each hospital's own cost base. During the third
year of the transition, 75 percent of the payment amount would
be determined under the prospective payment methodology and 25
percent would be determined on each hospital's own cost base.
During the fourth year, 100 percent of the payment amount would
be determined under the diagnosis related payment methodology.
The intent of the phase-in period is to avoid any disruptions
that might occur for hospitals because of any sudden change in
medicare reimbursement policy.
Hospitals, which can demonstrate to the Secretary that their
practice prior to October 1, 1982 was such that some of their
services were billed independently of payments received by the
hospital, could be permitted by the Secretary to continue such
billing arrangements during the transition period during which
the prospective payment system is phased-in. Such arrangements
would not be recognized once the prospective payment system was
fully implemented.
Exclusion of Medical Education and Capital-Related Expenses
Capital-related costs and direct and indirect expenses
associated with medical education activities would be specifically
excluded from payment determinations under the prospective payment
system. Medical education expenses, such as the salaries of
interns and residents under approved education programs, would
continue to be paid on the basis of reasonable cost. In addition,
with respect to indirect medical education expenses, an adjustment
would be provided equal to twice the amount of the teaching
adjustment in the "section 223" limits of present law.
Payment for capital-related expenses would continue to be
made as under current law. The Secretary would be required to
study and report to Congress, by December 31, 1983, recommenda-
tions for including capital-related costs (including costs
relating to a return on net equity) under the prospective payment
system. For purposes of developing any subsequent policies
relating to payments for capital on a prospective basis, projects
initiated on or after March 1, 1983, would be considered new
capital subject to special future rules. States would be required
to have a section 1122 capital-approval agreement within 3 years
as a condition of payment for future capital expenditures in the
State. This provision would take effect only if alternative capital
payment policies are not enacted in the interim.
Payments for capital expenses relating to a return on net
equity for proprietary institutions would be phased-out over the
transition period during which the prospective payment system
is phased-in. During the first year of the transition, 75 percent
of any return on equity amount would be paid, since 75 percent
of each payment to a hospital per discharge during that year
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would be cost-based. During the second year, 50 percent of any
return on equity amount would be paid, since half of an institu-
tion's payments per discharge during that year would be cost
based. During the third year, 25 percent of the return on equity
payment would be paid. Beginning in the fourth year, no payments
for a return on equity would be paid, since 100 percent of the
payments to hospitals would be determined under the diagnosis
related prospective payment system.
Exemptions, Exceptions and Adjustments
Under the proposal, psychiatric, long-term care, children's
and rehabilitation hospitals would be exempt from the prospec-
tive payment system and would continue to be reimbursed on a
cost-based system and would be subject to the target reimburse-
ment limitation provided for in current law. Hospitals with re-
habilitation units or psychiatric care units could apply
to the Secretary for exemption from the prospective payment
system for care rendered in those units. Such hospital units
would be paid under the cost-based system of present law. The
Secretary would be required to report to Congress, before the
end of 1985, on whether exempted hospitals should be brought
under the prospective system and, if so, how this could be accom-
plished.
The secretary would be authorized to provide for exceptions
and adjustments to take into account the special needs of sole
community providers. Also, the Secretary would be required to
provide, by regulation, for such exceptions and adjustments as
he or she deems appropriate, including those with respect to
public hospitals, teaching hospitals, and hospitals that are
extensively involved in cancer treatment and research. In addi-
tion, the Secretary would be required to provide exceptions and
adjustments for hospitals that serve a disproportionately large
number of low-income persons and medicare beneficiaries.
Administrative and Judicial Review
The proposal provides for the same administrative and
judicial review procedures under the new prospective payment
system as those available to hospitals under present
law, except that neither administrative nor judicial review
of (1) the adequacy of the amount of prospective payments
and (2) the establishment of the diagnosis related classifi-
cations would be permitted.
Admissions and Quality Review
The Secretary would be required to establish an admissions
and discharges monitoring system utilizing the Health Care
Financing Administration, medicare intermediaries, professional
standards review organizations/professional review organizations
or such other medical review authority, to review admission
practices and quality of care. In addition, hospitals would be
required to contract with a professional review organization, or
any other review organization authorized to conduct review for
the medicare program in an area, for review of admissions,
discharges, and quality of care as a condition of receiving
medicare payments. The law would specify that the 12-month
waiting period required before medicare intermediaries may be
designated as review organizations would start to run on the
date the Secretary begins to enter into contracts with review
organizations or on October 1, 1983, whichever is earlier.
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The Secretary would be authorized to disallow payment and/or
terminate program participation, or require hospitals to take
corrective action where a provider is determined to be engaged in
aberrant and unacceptable practices.
The Secretary would be required to study and report back to
Congress before the end of 1985 on long-range policy changes to
limit increases in admissions resulting from the prospective
payment system. The Secretary would be required to include
analyses and recommendations on adjustments to the DRG payment
rate for increased admissions to minimize the incentive to
increase admissions and to report on the development of admini-
strative systems, such as pre-admission certification.
State Cost Control Systems
Under the Committee proposal, the Secretary would be autho-
rized to make medicare payments according to a State's hospital
cost control system, if the State so requests, if the system:
(1) applies to substantially all non-Federal acute care hospitals;
(2) applies to at least 75 percent of hospital revenues in the
State; (3) treats payors, employees, and patients equitably; (4)
will not result in greater medicare expenditures over a three-year
period than would otherwise have been made; and (5) will not
preclude HMOs or CMPs from negotiating directly with hospitals
with respect to payment for inpatient hospital services. The
Secretary would be prohibited from requiring that a State system
be based on DRG's or that the State's rate of increase in hospital
costs be less than the rate of increase for the United States.
The Secretary would be required to continue medicare waivers in
States which currently have them if the five conditions above
are being met.
The Secretary would be required, upon request of the State,
to modify the terms of the current demonstration project agree-
ments with the States of New York and Massachusetts to eliminate
the requirement that New York or Massachusetts maintain a rate
of increase in medicare hospital costs in the State which is
less than the national rate of increase in medicare hospital
costs.
In addition, the Secretary would be required to approve
within 60 days a request for a State program if it meets the
above five conditions and certain other requirements, including
that the system: (1) is operated directly by the State or an
entity designated by law; (2) is prospective; (3) provides
for such hospital cost reports as the Secretary may require;
(4) will not result in changes in admission practices which
will reduce treatment to low income, high cost, or emergency
patients; and (5) will not reduce payments without 60 days'
notice to the Secretary. The Secretary is required to provide
the Congress and the State an explanation for any denial of
approval of the State program.
Under the Committee's proposal, local government officials
must be consulted in the development of a State cost control
system with respect to its impact on publicly owned hospitals.
The Secretary would be required to quantify and report to
the Congress, before the end of 1986, on the overall impact of
State systems, assessing their impact on medicare and other
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programs, on private health insurance costs and premiums, and
on tax expenditures.
Impact Studies and Research on Payment Methods
Under the Committee's proposal, the Secretary would be
required to analyze the impact of the prospective payment
plan in operation on individual hospitals, classes of hospitals,
and third-party payors, and to report o Congress in each of
four years. In addition, GAO would be required to review the
adequacy of the Secretary's analysis.
The Secretary would be required to report to Congress by
December 31, 1983, on the impact on skilled nursing facilities
(SNFs) of the hospital prospective payment system and to make
recommendations with respect to the payment of SNFs.
The Committee agreed that report language should express
the Committee's intention that the Secretary conduct a major,
independent, multiple-disciplinary research effort, and that
such research shall include long-term contracts with two or
three university-based applied research centers, on issues
related to medicare program costs and payment methods, and shall
include the use of such experts as physicians, economists, stat-
isticians, actuaries, financial and organizational specialists
and other relevant disciplines. The Committee report would
also require studies of assignment/non-assignment for hospitals,
public disclosure of hospital DRG rates, and payment methods to
HMOs and CMPs.
Payments to Physicians
In the first year of the program, fiscal year 1984, the
Secretary would be required to begin to collect data to calculate
physician charges for each DRG. The Secretary would be required
to report to the Congress by December 31, 1984, on the advisa-
bility and feasibility of making physician payments under a
prospective payment system.
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