Medicare Solvency and Health Care Financing Reform Act of 1985

Medicare Solvency and Health Care Financing Reform Act of 1985 - Adds a new title XXI to the Public Health Service Act entitled "Programs for Reforming the Health Care Financing System." Sets forth part A of such title entitled "State Health Care Programs." Provides that if a State transmits to the Secretary of Health and Human Services, within one year of the enactment of this Act, a statement that the State intends to submit a health care plan (described below), for purposes of making payments to the State under title XIX (Medicaid) of the Social Security Act the Federal medical assistance percentage shall be 102 percent of such percentage as otherwise determined under Medicaid for such State for up to one year. Directs the Secretary to exempt hospitals in a State from the prospective payment limits established under this Act for certain time periods occurring during the first year of the transition period (defined in part C of title XXI as the 24-month period beginning January 1986) if: (1) the State requests such treatment; (2) the State indicates an intention to have implemented a State plan under title XXI which will provide for a recoupment of any revenues received in excess of the amounts permitted under part A; and (3) the State has agreed, with respect to such hospitals, that if a State plan under this Act is not implemented by the end of the first year of the transition period, then the Secretary shall provide for such adjustment in the prospective payment limits under part I of part B as will provide for recoupment in the subsequent year of any revenues received in excess of amounts permitted.

Authorizes a State to apply to the Secretary for the approval of a health care plan for the State for an initial period of up to three years, subject to disapproval. Authorizes extensions of such initial period for up to two additional years. Provides that, for any one-year period, in the case of any State with an approved plan: (1) the transitional period provisions of subpart I of part B of title XXI shall not apply; (2) requirements for reimbursement (other than those relating to beneficiary cost sharing) under title XVIII (Medicare) of the Social Security Act shall be waived; and (3) for purposes of making payments to a State under Medicaid the Federal medical assistance percentage shall, for the year the plan is in effect, be 103 percent (or 104 percent in the case of an unrestricted Medicaid plan) of the amount of the Federal medical assistance percentage otherwise determined under Medicaid and 102 percent (or 103 percent in the case of an unrestricted Medicaid plan) for any subsequent year (except for any extension period) of the amount of the Federal medical assistance percentage otherwise determined. Defines "unrestricted Medicaid plan" as a State Medicaid plan which does not impose any limitation on the scope or duration of inpatient hospital services other than requiring that such services be medically necessary. Directs the Secretary to annually review each approved plan. Requires the continued approval, for a certain time, of a plan not in compliance, if the State certifies that it will comply within a stated time period. Permits a further extension of approval if there is a trend towards compliance. Provides for the establishment of a Federal program with respect to hospitals for a State which cannot comply.

Requires a State plan, in order to be approved, to meet the general requirements set forth below and, if applicable, certain requirements relating to rate setting plans. Permits a plan, in meeting the general requirements, to be designed in a manner that meets such requirements through a rate setting system, a voluntary system, or through the use of competitive mechanisms. Requires a plan to be designed in a manner so as to provide, to the satisfaction of the Secretary, that: (1) the amount of the total revenues per discharge for all hospitals in the State for each year beginning before 1987 in which the plan is in effect may not exceed the base general hospital revenues per discharge increased by the sum of the compounded sum of the percentage limits for a year and the previous years for which the State plan was in effect, and the population-discharge factor; and (2) the amount of the total revenues per discharge for all services furnished to hospital inpatients for all hospitals in the State for each year beginning after 1986 in which the plan is in effect may not exceed the sum of the base general hospital revenues per discharge increased by the sum of the compounded sum of the percentage limits for a year and the previous years for which the State plan was in effect, and the population-discharge factor, plus the base physician-related hospital revenues per discharge increased by the sum of the compounded sum of the percentage limits for a year and the previous years for which the plan is in effect and provided for a limitation under this clause (2), and the population-discharge factor. Authorizes a State, at its option, to apply the test specified in clause (2) instead of the test specified in clause (1) with respect to years prior to 1986.

Permits a plan, instead of meeting the above requirements, to meet such other alternative test of constraint of health care costs as the Secretary determines will not result in a greater expenditure of funds under title XVIII (Medicare) of the Social Security Act and by private payers than would have been made if the plan met the above requirements.

Requires a plan to be designed so as to provide that the amount of revenues for inpatient hospital services and physicians' services to hospital inpatients and individuals entitled to benefits under parts A (Hospital Insurance) and B (Supplementary Medical Insurance) of title XVIII of the Social Security Act may not exceed the amount which would otherwise be payable (including copayments and deductibles) for such services under title XVIII. Permits a plan (other than a plan providing for the establishment of rates of hospital reimbursement for hospital inpatient services) to provide that payment under title XVIII for inpatient hospital services and for other services furnished to hospital inpatients shall continue to be made in the amounts and in the manner otherwise provided under Medicare.

Requires that the unreimbursed costs incurred by hospitals in providing services to low-income, uninsured or underinsured patients (other than Medicare or Medicaid patients) be paid pursuant to a plan in an amount which must, in the aggregate, be the same proportion of total revenues as such unreimbursed costs are of total costs of patients who are neither Medicare nor Medicaid patients. Provides that such unreimbursed costs shall be paid through distribution of funds pooled at the statewide level, through a higher payment rate, or through another method approved by the Secretary.

Requires a plan to have a mechanism for providing fair hearings for hospitals and any other entities aggrieved by determinations made under the plan.

Requires a State to provide for the appointment of a panel, consisting of members with expertise in health care economics and service delivery, to advise in the development and implementation of its plan, periodically review and propose modifications to the plan, and establish the methodology for establishing the percentage limit used to compute hospital revenues. Requires such methodology to include the use of appropriate external price indicators, the use of data from major collective-bargaining agreements for nonsupervisory hospital employees, and other appropriate indicators of wage costs. Requires the methodology to be approved by the Secretary.

Requires a plan, to the extent that it provides for meeting plan requirements through a system which provides for the establishment of rates for hospital reimbursement for hospital inpatient services by an entity other than the hospital, to meet the following additional requirements: (1) except as provided in clause (2), the plan must provide equitable treatment of all entities that pay for health services covered under the plan, of hospital employees, and of patients; (2) if the plan is established under State law, the plan must take into account the proportion of costs associated with, and services covered by, the different payors, including Medicare and Medicaid, and may not permit undue shifting of proportions of costs among the different payors; (3) the plan may not make available any discount in price to any purchaser unless the discount accurately reflects economic benefits to a hospital resulting from a service arrangement with a purchaser and the discount is made available to all other purchasers who can satisfy such service; and (4) the plan must provide a procedure whereby, upon the request of a hospital, an adjustment can be considered to the rate limitation applicable under the plan to that hospital to reflect a significant change in the inpatient hospital services, increased costs for the compensation of employees, funds necessary to provide for the efficient operation of a hospital which the State has determined should remain in operation, and higher expenses associated with a regional tertiary care institution, teaching hospital, or children's hospital.

Directs the Secretary, in reviewing a plan which provides for control of hospital inpatient costs through a competitive mechanism, to take into account the degree to which the plan provides for the following or other measures to improve price competition among providers: (1) the plan provides for open enrollment periods; (2) the plan provides for the dissemination of information concerning different health benefits plans; (3) the plan encourages innovation and public incentives to new forms of health care delivery and financing; (4) there are negotiated prices and risk-sharing between insurers and health care providers; and (5) the laws of the State do not impose legal barriers to competition in negotiated and other arrangements among insurers and health care providers.

Sets forth part B of title XXI entitled "Residual Federal Program, subpart I, Transition Period." Provides that, subject to the provisions of subpart I, for any accounting period of a hospital subject to subpart I, the total revenues for inpatient hospital services may not exceed the total of such revenues that are permitted on the basis of prospective payment limits established under subpart I for the hospital's discharges as classified by diagnosis-related groups.

Requires each hospital subject to a limitation on revenues under subpart I to provide for the publication of a price list which establishes the price per discharge which any payor may pay for inpatient hospital services. Requires a hospital to submit its price list to the Secretary.

Directs the Secretary to determine (for each accounting period) a prospective payment limit for inpatient hospital services for discharges classified by diagnosis-related groups. Sets forth the method for determining and adjusting the limit for each hospital for discharges.

Authorizes the Secretary, at the request of a hospital, to increase the allowable revenues for an accounting period or provide for an increase in the base number of discharges otherwise permitted under subpart I to allow for higher revenues than would otherwise be permitted if: (1) a major renovation or replacement of physical plant or significant change in the capacity of the hospital has occurred; (2) the hospital is a sole community provider or provides a disproportionate percentage of its services to low-income or Medicare patients, the hospital would otherwise be insolvent, and the State has determined that the hospital should remain open; (3) a larger revenue increase is needed because the hospital is a regional tertiary care institution, teaching hospital, or children's hospital; and (4) there has been a significant change in the characteristics of the hospital's mix of patients.

Subjects a hospital which has total inpatient revenues for an accounting period in excess of its applicable limit to a civil penalty, unless the excess is deposited in an escrow account. Permits withdrawals from the account upon the Secretary's certification that the total inpatient revenues of a hospital for an accounting period fall below the applicable limit for that period. Establishes a civil penalty for a physician or other person or entity (other than a hospital) who has charged any person or entity for services which are required by law to be billed to a hospital. Sets forth provisions relating to notice, opportunity for a hearing, and appeal of such penalties.

Prohibits a hospital from engaging in an admission practice that results in: (1) a refusal to admit a patient who is unable to pay for inpatient hospital services; (2) the refusal to admit a patient who would be expected to require unusually costly or prolonged treatment; or (3) the refusal to provide emergency services to any person in need of such services. Sets forth penalties, including exclusion from Medicare or Medicaid participation, for hospitals committing such admissions violations.

Sets forth subpart II of Part B entitled "Post-Transition Period." Provides that in the case of a State not having a plan approved under part A and in effect for any period beginning after the transition period, the Secretary shall establish and implement a health care plan for such State for such period which meets the requirements of part A, with specified differences.

Sets forth definitions under part C of title XXI.

Establishes an Advisory Committee on Health Care Technologies and Procedures. Directs the Advisory Committee to examine the appropriateness of the various interventions and the conditions under which they are needed, the safety and efficacy of alternative therapeutic and preventive regimens, and the standards for availability and utilization of various technologies, and to publicly report on whether or not payments should be made for such services and, if so, under what conditions and frequency of service.

Exempts individuals enrolled in health maintenance organizations and competitive medical plans from the limits established under title XXI on revenues and discharge of a hospital if: (1) the organization elects such treatment; or (2) the organization annually pays for more than 20 percent of the number of bed-days of care with respect to that hospital.

Amends provisions of the Public Health Service Act relating to employees' health benefits plans to provide that if an employer makes a contribution with respect to the costs of a health benefits plan of an employee and the employer offers the option of membership in a health maintenance organization or a competitive medical plan, which membership provides benefits at least actuarially equivalent to those provided under the other health benefits plan, the employer shall: (1) contribute at least as much towards the membership as the maximum amount of the employer's contribution to the other plan; (2) provide for a cash rebate if the contribution with respect to any other health benefits plan exceeds the cost of membership with the organization; and (3) provide information to employees that reasonably compares the benefits and costs of different plans. Exempts from the provisions of the previous sentence employees of an employer represented by a collective bargaining representative or other employee representative selected under any law.

Amends title XVIII (Medicare) of the Social Security Act, with respect to health maintenance organizations and competitive medical plans, to provide that the annual per capita rate of payment for each class of members shall be 100 percent in the case of individuals enrolled with an eligible organization in an area where at least 30 percent of the individuals eligible to enroll with an organization are enrolled.

Amends title XIX (Medicaid) of the Social Security Act to exempt a health maintenance organization which is a public entity from the requirement that at least 75 percent of its membership be Medicaid eligible or insured under part B (Supplementary Medical Insurance) of title XVIII or under both parts A (Hospital Insurance) and B of title XVIII.

Directs the Secretary, under the prospective payment provisions of title XVIII of the Social Security Act, to provide that in the case of a State health care plan approved under Part A of title XXI of the Public Health Service Act payments with respect to services covered under title XXI: (1) may, at the State's option, be made in accordance with title XXI rather than Medicare; or (2) shall be made in accordance with title XXI rather than Medicare in the case of a plan which provides for the control of hospital costs through a title XXI rate setting mechanism.

Provides for increased Medicare payments to a hospital for its operating costs if the number of admissions for an accounting period exceeds the hospital's admissions during a specified base period.

Directs the Secretary to determine a regionally adjusted capital-related prospective payment rate for each inpatient hospital discharge in accordance with a specified formula.

Directs the Secretary, for each diagnosis-related group, to estimate the average per discharge amount of charges recognized under part B of title XVIII attributable to items and services furnished to inpatients within such group during 1983. Provides that, subject to the part B deductible and subject to other provisions of the Medicare prospective payment rate provisions, with respect to each individual entitled to benefits under part A and enrolled under part B of title XVIII who is a hospital inpatient and whose discharge is classified within a diagnosis-related group, the Secretary shall provide for payment to the hospital of an amount equal to 80 percent of a specified rate in lieu of payments otherwise made under part B for inpatient services.

Requires that: (1) payments for health care services furnished to inpatients be made to or through a hospital as a condition of the hospital's participation in the Medicare payment; and (2) the Secretary provide for notice to the public and to individuals enrolled under part B of title XVIII of the Social Security Act of such requirement.

Permits the Federal Hospital Insurance Trust Fund to borrow at any time from other social security trust funds if it can repay the loan within ten years. Provides for the periodic transfer to the Federal Hospital Insurance Trust Fund from the Federal Supplementary Medical Insurance Trust Fund of amounts which the Secretary determines to be equal to a specified fraction of the total revenues of the Federal Supplementary Medical Insurance Trust Fund for each fiscal year.

Directs the Secretary to conduct and report to the Congress on seven studies relating to: (1) health care costs, quality, delivery, and services; and (2) the effects of this Act.