"(i) he had total earnings (as defined in section 203 (e)) of less than $2,400 in any calendar year preceding the year in which the first day of such period occurs, provided such calendar year is no earlier than the year preceding the year in which he attained retirement age, or

"(ii) he did not render services for wages of more than $100, and did not engage in self-employment in each of at least three months in any calendar year, provided such third month preceded the first day of such period and such calendar year is no earlier than the year preceding the year in which he attained retirement age, or

"(iii) he attained the age of seventy-two in a month prior to such period.

"(B) For the purposes of benefits for very expensive drugs, an individual shall be retired if on the first day of the month in which he incurs the cost of such drugs he meets the provisions of clause (i), (ii), or (iii) of subparagraph (A). Such first day shall be deemed the first day of the period for which he files for the payment of medical insurance benefits.

For purposes of subparagraph (A) (ii), an invidual shall be presumed not to have engaged in self-employment with respect to any month if, by applying the provisions of section 203(e) and the regulations issued thereunder, the Secretary determines that such individual did not engage in self-employment in such month.

"(4) Payment of medical insurance benefits which an individual is eligible to receive may be made for

"(A) hospital services furnished to such individual for a total of not more than ninety days in any calendar year;

"(B) nursing home services furnished to such individual for a total of not more than one hundred and eighty days in any calendar year;

"(C) home health services furnished to such individual for a total of not more than two hundred and forty days;

"(D) diagnostic outpatient services but only to the extent the Secretary, after consultation with the advisory council established pursuant to subsection (f), may by regulation specify;

"(E) expensive drugs furnished such individual, but only to the extent the Secretary, after consultation with such advisory council, may by regulation specify.

The maximum of any combination of hospital services, nursing home services, and home health services for which payment may be made for such services furnished, during any calendar year, to any individual eligible to receive medical insurance benefits shall not exceed ninety units of services. For the purpose of the preceding sentence, one 'unit of services' equals (i) one day of hospital services, (ii) two days of nursing home services, or (iii) two and two-thirds days of home health services.

"(5) Notwithstanding the previous provisions of this subsection, no individual shall be eligible to receive medical insurance benefits insofar as they relate to hospital services, nursing home services, or home health services, unless such services are rendered after referral by a physician licensed to practice surgery or medicine in a State and such physician certifies in writing that such hospital services, nursing home services, or home health services are or were required for his medical treatment; except that such referral shall not be required for hospital services in case of an emergency which makes such referral impracticable. Periodic recertification that medical treatment which extends over a period of time is required shall, in accordance with regulations established by the Secretary, be a condition of continuing eligibility to receive such benefits during the period such services are furnished.

"(6) (A) An application for the payment of medical insurance benefits shall be valid, with respect to a period during which one or more of the services described in subsection (c) are furnished, if such application is filed no earlier than the first day of the third month preceding the month in which the first day of such period occurs or no later than the last day of the twelfth month succeeding the month in which the first day of such period occurs. An application for the payment of medical insurance benefits shall be valid with respect to the cost incurred for a very expensive drug if such application is filed within such time as the Secretary may by regulation prescribe.

(B) For purposes of this section, a period during which—

"(i) hospital or nursing home services (or both) are furnished means a consecutive number of days (including only one day) in which such services are furnished;

"(ii) home health services are furnished means one or more days (but not exceeding two hundred and forty days in any calendar year) in which such services are furnished, but only if the number of days elapsing between any two days in which such services are furnished does not exceed thirty;

"(iii) diagnostic outpatient services are furnished means one or more days (but not exceeding in any calendar year the number of days specified by the Secretary pursuant to paragraph (4) (D) of this subsection) in which such services are furnished, but only if the number of days elapsing between any two days in which such services are furnished does not exceed fourteen.

"EVIDENCE AND DETERMINATIONS OF ELIGIBILITY

"(b)(1) Proof that an individual is entitled to monthly insurance benefits under section 202 by reason of having attained retirement age shall be conclusive evidence that such individual has attained retirement age.

"(2) The provisions of section 205 relating to the making and review of determinations shall be applicable to determinations as to (i) whether an individual is eligible to receive medical insurance benefits, and (ii) the number of days, in any calendar year, for which an individual is eligible to receive such benefits.

"DESCRIPTION OF MEDICAL INSURANCE BENEFITS

"(c) (1) 'Hospital services' means, subject to further definition and limitation by regulations, the following services provided an individual as an inpatient: bed and board in a hospital, in semiprivate accommodations unless they are unavailable, or unless other accommodations are occupied at the request of the patient or, are required for medical reasons; and such medical, nursing, ambulance, and other services, and such drugs, supplies, and appliances, as the hospital customarily provides bed patients either through its own employees or through arrangements with others, except that this term shall not include services provided in connection with cosmetic or plastic surgery performed for beautification.

"(2) 'Nursing home services' means, subject to further definition by regulations, skilled nursing care, related medical and personal services required for the treatment of the patient, and accompanying bed and board furnished on an inpatient basis in any skilled nursing facility (including a home for the aged), to an individual pursuant to a certification by a physician for a condition for which such individual had, immediately prior to transfer to such facility, been hospitalized.

"(3) 'Home health services' means, subject to further definition by regulations, professional nursing care (including part-time homemaker services, physical and Occupational therapy, medical social services, dietary counseling, ambulance service, and similar allied services) in a place of residence maintained as an individual's home, furnished by a public or other nonprofit home health service agency.

"(4) 'Diagnostic outpatient services' means, subject to further definition by regulations, such services furnished by a hospital and prescribed by a physician licensed to practice surgery or medicine to any individual as an outpatient for purposes of diagnostic study.

"(5) 'Expensive drugs' means, subject to further definition by regulations, any drug which has been prescribed by a physician licensed to practice surgery or medicine in a State for use of an individual, including drugs, for repeated use over a period of time, if such drug is prescribed by its official title as included in United States Pharmacopoeia, National Formulary, Homeopathic Pharmacopoeia, or New and Non-Official Remedies, or in any other compendium recognized by law as an official compendium and the cost of which is in excess of an amount fixed by the Secretary.

"(6) Notwithstanding the description of services in the preceding paragraphs of this subsection, such services shall also include that part of similar but of more expensive services as is equivalent in cost to the services specified in such preceding paragraphs.

"AGREEMENTS WITH PROVIDERS OF HEALTH SERVICES

“(d)(1)(A) The Secretary shall publish, at such time or times as he designates, a list of (i) hospitals, (ii) hospitals furnishing outpatient diagnostic services, (iii) facilities furnishing nursing home services, and (iv) public or other nonprofit home health services agencies in the United States, which meet the standards

prescribed by him for providing hospital services, diagnostic outpatient services, nursing home services, and home health services, and which have filed with him agreements under subparagraph (B) of this paragraph. No institution or agency required by or pursuant to State law to be licensed shall be included in any such list unless it is duly licensed. In setting eligibility standards for any class of institutions or agencies, the Secretary may take account of standards set by any recognized national listing or accrediting body. The Secretary may utilize the services of appropriate State agencies in determining whether providers of services meet such standards as he shall prescribe.

"(B) No hospital, nursing home, or home health service agency shall be included in a list under subparagraph (A) unless it has filed with the Secretary an agreement to make no charge to or on account of individuals for services furnished to such individuals who are eligible to receive medical insurance benefits under this section (and abide by regulations of the Secretary with respect to making charges in cases of uncertainty or delay in determining eligibility), but such agreements shall not preclude the making of charges to such individuals or persons for accommodations or services, furnished at their request, which are in addition to, or more expensive than, those for which patients are eligible to receive as individuals eligible for medical insurance benefits by reason of this section. An agreement under this paragraph may be terminated by the provider of health services at such time and upon such notice to the Secretary and to the public as he may specify by regulations.

"(C) No mental or tuberculosis hospital shall be included in a list under this paragraph.

"(2)(A) Any hospital, nursing home, or home health services agency, listed by the Secretary under paragraph (1) for providing a class of services, which provides services of that class to an individual eligible to receive medical insurance benefits under this section shall be entitled to receive payment for such services under this title. Under conditions specified in regulations, and in amounts determined in accordance therewith, payments shall be made to hospitals not listed by the Secretary for emergency hospital services rendered to individuals eligible to receive medical insurance benefits under this section.

"(3) Payments for hospital services and outpatient diagnostic services, to hospitals listed by the Secretary, shall be equal to the cost of rendering the services. The method or methods of determining such cost shall be prescribed by regulations, issued after consultation with the advisory council.

"(4) No payment shall be made under this section for any hospital services which the hospital is obligated by law, or by contract with the United States or a State or political subdivision thereof, to render at public expense and without regard to the income or resources of the patient. No such payment shall be made for any hospital services for any injury, disease, or disability for which the patient is entitled to hospitalization (or to the cost thereof) under any workmen's compensation law; except that payment may be made if (A) an appropriate application for hospitalization (or for the cost thereof) has been made under the workmen's compensation law, (B) entitlement thereto has not been finally determined, and (C) an arrangement satisfactory to the Secretary has been made for reimbursement of the Federal Medical Insurance Trust Fund if the claim under the workmen's compensation law is finally sustained.

"(5) The amount of payments of nursing home services and for home health services shall be determined after consultation with the advisory council and shall be based on the reasonable cost of rendering the services.

"(6) (A) Any pharmacy which employs one or more pharmacists who are licensed under the laws of the State in which it is located to dispense drugs at retail shall be eligible to enter into an agreement with the Secretary whereby such pharmacy will be paid for furnishing drugs to individuals eligible to receive medical insurance benefits under this section.

"(B) Such agreement shall apply only to the furnishing of 'expensive drugs' as defined in subsection (c) (5), and shall relate only to the part of the cost of such drugs which exceeds such amount as may be fixed by the Secretary. The method of determining the amount of the payments to a pharmacy shall be based on the reasonable cost of such drugs to such pharmacy plus such percentage of such costs as may be determined to provide adequate compensation to such pharmacy for its services in furnishing such drugs.

"(7) No supervision or control over the administration or operation, or over the selection, tenure, or compensation of personnel, shall be exercised under the authority of this section over any hospital, nursing home facility, home health services agency, or pharmacy which has entered into an agreement under this section.

"(8) Agreements under this section shall be made by the hospital, nursing home, home health services agency, or pharmacy providing the services described in subsection (c), but this paragraph shall not preclude representation of such institution or pharmacy by any individual, association, or organization authorized by the institution or agency to act on its behalf.

"(9) Nothing in such agreements or in this section shall be construed to give the Secretary supervision or control over the practice of medicine or the manner in which medical services are provided.

"(10) Except to the extent the Secretary has made provision pursuant to subsection (g) (relating to utilization of private nonprofit organizations) for the making of payments to providers of health services, he shall from time to time determine the amount to be paid to each provider of health services under an agreement with respect to the services furnished and shall pay such amount, except that such amount may be reduced or increased, as the case may be, by any sum by which the Secretary finds that the amount paid to such provider of health services for any prior period was greater or less than the amount which should have been paid to it for such period. The Secretary of the Treasury, prior to audit or settlement by the General Accounting Office, shall make payment from the Federal Medical Insurance benefits under this section may obtain hospital services, in accordance with such certification.

"FREE CHOICE BY PATIENT

"(e) Any individual eligible to receive medical insurance benefits under this section may obtain hospital services, nursing home services, home health services, or diagnostic outpatient services from any provider of health services which is listed by the Secretary under subsection (d)(1) as eligible to provide the class of health services in question and which admits such individual or undertakes to provide him services; and may obtain very expensive drugs, upon such payment as may be required, from any pharmacy with which the Secretary has in effect an agreement under subsection (c) (6).

"NATIONAL MEDICAL INSURANCE BENEFITS ADVISORY COUNCIL

"(f) (1) For the purpose of advising and assisting the Secretary in the formulation of policy and the promulgation of regulations in connection with the administration of this section, there is hereby created a National Medical Insurance Benefits Advisory Council which shall consist of the Commissioner of Social Security and the Surgeon General of the Public Health Service, who shall serve as co-chairman ex officio, and twelve members to be appointed by the Secretary. Not less than four of the appointed members shall be representatives of the general public and the remainder of the appointed members shall be persons who are outstanding in the fields pertaining to hospitals and health activities. Each appointed member shall hold office for a term of four years, except that any member appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed shall be appointed for the remainder of such term, and the terms of office of the member first taking office shall expire, as described by the Secretary at the time of appointment, three at the end of the first year, three at the end of the fourth year after the date of appointment. An appointed member shall not be eligible to serve continuously for more than two terms but shall be eligible for reappointment if he has not served immediately preceding his reappointment. The advisory council is authorized to appoint such special advisory and technical committees as may be useful in carrying out its functions. Appointed members of the advisory council and members of its advisory or technical committees, while serving on business of the advisory council, shall receive compensation at rates fixed by the Secretary, but not exceeding $50 per day, and shall also be entitled to receive an allowance for actual and necessary travel and for subsistence expenses while so serving away from their places of residence. The advisory council shall meet as frequently as the Secretary deems necessary, but not less than once each year. Upon request of four or more members it shall be the duty of the Secretary to call a meeting of the advisory council.

"(2) The advisory council, or a technical committee appointed by the council with the approval of the Secretary, shall have the duty of study and evaluation of the operation of this section. Any recommendations by the council for amendment of this section shall be transmitted to the Congress by the Secretary.

"UTILIZATION OF NONPROFIT ORGANIZATIONS

"(g) (1) The Secretary may utilize, to the extent he finds economical and otherwise advantageous, the services of private nonprofit organizations exempt from Federal taxation under section 501 of the Internal Revenue Code of 1954, or public agencies which are skilled in dealing with hospitals in matters pertaining to hospitalization of individual patients and payment therefor. The Secretary is authorized to enter into an agreement with any such organization or agency under which, in the whole or any part of the United States, the organization or agency undertakes to determine (subject to such review as may be provided for in the agreement) the payments to hospitals required by this section and by regulations prescribed thereunder, and to make such payments, and to perform such other functions as may be deemed appropriate by the Secretary. The Secretary is authorized to utilize in similar manner the services of such organizations or agencies to determine and make payments, and to perform such other functions as he deems appropriate, in the provision of services (other than hospital services) described in subsection (c).

"(2) An agreement under paragraph (1) shall provide for payment from the Federal Medical Insurance Trust Fund to the organization or agency of the amounts paid out by such organization to providers of health services under this section and of the cost of administration determined by the Secretary with the advice of the advisory council to be necessary and proper for carrying out such organization's or agency's functions under its agreement pursuant to this section. Such payments to any organization or agency shall be made either in advance on the basis of estimates by the Secretary or as reimbursement, as may be agreed upon by the organization and the Secretary, and adjustments may be made in subsequent payments on account of overpayments or underpayments previously made to the organization under this section. Such payments shall be made by the Secretary of the Treasury from the Federal Medical Insurance Trust Fund at such time or times as the Secretary may specify and shall be made prior to audit or settlement by the General Accounting Office.

"(3) An agreement under subsection (a) with any organization may require any of its officers or employees certifying payments or disbursing funds pursuant to the agreement, or otherwise participating in its performance, to give surety bond to the United States in such amount as the Secretary may deem necessary, and may provide for the payment of the cost of such bond from the Federal Medical Insurance Trust Fund.

"RULEMAKING POWERS OF THE SECRETARY

"(h) The Secretary, after consulting with the advisory council, shall have full power and authority to make rules and regulations and to establish procedures, not inconsistent with the provision of this section, which are necessary or appropriate to carry out such provisions, and shall adopt reasonable and proper rules and regulations to regulate and provide for the nature and extent of the proofs and evidence and the method of taking and furnishing the same in order to establish the right of individuals to medical insurance benefits hereunder, and the rights of providers of services to payment.

"CERTIFYING AND DISBURSING OFFICERS

"(i) (1) No individual designated by the Secretary pursuant to an agreement under this section as a certifying officer shall, in the absence of gross negligence or intent to defraud the United States, be liable with respect to any payments certified by him under this section.

"(2) No disbursing officer shall, in the absence of gross negligence or intent to defraud the United States, be liable with respect to any payment by him under this section if it was based upon a voucher signed by a certifying officer designated as provided in paragraph (1).”

FEDERAL MEDICAL INSURANCE TRUST FUND

(b) (1) The heading to section 201 of the Social Security Act is amended to read: "FEDERAL OLD-AGE AND SURVIVORS INSURANCE TRUST FUND, FEDERAL DISABILITY INSURANCE TRUST FUND, AND FEDERAL MEDICAL INSURANCE TRUST FUND".

(2) Subsection (a) of section 201 of such Act is amended by inserting before the semicolon in paragraph (3) thereof the following: "and in clause (1) of subsection (c) of this section"; by inserting before the period in paragraph (4) thereof