tion to participate in such programs may not be reinstated unless the Secretary finds that the reason for termination has been removed and there is reasonable assurance that it will not recur.

"(d) Effective July 1, 1977, no payment may be made to any State under this title with respect to skilled nursing facility services furnished by any institution—

"(1) which does not have in effect an agreement with the State agency executed pursuant to subsection (b), or

"(2) whose approval of eligibility to participate in the programs established by this title or title XVIII has been terminated by the Secretary and has not been reinstated, except that payment may be made for up to thirty days with respect to skilled nursing facility services furnished to any eligible individual who was admitted to such institution prior to the effective date of such termination.".

CRITERIA UNDER MEDICAID PROGRAM FOR DETERMINING REASONABLE VALUE OF CERTAIN TRANSFERRED FACILITIES

SEC. 32. (a) Section 1902 (a) (13) of the Social Security Act is amended(1) in clause (D) thereof, by inserting “and subsection (g)" immediately after "section 1122”, and

(2) in clause (E) thereof, by inserting ", consistent with subsection (g)", immediately after "methods and standards".

(b) Section 1902 of such Act is further amended by adding at the end thereof the following new subsection:

"(g) The reasonable value of any facility or organization (which is a hospital, skilled nursing facility, intermediate care facility, or other health care organization) shall, for purposes of determining allowable depreciation, interest or lease expense, and any related capital items of cost, be determined in accordance with the criteria employed under title XVIII for determining the reasonable value of such a facility or organization for such purpose for the period following a change of ownership (whether by sale, lease, or other transfer) of the facility or organization of the business which operates the facility or organization, if, during any period prior to such change of ownership, such facility or organization provided (or arranged for) services for which payment was made under a State plan approved under this title.".

(b) The amendment made by subsection (a) shall be applicable to facilities or organizations the ownership of which is changed after June 30, 1976.

VISIT AWAY FROM INSTITUTION BY PATIENTS OF SKILLED NURSING OR INTERMEDIATE CARE FACILITIES

SEC. 33. Section 1903 of the Social Security Act is amended by adding at the end thereof the following new subsection:

"(1) In the administration of this title, the fact that an individual, who is an inpatient of a skilled nursing facility or an intermediate care facility, absents himself therefrom to make visits outside the institution shall not be regarded as conclusively indicating that such individual is not in need of the services which such facility is designed to provide; but such visits, and the frequency and length thereof, shall be taken into account, together with other evidence, in determining whether such individual is in need of such services.",

PROCEDURES FOR DETERMINING REASONABLE COST AND REASONABLE CHARGE;
DISCLOSURE OF OWNERSHIP AND FINANCIAL INFORMATION

SEC. 40. (a) Part A of title XI of the Social Security Act is amended by adding after section 1132 thereof (as added by section 11 of this Act) the following new section:

"PROCEDURES FOR DETERMINING REASONABLE COST AND REASONABLE CHARGE; DISCLOSURE OF OWNERSHIP AND FINANCIAL INFORMATION

"SEC. 1133. (a) (1) In determining, for purposes of ascertaining the amount of any payment for a health service, or services furnished under title XVIII, under a program established pursuant to title V, or under a State plan approved under title XIX, when such payment is based on the reasonable cost or reasonable

charge for such service (or services), no element comprising any part of such cost or charge shall be considered to be reasonable if, and to the extent that, such element is—

"(A) a commission, finder's fee, or for a similar arrangement, or

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‘(B) an amount payable for any facility (or part or activity thereof) under any rental or lease arrangement which is, directly or indirectly, determined, wholly or in part as a per centum, fraction, or portion of the charge or cost attributed to any health service (or health services) (other than such element) or any health service (or health. services) including, but not limited to, such element.

"(2) The Secretary shall by regulations provide that, in determining the reasonable charge or reasonable cost of any health service (for purposes of title XVIII, any program established pursuant to title V, or any State plan approved under title XIX), appropriate account will be taken of the relationship between direct and indirect overhead costs and the direct costs involved with the provision of such service, and, in connection with the making of any such determina-tion with respect to any such service, there shall be included as a part thereof an indication of the ratio of such overhead costs with respect to such service and the total costs involved in the furnishing of such service.

"(b) (1) The Secretary shall by regulation establish procedures whereby, in the administration of title XVIII, programs established pursuant to title V, and State plans approved under title XIX, there will be review and advance approval of any contract which

"(A) constitutes an element of cost of any health service for which payment is authorized under title XVIII, a program established pursuant to title V, or a State plan approved under title XIX;

"(B) is a consulting, management, or service contract; and

"(C) involves payments with respect to any consecutive period of twelvemonths which aggregate $10,000 or more.

"(2) Such procedure shall provide that advance approval of such a contract will be given only if

"(A) the services to be furnished thereunder are found to be services. which may appropriately be furnished on a contract basis;

"(B) the contracting party is qualified to furnish the services called for under such contract;

"(C) the contract price for the services called for thereunder is reason-able; and

"(D) any part of the payment called for under the contract is to be paid in advance, the amount of the payment will be based on the needs of the contracting party for the advance payment.

"(c) (1) The Secretary shall by regulations (or by contract provision) provide that any entity (other than a public agency) which is—

"(A) a provider of services which furnishes services with respect to which payment is claimed under title XVIII, under any program established pursuant to title V, or under a State plan approved under title XIX;

or

"(B) a party to an agreement with the Secretary entered into pursuant tosection 1816 or 1842 (a);

shall promptly comply with any request, made by the Secretary or the Comptroller General of the United States for any or all of the following:

"(C) full and complete information as to the idenity (i) of each person having (directly or indirectly) an ownership interest of 1 per centum or more in such entity or who is the owner (in whole or in part) of any mortgage, deed of trust, note, or other obligation secured (in whole or in part) by such entity or any of the property or assets thereof, (ii) in case such entity is organized as a corporation, of each officer and director of the corporation, and (iii) in case such entity is organized as a partnership, of each partner;

"(D) full and complete information as to any business dealings between such entity and persons referred to in clause (C), and

"(E) a consolidated certified costs report with respect to its costs and charges, including costs and charges of related organizations (as that term is employed for purposes of title XVIII).

"(2) (A) If at the close of the sixty-day period which begins on the date a request (as described in paragraph (1)) is made of an entity described in para-graph (1) (A) or (B), such request has not been fully complied with, then

"(i) in case such entity is an entity described in paragraph (1) (A), the Secretary shall notify such entity that no payment will be made to such entity under title XVIII, and no Federal funds shall be available with respect to any expenditures made under or pursuant to title V or XIX (or a program or plan approved thereunder), for or on account of any services furnished by such entity on or after the first calendar month which begins not less than thirty days after the date such notice is sent, and

"(ii) in case such entity is an entity described in paragraph (1)(B), the Secretary shall notify such entity that any agreement between such entity and the Secretary entered into pursuant to section 1816 or section 1842 is terminated effective on the first day of the first calendar month which begins not less than thirty days after the date such notice is sent.

In case the Comptroller General makes a request (as described in paragraph (1)) which is not complied with prior to the sixty-day period described in paragraph (2), then he shall, at the earliest practicable date after the close of such period, advise the Secretary of that fact that such request was made by him and was not complied with within such period, so as to enable the Secretary to notify the entity involved as provided in subparagraph (A) (i) or (ii). "(B) Notwithstanding any other provision of law

"(i) payments otherwise authorized to be made under title XVIII, and Federal funds otherwise available with respect to expenditures under or pursuant to title V or XIX (or a program or plan approved thereunder) shall be subject to the limitations referred to in a notice sent by the Secretary pursuant to subparagraph (A) (i), and

"(ii) agreements referred to in subparagraph (A) (ii) shall be terminated as indicated by the Secretary in a notice sent by him pursuant to subparagraph (A) (ii),

except that the Secretary, for good cause shown, may terminate the application of such limitation after it has been in effect for not less than three months.. Whenever an agreement between the Secretary and any entity is terminated pursuant to clause (ii) of the preceding sentence, the Secretary shall not enter into another agreement with such entity under section 1816 or section 1842 sooner. than three months after such agreement was so terminated.

"(d) Notwithstanding any other provision of law

"(1) no payment shall be made under title XVIII, and

"(2) no Federal funds shall be available under title V or XIX with respect to expenditures made under a State program or plan approved thereunder,

for goods and services furnished, on or after the first day of the first calendar month which begins not less than ninety days after the date of enactment of this subsection, to a patient (directly or indirectly) by any entity which is an independent pharmacy or laboratory unless there is in effect an agreement between such entity and the Secretary or in the case of title XIX the State agency under which such entity agrees to provide to the Secretary (or any authorized officer or employee of the Department of Health, Education, and' Welfare) reasonable access to the books and records thereof which pertain to the provision of billing and payment for goods and services supplied or rendered by such entity.".

(b) The amendments shall, except as otherwise specified therein, take effect, in the case of a provider for fiscal years beginning or or after July 1, 1976 and, in the case of any other person on July 1, 1976.

STANDARDS FOR PAYMENTS UNDER MEDICAID TO HEALTH MAINTENANCE ORGANIZATIONS SEC. 41. Section 1903 of such Act is amended by inserting at the end thereof the following new subsection:

"(m) Payment under the preceding provisions of this section shall be made with respect to any amount expended during calendar quarters commencing after December 31, 1976, by a State as payment on a per capita or similar basis for the provision of medical assistance only if—

"(1) the entity to which such payment is made meets the definition of a health maintenance organization contained in section 1876 as amended, "(2) of the enrolled members of such entity not less than (A) 50 per centum of such members (in case such entity is not an entity described in clause (B)) are individuals who are neither entitled to benefits under title XVIII nor eligible for medical assistance under the State plan approved

under this title, or (B) in case such entity serves a geographic area in which individuals (referred to in clause (A)) constitute less than 50 per centum of the total population, a per centum equal to whichever of the following is the larger: (i) a per centum of such members equal to the per centum of such total population which consists of such individuals, or (ii) 25 per centum of such members; and

"(3) such payment is made under a contract or other arrangement which has been approved in advance by the Secretary and which meets requirements imposed by regulations which the Secretary shall prescribe for the purpose of assuring that payments by a State on a per capita or similar basis for the provision of medical assistance are subject to substantially the same requirements as those imposed by subsections (a) and (i) of section 1876 with respect to title XVIII.".

AMBULANCE SERVICE

SEC. 42. (a) Section 1861(s) (7) of the Social Security Act is amended by inserting :

"(Including ambulance service to the nearest hospital which is: (a) adequately equipped and (b) has medical personnel qualified, in the opinion of the hospital, to deal with, and available for the treatment of, the individual's illness, injury, or condition)" immediately after "ambulance service". (b) The amendment made by subsection (a) shall be applicable with respect to services furnished on and after the first day of the first calendar month which begins after the date of enactment of this Act.

GRANTS TO REGIONAL PEDIATRIC PULMONARY CENTERS

SEC. 43. (a) Section 511 of the Social Security Act is amended(1) by inserting “(a)" immediately after "SEC. 511.", and

(2) by adding at the end of such section the following new subsection: "(b) (1) From the sums available under paragraph (2), the Secretary is authorized to make grants to public or nonprofit private regional pediatric respiratory centers, which are a part of (or are affiliated with) an institution of higher learning, to assist them in carrying out a program for the training and instruction (through demonstrations and otherwise) of health care personnel in the prevention, diagnosis and treatment of respiratory diseases in children and young adults, and in providing (through such program) needed health care services to children and young adults suffering from such diseases.

"(2) For the purpose of making grants under this subsection, there is authorized to be appropriated, for the fiscal year ending September 30, 1977, and each of the next four succeeding fiscal years, such sums (not in excess of $5,000,000 for any fiscal year) as may be necessary. Sums authorized to be appropriated for any fiscal year under this subsection for making grants for the purposes referred to in paragraph (1) shall be in addition to any sums authorized to be appropriated for such fiscal year for similar purposes under other provisions of this title.".

(b) Section 502(2) of such Act is amended by inserting "(a)" immediately after "511".

RESOURCES OF MEDICAID APPLICANT TO INCLUDE CERTAIN PROPERTY PREVIOUSLY DISPOSED OF TO APPLICANT'S RELATIVE FOR LESS THAN MARKET VALUE

SEC. 44. (a) Section 1902 (a) (17) of the Social Security Act is amended by striking out "and (D)" and inserting in lieu thereof the following: "(D) provide that, in determining the amount of the resources of any individual who is an applicant or recipient of medical assistance under the State plan, there shall (in addition to all resources actually owned by the individual) be included an amount equal to the current market value of any property of such individual if and to the extent that, within the one-year period immediately preceding the date the determination is made, such property was disposed of to a relative of such individual for less than fair market value, and (E)".

PENALTY FOR DEFRAUDING MEDICARE AND MEDICAID PROGRAMS

SEC. 45. (a) Section 1877 (b) of the Social Security Act is amended

(1) by striking out "misdemeanor" and inserting in lieu thereof "felony", and

(2) by striking out "one year" end inserting in lieu thereof "two years". (b) Section 1909 (b) of such Act is amended

(1) by striking out "misdemeanor" and inserting in lieu thereof "felony", and

(2) by striking out "one year" and inserting in lieu thereof "two years". Senator TALMADGE. I am glad that Senators Long, Ribicoff, Eastland, Hollings, Moss, Inouye, Domenici, Percy, Stone, Pell, Randolph, Gravel, Nunn, and Hartke as well as both the majority and minority leaders, Senators Mansfield and Scott, have joined me in this vital and urgent effort.

The situation is indeed urgent. Medicare and medicaid will cost Federal and State taxpayers more than $38 billion in fiscal year 1977-an increase of $7 billion over fiscal year 1976.

The increasing costs of these programs continually outstrip the rate of rise in Federal revenues. The choice is a simple one-either we make medicare and medicaid more efficient and economical, or we reduce benefits.

We have just too many worthwhile demands on the Federal dollar to be able to allocate increasingly disproportionate amounts to medicare and medicaid.

There is, of course, another choice-we can increase taxes. But even if that hard decision were taken we would, without necessary changes, be pouring dollars down a bottomless pit.

As they now operate, medicare and medicaid clearly could absorb every single dollar the Federal Government can come up with. It is time, in fact past time, to put our house in order. To do that, hard decisions have to be made-decisions which I believe this bill makes. If these decisions are not made now, we may well be confronted with the need to cut and slash payments to hospitals and doctors indiscriminately and often inequitably. That path is exactly what S. 3205 seeks to avoid.

States are now moving to place ceilings on payments to hospitals. Blue Cross plans are moving in that direction. The administration proposes a flat 7 percent limit on hospital cost increases. Momentum is rapidly increasing for arbitrary controls on payments to providers and practitioners. This bill, however, seeks to avoid cutoffs of this sort.

In Colorado, for example, the State has ordered a 5 percent reduction in Blue Cross payments to hospitals and a 5 percent cut in Blue. Shield payments to doctors.

At the National Governors' Conference held in Hershey, Pa., just last month the Governors of this country stated that the "rapidly escalating costs of the medicaid program are bankrupting the States and their localities." The Governors' resolution noted that there is "a need for better control over both the rates paid for health services and the utilization of these services by the patient."

The Governors' Conference urged State governments to intensify efforts to manage their medicaid programs better and also urged related cooperative action by the Federal Government to revise "existing regulations and legislation which pose obstacles to effective cost control procedures."

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