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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2486 Introduced in House (IH)]

  1st Session
                                H. R. 2486

To amend title XVIII of the Social Security Act to preserve and reform 
                         the medicare program.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            October 17, 1995

  Mr. Peterson of Minnesota introduced the following bill; which was 
  referred to the Committee on Ways and Means, and in addition to the 
 Committees on Commerce, the Judiciary, and Rules, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL

 
To amend title XVIII of the Social Security Act to preserve and reform 
                         the medicare program.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

                           TITLE XV--MEDICARE

SEC. 15000. SHORT TITLE; REFERENCES IN TITLE; TABLE OF CONTENTS.

    (a) Short Title of Title.--This title may be cited as the 
``Medicare Preservation Act of 1995''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this title an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (c) References to OBRA.--In this title, the terms ``OBRA-1986'', 
``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and ``OBRA-1993'' refer to 
the Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509), the 
Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203), the 
Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239), the 
Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508), and the 
Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66), 
respectively.
    (c) Table of Contents.--The table of contents of this title is as 
follows:

                          TITLE VIII--MEDICARE

Sec. 15000. Short title; references in title; table of contents.
                  Subtitle A--Medicare Choice Program

          Part 1--Increasing Choice Under the Medicare Program

Sec. 15001. Increasing choice under Medicare.
Sec. 15002. Medicare Choice Program.
            ``Part C--Provisions Relating to Medicare Choice

        ``Sec. 1851. Requirements for Medicare Choice organizations.
        ``Sec. 1852. Requirements relating to benefits, provision of 
                            services, enrollment, and premiums.
        ``Sec. 1853. Patient protection standards.
        ``Sec. 1854. Provider-sponsored organizations.
        ``Sec. 1855. Payments to Medicare choice organizations.
        ``Sec. 1856. Establishment of standards for Medicare choice 
                            organizations and products.
        ``Sec. 1857. Medicare choice certification.
        ``Sec. 1858. Contracts with Medicare Choice organizations.
        ``Sec. 1859. Demonstration project for high deductible/medisave 
                            products.
Sec. 15003. Reports.
Sec. 15004. Transitional rules for current Medicare HMO program.
   Part 2--Special Rules for Medicare Choice Medical Savings Accounts

Sec. 15011. Medicare Choice MSA's.
Sec. 15012. Certain rebates excluded from gross income.
      Part 3--Special Antitrust Rule for Provider Service Networks

Sec. 15021. Application of antitrust rule of reason to provider service 
                            networks.
                          Part 4--Commissions

Sec. 15031. Medicare payment review commission.
Sec. 15032. Commission on the Effect of the Baby Boom Generation on the 
                            Medicare Program.
           Part 5--Preemption of State Anti-Managed Care Laws

Sec. 15041. Preemption of State law restrictions on managed care 
                            arrangements.
Sec. 15042. Preemption of State laws restricting utilization review 
                            programs.
          Subtitle B--Provisions Relating to Regulatory Relief

    Part 1--Provisions Relating to Physician Financial Relationships

Sec. 15101. Repeal of prohibitions based on compensation arrangements.
Sec. 15102. Revision of designated health services subject to 
                            prohibition.
Sec. 15103. Delay in implementation until promulgation of regulations.
Sec. 15104. Exceptions to prohibition.
Sec. 15105. Repeal of reporting requirements.
Sec. 15106. Preemption of State law.
Sec. 15107. Effective date.
                        Part 2--Antitrust Reform

Sec. 15111. Publication of antitrust guidelines on activities of health 
                            plans.
Sec. 15112. Issuance of health care certificates of public advantage.
Sec. 15113. Study of impact on competition.
Sec. 15114. Antitrust exemption.
Sec. 15115. Requirements.
Sec. 15116. Definitions.
          subpart a--uniform standards for malpractice claims
Sec. 15121. Applicability.
Sec. 15122. Requirement for initial resolution of action through 
                            alternative dispute resolution.
Sec. 15123. Optional application of practice guidelines.
Sec. 15124. Treatment of noneconomic and punitive damages.
Sec. 15125. Periodic payments for future losses.
Sec. 15126. Treatment of attorney's fees and other costs.
Sec. 15127. Uniform statute of limitations.
Sec. 15128. Special provision for certain obstetric services.
Sec. 15129. Jurisdiction of Federal courts.
subpart b--requirements for state alternative dispute resolution (adr) 
                                systems
Sec. 15131. Basic requirements.
Sec. 15132. Certification of State systems; applicability of 
                            alternative Federal system.
Sec. 15133. Reports on implementation and effectiveness of alternative 
                         subpart c--definitionssystems.
Sec. 15141. Definitions.
     Part 4--Payment Areas for Physicians' Services Under Medicare

Sec. 15151. Modification of payment areas used to determine payments 
                            for physicians' services under medicare.
         Subtitle C--Medicare Payments to Health Care Providers

               Part 1--Provisions Affecting All Providers

Sec. 15201. One-year freeze in payments to providers.
                  Part 2--Provisions Affecting Doctors

Sec. 15211. Updating fees for physicians' services.
Sec. 15212. Use of real GDP to adjust for volume and intensity.
                 Part 3--Provisions Affecting Hospitals

Sec. 15221. Reduction in update for inpatient hospital services.
Sec. 15222. Elimination of formula-driven overpayments for certain 
                            outpatient hospital services.
Sec. 15223. Establishment of prospective payment system for outpatient 
                            services.
Sec. 15224. Reduction in medicare payments to hospitals for inpatient 
                            capital-related costs.
Sec. 15225. Moratorium on PPS exemption for long-term care hospitals.
Sec. 15226. Elimination of certain additional payments for outlier 
                            cases.
              Part 4--Provisions Affecting Other Providers

Sec. 15231. Revision of payment methodology for home health services.
Sec. 15232. Limitation of home health coverage under part A.
Sec. 15233. Reduction in fee schedule for durable medical equipment.
Sec. 15234. Nursing home billing.
Sec. 15235. Freeze in payments for clinical diagnostic laboratory 
                            tests.
       Part 5--Graduate Medical Education and Teaching Hospitals

Sec. 15241. Teaching Hospital and Graduate Medical Education Trust 
                            Fund.
  ``TITLE XXI--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST 
                                  FUND

                    ``Part A--Establishment of Fund

        ``Sec. 2101. Establishment of fund.
                ``Part B--Payments to Teaching Hospitals

        ``Sec. 2111. Formula payments to teaching hospitals.
Sec. 15242. Reduction in payment adjustments for indirect medical 
                            education.
       Subtitle D--Provisions Relating to Medicare Beneficiaries

Sec. 15301. Extending medicare part B premium.
Sec. 15302. Relating medicare part B premium to income for certain high 
                            income individuals.
Sec. 15303. Expanded coverage of preventive benefits.
                  Subtitle E--Medicare Fraud Reduction

Sec. 15401. Increasing beneficiary awareness of fraud and abuse.
Sec. 15402. Beneficiary incentives to report fraud and abuse.
Sec. 15403. Elimination of home health overpayments.
Sec. 15404. Skilled nursing facilities.
Sec. 15405. Direct spending for anti-fraud activities under medicare.
Sec. 15406. Fraud reduction demonstration project.
Sec. 15407. Report on competitive pricing.
              Subtitle F--Improving Access to Health Care

         Part 1--Improving Access to Health Care in Rural Areas

Sec. 15501. Community rural health network grants.
Sec. 15502. Provider incentives.
Sec. 15503. Modifications to the National Health Service Corps.
Sec. 15504. Creation of hospital-affiliated primary care centers.
Sec. 15505. Establishment of rural emergency access care hospitals.
Sec. 15506. Medical education.
Sec. 15507. Telemedicine payment methodology.
Sec. 15508. Demonstration project to increase choice in rural areas.
                      Part 2--Medicare Subvention

Sec. 15511. Medicare program payments for health care services provided 
                            in the military health services system.
                      Subtitle G--Other Provisions

Sec. 15601. Extension and expansion of existing secondary payer 
                            requirements.
Sec. 15602. Clarification of medicare coverage of items and services 
                            associated with certain medical devices 
                            approved for investigational use.
Sec. 15603. Additional exclusion from coverage.
      Subtitle H--Monitoring Achievement of Medicare Reform Goals

Sec. 15701. Establishment of budgetary and program goals.
Sec. 15702. Medicare Reform Commission.
Subtitle I--Lock-Box Provisions for Medicare Part B Savings From Growth 
                               Reductions

Sec. 15801. Establishment of Medicare Growth Reduction Trust Fund for 
                            part B savings.

                  Subtitle A--Medicare Choice Program

          PART 1--INCREASING CHOICE UNDER THE MEDICARE PROGRAM

                                                      Subtitle A Part 1

SEC. 15001. INCREASING CHOICE UNDER MEDICARE.

    (a) In General.--Title XVIII is amended by inserting after section 
1804 the following new section:

                   ``providing for choice of coverage

    ``Sec. 1805. (a) Choice of Coverage.--
            ``(1) In general.--Subject to the provisions of this 
        section, every individual who is entitled to benefits under 
        part A and enrolled under part B shall elect to receive 
        benefits under this title through one of the following:
                    ``(A) Through fee-for-service system.--Through the 
                provisions of parts A and B.
                    ``(B) Through a medicare choice product.--Through a 
                Medicare Choice product (as defined in paragraph (2)), 
                which may be--
                            ``(i) a product offered by a provider-
                        sponsored organization,
                            ``(ii) a product offered by an organization 
                        that is a union, Taft-Hartley plan, or 
                        association, or
                            ``(iii) a product providing for benefits on 
                        a fee-for-service or other basis.
                Such a product may be a high deductible/medisave 
                product (and a contribution into a Medicare Choice 
                medical savings account (MSA)) under the demonstration 
                project provided under section 1859.
            ``(2) Medicare choice product defined.--For purposes this 
        section and part C, the term `Medicare Choice product' means 
        health benefits coverage offered under a policy, contract, or 
        plan by a Medicare Choice organization (as defined in section 
        1851(a)) pursuant to and in accordance with a contract under 
        section 1858.
            ``(3) Terminology relating to options.--For purposes of 
        this section and part C--
                    ``(A) Non-medicare-choice option.--An individual 
                who has made the election described in paragraph (1)(A) 
                is considered to have elected the `Non-Medicare Choice 
                option'.
                    ``(B) Medicare choice option.--An individual who 
                has made the election described in paragraph (1)(B) to 
                obtain coverage through a Medicare Choice product is 
                considered to have elected the `Medicare Choice option' 
                for that product.
    ``(b) Special rules.--
            ``(1) Residence requirement.--Except as the Secretary may 
        otherwise provide, an individual is eligible to elect a 
        Medicare Choice product offered by a Medicare Choice 
        organization only if the organization in relation to the 
        product serves the geographic area in which the individual 
        resides.
            ``(2) Affiliation requirements for certain products.--
                    ``(A) In general.--Subject to subparagraph (B), an 
                individual is eligible to elect a Medicare Choice 
                product offered by a limited enrollment Medicare Choice 
                organization (as defined in section 1852(c)(4)(D)) only 
                if--
                            ``(i) the individual is eligible under 
                        section 1852(c)(4) to make such election, and
                            ``(ii) in the case of a Medicare Choice 
                        organization that is a union sponsor or Taft-
                        Hartley sponsor (as defined in section 
                        1852(c)(4)), the individual elected under this 
                        section a Medicare Choice product offered by 
                        the sponsor during the first enrollment period 
                        in which the individual was eligible to make 
                        such election with respect to such sponsor.
                    ``(B) No reelection after disenrollment for certain 
                products.--An individual is not eligible to elect a 
                Medicare Choice product offered by a Medicare Choice 
                organization that is a union sponsor or Taft-Hartley 
                sponsor if the individual previously had elected a 
                Medicare Choice product offered by the organization and 
                had subsequently discontinued to elect such a product 
                offered by the organization.
    ``(c) Process for Exercising Choice.--
            ``(1) In general.--The Secretary shall establish a process 
        through which elections described in subsection (a) are made 
        and changed, including the form and manner in which such 
        elections are made and changed. Such elections shall be made or 
        changed only during coverage election periods specified under 
        subsection (e) and shall become effective as provided in 
        subsection (f).
            ``(2) Expedited implementation.--The Secretary shall 
        establish the process of electing coverage under this section 
        during the transition period (as defined in subsection 
        (e)(1)(B)) in such an expedited manner as will permit such an 
        election for Medicare Choice products in an area as soon as 
        such products become available in that area.
            ``(3) Coordination through medicare choice organizations.--
                    ``(A) Enrollment.--Such process shall permit an 
                individual who wishes to elect a Medicare Choice 
                product offered by a Medicare Choice organization to 
                make such election through the filing of an appropriate 
                election form with the organization.
                    ``(B) Disenrollment.--Such process shall permit an 
                individual, who has elected a Medicare Choice product 
                offered by a Medicare Choice organization and who 
                wishes to terminate such election, to terminate such 
                election through the filing of an appropriate election 
                form with the organization.
            ``(4) Default.--
                    ``(A) Initial election.--
                            ``(i) In general.--Subject to clause (ii), 
                        an individual who fails to make an election 
                        during an initial election period under 
                        subsection (e)(1) is deemed to have chosen the 
                        Non-Medicare Choice option.
                            ``(ii) Seamless continuation of coverage.--
                        The Secretary shall establish procedures under 
                        which individuals who are enrolled with a 
                        Medicare Choice organization at the time of the 
                        initial election period and who fail to elect 
                        to receive coverage other than through the 
                        organization are deemed to have elected an 
                        appropriate Medicare Choice product offered by 
                        the organization.
                    ``(B) Continuing periods.--An individual who has 
                made (or deemed to have made) an election under this 
                section is considered to have continued to make such 
                election until such time as--
                            ``(i) the individual changes the election 
                        under this section, or
                            ``(ii) a Medicare Choice product is 
                        discontinued, if the individual had elected 
                        such product at the time of the 
                        discontinuation.
            ``(5) Agreements with commissioner of social security to 
        promote efficient administration.--In order to promote the 
        efficient administration of this section and the Medicare 
        Choice program under part C, the Secretary may enter into an 
        agreement with the Commissioner of Social Security under which 
        the Commissioner performs administrative responsibilities 
        relating to enrollment and disenrollment in Medicare Choice 
        products under this section.
    ``(d) Provision of Beneficiary Information to Promote Informed 
Choice.--
            ``(1) In general.--The Secretary shall provide for 
        activities under this subsection to disseminate broadly 
        information to medicare beneficiaries (and prospective medicare 
        beneficiaries) on the coverage options provided under this 
        section in order to promote an active, informed selection among 
        such options. Such information shall be made available on such 
        a timely basis (such as 6 months before the date an individual 
        would first attain eligibility for medicare on the basis of 
        age) as to permit individuals to elect the Medicare Choice 
        option during the initial election period described in 
        subsection (e)(1).
            ``(2) Use of nonfederal entities.--The Secretary shall, to 
        the maximum extent feasible, enter into contracts with 
        appropriate non-Federal entities to carry out activities under 
        this subsection.
            ``(3) Specific activities.--In carrying out this 
        subsection, the Secretary shall provide for at least the 
        following activities in all areas in which Medicare Choice 
        products are offered:
                    ``(A) Information booklet.--
                            ``(i) In general.--The Secretary shall 
                        publish an information booklet and disseminate 
                        the booklet to all individuals eligible to 
                        elect the Medicare Choice option under this 
                        section during coverage election periods.
                            ``(ii) Information included.--The booklet 
                        shall include information presented in plain 
                        English and in a standardized format 
                        regarding--
                                    ``(I) the benefits (including cost-
                                sharing) and premiums for the various 
                                Medicare Choice products in the areas 
                                involved;
                                    ``(II) the quality of such 
                                products, including consumer 
                                satisfaction information; and
                                    ``(III) rights and responsibilities 
                                of medicare beneficiaries under such 
                                products.
                            ``(iii) Periodic updating.--The booklet 
                        shall be updated on a regular basis (not less 
                        often than once every 12 months) to reflect 
                        changes in the availability of Medicare Choice 
                        products and the benefits and premiums for such 
                        products.
                    ``(B) Toll-free number.--The Secretary shall 
                maintain a toll-free number for inquiries regarding 
                Medicare Choice options and the operation of part C.
                    ``(C) General information in medicare handbook.--
                The Secretary shall include information about the 
                Medicare Choice option provided under this section in 
                the annual notice of medicare benefits under section 
                1804.
    ``(e) Coverage Election Periods.--
            ``(1) Initial choice upon eligibility to make election.--
                    ``(A) In general.--In the case of an individual who 
                first becomes entitled to benefits under part A and 
                enrolled under part B after the beginning of the 
                transition period (as defined in subparagraph (B)), the 
                individual shall make the election under this section 
                during a period (of a duration and beginning at a time 
                specified by the Secretary) at the first time the 
                individual both is entitled to benefits under part A 
                and enrolled under part B. Such period shall be 
                specified in a manner so that, in the case of an 
                individual who elects a Medicare Choice product during 
                the period, coverage under the product becomes 
                effective as of the first date on which the individual 
                may receive such coverage.
                    ``(B) Transition period defined.--In this 
                subsection, the term `transition period' means, with 
                respect to an individual in an area, the period 
                beginning on the first day of the first month in which 
                a Medicare Choice product is first made available to 
                individuals in the area and ending with the month 
                preceding the beginning of the first annual, 
                coordinated election period under paragraph (3).
            ``(2) During transition period.--Subject to paragraph (6)--
                    ``(A) Continuous open enrollment into a medicare 
                choice option.--During the transition period, an 
                individual who is eligible to make an election under 
                this section and who has elected the non-Medicare 
                Choice option may change such election to a Medicare 
                Choice option at any time.
                    ``(B) Open disenrollment before end of transition 
                period.--During the transition period, an individual 
                who has elected a Medicare Choice option for a Medicare 
                Choice product may change such election to another 
                Medicare Choice product or to the non-Medicare Choice 
                option.
            ``(3) Annual, coordinated election period.--
                    ``(A) In general.--Subject to paragraph (5), each 
                individual who is eligible to make an election under 
                this section may change such election during annual, 
                coordinated election periods.
                    ``(B) Annual, coordinated election period.--For 
                purposes of this section, the term `annual, coordinated 
                election period' means, with respect to a calendar year 
                (beginning with 1998), the month of October before such 
                year.
                    ``(C) Medicare choice health fair during october, 
                1996.--In the month of October, 1996, the Secretary 
                shall provide for a nationally coordinated educational 
                and publicity campaign to inform individuals, who are 
                eligible to elect Medicare Choice products, about such 
                products and the election process provided under this 
                section (including the annual, coordinated election 
                periods that occur in subsequent years).
            ``(4) Special 90-day disenrollment option.--
                    ``(A) In general.--In the case of the first time an 
                individual elects a Medicare Choice option under this 
                section, the individual may discontinue such election 
                through the filing of an appropriate notice during the 
                90-day period beginning on the first day on which the 
                individual's coverage under the Medicare Choice product 
                under such option becomes effective.
                    ``(B) Effect of discontinuation of election.--An 
                individual who discontinues an election under this 
                paragraph shall be deemed at the time of such 
                discontinuation to have elected the Non-Medicare Choice 
                option.
            ``(5) Special election periods.--An individual may 
        discontinue an election of a Medicare Choice product offered by 
        a Medicare Choice organization other than during an annual, 
        coordinated election period and make a new election under this 
        section if--
                    ``(A) the organization's or product's certification 
                under part C has been terminated or the organization 
                has terminated or otherwise discontinued providing the 
                product;
                    ``(B) in the case of an individual who has elected 
                a Medicare Choice product offered by a Medicare Choice 
                organization, the individual is no longer eligible to 
                elect the product because of a change in the 
                individual's place of residence or other change in 
                circumstances (specified by the Secretary, but not 
                including termination of membership in a qualified 
                association in the case of a product offered by a 
                qualified association or termination of the 
                individual's enrollment on the basis described in 
                clause (i) or (ii) section 1852(c)(3)(B));
                    ``(C) the individual demonstrates (in accordance 
                with guidelines established by the Secretary) that--
                            ``(i) the organization offering the product 
                        substantially violated a material provision of 
                        the organization's contract under part C in 
                        relation to the individual and the product; or
                            ``(ii) the organization (or an agent or 
                        other entity acting on the organization's 
                        behalf) materially misrepresented the product's 
                        provisions in marketing the product to the 
                        individual; or
                    ``(D) the individual meets such other conditions as 
                the Secretary may provide.
    ``(f) Effectiveness of Elections.--
            ``(1) During initial coverage election period.--An election 
        of coverage made during the initial coverage election period 
        under subsection (e)(1)(A) shall take effect upon the date the 
        individual becomes entitled to benefits under part A and 
        enrolled under part B, except as the Secretary may provide 
        (consistent with section 1838) in order to prevent retroactive 
        coverage.
            ``(2) During transition; 90-day disenrollment option.--An 
        election of coverage made under subsection (e)(2) and an 
        election to discontinue a Medicare Choice option under 
        subsection (e)(4) at any time shall take effect with the first 
        calendar month following the date on which the election is 
        made.
            ``(3) Annual, coordinated election period and medisave 
        election.--An election of coverage made during an annual, 
        coordinated election period (as defined in subsection 
        (e)(3)(B)) in a year shall take effect as of the first day of 
        the following year.
            ``(4) Other periods.--An election of coverage made during 
        any other period under subsection (e)(5) shall take effect in 
        such manner as the Secretary provides in a manner consistent 
        (to the extent practicable) with protecting continuity of 
        health benefit coverage.
    ``(g) Effect of Election of Medicare Choice Option.--Subject to the 
provisions of section 1855(f), payments under a contract with a 
Medicare Choice organization under section 1858(a) with respect to an 
individual electing a Medicare Choice product offered by the 
organization shall be instead of the amounts which (in the absence of 
the contract) would otherwise be payable under parts A and B for items 
and services furnished to the individual.
    ``(h) Demonstration Projects.--The Secretary shall conduct 
demonstration projects to test alternative approahces to coordinated 
open enrollments in different markets, including different annual 
enrollment periods and models of rolling open enrollment periods. The 
Secretary may waive previous provisions of this section in order to 
carry out such projects.''.

SEC. 15002. MEDICARE CHOICE PROGRAM.

    (a) In General.--Title XVIII is amended by redesignating part C as 
part D and by inserting after part B the following new part:

            ``Part C--Provisions Relating to Medicare Choice

            ``requirements for medicare choice organizations

    ``Sec. 1851. (a) Medicare Choice Organization Defined.--In this 
part, subject to the succeeding provisions of this section, the term 
`Medicare Choice organization' means a public or private entity that is 
certified under section 1857 as meeting the requirements and standards 
of this part for such an organization.
    ``(b) Organized and Licensed Under State Law.--
            ``(1) In general.--A Medicare Choice organization shall be 
        organized and licensed under State law to offer health 
        insurance or health benefits coverage in each State in which it 
        offers a Medicare Choice product.
            ``(2) Exception for union and taft-hartley sponsors.--
        Paragraph (1) shall not apply to a Medicare Choice organization 
        that is a union sponsor or Taft-Hartley sponsor (as defined in 
        section 1852(c)(4)).
            ``(3) Exception for provider-sponsored organizations.--
        Paragraph (1) shall not apply to a Medicare Choice organization 
        that is a provider-sponsored organization (as defined in 
        section 1854(a)) except to the extent provided under section 
        1857(b).
            ``(4) Exception for qualified associations.--Paragraph (1) 
        shall not apply to a Medicare Choice organization that is a 
        qualified association (as defined in section 1852(c)(4)(B)).
    ``(c) Prepaid Payment.--A Medicare Choice organization shall be 
compensated (except for deductibles, coinsurance, and copayments) for 
the provision of health care services to enrolled members by a payment 
which is paid on a periodic basis without regard to the date the health 
care services are provided and which is fixed without regard to the 
frequency, extent, or kind of health care service actually provided to 
a member.
    ``(d) Assumption of Full Financial Risk.--The Medicare Choice 
organization shall assume full financial risk on a prospective basis 
for the provision of the health care services (other than hospice care) 
for which benefits are required to be provided under section 
1852(a)(1), except that the organization--
            ``(1) may obtain insurance or make other arrangements for 
        the cost of providing to any enrolled member such services the 
        aggregate value of which exceeds $5,000 in any year,
            ``(2) may obtain insurance or make other arrangements for 
        the cost of such services provided to its enrolled members 
        other than through the organization because medical necessity 
        required their provision before they could be secured through 
        the organization,
            ``(3) may obtain insurance or make other arrangements for 
        not more than 90 percent of the amount by which its costs for 
        any of its fiscal years exceed 115 percent of its income for 
        such fiscal year, and
            ``(4) may make arrangements with physicians or other health 
        professionals, health care institutions, or any combination of 
        such individuals or institutions to assume all or part of the 
        financial risk on a prospective basis for the provision of 
        basic health services by the physicians or other health 
        professionals or through the institutions.
In the case of a Medicare Choice organization that is a union sponsor 
or Taft-Hartley sponsor (as defined in section 1852(c)(4)) or a 
qualified association (as defined in section 1852(c)(4)(B)), this 
subsection shall not apply with respect to Medicare Choice products 
offered by such organization and issued by an organization to which 
subsection (b)(1) applies or by a provider-sponsored organization (as 
defined in section 1854(a)).
    ``(e) Provision Against Risk of Insolvency.--
            ``(1) In general.--Each Medicare Choice organization shall 
        meet standards under section 1856 relating to the financial 
        solvency and capital adequacy of the organization. Such 
        standards shall take into account the nature and type of 
        Medicare Choice products offered by the organization.
            ``(2) Treatment of taft-hartley sponsors.--An entity that 
        is a Taft-Hartley sponsor is deemed to meet the requirement of 
        paragraph (1).
    ``(3) Treatment of certain qualified associations.--An entity that 
is a qualified association is deemed to meet the requirement of 
paragraph (1) with respect to Medicare Choice products offered by such 
association and issued by an organization to which subsection (b)(1) 
applies or by a provider-sponsored organization.
    ``(f) Organizations Treated as MedicarePlus Organizations During 
Transition.--Any of the following organizations shall be considered to 
qualify as a MedicarePlus organization for contract years beginning 
before January 1, 1997:
            ``(1) Health maintenance organizations.--An organization 
        that is organized under the laws of any State and that is a 
        qualified health maintenance organization (as defined in 
        section 1310(d) of the Public Health Service Act), an 
        organization recognized under State law as a health maintenance 
        organization, or a similar organization regulated under State 
        law for solvency in the same manner and to the same extent as 
        such a health maintenance organization.
            ``(2) Licensed insurers.--An organization that is organized 
        under the laws of any State and--
                    ``(A) is licensed by a State agency as an insurer 
                for the offering of health benefit coverage, or
                    ``(B) is licensed by a State agency as a service 
                benefit plan,
        but only for individuals residing in an area in which the 
        organization is licensed to offer health insurance coverage.
            ``(3) Current risk-contractors.--An organization that is an 
        eligible organization (as defined in section 1876(b)) and that 
        has a risk-sharing contract in effect under section 1876 as of 
        the date of the enactment of this section.

``requirements relating to benefits, provision of services, enrollment, 
                              and premiums

    ``Sec. 1852. (a) Benefits Covered.--
            ``(1) In general.--Each Medicare Choice product offered 
        under this part shall provide benefits for at least the items 
        and services for which benefits are available under parts A and 
        B consistent with the standards for coverage of such items and 
        services applicable under this title.
            ``(2) Organization as secondary payer.--Notwithstanding any 
        other provision of law, a Medicare Choice organization may (in 
        the case of the provision of items and services to an 
        individual under this part under circumstances in which payment 
        under this title is made secondary pursuant to section 
        1862(b)(2)) charge or authorize the provider of such services 
        to charge, in accordance with the charges allowed under such 
        law or policy--
                    ``(A) the insurance carrier, employer, or other 
                entity which under such law, plan, or policy is to pay 
                for the provision of such services, or
                    ``(B) such individual to the extent that the 
                individual has been paid under such law, plan, or 
                policy for such services.
            ``(3) Satisfaction of requirement.--A Medicare Choice 
        product offered by a Medicare Choice organization satisfies 
        paragraph (1) with respect to benefits for items and services 
        if the following requirements are met:
                    ``(A) Fee for service providers.--In the case of 
                benefits furnished through a provider that does not 
                have a contract with the organization, the product 
                provides for at least the dollar amount of payment for 
                such items and services as would otherwise be provided 
                under parts A and B.
                    ``(B) Participating providers.--In the case of 
                benefits furnished through a provider that has such a 
                contract, the individual's liability for payment for 
                such items and services does not exceed (after taking 
                into account any deductible, which does not exceed any 
                deductible under parts A and B) the lesser of the 
                following:
                            ``(i) Non-medicare choice liability.--The 
                        amount of the liability that the individual 
                        would have had (based on the provider being a 
                        participating provider) if the individual had 
                        elected the non-Medicare Choice option.
                            ``(ii) Medicare coinsurance applied to 
                        product payment rates.--The applicable 
                        coinsurance or copayment rate (that would have 
                        applied under the non-Medicare Choice option) 
                        of the payment rate provided under the 
                        contract.
    ``(b) Antidiscrimination.--A Medicare Choice organization may not 
deny, limit, or condition the coverage or provision of benefits under 
this part based on the health status, claims experience, receipt of 
health care, medical history, or lack of evidence of insurability, of 
an individual.
    ``(c) Guaranteed Issue and Renewal.--
            ``(1) In general.--Except as provided in this subsection, a 
        Medicare Choice organization shall provide that at any time 
        during which elections are accepted under section 1805 with 
        respect to a Medicare Choice product offered by the 
        organization, the organization will accept without restrictions 
        individuals who are eligible to make such election.
            ``(2) Priority.--If the Secretary determines that a 
        Medicare Choice organization, in relation to a Medicare Choice 
        product it offers, has a capacity limit and the number of 
        eligible individuals who elect the product under section 1805 
        exceeds the capacity limit, the organization may limit the 
        election of individuals of the product under such section but 
        only if priority in election is provided--
                    ``(A) first to such individuals as have elected the 
                product at the time of the determination, and
                    ``(B) then to other such individuals in such a 
                manner that does not discriminate among the individuals 
                (who seek to elect the product) on a basis described in 
                subsection (b).
            ``(3) Limitation on termination of election.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                Medicare Choice organization may not for any reason 
                terminate the election of any individual under section 
                1805 for a Medicare Choice product it offers.
                    ``(B) Basis for termination of election.--A 
                Medicare Choice organization may terminate an 
                individual's election under section 1805 with respect 
                to a Medicare Choice product it offers if--
                            ``(i) any premiums required with respect to 
                        such product are not paid on a timely basis 
                        (consistent with standards under section 1856 
                        that provide for a grace period for late 
                        payment of premiums),
                            ``(ii) the individual has engaged in 
                        disruptive behavior (as specified in such 
                        standards), or
                            ``(iii) the product is terminated with 
                        respect to all individuals under this part.
                Any individual whose election is so terminated is 
                deemed to have elected the Non-Medicare Choice option 
                (as defined in section 1805(a)(3)(A)).
            ``(C) Organization obligation with respect to election 
        forms.--Pursuant to a contract under section 1858, each 
        Medicare Choice organization receiving an election form under 
        section 1805(c)(2) shall transmit to the Secretary (at such 
        time and in such manner as the Secretary may specify) a copy of 
        such form or such other information respecting the election as 
        the Secretary may specify.
            ``(4) Special rules for limited enrollment Medicare Choice 
        organizations.--
                    ``(A) Taft-hartley sponsors.--
                            ``(i) In general.--Subject to subparagraph 
                        (D), a Medicare Choice organization that is a 
                        Taft-Hartley sponsor (as defined in clause 
                        (ii)) shall limit eligibility of enrollees 
                        under this part for Medicare Choice products it 
                        offers to individuals who are entitled to 
                        obtain benefits through such products under the 
                        terms of an applicable collective bargaining 
                        agreement.
                            ``(ii) Taft-hartley sponsor.--In this part 
                        and section 1805, the term `Taft-Hartley 
                        sponsor' means, in relation to a group health 
                        plan that is established or maintained by two 
                        or more employers or jointly by one or more 
                        employers and one or more employee 
                        organizations, the association, committee, 
                        joint board of trustees, or other similar group 
                        of representatives of parties who establish or 
                        maintain the plan.
                    ``(B) Qualified associations.--
                            ``(i) In general.--Subject to subparagraph 
                        (D), a Medicare Choice organization that is a 
                        qualified association (as defined in clause 
                        (iii)) shall limit eligibility of individuals 
                        under this part for products it offers to 
                        individuals who are members of the association 
                        (or who are spouses of such individuals).
                            ``(ii) Limitation on termination of 
                        coverage.--Such a qualifying association 
                        offering a Medicare Choice product to an 
                        individual may not terminate coverage of the 
                        individual on the basis that the individual is 
                        no longer a member of the association except 
                        pursuant to a change of election during an 
open election period occurring on or after the date of the termination 
of membership.
                            ``(iii) Qualified association.--In this 
                        part and section 1805, the term `qualified 
                        association' means an association, religious 
                        fraternal organization, or other organization 
                        (which may be a trade, industry, or 
                        professional association, a chamber of 
                        commerce, or a public entity association) that 
                        the Secretary finds--
                                    ``(I) has been formed for purposes 
                                other than the sale of any health 
                                insurance and does not restrict 
                                membership based on the health status, 
                                claims experience, receipt of health 
                                care, medical history, or lack of 
                                evidence of insurability, of an 
                                individual,
                                    ``(II) does not exist solely or 
                                principally for the purpose of selling 
                                insurance, and
                                    ``(III) has at least 1,000 
                                individual members or 200 employer 
                                members.
                        Such term includes a subsidiary or corporation 
                        that is wholly owned by one or more qualified 
                        organizations.
                    ``(C) Unions.--
                            ``(i) In general.--Subject to subparagraph 
                        (D), a union sponsor (as defined in clause 
                        (ii)) shall limit eligibility of enrollees 
                        under this part for MedicarePlus products it 
                        offers to individuals who are members of the 
                        sponsor and affiliated with the sponsor through 
                        an employment relationship with any employer or 
                        are the spouses of such members.
                            ``(ii) Union sponsor.--In this part and 
                        section 1805, the term `union sponsor' means an 
                        employee organization in relation to a group 
                        health plan that is established or maintained 
                        by the organization other than pursuant to a 
                        collective bargaining agreement.
                    ``(D) Limitation.--Rules of eligibility to carry 
                out the previous subparagraphs of this paragraph shall 
                not have the effect of denying eligibility to 
                individuals on the basis of health status, claims 
                experience, receipt of health care, medical history, or 
                lack of evidence of insurability.
                    ``(E) Limited enrollment medicare choice 
                organization.--In this part and section 1805, the term 
                `limited enrollment Medicare Choice organization' means 
                a Medicare Choice organization that is a union sponsor, 
                a Taft-Hartley sponsor, or a qualified association.
                    ``(F) Employer, etc.--In this paragraph, the terms 
                `employer', `employee organization', and `group health 
                plan' have the meanings given such terms for purposes 
                of part 6 of subtitle B of title I of the Employee 
                Retirement Income Security Act of 1974.
    ``(d) Submission and Charging of Premiums.--
            ``(1) In general.--Each Medicare Choice organization shall 
        file with the Secretary each year, in a form and manner and at 
        a time specified by the Secretary--
                    ``(A) the amount of the monthly premiums for 
                coverage under each Medicare Choice product it offers 
                under this part in each payment area (as determined for 
                purposes of section 1855) in which the product is being 
                offered; and
                    ``(B) the enrollment capacity in relation to the 
                product in each such area.
            ``(2) Amounts of premiums charged.--The amount of the 
        monthly premium charged by a Medicare Choice organization for a 
        Medicare Choice product offered in a payment area to an 
        individual under this part shall be equal to the amount (if 
        any) by which--
                    ``(A) the amount of the monthly premium for the 
                product for the period involved, as established under 
                paragraph (3) and submitted under paragraph (1), 
                exceeds
                    ``(B) \1/12\ of the annual Medicare Choice 
                capitation rate specified in section 1855(b)(2) for the 
                area and period involved.
            ``(3) Uniform premium.--The premiums charged by a Medicare 
        Choice organization under this part may not vary among 
        individuals who reside in the same payment area.
            ``(4) Terms and conditions of imposing premiums.--Each 
        Medicare Choice organization shall permit the payment of 
        monthly premiums on a monthly basis and may terminate election 
        of individuals for a Medicare Choice product for failure to 
        make premium payments only in accordance with subsection 
        (c)(3)(B).
            ``(5) Relation of premiums and cost-sharing to benefits.--
        In no case may the portion of a Medicare Choice organization's 
        premium rate and the actuarial value of its deductibles, 
        coinsurance, and copayments charged (to the extent attributable 
        to the minimum benefits described in subsection (a)(1) and not 
        counting any amount attributable to balance billing) to 
        individuals who are enrolled under this part with the 
        organization exceed the actuarial value of the coinsurance and 
        deductibles that would be applicable on the average to 
        individuals enrolled under this part with the organization (or, 
        if the Secretary finds that adequate data are not available to 
        determine that actuarial value, the actuarial value of the 
        coinsurance and deductibles applicable on the average to 
        individuals in the area, in the State, or in the United States, 
        eligible to enroll under this part with the organization, or 
        other appropriate data) and entitled to benefits under part A 
        and enrolled under part B if they were not members of a 
        Medicare Choice organization.
    ``(e) Requirement for Additional Benefits, Part B Premium Discount 
Rebates, or Both.--
            ``(1) Requirement.--
                    ``(A) In general.--Each Medicare Choice 
                organization (in relation to a Medicare Choice product 
                it offers) shall provide that if there is an excess 
                amount (as defined in subparagraph (B)) for the product 
                for a contract year, subject to the succeeding 
                provisions of this subsection, the organization shall 
                provide to individuals such additional benefits (as the 
                organization may specify), a monetary rebate (paid on a 
                monthly basis) of the part B monthly premium, or a 
                combination thereof, in an total value which is at 
                least equal to the adjusted excess amount (as defined 
                in subparagraph (C)).
                    ``(B) Excess amount.--For purposes of this 
                paragraph, the `excess amount', for an organization for 
                a product, is the amount (if any) by which--
                            ``(i) the average of the capitation 
                        payments made to the organization under this 
                        part for the product at the beginning of 
                        contract year, exceeds
                            ``(ii) the actuarial value of the minimum 
                        benefits described in subsection (a)(1) under 
                        the product for individuals under this part, as 
                        determined based upon an adjusted community 
                        rate described in paragraph (5) (as reduced for 
                        the actuarial value of the coinsurance and 
                        deductibles under parts A and B).
                    ``(C) Adjusted excess amount.--For purposes of this 
                paragraph, the `adjusted excess amount', for an 
                organization for a product, is the excess amount 
                reduced to reflect any amount withheld and reserved for 
                the organization for the year under paragraph (3).
                    ``(D) Uniform application.--This paragraph shall be 
                applied uniformly for all enrollees for a product in a 
                service area.
                    ``(E) Construction.--Nothing in this subsection 
                shall be construed as preventing a Medicare Choice 
                organization from providing health care benefits that 
are in addition to the benefits otherwise required to be provided under 
this paragraph and from imposing a premium for such additional 
benefits.
            ``(2) Limitation on amount of part b premium discount 
        rebate.--In no case shall the amount of a part B premium 
        discount rebate under paragraph (1)(A) exceed, with respect to 
        a month, the amount of premiums imposed under part B (not 
        taking into account section 1839(b) (relating to penalty for 
        late enrollment) or 1839(h) (relating to affluence testing)), 
        for the individual for the month. Except as provided in the 
        previous sentence, a Medicare Choice organization is not 
        authorized to provide for cash or other monetary rebates as an 
        inducement for enrollment or otherwise.
            ``(3) Stabilization fund.--A Medicare Choice organization 
        may provide that a part of the value of an excess actuarial 
        amount described in paragraph (1) be withheld and reserved in 
        the Federal Hospital Insurance Trust Fund and in the Federal 
        Supplementary Medical Insurance Trust Fund (in such proportions 
        as the Secretary determines to be appropriate) by the Secretary 
        for subsequent annual contract periods, to the extent required 
        to stabilize and prevent undue fluctuations in the additional 
        benefits and rebates offered in those subsequent periods by the 
        organization in accordance with such paragraph. Any of such 
        value of amount reserved which is not provided as additional 
        benefits described in paragraph (1)(A) to individuals electing 
        the Medicare Choice product in accordance with such paragraph 
        prior to the end of such periods, shall revert for the use of 
        such trust funds.
            ``(4) Determination based on insufficient data.--For 
        purposes of this subsection, if the Secretary finds that there 
        is insufficient enrollment experience (including no enrollment 
        experience in the case of a provider-sponsored organization) to 
        determine an average of the capitation payments to be made 
        under this part at the beginning of a contract period, the 
        Secretary may determine such an average based on the enrollment 
        experience of other contracts entered into under this part.
            ``(5) Adjusted community rate.--
                    ``(A) In general.--For purposes of this subsection, 
                subject to subparagraph (B), the term `adjusted 
                community rate' for a service or services means, at the 
                election of a Medicare Choice organization, either--
                            ``(i) the rate of payment for that service 
                        or services which the Secretary annually 
                        determines would apply to an individual 
                        electing a Medicare Choice product under this 
                        part if the rate of payment were determined 
                        under a `community rating system' (as defined 
                        in section 1302(8) of the Public Health Service 
                        Act, other than subparagraph (C)), or
                            ``(ii) such portion of the weighted 
                        aggregate premium, which the Secretary annually 
                        estimates would apply to such an individual, as 
                        the Secretary annually estimates is 
                        attributable to that service or services,
                but adjusted for differences between the utilization 
                characteristics of the individuals electing coverage 
                under this part and the utilization characteristics of 
                the other enrollees with the organization (or, if the 
                Secretary finds that adequate data are not available to 
                adjust for those differences, the differences between 
                the utilization characteristics of individuals 
                selecting other Medicare Choice coverage, or 
                individuals in the area, in the State, or in the United 
                States, eligible to elect Medicare Choice coverage 
                under this part and the utilization characteristics of 
                the rest of the population in the area, in the State, 
                or in the United States, respectively).
                    ``(B) Special rule for provider-sponsored 
                organizations.--In the case of a Medicare Choice 
                organization that is a provider-sponsored organization, 
                the adjusted community rate under subparagraph (A) for 
                a Medicare Choice product may be computed (in a manner 
                specified by the Secretary) using data in the general 
                commercial marketplace or (during a transition period) 
                based on the costs incurred by the organization in 
                providing such a product.
    ``(f) Rules Regarding Physician Participation.--
            ``(1) Procedures.--Each Medicare Choice organization shall 
        establish reasonable procedures relating to the participation 
        (under an agreement between a physician and the organization) 
        of physicians under Medicare Choice products offered by the 
        organization under this part. Such procedures shall include--
                    ``(A) providing notice of the rules regarding 
                participation,
                    ``(B) providing written notice of participation 
                decisions that are adverse to physicians, and
                    ``(C) providing a process within the organization 
                for appealing adverse decisions, including the 
                presentation of information and views of the physician 
                regarding such decision.
            ``(2) Consultation in medical policies.--A Medicare Choice 
        organization shall consult with physicians who have entered 
        into participation agreements with the organization regarding 
        the organization's medical policy, quality, and medical 
        management procedures.
            ``(3) Limitations on physician incentive plans.--
                    ``(A) In general.--Each Medicare Choice 
                organization may not operate any physician incentive 
                plan (as defined in subparagraph (B)) unless the 
                following requirements are met:
                            ``(i) No specific payment is made directly 
                        or indirectly under the plan to a physician or 
                        physician group as an inducement to reduce or 
                        limit medically necessary services provided 
                        with respect to a specific individual enrolled 
                        with the organization.
                            ``(ii) If the plan places a physician or 
                        physician group at substantial financial risk 
                        (as determined by the Secretary) for services 
                        not provided by the physician or physician 
                        group, the organization--
                                    ``(I) provides stop-loss protection 
                                for the physician or group that is 
                                adequate and appropriate, based on 
                                standards developed by the Secretary 
                                that take into account the number of 
                                physicians placed at such substantial 
                                financial risk in the group or under 
                                the plan and the number of individuals 
                                enrolled with the organization who 
                                receive services from the physician or 
                                the physician group, and
                                    ``(II) conducts periodic surveys of 
                                both individuals enrolled and 
                                individuals previously enrolled with 
                                the organization to determine the 
                                degree of access of such individuals to 
                                services provided by the organization 
                                and satisfaction with the quality of 
                                such services.
                            ``(iii) The organization provides the 
                        Secretary with descriptive information 
                        regarding the plan, sufficient to permit the 
                        Secretary to determine whether the plan is in 
                        compliance with the requirements of this 
                        subparagraph.
                    ``(B) Physician incentive plan defined.--In this 
                paragraph, the term `physician incentive plan' means 
                any compensation arrangement between a Medicare Choice 
                organization and a physician or physician group that 
                may directly or indirectly have the effect of reducing 
or limiting services provided with respect to individuals enrolled with 
the organization under this part.
            ``(4) Exception for certain fee-for-service plans.--The 
        previous provisions of this subsection shall not apply in the 
        case of a Medicare Choice organization in relation to a 
        Medicare Choice product if the organization does not have 
        agreements between physicians and the organization for the 
        provision of benefits under the product.
    ``(g) Provision of Information.--A Medicare Choice organization 
shall provide the Secretary with such information on the organization 
and each Medicare Choice product it offers as may be required for the 
preparation of the information booklet described in section 
1805(d)(3)(A).
    ``(h) Coordinated Acute and Long-term Care Benefits Under a 
Medicare Choice Product.--Nothing in this part shall be construed as 
preventing a State from coordinating benefits under its medicaid 
program under title XIX with those provided under a Medicare Choice 
product in a manner that assures continuity of a full-range of acute 
care and long-term care services to poor elderly or disabled 
individuals eligible for benefits under this title and under such 
program.

                     ``patient protection standards

    ``Sec. 1853. (a) Disclosure to Enrollees.--A Medicare Choice 
organization shall disclose in clear, accurate, and standardized form, 
information regarding all of the following for each Medicare Choice 
product it offers:
            ``(1) Benefits under the Medicare Choice product offered, 
        including exclusions from coverage.
            ``(2) Rules regarding prior authorization or other review 
        requirements that could result in nonpayment.
            ``(3) Potential liability for cost-sharing for out-of-
        network services.
            ``(4) The number, mix, and distribution of participating 
        providers.
            ``(5) The financial obligations of the enrollee, including 
        premiums, deductibles, co-payments, and maximum limits on out-
        of-pocket losses for items and services (both in and out of 
        network).
            ``(6) Statistics on enrollee satisfaction with the product 
        and organization, including rates of reenrollment.
            ``(7) Enrollee rights and responsibilities, including the 
        grievance process provided under subsection (f).
            ``(8) A statement that the use of the 911 emergency 
        telephone number is appropriate in emergency situations and an 
        explanation of what constitutes an emergency situation.
            ``(9) A description of the organization's quality assurance 
        program under subsection (d).
Such information shall be disclosed to each enrollee under this part at 
the time of enrollment and at least annually thereafter.
    ``(b) Access to Services.--
            ``(1) In general.--A Medicare Choice organization offering 
        a Medicare Choice product may restrict the providers from whom 
        the benefits under the product are provided so long as--
                    ``(A) the organization makes such benefits 
                available and accessible to each individual electing 
                the product within the product service area with 
                reasonable promptness and in a manner which assures 
                continuity in the provision of benefits;
                    ``(B) when medically necessary the organization 
                makes such benefits available and accessible 24 hours a 
                day and 7 days a week;
                    ``(C) the product provides for reimbursement with 
                respect to services which are covered under 
                subparagraphs (A) and (B) and which are provided to 
                such an individual other than through the organization, 
                if--
                            ``(i) the services were medically necessary 
                        and immediately required because of an 
                        unforeseen illness, injury, or condition, and
                            ``(ii) it was not reasonable given the 
                        circumstances to obtain the services through 
                        the organization; and
                    ``(D) coverage is provided for emergency services 
                (as defined in paragraph (5)) without regard to prior 
                authorization or the emergency care provider's 
                contractual relationship with the organization.
            ``(2) Minimum payment levels where providing point-of-
        service coverage.--If a Medicare Choice product provides 
        benefits for items and services (not described in paragraph 
        (1)(C)) through a network of providers and also permits payment 
        to be made under the product for such items and services not 
        provided through such a network, the payment level under the 
        product with respect to such items and services furnished 
        outside the network shall be at least 70 percent (or, if the 
        effective cost-sharing rate is 50 percent, at least 35 percent) 
        of the lesser of--
                    ``(A) the payment basis (determined without regard 
                to deductibles and cost-sharing) that would have 
                applied for such items and services under parts A and 
                B, or
                    ``(B) the amount charged by the entity furnishing 
                such items and services.
            ``(3) Protection of enrollees for certain out-of-network 
        services.--
                    ``(A) Participating providers.--In the case of 
                physicians' services or renal dialysis services 
                described in subparagraph (C) which are furnished by a 
                participating physician or provider of services or 
                renal dialysis facility to an individual enrolled with 
                a MedicarePlus organization under this section, the 
                applicable participation agreement is deemed to provide 
                that the physician or provider of services or renal 
                dialysis facility will accept as payment in full from 
                the organization the amount that would be payable to 
                the physician or provider of services or renal dialysis 
                facility under part B and from the individual under 
                such part, if the individual were not enrolled with 
                such an organization under this part.
                    ``(B) Nonparticipating providers.--In the case of 
                physicians' services described in subparagraph (C) 
                which are furnished by a nonparticipating physician, 
                the limitations on actual charges for such services 
                otherwise applicable under part B (to services 
                furnished by individuals not enrolled with a 
                MedicarePlus organization under this section) shall 
                apply in the same manner as such limitations apply to 
                services furnished to individuals not enrolled with 
                such an organization.
                    ``(C) Services described.--The physicians' services 
                or renal dialysis services described in this 
                subparagraph are physicians' services or renal dialysis 
                services which are furnished to an enrollee of a 
                MedicarePlus organization under this part by a 
                physician, provider of services, or renal dialysis 
                facility who is not under a contract with the 
                organization.
            ``(4) Protection for needed services.--A Medicare Choice 
        organization that provides covered services through a network 
        of providers shall provide coverage of services provided by a 
        provider that is not part of the network if the service cannot 
        be provided by a provider that is part of the network and the 
        organization authorized the service directly or through 
        referral by the primary care physician who is designated by the 
        organization for the individual involved.
            ``(5) Definition of emergency services.--In this 
        subsection, the term `emergency services' means, with respect 
        to an individual enrolled with an organization, covered 
        inpatient and outpatient services that--
                    ``(A) are furnished by an appropriate source other 
                than the organization,
                    ``(B) are needed immediately because of an injury 
                or sudden illness, and
                    ``(C) are needed because the time required to reach 
                the organization's providers or suppliers would have 
                meant risk of serious damage to the patient's health.
    ``(c) Confidentiality and Accuracy of Enrollee Records.--Each 
Medicare Choice organization shall establish procedures--
            ``(1) to safeguard the privacy of individually identifiable 
        enrollee information, and
            ``(2) to maintain accurate and timely medical records for 
        enrollees.
    ``(d) Quality Assurance Program.--
            ``(1) In general.--Each Medicare Choice organization must 
        have arrangements, established in accordance with regulations 
        of the Secretary, for an ongoing quality assurance program for 
        health care services it provides to such individuals.
            ``(2) Elements of program.--The quality assurance program 
        shall--
                    ``(A) stress health outcomes;
                    ``(B) provide for the establishment of written 
                protocols for utilization review, based on current 
                standards of medical practice;
                    ``(C) provide review by physicians and other health 
                care professionals of the process followed in the 
                provision of such health care services;
                    ``(D) monitors and evaluates high volume and high 
                risk services and the care of acute and chronic 
                conditions;
                    ``(E) evaluates the continuity and coordination of 
                care that enrollees receive;
                    ``(F) has mechanisms to detect both 
                underutilization and overutilization of services;
                    ``(G) after identifying areas for improvement, 
                establishes or alters practice parameters;
                    ``(H) takes action to improve quality and assesses 
                the effectiveness of such action through systematic 
                follow-up;
                    ``(I) makes available information on quality and 
                outcomes measures to facilitate beneficiary comparison 
                and choice of health coverage options (in such form and 
                on such quality and outcomes measures as the Secretary 
                determines to be appropriate);
                    ``(J) is evaluated on an ongoing basis as to its 
                effectiveness; and
                    ``(K) provide for external accreditation or review, 
                by a utilization and quality control peer review 
                organization under part B of title XI or other 
                qualified independent review organization, of the 
                quality of services furnished by the organization meets 
                professionally recognized standards of health care 
                (including providing adequate access of enrollees to 
                services).
            ``(3) Exception for certain fee-for-service plans.--
        Paragraph (1) and subsection (c)(2) shall not apply in the case 
        of a Medicare Choice organization in relation to a Medicare 
        Choice product to the extent the organization provides for 
        coverage of benefits without restrictions relating to 
        utilization and without regard to whether the provider has a 
        contract or other arrangement with the plan for the provision 
        of such benefits.
            ``(4) Treatment of accreditation.--The Secretary shall 
        provide that a Medicare Choice organization is deemed to meet 
        the requirements of paragraphs (1) and (2) of this subsection 
        and subsection (c) if the organization is accredited (and 
        periodically reaccredited) by a private organization under a 
        process that the Secretary has determined assures that the 
        organization meets standards that are no less stringent than 
        the standards established under section 1856 to carry out this 
        subsection and subsection (c).
    ``(e) Coverage Determinations.--
            ``(1) Decisions on nonemergency care.--A Medicare Choice 
        organization shall make determinations regarding authorization 
        requests for nonemergency care on a timely basis, depending on 
        the urgency of the situation.
            ``(2) Appeals.--
                    ``(A) In general.--Appeals from a determination of 
                an organization denying coverage shall be decided 
                within 30 days of the date of receipt of medical 
                information, but not later than 60 days after the date 
                of the decision.
                    ``(B) Physician decision on certain appeals.--
                Appeal decisions relating to a determination to deny 
                coverage based on a lack of medical necessity shall be 
                made only by a physician.
                    ``(C) Emergency cases.--Appeals from such a 
                determination involving a life-threatening or emergency 
                situation shall be decided on an expedited basis.
    ``(f) Grievances and Appeals.--
            ``(1) Grievance mechanism.--Each Medicare Choice 
        organization must provide meaningful procedures for hearing and 
        resolving grievances between the organization (including any 
        entity or individual through which the organization provides 
        health care services) and enrollees under this part.
            ``(2) Appeals.--An enrollee with an organization under this 
        part who is dissatisfied by reason of the enrollee's failure to 
        receive any health service to which the enrollee believes the 
        enrollee is entitled and at no greater charge than the enrollee 
        believes the enrollee is required to pay is entitled, if the 
        amount in controversy is $100 or more, to a hearing before the 
        Secretary to the same extent as is provided in section 205(b), 
        and in any such hearing the Secretary shall make the 
        organization a party. If the amount in controversy is $1,000 or 
        more, the individual or organization shall, upon notifying the 
        other party, be entitled to judicial review of the Secretary's 
        final decision as provided in section 205(g), and both the 
        individual and the organization shall be entitled to be parties 
        to that judicial review. In applying sections 205(b) and 205(g) 
        as provided in this subparagraph, and in applying section 
        205(l) thereto, any reference therein to the Commissioner of 
        Social Security or the Social Security Administration shall be 
        considered a reference to the Secretary or the Department of 
        Health and Human Services, respectively.
            ``(3) Coordination with secretary of labor.--The Secretary 
        shall consult with the Secretary of Labor so as to ensure that 
        the requirements of this subsection, as they apply in the case 
        of grievances referred to in paragraph (1) to which section 503 
        of the Employee Retirement Income Security Act of 1974 applies, 
        are applied in a manner consistent with the requirements of 
        such section 503.
    ``(g) Information on Advance Directives.--Each Medicare Choice 
organization shall meet the requirement of section 1866(f) (relating to 
maintaining written policies and procedures respecting advance 
directives).
    ``(h) Approval of Marketing Materials.--
            ``(1) Submission.--Each Medicare Choice organization may 
        not distribute marketing materials unless--
                    ``(A) at least 45 days before the date of 
                distribution the organization has submitted the 
                material to the Secretary for review, and
                    ``(B) the Secretary has not disapproved the 
                distribution of such material.
            ``(2) Review.--The standards established under section 1856 
        shall include guidelines for the review of all such material 
        submitted and under such guidelines the Secretary shall 
        disapprove such material if the material is materially 
        inaccurate or misleading or otherwise makes a material 
        misrepresentation.
            ``(3) Deemed approval (1-stop shopping).--In the case of 
        material that is submitted under paragraph (1)(A) to the 
        Secretary or a regional office of the Department of Health and 
        Human Services and the Secretary or the office has not 
        disapproved the distribution of marketing materials under 
        paragraph (1)(B) with respect to a Medicare Choice product in 
        an area, the Secretary is deemed not to have disapproved such 
        distribution in all other areas covered by the product and 
        organization.
            ``(4) Prohibition of certain marketing practices.--Each 
        Medicare Choice organization shall conform to fair marketing 
        standards in relation to Medicare Choice products offered under 
        this part, included in the standards established under section 
        1856. Such standards shall include a prohibition against an 
        organization (or agent of such an organization) completing any 
        portion of any election form under section 1805 on behalf of 
        any individual.
    ``(i) Additional Standardized Information on Quality, Outcomes, and 
Other Factors.--
            ``(1) In general.--In addition to any other information 
        required to be provided under this part, each Medicare Choice 
        organization shall provide the Secretary (at a time, not less 
        frequently than annually, and in an electronic, standardized 
        form and manner specified by the Secretary) such information as 
        the Secretary determines to be necessary, consistent with this 
        part, to evaluate the performance of the organization in 
        providing benefits to enrollees.
            ``(2) Information to be included.--Subject to paragraph 
        (3), information to be provided under this subsection shall 
        include at least the following:
                    ``(A) Information on the characteristics of 
                enrollees that may affect their need for or use of 
                health services and the determination of risk-adjusted 
                payments under section 1855.
                    ``(B) Information on the types of treatments and 
                outcomes of treatments with respect to the clinical 
                health, functional status, and well-being of enrollees.
                    ``(C) Information on health care expenditures and 
                the volume and prices of procedures.
                    ``(D) Information on the flexibility permitted by 
                plans to enrollees in their selection of providers.
            ``(3) Special treatment.--The Secretary may waive the 
        provision of such information under paragraph (2), or require 
        such other information, as the Secretary finds appropriate in 
        the case of a newly established Medicare Choice organization 
        for which such information is not available.
    ``(j) Demonstration Projects.--The Secretary shall provide for 
demonstration projects to determine the effectiveness, cost, and impact 
of alternative methods of providing comparative information about the 
performance of Medicare Choice organizations and products and the 
performance of medicare supplemental policies in relation to such 
products. Such projects shall include information about health care 
outcomes resulting from coverage under different products and policies.

                   ``provider-sponsored organizations

    ``Sec. 1854. (a) Provider-Sponsored Organization Defined.--
            ``(1) In general.--In this part, the term `provider-
        sponsored organization' means a public or private entity that 
        (in accordance with standards established under subsection (b)) 
        is a provider, or group of affiliated providers, that provides 
        a substantial proportion (as defined by the Secretary under 
        such standards) of the health care items and services under the 
        contract under this part directly through the provider or 
        affiliated group of providers.
            ``(2) Substantial proportion.--In defining what is a 
        `substantial proportion' for purposes of paragraph (1), the 
        Secretary--
                    ``(A) shall take into account the need for such an 
                organization to assume responsibility for a substantial 
                proportion of services in order to assure financial 
                stability and the practical difficulties in such an 
                organization integrating a very wide range of service 
                providers; and
                    ``(B) may vary such proportion based upon relevant 
                differences among organizations, such as their location 
                in an urban or rural area.
            ``(3) Affiliation.--For purposes of this subsection, a 
        provider is `affiliated' with another provider if, through 
        contract, ownership, or otherwise--
                    ``(A) one provider, directly or indirectly, 
                controls, is controlled by, or is under common control 
                with the other,
                    ``(B) each provider is a participant in a lawful 
                combination under which each provider shares, directly 
                or indirectly, substantial financial risk in connection 
                with their operations,
                    ``(C) both providers are part of a controlled group 
                of corporations under section 1563 of the Internal 
                Revenue Code of 1986, or
                    ``(D) both providers are part of an affiliated 
                service group under section 414 of such Code.
            ``(4) Control.--For purposes of paragraph (3), control is 
        presumed to exist if one party, directly or indirectly, owns, 
        controls, or holds the power to vote, or proxies for, not less 
        than 51 percent of the voting rights or governance rights of 
        another.
    ``(b) Preemption of State Insurance Licensing Requirements.--
            ``(1) In general.--This section supersedes any State law 
        which--
                    ``(A) requires that a provider-sponsored 
                organization meet requirements for insurers of health 
                services or health maintenance organizations doing 
                business in the State with respect to initial 
                capitalization and establishment of financial reserves 
                against insolvency, or
                    ``(B) imposes requirements that would have the 
                effect of prohibiting the organization from complying 
                with the applicable requirements of this part,
        insofar as such the law applies to individuals enrolled with 
        the organization under this part.
            ``(2) Exception.--Paragraph (1) shall not apply with 
        respect to any State law to the extent that such law provides 
        standards or requirements, or provides for enforcement thereof, 
        so as to meet the requirements of section 1857(b) with respect 
        to approval by the Secretary of State certification 
        requirements thereunder.
            ``(3) Construction.--Nothing in this subsection shall be 
        construed as affecting the operation of section 514 of the 
        Employee Retirement Income Security Act of 1974.

              ``payments to medicare choice organizations

    ``Sec. 1855. (a) Payments.--
            ``(1) In general.--Under a contract under section 1858 the 
        Secretary shall pay to each Medicare Choice organization, with 
        respect to coverage of an individual under this part in a 
        payment area for a month, an amount equal to the 
monthly adjusted Medicare Choice capitation rate (as provided under 
subsection (b)) with respect to that individual for that area.
            ``(2) Annual announcement.--The Secretary shall annually 
        determine, and shall announce (in a manner intended to provide 
        notice to interested parties) not later than September 7 before 
        the calendar year concerned--
                    ``(A) the annual Medicare Choice capitation rate 
                for each payment area for the year, and
                    ``(B) the factors to be used in adjusting such 
                rates under subsection (b) for payments for months in 
                that year.
            ``(3) Advance notice of methodological changes.--At least 
        45 days before making the announcement under paragraph (2) for 
        a year, the Secretary shall provide for notice to Medicare 
        Choice organizations of proposed changes to be made in the 
        methodology or benefit coverage assumptions from the 
        methodology and assumptions used in the previous announcement 
        and shall provide such organizations an opportunity to comment 
        on such proposed changes.
            ``(4) Explanation of assumptions.--In each announcement 
        made under paragraph (2) for a year, the Secretary shall 
        include an explanation of the assumptions (including any 
        benefit coverage assumptions) and changes in methodology used 
        in the announcement in sufficient detail so that Medicare 
        Choice organizations can compute monthly adjusted Medicare 
        Choice capitation rates for classes of individuals located in 
        each payment area which is in whole or in part within the 
        service area of such an organization.
    ``(b) Monthly Adjusted Medicare Choice Capitation Rate.--
            ``(1) In general.--For purposes of this section, the 
        `monthly adjusted Medicare Choice capitation rate' under this 
        subsection, for a month in a year for an individual in a 
        payment area (specified under paragraph (3)) and in a class 
        (established under paragraph (4)), is \1/12\ of the annual 
        Medicare Choice capitation rate specified in paragraph (2) for 
        that area for the year, adjusted to reflect the actuarial value 
        of benefits under this title with respect to individuals in 
        such class compared to the national average for individuals in 
        all classes.
            ``(2) Annual medicare choice capitation rates.--
                    ``(A) In general.--For purposes of this section, 
                the annual Medicare Choice capitation rate for a 
                payment area for a year is equal to the annual Medicare 
                Choice capitation rate for the area for the previous 
                year (or, in the case of 1996, the average annual per 
                capita rate of payment described in section 
                1876(a)(1)(C) for the area for 1995) increased by the 
                per capita growth rate for that area and year (as 
                determined under subsection (c)).
                    ``(B) Special rules for 1996.--
                            ``(i) Floor at 85 percent of national 
                        average.--In no case shall the annual Medicare 
                        Choice capitation rate for a payment area for 
                        1996 be less than 85 percent of the national 
                        average of such rates for such year for all 
                        payment areas (weighted to reflect the number 
                        of medicare beneficiaries in each such area).
                            ``(ii) Removal of medical education and 
                        disproportionate share hospital payments from 
                        calculation of adjusted average per capita 
                        cost.--In determining the annual Medicare 
                        Choice capitation rate for 1996, the average 
                        annual per capita rate of payment described in 
                        section 1876(a)(1)(C) for 1995 shall be 
                        determined as though the Secretary had excluded 
                        from such rate any amounts which the Secretary 
                        estimated would have been payable under this 
                        title during the year for--
                                    ``(I) payment adjustments under 
                                section 1886(d)(5)(F) for hospitals 
                                serving a disproportionate share of 
                                low-income patients; and
                                    ``(II) the indirect costs of 
                                medical education under section 
                                1886(d)(5)(B) or for direct graduate 
                                medical education costs under section 
                                1886(h).
            ``(3) Payment area defined.--
                    ``(A) In general.--In this section, the term 
                `payment area' means--
                    ``(i) a metropolitan statistical area, or
                    ``(ii) all areas of a State outside of such an 
                area.
                    ``(B) Special rule for esrd beneficiaries.--Such 
                term means, in the case of the population group 
                described in paragraph (5)(C), each State.
            ``(4) Classes.--
                    ``(A) In general.--For purposes of this section, 
                the Secretary shall define appropriate classes of 
                enrollees, consistent with paragraph (5), based on age, 
                gender, welfare status, institutionalization, and such 
                other factors as the Secretary determines to be 
                appropriate, so as to ensure actuarial equivalence. The 
                Secretary may add to, modify, or substitute for such 
                classes, if such changes will improve the determination 
                of actuarial equivalence.
                    ``(B) Research.--The Secretary shall conduct such 
                research as may be necessary to provide for greater 
                accuracy in the adjustment of capitation rates under 
                this subsection. Such research may include research 
                into the addition or modification of classes under 
                subparagraph (A). The Secretary shall submit to 
                Congress a report on such research by not later than 
                January 1, 1997.
            ``(5) Division of medicare population.--In carrying out 
        paragraph (4) and this section, the Secretary shall recognize 
        the following separate population groups:
                    ``(A) Aged.--Individuals 65 years of age or older 
                who are not described in subparagraph (C).
                    ``(B) Disabled.--Disabled individuals who are under 
                65 years of age and not described in subparagraph (C).
                    ``(C) Individuals with end stage renal disease.--
                Individuals who are determined to have end stage renal 
                disease.
    ``(c) Per Capita Growth Rates.--
            ``(1) For 1996.--
                    ``(A) In general.--For purposes of this section and 
                subject to subparagraph (B), the per capita growth 
                rates for 1996, for a payment area assigned to a 
                service utilization cohort under subsection (d), shall 
                be the following:
                            ``(i) Below average service utilization 
                        cohort.--For areas assigned to the below 
                        average service utilization cohort, 11.5 
                        percent.
                            ``(ii) Above average service utilization 
                        cohort.--For areas assigned to the above 
                        average service utilization cohort, 6.4 
                        percent.
                            ``(iii) Highest service utilization 
                        cohort.--For areas assigned to the highest 
                        service utilization cohort, 3.2 percent.
                    ``(B) Budget neutral adjustment.--The Secretary 
                shall adjust the per capita growth rates specified in 
                subparagraph (A) for all the areas by such uniform 
                factor as may be necessary to assure that the total 
                capitation payments under this section during 1996 are 
                the same as the amount such payments would have been if 
                the per capita growth rate for all such areas for 1996 
                were equal to the national average per capita growth 
                rate, specified in paragraph (3) for 1996.
            ``(2) For subsequent years.--
                    ``(A) In general.--For purposes of this section and 
                subject to subparagraph (B), the Secretary shall 
                compute a per capita growth rate for each year after 
                1996, for each payment area as assigned to a service 
                utilization cohort under subsection (d), consistent 
                with the following rules:
                            ``(i) Below average service utilization 
                        cohort set at 143 percent of national average 
                        per capita growth rate.--The per capita growth 
                        rate for areas assigned to the below average 
                        service utilization cohort for the year shall 
                        be 143 percent of the national average per 
                        capita growth rate for the year (as specified 
                        under paragraph (3)).
                            ``(ii) Above average service utilization 
                        cohort set at 80 percent of national average 
                        per capita growth rate.--The per capita growth 
                        rate for areas assigned to the above average 
                        service utilization cohort for the year shall 
                        be 80 percent of the national average per 
                        capita growth rate for the year.
                            ``(iii) Highest service utilization cohort 
                        set at 40 percent of national average per 
                        capita growth rate.--The per capita growth rate 
                        for areas assigned to the highest service 
                        utilization cohort for the year shall be 40 
                        percent of the national average per capita 
                        growth rate for the year.
                    ``(B) Average per capita growth rate at national 
                average to assure budget neutrality.--The Secretary 
                shall compute per capita growth rates for a year under 
                subparagraph (A) in a manner so that the weighted 
                average per capita growth rate for all areas for the 
                year (weighted to reflect the number of medicare 
                beneficiaries in each area) is equal to the national 
                average per capita growth rate under paragraph (3) for 
                the year.
            ``(3) National average per capita growth rates.--In this 
        subsection, the `national average per capita growth rate' for--
                    ``(A) 1996 is 8.0 percent,
                    ``(B) 1997 is 7.5 percent,
                    ``(C) 1998 is 7.0 percent,
                    ``(D) 1999 is 7.0 percent,
                    ``(E) 2000 is 7.0 percent,
                    ``(F) 2001 is 7.0 percent,
                    ``(G) 2002 is 6.0 percent, and
                    ``(H) each subsequent year is 6.0 percent.
    ``(d) Assignment of Payment Areas to Service Utilization Cohorts.--
            ``(1) In general.--For purposes of determining per capita 
        growth rates under subsection (c) for areas for a year, the 
        Secretary shall assign each payment area to a service 
        utilization cohort (based on the service utilization index 
        value for that area determined under paragraph (2)) as follows:
                    ``(A) Below average service utilization cohort.--
                Areas with a service utilization index value of less 
                than 1.00 shall be assigned to the below average 
                service utilization cohort.
                    ``(B) Above average service utilization cohort.--
                Areas with a service utilization index value of at 
                least 1.00 but less than 1.20 shall be assigned to the 
                above average service utilization cohort.
                    ``(C) Highest service utilization cohort.--Areas 
                with a service utilization index value of at least 1.20 
                shall be assigned to the highest service utilization 
                cohort.
            ``(2) Determination of service utilization index values.--
        In order to determine the per capita growth rate for a payment 
        area for each year (beginning with 1996), the Secretary shall 
        determine for such area and year a service utilization index 
        value, which is equal to--
                    ``(A) the annual Medicare Choice capitation rate 
                under this section for the area for the year in which 
                the determination is made (or, in the case of 1996, the 
                average annual per capita rate of payment (described in 
                section 1876(a)(1)(C)) for the area for 1995); divided 
                by
                    ``(B) the input-price-adjusted annual national 
                Medicare Choice capitation rate (as determined under 
                paragraph (3)) for that area for the year in which the 
                determination is made.
            ``(3) Determination of input-price-adjusted rates.--
                    ``(A) In general.--For purposes of paragraph (2), 
                the `input-price-adjusted annual national Medicare 
                Choice capitation rate' for a payment area for a year 
                is equal to the sum, for all the types of medicare 
                services (as classified by the Secretary), of the 
                product (for each such type) of--
                            ``(i) the national standardized Medicare 
                        Choice capitation rate (determined under 
                        subparagraph (B)) for the year,
                            ``(ii) the proportion of such rate for the 
                        year which is attributable to such type of 
                        services, and
                            ``(iii) an index that reflects (for that 
                        year and that type of services) the relative 
                        input price of such services in the area 
                        compared to the national average input price of 
                        such services.
                In applying clause (iii), the Secretary shall, subject 
                to subparagraph (C), apply those indices under this 
                title that are used in applying (or updating) national 
                payment rates for specific areas and localities.
                    ``(B) National standardized medicare choice 
                capitation rate.--In this paragraph, the `national 
                standardized Medicare Choice capitation rate' for a 
                year is equal to--
                            ``(i) the sum (for all payment areas) of 
                        the product of (I) the annual Medicare Choice 
                        capitation rate for that year for the area 
                        under subsection (b)(2), and (II) the average 
                        number of medicare beneficiaries residing in 
                        that area in the year; divided by
                            ``(ii) the total average number of medicare 
                        beneficiaries residing in all the payment areas 
                        for that year.
                    ``(C) Special rules for 1996.--In applying this 
                paragraph for 1996--
                            ``(i) medicare services shall be divided 
                        into 2 types of services: part A services and 
                        part B services;
                            ``(ii) the proportions described in 
                        subparagraph (A)(ii) for such types of services 
                        shall be--
                                    ``(I) for part A services, the 
                                ratio (expressed as a percentage) of 
                                the average annual per capita rate of 
                                payment for the area for part A for 
                                1995 to the total average annual per 
                                capita rate of payment for the area for 
                                parts A and B for 1995, and
                                    ``(II) for part B services, 100 
                                percent minus the ratio described in 
                                subclause (I);
                            ``(iii) for the part A services, 70 percent 
                        of payments attributable to such services shall 
                        be adjusted by the index used under section 
                        1886(d)(3)(E) to adjust payment rates for 
                        relative hospital wage levels for hospitals 
                        located in the payment area involved;
                            ``(iv) for part B services--
                                    ``(I) 66 percent of payments 
                                attributable to such services shall be 
                                adjusted by the index of the geographic 
                                area factors under section 1848(e) used 
                                to adjust payment rates for physicians' 
                                services furnished in the payment area, 
                                and
                                    ``(II) of the remaining 34 percent 
                                of the amount of such payments, 70 
                                percent shall be adjusted by the index 
                                described in clause (iii);
                            ``(v) the index values shall be computed 
                        based only on the beneficiary population 
                        described in subsection (b)(5)(A).
                The Secretary may continue to apply the rules described 
                in this subparagraph (or similar rules) for 1997.
    ``(e) Payment Process.--
            ``(1) In general.--Subject to section 1859(f), the 
        Secretary shall make monthly payments under this section in 
        advance and in accordance with the rate determined under 
        subsection (a) to the plan for each individual enrolled with a 
        Medicare Choice organization under this part.
            ``(2) Adjustment to reflect number of enrollees.--
                    ``(A) In general.--The amount of payment under this 
                subsection may be retroactively adjusted to take into 
                account any difference between the actual number of 
                individuals enrolled with an organization under this 
                part and the number of such individuals estimated to be 
                so enrolled in determining the amount of the advance 
                payment.
                    ``(B) Special rule for certain enrollees.--
                            ``(i) In general.--Subject to clause (ii), 
                        the Secretary may make retroactive adjustments 
                        under subparagraph (A) to take into account 
                        individuals enrolled during the period 
                        beginning on the date on which the individual 
                        enrolls with a Medicare Choice organization 
                        under a product operated, sponsored, or 
                        contributed to by the individual's employer or 
                        former employer (or the employer or former 
                        employer of the individual's spouse) and ending 
                        on the date on which the individual is enrolled 
                        in the organization under this part, except 
                        that for purposes of making such retroactive 
                        adjustments under this subparagraph, such 
                        period may not exceed 90 days.
                            ``(ii) Exception.--No adjustment may be 
                        made under clause (i) with respect to any 
                        individual who does not certify that the 
                        organization provided the individual with the 
                        disclosure statement described in section 
                        1853(a) at the time the individual enrolled 
                        with the organization.
    ``(f) Payments From Trust Fund.--The payment to a Medicare Choice 
organization under this section for individuals enrolled under this 
part with the organization, and payments to a Medicare Choice MSA under 
subsection (f)(1)(B), shall be made from the Federal Hospital Insurance 
Trust Fund and the Federal Supplementary Medical Insurance Trust Fund 
in such proportion as the Secretary determines reflects the relative 
weight that benefits under part A and under part B represents of the 
actuarial value of the total benefits under this title.
    ``(g) Special Rule for Certain Inpatient Hospital Stays.--In the 
case of an individual who is receiving inpatient hospital services from 
a subsection (d) hospital (as defined in section 1886(d)(1)(B)) as of 
the effective date of the individual's--
            ``(1) election under this part of a Medicare Choice product 
        offered by a Medicare Choice organization--
                    ``(A) payment for such services until the date of 
                the individual's discharge shall be made under this 
                title through the Medicare Choice product or Non-
                Medicare Choice option (as the case may be) elected 
                before the election with such organization,
                    ``(B) the elected organization shall not be 
                financially responsible for payment for such services 
                until the date after the date of the individual's 
                discharge, and
                    ``(C) the organization shall nonetheless be paid 
                the full amount otherwise payable to the organization 
                under this part; or
            ``(2) termination of election with respect to a Medicare 
        Choice organization under this part--
                    ``(A) the organization shall be financially 
                responsible for payment for such services after such 
                date and until the date of the individual's discharge,
                    ``(B) payment for such services during the stay 
                shall not be made under section 1886(d) or by any 
                succeeding Medicare Choice organization, and
                    ``(C) the terminated organization shall not receive 
                any payment with respect to the individual under this 
                part during the period the individual is not enrolled.

  ``establishment of standards for medicare choice organizations and 
                                products

    ``Sec. 1856. (a) Interim Standards.--
            ``(1) In general.--The Secretary shall issue regulations 
        regarding standards for Medicare Choice organizations and 
        products within 180 days after the date of the enactment of 
        this section. Such regulations shall be issued on an interim 
        basis, but shall become effective upon publication and shall be 
        effective through the end of 1999.
            ``(2) Solicitation of views.--In developing standards under 
        this subsection relating to solvency of Medicare Choice 
        organizations, the Secretary shall solicit the views of the 
        American Academy of Actuaries.
            ``(3) Effect on state regulations.--Regulations under this 
        subsection shall not preempt State regulations for Medicare 
        Choice organizations for products not offered under this part.
    ``(b) Permanent Standards.--
            ``(1) In general.--The Secretary shall develop permanent 
        standards under this subsection.
            ``(2) Consultation.--In developing standards under this 
        subsection, the Secretary shall consult with the National 
        Association of Insurance Commissioners, associations 
        representing the various types of Medicare Choice 
        organizations, and medicare beneficiaries.
            ``(3) Effectiveness.--The standards under this subsection 
        shall take effect for periods beginning on or after January 1, 
        2000.
    ``(c) Solvency.--In establishing interim and permanent standards 
under this section relating to solvency of organizations, the Secretary 
shall recognize the multiple means of demonstrating solvency, 
including--
            ``(1) reinsurance purchased through a recognized commerce 
        company or through a capitive company owned directly or 
        indirectly by 3 or more provider-sponsored organizations,
            ``(2) unrestricted surplus,
            ``(3) guarantees, and
            ``(4) letters of credit.
In such standards, the Secretary may treat as admitted assets the 
assets used by a provider-sponsored organization in delivering covered 
services.
    ``(d) Application of New Standards to Entities with a Contract.--In 
the case of a Medicare Choice organization with a contract in effect 
under this part at the time standards applicable to the organization 
under this section are changed, the organization may elect not to have 
such changes apply to the organization until the end of the current 
contract year (or, if there is less than 6 months remaining in the 
contract year, until 1 year after the end of the current contract 
year).
    ``(e) Relation to State Laws.--The standards established under this 
section shall supersede any State law. The standard or regulation with 
respect to Medicare Choice products which are offered by Medicare 
Choice organizations and are issued by organizations to which section 
1851(b)(1) applies, to the extent such law or regulation is 
inconsistent with such standards.

                    ``medicare choice certification

    ``Sec. 1857. (a) In General.--
            ``(1) Establishment.--The Secretary shall establish a 
        process for the certification of organizations and products 
        offered by organizations as meeting the applicable standards 
        for Medicare Choice organizations and Medicare Choice products 
        established under section 1856.
            ``(2) Involvement of secretary of labor.--Such process 
        shall be established and operated in cooperation with the 
        Secretary of Labor with respect to union sponsors and Taft-
        Hartley sponsors.
            ``(3) Use of state licensing and private accreditation 
        processes.--
                    ``(A) In general.--The process under this 
                subsection shall, to the maximum extent practicable, 
                provide that Medicare Choice organizations and products 
                that are licensed or certified through a qualified 
                private accreditation process that the Secretary finds 
                applies standards that are no less stringent than the 
                requirements of this part are deemed to meet the 
                corresponding requirements of this part for such an 
                organization or product.
                    ``(B) Periodic accreditation.--The use of an 
                accreditation under subparagraph (A) shall be valid 
                only for such period as the Secretary specifies.
            ``(4) User fees.--The Secretary may impose user fees on 
        entities seeking certification under this subsection in such 
        amounts as the Secretary deems sufficient to finance the costs 
        of such certification.
    ``(b) State Certification Process.--
            ``(1) Approval of state process.--Effective for periods 
        beginning on or after January 1, 2000, the Secretary shall 
        approve a Medicare Choice certification and enforcement program 
        established by a State for applying the standards established 
        under section 1856 to Medicare Choice organizations and 
        Medicare Choice products offered by such organizations if the 
        Secretary determines that the program fairly and efficiently 
        provides for the application and enforcement of such standards 
        in the State with respect to such organizations and products 
        and such program does not provide for the imposition (for 
        organizations only offering products under this part) of any 
        standards in addition to the standards provided under section 
        1856. Such program shall provide for certification of 
        compliance of Medicare Choice organizations and products with 
        the applicable requirements of this part not less often than 
        once every 3 years.
            ``(2) Effect of certification under state process.--A 
        Medicare Choice organization and Medicare Choice product 
        offered by such an organization that is certified under such 
        program is considered to have been certified under this 
        subsection with respect to the offering of the product to 
        individuals residing in the State.
            ``(3) User fees.--The State may impose user fees on 
        organizations seeking certification under this subsection in 
        such amounts as the State deems sufficient to finance the costs 
        of such certification. Nothing in this paragraph shall be 
        construed as restricting a State's authority to impose premium 
        taxes, other taxes, or other levies.
            ``(4) Review.--The Secretary periodically shall review 
        State programs approved under paragraph (1) to determine if 
        they continue to provide for the fair and efficient 
        certification and enforcement described in such paragraph. If 
        the Secretary finds that a State program no longer so provides, 
        before making a final determination, the Secretary shall 
        provide the State an opportunity to adopt such a plan of 
        correction as would permit the State program to meet the 
        requirements of paragraph (1). If the Secretary makes a final 
        determination that the State program, after such an 
        opportunity, fails to meet such requirements, the provisions of 
        paragraph (2) shall no longer apply to Medicare Choice 
        organizations and products in the State.
            ``(5) Publication of list of approved state programs.--The 
        Secretary shall publish (and periodically update) a list of 
        those State programs which are approved for purposes of this 
        subsection.
    ``(c) Notice to Enrollees in Case of Decertification.--If a 
Medicare Choice organization or product is decertified under this 
section, the organization shall notify each enrollee with the 
organization and product under this part of such decertification.
    ``(d) Qualified Associations.--In the case of Medicare Choice 
products offered by a Medicare Choice organization that is a qualified 
association (as defined in section 1854(c)(4)(C)) and issued by an 
organization to which section 1851(b)(1) applies or by a provider-
sponsored organization (as defined in section 1854(a)), nothing in this 
section shall be construed as limiting the authority of States to 
regulate such products.

             ``contracts with medicare choice organizations

    ``Sec. 1858. (a) In General.--The Secretary shall not permit the 
election under section 1805 of a Medicare Choice product offered by a 
Medicare Choice organization under this part, and no payment shall be 
made under section 1856 to an organization, unless the Secretary has 
entered into a contract under this section with an organization with 
respect to the offering of such product. Such a contract with an 
organization may cover more than one Medicare Choice product. Such 
contract shall provide that the organization agrees to comply with the 
applicable requirements and standards of this part and the terms and 
conditions of payment as provided for in this part.
    ``(b) Enrollment Requirements.--
                    ``(A) Minimum enrollment requirement.--Subject to 
                subparagraphs (B) and (C), the Secretary may not enter 
                into a contract under this section with a Medicare 
                Choice organization (other than a union sponsor or 
                Taft-Hartley sponsor) unless the organization has at 
                least 5,000 individuals (or 1,500 individuals in the 
                case of an organization that is a provider-sponsored 
                organization) who are receiving health benefits through 
                the organization, except that the standards under 
                section 1856 may permit the organization to have a 
                lesser number of beneficiaries (but not less than 500 
                in the case of an organization that is a provider-
                sponsored organization) if the organization primarily 
                serves individuals residing outside of urbanized areas.
                    ``(B) Allowing transition.--The Secretary may waive 
                the requirement of subparagraph (A) during the first 3 
                contract years with respect to an organization.
                    ``(C) Treatment of areas with low managed care 
                penetration.--The Secretary may waive the requirement 
                of subparagraph (A) in the case of organizations 
                operating in areas in which there is a low proportion 
                of medicare beneficiaries who have made the Medicare 
                Choice election.
            ``(2) Requirement for enrollment of non-medicare 
        beneficiaries.--
                    ``(A) In general.--Each Medicare Choice 
                organization with which the Secretary enters into a 
                contract under this section shall have, for the 
                duration of such contract, an enrolled membership at 
                least one-half of which consists of individuals who are 
                not entitled to benefits under this title or under a 
                State plan approved under title XIX.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to--
                            ``(i) an organization that has been 
                        certified by a national organization recognized 
                        by the Secretary and has been found to have met 
                        performance standards established by the 
                        Secretary for at least 2 years, or
                            ``(ii) a provider-sponsored organization 
                        for which commercial payments to providers 
                        participating in the organization exceed the 
                        payments to the organization under this part.
                    ``(C) Modification and waiver.--The Secretary may 
                modify or waive the requirement imposed by subparagraph 
                (A)--
                            ``(i) to the extent that more than 50 
                        percent of the population of the area served by 
                        the organization consists of individuals who 
                        are entitled to benefits under this title or 
                        under a State plan approved under title XIX, or
                            ``(ii) in the case of an organization that 
                        is owned and operated by a governmental entity, 
                        only with respect to a period of three years 
                        beginning on the date the organization first 
                        enters into a contract under this section, and 
                        only if the organization has taken and is 
                        making reasonable efforts to enroll individuals 
                        who are not entitled to benefits under this 
                        title or under a State plan approved under 
                        title XIX.
                    ``(D) Enforcement.--If the Secretary determines 
                that an organization has failed to comply with the 
                requirements of this paragraph, the Secretary may 
                provide for the suspension of enrollment of individuals 
                under this part or of payment to the organization under 
                this part for individuals newly enrolled with the 
                organization, after the date the Secretary notifies the 
                organization of such noncompliance.
    ``(c) Contract Period and Effectiveness.--
            ``(1) Period.--Each contract under this section shall be 
        for a term of at least one year, as determined by the 
        Secretary, and may be made automatically renewable from term to 
        term in the absence of notice by either party of intention to 
        terminate at the end of the current term.
            ``(2) Termination authority.--In accordance with procedures 
        established under subsection (h), the Secretary may at any time 
        terminate any such contract or may impose the intermediate 
        sanctions described in an applicable paragraph of subsection 
        (g) on the Medicare Choice organization if the Secretary 
        determines that the organization--
                    ``(A) has failed substantially to carry out the 
                contract;
                    ``(B) is carrying out the contract in a manner 
                inconsistent with the efficient and effective 
                administration of this part;
                    ``(C) is operating in a manner that is not in the 
                best interests of the individuals covered under the 
                contract; or
                    ``(D) no longer substantially meets the applicable 
                conditions of this part.
            ``(3) Effective date of contracts.--The effective date of 
        any contract executed pursuant to this section shall be 
        specified in the contract.
            ``(4) Previous terminations.--The Secretary may not enter 
        into a contract with a Medicare Choice organization if a 
        previous contract with that organization under this section was 
        terminated at the request of the organization within the 
        preceding five-year period, except in circumstances which 
        warrant special consideration, as determined by the Secretary.
            ``(5) No contracting authority.--The authority vested in 
        the Secretary by this part may be performed without regard to 
        such provisions of law or regulations relating to the making, 
        performance, amendment, or modification of contracts of the 
        United States as the Secretary may determine to be inconsistent 
        with the furtherance of the purpose of this title.
    ``(d) Protections Against Fraud and Beneficiary Protections.--
            ``(1) Inspection and audit.--Each contract under this 
        section shall provide that the Secretary, or any person or 
        organization designated by the Secretary--
                    ``(A) shall have the right to inspect or otherwise 
                evaluate (i) the quality, appropriateness, and 
                timeliness of services performed under the contract and 
                (ii) the facilities of the organization when there is 
                reasonable evidence of some need for such inspection, 
                and
                    ``(B) shall have the right to audit and inspect any 
                books and records of the Medicare Choice organization 
                that pertain (i) to the ability of the organization to 
                bear the risk of potential financial losses, or (ii) to 
                services performed or determinations of amounts payable 
                under the contract.
            ``(2) Enrollee notice at time of termination.--Each 
        contract under this section shall require the organization to 
        provide (and pay for) written notice in advance of the 
        contract's termination, as well as a description of 
        alternatives for obtaining benefits under this title, to each 
        individual enrolled with the organization under this part.
            ``(3) Disclosure.--
                    ``(A) In general.--Each Medicare Choice 
                organization shall, in accordance with regulations of 
                the Secretary, report to the Secretary financial 
                information which shall include the following:
                            ``(i) Such information as the Secretary may 
                        require demonstrating that the organization has 
                        a fiscally sound operation.
                            ``(ii) A copy of the report, if any, filed 
                        with the Health Care Financing Administration 
                        containing the information required to be 
                        reported under section 1124 by disclosing 
                        entities.
                            ``(iii) A description of transactions, as 
                        specified by the Secretary, between the 
                        organization and a party in interest. Such 
                        transactions shall include--
                                    ``(I) any sale or exchange, or 
                                leasing of any property between the 
                                organization and a party in interest;
                                    ``(II) any furnishing for 
                                consideration of goods, services 
                                (including management services), or 
                                facilities between the organization and 
                                a party in interest, but not including 
                                salaries paid to employees for services 
                                provided in the normal course of their 
                                employment and health services provided 
                                to members by hospitals and other 
                                providers and by staff, medical group 
                                (or groups), individual practice 
                                association (or associations), or any 
                                combination thereof; and
                                    ``(III) any lending of money or 
                                other extension of credit between an 
                                organization and a party in interest.
                The Secretary may require that information reported 
                respecting an organization which controls, is 
                controlled by, or is under common control with, another 
                entity be in the form of a consolidated financial 
                statement for the organization and such entity.
                    ``(B) Party in interest defined.--For the purposes 
                of this paragraph, the term `party in interest' means--
                            ``(i) any director, officer, partner, or 
                        employee responsible for management or 
                        administration of a Medicare Choice 
                        organization, any person who is directly or 
                        indirectly the beneficial owner of more than 
5 percent of the equity of the organization, any person who is the 
beneficial owner of a mortgage, deed of trust, note, or other interest 
secured by, and valuing more than 5 percent of the organization, and, 
in the case of a Medicare Choice organization organized as a nonprofit 
corporation, an incorporator or member of such corporation under 
applicable State corporation law;
                            ``(ii) any entity in which a person 
                        described in clause (i)--
                                    ``(I) is an officer or director;
                                    ``(II) is a partner (if such entity 
                                is organized as a partnership);
                                    ``(III) has directly or indirectly 
                                a beneficial interest of more than 5 
                                percent of the equity; or
                                    ``(IV) has a mortgage, deed of 
                                trust, note, or other interest valuing 
                                more than 5 percent of the assets of 
                                such entity;
                            ``(iii) any person directly or indirectly 
                        controlling, controlled by, or under common 
                        control with an organization; and
                            ``(iv) any spouse, child, or parent of an 
                        individual described in clause (i).
                    ``(C) Access to information.--Each Medicare Choice 
                organization shall make the information reported 
                pursuant to subparagraph (A) available to its enrollees 
                upon reasonable request.
            ``(4) Loan information.--The contract shall require the 
        organization to notify the Secretary of loans and other special 
        financial arrangements which are made between the organization 
        and subcontractors, affiliates, and related parties.
    ``(f) Additional Contract Terms.--The contract shall contain such 
other terms and conditions not inconsistent with this part (including 
requiring the organization to provide the Secretary with such 
information) as the Secretary may find necessary and appropriate.
    ``(g) Intermediate Sanctions.--
            ``(1) In general.--If the Secretary determines that a 
        Medicare Choice organization with a contract under this 
        section--
                    ``(A) fails substantially to provide medically 
                necessary items and services that are required (under 
                law or under the contract) to be provided to an 
                individual covered under the contract, if the failure 
                has adversely affected (or has substantial likelihood 
                of adversely affecting) the individual;
                    ``(B) imposes premiums on individuals enrolled 
                under this part in excess of the premiums permitted;
                    ``(C) acts to expel or to refuse to re-enroll an 
                individual in violation of the provisions of this part;
                    ``(D) engages in any practice that would reasonably 
                be expected to have the effect of denying or 
                discouraging enrollment (except as permitted by this 
                part) by eligible individuals with the organization 
                whose medical condition or history indicates a need for 
                substantial future medical services;
                    ``(E) misrepresents or falsifies information that 
                is furnished--
                            ``(i) to the Secretary under this part, or
                            ``(ii) to an individual or to any other 
                        entity under this part;
                    ``(F) fails to comply with the requirements of 
                section 1852(f)(3); or
                    ``(G) employs or contracts with any individual or 
                entity that is excluded from participation under this 
                title under section 1128 or 1128A for the provision of 
                health care, utilization review, medical social work, 
                or administrative services or employs or contracts with 
                any entity for the provision (directly or indirectly) 
                through such an excluded individual or entity of such 
                services;
        the Secretary may provide, in addition to any other remedies 
        authorized by law, for any of the remedies described in 
        paragraph (2).
            ``(2) Remedies.--The remedies described in this paragraph 
        are--
                    ``(A) civil money penalties of not more than 
                $25,000 for each determination under paragraph (1) or, 
                with respect to a determination under subparagraph (D) 
                or (E)(i) of such paragraph, of not more than $100,000 
                for each such determination, plus, with respect to a 
                determination under paragraph (1)(B), double the excess 
                amount charged in violation of such paragraph (and the 
                excess amount charged shall be deducted from the 
                penalty and returned to the individual concerned), and 
                plus, with respect to a determination under paragraph 
                (1)(D), $15,000 for each individual not enrolled as a 
                result of the practice involved,
                    ``(B) suspension of enrollment of individuals under 
                this part after the date the Secretary notifies the 
                organization of a determination under paragraph (1) and 
                until the Secretary is satisfied that the basis for 
                such determination has been corrected and is not likely 
                to recur, or
                    ``(C) suspension of payment to the organization 
                under this part for individuals enrolled after the date 
                the Secretary notifies the organization of a 
                determination under paragraph (1) and until the 
                Secretary is satisfied that the basis for such 
                determination has been corrected and is not likely to 
                recur.
            ``(3) Other intermediate sanctions.--In the case of a 
        Medicare Choice organization for which the Secretary makes a 
        determination under subsection (c)(2) the basis of which is not 
        described in paragraph (1), the Secretary may apply the 
        following intermediate sanctions:
                    ``(A) civil money penalties of not more than 
                $25,000 for each determination under subsection (c)(2) 
                if the deficiency that is the basis of the 
                determination has directly adversely affected (or has 
                the substantial likelihood of adversely affecting) an 
                individual covered under the organization's contract;
                    ``(B) civil money penalties of not more than 
                $10,000 for each week beginning after the initiation of 
                procedures by the Secretary under subsection (h) during 
                which the deficiency that is the basis of a 
                determination under subsection (c)(2) exists; and
                    ``(C) suspension of enrollment of individuals under 
                this part after the date the Secretary notifies the 
                organization of a determination under subsection (c)(2) 
                and until the Secretary is satisfied that the 
                deficiency that is the basis for the determination has 
                been corrected and is not likely to recur.
            ``(4) Procedures for imposing sanctions.--The provisions of 
        section 1128A (other than subsections (a) and (b)) shall apply 
        to a civil money penalty under paragraph (1) or (2) in the same 
        manner as they apply to a civil money penalty or proceeding 
        under section 1128A(a).
    ``(h) Procedures for Imposing Sanctions.--The Secretary may 
terminate a contract with a Medicare Choice organization under this 
section or may impose the intermediate sanctions described in 
subsection (g) on the organization in accordance with formal 
investigation and compliance procedures established by the Secretary 
under which--
            ``(1) the Secretary provides the organization with the 
        opportunity to develop and implement a corrective action plan 
        to correct the deficiencies that were the basis of the 
        Secretary's determination under subsection (c)(2);
            ``(2) the Secretary shall impose more severe sanctions on 
        organizations that have a history of deficiencies or that have 
        not taken steps to correct deficiencies the Secretary has 
        brought to their attention;
            ``(3) there are no unreasonable or unnecessary delays 
        between the finding of a deficiency and the imposition of 
        sanctions; and
            ``(4) the Secretary provides the organization with 
        reasonable notice and opportunity for hearing (including the 
        right to appeal an initial decision) before imposing any 
        sanction or terminating the contract.

     ``demonstration project for high deductible/medisave products

    ``Sec. 1859. (a) In General.--The Secretary shall permit, on a 
demonstration project basis, the offering of high deductible/medisave 
products under this part, subject to the special rules provided under 
this section.
    ``(b) High Deductible/Medisave Product Defined.--
            ``(1) In general.--In this part, the term `high deductible/
        medisave product' means a Medicare Choice product that--
                    ``(A) provides reimbursement for at least the items 
                and services described in section 1852(a)(1) in a year 
                but only after the enrollee incurs countable expenses 
                (as specified under the product) equal to the amount of 
                a deductible (described in paragraph (2));
                    ``(B) counts as such expenses (for purposes of such 
                deductible) at least all amounts that would have been 
                payable under parts A and B or by the enrollee if the 
                enrollee had elected to receive benefits through the 
                provisions of such parts; and
                    ``(C) provides, after such deductible is met for a 
                year and for all subsequent expenses for benefits 
                referred to in subparagraph (A) in the year, for a 
                level of reimbursement that is not less than--
                            ``(i) 100 percent of such expenses, or
                            ``(ii) 100 percent of the amounts that 
                        would have been paid (without regard to any 
                        deductibles or coinsurance) under parts A and B 
                        with respect to such expenses,
                whichever is less. Such term does not include the 
                Medicare Choice MSA itself or any contribution into 
                such account.
            ``(2) Deductible.--The amount of deductible under a high 
        deductible/medisave product--
                    ``(A) for contract year 1997 shall be not more than 
                $10,000; and
                    ``(B) for a subsequent contract year shall be not 
                more than the maximum amount of such deductible for the 
                previous contract year under this paragraph increased 
                by the national average per capita growth rate under 
                section 1855(c)(3) for the year.
        If the amount of the deductible under subparagraph (B) is not a 
        multiple of $50, the amount shall be rounded to the nearest 
        multiple of $50.
    ``(c) Special Rules Relating to Enrollment.--The rule under section 
1805 relating to election of Medicare Choice products shall apply to 
election of high deductible/medisave products offered under the 
demonstration project under this section, except as follows:
            ``(1) Special rule for certain annuitants.--An individual 
        is not eligible to elect a high deductible/medisave product 
        under section 1805 if the individual is entitled to benefits 
        under chapter 89 of title 5, United States Code, as an 
        annuitant or spouse of an annuitant.
            ``(2) Transition period rule.--During the transition period 
        (as defined in section 1805(e)(1)(B)), an individual who has 
        elected a high deductible/medisave product may not change such 
        election to a Medicare Choice product that is not a high 
        deductible/medisave product unless the individual has had such 
        election in effect for 12 months.
            ``(3) No 90-day disenrollment option.--Paragraph (4)(A) of 
        section 1805(e) shall not apply to an individual who elects a 
        high deductible/medisave product.
            ``(4) Timing of election.--An individual may elect a high 
        deductible/medisave product only during an annual, coordinated 
        election period described in section 1805(e)(3)(B) or during 
        the month of October, 1996.
            ``(5) Effectiveness of election.--An election of coverage 
        for a high deductible/medisave product made in a year shall 
        take effect as of the first day of the following year.
    ``(d) Special Rules Relating to Benefits.--
            ``(1) In general.--Paragraphs (1) and (3) of section 
        1852(a) shall not apply to high deductible/medisave products.
            ``(2) Premiums.--
                    ``(A) Application of alternative premium.--In 
                applying section 1852(d)(2) in the case of a high 
                deductible/medisave product, instead of the amount 
                specified in subparagraph (B) there shall be 
                substituted the monthly adjusted Medicare Choice 
                capitation rate specified in section 1855(b)(1) for the 
                individual and period involved.
                    ``(B) Class adjusted premiums.--Notwithstanding 
                section 1852(d)(3), a Medicare Choice organization 
                shall establish premiums for any high deductible/
                medisave product it offers in a payment area based on 
                each of the risk adjustment categories established for 
                purposes of determining the amount of the payment to 
                Medicare Choice organizations under section 1855(b)(1) 
                and using the identical demographic and other 
                adjustments among such categories as are used for such 
                purposes.
                    ``(C) Requirement for additional benefits not 
                applicable.--Section 1852(e)(1)(A) shall not apply to a 
                high deductible/medisave product.
    ``(e) Additional Disclosure.--In any disclosure made pursuant to 
section 1853(a)(1) for a high deductible/medisave product, the 
disclosure shall include a comparison of benefits under such a product 
with benefits under other Medicare Choice products.
    ``(f) Special Rules for Individuals Electing High Deductible/
Medisave Product.--
            ``(1) In general.--In the case of an individual who has 
        elected a high deductible/medisave product, notwithstanding the 
        provisions of section 1855--
                    ``(A) the amount of the payment to the Medicare 
                Choice organization offering the high deductible/
                medisave product shall not exceed the premium for the 
                product, and
                    ``(B) subject to paragraph (2), the difference 
                between the amount of payment that would otherwise be 
                made and the amount of payment to such organization 
                shall be made directly into a Medicare Choice MSA 
                established (and, if applicable, designated) by the 
                individual under paragraph (2).
            ``(2) Establishment and designation of medicare choice 
        medical savings account as requirement for payment of 
        contribution.--In the case of an individual who has elected 
        coverage under a high deductible/medisave product, no payment 
        shall be made under paragraph (1)(B) on behalf of an individual 
        for a month unless the individual--
                    ``(A) has established before the beginning of the 
                month (or by such other deadline as the Secretary may 
                specify) a Medicare Choice MSA (as defined in section 
                137(b) of the Internal Revenue Code of 1986), and
                    ``(B) if the individual has established more than 
                one Medicare Choice MSA, has designated one of 
such accounts as the individual's Medicare Choice MSA for purposes of 
this part.
        Under rules under this section, such an individual may change 
        the designation of such account under subparagraph (B) for 
        purposes of this part.
            ``(3) Lump sum deposit of medical savings account 
        contribution.--In the case of an individual electing a high 
        deductible/medisave product effective beginning with a month in 
        a year, the amount of the contribution to the Medicare Choice 
        MSA on behalf of the individual for that month and all 
        successive months in the year shall be deposited during that 
        first month. In the case of a termination of such an election 
        as of a month before the end of a year, the Secretary shall 
        provide for a procedure for the recovery of deposits 
        attributable to the remaining months in the year.
    ``(g) Special Contract Rules.--
            ``(1) Enrollment requirements waived.--Subsection (b) of 
        section 1858 shall not apply with respect to a contract that 
        relates only to one or more high deductible/medisave products.
            ``(2) Effective date of contracts.--In no case shall a 
        contract under section 1858 which provides for coverage under a 
        high deductible/medisave account be effective before January 
        1997 with respect to such coverage.''.
    (b) Conforming References to Previous Part C.--Any reference in law 
(in effect before the date of the enactment of this Act) to part C of 
title XVIII of the Social Security Act is deemed a reference to part D 
of such title (as in effect after such date).
    (c) Use of Interim, Final Regulations.--In order to carry out the 
amendment made by subsection (a) in a timely manner, the Secretary of 
Health and Human Services may promulgate regulations that take effect 
on an interim basis, after notice and pending opportunity for public 
comment.
    (d) Advance Directives.--Section 1866(f)(1) (42 U.S.C. 
1395cc(f)(1)) is amended--
            (1) in paragraph (1)--
                    (A) by inserting ``1853(g),'' after ``1833(s),'', 
                and
                    (B) by inserting ``, Medicare Choice 
                organization,'' after ``provider of services'', and
            (2) by adding at the end the following new paragraph:
    ``(4) Nothing in this subsection shall be construed to require the 
provision of information regarding assisted suicide, euthanasia, or 
mercy killing.''.
    (e) Conforming Amendment.--Section 1866(a)(1)(O) (42 U.S.C. 
1395cc(a)(1)(O)) is amended by inserting before the semicolon at the 
end the following: ``and in the case of hospitals to accept as payment 
in full for inpatient hospital services that are covered under this 
title and are furnished to any individual enrolled under part C with a 
Medicare Choice organization which does not have a contract 
establishing payment amounts for services furnished to members of the 
organization the amounts that would be made as a payment in full under 
this title if the individuals were not so enrolled''.

SEC. 15003. REPORTS.

    (a) Alternative Payment Approaches.--By not later than ____, the 
Secretary of Health and Human Services (in this title referred to as 
the ``Secretary'') shall submit to Congress a report on alternative 
provider payment approaches under the medicare program, including--
            (1) combined hospital and physician payments per admission,
            (2) partial capitation models for subsets of medicare 
        benefits, and
            (3) risk-sharing arrangements in which the Secretary 
        defines the risk corridor and shares in gains and losses.
Such report shall include recommendations for implementing and testing 
such approaches and legislation that may be required to implement and 
test such approaches.
    (b) Coverage of Retired Workers.--
            (1) In general.--The Secretary shall work with employers 
        and health benefit plans to develop standards and payment 
        methodologies to allow retired workers to continue to 
        participate in employer health plans instead of participating 
        in the medicare program. Such standards shall also cover 
        workers covered under the Federal Employees Health Benefits 
        Program under chapter 89 of title 5, United States Code.
            (2) Report.--Not later than 18 months after the date of the 
        enactment of this Act, the Secretary shall submit to Congress a 
        report on the development of such standards and payment 
        methodologies. The report shall include recommendations 
        relating to such legislation as may be necessary.

SEC. 15004. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO PROGRAM.

    (a) Transition from Current Contracts.--
            (1) Limitation on new contracts.--
                    (A) No new risk-sharing contracts after new 
                standards established.--The Secretary of Health and 
                Human Services (in this section referred to as the 
                ``Secretary'') shall not enter into any risk-sharing 
                contract under section 1876 of the Social Security Act 
                with an eligible organization for any contract year 
                beginning on or after the date standards for Medicare 
                Choice organizations and products are first established 
                under section 1856(a) of such Act with respect to 
                Medicare Choice organizations that are insurers or 
                health maintenance organizations unless such a contract 
                had been in effect under section 1876 of such Act for 
                the organization for the previous contract year.
                    (B) No new cost reimbursement contracts.--The 
                Secretary shall not enter into any cost reimbursement 
                contract under section 1876 of the Social Security Act 
                beginning for any contract year beginning on or after 
                the date of the enactment of this Act.
            (2) Termination of current contracts.--
                    (A) Risk-sharing contracts.--Notwithstanding any 
                other provision of law, the Secretary shall not extend 
                or continue any risk-sharing contract with an eligible 
                organization under section 1876 of the Social Security 
                Act (for which a contract was entered into consistent 
                with paragraph (1)(A)) for any contract year beginning 
                on or after 1 year after the date standards described 
                in paragraph (1)(A) are established.
                    (B) Cost reimbursement contracts.--The Secretary 
                shall not extend or continue any reasonable cost 
                reimbursement contract with an eligible organization 
                under section 1876 of the Social Security Act for any 
                contract year beginning on or after January 1, 1998.
    (b) Conforming Payment Rates.--
            (1) Risk-sharing contracts.--Notwithstanding any other 
        provision of law, the Secretary shall provide that payment 
        amounts under risk-sharing contracts under section 1876(a) of 
        the Social Security Act for months in a year (beginning with 
        January 1996) shall be computed--
                    (A) with respect to individuals entitled to 
                benefits under both parts A and B of title XVIII of 
                such Act, by substituting payment rates under section 
                1855(a) of such Act for the payment rates otherwise 
                established under section 1876(a) of such Act, and
                    (B) with respect to individuals only entitled to 
                benefits under part B of such title, by substituting an 
                appropriate proportion of such rates (reflecting the 
                relative proportion of payments under such title 
attributable to such part) for the payment rates otherwise established 
under section 1876(a) of such Act.
        For purposes of carrying out this paragraph for payment for 
        months in 1996, the Secretary shall compute, announce, and 
        apply the payment rates under section 1855(a) of such Act 
        (notwithstanding any deadlines specified in such section) in as 
        timely a manner as possible and may (to the extent necessary) 
        provide for retroactive adjustment in payments made not in 
        accordance with such rates.
            (2) Cost contracts.--Notwithstanding any other provision of 
        law, the Secretary shall provide that payment amounts under 
        cost reimbursement contracts under section 1876(a) of the 
        Social Security Act shall take into account adjustments in 
        payment amounts made in parts A and B of title XVIII of such 
        Act pursuant to the amendments made by this title.

   PART 2--SPECIAL RULES FOR MEDICARE CHOICE MEDICAL SAVINGS ACCOUNTS

                                                     Subtitle A, Part 2

SEC. 15011. MEDICARE CHOICE MSA'S.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to amounts specifically 
excluded from gross income) is amended by redesignating section 137 as 
section 138 and by inserting after section 136 the following new 
section:

``SEC. 137. MEDICARE CHOICE MSA'S.

    ``(a) Exclusion.--Gross income shall not include any payment to the 
Medicare Choice MSA of an individual by the Secretary of Health and 
Human Services under section 1859(f)(1)(B) of the Social Security Act.
    ``(b) Medicare Choice MSA.--For purposes of this section--
            ``(1) Medicare choice msa.--The term `Medicare Choice MSA' 
        means a trust created or organized in the United States 
        exclusively for the purpose of paying the qualified medical 
        expenses of the account holder, but only if the written 
        governing instrument creating the trust meets the following 
        requirements:
                    ``(A) Except in the case of a trustee-to-trustee 
                transfer described in subsection (d)(4), no 
                contribution will be accepted unless it is made by the 
                Secretary of Health and Human Services under section 
                1859(f)(1)(B) of the Social Security Act.
                    ``(B) The trustee is a bank (as defined in section 
                408(n)), an insurance company (as defined in section 
                816), or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) No part of the trust assets will be invested 
                in life insurance contracts.
                    ``(D) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
                    ``(E) The interest of an individual in the balance 
                in his account is nonforfeitable.
                    ``(F) Trustee-to-trustee transfers described in 
                subsection (d)(4) may be made to and from the trust.
            ``(2) Qualified medical expenses.--
                    ``(A) In general.--The term `qualified medical 
                expenses' means, with respect to an account holder, 
                amounts paid by such holder--
                            ``(i) for medical care (as defined in 
                        section 213(d)) for the account holder, but 
                        only to the extent such amounts are not 
                        compensated for by insurance or otherwise, or
                            ``(ii) for long-term care insurance for the 
                        account holder.
                    ``(B) Health insurance may not be purchased from 
                account.--Subparagraph (A)(i) shall not apply to any 
                payment for insurance.
            ``(3) Account holder.--The term `account holder' means the 
        individual on whose behalf the Medicare Choice MSA is 
        maintained.
            ``(4) Certain rules to apply.--Rules similar to the rules 
        of subsections (g) and (h) of section 408 shall apply for 
        purposes of this section.
    ``(c) Tax Treatment of Accounts.--
            ``(1) In general.--A Medicare Choice MSA is exempt from 
        taxation under this subtitle unless such MSA has ceased to be a 
        Medicare Choice MSA by reason of paragraph (2). Notwithstanding 
        the preceding sentence, any such MSA is subject to the taxes 
        imposed by section 511 (relating to imposition of tax on 
        unrelated business income of charitable, etc. organizations).
            ``(2) Account assets treated as distributed in the case of 
        prohibited transactions or account pledged as security for 
        loan.--Rules similar to the rules of paragraphs (2) and (4) of 
        section 408(e) shall apply to Medicare Choice MSA's, and any 
        amount treated as distributed under such rules shall be treated 
        as not used to pay qualified medical expenses.
    ``(d) Tax Treatment of Distributions.--
            ``(1) Inclusion of amounts not used for qualified medical 
        expenses.--No amount shall be included in the gross income of 
        the account holder by reason of a payment or distribution from 
        a Medicare Choice MSA which is used exclusively to pay the 
        qualified medical expenses of the account holder. Any amount 
        paid or distributed from a Medicare Choice MSA which is not so 
        used shall be included in the gross income of such holder.
            ``(2) Penalty for distributions not used for qualified 
        medical expenses if minimum balance not maintained.--
                    ``(A) In general.--The tax imposed by this chapter 
                for any taxable year in which there is a payment or 
                distribution from a Medicare Choice MSA which is not 
                used exclusively to pay the qualified medical expenses 
                of the account holder shall be increased by 50 percent 
                of the excess (if any) of--
                            ``(i) the amount of such payment or 
                        distribution, over
                            ``(ii) the excess (if any) of--
                                    ``(I) the fair market value of the 
                                assets in the Medicare Choice MSA as of 
                                the close of the calendar year 
                                preceding the calendar year in which 
                                the taxable year begins, over
                                    ``(II) an amount equal to 60 
                                percent of the deductible under the 
                                catastrophic health plan covering the 
                                account holder as of January 1 of the 
                                calendar year in which the taxable year 
                                begins.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                if the payment or distribution is made on or after the 
                date the account holder--
                            ``(i) becomes disabled within the meaning 
                        of section 72(m)(7), or
                            ``(ii) dies.
                    ``(C) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) all Medicare Choice MSA's of the 
                        account holder shall be treated as 1 account,
                            ``(ii) all payments and distributions not 
                        used exclusively to pay the qualified medical 
                        expenses of the account holder during any 
taxable year shall be treated as 1 distribution, and
                            ``(iii) any distribution of property shall 
                        be taken into account at its fair market value 
                        on the date of the distribution.
            ``(3) Withdrawal of erroneous contributions.--Paragraphs 
        (1) and (2) shall not apply to any payment or distribution from 
        a Medicare Choice MSA to the Secretary of Health and Human 
        Services of an erroneous contribution to such MSA and of the 
        net income attributable to such contribution.
            ``(4) Trustee-to-trustee transfers.--Paragraphs (1) and (2) 
        shall not apply to any trustee-to-trustee transfer from a 
        Medicare Choice MSA of an account holder to another Medicare 
        Choice MSA of such account holder.
            ``(5) Coordination with medical expense deduction.--For 
        purposes of section 213, any payment or distribution out of a 
        Medicare Choice MSA for qualified medical expenses shall not be 
        treated as an expense paid for medical care.
    ``(e) Treatment of Account After Death of Account Holder.--
            ``(1) Treatment if designated beneficiary is spouse.--
                    ``(A) In general.--In the case of an account 
                holder's interest in a Medicare Choice MSA which is 
                payable to (or for the benefit of) such holder's spouse 
                upon the death of such holder, such Medicare Choice MSA 
                shall be treated as a Medicare Choice MSA of such 
                spouse as of the date of such death.
                    ``(B) Special rules if spouse not medicare 
                eligible.--If, as of the date of such death, such 
                spouse is not entitled to benefits under title XVIII of 
                the Social Security Act, then after the date of such 
                death--
                            ``(i) the Secretary of Health and Human 
                        Services may not make any payments to such 
                        Medicare Choice MSA, other than payments 
                        attributable to periods before such date,
                            ``(ii) in applying subsection (b)(2) with 
                        respect to such Medicare Choice MSA, references 
                        to the account holder shall be treated as 
                        including references to any dependent (as 
                        defined in section 152) of such spouse and any 
                        subsequent spouse of such spouse, and
                            ``(iii) in lieu of applying subsection 
                        (d)(2), the rules of section 220(f)(2) shall 
                        apply.
            ``(2) Treatment if designated beneficiary is not spouse.--
        In the case of an account holder's interest in a Medicare 
        Choice MSA which is payable to (or for the benefit of) any 
        person other than such holder's spouse upon the death of such 
        holder--
                    ``(A) such account shall cease to be a Medicare 
                Choice MSA as of the date of death, and
                    ``(B) an amount equal to the fair market value of 
                the assets in such account on such date shall be 
                includible--
                            ``(i) if such person is not the estate of 
                        such holder, in such person's gross income for 
                        the taxable year which includes such date, or
                            ``(ii) if such person is the estate of such 
                        holder, in such holder's gross income for last 
                        taxable year of such holder.
    ``(f) Reports.--
            ``(1) In general.--The trustee of a Medicare Choice MSA 
        shall make such reports regarding such account to the Secretary 
        and to the account holder with respect to--
                    ``(A) the fair market value of the assets in such 
                Medicare Choice MSA as of the close of each calendar 
                year, and
                    ``(B) contributions, distributions, and other 
                matters,
        as the Secretary may require by regulations.
            ``(2) Time and manner of reports.--The reports required by 
        this subsection--
                    ``(A) shall be filed at such time and in such 
                manner as the Secretary prescribes in such regulations, 
                and
                    ``(B) shall be furnished to the account holder--
                            ``(i) not later than January 31 of the 
                        calendar year following the calendar year to 
                        which such reports relate, and
                            ``(ii) in such manner as the Secretary 
                        prescribes in such regulations.''
    (b) Exclusion of Medicare Choice MSA's From Estate Tax.--Part IV of 
subchapter A of chapter 11 of such Code is amended by adding at the end 
the following new section:

``SEC. 2057. MEDICARE CHOICE MSA'S.

    ``For purposes of the tax imposed by section 2001, the value of the 
taxable estate shall be determined by deducting from the value of the 
gross estate an amount equal to the value of any Medicare Choice MSA 
(as defined in section 137(b)) included in the gross estate.''
    (c) Tax on Prohibited Transactions.--
            (1) Section 4975 of such Code (relating to tax on 
        prohibited transactions) is amended by adding at the end of 
        subsection (c) the following new paragraph:
            ``(5) Special rule for medicare choice MSA's.--An 
        individual for whose benefit a Medicare Choice MSA (within the 
        meaning of section 137(b)) is established shall be exempt from 
        the tax imposed by this section with respect to any transaction 
        concerning such account (which would otherwise be taxable under 
        this section) if, with respect to such transaction, the account 
        ceases to be a Medicare Choice MSA by reason of the application 
        of section 137(c)(2) to such account.''
            (2) Paragraph (1) of section 4975(e) of such Code is 
        amended to read as follows:
            ``(1) Plan.--For purposes of this section, the term `plan' 
        means--
                    ``(A) a trust described in section 401(a) which 
                forms a part of a plan, or a plan described in section 
                403(a), which trust or plan is exempt from tax under 
                section 501(a),
                    ``(B) an individual retirement account described in 
                section 408(a),
                    ``(C) an individual retirement annuity described in 
                section 408(b),
                    ``(D) a medical savings account described in 
                section 220(d),
                    ``(E) a Medicare Choice MSA described in section 
                137(b), or
                    ``(F) a trust, plan, account, or annuity which, at 
                any time, has been determined by the Secretary to be 
                described in any preceding subparagraph of this 
                paragraph.''
    (d) Failure To Provide Reports on Medicare Choice MSA's.--
            (1) Subsection (a) of section 6693 of such Code (relating 
        to failure to provide reports on individual retirement accounts 
        or annuities) is amended to read as follows:
    ``(a) Reports.--
            ``(1) In general.--If a person required to file a report 
        under a provision referred to in paragraph (2) fails to file 
        such report at the time and in the manner required by such 
        provision, such person shall pay a penalty of $50 for each 
        failure unless it is shown that such failure is due to 
        reasonable cause.
            ``(2) Provisions.--The provisions referred to in this 
        paragraph are--
                    ``(A) subsections (i) and (l) of section 408 
                (relating to individual retirement plans),
                    ``(B) section 220(h) (relating to medical savings 
                accounts), and
                    ``(C) section 137(f) (relating to Medicare Choice 
                MSA's).''
            (2) The section heading for section 6693 of such Code is 
        amended to read as follows:

``SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RETIREMENT PLANS AND 
              CERTAIN OTHER TAX-FAVORED ACCOUNTS; PENALTIES RELATING TO 
              DESIGNATED NONDEDUCTIBLE CONTRIBUTIONS.''

    (e) Clerical Amendments.--
            (1) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following:

                              ``Sec. 137. Medicare Choice MSA's.
                              ``Sec. 138. Cross references to other 
                                        Acts.''
            (2) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by striking the item relating to section 
        6693 and inserting the following new item:

                              ``Sec. 6693. Failure to file reports on 
                                        individual retirement plans and 
                                        certain other tax-favored 
                                        accounts; penalties relating to 
                                        designated nondeductible 
                                        contributions.''
            (3) The table of sections for part IV of subchapter A of 
        chapter 11 of such Code is amended by adding at the end the 
        following new item:

                              ``Sec. 2057. Medicare Choice MSA's.''
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 15012. CERTAIN REBATES EXCLUDED FROM GROSS INCOME.

    (a) In General.--Section 105 of the Internal Revenue Code of 1986 
(relating to amounts received under accident and health plans) is 
amended by adding at the end the following new subsection:
    ``(j) Certain Rebates Under Social Security Act.--Gross income does 
not include any rebate received under section 1852(e)(1)(A) of the 
Social Security Act during the taxable year.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to amounts received after the date of the enactment of this Act.

      PART 3--SPECIAL ANTITRUST RULE FOR PROVIDER SERVICE NETWORKS

                                                     Subtitle A, Part 3

SEC. 15021. APPLICATION OF ANTITRUST RULE OF REASON TO PROVIDER SERVICE 
              NETWORKS.

    (a) Rule of Reason Standard.--In any action under the antitrust 
laws, or under any State law similar to the antitrust laws--
            (1) the conduct of a provider service network in 
        negotiating, making, or performing a contract (including the 
        establishment and modification of a fee schedule and the 
        development of a panel of physicians), to the extent such 
        contract is for the purpose of providing health care services 
        to individuals under the terms of a Medicare Choice PSO 
        product, and
            (2) the conduct of any member of such network for the 
        purpose of providing such health care services under such 
        contract to such extent,
shall not be deemed illegal per se. Such conduct shall be judged on the 
basis of its reasonableness, taking into account all relevant factors 
affecting competition, including the effects on competition in properly 
defined markets.
    (b) Definitions.--For purposes of subsection (a):
            (1) Antitrust laws.--The term ``antitrust laws'' has the 
        meaning given it in subsection (a) of the first section of the 
        Clayton Act (15 U.S.C. 12), except that such term includes 
        section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to 
        the extent that such section 5 applies to unfair methods of 
        competition.
            (2) Health care provider.--The term ``health care 
        provider'' means any individual or entity that is engaged in 
        the delivery of health care services in a State and that is 
        required by State law or regulation to be licensed or certified 
        by the State to engage in the delivery of such services in the 
        State.
            (3) Health care service.--The term ``health care service'' 
        means any service for which payment may be made under a 
        Medicare Choice PSO product including services related to the 
        delivery or administration of such service.
            (4) Medicare choice program.--The term ``Medicare Choice 
        program'' means the program under part C of title XVIII of the 
        Social Security Act.
            (5) Medicare choice pso product.--The term ``Medicare 
        Choice PSO product'' means a Medicare Choice product offered by 
        a provider-sponsored organization under part C of title XVIII 
        of the Social Security Act.
            (6) Provider service network.--The term ``provider service 
        network'' means an organization that--
                    (A) is organized by, operated by, and composed of 
                members who are health care providers and for purposes 
                that include providing health care services,
                    (B) is funded in part by capital contributions made 
                by the members of such organization,
                    (C) with respect to each contract made by such 
                organization for the purpose of providing a type of 
                health care service to individuals under the terms of a 
                Medicare Choice PSO product--
                            (i) requires all members of such 
                        organization who engage in providing such type 
                        of health care service to agree to provide 
                        health care services of such type under such 
                        contract,
                            (ii) receives the compensation paid for the 
                        health care services of such type provided 
                        under such contract by such members, and
                            (iii) provides for the distribution of such 
                        compensation,
                    (D) has established, consistent with the 
                requirements of the Medicare Choice program for 
                provider-sponsored organizations, a program to review, 
                pursuant to written guidelines, the quality, 
                efficiency, and appropriateness of treatment methods 
                and setting of services for all health care providers 
                and all patients participating in such product, along 
                with internal procedures to correct identified 
                deficiencies relating to such methods and such 
                services,
                    (E) has established, consistent with the 
                requirements of the Medicare Choice program for 
                provider-sponsored organizations, a program to monitor 
                and control utilization of health care services 
                provided under such product, for the purpose of 
                improving efficient, appropriate care and eliminating 
                the provision of unnecessary health care services,
                    (F) has established a management program to 
                coordinate the delivery of health care services for all 
                health care providers and all patients participating in 
                such product, for the purpose of achieving efficiencies 
                and enhancing the quality of health care services 
                provided, and
                    (G) has established, consistent with the 
                requirements of the Medicare Choice program for 
                provider-sponsored organizations, a grievance and 
                appeal process for such organization designed to review 
                and promptly resolve beneficiary or patient grievances 
                and complaints.
        Such term may include a provider-sponsored organization.
            (7) Provider-sponsored organization.--The term ``provider-
        sponsored organization'' means a Medicare Choice organization 
under the Medicare Choice program that is a provider-sponsored 
organization (as defined in section ____ of the Social Security Act).
            (8) State.--The term ``State'' has the meaning given it in 
        section 4G(2) of the Clayton Act (15 U.S.C. 15g(2)).
    (c) Issuance of Guidelines.--Not later than 120 days after the date 
of the enactment of this Act, the Attorney General and the Federal 
Trade Commission shall issue jointly guidelines specifying the 
enforcement policies and analytical principles that will be applied by 
the Department of Justice and the Commission with respect to the 
operation of subsection (a).

                          PART 4--COMMISSIONS

                                                     Subtitle A, Part 4

SEC. 15031. MEDICARE PAYMENT REVIEW COMMISSION.

    (a) In General.--Title XVIII, as amended by section 8001(a), is 
amended by inserting after section 1805 the following new section:

                  ``medicare payment review commission

    ``Sec. 1806. (a) Establishment.--There is hereby established the 
Medicare Payment Review Commission (in this section referred to as the 
`Commission').
    ``(b) Duties.--
            ``(1) General duties and reports.--The Commission shall 
        review, and make recommendations to Congress concerning, 
        payment policies under this title. By not later than June 1 of 
        each year, the Commission shall submit a report to Congress 
        containing an examination of issues affecting the medicare 
        program, including the implications of changes in health care 
        delivery in the United States and in the market for health care 
        services on the medicare program. The Commission may submit to 
        Congress from time to time such other reports as the Commission 
        deems appropriate. The Secretary shall respond to 
        recommendations of the Commission in notices of rulemaking 
        proceedings under this title.
            ``(2) Specific duties relating to medicare choice 
        program.--Specifically, the Commission shall review, with 
        respect to the Medicare Choice program under part C--
                    ``(A) the appropriateness of the methodology for 
                making payment to plans under such program, including 
                the making of differential payments and the 
                distribution of differential updates among different 
                payment areas,
                    ``(B) the appropriateness of the mechanisms used to 
                adjust payments for risk and the need to adjust such 
                mechanisms to take into account health status of 
                beneficiaries,
                    ``(C) the implications of risk selection both among 
                Medicare Choice organizations and between the Medicare 
                Choice option and the non-Medicare Choice option,
                    ``(D) in relation to payment under part C, the 
                development and implementation of mechanisms to assure 
                the quality of care for those enrolled with Medicare 
                Choice organizations,
                    ``(F) the impact of the Medicare Choice program on 
                access to care for medicare beneficiaries, and
                    ``(G) other major issues in implementation and 
                further development of the Medicare Choice program.
            ``(3) Specific duties relating to the fee-for-service 
        system.--Specifically, the Commission shall review payment 
        policies under parts A and B, including--
                    ``(A) the factors affecting expenditures for 
                services in different sectors, including the process 
                for updating hospital, physician, and other fees,
                    ``(B) payment methodologies; and
                    ``(C) the impact of payment policies on access and 
                quality of care for medicare beneficiaries.
            ``(4) Specific duties relating to interaction of payment 
        policies with health care delivery generally.--Specifically the 
        Commission shall review the effect of payment policies under 
        this title on the delivery of health care services under this 
        title and assess the implications of changes in the health 
        services market on the medicare program.
    ``(c) Membership.--
            ``(1) Number and appointment.--The Commission shall be 
        composed of 15 members appointed by the Comptroller General.
            ``(2) Qualifications.--The membership of the Commission 
        shall include individuals with national recognition for their 
        expertise in health finance and economics, actuarial science, 
        health facility management, health plans and integrated 
        delivery systems, reimbursement of health facilities, 
        physicians, and other providers of services, and other related 
        fields, who provide a mix of different professionals, broad 
        geographic representation, and a balance between urban and 
        rural representatives, including physicians and other health 
        professionals, employers, third party payors, individuals 
        skilled in the conduct and interpretation of biomedical, health 
        services, and health economics research and expertise in 
        outcomes and effectiveness research and technology assessment. 
        Such membership shall also include representatives of consumers 
        and the elderly.
            ``(3) Considerations in initial appointment.--To the extent 
        possible, in first appointing members to the Commission the 
        Comptroller General shall consider appointing individuals who 
        (as of the date of the enactment of this section) were serving 
        on the Prospective Payment Assessment Commission or the 
        Physician Payment Review Commission.
            ``(4) Terms.--
                    ``(A) In general.--The terms of members of the 
                Commission shall be for 3 years except that the 
                Comptroller General shall designate staggered terms for 
                the members first appointed.
                    ``(B) Vacancies.--Any member appointed to fill a 
                vacancy occurring before the expiration of the term for 
                which the member's predecessor was appointed shall be 
                appointed only for the remainder of that term. A member 
                may serve after the expiration of that member's term 
                until a successor has taken office. A vacancy in the 
                Commission shall be filled in the manner in which the 
                original appointment was made.
            ``(5) Compensation.--While serving on the business of the 
        Commission (including traveltime), a member of the Commission 
        shall be entitled to compensation at the per diem equivalent of 
        the rate provided for level IV of the Executive Schedule under 
        section 5315 of title 5, United States Code; and while so 
        serving away from home and member's regular place of business, 
        a member may be allowed travel expenses, as authorized by the 
        Chairman of the Commission. Physicians serving as personnel of 
        the Commission may be provided a physician comparability 
        allowance by the Commission in the same manner as Government 
        physicians may be provided such an allowance by an agency under 
        section 5948 of title 5, United States Code, and for such 
        purpose subsection (i) of such section shall apply to the 
        Commission in the same manner as it applies to the Tennessee 
        Valley Authority. For purposes of pay (other than pay of 
        members of the Commission) and employment benefits, rights, and 
        privileges, all personnel of the Commission shall be treated as 
        if they were employees of the United States Senate.
            ``(6) Chairman; vice chairman.--The Comptroller General 
        shall designate a member of the Commission, at the time 
of appointment of the member, as Chairman and a member as Vice Chairman 
for that term of appointment.
            ``(7) Meetings.--The Commission shall meet at the call of 
        the Chairman.
    ``(d) Director and Staff; Experts and Consultants.--Subject to such 
review as the Comptroller General deems necessary to assure the 
efficient administration of the Commission, the Commission may--
            ``(1) employ and fix the compensation of an Executive 
        Director (subject to the approval of the Comptroller General) 
        and such other personnel as may be necessary to carry out its 
        duties (without regard to the provisions of title 5, United 
        States Code, governing appointments in the competitive 
        service);
            ``(2) seek such assistance and support as may be required 
        in the performance of its duties from appropriate Federal 
        departments and agencies;
            ``(3) enter into contracts or make other arrangements, as 
        may be necessary for the conduct of the work of the Commission 
        (without regard to section 3709 of the Revised Statutes (41 
        U.S.C. 5));
            ``(4) make advance, progress, and other payments which 
        relate to the work of the Commission;
            ``(5) provide transportation and subsistence for persons 
        serving without compensation; and
            ``(6) prescribe such rules and regulations as it deems 
        necessary with respect to the internal organization and 
        operation of the Commission.
    ``(e) Powers.--
            ``(1) Obtaining official data.--The Commission may secure 
        directly from any department or agency of the United States 
        information necessary to enable it to carry out this section. 
        Upon request of the Chairman, the head of that department or 
        agency shall furnish that information to the Commission on an 
        agreed upon schedule.
            ``(2) Data collection.--In order to carry out its 
        functions, the Commission shall collect and assess information 
        to--
                    ``(A) utilize existing information, both published 
                and unpublished, where possible, collected and assessed 
                either by its own staff or under other arrangements 
                made in accordance with this section,
                    ``(B) carry out, or award grants or contracts for, 
                original research and experimentation, where existing 
                information is inadequate, and
                    ``(C) adopt procedures allowing any interested 
                party to submit information for the Commission's use in 
                making reports and recommendations.
            ``(3) Access of gao to information.--The Comptroller 
        General shall have unrestricted access to all deliberations, 
        records, and data of the Commission, immediately upon request.
            ``(4) Periodic audit.--The Commission shall be subject to 
        periodic audit by the General Accounting Office.
    ``(f) Authorization of Appropriations.--
            ``(1) Request for appropriations.--The Commission shall 
        submit requests for appropriations in the same manner as the 
        Comptroller General submits requests for appropriations, but 
        amounts appropriated for the Commission shall be separate from 
        amounts appropriated for the Comptroller General.
            ``(2) Authorization.--There are authorized to be 
        appropriated such sums as may be necessary to carry out the 
        provisions of this section. 60 percent of such appropriation 
        shall be payable from the Federal Hospital Insurance Trust 
        Fund, and 40 percent of such appropriation shall be payable 
        from the Federal Supplementary Medical Insurance Trust Fund.''.
    (b) Abolition of ProPAC and PPRC.--
            (1) Propac.--
                    (A) In general.--Section 1886(e) (42 U.S.C. 
                1395ww(e)) is amended--
                            (i) by striking paragraphs (2) and (6); and
                            (ii) in paragraph (3), by striking ``(A) 
                        The Commission'' and all that follows through 
                        ``(B)''.
                    (B) Conforming amendment.--Section 1862 (42 U.S.C. 
                1395y) is amended by striking ``Prospective Payment 
                Assessment Commission'' each place it appears in 
                subsection (a)(1)(D) and subsection (i) and inserting 
                ``Medicare Payment Review Commission''.
            (2) PPRC.--
                    (A) In general.--Title XVIII is amended by striking 
                section 1845 (42 U.S.C. 1395w-1).
                    (B) Conforming amendments.--
                            (i) Section 1834(b)(2) (42 U.S.C. 
                        1395m(b)(2)) is amended by striking ``Physician 
                        Payment Review Commission'' and inserting 
                        ``Medicare Payment Review Commission''.
                            (ii) Section 1842(b) (42 U.S.C. 1395u(b)) 
                        is amended by striking ``Physician Payment 
                        Review Commission'' each place it appears in 
                        paragraphs (2)(C), (9)(D), and (14)(C)(i) and 
                        inserting ``Medicare Payment Review 
                        Commission''.
                            (iii) Section 1848 (42 U.S.C. 1395w-4) is 
                        amended by striking ``Physician Payment Review 
                        Commission'' and inserting ``Medicare Payment 
                        Review Commission'' each place it appears in 
                        paragraph (2)(A)(ii), (2)(B)(iii), and (5) of 
                        subsection (c), subsection (d)(2)(F), 
                        paragraphs (1)(B), (3), and (4)(A)of subsection 
                        (f), and paragraphs (6)(C) and (7)(C) of 
                        subsection (g).
    (c) Effective Date; Transition.--
            (1) In general.--The Comptroller General shall first 
        provide for appointment of members to the Medicare Payment 
        Review Commission (in this subsection referred to as ``MPRC'') 
        by not later than March 31, 1996.
            (2) Transition.--Effective on a date (not later than 30 
        days after the date a majority of members of the MPRC have 
        first been appointed, the Prospective Payment Assessment 
        Commission (in this subsection referred to as ``ProPAC'') and 
        the Physician Payment Review Commission (in this subsection 
        referred to as ``PPRC''), and amendments made by subsection 
        (b), are terminated. The Comptroller General, to the maximum 
        extent feasible, shall provide for the transfer to the MPRC of 
        assets and staff of ProPAC and PPRC, without any loss of 
        benefits or seniority by virtue of such transfers. Fund 
        balances available to the ProPAC or PPRC for any period shall 
        be available to the MPRC for such period for like purposes.
            (3) Continuing responsibility for reports.--The MPRC shall 
        be responsible for the preparation and submission of reports 
        required by law to be submitted (and which have not been 
        submitted by the date of establishment of the MPRC) by the 
        ProPAC and PPRC, and, for this purpose, any reference in law to 
        either such Commission is deemed, after the appointment of the 
        MPRC, to refer to the MPRC.

SEC. 15032. COMMISSION ON THE EFFECT OF THE BABY BOOM GENERATION ON THE 
              MEDICARE PROGRAM.

    (a) Establishment.--There is established a commission to be known 
as the Commission on the Effect of the Baby Boom Generation on the 
Medicare Program (in this section referred to as the ``Commission'').
    (b) Duties.--
            (1) In general.--The Commission shall--
                    (A) examine the financial impact on the medicare 
                program of the significant increase in the number of 
                medicare eligible individuals which will occur 
                beginning approximately during 2010 and lasting for 
approximately 25 years, and
                    (B) make specific recommendations to the Congress 
                respecting a comprehensive approach to preserve the 
                medicare program for the period during which such 
                individuals are eligible for medicare.
            (2) Considerations in making recommendations.--In making 
        its recommendations, the Commission shall consider the 
        following:
                    (A) The amount and sources of Federal funds to 
                finance the medicare program, including the potential 
                use of innovative financing methods.
                    (B) The most efficient and effective manner of 
                administering the program, including the 
                appropriateness of continuing the application of the 
                failsafe budget mechanism under section 1895 of the 
                Social Security Act for fiscal years after fiscal year 
                2002 and the appropriate long-term growth rates for 
                contributions electing coverage under Medicare Choice 
                under part C of title XVIII of such Act.
                    (C) Methods used by other nations to respond to 
                comparable demographic patterns in eligibility for 
                health care benefits for elderly and disabled 
                individuals.
                    (D) Modifying age-based eligibility to correspond 
                to changes in age-based eligibility under the OASDI 
                program.
                    (E) Trends in employment-related health care for 
                retirees, including the use of medical savings accounts 
                and similar financing devices.
    (c) Membership.--
            (1) Appointment.--The Commission shall be composed of 15 
        members appointed as follows:
                    (A) The President shall appoint 3 members.
                    (B) The Majority Leader of the Senate shall 
                appoint, after consultation with the minority leader of 
                the Senate, 6 members, of whom not more than 4 may be 
                of the same political party.
                    (C) The Speaker of the House of Representatives 
                shall appoint, after consultation with the minority 
                leader of the House of Representatives, 6 members, of 
                whom not more than 4 may be of the same political 
                party.
            (2) Chairman and vice chairman.--The Commission shall elect 
        a Chairman and Vice Chairman from among its members.
            (3) Vacancies.--Any vacancy in the membership of the 
        Commission shall be filled in the manner in which the original 
        appointment was made and shall not affect the power of the 
        remaining members to execute the duties of the Commission.
            (4) Quorum.--A quorum shall consist of 8 members of the 
        Commission, except that 4 members may conduct a hearing under 
        subsection (e).
            (5) Meetings.--The Commission shall meet at the call of its 
        Chairman or a majority of its members.
            (6) Compensation and reimbursement of expenses.--Members of 
        the Commission are not entitled to receive compensation for 
        service on the Commission. Members may be reimbursed for 
        travel, subsistence, and other necessary expenses incurred in 
        carrying out the duties of the Commission.
    (d) Staff and Consultants.--
            (1) Staff.--The Commission may appoint and determine the 
        compensation of such staff as may be necessary to carry out the 
        duties of the Commission. Such appointments and compensation 
        may be made without regard to the provisions of title 5, United 
        States Code, that govern appointments in the competitive 
        services, and the provisions of chapter 51 and subchapter III 
        of chapter 53 of such title that relate to classifications and 
        the General Schedule pay rates.
            (2) Consultants.--The Commission may procure such temporary 
        and intermittent services of consultants under section 3109(b) 
        of title 5, United States Code, as the Commission determines to 
        be necessary to carry out the duties of the Commission.
    (e) Powers.--
            (1) Hearings and other activities.--For the purpose of 
        carrying out its duties, the Commission may hold such hearings 
        and undertake such other activities as the Commission 
        determines to be necessary to carry out its duties.
            (2) Studies by gao.--Upon the request of the Commission, 
        the Comptroller General shall conduct such studies or 
        investigations as the Commission determines to be necessary to 
        carry out its duties.
            (3) Cost estimates by congressional budget office.--
                    (A) Upon the request of the Commission, the 
                Director of the Congressional Budget Office shall 
                provide to the Commission such cost estimates as the 
                Commission determines to be necessary to carry out its 
                duties.
                    (B) The Commission shall reimburse the Director of 
                the Congressional Budget Office for expenses relating 
                to the employment in the office of the Director of such 
                additional staff as may be necessary for the Director 
                to comply with requests by the Commission under 
                subparagraph (A).
            (4) Detail of federal employees.--Upon the request of the 
        Commission, the head of any Federal agency is authorized to 
        detail, without reimbursement, any of the personnel of such 
        agency to the Commission to assist the Commission in carrying 
        out its duties. Any such detail shall not interrupt or 
        otherwise affect the civil service status or privileges of the 
        Federal employee.
            (5) Technical assistance.--Upon the request of the 
        Commission, the head of a Federal agency shall provide such 
        technical assistance to the Commission as the Commission 
        determines to be necessary to carry out its duties.
            (6) Use of mails.--The Commission may use the United States 
        mails in the same manner and under the same conditions as 
        Federal agencies and shall, for purposes of the frank, be 
        considered a commission of Congress as described in section 
        3215 of title 39, United States Code.
            (7) Obtaining information.--The Commission may secure 
        directly from any Federal agency information necessary to 
        enable it to carry out its duties, if the information may be 
        disclosed under section 552 of title 5, United States Code. 
        Upon request of the Chairman of the Commission, the head of 
        such agency shall furnish such information to the Commission.
            (8) Administrative support services.--Upon the request of 
        the Commission, the Administrator of General Services shall 
        provide to the Commission on a reimbursable basis such 
        administrative support services as the Commission may request.
            (9) Acceptance of donations.--The Commission may accept, 
        use, and dispose of gifts or donations of services or property.
            (10) Printing.--For purposes of costs relating to printing 
        and binding, including the cost of personnel detailed from the 
        Government Printing Office, the Commission shall be deemed to 
        be a committee of the Congress.
    (f) Report.--Not later than May 1, 1997, the Commission shall 
submit to Congress a report containing its findings and recommendations 
regarding how to protect and preserve the medicare program in a 
financially solvent manner until 2030 (or, if later, throughout the 
period of projected solvency of the Federal Old-Age and Survivors 
Insurance Trust Fund). The report shall include detailed 
recommendations for appropriate legislative initiatives respecting how 
to accomplish this objective.
    (g) Termination.--The Commission shall terminate 60 days after the 
date of submission of the report required in subsection (f).
    (h) Authorization of Appropriations.--There are authorized to be 
appropriated $1,500,000 to carry out this section. Amounts appropriated 
to carry out this section shall remain available until expended.

           PART 5--PREEMPTION OF STATE ANTI-MANAGED CARE LAWS

                                                     Subtitle A, Part 5

SEC. 15041. PREEMPTION OF STATE LAW RESTRICTIONS ON MANAGED CARE 
              ARRANGEMENTS.

    (a) Limitation on Restrictions on Network Plans.--Effective as of 
January 1, 1997--
            (1) a State may not prohibit or limit a carrier or group 
        health plan providing health coverage from including incentives 
        for enrollees to use the services of participating providers;
            (2) a State may not prohibit or limit such a carrier or 
        plan from limiting coverage of services to those provided by a 
        participating provider, except as provided in section 1013;
            (3) a State may not prohibit or limit the negotiation of 
        rates and forms of payments for providers by such a carrier or 
        plan with respect to health coverage;
            (4) a State may not prohibit or limit such a carrier or 
        plan from limiting the number of participating providers;
            (5) a State may not prohibit or limit such a carrier or 
        plan from requiring that services be provided (or authorized) 
        by a practitioner selected by the enrollee from a list of 
        available participating providers or, except for services of a 
        physician who specializes in obstetrics and gynecology, from 
        requiring enrollees to obtain referral in order to have 
        coverage for treatment by a specialist or health institution; 
        and
            (6) a State may not prohibit or limit the corporate 
        practice of medicine.
    (b) Definitions.--In this section:
            (1) Managed care coverage.--The term ``managed care 
        coverage'' means health coverage to the extent the coverage is 
        provided through a managed care arrangement (as defined in 
        paragraph (3)) that meets the applicable requirements of such 
        section.
            (2) Participating provider.--The term ``participating 
        provider'' means an entity or individual which provides, sells, 
        or leases health care services as part of a provider network 
        (as defined in paragraph (4)).
            (3) Managed care arrangement.--The term ``managed care 
        arrangement'' means, with respect to a group health plan or 
        under health insurance coverage, an arrangement under such plan 
        or coverage under which providers agree to provide items and 
        services covered under the arrangement to individuals covered 
        under the plan or who have such coverage.
            (4) Provider network.--The term ``provider network'' means, 
        with respect to a group health plan or health insurance 
        coverage, providers who have entered into an agreement 
        described in paragraph (3).

SEC. 15042. PREEMPTION OF STATE LAWS RESTRICTING UTILIZATION REVIEW 
              PROGRAMS.

    (a) In General.--Effective January 1, 1997, no State law or 
regulation shall prohibit or regulate activities under a utilization 
review program (as defined in subsection (b)).
    (b) Utilization Review Program Defined.--In this section, the term 
``utilization review program'' means a system of reviewing the medical 
necessity and appropriateness of patient services (which may include 
inpatient and outpatient services) using specified guidelines. Such a 
system may include preadmission certification, the application of 
practice guidelines, continued stay review, discharge planning, 
preauthorization of ambulatory procedures, and retrospective review.
    (c) Exemption of Laws Preventing Denial of Lifesaving Medical 
Treatment Pending Transfer to Another Health Care Provider.--Nothing in 
this subtitle shall be construed to invalidate any State law that has 
the effect of preventing involuntary denial of life-preserving medical 
treatment when such denial would cause the involuntary death of the 
patient pending transfer of the patient to a health care provider 
willing to provide such treatment.

          Subtitle B--Provisions Relating to Regulatory Relief

    PART 1--PROVISIONS RELATING TO PHYSICIAN FINANCIAL RELATIONSHIPS

                                                     Subtitle B, Part 1

SEC. 15101. REPEAL OF PROHIBITIONS BASED ON COMPENSATION ARRANGEMENTS.

    (a) In General.--Section 1877(a)(2) (42 U.S.C. 1395nn(a)(2)) is 
amended by striking ``is--'' and all that follows through ``equity,'' 
and inserting the following: ``is (except as provided in subsection 
(c)) an ownership or investment interest in the entity through 
equity,''.
    (b) Conforming Amendments.--Section 1877 (42 U.S.C. 1395nn) is 
amended as follows:
            (1) In subsection (b)--
                    (A) in the heading, by striking ``to Both Ownership 
                and Compensation Arrangement Provisions'' and inserting 
                ``Where Financial Relationship Exists''; and
                    (B) by redesignating paragraph (4) as paragraph 
                (7).
            (2) In subsection (c)--
                    (A) by amending the heading to read as follows: 
                ``Exception for Ownership or Investment Interest in 
                Publicly Traded Securities and Mutual Funds''; and
                    (B) in the matter preceding paragraph (1), by 
                striking ``subsection (a)(2)(A)'' and inserting 
                ``subsection (a)(2)''.
            (3) In subsection (d)--
                    (A) by striking the matter preceding paragraph (1);
                    (B) in paragraph (3), by striking ``paragraph (1)'' 
                and inserting ``paragraph (4)''; and
                    (C) by redesignating paragraphs (1), (2), and (3) 
                as paragraphs (4), (5), and (6), and by transferring 
                and inserting such paragraphs after paragraph (3) of 
                subsection (b).
            (4) By striking subsection (e).
            (5) In subsection (f)(2), as amended by section 152(a) of 
        the Social Security Act Amendments of 1994--
                    (A) in the matter preceding paragraph (1), by 
                striking ``ownership, investment, and compensation'' 
                and inserting ``ownership and investment'';
                    (B) in paragraph (2), by striking ``subsection 
                (a)(2)(A)'' and all that follows through ``subsection 
                (a)(2)(B)),'' and inserting ``subsection (a)(2),''; and
                    (C) in paragraph (2), by striking ``or who have 
                such a compensation relationship with the entity''.
            (6) In subsection (h)--
                    (A) by striking paragraphs (1), (2), and (3);
                    (B) in paragraph (4)(A), by striking clauses (iv) 
                and (vi);
                    (C) in paragraph (4)(B), by striking ``rules.--'' 
                and all that follows through ``(ii) Faculty'' and 
                inserting ``rules for faculty; and
                    (D) by adding at the end of paragraph (4) the 
                following new subparagraph:
                    ``(C) Member of a group.--A physician is a `member' 
                of a group if the physician is an owner or a bona fide 
                employee, or both, of the group.''.

SEC. 15102. REVISION OF DESIGNATED HEALTH SERVICES SUBJECT TO 
              PROHIBITION.

    (a) In General.--Section 1877(h)(6) (42 U.S.C. 1395nn(h)(6)) is 
amended by striking subparagraphs (B) through (K) and inserting the 
following:
                    ``(B) Items and services furnished by a community 
                pharmacy (as defined in paragraph (1)).
                    ``(C) Magnetic resonance imaging and computerized 
                tomography services.
                    ``(D) Outpatient physical therapy services.''.
    (b) Community Pharmacy Defined.--Section 1877(h) (42 U.S.C. 
1395nn(h)), as amended by section 15101(b)(6), is amended by inserting 
before paragraph (4) the following new paragraph:
            ``(1) Community pharmacy.--The term `community pharmacy' 
        means any entity licensed or certified to dispense prescription 
        drugs by the State in which the entity is located (including an 
        entity which dispenses such drugs by mail order).''.
    (c) Conforming Amendments.--
            (1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended 
        in the matter preceding subparagraph (A) by striking 
        ``services'' and all that follows through ``supplies)--'' and 
        inserting ``services--''.
            (2) Section 1877(h)(5)(C) (42 U.S.C. 1395nn(h)(5)(C)) is 
        amended--
                    (A) by striking ``, a request by a radiologist for 
                diagnostic radiology services, and a request by a 
                radiation oncologist for radiation therapy,'' and 
                inserting ``and a request by a radiologist for magnetic 
                resonance imaging or for computerized tomography'', and
                    (B) by striking ``radiologist, or radiation 
                oncologist'' and inserting ``or radiologist''.

SEC. 15103. DELAY IN IMPLEMENTATION UNTIL PROMULGATION OF REGULATIONS.

    (a) In General.--Section 13562(b) of OBRA-1993 (42 U.S.C. 1395nn 
note) is amended--
            (1) in paragraph (1), by striking ``paragraph (2)'' and 
        inserting ``paragraphs (2) and (3)''; and
            (2) by adding at the end the following new paragraph:
            ``(3) Promulgation of regulations.--Notwithstanding 
        paragraphs (1) and (2), the amendments made by this section 
        shall not apply to any referrals made before the effective date 
        of final regulations promulgated by the Secretary of Health and 
        Human Services to carry out such amendments.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect as if included in the enactment of OBRA-1993.

SEC. 15104. EXCEPTIONS TO PROHIBITION.

    (a) Revisions to Exception for In-Office Ancillary Services.--
            (1) Repeal of site-of-service requirement.--Section 1877 
        (42 U.S.C. 1395nn) is amended--
                    (A) by amending subparagraph (A) of subsection 
                (b)(2) to read as follows:
                    ``(A) that are furnished personally by the 
                referring physician, personally by a physician who is a 
                member of the same group practice as the referring 
                physician, or personally by individuals who are under 
                the general supervision of the physician or of another 
                physician in the group practice, and'', and
                    (B) by adding at the end of subsection (h) the 
                following new paragraph:
            ``(7) General supervision.--An individual is considered to 
        be under the `general supervision' of a physician if the 
        physician (or group practice of which the physician is a 
        member) is legally responsible for the services performed by 
        the individual and for ensuring that the individual meets 
        licensure and certification requirements, if any, applicable 
        under other provisions of law, regardless of whether or not the 
        physician is physically present when the individual furnishes 
        an item or service.''.
            (2) Clarification of treatment of physician owners of group 
        practice.--Section 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is 
        amended by striking ``physician or such group practice'' and 
        inserting ``physician, such group practice, or the physician 
        owners of such group practice''.
            (3) Conforming amendment.--Section 1877(b)(2) (42 U.S.C. 
        1395nn(b)(2)) is amended by amending the heading to read as 
        follows: ``Ancillary services furnished personally or through 
        group practice.--''.
    (b) Clarification of Exception for Services Furnished in a Rural 
Area.--Paragraph (5) of section 1877(b) (42 U.S.C. 1395nn(b)), as 
transferred by section 15101(b)(3)(C), is amended by striking 
``substantially all'' and inserting ``not less than 75 percent''.
    (c) Revision of Exception for Certain Managed Care Arrangements.--
Section 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is amended--
            (1) in the heading by inserting ``managed care 
        arrangements'' after ``Prepaid plans'';
            (2) in the matter preceding subparagraph (A), by striking 
        ``organization--'' and inserting ``organization, directly or 
        through contractual arrangements with other entities, to 
        individuals enrolled with the organization--'';
            (3) in subparagraph (A), by inserting ``or part C'' after 
        ``section 1876'';
            (4) by striking ``or'' at the end of subparagraph (C);
            (5) by striking the period at the end of subparagraph (D) 
        and inserting a comma; and
            (6) by adding at the end the following new subparagraphs:
                    ``(E) with a contract with a State to provide 
                services under the State plan under title XIX (in 
                accordance with section 1903(m)) or a State MediGrant 
                plan under title XXI; or
                    ``(F) which--
                            ``(i) provides health care items or 
                        services directly or through one or more 
                        subsidiary entities or arranges for the 
                        provision of health care items or services 
                        substantially through the services of health 
                        care providers under contract with the 
                        organization, and
                            ``(ii)(I) assumes financial risk for the 
                        provision of health services through mechanisms 
                        (such as capitation, risk pools, withholds, and 
                        per diem payments) or offers its network of 
                        contract health providers to an entity 
                        (including self-insured employers and indemnity 
                        plans) which assumes financial risk for the 
                        provision of such health services, or
                            ``(II) has in effect a written agreement 
                        with the provider of services under which the 
                        provider is at significant financial risk 
                        (whether through a withhold, capitation, 
                        incentive pool, per diem payments, or similar 
                        risk sharing arrangement) for the cost or 
                        utilization of services that the provider is 
                        obligated to provide.''.
    (d) New Exception for Shared Facility Services.--
            (1) In general.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
        amended by section 15101(b)(3)(C), is amended--
                    (A) by redesignating paragraphs (4) through (7) as 
                paragraphs (5) through (8); and
                    (B) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) Shared facility services.--In the case of a 
        designated health service consisting of a shared facility 
        service of a shared facility--
                    ``(A) that is furnished--
                            ``(i) personally by the referring physician 
                        who is a shared facility physician or 
                        personally by an individual directly employed 
                        or under the general supervision of such a 
                        physician,
                            ``(ii) by a shared facility in a building 
                        in which the referring physician furnishes 
                        substantially all of the services of the 
                        physician that are unrelated to the furnishing 
                        of shared facility services, and
                            ``(iii) to a patient of a shared facility 
                        physician; and
                    ``(B) that is billed by the referring physician or 
                a group practice of which the physician is a member.''.
            (2) Definitions.--Section 1877(h) (42 U.S.C. 1395nn(h)), as 
        amended by section 15101(b)(6) and section 15102(b), is amended 
        by inserting after paragraph (1) the following new paragraph:
            ``(2) Shared facility related definitions.--
                    ``(A) Shared facility service.--The term `shared 
                facility service' means, with respect to a shared 
                facility, a designated health service furnished by the 
                facility to patients of shared facility physicians.
                    ``(B) Shared facility.--The term `shared facility' 
                means an entity that furnishes shared facility services 
                under a shared facility arrangement.
                    ``(C) Shared facility physician.--The term `shared 
                facility physician' means, with respect to a shared 
                facility, a physician (or a group practice of which the 
                physician is a member) who has a financial relationship 
                under a shared facility arrangement with the facility.
                    ``(D) Shared facility arrangement.--The term 
                `shared facility arrangement' means, with respect to 
                the provision of shared facility services in a 
                building, a financial arrangement--
                            ``(i) which is only between physicians who 
                        are providing services (unrelated to shared 
                        facility services) in the same building,
                            ``(ii) in which the overhead expenses of 
                        the facility are shared, in accordance with 
                        methods previously determined by the physicians 
                        in the arrangement, among the physicians in the 
                        arrangement, and
                            ``(iii) which, in the case of a 
                        corporation, is wholly owned and controlled by 
                        shared facility physicians.''.
    (e) New Exception for Services Furnished in Communities With No 
Alternative Providers.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
amended by section 15101(b)(3)(C) and subsection (d)(1), is amended--
            (1) by redesignating paragraphs (5) through (8) as 
        paragraphs (6) through (9); and
            (2) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) No alternative providers in area.--In the case of a 
        designated health service furnished in any area with respect to 
        which the Secretary determines that individuals residing in the 
        area do not have reasonable access to such a designated health 
        service for which subsection (a)(1) does not apply.''.
    (f) New Exception for Services Furnished in Ambulatory Surgical 
Centers.--Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 
15101(b)(3)(C), subsection (d)(1), and subsection (e)(1), is amended--
            (1) by redesignating paragraphs (6) through (9) as 
        paragraphs (7) through (10); and
            (2) by inserting after paragraph (5) the following new 
        paragraph:
            ``(6) Services furnished in ambulatory surgical centers.--
        In the case of a designated health service furnished in an 
        ambulatory surgical center described in section 
        1832(a)(2)(F)(i).''.
    (g) New Exception for Services Furnished in Renal Dialysis 
Facilities.--Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by 
section 15101(b)(3)(C), subsection (d)(1), subsection (e)(1), and 
subsection (f), is amended--
            (1) by redesignating paragraphs (7) through (10) as 
        paragraphs (8) through (11); and
            (2) by inserting after paragraph (6) the following new 
        paragraph:
            ``(7) Services furnished in renal dialysis facilities.--In 
        the case of a designated health service furnished in a renal 
        dialysis facility under section 1881.''.
    (h) New Exception for Services Furnished in a Hospice.--Section 
1877(b) (42 U.S.C. 1395nn(b)), as amended by section 15101(b)(3)(C), 
subsection (d)(1), subsection (e)(1), subsection (f), and subsection 
(g), is amended--
            (1) by redesignating paragraphs (8) through (11) as 
        paragraphs (9) through (12); and
            (2) by inserting after paragraph (7) the following new 
        paragraph:
            ``(8) Services furnished by a hospice program.--In the case 
        of a designated health service furnished by a hospice program 
        under section 1861(dd)(2).''.
    (i) New Exception for Services Furnished in a Comprehensive 
Outpatient Rehabilitation Facility.--Section 1877(b) (42 U.S.C. 
1395nn(b)), as amended by section 15101(b)(3)(C), subsection (d)(1), 
subsection (e)(1), subsection (f), subsection (g), and subsection (h), 
is amended--
            (1) by redesignating paragraphs (9) through (12) as 
        paragraphs (10) through (13); and
            (2) by inserting after paragraph (8) the following new 
        paragraph:
            ``(9) Services furnished in a comprehensive outpatient 
        rehabilitation facility.--In the case of a designated health 
        service furnished in a comprehensive outpatient rehabilitation 
        facility (as defined in section 1861(cc)(2)).''.
    (i) Definition of Referral.--Section 1877(h)(5)(A) (42 U.S.C. 
1395nn(h)(5)(A)) is amended--
            (1) by striking ``an item or service'' and inserting ``a 
        designated health service'', and
            (2) by striking ``the item or service'' and inserting ``the 
        designated health service''.

SEC. 15105. REPEAL OF REPORTING REQUIREMENTS.

    Section 1877 (42 U.S.C. 1395nn) is amended--
            (1) by striking subsection (f); and
            (2) by striking subsection (g)(5).

SEC. 15106. PREEMPTION OF STATE LAW.

    Section 1877 (42 U.S.C. 1395nn) is amended by adding at the end the 
following new subsection:
    ``(i) Preemption of State Law.--This section preempts State law to 
the extent State law is inconsistent with this section.''.

SEC. 15107. EFFECTIVE DATE.

    Except as provided in section 15103(b), the amendments made by this 
part shall apply to referrals made on or after August 14, 1995, 
regardless of whether or not regulations are promulgated to carry out 
such amendments.

                        PART 2--ANTITRUST REFORM

                                                     Subtitle B, Part 2

SEC. 15111. PUBLICATION OF ANTITRUST GUIDELINES ON ACTIVITIES OF HEALTH 
              PLANS.

    (a) In General.--The Attorney General shall provide for the 
development and publication of explicit guidelines on the application 
of antitrust laws to the activities of health plans. The guidelines 
shall be designed to facilitate development and operation of plans, 
consistent with the antitrust laws.
    (b) Review Process.--The Attorney General shall establish a review 
process under which the administrator or sponsor of a health plan (or 
organization that proposes to administer or sponsor a health plan) may 
submit a request to the Attorney General to obtain a prompt opinion 
(but in no event later than 90 days after the Attorney General receives 
the request) from the Department of Justice on the plan's conformity 
with the Federal antitrust laws.

SEC. 15112. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC ADVANTAGE.

    (a) Issuance and Effect of Certificate.--The Attorney General, 
after consultation with the Secretary, shall issue in accordance with 
this section a certificate of public advantage to each eligible health 
care collaborative activity that complies with the requirements in 
effect under this section on or after the expiration of the 1-year 
period that begins on the date of the enactment of this Act (without 
regard to whether or not the Attorney General has promulgated 
regulations to carry out this section by such date). Such activity, and 
the parties to such activity, shall not be liable under any of the 
antitrust laws for conduct described in such certificate and engaged in 
by such activity if such conduct occurs while such certificate is in 
effect.
    (b) Requirements Applicable to Issuance of Certificates.--
            (1) Standards to be met.--The Attorney General shall issue 
        a certificate to an eligible health care collaborative activity 
        if the Attorney General finds that--
                    (A) the benefits that are likely to result from 
                carrying out the activity outweigh the reduction in 
                competition (if any) that is likely to result from the 
                activity, and
                    (B) such reduction in competition is necessary to 
                obtain such benefits.
            (2) Factors to be considered.--
                    (A) Weighing of benefits against reduction in 
                competition.--For purposes of making the finding 
                described in paragraph (1)(A), the Attorney General 
                shall consider whether the activity is likely--
                            (i) to maintain or to increase the quality 
                        of health care by providing new services not 
                        currently offered in the relevant market,
                            (ii) to increase access to health care,
                            (iii) to achieve cost efficiencies that 
                        will be passed on to health care consumers, 
                        such as economies of scale, reduced transaction 
                        costs, and reduced administrative costs, that 
                        cannot be achieved by the provision of 
                        available services and facilities in the 
                        relevant market,
                            (iv) to preserve the operation of health 
                        care facilities located in underserved 
                        geographical areas,
                            (v) to improve utilization of health care 
                        resources, and
                            (vi) to reduce inefficient health care 
                        resource duplication.
                    (B) Necessity of reduction in competition.--For 
                purposes of making the finding described in paragraph 
                (1)(B), the Attorney General shall consider--
                            (i) the ability of the providers of health 
                        care services that are (or likely to be) 
                        affected by the health care collaborative 
                        activity and the entities responsible for 
                        making payments to such providers to negotiate 
                        societally optimal payment and service 
                        arrangements,
                            (ii) the effects of the health care 
                        collaborative activity on premiums and other 
                        charges imposed by the entities described in 
                        clause (i), and
                            (iii) the availability of equally 
                        efficient, less restrictive alternatives to 
                        achieve the benefits that are intended to be 
                        achieved by carrying out the activity.
    (c) Establishment of Criteria and Procedures.--Subject to 
subsections (d) and (e), not later than 1 year after the date of the 
enactment of this Act, the Attorney General and the Secretary shall 
establish jointly by rule the criteria and procedures applicable to the 
issuance of certificates under subsection (a). The rules shall specify 
the form and content of the application to be submitted to the Attorney 
General to request a certificate, the information required to be 
submitted in support of such application, the procedures applicable to 
denying and to revoking a certificate, and the procedures applicable to 
the administrative appeal (if such appeal is authorized by rule) of the 
denial and the revocation of a certificate. Such information may 
include the terms of the health care collaborative activity (in the 
case of an activity in existence as of the time of the application) and 
implementation plan for the collaborative activity.
    (d) Eligible Health Care Collaborative Activity.--To be an eligible 
health care collaborative activity for purposes of this section, a 
health care collaborative activity shall submit to the Attorney General 
an application that complies with the rules in effect under subsection 
(c) and that includes--
            (1) an agreement by the parties to the activity that the 
        activity will not foreclose competition by entering into 
        contracts that prevent health care providers from providing 
        health care in competition with the activity,
            (2) an agreement that the activity will submit to the 
        Attorney General annually a report that describes the 
        operations of the activity and information regarding the impact 
        of the activity on health care and on competition in health 
        care, and
            (3) an agreement that the parties to the activity will 
        notify the Attorney General and the Secretary of the 
        termination of the activity not later than 30 days after such 
        termination occurs.
    (e) Review of Applications for Certificates.--Not later than 90 
days after an eligible health care collaborative activity submits to 
the Attorney General an application that complies with the rules in 
effect under subsection (c) and with subsection (d), the Attorney 
General shall issue or deny the issuance of such certificate. If, 
before the expiration of such 90-day period, the Attorney General may 
extend the time for issuance for good cause.
    (f) Revocation of Certificate.--Whenever the Attorney General finds 
that a health care collaborative activity with respect to which a 
certificate is in effect does not meet the standards specified in 
subsection (b), the Attorney General shall revoke such certificate.
    (g) Written Reasons; Judicial Review.--
            (1) Denial and revocation of certificates.--If the Attorney 
        General denies an application for a certificate or revokes a 
        certificate, the Attorney General shall include in the notice 
        of denial or revocation a statement of the reasons relied upon 
        for the denial or revocation of such certificate.
            (2) Judicial review.--
                    (A) After administrative proceeding.--(i) If the 
                Attorney General denies an application submitted or 
                revokes a certificate issued under this section after 
                an opportunity for hearing on the record, then any 
                party to the health care collaborative activity 
                involved may commence a civil action, not later than 60 
                days after receiving notice of the denial or 
                revocation, in an appropriate district court of the 
                United States for review of the record of such denial 
                or revocation.
                    (ii) As part of the Attorney General's answer, the 
                Attorney General shall file in such court a certified 
                copy of the record on which such denial or revocation 
                is based. The findings of fact of the Attorney General 
may be set aside only if found to be unsupported by substantial 
evidence in such record taken as a whole.
                    (B) Denial or revocation without administrative 
                proceeding.--If the Attorney General denies an 
                application submitted or revokes a certificate issued 
                under this section without an opportunity for hearing 
                on the record, then any party to the health care 
                collaborative activity involved may commence a civil 
                action, not later than 60 days after receiving notice 
                of the denial or revocation, in an appropriate district 
                court of the United States for de novo review of such 
                denial or revocation.
    (h) Exemption.--A person shall not be liable under any of the 
antitrust laws for conduct necessary--
            (1) to prepare, agree to prepare, or attempt to agree to 
        prepare an application to request a certificate under this 
        section, or
            (2) to attempt to enter into any health care collaborative 
        activity with respect to which such a certificate is in effect.
    (i) Definitions.--In this section:
            (1) The term ``certificate'' means a certificate of public 
        advantage authorized to be issued under subsection (a).
            (2) The term ``health care collaborative activity'' means 
        an agreement (whether existing or proposed) between 2 or more 
        providers of health care services that is entered into solely 
        for the purpose of sharing in the provision and coordination of 
        health care services and that involves substantial integration 
        and financial risk-sharing between the parties, but does not 
        include the exchanging of information, the entering into of any 
        agreement, or the engagement in any other conduct that is not 
        reasonably required to carry out such agreement.
            (3) The term ``health care services'' includes services 
        related to the delivery or administration of health care 
        services.
            (4) The term ``liable'' means liable for any civil or 
        criminal violation of the antitrust laws.
            (5) The term ``provider of health care services'' means any 
        individual or entity that is engaged in the delivery of health 
        care services in a State and that is required by State law or 
        regulation to be licensed or certified by the State to engage 
        in the delivery of such services in the State.

SEC. 15113. STUDY OF IMPACT ON COMPETITION.

    The Attorney General, in consultation with the Chairman of the 
Federal Trade Commission, annually shall submit to the Congress a 
report as part of the annual budget oversight proceedings concerning 
the Antitrust Division of the Department of Justice. The report shall 
enable the Congress to determine how enforcement of antitrust laws is 
affecting the formation of efficient, cost-saving joint ventures and if 
the certificate of public advantage procedure set forth in section 
15112 has resulted in undesirable reduction in competition in the 
health care marketplace. The report shall include an evaluation of the 
factors set forth in paragraphs (2)(A) and (2)(B) of section 15112(b).

SEC. 15114. ANTITRUST EXEMPTION.

    The antitrust laws shall not apply with respect to--
            (1) the merger of, or the attempt to merge, 2 or more 
        hospitals,
            (2) a contract entered into solely by 2 or more hospitals 
        to allocate hospital services, or
            (3) the attempt by only 2 or more hospitals to enter into a 
        contract to allocate hospital services,
if each of such hospitals satisfies all of the requirements of section 
15115 at the time such hospitals engage in the conduct described in 
paragraph (1), (2), or (3), as the case may be.

SEC. 15115. REQUIREMENTS.

    The requirements referred to in section 15114 are as follows:
            (1) The hospital is located outside of a city, or in a city 
        that has less than 150,000 inhabitants, as determined in 
        accordance with the most recent data available from the Bureau 
        of the Census.
            (2) In the most recently concluded calendar year, the 
        hospital received more than 40 percent of its gross revenue 
        from payments made under Federal programs.
            (3) There is in effect with respect to the hospital a 
        certificate issued by the Health Care Financing Administration 
        specifying that such Administration has determined that Federal 
        expenditures would be reduced, consumer costs would not 
        increase, and access to health care services would not be 
        reduced, if the hospital and the other hospitals that requested 
        such certificate merge, or allocate the hospital services 
        specified in such request, as the case may be.

SEC. 15116. DEFINITION.

    For purposes of this subtitle, the term `antitrust laws' has the 
meaning given such term in subsection (a) of the first section of the 
Clayton Act (15 U.S.C. 12), except that such term includes section 5 of 
the Federal Trade Commission Act (15 U.S.C. 45) to the extent that such 
section 5 applies with respect to unfair methods of competition.

                       PART 3--MALPRACTICE REFORM

                                                     Subtitle B, Part 3

          Subpart A--Uniform Standards for Malpractice Claims

SEC. 15121. APPLICABILITY.

    Except as provided in section 15131, this subpart shall apply to 
any medical malpractice liability action brought in a Federal or State 
court, and to any medical malpractice claim subject to an alternative 
dispute resolution system, that is initiated on or after January 1, 
1996.

SEC. 15122. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION THROUGH 
              ALTERNATIVE DISPUTE RESOLUTION.

    (a) In General.--
            (1) State cases.--A medical malpractice liability action 
        may not be brought in any State court during a calendar year 
        unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under an 
        alternative dispute resolution system certified for the year by 
        the Secretary under section 15132(a), or, in the case of a 
        State in which such a system is not in effect for the year, 
        under the alternative Federal system established under section 
        15132(b).
            (2) Federal diversity actions.--A medical malpractice 
        liability action may not be brought in any Federal court under 
        section 1332 of title 28, United States Code, during a calendar 
        year unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under the 
        alternative dispute resolution system referred to in paragraph 
        (1) that applied in the State whose law applies in such action.
            (3) Claims against united states.--
                    (A) Establishment of process for claims.--The 
                Attorney General shall establish an alternative dispute 
                resolution process for the resolution of tort claims 
                consisting of medical malpractice liability claims 
                brought against the United States under chapter 171 of 
                title 28, United States Code. Under such process, the 
                resolution of a claim shall occur after the completion 
                of the administrative claim process applicable to the 
                claim under section 2675 of such title.
                    (B) Requirement for initial resolution under 
                process.--A medical malpractice liability action based 
                on a medical malpractice liability claim described 
in subparagraph (A) may not be brought in any Federal court unless the 
claim has been initially resolved under the alternative dispute 
resolution process established by the Attorney General under such 
subparagraph.
    (b) Initial Resolution of Claims Under ADR.--For purposes of 
subsection (a), an action is ``initially resolved'' under an 
alternative dispute resolution system if--
            (1) the ADR reaches a decision on whether the defendant is 
        liable to the plaintiff for damages; and
            (2) if the ADR determines that the defendant is liable, the 
        ADR reaches a decision on the amount of damages assessed 
        against the defendant.
    (c) Procedures for Filing Actions.--
            (1) Notice of intent to contest decision.--Not later than 
        60 days after a decision is issued with respect to a medical 
        malpractice liability claim under an alternative dispute 
        resolution system, each party affected by the decision shall 
        submit a sealed statement to a court of competent jurisdiction 
        indicating whether or not the party intends to contest the 
        decision.
            (2) Deadline for filing action.--A medical malpractice 
        liability action may not be brought by a party unless--
                    (A) the party has filed the notice of intent 
                required by paragraph (1); and
                    (B) the party files the action in a court of 
                competent jurisdiction not later than 90 days after the 
                decision resolving the medical malpractice liability 
                claim that is the subject of the action is issued under 
                the applicable alternative dispute resolution system.
            (3) Court of competent jurisdiction.--For purposes of this 
        subsection, the term ``court of competent jurisdiction'' 
        means--
                    (A) with respect to actions filed in a State court, 
                the appropriate State trial court; and
                    (B) with respect to actions filed in a Federal 
                court, the appropriate United States district court.
    (d) Legal Effect of Uncontested ADR Decision.--The decision reached 
under an alternative dispute resolution system shall, for purposes of 
enforcement by a court of competent jurisdiction, have the same status 
in the court as the verdict of a medical malpractice liability action 
adjudicated in a State or Federal trial court. The previous sentence 
shall not apply to a decision that is contested by a party affected by 
the decision pursuant to subsection (c)(1).

SEC. 15123. OPTIONAL APPLICATION OF PRACTICE GUIDELINES.

    (a) Development and Certification of Guidelines.--Each State may 
develop, for certification by the Secretary, a set of specialty 
clinical practice guidelines, based on recommended guidelines from 
national specialty societies, to be updated annually. In the absence of 
recommended guidelines from such societies, each State may develop such 
guidelines based on such criteria as the State considers appropriate 
(including based on recommended guidelines developed by the Agency for 
Health Care Policy and Research).
    (b) Provision of Health Care Under Guidelines.--Notwithstanding any 
other provision of law, in any medical malpractice liability action 
arising from the conduct of a health care provider or health care 
professional, if such conduct was in accordance with a guideline 
developed by the State in which the conduct occurred and certified by 
the Secretary under subsection (a), the guideline--
            (1) may be introduced by any party to the action (including 
        a health care provider, health care professional, or patient); 
        and
            (2) if introduced, shall establish a rebuttable presumption 
        that the conduct was in accordance with the appropriate 
        standard of medical care, which may only be overcome by the 
        presentation of clear and convincing evidence on behalf of the 
        party against whom the presumption operates.

SEC. 15124. TREATMENT OF NONECONOMIC AND PUNITIVE DAMAGES.

    (a) Limitation on Noneconomic Damages.--The total amount of 
noneconomic damages that may be awarded to a claimant and the members 
of the claimant's family for losses resulting from the injury which is 
the subject of a medical malpractice liability action may not exceed 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of actions brought with respect to the injury.
    (b) No Award of Punitive Damages Against Manufacturer of Medical 
Product.--In the case of a medical malpractice liability action in 
which the plaintiff alleges a claim against the manufacturer of a 
medical product, no punitive or exemplary damages may be awarded 
against such manufacturer.
    (c) Joint and Several Liability for Noneconomic Damages.--The 
liability of each defendant for noneconomic damages shall be several 
only and shall not be joint, and each defendant shall be liable only 
for the amount of noneconomic damages allocated to the defendant in 
direct proportion to the defendant's percentage of responsibility (as 
determined by the trier of fact).
    (d) Use of Punitive Damage Awards for Operation of ADR Systems in 
States.--
            (1) In general.--The total amount of any punitive damages 
        awarded in a medical malpractice liability action shall be paid 
        to the State in which the action is brought (or, in a case 
        brought in Federal court, in the State in which the health care 
        services that caused the injury that is the subject of the 
        action were provided), and shall be used by the State solely to 
        implement and operate the State alternative dispute resolution 
        system certified by the Secretary under section 15132 (except 
        as provided in paragraph (2)).
            (2) Use of remaining amounts for provider licensing and 
        disciplinary activities.--If the amount of punitive damages 
        paid to a State under paragraph (1) for a year is greater than 
        the State's costs of implementing and operating the State 
        alternative dispute resolution system during the year, the 
        balance of such punitive damages paid to the State shall be 
        used solely to carry out activities to assure the safety and 
        quality of health care services provided in the State, 
        including (but not limited to)--
                    (A) licensing or certifying health care 
                professionals and health care providers in the State; 
                and
                    (B) carrying out programs to reduce malpractice-
                related costs for providers volunteering to provide 
                services in medically underserved areas.
            (3) Maintenance of effort.--A State shall use any amounts 
        paid pursuant to paragraph (1) to supplement and not to replace 
        amounts spent by the State for implementing and operating the 
        State alternative dispute resolution system or carrying out the 
        activities described in paragraph (2).
    (e) Drugs and Devices.--
            (1)(A) Punitive damages shall not be awarded against a 
        manufacturer or product seller of a drug (as defined in section 
        201(g)(1) of the Federal Food, Drug, and Cosmetic Act (21 
        U.S.C. 321(g)(1)) or medical device (as defined in section 
        201(h) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
        321(h)) which caused the claimant's harm where--
                    (i) such drug or device was subject to premarket 
                approval by the Food and Drug Administration with 
                respect to the safety of the formulation or performance 
                of the aspect of such drug or device which caused the 
                claimant's harm or the adequacy of the packaging or 
                labeling of such drug or device, and such drug was 
                approved by the Food and Drug Administration; or
                    (ii) the drug is generally recognized as safe and 
                effective pursuant to conditions established by the 
                Food and Drug Administration and applicable 
                regulations, including packaging and labeling 
                regulations.
            (B) Subparagraph (A) shall not apply in any case in which 
        the defendant, before or after premarket approval of a drug or 
        device--
                    (i) intentionally and wrongfully withheld from or 
                misrepresented to the Food and Drug Administration 
                information concerning such drug or device required to 
                be submitted under the Federal Food, Drug, and Cosmetic 
                Act (21 U.S.C. 301 et seq.) or section 351 of the 
                Public Health Service Act (42 U.S.C. 262) that is 
                material and relevant to the harm suffered by the 
                claimant, or
                    (ii) made an illegal payment to an official or 
                employee of the Food and Drug Administration for the 
purpose of securing or maintaining approval of such drug or device.
            (2) Packaging.--In a product liability action for harm 
        which is alleged to relate to the adequacy of the packaging (or 
        labeling relating to such packaging) of a drug which is 
        required to have tamper-resistant packaging under regulations 
        of the Secretary of Health and Human Services (including 
        labeling regulations related to such packaging), the 
        manufacturer of the drug shall not be held liable for punitive 
        damages unless the drug is found by the court by clear and 
        convincing evidence to be substantially out of compliance with 
        such regulations.

SEC. 15125. PERIODIC PAYMENTS FOR FUTURE LOSSES.

    (a) In General.--In any medical malpractice liability action in 
which the damages awarded for future economic loss exceeds $100,000, a 
defendant may not be required to pay such damages in a single, lump-sum 
payment, but may be permitted to make such payments on a periodic 
basis. The periods for such payments shall be determined by the court, 
based upon projections of when such expenses are likely to be incurred.
    (b) Waiver.--A court may waive the application of subsection (a) 
with respect to a defendant if the court determines that it is not in 
the best interests of the plaintiff to receive payments for damages on 
such a periodic basis.

SEC. 15126. TREATMENT OF ATTORNEY'S FEES AND OTHER COSTS.

    (a) Requiring Party Contesting ADR Ruling To Pay Attorney's Fees 
and Other Costs.--
            (1) In general.--The court in a medical malpractice 
        liability action shall require the party that (pursuant to 
        section 15122(c)(1)) contested the ruling of the alternative 
        dispute resolution system with respect to the medical 
        malpractice liability claim that is the subject of the action 
        to pay to the opposing party the costs incurred by the opposing 
        party under the action, including attorney's fees, fees paid to 
        expert witnesses, and other litigation expenses (but not 
        including court costs, filing fees, or other expenses paid 
        directly by the party to the court, or any fees or costs 
        associated with the resolution of the claim under the 
        alternative dispute resolution system), but only if--
                    (A) in the case of an action in which the party 
                that contested the ruling is the claimant, the amount 
                of damages awarded to the party under the action is 
                less than the amount of damages awarded to the party 
                under the ADR system; and
                    (B) in the case of an action in which the party 
                that contested the ruling is the defendant, the amount 
                of damages assessed against the party under the action 
                is greater than the amount of damages assessed under 
                the ADR system.
            (2) Exceptions.--Paragraph (1) shall not apply if--
                    (A) the party contesting the ruling made under the 
                previous alternative dispute resolution system shows 
                that--
                            (i) the ruling was procured by corruption, 
                        fraud, or undue means,
                            (ii) there was partiality or corruption 
                        under the system,
                            (iii) there was other misconduct under the 
                        system that materially prejudiced the party's 
                        rights, or
                            (iv) the ruling was based on an error of 
                        law;
                    (B) the party contesting the ruling made under the 
                alternative dispute resolution system presents new 
                evidence before the trier of fact that was not 
                available for presentation under the ADR system;
                    (C) the medical malpractice liability action raised 
                a novel issue of law; or
                    (D) the court finds that the application of such 
                paragraph to a party would constitute an undue 
                hardship, and issues an order waiving or modifying the 
                application of such paragraph that specifies the 
                grounds for the court's decision.
            (3) Limit on attorneys' fees paid.--Attorneys' fees that 
        are required to be paid under paragraph (1) by the contesting 
        party shall not exceed the amount of the attorneys' fees 
        incurred by the contesting party in the action. If the 
        attorneys' fees of the contesting party are based on a 
        contingency fee agreement, the amount of attorneys' fees for 
        purposes of the preceding sentence shall not exceed the 
        reasonable value of those services.
            (4) Records.--In order to receive attorneys' fees under 
        paragraph (1), counsel of record in the medical malpractice 
        liability action involved shall maintain accurate, complete 
        records of hours worked on the action, regardless of the fee 
        arrangement with the client involved.
    (b) Contingency Fee Defined.--As used in this section, the term 
``contingency fee'' means any fee for professional legal services which 
is, in whole or in part, contingent upon the recovery of any amount of 
damages, whether through judgment or settlement.

SEC. 15127. UNIFORM STATUTE OF LIMITATIONS.

    (a) In General.--Except as provided in subsection (b), no medical 
malpractice claim may be initiated after the expiration of the 2-year 
period that begins on the date on which the alleged injury that is the 
subject of such claim was discovered, but in no event may such a claim 
be initiated after the expiration of the 4-year period that begins on 
the date on which the alleged injury that is the subject of such claim 
occurred.
    (b) Exception for Minors.--In the case of an alleged injury 
suffered by a minor who has not attained 6 years of age, a medical 
malpractice claim may not be initiated after the expiration of the 2-
year period that begins on the date on which the alleged injury that is 
the subject of such claim was discovered or should reasonably have been 
discovered, but in no event may such a claim be initiated after the 
date on which the minor attains 12 years of age.

SEC. 15128. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

    (a) In General.--In the case of a medical malpractice claim 
relating to services provided during labor or the delivery of a baby, 
if the health care professional or health care provider against whom 
the claim is brought did not previously treat the claimant for the 
pregnancy, the trier of fact may not find that such professional or 
provider committed malpractice and may not assess damages against such 
professional or provider unless the malpractice is proven by clear and 
convincing evidence.
    (b) Applicability to Group Practices or Agreements Among 
Providers.--For purposes of subsection (a), a health care professional 
shall be considered to have previously treated an individual for a 
pregnancy if the professional is a member of a group practice whose 
members previously treated the individual for the pregnancy or is 
providing services to the individual during labor or the delivery of a 
baby pursuant to an agreement with another professional.

SEC. 15129. JURISDICTION OF FEDERAL COURTS.

    Nothing in this subpart shall be construed to establish any 
jurisdiction over any medical malpractice liability action in the 
district courts of the United States on the basis of sections 1331 or 
1337 of title 28, United States Code.

SEC. 15130. PREEMPTION.

    (a) In General.--The provisions of this subpart shall preempt any 
State law to the extent such law is inconsistent with such provisions, 
except that the provisions of this subpart shall not preempt any State 
law that provides for defenses or places limitations on a person's 
liability in addition to those contained in this part, places greater 
limitations on the amount of attorneys' fees that can be collected, or 
otherwise imposes greater restrictions than those provided in this 
part.
    (b) Effect on Sovereign Immunity and Choice of Law or Venue.--
Nothing in this subpart shall be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any provision of law;
            (2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            (3) affect the applicability of any provision of the 
        Foreign Sovereign Immunities Act of 1976;
            (4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation; or
            (5) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground in inconvenient forum.

   Subpart B--Requirements for State Alternative Dispute Resolution 
                             Systems (ADR)

SEC. 15131. BASIC REQUIREMENTS.

    (a) In General.--A State's alternative dispute resolution system 
meets the requirements of this section if the system--
            (1) applies to all medical malpractice liability claims 
        under the jurisdiction of the courts of that State;
            (2) requires that a written opinion resolving the dispute 
        be issued not later than 6 months after the date by which each 
        party against whom the claim is filed has received notice of 
        the claim (other than in exceptional cases for which a longer 
        period is required for the issuance of such an opinion), and 
        that the opinion contain--
                    (A) findings of fact relating to the dispute, and
                    (B) a description of the costs incurred in 
                resolving the dispute under the system (including any 
                fees paid to the individuals hearing and resolving the 
                claim), together with an appropriate assessment of the 
                costs against any of the parties;
            (3) requires individuals who hear and resolve claims under 
        the system to meet such qualifications as the State may require 
        (in accordance with regulations of the Secretary);
            (4) is approved by the State or by local governments in the 
        State;
            (5) with respect to a State system that consists of 
        multiple dispute resolution procedures--
                    (A) permits the parties to a dispute to select the 
                procedure to be used for the resolution of the dispute 
                under the system, and
                    (B) if the parties do not agree on the procedure to 
                be used for the resolution of the dispute, assigns a 
                particular procedure to the parties;
            (6) provides for the transmittal to the State agency 
        responsible for monitoring or disciplining health care 
        professionals and health care providers of any findings made 
        under the system that such a professional or provider committed 
        malpractice, unless, during the 90-day period beginning on the 
        date the system resolves the claim against the professional or 
        provider, the professional or provider brings an action 
        contesting the decision made under the system; and
            (7) provides for the regular transmittal to the 
        Administrator for Health Care Policy and Research of 
        information on disputes resolved under the system, in a manner 
        that assures that the identity of the parties to a dispute 
        shall not be revealed.
    (b) Application of Malpractice Liability Standards to Alternative 
Dispute Resolution.--The provisions of subpart A (other than section 
15122) shall apply with respect to claims brought under a State 
alternative dispute resolution system or the alternative Federal system 
in the same manner as such provisions apply with respect to medical 
malpractice liability actions brought in the State.

SEC. 15132. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF 
              ALTERNATIVE FEDERAL SYSTEM.

    (a) Certification.--
            (1) In general.--Not later than October 1 of each year 
        (beginning with 1995), the Secretary, in consultation with the 
        Attorney General, shall determine whether a State's alternative 
        dispute resolution system meets the requirements of this 
        subpart for the following calendar year.
            (2) Basis for certification.--The Secretary shall certify a 
        State's alternative dispute resolution system under this 
        subsection for a calendar year if the Secretary determines 
        under paragraph (1) that the system meets the requirements of 
        section 15131, including the requirement described in section 
        15124 that punitive damages awarded under the system are paid 
        to the State for the uses described in such section.
    (b) Applicability of Alternative Federal System.--
            (1) Establishment and applicability.--Not later than 
        October 1, 1995, the Secretary, in consultation with the 
        Attorney General, shall establish by rule an alternative 
        Federal ADR system for the resolution of medical malpractice 
        liability claims during a calendar year in States that do not 
        have in effect an alternative dispute resolution system 
        certified under subsection (a) for the year.
            (2) Requirements for system.--Under the alternative Federal 
        ADR system established under paragraph (1)--
                    (A) paragraphs (1), (2), (6), and (7) of section 
                15131(a) shall apply to claims brought under the 
                system;
                    (B) if the system provides for the resolution of 
                claims through arbitration, the claims brought under 
                the system shall be heard and resolved by arbitrators 
                appointed by the Secretary in consultation with the 
                Attorney General; and
                    (C) with respect to a State in which the system is 
                in effect, the Secretary may (at the State's request) 
                modify the system to take into account the existence of 
                dispute resolution procedures in the State that affect 
                the resolution of medical malpractice liability claims.
            (3) Treatment of states with alternative system in 
        effect.--If the alternative Federal ADR system established 
        under this subsection is applied with respect to a State for a 
        calendar year, the State shall make a payment to the United 
        States (at such time and in such manner as the Secretary may 
        require) in an amount equal to 110 percent of the costs 
        incurred by the United States during the year as a result of 
        the application of the system with respect to the State.

SEC. 15133. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF ALTERNATIVE 
              DISPUTE RESOLUTION SYSTEMS.

    (a) In General.--Not later than 5 years after the date of the 
enactment of this Act, the Secretary shall prepare and submit to the 
Congress a report describing and evaluating State alternative dispute 
resolution systems operated pursuant to this subpart and the 
alternative Federal system established under section 15132(b).
    (b) Contents of Report.--The Secretary shall include in the report 
prepared and submitted under subsection (a)--
            (1) information on--
                    (A) the effect of the alternative dispute 
                resolution systems on the cost of health care within 
                each State,
                    (B) the impact of such systems on the access of 
                individuals to health care within the State, and
                    (C) the effect of such systems on the quality of 
                health care provided within the State; and
            (2) to the extent that such report does not provide 
        information on no-fault systems operated by States as 
        alternative dispute resolution systems pursuant to this part, 
        an analysis of the feasibility and desirability of establishing 
        a system under which medical malpractice liability claims shall 
        be resolved on a no-fault basis.

                         Subpart C--Definitions

SEC. 15141. DEFINITIONS.

    As used in this part:
            (1) Alternative dispute resolution system.--The term 
        ``alternative dispute resolution system'' means a system that 
        is enacted or adopted by a State to resolve medical malpractice 
        claims other than through a medical malpractice liability 
        action.
            (2) Claimant.--The term ``claimant'' means any person who 
        brings a health care liability action and, in the case of an 
        individual who is deceased, incompetent, or a minor, the person 
        on whose behalf such an action is brought.
            (3) Clear and convincing evidence.--The term ``clear and 
        convincing evidence'' is that measure or degree of proof that 
        will produce in the mind of the trier of fact a firm belief or 
        conviction as to the truth of the allegations sought to be 
        established, except that such measure or degree of proof is 
        more than that required under preponderance of the evidence, 
        but less than that required for proof beyond a reasonable 
        doubt.
            (4) Economic damages.--The term ``economic damages'' means 
        damages paid to compensate an individual for losses for 
        hospital and other medical expenses, lost wages, lost 
        employment, and other pecuniary losses.
            (5) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by State law or 
        regulation to be licensed or certified by the State to provide 
        such services in the State.
            (6) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State that 
        is required by State law or regulation to be licensed or 
        certified by the State to engage in the delivery of such 
        services in the State.
            (7) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice claim.
            (8) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means any civil action 
        brought pursuant to State law in which a plaintiff alleges a 
        medical malpractice claim against a health care provider or 
        health care professional, but does not include any action in 
        which the plaintiff's sole allegation is an allegation of an 
        intentional tort.
            (9) Medical malpractice claim.--The term ``medical 
        malpractice claim'' means any claim relating to the provision 
        of (or the failure to provide) health care services or the use 
        of a medical product, without regard to the theory of liability 
        asserted, and includes any third-party claim, cross-claim, 
        counterclaim, or contribution claim in a medical malpractice 
        liability action.
            (10) Medical product.--
                    (A) In general.--The term ``medical product'' 
                means, with respect to the allegation of a claimant, a 
                drug (as defined in section 201(g)(1) of the Federal 
                Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a 
                medical device (as defined in section 201(h) of the 
                Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) 
                if--
                            (i) such drug or device was subject to 
                        premarket approval under section 505, 507, or 
                        515 of the Federal Food, Drug, and Cosmetic Act 
                        (21 U.S.C. 355, 357, or 360e) or section 351 of 
                        the Public Health Service Act (42 U.S.C. 262) 
                        with respect to the safety of the formulation 
                        or performance of the aspect of such drug or 
                        device which is the subject of the claimant's 
                        allegation or the adequacy of the packaging or 
                        labeling of such drug or device, and such drug 
                        or device is approved by the Food and Drug 
                        Administration; or
                            (ii) the drug or device is generally 
                        recognized as safe and effective under 
                        regulations issued by the Secretary of Health 
                        and Human Services under section 201(p) of the 
                        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                        321(p)).
                    (B) Exception in case of misrepresentation or 
                fraud.--Notwithstanding subparagraph (A), the term 
                ``medical product'' shall not include any product 
                described in such subparagraph if the claimant shows 
                that the product is approved by the Food and Drug 
                Administration for marketing as a result of withheld 
                information, misrepresentation, or an illegal payment 
                by manufacturer of the product.
            (11) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages paid to compensate an individual for losses for 
        physical and emotional pain, suffering, inconvenience, physical 
        impairment, mental anguish, disfigurement, loss of enjoyment of 
        life, loss of consortium, and other nonpecuniary losses, but 
        does not include punitive damages.
            (12) Punitive damages.--The term ``punitive damages'' means 
        compensation, in addition to compensation for actual harm 
        suffered, that is awarded for the purpose of punishing a person 
        for conduct deemed to be malicious, wanton, willful, or 
        excessively reckless.

     PART 4--PAYMENT AREAS FOR PHYSICIANS' SERVICES UNDER MEDICARE

                                                     Subtitle B, Part 4

SEC. 15151. MODIFICATION OF PAYMENT AREAS USED TO DETERMINE PAYMENTS 
              FOR PHYSICIANS' SERVICES UNDER MEDICARE.

    (a) In General.--Section 1848(j)(2) (42 U.S.C. 1395w@4(j)(2)) is 
amended to read as follows:
            ``(2) Fee schedule area.--
                    ``(A) General rule.--Except as provided in 
                subparagraph (B), the term `fee schedule area' means, 
                with respect to physicians' services furnished in a 
                State, the State.
                    ``(B) Exception for states with highest variation 
                among areas.--In the case of the 15 States with the 
                greatest variation in cost associated with physicians' 
                services among various geographic areas of the State 
                (as determined by the Secretary in accordance with such 
standards as the Secretary considers appropriate), the fee schedule 
area applicable with respect to physicians' services furnished in the 
State shall be a locality used under section 1842(b) for purposes of 
computing payment amounts for physicians' services, except that the 
Secretary shall revise the localities used under such section so that 
there are no more than 5 such localities in any State.''.
    (b) Budget-Neutrality Requirement.--The Secretary of Health and 
Human Services shall carry out the amendment made by subsection (a) in 
a manner which ensures that the aggregate amount of payment made for 
physicians' services under part B of the medicare program in any year 
does not exceed the aggregate amount of payment which would have been 
made for such services under part B during the year if the amendment 
were not in effect.
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to physicians' services furnished on or after January 1, 1997.

         Subtitle C--Medicare Payments to Health Care Providers

               PART 1--PROVISIONS AFFECTING ALL PROVIDERS

                                                     Subtitle C, Part 1

SEC. 15201. ONE-YEAR FREEZE IN PAYMENTS TO PROVIDERS.

    (a) Freeze in Updates.--
            (1) In general.--Notwithstanding any other provision of 
        law, except as otherwise provided in paragraph (2), for 
        purposes of determining the amount to be paid for an item or 
        service under title XVIII of the Social Security Act, the 
        percentage increase in any economic index by which a payment 
        amount under title XVIII of the Social Security Act is required 
        to be increased during fiscal year 1996 shall be deemed to be 
        zero.
            (2) Exceptions.--Paragraph (1) shall not apply--
                    (A) to payments for the operating costs of 
                inpatient hospital services of a subsection (d) 
                hospital (as defined in section 1886(d)(1)(B) of the 
                Social Security Act); or
                    (B) to the determination of hospital-specific FTE 
                resident amounts under section 1886(h) of such Act.
    (b) Economic Index.-- The term ``economic index'' includes--
            (1) the hospital market basket index (described in section 
        1886(b)(3)(B)(iii) of the Social Security Act),
            (2) the medicare economic index (referred to in the fourth 
        sentence of section 1842(b)(3) of such Act),
            (3) the consumer price index for all urban consumers (U.S. 
        city average), and
            (4) any other index used to adjust payment amounts under 
        title XVIII of such Act.
    (c) Extension of Payment Freeze for SNFs and HHAs.--
            (1) Skilled nursing facilities.--
                    (A) No change in cost limits.--Section 13503(a)(1) 
                of OBRA-1993 is amended by striking ``1994 and 1995'' 
                and inserting ``1994, 1995, and 1996''.
                    (B) Delay in updates; no catchup.--The last 
                sentence of section 1888(a) (42 U.S.C. 1395yy(a)) is 
                amended--
                            (i) by striking ``1995'' and inserting 
                        ``1996'', and
                            (ii) by striking ``subsection.'' and 
                        inserting ``subsection (except that such 
                        updates may not take into account any changes 
                        in the routine service costs of skilled nursing 
                        facilities during cost reporting periods which 
                        began during fiscal year 1994, 1995, or 
                        1996).''.
                    (C) Prospective payments.--Section 13505(b) of 
                OBRA-1993 is amended by striking ``fiscal years 1994 
                and 1995'' and inserting ``fiscal years 1994, 1995, and 
                1996''.
            (2) Home health agencies.--
                    (A) No change in cost limits.--Section 13564(a)(1) 
                of OBRA-1993 is amended by striking ``1996'' and 
                inserting ``1997''.
                    (B) Delay in updates; no catchup.--Section 
                1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is 
                amended--
                            (i) by striking ``1996'' and inserting 
                        ``1997'', and
                            (ii) by adding at the end the following: 
                        ``In establishing limits under this 
                        subparagraph, the Secretary may not take into 
                        account any changes in the routine service 
                        costs of the provision of services furnished by 
                        home health agencies with respect to cost 
                        reporting periods which began on or after July 
                        1, 1994, and before July 1,1997.''.

                  PART 2--PROVISIONS AFFECTING DOCTORS

                                                     Subtitle C, Part 2

SEC. 15211. UPDATING FEES FOR PHYSICIANS' SERVICES.

    (a) Establishment of Single, Cumulative MVPS.-- Section 1848(f) (42 
U.S.C. 1395w-4(f)) is amended--
            (1) in subparagraphs (A) and (C) of paragraph (1), by 
        striking ``rates of increase for all physicians' services and 
        for each category of such services'' each place it appears and 
        inserting ``rate of increase for all physicians' services (and, 
        in the case of fiscal years beginning before fiscal year 1996, 
        for each category of such services)''; and
            (2) in paragraph (2)--
                    (A) in subparagraph (A)--
                            (i) by striking ``In general.--'' and 
                        inserting ``Fiscal years 1991 through 1995.--
                        '',
                            (ii) in the matter preceding clause (i), by 
                        striking ``a fiscal year (beginning with fiscal 
                        year 1991)'' and inserting ``fiscal years 1991 
                        through 1995'', and
                            (iii) in the matter following clause (iv), 
                        by striking ``subparagraph (B)) and inserting 
                        ``subparagraph (C))'',
                    (B) by redesignating subparagraphs (B) and (C) as 
                subparagraphs (C) and (D), and
                    (C) by inserting after subparagraph (A) the 
                following:
                    ``(B) Fiscal year 1996 and thereafter.--Unless 
                Congress otherwise provides, the performance standard 
                rate of increase for all physicians' services for a 
                fiscal year beginning with fiscal year 1996 shall be 
                equal to the performance standard rate of increase 
                determined under this paragraph for the previous fiscal 
                year, increased by the product of--
                            ``(i) 1 plus the Secretary's estimate of 
                        the weighted average percentage increase 
                        (divided by 100) in the fees for all 
                        physicians' services under this part for 
                        portions of calendar years included in the 
                        fiscal year involved,
                            ``(ii) 1 plus the Secretary's estimate of 
                        the percentage increase or decrease (divided by 
                        100) in the average number of individuals 
                        enrolled under this part (other than HMO 
                        enrollees) from the previous fiscal year to the 
                        fiscal year involved,
                            ``(iii) 1 plus the Secretary's estimate of 
                        the average annual percentage growth (divided 
                        by 100) in volume and intensity of all 
                        physicians' services under this part for the 5-
                        fiscal-year-period ending with the preceding 
                        fiscal year, and
                            ``(iv) 1 plus the Secretary's estimate of 
                        the percentage increase or decrease (divided by 
                        100) in expenditures for all physicians' 
services in the fiscal year (compared with the previous fiscal year) 
that are estimated to result from changes in law or regulations 
affecting the percentage increase described in clause (i) and that is 
not taken into account in the percentage increase described in clause 
(i), minus 1, multiplied by 100, and reduced by the performance 
standard factor (specified in subparagraph (C)).''.
    (b) Annual Update Based on Cumulative Performance.--
            (1) In general.--Section 1848(d)(3)(B) (42 U.S.C. 1395w-
        4(d)(3)(B)) is amended--
                    (A) in clause (i)--
                            (i) by striking ``In general.--'' and 
                        inserting ``For 1992 through 1995'',
                            (ii) by striking ``for a year'' and 
                        inserting ``for each of the years 1992 through 
                        1995'', and
                            (iii) by striking ``, subject to clause 
                        (ii),'' and inserting ``subject to clause 
                        (iii),'';
                    (B) by redesignating clause (ii) as clause (iii); 
                and
                    (C) by inserting after clause (i) the following:
                            ``(ii) Years beginning after 1996.--
                                    ``(I) In general.--The update for 
                                all physicians'' services for a year 
                                beginning after 1996 provided under 
                                subparagraph (A) shall, subject to 
                                clause (iii), be increased or decreased 
                                by the same percentage by which the 
                                cumulative percentage increase in 
                                actual expenditures for all physicians' 
                                services in the second previous fiscal 
                                year over the third previous fiscal 
                                year, was less or greater, 
                                respectively, than the performance 
                                standard rate of increase (established 
                                under subsection (f)) for such services 
                                for the second previous fiscal year.
                                    ``(II) Cumulative percentage 
                                increase defined.--In subclause (I), 
                                the `cumulative percentage increase in 
                                actual expenditures' for a year shall 
                                be equal to the product of the adjusted 
                                increases for each year beginning with 
                                1995 up to and including the year 
                                involved, minus 1 and multiplied by 
                                100. In the previous sentence, the 
                                `adjusted increase' for a year is equal 
                                to 1 plus the percentage increase in 
                                actual expenditures for the year (over 
                                the preceding year).''.
            (3) Establishment of conversion factor for 1996.--Section 
        1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) is amended--
                    (A) by redesignating subparagraph (C) as 
                subparagraph (D); and
                    (B) by inserting after subparagraph (B) the 
                following new subparagraph:
                    ``(C) Special rule for 1996.--For 1996, the 
                conversion factor under this subsection shall be $36.40 
                for all physicians' services.''.
    (c) Establishing Upper Limit on MVPS Rewards.--
            (1) In general.--Clause (iii) of section 1848(d)(3)(B), as 
        redesignated by subsection (b)(1)(B), is amended by striking 
        ``a decrease'' and inserting ``an increase or decrease''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to physicians' services furnished on or after 
        January 1, 1996.

SEC. 15212. USE OF REAL GDP TO ADJUST FOR VOLUME AND INTENSITY.

    Section 1848(f)(2)(B)(iii) (42 U.S.C. 1395w-4(f)(2)(B)(iii)), as 
added by section 15211(a)(2)(C), is amended to read as follows:
                            ``(iii) 1 plus the average per capita 
                        growth in the real gross domestic product 
                        (divided by 100) for the 5-fiscal-year period 
                        ending with the previous fiscal year (increased 
                        by 1.5 percentage points for the category of 
                        services consisting of primary care services), 
                        and''.

                 PART 3--PROVISIONS AFFECTING HOSPITALS

                                                     Subtitle C, Part 3

SEC. 15221. REDUCTION IN UPDATE FOR INPATIENT HOSPITAL SERVICES.

    (a) PPS Hospitals.--Section 1886(b)(3)(B)(i) (42 U.S.C. 
1395ww(b)(3)(B)(i)) is amended--
            (1) by amending subclause (XII) to read as follows:
            ``(XII) for each of the fiscal years 1997 through 2002, the 
        market basket percentage increase minus 0.5 percentage point 
        for hospitals in a rural area, and the market basket percentage 
        increase minus 1.5 percentage points for all other hospitals, 
        and''; and
            (2) in subclause (XIII), by striking ``1998'' and inserting 
        ``2003''.
    (b) PPS-Exempt Hospitals.--
            (1) In general.--Section 1886(b)(3)(B)(ii) (42 U.S.C. 
        1395ww(b)(3)(B)(ii)) is amended--
                    (A) in subclause (V)--
                            (i) by striking ``through 1997'' and 
                        inserting ``through 1996'', and
                            (ii) by striking ``and'' at the end;
                    (B) by redesignating subclause (VI) as subclause 
                (VII); and
                    (C) by inserting after subclause (V) the following 
                new subclause:
            ``(VI) fiscal years 1997 through 2002, is the market basket 
        percentage increase minus 1.0 percentage point, and''.
            (2) Conforming amendment.--Section 1886(b)(3)(B) (42 U.S.C. 
        1395ww(b)(3)(B)) is amended by striking clause (v).

SEC. 15222. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN 
              OUTPATIENT HOSPITAL SERVICES.

    (a) Ambulatory Surgical Center Procedures.--Section 
1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (b) Radiology Services and Diagnostic Procedures.--Section 
1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended--
            (1) by striking ``of 80 percent''; and
            (2) by striking the period at the end and inserting the 
        following: ``, less the amount a provider may charge as 
        described in clause (ii) of section 1866(a)(2)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished during portions of cost reporting periods 
occurring on or after July 1, 1994.

SEC. 15223. ESTABLISHMENT OF PROSPECTIVE PAYMENT SYSTEM FOR OUTPATIENT 
              SERVICES.

    (a) In General.--Section 1833(a)(2)(B) (42 U.S.C. 1395l(a)(2)(B)) 
is amended by striking ``section 1886)--'' and all that follows and 
inserting the following: ``section 1886), an amount equal to a 
prospectively determined payment rate established by the Secretary that 
provides for payments for such items and services to be based upon a 
national rate adjusted to take into account the relative costs of 
furnishing such items and services in various geographic areas, except 
that for items and services furnished during cost reporting periods (or 
portions thereof) in years beginning with 1996, such amount shall be 
equal to 95 percent of the amount that would otherwise have been 
determined;''.
    (b) Establishment of Prospective Payment System.--Not later than 
July 1, 1995, the Secretary of Health and Human Services shall 
establish the prospective payment system for hospital outpatient 
services necessary to carry out section 1833(a)(2)(B) of the Social 
Security Act (as amended by subsection (a)).
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to items and services furnished on or after January 1, 1996.

SEC. 15224. REDUCTION IN MEDICARE PAYMENTS TO HOSPITALS FOR INPATIENT 
              CAPITAL-RELATED COSTS.

    (a) PPS Hospitals.--Section 1886(g)(1)(A) (42 U.S.C. 
1395ww(g)(1)(A)) is amended by striking ``1995'' and inserting 
``1996''.
    (b) Reduction in Base Payment Rates for PPS Hospitals.--Section 
1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended by adding at the 
end the following new sentence: ``In addition to the reduction 
described in the preceding sentence, for discharges occurring after 
September 30, 1995, the Secretary shall reduce by 7.47 percent the 
unadjusted standard Federal capital payment rate (as described in 42 
CFR 412.308(c), as in effect on the date of the enactment of the 
Omnibus Budget Reconciliation Act of 1995) and shall reduce by 8.27 
percent the unadjusted hospital-specific rate (as described in 42 CFR 
412.328(e)(1), as in effect on the date of the enactment of the Omnibus 
Budget Reconciliation Act of 1995).''.
    (c) PPS-Exempt Hospitals.--Section 1861(v)(1) (42 U.S.C. 
1395x(v)(1)) is amended by adding at the end the following:
                    ``(T) Such regulations shall provide that, in 
                determining the amount of the payments that may be made 
                under this title with respect to the capital-related 
                costs of inpatient hospital services furnished by a 
                hospital that is not a subsection (d) hospital (as 
                defined in section 1886(d)(1)(B)) or a subsection (d) 
                Puerto Rico hospital (as defined in section 
                1886(d)(9)(A)), the Secretary shall reduce the amounts 
                of such payments otherwise established under this title 
                by 10 percent for payments attributable to portions of 
                cost reporting periods occurring during fiscal year 
                1996.''.

SEC. 15225. MORATORIUM ON PPS EXEMPTION FOR LONG-TERM CARE HOSPITALS.

    (a) In General.--Section 1886(d)(1)(B)(iv) (42 U.S.C. 
1395ww(d)(1)(B)(iv)) is amended by striking ``Secretary)'' and 
inserting ``Secretary on or before September 30, 1995)''.
    (b) Recommendations on Appropriate Standards for Long-Term Care 
Hospitals.--Not later than 1 year after the date of the enactment of 
this Act, the Secretary of Health and Human Services shall submit to 
Congress recommendations for modifications to the standards used by the 
Secretary to determine whether a hospital (including a distinct part of 
another hospital) is classified as a long-term care hospital for 
purposes of determining the amount of payment to the hospital under 
part A of the medicare program for the operating costs of inpatient 
hospital services.

SEC. 15226. ELIMINATION OF CERTAIN ADDITIONAL PAYMENTS FOR OUTLIER 
              CASES.

    (a) Indirect Medical Education.--Section 1886(d)(5)(B)(i)(I) (42 
U.S.C. 1395ww(d)(5)(B)(i)(I)) is amended--
            (1) by striking ``the sum of''; and
            (2) by striking ``and the amount paid to the hospital under 
        subparagraph (A)''.
    (b) Disproportionate Share Adjustments.--Section 
1886(d)(5)(F)(ii)(I) (42 U.S.C. 1395ww(d)(5)(F)(ii)(I)) is amended--
            (1) by striking ``the sum of''; and
            (2) by striking ``and the amount paid to the hospital under 
        subparagraph (A) for that discharge''.
    (c) Effective Date.--The amendments made by this section shall 
apply to discharges occurring on or after October 1, 1995.

             PART 4--PROVISIONS AFFECTING OTHER PROVIDERS.

                                                     Subtitle C, Part 4

SEC. 15231. REVISION OF PAYMENT METHODOLOGY FOR HOME HEALTH SERVICES.

    (a) Additions to Cost Limits.--Section 1861(v)(1)(L) (42 U.S.C. 
1395x(v)(1)(L)) is amended by adding at the end the following new 
clauses:
                            ``(iv) For services furnished by home 
                        health agencies for cost reporting periods 
                        beginning on or after October 1, 1996, the 
                        Secretary shall provide for an interim system 
                        of limits. Payment shall be the lower of--
                                    ``(I) costs determined under the 
                                preceding provisions of this 
                                subparagraph, or
                                    ``(II) an agency-specific per 
                                beneficiary annual limit calculated 
                                from the agency's 12-month cost 
                                reporting period ending on or after 
                                January 1, 1994 and on or before 
                                December 31, 1994 based on reasonable 
                                costs (including non-routine medical 
                                supplies), updated by the home health 
                                market basket index. The per 
                                beneficiary limitation shall be 
                                multiplied by the agency's unduplicated 
                                census count of Medicare patients for 
                                the year subject to the limitation. The 
                                limitation shall represent total 
                                Medicare reasonable costs divided by 
                                the unduplicated census count of 
                                Medicare patients.
                            ``(v) For services furnished by home health 
                        agencies for cost reporting periods beginning 
                        on or after October 1, 1996, the following 
                        rules shall apply:
                                    ``(I) For new providers and those 
                                providers without a 12-month cost 
                                reporting period ending in calendar 
                                year 1994, the per beneficiary limit 
                                shall be equal to the mean of these 
                                limits (or the Secretary's best 
                                estimates thereof) applied to home 
                                health agencies as determined by the 
                                Secretary. Home health agencies that 
                                have altered their corporate structure 
                                or name may not be considered new 
                                providers for payment purposes.
                                    ``(II) For beneficiaries who use 
                                services furnished by more than one 
                                home health agency, the per beneficiary 
                                limitation shall be pro-rated among 
                                agencies.
                            ``(vi) Home health agencies whose cost or 
                        utilization experience is below 125 percent of 
                        the mean national or census region aggregate 
                        per beneficiary cost or utilization experience 
                        for 1994, or best estimates thereof, and whose 
                        year-end reasonable costs are below the agency-
                        specific per beneficiary limit, shall receive 
                        payment equal to 50 percent of the difference 
                        between the agency's reasonable costs and its 
                        limit for fiscal years 1996, 1997, 1998, and 
                        1999. Such payments may not exceed 5 percent of 
                        an agency's aggregate Medicare reasonable cost 
                        in a year.
                            ``(vii) Effective January 1, 1997, or as 
                        soon as feasible, the Secretary shall modify 
                        the agency specific per beneficiary annual 
                        limit described in clause (iv) to provide for 
                        regional or national variations in utilization. 
                        For purposes of determining payment under 
                        clause (iv), the limit shall be calculated 
                        through a blend of 75 percent of the agency-
                        specific cost or utilization experience in 1994 
                        with 25 percent of the national or census 
                        region cost or utilization experience in 1994, 
                        or the Secretary's best estimates thereof.''.
    (b) Use of Interim Final Regulations.--The Secretary shall 
implement the payment limits described in section 1861(v)(1)(L)(iv) of 
the Social Security Act by publishing in the Federal Register a notice 
of interim final payment limits by August 1, 1996 and allowing for a 
period of public comments thereon. Payments subject to these limits 
will be effective for cost reporting periods beginning on or after 
October 1, 1996, without the necessity for consideration of comments 
received, but the Secretary shall, by Federal Register notice, affirm 
or modify the limits after considering those comments.
    (c) Studies.--The Secretary shall expand research on a prospective 
payment system for home health agencies that shall tie prospective 
payments to an episode of care, including an intensive effort to 
develop a reliable case mix adjuster that explains a significant amount 
of the variances in costs. The Secretary shall develop such a system 
for implementation in fiscal year 2000.
    (d) Payments Determined on Prospective Basis.--Title XVIII is 
amended by adding at the end the following new section:

             ``prospective payment for home health services

    ``Sec. 1893. (a) Notwithstanding section 1861(v), the Secretary 
shall, for cost reporting periods beginning on or after fiscal year 
2000, provide for payments for home health services in accordance with 
a prospective payment system, which pays home health agencies on a per 
episode basis, established by the Secretary.
    ``(b) Such a system shall include the following:
            ``(1) Per episode rates under the system shall be 15 
        percent less than those that would otherwise occur under fiscal 
        year 2000 Medicare expenditures for home health services.
            ``(2) All services covered and paid on a reasonable cost 
        basis under the Medicare home health benefit as of the date of 
        the enactment of the Medicare Enhancement Act of 1995, 
        including medical supplies, shall be subject to the per episode 
        amount. In defining an episode of care, the Secretary shall 
        consider an appropriate length of time for an episode the use 
        of services and the number of visits provided within an 
        episode, potential changes in the mix of services provided 
        within an episode and their cost, and a general system design 
        that will provide for continued access to quality services. The 
        per episode amount shall be based on the most current audited 
        cost report data available to the Secretary.
    ``(c) The Secretary shall employ an appropriate case mix adjuster 
that explains a significant amount of the variation in cost.
    ``(d) The episode payment amount shall be adjusted annually by the 
home health market basket index. The labor portion of the episode 
amount shall be adjusted for geographic differences in labor-related 
costs based on the most current hospital wage index.
    ``(e) The Secretary may designate a payment provision for outliers, 
recognizing the need to adjust payments due to unusual variations in 
the type or amount of medically necessary care.
    ``(f) A home health agency shall be responsible for coordinating 
all care for a beneficiary. If a beneficiary elects to transfer to, or 
receive services from, another home health agency within an episode 
period, the episode payment shall be pro-rated between home health 
agencies.''.

SEC. 15232. LIMITATION OF HOME HEALTH COVERAGE UNDER PART A.

    (a) In General.--Section 1812(a)(3) (42 U.S.C. 1395d(a)(3)) is 
amended by striking the semicolon and inserting ``for up to 150 days 
during any spell of illness;''.
    (b) Conforming Amendment.--Section 1812(b) (42 U.S.C. 1395d(b)) is 
amended--
            (1) by striking ``or'' at the end of paragraph (2),
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``; or'', and
            (3) by adding at the end the following new paragraph:
            ``(4) home health services furnished to the individual 
        during such spell after such services have been furnished to 
        the individual for 150 days during such spell.''.
            (3) Exclusion of additional part b costs from determination 
        of part b monthly premium.--Section 1839(a) (42 U.S.C. 
        1395r(a)) is amended--
                    (A) in the second sentence of paragraph (1), by 
                striking ``enrollees.'' and inserting ``enrollees 
                (except as provided in paragraph (5)).''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(5) In estimating the benefits and administrative costs which 
will be payable from the Federal Supplementary Medical Insurance Trust 
Fund for a year (beginning with 1996), the Secretary shall exclude an 
estimate of any benefits and costs attributable to home health services 
for which payment would have been made under part A during the year but 
for paragraph (4) of section 1812(b).''.
    (c) Effective Date.--The amendments made by this subsection shall 
apply to spells of illness beginning on or after October 1, 1995.

SEC. 15233. REDUCTION IN FEE SCHEDULE FOR DURABLE MEDICAL EQUIPMENT.

    (a) In General.--
            (1) Freeze in update for covered items.--Section 
        1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (A);
                    (B) in subparagraph (B)--
                            (i) by striking ``a subsequent year'' and 
                        inserting ``1993, 1994, and 1995'', and
                            (ii) by striking the period at the end and 
                        inserting ``; and''; and
                    (C) by adding at the end the following:
                    ``(C) for each of the years 1996 through 1998, 0 
                percent; and
                    ``(D) for a subsequent year, the percentage 
                increase in the consumer price index for all urban 
                consumers (U.S. urban average) for the 12-month period 
                ending with June of the previous year.''.
            (2) Update for orthotics and prosthetics.--Section 
        1834(h)(4)(A)(iii) (42 U.S.C. 1395m(h)(4)(A)(iii)) is amended 
        by striking ``1994 and 1995'' and inserting ``each of the years 
        1994 through 1998''.
    (b) Oxygen and Oxygen Equipment.--Section 1834(a)(9)(C) (42 U.S.C. 
1395m(a)(9)(C)) is amended--
            (1) by striking ``and'' at the end of clause (iii);
            (2) in clause (iv)--
                    (A) by striking ``a subsequent year'' and inserting 
                ``1993, 1994, and 1995'', and
                    (B) by striking the period at the end and inserting 
                ``; and''; and
            (3) by adding at the end the following new clause:
                            ``(v) in 1996 and each subsequent year, is 
                        90 percent of the national limited monthly 
                        payment rate computed under subparagraph (B) 
                        for the item for the year.''.

SEC. 15234. NURSING HOME BILLING.

    (a) Payments for Routine Service Costs.--
            (1) Clarification of definition of routine service costs.--
        Section 1888 (42 U.S.C. 1395yy) is amended by adding at the end 
        the following new subsection:
    ``(e) For purposes of this section, the `routine service costs' of 
a skilled nursing facility are all costs which are attributable to 
nursing services, room and board, administrative costs, other overhead 
costs, and all other ancillary services (including supplies and 
equipment), excluding costs attributable to covered non-routine 
services subject to payment limits under section 1888A.''.
            (2) Conforming amendment.--Section 1888 (42 U.S.C. 1395yy) 
        is amended in the heading by inserting ``and certain 
        ancillary'' after ``service''.
    (b) Incentives for Cost-Effective Management of Covered Non-routine 
Services.--
            (1) In general.--Title XVIII is amended by inserting after 
        section 1888 the following new section:

   ``incentives for cost-effective management of covered non-routine 
                 services of skilled nursing facilities

    ``Sec. 1888A. (a) Definitions.--For purposes of this section:
            ``(1) Covered non-routine services.--The term `covered non-
        routine services' means post-hospital extended care services 
        consisting of any of the following:
                    ``(A) Physical or occupational therapy or speech-
                language pathology services, or respiratory therapy.
                    ``(B) Prescription drugs.
                    ``(C) Complex medical equipment.
                    ``(D) Intravenous therapy and solutions (including 
                enteral and parenteral nutrients, supplies, and 
                equipment).
                    ``(E) Radiation therapy.
                    ``(F) Diagnostic services, including laboratory, 
                radiology (including computerized tomography services 
                and imaging services), and pulmonary services.
            ``(2) SNF market basket percentage increase.--The term `SNF 
        market basket percentage increase' for a fiscal year means a 
        percentage equal to the percentage increase in routine service 
        cost limits for the year under section 1888(a).
            ``(3) Stay.--The term `stay' means, with respect to an 
        individual who is a resident of a skilled nursing facility, a 
        period of continuous days during which the facility provides 
        extended care services for which payment may be made under this 
        title to the individual during the individual's spell of 
        illness.
    ``(b) New Payment Method for Covered Non-Routine Services.--
            ``(1) In general.--Subject to subsection (c), a skilled 
        nursing facility shall receive interim payments under this 
        title for covered non-routine services furnished to an 
        individual during a cost reporting period beginning during a 
        fiscal year (after fiscal year 1996) in an amount equal to the 
        reasonable cost of providing such services in accordance with 
        section 1861(v). The Secretary may adjust such payments if the 
        Secretary determines (on the basis of such estimated 
        information as the Secretary considers appropriate) that 
        payments to the facility under this paragraph for a cost 
        reporting period would substantially exceed the cost reporting 
        period limit determined under subsection (c)(1)(B).
            ``(2) Responsibility of skilled nursing facility to manage 
        billings.--
                    ``(A) Clarification relating to part a billing.--In 
                the case of a covered non-routine service furnished to 
                an individual who (at the time the service is 
                furnished) is a resident of a skilled nursing facility 
                who is entitled to coverage under section 1812(a)(2) 
                for such service, the skilled nursing facility shall 
                submit a claim for payment under this title for such 
                service under part A (without regard to whether or not 
                the item or service was furnished by the facility, by 
                others under arrangement with them made by the 
                facility, under any other contracting or consulting 
                arrangement, or otherwise).
                    ``(B) Part b billing.--In the case of a covered 
                non-routine service furnished to an individual who (at 
                the time the service is furnished) is a resident of a 
                skilled nursing facility who is not entitled to 
                coverage under section 1812(a)(2) for such service but 
                is entitled to coverage under part B for such service, 
                the skilled nursing facility shall submit a claim for 
                payment under this title for such service under part B 
                (without regard to whether or not the item or service 
                was furnished by the facility, by others under 
                arrangement with them made by the facility, under any 
                other contracting or consulting arrangement, or 
                otherwise).
                    ``(C) Maintaining records on services furnished to 
                residents.--Each skilled nursing facility receiving 
                payments for extended care services under this title 
                shall document on the facility's cost report all 
                covered non-routine services furnished to all residents 
                of the facility to whom the facility provided extended 
                care services for which payment was made under part A 
                during a fiscal year (beginning with fiscal year 1996) 
                (without regard to whether or not the services were 
                furnished by the facility, by others under arrangement 
                with them made by the facility, under any other 
                contracting or consulting arrangement, or otherwise).
    ``(c) Reconciliation of Amounts.--
            ``(1) Limit based on per stay limit and number of stays.--
                    ``(A) In general.--If a skilled nursing facility 
                has received aggregate payments under subsection (b) 
                for covered non-routine services during a cost 
                reporting period beginning during a fiscal year in 
                excess of an amount equal to the cost reporting period 
                limit determined under subparagraph (B), the Secretary 
                shall reduce the payments made to the facility with 
                respect to such services for cost reporting periods 
                beginning during the following fiscal year in an amount 
                equal to such excess. The Secretary shall reduce 
                payments under this subparagraph at such times and in 
                such manner during a fiscal year as the Secretary finds 
                necessary to meet the requirement of this subparagraph.
                    ``(B) Cost reporting period limit.--The cost 
                reporting period limit determined under this 
                subparagraph is an amount equal to the product of--
                            ``(i) the per stay limit applicable to the 
                        facility under subsection (d) for the period; 
                        and
                            ``(ii) the number of stays beginning during 
                        the period for which payment was made to the 
                        facility for such services.
                    ``(C) Prospective reduction in payments.--In 
                addition to the process for reducing payments described 
                in subparagraph (A), the Secretary may reduce payments 
                made to a facility under this section during a cost 
                reporting period if the Secretary determines (on the 
                basis of such estimated information as the Secretary 
                considers appropriate) that payments to the facility 
                under this section for the period will substantially 
                exceed the cost reporting period limit for the period 
                determined under this paragraph.
            ``(2) Incentive payments.--
                    ``(A) In general.--If a skilled nursing facility 
                has received aggregate payments under subsection (b) 
                for covered non-routine services during a cost 
                reporting period beginning during a fiscal year in an 
                amount that is less than the amount determined under 
                paragraph (1)(B), the Secretary shall pay the skilled 
                nursing facility in the following fiscal year an 
                incentive payment equal to 50 percent of the difference 
                between such amounts, except that the incentive payment 
                may not exceed 5 percent of the aggregate payments made 
                to the facility under subsection (b) for the previous 
                fiscal year (without regard to subparagraph (B)).
                    ``(B) Installment incentive payments.--The 
                Secretary may make installment payments during a fiscal 
                year to a skilled nursing facility based on the 
                estimated incentive payment that the facility would be 
                eligible to receive with respect to such fiscal year.
    ``(d) Determination of Facility Per Stay Limit.--
            ``(1) Limit for fiscal year 1997.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the Secretary shall establish 
                separate per stay limits for hospital-based and 
                freestanding skilled nursing facilities for the 12-
                month cost reporting period beginning during fiscal 
                year 1997 that are equal to the sum of--
                            ``(i) 50 percent of the facility-specific 
                        stay amount for the facility (as determined 
                        under subsection (e)) for the last 12-month 
                        cost reporting period ending on or before 
                        September 30, 1994, increased (in a compounded 
                        manner) by the SNF market basket percentage 
                        increase for fiscal years 1995 through 1997; 
                        and
                            ``(ii) 50 percent of the average of all 
                        facility-specific stay amounts for all 
                        hospital-based facilities or all freestanding 
                        facilities (whichever is applicable) during the 
                        cost reporting period described in clause (i), 
                        increased (in a compounded manner) by the SNF 
                        market basket percentage increase for fiscal 
                        years 1995 through 1997.
                    ``(B) Facilities not having 1994 cost reporting 
                period.--In the case of a skilled nursing facility for 
                which payments were not made under this title for 
                covered non-routine services for the last 12-month cost 
                reporting period ending on or before September 30, 
                1994, the per stay limit for the 12-month cost 
                reporting period beginning during fiscal year 1997 
                shall be twice the amount determined under subparagraph 
                (A)(ii).
            ``(2) Limit for subsequent fiscal years.--The per stay 
        limit for a skilled nursing facility for a 12-month cost 
        reporting period beginning during a fiscal year after fiscal 
        year 1997 is equal to the per stay limit established under this 
        subsection for the 12-month cost reporting period beginning 
        during the previous fiscal year, increased by the SNF market 
        basket percentage increase for such subsequent fiscal year 
        minus 2 percentage points.
            ``(3) Rebasing of amounts.--
                    ``(A) In general.--The Secretary shall provide for 
                an update to the facility-specific amounts used to 
                determine the per stay limits under this subsection for 
                cost reporting periods beginning on or after October 1, 
                1999, and every 2 years thereafter.
                    ``(B) Treatment of facilities not having rebased 
                cost reporting periods.--Paragraph (1)(B) shall apply 
                with respect to a skilled nursing facility for which 
                payments were not made under this title for covered 
                non-routine services for the 12-month cost reporting 
                period used by the Secretary to update facility-
                specific amounts under subparagraph (A) in the same 
                manner as such paragraph applies with respect to a 
                facility for which payments were not made under this 
                title for covered non-routine services for the last 12-
                month cost reporting period ending on or before 
                September 30, 1994.
    ``(e) Determination of Facility-Specific Stay Amounts.--The 
`facility-specific stay amount' for a skilled nursing facility for a 
cost reporting period is the sum of--
            ``(1) the average amount of payments made to the facility 
        under part A during the period which are attributable to 
        covered non-routine services furnished during a stay (as 
        determined on a per diem basis); and
            ``(2) the Secretary's best estimate of the average amount 
        of payments made under part B during the period for covered 
        non-routine services furnished to all residents of the facility 
        to whom the facility provided extended care services for which 
        payment was made under part A during the period (without regard 
        to whether or not the services were furnished by the facility, 
        by others under arrangement with them made by the facility, 
        under any other contracting or consulting arrangement, or 
        otherwise), as estimated by the Secretary.
    ``(f) Intensive Nursing or Therapy Needs.--
            ``(1) In general.--In applying subsection (b) to covered 
        non-routine services furnished during a stay beginning during a 
        cost reporting period beginning during a fiscal year (beginning 
        with fiscal years after fiscal year 1997) to a resident of a 
        skilled nursing facility who requires intensive nursing or 
        therapy services, the per stay limit for such resident shall be 
        the per stay limit developed under paragraph (2) instead of the 
        per stay limit determined under subsection (d)(1)(A).
            ``(2) Per stay limit for intensive need residents.--Not 
        later than June 30, 1997, the Secretary, after consultation 
        with the Medicare Payment Review Commission and skilled nursing 
        facility experts, shall develop and publish a per stay limit 
        for residents of a skilled nursing facility who require 
        intensive nursing or therapy services.
            ``(3) Budget neutrality.--The Secretary shall adjust 
        payments under subsection (b) in a manner that ensures that 
        total payments for covered non-routine services under this 
        section are not greater or less than total payments for such 
        services would have been but for the application of paragraph 
        (1).
    ``(g) Special Treatment for Small Skilled Nursing Facilities.--This 
section shall not apply with respect to a skilled nursing facility for 
which payment is made for routine service costs during a cost reporting 
period on the basis of prospective payments under section 1888(d).
    ``(h) Exceptions and Adjustments to Limits.--
            ``(1) In general.--The Secretary may make exceptions and 
        adjustments to the cost reporting limits applicable to a 
        skilled nursing facility under subsection (c)(1)(B) for a cost 
        reporting period, except that the total amount of any 
        additional payments made under this section for covered non-
        routine services during the cost reporting period as a result 
        of such exceptions and adjustments may not exceed 5 percent of 
        the aggregate payments made to all skilled nursing facilities 
        for covered non-routine services during the cost reporting 
        period (determined without regard to this paragraph).
            ``(2) Budget neutrality.--The Secretary shall adjust 
        payments under subsection (b) in a manner that ensures that 
        total payments for covered non-routine services under this 
        section are not greater or less than total payments for such 
        services would have been but for the application of paragraph 
        (1).
    ``(i) Special Rule for X-Ray Services.--Before furnishing a covered 
non-routine service consisting of an X-ray service for which payment 
may be made under part A or part B to a resident, a skilled nursing 
facility shall consider whether furnishing the service through a 
provider of portable X-ray service services would be appropriate, 
taking into account the cost effectiveness of the service and the 
convenience to the resident.''.
            (2) Conforming amendment.--Section 1814(b) (42 U.S.C. 
        1395f(b)) is amended in the matter preceding paragraph (1) by 
        striking ``1813 and 1886'' and inserting ``1813, 1886, 1888, 
        and 1888A''.

SEC. 15235. FREEZE IN PAYMENTS FOR CLINICAL DIAGNOSTIC LABORATORY 
              TESTS.

    Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV)) is 
amended by striking ``1994 and 1995'' and inserting ``1994 through 
1998''.

       PART 5--GRADUATE MEDICAL EDUCATION AND TEACHING HOSPITALS

                                                     Subtitle C, Part 5

SEC. 15241. TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST 
              FUND.

    (a) Teaching Hospital and Graduate Medical Education Trust Fund.--
The Social Security Act (42 U.S.C. 300 et seq.) is amended by adding at 
the end the following title:

  ``TITLE XXI--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST 
                                  FUND

                    ``Part A--Establishment of Fund

``SEC. 2101. ESTABLISHMENT OF FUND.

    ``(a) In General.--There is established in the Treasury of the 
United States a fund to be known as the Teaching Hospital and Graduate 
Medical Education Trust Fund (in this title referred to as the `Fund'), 
consisting of amounts transferred to the Fund under subsection (c), 
amounts appropriated to the Fund pursuant to subsections (d) and 
(e)(3), and such gifts and bequests as may be deposited in the Fund 
pursuant to subsection (f). Amounts in the Fund are available until 
expended.
    ``(b) Expenditures From Fund.--Amounts in the Fund are available to 
the Secretary for making payments under section 2111.
    ``(c) Transfers to Fund.--
            ``(1) In general.--From the Federal Hospital Insurance 
        Trust Fund and the Federal Supplementary Medical Insurance 
        Trust Fund, the Secretary shall, for fiscal year 1996 and each 
        subsequent fiscal year, transfer to the Fund an amount 
        determined by the Secretary for the fiscal year involved in 
        accordance with paragraph (2).
            ``(2) Determination of amounts.--For purposes of paragraph 
        (1), the amount determined under this paragraph for a fiscal 
        year is an estimate by the Secretary of an amount equal to 75 
        percent of the difference between--
                    ``(A) the nationwide total of the amounts that 
                would have been paid under sections 1855 and 1876 
                during the year but for the operation of section 
                1855(b)(2)(B)(ii); and
                    ``(B) the nationwide total of the amounts paid 
                under such sections during the year.
            ``(3) Allocation between medicare trust funds.--In 
        providing for a transfer under paragraph (1) for a fiscal year, 
        the Secretary shall provide for an allocation of the amounts 
        involved between part A and part B of title XVIII (and the 
        trust funds established under the respective parts) as 
        reasonably reflects the proportion of payments for the indirect 
        costs of medical education and direct graduate medical 
        education costs of hospitals associated with the provision of 
        services under each respective part.
    ``(d) Authorization of Appropriations.--There are authorized to be 
appropriated to the Fund such sums as may be necessary for each of the 
fiscal years 1996 through 2002.
    ``(e) Investment.--
            ``(1) In general.--The Secretary of the Treasury shall 
        invest such amounts of the Fund as such Secretary determines 
        are not required to meet current withdrawals from the Fund. 
        Such investments may be made only in interest-bearing 
        obligations of the United States. For such purpose, such 
        obligations may be acquired on original issue at the issue 
        price, or by purchase of outstanding obligations at the market 
        price.
            ``(2) Sale of obligations.--Any obligation acquired by the 
        Fund may be sold by the Secretary of the Treasury at the market 
        price.
            ``(3) Availability of income.--Any interest derived from 
        obligations acquired by the Fund, and proceeds from any sale or 
        redemption of such obligations, are hereby appropriated to the 
        Fund.
    ``(f) Acceptance of Gifts and Bequests.--The Fund may accept on 
behalf of the United States money gifts and bequests made 
unconditionally to the Fund for the benefit of the Fund or any activity 
financed through the Fund.

                ``Part B--Payments to Teaching Hospitals

``SEC. 2111. FORMULA PAYMENTS TO TEACHING HOSPITALS.

    ``(a) In General.--In the case of each teaching hospital that in 
accordance with subsection (b) submits to the Secretary a payment 
document for fiscal year 1996 or any subsequent fiscal year, the 
Secretary shall make payments for the year to the teaching hospital for 
the direct and indirect costs of operating approved medical residency 
training programs. Such payments shall be made from the Fund, and shall 
be made in accordance with a formula established by the Secretary.
    ``(b) Payment Document.--For purposes of subsection (a), a payment 
document is a document containing such information as may be necessary 
for the Secretary to make payments under such subsection to a teaching 
hospital for a fiscal year. The document is submitted in accordance 
with this subsection if the document is submitted not later than the 
date specified by the Secretary, and the document is in such form and 
is made in such manner as the Secretary may require. The Secretary may 
require that information under this subsection be submitted to the 
Secretary in periodic reports.''.
    (b) National Advisory Council on Postgraduate Medical Education.--
            (1) In general.--There is established within the Department 
        of Health and Human Services an advisory council to be known as 
        the National Advisory Council on Postgraduate Medical Education 
        (in this title referred to as the ``Council'').
            (2) Duties.--The council shall provide advice to the 
        Secretary on appropriate policies for making payments for the 
        support of postgraduate medical education in order to assure an 
        adequate supply of physicians trained in various specialities, 
        consistent with the health care needs of the United States.
            (3) Composition.--
                    (A) In general.--The Secretary shall appoint to the 
                Council 15 individuals who are not officers or 
                employees of the United States. Such individuals shall 
                include not less than 1 individual from each of the 
                following categories of individuals or entities:
                            (i) Organizations representing consumers of 
                        health care services.
                            (ii) Physicians who are faculty members of 
                        medical schools, or who supervise approved 
                        physician training programs.
                            (iii) Physicians in private practice who 
                        are not physicians described in clause (ii).
                            (iv) Practitioners in public health.
                            (v) Advanced-practice nurses.
                            (vi) Other health professionals who are not 
                        physicians.
                            (vii) Medical schools.
                            (viii) Teaching hospitals.
                            (ix) The Accreditation Council on Graduate 
                        Medical Education.
                            (x) The American Board of Medical 
                        Specialities.
                            (xi) The Council on Postdoctoral Training 
                        of the American Osteopathic Association.
                            (xii) The Council on Podiatric Medical 
                        Education of the American Podiatric Medical 
                        Association.
                    (B) Requirements regarding representative 
                membership.--To the greatest extent feasible, the 
                membership of the Council shall represent the various 
                geographic regions of the United States, shall reflect 
                the racial, ethnic, and gender composition of the 
                population of the United States, and shall be broadly 
                representative of medical schools and teaching 
                hospitals in the United States.
                    (C) Ex officio members; other federal officers or 
                employees.--The membership of the Council shall include 
                individuals designated by the Secretary to serve as 
                members of the Council from among Federal officers or 
                employees who are appointed by the President, or by the 
                Secretary (or by other Federal officers who are 
                appointed by the President with the advice and consent 
                of the Senate). Individuals designated under the 
                preceding sentence shall include each of the following 
                officials (or a designee of the official):
                            (i) The Secretary of Health and Human 
                        Services.
                            (ii) The Secretary of Veterans Affairs.
                            (iii) The Secretary of Defense.
            (4) Chair.--The Secretary shall, from among members of the 
        council appointed under paragraph (3)(A), designate an 
        individual to serve as the chair of the council.
            (5) Termination.--The Council terminates December 31, 1999.
    (c) Remove Medical Education and Disproportionate Share Hospital 
Payments From Calculation of Adjusted Average Per Capita Cost.--For 
provision removing medical education and disproportionate share 
hospital payments from calculation of payment amounts for organizations 
paid on a capitated basis, see section 1855(b)(2)(B)(ii).
            (2) Payments to hospitals of amounts attributable to dsh.--
        Section 1886 (42 U.S.C. 1395ww) is amended by adding at the end 
        the following new subsection:
    ``(j)(1) In addition to amounts paid under subsection (d)(5)(F), 
the Secretary is authorized to pay hospitals which are eligible for 
such payments for a fiscal year supplemental amounts that do not exceed 
the limit provided for in paragraph (2).
    ``(2) The sum of the aggregate amounts paid pursuant to paragraph 
(1) for a fiscal year shall not exceed the Secretary's estimate of 75 
percent of the amount of reductions in payments under section 1855 that 
are attributable to the operation of subsection (b)(2)(B)(ii) of such 
section. ''.

SEC. 15242. REDUCTION IN PAYMENT ADJUSTMENTS FOR INDIRECT MEDICAL 
              EDUCATION.

    (a) Modification Regarding 5.6 Percent.--Section 1886(d)(5)(B)(ii) 
(42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended--
            (1) by striking ``on or after October 1, 1988,'' and 
        inserting ``on or after October 1, 1999,''; and
            (2) by striking ``1.89'' and inserting ``1.38''.
    (b) Special Rule Regarding Fiscal Years 1996 Through 1998; 
Modification Regarding 6 Per- cent.--Section 1886(d)(5)(B)(ii), as 
amended by paragraph (1), is amended by adding at the end the 
following: ``In the case of discharges occurring on or after October 1, 
1995, and before October 1, 1999, the preceding sentence applies to the 
same extent and in the same manner as the sentence applies to 
discharges occurring on or after October 1, 1999, except that the term 
`1.38' is deemed to be 1.48.''.

       Subtitle D--Provisions Relating to Medicare Beneficiaries

                                                             Subtitle D

SEC. 15301. EXTENDING MEDICARE PART B PREMIUM.

    Section 1839(e) (42 U.S.C. 1395r(e)) is amended--
            (1) in paragraph (1)(A), by striking ``January 1999 shall 
        be an amount equal to 50 percent'' and inserting ``January 2003 
        shall be an amount equal to 56 percent'', and
            (2) in paragraph (2) by striking ``1998'' and inserting 
        ``2002''.

SEC. 15302. RELATING MEDICARE PART B PREMIUM TO INCOME FOR CERTAIN HIGH 
              INCOME INDIVIDUALS.

    (a) Increase in Premium.--
            (1) In general.--Section 1839 (42 U.S.C. 1395r) is amended 
        by adding at the end the following:
    ``(h)(1) Notwithstanding the previous subsections of this section, 
in the case of an individual whose modified adjusted gross income in a 
taxable year ending with or within a calendar year (as reported by the 
individual under section 1894(a)) is equal to or exceeds the sum of the 
threshold amount described in paragraph (4) and $25,000, the amount of 
the monthly premium for the calendar year shall be increased by an 
amount such that the total monthly premium (determined without regard 
to subsection (b)) is equal to 200 percent of the monthly actuarial 
rate for enrollees age 65 and over as determined under subsection 
(a)(1) for that calendar year. The preceding sentence shall not apply 
to any individual whose threshold amount is zero.
    ``(2) Notwithstanding the previous subsections of this section, in 
the case of an individual not described in paragraph (1) whose modified 
adjusted gross income in a taxable year ending with or within a 
calendar year (as reported by the individual under section 1894(a)) 
exceeds the threshold amount described in paragraph (4), the amount of 
the monthly premium for the calendar year shall be increased by an 
amount which bears the same ratio to the amount of the increase 
determined under paragraph (1) as such excess bears to $25,000. The 
preceding sentence shall not apply to any individual whose threshold 
amount is zero.
    ``(3) Using information provided by the Secretary of the Treasury 
under section 6103(l)(14) of the Internal Revenue Code of 1986, the 
Secretary shall determine the actual modified adjusted gross income of 
individuals enrolled in this part during a taxable year and adjust the 
monthly premium applicable to an individual during a calendar year to 
take into account any overpayments or underpayments in the premium 
during the previous calendar year resulting from the application of 
this subsection.
    ``(4) In this subsection and section 1813(c), the term `threshold 
amount' means--
            ``(A) except as otherwise provided in this paragraph, 
        $75,000,
            ``(B) $100,000 in the case of an individual who files a 
        joint return under section 6013 of the Internal Revenue Code of 
        1986, and
            ``(C) zero in the case of an individual who--
                    ``(i) is married at the close of the taxable year 
                (as determined under section 7703 of the Internal 
                Revenue Code of 1986) but does not file a joint return 
                for such year, and
                    ``(ii) does not live apart from the individual's 
                spouse at all times during the taxable year.''.
            (2) Conforming amendment.--Section 1839(f) (42 U.S.C. 
        1395r(f)) is amended by striking ``if an individual'' and 
        inserting the following: ``if an individual (other than an 
        individual subject to an increase in the monthly premium under 
        this section pursuant to subsection (h))''.
            (3) Effective date.--The amendments made by paragraphs (1) 
        and (2) shall apply to the monthly premium under section 1839 
        of the Social Security Act for months beginning after February 
        1996 in taxable years beginning after December 31, 1995.
    (b) Reporting Requirement for Beneficiaries.--Title XVIII, as 
amended by section 15231(d), is further amended by adding at the end 
the following:

   ``report to secretary on estimated modified adjusted gross income

    ``Sec. 1894. (a) In General.--
            ``(1) Individuals covered throughout year.--Not later than 
        November 1 of each year (beginning with 1996), each individual 
        enrolled under part B shall submit to the Secretary (in such 
        form and manner as the Secretary may require, in consultation 
        with the Secretary of the Treasury) an estimate of the 
        individual's modified adjusted gross income anticipated for the 
        taxable year ending with or within the following calendar year, 
        to be used (subject to section 1839(h)(3)) to determine whether 
        the individual is to be subject to an increase in the monthly 
        part B premium under section 1839(h) for such following 
        calendar year.
            ``(2) Special rule for first year of coverage.--For the 
        first year in which an individual is enrolled under part B, the 
        individual shall submit to the Secretary (at such time and in 
        such form and manner as the Secretary may require, in 
        consultation with the Secretary of the Treasury) an estimate of 
        the individual's modified adjusted gross income anticipated for 
        the taxable year ending with December 31 of such year, to be 
        used to determine whether the individual is to be subject to an 
        increase in the monthly part B premium under section 1839(h) 
        for such year.
    ``(b) Special Rule for 1996.--Not later than 60 days after the date 
of the enactment of this section, each individual described in 
subsection (a) shall submit to the Secretary an estimate of the 
individual's modified adjusted gross income for the taxable year ending 
December 1995, to be used to determine (subject to section 1839(h)(3)) 
whether the individual is to be subject to an increase in the monthly 
part B premium under section 1839(h) during 1996.
    ``(c) Modified Adjusted Gross Income Defined.--In subsection (a), 
the term `modified adjusted gross income' means, with respect to an 
individual for a taxable year, the individual's adjusted gross income 
under the Internal Revenue Code of 1986, determined without regard to 
sections 931 or 933 of such Code.''.
    (c) Disclosure of Certain Tax Information by Secretary of 
Treasury.--
            (1) In general.--Subsection (l) of section 6103 of the 
        Internal Revenue Code of 1986 (relating to confidentiality and 
        disclosure of returns and return information) is amended by 
        adding at the end thereof the following new paragraph:
            ``(14) Disclosure of return information to means-test 
        medicare.--
                    ``(A) In general.--The Secretary shall, upon 
                written request from the Administrator of the Health 
                Care Financing Administration, disclose to the officers 
                and employees of such Administration return information 
                necessary to determine the modified adjusted gross 
                income (as defined in section 1894(c) of the Social 
                Security Act) of any medicare beneficiary (as defined 
                in paragraph (12)(E)), to be used to determine whether 
                the beneficiary is to be subject to an increase in the 
                monthly part B premium under section 1839(g) of such 
                Act.
                    ``(B) Restriction on use of disclosed 
                information.--Any officer or employee of the Health 
                Care Financing Administration receiving return 
                information under subparagraph (A) shall use such 
                information only for purposes of, and to the extent 
                necessary in, establishing the modified adjusted gross 
                income (as so defined) of any medicare beneficiary (as 
                so defined).''
            (2) Conforming amendments.--Paragraphs (3)(A) and (4) of 
        section 6103(p) of such Code are each amended by striking ``or 
        (13)'' each place it appears and inserting ``(13), or (14)''.
            (3) Effective date.--The amendments made by paragraphs (1) 
        and (2) shall apply with respect to information for taxable 
        years beginning after December 31, 1995.

SEC. 15303. EXPANDED COVERAGE OF PREVENTIVE BENEFITS.

    (a) Providing Annual Screening Mammography for Women Over Age 49.--
Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is amended--
            (1) in clause (iv), by striking ``but under 65 years of 
        age,''; and
            (2) by striking clause (v).
    (b) Coverage of Screening Pap Smear and Pelvic Exams.--
            (1) Coverage of pelvic exam; increasing frequency of 
        coverage of pap smear.--Section 1861(nn) (42 U.S.C. 1395x(nn)) 
        is amended--
                    (A) in the heading, by striking ``Smear'' and 
                inserting ``Smear; Screening Pelvic Exam'';
                    (B) by striking ``(nn)'' and inserting ``(nn)(1)'';
                    (C) by striking ``3 years'' and all that follows 
                and inserting ``3 years, or during the preceding year 
                in the case of a woman described in paragraph (3).''; 
                and
                    (D) by adding at the end the following new 
                paragraphs:
    ``(2) The term `screening pelvic exam' means an pelvic examination 
provided to a woman if the woman involved has not had such an 
examination during the preceding 3 years, or during the preceding year 
in the case of a woman described in paragraph (3), and includes a 
clinical breast examination.
    ``(3) A woman described in this paragraph is a woman who--
            ``(A) is of childbearing age and has not had a test 
        described in this subsection during each of the preceding 3 
        years that did not indicate the presence of cervical cancer; or
            ``(B) is at high risk of developing cervical cancer (as 
        determined pursuant to factors identified by the Secretary).''.
            (2) Waiver of deductible.--The first sentence of section 
        1833(b) (42 U.S.C. 1395l(b)), as amended by subsection (a)(2), 
        is amended--
                    (A) by striking ``and (5)'' and inserting ``(5)''; 
                and
                    (B) by striking the period at the end and inserting 
                the following: ``, and (6) such deductible shall not 
                apply with respect to screening pap smear and screening 
                pelvic exam (as described in section 1861(nn)).''.
            (3) Conforming amendments.--(A) Section 1861(s)(14) (42 
        U.S.C. 1395x(s)(14)) is amended by inserting ``and screening 
        pelvic exam'' after ``screening pap smear''.
            (B) Section 1862(a)(1)(F) (42 U.S.C. 1395y(a)(1)(F)) is 
        amended by inserting ``and screening pelvic exam'' after 
        ``screening pap smear''.
    (c) Coverage of Colorectal Screening.--
            (1) In general.--Section 1834 (42 U.S.C. 1395m) is amended 
        by inserting after subsection (c) the following new subsection:
    ``(d) Frequency and Payment Limits for Screening Fecal-Occult Blood 
Tests, Screening Flexible Sigmoidoscopies, and Screening Colonoscopy.--
            ``(1) Frequency limits for screening fecal-occult blood 
        tests.--Subject to revision by the Secretary under paragraph 
        (4), no payment may be made under this part for a screening 
        fecal-occult blood test provided to an individual for the 
        purpose of early detection of colon cancer if the test is 
        performed--
                    ``(A) in the case of an individual under 65 years 
                of age, more frequently than is provided in a 
                periodicity schedule established by the Secretary for 
                purposes of this subparagraph; or
                    ``(B) in the case of any other individual, within 
                the 11 months following the month in which a previous 
                screening fecal-occult blood test was performed.
            ``(2) Screening flexible sigmoidoscopies.--
                    ``(A) Payment amount.--The Secretary shall 
                establish a payment amount under section 1848 with 
                respect to screening flexible sigmoidoscopies provided 
                for the purpose of early detection of colon cancer that 
                is consistent with payment amounts under such section 
                for similar or related services, except that such 
                payment amount shall be established without regard to 
                subsection (a)(2)(A) of such section.
                    ``(B) Frequency limits.--Subject to revision by the 
                Secretary under paragraph (4), no payment may be made 
                under this part for a screening flexible sigmoidoscopy 
                provided to an individual for the purpose of early 
                detection of colon cancer if the procedure is 
                performed--
                            ``(i) in the case of an individual under 65 
                        years of age, more frequently than is provided 
                        in a periodicity schedule established by the 
                        Secretary for purposes of this subparagraph; or
                            ``(ii) in the case of any other individual, 
                        within the 59 months following the month in 
                        which a previous screening flexible 
                        sigmoidoscopy was performed.
            ``(3) Screening colonoscopy for individuals at high risk 
        for colorectal cancer.--
                    ``(A) Payment amount.--The Secretary shall 
                establish a payment amount under section 1848 with 
                respect to screening colonoscopy for individuals at 
                high risk for colorectal cancer (as determined in 
                accordance with criteria established by the Secretary) 
                provided for the purpose of early detection of colon 
                cancer that is consistent with payment amounts under 
                such section for similar or related services, except 
                that such payment amount shall be established without 
                regard to subsection (a)(2)(A) of such section.
                    ``(B) Frequency limit.--Subject to revision by the 
                Secretary under paragraph (4), no payment may be made 
                under this part for a screening colonoscopy for 
                individuals at high risk for colorectal cancer provided 
                to an individual for the purpose of early detection of 
                colon cancer if the procedure is performed within the 
                47 months following the month in which a previous 
                screening colonoscopy was performed.
                    ``(C) Factors considered in establishing criteria 
                for determining individuals at high risk.--In 
                establishing criteria for determining whether an 
                individual is at high risk for colorectal cancer for 
                purposes of this paragraph, the Secretary shall take 
                into consideration family history, prior experience of 
                cancer, a history of chronic digestive disease 
                condition, and the presence of any appropriate 
                recognized gene markers for colorectal cancer.
            ``(4) Revision of frequency.--
                    ``(A) Review.--The Secretary shall review 
                periodically the appropriate frequency for performing 
                screening fecal-occult blood tests, screening flexible 
                sigmoidoscopies, and screening colonoscopy based on age 
                and such other factors as the Secretary believes to be 
                pertinent.
                    ``(B) Revision of frequency.--The Secretary, taking 
                into consideration the review made under clause (i), 
                may revise from time to time the frequency with which 
                such tests and procedures may be paid for under this 
                subsection.''.
            (2) Conforming amendments.--(A) Paragraphs (1)(D) and 
        (2)(D) of section 1833(a) (42 U.S.C. 1395l(a)) are each amended 
        by striking ``subsection (h)(1),'' and inserting ``subsection 
        (h)(1) or section 1834(d)(1),''.
            (B) Clauses (i) and (ii) of section 1848(a)(2)(A) (42 
        U.S.C. 1395w-4(a)(2)(A)) are each amended by striking ``a 
        service'' and inserting ``a service (other than a screening 
        flexible sigmoidoscopy provided to an individual for the 
        purpose of early detection of colon cancer or a screening 
        colonoscopy provided to an individual at high risk for 
        colorectal cancer for the purpose of early detection of colon 
        cancer)''.
            (C) Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
                    (i) in paragraph (1)--
                            (I) in subparagraph (E), by striking 
                        ``and'' at the end;
                            (II) in subparagraph (F), by striking the 
                        semicolon at the end and inserting ``, and''; 
                        and
                            (III) by adding at the end the following 
                        new subparagraph:
            ``(G) in the case of screening fecal-occult blood tests, 
        screening flexible sigmoidoscopies, and screening colonoscopy 
        provided for the purpose of early detection of colon cancer, 
        which are performed more frequently than is covered under 
        section 1834(d);''; and
                    (ii) in paragraph (7), by striking ``paragraph 
                (1)(B) or under paragraph (1)(F)'' and inserting 
                ``subparagraphs (B), (F), or (G) of paragraph (1)''.
    (d) Prostate Cancer Screening Tests.--
            (1) In general.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) 
        is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (N) and subparagraph (O); and
                    (B) by inserting after subparagraph (O) the 
                following new subparagraph:
            ``(P) prostate cancer screening tests (as defined in 
        subsection (oo)); and''.
            (2) Tests described.--Section 1861 (42 U.S.C. 1395x) is 
        amended by adding at the end the following new subsection:

                   ``Prostate Cancer Screening Tests

    ``(oo) The term `prostate cancer screening test' means a test that 
consists of a digital rectal examination or a prostate-specific antigen 
blood test (or both) provided for the purpose of early detection of 
prostate cancer to a man over 40 years of age who has not had such a 
test during the preceding year.''.
            (3) Payment for prostate-specific antigen blood test under 
        clinical diagnostic laboratory test fee schedules.--Section 
        1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is amended by 
        inserting after ``laboratory tests'' the following: 
        ``(including prostate cancer screening tests under section 
        1861(oo) consisting of prostate-specific antigen blood 
        tests)''.
            (4) Conforming amendment.--Section 1862(a) (42 U.S.C. 
        1395y(a)), as amended by subsection (c)(3)(C), is amended--
                    (A) in paragraph (1)--
                            (i) in subparagraph (F), by striking 
                        ``and'' at the end,
                            (ii) in subparagraph (G), by striking the 
                        semicolon at the end and inserting ``, and'', 
                        and
                            (iii) by adding at the end the following 
                        new subparagraph:
            ``(H) in the case of prostate cancer screening test (as 
        defined in section 1861(oo)) provided for the purpose of early 
        detection of prostate cancer, which are performed more 
        frequently than is covered under such section;''; and
                    (B) in paragraph (7), by striking ``or (G)'' and 
                inserting ``(G), or (H)''.
    (e) Diabetes Screening Benefits.--
            (1) Diabetes outpatient self-management training 
        services.--
                    (A) In general.--Section 1861(s)(2) (42 U.S.C. 
                1395x(s)(2)), as amended by subsection (d)(1), is 
                amended--
                            (i) by striking ``and'' at the end of 
                        subparagraph (N);
                            (ii) by striking ``and'' at the end of 
                        subparagraph (O); and
                            (iii) by inserting after subparagraph (O) 
                        the following new subparagraph:
            ``(P) diabetes outpatient self-management training services 
        (as defined in subsection (pp)); and''.
                    (B) Definition.--Section 1861 (42 U.S.C. 1395x), as 
                amended by subsection (d)(2), is amended by adding at 
                the end the following new subsection:

        ``diabetes outpatient self-management training services

    ``(pp)(1) The term `diabetes outpatient self-management training 
services' means educational and training services furnished to an 
individual with diabetes by or under arrangements with a certified 
provider (as described in paragraph (2)(A)) in an outpatient setting by 
an individual or entity who meets the quality standards described in 
paragraph (2)(B), but only if the physician who is managing the 
individual's diabetic condition certifies that such services are needed 
under a comprehensive plan of care related to the individual's diabetic 
condition to provide the individual with necessary skills and knowledge 
(including skills related to the self-administration of injectable 
drugs) to participate in the management of the individual's condition.
    ``(2) In paragraph (1)--
            ``(A) a `certified provider' is an individual or entity 
        that, in addition to providing diabetes outpatient self-
        management training services, provides other items or services 
        for which payment may be made under this title; and
            ``(B) an individual or entity meets the quality standards 
        described in this paragraph if the individual or entity meets 
        quality standards established by the Secretary, except that the 
        individual or entity shall be deemed to have met such standards 
        if the individual or entity meets applicable standards 
        originally established by the National Diabetes Advisory Board 
        and subsequently revised by organizations who participated in 
        the establishment of standards by such Board, or is recognized 
        by the American Diabetes Association as meeting standards for 
        furnishing the services.''.
                    (C) Consultation with organizations in establishing 
                payment amounts for services provided by physicians.--
                In establishing payment amounts under section 1848(a) 
                of the Social Security Act for physicians' services 
                consisting of diabetes outpatient self-management 
                training services, the Secretary of Health and Human 
                Services shall consult with appropriate organizations, 
                including the American Diabetes Association, in 
                determining the relative value for such services under 
                section 1848(c)(2) of such Act.
            (2) Blood-testing strips for individuals with diabetes.--
                    (A) Including strips as durable medical 
                equipment.--Section 1861(n) (42 U.S.C. 1395x(n)) is 
                amended by striking the semicolon in the first sentence 
                and inserting the following: ``, and includes blood-
                testing strips for individuals with diabetes without 
                regard to whether the individual has Type I or Type II 
                diabetes (as determined under standards established by 
                the Secretary in consultation with the American 
                Diabetes Association);''.
            (2) Payment for strips based on methodology for inexpensive 
        and routinely purchased equipment.--Section 1834(a)(2)(A) (42 
        U.S.C. 1395m(a)(2)(A)) is amended--
                    (A) by striking ``or'' at the end of clause (ii);
                    (B) by adding ``or'' at the end of clause (iii); 
                and
                    (C) by inserting after clause (iii) the following 
                new clause:
                            ``(iv) which is a blood-testing strip for 
                        an individual with diabetes,''.
    (e) Effective Date.--The amendments made by this section shall 
apply to items and services furnished on or after January 1, 1996.

                  Subtitle E--Medicare Fraud Reduction

                                                             Subtitle E

SEC. 15401. INCREASING BENEFICIARY AWARENESS OF FRAUD AND ABUSE.

    (a) Beneficiary Outreach Efforts.--The Secretary of Health and 
Human Services (acting through the Administrator of the Health Care 
Financing Administration and the Inspector General of the Department of 
Health and Human Services) shall make ongoing efforts (through public 
service announcements, publications, and other appropriate methods) to 
alert individuals entitled to benefits under the medicare program of 
the existence of fraud and abuse committed against the program and the 
costs to the program of such fraud and abuse, and of the existence of 
the toll-free telephone line operated by the Secretary to receive 
information on fraud and abuse committed against the program.
    (b) Clarification of Requirement to Provide Explanation of Medicare 
Benefits.--The Secretary shall provide an explanation of benefits under 
the medicare program with respect to each item or service for which 
payment may be made under the program which is furnished to an 
individual, without regard to whether or not a deductible or 
coinsurance may be imposed against the individual with respect to the 
item or service.
    (c) Provider Outreach Efforts; Publication of Fraud Alerts.--
            (1) Special fraud alerts.--
                    (A) In general.--
                            (i) Request for special fraud alerts.--Any 
                        person may present, at any time, a request to 
                        the Secretary to issue and publish a special 
                        fraud alert.
                            (ii) Special fraud alert defined.--In this 
                        section, a ``special fraud alert'' is a notice 
                        which informs the public of practices which the 
                        Secretary considers to be suspect or of 
                        particular concern under the medicare program 
                        or a State health care program (as defined in 
                        section 1128(h) of the Social Security Act).
                    (B) Issuance and publication of special fraud 
                alerts.--
                            (i) Investigation.--Upon receipt of a 
                        request for a special fraud alert under 
                        subparagraph (A), the Secretary shall 
                        investigate the subject matter of the request 
                        to determine whether a special fraud alert 
                        should be issued. If appropriate, the Secretary 
                        (in consultation with the Attorney General) 
                        shall issue a special fraud alert in response 
                        to the request. All special fraud alerts issued 
                        pursuant to this subparagraph shall be 
                        published in the Federal Register.
                            (ii) Criteria for issuance.--In determining 
                        whether to issue a special fraud alert upon a 
                        request under subparagraph (A), the Secretary 
                        may consider--
                                    (I) whether and to what extent the 
                                practices that would be identified in 
                                the special fraud alert may result in 
                                any of the consequences described in 
                                subparagraph (C); and
                                    (II) the extent and frequency of 
                                the conduct that would be identified in 
                                the special fraud alert.
                    (C) Consequences described.--The consequences 
                described in this subparagraph are as follows:
                            (i) An increase or decrease in access to 
                        health care services.
                            (ii) An increase or decrease in the quality 
                        of health care services.
                            (iii) An increase or decrease in patient 
                        freedom of choice among health care providers.
                            (iv) An increase or decrease in competition 
                        among health care providers.
                            (v) An increase or decrease in the cost to 
                        health care programs of the Federal Government.
                            (vi) An increase or decrease in the 
                        potential overutilization of health care 
                        services.
                            (vii) Any other factors the Secretary deems 
                        appropriate in the interest of preventing fraud 
                        and abuse in health care programs of the 
                        Federal Government.
            (2) Publication of all hcfa fraud alerts in federal 
        register.--Each notice issued by the Health Care Financing 
        Administration which informs the public of practices which the 
        Secretary considers to be suspect or of particular concern 
        under the medicare program or a State health care program (as 
        defined in section 1128(h) of the Social Security Act) shall be 
        published in the Federal Register, without regard to whether or 
        not the notice is issued by a regional office of the Health 
        Care Financing Administration.

SEC. 15402. BENEFICIARY INCENTIVES TO REPORT FRAUD AND ABUSE.

    (a) Program to Collect Information on Fraud and Abuse.--
            (1) Establishment of program.--Not later than 3 months 
        after the date of the enactment of this Act, the Secretary 
        shall establish a program under which the Secretary shall 
        encourage individuals to report to the Secretary information on 
        individuals and entities who are engaging or who have engaged 
        in acts or omissions which constitute grounds for the 
        imposition of a sanction under section 1128, section 1128A, or 
        section 1128B of the Social Security Act, or who have otherwise 
        engaged in fraud and abuse against the medicare program.
            (2) Payment of portion of amounts collected.--If an 
        individual reports information to the Secretary under the 
        program established under paragraph (1) which serves as the 
        basis for the collection by the Secretary or the Attorney 
        General of any amount of at least $100 (other than any amount 
        paid as a penalty under section 1128B of the Social Security 
        Act), the Secretary may pay a portion of the amount collected 
        to the individual (under procedures similar to those applicable 
        under section 7623 of the Internal Revenue Code of 1986 to 
        payments to individuals providing information on violations of 
        such Code).
    (b) Program to Collect Information on Program Efficiency.--
            (1) Establishment of program.--Not later than 3 months 
        after the date of the enactment of this Act, the Secretary 
        shall establish a program under which the Secretary shall 
        encourage individuals to submit to the Secretary suggestions on 
        methods to improve the efficiency of the medicare program.
            (2) Payment of portion of program savings.--If an 
        individual submits a suggestion to the Secretary under the 
        program established under paragraph (1) which is adopted by the 
        Secretary and which results in savings to the program, the 
        Secretary may make a payment to the individual of such amount 
        as the Secretary considers appropriate.

SEC. 15403. ELIMINATION OF HOME HEALTH OVERPAYMENTS.

    (a) Requiring Billing and Payment To Be Based on Site Where Service 
Furnished.--Section 1891 (42 U.S.C. 1395bbb) is amended by adding at 
the end the following new subsection:
    ``(g) A home health agency shall submit claims for payment for home 
health services under this title only on the basis of the geographic 
location at which the service is furnished.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to services furnished during cost reporting periods beginning on 
or after October 1, 1995.

SEC. 15404. SKILLED NURSING FACILITIES.

    (a) Clarification of Treatment of Hospital Transfers.--Section 
1886(d)(5)(I) (42 U.S.C. 1395ww(d)(5)(I)) is amended by adding at the 
end the following new clause:
    ``(iii) In making adjustments under clause (i) for transfer cases, 
the Secretary shall treat as a transfer any transfer to a hospital 
(without regard to whether or not the hospital is a subsection (d) 
hospital), a unit thereof, or a skilled nursing facility.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to discharges occurring on or after October 1, 1995.

SEC. 15405. DIRECT SPENDING FOR ANTI-FRAUD ACTIVITIES UNDER MEDICARE.

    (a) Establishment of Medicare Integrity Program.--Title XVIII, as 
amended by section 15231(d) and section 15302(b), is further amended by 
adding at the end the following new section:

                      ``medicare integrity program

    ``Sec. 1895. (a) Establishment of Program.--There is hereby 
established the Medicare Integrity Program (hereafter in this section 
referred to as the `Program') under which the Secretary shall promote 
the integrity of the medicare program by entering into contracts in 
accordance with this section with eligible private entities to carry 
out the activities described in subsection (b).
    ``(b) Activities Described.--The activities described in this 
subsection are as follows:
            ``(1) Review of activities of providers of services or 
        other individuals and entities furnishing items and services 
        for which payment may be made under this title (including 
        skilled nursing facilities and home health agencies), including 
        medical and utilization review and fraud review (employing 
        similar standards, processes, and technologies used by private 
        health plans, including equipment and software technologies 
        which surpass the capability of the equipment and technologies 
        used in the review of claims under this title as of the date of 
        the enactment of this section).
            ``(2) Audit of cost reports.
            ``(3) Determinations as to whether payment should not be, 
        or should not have been, made under this title by reason of 
        section 1862(b), and recovery of payments that should not have 
        been made.
            ``(4) Education of providers of services, beneficiaries, 
        and other persons with respect to payment integrity and benefit 
        quality assurance issues.
    ``(c) Eligibility of Entities.--An entity is eligible to enter into 
a contract under the Program to carry out any of the activities 
described in subsection (b) if--
            ``(1) the entity has demonstrated capability to carry out 
        such activities;
            ``(2) in carrying out such activities, the entity agrees to 
        cooperate with the Inspector General of the Department of 
        Health and Human Services, the Attorney General of the United 
        States, and other law enforcement agencies, as appropriate, in 
        the investigation and deterrence of fraud and abuse in relation 
        to this title and in other cases arising out of such 
        activities;
            ``(3) the entity's financial holdings, interests, or 
        relationships will not interfere with its ability to perform 
        the functions to be required by the contract in an effective 
        and impartial manner; and
            ``(4) the entity meets such other requirements as the 
        Secretary may impose.
    ``(d) Process for Entering Into Contracts.--The Secretary shall 
enter into contracts under the Program in accordance with such 
procedures as the Secretary may by regulation establish, except that 
such procedures shall include the following:
            ``(1) The Secretary shall determine the appropriate number 
        of separate contracts which are necessary to carry out the 
        Program and the appropriate times at which the Secretary shall 
        enter into such contracts.
            ``(2) The provisions of section 1153(e)(1) shall apply to 
        contracts and contracting authority under this section, except 
        that competitive procedures must be used when entering into new 
        contracts under this section, or at any other time considered 
        appropriate by the Secretary.
            ``(3) A contract under this section may be renewed without 
        regard to any provision of law requiring competition if the 
        contractor has met or exceeded the performance requirements 
        established in the current contract.
    ``(e) Limitation on Contractor Liability.--The Secretary shall by 
regulation provide for the limitation of a contractor's liability for 
actions taken to carry out a contract under the Program, and such 
regulation shall, to the extent the Secretary finds appropriate, employ 
the same or comparable standards and other substantive and procedural 
provisions as are contained in section 1157.
    ``(f) Transfer of Amounts to Medicare Anti-Fraud and Abuse Trust 
Fund.--For each fiscal year, the Secretary shall transfer from the 
Federal Hospital Insurance Trust Fund and the Federal Supplementary 
Medical Insurance Trust Fund to the Medicare Anti-Fraud and Abuse Trust 
Fund under subsection (g) such amounts as are necessary to carry out 
the activities described in subsection (b). Such transfer shall be in 
an allocation as reasonably reflects the proportion of such 
expenditures associated with part A and part B.
    ``(g) Medicare Anti-Fraud and Abuse Trust Fund.--
            ``(1) Establishment.--
                    ``(A) In general.--There is hereby established in 
                the Treasury of the United States the Anti-Fraud and 
                Abuse Trust Fund (hereafter in this subsection referred 
                to as the `Trust Fund'). The Trust Fund shall consist 
                of such gifts and bequests as may be made as provided 
                in subparagraph (B) and such amounts as may be 
                deposited in the Trust Fund as provided in subsection 
                (f).
                    ``(B) Authorization to accept gifts and bequests.--
                The Trust Fund is authorized to accept on behalf of the 
                United States money gifts and bequests made 
                unconditionally to the Trust Fund, for the benefit of 
                the Trust Fund or any activity financed through the 
                Trust Fund.
            ``(2) Investment.--
                    ``(A) In general.--The Secretary of the Treasury 
                shall invest such amounts of the Fund as such Secretary 
                determines are not required to meet current withdrawals 
                from the Fund in government account serial securities.
                    ``(B) Use of income.--Any interest derived from 
                investments under subparagraph (A) shall be credited to 
                the Fund.
            ``(3) Direct appropriation of funds to carry out program.--
                    ``(A) In general.--There are appropriated from the 
                Trust Fund for each fiscal year such amounts as are 
                necessary to carry out the Medicare Integrity Program 
                under this section, subject to subparagraph (B).
                    ``(B) Amounts specified.--The amount appropriated 
                under subparagraph (A) for a fiscal year is as follows:
                            ``(i) For fiscal year 1996, such amount 
                        shall be not less than $430,000,000 and not 
                        more than $440,000,000.
                            ``(ii) For fiscal year 1997, such amount 
                        shall be not less than $490,000,000 and not 
                        more than $500,000,000.
                            ``(iii) For fiscal year 1998, such amount 
                        shall be not less than $550,000,000 and not 
                        more than $560,000,000.
                            ``(iv) For fiscal year 1999, such amount 
                        shall be not less than $620,000,000 and not 
                        more than $630,000,000.
                            ``(v) For fiscal year 2000, such amount 
                        shall be not less than $670,000,000 and not 
                        more than $680,000,000.
                            ``(vi) For fiscal year 2001, such amount 
                        shall be not less than $690,000,000 and not 
                        more than $700,000,000.
                            ``(vii) For fiscal year 2002, such amount 
                        shall be not less than $710,000,000 and not 
                        more than $720,000,000.
            ``(4) Annual report.--The Secretary shall submit an annual 
        report to Congress on the amount of revenue which is generated 
        and disbursed by the Trust Fund in each fiscal year.''.
    (b) Elimination of FI and Carrier Responsibility for Carrying out 
Activities Subject to Program.--
            (1) Responsibilities of fiscal intermediaries under part 
        a.--Section 1816 (42 U.S.C. 1395h) is amended by adding at the 
        end the following new subsection:
    ``(l) No agency or organization may carry out (or receive payment 
for carrying out) any activity pursuant to an agreement under this 
section to the extent that the activity is carried out pursuant to a 
contract under the Medicare Integrity Program under section 1895.''.
            (2) Responsibilities of carriers under part b.--Section 
        1842(c) (42 U.S.C. 1395u(c)) is amended by adding at the end 
        the following new paragraph:
    ``(6) No carrier may carry out (or receive payment for carrying 
out) any activity pursuant to a contract under this subsection to the 
extent that the activity is carried out pursuant to a contract under 
the Medicare Integrity Program under section 1895.''.
    (c) Direct Spending for Medicare-Related Activities of Inspector 
General.--Section 1895, as added by subsection (a), is amended by 
adding at the end the following new subsection:
    ``(h) Direct Spending for Medicare-Related Activities of Inspector 
General.--
            ``(1) In general.--There are appropriated from the Federal 
        Hospital Insurance Trust Fund and the Federal Supplementary 
        Medical Insurance Trust Fund to the Inspector General of the 
        Department of Health and Human Services for each fiscal year 
        such amounts as are necessary to enable the Inspector General 
        to carry out activities relating to the medicare program (as 
        described in paragraph (2)), subject to paragraph (3).
            ``(2) Activities described.--The activities described in 
        this paragraph are as follows:
                    ``(A) Prosecuting medicare-related matters through 
                criminal, civil, and administrative proceedings.
                    ``(B) Conducting investigations relating to the 
                medicare program.
                    ``(C) Performing financial and performance audits 
                of programs and operations relating to the medicare 
                program.
                    ``(D) Performing inspections and other evaluations 
                relating to the medicare program.
                    ``(E) Conducting provider and conumer education 
                activities regarding the requirements of this title.
            ``(3) Amounts specified.--The amount appropriated under 
        paragraph (1) for a fiscal year is as follows:
                    ``(A) For fiscal year 1996, such amount shall be 
                $130,000,000.
                    ``(B) For fiscal year 1997, such amount shall be 
                $181,000,000.
                    ``(C) For fiscal year 1998, such amount shall be 
                $204,000,000.
                    ``(D) For each subsequent fiscal year, the amount 
                appropriated for the previous fiscal year, increased by 
                the percentage increase in aggregate expenditures under 
                this title for the fiscal year involved over the 
                previous fiscal year.
            ``(4) Allocation of payments among trust funds.--The 
        appropriations made under paragraph (1) shall be in an 
        allocation as reasonably reflects the proportion of such 
        expenditures associated with part A and part B.''.

SEC. 15406. FRAUD REDUCTION DEMONSTRATION PROJECT.

    (a) In General.--Not later than July 1, 1996, the Secretary of 
Health and Human Services (in this section referred to as the 
``Secretary'') shall establish not less than three demonstration 
projects under which organizations with a contract under section 1816 
or section 1842 of the Social Security Act--
            (1) identify practitioners and providers whose patterns of 
        providing care to beneficiaries enrolled under title XVIII of 
        the Social Security Act are consistently outside the norm for 
        other practitioners or providers of the same category, class, 
        or type, and
            (2) experiment with ways of identifying fraudulent claims 
        submitted to the program established under such title before 
        they are paid.
    (b) Duration of Projects.--Each project established under 
subsection (a) shall last for at least 18 months and shall focus on 
those categories, classes, or types of providers and practitioners that 
have been identified by the Inspector General of the Department of 
Health and Human Services as having a high incidence of fraud and 
abuse.
    (c) Report.--Not later than July 1, 1997, the Secretary shall 
report to the Congress on the demonstration projects established under 
subsection (a), and shall include in the report an assessment of the 
effectiveness of, and any recommended legislative changes based on, the 
projects.

SEC. 15407. REPORT ON COMPETITIVE PRICING.

    Not later than 1 year after the date of the enactment of this Act, 
the Secretary of Health and Human Services (acting through the 
Administrator of the Health Care Financing Administration) shall submit 
to Congress a report recommending legislative changes to the medicare 
program to enable the prices paid for items and services under the 
medicare program to be established on a more competitive basis.

              Subtitle F--Improving Access to Health Care

         PART 1--IMPROVING ACCESS TO HEALTH CARE IN RURAL AREAS

                                                     Subtitle F, Part 1

SEC. 15501. COMMUNITY RURAL HEALTH NETWORK GRANTS.

    (a) Assistance for Development of Access Plans for Chronically 
Underserved Areas.--
            (1) Availability of financial assistance to implement 
        action plans to increase access.--
                    (A) In general.--The Secretary shall provide grants 
                (in amounts determined in accordance with subparagraph 
                (C)) over a 3-year period to an eligible State for the 
                development of plans to increase access to health care 
                services during such period for residents of areas in 
                the State that are designated as chronically 
                underserved areas in accordance with paragraph (2).
                    (B) Eligibility requirements.--A State is eligible 
                to receive grants under this section if the State 
                submits to the Secretary (at such time and in such form 
                as the Secretary may require) assurances that the State 
                has developed (or is in the process of developing) a 
                plan to increase the access of residents of a 
                chronically underserved area to health care services 
                that meets the requirements of paragraph (3), together 
                with such other information and assurances as the 
                Secretary may require.
                    (C) Amount of assistance.--
                            (i) In general.--Subject to clause (ii), 
                        the amount of assistance provided to a State 
                        under this subsection with respect to any plan 
                        during a 3-year period shall be equal to--
                                    (I) for the first year of the 
                                period, an amount equal to 100 percent 
                                of the amounts expended by the State 
                                during the year to implement the plan 
                                described in subparagraph (A) (as 
                                reported to the Secretary in accordance 
                                with such requirements as the Secretary 
                                may impose);
                                    (II) for the second year of the 
                                period, an amount equal to 50 percent 
                                of the amounts expended by the State 
                                during the year to implement the plan; 
                                and
                                    (III) for the third year of the 
                                period, an amount equal to 33 percent 
                                of the amounts expended by the State 
                                during the year to implement the plan.
                            (ii) Aggregate per plan limit.--The amount 
                        of assistance provided to a State under this 
                        paragraph with respect to any plan may not 
                        exceed $100,000 during any year of the 3-year 
                        period for which the State receives assistance.
            (2) Designation of areas.--
                    (A) Designation by governor.--In accordance with 
                the guidelines developed under subparagraph (B), the 
                Governor of a State may designate an area in the State 
                as a chronically underserved area for purposes of this 
                section upon the request of a local official of the 
                area or upon the Governor's initiative.
                    (B) Guidelines for designation.--
                            (i) Development by secretary.--Not later 
                        than 1 year after the date of the enactment of 
                        this Act, the Secretary shall develop 
                        guidelines for the designation of areas as 
                        chronically underserved areas under this 
                        subsection.
                            (ii) Factors considered in development of 
                        guidelines.--In developing guidelines under 
                        subparagraph (A), the Secretary shall consider 
                        the following factors:
                                    (I) Whether the area (or a 
                                significant portion of the area)--
                                            (aa) is designated as a 
                                        health professional shortage 
                                        area (under section 332(a) of 
                                        the Public Health Service Act), 
                                        or meets the criteria for 
                                        designation as such an area; or
                                            (bb) was previously 
                                        designated as such an area or 
                                        previously met such criteria 
                                        for an extended period prior to 
                                        the designation of the area 
                                        under this subsection (in 
                                        accordance with criteria 
                                        established by the Secretary).
                                    (II) The availability and adequacy 
                                of health care providers and facilities 
                                for residents of the area.
                                    (III) The extent to which the 
                                availability of assistance under other 
                                Federal and State programs has failed 
                                to alleviate the lack of access to 
                                health care services for residents of 
                                the area.
                                    (IV) The percentage of residents of 
                                the area whose income is at or below 
                                the poverty level.
                                    (V) The percentage of residents of 
                                the area who are age 65 or older.
                                    (VI) The existence of cultural or 
                                geographic barriers to access to health 
                                care services in the area, including 
                                weather conditions.
                    (C) Review by secretary.--No designation under 
                subparagraph (A) shall take effect under this 
                subsection unless the Secretary--
                            (i) has been notified of the proposed 
                        designation; and
                            (ii) has not, within 60 days after the date 
                        of receipt of the notice, disapproved the 
                        designation.
                    (D) Period of designation.--A designation under 
                this subsection shall be effective during a period 
                specified by the Governor of not longer than 3 years. 
                The Governor may extend the designation for additional 
                3-year periods, except that a State may not receive 
                assistance under paragraph (1)(C) for amounts expended 
                during any such additional periods.
            (3) Requirements for state access plans.--A State plan to 
        increase the access of residents of chronically underserved 
        areas to health care services meets the requirements of this 
        subsection if the Secretary finds that the plan was developed 
        with the participation of health care providers and facilities 
        and residents of the area that is the subject of the plan, 
        together with such other requirements as the Secretary may 
        impose.
            (4) Authorization of appropriations.--There are authorized 
        to be appropriated for assistance under this subsection 
        $10,000,000 for each of the first 3 fiscal years beginning 
        after the date on which the Secretary develops guidelines for 
        the designation of areas as chronically underserved areas under 
        paragraph (2)(B).
    (b) Technical Assistance Grants for Networks.--
            (1) In general.--The Secretary shall make funds available 
        under this subsection to provide technical assistance 
        (including information regarding eligibility for other Federal 
        programs) and advice for entities described in paragraph (2) 
        seeking to establish or enhance a community rural health 
        network in an underserved rural area.
            (2) Entities eligible to receive funds.--The following 
        entities are eligible to receive funds for technical assistance 
        under this subsection:
                    (A) An entity receiving a grant under subsection 
                (c).
                    (B) A State or unit of local government.
                    (C) An entity providing health care services 
                (including health professional education services) in 
                the area involved.
            (3) Use of funds.--
                    (A) In general.--Funds made available under this 
                subsection may be used--
                            (i) for planning a community rural health 
                        network and the submission of the plan for the 
                        network to the Secretary under subsection 
                        (c)(3) (subject to the limitation described in 
                        subparagraph (B));
                            (ii) to provide assistance in conducting 
                        community-based needs and prioritization, 
                        identifying existing regional health resources, 
                        and developing networks, utilizing existing 
                        local providers and facilities where 
                        appropriate;
                            (iii) to provide advice on obtaining the 
                        proper balance of primary and secondary 
                        facilities for the population served by the 
                        network;
                            (iv) to provide assistance in coordinating 
                        arrangements for tertiary care;
                            (v) to provide assistance in recruitment 
                        and retention of health care professionals;
                            (vi) to provide assistance in coordinating 
                        the delivery of emergency services with the 
                        provision of other health care services in the 
                        area served by the network;
                            (vii) to provide assistance in coordinating 
                        arrangements for mental health and substance 
                        abuse treatment services; and
                            (viii) to provide information regarding the 
                        area or proposed network's eligibility for 
                        Federal and State assistance for health care-
                        related activities, together with information 
                        on funds available through private sources.
                    (B) Limitation on amount available for development 
                of network.--The amount of financial assistance 
                available for activities described in subparagraph (A) 
                may not exceed $50,000 and may not be available for a 
                period of time exceeding 1 year.
            (4) Use of rural health offices.--In carrying out this 
        subsection with respect to entities in rural areas, the 
        Secretary shall make funds available through the State offices 
        of rural health or through appropriate entities designated by 
        such offices.
            (5) Authorization of appropriations.--There are authorized 
        to be appropriated $10,000,000 for each of fiscal years 1996 
        through 2000 to carry out this section. Amounts appropriated 
        under this subsection shall be available until expended.
    (c) Development Grants for Networks.--
            (1) In general.--The Secretary shall provide financial 
        assistance to eligible entities for the purpose of providing 
        for the development and implementation of community rural 
        health networks (as defined in subsection (d)). In providing 
        such assistance, the Secretary shall give priority to eligible 
        entities that will carry out such purpose in States that have 
        developed a plan under subsection (a).
            (2) Eligible entities.--
                    (A) In general.--An entity is eligible to receive 
                financial assistance under this subsection only if the 
                entity meets the requirements of clauses (i) through 
                (iii) as follows:
                            (i) The entity--
                                    (I) is based in a rural area;
                                    (II) is described in subparagraph 
                                (B), (C), or (D) of subsection 
                                (b)(2);or
                                    (III) is a hospital-affiliated 
                                primary care center (as defined in 
                                subsection (d)).
                            (ii) The entity is undertaking to develop 
                        and implement a community rural health network 
                        in one or more underserved rural areas (as 
                        defined in subsection (d)) with the active 
                        participation of at least 3 health care 
                        providers or facilities in the area.
                            (iii) The entity has consulted with the 
                        local governments of the area to be served by 
                        the network and with individuals who reside in 
                        the area.
                    (B) Coordination with providers outside of area 
                permitted.--Nothing in this subsection shall be 
                construed as preventing an entity that coordinates the 
                delivery of services in an underserved rural area with 
                an entity outside the area from qualifying for 
                financial assistance under this section, or as 
                preventing an entity consisting of a consortia of 
                members located in adjoining States from qualifying for 
                such assistance.
                    (C) Permitting entities not receiving funding for 
                development of plan to receive funding for 
                implementation.--An entity that is eligible to receive 
                financial assistance under this subsection may receive 
                assistance to carry out activities described in 
                paragraph (3)(A)(ii) notwithstanding that the entity 
                does not receive assistance to carry out activities 
                described in paragraph (c)(A)(i).
            (3) Use of funds.--
                    (A) In general.--Financial assistance made 
                available to eligible entities under this subsection 
                may be used only--
                            (ii) for the development of a community 
                        health network and the submission of the plan 
                        for the network to the Secretary; and
                            (ii) after the Secretary approves the plan 
                        for the network, for activities to implement 
                        the network, including (but not limited to)--
                                    (I) establishing information 
                                systems, including telecommunications,
                                    (II) recruiting health care 
                                providers,
                                    (III) providing services to enable 
                                individuals to have access to health 
                                care services, including transportation 
                                and language interpretation services 
                                (including interpretation services for 
                                the hearing-impaired), and
                                    (IV) establishing and operating a 
                                community health advisor program 
                                described in subparagraph (B).
                    (B) Community health advisor program.--
                            (i) Program described.--In subparagraph 
                        (A), a ``community health advisor program'' is 
                        a program under which community health advisors 
                        carry out the following activities:
                                    (I) Collaborating efforts with 
                                health care providers and related 
                                entities to facilitate the provision of 
                                health services and health-related 
                                social services.
                                    (II) Providing public education on 
                                health promotion and disease prevention 
                                and efforts to facilitate the use of 
                                available health services and health-
                                related social services.
                                    (III) Providing health-related 
                                counseling.
                                    (IV) Making referrals for available 
                                health services and health-related 
                                social services.
                                    (V) Improving the ability of 
                                individuals to use health services and 
                                health-related social services under 
                                Federal, State, and local programs 
                                through assisting individuals in 
                                establishing eligibility under the 
                                programs.
                                    (VI) Providing outreach services to 
                                inform the community of the 
                                availability of the services provided 
                                under the program.
                            (ii) Community health advisor defined.--In 
                        clause (i), the term ``community health 
                        advisor'' means, with respect to a community 
                        health advisor program, an individual--
                                    (I) who has demonstrated the 
                                capacity to carry out one or more of 
                                the activities carried out under the 
                                program; and
                                    (II) who, for not less than one 
                                year, has been a resident of the 
                                community in which the program is to be 
                                operated.
                    (C) Limitations on activities funded.--Financial 
                assistance made available under this subsection may not 
                be used for any of the following:
                            (i) For a telecommunications system unless 
                        such system is coordinated with, and does not 
                        duplicate, a system existing in the area.
                            (ii) For construction or remodeling of 
                        health care facilities.
                    (D) Limitation on amount available for development 
                of network.--The amount of financial assistance 
                available for activities described in subparagraph 
                (A)(i) may not exceed $50,000 and may not be made 
                available for a period of time exceeding 1 year.
            (4) Application.--
                    (A) In general.--No financial assistance shall be 
                provided under this section to an entity unless the 
                entity has submitted to the Secretary, in a time and 
                manner specified by the Secretary, and had approved by 
                the Secretary an application.
                    (B) Information to be included.--Each such 
                application shall include--
                            (i) a description of the community rural 
                        health network, including service area and 
                        capacity, and
                            (ii) a description of how the proposed 
                        network will utilize existing health care 
                        facilities in a manner that avoids unnecessary 
                        duplication.
            (5) Authorization of appropriations.--
                    (A) In general.--There are authorized to be 
                appropriated $100,000,000 for each of fiscal years 1996 
                through 2000 to carry out this subsection. Amounts 
                appropriated under this subsection shall be available 
                until expended.
                    (B) Annual limit on assistance to grantee.--The 
                amount of financial assistance provided to an entity 
                under this subsection during a year may not exceed 
                $250,000.
    (d) Definitions.--
            (1) In general.--
                    (A) Community rural health network.--For purposes 
                of this section, the term ``community rural health 
                network'' means a formal cooperative arrangement 
                between participating hospitals, physicians, and other 
                health care providers which--
                            (i) is located in an underserved rural 
                        area;
                            (ii) furnishes health care services to 
                        individuals residing in the area; and
                            (iii) is governed by a board of directors 
                        selected by participating health care providers 
                        and residents of the area.
                    (B) Hospital-affiliated primary care center.--
                            (i) In general.--For purposes of this 
                        section, the term ``hospital-affiliated primary 
                        care center'' means a distinct administrative 
                        unit of a community hospital (as defined in 
                        clause (ii)) meeting the following requirement:
                                    (I) The unit is located in, or 
                                adjacent to, the hospital.
                                    (II) The unit delivers primary 
                                health services, as defined in 
                                paragraph (1) of section 330(b) of the 
                                Public Health Service Act to a 
                                catchment area determined by the 
                                hospital and approved by the Secretary.
                                    (III) The unit provides referrals 
                                to providers of supplemental health 
                                services, as defined in paragraph (2) 
                                of such section.
                                    (IV) The services of the unit are 
                                delivered through a primary care group 
                                practice (as defined in clause (iii)).
                                    (V) To the extent practicable, 
                                primary health services in the 
                                community hospital are delivered only 
                                through the unit.
                                    (VI) Qualified personnel trained in 
                                triage are placed in the unit, the 
                                emergency room, and the outpatient 
                                department to screen and direct 
                                patients to the appropriate location 
                                for care.
                                    (VII) Each patient of the unit has 
                                an identified member of the group 
                                practice responsible for continuous 
                                management of the patient, including 
                                emergency services and referrals of the 
                                patients for inpatient or outpatient 
                                services.
                                    (VIII) To the extent practicable, 
                                excess facilities and equipment in or 
                                owned by the community hospital are 
                                covered for use in the unit.
                                    (IX) The unit and the hospital 
                                avoid unnecessary duplication of 
                                facilities and equipment, except that 
                                the unit may install appropriate 
                                support equipment for routine primary 
                                health services.
                                    (X) The unit is maintained as a 
                                separate and distinct cost and revenue 
                                center for accounting purposes.
                                    (XI) The unit is operated in 
                                accordance with all of the requirements 
                                specified for community health centers 
                                in section 330(e)(3) of the Public 
                                Health Service Act (other than clause 
                                (vii).
                                    (XII) The hospital has an advisory 
                                committee that--
                                            (aa) is composed of 
                                        individuals a majority of whom 
                                        are health consumers in the 
                                        catchment area of the hospital; 
                                        and
                                            (bb) meets at least 6 times 
                                        a year to review the operations 
                                        of the primary care center and 
                                        develop recommendations to the 
                                        governing board of the hospital 
                                        about the operation of the 
                                        center and the types of 
                                        services to be provided.
                                    (XIII) The unit maintains an 
                                information program for its patients 
                                that fully discloses--
                                            (aa) the covered 
                                        professional services and 
                                        referral capabilities offered 
                                        by the unit; and
                                            (bb) the method by which 
                                        patients of the unit may 
                                        resolve grievances about 
                                        billing for covered 
                                        professional services and the 
                                        quality of such services.
                            (ii) Community hospital.--For purposes of 
                        this section, the term ``community hospital'' 
                        means a public general hospital, owned and 
                        operated by a State, county or local unit of 
                        government, or a private community hospital 
                        that--
                            (i) has less than 50 beds; and
                            (ii) primarily serves--
                                    (I) a medically underserved 
                                population, as defined in section 
                                330(b)(3) of the Public Health Service 
                                Act; or
                                    (II) a health professional shortage 
                                area, as defined in section 332(a)(1) 
                                of such Act.
                            (iii) Primary care group practice.--For 
                        purposes of this section, the term ``primary 
                        care group practice'' means any combination of 
                        3 or more primary care physicians who are--
                                    (I) organized to provide primary 
                                health services in a manner that is 
                                consistent with the needs of the 
                                population served;
                                    (II) located in, or adjacent to, 
                                the community hospital;
                                    (III) who have admitting privileges 
                                at the community hospital; and
                                    (IV)(aa) who are salaried by the 
                                hospital such that a majority of the 
                                members of the group practice is full 
                                time in the primary care center; or
                                    (bb) who are organized into a legal 
                                entity (partnership, corporation, or 
                                professional association) that has a 
                                contract approved by the Secretary with 
                                the community hospital to provide 
                                primary health services.
            (2) Other definitions.--For purposes of this section:
                    (A) The term ``rural area'' has the meaning given 
                such term in section 1886(d)(2)(D) of the Social 
                Security Act.
                    (B) The term ``Secretary'' means the Secretary of 
                Health and Human Services.
                    (C) The term ``State'' means each of the several 
                States, the District of Columbia, Puerto Rico, the 
                Virgin Islands, Guam, the Northern Mariana Islands, and 
                American Samoa.
                    (D) The term ``underserved rural area'' means a 
                rural area designated--
                            (i) as a health professional shortage area 
                        under section 332(a) of the Public Health 
                        Service Act; or
                            (ii) as a chronically underserved area 
                        under subsection (a).

SEC. 15502. PROVIDER INCENTIVES.

    (a) Additional Payments Under Medicare for Physicians' Services 
Furnished in Shortage Areas.--
            (1) Increase in amount of additional payment.--Section 
        1833(m) (42 U.S.C. 1395l(m)) is amended by striking ``10 
        percent'' and inserting ``20 percent''.
            (2) Restriction to primary care services.--Section 1833(m) 
        (42 U.S.C. 1395l(m)) is amended by inserting after 
        ``physicians' services'' the following: ``consisting of primary 
        care services (as defined in section 1842(i)(4))''.
            (3) Extension of payment for former shortage areas.--
                    (A) In general.--Section 1833(m) (42 U.S.C. 
                1395l(m)) is amended by striking ``area,'' and 
                inserting ``area (or, in the case of an area for which 
                the designation as a health professional shortage area 
                under such section is withdrawn, in the case of 
                physicians' services furnished to such an individual 
                during the 3-year period beginning on the effective 
                date of the withdrawal of such designation),''.
                    (B) Effective date.--The amendment made by 
                subparagraph (A) shall apply to physicians' services 
                furnished in an area for which the designation as a 
                health professional shortage area under section 
332(a)(1)(A) of the Public Health Service Act is withdrawn on or after 
January 1, 1996.
            (4) Requiring carriers to report on services provided.--
        Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (I); and
                    (B) by inserting after subparagraph (I) the 
                following new subparagraph:
            ``(J) will provide information to the Secretary not later 
        than 30 days after the end of the contract year on the types of 
        providers to whom the carrier made additional payments during 
        the year for certain physicians' services pursuant to section 
        1833(m), together with a description of the services furnished 
        by such providers during the year; and''.
            (5) Study.--
                    (A) In general.--The Secretary of Health and Human 
                Services shall conduct a study analyzing the 
                effectiveness of the provision of additional payments 
                under part B of the medicare program for physicians' 
                services provided in health professional shortage areas 
                in recruiting and retaining physicians to provide 
                services in such areas.
                    (B) Report.--Not later than 1 year after the date 
                of the enactment of this Act, the Secretary shall 
                submit to Congress a report on the study conducted 
                under subparagraph (A), and shall include in the report 
                such recommendations as the Secretary considers 
                appropriate.
            (6) Effective date.--The amendments made by paragraphs (1), 
        (2), and (4) shall apply to physicians' services furnished on 
        or after January 1, 1996.
    (b) Development of Model State Scope of Practice Law.--
            (1) In general.--The Secretary of Health and Human Services 
        shall develop and publish a model law that may be adopted by 
        States to increase the access of individuals residing in 
        underserved rural areas to health care services by expanding 
        the services which non-physician health care professionals may 
        provide in such areas.
            (2) Deadline.--The Secretary shall publish the model law 
        developed under paragraph (1) not later than 1 year after the 
        date of the enactment of this Act.

SEC. 8503. MODIFICATIONS TO THE NATIONAL HEALTH SERVICE CORPS.

    (a) National Health Service Corps Loan Repayments Excluded From 
Gross Income.--
            (1) In general.--Part III of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 (relating to items 
        specifically excluded from gross income) is amended by 
        redesignating section 137 as section 138 and by inserting after 
        section 136 the following new section:

``SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS.

    ``(a) General Rule.--Gross income shall not include any qualified 
loan repayment.
    ``(b) Qualified Loan Repayment.--For purposes of this section, the 
term `qualified loan repayment' means any payment made on behalf of the 
taxpayer by the National Health Service Corps Loan Repayment Program 
under section 338B(g) of the Public Health Service Act.''.
            (2) Conforming amendment.--Paragraph (3) of section 338B(g) 
        of the Public Health Service Act is amended by striking 
        ``Federal, State, or local'' and inserting ``State or local''.
            (3) Clerical amendment.--The table of sections for part III 
        of subchapter B of chapter 1 of the Internal Revenue Code of 
        1986 is amended by striking the item relating to section 137 
        and inserting the following:

                              ``Sec. 137. National Health Service Corps 
                                        loan repayments.
                              ``Sec. 138. Cross references to other 
                                        Acts.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to payments made under section 338B(g) of the 
        Public Health Service Act after the date of the enactment of 
        this Act.
    (b) Study Regarding Designation as Health Professional Shortage 
Area; Allocation of Corps Members Among Shortage Areas.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this subsection referred to as the ``Secretary'') shall 
        conduct a study for the purpose of determining the following:
                    (A) With respect to the designation of health 
                professional shortage areas under subpart II of part D 
                of title III of the Public Health Service Act--
                            (i) whether the statutory and 
                        administrative criteria for the designation of 
                        such areas should be modified to ensure that 
                        all areas with significant shortages of health 
                        professionals receive such a designation; and
                            (ii) if so, the recommendations of the 
                        Secretary for modifications in the criteria.
                    (B) With respect to the assignment of members of 
                the National Health Service Corps under such subpart--
                            (i) whether the statutory and 
                        administrative criteria for the assignment of 
                        Corps members should be modified in order to 
                        ensure that the members are equitably allocated 
                        among health professional shortage areas; and
                            (ii) if so, the recommendations of the 
                        Secretary for modifications in the criteria.
            (2) Report.--Not later than May 1, 1996, the Secretary 
        shall complete the study required in paragraph (1) and submit 
        to the Congress a report describing the findings made in the 
        study.
    (c) Other Provisions Regarding National Health Service Corps.--
            (1) Priority in assignment of corps members; community 
        rural health networks.--Section 333A(a)(1)(B) of the Public 
        Health Service Act (42 U.S.C. 254f-1(a)(1)(B)) is amended--
                    (A) in clause (iii), by striking ``and'' after the 
                semicolon at the end;
                    (B) in clause (iv), by adding ``and'' after the 
                semicolon at the end; and
                    (B) by adding at the end the following clause:
                            ``(v) is a participant in a community rural 
                        health network, as defined in section 15501 of 
                        the Medicare Preservation Act of 1995.''.
            (2) Allocation for participation of nurses in scholarship 
        program.--Section 338H(b)(2) of the Public Health Service Act 
        (42 U.S.C. 254q(b)(2)) is amended by adding at the end the 
        following subparagraph:
                    ``(C) Of the amounts appropriated under paragraph 
                (1) for fiscal year 1996 and subsequent fiscal years, 
                the Secretary shall reserve such amounts as may be 
                necessary to ensure that, of the aggregate number of 
                individuals who are participants in the Scholarship 
                Program, the total number who are being educated as 
                nurses or are serving as nurses, respectively, is 
                increased to 20 percent.''.

SEC. 15504. CREATION OF HOSPITAL-AFFILIATED PRIMARY CARE CENTERS.

    Section 330 of the Public Health Service Act (42 U.S.C. 254c) is 
amended by adding at the end the following subsection:
    ``(l) Of the amounts appropriated under subsection (g)(1)(A) for a 
fiscal year, the Secretary shall reserve not less than 10 percent, and 
not more than 20 percent, for the establishment and operation of 
hospital-affiliated primary care centers, as defined in section 15504 
of the Medicare Preservation Act of 1995.''.

SEC. 15505. ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS.

    (a) Establishment.--
            (1) In general.--Section 1861 (42 U.S.C. 1395x) is amended 
        by adding at the end the following new subsection:

  ``Rural Emergency Access Care Hospital; Rural Emergency Access Care 
                           Hospital Services

    ``(oo)(1) The term `rural emergency access care hospital' means, 
for a fiscal year, a facility with respect to which the Secretary finds 
the following:
            ``(A) The facility is located in a rural area (as defined 
        in section 1886(d)(2)(D)).
            ``(B) The facility was a hospital under this title at any 
        time during the 5-year period that ends on the date of the 
        enactment of this subsection.
            ``(C) The facility is in danger of closing due to low 
        inpatient utilization rates and operating losses, and the 
        closure of the facility would limit the access to emergency 
        services of individuals residing in the facility's service 
        area.
            ``(D) The facility has entered into (or plans to enter 
        into) an agreement with a hospital with a participation 
        agreement in effect under section 1866(a), and under such 
        agreement the hospital shall accept patients transferred to the 
        hospital from the facility and receive data from and transmit 
        data to the facility.
            ``(E) There is a practitioner who is qualified to provide 
        advanced cardiac life support services (as determined by the 
        State in which the facility is located) on-site at the facility 
        on a 24-hour basis.
            ``(F) A physician is available on-call to provide emergency 
        medical services on a 24-hour basis.
            ``(G) The facility meets such staffing requirements as 
        would apply under section 1861(e) to a hospital located in a 
        rural area, except that--
                    ``(i) the facility need not meet hospital standards 
                relating to the number of hours during a day, or days 
                during a week, in which the facility must be open, 
                except insofar as the facility is required to provide 
                emergency care on a 24-hour basis under subparagraphs 
                (E) and (F); and
                    ``(ii) the facility may provide any services 
                otherwise required to be provided by a full-time, on-
                site dietitian, pharmacist, laboratory technician, 
                medical technologist, or radiological technologist on a 
                part-time, off-site basis.
            ``(H) The facility meets the requirements applicable to 
        clinics and facilities under subparagraphs (C) through (J) of 
        paragraph (2) of section 1861(aa) and of clauses (ii) and (iv) 
        of the second sentence of such paragraph (or, in the case of 
        the requirements of subparagraph (E), (F), or (J) of such 
        paragraph, would meet the requirements if any reference in such 
        subparagraph to a `nurse practitioner' or to `nurse 
        practitioners' were deemed to be a reference to a `nurse 
        practitioner or nurse' or to `nurse practitioners or nurses'); 
        except that in determining whether a facility meets the 
        requirements of this subparagraph, subparagraphs (E) and (F) of 
        that paragraph shall be applied as if any reference to a 
        `physician' is a reference to a physician as defined in section 
        1861(r)(1).
    ``(2) The term `rural emergency access care hospital services' 
means the following services provided by a rural emergency access care 
hospital and furnished to an individual over a continuous period not to 
exceed 24 hours (except that such services may be furnished over a 
longer period in the case of an individual who is unable to leave the 
hospital because of inclement weather):
            ``(A) An appropriate medical screening examination (as 
        described in section 1867(a)).
            ``(B) Necessary stabilizing examination and treatment 
        services for an emergency medical condition and labor (as 
        described in section 1867(b)).''.
            (2) Requiring rural emergency access care hospitals to meet 
        hospital anti-dumping requirements.--Section 1867(e)(5) (42 
        U.S.C. 1395dd(e)(5)) is amended by striking ``1861(mm)(1))'' 
        and inserting ``1861(mm)(1)) and a rural emergency access care 
        hospital (as defined in section 1861(oo)(1))''.
    (b) Coverage and Payment Under Part B.--
            (1) Coverage under part b.--Section 1832(a)(2) (42 U.S.C. 
        1395k(a)(2)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (I);
                    (B) by striking the period at the end of 
                subparagraph (J) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(K) rural emergency access care hospital services 
                (as defined in section 1861(oo)(2)).''.
            (2) Payment based on payment for outpatient rural primary 
        care hospital services.--
                    (A) In general.--Section 1833(a)(6) (42 U.S.C. 
                1395l(a)(6)) is amended by striking ``services,'' and 
                inserting ``services and rural emergency access care 
                hospital services,''.
                    (B) Payment methodology described.--Section 1834(g) 
                (42 U.S.C. 1395m(g)) is amended--
                            (i) in the heading, by striking 
                        ``Services'' and inserting ``Services and Rural 
                        Emergency Access Care Hospital Services''; and
                            (ii) by adding at the end the following new 
                        sentence: ``The amount of payment for rural 
                        emergency access care hospital services 
                        provided during a year shall be determined 
                        using the applicable method provided under this 
                        subsection for determining payment for 
                        outpatient rural primary care hospital services 
                        during the year.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to fiscal years beginning on or after October 1, 1995.

SEC. 15506. MEDICAL EDUCATION.

    (a) State and Consortium Demonstration Projects.--
            (1) In general.--
                    (A) Participation of states and consortia.--The 
                Secretary shall establish and conduct a demonstration 
                project to increase the number and percentage of 
                medical students entering primary care practice 
                relative to those entering nonprimary care practice 
                under which the Secretary shall make payments in 
                accordance with paragraph (4)--
                            (i) to not more than 10 States for the 
                        purpose of testing and evaluating mechanisms to 
                        meet the goals described in subsection (b); and
                            (ii) to not more than 10 health care 
                        training consortia for the purpose of testing 
                        and evaluating mechanisms to meet such goals.
                    (B) Exclusion of consortia in participating 
                states.--A consortia may not receive payments under the 
                demonstration project under subparagraph (A)(ii) if any 
                of its members is located in a State receiving payments 
                under the project under subparagraph (A)(i).
            (2) Applications.--
                    (A) In general.--Each State and consortium desiring 
                to conduct a demonstration project under this 
                subsection shall prepare and submit to the Secretary an 
application, at such time, in such manner, and containing such 
information as the Secretary may require to assure that the State or 
consortium will meet the goals described in subsection (b). In the case 
of an application of a State, the application shall include--
                            (i) information demonstrating that the 
                        State has consulted with interested parties 
                        with respect to the project, including State 
                        medical associations, State hospital 
                        associations, and medical schools located in 
                        the State;
                            (ii) an assurance that no hospital 
                        conducting an approved medical residency 
                        training program in the State will lose more 
                        than 10 percent of such hospital's approved 
                        medical residency positions in any year as a 
                        result of the project; and
                            (iii) an explanation of a plan for 
                        evaluating the impact of the project in the 
                        State.
                    (B) Approval of applications.--A State or 
                consortium that submits an application under 
                subparagraph (A) may begin a demonstration project 
                under this subsection--
                            (i) upon approval of such application by 
                        the Secretary; or
                            (ii) at the end of the 60-day period 
                        beginning on the date such application is 
                        submitted, unless the Secretary denies the 
                        application during such period.
                    (C) Notice and comment.--A State or consortium 
                shall issue a public notice on the date it submits an 
                application under subparagraph (A) which contains a 
                general description of the proposed demonstration 
                project. Any interested party may comment on the 
                proposed demonstration project to the State or 
                consortium or the Secretary during the 30-day period 
                beginning on the date the public notice is issued.
            (3) Specific requirements for participants.--
                    (A) Requirements for states.--Each State 
                participating in the demonstration project under this 
                section shall use the payments provided under paragraph 
                (4) to test and evaluate either of the following 
                mechanisms to increase the number and percentage of 
                medical students entering primary care practice 
                relative to those entering nonprimary care practice:
                            (i) Use of alternative weighting factors.--
                                    (I) In general.--The State may make 
                                payments to hospitals in the State for 
                                direct graduate medical education costs 
                                in amounts determined under the 
                                methodology provided under section 
                                1886(h) of the Social Security Act, 
                                except that the State shall apply 
                                weighting factors that are different 
                                than the weighting factors otherwise 
                                set forth in section 1886(h)(4)(C) of 
                                the Social Security Act.
                                    (II) Use of payments for primary 
                                care residents.--In applying different 
                                weighting factors under subclause (I), 
                                the State shall ensure that the amount 
                                of payment made to hospitals for costs 
                                attributable to primary care residents 
                                shall be greater than the amount that 
                                would have been paid to hospitals for 
                                costs attributable to such residents if 
                                the State had applied the weighting 
                                factors otherwise set forth in section 
                                1886(h)(4)(C) of the Social Security 
                                Act.
                            (ii) Payments for medical education through 
                        consortium.--The State may make payments for 
                        graduate medical education costs through 
                        payments to a health care training consortium 
                        (or through any entity identified by such a 
                        consortium as appropriate for receiving 
                        payments on behalf of the consortium) that is 
                        established in the State but that is not 
                        otherwise participating in the demonstration 
                        project.
                    (B) Requirements for consortium.--
                            (i) In general.--In the case of a 
                        consortium participating in the demonstration 
                        project under this section, the Secretary shall 
                        make payments for graduate medical education 
                        costs through a health care training consortium 
                        whose members provide medical residency 
                        training (or through any entity identified by 
                        such a consortium as appropriate for receiving 
                        payments on behalf of the consortium).
                            (ii) Use of payments.--
                                    (I) In general.--Each consortium 
                                receiving payments under clause (i) 
                                shall use such funds to conduct 
                                activities which test and evaluate 
                                mechanisms to increase the number and 
                                percentage of medical students entering 
                                primary care practice relative to those 
                                entering nonprimary care practice, and 
                                may use such funds for the operation of 
                                the consortium.
                                    (II) Payments to participating 
                                programs.--The consortium shall ensure 
                                that the majority of the payments 
                                received under clause (i) are directed 
                                to consortium members for primary care 
                                residency programs, and shall designate 
                                for each resident assigned to the 
                                consortium a hospital operating an 
                                approved medical residency training 
                                program for purposes of enabling the 
                                Secretary to calculate the consortium's 
                                payment amount under the project. Such 
                                hospital shall be the hospital where 
                                the resident receives the majority of 
                                the resident's hospital-based, 
                                nonambulatory training experience.
            (4) Allocation of portion of medicare gme payments for 
        activities under project.--Notwithstanding any provision of 
        title XVIII of the Social Security Act, the following rules 
        apply with respect to each State and each health care training 
        consortium participating in the demonstration project 
        established under this subsection during a year:
                    (A) In the case of a State--
                            (i) the Secretary shall reduce the amount 
                        of each payment made to hospitals in the State 
                        during the year for direct graduate medical 
                        education costs under section 1886(h) of the 
                        Social Security Act by 3 percent; and
                            (ii) the Secretary shall pay the State an 
                        amount equal to the Secretary's estimate of the 
                        sum of the reductions made during the year 
                        under clause (i) (as adjusted by the Secretary 
                        in subsequent years for over- or under-
                        estimations in the amount estimated under this 
                        subparagraph in previous years).
                    (B) In the case of a consortium--
                            (i) the Secretary shall reduce the amount 
                        of each payment made to hospitals who are 
                        members of the consortium during the year for 
                        direct graduate medical education costs under 
                        section 1886(h) of the Social Security Act by 3 
                        percent; and
                            (ii) the Secretary shall pay the consortium 
                        an amount equal to the Secretary's estimate of 
                        the sum of the reductions made during the year 
                        under clause (i) (as adjusted by the Secretary 
                        in subsequent years for over- or under-
                        estimations in the amount estimated under this 
                        subparagraph in previous years).
            (5) Additional grant for planning and evaluation.--
                    (A) In general.--The Secretary may award grants to 
                States and consortia participating in the demonstration 
                project under this subsection for the purpose of 
                planning and evaluating such projects. A State or 
                consortia may conduct such planning and evaluation 
                activities or contract with a private entity to conduct 
                such activities. Each State and consortia desiring to 
                receive a grant under this subparagraph shall prepare 
                and submit to the Secretary an application, at such 
                time, in such manner, and containing such information 
                as the Secretary may require.
                    (B) Authorization of appropriations.--There are 
                authorized to be appropriated for grants under this 
                subparagraph $250,000 for fiscal year 1996, and 
                $100,000 for each of the fiscal years 1997 through 
                2001.
            (6) Duration.--A demonstration project under this 
        subsection shall be conducted for a period not to exceed 5 
        years. The Secretary may terminate a project if the Secretary 
        determines that the State or consortium conducting the project 
        is not in substantial compliance with the terms of the 
        application approved by the Secretary.
            (7) Evaluations and reports.--
                    (A) Evaluations.--Each State or consortium 
                participating in the demonstration project shall submit 
                to the Secretary a final evaluation within 360 days of 
                the termination of the State or consortium's 
                participation and such interim evaluations as the 
                Secretary may require.
                    (B) Reports to congress.--Not later than 360 days 
                after the first demonstration project under this 
                section begins, and annually thereafter for each year 
                in which such a project is conducted, the Secretary 
                shall submit a report to Congress which evaluates the 
                effectiveness of the State and consortium activities 
                conducted under such projects and includes any 
                legislative recommendations determined appropriate by 
                the Secretary.
            (8) Maintenance of effort.--Any funds available for the 
        activities covered by a demonstration project under this 
        section shall supplement, and shall not supplant, funds that 
        are expended for similar purposes under any State, regional, or 
        local program.
    (b) Goals for Projects.--The goals referred to in this subsection 
for a State or consortium participating in the demonstration project 
under this section are as follows:
            (1) The training of an equal number of physician and 
        nonphysician primary care providers.
            (2) The recruiting of residents for graduate medical 
        education training programs who received a portion of 
        undergraduate training in a rural area.
            (3) The allocation of not less than 50 percent of the 
        training spent in a graduate medical residency training program 
        at sites at which acute care inpatient hospital services are 
        not furnished.
            (4) The rotation of residents in approved medical residency 
        training programs among practices that serve residents of rural 
        areas.
            (5) The development of a plan under which, after a 5-year 
        transition period, not less than 50 percent of the residents 
        who begin an initial residency period in an approved medical 
        residency training program shall be primary care residents.
    (c) Definitions.--In this section:
            (1) Approved medical residency training program.--The term 
        ``approved medical residency training program'' has the meaning 
        given such term in section 1886(h)(5)(A) of the Social Security 
        Act.
            (2) Health care training consortium.--The term ``health 
        care training consortium'' means a State, regional, or local 
        entity consisting of at least one of each of the following:
                    (A) A hospital operating an approved medical 
                residency training program at which residents receive 
                training at ambulatory training sites located in rural 
                areas.
                    (B) A school of medicine or osteopathic medicine.
                    (C) A school of allied health or a program for the 
                training of physician assistants (as such terms are 
                defined in section 799 of the Public Health Service 
                Act).
                    (D) A school of nursing (as defined in section 853 
                of the Public Health Service Act).
            (3) Primary care.--The term ``primary care'' means family 
        practice, general internal medicine, general pediatrics, and 
        obstetrics and gynecology.
            (4) Resident.--The term ``resident'' has the meaning given 
        such term in section 1886(h)(5)(H) of the Social Security Act.
            (5) Rural area.--The term ``rural area'' has the meaning 
        given such term in section 1886(d)(2)(D) of the Social Security 
        Act.

SEC. 15507. TELEMEDICINE PAYMENT METHODOLOGY.

    The Secretary of Health and Human Services shall establish a 
methodology for making payments under part B of the medicare program 
for telemedicine services furnished on an emergency basis to 
individuals residing in an area designated as a health professional 
shortage area (under section 332(a) of the Public Health Service Act).

SEC. 15508. DEMONSTRATION PROJECT TO INCREASE CHOICE IN RURAL AREAS.

    The Secretary of Health and Human Services (acting through the 
Administrator of the Health Care Financing Administration) shall 
conduct a demonstration project to assess the advantages and 
disadvantages of requiring Medicare Choice organizations under part C 
of title XVIII of the Social Security Act (as added by section 
15002(a)) to market Medicare Choice products in certain underserved 
areas which are near the standard service area for such products.

                      PART 2--MEDICARE SUBVENTION

                                                     Subtitle F, Part 2

SEC. 15511. MEDICARE PROGRAM PAYMENTS FOR HEALTH CARE SERVICES PROVIDED 
              IN THE MILITARY HEALTH SERVICES SYSTEM.

    (a) Payments Under Medicare Risk Contracts Program.--
            (1) Current program.--Section 1876 (42 U.S.C. 1395mm) is 
        amended by adding at the end the following new subsection:
    ``(k) Notwithstanding any other provision of this section, a 
managed health care plan established by the Secretary of Defense under 
chapter 55 of title 10, United States Code, shall be considered an 
eligible organization under this section, and the Secretary shall make 
payments to such a managed health care plan during a year on behalf of 
any individuals entitled to benefits under this title who are enrolled 
in such a managed health care plan during the year. Such payments shall 
be made in the same amounts and under similar terms and conditions 
under which the Secretary makes payments to other eligible 
organizations with risk sharing contracts under this section.''.
            (2) Medicare choice program.--Section 1855, as inserted by 
        section 15002(a), by adding at the end the following new 
        subsection:
    ``(h) Payments to Military Program.--Notwithstanding any other 
provision of this section, a managed health care plan established by 
the Secretary of Defense under chapter 55 of title 10, United States 
Code, shall be considered a Medicare Choice organization under this 
part, and the Secretary shall make payments to such a managed health 
care plan during a year on behalf of any individuals entitled to 
benefits under this title who are enrolled in such a managed health 
care plan during the year. Such payments shall be made in the same 
amounts and under similar terms and conditions under which the 
Secretary makes payments to other Medicare Choice organizations with 
contracts in effect under this part.''.
    (b) Temporary Provision for Waiver of Part B Premium Penalty.--
Section 1839 (42 U.S.C. 1395r) is amended by adding at the end the 
following new subsection:
    ``(h) The premium increase required by subsection (b) shall not 
apply with respect to a person who is enrolled with a managed care plan 
that is established by the Secretary of Defense under chapter 55 of 
title 10, United States Code, and is recognized as an eligible 
organization pursuant to section 1855(h) or section 1876(k), if such 
person first enrolled in such plan prior to January 1, 1998.''.
    (c) Payments Under Part A of Medicare.--Section 1814(c) (42 U.S.C. 
1395f(c)) is amended--
            (1) by redesignating the current matter as paragraph (1); 
        and
            (2) by adding at the end the following new paragraph:
            ``(2) Paragraph (1) shall not apply to services provided by 
        facilities of the uniformed services pursuant to chapter 55 of 
        title 10, United States Code, and subject to the provisions of 
        section 1095 of such title. With respect to such services, 
        payments under this title shall be made without regard to 
        whether the beneficiary under this title has paid the 
        deductible and copayments amounts generally required by this 
        title.''.
    (d) Payments Under Part B of Medicare.--Section 1835(d) (42 U.S.C. 
1395n(d)) is amended--
            (1) by redesignating the current matter as paragraph (1); 
        and
            (2) by adding at the end the following new paragraph:
    ``(2) Paragraph (1) shall not apply to services provided by 
facilities of the uniformed services pursuant to chapter 55 of title 
10, United States Code, and subject to the provisions of section 1095 
of such title. With respect to such services, payments under this title 
shall be made without regard to whether the beneficiary under this 
title has paid the deductible and copayments amounts generally required 
by this title.''.
    (e) Conforming Amendments to the Third Party Collection Program for 
Military Medical Facilities.--(1) Section 1095(d) of title 10, United 
States Code, is amended--
            (A) by striking ``XVIII or''; and
            (B) by striking ``1395'' and inserting ``1396''.
    (2) Section 1095(h)(2) of such title is amended by inserting after 
``includes'' the following: ``plans administered under title XVIII of 
the Social Security Act (42 U.S.C. 1395 et seq.),''.
    (f) Effective Date.--The amendments made by this section shall take 
effect at the end of the 30-day period beginning on the date of the 
enactment of this Act.

                      Subtitle G--Other Provisions

                                                             Subtitle G

SEC. 15601. EXTENSION AND EXPANSION OF EXISTING SECONDARY PAYER 
              REQUIREMENTS.

    (a) Data Match.--
            (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is 
        amended by striking clause (iii).
            (2) Section 6103(l)(12) of the Internal Revenue Code of 
        1986 is amended by striking subparagraph (F).
    (b) Application to Disabled Individuals in Large Group Health 
Plans.--
            (1) In general.--Section 1862(b)(1)(B) (42 U.S.C. 
        1395y(b)(1)(B)) is amended--
                    (A) in clause (i), by striking ``clause (iv)'' and 
                inserting ``clause (iii)'',
                    (B) by striking clause (iii), and
                    (C) by redesignating clause (iv) as clause (iii).
            (2) Conforming amendments.--Paragraphs (1) through (3) of 
        section 1837(i) (42 U.S.C. 1395p(i)) and the second sentence of 
        section 1839(b) (42 U.S.C. 1395r(b)) are each amended by 
        striking ``1862(b)(1)(B)(iv)'' each place it appears and 
        inserting ``1862(b)(1)(B)(iii)''.
    (c) Expansion of Period of Application to Individuals With End 
Stage Renal Disease.--Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) 
is amended--
            (1) in the first sentence, by striking ``12-month'' each 
        place it appears and inserting ``24-month'', and
            (2) by striking the second sentence.

SEC. 15602. CLARIFICATION OF MEDICARE COVERAGE OF ITEMS AND SERVICES 
              ASSOCIATED WITH CERTAIN MEDICAL DEVICES APPROVED FOR 
              INVESTIGATIONAL USE.

    (a) Coverage.--Nothing in title XVIII of the Social Security Act 
may be construed to prohibit coverage under part A or part B of the 
medicare program of items and services associated with the use of a 
medical device in the furnishing of inpatient or outpatient hospital 
services (including outpatient diagnostic imaging services) for which 
payment may be made under the program solely on the grounds that the 
device is not an approved device, if--
            (1) the device is an investigational device; and
            (2) the device is used instead of either an approved device 
        or a covered procedure.
    (b) Clarification of Payment Amount.--Notwithstanding any other 
provision of title XVIII of the Social Security Act, the amount of 
payment made under the medicare program for any item or service 
associated with the use of an investigational device in the furnishing 
of inpatient or outpatient hospital services (including outpatient 
diagnostic imaging services) for which payment may be made under the 
program may not exceed the amount of the payment which would have been 
made under the program for the item or service if the item or service 
were associated with the use of an approved device or a covered 
procedure.
    (c) Definitions.--In this section--
            (1) the term ``approved device'' means a medical device (or 
        devices) which has been approved for marketing under pre-market 
        approval under the Federal Food, Drug, and Cosmetic Act or 
        cleared for marketing under a 510(k) notice under such Act; and
            (2) the term ``investigational device'' means--
                    (A) a medical device or devices (other than a 
                device described in paragraph (1)) approved for 
                investigational use under section 520(g) of the Federal 
                Food, Drug, and Cosmetic Act, or
                    (B) a product authorized for use under section 
                505(i) of the Federal Food, Drug, and Cosmetic Act 
                which includes the use of a medical device (or devices) 
                or an investigational combination product under section 
                503(g) of such Act which includes a device (or devices) 
                authorized for use under section 505(i) of such Act.

SEC. 15603. ADDITIONAL EXCLUSION FROM COVERAGE.

    (a) In General.--Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
            (1) by striking ``or'' at the end of paragraph (14),
            (2) by striking the period at the end of paragraph (15) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (15) the following new 
        paragraph:
            ``(16) where such expenses are for items or services, or to 
        assist in the purchase, in whole or in part, of health benefit 
        coverage that includes items or services, for the purpose of 
        causing, or assisting in causing, the death, suicide, 
        euthanasia, or mercy killing of a person.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to payment for items and services furnished on or after the date 
of the enactment of this Act.

      Subtitle H--Monitoring Achievement of Medicare Reform Goals

                                                             Subtitle H

SEC. 15701. ESTABLISHMENT OF BUDGETARY AND PROGRAM GOALS.

    (a) In General.--The Secretary shall establish program budgetary 
and program goals for the medicare program consistent with this 
section.
    (b) Budgetary Goals.--The budgetary goal is to restrict total 
outlays under the medicare program as follows:
            (1) For fiscal year 1996, $____.
            (2) For fiscal year 1997, $____.
            (3) For fiscal year 1998, $____.
            (4) For fiscal year 1999, $____.
            (5) For fiscal year 2000, $____.
            (6) For fiscal year 2001, $____.
            (7) For fiscal year 2002, $____.
    (c) Program Goals.--The program goals shall be consistent with the 
following:
            (1) There should be an equitable distribution of funds 
        between per beneficiary spending on payments to Medicare Choice 
        organizations under part C of the medicare program and on 
        payments to providers on a fee-for-service basis under parts A 
        and B of the program.
            (2) Payments to Medicare Choice organizations should be 
        established in a manner that promotes the availability of 
        Medicare Choice products in all regions of the country and that 
        permits such organizations to offer adequate coverage.

SEC. 15702. MEDICARE REFORM COMMISSION.

    (a) Establishment.--There is established a commission to be known 
as the Medicare Reform Commission (in this section referred to as the 
``Commission'').
    (b) Duties.--
            (1) In general.--The Commission shall examine how the 
        medicare program has met the budgetary and program goals 
        established under section 15701.
            (2) Periodic reports.--
                    (A) In general.--The Commission shall issue a 
                report on April 1, 1998, and on March 1 of every third 
                subsequent year, on the status of the medicare program 
                in relation to the budgetary and program goals 
                specified in section 15601.
                    (B) Contents.--Each report shall include the 
                following information about the medicare program in the 
                most recent fiscal year and projects for the succeeding 
                3 fiscal years:
                            (i) The actuarial value of the traditional 
                        medicare benefit package.
                            (ii) The projected rate of growth of 
                        outlays under the traditional medicare program.
                            (iii) The ability of Medicare Choice 
                        organizations to offer an adequate benefit 
                        package under part C of the medicare program.
                            (iv) The extent of Medicare Choice products 
                        made available to medicare beneficiaries in the 
                        different regions of the country.
            (3) Recommendations.--
                    (A) In general.--If a report under paragraph (2) 
                finds that any of the following problems exists, the 
                Commission shall include recommendations to respond to 
                the problem:
                            (i) The actuarial value of the traditional 
                        medicare benefit package exceeds the payment 
                        rate under the Medicare Choice program.
                            (ii) The rate of growth of the traditional 
                        medicare program under parts A and B is 
                        projected to result in medicare outlays 
                        exceeding the outlay targets specified in 
                        section 15701.
                            (iii) The payments under the Medicare 
                        Choice program are not sufficient to allow 
                        contractors to provide an adequate benefit 
                        package.
                            (iv) The selection of Medicare Choice 
                        products are limited or not available in parts 
                        of the country.
                    (B) Types of recommendations.--The recommendations 
                provided under subparagraph (A) may include--
                            (i) in response to the problem described in 
                        subparagraph (A)(ii), reduction in payments to 
                        providers under parts A and B or an increase in 
                        cost sharing by beneficiaries; and
                            (ii) in response to the problems described 
                        in subparagraphs (A)(iii) and (A)(iv), an 
                        adjustment to payment rates to Medicare Choice 
                        organizations.
                Such recommendations may not include any change that is 
                inconsistent with attaining the outlay targets 
                specified under section 15701.
            (4) Presidential response.--If the Commission reports under 
        this subsection that the goals established in section 15701 are 
        not met (or projects that such goals will not be met during a 
        3-year period), the President shall submit to Congress, within 
        90 days after the date of submission of the report, specific 
        legislative recommendations to correct the problem. Such 
        recommendations may include those described in paragraph (3)(B) 
        and may not include any change that is inconsistent with 
        attaining the outlay targets specified under section 15701.
            (5) Congressional consideration.--
                    (A) In general.--The President's recommendations 
                submitted under paragraph (4) shall not apply unless a 
                joint resolution (described in subparagraph (B)) 
                approving such recommendations is enacted, in 
                accordance with the provisions of subparagraph (C), 
                before the end of the 60-day period beginning on the 
                date on which a report containing such recommendations 
                is submitted by the President under paragraph (4). For 
                purposes of applying the preceding sentence and 
                subparagraphs (B) and (C), the days on which either 
                House of Congress is not in session because of an 
                adjournment of more than three days to a day certain 
                shall be excluded in the computation of a period.
                    (B) Joint resolution of approval.--A joint 
                resolution described in this subparagraph means only a 
                joint resolution which is introduced within the 10-day 
                period beginning on the date on which the report 
                described in subparagraph (A) is submitted and--
                            (i) which does not have a preamble;
                            (ii) the matter after the resolving clause 
                        of which is as follows: ``That Congress 
                        approves the recommendations of the President 
                        under section 15702(b)(4) of the Medicare 
                        Preservation Act, as submitted by the President 
                        on ______________.'', the blank space being 
                        filled in with the appropriate date; and
                            (iii) the title of which is as follows: 
                        ``Joint resolution approving Presidential 
                        recommendations submitted under section 
                        15702(b)(4) of the Medicare Preservation Act, 
                        as submitted by the President on 
                        ______________.'', the blank space being filled 
                        in with the appropriate date.
                    (C) Procedures for consideration of resolution of 
                approval.--Subject to subparagraph (D), the provisions 
                of section 2908 (other than subsection (a)) of the 
                Defense Base Closure and Realignment Act of 1990 shall 
                apply to the consideration of a joint resolution 
                described in subparagraph (B) in the same manner as 
                such provisions apply to a joint resolution described 
                in section 2908(a) of such Act.
                    (D) Special rules.--For purposes of applying 
                subparagraph (C) with respect to such provisions--
                            (i) any reference to the Committee on Armed 
                        Services of the House of Representatives shall 
                        be deemed a reference to the Committee on Ways 
                        and Means and any reference to the Committee on 
                        Armed Services of the Senate shall be deemed a 
                        reference to the Committee on Finance of the 
                        Senate; and
                            (ii) any reference to the date on which the 
                        President transmits a report shall be deemed a 
                        reference to the date on which the President 
                        submits the recommendations under paragraph 
                        (4).
    (c) Membership.--
            (1) Appointment.--The Commission shall be composed of 5 
        members appointed by the President, of which 4 of whom are 
        appointed from a list (of at least 5 nominees) submitted by 
        each of the following:
                    (A) The Speaker of the House of Representatives.
                    (B) The Minority Leader of the House of 
                Representatives.
                    (C) The Majority Leader of the Senate.
                    (D) The Minority Leader of the Senate.
            (2) Chairman and vice chairman.--The Commission shall elect 
        a Chairman and Vice Chairman from among its members.
            (3) Vacancies.--Any vacancy in the membership of the 
        Commission shall be filled in the manner in which the original 
        appointment was made and shall not affect the power of the 
        remaining members to execute the duties of the Commission.
            (4) Quorum.--A quorum shall consist of 3 members of the 
        Commission, except that 2 members may conduct a hearing under 
        subsection (e).
            (5) Meetings.--The Commission shall meet at the call of its 
        Chairman or a majority of its members.
            (6) Compensation and reimbursement of expenses.--Members of 
        the Commission are not entitled to receive compensation for 
        service on the Commission. Members may be reimbursed for 
        travel, subsistence, and other necessary expenses incurred in 
        carrying out the duties of the Commission.
    (d) Staff and Consultants.--
            (1) Staff.--The Commission may appoint and determine the 
        compensation of such staff as may be necessary to carry out the 
        duties of the Commission. Such appointments and compensation 
        may be made without regard to the provisions of title 5, United 
        States Code, that govern appointments in the competitive 
        services, and the provisions of chapter 51 and subchapter III 
        of chapter 53 of such title that relate to classifications and 
        the General Schedule pay rates.
            (2) Consultants.--The Commission may procure such temporary 
        and intermittent services of consultants under section 3109(b) 
        of title 5, United States Code, as the Commission determines to 
        be necessary to carry out the duties of the Commission.
    (e) Powers.--
            (1) Hearings and other activities.--For the purpose of 
        carrying out its duties, the Commission may hold such hearings 
        and undertake such other activities as the Commission 
        determines to be necessary to carry out its duties.
            (2) Studies by gao.--Upon the request of the Commission, 
        the Comptroller General shall conduct such studies or 
        investigations as the Commission determines to be necessary to 
        carry out its duties.
            (3) Cost estimates by congressional budget office.--
                    (A) Upon the request of the Commission, the 
                Director of the Congressional Budget Office shall 
                provide to the Commission such cost estimates as the 
                Commission determines to be necessary to carry out its 
                duties.
                    (B) The Commission shall reimburse the Director of 
                the Congressional Budget Office for expenses relating 
                to the employment in the office of the Director of such 
                additional staff as may be necessary for the Director 
                to comply with requests by the Commission under 
                subparagraph (A).
            (4) Detail of federal employees.--Upon the request of the 
        Commission, the head of any Federal agency is authorized to 
        detail, without reimbursement, any of the personnel of such 
        agency to the Commission to assist the Commission in carrying 
        out its duties. Any such detail shall not interrupt or 
        otherwise affect the civil service status or privileges of the 
        Federal employee.
            (5) Technical assistance.--Upon the request of the 
        Commission, the head of a Federal agency shall provide such 
        technical assistance to the Commission as the Commission 
        determines to be necessary to carry out its duties.
            (6) Use of mails.--The Commission may use the United States 
        mails in the same manner and under the same conditions as 
        Federal agencies and shall, for purposes of the frank, be 
        considered a commission of Congress as described in section 
        3215 of title 39, United States Code.
            (7) Obtaining information.--The Commission may secure 
        directly from any Federal agency information necessary to 
        enable it to carry out its duties, if the information may be 
        disclosed under section 552 of title 5, United States Code. 
        Upon request of the Chairman of the Commission, the head of 
        such agency shall furnish such information to the Commission. 
        In particular, the Administrator of the Health Care Financing 
        Administration and the Director of the Office of Management and 
        Budget shall provide the Commission with access to data for the 
        conduct of its work.
            (8) Administrative support services.--Upon the request of 
        the Commission, the Administrator of General Services shall 
        provide to the Commission on a reimbursable basis such 
        administrative support services as the Commission may request.
            (9) Acceptance of donations.--The Commission may accept, 
        use, and dispose of gifts or donations of services or property.
            (10) Printing.--For purposes of costs relating to printing 
        and binding, including the cost of personnel detailed from the 
        Government Printing Office, the Commission shall be deemed to 
        be a committee of the Congress.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out this section. 
Amounts appropriated to carry out this section shall remain available 
until expended.

Subtitle I--Lock-Box Provisions for Medicare Part B Savings from Growth 
                               Reductions

                                                             Subtitle I

SEC. 15801. ESTABLISHMENT OF MEDICARE GROWTH REDUCTION TRUST FUND FOR 
              PART B SAVINGS.

    Part B of title XVIII is amended by inserting after section 1841 
the following new section:

                 ``medicare growth reduction trust fund

    ``Sec. 1841A. (a)(1) There is hereby created on the books of the 
Treasury of the United States a trust fund to be known as the `Federal 
Medicare Growth Reduction Trust Fund' (in this section referred to as 
the `Trust Fund'). The Trust Fund shall consist of such gifts and 
bequests as may be made as provided in section 201(i)(1) and amounts 
appropriated under paragraph (2).
    ``(2) There are hereby appropriated to the Trust Fund amounts 
equivalent to 100 percent of the Secretary's estimate of the reductions 
in expenditures under this part that are attributable to the Medicare 
Preservation Act of 1995. The amounts appropriated by the preceding 
sentence shall be transferred from time to time (not less frequently 
than monthly) from the general fund in the Treasury to the Trust Fund.
    ``(3)(A) Subject to subparagraph (B), with respect to monies 
transferred to the Trust Fund, no transfers, authorizations of 
appropriations, or appropriations are permitted.
    ``(B) Beginning with fiscal year 2003, the Secretary may expend 
funds in the Trust Fund to carry out this title, but only to the extent 
provided by Congress in advance through a specific amendment to this 
section.
    ``(b) The provisions of subsections (b) through (e) of section 1841 
shall apply to the Trust Fund in the same manner as they apply to the 
Federal Supplementary Medical Insurance Trust Fund, except that the 
Board of Trustees and Managing Trustee of the Trust Fund shall be 
composed of the members of the Board of Trustees and the Managing 
Trustee, respectively, of the Federal Supplementary Medical Insurance 
Trust Fund.''.
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