I

104TH CONGRESS

2D SESSION H. R. 3125

To provide for improvements in financial security for senior citizens.

IN THE HOUSE OF REPRESENTATIVES

MARCH 20, 1996

Mr. ENGLISH of Pennsylvania (for himself, Mr. HASTERT, Mr. FOX of Pennsylvania, Mr. CHRISTENSEN, Mr. STOCKMAN, and Mr. HOSTETTLER) introduced the following bill; which was referred to the Committee on Ways

and Means, and in addition to the Committees on Commerce, the Judiciary, Rules, Government Reform and Oversight, and the Budget, 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 provide for improvements in financial security for senior

citizens.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

4 This Act may be cited as the ‘‘Senior Citizens Bill

5 of Rights Act of 1996’’.

Sec. 1. Short title and table of contents.

TITLE I—LONG-TERM CARE

Sec. 101. Treatment of long-term care insurance.

Sec. 102. Qualified long-term care services treated as medical care.
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Sec. 103. Certain exchanges of life insurance contracts for long-term care insurance contracts not taxable.

Sec. 104. Exclusion from gross income for amounts withdrawn from certain retirement plans for long-term care insurance.

Sec. 105. Credit for taxpayers with certain persons requiring custodial care in

their households.

TITLE II—SOCIAL SECURITY BENEFITS

Sec. 201. Increases in monthly exempt amount for purposes of the social security earnings limit.

Sec. 202. Revocation by members of the clergy of exemption from social security coverage.

TITLE III—INDEPENDENT COMMISSION ON MEDICARE

Sec. 301. Establishment of Commission.

Sec. 302. Duties of the Commission.

Sec. 303. Expedited congressional consideration of recommendations.

Sec. 304. No termination of Commission.

Sec. 305. Establishment of annual limits on outlays.

Sec. 306. Enforcement of limits through sequestration.

TITLE IV—HEALTH CARE FRAUD PREVENTION

Subtitle A—All-Payer Fraud and Abuse Control Program

Sec. 401. All-payer fraud and abuse control program.

Sec. 402. Application of certain Federal health anti-fraud and abuse sanctions

to fraud and abuse against any health plan.

Sec. 403. Health care fraud and abuse guidance.

Sec. 404. Reporting of fraudulent actions under medicare.

Subtitle B—Revisions to Current Sanctions for Fraud and Abuse

Sec. 411. Mandatory exclusion from participation in medicare and State health

care programs.

Sec. 412. Establishment of minimum period of exclusion for certain individuals

and entities subject to permissive exclusion from medicare and

State health care programs.

Sec. 413. Permissive exclusion of individuals with ownership or control interest

in sanctioned entities.

Sec. 414. Sanctions against practitioners and persons for failure to comply with

statutory obligations.

Sec. 415. Intermediate sanctions for medicare health maintenance organizations.

Sec. 416. Effective date.

Subtitle C—Administrative and Miscellaneous Provisions

Sec. 421. Establishment of the health care fraud and abuse data collection program.

Subtitle D—Civil Monetary Penalties

Sec. 431. Civil monetary penalties.

Subtitle E—Amendments to Criminal Law
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Sec. 441. Health care fraud.

Sec. 442. Forfeitures for Federal health care offenses.

Sec. 443. Injunctive relief relating to Federal health care offenses.

Sec. 444. Grand jury disclosure.

Sec. 445. False statements.

Sec. 446. Voluntary disclosure program.

Sec. 447. Obstruction of criminal investigations of Federal health care offenses.

Sec. 448. Theft or embezzlement.

Sec. 449. Laundering of monetary instruments.

Subtitle F—Payments for State Health Care Fraud Control Units

Sec. 451. Establishment of State fraud units.

Sec. 452. Requirements for State fraud units.

Sec. 453. Scope and purpose.

Sec. 454. Payments to States.

1 TITLE I—LONG-TERM CARE

2 SEC. 101. TREATMENT OF LONG-TERM CARE INSURANCE.

3 (a) GENERAL RULE.—Chapter 79 of the Internal

4 Revenue Code of 1986 (relating to definitions) is amended

5 by inserting after section 7702A the following new section:

6 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR7 ANCE.

8 ‘‘(a) IN GENERAL.—For purposes of this title—

9 ‘‘(1) a long-term care insurance contract shall

10 be treated as an accident and health insurance con11 tract,

12 ‘‘(2) amounts (other than policyholder divi13 dends, as defined in section 808, or premium re14 funds) received under a long-term care insurance

15 contract shall be treated as amounts received for

16 personal injuries and sickness and shall be treated

17 as reimbursement for expenses actually incurred for

18 medical care (as defined in section 213(d)),
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1 ‘‘(3) any plan of an employer providing cov2 erage under a long-term care insurance contract

3 shall be treated as an accident and health plan with

4 respect to such coverage,

5 ‘‘(4) except as provided in subsection (d)(3),

6 amounts paid for a long-term care insurance con7 tract providing the benefits described in subsection

8 (b)(2)(A) shall be treated as payments made for in9 surance for purposes of section 213(d)(1)(D), and

10 ‘‘(5) a long-term care insurance contract shall

11 be treated as a guaranteed renewable contract sub12 ject to the rules of section 816(e).

13 ‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—

14 For purposes of this title—

15 ‘‘(1) IN GENERAL.—The term ‘long-term care

16 insurance contract’ means any insurance contract

17 if—

18 ‘‘(A) the only insurance protection pro19 vided under such contract is coverage of quali20 fied long-term care services,

21 ‘‘(B) such contract does not pay or reim22 burse expenses incurred for services or items to

23 the extent that such expenses are reimbursable

24 under title XVIII of the Social Security Act or
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1 would be so reimbursable but for the applica2 tion of a deductible or coinsurance amount,

3 ‘‘(C) such contract is guaranteed renew4 able,

5 ‘‘(D) such contract does not provide for a

6 cash surrender value or other money that can

7 be—

8 ‘‘(i) paid, assigned, or pledged as col9 lateral for a loan, or

10 ‘‘(ii) borrowed,

11 other than as provided in subparagraph (E) or

12 paragraph (2)(C), and

13 ‘‘(E) all refunds of premiums, and all pol14 icyholder dividends or similar amounts, under

15 such contract are to be applied as a reduction

16 in future premiums or to increase future bene17 fits.

18 ‘‘(2) SPECIAL RULES.—

19 ‘‘(A) PER DIEM, ETC. PAYMENTS PER20 MITTED.—A contract shall not fail to be de21 scribed in subparagraph (A) or (B) of para22 graph (1) by reason of payments being made on

23 a per diem or other periodic basis without re24 gard to the expenses incurred during the period

25 to which the payments relate.
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1 ‘‘(B) SPECIAL RULES RELATING TO MEDI2 CARE.—

3 ‘‘(i) Paragraph (1)(B) shall not apply

4 to expenses which are reimbursable under

5 title XVIII of the Social Security Act only

6 as a secondary payor.

7 ‘‘(ii) No provision of law shall be con8 strued or applied so as to prohibit the of9 fering of a long-term care insurance con10 tract on the basis that the contract coordi11 nates its benefits with those provided

12 under such title.

13 ‘‘(C) REFUNDS OF PREMIUMS.—Paragraph

14 (1)(E) shall not apply to any refund on the

15 death of the insured, or on a complete surren16 der or cancellation of the contract, which can17 not exceed the aggregate premiums paid under

18 the contract. Any refund on a complete surren19 der or cancellation of the contract shall be in20 cludible in gross income to the extent that any

21 deduction or exclusion was allowable with re22 spect to the premiums.

23 ‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For

24 purposes of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified long2 term care services’ means necessary diagnostic, pre3 ventive, therapeutic, curing, treating, mitigating, and

4 rehabilitative services, and maintenance or personal

5 care services, which—

6 ‘‘(A) are required by a chronically ill indi7 vidual, and

8 ‘‘(B) are provided pursuant to a plan of

9 care prescribed by a licensed health care practi10 tioner.

11 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

12 ‘‘(A) IN GENERAL.—The term ‘chronically

13 ill individual’ means any individual who has

14 been certified by a licensed health care practi15 tioner as—

16 ‘‘(i) being unable to perform (without

17 substantial assistance from another indi18 vidual) at least 2 activities of daily living

19 for a period of at least 90 days due to a

20 loss of functional capacity or to cognitive

21 impairment, or

22 ‘‘(ii) having a level of disability simi23 lar (as determined by the Secretary in con24 sultation with the Secretary of Health and
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1 Human Services) to the level of disability

2 described in clause (i).

3 Such term shall not include any individual oth4 erwise meeting the requirements of the preced5 ing sentence unless within the preceding 12-

6 month period a licensed health care practitioner

7 has certified that such individual meets such re8 quirements.

9 ‘‘(B) ACTIVITIES OF DAILY LIVING.—For

10 purposes of subparagraph (A), each of the fol11 lowing is an activity of daily living:

12 ‘‘(i) Eating.

13 ‘‘(ii) Toileting.

14 ‘‘(iii) Transferring.

15 ‘‘(iv) Bathing.

16 ‘‘(v) Dressing.

17 ‘‘(vi) Continence.

18 Nothing in this section shall be construed to re19 quire a contract to take into account all of the

20 preceding activities of daily living.

21 ‘‘(3) MAINTENANCE OR PERSONAL CARE SERV22 ICES.—The term ‘maintenance or personal care serv23 ices’ means any care the primary purpose of which

24 is the provision of needed assistance with any of the

25 disabilities as a result of which the individual is a
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1 chronically ill individual (including the protection

2 from threats to health and safety due to severe cog3 nitive impairment).

4 ‘‘(4) LICENSED HEALTH CARE PRACTI5 TIONER.—The term ‘licensed health care practi6 tioner’ means any physician (as defined in section

7 1861(r)(1) of the Social Security Act) and any reg8 istered professional nurse, licensed social worker, or

9 other individual who meets such requirements as

10 may be prescribed by the Secretary.

11 ‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART

12 OF A LIFE INSURANCE CONTRACT.—Except as otherwise

13 provided in regulations prescribed by the Secretary, in the

14 case of any long-term care insurance coverage (whether

15 or not qualified) provided by a rider on a life insurance

16 contract—

17 ‘‘(1) IN GENERAL.—This section shall apply as

18 if the portion of the contract providing such cov19 erage is a separate contract.

20 ‘‘(2) APPLICATION OF 7702.—Section

21 7702(c)(2) (relating to the guideline premium limi22 tation) shall be applied by increasing the guideline

23 premium limitation with respect to a life insurance

24 contract, as of any date—
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1 ‘‘(A) by the sum of any charges (but not

2 premium payments) against the life insurance

3 contract’s cash surrender value (within the

4 meaning of section 7702(f)(2)(A)) for such cov5 erage made to that date under the contract, less

6 ‘‘(B) any such charges the imposition of

7 which reduces the premiums paid for the con8 tract (within the meaning of section

9 7702(f)(1)).

10 ‘‘(3) APPLICATION OF SECTION 213.—No deduc11 tion shall be allowed under section 213(a) for

12 charges against the life insurance contract’s cash

13 surrender value described in paragraph (2), unless

14 such charges are includible in income as a result of

15 the application of section 72(e)(10) and the rider is

16 a long-term care insurance contract under sub17 section (b).

18 ‘‘(4) PORTION DEFINED.—For purposes of this

19 subsection, the term ‘portion’ means only the terms

20 and benefits under a life insurance contract that are

21 in addition to the terms and benefits under the con22 tract without regard to the coverage under a long23 term care insurance contract.’’

24 (b) RESERVE METHOD.—Clause (iii) of section

25 807(d)(3)(A) of such Code is amended by inserting
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1 ‘‘(other than a long-term care insurance contract, as de2 fined in section 7702B(b))’’ after ‘‘insurance contract’’.

3 (c) LONG-TERM CARE INSURANCE NOT PERMITTED

4 UNDER CAFETERIA PLANS OR FLEXIBLE SPENDING AR5 RANGEMENTS.—

6 (1) CAFETERIA PLANS.—Section 125(f) of such

7 Code is amended by adding at the end the following

8 new sentence: ‘‘Such term shall not include any

9 long-term care insurance contract (as defined in sec10 tion 7702B(b)).’’

11 (2) FLEXIBLE SPENDING ARRANGEMENTS.—

12 The text of section 106 of such Code (relating to

13 contributions by employer to accident and health

14 plans) is amended to read as follows:

15 ‘‘(a) GENERAL RULE.—Except as provided in sub16 section (b), gross income of an employee does not include

17 employer-provided coverage under an accident or health

18 plan.

19 ‘‘(b) INCLUSION OF LONG-TERM CARE BENEFITS

20 PROVIDED THROUGH FLEXIBLE SPENDING ARRANGE21 MENTS.—

22 ‘‘(1) IN GENERAL.—Effective on and after Jan23 uary 1, 1996, gross income of an employee shall in24 clude employer-provided coverage for qualified long25 term care services (as defined in section 7702B(c))
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1 to the extent that such coverage is provided through

2 a flexible spending or similar arrangement.

3 ‘‘(2) FLEXIBLE SPENDING ARRANGEMENT.—

4 For purposes of this subsection, a flexible spending

5 arrangement is a benefit program which provides

6 employees with coverage under which—

7 ‘‘(A) specified incurred expenses may be

8 reimbursed (subject to reimbursement maxi9 mums and other reasonable conditions), and

10 ‘‘(B) the maximum amount of reimburse11 ment which is reasonably available to a partici12 pant for such coverage is less than 500 percent

13 of the value of such coverage.

14 In the case of an insured plan, the maximum

15 amount reasonably available shall be determined on

16 the basis of the underlying coverage.’’

17 (d) CONTINUATION COVERAGE EXCISE TAX NOT TO

18 APPLY.—Subsection (f) of section 4980B of such Code is

19 amended by adding at the end the following new para20 graph:

21 ‘‘(9) CONTINUATION OF LONG-TERM CARE COV22 ERAGE NOT REQUIRED.—A group health plan shall

23 not be treated as failing to meet the requirements of

24 this subsection solely by reason of failing to provide
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1 coverage under any long-term care insurance con2 tract (as defined in section 7702B(b)).’’

3 (e) AMOUNTS PAID TO RELATIVES TREATED AS NOT

4 PAID FOR MEDICAL CARE.—Section 213(d) of such Code

5 is amended by adding at the end the following new para6 graph:

7 ‘‘(10) CERTAIN PAYMENTS TO RELATIVES

8 TREATED AS NOT PAID FOR MEDICAL CARE.—An

9 amount paid for a qualified long-term care service

10 (as defined in section 7702B(c)) provided to an indi11 vidual shall be treated as not paid for medical care

12 if such service is provided—

13 ‘‘(A) by a relative (directly or through a

14 partnership, corporation, or other entity) unless

15 the relative is a licensed professional with re16 spect to such services, or

17 ‘‘(B) by a corporation or partnership which

18 is related (within the meaning of section 267(b)

19 or 707(b)) to the individual.

20 For purposes of this paragraph, the term ‘relative’

21 means an individual bearing a relationship to the in22 dividual which is described in any of paragraphs (1)

23 through (8) of section 152(a). This paragraph shall

24 not apply for purposes of section 105(b) with respect

25 to reimbursements through insurance.’’
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1 (f) CLERICAL AMENDMENT.—The table of sections

2 for chapter 79 of such Code is amended by inserting after

3 the item relating to section 7702A the following new item:

‘‘Sec. 7702B. Treatment of long-term care insurance.’’.

4 (g) EFFECTIVE DATE.—

5 (1) IN GENERAL.—The amendments made by

6 this section shall apply to contracts issued after De7 cember 31, 1996.

8 (2) CONTINUATION OF EXISTING POLICIES.—In

9 the case of any contract issued before January 1,

10 1997, which met the long-term care insurance re11 quirements of the State in which the contract was

12 issued at the time the contract was issued—

13 (A) such contract shall be treated for pur14 poses of the Internal Revenue Code of 1986 as

15 a long-term care insurance contract (as defined

16 in section 7702B(b) of such Code), and

17 (B) services provided under, or reimbursed

18 by, such contract shall be treated for such pur19 poses as qualified long-term care services (as

20 defined in section 7702B(c) of such Code).

21 (3) EXCHANGES OF EXISTING POLICIES.—If,

22 after the date of enactment of this Act and before

23 January 1, 1997, a contract providing for long-term

24 care insurance coverage is exchanged solely for a

25 long-term care insurance contract (as defined in sec-
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1 tion 7702B(b) of such Code), no gain or loss shall

2 be recognized on the exchange. If, in addition to a

3 long-term care insurance contract, money or other

4 property is received in the exchange, then any gain

5 shall be recognized to the extent of the sum of the

6 money and the fair market value of the other prop7 erty received. For purposes of this paragraph, the

8 cancellation of a contract providing for long-term

9 care insurance coverage and reinvestment of the can10 cellation proceeds in a long-term care insurance con11 tract within 60 days thereafter shall be treated as

12 an exchange.

13 (4) ISSUANCE OF CERTAIN RIDERS PER14 MITTED.—For purposes of applying sections 101(f),

15 7702, and 7702A of the Internal Revenue Code of

16 1986 to any contract—

17 (A) the issuance of a rider which is treated

18 as a long-term care insurance contract under

19 section 7702B, and

20 (B) the addition of any provision required

21 to conform any other long-term care rider to be

22 so treated,

23 shall not be treated as a modification or material

24 change of such contract.
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1 SEC. 102. QUALIFIED LONG-TERM CARE SERVICES TREAT2 ED AS MEDICAL CARE.

3 (a) GENERAL RULE.—Paragraph (1) of section

4 213(d) of the Internal Revenue Code of 1986 (defining

5 medical care) is amended by striking ‘‘or’’ at the end of

6 subparagraph (B), by redesignating subparagraph (C) as

7 subparagraph (D), and by inserting after subparagraph

8 (B) the following new subparagraph:

9 ‘‘(C) for qualified long-term care services

10 (as defined in section 7702B(c)), or’’.

11 (b) TECHNICAL AMENDMENTS.—

12 (1) Subparagraph (D) of section 213(d)(1) of

13 such Code (as redesignated by subsection (a)) is

14 amended by striking ‘‘subparagraphs (A) and (B)’’

15 and inserting ‘‘subparagraphs (A), (B), and (C)’’.

16 (2)(A) Paragraph (1) of section 213(d) of such

17 Code is amended by adding at the end the following

18 new flush sentence:

19 ‘‘In the case of a long-term care insurance contract

20 (as defined in section 7702B(b)), only eligible long21 term care premiums (as defined in paragraph (11))

22 shall be taken into account under subparagraph

23 (D).’’

24 (B) Subsection (d) of section 213 of such Code

25 is amended by adding at the end the following new

26 paragraph:
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1 ‘‘(11) ELIGIBLE LONG-TERM CARE PRE2 MIUMS.—

3 ‘‘(A) IN GENERAL.—For purposes of this

4 section, the term ‘eligible long-term care pre5 miums’ means the amount paid during a tax6 able year for any long-term care insurance con7 tract (as defined in section 7702B(b)) covering

8 an individual, to the extent such amount does

9 not exceed the limitation determined under the

10 following table:

‘‘In the case of an individual

with an attained age before the The limitation

close of the taxable year of: is:

40 or less ................................................... $200

More than 40 but not more than 50 ......... 375

More than 50 but not more than 60 ......... 750

More than 60 but not more than 70 ......... 2,000

More than 70 ............................................. 2,500.

11 ‘‘(B) INDEXING.—

12 ‘‘(i) IN GENERAL.—In the case of any

13 taxable year beginning in a calendar year

14 after 1996, each dollar amount contained

15 in subparagraph (A) shall be increased by

16 the medical care cost adjustment of such

17 amount for such calendar year. If any in18 crease determined under the preceding sen19 tence is not a multiple of $10, such in20 crease shall be rounded to the nearest mul21 tiple of $10.
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1 ‘‘(ii) MEDICAL CARE COST ADJUST2 MENT.—For purposes of clause (i), the

3 medical care cost adjustment for any cal4 endar year is the percentage (if any) by

5 which—

6 ‘‘(I) the medical care component

7 of the Consumer Price Index (as de8 fined in section 1(f)(5)) for August of

9 the preceding calendar year, exceeds

10 ‘‘(II) such component for August

11 of 1995.

12 The Secretary shall, in consultation with

13 the Secretary of Health and Human Serv14 ices, prescribe an adjustment which the

15 Secretary determines is more appropriate

16 for purposes of this paragraph than the

17 adjustment described in the preceding sen18 tence, and the adjustment so prescribed

19 shall apply in lieu of the adjustment de20 scribed in the preceding sentence.’’

21 (3) Paragraph (6) of section 213(d) of such

22 Code is amended—

23 (A) by striking ‘‘subparagraphs (A) and

24 (B)’’ and inserting ‘‘subparagraphs (A), (B),

25 and (C)’’, and
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1 (B) by striking ‘‘paragraph (1)(C)’’ in sub2 paragraph (A) and inserting ‘‘paragraph

3 (1)(D)’’.

4 (4) Paragraph (7) of section 213(d) of such

5 Code is amended by striking ‘‘subparagraphs (A)

6 and (B)’’ and inserting ‘‘subparagraphs (A), (B),

7 and (C)’’.

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 December 31, 1996.

11 SEC. 103. CERTAIN EXCHANGES OF LIFE INSURANCE CON12 TRACTS FOR LONG-TERM CARE INSURANCE

13 CONTRACTS NOT TAXABLE.

14 (a) IN GENERAL.—Subsection (a) of section 1035 of

15 the Internal Revenue Code of 1986 (relating to certain

16 exchanges of insurance contracts) is amended by striking

17 the period at the end of paragraph (3) and inserting ‘‘;

18 or’’, and by adding at the end the following new para19 graph:

20 ‘‘(4) a contract of life insurance or an endow21 ment or annuity contract for a long-term care insur22 ance contract (as defined in section 7702B(b)).’’

23 (b) EFFECTIVE DATE.—The amendment made by

24 this section shall apply to taxable years beginning after

25 December 31, 1996.
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1 SEC. 104. EXCLUSION FROM GROSS INCOME FOR AMOUNTS

2 WITHDRAWN FROM CERTAIN RETIREMENT

3 PLANS FOR LONG-TERM CARE INSURANCE.

4 (a) IN GENERAL.—Part III of subchapter B of chap5 ter 1 of the Internal Revenue Code of 1986 (relating to

6 items specifically excluded from gross income) is amended

7 by redesignating section 137 as section 138 and by insert8 ing after section 136 the following new section:

9 ‘‘SEC. 137. DISTRIBUTIONS FROM CERTAIN RETIREMENT

10 PLANS FOR LONG-TERM CARE INSURANCE.

11 ‘‘(a) GENERAL RULE.—The amount which would

12 (but for this section) be includible in the gross income of

13 an individual for the taxable year by reason of eligible dis14 tributions during the taxable year shall be reduced (but

15 not below zero) by the aggregate premiums paid by such

16 individual during such taxable year for any long-term care

17 insurance contract (as defined in section 7702B(b)) for

18 coverage of such individual or the spouse of such individ19 ual.

20 ‘‘(b) ELIGIBLE DISTRIBUTION.—For purposes of this

21 section, the term ‘eligible distribution’ means any distribu22 tion or payment to an individual from—

23 ‘‘(1) an individual retirement plan of such indi24 vidual,

25 ‘‘(2) amounts attributable to employer contribu26 tions made pursuant to elective deferrals described
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1 in subparagraph (A) or (C) of section 402(g)(3) or

2 section 501(c)(18)(D)(iii), or

3 ‘‘(3) amounts deferred under section 457(a).’’

4 (b) CONFORMING AMENDMENTS.—

5 (1) Section 401(k)(2)(B)(i) of such Code is

6 amended by striking ‘‘or’’ at the end of subclause

7 (III), by striking ‘‘and’’ at the end of subclause (IV)

8 and inserting ‘‘or’’, and by inserting after subclause

9 (IV) the following new subclause:

10 ‘‘(V) the date distributions for

11 premiums for a long-term care insur12 ance contract (as defined in section

13 7702B(b)) for coverage of such indi14 vidual or the spouse of such individual

15 are made, and’’.

16 (2) Section 403(b)(11) of such Code is amend17 ed by striking ‘‘or’’ at the end of subparagraph (A),

18 by striking the period at the end of subparagraph

19 (B) and inserting ‘‘, or’’, and by inserting after sub20 paragraph (B) the following new subparagraph:

21 ‘‘(C) for the payment of premiums for a

22 long-term care insurance contract (as defined in

23 section 7702B(b)) for coverage of the employee

24 or the spouse of the employee.’’
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1 (3) Subparagraph (A) of section 457(d)(1) of

2 such Code is amended by striking ‘‘or’’ at the end

3 of clause (ii), by striking ‘‘and’’ at the end of clause

4 (iii) and inserting ‘‘or’’, and by inserting after clause

5 (iii) the following new clause:

6 ‘‘(iv) the date distributions for pre7 miums for a long-term care insurance con8 tract (as defined in section 7702B(b)) for

9 coverage of such individual or the spouse

10 of such individual are made, and’’.

11 (4) The table of sections for part III of sub12 chapter B of chapter 1 of such Code is amended by

13 striking the last item and inserting the following

14 new items:

‘‘Sec. 137. Distributions from certain retirement plans for longterm care insurance.

‘‘Sec. 138. Cross references to other Acts.’’

15 (c) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to payments and distributions after

17 December 31, 1996.

18 SEC. 105. CREDIT FOR TAXPAYERS WITH CERTAIN PER19 SONS REQUIRING CUSTODIAL CARE IN THEIR

20 HOUSEHOLDS.

21 (a) IN GENERAL.—Subpart A of part IV of sub22 chapter A of chapter 1 of the Internal Revenue Code of

23 1986 is amended by inserting after section 25A the follow24 ing new section:
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1 ‘‘SEC. 25B. CREDIT FOR TAXPAYERS WITH CERTAIN PER2 SONS REQUIRING CUSTODIAL CARE IN THEIR

3 HOUSEHOLDS.

4 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in5 dividual who maintains a household which includes as a

6 member one or more qualified persons, there shall be al7 lowed as a credit against the tax imposed by this chapter

8 for the taxable year an amount equal to $1,000 for each

9 such person.

10 ‘‘(b) QUALIFIED PERSON.—For purposes of this sec11 tion, the term ‘qualified person’ means any individual—

12 ‘‘(1) who is a father or mother of the taxpayer,

13 his spouse, or his former spouse or who is an ances14 tor of such a father or mother,

15 ‘‘(2) who is physically or mentally incapable of

16 caring for himself,

17 ‘‘(3) who has as his principal place of abode for

18 more than half of the taxable year the home of the

19 taxpayer, and

20 ‘‘(4) whose name and TIN are included on the

21 taxpayer’s return for the taxable year.

22 For purposes of paragraph (1), a stepfather or stepmother

23 shall be treated as a father or mother.

24 ‘‘(c) SPECIAL RULES.—For purposes of this section,

25 rules similar to the rules of paragraphs (1), (2), (3), and

26 (4) of section 21(e) shall apply.’’
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 for subpart A of part IV of subchapter A of chapter 1

3 of such Code is amended by inserting after the item relat4 ing to section 25A the following new item:

‘‘Sec. 25B. Credit for taxpayers with certain persons requiring

custodial care in their households.’’

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to taxable years beginning after

7 December 31, 1996.

8 TITLE II—SOCIAL SECURITY

9 BENEFITS

10 SEC. 201. INCREASES IN MONTHLY EXEMPT AMOUNT FOR

11 PURPOSES OF THE SOCIAL SECURITY EARN12 INGS LIMIT.

13 (a) INCREASE IN MONTHLY EXEMPT AMOUNT FOR

14 INDIVIDUALS WHO HAVE ATTAINED RETIREMENT

15 AGE.—Section 203(f)(8)(D) of the Social Security Act (42

16 U.S.C. 403(f)(8)(D)) is amended to read as follows:

17 ‘‘(D) Notwithstanding any other provision of

18 this subsection, the exempt amount which is applica19 ble to an individual who has attained retirement age

20 (as defined in section 216(l)) before the close of the

21 taxable year involved shall be—

22 ‘‘(i) for each month of any taxable year

23 ending after 1996 and before 1998,

$1,466.662 24 ⁄3,
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1 ‘‘(ii) for each month of any taxable year

2 ending after 1997 and before 1999, $1,875.00,

3 ‘‘(iii) for each month of any taxable year

4 ending after 1998 and before 2000,

$2,333.331 5 ⁄3,

6 ‘‘(iv) for each month of any taxable year

7 ending after 1999 and before 2001,

$2,791.662 8 ⁄3,

9 ‘‘(v) for each month of any taxable year

10 ending after 2000 and before 2002, $3,250.00,

11 ‘‘(vi) for each month of any taxable year

12 ending after 2001 and before 2003,

$3,708.331 13 ⁄3, and

14 ‘‘(vii) for each month of any taxable year

15 ending after 2002 and before 2004,

$4,166.662 16 ⁄3.’’.

17 (b) CONFORMING AMENDMENTS.—

18 (1) Section 203(f)(8)(B)(ii) of such Act (42

19 U.S.C. 403(f)(8)(B)(ii)) is amended—

20 (A) by striking ‘‘the taxable year ending

21 after 1993 and before 1995’’ and inserting ‘‘the

22 taxable year ending after 2002 and before 2004

23 (with respect to individuals described in sub24 paragraph (D)) or the taxable year ending after
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1 1993 and before 1995 (with respect to other in2 dividuals)’’; and

3 (B) in subclause (II), by striking ‘‘for

4 1992’’ and inserting ‘‘for 2001 (with respect to

5 individuals described in subparagraph (D)) or

6 1992 (with respect to other individuals)’’.

7 (2) The second sentence of section 223(d)(4)(A)

8 of such Act (42 U.S.C. 423(d)(4)(A)) is amended by

9 striking ‘‘the exempt amount under section 203(f)(8)

10 which is applicable to individuals described in sub11 paragraph (D) thereof’’ and inserting the following:

12 ‘‘an amount equal to the exempt amount which

13 would be applicable under section 203(f)(8), to indi14 viduals described in subparagraph (D) thereof, if

15 section 201 of the Senior Citizens Bill of Rights Act

16 of 1996 had not been enacted’’.

17 (c) EFFECTIVE DATE.—The amendments made by

18 this section shall apply with respect to taxable years end19 ing after 1996.

20 SEC. 202. REVOCATION BY MEMBERS OF THE CLERGY OF

21 EXEMPTION FROM SOCIAL SECURITY COV22 ERAGE.

23 (a) IN GENERAL.—Notwithstanding section

24 1402(e)(4) of the Internal Revenue Code of 1986, any ex25 emption which has been received under section 1402(e)(1)
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1 of such Code by a duly ordained, commissioned, or li2 censed minister of a church, a member of a religious order,

3 or a Christian Science practitioner, and which is effective

4 for the taxable year in which this Act is enacted, may be

5 revoked by filing an application therefor (in such form and

6 manner, and with such official, as may be prescribed in

7 regulations made under chapter 2 of such Code), if such

8 application is filed no later than the due date of the Fed9 eral income tax return (including any extension thereof)

10 for the applicant’s second taxable year beginning after De11 cember 31, 1996. Any such revocation shall be effective

12 (for purposes of chapter 2 of the Internal Revenue Code

13 of 1986 and title II of the Social Security Act), as speci14 fied in the application, either with respect to the appli15 cant’s first taxable year beginning after December 31,

16 1996, or with respect to the applicant’s second taxable

17 year beginning after such date, and for all succeeding tax18 able years; and the applicant for any such revocation may

19 not thereafter again file application for an exemption

20 under such section 1402(e)(1). If the application is filed

21 after the due date of the applicant’s Federal income tax

22 return for a taxable year and is effective with respect to

23 that taxable year, it shall include or be accompanied by

24 payment in full of an amount equal to the total of the

25 taxes that would have been imposed by section 1401 of
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1 the Internal Revenue Code of 1986 with respect to all of

2 the applicant’s income derived in that taxable year which

3 would have constituted net earnings from self-employment

4 for purposes of chapter 2 of such Code (notwithstanding

5 section 1402 (c)(4) or (c)(5) of such Code) except for the

6 exemption under section 1402(e)(1) of such Code.

7 (b) EFFECTIVE DATE.—Subsection (a) shall apply

8 with respect to service performed (to the extent specified

9 in such subsection) in taxable years beginning after De10 cember 31, 1996, and with respect to monthly insurance

11 benefits payable under title II of the Social Security Act

12 on the basis of the wages and self-employment income of

13 any individual for months in or after the calendar year

14 in which such individual’s application for revocation (as

15 described in such subsection) is effective (and lump-sum

16 death payments payable under such title on the basis of

17 such wages and self-employment income in the case of

18 deaths occurring in or after such calendar year).

19 TITLE III—INDEPENDENT

20 COMMISSION ON MEDICARE

21 SEC. 301. ESTABLISHMENT OF COMMISSION.

22 (a) IN GENERAL.—There is established a commission

23 to be known as the Independent Commission on Medicare

24 (in this title referred to as the ‘‘Commission’’).

25 (b) MEMBERSHIP.—
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1 (1) COMPOSITION.—The Commission shall be

2 composed of 7 members appointed by the President,

3 by and with the advice and consent of the Senate.

4 (2) CHAIR.—The President shall designate one

5 of the members to chair the Commission.

6 (3) QUALIFICATIONS.—The membership of the

7 Commission shall consist of individuals with national

8 recognition for expertise in fields related to health

9 care.

10 (c) TERMS.—

11 (1) IN GENERAL.—Except as provided in para12 graphs (2) and (3), each member of the Commission

13 shall be appointed for a term of 9 years.

14 (2) TERMS OF INITIAL APPOINTMENT.—As des15 ignated by the President at the time of appointment,

16 of the members first appointed—

17 (A) 3 shall be appointed for a term of 3

18 years; and

19 (B) 3 shall be appointed for a term of 6

20 years.

21 (3) VACANCIES.—Any member appointed to fill

22 a vacancy occurring before the expiration of the

23 term for which the member’s predecessor was ap24 pointed shall be appointed only for the remainder of

25 that term. A vacancy in the Commission shall be
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1 filled in the manner in which the original appoint2 ment was made.

3 (4) EXCLUSIVE EMPLOYMENT.—During the

4 term of appointment, members shall serve as em5 ployees of the Federal Government and shall hold no

6 other employment.

7 (5) COMPENSATION OF BOARD MEMBERS.—

8 Each member of the Commission (other than the

9 chair) shall receive an annual salary at the annual

10 rate payable from time to time for level IV of the

11 Executive Schedule. The chair of the Commission,

12 during the period of service as chair, shall receive an

13 annual salary at the annual rate payable from time

14 to time for level III of the Executive Schedule.

15 (6) REMOVAL.—A member of the Commission

16 may be removed by the President only for neglect of

17 duty or malfeasance in office.

18 (d) MEETINGS.—Each meeting of the Commission

19 shall be open to the public, except that the Commission

20 may meet in executive session to address matters relating

21 to personnel and other internal matters of the Commission

22 unrelated to the duties specified in section 302.

23 (e) STAFF.—

24 (1) IN GENERAL.—The Commission shall ap25 point a Director, who shall be paid at a rate the
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1 Commission considers appropriate. The Director

2 may appoint and fix the pay of such additional per3 sonnel as the Director (with the approval of the

4 Chair of the Commission) considers appropriate,

5 without regard to provisions of title 5, United States

6 Code, governing appointments in the competitive

7 service.

8 (2) EXPERTS AND CONSULTANTS.—The Com9 mission may procure temporary and intermittent

10 services under section 3109(b) of title 5, United

11 States Code.

12 (3) STAFF OF FEDERAL AGENCIES.—Upon re13 quest of the Director, the head of any Federal de14 partment or agency may detail, on a reimbursable

15 basis, any of the personnel of that department or

16 agency to the Commission to assist it in carrying out

17 its duties under this title.

18 (f) POWERS.—

19 (1) HEARINGS AND SESSIONS.—The Commis20 sion may, for the purpose of carrying out its duties

21 under this title, hold hearings, sit and act at times

22 and places, take testimony, and receive evidence as

23 the Commission considers appropriate. The Commis24 sion may administer oaths or affirmations to wit25 nesses appearing before it.
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1 (2) POWERS OF MEMBERS AND AGENTS.—Any

2 member or agent of the Commission may, if author3 ized by the Commission, take any action which the

4 Commission is authorized to take by this section.

5 (3) OBTAINING OFFICIAL DATA.—The Commis6 sion may secure directly from any department or

7 agency of the United States information necessary

8 to enable it to carry out this title. Upon request of

9 the Chair of the Commission, the head of that de10 partment or agency shall furnish that information to

11 the Commission.

12 (4) GIFTS, BEQUESTS, AND DEVISES.—The

13 Commission may accept, use, and dispose of gifts,

14 bequests, or devises of services or property, both real

15 and personal, for the purpose of aiding or facilitat16 ing the work of the Commission. Gifts, bequests, or

17 devises of money and proceeds from sales of other

18 property received as gifts, bequests, or devises shall

19 be deposited in the Treasury and shall be available

20 for disbursement upon order of the Chair of the

21 Commission.

22 (5) MAILS.—The Commission may use the

23 United States mails in the same manner and under

24 the same conditions as other departments and agen25 cies of the United States.
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1 (6) ADMINISTRATIVE SUPPORT SERVICES.—

2 Upon the request of the Commission, the Adminis3 trator of General Services shall provide to the Com4 mission, on a reimbursable basis, the administrative

5 support services necessary for the Commission to

6 carry out its duties under this title.

7 SEC. 302. DUTIES OF THE COMMISSION.

8 (a) IN GENERAL.—The Commission shall—

9 (1) transmit to Congress and the President

10 during December of each year (beginning with 1996)

11 a report on the aspects of the Medicare program

12 specified in subsection (b); and

13 (2) transmit to Congress during July of each

14 year (beginning with 1997) a report containing spe15 cific recommendations on the matters specified in

16 subsection (c).

17 (b) ASPECTS OF MEDICARE.—

18 (1) IN GENERAL.—The report transmitted pur19 suant to subsection (a)(1) during December of a

20 year shall include information on the following:

21 (A) The total outlays made under the med22 icare program for each of the 10 most recently

23 completed fiscal years.

24 (B) Projections of the outlays under such

25 program for the fiscal year beginning on Octo-
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1 ber 1 of the next calendar year and each of the

2 4 succeeding fiscal years, on an aggregate and

3 a per capita basis.

4 (C) Projections of the actuarial value of

5 the package of benefits provided to medicare

6 beneficiaries for each of the fiscal years speci7 fied in subparagraph (B), on an aggregate and

8 a per capita basis.

9 (D) A comparison of each of the projec10 tions made under subparagraph (B) for a fiscal

11 year with the projections made for the year

12 under subparagraph (C).

13 (E) The health status of medicare bene14 ficiaries, the access of beneficiaries to health

15 services covered under the medicare program,

16 and the utilization of such services by bene17 ficiaries.

18 (F) Methods to improve the methodologies

19 used to determine the payments made under

20 the medicare program to or on behalf of medi21 care beneficiaries (including the use of risk ad22 justment in the determination of the amount of

23 such payments) and methods to encourage effi24 ciency and cost-effectiveness in the delivery of

25 health care services.
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1 (G) Such other matters as the Commission

2 determines to be appropriate.

3 (2) ACTUARIAL VALUE DEFINED.—For pur4 poses of projecting the actuarial value of the pack5 age of benefits provided to medicare beneficiaries

6 under paragraph (1)(C), the Commission shall deter7 mine actuarial value by measuring the costs of re8 sources used to provide health care services covered

9 under the medicare program and adjusting such

10 costs to take into account—

11 (A) inflation in the costs of health care

12 services and all costs generally;

13 (B) demographic changes in the population

14 of beneficiaries, including population growth,

15 age distribution, health status, and access to

16 care;

17 (C) changes in the mix and intensity of

18 services provided to beneficiaries and the sites

19 at which services are furnished;

20 (D) scientific and technological advances;

21 (E) the quality of care provided, including

22 the effect on quality of the overutilization of

23 services and other factors;

24 (F) other factors affecting the demand of

25 beneficiaries for services; and
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1 (G) such other factors as the Commission

2 considers appropriate.

3 (c) RECOMMENDATIONS ON CONTROLLING OUT4 LAYS.—The report transmitted to Congress pursuant to

5 subsection (a)(2) during July of a year shall include spe6 cific recommendations on changes in the medicare pro7 gram, including changes in eligibility, benefits (including

8 the mode of delivery of such benefits), cost-sharing, or

9 payments made to or on behalf of beneficiaries, sufficient

10 to ensure that total outlays for the program for the fiscal

11 year beginning on the following October 1 do not exceed

12 the limit established for that fiscal year under section 305,

13 except that such recommendations may not include

14 changes relating to the payment of payroll taxes for fi15 nancing the program.

16 SEC. 303. EXPEDITED CONGRESSIONAL CONSIDERATION

17 OF RECOMMENDATIONS.

18 (a) IN GENERAL.—The recommendations submitted

19 by the Commission under section 302(c) for a fiscal year

20 shall take effect if a joint resolution (described in sub21 section (b)) approving such recommendations is enacted,

22 in accordance with the provisions of subsection (c), before

23 the first day of the fiscal year.

24 (b) JOINT RESOLUTION OF APPROVAL.—A joint res25 olution described in this paragraph means only a joint res-
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1 olution which is introduced within the 10-day period be2 ginning on the date on which the Commission submits rec3 ommendations under section 302(c) and—

4 (1) which does not have a preamble;

5 (2) the matter after the resolving clause of

6 which is as follows: ‘‘That Congress approves the

7 recommendations of the Independent Commission on

8 Medicare concerning methods to control outlays

9 under the medicare program for fiscal year

10 llll, as submitted by the Commission on

11 lllllll.’’, the first blank space being filled

12 in with the appropriate fiscal year and the second

13 blank space being filled in with the appropriate date;

14 and

15 (3) the title of which is as follows: ‘‘Joint reso16 lution approving recommendations of the Independ17 ent Commission on Medicare concerning methods to

18 control outlays under the medicare program for fis19 cal year llll, as submitted by the Commission

20 on lllllll.’’, the first blank space being

21 filled in with the appropriate fiscal year and the sec22 ond blank space being filled in with the appropriate

23 date.

24 (c) PROCEDURES FOR CONSIDERATION OF RESOLU25 TION OF APPROVAL.—Subject to subsection (d), the provi-
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1 sions of section 2908 (other than subsection (a)) of the

2 Defense Base Closure and Realignment Act of 1990 shall

3 apply to the consideration of a joint resolution described

4 in subsection (b) in the same manner as such provisions

5 apply to a joint resolution described in section 2908(a)

6 of such Act.

7 (d) SPECIAL RULES.—For purposes of applying sub8 section (c) with respect to such provisions—

9 (1) any reference to the Committee on Armed

10 Services of the House of Representatives shall be

11 deemed a reference to an appropriate committee of

12 the House of Representatives (specified by the

13 Speaker of the House of Representatives at the time

14 of submission of recommendations under subsection

15 (c)) and any reference to the Committee on Armed

16 Services of the Senate shall be deemed a reference

17 to an appropriate committee of the Senate (specified

18 by the majority leader of the Senate at the time of

19 submission of recommendations by the Commission

20 under section 302(c)); and

21 (2) any reference to the date on which the

22 President transmits a report shall be deemed a ref23 erence to the date on which the Commission submits

24 recommendations under section 302(c).
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1 SEC. 304. NO TERMINATION OF COMMISSION.

2 Section 14(a)(2)(B) of the Federal Advisory Commit3 tee Act (5 U.S.C. App.; relating to the termination of advi4 sory committees) shall not apply to the Commission.

5 SEC. 305. ESTABLISHMENT OF ANNUAL LIMITS ON OUT6 LAYS.

7 Not later than April 15 of each year (beginning with

8 1997), Congress shall in the concurrent resolution on the

9 budget for the fiscal year beginning on the following Octo10 ber 1 establish a limit on total outlays to be made under

11 the medicare program for the fiscal year.

12 SEC. 306. ENFORCEMENT OF LIMITS THROUGH SEQUES13 TRATION.

14 (a) IN GENERAL.—Part C of the Balanced Budget

15 and Emergency Deficit Control Act of 1985 (2 U.S.C. 900

16 et seq.) is amended by inserting after section 252 the fol17 lowing new section:

18 ‘‘SEC. 252A. SEQUESTRATION WITH RESPECT TO MEDICARE.

19 ‘‘(a) SEQUESTRATION.—If, with respect to a fiscal

20 year (beginning with fiscal year 1998), Congress has not

21 enacted a joint resolution under section 303(b) of the Sen22 ior Citizens Bill of Rights Act of 1996 before the first

23 day of the fiscal year, there shall be a sequestration to

24 eliminate any budgetary excess in the medicare program

25 as described in subsection (b).

26 ‘‘(b) ELIMINATING A BUDGETARY EXCESS.—
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1 ‘‘(1) IN GENERAL.—Outlays under the medicare

2 program shall be reduced during a fiscal year as

3 provided by paragraph (2), as necessary to eliminate

4 any amount by which estimated outlays under the

5 program in the year exceed the limit for such out6 lays established for the year by Congress pursuant

7 to section 305 of the Senior Citizens Bill of Rights

8 Act of 1996.

9 ‘‘(2) REDUCTIONS DESCRIBED.—In carrying

10 out paragraph (1), the President shall—

11 ‘‘(A) reduce payments made under the

12 medicare program by a uniform percentage suf13 ficient to reduce 50 percent of the amount de14 scribed in paragraph (1); and

15 ‘‘(B) increase premiums, deductibles,

16 copayments, and coinsurance required to be

17 paid under the program by a uniform percent18 age sufficient to reduce 50 percent of the

19 amount described in paragraph (1).

20 ‘‘(c) PART-YEAR APPROPRIATIONS AND OMB ESTI21 MATES.—Paragraphs (4) and (7) of section 251(a) shall

22 apply to sequestration of amounts under this section in

23 the same manner as those paragraphs apply to discre24 tionary appropriations and sequestrations under that sec25 tion.
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1 ‘‘(d) COORDINATION WITH OTHER SEQUESTRA2 TION.—

3 ‘‘(1) IN GENERAL.—Reductions under sub4 section (b) for a fiscal year shall supersede any re5 duction otherwise made under section 252 or 253.

6 ‘‘(2) REPORTS.—On the dates specified in sec7 tion 254(a), OMB and CBO shall issue preview, up8 date, and final reports on medicare sequestration

9 under this section. Such reports shall specify—

10 ‘‘(A) the estimated amount described in

11 subsection (b)(1) for the fiscal year;

12 ‘‘(B) the estimated uniform percentage de13 scribed in subsection (b)(2)(A) of the fiscal

14 year; and

15 ‘‘(C) the estimated uniform percentage de16 scribed in subsection (b)(2)(B) of the fiscal

17 year.

18 ‘‘(3) RULES FOR APPLICATION OF REDUC19 TIONS.—The provisions of section 256(d) shall apply

20 to reductions under this section.’’.

21 (b) CLERICAL AMENDMENT.—The table of contents

22 for part C of the Balanced Budget and Emergency Deficit

23 Control Act of 1985 (2 U.S.C. 900 et seq.) is amended

24 by inserting after the item relating to section 252 the fol25 lowing:

‘‘Sec. 252A. Sequestration with respect to medicare.’’.
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1 TITLE IV—HEALTH CARE FRAUD

2 PREVENTION

3 Subtitle A—All-Payer Fraud and

4 Abuse Control Program

5 SEC. 401. ALL-PAYER FRAUD AND ABUSE CONTROL PRO6 GRAM.

7 (a) ESTABLISHMENT OF PROGRAM.—

8 (1) IN GENERAL.—Not later than January 1,

9 1997, the Secretary of Health and Human Services

10 (in this title referred to as the ‘‘Secretary’’), acting

11 through the Office of the Inspector General of the

12 Department of Health and Human Services, and the

13 Attorney General shall establish a program—

14 (A) to coordinate Federal, State, and local

15 law enforcement programs to control fraud and

16 abuse with respect to the delivery of and pay17 ment for health care in the United States,

18 (B) to conduct investigations, audits, eval19 uations, and inspections relating to the delivery

20 of and payment for health care in the United

21 States,

22 (C) to facilitate the enforcement of the

23 provisions of sections 1128, 1128A, and 1128B

24 of the Social Security Act and other statutes

25 applicable to health care fraud and abuse, and
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1 (D) to provide for the modification and es2 tablishment of safe harbors and to issue inter3 pretative rulings and special fraud alerts pursu4 ant to section 403.

5 (2) COORDINATION WITH HEALTH PLANS.—In

6 carrying out the program established under para7 graph (1), the Secretary and the Attorney General

8 shall consult with, and arrange for the sharing of

9 data with representatives of health plans.

10 (3) REGULATIONS.—

11 (A) IN GENERAL.—The Secretary and the

12 Attorney General shall by regulation establish

13 standards to carry out the program under para14 graph (1).

15 (B) INFORMATION STANDARDS.—

16 (i) IN GENERAL.—Such standards

17 shall include standards relating to the fur18 nishing of information by health plans,

19 providers, and others to enable the Sec20 retary and the Attorney General to carry

21 out the program (including coordination

22 with health plans under paragraph (2)).

23 (ii) CONFIDENTIALITY.—Such stand24 ards shall include procedures to assure

25 that such information is provided and uti-
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1 lized in a manner that appropriately pro2 tects the confidentiality of the information

3 and the privacy of individuals receiving

4 health care services and items.

5 (iii) QUALIFIED IMMUNITY FOR PRO6 VIDING INFORMATION.—The provisions of

7 section 1157(a) of the Social Security Act

8 (relating to limitation on liability) shall

9 apply to a person providing information to

10 the Secretary or the Attorney General in

11 conjunction with their performance of du12 ties under this section.

13 (C) DISCLOSURE OF OWNERSHIP INFOR14 MATION.—

15 (i) IN GENERAL.—Such standards

16 shall include standards relating to the dis17 closure of ownership information described

18 in clause (ii) by any entity providing health

19 care services and items.

20 (ii) OWNERSHIP INFORMATION DE21 SCRIBED.—The ownership information de22 scribed in this clause includes—

23 (I) a description of such items

24 and services provided by such entity;
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1 (II) the names and unique physi2 cian identification numbers of all phy3 sicians with a financial relationship

4 (as defined in section 1877(a)(2) of

5 the Social Security Act) with such en6 tity;

7 (III) the names of all other indi8 viduals with such an ownership or in9 vestment interest in such entity; and

10 (IV) any other ownership and re11 lated information required to be dis12 closed by such entity under section

13 1124 or section 1124A of the Social

14 Security Act, except that the Sec15 retary shall establish procedures

16 under which the information required

17 to be submitted under this subclause

18 will be reduced with respect to health

19 care provider entities that the Sec20 retary determines will be unduly bur21 dened if such entities are required to

22 comply fully with this subclause.

23 (4) AUTHORIZATION OF APPROPRIATIONS FOR

24 INVESTIGATORS AND OTHER PERSONNEL.—In addi25 tion to any other amounts authorized to be appro-
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1 priated to the Secretary, the Attorney General, the

2 Director of the Federal Bureau of Investigation, and

3 the Inspectors General of the Departments of De4 fense, Labor, and Veterans Affairs and of the Office

5 of Personnel Management, for health care anti-fraud

6 and abuse activities for a fiscal year, there are au7 thorized to be appropriated additional amounts,

8 from the Health Care Fraud and Abuse Account de9 scribed in subsection (b) of this section, as may be

10 necessary to enable the Secretary, the Attorney Gen11 eral, and such Inspectors General to conduct inves12 tigations and audits of allegations of health care

13 fraud and abuse and otherwise carry out the pro14 gram established under paragraph (1) in a fiscal

15 year.

16 (5) ENSURING ACCESS TO DOCUMENTATION.—

17 The Inspector General of the Department of Health

18 and Human Services is authorized to exercise the

19 authority described in paragraphs (4) and (5) of sec20 tion 6 of the Inspector General Act of 1978 (relating

21 to subpoenas and administration of oaths) with re22 spect to the activities under the all-payer fraud and

23 abuse control program established under this sub24 section to the same extent as such Inspector General
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1 may exercise such authorities to perform the func2 tions assigned by such Act.

3 (6) AUTHORITY OF INSPECTOR GENERAL.—

4 Nothing in this Act shall be construed to diminish

5 the authority of any Inspector General, including

6 such authority as provided in the Inspector General

7 Act of 1978.

8 (7) HEALTH PLAN DEFINED.—For the purposes

9 of this subsection, the term ‘‘health plan’’ shall have

10 the meaning given such term in section 1128(i) of

11 the Social Security Act.

12 (b) HEALTH CARE FRAUD AND ABUSE CONTROL AC13 COUNT.—

14 (1) ESTABLISHMENT.—

15 (A) IN GENERAL.—There is hereby estab16 lished an account to be known as the ‘‘Health

17 Care Fraud and Abuse Control Account’’ (in

18 this section referred to as the ‘‘Anti-Fraud Ac19 count’’). The Anti-Fraud Account shall consist

20 of—

21 (i) such gifts and bequests as may be

22 made as provided in subparagraph (B);

23 (ii) such amounts as may be deposited

24 in the Anti-Fraud Account as provided in

25 subsection (a)(4), sections 441(b) and
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1 442(b), and title XI of the Social Security

2 Act; and

3 (iii) such amounts as are transferred

4 to the Anti-Fraud Account under subpara5 graph (C).

6 (B) AUTHORIZATION TO ACCEPT GIFTS.—

7 The Anti-Fraud Account is authorized to accept

8 on behalf of the United States money gifts and

9 bequests made unconditionally to the Anti10 Fraud Account, for the benefit of the Anti11 Fraud Account or any activity financed through

12 the Anti-Fraud Account.

13 (C) TRANSFER OF AMOUNTS.—The Sec14 retary of the Treasury shall transfer to the

15 Anti-Fraud Account an amount equal to the

16 sum of the following:

17 (i) Criminal fines imposed in cases in18 volving a Federal health care offense (as

19 defined in section 982(a)(6)(B) of title 18,

20 United States Code).

21 (ii) Administrative penalties and as22 sessments imposed under titles XI, XVIII,

23 and XIX of the Social Security Act (except

24 as otherwise provided by law).
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1 (iii) Amounts resulting from the for2 feiture of property by reason of a Federal

3 health care offense.

4 (iv) Penalties and damages imposed

5 under the False Claims Act (31 U.S.C.

6 3729 et seq.), in cases involving claims re7 lated to the provision of health care items

8 and services (other than funds awarded to

9 a relator or for restitution).

10 (2) USE OF FUNDS.—

11 (A) IN GENERAL.—Amounts in the Anti12 Fraud Account shall be available to carry out

13 the health care fraud and abuse control pro14 gram established under subsection (a) (includ15 ing the administration of the program), and

16 may be used to cover costs incurred in operat17 ing the program, including costs (including

18 equipment, salaries and benefits, and travel and

19 training) of—

20 (i) prosecuting health care matters

21 (through criminal, civil, and administrative

22 proceedings);

23 (ii) investigations;

24 (iii) financial and performance audits

25 of health care programs and operations;
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1 (iv) inspections and other evaluations;

2 and

3 (v) provider and consumer education

4 regarding compliance with the provisions of

5 this title.

6 (B) FUNDS USED TO SUPPLEMENT AGEN7 CY APPROPRIATIONS.—It is intended that dis8 bursements made from the Anti-Fraud Account

9 to any Federal agency be used to increase and

10 not supplant the recipient agency’s appro11 priated operating budget.

12 (3) ANNUAL REPORT.—The Secretary and the

13 Attorney General shall submit jointly an annual re14 port to Congress on the amount of revenue which is

15 generated and disbursed by the Anti-Fraud Account

16 in each fiscal year.

17 (4) USE OF FUNDS BY INSPECTOR GENERAL.—

18 (A) REIMBURSEMENTS FOR INVESTIGA19 TIONS.—The Inspector General is authorized to

20 receive and retain for current use reimburse21 ment for the costs of conducting investigations,

22 when such restitution is ordered by a court, vol23 untarily agreed to by the payer, or otherwise.

24 (B) CREDITING.—Funds received by the

25 Inspector General or the Inspectors General of
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1 the Departments of Defense, Labor, and Veter2 ans Affairs and of the Office of Personnel Man3 agement, as reimbursement for costs of con4 ducting investigations shall be deposited to the

5 credit of the appropriation from which initially

6 paid, or to appropriations for similar purposes

7 currently available at the time of deposit, and

8 shall remain available for obligation for 1 year

9 from the date of their deposit.

10 SEC. 402. APPLICATION OF CERTAIN FEDERAL HEALTH

11 ANTI-FRAUD AND ABUSE SANCTIONS TO

12 FRAUD AND ABUSE AGAINST ANY HEALTH

13 PLAN.

14 (a) CRIMES.—

15 (1) SOCIAL SECURITY ACT.—Section 1128B of

16 the Social Security Act (42 U.S.C. 1320a–7b) is

17 amended as follows:

18 (A) In the heading, by adding at the end

19 the following: ‘‘OR HEALTH PLANS’’.

20 (B) In subsection (a)(1)—

21 (i) by striking ‘‘title XVIII or’’ and

22 inserting ‘‘title XVIII,’’, and

23 (ii) by adding at the end the follow24 ing: ‘‘or a health plan (as defined in sec25 tion 1128(i)),’’.
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1 (C) In subsection (a)(5), by striking ‘‘title

2 XVIII or a State health care program’’ and in3 serting ‘‘title XVIII, a State health care pro4 gram, or a health plan’’.

5 (D) In the second sentence of subsection

6 (a)—

7 (i) by inserting after ‘‘title XIX’’ the

8 following: ‘‘or a health plan’’, and

9 (ii) by inserting after ‘‘the State’’ the

10 following: ‘‘or the plan’’.

11 (2) IDENTIFICATION OF COMMUNITY SERVICE

12 OPPORTUNITIES.—Section 1128B of such Act (42

13 U.S.C. 1320a–7b) is further amended by adding at

14 the end the following new subsection:

15 ‘‘(f) The Secretary may—

16 ‘‘(1) in consultation with State and local health

17 care officials, identify opportunities for the satisfac18 tion of community service obligations that a court

19 may impose upon the conviction of an offense under

20 this section, and

21 ‘‘(2) make information concerning such oppor22 tunities available to Federal and State law enforce23 ment officers and State and local health care offi24 cials.’’.
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1 (b) HEALTH PLAN DEFINED.—Section 1128 of the

2 Social Security Act (42 U.S.C. 1320a–7) is amended by

3 redesignating subsection (i) as subsection (j) and by in4 serting after subsection (h) the following new subsection:

5 ‘‘(i) HEALTH PLAN DEFINED.—For purposes of sec6 tions 1128A and 1128B, the term ‘health plan’ means a

7 plan that provides health benefits, whether through di8 rectly, through insurance, or otherwise, and includes a pol9 icy of health insurance, a contract of a service benefit or10 ganization, or a membership agreement with a health

11 maintenance organization or other prepaid health plan,

12 and also includes an employee welfare benefit plan or a

13 multiple employer welfare plan (as such terms are defined

14 in section 3 of the Employee Retirement Income Security

15 Act of 1974).’’.

16 (c) EFFECTIVE DATE.—The amendments made by

17 this section shall take effect on January 1, 1997.

18 SEC. 403. HEALTH CARE FRAUD AND ABUSE GUIDANCE.

19 (a) SOLICITATION AND PUBLICATION OF MODIFICA20 TIONS TO EXISTING SAFE HARBORS AND NEW SAFE

21 HARBORS.—

22 (1) IN GENERAL.—

23 (A) SOLICITATION OF PROPOSALS FOR

24 SAFE HARBORS.—Not later than January 1,

25 1997, and not less than annually thereafter, the
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1 Secretary shall publish a notice in the Federal

2 Register soliciting proposals, which will be ac3 cepted during a 60-day period, for—

4 (i) modifications to existing safe har5 bors issued pursuant to section 14(a) of

6 the Medicare and Medicaid Patient and

7 Program Protection Act of 1987 (42

8 U.S.C. 1320a–7b note);

9 (ii) additional safe harbors specifying

10 payment practices that shall not be treated

11 as a criminal offense under section

12 1128B(b) of the Social Security Act the

13 (42 U.S.C. 1320a–7b(b)) and shall not

14 serve as the basis for an exclusion under

15 section 1128(b)(7) of such Act (42 U.S.C.

16 1320a–7(b)(7));

17 (iii) interpretive rulings to be issued

18 pursuant to subsection (b); and

19 (iv) special fraud alerts to be issued

20 pursuant to subsection (c).

21 (B) PUBLICATION OF PROPOSED MODI22 FICATIONS AND PROPOSED ADDITIONAL SAFE

23 HARBORS.—After considering the proposals de24 scribed in clauses (i) and (ii) of subparagraph

25 (A), the Secretary, in consultation with the At-
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1 torney General, shall publish in the Federal

2 Register proposed modifications to existing safe

3 harbors and proposed additional safe harbors, if

4 appropriate, with a 60-day comment period.

5 After considering any public comments received

6 during this period, the Secretary shall issue

7 final rules modifying the existing safe harbors

8 and establishing new safe harbors, as appro9 priate.

10 (C) REPORT.—The Inspector General of

11 the Department of Health and Human Services

12 (hereafter in this section referred to as the ‘‘In13 spector General’’) shall, in an annual report to

14 Congress or as part of the year-end semiannual

15 report required by section 5 of the Inspector

16 General Act of 1978 (5 U.S.C. App.), describe

17 the proposals received under clauses (i) and (ii)

18 of subparagraph (A) and explain which propos19 als were included in the publication described in

20 subparagraph (B), which proposals were not in21 cluded in that publication, and the reasons for

22 the rejection of the proposals that were not in23 cluded.

24 (2) CRITERIA FOR MODIFYING AND ESTABLISH25 ING SAFE HARBORS.—In modifying and establishing
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1 safe harbors under paragraph (1)(B), the Secretary

2 may consider the extent to which providing a safe

3 harbor for the specified payment practice may result

4 in any of the following:

5 (A) An increase or decrease in access to

6 health care services.

7 (B) An increase or decrease in the quality

8 of health care services.

9 (C) An increase or decrease in patient free10 dom of choice among health care providers.

11 (D) An increase or decrease in competition

12 among health care providers.

13 (E) An increase or decrease in the ability

14 of health care facilities to provide services in

15 medically underserved areas or to medically un16 derserved populations.

17 (F) An increase or decrease in the cost to

18 Government health care programs.

19 (G) An increase or decrease in the poten20 tial overutilization of health care services.

21 (H) The existence or nonexistence of any

22 potential financial benefit to a health care pro23 fessional or provider which may vary based on

24 their decisions of—
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1 (i) whether to order a health care

2 item or service; or

3 (ii) whether to arrange for a referral

4 of health care items or services to a par5 ticular practitioner or provider.

6 (I) Any other factors the Secretary deems

7 appropriate in the interest of preventing fraud

8 and abuse in Government health care programs.

9 (b) INTERPRETIVE RULINGS.—

10 (1) IN GENERAL.—

11 (A) REQUEST FOR INTERPRETIVE RUL12 ING.—Any person may present, at any time, a

13 request to the Inspector General for a state14 ment of the Inspector General’s current inter15 pretation of the meaning of a specific aspect of

16 the application of sections 1128A and 1128B of

17 the Social Security Act (hereafter in this sec18 tion referred to as an ‘‘interpretive ruling’’).

19 (B) ISSUANCE AND EFFECT OF INTERPRE20 TIVE RULING.—

21 (i) IN GENERAL.—If appropriate, the

22 Inspector General shall in consultation

23 with the Attorney General, issue an inter24 pretive ruling in response to a request de25 scribed in subparagraph (A). Interpretive
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1 rulings shall not have the force of law and

2 shall be treated as an interpretive rule

3 within the meaning of section 553(b) of

4 title 5, United States Code. All interpretive

5 rulings issued pursuant to this provision

6 shall be published in the Federal Register

7 or otherwise made available for public in8 spection.

9 (ii) REASONS FOR DENIAL.—If the In10 spector General does not issue an interpre11 tive ruling in response to a request de12 scribed in subparagraph (A), the Inspector

13 General shall notify the requesting party of

14 such decision and shall identify the reasons

15 for such decision.

16 (2) CRITERIA FOR INTERPRETIVE RULINGS.—

17 (A) IN GENERAL.—In determining whether

18 to issue an interpretive ruling under paragraph

19 (1)(B), the Inspector General may consider—

20 (i) whether and to what extent the re21 quest identifies an ambiguity within the

22 language of the statute, the existing safe

23 harbors, or previous interpretive rulings;

24 and
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1 (ii) whether the subject of the re2 quested interpretive ruling can be ade3 quately addressed by interpretation of the

4 language of the statute, the existing safe

5 harbor rules, or previous interpretive rul6 ings, or whether the request would require

7 a substantive ruling not authorized under

8 this subsection.

9 (B) NO RULINGS ON FACTUAL ISSUES.—

10 The Inspector General shall not give an inter11 pretive ruling on any factual issue, including

12 the intent of the parties or the fair market

13 value of particular leased space or equipment.

14 (c) SPECIAL FRAUD ALERTS.—

15 (1) IN GENERAL.—

16 (A) REQUEST FOR SPECIAL FRAUD

17 ALERTS.—Any person may present, at any

18 time, a request to the Inspector General for a

19 notice which informs the public of practices

20 which the Inspector General considers to be

21 suspect or of particular concern under section

22 1128B(b) of the Social Security Act (42 U.S.C.

23 1320a–7b(b)) (hereafter in this subsection re24 ferred to as a ‘‘special fraud alert’’).
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1 (B) ISSUANCE AND PUBLICATION OF SPE2 CIAL FRAUD ALERTS.—Upon receipt of a re3 quest described in subparagraph (A), the In4 spector General shall investigate the subject

5 matter of the request to determine whether a

6 special fraud alert should be issued. If appro7 priate, the Inspector General shall in consulta8 tion with the Attorney General, issue a special

9 fraud alert in response to the request. All spe10 cial fraud alerts issued pursuant to this sub11 paragraph shall be published in the Federal

12 Register.

13 (2) CRITERIA FOR SPECIAL FRAUD ALERTS.—

14 In determining whether to issue a special fraud alert

15 upon a request described in paragraph (1), the In16 spector General may consider—

17 (A) whether and to what extent the prac18 tices that would be identified in the special

19 fraud alert may result in any of the con20 sequences described in subsection (a)(2); and

21 (B) the volume and frequency of the con22 duct that would be identified in the special

23 fraud alert.
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1 SEC. 404. REPORTING OF FRAUDULENT ACTIONS UNDER

2 MEDICARE.

3 Not later than 1 year after the date of the enactment

4 of this Act, the Secretary shall establish a program

5 through which individuals entitled to benefits under the

6 medicare program may report to the Secretary on a con7 fidential basis (at the individual’s request) instances of

8 suspected fraudulent actions arising under the program by

9 providers of items and services under the program.

10 Subtitle B—Revisions to Current

11 Sanctions for Fraud and Abuse

12 SEC. 411. MANDATORY EXCLUSION FROM PARTICIPATION

13 IN MEDICARE AND STATE HEALTH CARE PRO14 GRAMS.

15 (a) INDIVIDUAL CONVICTED OF FELONY RELATING

16 TO FRAUD.—

17 (1) IN GENERAL.—Section 1128(a) of the So18 cial Security Act (42 U.S.C. 1320a–7(a)) is amend19 ed by adding at the end the following new para20 graph:

21 ‘‘(3) FELONY CONVICTION RELATING TO

22 FRAUD.—Any individual or entity that has been con23 victed after the date of the enactment of the Senior

24 Citizens Bill of Rights Act of 1996, under Federal

25 or State law, in connection with the delivery of a

26 health care item or service or with respect to any act
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1 or omission in a program (other than those specifi2 cally described in paragraph (1)) operated by or fi3 nanced in whole or in part by any Federal, State, or

4 local government agency, of a criminal offense con5 sisting of a felony relating to fraud, theft, embezzle6 ment, breach of fiduciary responsibility, or other fi7 nancial misconduct.’’.

8 (2) CONFORMING AMENDMENT.—Section

9 1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))

10 is amended—

11 (A) in the heading, by striking ‘‘CONVIC12 TION’’ and inserting ‘‘MISDEMEANOR CONVIC13 TION’’; and

14 (B) by striking ‘‘criminal offense’’ and in15 serting ‘‘criminal offense consisting of a mis16 demeanor’’.

17 (b) INDIVIDUAL CONVICTED OF FELONY RELATING

18 TO CONTROLLED SUBSTANCE.—

19 (1) IN GENERAL.—Section 1128(a) of the So20 cial Security Act (42 U.S.C. 1320a–7(a)), as amend21 ed by subsection (a), is amended by adding at the

22 end the following new paragraph:

23 ‘‘(4) FELONY CONVICTION RELATING TO CON24 TROLLED SUBSTANCE.—Any individual or entity

25 that has been convicted after the date of the enact-
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1 ment of the Senior Citizens Bill of Rights Act of

2 1996, under Federal or State law, of a criminal of3 fense consisting of a felony relating to the unlawful

4 manufacture, distribution, prescription, or dispens5 ing of a controlled substance.’’.

6 (2) CONFORMING AMENDMENT.—Section

7 1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))

8 is amended—

9 (A) in the heading, by striking ‘‘CONVIC10 TION’’ and inserting ‘‘MISDEMEANOR CONVIC11 TION’’; and

12 (B) by striking ‘‘criminal offense’’ and in13 serting ‘‘criminal offense consisting of a mis14 demeanor’’.

15 SEC. 412. ESTABLISHMENT OF MINIMUM PERIOD OF EX16 CLUSION FOR CERTAIN INDIVIDUALS AND

17 ENTITIES SUBJECT TO PERMISSIVE EXCLU18 SION FROM MEDICARE AND STATE HEALTH

19 CARE PROGRAMS.

20 Section 1128(c)(3) of the Social Security Act (42

21 U.S.C. 1320a–7(c)(3)) is amended by adding at the end

22 the following new subparagraphs:

23 ‘‘(D) In the case of an exclusion of an individual or

24 entity under paragraph (1), (2), or (3) of subsection (b),

25 the period of the exclusion shall be 3 years, unless the
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1 Secretary determines in accordance with published regula2 tions that a shorter period is appropriate because of miti3 gating circumstances or that a longer period is appro4 priate because of aggravating circumstances.

5 ‘‘(E) In the case of an exclusion of an individual or

6 entity under subsection (b)(4) or (b)(5), the period of the

7 exclusion shall not be less than the period during which

8 the individual’s or entity’s license to provide health care

9 is revoked, suspended, or surrendered, or the individual

10 or the entity is excluded or suspended from a Federal or

11 State health care program.

12 ‘‘(F) In the case of an exclusion of an individual or

13 entity under subsection (b)(6)(B), the period of the exclu14 sion shall be not less than 1 year.’’.

15 SEC. 413. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

16 OWNERSHIP OR CONTROL INTEREST IN

17 SANCTIONED ENTITIES.

18 Section 1128(b) of the Social Security Act (42 U.S.C.

19 1320a–7(b)) is amended by adding at the end the follow20 ing new paragraph:

21 ‘‘(15) INDIVIDUALS CONTROLLING A SANC22 TIONED ENTITY.—Any individual who has a direct

23 or indirect ownership or control interest of 5 percent

24 or more, or an ownership or control interest (as de25 fined in section 1124(a)(3)) in, or who is an officer,
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1 director, agent, or managing employee (as defined in

2 section 1126(b)) of, an entity—

3 ‘‘(A) that has been convicted of any of4 fense described in subsection (a) or in para5 graph (1), (2), or (3) of this subsection;

6 ‘‘(B) against which a civil monetary pen7 alty has been assessed under section 1128A; or

8 ‘‘(C) that has been excluded from partici9 pation under a program under title XVIII or

10 under a State health care program.’’.

11 SEC. 414. SANCTIONS AGAINST PRACTITIONERS AND PER12 SONS FOR FAILURE TO COMPLY WITH STATU13 TORY OBLIGATIONS.

14 (a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI15 TIONERS AND PERSONS FAILING TO MEET STATUTORY

16 OBLIGATIONS.—

17 (1) IN GENERAL.—The second sentence of sec18 tion 1156(b)(1) of the Social Security Act (42

19 U.S.C. 1320c–5(b)(1)) is amended by striking ‘‘may

20 prescribe)’’ and inserting ‘‘may prescribe, except

21 that such period may not be less than 1 year)’’.

22 (2) CONFORMING AMENDMENT.—Section

23 1156(b)(2) of such Act (42 U.S.C. 1320c–5(b)(2)) is

24 amended by striking ‘‘shall remain’’ and inserting
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1 ‘‘shall (subject to the minimum period specified in

2 the second sentence of paragraph (1)) remain’’.

3 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI4 TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)

5 of the Social Security Act (42 U.S.C. 1320c–5(b)(1)) is

6 amended—

7 (1) in the second sentence, by striking ‘‘and de8 termines’’ and all that follows through ‘‘such obliga9 tions,’’; and

10 (2) by striking the third sentence.

11 SEC. 415. INTERMEDIATE SANCTIONS FOR MEDICARE

12 HEALTH MAINTENANCE ORGANIZATIONS.

13 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

14 ANY PROGRAM VIOLATIONS.—

15 (1) IN GENERAL.—Section 1876(i)(1) of the

16 Social Security Act (42 U.S.C. 1395mm(i)(1)) is

17 amended by striking ‘‘the Secretary may terminate’’

18 and all that follows and inserting the following: ‘‘in

19 accordance with procedures established under para20 graph (9), the Secretary may at any time terminate

21 any such contract or may impose the intermediate

22 sanctions described in paragraph (6)(B) or (6)(C)

23 (whichever is applicable) on the eligible organization

24 if the Secretary determines that the organization—
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1 ‘‘(A) has failed substantially to carry out

2 the contract;

3 ‘‘(B) is carrying out the contract in a man4 ner inconsistent with the efficient and effective

5 administration of this section; or

6 ‘‘(C) no longer substantially meets the ap7 plicable conditions of subsections (b), (c), (e),

8 and (f).’’.

9 (2) OTHER INTERMEDIATE SANCTIONS FOR

10 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

11 1876(i)(6) of such Act (42 U.S.C. 1395mm(i)(6)) is

12 amended by adding at the end the following new

13 subparagraph:

14 ‘‘(C) In the case of an eligible organization for which

15 the Secretary makes a determination under paragraph (1)

16 the basis of which is not described in subparagraph (A),

17 the Secretary may apply the following intermediate sanc18 tions:

19 ‘‘(i) Civil money penalties of not more than

20 $25,000 for each determination under paragraph (1)

21 if the deficiency that is the basis of the determina22 tion has directly adversely affected (or has the sub23 stantial likelihood of adversely affecting) an individ24 ual covered under the organization’s contract.
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1 ‘‘(ii) Civil money penalties of not more than

2 $10,000 for each week beginning after the initiation

3 of procedures by the Secretary under paragraph (9)

4 during which the deficiency that is the basis of a de5 termination under paragraph (1) exists.

6 ‘‘(iii) Suspension of enrollment of individuals

7 under this section after the date the Secretary noti8 fies the organization of a determination under para9 graph (1) and until the Secretary is satisfied that

10 the deficiency that is the basis for the determination

11 has been corrected and is not likely to recur.’’.

12 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

13 Section 1876(i) of such Act (42 U.S.C. 1395mm(i))

14 is amended by adding at the end the following new

15 paragraph:

16 ‘‘(9) The Secretary may terminate a contract with an

17 eligible organization under this section or may impose the

18 intermediate sanctions described in paragraph (6) on the

19 organization in accordance with formal investigation and

20 compliance procedures established by the Secretary under

21 which—

22 ‘‘(A) the Secretary provides the organization

23 with the opportunity to develop and implement a

24 corrective action plan to correct the deficiencies that
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1 were the basis of the Secretary’s determination

2 under paragraph (1);

3 ‘‘(B) in deciding whether to impose sanctions,

4 the Secretary considers aggravating factors such as

5 whether an entity has a history of deficiencies or has

6 not taken action to correct deficiencies the Secretary

7 has brought to their attention;

8 ‘‘(C) there are no unreasonable or unnecessary

9 delays between the finding of a deficiency and the

10 imposition of sanctions; and

11 ‘‘(D) the Secretary provides the organization

12 with reasonable notice and opportunity for hearing

13 (including the right to appeal an initial decision) be14 fore imposing any sanction or terminating the con15 tract.’’.

16 (4) CONFORMING AMENDMENTS.—Section

17 1876(i)(6)(B) of such Act (42 U.S.C.

18 1395mm(i)(6)(B)) is amended by striking the sec19 ond sentence.

20 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA21 TIONS.—

22 (1) REQUIREMENT FOR WRITTEN AGREE23 MENT.—Section 1876(i)(7)(A) of the Social Security

24 Act (42 U.S.C. 1395mm(i)(7)(A)) is amended by
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1 striking ‘‘an agreement’’ and inserting ‘‘a written

2 agreement’’.

3 (2) DEVELOPMENT OF MODEL AGREEMENT.—

4 Not later than July 1, 1996, the Secretary shall de5 velop a model of the agreement that an eligible orga6 nization with a risk-sharing contract under section

7 1876 of the Social Security Act must enter into with

8 an entity providing peer review services with respect

9 to services provided by the organization under sec10 tion 1876(i)(7)(A) of such Act.

11 (3) REPORT BY GAO.—

12 (A) STUDY.—The Comptroller General of

13 the United States shall conduct a study of the

14 costs incurred by eligible organizations with

15 risk-sharing contracts under section 1876(b) of

16 such Act of complying with the requirement of

17 entering into a written agreement with an en18 tity providing peer review services with respect

19 to services provided by the organization, to20 gether with an analysis of how information gen21 erated by such entities is used by the Secretary

22 to assess the quality of services provided by

23 such eligible organizations.

24 (B) REPORT TO CONGRESS.—Not later

25 than July 1, 1999, the Comptroller General
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1 shall submit a report to the Committee on

2 Ways and Means and the Committee on Energy

3 and Commerce of the House of Representatives

4 and the Committee on Finance and the Special

5 Committee on Aging of the Senate on the study

6 conducted under subparagraph (A).

7 (c) EFFECTIVE DATE.—The amendments made by

8 this section shall apply with respect to contract years be9 ginning on or after January 1, 1997.

10 SEC. 416. EFFECTIVE DATE.

11 The amendments made by this part shall take effect

12 January 1, 1997.

13 Subtitle C—Administrative and

14 Miscellaneous Provisions

15 SEC. 421. ESTABLISHMENT OF THE HEALTH CARE FRAUD

16 AND ABUSE DATA COLLECTION PROGRAM.

17 (a) GENERAL PURPOSE.—Not later than January 1,

18 1997, the Secretary shall establish a national health care

19 fraud and abuse data collection program for the reporting

20 of final adverse actions (not including settlements in which

21 no findings of liability have been made) against health

22 care providers, suppliers, or practitioners as required by

23 subsection (b), with access as set forth in subsection (c).

24 (b) REPORTING OF INFORMATION.—
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1 (1) IN GENERAL.—Each government agency

2 and health plan shall report any final adverse action

3 (not including settlements in which no findings of li4 ability have been made) taken against a health care

5 provider, supplier, or practitioner.

6 (2) INFORMATION TO BE REPORTED.—The in7 formation to be reported under paragraph (1) in8 cludes:

9 (A) The name of any health care provider,

10 supplier, or practitioner who is the subject of a

11 final adverse action.

12 (B) The name (if known) of any health

13 care entity with which a health care provider,

14 supplier, or practitioner is affiliated or associ15 ated.

16 (C) The nature of the final adverse action.

17 (D) A description of the acts or omissions

18 and injuries upon which the final adverse action

19 was based, and such other information as the

20 Secretary determines by regulation is required

21 for appropriate interpretation of information re22 ported under this section.

23 (3) CONFIDENTIALITY.—In determining what

24 information is required, the Secretary shall include

25 procedures to assure that the privacy of individuals
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1 receiving health care services is appropriately pro2 tected.

3 (4) TIMING AND FORM OF REPORTING.—The

4 information required to be reported under this sub5 section shall be reported regularly (but not less often

6 than monthly) and in such form and manner as the

7 Secretary prescribes. Such information shall first be

8 required to be reported on a date specified by the

9 Secretary.

10 (5) TO WHOM REPORTED.—The information re11 quired to be reported under this subsection shall be

12 reported to the Secretary.

13 (c) DISCLOSURE AND CORRECTION OF INFORMA14 TION.—

15 (1) DISCLOSURE.—With respect to the informa16 tion about final adverse actions (not including settle17 ments in which no findings of liability have been

18 made) reported to the Secretary under this section

19 respecting a health care provider, supplier, or practi20 tioner, the Secretary shall, by regulation, provide

21 for—

22 (A) disclosure of the information, upon re23 quest, to the health care provider, supplier, or

24 licensed practitioner, and
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1 (B) procedures in the case of disputed ac2 curacy of the information.

3 (2) CORRECTIONS.—Each Government agency

4 and health plan shall report corrections of informa5 tion already reported about any final adverse action

6 taken against a health care provider, supplier, or

7 practitioner, in such form and manner that the Sec8 retary prescribes by regulation.

9 (d) ACCESS TO REPORTED INFORMATION.—

10 (1) AVAILABILITY.—The information in this

11 database shall be available to Federal and State gov12 ernment agencies and health plans pursuant to pro13 cedures that the Secretary shall provide by regula14 tion.

15 (2) FEES FOR DISCLOSURE.—The Secretary

16 may establish or approve reasonable fees for the dis17 closure of information in this database. The amount

18 of such a fee may not exceed the costs of processing

19 the requests for disclosure and of providing such in20 formation. Such fees shall be available to the Sec21 retary or, in the Secretary’s discretion to the agency

22 designated under this section to cover such costs.

23 (e) PROTECTION FROM LIABILITY FOR REPORT24 ING.—No person or entity, including the agency des25 ignated by the Secretary in subsection (b)(5) shall be held
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1 liable in any civil action with respect to any report made

2 as required by this section, without knowledge of the fal3 sity of the information contained in the report.

4 (f) DEFINITIONS AND SPECIAL RULES.—For pur5 poses of this section:

6 (1) The term ‘‘final adverse action’’ includes:

7 (A) Civil judgments against a health care

8 provider in Federal or State court related to the

9 delivery of a health care item or service.

10 (B) Federal or State criminal convictions

11 related to the delivery of a health care item or

12 service.

13 (C) Actions by Federal or State agencies

14 responsible for the licensing and certification of

15 health care providers, suppliers, and licensed

16 health care practitioners, including—

17 (i) formal or official actions, such as

18 revocation or suspension of a license (and

19 the length of any such suspension), rep20 rimand, censure or probation,

21 (ii) any other loss of license of the

22 provider, supplier, or practitioner, by oper23 ation of law, or
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1 (iii) any other negative action or find2 ing by such Federal or State agency that

3 is publicly available information.

4 (D) Exclusion from participation in Fed5 eral or State health care programs.

6 (E) Any other adjudicated actions or deci7 sions that the Secretary shall establish by regu8 lation.

9 (2) The terms ‘‘licensed health care practi10 tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’

11 mean, with respect to a State, an individual who is

12 licensed or otherwise authorized by the State to pro13 vide health care services (or any individual who,

14 without authority holds himself or herself out to be

15 so licensed or authorized).

16 (3) The term ‘‘health care provider’’ means a

17 provider of services as defined in section 1861(u) of

18 the Social Security Act, and any entity, including a

19 health maintenance organization, group medical

20 practice, or any other entity listed by the Secretary

21 in regulation, that provides health care services.

22 (4) The term ‘‘supplier’’ means a supplier of

23 health care items and services described in section

24 1819 (a) and (b), and section 1861 of the Social Se25 curity Act.
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1 (5) The term ‘‘Government agency’’ shall in2 clude:

3 (A) The Department of Justice.

4 (B) The Department of Health and

5 Human Services.

6 (C) Any other Federal agency that either

7 administers or provides payment for the deliv8 ery of health care services, including, but not

9 limited to the Department of Defense and the

10 Veterans’ Administration.

11 (D) State law enforcement agencies.

12 (E) State medicaid fraud and abuse units.

13 (F) Federal or State agencies responsible

14 for the licensing and certification of health care

15 providers and licensed health care practitioners.

16 (6) The term ‘‘health plan’’ has the meaning

17 given to such term by section 1128(i) of the Social

18 Security Act.

19 (7) For purposes of paragraph (2), the exist20 ence of a conviction shall be determined under para21 graph (4) of section 1128(j) of the Social Security

22 Act.

23 (g) CONFORMING AMENDMENT.—Section 1921(d) of

24 the Social Security Act is amended by inserting ‘‘and sec25 tion 421 of the Senior Citizens Bill of Rights Act of 1996’’
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1 after ‘‘section 422 of the Health Care Quality Improve2 ment Act of 1986’’.

3 Subtitle D—Civil Monetary

4 Penalties

5 SEC. 431. CIVIL MONETARY PENALTIES.

6 (a) GENERAL CIVIL MONETARY PENALTIES.—Sec7 tion 1128A of the Social Security Act (42 U.S.C. 1320a–

8 7a) is amended as follows:

9 (1) In subsection (a)(1), by inserting ‘‘or of any

10 health plan (as defined in section 1128(i)),’’ after

11 ‘‘subsection (i)(1)),’’.

12 (2) In subsection (f)—

13 (A) by redesignating paragraph (3) as

14 paragraph (4); and

15 (B) by inserting after paragraph (2) the

16 following new paragraphs:

17 ‘‘(3) With respect to amounts recovered arising

18 out of a claim under a health plan, the portion of

19 such amounts as is determined to have been paid by

20 the plan shall be repaid to the plan, and the portion

21 of such amounts attributable to the amounts recov22 ered under this section by reason of the amendments

23 made by title IV of the Senior Citizens Bill of Rights

24 Act of 1996 (as estimated by the Secretary) shall be

25 deposited into the Health Care Fraud and Abuse
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1 Control Account established under section 101(b) of

2 such Act.’’.

3 (3) In subsection (i)—

4 (A) in paragraph (2), by inserting ‘‘or

5 under a health plan’’ before the period at the

6 end, and

7 (B) in paragraph (5), by inserting ‘‘or

8 under a health plan’’ after ‘‘or XX’’.

9 (b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

10 OR CONTROL INTEREST IN PARTICIPATING ENTITY.—

11 Section 1128A(a) of the Social Security Act (42 U.S.C.

12 1320a–7a(a)) is amended—

13 (1) by striking ‘‘or’’ at the end of paragraph

14 (1)(D);

15 (2) by striking ‘‘, or’’ at the end of paragraph

16 (2) and inserting a semicolon;

17 (3) by striking the semicolon at the end of

18 paragraph (3) and inserting ‘‘; or’’; and

19 (4) by inserting after paragraph (3) the follow20 ing new paragraph:

21 ‘‘(4) in the case of a person who is not an orga22 nization, agency, or other entity, is excluded from

23 participating in a program under title XVIII or a

24 State health care program in accordance with this

25 subsection or under section 1128 and who, at the
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1 time of a violation of this subsection, retains a direct

2 or indirect ownership or control interest of 5 percent

3 or more, or an ownership or control interest (as de4 fined in section 1124(a)(3)) in, or who is an officer,

5 director, agent, or managing employee (as defined in

6 section 1126(b)) of, an entity that is participating in

7 a program under title XVIII or a State health care

8 program;’’.

9 (c) MODIFICATIONS OF AMOUNTS OF PENALTIES

10 AND ASSESSMENTS.—Section 1128A(a) of the Social Se11 curity Act (42 U.S.C. 1320a–7a(a)), as amended by sub12 section (b), is amended in the matter following paragraph

13 (4)—

14 (1) by striking ‘‘$2,000’’ and inserting

15 ‘‘$10,000’’;

16 (2) by inserting ‘‘; in cases under paragraph

17 (4), $10,000 for each day the prohibited relationship

18 occurs’’ after ‘‘false or misleading information was

19 given’’; and

20 (3) by striking ‘‘twice the amount’’ and insert21 ing ‘‘3 times the amount’’.

22 (d) CLAIM FOR ITEM OR SERVICE BASED ON INCOR23 RECT CODING OR MEDICALLY UNNECESSARY SERV24 ICES.—Section 1128A(a)(1) of the Social Security Act (42

25 U.S.C. 1320a–7a(a)(1)) is amended—
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1 (1) in subparagraph (A) by striking ‘‘claimed,’’

2 and inserting the following: ‘‘claimed, including any

3 person who repeatedly presents or causes to be pre4 sented a claim for an item or service that is based

5 on a code that the person knows or should know will

6 result in a greater payment to the person than the

7 code the person knows or should know is applicable

8 to the item or service actually provided,’’;

9 (2) in subparagraph (C), by striking ‘‘or’’ at

10 the end;

11 (3) in subparagraph (D), by striking ‘‘; or’’ and

12 inserting ‘‘, or’’; and

13 (4) by inserting after subparagraph (D) the fol14 lowing new subparagraph:

15 ‘‘(E) is for a medical or other item or serv16 ice that a person repeatedly knows or should

17 know is not medically necessary; or’’.

18 (e) PERMITTING SECRETARY TO IMPOSE CIVIL MON19 ETARY PENALTY.—Section 1128A(b) of the Social Secu20 rity Act (42 U.S.C. 1320a–7a(a)) is amended by adding

21 the following new paragraph:

22 ‘‘(3) Any person (including any organization,

23 agency, or other entity, but excluding a beneficiary

24 as defined in subsection (i)(5)) who the Secretary

25 determines has violated section 1128B(b) of this
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1 title shall be subject to a civil monetary penalty of

2 not more than $10,000 for each such violation. In

3 addition, such person shall be subject to an assess4 ment of not more than twice the total amount of the

5 remuneration offered, paid, solicited, or received in

6 violation of section 1128B(b). The total amount of

7 remuneration subject to an assessment shall be cal8 culated without regard to whether some portion

9 thereof also may have been intended to serve a pur10 pose other than one proscribed by section

11 1128B(b).’’.

12 (f) SANCTIONS AGAINST PRACTITIONERS AND PER13 SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLI14 GATIONS.—Section 1156(b)(3) of the Social Security Act

15 (42 U.S.C. 1320c–5(b)(3)) is amended by striking ‘‘the

16 actual or estimated cost’’ and inserting the following: ‘‘up

17 to $10,000 for each instance’’.

18 (g) PROCEDURAL PROVISIONS.—Section 1876(i)(6)

19 of such Act (42 U.S.C. 1395mm(i)(6)) is further amended

20 by adding at the end the following new subparagraph:

21 ‘‘(D) The provisions of section 1128A (other than

22 subsections (a) and (b)) shall apply to a civil money pen23 alty under subparagraph (A) or (B) in the same manner

24 as they apply to a civil money penalty or proceeding under

25 section 1128A(a).’’.
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1 (h) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect January 1, 1997.

3 (i) PROHIBITION AGAINST OFFERING INDUCEMENTS

4 TO INDIVIDUALS ENROLLED UNDER PROGRAMS OR

5 PLANS.—

6 (1) OFFER OF REMUNERATION.—Section

7 1128A(a) of the Social Security Act (42 U.S.C.

8 1320a–7a(a)) is amended—

9 (A) by striking ‘‘or’’ at the end of para10 graph (1)(D);

11 (B) by striking ‘‘, or’’ at the end of para12 graph (2) and inserting a semicolon;

13 (C) by striking the semicolon at the end of

14 paragraph (3) and inserting ‘‘; or’’; and

15 (D) by inserting after paragraph (3) the

16 following new paragraph:

17 ‘‘(4) offers to or transfers remuneration to any

18 individual eligible for benefits under title XVIII of

19 this Act, or under a State health care program (as

20 defined in section 1128(h)) that such person knows

21 or should know is likely to influence such individual

22 to order or receive from a particular provider, practi23 tioner, or supplier any item or service for which pay24 ment may be made, in whole or in part, under title

25 XVIII, or a State health care program;’’.
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1 (2) REMUNERATION DEFINED.—Section

2 1128A(i) of such Act (42 U.S.C. 1320a–7a(i)) is

3 amended by adding the following new paragraph:

4 ‘‘(6) The term ‘remuneration’ includes the waiv5 er of coinsurance and deductible amounts (or any

6 part thereof), and transfers of items or services for

7 free or for other than fair market value. The term

8 ‘remuneration’ does not include—

9 ‘‘(A) the waiver of coinsurance and deduct10 ible amounts by a person, if—

11 ‘‘(i) the waiver is not offered as part

12 of any advertisement or solicitation;

13 ‘‘(ii) the person does not routinely

14 waive coinsurance or deductible amounts;

15 and

16 ‘‘(iii) the person—

17 ‘‘(I) waives the coinsurance and

18 deductible amounts after determining

19 in good faith that the individual is in

20 financial need;

21 ‘‘(II) fails to collect coinsurance

22 or deductible amounts after making

23 reasonable collection efforts; or

24 ‘‘(III) provides for any permis25 sible waiver as specified in section
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1 1128B(b)(3) or in regulations issued

2 by the Secretary;

3 ‘‘(B) differentials in coinsurance and de4 ductible amounts as part of a benefit plan de5 sign as long as the differentials have been dis6 closed in writing to all third party payors to

7 whom claims are presented and as long as the

8 differentials meet the standards as defined in

9 regulations promulgated by the Secretary; or

10 ‘‘(C) incentives given to individuals to pro11 mote the delivery of preventive care as deter12 mined by the Secretary in regulations.’’.

13 Subtitle E—Amendments to

14 Criminal Law

15 SEC. 441. HEALTH CARE FRAUD.

16 (a) IN GENERAL.—

17 (1) FINES AND IMPRISONMENT FOR HEALTH

18 CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,

19 United States Code, is amended by adding at the

20 end the following new section:

21 ‘‘§ 1347. Health care fraud

22 ‘‘(a) Whoever knowingly executes, or attempts to exe23 cute, a scheme or artifice—
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1 ‘‘(1) to defraud any health plan or other per2 son, in connection with the delivery of or payment

3 for health care benefits, items, or services; or

4 ‘‘(2) to obtain, by means of false or fraudulent

5 pretenses, representations, or promises, any of the

6 money or property owned by, or under the custody

7 or control of, any health plan, or person in connec8 tion with the delivery of or payment for health care

9 benefits, items, or services;

10 shall be fined under this title or imprisoned not more than

11 10 years, or both. If the violation results in serious bodily

12 injury (as defined in section 1365(g)(3) of this title), such

13 person shall be imprisoned for any term of years.

14 ‘‘(b) For purposes of this section, the term ‘health

15 plan’ has the same meaning given such term in section

16 1128(i) of the Social Security Act.’’.

17 (2) CLERICAL AMENDMENT.—The table of sec18 tions at the beginning of chapter 63 of title 18,

19 United States Code, is amended by adding at the

20 end the following:

‘‘1347. Health care fraud.’’.

21 (b) CRIMINAL FINES DEPOSITED IN THE HEALTH

22 CARE FRAUD AND ABUSE CONTROL ACCOUNT.—The Sec23 retary of the Treasury shall deposit into the Health Care

24 Fraud and Abuse Control Account established under sec25 tion 401(b) an amount equal to the criminal fines imposed
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1 under section 1347 of title 18, United States Code (relat2 ing to health care fraud).

3 SEC. 442. FORFEITURES FOR FEDERAL HEALTH CARE OF4 FENSES.

5 (a) IN GENERAL.—Section 982(a) of title 18, United

6 States Code, is amended by adding after paragraph (5)

7 the following new paragraph:

8 ‘‘(6)(A) The court, in imposing sentence on a person

9 convicted of a Federal health care offense, shall order the

10 person to forfeit property, real or personal, that—

11 ‘‘(i) is used in the commission of the offense if

12 the offense results in a financial loss or gain of

13 $50,000 or more; or

14 ‘‘(ii) constitutes or is derived from proceeds

15 traceable to the commission of the offense.

16 ‘‘(B) For purposes of this paragraph, the term ‘Fed17 eral health care offense’ means a violation of, or a criminal

18 conspiracy to violate—

19 ‘‘(i) section 1347 of this title;

20 ‘‘(ii) section 1128B of the Social Security Act;

21 ‘‘(iii) sections 287, 371, 664, 666, 1001, 1027,

22 1341, 1343, or 1954 of this title if the violation or

23 conspiracy relates to health care fraud; and
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1 ‘‘(iv) section 501 or 511 of the Employee Re2 tirement Income Security Act of 1974, if the viola3 tion or conspiracy relates to health care fraud.’’.

4 (b) PROPERTY FORFEITED DEPOSITED IN HEALTH

5 CARE FRAUD AND ABUSE CONTROL ACCOUNT.—The Sec6 retary of the Treasury shall deposit into the Health Care

7 Fraud and Abuse Control Account established under sec8 tion 401(b) an amount equal to amounts resulting from

9 forfeiture of property by reason of a Federal health care

10 offense pursuant to section 982(a)(6) of title 18, United

11 States Code.

12 SEC. 443. INJUNCTIVE RELIEF RELATING TO FEDERAL

13 HEALTH CARE OFFENSES.

14 (a) IN GENERAL.—Section 1345(a)(1) of title 18,

15 United States Code, is amended—

16 (1) by striking ‘‘or’’ at the end of subparagraph

17 (A);

18 (2) by inserting ‘‘or’’ at the end of subpara19 graph (B); and

20 (3) by adding at the end the following:

21 ‘‘(C) committing or about to commit a

22 Federal health care offense (as defined in sec23 tion 982(a)(6)(B) of this title);’’.

24 (b) FREEZING OF ASSETS.—Section 1345(a)(2) of

25 title 18, United States Code, is amended by inserting ‘‘or
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1 a Federal health care offense (as defined in section

2 982(a)(6)(B))’’ after ‘‘title)’’.

3 SEC. 444. GRAND JURY DISCLOSURE.

4 Section 3322 of title 18, United States Code, is

5 amended—

6 (1) by redesignating subsections (c) and (d) as

7 subsections (d) and (e), respectively; and

8 (2) by inserting after subsection (b) the follow9 ing:

10 ‘‘(c) A person who is privy to grand jury information

11 concerning a Federal health care offense (as defined in

12 section 982(a)(6)(B))—

13 ‘‘(1) received in the course of duty as an attor14 ney for the Government; or

15 ‘‘(2) disclosed under rule 6(e)(3)(A)(ii) of the

16 Federal Rules of Criminal Procedure;

17 may disclose that information to an attorney for the Gov18 ernment to use in any investigation or civil proceeding re19 lating to health care fraud.’’.

20 SEC. 445. FALSE STATEMENTS.

21 (a) IN GENERAL.—Chapter 47, of title 18, United

22 States Code, is amended by adding at the end the follow23 ing:
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1 ‘‘§ 1033. False statements relating to health care mat2 ters

3 ‘‘Whoever, in any matter involving a health plan,

4 knowingly and willfully falsifies, conceals, or covers up by

5 any trick, scheme, or device a material fact, or makes any

6 false, fictitious, or fraudulent statements or representa7 tions, or makes or uses any false writing or document

8 knowing the same to contain any false, fictitious, or fraud9 ulent statement or entry, shall be fined under this title

10 or imprisoned not more than 5 years, or both.’’.

11 (b) CLERICAL AMENDMENT.—The table of sections

12 at the beginning of chapter 47 of title 18, United States

13 Code, is amended by adding at the end the following:

‘‘1033. False statements relating to health care matters.’’.

14 SEC. 446. VOLUNTARY DISCLOSURE PROGRAM.

15 In consultation with the Attorney General of the

16 United States, the Secretary of Health and Human Serv17 ices shall publish proposed regulations not later than 9

18 months after the date of enactment of this Act, and final

19 regulations not later than 18 months after such date of

20 enactment, establishing a program of voluntary disclosure

21 that would facilitate the enforcement of sections 1128A

22 and 1128B of the Social Security Act (42 U.S.C. 1320a–

23 7a and 1320a–7b) and other relevant provisions of Fed24 eral law relating to health care fraud and abuse. Such pro25 gram should promote and provide incentives for disclo-
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1 sures of potential violations of such sections and provi2 sions by providing that, under certain circumstances, the

3 voluntary disclosure of wrongdoing would result in the im4 position of penalties and punishments less substantial

5 than those that would be assessed for the same wrong6 doing if voluntary disclosure did not occur.

7 SEC. 447. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF

8 FEDERAL HEALTH CARE OFFENSES.

9 (a) IN GENERAL.—Chapter 73 of title 18, United

10 States Code, is amended by adding at the end the follow11 ing new section:

12 ‘‘§ 1518. Obstruction of criminal investigations of

13 Federal health care offenses

14 ‘‘(a) IN GENERAL.—Whoever willfully prevents, ob15 structs, misleads, delays or attempts to prevent, obstruct,

16 mislead, or delay the communication of information or

17 records relating to a Federal health care offense to a

18 criminal investigator shall be fined under this title or im19 prisoned not more than 5 years, or both.

20 ‘‘(b) FEDERAL HEALTH CARE OFFENSE.—As used

21 in this section the term ‘Federal health care offense’ has

22 the same meaning given such term in section 982(a)(6)(B)

23 of this title.

24 ‘‘(c) CRIMINAL INVESTIGATOR.—As used in this sec25 tion the term ‘criminal investigator’ means any individual
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1 duly authorized by a department, agency, or armed force

2 of the United States to conduct or engage in investigations

3 for prosecutions for violations of health care offenses.’’.

4 (b) CLERICAL AMENDMENT.—The table of sections

5 at the beginning of chapter 73 of title 18, United States

6 Code, in amended by adding at the end the following:

‘‘1518. Obstruction of criminal investigations of Federal health care offenses.’’.

7 SEC. 448. THEFT OR EMBEZZLEMENT.

8 (a) IN GENERAL.—Chapter 31 of title 18, United

9 States Code, is amended by adding at the end the follow10 ing new section:

11 ‘‘§ 669. Theft or embezzlement in connection with

12 health care

13 ‘‘(a) IN GENERAL.—Whoever willfully embezzles,

14 steals, or otherwise without authority willfully and unlaw15 fully converts to the use of any person other than the

16 rightful owner, or intentionally misapplies any of the mon17 eys, funds, securities, premiums, credits, property, or

18 other assets of a health care benefit program, shall be

19 fined under this title or imprisoned not more than 10

20 years, or both.

21 ‘‘(b) FEDERAL HEALTH CARE OFFENSE.—As used

22 in this section the term ‘Federal health care offense’ has

23 the same meaning given such term in section 982(a)(6)(B)

24 of this title.’’.
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 at the beginning of chapter 31 of title 18, United States

3 Code, is amended by adding at the end the following:

‘‘669. Theft or embezzlement in connection with health care.’’.

4 SEC. 449. LAUNDERING OF MONETARY INSTRUMENTS.

5 Section 1956(c)(7) of title 18, United States Code,

6 is amended by adding at the end the following new sub7 paragraph:

8 ‘‘(F) Any act or activity constituting an of9 fense involving a Federal health care offense as

10 that term is defined in section 982(a)(6)(B) of

11 this title.’’.

12 Subtitle F—Payments for State

13 Health Care Fraud Control Units

14 SEC. 451. ESTABLISHMENT OF STATE FRAUD UNITS.

15 (a) ESTABLISHMENT OF HEALTH CARE FRAUD AND

16 ABUSE CONTROL UNIT.—The Governor of each State

17 shall, consistent with State law, establish and maintain in

18 accordance with subsection (b) a State agency to act as

19 a Health Care Fraud and Abuse Control Unit for purposes

20 of this part.

21 (b) DEFINITION.—In this section, a ‘‘State Fraud

22 Unit’’ means a Health Care Fraud and Abuse Control

23 Unit designated under subsection (a) that the Secretary

24 certifies meets the requirements of this part.
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1 SEC. 452. REQUIREMENTS FOR STATE FRAUD UNITS.

2 (a) IN GENERAL.—The State Fraud Unit must—

3 (1) be a single identifiable entity of the State

4 government;

5 (2) be separate and distinct from any State

6 agency with principal responsibility for the adminis7 tration of any Federally-funded or mandated health

8 care program;

9 (3) meet the other requirements of this section.

10 (b) SPECIFIC REQUIREMENTS DESCRIBED.—The

11 State Fraud Unit shall—

12 (1) be a Unit of the office of the State Attorney

13 General or of another department of State govern14 ment which possesses statewide authority to pros15 ecute individuals for criminal violations;

16 (2) if it is in a State the constitution of which

17 does not provide for the criminal prosecution of indi18 viduals by a statewide authority and has formal pro19 cedures, (A) assure its referral of suspected criminal

20 violations to the appropriate authority or authorities

21 in the State for prosecution, and (B) assure its as22 sistance of, and coordination with, such authority or

23 authorities in such prosecutions; or

24 (3) have a formal working relationship with the

25 office of the State Attorney General or the appro26 priate authority or authorities for prosecution and
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1 have formal procedures (including procedures for its

2 referral of suspected criminal violations to such of3 fice) which provide effective coordination of activities

4 between the Fraud Unit and such office with respect

5 to the detection, investigation, and prosecution of

6 suspected criminal violations relating to any Feder7 ally-funded or mandated health care programs.

8 (c) STAFFING REQUIREMENTS.—The State Fraud

9 Unit shall—

10 (1) employ attorneys, auditors, investigators

11 and other necessary personnel; and

12 (2) be organized in such a manner and provide

13 sufficient resources as is necessary to promote the

14 effective and efficient conduct of State Fraud Unit

15 activities.

16 (d) COOPERATIVE AGREEMENTS; MEMORANDA OF

17 UNDERSTANDING.—The State Fraud Unit shall have co18 operative agreements with—

19 (1) Federally-funded or mandated health care

20 programs;

21 (2) similar Fraud Units in other States, as ex22 emplified through membership and participation in

23 the National Association of Medicaid Fraud Control

24 Units or its successor; and

25 (3) the Secretary.
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1 (e) REPORTS.—The State Fraud Unit shall submit

2 to the Secretary an application and an annual report con3 taining such information as the Secretary determines to

4 be necessary to determine whether the State Fraud Unit

5 meets the requirements of this section.

6 (f) FUNDING SOURCE; PARTICIPATION IN ALL7 PAYER PROGRAM.—In addition to those sums expended

8 by a State under section 454(a) for purposes of determin9 ing the amount of the Secretary’s payments, a State

10 Fraud Unit may receive funding for its activities from

11 other sources, the identity of which shall be reported to

12 the Secretary in its application or annual report. The

13 State Fraud Unit shall participate in the all-payer fraud

14 and abuse control program established under section 101.

15 SEC. 453. SCOPE AND PURPOSE.

16 The State Fraud Unit shall carry out the following

17 activities:

18 (1) The State Fraud Unit shall conduct a state19 wide program for the investigation and prosecution

20 (or referring for prosecution) of violations of all ap21 plicable state laws regarding any and all aspects of

22 fraud in connection with any aspect of the adminis23 tration and provision of health care services and ac24 tivities of providers of such services under any Fed25 erally-funded or mandated health care programs;
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1 (2) The State Fraud Unit shall have procedures

2 for reviewing complaints of the abuse or neglect of

3 patients of facilities (including patients in residential

4 facilities and home health care programs) that re5 ceive payments under any Federally-funded or man6 dated health care programs, and, where appropriate,

7 to investigate and prosecute such complaints under

8 the criminal laws of the State or for referring the

9 complaints to other State agencies for action.

10 (3) The State Fraud Unit shall provide for the

11 collection, or referral for collection to the appro12 priate agency, of overpayments that are made under

13 any Federally-funded or mandated health care pro14 gram and that are discovered by the State Fraud

15 Unit in carrying out its activities.

16 SEC. 454. PAYMENTS TO STATES.

17 (a) MATCHING PAYMENTS TO STATES.—Subject to

18 subsection (c), for each year for which a State has a State

19 Fraud Unit approved under section 602(b) in operation

20 the Secretary shall provide for a payment to the State for

21 each quarter in a fiscal year in an amount equal to the

22 applicable percentage of the sums expended during the

23 quarter by the State Fraud Unit.

24 (b) APPLICABLE PERCENTAGE DEFINED.—
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1 (1) IN GENERAL.—In subsection (a), the ‘‘ap2 plicable percentage’’ with respect to a State for a

3 fiscal year is—

4 (A) 90 percent, for quarters occurring dur5 ing the first 3 years for which the State Fraud

6 Unit is in operation; or

7 (B) 75 percent, for any other quarters.

8 (2) TREATMENT OF STATES WITH MEDICAID

9 FRAUD CONTROL UNITS.—In the case of a State

10 with a State medicaid fraud control in operation

11 prior to or as of the date of the enactment of this

12 Act, in determining the number of years for which

13 the State Fraud Unit under this part has been in

14 operation, there shall be included the number of

15 years for which such State medicaid fraud control

16 unit was in operation.

17 (c) LIMIT ON PAYMENT.—Notwithstanding sub18 section (a), the total amount of payments made to a State

19 under this section for a fiscal year may not exceed the

20 amounts as authorized pursuant to section 1903(b)(3) of

21 the Social Security Act.

Æ