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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3070 Reported in House (RH)]

                                                 Union Calendar No. 249

104th CONGRESS

  2d Session

                               H. R. 3070

                      [Report No. 104-497, Part I]

_______________________________________________________________________

                                 A BILL

 To improve portability and continuity of health insurance coverage in 
the group and individual markets, to combat waste, fraud, and abuse in 
    health insurance and health care delivery, and to simplify the 
                  administration of health insurance.

_______________________________________________________________________

                             March 29, 1996

     Committees on Ways and Means, the Judiciary, and Economic and 
Educational Opportunities discharged; committed to the Committee of the 
    Whole House on the State of the Union and ordered to be printed

                                                 Union Calendar No. 249
104th CONGRESS
  2d Session
                                H. R. 3070

                      [Report No. 104-497, Part I]

 To improve portability and continuity of health insurance coverage in 
the group and individual markets, to combat waste, fraud, and abuse in 
    health insurance and health care delivery, and to simplify the 
                  administration of health insurance.
_______________________________________________________________________
                    IN THE HOUSE OF REPRESENTATIVES

                             March 12, 1996

  Mr. Bilirakis (for himself and Mr. Bliley) introduced the following 
bill; which was referred to the Committee on Commerce, and in addition 
 to the Committees on Ways and Means, the Judiciary, and Economic and 
 Educational Opportunities, 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

                             March 25, 1996

       Reported from the Committee on Commerce with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                             March 25, 1996

   Referral to the Committees on Ways and Means, the Judiciary, and 
Economic and Educational Opportunities extended for a period ending not 
                       later than March 29, 1996
                             March 29, 1996

 Additional sponsors: Mr. Hastert, Mr. Gillmor, Mr. Stearns, Mr. Klug, 
                      Mr. Norwood, and Mr. Weller

                             March 29, 1996

     Committees on Ways and Means, the Judiciary, and Economic and 
Educational Opportunities discharged; committed to the Committee of the 
    Whole House on the State of the Union and ordered to be printed
 [For text of introduced bill, see copy of bill as introduced on March 
                               12, 1996]
_______________________________________________________________________

                                 A BILL

 
 To improve portability and continuity of health insurance coverage in 
the group and individual markets, to combat waste, fraud, and abuse in 
    health insurance and health care delivery, and to simplify the 
                  administration of health insurance.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Coverage 
Availability and Affordability Act of 1996''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.

  TITLE I--IMPROVED AVAILABILITY AND PORTABILITY OF HEALTH INSURANCE 
                                COVERAGE

             Subtitle A--Coverage Under Group Health Plans

Sec. 101. Portability of coverage for previously covered individuals.
Sec. 102. Limitation on preexisting condition exclusions; no 
                            application to certain newborns, adopted 
                            children, and pregnancy.
Sec. 103. Prohibiting exclusions based on health status and providing 
                            for enrollment periods.
Sec. 104. Enforcement.

Subtitle B--Certain Requirements for Insurers and HMOs in the Group and 
                           Individual Markets

        Part 1--Availability of Group Health Insurance Coverage

Sec. 131. Guaranteed availability of general coverage in the small 
                            group market.
Sec. 132. Guaranteed renewability of group coverage.

      Part 2--Availability of Individual Health Insurance Coverage

Sec. 141. Guaranteed availability of individual health insurance 
                            coverage to certain individuals with prior 
                            group coverage.
Sec. 142. Guaranteed renewability of individual health insurance 
                            coverage.

                          Part 3--Enforcement

Sec. 151. Incorporation of provisions for State enforcement with 
                            Federal fallback authority.

       Subtitle C--Sense of Committee on Additional Requirements

Sec. 161. Sense of Committee on Commerce on additional requirements.

              Subtitle D--Definitions; General Provisions

Sec. 191. Definitions; scope of coverage.
Sec. 192. State flexibility to provide greater protection.
Sec. 193. Effective date.
Sec. 194. Rule of construction.

   TITLE II--PREVENTING HEALTH CARE FRAUD AND ABUSE; ADMINISTRATIVE 
                             SIMPLIFICATION

Sec. 200. References in title.

              Subtitle A--Fraud and Abuse Control Program

Sec. 201. Fraud and abuse control program.
Sec. 202. Medicare integrity program.
Sec. 203. Beneficiary incentive programs.
Sec. 204. Application of certain health anti-fraud and abuse sanctions 
                            to fraud and abuse against Federal health 
                            care programs.
Sec. 205. Guidance regarding application of health care fraud and abuse 
                            sanctions.

     Subtitle B--Revisions to Current Sanctions for Fraud and Abuse

Sec. 211. Mandatory exclusion from participation in medicare and State 
                            health care programs.
Sec. 212. Establishment of minimum period of exclusion for certain 
                            individuals and entities subject to 
                            permissive exclusion from medicare and 
                            State health care programs.
Sec. 213. Permissive exclusion of individuals with ownership or control 
                            interest in sanctioned entities.
Sec. 214. Sanctions against practitioners and persons for failure to 
                            comply with statutory obligations.
Sec. 215. Intermediate sanctions for medicare health maintenance 
                            organizations.
Sec. 216. Additional exception to anti-kickback penalties for 
                            discounting and managed care arrangements.
Sec. 217. Criminal penalty for fraudulent disposition of assets in 
                            order to obtain medicaid benefits.
Sec. 218. Effective date.

                      Subtitle C--Data Collection

Sec. 221. Establishment of the health care fraud and abuse data 
                            collection program.

                  Subtitle D--Civil Monetary Penalties

Sec. 231. Social security act civil monetary penalties.
Sec. 232. Clarification of level of intent required for imposition of 
                            sanctions.
Sec. 233. Penalty for false certification for home health services.

                 Subtitle E--Revisions to Criminal Law

Sec. 241. Definition of Federal health care offense.
Sec. 242. Health care fraud.
Sec. 243. Theft or embezzlement.
Sec. 244. False statements.
Sec. 245. Obstruction of criminal investigations of health care 
                            offenses.
Sec. 246. Laundering of monetary instruments.
Sec. 247. Injunctive relief relating to health care offenses.
Sec. 248. Authorized investigative demand procedures.
Sec. 249. Forfeitures for Federal health care offenses.

               Subtitle F--Administrative Simplification

Sec. 251. Purpose.
Sec. 252. Administrative simplification.

                ``Part C--Administrative Simplification

        ``Sec. 1171. Definitions.
        ``Sec. 1172. General requirements for adoption of standards.
        ``Sec. 1173. Standards for information transactions and data 
                            elements.
        ``Sec. 1174. Timetables for adoption of standards.
        ``Sec. 1175. Requirements.
        ``Sec. 1176. General penalty for failure to comply with 
                            requirements and standards.
        ``Sec. 1177. Wrongful disclosure of individually identifiable 
                            health information.
        ``Sec. 1178. Effect on State law.
        ``Sec. 1179. Health Information Advisory Committee.

  TITLE I--IMPROVED AVAILABILITY AND PORTABILITY OF HEALTH INSURANCE 
                                COVERAGE

             Subtitle A--Coverage Under Group Health Plans

SEC. 101. PORTABILITY OF COVERAGE FOR PREVIOUSLY COVERED INDIVIDUALS.

    (a) Crediting Periods of Previous Coverage Toward Preexisting 
Condition Restrictions.--Subject to the succeeding provisions of this 
section, a group health plan, and an insurer or health maintenance 
organization offering health insurance coverage in connection with a 
group health plan, shall provide that any preexisting condition 
limitation period (as defined in subsection (b)(2)) is reduced by the 
length of the aggregate period of qualified prior coverage (if any, as 
defined in subsection (b)(3)) applicable to the participant or 
beneficiary as of the date of commencement of coverage under the plan.
    (b) Definitions and Other Provisions Relating to Preexisting 
Conditions.--
            (1) Preexisting condition.--
                    (A) In general.--For purposes of this subtitle, 
                subject to subparagraph (B), the term ``preexisting 
                condition'' means a condition, regardless of the cause 
                of the condition, for which medical advice, diagnosis, 
                care, or treatment was recommended or received within 
                the 6-month period ending on the day before--
                            (i) the effective date of the coverage of 
                        such participant or beneficiary, or
                            (ii) the earliest date upon which such 
                        coverage could have been effective if there 
                        were no waiting period applicable,
                whichever is earlier.
                    (B) Treatment of genetic information.--For purposes 
                of this section, genetic information shall not be 
                considered to be a preexisting condition, so long as 
                treatment of the condition to which the information is 
                applicable has not been sought during the 6-month 
                period described in subparagraph (A).
            (2) Preexisting condition limitation period.--For purposes 
        of this subtitle, the term ``preexisting condition limitation 
        period'' means, with respect to coverage of an individual under 
        a group health plan or under health insurance coverage, the 
        period during which benefits with respect to treatment of a 
        condition of such individual are not provided based on the fact 
        that the condition is a preexisting condition.
            (3) Aggregate period of qualified prior coverage.--
                    (A) In general.--For purposes of this section, the 
                term ``aggregate period of qualified prior coverage'' 
                means, with respect to commencement of coverage of an 
                individual under a group health plan or health 
                insurance coverage offered in connection with a group 
                health plan, the aggregate of the qualified coverage 
                periods (as defined in subparagraph (B)) of such 
                individual occurring before the date of such 
                commencement. Such period shall be treated as zero if 
                there is more than a 60-day break in coverage under a 
                group health plan (or health insurance coverage offered 
                in connection with such a plan) between the date the 
                most recent qualified coverage period ends and the date 
                of such commencement.
                    (B) Qualified coverage period.--
                            (i) In general.--For purposes of this 
                        paragraph, subject to subsection (c), the term 
                        ``qualified coverage period'' means, with 
                        respect to an individual, any period of 
                        coverage of the individual under a group health 
                        plan, health insurance coverage, under title 
                        XVIII or XIX of the Social Security Act, 
                        coverage under the TRICARE program under 
                        chapter 55 of title 10, United States Code, a 
                        program of the Indian Health Service, and State 
                        health insurance coverage or risk pool, and 
                        includes coverage under a health plan offered 
                        under chapter 89 of title 5, United States 
                        Code.
                            (ii) Disregarding periods before breaks in 
                        coverage.--Such term does not include any 
                        period occurring before any 60-day break in 
                        coverage described in subparagraph (A).
                    (C) Waiting period not treated as a break in 
                coverage.--For purposes of subparagraphs (A) and (B), 
                any period that is in a waiting period for any coverage 
                under a group health plan (or for health insurance 
                coverage offered in connection with a group health 
                plan) shall not be considered to be a break in coverage 
                described in subparagraph (B)(ii).
                    (D) Establishment of period.--A qualified coverage 
                period with respect to an individual shall be 
                established through presentation of certifications 
                described in subsection (c) or in such other manner as 
                may be specified in regulations to carry out this 
                section.
    (c) Certifications of Coverage; Conforming Coverage.--
            (1) In general.--The plan administrator of a group health 
        plan, or the insurer or HMO offering health insurance coverage 
        in connection with a group health plan, shall, on request made 
        on behalf of an individual covered (or previously covered 
        within the previous 18 months) under the plan or coverage, 
        provide for a certification of the period of coverage of the 
        individual under such plan or coverage and of the waiting 
        period (if any) imposed with respect to the individual for any 
        coverage under the plan.
            (2) Standard method.--Subject to paragraph (3), a group 
        health plan, or insurer or HMO offering health insurance 
        coverage in connection with a group health plan, shall 
        determine qualified coverage periods under subsection (b)(3)(B) 
        by including all periods described in such subsection, without 
        regard to the specific benefits offered during such a period.
            (3) Alternative method.--Such a plan, insurer, or HMO may 
        elect to make such determination on a benefit-specific basis 
        for all participants and beneficiaries and not to include as a 
        qualified coverage period with respect to a specific benefit 
        coverage during a previous period unless such previous coverage 
        for that benefit was included at the end of the most recent 
        period of coverage. In the case of such an election--
                    (A) the plan, insurer, or HMO shall prominently 
                state in any disclosure statements concerning the plan 
                or coverage and to each enrollee at the time of 
                enrollment under the plan (or at the time the health 
                insurance coverage is offered for sale in the group 
                health market) that the plan or coverage has made such 
                election and shall include a description of the effect 
                of this election; and
                    (B) upon the request of the plan, insurer, or HMO, 
                the entity providing a certification under paragraph 
                (1)--
                            (i) shall promptly disclose to the 
                        requesting plan, insurer, or HMO the plan 
                        statement (insofar as it relates to health 
                        benefits under the plan) or other detailed 
                        benefit information on the benefits available 
                        under the previous plan or coverage, and
                            (ii) may charge for the reasonable cost of 
                        providing such information.

SEC. 102. LIMITATION ON PREEXISTING CONDITION EXCLUSIONS; NO 
              APPLICATION TO CERTAIN NEWBORNS, ADOPTED CHILDREN, AND 
              PREGNANCY.

    (a) Limitation of Period.--
            (1) In general.--Subject to the succeeding provisions of 
        this section, a group health plan, and an insurer or HMO 
        offering health insurance coverage in connection with a group 
        health plan, shall provide that any preexisting condition 
        limitation period (as defined in section 101(b)(2)) does not 
        exceed 12 months, counting from the effective date of coverage.
            (2) Extension of period in the case of late enrollment.--In 
        the case of a participant or beneficiary whose initial coverage 
        commences after the date the participant or beneficiary first 
        becomes eligible for coverage under the group health plan, the 
        reference in paragraph (1) to ``12 months'' is deemed a 
        reference to ``18 months''.
    (b) Exclusion Not Applicable to Certain Newborns and Certain 
Adoptions.--
            (1) In general.--Subject to paragraph (2), a group health 
        plan, and an insurer or HMO offering health insurance coverage 
        in connection with a group health plan, may not provide any 
        limitation on benefits based on the existence of a preexisting 
        condition in the case of--
                    (A) an individual who within the 30-day period 
                beginning with the date of birth, or
                    (B) an adopted child or a child placed for adoption 
                beginning at the time of adoption or placement if the 
                individual, within the 30-day period beginning on the 
                date of adoption or placement,
        becomes covered under a group health plan or otherwise becomes 
        covered under health insurance coverage (or covered for medical 
        assistance under title XIX of the Social Security Act).
            (2) Loss if break in coverage.--Paragraph (1) shall no 
        longer apply to an individual if the individual does not have 
        any coverage described in section 101(b)(3)(B)(i) for a 
        continuous period of 60 days, not counting in such period any 
        days that are in a waiting period for any coverage under a 
        group health plan.
            (3) Placed for adoption defined.--In this subsection and 
        section 103(d), the term ``placement'', or being ``placed'', 
        for adoption, in connection with any placement for adoption of 
        a child with any person, means the assumption and retention by 
        such person of a legal obligation for total or partial support 
        of such child in anticipation of adoption of such child. The 
        child's placement with such person terminates upon the 
        termination of such legal obligation.
    (c) Exclusion Not Applicable to Pregnancy.--For purposes of this 
section, pregnancy shall not be treated as a preexisting condition.
    (d) Eligibility Period Imposed by Health Maintenance Organizations 
as Alternative to Preexisting Condition Limitation.--A health 
maintenance organization which offers health insurance coverage in 
connection with a group health plan and which does not use the 
preexisting condition limitations allowed under this section and 
section 101 with respect to any particular coverage option may impose 
an eligibility period for such coverage option, but only if such period 
does not exceed--
            (1) 60 days, in the case of a participant or beneficiary 
        whose initial coverage commences at the time such participant 
        or beneficiary first becomes eligible for coverage under the 
        plan, or
            (2) 90 days, in the case of a participant or beneficiary 
        whose initial coverage commences after the date on which such 
        participant or beneficiary first becomes eligible for coverage.
Such an HMO may use alternative methods, from those described in the 
previous sentence, to address adverse selection as approved by the 
applicable State authority. For purposes of this subsection, the term 
``eligibility period'' means a period which, under the terms of the 
health insurance coverage offered by the health maintenance 
organization, must expire before the health insurance coverage becomes 
effective. Any such eligibility period shall be treated for purposes of 
this subtitle as a waiting period under the plan and shall run 
concurrently with any other applicable waiting period under the plan.

SEC. 103. PROHIBITING EXCLUSIONS BASED ON HEALTH STATUS AND PROVIDING 
              FOR ENROLLMENT PERIODS.

    (a) Prohibition of Exclusion of Participants or Beneficiaries Based 
on Health Status.--
            (1) In general.--A group health plan, and an insurer or HMO 
        offering health insurance coverage in connection with a group 
        health plan, may not exclude an employee or his or her 
        beneficiary from being (or continuing to be) a participant or 
        beneficiary under the terms of such plan or coverage based on 
        health status (as defined in section 191(c)(6)).
            (2) Construction.--Nothing in this subsection shall be 
        construed as preventing the establishment of preexisting 
        condition limitations and restrictions to the extent consistent 
        with the provisions of this subtitle.
    (b) Enrollment of Eligible Individuals Who Lose Other Coverage.--A 
group health plan shall permit an uncovered employee who is otherwise 
eligible for coverage under the terms of the plan (or an uncovered 
dependent, as defined under the terms of the plan, of such an employee, 
if family coverage is available) to enroll for coverage under the plan 
under at least one benefit option if each of the following conditions 
is met:
            (1) The employee or dependent was covered under a group 
        health plan or had health insurance coverage at the time 
        coverage was previously offered to the employee or individual.
            (2) The employee stated in writing at such time that 
        coverage under a group health plan or health insurance coverage 
        was the reason for declining enrollment.
            (3) The employee or dependent lost coverage under a group 
        health plan or health insurance coverage (as a result of loss 
        of eligibility for the coverage, termination of employment, or 
        reduction in the number of hours of employment).
            (4) The employee requests such enrollment within 30 days 
        after the date of termination of such coverage.
    (c) Dependent Beneficiaries.--
            (1) In general.--If a group health plan makes family 
        coverage available, the plan may not require, as a condition of 
        coverage of an individual as a dependent (as defined under the 
        terms of the plan) of a participant in the plan, a waiting 
        period applicable to the coverage of a dependent who--
                    (A) is a newborn,
                    (B) is an adopted child or child placed for 
                adoption (within the meaning of section 102(b)(3)), at 
                the time of adoption or placement, or
                    (C) is a spouse, at the time of marriage,
        if the participant has met any waiting period applicable to 
        that participant.
            (2) Timely enrollment.--
                    (A) In general.--Enrollment of a participant's 
                beneficiary described in paragraph (1) shall be 
                considered to be timely if a request for enrollment is 
                made within 30 days of the date family coverage is 
                first made available or, in the case described in--
                            (i) paragraph (1)(A), within 30 days of the 
                        date of the birth,
                            (ii) paragraph (1)(B), within 30 days of 
                        the date of the adoption or placement for 
                        adoption, or
                            (iii) paragraph (1)(C), within 30 days of 
                        the date of the marriage with such a 
                        beneficiary who is the spouse of the 
                        participant,
                if family coverage is available as of such date.
                    (B) Coverage.--If available coverage includes 
                family coverage and enrollment is made under such 
                coverage on a timely basis under subparagraph (A), the 
                coverage shall become effective not later than the 
                first day of the first month beginning 15 days after 
                the date the completed request for enrollment is 
                received.

SEC. 104. ENFORCEMENT.

    (a) Enforcement Through COBRA Provisions in Internal Revenue 
Code.--
            (1) Application of cobra sanctions.--Subsection (a) of 
        section 4980B of the Internal Revenue Code of 1986 is amended 
        by striking ``the requirements of'' and all that follows and 
        inserting ``the requirements of--
            ``(1) subsection (f) with respect to any qualified 
        beneficiary, or
            ``(2) subject to subsection (h)--
                    ``(A) section 101 or 102 of the Health Coverage 
                Availability and Affordability Act of 1996 with respect 
                to any individual covered under the group health plan, 
                or
                    ``(B) section 103 of such Act with respect to any 
                individual.''.
            (2) Notice requirement.--Section 4980B(f)(6)(A) of such 
        Code is amended by inserting before the period the following: 
        ``and subtitle A of title I of the Health Coverage Availability 
and Affordability Act of 1996''.
            (3) Special rules.--Section 4980B of such Code is amended 
        by adding at the end the following:
    ``(h) Special Rules.--For purposes of applying this section in the 
case of requirements described in subsection (a)(2) relating to section 
101, section 102, or section 103 of the Health Coverage Availability 
and Affordability Act of 1996--
            ``(1) Deferral to state regulation.--No tax shall be 
        imposed by this section on any failure to meet the requirements 
        of such section by any entity which offers health insurance 
        coverage and which is an insurer or health maintenance 
        organization (as defined in section 191(c) of the Health 
        Coverage Availability and Affordability Act of 1996) regulated 
        by a State if the Secretary of Health and Human Services has 
        made the determination described in section 104(c)(2) of such 
        Act with respect to such State, section, and entity.
            ``(2) Limitation for insured plans.--In the case of a group 
        health plan of a small employer (as defined in section 191 of 
        the Health Coverage Availability and Affordability Act of 1996) 
        that provides health care benefits solely through a contract 
        with an insurer or health maintenance organization (as defined 
        in such section), no tax shall be imposed by this section upon 
        the employer on a failure to meet such requirements if the 
        failure is solely because of the product offered by the insurer 
        or organization under such contract.
            ``(3) Limitation on imposition of tax.--In no case shall a 
        tax be imposed by this section for a failure to meet such a 
        requirement if a sanction has been imposed--
                    ``(A) by the Secretary of Labor under part 5 of 
                subtitle A of title I of the Employee Retirement Income 
                Security Act of 1974 with respect to such failure, or
                    ``(B) by the Secretary of Health and Human Services 
                under section 109 of the Health Coverage Availability 
                and Affordability Act of 1996 with respect to such 
                failure.''.
    (b) Enforcement Through ERISA Sanctions for Certain Group Health 
Plans.--
            (1) In general.--Subject to the succeeding provisions of 
        this subsection, sections 101 through 103 of this subtitle 
        shall be deemed to be provisions of title I of the Employee 
        Retirement Income Security Act of 1974 for purposes of applying 
        such title.
            (2) Federal enforcement only if no enforcement through 
        state.--The Secretary of Labor shall enforce each section 
        referred to in paragraph (1) with respect to any entity which 
        is an insurer or health maintenance organization regulated by a 
        State only if the Secretary of Labor determines that--
                    (A) such State has not provided for enforcement of 
                State laws which govern the same matters as are 
                governed by such section and which require compliance 
                by such entity with at least the same requirements as 
                those provided under such section, and
                    (B) such entity has failed to comply with such 
                requirements of such section as are applicable to such 
                entity.
            (3) Limitations on liability.--
                    (A) No application where failure not discovered 
                exercising reasonable diligence.--No liability shall be 
                imposed under this subsection on the basis of any 
                failure during any period for which it is established 
                to the satisfaction of the Secretary of Labor that none 
                of the persons against whom the liability would be 
                imposed knew, or exercising reasonable diligence would 
                have known, that such failure existed.
                    (B) No application where failure corrected within 
                30 days.--No liability shall be imposed under this 
                subsection on the basis of any failure if such failure 
                was due to reasonable cause and not to willful neglect, 
                and such failure is corrected during the 30-day period 
                beginning on the first day any of the persons against 
                whom the liability would be imposed knew, or exercising 
                reasonable diligence would have known, that such 
                failure existed.
            (4) Avoiding duplication of certain penalties.--In no case 
        shall a civil money penalty be imposed under the authority 
        provided under paragraph (1) for a violation of this subtitle 
        for which an excise tax has been imposed under section 4980B of 
        the Internal Revenue Code of 1986 or a civil money penalty 
        imposed under subsection (c).
    (c) Enforcement Through Civil Money Penalties.--
            (1) Imposition.--
                    (A) In general.--Subject to the succeeding 
                provisions of this subsection, any group health plan, 
                insurer, or organization that fails to meet a 
requirement of this subtitle is subject to a civil money penalty under 
this section.
                    (B) Liability for penalty.--Rules similar to the 
                rules described in section 4980B(e) of the Internal 
                Revenue Code of 1986 for liability for a tax imposed 
                under section 4980B(a) of such Code shall apply to 
                liability for a penalty imposed under subparagraph (A).
                    (C) Amount of penalty.--
                            (i) In general.--The maximum amount of 
                        penalty imposed under this paragraph is $100 
                        for each day for each individual with respect 
                        to which such a failure occurs.
                            (ii) Considerations in imposition.--In 
                        determining the amount of any penalty to be 
                        assessed under this paragraph, the Secretary of 
                        Health and Human Services shall take into 
                        account the previous record of compliance of 
                        the person being assessed with the applicable 
                        requirements of this subtitle, the gravity of 
                        the violation, and the overall limitations for 
                        unintentional failures provided under section 
                        4980B(c)(4) of the Internal Revenue Code of 
                        1986.
                            (iii) Limitations.--
                                    (I) Penalty not to apply where 
                                failure not discovered exercising 
                                reasonable diligence.--No civil money 
                                penalty shall be imposed under this 
                                paragraph on any failure during any 
                                period for which it is established to 
                                the satisfaction of the Secretary that 
                                none of the persons against whom the 
                                penalty would be imposed knew, or 
                                exercising reasonable diligence would 
                                have known, that such failure existed.
                                    (II) Penalty not to apply to 
                                failures corrected within 30 days.--No 
                                civil money penalty shall be imposed 
                                under this paragraph on any failure if 
                                such failure was due to reasonable 
                                cause and not to willful neglect, and 
                                such failure is corrected during the 
                                30-day period beginning on the first 
                                day any of the persons against whom the 
                                penalty would be imposed knew, or 
                                exercising reasonable diligence would 
                                have known, that such failure existed.
                    (D) Administrative review.--
                            (i) Opportunity for hearing.--The person 
                        assessed shall be afforded an opportunity for 
                        hearing by the Secretary upon request made 
                        within 30 days after the date of the issuance 
                        of a notice of assessment. In such hearing the 
                        decision shall be made on the record pursuant 
                        to section 554 of title 5, United States Code. 
                        If no hearing is requested, the assessment 
                        shall constitute a final and unappealable 
                        order.
                            (ii) Hearing procedure.--If a hearing is 
                        requested, the initial agency decision shall be 
                        made by an administrative law judge, and such 
                        decision shall become the final order unless 
                        the Secretary modifies or vacates the decision. 
                        Notice of intent to modify or vacate the 
                        decision of the administrative law judge shall 
                        be issued to the parties within 30 days after 
                        the date of the decision of the judge. A final 
                        order which takes effect under this paragraph 
                        shall be subject to review only as provided 
                        under subparagraph (D).
                    (E) Judicial review.--
                            (i) Filing of action for review.--Any 
                        person against whom an order imposing a civil 
                        money penalty has been entered after an agency 
                        hearing under this paragraph may obtain review 
                        by the United States district court for any 
                        district in which such person is located or the 
                        United States District Court for the District 
                        of Columbia by filing a notice of appeal in 
                        such court within 30 days from the date of such 
                        order, and simultaneously sending a copy of 
                        such notice be registered mail to the 
                        Secretary.
                            (ii) Certification of administrative 
                        record.--The Secretary shall promptly certify 
                        and file in such court the record upon which 
                        the penalty was imposed.
                            (iii) Standard for review.--The findings of 
                        the Secretary shall be set aside only if found 
                        to be unsupported by substantial evidence as 
                        provided by section 706(2)(E) of title 5, 
                        United States Code.
                            (iv) Appeal.--Any final decision, order, or 
                        judgment of such district court concerning such 
                        review shall be subject to appeal as provided 
                        in chapter 83 of title 28 of such Code.
                    (F) Failure to pay assessment; maintenance of 
                action.--
                            (i) Failure to pay assessment.--If any 
                        person fails to pay an assessment after it has 
                        become a final and unappealable order, or after 
                        the court has entered final judgment in favor 
                        of the Secretary, the Secretary shall refer the 
                        matter to the Attorney General who shall 
                        recover the amount assessed by action in the 
                        appropriate United States district court.
                            (ii) Nonreviewability.--In such action the 
                        validity and appropriateness of the final order 
                        imposing the penalty shall not be subject to 
                        review.
                    (G) Payment of penalties.--Except as otherwise 
                provided, penalties collected under this paragraph 
                shall be paid to the Secretary (or other officer) 
                imposing the penalty and shall be available without 
                appropriation and until expended for the purpose of 
                enforcing the provisions with respect to which the 
                penalty was imposed.
            (2) Federal enforcement only if no enforcement through 
        state.--Paragraph (1) shall apply to enforcement of the 
        requirements of section 101, 102, or 103 with respect to any 
        entity which offers health insurance coverage and which is an 
        insurer or HMO regulated by a State if the Secretary of Health 
        and Human Services has determined that such State has not 
        provided for enforcement of State laws which govern the same 
        matters as are governed by such section and which require 
        compliance by such entity with at least the same requirements 
        as those provided under such section.
            (3) Nonduplication of sanctions.--In no case shall a civil 
        money penalty be imposed under this subsection for a violation 
        of this subtitle for which an excise tax has been imposed under 
        section 4980B of the Internal Revenue Code of 1986 or for which 
        a civil money penalty has been imposed under the authority 
        provided under subsection (b).
    (d) Coordination in Administration.--The Secretaries of the 
Treasury, Labor, and Health and Human Services shall issue regulations 
that are nonduplicative to carry out this subtitle. Such regulations 
shall be issued in a manner that assures coordination and 
nonduplication in their activities under this subtitle.

Subtitle B--Certain Requirements for Insurers and HMOs in the Group and 
                           Individual Markets

        PART 1--AVAILABILITY OF GROUP HEALTH INSURANCE COVERAGE

SEC. 131. GUARANTEED AVAILABILITY OF GENERAL COVERAGE IN THE SMALL 
              GROUP MARKET.

    (a) Issuance of Coverage.--
            (1) In general.--Subject to the succeeding subsections of 
        this section, each insurer or HMO that offers health insurance 
        coverage in the small group market in a State--
                    (A) must accept every small employer in the State 
                that applies for such coverage; and
                    (B) must accept for enrollment under such coverage 
                every eligible individual (as defined in paragraph (2)) 
                who applies for enrollment during the initial period in 
                which the individual first becomes eligible for 
                coverage under the group health plan and may not place 
                any restriction which is inconsistent with section 
                103(a) on an individual being a participant or 
beneficiary so long as such individual is an eligible individual.
            (2) Eligible individual defined.--In this section, the term 
        ``eligible individual'' means, with respect to an insurer or 
        HMO that offers health insurance coverage to any small employer 
        in the small group market, such an individual in relation to 
        the employer as shall be determined--
                    (A) in accordance with the terms of such plan,
                    (B) as provided by the insurer or HMO under rules 
                of the insurer or HMO which are uniformly applicable, 
                and
                    (C) in accordance with all applicable State laws 
                governing such insurer or HMO.
    (b) Special Rules for Network Plans and HMOs.--
            (1) In general.--In the case of an insurer that offers 
        health insurance coverage in the small group market through a 
        network plan and in the case of an HMO that offers health 
        insurance coverage in connection with such a plan, the insurer 
        or HMO may--
                    (A) limit the employers that may apply for such 
                coverage to those with eligible individuals whose place 
                of employment or residence is in the service area for 
                such plan or HMO;
                    (B) limit the individuals who may be enrolled under 
                such coverage to those whose place of residence or 
                employment is within the service area for such plan or 
                HMO; and
                    (C) within the service area of such plan or HMO, 
                deny such coverage to such employers if the insurer or 
                HMO demonstrates that--
                            (i) it will not have the capacity to 
                        deliver services adequately to enrollees of any 
                        additional groups because of its obligations to 
                        existing group contract holders and enrollees, 
                        and
                            (ii) it is applying this paragraph 
                        uniformly to all employers without regard to 
                        the claims experience of those employers and 
                        their employees (and their beneficiaries) or 
                        the health status of such employees and 
                        beneficiaries.
            (2) 180-day suspension upon denial of coverage.--An insurer 
        or HMO, upon denying health insurance coverage in any service 
        area in accordance with paragraph (1)(C), may not offer 
        coverage in the small group market within such service area for 
        a period of 180 days after such coverage is denied.
    (c) Special Rule for Financial Capacity Limits.--
            (1) In general.--An insurer or HMO may deny health 
        insurance coverage in the small group market if the insurer or 
        HMO demonstrates to the applicable State authority that--
                    (A) it does not have the financial reserves 
                necessary to underwrite additional coverage, and
                    (B) it is applying this paragraph uniformly to all 
                employers without regard to the claims experience or 
                duration of coverage of those employers and their 
                employees (and their beneficiaries) or the health 
                status of such employees and beneficiaries.
            (2) 180-day suspension upon denial of coverage.--An insurer 
        or HMO upon denying health insurance coverage in connection 
        with group health plans in any service area in accordance with 
        paragraph (1) may not offer coverage in connection with group 
        health plans in the small group market within such service area 
        for a period of 180 days after such coverage is denied.
    (d) Exception to Requirement for Issuance of Coverage by Reason of 
Failure by Plan To Meet Certain Minimum Participation or Contribution 
Rules.--
            (1) In general.--Subsection (a) shall not apply in the case 
        of any group health plan with respect to which--
                    (A) participation rules of an insurer or HMO which 
                are described in paragraph (2) are not met, or
                    (B) contribution rules of an insurer or HMO which 
                are described in paragraph (3) are not met.
            (2) Participation rules.--For purposes of paragraph (1)(A), 
        participation rules (if any) of an insurer or HMO shall be 
        treated as met with respect to a group health plan only if such 
        rules are uniformly applicable and in accordance with 
        applicable State law and the number or percentage of eligible 
        individuals who, under the plan, are participants or 
        beneficiaries equals or exceeds a level which is determined in 
        accordance with such rules.
            (3) Contribution rules.--For purposes of paragraph (1)(B), 
        contribution rules (if any) of an insurer or HMO shall be 
        treated as met with respect to a group health plan only if such 
        rules are in accordance with applicable State law.

SEC. 132. GUARANTEED RENEWABILITY OF GROUP COVERAGE.

    (a) In General.--Except as provided in this section, if an insurer 
or health maintenance organization offers health insurance coverage in 
the small or large group market, the insurer or organization must renew 
or continue in force such coverage at the option of the employer.
    (b) General Exceptions.--An insurer or organization may nonrenew or 
discontinue health insurance coverage offered an employer based only on 
one or more of the following:
            (1) Nonpayment of premiums.--The employer has failed to pay 
        premiums or contributions in accordance with the terms of the 
        health insurance coverage or the insurer or organization has 
        not received timely premium payments.
            (2) Fraud.--The employer has performed an act or practice 
        that constitutes fraud or made an intentional misrepresentation 
        of material fact under the terms of the coverage.
            (3) Violation with participation or contribution rules.--
        The employer has failed to comply with a material plan 
        provision relating to participation or contribution rules in 
        accordance with section 131(d).
            (4) Termination of plan.--Subject to subsection (c), the 
        insurer or organization is ceasing to offer coverage in the 
        small or large group market in a State (or, in the case of a 
        network plan or HMO, in a geographic area).
            (5) Movement outside service area.--The employer has 
        changed the place of employment in such manner that employees 
        and dependents reside and are employed outside the service area 
        of the insurer or organization or outside the area for which 
        the insurer or organization is authorized to do business.
Paragraph (5) shall apply to an insurer or HMO only if it is applied 
uniformly without regard to the claims experience of employers and 
their employees (and their beneficiaries) or the health status of such 
employees and beneficiaries.
    (c) Exceptions for Uniform Termination of Coverage.--
            (1) Particular type of coverage not offered.--In any case 
        in which a insurer or HMO decides to discontinue offering a 
        particular type of health insurance coverage in the small or 
        large group market, coverage of such type may be discontinued 
        by the insurer or organization only if--
                    (A) the insurer or organization provides notice to 
                each employer provided coverage of this type in such 
                market (and participants and beneficiaries covered 
                under such coverage) of such discontinuation at least 
                90 days prior to the date of the discontinuation of 
                such coverage;
                    (B) the insurer or organization offers to each 
                employer in the small employer or large employer market 
                provided coverage of this type, the option to purchase 
                any other health insurance coverage currently being 
                offered by the insurer or organization for employers in 
                such market; and
                    (C) in exercising the option to discontinue 
                coverage of this type and in offering one or more 
                replacement coverage, the insurer or organization acts 
                uniformly without regard to the health status or 
                insurability of participants or beneficiaries covered 
                or new participants or beneficiaries who may become 
                eligible for such coverage.
            (2) Discontinuance of all coverage.--
                    (A) In general.--Subject to subparagraph (C), in 
                any case in which an insurer or HMO elects to 
                discontinue offering all health insurance coverage in 
                the small group market or the large group market, or 
                both markets, in a State, health insurance coverage may 
                be discontinued by the insurer or organization only 
                if--
                            (i) the insurer or organization provides 
                        notice to the applicable State authority and to 
                        each employer (and participants and 
                        beneficiaries covered under such coverage) of 
                        such discontinuation at least 180 days prior to 
                        the date of the expiration of such coverage, 
                        and
                            (ii) all health insurance issued or 
                        delivered for issuance in the State in such 
                        market (or markets) are discontinued and 
                        coverage under such health insurance coverage 
                        in such market (or markets) is not renewed.
                    (B) Prohibition on market reentry.--In the case of 
                a discontinuation under subparagraph (A) in one or both 
                markets, the insurer or organization may not provide 
                for the issuance of any health insurance coverage in 
                the market and State involved during the 5-year period 
                beginning on the date of the discontinuation of the 
                last health insurance coverage not so renewed.
    (d) Exception for Uniform Modification of Coverage.--At the time of 
coverage renewal, an insurer or HMO may modify the coverage offered to 
a group health plan in the group health market so long as such 
modification is effective on a uniform basis among group health plans 
with that type of coverage.

      PART 2--AVAILABILITY OF INDIVIDUAL HEALTH INSURANCE COVERAGE

SEC. 141. GUARANTEED AVAILABILITY OF INDIVIDUAL HEALTH INSURANCE 
              COVERAGE TO CERTAIN INDIVIDUALS WITH PRIOR GROUP 
              COVERAGE.

    (a) Goals.--The goals of this section are--
            (1) to guarantee that any qualifying individual (as defined 
        in subsection (b)(1)) is able to obtain qualifying coverage (as 
        defined in subsection (b)(2)); and
            (2) to assure that qualifying individuals obtaining such 
        coverage receive credit for their prior coverage toward the new 
        coverage's preexisting condition exclusion period (if any) in a 
        manner consistent with subsection (b)(3).
    (b) Qualifying Individual and Health Insurance Coverage Defined.--
In this section--
            (1) Qualifying individual.--The term ``qualifying 
        individual'' means an individual--
                    (A) who is in a qualified coverage period (as 
                defined in section 101(b)(3)(C)) that--
                            (i) includes coverage under one or more 
                        group health plans, and
                            (ii) commenced 18 or more months before the 
                        date on which the individual seeks coverage 
                        under this section;
                    (B) is not eligible for coverage under (i) a group 
                health plan, (ii) part A or part B of title XVIII of 
                the Social Security Act, or (iii) a State plan under 
                title XIX of such Act (or any successor program);
                    (C) with respect to whom the most recent coverage 
                within the coverage period described in subparagraph 
                (A)(i) was not terminated based on a factor described 
                in paragraph (1) or (2) of section 132(b);
                    (D) if the individual had been offered the option 
                of continuation coverage under a COBRA continuation 
                provision or under a similar State program, elected 
                such coverage;
                    (E) who, if the individual elected such 
                continuation coverage, has exhausted such continuation 
                coverage;
                    (F) who does not have individual health insurance 
                coverage; and
                    (G) whose most recent prior coverage either (i) was 
                under a group health plan, governmental plan, or church 
                plan (or health insurance coverage offered in 
                connection with any such plan), or (ii) was not under 
                such a plan (or such coverage) but was terminated 
                involuntarily because of the withdrawal of the plan or 
                coverage, movement out of a service area, or similar 
                involuntary reasons.
            (2) Qualifying coverage.--
                    (A) In general.--The term ``qualifying coverage'' 
                means, with respect to an insurer or HMO in relation to 
                an qualifying individual, individual health insurance 
                coverage for which the actuarial value of the benefits 
                is not less than--
                            (i) the weighted average actuarial value of 
                        the benefits provided by all the individual 
                        health insurance coverage issued by the insurer 
                        or HMO in the State during the previous year 
                        (not including coverage issued under this 
                        section), or
                            (ii) the weighted average of the actuarial 
                        value of the benefits provided by all the 
                        individual health insurance coverage issued by 
                        all insurers and HMOs in the State during the 
                        previous year (not including coverage issued 
                        under this section),
                as elected by the plan or by the State under subsection 
                (c)(1).
                    (B) Assumptions.--For purposes of subparagraph (A), 
                the actuarial value of benefits provided under 
                individual health insurance coverage shall be 
                calculated based on a standardized population and a set 
                of standardized utilization and cost factors.
            (3) Crediting for previous coverage.--Crediting is 
        consistent with this paragraph only if any preexisting 
        condition exclusion period is reduced at least to the extent 
        such a period would be reduced if the coverage under this 
        section were under a group health plan to which section 101(a) 
        applies. In carrying out this subsection, provisions similar to 
        the provisions of section 101(c) shall apply.
    (c) Optional State Establishment of Mechanisms To Achieve Goals of 
Guaranteeing Availability of Coverage.--
            (1) In general.--Any State may establish public or private 
        mechanisms reasonably designed to meet the goals specified in 
        subsection (a). If a State implements such a mechanism by the 
        deadline specified in paragraph (4), the State may elect to 
        have such mechanisms apply instead of having subsection (d) 
        apply in the State. An election under this paragraph shall be 
        by notice to the Secretary of Health and Human Services on a 
        timely basis consistent with the deadlines specified in 
        paragraph (4). In establishing what is qualifying coverage 
        under such a mechanism under this subsection, a State may 
        exercise the election described in subsection (b)(2)(A) with 
        respect to each insurer or HMO in the State (or on a collective 
        basis after exercising such election for each such insurer or 
        HMO).
            (2) Types of mechanisms.--State mechanisms under this 
        subsection may include one or more (or a combination) of the 
        following:
                    (A) Health insurance coverage pools or programs 
                authorized or established by the State.
                    (B) Mandatory group conversion policies.
                    (C) Guaranteed issue of one or more plans of 
                individual health insurance coverage to qualifying 
                individuals.
                    (D) Open enrollment by one or more insurers or 
                HMOs.
        The mechanisms described in the previous sentence are not an 
        exclusive list of the mechanisms (or combinations of 
        mechanisms) that may be used under this subsection.
            (3) Safe harbor for benefits under current risk pools.--In 
        the case of a State that has a health insurance coverage pool 
        or risk pool in effect on March 12, 1996, and that implements 
        the mechanism described in paragraph (2)(A), the benefits under 
        such mechanism (or benefits the actuarial value of which is not 
        less than the actuarial value of such current benefits, using 
        the assumptions described in subsection (b)(2)(B)) are deemed, 
        for purposes of this section, to constitute qualified coverage.
            (4) Deadline for state implementation.--
                    (A) In general.--Subject to subparagraph (B), the 
                deadline under this paragraph is July 1, 1997.
                    (B) Extension to permit legislation.--The deadline 
                under this paragraph is July 1, 1998, in the case of a 
                State the legislature of which does not have a regular 
                legislative session at any time between January 1, 
                1997, and June 30, 1997.
                    (C) Construction.--Nothing in this section shall be 
                construed as preventing a State from--
                            (i) implementing guaranteed availability 
                        mechanisms before the deadline,
                            (ii) continuing in effect mechanisms that 
                        are in effect before the date of the enactment 
                        of this Act,
                            (iii) offering guaranteed availability of 
                        coverage that is not qualifying coverage, or
                            (iv) offering guaranteed availability of 
                        coverage to individuals who are not qualifying 
                        individuals.
    (d) Fallback Provisions.--
            (1) No state election.--If a State has not provided notice 
        to the Secretary of an election on a timely basis under 
        subsection (c), the Secretary shall notify the State that 
        paragraph (3) will be applied in the State.
            (2) Preliminary determination after state election.--If--
                    (A) a State has provided notice of an election on a 
                timely basis under subsection (c), and
                    (B) the Secretary finds, after consultation with 
                the chief executive officer of the State and the 
                insurance commissioner or chief insurance regulatory 
                official of the State, that such a mechanism (for which 
                notice was provided) is not reasonably designed to meet 
                the goals specified in subsection (a),
        the Secretary shall notify the State of such preliminary 
        determination, of the consequences under paragraph (3) of a 
        failure to implement such a mechanism, and permit the State a 
        reasonable opportunity in which to modify the mechanism (or to 
        adopt another mechanism) that is reasonably designed to meet 
        the goals specified in subsection (a). If, after providing such 
        notice and opportunity, the Secretary finds that the State has 
        not implemented such a mechanism, the Secretary shall notify 
        the State that paragraph (3) will be applied in the State.
            (3) Description of fallback mechanism.--As provided under 
        paragraphs (1) and (2) and subject to paragraph (5), each 
        insurer or HMO in the State involved that issues individual 
        health insurance coverage--
                    (A) shall offer qualifying health insurance 
                coverage, in which qualifying individuals obtaining 
                such coverage receive credit for their prior coverage 
                toward the new coverage's preexisting condition 
                exclusion period (if any) in a manner consistent with 
                subsection (b)(3), to each qualifying individual in the 
                State, and
                    (B) may not decline to issue such coverage to such 
                an individual based on health status (except as 
                permitted under paragraph (4)).
            (4) Application of network and capacity limits.--Under 
        regulations, the provisions of subsections (b) and (c) of 
        section 131 shall apply to an individual in the individual 
        health insurance market under this subsection in the same 
        manner as they apply under section 131 to an employer in the 
        small group market.
            (5) Termination of fallback mechanism.--The provisions of 
        this subsection shall cease to apply to a State if the 
        Secretary finds that a State has implemented a mechanism that 
        is reasonably designed to meet the goals specified in 
        subsection (a), and until the Secretary finds that such 
        mechanism is no longer being implemented.
    (e) Construction.--
            (1) Premiums.--Nothing in this section shall be construed 
        to affect the determination of an insurer or HMO as to the 
        amount of the premium payable under an individual health 
        insurance coverage under applicable state law.
            (2) Market requirements.--
                    (A) In general.--The provisions of subsection (a) 
                shall not be construed to require that an insurer or 
                HMO offering health insurance coverage only in 
                connection with a group health plan or an association 
                offer individual health insurance coverage.
                    (B) Conversion policies.--An insurer or HMO 
                offering health insurance coverage in connection with a 
                group health plan under subtitle A shall not be deemed 
                to be an insurer or HMO offering an individual health 
                insurance coverage solely because such insurer or HMO 
                offers a conversion policy.
            (3) Disregard of association coverage.--An insurer or HMO 
        that offers health insurance coverage only in connection with a 
        group health plan or in connection with individuals based on 
        affiliation with one or more associations is not considered, 
        for purposes of this subtitle, to be offering individual health 
        insurance coverage.
            (4) Marketing of plans.--Nothing in this section shall be 
        construed to prevent a State from requiring insurer or HMOs 
        offering individual health insurance coverage to actively 
        market such coverage.

SEC. 142. GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH INSURANCE 
              COVERAGE.

    (a) Guaranteed Renewability.--Subject to the succeeding provisions 
of this section, an insurer or HMO that provides individual health 
insurance coverage to an individual shall renew or continue such 
coverage at the option of the individual.
    (b) Nonrenewal Permitted in Certain Cases.--An insurer or HMO may 
nonrenew or discontinue individual health insurance coverage of an 
individual only based on one or more of the following:
            (1) Nonpayment.--The individual fails to pay payment of 
        premiums or contributions in accordance with the terms of the 
        coverage or the insurer or organization has not failed to 
        receive timely premium payments.
            (2) Fraud.--The individual has performed an act or practice 
        that constitutes fraud or made an intentional misrepresentation 
        of material fact under the terms of the coverage.
            (3) Termination of coverage.--Subject to subsection (c), 
        the insurer or HMO is ceasing to offer health insurance 
        coverage in the individual market in a State (or, in the case 
        of a network plan or HMO, in a geographic area).
            (4) Movement outside service area.--The individual has 
        changed residence and resides outside the service area of the 
        insurer or organization or outside the area for which the 
        insurer or organization is authorized to do business.
Paragraph (4) shall apply to an insurer or HMO only if it is applied 
uniformly without regard to the claims experience of employers and 
their employees (and their beneficiaries) or the health status of such 
employees and beneficiaries.
    (c) Termination of Individual Coverage.--The provisions of section 
132(c) shall apply to this section in the same manner as they apply 
under section 132, except that any reference to an employer or market 
is deemed a reference to the a covered individual or the individual 
market, respectively.
    (d) Exception for Uniform Modification of Coverage.--The provisions 
of section 132(d) shall apply to individual health insurance coverage 
in the individual market under this section in the same manner as it 
applies to health insurance coverage offered in connection with a group 
health plan in the group market under such section.

                          PART 3--ENFORCEMENT

SEC. 151. INCORPORATION OF PROVISIONS FOR STATE ENFORCEMENT WITH 
              FEDERAL FALLBACK AUTHORITY.

    The provisions of paragraphs (1) and (2) of section 104(c) shall 
apply to enforcement of requirements in each section in part 1 or part 
2 with respect to insurers and HMOs regulated by a State in the same 
manner as such provisions apply to enforcement of requirements in 
section 101, 102, or 103 with respect to insurers and HMOs regulated by 
a State.

       Subtitle C--Sense of Committee on Additional Requirements

SEC. 161. SENSE OF COMMITTEE ON COMMERCE ON ADDITIONAL REQUIREMENTS.

    (a) Findings.--The Committee on Commerce of the House of 
Representatives finds the following:
            (1) The National Cancer Institute has stated that 
        sufficient data do not exist to support widespread clinical 
        applicability of autologous bone marrow transplants and high 
        dosage chemotherapy for treatment of breast cancer.
            (2) In relation to mandatory hospital stays for child 
        birth, several studies have shown little association between 
        initial hospital stays and subsequent hospital stays. For 
        example, a review of 20,000 inpatient deliveries found no 
        connection between the length of stay and a newborn's 
        likelihood of developing health problems. Another study that 
        tracked readmission rates to 275,000 discharges showed no 
        statistically significant differences for those who had 
        hospital stays of 24 hours or less.
    (b) Sense of Committee.--It is the sense of the Committee on 
Commerce of the House of Representatives that--
            (1) the impact, on health care costs and the provision of 
        necessary quality health services, of mandating the inclusion 
        in health insurance coverage and group health plans of bone 
        marrow transplants for treatment of breast cancer and of 
        minimum periods of inpatient care for child birth has not been 
        evaluated;
            (2) there is no legislative precedent for Congress 
        requiring the coverage of specific benefits under private and 
        State health insurance plans; and
            (3) it is the intent of the Committee to conduct one or 
        more hearings to examine issues relating to requiring the 
        inclusion of benefits under group health plans and health 
        insurance coverage offered in the group and individual markets.

              Subtitle D--Definitions; General Provisions

SEC. 191. DEFINITIONS; SCOPE OF COVERAGE.

    (a) Group Health Plan.--
            (1) Definition.--Subject to the succeeding provisions of 
        this subsection and subsection (d)(1), the term ``group health 
        plan'' means an employee welfare benefit plan to the extent 
        that the plan provides medical care (as defined in subsection 
        (c)(9)) to employees or their dependents (as defined under the 
        terms of the plan) directly or through insurance, 
        reimbursement, or otherwise, and includes a group health plan 
        (within the meaning of section 5000(b)(1) of the Internal 
        Revenue Code of 1986).
            (2) Limitation of requirements to plans with 2 or more 
        employee participants.--The requirements of subtitle A and part 
        1 of subtitle B shall apply in the case of a group health plan 
        for any plan year, or for health insurance coverage offered in 
        connection with a group health plan for a year, only if the 
        group health plan has two or more participants as current 
        employees on the first day of the plan year.
            (3) Exclusion of plans with limited coverage.--An employee 
        welfare benefit plan shall be treated as a group health plan 
        under this title only with respect to medical care which is 
        provided under the plan and which does not consist of coverage 
        excluded from the definition of health insurance coverage under 
        subsection (c)(4)(B).
            (4) Treatment of church plans.--
                    (A) Exclusion.--The requirements of this title 
                insofar as they apply to group health plans shall not 
                apply to church plans.
                    (B) Optional disregard in determining period of 
                coverage.--For purposes of applying section 
                101(b)(3)(B)(i), a group health plan may elect to 
                disregard periods of coverage of an individual under a 
                church plan that, pursuant to subparagraph (A), is not 
                subject to the requirements of this title.
            (5) Treatment of governmental plans.--
                    (A) Election to be excluded.--If the plan sponsor 
                of a governmental plan which is a group health plan to 
                which the provisions of this subtitle otherwise apply 
                makes an election under this paragraph for any 
                specified period (in such form and manner as the 
                Secretary of Health and Human Services may by 
                regulations prescribe), then the requirements of this 
                title insofar as they apply to group health plans shall 
                not apply to such governmental plans for such period.
                    (B) Optional disregard in determining period of 
                coverage if election made.--For purposes of applying 
                section 101(b)(3)(B)(i), a group health plan may elect 
                to disregard periods of coverage of an individual under 
                a governmental plan that, under an election under 
                subparagraph (A), is not subject to the requirements of 
                this title.
            (6) Treatment of medicaid plan as group health plan.--A 
        State plan under title XIX of the Social Security Act shall be 
        treated as a group health plan for purposes of applying section 
        101(c)(1), unless the State elects not to be so treated.
            (7) Treatment of medicare and indian health service 
        programs as group health plan.--Title XVIII of the Social 
        Security Act and a program of the Indian Health Service shall 
        be treated as a group health plan for purposes of applying 
        section 101(c)(1).
    (b) Incorporation of Certain Definitions in Employee Retirement 
Income Security Act of 1974.--Except as provided in this section, the 
terms ``beneficiary'', ``church plan'', ``employee'', ``employee 
welfare benefit plan'', ``employer'', ``governmental plan'', 
``multiemployer plan'', ``multiple employer welfare arrangement'', 
``participant'', ``plan sponsor'', and ``State'' have the meanings 
given such terms in section 3 of the Employee Retirement Income 
Security Act of 1974.
    (c) Other Definitions.--For purposes of this title:
            (1) Applicable state authority.--The term ``applicable 
        State authority'' means, with respect to an insurer or health 
        maintenance organization in a State, the State insurance 
        commissioner or official or officials designated by the State 
        to enforce the requirements of this title for the State 
        involved with respect to such insurer or organization.
            (2) Bona fide association.--The term ``bona fide 
        association'' means an association which--
                    (A) has been actively in existence for at least 5 
                years,
                    (B) has been formed and maintained in good faith 
                for purposes other than obtaining insurance,
                    (C) does not condition membership in the 
                association on health status,
                    (D) makes health insurance coverage offered through 
                the association available to all members regardless of 
                health status,
                    (E) does not make health insurance coverage offered 
                through the association available to any individual who 
                is not a member (or dependent of a member) of the 
                association at the time the coverage is initially 
                issued,
                    (F) does not impose preexisting condition 
                exclusions except in a manner consistent with the 
                requirements of sections 101 and 102 as they relate to 
                group health plans, and
                    (G) provides for renewal and continuation of health 
                insurance coverage in a manner consistent with the 
                requirements of section 132 as they relate to the 
                renewal and continuation in force of coverage in a 
                group market.
            (3) COBRA continuation provision.--The term ``COBRA 
        continuation provision'' means any of the following:
                    (A) Section 4980B of the Internal Revenue Code of 
                1986, other than subsection (f)(1) of such section 
                insofar as it relates to pediatric vaccines.
                    (B) Part 6 of subtitle B of title I of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 1161 
                et seq.), other than section 609.
                    (C) Title XXII of the Public Health Service Act.
            (4) Health insurance coverage.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``health insurance coverage'' means 
                benefits consisting of medical care (provided directly, 
                through insurance or reimbursement, or otherwise) under 
                any hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization group contract offered by an 
                insurer or a health maintenance organization.
                    (B) Exception.--Such term does not include coverage 
                under any separate policy, certificate, or contract 
                only for one or more of any of the following:
                            (i) Coverage for accident, credit-only, 
                        vision, disability income, long-term care, 
                        nursing home care, community-based care dental, 
                        on-site medical clinics, or employee assistance 
                        programs, or any combination thereof.
                            (ii) Medicare supplemental health insurance 
                        (within the meaning of section 1882(g)(1) of 
                        the Social Security Act (42 U.S.C. 
                        1395ss(g)(1))) and similar supplemental 
                        coverage provided under a group health plan.
                            (iii) Coverage issued as a supplement to 
                        liability insurance.
                            (iv) Liability insurance, including general 
                        liability insurance and automobile liability 
                        insurance.
                            (v) Workers' compensation or similar 
                        insurance.
                            (vi) Automobile medical-payment insurance.
                            (vii) Coverage consisting of benefit 
                        payments made on a periodic basis for a 
                        specified disease or illness or period of 
                        hospitalization, without regard to the costs 
                        incurred or services rendered during the period 
                        to which the payments relate.
                            (viii) Short-term limited duration 
                        insurance.
                            (ix) Such other coverage, comparable to 
                        that described in previous clauses, as may be 
                        specified in regulations prescribed under this 
                        title.
            (5) Health maintenance organization; hmo.--The terms 
        ``health maintenance organization'' and ``HMO'' mean--
                    (A) a Federally qualified health maintenance 
                organization (as defined in section 1301(a) of the 
                Public Health Service Act (42 U.S.C. 300e(a))),
                    (B) an organization recognized under State law as a 
                health maintenance organization, or
                    (C) a similar organization regulated under State 
                law for solvency in the same manner and to the same 
                extent as such a health maintenance organization,
        if (other than for purposes of part 2 of subtitle B) it is 
        subject to State law which regulates insurance (within the 
        meaning of section 514(b)(2) of the Employee Retirement Income 
        Security Act of 1974).
            (6) Health status.--The term ``health status'' includes, 
        with respect to an individual, medical condition, claims 
        experience, receipt of health care, medical history, genetic 
        information, evidence of insurability (including conditions 
        arising out of acts of domestic violence), or disability.
            (7) Individual health insurance coverage.--The term 
        ``individual health insurance coverage'' means health insurance 
        coverage offered to individuals if the coverage is not offered 
        in connection with a group health plan (other than such a plan 
        that has fewer than two participants as current employees on 
        the first day of the plan year).
            (8) Insurer.--The term ``insurer'' means an insurance 
        company, insurance service, or insurance organization which is 
        licensed to engage in the business of insurance in a State and 
        (except for purposes of part 2 of subtitle B) which is 
        regulated by a State (within the meaning of section 
        514(b)(2)(A) of the Employee Retirement Income Security Act of 
        1974).
            (9) Medical care.--The term ``medical care'' means--
                    (A) amounts paid for, or items or services in the 
                form of, the diagnosis, cure, mitigation, treatment, or 
                prevention of disease, or amounts paid for, or items or 
                services provided for, the purpose of affecting any 
                structure or function of the body,
                    (B) amounts paid for, or services in the form of, 
                transportation primarily for and essential to medical 
                care referred to in subparagraph (A), and
                    (C) amounts paid for insurance covering medical 
                care referred to in subparagraphs (A) and (B).
            (10) Network plan.--The term ``network plan'' means, with 
        respect to health insurance coverage, an arrangement of an 
        insurer or a health maintenance organization under which the 
        financing and delivery of medical care are provided, in whole 
        or in part, through a defined set of providers under contract 
        with the insurer or health maintenance organization.
            (11) Waiting period.--The term ``waiting period'' means, 
        with respect to a group health plan and an individual who is a 
        potential participant or beneficiary in the plan, the minimum 
        period that must pass with respect to the individual before the 
        individual is eligible to be covered for benefits under the 
        plan.
    (d) Treatment of Partnerships.--
            (1) Treatment as a group health plan.--Any plan, fund, or 
        program which would not be (but for this paragraph) an employee 
        welfare benefit plan and which is established or maintained by 
        a partnership, to the extent that such plan, fund, or program 
        provides medical care to present or former partners in the 
        partnership or to their dependents (as defined under the terms 
        of the plan, fund, or program), directly or through insurance, 
        reimbursement, or otherwise, shall be treated (subject to 
        paragraph (1)) as an employee welfare benefit plan which is a 
        group health plan.
            (2) Treatment of partnership and partners and employer and 
        participants.--In the case of a group health plan--
                    (A) the term ``employer'' includes the partnership 
                in relation to any partner; and
                    (B) the term ``participant'' includes--
                            (i) in connection with a group health plan 
                        maintained by a partnership, an individual who 
                        is a partner in relation to the partnership, or
                            (ii) in connection with a group health plan 
                        maintained by a self-employed individual (under 
                        which one or more employees are participants), 
                        the self-employed individual,
                if such individual is or may become eligible to receive 
                a benefit under the plan or such individual's 
                beneficiaries may be eligible to receive any such 
                benefit.
    (e) Definitions Relating to Markets and Small Employers.--As used 
in this title:
            (1) Individual market.--The term ``individual market'' 
        means the market for health insurance coverage offered to 
        individuals and not to employers or in connection with a group 
        health plan and does not include the market for such coverage 
        issued only by an insurer or HMO that makes such coverage 
        available only on the basis of affiliation with a bona fide 
        association (as defined in subsection (c)(2)).
            (2) Large group market.--The term ``large group market'' 
        means the market for health insurance coverage offered to 
        employers (other than small employers) on behalf of their 
        employees (and their dependents) and does not include health 
        insurance coverage available solely in connection with a bona 
        fide association (as defined in subsection (c)(2)).
            (3) Small employer.--The term ``small employer'' means, in 
        connection with a group health plan with respect to a calendar 
        year, an employer who employs at least 2 but fewer than 51 
        employees on a typical business day in the year. For purposes 
        of this paragraph, two or more trades or businesses, whether or 
        not incorporated, shall be deemed a single employer if such 
        trades or businesses are within the same control group (within 
        the meaning of section 3(40)(B)(ii)) of the Employee Retirement 
        Income Security Act of 1974.
            (4) Small group market.--The term ``small group market'' 
        means the health insurance market under which individuals 
        obtain health insurance coverage (directly or through any 
        arrangement) on behalf of themselves (and their dependents) on 
        the basis of employment or other relationship with respect to a 
        small employer and does not include health insurance coverage 
        available solely in connection with a bona fide association (as 
        defined in subsection (c)(2)).

SEC. 192. STATE FLEXIBILITY TO PROVIDE GREATER PROTECTION.

    (a) State Flexibility To Provide Greater Protection.--Subject to 
subsection (b), nothing in this title shall be construed to preempt 
State laws that require insurers or HMOs--
            (1) to impose a limitation or exclusion of benefits 
        relating to the treatment of a preexisting condition for a 
        period that is shorter than the applicable period provided for 
        under this title;
            (2) to allow individuals, participants, and beneficiaries 
        to be considered to be in a period of previous qualifying 
        coverage if such individual, participant, or beneficiary 
        experiences a lapse in coverage that is greater than the 60-day 
        periods provided for under sections 101(b)(3)(A), 
        101(b)(3)(B)(ii), and 102(b)(2); or
            (3) in defining ``pre-existing condition'' to have a look-
        back period that is shorter than the 6-month period described 
        in section 101(b)(1)(A).
    (b) No Override of ERISA Preemption.--Nothing in this Act shall be 
construed to affect or modify the provisions of section 514 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1144).

SEC. 193. EFFECTIVE DATE.

    (a) In General.--Except as otherwise provided for in this title, 
the provisions of this title shall apply with respect to--
            (1) group health plans, and health insurance coverage 
        offered in connection with group health plans, for plan years 
        beginning on or after January 1, 1998, and
            (2) individual health insurance coverage issued, renewed, 
        in effect, or operated on or after July 1, 1998.
    (b) Consideration of Previous Coverage.--The Secretaries of Health 
and Human Services, Treasury, and Labor shall jointly establish rules 
regarding the treatment (in determining qualified coverage periods 
under sections 102(b) and 141(b)) of coverage before the applicable 
effective date specified in subsection (a).
    (c) Timely Issuance of Regulations.--The Secretaries of Health and 
Human Services, the Treasury, and Labor shall issue such regulations on 
a timely basis as may be required to carry out this title.

SEC. 194. RULE OF CONSTRUCTION.

    Nothing in this title or any amendment made thereby may be 
construed to require the coverage of any specific procedure, treatment, 
or service as part of a group health plan or health insurance coverage 
under this title or through regulation.

   TITLE II--PREVENTING HEALTH CARE FRAUD AND ABUSE; ADMINISTRATIVE 
                             SIMPLIFICATION

SEC. 200. REFERENCES IN TITLE.

    Except as otherwise specifically provided, whenever in this title 
an amendment is expressed in terms of an amendment to or repeal of a 
section or other provision, the reference shall be considered to be 
made to that section or other provision of the Social Security Act.

              Subtitle A--Fraud and Abuse Control Program

SEC. 201. FRAUD AND ABUSE CONTROL PROGRAM.

    (a) Establishment of Program.--Title XI (42 U.S.C. 1301 et seq.) is 
amended by inserting after section 1128B the following new section:

                   ``fraud and abuse control program

    ``Sec. 1128C. (a) Establishment of Program.--
            ``(1) In general.--Not later than January 1, 1997, the 
        Secretary, acting through the Office of the Inspector General 
        of the Department of Health and Human Services, and the 
        Attorney General shall establish a program--
                    ``(A) to coordinate Federal, State, and local law 
                enforcement programs to control fraud and abuse with 
                respect to health plans,
                    ``(B) to conduct investigations, audits, 
                evaluations, and inspections relating to the delivery 
                of and payment for health care in the United States,
                    ``(C) to facilitate the enforcement of the 
                provisions of sections 1128, 1128A, and 1128B and other 
                statutes applicable to health care fraud and abuse,
                    ``(D) to provide for the modification and 
                establishment of safe harbors and to issue advisory 
                opinions and special fraud alerts pursuant to section 
                1128D, and
                    ``(E) to provide for the reporting and disclosure 
                of certain final adverse actions against health care 
                providers, suppliers, or practitioners pursuant to the 
                data collection system established under section 1128E.
            ``(2) Coordination with health plans.--In carrying out the 
        program established under paragraph (1), the Secretary and the 
        Attorney General shall consult with, and arrange for the 
        sharing of data with representatives of health plans.
            ``(3) Guidelines.--
                    ``(A) In general.--The Secretary and the Attorney 
                General shall issue guidelines to carry out the program 
                under paragraph (1). The provisions of sections 553, 
                556, and 557 of title 5, United States Code, shall not 
                apply in the issuance of such guidelines.
                    ``(B) Information guidelines.--
                            ``(i) In general.--Such guidelines shall 
                        include guidelines relating to the furnishing 
                        of information by health plans, providers, and 
                        others to enable the Secretary and the Attorney 
                        General to carry out the program (including 
                        coordination with health plans under paragraph 
                        (2)).
                            ``(ii) Confidentiality.--Such guidelines 
                        shall include procedures to assure that such 
                        information is provided and utilized in a 
                        manner that appropriately protects the 
                        confidentiality of the information and the 
                        privacy of individuals receiving health care 
                        services and items.
                            ``(iii) Qualified immunity for providing 
                        information.--The provisions of section 1157(a) 
                        (relating to limitation on liability) shall 
                        apply to a person providing information to the 
                        Secretary or the Attorney General in 
                        conjunction with their performance of duties 
                        under this section.
            ``(4) Ensuring access to documentation.--The Inspector 
        General of the Department of Health and Human Services is 
        authorized to exercise such authority described in paragraphs 
        (3) through (9) of section 6 of the Inspector General Act of 
        1978 (5 U.S.C. App.) as necessary with respect to the 
        activities under the fraud and abuse control program 
        established under this subsection.
            ``(5) Authority of inspector general.--Nothing in this Act 
        shall be construed to diminish the authority of any Inspector 
        General, including such authority as provided in the Inspector 
        General Act of 1978 (5 U.S.C. App.).
    ``(b) Additional Use of Funds by Inspector General.--
            ``(1) Reimbursements for investigations.--The Inspector 
        General of the Department of Health and Human Services is 
        authorized to receive and retain for current use reimbursement 
        for the costs of conducting investigations and audits and for 
        monitoring compliance plans when such costs are ordered by a 
court, voluntarily agreed to by the payor, or otherwise.
            ``(2) Crediting.--Funds received by the Inspector General 
        under paragraph (1) as reimbursement for costs of conducting 
        investigations shall be deposited to the credit of the 
        appropriation from which initially paid, or to appropriations 
        for similar purposes currently available at the time of 
        deposit, and shall remain available for obligation for 1 year 
        from the date of the deposit of such funds.
    ``(c) Health Plan Defined.--For purposes of this section, the term 
`health plan' means a plan or program that provides health benefits, 
whether directly, through insurance, or otherwise, and includes--
            ``(1) a policy of health insurance;
            ``(2) a contract of a service benefit organization; and
            ``(3) a membership agreement with a health maintenance 
        organization or other prepaid health plan.''.
    (b) Establishment of Health Care Fraud and Abuse Control Account in 
Federal Hospital Insurance Trust Fund.--Section 1817 (42 U.S.C. 1395i) 
is amended by adding at the end the following new subsection:
    ``(k) Health Care Fraud and Abuse Control Account.--
            ``(1) Establishment.--There is hereby established in the 
        Trust Fund an expenditure account to be known as the `Health 
        Care Fraud and Abuse Control Account' (in this subsection 
        referred to as the `Account').
            ``(2) Appropriated amounts to trust fund.--
                    ``(A) In general.--There are hereby appropriated to 
                the Trust Fund--
                            ``(i) such gifts and bequests as may be 
                        made as provided in subparagraph (B);
                            ``(ii) such amounts as may be deposited in 
                        the Trust Fund as provided in sections 242(b) 
                        and 249(c) of the Health Coverage Availability 
                        and Affordability Act of 1996, and title XI; 
                        and
                            ``(iii) such amounts as are transferred to 
                        the Trust Fund under subparagraph (C).
                    ``(B) Authorization to accept gifts.--The Trust 
                Fund is authorized to accept on behalf of the United 
                States money gifts and bequests made unconditionally to 
                the Trust Fund, for the benefit of the Account or any 
                activity financed through the Account.
                    ``(C) Transfer of amounts.--The Managing Trustee 
                shall transfer to the Trust Fund, under rules similar 
                to the rules in section 9601 of the Internal Revenue 
                Code of 1986, an amount equal to the sum of the 
                following:
                            ``(i) Criminal fines recovered in cases 
                        involving a Federal health care offense (as 
                        defined in section 982(a)(6)(B) of title 18, 
                        United States Code).
                            ``(ii) Civil monetary penalties and 
                        assessments imposed in health care cases, 
                        including amounts recovered under titles XI, 
                        XVIII, and XIX, and chapter 38 of title 31, 
                        United States Code (except as otherwise 
                        provided by law).
                            ``(iii) Amounts resulting from the 
                        forfeiture of property by reason of a Federal 
                        health care offense.
                            ``(iv) Penalties and damages obtained and 
                        otherwise creditable to miscellaneous receipts 
                        of the general fund of the Treasury obtained 
                        under sections 3729 through 3733 of title 31, 
                        United States Code (known as the False Claims 
                        Act), in cases involving claims related to the 
                        provision of health care items and services 
                        (other than funds awarded to a relator, for 
                        restitution or otherwise authorized by law).
            ``(3) Appropriated amounts to account for fraud and abuse 
        control program, etc.--
                    ``(A) Departments of health and human services and 
                justice.--
                            ``(i) In general.--There are hereby 
                        appropriated to the Account from the Trust Fund 
                        such sums as the Secretary and the Attorney 
                        General certify are necessary to carry out the 
                        purposes described in subparagraph (C), to be 
                        available without further appropriation, in an 
                        amount not to exceed--
                                    ``(I) for fiscal year 1997, 
                                $104,000,000,
                                    ``(II) for each of the fiscal years 
                                1998 through 2003, the limit for the 
                                preceding fiscal year, increased by 15 
                                percent; and
                                    ``(III) for each fiscal year after 
                                fiscal year 2003, the limit for fiscal 
                                year 2003.
                            ``(ii) Medicare and medicaid activities.--
                        For each fiscal year, of the amount 
                        appropriated in clause (i), the following 
                        amounts shall be available only for the 
                        purposes of the activities of the Office of the 
                        Inspector General of the Department of Health 
                        and Human Services with respect to the medicare 
                        and medicaid programs--
                                    ``(I) for fiscal year 1997, not 
                                less than $60,000,000 and not more than 
                                $70,000,000;
                                    ``(II) for fiscal year 1998, not 
                                less than $80,000,000 and not more than 
                                $90,000,000;
                                    ``(III) for fiscal year 1999, not 
                                less than $90,000,000 and not more than 
                                $100,000,000;
                                    ``(IV) for fiscal year 2000, not 
                                less than $110,000,000 and not more 
                                than $120,000,000;
                                    ``(V) for fiscal year 2001, not 
                                less than $120,000,000 and not more 
                                than $130,000,000;
                                    ``(VI) for fiscal year 2002, not 
                                less than $140,000,000 and not more 
                                than $150,000,000; and
                                    ``(VII) for each fiscal year after 
                                fiscal year 2002, not less than 
                                $150,000,000 and not more than 
                                $160,000,000.
                    ``(B) Federal bureau of investigation.--There are 
                hereby appropriated from the general fund of the United 
                States Treasury and hereby appropriated to the Account 
                for transfer to the Federal Bureau of Investigation to 
                carry out the purposes described in subparagraph (C), 
                to be available without further appropriation--
                            ``(i) for fiscal year 1997, $47,000,000;
                            ``(ii) for fiscal year 1998, $56,000,000;
                            ``(iii) for fiscal year 1999, $66,000,000;
                            ``(iv) for fiscal year 2000, $76,000,000;
                            ``(v) for fiscal year 2001, $88,000,000;
                            ``(vi) for fiscal year 2002, $101,000,000; 
                        and
                            ``(vii) for each fiscal year after fiscal 
                        year 2002, $114,000,000.
                    ``(C) Use of funds.--The purposes described in this 
                subparagraph are to cover the costs (including 
                equipment, salaries and benefits, and travel and 
                training) of the administration and operation of the 
                health care fraud and abuse control program established 
                under section 1128C(a), including the costs of--
                            ``(i) prosecuting health care matters 
                        (through criminal, civil, and administrative 
                        proceedings);
                            ``(ii) investigations;
                            ``(iii) financial and performance audits of 
                        health care programs and operations;
                            ``(iv) inspections and other evaluations; 
                        and
                            ``(v) provider and consumer education 
                        regarding compliance with the provisions of 
                        title XI.
            ``(4) Appropriated amounts to account for medicare 
        integrity program.--
                    ``(A) In general.--There are hereby appropriated to 
                the Account from the Trust Fund for each fiscal year 
                such amounts as are necessary to carry out the Medicare 
                Integrity Program under section 1893, subject to 
                subparagraph (B) and to be available without further 
                appropriation.
                    ``(B) Amounts specified.--The amount appropriated 
                under subparagraph (A) for a fiscal year is as follows:
                            ``(i) For fiscal year 1997, such amount 
                        shall be not less than $430,000,000 and not 
                        more than $440,000,000.
                            ``(ii) For fiscal year 1998, such amount 
                        shall be not less than $490,000,000 and not 
                        more than $500,000,000.
                            ``(iii) For fiscal year 1999, such amount 
                        shall be not less than $550,000,000 and not 
                        more than $560,000,000.
                            ``(iv) For fiscal year 2000, such amount 
                        shall be not less than $620,000,000 and not 
                        more than $630,000,000.
                            ``(v) For fiscal year 2001, such amount 
                        shall be not less than $670,000,000 and not 
                        more than $680,000,000.
                            ``(vi) For fiscal year 2002, such amount 
                        shall be not less than $690,000,000 and not 
                        more than $700,000,000.
                            ``(vii) For each fiscal year after fiscal 
                        year 2002, such amount shall be not less than 
                        $710,000,000 and not more than $720,000,000.
            ``(5) Annual report.--The Secretary and the Attorney 
        General shall submit jointly an annual report to Congress on 
        the amount of revenue which is generated and disbursed, and the 
        justification for such disbursements, by the Account in each 
        fiscal year.''.

SEC. 202. MEDICARE INTEGRITY PROGRAM.

    (a) Establishment of Medicare Integrity Program.--Title XVIII is 
amended by adding at the end the following new section:

                      ``medicare integrity program

    ``Sec. 1893. (a) Establishment of Program.--There is hereby 
established the Medicare Integrity Program (in this section referred to 
as the `Program') under which the Secretary shall promote the integrity 
of the medicare program by entering into contracts in accordance with 
this section with eligible private entities to carry out the activities 
described in subsection (b).
    ``(b) Activities Described.--The activities described in this 
subsection are as follows:
            ``(1) Review of activities of providers of services or 
        other individuals and entities furnishing items and services 
        for which payment may be made under this title (including 
        skilled nursing facilities and home health agencies), including 
        medical and utilization review and fraud review (employing 
        similar standards, processes, and technologies used by private 
        health plans, including equipment and software technologies 
        which surpass the capability of the equipment and technologies 
        used in the review of claims under this title as of the date of 
        the enactment of this section).
            ``(2) Audit of cost reports.
            ``(3) Determinations as to whether payment should not be, 
        or should not have been, made under this title by reason of 
        section 1862(b), and recovery of payments that should not have 
        been made.
            ``(4) Education of providers of services, beneficiaries, 
        and other persons with respect to payment integrity and benefit 
        quality assurance issues.
            ``(5) Developing (and periodically updating) a list of 
        items of durable medical equipment in accordance with section 
        1834(a)(15) which are subject to prior authorization under such 
        section.
    ``(c) Eligibility of Entities.--An entity is eligible to enter into 
a contract under the Program to carry out any of the activities 
described in subsection (b) if--
            ``(1) the entity has demonstrated capability to carry out 
        such activities;
            ``(2) in carrying out such activities, the entity agrees to 
        cooperate with the Inspector General of the Department of 
        Health and Human Services, the Attorney General of the United 
        States, and other law enforcement agencies, as appropriate, in 
        the investigation and deterrence of fraud and abuse in relation 
        to this title and in other cases arising out of such 
        activities;
            ``(3) the entity demonstrates to the Secretary that the 
        entity's financial holdings, interests, or relationships will 
        not interfere with its ability to perform the functions to be 
        required by the contract in an effective and impartial manner; 
        and
            ``(4) the entity meets such other requirements as the 
        Secretary may impose.
In the case of the activity described in subsection (b)(5), an entity 
shall be deemed to be eligible to enter into a contract under the 
Program to carry out the activity if the entity is a carrier with a 
contract in effect under section 1842.
    ``(d) Process for Entering Into Contracts.--The Secretary shall 
enter into contracts under the Program in accordance with such 
procedures as the Secretary shall by regulation establish, except that 
such procedures shall include the following:
            ``(1) The Secretary shall determine the appropriate number 
        of separate contracts which are necessary to carry out the 
        Program and the appropriate times at which the Secretary shall 
        enter into such contracts.
            ``(2)(A) Except as provided in subparagraph (B), the 
        provisions of section 1153(e)(1) shall apply to contracts and 
        contracting authority under this section.
            ``(B) Competitive procedures must be used when entering 
        into new contracts under this section, or at any other time 
        considered appropriate by the Secretary, except that the 
        Secretary may contract with entities that are carrying out the 
        activities described in this section pursuant to agreements 
        under section 1816 or contracts under section 1842 in effect on 
        the date of the enactment of this section.
            ``(3) A contract under this section may be renewed without 
        regard to any provision of law requiring competition if the 
        contractor has met or exceeded the performance requirements 
        established in the current contract.
    ``(e) Limitation on Contractor Liability.--The Secretary shall by 
regulation provide for the limitation of a contractor's liability for 
actions taken to carry out a contract under the Program, and such 
regulation shall, to the extent the Secretary finds appropriate, employ 
the same or comparable standards and other substantive and procedural 
provisions as are contained in section 1157.''.
    (b) Elimination of FI and Carrier Responsibility for Carrying Out 
Activities Subject to Program.--
            (1) Responsibilities of fiscal intermediaries under part 
        a.--Section 1816 (42 U.S.C. 1395h) is amended by adding at the 
        end the following new subsection:
    ``(l) No agency or organization may carry out (or receive payment 
for carrying out) any activity pursuant to an agreement under this 
section to the extent that the activity is carried out pursuant to a 
contract under the Medicare Integrity Program under section 1893.''.
            (2) Responsibilities of carriers under part b.--Section 
        1842(c) (42 U.S.C. 1395u(c)) is amended by adding at the end 
        the following new paragraph:
    ``(6) No carrier may carry out (or receive payment for carrying 
out) any activity pursuant to a contract under this subsection to the 
extent that the activity is carried out pursuant to a contract under 
the Medicare Integrity Program under section 1893. The previous 
sentence shall not apply with respect to the activity described in 
section 1893(b)(5) (relating to prior authorization of certain items of 
durable medical equipment under section 1834(a)(15)).''.

SEC. 203. BENEFICIARY INCENTIVE PROGRAMS.

    (a) Clarification of Requirement To Provide Explanation of Medicare 
Benefits.--The Secretary of Health and Human Services (in this section 
referred to as the ``Secretary'') shall provide an explanation of 
benefits under the medicare program under title XVIII of the Social 
Security Act with respect to each item or service for which payment may 
be made under the program which is furnished to an individual, without 
regard to whether or not a deductible or coinsurance may be imposed 
against the individual with respect to the item or service.
    (b) Program To Collect Information on Fraud and Abuse.--
            (1) Establishment of program.--Not later than 3 months 
        after the date of the enactment of this Act, the Secretary 
        shall establish a program under which the Secretary shall 
        encourage individuals to report to the Secretary information on 
        individuals and entities who are engaging or who have engaged 
        in acts or omissions which constitute grounds for the 
        imposition of a sanction under section 1128, section 1128A, or 
        section 1128B of the Social Security Act, or who have otherwise 
        engaged in fraud and abuse against the medicare program for 
        which there is a sanction provided under law. The program shall 
        discourage provision of, and not consider, information which is 
        frivolous or otherwise not relevant or material to the 
        imposition of such a sanction.
            (2) Payment of portion of amounts collected.--If an 
        individual reports information to the Secretary under the 
        program established under paragraph (1) which serves as the 
        basis for the collection by the Secretary or the Attorney 
        General of any amount of at least $100 (other than any amount 
        paid as a penalty under section 1128B of the Social Security 
        Act), the Secretary may pay a portion of the amount collected 
        to the individual (under procedures similar to those applicable 
        under section 7623 of the Internal Revenue Code of 1986 to 
        payments to individuals providing information on violations of 
        such Code).
    (c) Program To Collect Information on Program Efficiency.--
            (1) Establishment of program.--Not later than 3 months 
        after the date of the enactment of this Act, the Secretary 
        shall establish a program under which the Secretary shall 
        encourage individuals to submit to the Secretary suggestions on 
        methods to improve the efficiency of the medicare program.
            (2) Payment of portion of program savings.--If an 
        individual submits a suggestion to the Secretary under the 
        program established under paragraph (1) which is adopted by the 
        Secretary and which results in savings to the program, the 
        Secretary may make a payment to the individual of such amount 
        as the Secretary considers appropriate.

SEC. 204. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD AND ABUSE SANCTIONS 
              TO FRAUD AND ABUSE AGAINST FEDERAL HEALTH CARE PROGRAMS.

    (a) In General.--Section 1128B (42 U.S.C. 1320a-7b) is amended as 
follows:
            (1) In the heading, by striking ``medicare or state health 
        care programs'' and inserting ``federal health care programs''.
            (2) In subsection (a)(1), by striking ``a program under 
        title XVIII or a State health care program (as defined in 
        section 1128(h))'' and inserting ``a Federal health care 
        program''.
            (3) In subsection (a)(5), by striking ``a program under 
        title XVIII or a State health care program'' and inserting ``a 
        Federal health care program''.
            (4) In the second sentence of subsection (a)--
                    (A) by striking ``a State plan approved under title 
                XIX'' and inserting ``a Federal health care program'', 
                and
                    (B) by striking ``the State may at its option 
                (notwithstanding any other provision of that title or 
                of such plan)'' and inserting ``the administrator of 
                such program may at its option (notwithstanding any 
                other provision of such program)''.
            (5) In subsection (b), by striking ``title XVIII or a State 
        health care program'' each place it appears and inserting ``a 
        Federal health care program''.
            (6) In subsection (c), by inserting ``(as defined in 
        section 1128(h))'' after ``a State health care program''.
            (7) By adding at the end the following new subsection:
    ``(f) For purposes of this section, the term `Federal health care 
program' means--
            ``(1) any plan or program that provides health benefits, 
        whether directly, through insurance, or otherwise, which is 
        funded directly, in whole or in part, by the United States 
        Government (other than the health insurance program under 
        chapter 89 of title 5, United States Code); or
            ``(2) any State health care program, as defined in section 
        1128(h).''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1997.

SEC. 205. GUIDANCE REGARDING APPLICATION OF HEALTH CARE FRAUD AND ABUSE 
              SANCTIONS.

    Title XI (42 U.S.C. 1301 et seq.), as amended by section 201, is 
amended by inserting after section 1128C the following new section:

    ``guidance regarding application of health care fraud and abuse 
                               sanctions

    ``Sec. 1128D. (a) Solicitation and Publication of Modifications to 
Existing Safe Harbors and New Safe Harbors.--
            ``(1) In general.--
                    ``(A) Solicitation of proposals for safe harbors.--
                Not later than January 1, 1997, and not less than 
                annually thereafter, the Secretary shall publish a 
                notice in the Federal Register soliciting proposals, 
which will be accepted during a 60-day period, for--
                            ``(i) modifications to existing safe 
                        harbors issued pursuant to section 14(a) of the 
                        Medicare and Medicaid Patient and Program 
                        Protection Act of 1987 (42 U.S.C. 1320a-7b 
                        note);
                            ``(ii) additional safe harbors specifying 
                        payment practices that shall not be treated as 
                        a criminal offense under section 1128B(b) and 
                        shall not serve as the basis for an exclusion 
                        under section 1128(b)(7);
                            ``(iii) advisory opinions to be issued 
                        pursuant to subsection (b); and
                            ``(iv) special fraud alerts to be issued 
                        pursuant to subsection (c).
                    ``(B) Publication of proposed modifications and 
                proposed additional safe harbors.--After considering 
                the proposals described in clauses (i) and (ii) of 
                subparagraph (A), the Secretary, in consultation with 
                the Attorney General, shall publish in the Federal 
                Register proposed modifications to existing safe 
                harbors and proposed additional safe harbors, if 
                appropriate, with a 60-day comment period. After 
                considering any public comments received during this 
                period, the Secretary shall issue final rules modifying 
                the existing safe harbors and establishing new safe 
                harbors, as appropriate.
                    ``(C) Report.--The Inspector General of the 
                Department of Health and Human Services (in this 
                section referred to as the `Inspector General') shall, 
                in an annual report to Congress or as part of the year-
                end semiannual report required by section 5 of the 
                Inspector General Act of 1978 (5 U.S.C. App.), describe 
                the proposals received under clauses (i) and (ii) of 
                subparagraph (A) and explain which proposals were 
                included in the publication described in subparagraph 
                (B), which proposals were not included in that 
                publication, and the reasons for the rejection of the 
                proposals that were not included.
            ``(2) Criteria for modifying and establishing safe 
        harbors.--In modifying and establishing safe harbors under 
        paragraph (1)(B), the Secretary may consider the extent to 
        which providing a safe harbor for the specified payment 
        practice may result in any of the following:
                    ``(A) An increase or decrease in access to health 
                care services.
                    ``(B) An increase or decrease in the quality of 
                health care services.
                    ``(C) An increase or decrease in patient freedom of 
                choice among health care providers.
                    ``(D) An increase or decrease in competition among 
                health care providers.
                    ``(E) An increase or decrease in the ability of 
                health care facilities to provide services in medically 
                underserved areas or to medically underserved 
                populations.
                    ``(F) An increase or decrease in the cost to 
                Federal health care programs (as defined in section 
                1128B(f)).
                    ``(G) An increase or decrease in the potential 
                overutilization of health care services.
                    ``(H) The existence or nonexistence of any 
                potential financial benefit to a health care 
                professional or provider which may vary based on their 
                decisions of--
                            ``(i) whether to order a health care item 
                        or service; or
                            ``(ii) whether to arrange for a referral of 
                        health care items or services to a particular 
                        practitioner or provider.
                    ``(I) Any other factors the Secretary deems 
                appropriate in the interest of preventing fraud and 
                abuse in Federal health care programs (as so defined).
    ``(b) Advisory Opinions.--
            ``(1) Issuance of advisory opinions.--The Secretary shall 
        issue written advisory opinions as provided in this subsection.
            ``(2) Matters subject to advisory opinions.--The Secretary 
        shall issue advisory opinions as to the following matters:
                    ``(A) What constitutes prohibited remuneration 
                within the meaning of section 1128B(b).
                    ``(B) Whether an arrangement or proposed 
                arrangement satisfies the criteria set forth in section 
                1128B(b)(3) for activities which do not result in 
                prohibited remuneration.
                    ``(C) Whether an arrangement or proposed 
                arrangement satisfies the criteria which the Secretary 
                has established, or shall establish by regulation for 
                activities which do not result in prohibited 
                remuneration.
                    ``(D) What constitutes an inducement to reduce or 
                limit services to individuals entitled to benefits 
                under title XVIII or title XIX or title XXI within the 
                meaning of section 1128B(b).
                    ``(E) Whether any activity or proposed activity 
                constitutes grounds for the imposition of a sanction 
                under section 1128, 1128A, or 1128B.
            ``(3) Matters not subject to advisory opinions.--Such 
        advisory opinions shall not address the following matters:
                    ``(A) Whether the fair market value shall be, or 
                was paid or received for any goods, services or 
                property.
                    ``(B) Whether an individual is a bona fide employee 
                within the requirements of section 3121(d)(2) of the 
                Internal Revenue Code of 1986.
            ``(4) Effect of advisory opinions.--
                    ``(A) Binding as to secretary and parties 
                involved.--Each advisory opinion issued by the 
                Secretary shall be binding as to the Secretary and the 
                party or parties requesting the opinion.
                    ``(B) Failure to seek opinion.--The failure of a 
                party to seek an advisory opinion may not be introduced 
                into evidence to prove that the party intended to 
                violate the provisions of sections 1128, 1128A, or 
                1128B.
            ``(5) Regulations.--
                    ``(A) In general.--Not later than 180 days after 
                the date of the enactment of this section, the 
                Secretary shall issue regulations to carry out this 
                section. Such regulations shall provide for--
                            ``(i) the procedure to be followed by a 
                        party applying for an advisory opinion;
                            ``(ii) the procedure to be followed by the 
                        Secretary in responding to a request for an 
                        advisory opinion;
                            ``(iii) the interval in which the Secretary 
                        shall respond;
                            ``(iv) the reasonable fee to be charged to 
                        the party requesting an advisory opinion; and
                            ``(v) the manner in which advisory opinions 
                        will be made available to the public.
                    ``(B) Specific contents.--Under the regulations 
                promulgated pursuant to subparagraph (A)--
                            ``(i) the Secretary shall be required to 
                        respond to a party requesting an 
advisory opinion by not later than 30 days after the request is 
received; and
                            ``(ii) the fee charged to the party 
                        requesting an advisory opinion shall be equal 
                        to the costs incurred by the Secretary in 
                        responding to the request.
    ``(c) Special Fraud Alerts.--
            ``(1) In general.--
                    ``(A) Request for special fraud alerts.--Any person 
                may present, at any time, a request to the Inspector 
                General for a notice which informs the public of 
                practices which the Inspector General considers to be 
                suspect or of particular concern under the medicare 
                program or a State health care program, as defined in 
                section 1128(h) (in this subsection referred to as a 
                `special fraud alert').
                    ``(B) Issuance and publication of special fraud 
                alerts.--Upon receipt of a request described in 
                subparagraph (A), the Inspector General shall 
                investigate the subject matter of the request to 
                determine whether a special fraud alert should be 
                issued. If appropriate, the Inspector General shall 
                issue a special fraud alert in response to the request. 
                All special fraud alerts issued pursuant to this 
                subparagraph shall be published in the Federal 
                Register.
            ``(2) Criteria for special fraud alerts.--In determining 
        whether to issue a special fraud alert upon a request described 
        in paragraph (1), the Inspector General may consider--
                    ``(A) whether and to what extent the practices that 
                would be identified in the special fraud alert may 
                result in any of the consequences described in 
                subsection (a)(2); and
                    ``(B) the volume and frequency of the conduct that 
                would be identified in the special fraud alert.''.

     Subtitle B--Revisions to Current Sanctions for Fraud and Abuse

SEC. 211. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE AND STATE 
              HEALTH CARE PROGRAMS.

    (a) Individual Convicted of Felony Relating to Health Care Fraud.--
            (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)) is 
        amended by adding at the end the following new paragraph:
            ``(3) Felony conviction relating to health care fraud.--Any 
        individual or entity that has been convicted after the date of 
        the enactment of the Health Coverage Availability and 
        Affordability Act of 1996, under Federal or State law, in 
        connection with the delivery of a health care item or service 
        or with respect to any act or omission in a health care program 
        (other than those specifically described in paragraph (1)) 
        operated by or financed in whole or in part by any Federal, 
        State, or local government agency, of a criminal offense 
        consisting of a felony relating to fraud, theft, embezzlement, 
        breach of fiduciary responsibility, or other financial 
        misconduct.''.
            (2) Conforming amendment.--Paragraph (1) of section 1128(b) 
        (42 U.S.C. 1320a-7(b)) is amended to read as follows:
            ``(1) Conviction relating to fraud.--Any individual or 
        entity that has been convicted after the date of the enactment 
        of the Health Coverage Availability and Affordability Act of 
        1996, under Federal or State law--
                    ``(A) of a criminal offense consisting of a 
                misdemeanor relating to fraud, theft, embezzlement, 
                breach of fiduciary responsibility, or other financial 
                misconduct--
                            ``(i) in connection with the delivery of a 
                        health care item or service, or
                            ``(ii) with respect to any act or omission 
                        in a health care program (other than those 
                        specifically described in subsection (a)(1)) 
                        operated by or financed in whole or in part by 
                        any Federal, State, or local government agency; 
                        or
                    ``(B) of a criminal offense relating to fraud, 
                theft, embezzlement, breach of fiduciary 
                responsibility, or other financial misconduct with 
                respect to any act or omission in a program (other than 
                a health care program) operated by or financed in whole 
                or in part by any Federal, State, or local government 
                agency.''.
    (b) Individual Convicted of Felony Relating to Controlled 
Substance.--
            (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)), as 
        amended by subsection (a), is amended by adding at the end the 
        following new paragraph:
            ``(4) Felony conviction relating to controlled substance.--
        Any individual or entity that has been convicted after the date 
        of the enactment of the Health Coverage Availability and 
        Affordability Act of 1996, under Federal or State law, of a 
        criminal offense consisting of a felony relating to the 
        unlawful manufacture, distribution, prescription, or dispensing 
        of a controlled substance.''.
            (2) Conforming amendment.--Section 1128(b)(3) (42 U.S.C. 
        1320a-7(b)(3)) is amended--
                    (A) in the heading, by striking ``Conviction'' and 
                inserting ``Misdemeanor conviction''; and
                    (B) by striking ``criminal offense'' and inserting 
                ``criminal offense consisting of a misdemeanor''.

SEC. 212. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR CERTAIN 
              INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE EXCLUSION 
              FROM MEDICARE AND STATE HEALTH CARE PROGRAMS.

    Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended by adding 
at the end the following new subparagraphs:
    ``(D) In the case of an exclusion of an individual or entity under 
paragraph (1), (2), or (3) of subsection (b), the period of the 
exclusion shall be 3 years, unless the Secretary determines in 
accordance with published regulations that a shorter period is 
appropriate because of mitigating circumstances or that a longer period 
is appropriate because of aggravating circumstances.
    ``(E) In the case of an exclusion of an individual or entity under 
subsection (b)(4) or (b)(5), the period of the exclusion shall not be 
less than the period during which the individual's or entity's license 
to provide health care is revoked, suspended, or surrendered, or the 
individual or the entity is excluded or suspended from a Federal or 
State health care program.
    ``(F) In the case of an exclusion of an individual or entity under 
subsection (b)(6)(B), the period of the exclusion shall be not less 
than 1 year.''.

SEC. 213. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP OR CONTROL 
              INTEREST IN SANCTIONED ENTITIES.

    Section 1128(b) (42 U.S.C. 1320a-7(b)) is amended by adding at the 
end the following new paragraph:
            ``(15) Individuals controlling a sanctioned entity.--(A) 
        Any individual--
                    ``(i) who has a direct or indirect ownership or 
                control interest in a sanctioned entity and who knows 
                or should know (as defined in section 1128A(i)(6)) of 
                the action constituting the basis for the conviction or 
                exclusion described in subparagraph (B); or
                    ``(ii) who is an officer or managing employee (as 
                defined in section 1126(b)) of such an entity.
            ``(B) For purposes of subparagraph (A), the term 
        `sanctioned entity' means an entity--
                    ``(i) that has been convicted of any offense 
                described in subsection (a) or in paragraph (1), (2), 
                or (3) of this subsection; or
                    ``(ii) that has been excluded from participation 
                under a program under title XVIII or under a State 
                health care program.''.

SEC. 214. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO 
              COMPLY WITH STATUTORY OBLIGATIONS.

    (a) Minimum Period of Exclusion for Practitioners and Persons 
Failing To Meet Statutory Obligations.--
            (1) In general.--The second sentence of section 1156(b)(1) 
        (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may 
        prescribe)'' and inserting ``may prescribe, except that such 
        period may not be less than 1 year)''.
            (2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C. 
        1320c-5(b)(2)) is amended by striking ``shall remain'' and 
        inserting ``shall (subject to the minimum period specified in 
        the second sentence of paragraph (1)) remain''.
    (b) Repeal of ``Unwilling or Unable'' Condition for Imposition of 
Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended--
            (1) in the second sentence, by striking ``and determines'' 
        and all that follows through ``such obligations,''; and
            (2) by striking the third sentence.

SEC. 215. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH MAINTENANCE 
              ORGANIZATIONS.

    (a) Application of Intermediate Sanctions for any Program 
Violations.--
            (1) In general.--Section 1876(i)(1) (42 U.S.C. 
        1395mm(i)(1)) is amended by striking ``the Secretary may 
        terminate'' and all that follows and inserting ``in accordance 
        with procedures established under paragraph (9), the Secretary 
        may at any time terminate any such contract or may impose the 
        intermediate sanctions described in paragraph (6)(B) or (6)(C) 
        (whichever is applicable) on the eligible organization if the 
        Secretary determines that the organization--
            ``(A) has failed substantially to carry out the contract;
            ``(B) is carrying out the contract in a manner 
        substantially inconsistent with the efficient and effective 
        administration of this section; or
            ``(C) no longer substantially meets the applicable 
        conditions of subsections (b), (c), (e), and (f).''.
            (2) Other intermediate sanctions for miscellaneous program 
        violations.--Section 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is 
        amended by adding at the end the following new subparagraph:
    ``(C) In the case of an eligible organization for which the 
Secretary makes a determination under paragraph (1) the basis of which 
is not described in subparagraph (A), the Secretary may apply the 
following intermediate sanctions:
            ``(i) Civil money penalties of not more than $25,000 for 
        each determination under paragraph (1) if the deficiency that 
        is the basis of the determination has directly adversely 
        affected (or has the substantial likelihood of adversely 
        affecting) an individual covered under the organization's 
        contract.
            ``(ii) Civil money penalties of not more than $10,000 for 
        each week beginning after the initiation of procedures by the 
        Secretary under paragraph (9) during which the deficiency that 
        is the basis of a determination under paragraph (1) exists.
            ``(iii) Suspension of enrollment of individuals under this 
        section after the date the Secretary notifies the organization 
        of a determination under paragraph (1) and until the Secretary 
        is satisfied that the deficiency that is the basis for the 
        determination has been corrected and is not likely to recur.''.
            (3) Procedures for imposing sanctions.--Section 1876(i) (42 
        U.S.C. 1395mm(i)) is amended by adding at the end the following 
        new paragraph:
    ``(9) The Secretary may terminate a contract with an eligible 
organization under this section or may impose the intermediate 
sanctions described in paragraph (6) on the organization in accordance 
with formal investigation and compliance procedures established by the 
Secretary under which--
            ``(A) the Secretary first provides the organization with 
        the reasonable opportunity to develop and implement a 
        corrective action plan to correct the deficiencies that were 
        the basis of the Secretary's determination under paragraph (1) 
        and the organization fails to develop or implement such a plan;
            ``(B) in deciding whether to impose sanctions, the 
        Secretary considers aggravating factors such as whether an 
        organization has a history of deficiencies or has not taken 
        action to correct deficiencies the Secretary has brought to the 
        organization's attention;
            ``(C) there are no unreasonable or unnecessary delays 
        between the finding of a deficiency and the imposition of 
        sanctions; and
            ``(D) the Secretary provides the organization with 
        reasonable notice and opportunity for hearing (including the 
        right to appeal an initial decision) before imposing any 
        sanction or terminating the contract.''.
            (4) Conforming amendments.--Section 1876(i)(6)(B) (42 
        U.S.C. 1395mm(i)(6)(B)) is amended by striking the second 
        sentence.
    (b) Agreements With Peer Review Organizations.--Section 
1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A)) is amended by striking ``an 
agreement'' and inserting ``a written agreement''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to contract years beginning on or after January 1, 
1996.

SEC. 216. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PENALTIES FOR 
              DISCOUNTING AND MANAGED CARE ARRANGEMENTS.

    (a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is 
amended--
            (1) by striking ``and'' at the end of subparagraph (D);
            (2) by striking the period at the end of subparagraph (E) 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
            ``(F) any remuneration between an organization and an 
        individual or entity providing items or services, or a 
        combination thereof, pursuant to a written agreement between 
        the organization and the individual or entity if the 
        organization is an eligible organization under section 1876 or 
        if the written agreement places the individual or entity at 
        substantial financial risk for the cost or utilization of the 
        items or services, or a combination thereof, which the 
        individual or entity is obligated to provide, whether through a 
        withhold, capitation, incentive pool, per diem payment, or any 
        other similar risk arrangement which places the individual or 
        entity at substantial financial risk.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to written agreements entered into on or after January 1, 1997.

SEC. 217. CRIMINAL PENALTY FOR FRAUDULENT DISPOSITION OF ASSETS IN 
              ORDER TO OBTAIN MEDICAID BENEFITS.

    Section 1128B(a) (42 U.S.C. 1320a-7b(a)) is amended--
            (1) by striking ``or'' at the end of paragraph (4);
            (2) by adding ``or'' at the end of paragraph (5); and
            (3) by inserting after paragraph (5) the following new 
        paragraph:
            ``(6) knowingly and willfully disposes of assets (including 
        by any transfer in trust) in order for an individual to become 
        eligible for medical assistance under a State plan under title 
        XIX, if disposing of the assets results in the imposition of a 
        period of ineligibility for such assistance under section 
        1917(c),''.

SEC. 218. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this subtitle 
shall take effect January 1, 1997.

                      Subtitle C--Data Collection

SEC. 221. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE DATA 
              COLLECTION PROGRAM.

    (a) In General.--Title XI (42 U.S.C. 1301 et seq.), as amended by 
sections 201 and 205, is amended by inserting after section 1128D the 
following new section:

         ``health care fraud and abuse data collection program

    ``Sec. 1128E. (a) General Purpose.--Not later than January 1, 1997, 
the Secretary shall establish a national health care fraud and abuse 
data collection program for the reporting of final adverse actions (not 
including settlements in which no findings of liability have been made) 
against health care providers, suppliers, or practitioners as required 
by subsection (b), with access as set forth in subsection (c).
    ``(b) Reporting of Information.--
            ``(1) In general.--Each Government agency and health plan 
        shall report any final adverse action (not including 
        settlements in which no findings of liability have been made) 
        taken against a health care provider, supplier, or 
        practitioner.
            ``(2) Information to be reported.--The information to be 
        reported under paragraph (1) includes:
                    ``(A) The name and TIN (as defined in section 
                7701(a)(41) of the Internal Revenue Code of 1986) of 
                any health care provider, supplier, or practitioner who 
                is the subject of a final adverse action.
                    ``(B) The name (if known) of any health care entity 
                with which a health care provider, supplier, or 
                practitioner is affiliated or associated.
                    ``(C) The nature of the final adverse action and 
                whether such action is on appeal.
                    ``(D) A description of the acts or omissions and 
                injuries upon which the final adverse action was based, 
                and such other information as the Secretary determines 
                by regulation is required for appropriate 
                interpretation of information reported under this 
                section.
            ``(3) Confidentiality.--In determining what information is 
        required, the Secretary shall include procedures to assure that 
        the privacy of individuals receiving health care services is 
        appropriately protected.
            ``(4) Timing and form of reporting.--The information 
        required to be reported under this subsection shall be reported 
        regularly (but not less often than monthly) and in such form 
        and manner as the Secretary prescribes. Such information shall 
        first be required to be reported on a date specified by the 
        Secretary.
            ``(5) To whom reported.--The information required to be 
        reported under this subsection shall be reported to the 
        Secretary.
    ``(c) Disclosure and Correction of Information.--
            ``(1) Disclosure.--With respect to the information about 
        final adverse actions (not including settlements in which no 
        findings of liability have been made) reported to the Secretary 
        under this section respecting a health care provider, supplier, 
        or practitioner, the Secretary shall, by regulation, provide 
        for--
                    ``(A) disclosure of the information, upon request, 
                to the health care provider, supplier, or licensed 
                practitioner, and
                    ``(B) procedures in the case of disputed accuracy 
                of the information.
            ``(2) Corrections.--Each Government agency and health plan 
        shall report corrections of information already reported about 
        any final adverse action taken against a health care provider, 
        supplier, or practitioner, in such form and manner that the 
        Secretary prescribes by regulation.
    ``(d) Access to Reported Information.--
            ``(1) Availability.--The information in this database shall 
        be available to Federal and State government agencies and 
        health plans pursuant to procedures that the Secretary shall 
        provide by regulation.
            ``(2) Fees for disclosure.--The Secretary may establish or 
        approve reasonable fees for the disclosure of information in 
        this database (other than with respect to requests by Federal 
        agencies). The amount of such a fee shall be sufficient to 
        recover the full costs of operating the database. Such fees 
        shall be available to the Secretary or, in the Secretary's 
        discretion to the agency designated under this section to cover 
        such costs.
    ``(e) Protection From Liability for Reporting.--No person or 
entity, including the agency designated by the Secretary in subsection 
(b)(5) shall be held liable in any civil action with respect to any 
report made as required by this section, without knowledge of the 
falsity of the information contained in the report.
    ``(f) Definitions and Special Rules.--For purposes of this section:
            ``(1) Final adverse action.--
                    ``(A) In general.--The term `final adverse action' 
                includes:
                            ``(i) Civil judgments against a health care 
                        provider, supplier, or practitioner in Federal 
                        or State court related to the delivery of a 
                        health care item or service.
                            ``(ii) Federal or State criminal 
                        convictions related to the delivery of a health 
                        care item or service.
                            ``(iii) Actions by Federal or State 
                        agencies responsible for the licensing and 
                        certification of health care providers, 
                        suppliers, and licensed health care 
                        practitioners, including--
                                    ``(I) formal or official actions, 
                                such as revocation or suspension of a 
                                license (and the length of any such 
                                suspension), reprimand, censure or 
                                probation,
                                    ``(II) any other loss of license or 
                                the right to apply for, or renew, a 
                                license of the provider, supplier, or 
                                practitioner, whether by operation of 
                                law, voluntary surrender, non-
                                renewability, or otherwise, or
                                    ``(III) any other negative action 
                                or finding by such Federal or State 
                                agency that is publicly available 
                                information.
                            ``(iv) Exclusion from participation in 
                        Federal or State health care programs.
                            ``(v) Any other adjudicated actions or 
                        decisions that the Secretary shall establish by 
                        regulation.
                    ``(B) Exception.--The term does not include any 
                action with respect to a malpractice claim.
            ``(2) Practitioner.--The terms `licensed health care 
        practitioner', `licensed practitioner', and `practitioner' 
        mean, with respect to a State, an individual who is licensed or 
        otherwise authorized by the State to provide health care 
        services (or any individual who, without authority holds 
        himself or herself out to be so licensed or authorized).
            ``(3) Government agency.--The term `Government agency' 
        shall include:
                    ``(A) The Department of Justice.
                    ``(B) The Department of Health and Human Services.
                    ``(C) Any other Federal agency that either 
                administers or provides payment for the delivery of 
                health care services, including, but not limited to the 
                Department of Defense and the Veterans' Administration.
                    ``(D) State law enforcement agencies.
                    ``(E) State medicaid fraud control units.
                    ``(F) Federal or State agencies responsible for the 
                licensing and certification of health care providers 
                and licensed health care practitioners.
            ``(4) Health plan.--The term `health plan' has the meaning 
        given such term by section 1128C(c).
            ``(5) Determination of conviction.--For purposes of 
        paragraph (1), the existence of a conviction shall be 
        determined under paragraph (4) of section 1128(i).''.
    (b) Improved Prevention in Issuance of Medicare Provider Numbers.--
Section 1842(r) (42 U.S.C. 1395u(r)) is amended by adding at the end 
the following new sentence: ``Under such system, the Secretary may 
impose appropriate fees on such physicians to cover the costs of 
investigation and recertification activities with respect to the 
issuance of the identifiers.''.

                  Subtitle D--Civil Monetary Penalties

SEC. 231. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.

    (a) General Civil Monetary Penalties.--Section 1128A (42 U.S.C. 
1320a-7a) is amended as follows:
            (1) In the third sentence of subsection (a), by striking 
        ``programs under title XVIII'' and inserting ``Federal health 
        care programs (as defined in section 1128B(f)(1))''.
            (2) In subsection (f)--
                    (A) by redesignating paragraph (3) as paragraph 
                (4); and
                    (B) by inserting after paragraph (2) the following 
                new paragraph:
            ``(3) With respect to amounts recovered arising out of a 
        claim under a Federal health care program (as defined in 
        section 1128B(f)), the portion of such amounts as is determined 
        to have been paid by the program shall be repaid to the 
        program, and the portion of such amounts attributable to the 
        amounts recovered under this section by reason of the 
        amendments made by the Health Coverage Availability and 
        Affordability Act of 1996 (as estimated by the Secretary) shall 
        be deposited into the Federal Hospital Insurance Trust Fund 
        pursuant to section 1817(k)(2)(C).''.
            (3) In subsection (i)--
                    (A) in paragraph (2), by striking ``title V, XVIII, 
                XIX, or XX of this Act'' and inserting ``a Federal 
                health care program (as defined in section 1128B(f))'',
                    (B) in paragraph (4), by striking ``a health 
                insurance or medical services program under title XVIII 
                or XIX of this Act'' and inserting ``a Federal health 
                care program (as so defined)'', and
                    (C) in paragraph (5), by striking ``title V, XVIII, 
                XIX, or XX'' and inserting ``a Federal health care 
                program (as so defined)''.
            (4) By adding at the end the following new subsection:
    ``(m)(1) For purposes of this section, with respect to a Federal 
health care program not contained in this Act, references to the 
Secretary in this section shall be deemed to be references to the 
Secretary or Administrator of the department or agency with 
jurisdiction over such program and references to the Inspector General 
of the Department of Health and Human Services in this section shall be 
deemed to be references to the Inspector General of the applicable 
department or agency.
    ``(2)(A) The Secretary and Administrator of the departments and 
agencies referred to in paragraph (1) may include in any action 
pursuant to this section, claims within the jurisdiction of other 
Federal departments or agencies as long as the following conditions are 
satisfied:
            ``(i) The case involves primarily claims submitted to the 
        Federal health care programs of the department or agency 
        initiating the action.
            ``(ii) The Secretary or Administrator of the department or 
        agency initiating the action gives notice and an opportunity to 
        participate in the investigation to the Inspector General of 
        the department or agency with primary jurisdiction over the 
        Federal health care programs to which the claims were 
        submitted.
    ``(B) If the conditions specified in subparagraph (A) are 
fulfilled, the Inspector General of the department or agency initiating 
the action is authorized to exercise all powers granted under the 
Inspector General Act of 1978 with respect to the claims submitted to 
the other departments or agencies to the same manner and extent as 
provided in that Act with respect to claims submitted to such 
departments or agencies.''.
    (b) Excluded Individual Retaining Ownership or Control Interest in 
Participating Entity.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is 
amended--
            (1) by striking ``or'' at the end of paragraph (1)(D);
            (2) by striking ``, or'' at the end of paragraph (2) and 
        inserting a semicolon;
            (3) by striking the semicolon at the end of paragraph (3) 
        and inserting ``; or''; and
            (4) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) in the case of a person who is not an organization, 
        agency, or other entity, is excluded from participating in a 
        program under title XVIII or a State health care program in 
        accordance with this subsection or under section 1128 and who, 
        at the time of a violation of this subsection--
                    ``(A) retains a direct or indirect ownership or 
                control interest in an entity that is participating in 
                a program under title XVIII or a State health care 
                program, and who knows or should know of the action 
                constituting the basis for the exclusion; or
                    ``(B) is an officer or managing employee (as 
                defined in section 1126(b)) of such an entity;''.
    (c) Modifications of Amounts of Penalties and Assessments.--Section 
1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by subsection (b), is 
amended in the matter following paragraph (4)--
            (1) by striking ``$2,000'' and inserting ``$10,000'';
            (2) by inserting ``; in cases under paragraph (4), $10,000 
        for each day the prohibited relationship occurs'' after ``false 
        or misleading information was given''; and
            (3) by striking ``twice the amount'' and inserting ``3 
        times the amount''.
    (d) Claim for Item or Service Based on Incorrect Coding or 
Medically Unnecessary Services.--Section 1128A(a)(1) (42 U.S.C. 1320a-
7a(a)(1)) is amended--
            (1) in subparagraph (A) by striking ``claimed,'' and 
        inserting ``claimed, including any person who engages in a 
        pattern or practice of presenting or causing to be presented a 
        claim for an item or service that is based on a code that the 
        person knows or should know will result in a greater payment to 
        the person than the code the person knows or should know is 
        applicable to the item or service actually provided,'';
            (2) in subparagraph (C), by striking ``or'' at the end; and
            (3) by inserting after subparagraph (D) the following new 
        subparagraph:
                    ``(E) is for a medical or other item or service 
                that a person knows or should know is not medically 
                necessary; or''.
    (e) Sanctions Against Practitioners and Persons for Failure To 
Comply With Statutory Obligations.--Section 1156(b)(3) (42 U.S.C. 
1320c-5(b)(3)) is amended by striking ``the actual or estimated cost'' 
and inserting ``up to $10,000 for each instance''.
    (f) Procedural Provisions.--Section 1876(i)(6) (42 U.S.C. 
1395mm(i)(6)), as amended by section 215(a)(2), is amended by adding at 
the end the following new subparagraph:
    ``(D) The provisions of section 1128A (other than subsections (a) 
and (b)) shall apply to a civil money penalty under subparagraph (B)(i) 
or (C)(i) in the same manner as such provisions apply to a civil money 
penalty or proceeding under section 1128A(a).''.
    (g) Prohibition Against Offering Inducements to Individuals 
Enrolled Under Programs or Plans.--
            (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 
        1320a-7a(a)), as amended, is amended--
                    (A) by striking ``or'' at the end of paragraph (3);
                    (B) by striking the semicolon at the end of 
                paragraph (4) and inserting ``; or''; and
                    (D) by inserting after paragraph (4) the following 
                new paragraph:
            ``(5) offers to or transfers remuneration to any individual 
        eligible for benefits under title XVIII of this Act, or under a 
        State health care program (as defined in section 1128(h)) that 
        such person knows or should know is likely to influence such 
        individual to order or receive from a particular provider, 
        practitioner, or supplier any item or service for which payment 
        may be made, in whole or in part, under title XVIII, or a State 
        health care program (as so defined);''.
            (2) Remuneration defined.--Section 1128A(i) (42 U.S.C. 
        1320a-7a(i)) is amended by adding at the end the following new 
        paragraph:
            ``(6) The term `remuneration' includes the waiver of 
        coinsurance and deductible amounts (or any part thereof), and 
        transfers of items or services for free or for other than fair 
        market value. The term `remuneration' does not include--
                    ``(A) the waiver of coinsurance and deductible 
                amounts by a person, if--
                            ``(i) the waiver is not offered as part of 
                        any advertisement or solicitation;
                            ``(ii) the person does not routinely waive 
                        coinsurance or deductible amounts; and
                            ``(iii) the person--
                                    ``(I) waives the coinsurance and 
                                deductible amounts after determining in 
                                good faith that the individual is in 
                                financial need;
                                    ``(II) fails to collect coinsurance 
                                or deductible amounts after making 
                                reasonable collection efforts; or
                                    ``(III) provides for any 
                                permissible waiver as specified in 
                                section 1128B(b)(3) or in regulations 
                                issued by the Secretary;
                    ``(B) differentials in coinsurance and deductible 
                amounts as part of a benefit plan design as long as the 
                differentials have been disclosed in writing to all 
                beneficiaries, third party payers, and providers, to 
                whom claims are presented and as long as the 
                differentials meet the standards as defined in 
                regulations promulgated by the Secretary not later than 
                180 days after the date of the enactment of the Health 
                Coverage Availability and Affordability Act of 1996; or
                    ``(C) incentives given to individuals to promote 
                the delivery of preventive care as determined by the 
                Secretary in regulations so promulgated.''.
    (h) Effective Date.--The amendments made by this section shall take 
effect January 1, 1997.

SEC. 232. CLARIFICATION OF LEVEL OF INTENT REQUIRED FOR IMPOSITION OF 
              SANCTIONS.

    (a) Clarification of Level of Knowledge Required for Imposition of 
Civil Monetary Penalties.--
            (1) In general.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) 
        is amended--
                    (A) in paragraphs (1) and (2), by inserting 
                ``knowingly'' before ``presents'' each place it 
                appears; and
                    (B) in paragraph (3), by striking ``gives'' and 
                inserting ``knowingly gives or causes to be given''.
            (2) Definition of standard.--Section 1128A(i) (42 U.S.C. 
        1320a-7a(i)), as amended by section 231(g)(2), is amended by 
        adding at the end the following new paragraph:
            ``(7) The term `should know' means that a person, with 
        respect to information--
                    ``(A) acts in deliberate ignorance of the truth or 
                falsity of the information; or
                    ``(B) acts in reckless disregard of the truth or 
                falsity of the information,
        and no proof of specific intent to defraud is required.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to acts or omissions occurring on or after January 1, 1997.

SEC. 233. PENALTY FOR FALSE CERTIFICATION FOR HOME HEALTH SERVICES.

    (a) In General.--Section 1128A(b) (42 U.S.C. 1320a-7a(b)) is 
amended by adding at the end the following new paragraph:
    ``(3)(A) Any physician who executes a document described in 
subparagraph (B) with respect to an individual knowing that all of the 
requirements referred to in such subparagraph are not met with respect 
to the individual shall be subject to a civil monetary penalty of not 
more than the greater of--
            ``(i) $5,000, or
            ``(ii) three times the amount of the payments under title 
        XVIII for home health services which are made pursuant to such 
        certification.
    ``(B) A document described in this subparagraph is any document 
that certifies, for purposes of title XVIII, that an individual meets 
the requirements of section 1814(a)(2)(C) or 1835(a)(2)(A) in the case 
of home health services furnished to the individual.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to certifications made on or after the date of the enactment of 
this Act.

                 Subtitle E--Revisions to Criminal Law

SEC. 241. DEFINITION OF FEDERAL HEALTH CARE OFFENSE.

    (a) In General.--Chapter 1 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 24. Definition of Federal health care offense
    ``(a) As used in this title, the term `Federal health care offense' 
means a violation of, or a criminal conspiracy to violate--
            ``(1) section 669, 1035, or 1347 of this title; or
            ``(2) section 287, 371, 664, 666, 1001, 1027, 1341, 1343, 
        or 1954 of this title, if the violation or conspiracy relates 
        to a health care benefit program.
    ``(b) As used in this title, the term `health care benefit program' 
has the meaning given such term in section 1347(b) of this title.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 2 of title 18, United States Code, is amended by inserting 
after the item relating to section 23 the following new item:

``24. Definition of Federal health care offense.''.

SEC. 242. HEALTH CARE FRAUD.

    (a) Offense.--
            (1) In general.--Chapter 63 of title 18, United States 
        Code, is amended by adding at the end the following:
``Sec. 1347. Health care fraud
    ``(a) Whoever knowingly executes, or attempts to execute, a scheme 
or artifice--
            ``(1) to defraud any health care benefit program; or
            ``(2) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any of the money or property 
        owned by, or under the custody or control of, any health care 
        benefit program,
in connection with the delivery of or payment for health care benefits, 
items, or services, shall be fined under this title or imprisoned not 
more than 10 years, or both. If the violation results in serious bodily 
injury (as defined in section 1365 of this title), such person shall be 
fined under this title or imprisoned not more than 20 years, or both; 
and if the violation results in death, such person shall be fined under 
this title, or imprisoned for any term of years or for life, or both.
    ``(b) As used in this section, the term `health care benefit 
program' means any public or private plan or contract, affecting 
commerce, under which any medical benefit, item, or service is provided 
to any individual, and includes any individual or entity who is 
providing a medical benefit, item, or service for which payment may be 
made under the plan or contract.''.
            (2) Clerical amendment.--The table of sections at the 
        beginning of chapter 63 of title 18, United States Code, is 
        amended by adding at the end the following:

``1347. Health care fraud.''.
    (b) Criminal Fines Deposited in Federal Hospital Insurance Trust 
Fund.--The Secretary of the Treasury shall deposit into the Federal 
Hospital Insurance Trust Fund pursuant to section 1817(k)(2)(C) of the 
Social Security Act (42 U.S.C. 1395i) an amount equal to the criminal 
fines imposed under section 1347 of title 18, United States Code 
(relating to health care fraud).

SEC. 243. THEFT OR EMBEZZLEMENT.

    (a) In General.--Chapter 31 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 669. Theft or embezzlement in connection with health care
    ``(a) Whoever embezzles, steals, or otherwise without authority 
willfully and unlawfully converts to the use of any person other than 
the rightful owner, or intentionally misapplies any of the moneys, 
funds, securities, premiums, credits, property, or other assets of a 
health care benefit program, shall be fined under this title or 
imprisoned not more than 10 years, or both; but if the value of such 
property does not exceed the sum of $100 the defendant shall be fined 
under this title or imprisoned not more than one year, or both.
    ``(b) As used in this section, the term `health care benefit 
program' has the meaning given such term in section 1347(b) of this 
title.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 31 of title 18, United States Code, is amended by adding at the 
end the following:

``669. Theft or embezzlement in connection with health care.''.

SEC. 244. FALSE STATEMENTS.

    (a) In General.--Chapter 47 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1035. False statements relating to health care matters
    ``(a) Whoever, in any matter involving a health care benefit 
program, knowingly--
            ``(1) falsifies, conceals, or covers up by any trick, 
        scheme, or device a material fact; or
            ``(2) makes any false, fictitious, or fraudulent statements 
        or representations, or makes or uses any false writing or 
        document knowing the same to contain any false, fictitious, or 
        fraudulent statement or entry,
in connection with the delivery of or payment for health care benefits, 
items, or services, shall be fined under this title or imprisoned not 
more than 5 years, or both.
    ``(b) As used in this section, the term `health care benefit 
program' has the meaning given such term in section 1347(b) of this 
title.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 47 of title 18, United States Code, is amended by adding at the 
end the following new item:

``1035. False statements relating to health care matters.''.

SEC. 245. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF HEALTH CARE 
              OFFENSES.

    (a) In General.--Chapter 73 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1518. Obstruction of criminal investigations of health care 
              offenses
    ``(a) Whoever willfully prevents, obstructs, misleads, delays or 
attempts to prevent, obstruct, mislead, or delay the communication of 
information or records relating to a violation of a Federal health care 
offense to a criminal investigator shall be fined under this title or 
imprisoned not more than 5 years, or both.
    ``(b) As used in this section the term `criminal investigator' 
means any individual duly authorized by a department, agency, or armed 
force of the United States to conduct or engage in investigations for 
prosecutions for violations of health care offenses.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 of title 18, United States Code, is amended by adding at the 
end the following new item:

``1518. Obstruction of criminal investigations of health care 
                            offenses.''.

SEC. 246. LAUNDERING OF MONETARY INSTRUMENTS.

    Section 1956(c)(7) of title 18, United States Code, is amended by 
adding at the end the following:
                    ``(F) Any act or activity constituting an offense 
                involving a Federal health care offense.''.

SEC. 247. INJUNCTIVE RELIEF RELATING TO HEALTH CARE OFFENSES.

    (a) In General.--Section 1345(a)(1) of title 18, United States 
Code, is amended--
            (1) by striking ``or'' at the end of subparagraph (A);
            (2) by inserting ``or'' at the end of subparagraph (B); and
            (3) by adding at the end the following:
            ``(C) committing or about to commit a Federal health care 
        offense.''.
    (b) Freezing of Assets.--Section 1345(a)(2) of title 18, United 
States Code, is amended by inserting ``or a Federal health care 
offense'' after ``title)''.

SEC. 248. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.

    (a) In General.--Chapter 223 of title 18, United States Code, is 
amended by adding after section 3485 the following:
``Sec. 3486. Authorized investigative demand procedures
    ``(a) Authorization.--In any investigation relating to any act or 
activity involving a Federal health care offense, the Attorney General 
or the Attorney General's designee may issue in writing and cause to be 
served a subpoena requiring the production of any records (including 
any books, papers, documents, electronic media, or other objects or 
tangible things), which may be relevant to an authorized law 
enforcement inquiry, that a person or legal entity may possess or have 
care, custody, or control. A subpoena shall describe the objects 
required to be produced and prescribe a return date within a reasonable 
period of time within which the objects can be assembled and made 
available.
    ``(b) Service.--A subpoena issued under this section may be served 
by any person designated in the subpoena to serve it. Service upon a 
natural person may be made by personal delivery of the subpoena to him. 
Service may be made upon a domestic or foreign corporation or upon a 
partnership or other unincorporated association which is subject to 
suit under a common name, by delivering the subpoena to an officer, to 
a managing or general agent, or to any other agent authorized by 
appointment or by law to receive service of process. The affidavit of 
the person serving the subpoena entered on a true copy thereof by the 
person serving it shall be proof of service.
    ``(c) Enforcement.--In the case of contumacy by or refusal to obey 
a subpoena issued to any person, the Attorney General may invoke the 
aid of any court of the United States within the jurisdiction of which 
the investigation is carried on or of which the subpoenaed person is an 
inhabitant, or in which he carries on business or may be found, to 
compel compliance with the subpoena. The court may issue an order 
requiring the subpoenaed person to appear before the Attorney General 
to produce records, if so ordered, or to give testimony touching the 
matter under investigation. Any failure to obey the order of the court 
may be punished by the court as a contempt thereof. All process in any 
such case may be served in any judicial district in which such person 
may be found.
    ``(d) Immunity From Civil Liability.--Notwithstanding any Federal, 
State, or local law, any person, including officers, agents, and 
employees, receiving a summons under this section, who complies in good 
faith with the summons and thus produces the materials sought, shall 
not be liable in any court of any State or the United States to any 
customer or other person for such production or for nondisclosure of 
that production to the customer.
    ``(e) Limitation on Use.--(1) Health information about an 
individual that is disclosed under this section may not be used in, or 
disclosed to any person for use in, any administrative, civil, or 
criminal action or investigation directed against the individual who is 
the subject of the information unless the action or investigation 
arises out of and is directly related to receipt of health care or 
payment for health care or action involving a fraudulent claim related 
to health; or if authorized by an appropriate order of a court of 
competent jurisdiction, granted after application showing good cause 
therefor.
    ``(2) In assessing good cause, the court shall weigh the public 
interest and the need for disclosure against the injury to the patient, 
to the physician-patient relationship, and to the treatment services.
    ``(3) Upon the granting of such order, the court, in determining 
the extent to which any disclosure of all or any part of any record is 
necessary, shall impose appropriate safeguards against unauthorized 
disclosure.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 223 of title 18, United States Code, is amended by inserting 
after the item relating to section 3485 the following new item:

``3486. Authorized investigative demand procedures.''.
    (c) Conforming Amendment.--Section 1510(b)(3)(B) of title 18, 
United States Code, is amended by inserting ``or a Department of 
Justice subpoena (issued under section 3486 of title 18),'' after 
``subpoena''.

SEC. 249. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

    (a) In General.--Section 982(a) of title 18, United States Code, is 
amended by adding after paragraph (5) the following new paragraph:
    ``(6) The court, in imposing sentence on a person convicted of a 
Federal health care offense, shall order the person to forfeit 
property, real or personal, that constitutes or is derived, directly or 
indirectly, from gross proceeds traceable to the commission of the 
offense.''.
    (b) Conforming Amendment.--Section 982(b)(1)(A) of title 18, United 
States Code, is amended by inserting ``or (a)(6)'' after ``(a)(1)''.
    (c) Property Forfeited Deposited in Federal Hospital Insurance 
Trust Fund.--
            (1) In general.--After the payment of the costs of asset 
        forfeiture has been made, and notwithstanding any other 
        provision of law, the Secretary of the Treasury shall deposit 
        into the Federal Hospital Insurance Trust Fund pursuant to 
        section 1817(k)(2)(C) of the Social Security Act, as added by 
        section 301(b), an amount equal to the net amount realized from 
        the forfeiture of property by reason of a Federal health care 
        offense pursuant to section 982(a)(6) of title 18, United 
        States Code.
            (2) Costs of asset forfeiture.--For purposes of paragraph 
        (1), the term ``payment of the costs of asset forfeiture'' 
        means--
                    (A) the payment, at the discretion of the Attorney 
                General, of any expenses necessary to seize, detain, 
                inventory, safeguard, maintain, advertise, sell, or 
                dispose of property under seizure, detention, or 
                forfeited, or of any other necessary expenses incident 
                to the seizure, detention, forfeiture, or disposal of 
                such property, including payment for--
                            (i) contract services,
                            (ii) the employment of outside contractors 
                        to operate and manage properties or provide 
                        other specialized services necessary to dispose 
                        of such properties in an effort to maximize the 
                        return from such properties; and
                            (iii) reimbursement of any Federal, State, 
                        or local agency for any expenditures made to 
                        perform the functions described in this 
                        subparagraph;
                    (B) at the discretion of the Attorney General, the 
                payment of awards for information or assistance leading 
                to a civil or criminal forfeiture involving any Federal 
                agency participating in the Health Care Fraud and Abuse 
                Control Account;
                    (C) the compromise and payment of valid liens and 
                mortgages against property that has been forfeited, 
                subject to the discretion of the Attorney General to 
                determine the validity of any such lien or mortgage and 
                the amount of payment to be made, and the employment of 
                attorneys and other personnel skilled in State real 
                estate law as necessary;
                    (D) payment authorized in connection with remission 
                or mitigation procedures relating to property 
                forfeited; and
                    (E) the payment of State and local property taxes 
                on forfeited real property that accrued between the 
                date of the violation giving rise to the forfeiture and 
                the date of the forfeiture order.

               Subtitle F--Administrative Simplification

SEC. 251. PURPOSE.

    It is the purpose of this subtitle to improve the medicare program 
under title XVIII of the Social Security Act, the medicaid program 
under title XIX of such Act, and the efficiency and effectiveness of 
the health care system, by encouraging the development of a health 
information system through the establishment of standards and 
requirements for the electronic transmission of certain health 
information.

SEC. 252. ADMINISTRATIVE SIMPLIFICATION.

    (a) In General.--Title XI (42 U.S.C. 1301 et seq.) is amended by 
adding at the end the following:

                ``PART C--ADMINISTRATIVE SIMPLIFICATION

``SEC. 1171. DEFINITIONS.

    ``For purposes of this part:
            ``(1) Clearinghouse.--The term `clearinghouse' means a 
        public or private entity that--
                    ``(A) processes or facilitates the processing of 
                nonstandard data elements of health information into 
                standard data elements; or
                    ``(B) provides the means by which persons may meet 
                the requirements of this part.
            ``(2) Code set.--The term `code set' means any set of codes 
        used for encoding data elements, such as tables of terms, 
        medical concepts, medical diagnostic codes, or medical 
        procedure codes.
            ``(3) Health care provider.--The term `health care 
        provider' includes a provider of services (as defined in 
        section 1861(u)), a provider of medical or other health 
        services (as defined in section 1861(s)), and any other person 
        furnishing health care services or supplies.
            ``(4) Health information.--The term `health information' 
        means any information, whether oral or recorded in any form or 
        medium that--
                    ``(A) is created or received by a health care 
                provider, health plan, public health authority, 
                employer, life insurer, school or university, or 
                clearinghouse; and
                    ``(B) relates to the past, present, or future 
                physical or mental health or condition of an 
                individual, the provision of health care to an 
                individual, or the past, present, or future payment for 
                the provision of health care to an individual.
            ``(5) Health plan.--The term `health plan' means a plan 
        which provides, or pays the cost of, health benefits. Such term 
        includes the following, or any combination thereof:
                    ``(A) Part A or part B of the medicare program 
                under title XVIII.
                    ``(B) The medicaid program under title XIX.
                    ``(C) A medicare supplemental policy (as defined in 
                section 1882(g)(1)).
                    ``(D) Coverage issued as a supplement to liability 
                insurance.
                    ``(E) General liability insurance.
                    ``(F) Worker's compensation or similar insurance.
                    ``(G) Automobile or automobile medical-payment 
                insurance.
                    ``(H) A long-term care policy, including a nursing 
                home fixed indemnity policy (unless the Secretary 
                determines that such a policy does not provide 
                sufficiently comprehensive coverage of a benefit so 
                that the policy should be treated as a health plan).
                    ``(I) A hospital or fixed indemnity income-
                protection policy.
                    ``(J) An employee welfare benefit plan, as defined 
                in section 3(1) of the Employee Retirement Income 
                Security Act of 1974 (29 U.S.C. 1002(1)), but only to 
                the extent the plan is established or maintained for 
                the purpose of providing health benefits and has 50 or 
                more participants (as defined in section 3(7) of such 
                Act).
                    ``(K) An employee welfare benefit plan or any other 
                arrangement which is established or maintained for the 
                purpose of offering or providing health benefits to the 
                employees of 2 or more employers.
                    ``(L) The health care program for active military 
                personnel under title 10, United States Code.
                    ``(M) The veterans health care program under 
                chapter 17 of title 38, United States Code.
                    ``(N) The Civilian Health and Medical Program of 
                the Uniformed Services (CHAMPUS), as defined in section 
                1073(4) of title 10, United States Code.
                    ``(O) The Indian health service program under the 
                Indian Health Care Improvement Act (25 U.S.C. 1601 et 
                seq.).
                    ``(P) The Federal Employees Health Benefit Plan 
                under chapter 89 of title 5, United States Code.
                    ``(Q) Such other plan or arrangement as the 
                Secretary determines is a health plan.
            ``(6) Individually identifiable health information.--The 
        term `individually identifiable health information' means any 
        information, including demographic information collected from 
        an individual, that--
                    ``(A) is created or received by a health care 
                provider, health plan, employer, or clearinghouse; and
                    ``(B) relates to the past, present, or future 
                physical or mental health or condition of an 
                individual, the provision of health care to an 
                individual, or the past, present, or future payment for 
                the provision of health care to an individual, and--
                            ``(i) identifies the individual; or
                            ``(ii) with respect to which there is a 
                        reasonable basis to believe that the 
                        information can be used to identify the 
                        individual.
            ``(7) Standard.--The term `standard', when used with 
        reference to a data element of health information or a 
        transaction referred to in section 1173(a)(1), means any such 
        data element or transaction that meets each of the standards 
        and implementation specifications adopted or established by the 
        Secretary with respect to the data element or transaction under 
        sections 1172 through 1174.
            ``(8) Standard setting organization.--The term `standard 
        setting organization' means a standard setting organization 
        accredited by the American National Standards Institute, 
        including the National Council for Prescription Drug Programs, 
        that develops standards for information transactions, data 
        elements, or any other standard that is necessary to, or will 
        facilitate, the implementation of this part.

``SEC. 1172. GENERAL REQUIREMENTS FOR ADOPTION OF STANDARDS.

    ``(a) Applicability.--Any standard adopted under this part shall 
apply to the following persons:
            ``(1) A health plan.
            ``(2) A clearinghouse.
            ``(3) A health care provider who transmits any health 
        information in electronic form in connection with a transaction 
        referred to in section 1173(a)(1).
    ``(b) Reduction of Costs.--Any standard adopted under this part 
shall be consistent with the objective of reducing the administrative 
costs of providing and paying for health care.
    ``(c) Role of Standard Setting Organizations.--
            ``(1) In general.--Except as provided in paragraph (2), any 
        standard adopted under this part shall be developed or modified 
        by a standard setting organization.
            ``(2) Special rules.--
                    ``(A) Different standards.--The Secretary may adopt 
                a standard that is different from any standard 
                developed or modified by a standard setting 
                organization, if--
                            ``(i) the different standard will 
                        substantially reduce administrative costs 
to health care providers and health plans compared to the alternatives; 
and
                            ``(ii) the standard is promulgated in 
                        accordance with the rulemaking procedures of 
                        subchapter III of chapter 5 of title 5, United 
                        States Code.
                    ``(B) No standard by standard setting 
                organization.--If no standard setting organization has 
                adopted or modified any standard relating to a standard 
                that the Secretary is authorized or required to adopt 
                under this part--
                            ``(i) paragraph (1) shall not apply; and
                            ``(ii) subsection (f) shall apply.
    ``(d) Implementation Specifications.--The Secretary shall establish 
specifications for implementing each of the standards adopted under 
this part.
    ``(e) Protection of Trade Secrets.--Except as otherwise required by 
law, a standard adopted under this part shall not require disclosure of 
trade secrets or confidential commercial information by a person 
required to comply with this part.
    ``(f) Assistance to the Secretary.--In complying with the 
requirements of this part, the Secretary shall rely on the 
recommendations of the Health Information Advisory Committee 
established under section 1179 and shall consult with appropriate 
Federal and State agencies and private organizations. The Secretary 
shall publish in the Federal Register the recommendations of the Health 
Information Advisory Committee regarding the adoption of a standard 
under this part.
    ``(g) Application to Modifications of Standards.--This section 
shall apply to a modification to a standard (including an addition to a 
standard) adopted under section 1174(b) in the same manner as it 
applies to an initial standard adopted under section 1174(a).

``SEC. 1173. STANDARDS FOR INFORMATION TRANSACTIONS AND DATA ELEMENTS.

    ``(a) Standards to Enable Electronic Exchange.--
            ``(1) In general.--The Secretary shall adopt standards for 
        transactions, and data elements for such transactions, to 
        enable health information to be exchanged electronically, that 
        are--
                    ``(A) appropriate for the financial and 
                administrative transactions described in paragraph (2); 
                and
                    ``(B) related to other financial and administrative 
                transactions determined appropriate by the Secretary 
                consistent with the goals of improving the operation of 
                the health care system and reducing administrative 
                costs.
            ``(2) Transactions.--The transactions referred to in 
        paragraph (1)(A) are the following:
                    ``(A) Claims (including coordination of benefits) 
                or equivalent encounter information.
                    ``(B) Claims attachments.
                    ``(C) Enrollment and disenrollment.
                    ``(D) Eligibility.
                    ``(E) Health care payment and remittance advice.
                    ``(F) Premium payments.
                    ``(G) First report of injury.
                    ``(H) Claims status.
                    ``(I) Referral certification and authorization.
            ``(3) Accommodation of specific providers.--The standards 
        adopted by the Secretary under paragraph (1) shall accommodate 
        the needs of different types of health care providers.
    ``(b) Unique Health Identifiers.--
            ``(1) In general.--The Secretary shall adopt standards 
        providing for a standard unique health identifier for each 
        individual, employer, health plan, and health care provider for 
        use in the health care system. In carrying out the preceding 
        sentence for each health plan and health care provider, the 
        Secretary shall take into account multiple uses for identifiers 
        and multiple locations and specialty classifications for health 
        care providers.
            ``(2) Use of identifiers.--The standards adopted under 
        paragraphs (1) shall specify the purposes for which a unique 
        health identifier may be used.
    ``(c) Code Sets.--
            ``(1) In general.--The Secretary shall adopt standards 
        that--
                    ``(A) select code sets for appropriate data 
                elements for the transactions referred to in subsection 
                (a)(1) from among the code sets that have been 
                developed by private and public entities; or
                    ``(B) establish code sets for such data elements if 
                no code sets for the data elements have been developed.
            ``(2) Distribution.--The Secretary shall establish 
        efficient and low-cost procedures for distribution (including 
        electronic distribution) of code sets and modifications made to 
        such code sets under section 1174(b).
    ``(d) Security Standards for Health Information.--
            ``(1) Security standards.--The Secretary shall adopt 
        security standards that--
                    ``(A) take into account--
                            ``(i) the technical capabilities of record 
                        systems used to maintain health information;
                            ``(ii) the costs of security measures;
                            ``(iii) the need for training persons who 
                        have access to health information;
                            ``(iv) the value of audit trails in 
                        computerized record systems; and
                            ``(v) the needs and capabilities of small 
                        health care providers and rural health care 
                        providers (as such providers are defined by the 
                        Secretary); and
                    ``(B) ensure that a clearinghouse, if it is part of 
                a larger organization, has policies and security 
                procedures which isolate the activities of the 
                clearinghouse with respect to processing information in 
                a manner that prevents unauthorized access to such 
                information by such larger organization.
            ``(2) Safeguards.--Each person described in section 1172(a) 
        who maintains or transmits health information shall maintain 
        reasonable and appropriate administrative, technical, and 
        physical safeguards--
                    ``(A) to ensure the integrity and confidentiality 
                of the information;
                    ``(B) to protect against any reasonably 
                anticipated--
                            ``(i) threats or hazards to the security or 
                        integrity of the information; and
                            ``(ii) unauthorized uses or disclosures of 
                        the information; and
                    ``(C) otherwise to ensure compliance with this part 
                by the officers and employees of such person.
    ``(e) Privacy Standards for Health Information.--The Secretary 
shall adopt standards with respect to the privacy of individually 
identifiable health information. Such standards shall include standards 
concerning at least the following:
            ``(1) The rights of an individual who is a subject of such 
        information.
            ``(2) The procedures to be established for the exercise of 
        such rights.
            ``(3) The uses and disclosures of such information that are 
        authorized or required.
    ``(f) Electronic Signature.--
            ``(1) In general.--The Secretary, in coordination with the 
        Secretary of Commerce, shall adopt standards specifying 
        procedures for the electronic transmission and authentication 
        of signatures, compliance with which shall be deemed to satisfy 
        Federal and State statutory requirements for written signatures 
        with respect to the transactions referred to in subsection 
        (a)(1).
            ``(2) Payments for services and premiums.--Nothing in this 
        part shall be construed to prohibit payment for health care 
        services or health plan premiums by debit, credit, payment card 
        or numbers, or other electronic means.
    ``(g) Transfer of Information Among Health Plans.--The Secretary 
shall adopt standards for transferring among health plans appropriate 
standard data elements needed for the coordination of benefits, the 
sequential processing of claims, and other data elements for 
individuals who have more than one health plan.

``SEC. 1174. TIMETABLES FOR ADOPTION OF STANDARDS.

    ``(a) Initial Standards.--The Secretary shall carry out section 
1173 not later than 18 months after the date of the enactment of this 
part, except that standards relating to claims attachments shall be 
adopted not later than 30 months after such date.
    ``(b) Additions and Modifications to Standards.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        Secretary shall review the standards adopted under section 
        1173, and shall adopt modifications to the standards (including 
        additions to the standards), as determined appropriate, but not 
        more frequently than once every 6 months. Any addition or 
        modification to a standard shall be completed in a manner which 
        minimizes the disruption and cost of compliance.
            ``(2) Special rules.--
                    ``(A) First 12-month period.--Except with respect 
                to additions and modifications to code sets under 
                subparagraph (B), the Secretary may not adopt any 
                modification to a standard adopted under this part 
                during the 12-month period beginning on the date the 
                standard is initially adopted, unless the Secretary 
                determines that the modification is necessary in order 
                to permit compliance with the standard.
                    ``(B) Additions and modifications to code sets.--
                            ``(i) In general.--The Secretary shall 
                        ensure that procedures exist for the routine 
                        maintenance, testing, enhancement, and 
                        expansion of code sets.
                            ``(ii) Additional rules.--If a code set is 
                        modified under this subsection, the modified 
                        code set shall include instructions on how data 
                        elements of health information that were 
                        encoded prior to the modification may be 
                        converted or translated so as to preserve the 
                        informational value of the data elements that 
                        existed before the modification. Any 
                        modification to a code set under this 
                        subsection shall be implemented in a manner 
                        that minimizes the disruption and cost of 
                        complying with such modification.

``SEC. 1175. REQUIREMENTS.

    ``(a) Conduct of Transactions by Plans.--
            ``(1) In general.--If a person desires to conduct a 
        transaction referred to in section 1173(a)(1) with a health 
        plan as a standard transaction--
                    ``(A) the health plan may not refuse to conduct 
                such transaction as a standard transaction;
                    ``(B) the health plan may not delay such 
                transaction, or otherwise adversely affect, or attempt 
                to adversely affect, the person or the transaction on 
                the ground that the transaction is a standard 
                transaction; and
                    ``(C) the information transmitted and received in 
                connection with the transaction shall be in the form of 
                standard data elements of health information.
            ``(2) Satisfaction of requirements.--A health plan may 
        satisfy the requirements under paragraph (1) by--
                    ``(A) directly transmitting and receiving standard 
                data elements of health information; or
                    ``(B) submitting nonstandard data elements to a 
                clearinghouse for processing into standard data 
                elements and transmission by the clearinghouse, and 
                receiving standard data elements through the 
                clearinghouse.
            ``(3) Timetable for compliance.--Paragraph (1) shall not be 
        construed to require a health plan to comply with any standard, 
        implementation specification, or modification to a standard or 
        specification adopted or established by the Secretary under 
        sections 1172 through 1174 at any time prior to the date on 
        which the plan is required to comply with the standard or 
        specification under subsection (b).
    ``(b) Compliance With Standards.--
            ``(1) Initial compliance.--
                    ``(A) In general.--Not later than 24 months after 
                the date on which an initial standard or implementation 
                specification is adopted or established under sections 
                1172 and 1173, each person to whom the standard or 
                implementation specification applies shall comply with 
                the standard or specification.
                    ``(B) Special rule for small health plans.--In the 
                case of a small health plan, paragraph (1) shall be 
                applied by substituting `36 months' for `24 months'. 
                For purposes of this subsection, the Secretary shall 
                determine the plans that qualify as small health plans.
            ``(2) Compliance With modified standards.--If the Secretary 
        adopts a modification to a standard or implementation 
        specification under this part, each person to whom the standard 
        or implementation specification applies shall comply with the 
        modified standard or implementation specification at such time 
        as the Secretary determines appropriate, taking into account 
        the time needed to comply due to the nature and extent of the 
        modification. The time determined appropriate under the 
        preceding sentence may not be earlier than the last day of the 
        180-day period beginning on the date such modification is 
        adopted. The Secretary may extend the time for compliance for 
        small health plans, if the Secretary determines that such 
        extension is appropriate.

``SEC. 1176. GENERAL PENALTY FOR FAILURE TO COMPLY WITH REQUIREMENTS 
              AND STANDARDS.

    ``(a) General Penalty.--
            ``(1) In general.--Except as provided in subsection (b), 
        the Secretary shall impose on any person who violates a 
        provision of this part a penalty of not more than $100 for each 
        such violation, except that the total amount imposed on the 
        person for all violations of an identical requirement or 
        prohibition during a calendar year may not exceed $25,000.
            ``(2) Procedures.--The provisions of section 1128A (other 
        than subsections (a) and (b) and the second sentence of 
        subsection (f)) shall apply to the imposition of a civil money 
        penalty under this subsection in the same manner as such 
        provisions apply to the imposition of a penalty under such 
        section 1128A.
    ``(b) Limitations.--
            ``(1) Offenses otherwise punishable.--A penalty may not be 
        imposed under subsection (a) with respect to an act if the act 
        constitutes an offense punishable under section 1177.
            ``(2) Noncompliance not discovered.--A penalty may not be 
        imposed under subsection (a) with respect to a provision of 
        this part if it is established to the satisfaction of the 
        Secretary that the person liable for the penalty did not know, 
        and by exercising reasonable diligence would not have known, 
        that such person violated the provision.
            ``(3) Failures due to reasonable cause.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a penalty may not be imposed under 
                subsection (a) if--
                            ``(i) the failure to comply was due to 
                        reasonable cause and not to willful neglect; 
                        and
                            ``(ii) the failure to comply is corrected 
                        during the 30-day period beginning on the first 
                        date the person liable for the penalty knew, or 
                        by exercising reasonable diligence would have 
                        known, that the failure to comply occurred.
                    ``(B) Extension of period.--
                            ``(i) No penalty.--The period referred to 
                        in subparagraph (A)(ii) may be extended as 
                        determined appropriate by the Secretary based 
                        on the nature and extent of the failure to 
                        comply.
                            ``(ii) Assistance.--If the Secretary 
                        determines that a person failed to comply 
                        because the person was unable to comply, the 
                        Secretary may provide technical assistance to 
                        the person during the period described in 
                        subparagraph (A)(ii). Such assistance shall be 
                        provided in any manner determined appropriate 
                        by the Secretary.
            ``(4) Reduction.--In the case of a failure to comply which 
        is due to reasonable cause and not to willful neglect, any 
        penalty under subsection (a) that is not entirely waived under 
        paragraph (3) may be waived to the extent that the payment of 
        such penalty would be excessive relative to the compliance 
        failure involved.

``SEC. 1177. WRONGFUL DISCLOSURE OF INDIVIDUALLY IDENTIFIABLE HEALTH 
              INFORMATION.

    ``(a) Offense.--A person who knowingly and in violation of this 
part--
            ``(1) uses or causes to be used a unique health identifier;
            ``(2) obtains individually identifiable health information 
        relating to an individual; or
            ``(3) discloses individually identifiable health 
        information to another person,
shall be punished as provided in subsection (b).
    ``(b) Penalties.--A person described in subsection (a) shall--
            ``(1) be fined not more than $50,000, imprisoned not more 
        than 1 year, or both;
            ``(2) if the offense is committed under false pretenses, be 
        fined not more than $100,000, imprisoned not more than 5 years, 
        or both; and
            ``(3) if the offense is committed with intent to sell, 
        transfer, or use individually identifiable health information 
        for commercial advantage, personal gain, or malicious harm, 
        fined not more than $250,000, imprisoned not more than 10 
        years, or both.

``SEC. 1178. EFFECT ON STATE LAW.

    ``(a) General Effect.--
            ``(1) General rule.--Except as provided in paragraph (2), a 
        provision or requirement under this part, or a standard or 
        implementation specification adopted or established under 
        sections 1172 through 1174, shall supersede any contrary 
        provision of State law, including a provision of State law that 
        requires medical or health plan records (including billing 
        information) to be maintained or transmitted in written rather 
        than electronic form.
            ``(2) Exceptions.--A provision or requirement under this 
        part, or a standard or implementation specification adopted or 
        established under sections 1172 through 1174, shall not 
        supersede a contrary provision of State law, if the provision 
        of State law--
                    ``(A) imposes requirements, standards, or 
                implementation specifications that are more stringent 
                than the requirements, standards, or implementation 
                specifications under this part with respect to the 
                privacy of individually identifiable health 
                information; or
                    ``(B) is a provision the Secretary determines--
                            ``(i) is necessary to prevent fraud and 
                        abuse, or for other purposes; or
                            ``(ii) addresses controlled substances.
    ``(b) Public Health Reporting.--Nothing in this part shall be 
construed to invalidate or limit the authority, power, or procedures 
established under any law providing for the reporting of disease or 
injury, child abuse, birth, or death, public health surveillance, or 
public health investigation or intervention.

``SEC. 1179. HEALTH INFORMATION ADVISORY COMMITTEE.

    ``(a) Establishment.--There is established a committee to be known 
as the Health Information Advisory Committee (in this section referred 
to as the `committee').
    ``(b) Duties.--The committee shall--
            ``(1) provide assistance to the Secretary in complying with 
        the requirements imposed on the Secretary under this part;
            ``(2) study the issues related to the adoption of uniform 
        data standards for patient medical record information and the 
        electronic exchange of such information;
            ``(3) report to the Secretary not later than 4 years after 
        the date of the enactment of this part recommendations and 
        legislative proposals for such standards and electronic 
        exchange; and
            ``(4) generally be responsible for advising the Secretary 
        and the Congress on the status of the implementation of this 
        part.
    ``(c) Membership.--
            ``(1) In general.--The committee shall consist of 15 
        members of whom--
                    ``(A) 3 shall be appointed by the President;
                    ``(B) 6 shall be appointed by the Speaker of the 
                House of Representatives after consultation with the 
                minority leader of the House of Representatives; and
                    ``(C) 6 shall be appointed by the President pro 
                tempore of the Senate after consultation with the 
                minority leader of the Senate.
        The appointments of the members shall be made not later than 60 
        days after the date of the enactment of this part. The 
        President shall designate 1 member as the Chair.
            ``(2) Expertise.--The membership of the committee shall 
        consist of individuals who are of recognized standing and 
        distinction in the areas of information systems, information 
        networking and integration, consumer health, health care 
        financial management, or privacy, and who possess the 
        demonstrated capacity to discharge the duties imposed on the 
        committee.
            ``(3) Terms.--Each member of the committee shall be 
        appointed for a term of 5 years, except that the members first 
        appointed shall serve staggered terms such that the terms of 
        not more than 3 members expire at one time.
            ``(4) Initial meeting.--Not later than 30 days after the 
        date on which a majority of the members have been appointed, 
        the committee shall hold its first meeting.
    ``(d) Reports.--Not later than 1 year after the date of the 
enactment of this part, and annually thereafter, the committee shall 
submit to the Congress, and make public, a report regarding--
            ``(1) the extent to which persons required to comply with 
        this part are cooperating in implementing the standards adopted 
        under this part;
            ``(2) the extent to which such entities are meeting the 
        privacy and security standards adopted under this part and the 
        types of penalties assessed for noncompliance with such 
        standards;
            ``(3) whether the Federal and State Governments are 
        receiving information of sufficient quality to meet their 
        responsibilities under this part;
            ``(4) any problems that exist with respect to 
        implementation of this part; and
            ``(5) the extent to which timetables under this part are 
        being met.''.
    (b) Conforming Amendments.--
            (1) Requirement for medicare providers.--Section 1866(a)(1) 
        (42 U.S.C. 1395cc(a)(1)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (P);
                    (B) by striking the period at the end of 
                subparagraph (Q) and inserting ``; and''; and
                    (C) by inserting immediately after subparagraph (Q) 
                the following new subparagraph:
            ``(R) to contract only with a clearinghouse (as defined in 
        section 1171) that meets each standard and implementation 
        specification adopted or established under part C of title XI 
        on or after the date on which the clearinghouse is required to 
        comply with the standard or specification.''.
            (2) Title heading.--Title XI (42 U.S.C. 1301 et seq.) is 
        amended by striking the title heading and inserting the 
        following:

    ``TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
                           SIMPLIFICATION''.
```