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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4202 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 4202

    To increase access to high quality, affordable health insurance.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             April 13, 1994

   Mr. McCrery (for himself, Mr. Tauzin, Mr. Baker of Louisiana, Mr. 
  DeLay, Mr. Doolittle, Mr. Houghton, Mr. Inhofe, Mr. Sam Johnson of 
Texas, Mr. Livingston, Mr. Hayes, Mr. Inglis of South Carolina, and Mr. 
Hoke) introduced the following bill; which was referred jointly to the 
 Committees on Energy and Commerce, Ways and Means, the Judiciary, and 
                          Education and Labor

_______________________________________________________________________

                                 A BILL

 
    To increase access to high quality, affordable 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 Savings and 
Security Act of 1994''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

                       TITLE I--INSURANCE REFORM

                    Subtitle A--Insurance Provisions

           Part 1--Requirements for Tax-favored Health Plans

Sec. 101. Requirements for high deductible umbrella                   6
                            insurance plans and managed 
                            health care plans.
Sec. 102. Benefits..........................................          9
Sec. 103. Rating practices..................................         13
Sec. 104. Guaranteed issue..................................         14
Sec. 105. Guaranteed renewability...........................         16
Sec. 106. Restrictions on agent compensation and broker              17
                            activities.
 Part 2--Certification of High Deductible Umbrella Insurance Plans and 
                       Managed Care Health Plans

Sec. 111. Establishment of regulatory program for                    18
                            certification of plans.
Sec. 112. Standards for regulatory programs.................         20
 Subtitle B--Promoting Development of Voluntary Health Plan Purchasing 
                              Cooperatives

Sec. 121. Establishment of standards; application in States.         28
Sec. 122. Specification of HPPC areas.......................         32
Sec. 123. Standards for health plan purchasing cooperatives.         32
Sec. 124. Functions of health plan purchasing cooperatives..         36
Sec. 125. Qualified health carriers.........................         44
Sec. 126. Marketing HPPC plans..............................         50
Sec. 127. Collection and submission of data.................         51
Sec. 128. Role of State; oversight; evaluation..............         53
Sec. 129. Definitions.......................................         55
                     Subtitle C--Federal Preemption

Sec. 141. Prohibition of State benefit mandates for group            58
                            health plans.
Sec. 142. Prohibition of provisions prohibiting employer             59
                            groups from purchasing health 
                            insurance.
Sec. 143. Restrictions on managed care......................         59
Sec. 144. Exemption of state laws preventing denial of               61
                            lifesaving medical treatment 
                            pending transfer to another 
                            health care provider.
Sec. 145. Definitions.......................................         62
    Subtitle D--Rules of Construction Regarding Abortion Services; 
                             Inseverability

Sec. 151. Rules of construction regarding abortion services.         64
Sec. 152. Inseverability....................................         65
         TITLE II--AMENDMENTS OF INTERNAL REVENUE CODE OF 1986

Subtitle A--Limitations on Employer Deduction for Health Care Coverage 
 for Employees and on Employee Exclusion for Employer-Provided Health 
                             Care Coverage

Sec. 201. Employer deduction for health care coverage for            66
                            employees limited to coverage 
                            under high-deductible plans and 
                            managed care plans and to 
                            contributions to medical savings 
                            accounts for employees.
Sec. 202. Limitation on exclusion for employer-provided              74
                            coverage under health plan.
Sec. 203. Health benefits may not be provided under                  77
                            cafeteria plans.
Sec. 204. Effective date....................................         78
Subtitle B--Credits for Contributions to Medical Savings Accounts, for 
  Purchase of Coverage Under Tax-Qualified Health Care Plans, and for 
                        Routine Preventive Care

Sec. 211. Credit for contributions to medical savings                79
                            accounts.
Sec. 212. Refundable credit for purchase of coverage under           97
                            tax-qualified health care plans.
Sec. 213. Credit for cost of routine preventive care........        103
Sec. 214. Effective date....................................        105
            Subtitle C--Repeal of Medical Expense Deduction

Sec. 221. Repeal of medical expense deduction...............        105
     Subtitle D--Veterans Medical Benefits and Services Unaffected

Sec. 231. Veterans medical benefits and services unaffected.        106
          TITLE III--SAVINGS IN MEDICARE AND MEDICAID PROGRAMS

                      Subtitle A--Medicare Program

Sec. 301. Increase in Medicare part B premium for                   106
                            individuals with high income.
Sec. 302. Imposition of 20 percent coinsurance on clinical          110
                            laboratory services under 
                            Medicare.
Sec. 303. Annual indexing of part B deductible..............        110
                      Subtitle B--Medicaid Program

                  Part 1--Achieving Savings in Program

Sec. 311. Cap on Federal payments made for acute medical            111
                            services furnished under the 
                            Medicaid program.
   Part 2--Optional Enrollment of Low-income Individuals Under High 
   Deductible Umbrella Insurance Plans and Managed Health Care Plans

Sec. 321. Optional enrollment under plans...................        119
Part 3--Increasing State Flexibility to Use Managed Care Under Medicaid

Sec. 331. Modification of Federal requirements to allow             128
                            States more flexibility in 
                            contracting for coordinated care 
                            services under Medicaid.
   Part 4--Limitations on Funding of Abortion Services Under Medicaid

Sec. 341. Limitations on funding of abortion services under         182
                            Medicaid.
                 TITLE IV--CONTAINING HEALTH CARE COSTS

            Subtitle A--Medical Malpractice Liability Reform

                       Part 1--General Provisions

Sec. 401. Federal reform of medical malpractice liability           183
                            actions.
Sec. 402. Definitions.......................................        185
Sec. 403. Effective date....................................        190
        Part 2--Medical Malpractice and Product Liability Reform

Sec. 411. Requirement for initial resolution of action              191
                            through alternative dispute 
                            resolution.
Sec. 412. Calculation and payment of damages................        195
Sec. 413. Requiring party contesting ADR ruling to pay              198
                            attorney's fees and other costs.
Sec. 414. Joint and several liability for noneconomic               201
                            damages.
Sec. 415. Statute of limitations............................        202
Sec. 416. Uniform standard for determining negligence.......        202
Sec. 417. Special provision for certain obstetric services..        202
 Part 3--Requirements for State Alternative Dispute Resolution Systems 
                                 (ADR)

Sec. 421. Basic requirements................................        203
Sec. 422. Certification of State systems; applicability of          206
                            alternative Federal system.
Sec. 423. Reports on implementation and effectiveness of            208
                            alternative dispute resolution 
                            systems.
   Part 4--Other Provisions Relating to Medical Malpractice Liability

Sec. 431. Permitting State professional societies to                209
                            participate in disciplinary 
                            activities.
Sec. 432. Study of incentives to encourage voluntary service        211
                            by physicians.
Sec. 433. Requirements for risk management programs.........        212
Sec. 434. Grants for medical safety promotion...............        213
  Subtitle B--Treatment of Certain Activities Under the Antitrust Laws

Sec. 451. Exemption from antitrust laws for certain                 216
                            competitive and collaborative 
                            activities.
Sec. 452. Safe harbors......................................        218
Sec. 453. Designation of additional safe harbors............        222
Sec. 454. Certificates of review............................        225
Sec. 455. Notifications providing reduction in certain              237
                            penalties under antitrust law 
                            for health care cooperative 
                            ventures.
Sec. 456. Review and reports on safe harbors and                    246
                            certificates of review.
Sec. 457. Rules, regulations, and guidelines................        247
Sec. 458. Establishment of HHS Office of Health Care                249
                            Competition Policy.
Sec. 459. Definitions.......................................        249
TITLE V--SPECIAL ASSISTANCE FOR FRONTIER, RURAL, AND URBAN UNDERSERVED 
                                 AREAS

        Subtitle A--Frontier, Rural, and Urban Underserved Areas

Sec. 501. Establishment of program to make community-based          252
                            primary health grants and health 
                            service access grants for 
                            Federally-qualified health 
                            centers.
Sec. 502. Tax incentives for practice in frontier, rural,           276
                            and urban underserved areas.
Sec. 503. Rural emergency access care hospitals.............        290
Sec. 504. Grants to States regarding aircraft for                   295
                            transporting rural victims of 
                            medical emergencies.
Sec. 505. Demonstration projects to encourage the                   301
                            development and operation of 
                            rural health networks.
              Subtitle B--Primary Care Provider Education

Sec. 511. Graduate medical education demonstration projects.        311
Sec. 512. Funding under Medicare for training in                    323
                            nonhospital-owned facilities.
Sec. 513. Increase in National Health Service Corps funding.        326
Sec. 514. Increase in health professions funding for primary        326
                            care physicians.
Sec. 515. Health professions funding for nurse practitioners        327
                            and physician assistants 
                            programs.
Sec. 516. State grants to increase the number of primary            330
                            care providers.
 Subtitle C--Programs Relating to Primary and Preventive Care Services

Sec. 521. Maternal and infant care coordination.............        331
Sec. 522. Frontier States...................................        335
            Subtitle D--Limitation on Funding for Abortions

Sec. 531. Limitation on funding for abortions...............        335
                 TITLE VI--ADMINISTRATIVE COST SAVINGS

            Subtitle A--Standardization of Claims Processing

Sec. 601. Adoption of data elements, uniform claims, and            336
                            uniform electronic transmission 
                            standards.
Sec. 602. Application of standards..........................        338
Sec. 603. Periodic review and revision of standards.........        342
Sec. 604. Health insurance plan defined.....................        343
             Subtitle B--Electronic Medical Data Standards

Sec. 611. Medical data standards for hospitals and other            343
                            providers.
Sec. 612. Application of electronic data standards to               345
                            certain hospitals.
Sec. 613. Electronic transmission to Federal agencies.......        348
Sec. 614. Limitation on data requirements where standards in        348
                            effect.
Sec. 615. Advisory commission...............................        350
     Subtitle C--Development and Distribution of Comparative Value 
                              Information

Sec. 621. State comparative value information programs for          351
                            health care purchasing.
Sec. 622. Federal implementation............................        354
Sec. 623. Comparative value information concerning Federal          354
                            programs.
             Subtitle D--Preemption of State Quill Pen Laws

Sec. 631. Preemption of State quill pen laws................        355
                TITLE VII--ANTI-FRAUD AND ANTI-RATIONING

         Subtitle A--Criminal Prosecution of Health Care Fraud

Sec. 701. Penalties for health care fraud...................        356
Sec. 702. Rewards for information leading to prosecution and        357
                            conviction.
Subtitle B--Coordination of Health Care Anti-Fraud and Abuse Activities

Sec. 711. Application of Federal health anti-fraud and abuse        359
                            sanctions to all fraud and abuse 
                            against any health insurance 
                            plan.
         Subtitle C--Protection Against Rationing of Treatment

Sec. 721. Prohibition on denial or treatment based on age,          363
                            disability, degree of medical 
                            need, or quality of life.
Sec. 722. Enforcement.......................................        364

                       TITLE I--INSURANCE REFORM

                    Subtitle A--Insurance Provisions

           PART 1--REQUIREMENTS FOR TAX-FAVORED HEALTH PLANS

SEC. 101. REQUIREMENTS FOR HIGH DEDUCTIBLE UMBRELLA INSURANCE PLANS AND 
              MANAGED HEALTH CARE PLANS.

    (a) In General.--For purposes of section 162(o) of the Internal 
Revenue Code of 1986 and this Act:
            (1) High deductible umbrella insurance plan.--A ``high 
        deductible umbrella insurance plan'' is a health insurance plan 
        offered, issued, or renewed on or after January 1, 1996, which 
        is certified by the applicable regulatory authority as meeting, 
        at a minimum, the applicable requirements of sections 102, 103, 
        104, 105, and 106 with respect to such a plan and providing for 
        the regulatory program described in section 112.
            (2) Managed health care plan.--A ``managed health care 
        plan'' is a health insurance plan offered, issued, or renewed 
        on or after January 1, 1996, which is certified by the 
        applicable regulatory authority as meeting, at a minimum, the 
        applicable requirements of sections 102, 103, 104, 105, and 106 
        with respect to such a plan and providing for the regulatory 
        program described in section 112.
            (3) Tax-qualified health care plan.--The term ``tax-
        qualified health care plan'' means a high deductible umbrella 
        insurance plan or managed health care plan.
    (b) General Definitions.--As used in this title:
            (1) Health insurance plan.--The term ``health insurance 
        plan'' means any hospital or medical service policy or 
        certificate, hospital or medical service plan contract, or 
        health maintenance organization group contract and, in States 
        which have distinct licensure requirements, a multiple employer 
        welfare arrangement, but does not include any (or any 
        combination) of the following offered by an insurer:
                    (A) Accident only, dental only, disability only, or 
                long-term care only insurance.
                    (B) Coverage issued as a supplement to liability 
                insurance.
                    (C) Workers' compensation or similar insurance.
                    (D) Automobile medical-payment insurance.
            (2) Applicable regulatory authority.--The term ``applicable 
        regulatory authority'' means--
                    (A) in the case of a State with a program described 
                in section 111, the State commissioner or 
                superintendent of insurance or other State authority 
                responsible for regulation of health insurance; or
                    (B) if the State has not established such a program 
                or such program has been decertified under section 
                111(b), the Secretary.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (4) State.--The term ``State'' means each of the several 
        States of the United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the United States Virgin Islands, 
        Guam, American Samoa, and the Commonwealth of the Northern 
        Mariana Islands.
    (c) Establishment or Operation of Managed Health Care Plans by 
States.--A State may establish or operate a managed health care plan.

SEC. 102. BENEFITS.

    (a) In General.--The requirements of this section are met, if the 
health insurance plan--
            (1) provides coverage for all medically necessary acute 
        medical care described in subsection (b),
            (2) does not exclude coverage for selected illnesses or 
        selected treatments if consistent with medically accepted 
        practices, and
            (3) meets the applicable patient cost-sharing requirements 
        of subsection (c).
    (b) Acute Medical Care.--Acute medical care described in this 
subsection includes--
            (1) physician services,
            (2) inpatient, outpatient, and emergency hospital services 
        and appropriate alternatives to hospitalization, and
            (3) inpatient and outpatient prescription drugs.
    (c) Cost Sharing Requirements.--The requirements of this subsection 
are as follows:
            (1) Limitation on deductibles.--
                    (A) High deductible umbrella health insurance 
                plan.--
                            (i) In general.--In the case of a high 
                        deductible umbrella insurance plan, the plan 
                        shall provide a deductible amount for benefits 
                        provided in any plan year which is at least 
                        $1,500 (but not to exceed $3,000) for items and 
                        services furnished to a family (composed of one 
                        or more individuals) enrolled under the plan in 
                        a year.
                            (ii) Indexing dollar amounts.--For any 
                        calendar year beginning with 1997, the dollar 
                        amount specified in clause (i) (as previously 
                        increased under this clause) shall be increased 
                        by the percentage increase in the consumer 
                        price index for all urban consumers (United 
                        States city average, as published by the Bureau 
                        of Labor Statistics) for the 12-month period 
                        ending with September of the preceding calendar 
                        year. Any dollar amount increased under the 
                        previous sentence that is not a multiple of 
                        $10, shall be rounded to the next highest 
                        multiple of $10.
                    (B) Managed health care plans.--In the case of a 
                managed health care plan, the plan may provide a 
                deductible the amount of which does not exceed the 
                amount of the deductible permitted under subparagraph 
                (A).
            (2) Limitation on copayments and coinsurance.--
                    (A) In general.--A health insurance plan may not 
                require the payment of any copayment or coinsurance for 
                an item or service for which coverage is required under 
                this section after an individual or a family covered 
                under the plan has incurred out-of-pocket expenses 
                under the plan that are equal to the out-of-pocket 
                limit for a plan year.
                    (B) Limit on out-of-pocket expenses.--As used in 
                this paragraph--
                            (i) Out-of-pocket expenses defined.--The 
                        term ``out-of-pocket expenses'' means, with 
                        respect to an individual or a family in a plan 
                        year, amounts payable under the plan as 
                        deductibles and coinsurance with respect to 
                        items and services provided under the plan and 
                        furnished in the plan year on behalf of the 
                        individual or the family covered under the 
                        plan.
                            (ii) Out-of-pocket limit defined.--The term 
                        ``out-of-pocket limit'' means for a plan year 
                        beginning in--
                                    (I) a calendar year prior to 1998, 
                                $5,000; or
                                    (II) for a subsequent calendar 
                                year, the limit specified in this 
                                clause for the previous calendar year 
                                increased by the percentage increase in 
                                the consumer price index for all urban 
                                consumers (United States city average, 
                                as published by the Bureau of Labor 
                                Statistics) for the 12-month period 
                                ending on September 30 of the preceding 
                                calendar year.
                        If the limit computed under subclause (II) is 
                        not a multiple of $10, it shall be rounded to 
                        the next highest multiple of $10.

SEC. 103. RATING PRACTICES.

    (a) In General.--The requirements of this section are met, if, 
except as provided in subsection (b), the health insurance plan 
provides for--
            (1) a variation in premium rates only--
                    (A) on the basis of age, sex, geography, and family 
                enrollment,
                    (B) on the basis of individual and group coverage, 
                and
                    (C) in the case of group coverage, on the basis of 
                the number of individuals covered within the group;
            (2) a charge of the same premium rates to new applicants 
        and existing policyholders with the same age, sex, geographic 
        characteristics, and family enrollment; and
            (3) the highest premium for the plan for a particular class 
        of family enrollment and geographic characteristics may not 
        exceed four times the lowest premium for such plan for the same 
        enrollment and geographic characteristics.
    (b) Incentive Discounts.--A plan may discount an individual's 
premium rate by not more than 10 percent as an incentive for 
participating in a program, approved by the applicable regulatory 
authority to be offered in conjunction with the coverage, which has as 
its objective, 1 or more of the following:
            (1) To promote healthy behavior.
            (2) To prevent or delay the onset of illness.
            (3) To provide for screening or early detection of illness.
    (c) Classes of Family Enrollment Described.--In this section, each 
of the following shall be considered a separate ``class of family 
enrollment'':
            (1) Single individual without children.
            (2) Married couple without children.
            (3) Single individual with 1 or more children.
            (4) Married couple with 1 or more children.
    (d) Treatment of HPPCs.--For purposes of subsection (a), any 
coverage obtained through a health plan purchasing cooperative approved 
under subtitle B shall be treated as a form of group coverage.

SEC. 104. GUARANTEED ISSUE.

    (a) In General.--The requirements of this section are met, if the 
health insurance plan--
            (1) provides guaranteed issue at standard rates to all 
        applicants, and
            (2) does not exclude from coverage, or limit coverage for, 
        any preexisting condition except as provided in subsection (b).
    (b) Treatment of Preexisting Conditions.--
            (1) No exclusion for preexisting condition for applicants 
        continuously covered.--A health insurance plan may not exclude 
        from coverage, or limit coverage for, any preexisting condition 
        for any applicant who, on the date the application is made, has 
        been continuously insured for a period of at least 6 months 
        prior to the date of the application under 1 or more of the 
        following health insurance plans or programs:
                    (A) A high deductible umbrella insurance plan or a 
                managed health care plan.
                    (B) An employer-sponsored group health insurance 
                plan in effect before the date of the enactment of this 
                Act.
                    (C) An individual health insurance plan in effect 
                before such date.
                    (D) A program described in--
                            (i) title XVIII or XIX of the Social 
                        Security Act,
                            (ii) chapter 55 of title 10, United States 
                        Code,
                            (iii) chapter 17 of title 38, United States 
                        Code,
                            (iv) chapter 89 of title 5, United States 
                        Code, or
                            (v) the Indian Health Care Improvement Act.
            (2) Limitation on period of exclusion for other 
        applicants.--In the case of an applicant not described in 
        paragraph (1), the health insurance plan may exclude from 
        coverage, or limit coverage for, any preexisting condition for 
        a period no greater than the lesser of--
                    (A) the number of months immediately prior to the 
                date of the application during which the individual was 
                not insured since the illness or condition in question 
                was first diagnosed, or
                    (B) 6 months.
    (c) Preexisting Condition.--For purposes of this section, the term 
``preexisting condition'' means, with respect to coverage under a 
health insurance plan, a condition which has been diagnosed or treated 
during the 6-month period ending on the day before the first date of 
such coverage (without regard to any waiting period).

SEC. 105. GUARANTEED RENEWABILITY.

    The requirements of this section are met, if the health insurance 
plan provides the policyholder with a contractual right to renew the 
coverage which stipulates that the insurer cannot cancel or refuse to 
renew the coverage except for cases of--
            (1) nonpayment of premiums by the policyholder, or
            (2) fraud or misrepresentation by the policyholder.

SEC. 106. RESTRICTIONS ON AGENT COMPENSATION AND BROKER ACTIVITIES.

    The requirements of this section are not met if--
            (1) the health insurance plan varies compensation or 
        commissions to an agent, broker, contractor, or producer based, 
        directly or indirectly, on the anticipated or actual claims 
        experience or health status associated with particular small 
        employers or eligible individuals to which each plan is sold, 
        or
            (2) the health insurance plan (or agent, broker, 
        contractor, or producer for a health insurance plan) engages, 
        directly, or indirectly, in any activity or marketing practice 
        that would encourage small employers or eligible individuals to 
        refrain from enrolling in the plan, or seek coverage from 
        another health insurance plan, because of the health status or 
        claims experience of the employer or individual.

 PART 2--CERTIFICATION OF HIGH DEDUCTIBLE UMBRELLA INSURANCE PLANS AND 
                       MANAGED CARE HEALTH PLANS

SEC. 111. ESTABLISHMENT OF REGULATORY PROGRAM FOR CERTIFICATION OF 
              PLANS.

    (a) Enforcement of Program Through States.--
            (1) In general.--Each State shall submit to the Secretary, 
        by the deadline specified in paragraph (2), a report on steps 
        the State is taking to implement and enforce the regulatory 
        program developed under section 112 with respect to high 
        deductible umbrella insurance plans and managed care health 
        plans offered not later than such deadline.
            (2) Deadline for report.--
                    (A) 1 year after standards established.--Subject to 
                subparagraph (B), the deadline under this paragraph is 
                1 year after the date the regulatory program is 
                developed under section 112.
                    (B) Exception for legislation.--In the case of a 
                State which the Secretary identifies, in consultation 
                with the NAIC, as--
                            (i) requiring State legislation (other than 
                        legislation appropriating funds) in order for 
                        high deductible umbrella insurance plans and 
                        managed care health plans to meet the 
                        requirements of the program developed under 
                        section 112, but
                            (ii) having a legislature which is not 
                        scheduled to meet in 1996 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1996. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.
    (b) Federal Role.--
            (1) Failure of state to enforce program.--If the Secretary 
        determines that a State has failed to submit a report by the 
        deadline specified under subsection (a) or finds that the State 
        has not implemented and provided adequate enforcement of the 
        regulatory program developed under section 112, the Secretary 
        shall notify the State and provide the State a period of 60 
        days in which to submit such report or to implement and enforce 
        such program.
            (2) Procedures for federal enforcement.--If, after the 60-
        day period referred to in paragraph (1), the Secretary finds 
        that such a failure has not been corrected, the Secretary shall 
        provide for such mechanism for the implementation and 
        enforcement of such program in the State as the Secretary 
        determines to be appropriate. Such implementation and 
        enforcement shall take effect with respect to high deductible 
        umbrella insurance plans and managed care health plans offered 
        or renewed, on or after 3 months after the date of the 
        Secretary's finding under the previous sentence, and until the 
        date the Secretary finds that such a failure has been 
        corrected.

SEC. 112. STANDARDS FOR REGULATORY PROGRAMS.

    (a) In General.--The Secretary, in consultation with the National 
Association of Insurance Commissioners (in this section referred to as 
``NAIC'') shall develop by not later than 1 year after the date of the 
enactment of this Act, in the form of model Acts and model regulations, 
State regulatory program standards which include--
            (1) procedures for certifying that the requirements of part 
        1 of this subtitle have been met by a health insurance plan 
        applying for certification as a high deductible umbrella 
        insurance plan or a managed care health plan,
            (2) the requirements described in subsections (b) and (c) 
        with respect to such a plan,
            (3) requirements with respect to solvency standards and 
        guaranty funds for carriers of such plans, and
            (4) reporting requirements under which carriers report to 
        the Internal Revenue Service regarding the acquisition and 
        termination by individuals of coverage under such plans.
    (b) Marketing Practices.--The requirements of this subsection are 
met, if the carrier offering the plan retains the right to select 
agents with whom such plan contracts and to determine the amount and 
form of compensation to such agents, except that--
            (1) if the carrier chooses to contract with an agent, the 
        carrier may not terminate or refuse to renew the agency 
        contract for any reason related to the age, sex, health status, 
        claims experience, occupation, or geographic location of the 
        insureds placed by the agent with such plan, and
            (2) the carrier may not, directly or indirectly, enter into 
        any contract, agreement, or arrangement with an agent that 
        provides for, or results in, any consideration provided to such 
        agent for the issuance or renewal of such a plan to vary on 
        account of the age, sex, health status, claims experience, 
        occupation, or geographic location of the insureds placed by 
        the agent with such plan.
    (c) Reinsurance or Allocation of Risk Mechanisms.--
            (1) Establishment of standards.--
                    (A) Role of naic.--The Secretary shall request the 
                NAIC to develop, within 9 months after the date of the 
                enactment of this Act, models for reinsurance or 
                allocation of risk mechanisms (each in this section 
                referred to as a ``reinsurance or allocation of risk 
                mechanism'') for high deductible umbrella insurance 
                plans and managed care health plans made available to 
                individuals for whom an insurer is at risk of incurring 
                high costs under the plan. If the NAIC develops such 
                models within such period, the Secretary shall review 
                such models to determine if they provide for an 
                effective reinsurance or allocation of risk mechanism. 
                Such review shall be completed within 30 days after the 
                date the models are developed. Unless the Secretary 
                determines within such period that such a model is not 
                an effective reinsurance or allocation of risk 
                mechanism, such remaining models shall serve as the 
                models under this subsection, with such amendments as 
                the Secretary deems necessary.
                    (B) Contingency.--If the NAIC does not develop such 
                models within such period or the Secretary determines 
                that all such models do not provide for an effective 
                reinsurance or allocation of risk mechanism, the 
                Secretary shall specify, within 15 months after the 
                date of the enactment of this Act, models to carry out 
                this subsection.
            (2) Implementation of reinsurance or allocation of risk 
        mechanisms.--
                    (A) By states.--Each State shall establish and 
                maintain one or more reinsurance or allocation of risk 
                mechanisms that are consistent with a model established 
                under paragraph (1) by not later than the deadline 
                specified in section 111(a)(2). A State may establish 
                and maintain such a mechanism jointly with one or more 
                other States.
                    (B) Federal role.--
                            (i) In general.--If the Secretary 
                        determines that a State has failed to establish 
                        or maintain a reinsurance or allocation of risk 
                        mechanism in accordance with subparagraph (A), 
                        the Secretary shall establish and maintain such 
                        a reinsurance or allocation of risk mechanism 
                        meeting the requirements of this subparagraph.
                            (ii) Reinsurance mechanism.--Unless the 
                        Secretary determines under clause (iii) that an 
                        allocation of risk mechanism is the appropriate 
                        mechanism to use in a State under this 
                        subparagraph, the Secretary shall establish and 
                        maintain for use under this subsection for each 
                        State an appropriate reinsurance mechanism.
                            (iii) Allocation of risk mechanism.--If the 
                        Secretary determines that, due to the nature of 
                        the health coverage market in the State 
                        (including a relatively small number of high 
                        deductible umbrella insurance plans or managed 
                        care health plans offered or a relatively small 
                        number of uninsurable individuals), an 
                        allocation of risk mechanism would be a better 
                        mechanism than a reinsurance mechanism, the 
                        Secretary shall establish and maintain for use 
                        under this section for a State an allocation of 
                        risk mechanism under which uninsurable 
                        individuals would be equitably assigned among 
                        insurers offering high deductible umbrella 
                        insurance plans or managed care health plans.
                            (iv) Financing deficit for reinsurance 
                        mechanisms.--
                                    (I) In general.--Chapter 43 of the 
                                Internal Revenue Code of 1986 (relating 
                                to qualified pension plans, etc.) is 
                                amended by adding at the end thereof 
                                the following new section:

``SEC. 4980D. ADDITIONAL TAX TO FUND REINSURANCE IN STATES UNDER 
              FEDERAL REINSURANCE.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
providing of any high deductible umbrella insurance plan or managed 
care health plan which covers any individual in a Federal reinsurance 
State.
    ``(b) Amount of Tax.--
            ``(1) In general.--The tax imposed by subsection (a) shall 
        be equal to the applicable percentage of the amount received by 
        the insurer for providing such plan in such Federal reinsurance 
        State.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means, with respect to 
        any State for any period, the lowest percentage estimated by 
        the Secretary as generating sufficient revenues to carry out 
        section 112(c)(2)(B) of the Health Savings and Security Act of 
        1994 in such State for such period.
    ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid by the insurer.
    ``(d) Definitions.--For purposes of this section--
            ``(1) High deductible insurance plan; managed care health 
        plan.--The terms `high deductible insurance plan' and `managed 
        care health plan' have the meaning given such terms in section 
        101(a) of the Health Savings and Security Act of 1994.
            ``(2) Federal reinsurance state.--The term `Federal 
        reinsurance State' means any State with respect to which a 
        determination is in effect under section 112(c)(2)(B) of the 
        Health Savings and Security Act of 1994 and for which the 
        Secretary of Health and Human Services has established and is 
        maintaining a reinsurance mechanism under clause (ii) of such 
        section for the State.
            ``(3) Insurer.--The term `insurer' means a licensed 
        insurance company, a prepaid hospital or medical service plan, 
        and a health maintenance organization offering such a plan, and 
        includes a similar organization regulated under State law for 
        solvency.''
                                    (II) Clerical amendment.--The table 
                                of sections for chapter 43 of such Code 
                                is amended by adding at the end thereof 
                                the following new item:

                              ``Sec. 4980D. Additional tax to fund 
                                        reinsurance in States under 
                                        Federal reinsurance.''
            (3) Construction.--Nothing in this section shall be 
        construed to prohibit reinsurance or allocation of risk 
        arrangements relating to high deductible umbrella insurance 
        plans or managed care health plans, whether on a State or 
        multi-state basis, not required under this subsection.

 Subtitle B--Promoting Development of Voluntary Health Plan Purchasing 
                              Cooperatives

SEC. 121. ESTABLISHMENT OF STANDARDS; APPLICATION IN STATES.

    (a) Establishment of Standards.--
            (1) In general.--The Secretary of Health and Human 
        Services, in consultation with the National Association of 
        Insurance Commissioners, shall establish standards under this 
        subtitle to carry out the requirements of this subtitle, 
        including standards relating to--
                    (A) the establishment of health plan purchasing 
                cooperatives (or HPPCs),
                    (B) qualifications for qualified health carriers, 
                and
                    (C) the roles of States under this subtitle.
            (2) Deadline.--The Secretary shall establish and publish 
        the standards by not later than 6 months after the date of the 
        enactment of this Act.
            (3) Revision.--The Secretary from time to time may revise 
        standards established under this subsection. The revisions 
        shall only become effective in a manner that permits States 
        sufficient time to change laws and regulations in order to 
        implement the revisions.
    (b) Application of Standards Through States.--
            (1) Application of standards.--
                    (A) In general.--Subject to subsection (c), each 
                State shall submit to the Secretary, by the deadline 
                specified in subparagraph (B), a report on steps the 
                State is taking to implement the standards established 
                under subsection (a) in order to permit HPPCs to be 
                established and operate in all parts of the State, and 
                to conform its insurance laws to meet the requirements 
                of this subtitle, not later than that deadline.
                    (B) Deadline for report.--
                            (i) 1 year after standards established.--
                        Subject to clause (ii), the deadline under this 
                        subparagraph is 1 year after the date the 
                        standards are established under subsection (a).
                            (ii) Exception for legislation.--In the 
                        case of a State which the Secretary identifies, 
                        in consultation with the National Association 
                        of Insurance Commissioners, as--
                                    (I) requiring State legislation 
                                (other than legislation appropriating 
                                funds) in order for carriers and health 
                                plans offered to meet the standards 
                                established under subsection (a), but
                                    (II) having a legislature which is 
                                not scheduled to meet in 1995 in a 
                                legislative session in which such 
                                legislation may be considered,
                        the date specified in this subparagraph is the 
                        first day of the first calendar quarter 
                        beginning after the close of the first 
                        legislative session of the State legislature 
                        that begins on or after January 1, 1996. For 
                        purposes of the previous sentence, in the case 
                        of a State that has a 2-year legislative 
                        session, each year of the session shall be 
                        deemed to be a separate regular session of the 
                        State legislature.
            (2) Federal role.--
                    (A) Notice to states.--If the Secretary determines 
                that a State has failed to submit a report by the 
                deadline specified under paragraph (1) or finds that 
                the State has not taken sufficient steps to permit 
                establishment and operation of HPPCs in accordance with 
                the standards established under subsection (a), the 
                Secretary shall notify the State and provide the State 
                a period of 60 days in which to submit the report or to 
                implement the standards under paragraph (1).
                    (B) Federal fall-back participation.--If, after the 
                60-day period, the Secretary finds that the failure has 
                not been corrected, the Secretary shall provide for 
                such mechanism as will--
                            (i) permit the establishment and operation 
                        of HPPCs in accordance with the standards 
                        established under subsection (a) in the State 
                        as the Secretary determines to be appropriate, 
                        and
                            (ii) provide for the Secretary assuming the 
                        role of the State otherwise provided under this 
                        subtitle.
                    (C) Duration.--The Secretary's exercise of 
                authority under subparagraph (B) shall take effect with 
                respect to carriers, and health plans offered or 
                renewed, on or after 3 months after the date of the 
                Secretary's finding under that subparagraph and until 
                the date the Secretary finds that the failure of the 
                State has been corrected.
    (c) Implementation.--The report under subsection (b) shall specify 
the State official (or officials), or State board, commission, or 
department, responsible for carrying out the standards under subsection 
(a).

SEC. 122. SPECIFICATION OF HPPC AREAS.

    (a) In General.--Each State shall establish boundaries for HPPC 
areas in the State.
    (b) Standards.--Each part of the State shall be in one, and only 
one, HPPC area. Each HPPC area shall include a sufficient number of 
potential enrollees, health care providers, and qualified health 
carriers to carry out the purposes of this subtitle. A HPPC area may 
include portions of more than one State.
    (c) Revisions.--A State may revise the boundaries of HPPC areas not 
more frequently than annually.

SEC. 123. STANDARDS FOR HEALTH PLAN PURCHASING COOPERATIVES.

    (a) Establishment.--
            (1) In general.--One or more State-chartered, nonprofit 
        private corporations may be established in accordance with this 
        section to serve as a HPPC for each HPPC area specified under 
        section 122 for the benefit of small employers and eligible 
        individuals in the area. A carrier may not form, underwrite, or 
        possess a majority vote of a HPPC, but may administer a HPPC.
            (2) Rules of construction.--
                    (A) Establishment not required.--Nothing in this 
                section shall be construed as requiring--
                            (i) that a HPPC be established in each HPPC 
                        area; and
                            (ii) that there be only one HPPC 
                        established with respect to any HPPC area.
                    (B) Single organization serving multiple areas.--
                Nothing in this section shall be construed as 
                preventing a single not-for-profit corporation from 
                being a HPPC for more than one HPPC area.
    (b) Bylaws and Board of Directors.--
            (1) Bylaws.--Each HPPC shall establish bylaws, consistent 
        with this section, for its operation, including the election of 
        members of its board of directors.
            (2) Board of directors.--
                    (A) In general.--Each HPPC shall operate under the 
                supervision of a board of directors established under 
                the bylaws of the HPPC. A majority of the members of 
                the board shall be small employers or eligible 
                individuals, or representatives thereof, that 
                participate in the HPPC.
                    (B) Appointment and election.--After the initial 
                appointment of members to the board of directors of a 
                HPPC (in accordance with the articles of incorporation 
                of the HPPC), the board shall be elected by small 
                employer members and individual members of the HPPC in 
                accordance with bylaws of the HPPC. The elections shall 
                occur not less frequently than once every 2 years. The 
                standards may provide, at the option of a State, for 
                different voting rights for members that are small 
                employers to reflect the number of individuals 
                receiving coverage through those employers.
            (3) Limitation on liability.--There shall be no liability 
        on the part of, and no cause of action of any nature shall 
        arise against, any member of the board of directors of a HPPC, 
        or its employees or agent, for any action taken in good faith 
        by them in the performance of duties of HPPCs specified in this 
        subtitle.
    (c) Officers and Employees.--Each HPPC shall provide, consistent 
with its bylaws, for--
            (1) the appointment of officers from among its members, and
            (2) the appointment of an executive director to serve as 
        the chief operating officer of the HPPC.
    (d) Advisory Committees.--Each HPPC shall establish such advisory 
committees as may be necessary to assist in carrying out its duties 
under this subtitle. An advisory committee may include representation 
from qualified health carriers, agents, and health care providers.
    (e) Annual Report; Records; Audit.--Each HPPC shall--
            (1) prepare, and submit to the State and the Secretary, an 
        annual report on its operations, including its program and 
        financial operations;
            (2) conduct such annual internal and independent audits as 
        it determines to be appropriate; and
            (3) maintain records on its operations.
    (f) General Authorities; Limitations on Authority.--
            (1) In general.--A HPPC may--
                    (A) sue (or be sued), and
                    (B) subject to paragraph (2), accept and expend 
                grants or funds from any public or private agency.
            (2) Limitations.--A HPPC may not--
                    (A) purchase health care services or perform any 
                activity (including review, approval, or enforcement) 
                relating to payment rates for providers;
                    (B) assume financial risk for the cost or provision 
                of health care services;
                    (C) contract directly with health care providers 
                (other than with qualified health carriers under 
                section 124) for the provision of health care services 
                for members; or
                    (D) accept any funds from any private agency that 
                is (or is affiliated with) a qualified health carrier 
                or other party that would pose a conflict of interest 
                (as specified by the Secretary).

SEC. 124. FUNCTIONS OF HEALTH PLAN PURCHASING COOPERATIVES.

    (a) Contracts with Qualified Health Carriers; Enrollment in 
Plans.--
            (1) Contracts with plans.--Each HPPC shall enter into 
        contracts and hold policies with qualified health carriers 
        which elect to offer HPPC plans to members, in accordance with 
        subsection (d).
            (2) Enrollment.--
                    (A) In general.--Each HPPC shall provide for the 
                enrollment of eligible employees of small employers and 
                eligible individuals in HPPC plans of qualified health 
                carriers offered by the HPPC.
                    (B) Open enrollment periods.--Each HPPC shall 
                provide for an annual open enrollment period of 30 days 
                to be available within 60 days before the anniversary 
                date of each member's coverage under a HPPC plan.
            (3) Provision of information.--Each HPPC shall provide to 
        its members and eligible employees of small employer members 
        comparison sheets, in accordance with standards established by 
        the Secretary, which provide clear standardized information on 
        each qualified health carrier and each HPPC plan offered by a 
        qualified health carrier, including information on price, 
        consumer satisfaction, and (if feasible) health outcomes and 
        enrollment and enrollee responsibilities and obligations.
    (b) Membership Requirements.--
            (1) In general.--Each HPPC shall establish requirements for 
        participation of small employers and eligible individuals as 
        members of the HPPC consistent with any standards the Secretary 
        establishes consistent with this subsection. Each HPPC shall 
        maintain eligibility records to carry out its functions.
            (2) Small employer standards.--Under those standards--
                    (A) each small employer in the area that meets 
                requirements for membership is permitted to become a 
                member;
                    (B) a small employer that is not a valid small 
                employer group and was formed for the purpose of 
                securing health benefits coverage shall be denied 
                membership;
                    (C) each small employer member shall offer to 
                eligible employees a choice of at least 2 different 
                HPPC plans, of which--
                            (i) at least one is a high deductible 
                        umbrella insurance plan, and
                            (ii) at least one is a managed care health 
                        plan;
                    (D) no small employer is required, as a condition 
                of membership, to make any contribution towards the 
                premium for coverage of any eligible employee; and
                    (E) if a small employer member terminates coverage 
                purchased through the HPPC, the former member shall be 
                ineligible to purchase a HPPC plan through the HPPC for 
                a period of 12 months.
            (3) Individual members.--Under those standards, eligible 
        individuals residing in a HPPC area may become individual 
        members of the HPPC for the area. Nothing in this subtitle 
        shall be construed as requiring as a condition of membership 
        for a HPPC serving a HPPC area that individual be residing in 
        the area.
            (4) Payment of premiums.--
                    (A) In general.--A HPPC may condition membership 
                upon prepayment of a monthly premium (or compliance 
                with other mechanisms) to assure that payment will be 
                made for coverage of members on a timely basis.
                    (B) Notification of failure to receive premium.--If 
                a HPPC fails to receive payment on a premium due with 
                respect to an individual covered under a qualified 
                health carrier offered by the HPPC, the HPPC shall 
                provide notice of the failure to the individual within 
                the 20-day period after the date on which the premium 
                payment was due.
                    (C) Direct payment allowed in case of employer 
                nonpayment.--In the case a small employer member of a 
                HPPC fails to make payment of premiums due with respect 
                to an eligible employee covered under a qualified 
                health carrier offered through the HPPC, the HPPC shall 
                notify the employee of the nonpayment and shall allow 
                the employee to make direct payments to the HPPC 
                effective with the next succeeding payment period.
            (5) Dispute resolution procedures.--Each HPPC shall 
        establish, in accordance with standards established under this 
        subtitle dispute resolution procedures to resolve disputes 
        between the HPPC and its members and disputes between the HPPC 
        and qualified health carriers. Under those procedures, a member 
        or HPPC may appeal the proposed resolution of a dispute to the 
        State.
    (c) Contracts With Members.--
            (1) Premium payments.--
                    (A) In general.--Each contract between a member and 
                a HPPC shall provide that payment of all premiums shall 
                be transmitted by the member (which in the case of a 
                small employer member shall be on behalf of eligible 
                employees) to (or on behalf of) the HPPC for the 
                benefit of the qualified health carrier in which the 
                eligible employee or individual is enrolled. The HPPC 
                shall provide for procedures for the collection of 
                premiums from members (including, in the case of a 
                small employer member, eligible employees).
                    (B) At least bimonthly.--The premiums are payable 
                not less often than bimonthly.
                    (C) Late charges.--A HPPC may provide for penalties 
                for late payment.
                    (D) Nonpayment.--Nonpayment of premiums by a member 
                shall constitute a breach of the contract, a breach of 
                the health care policy, and a default on the member's 
                obligation.
            (2) Contract holder.--The contract shall provide that--
                    (A) the HPPC may be the contract holder of the 
                health benefit policy on behalf of the member 
                (including eligible employees), and
                    (B) all eligible employees who obtain coverage 
                under the HPPC plan offered by a small employer must 
                obtain the coverage through any HPPC plan offered by a 
                qualified health carrier through the HPPC.
            (3) Premium amounts.--The amount of premiums imposed shall 
        include an amount that includes the fixed overhead allowance 
        percentage established by the HPPC under subsection (e).
    (d) Contracts With Plans.--
            (1) In general.--Each contract between a qualified health 
        carrier and a HPPC shall provide--
                    (A) that premiums of members shall be forwarded to 
                the plan in which they are enrolled, subject to any 
                adjustment under section 128, on the effective date of 
                coverage (if that occurs more than once a month), on a 
                monthly basis, or as agreed in the contract (but in no 
                event less frequently than monthly); and
                    (B) that the HPPC shall transmit enrollment and 
                eligibility information to the plan on a timely basis.
            (2) Termination.--A qualified health carrier may not 
        terminate the contract unless the plan--
                    (A) provides advance notice to the HPPC, and
                    (B) provides notice at least 180 days before the 
                nonrenewal of any HPPC plan to enrollees.
        In the case of a contract termination, the qualified health 
        carrier shall not write new business with the HPPC for a period 
        of 3 years from the date of the notice of termination.
    (e) Overhead Allowance.--Each HPPC shall establish a fixed overhead 
allowance percentage that shall be--
            (1) applied as addition to the premiums charged for 
        enrollment in a qualified health carrier offered through the 
        HPPC to its members, and
            (2) used to cover administrative costs of the HPPC, as well 
        as defaults by members of premium payments.
    (f) Uniform Administrative and Accounting Procedures.--Each HPPC 
shall establish such uniform administrative and accounting procedures 
as are needed to conform with applicable national standards identified 
by the Secretary.
    (g) Contracts for Administrative Services.--
            (1) In general.--Each HPPC shall contract with a qualified, 
        independent third party for any service necessary to carry out 
        its duties under this subtitle. The contracts shall include--
                    (A) contracts with agents to assist in contracting 
                with qualified health carriers and small employer 
                members, and
                    (B) contracts to market and publicize the 
                availability of HPPC plans through the HPPC.
            (2) Information.--Unless permission is specifically granted 
        by the HPPC, a third party may not release, publish, or 
        otherwise use any information to which the party has access 
        under its contract.
    (g) Construction.--Nothing in this subtitle shall be construed as 
requiring a small employer or eligible individual to obtain coverage 
from or through a HPPC.

SEC. 125. QUALIFIED HEALTH CARRIERS.

    (a) Designation.--Each State shall establish a process whereby a 
carrier that demonstrates to the satisfaction of the State insurance 
commissioner that it has the capability to fulfill the following 
requirements (directly or through subcontracts) is designated as a 
qualified health carrier for purposes of this subtitle:
            (1) Licensure.--The carrier is licensed and in good 
        standing with the State insurance commissioner (or other 
        comparable official for a State).
            (2) Administrative capacity.--The carrier has the capacity 
        to administer HPPC plans.
            (3) Access.--In the case of a carrier with a contractual 
        obligation to provide or arrange for health services included 
        in a HPPC plan, the ability to provide enrollees with adequate 
        access to these covered services within the carrier's service 
        area.
            (4) Grievance procedures.--The carrier has grievance 
        procedures, including the ability to respond to enrollees' 
        calls, questions, and complaints.
            (5) Utilization management procedures.--The carrier has 
        established utilization management procedures.
            (6) Quality.--The carrier has the ability to monitor and 
        evaluate the quality and cost-effectiveness of care.
            (7) Information.--The carrier has the ability to provide 
        information on enrollee satisfaction (based on standard surveys 
        described in section 127(b)(4)).
            (8) Data.--The carrier has the ability to provide standard 
        data elements (identified under section 127(b)).
    (b) Functions of Qualified Health Carriers.--
            (1) In general.--In every HPPC with which it has a contract 
        under section 124(d), each qualified health carrier shall 
        provide for activities described in this subsection.
            (2) Offering plan.--Each qualified health carrier shall 
        offer HPPC plans. If a qualified health carrier offers a high 
        deductible umbrella insurance plan or a managed health care 
        plan in a State (or geographic area) to employers that are not 
        small employers, the carrier shall offer, as a HPPC plan, a 
        similar high deductible umbrella insurance plan or managed 
        health care plan in that State or geographic area.
            (3) Performance information.--Each qualified health carrier 
        shall provide for the collection and reporting to the State and 
        to the appropriate HPPC of information on the performance of 
        the plan regarding the effectiveness in providing services, 
        consistent with section 127(b).
            (4) Compliance with requirements.--Each qualified health 
        carrier shall--
                    (A) meet the requirements of part 1 of subtitle A 
                (relating to benefits, rating practices, guaranteed 
                issue, guaranteed renewability, and restrictions on 
                agent compensation and broker activities) with respect 
                to HPPC plans it offers; and
                    (B) file on a quarterly basis with the HPPC in 
                which it is participating the premium rates for HPPC 
                plans offered by the carrier.
            (5) Notice of termination of hppc contract.--Each qualified 
        health carrier may only terminate its contract with the HPPC in 
        accordance with section 124(d)(2).
            (6) Grievance procedures.--Each qualified health carrier 
        shall provide a procedure for addressing grievances that arise 
        between the carrier and the HPPC or members of the HPPC (and, 
        in the case of small employer members, their eligible 
        employees) that requires both parties to fully exhaust the 
        remedies provided under the procedure to resolve grievance 
        before seeking any relief other than as provided in the 
        procedure.
            (7) Use of uniform claims forms.--Each qualified health 
        carrier shall use standardized forms, including uniform claims 
        forms, identified by the Secretary with respect to HPPC plans.
    (c) Coverage.--
            (1) In general.--Coverage under a HPPC plan offered by a 
        qualified health carrier shall be available to any member of 
        the HPPC at the anniversary date of each member's coverage 
        under a HPPC plan (or in the case of an employer or individual 
        who has applied to become a member of a HPPC when the member 
        first joins the HPPC).
            (2) Exception.--A qualified health carrier is not required 
        to offer coverage or accept enrollment if--
                    (A) the eligible individual or employee does not 
                reside within the plan's service area (as approved by 
                the State insurance commissioner);
                    (B) the plan provides 90 days prior notice that it 
                will not have the capacity to deliver services 
                adequately in the HPPC area to additional enrollees 
                because of its obligations to existing groups and 
                enrollees; or
                    (C) the State insurance commissioner determines 
                that the acceptance of an application or applications 
                would place the plan in a financially impaired 
                condition.
            (3) Conditions.--
                    (A) Insufficient capacity.--A qualified health 
                carrier that cannot offer coverage under paragraph 
                (2)(B) may not offer coverage to the employees of a new 
                employer group until the later of 90 days following 
                that refusal or the date on which the plan notifies the 
                HPPC and the State insurance commissioner that it has 
                regained capacity to deliver services to eligible 
                individuals in the service area.
                    (B) Financial impairment.--A qualified health 
                carrier that cannot offer coverage under paragraph 
                (2)(C) may not offer coverage or accept applications 
                for any individual or employer group until a 
                determination by the State insurance commissioner that 
                acceptance of an application will not put the plan in a 
                financially impaired condition.
    (d) Deemed Compliance.--Carriers which comply with any of the 
requirements of a paragraph of subsection (a) through a requirement of 
State law shall be deemed to be in compliance with the corresponding 
paragraph of that subsection. Carriers receiving accreditation by 
nationally recognized, health related accreditation organizations 
(including the National Committee on Quality Assurance, the Utilization 
Review Accreditation Commission, the Joint Commission on Accreditation 
of Health Care Organizations), or qualification by Federal agencies, 
shall be deemed in compliance with the requirements of subsection (a) 
as they pertain to the relevant accreditation activities of the 
organizations.
    (e) Determinations.--Each State shall provide for a determination 
of whether a carrier is a qualified health carrier within 30 days of a 
completed application being submitted to the State.
    (f) Termination.--After notice and hearing, a State may suspend or 
revoke the designation as a qualified health carrier of a carrier that 
fails to maintain compliance with the requirements in subsections (a), 
(b), and (c).

SEC. 126. MARKETING HPPC PLANS.

    (a) In General.--Each HPPC shall use efficient and standardized 
means to notify small employers of the availability of HPPC plans 
through the HPPC.
    (b) Marketing Materials.--Each HPPC shall make available to small 
employer and individual members marketing materials that accurately 
summarize the HPPC plans, cost, and other relevant information 
concerning qualified health carriers offered by the HPPC.
    (c) Use of Brokers.--Nothing in this subtitle shall be construed to 
prohibit a HPPC or qualified health carrier from using the services of 
an agent, broker, contractor, or producer in order to assist in 
marketing.
    (d) Monitoring.--Each HPPC shall notify the State insurance 
commissioner (or other official identified by the State) of any 
marketing practices or materials that it finds contrary to the fair and 
affirmative marketing of qualified health carriers and HPPC plans under 
this subtitle.
    (e) State Role.--Each State insurance commissioner shall monitor 
compliance with the marketing requirements of this subtitle and 
subtitle A, including the conduct of agents, brokers, contractors, and 
producers and investigate complaints of violations of those 
requirements.

SEC. 127. COLLECTION AND SUBMISSION OF DATA.

    (a) From HPPCs to States.--Each HPPC shall submit such data to the 
State, on a quarterly basis, as the Secretary may specify. The data 
shall include the following:
            (1) With respect to small employer members--
                    (A) employer enrollment by employer size, industry 
                sector, previous insurance status, and number of 
                eligible employees within each small employer, and
                    (B) number of total eligible employers in the HPPC 
                area.
            (2) With respect to eligible individuals, the demographic 
        characteristics of those individuals, including age, gender, 
        employment status and employment sector, and previous insurance 
        status.
            (3) Premium ranges for each HPPC plan for HPPC member 
        categories.
            (4) HPPC overhead charges.
            (5) HPPC financial statements.
    (b) Collection of Data by HPPCs.--
            (1) In general.--The Secretary shall establish uniform 
        standards for data that a HPPC collects from qualified health 
        carriers and providers and disseminates.
            (2) Collection.--Under the standards, each HPPC shall 
        collect only such data as are necessary for evaluation of the 
        performance of qualified health carriers (and any provider 
        networks used by those carriers) by consumers and providers. 
        The Secretary shall establish the standards consistent with the 
        method of operation of qualified health carriers, with national 
        health care data collection initiatives, and with not imposing 
        an unreasonable cost of compliance on qualified health 
        carriers. The Secretary shall establish the standards only 
        after a study of the feasibility and cost-effectiveness.
            (3) Dissemination.--Under the standards, each HPPC shall 
        release the data collected in a uniform and standardized format 
        which compares all qualified health carriers or providers (as 
        the case may be).
            (4) Enrollee satisfaction surveys.--All enrollee 
        satisfaction surveys used by qualified health carriers in 
        reporting to HPPCs shall be in a standardized format 
        promulgated by the Secretary.

SEC. 128. ROLE OF STATE; OVERSIGHT; EVALUATION.

    (a) Oversight.--Each State shall--
            (1) assure compliance of HPPCs, small employers, and 
        eligible employees and individuals with the requirements of 
        this subtitle; and
            (2) conduct reviews, not less frequently than annually, on 
        the performance of each HPPC in assuring access to health 
        coverage to small employers and eligible individuals in the 
        HPPC area in accordance with this subtitle.
    (b) Dispute Resolution.--Each State shall receive, review, and act 
on appeals of disputes, between a HPPC and a member, not resolved by 
the HPPC under section 124(b)(5).
    (c) Analysis of Information.--Each State shall analyze information 
collected from qualified health carriers and other sources and report 
findings that assist consumers, HPPCs, qualified health carriers, or 
health care providers in improving the delivery or purchase of cost-
effective health care.
    (d) Dissemination of Information.--Each State shall prepare and 
make available to HPPCs and employers located in the State (and to 
eligible individuals upon request) information, in comparative form, 
concerning the HPPC plans in the State and HPPCs operating in the 
State. The information shall include a description of the following:
            (1) The HPPCs in the State and HPPC plans of qualified 
        health carriers available with respect to each HPPC.
            (2) The existence of HPPCs within each HPPC area.
            (3) Any other information determined appropriate by the 
        State.
    (e) Annual Report.--Each State shall report to the Secretary, at a 
frequency (not more often than annually) specified by the Secretary, on 
the impact of the reforms under this subtitle in expanding the 
availability and affordability of health coverage to eligible employees 
and eligible individuals.
    (f) Antitrust Protection.--Each State shall actively supervise 
HPPCs to ensure that actions that affect market competition accomplish 
the objectives of this subtitle, so as to provide State and Federal 
protection to HPPCs and the board of directors of HPPCs against Federal 
and State laws intended to protect commerce from unlawful restraints, 
monopolies, and unfair business practices.
    (g) Non-Preemption.--Nothing in this subtitle shall be construed as 
preempting a State from taking any actions that are in addition to, and 
not directly inconsistent with, the provisions of this subtitle.

SEC. 129. DEFINITIONS.

    In this subtitle:
            (1) Carrier.--The term ``carrier'' means a licensed 
        insurance company, a prepaid hospital or medical service plan, 
        and a health maintenance organization offering a health benefit 
        plan, and includes a similar organization regulated under State 
        law for solvency.
            (2) Eligible employee.--The term ``eligible employee'' 
        means, with respect to an employer, an employee who normally 
        performs on a monthly basis at least 30 hours of service per 
        week for that employer.
            (3) Eligible individual.--The term ``eligible individual'' 
        means an individual residing in the United States who is a 
        citizen or national of the United States or an alien lawfully 
        residing permanently in the United States.
            (4) Employer.--The term ``employer'' has the meaning given 
        that term in section 3(5) of the Employee Retirement Income 
        Security Act of 1974.
            (5) Health plan purchasing cooperative; hppc.--The terms 
        ``health plan purchasing cooperative'' and ``HPPC'' mean a 
        State-chartered, nonprofit organization that--
                    (A) provides health coverage purchasing services to 
                members in a HPPC area regarding HPPC plans offered by 
                qualified health carriers, and
                    (B) is established in accordance with section 123.
            (6) HPPC area.--The term ``HPPC area'' means an area 
        designated under section 123.
            (7) HPPC plan.--The term ``HPPC plan'' means, with respect 
        to a HPPC, a high deductible umbrella insurance plan or managed 
        health care plan, as defined in section 101, offered by the 
        HPPC that is marketed in accordance with section 126 and 
        submits data in accordance with section 127.
            (8) Health maintenance organization.--The term ``health 
        maintenance organization'' includes, as determined under 
        standards established by the Secretary, a health insurance plan 
        that meets specified standards and that offers to provide 
        health services on a prepaid, at-risk basis primarily through a 
        defined set of providers.
            (9) Member.--The term ``member'' means, with respect to a 
        HPPC, a small employer or eligible individual that meets 
        membership requirements for the HPPC under section 124(b).
            (10) Qualified health carrier.--The term ``qualified health 
        carrier'' means a carrier designated under section 125(a) by a 
        State insurance commissioner.
            (11) Service area.--The term ``service area'' means a 
        geographic region in which a carrier is licensed to operate.
            (12) Small employer.--The term ``small employer'' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but less than 501 eligible employees on a 
        typical business day in any 3-consecutive-month-period in the 
        year. For the purposes of this paragraph, the term ``employee'' 
        includes a self-employed individual. For purposes of 
        determining if an employer is a small employer, rules similar 
        to the rules of subsection (b) and (c) of section 414 of the 
        Internal Revenue Code of 1986 shall apply.
            (13) Small employer member.--The term ``small employer 
        member'' means, with respect to a HPPC, a small employer that 
        is a member of the HPPC.
            (14) State insurance commissioner.--The term ``State 
        insurance commissioner'' includes a State superintendent of 
        insurance and includes, with respect to a health maintenance 
        organization or other carrier not regulated by that official, 
        the State official who is responsible for regulation of the 
        organization or carrier.

                     Subtitle C--Federal Preemption

SEC. 141. PROHIBITION OF STATE BENEFIT MANDATES FOR GROUP HEALTH PLANS.

    In the case of a group health plan, no provision of State or local 
law shall apply that requires the coverage of one or more specific 
benefits, services, or categories of health care, or services of any 
class or type of provider of health care.

SEC. 142. PROHIBITION OF PROVISIONS PROHIBITING EMPLOYER GROUPS FROM 
              PURCHASING HEALTH INSURANCE.

    No provision of State or local law shall apply that prohibits 2 or 
more employers from obtaining coverage under an insured multiple 
employer health plan.

SEC. 143. RESTRICTIONS ON MANAGED CARE.

    (a) Preemption of State Law Provisions.--Subject to subsection (c), 
the following provisions of State law are preempted and may not be 
enforced:
            (1) Restrictions on reimbursement rates or selective 
        contracting.--Any law that restricts the ability of a group 
        health plan to negotiate reimbursement rates with providers or 
        to contract selectively with one provider or a limited number 
        of providers.
            (2) Restrictions on differential financial incentives.--Any 
        law that limits the financial incentives that a group health 
        plan may require a beneficiary to pay when a non-plan provider 
        is used on a non-emergency basis.
            (3) Restrictions on utilization review methods.--Any law 
        that--
                    (A) prohibits utilization review of any or all 
                treatments and conditions,
                    (B) requires that such review be made (i) by a 
                resident of the State in which the treatment is to be 
                offered or by an individual licensed in such State, or 
                (ii) by a physician in any particular specialty or with 
                any board certified specialty of the same medical 
                specialty as the provider whose services are being 
                reviewed,
                    (C) requires the use of specified standards of 
                health care practice in such reviews or requires the 
                disclosure of the specific criteria used in such 
                reviews,
                    (D) requires payments to providers for the expenses 
                of responding to utilization review requests, or
                    (E) imposes liability for delays in performing such 
                review.
        Nothing in subparagraph (B) shall be construed as prohibiting a 
        State from (i) requiring a licensed physician or other health 
        care professional be available at some time in the review or 
        appeal process, or (ii) requiring that any decision in an 
        appeal from such a review be made by a licensed physician.
    (b) GAO Study.--
            (1) In general.--The Comptroller General shall conduct a 
        study of the benefits and cost effectiveness of the use of 
        managed care in the delivery of health services.
            (2) Report.--By not later than 4 years after the date of 
        the enactment of this Act, the Comptroller General shall submit 
        a report to Congress on the study conducted under paragraph (1) 
        and shall include in the report such recommendations (including 
        whether the provisions of subsection (a) should be extended) as 
        may be appropriate.
    (c) Sunset.--Unless otherwise provided, subsection (a) shall not 
apply 5 years after the date of the enactment of this Act.

SEC. 144. EXEMPTION OF STATE LAWS PREVENTING DENIAL OF LIFESAVING 
              MEDICAL TREATMENT PENDING TRANSFER TO ANOTHER HEALTH CARE 
              PROVIDER.

    Nothing in this subtitle shall be construed to invalidate any State 
law that has the effect of preventing involuntary denial of lifesaving 
medical treatment when such denial would cause the involuntary death of 
the patient pending transfer of the patient to a health care provider 
willing to provide such treatment.

SEC. 145. DEFINITIONS.

    In this subtitle, the following definitions shall apply:
            (1) Employer.--The term ``employer'' shall have the meaning 
        applicable under section 3(5) of the Employee Retirement Income 
        Security Act of 1974.
            (2) Group health plan; plan.--(A) The term ``group health 
        plan'' means an employee welfare benefit plan providing medical 
        care (as defined in section 213(d) of the Internal Revenue Code 
        of 1986) to participants or beneficiaries directly or through 
        insurance, reimbursement, or otherwise, but does not include 
        any type of coverage excluded from the definition of a health 
        insurance plan.
            (B) The term ``plan'' means, unless used with a modifying 
        term or the context specifically indicates otherwise, a group 
        health plan (including any such plan which is a multiemployer 
        plan), an exempted multiple employer health plan, or an insured 
        multiple employer health plan.
            (3) Health insurance plan.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``health insurance plan'' means any 
                hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization group contract offered by an 
                insurer.
                    (B) Exception.--Such term does not include any of 
                the following--
                            (i) coverage only for accident, dental, 
                        vision, disability income, or long-term care 
                        insurance, or any combination thereof,
                            (ii) medicare supplemental health 
                        insurance,
                            (iii) coverage issued as a supplement to 
                        liability insurance,
                            (iv) worker's compensation or similar 
                        insurance, or
                            (v) automobile medical-payment insurance,
                or any combination thereof.
            (4) Insured multiple employer health plan.--The term 
        ``insured multiple employer health plan'' means a fully insured 
        multiple employer welfare arrangement under which benefits 
        consist solely of medical care described in section 607(1) of 
        the Employee Retirement Income Security Act of 1974 
        (disregarding such incidental benefits as the Secretary shall 
        specify by regulations).
            (5) Insurer.--The term ``insurer'' means a licensed 
        insurance company, a prepaid hospital or medical service plan, 
        and a health maintenance organization offering such a plan to 
        an employer, and includes a similar organization regulated 
        under State law for solvency.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (7) State.--The term ``State'' means the 50 States, the 
        District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
        and American Samoa.

    Subtitle D--Rules of Construction Regarding Abortion Services; 
                             Inseverability

SEC. 151. RULES OF CONSTRUCTION REGARDING ABORTION SERVICES.

    Nothing in this title or title II may be construed--
            (1) to require any health plan to include any abortion 
        services, or
            (2) to condition tax deductibility on the inclusion of such 
        services.

SEC. 152. INSEVERABILITY.

    If section 151 is judicially determined to be invalid or any 
provision in this title or title II is judicially determined--
            (1) to require any health plan to include any abortion 
        services, or
            (2) to condition tax deductibility on the inclusion of such 
        services,
then all the provisions of this title and title II shall be deemed to 
be invalid and shall not be given any effect.

         TITLE II--AMENDMENTS OF INTERNAL REVENUE CODE OF 1986

Subtitle A--Limitations on Employer Deduction for Health Care Coverage 
 for Employees and on Employee Exclusion for Employer-Provided Health 
                             Care Coverage

SEC. 201. EMPLOYER DEDUCTION FOR HEALTH CARE COVERAGE FOR EMPLOYEES 
              LIMITED TO COVERAGE UNDER HIGH-DEDUCTIBLE PLANS AND 
              MANAGED CARE PLANS AND TO CONTRIBUTIONS TO MEDICAL 
              SAVINGS ACCOUNTS FOR EMPLOYEES.

    (a) In General.--Part IX of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items not deductible) is 
amended by adding at the end the following new section:

``SEC. 280I. CERTAIN HEALTH CARE COVERAGE FOR EMPLOYEES.

    ``(a) In General.--Except as otherwise provided in this section, no 
deduction shall be allowed under this chapter to any employer for 
health care coverage for any employee.
    ``(b) Exceptions.--
            ``(1) In general.--Subsection (a) shall not apply to 
        coverage under--
                    ``(A) a high deductible umbrella insurance plan, or
                    ``(B) a managed health care plan.
            ``(2) Medical savings accounts permitted with high 
        deductible umbrella insurance plan coverage.--In the case of an 
        employer who provides coverage under a high deductible umbrella 
        insurance plan for an employee, subsection (a) also shall not 
        apply to employer contributions to a medical savings account 
        (as defined in section 23(c)) for the benefit of such employee.
            ``(3) Permitted coverage.--Subsection (a) shall not apply 
        to permitted coverage (as defined in subsection (e)).
    ``(c) Maximum Deduction for Provision of Tax-Qualified Health Care 
Plans and Medical Savings Accounts.--The amount allowed as a deduction 
by reason of paragraphs (1) and (2) of subsection (b) for any taxable 
year with respect to an employee shall not exceed the health care tax 
benefit limitation for such taxable year.
    ``(d) Health Care Tax Benefit Limitation.--
            ``(1) In general.--The health care tax benefit limitation 
        for any taxable year is the sum of--
                    ``(A) $2,500 ($4,000 in the case of a joint return 
                filed by individuals both of whom are covered under a 
                tax-qualified health care plan provided by the 
                employer), plus
                    ``(B) $1,000 if any individual (other than the 
                taxpayer and the spouse (if any) of the taxpayer) is 
                covered under such plan by reason of their relationship 
                to such taxpayer or spouse.
            ``(2) Variation of maximum deduction by geographic area.--
                    ``(A) In general.--In the case of any calendar year 
                after 1996, each of the dollar amounts applicable under 
                paragraph (1) (after the adjustment under paragraph 
                (3)) shall be adjusted by the Secretary to reflect 
                variations in the cost of tax-qualified health care 
                plans between statistical areas (as defined in section 
                143(k)(2)). The amounts prescribed by the Secretary 
                under this subparagraph for any calendar year shall 
                apply to taxable years beginning in such calendar year.
                    ``(B) Method.--
                            ``(i) In general.--Amounts prescribed under 
                        subparagraph (A) for any area for any calendar 
                        year shall be determined by multiplying the 
                        dollar amounts applicable under paragraph (1) 
                        (after the adjustment under paragraph (3)) by 
                        the cost-of-living multiplier for such area for 
                        such calendar year. If any adjustment under the 
                        preceding sentence is not a multiple of $50, 
                        such adjustment shall be rounded to the nearest 
                        multiple of $50.
                            ``(ii) Multiplier.--The cost-of-living 
                        multiplier for any area for any calendar year 
                        is the fraction--
                                    ``(I) the numerator of which is the 
                                cost-of-living for such area for such 
                                calendar year; and
                                    ``(II) the denominator of which is 
                                the average cost-of-living for the 
                                United States for such calendar year.
                        The Secretary shall determine the cost-of-
                        living for an area using retail market prices 
                        selected and used under the same methodology as 
                        is used by the Bureau of Labor Statistics in 
                        developing the Consumer Price Index for All 
                        Urban Consumers. The cost-of-living for any 
                        calendar year is the cost-of-living as of the 
                        close of the 12-month period ending on August 
                        31 of such calendar year.
            ``(3) Inflation adjustment.--
                    ``(A) In general.--In the case of any calendar year 
                after 1996, each dollar amount contained in paragraph 
                (1) shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the inflation adjustment for such 
                        calendar year.
                If any increase under the preceding sentence is not a 
                multiple of $50, such increase shall be rounded to the 
                nearest multiple of $50.
                    ``(B) Method of adjustment.--For purposes of 
                subparagraph (A), the inflation adjustment for any 
                calendar year is the greater of--
                            ``(i) the CPI adjustment, or
                            ``(ii) the MEI adjustment.
                    ``(C) CPI adjustment.--The CPI adjustment for any 
                calendar year is the percentage (if any) by which the 
                CPI-U for the preceding calendar year exceeds the CPI-U 
                for the second preceding calendar year.
                    ``(D) MEI adjustment.--The MEI adjustment for any 
                calendar year is--
                            ``(i) the percentage (if any) by which MEI 
                        for the preceding calendar year exceeds the MEI 
                        for the second preceding calendar year, reduced 
                        by
                            ``(ii) 2 percentage points (1 percentage 
                        point in the case of adjustments for calendar 
                        years 1997 and 1998).
                    ``(E) Index for any calendar year.--For purposes of 
                this paragraph, the CPI-U and MEI for any calendar year 
                is the CPI-U and MEI as of the close of the 12-month 
                period ending on August 31 of such calendar year.
                    ``(F) CPI-U and MEI.--For purposes of this 
                paragraph--
                            ``(i) The term `CPI-U' means the Consumer 
                        Price Index for all-urban consumers published 
                        by the Department of Labor.
                            ``(ii) The term `MEI' means the Medicare 
                        Economic Index referred to in the 4th sentence 
                        of section 1842(b)(3) of the Social Security 
                        Act.
    ``(e) Permitted Coverage.--For purposes of this section, the term 
`permitted coverage' means--
            ``(1) any coverage providing wages or payments in lieu of 
        wages for any period during which the employee is absent from 
        work on account of sickness or injury,
            ``(2) any coverage providing for payments referred to in 
        section 105(c),
            ``(3) insurance that limits benefits with respect to 
        specific diseases (or conditions),
            ``(4) hospital or nursing home indemnity insurance,
            ``(5) insurance with respect to accidents,
            ``(6) any coverage provided to an employee or former 
        employee after such employee has attained age 65, unless such 
        coverage is provided by reason of the current employment of the 
        individual (within the meaning of section 1862(b)(1)(A)(i)(I) 
        of the Social Security Act) with the employer providing the 
        coverage,
            ``(7) any coverage provided under Federal law to any 
        individual (or spouse or dependent thereof) by reason of such 
        individual being--
                    ``(A) a member of the Armed Forces of the United 
                States, or
                    ``(B) a veteran, and
            ``(8) any other coverage to the extent that the Secretary 
        determines that the continuation of an exclusion for such 
        coverage is not inconsistent with the purposes of this section.
Insurance shall be treated as described in paragraph (3), (4), or (5) 
only if the amount of the benefits under the insurance do not vary 
based on the amount of expenses incurred.
    ``(f) Special Rules for Determining Amount of Deduction.--
            ``(1) In general.--For purposes of this section, the cost 
        of any coverage for an employee, his spouse, and dependents 
        shall be determined on the basis of the average cost of 
        providing such coverage to the beneficiaries receiving such 
        coverage.
            ``(2) Special rule.--To the extent provided by the 
        Secretary, cost determinations under paragraph (1) may be made 
        on the basis of reasonable estimates.
    ``(g) Definitions.--For purposes of this section, the terms `high 
deductible umbrella insurance plan', `managed health care plan', and 
`tax-qualified health care plan' have the respective meanings given 
such terms by section 101 of Health Savings and Security Act of 1994.''
    (b) Clerical Amendment.--The table of sections for such part IX is 
amended by adding at the end the following new item:

                              ``Sec. 280I. Certain health care coverage 
                                        for employees.''

SEC. 202. LIMITATION ON EXCLUSION FOR EMPLOYER-PROVIDED COVERAGE UNDER 
              HEALTH PLAN.

    (a) In General.--The text of section 106 of the Internal Revenue 
Code of 1986 (relating to contributions by employer to accident and 
health plans) is amended to read as follows:
    ``(a) In General.--Except as provided in subsection (b), gross 
income of an employee does not include employer-provided coverage under 
an accident or health plan.
    ``(b) Limitations.--
            ``(1) Only certain coverage excludable.--Gross income of an 
        employee shall include employer-provided coverage under any 
        accident or health plan except to the extent that--
                    ``(A) such coverage consists of coverage under a 
                tax-qualified health care plan (as defined in section 
                101 of the Health Savings and Security Act of 1994),
                    ``(B) such coverage consists of contributions to a 
                medical savings account (as defined in section 23(c)) 
                for the benefit of an employee, or
                    ``(C) such coverage consists of permitted coverage 
                (as defined in section 280I(e)).
            ``(2) Maximum exclusion for employer-provided tax-qualified 
        health care plans and medical savings accounts.--
                    ``(A) In general.--The amount excluded from gross 
                income by reason of subparagraphs (A) and (B) of 
                paragraph (1) for any taxable year shall not exceed the 
                health care tax benefit limitation for such taxable 
                year determined under section 280I(d).
                    ``(B) Spouses with dual coverage.--If the taxpayer 
                or the spouse of the taxpayer are covered under more 
                than 1 tax-qualified health care plan, coverage under 
                the least expensive such plan shall not be subject to 
                subparagraph (A) and such coverage shall not be taken 
                into account in applying subparagraph (A) to the other 
                such plan.
    ``(c) Special Rules for Determining Amount of Inclusion.--
            ``(1) In general.--For purposes of this section, the value 
        of any coverage shall be determined on the basis of the average 
        cost of providing such coverage to the beneficiaries receiving 
        such coverage.
            ``(2) Special rule.--To the extent provided by the 
        Secretary, cost determinations under paragraph (1) may be made 
        on the basis of reasonable estimates.''
    (b) Employment Tax Treatment.--
            (1) Social security tax.--
                    (A) Subsection (a) of section 3121 of such Code is 
                amended by inserting after paragraph (21) the following 
                new sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
                    (B) Subsection (a) of section 209 of the Social 
                Security Act is amended by inserting after paragraph 
                (21) the following new sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b) of the Internal Revenue Code of 1986.''
            (2) Railroad retirement tax.--Paragraph (1) of section 
        3231(e) of such Code is amended by adding at the end thereof 
        the following new sentence: ``Nothing in clause (i) of the 
        second sentence of this paragraph shall exclude from the term 
        `compensation' any amount which is required to be included in 
        gross income under section 106(b).''
            (3) Unemployment tax.--Subsection (b) of section 3306 of 
        such Code is amended by inserting after paragraph (16) the 
        following new sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
            (4) Wage withholding.--Subsection (a) of section 3401 of 
        such Code is amended by adding at the end thereof the following 
        new sentence:
``Nothing in the preceding provisions of this subsection shall exclude 
from the term `wages' any amount which is required to be included in 
gross income under section 106(b).''

SEC. 203. HEALTH BENEFITS MAY NOT BE PROVIDED UNDER CAFETERIA PLANS.

    (a) General Rule.--Subsection (f) of section 125 (defining 
qualified benefits) is amended by adding at the end thereof the 
following new sentence: ``Such term shall not include any benefits or 
coverage (other than benefits or coverage described in paragraph (1), 
(2), (3), (4), or (5) of section 280I(e)) under an accident or health 
plan.''
    (b) Conforming Amendment.--Subsection (g) of section 125 is amended 
by striking paragraph (2) and redesignating paragraphs (3) and (4) as 
paragraphs (2) and (3), respectively.

SEC. 204. EFFECTIVE DATE.

    (a) In General.--The amendments made by this subtitle shall take 
effect on January 1, 1996.
    (b) Collectively Bargained Plans.--In the case of a plan maintained 
pursuant to 1 or more collective bargaining agreements between employee 
representatives and 1 or more employers ratified before March 15, 1994, 
the amendments made by this subtitle shall not apply to health coverage 
pursuant to such plan before the earlier of--
            (1) the later of--
                    (A) January 1, 1997, or
                    (B) the date on which the last of such collective 
                bargaining agreements terminates (determined without 
                regard to any extension thereof after March 14, 1994), 
                or
            (2) January 1, 1999.

Subtitle B--Credits for Contributions to Medical Savings Accounts, for 
    Purchase of High Deductible Umbrella Insurance, and for Routine 
                            Preventive Care

SEC. 211. CREDIT FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
credits) is amended by inserting after section 22 the following new 
section:

``SEC. 23. MEDICAL SAVINGS ACCOUNT CONTRIBUTIONS.

    ``(a) Exclusion.--In the case of an eligible individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 31 percent of the medical 
savings account contributions of the individual for the taxable year.
    ``(b) Limitations.--
            ``(1) In general.--The amount of medical savings account 
        contributions by an eligible individual which may be taken into 
        account under subsection (a) for any taxable year shall not 
        exceed the excess of--
                    ``(A) the lesser of--
                            ``(i) the account limitation, or
                            ``(ii) the excess health care tax benefit 
                        limitation for the taxable year, over
                    ``(B) the amount (if any) allowable as a credit 
                under section 35 to the taxpayer for the taxable year.
            ``(2) Account limitation.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the account limitation is $2,000.
                    ``(B) Higher account limitation if taxpayer has 
                dependents.--The $2,000 amount in subparagraph (A) 
                shall be increased by the lesser of--
                            ``(i) $500 for each other individual who is 
                        covered under the high deductible umbrella 
                        insurance plan (as defined in section 101 of 
                        the Health Savings and Security Act of 1994) by 
                        reason of such individual's relationship to the 
                        taxpayer, or
                            ``(ii) $1,500.
                In the case of a married individual (as defined in 
                section 7703) who does not file a joint return with 
                such individual's spouse, the $1,500 amount in clause 
                (ii) shall be divided equally between such individual 
                and spouse unless they agree on a different division of 
                such amount.
                    ``(C) Proration of limitation if part-year 
                eligibility.--In the case of an individual who is an 
                eligible individual only for a portion (but not all) of 
                the calendar year ending with or within the taxable 
                year, the account limitation under this paragraph for 
                such taxable year shall be an amount which bears the 
                same ratio to such limitation (determined without 
                regard to this paragraph) as such portion bears to the 
                entire calendar year.
            ``(3) Excess health care tax benefit limitation.--For 
        purposes of paragraph (1), the excess health care tax benefit 
        limitation for any taxable year is the excess (if any) of--
                    ``(A) the health care tax benefit limitation under 
                section 280I(d) for such taxable year, over
                    ``(B) the amount excluded from the taxpayer's gross 
                income by reason of subparagraphs (A) and (B) of 
                section 106(b)(1) for such taxable year.
    ``(c) Definitions.--For purposes of this section:
            ``(1) Medical savings account.--The term `medical savings 
        account' means a trust created or organized in the United 
        States exclusively for the purpose of paying the medical 
        expenses of the account beneficiary, but only if the written 
        governing instrument creating the trust meets the following 
        requirements:
                    ``(A) No contribution will be accepted unless it is 
                in cash, and contributions will not be accepted during 
                any calendar year in excess of the limitation under 
                subsection (b).
                    ``(B) The trustee is a bank (as defined in section 
                408(n)) or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) No part of the trust assets will be invested 
                in life insurance contracts.
                    ``(D) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
            ``(2) Eligible individual.--The term `eligible individual' 
        means any individual who is covered under a high deductible 
        umbrella insurance plan (as defined in section 101 of Health 
        Savings and Security Act of 1994) other than--
                    ``(A) an individual who is covered by--
                            ``(i) part A or part B of the medicare 
                        program under title XVIII of the Social 
                        Security Act,
                            ``(ii) the medicaid program under title XIX 
                        of the Social Security Act,
                            ``(iii) the health care program for active 
                        military personnel under title 10, United 
                        States Code,
                            ``(iv) the veterans health care program 
                        under chapter 17 of title 38, United States 
                        Code,
                            ``(v) the Civilian Health and Medical 
                        Program of the Uniformed Services (CHAMPUS), as 
                        defined in section 1073(4) of title 10, United 
                        States Code, or
                            ``(vi) the Indian health service program 
                        under the Indian Health Care Improvement Act 
                        (25 U.S.C. 1601 et seq.),
                    ``(B) an individual with respect to whom a 
                deduction under section 151 is allowable to another 
                taxpayer for a taxable year beginning in the calendar 
                year in which the individual's taxable year begins, and
                    ``(C) an individual if the amendments made by 
                subtitle A of title II of the Health Savings and 
                Security Act of 1994 do not apply to such individual's 
                health coverage by reason of section 204(b) of such 
                Act.
            ``(3) Medical expenses.--
                    ``(A) In general.--The term `medical expenses' 
                means, with respect to the account beneficiary, the 
                amount paid by such beneficiary for medical care (as 
                defined in section 213(d)) of such beneficiary and the 
                spouse and dependents (as defined in section 152) of 
                such beneficiary.
                    ``(B) Limitation on amounts paid for health 
                insurance.--Such term shall include amounts paid for 
                insurance only if--
                            ``(i) the account beneficiary is not 
                        eligible to participate in any subsidized 
                        health plan maintained by any employer of such 
                        beneficiary or of the spouse of such 
                        beneficiary, and
                            ``(ii) the insurance is a high deductible 
                        umbrella insurance plan (as defined in section 
                        101 of the Health Savings and Security Act of 
                        1994.
            ``(4) Medical savings account contributions.--The term 
        `medical savings account contributions' means any amount paid 
        in cash for the taxable year by or on behalf of an individual 
        to a medical savings account for such individual's benefit.
            ``(5) Account beneficiary.--The term `account beneficiary' 
        means the individual for whose benefit the medical savings 
        account is established.
    ``(d) Other Definitions and Special Rules.--
            ``(1) Time when contributions deemed made.--A contribution 
        shall be deemed to be made on the last day of the preceding 
        taxable year if the contribution is made on account of such 
        taxable year and is made not later than the time prescribed by 
        law for filing the return for such taxable year (not including 
        extensions thereof).
            ``(2) Married individuals.--The maximum credit under 
        subsection (b) shall be computed separately for each 
        individual.
            ``(3) Employer payments.--For purposes of this title, any 
        amount paid by an employer to a medical savings account shall 
        be treated as a payment of compensation to the employee (other 
        than a self-employed individual who is an employee within the 
        meaning of section 401(c)(1)) includible in his gross income 
        for the taxable year for which the amount was contributed, 
        whether or not a credit for such payment is allowable under 
        this section to the employee.
    ``(e) Tax Treatment of Distributions.--
            ``(1) In general.--Any amount paid or distributed out of a 
        medical savings account shall be included in the gross income 
        of the account beneficiary unless such amount is used 
        exclusively to pay--
                    ``(A) the medical expenses of such beneficiary or 
                of the spouse and dependents (as defined in section 
                152) of such beneficiary, or
                    ``(B) the expenses for long-term care (including 
                long-term care insurance) for any of such individuals 
                who have attained age 65 as of the date such expenses 
                are paid.
            ``(2) Excess contributions returned before due date of 
        return.--Paragraph (1) shall not apply to the distribution of 
        any contribution paid during a taxable year to a medical 
        savings account to the extent that such contribution exceeds 
        the amount excludable under subsection (a) if--
                    ``(A) such distribution is received by the 
                individual on or before the last day prescribed by law 
                (including extensions of time) for filing such 
                individual's return for such taxable year, and
                    ``(B) such distribution is accompanied by the 
                amount of net income attributable to such excess 
                contribution.
        Any net income described in subparagraph (B) shall be included 
        in the gross income of the individual for the taxable year in 
        which it is received.
            ``(3) Rollovers to individual retirement plans.--Paragraph 
        (1) shall not apply to any payment or distribution to the 
        account beneficiary if--
                    ``(A) the payment or distribution is made on or 
                after the date such beneficiary attains age 65, and
                    ``(B) the entire amount received (including money 
                and other property) is paid into an individual 
                retirement plan for the benefit of such beneficiary not 
                later than the 60th day after the day on which the 
                individual receives the payment or distribution.
        The dollar limitation under section 408(a)(1) shall not apply 
        to amounts paid under the preceding sentence.
            ``(4) Penalty for distributions not used for medical 
        expenses, etc.--
                    ``(A) In general.--The tax imposed by this chapter 
                for any taxable year in which there is a payment or 
                distribution from a medical savings account which is 
                includible in gross income under paragraph (1) shall be 
                increased by 10 percent of the amount which is so 
                includible.
                    ``(B) Exception for distributions after age 65.--
                Subparagraph (A) shall not apply to any distribution or 
                payment after the date on which the account beneficiary 
                attains age 65.
                    ``(C) Disability or death cases.--Subparagraph (A) 
                shall not apply if the payment or distribution is made 
                after the account beneficiary becomes disabled within 
                the meaning of section 72(m)(7) or dies.
    ``(f) Tax Treatment of Accounts.--
            ``(1) In general.--A medical savings account is exempt from 
        taxation under this subtitle, unless such account has ceased to 
        be a medical savings account by reason of paragraph (2) or (3). 
        Notwithstanding the preceding sentence, any such account is 
        subject to the taxes imposed by section 511 (relating to 
        imposition of tax on unrelated business income of charitable, 
        etc., organizations).
            ``(2) Account terminates if individual engages in 
        prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the account beneficiary engages in any transaction 
                prohibited by section 4975 with respect to the account, 
                the account ceases to be a medical savings account as 
                of the first day of that taxable year.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical savings account by reason of subparagraph (A) 
                on the first day of any taxable year, paragraph (1) of 
                subsection (e) shall be applied as if there were a 
                distribution on such first day in an amount equal to 
                the fair market value (on such first day) of all assets 
                in the account (on such first day) and no portion of 
                such distribution were used to pay medical expenses.
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the account beneficiary uses the account or 
        any portion thereof as security for a loan, the portion so used 
        is treated as distributed and not used to pay medical expenses.
    ``(g) Inflation Adjustment.--In the case of any calendar year after 
1996, each dollar amount in subsection (b) shall be increased by an 
amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the inflation adjustment (determined under section 
        280I(d)(3)) for such calendar year.
If any increase under the preceding sentence is not a multiple of $50, 
such increase shall be rounded to the nearest multiple of $50.
    ``(h) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if--
            ``(1) the assets of such account are held by a bank (as 
        defined in section 408(n)) or another person who demonstrates 
        to the satisfaction of the Secretary that the manner in which 
        he will administer the account will be consistent with the 
        requirements of this section, and
            ``(2) the custodial account would, except for the fact that 
        it is not a trust, constitute a medical savings account 
        described in subsection (c).
For purposes of this title, in the case of a custodial account treated 
as a trust by reason of the preceding sentence, the custodian of such 
account shall be treated as the trustee thereof.
    ``(i) Reports.--The trustee of a medical savings account shall make 
such reports regarding such account to the Secretary and to the account 
beneficiary with respect to contributions, distributions, and such 
other matters as the Secretary may require under regulations. The 
reports required by this subsection shall be filed at such time and in 
such manner and furnished to such individuals at such time and in such 
manner as may be required by those regulations.
    ``(j) Other Definitions.--For purposes of this section--
            ``(1) Employer.--The term `employer' includes persons 
        treated as an employer under section 401(c)(4).
            ``(2) Employee.--The term `employee' includes an individual 
        who is an employee within the meaning of section 401(c)(1).''
    (b) Employer Payments Excluded From Employment Tax Base.--
            (1) Social security taxes.--
                    (A) Subsection (a) of section 3121 of such Code is 
                amended by striking ``or'' at the end of paragraph 
                (20), by striking the period at the end of paragraph 
                (21) and inserting ``; or'', and by inserting after 
                paragraph (21) the following new paragraph:
            ``(22) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to take such payment 
        into account in determining the credit under section 23.''
                    (B) Subsection (a) of section 209 of the Social 
                Security Act is amended by striking ``or'' at the end 
                of paragraph (18), by striking the period at the end of 
                paragraph (19) and inserting ``; or'', and by inserting 
                after paragraph (19) the following new paragraph:
            ``(20) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to take such payment 
        into account in determining the credit under section 23 of the 
        Internal Revenue Code of 1986.''
            (2) Railroad retirement tax.--Subsection (e) of section 
        3231 of such Code is amended by adding at the end the following 
        new paragraph:
            ``(10) Medical savings account contributions.--The term 
        `compensation' shall not include any payment made to or for the 
        benefit of an employee if at the time of such payment it is 
        reasonable to believe that the employee will be able to take 
        such payment into account in determining the credit under 
        section 23.''
            (3) Unemployment tax.--Subsection (b) of section 3306 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (15), by striking the period at the end of paragraph (16) and 
        inserting ``; or'', and by inserting after paragraph (16) the 
        following new paragraph:
            ``(17) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to take such payment 
        into account in determining the credit under section 23.''
            (4) Withholding tax.--Subsection (a) of section 3401 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (19), by striking the period at the end of paragraph (20) and 
        inserting ``; or'', and by inserting after paragraph (20) the 
        following new paragraph:
            ``(21) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to take such payment 
        into account in determining the credit under section 23.''
    (c) Tax on Excess Contributions.--Section 4973 of such Code 
(relating to tax on excess contributions to individual retirement 
accounts, certain section 403(b) contracts, and certain individual 
retirement annuities) is amended--
            (1) by inserting ``medical savings accounts,'' after 
        ``accounts,'' in the heading of such section,
            (2) by redesignating paragraph (2) of subsection (a) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following:
            ``(2) a medical savings account (within the meaning of 
        section 23(c)),'',
            (3) by striking ``or'' at the end of paragraph (1) of 
        subsection (a), and
            (4) by adding at the end thereof the following new 
        subsection:
    ``(d) Excess Contributions to Medical Savings Accounts.--For 
purposes of this section, in the case of a medical savings account 
(within the meaning of section 23(c)), the term `excess contributions' 
means the amount by which the amount contributed for the taxable year 
to the account exceeds the amount which may be taken into account in 
determining the credit under section 23 for such taxable year. For 
purposes of this subsection, any contribution which is distributed out 
of the medical savings account in a distribution to which section 
23(e)(2) applies shall be treated as an amount not contributed.''
    (d) Tax on Prohibited Transactions.--Section 4975 of such Code 
(relating to prohibited transactions) is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for medical savings accounts.--An 
        individual for whose benefit a medical savings account (within 
        the meaning of section 23(c)) is established shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medical savings account 
        by reason of the application of section 23(f)(2)(A) to such 
        account.'', and
            (2) by inserting ``or a medical savings account described 
        in section 23(c)'' in subsection (e)(1) after ``described in 
        section 408(a)''.
    (e) Failure To Provide Reports On Medical Savings Accounts.--
Section 6693 of such Code (relating to failure to provide reports on 
individual retirement account or annuities) is amended--
            (1) by inserting ``or on medical savings accounts'' after 
        ``annuities'' in the heading of such section, and
            (2) by adding at the end of subsection (a) the following: 
        ``The person required by section 23(i) to file a report 
        regarding a medical savings account at the time and in the 
        manner required by such section shall pay a penalty of $50 for 
        each failure unless it is shown that such failure is due to 
        reasonable cause.''
    (f) Clerical Amendments.--
            (1) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 22:

                              ``Sec. 23. Medical savings account 
                                        contributions.''
            (2) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 4973 and 
        inserting the following:

                              ``Sec. 4973. Tax on excess contributions 
                                        to individual retirement 
                                        accounts, medical savings 
                                        accounts, certain 403(b) 
                                        contracts, and certain 
                                        individual retirement 
                                        annuities.''
            (3) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by inserting ``or on medical savings 
        accounts'' after ``annuities'' in the item relating to section 
        6693.

SEC. 212. REFUNDABLE CREDIT FOR PURCHASE OF COVERAGE UNDER TAX-
              QUALIFIED HEALTH CARE PLANS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 35 as section 36 and by inserting 
after section 34 the following new section:

``SEC. 35. PURCHASE OF COVERAGE UNDER TAX-QUALIFIED HEALTH CARE PLANS.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to 31 percent of the amount paid 
by the taxpayer during the taxable year for coverage under a tax-
qualified health care plan (as defined in section 101 of the Health 
Savings and Security Act of 1994) for the taxpayer, the spouse of the 
taxpayer, and any dependent (as defined in section 152) of the 
taxpayer.
    ``(b) Coverage of Certain Individuals Not Included.--There shall 
not be taken into account under subsection (a) amounts paid for 
coverage for any individual if--
            ``(1) such individual is covered by--
                    ``(A) part A or part B of the medicare program 
                under title XVIII of the Social Security Act,
                    ``(B) the medicaid program under title XIX of the 
                Social Security Act,
                    ``(C) the health care program for active military 
                personnel under title 10, United States Code,
                    ``(D) the veterans health care program under 
                chapter 17 of title 38, United States Code,
                    ``(E) the Civilian Health and Medical Program of 
                the Uniformed Services (CHAMPUS), as defined in section 
                1073(4) of title 10, United States Code, or
                    ``(F) the Indian health service program under the 
                Indian Health Care Improvement Act (25 U.S.C. 1601 et 
                seq.), or
            ``(2) the amendments made by subtitle A of title II of the 
        Health Savings and Security Act of 1994 do not apply to such 
        individual's health coverage by reason of section 204(b) of 
        such Act.
    ``(c) Coordination With Health Insurance Credit Certificates.--
            ``(1) In general.--If any health insurance credit 
        certificate is used pursuant to section 212(b) of the Health 
        Savings and Security Act of 1994 by the taxpayer to pay for 
        coverage under a tax-qualified health care plan during any 
        taxable year, then the tax imposed by this chapter for such 
        taxable year shall be increased by the aggregate dollar amount 
        of the certificates so used during such taxable year.
            ``(2) Reconciliation of certificates and credit allowed.--
        Any increase in tax under paragraph (1) shall not be treated as 
        tax imposed by this chapter for purposes of determining the 
        amount of any credit (other than the credit allowed by 
        subsection (a)) allowable under this subpart.''
    (b) Health Insurance Certificates for Low-Income Individuals 
Eligible for Credit.--
            (1) In general.--The Secretary of the Treasury shall 
        establish a program under which individuals provide 
        certificates to any provider of a tax-qualified health care 
        plan (as defined in section 101 of this Act) in full or partial 
        payment of the provider's premium for the individual for the 
        year. If an individual presents the provider with such a 
        certificate, the provider shall accept the certificate toward 
        payment of the provider's premium for the individual for the 
        year.
            (2) Individuals eligible for certificates.--Under the 
        program established pursuant to paragraph (1), certificates 
        shall be available only to individuals--
                    (A) to whom a credit under section 35 of the 
                Internal Revenue Code of 1986 (as added by subsection 
                (a)) is allowable for the taxable year, and
                    (B) whose liability for tax under subtitle A of 
                such Code (determined without regard to such credit) is 
                likely (as determined by the Secretary) to be less than 
                the amount of such credit allowable for such taxable 
                year.
            (3) Amount of certificates.--The dollar amount of the 
        certificates provided under such program to an individual for 
        any taxable year shall not exceed the amount of the credit 
        under such section 35 that the Secretary estimates will be 
        allowable to such individual for such taxable year.
            (4) Payment to providers.--
                    (A) Amount.--Except as otherwise provided in this 
                paragraph, a provider of any tax-qualified health care 
                plan shall be entitled, upon presentation to the 
                Secretary (or his designee) of an individual's 
                certificate and of information used by the provider to 
                determine the individual's applicable premium, to 
                payment equal to the dollar amount of the certificate.
                    (B) Premium less than certificate dollar amount.--
                If the certificate dollar amount is greater than the 
                amount of the individual's applicable premium, the 
                provider of the tax-qualified health care plan to the 
                individual shall be entitled to payment under 
                subparagraph (A) only in the amount of the individual's 
                applicable premium.
                    (C) Offsetting payments.--If a provider of a tax-
                qualified health care plan has received prepayment of 
                an individual's applicable premium for any period for 
                which the individual's certificate is in effect, the 
                amount of the payment to which the provider is 
                otherwise entitled under subparagraph (A) shall be 
                reduced to the extent of such premium paid.
                    (D) Acceptance of certain improper certificates.--
                The Secretary may not deny payment under subparagraph 
                (A) to a provider of a tax-qualified health care plan 
                because a certificate presented for payment was 
                invalid, unless the entity had knowledge of such 
                invalidity at the time of its acceptance of the 
                certificate.
            (5) Health plans provided by states.--In the case of a tax-
        qualified health care plan provided pursuant to a program 
        described in section 1932 of the Social Security Act, the State 
        shall be treated for purposes of this subsection as the 
        provider of such plan.
    (c) Technical Amendments.--
            (1) Subsection (l) of section 162 of such Code is hereby 
        repealed.
            (2) The table of sections for such subpart C is amended by 
        striking the last item and inserting the following new items:

                              ``Sec. 35. Purchase of coverage under 
                                        tax-qualified health care 
                                        plans.
                              ``Sec. 36. Overpayments of tax.''
            (3) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``or 
        from section 35 of such Code''.

SEC. 213. CREDIT FOR COST OF ROUTINE PREVENTIVE CARE.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
credits) is amended by inserting after section 23 the following new 
section:

``SEC. 24. COST OF ROUTINE PREVENTIVE CARE.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to 31 percent of the amount paid 
by the taxpayer during the taxable year for routine preventive care for 
the taxpayer, the spouse of the taxpayer, and any dependent (as defined 
in section 152) of the taxpayer.
    ``(b) Care of Certain Individuals Not Included.--There shall not be 
taken into account under subsection (a) amounts paid for routine 
preventive care for--
            ``(1) any individual who is the beneficiary of a medical 
        savings account (as defined in section 23(c)) or the spouse or 
        a dependent of such a beneficiary,
            ``(2) any individual who is covered under a managed health 
        care plan (as defined in section 101 of Health Savings and 
        Security Act of 1994),
            ``(3) any individual who is covered by--
                    ``(A) part A or part B of the medicare program 
                under title XVIII of the Social Security Act,
                    ``(B) the medicaid program under title XIX of the 
                Social Security Act,
                    ``(C) the health care program for active military 
                personnel under title 10, United States Code,
                    ``(D) the veterans health care program under 
                chapter 17 of title 38, United States Code,
                    ``(E) the Civilian Health and Medical Program of 
                the Uniformed Services (CHAMPUS), as defined in section 
                1073(4) of title 10, United States Code,
                    ``(F) the Indian health service program under the 
                Indian Health Care Improvement Act (25 U.S.C. 1601 et 
                seq.), and
            ``(4) any individual if the amendments made by subtitle A 
        of title II of the Health Savings and Security Act of 1994 do 
        not apply to such individual's health coverage by reason of 
        section 204(b) of such Act.
    ``(c) Routine Preventive Care.--For purposes of this section, the 
term `routine preventive care' means any service provided in accordance 
with the recommended schedule of clinical preventive services of the 
United States Preventive Services Task Force.''
    (b) Clerical Amendment.--The table of sections for such subpart A 
is amended by inserting after the item relating to section 23 the 
following new item:

                              ``Sec. 24. Cost of routine preventive 
                                        care.''

SEC. 214. EFFECTIVE DATE.

    The amendments made by this subtitle shall apply to taxable years 
beginning after December 31, 1995.

            Subtitle C--Repeal of Medical Expense Deduction

SEC. 221. REPEAL OF MEDICAL EXPENSE DEDUCTION.

    Section 213 of the Internal Revenue Code of 1986 (relating to 
medical, dental, etc., expenses) is amended by adding at the end 
thereof the following new subsection:
    ``(f) Termination.--No deduction shall be allowed under this 
section for any taxable year beginning after December 31, 1995.''

     Subtitle D--Veterans Medical Benefits and Services Unaffected

SEC. 231. VETERANS MEDICAL BENEFITS AND SERVICES UNAFFECTED.

    Nothing in this title or the amendments made by this title shall 
affect the eligibility of any veteran (or spouse or dependent thereof) 
for medical benefits and services provided under title 38, United 
States Code.

          TITLE III--SAVINGS IN MEDICARE AND MEDICAID PROGRAMS

                      Subtitle A--Medicare Program

SEC. 301. INCREASE IN MEDICARE PART B PREMIUM FOR INDIVIDUALS WITH HIGH 
              INCOME.

    (a) In General.--Subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 is amended by adding at the end thereof the following new 
part:

   ``PART VIII--MEDICARE PART B PREMIUMS FOR HIGH-INCOME INDIVIDUALS

                              ``Sec. 59B. Medicare part B premium tax.

``SEC. 59B. MEDICARE PART B PREMIUM TAX.

    ``(a) Imposition of Tax.--In the case of an individual to whom this 
section applies for the taxable year, there is hereby imposed (in 
addition to any other tax imposed by this subtitle) a tax for such 
taxable year equal to the aggregate of the Medicare part B premium 
taxes for each of the months during such year that such individual is 
covered by Medicare part B.
    ``(b) Individuals to Whom Section Applies.--This section shall 
apply to any individual for any taxable year if--
            ``(1) such individual is covered under Medicare part B for 
        any month during such year, and
            ``(2) the modified adjusted gross income of the taxpayer 
        for such taxable year exceeds the threshold amount.
    ``(c) Medicare Part B Premium Tax for Month.--
            ``(1) In general.--The Medicare part B premium tax for any 
        month is \2/3\ the amount equal to the excess of--
                    ``(A) 150 percent of the monthly actuarial rate for 
                enrollees age 65 and over determined for that calendar 
                year under section 1839(b) of the Social Security Act, 
                over
                    ``(B) the total monthly premium under section 1839 
                of the Social Security Act (determined without regard 
                to subsections (b) and (f) of section 1839 of such 
                Act).
            ``(2) Phasein of tax.--If the modified adjusted gross 
        income of the taxpayer for any taxable years exceeds the 
        threshold amount by less than $50,000, the Medicare part B 
        premium tax for any month during such taxable year shall be an 
        amount which bears the same ratio to the amount determined 
        under paragraph (1) (without regard to this paragraph) as such 
        excess bears to $50,000. The preceding sentence shall not apply 
        to any individual whose threshold amount is zero.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) except as otherwise provided in this 
                paragraph, $100,000,
                    ``(B) $125,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married at the close of the 
                        taxable year but does not file a joint return 
                        for such year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during the taxable year.
            ``(2) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Medicare part b coverage.--An individual shall be 
        treated as covered under Medicare part B for any month if a 
        premium is paid under part B of title XVIII of the Social 
        Security Act for the coverage of the individual under such part 
        for the month.
            ``(4) Married individual.--The determination of whether an 
        individual is married shall be made in accordance with section 
        7703.''
    (b) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 of such Code is amended by adding at the end thereof the 
following new item:

                              ``Part VIII. Medicare Part B Premiums For 
                                        High-Income Individuals.''
    (c) Effective Date.--The amendments made by this section shall 
apply to months after December 1993 in taxable years ending after 
December 31, 1995.

SEC. 302. IMPOSITION OF 20 PERCENT COINSURANCE ON CLINICAL LABORATORY 
              SERVICES UNDER MEDICARE.

    (a) In General.--Paragraphs (1)(D) and (2)(D) of section 1833(a) of 
the Social Security Act (42 U.S.C. 1395l(a)) are each amended--
            (1) by striking ``(or 100 percent'' and all that follows 
        through ``the first opinion))''; and
            (2) by striking ``100 percent of such negotiated rate'' and 
        inserting ``80 percent of such negotiated rate''.
    (b) Repeal of Mandatory Assignment.--Section 1833(h)(5) of such Act 
(42 U.S.C. 1395l(h)(5)) is amended by striking subparagraphs (C) and 
(D).
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to tests furnished on or after January 1, 1996.

SEC. 303. ANNUAL INDEXING OF PART B DEDUCTIBLE.

    Section 1833(b) of the Social Security Act (42 U.S.C. 1395l(b)) is 
amended by striking ``1991 and subsequent years'' and inserting the 
following: ``calendar years 1991 through 1995, and, for calendar year 
1996 and each subsequent year, by a deductible equal to the deductible 
under this subsection for the previous year increased by the percentage 
increase in the consumer price index for all urban consumers (U.S. city 
average) for the 12-month period ending with June of the previous 
year''.

                      Subtitle B--Medicaid Program

                  PART 1--ACHIEVING SAVINGS IN PROGRAM

SEC. 311. CAP ON FEDERAL PAYMENTS MADE FOR ACUTE MEDICAL SERVICES 
              FURNISHED UNDER THE MEDICAID PROGRAM.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended by redesignating section 1931 as section 1932 
and by inserting after section 1930 the following new section:

        ``cap on federal payment made for acute medical services

    ``Sec. 1931. (a) Annual Federal Cap.--Federal financial 
participation is not available under section 1903(a)(1) for 
expenditures for acute medical services (as defined in subsection (c)) 
for a class of medicaid categorical individuals (as defined in 
subsection (c)(2)) for a State for a quarter in a fiscal year, to the 
extent such expenditures exceed \1/4\ of the product of--
            ``(1) the per-capita limit determined under subsection (b) 
        for the State for such fiscal year for such class, multiplied 
        by
            ``(2) the average number of medicaid categorical 
        individuals in such class entitled to receive medical 
        assistance under the State plan in any month in the quarter.
    ``(b) Per-capita Limit.--
            ``(1) In general.--For purposes of subsection (a), the per-
        capita limit for a class of medicaid categorical individuals 
        for a State for--
                    ``(A) fiscal year 1996, is an amount equal to the 
                base per-capita funding amount (as determined under 
                paragraph (2)) for such class for such State, increased 
                by 20 percent; and
                    ``(B) fiscal year 1997 and each succeeding fiscal 
                year, is an amount equal to the amount determined under 
                this paragraph for the previous fiscal year for the 
                class updated by the applicable percentage for such 
                fiscal year (described in paragraph (3)).
            ``(2) Base per-capita funding amount.--
                    ``(A) In general.--The base per-capita funding 
                amount for a State for a class is an amount equal to 
                the quotient of--
                            ``(i) the gross amount of payments under 
                        the State plan under this title with respect to 
                        medical assistance furnished for acute medical 
                        services for individuals within such class for 
                        calendar quarters in fiscal year 1994, but does 
                        not include such expenditures for which no 
                        Federal financial participation is provided 
                        under such plan; divided by
                            ``(ii) the average total number of medicaid 
                        categorical individuals in such class in the 
                        State in any month during fiscal year 1994.
                    ``(B) Disproportionate share payments not 
                included.--In applying subparagraph (A), payments made 
                under section 1923 shall not be counted in the gross 
                amount of payments.
                    ``(C) Treatment of disallowances.--The amount 
                determined under this paragraph shall take into account 
                amounts (or an estimate of amounts) disallowed.
            ``(3) Applicable percentage.--In paragraph (1), the 
        applicable percentage for a fiscal year is equal to--
                    ``(A) for fiscal year 1997, the greater of--
                            ``(i) the estimated percentage change in 
                        the Consumer Price Index through the midpoint 
                        of fiscal year 1996, plus 3 percentage points, 
                        or
                            ``(ii) the medicare economic index referred 
                        to in the fourth sentence of section 1842(b)(3) 
                        applicable to services provided as of January 1 
                        of the fiscal year, minus 1 percentage point;
                    ``(B) for fiscal year 1998, the greater of--
                            ``(i) the estimated percentage change in 
                        the Consumer Price Index through the midpoint 
                        of fiscal year 1997, plus 2 percentage points, 
                        or
                            ``(ii) the medicare economic index referred 
                        to in the fourth sentence of section 1842(b)(3) 
                        applicable to services provided as of January 1 
                        of the fiscal year, minus 1 percentage point;
                    ``(C) for fiscal year 1999, the greater of--
                            ``(i) the estimated percentage change in 
                        the Consumer Price Index through the midpoint 
                        of fiscal year 1998, plus 1 percentage point, 
                        or
                            ``(ii) the medicare economic index referred 
                        to in the fourth sentence of section 1842(b)(3) 
                        applicable to services provided as of January 1 
                        of the fiscal year, minus 2 percentage points; 
                        and
                    ``(D) for fiscal year 2000 and each succeeding 
                fiscal year, the greater of--
                            ``(i) the estimated percentage change in 
                        the Consumer Price Index through the midpoint 
                        of the previous fiscal year, or
                            ``(ii) the medicare economic index referred 
                        to in the fourth sentence of section 1842(b)(3) 
                        applicable to services provided as of January 1 
                        of the fiscal year, minus 2 percentage points.
            ``(4) Estimations of and adjustments to state total funding 
        amount.--The Secretary shall--
                    ``(A) establish a process for estimating the limit 
                on expenditures for acute medical services applicable 
                under subsection (a) at the beginning of each fiscal 
                year and adjusting such amount during such fiscal year; 
                and
                    ``(B) notifying each State of the estimations and 
                adjustments referred to in subparagraph (A).
    ``(c) Definitions.--For purposes of this section and section 1931:
            ``(1) Acute medical services.--The term `acute medical 
        services' means items and services described in section 1905(a) 
        other than the following:
                    ``(A) Nursing facility services (as defined in 
                section 1905(f)).
                    ``(B) Intermediate care facility for the mentally 
                retarded services (as defined in section 1905(d)).
                    ``(C) Personal care services (as described in 
                section 1905(a)(24)).
                    ``(D) Private duty nursing services (as referred to 
                in section 1905(a)(8)).
                    ``(E) Home or community-based services furnished 
                under a waiver granted under subsection (c), (d), or 
                (e) of section 1915.
                    ``(F) Home and community care furnished to 
                functionally disabled elderly individuals under section 
                1929.
                    ``(G) Community supported living arrangements 
                services under section 1930.
                    ``(H) Case-management services (as described in 
                section 1915(g)(2)).
                    ``(I) Home health care services (as referred to in 
                section 1905(a)(7)), clinic services, and 
                rehabilitation services that are furnished to an 
                individual who has a condition or disability that 
                qualifies the individual to receive any of the services 
                described in a previous subparagraph.
                    ``(J) Hospice care.
            ``(2) Medicaid categorical individual.--The term `medicaid 
        categorical individual' means an individual described in 
        section 1902(a)(10)(A).
            ``(3) Class of medicaid categorical individuals.--The term 
        `class' means individuals within each of the following classes:
                    ``(A) SSI-related individuals.--Medicaid 
                categorical individuals--
                            ``(i) with respect to whom supplemental 
                        security income benefits are being paid under 
                        title XVI of the Social Security Act,
                            ``(ii) who receiving a supplementary 
                        payment under section 1616 of such Act or under 
                        section 212 of Public Law 93-66, or
                            ``(iii) who receiving monthly benefits 
                        under section 1619(a) of such Act (whether or 
                        not pursuant to section 1616(c)(3) of such 
                        Act).
                    ``(B) Other individuals.--Medicaid categorical 
                individuals not described in subparagraph (A).''.
    (b) Requiring State Maintenance of Effort.--Section 1902(a) of such 
Act (42 U.S.C. 1396a(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (61);
            (2) by striking the period at the end of paragraph (62) and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(63) provide that the State will continue to make 
        eligible for medical assistance under section 1902(a)(10)(A) 
        any class or category of individuals eligible for medical 
        assistance under such section during fiscal year 1994.''.
    (c) Discontinuation of Reimbursement Standards for Inpatient 
Hospital Services.--Section 1902(a)(13)(A) of such Act (42 U.S.C. 
1396a(a)(13)(A)) is amended--
            (1) by striking ``hospital services, nursing facility 
        services, and'' and inserting ``nursing facilities services 
        and'';
            (2) by striking ``, in the case of hospitals,'' and all 
        that follows through ``(v)(1)(G))) which'';
            (3) by striking ``and to assure'' and all that follows 
        through ``adequate quality''; and
            (4) by striking ``each hospital, nursing facility, and'' 
        and inserting ``each nursing facility and''.
    (d) Effective Date.--The amendments made by this section shall 
become effective on October 1, 1995.

   PART 2--OPTIONAL ENROLLMENT OF LOW-INCOME INDIVIDUALS UNDER HIGH 
   DEDUCTIBLE UMBRELLA INSURANCE PLANS AND MANAGED HEALTH CARE PLANS

SEC. 321. OPTIONAL ENROLLMENT UNDER PLANS.

    (a) State Option.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (61);
            (2) by striking the period at the end of paragraph (62) and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(63) at the option of the State, provide that an 
        individual eligible for medical assistance under the State plan 
        has the option to receive medical assistance consisting of 
        acute medical services (as defined in section 1931(c)(1)) 
        through enrollment with a high deductible umbrella insurance 
        plan or a managed health care plan (as defined in section 
        1932(f)(2)) under the program described in section 1932, in 
        accordance with the requirements of section 1932.''.
    (b) Requirements Described.--Title XIX of such Act (42 U.S.C. 1396 
et seq.), as amended by section 311(a)(1), is further amended by 
redesignating section 1932 as section 1933 and by inserting after 
section 1931 the following new section:

   ``optional state program to enroll individuals in high deductible 
         umbrella insurance plans or managed health care plans

    ``Sec. 1932. (a) In General.--For purposes of section 1902(a)(63), 
a program under this section is a program under which the State makes 
payments to high deductible umbrella insurance plans and managed health 
care plans for enrolling eligible individuals (as described in 
subsection (c)) for coverage of acute medical services under such 
plans, including all necessary payments of premiums, copayments, and 
deductibles applicable under such a plan on behalf of such an 
individual.
    ``(b) Treatment of Payments as Medical Assistance.--
            ``(1) In general.--Subject to paragraph (3), for purposes 
        of determining the amount of Federal financial participation 
        for a State under section 1903 in a quarter, any payments made 
        by a State under the program under this section shall be 
        treated as expenditures for medical assistance under the State 
        plan for such quarter, without regard to whether or not such 
        payments are on behalf of individuals who (but for this 
        section) would not otherwise be eligible for medical assistance 
        under the State plan under this title.
            ``(2) Federal payment restricted to acute medical 
        services.--No amounts expended under a qualified health plan on 
        behalf of an individual enrolled under such a plan pursuant to 
        this section that are attributable to medical assistance for 
        other than acute medical services shall be included in the 
        total amount expended as medical assistance under the State 
        plan under paragraph (1). No amounts expended for abortions or 
        services directly related to the performance of abortions, 
        except when necessary to prevent the death of the mother, shall 
        be included in the total amount expended as medical assistance 
        under the State plan under paragraph (1).
            ``(3) Limitation.--In no case shall this subsection result 
        in (A) the total Federal payments to the State for the quarter 
        under this title (including payments attributable to this 
        section and section 1923), exceeding (B) the total Federal 
        payments that the Secretary estimates would have been paid 
        under this title to the State for the quarter if the State did 
        not have a program under this section.
    ``(c) Eligibility of Individuals to Participate in Program.--
            ``(1) Automatic eligibility of medicaid categorically 
        eligible individuals.--Subject to subsection (d), any 
        individual to whom the State makes medical assistance available 
        under the State plan under this title pursuant to clause (i) of 
        section 1902(a)(10)(A) shall be eligible to participate in the 
        program under this section.
            ``(2) Mandatory eligibility of individuals with income 
        under the poverty level.--
                    ``(A) In general.--Subject to subsection (e) and 
                subparagraph (B), an individual lawfully residing in 
                the State shall be eligible to participate in the 
                program if the income of the individual's family is 
                equal to or less than 100 percent of the official 
                poverty line (as defined by the Office of Management 
                and Budget, and revised annually in accordance with 
                section 673(2) of the Omnibus Budget Reconciliation Act 
                of 1991) applicable to a family of the size involved.
                    ``(B) Exception.--If the application of 
                subparagraph (A) would result in--
                            ``(i) the total State expenditures for a 
                        quarter under this title (including 
                        expenditures attributable to this section and 
                        section 1923), exceeding
                            ``(ii) the total State expenditures that 
                        the Secretary estimates would have been made 
                        under this title for the quarter if the State 
                        did not have a program under this section,
                then there shall be substituted for 100 percent in 
                subparagraph (A) such percent as would result in the 
                amount described in clause (i) equaling the amount 
                described in clause (ii).
            ``(3) Optional eligibility of individuals with income up to 
        160 percent of poverty level.--
                    ``(A) In general.--Subject to subsection (e), a 
                State operating a program under this section may make 
                an individual lawfully residing in the State eligible 
                to participate in the program if the income of the 
                individual's family is greater than 100 percent (but 
                less than such percentage, not to exceed 160 percent, 
                as the State may specify) of such official poverty 
                line.
                    ``(B) Contribution may be required.--In the case of 
                an individual who is participating in the program 
                pursuant to this paragraph, the program may require 
                such an individual to contribute all (or a portion) of 
                the premiums and cost-sharing of such a high deductible 
                umbrella insurance plan or managed care health plan if 
                the amount of such contribution is determined in 
                accordance with a sliding scale based on the 
                individual's family income.
            ``(4) Optional enrollment of other individuals.--
                    ``(A) In general.--Subject to subsection (e), a 
                State operating a program under this section may make 
                any individual (or class of individuals) who is not 
                described in paragraph (1), (2), or (3) and who is not 
                otherwise offered coverage under a high deductible 
                umbrella insurance plan or managed care health plan 
                eligible to participate in the program.
                    ``(B) Special rules.--
                            ``(i) Contribution may be required.--In the 
                        case of an individual who is participating in 
                        the program pursuant to this paragraph, the 
                        program may require such an individual to 
                        contribute all (or a portion) of the premiums 
                        and cost-sharing of such a high deductible 
                        umbrella insurance plan or managed health care 
                        plan.
                            ``(ii) No federal matching payments.--For 
                        purposes of payment to States under section 
                        1903(a), no amounts expended by the State under 
                        the program during a fiscal year on behalf of 
                        an individual enrolled pursuant to subparagraph 
                        (A) may be included in the total amount 
                        expended during the fiscal year as medical 
                        assistance under the State plan.
            ``(5) Offering of coverage through other programs.--Nothing 
        in this section shall be construed as preventing a State 
        which--
                    ``(A) does not operate a State program under this 
                section from assuring that individuals in the State who 
                are not offered coverage under a high deductible 
                umbrella insurance plan or managed health care plan are 
                offered coverage under a health plan, or
                    ``(B) does operate such a program from assuring 
                that individuals in the State who are not described in 
                paragraph (1), (2), or (3) and who are not offered 
                coverage under a high deductible umbrella insurance 
                plan or managed health care plan are offered coverage 
                under a health plan other than through such program.''.
    ``(d) Exclusion and Use of Resource Standard.--
            ``(1) Exclusion of elderly medicare-eligible individuals.--
        No individual shall be eligible to participate in the program 
        under this section if the individual is entitled to benefits 
        under title XVIII of the Social Security Act pursuant to 
        section 226 of such Act.
            ``(2) Use of resource standard.--A State may require an 
        individual to meet a resource standard as a condition of 
        eligibility to participate in the program only if the Secretary 
        approves the State's use of such a standard.
    ``(e) Construction.--No provision of any Federal law shall prevent 
a State from enrolling any employee or other individual in accordance 
with this section. The previous sentence shall not be construed as 
permitting a State to require the employer of an individual 
participating in the program to contribute toward the individual's 
premium required for such participation.
    ``(f) Definitions.--For purposes of this section:
            ``(1) Acute medical services.--The term `acute medical 
        services' means the care and services described in section 
        1932(c)(1).
            ``(2) High deductible umbrella insurance plan; managed 
        health care plan.--The terms `high deductible umbrella 
        insurance plan' and `managed health care plan' have the meaning 
        given such terms in section 101(a) of the Health Savings and 
        Security Act of 1994.''.
    (c) Reduction in Disproportionate Share Hospital Payments for 
Participating States.--Section 1923 of the Social Security Act (42 
U.S.C. 1396r-4), as amended by section 13621(b)(1) of the Omnibus 
Budget Reconciliation Act of 1993, is amended by adding at the end the 
following new subsection:
    ``(h) Reduction in Payment Adjustments for States Enrolling 
Individuals in Certain Private Health Plans.--In the case of a State 
operating a program under section 1932 to make payments to enroll 
individuals in high deductible umbrella insurance plans or managed 
health care plans in a fiscal year, the Secretary shall reduce the 
total payment adjustments made under this section for hospitals in the 
State for quarters in the year by such amount as the Secretary 
determines to be necessary to ensure that the total amount paid to the 
State under section 1903(a)(1) for the year does not exceed the amount 
that would have been paid to the State under such section for the year 
if the State did not operate such a program.''.

PART 3--INCREASING STATE FLEXIBILITY TO USE MANAGED CARE UNDER MEDICAID

SEC. 331. MODIFICATION OF FEDERAL REQUIREMENTS TO ALLOW STATES MORE 
              FLEXIBILITY IN CONTRACTING FOR COORDINATED CARE SERVICES 
              UNDER MEDICAID.

    (a) In General.--
            (1) Payment provisions.--Section 1903(m) of the Social 
        Security Act (42 U.S.C. 1396b(m)) is amended to read as 
        follows:
    ``(m)(1) No payment shall be made under this title to a State with 
respect to expenditures incurred by such State for payment to an entity 
which is at risk (as defined in section 1933(a)(4)) for services 
provided by such entity to individuals eligible for medical assistance 
under the State plan under this title, unless the entity is a risk 
contracting entity (as defined in section 1933(a)(3)) and the State and 
such entity comply with the applicable provisions of section 1933.
    ``(2) No payment shall be made under this title to a State with 
respect to expenditures incurred by such State for payment for services 
provided to an individual eligible for medical assistance under the 
State plan under this title if such payment by the State is contingent 
upon the individual receiving such services from a specified health 
care provider or subject to the approval of a specified health care 
provider, unless the entity receiving payment is a primary care case 
management entity (as defined in section 1933(a)(2)) and the State and 
such entity comply with the applicable provisions of section 1933.''.
            (2) Requirements for coordinated care services.--Title XIX 
        of the Social Security Act (42 U.S.C. 1396 et seq.), as amended 
        by sections 311(a)(1) and 321(b), is further amended by 
        redesignating section 1933 as section 1934 and by inserting 
        after section 1932 the following new section:

              ``requirements for coordinated care services

    ``Sec. 1933. (a) Definitions.--For purposes of this title:
          ``(1) Primary care case management program.--The term 
        `primary care case management program' means a program operated 
        by a State agency under which such State agency enters into 
        contracts with primary care case management entities for the 
        provision of health care items and services which are specified 
        in such contracts and the provision of case management services 
        to individuals who are--
                    ``(A) eligible for medical assistance under the 
                State plan,
                    ``(B) enrolled with such primary care case 
                management entities, and
                    ``(C) entitled to receive such specified health 
                care items and services and case management services 
                only as approved and arranged for, or provided, by such 
                entities.
            ``(2) Primary care case management entity.--The term 
        `primary care case management entity' means a health care 
        provider which--
                    ``(A) must be a physician, group of physicians, a 
                Federally qualified health center, a rural health 
                clinic, or an entity employing or having other 
                arrangements with physicians operating under a contract 
                with a State to provide services under a primary care 
                case management program,
                    ``(B) receives payment on a fee for service basis 
                (or, in the case of a Federally qualified health center 
                or a rural health clinic, on a reasonable cost per 
                encounter basis) for the provision of health care items 
                and services specified in such contract to enrolled 
                individuals,
                    ``(C) receives an additional fixed fee per enrollee 
                for a period specified in such contract for providing 
                case management services (including approving and 
                arranging for the provision of health care items and 
                services specified in such contract on a referral 
                basis) to enrolled individuals, and
                    ``(D) is not an entity that is at risk (as defined 
                in paragraph (4)) for such case management services.
            ``(3) Risk contracting entity.--The term `risk contracting 
        entity' means an entity which has a contract with the State 
        agency (or a health insuring organization described in 
        subsection (n)(2)) under which the entity--
                    ``(A) provides or arranges for the provision of 
                health care items or services which are specified in 
                such contract to individuals eligible for medical 
                assistance under the State plan, and
                    ``(B) is at risk (as defined in paragraph (4)) for 
                part or all of the cost of such items or services 
                furnished to individuals eligible for medical 
                assistance under such plan.
            ``(4) At risk.--The term `at risk' means an entity which--
                    ``(A) has a contract with the State agency under 
                which such entity is paid a fixed amount for providing 
                or arranging for the provision of health care items or 
                services specified in such contract to an individual 
                eligible for medical assistance under the State plan 
                and enrolled with such entity, regardless of whether 
                such items or services are furnished to such 
                individual, and
                    ``(B) is liable for all or part of the cost of 
                furnishing such items or services, regardless of 
                whether such cost exceeds such fixed payment.
            ``(5) Federally qualified health center.--The term 
        `Federally qualified health center' means a Federally qualified 
        health center as defined in section 1905(l)(2)(B).
            ``(6) Rural health clinic.--The term `rural health clinic' 
        means a rural health clinic as defined in section 1905(l)(1).
    ``(b) General Requirements for Risk Contracting Entities.--
            ``(1) Organization.--A risk contracting entity meets the 
        requirements of this section only if such entity--
                    ``(A)(i) is a qualified health maintenance 
                organization as defined in section 1310(d) of the 
                Public Health Service Act, as determined by the 
                Secretary pursuant to section 1312 of such Act; or
                    ``(ii) is described in subparagraph (C), (D), (E), 
                (F), or (G) of subsection (e)(4);
                    ``(B) is a Federally qualified health center or a 
                rural health clinic which has made adequate provision 
                against the risk of insolvency (pursuant to the 
                guidelines and regulations issued by the Secretary 
                under this section), and ensures that individuals 
                eligible for medical assistance under the State plan 
                are not held liable for such entity's debts in case of 
                such entity's insolvency; or
                    ``(C) is an entity which meets all applicable State 
                licensing requirements and has made adequate provision 
                against the risk of insolvency (pursuant to the 
                guidelines and regulations issued by the Secretary 
                under this section), and ensures that individuals 
                eligible for medical assistance under the State plan 
                are not held liable for such entity's debts in case of 
                such entity's insolvency.
            ``(2) Guarantees of enrollee access.--A risk contracting 
        entity meets the requirements of this section only if--
                    ``(A) the geographic locations, hours of operation, 
                patient to staff ratios, and other relevant 
                characteristics of such entity are sufficient to afford 
                individuals eligible for medical assistance under the 
                State plan access to such entities that is at least 
                equivalent to the access to health care providers that 
                would be available to such individuals if such 
                individuals were not enrolled with such entity;
                    ``(B) such entity has reasonable and adequate hours 
                of operation, including 24-hour availability of--
                            ``(i)(I) treatment for an unforeseen 
                        illness, injury, or condition of an individual 
                        eligible for medical assistance under the State 
                        plan and enrolled with such entity; or
                            ``(II) referral to other health care 
                        providers for such treatment; and
                            ``(ii) other information, as determined by 
                        the Secretary or the State; and
                    ``(C) such entity complies with such other 
                requirements relating to access to care as the 
                Secretary or the State may impose.
            ``(3) Contract with state agency.--A risk contracting 
        entity meets the requirements of this section only if such 
        entity has a written contract with the State agency which 
        provides--
                    ``(A) that the entity will comply with all 
                applicable provisions of this section, that the State 
                has the right to penalize the entity for failure to 
                comply with such requirements and to terminate the 
                contract in accordance with subsection (j), and that 
                the entity will be subject to penalties imposed by the 
                Secretary under subsection (i) for failure to comply 
                with such requirements;
                    ``(B) for a payment methodology based on experience 
                rating or another actuarially sound methodology 
                approved by the Secretary, which guarantees (as 
                demonstrated by such models or formulas as the 
                Secretary may approve) that--
                            ``(i) payments to the entity under the 
                        contract shall not exceed an amount equal to 
                        100 percent of the costs (which shall include 
                        administrative costs and which may include 
                        costs for inpatient hospital services that 
                        would have been incurred in the absence of such 
                        contract) that would have been incurred by the 
                        State agency in the absence of the contract; 
                        and
                            ``(ii) the financial risk for inpatient 
                        hospital services is limited to an extent 
                        established by the State;
                    ``(C) that the Secretary and the State (or any 
                person or organization designated by either) shall have 
                the right to audit and inspect any books and records of 
                the entity (and of any subcontractor) that pertain--
                            ``(i) to the ability of the entity (or a 
                        subcontractor) to bear the risk of potential 
                        financial losses; or
                            ``(ii) to services performed or 
                        determinations of amounts payable under the 
                        contract;
                    ``(D) that in the entity's enrollment, 
                reenrollment, or disenrollment of individuals eligible 
                for medical assistance under the State plan and 
                eligible to enroll, reenroll, or disenroll with the 
                entity pursuant to the contract, the entity will not 
                discriminate among such individuals on the basis of 
                such individuals' health status or requirements for 
                health care services;
                    ``(E)(i) individuals eligible for medical 
                assistance under the State plan who have enrolled with 
                the entity are permitted to terminate such enrollment 
                without cause as of the beginning of the first calendar 
                month (or in the case of an entity described in 
                subsection (e)(4), as of the beginning of the first 
                enrollment period) following a full calendar month 
                after a request is made for such termination;
                    ``(ii) that when an individual has relocated 
                outside the entity's service area, and the entity has 
                been notified of the relocation, services (within 
                reasonable limits) furnished by a health care provider 
                outside the service area will be reimbursed either by 
                the entity or by the State agency; and
                    ``(iii) for written notification of each such 
                individual's right to terminate enrollment, which shall 
                be provided at the time of such individual's 
                enrollment, and, in the case of a child with special 
                health care needs as defined in subsection 
                (e)(1)(B)(ii), at the time the entity identifies such a 
                child;
                    ``(F) in the case of services immediately required 
                to treat an unforeseen illness, injury, or condition, 
                of an individual eligible for medical assistance under 
                the State plan and enrolled with the entity--
                            ``(i) that such services shall not be 
                        subject to a preapproval requirement; and
                            ``(ii) where such services are furnished by 
                        a health care provider other than the entity, 
                        for reimbursement of such provider either by 
                        the entity or by the State agency;
                    ``(G) for disclosure of information in accordance 
                with subsection (h) and section 1124;
                    ``(H) that any physician incentive plan operated by 
                the entity meets the requirements of section 
                1876(i)(8);
                    ``(I) for maintenance of sufficient patient 
                encounter data to identify the physician who delivers 
                services to patients;
                    ``(J) that the entity will comply with the 
                requirement of section 1902(w) with respect to each 
                enrollee;
                    ``(K) that the entity will implement a grievance 
                system, inform enrollees in writing about how to use 
                such grievance system, ensure that grievances are 
                addressed in a timely manner, and report grievances to 
                the State at intervals to be determined by the State;
                    ``(L) that contracts between the entity and each 
                subcontractor of such entity will require each 
                subcontractor--
                            ``(i) to cooperate with the entity in the 
                        implementation of its internal quality 
                        assurance program under paragraph (4) and 
                        adhere to the standards set forth in the 
                        quality assurance program, including standards 
                        with respect to access to care, facilities in 
                        which patients receive care, and availability, 
                        maintenance, and review of medical records;
                            ``(ii) to cooperate with the Secretary, the 
                        State agency and any contractor to the State in 
                        monitoring and evaluating the quality and 
                        appropriateness of care provided to enrollees 
                        as required by Federal or State laws and 
                        regulations; and
                            ``(iii) where applicable, to adhere to 
                        regulations and program guidance with respect 
                        to reporting requirements under section 
                        1905(r);
                    ``(M) that, where the State deems it necessary to 
                ensure the timely provision to enrollees of the 
                services listed in subsection (f)(2)(C)(ii), the State 
                may arrange for the provision of such services by 
                health care providers other than the entity and may 
                adjust its payments to the entity accordingly;
                    ``(N) that the entity and the State will comply 
                with guidelines and regulations issued by the Secretary 
                with respect to procedures for marketing and 
                information that must be provided to individuals 
                eligible for medical assistance under the State plan;
                    ``(O) that the entity must provide payments to 
                hospitals for inpatient hospital services furnished to 
                infants who have not attained the age of 1 year, and to 
                children who have not attained the age of 6 years and 
                who receive such services in a disproportionate share 
                hospital, in accordance with paragraphs (2) and (3) of 
                section 1902(s);
                    ``(P) that the entity shall report to the State, at 
                such time and in such manner as the State shall 
                require, on the rates paid for hospital services (by 
                type of hospital and type of service) furnished to 
                individuals enrolled with the entity;
                    ``(Q) detailed information regarding the relative 
                responsibilities of the entity and the State, for 
                providing (or arranging for the provision of), and 
                making payment for, the following items and services:
                            ``(i) immunizations;
                            ``(ii) the purchase of vaccines;
                            ``(iii) lead screening and treatment 
                        services;
                            ``(iv) screening and treatment for 
                        tuberculosis;
                            ``(v) screening and treatment for, and 
                        preventive services related to, sexually 
                        transmitted diseases, including HIV infection;
                            ``(vi) screening, diagnostic, and treatment 
                        services required under section 1905(r);
                            ``(vii) family planning services;
                            ``(viii) services prescribed under--
                                    ``(I) an Individual Education Plan 
                                or Individualized Family Service Plan 
                                under part B or part H of the 
                                Individuals with Disabilities Education 
                                Act; and
                                    ``(II) any other individual plan of 
                                care or treatment developed under this 
                                title or title V;
                            ``(ix) transportation needed to obtain 
                        services to which the enrollee is entitled 
                        under the State plan or pursuant to an 
                        individual plan of care or treatment described 
                        in subclauses (I) and (II) of clause (viii); 
                        and
                            ``(x) such other services as the Secretary 
                        may specify;
                    ``(R) detailed information regarding the procedures 
                for coordinating the relative responsibilities of the 
                entity and the State to ensure prompt delivery of, 
                compliance with any applicable reporting requirements 
                related to, and appropriate record keeping with respect 
                to, the items and services described in subparagraph 
                (Q); and
                    ``(S) such other provisions as the Secretary may 
                require.
            ``(4) Internal quality assurance.--A risk contracting 
        entity meets the requirements of this section only if such 
        entity has in effect a written internal quality assurance 
        program which includes a systematic process to achieve 
        specified and measurable goals and objectives for access to, 
        and quality of, care, which--
                    ``(A) identifies the organizational units 
                responsible for performing specific quality assurance 
                functions, and ensures that such units are accountable 
                to the governing body of the entity and that such units 
                have adequate supervision, staff, and other necessary 
                resources to perform these functions effectively,
                    ``(B) if any quality assurance functions are 
                delegated to other entities, ensures that the risk 
                contracting entity remains accountable for all quality 
                assurance functions and has mechanisms to ensure that 
                all quality assurance activities are carried out,
                    ``(C) includes methods to ensure that physicians 
                and other health care professionals under contract with 
                the entity are licensed or certified as required by 
                State law, or are otherwise qualified to perform the 
                services such physicians and other professionals 
                provide, and that these qualifications are ensured 
                through appropriate credentialing and recredentialing 
                procedures,
                    ``(D) provides for continuous monitoring of the 
                delivery of health care, through--
                            ``(i) identification of clinical areas to 
                        be monitored, including immunizations, prenatal 
                        care, services required under section 1905(r), 
                        and other appropriate clinical areas, to 
                        reflect care provided to enrollees eligible for 
                        medical assistance under the State plan,
                            ``(ii) use of quality indicators and 
                        standards for assessing the quality and 
                        appropriateness of care delivered, and the 
                        availability and accessibility of all services 
                        for which the entity is responsible under such 
                        entity's contract with the State,
                            ``(iii) use of epidemiological data or 
                        chart review, as appropriate, and patterns of 
                        care overall,
                            ``(iv) patient surveys, spot checks, or 
                        other appropriate methods to determine 
                        whether--
                                    ``(I) enrollees are able to obtain 
                                timely appointments with primary care 
                                providers and specialists, and
                                    ``(II) enrollees are otherwise 
                                guaranteed access and care as provided 
                                under paragraph (2),
                            ``(v) provision of written information to 
                        health care providers and other personnel on 
                        the outcomes, quality, availability, 
                        accessibility, and appropriateness of care, and
                            ``(vi) implementation of corrective 
                        actions,
                    ``(E) includes standards for timely enrollee access 
                to information and care which at a minimum shall 
                incorporate standards used by the State or professional 
                or accreditation bodies for facilities furnishing 
                perinatal and neonatology care and other forms of 
                specialized medical and surgical care,
                    ``(F) includes standards for the facilities in 
                which patients receive care,
                    ``(G) includes standards for managing and treating 
                medical conditions prevalent among such entity's 
                enrollees eligible for medical assistance under the 
                State plan,
                    ``(H) includes mechanisms to ensure that enrollees 
                eligible for medical assistance under the State plan 
                receive services for which the entity is responsible 
                under the contract which are consistent with standards 
                established by the applicable professional societies or 
                government agencies,
                    ``(I) includes standards for the availability, 
                maintenance, and review of medical records consistent 
                with generally accepted medical practice,
                    ``(J) provides for dissemination of quality 
                assurance procedures to health care providers under 
                contract with the entity, and
                    ``(K) meets any other requirements prescribed by 
                the Secretary or the State.
    ``(c) General Requirements for Primary Care Case Management 
Programs.--A primary care case management program implemented by a 
State under this section shall--
            ``(1) provide that each primary care case management entity 
        participating in such program has a written contract with the 
        State agency,
            ``(2) include methods for selection and monitoring of 
        participating primary care case management entities to ensure--
                    ``(A) that the geographic locations, hours of 
                operation, patient to staff ratio, and other relevant 
                characteristics of such entities are sufficient to 
                afford individuals eligible for medical assistance 
                under the State plan access to such entities that is at 
                least equivalent to the access to health care providers 
                that would be available to such individuals if such 
                individuals were not enrolled with such entity,
                    ``(B) that such entities and their professional 
                personnel are licensed as required by State law and 
                qualified to provide case management services, through 
                methods such as ongoing monitoring of compliance with 
                applicable requirements and providing information and 
                technical assistance, and
                    ``(C) that such entities--
                            ``(i) provide timely and appropriate 
                        primary care to such enrollees consistent with 
                        standards established by applicable 
                        professional societies or governmental 
                        agencies, or such other standards prescribed by 
                        the Secretary or the State, and
                            ``(ii) where other items and services are 
                        determined to be medically necessary, give 
                        timely approval of such items and services and 
                        referral to appropriate health care providers,
            ``(3) provide that no preapproval shall be required for 
        emergency health care items or services, and
            ``(4) permit individuals eligible for medical assistance 
        under the State plan who have enrolled with a primary care case 
        management entity to terminate such enrollment without cause 
        not later than the beginning of the first calendar month 
        following a full calendar month after the request is made for 
        such termination.
    ``(d) Exemptions From State Plan Requirements.--A State plan may 
permit or require an individual eligible for medical assistance under 
such plan to enroll with a risk contracting entity or a primary care 
case management entity without regard to the requirements set forth in 
the following paragraphs of section 1902(a):
            ``(1) Paragraph (1) (concerning statewideness).
            ``(2) Paragraph (10)(B) (concerning comparability of 
        benefits), to the extent benefits not included in the State 
        plan are provided.
            ``(3) Paragraph (23) (concerning freedom of choice of 
        provider), except with respect to services described in section 
        1905(a)(4)(C) and except as required under subsection (e).
    ``(e) State Options With Respect to Enrollment and Disenrollment.--
            ``(1) Mandatory enrollment.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a State plan may require an 
                individual eligible for medical assistance under such 
                plan to enroll with a risk contracting entity or a 
                primary care case management entity only if the 
                individual is permitted a choice within a reasonable 
                service area (as defined by the State)--
                            ``(i) between or among 2 or more risk 
                        contracting entities,
                            ``(ii) among a risk contracting entity and 
                        a primary care case management program, or
                            ``(iii) among primary care case management 
                        entities.
                    ``(B) Special needs children.--
                            ``(i) In general.--A State may not require 
                        a child with special health care needs (as 
                        defined in clause (ii)) to enroll with a risk 
                        contracting entity or a primary care case 
                        management entity.
                            ``(ii) Definition.--For purposes of this 
                        subparagraph, the term `child with special 
                        health care needs' refers to an individual 
                        eligible for supplemental security income under 
                        title XVI, a child described under section 
                        501(a)(1)(D), or a child described in section 
                        1902(e)(3).
            ``(2) Reenrollment of individuals who regain eligibility.--
        In the case of an individual who--
                    ``(A) in a month is eligible for medical assistance 
                under the State plan and enrolled with a risk 
                contracting entity with a contract under this section,
                    ``(B) in the next month (or next 2 months) is not 
                eligible for such medical assistance, but
                    ``(C) in the succeeding month is again eligible for 
                such benefits,
        the State agency (subject to subsection (b)(3)(E)) may enroll 
        the individual for that succeeding month with such entity, if 
        the entity continues to have a contract with the State agency 
        under this subsection.
            ``(3) Disenrollment.--
                    ``(A) Restrictions on disenrollment without 
                cause.--Except as provided in subparagraph (C), a State 
                plan may restrict the period in which individuals 
                enrolled with risk contracting entities described in 
                paragraph (4) may terminate such enrollment without 
                cause to the first month of each period of enrollment 
                (as defined in subparagraph (B)), but only if the State 
                provides notification, at least once during each such 
                enrollment period, to individuals enrolled with such 
                entity of the right to terminate such enrollment and 
                the restriction on the exercise of this right. Such 
                restriction shall not apply to requests for termination 
                of enrollment for cause.
                    ``(B) Period of enrollment.--For purposes of this 
                paragraph, the term `period of enrollment' means--
                            ``(i) a period not to exceed 6 months in 
                        duration, or
                            ``(ii) a period not to exceed 1 year in 
                        duration, in the case of a State that, on the 
                        effective date of this paragraph, had in effect 
                        a waiver under section 1115 of requirements 
                        under this title under which the State could 
                        establish a 1-year minimum period of enrollment 
                        with risk contracting entities.
                    ``(C) Special needs children.--A State may not 
                restrict disenrollment of a child with special health 
                care needs (as defined in paragraph (1)(B)(ii)).
            ``(4) Entities eligible for disenrollment restrictions.--A 
        risk contracting entity described in this paragraph is--
                    ``(A) a qualified health maintenance organization 
                as defined in section 1310(d) of the Public Health 
                Service Act,
                    ``(B) an eligible organization with a contract 
                under section 1876,
                    ``(C) an entity that is receiving (and has received 
                during the previous 2 years) a grant of at least 
                $100,000 under section 329(d)(1)(A) or 330(d)(1) of the 
                Public Health Service Act,
                    ``(D) an entity that--
                            ``(i) received a grant of at least $100,000 
                        under section 329(d)(1)(A) or section 330(d)(1) 
                        of the Public Health Service Act in the fiscal 
                        year ending June 30, 1976, and has been a 
                        grantee under either such section for all 
                        periods after that date, and
                            ``(ii) provides to its enrollees, on a 
                        prepaid capitation or other risk basis, all of 
                        the services described in paragraphs (1), (2), 
                        (3), (4)(C), and (5) of section 1905(a) (and 
                        the services described in section 1905(a)(7), 
                        to the extent required by section 
                        1902(a)(10)(D)),
                    ``(E) an entity that is receiving (and has received 
                during the previous 2 years) at least $100,000 (by 
                grant, subgrant, or subcontract) under the Appalachian 
                Regional Development Act of 1965,
                    ``(F) a nonprofit primary health care entity 
                located in a rural area (as defined by the Appalachian 
                Regional Commission)--
                            ``(i) which received in the fiscal year 
                        ending June 30, 1976, at least $100,000 (by 
                        grant, subgrant, or subcontract) under the 
                        Appalachian Regional Development Act of 1965, 
                        and
                            ``(ii) which, for all periods after such 
                        date, either has been the recipient of a grant, 
                        subgrant, or subcontract under such Act or has 
                        provided services on a prepaid capitation or 
                        other risk basis under a contract with the 
                        State agency initially entered into during a 
                        year in which the entity was the recipient of 
                        such a grant, subgrant, or subcontract,
                    ``(G) an entity that had contracted with the State 
                agency prior to 1970 for the provision, on a prepaid 
                risk basis, of services (which did not include 
                inpatient hospital services) to individuals eligible 
                for medical assistance under the State plan,
                    ``(H) a program pursuant to an undertaking 
                described in subsection (n)(3) in which at least 25 
                percent of the membership enrolled on a prepaid basis 
                are individuals who--
                            ``(i) are not insured for benefits under 
                        part B of title XVIII or eligible for medical 
                        assistance under the State plan, and
                            ``(ii) (in the case of such individuals 
                        whose prepayments are made in whole or in part 
                        by any government entity) had the opportunity 
                        at the time of enrollment in the program to 
                        elect other coverage of health care costs that 
                        would have been paid in whole or in part by any 
                        governmental entity,
                    ``(I) an entity that, on the date of enactment of 
                this provision, had a contract with the State agency 
                under a waiver under section 1115 or 1915(b) and was 
                not subject to a requirement under this title to permit 
                disenrollment without cause, or
                    ``(J) an entity that has a contract with the State 
                agency under a waiver under section 1915(b)(5).
    ``(f) State Monitoring and External Review.--
            ``(1) State grievance procedure.--A State contracting with 
        a risk contracting entity or a primary care case management 
        entity under this section shall provide for a grievance 
        procedure for enrollees of such entity with at least the 
        following elements:
                    ``(A) A toll-free telephone number for enrollee 
                questions and grievances.
                    ``(B) Periodic notification of enrollees of their 
                rights with respect to such entity or program.
                    ``(C) Periodic sample reviews of grievances 
                registered with such entity or program or with the 
                State.
                    ``(D) Periodic survey and analysis of enrollee 
                satisfaction with such entity or program, including 
                interviews with individuals who disenroll from the 
                entity or program.
            ``(2) State monitoring of quality and access.--
                    ``(A) Risk contracting entities.--A State 
                contracting with a risk contracting entity under this 
                section shall provide for ongoing monitoring of such 
                entity's compliance with the requirements of subsection 
                (b), including compliance with the requirements of such 
                entity's contract under subsection (b)(3), and shall 
                undertake appropriate followup activities to ensure 
                that any problems identified are rectified and that 
                compliance with the requirements of subsection (b) and 
                the requirements of the contract under subsection 
                (b)(3) is maintained.
                    ``(B) Primary care case management entities.--A 
                State electing to implement a primary care case 
                management program shall provide for ongoing monitoring 
                of the program's compliance with the requirements of 
                subsection (c) and shall undertake appropriate followup 
                activities to ensure that any problems identified are 
                rectified and that compliance with subsection (c) is 
                maintained.
                    ``(C) Services.--
                            ``(i) In general.--The State shall 
                        establish procedures (in addition to those 
                        required under subparagraphs (A) and (B)) to 
                        ensure that the services listed in clause (ii) 
                        are available in a timely manner to an 
                        individual enrolled with a risk contracting 
                        entity or a primary care case management 
                        entity. Where necessary to ensure the timely 
                        provision of such services, the State shall 
                        arrange for the provision of such services by 
                        health care providers other than the risk 
                        contracting entity or the primary care case 
                        management entity in which an individual is 
                        enrolled.
                            ``(ii) Services listed.--The services 
                        listed in this clause are--
                                    ``(I) prenatal care;
                                    ``(II) immunizations;
                                    ``(III) lead screening and 
                                treatment;
                                    ``(IV) prevention, diagnosis and 
                                treatment of tuberculosis, sexually 
                                transmitted diseases (including HIV 
                                infection), and other communicable 
                                diseases; and
                                    ``(V) such other services as the 
                                Secretary may specify.
                            ``(iii) Report.--The procedures referred to 
                        in clause (i) shall be described in an annual 
                        report to the Secretary provided by the State.
            ``(3) External independent review.--
                    ``(A) In general.--Except as provided in paragraph 
                (4), a State contracting with a risk contracting entity 
                under this section shall provide for an annual external 
                independent review of the quality and timeliness of, 
                and access to, the items and services specified in such 
                entity's contract with the State agency. Such review 
                shall be conducted by a utilization control and peer 
                review organization with a contract under section 1153 
                or another organization unaffiliated with the State 
                government or with any risk contracting entity and 
                approved by the Secretary.
                    ``(B) Contents of review.--An external independent 
                review conducted under this paragraph shall include the 
                following:
                            ``(i) A review of the entity's medical 
                        care, through sampling of medical records or 
                        other appropriate methods, for indications of 
                        quality of care and inappropriate utilization 
                        (including overutilization) and treatment.
                            ``(ii) A review of enrollee inpatient and 
                        ambulatory data, through sampling of medical 
                        records or other appropriate methods, to 
                        determine trends in quality and appropriateness 
                        of care.
                            ``(iii) Notification of the entity and the 
                        State when the review under this paragraph 
                        indicates inappropriate care, treatment, or 
                        utilization of services (including 
                        overutilization).
                            ``(iv) Other activities as prescribed by 
                        the Secretary or the State.
                    ``(C) Availability.--The results of each external 
                independent review conducted under this paragraph shall 
                be available to the public consistent with the 
                requirements for disclosure of information contained in 
                section 1160.
            ``(4) Deemed compliance with external independent quality 
        of care review requirements.--
                    ``(A) In general.--The Secretary may deem the State 
                to have fulfilled the requirement for independent 
                external review of quality of care with respect to an 
                entity which has been accredited by an organization 
                described in subparagraph (B) and approved by the 
                Secretary.
                    ``(B) Accrediting organization.--An accrediting 
                organization described in this subparagraph must--
                            ``(i) exist for the primary purpose of 
                        accrediting coordinated care organizations;
                            ``(ii) be governed by a group of 
                        individuals representing health care providers, 
                        purchasers, regulators, and consumers (a 
                        minority of which shall be representatives of 
                        health care providers);
                            ``(iii) have substantial experience in 
                        accrediting coordinated care organizations, 
                        including an organization's internal quality 
                        assurance program;
                            ``(iv) be independent of health care 
                        providers or associations of health care 
                        providers;
                            ``(v) be a nonprofit organization; and
                            ``(vi) have an accreditation process which 
                        meets requirements specified by the Secretary.
            ``(5) Federal monitoring responsibilities.--The Secretary 
        shall review the external independent reviews conducted 
        pursuant to paragraph (3) and shall monitor the effectiveness 
        of the State's monitoring and followup activities required 
        under subparagraph (A) of paragraph (2). If the Secretary 
        determines that a State's monitoring and followup activities 
        are not adequate to ensure that the requirements of paragraph 
        (2) are met, the Secretary shall undertake appropriate followup 
        activities to ensure that the State improves its monitoring and 
        followup activities.
    ``(g) Participation of Federally Qualified Health Centers and Rural 
Health Clinics.--
            ``(1) In general.--Each risk contracting entity shall, with 
        respect to each electing essential community provider (as 
        defined in paragraph (5)) located within the plan's service 
        area, either--
                    ``(A) enter into a written provider participation 
                agreement (described in paragraph (2)) with the 
                provider, or
                    ``(B) enter into a written agreement under which 
                the plan shall make payment to the provider in 
                accordance with paragraph (3).
            ``(2) Participation agreement.--A participation agreement 
        between a risk contracting entity and an electing essential 
        community provider under this subsection shall provide that the 
        entity agrees to treat the provider in accordance with terms 
        and conditions at least as favorable as those that are 
        applicable to other participating providers with the risk 
        contracting entity with respect to each of the following:
                    ``(A) The scope of services for which payment is 
                made by the entity to the provider.
                    ``(B) The rate of payment for covered care and 
                services.
                    ``(C) The availability of financial incentives to 
                participating providers.
                    ``(D) Limitations on financial risk provided to 
                other participating providers.
                    ``(E) Assignment of enrollees to participating 
                providers.
                    ``(F) Access by the provider's patients to 
                providers in medical specialties or subspecialties 
                participating in the plan.
            ``(3) Payments for providers without participation 
        agreements.--Payment in accordance with this paragraph is 
        payment based on payment methodologies and rates used under the 
        applicable Medicare payment methodology and rates (or the most 
        closely applicable methodology under such program as the 
        Secretary of Health and Human Services specifies in 
        regulations).
            ``(4) Election.--
                    ``(A) In general.--In this subsection, the term 
                `electing essential community provider' means, with 
                respect to a risk contracting entity, an essential 
                community provider that elects this subpart to apply to 
                the entity.
                    ``(B) Form of election.--An election under this 
                paragraph shall be made in a form and manner specified 
                by the Secretary, and shall include notice to the risk 
                contracting entity involved. Such an election may be 
                made annually with respect to an entity, except that 
                the entity and provider may agree to make such an 
                election on a more frequent basis.
            ``(5) Providers described.--The categories of providers and 
        organizations described in this subsection are as follows:
                    ``(A) Migrant health centers.--A recipient or 
                subrecipient of a grant under section 329 of the Public 
                Health Service Act.
                    ``(B) Community health centers.--A recipient or 
                subrecipient of a grant under section 330 of the Public 
                Health Service Act.
                    ``(C) Homeless program providers.--A recipient or 
                subrecipient of a grant under section 340 of the Public 
                Health Service Act.
                    ``(D) Public housing providers.--A recipient or 
                subrecipient of a grant under section 340A of the 
                Public Health Service Act.
                    ``(E) Family planning clinics.--A recipient or 
                subrecipient of a grant under title X of the Public 
                Health Service Act.
                    ``(F) Indian health programs.--A service unit of 
                the Indian Health Service, a tribal organization, or an 
                urban Indian program, as defined in the Indian Health 
                Care Improvement Act.
                    ``(G) AIDS providers under ryan white act.--A 
                public or private nonprofit health care provider that 
                is a recipient or subrecipient of a grant under title 
                XXIII of the Public Health Service Act.
                    ``(H) Maternal and child health providers.--A 
                public or private nonprofit entity that provides 
                prenatal care, pediatric care, or ambulatory services 
                to children, including children with special health 
                care needs, and that receives funding for such care or 
                services under title V of the Social Security Act.
                    ``(I) Federally qualified health center; rural 
                health clinic.--A Federally-qualified health center or 
                a rural health clinic (as such terms are defined in 
                section 1861(aa)).
            ``(6) Subrecipient defined.--In this subsection, the term 
        `subrecipient' means, with respect to a recipient of a grant 
        under a particular authority, an entity that--
                    ``(A) is receiving funding from such a grant under 
                a contract with the principal recipient of such a 
                grant, and
                    ``(B) meets the requirements established to be a 
                recipient of such a grant.
            ``(7) Sunset of requirement.--The requirements of this 
        subsection shall only apply to risk contracting entities during 
        calendar years 1995 through 2000.
    ``(h) Transactions With Parties in Interest.--
            ``(1) In general.--Each risk contracting entity which is 
        not a qualified health maintenance organization (as defined in 
        section 1310(d) of the Public Health Service Act) must report 
        to the State and, upon request, to the Secretary, the Inspector 
        General of the Department of Health and Human Services, and the 
        Comptroller General of the United States a description of 
        transactions between the entity and a party in interest (as 
        defined in section 1318(b) of such Act), including the 
        following transactions:
                    ``(A) Any sale or exchange, or leasing of any 
                property between the entity and such a party.
                    ``(B) Any furnishing for consideration of goods, 
                services (including management services), or facilities 
                between the entity and such a party, but not including 
                salaries paid to employees for services provided in the 
                normal course of their employment.
                    ``(C) Any lending of money or other extension of 
                credit between the entity and such a party.
        The State or the Secretary may require that information 
        reported with respect to a risk contracting entity which 
        controls, or is controlled by, or is under common control with, 
        another entity be in the form of a consolidated financial 
        statement for the risk contracting entity and such entity.
            ``(2) Availability of information.--Each risk contracting 
        entity shall make the information reported pursuant to 
        paragraph (1) available to its enrollees upon reasonable 
        request.
    ``(i) Remedies for Failure To Comply.--
            ``(1) In general.--If the Secretary determines that a risk 
        contracting entity or a primary care case management entity--
                    ``(A) fails substantially to provide services 
                required under section 1905(r), when such an entity is 
                required to do so, or provide medically necessary items 
                and services that are required to be provided to an 
                individual enrolled with such an entity, if the failure 
                has adversely affected (or has substantial likelihood 
                of adversely affecting) the individual;
                    ``(B) imposes premiums on individuals enrolled with 
                such an entity in excess of the premiums permitted 
                under this title;
                    ``(C) acts to discriminate among individuals in 
                violation of the provision of subsection (b)(3)(D), 
                including expulsion or refusal to reenroll an 
                individual or engaging in any practice that would 
                reasonably be expected to have the effect of denying or 
                discouraging enrollment (except as permitted by this 
                section) by eligible individuals with the entity whose 
                medical condition or history indicates a need for 
                substantial future medical services;
                    ``(D) misrepresents or falsifies information that 
                is furnished--
                            ``(i) to the Secretary or the State under 
                        this section; or
                            ``(ii) to an individual or to any other 
                        entity under this section; or
                    ``(E) fails to comply with the requirements of 
                section 1876(i)(8),
        the Secretary may provide, in addition to any other remedies 
        available under law, for any of the remedies described in 
        paragraph (2).
            ``(2) Additional remedies.--The remedies described in this 
        paragraph are--
                    ``(A) civil money penalties of not more than 
                $25,000 for each determination under paragraph (1), or, 
                with respect to a determination under subparagraph (C) 
                or (D)(i) of such paragraph, of not more than $100,000 
                for each such determination, plus, with respect to a 
                determination under paragraph (1)(B), double the excess 
                amount charged in violation of such paragraph (and the 
                excess amount charged shall be deducted from the 
                penalty and returned to the individual concerned), and 
                plus, with respect to a determination under paragraph 
                (1)(C), $15,000 for each individual not enrolled as a 
                result of a practice described in such paragraph, or
                    ``(B) denial of payment to the State for medical 
                assistance furnished by a risk contracting entity or a 
                primary care case management entity under this section 
                for individuals enrolled after the date the Secretary 
                notifies the entity of a determination under paragraph 
                (1) and until the Secretary is satisfied that the basis 
                for such determination has been corrected and is not 
                likely to recur.
        The provisions of section 1128A (other than subsections (a) 
        and(b)) shall apply to a civil money penalty under subparagraph 
        (A) in the same manner as such provisions apply to a penalty or 
        proceeding under section 1128A(a).
    ``(j) Termination of Contract by State.--Any State which has a 
contract with a risk contracting entity or a primary care case 
management entity may terminate such contract if such entity fails to 
comply with the terms of such contract or any applicable provision of 
this section.
    ``(k) Fair Hearing.--Nothing in this section shall affect the 
rights of an individual eligible to receive medical assistance under 
the State plan to obtain a fair hearing under section 1902(a)(3) or 
under applicable State law.
    ``(l) Disproportionate Share Hospitals.--Nothing in this section 
shall affect any requirement on a State to comply with section 1923.
    ``(m) Referral Payments.--For 1 year following the date on which 
individuals eligible for medical assistance under the State plan in a 
service area are required to enroll with a risk contracting entity or a 
primary care case management entity, Federally qualified health centers 
and rural health centers located in such service area or providing care 
to such enrollees, shall receive a fee for educating such enrollees 
about the availability of services from the risk contracting entity or 
primary care case management entity with which such enrollees are 
enrolled.
    ``(n) Special Rules.--
            ``(1) Nonapplicability of certain provisions to certain 
        risk contracting entities.--
        In the case of any risk contracting entity which--
                    ``(A)(i) is an individual physician or a physician 
                group practice of less than 50 physicians, and
                    ``(ii) is not described in paragraphs (A) and (B) 
                of subsection (b)(1), and
                    ``(B) is at risk only for the health care items and 
                services directly provided by such entity,
        paragraphs (3)(K), (3)(L), (3)(O), (3)(P), and (4) of 
        subsection (b), and paragraph (3) of subsection (f), shall not 
        apply to such entity.
            ``(2) Exception from definition of risk contracting 
        entity.--For purposes of this section, the term `risk 
        contracting entity' shall not include a health insuring 
        organization which was used by a State before April 1, 1986, to 
        administer a portion of the State plan of such State on a 
        statewide basis.
            ``(3) New jersey.--The rules under section 1903(m)(6) as in 
        effect on the day before the effective date of this section 
        shall apply in the case of an undertaking by the State of New 
        Jersey (as described in such section 1903(m)(6)).
    ``(o) Continuation of Certain Coordinated Care Programs.--The 
Secretary may provide for the continuation of any coordinated care 
program operating under section 1115 or 1915 without requiring 
compliance with any provision of this section which conflicts with the 
continuation of such program and without requiring any additional 
waivers under such sections 1115 and 1915 if the program has been 
successful in assuring quality and containing costs (as determining by 
the Secretary) and is likely to continue to be successful in the 
future.
    ``(p) Guidelines, Regulations, and Model Contract.--
            ``(1) Guidelines and regulations on solvency.--At the 
        earliest practicable time after the date of enactment of this 
        section, the Secretary shall issue guidelines and regulations 
        concerning solvency standards for risk contracting entities and 
        subcontractors of such risk contracting entities. Such 
        guidelines and regulations shall take into account 
        characteristics that may differ among risk contracting entities 
        including whether such an entity is at risk for inpatient 
        hospital services.
            ``(2) Guidelines and regulations on marketing.--At the 
        earliest practicable time after the date of enactment of this 
        section, the Secretary shall issue guidelines and regulations 
        concerning--
                    ``(A) marketing undertaken by any risk contracting 
                entity or any primary care case management program to 
                individuals eligible for medical assistance under the 
                State plan, and
                    ``(B) information that must be provided by States 
                or any such entity to individuals eligible for medical 
                assistance under the State plan with respect to--
                            ``(i) the options and rights of such 
                        individuals to enroll with, and disenroll from, 
                        any such entity, as provided in this section, 
                        and
                            ``(ii) the availability of services from 
                        any such entity (including a list of services 
                        for which such entity is responsible or must 
                        approve and information on how to obtain 
                        services for which such entity is not 
                        responsible).
        In developing the guidelines and regulations under this 
        paragraph, the Secretary shall address the special 
        circumstances of children with special health care needs (as 
        defined in subsection (e)(1)(B)(ii)) and other individuals with 
        special health care needs.
            ``(3) Model contract.--The Secretary shall develop a model 
        contract to reflect the requirements of subsection (b)(3) and 
        such other requirements as the Secretary determines 
        appropriate.''.
    (b) Waivers From Requirements on Coordinated Care Programs.--
Section 1915(b) of the Social Security Act (42 U.S.C. 1396n) is 
amended--
            (1) in the matter preceding paragraph (1), by striking ``as 
        may be necessary'' and inserting ``, and section 1933 as may be 
        necessary'';
            (2) in paragraph (1), by striking ``a primary care case 
        management system or'';
            (3) by striking ``and'' at the end of paragraph (3);
            (4) by striking the period at the end of paragraph (4) and 
        inserting ``, and''; and
            (5) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) to permit a risk contracting entity (as defined in 
        section 1933(a)(3)) to restrict the period in which individuals 
        enrolled with such entity may terminate such enrollment without 
        cause in accordance with section 1933(e)(3)(A).''.
    (c) State Option To Guarantee Medicaid Eligibility.--Section 
1902(e)(2) of such Act (42 U.S.C. 1396a(e)(2)) is amended--
            (1) in subparagraph (A), by striking all that precedes 
        ``(but for this paragraph)'' and inserting ``In the case of an 
        individual who is enrolled--
                    ``(i) with a qualified health maintenance 
                organization (as defined in title XIII of the Public 
                Health Service Act) or with a risk contracting entity 
                (as defined in section 1933(a)(3)), or
                    ``(ii) with any risk contracting entity (as defined 
                in section 1933(a)(3)) in a State that, on the 
                effective date of this provision, had in effect a 
                waiver under section 1115 of requirements under this 
                title under which the State could extend eligibility 
                for medical assistance for enrollees of such entity, or
                    ``(iii) with an eligible organization with a 
                contract under section 1876,
        and who would'',
            (2) in subparagraph (B), by striking ``organization or'' 
        each place it appears, and
            (3) by adding at the end the following new subparagraph:
                    ``(C) The State plan may provide, notwithstanding 
                any other provision of this title, that an individual 
                shall be deemed to continue to be eligible for benefits 
                under this title until the end of the month following 
                the month in which such individual would (but for this 
                paragraph) lose such eligibility because of excess 
                income and resources, if the individual is enrolled 
                with a risk contracting entity or primary care case 
                management entity (as those terms are defined in 
                section 1933(a)).''.
    (d) Enhanced Match Related To Quality Review.--Section 
1903(a)(3)(C) of such Act (42 U.S.C. 1396b(a)(3)(C)) is amended--
            (1) by striking ``organization or by'' and inserting 
        ``organization, by''; and
            (2) by striking ``section 1152, as determined by the 
        Secretary,'' and inserting ``section 1152, as determined by the 
        Secretary, or by another organization approved by the Secretary 
        which is unaffiliated with the State government or with any 
        risk contracting entity (as defined in section 1933(a)(3)),''.
    (e) Accumulation of Reserves by Certain Entities.--Any organization 
referred to in section 329, 330, or 340, of the Public Health Service 
Act which has contracted with a State agency as a risk contracting 
entity under section 1933(g)(3)(A) of the Social Security Act may 
accumulate reserves with respect to payments made to such organization 
under section 1933(g)(3)(C) of such Act.
    (f) Conforming Amendments.--
            (1) Section 1128(b)(6)(C)(i) of such Act (42 U.S.C. 1320a-
        7(b)(6)(C)(i)) is amended by striking ``health maintenance 
        organization'' and inserting ``risk contracting entity''.
            (2) Section 1902(a)(23) of such Act (42 U.S.C. 
        1396a(a)(23)) is amended by striking ``primary care-case 
        management system (described in section 1915(b)(1)), a health 
        maintenance organization,'' and inserting ``primary care case 
        management program (as defined in section 1933(a)(1)), a risk 
        contracting entity (as defined in section 1933(a)(3)),''.
            (3) Section 1902(a)(30)(C) of such Act (42 U.S.C. 
        1396a(a)(30)(C)) is amended by striking ``use a utilization'' 
        and all that follows through ``with the results'' and inserting 
        ``provide for independent review and quality assurance of 
        entities with contracts under section 1933, in accordance with 
        subsection (f) of such section 1933, with the results''.
            (4) Section 1902(a)(57) of such Act (42 U.S.C. 
        1396a(a)(57)) is amended by striking ``or health maintenance 
        organization (as defined in section 1903(m)(1)(A))'' and 
        inserting ``risk contracting entity, or primary care case 
        management entity (as defined in section 1933(a))''.
            (5) Section 1902(a) of such Act (42 U.S.C. 1396a), as 
        amended by section 321(a), is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (62);
                    (B) by striking the period at the end of paragraph 
                (63) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraphs:
            ``(64) at State option, provide for a primary care case 
        management program in accordance with section 1933; and
            ``(65) at State option, provide for a program under which 
        the State contracts with risk contracting entities in 
        accordance with section 1933.''.
            (6) Section 1902(p)(2) of such Act (42 U.S.C. 1396a(p)(2)) 
        is amended by striking ``health maintenance organization (as 
        defined in section 1903(m))'' and inserting ``risk contracting 
        entity (as defined in section 1933(a)(3))''.
            (7) Section 1902(w) of such Act (42 U.S.C. 1396a(w)) is 
        amended--
                    (A) in paragraph (1), by striking ``section 
                1903(m)(1)(A)'' and inserting ``section 1933(a)(3)'', 
                and
                    (B) in paragraph (2)(E)--
                            (i) by striking ``health maintenance 
                        organization'' and inserting ``risk contracting 
                        entity'', and
                            (ii) by striking ``organization'' and 
                        inserting ``entity''.
            (8) Section 1903(k) of such Act (42 U.S.C. 1396b(k)) is 
        amended by striking ``health maintenance organization which 
        meets the requirements of subsection (m) of this section'' and 
        inserting ``risk contracting entity which meets the 
        requirements of section 1933''.
            (9) Section 1903(w)(7)(A)(viii) of such Act (42 U.S.C. 
        1396b(w)(7)(A)(viii)) is amended by striking ``health 
        maintenance organizations (and other organizations with 
        contracts under section 1903(m))'' and inserting ``risk 
        contracting entities with contracts under section 1933''.
            (10) Section 1905(a) of such Act (42 U.S.C. 1396d(a)) is 
        amended, in the matter preceding clause (i), by inserting 
        ``(which may be on a prepaid capitation or other risk basis)'' 
        after ``payment''.
            (11) Section 1916(b)(2)(D) of such Act (42 U.S.C. 
        1396o(b)(2)(D)) is amended by striking ``health maintenance 
        organization (as defined in section 1903(m))'' and inserting 
        ``risk contracting entity (as defined in section 1933(a)(3))''.
            (12) Section 1925(b)(4)(D)(iv) of such Act (42 U.S.C. 
        1396r-6(b)(4)(D)(iv)) is amended--
                    (A) in the heading, by striking ``hmo'' and 
                inserting ``risk contracting entity'',
                    (B) by striking ``health maintenance organization 
                (as defined in section 1903(m)(1)(A))'' and inserting 
                ``risk contracting entity (as defined in section 
                1933(a)(3)'', and
                    (C) by striking ``health maintenance organization 
                in accordance with section 1903(m)'' and inserting 
                ``risk contracting entity in accordance with section 
                1933''.
            (13) Paragraphs (1) and (2) of section 1926(a) of such Act 
        (42 U.S.C. 1396r-7(a)) are each amended by striking ``health 
        maintenance organizations under section 1903(m)'' and inserting 
        ``risk contracting entities under section 1933''.
            (14) Section 1927(j)(1) of such Act (42 U.S.C. 1396r-
        8(j)(1)) is amended by striking ``* * * Health Maintenance 
        Organizations, including those organizations that contract 
        under section 1903(m)'' and inserting ``risk contracting 
        entities (as defined in section 1933(a)(3))''.
    (g) Effective Date.--The amendments made by this section shall 
become effective with respect to calendar quarters beginning on or 
after January 1, 1995.

   PART 4--LIMITATIONS ON FUNDING OF ABORTION SERVICES UNDER MEDICAID

SEC. 341. LIMITATIONS ON FUNDING OF ABORTION SERVICES UNDER MEDICAID.

    Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.), as 
amended by sections 311(a)(1), 321(b), and 331(a)(2), is further 
amended by redesignating section 1934 as section 1935 and by inserting 
after section 1933 the following new section:

             ``limitations on funding of abortion services

    ``Sec. 1934. (a) None of the funds authorized by this title may be 
used to provide abortions, except to prevent the death of the mother.
    ``(b) Nothing in this title shall be construed--
            ``(1) to require any State to pay for abortions, except 
        those necessary to prevent the death of the mother, or
            ``(2) to require any health plan or other entity to provide 
        abortions in order to participate in any program authorized by 
        this title, or
            ``(3) to authorize any State to impose such a requirement 
        for participation in any program authorized by this title.''.

                 TITLE IV--CONTAINING HEALTH CARE COSTS

            Subtitle A--Medical Malpractice Liability Reform

                       PART 1--GENERAL PROVISIONS

SEC. 401. FEDERAL REFORM OF MEDICAL MALPRACTICE LIABILITY ACTIONS.

    (a) Applicability.--This subtitle shall apply with respect to any 
medical malpractice liability claim and to any medical malpractice 
liability action brought in any State or Federal court, except that 
this subtitle--
            (1) shall not apply to a claim or action for damages 
        arising from a vaccine-related injury or death to the extent 
        that title XXI of the Public Health Service Act applies to the 
        claim or action, and
            (2) it shall not apply to a claim or action for damages 
        brought pursuant to subtitle C of title VII.
    (b) Preemption.--The provisions of this subtitle shall preempt any 
State law to the extent such law is inconsistent with the limitations 
contained in such provisions. The provisions of this subtitle shall not 
preempt any State law that provides for defenses or places limitations 
on a person's liability in addition to those contained in this subtitle 
or otherwise imposes greater restrictions than those provided in this 
subtitle.
    (c) Effect on Sovereign Immunity and Choice of Law or Venue.--
Nothing in subsection (b) shall be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any provision of law;
            (2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            (3) affect the applicability of any provision of the 
        Foreign Sovereign Immunities Act of 1976;
            (4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation; or
            (5) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground of inconvenient forum.
    (d) Federal Court Jurisdiction Not Established on Federal Question 
Grounds.--Nothing in this subtitle shall be construed to establish any 
jurisdiction in the district courts of the United States over medical 
malpractice liability actions on the basis of section 1331 or 1337 of 
title 28, United States Code.

SEC. 402. DEFINITIONS.

    As used in this subtitle:
            (1) Alternative dispute resolution system; adr.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system established under this subtitle that provides for the 
        resolution of medical malpractice liability claims in a manner 
        other than through medical malpractice liability actions.
            (2) Claimant.--The term ``claimant'' means any person who 
        alleges a medical malpractice liability claim, and any person 
        on whose behalf such a claim is alleged, including the decedent 
        in the case of an action brought through or on behalf of an 
        estate.
            (3) Clear and convincing evidence.--The term ``clear and 
        convincing evidence'' is that measure or degree of proof that 
        will produce in the mind of the trier of fact a firm belief or 
        conviction as to the truth of the allegations sought to be 
        established, except that such measure or degree of proof is 
        more than that required under preponderance of the evidence, 
        but less than that required for proof beyond a reasonable 
        doubt.
            (4) Economic damages.--The term ``economic damages'' means 
        damages paid to compensate an individual for hospital and other 
        medical expenses, lost wages, lost employment, and other 
        pecuniary losses.
            (5) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by the laws or 
        regulations of the State to be licensed or certified by the 
        State to provide such services in the State.
            (6) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State and 
        that is required by the laws or regulations of the State to be 
        licensed or certified by the State to engage in the delivery of 
        such services in the State.
            (7) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or a medical malpractice liability 
        claim.
            (8) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means a civil action 
        brought in a State or Federal court against a health care 
        provider or health care professional in which the plaintiff 
        alleges a medical malpractice liability claim, but does not 
        include any action in which the plaintiff's sole allegation is 
        an allegation of an intentional tort.
            (9) Medical malpractice liability claim.--The term 
        ``medical malpractice liability claim'' means a claim in which 
        the claimant alleges that injury was caused by the provision of 
        (or the failure to provide) health care services or the use of 
        a medical product.
            (10) Medical product.--
                    (A) In general.--The term ``medical product'' 
                means, with respect to the allegation of a claimant, a 
                drug (as defined in section 201(g)(1) of the Federal 
                Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a 
                medical device (as defined in section 201(h) of the 
                Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) 
                if--
                            (i) such drug or device was subject to 
                        premarket approval under section 505, 507, or 
                        515 of the Federal Food, Drug, and Cosmetic Act 
                        (21 U.S.C. 355, 357, or 360e) or section 351 of 
                        the Public Health Service Act (42 U.S.C. 262) 
                        with respect to the safety of the formulation 
                        or performance of the aspect of such drug or 
                        device which is the subject of the claimant's 
                        allegation or the adequacy of the packaging or 
                        labeling of such drug or device, and such drug 
                        or device is approved by the Food and Drug 
                        Administration; or
                            (ii) the drug or device is generally 
                        recognized as safe and effective under 
                        regulations issued by the Secretary of Health 
                        and Human Services under section 201(p) of the 
                        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                        321(p)).
                    (B) Exception in case of misrepresentation or 
                fraud.--Notwithstanding subparagraph (A), the term 
                ``medical product'' shall not include any product 
                described in such subparagraph if the claimant shows 
                that the product is approved by the Food and Drug 
                Administration for marketing as a result of withheld 
                information, misrepresentation, or an illegal payment 
                by manufacturer of the product.
                    (C) Exception in the case of abortion-inducing 
                drugs and devices.--Notwithstanding subparagraph (A), 
                the term ``medical product'' shall not include any drug 
                or device which is used as a contraceptive or 
                abortifacient and which has as one of its known effects 
                the interference with implantation of a fertilized 
                human ovum or embryo or the termination of pregnancy 
                after implantation with intent other than to produce a 
                live birth.
            (11) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages paid to compensate an individual for physical and 
        emotional pain, suffering, inconvenience, physical impairment, 
        mental anguish, disfigurement, loss of enjoyment of life, loss 
        of consortium, and other nonpecuniary losses, but does not 
        include punitive damages.
            (12) Punitive damages; exemplary damages.--The terms 
        ``punitive damages'' and ``exemplary damages'' mean 
        compensation, in addition to compensation for actual harm 
        suffered, that is awarded for the purpose of punishing a person 
        for conduct deemed to be malicious, wanton, willful, or 
        excessively reckless.
            (13) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (14) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, and American Samoa.

SEC. 403. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b) and section 
417(c), this subtitle shall apply with respect to claims accruing or 
actions brought on or after the expiration of the 3-year period that 
begins on the date of the enactment of this Act.
    (b) Exception for States Requesting Earlier Implementation of 
Reforms.--
            (1) Application.--A State may submit an application to the 
        Secretary requesting the early implementation of this subtitle 
        with respect to claims or actions brought in the State.
            (2) Decision by secretary.--The Secretary shall issue a 
        response to a State's application under paragraph (1) not later 
        than 90 days after receiving the application. If the Secretary 
        determines that the State meets the requirements of this 
        subtitle at the time of submitting its application, the 
        Secretary shall approve the State's application, and this 
        subtitle shall apply with respect to actions brought in the 
        State on or after the expiration of the 90-day period that 
        begins on the date the Secretary issues the response. If the 
        Secretary denies the State's application, the Secretary shall 
        provide the State with a written explanation of the grounds for 
        the decision.

        PART 2--MEDICAL MALPRACTICE AND PRODUCT LIABILITY REFORM

SEC. 411. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION THROUGH 
              ALTERNATIVE DISPUTE RESOLUTION.

    (a) In General.--
            (1) State cases.--A medical malpractice liability action 
        may not be brought in any State court during a calendar year 
        unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under an 
        alternative dispute resolution system certified for the year by 
        the Secretary under section 422(a), or, in the case of a State 
        in which such a system is not in effect for the year, under the 
        alternative Federal system established under section 422(b).
            (2) Federal diversity actions.--A medical malpractice 
        liability action may not be brought in any Federal court under 
        section 1332 of title 28, United States Code, during a calendar 
        year unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under the 
        alternative dispute resolution system referred to in paragraph 
        (1) that applied in the State whose law applies in such action.
            (3) Claims against united states.--
                    (A) Establishment of process for claims.--The 
                Attorney General shall establish an alternative dispute 
                resolution process for the resolution of tort claims 
                consisting of medical malpractice liability claims 
                brought against the United States under chapter 171 of 
                title 28, United States Code. Under such process, the 
                resolution of a claim shall occur after the completion 
                of the administrative claim process applicable to the 
                claim under section 2675 of such title.
                    (B) Requirement for initial resolution under 
                process.--A medical malpractice liability action based 
                on a medical malpractice liability claim described in 
                subparagraph (A) may not be brought in any Federal 
                court unless the claim has been initially resolved 
                under the alternative dispute resolution process 
                established by the Attorney General under such 
                subparagraph.
    (b) Initial Resolution of Claims Under ADR.--For purposes of 
subsection (a), an action is ``initially resolved'' under an 
alternative dispute resolution system if--
                    (A) the ADR reaches a decision on whether the 
                defendant is liable to the plaintiff for damages; and
                    (B) if the ADR determines that the defendant is 
                liable, the ADR reaches a decision on the amount of 
                damages assessed against the defendant.
    (c) Procedures for Filing Actions.--
            (1) Notice of intent to contest decision.--Not later than 
        60 days after a decision is issued with respect to a medical 
        malpractice liability claim under an alternative dispute 
        resolution system, each party affected by the decision shall 
        submit a sealed statement to a court of competent jurisdiction 
        indicating whether or not the party intends to contest the 
        decision.
            (2) Deadline for filing action.--A medical malpractice 
        liability action may not be brought by a party unless--
                    (A) the party has filed the notice of intent 
                required by paragraph (1); and
                    (B) the party files the action in a court of 
                competent jurisdiction not later than 90 days after the 
                decision resolving the medical malpractice liability 
                claim that is the subject of the action is issued under 
                the applicable alternative dispute resolution system.
            (3) Court of competent jurisdiction.--For purposes of this 
        subsection, the term ``court of competent jurisdiction'' 
        means--
                    (A) with respect to actions filed in a State court, 
                the appropriate State trial court; and
                    (B) with respect to actions filed in a Federal 
                court, the appropriate United States district court.
    (d) Legal Effect of Uncontested ADR Decision.--The decision reached 
under an alternative dispute resolution system shall, for purposes of 
enforcement by a court of competent jurisdiction, have the same status 
in the court as the verdict of a medical malpractice liability action 
adjudicated in a State or Federal trial court. The previous sentence 
shall not apply to a decision that is contested by a party affected by 
the decision pursuant to subsection (c)(1).

SEC. 412. CALCULATION AND PAYMENT OF DAMAGES.

    (a) Limitation on Noneconomic Damages.--The total amount of 
noneconomic damages that may be awarded to a claimant and the members 
of the claimant's family for losses resulting from the injury which is 
the subject of a medical malpractice liability action may not exceed 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of actions brought with respect to the injury.
    (b) Treatment of Punitive Damages.--
            (1) Basis for recovery.--Punitive or exemplary damages 
        shall not be awarded in a medical malpractice liability action 
        unless the claimant establishes by clear and convincing 
        evidence that the injury suffered was the direct result of 
        conduct manifesting a malicious, wanton, willful, or 
        excessively reckless disregard of the safety of others.
            (2) No award against manufacturer of medical product.--In 
        the case of a medical malpractice liability action in which the 
        plaintiff alleges a claim against the manufacturer of a medical 
        product, no punitive or exemplary damages may be awarded 
        against such manufacturer.
            (3) Payments to state for medical quality assurance 
        activities.--
                    (A) In general.--Any punitive or exemplary damages 
                awarded in a medical malpractice liability action shall 
                be paid to the State in which the action is brought or, 
                in a case brought in Federal court, in the State in 
                which the health care services that caused the injury 
                that is the subject of the action were provided.
                    (B) Activities described.--A State shall use 
                amounts paid pursuant to subparagraph (A) to carry out 
                activities to assure the safety and quality of health 
                care services provided in the State, including (but not 
                limited to)--
                            (i) licensing or certifying health care 
                        professionals and health care providers in the 
                        State;
                            (ii) operating alternative dispute 
                        resolution systems;
                            (iii) carrying out public education 
                        programs relating to medical malpractice and 
                        the availability of alternative dispute 
                        resolution systems in the State; and
                            (iv) carrying out programs to reduce 
                        malpractice-related costs for retired providers 
                        or other providers volunteering to provide 
                        services in medically underserved areas.
                    (C) Maintenance of effort.--A State shall use any 
                amounts paid pursuant to subparagraph (A) to supplement 
                and not to replace amounts spent by the State for the 
                activities described in subparagraph (B).
    (c) Periodic Payments for Future Losses.--
            (1) General rule.--In any medical malpractice liability 
        action in which the damages awarded for future economic loss 
        exceeds $100,000, a defendant may not be required to pay such 
        damages in a single, lump-sum payment, but shall be permitted 
        to make such payments periodically based on when the damages 
        are found likely to occur, as such payments are determined by 
        the court.
            (2) Waiver.--A court may waive the application of paragraph 
        (1) with respect to a defendant if the court determines that it 
        is not in the best interests of the plaintiff to receive 
        payments for damages on such a periodic basis.

SEC. 413. REQUIRING PARTY CONTESTING ADR RULING TO PAY ATTORNEY'S FEES 
              AND OTHER COSTS.

    (a) In General.--The court in a medical malpractice liability 
action shall require the party that (pursuant to section 411(c)(1)) 
contested the ruling of the alternative dispute resolution system with 
respect to the medical malpractice liability claim that is the subject 
of the action to pay to the opposing party the costs incurred by the 
opposing party under the action, including attorney's fees, fees paid 
to expert witnesses, and other litigation expenses (but not including 
court costs, filing fees, or other expenses paid directly by the party 
to the court, or any fees or costs associated with the resolution of 
the claim under the alternative dispute resolution system), but only 
if--
            (1) in the case of an action in which the party that 
        contested the ruling is the claimant, the amount of damages 
        awarded to the party under the action does not exceed the 
        amount of damages awarded to the party under the ADR system by 
        at least 10 percent; and
            (2) in the case of an action in which the party that 
        contested the ruling is the defendant, the amount of damages 
        assessed against the party under the action is not at least 10 
        percent less than the amount of damages assessed under the ADR 
        system.
    (b) Exceptions.--Subsection (a) shall not apply if--
            (1) the party contesting the ruling made under the previous 
        alternative dispute resolution system shows that--
                    (A) the ruling was procured by corruption, fraud, 
                or undue means,
                    (B) there was partiality or corruption under the 
                system,
                    (C) there was other misconduct under the system 
                that materially prejudiced the party's rights, or
                    (D) the ruling was based on an error of law;
            (2) the party contesting the ruling made under the 
        alternative dispute resolution system presents new evidence 
        before the trier of fact that was not available for 
        presentation under the ADR system;
            (3) the medical malpractice liability action raised a novel 
        issue of law; or
            (4) the court finds that the application of such paragraph 
        to a party would constitute an undue hardship, and issues an 
        order waiving or modifying the application of such paragraph 
        that specifies the grounds for the court's decision.
    (c) Requirement for Performance Bond.--The court in a medical 
malpractice liability action shall require the party that (pursuant to 
section 411(c)(1)) contested the ruling of the alternative dispute 
resolution system with respect to the medical malpractice liability 
claim that is the subject of the action to post a performance bond (in 
such amount and consisting of such funds and assets as the court 
determines to be appropriate), except that the court may waive the 
application of such requirement to a party if the court determines that 
the posting of such a bond is not necessary to ensure that the party 
shall meet the requirements of this subsection to pay the opposing 
party the costs incurred by the opposing party under the action.
    (d) Limit on Attorney's Fees Paid.--Attorneys' fees that are 
required to be paid under subsection (a) by the contesting party shall 
not exceed the amount of the attorneys' fees incurred by the contesting 
party in the action. If the attorneys' fees of the contesting party are 
based on a contingency fee agreement, the amount of attorneys' fees for 
purposes of the preceding sentence shall not exceed the reasonable 
value of those services.
    (e) Records.--In order to receive attorneys' fees under subsection 
(a), counsel of record in the medical malpractice liability action 
involved shall maintain accurate, complete records of hours worked on 
the action, regardless of the fee arrangement with the client involved.
    (f) Contingency Fee Defined.--As used in this section, the term 
``contingency fee'' means any fee for professional legal services which 
is, in whole or in part, contingent upon the recovery of any amount of 
damages, whether through judgment or settlement.

SEC. 414. JOINT AND SEVERAL LIABILITY FOR NONECONOMIC DAMAGES.

    A defendant may be held severally but not jointly liable in a 
medical malpractice action for noneconomic damages. A person found 
liable for such damages in any such action may be found liable, if at 
all, only for those damages directly attributable to the person's 
proportionate share of fault or responsibility for the injury, and may 
not be found liable for damages attributable to the proportionate share 
of fault or responsibility of any other person (without regard to 
whether that person is a party to the action) for the injury, including 
any person bringing the action.

SEC. 415. STATUTE OF LIMITATIONS.

    A medical malpractice liability claim may not be brought after the 
expiration of the 7-year period that begins on the date the alleged 
injury that is the subject of the claim occurred. If the commencement 
of such an action is stayed or enjoined, the running of the statute of 
limitations under this section shall be suspended for the period of the 
stay or injunction.

SEC. 416. UNIFORM STANDARD FOR DETERMINING NEGLIGENCE.

    A defendant in a medical malpractice liability action may not be 
found to have acted negligently unless the defendant's conduct at the 
time of providing the health care services that are the subject of the 
action was not reasonable.

SEC. 417. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

    (a) Imposition of Higher Standard of Proof.--In the case of a 
medical malpractice liability claim relating to services provided 
during labor or the delivery of a baby, if the health care professional 
against whom the claim is brought did not previously treat the 
individual alleged to have been injured for the pregnancy, the trier of 
fact may not find that the defendant committed malpractice and may not 
assess damages against the health care professional unless the 
malpractice is proven by clear and convincing evidence.
    (b) Applicability to Group Practices or Agreements Among 
Providers.--For purposes of subsection (a), a health care professional 
shall be considered to have previously treated an individual for a 
pregnancy if the professional is a member of a group practice whose 
members previously treated the individual for the pregnancy or is 
providing services to the individual during labor or the delivery of a 
baby pursuant to an agreement with another health care professional.
    (c) Effective Date.--This section shall apply with respect to 
claims accruing or actions brought on or after the expiration of the 2-
year period that begins on the date of the enactment of this Act.

 PART 3--REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION SYSTEMS 
                                 (ADR)

SEC. 421. BASIC REQUIREMENTS.

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

SEC. 422. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF ALTERNATIVE 
              FEDERAL SYSTEM.

    (a) Certification.--
            (1) In general.--Not later than October 1 of each year 
        (beginning with 1995), the Secretary, in consultation with the 
        Attorney General, shall determine whether a State's alternative 
        dispute resolution system meets the requirements of this part 
        for the following calendar year.
            (2) Basis for certification.--The Secretary shall certify a 
        State's alternative dispute resolution system under this 
        subsection for a calendar year if the Secretary determines 
        under paragraph (1) that the system meets the requirements of 
        section 421.
    (b) Applicability of Alternative Federal System.--
            (1) Establishment and applicability.--Not later than 
        October 1, 1995, the Secretary, in consultation with the 
        Attorney General, shall establish by rule an alternative 
        Federal ADR system for the resolution of medical malpractice 
        liability claims during a calendar year in States that do not 
        have in effect an alternative dispute resolution system 
        certified under subsection (a) for the year.
            (2) Requirements for system.--Under the alternative Federal 
        ADR system established under paragraph (1)--
                    (A) paragraphs (1), (2), (6), and (7) of section 
                421(a) shall apply to claims brought under the system;
                    (B) if the system provides for the resolution of 
                claims through arbitration, the claims brought under 
                the system shall be heard and resolved by arbitrators 
                appointed by the Secretary in consultation with the 
                Attorney General; and
                    (C) with respect to a State in which the system is 
                in effect, the Secretary may (at the State's request) 
                modify the system to take into account the existence of 
                dispute resolution procedures in the State that affect 
                the resolution of medical malpractice liability claims.
            (3) Treatment of states with alternative system in 
        effect.--If the alternative Federal ADR system established 
        under this subsection is applied with respect to a State for a 
        calendar year--
                    (A) the State shall reimburse the United States (at 
                such time and in such manner as the Secretary may 
                require) for the costs incurred by the United States 
                during the year as a result of the application of the 
                system with respect to the State; and
                    (B) notwithstanding any other provision of law, no 
                funds may be paid to the State (or to any unit of local 
                government in the State) or to any entity in the State 
                pursuant to the Public Health Service Act.

SEC. 423. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF ALTERNATIVE 
              DISPUTE RESOLUTION SYSTEMS.

    (a) In General.--Not later than 5 years after the date of the 
enactment of this Act, the Secretary shall prepare and submit to the 
Congress a report describing and evaluating State alternative dispute 
resolution systems operated pursuant to this part and the alternative 
Federal system established under section 422(b).
    (b) Contents of Report.--The Secretary shall include in the report 
prepared and submitted under subsection (a)--
            (1) information on--
                    (A) the effect of the alternative dispute 
                resolution systems on the cost of health care within 
                each State,
                    (B) the impact of such systems on the access of 
                individuals to health care within the State, and
                    (C) the effect of such systems on the quality of 
                health care provided within the State; and
            (2) to the extent that such report does not provide 
        information on no-fault systems operated by States as 
        alternative dispute resolution systems pursuant to this part, 
        an analysis of the feasibility and desirability of establishing 
        a system under which medical malpractice liability claims shall 
        be resolved on a no-fault basis.

   PART 4--OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY

SEC. 431. PERMITTING STATE PROFESSIONAL SOCIETIES TO PARTICIPATE IN 
              DISCIPLINARY ACTIVITIES.

    (a) Role of Professional Societies.--Notwithstanding any other 
provision of State or Federal law, a State agency responsible for the 
conduct of disciplinary actions for a type of health care practitioner 
may enter into agreements with State or county professional societies 
of such type of health care practitioner to permit such societies to 
participate in the licensing of such health care practitioner, and to 
review any health care malpractice action, health care malpractice 
claim or allegation, or other information concerning the practice 
patterns of any such health care practitioner. Any such agreement shall 
comply with subsection (b).
    (b) Requirements of Agreements.--Any agreement entered into under 
subsection (a) for licensing activities or the review of any health 
care malpractice action, health care malpractice claim or allegation, 
or other information concerning the practice patterns of a health care 
practitioner shall provide that--
            (1) the health care professional society conducts such 
        activities or review as expeditiously as possible;
            (2) after the completion of such review, such society shall 
        report its findings to the State agency with which it entered 
        into such agreement;
            (3) the conduct of such activities or review and the 
        reporting of such findings be conducted in a manner which 
        assures the preservation of confidentiality of health care 
        information and of the review process; and
            (4) no individual affiliated with such society is liable 
        for any damages or injury directly caused by the individual's 
        actions in conducting such activities or review.
    (c) Agreements Not Mandatory.--Nothing in this section may be 
construed to require a State to enter into agreements with societies 
described in subsection (a) to conduct the activities described in such 
subsection.
    (d) Effective Date.--This section shall take effect 2 years after 
the date of the enactment of this Act.

SEC. 432. STUDY OF INCENTIVES TO ENCOURAGE VOLUNTARY SERVICE BY 
              PHYSICIANS.

    (a) Study.--The Secretary shall conduct a study analyzing the 
existence and effectiveness of incentives adopted by State and local 
governments, insurers, medical societies, and other entities to 
encourage physicians (whether practicing or retired) to volunteer to 
provide health care services in medically underserved areas.
    (b) Reports.--(1) Not later than 1 year after the date of the 
enactment of this Act, the Secretary shall submit an interim report to 
Congress on the study conducted under subsection (a), together with the 
Secretary's recommendations for actions to increase the number of 
physicians volunteering to provide health care services in medically 
underserved areas.
    (2) Not later than 5 years after the date of the enactment of this 
Act, the Secretary shall submit a final report to the Congress on the 
study conducted under subsection (a) (taking into account the effects 
of this subtitle on the incidence and costs of medical malpractice), 
together with the Secretary's recommendations for actions to increase 
the number of physicians volunteering to provide health care services 
in medically underserved areas.

SEC. 433. REQUIREMENTS FOR RISK MANAGEMENT PROGRAMS.

    (a) Requirements for Providers.--Each State shall require each 
health care professional and health care provider providing services in 
the State to participate in a risk management program to prevent and 
provide early warning of practices which may result in injuries to 
patients or which otherwise may endanger patient safety.
    (b) Requirements for Insurers.--Each State shall require each 
entity which provides health care professional or provider liability 
insurance to health care professionals and health care providers in the 
State to--
            (1) establish risk management programs based on data 
        available to such entity or sanction programs of risk 
        management for health care professionals and health care 
        providers provided by other entities; and
            (2) require each such professional or provider, as a 
        condition of maintaining insurance, to participate in one 
        program described in paragraph (1) at least once in each 3-year 
        period.
    (c) Effective Date.--This section shall take effect 2 years after 
the date of the enactment of this Act.

SEC. 434. GRANTS FOR MEDICAL SAFETY PROMOTION.

    (a) Research on Medical Injury Prevention and Compensation.
            (1) In general.--The Secretary shall make grants for the 
        conduct of basic research in the prevention of and compensation 
        for injuries resulting from health care professional or health 
        care provider malpractice, and research of the outcomes of 
        health care procedures.
            (2) Preference for research on certain activities.--In 
        making grants under paragraph (1), the Secretary shall give 
        preference to applications for grants to conduct research on 
        the behavior of health care providers and health care 
        professionals in carrying out their professional duties and of 
        other participants in systems for compensating individuals 
        injured by medical malpractice, the effects of financial and 
        other incentives on such behavior, the determinants of 
        compensation system outcomes, and the costs and benefits of 
        alternative compensation policy options.
            (3) Application.--The Secretary may not make a grant under 
        paragraph (1) unless an applicant submits an application to the 
        Secretary at such time, in such form, in such manner, and 
        containing such information as the Secretary may require.
    (b) Grants for Licensing and Disciplinary Activities.--
            (1) In general.--The Secretary shall make grants to States 
        to assist States in improving the State's ability to license 
        and discipline health care professionals.
            (2) Uses for grants.--A State may use a grant awarded under 
        subsection (a) to develop and implement improved mechanisms for 
        monitoring the practices of health care professionals or for 
        conducting disciplinary activities.
            (3) Technical assistance.--The Secretary shall provide 
        technical assistance to States receiving grants under paragraph 
        (1) to assist them in evaluating their medical practice acts 
        and procedures and to encourage the use of efficient and 
        effective early warning systems and other mechanisms for 
        detecting practices which endanger patient safety and for 
        disciplining health care professionals.
            (4) Applications.--The Secretary may not make a grant under 
        paragraph (1) unless the applicant submits an application to 
        the Secretary at such time, in such form, in such manner, and 
        containing such information as the Secretary shall require.
    (c) Grants for Public Education Programs.--
            (1) In general.--The Secretary shall make grants to States 
        and to local governments, private nonprofit organizations, and 
        health professional schools (as defined in paragraph (3)) for--
                    (A) educating the general public about the 
                appropriate use of health care and realistic 
                expectations of medical intervention;
                    (B) educating the public about the resources and 
                role of health care professional licensing and 
                disciplinary boards in investigating claims of 
                incompetence or health care malpractice; and
                    (C) developing programs of faculty training and 
                curricula for educating health care professionals in 
                quality assurance, risk management, and medical injury 
                prevention.
            (2) Applications.--The Secretary may not make a grant under 
        paragraph (1) unless the applicant submits an application to 
        the Secretary at such time, in such form, in such manner, and 
        containing such information as the Secretary shall require.
            (3) Health professional school defined.--In paragraph (1), 
        the term ``health professional school'' means a school of 
        nursing (as defined in section 853(2) of the Public Health 
        Service Act) or a school or program under section 799(1) of 
        such Act.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated not more than $15,000,000 for each of the first 5 fiscal 
years beginning on or after the date of the enactment of this Act for 
grants under this section.

  Subtitle B--Treatment of Certain Activities Under the Antitrust Laws

SEC. 451. EXEMPTION FROM ANTITRUST LAWS FOR CERTAIN COMPETITIVE AND 
              COLLABORATIVE ACTIVITIES.

    (a) Exemption Described.--An activity relating to the provision of 
health care services shall be exempt from the antitrust laws if--
            (1) the activity is within one of the categories of safe 
        harbors described in section 452;
            (2) the activity is within an additional safe harbor 
        designated by the Attorney General under section 453; or
            (3) the activity is specified in and in compliance with the 
        terms of a certificate of review issued by the Attorney General 
        under section 454 and the activity occurs--
                    (A) while the certificate is in effect, or
                    (B) in the case of a certificate issued during the 
                2-year period beginning on the date of the enactment of 
                this Act, at any time on or after the first day of the 
                2-year period that ends on the date the certificate 
                takes effect.
    (b) Award of Attorney's Fees and Costs of Suit.--
            (1) In general.--If any person brings an action alleging a 
        claim under the antitrust laws and the activity on which the 
        claim is based is found by the court to be exempt from such 
        laws under subsection (a), the court shall, at the conclusion 
        of the action--
                    (A) award to a substantially prevailing claimant 
                the cost of suit attributable to such claim, including 
                a reasonable attorney's fee, or
                    (B) award to a substantially prevailing party 
                defending against such claim the cost of such suit 
                attributable to such claim, including reasonable 
                attorney's fee, if the claim, or the claimant's conduct 
                during litigation of the claim, was frivolous, 
                unreasonable, without foundation, or in bad faith.
            (2) Offset in cases of bad faith.--The court may reduce an 
        award made pursuant to paragraph (1) in whole or in part by an 
        award in favor of another party for any part of the cost of 
        suit (including a reasonable attorney's fee) attributable to 
        conduct during the litigation by any prevailing party that the 
        court finds to be frivolous, unreasonable, without foundation, 
        or in bad faith.

SEC. 452. SAFE HARBORS.

    The following activities are safe harbors for purposes of section 
451(a)(1):
            (1) Combinations with market share below threshold.--
        Activities relating to health care services of any combination 
        of health care providers if the number of each type or 
        specialty of provider in question does not exceed 20 percent of 
        the total number of such type or specialty of provider in the 
        relevant market area.
            (2) Activities of medical self-regulatory entities.--
                    (A) In general.--Subject to subparagraph (B), any 
                activity of a medical self-regulatory entity relating 
                to standard setting or standard enforcement activities 
                that are designed to promote the quality of health care 
                provided to patients.
                    (B) Exception.--No activity of a medical self-
                regulatory entity may be deemed to fall under the safe 
                harbor established under this paragraph if the activity 
                is conducted for purposes of financial gain.
            (3) Participation in surveys.--The participation of a 
        provider of health care services in a written survey of the 
        prices of services, reimbursement levels, or the compensation 
        and benefits of employees and personnel, but only if--
                    (A) the survey is conducted by a third party, such 
                as a purchaser of health care services, governmental 
                entity, institution of higher education, or trade 
                association;
                    (B) the information provided by participants in the 
                survey is based on prices charged, reimbursements 
                received, or compensation and benefits paid prior to 
                the third month preceding the month in which the 
                information is provided; and
                    (C) if the results of the survey are disseminated, 
                the results are aggregated in a manner that ensures 
                that no recipient of the results may identify the 
                prices charged, reimbursement received, or compensation 
                and benefits paid by any particular provider.
            (4) Joint ventures for high technology and costly equipment 
        and services.--Any activity of a health care cooperative 
        venture relating to the purchase, operation, or marketing of 
        high technology or other expensive medical equipment, or the 
        provision of high cost or complex services, but only if the 
        number of participants in the venture does not exceed the 
        lowest number needed to support the venture. Other providers 
        may be included in the venture, but only if such other 
        providers could not purchase, operate, or market such equipment 
        or provide a competing service either alone or through the 
        formation of a competing venture.
            (5) Hospital mergers.--Activities relating to a merger of 2 
        hospitals if, during the 3-year period preceding the merger, 
        one of the hospitals had an average of 150 or fewer operational 
        beds and an average daily inpatient census of less than 50 
        percent of such beds.
            (6) Joint purchasing arrangements.--Any joint purchasing 
        arrangement among health care providers if--
                    (A) the purchases under the arrangement represent 
                less than 35 percent of the total sales of the product 
                or service purchased in the relevant market; and
                    (B) the cost of the products and services purchased 
                jointly accounts for less than 20 percent of the total 
                revenues from all products or services sold by each 
                participant in the joint purchasing arrangement.
            (7) Negotiations.--Activities consisting of good faith 
        negotiations to carry out any activity--
                    (A) described in this section,
                    (B) within an additional safe harbor designated by 
                the Attorney General under section 453,
                    (C) that is the subject of an application for a 
                certificate of review under section 454, or
                    (D) that is deemed a submission of a notification 
                under section 455(a)(2)(B),
        without regard to whether such an activity is carried out.

SEC. 453. DESIGNATION OF ADDITIONAL SAFE HARBORS.

    (a) In General.--
            (1) Solicitation of proposals.--Not later than 30 days 
        after the date of the enactment of this Act, the Attorney 
        General shall publish a notice in the Federal Register 
        soliciting proposals for additional safe harbors.
            (2) Review and report on proposed safe harbors.--Not later 
        than 180 days after the date of the enactment of this Act, the 
        Attorney General (in consultation with the Secretary of Health 
        and Human Services and the Chair of the Federal Trade 
        Commission) shall--
                    (A) review the proposed safe harbors submitted 
                under paragraph (1); and
                    (B) submit a report to Congress describing the 
                proposals to be included in the publication of 
                additional safe harbors described in paragraph (3) and 
                the proposals that are not to be so included, together 
                with explanations therefore.
            (3) Publication of additional safe harbors.--Not later than 
        180 days after the date of the enactment of this Act, the 
        Attorney General (in consultation with the Secretary of Health 
        and Human Services and the Chair of the Federal Trade 
        Commission) shall publish in the Federal Register proposed 
        additional safe harbors for purposes of section 451(a)(2) for 
        providers of health care services. Not later than 180 days 
        after publishing such proposed safe harbors in the Federal 
        Register, the Attorney General shall issue final rules 
        establishing such safe harbors.
    (b) Criteria for Safe Harbors.--In establishing safe harbors under 
subsection (a), the Attorney General shall take into account the 
following:
            (1) The extent to which a competitive or collaborative 
        activity will accomplish any of the following:
                    (A) An increase in access to health care services.
                    (B) The enhancement of the quality of health care 
                services.
                    (C) The establishment of cost efficiencies that 
                will be passed on to consumers, including economies of 
                scale and reduced transaction and administrative costs.
                    (D) An increase in the ability of health care 
                facilities to provide services in medically underserved 
                areas or to medically underserved populations.
                    (E) An improvement in the utilization of health 
                care resources or the reduction in the inefficient 
                duplication of the use of such resources.
            (2) Whether the designation of an activity as a safe harbor 
        under subsection (a) will result in the following outcomes:
                    (A) Health plans and other health care insurers, 
                consumers of health care services, and health care 
                providers will be better able to negotiate payment and 
                service arrangements which will reduce costs to 
                consumers.
                    (B) Taking into consideration the characteristics 
                of the particular purchasers and providers involved, 
                competition will not be unduly restricted.
                    (C) Equally efficient and less restrictive 
                alternatives do not exist to meet the criteria 
                described in paragraph (1).
                    (D) The activity will not unreasonably foreclose 
                competition by denying competitors a necessary element 
                of competition.

SEC. 454. CERTIFICATES OF REVIEW.

    (a) Establishment of Program.--In consultation with the Secretary 
and the Chair, the Attorney General shall (not later than 180 days 
after the date of the enactment of this Act) issue certificates of 
review in accordance with this section for providers of health care 
services and advise and assist any person with respect to applying for 
such a certificate of review.
    (b) Procedures for Application for Certificate.--
            (1) Form; content.--To apply for a certificate of review, a 
        person shall submit to the Attorney General a written 
        application which--
                    (A) specifies the activities relating to the 
                provision of health care services which satisfy the 
                criteria described in section 453(b) and which will be 
                included in the certificate; and
                    (B) is in a form and contains any information, 
                including information pertaining to the overall market 
                in which the applicant operates, required by rule or 
                regulation promulgated under section 457.
            (2) Publication of notice in federal register.--Within 10 
        days after an application submitted under paragraph (1) is 
        received by the Attorney General, the Attorney General shall 
        publish in the Federal Register a notice that announces that an 
        application for a certificate of review has been submitted, 
        identifies each person submitting the application, and 
        describes the conduct for which the application is submitted.
            (3) Establishment of procedures for issuance of 
        certificate.--In consultation with the Chair and the Secretary, 
        the Attorney General shall establish procedures to be used in 
        applying for and in determining whether to approve an 
        application for a certificate of review under this subtitle. 
        Under such procedures the Attorney General shall approve an 
        application if the Attorney General determines that the 
        activities to be covered under the certificate will satisfy the 
        criteria described in section 453(b) for additional safe 
        harbors designated under such section and that the benefits of 
        the issuance of the certificate will outweigh any disadvantages 
        that may result from reduced competition.
            (4) Timing for decision on application.--
                    (A) In general.--Within 90 days after the Attorney 
                General receives an application for a certificate of 
                review, the Attorney General shall determine whether 
                the applicant's health care market activities are in 
                accordance with the procedures described in paragraph 
                (3). If the Attorney General, with the concurrence of 
                the Secretary, determines that such procedures are met, 
                the Attorney General shall issue to the applicant a 
                certificate of review. The certificate of review shall 
                specify--
                            (i) the health care market activities to 
                        which the certificate applies,
                            (ii) the person to whom the certificate of 
                        review is issued, and
                            (iii) any terms and conditions the Attorney 
                        General or the Secretary deems necessary to 
                        assure compliance with the applicable 
                        procedures described in paragraph (3).
                    (B) Applications deemed approved.--If the Attorney 
                General does not reject an application before the 
                expiration of the 90-period beginning on the date the 
                Attorney General receives the application, the Attorney 
                General shall be deemed to have approved the 
                application and to have issued a certificate of review 
                relating to the applicant's health care market 
                activities covered under the application.
            (5) Expedited action.--If the applicant indicates a special 
        need for prompt disposition, the Attorney General and the 
        Secretary may expedite action on the application, except that 
        no certificate of review may be issued within 30 days of 
        publication of notice in the Federal Register under subsection 
        (b)(2).
            (6) Actions upon denial.--
                    (A) Notification.--If the Attorney General denies 
                in whole or in part an application for a certificate, 
                the Attorney General shall notify the applicant of the 
                Attorney General's determination and the reasons for 
                it.
                    (B) Request for reconsideration.--An applicant may, 
                within 30 days of receipt of notification that the 
                application has been denied in whole or in part, 
                request the Attorney General to reconsider the 
                determination. The Attorney General, with the 
                concurrence of the Secretary, shall notify the 
                applicant of the determination upon reconsideration 
                within 30 days of receipt of the request.
                    (C) Return of documents.--If the Attorney General 
                denies an application for the issuance of a certificate 
                of review and thereafter receives from the applicant a 
                request for the return of documents submitted by the 
                applicant in connection with the application for the 
                certificate, the Attorney General and the Secretary 
                shall return to the applicant, not later than 30 days 
                after receipt of the request, the documents and all 
                copies of the documents available to the Attorney 
                General and the Secretary, except to the extent that 
                the information has been made public under an exception 
                to the rule against public disclosure described in 
                subsection (g)(2)(B).
            (7) Fraudulent procurement.--A certificate of review shall 
        be void ab initio with respect to any health care market 
        activities for which the certificate was procured by fraud.
    (c) Amendment and Revocation of Certificates.--
            (1) Notification of changes.--Any applicant who receives a 
        certificate of review--
                    (A) shall promptly report to the Attorney General 
                any change relevant to the matters specified in the 
                certificate; and
                    (B) may submit to the Attorney General an 
                application to amend the certificate to reflect the 
                effect of the change on the conduct specified in the 
                certificate.
            (2) Amendment to certificate.--An application for an 
        amendment to a certificate of review shall be treated as an 
        application for the issuance of a certificate. The effective 
        date of an amendment shall be the date on which the application 
        for the amendment is submitted to the Attorney General.
            (3) Revocation.--
                    (A) Grounds for revocation.--In accordance with 
                this paragraph, the Attorney General may revoke in 
                whole or in part a certificate of review issued under 
                this section. The following shall be considered grounds 
                for the revocation of a certificate:
                            (i) After the expiration of the 2-year 
                        period beginning on the date a person's 
                        certificate is issued, the activities of the 
                        person have not substantially accomplished the 
                        purposes for the issuance of the certificate.
                            (ii) The person has failed to comply with 
                        any of the terms or conditions imposed under 
                        the certificate by the Attorney General or the 
                        Secretary under subsection (b)(4).
                            (iii) The activities covered under the 
                        certificate no longer satisfy the criteria set 
                        forth in section 453(b).
                    (B) Request for compliance information.--If the 
                Attorney General or Secretary has reason to believe 
                that any of the grounds for revocation of a certificate 
                of review described in subparagraph (A) may apply to a 
                person holding the certificate, the Attorney General 
                shall request such information from such person as the 
                Attorney General or the Secretary deems necessary to 
                resolve the matter of compliance. Failure to comply 
                with such request shall be grounds for revocation of 
                the certificate under this paragraph.
                    (C) Procedures for revocation.--If the Attorney 
                General or the Secretary determines that any of the 
                grounds for revocation of a certificate of review 
                described in subparagraph (A) apply to a person holding 
                the certificate, or that such person has failed to 
                comply with a request made under subparagraph (B), the 
                Attorney General shall give written notice of the 
                determination to such person. The notice shall include 
                a statement of the circumstances underlying, and the 
                reasons in support of, the determination. In the 60-day 
                period beginning 30 days after the notice is given, the 
                Attorney General shall revoke the certificate or modify 
                it as the Attorney General or the Secretary deems 
                necessary to cause the certificate to apply only to 
                activities that meet the procedures for the issuance of 
                certificates described in subsection (b)(2).
                    (D) Investigation authority.--For purposes of 
                carrying out this paragraph, the Attorney General may 
                conduct investigations in the same manner as the 
                Attorney General conducts investigations under section 
                3 of the Antitrust Civil Process Act, except that no 
                civil investigative demand may be issued to a person to 
                whom a certificate of review is issued if such person 
                is the target of such investigation.
    (d) Review of Determinations.--
            (1) Availability of review for certain actions.--If the 
        Attorney General denies, in whole or in part, an application 
        for a certificate of review or for an amendment to a 
        certificate, or revokes or modifies a certificate pursuant to 
        paragraph (3), the applicant or certificate holder (as the case 
        may be) may, within 30 days of the denial or revocation, bring 
        an action in any appropriate district court of the United 
        States to set aside the determination on the ground that such 
        determination is erroneous based on the preponderance of the 
        evidence.
            (2) No other review permitted.--Except as provided in 
        paragraph (1), no action by the Attorney General or the 
        Secretary pursuant to this subtitle shall be subject to 
        judicial review.
            (3) Effect of rejected application.--If the Attorney 
        General denies, in whole or in part, an application for a 
        certificate of review or for an amendment to a certificate, or 
        revokes or amends a certificate, neither the negative 
        determination nor the statement of reasons therefore shall be 
        admissible in evidence, in any administrative or judicial 
        proceeding, concerning any claim under the antitrust laws.
    (e) Publication of Decisions.--The Attorney General shall publish a 
notice in the Federal Register on a timely basis of each decision made 
with respect to an application for a certificate of review under this 
section or the amendment or revocation of such a certificate, in a 
manner that protects the confidentiality of any proprietary information 
relating to the application.
    (f) Annual Reports.--Every person to whom a certificate of review 
is issued shall submit to the Attorney General an annual report, in 
such form and at such time as the Attorney General may require, that 
contains any necessary updates to the information required under 
subsection (b) and a description of the activities of the holder under 
the certificate during the preceding year.
    (g) Restrictions on Disclosure of Information.--
            (1) Waiver of disclosure requirements under administrative 
        procedure act.--Information submitted by any person in 
        connection with the issuance, amendment, or revocation of a 
        certificate of review shall be exempt from disclosure under 
        section 552 of title 5, United States Code.
            (2) Restrictions on disclosure of commercial or financial 
        information.--
                    (A) In general.--Except as provided in subparagraph 
                (B), no officer or employee of the United States shall 
                disclose commercial or financial information submitted 
                in connection with the issuance, amendment, or 
                revocation of a certificate of review if the 
                information is privileged or confidential and if 
                disclosure of the information would cause harm to the 
                person who submitted the information.
                    (B) Exceptions.--Subparagraph (A) shall not apply 
                with respect to information disclosed--
                            (i) upon a request made by the Congress or 
                        any committee of the Congress,
                            (ii) in a judicial or administrative 
                        proceeding, subject to appropriate protective 
                        orders,
                            (iii) with the consent of the person who 
                        submitted the information,
                            (iv) in the course of making a 
                        determination with respect to the issuance, 
                        amendment, or revocation of a certificate of 
                        review, if the Attorney General deems 
                        disclosure of the information to be necessary 
                        in connection with making the determination,
                            (v) in accordance with any requirement 
                        imposed by a statute of the United States, or
                            (vi) in accordance with any rule or 
                        regulation promulgated under subsection (i) 
                        permitting the disclosure of the information to 
                        an agency of the United States or of a State on 
                        the condition that the agency will disclose the 
                        information only under the circumstances 
                        specified in clauses (i) through (v).
            (3) Prohibition against use of information to support or 
        answer claims under antitrust laws.--Any information disclosed 
        in an application for a certificate of review under this 
        section shall only be admissible into evidence in a judicial or 
        administrative proceeding for the sole purpose of establishing 
        that a person is entitled to the protections provided by such a 
        certificate.

SEC. 455. NOTIFICATIONS PROVIDING REDUCTION IN CERTAIN PENALTIES UNDER 
              ANTITRUST LAW FOR HEALTH CARE COOPERATIVE VENTURES.

    (a) Notifications Described.--
            (1) Submission of notification by venture.--Any party to a 
        health care cooperative venture, acting on such venture's 
        behalf, may, not later than 90 days after entering into a 
        written agreement to form such venture or not later than 90 
        days after the date of the enactment of this Act, whichever is 
        later, file with the Attorney General a written notification 
        disclosing--
                    (A) the identities of the parties to such venture,
                    (B) the nature and objectives of such venture, and
                    (C) such additional information as the Attorney 
                General may require by regulation.
            (2) Activities deemed submission of notification.--The 
        following health care cooperative ventures shall be deemed to 
        have filed a written notification with respect to the venture 
        under paragraph (1):
                    (A) Submission of application for certificate of 
                review.--Any health care cooperative venture for which 
                an application for a certificate of review is filed 
                with the Attorney General under section 453.
                    (B) Certain ventures.--Any health care cooperative 
                venture meeting the following requirements:
                            (i) The venture consists of a network of 
                        non-institutional providers not greater than--
                                    (I) in the case of a nonexclusive 
                                network in which the participating 
                                members are permitted to create or join 
                                other competing networks, 50 percent of 
                                the providers of health care services 
                                in the relevant geographic area and 50 
                                percent of the members of the provider 
                                specialty group in the relevant market; 
                                or
                                    (II) in the case of an exclusive 
                                network in which the participating 
                                members are not permitted to create or 
                                join other competing networks, 35 
                                percent of the providers of health care 
                                services in the relevant geographic 
                                area and 35 percent of the members of 
                                the provider specialty group in the 
                                relevant market.
                            (ii) Each member of the venture assumes 
                        substantial financial risk for the operation of 
                        the venture through risk-sharing arrangements, 
                        including (but not limited to)--
                                    (I) the acceptance of capitation 
                                contracts;
                                    (II) the acceptance of contracts 
                                with fee withholding mechanisms 
                                relating to the ability to meet 
                                established goals for utilization 
                                review and management; and
                                    (III) the holding by members of 
                                significant ownership or equity 
                                interests in the venture, where the 
                                capital contributed by the members is 
                                used to fund the operational costs of 
                                the venture such as administration, 
                                marketing, and computer-operated 
                                medical information, if the venture 
                                develops and operates comprehensive 
                                programs for utilization management and 
                                quality assurance that include controls 
                                over the use of institutional, 
                                specialized, and ancillary medical 
                                services.
            (3) Submission of additional information.--
                    (A) Request of attorney general.--At any time after 
                receiving a notification filed under paragraph (1), the 
                Attorney General may require the submission of 
                additional information or documentary material relevant 
                to the proposed health care cooperative venture.
                    (B) Parties to venture.--Any party to a health care 
                cooperative venture may submit such additional 
                information on the venture's behalf as may be 
                appropriate to ensure that the venture will receive the 
                protections provided under subsection (b).
                    (C) Required submission of information on changes 
                to venture.--A health care cooperative venture for 
                which a notification is in effect under this section 
                shall submit information on any change in the 
                membership of the venture not later than 90 days after 
                such change occurs.
            (4) Publication of notification.--
                    (A) Information made publicly available.--Not later 
                than 30 days after receiving a notification with 
                respect to a venture under paragraph (1), the Attorney 
                General shall publish in the Federal Register a notice 
                with respect to the venture that identifies the parties 
                to the venture and generally describes the purpose and 
                planned activity of the venture. Prior to its 
                publication, the contents of the notice shall be made 
                available to the parties to the venture.
                    (B) Restriction on disclosure of other 
                information.--All information and documentary material 
                submitted pursuant to this section and all information 
                obtained by the Attorney General in the course of any 
                investigation or case with respect to a potential 
                violation of the antitrust laws by the health care 
                cooperative venture (other than information and 
                material described in subparagraph (A)) shall be exempt 
                from disclosure under section 552 of title 5, United 
                States Code, and shall not be made publicly available 
                by any agency of the United States to which such 
                section applies except in a judicial proceeding in 
                which such information and material is subject to any 
                protective order.
            (5) Withdrawal of notification.--Any person who files a 
        notification pursuant to this section may withdraw such 
        notification before a publication by the Attorney General 
        pursuant to paragraph (4). Any person who is deemed to have 
        filed a notification under paragraph (2)(A) shall be deemed to 
        have withdrawn the notification if the certificate of review in 
        question is revoked or withdrawn under section 454.
            (6) No judicial review permitted.--Any action taken or not 
        taken by the Attorney General with respect to notifications 
        filed pursuant to this subsection shall not be subject to 
        judicial review.
    (b) Protections for Ventures Subject to Notification.--
            (1) In general.--
                    (A) Protections described.--The provisions of 
                paragraphs (2), (3), (4), and (5) shall apply with 
                respect to any action under the antitrust laws 
                challenging conduct within the scope of a notification 
                which is in effect pursuant to subsection (a)(1).
                    (B) Timing of protections.--The protections 
                described in this subsection shall apply to the venture 
                that is the subject of a notification under subsection 
                (a)(1) as of the earlier of--
                            (i) the date of the publication in the 
                        Federal Register of the notice published with 
                        respect to the notification; or
                            (ii) if such notice is not published during 
                        the period required under subsection (a)(4), 
                        the expiration of the 30-day period that begins 
                        on the date the Attorney General receives any 
                        necessary information required to be submitted 
                        under subsection (a)(1) or any additional 
                        information required by the Attorney General 
                        under subsection (a)(3)(A).
            (2) Applicability of rule of reason standard.--In any 
        action under the antitrust laws, the conduct of any person 
        which is within the scope of a notification filed under 
        subsection (a) shall not be deemed illegal per se, but shall be 
        judged on the basis of its reasonableness, taking into account 
        all relevant factors affecting competition, including, but not 
        limited to, effects on competition in relevant markets.
            (3) Limitation on recovery to actual damages and 
        interest.--Notwithstanding section 4 of the Clayton Act, any 
        person who is entitled to recovery under the antitrust laws for 
        conduct that is within the scope of a notification filed under 
        subsection (a) shall recover the actual damages sustained by 
        such person and interest calculated at the rate specified in 
        section 1961 of title 28, United States Code, for the period 
        beginning on the earliest date for which injury can be 
        established and ending on the date of judgment, unless the 
        court finds that the award of all or part of such interest is 
        unjust under the circumstances.
            (4) Award of attorney's fees and costs of suit.--
                    (A) In general.--In any action under the antitrust 
                laws brought against a health care cooperative venture 
                for conduct that is within the scope of a notification 
                filed under subsection (a), the court shall, at the 
                conclusion of the action--
                            (i) award to a substantially prevailing 
                        claimant the cost of suit attributable to such 
                        claim, including a reasonable attorney's fee, 
                        or
                            (ii) award to a substantially prevailing 
                        party defending against such claim the cost of 
                        such suit attributable to such claim, including 
                        reasonable attorney's fee, if the claim, or the 
                        claimant's conduct during litigation of the 
                        claim, was frivolous, unreasonable, without 
                        foundation, or in bad faith.
                    (B) Offset in cases of bad faith.--The court may 
                reduce an award made pursuant to subparagraph (A) in 
                whole or in part by an award in favor of another party 
                for any part of the cost of suit (including a 
                reasonable attorney's fee) attributable to conduct 
                during the litigation by any prevailing party that the 
                court finds to be frivolous, unreasonable, without 
                foundation, or in bad faith.
            (5) Restrictions on admissibility of information.--
                    (A) In general.--Any information disclosed in a 
                notification submitted under subsection (a)(1) and the 
                fact of the publication of a notification by the 
                Attorney General under subsection (a)(4) shall only be 
                admissible into evidence in a judicial or 
                administrative proceeding for the sole purpose of 
                establishing that a party to a health care cooperative 
                venture is entitled to the protections described in 
                this subsection.
                    (B) Actions of attorney general.--No action taken 
                by the Attorney General pursuant to this section shall 
                be admissible into evidence in any judicial or 
                administrative proceeding for the purpose of supporting 
                or answering any claim under the antitrust laws.

SEC. 456. REVIEW AND REPORTS ON SAFE HARBORS AND CERTIFICATES OF 
              REVIEW.

    (a) In General.--The Attorney General (in consultation with the 
Secretary and the Chair) shall periodically review the safe harbors 
described in section 452, the additional safe harbors designated under 
section 453, and the certificates of review issued under section 454, 
and--
            (1) with respect to the safe harbors described in section 
        452, submit such recommendations to Congress as the Attorney 
        General considers appropriate for modifications of such safe 
        harbors;
            (2) with respect to the additional safe harbors under 
        designated under section 453, issue proposed revisions to such 
        activities and publish the revisions in the Federal Register; 
        and
            (3) with respect to the certificates of review, submit a 
        report to Congress on the issuance of such certificates, and 
        shall include in the report a description of the effect of such 
        certificates on increasing access to high quality health care 
        services at reduced costs.
    (b) Recommendations for Legislation.--The Attorney General shall 
include in the reports submitted under subsection (a)(3) any 
recommendations of the Attorney General for legislation to improve the 
program for the issuance of certificates of review established under 
this subtitle.

SEC. 457. RULES, REGULATIONS, AND GUIDELINES.

    (a) Safe Harbors, Certificates, and Notifications.--The Attorney 
General, with the concurrence of the Secretary, shall promulgate such 
rules, regulations, and guidelines as are necessary to carry out 
sections 452, 453, 454, and 455, including guidelines defining or 
relating to relevant geographic and product markets for health care 
services and providers of health care services.
    (b) Guidance for Providers.--
            (1) In general.--To promote greater certainty regarding the 
        application of the antitrust laws to activities in the health 
        care market, the Attorney General, in consultation with the 
        Secretary and the Chair, shall (not later than 1 year after the 
        date of the enactment of this Act), taking into account the 
        criteria used to designate additional safe harbors under 
        section 453 and grant certificates of review under section 454, 
        publish guidelines--
                    (A) to assist providers of health care services in 
                analyzing whether the activities of such providers may 
                be subject to a safe harbor under sections 452 or 453; 
                and
                    (B) describing specific types of activities which 
                would meet the requirements for a certificate of review 
                under section 454, and summarizing the factual and 
                legal bases on which the activities would meet the 
                requirements.
            (2) Periodic update.--The Attorney General shall 
        periodically update the guidelines published under paragraph 
        (1) as the Attorney General considers appropriate.
            (3) Waiver of administrative procedure act.--Section 553 of 
        title 5, United States Code, shall not apply to the issuance of 
        guidelines under paragraph (1).

SEC. 458. ESTABLISHMENT OF HHS OFFICE OF HEALTH CARE COMPETITION 
              POLICY.

    (a) In General.--There is established within the Department of 
Health and Human Services an Office to be known as the Office of Health 
Care Competition Policy (hereafter in this section referred to as the 
``Office''). The Office shall be headed by a director, who shall be 
appointed by the Secretary.
    (b) Duties.--The Office shall coordinate the responsibilities of 
the Secretary under this subtitle and otherwise assist the Secretary in 
developing policies relating to the competitive and collaborative 
activities of providers of health care services.

SEC. 459. DEFINITIONS.

    In this subtitle, the following definitions shall apply:
            (1) The term ``antitrust laws''--
                    (A) has the meaning given it in subsection (a) of 
                the first section of the Clayton Act (15 U.S.C. 12(a)), 
                except that such term includes section 5 of the Federal 
                Trade Commission Act (15 U.S.C. 45) to the extent such 
                section applies to unfair methods of competition; and
                    (B) includes any State law similar to the laws 
                referred to in subparagraph (A).
            (2) The term ``Chair'' means the Chair of the Federal Trade 
        Commission.
            (3) The term ``health care cooperative venture'' means any 
        activities, including attempts to enter into or perform a 
        contract or agreement, carried out by 2 or more persons for the 
        purpose of providing health care services.
            (4) The term ``health care services'' means any services 
        for which payment may be made under a health plan, including 
        services related to the delivery or administration of such 
        services.
            (5) The term ``medical self-regulatory entity'' means a 
        medical society or association, a specialty board, a recognized 
        accrediting agency, or a hospital medical staff, and includes 
        the members, officers, employees, consultants, and volunteers 
        or committees of such an entity.
            (6) The term ``person'' includes a State or unit of local 
        government.
            (7) The term ``provider of health care services'' means any 
        individual or entity that is engaged in the delivery of health 
        care services in a State and that is required by State law or 
        regulation to be licensed or certified by the State to engage 
        in the delivery of such services in the State.
            (8) The term ``specialty group'' means a medical specialty 
        or subspecialty in which a provider of health care services may 
        be licensed to practice by a State (as determined by the 
        Secretary in consultation with the certification boards for 
        such specialties and subspecialties).
            (9) The term ``standard setting and enforcement 
        activities'' means--
                    (A) accreditation of health care practitioners, 
                health care providers, medical education institutions, 
                or medical education programs,
                    (B) technology assessment and risk management 
                activities,
                    (C) the development and implementation of practice 
                guidelines or practice parameters, or
                    (D) official peer review proceedings undertaken by 
                a hospital medical staff (or committee thereof) or a 
                medical society or association for purposes of 
                evaluating the professional conduct or quality of 
                health care provided by a medical professional.

TITLE V--SPECIAL ASSISTANCE FOR FRONTIER, RURAL, AND URBAN UNDERSERVED 
                                 AREAS

        Subtitle A--Frontier, Rural, and Urban Underserved Areas

SEC. 501. ESTABLISHMENT OF PROGRAM TO MAKE COMMUNITY-BASED PRIMARY 
              HEALTH GRANTS AND HEALTH SERVICE ACCESS GRANTS FOR 
              FEDERALLY-QUALIFIED HEALTH CENTERS.

    (a) In General.--Subpart I of part D of title III of the Public 
Health Service Act (42 U.S.C. 254b et seq.) is amended by adding at the 
end the following new section:

``SEC. 330A. GRANTS FOR EXPANDED ACCESS TO PRIMARY HEALTH SERVICES.

    ``(a) Community-Based Primary Health Care Grant Program.--
            ``(1) Establishment.--The Secretary shall establish and 
        administer a program to provide allotments to states to enable 
        such states to provide grants for the creation or enhancement 
        of community-based primary health care entities that provide 
        services to low-income or medically underserved populations.
            ``(2) Allotments to states.--
                    ``(A) In general.--From the amount available for 
                allotment under subsection (c) for a fiscal year, the 
                Secretary shall allot to each State an amount equal to 
                the product of the grant share of the State (as 
                determined under subparagraph (B)) multiplied by such 
                amount available.
                    ``(B) Grant share.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), the grant share of a State 
                        shall be the product of the need-adjusted 
                        population of the State (as determined under 
                        clause (ii)) multiplied by the Federal matching 
                        percentage of the State (as determined under 
                        clause (iii)), expressed as a percentage of the 
                        sum of the products of such factors for all 
                        States.
                            ``(ii) Need-adjusted population.--
                                    ``(I) In general.--For purposes of 
                                clause (i), the need-adjusted 
                                population of a State shall be the 
                                product of the total population of the 
                                State (as estimated by the Secretary of 
                                Commerce) multiplied by the need index 
                                of the State (as determined under 
                                subclause (B)).
                                    ``(II) Need index.--For purposes of 
                                subclause (I), the need index of a 
                                State shall be the ratio of--
                                            ``(aa) the weighted sum of 
                                        the geographic percentage of 
                                        the State (as determined under 
                                        subclause (III)), the poverty 
                                        percentage of the State (as 
                                        determined under subclause 
                                        (IV)), and the multiple grant 
                                        percentage of the State (as 
                                        determined under subclause 
                                        (V)); to
                                            ``(bb) the general 
                                        population percentage of the 
                                        State (as determined under 
                                        subclause (VI)).
                                    ``(III) Geographic percentage.--For 
                                purposes of subclause (II)(a), the 
                                geographic percentage of the State 
                                shall be the estimated population of 
                                the State that is residing in 
                                nonurbanized areas expressed as a 
                                percentage of the total nonurbanized 
                                population of all States. For purposes 
                                of the preceding sentence, the 
                                estimated population of the State that 
                                is residing in nonurbanized areas shall 
                                be one minus the urbanized population 
                                of the State (as determined using the 
                                most recent decennial census), 
                                expressed as a percentage of the total 
                                population of the State (as determined 
                                using the most recent decennial 
                                census), multiplied by the current 
                                estimated population of the State.
                                    ``(IV) Poverty percentage.--For 
                                purposes of subclause (II)(aa), the 
                                poverty percentage of the State shall 
                                be the estimated number of people 
                                residing in the State with incomes 
                                below 160 percent of the income 
                                official poverty line (as adjusted for 
                                actual costs and incomes in each State 
                                and as determined by the Office of 
                                Management and Budget) expressed as a 
                                percentage of the total number of such 
                                people residing in all States.
                                    ``(V) Multiple grant percentage.--
                                For purposes of subclause (II)(aa), the 
                                multiple grant percentage of the State 
                                shall be the amount of Federal funding 
                                received by the State under grants 
                                awarded under sections 329, 330, and 
                                340, expressed as a percentage of the 
                                total amounts received under such 
                                grants by all States. With respect to a 
                                State, such percentage shall not exceed 
                                twice the general population percentage 
                                of the State under subclause (VI) or be 
                                less than one-half of the States 
                                general population percentage.
                                    ``(VI) General population 
                                percentage.--For purposes of subclause 
                                (II)(bb), the general population 
                                percentage of the State shall be the 
                                total population of the State (as 
                                determined by the Secretary of 
                                Commerce) expressed as a percentage of 
                                the total population of all States.
                            ``(iii) Federal matching percentage.--
                                    ``(I) In general.--For purposes of 
                                clause (i), the Federal matching 
                                percentage of the State shall be equal 
                                to one, less the State matching 
                                percentage (as determined under 
                                subclause (B)).
                                    ``(II) State matching percentage.--
                                For purposes of clause (i), the State 
                                matching percentage of the State shall 
                                be 0.50 multiplied by the ratio of the 
                                total taxable resource percentage (as 
                                determined under subclause (III)) to 
                                the need-adjusted population of the 
                                State (as determined under clause 
                                (ii)).
                                    ``(III) Total taxable resource 
                                percentage.--For purposes of subclause 
                                (II), the total taxable resources 
                                percentage of the State shall be the 
                                total taxable resources of a State (as 
                                determined by the Secretary of the 
                                Treasury) expressed as a percentage of 
                                the sum of the total taxable resources 
                                of all States.
                    ``(C) Annual estimates.--
                            ``(i) In general.--If the Secretary of 
                        Commerce does not produce the annual estimates 
                        required under subparagraph (B)(ii)(IV), such 
                        estimates shall be determined by multiplying 
                        the percentage of the population of the State 
                        that is below 160 percent of the income 
                        official poverty line as determined using the 
                        most recent decennial census by the most recent 
                        estimate of the total population of the State. 
                        Except as provided in clause (ii), the 
                        calculations required under this clause shall 
                        be made based on the most recent 3-year average 
                        of the total taxable resources of individuals 
                        within the State.
                            ``(ii) District of columbia.--
                        Notwithstanding clause (i), the calculations 
                        required under such clause with respect to the 
                        District of Columbia shall be based on the most 
                        recent 3-year average of the personal income of 
                        individuals residing within the District as a 
                        percentage of the personal income for all 
                        individuals residing within the District, as 
                        determined by the Secretary of Commerce.
                            ``(iii) State of alaska.--Notwithstanding 
                        clause (i), the calculations required under 
                        such clause with respect to the State of Alaska 
                        shall be based on the quotient of--
                                    ``(I) the most recent 3-year 
                                average of the per capita income of 
                                individuals residing in the State; 
                                divided by
                                    ``(II) 1.25.
                    ``(D) Matching requirement.--A State that receives 
                an allotment under this subsection shall make available 
                State resources (either directly or indirectly) to 
                carry out this subsection in an amount that shall equal 
                the State matching percentage for the State (as 
                determined under subparagraph (B)(iii)(II)) divided by 
                the Federal matching percentage (as determined under 
                subparagraph (B)(iii)).
            ``(3) Application.--
                    ``(A) In general.--To be eligible to receive an 
                allotment under this subsection, a State shall prepare 
                and submit an application to the Secretary at such 
                time, in such manner, and containing such information 
                as the Secretary may by regulation require.
                    ``(B) Assurances.--A State application submitted 
                under subparagraph (A) shall contain an assurance 
                that--
                            ``(i) the State will use amounts received 
                        under its allotment consistent with the 
                        requirements of this subsection; and
                            ``(ii) the State will provide, from non-
                        Federal sources, the amounts required under 
                        paragraph (2)(D).
            ``(4) Use of funds.--
                    ``(A) In general.--The State shall use amounts 
                received under this subsection to award grants to 
                eligible public and nonprofit private entities, or 
                consortia of such entities, within the State to enable 
                such entities or consortia to provide services of the 
                type described in paragraph (2) of section 329(h) to 
                low-income or medically underserved populations.
                    ``(B) Eligibility.--To be eligible to receive a 
                grant under subparagraph (A), an entity or consortium 
                shall--
                            ``(i) prepare and submit to the 
                        administering entity of the State, an 
                        application at such time, in such manner, and 
                        containing such information as such 
                        administering entity may require, including a 
                        plan for the provision of services of the type 
                        described in subparagraph (C);
                            ``(ii) provide assurances that services 
                        will be provided under the grant at fee rates 
                        established or determined in accordance with 
                        section 330(e)(3)(F); and
                            ``(iii) provide assurances that in the case 
                        of services provided to individuals with health 
                        insurance, such insurance shall be used as the 
                        primary source of payment for such services.
                    ``(C) Services.--The services to be provided under 
                a grant awarded under subparagraph (A) shall include--
                            ``(i) one or more of the types of primary 
                        health services described in section 330(b)(1);
                            ``(ii) one or more of the types of 
                        supplemental health services described in 
                        section 330(b)(2); and
                            ``(iii) any other services determined 
                        appropriate by the administering entity of the 
                        State.
                    ``(D) Target populations.--Entities or consortia 
                receiving grants under subparagraph (A) shall, in 
                providing the services described in subparagraph (C), 
                substantially target populations of low-income or 
                medically underserved populations within the State who 
                reside in medically underserved or health professional 
                shortage areas, areas certified as underserved under 
                the rural health clinic program, or other areas 
                determined appropriate by the administering entity of 
                the State, within the State.
                    ``(E) Priority.--In awarding grants under 
                subparagraph (A), the State shall--
                            ``(i) give priority to entities or 
                        consortia that can demonstrate through the plan 
                        submitted under subparagraph (B) that--
                                    ``(I) the services provided under 
                                the grant will expand the availability 
                                of primary care services to the maximum 
                                number of low-income or medically 
                                underserved populations who have no 
                                access to such care on the date of the 
                                grant award; and
                                    ``(II) the delivery of services 
                                under the grant will be cost-effective; 
                                and
                            ``(ii) ensure that an equitable 
                        distribution of funds is achieved among urban 
                        and rural entities or consortia.
            ``(5) Reports and audits.--Each State shall prepare and 
        submit to the Secretary annual reports concerning the State's 
        activities under this subsection which shall be in such form 
        and contain such information as the Secretary determines 
        appropriate. Each such State shall establish fiscal control and 
        fund accounting procedures as may be necessary to assure that 
        amounts received under this subsection are being disbursed 
        properly and are accounted for, and include the results of 
        audits conducted under such procedures in the reports submitted 
        under this paragraph.
            ``(6) Payments.--
                    ``(A) Eligibility.--Each State for which an 
                application has been approved by the Secretary under 
                this subsection shall be eligible to receive payments 
                under this subsection for each fiscal year in an amount 
                not to exceed the State's allotment under paragraph (2) 
                to be expended by the State in accordance with the 
                terms of the application for the fiscal year for which 
                the allotment is to be made.
                    ``(B) Method of payments.--The Secretary may make 
                payments to a State in installments, and in advance or 
                by way of reimbursement, with necessary adjustments on 
                account of overpayments or underpayments, as the 
                Secretary may determine.
                    ``(C) State spending of payments.--Payments to a 
                State from the allotment under paragraph (2) for any 
                fiscal year must be expended by the State in that 
                fiscal year or in the succeeding fiscal year.
            ``(7) Definition.--As used in this subsection, the term 
        `administering entity of the State' means the agency or 
        official designated by the chief executive officer of the State 
        to administer the amounts provided to the State under this 
        section.
    ``(b) Health Services Access Grants.--
            ``(1) Establishment of program.--From amounts appropriated 
        under this subsection, the Secretary shall, acting through the 
        Bureau of Health Care Delivery Assistance, award grants under 
        this subsection to Federally Qualified Health Centers 
        (hereinafter referred to in this subsection as `FQHC's') and 
        other entities and organizations submitting applications under 
        this subsection (as described in paragraph (3)) for the purpose 
        of providing access to services for medically underserved 
        populations (as defined in section 330(b)(3)) or in high impact 
        areas (as defined in section 329(a)(5)) not currently being 
        served by a FQHC.
            ``(2) Eligibility for grants.--
                    ``(A) In general.--The Secretary shall award grants 
                under this subsection to entities or organizations 
                described in this subparagraph and subparagraph (B) 
                which have submitted a proposal to the Secretary to 
                expand such entities or organizations operations 
                (including expansions to new sites (as determined 
                necessary by the Secretary)) to serve medically 
                underserved populations or high impact areas not 
                currently served by a FQHC and which--
                            ``(i) have as of January 1, 1991, been 
                        certified by the Secretary as a FQHC under 
                        section 1905(l)(2)(B) of the Social Security 
                        Act; or
                            ``(ii) have submitted applications to the 
                        Secretary to qualify as FQHC's under such 
                        section 1905(l)(2)(B); or
                            ``(iii) have submitted a plan to the 
                        Secretary which provides that the entity will 
                        meet the requirements to qualify as a FQHC when 
                        operational.
                    ``(B) Non fqhc entities.--
                            ``(i) Eligibility.--The Secretary shall 
                        also make grants under this subsection to 
                        public or private nonprofit agencies, health 
                        care entities or organizations which meet the 
                        requirements necessary to qualify as a FQHC 
                        except, the requirement that such entity have a 
                        consumer majority governing board and which 
                        have submitted a proposal to the Secretary to 
                        provide those services provided by a FQHC as 
                        defined in section 1905(l)(2)(B) of the Social 
                        Security Act and which are designed to promote 
                        access to primary care services or to reduce 
                        reliance on hospital emergency rooms or other 
                        high cost providers of primary health care 
                        services, provided such proposal is developed 
                        by the entity or organizations (or such 
                        entities or organizations acting in a 
                        consortium in a community) with the review and 
                        approval of the Governor of the State in which 
                        such entity or organization is located.
                            ``(ii) Limitation.--The Secretary shall 
                        provide in making grants to entities or 
                        organizations described in this subparagraph 
                        that no more than 10 percent of the funds 
                        provided for grants under this subsection shall 
                        be made available for grants to such entities 
                        or organizations.
            ``(3) Application requirements.--
                    ``(A) In general.--In order to be eligible to 
                receive a grant under this subsection, a FQHC or other 
                entity or organization must submit an application in 
                such form and at such time as the Secretary shall 
                prescribe and which meets the requirements of this 
                paragraph.
                    ``(B) Requirements.--An application submitted under 
                this subsection must provide--
                            ``(i)(I) for a schedule of fees or payments 
                        for the provision of the services provided by 
                        the entity designed to cover its reasonable 
                        costs of operations; and
                            ``(II) for a corresponding schedule of 
                        discounts to be applied to such fees or 
                        payments, based upon the patient's ability to 
                        pay (determined by using a sliding scale 
                        formula based on the income of the patient);
                            ``(ii) assurances that the entity or 
                        organization provides services to persons who 
                        are eligible for benefits under title XVIII of 
                        the Social Security Act, for medical assistance 
                        under title XIX of such Act or for assistance 
                        for medical expenses under any other public 
                        assistance program or private health insurance 
                        program; and
                            ``(iii) assurances that the entity or 
                        organization has made and will continue to make 
                        every reasonable effort to collect 
                        reimbursement for services--
                                    ``(I) from persons eligible for 
                                assistance under any of the programs 
                                described in clause (ii); and
                                    ``(II) from patients not entitled 
                                to benefits under any such programs.
            ``(4) Limitations on use of funds.--
                    ``(A) In general.--From the amounts awarded to an 
                entity or organization under this subsection, funds may 
                be used for purposes of planning but may only be 
                expended for the costs of--
                            ``(i) assessing the needs of the 
                        populations or proposed areas to be served;
                            ``(ii) preparing a description of how the 
                        needs identified will be met; and
                            ``(iii) development of an implementation 
                        plan that addresses--
                                    ``(I) recruitment and training of 
                                personnel; and
                                    ``(II) activities necessary to 
                                achieve operational status in order to 
                                meet FQHC requirements under 
                                1905(l)(2)(B) of the Social Security 
                                Act.
                    ``(B) Recruiting, training and compensation of 
                staff.--From the amounts awarded to an entity or 
                organization under this subsection, funds may be used 
                for the purposes of paying for the costs of recruiting, 
                training and compensating staff (clinical and 
                associated administrative personnel (to the extent such 
                costs are not already reimbursed under title XIX of the 
                Social Security Act or any other State or Federal 
                program)) to the extent necessary to allow the entity 
                to operate at new or expended existing sites.
                    ``(C) Facilities and equipment.--From the amounts 
                awarded to an entity or organization under this 
                subsection, funds may be expended for the purposes of 
                acquiring facilities and equipment but only for the 
                cost of--
                            ``(i) construction of new buildings (to the 
                        extent that new construction is found to be the 
                        most cost-efficient approach by the Secretary);
                            ``(ii) acquiring, expanding, and 
                        modernizing of existing facilities;
                            ``(iii) purchasing essential (as determined 
                        by the Secretary) equipment; and
                            ``(iv) amortization of principal and 
                        payment of interest on loans obtained for 
                        purposes of site construction, acquisition, 
                        modernization, or expansion, as well as 
                        necessary equipment.
                    ``(D) Services.--From the amounts awarded to an 
                entity or organization under this subsection, funds may 
                be expanded for the payment of services but only for 
                the costs of--
                            ``(i) providing or arranging for the 
                        provision of all services through the entity 
                        necessary to qualify such entity as a FQHC 
                        under section 1905(l)(2)(B) of the Social 
                        Security Act;
                            ``(ii) providing or arranging for any other 
                        service that a FQHC may provide and be 
                        reimbursed for under title XIX of such Act; and
                            ``(iii) providing any unreimbursed costs of 
                        providing services as described in section 
                        330(a) to patients.
            ``(5) Priorities in the awarding of grants.--
                    ``(A) Certified fqhc's.--The Secretary shall give 
                priority in awarding grants under this subsection to 
                entities which have, as of January 1, 1991, been 
                certified as a FQHC under section 1905(l)(2)(B) of the 
                Social Security Act and which have submitted a proposal 
                to the Secretary to expand their operations (including 
                expansion to new sites) to serve medically underserved 
                populations for high impact areas not currently served 
                by a FQHC. The Secretary shall give first priority in 
                awarding grants under this subsection to those FQHCs or 
                other entities which propose to serve populations with 
                the highest degree of unmet need, and which can 
                demonstrate the ability to expand their operations in 
                the most efficient manner.
                    ``(B) Qualified fqhc's.--The Secretary shall give 
                second priority in awarding grants to entities which 
                have submitted applications to the Secretary which 
                demonstrate that the entity will qualify as a FQHC 
                under section 1905(l)(2)(B) of the Social Security Act 
                before it provides or arranges for the provision of 
                services supported by funds awarded under this 
                subsection, and which are serving or proposing to serve 
                medically underserved populations or high impact areas 
                which are not currently served (or proposed to be 
                served) by a FQHC.
                    ``(C) Expanded services and projects.--The 
                Secretary shall give third priority in awarding grants 
                in subsequent years to those FQHCs or other entities 
                which have provided for expanded services and project 
                and are able to demonstrate that such entity will incur 
                significant unreimbursed costs in providing such 
                expanded services.
            ``(6) Return of funds to secretary for costs reimbursed 
        from other sources.--To the extent that an entity or 
        organization receiving funds under this subsection is 
        reimbursed from another source for the provision of services to 
        an individual, and does not use such increased reimbursement to 
        expand services furnished, areas served, to compensate for 
        costs of unreimbursed services provided to patients, or to 
        promote recruitment, training, or retention of personnel, such 
        excess revenues shall be returned to the Secretary.
            ``(7) Termination of grants.--
                    ``(A) Failure to meet fqhc requirements.--
                            ``(A) In general.--With respect to any 
                        entity that is receiving funds awarded under 
                        this subsection and which subsequently fails to 
                        meet the requirements to qualify as a FQHC 
                        under section 1905(l)(2)(B) or is an entity 
                        that is not required to meet the requirements 
                        to qualify as a FQHC under section 
                        1905(l)(2)(B) of the Social Security Act but 
                        fails to meet the requirements of this 
                        subsection, the Secretary shall terminate the 
                        award of funds under this subsection to such 
                        entity.
                            ``(ii) Notice.--Prior to any termination of 
                        funds under this subsection to an entity, the 
                        entities shall be entitled to 60 days prior 
                        notice of termination and, as provided by the 
                        Secretary in regulations, an opportunity to 
                        correct any deficiencies in order to allow the 
                        entity to continue to receive funds under this 
                        subsection.
                    ``(B) Requirements.--Upon any termination of 
                funding under this subsection, the Secretary may (to 
                the extent practicable)--
                            ``(i) sell any property (including 
                        equipment) acquired or constructed by the 
                        entity using funds made available under this 
                        subsection or transfer such property to another 
                        FQHC, provided, that the Secretary shall 
                        reimburse any costs which were incurred by the 
                        entity in acquiring or constructing such 
                        property (including equipment) which were not 
                        supported by grants under this subsection; and
                            ``(ii) recoup any funds provided to an 
                        entity terminated under this subsection.
    ``(c) Authorization of Appropriations; Allocation Among Programs.--
            ``(1) Authorization.--There are authorized to be 
        appropriated to carry out this section, $400,000,000 for fiscal 
        year 1995, $800,000,000 for fiscal year 1996, $1,200,000,000 
        for fiscal year 1997, $1,600,000,000 for fiscal year 1998, and 
        $1,600,000,000 for fiscal year 1999.
            ``(2) Allocation.--Of the amounts appropriated pursuant to 
        the authorization described in paragraph (1) to carry out this 
        section in a fiscal year, 50 percent shall be allocated for 
        grants under subsection (a) and 50 percent shall be allocated 
        for grants under subsection (b).''.
    (b) Study and Report on Services Provided by Community Health 
Centers and Hospitals.--
            (1) In general.--The Secretary of Health and Human Services 
        (hereinafter referred to in this subsection as the 
        ``Secretary'') shall provide for a study to examine the 
        relationship and interaction between community health centers 
        and hospitals in providing services to individuals residing in 
        medically underserved areas. The Secretary shall ensure that 
        the National Rural Research Centers participate in such study.
            (2) Report.--The Secretary shall provide to the appropriate 
        committees of Congress a report summarizing the findings of the 
        study within 90 days of the end of each project year and shall 
        include in such report recommendations on methods to improve 
        the coordination of and provision of services in medically 
        underserved areas by community health centers and hospitals.
            (3) Authorization.--There are authorized to be appropriated 
        to carry out the study provided for in this subsection $150,000 
        for each of fiscal years 1995 and 1996.

SEC. 502. TAX INCENTIVES FOR PRACTICE IN FRONTIER, RURAL, AND URBAN 
              UNDERSERVED AREAS.

    (a) Nonrefundable Credit for Certain Primary Health Services 
Providers.--
            (1) In general.--Subpart A of part IV of subchapter A of 
        chapter 1 of the Internal Revenue Code of 1986 (relating to 
        nonrefundable personal credits) is amended by inserting after 
        section 25 the following new section:

``SEC. 25A. PRIMARY HEALTH SERVICES PROVIDERS.

    ``(a) Allowance of Credit.--In the case of a qualified primary 
health services provider, there is allowed as a credit against the tax 
imposed by this chapter for any taxable year in a mandatory service 
period an amount equal to the product of--
            ``(1) the lesser of--
                    ``(A) the number of months of such period occurring 
                in such taxable year, or
                    ``(B) 36 months, reduced by the number of months 
                taken into account under this paragraph with respect to 
                such provider for all preceding taxable years (whether 
                or not in the same mandatory service period), 
                multiplied by
            ``(2) $1,000 ($500 in the case of a qualified primary 
        health services provider who is a physician assistant or a 
        nurse practitioner).
    ``(b) Qualified Primary Health Services Provider.--For purposes of 
this section, the term `qualified primary health services provider' 
means any physician, physician assistant, or nurse practitioner who for 
any month during a mandatory service period is certified by the Bureau 
to be a primary health services provider who--
            ``(1) is providing primary health services--
                    ``(A) full time, and
                    ``(B) to individuals at least 80 percent of whom 
                reside in a health professional shortage area (as 
                defined in subsection (d)(2)),
            ``(2) is not receiving during such year a scholarship under 
        the National Health Service Corps Scholarship Program or a loan 
        repayment under the National Health Service Corps Loan 
        Repayment Program,
            ``(3) is not fulfilling service obligations under such 
        Programs, and
            ``(4) has not defaulted on such obligations.
    ``(c) Mandatory Service Period.--For purposes of this section, the 
term `mandatory service period' means the period of 60 consecutive 
calendar months beginning with the first month the taxpayer is a 
qualified primary health services provider.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Bureau.--The term `Bureau' means the Bureau of Health 
        Care Delivery and Assistance, Health Resources and Services 
        Administration of the United States Public Health Service.
            ``(2) Health professional shortage area.--The term `health 
        professional shortage area' means--
                    ``(A) a geographic area in which there are 6 or 
                fewer individuals residing per square mile,
                    ``(B) a health professional shortage area (as 
                defined in section 332(a)(1)(A) of the Public Health 
                Service Act),
                    ``(C) an area which is determined by the Secretary 
                of Health and Human Services as equivalent to an area 
                described in subparagraph (A) and which is designated 
                by the Bureau of the Census as not urbanized, or
                    ``(D) a community that is certified as underserved 
                by the Secretary for purposes of participation in the 
                rural health clinic program under title XVIII of the 
                Social Security Act.
            ``(3) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r) or the Social Security 
        Act.
            ``(4) Physician assistant; nurse practitioner.--The terms 
        `physician assistant' and `nurse practitioner' have the 
        meanings given to such terms by section 1861(aa)(5) of the 
        Social Security Act.
            ``(5) Primary health services provider.--The term `primary 
        health services provider' means a provider of primary health 
        services (as defined in section 330(b)(1) of the Public Health 
        Service Act).
    ``(e) Recapture of Credit.--
            ``(1) In general.--If, during any taxable year, there is a 
        recapture event, then the tax of the taxpayer under this 
        chapter for such taxable year shall be increased by an amount 
        equal to the product of--
                    ``(A) the applicable percentage, and
                    ``(B) the aggregate unrecaptured credits allowed to 
                such taxpayer under this section for all prior taxable 
                years.
            ``(2) Applicable recapture percentage.--
                    ``(A) In general.--For purposes of this subsection, 
                the applicable recapture percentage shall be determined 
                from the following table:

  
                                                         The applicable
                    ``If the recapture
                                                              recapture
                      event occurs during:
                                                         percentage is:
                            Months 1-24..............           100    
                            Months 25-36.............            75    
                            Months 37-48.............            50    
                            Months 49-60.............            25    
                            Months 61 and thereafter.            0.    
                    ``(B) Timing.--For purposes of subparagraph (A), 
                month 1 shall begin on the first day of the mandatory 
                service period.
            ``(3) Recapture event defined.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `recapture event' means the failure of the 
                taxpayer to be a qualified primary health services 
                provider for any month during any mandatory service 
                period.
                    ``(B) Cessation of designation.--The cessation of 
                the designation of any area as a rural health 
                professional shortage area after the beginning of the 
                mandatory service period for any taxpayer shall not 
                constitute a recapture event.
                    ``(C) Secretarial waiver.--The Secretary may waive 
                any recapture event caused by extraordinary 
                circumstances.
            ``(4) No credits against tax.--Any increase in tax under 
        this subsection shall not be treated as a tax imposed by this 
        chapter for purposes of determining the amount of any credit 
        under subpart A, B, or D of this part.''.
            (2) Clerical amendment.--The table of sections for subpart 
        A of part IV of subchapter A of chapter 1 of such Code is 
        amended by inserting after the item relating to section 25 the 
        following new item:

                              ``Sec. 25A. Primary health services 
                                        providers.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.
    (b) National Health Service Corps Loan Repayments Excluded From 
Gross Income.--
            (1) In general.--Part III of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 (relating to items 
        specifically excluded from gross income) is amended by 
        redesignating section 137 as section 138 and by inserting after 
        section 136 the following new section:

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

    ``(a) General Rule.--Gross income shall not include any qualified 
loan repayment.
    ``(b) Qualified Loan Repayment.--For purposes of this section, the 
term `qualified loan repayment' means any payment made on behalf of the 
taxpayer by the National Health Service Corps Loan Repayment Program 
under section 338B(g) of the Public Health Service Act.''.
            (2) Conforming amendment.--Paragraph (3) of section 338B(g) 
        of the Public Health Service Act is amended by striking 
        ``Federal, State, or local'' and inserting ``State or local''.
            (3) Clerical amendment.--The table of sections for part III 
        of subchapter B of chapter 1 of the Internal Revenue Code of 
        1986 is amended by striking the item relating to section 136 
        and inserting the following:

                              ``Sec. 137. National Health Service Corps 
                                        loan repayments.
                              ``Sec. 138. Cross references to other 
                                        Acts.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to payments made under section 338B(g) of the 
        Public Health Service Act after the date of the enactment of 
        this Act.
    (c) Expensing of Medical Equipment.--
            (1) In general.--Section 179 of the Internal Revenue Code 
        of 1986 (relating to election to expense certain depreciable 
        business assets) is amended--
                    (A) by striking paragraph (1) of subsection (b) and 
                inserting the following:
            ``(1) Dollar limitation.--
                    ``(A) General rule.--The aggregate cost which may 
                be taken into account under subsection (a) for any 
                taxable year shall not exceed $17,500.
                    ``(B) Rural health care property.--In the case of 
                rural health care property, the aggregate cost which 
                may be taken into account under subsection (a) for any 
                taxable year shall not exceed $32,500, reduced by the 
                amount otherwise taken into account under subsection 
                (a) for such year.''; and
                    (B) by adding at the end of subsection (d) the 
                following new paragraph:
            ``(11) Rural health care property.--For purposes of this 
        section, the term `rural health care property' means section 
        179 property--
                    ``(A) which is medical equipment used in the 
                screening, monitoring, observation, diagnosis, or 
                treatment of patients in a laboratory, medical, or 
                hospital environment,
                    ``(B) which is owned (directly or indirectly) and 
                used by a physician (as defined in section 1861(r) of 
                the Social Security Act) in the active conduct of such 
                physician's full-time trade or business of providing 
                primary health services (as defined in section 
                330(b)(1) of the Public Health Service Act) in a rural 
                health professional shortage area (as defined in 
                section 25A(d)(5)), and
                    ``(C) substantially all the use of which is in such 
                area.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to property placed in service in taxable years 
        beginning after the date of enactment of this Act.
    (d) Deduction for Student Loan Payments by Medical Professionals 
Practicing in Rural Areas.--
            (1) Interest on student loans not treated as personal 
        interest.--Section 163(h)(2) of the Internal Revenue Code of 
        1986 (defining personal interest) is amended by striking 
        ``and'' at the end of subparagraph (D), by striking the period 
        at the end of subparagraph (E) and inserting ``, and'', and by 
        adding at the end thereof the following new subparagraph:
            ``(F) any qualified medical education interest (within the 
        meaning of subsection (k)).''.
            (2) Qualified medical education interest defined.--Section 
        163 of such Code (relating to interest expenses) is amended by 
        redesignating subsection (k) as subsection (l) and by inserting 
        after subsection (j) the following new subsection:
    ``(k) Qualified Medical Education Interest of Medical Professionals 
Practicing in Rural Areas.--
            ``(1) In general.--For purposes of subsection (h)(2)(F), 
        the term `qualified medical education interest' means an amount 
        which bears the same ratio to the interest paid on qualified 
        educational loans during the taxable year by an individual 
        performing services under a qualified rural medical practice 
        agreement as--
                    ``(A) the number of months during the taxable year 
                during which such services were performed, bears to
                    ``(B) the number of months in the taxable year.
            ``(2) Dollar limitation.--The aggregate amount which may be 
        treated as qualified medical education interest for any taxable 
        year with respect to an individual shall not exceed $5,000.
            ``(3) Qualified rural medical practice agreement.--For 
        purposes of this subsection--
                    ``(A) In general.--The term `qualified rural 
                medical practice agreement' means a written agreement 
                between an individual and an applicable rural community 
                under which the individual agrees--
                            ``(i) in the case of a medical doctor, upon 
                        completion of the individual's residency (or 
                        internship if no residency is required), or
                            ``(ii) in the case of a registered nurse, 
                        nurse practitioner, or physician's assistant, 
                        upon completion of the education to which the 
                        qualified education loan relates, to perform 
                        full-time services as such a medical 
                        professional in the applicable rural community 
                        for a period of 24 consecutive months. An 
                        individual and an applicable rural community 
                        may elect to have the agreement apply for 36 
                        consecutive months rather than 24 months.
                    ``(B) Special rule for computing periods.--An 
                individual shall be treated as meeting the 24- or 36-
                consecutive month requirement under subparagraph (A) 
                if, during each 12-consecutive month period within 
                either such period, the individual performs full-time 
                services as a medical doctor, registered nurse, nurse 
                practitioner, or physician's assistant, whichever 
                applies, in the applicable rural community during 9 of 
                the months in such 12-consecutive month period. For 
                purposes of this subsection, an individual meeting the 
                requirements of the preceding sentence shall be treated 
                as performing services during the entire 12-month 
                period.
                    ``(C) Applicable rural community.--The term 
                `applicable rural community' means--
                            ``(i) any political subdivision of a State 
                        which--
                                    ``(I) has a population of 5,000 or 
                                less, and
                                    ``(II) has a per capita income of 
                                $15,000 or less, or
                            ``(ii) an Indian reservation which has a 
                        per capita income of $15,000 or less.
            ``(4) Qualified educational loan.--The term `qualified 
        educational loan' means any indebtedness to pay qualified 
        higher education expenses (within the meaning of section 
        135(c)(2)) and reasonable living expenses--
                    ``(A) which are paid or incurred--
                            ``(i) as a candidate for a degree as a 
                        medical doctor at an educational institution 
                        described in section 170(b)(1)(A)(ii), or
                            ``(ii) in connection with courses of 
                        instruction at such an institution necessary 
                        for certification as a registered nurse, nurse 
                        practitioner, or physician's assistant, and
                    ``(B) which are paid or incurred within a 
                reasonable time before or after such indebtedness is 
                incurred.
            ``(5) Recapture.--If an individual fails to carry out a 
        qualified rural medical practice agreement during any taxable 
        year, then--
                    ``(A) no deduction with respect to such agreement 
                shall be allowable by reason of subsection (h)(2)(F) 
                for such taxable year and any subsequent taxable year, 
                and
                    ``(B) there shall be included in gross income for 
                such taxable year the aggregate amount of the 
                deductions allowable under this section (by reason of 
                subsection (h)(2)(F)) for all preceding taxable years.
            ``(6) Definitions.--For purposes of this subsection, the 
        terms `registered nurse', `nurse practitioner', and 
        `physician's assistant' have the meaning given such terms by 
        section 1861 of the Social Security Act.''.
            (3) Deduction allowed in computing adjusted gross income.--
        Section 62(a) of such Code, as amended by sections 2002(c)(3) 
        and 2003(b), is amended by inserting after paragraph (17) the 
        following new paragraph:
            ``(18) Interest on student loans of rural health 
        professionals.--The deduction allowable by reason of section 
        163(h)(2)(F) (relating to student loan payments of medical 
        professionals practicing in rural areas).''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.

SEC. 503. RURAL EMERGENCY ACCESS CARE HOSPITALS.

    (a) Rural Emergency Access Care Hospitals Described.--Section 1861 
of the Social Security Act (42 U.S.C. 1395x) is amended by adding at 
the end the following new subsection:

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

    ``(oo)(1) The term `rural emergency access care hospital' means, 
for a fiscal year, a facility with respect to which the Secretary finds 
the following:
            ``(A) The facility is located in a rural area (as defined 
        in section 1886(d)(2)(D)).
            ``(B) The facility was a hospital under this title at any 
        time during the 5-year period that ends on the date of the 
        enactment of this subsection.
            ``(C) The facility is in danger of closing due to low 
        inpatient utilization rates and negative operating losses, and 
        the closure of the facility would limit the access of 
        individuals residing in the facility's service area to 
        emergency services.
            ``(D) The facility has entered into (or plans to enter 
        into) an agreement with a hospital with a participation 
        agreement in effect under section 1866(a), and under such 
        agreement the hospital shall accept patients transferred to the 
        hospital from the facility and receive data from and transmit 
        data to the  facility.
            ``(E) There is a practitioner who is qualified to provide 
        advanced cardiac life support services (as determined by the 
        State in which the facility is located) on-site at the facility 
        on a 24-hour basis.
            ``(F) A physician is available on-call to provide emergency 
        medical services on a 24-hour basis.
            ``(G) The facility meets such staffing requirements as 
        would apply under section 1861(e) to a hospital located in a 
        rural area, except that--
                    ``(i) the facility need not meet hospital standards 
                relating to the number of hours during a day, or days 
                during a week, in which the facility must be open, 
                except insofar as the facility is required to provide 
                emergency care on a 24-hour basis under subparagraphs 
                (E) and (F); and
                    ``(ii) the facility may provide any services 
                otherwise required to be provided by a full-time, on-
                site dietician, pharmacist, laboratory technician, 
                medical technologist, or radiological technologist on a 
                part-time, off-site basis.
            ``(H) The facility meets the requirements applicable to 
        clinics and facilities under subparagraphs (C) through (J) of 
        paragraph (2) of section 1861(aa) and of clauses (ii) and (iv) 
        of the second sentence of such paragraph (or, in the case of 
        the requirements of subparagraph (E), (F), or (J) of such 
        paragraph, would meet the requirements if any reference in such 
        subparagraph to a `nurse practitioner' or to `nurse 
        practitioners' was deemed to be a reference to a `nurse 
        practitioner or nurse' or to `nurse practitioners or nurses'), 
        except that in determining whether a facility meets the 
        requirements of this subparagraph, subparagraphs (E) and (F) of 
        that paragraph shall be applied as if any reference to a 
        `physician' is a reference to a physician as defined in section 
        1861(r)(1).
    ``(2) The term `rural emergency access care hospital services' 
means medical and other health services furnished by a rural emergency 
access care hospital.''.
    (b) Coverage of and Payment for Services.--Section 1832(a)(2) of 
the Social Security Act (42 U.S.C. 1395k(a)(2)) is amended--
            (1) by striking ``and'' at the end of subparagraph (I);
            (2) by striking the period at the end of subparagraph (J) 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(K) rural emergency access care hospital services 
                (as defined in section 1861(oo)(2)).''.
    (c) Payment Based on Payment for Outpatient Rural Primary Care 
Hospital Services.--
            (1) In general.--Section 1833(a)(6) of the Social Security 
        Act (42 U.S.C. 1395l(a)(6)) is amended by striking 
        ``services,'' and inserting ``services and rural emergency 
        access care hospital services,''.
            (2) Payment methodology described.--Section 1834(g) of such 
        Act (42 U.S.C. 1395m(g)) is amended--
                    (A) in the heading, by striking ``Services'' and 
                inserting ``Services and Rural Emergency Access Care 
                Hospital Services'';
                    (B) in paragraph (1), by striking ``during a year 
                before 1993'' and inserting ``during a year before the 
                prospective payment system described in paragraph (2) 
                is in effect'';
                    (C) in paragraph (1), by adding at the end the 
                following: ``The amount of payment shall be determined 
                under either method without regard to the amount of the 
                customary or other charge.'';
                    (D) in paragraph (2), by striking ``January 1, 
                1993,'' and inserting ``January 1, 1996,''; and
                    (E) by adding at the end the following new 
                paragraph:
            ``(3) Application of methods to payment for rural emergency 
        access care hospital services.--The amount of payment for rural 
        emergency access care hospital services provided during a year 
        shall be determined using the applicable method provided under 
        this subsection for determining payment for outpatient rural 
        primary care hospital services during the year.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fiscal years beginning on or after October 1, 1994.

SEC. 504. GRANTS TO STATES REGARDING AIRCRAFT FOR TRANSPORTING RURAL 
              VICTIMS OF MEDICAL EMERGENCIES.

    Part E of title XII of the Public Health Service Act (42 U.S.C. 
300d-51 et seq.) is amended by adding at the end thereof the following 
new section:

``SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL VICTIMS OF MEDICAL 
              EMERGENCIES.

    ``(a) In General.--The Secretary shall make grants to States to 
assist such States in the creation or enhancement of air medical 
transport systems that provide victims of medical emergencies in rural 
areas with access to treatments for the injuries or other conditions 
resulting from such emergencies.
    ``(b) Application and Plan.--
            ``(1) Application.--To be eligible to receive a grant under 
        subsection (a), a State shall prepare and submit to the 
        Secretary an application in such form, made in such manner, and 
        containing such agreements, assurances, and information, 
        including a State plan as required in paragraph (2), as the 
        Secretary determines to be necessary to carry out this section.
            ``(2) State plan.--An application submitted under paragraph 
        (1) shall contain a State plan that shall--
                    ``(A) describe the intended uses of the grant 
                proceeds and the geographic areas to be served;
                    ``(B) demonstrate that the geographic areas to be 
                served, as described under subparagraph (A), are rural 
                in nature;
                    ``(C) demonstrate that there is a lack of 
                facilities available and equipped to deliver advanced 
                levels of medical care in the geographic areas to be 
                served;
                    ``(D) demonstrate that in utilizing the grant 
                proceeds for the establishment or enhancement of air 
                medical services the State would be making a cost-
                effective improvement to existing ground-based or air 
                emergency medical service systems;
                    ``(E) demonstrate that the State will not utilize 
                the grant proceeds to duplicate the capabilities of 
                existing air medical systems that are effectively 
                meeting the emergency medical needs of the populations 
                they serve;
                    ``(F) demonstrate that in utilizing the grant 
                proceeds the State is likely to achieve a reduction in 
                the morbidity and mortality rates of the areas to be 
                served, as determined by the Secretary;
                    ``(G) demonstrate that the State, in utilizing the 
                grant proceeds, will--
                            ``(i) maintain the expenditures of the 
                        State for air and ground medical transport 
                        systems at a level equal to not less than the 
                        level of such expenditures maintained by the 
                        State for the fiscal year preceding the fiscal 
                        year for which the grant is received; and
                            ``(ii) ensure that recipients of direct 
                        financial assistance from the State under such 
                        grant will maintain expenditures of such 
                        recipients for such systems at a level at least 
                        equal to the level of such expenditures 
                        maintained by such recipients for the fiscal 
                        year preceding the fiscal year for which the 
                        financial assistance is received;
                    ``(H) demonstrate that persons experienced in the 
                field of air medical service delivery were consulted in 
                the preparation of the State plan; and
                    ``(I) contain such other information as the 
                Secretary may determine appropriate.
    ``(c) Considerations in Awarding Grants.--In determining whether to 
award a grant to a State under this section, the Secretary shall--
            ``(1) consider the rural nature of the areas to be served 
        with the grant proceeds and the services to be provided with 
        such proceeds, as identified in the State plan submitted under 
        subsection (b); and
            ``(2) give preference to States with State plans that 
        demonstrate an effective integration of the proposed air 
        medical transport systems into a comprehensive network or plan 
        for regional or statewide emergency medical service delivery.
    ``(d) State Administration and Use of Grant.--
            ``(1) In general.--The Secretary may not make a grant to a 
        State under subsection (a) unless the State agrees that such 
        grant will be administered by the State agency with principal 
        responsibility for carrying out programs regarding the 
        provision of medical services to victims of medical emergencies 
        or trauma.
            ``(2) Permitted uses.--A State may use amounts received 
        under a grant awarded under this section to award subgrants to 
        public and private entities operating within the State.
            ``(3) Opportunity for public comment.--The Secretary may 
        not make a grant to a State under subsection (a) unless that 
        State agrees that, in developing and carrying out the State 
        plan under subsection (b)(2), the State will provide public 
        notice with respect to the plan (including any revisions 
        thereto) and facilitate comments from interested persons.
    ``(e) Number of Grants.--The Secretary shall award grants under 
this section to not less than 7 States.
    ``(f) Reports.--
            ``(1) Requirement.--A State that receives a grant under 
        this section shall annually (during each year in which the 
        grant proceeds are used) prepare and submit to the Secretary a 
        report that shall contain--
                    ``(A) a description of the manner in which the 
                grant proceeds were utilized;
                    ``(B) a description of the effectiveness of the air 
                medical transport programs assisted with grant 
                proceeds; and
                    ``(C) such other information as the Secretary may 
                require.
            ``(2) Termination of fundings.--In reviewing reports 
        submitted under paragraph (1), if the Secretary determines that 
        a State is not using amounts provided under a grant awarded 
        under this section in accordance with the State plan submitted 
        by the State under subsection (b), the Secretary may terminate 
        the payment of amounts under such grant to the State until such 
        time as the Secretary determines that the State comes into 
        compliance with such plan.
    ``(g) Definition.--As used in this section, the term `rural areas' 
means geographic areas that are located outside of standard 
metropolitan statistical areas, as identified by the Secretary.
    ``(h) Authorization of Appropriations.--There are authorized to be 
appropriated to make grants under this section, $15,000,000 for fiscal 
year 1995, and such sums as may be necessary for each for fiscal years 
1996 and 1997.''.

SEC. 505. DEMONSTRATION PROJECTS TO ENCOURAGE THE DEVELOPMENT AND 
              OPERATION OF RURAL HEALTH NETWORKS.

    (a) In General.--
            (1) Establishment.--
                    (A) In general.--The Secretary may conduct a 
                demonstration project under which public and private 
                entities may apply for waivers of any of the provisions 
                of title XVIII and XIX of the Social Security Act in 
                order to operate rural health networks (as defined in 
                subsection (d)(1)) which--
                            (i) improve the access of medicare 
                        beneficiaries (as defined in subsection (d)(2)) 
                        and medicaid beneficiaries (as defined in 
                        subsection (d)(3)) to health care services;
                            (ii) improve the quality of health care 
                        services furnished to such beneficiaries; and
                            (iii) improve the outcomes of health care 
                        services furnished to such beneficiaries.
                    (B) Number of waivers.--The Secretary may grant 
                waivers to operate rural health networks under the 
                demonstration project conducted under this section to a 
                number of public and private entities determined 
                appropriate by the Secretary.
            (2) Applications.--
                    (A) In general.--In order to participate in the 
                demonstration project conducted under this subsection, 
                a public or private entity desiring to operate a rural 
                health network shall submit an application to the 
                Secretary which meets the requirements of subparagraph 
                (B). Such application shall be submitted in such manner 
                and at such time as the Secretary shall require.
                    (B) Requirements.--An application submitted by a 
                public or private entity under this subsection must 
                provide--
                            (i) a description of the health care 
                        providers participating in the rural health 
                        network;
                            (ii) a description of the geographic area 
                        served by the rural health networks;
                            (iii) information demonstrating that the 
                        public or private entity has consulted with 
                        interested parties with respect to the 
                        operation of the rural health network, 
                        including local government entities and 
                        community groups;
                            (iv) a description of the operational 
                        structure of the rural health network, 
                        including whether the network is a managed care 
                        entity or a fee-for-service provider;
                            (v) a proposal for how payments should be 
                        made to the rural health network under titles 
                        XVIII and XIX of the Social Security Act, 
                        including a statement as to whether such 
                        payments should be made pursuant to the 
                        provisions of such titles or pursuant to an 
                        alternative payment methodology described in 
                        the application;
                            (vi) assurances that medicare beneficiaries 
                        served by the rural health network will receive 
                        care and services of the same quality as the 
                        care and services received by other 
                        beneficiaries under title XVIII of the Social 
                        Security Act;
                            (vii) assurances that medicaid 
                        beneficiaries served by the rural health 
                        network will receive care and services of the 
                        same quality as the care and services received 
                        by other beneficiaries under title XIX of the 
                        Social Security Act;
                            (viii) a description of how the rural 
                        health network plans to handle any situation in 
                        which a medicare beneficiary or medicaid 
                        beneficiary served by the network receives 
                        health care services from providers outside the 
                        network;
                            (ix) assurances that the rural health 
                        network is furnishing health care services to a 
                        significant number of individuals who are not 
                        receiving benefits under titles XVIII and XIX 
                        of the Social Security Act;
                            (x) assurances that through sharing of 
                        facilities, land, and equipment, the rural 
                        health network will result in a reduction of 
                        total capital costs for the area served by the 
                        network;
                            (xi) a plan for cooperation in service 
                        delivery by health care providers participating 
                        in the rural health network that demonstrates 
                        the elimination of unnecessary duplication and, 
                        when appropriate, the consolidation of 
                        specialized services within the area served by 
                        the network;
                            (xii) evidence that the rural health 
                        network furnishes services which address the 
                        special access needs of the medicare 
                        beneficiaries and medicaid beneficiaries served 
                        by the network;
                            (xiii) evidence of capability and expertise 
                        in network planning and management; and
                            (xiv) such additional information as the 
                        Secretary determines appropriate.
                    (C) Approval of application.--
                            (i) Initial review.--Within 60 days after 
                        an application is submitted by a public or 
                        private entity under this subsection, the 
                        Secretary shall review and approve such 
                        application or provide the entity with a list 
                        of the modifications that are necessary for 
                        such application to be approved.
                            (ii) Additional review.--Within 60 days 
                        after a public or private entity resubmits any 
                        application under this subsection, the 
                        Secretary shall review and approve such 
                        application or provide the entity with a 
                        summary of which items included on the list 
                        provided to the State under clause (i) remain 
                        unsatisfied. An entity may resubmit an 
                        application under this subparagraph as many 
                        times as necessary to gain approval.
            (3) Coordination with other programs.--The Secretary shall 
        coordinate the demonstration project conducted under this 
        subsection with any other relevant Federal or State programs in 
        order to prevent duplication and improve the quality and 
        delivery of health care services to medicare beneficiaries and 
        medicaid beneficiaries.
            (4) Payments to networks.--
                    (A) In general.--The Secretary shall determine the 
                amount of payments to be made under titles XVIII and 
                XIX to a rural health network participating in a 
                demonstration project under this subsection based on 
                historic costs adjusted based on population and 
                geographic area as the Secretary determines appropriate 
                to take into account the costs of furnishing health 
                care services in the area served by the network.
                    (B) Budget neutrality.--The Secretary shall provide 
                that in carrying out the demonstration project under 
                this section, the aggregate payments under titles XVIII 
                and XIX of the Social Security Act to providers 
                participating in a rural health network shall be no 
                greater or lesser than what such payments would have 
                been if such providers were not participating in such 
                network.
            (5) Duration of waivers.--Any waiver granted under the 
        demonstration project conducted under this subsection shall be 
        granted for a period determined appropriate by the Secretary. 
        The Secretary may terminate such a waiver at any time if the 
        Secretary determines that the rural health network has failed 
        to furnish health care services in accordance with the terms of 
        the waiver.
            (6) Reports.--
                    (A) In general.--Each public or private entity 
                receiving a waiver to operate a rural health network 
                under the demonstration project conducted under this 
                subsection shall, through an independent entity, 
                evaluate the network and submit interim and final 
                reports to the Secretary at such times and containing 
                such information as the Secretary shall require.
                    (B) Report to congress.--Not later than 60 days 
                after the receipt of a final report by a rural health 
                network under subparagraph (A) the Secretary shall 
                submit a report to Congress.
    (b) Grants for the Development of Rural Health Networks.--
            (1) In general.--The Secretary shall award grants to public 
        and private entities which have received a waiver under the 
        demonstration project conducted under subsection (a) for the 
        purpose of planning and developing rural health networks.
            (2) Application process.--
                    (A) Submission of application.--Each public or 
                private entity desiring to receive a grant under this 
                subsection shall submit an application to the Secretary 
                at such time and containing such information as the 
                Secretary determines appropriate.
                    (B) Consideration of applications.--The Secretary 
                shall develop a system for determining the priority for 
                distributing grants under this subsection and such 
                grants shall be distributed in accordance with such 
                system.
            (3) Use of grant funds.--A State that is awarded grant 
        funds under this subsection may use such funds for all costs 
        associated with assisting public or private entities in 
        planning and developing rural health networks.
            (4) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as may be necessary for the 
        purposes of awarding grants under this subsection.
    (c) Grants for the Operation of Rural Health Networks.--
            (1) In general.--The Secretary shall award grants to public 
        and private entities which have received a waiver under the 
        demonstration project conducted under subsection (a) for the 
        operation of rural health networks.
            (2) Application process.--
                    (A) Submission of application.--Any public or 
                private entity which desires to receive a grant under 
                this subsection shall submit an application to the 
                Secretary at such time and containing such information 
                as the Secretary determines appropriate.
                    (B) Consideration of applications.--The Secretary 
                shall develop a system for determining the priority for 
                distributing grants under this subsection and such 
                grants shall be distributed in accordance with such 
                priority.
            (3) Use of grant funds.--A public or private entity that is 
        awarded grant funds under this subsection may use such funds 
        for all costs associated with operating a rural health network.
            (4) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as may be necessary for the 
        purposes of awarding grants under this subsection.
    (d) Definitions.--For purposes of this section:
            (1) Rural health network.--The term ``rural health 
        network'' means a formal cooperative arrangement between 
        participating hospitals, physicians, and other health care 
        providers which--
                    (A) furnishes health care services to medicare 
                beneficiaries and medicaid beneficiaries;
                    (B) is located in a rural area; and
                    (C) is governed by a board of directors selected by 
                participating health care providers.
            (2) Medicaid beneficiary.--The term ``medicaid 
        beneficiary'' means an individual receiving benefits under 
        title XIX of the Social Security Act who resides in a rural 
        area or who receives health care services from a health care 
        provider located in a rural area.
            (3) Medicare beneficiary.--The term ``medicare 
        beneficiary'' means an individual receiving benefits under 
        title XVIII of the Social Security Act who resides in a rural 
        area or who receives health care services from a health care 
        provider located in a rural area.
            (4) Rural area.--The term ``rural area'' means a rural area 
        as described in section 1886(d)(2)(D).

              Subtitle B--Primary Care Provider Education

SEC. 511. GRADUATE MEDICAL EDUCATION DEMONSTRATION PROJECTS.

    Part C of title VII of the Public Health Service Act (42 U.S.C. 
293j et seq.) is amended by adding at the end the following new 
section:

``SEC. 753. GRADUATE MEDICAL EDUCATION DEMONSTRATION PROJECTS.

    ``(a) State Demonstration Program.--
            ``(1) In general.--The Secretary of Health and Human 
        Services (hereafter referred to in this section as the 
        `Secretary') acting through the Administrator of the Health 
        Resources and Services Administration shall provide for the 
        establishment of demonstration projects in no more than 7 
        States for the purpose of testing and evaluating mechanisms to 
        increase the number and percentage of medical students entering 
        primary care practice relative to those entering nonprimary 
        care practice through the use of funds otherwise available for 
        direct graduate medical education costs under section 1886(h) 
        of the Social Security Act.
            ``(2) Applications.--
                    ``(A) In general.--Each State desiring to conduct a 
                demonstration project under this subsection shall 
                prepare and submit to the Secretary an application, at 
                such time, in such manner, and containing such 
                information as the Secretary may require, including--
                            ``(i) information demonstrating that the 
                        State has consulted with interested parties 
                        with respect to conducting a demonstration 
                        project under this subsection, including State 
                        medical associations, State hospital 
                        associations, and medical schools located in 
                        the State;
                            ``(ii) an assurance that in conducting a 
                        demonstration project under this subsection no 
                        single teaching hospital located in the State 
                        will lose more than 10 percent of such 
                        hospital's approved medical residency positions 
                        in any year; and
                            ``(iii) an explanation of a plan for 
                        evaluating the project.
                    ``(B) Approval of applications.--A State that 
                submits an application under subparagraph (A) may begin 
                a demonstration project under this subsection--
                            ``(i) upon approval of such application by 
                        the Secretary; or
                            ``(ii) at the end of the 60-day period 
                        beginning on the date such application is 
                        submitted, unless the Secretary denies the 
                        application during such period.
                    ``(C) Notice and comment.--A State shall issue a 
                public notice on the date it submits an application 
                under subparagraph (A) which contains a general 
                description of the proposed demonstration project. Any 
                interested party may comment on the proposed 
                demonstration project to the State or the Secretary 
                during the 30-day period beginning on the date the 
                public notice is issued.
            ``(3) Funding for demonstration projects.--
                    ``(A) Allocation of gme funds.--
                            ``(i) In general.--For each year a State 
                        conducts a demonstration project under this 
                        subsection the Secretary shall pay to such 
                        State an amount equal to the total amount 
                        available to hospitals located in the State 
                        under section 1886(h) of the Social Security 
                        Act. In the case of a State which establishes 
                        any health care training consortium under 
                        clause (ii)(II), the State shall designate a 
                        teaching hospital for each resident assigned to 
                        such a consortium which the Secretary shall use 
                        to calculate the State's payment amount under 
                        such section. Such teaching hospital shall be 
                        the hospital where the resident receives the 
                        majority of the resident's hospital-based, 
                        nonambulatory training experience.
                            ``(ii) Use of funds.--Each State that 
                        receives a payment under clause (i) shall use 
                        such funds to conduct activities which test and 
                        evaluate mechanisms to increase the number and 
                        percentage of medical students entering primary 
                        care practice relative to those entering 
                        nonprimary care practice as follows:
                                    ``(I) The State may apply weighting 
                                factors that are different than the 
                                weighting factors set forth in section 
                                1886(h)(4)(C) of the Social Security 
                                Act for the purpose of making direct 
                                graduate medical education payments. In 
                                applying different weighting factors, 
                                the State may require entities 
                                receiving payments to use a portion of 
                                such payments to increase stipends paid 
                                to primary care residents relative to 
                                nonprimary care residents.
                                    ``(II) The State may use funds to 
                                provide for the establishment and 
                                operation of any health care training 
                                consortium. The State shall make 
                                payments to any such consortium through 
                                an entity identified by the consortium 
                                as appropriate for receiving payment on 
                                behalf of the consortium. The 
                                consortium shall have discretion in 
                                determining the purposes for which such 
                                payments may be used and may direct 
                                such payments to consortium medical 
                                schools for primary care medical 
                                student education programs.
                    ``(B) Grants for planning and evaluations.--
                            ``(i) In general.--The Secretary may award 
                        grants to States conducting demonstration 
                        projects under this subsection for the purpose 
                        of developing and evaluating such projects. A 
                        State may conduct such an evaluation or 
                        contract with a private entity to conduct the 
                        evaluation. Each State desiring to receive a 
                        grant under this subparagraph shall prepare and 
                        submit to the Secretary an application, at such 
                        time, in such manner, and containing such 
                        information as the Secretary may require.
                            ``(ii) Authorization of appropriations.--
                        There are authorized to be appropriated such 
                        sums as may be necessary to carry out the 
                        purposes of this subparagraph for fiscal years 
                        1995 through 2003.
            ``(4) Maintenance of effort.--Any funds available for the 
        activities covered by a demonstration project conducted under 
        this subsection shall supplement, and shall not supplant, funds 
        that are expended for similar purposes under any State, 
        regional, or local program.
    ``(b) Consortium Demonstration Program.--
            ``(1) In general.--The Secretary, acting through the 
        Administrator of the Health Resources and Services 
        Administration, shall provide for the establishment of 
        demonstration projects for no more than 7 health care training 
        consortia which are located in States that are not conducting a 
        demonstration project under subsection (a) for the purpose of 
        testing and evaluating mechanisms to increase the number and 
        percentage of medical students entering primary care practice 
        relative to those entering nonprimary care practice through the 
        use of funds otherwise available for direct graduate medical 
        education costs under section 1886(h) of the Social Security 
        Act.
            ``(2) Applications.--
                    ``(A) In general.--Each health care training 
                consortium desiring to conduct a demonstration project 
                under this subsection shall prepare and submit to the 
                Secretary an application, at such time, in such manner, 
                and containing such information as the Secretary may 
                require, including an explanation of a plan for 
                evaluating the project.
                    ``(B) Approval of applications.--A consortium that 
                submits an application under subparagraph (A) may begin 
                a demonstration project under this subsection--
                            ``(i) upon approval of such application by 
                        the Secretary; or
                            ``(ii) at the end of the 60-day period 
                        beginnning on the date such application is 
                        submitted, unless the Secretary denies the 
                        application during such period.
            ``(3) Funding for demonstration projects.--
                    ``(A) Allocation of gme funds.--
                            ``(i) In general.--For each year a 
                        consortium conducts a demonstration project 
                        under this subsection the Secretary shall pay 
                        to such consortium an amount equal to the total 
                        amount available to hospitals that are members 
                        of the consortium under section 1886(h) of the 
                        Social Security Act. The consortium shall 
                        designate a teaching hospital for each resident 
                        assigned to the consortium which the Secretary 
                        shall use to calculate the consortium's payment 
                        amount under such section. Such teaching 
                        hospital shall be the hospital where the 
                        resident receives the majority of the 
                        resident's hospital-based, nonambulatory 
                        training experience.
                            ``(ii) Use of funds.--
                                    ``(I) Testing and evaluation.--Each 
                                consortium that receives a payment 
                                under clause (i) shall use such funds 
                                to conduct activities which test and 
                                evaluate mechanisms to increase the 
                                number and percentage of medical 
                                students entering primary care practice 
                                relative to those entering nonprimary 
                                care practice.
                                    ``(II) Establishment and 
                                operation.--Each consortium that 
                                receives a payment under clause (i) may 
                                also use such funds for the 
                                establishment and operation of the 
                                consortium. The Secretary shall make 
                                payments to the consortium through an 
                                entity identified by the consortium as 
                                appropriate for receiving payment on 
                                behalf of the consortium. The 
                                consortium shall have discretion in 
                                determining the purposes for which such 
                                payments may be used and may direct 
                                such payments to consortium medical 
                                schools for primary care medical 
                                student education programs.
                    ``(B) Grants for planning and evaluations.--
                            ``(i) In general.--The Secretary may award 
                        grants to consortia conducting demonstration 
                        projects under this subsection for the purpose 
                        of developing and evaluating such projects. 
                        Each consortium desiring to receive a grant 
                        under this subparagraph shall prepare and 
                        submit to the Secretary an application, at such 
                        time, in such manner, and containing such 
                        information as the Secretary may require.
                            ``(ii) Authorization of appropriations.--
                        There are authorized to be appropriated such 
                        sums as may be necessary to carry out the 
                        purposes of this subparagraph for fiscal years 
                        1995 through 2003.
            ``(4) Maintenance of effort.--Any funds available for the 
        activities covered by a demonstration project conducted under 
        this subsection shall supplement, and shall not supplant, funds 
        that are expended for similar purposes under any State, 
        regional, or local program.
    ``(c) Duration.--A demonstration project under this section shall 
be conducted for a period not to exceed 8 years. The Secretary may 
terminate a project if the Secretary determines that the State or 
consortium conducting the project is not in substantial compliance with 
the terms of the application approved by the Secretary under this 
section.
    ``(d) Evaluations and Reports.--
            ``(1) Evaluations.--Each State or consortium that conducts 
        a demonstration project under this section shall submit to the 
        Secretary a final evaluation of such project within 360 days of 
        the termination of such project and such interim evaluations as 
        the Secretary may require.
            ``(2) Reports to congress.--Not later than 360 days after 
        the first demonstration project under this section begins, and 
        annually thereafter for each year in which a project is 
        conducted under this section, the Secretary shall submit a 
        report to the appropriate committees of the Congress which 
        evaluates the effectiveness of the demonstration projects 
        conducted under this section and includes any legislative 
        recommendations determined appropriate by the Secretary.
    ``(e) Definitions.--For purposes of this section:
            ``(1) Ambulatory training sites.--The term `ambulatory 
        training sites' includes, but is not limited to, health 
        maintenance organizations, federally qualified health centers, 
        community health centers, migrant health centers, rural health 
        clinics, nursing homes, hospice, and other community-based 
        providers, including private practices.
            ``(2) Health care training consortium.--The term `health 
        care training consortium' means a State, regional, or local 
        entity which--
                    ``(A) includes teaching hospitals, ambulatory 
                training sites, and one or more schools of medicine 
                located in the same geographic region; and
                    ``(B) is operated in a manner intended to ensure 
                that by the end of the 8-year demonstration project at 
                least 50 percent of the graduates of the schools 
                included in the entity will become primary care 
                providers during the 1-year period immediately 
                following the date such graduates complete their 
                residency training.
            ``(3) Primary care.--The term `primary care' means family 
        practice, general internal medicine, and general pediatrics, 
        and may also include obstetrics and gynecology if such care is 
        person-centered, comprehensive care that is not organ or 
        problem specific.''.

SEC. 512. FUNDING UNDER MEDICARE FOR TRAINING IN NONHOSPITAL-OWNED 
              FACILITIES.

    (a) Residency Training Time in Nonhospital-Owned Facilities Counted 
in Determining Full-Time-Equivalent Residents for Direct Graduate 
Medical Education Payments.--Section 1886(h)(4)(E) of the Social 
Security Act (42 U.S.C. 1395ww(h)(4)(E)) is amended by striking ``, if 
the hospital incurs all, or substantially all, of the costs for the 
training program in that setting''.
    (b) Residency Training Time in Nonhospital-Owned Facilities Counted 
in Determining Full-Time-Equivalent Residents for Indirect Medical 
Education Payments.--
            (1) In general.--Section 1886(d)(5)(B)(iv) of the Social 
        Security Act (42 U.S.C. 1395ww(d)(5)(B)(iv)) is amended to read 
        as follows:
                            ``(iv) In determining such adjustment, the 
                        Secretary shall count interns and residents--
                                    ``(I) assigned to any patient 
                                service environment which is part of 
                                the hospital's approved medical 
                                residency training program (as defined 
                                in section 1886(h)(5)(A)), or
                                    ``(II) providing services at any 
                                entity receiving a grant under section 
                                330 of the Public Health Service Act 
                                that is under the ownership or control 
                                of the hospital (if the hospital incurs 
                                all, or substantially all, of the costs 
                                of the services furnished by such 
                                interns and residents),
                        as part of the calculation of the full-time-
                        equivalent number of interns and residents.''.
            (2) Adjustment of indirect teaching adjustment factor to 
        achieve budget neutrality.--Section 1886(d)(5)(B)(ii) of the 
        Social Security Act (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended 
        to read as follows:
                            ``(ii)(I) For purposes of clause (i)(II), 
                        the indirect teaching adjustment factor is 
                        equal to 1.89  x  (((1+r  x  t) to the nth 
                        power)-1).
                            ``(II) For purposes of subclause (i)--
                                    ``(aa) `r' is the ratio of the 
                                hospital's full-time-equivalent interns 
                                and residents to beds;
                                    ``(bb) `t' is the ratio of the 
                                number of full-time-equivalent interns 
                                and residents of all hospitals paid 
                                under this paragraph and used in the 
                                calculation of `r' on June 1, 1993, to 
                                the number of full-time-equivalent 
                                interns and residents of all hospitals 
                                paid under this paragraph and used in 
                                the calculation of `r' on June 1, 1994; 
                                and
                                    ``(cc) `n' equals .405.''.

SEC. 513. INCREASE IN NATIONAL HEALTH SERVICE CORPS FUNDING.

    (a) General Authorization.--Section 338H(b)(1) of the Public Health 
Service Act (42 U.S.C. 254q(b)(1)) is amended--
            (1) by striking ``1991, and'' and inserting ``1991,''; and
            (2) by striking ``through 2000'' and inserting ``, 1993, 
        and 1994, $120,000,000 for fiscal year 1995, and such sums as 
        may be necessary for each of the fiscal years 1996 through 
        1998''.
    (b) Grants for State Loan Repayment Programs.--Section 338I(i)(1) 
of such Act (42 U.S.C. 254q-1(i)(1)) is amended to read as follows:
            ``(1) In general.--The Secretary shall ensure that not less 
        than one-third of the amounts appropriated under section 
        338H(b)(1) for each fiscal year shall be made available for 
        grants under this section.''.

SEC. 514. INCREASE IN HEALTH PROFESSIONS FUNDING FOR PRIMARY CARE 
              PHYSICIANS.

    (a) Family Medicine.--Section 747(d)(1) of the Public Health 
Service Act (42 U.S.C. 293k(d)(1)) is amended by striking ``for each 
of'' and all that follows through ``1995'' and inserting ``for each of 
the fiscal years 1993 and 1994, $67,500,000 for fiscal year 1995, and 
such sums as may be necessary for each of the fiscal years 1996 and 
1997''.
    (b) General Internal Medicine and Pediatrics.--Section 748(c) of 
the Public Health Service Act (42 U.S.C. 293l(c)) is amended by 
striking ``for each of'' and all that follows through ``1995'' and 
inserting ``for each of the fiscal years 1993 and 1994, $31,250,000 for 
fiscal year 1995, and such sums as may be necessary for each of the 
fiscal years 1996 and 1997''.

SEC. 515. HEALTH PROFESSIONS FUNDING FOR NURSE PRACTITIONERS AND 
              PHYSICIAN ASSISTANTS PROGRAMS.

    (a) Physician Assistants.--Section 750(d)(1) of the Public Health 
Service Act (42 U.S.C. 293n(d)(1)) is amended by striking ``for each of 
the fiscal years 1993 through 1995'' and inserting ``for each of the 
fiscal years 1993 and 1994, $11,250,000 for fiscal year 1995, and such 
sums as may be necessary for each of the fiscal years 1996 and 1997.''.
    (b) Nurse Practitioners.--Section 822(d) of such Act (42 U.S.C. 
296m(d)) is amended by striking ``1994.'' and inserting ``1994, 
$25,000,000 for fiscal year 1995, and such sums as may be necessary for 
each of the fiscal years 1996 and 1997''.
    (c) Advanced Education or Professional Nurses.--Section 830(f)(1) 
of the Public Health Service Act (42 U.S.C. 297(f)(1)) is amended by 
striking ``for each of'' and all that follows through ``1995'' and 
inserting ``for each of the fiscal years 1993 and 1994, $25,000,000 for 
fiscal year 1995, and such sums as may be necessary for each of the 
fiscal years 1996 and 1997''.
    (d) Scholarship Program for Physician Assistants.--Part C of title 
VII of the Public Health Service Act (42 U.S.C. 293j et seq.), as 
amended by section 511, is further amended by adding at the end thereof 
the following new section:

``SEC. 754. PHYSICIAN ASSISTANT SCHOLARSHIP PROGRAM.

    ``(a) In General.--The Secretary may award grants to public and 
nonprofit private entities to enable such entities to meet the cost of 
providing traineeships for individuals in baccalaureate and advanced-
degree programs in order to educate such individuals to serve in and 
prepare for practice as physician assistants.
    ``(b) Special Consideration in Making Grants.--In awarding grants 
for traineeships under subsection (a), the Secretary shall give special 
consideration to entities submitting applications for the conduct of 
traineeship programs that conform to the guidelines established by the 
Secretary under section 750(b)(2).
    ``(c) Preferences in Awarding Grants.--The Secretary may award a 
grant under subsection (a) only if the grant applicant involved agrees 
that, in providing traineeships under such grant, the applicant will 
give preference to individuals who are residents of health professional 
shortage areas designated under section 332.
    ``(d) Use of Grant.--The Secretary may award a grant under 
subsection (a) only if the grant applicant involved agrees that 
traineeships provided with amounts received under the grant will pay 
all or part of the costs of--
            ``(1) the tuition, books, and fees of the physician 
        assistants' program with respect to which the traineeship is 
        provided; and
            ``(2) amounts necessary to pay the reasonable living 
        expenses of the individual involved during the period for which 
        the traineeship is provided.
    ``(e) Authorization of Appropriations.--For the purpose of carrying 
out this section, there are authorized to be appropriated $25,000,000 
for fiscal year 1995, and such sums as may be necessary for each of the 
fiscal years 1996 and 1997.''.

SEC. 516. STATE GRANTS TO INCREASE THE NUMBER OF PRIMARY CARE 
              PROVIDERS.

    Part B of title III of the Public Health Service Act (42 U.S.C. 243 
et seq.) is amended by adding at the end thereof the following new 
section:

``SEC. 320A. PRIMARY CARE DEMONSTRATION GRANTS.

    ``(a) Authorization.--The Secretary, acting through the Health 
Resources and Services Administration, shall award grants to States or 
nonprofit entities to fund not less than 10 demonstration projects to 
enable such States or entities to evaluate one or more of the 
following:
            ``(1) State mechanisms, including changes in the scope of 
        practice laws, to enhance the delivery of primary care by nurse 
        practitioners or physician assistants.
            ``(2) The feasibility of, and the most effective means to 
        train subspecialists to deliver primary care as primary care 
        providers.
            ``(3) State mechanisms to increase the supply or improve 
        the distribution of primary care providers.
    ``(b) Application.--To be eligible to receive a grant under this 
section a State or nonprofit entity shall prepare and submit to the 
Secretary an application at such time, in such manner, and containing 
such information as the Secretary may require. In reviewing such 
applications, the Secretary may not consider whether or not a State 
permits persons other than licensed physicians to perform legal 
abortions, and nothing in this Act or any other Act may be construed to 
conflict with any State law or regulation or program guideline 
pertaining to the professional qualifications required to perform or 
assist in abortions.
    ``(c) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $9,000,000 for fiscal year 
1995, and such sums as may be necessary for each of the fiscal years 
1996 through 1998.''.

 Subtitle C--Programs Relating to Primary and Preventive Care Services

SEC. 521. MATERNAL AND INFANT CARE COORDINATION.

    (a) Purpose.--It is the purpose of this section to assist States in 
the development and implementation of coordinated, multidisciplinary, 
and comprehensive primary health care and social services, and health 
and nutrition education programs, designed to improve maternal and 
child health.
    (b) Grants for Implementation of Programs.--
            (1) Authority.--The Secretary of Health and Human Services 
        (hereafter referred to in this section as the ``Secretary'') is 
        authorized to award grants to States to enable such States to 
        plan and implement coordinated, multidisciplinary, and 
        comprehensive primary health care and social service programs 
        targeted to pregnant women and infants.
            (2) Eligibility.--To be eligible to receive a grant under 
        this section, a State shall--
                    (A) prepare and submit to the Secretary an 
                application at such time, in such manner, and 
                containing such information as the Secretary may 
                require;
                    (B) as part of the State application, provide 
                assurances that under the program established with 
                amounts received under a grant, individuals will have 
                access to a broad range of primary health care 
                services, social services, and health and nutrition 
                programs designed to improve maternal and child health 
                and a description of how coordination of such services 
                will improve maternal and child health based upon the 
                goals of ``Healthy People 2000: National Health 
                Promotion and Disease Prevention Objectives'';
                    (C) as part of the State application, submit a plan 
                for the coordination of existing and proposed Federal 
                and State resources, as appropriate, including amounts 
                provided under the medicaid program under title XIX of 
                the Social Security Act, the special supplemental food 
                program under section 17 of the Child Nutrition Act of 
                1966, family planning programs, substance abuse 
                programs, State maternal and child health programs 
                funded under title V of the Social Security Act, 
                community and migrant health center programs under the 
                Public Health Service Act, and other publicly, or where 
                practicable, privately supported programs;
                    (D) demonstrate that the major service providers to 
                be involved, including private nonprofit entities 
                committed to improving maternal and infant health, are 
                committed to and involved in the program to be funded 
                with amounts received under the grant;
                    (E) with respect to States with high infant 
                mortality rates among minority populations, demonstrate 
                the involvement of major health, multiservice, 
                professional, or civic group representatives of such 
                minority groups in the planning and implementation of 
                the State program; and
                    (F) demonstrate that activities under the State 
                program are targeted to women of child-bearing age, 
                particularly those at risk for having low birth weight 
                babies.
            (3) Term of grant.--A grant awarded under this subsection 
        shall be for a period of 5 years.
            (4) Use of amounts.--Amounts received by a State under a 
        grant awarded under this subsection shall be used to establish 
        a State program to provide coordinated, multidisciplinary, and 
        comprehensive primary health care and social services, and 
        health and nutrition education program services, that are 
        designed to improve maternal and child health. Such amounts 
        shall not be used for the construction of buildings or the 
        purchase of medical equipment.
            (5) Maintenance of effort.--Any funds received by a State 
        under this subsection shall supplement, and shall not supplant, 
        funds that are expended for similar purposes by the State.
            (6) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as may be necessary to carry out 
        the purposes of this subsection for fiscal years 1995 through 
        1998.

SEC. 522. FRONTIER STATES.

    (a) In General.--Frontier States (including Alaska, Wyoming and 
Montana) may implement proposals to offer preventive services, 
including mobile preventive health centers which may include centers 
equipped with various preventive health services, such as mammography, 
eye care, X-ray, and other advanced equipment, and which may be located 
on aircraft, watercraft, or other forms of transportation.
    (b) Demonstration Projects.--Frontier States may participate in 
demonstration projects under this or any other Act to improve 
recruitment, retention, and training of rural providers, including 
nurse practitioners and physician assistants. Such demonstration 
projects shall give special consideration to the diverse needs of 
Frontier States, and shall involve cooperative agreements with a range 
of service delivery systems and teaching hospitals.

            Subtitle D--Limitation on Funding for Abortions

SEC. 531. LIMITATION ON FUNDING FOR ABORTIONS.

    (a) In General.--Nothing in this title shall be construed to 
authorize funding for any abortion, except to prevent the death of the 
mother.
    (b) No Requirement on State as a Condition of Funding.--The 
provision of abortion services by a State or any other entity shall not 
be regarded as a condition for participation in any grant or benefit 
authorized in this title.

                 TITLE VI--ADMINISTRATIVE COST SAVINGS

            Subtitle A--Standardization of Claims Processing

SEC. 601. ADOPTION OF DATA ELEMENTS, UNIFORM CLAIMS, AND UNIFORM 
              ELECTRONIC TRANSMISSION STANDARDS.

    (a) In General.--The Secretary shall adopt standards relating to 
each of the following:
            (1) Data elements for use in paper and electronic claims 
        processing under health insurance plans, as well as for use in 
        utilization review and management of care (including data 
        fields, formats, and medical nomenclature, and including plan 
        benefit and insurance information).
            (2) Uniform claims forms (including uniform procedure and 
        billing codes for uses with such forms and including 
        information on other health insurance plans that may be liable 
        for benefits).
            (3) Uniform electronic transmission of the data elements 
        (for purposes of billing and utilization review).
Standards under paragraph (3) relating to electronic transmission of 
data elements for claims for services shall supersede (to the extent 
specified in such standards) the standards adopted under paragraph (2) 
relating to the submission of paper claims for such services. Standards 
under paragraph (3) shall include protections to assure the 
confidentiality of patient-specific information and to protect against 
the unauthorized use and disclosure of information.
    (b) Use of Task Forces.--In adopting standards under this section--
            (1) the Secretary shall take into account the 
        recommendations of current task forces, including at least the 
        Workgroup on Electronic Data Interchange, National Uniform 
        Billing Committee, the Uniform Claim Task Force, and the 
        Computer-based Patient Record Institute;
            (2) the Secretary shall consult with the National 
        Association of Insurance Commissioners (and, with respect to 
        standards under subsection (a)(3), the American National 
        Standards Institute); and
            (3) the Secretary shall, to the maximum extent practicable, 
        seek to make the standards consistent with any uniform clinical 
        data sets which have been adopted and are widely recognized.
    (c) Deadlines for Promulgation.--The Secretary shall promulgate the 
standards under--
            (1) subsection (a)(1) relating to claims processing data, 
        by not later than 12 months after the date of the enactment of 
        this Act;
            (2) subsection (a)(2) (relating to uniform claims forms) by 
        not later than 12 months after the date of the enactment of 
        this Act; and
            (3)(A) subsection (a)(3) relating to transmission of 
        information concerning hospital and physicians services, by not 
        later than 24 months after the date of the enactment of this 
        Act, and
            (B) subsection (a)(3) relating to transmission of 
        information on other services, by such later date as the 
        Secretary may determine it to be feasible.
    (d) Report to Congress.--Not later than 3 years after the date of 
the enactment of this Act, the Secretary shall report to Congress 
recommendations regarding restructuring the medicare peer review 
quality assurance program given the availability of hospital data in 
electronic form.

SEC. 602. APPLICATION OF STANDARDS.

    (a) In General.--If the Secretary determines, at the end of the 2-
year period beginning on the date that standards are adopted under 
section 601 with respect to classes of services, that a significant 
number of claims for benefits for such services under health insurance 
plans are not being submitted in accordance with such standards, the 
Secretary may require, after notice in the Federal Register of not less 
than 6 months, that all providers of such services must submit claims 
to health insurance plans in accordance with such standards. The 
Secretary may waive the application of such a requirement in such cases 
as the Secretary finds that the imposition of the requirement would not 
be economically practicable.
    (b) Significant Number.--The Secretary shall make an affirmative 
determination described in subsection (a) for a class of services only 
if the Secretary finds that there would be a significant, measurable 
additional gain in efficiencies in the health care system that would be 
obtained by imposing the requirement described in such paragraph with 
respect to such services.
    (c) Application of Requirement.--
            (1) In general.--If the Secretary imposes the requirement 
        under subsection (a)--
                    (A) in the case of a requirement that imposes the 
                standards relating to electronic transmission of claims 
                for a class of services, each health care provider that 
                furnishes such services for which benefits are payable 
                under a health insurance plan shall transmit 
                electronically and directly to the plan on behalf of 
                the beneficiary involved a claim for such services in 
                accordance with such standards;
                    (B) any health insurance plan may reject any claim 
                subject to the standards adopted under section 601 but 
                which is not submitted in accordance with such 
                standards;
                    (C) it is unlawful for a health insurance plan (i) 
                to reject any such claim on the basis of the form in 
                which it is submitted if it is submitted in accordance 
                with such standards or (ii) to require, for the purpose 
                of utilization review or as a condition of providing 
                benefits under the plan, a provider to transmit medical 
                data elements that are inconsistent with the standards 
                established under section 601(a)(1); and
                    (D) the Secretary may impose a civil money penalty 
                on any provider that knowingly and repeatedly submits 
                claims in violation of such standards or on any health 
                insurance plan (other than a health insurance plan 
                described in paragraph (2)) that knowingly and 
                repeatedly rejects claims in violation of subparagraph 
                (B), in an amount not to exceed $100 for each such 
                claim.
        The provisions of section 1128A of the Social Security Act 
        (other than the first sentence of subsection (a) and other than 
        subsection (b)) shall apply to a civil money penalty under 
        subparagraph (D) in the same manner as such provisions apply to 
        a penalty or proceeding under section 1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health insurance plan--
                    (A) that is subject to regulation by a State, and
                    (B) with respect to which the Secretary finds 
                that--
                            (i) the State provides for application of 
                        the standards established under section 601, 
                        and
                            (ii) the State regulatory program provides 
                        for the appropriate and effective enforcement 
                        of such standards.
    (d) Treatment of Rejections.--If a plan rejects a claim pursuant to 
subsection (c)(1), the plan shall permit the person submitting the 
claim a reasonable opportunity to resubmit the claim on a form or in an 
electronic manner that meets the requirements for acceptance of the 
claim under such subsection.

SEC. 603. PERIODIC REVIEW AND REVISION OF STANDARDS.

    (a) In General.--The Secretary shall--
            (1) provide for the ongoing receipt and review of comments 
        and suggestions for changes in the standards adopted and 
        promulgated under section 601;
            (2) establish a schedule for the periodic review of such 
        standards; and
            (3) based upon such comments, suggestions, and review, 
        revise such standards and promulgate such revisions.
    (b) Application of Revised Standards.--If the Secretary under 
subsection (a) revises the standards described in 601, then, in the 
case of any claim for benefits submitted under a health insurance plan 
more than the minimum period (of not less than 6 months specified by 
the Secretary) after the date the revision is promulgated under 
subsection (a)(3), such standards shall apply under section 602 instead 
of the standards previously promulgated.

SEC. 604. HEALTH INSURANCE PLAN DEFINED.

    In this title, the term ``health insurance plan'' has the meaning 
given such term in section 101(b)(1) and includes--
            (1) the medicare program (under title XVIII of the Social 
        Security Act) and medicare supplemental health insurance, and
            (2) a State medicaid plan (approved under title XIX of such 
        Act).

             Subtitle B--Electronic Medical Data Standards

SEC. 611. MEDICAL DATA STANDARDS FOR HOSPITALS AND OTHER PROVIDERS.

    (a) Promulgation of Hospital Data Standards.--
            (1) In general.--Between July 1, 1995, and January 1, 1996, 
        the Secretary shall promulgate standards described in 
        subsection (b) for hospitals concerning electronic medical 
        data.
            (2) Revision.--The Secretary may from time to time revise 
        the standards promulgated under this subsection.
    (b) Contents of Data Standards.--The standards promulgated under 
subsection (a) shall include at least the following:
            (1) A definition of a standard set of data elements for use 
        by utilization and quality control peer review organizations.
            (2) A definition of the set of comprehensive data elements, 
        which set shall include for hospitals the standard set of data 
        elements defined under paragraph (1).
            (3) Standards for an electronic patient care information 
        system with data obtained at the point of care, including 
        standards to protect against the unauthorized use and 
        disclosure of information.
            (4) A specification of, and manner of presentation of, the 
        individual data elements of the sets and system under this 
        subsection.
            (5) Standards concerning the transmission of electronic 
        medical data.
            (6) Standards relating to confidentiality of patient-
        specific information.
The standards under this section shall be consistent with standards for 
data elements established under section 601.
    (c) Optional Data Standards for Other Providers.--
            (1) In general.--The Secretary may promulgate standards 
        described in paragraph (2) concerning electronic medical data 
        for providers that are not hospitals. The Secretary may from 
        time to time revise the standards promulgated under this 
        subsection.
            (2) Contents of data standards.--The standards promulgated 
        under paragraph (1) for non-hospital providers may include 
        standards comparable to the standards described in paragraphs 
        (2), (4), and (5) of subsection (b) for hospitals.
    (d) Consultation.--In promulgating and revising standards under 
this section, the Secretary shall--
            (1) consult with the American National Standards Institute, 
        hospitals, with the advisory commission established under 
        section 615, and with other affected providers, health 
        insurance plans, and other interested parties, and
            (2) take into consideration, in developing standards under 
        subsection (b)(1), the data set used by the utilization and 
        quality control peer review program under part B of title XI of 
        the Social Security Act.

SEC. 612. APPLICATION OF ELECTRONIC DATA STANDARDS TO CERTAIN 
              HOSPITALS.

    (a) Medicare Requirement for Sharing of Hospital Information.--As 
of January 1, 1996, subject to paragraph (2), each hospital, as a 
requirement of each participation agreement under section 1866 of the 
Social Security Act, shall--
            (1) maintain clinical data included in the set of 
        comprehensive data elements under section 611(b)(2) in 
        electronic form on all inpatients,
            (2) upon request of the Secretary or of a utilization and 
        quality control peer review organization (with which the 
        Secretary has entered into a contract under part B of title XI 
        of such Act), transmit electronically the data set, and
            (3) upon request of the Secretary, or of a fiscal 
        intermediary or carrier, transmit electronically any data (with 
        respect to a claim) from such data set,
in accordance with the standards promulgated under section 611(a).
    (b) Waiver Authority.--Until January 1, 2000:
            (1) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is a small 
        rural hospital, for such period as the hospital demonstrates 
        compliance with such requirements would constitute an undue 
        financial hardship.
            (2) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is in the 
        process of developing a system to provide the required data set 
        and executes agreements with its fiscal intermediary and its 
        utilization and quality control peer review organization that 
        the hospital will meet the requirements of subsection (a) by a 
        specified date (not later than January 1, 2000).
            (3) The Secretary may waive the application of the 
        requirement of subsection (a)(1) for a hospital that agrees to 
        obtain from its records the data elements that are needed to 
        meet the requirements of paragraphs (2) and (3) of subsection 
        (a) and agrees to subject its data transfer process to a 
        quality assurance program specified by the Secretary.
    (c) Application to Hospitals of the Department of Veterans 
Affairs.--
            (1) In general.--The Secretary of Veterans Affairs shall 
        provide that each hospital of the Department of Veterans 
        Affairs shall comply with the requirements of subsection (a) in 
        the same manner as such requirements would apply to the 
        hospital if it were participating in the Medicare program.
            (2) Waiver.--The Secretary of Veterans Affairs may waive 
        the application of such requirements to a hospital in the same 
        manner as the Secretary of Health and Human Services may waive 
        under subsection (b) the application of the requirements of 
        subsection (a).

SEC. 613. ELECTRONIC TRANSMISSION TO FEDERAL AGENCIES.

    (a) In General.--Effective January 1, 2000, if a provider is 
required under a Federal program to transmit a data element that is 
subject to a presentation or transmission standard (as defined in 
subsection (b)), the head of the Federal agency responsible for such 
program (if not otherwise authorized) is authorized to require the 
provider to present and transmit the data element electronically in 
accordance with such a standard.
    (b) Presentation or Transmission Standard Defined.--In subsection 
(a), the term ``presentation or transmission standard'' means a 
standard, promulgated under subsection (b) or (c) of section 611, 
described in paragraph (4) or (5) of section 611(b).

SEC. 614. LIMITATION ON DATA REQUIREMENTS WHERE STANDARDS IN EFFECT.

    (a) In General.--If standards with respect to data elements are 
promulgated under section 611 with respect to a class of provider, a 
health insurance plan may not require, for the purpose of utilization 
review or as a condition of providing benefits under the plan, that a 
provider in the class--
            (1) provide any data element not in the set of 
        comprehensive data elements specified under such standards, or
            (2) transmit or present any such data element in a manner 
        inconsistent with the applicable standards for such 
        transmission or presentation.
    (b) Compliance.--
            (1) In general.--The Secretary may impose a civil money 
        penalty on any health insurance plan (other than a health 
        insurance plan described in paragraph (2)) that fails to comply 
        with subsection (a) in an amount not to exceed $100 for each 
        such failure. The provisions of section 1128A of the Social 
        Security Act (other than the first sentence of subsection (a) 
        and other than subsection (b)) shall apply to a civil money 
        penalty under this paragraph in the same manner as such 
        provisions apply to a penalty or proceeding under section 
        1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health insurance plan that is 
        subject to regulation by a State, if the Secretary finds that--
                    (A) the State provides for application of the 
                requirement of subsection (a), and
                    (B) the State regulatory program provides for the 
                appropriate and effective enforcement of such 
                requirement with respect to such plans.

SEC. 615. ADVISORY COMMISSION.

    (a) In General.--The Secretary shall establish an advisory 
commission including hospital executives, hospital data base managers, 
physicians, health services researchers, and technical experts in 
collection and use of data and operation of data systems. Such 
commission shall include, as ex officio members, a representative of 
the Director of the National Institutes of Health, the Administrator 
for Health Care Policy and Research, the Secretary of Veterans Affairs, 
and the Director of the Centers for Disease Control.
    (b) Functions.--The advisory commission shall monitor and advise 
the Secretary concerning--
            (1) the standards established under this subtitle, and
            (2) operational concerns about the implementation of such 
        standards under this subtitle.
    (c) Staff.--From the amounts appropriated under subsection (d), the 
Secretary shall provide sufficient staff to assist the advisory 
commission in its activities under this section.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated $2,000,000 for each of fiscal years 1995 through 2000 to 
carry out this section.

     Subtitle C--Development and Distribution of Comparative Value 
                              Information

SEC. 621. STATE COMPARATIVE VALUE INFORMATION PROGRAMS FOR HEALTH CARE 
              PURCHASING.

    (a) Purpose.--In order to assure the availability of comparative 
value information to purchasers of health care in each State, the 
Secretary shall determine whether each State is developing and 
implementing a health care value information program that meets the 
criteria and schedule set forth in subsection (b).
    (b) Criteria and Schedule for State Programs.--The criteria and 
schedule for a State health care value information program in this 
subsection shall be specified by the Secretary as follows:
            (1) The State begins promptly after enactment of this Act 
        to develop (directly or through contractual or other 
        arrangements with 1 or more States, coalitions of health 
        insurance purchasers, other entities, or any combination of 
        such arrangements) information systems regarding comparative 
        health values.
            (2) The information contained in such systems covers at 
        least the average prices of common health care services (as 
        defined in subsection (d)) and health insurance plans, and, 
        where available, measures of the variability of these prices 
        within a State or other market areas.
            (3) The information described in paragraph (2) is made 
        available within the State beginning not later than 1 year 
        after the date of the enactment of this Act, and is revised as 
        frequently as reasonably necessary, but at intervals of no 
        greater than 1 year.
            (4) Not later than 6 years after the date of the enactment 
        of this Act the State has developed information systems that 
        provide comparative costs, quality, and outcomes data with 
        respect to health insurance plans and hospitals and made the 
        information broadly available within the relevant market areas.
Nothing in this section shall preclude a State from providing 
additional information, such as information on prices and benefits of 
different health insurance plans, available.
    (c) Grants to States for the Development of State Programs.--
            (1) Grant authority.--The Secretary may make grants to each 
        State to enable such State to plan the development of its 
        health care value information program and, if necessary, to 
        initiate the implementation of such program. Each State seeking 
        such a grant shall submit an application therefor, containing 
        such information as the Secretary finds necessary to assure 
        that the State is likely to develop and implement a program in 
        accordance with the criteria and schedule in subsection (b).
            (2) Offset authority.--If, at any time within the 3-year 
        period following the receipt by a State of a grant under this 
        subsection, the Secretary is required by section 622 to 
        implement a health care information program in the State, the 
        Secretary may recover the amount of the grant under this 
        subsection by offset against any other amount payable to the 
        State under the Social Security Act. The amount of the offset 
        shall be made available (from the appropriation account with 
        respect to which the offset was taken) to the Secretary to 
        carry out such section.
            (3) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as are necessary to make grants 
        under this subsection, to remain available until expended.
    (d) Common Health Care Services Defined.--In this section, the term 
``common health care services'' includes such procedures as the 
Secretary may specify and any additional health care services which a 
State may wish to include in its comparative value information program.
    (e) State Defined.--In this title, the term ``State'' includes the 
District of Columbia, Puerto Rico, the Virgin Islands, Guam, and 
American Samoa.

SEC. 622. FEDERAL IMPLEMENTATION.

    (a) In General.--If the Secretary finds, at any time, that a State 
has failed to develop or to continue to implement a health care value 
information program in accordance with the criteria and schedule in 
section 621(b), the Secretary shall take the actions necessary, 
directly or through grants or contract, to implement a comparable 
program in the State.
    (b) Fees.--Fees may be charged by the Secretary for the information 
materials provided pursuant to a program under this section. Any 
amounts so collected shall be deposited in the appropriation account 
from which the Secretary's costs of providing such materials were met, 
and shall remain available for such purposes until expended.

SEC. 623. COMPARATIVE VALUE INFORMATION CONCERNING FEDERAL PROGRAMS.

    (a) Development.--The head of each Federal agency with 
responsibility for the provision of health insurance or of health care 
services to individuals shall promptly develop health care value 
information relating to each program that such head administers and 
covering the same types of data that a State program meeting the 
criteria of section 621(b) would provide.
    (b) Dissemination of Information.--Such information shall be made 
generally available to States and to providers and consumers of health 
care services.

             Subtitle D--Preemption of State Quill Pen Laws

SEC. 631. PREEMPTION OF STATE QUILL PEN LAWS.

    (a) In General.--Effective January 1, 1996, no effect shall be 
given to any provision of State law that requires medical or health 
insurance records (including billing information) to be maintained in 
written, rather than electronic form.
    (b) Secretarial Authority.--The Secretary may issue regulations to 
carry out subsection (a). Such regulations may provide for such 
exceptions to subsection (a) as the Secretary determines to be 
necessary to prevent fraud and abuse, with respect to controlled 
substances, and in such other cases as the Secretary deems appropriate.

               TITLE VIII--ANTI-FRAUD AND ANTI-RATIONING

         Subtitle A--Criminal Prosecution of Health Care Fraud

SEC. 701. PENALTIES FOR HEALTH CARE FRAUD.

    (a) 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) Offense.--Whoever, being a health care provider, knowingly 
engages in any scheme or artifice to defraud any person in connection 
with the provision of health care shall be fined under this title or 
imprisoned not more than 5 years, or both.
    ``(b) Definition.--In this section, the term `health care provider' 
means--
            ``(1) a physician, nurse, dentist, therapist, pharmacist, 
        or other professional provider of health care; and
            ``(2) a hospital, health maintenance organization, 
        pharmacy, laboratory, clinic, or other health care facility or 
        a provider of medical services, medical devices, medical 
        equipment, or other medical supplies.
    (b) 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 new item:

``1347. Health care fraud.''.

SEC. 702. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
              CONVICTION.

    Section 3059 of title 18, United States Code, is amended by adding 
at the end the following new subsection:
    ``(c)(1) In special circumstances and in the Attorney General's 
sole discretion, the Attorney General may make a payment of up to 
$10,000 to a person who furnishes information unknown to the Government 
relating to a possible prosecution under section 1101.
    ``(2) A person is not eligible for a payment under paragraph (1) 
if--
            ``(A) the person is a current or former officer or employee 
        of a Federal or State government agency or instrumentality who 
        furnishes information discovered or gathered in the course of 
        government employment;
            ``(B) the person knowingly participated in the offense;
            ``(C) the information furnished by the person consists of 
        allegations or transactions that have been disclosed to the 
        public--
                    ``(i) in a criminal, civil, or administrative 
                proceeding;
                    ``(ii) in a congressional, administrative or 
                General Accounting Office report, hearing, audit, or 
                investigation; or
                    ``(iii) by the news media, unless the person is the 
                original source of the information; or
            ``(D) when, in the judgment of the Attorney General, it 
        appears that a person whose illegal activities are being 
        prosecuted or investigated could benefit from the award.
    ``(3) For the purposes of paragraph (2)(C)(iii), the term `original 
source' means a person who has direct and independent knowledge of the 
information that is furnished and has voluntarily provided the 
information to the Government prior to disclosure by the news media.
    ``(4) Neither the failure of the Attorney General to authorize a 
payment under paragraph (1) nor the amount authorized shall be subject 
to judicial review.''.

Subtitle B--Coordination of Health Care Anti-Fraud and Abuse Activities

SEC. 711. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD AND ABUSE SANCTIONS 
              TO ALL FRAUD AND ABUSE AGAINST ANY HEALTH INSURANCE PLAN.

    (a) Civil Monetary Penalties.--Section 1128A of the Social Security 
Act (42 U.S.C. 1320a-7a) is amended as follows:
            (1) In subsection (a)(1), in the matter before subparagraph 
        (A), by inserting ``or of any health insurance plan,'' after 
        ``subsection (i)(1)),''.
            (2) In subsection (b)(1)(A), by inserting ``or under a 
        health insurance plan'' after ``title XIX''.
            (3) 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 health insurance plan, the portion of such 
        amounts as is determined to have been paid by the plan shall be 
        repaid to the plan.''.
            (4) In subsection (i)--
                    (A) in paragraph (2), by inserting ``or under a 
                health insurance plan'' before the period at the end, 
                and
                    (B) in paragraph (5), by inserting ``or under a 
                health insurance plan'' after ``or XX''.
    (b) Crimes.--
            (1) Social security act.--Section 1128B of such Act (42 
        U.S.C. 1320a-7b) is amended as follows:
                    (A) In the heading, by adding at the end the 
                following: ``or health insurance plans''.
                    (B) In subsection (a)(1)--
                            (i) by striking ``title XVIII or'' and 
                        inserting ``title XVIII,'', and
                            (ii) by adding at the end the following: 
                        ``or a health insurance plan (as defined in 
                        section 1128(i)),''.
                    (C) In subsection (a)(5), by striking ``title XVIII 
                or a State health care program'' and inserting ``title 
                XVIII, a State health care program, or a health 
                insurance plan''.
                    (D) In the second sentence of subsection (a)--
                            (i) by inserting after ``title XIX'' the 
                        following: ``or a health insurance plan'', and
                            (ii) by inserting after ``the State'' the 
                        following: ``or the plan''.
                    (E) In subsection (b)(1), by striking ``title XVIII 
                or a State health care program'' each place it appears 
                and inserting ``title XVIII, a State health care 
                program, or a health insurance plan''.
                    (F) In subsection (b)(2), by striking ``title XVIII 
                or a State health care program'' each place it appears 
                and inserting ``title XVIII, a State health care 
                program, or a health insurance plan''.
                    (G) In subsection (b)(3), by striking ``title XVIII 
                or a State health care program'' each place it appears 
                in subparagraphs (A) and (C) and inserting ``title 
                XVIII, a State health care program, or a health 
                insurance plan''.
                    (H) In subsection (d)(2)--
                            (i) by striking ``title XIX,'' and 
                        inserting ``title XIX or under a health 
                        insurance plan,'', and
                            (ii) by striking ``State plan,'' and 
                        inserting ``State plan or the health insurance 
                        plan,''.
            (2) Treble damages for criminal sanctions.--Section 1128B 
        of such Act (42 U.S.C. 1320a-7b) is amended by adding at the 
        end the following new subsection:
    ``(f) In addition to the fines that may be imposed under subsection 
(a), (b), or (c), any individual found to have violated the provisions 
of any of such subsections may be subject to treble damages.''.
            (3) Identification of community service opportunities.--
        Section 1128B of such Act (42 U.S.C. 1320a-7b) is further 
        amended by adding at the end the following new subsection:
    ``(g) The Secretary shall--
            ``(1) in consultation with State and local health care 
        officials, identify opportunities for the satisfaction of 
        community service obligations that a court may impose upon the 
        conviction of an offense under this section, and
            ``(2) make information concerning such opportunities 
        available to Federal and State law enforcement officers and 
        State and local health care officials.''.
    (c) Health Insurance Plan Defined.--Section 1128 of such Act (42 
U.S.C. 1320a-7) is amended by redesignating subsection (i) as 
subsection (j) and by inserting after subsection (h) the following new 
subsection:
    ``(i) Health Insurance Plan Defined.--For purposes of sections 
1128A and 1128B, the term `health insurance plan' means a health 
insurance program other than the medicare program, the medicaid 
program, or a State health care program.''.
    (d) Conforming Amendment.--Section 1128(b)(8)(B)(ii) of such Act 
(42 U.S.C. 1320a-7(b)(8)(B)(ii)) is amended by striking ``1128A'' and 
inserting ``1128A (other than a penalty arising from a health insurance 
plan, as defined in subsection (i))''.
    (e) Effective Date.--The amendments made by this section shall take 
effect January 1, 1995.

         Subtitle C--Protection Against Rationing of Treatment

SEC. 721. PROHIBITION ON DENIAL OR TREATMENT BASED ON AGE, DISABILITY, 
              DEGREE OF MEDICAL NEED, OR QUALITY OF LIFE.

    No health care provider or health insurance plan may deny medical 
treatment, or insurance coverage of medical treatment, that a patient 
is otherwise qualified to receive, against the wishes of a patient, or 
if the patient is incompetent, against the wishes of the patient's 
guardian, on the basis of the patient's present or predicted age, 
disability, degree of medical need, or quality of life.

SEC. 722. ENFORCEMENT.

    The remedies and procedures set forth in subsections (a) and (b) of 
Civil Rights Act of 1964 (42 U.S.C. 2000a-3) are the remedies and 
procedures available under this subtitle to nay person who is being 
subjected to denial of medical treatment or denial of insurance 
coverage for medical treatment, or who has reasonable grounds for 
believing that such person is about to be subjected to such denial, in 
violation of this subtitle. A person who has been subjected to such 
denial in violation of this subtitle, or if that person has died, a 
person who would be entitled to bring a cause of action for the dead 
person's wrongful death under the laws of the State in which the denial 
of treatment occurred, may also obtain damages, including reasonable 
and appropriate punitive damages.

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