I

103D CONGRESS

2D SESSION H. R. 4550

To provide Americans with secure, portable health insurance benefits through

tax credits, medical savings accounts, and greater choice of health insurance plans without mandates, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JUNE 8, 1994

Mr. STEARNS (for himself, Mr. ARMEY, Mr. BAKER of California, Mr. CRANE,

Mr. DELAY, Mr. DORNAN, Mr. DUNCAN, Mr. GEKAS, Mr. GINGRICH, Mr.

GOSS, Mr. GRAMS, Mr. HANCOCK, Mr. HASTERT, Mr. HUNTER, Mr.

HUTCHINSON, Mr. HYDE, Mr. KYL, Mr. LEWIS of Florida, Mr. LINDER,

Mr. ROHRABACHER, Mr. SHAYS, and Mrs. VUCANOVICH) introduced the

following bill; which was referred jointly to the Committees on Ways and

Means, Energy and Commerce, Education and Labor, Rules, the Judiciary, Agriculture, and Banking, Finance and Urban Affairs

A BILL

To provide Americans with secure, portable health insurance

benefits through tax credits, medical savings accounts,

and greater choice of health insurance plans without

mandates, and for other purposes.

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

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Consumer Choice Health Security Act of 1994’’.
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1 (b) TABLE OF CONTENTS.—The table of contents for

2 this Act is as follows:

Sec. 1. Short title and table of contents.

Sec. 2. Purposes.

TITLE I—TAX AND INSURANCE PROVISIONS

Subtitle A—Tax Treatment of Health Care Expenses

Sec. 101. Refundable health care expenses tax credit.

Sec. 102. Medical savings accounts.

Sec. 103. Other tax provisions.

Subtitle B—Insurance Provisions

PART I—FEDERALLY QUALIFIED HEALTH INSURANCE PLAN

Sec. 111. Federally qualified health insurance plan.

Sec. 112. Family security benefits package.

Sec. 113. Rating practices.

Sec. 114. Guaranteed issue.

Sec. 115. Guaranteed renewability.

PART II—CERTIFICATION OF FEDERALLY QUALIFIED HEALTH INSURANCE

PLANS

Sec. 117. Establishment of regulatory program for certification of plans.

Sec. 118. Standards for regulatory programs.

Subtitle C—Employer Provisions

Sec. 121. General provisions relating to employers.

Sec. 122. Conversion of non-self-insured plans.

Sec. 123. Provisions relating to existing self-insured plans.

Sec. 124. Continuation of employer-provided health coverage required until effective date of new coverage under this Act.

Sec. 125. Requirements with respect to cashing out employer-sponsored plans.

Sec. 126. Enforcement.

Subtitle D—Federal Preemption

Sec. 131. Federal preemption of certain State laws.

Subtitle E—Report

Sec. 141. Report on health insurance coverage.

TITLE II—MEDICARE AND MEDICAID REFORMS

Subtitle A—Medicare

Sec. 201. Study of medicare private health insurance program.

Sec. 202. Elimination of medicare hospital disproportionate share adjustment

payments.

Sec. 203. Reduction in adjustment for indirect medical education.

Sec. 204. Imposition of copayment for skilled nursing facility services.
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Sec. 205. Shift payment updates to January for all payment rates under hospital insurance program.

Sec. 206. Acceleration of transition to prospective rates for facility costs in hospital outpatient departments.

Subtitle B—Medicaid

Sec. 211. Cap on Federal payments made for acute medical services under the

medicaid program.

Sec. 212. Waivers for the furnishing of acute medical services under the medicaid program.

Sec. 213. Termination of disproportionate share payments.

Sec. 214. Grants for health insurance coverage, acute medical services, preventive care, and disease prevention.

TITLE III—HEALTH CARE LIABILITY REFORM

Sec. 301. Short title.

Sec. 302. Definitions.

Sec. 303. Health care malpractice.

Sec. 304. Health care product liability of manufacturer or seller.

Sec. 305. General provisions relating to health care liability.

Sec. 306. Punitive damages.

Sec. 307. Exceptions.

Sec. 308. Rules of construction.

TITLE IV—ADMINISTRATIVE COST SAVINGS

Subtitle A—Standardization of Claims Processing

Sec. 401. Adoption of data elements, uniform claims, and uniform electronic

transmission standards.

Sec. 402. Application of standards.

Sec. 403. Periodic review and revision of standards.

Sec. 404. Health insurance plan defined.

Subtitle B—Electronic Medical Data Standards

Sec. 411. Medical data standards for hospitals and other providers.

Sec. 412. Application of electronic data standards to certain hospitals.

Sec. 413. Electronic transmission to Federal agencies.

Sec. 414. Limitation on data requirements where standards in effect.

Sec. 415. Advisory commission.

Subtitle C—Development and Distribution of Comparative Value Information

Sec. 421. State comparative value information programs for health care purchasing.

Sec. 422. Federal implementation.

Sec. 423. Comparative value information concerning Federal programs.

Subtitle D—Preemption of State Quill Pen Laws

Sec. 431. Preemption of State quill pen laws.

TITLE V—ANTI-FRAUD

Subtitle A—Criminal Prosecution of Health Care Fraud
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Sec. 501. Penalties for health care fraud.

Sec. 502. Rewards for information leading to prosecution and conviction.

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

Sec. 511. Application of Federal health anti-fraud and abuse sanctions to all

fraud and abuse against any health insurance plan.

TITLE VI—ANTITRUST PROVISIONS

Sec. 601. Exemption from antitrust laws for certain competitive and collaborative activities.

Sec. 602. Safe harbors.

Sec. 603. Designation of additional safe harbors.

Sec. 604. Certificates of review.

Sec. 605. Notifications providing reduction in certain penalties under antitrust

law for health care cooperative ventures.

Sec. 606. Review and reports on safe harbors and certificates of review.

Sec. 607. Rules, regulations, and guidelines.

Sec. 608. Definitions.

TITLE VII—LONG-TERM CARE

Sec. 701. Exclusion from gross income for amounts withdrawn from individual

retirement plans or 401(k) plans for long-term care insurance.

Sec. 702. Certain exchanges of life insurance contracts for long-term care insurance contracts not taxable.

Sec. 703. Tax treatment of accelerated death benefits under life insurance contracts.

Sec. 704. Effective date.

TITLE VIII—WELFARE RESTRICTIONS FOR ALIENS

Sec. 801. Ineligibility of aliens for public welfare assistance.

Sec. 802. State AFDC agencies required to provide information on illegal aliens

to the Immigration and Naturalization Service.

TITLE IX—INCREASE IN ASSISTANCE TO COMMUNITY AND

MIGRANT HEALTH CENTERS FROM RESIDUAL SAVINGS

Sec. 901. Grant program to promote primary health care services for underserved populations.

1 SEC. 2. PURPOSES.

2 The purposes of this Act are to—

3 (1) provide Americans with secure, portable

4 health insurance benefits and greater choice of

5 health insurance plans,

6 (2) make the American health care system re7 sponsive to consumer needs and encourage the provi-
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1 sion of quality medical care at reasonable prices

2 through enhanced competition,

3 (3) provide more equitable tax treatment of

4 health insurance and medical care expenses, and

5 (4) assist low-income and uninsured Americans

6 in purchasing health insurance and receiving pri7 mary medical care.

8 TITLE I—TAX AND INSURANCE

9 PROVISIONS

10 Subtitle A—Tax Treatment of

11 Health Care Expenses

12 SEC. 101. REFUNDABLE HEALTH CARE EXPENSES TAX

13 CREDIT.

14 (a) IN GENERAL.—Subpart C of part IV of sub15 chapter A of chapter 1 of the Internal Revenue Code of

16 1986 (relating to refundable personal credits) is amended

17 by inserting after section 34 the following new section:

18 ‘‘SEC. 34A. HEALTH CARE EXPENSES.

19 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a

20 qualified individual, there shall be allowed as a credit

21 against the tax imposed by this subtitle for the taxable

22 year an amount equal to the applicable percentage of the

23 sum of—

24 ‘‘(1) 25 percent of the sum of the qualified

25 health insurance premiums and the unreimbursed
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1 expenses for medical care paid by such individual

2 during the taxable year which does not exceed 10

3 percent of the adjusted gross income of such individ4 ual for such year, plus

5 ‘‘(2) 50 percent of the sum of such premiums

6 and such unreimbursed expenses so paid which ex7 ceeds 10 percent but does not exceed 20 percent of

8 such adjusted gross income, plus

9 ‘‘(3) 75 percent of the sum of such premiums

10 and such unreimbursed expenses so paid which ex11 ceeds 20 percent of such adjusted gross income.

12 ‘‘(b) QUALIFIED INDIVIDUALS.—For purposes of this

13 section:

14 ‘‘(1) IN GENERAL.—The term ‘qualified individ15 ual’ means the taxpayer, the spouse of the taxpayer,

16 and each dependent of the taxpayer (as defined in

17 section 152) who is enrolled in a federally qualified

18 health insurance plan.

19 ‘‘(2) FEDERALLY COVERED INDIVIDUALS.—The

20 term ‘qualified individual’ does not include any indi21 vidual whose medical care is covered under—

22 ‘‘(A) title XVIII or XIX of the Social Se23 curity Act,

24 ‘‘(B) chapter 55 of title 10, United States

25 Code,
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1 ‘‘(C) chapter 17 of title 38, United States

2 Code, or

3 ‘‘(D) the Indian Health Care Improvement

4 Act.

5 ‘‘(3) SPECIAL RULE IN THE CASE OF CHILD OF

6 DIVORCED PARENTS, ETC.—Any child to whom sec7 tion 152(e) applies shall be treated as a dependent

8 of both parents.

9 ‘‘(4) MARRIAGE RULES.—The determination of

10 whether an individual is married at any time during

11 the taxable year shall be made in accordance with

12 the provisions of section 6013(d) (relating to deter13 mination of status as husband and wife).

14 ‘‘(c) APPLICABLE PERCENTAGE.—For purposes of

15 subsection (a), the applicable percentage for any taxable

16 year is determined by the number of whole months in such

17 year in which the taxpayer is a qualified individual.

18 ‘‘(d) QUALIFIED HEALTH INSURANCE PREMIUMS.—

19 For purposes of this section, the term ‘qualified health in20 surance premiums’ means premiums for—

21 ‘‘(1) a federally qualified health insurance plan,

22 and

23 ‘‘(2) any other benefits or plans supplementary

24 to such a federally qualified health insurance plan.
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1 ‘‘(e) FEDERALLY QUALIFIED HEALTH INSURANCE

2 PLAN.—For purposes of this section, the term ‘federally

3 qualified health insurance plan’ means a health insurance

4 plan which is described in section 111 of the Consumer

5 Choice Health Security Act of 1994.

6 ‘‘(f) MEDICAL CARE.—For purposes of this section:

7 ‘‘(1) IN GENERAL.—The term ‘medical care’

8 means amounts paid—

9 ‘‘(A) for the diagnosis, cure, mitigation,

10 treatment, or prevention of disease, or for the

11 purpose of affecting any structure or function

12 of the body, and

13 ‘‘(B) for transportation primarily for and

14 essential to medical care referred to in subpara15 graph (A).

16 ‘‘(2) AMOUNTS PAID FOR CERTAIN LODGING

17 AWAY FROM HOME TREATED AS PAID FOR MEDICAL

18 CARE.—Amounts paid for lodging (not lavish or ex19 travagant under the circumstances) while away from

20 home primarily for and essential to medical care re21 ferred to in paragraph (1)(A) shall be treated as

22 amounts paid for medical care if—

23 ‘‘(A) the medical care referred to in para24 graph (1)(A) is provided by a physician in a li25 censed hospital (or in a medical care facility
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1 which is related to, or the equivalent of, a li2 censed hospital), and

3 ‘‘(B) there is no significant element of per4 sonal pleasure, recreation, or vacation in the

5 travel away from home.

6 The amount taken into account under the preceding

7 sentence shall not exceed $50 for each night for each

8 individual.

9 ‘‘(3) COSMETIC SURGERY.—

10 ‘‘(A) IN GENERAL.—The term ‘medical

11 care’ does not include cosmetic surgery or other

12 similar procedures, unless the surgery or proce13 dure is necessary to ameliorate a deformity

14 arising from, or directly related to, a congenital

15 abnormality, a personal injury resulting from

16 an accident or trauma, or disfiguring disease.

17 ‘‘(B) COSMETIC SURGERY DEFINED.—For

18 purposes of this paragraph, the term ‘cosmetic

19 surgery’ means any procedure which is directed

20 at improving the patient’s appearance and does

21 not meaningfully promote the proper function

22 of the body or prevent or treat illness or dis23 ease.
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1 ‘‘(4) PHYSICIAN.—The term ‘physician’ has the

2 meaning given to such term by section 1861(r) of

3 the Social Security Act (42 U.S.C. 1395x(r)).

4 ‘‘(g) SPECIAL RULES.—For purposes of this section:

5 ‘‘(1) LIMITATION WITH RESPECT TO MEDICINE

6 AND DRUGS.—

7 ‘‘(A) IN GENERAL.—An amount paid dur8 ing the taxable year for medicine or a drug

9 shall be taken into account under subsection (a)

10 only if such medicine or drug is a prescribed

11 drug or is insulin.

12 ‘‘(B) PRESCRIBED DRUG.—The term ‘pre13 scribed drug’ means a drug or biological which

14 requires a prescription of a physician for its use

15 by an individual.

16 ‘‘(2) SPECIAL RULE FOR DECEDENTS.—

17 ‘‘(A) TREATMENT OF EXPENSES PAID

18 AFTER DEATH.—Expenses for the medical care

19 of the taxpayer which are paid out of the tax20 payer’s estate during the 1-year period begin21 ning with the day after the date of the tax22 payer’s death shall be treated as paid by the

23 taxpayer at the time incurred.

24 ‘‘(B) LIMITATION.—Subparagraph (A)

25 shall not apply if the amount paid is allowable
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1 under section 2053 as a deduction in computing

2 the taxable estate of the decedent, but this sub3 paragraph shall not apply if (within the time

4 and in the manner and form prescribed by the

5 Secretary) there is filed—

6 ‘‘(i) a statement that such amount

7 has not been allowed as a deduction under

8 section 2053, and

9 ‘‘(ii) a waiver of the right to have

10 such amount allowed at any time as a de11 duction under section 2053.

12 ‘‘(3) FORM OF INSURANCE CONTRACT.—In the

13 case of an insurance contract under which amounts

14 are payable for other than medical care—

15 ‘‘(A) no amount shall be treated as paid

16 for insurance to which subsection (a) applies

17 unless the charge for such insurance is either

18 separately stated in the contract, or furnished

19 to the policyholder by the insurance company in

20 a separate statement,

21 ‘‘(B) the amount taken into account as the

22 amount paid for such insurance shall not exceed

23 such charge, and

24 ‘‘(C) no amount shall be treated as paid

25 for such insurance if the amount specified in
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1 the contract (or furnished to the policyholder by

2 the insurance company in a separate statement)

3 as the charge for such insurance is unreason4 ably large in relation to the total charges under

5 the contract.

6 ‘‘(4) EXCLUSION OF AMOUNTS ALLOWED FOR

7 CARE OF CERTAIN DEPENDENTS.—Any expense al8 lowed as a credit under section 21 shall not be treat9 ed as an expense paid for medical care.

10 ‘‘(5) COORDINATION WITH ADVANCE PAYMENT

11 AND MINIMUM TAX.—Rules similar to the rules of

12 subsections (g) and (h) of section 32 shall apply to

13 any credit to which this section applies.

14 ‘‘(6) SUBSIDIZED EXPENSES.—No expense shall

15 be taken into account under subsection (a), if—

16 ‘‘(A) such expense is paid, reimbursed, or

17 subsidized (whether by being disregarded for

18 purposes of another program or otherwise) by

19 the Federal Government, a State or local gov20 ernment, or any agency or instrumentality

21 thereof, and

22 ‘‘(B) the payment, reimbursement, or sub23 sidy of such expense is not includable in the

24 gross income of the recipient.
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1 ‘‘(7) COORDINATION WITH MEDICAL SAVINGS

2 ACCOUNTS.—The amount otherwise taken into ac3 count under subsection (a) shall be reduced by the

4 amount (if any) of the distributions from any medi5 cal savings account of the taxpayer during the tax6 able year which is not includible in gross income by

7 reason of being used for qualified medical expenses

8 (as defined in section 25A(c)(2)).

9 ‘‘(h) INDEXING OF PERCENTAGES.—For each year

10 after 1997, the Secretary, in consultation with the Sec11 retary of Health and Human Services, shall adjust the ref12 erences to 10 percent and 20 percent in subsection (a)

13 by the ratio of—

14 ‘‘(1) the percentage increase in medical care in15 flation between 1996 and the year before the year

16 involved, to

17 ‘‘(2) the national average percentage increase in

18 adjusted gross income of individuals between such

19 years.

20 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

21 such regulations as may be necessary to carry out the pur22 poses of this section.’’.

23 (b) ADVANCE PAYMENT OF CREDIT.—Chapter 25 of

24 the Internal Revenue Code of 1986 (relating to general
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1 provisions relating to employment taxes) is amended by

2 inserting after section 3507 the following new section:

3 ‘‘SEC. 3507A. ADVANCE PAYMENT OF HEALTH EXPENSES

4 CREDIT.

5 ‘‘(a) GENERAL RULE.—Except as otherwise provided

6 in this section, every employer making payment of wages

7 with respect to whom a health care expenses eligibility cer8 tificate is in effect shall, at the time of paying such wages,

9 make an additional payment equal to such employee’s

10 health care expenses advance amount.

11 ‘‘(b) HEALTH CARE EXPENSES ELIGIBILITY CER12 TIFICATE.—For purposes of this title, a health care ex13 penses eligibility certificate is a statement furnished by an

14 employee to the employer which—

15 ‘‘(1) certifies that the employee will be eligible

16 to receive the credit provided by section 34A for the

17 taxable year,

18 ‘‘(2) certifies that the employee does not have

19 a health care expenses eligibility certificate in effect

20 for the calendar year with respect to the payment of

21 wages by another employer,

22 ‘‘(3) states whether or not the employee’s

23 spouse has a health care expenses eligibility certifi24 cate in effect, and
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1 ‘‘(4) estimates the amount of premiums for a

2 federally qualified health insurance plan and unreim3 bursed expenses for medical care (as defined in sec4 tion 34A) for the calendar year.

5 For purposes of this section, a certificate shall be treated

6 as being in effect with respect to a spouse if such a certifi7 cate will be in effect on the first status determination date

8 following the date on which the employee furnishes the

9 statement in question.

10 ‘‘(c) HEALTH CARE EXPENSES ADVANCE

11 AMOUNT.—

12 ‘‘(1) IN GENERAL.—For purposes of this title,

13 the term ‘health expenses advance amount’ means,

14 with respect to any payroll period, the amount deter15 mined—

16 ‘‘(A) on the basis of the employee’s wages

17 from the employer for such period,

18 ‘‘(B) on the basis of the employee’s esti19 mated premiums for a federally qualified health

20 insurance plan and unreimbursed expenses for

21 medical care included in the health care ex22 penses eligibility certificate, and

23 ‘‘(C) in accordance with tables provided by

24 the Secretary.
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1 ‘‘(2) ADVANCE AMOUNT TABLES.—The tables

2 referred to in paragraph (1)(C) shall be similar in

3 form to the tables prescribed under section 3402

4 and, to the maximum extent feasible, shall be coordi5 nated with such tables and the tables prescribed

6 under section 3507(c).

7 ‘‘(d) OTHER RULES.—For purposes of this section,

8 rules similar to the rules of subsections (d) and (e) of sec9 tion 3507 shall apply.

10 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

11 such regulations as may be necessary to carry out the pur12 poses of this section.’’.

13 (c) CLERICAL AMENDMENTS.—

14 (1) The table of sections for subpart A of part

15 IV of subchapter A of chapter 1 of the Internal Rev16 enue Code of 1986 is amended by inserting after the

17 item relating to section 34 the following new item:

‘‘Sec. 34A. Health care expenses.’’.

18 (2) The table of sections for chapter 25 of such

19 Code is amended by adding after the item relating

20 to section 3507 the following new item:

‘‘Sec. 3507A. Advance payment of health care expenses credit.’’.

21 (d) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to taxable years beginning after

23 December 31, 1997.
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1 SEC. 102. MEDICAL SAVINGS ACCOUNTS.

2 (a) IN GENERAL.—Subpart A of part IV of sub3 chapter A of chapter 1 of the Internal Revenue Code of

4 1986 (relating to nonrefundable personal credits) is

5 amended by inserting after section 25 the following new

6 section:

7 ‘‘SEC. 25A. MEDICAL SAVINGS ACCOUNTS.

8 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in9 dividual, there shall be allowed as a credit against the tax

10 imposed by this subtitle for the taxable year an amount

11 equal to 25 percent of the amount paid in cash during

12 such year by or on behalf of such individual to a medical

13 savings account.

14 ‘‘(b) LIMITATIONS.—For purposes of this section:

15 ‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—No credit

16 shall be allowed under subsection (a) for amounts

17 paid to any medical savings account for the benefit

18 of an individual, such individual’s spouse, or any de19 pendent (as defined in section 152) of such individ20 ual if such individual, spouse, or dependent is a ben21 eficiary of any other medical savings account.

22 ‘‘(2) DOLLAR LIMITATION.—The aggregate

23 amount of contributions which may be taken into ac24 count under subsection (a) with respect to any indi25 vidual for any taxable year shall not exceed the sum

26 of—
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1 ‘‘(A) $3,000, plus

2 ‘‘(B) $500 for each individual who is a de3 pendent (as so defined) of the individual for

4 whose benefit the account is established.

5 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur6 poses of this section:

7 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—

8 ‘‘(A) IN GENERAL.—The term ‘medical

9 savings account’ means a trust created or orga10 nized in the United States exclusively for the

11 purpose of paying the qualified medical ex12 penses of the individual for whose benefit the

13 trust is established, but only if the written gov14 erning instrument creating the trust meets the

15 following requirements:

16 ‘‘(i) Except in the case of a rollover

17 contribution described in subsection (d)(4),

18 no contribution will be accepted unless it is

19 in cash and contributions will not be ac20 cepted for any taxable year in excess of the

21 amount determined under subsection

22 (b)(1).

23 ‘‘(ii) The trustee is a bank (as defined

24 in section 408(n)) or another person who

25 demonstrates to the satisfaction of the Sec-
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1 retary that the manner in which such per2 son will administer the trust will be con3 sistent with the requirements of this sec4 tion.

5 ‘‘(iii) No part of the trust assets will

6 be invested in life insurance contracts.

7 ‘‘(iv) The assets of the trust will not

8 be commingled with other property except

9 in a common trust fund or common invest10 ment fund.

11 ‘‘(v) The interest of an individual in

12 the balance in such individual’s account is

13 nonforfeitable.

14 ‘‘(vi) Under regulations prescribed by

15 the Secretary, rules similar to the rules of

16 section 401(a)(9) shall apply to the dis17 tribution of the entire interest of bene18 ficiaries of such trust.

19 ‘‘(B) TREATMENT OF COMPARABLE AC20 COUNTS HELD BY INSURANCE COMPANIES.—An

21 account held by an insurance company in the

22 United States shall be treated as a medical sav23 ings account (and such company shall be treat24 ed as a bank) if—
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1 ‘‘(i) such account is part of a federally

2 qualified health insurance plan (as defined

3 in section 34A(e)),

4 ‘‘(ii) such account is exclusively for

5 the purpose of paying the medical expenses

6 of the beneficiaries of such account who

7 are covered under such health insurance

8 plan, and

9 ‘‘(iii) the written instrument govern10 ing the account meets the requirements of

11 clauses (i), (v), and (vi) of subparagraph

12 (A).

13 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—The

14 term ‘qualified medical expenses’ means amounts

15 paid by the individual for whose benefit the account

16 was established for premiums for a federally quali17 fied health insurance plan (as so defined) and the

18 unreimbursed expenses for medical care (as deter19 mined under section 34A) of such individual, the

20 spouse of such individual, and any dependent (as so

21 defined) of such individual.

22 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

23 MADE.—A contribution shall be deemed to be made

24 on the last day of the preceding taxable year if the

25 contribution is made on account of such taxable year
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1 and is made not later than the time prescribed by

2 law for filing the return for such taxable year (not

3 including extensions thereof).

4 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

5 ‘‘(1) IN GENERAL.—Except as otherwise pro6 vided in this subsection, any amount paid or distrib7 uted out of a medical savings account shall be in8 cluded in the gross income of the individual for

9 whose benefit such account was established unless

10 such amount is used exclusively to pay the qualified

11 medical expenses of such individual.

12 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE13 FORE DUE DATE OF RETURN.—Paragraph (1) shall

14 not apply to the distribution of any contribution paid

15 during a taxable year to a medical savings account

16 to the extent that such contribution exceeds the

17 amount allowable under subsection (b) if—

18 ‘‘(A) such distribution is received on or be19 fore the day prescribed by law (including exten20 sions of time) for filing such individual’s return

21 for such taxable year,

22 ‘‘(B) no credit is allowed under subsection

23 (a) with respect to such excess contribution,

24 and
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1 ‘‘(C) such distribution is accompanied by

2 the amount of net income attributable to such

3 excess contribution.

4 Any net income described in subparagraph (C) shall

5 be included in the gross income of the individual for

6 the taxable year in which it is received.

7 ‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED

8 FOR MEDICAL EXPENSES.—The tax imposed by this

9 chapter for any taxable year in which there is a pay10 ment or distribution from a medical savings account

11 which is not used to pay the medical expenses of the

12 individual for whose benefit the account was estab13 lished, shall be increased by 10 percent of the

14 amount of such payment or distribution which is in15 cludible in gross income under paragraph (1).

16 ‘‘(4) ROLLOVERS.—Paragraph (1) shall not

17 apply to any amount paid or distributed out of a

18 medical savings account to the individual for whose

19 benefit the account is maintained, if the entire

20 amount received (including money and any other

21 property) is paid into another medical savings ac22 count for the benefit of such individual not later

23 than the 60th day after the day on which the indi24 vidual received the payment or distribution.

25 ‘‘(e) TAX TREATMENT OF ACCOUNTS.—
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1 ‘‘(1) EXEMPTION FROM TAX.—Any medical sav2 ings account is exempt from taxation under this sub3 title unless such account has ceased to be a medical

4 savings account by reason of paragraph (2) or (3).

5 Notwithstanding the preceding sentence, any such

6 account shall be subject to the taxes imposed by sec7 tion 511 (relating to imposition of tax on unrelated

8 business income of charitable, etc. organizations).

9 ‘‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE

10 INDIVIDUAL ENGAGES IN PROHIBITED TRANS11 ACTION.—

12 ‘‘(A) IN GENERAL.—If, during any taxable

13 year of the individual for whose benefit the

14 medical savings account was established, such

15 individual engages in any transaction prohibited

16 by section 4975 with respect to the account, the

17 account ceases to be a medical savings account

18 as of the first day of that taxable year.

19 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

20 ALL ITS ASSETS.—In any case in which any ac21 count ceases to be a medical savings account by

22 reason of subparagraph (A) on the first day of

23 any taxable year, paragraph (1) of subsection

24 (d) applies as if there were a distribution on

25 such first day in an amount equal to the fair
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1 market value (on such first day) of all assets in

2 the account (on such first day) and no portion

3 of such distribution were used to pay qualified

4 medical expenses.

5 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU6 RITY.—If, during any taxable year, the individual for

7 whose benefit a medical savings account was estab8 lished uses the account or any portion thereof as se9 curity for a loan, the portion so used is treated as

10 distributed to that individual and not used to pay

11 qualified medical expenses.

12 ‘‘(f) CUSTODIAL ACCOUNTS.—For purposes of this

13 section, a custodial account shall be treated as a trust if—

14 ‘‘(1) the assets of such account are held by a

15 bank (as defined in section 408(n)) or another per16 son who demonstrates to the satisfaction of the Sec17 retary that the manner in which he will administer

18 the account will be consistent with the requirements

19 of this section, and

20 ‘‘(2) the custodial account would, except for the

21 fact that it is not a trust, constitute a medical sav22 ings account described in subsection (c).

23 For purposes of this title, in the case of a custodial ac24 count treated as a trust by reason of the preceding sen-
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1 tence, the custodian of such account shall be treated as

2 the trustee thereof.

3 ‘‘(g) INFLATION ADJUSTMENT.—

4 ‘‘(1) IN GENERAL.—In the case of any taxable

5 year beginning in a calendar year after 1998, each

6 applicable dollar amount shall be increased by an

7 amount equal to—

8 ‘‘(A) such dollar amount, multiplied by

9 ‘‘(B) the cost-of-living adjustment for the

10 calendar year in which the taxable year begins.

11 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur12 poses of paragraph (1), the cost-of-living adjustment

13 for any calendar year is the percentage (if any) by

14 which—

15 ‘‘(A) the deemed average total wages (as

16 defined in section 209(k) of the Social Security

17 Act) for the preceding calendar year, exceeds

18 ‘‘(B) the deemed average total wages (as

19 so defined) for calendar year 1996.

20 ‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur21 poses of paragraph (1), the term ‘applicable dollar

22 amount’ means the $3,000 and $500 amounts in

23 subsection (b)(2).

24 ‘‘(4) ROUNDING.—If any amount as adjusted

25 under paragraph (1) is not a multiple of $10, such
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1 amount shall be rounded to the nearest multiple of

2 $10 (or, if such amount is a multiple of $5 and not

3 of $10, such amount shall be rounded to the next

4 highest multiple of $10).

5 ‘‘(h) REPORTS.—The trustee of a medical savings ac6 count shall make such reports regarding such account to

7 the Secretary and to the individual for whose benefit the

8 account is maintained with respect to contributions, dis9 tributions, and such other matters as the Secretary may

10 require under regulations. The reports required by this

11 subsection shall be filed at such time and in such manner

12 and furnished to such individuals at such time and in such

13 manner as may be required by those regulations.’’.

14 (b) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

15 of the Internal Revenue Code of 1986 (relating to tax on

16 excess contributions to individual retirement accounts, cer17 tain section 403(b) contracts, and certain individual re18 tirement annuities) is amended—

19 (1) by inserting ‘‘MEDICAL SAVINGS AC20 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

21 such section,

22 (2) by redesignating paragraph (2) of sub23 section (a) as paragraph (3) and by inserting after

24 paragraph (1) the following:
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1 ‘‘(2) a medical savings account (within the

2 meaning of section 25A(c)(1)),’’,

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

4 (1) of subsection (a), and

5 (4) by adding at the end thereof the following

6 new subsection:

7 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

8 ACCOUNTS.—For purposes of this section, in the case of

9 a medical savings account (within the meaning of section

10 25A(c)(1)), the term ‘excess contributions’ means the

11 amount by which the amount contributed for the taxable

12 year to the account exceeds the amount allowable under

13 section 25A(b)(2) for such taxable year. For purposes of

14 this subsection, any contribution which is distributed out

15 of the medical savings account and a distribution to which

16 section 25A(d)(2) applies shall be treated as an amount

17 not contributed.’’.

18 (c) TAX ON PROHIBITED TRANSACTIONS.—Section

19 4975 of the Internal Revenue Code of 1986 (relating to

20 prohibited transactions) is amended—

21 (1) by adding at the end of subsection (c) the

22 following new paragraph:

23 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC24 COUNTS.—An individual for whose benefit a medical

25 savings account (within the meaning of section
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1 25A(c)(1)) is established shall be exempt from the

2 tax imposed by this section with respect to any

3 transaction concerning such account (which would

4 otherwise be taxable under this section) if, with re5 spect to such transaction, the account ceases to be

6 a medical savings account by reason of the applica7 tion of section 25A(e)(2)(A) to such account.’’, and

8 (2) by inserting ‘‘or a medical savings account

9 described in section 25A(c)(1)’’ in subsection (e)(1)

10 after ‘‘described in section 408(a)’’.

11 (d) FAILURE TO PROVIDE REPORTS ON MEDICAL

12 SAVINGS ACCOUNTS.—Section 6693 of the Internal Reve13 nue Code of 1986 (relating to failure to provide reports

14 on individual retirement account or annuities) is amend15 ed—

16 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

17 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

18 such section, and

19 (2) by adding at the end of subsection (a) the

20 following: ‘‘The person required by section 25A(h) to

21 file a report regarding a medical savings account at

22 the time and in the manner required by such section

23 shall pay a penalty of $50 for each failure unless it

24 is shown that such failure is due to reasonable

25 cause.’’.
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1 (e) CLERICAL AMENDMENTS.—

2 (1) The table of sections for subpart A of part

3 IV of subchapter A of chapter 1 of the Internal Rev4 enue Code of 1986 is amended by inserting after the

5 item relating to section 25 the following:

‘‘Sec. 25A. Medical savings accounts.’’.

6 (2) The table of sections for chapter 43 of such

7 Code is amended by striking the item relating to sec8 tion 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.’’.

9 (3) The table of sections for subchapter B of

10 chapter 68 of such Code is amended by inserting ‘‘or

11 on medical savings accounts’’ after ‘‘annuities’’ in

12 the item relating to section 6693.

13 (f) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 1997.

16 SEC. 103. OTHER TAX PROVISIONS.

17 (a) TERMINATION OF MEDICAL EXPENSE DEDUC18 TION.—Section 213 of the Internal Revenue Code of 1986

19 (relating to medical, dental, etc., expenses) is amended by

20 adding at the end thereof the following new subsection:
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1 ‘‘(g) TERMINATION.—No amount paid after Decem2 ber 31, 1997, shall be treated as an expense paid for medi3 cal care.’’.

4 (b) TERMINATION OF DEDUCTION FOR HEALTH IN5 SURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.—

6 (1) IN GENERAL.—Section 162(l) of the Inter7 nal Revenue Code of 1986 (relating to special rules

8 for health insurance costs of self-employed individ9 uals) is amended by striking paragraph (6).

10 (2) EFFECTIVE DATE.—The amendment made

11 by paragraph (1) shall apply to taxable years begin12 ning after December 31, 1997.

13 (c) TERMINATION OF EXCLUSION FOR EMPLOYER14 PROVIDED HEALTH INSURANCE.—Section 106 of the In15 ternal Revenue Code of 1986 (relating to contributions by

16 employer to accident and health plans) is amended by add17 ing at the end the following new sentence: ‘‘The preceding

18 sentence shall not apply to any amount paid after Decem19 ber 31, 1997.’’.
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1 Subtitle B—Insurance Provisions

2 PART I—FEDERALLY QUALIFIED HEALTH

3 INSURANCE PLAN

4 SEC. 111. FEDERALLY QUALIFIED HEALTH INSURANCE

5 PLAN.

6 (a) IN GENERAL.—A federally qualified health insur7 ance plan is a health insurance plan offered, issued, or

8 renewed on or after January 1, 1998, which is certified

9 by the applicable regulatory authority as meeting, at a

10 minimum, the requirements of sections 112, 113, 114, and

11 115, and the regulatory program described in section 117.

12 (b) GENERAL DEFINITIONS.—As used in this Act:

13 (1) HEALTH INSURANCE PLAN.—The term

14 ‘‘health insurance plan’’ means any hospital or medi15 cal service policy or certificate, hospital or medical

16 service plan contract, or health maintenance organi17 zation group contract and, in States which have dis18 tinct licensure requirements, a multiple employer

19 welfare arrangement, but does not include any of the

20 following offered by an insurer:

21 (A) Accident only, dental only, disability

22 only, or long-term care only insurance.

23 (B) Coverage issued as a supplement to li24 ability insurance.
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1 (C) Workers’ compensation or similar in2 surance.

3 (D) Automobile medical-payment insur4 ance.

5 (2) APPLICABLE REGULATORY AUTHORITY.—

6 The term ‘applicable regulatory authority’ means—

7 (A) in the case of a State with a program

8 described in section 117, the State commis9 sioner or superintendent of insurance or other

10 State authority responsible for regulation of

11 health insurance; or

12 (B) if the State has not established such a

13 program or such program has been decertified

14 under section 117(b), the Secretary.

15 (3) SECRETARY.—The term ‘‘Secretary’’ means

16 the Secretary of Health and Human Services.

17 (4) STATE.—The term ‘‘State’’ means each of

18 the several States of the United States, the District

19 of Columbia, the Commonwealth of Puerto Rico, the

20 United States Virgin Islands, Guam, America

21 Samoa, and the Commonwealth of the Northern

22 Mariana Islands.

23 SEC. 112. FAMILY SECURITY BENEFITS PACKAGE.

24 (a) REQUIREMENTS.—
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1 (1) IN GENERAL.—Subject to paragraph (2),

2 the requirements of this section are met, if the

3 health insurance plan—

4 (A) provides coverage for all medically nec5 essary acute medical care described in sub6 section (b),

7 (B) does not exclude coverage for selected

8 illnesses or selected treatments if consistent

9 with medically accepted practices, and

10 (C) meets the patient cost sharing require11 ments of subsection (c).

12 (2) ACTUARIAL EQUIVALENTS ALLOWED.—The

13 requirements of this section also are met with re14 spect to a plan if the plan covers medically necessary

15 acute medical care and has an actuarial value at

16 least equivalent to the actuarial value of the benefits

17 otherwise required under paragraph (1).

18 (b) ACUTE MEDICAL CARE.—Coverage for all medi19 cally necessary acute medical care is described in this sub20 section if such coverage includes—

21 (1) physician services,

22 (2) inpatient, outpatient, and emergency hos23 pital services and appropriate alternatives to hos24 pitalization, and

25 (3) inpatient prescription drugs.
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1 Nothing in this subsection may be construed to require

2 the inclusion of abortion services.

3 (c) LIMITATION ON COST SHARING.—

4 (1) IN GENERAL.—A health insurance plan may

5 not require the payment of any deductible,

6 copayment, or coinsurance for an item or service for

7 which coverage is required under this section after

8 an individual or a family covered under the plan has

9 incurred out-of-pocket expenses under the plan that

10 are equal to the out-of-pocket limit for a plan year.

11 (2) LIMIT ON OUT-OF-POCKET EXPENSES.—As

12 used in this paragraph:

13 (A) OUT-OF-POCKET EXPENSES DE14 FINED.—The term ‘‘out-of-pocket expenses’’

15 means, with respect to an individual or a family

16 in a plan year, amounts payable under the plan

17 as deductibles, coinsurance, and copayments

18 with respect to items and services provided

19 under the plan and furnished in the plan year

20 on behalf of the individual or the family covered

21 under the plan.

22 (B) OUT-OF-POCKET LIMIT DEFINED.—

23 (i) IN GENERAL.—The term ‘‘out-of24 pocket limit’’ means—
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1 (I) the amount specified under

2 clause (ii), or

3 (II) 10 percent of the adjusted

4 gross income of the family involved,

5 whichever is greater.

6 (ii) MINIMUM AMOUNT.—The amount

7 specified in this clause for a plan year be8 ginning in—

9 (I) a calendar year prior to 1998,

10 is $5,000; or

11 (II) for a subsequent calendar

12 year, is the amount specified in this

13 clause for the previous calendar year

14 increased by the percentage increase

15 in the consumer price index for all

16 urban consumers (United States city

17 average, as published by the Bureau

18 of Labor Statistics) for the 12-month

19 period ending on September 30 of the

20 preceding calendar year.

21 If the amount computed under subclause

22 (II) is not a multiple of $10, it shall be

23 rounded to the next highest multiple of

24 $10.
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1 SEC. 113. RATING PRACTICES.

2 (a) IN GENERAL.—The requirements of this section

3 are met, if, except as provided in subsection (b), the health

4 insurance plan provides for—

5 (1) a variation in premium rates only on the

6 basis of age, sex, and geography, and

7 (2) a charge of the same premium rates to new

8 applicants and existing policyholders with the same

9 age, sex, and geographic characteristics.

10 (b) INCENTIVE DISCOUNTS.—A plan may discount

11 an individual’s premium rate as an incentive for partici12 pating in a program, approved by the applicable regulatory

13 authority to be offered in conjunction with the coverage,

14 which has as its objective, 1 or more of the following:

15 (1) To promote healthy behavior.

16 (2) To prevent or delay the onset of illness.

17 (3) To provide for screening or early detection

18 of illness.

19 SEC. 114. GUARANTEED ISSUE.

20 (a) IN GENERAL.—Except as provided in paragraph

21 (2), in the case of applications made on and after January

22 1, 1999, the following rules apply:

23 (1) IN GENERAL.—The requirements of this

24 section are met, if, except as provided in paragraph

25 (2), the health insurance plan—
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1 (A) provides guaranteed issue at standard

2 rates to all applicants, and

3 (B) does not exclude from coverage, or

4 limit coverage for, any preexisting medical con5 dition of any applicant who, on the date the ap6 plication is made, has been continuously insured

7 for a period of at least 1 year prior to the date

8 of the application under 1 or more of the fol9 lowing health insurance plans or programs:

10 (i) Another federally qualified health

11 insurance plan.

12 (ii) An employer-sponsored group

13 health insurance plan in effect before the

14 date of the enactment of this Act.

15 (iii) An individual health insurance

16 plan in effect before such date.

17 (iv) A program described in—

18 (I) title XVIII or XIX of the So19 cial Security Act,

20 (II) chapter 55 of title 10,

21 United States Code,

22 (III) chapter 17 of title 38,

23 United States Code,

24 (IV) chapter 89 of title 5, United

25 States Code, or
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1 (V) the Indian Health Care Im2 provement Act.

3 (2) BREAK IN COVERAGE.—In the case of an

4 applicant who has not been continuously insured for

5 a period of 1 year prior to the date the application

6 is made, the health insurance plan may exclude from

7 coverage, or limit coverage for, any preexisting medi8 cal condition for a period no greater than the lesser

9 of—

10 (A) the number of months immediately

11 prior to the date of the application during

12 which the individual was not insured since the

13 illness or condition in question was first diag14 nosed, or

15 (B) 1 year.

16 (b) TRANSITION RULE.—In the case of applications

17 made in 1998, the requirements of this section are met,

18 if the health insurance plan—

19 (1) provides guaranteed issue at standard rates

20 to all applicants, and

21 (2) does not exclude from coverage, or limit

22 coverage for, any preexisting medical condition of

23 any applicant.
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1 SEC. 115. GUARANTEED RENEWABILITY.

2 The requirements of this section are met, if the

3 health insurance plan provides the policyholder with a con4 tractual right to renew the coverage which stipulates that

5 the insurer cannot cancel or refuse to renew the coverage

6 except for cases of—

7 (1) nonpayment of premiums by the policy8 holder, or

9 (2) fraud or misrepresentation by the policy10 holder.

11 PART II—CERTIFICATION OF FEDERALLY

12 QUALIFIED HEALTH INSURANCE PLANS

13 SEC. 117. ESTABLISHMENT OF REGULATORY PROGRAM

14 FOR CERTIFICATION OF PLANS.

15 (a) IN GENERAL.—Each State shall establish no later

16 than January 1, 1998, a regulatory program which meets

17 the standards referred to in section 118.

18 (b) PERIODIC SECRETARIAL REVIEW OF STATE REG19 ULATORY PROGRAM.—The Secretary periodically shall re20 view each State regulatory program to determine if such

21 program continues to meet and enforce the standards re22 ferred to in section 118. If the Secretary initially deter23 mines that a State regulatory program no longer meets

24 and enforces such standards, the Secretary shall provide

25 the State an opportunity to adopt a plan of correction that

26 would bring such program into compliance with such
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1 standards. If the Secretary makes a final determination

2 that the State regulatory program fails to meet and en3 force such standards after such an opportunity, the Sec4 retary shall decertify such program and assume respon5 sibility with respect to health insurance plans in the State.

6 SEC. 118. STANDARDS FOR REGULATORY PROGRAMS.

7 (a) IN GENERAL.—The Secretary, in consultation

8 with the National Association of Insurance Commissioners

9 (hereafter in this section referred to as ‘‘NAIC’’) shall de10 velop by not later than 1 year after the date of the enact11 ment of this Act, in the form of model Acts and model

12 regulations, State regulatory program standards which in13 clude—

14 (1) procedures for certifying that the require15 ments of part I of this subtitle have been met by a

16 health insurance plan applying for certification as a

17 federally qualified health insurance plan,

18 (2) the requirements described in subsections

19 (b), (c), and (d),

20 (3) requirements with respect to solvency stand21 ards and guaranty funds for carriers of federally

22 qualified health insurance plans, and

23 (4) reporting requirements under which carriers

24 report to the Internal Revenue Service regarding the

25 acquisition and termination by individuals of cov-
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1 erage under federally qualified health insurance

2 plans.

3 (b) PASSBACK OF CLAIMS AND PREMIUMS.—The re4 quirements of this subsection are met, if, in the case of

5 an applicant who has been continuously insured, as de6 scribed in section 114(b)(1)(B), and is at the time of the

7 application receiving treatment for a preexisting medical

8 condition—

9 (1) the federally qualified health insurance plan

10 is allowed to pass back to the applicant’s previous

11 plan any claims relating to such condition, together

12 with a portion of the premium, and

13 (2) such previous plan is required to pay such

14 claims and premium incurred during the lesser of—

15 (A) the duration of the course of the treat16 ment or spell of illness, or

17 (B) 2 years from the date at which cov18 erage commenced under the federally qualified

19 health insurance plan.

20 (c) MARKETING PRACTICES.—The requirements of

21 this subsection are met, if the carrier offering the federally

22 qualified health insurance plan retains the right to select

23 agents with whom such plan contracts and to determine

24 the amount and form of compensation to such agents, ex25 cept that—
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1 (1) if the carrier chooses to contract with an

2 agent, the carrier may not terminate or refuse to

3 renew the agency contract for any reason related to

4 the age, sex, health status, claims experience, occu5 pation, or geographic location of the insureds placed

6 by the agent with such plan, and

7 (2) the carrier may not, directly or indirectly,

8 enter into any contract, agreement, or arrangement

9 with an agent that provides for, or results in, any

10 consideration provided to such agent for the issu11 ance or renewal of such a plan to vary on account

12 of the age, sex, health status, claims experience, oc13 cupation, or geographic location of the insureds

14 placed by the agent with such plan.

15 (d) RISK ADJUSTMENT OR REINSURANCE PRO16 GRAMS.—The requirements of this subsection are met, if

17 the carrier offering the federally qualified health insurance

18 plan participates in a State-administered risk adjustment

19 program (or, at the option of the State, a reinsurance pro20 gram) designed to compensate for the potential occurrence

21 of grossly disproportionate distributions of above-standard

22 or below-standard insured risks among federally qualified

23 health insurance plans.

24 (e) NONBINDING STANDARDS.—The Secretary, in

25 consultation with NAIC, shall also develop within the 1-
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1 year period described in subsection (a), nonbinding stand2 ards for premium rating practices and guaranteed renew3 ability of coverage which, if the insurer so elects, is more

4 generous (additional benefits or lower cost sharing or

5 both) than the requirements under part I of this subtitle

6 for federally qualified health insurance plans.

7 Subtitle C—Employer Provisions

8 SEC. 121. GENERAL PROVISIONS RELATING TO EMPLOY9 ERS.

10 (a) PREMIUMS WITHHELD.—Each employer shall—

11 (1) withhold from each employee’s wages the

12 amount of the employee’s health insurance premium

13 and remit, directly or indirectly, such premium to

14 the insurance plan of the employee’s choice accord15 ing to an agreed upon schedule, and

16 (2) within the first 30 days of any calendar

17 year or the date of the hire of an employee, notify

18 each employee of the employee’s right to claim an

19 advance refundable tax credit for such premium

20 under section 34A of the Internal Revenue Code of

21 1986.

22 (b) EFFECTIVE DATE.—The requirements under

23 subsection (a) shall apply with respect to calendar year

24 1998 and thereafter.
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1 SEC. 122. CONVERSION OF NON-SELF-INSURED PLANS.

2 In the case of an employer-sponsored health insur3 ance plan in force on the date of the enactment of this

4 Act, and which is not a self-insured plan, the insurer from

5 whom the plan was purchased (or, in the event such in6 surer refuses, any new subsidiary, corporation, insurer,

7 union, cooperative, or association willing to become the

8 new sponsor of the plan) shall—

9 (1) notify, not later than October 1, 1997, all

10 of the primary insured beneficiaries of the employer11 sponsored plan of their rights to convert their insur12 ance coverage to a federally qualified health insur13 ance plan (as defined in section 111) offered by the

14 insurer with benefits identical to, or actuarially

15 equivalent to, those of the employer-sponsored plan

16 and the rates of that coverage, and provide such

17 beneficiaries 60 additional days to decline or accept

18 the new coverage, and

19 (2) offer such coverage beginning January 1,

20 1998, at premium rates which vary only by age, sex,

21 and geography, except that the combined total of the

22 new rates charged separately to the various bene23 ficiaries may not exceed the total group rate paid by

24 the employer or employees or both under the em25 ployer-sponsored plan on the last day it is, or was,

26 in force.
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1 SEC. 123. PROVISIONS RELATING TO EXISTING SELF-IN2 SURED PLANS.

3 (a) IN GENERAL.—In the case of an employer-spon4 sored health insurance plan in force on the date of the

5 enactment of this Act, and which is a self-insured plan,

6 the employer sponsoring the plan may, at anytime follow7 ing such date sell, transfer, or assign the plan to any exist8 ing or new, subsidiary, corporation, insurer, union, cooper9 ative or association, willing to become the new sponsor of

10 the plan, except that—

11 (1) such sale, transfer, or assignment may not

12 take effect unless first approved by a two-thirds ma13 jority vote of all the primary-insured beneficiaries of

14 the plan, and

15 (2) the terms or conditions and benefits or cov16 erage of the plan, and the eligibility criteria for par17 ticipation in the plan, may not be altered before

18 such date.

19 (b) PROVISIONS GOVERNING PLAN.—As of the date

20 of the enactment of this Act, the sponsor of the plan de21 scribed in subsection (a) becomes subject to all laws gov22 erning the operation of a corporation selling health insur23 ance in the applicable State or States and to the provisions

24 of section 122.
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1 SEC. 124. CONTINUATION OF EMPLOYER-PROVIDED

2 HEALTH COVERAGE REQUIRED UNTIL EF3 FECTIVE DATE OF NEW COVERAGE UNDER

4 THIS ACT.

5 (a) IN GENERAL.—Clause (i) of section

6 4980B(f)(2)(B) of the Internal Revenue Code of 1986 (re7 lating to period of coverage) is amended by inserting after

8 subclause (V) the following new subclause:

9 ‘‘(VI) QUALIFYING EVENT IN10 VOLVING END OF PLAN.—In the case

11 of an event described in paragraph

12 (3)(G), December 31, 1997.’’.

13 (b) QUALIFYING EVENT INVOLVING END OF

14 PLAN.—Paragraph (3) of section 4980B(f) of the Internal

15 Revenue Code of 1986 (defining qualifying event) is

16 amended by inserting after subparagraph (F) the follow17 ing new subparagraph:

18 ‘‘(G) The termination by the employer of

19 the group health plan after the date of the en20 actment of the Consumer Choice Health Secu21 rity Act of 1994.’’.

22 (c) CONFORMING AMENDMENT.—Clause (ii) of sec23 tion 4980B(f)(2)(B) of the Internal Revenue Code of 1986

24 is amended by striking ‘‘The date’’ and inserting ‘‘Except

25 in the case of a qualifying event described in paragraph

26 (3)(G), the date’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to qualifying events occurring after

3 the date of the enactment of this Act.

4 SEC. 125. REQUIREMENTS WITH RESPECT TO CASHING OUT

5 EMPLOYER-SPONSORED PLANS.

6 (a) NON-FEDERAL EMPLOYERS.—

7 (1) IN GENERAL.—Each employer contributing

8 in whole or in part to an employer-sponsored health

9 insurance plan on December 1, 1997, shall, within

10 30 days after such date—

11 (A) notify each employee participating in

12 the plan of the amount spent by the employer

13 on the employee’s health insurance, as deter14 mined under paragraph (2),

15 (B) add such amount to the cash wages of

16 the employee commencing with pay periods be17 ginning on and after January 1, 1998, and

18 (C) hold each employee harmless for the

19 employer’s share of any payroll taxes due under

20 chapter 31 of the Internal Revenue Code of

21 1986 on such amount.

22 (2) AMOUNT OF INCLUSION.—The amount de23 scribed in paragraph (1)(A) shall equal the actuarial

24 value of the employer’s contribution for group health

25 issuance coverage apportioned to the plan’s bene-
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1 ficiaries according to the new premiums for individ2 ual and family coverage determined by the insurer.

3 (3) PRIOR TERMINATION.—Any beneficiary of

4 an employer-sponsored health insurance plan who

5 voluntarily terminates coverage under such a plan

6 before December 1, 1997, forfeits the right to re7 ceive the value of the beneficiary’s coverage in cash.

8 (b) COMMISSION ON CASHING OUT FEHBP BENE9 FITS.—

10 (1) ESTABLISHMENT.—

11 (A) IN GENERAL.—There is established an

12 independent board to be known as the ‘‘Bene13 fits Cash Out Commission’’ (in this subtitle, re14 ferred to as the ‘‘Commission’’).

15 (B) DUTIES.—The Commission shall study

16 and propose a procedure under which individ17 uals may cash out health benefits under chapter

18 89 of title 5, United States Code, and pay

19 scales and retirement benefits would be ad20 justed accordingly. The Commission shall report

21 to Congress regarding such study and proposal

22 not later than 1 year after the date of the en23 actment of this Act.

24 (C) MEMBERSHIP.—
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1 (i) IN GENERAL.—The Commission

2 shall be composed of 13 members ap3 pointed by the President by and with the

4 advice and consent of the Senate.

5 (ii) CONSULTATION.—In selecting in6 dividuals for nominations for appointments

7 for the Commission, the President should

8 consult with—

9 (I) the Speaker of the House of

10 Representatives concerning the ap11 pointment of 3 members;

12 (II) the Majority Leader of the

13 Senate concerning the appointment of

14 3 members;

15 (III) the Minority Leader of the

16 House of Representatives concerning

17 the appointment of 3 members; and

18 (IV) the Minority Leader of the

19 Senate concerning the appointment of

20 3 members.

21 (iii) CHAIR.—The President shall des22 ignate 1 individual described in clause (ii)

23 who shall serve as Chair of the Commis24 sion.
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1 (iv) COMPOSITION OF COMMISSION.—

2 The membership of the Commission shall

3 include individuals with national recogni4 tion for expertise in the valuation of health

5 insurance benefits and of Federal civilian

6 pay and retirement benefits.

7 (D) ADMINISTRATIVE PROVISIONS.—

8 (i) MEETINGS.—Each meeting of the

9 Commission shall be open to the public.

10 (ii) PAY AND TRAVEL EXPENSES.—

11 (I) IN GENERAL.—Each member,

12 other than the Chair, shall be paid at

13 a rate equal to the daily equivalent of

14 the minimum annual rate of basic pay

15 payable for level IV of the Executive

16 Schedule under section 5315 of title

17 5, United States Code, for each day

18 (including travel time) during which

19 the member is engaged in the actual

20 performance of duties vested in the

21 Commission.

22 (II) CHAIR.—The Chair shall be

23 paid for each day referred to in

24 subclause (I) at a rate equal to the

25 daily equivalent of the minimum an-
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•HR 4550 IH

1 nual rate of basic pay payable for

2 level III of the Executive Schedule

3 under section 5314 of title 5, United

4 States Code.

5 (III) TRAVEL EXPENSES.—Mem6 bers shall receive travel expenses, in7 cluding per diem in lieu of subsist8 ence, in accordance with sections

9 5702 and 5703 of title 5, United

10 States Code.

11 (iii) STAFF.—

12 (I) IN GENERAL.—Subject to

13 subclauses (II) and (III), the Chair,

14 with the approval of the Commission,

15 may appoint and fix the pay of addi16 tional personnel.

17 (II) PAY.—The Chair may make

18 such appointments without regard to

19 the provisions of title 5, United States

20 Code, governing appointments in the

21 competitive service, and any personnel

22 so appointed may be paid without re23 gard to the provisions of chapter 51

24 and subchapter III of chapter 53 of

25 such title, relating to classification
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1 and General Schedule pay rates, ex2 cept that an individual so appointed

3 may not receive pay in excess of 120

4 percent of the annual rate of basic

5 pay payable for GS–15 of the General

6 Schedule.

7 (III) DETAILED PERSONNEL.—

8 Upon request of the Chair, the head

9 of any Federal department or agency

10 may detail any of the personnel of

11 that department or agency to the

12 Commission to assist the Commission

13 in carrying out its duties under this

14 Act.

15 (iv) OTHER AUTHORITY.—

16 (I) CONTRACT SERVICES.—The

17 Commission may procure by contract,

18 to the extent funds are available, the

19 temporary or intermittent services of

20 experts or consultants pursuant to

21 section 3109 of title 5, United States

22 Code.

23 (II) LEASES, ETC.—The Com24 mission may lease space and acquire
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1 personal property to the extent funds

2 are available.

3 (2) CONSIDERATION.—

4 (A) IN GENERAL.—The proposal described

5 in paragraph (1)(B) shall be considered by the

6 Congress under the procedures for consider7 ation of an ‘‘approval resolution’’ as described

8 in subparagraph (D).

9 (B) EFFECTIVE DATE OF IMPLEMENTA10 TION.—The provisions of the proposal shall be11 come effective on January 1, 1997.

12 (C) PERIOD FOR RESUBMISSION OF PRO13 POSAL IN CASE OF NONAPPROVAL.—If the pro14 posal of the Commission described in subpara15 graph (A) is not approved by Congress, the

16 Commission shall by not later than January 1,

17 1996, submit a new proposal to Congress.

18 (D) RULES GOVERNING CONGRESSIONAL

19 CONSIDERATION.—

20 (i) RULES OF HOUSE OF REPRESENT21 ATIVES AND SENATE.—This subparagraph

22 is enacted by the Congress—

23 (I) as an exercise of the rule24 making power of the House of Rep25 resentatives and the Senate, respec-
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•HR 4550 IH

1 tively, and as such is deemed a part

2 of the rules of each House, respec3 tively, but applicable only with respect

4 to the procedure to be followed in that

5 House in the case of approval resolu6 tions described in clause (ii), and su7 persedes other rules only to the extent

8 that such rules are inconsistent there9 with; and

10 (II) with full recognition of the

11 constitutional right of either House to

12 change the rules (so far as relating to

13 the procedure of that House) at any

14 time, in the same manner and to the

15 same extent as in the case of any

16 other rule of that House.

17 (ii) TERMS OF THE RESOLUTION.—

18 For purposes of subparagraph (A), the

19 term ‘‘approval resolution’’ means only a

20 joint resolution of the 2 Houses of the

21 Congress, providing in—

22 (I) the matter after the resolving

23 clause of which is as follows: ‘‘That

24 the Congress approves the rec25 ommendations of the Benefits Cash
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•HR 4550 IH

1 Out Commission as submitted by the

2 Commission on lllllll’’, the

3 blank space being filled in with the

4 appropriate date; and

5 (II) the title of which is as fol6 lows: ‘‘Joint Resolution approving the

7 recommendation of the Benefits Cash

8 Out Commission’’.

9 (iii) INTRODUCTION AND REFER10 RAL.—On the day on which the rec11 ommendation of the Commission is trans12 mitted to the House of Representatives

13 and the Senate, an approval resolution

14 with respect to such recommendation shall

15 be introduced (by request) in the House of

16 Representatives by the Majority Leader of

17 the House, for himself or herself and the

18 Minority Leader of the House, or by Mem19 bers of the House designated by the Ma20 jority Leader and Minority Leader of the

21 House; and shall be introduced (by re22 quest) in the Senate by the Majority Lead23 er of the Senate, for himself or herself and

24 the Minority Leader of the Senate, or by

25 Members of the Senate designated by the
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•HR 4550 IH

1 Majority Leader and Minority Leader of

2 the Senate. If either House is not in ses3 sion on the day on which such rec4 ommendation is transmitted, the approval

5 resolution with respect to such rec6 ommendation shall be introduced in the

7 House, as provided in the preceding sen8 tence, on the first day thereafter on which

9 the House is in session. The approval reso10 lution introduced in the House of Rep11 resentatives and the Senate shall be re12 ferred to the appropriate committees of

13 each House.

14 (iv) AMENDMENTS PROHIBITED.—No

15 amendment to an approval resolution shall

16 be in order in either the House of Rep17 resentatives or the Senate; and no motion

18 to suspend the application of this clause

19 shall be in order in either House, nor shall

20 it be in order in either House for the Pre21 siding Officer to entertain a request to sus22 pend the application of this clause by

23 unanimous consent.

24 (v) PERIOD FOR COMMITTEE AND

25 FLOOR CONSIDERATION.—
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1 (I) IN GENERAL.—Except as pro2 vided in subclause (II), if the commit3 tee or committees of either House to

4 which an approval resolution has been

5 referred have not reported it at the

6 close of the 30th day after its intro7 duction, such committee or commit8 tees shall be automatically discharged

9 from further consideration of the ap10 proval resolution and it shall be

11 placed on the appropriation calendar.

12 A vote on final passage of the ap13 proval resolution shall be taken in

14 each House on or before the close of

15 the 30th day after the approval reso16 lution is reported by the committees

17 or committee of that House to which

18 it was referred, or after such commit19 tee or committees have been dis20 charged from further consideration of

21 the approval resolution. If prior to the

22 passage by 1 House of an approval

23 resolution of that House, that House

24 receives the same approval resolution

25 from the other House then the proce-
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•HR 4550 IH

1 dure in that House shall be the same

2 as if no approval resolution had been

3 received from the other House, but

4 the vote on final passage shall be on

5 the approval resolution of the other

6 House.

7 (II) COMPUTATION OF DAYS.—

8 For purposes of subclause (I), in com9 puting a number of days in either

10 House, there shall be excluded any

11 day on which the House is not in ses12 sion.

13 (vi) FLOOR CONSIDERATION IN THE

14 HOUSE OF REPRESENTATIVES.—

15 (I) MOTION TO PROCEED.—A

16 motion in the House of Representa17 tives to proceed to the consideration

18 of an approval resolution shall be

19 highly privileged and not debatable.

20 An amendment to the motion shall

21 not be in order, nor shall it be in

22 order to move to reconsider the vote

23 by which the motion is agreed to or

24 disagreed to.
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1 (II) DEBATE.—Debate in the

2 House of Representatives on an ap3 proval resolution shall be limited to

4 not more than 20 hours, which shall

5 be divided equally between those fa6 voring and those opposing the bill or

7 resolution. A motion further to limit

8 debate shall not be debatable. It shall

9 not be in order to move to recommit

10 an approval resolution or to move to

11 reconsider the vote by which an ap12 proval resolution is agreed to or dis13 agreed to.

14 (III) MOTION TO POSTPONE.—

15 Motions to postpone, made in the

16 House of Representatives with respect

17 to the consideration of an approval

18 resolution, and motions to proceed to

19 the consideration of other business,

20 shall be decided without debate.

21 (IV) APPEALS.—All appeals from

22 the decisions of the Chair relating to

23 the application of the Rules of the

24 House of Representatives to the pro-
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•HR 4550 IH

1 cedure relating to an approval resolu2 tion shall be decided without debate.

3 (V) GENERAL RULES APPLY.—

4 Except to the extent specifically pro5 vided in the preceding provisions of

6 this clause, consideration of an ap7 proval resolution shall be governed by

8 the Rules of the House of Representa9 tives applicable to other bills and reso10 lutions in similar circumstances.

11 (vii) FLOOR CONSIDERATION IN THE

12 SENATE.—

13 (I) MOTION TO PROCEED.—A

14 motion in the Senate to proceed to the

15 consideration of an approval resolu16 tion shall be privileged and not debat17 able. An amendment to the motion

18 shall not be in order, nor shall it be

19 in order to move to reconsider the

20 vote by which the motion is agreed to

21 or disagreed to.

22 (II) GENERAL DEBATE.—Debate

23 in the Senate on an approval resolu24 tion, and all debatable motions and

25 appeals in connection therewith, shall
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1 be limited to not more than 20 hours.

2 The time shall be equally divided be3 tween, and controlled by, the Majority

4 Leader and the Minority Leader or

5 their designees.

6 (III) DEBATE OF MOTIONS AND

7 APPEALS.—Debate in the Senate on

8 any debatable motion or appeal in

9 connection with an approval resolution

10 shall be limited to not more than 1

11 hour, to be equally divided between,

12 and controlled by, the mover and the

13 manager of the approval resolution,

14 except that in the event the manager

15 of the approval resolution is in favor

16 of any such motion or appeal, the

17 time in opposition thereto, shall be

18 controlled by the Minority Leader or

19 his designee. Such leaders, or either of

20 them, may, from time under their

21 control on the passage of an approval

22 resolution, allot additional time to any

23 Senator during the consideration of

24 any debatable motion or appeal.
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1 (IV) OTHER MOTIONS.—A mo2 tion in the Senate to further limit de3 bate is not debatable. A motion to re4 commit an approval resolution is not

5 in order.

6 SEC. 126. ENFORCEMENT.

7 (a) IN GENERAL.—Chapter 47 of the Internal Reve8 nue Code of 1986 (relating to excise taxes on qualified

9 pension, etc. plans) is amended by inserting after section

10 5000 the following new sections:

11 ‘‘SEC. 5000A. FAILURE OF EMPLOYERS WITH RESPECT TO

12 HEALTH INSURANCE.

13 ‘‘(a) GENERAL RULE.—There is hereby imposed a

14 tax on the failure of any person to comply with the re15 quirements of sections 121 and 125(a) of the Consumer

16 Choice Health Security Act of 1994 with respect to any

17 employee of the person.

18 ‘‘(b) AMOUNT OF TAX.—

19 ‘‘(1) IN GENERAL.—The amount of the tax im20 posed by subsection (a) on any failure with respect

21 to an employee shall be $50 for each day in the non22 compliance period with respect to such failure.

23 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

24 of this section, the term ‘noncompliance period’

25 means, with respect to any failure, the period—
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1 ‘‘(A) beginning on the date such failure

2 first occurs, and

3 ‘‘(B) ending on the date such failure is

4 corrected.

5 ‘‘(3) CORRECTION.—A failure of a person to

6 comply with the requirements of section 121 or

7 125(a) of the Consumer Choice Health Security Act

8 of 1994 with respect to any employee of the person

9 shall be treated as corrected if—

10 ‘‘(A) such failure is retroactively undone to

11 the extent possible, and

12 ‘‘(B) the employee is placed in a financial

13 position which is as good as such employee

14 would have been in had such failure not oc15 curred.

16 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

17 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

18 DISCOVERED EXERCISING REASONABLE DILI19 GENCE.—No tax shall be imposed by subsection (a)

20 on any failure during any period for which it is es21 tablished to the satisfaction of the Secretary that

22 none of the persons referred to in subsection (d)

23 knew, or exercising reasonable diligence would have

24 known, that such failure existed.
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1 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR2 RECTED WITHIN 30 DAYS.—No tax shall be imposed

3 by subsection (a) on any failure if—

4 ‘‘(A) such failure was due to reasonable

5 cause and not to willful neglect, and

6 ‘‘(B) such failure is corrected during the

7 30-day period beginning on the first date any of

8 the persons referred to in subsection (d) knew,

9 or exercising reasonable diligence would have

10 known, that such failure existed.

11 ‘‘(3) WAIVER BY SECRETARY.—In the case of a

12 failure which is due to reasonable cause and not to

13 willful neglect, the Secretary may waive part or all

14 of the tax imposed by subsection (a) to the extent

15 that the payment of such tax would be excessive rel16 ative to the failure involved.

17 ‘‘(d) LIABILITY FOR TAX.—

18 ‘‘(1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, the following shall be liable

20 for the tax imposed by subsection (a) on a failure:

21 ‘‘(A) In the case of a health insurance plan

22 other than a multiemployer plan, the employer.

23 ‘‘(B) In the case of a multiemployer plan,

24 the plan.
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1 ‘‘(C) Each person who is responsible (other

2 than in a capacity as an employee) for admin3 istering or providing benefits under the health

4 insurance plan and whose act or failure to act

5 caused (in whole or in part) the failure.

6 ‘‘(2) SPECIAL RULES FOR PERSONS DESCRIBED

7 IN PARAGRAPH (1)(C).—A person described in sub8 paragraph (C) (and not in subparagraphs (A) and

9 (B)) of paragraph (1) shall be liable for the tax im10 posed by subsection (a) on any failure only if such

11 person assumed (under a legally enforceable written

12 agreement) responsibility for the performance of the

13 act to which the failure relates.

14 ‘‘SEC. 5000B. FAILURE OF CARRIERS WITH RESPECT TO

15 HEALTH INSURANCE.

16 ‘‘(a) GENERAL RULE.—There is hereby imposed a

17 tax on the failure of any carrier offering any health insur18 ance plan to comply with the requirements of sections 122

19 and 123 of the Consumer Choice Health Security Act of

20 1994.

21 ‘‘(b) AMOUNT OF TAX.—

22 ‘‘(1) IN GENERAL.—The amount of tax imposed

23 by subsection (a) by reason of 1 or more failures

24 during a taxable year shall be equal to 50 percent

25 of the gross premiums received during such taxable
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1 year with respect to all health insurance plans issued

2 by the carrier on whom such tax is imposed.

3 ‘‘(2) GROSS PREMIUMS.—For purposes of para4 graph (1), gross premiums shall include any consid5 eration received with respect to any health insurance

6 contract.

7 ‘‘(3) CONTROLLED GROUPS.—For purposes of

8 paragraph (1)—

9 ‘‘(A) CONTROLLED GROUP OF CORPORA10 TIONS.—All corporations which are members of

11 the same controlled group of corporations shall

12 be treated as 1 carrier. For purposes of the pre13 ceding sentence, the term ‘controlled group of

14 corporations’ has the meaning given to such

15 term by section 1563(a), except that—

16 ‘‘(i) ‘more than 50 percent’ shall be

17 substituted for ‘at least 80 percent’ each

18 place it appears in section 1563(a)(1), and

19 ‘‘(ii) the determination shall be made

20 without regard to subsections (a)(4) and

21 (e)(3)(C) of section 1563.

22 ‘‘(B) PARTNERSHIPS, PROPRIETORSHIPS,

23 ETC., WHICH ARE UNDER COMMON CONTROL.—

24 Under regulations prescribed by the Secretary,

25 all trades or business (whether or not incor-
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1 porated) which are under common control shall

2 be treated as 1 carrier. The regulations pre3 scribed under this subparagraph shall be based

4 on principles similar to the principles which

5 apply in the case of subparagraph (A).

6 ‘‘(c) LIMITATION ON TAX.—

7 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

8 DISCOVERED EXERCISING REASONABLE DILI9 GENCE.—No tax shall be imposed by subsection (a)

10 with respect to any failure for which it is established

11 to the satisfaction of the Secretary that the carrier

12 on whom the tax is imposed did not know, and exer13 cising reasonable diligence would not have known,

14 that such failure existed.

15 ‘‘(2) TAX NOT TO APPLY WHERE FAILURES

16 CORRECTED WITHIN 30 DAYS.—No tax shall be im17 posed by subsection (a) with respect to any failure

18 if—

19 ‘‘(A) such failure was due to reasonable

20 cause and not to willful neglect, and

21 ‘‘(B) such failure is corrected during the

22 30-day period beginning on the 1st date any of

23 the carriers on whom the tax is imposed knew,

24 or exercising reasonable diligence would have

25 known, that such failure existed.
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1 ‘‘(3) WAIVER BY SECRETARY.—In the case of a

2 failure which is due to reasonable cause and not to

3 willful neglect, the Secretary may waive part or all

4 of the tax imposed by subsection (a) to the extent

5 that the payment of such tax would be excessive rel6 ative to the failure involved.’’.

7 (b) CLERICAL AMENDMENTS.—The table of sections

8 for such chapter 47 is amended by adding at the end

9 thereof the following new items:

‘‘Sec. 5000A. Failure of employers with respect to health insurance.

‘‘Sec. 5000B. Failure of carriers with respect to health insurance.’’.

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

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

12 Subtitle D—Federal Preemption

13 SEC. 131. FEDERAL PREEMPTION OF CERTAIN STATE LAWS.

14 All State laws in existence on January 1, 1998, in

15 the following areas are preempted:

16 (1) MANDATED INSURANCE BENEFIT LAWS.—

17 Laws requiring health insurance policies to cover

18 specific diseases, services, or providers.

19 (2) ANTI-MANAGED CARE LAWS.—Laws re20 stricting the ability of managed care plans to selec21 tively contract with providers of their choice.

22 (3) MANDATED COST-SHARING LAWS.—Laws

23 restricting the extent to which insurers may require
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1 enrollee cost sharing as part of their plans, or re2 stricting the extent to which managed care plans

3 may impose different levels of cost sharing on en4 rollee claims for treatment by providers not partici5 pating in the plan.

6 Subtitle E—Report

7 SEC. 141. REPORT ON HEALTH INSURANCE COVERAGE.

8 The Secretary of Health and Human Services shall

9 submit to the Congress, not later than 5 years after the

10 date of the enactment of this Act, a report on the follow11 ing:

12 (1) The number and demographic profile of

13 Americans who have purchased health insurance

14 pursuant to the provisions of this Act, including in15 formation concerning the type of coverage purchased

16 and its cost.

17 (2) The number and demographic profile of

18 Americans who have chosen to forgo health insur19 ance coverage.

20 (3) The estimated health care costs incurred by

21 the insured and the extent to which such costs have

22 been—

23 (A) paid for directly by the uninsured, or
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1 (B) shifted to individuals with health in2 surance coverage and to Federal, State, and

3 local governmental entities.

4 TITLE II—MEDICARE AND

5 MEDICAID REFORMS

6 Subtitle A—Medicare

7 SEC. 201. STUDY OF MEDICARE PRIVATE HEALTH INSUR8 ANCE PROGRAM.

9 (a) STUDY.—The Secretary shall conduct a study of

10 the feasibility of permitting future medicare beneficiaries

11 to elect, upon attaining medicare eligibility, to retain pri12 vate health insurance coverage and receive, in lieu of the

13 medicare benefits such beneficiaries would otherwise be

14 entitled to, certificates for use in purchasing private health

15 insurance coverage. The study shall recommend—

16 (1) certificate amounts which—

17 (A) provide the maximum assistance pos18 sible to eligible individuals,

19 (B) are adjusted for different classes of

20 beneficiaries on the basis of age, sex, and geog21 raphy to reflect actuarial differences in the cost

22 of insurance, and

23 (C) will not further jeopardize the future

24 solvency of the medicare program, as projected
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1 by the trustees of the medicare trust funds as

2 of the date of the report of the study,

3 (2) a mechanism for annually adjusting such

4 amounts, and

5 (3) legislative, regulatory, and administrative

6 reforms necessary or desirable for establishing such

7 a program.

8 (b) REPORT.—The Secretary shall submit a report

9 regarding the study described in subsection (a) to the Con10 gress no later than January 1, 1997.

11 SEC. 202. ELIMINATION OF MEDICARE HOSPITAL DIS12 PROPORTIONATE SHARE ADJUSTMENT PAY13 MENTS.

14 Section 1886(d)(5)(F)(i) of the Social Security Act

15 (42 U.S.C. 1395ww(d)(5)(F)(i)) is amended by inserting

16 ‘‘and before September 30, 1994,’’ after ‘‘1986,’’.

17 SEC. 203. REDUCTION IN ADJUSTMENT FOR INDIRECT MED18 ICAL EDUCATION.

19 Section 1886(d)(5)(B)(ii) of the Social Security Act

20 (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as

21 follows:

22 ‘‘(ii) For purposes of clause (i)(II), the indirect

23 teaching adjustment factor is equal to c * (((1+r)

24 to the nth power) - 1), where ‘r’ is the ratio of the

25 hospital’s full-time equivalent interns and residents
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1 to beds and ‘n’ equals .405. For discharges occur2 ring on or after—

3 ‘‘(I) May 1, 1986, and before October 1,

4 1994, ‘c’ is equal to 1.89,

5 ‘‘(II) October 1, 1994, and before October

6 1, 1995, ‘c’ is equal to 1.395, and

7 ‘‘(III) October 1, 1995, ‘c’ is equal to

8 0.74.’’.

9 SEC. 204. IMPOSITION OF COPAYMENT FOR SKILLED NURS10 ING FACILITY SERVICES.

11 (a) IN GENERAL.—Paragraph (3) of section 1813(b)

12 of the Social Security Act (42 U.S.C. 1395e(b)) is amend13 ed to read as follows:

14 ‘‘(3) The amount payable for post-hospital extended

15 care services furnished an individual during any spell of

16 illness shall be reduced by a copayment amount equal to

17 20 percent of the average of all per day costs for such

18 services furnished under this title (as determined by the

19 Secretary on a prospective basis for services furnished

20 during a calendar year).’’.

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

22 subsection (a) shall apply to post-hospital extended care

23 services furnished on or after October 1, 1994.
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1 SEC. 205. SHIFT PAYMENT UPDATES TO JANUARY FOR ALL

2 PAYMENT RATES UNDER HOSPITAL INSUR3 ANCE PROGRAM.

4 (a) PPS HOSPITALS.—

5 (1) IN GENERAL.—Section 1886(b)(3)(B)(i) of

6 the Social Security Act (42 U.S.C.

7 1395ww(b)(3)(B)(i)) is amended—

8 (A) in the matter preceding subclause (I),

9 by striking ‘‘fiscal year’’ and inserting ‘‘particu10 lar time period’’,

11 (B) in subclause (IX), by striking ‘‘fiscal

12 year 1994’’, and inserting ‘‘the 15-month pe13 riod beginning on October 1, 1993’’,

14 (C) in subclauses (X), (XI), and (XII), by

15 striking ‘‘fiscal year’’, and

16 (D) in subclause (XIII), by striking ‘‘fiscal

17 year 1998 and each subsequent fiscal year’’ and

18 inserting ‘‘1998 and each subsequent calendar

19 year’’.

20 (2) OTHER HOSPITALS.—

21 (A) IN GENERAL.—Section

22 1886(b)(3)(B)(ii) of such Act (42 U.S.C.

23 1395ww(b)(3)(B)(ii)) is amended—

24 (i) in subclause (V)—

25 (I) by striking ‘‘fiscal years 1994

26 through 1997’’ and inserting ‘‘the 15-
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1 month period beginning on October 1,

2 1993,’’, and

3 (II) by striking ‘‘and’’ at the end,

4 and

5 (ii) by striking subclause (VI) and in6 sert the following:

7 ‘‘(VI) 1995 through 1997, is the market basket

8 percentage increase minus the applicable reduction

9 (as defined in clause (vi)(II)), or in the case of a

10 hospital for a calendar year for which the hospital’s

11 update adjustment percentage (as defined in clause

12 (vi)(I)) is at least 10 percent, the market basket per13 centage increase, and

14 ‘‘(VII) subsequent calendar years is the market

15 basket percentage increase.’’.

16 (B) CONFORMING AMENDMENT.—Section

17 1886(b)(3)(B) of such Act (42 U.S.C.

18 1395ww(b)(3)(B)) is amended by adding at the

19 end the following new clause:

20 ‘‘(vi) For purposes of clause (ii)(VI)—

21 ‘‘(I) a hospital’s ‘update adjustment percentage’

22 for a calendar year is the percentage by which the

23 hospital’s allowable operating cost of inpatient hos24 pital services recognized under this title for the cost

25 reporting period beginning in fiscal year 1990 ex-
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1 ceeds the hospital’s target amount (as determined

2 under subparagraph (A)) for such cost reporting pe3 riod, increased for each calendar year (beginning

4 with 1995) by the sum of any of the hospital’s appli5 cable reductions under subclause (VI) for previous

6 years; and

7 ‘‘(II) the ‘applicable reduction’ with respect to

8 a hospital for a calendar year is the lesser of 1 per9 centage point or the percentage point difference be10 tween 10 percent and the hospital’s update adjust11 ment percentage for the calendar year.’’.

12 (3) SOLE COMMUNITY AND MEDICARE-DEPEND13 ENT, SMALL RURAL HOSPITALS.—

14 (A) IN GENERAL.—Section

15 1886(b)(3)(B)(iv) of such Act (42 U.S.C.

16 1395ww(b)(3)(B)(iv)) is amended—

17 (i) in subclause (II), by striking ‘‘fis18 cal year 1994’’ and inserting ‘‘the 15-

19 month period beginning on October 1,

20 1993’’,

21 (ii) in subclause (III), by striking ‘‘fis22 cal year’’, and

23 (iii) in subclause (IV), by striking

24 ‘‘fiscal year 1996 and each subsequent fis-
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1 cal year’’ and inserting ‘‘1996 and each

2 subsequent calendar year’’.

3 (B) TARGET AMOUNT ADJUSTMENT.—Sec4 tion 1886(b)(3)(C) of such Act (42 U.S.C.

5 1395ww(b)(3)(C)) is amended—

6 (i) in clause (iii), by inserting ‘‘or por7 tion of a cost reporting period occurring

8 before December 31, 1994,’’ before ‘‘the

9 target amount’’, and

10 (ii) in clause (iv), by striking ‘‘fiscal

11 year 1995 and each subsequent fiscal

12 year’’ and inserting ‘‘1995 and each subse13 quent year’’.

14 (C) EXTENSION OF REGIONAL FLOOR.—

15 Section 1886(d)(1)(A)(iii)(II) of such Act (42

16 U.S.C. 1395ww(d)(1)(A)(iii)(II)) is amended—

17 (i) by striking ‘‘for discharges occur18 ring during a fiscal year ending on or be19 fore September 30, 1996’’ and inserting

20 ‘‘for discharges occurring during the 15-

21 month period beginning on October 1,

22 1993, and during any calendar year ending

23 on or before December 31, 1996’’, and
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1 (ii) by striking ‘‘such fiscal year’’ and

2 inserting ‘‘such 15-month period or such

3 calendar year, as the case may be’’.

4 (4) CONFORMING AMENDMENTS.—

5 (A) Section 1886(b)(3)(B)(iii) of such Act

6 (42 U.S.C. 1395ww(b)(3)(B)(iii)) is amended—

7 (i) by inserting ‘‘beginning in’’ after

8 ‘‘cost reporting periods’’,

9 (ii) by striking ‘‘fiscal year’’ the first

10 place it appears and inserting ‘‘particular

11 time period’’,

12 (iii) by striking ‘‘or fiscal year’’ the

13 first and second place it appears, and

14 (iv) by striking ‘‘cost reporting period

15 or fiscal year’’ and inserting ‘‘period’’.

16 (B) Section 1886(d)(1)(A) of such Act (42

17 U.S.C. 1395ww(d)(1)(A)) is amended in the

18 matter preceding clause (i) by inserting ‘‘or cal19 endar’’ after ‘‘fiscal’’.

20 (C) Section 1886(d)(2)(D) of such Act (42

21 U.S.C. 1395ww(d)(2)(D)) is amended by insert22 ing ‘‘or calendar’’ after ‘‘fiscal’’ each place it

23 appears.

24 (D) Section 1886(d)(3) of such Act (42

25 U.S.C. 1395ww(d)(3)) is amended in the first
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1 sentence by inserting ‘‘or calendar’’ after ‘‘fis2 cal’’ the first place it appears and by inserting

3 ‘‘for each fiscal year through 1994’’ after ‘‘in

4 the United States, and’’.

5 (E) Section 1886(d)(3)(A)(ii) of such Act

6 (42 U.S.C. 1395ww(d)(3)(A)(ii)) is amended—

7 (i) by striking ‘‘1994,’’ and inserting

8 ‘‘1993, and occurring in the 15-month pe9 riod beginning on October 1, 1993,’’, and

10 (ii) by striking ‘‘fiscal year’’ the sec11 ond and last place it appears and inserting

12 ‘‘time period’’.

13 (F) Section 1886(d)(3)(A)(iii) of such Act

14 (42 U.S.C. 1395ww(d)(3)(A)(iii)) is amended

15 by striking ‘‘the fiscal year beginning on Octo16 ber 1, 1994’’ and inserting ‘‘1995’’.

17 (G) Section 1886(d)(3)(A)(iv) of such Act

18 (42 U.S.C. 1395ww(d)(3)(A)(iv)) is amended—

19 (i) by striking ‘‘fiscal year beginning

20 on or after October 1, 1995’’ and inserting

21 ‘‘year beginning on or after January 1,

22 1996’’,

23 (ii) by striking ‘‘and within each re24 gion’’, and
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1 (iii) by striking ‘‘fiscal’’ each place it

2 appears.

3 (H) Section 1886(d)(3)(D) of such Act (42

4 U.S.C. 1395ww(d)(3)(D)) is amended—

5 (i) by inserting ‘‘or calendar’’ after

6 ‘‘fiscal’’ each place it appears, and

7 (ii) by inserting ‘‘for each fiscal year

8 through 1994’’ after ‘‘and shall establish’’.

9 (I) Section 1886(d)(3)(E) of such Act (42

10 U.S.C. 1395ww(d)(3)(E)) is amended—

11 (i) in the second sentence, by striking

12 ‘‘at least every 12 months thereafter’’ and

13 inserting ‘‘beginning January 1, 1995, at

14 least every 12 months thereafter’’, and

15 (ii) in the last sentence, by inserting

16 ‘‘or calendar’’ after ‘‘fiscal’’ the first and

17 last place it appears.

18 (J)(i) Section 1886(d)(4)(C)(iii) of such

19 Act (42 U.S.C. 1395ww(d)(4)(C)(iii)) is amend20 ed—

21 (I) by inserting ‘‘or calendar’’ after

22 ‘‘fiscal’’ the first place it appears, and

23 (II) by deleting ‘‘fiscal’’ the last place

24 it appears.
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1 (ii) The requirements of paragraphs (3)(E)

2 and (4)(C)(iii) of section 1886(d) of the Social

3 Security Act (42 U.S.C. 1395ww(d)(4)(C)(iii))

4 shall be applied on a 15-month basis for the pe5 riod beginning on October 1, 1993, and ending

6 on December 31, 1994.

7 (K)(i) Section 1886(d)(5)(A) of such Act

8 (42 U.S.C. 1395ww(d)(5)(A)) is amended—

9 (I) in clause (i), by striking ‘‘fiscal

10 years ending on or before September 30,

11 1997’’ and inserting ‘‘calendar years end12 ing on or before December 31, 1997’’,

13 (II) in clause (ii), by striking ‘‘fiscal

14 years beginning on or after October 1,

15 1994’’ and inserting ‘‘calendar years begin16 ning on or after January 1, 1995’’,

17 (III) in clause (iv), by inserting ‘‘or

18 calendar’’ after ‘‘fiscal’’,

19 (IV) in clause (v), by striking ‘‘fiscal

20 year’’ each place it appears, and

21 (V) in clause (vi), by striking ‘‘fiscal’’

22 and inserting ‘‘calendar’’.

23 (ii) The requirement of section

24 1886(d)(5)(A)(iv) of the Social Security Act

25 (42 U.S.C. 1395ww(d)(5)(A)(iv)) shall be ap-
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1 plied on a 15-month basis for the period begin2 ning on October 1, 1993, and ending on De3 cember 31, 1994.

4 (L) Section 1886(d)(5)(E)(ii) of such Act

5 (42 U.S.C. 1395ww(d)(5)(E)(ii)) is amended by

6 inserting ‘‘or calendar’’ after ‘‘fiscal’’.

7 (M) Section 1886(d)(6) of such Act (42

8 U.S.C. 1395ww(d)(6)) is amended by inserting

9 ‘‘or December 1 of each calendar year (begin10 ning with calendar year 1995)’’ after ‘‘1984)’’.

11 (N) Section 1886(d)(9)(A) of such Act (42

12 U.S.C. 1395ww(d)(9)(A)) is amended in the

13 matter preceding clause (i) by striking ‘‘fiscal

14 year’’ and inserting ‘‘particular time period’’.

15 (O) Section 1886(d)(9)(C)(i) of such Act

16 (42 U.S.C. 1395ww(d)(9)(C)(i)) is amended—

17 (i) by striking ‘‘fiscal year’’ the first

18 place it appears and inserting ‘‘time pe19 riod’’,

20 (ii) by striking ‘‘for fiscal year 1989’’,

21 and

22 (iii) by striking ‘‘fiscal years’’ and in23 serting ‘‘time periods’’.

24 (P) Section 1886(d)(10)(C) of such Act

25 (42 U.S.C. 1395ww(d)(10)(C)) is amended—
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1 (i) in clause (i), by striking ‘‘fiscal

2 year’’ and inserting ‘‘particular time pe3 riod’’, and

4 (ii) in clause (ii), by inserting ‘‘or cal5 endar’’ after ‘‘fiscal’’ the first place it ap6 pears and striking ‘‘fiscal’’ the last place it

7 appears.

8 (Q) Section 1886(e)(2) of such Act (42

9 U.S.C. 1395ww(e)(2)) is amended—

10 (i) in subparagraph (A), by striking

11 ‘‘fiscal years’’ and inserting ‘‘particular

12 time periods’’, and

13 (ii) in subparagraph (B), by striking

14 ‘‘fiscal year’’ each place it appears and in15 serting ‘‘particular time period’’.

16 (R) Section 1886(e)(3) of such Act (42

17 U.S.C. 1395ww(e)(3)) is amended—

18 (i) in subparagraph (A)—

19 (I) by striking ‘‘before the begin20 ning of each fiscal year (beginning

21 with fiscal year 1986)’’, and

22 (II) by striking ‘‘that fiscal year’’

23 and inserting ‘‘the succeeding year’’,

24 and

25 (ii) in subparagraph (B)—
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1 (I) by striking ‘‘before the begin2 ning of each fiscal year (beginning

3 with fiscal year 1989)’’, and

4 (II) by striking ‘‘that fiscal year’’

5 and inserting ‘‘the succeeding year’’.

6 (S) Section 1886(e)(4)(A) of such Act (42

7 U.S.C. 1395ww(e)(4)(A)) is amended in the

8 first sentence by striking ‘‘fiscal’’ the first and

9 last place it appears and by striking ‘‘(begin10 ning with fiscal year 1988)’’.

11 (T) Section 1886(e)(4)(B) of such Act (42

12 U.S.C. 1395ww(e)(4)(B)) is amended by strik13 ing ‘‘fiscal’’ the first place it appears and by

14 striking ‘‘(beginning with fiscal year 1992)’’.

15 (U) Section 1886(e)(5) of such Act (42

16 U.S.C. 1395ww(e)(5)) is amended—

17 (i) in subparagraph (A), by striking

18 ‘‘the May 1 before each fiscal year (begin19 ning with fiscal year 1986) and inserting

20 ‘‘May 1’’ and by striking ‘‘that fiscal year’’

21 and inserting ‘‘the succeeding year’’, and

22 (ii) in subparagraph (B), by striking

23 ‘‘fiscal’’.

24 (V) The second and third sentences of sec25 tion 1886(e)(5) of such Act (42 U.S.C.
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1 1395ww(e)(5)) are each amended by striking

2 ‘‘fiscal’’ each place it appears.

3 (W) Section 1886(g)(1)(A) of such Act (42

4 U.S.C. 1395ww(g)(1)(A)) is amended—

5 (i) by striking ‘‘fiscal years 1992,

6 through 1995’’ and inserting ‘‘fiscal years

7 1992 and 1993, the 15-month period be8 ginning on October 1, 1993, and calendar

9 year 1995’’, and

10 (ii) by striking ‘‘such fiscal year’’ and

11 inserting ‘‘such period’’.

12 (5) CLERICAL AMENDMENTS CONCERNING

13 TRANSITIONAL PAYMENTS FOR A RECLASSIFIED

14 HOSPITAL.—

15 (A) Section 1886(d)(8)(A) of such Act (42

16 U.S.C. 1395ww(d)(8)(A)) is amended in the

17 matter preceding clause (i), by striking ‘‘cost

18 reporting periods’’ and inserting ‘‘years’’.

19 (B) Section 1886(d)(8)(A)(i) of such Act

20 (42 U.S.C. 1395ww(d)(8)(A)(i)) is amended—

21 (i) in the matter preceding subclause

22 (I), by striking ‘‘cost reporting period’’ and

23 inserting ‘‘year’’ and by striking ‘‘reporting

24 period’’ and inserting ‘‘year’’,
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1 (ii) in subclause (I), by striking ‘‘re2 porting period’’ and inserting ‘‘year’’, and

3 (iii) in subclause (II), by striking ‘‘re4 porting period’’ and inserting ‘‘year’’.

5 (C) Section 1886(d)(8)(A)(ii) of such Act

6 (42 U.S.C. 1395ww(d)(8)(A)(ii)) is amended—

7 (i) in the matter preceding subclause

8 (I), by striking ‘‘cost reporting period’’ and

9 inserting ‘‘year’’ and by striking ‘‘reporting

10 period’’ and inserting ‘‘year’’,

11 (ii) in subclause (I), by striking ‘‘re12 porting period’’ and inserting ‘‘year’’, and

13 (iii) in subclause (II), by striking ‘‘re14 porting period’’ and inserting ‘‘year’’.

15 (b) HOME HEALTH AGENCIES.—Clause (iii) of sec16 tion 1861(v)(1)(L) of such Act (42 U.S.C.

17 1395x(v)(1)(L)) is amended by striking ‘‘July 1, 1991,

18 and annually thereafter (but not for cost reporting periods

19 beginning on and after July 1, 1994, and before July 1,

20 1996)’’ and inserting ‘‘July 1 of 1991, 1992, and 1993

21 (but not for cost reporting periods beginning on and after

22 July 1, 1994, and before January 1, 1997), and annually

23 thereafter’’.

24 (c) HOSPICE CARE.—
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1 (1) IN GENERAL.—Clause (ii) of section

2 1814(i)(1)(C) of such Act (42 U.S.C.

3 1395f(i)(1)(C)) is amended—

4 (A) in subclause (II), by striking ‘‘fiscal

5 year 1994’’ and inserting ‘‘the 15-month period

6 beginning on October 1, 1993’’, and

7 (B) in subclauses (III), (IV), (V), and

8 (VI), by striking ‘‘fiscal year’’ each place it ap9 pears and inserting ‘‘calendar year’’.

10 (2) CONFORMING AMENDMENT.—Section

11 1814(i)(2) of such Act (42 U.S.C. 1395f(i)(2)) is

12 amended by adding at the end the following new

13 subparagraph:

14 ‘‘(D) For purposes of subparagraph (A), the term

15 ‘accounting year’ means—

16 ‘‘(i) fiscal years 1985 through 1993,

17 ‘‘(ii) the 15-month period beginning on October

18 1, 1993, and

19 ‘‘(iii) calendar years beginning on or after Jan20 uary 1, 1995.’’.

21 (d) SKILLED NURSING FACILITY SERVICES.—

22 (1) IN GENERAL.—The last sentence of section

23 1888(a) of such Act (42 U.S.C. 1395yy(b)) is

24 amended by striking ‘‘October 1, 1995’’ and insert25 ing ‘‘January 1, 1996’’.
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1 (2) CONFORMING AMENDMENTS.—

2 (A) Section 1888(d)(4) of such Act (42

3 U.S.C. 1395yy(d)(4)) is amended by striking

4 ‘‘fiscal’’ each place it appears.

5 (B) Subsections (a)(1) and (b) of section

6 13503 of the Omnibus Budget Reconciliation

7 Act of 1993 are amended by striking ‘‘fiscal

8 years 1994 and 1995’’ each place it appears

9 and inserting ‘‘the 15-month period beginning

10 on October 1, 1993, and calendar year 1995’’.

11 SEC. 206. ACCELERATION OF TRANSITION TO PROSPEC12 TIVE RATES FOR FACILITY COSTS IN HOS13 PITAL OUTPATIENT DEPARTMENTS.

14 (a) OUTPATIENT SURGERY.—Section

15 1833(i)(3)(B)(ii) of the Social Security Act (42 U.S.C.

16 1395l(i)(3)(B)(ii)) is amended—

17 (1) in subclause (I)—

18 (A) by striking ‘‘and 42 percent’’ and in19 serting ‘‘42 percent’’, and

20 (B) by striking ‘‘1991’’ and inserting

21 ‘‘1991, and beginning on or before September

22 30, 1994, 25 percent for portions of cost re23 porting periods beginning in fiscal year 1995,

24 and 0 percent for portions of cost reporting pe-
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1 riods beginning on or after October 1, 1995’’,

2 and

3 (2) in subclause (II)—

4 (A) by striking ‘‘and 58 percent’’ and in5 serting ‘‘58 percent’’, and

6 (B) by striking ‘‘1991’’ and inserting

7 ‘‘1991, and beginning on or before September

8 30, 1994, 75 percent for portions of cost re9 porting periods beginning in fiscal year 1995,

10 and 100 percent for portions of cost reporting

11 periods beginning on or after October 1, 1995’’.

12 (b) OUTPATIENT RADIOLOGY AND DIAGNOSTIC

13 SERVICES.—Section 1833(n)(1)(B)(ii)(I) of the Social Se14 curity Act (42 U.S.C. 1395l(n)(1)(B)(ii)(I)) is amended

15 by striking ‘‘January 1, 1991.’’ and inserting ‘‘January

16 1, 1991, and beginning on or before September 30, 1994.

17 The term means 25 percent for portions of cost reporting

18 periods beginning in fiscal year 1995 and 0 percent for

19 portions of cost reporting periods beginning on or after

20 October 1, 1995.’’.
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1 Subtitle B—Medicaid

2 SEC. 211. CAP ON FEDERAL PAYMENTS MADE FOR ACUTE

3 MEDICAL SERVICES UNDER THE MEDICAID

4 PROGRAM.

5 (a) IN GENERAL.—Title XIX of the Social Security

6 Act (42 U.S.C. 1396 et seq.) is amended by redesignating

7 section 1931 as section 1932 and by inserting after section

8 1930 the following new section:

9 ‘‘CAP ON FEDERAL PAYMENT MADE FOR ACUTE MEDICAL

10 SERVICES FURNISHED UNDER THE MEDICAID PROGRAM

11 ‘‘SEC. 1931. (a) ANNUAL FEDERAL CAP.—For pur12 poses of furnishing acute medical services to eligible indi13 viduals, the Secretary shall pay to a State for a fiscal year

14 under section 1903 an amount that does not exceed the

15 State’s total funding amount for such fiscal year deter16 mined under subsection (b).

17 ‘‘(b) STATE TOTAL FUNDING AMOUNT.—

18 ‘‘(1) IN GENERAL.—A State’s total funding

19 amount for a fiscal year is an amount equal to the

20 lesser of—

21 ‘‘(A) the sum of—

22 ‘‘(i) the product of—

23 ‘‘(I) the per-adult funding

24 amount for the State for such fiscal

25 year, and
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1 ‘‘(II) the total number of eligible

2 individuals who are at least 21 years

3 of age who will receive acute medical

4 services in the State during the fiscal

5 year; and

6 ‘‘(ii) the product of—

7 ‘‘(I) the per-child funding

8 amount for the State for such fiscal

9 year, and

10 ‘‘(II) the total number of eligible

11 individuals who are under 21 years of

12 age who will receive acute medical

13 services in the State during the fiscal

14 year; or

15 ‘‘(B) the maximum Federal amount for

16 such State (as determined under paragraph

17 (3)).

18 ‘‘(2) PER-ADULT AND PER-CHILD FUNDING

19 AMOUNTS.—The Secretary shall calculate for each

20 State a per-adult funding amount and a per-child

21 funding amount for each fiscal year as follows:

22 ‘‘(A) IN GENERAL.—

23 ‘‘(i) FISCAL YEAR 1995.—For fiscal

24 year 1995—
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1 ‘‘(I) the per-adult funding

2 amount for a State shall be an

3 amount equal to the base per-adult

4 funding amount determined under

5 subparagraph (B) increased by 20

6 percent of such amount; and

7 ‘‘(II) the per-child funding

8 amount for the State shall be an

9 amount equal to the base per-child

10 funding amount for the State deter11 mined under subparagraph (C) in12 creased by 20 percent of such amount.

13 ‘‘(ii) SUBSEQUENT FISCAL YEARS.—

14 For fiscal year 1996 and subsequent fiscal

15 years, the per-adult funding amount for a

16 State and the per-child funding amount for

17 a State, respectively, shall be an amount

18 equal to the amount determined under this

19 subparagraph for the previous fiscal year

20 updated, through the midpoint of the pe21 riod, by the estimated percentage change

22 in the Consumer Price Index during the

23 12-month period ending at that midpoint,

24 with appropriate adjustments to reflect

25 previous underestimations or overesti-
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1 mations under this clause in the projected

2 percentage change in the Consumer Price

3 Index, plus 1 percentage point.

4 ‘‘(B) BASE PER-ADULT FUNDING

5 AMOUNT.—The base per-adult funding amount

6 for a State is an amount equal to—

7 ‘‘(i) the total amount of Federal funds

8 paid to such State under section 1903(a)

9 for fiscal year 1993 for providing acute

10 medical services to eligible individuals who

11 were at least 21 years of age; divided by

12 ‘‘(ii) the total number of eligible indi13 viduals who were at least 21 years of age

14 who received acute medical services in such

15 State during fiscal year 1993.

16 ‘‘(C) BASE PER-CHILD FUNDING

17 AMOUNT.—The base per-child funding amount

18 for a State is an amount equal to—

19 ‘‘(i) the total amount of Federal funds

20 paid to such State under section 1903(a)

21 for fiscal year 1993 for providing acute

22 medical services to eligible individuals who

23 were under 21 years of age; divided by

24 ‘‘(ii) the total number of eligible indi25 viduals who were under 21 years of age
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1 who received acute medical services in such

2 State during fiscal year 1993.

3 ‘‘(3) MAXIMUM FEDERAL AMOUNT.—The Sec4 retary shall calculate for each State a maximum

5 Federal amount for each fiscal year as follows:

6 ‘‘(A) IN GENERAL.—

7 ‘‘(i) FISCAL YEAR 1995.—For fiscal

8 year 1995, the maximum Federal amount

9 for a State shall be an amount equal to the

10 base maximum Federal amount determined

11 under subparagraph (C) increased by 20

12 percent of such amount.

13 ‘‘(ii) SUBSEQUENT FISCAL YEARS.—

14 For fiscal year 1996 and subsequent fiscal

15 years, the maximum Federal amount for a

16 State shall be an amount equal to the

17 amount determined under this subpara18 graph for the previous fiscal year updated,

19 through the midpoint of the period, by the

20 estimated percentage change in the

21 Consumer Price Index during the 12-

22 month period ending at that midpoint,

23 with appropriate adjustments to reflect

24 previous underestimations or overesti25 mations under this clause in the projected
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1 percentage change in the Consumer Price

2 Index, plus 2.5 percentage points.

3 ‘‘(B) BASE MAXIMUM FEDERAL

4 AMOUNT.—

5 ‘‘(i) IN GENERAL.—The base maxi6 mum Federal amount for a State is an

7 amount equal to the State’s applicable per8 centage (as determined under clause (ii))

9 of the State’s total maximum amount (as

10 determined under clause (iii)).

11 ‘‘(ii) STATE’S APPLICABLE PERCENT12 AGE.—A State’s applicable percentage de13 termined under this clause is a percentage

14 equal to the quotient of—

15 ‘‘(I) the amount of Federal funds

16 paid to the State for the furnishing of

17 acute medical services to eligible indi18 viduals and the provision of adminis19 trative services to such individuals in

20 fiscal year 1993, divided by

21 ‘‘(II) the amount of Federal

22 funds paid to all States for the fur23 nishing of acute medical services to el24 igible individuals and the provision of
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1 administrative services to such indi2 viduals in fiscal year 1993.

3 ‘‘(iii) STATE’S TOTAL MAXIMUM

4 AMOUNT.—A State’s total maximum

5 amount determined under this clause is an

6 amount equal to the applicable percentage

7 of the total amount of Federal funds paid

8 to all States for the furnishing of acute

9 medical services to eligible individuals and

10 the provision of administrative services to

11 such individuals in fiscal year 1993.

12 ‘‘(c) MINIMUM EXPENDITURE BY STATES.—

13 ‘‘(1) IN GENERAL.—For the purpose of furnish14 ing acute medical services to eligible individuals and

15 providing administrative services to such individuals

16 in a fiscal year, a State shall incur expenditures

17 which are at least equal to the product of—

18 ‘‘(A) the State’s updated per capita

19 amount, and

20 ‘‘(B) the total number of eligible individ21 ual’s receiving acute medical services in the

22 State during such fiscal year.

23 ‘‘(2) UPDATED PER CAPITA AMOUNT.—For pur24 poses of paragraph (1)(A)—
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1 ‘‘(A) IN GENERAL.—The updated per cap2 ita amount for a State shall be—

3 ‘‘(i) for fiscal year 1995, an amount

4 equal to the State’s base per capita

5 amount, and

6 ‘‘(ii) for fiscal year 1996 and each

7 succeeding fiscal year, an amount equal to

8 the amount determined under this sub9 paragraph for the first preceding fiscal

10 year updated by the percentage change in

11 the consumer price index between such

12 first preceding fiscal year and the second

13 preceding fiscal year (as determined by the

14 Secretary of Commerce).

15 ‘‘(B) BASE PER CAPITA AMOUNT.—The

16 base per capita amount for a State shall be an

17 amount equal to the quotient of—

18 ‘‘(i) the total amount of State expend19 itures in fiscal year 1993 for the furnish20 ing of acute medical services to eligible in21 dividuals and the provision of administra22 tive services to such individuals, divided by

23 ‘‘(ii) the total number of eligible indi24 viduals receiving acute medical services

25 during fiscal year 1993.
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1 ‘‘(d) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) ACUTE MEDICAL SERVICES.—The term

3 ‘acute medical services’ means all of the care and

4 services furnished to individuals eligible under a

5 State plan under this title except the following:

6 ‘‘(A) Nursing facility services (as defined

7 in section 1905(f)).

8 ‘‘(B) Intermediate care facility for the

9 mentally retarded services (as defined in section

10 1905(d)).

11 ‘‘(C) Personal care services (as described

12 in section 1905(a)(24)).

13 ‘‘(D) Private duty nursing services (as re14 ferred to in section 1905(a)(8)).

15 ‘‘(E) Home or community-based services

16 furnished under a waiver granted under sub17 section (c), (d), or (e) of section 1915.

18 ‘‘(F) Home and community care furnished

19 to functionally disabled elderly individuals

20 under section 1929.

21 ‘‘(G) Community supported living arrange22 ments services under section 1930.

23 ‘‘(H) Case-management services (as de24 scribed in section 1915(g)(2)).
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1 ‘‘(I) Home health care services (as referred

2 to in section 1905(a)(7)).

3 ‘‘(J) Hospice care (as defined in section

4 1905(o)).

5 ‘‘(2) ELIGIBLE INDIVIDUAL.—The term ‘eligible

6 individual’ means an individual who is eligible to re7 ceive medical assistance under the State plan under

8 this title.

9 ‘‘(3) FEDERAL FUNDS.—The term ‘Federal

10 funds’ means funds paid to a State under section

11 1903, excluding funds paid under such section with

12 respect to expenditures by such State in the form of

13 payment adjustments made by such State in order

14 to comply with the requirement under section

15 1902(a)(13)(A) (as in effect on the date of the en16 actment of this section) that payments to hospitals

17 to take into account the situation of hospitals which

18 serve a disproportionate number of low income pa19 tients with special needs.

20 ‘‘(4) STATE EXPENDITURES.—The term ‘State

21 expenditures’ means expenditures by a State under

22 its plan under this title, excluding expenditures in

23 the form of payment adjustments made by such

24 State in order to comply with the requirement under

25 section 1902(a)(13)(A) (as in effect on the date of
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1 the enactment of this section) that payments made

2 by the State to hospitals take into account the situa3 tion of hospitals which serve a disproportionate

4 number of low income patients with special needs.’’.

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

6 subsection (a) shall be effective with respect to fiscal years

7 beginning after September 30, 1994.

8 SEC. 212. WAIVERS FOR THE FURNISHING OF ACUTE MEDI9 CAL SERVICES UNDER THE MEDICAID PRO10 GRAM.

11 (a) IN GENERAL.—Title XIX of the Social Security

12 Act (42 U.S.C. 1396 et seq.) is amended by redesignating

13 section 1932 as section 1933 and by inserting after section

14 1931 the following new section:

15 ‘‘WAIVERS FOR THE FURNISHING OF ACUTE MEDICAL

16 SERVICES UNDER THE MEDICAID PROGRAM

17 ‘‘SEC. 1932. (a) IN GENERAL.—The Secretary shall

18 establish a process under which a State with a State plan

19 approved under this title may apply for waivers of any

20 of the requirements under this title in order to establish

21 innovative and cost effective programs for furnishing acute

22 medical services (as defined in section 1931(d)(1)) to eligi23 ble individuals (as defined in section 1931(d)(2)).

24 ‘‘(b) APPLICATION FOR WAIVERS.—

25 ‘‘(1) IN GENERAL.—In order to receive a waiver

26 under subsection (a), a State shall submit an appli-
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1 cation to the Secretary at such time and containing

2 such information as the Secretary determines appro3 priate.

4 ‘‘(2) APPROVAL OF APPLICATION.—

5 ‘‘(A) INITIAL REVIEW.—Within 60 days

6 after an application is submitted by the State

7 under this subsection, the Secretary shall review

8 and approve such application or provide the

9 State with a list of the modifications that are

10 necessary for such application to be approved.

11 ‘‘(B) ADDITIONAL REVIEW.—Within 60

12 days after a State resubmits any application

13 under this subsection, the Secretary shall review

14 and approve such application or provide the

15 State with a summary of which items included

16 on the list provided to the State under subpara17 graph (A) remain unsatisfied. A State may re18 submit an application under this subparagraph

19 as many times as necessary to gain approval.

20 ‘‘(c) DURATION OF WAIVERS.—Except as provided in

21 subsection (d), any waiver under this section shall be

22 granted for a period of 5 years, and renewed for subse23 quent 5-year periods, unless the Secretary determines that

24 the State has failed to furnish acute medical services in

25 accordance with the terms of the waiver and any provi-
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1 sions of this title with respect to which the Secretary has

2 not granted a waiver.

3 ‘‘(d) TERMINATION OF WAIVERS.—The Secretary

4 may terminate a waiver granted under this section at any

5 time if the Secretary determines that the State has failed

6 to furnish acute medical services in accordance with the

7 terms of the waiver and any provisions of this title with

8 respect to which the Secretary has not granted a waiver.

9 ‘‘(e) REPORTS.—

10 ‘‘(1) IN GENERAL.—The State shall, through

11 an independent entity, evaluate the programs oper12 ated under a waiver granted under this section and

13 submit interim and final reports to the Secretary at

14 such times and containing such information as the

15 Secretary shall require.

16 ‘‘(2) REPORT TO CONGRESS.—Not later than

17 60 days after the receipt of a final report by the

18 State regarding a waiver granted under this section,

19 the Secretary shall submit a report to Congress.’’.

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

21 subsection (a) shall be effective with respect to fiscal years

22 beginning after September 30, 1994.

23 SEC. 213. TERMINATION OF DISPROPORTIONATE SHARE

24 PAYMENTS.

25 (a) IN GENERAL.—
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1 (1) ELIMINATION OF STATE PLAN REQUIRE2 MENT.—Section 1902(a)(13) of the Social Security

3 Act (42 U.S.C. 1396a(a)(13)) is amended by strik4 ing ‘‘which, in the case of hospitals, take into ac5 count the situation of hospitals which serve a dis6 proportionate number of low income patients with

7 special needs and’’.

8 (2) CONFORMING AMENDMENTS.—(A) Section

9 1923 of such Act (42 U.S.C. 1396r–4) is repealed.

10 (B) Section 1902(a)(55) of such Act (42 U.S.C.

11 1396a(a)(55)) is amended by striking ‘‘facilities de12 fined as disproportionate share hospitals under sec13 tion 1923(a)(1)(A) and’’.

14 (C) Section 1902(s) of such Act (42 U.S.C.

15 1396a(s)) is amended by striking ‘‘, and to children

16 who have not attained the age of 6 years and who

17 receive such services in a disproportionate share hos18 pital described in section 1923(b)(1),’’.

19 (D) Section 1903(a)(1) of such Act (42 U.S.C.

20 1396b(a)(1)) is amended by striking ‘‘and sub21 section 1923(f)’’.

22 (E) Section 1903(d)(6) of such Act (42 U.S.C.

23 1396b(d)(6)) is amended—

24 (i) by striking ‘‘(6)(A)’’ and inserting

25 ‘‘(6)’’,
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1 (ii) by striking ‘‘(i)’’ and ‘‘(ii)’’ and insert2 ing ‘‘(A)’’ and ‘‘(B)’’, respectively, and

3 (iii) by striking subparagraph (B).

4 (b) EFFECTIVE DATE.—The amendments made by

5 this section shall be effective on and after October 1,

6 1996.

7 SEC. 214. GRANTS FOR HEALTH INSURANCE COVERAGE,

8 ACUTE MEDICAL SERVICES, PREVENTIVE

9 CARE, AND DISEASE PREVENTION.

10 (a) IN GENERAL.—Title XIX of the Social Security

11 Act (42 U.S.C. 1396 et seq.) is amended by redesignating

12 section 1933 as section 1934 and by inserting after section

13 1932 the following new section:

14 ‘‘GRANTS FOR HEALTH INSURANCE COVERAGE, ACUTE

15 MEDICAL SERVICES, PREVENTIVE CARE, AND DIS16 EASE PREVENTION

17 ‘‘SEC. 1933. (a) IN GENERAL.—The Secretary shall

18 provide grants to States for the purpose of conducting

19 State programs under which individuals with incomes

20 below 150 percent of the income official poverty line are

21 provided health insurance coverage, acute medical serv22 ices, preventive care, and disease prevention services. A

23 State receiving a grant under this section shall conduct

24 a program described in this section in consultation with

25 the Secretary and in any manner determined appropriate

26 by the State which is in accordance with subsection (b).
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1 ‘‘(b) REQUIREMENTS ON PROGRAMS.—

2 ‘‘(1) PRIORITY OF BENEFITS.—A State pro3 gram conducted under this section shall give priority

4 to individuals who—

5 ‘‘(A) are ineligible for benefits under a

6 State plan under title XIX of the Social Secu7 rity Act,

8 ‘‘(B) are eligible for the tax credit estab9 lished under section 34A of the Internal Reve10 nue Code of 1986, and

11 ‘‘(C) has unreimbursed expenses for health

12 insurance coverage and medical care—

13 ‘‘(i) exceeding 5 percent of the indi14 vidual’s adjusted gross income, and

15 ‘‘(ii) not otherwise taken into account

16 in determining the credit under section

17 34A of the Internal Revenue Code of 1986

18 for such individual.

19 ‘‘(2) SERVICES.—

20 ‘‘(A) MANDATORY.—A State program con21 ducted under this section shall provide financial

22 assistance as determined by the State for pur23 chasing health insurance coverage and paying

24 medical bills to individuals described in para25 graph (1).
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1 ‘‘(B) OPTIONAL.—A State program con2 ducted under this section may provide—

3 ‘‘(i) medical services directly to eligi4 ble individuals,

5 ‘‘(ii) primary and preventive care serv6 ices to underserved populations,

7 ‘‘(iii) funding for community and mi8 grant health centers,

9 ‘‘(iv) delivery of outpatient primary

10 and preventive health services,

11 ‘‘(v) improvements to the availability

12 and quality of emergency medical services

13 and trauma care,

14 ‘‘(vi) transportation of victims of med15 ical emergencies, including air transpor16 tation for victims of medical emergencies

17 in rural areas, and

18 ‘‘(vii) telecommunications systems be19 tween rural medical facilities and other

20 medical facilities which have expertise in

21 certain areas or equipment that can be uti22 lized by rural facilities through such sys23 tems.

24 ‘‘(c) FEDERAL FUNDS AVAILABLE FOR GRANTS.—
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1 ‘‘(1) IN GENERAL.—The total amount of Fed2 eral funds available under this title for grants to

3 States under this section shall be—

4 ‘‘(A) $14,200,000,000 for fiscal year 1997,

5 ‘‘(B) $15,800,000,000 for fiscal year 1998,

6 ‘‘(C) $17,400,000,000 for fiscal year 1999,

7 ‘‘(D) $20,000,000,000 for fiscal year

8 2000, and

9 ‘‘(E) for each fiscal year thereafter, the

10 amount for the preceding fiscal year increased

11 by 7.5 percent of such amount.

12 ‘‘(2) FORMULA FOR DISTRIBUTION OF

13 GRANTS.—

14 ‘‘(A) IN GENERAL.—The Secretary shall

15 pay to each State conducting a program under

16 this section for a fiscal year an amount equal

17 to the State’s percentage (as determined under

18 subparagraph (B)) of the total amount available

19 for grants under this section as provided in

20 paragraph (1).

21 ‘‘(B) STATE PERCENTAGE.—

22 ‘‘(i) IN GENERAL.—A State’s percent23 age determined under this subparagraph

24 for a fiscal year is a percentage equal to

25 the quotient of—
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1 ‘‘(I) the number of individuals in

2 the State’s needy population (as de3 fined in clause (ii)) for such fiscal

4 year, divided by

5 ‘‘(II) the total number of individ6 uals in the needy populations of all

7 States for the fiscal year.

8 ‘‘(ii) STATE NEEDY POPULATION.—

9 The term ‘State’s needy population’

10 means, with respect to a fiscal year, the

11 number of individuals equal to the product

12 of—

13 ‘‘(I) the average number of indi14 viduals in the State with incomes

15 below the income official poverty line

16 during the 3 preceding fiscal years (as

17 determined by the Secretary), and

18 (II) the State’s Federal percent19 age (as determined under clause (iii)).

20 ‘‘(iii) STATE FEDERAL PERCENT21 AGE.—

22 ‘‘(I) IN GENERAL.—A State’s

23 Federal percentage for a fiscal year is

24 the greater of—
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1 ‘‘(aa) 1 minus the percent2 age determined under subclause

3 (II), or

4 ‘‘(bb) 40 percent.

5 ‘‘(II) PERCENTAGE DETER6 MINED.—The percentage determined

7 under this subclause is the product

8 of—

9 ‘‘(aa) .40, and

10 ‘‘(bb) the product of the

11 amount determined under

12 subclause (III) multiplied by it13 self.

14 ‘‘(III) AMOUNT DETERMINED.—

15 The amount determined under this

16 subclause is the quotient of—

17 ‘‘(aa) the State’s share of

18 total taxable resources, divided

19 by

20 ‘‘(bb) the State’s share of

21 need.

22 ‘‘(d) STATE EXPENDITURES.—

23 ‘‘(1) IN GENERAL.—For a fiscal year, a State

24 shall expend for purposes of conducting the State
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1 program described in subsection (a) an amount at

2 least equal to—

3 ‘‘(A) for fiscal year 1998, the base year

4 DSH payment for the State (as defined in

5 paragraph (2)) updated by the percentage

6 change in the consumer price index between fis7 cal year 1997 and fiscal year 1996 (as deter8 mined by the Secretary of Commerce), and

9 ‘‘(B) for fiscal year 1999 and each suc10 ceeding fiscal year, an amount equal to the

11 amount determined under this clause for the

12 first preceding fiscal year updated by the per13 centage change in the consumer price index be14 tween such first preceding fiscal year and the

15 second preceding fiscal year (as determined by

16 the Secretary of Commerce).

17 ‘‘(2) BASE YEAR DSH PAYMENT.—For purposes

18 of paragraph (1), the term ‘base year DSH pay19 ment’ means the amount of expenditures made by

20 the State in fiscal year 1997 in the form of payment

21 adjustments in order to comply with the requirement

22 under section 1902(a)(13)(A) (as in effect on the

23 date of the enactment of this section) that payments

24 made by the State to hospitals take into account the
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1 situation of hospitals which serve a disproportionate

2 number of low income patients with special needs.

3 ‘‘(e) OTHER DEFINITIONS.—

4 ‘‘(1) INCOME OFFICIAL POVERTY LINE.—For

5 purposes of this section, the term ‘income official

6 poverty line’ means the income official poverty line

7 (as defined by the Office of Management and Budg8 et, and revised annually in accordance with section

9 673(2) of the Omnibus Budget Reconciliation Act of

10 1981).

11 ‘‘(2) STATE’S SHARE OF TOTAL TAXABLE RE12 SOURCES.—

13 ‘‘(A) IN GENERAL.—Except as provided in

14 subparagraph (B), the term ‘State share of

15 total taxable resources’ for a fiscal year means

16 an amount equal to the quotient of—

17 ‘‘(i) the average of total taxable re18 sources for the State (as determined by the

19 Secretary of the Treasury based on data

20 available for the 3 most recent calendar

21 years), divided by

22 ‘‘(ii) the average of the total taxable

23 resources for all States (as determined by

24 the Secretary of the Treasury based on
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1 data available for the 3 most recent cal2 endar years).

3 ‘‘(B) SPECIAL RULE FOR THE DISTRICT OF

4 COLUMBIA.—Notwithstanding subparagraph

5 (A), with respect to the District of Columbia,

6 the term ‘State share of total taxable resources’

7 for a fiscal year means an amount equal to the

8 quotient of—

9 ‘‘(i) the average of the total personal

10 income in such District for the 3 preceding

11 calendar years (as determined by the Sec12 retary of Commerce), divided by

13 ‘‘(ii) the average of the total personal

14 income for all States for the 3 preceding

15 calendar years (as determined by the Sec16 retary of Commerce).

17 ‘‘(3) STATE’S SHARE OF NEED.—The term

18 ‘State’s share of need’ for a fiscal year means the

19 quotient of—

20 ‘‘(A) the average number of individuals in

21 the State with incomes below the income official

22 poverty line for the 3 preceding fiscal years (as

23 determined by the Secretary), divided by

24 ‘‘(B) the average number of individuals in

25 all States with incomes below the income offi-
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1 cial poverty line for the 3 preceding fiscal years

2 (as determined by the Secretary).’’.

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

4 subsection (a) shall be effective with respect to fiscal years

5 beginning after September 30, 1997.

6 TITLE III—HEALTH CARE

7 LIABILITY REFORM

8 SEC. 301. SHORT TITLE.

9 This title may be cited as the ‘‘Health Care Liability

10 Reform Act of 1994’’.

11 SEC. 302. DEFINITIONS.

12 For purposes of this title the term—

13 (1) ‘‘approved by the Food and Drug Adminis14 tration’’ means, with respect to a health care prod15 uct, that the health care product—

16 (A) was subject to premarket approval by

17 the Food and Drug Administration with respect

18 to the safety of the formulation or performance

19 of the aspect of such drug or device which

20 caused the claimant’s harm or the adequacy of

21 the packaging or labeling of such drug or de22 vice, and such drug or device was approved by

23 the Food and Drug Administration; or

24 (B) is generally recognized as safe and ef25 fective under conditions established by the Food
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1 and Drug Administration and applicable regula2 tions, including packaging and labeling regula3 tions;

4 (2) ‘‘arbitration’’ means a dispute resolution

5 process in which the parties submit the dispute out6 side of a Federal or State civil justice system for

7 resolution by a person or panel of persons;

8 (3) ‘‘economic losses’’ means losses for hospital

9 and medical expenses, lost wages, lost employment,

10 and other pecuniary losses;

11 (4) ‘‘health care malpractice action’’ means a

12 civil action alleging a health care malpractice claim

13 against a health care provider or health care profes14 sional;

15 (5) ‘‘health care malpractice claim’’ means any

16 claim relating to the provision of (or the failure to

17 provide) health care services based on negligence or

18 gross negligence, breach of express or implied war19 ranty or contract, or failure to discharge a duty to

20 warn or instruct to obtain consent;

21 (6) ‘‘health care product’’ means a drug, as de22 fined under section 201(g)(1) of the Federal Food,

23 Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a

24 medical device, as defined under section 201(h) of
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1 the Federal Food, Drug, and Cosmetic Act (21

2 U.S.C. 321(h)), or any combination thereof;

3 (7) ‘‘health care product liability action’’ means

4 a civil action alleging a health care product liability

5 claim against a manufacturer or seller of a health

6 care product or against a health care provider or

7 health care professional;

8 (8) ‘‘health care product liability claim’’ means

9 any claim relating to harm alleged to have been

10 caused by a health care product;

11 (9) ‘‘health care professional’’ means any indi12 vidual who provides health care services in a State

13 and who is required by State law or regulation to be

14 licensed or certified by the State to provide such

15 services in the State, including a physician, nurse,

16 chiropractor, nurse midwife, physical therapist, so17 cial worker, or physician assistant;

18 (10) ‘‘health care provider’’ means any organi19 zation or institution that is engaged in the delivery

20 of health care services in a State and that is re21 quired by State law or regulation to be licensed or

22 certified by the State to engage in the delivery of

23 such services in the State;
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1 (11) ‘‘injury’’ means any injury, illness, disease,

2 or other harm that is the subject of a health care

3 malpractice claim; and

4 (12) ‘‘noneconomic losses’’ means losses for

5 physical and emotional pain, suffering, inconven6 ience, physical impairment, mental anguish, dis7 figurement, loss of enjoyment of life, and other

8 nonpecuniary losses.

9 SEC. 303. HEALTH CARE MALPRACTICE.

10 (a) APPLICATION.—The provisions of this section

11 shall apply to any health care malpractice action filed in

12 any Federal or State court and any health care mal13 practice claim resolved through arbitration.

14 (b) PAYMENTS.—No person may be required to pay

15 more than $100,000 in a single payment in damages for

16 expenses to be incurred in the future, but such person

17 shall be permitted to make such payments on a periodic

18 basis. The periods for such payments shall be determined

19 by the court, based on projections of when expenses are

20 likely to be incurred.

21 (c) DAMAGES.—(1) The total amount of damages re22 ceived by an individual shall be reduced, in accordance

23 with paragraph (2), by any other payment which has been

24 made or which will be made to such individual to com-
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1 pensate such individual for an injury, including payments

2 under—

3 (A) Federal or State disability or sickness pro4 grams;

5 (B) Federal, State, or private health insurance

6 programs;

7 (C) private disability insurance programs;

8 (D) employer wage continuation programs; and

9 (E) any other source of payment intended to

10 compensate such individual for such injury.

11 (2) The amount by which an award of damages to

12 an individual for an injury shall be reduced under para13 graph (1) shall be—

14 (A) the total amount of any payments (other

15 than such award) which have been made or which

16 will be made to such individual to compensate such

17 individual for such injury; minus

18 (B) the amount paid by such individual (or by

19 the spouse, parent, or legal guardian of such individ20 ual) to secure the payments described under sub21 paragraph (A).

22 (d) STATUTE OF LIMITATIONS.—(1) Except as pro23 vided under paragraph (2), no health care malpractice

24 claim may be initiated after the expiration of the 2-year

25 period that begins on the date the alleged injury should
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1 reasonably have been discovered, or the expiration of the

2 4-year period that begins on the date the alleged injury

3 occurred, whichever is later.

4 (2) In the case of an alleged injury suffered by a

5 minor who has not attained 6 years of age, no health care

6 malpractice claim may be initiated after the expiration of

7 the 2-year period that begins on the date the alleged injury

8 should reasonably have been discovered, or the date on

9 which the minor attains 10 years of age, whichever is

10 later.

11 (e) ATTORNEYS’ FEES.—With respect to any health

12 care malpractice action or any health care malpractice

13 claim, attorneys’ fees may not exceed—

14 (1) 40 percent of the first $50,000 of any

15 award or settlement under such action or claim;

(2) 331 16 ⁄3 percent of the next $50,000 of any

17 award or settlement under such action or claim;

18 (3) 25 percent of the next $500,000 of any

19 award or settlement under such action or claim; and

20 (4) 15 percent of any additional amounts.

21 SEC. 304. HEALTH CARE PRODUCT LIABILITY OF MANUFAC22 TURER OR SELLER.

23 (a) NONAPPLICATION OF STRICT LIABILITY.—A

24 manufacturer or seller of a health care product approved
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1 by the Food and Drug Administration shall not be strictly

2 liable for any injury alleged to have resulted from—

3 (1) a defect in the design of the health care

4 product; or

5 (2) a failure to warn or instruct regarding a

6 risk posed by the health care product that was nei7 ther known nor reasonably knowable at the time the

8 health care product left the control of the manufac9 turer or seller.

10 (b) DUTY TO WARN.—(1) A manufacturer or seller

11 of a health care product that is to be prescribed by, or

12 used at the direction of, a health care professional shall

13 not be liable for harm allegedly caused by a failure to warn

14 or instruct the ultimate user or recipient of the product

15 about a risk if the manufacturer or seller provided ade16 quate warning or instruction to the user’s or recipient’s

17 health care professional.

18 (2) This subsection shall not apply to any health care

19 product to which the Food and Drug Administration spe20 cifically provides that a warning or instruction regarding

21 such product shall be given by the manufacturer or seller

22 directly to the ultimate user or recipient.
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1 SEC. 305. GENERAL PROVISIONS RELATING TO HEALTH

2 CARE LIABILITY.

3 (a) LIMITATION ON NONECONOMIC DAMAGES.—(1)

4 Except as provided under paragraph (2), the total amount

5 of damages which may be awarded to an individual and

6 the family members of such individual for noneconomic

7 losses resulting from an injury which is the subject of a

8 health care malpractice claim or a health care product li9 ability claim may not exceed $250,000, regardless of the

10 number of defendants against whom the claim is brought,

11 the number of claims brought with respect to the injury,

12 or the number of actions brought with respect to the in13 jury.

14 (2)(A) In any jury trial, the jury shall not be in15 formed of the limitation established under paragraph (1).

16 If the jury awards an amount for noneconomic damages

17 that exceeds $250,000, the court shall reduce the award

18 to $250,000 unless the court finds that special cir19 cumstances (such as egregious injury) would make such

20 reduction unjust.

21 (B) In any case in which the court finds a reduction

22 under subparagraph (A) would be unjust, the court may—

23 (i) decline to reduce such award; or

24 (ii) reduce such award by a lesser amount than

25 provided for under subparagraph (A).
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1 (b) SEVERAL LIABILITY FOR NONECONOMIC LOSS.—

2 (1) In any health care malpractice action or health care

3 product liability action the liability of each defendant for

4 noneconomic loss and for punitive damages shall be sev5 eral only and shall not be joint. Each defendant shall be

6 liable only for the amount of noneconomic loss and puni7 tive damages allocated to such defendant in direct propor8 tion to such defendant’s percentage of responsibility as de9 termined under paragraph (2). A separate judgment shall

10 be rendered against such defendant for that amount.

11 (2) For purposes of this subsection, the trier of fact

12 shall determine the proportion of responsibility of each

13 party for the claimant’s harm.

14 SEC. 306. PUNITIVE DAMAGES.

15 (a) IN GENERAL.—Punitive damages may, if other16 wise permitted by applicable law, be awarded against a

17 defendant in a health care malpractice action or a health

18 care product liability action only if the claimant estab19 lishes by clear and convincing evidence that the harm suf20 fered by the claimant was the result of conduct manifest21 ing conscious, flagrant indifference to the health of the

22 claimant or to the health of those persons who might be

23 harmed by the health care product.

24 (b) DETERMINATION OF AMOUNT.—The amount of

25 any punitive damages award shall be determined (subject
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1 to appellate review as permitted by applicable law) by the

2 trial judge.

3 (c) LIMITATION CONCERNING CERTAIN HEALTH

4 CARE PRODUCTS.—Punitive damages shall not be award5 ed against a manufacturer or seller of a health care prod6 uct approved by the Food and Drug Administration where

7 that health care product caused the claimant’s harm.

8 SEC. 307. EXCEPTIONS.

9 The provisions of sections 304(a) and 306(c) shall

10 not apply in any case in which—

11 (1) the defendant, before or after premarket ap12 proval of a drug or device, withheld from or mis13 represented to the Food and Drug Administration or

14 any other agency or official of the Federal Govern15 ment required information that is material and rel16 evant to the performance of such drug or device and

17 is causally related to the harm which the claimant

18 allegedly suffered; or

19 (2) the defendant made an illegal payment to

20 an official of the Food and Drug Administration for

21 the purpose of either securing or maintaining ap22 proval of such drug or device.

23 SEC. 308. RULES OF CONSTRUCTION.

24 Nothing in this title shall be construed to—
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1 (1) waive or affect any defense of sovereign im2 munity asserted by any State under any provision of

3 law;

4 (2) waive or affect any defense of sovereign im5 munity asserted by the United States;

6 (3) affect the applicability of any provision of

7 the Foreign Sovereign Immunities Act of 1976;

8 (4) preempt State choice-of-law rules with re9 spect to claims brought by a foreign nation or a citi10 zen of a foreign nation;

11 (5) affect the right of any court to transfer

12 venue or to apply the law of a foreign nation or to

13 dismiss a claim of a foreign nation or of a citizen

14 of a foreign nation on the grounds of inconvenient

15 forum;

16 (6) restrict or limit the preemptive effect of any

17 other Federal law; or

18 (7) create any cause of action under Federal

19 law.
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1 TITLE IV—ADMINISTRATIVE

2 COST SAVINGS

3 Subtitle A—Standardization of

4 Claims Processing

5 SEC. 401. ADOPTION OF DATA ELEMENTS, UNIFORM

6 CLAIMS, AND UNIFORM ELECTRONIC TRANS7 MISSION STANDARDS.

8 (a) IN GENERAL.—The Secretary shall adopt stand9 ards relating to each of the following:

10 (1) Data elements for use in paper and elec11 tronic claims processing under health insurance

12 plans, as well as for use in utilization review and

13 management of care (including data fields, formats,

14 and medical nomenclature, and including plan bene15 fit and insurance information).

16 (2) Uniform claims forms (including uniform

17 procedure and billing codes for uses with such forms

18 and including information on other health insurance

19 plans that may be liable for benefits).

20 (3) Uniform electronic transmission of the data

21 elements (for purposes of billing and utilization re22 view).

23 Standards under paragraph (3) relating to electronic

24 transmission of data elements for claims for services shall

25 supersede (to the extent specified in such standards) the
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1 standards adopted under paragraph (2) relating to the

2 submission of paper claims for such services. Standards

3 under paragraph (3) shall include protections to assure

4 the confidentiality of patient-specific information and to

5 protect against the unauthorized use and disclosure of in6 formation.

7 (b) USE OF TASK FORCES.—In adopting standards

8 under this section—

9 (1) the Secretary shall take into account the

10 recommendations of current task forces, including at

11 least the Workgroup on Electronic Data Inter12 change, National Uniform Billing Committee, the

13 Uniform Claim Task Force, and the Computer-based

14 Patient Record Institute;

15 (2) the Secretary shall consult with the Na16 tional Association of Insurance Commissioners (and,

17 with respect to standards under subsection (a)(3),

18 the American National Standards Institute); and

19 (3) the Secretary shall, to the maximum extent

20 practicable, seek to make the standards consistent

21 with any uniform clinical data sets which have been

22 adopted and are widely recognized.

23 (c) DEADLINES FOR PROMULGATION.—The Sec24 retary shall promulgate the standards under—
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1 (1) subsection (a)(1) relating to claims process2 ing data, by not later than 12 months after the date

3 of the enactment of this Act;

4 (2) subsection (a)(2) (relating to uniform

5 claims forms) by not later than 12 months after the

6 date of the enactment of this Act; and

7 (3)(A) subsection (a)(3) relating to trans8 mission of information concerning hospital and phy9 sicians services, by not later than 24 months after

10 the date of the enactment of this Act, and

11 (B) subsection (a)(3) relating to transmission

12 of information on other services, by such later date

13 as the Secretary may determine it to be feasible.

14 (d) REPORT TO CONGRESS.—Not later than 3 years

15 after the date of the enactment of this Act, the Secretary

16 shall report to Congress recommendations regarding re17 structuring the medicare peer review quality assurance

18 program given the availability of hospital data in elec19 tronic form.

20 SEC. 402. APPLICATION OF STANDARDS.

21 (a) IN GENERAL.—If the Secretary determines, at

22 the end of the 2-year period beginning on the date that

23 standards are adopted under section 401 with respect to

24 classes of services, that a significant number of claims for

25 benefits for such services under health insurance plans are
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1 not being submitted in accordance with such standards,

2 the Secretary may require, after notice in the Federal

3 Register of not less than 6 months, that all providers of

4 such services must submit claims to health insurance plans

5 in accordance with such standards. The Secretary may

6 waive the application of such a requirement in such cases

7 as the Secretary finds that the imposition of the require8 ment would not be economically practicable.

9 (b) SIGNIFICANT NUMBER.—The Secretary shall

10 make an affirmative determination described in subsection

11 (a) for a class of services only if the Secretary finds that

12 there would be a significant, measurable additional gain

13 in efficiencies in the health care system that would be ob14 tained by imposing the requirement described in such

15 paragraph with respect to such services.

16 (c) APPLICATION OF REQUIREMENT.—

17 (1) IN GENERAL.—If the Secretary imposes the

18 requirement under subsection (a)—

19 (A) in the case of a requirement that im20 poses the standards relating to electronic trans21 mission of claims for a class of services, each

22 health care provider that furnishes such services

23 for which benefits are payable under a health

24 insurance plan shall transmit electronically and

25 directly to the plan on behalf of the beneficiary
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1 involved a claim for such services in accordance

2 with such standards;

3 (B) any health insurance plan may reject

4 any claim subject to the standards adopted

5 under section 401 but which is not submitted in

6 accordance with such standards;

7 (C) it is unlawful for a health insurance

8 plan (i) to reject any such claim on the basis

9 of the form in which it is submitted if it is sub10 mitted in accordance with such standards or (ii)

11 to require, for the purpose of utilization review

12 or as a condition of providing benefits under

13 the plan, a provider to transmit medical data

14 elements that are inconsistent with the stand15 ards established under section 401(a)(1); and

16 (D) the Secretary may impose a civil

17 money penalty on any provider that knowingly

18 and repeatedly submits claims in violation of

19 such standards or on any health insurance plan

20 (other than a health insurance plan described in

21 paragraph (2)) that knowingly and repeatedly

22 rejects claims in violation of subparagraph (B),

23 in an amount not to exceed $100 for each such

24 claim.
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1 The provisions of section 1128A of the Social Secu2 rity Act (other than the first sentence of subsection

3 (a) and other than subsection (b)) shall apply to a

4 civil money penalty under subparagraph (D) in the

5 same manner as such provisions apply to a penalty

6 or proceeding under section 1128A(a) of such Act.

7 (2) PLANS SUBJECT TO EFFECTIVE STATE REG8 ULATION.—A plan described in this paragraph is a

9 health insurance plan—

10 (A) that is subject to regulation by a

11 State, and

12 (B) with respect to which the Secretary

13 finds that—

14 (i) the State provides for application

15 of the standards established under section

16 401, and

17 (ii) the State regulatory program pro18 vides for the appropriate and effective en19 forcement of such standards.

20 (d) TREATMENT OF REJECTIONS.—If a plan rejects

21 a claim pursuant to subsection (c)(1), the plan shall per22 mit the person submitting the claim a reasonable oppor23 tunity to resubmit the claim on a form or in an electronic

24 manner that meets the requirements for acceptance of the

25 claim under such subsection.
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1 SEC. 403. PERIODIC REVIEW AND REVISION OF STAND2 ARDS.

3 (a) IN GENERAL.—The Secretary shall—

4 (1) provide for the ongoing receipt and review

5 of comments and suggestions for changes in the

6 standards adopted and promulgated under section

7 401;

8 (2) establish a schedule for the periodic review

9 of such standards; and

10 (3) based upon such comments, suggestions,

11 and review, revise such standards and promulgate

12 such revisions.

13 (b) APPLICATION OF REVISED STANDARDS.—If the

14 Secretary under subsection (a) revises the standards de15 scribed in 401, then, in the case of any claim for benefits

16 submitted under a health insurance plan more than the

17 minimum period (of not less than 6 months specified by

18 the Secretary) after the date the revision is promulgated

19 under subsection (a)(3), such standards shall apply under

20 section 402 instead of the standards previously promul21 gated.

22 SEC. 404. HEALTH INSURANCE PLAN DEFINED.

23 In this title, the term ‘‘health insurance plan’’ has

24 the meaning given such term in section 111(b) and in25 cludes—
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1 (1) the medicare program (under title XVIII of

2 the Social Security Act) and medicare supplemental

3 health insurance, and

4 (2) a State medicaid plan (approved under title

5 XIX of such Act).

6 Subtitle B—Electronic Medical

7 Data Standards

8 SEC. 411. MEDICAL DATA STANDARDS FOR HOSPITALS AND

9 OTHER PROVIDERS.

10 (a) PROMULGATION OF HOSPITAL DATA STAND11 ARDS.—

12 (1) IN GENERAL.—Between July 1, 1995, and

13 January 1, 1996, the Secretary shall promulgate

14 standards described in subsection (b) for hospitals

15 concerning electronic medical data.

16 (2) REVISION.—The Secretary may from time

17 to time revise the standards promulgated under this

18 subsection.

19 (b) CONTENTS OF DATA STANDARDS.—The stand20 ards promulgated under subsection (a) shall include at

21 least the following:

22 (1) A definition of a standard set of data ele23 ments for use by utilization and quality control peer

24 review organizations.
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1 (2) A definition of the set of comprehensive

2 data elements, which set shall include for hospitals

3 the standard set of data elements defined under

4 paragraph (1).

5 (3) Standards for an electronic patient care in6 formation system with data obtained at the point of

7 care, including standards to protect against the un8 authorized use and disclosure of information.

9 (4) A specification of, and manner of presen10 tation of, the individual data elements of the sets

11 and system under this subsection.

12 (5) Standards concerning the transmission of

13 electronic medical data.

14 (6) Standards relating to confidentiality of pa15 tient-specific information.

16 The standards under this section shall be consistent with

17 standards for data elements established under section 401.

18 (c) OPTIONAL DATA STANDARDS FOR OTHER PRO19 VIDERS.—

20 (1) IN GENERAL.—The Secretary may promul21 gate standards described in paragraph (2) concern22 ing electronic medical data for providers that are not

23 hospitals. The Secretary may from time to time re24 vise the standards promulgated under this sub25 section.
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1 (2) CONTENTS OF DATA STANDARDS.—The

2 standards promulgated under paragraph (1) for non3 hospital providers may include standards comparable

4 to the standards described in paragraphs (2), (4),

5 and (5) of subsection (b) for hospitals.

6 (d) CONSULTATION.—In promulgating and revising

7 standards under this section, the Secretary shall—

8 (1) consult with the American National Stand9 ards Institute, hospitals, with the advisory commis10 sion established under section 415, and with other

11 affected providers, health insurance plans, and other

12 interested parties, and

13 (2) take into consideration, in developing stand14 ards under subsection (b)(1), the data set used by

15 the utilization and quality control peer review pro16 gram under part B of title XI of the Social Security

17 Act.

18 SEC. 412. APPLICATION OF ELECTRONIC DATA STANDARDS

19 TO CERTAIN HOSPITALS.

20 (a) MEDICARE REQUIREMENT FOR SHARING OF

21 HOSPITAL INFORMATION.—As of January 1, 1996, sub22 ject to paragraph (2), each hospital, as a requirement of

23 each participation agreement under section 1866 of the

24 Social Security Act, shall—
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1 (1) maintain clinical data included in the set of

2 comprehensive data elements under section

3 411(b)(2) in electronic form on all inpatients,

4 (2) upon request of the Secretary or of a utili5 zation and quality control peer review organization

6 (with which the Secretary has entered into a con7 tract under part B of title XI of such Act), transmit

8 electronically the data set, and

9 (3) upon request of the Secretary, or of a fiscal

10 intermediary or carrier, transmit electronically any

11 data (with respect to a claim) from such data set,

12 in accordance with the standards promulgated under sec13 tion 411(a).

14 (b) WAIVER AUTHORITY.—Until January 1, 2000:

15 (1) The Secretary may waive the application of

16 the requirements of subsection (a) for a hospital

17 that is a small rural hospital, for such period as the

18 hospital demonstrates compliance with such require19 ments would constitute an undue financial hardship.

20 (2) The Secretary may waive the application of

21 the requirements of subsection (a) for a hospital

22 that is in the process of developing a system to pro23 vide the required data set and executes agreements

24 with its fiscal intermediary and its utilization and

25 quality control peer review organization that the hos-
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1 pital will meet the requirements of subsection (a) by

2 a specified date (not later than January 1, 2000).

3 (3) The Secretary may waive the application of

4 the requirement of subsection (a)(1) for a hospital

5 that agrees to obtain from its records the data ele6 ments that are needed to meet the requirements of

7 paragraphs (2) and (3) of subsection (a) and agrees

8 to subject its data transfer process to a quality as9 surance program specified by the Secretary.

10 (c) APPLICATION TO HOSPITALS OF THE DEPART11 MENT OF VETERANS AFFAIRS.—

12 (1) IN GENERAL.—The Secretary of Veterans

13 Affairs shall provide that each hospital of the De14 partment of Veterans Affairs shall comply with the

15 requirements of subsection (a) in the same manner

16 as such requirements would apply to the hospital if

17 it were participating in the Medicare program.

18 (2) WAIVER.—The Secretary of Veterans Af19 fairs may waive the application of such requirements

20 to a hospital in the same manner as the Secretary

21 of Health and Human Services may waive under

22 subsection (b) the application of the requirements of

23 subsection (a).
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1 SEC. 413. ELECTRONIC TRANSMISSION TO FEDERAL AGEN2 CIES.

3 (a) IN GENERAL.—Effective January 1, 2000, if a

4 provider is required under a Federal program to transmit

5 a data element that is subject to a presentation or trans6 mission standard (as defined in subsection (b)), the head

7 of the Federal agency responsible for such program (if not

8 otherwise authorized) is authorized to require the provider

9 to present and transmit the data element electronically in

10 accordance with such a standard.

11 (b) PRESENTATION OR TRANSMISSION STANDARD

12 DEFINED.—In subsection (a), the term ‘‘presentation or

13 transmission standard’’ means a standard, promulgated

14 under subsection (b) or (c) of section 411, described in

15 paragraph (4) or (5) of section 411(b).

16 SEC. 414. LIMITATION ON DATA REQUIREMENTS WHERE

17 STANDARDS IN EFFECT.

18 (a) IN GENERAL.—If standards with respect to data

19 elements are promulgated under section 411 with respect

20 to a class of provider, a health insurance plan may not

21 require, for the purpose of utilization review or as a condi22 tion of providing benefits under the plan, that a provider

23 in the class—

24 (1) provide any data element not in the set of

25 comprehensive data elements specified under such

26 standards, or
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1 (2) transmit or present any such data element

2 in a manner inconsistent with the applicable stand3 ards for such transmission or presentation.

4 (b) COMPLIANCE.—

5 (1) IN GENERAL.—The Secretary may impose a

6 civil money penalty on any health insurance plan

7 (other than a health insurance plan described in

8 paragraph (2)) that fails to comply with subsection

9 (a) in an amount not to exceed $100 for each such

10 failure. The provisions of section 1128A of the So11 cial Security Act (other than the first sentence of

12 subsection (a) and other than subsection (b)) shall

13 apply to a civil money penalty under this paragraph

14 in the same manner as such provisions apply to a

15 penalty or proceeding under section 1128A(a) of

16 such Act.

17 (2) PLANS SUBJECT TO EFFECTIVE STATE REG18 ULATION.—A plan described in this paragraph is a

19 health insurance plan that is subject to regulation by

20 a State, if the Secretary finds that—

21 (A) the State provides for application of

22 the requirement of subsection (a), and

23 (B) the State regulatory program provides

24 for the appropriate and effective enforcement of

25 such requirement with respect to such plans.
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1 SEC. 415. ADVISORY COMMISSION.

2 (a) IN GENERAL.—The Secretary shall establish an

3 advisory commission including hospital executives, hospital

4 data base managers, physicians, health services research5 ers, and technical experts in collection and use of data

6 and operation of data systems. Such commission shall in7 clude, as ex officio members, a representative of the Direc8 tor of the National Institutes of Health, the Administrator

9 for Health Care Policy and Research, the Secretary of

10 Veterans Affairs, and the Director of the Centers for Dis11 ease Control.

12 (b) FUNCTIONS.—The advisory commission shall

13 monitor and advise the Secretary concerning—

14 (1) the standards established under this sub15 title, and

16 (2) operational concerns about the implementa17 tion of such standards under this subtitle.

18 (c) STAFF.—From the amounts appropriated under

19 subsection (d), the Secretary shall provide sufficient staff

20 to assist the advisory commission in its activities under

21 this section.

22 (d) AUTHORIZATION OF APPROPRIATIONS.—There

23 are authorized to be appropriated $2,000,000 for each of

24 fiscal years 1995 through 2000 to carry out this section.
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1 Subtitle C—Development and Dis2 tribution of Comparative Value

3 Information

4 SEC. 421. STATE COMPARATIVE VALUE INFORMATION PRO5 GRAMS FOR HEALTH CARE PURCHASING.

6 (a) PURPOSE.—In order to assure the availability of

7 comparative value information to purchasers of health

8 care in each State, the Secretary shall determine whether

9 each State is developing and implementing a health care

10 value information program that meets the criteria and

11 schedule set forth in subsection (b).

12 (b) CRITERIA AND SCHEDULE FOR STATE PRO13 GRAMS.—The criteria and schedule for a State health care

14 value information program in this subsection shall be spec15 ified by the Secretary as follows:

16 (1) The State begins promptly after enactment

17 of this Act to develop (directly or through contrac18 tual or other arrangements with 1 or more States,

19 coalitions of health insurance purchasers, other enti20 ties, or any combination of such arrangements) in21 formation systems regarding comparative health val22 ues.

23 (2) The information contained in such systems

24 covers at least the average prices of common health

25 care services (as defined in subsection (d)) and
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1 health insurance plans, and, where available, meas2 ures of the variability of these prices within a State

3 or other market areas.

4 (3) The information described in paragraph (2)

5 is made available within the State beginning not

6 later than 1 year after the date of the enactment of

7 this Act, and is revised as frequently as reasonably

8 necessary, but at intervals of no greater than 1 year.

9 (4) Not later than 6 years after the date of the

10 enactment of this Act the State has developed infor11 mation systems that provide comparative costs, qual12 ity, and outcomes data with respect to health insur13 ance plans and hospitals and made the information

14 broadly available within the relevant market areas.

15 Nothing in this section shall preclude a State from provid16 ing additional information, such as information on prices

17 and benefits of different health insurance plans available.

18 (c) GRANTS TO STATES FOR THE DEVELOPMENT OF

19 STATE PROGRAMS.—

20 (1) GRANT AUTHORITY.—The Secretary may

21 make grants to each State to enable such State to

22 plan the development of its health care value infor23 mation program and, if necessary, to initiate the im24 plementation of such program. Each State seeking

25 such a grant shall submit an application therefor,
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1 containing such information as the Secretary finds

2 necessary to assure that the State is likely to de3 velop and implement a program in accordance with

4 the criteria and schedule in subsection (b).

5 (2) OFFSET AUTHORITY.—If, at any time with6 in the 3-year period following the receipt by a State

7 of a grant under this subsection, the Secretary is re8 quired by section 422 to implement a health care in9 formation program in the State, the Secretary may

10 recover the amount of the grant under this sub11 section by offset against any other amount payable

12 to the State under the Social Security Act. The

13 amount of the offset shall be made available (from

14 the appropriation account with respect to which the

15 offset was taken) to the Secretary to carry out such

16 section.

17 (3) AUTHORIZATION OF APPROPRIATIONS.—

18 There are authorized to be appropriated such sums

19 as are necessary to make grants under this sub20 section, to remain available until expended.

21 (d) COMMON HEALTH CARE SERVICES DEFINED.—

22 In this section, the term ‘‘common health care services’’

23 includes such procedures as the Secretary may specify and

24 any additional health care services which a State may wish

25 to include in its comparative value information program.
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1 (e) STATE DEFINED.—In this title, the term ‘‘State’’

2 includes the District of Columbia, Puerto Rico, the Virgin

3 Islands, Guam, and American Samoa.

4 SEC. 422. FEDERAL IMPLEMENTATION.

5 (a) IN GENERAL.—If the Secretary finds, at any

6 time, that a State has failed to develop or to continue to

7 implement a health care value information program in ac8 cordance with the criteria and schedule in section 421(b),

9 the Secretary shall take the actions necessary, directly or

10 through grants or contract, to implement a comparable

11 program in the State.

12 (b) FEES.—Fees may be charged by the Secretary

13 for the information materials provided pursuant to a pro14 gram under this section. Any amounts so collected shall

15 be deposited in the appropriation account from which the

16 Secretary’s costs of providing such materials were met,

17 and shall remain available for such purposes until ex18 pended.

19 SEC. 423. COMPARATIVE VALUE INFORMATION CONCERN20 ING FEDERAL PROGRAMS.

21 (a) DEVELOPMENT.—The head of each Federal agen22 cy with responsibility for the provision of health insurance

23 or of health care services to individuals shall promptly de24 velop health care value information relating to each pro25 gram that such head administers and covering the same
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1 types of data that a State program meeting the criteria

2 of section 421(b) would provide.

3 (b) DISSEMINATION OF INFORMATION.—Such infor4 mation shall be made generally available to States and to

5 providers and consumers of health care services.

6 Subtitle D—Preemption of State

7 Quill Pen Laws

8 SEC. 431. PREEMPTION OF STATE QUILL PEN LAWS.

9 (a) IN GENERAL.—Effective January 1, 1996, no ef10 fect shall be given to any provision of State law that re11 quires medical or health insurance records (including bill12 ing information) to be maintained in written, rather than

13 electronic form.

14 (b) SECRETARIAL AUTHORITY.—The Secretary may

15 issue regulations to carry out subsection (a). Such regula16 tions may provide for such exceptions to subsection (a)

17 as the Secretary determines to be necessary to prevent

18 fraud and abuse, with respect to controlled substances,

19 and in such other cases as the Secretary deems appro20 priate.
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1 TITLE V—ANTI-FRAUD

2 Subtitle A—Criminal Prosecution

3 of Health Care Fraud

4 SEC. 501. PENALTIES FOR HEALTH CARE FRAUD.

5 (a) IN GENERAL.—Chapter 63 of title 18, United

6 States Code, is amended by adding at the end the follow7 ing:

8 ‘‘§ 1347. Health care fraud

9 ‘‘(a) OFFENSE.—Whoever, being a health care pro10 vider, knowingly engages in any scheme or artifice to de11 fraud any person in connection with the provision of

12 health care shall be fined under this title or imprisoned

13 not more than 5 years, or both.

14 ‘‘(b) DEFINITION.—In this section, the term ‘health

15 care provider’ means—

16 ‘‘(1) a physician, nurse, dentist, therapist, phar17 macist, or other professional provider of health care;

18 and

19 ‘‘(2) a hospital, health maintenance organiza20 tion, pharmacy, laboratory, clinic, or other health

21 care facility or a provider of medical services, medi22 cal devices, medical equipment, or other medical sup23 plies.

24 (b) CLERICAL AMENDMENT.—The table of sections

25 at the beginning of chapter 63 of title 18, United States
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1 Code, is amended by adding at the end the following new

2 item:

‘‘1347. Health care fraud.’’.

3 SEC. 502. REWARDS FOR INFORMATION LEADING TO PROS4 ECUTION AND CONVICTION.

5 Section 3059 of title 18, United States Code, is

6 amended by adding at the end the following new sub7 section:

8 ‘‘(c)(1) In special circumstances and in the Attorney

9 General’s sole discretion, the Attorney General may make

10 a payment of up to $10,000 to a person who furnishes

11 information unknown to the Government relating to a pos12 sible prosecution under section 1101.

13 ‘‘(2) A person is not eligible for a payment under

14 paragraph (1) if—

15 ‘‘(A) the person is a current or former officer

16 or employee of a Federal or State government agen17 cy or instrumentality who furnishes information dis18 covered or gathered in the course of government em19 ployment;

20 ‘‘(B) the person knowingly participated in the

21 offense;

22 ‘‘(C) the information furnished by the person

23 consists of allegations or transactions that have been

24 disclosed to the public—
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1 ‘‘(i) in a criminal, civil, or administrative

2 proceeding;

3 ‘‘(ii) in a congressional, administrative or

4 General Accounting Office report, hearing,

5 audit, or investigation; or

6 ‘‘(iii) by the news media, unless the person

7 is the original source of the information; or

8 ‘‘(D) when, in the judgment of the Attorney

9 General, it appears that a person whose illegal ac10 tivities are being prosecuted or investigated could

11 benefit from the award.

12 ‘‘(3) For the purposes of paragraph (2)(C)(iii), the

13 term ‘original source’ means a person who has direct and

14 independent knowledge of the information that is fur15 nished and has voluntarily provided the information to the

16 Government prior to disclosure by the news media.

17 ‘‘(4) Neither the failure of the Attorney General to

18 authorize a payment under paragraph (1) nor the amount

19 authorized shall be subject to judicial review.’’.
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1 Subtitle B—Coordination of Health

2 Care Anti-Fraud and Abuse Ac3 tivities

4 SEC. 511. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD

5 AND ABUSE SANCTIONS TO ALL FRAUD AND

6 ABUSE AGAINST ANY HEALTH INSURANCE

7 PLAN.

8 (a) CIVIL MONETARY PENALTIES.—Section 1128A

9 of the Social Security Act (42 U.S.C. 1320a–7a) is amend10 ed as follows:

11 (1) In subsection (a)(1), in the matter before

12 subparagraph (A), by inserting ‘‘or of any health in13 surance plan,’’ after ‘‘subsection (i)(1)),’’.

14 (2) In subsection (b)(1)(A), by inserting ‘‘or

15 under a health insurance plan’’ after ‘‘title XIX’’.

16 (3) In subsection (f)—

17 (A) by redesignating paragraph (3) as

18 paragraph (4); and

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

20 following new paragraph:

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

22 out of a claim under a health insurance plan, the

23 portion of such amounts as is determined to have

24 been paid by the plan shall be repaid to the plan.’’.

25 (4) In subsection (i)—
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1 (A) in paragraph (2), by inserting ‘‘or

2 under a health insurance plan’’ before the pe3 riod at the end, and

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

5 under a health insurance plan’’ after ‘‘or XX’’.

6 (b) CRIMES.—

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

8 such Act (42 U.S.C. 1320a–7b) is amended as fol9 lows:

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

11 the following: ‘‘OR HEALTH INSURANCE PLANS’’.

12 (B) In subsection (a)(1)—

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

14 inserting ‘‘title XVIII,’’, and

15 (ii) by adding at the end the follow16 ing: ‘‘or a health insurance plan (as de17 fined in section 1128(i)),’’.

18 (C) In subsection (a)(5), by striking ‘‘title

19 XVIII or a State health care program’’ and in20 serting ‘‘title XVIII, a State health care pro21 gram, or a health insurance plan’’.

22 (D) In the second sentence of subsection

23 (a)—
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1 (i) by inserting after ‘‘title XIX’’ the

2 following: ‘‘or a health insurance plan’’,

3 and

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

5 following: ‘‘or the plan’’.

6 (E) In subsection (b)(1), by striking ‘‘title

7 XVIII or a State health care program’’ each

8 place it appears and inserting ‘‘title XVIII, a

9 State health care program, or a health insur10 ance plan’’.

11 (F) In subsection (b)(2), by striking ‘‘title

12 XVIII or a State health care program’’ each

13 place it appears and inserting ‘‘title XVIII, a

14 State health care program, or a health insur15 ance plan’’.

16 (G) In subsection (b)(3), by striking ‘‘title

17 XVIII or a State health care program’’ each

18 place it appears in subparagraphs (A) and (C)

19 and inserting ‘‘title XVIII, a State health care

20 program, or a health insurance plan’’.

21 (H) In subsection (d)(2)—

22 (i) by striking ‘‘title XIX,’’ and insert23 ing ‘‘title XIX or under a health insurance

24 plan,’’, and
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1 (ii) by striking ‘‘State plan,’’ and in2 serting ‘‘State plan or the health insurance

3 plan,’’.

4 (2) TREBLE DAMAGES FOR CRIMINAL SANC5 TIONS.—Section 1128B of such Act (42 U.S.C.

6 1320a–7b) is amended by adding at the end the fol7 lowing new subsection:

8 ‘‘(f) In addition to the fines that may be imposed

9 under subsection (a), (b), or (c), any individual found to

10 have violated the provisions of any of such subsections

11 may be subject to treble damages.’’.

12 (3) IDENTIFICATION OF COMMUNITY SERVICE

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

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

15 the end the following new subsection:

16 ‘‘(g) The Secretary shall—

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

18 care officials, identify opportunities for the satisfac19 tion of community service obligations that a court

20 may impose upon the conviction of an offense under

21 this section, and

22 ‘‘(2) make information concerning such oppor23 tunities available to Federal and State law enforce24 ment officers and State and local health care offi25 cials.’’.
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1 (c) HEALTH INSURANCE PLAN DEFINED.—Section

2 1128 of such Act (42 U.S.C. 1320a–7) is amended by re3 designating subsection (i) as subsection (j) and by insert4 ing after subsection (h) the following new subsection:

5 ‘‘(i) HEALTH INSURANCE PLAN DEFINED.—For pur6 poses of sections 1128A and 1128B, the term ‘health in7 surance plan’ means a health insurance program other

8 than the medicare program, the medicaid program, or a

9 State health care program.’’.

10 (d) CONFORMING AMENDMENT.—Section

11 1128(b)(8)(B)(ii) of such Act (42 U.S.C. 1320a–

12 7(b)(8)(B)(ii)) is amended by striking ‘‘1128A’’ and in13 serting ‘‘1128A (other than a penalty arising from a

14 health insurance plan, as defined in subsection (i))’’.

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

16 this section shall take effect January 1, 1995.

17 TITLE VI—ANTITRUST

18 PROVISIONS

19 SEC. 601. EXEMPTION FROM ANTITRUST LAWS FOR CER20 TAIN COMPETITIVE AND COLLABORATIVE

21 ACTIVITIES.

22 (a) EXEMPTION DESCRIBED.—An activity relating to

23 the provision of health care services shall be exempt from

24 the antitrust laws if—
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1 (1) the activity is within one of the categories

2 of safe harbors described in section 602;

3 (2) the activity is within an additional safe har4 bor designated by the Attorney General under sec5 tion 603; or

6 (3) the activity is specified in and in compliance

7 with the terms of a certificate of review issued by

8 the Attorney General under section 604 and the ac9 tivity occurs—

10 (A) while the certificate is in effect, or

11 (B) in the case of a certificate issued dur12 ing the 2-year period beginning on the date of

13 the enactment of this Act, at any time on or

14 after the first day of the 2-year period that

15 ends on the date the certificate takes effect.

16 (b) AWARD OF ATTORNEY’S FEES AND COSTS OF

17 SUIT.—

18 (1) IN GENERAL.—If any person brings an ac19 tion alleging a claim under the antitrust laws and

20 the activity on which the claim is based is found by

21 the court to be exempt from such laws under sub22 section (a), the court shall, at the conclusion of the

23 action—
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1 (A) award to a substantially prevailing

2 claimant the cost of suit attributable to such

3 claim, including a reasonable attorney’s fee, or

4 (B) award to a substantially prevailing

5 party defending against such claim the cost of

6 such suit attributable to such claim, including

7 reasonable attorney’s fee, if the claim, or the

8 claimant’s conduct during litigation of the

9 claim, was frivolous, unreasonable, without

10 foundation, or in bad faith.

11 (2) OFFSET IN CASES OF BAD FAITH.—The

12 court may reduce an award made pursuant to para13 graph (1) in whole or in part by an award in favor

14 of another party for any part of the cost of suit (in15 cluding a reasonable attorney’s fee) attributable to

16 conduct during the litigation by any prevailing party

17 that the court finds to be frivolous, unreasonable,

18 without foundation, or in bad faith.

19 SEC. 602. SAFE HARBORS.

20 The following activities are safe harbors for purposes

21 of section 601(a)(1):

22 (1) COMBINATIONS WITH MARKET SHARE

23 BELOW THRESHOLD.—Activities relating to health

24 care services of any combination of health care pro25 viders if the number of each type or specialty of pro-
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1 vider in question does not exceed 20 percent of the

2 total number of such type or specialty of provider in

3 the relevant market area.

4 (2) ACTIVITIES OF MEDICAL SELF-REGULATORY

5 ENTITIES.—

6 (A) IN GENERAL.—Subject to subpara7 graph (B), any activity of a medical self-regu8 latory entity relating to standard setting or

9 standard enforcement activities that are de10 signed to promote the quality of health care

11 provided to patients.

12 (B) EXCEPTION.—No activity of a medical

13 self-regulatory entity may be deemed to fall

14 under the safe harbor established under this

15 paragraph if the activity is conducted for pur16 poses of financial gain.

17 (3) PARTICIPATION IN SURVEYS.—The partici18 pation of a provider of health care services in a writ19 ten survey of the prices of services, reimbursement

20 levels, or the compensation and benefits of employ21 ees and personnel, but only if—

22 (A) the survey is conducted by a third

23 party, such as a purchaser of health care serv24 ices, governmental entity, institution of higher

25 education, or trade association;
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1 (B) the information provided by partici2 pants in the survey is based on prices charged,

3 reimbursements received, or compensation and

4 benefits paid prior to the third month preceding

5 the month in which the information is provided;

6 and

7 (C) if the results of the survey are dissemi8 nated, the results are aggregated in a manner

9 that ensures that no recipient of the results

10 may identify the prices charged, reimbursement

11 received, or compensation and benefits paid by

12 any particular provider.

13 (4) JOINT VENTURES FOR HIGH TECHNOLOGY

14 AND COSTLY EQUIPMENT AND SERVICES.—Any ac15 tivity of a health care cooperative venture relating to

16 the purchase, operation, or marketing of high tech17 nology or other expensive medical equipment, or the

18 provision of high cost or complex services, but only

19 if the number of participants in the venture does not

20 exceed the lowest number needed to support the ven21 ture. Other providers may be included in the ven22 ture, but only if such other providers could not pur23 chase, operate, or market such equipment or provide

24 a competing service either alone or through the for25 mation of a competing venture.
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1 (5) HOSPITAL MERGERS.—Activities relating to

2 a merger of 2 hospitals if, during the 3-year period

3 preceding the merger, one of the hospitals had an

4 average of 150 or fewer operational beds and an av5 erage daily inpatient census of less than 50 percent

6 of such beds.

7 (6) JOINT PURCHASING ARRANGEMENTS.—Any

8 joint purchasing arrangement among health care

9 providers if—

10 (A) the purchases under the arrangement

11 represent less than 35 percent of the total sales

12 of the product or service purchased in the rel13 evant market; and

14 (B) the cost of the products and services

15 purchased jointly accounts for less than 20 per16 cent of the total revenues from all products or

17 services sold by each participant in the joint

18 purchasing arrangement.

19 (7) NEGOTIATIONS.—Activities consisting of

20 good faith negotiations to carry out any activity—

21 (A) described in this section,

22 (B) within an additional safe harbor des23 ignated by the Attorney General under section

24 603,
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1 (C) that is the subject of an application for

2 a certificate of review under section 604, or

3 (D) that is deemed a submission of a noti4 fication under section 605(a)(2)(B),

5 without regard to whether such an activity is carried

6 out.

7 SEC. 603. DESIGNATION OF ADDITIONAL SAFE HARBORS.

8 (a) IN GENERAL.—

9 (1) SOLICITATION OF PROPOSALS.—Not later

10 than 30 days after the date of the enactment of this

11 Act, the Attorney General shall publish a notice in

12 the Federal Register soliciting proposals for addi13 tional safe harbors.

14 (2) REVIEW AND REPORT ON PROPOSED SAFE

15 HARBORS.—Not later than 180 days after the date

16 of the enactment of this Act, the Attorney General

17 (in consultation with the Secretary of Health and

18 Human Services and the Chair of the Federal Trade

19 Commission) shall—

20 (A) review the proposed safe harbors sub21 mitted under paragraph (1); and

22 (B) submit a report to Congress describing

23 the proposals to be included in the publication

24 of additional safe harbors described in para-
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1 graph (3) and the proposals that are not to be

2 so included, together with explanations therefor.

3 (3) PUBLICATION OF ADDITIONAL SAFE HAR4 BORS.—Not later than 180 days after the date of

5 the enactment of this Act, the Attorney General (in

6 consultation with the Secretary of Health and

7 Human Services and the Chair of the Federal Trade

8 Commission) shall publish in the Federal Register

9 proposed additional safe harbors for purposes of sec10 tion 601(a)(2) for providers of health care services.

11 Not later than 180 days after publishing such pro12 posed safe harbors in the Federal Register, the At13 torney General shall issue final rules establishing

14 such safe harbors.

15 (b) CRITERIA FOR SAFE HARBORS.—In establishing

16 safe harbors under subsection (a), the Attorney General

17 shall take into account the following:

18 (1) The extent to which a competitive or col19 laborative activity will accomplish any of the follow20 ing:

21 (A) An increase in access to health care

22 services.

23 (B) The enhancement of the quality of

24 health care services.
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1 (C) The establishment of cost efficiencies

2 that will be passed on to consumers, including

3 economies of scale and reduced transaction and

4 administrative costs.

5 (D) An increase in the ability of health

6 care facilities to provide services in medically

7 underserved areas or to medically underserved

8 populations.

9 (E) An improvement in the utilization of

10 health care resources or the reduction in the in11 efficient duplication of the use of such re12 sources.

13 (2) Whether the designation of an activity as a

14 safe harbor under subsection (a) will result in the

15 following outcomes:

16 (A) Health plans and other health care in17 surers, consumers of health care services, and

18 health care providers will be better able to ne19 gotiate payment and service arrangements

20 which will reduce costs to consumers.

21 (B) Taking into consideration the charac22 teristics of the particular purchasers and pro23 viders involved, competition will not be unduly

24 restricted.
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1 (C) Equally efficient and less restrictive al2 ternatives do not exist to meet the criteria de3 scribed in paragraph (1).

4 (D) The activity will not unreasonably

5 foreclose competition by denying competitors a

6 necessary element of competition.

7 SEC. 604. CERTIFICATES OF REVIEW.

8 (a) ESTABLISHMENT OF PROGRAM.—In consultation

9 with the Secretary and the Chair, the Attorney General

10 shall (not later than 180 days after the date of the enact11 ment of this Act) issue certificates of review in accordance

12 with this section for providers of health care services and

13 advise and assist any person with respect to applying for

14 such a certificate of review.

15 (b) PROCEDURES FOR APPLICATION FOR CERTIFI16 CATE.—

17 (1) FORM; CONTENT.—To apply for a certifi18 cate of review, a person shall submit to the Attorney

19 General a written application which—

20 (A) specifies the activities relating to the

21 provision of health care services which satisfy

22 the criteria described in section 603(b) and

23 which will be included in the certificate; and

24 (B) is in a form and contains any informa25 tion, including information pertaining to the
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1 overall market in which the applicant operates,

2 required by rule or regulation promulgated

3 under section 607.

4 (2) PUBLICATION OF NOTICE IN FEDERAL REG5 ISTER.—Within 10 days after an application submit6 ted under paragraph (1) is received by the Attorney

7 General, the Attorney General shall publish in the

8 Federal Register a notice that announces that an

9 application for a certificate of review has been sub10 mitted, identifies each person submitting the appli11 cation, and describes the conduct for which the ap12 plication is submitted.

13 (3) ESTABLISHMENT OF PROCEDURES FOR IS14 SUANCE OF CERTIFICATE.—In consultation with the

15 Chair and the Secretary, the Attorney General shall

16 establish procedures to be used in applying for and

17 in determining whether to approve an application for

18 a certificate of review under this title. Under such

19 procedures the Attorney General shall approve an

20 application if the Attorney General determines that

21 the activities to be covered under the certificate will

22 satisfy the criteria described in section 603(b) for

23 additional safe harbors designated under such sec24 tion and that the benefits of the issuance of the cer-
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1 tificate will outweigh any disadvantages that may re2 sult from reduced competition.

3 (4) TIMING FOR DECISION ON APPLICATION.—

4 (A) IN GENERAL.—Within 90 days after

5 the Attorney General receives an application for

6 a certificate of review, the Attorney General

7 shall determine whether the applicant’s health

8 care market activities are in accordance with

9 the procedures described in paragraph (3). If

10 the Attorney General, with the concurrence of

11 the Secretary, determines that such procedures

12 are met, the Attorney General shall issue to the

13 applicant a certificate of review. The certificate

14 of review shall specify—

15 (i) the health care market activities to

16 which the certificate applies,

17 (ii) the person to whom the certificate

18 of review is issued, and

19 (iii) any terms and conditions the At20 torney General or the Secretary deems nec21 essary to assure compliance with the appli22 cable procedures described in paragraph

23 (3).

24 (B) APPLICATIONS DEEMED APPROVED.—

25 If the Attorney General does not reject an ap-
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1 plication before the expiration of the 90-day pe2 riod beginning on the date the Attorney General

3 receives the application, the Attorney General

4 shall be deemed to have approved the applica5 tion and to have issued a certificate of review

6 relating to the applicant’s health care market

7 activities covered under the application.

8 (5) EXPEDITED ACTION.—If the applicant indi9 cates a special need for prompt disposition, the At10 torney General and the Secretary may expedite ac11 tion on the application, except that no certificate of

12 review may be issued within 30 days of publication

13 of notice in the Federal Register under subsection

14 (b)(2).

15 (6) ACTIONS UPON DENIAL.—

16 (A) NOTIFICATION.—If the Attorney Gen17 eral denies in whole or in part an application

18 for a certificate, the Attorney General shall no19 tify the applicant of the Attorney General’s de20 termination and the reasons for it.

21 (B) REQUEST FOR RECONSIDERATION.—

22 An applicant may, within 30 days of receipt of

23 notification that the application has been denied

24 in whole or in part, request the Attorney Gen25 eral to reconsider the determination. The Attor-
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1 ney General, with the concurrence of the Sec2 retary, shall notify the applicant of the deter3 mination upon reconsideration within 30 days

4 of receipt of the request.

5 (C) RETURN OF DOCUMENTS.—If the At6 torney General denies an application for the is7 suance of a certificate of review and thereafter

8 receives from the applicant a request for the re9 turn of documents submitted by the applicant

10 in connection with the application for the cer11 tificate, the Attorney General and the Secretary

12 shall return to the applicant, not later than 30

13 days after receipt of the request, the documents

14 and all copies of the documents available to the

15 Attorney General and the Secretary, except to

16 the extent that the information has been made

17 public under an exception to the rule against

18 public disclosure described in subsection

19 (g)(2)(B).

20 (7) FRAUDULENT PROCUREMENT.—A certifi21 cate of review shall be void ab initio with respect to

22 any health care market activities for which the cer23 tificate was procured by fraud.

24 (c) AMENDMENT AND REVOCATION OF CERTIFI25 CATES.—
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1 (1) NOTIFICATION OF CHANGES.—Any appli2 cant who receives a certificate of review—

3 (A) shall promptly report to the Attorney

4 General any change relevant to the matters

5 specified in the certificate; and

6 (B) may submit to the Attorney General

7 an application to amend the certificate to re8 flect the effect of the change on the conduct

9 specified in the certificate.

10 (2) AMENDMENT TO CERTIFICATE.—An appli11 cation for an amendment to a certificate of review

12 shall be treated as an application for the issuance of

13 a certificate. The effective date of an amendment

14 shall be the date on which the application for the

15 amendment is submitted to the Attorney General.

16 (3) REVOCATION.—

17 (A) GROUNDS FOR REVOCATION.—In ac18 cordance with this paragraph, the Attorney

19 General may revoke in whole or in part a cer20 tificate of review issued under this section. The

21 following shall be considered grounds for the

22 revocation of a certificate:

23 (i) After the expiration of the 2-year

24 period beginning on the date a person’s

25 certificate is issued, the activities of the
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1 person have not substantially accomplished

2 the purposes for the issuance of the certifi3 cate.

4 (ii) The person has failed to comply

5 with any of the terms or conditions im6 posed under the certificate by the Attorney

7 General or the Secretary under subsection

8 (b)(4).

9 (iii) The activities covered under the

10 certificate no longer satisfy the criteria set

11 forth in section 603(b).

12 (B) REQUEST FOR COMPLIANCE INFORMA13 TION.—If the Attorney General or Secretary

14 has reason to believe that any of the grounds

15 for revocation of a certificate of review de16 scribed in subparagraph (A) may apply to a

17 person holding the certificate, the Attorney

18 General shall request such information from

19 such person as the Attorney General or the Sec20 retary deems necessary to resolve the matter of

21 compliance. Failure to comply with such request

22 shall be grounds for revocation of the certificate

23 under this paragraph.

24 (C) PROCEDURES FOR REVOCATION.—If

25 the Attorney General or the Secretary deter-
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1 mines that any of the grounds for revocation of

2 a certificate of review described in subpara3 graph (A) apply to a person holding the certifi4 cate, or that such person has failed to comply

5 with a request made under subparagraph (B),

6 the Attorney General shall give written notice of

7 the determination to such person. The notice

8 shall include a statement of the circumstances

9 underlying, and the reasons in support of, the

10 determination. In the 60-day period beginning

11 30 days after the notice is given, the Attorney

12 General shall revoke the certificate or modify it

13 as the Attorney General or the Secretary deems

14 necessary to cause the certificate to apply only

15 to activities that meet the procedures for the is16 suance of certificates described in subsection

17 (b)(2).

18 (D) INVESTIGATION AUTHORITY.—For

19 purposes of carrying out this paragraph, the

20 Attorney General may conduct investigations in

21 the same manner as the Attorney General con22 ducts investigations under section 3 of the Anti23 trust Civil Process Act, except that no civil in24 vestigative demand may be issued to a person
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1 to whom a certificate of review is issued if such

2 person is the target of such investigation.

3 (d) REVIEW OF DETERMINATIONS.—

4 (1) AVAILABILITY OF REVIEW FOR CERTAIN AC5 TIONS.—If the Attorney General denies, in whole or

6 in part, an application for a certificate of review or

7 for an amendment to a certificate, or revokes or

8 modifies a certificate pursuant to paragraph (3), the

9 applicant or certificate holder (as the case may be)

10 may, within 30 days of the denial or revocation,

11 bring an action in any appropriate district court of

12 the United States to set aside the determination on

13 the ground that such determination is erroneous

14 based on the preponderance of the evidence.

15 (2) NO OTHER REVIEW PERMITTED.—Except

16 as provided in paragraph (1), no action by the At17 torney General or the Secretary pursuant to this

18 title shall be subject to judicial review.

19 (3) EFFECT OF REJECTED APPLICATION.—If

20 the Attorney General denies, in whole or in part, an

21 application for a certificate of review or for an

22 amendment to a certificate, or revokes or amends a

23 certificate, neither the negative determination nor

24 the statement of reasons therefore shall be admissi25 ble in evidence, in any administrative or judicial pro-
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1 ceeding, concerning any claim under the antitrust

2 laws.

3 (e) PUBLICATION OF DECISIONS.—The Attorney

4 General shall publish a notice in the Federal Register on

5 a timely basis of each decision made with respect to an

6 application for a certificate of review under this section

7 or the amendment or revocation of such a certificate, in

8 a manner that protects the confidentiality of any propri9 etary information relating to the application.

10 (f) ANNUAL REPORTS.—Every person to whom a cer11 tificate of review is issued shall submit to the Attorney

12 General an annual report, in such form and at such time

13 as the Attorney General may require, that contains any

14 necessary updates to the information required under sub15 section (b) and a description of the activities of the holder

16 under the certificate during the preceding year.

17 (g) RESTRICTIONS ON DISCLOSURE OF INFORMA18 TION.—

19 (1) WAIVER OF DISCLOSURE REQUIREMENTS

20 UNDER ADMINISTRATIVE PROCEDURE ACT.—Infor21 mation submitted by any person in connection with

22 the issuance, amendment, or revocation of a certifi23 cate of review shall be exempt from disclosure under

24 section 552 of title 5, United States Code.
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1 (2) RESTRICTIONS ON DISCLOSURE OF COM2 MERCIAL OR FINANCIAL INFORMATION.—

3 (A) IN GENERAL.—Except as provided in

4 subparagraph (B), no officer or employee of the

5 United States shall disclose commercial or fi6 nancial information submitted in connection

7 with the issuance, amendment, or revocation of

8 a certificate of review if the information is priv9 ileged or confidential and if disclosure of the in10 formation would cause harm to the person who

11 submitted the information.

12 (B) EXCEPTIONS.—Subparagraph (A)

13 shall not apply with respect to information dis14 closed—

15 (i) upon a request made by the Con16 gress or any committee of the Congress,

17 (ii) in a judicial or administrative pro18 ceeding, subject to appropriate protective

19 orders,

20 (iii) with the consent of the person

21 who submitted the information,

22 (iv) in the course of making a deter23 mination with respect to the issuance,

24 amendment, or revocation of a certificate

25 of review, if the Attorney General deems
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1 disclosure of the information to be nec2 essary in connection with making the de3 termination,

4 (v) in accordance with any require5 ment imposed by a statute of the United

6 States, or

7 (vi) in accordance with any rule or

8 regulation promulgated under subsection

9 (i) permitting the disclosure of the infor10 mation to an agency of the United States

11 or of a State on the condition that the

12 agency will disclose the information only

13 under the circumstances specified in

14 clauses (i) through (v).

15 (3) PROHIBITION AGAINST USE OF INFORMA16 TION TO SUPPORT OR ANSWER CLAIMS UNDER ANTI17 TRUST LAWS.—Any information disclosed in an ap18 plication for a certificate of review under this section

19 shall only be admissible into evidence in a judicial or

20 administrative proceeding for the sole purpose of es21 tablishing that a person is entitled to the protection

22 provided by such a certificate.
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1 SEC. 605. NOTIFICATIONS PROVIDING REDUCTION IN CER2 TAIN PENALTIES UNDER ANTITRUST LAW

3 FOR HEALTH CARE COOPERATIVE VEN4 TURES.

5 (a) NOTIFICATIONS DESCRIBED.—

6 (1) SUBMISSION OF NOTIFICATION BY VEN7 TURE.—Any party to a health care cooperative ven8 ture, acting on such venture’s behalf, may, not later

9 than 90 days after entering into a written agreement

10 to form such venture or not later than 90 days after

11 the date of the enactment of this Act, whichever is

12 later, file with the Attorney General a written notifi13 cation disclosing—

14 (A) the identities of the parties to such

15 venture,

16 (B) the nature and objectives of such ven17 ture, and

18 (C) such additional information as the At19 torney General may require by regulation.

20 (2) ACTIVITIES DEEMED SUBMISSION OF NOTI21 FICATION.—The following health care cooperative

22 ventures shall be deemed to have filed a written noti23 fication with respect to the venture under paragraph

24 (1):

25 (A) SUBMISSION OF APPLICATION FOR

26 CERTIFICATE OF REVIEW.—Any health care co-
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1 operative venture for which an application for a

2 certificate of review is filed with the Attorney

3 General under section 603.

4 (B) CERTAIN VENTURES.—Any health care

5 cooperative venture meeting the following re6 quirements:

7 (i) The venture consists of a network

8 of non-institutional providers not greater

9 than—

10 (I) in the case of a nonexclusive

11 network in which the participating

12 members are permitted to create or

13 join other competing networks, 50

14 percent of the providers of health care

15 services in the relevant geographic

16 area and 50 percent of the members

17 of the provider specialty group in the

18 relevant market; or

19 (II) in the case of an exclusive

20 network in which the participating

21 members are not permitted to create

22 or join other competing networks, 35

23 percent of the providers of health care

24 services in the relevant geographic

25 area and 35 percent of the members
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1 of the provider specialty group in the

2 relevant market.

3 (ii) Each member of the venture as4 sumes substantial financial risk for the op5 eration of the venture through risk-sharing

6 arrangements, including (but not limited

7 to)—

8 (I) the acceptance of capitation

9 contracts;

10 (II) the acceptance of contracts

11 with fee withholding mechanisms re12 lating to the ability to meet estab13 lished goals for utilization review and

14 management; and

15 (III) the holding by members of

16 significant ownership or equity inter17 ests in the venture, where the capital

18 contributed by the members is used to

19 fund the operational costs of the ven20 ture such as administration, market21 ing, and computer-operated medical

22 information, if the venture develops

23 and operates comprehensive programs

24 for utilization management and qual25 ity assurance that include controls
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1 over the use of institutional, special2 ized, and ancillary medical services.

3 (3) SUBMISSION OF ADDITIONAL INFORMA4 TION.—

5 (A) REQUEST OF ATTORNEY GENERAL.—

6 At any time after receiving a notification filed

7 under paragraph (1), the Attorney General may

8 require the submission of additional information

9 or documentary material relevant to the pro10 posed health care cooperative venture.

11 (B) PARTIES TO VENTURE.—Any party to

12 a health care cooperative venture may submit

13 such additional information on the venture’s be14 half as may be appropriate to ensure that the

15 venture will receive the protections provided

16 under subsection (b).

17 (C) REQUIRED SUBMISSION OF INFORMA18 TION ON CHANGES TO VENTURE.—A health

19 care cooperative venture for which a notification

20 is in effect under this section shall submit infor21 mation on any change in the membership of the

22 venture not later than 90 days after such

23 change occurs.

24 (4) PUBLICATION OF NOTIFICATION.—
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1 (A) INFORMATION MADE PUBLICLY AVAIL2 ABLE.—Not later than 30 days after receiving

3 a notification with respect to a venture under

4 paragraph (1), the Attorney General shall pub5 lish in the Federal Register a notice with re6 spect to the venture that identifies the parties

7 to the venture and generally describes the pur8 pose and planned activity of the venture. Prior

9 to its publication, the contents of the notice

10 shall be made available to the parties to the

11 venture.

12 (B) RESTRICTION ON DISCLOSURE OF

13 OTHER INFORMATION.—All information and

14 documentary material submitted pursuant to

15 this section and all information obtained by the

16 Attorney General in the course of any investiga17 tion or case with respect to a potential violation

18 of the antitrust laws by the health care coopera19 tive venture (other than information and mate20 rial described in subparagraph (A)) shall be ex21 empt from disclosure under section 552 of title

22 5, United States Code, and shall not be made

23 publicly available by any agency of the United

24 States to which such section applies except in
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1 a judicial proceeding in which such information

2 and material is subject to any protective order.

3 (5) WITHDRAWAL OF NOTIFICATION.—Any per4 son who files a notification pursuant to this section

5 may withdraw such notification before a publication

6 by the Attorney General pursuant to paragraph (4).

7 Any person who is deemed to have filed a notifica8 tion under paragraph (2)(A) shall be deemed to have

9 withdrawn the notification if the certificate of review

10 in question is revoked or withdrawn under section

11 604.

12 (6) NO JUDICIAL REVIEW PERMITTED.—Any

13 action taken or not taken by the Attorney General

14 with respect to notifications filed pursuant to this

15 subsection shall not be subject to judicial review.

16 (b) PROTECTIONS FOR VENTURES SUBJECT TO NO17 TIFICATION.—

18 (1) IN GENERAL.—

19 (A) PROTECTIONS DESCRIBED.—The pro20 visions of paragraphs (2), (3), (4), and (5) shall

21 apply with respect to any action under the anti22 trust laws challenging conduct within the scope

23 of a notification which is in effect pursuant to

24 subsection (a)(1).
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1 (B) TIMING OF PROTECTIONS.—The pro2 tections described in this subsection shall apply

3 to the venture that is the subject of a notifica4 tion under subsection (a)(1) as of the earlier

5 of—

6 (i) the date of the publication in the

7 Federal Register of the notice published

8 with respect to the notification; or

9 (ii) if such notice is not published dur10 ing the period required under subsection

11 (a)(4), the expiration of the 30-day period

12 that begins on the date the Attorney Gen13 eral receives any necessary information re14 quired to be submitted under subsection

15 (a)(1) or any additional information re16 quired by the Attorney General under sub17 section (a)(3)(A).

18 (2) APPLICABILITY OF RULE OF REASON

19 STANDARD.—In any action under the antitrust laws,

20 the conduct of any person which is within the scope

21 of a notification filed under subsection (a) shall not

22 be deemed illegal per se, but shall be judged on the

23 basis of its reasonableness, taking into account all

24 relevant factors affecting competition, including, but
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1 not limited to, effects on competition in relevant

2 markets.

3 (3) LIMITATION ON RECOVERY TO ACTUAL

4 DAMAGES AND INTEREST.—Notwithstanding section

5 4 of the Clayton Act, any person who is entitled to

6 recovery under the antitrust laws for conduct that is

7 within the scope of a notification filed under sub8 section (a) shall recover the actual damages sus9 tained by such person and interest calculated at the

10 rate specified in section 1961 of title 28, United

11 States Code, for the period beginning on the earliest

12 date for which injury can be established and ending

13 on the date of judgment, unless the court finds that

14 the award of all or part of such interest is unjust

15 under the circumstances.

16 (4) AWARD OF ATTORNEY’S FEES AND COSTS

17 OF SUIT.—

18 (A) IN GENERAL.—In any action under the

19 antitrust laws brought against a health care co20 operative venture for conduct that is within the

21 scope of a notification filed under subsection

22 (a), the court shall, at the conclusion of the ac23 tion—

24 (i) award to a substantially prevailing

25 claimant the cost of suit attributable to
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1 such claim, including a reasonable attor2 ney’s fee, or

3 (ii) award to a substantially prevailing

4 party defending against such claim the

5 cost of such suit attributable to such claim,

6 including reasonable attorney’s fee, if the

7 claim, or the claimant’s conduct during

8 litigation of the claim, was frivolous, un9 reasonable, without foundation, or in bad

10 faith.

11 (B) OFFSET IN CASES OF BAD FAITH.—

12 The court may reduce an award made pursuant

13 to subparagraph (A) in whole or in part by an

14 award in favor of another party for any part of

15 the cost of suit (including a reasonable attor16 ney’s fee) attributable to conduct during the

17 litigation by any prevailing party that the court

18 finds to be frivolous, unreasonable, without

19 foundation, or in bad faith.

20 (5) RESTRICTIONS ON ADMISSIBILITY OF IN21 FORMATION.—

22 (A) IN GENERAL.—Any information dis23 closed in a notification submitted under sub24 section (a)(1) and the fact of the publication of

25 a notification by the Attorney General under
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1 subsection (a)(4) shall only be admissible into

2 evidence in a judicial or administrative proceed3 ing for the sole purpose of establishing that a

4 party to a health care cooperative venture is en5 titled to the protections described in this sub6 section.

7 (B) ACTIONS OF ATTORNEY GENERAL.—

8 No action taken by the Attorney General pursu9 ant to this section shall be admissible into evi10 dence in any judicial or administrative proceed11 ing for the purpose of supporting or answering

12 any claim under the antitrust laws.

13 SEC. 606. REVIEW AND REPORTS ON SAFE HARBORS AND

14 CERTIFICATES OF REVIEW.

15 (a) IN GENERAL.—The Attorney General (in con16 sultation with the Secretary and the Chair) shall periodi17 cally review the safe harbors described in section 602, the

18 additional safe harbors designated under section 603, and

19 the certificates of review issued under section 604, and—

20 (1) with respect to the safe harbors described in

21 section 602, submit such recommendations to Con22 gress as the Attorney General considers appropriate

23 for modifications of such safe harbors;

24 (2) with respect to the additional safe harbors

25 under designated under section 603, issue proposed
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1 revisions to such activities and publish the revisions

2 in the Federal Register; and

3 (3) with respect to the certificates of review,

4 submit a report to Congress on the issuance of such

5 certificates, and shall include in the report a descrip6 tion of the effect of such certificates on increasing

7 access to high quality health care services at reduced

8 costs.

9 (b) RECOMMENDATIONS FOR LEGISLATION.—The

10 Attorney General shall include in the reports submitted

11 under subsection (a)(3) any recommendations of the At12 torney General for legislation to improve the program for

13 the issuance of certificates of review established under this

14 title.

15 SEC. 607. RULES, REGULATIONS, AND GUIDELINES.

16 (a) SAFE HARBORS, CERTIFICATES, AND NOTIFICA17 TIONS.—The Attorney General, with the concurrence of

18 the Secretary, shall promulgate such rules, regulations,

19 and guidelines as are necessary to carry out sections 602,

20 603, 604, and 605, including guidelines defining or relat21 ing to relevant geographic and product markets for health

22 care services and providers of health care services.

23 (b) GUIDANCE FOR PROVIDERS.—

24 (1) IN GENERAL.—To promote greater cer25 tainty regarding the application of the antitrust laws
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1 to activities in the health care market, the Attorney

2 General, in consultation with the Secretary and the

3 Chair, shall (not later than 1 year after the date of

4 the enactment of this Act), taking into account the

5 criteria used to designate additional safe harbors

6 under section 603 and grant certificates of review

7 under section 604, publish guidelines—

8 (A) to assist providers of health care serv9 ices in analyzing whether the activities of such

10 providers may be subject to a safe harbor under

11 sections 602 or 603; and

12 (B) describing specific types of activities

13 which would meet the requirements for a cer14 tificate of review under section 604, and sum15 marizing the factual and legal bases on which

16 the activities would meet the requirements.

17 (2) PERIODIC UPDATE.—The Attorney General

18 shall periodically update the guidelines published

19 under paragraph (1) as the Attorney General consid20 ers appropriate.

21 (3) WAIVER OF ADMINISTRATIVE PROCEDURE

22 ACT.—Section 553 of title 5, United States Code,

23 shall not apply to the issuance of guidelines under

24 paragraph (1).
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1 SEC. 608. DEFINITIONS.

2 In this title, the following definitions shall apply:

3 (1) The term ‘‘antitrust laws’’—

4 (A) has the meaning given it in subsection

5 (a) of the first section of the Clayton Act (15

6 U.S.C. 12(a)), except that such term includes

7 section 5 of the Federal Trade Commission Act

8 (15 U.S.C. 45) to the extent such section ap9 plies to unfair methods of competition; and

10 (B) includes any State law similar to the

11 laws referred to in subparagraph (A).

12 (2) The term ‘‘Chair’’ means the Chair of the

13 Federal Trade Commission.

14 (3) The term ‘‘health insurance plan’’ has the

15 meaning given such term in section 111(b).

16 (4) The term ‘‘health care cooperative venture’’

17 means any activities, including attempts to enter

18 into or perform a contract or agreement, carried out

19 by 2 or more persons for the purpose of providing

20 health care services.

21 (5) The term ‘‘health care services’’ means any

22 services for which payment may be made under a

23 health insurance plan, including services related to

24 the delivery or administration of such services.

25 (6) The term ‘‘medical self-regulatory entity’’

26 means a medical society or association, a specialty
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1 board, a recognized accrediting agency, or a hospital

2 medical staff, and includes the members, officers,

3 employees, consultants, and volunteers or commit4 tees of such an entity.

5 (7) The term ‘‘person’’ includes a State or unit

6 of local government.

7 (8) The term ‘‘provider of health care services’’

8 means any individual or entity that is engaged in the

9 delivery of health care services in a State and that

10 is required by State law or regulation to be licensed

11 or certified by the State to engage in the delivery of

12 such services in the State.

13 (9) The term ‘‘specialty group’’ means a medi14 cal specialty or subspecialty in which a provider of

15 health care services may be licensed to practice by

16 a State (as determined by the Secretary in consulta17 tion with the certification boards for such specialties

18 and subspecialties).

19 (10) The term ‘‘standard setting and enforce20 ment activities’’ means—

21 (A) accreditation of health care practition22 ers, health care providers, medical education in23 stitutions, or medical education programs,

24 (B) technology assessment and risk man25 agement activities,
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1 (C) the development and implementation of

2 practice guidelines or practice parameters, or

3 (D) official peer review proceedings under4 taken by a hospital medical staff (or committee

5 thereof) or a medical society or association for

6 purposes of evaluating the professional conduct

7 or quality of health care provided by a medical

8 professional.

9 TITLE VII—LONG-TERM CARE

10 SEC. 701. EXCLUSION FROM GROSS INCOME FOR AMOUNTS

11 WITHDRAWN FROM INDIVIDUAL RETIRE12 MENT PLANS OR 401(k) PLANS FOR LONG13 TERM CARE INSURANCE.

14 (a) IN GENERAL.—Part III of subchapter B of chap15 ter 1 of the Internal Revenue Code of 1986 (relating to

16 items specifically excluded from gross income) is amended

17 by redesignating section 137 as section 138 and by insert18 ing after section 136 the following new section:

19 ‘‘SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT

20 ACCOUNTS AND SECTION 401(k) PLANS FOR

21 LONG-TERM CARE INSURANCE.

22 ‘‘(a) GENERAL RULE.—The amount includible in the

23 gross income of an individual for the taxable year by rea24 son of qualified distributions during such taxable year

25 shall not exceed the excess of—
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1 ‘‘(1) the amount which would (but for this sec2 tion) be so includible by reason of such distributions,

3 over

4 ‘‘(2) the aggregate premiums paid by such indi5 vidual during such taxable year for any long-term

6 care insurance contract for the benefit of such indi7 vidual or the spouse of such individual.

8 ‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of

9 this section, the term ‘qualified distribution’ means any

10 distribution to an individual from an individual retirement

11 account or a section 401(k) plan if such individual has

attained age 591 12 ⁄2 on or before the date of the distribution

13 (and, in the case of a distribution used to pay premiums

14 for the benefit of the spouse of such individual, such

spouse has attained age 591 15 ⁄2 on or before the date of the

16 distribution).

17 ‘‘(c) DEFINITIONS AND SPECIAL RULES RELATING

18 TO LONG-TERM INSURANCE CONTRACTS.—

19 ‘‘(1) LONG-TERM CARE INSURANCE CON20 TRACT.—

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

22 section, the term ‘long-term care insurance con23 tract’ means any insurance contract issued if—

24 ‘‘(i) the only insurance protection pro25 vided under such contract is coverage of
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1 qualified long-term care services and bene2 fits incidental to such coverage,

3 ‘‘(ii) the maximum benefit under the

4 policy for expenses incurred for any day

5 does not exceed $200,

6 ‘‘(iii) such contract does not cover ex7 penses incurred for services or items to the

8 extent that such expenses are reimbursable

9 under title XVIII of the Social Security

10 Act or would be so reimbursable but for

11 the application of a deductible or coinsur12 ance amount,

13 ‘‘(iv) such contract is guaranteed re14 newable,

15 ‘‘(v) such contract does not have any

16 cash surrender value, and

17 ‘‘(vi) all refunds of premiums, and all

18 policyholder dividends or similar amounts,

19 under such contract are to be applied as a

20 reduction in future premiums or to in21 crease future benefits.

22 ‘‘(B) SPECIAL RULES.—

23 ‘‘(i) PER DIEM, ETC. PAYMENTS PER24 MITTED.—A contract shall not fail to be

25 treated as described in subparagraph
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1 (A)(i) by reason of payments being made

2 on a per diem or other periodic basis with3 out regard to the expenses incurred during

4 the period to which the payments relate.

5 ‘‘(ii) CONTRACT MAY COVER MEDI6 CARE REIMBURSABLE EXPENSES WHERE

7 MEDICARE IS SECONDARY PAYOR.—Sub8 paragraph (A)(iii) shall not apply to ex9 penses which are reimbursable under title

10 XVIII of the Social Security Act only as a

11 secondary payor.

12 ‘‘(iii) REFUNDS OF PREMIUMS.—Sub13 paragraph (A)(vi) shall not apply to any

14 refund of premiums on surrender or can15 cellation of the contract.

16 ‘‘(2) QUALIFIED LONG-TERM CARE SERVICES.—

17 For purposes of this subsection—

18 ‘‘(A) IN GENERAL.—The term ‘qualified

19 long-term care services’ means necessary diag20 nostic, preventive, therapeutic, and rehabilita21 tive services, and maintenance or personal care

22 services, which—

23 ‘‘(i) are required by a chronically ill

24 individual in a qualified facility, and
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1 ‘‘(ii) are provided pursuant to a plan

2 of care prescribed by a licensed health care

3 practitioner.

4 ‘‘(B) CHRONICALLY ILL INDIVIDUAL.—

5 ‘‘(i) IN GENERAL.—The term ‘chron6 ically ill individual’ means any individual

7 who has been certified by a licensed health

8 care practitioner as—

9 ‘‘(I) being unable to perform

10 (without substantial assistance from

11 another individual) at least 2 activi12 ties of daily living (as defined in

13 clause (ii)) for a period of at least 90

14 days due to a loss of functional capac15 ity, or having a similar level of disabil16 ity (as determined by the Secretary in

17 consultation with the Secretary of

18 Health and Human Services), or

19 ‘‘(II) having a similar level of

20 disability due to cognitive impairment.

21 ‘‘(ii) ACTIVITIES OF DAILY LIVING.—

22 For purposes of clause (i), each of the fol23 lowing is an activity of daily living:

24 ‘‘(I) MOBILITY.—The process of

25 walking or wheeling on a level surface
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1 which may include the use of an

2 assistive device such as a cane, walk3 er, wheelchair, or brace.

4 ‘‘(II) DRESSING.—The overall

5 complex behavior of getting clothes

6 from closets and drawers and then

7 getting dressed.

8 ‘‘(III) TOILETING.—The act of

9 going to the toilet room for bowel and

10 bladder function, transferring on and

11 off the toilet, cleaning after elimi12 nation, and arranging clothes or the

13 ability to voluntarily control bowel and

14 bladder function, or in the event of in15 continence, the ability to maintain a

16 reasonable level of personal hygiene.

17 ‘‘(IV) TRANSFER.—The process

18 of getting in and out of bed or in and

19 out of a chair or wheelchair.

20 ‘‘(V) EATING.—The process of

21 getting food from a plate or its equiv22 alent into the mouth.

23 ‘‘(C) QUALIFIED FACILITY.—The term

24 ‘qualified facility’ means—
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1 ‘‘(i) a nursing, rehabilitative, hospice,

2 or adult day care facility (including a hos3 pital, retirement home, nursing home,

4 skilled nursing facility, intermediate care

5 facility, or similar institution)—

6 ‘‘(I) which is licensed under

7 State law, or

8 ‘‘(II) which is a certified facility

9 for purposes of title XVIII or XIX of

10 the Social Security Act, or

11 ‘‘(ii) an individual’s home if a licensed

12 health care practitioner certifies that with13 out home care the individual would have to

14 be cared for in a facility described in

15 clause (i).

16 ‘‘(D) MAINTENANCE OR PERSONAL CARE

17 SERVICES.—The term ‘maintenance or personal

18 care services’ means any care the primary pur19 pose of which is to provide needed assistance

20 with any of the activities of daily living de21 scribed in subparagraph (B)(ii).

22 ‘‘(E) LICENSED HEALTH CARE PRACTI23 TIONER.—The term ‘licensed health care practi24 tioner’ means any physician (as defined in sec25 tion 1861(r) of the Social Security Act) and
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1 any registered professional nurse, licensed social

2 worker, or other individual who meets such re3 quirements as may be prescribed by the Sec4 retary.

5 ‘‘(3) INFLATION ADJUSTMENT OF $200 BENEFIT

6 LIMIT.—

7 ‘‘(A) IN GENERAL.—In the case of a cal8 endar year after 1995, the $200 amount con9 tained in paragraph (1)(A)(ii) shall be in10 creased for such calendar year by the medical

11 care cost adjustment for such calendar year. If

12 any increase determined under the preceding

13 sentence is not a multiple of $10, such increase

14 shall be rounded to the nearest multiple of $10.

15 ‘‘(B) MEDICAL CARE COST ADJUST16 MENT.—For purposes of subparagraph (A), the

17 medical care cost adjustment for any calendar

18 year is the percentage (if any) by which—

19 ‘‘(i) the medical care component of

20 the Consumer Price Index (as defined in

21 section 1(f)(5)) for August of the preced22 ing calendar year, exceeds

23 ‘‘(ii) such component for August of

24 1994.
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1 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

2 section—

3 ‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The

4 term ‘individual retirement account’ has the mean5 ing given such term by section 408(a).

6 ‘‘(2) SECTION 401(k) PLAN.—The term ‘section

7 401(k) plan’ means any employer plan which meets

8 the requirements of section 401(a) and which in9 cludes a qualified cash or deferred arrangement (as

10 defined in section 401(k)).

11 ‘‘(e) SPECIAL RULES FOR SECTION 401(k) PLANS.—

12 ‘‘(1) WITHDRAWALS CANNOT EXCEED ELEC13 TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR

14 DEFERRED ARRANGEMENT.—This section shall not

15 apply to any distribution from a section 401(k) plan

16 to the extent the aggregate amount of such distribu17 tions for the use described in subsection (a) exceeds

18 the aggregate employer contributions made pursuant

19 to the employee’s election under section 401(k)(2).

20 ‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI21 FICATION.—A plan shall not be treated as failing to

22 satisfy the requirements of section 401, and an ar23 rangement shall not be treated as failing to be a

24 qualified cash or deferred arrangement (as defined

25 in section 401(k)(2)), merely because under the plan
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1 or arrangement distributions are permitted which

2 are excludable from gross income by reason of this

3 section.’’

4 (b) CONFORMING AMENDMENTS.—

5 (1) Section 401(k) of such Code is amended by

6 adding at the end the following new paragraph:

7 ‘‘(11) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

for payment of long-term care premiums, see section

137.’’

8 (2) Section 408(d) of such Code is amended by

9 adding at the end the following new paragraph:

10 ‘‘(8) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

from individual retirement accounts for payment of

long-term care premiums, see section 137.’’

11 (3) The table of sections for such part III is

12 amended by striking the last item and inserting the

13 following new items:

‘‘Sec. 137. Distributions from individual retirement accounts and

section 401(k) plans for long-term care insurance.

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

14 SEC. 702. CERTAIN EXCHANGES OF LIFE INSURANCE CON15 TRACTS FOR LONG-TERM CARE INSURANCE

16 CONTRACTS NOT TAXABLE.

17 Subsection (a) of section 1035 of the Internal Reve18 nue Code of 1986 (relating to certain exchanges of insur19 ance contracts) is amended by striking the period at the
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1 end of paragraph (3) and inserting ‘‘; or’’, and by adding

2 at the end thereof the following new paragraph:

3 ‘‘(4) a contract of life insurance or an endow4 ment or annuity contract for a long-term care insur5 ance contract (as defined in section 137(c)(1)).’’

6 SEC. 703. TAX TREATMENT OF ACCELERATED DEATH BENE7 FITS UNDER LIFE INSURANCE CONTRACTS.

8 Section 101 of the Internal Revenue Code of 1986

9 (relating to certain death benefits) is amended by adding

10 at the end thereof the following new subsection:

11 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

12 DEATH BENEFITS.—

13 ‘‘(1) IN GENERAL.—For purposes of this sec14 tion, any amount paid or advanced to an individual

15 under a life insurance contract on the life of an in16 sured—

17 ‘‘(A) who is a terminally ill individual, or

18 ‘‘(B) who is a chronically ill individual (as

19 defined in section 137(c)(2)(B)) who is confined

20 to a qualified facility (as defined in section

21 137(c)(2)(C)(i)),

22 shall be treated as an amount paid by reason of the

23 death of such insured.

24 ‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur25 poses of this subsection, the term ‘terminally ill indi-
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1 vidual’ means an individual who has been certified

2 by a physician as having an illness or physical condi3 tion which can reasonably be expected to result in

4 death in 12 months or less.

5 ‘‘(3) PHYSICIAN.—For purposes of this sub6 section, the term ‘physician’ has the meaning given

7 to such term by section 137(c)(2)(E).’’

8 SEC. 704. EFFECTIVE DATE.

9 The amendments made by this subtitle shall apply to

10 taxable years beginning after December 31, 1994.

11 TITLE VI—WELFARE

12 RESTRICTIONS FOR ALIENS

13 SEC. 801. INELIGIBILITY OF ALIENS FOR PUBLIC WELFARE

14 ASSISTANCE.

15 (a) IN GENERAL.—Notwithstanding any other provi16 sion of law and except as provided in subsections (b) and

17 (c), no alien shall be eligible for any program referred to

18 in subsection (d).

19 (b) EXCEPTIONS.—

20 (1) REFUGEE EXCEPTION.—Subsection (a)

21 shall not apply to an alien admitted to the United

22 States as a refugee under section 207 of the Immi23 gration and Nationality Act until 6 years after the

24 date of such alien’s arrival into the United States.
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1 (2) AGED EXCEPTION.—Subsection (a) shall

2 not apply to an alien who—

3 (A) has been lawfully admitted to the

4 United States for permanent residence;

5 (B) is over 75 years of age; and

6 (C) has resided in the United States for at

7 least 5 years.

8 (3) CURRENT RESIDENT EXCEPTION.—Sub9 section (a) shall not apply to the eligibility of an

10 alien for a program referred to in subsection (d)

11 until 1 year after the date of the enactment of this

12 Act if, on such date of enactment, the alien is resid13 ing in the United States and is eligible for the pro14 gram.

15 (c) PROGRAMS FOR WHICH ALIENS MAY BE ELIGI16 BLE.—The limitation under subsection (a) shall not apply

17 to the following programs:

18 (1) Medical assistance with respect to emer19 gency services (as defined for purposes of section

20 1916(a)(2)(D) of the Social Security Act).

21 (d) PROGRAMS FOR WHICH ALIENS ARE INELI22 GIBLE.—The programs referred to in this subsection are

23 the following:
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1 (1) The program of medical assistance under

2 title XIX of the Social Security Act, except emer3 gency services as provided in subsection (c).

4 (2) The Maternal and Child Health Services

5 Block Grant Program under title V of the Social Se6 curity Act.

7 (3) The program established in section 330 of

8 the Public Health Service Act (relating to commu9 nity health centers).

10 (4) The program established in section 1001 of

11 the Public Health Service Act (relating to family

12 planning methods and services).

13 (5) The program established in section 329 of

14 the Public Health Service Act (relating to migrant

15 health centers).

16 (6) The program of aid and services to needy

17 families with children under part A of title IV of the

18 Social Security Act.

19 (7) The child welfare services program under

20 part B of title IV of the Social Security Act.

21 (8) The supplemental security income program

22 under title XVI of the Social Security Act.

23 (9) The program of foster care and adoption

24 assistance under part E of title IV of the Social Se25 curity Act.
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1 (10) The food stamp program, as defined in

2 section 3(h) of the Food Stamp Act of 1977 (7

3 U.S.C. 2012(h)).

4 (11) The school lunch program carried out

5 under the National School Lunch Act (42 U.S.C.

6 1751 et seq.).

7 (12) The special supplemental food program for

8 women, infants, and children carried out under sec9 tion 17 of the Child Nutrition Act of 1966 (42

10 U.S.C. 1786).

11 (13) The nutrition programs carried out under

12 part C of title III of the Older Americans Act of

13 1965 (42 U.S.C. 3030e et seq.).

14 (14) The school breakfast program carried out

15 under section 4 of the Child Nutrition Act of 1966

16 (42 U.S.C. 1773).

17 (15) The child and adult care food program

18 carried out under section 17 of the National School

19 Lunch Act (42 U.S.C. 1766).

20 (16) The Emergency Food Assistance Act of

21 1983 (7 U.S.C. 612c note).

22 (17) The summer food service program for chil23 dren carried out under section 13 of the National

24 School Lunch Act (42 U.S.C. 1761).
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1 (18) The commodity supplemental food pro2 gram authorized by section 4(a) of the Agriculture

3 and Consumer Protection Act of 1973 (7 U.S.C.

4 612c note).

5 (19) The special milk program carried out

6 under section 3 of the Child Nutrition Act of 1966

7 (42 U.S.C. 1772).

8 (20) The program of rental assistance on behalf

9 of low-income families provided under section 8 of

10 the United States Housing Act of 1937 (42 U.S.C.

11 1437f).

12 (21) The program of assistance to public hous13 ing under title I of the United States Housing Act

14 of 1937 (42 U.S.C. 1437 et seq.).

15 (22) The loan program under section 502 of the

16 Housing Act of 1949 (42 U.S.C. 1472).

17 (23) The program of interest reduction pay18 ments pursuant to contracts entered into by the Sec19 retary of Housing and Urban Development under

20 section 236 of the National Housing Act (12 U.S.C.

21 1715z–1).

22 (24) The program of loans for rental and coop23 erative housing under section 515 of the Housing

24 Act of 1949 (42 U.S.C. 1485).
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1 (25) The program of rental assistance pay2 ments pursuant to contracts entered into under sec3 tion 521(a)(2)(A) of the Housing Act of 1949 (42

4 U.S.C. 1490a(a)(2)(A)).

5 (26) The program of assistance payments on

6 behalf of homeowners under section 235 of the Na7 tional Housing Act (12 U.S.C. 1715z).

8 (27) The program of rent supplement payments

9 on behalf of qualified tenants pursuant to contracts

10 entered into under section 101 of the Housing and

11 Urban Development Act of 1965 (12 U.S.C. 1701s).

12 (28) The loan and grant programs under sec13 tion 504 of the Housing Act of 1949 (42 U.S.C.

14 1474) for repairs and improvements to rural dwell15 ings.

16 (29) The loan and assistance programs under

17 sections 514 and 516 of the Housing Act of 1949

18 (42 U.S.C. 1484, 1486) for housing for farm labor.

19 (30) The program of grants for preservation

20 and rehabilitation of housing under section 533 of

21 the Housing Act of 1949 (42 U.S.C. 1490m).

22 (31) The program of grants and loans for mu23 tual and self-help housing and technical assistance

24 under section 523 of the Housing Act of 1949 (42

25 U.S.C. 1490c).
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1 (32) The program of site loans under section

2 524 of the Housing Act of 1949 (42 U.S.C. 1490d).

3 (33) The program under part B of title IV of

4 the Higher Education Act of 1965.

5 (34) The program under subpart 1 of part A of

6 title IV of the Higher Education Act of 1965.

7 (35) The program under part C of title IV of

8 the Higher Education Act of 1965.

9 (36) The program under subpart 3 of part A of

10 title IV of the Higher Education Act of 1965.

11 (37) The program under part E of title IV of

12 the Higher Education Act of 1965.

13 (38) The program under subpart 4 of part A of

14 title IV of the Higher Education Act of 1965.

15 (39) The program under title IX of the Higher

16 Education Act of 1965.

17 (40) The program under subpart 5 of part A of

18 title IV of the Higher Education Act of 1965.

19 (41) The programs established in sections 338A

20 and 338B of the Public Health Service Act and the

21 programs established in part A of title VII of such

22 Act (relating to loans and scholarships for education

23 in the health professions).

24 (42) The program established in section

25 317(j)(1) of the Public Health Service Act (relating
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1 to grants for immunizations against vaccine-prevent2 able diseases).

3 (43) The program established in section 317A

4 of the Public Health Service Act (relating to grants

5 for screening, referrals, and education regarding

6 lead poisoning in infants and children).

7 (44) The program established in part A of title

8 XIX of the Public Health Service Act (relating to

9 block grants for preventive health and health serv10 ices).

11 (45) The programs established in subparts I

12 and II of part B of title XIX of the Public Health

13 Service Act.

14 (46)(A) The program of training for disadvan15 taged adults and youth under part A of title II of

16 the Job Training Partnership Act (29 U.S.C. 1601

17 et seq.), as in effect before July 1, 1993.

18 (B)(i) The program of training for disadvan19 taged adults under part A of title II of the Job

20 Training Partnership Act (29 U.S.C. 1601 et seq.),

21 as in effect on and after July 1, 1993.

22 (ii) The program of training for disadvantaged

23 youth under part C of title II of the Job Training

24 Partnership Act (29 U.S.C. 1641 et seq.), as in ef25 fect on and after July 1, 1993.
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1 (47) The Job Corps program under part B of

2 title IV of the Job Training Partnership Act (29

3 U.S.C. 1692 et seq.).

4 (48) The summer youth employment and train5 ing programs under part B of title II of the Job

6 Training Partnership Act (29 U.S.C. 1630 et seq.).

7 (49) The programs carried out under the Older

8 American Community Service Employment Act (42

9 U.S.C. 3001 et seq.).

10 (50) The programs under title III of the Older

11 Americans Act of 1965.

12 (51) The programs carried out under part B of

13 title II of the Domestic Volunteer Service Act of

14 1973 (42 U.S.C. 5011–5012).

15 (52) The programs carried out under part C of

16 title II of the Domestic Volunteer Service Act of

17 1973 (42 U.S.C. 5013).

18 (53) The program under the Low-Income En19 ergy Assistance Act of 1981 (42 U.S.C. 8621 et

20 seq.).

21 (54) The weatherization assistance program

22 under title IV of the Energy Conservation and Pro23 duction Act (42 U.S.C. 6851).
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1 (55) The program of block grants to States for

2 social services under title XX of the Social Security

3 Act.

4 (56) The programs carried out under the Com5 munity Services Block Grant Act (42 U.S.C. 9901

6 et seq.).

7 (57) The program of legal assistance to eligible

8 clients and other programs under the Legal Services

9 Corporation Act (42 U.S.C. 2996 et seq.).

10 (58) The program for emergency food and shel11 ter grants under title III of the Stewart B. McKin12 ney Homeless Assistance Act (42 U.S.C. 11331 et

13 seq.).

14 (59) The programs carried out under the Child

15 Care and Development Block Grant Act of 1990 (42

16 U.S.C. 9858 et seq.).

17 (60) A State program for providing child care

18 under section 402(i) of the Social Security Act.

19 (61) The program of State legalization impact20 assistance grants (SLIAG) under section 204 of the

21 Immigration Reform and Control Act of 1986.

22 (e) NOTIFICATION OF ALIENS.—Any Federal agency

23 that administers a program referred to in subsection (d)

24 shall, directly or through the States, notify each alien re-
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1 ceiving benefits under the program whose eligibility for the

2 program is or will be terminated by reason of this section.

3 SEC. 802. STATE AFDC AGENCIES REQUIRED TO PROVIDE

4 INFORMATION ON ILLEGAL ALIENS TO THE

5 IMMIGRATION AND NATURALIZATION SERV6 ICE.

7 Section 402(a) of the Social Security Act (42 U.S.C.

8 602(a)) is amended—

9 (1) by striking ‘‘and’’ at the end of paragraph

10 (44);

11 (2) by striking the period at the end of para12 graph (45) and inserting ‘‘; and’’; and

13 (3) by inserting after paragraph (45) the fol14 lowing:

15 ‘‘(46) require the State agency to provide to the

16 Immigration and Naturalization Service the name,

17 address, and other identifying information that the

18 agency has with respect to any individual unlawfully

19 in the United States any of whose children is a citi20 zen of the United States.’’.
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1 TITLE IX—INCREASE IN ASSIST2 ANCE TO COMMUNITY AND

3 MIGRANT HEALTH CENTERS

4 FROM RESIDUAL SAVINGS

5 SEC. 901. GRANT PROGRAM TO PROMOTE PRIMARY

6 HEALTH CARE SERVICES FOR UNDERSERVED

7 POPULATIONS.

8 (a) AUTHORIZATION.—The Secretary of Health and

9 Human Services shall provide for a program of grants to

10 migrant and community health centers (receiving grants

11 or contracts under section 329, 330, or 340 of the Public

12 Health Service Act) in order to promote the provision of

13 primary health care services for underserved individuals.

14 Such grants may be used—

15 (1) to promote the provision of off-site services

16 (through means such as mobile medical clinics);

17 (2) to improve birth outcomes in areas with

18 high infant mortality and morbidity;

19 (3) to establish primary care clinics in areas

20 identified as in need of such clinics; and

21 (4) for recruitment and training costs of nec22 essary providers and operating costs for unreim23 bursed services.
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1 (b) CONDITIONS.—(1) Grants under this subsection

2 shall only be made upon application, approved by the Sec3 retary.

4 (2) The amount of grants made under this section

5 shall be determined by the Secretary.

6 (c) AUTHORIZATION OF APPROPRIATIONS.—

7 (1) IN GENERAL.—There are authorized to be

8 appropriated for each fiscal year, in the 5-fiscal-year

9 period beginning with fiscal year 1995, such

10 amounts as the Secretary estimates, in consultation

11 with the Director of the Office of Management and

12 Budget, reflects the net savings to the Federal Gov13 ernment in the fiscal year of the enactment of this

14 Act.

15 (2) USE OF FUNDS.—Of the amounts appro16 priated each fiscal year under this section, at least

17 10 percent shall be used for grants described in sub18 section (a)(1) and at least 10 percent shall be used

19 for grants described in subsection (a)(2). The Sec20 retary may use not to exceed 50 percent of the

21 amounts appropriated to carry out this section for

22 the purpose of making new grants or contracts

23 under sections 329, 330, and 340 of the Public

24 Health Service Act.
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1 (d) STUDY AND REPORT.—The Secretary shall con2 duct a study of the impact of the grants made under this

3 section to migrant and community health centers on ac4 cess to health care, birth outcomes, and the use of emer5 gency room services. Not later than 2 years after the date

6 of the enactment of this Act, the Secretary shall submit

7 to Congress a report on such study and on recommenda8 tions for changes in the programs under this section in

9 order to promote the appropriate use of cost-effective out10 patient services.

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