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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5228 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 5228

To reform the health insurance market, to promote the availability and 
continuity of health coverage, to remove financial barriers to access, 
  to reform the medicaid program, to enhance health care quality, to 
contain costs through market incentives and administrative reforms, to 
provide incentives to purchase long-term care insurance, and for other 
                               purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            October 6, 1994

 Mr. Rowland (for himself, Mr. Cooper, Mr. Bilirakis, Mr. Grandy, Mr. 
   McCurdy, Mr. Goss, Mr. Parker, Mr. Hastert, Mr. Stenholm, and Mr. 
Thomas of California) introduced the following bill; which was referred 
   jointly to the Committees on Energy and Commerce, Ways and Means, 
       Education and Labor, the Judiciary, and Veterans' Affairs

_______________________________________________________________________

                                 A BILL

 
To reform the health insurance market, to promote the availability and 
continuity of health coverage, to remove financial barriers to access, 
  to reform the medicaid program, to enhance health care quality, to 
contain costs through market incentives and administrative reforms, to 
provide incentives to purchase long-term care insurance, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE; TABLE OF TITLES AND SUBTITLES.

    (a) Short Title.--This Act may be cited as the ``Bipartisan Health 
Care Reform Act of 1994''.
    (b) Table of Titles and Subtitles in Act.--The following are the 
titles and subtitles contained in this Act:

    TITLE I--ASSURING AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE

Subtitle A--Insurance Reforms
Subtitle B--Benefits
Subtitle C--Employer Responsibilities
Subtitle D--Standards and Certification; Enforcement; Preemption
Subtitle E--Multiple Employer Health Benefits Protections and Related 
                            Provisions
Subtitle F--Definitions; General Provisions
           TITLE II--REMOVAL OF FINANCIAL BARRIERS TO ACCESS

Subtitle A--Tax Deductibility for Individuals and Self-Employed
Subtitle B--Premium and Cost-Sharing Subsidy Program for Low-Income 
                            Individuals
                      TITLE III--MEDICAID REFORMS

Subtitle A--Treatment of Acute Care Benefits for AFDC and Non-cash 
                            Beneficiaries
Subtitle B--Flexibility in Expenditures for Supplemental Benefits for 
                            AFDC and Non-cash Beneficiaries
Subtitle C--Increased State Flexibility in Contracting for Coordinated 
                            Care
Subtitle D--Additional Medicaid Reforms
                     TITLE IV--ACCESS IMPROVEMENTS

Subtitle A--Expanding Access in Underserved Areas
Subtitle B--Improved Access in Rural Areas
Subtitle C--Academic Health Centers
Subtitle D--United States-Mexico Border Health Commission
                TITLE V--HEALTH CARE QUALITY ENHANCEMENT

Subtitle A--Quality Assurance
Subtitle B--Primary Care Provider Education
            TITLE VI--MARKET INCENTIVES TO CONTAINING COSTS

Subtitle A--Facilitating Establishment of Health Plan Purchasing 
                            Organization (HPPOs)
Subtitle B--Preemption of State Benefit Mandates and Anti-Managed Care 
                            Laws
Subtitle C--Malpractice Reform
Subtitle D--Administrative Simplification
Subtitle E--Fair Health Information Practices
Subtitle F--Antitrust
Subtitle G--Fraud and Abuse
Subtitle H--Billing for Laboratory Services
                          TITLE VII--MEDICARE

Subtitle A--Increased Beneficiary Choice; Improved Program Efficiency
Subtitle B--Savings
      TITLE VIII--INCENTIVES TO PURCHASE LONG-TERM CARE INSURANCE

Subtitle A--Establishment of Federal Standards for Long-term Care 
                            Insurance
Subtitle B--Tax Treatment of Long-term Care Insurance
                TITLE IX--DEPARTMENT OF VETERANS AFFAIRS

               TITLE X--MISCELLANEOUS SAVINGS PROVISIONS

Subtitle A--Automobile Insurance Coordination
Subtitle B--Prefunding Government Health Benefits Contributions

                                                                Title I

    TITLE I--ASSURING AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE

                       table of contents of title

                      Subtitle A--Insurance Reform

              Part 1--Guaranteed Access to Health Coverage

Sec. 1001. Guaranteed offer by carriers.
Sec. 1002. Guaranteed issue by carriers.
Sec. 1003. Guaranteed renewal.
Sec. 1004. Restricting preexisting condition exclusions.
Sec. 1005. Enrollment periods.
Sec. 1006. Treatment of religious fraternal benefit societies.
                     Part 2--Provision of Benefits

Sec. 1011. Standards for managed care arrangements.
Sec. 1012. Utilization review.
Sec. 1013. Requirements for arrangements with essential community 
                            providers.
Sec. 1014. Medical savings accounts.
                     Part 3--Fair Rating Practices

Sec. 1021. Use of fair rating practices.
Sec. 1022. Coordination with premium assistance certificate program.
Sec. 1023. Establishment of risk adjustment mechanisms.
                      Part 4--Consumer Protections

Sec. 1031. Requirement for provision of information.
Sec. 1032. Prohibition of improper incentives.
Sec. 1033. Written policies and procedures respecting advance 
                            directives.
                          Subtitle B--Benefits

Sec. 1101. Qualified health coverage.
Sec. 1102. Standard coverage.
Sec. 1103. High-deductible coverage.
Sec. 1104. Actuarial valuation of benefits.
Sec. 1105. Limitation on offering supplemental benefits.
Sec. 1106. Family coverage option; supplemental coverage.
Sec. 1107. Level playing field for providers.
                 Subtitle C--Employer Responsibilities

Sec. 1201. Requiring employers to offer option of coverage.
Sec. 1202. Nondiscrimination under group health plans.
Sec. 1203. Effective dates.
   Subtitle D--Standards and Certification; Enforcement; Preemption; 
                           General Provisions

Sec. 1301. Establishment of standards.
Sec. 1302. Application of standards to carriers through States.
Sec. 1303. Application to group health plans.
Sec. 1304. Enforcement.
Sec. 1305. Limitation on self insurance for small employers.
 Subtitle E--Multiple Employer Health Benefits Protections and Related 
                               Provisions

         Part 1--Multiple Employer Health Benefits Protections

Sec. 1401. Limited exemption from certain restrictions on ERISA 
                            preemption of State law for health plans 
                            maintained by multiple employers subject to 
                            certain Federal standards.
                ``Part 7--Multiple Employer Health Plans

        ``Sec. 701. Definitions.
        ``Sec. 702. Certified multiple employer health plans relieved 
                            of certain restrictions on preemption of 
                            State law and treated as employee welfare 
                            benefit plans.
        ``Sec. 703. Certification procedure.
        ``Sec. 704. Eligibility requirements.
        ``Sec. 705. Additional requirements applicable to certified 
                            multiple employer health plans.
        ``Sec. 706. Disclosure to participating employers by 
                            arrangements providing medical care.
        ``Sec. 707. Maintenance of reserves.
        ``Sec. 708. Corrective actions.
        ``Sec. 709. Expiration, suspension, or revocation of 
                            certification.
        ``Sec. 710. Review of actions of the secretary.
        ``Sec. 711. Small employer pooling arrangements.''
Sec. 1402. Clarification of scope of preemption rules.
Sec. 1403. Clarification of treatment of single employer arrangements.
Sec. 1404. Clarification of treatment of certain collectively bargained 
                            arrangements.
Sec. 1405. Employee leasing health care arrangements.
Sec. 1406. Enforcement provisions relating to multiple employer welfare 
                            arrangements and employee leasing health 
                            care arrangements.
Sec. 1407. Filing requirements for multiple employer welfare 
                            arrangements providing health benefits.
Sec. 1408. Cooperation between Federal and State authorities.
Sec. 1409. Effective date; transitional rules.
   Part 2--Simplifying Filing of Reports for Employers Covered Under 
Multiple Employer Welfare Arrangements Providing Fully Insured Coverage 
                       Consisting of Medical Care

Sec. 1411. Single annual filing for all participating employers.
              Subtitle F--Definitions; General Provisions

                          Part 1--Definitions

Sec. 1901. General definitions.
Sec. 1902. Definitions relating to employment.
Sec. 1903. Definitions relating to health coverage, plans, and 
                            carriers.
Sec. 1904. Definitions relating to residence and immigration status.
Sec. 1905. Effective dates.
    Part 2--Report and Recommendations on Health Coverage and Access

Sec. 1911. Objective of full access and coverage.
Sec. 1912. Report and recommendations on achievement of objective for 
                            health coverage and access.

                                                    Title I, Subtitle A

                      Subtitle A--Insurance Reform

              PART 1--GUARANTEED ACCESS TO HEALTH COVERAGE

SEC. 1001. GUARANTEED OFFER BY CARRIERS.

    (a) In General.--Each carrier that offers health insurance coverage 
in the individual/small group market in a fair rating area (as defined 
in section 1903) shall make available, to each qualifying individual 
(as defined in section 1904(3)) or small employer (covered in such 
market) in such fair rating area--
            (1) qualified standard coverage consistent with section 
        1102, and
            (2) subject to subsection (b), qualified high-deductible 
        coverage consistent with section 1103.
    (b) High-Deductible Coverage.--
            (1) Exception for health maintenance organizations.--The 
        requirement of subsection (a)(2) shall not apply with respect 
        to health insurance coverage that--
                    (A) is provided by a Federally qualified health 
                maintenance organization (as defined in section 1301(a) 
                of the Public Health Service Act), or
                    (B) is not provided by such an organization but is 
                provided by an organization recognized under State law 
                as a health maintenance organization or managed care 
                organization or a similar organization regulated under 
                State law for solvency.
            (2) Limitation on offer of high-deductible coverage.--
        Qualified high-deductible coverage may not be made available by 
        a carrier to a qualifying individual (or to a small employer 
        with respect to an employee) unless the carrier also makes 
        available qualified standard coverage that has identical 
        benefits (other than the amount of the deductible) and the 
        individual or employee demonstrates to the carrier that the 
        individual or employee has available assets (as defined by the 
        Secretary) equal to at least the deductible amount established 
        under section 1104(b)(1) applicable to the high-deductible 
        coverage. A carrier may not make available to an individual 
        health coverage (other than coverage for supplemental benefits) 
        the actuarial value of which is less than the actuarial value 
        of qualified high-deductible coverage, unless the individual 
        has available assets (as defined by the Secretary) equal to at 
        least the deductible amount of the coverage offered.
            (3) Option to offer medisave coverage.--The offer of high-
        deductible coverage under subsection (a)(2) may be accompanied 
        by the contribution by an employer to a medical savings account 
        (in accordance with section 7705 of the Internal Revenue Code 
        of 1986).
    (c) Coverage of Entire Rating Area.--
            (1) In general.--With respect to each fair rating area for 
        which a carrier offers health insurance coverage, the carrier 
        shall provide for coverage of benefits for items and services 
        furnished throughout the fair rating area.
            (2) Special rule for carriers offering coverage in multi-
        state metropolitan statistical areas.--In the case of a carrier 
        that offers qualified health insurance coverage in the 
        individual/small employer market in a portion of a State that 
        is located in an interstate metropolitan statistical area, the 
        carrier may not provide such coverage with respect to an 
        individual or employer in such metropolitan statistical area 
        unless the carrier also offers such coverage in other portions 
        of the area located in other States.
            (3) Special rule for coverage through managed care 
        arrangement.--In the case of coverage offered by a carrier or 
        under a group health plan to the extent that it provides 
        benefits through a managed care arrangement in a fair rating 
        area, this subsection shall not be construed as requiring the 
        establishment of facilities throughout the area, if the 
        facilities are located consistent with section 1002(b)(1).
    (d) Family Coverage Option.--The offer of coverage under this 
section with respect to an individual shall include the option of 
coverage of family members of the individual.
    (e) Limitation on Carriers.--A carrier may not require an employer 
under a group health plan to impose through a waiting period for health 
coverage under a plan or similarly require a limitation or condition on 
health coverage or benefits based on--
            (1) the health status of an individual,
            (2) claims experience of an individual,
            (3) receipt of health care by an individual,
            (4) medical history of an individual,
            (5) receipt of public subsidies by an individual, or
            (6) lack of evidence of insurability of an individual.

SEC. 1002. GUARANTEED ISSUE BY CARRIERS.

    (a) In General.--Subject to subsections (b) and (c) and section 
1003, each carrier that offers health insurance coverage in the 
individual/small group market in a fair rating area--
            (1) must accept every small employer in the area that 
        applies for such coverage during an enrollment period provided 
        under section 1005; and
            (2) must accept for enrollment under such coverage every 
        qualifying individual (and family member of such an individual) 
        who applies for enrollment during an enrollment period provided 
        under section 1005 and may not place any restriction on the 
        eligibility of an individual to enroll so long as such 
        individual is a qualifying individual.
    (b) Special Rules for Managed Care Arrangements.--In the case of 
coverage offered by a carrier or under a group health plan that 
provides benefits through a managed care arrangement in a fair rating 
area, the carrier or plan--
            (1) need not establish facilities for the delivery of 
        health care services throughout the area so long as such 
        facilities are located in a manner that does not discriminate 
        on the basis of health status of individuals residing in 
        proximity to such facilities, and
            (2) may deny such coverage in a fair rating area to 
        employers or individuals if the organization demonstrates to 
        the applicable regulatory authority that--
                    (A) it will not have the capacity to deliver 
                services adequately to enrollees of any additional 
                groups or additional enrollees because of its 
                obligations to existing group contract holders and 
                enrollees, and
                    (B) it is applying this paragraph uniformly to all 
                employers and individuals without regard to the health 
                status, claims experience, or duration of coverage of 
                those employers and their employees.
Coverage may be denied under paragraph (2) only if the denial is 
applied during a consecutive period of at least 180 days.
    (c) Special Rule for Financial Capacity Limits.--In addition to the 
authority provided under subsection (b)(2), in the case of coverage 
offered by any carrier, the carrier may deny coverage to a small 
employer or individual if the carrier demonstrates to the applicable 
regulatory authority that--
            (1) it does not have the financial reserves necessary to 
        underwrite additional coverage, and
            (2) it is applying this subsection uniformly to all 
        employers and individuals without regard to the health status, 
        claims experience, or duration of coverage of those employers 
        and their employees.
Coverage may be denied under this subsection only if the denial is 
applied during a consecutive period of at least 180 days.

SEC. 1003. GUARANTEED RENEWAL.

    (a) Limitation on Termination by Carriers.--A carrier may not deny, 
cancel, or refuse to renew health coverage of a qualifying individual 
or eligible employer within a type of coverage option described in 
section 1903(15) except--
            (1) on the basis of nonpayment of premiums,
            (2) on the basis of fraud or misrepresentation, or
            (3) subject to subsection (b), in a fair rating area 
        because the carrier is ceasing to provide any health insurance 
        coverage in the individual/small group market within such type 
        of coverage option in the area.
    (b) Limitations on Market Exit by Carriers.--
            (1) Notice, etc.--Subsection (a)(3) shall not apply to a 
        carrier ceasing to provide health insurance coverage unless--
                    (A) such termination of coverage takes effect at 
                the end of a contract year, and
                    (B) the carrier provides notice of such termination 
                to employers and individuals covered at least 30 days 
                before the date of an annual open enrollment period 
                established with respect to the employer or individual 
                under section 1005.
            (2) Limitation on reentry in individual/small group 
        market.--If a carrier ceases to offer or provide health 
        insurance coverage in an area with respect to the individual/
        small group market for a type of coverage option, the insurer 
        may not offer health insurance coverage in the area in such 
        market within such type of coverage option until 5 years after 
        the date of the termination.
    (c) Rule for Multiemployer Plans and Certified Multiple Employer 
Health.--A multiemployer plan and a certified multiple employer health 
plan may not cancel coverage or deny renewal of coverage under such a 
plan with respect to an employer other than--
            (1) for nonpayment of contributions,
            (2) for fraud or other misrepresentation by the employer, 
        or
            (3) because the plan is ceasing to provide any coverage in 
        a geographic area.

SEC. 1004. RESTRICTING PREEXISTING CONDITION EXCLUSIONS.

    (a) In General.--Except as provided in this section, a carrier or 
group health plan providing health coverage may not exclude health 
coverage with respect to services related to treatment of a condition 
based on the fact that the condition of an individual existed before 
the effective date of coverage of the individual.
    (b) Limited 6-month Exclusion Permitted.--
            (1) In general.--Subject to paragraph (2) and subsections 
        (c) through (e), a carrier or group health plan providing 
        health coverage may exclude health coverage with respect to 
        services related to treatment of a condition of an individual 
        based on the fact that the condition existed before the 
        effective date of coverage of the individual only if the period 
        of the exclusion does not exceed 6 months beginning on the date 
        of coverage.
            (2) Crediting of previous coverage.--
                    (A) In general.--A carrier or group health plan 
                providing health coverage shall provide that if a 
                covered individual is in a period of continuous 
                coverage (as defined in subparagraph (C)) as of a date 
                upon which coverage is initiated or reinitiated, any 
                period of exclusion of coverage with respect to a 
                preexisting condition (as defined in subparagraph (B)) 
                for such services or type of services shall be reduced 
                by 1 month for each month in the period of continuous 
                coverage.
                    (B) Preexisting condition defined.--In this 
                paragraph, the term ``preexisting condition'' means, 
                with respect to health coverage, a condition which has 
                been diagnosed or treated during the 3-month period 
                ending on the day before the first date of such 
                coverage (without regard to any waiting period).
                    (C) Period of continuous coverage.--In this part, 
                the term ``period of continuous coverage'' means the 
                period beginning on the date an individual has health 
                coverage (or coverage under a public plan providing 
                medical benefits) and ends on the date the individual 
                does not have such coverage for a continuous period of 
                more than 3 months (or 6 months in the case of an 
                individual who loses coverage due to involuntary 
                termination of employment, other than by reason of an 
                employee's gross misconduct).
    (c) Exclusion Not Applicable to Pregnancy.--Any exclusion of 
coverage under subsection (b)(1) shall not apply if the exclusion 
relates to pregnancy.
    (d) Exclusion Not Applicable to Newborns and Adopted Children.--
            (1) Newborns.--Any exclusion of coverage under subsection 
        (b)(1) shall not apply to a child who is covered at the time of 
        birth and remains in a period of continuous coverage after such 
        time.
            (2) Adopted children.--Any exclusion of coverage under 
        subsection (b)(1) shall not apply (beginning on the date of 
        adoption) to an adopted child who is covered at the time of 
        adoption and remains in a period of continuous coverage after 
        such time.
    (e) Exclusion Not Applicable to Individuals Enrolled or Enrolling 
During Certain Open Enrollment Periods.--
            (1) Individuals enrolling during period.--In the case of an 
        individual who enrolls and obtains coverage during an open 
        enrollment period described in section 1005(b), any exclusion 
        of coverage under subsection (b)(1) shall not apply so long as 
        the individual remains in a period of continuous coverage.
            (2) Individuals enrolled at beginning of period.--In the 
        case of an individual who has health coverage as of the first 
        day of the initial open enrollment period described in section 
        1005(b)(1), any exclusion of coverage under subsection (b)(1) 
        shall not apply as of such date and so long as the individual 
        is in a period of continuous coverage.
    (f) Application of Rules by Certain Health Maintenance 
Organizations.--A health maintenance organization that provides health 
insurance coverage shall not be considered as failing to meet the 
requirements of section 1301 of the Public Health Service Act 
notwithstanding that it provides for an exclusion of the coverage based 
on a preexisting condition consistent with the provisions of this part 
so long as such exclusion is applied consistent with the provisions of 
this part.

SEC. 1005. ENROLLMENT PERIODS.

    (a) In General.--Each carrier and each group health plan providing 
health coverage (and each health plan purchasing organization under 
subtitle A of title V) in the individual/small group market shall 
permit qualifying individuals and eligible employers to obtain health 
coverage from the carrier or group health plan during each enrollment 
period provided under this section.
    (b) Open Enrollment Periods for Which Preexisting Condition 
Exclusions Waived.--
            (1) Initial period.--There shall be an initial open 
        enrollment period, with respect to individuals and employees 
        who are residents of a State, during the 60-day period 
        beginning on January 1, 1997.
            (2) Individuals eligible for subsidies.--There shall be an 
        individual open enrollment period with respect to an individual 
        at the time the individual first becomes eligible for any 
        premium assistance under part A of title XXI of the Social 
        Security Act, during the 60-day period beginning on the first 
        date the individual meets eligibility criteria within any 12-
        month period.
            (3) Court orders.--If a court has ordered that coverage be 
        provided for a spouse or child of an employee or individual 
        under health coverage of the employee or individual, there 
        shall be an open enrollment period during the 30-day period 
        beginning on the date of issuance of the court order.
            (4) Enrollment of newborns and newly adopted children.--
        There shall be an open enrollment period with respect to a 
        newborn child and a newly adopted child during the 30-day 
        period beginning on the date of the birth or adoption of a 
        child, if family coverage is available as of such date.
    (c) Annual Open Enrollment Periods for Which Preexisting Condition 
Exclusions May Apply.--
            (1) In general.--Each carrier and each group health plan 
        providing health coverage (and each health plan purchasing 
        organization under subtitle A of title V) in the individual/
        small group market shall provide for at least one annual open 
        enrollment period (of not less than 30 days) each year. Such 
        period shall be in addition to the open enrollment periods 
        described in subsection (b).
            (2) Coordination.--
                    (A) Carriers in individual/small group market.--
                Such annual open enrollment periods with respect to 
                carriers in the individual/small group market are 
                subject to coordination by States.
                    (B) Group health plans.--Such annual open 
                enrollment periods with respect to any group health 
                plan are subject to coordination in order to meet the 
                requirement of section 1201(a)(2)(F).
    (d) Other Open Enrollment Periods for Which Preexisting Condition 
Exclusions May Apply.--
            (1) Termination of residence area.--For each qualifying 
        individual, at the time the individual terminates residence in 
        the service area of coverage provided by a carrier to the 
        individual, there shall be an open enrollment period (of not 
        less than 30 days) during which the individual may enroll in 
        health coverage.
            (2) Family or employment changes.--In the case of a 
        qualifying individual who--
                    (A) through divorce or death of a family member 
                experiences a change in family composition, or
                    (B) experiences a change in employment status 
                (including a significant change in the terms and 
                conditions of employment or the terms and conditions of 
                employment of a spouse),
        there shall be an open enrollment period (of at least 30 days) 
        in which the individual is permitted to change the individual 
        or family basis of coverage or the health coverage in which the 
        individual is enrolled. The circumstances under which such 
        enrollment periods are required and the duration of such 
        periods shall be specified by the Secretary.
            (3) Enrollment due to loss of previous coverage.--In the 
        case of a qualifying individual who--
                    (A) had health coverage at the time of an 
                individual's enrollment period,
                    (B) stated at the time of such period that having 
                other health coverage was the reason for declining 
                enrollment, and
                    (C) lost the other health coverage as a result of 
                the termination of the coverage, termination or 
                reduction of employment, or other reason, except 
                termination at the option of the individual,
        there shall be an open enrollment period during the 30-day 
        period beginning on the date of termination of the other 
        coverage.
            (4) Enrollment at time of marriage.--There shall be an open 
        enrollment period with respect to the spouse of an individual 
        (including children of the spouse) during the 30-day period 
        beginning on the date of the marriage, if family coverage is 
        available as of such date.
            (5) No effect on cobra continuation benefits.--Nothing in 
        this subsection shall be construed as affecting rights of 
        individuals to continuation coverage under section 4980B of the 
        Internal Revenue Code of 1986, part 6 of subtitle B of title I 
        of the Employee Retirement Income Security Act of 1974, or 
        title XXII of the Public Health Service Act.
    (e) Period of Coverage.--
            (1) In general.--In the case of a qualifying individual who 
        enrolls under health coverage during an open enrollment period 
        under this section, coverage shall begin on such date (not 
        later than the first day of the first month that begins at 
        least 15 days after the date of enrollment) as the Secretary 
        shall specify, consistent with this subsection.
            (2) Coverage of family members.--In the case of an open 
        enrollment period described in subsection (b)(3), (b)(4), or 
        (d)(4), the Secretary shall provide for coverage of family 
        members to begin as soon as possible on or after the date of 
        the event that gives rise to the special enrollment period (or, 
        in the case of birth or adoption, as of the date of birth or 
        adoption).

SEC. 1006. TREATMENT OF RELIGIOUS FRATERNAL BENEFIT SOCIETIES.

    (a) In General.--Sections 1001 and 1002 shall not apply to any 
religious fraternal benefit society in existence as of September 1993, 
which--
            (1) bears the risk of providing insurance to its members, 
        and
            (2) is an organization described in section 501(c)(8) of 
        the Internal Revenue Code of 1986 which is exempt from taxation 
        under section 501(a) of such Code.
    (b) Definition.--In subsection (a), the term ``fraternal benefit 
society'' includes any affiliate or wholly-owned subsidiary of a 
fraternal benefit society, including a health maintenance organization 
insofar as it is utilized directly or indirectly to provide managed 
care to members of the society.

                     PART 2--PROVISION OF BENEFITS

SEC. 1011. STANDARDS FOR MANAGED CARE ARRANGEMENTS.

    (a) Application of Requirements.--Each group health plan, and each 
carrier providing health insurance coverage, that provides for health 
care through a managed care arrangement (as defined in section 
1903(12)(A)) shall comply with the applicable requirements of this 
section.
    (b) Scope of Arrangements With Providers.--
            (1) Access to care.--The entity providing for a managed 
        care arrangement with respect to health coverage shall enter 
        into such agreements with health care providers (including 
        primary and specialty providers, such as providers for 
        children) or have such other arrangements as may be necessary 
        to assure that covered individuals have reasonably prompt 
        access through the entity's provider network to all items and 
        services contained in the package of benefits for which 
        coverage is provided (including access to emergency services on 
        a 24-hour basis where medically necessary), in a manner that 
        assures the continuity of the provision of such items and 
        services. Such access shall take into account the diverse needs 
        of enrollees and proximity to the workplaces or residences of 
        enrollees.
            (2) Access to centers of excellence.--
                    (A) In general.--The entity providing for a managed 
                care arrangement under health coverage shall 
                demonstrate that covered individuals (including 
                individuals with chronic diseases) have access through 
                the entity's provider network to specialized treatment 
                expertise. Such entity may demonstrate such access 
                through contracts with centers of excellence described 
                in subparagraph (B).
                    (B) Designation of centers of excellence.--The 
                Secretary shall establish a process for the designation 
                of facilities, including children's hospitals and other 
                pediatric facilities, as centers of excellence for 
                purposes of this paragraph. A facility may not be 
                designated unless the facility is determined--
                            (i) to provide specialty care,
                            (ii) to deliver care for complex cases 
                        requiring specialized treatment and for 
                        individuals with chronic diseases, and
                            (iii) to meet other requirements that may 
                        be established by the Secretary relating to 
                        specialized education and training of health 
                        professionals, participation in peer-reviewed 
                        research, or treatment of patients from outside 
                        the geographic area of the facility.
            (3) Choice of personal physician.--The entity providing for 
        a managed care arrangement under health coverage shall permit 
        each enrollee to choose a personal physician from among 
        available participating physicians and change that selection as 
        appropriate.
    (c) Provision of Emergency Care Services.--
            (1) In general.--The entity providing for a managed care 
        arrangement under health coverage must cover medically 
        necessary emergency care services provided to covered 
        individuals (including trauma services, such as those provided 
        by designated trauma centers), without regard to whether or not 
        the provider furnishing such services has a contractual (or 
        other) arrangement with the entity to provide items or services 
        to covered individuals and, in the case of services furnished 
        for the treatment of an emergency medical condition (as defined 
        in section 1867(e)(1) of the Social Security Act), without 
        regard to prior authorization.
            (2) Designated trauma centers defined.--In paragraph (1), 
        the term ``designated trauma center''--
                    (A) has the meaning given such term in section 1231 
                of the Public Health Service Act, and
                    (B) includes (for years prior to 2001) a trauma 
                center that--
                            (i) is located in a State that has not 
                        designated trauma centers under section 1213 of 
                        such Act, and
                            (ii) the Secretary finds it meets the 
                        standards under such section to be a designated 
                        trauma center.
    (d) Due Process Standards Relating to Provider Networks.--
            (1) Standards for selection of providers for network.--
                    (A) Establishment.--The entity providing for a 
                managed care arrangement under health coverage shall 
                establish standards (including criteria for quality, 
                efficiency, credentialing, and services) to be used by 
                the entity for contracting with health care providers 
                with respect to the entity's provider network. Such 
                standards shall be established in consultation with 
                providers who are members of the network, including 
                providers who are members of the advisory committee 
                established under paragraph (3)(D).
                    (B) Distribution of information.--Descriptive 
                information regarding these standards and criteria 
                shall be made available to enrollees, providers who are 
                members of the network, and prospective enrollees and 
                prospective participating providers, including notice 
                of when applications for participation will be 
                accepted.
                    (C) Notice of denials.--The entity shall provide 
                written notice to the provider of any denial of an 
                application to participate in the provider network.
            (2) Termination process.--
                    (A) In general.--The entity may not terminate or 
                refuse to renew a participation agreement with a 
                provider in the entity's provider network unless the 
                entity provides written notification to the provider of 
                the entity's decision to terminate or refuse to renew 
                the agreement. The notification shall include a 
                statement of the reasons for the entity's decision, 
                consistent with the standards established under 
                paragraph (1).
                    (B) Timing of notification.--The entity shall 
                provide the notification required under subparagraph 
                (A) at least 45 days prior to the effective date of the 
                termination or expiration of the agreement (whichever 
                is applicable). The previous sentence shall not apply 
                if failure to terminate the agreement prior to the 
                deadline would adversely affect the health or safety of 
                a covered individual.
            (3) Review process.--
                    (A) In general.--The entity shall provide a process 
                under which the provider may request a review of the 
                entity's decision to terminate or refuse to renew the 
                provider's participation agreement. Such review shall 
                be conducted by a group of individuals the majority of 
                whom are health care providers who are members of the 
                entity's provider network or employees of the entity, 
                and who are members of the same profession as the 
                provider who requests the review.
                    (B) Counsel.--If the provider requests in advance, 
                the entity shall permit an attorney representing the 
                provider to be present at the provider's review.
                    (C) Review advisory.--The findings and conclusions 
                of a review under this paragraph may be advisory and 
                non-binding.
                    (D) Advisory committee.--The entity shall establish 
                an advisory committee of participating physicians with 
                whom it consults, on an advisory basis, on the 
                termination of physicians who have been participating 
                in the provider network. In making recommendations to 
                the entity, such an advisory committee shall consider 
                such features of the physician's practice, relating to 
                case mix and age of patients, as may lead the physician 
                to have higher than expected treatment costs for the 
                patients of the physician who are enrollees.
            (4) Construction.--Nothing in this subsection shall be 
        construed to affect any other provision of law that provides an 
        appeals process or other form of relief to a provider of health 
        care services or an entity providing for a managed care 
        arrangement.
    (e) No Referral Required for Obstetrics and Gynecology.--A carrier 
or group health plan may not require an individual to obtain a referral 
from a physician in order to obtain covered items and services from a 
physician who specializes in obstetrics and gynecology.

SEC. 1012. UTILIZATION REVIEW.

    (a) Establishment of Standards by Secretary.--The Secretary shall 
establish standards for utilization review programs, consistent with 
subsection (c), and shall periodically review and update such standards 
to reflect changes in the delivery of health care services. The 
Secretary shall establish such standards in consultation with 
appropriate parties.
    (b) Requiring Review To Meet Standards.--A group health plan or 
carrier providing health insurance coverage may not deny coverage of or 
payment for items and services on the basis of a utilization review 
program unless the program meets the standards established by the 
Secretary under this section.
    (c) Requirements for Standards.--Under the standards established 
under subsection (a)--
            (1) individuals performing utilization review may not 
        receive financial compensation based upon the number of denials 
        of coverage;
            (2) negative determinations of the medical necessity or 
        appropriateness of services or the site at which services are 
        furnished may be made only by clinically qualified personnel;
            (3) the utilization review program shall provide for a 
        process under which an enrollee or provider may obtain timely 
        review of a denial of coverage, including upon request a review 
        conducted by the medical director of the carrier or plan or a 
        physician designated by the carrier or plan;
            (4) utilization review shall be conducted in accordance 
        with uniformly applied standards that are based on currently 
        available medical evidence; and
            (5) providers shall participate in the development of the 
        utilization review program.
    (d) Preemption.--For provision preempting State laws relating to 
utilization review, see section 6103.

SEC. 1013. REQUIREMENTS FOR ARRANGEMENTS WITH ESSENTIAL COMMUNITY 
              PROVIDERS.

    (a) Requirement.--
            (1) In general.--Subject to subsection (d), each group 
        health plan and each carrier providing qualified health 
        coverage to individuals residing in a fair rating area (or 
        service area in the case of a carrier that is a health 
        maintenance organization) shall, with respect to at least one 
        essential community provider (as defined in subsection (c)) 
        within each class of such a provider (as described in paragraph 
        (2)) located within the area, enter into a written provider 
        participation agreement (described in subsection (b)) with the 
        provider, unless all the providers in the class have declined 
        to enter into such a contract with the plan or carrier.
            (2) Class defined.--For purposes of the paragraph (1), 
        providers described in each paragraph of subsection (c) shall 
        constitute a separate ``class'' of providers.
    (b) Participation Agreement.--A participation agreement between a 
group health plan or carrier and an essential community provider under 
this subsection shall provide that the plan or carrier agrees to treat 
the provider in accordance with terms and conditions at least as 
favorable as those that are applicable to other providers with a 
participation agreement with the plan or carrier with respect to the 
scope of services for which payment is made by the plan or carrier to 
the provider.
    (c) Essential Community Providers Described.--In this section, an 
``essential community provider'' means any of the following:
            (1) Certain medicare disproportionate share hospitals.--A 
        hospital--
                    (A) described in section 1886(d)(5)(F)(i)(II) of 
                the Social Security Act;
                    (B) described in section 1886(d)(5)(F)(iv)(I) of 
                such Act with a disproportionate patient percentage (as 
                defined in section 1886(d)(5)(F)(vi) of such Act) 
                greater than 20.2; or
                    (C) that would be described in subparagraph (A) or 
                (B) if the hospital were a subsection (d) hospital (as 
                defined in section 1886(d)(1)(B) of such Act).
            (2) Sole community hospitals.--A sole community hospital 
        (as described in section 1886(d)(5)(D)(iii) of such Act).
            (3) Medicare-dependent, small rural hospitals.--A medicare-
        dependent, small rural hospital (as described in section 
        1886(d)(5)(G)(iii) of such Act), or a hospital that would be a 
        medicare-dependent, small rural hospital if the hospital were a 
        subsection (d) hospital (as defined in section 1886(d)(1)(B) of 
        such Act).
            (4) Federally qualified health centers.--A Federally 
        qualified health center (as defined in section 1861(aa)(4) of 
        the Social Security Act) or an entity that would be such a 
        center but for its failure to meet the requirement described in 
        section 329(f)(2)(G)(i) of the Public Health Service Act or the 
        requirement described in section 330(e)(3)(G)(i) of such Act 
        (relating to the composition of the entity's governing board).
            (5) Rural health clinics.--A rural health clinic (as 
        defined in section 1861(aa)(2) of the Social Security Act).
            (6) Local health departments.--A health department of a 
        unit of State or local government which provides health 
        services directly to individuals.
            (7) Certain children's hospitals.--A hospital whose 
        inpatients are predominantly individuals under 18 years of age 
        and that would be described in subparagraph (A) or (B) of 
        paragraph (1) if the hospital were a subsection (d) hospital 
        (as defined in section 1886(d)(1)(B) of the Social Security 
        Act) with more than 100 beds.
    (d) Sunset.--The requirement of subsection (a) shall not apply to 
health coverage provided after December 31, 1999.

SEC. 1014. MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Chapter 79 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new section:

``SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

    ``(a) General Rule.--For purposes of this title, the term `medical 
savings account' means a trust created or organized in the United 
States for the exclusive benefit of an individual or his beneficiaries, 
but only if the written instrument creating the trust meets the 
following requirements:
            ``(1) Except in the case of a rollover contribution 
        described in subsection (d)(3), no contribution will be 
        accepted unless--
                    ``(A) it is in cash, and
                    ``(B) such individual is an eligible employee for 
                the period for which such contribution is made.
            ``(2) The trustee is a bank (as defined in section 408(n)), 
        insurance company (as defined in section 816), or such other 
        person who demonstrates to the satisfaction of the Secretary 
        that the manner in which such other person will administer the 
        trust will be consistent with the requirements of this section.
            ``(3) No part of the trust funds will be invested in life 
        insurance contracts.
            ``(4) The interest of an individual in the balance of the 
        account is nonforfeitable.
            ``(5) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(b) Eligible Employee.--For purposes of this section--
            ``(1) In general.--The term `eligible employee' means any 
        employee who has high-deductible coverage (as defined in 
        section 1103 of the Bipartisan Health Care Reform Act of 1994) 
        offered by the employer.
            ``(2) Exception.--An employee shall be treated as not being 
        an eligible employee for any calendar year if, for any month 
        during such year, it is reasonably expected that such 
        employee--
                    ``(A) will have adjusted gross income that is less 
                than 100 percent of the income official poverty line 
                (as determined by the Director of the Office of 
                Management and Budget) for a family of the size 
                involved; or
                    ``(B) is an AFDC recipient or SSI recipient.
            ``(3) Definitions.--For purposes of paragraph (2)--
                    ``(A) AFDC recipient.--The term `AFDC recipient' 
                means, for a month, an individual who is receiving aid 
                or assistance under any plan of the State approved 
                under title I, X, XIV, or XVI, or part A or part E of 
                title IV, of the Social Security Act for the month.
                    ``(B) SSI recipient.--The term `SSI recipient' 
                means, for a month, an individual--
                            ``(i) with respect to whom supplemental 
                        security income benefits are being paid under 
                        title XVI of the Social Security Act for the 
                        month,
                            ``(ii) who is receiving a supplementary 
                        payment under section 1616 of such Act or under 
                        section 212 of Public Law 93-66 for the month,
                            ``(iii) who is receiving monthly benefits 
                        under section 1619(a) of the Social Security 
                        Act (whether or not pursuant to section 
                        1616(c)(3) of such Act) for the month, or
                            ``(iv) who is treated under section 1619(b) 
                        of the Social Security Act as receiving 
                        supplemental security income benefits in a 
                        month for purposes of title XIX of such Act.
    ``(c) Tax Treatment of Accounts.--
            ``(1) Account taxed as grantor trust.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the account beneficiary of a medical 
                savings account shall be treated for purposes of this 
                title as the owner of such account and shall be subject 
                to tax thereon in accordance with subpart E of part I 
                of subchapter J of this chapter (relating to grantors 
                and others treated as substantial owners).
                    ``(B) Treatment of capital losses.--With respect to 
                assets held in a medical savings account, any capital 
                loss for a taxable year from the sale or exchange of 
                such an asset shall be allowed only to the extent of 
                capital gains from such assets for such taxable year. 
                Any capital loss which is disallowed under the 
                preceding sentence shall be treated as a capital loss 
                from the sale or exchange of such an asset in the next 
                taxable year. For purposes of this subparagraph, all 
                medical savings accounts of the account beneficiary 
                shall be treated as 1 account.
            ``(2) Account terminates if individual engages in 
        prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the account beneficiary, such beneficiary engages in 
                any transaction prohibited by section 4975 with respect 
                to the account, the account shall cease to be a medical 
                savings account as of the first day of such taxable 
                year.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical savings account by reason of subparagraph (A) 
                on the first day of any taxable year, subsection (d) 
                shall be applied as if--
                            ``(i) there were a distribution on such 
                        first day in an amount equal to the fair market 
                        value (on such first day) of all assets in the 
                        account (on such first day), and
                            ``(ii) no portion of such distribution were 
                        used to pay qualified medical expenses.
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the account beneficiary uses the account or 
        any portion thereof as security for a loan, the portion so used 
        is treated as distributed and not used to pay qualified medical 
        expenses.
    ``(d) Tax Treatment of Distributions.--
            ``(1) Inclusion of amounts not used for qualified medical 
        expenses.--
                    ``(A) In general.--Any amount paid or distributed 
                out of a medical savings account which is not used 
                exclusively to pay the qualified medical expenses of 
                the account beneficiary or of the spouse or dependents 
                (as defined in section 152) of such beneficiary shall 
                be included in the gross income of such beneficiary to 
                the extent such amount does not exceed the excess of--
                            ``(i) the aggregate contributions to such 
                        account which were not includible in gross 
                        income by reason of section 106(2), over
                            ``(ii) the aggregate prior payments or 
                        distributions from such account which were 
                        includible in gross income under this 
                        paragraph.
                    ``(B) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) all medical savings accounts of the 
                        account beneficiary shall be treated as 1 
                        account,
                            ``(ii) all payments and distributions 
                        during any taxable year shall be treated as 1 
                        distribution, and
                            ``(iii) any distribution of property shall 
                        be taken into account at its fair market value 
                        on the date of the distribution.
            ``(2) Penalty for distributions not used for qualified 
        medical expenses.--
                    ``(A) In general.--The tax imposed by chapter 1 on 
                the account beneficiary for any taxable year in which 
                there is a payment or distribution from a medical 
                savings account of such beneficiary which is includible 
                in gross income under paragraph (1) shall be increased 
                by 100 percent of the amount which is so includible.
                    ``(B) Exception for distributions after age 65.--
                Subparagraph (A) shall not apply to any payment or 
                distribution after the date on which the account 
                beneficiary attains age 65.
                    ``(C) Exception for disability or death.--
                Subparagraph (A) shall not apply if the payment or 
                distribution is made after the account beneficiary 
                becomes disabled within the meaning of section 72(m)(7) 
                or dies.
            ``(3) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of subparagraphs (A) and (B).
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount paid or distributed from a medical savings 
                account to the account beneficiary to the extent the 
                amount received is paid into a medical savings account 
                for the benefit of such beneficiary not later than the 
                60th day after the day on which he receives the payment 
                or distribution.
                    ``(B) Limitation.--This paragraph shall not apply 
                to any amount described in subparagraph (A) received by 
                an individual from a medical savings account if, at any 
                time during the 1-year period ending on the day of such 
                receipt, such individual received any other amount 
                described in subparagraph (A) from a medical savings 
                account which was not includible in his gross income 
                because of the application of this paragraph.
            ``(4) Coordination with medical expense deduction.--For 
        purposes of section 213, any payment or distribution out of a 
        medical savings account for qualified medical expenses shall 
        not be treated as an expense paid for medical care to the 
        extent of the amount of such payment or distribution which is 
        excludable from gross income solely by reason of paragraph 
        (1)(A).
    ``(e) Definitions.--For purposes of this section--
            ``(1) Qualified medical expenses.--The term `qualified 
        medical expenses' means any expense for medical care (as 
        defined in section 213(d)); except that such term shall not 
        include any amount paid for insurance.
            ``(2) Account beneficiary.--The term `account beneficiary' 
        means the individual for whose benefit the medical savings 
        account is maintained.
    ``(f) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if--
            ``(1) the assets of such account are held by a bank (as 
        defined in section 408(n)), insurance company (as defined in 
        section 816), or another person who demonstrates to the 
        satisfaction of the Secretary that the manner in which he will 
        administer the account will be consistent with the requirements 
        of this section, and
            ``(2) the custodial account would, except for the fact that 
        it is not a trust, constitute a medical savings account 
        described in subsection (a).
For purposes of this title, in the case of a custodial account treated 
as a trust by reason of the preceding sentence, the custodian of such 
account shall be treated as the trustee thereof.
    ``(g) Reports.--The trustee of a medical savings account shall keep 
such records and make such reports regarding such account to the 
Secretary and to the account beneficiary with respect to contributions, 
distributions, and such other matters as the Secretary may require 
under regulations. The reports required by this subsection shall be 
filed at such time and in such manner and furnished to such individuals 
at such time and in such manner as may be required by such 
regulations.''
    (b) Income and Employment Tax Treatment of Employer 
Contributions.--
            (1) Employer payments excluded from gross income.--The text 
        of section 106 of such Code is amended to read as follows:
    ``Gross income of an employee does not include--
            ``(1) employer-provided coverage under an accident or 
        health plan, and
            ``(2) employer contributions to any medical savings account 
        (as defined in section 7705) of an eligible employee, but only 
        to the extent that the amount contributed does not exceed the 
        excess of premium for standard coverage over the premium for 
        high-deductible coverage (as such terms are defined in section 
        1903 of the Bipartisan Health Care Reform Act of 1994).''
            (2) Employer payments excluded from employment tax base.--
                    (A) Social security taxes.--
                            (i) Subsection (a) of section 3121 of such 
                        Code is amended by striking ``or'' at the end 
                        of paragraph (20), by striking the period at 
                        the end of paragraph (21) and inserting ``; 
                        or'', and by inserting after paragraph (21) the 
                        following new paragraph:
            ``(22) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(2).''
                            (ii) Subsection (a) of section 209 of the 
                        Social Security Act is amended by striking 
                        ``or'' at the end of paragraph (18), by 
                        striking the period at the end of paragraph 
                        (19) and inserting ``; or'', and by inserting 
                        after paragraph (19) the following new 
                        paragraph:
            ``(20) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(2) of the Internal Revenue Code 
        of 1986.''
                    (B) Railroad retirement tax.--Subsection (e) of 
                section 3231 of such Code is amended by adding at the 
                end the following new paragraph:
            ``(10) Medical savings account contributions.--The term 
        `compensation' shall not include any payment made to or for the 
        benefit of an employee if at the time of such payment it is 
        reasonable to believe that the employee will be able to exclude 
        such payment from income under section 106(2).''
                    (C) Unemployment tax.--Subsection (b) of section 
                3306 of such Code is amended by striking ``or'' at the 
                end of paragraph (15), by striking the period at the 
                end of paragraph (16) and inserting ``; or'', and by 
                inserting after paragraph (16) the following new 
                paragraph:
            ``(17) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(2).''
                    (D) Withholding tax.--Subsection (a) of section 
                3401 of such Code is amended by striking ``or'' at the 
                end of paragraph (19), by striking the period at the 
                end of paragraph (20) and inserting ``; or'', and by 
                inserting after paragraph (20) the following new 
                paragraph:
            ``(21) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106(2).''
    (c) Technical Amendments.--
            (1) Tax on prohibited transactions.--Section 4975 of such 
        Code (relating to prohibited transactions) is amended--
                    (A) by adding at the end of subsection (c) the 
                following new paragraph:
            ``(4) Special rule for medical savings accounts.--An 
        individual for whose benefit a medical savings account (within 
        the meaning of section 7705) is established shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medical savings account 
        by reason of the application of section 7705(c)(2)(A) to such 
        account.'', and
                    (B) by inserting ``or a medical savings account 
                described in section 7705'' in subsection (e)(1) after 
                ``described in section 408(a)''.
            (2) Failure to provide reports on medical savings 
        accounts.--Section 6693 of such Code (relating to failure to 
        provide reports on individual retirement account or annuities) 
        is amended--
                    (A) by inserting ``or on medical savings accounts'' 
                after ``annuities'' in the heading of such section, and
                    (B) by adding at the end of subsection (a) the 
                following: ``The person required by section 7705(g) to 
                file a report regarding a medical savings account at 
                the time and in the manner required by such section 
                shall pay a penalty of $50 for each failure unless it 
                is shown that such failure is due to reasonable 
                cause.''
            (3) Clerical amendments.--
                    (A) The table of sections for chapter 79 of such 
                Code is amended by adding at the end the following:

                              ``Sec. 7705. Medical savings accounts.''

                    (B) The table of sections for subchapter B of 
                chapter 68 of such Code is amended by inserting ``or on 
                medical savings accounts'' after ``annuities'' in the 
                item relating to section 6693.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

                     PART 3--FAIR RATING PRACTICES

SEC. 1021. USE OF FAIR RATING PRACTICES.

    (a) Use of Fair Rating Practices.--The premium rate established by 
a carrier for health insurance coverage in the individual/small group 
market (including the premium rate for coverage for a small employer 
through a multiple employer welfare arrangement that is fully-insured) 
may not vary except by the following:
            (1) Age.--By age, based on classes of age established by 
        the Secretary, in consultation with the NAIC, consistent with 
        subsection (b).
            (2) Geographic area.--By geographic area, as identified by 
        a State consistent with subsection (c).
            (3) Family class.--By family class, based on the following 
        4 classes of family coverage: individual, individual with one 
        or more children, married couple without a child, and married 
        couple with one or more children.
            (4) Benefit design.--By benefit design of coverage, 
        including by type of coverage, such as standard coverage and 
        high-deductible coverage, and by type of coverage option 
        (described in section 1903(15)) with respect to standard 
        coverage.
            (5) Administrative categories.--By permitted expense 
        category, based on differences in expenses among such 
        categories, consistent with subsection (d).
The premiums shall be established for the different benefit designs 
(including standard coverage and high-deductible coverage) based on the 
actuarial value of the coverage for the population of the individual/
small group market in the fair rating area, without regard to the 
distribution of such population among the types of coverage or type of 
coverage options.
    (b) Limitation on Variation by Age.--
            (1) In general.--Any variation in premium rates by age 
        under subsection (a)(1) for age classes of individuals under 65 
        years of age may not result in the ratio of the highest age 
        rate to the lowest age rate exceeding the limiting ratio 
        described in paragraph (2).
            (2) Limiting ratio.--For purposes of paragraph (1), the 
        limiting ratio described in this paragraph is--
                    (A) 4-to-1, for premiums for months in 1997,
                    (B) 3.67-to-1, for premiums for months in 1998,
                    (C) 3.33-to-1, for premiums for months in 1999, and
                    (D) 3-to-1, for premiums for months in 2000 and any 
                succeeding year.
            (3) Separate age classes for individuals 65 years of age or 
        older.--The Secretary shall establish one or more separate age 
        classes for individuals 65 years of age or older.
            (4) Preemption.--For preemption of State laws relating to 
        establishment of premium rates, see section 6105.
    (c) Geographic Area Variations.--For purposes of subsection (a)(2), 
a State--
            (1) may not identify an area that divides a 3-digit zip 
        code, a county, or all portions of a metropolitan statistical 
        area,
            (2) shall not permit premium rates for coverage offered in 
        a portion of an interstate metropolitan statistical area to 
        vary based on the State in which the coverage is offered, and
            (3) may, upon agreement with one or more adjacent States, 
        identify multi-state geographic areas consistent with 
        paragraphs (1) and (2).
    (d) Administrative Variations.--
            (1) Expense categories.--Expense categories shall be 
        established under subsection (a)(5) by a carrier in a manner 
        that only reflects differences based on marketing, commissions, 
        and similar expenses. Such categories shall take into account 
        health plan purchasing organizations.
            (2) Limitation on variations.--The variation provided among 
        expense categories under subsection (a)(5) may not result in a 
        premium for the highest expense category exceeding 120 percent 
        of the premium for the lowest expense category.
    (e) Premium Rating in Group Health Plans.--The premium rate 
established under a group health plan for health insurance coverage may 
not vary within a benefit design except by the factors described in 
subsection (a) and subject to the limitation specified in subsection 
(b).
    (f) Actuarial Certification.--Each carrier that offers health 
insurance coverage in a State shall file annually with the State 
commissioner of insurance a written statement by a member of the 
American Academy of Actuaries (or other individual acceptable to the 
commissioner) that, based upon an examination by the individual which 
includes a review of the appropriate records and of the actuarial 
assumptions of the carrier and methods used by the carrier in 
establishing premium rates for applicable health insurance coverage--
            (1) the carrier is in compliance with the applicable 
        provisions of this section, and
            (2) the rating methods are actuarially sound.
Each such carrier shall retain a copy of such statement for examination 
at its principal place of business.
    (g) Construction.--The provisions of this section shall apply to 
premium rates established by carriers for multiple employer welfare 
arrangements that are fully-insured or for fully-insured coverage 
offered with respect to individuals and small employers in the 
individual/small group market. Such premium rates shall apply based on 
the fair rating area in which the covered individual or employee 
resides to reflect the population in the individual/small group market.

SEC. 1022. COORDINATION WITH PREMIUM ASSISTANCE CERTIFICATE PROGRAM.

    Each carrier or group health plan providing qualified health 
coverage shall accept and apply (as a reduction against premiums 
otherwise imposed) any premium certificate issued under a State premium 
assistance program under part A of title XXI of the Social Security 
Act.

SEC. 1023. ESTABLISHMENT OF RISK ADJUSTMENT MECHANISMS.

    (a) Establishment of Standards.--
            (1) Development of models.--
                    (A) In general.--The Secretary shall request the 
                NAIC to develop, within 9 months after the date of the 
                enactment of this Act and in consultation with the 
                American Academy of Actuaries, a model risk adjustment 
                system composed of one or more risk adjustment 
                mechanisms under which premiums applicable to health 
                insurance coverage in the individual/small group market 
                and coverage under small employer pooling arrangements 
                and under multiple employer welfare arrangements that 
                are fully insured (without regard to whether such an 
                arrangement is offered through an association) would be 
                adjusted to take into account such factors as may be 
                appropriate to predict the future need and the 
                efficient use of services by covered individuals in the 
                market. Such factors may include the age, gender, 
                geographic residence, health status, or other 
                demographic characteristics of individuals enrolled in 
                such plans and shall include consideration of 
                enrollment of a disproportionate share of individuals 
                who enroll during the initial open enrollment period 
                under section 1005(b)(1).
                    (B) Promulgation as proposed rule.--If the NAIC 
                develops such model within such period, the Secretary 
                shall publish the model as a proposed rule under 
                section 553 of title 5, United States Code. If the NAIC 
                has not developed such model within such period, the 
                Secretary shall publish (not later than 60 days after 
                the end of such period) a proposed rule that specifies 
                a proposed model that provides for effective risk 
                adjustment mechanisms.
            (2) Rule making process.--The Secretary shall provide for a 
        period (described in section 553(c) of title 5, United States 
        Code) of not less than 30 days for public comment on a proposed 
        rule published under paragraph (1)(B). The Secretary shall 
        publish a final rule, by not later than January 1, 1996, that 
        specifies risk adjustment mechanisms that the Secretary finds 
        are effective for purposes of carrying out this section. Such 
        rule shall include models developed by the NAIC if the 
        Secretary finds that such models provide for effective risk 
        adjustment mechanisms.
            (3) Modification.--The Secretary, at the request of the 
        NAIC or otherwise, may by regulation modify the model risk 
        adjustment system established under this subsection.
    (b) Implementation of Risk Adjustment System.--Each State shall 
establish and maintain a risk adjustment system that conforms with the 
model established under this section by not later than January 1, 1997. 
A State may establish and maintain such a system jointly with one or 
more other States.
    (c) Application to Small Employer Pooling Arrangements and Fully-
Insured MEWAs.--As required under sections 704(b)(6)(B) and 
711(c)(1)(B) of the Employee Retirement Income Security Act of 1974, as 
added by section 1401 of this Act, this section applies to small 
employer pooling arrangements and to multiple employer welfare 
arrangements that are fully insured (without regard to whether such an 
arrangement is offered through an association), with respect to 
individuals covered in the individual/small employer market, in such 
form and manner as the Secretary of Labor prescribes in regulation, in 
consultation with the Secretary of Health and Human Services. In 
applying this section to a small employer pooling arrangement, the 
regulation shall provide that assessments and credits under this 
section shall be provided through coordination with an insurer that 
provides excess/stop loss coverage (as defined in section 701 of such 
Act) with respect to the arrangement.

                      PART 4--CONSUMER PROTECTIONS

SEC. 1031. REQUIREMENT FOR PROVISION OF INFORMATION.

    (a) Carriers.--
            (1) In general.--Each carrier that offers health insurance 
        coverage to small employers (or eligible employees of small 
        employers) or qualifying individuals must disclose to such 
        prospective enrollees, to brokers, and to health plan 
        purchasing organizations the information that the Secretary may 
        specify relating to the performance of the carrier in providing 
        such coverage, consistent with any quality measures established 
        under section 5002, and relating to differences between the 
        coverage provided and the most similar model benefit package 
        established under section 1104(b)(2). If a carrier offers to 
        individuals or employers coverage the actuarial value of which 
        is more than the actuarial value for high-deductible coverage 
        but less than such value for standard coverage, the carrier 
        must disclose to such employers or individuals detailed 
        information on how the coverage offered compares to any 
        standard and high-deductible coverage offered by the carrier to 
        such individuals and employers.
            (2) Marketing material.--Each carrier that provides any 
        health insurance coverage in a State shall file with the State 
        those marketing materials relating to the offer and sale of 
        health insurance coverage to be used for distribution before 
        the materials are used. Such materials shall be in a uniform 
        format specified under the standards established under section 
        1301.
    (b) Group Health Plans.--Each group health plan that provides 
health coverage must disclose to enrollees and potential enrollees 
information, similar to the information described in subsection (a), 
relating to performance of the plan in providing such coverage, 
consistent with any quality measures established under section 5002, 
and relating to differences between the coverage provided and the most 
similar model benefit package established under section 1104(b)(2).
    (c) Information Relating to Risk Adjustment.--Each carrier or group 
health plan providing coverage in the individual/small group market 
(including small employer pooling arrangements and certified multiple 
employer health plans that are fully insured, without regard to whether 
such an arrangement or plan is offered through an association) shall 
provide to the State such information as the State may require in order 
to carry out section 1023 (relating to risk adjustment mechanisms).

SEC. 1032. PROHIBITION OF IMPROPER INCENTIVES.

    (a) Limitation on Financial Incentives.--No carrier that provides 
health insurance coverage may vary the commission or financial or other 
remuneration to a person based on the claims experience or health 
status of individuals enrolled by or through the person.
    (b) Nondiscrimination in Agent Compensation.--A carrier--
            (1) may not vary or condition the compensation provided to 
        an agent or broker related to the sale or renewal of health 
        insurance coverage because of the health status or claims 
        experience of any individuals enrolled with the carrier through 
        the agent or broker; and
            (2) may not terminate, fail to renew, or limit its contract 
        or agreement of representation with an agent or broker for any 
        reason related to the health status or claims experience of any 
        individuals enrolled with the carrier through the agent or 
        broker.
    (c) Prohibition of Tie-in Arrangements.--No carrier that offers 
health insurance coverage may require the purchase of any other 
insurance or product as a condition for the purchase of such coverage.

SEC. 1033. WRITTEN POLICIES AND PROCEDURES RESPECTING ADVANCE 
              DIRECTIVES.

    A carrier and a group health plan offering health coverage shall 
meet the requirements of section 1866(f) of the Social Security Act 
(relating to maintaining written policies and procedures respecting 
advance directives), insofar as such requirements would apply to the 
carrier or plan if the carrier or plan were an eligible organization.

                          Subtitle B--Benefits

                                                    Title I, Subtitle B

SEC. 1101. QUALIFIED HEALTH COVERAGE.

    In this Act, the term ``qualified health coverage'' means health 
coverage that--
            (1) provides--
                    (A) standard coverage consistent with section 
                1102(a), or
                    (B) high-deductible coverage consistent with 
                section 1103; and
            (2) meets other requirements of subtitle A applicable to 
        the coverage and the carrier or group health plan providing the 
        coverage.

SEC. 1102. STANDARD COVERAGE.

    (a) In General.--Health insurance coverage is considered to provide 
standard coverage consistent with this subsection and for preventive 
benefits under subsection (b)(4) if--
            (1) benefits under such coverage are provided within at 
        least each of the required categories of benefits described in 
        paragraph (1) of subsection (b) and consistent with such 
        subsection;
            (2) the actuarial value of the benefits meets the 
        requirements of subsection (c), and
            (3) the benefits comply with the minimum requirements 
        specified in subsection (d).
    (b) Required Categories of Covered Benefits.--
            (1) In general.--The categories of covered benefits 
        described in this paragraph are the types of benefits specified 
        in each of subparagraphs (A), (B), (C), (D), (E), and (F) of 
        paragraph (1), and subparagraphs (E) and (F) of paragraph (2), 
        of section 8904(a) of title 5, United States Code (relating to 
        types of benefits required to be in health insurance offered to 
        Federal employees).
            (2) Coverage of treatments in approved research trials.--
                    (A) In general.--Coverage of the routine medical 
                costs (as defined in subparagraph (B)) associated with 
                the delivery of treatments shall be considered to be 
                medically appropriate if the treatment is part of an 
                approved research trial (as defined in subparagraph 
                (C)).
                    (B) Routine medical costs defined.--In subparagraph 
                (A), the term ``routine medical costs'' means the cost 
                of health services required to provide treatment 
                according to the design of the trial, except those 
                costs normally paid for by other funding sources (as 
                defined by the Secretary). Such costs do not include 
                the cost of the investigational agent, devices or 
                procedures themselves, the costs of any nonhealth 
                services that might be required for a person to receive 
                the treatment, or the costs of managing the research.
                    (C) Approved research trial defined.--In 
                subparagraph (A), the term ``approved research trial'' 
                means a trial--
                            (i) conducted for the primary purpose of 
                        determining the safety, effectiveness, 
                        efficacy, or health outcomes of a treatment, 
                        compared with the best available alternative 
                        treatment, and
                            (ii) approved by the Secretary.
                A trial is deemed to be approved under clause (ii) if 
                it is approved by the National Institutes of Health, 
                the Food and Drug Administration (through an 
                investigational new drug exemption), the Department of 
                Veterans Affairs, or by a qualified nongovernmental 
                research entity (as identified in guidelines issued by 
                one or more of the National Institutes of Health).
            (3) Coverage of off-label use.--An off-label use for a drug 
        that has been found to be safe and effective under section 505 
        of the Federal Food, Drug, and Cosmetic Act shall be covered if 
        the medical indication for which it is used is listed in one of 
        the following 3 compendia: the American Hospital Formulary 
        Service-Drug Information, the American Medical Association Drug 
        Evaluations, and the United States Pharmacopeia-Drug 
        Information.
            (4) Preventive benefits.--The following are preventive 
        benefits that shall be covered without any deductibles, 
        copayment, coinsurance, or other cost-sharing:
                    (A) Newborn, well-baby and well-child care.--
                Newborn care, well-baby care, and well-child care for 
                individuals under 19 years of age, including routine 
                physical examinations, routine immunizations, and 
                routine tests, as specified by the Secretary based on 
                the schedule recommended by the American Academy of 
                Pediatricians.
                    (B) Mammograms.--Routine screening mammograms 
                (including their interpretation), limited to 1 
                mammogram for a woman who is at least 35 (but less than 
                40) years of age, 1 mammogram every 2 years for a woman 
                who is at least 40 (but less than 50) years of age, and 
                1 mammogram every year for a woman who is at least 50 
                years of age.
                    (C) Screening pap smears and pelvic exams.--
                Screening pap smears and pelvic exams for women over 17 
                years of age, limited to 1 each year.
                    (D) Colorectal screening.--Colorectal screening for 
                individuals over 18 years of age at high risk, 
                consisting of 1 fecal occult blood screening test every 
                year, 1 screening sigmoidoscopy every 5 years, and 1 
                screening colonoscopy every 4 years.
                    (E) Screening tuberculin tests.--Screening 
                tuberculin tests annually for individuals at risk of 
                contracting tuberculosis.
                    (F) Prenatal care.--Prenatal care.
                    (G) Adult immunizations.--Routine immunizations for 
                an individual over 17 years of age (including booster 
                immunizations against tetanus and diphtheria, but 
                limited to 1 such immunization every 10 years).
                    (H) Prostate cancer screening.--Routine cancer 
                screening for a man who is at least 40 years of age 
                through a prostate specific antigen test, limited to 1 
                test each year.
    (c) Standard Actuarial Value.--
            (1) In general.--The actuarial value of the benefits under 
        standard coverage in a fair rating area meets the requirements 
        of this subsection if such value is equivalent to the standard 
        actuarial value described in paragraph (2) for the area. The 
        actuarial value of benefits under standard coverage shall be 
        determined using the adjustment under paragraph (3) for a 
        standardized population and set of standardized utilization and 
        cost factors.
            (2) Standard actuarial value described.--The standard 
        actuarial value described in this paragraph for coverage in a 
        geographic area is the actuarial value of benchmark coverage 
        during 1994 in such area. Such actuarial value shall be 
        determined using the adjustment under paragraph (3) for a 
        standardized population and set of standardized utilization and 
        cost factors and updated annually in accordance with section 
        1104(a).
            (3) Adjustments for standardized population, standardized 
        utilization and cost factors, and geographic area.--The 
        adjustment under this paragraph--
                    (A) for a standardized population shall be made by 
                not taking into account individuals 65 years of age or 
                older, employees of the United States Postal Service, 
                retirees, and annuitants; and
                    (B)(i) except as provided in clause (ii), for a 
                geographic area shall be made in a manner that reflects 
                the ratio of the actuarial value of benchmark coverage 
                in such geographic area (as adjusted under subparagraph 
                (A)) to such actuarial value for such benchmark 
                coverage for the United States as a whole, taking into 
                account standardized actuarial utilization and cost 
                factors, and
                    (ii) in the case of a group health plan operating 
                in more than one geographic area, the ratio described 
                in clause (i) shall be determined in accordance with 
                regulations promulgated by the Secretary.
        At the election of a group health plan under subparagraph 
        (B)(ii), the ratio under such subparagraph shall be 1.
    (d) Minimum Requirements Within a Category.--Benefits offered in 
any standard coverage within any category of benefits shall be not less 
than the narrowest scope and shortest duration of benefits within that 
category in any of the approved health benefits plans offered under 
chapter 89 of title 5, United States Code (relating to Federal 
Employees Health Benefits Program) in 1994. Benefits offered in the 
standard plan within the category of preventive services shall not 
require payment of cost-sharing for covered items and services.
    (e) No Coverage of Specific Treatment, Procedures, or Classes 
Required.--Nothing in this section (or section 1103) may be construed 
to require the coverage of any specific procedure or treatment or class 
of service in health coverage under this Act or through regulation.
    (f) Construction.--Nothing in this section (or section 1103) shall 
be construed as requiring coverage to include benefits for items and 
services that are not medically necessary or appropriate.

SEC. 1103. HIGH-DEDUCTIBLE COVERAGE.

    Health insurance coverage is considered to provide high-deductible 
coverage consistent with this section if--
            (1) benefits under such coverage comply with--
                    (A) the requirements described in section 1102(b) 
                (relating to required categories of covered benefits), 
                and
                    (B) the requirements described in section 1102(d) 
                (relating to minimum requirements within a category);
            (2) the deductible amount is the amount established under 
        section 1104(b)(1);
            (3) benefits under the coverage in any year (other than 
        preventive benefits described in section 1102(b)(4)) are 
        covered only to the extent expenses incurred for items and 
        services included in the coverage for the year exceed the 
        deductible amount specified in paragraph (2); and
            (4) the actuarial value of the coverage (as determined 
        under rules consistent with section 1102(c)) is equivalent to 
        80 percent of the actuarial value established under such 
        section for standard coverage.

SEC. 1104. ACTUARIAL VALUATION OF BENEFITS.

    (a) In General.--The Secretary, in consultation with the NAIC and 
the American Academy of Actuaries, shall establish (and may from time 
to time modify) procedures by which health insurance benefits are 
valued for purposes of this subtitle.
    (b) Deductible; Model Benefit Packages.--The Secretary, in 
consultation with the NAIC and the American Academy of Actuaries, shall 
establish--
            (1) the deductible amount for high-deductible coverage for 
        the purposes of section 1103(2) such that the actuarial value 
        of high-deductible coverage described in section 1103 is 20 
        percent less than the actuarial value of standard coverage 
        described in section 1102(a); and
            (2) model benefit packages that may be treated, for 
        purposes of this title, as meeting the requirements for 
        standard or high-deductible coverage under sections 1102(a) and 
        1103, respectively, and which shall include model cost sharing 
        arrangements for fee-for-service options, managed care options, 
        and point-of-service options.

SEC. 1105. LIMITATION ON OFFERING SUPPLEMENTAL BENEFITS.

    A carrier or group health plan offering qualified health coverage 
may offer coverage of items and services only in addition to the 
qualified standard coverage offered (whether in the form of coverage of 
additional items and services or a reduction in cost sharing) and only 
if--
            (1) such supplemental coverage is offered and priced 
        separately from the standard coverage offered and is only made 
        available to individuals who obtain qualified standard coverage 
        through the carrier or plan;
            (2) the purchase of the qualified health coverage is not 
        conditioned upon the purchase of such supplemental coverage; 
        and
            (3) in the case of supplemental coverage that consists of a 
        reduction in the cost-sharing otherwise applicable, the premium 
        for the supplemental coverage takes into account any expected 
        increase in utilization of items and services included in the 
        qualified health coverage resulting from obtaining the 
        supplemental coverage.

SEC. 1106. FAMILY COVERAGE OPTION; SUPPLEMENTAL COVERAGE.

    (a) Family Coverage Option.--Each carrier and group health plan 
that offers health insurance coverage shall provide for an option under 
which children under 26 years of age (without regard to whether they 
are full-time students or disabled) will be treated (with respect to 
family coverage) as family members. The carrier or plan may impose an 
additional premium for such option.
    (b) Construction.--Nothing in this title shall be construed as 
limiting the benefits that may be offered as part of a group health 
plan or health insurance coverage.

SEC. 1107. LEVEL PLAYING FIELD FOR PROVIDERS.

    (a) In General.--Nothing in this subtitle may be construed to 
require or prohibit the use of a particular class of provider, among 
the providers that are legally authorized to provide such treatment.
    (b) Coverage of Certain Other Providers.--
            (1) In general.--For purposes of this subtitle, benefits 
        under standard coverage shall include the following:
                    (A) Coverage provided at an individual's home by a 
                Christian Science practitioner or Christian Science 
                nurse.
                    (B) Coverage provided in a Christian Science 
                Sanitorium (as defined in section 1861(y) of the Social 
                Security Act), including coverage provided by a 
                Christian Science practitioner.
            (2) Qualifications of providers.--A Christian Science 
        practitioner or Christian Science nurse is qualified for 
        purposes of paragraph (1) if the practitioner or nurse is 
        listed as such a practitioner or nurse by the First Church of 
        Christ, Scientist, in Boston, Massachusetts.

                                                    Title I, Subtitle C

                 Subtitle C--Employer Responsibilities

SEC. 1201. REQUIRING EMPLOYERS TO OFFER OPTION OF COVERAGE.

    (a) In General.--Subject to subsections (c) and (d), each employer 
shall make available with respect to each qualifying employee qualified 
health coverage under a group health plan (whether fully-insured or 
self-insured) which meets the following requirements (and the 
applicable requirements of subtitle A):
            (1) Annual offering.--The employee may elect health 
        coverage for the employee and family members on an annual basis 
        for each plan year and at such other times as may be specified 
        by the Secretary of Labor, in a manner consistent with the 
        standards established to carry out section 1105.
            (2) Choice of coverage.--
                    (A) In general.--Subject to subsection (c) and 
                subparagraph (G), such coverage is provided for at 
                least--
                            (i) a competing choice of qualified 
                        standard coverage (consistent with section 
                        1102(a)), including at least one option (either 
                        a fee-for-service option or a point-of-service 
                        option) that permits covered individuals to 
                        obtain benefits through an unrestricted choice 
                        of the lawful providers for which benefits are 
                        made available; and
                            (ii) high-deductible coverage (consistent 
                        with section 1103).
                    (B) Coverage floor.--With respect to any health 
                coverage (other than coverage for supplemental benefits 
                or qualified standard coverage) offered under the group 
                health plan--
                            (i) the coverage shall meet the 
                        requirements specified in paragraphs (1) and 
                        (3) of section 1102(a), and
                            (ii) the actuarial value of such coverage 
                        shall not be less than the actuarial value of 
                        high-deductible coverage.
                    (C) Disclosure for certain coverage.--If an 
                employer offers, in addition to the coverage required 
                to be offered under subparagraph (A), coverage the 
                actuarial value of which is more than the actuarial 
                value for high-deductible coverage but less than such 
                value for standard coverage, the employer must disclose 
                to the employees detailed information on how the 
                coverage offered compares to the standard and high-
                deductible coverage offered by the employer.
                    (D) Use of standardized factors.--For purposes of 
                this paragraph, the actuarial value of coverage shall 
                be determined using the standardized population and 
                standardized utilization and cost factors described in 
                section 1102(c)(3).
                    (E) Family coverage option.--The offer of coverage 
                under this section with respect to a qualifying 
                employee shall include the option of coverage of family 
                members of the employee.
                    (F) Annual enrollment period for choice of 
                coverage.--The group health plan provides, with respect 
                to any qualifying employee, a single annual open 
                enrollment period (of not less than 30 days) in which 
                the employee may choose among the coverage options 
                required under this paragraph.
                    (G) Limitation on offer of high-deductible 
                coverage.--Qualified high-deductible coverage may not 
                be made available under a group health plan with 
                respect to an employee unless the employee demonstrates 
                to the plan administrator that the employee has 
                available assets (as defined by the Secretary) equal to 
                at least the deductible amount established under 
                section 1104(b)(1) applicable to the high-deductible 
                coverage.
            (3) Payroll withholding.--The employee electing such 
        coverage may elect to have any premiums owed by the employee 
        collected through payroll deduction.
            (4) Nondiscrimination in contributions based on price of 
        coverage selected with respect to individual employees.--
                    (A) In general.--The employer may not vary the 
                dollar amount of any employer contribution, within a 
                class of family coverage, with respect to such coverage 
                for an individual employee, solely on the basis of the 
                total premium price of the coverage selected by the 
                employee.
                    (B) Special rules.--In applying subparagraph (A)--
                            (i) the ``total premium price'' shall 
                        include, in the case of high-deductible 
                        coverage, amounts paid by an employer into a 
                        medical savings account (established under 
                        section 7705 of the Internal Revenue Code of 
                        1986); and
                            (ii) if the employee selects health 
                        coverage the premium for which is less than the 
                        amount of the employer contribution, the 
                        employer shall pay the amount of such 
                        difference to the employee (or, at the 
                        employee's option in the case of an employee 
                        who has high-deductible coverage, to such a 
                        medical savings account).
    (b) No Employer Mandate.--Subject to subsection (a)(4) (relating to 
equal contribution rule), an employer is not required under this 
section to make any contribution to the cost of health coverage.
    (c) Grandfather for Existing Collective Bargaining Agreements.--
            (1) In general.--The requirement of subsection (a)(2) shall 
        not apply to a group health plan for a plan year if--
                    (A) the group health plan is in effect in the plan 
                year in which July 1, 1994, occurs, and
                    (B) the employer makes (or offers to make), in such 
                plan year and the plan year involved, a contribution to 
                the plan on behalf of each employee who is eligible to 
                participate in the plan under a collective bargaining 
                agreement or similar contract.
            (2) Sunset.--Paragraph (1) shall only apply to a group 
        health plan until the expiration of the collective bargaining 
        agreement or similar contract in effect on the date of the 
        enactment of this Act or, if earlier, January 1, 2000.
    (d) Special Rules.--
            (1) Employers contracting with health plan purchasing 
        organizations, etc.--An employer is deemed to have satisfied 
        the requirements of subsection (a) with respect to an employee 
        if the employer enters into a contract with a health plan 
        purchasing organization (established under subtitle A of title 
        VI), a small employer pooling arrangement (described in section 
        711 of the Employee Retirement Income Security Act of 1974), a 
        multiemployer plan providing health benefits, or a certified 
        multiple employer health plan (as defined in section 701(9) of 
        the Employee Retirement Income Security Act of 1974) to offer 
        coverage with respect to the employee.
            (2) Exclusion of new employers and certain small 
        employers.--Subsection (a) shall not apply to any small 
        employer for any plan year if, as of the beginning of such plan 
        year--
                    (A) such employer (including any predecessor 
                thereof) has been an employer for less than 1 year,
                    (B) such employer has no more than 2 qualifying 
                employees, or
                    (C) no more than 2 qualifying employees of the 
                employer are not covered under any group health plan.
            (3) Exclusion of family members.--Under such procedures as 
        the Secretary may prescribe, any relative of an employer may 
        be, at the election of the employer, excluded from 
        consideration as a qualifying employee for purposes of applying 
        the requirements of subsection (a). In the case of an employer 
        that is not an individual, an employee who is a relative of a 
        key employee (as defined in section 416(i)(1) of the Internal 
        Revenue Code of 1986) of the employer may, at the election of 
        the key employee, be considered a relative excludable under 
        this paragraph.
    (e) Construction on Range of Coverage Offerings.--Nothing in this 
section shall be construed--
            (1) as limiting the number of standard and high-deductible 
        coverage options that an employer may offer to an employee,
            (2) as preventing employers from offering supplemental 
        coverage described in section 1105, or
            (3) as preventing an employer from providing for 
        contributions to a medical savings account in connection with 
        the offering of high-deductible coverage, subject to subsection 
        (a)(4) and the requirements of section 7705 of the Internal 
        Revenue Code of 1986.

SEC. 1202. NONDISCRIMINATION UNDER GROUP HEALTH PLANS.

    (a) Application of Rules Similar to Medicare Nondiscrimination 
Rules.--The provisions of paragraphs (1)(A), (1)(D), (1)(E), (3)(A), 
and (3)(C) of section 1862(b) of the Social Security Act shall apply to 
a premium or cost-sharing assistance eligible individual under part A 
of title XXI of such Act in relation to an employer in the same manner 
as such provisions apply to an individual age 65 or over who is 
entitled to benefits under title XVIII of such Act under section 226(a) 
of such Act in relation to such employer.
    (b) Rules of Application.--In applying subsection (a)--
            (1) in applying clauses (ii) and (iii) of section 
        1862(b)(1)(A) of the Social Security Act, any reference to ``20 
        or more employees'' is deemed a reference to ``5 or more 
        employees'';
            (2) clause (iv) of section 1862(b)(1)(A) of such Act shall 
        not apply; and
            (3) any reference to title XVIII of such Act is deemed a 
        reference to assistance under part A of title XXI of such Act 
        (as added by subtitle A of title II of this Act).
    (c) Enforcement.--
            (1) In general.--Chapter 47 of the Internal Revenue Code of 
        1986 (relating to excise taxes on qualified pension, etc. 
        plans) is amended by inserting after section 5000 the following 
        new section:

``SEC. 5000A. EMPLOYER REQUIREMENTS.

    ``(a) General Rule.--There is hereby imposed a tax on the failure 
of any employer to comply with the requirements of section 1201 and 
section 1202 of the Bipartisan Health Care Reform Act of 1994.
    ``(b) Amount of Tax.--The amount of tax imposed by subsection (a) 
shall be equal to $100 for each day for each individual for which such 
a failure occurs.
    ``(c) Limitation on Tax.--
            ``(1) Tax not to apply where failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) with respect 
        to any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period (or such period as the Secretary may determine 
                appropriate) beginning on the 1st date any of the 
                individuals on whom the tax is imposed knew, or 
                exercising reasonable diligence would have known, that 
                such failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.''.
            (2) Clerical amendment.--The table of sections for such 
        chapter 47 is amended by adding at the end the following new 
        item:

                              ``Sec. 5000A. Employer requirements.''.

            (3) Effective date.--The amendments made by this subsection 
        shall take effect on January 1, 1997.

SEC. 1203. EFFECTIVE DATES.

    Except as otherwise provided, the requirements of sections 1201 and 
1202 shall apply to plan years beginning after December 31, 1996.

                                                    Title I, Subtitle D

   Subtitle D--Standards and Certification; Enforcement; Preemption; 
                           General Provisions

SEC. 1301. ESTABLISHMENT OF STANDARDS.

    (a) Role of NAIC.--
            (1) In general.--The Secretary shall request the NAIC to 
        develop, within 9 months after the date of the enactment of 
        this Act, model regulations that specify standards with respect 
        to the requirements of this subtitle as applicable to carriers 
        and health insurance coverage.
            (2) Review of standards.--If the NAIC develops recommended 
        regulations specifying such standards within such period, the 
        Secretary shall review the standards. Such review shall be 
        completed within 60 days after the date the regulations are 
        developed. Unless the Secretary determines within such period 
        that the standards do not meet the requirements, such standards 
        shall serve as the standards under this subtitle, with such 
        amendments as the Secretary deems necessary.
    (b) Contingency.--If the NAIC does not develop such model 
regulations within such period or the Secretary determines that such 
regulations do not specify standards that meet the requirements 
described in subsection (a), the Secretary shall specify, within 15 
months after the date of the enactment of this Act, standards to carry 
out those requirements.

SEC. 1302. APPLICATION OF STANDARDS TO CARRIERS THROUGH STATES.

    (a) Application of Standards.--
            (1) In general.--Each State shall submit to the Secretary, 
        by the deadline specified in paragraph (2), a report on steps 
        the State is taking to implement and enforce the standards 
        established under section 1301 with respect to carriers and 
        health insurance coverage offered or renewed not later than 
        such deadline.
            (2) Deadline for report.--The deadline under this paragraph 
        is 1 year after the date the standards are established under 
        section 1301.
    (b) Federal Role.--
            (1) Notice of deficiency.--If the Secretary determines that 
        a State has failed to submit a report by the deadline specified 
        under subsection (a)(2) or finds that the State has not 
        implemented and provided adequate enforcement of the standards 
        established under section 1301, the Secretary shall notify the 
        State and provide the State a period of 60 days in which to 
        submit such report or to implement and enforce such standards.
            (2) Implementation of alternative.--
                    (A) In general.--If, after such 60-day period, the 
                Secretary finds that such a failure has not been 
                corrected, the Secretary shall provide for such 
                mechanism for the implementation and enforcement of 
                such standards in the State as the Secretary determines 
                to be appropriate.
                    (B) Effective period.--Such implementation and 
                enforcement shall take effect with respect to carriers, 
                and health insurance coverage offered or renewed, on or 
                after 3 months after the date of the Secretary's 
                finding under subparagraph (A), and until the date the 
                Secretary finds that such a failure has been corrected.

SEC. 1303. APPLICATION TO GROUP HEALTH PLANS.

    (a) In General.--Subject to subsection (b), sections 1301 and 1302 
shall apply to group health plans providing health coverage in the same 
manner as they apply to carriers providing health insurance coverage.
    (b) Substitution of References.--For purposes of subsection (a), 
any reference in section 1301 or 1302 to--
            (1) a State or the Secretary of Health and Human Services 
        is deemed a reference to the Secretary of Labor, and
            (2) a carrier or health insurance coverage is deemed a 
        reference to a group health plan and health coverage, 
        respectively.

SEC. 1304. ENFORCEMENT.

    (a) Enforcement by Department of Labor for Employers and Group 
Health Plans.--
            (1) In general.--For purposes of part 5 of subtitle B of 
        title I of the Employee Retirement Income Security Act of 1974, 
        the provisions of this title insofar as they relate to group 
        health plans or employers shall be deemed to be provisions of 
        title I of such Act irrespective of exclusions under section 
        4(b) of such Act.
            (2) Regulatory authority.--With respect to the regulatory 
        authority of the Secretary of Labor under this subtitle 
        pursuant to paragraph (1), section 505 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1135) shall 
        apply.
    (b) Enforcement by Excise Tax for Carriers.--
            (1) In general.--Chapter 43 of the Internal Revenue Code of 
        1986 (relating to qualified pension plans, etc.) is amended by 
        adding at the end thereof the following new section:

``SEC. 4980C. FAILURE OF CARRIER TO COMPLY WITH HEALTH INSURANCE 
              STANDARDS.

    ``(a) Imposition of Tax.--
            ``(1) In general.--There is hereby imposed a tax on the 
        failure of a carrier to comply with the requirements applicable 
        to the carrier under parts 1 through 4 of subtitle A and 
        subtitle B of title I of the Bipartisan Health Care Reform Act 
        of 1994.
            ``(2) Exception.--Paragraph (1) shall not apply to a 
        failure by a carrier in a State if the Secretary of Health and 
        Human Services determines that the State has in effect a 
        regulatory enforcement mechanism that provides adequate 
        sanctions with respect to such a failure by such a carrier.
    ``(b) Amount of Tax.--
            ``(1) In general.--Subject to paragraph (2), the amount of 
        the tax imposed by subsection (a) shall be $100 for each day 
        during which such failure persists for each individual to which 
        such failure relates. A rule similar to the rule of section 
        4980B(b)(3) shall apply for purposes of this section.
            ``(2) Limitation.--The amount of the tax imposed by 
        subsection (a) for a carrier with respect to health insurance 
        coverage shall not exceed 25 percent of the amounts received 
        for such coverage during the period such failure persists.
    ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid by the carrier.
    ``(d) Exceptions.--
            ``(1) Corrections within 30 days.--No tax shall be imposed 
        by subsection (a) by reason of any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected within the 30-day 
                period beginning on the earliest date the carrier knew, 
                or exercising reasonable diligence would have known, 
                that such failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that payment of such tax would be 
        excessive relative to the failure involved.
    ``(e) Definitions.--For purposes of this section, the terms `health 
insurance coverage' and `carrier' have the respective meanings given 
such terms in section 1903 of the Bipartisan Health Care Reform Act of 
1994.''
            (2) Clerical amendment.--The table of sections for chapter 
        43 of such Code is amended by adding at the end thereof the 
        following new item:

                              ``Sec. 4980C. Failure of carrier to 
                                        comply with health insurance 
                                        standards.''

SEC. 1305. LIMITATION ON SELF INSURANCE FOR SMALL EMPLOYERS.

    A single employer plan (as defined in section 3(40)(B) of the 
Employee Retirement Income Security Act of 1974) may not offer health 
coverage other than through a carrier unless the plan has at least 100 
eligible employees.

                                                    Title I, Subtitle E

 Subtitle E--Multiple Employer Health Benefits Protections and Related 
                               Provisions

         PART 1--MULTIPLE EMPLOYER HEALTH BENEFITS PROTECTIONS

SEC. 1401. LIMITED EXEMPTION FROM CERTAIN RESTRICTIONS ON ERISA 
              PREEMPTION OF STATE LAW FOR HEALTH PLANS MAINTAINED BY 
              MULTIPLE EMPLOYERS SUBJECT TO CERTAIN FEDERAL STANDARDS.

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding at the end the 
following new part:

                ``Part 7--Multiple Employer Health Plans

``SEC. 701. DEFINITIONS.

    ``For purposes of this part--
            ``(1) Insurer.--The term `insurer' means an insurance 
        company, insurance service, or insurance organization, licensed 
        to engage in the business of insurance by a State.
            ``(2) Participating employer.--The term `participating 
        employer' means, in connection with a multiple employer welfare 
        arrangement, any employer if any of its employees, or any of 
        the dependents of its employees, are or were covered under such 
        arrangement in connection with the employment of the employees.
            ``(3) Excess/stop loss coverage.--The term `excess/stop 
        loss coverage' means, in connection with a multiple employer 
        welfare arrangement, a contract under which an insurer provides 
        for payment with respect to claims under the arrangement, 
        relating to participants or beneficiaries individually or 
        otherwise, in excess of an amount or amounts specified in such 
        contract.
            ``(4) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries or meets such reasonable standards and qualifications 
        as the Secretary may provide by regulation.
            ``(5) Sponsor.--The term `sponsor' means, in connection 
        with a multiple employer welfare arrangement, the association 
        or other entity which establishes or maintains the arrangement.
            ``(6) State insurance commissioner.--The term `State 
        insurance commissioner' means the insurance commissioner (or 
        similar official) of a State.
            ``(7) Domicile state.--The term `domicile State' means, in 
        connection with a multiple employer welfare arrangement, the 
        State in which, according to the application for a 
        certification under this part, most individuals to be covered 
        under the arrangement are located, except that, in any case in 
        which information contained in the latest annual report of the 
        arrangement filed under this part indicates that most 
        individuals covered under the arrangement are located in a 
        different State, such term means such different State.
            ``(8) Fully insured.--Coverage under a multiple employer 
        welfare arrangement is `fully insured' if one or more insurers, 
        health maintenance organizations, similar organizations 
        regulated under State law for solvency, or any combination 
        thereof are liable under one or more insurance policies or 
        contracts for all benefits under the arrangement (irrespective 
        of any recourse they may have against other parties).
            ``(9) Certified multiple employer health plan.--The term 
        `certified multiple employer health plan' means a multiple 
        employer welfare arrangement treated as an employee welfare 
        benefit plan by reason of certification under this part.

``SEC. 702. CERTIFIED MULTIPLE EMPLOYER HEALTH PLANS RELIEVED OF 
              CERTAIN RESTRICTIONS ON PREEMPTION OF STATE LAW AND 
              TREATED AS EMPLOYEE WELFARE BENEFIT PLANS.

    ``(a) In General.--Subject to subsection (b), a multiple employer 
welfare arrangement under which coverage is not fully insured and with 
respect to which there is in effect a certification granted by the 
Secretary under this part (or with respect to which there is pending a 
complete application for such a certification and the Secretary 
determines that provisional protection under this part is 
appropriate)--
            ``(1) shall be treated for purposes of subtitle A and the 
        preceding parts of this subtitle as an employee welfare benefit 
        plan, irrespective of whether such arrangement is an employee 
        welfare benefit plan, and
            ``(2) shall be exempt from section 514(b)(6)(A)(ii).
    ``(b) Benefits Must Consist of Medical Care.--Subsection (a) shall 
apply to a multiple employer welfare arrangement only if the benefits 
provided thereunder consist solely of medical care described in section 
607(1) (disregarding such incidental benefits as the Secretary shall 
specify by regulation).

``SEC. 703. CERTIFICATION PROCEDURE.

    ``(a) In General.--The Secretary shall grant a certification 
described in section 702(a) to a multiple employer welfare arrangement 
if--
            ``(1) an application for such certification with respect to 
        such arrangement, identified individually or by class, has been 
        duly filed in complete form with the Secretary in accordance 
        with this part,
            ``(2) such application demonstrates compliance with the 
        requirements of section 704 with respect to such arrangement, 
        and
            ``(3) the Secretary finds that such certification is--
                    ``(A) administratively feasible,
                    ``(B) not adverse to the interests of the 
                individuals covered under the arrangement, and
                    ``(C) protective of the rights and benefits of the 
                individuals covered under the arrangement.
    ``(b) Notice and Hearing.--Before granting a certification under 
this section, the Secretary shall publish notice in the Federal 
Register of the pendency of the certification, shall require that 
adequate notice be given to interested persons, including the State 
insurance commissioner of each State in which covered individuals under 
the arrangement are, or are expected to be, located, and shall afford 
interested persons opportunity to present views. The Secretary may not 
grant a certification under this section unless the Secretary affords 
an opportunity for a hearing and makes a determination on the record 
with respect to the findings required under subsection (a)(3). The 
Secretary shall, to the maximum extent practicable, make a final 
determination with respect to any application filed under this section 
in the case of a newly established arrangement within 90 days after the 
date which the Secretary determines is the date on which such 
application is filed in complete form.

``SEC. 704. ELIGIBILITY REQUIREMENTS.

    ``(a) Application for Certification.--
            ``(1) In general.--A certification may be granted by the 
        Secretary under this part only on the basis of an application 
        filed with the Secretary in such form and manner as shall be 
        prescribed in regulations of the Secretary. Any such 
        application shall be signed by the operating committee and the 
        sponsor of the arrangement.
            ``(2) Filing fee.--The arrangement shall pay to the 
        Secretary at the time of filing an application under this 
        section a filing fee in the amount of $5,000, which shall be 
        available, to the extent provided in appropriation Acts, to the 
        Secretary for the sole purpose of administering the 
        certification procedures under this part.
            ``(3) Information included.--An application filed under 
        this section shall include, in a manner and form prescribed in 
        regulations of the Secretary, at least the following 
        information:
                    ``(A) Identifying information.--The names and 
                addresses of--
                            ``(i) the sponsor, and
                            ``(ii) the members of the operating 
                        committee of the arrangement.
                    ``(B) States in which arrangement intends to do 
                business.--The States in which individuals covered 
                under the arrangement are to be located and the number 
                of such individuals expected to be located in each such 
                State.
                    ``(C) Bonding requirements.--Evidence provided by 
                the operating committee that the bonding requirements 
                of section 412 will be met as of the date of the 
                application.
                    ``(D) Plan documents.--A copy of the documents 
                governing the arrangement (including any bylaws and 
                trust agreements), the summary plan description, and 
                other material describing the benefits and coverage 
                that will be provided to individuals covered under the 
                arrangement.
                    ``(E) Agreements with service providers.--A copy of 
                any agreements between the arrangement and contract 
                administrators and other service providers.
                    ``(F) Funding report.--A report setting forth 
                information determined as of a date within the 120-day 
                period ending with the date of the application, 
                including the following:
                            ``(i) Reserves.--A statement, certified by 
                        the operating committee of the arrangement, and 
                        a statement of actuarial opinion, signed by a 
                        qualified actuary, that all applicable 
                        requirements of section 707 are or will be met 
                        in accordance with regulations which the 
                        Secretary shall prescribe.
                            ``(ii) Adequacy of contribution rates.--A 
                        statement of actuarial opinion, signed by a 
                        qualified actuary, which sets forth a 
                        description of the extent to which contribution 
                        rates are adequate to provide for the payment 
                        of all obligations and the maintenance of 
                        required reserves under the arrangement for the 
                        12-month period beginning with such date within 
                        such 120-day period, taking into account the 
                        expected coverage and experience of the 
                        arrangement. If the contribution rates are not 
                        fully adequate, the statement of actuarial 
                        opinion shall indicate the extent to which the 
                        rates are inadequate and the changes needed to 
                        ensure adequacy.
                            ``(iii) Current and projected value of 
                        assets and liabilities.--A statement of 
                        actuarial opinion signed by a qualified 
                        actuary, which sets forth the current value of 
                        the assets and liabilities accumulated under 
                        the arrangement and a projection of the assets, 
                        liabilities, income, and expenses of the 
                        arrangement for the 12-month period referred to 
                        in clause (ii). The income statement shall 
                        identify separately the arrangement's 
                        administrative expenses and claims.
                            ``(iv) Costs of coverage to be charged and 
                        other expenses.--A statement of the costs of 
                        coverage to be charged, including an 
                        itemization of amounts for administration, 
                        reserves, and other expenses associated with 
                        the operation of the arrangement.
                            ``(v) Other information.--Any other 
                        information which may be prescribed in 
                        regulations of the Secretary as necessary to 
                        carry out the purposes of this part.
    ``(b) Other Requirements.--A complete application for a 
certification under this part shall include information which the 
Secretary determines to be complete and accurate and sufficient to 
demonstrate that the following requirements are met with respect to the 
arrangement:
            ``(1) Sponsor.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                sponsor is, and has been (together with its immediate 
                predecessor, if any) for a continuous period of not 
                less than 3 years before the date of the application, 
                organized and maintained in good faith, with a 
                constitution and bylaws specifically stating its 
                purpose, as a trade association, an industry 
                association, a professional association, or a chamber 
                of commerce (or similar business group), for 
                substantial purposes other than that of obtaining or 
                providing medical care described in section 607(1), and 
                the applicant demonstrates to the satisfaction of the 
                Secretary that the sponsor is established as a 
                permanent entity which receives the active support of 
                its members.
                    ``(B) Special rule for employers in the same trade 
                or business.--In the case of an arrangement under which 
                all participating employers are engaged in a common 
                type of trade or business, the sponsor is the operating 
                committee of the arrangement.
            ``(2) Operating committee.--The arrangement is operated, 
        pursuant to a trust agreement, by an operating committee which 
        has complete fiscal control over the arrangement and which is 
        responsible for all operations of the arrangement, and the 
        operating committee has in effect rules of operation and 
        financial controls, based on a 3-year plan of operation, 
        adequate to carry out the terms of the arrangement and to meet 
        all requirements of this title applicable to the arrangement. 
        The members of the committee are individuals selected from 
        individuals who are the owners, officers, directors, or 
        employees of the participating employers or who are partners in 
        the participating employers and actively participate in the 
        business. No such member is an owner, officer, director, or 
        employee of, or partner in, a contract administrator or other 
        service provider to the arrangement, except that officers or 
        employees of a sponsor which is a service provider (other than 
        a contract administrator) to the arrangement may be members of 
        the committee if they constitute not more than 25 percent of 
        the membership of the committee and they do not provide 
        services to the arrangement other than on behalf of the 
        sponsor. The committee has sole authority to approve 
        applications for participation in the arrangement and to 
        contract with a service provider to administer the day-to-day 
        affairs of the arrangement.
            ``(3) Contents of governing instruments.--The instruments 
        governing the arrangement include a written instrument, meeting 
        the requirements of an instrument required under section 
        402(a)(1), which--
                    ``(A) provides that the committee serves as the 
                named fiduciary required for plans under such section 
                and serves in the capacity of a plan administrator 
                (referred to in section 3(16)(A)),
                    ``(B) provides that the sponsor is to serve as plan 
                sponsor (referred to in section 3(16)(B)),
                    ``(C) incorporates the requirements of section 707, 
                and
                    ``(D) provides that, effective upon the granting of 
                a certification under this part--
                            ``(i) all participating employers must be 
                        members or affiliated members of the sponsor, 
                        except that, in the case of a sponsor which is 
                        a professional association or other individual-
                        based association, if at least one of the 
                        officers, directors, or employees of an 
                        employer, or at least one of the individuals 
                        who are partners in an employer and who 
                        actively participates in the business, is a 
                        member or affiliated member of the sponsor, 
                        participating employers may also include such 
                        employer, and
                            ``(ii) all individuals thereafter 
                        commencing coverage under the arrangement must 
                        be--
                                    ``(I) active or retired owners, 
                                officers, directors, or employees of, 
                                or partners in, participating 
                                employers, or
                                    ``(II) the beneficiaries of 
                                individuals described in subclause (I).
            ``(4) Contribution rates.--The contribution rates referred 
        to in subsection (a)(3)(F)(ii) are adequate.
            ``(5) Option of family coverage.--If the arrangement 
        provides for coverage with respect to an employee, the 
        arrangement shall make available the option of coverage of 
        family members of the individual (as defined in section 1901(2) 
        of the Bipartisan Health Care Reform Act of 1994).
            ``(6) Miscellaneous requirements.--(A) The requirements of 
        the title I of the Bipartisan Health Care Reform Act of 1994 
        (insofar as they apply to group health plans), including the 
        following:
                    ``(i) Section 1003(c) (relating to guaranteed 
                renewal).
                    ``(ii) Section 1004 (relating to restricting 
                preexisting condition exclusions).
                    ``(iii) Section 1005 (relating to choice of 
                coverage through open enrollment).
                    ``(iv) Section 1011 (relating to standards for 
                managed care arrangements).
                    ``(v) Section 1012 (relating to utilization 
                review).
                    ``(vi) Section 1013 (relating to standards for 
                essential community providers).
                    ``(vii) Section 1021(d) (relating to use of fair 
                rating practices).
                    ``(viii) Section 1022 (relating to coordination 
                with premium assistance certificate program).
            ``(B) The requirements of section 1023 of the Bipartisan 
        Health Care Reform Act of 1994 (relating to establishment of 
        risk adjustment mechanisms) insofar as such requirements apply 
        to carriers but only with respect to covered individuals in the 
        individual/small group market.
            ``(7) Regulatory requirements.--Such other requirements as 
        the Secretary may prescribe by regulation as necessary to carry 
        out the purposes of this part.
    ``(c) Treatment of Party Seeking Certification Where Party Is 
Subject to Disqualification.--
            ``(1) In general.--In the case of any application for a 
        certification under this part with respect to a multiple 
        employer welfare arrangement, if the Secretary determines that 
        the sponsor of the arrangement or any other person associated 
        with the arrangement is subject to disqualification under 
        paragraph (2), the Secretary may deny the certification with 
        respect to such arrangement.
            ``(2) Disqualification.--A person is subject to 
        disqualification under this paragraph if such person--
                    ``(A) has intentionally made a material 
                misstatement in the application for certification;
                    ``(B) has obtained or attempted to obtain a 
                certification under this part through misrepresentation 
                or fraud;
                    ``(C) has misappropriated or converted to such 
                person's own use, or improperly withheld, money held 
                under a plan or any multiple employer welfare 
                arrangement;
                    ``(D) is prohibited (or would be prohibited if the 
                arrangement were a plan) from serving in any capacity 
                in connection with the arrangement under section 411;
                    ``(E) has failed to appear without reasonable cause 
                or excuse in response to a subpoena, examination, 
                warrant, or any other order lawfully issued by the 
                Secretary compelling such response;
                    ``(F) has previously been subject to a 
                determination under this part resulting in the denial, 
                suspension, or revocation of a certification under this 
                part on similar grounds; or
                    ``(G) has otherwise violated any provision of this 
                title with respect to a matter which the Secretary 
                determines of sufficient consequence to merit 
                disqualification for purposes of this part.
    ``(d) Franchise Networks.--In the case of a multiple employer 
welfare arrangement established and maintained by a franchisor for a 
franchise network consisting of its franchisees, such franchisor shall 
be treated as the sponsor referred to in the preceding provisions of 
this section, such network shall be treated as an association referred 
to in such provisions, and each franchisee shall be treated as a member 
(of the association and the sponsor) referred to in such provisions, if 
all participating employers are such franchisees and the requirements 
of subsection (b)(1) with respect to a sponsor are met with respect to 
the network.
    ``(e) Certain Collectively Bargained Arrangements.--In applying the 
preceding provisions of this section in the case of a multiple employer 
welfare arrangement which would be described in section 3(40)(A)(i) but 
for the failure to meet any requirement of section 3(40)(C)--
            ``(1) paragraphs (1) and (2) of subsection (b) and 
        subparagraphs (A), (B), and (D) of paragraph (3) of subsection 
        (b) shall be disregarded, and
            ``(2) the joint board of trustees shall be considered the 
        operating committee of the arrangement.
    ``(f) Certain Arrangements Not Meeting Single Employer 
Requirement.--
            ``(1) In general.--In any case in which the majority of the 
        employees covered under a multiple employer welfare arrangement 
        are employees of a single employer (within the meaning of 
        clauses (i) and (ii) of section 3(40)(B)), if all other 
        employees covered under the arrangement are employed by 
        employers who are related to such single employer, subsection 
        (b)(3)(D) shall be disregarded.
            ``(2) Related employers.--For purposes of paragraph (1), 
        employers are `related' if there is among all such employers a 
        common ownership interest or a substantial commonality of 
        business operations based on common suppliers or customers.

``SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO CERTIFIED MULTIPLE 
              EMPLOYER HEALTH PLANS.

    ``(a) Notice of Material Changes.--In the case of any certified 
multiple employer health plan, descriptions of material changes in any 
information which was required to be submitted with the application for 
the certification granted under this part shall be filed in such form 
and manner as shall be prescribed in regulations of the Secretary. The 
Secretary may require by regulation prior notice of material changes 
with respect to specified matters which might serve as the basis for 
suspension or revocation of the certification.
    ``(b) Reporting Requirements.--Under regulations of the Secretary, 
the requirements of sections 102, 103, and 104 shall apply with respect 
to any multiple employer welfare arrangement which is or has been a 
certified multiple employer health plan in the same manner and to the 
same extent as such requirements apply to employee welfare benefit 
plans, irrespective of whether such certification continues in effect. 
The annual report required under section 103 for any plan year in the 
case of any such multiple employer welfare arrangement shall also 
include information described in section 704(a)(3)(F) with respect to 
the plan year and, notwithstanding section 104(a)(1)(A), shall be filed 
not later than 90 days after the close of the plan year.
    ``(c) Engagement of Qualified Actuary.--The operating committee of 
each multiple employer welfare arrangement which is or has been a 
certified multiple employer health plan shall engage, on behalf of all 
covered individuals, a qualified actuary who shall be responsible for 
the preparation of the materials comprising information necessary to be 
submitted by a qualified actuary under this part. The qualified actuary 
shall utilize such assumptions and techniques as are necessary to 
enable such actuary to form an opinion as to whether the contents of 
the matters reported under this part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the arrangement and to reasonable expectations, 
        and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the arrangement.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.
    ``(d) Filing Notice of Certification With States.--A certification 
granted to a multiple employer welfare arrangement under this part 
shall not be effective unless written notice of such certification is 
filed with the State insurance commissioner of each State in which at 
least 5 percent of the individuals covered under the arrangement are 
located. For purposes of this subsection, an individual shall be 
considered to be located in the State in which a known address of such 
individual is located or in which such individual is employed. The 
Secretary may by regulation provide in specified cases for the 
application of the preceding sentence with lesser percentages in lieu 
of such 5 percent amount.

``SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY ARRANGEMENTS 
              PROVIDING MEDICAL CARE.

    ``(a) In General.--A multiple employer welfare arrangement 
providing benefits consisting of medical care described in section 
607(1) shall issue to each participating employer--
            ``(1) a document equivalent to the summary plan description 
        required of plans under part 1,
            ``(2) information describing the contribution rates 
        applicable to participating employers, and
            ``(3) a statement indicating--
                    ``(A) that the arrangement is not a licensed 
                insurer under the laws of any State,
                    ``(B) whether coverage under the arrangement is 
                fully insured, and
                    ``(C) if coverage under the arrangement if not 
                fully insured, (i) whether the arrangement is (or has 
                ceased to be) a certified multiple employer health 
                plan, and (ii) if such an arrangement is a certified 
                multiple employer health plan, that such arrangement is 
                treated as an employee welfare benefit plan under this 
                title.
    ``(b) Time for Disclosure.--Such information shall be issued to 
employers within such reasonable period of time before becoming 
participating employers as may be prescribed in regulations of the 
Secretary.

``SEC. 707. MAINTENANCE OF RESERVES.

    ``(a) In General.--Each multiple employer welfare arrangement which 
is or has been a certified multiple employer health plan and under 
which coverage is not fully insured shall establish and maintain such 
excess/stop loss coverage as the Secretary considers appropriate and 
shall establish and maintain reserves, consisting of--
            ``(1) a reserve for unearned contributions,
            ``(2) a reserve for payment of claims reported and not yet 
        paid and claims incurred but not yet reported, and for expected 
        administrative costs with respect to such claims, and
            ``(3) a reserve, in an amount recommended by the qualified 
        actuary, for any other obligations of the arrangement.
    ``(b) Minimum Amount for Certain Reserves.--The total of the 
reserves described in subsection (a)(2) shall not be less than an 
amount equal to 25 percent of expected incurred claims and expenses for 
the plan year.
    ``(c) Required Margin.--In determining the amounts of reserves 
required under this section in connection with any multiple employer 
welfare arrangement, the qualified actuary shall include a margin for 
error and other fluctuations taking into account the specific 
circumstances of such arrangement.
    ``(d) Additional Requirements.--The Secretary may provide such 
additional requirements relating to reserves and excess/stop loss 
coverage as the Secretary considers appropriate. Such requirements may 
be provided, by regulation or otherwise, with respect to any 
arrangement or any class of arrangements.
    ``(e) Adjustments for Excess/Stop Loss Coverage.--The Secretary may 
provide for adjustments to the levels of reserves otherwise required 
under subsections (a) and (b) with respect to any arrangement or class 
of arrangements to take into account excess/stop loss coverage provided 
with respect to such arrangement or arrangements.
    ``(f) Alternative Means of Compliance.--The Secretary may permit an 
arrangement to substitute, for all or part of the reserves required 
under subsection (a), such security, guarantee, or other financial 
arrangement as the Secretary determines to be adequate to enable the 
arrangement to fully meet all its financial obligations on a timely 
basis.

``SEC. 708. CORRECTIVE ACTIONS.

    ``(a) Actions To Avoid Depletion of Reserves.--A multiple employer 
welfare arrangement with respect to which there is or has been in 
effect a certification granted under this part shall continue to meet 
the requirements of section 707, irrespective of whether such 
certification continues in effect. The operating committee of such 
arrangement shall determine semiannually whether the requirements of 
section 707 are met. In any case in which the committee determines that 
there is reason to believe that there is or will be a failure to meet 
such requirements, or the Secretary makes such a determination and so 
notifies the committee, the committee shall immediately notify the 
qualified actuary engaged by the arrangement, and such actuary shall, 
not later than the end of the next following month, make such 
recommendations to the committee for corrective action as the actuary 
determines necessary to ensure compliance with section 707. Not later 
than 10 days after receiving from the actuary recommendations for 
corrective actions, the committee shall notify the Secretary (in such 
form and manner as the Secretary may prescribe by regulation) of such 
recommendations of the actuary for corrective action, together with a 
description of the actions (if any) that the committee has taken or 
plans to take in response to such recommendations. The committee shall 
thereafter report to the Secretary, in such form and frequency as the 
Secretary may specify to the committee, regarding corrective action 
taken by the committee until the requirements of section 707 are met.
    ``(b) Termination.--
            ``(1) Notice of termination.--In any case in which the 
        operating committee of a multiple employer welfare arrangement 
        which is or has been a certified multiple employer health plan 
        determines that there is reason to believe that the arrangement 
        will terminate, the committee shall so inform the Secretary, 
        shall develop a plan for winding up the affairs of the 
        arrangement in connection with such termination in a manner 
        which will result in timely payment of all benefits for which 
        the arrangement is obligated, and shall submit such plan in 
        writing to the Secretary. Actions required under this paragraph 
        shall be taken in such form and manner as may be prescribed in 
        regulations of the Secretary.
            ``(2) Actions required in connection with termination.--In 
        any case in which--
                    ``(A) the Secretary has been notified under 
                subsection (a) of a failure of a multiple employer 
                welfare arrangement which is or has been a certified 
                multiple employer health plan to meet the requirements 
                of section 707 and has not been notified by the 
                operating committee of the arrangement that corrective 
                action has restored compliance with such requirements, 
                and
                    ``(B) the Secretary determines that the continuing 
                failure to meet the requirements of section 707 can be 
                reasonably expected to result in a continuing failure 
                to pay benefits for which the arrangement is obligated,
        the operating committee of the arrangement shall, at the 
        direction of the Secretary, terminate the arrangement and, in 
        the course of the termination, take such actions as the 
        Secretary may require as necessary to ensure that the affairs 
        of the arrangement will be, to the maximum extent possible, 
        wound up in a manner which will result in timely payment of all 
        benefits for which the arrangement is obligated.

``SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF CERTIFICATION.

    ``(a) Expiration and Renewal of Certification.--A certification 
granted to a multiple employer welfare arrangement under this part 
shall expire 3 years after the date on which the certification is 
granted. A certification which has expired may be renewed by means of 
application for a certification in accordance with section 704.
    ``(b) Suspension or Revocation of Certification by Secretary.--The 
Secretary may suspend or revoke a certification granted to a multiple 
employer welfare arrangement under this part--
            ``(1) for any cause that may serve as the basis for the 
        denial of an initial application for such a certification under 
        section 704, or
            ``(2) if the Secretary finds that--
                    ``(A) the arrangement, or the sponsor thereof, in 
                the transaction of business while under the 
                certification, has used fraudulent, coercive, or 
                dishonest practices, or has demonstrated incompetence, 
                untrustworthiness, or financial irresponsibility,
                    ``(B) the arrangement, or the sponsor thereof, is 
                using such methods or practices in the conduct of its 
                operations, so as to render its further transaction of 
                operations hazardous or injurious to participating 
                employers, or covered individuals,
                    ``(C) the arrangement, or the sponsor thereof, has 
                refused to be examined in accordance with this part or 
                to produce its accounts, records, and files for 
                examination in accordance with this part, or
                    ``(D) any of the officers of the arrangement, or 
                the sponsor thereof, has refused to give information 
                with respect to the affairs of the arrangement or the 
                sponsor or to perform any other legal obligation 
                relating to such an examination when required by the 
                Secretary in accordance with this part.
Any such suspension or revocation under this subsection shall be 
effective only upon a final decision of the Secretary made after notice 
and opportunity for a hearing is provided in accordance with section 
710.
    ``(c) Suspension or Revocation of Certification Under Court 
Proceedings.--A certification granted to a multiple employer welfare 
arrangement under this part may be suspended or revoked by a court of 
competent jurisdiction in an action by the Secretary brought under 
paragraph (2), (5), or (6) of section 502(a), except that the 
suspension or revocation under this subsection shall be effective only 
upon notification of the Secretary of such suspension or revocation.
    ``(d) Notification of Participating Employers.--All participating 
employers in a multiple employer welfare arrangement shall be notified 
of the expiration, suspension, or revocation of a certification granted 
to such arrangement under this part, by such persons and in such form 
and manner as shall be prescribed in regulations of the Secretary, not 
later than 20 days after such expiration or after receipt of notice of 
a final decision requiring such suspension or revocation.
    ``(e) Publication of Expirations, Suspensions, and Revocations.--
The Secretary shall publish all expirations of, and all final decisions 
to suspend or revoke, certifications granted under this part.

``SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.

    ``(a) In General.--Any decision by the Secretary which involves the 
denial of an application by a multiple employer welfare arrangement for 
a certification under this part or the suspension or revocation of such 
a certification shall contain a statement of the specific reason or 
reasons supporting the Secretary's action, including reference to the 
specific terms of the certification and the statutory provision or 
provisions relevant to the determination.
    ``(b) Denials of Applications.--In the case of the denial of an 
application for a certification under this part, the Secretary shall 
send a copy of the decision to the applicant by certified or registered 
mail at the address specified in the records of the Secretary. Such 
decision shall constitute the final decision of the Secretary unless 
the arrangement, or any party that would be prejudiced by the decision, 
files a written appeal of the denial within 30 days after the mailing 
of such decision. The Secretary may affirm, modify, or reverse the 
initial decision. The decision on appeal shall become final upon the 
mailing of a copy by certified or registered mail to the arrangement or 
party that filed the appeal.
    ``(c) Suspensions or Revocations of Certification.--In the case of 
the suspension or revocation of a certification granted under this 
part, the Secretary shall send a copy of the decision to the 
arrangement by certified or registered mail at its address, as 
specified in the records of the Secretary. Upon the request of the 
arrangement, or any party that would be prejudiced by the suspension or 
revocation, filed within 15 days of the mailing of the Secretary's 
decision, the Secretary shall schedule a hearing on such decision by 
written notice, sent by certified or registered mail to the arrangement 
or party requesting such hearing. Such notice shall set forth--
            ``(1) a specific date and time for the hearing, which shall 
        be within the 10-day period commencing 20 days after the date 
        of the mailing of the notice, and
            ``(2) a specific place for the hearing, which shall be in 
        the District of Columbia or in the State and county thereof (or 
        parish or other similar political subdivision thereof) in which 
        is located the arrangement's principal place of business.
The decision as affirmed or modified in such hearing shall constitute 
the final decision of the Secretary, unless such decision is reversed 
in such hearing.

``SEC. 711. SMALL EMPLOYER POOLING ARRANGEMENTS.

    ``(a)  Requirements for SEPAs Applicable Where Significant Number 
of Small Employers Participate.--In any case in which coverage is 
provided for the current plan year under a multiple employer health 
plan and more than 10 percent of the participating employers in the 
arrangement are small employers (as defined in section 1902 of the 
Bipartisan Health Care Reform Act of 1994), the entity sponsoring such 
arrangement shall ensure that such arrangement is maintained for such 
year in the form of a small employer pooling arrangement.
    ``(b) Requirements for Small Employer Pooling Arrangements.--For 
purposes of this part, an arrangement is maintained in the form of a 
small employer pooling arrangement for any applicable fiscal year, if--
            ``(1) the benefits under the arrangement consist solely of 
        medical care described in section 607(1) (disregarding such 
        incidental benefits as the Secretary of Labor shall specify by 
        regulations),
            ``(2) the general requirements of subsection (c) are met 
        with respect to the arrangement, and
            ``(3) the arrangement constitutes a certified multiple 
        employer health plan under this part and the requirements of 
        subsection (c) are met with respect to the arrangement.
    ``(c) Requirements for Arrangements Providing Self-Insured 
Coverage.--
            ``(1) In general.--The requirements of this subsection with 
        respect to a small employer purchasing arrangement are as 
        follows:
                    ``(A) The arrangement meets the guaranteed issue 
                requirements specified in paragraph (2).
                    ``(B) The arrangement participates in any risk 
                adjustment mechanisms established under section 1023 of 
                the Bipartisan Health Care Reform Act of 1994.
                    ``(C) Under the arrangement, with respect to all 
                participating employers as of the beginning of each 
                plan year, the total number of eligible employees is 
                not less than 100.
            ``(2) Required scope of eligibility for participating 
        employers.--
                    ``(A) In general.--Under the terms of the written 
                instruments governing the arrangement, all restrictions 
                on the eligibility of employers to be participating 
                employers in the arrangement are specifically set forth 
                and consist solely of criteria described in 
                subparagraph (B), and all employers with respect to 
                whom such criteria are met may be participating 
                employers. No such restrictions under the arrangement 
                shall be considered enforceable unless they are so 
                specified.
                    ``(B) Criteria for restrictions on participating 
                employers.--The terms of the arrangement shall define 
                restrictions on eligibility of employers to be 
                participating employers only by reference to one or 
                more of the following criteria:
                            ``(i) Participating employers are 
                        restricted to those located in one or more 
                        specified geographic locations.
                            ``(ii) Participating employers are 
                        restricted to those who are (or whose owners, 
                        officers, or employees are) members of one or 
                        more trade associations, industry associations, 
                        professional associations, or chambers of 
                        commerce (or similar business groups).
                            ``(iii) Participating employers are 
                        restricted to those who are otherwise related 
                        by specified supply contracts, franchise 
                        arrangements, or common ownership interests.
                            ``(iv) Participating employers are 
                        restricted to employers whose employees are 
                        covered under one or more specified collective 
                        bargaining agreements.
    ``(d) Reference to Limitation on Self-Insurance by Small 
Employers.--For restriction on self-insurance by small employers, see 
section 1305 of the Bipartisan Health Care Reform Act of 1994.''.
    (b) Conforming Amendment to Definition of Plan Sponsor.--Section 
3(16)(B) of such Act (29 U.S.C. 1002(16)(B)) is amended by adding at 
the end the following new sentence: ``Such term also includes the 
sponsor (as defined in section 701(5)) of a multiple employer welfare 
arrangement which is or has been a certified multiple employer health 
plan (as defined in section 701(9)).''.
    (c) Alternative Means of Distribution of Summary Plan 
Descriptions.--Section 110 of such Act (29 U.S.C. 1030) is amended by 
adding at the end the following new subsection:
    ``(c) The Secretary shall prescribe, as an alternative method for 
distributing summary plan descriptions in order to meet the 
requirements of section 104(b)(1) in the case of multiple employer 
welfare arrangements providing benefits consisting of medical care 
described in section 607(1), a means of distribution of such 
descriptions by participating employers.''.
    (d) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 608 the following new items:

                ``Part 7--Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Certified multiple employer health plans relieved of 
                            certain restrictions on preemption of State 
                            law and treated as employee welfare benefit 
                            plans.
``Sec. 703. Certification procedure.
``Sec. 704. Eligibility requirements.
``Sec. 705. Additional requirements applicable to certified multiple 
                            employer health plans.
``Sec. 706. Disclosure to participating employers by arrangements 
                            providing medical care.
``Sec. 707. Maintenance of reserves.
``Sec. 708. Corrective actions.
``Sec. 709. Expiration, suspension, or revocation of certification.
``Sec. 710. Review of actions of the Secretary.
``Sec. 711. Small employer pooling arrangement.''.

SEC. 1402. CLARIFICATION OF SCOPE OF PREEMPTION RULES.

    (a) In General.--Section 514(b)(6)(A)(ii) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144(b)(6)(A)(ii)) is 
amended by inserting ``, but only, in the case of an arrangement which 
provides medical care described in section 607(1) and with respect to 
which a certification under part 7 is not in effect,'' before ``to the 
extent not inconsistent with the preceding sections of this title''.
    (b) Cross-Reference.--Section 514(b)(6) of such Act (29 U.S.C. 
1144(b)(6)) is amended by adding at the end the following new 
subparagraph:
    ``(E) For additional rules relating to exemption from subparagraph 
(A)(ii) of multiple employer welfare arrangements providing medical 
care, see part 7.''.

SEC. 1403. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

    Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i), by inserting ``for any plan year of any 
        such plan, or any fiscal year of any such other arrangement,'' 
        after ``single employer'', and by inserting ``during such year 
        or at any time during the preceding 1-year period'' after 
        ``common control'';
            (2) in clause (iii), by striking ``common control shall not 
        be based on an interest of less than 25 percent'' and inserting 
        ``an interest of greater than 25 percent may not be required as 
        the minimum interest necessary for common control'', and by 
        striking ``and'' at the end;
            (3) by redesignating clauses (iv) and (v) as clauses (v) 
        and (vi); and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in determining, after the application of clause (i), 
        whether benefits are provided to employees of two or more 
        employers, the arrangement shall be treated as having only 1 
        participating employer if, at the time the determination under 
        clause (i) is made, the number of individuals who are employees 
        and former employees of any one participating employer and who 
        are covered under the arrangement is greater than 95 percent of 
        the aggregate number of all individuals who are employees or 
        former employees of participating employers and who are covered 
        under the arrangement,''.

SEC. 1404. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY BARGAINED 
              ARRANGEMENTS.

    (a) In General.--Section 3(40)(A)(i) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1002(40)(A)(i)) is amended to 
read as follows:
            ``(i) under or pursuant to one or more collective 
        bargaining agreements,''.
    (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 1002(40)) is 
amended by adding at the end the following new subparagraphs:
    ``(C) Clause (i) of subparagraph (A) shall apply only if--
            ``(i) the plan or other arrangement, and the employee 
        organization or any other entity sponsoring the plan or other 
        arrangement, do not--
                    ``(I) utilize the services of any licensed 
                insurance agent or broker for soliciting or enrolling 
                employers or individuals as participating employers or 
                covered individuals under the plan or other 
                arrangement, or
                    ``(II) pay a commission or any other type of 
                compensation to a person that is related either to the 
                volume or number of employers or individuals solicited 
                or enrolled as participating employers or covered 
                individuals under the plan or other arrangement, or to 
                the dollar amount or size of the contributions made by 
                participating employers or covered individuals to the 
                plan or other arrangement,
            ``(ii) not less than 85 percent of the covered individuals 
        under the plan or other arrangement are individuals who--
                    ``(I) are employed within a bargaining unit covered 
                by at least one of the collective bargaining agreements 
                with a participating employer (or are covered on the 
                basis of an individual's employment in such a 
                bargaining unit), or
                    ``(II) are present or former employees of the 
                sponsoring employee organization, of an employer who is 
                or was a party to at least one of the collective 
                bargaining agreements, or of the plan or other 
                arrangement or a related plan or arrangement (or are 
                covered on the basis of such present or former 
                employment),
            ``(iii) the plan or other arrangement does not provide 
        benefits to individuals (other than individuals described in 
        clause (ii)(II)) who work outside the standard metropolitan 
        statistical area in which the sponsoring employee organization 
        represents employees (or to individuals (other than individuals 
        described in clause (ii)(II)) on the basis of such work by 
        others), except that in the case of a sponsoring employee 
        organization that represents employees who work outside of any 
        standard metropolitan statistical area, this clause shall be 
        applied by reference to the State in which the sponsoring 
        organization represents employees, and
            ``(iv) the employee organization or other entity sponsoring 
        the plan or other arrangement certifies to the Secretary each 
        year, in a form and manner which shall be prescribed in 
        regulations of the Secretary--
                    ``(I) that the plan or other arrangement meets the 
                requirements of clauses (i), (ii), and (iii), and
                    ``(II) if, for any year, 10 percent or more of the 
                covered individuals under the plan are individuals not 
                described in subclause (I) or (II) of clause (ii), the 
                total number of covered individuals and the total 
                number of covered individuals not so described.
    ``(D)(i) Clause (i) of subparagraph (A) shall not apply to a plan 
or other arrangement that is established or maintained pursuant to one 
or more collective bargaining agreements which the National Labor 
Relations Board determines to have been negotiated or otherwise agreed 
to in a manner or through conduct which violates section 8(a)(2) of the 
National Labor Relations Act (29 U.S.C. 158(a)(2)).
    ``(ii)(I) Whenever a State insurance commissioner has reason to 
believe that this subparagraph is applicable to part or all of a plan 
or other arrangement, the State insurance commissioner may file a 
petition with the National Labor Relations Board for a determination 
under clause (i), along with sworn written testimony supporting the 
petition.
    ``(II) The Board shall give any such petition priority over all 
other petitions and cases, other than other petitions under subclause 
(I) or cases given priority under section 10 of the National Labor 
Relations Act (29 U.S.C. 160).
    ``(III) The Board shall determine, upon the petition and any 
response, whether, on the facts before it, the plan or other 
arrangement was negotiated, created, or otherwise agreed to in a manner 
or through conduct which violates section 8(a)(2) of the National Labor 
Relations Act (29 U.S.C. 158(a)(2)). Such determination shall 
constitute a final determination for purposes of this subparagraph and 
shall be binding in all Federal or State actions with respect to the 
status of the plan or other arrangement under this subparagraph.
    ``(IV) A person aggrieved by the determination of the Board under 
subclause (III) may obtain review of the determination in any United 
States court of appeals in the circuit in which the collective 
bargaining at issue occurred. Commencement of proceedings under this 
subclause shall not, unless specifically ordered by the court, operate 
as a stay of any State administrative or judicial action or proceeding 
related to the status of the plan or other arrangement, except that in 
no case may the court stay, before the completion of the review, an 
order which prohibits the enrollment of new individuals into coverage 
under a plan or arrangement.''.

SEC. 1405. EMPLOYEE LEASING HEALTH CARE ARRANGEMENTS.

    (a) Employee Leasing Health Care Arrangement Defined.--Section 3 of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) is 
amended by adding at the end the following new paragraph:
    ``(43)(A) Subject to subparagraph (B), the term `employee leasing 
health care arrangement' means any labor leasing arrangement, staff 
leasing arrangement, extended employee staffing or supply arrangement, 
or other arrangement under which--
            ``(i) one business or other entity (hereinafter in this 
        paragraph referred to as the `lessee'), under a lease or other 
        arrangement entered into with any other business or other 
        entity (hereinafter in this paragraph referred to as the 
        `lessor'), receives from the lessor the services of individuals 
        to be performed under such lease or other arrangement, and
            ``(ii) benefits consisting of medical care described in 
        section 607(1) are provided to such individuals or such 
        individuals and their dependents as participants and 
        beneficiaries.
    ``(B) Such term does not include an arrangement described in 
subparagraph (A) if, under such arrangement, the lessor retains, both 
legally and in fact, a complete right of direction and control within 
the scope of employment over the individuals whose services are 
supplied under such lease or other arrangement, and such individuals 
perform a specified function for the lessee which is separate and 
divisible from the primary business or operations of the lessee.''.
    (b) Treatment of Employee Leasing Health Care Arrangements as 
Multiple Employer Welfare Arrangements.--Section 3(40) of such Act (29 
U.S.C. 1002(40)) (as amended by section 1404(b)) is further amended by 
adding at the end the following new subparagraph:
    ``(E) The term `multiple employer welfare arrangement' includes any 
employee leasing health care arrangement.''.
    (c) Special Rules for Employee Leasing Health Care Arrangements.--
            (1) In general.--Part 7 of subtitle B of title I of such 
        Act (as added by section 1401(a)) is amended by adding at the 
        end the following new section:

``SEC. 712. SPECIAL RULES FOR EMPLOYEE LEASING HEALTH CARE 
              ARRANGEMENTS.

    ``(a) In General.--The requirements of paragraphs (1), (2), and (3) 
of section 704(b) shall be treated as satisfied in the case of a 
multiple employer welfare arrangement that is an employee leasing 
health care arrangement if the application for certification includes 
information which the Secretary determines to be complete and accurate 
and sufficient to demonstrate that the following requirements are met 
with respect to the arrangement:
            ``(1) 3-year tenure.--The lessor has been in operation for 
        not less than 3 years.
            ``(2) Solicitation restrictions.--Employee leasing services 
        provided under the arrangement are not solicited, advertised, 
        or marketed through licensed insurance agents or brokers acting 
        in such capacity.
            ``(3) Creation of employment relationship.--
                    ``(A) Disclosure statement.--Written notice is 
                provided to each applicant for employment subject to 
                coverage under the arrangement, at the time of 
                application for employment and before commencing 
                coverage under the arrangement, stating that the 
                employer is the lessor under the arrangement.
                    ``(B) Informed consent.--Each such applicant signs 
                a written statement consenting to the employment 
                relationship with the lessor.
                    ``(C) Informed recruitment of lessee's employees.--
                In any case in which the lessor offers employment to an 
                employee of a lessee under the arrangement, the lessor 
                informs each employee in writing that his or her 
                acceptance of employment with the lessor is voluntary 
                and that refusal of such offer will not be deemed to be 
                resignation from or abandonment of current employment.
            ``(4) Requisite employer-employee relationship under 
        arrangement.--Under the employer-employee relationship with the 
        employees of the lessor--
                    ``(A) the lessor retains the ultimate authority to 
                hire, terminate, and reassign such employees,
                    ``(B) the lessor is responsible for the payment of 
                wages, payroll-related taxes, and employee benefits, 
                without regard to payment by the lessee to the lessor 
                for its services,
                    ``(C) the lessor maintains the right of direction 
                and control over its employees, except to the extent 
                that the lessee is responsible for supervision of the 
                work performed consistent with the lessee's 
                responsibility for its product or service, and
                    ``(D) in accordance with section 301(a) of the 
                Labor Management Relations Act, 1947 (29 U.S.C. 
                185(a)), the lessor retains in the absence of an 
                applicable collective bargaining agreement, the right 
                to enter into arbitration and to decide employee 
                grievances, and
                    ``(E) no owner, officer, or director of, or partner 
                in, a lessee is an employee of the lessor, and not more 
                than 10 percent of the individuals covered under the 
                arrangement consist of owners, officers, or directors 
                of, or partners in, such a lessee (or any combination 
                thereof).
    ``(b) Definitions.--For purposes of this section--
            ``(1) Lessor.--The term `lessor' means the business or 
        other entity from which services of individuals are obtained 
        under an employee leasing health care arrangement.
            ``(2) Lessee.--The term `lessee' means a business or other 
        entity which receives the services of individuals provided 
        under an employee leasing health care arrangement.''.
            (2) Clerical amendment.--The table of contents in section 1 
        of such Act (as amended by section 1401(d)) is further amended 
        by inserting after the item relating to section 711 the 
        following new item:

``Sec. 712. Employee leasing health care arrangements.''.

SEC. 1406. ENFORCEMENT PROVISIONS RELATING TO MULTIPLE EMPLOYER WELFARE 
              ARRANGEMENTS AND EMPLOYEE LEASING HEALTH CARE 
              ARRANGEMENTS.

    (a) Enforcement of Filing Requirements.--Section 502 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132) is 
amended--
            (1) in subsection (a)(6), by striking ``subsection (c)(2) 
        or (i) or (l)'' and inserting ``paragraph (2) or (4) of 
        subsection (c) or subsection (i) or (l)''; and
            (2) by adding at the end of subsection (c) the following 
        new paragraph:
    ``(4) The Secretary may assess a civil penalty against any person 
of up to $1,000 a day from the date of such person's failure or refusal 
to file the information required to be filed with the Secretary under 
section 101(g).''.
    (b) Actions by States in Federal Court.--Section 502(a) of such Act 
(29 U.S.C. 1132(a)) is amended--
            (1) in paragraph (5), by striking ``or'' at the end;
            (2) in paragraph (6), by striking the period and inserting 
        ``, or''; and
            (3) by adding at the end the following:
            ``(7) by a State official having authority under the law of 
        such State to enforce the laws of such State regulating 
        insurance, to enjoin any act or practice which violates any 
        provision of part 7 which such State has the power to enforce 
        under part 7.''.
    (c) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of such Act (29 U.S.C. 1131) is amended--
            (1) by inserting ``(a)'' after ``Sec. 501.''; and
            (2) by adding at the end the following new subsection:
    ``(b) Any person who, either willfully or with willful blindness, 
falsely represents, to any employee, any employee's beneficiary, any 
employer, the Secretary, or any State, an arrangement established or 
maintained for the purpose of offering or providing any benefit 
described in section 3(1) to employees or their beneficiaries as--
            ``(1) being a certified multiple employer health plan (as 
        defined in section 701(9)),
            ``(2) being an employee leasing health care arrangement 
        under a certification granted under part 7, or
            ``(3) having been established or maintained under or 
        pursuant to a collective bargaining agreement,
shall, upon conviction, be imprisoned not more than five years, be 
fined under title 18, United States Code, or both.''.
    (d) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
    ``(m)(1) Subject to paragraph (2), upon application by the 
Secretary showing the operation, promotion, or marketing of a multiple 
employer welfare arrangement providing benefits consisting of medical 
care described in section 607(1) that--
            ``(A) is not licensed, registered, or otherwise approved 
        under the insurance laws of the States in which the arrangement 
        offers or provides benefits, or
            ``(B) is not operating in accordance with the terms of a 
        certification granted by the Secretary under part 7,
a district court of the United States shall enter an order requiring 
that the arrangement cease activities.
    ``(2) Paragraph (1) shall not apply in the case of a multiple 
employer welfare arrangement if the arrangement shows that--
            ``(A) coverage under it is fully insured, within the 
        meaning of section 701(8),
            ``(B) it is licensed, registered, or otherwise approved in 
        each State in which it offers or provides benefits, except to 
        the extent that such State does not require licensing, 
        registration, or approval of multiple employer welfare 
        arrangements under which all coverage is fully insured, and
            ``(C) with respect to each such State, it is operating in 
        accordance with applicable State insurance laws that are not 
        superseded under section 514.
    ``(3) The court may grant such additional equitable or remedial 
relief, including any relief available under this title, as it deems 
necessary to protect the interests of the public and of persons having 
claims for benefits against the arrangement.''.
    (e) Responsibility for Claims Procedure.--Section 503 of such Act 
(29 U.S.C. 1133) is amended by adding at the end (after and below 
paragraph (2)) the following new sentence: ``The terms of each multiple 
employer welfare arrangement to which this section applies and which 
provides benefits consisting of medical care described in section 
607(1) shall require the operating committee or the named fiduciary (as 
applicable) to ensure that the requirements of this section are met in 
connection with claims filed under the arrangement.''.

SEC. 1407. FILING REQUIREMENTS FOR MULTIPLE EMPLOYER WELFARE 
              ARRANGEMENTS PROVIDING HEALTH BENEFITS.

    Section 101 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1021) is amended--
            (1) by redesignating subsection (g) as subsection (h); and
            (2) by inserting after subsection (f) the following new 
        subsection:
    ``(g)(1) Each multiple employer welfare arrangement shall file with 
the Secretary a registration statement described in paragraph (2) 
within 60 days before commencing operations (in the case of an 
arrangement commencing operations on or after January 1, 1997) and no 
later than February 15 of each year (in the case of an arrangement in 
operation since the beginning of such year), unless, as of the date by 
which such filing otherwise must be made, such arrangement provides no 
benefits consisting of medical care described in section 607(1).
    ``(2) Each registration statement--
            ``(A) shall be filed in such form, and contain such 
        information concerning the multiple employer welfare 
        arrangement and any persons involved in its operation 
        (including whether coverage under the arrangement is fully 
        insured), as shall be provided in regulations which shall be 
        prescribed by the Secretary, and
            ``(B) if coverage under the arrangement is not fully 
        insured, shall contain a certification that copies of such 
        registration statement have been transmitted by certified mail 
        to--
                    ``(i) in the case of an arrangement which is a 
                certified multiple employer health plan (as defined in 
                section 701(9)), the State insurance commissioner of 
                the domicile State of such arrangement, or
                    ``(ii) in the case of an arrangement which is not a 
                certified multiple employer health plan, the State 
                insurance commissioner of each State in which the 
                arrangement is located.
    ``(3) The person or persons responsible for filing the annual 
registration statement are--
            ``(A) the trustee or trustees so designated by the terms of 
        the instrument under which the multiple employer welfare 
        arrangement is established or maintained, or
            ``(B) in the case of a multiple employer welfare 
        arrangement for which the trustee or trustees cannot be 
        identified, or upon the failure of the trustee or trustees of 
        an arrangement to file, the person or persons actually 
        responsible for the acquisition, disposition, control, or 
        management of the cash or property of the arrangement, 
        irrespective of whether such acquisition, disposition, control, 
        or management is exercised directly by such person or persons 
        or through an agent designated by such person or persons.
    ``(4) Any agreement entered into under section 506(c) with a State 
as the primary domicile State with respect to any multiple employer 
welfare arrangement shall provide for simultaneous filings of reports 
required under this subsection with the Secretary and with the State 
insurance commissioner of such State.''.

SEC. 1408. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

    Section 506 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
    ``(c) Responsibility With Respect To Multiple Employer Welfare 
Arrangements.--
            ``(1) State enforcement.--
                    ``(A) Agreements with states.--A State may enter 
                into an agreement with the Secretary for delegation to 
                the State of some or all of the Secretary's authority 
                under sections 502 and 504 to enforce the provisions of 
                this title applicable to multiple employer welfare 
                arrangements which are or have been certified multiple 
                employer health plans (as defined in section 701(9)). 
                The Secretary shall enter into the agreement if the 
                Secretary determines that the delegation provided for 
                therein would not result in a lower level or quality of 
                enforcement of the provisions of this title.
                    ``(B) Delegations.--Any department, agency, or 
                instrumentality of a State to which authority is 
                delegated pursuant to an agreement entered into under 
                this paragraph may, if authorized under State law and 
                to the extent consistent with such agreement, exercise 
                the powers of the Secretary under this title which 
                relate to such authority.
                    ``(C) Concurrent authority of the secretary.--If 
                the Secretary delegates authority to a State in an 
                agreement entered into under subparagraph (A), the 
                Secretary may continue to exercise such authority 
                concurrently with the State.
                    ``(D) Recognition of primary domicile state.--In 
                entering into any agreement with a State under 
                subparagraph (A), the Secretary shall ensure that, as a 
                result of such agreement and all other agreements 
                entered into under subparagraph (A), only one State 
                will be recognized, with respect to any particular 
                multiple employer welfare arrangement, as the primary 
                domicile State to which authority has been delegated 
                pursuant to such agreements.
            ``(2) Assistance to states.--The Secretary shall--
                    ``(A) provide enforcement assistance to the States 
                with respect to multiple employer welfare arrangements, 
                including, but not limited to, coordinating Federal and 
                State efforts through the establishment of cooperative 
                agreements with appropriate State agencies under which 
                the Pension and Welfare Benefits Administration keeps 
                the States informed of the status of its cases and 
                makes available to the States information obtained by 
                it,
                    ``(B) provide continuing technical assistance to 
                the States with respect to issues involving multiple 
                employer welfare arrangements and this Act,
                    ``(C) assist the States in obtaining from the 
                Office of Regulations and Interpretations timely and 
                complete responses to requests for advisory opinions on 
                issues described in subparagraph (B), and
                    ``(D) distribute copies of all advisory opinions 
                described in subparagraph (C) to the State insurance 
                commissioner of each State.''.

SEC. 1409. EFFECTIVE DATE; TRANSITIONAL RULES.

    (a) Effective Date.--The amendments made by this part shall take 
effect January 1, 1997, except that the Secretary of Labor shall first 
issue regulations to carry out such amendments by not later than 
January 1, 1996. The Secretary shall issue all regulations necessary to 
carry out such amendments before the effective date thereof.
    (b) Transitional Rules.--If the sponsor of a multiple employer 
welfare arrangement which, as of January 1, 1996, provides benefits 
consisting of medical care described in section 607(1) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1167(1)) files with 
the Secretary of Labor an application for a certification under part 7 
of subtitle B of title I of such Act within 180 days after such date 
and the Secretary has not, as of 90 days after receipt of such 
application, found such application to be materially deficient, section 
514(b)(6)(A) of such Act (29 U.S.C. 1144(b)(6)(A)) shall not apply with 
respect to such arrangement during the 18-month period following such 
date. If the Secretary determines, at any time after the date of 
enactment of this Act, that any such exclusion from coverage under the 
provisions of such section 514(b)(6)(A) of such Act of a multiple 
employer welfare arrangement would be detrimental to the interests of 
individuals covered under such arrangement, such exclusion shall cease 
as of the date of the determination. Any determination made by the 
Secretary under this subsection shall be in the Secretary's sole 
discretion.

   PART 2--SIMPLIFYING FILING OF REPORTS FOR EMPLOYERS COVERED UNDER 
MULTIPLE EMPLOYER WELFARE ARRANGEMENTS PROVIDING FULLY INSURED COVERAGE 
                       CONSISTING OF MEDICAL CARE

SEC. 1411. SINGLE ANNUAL FILING FOR ALL PARTICIPATING EMPLOYERS.

    (a) In General.--Section 110 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1030), as amended by section 1401(c) of 
this subtitle, is amended by adding at the end the following new 
subsection:
    ``(d) The Secretary shall prescribe by regulation or otherwise an 
alternative method providing for the filing of a single annual report 
(as referred to in section 104(a)(1)(A)) with respect to all employers 
who are participating employers under a multiple employer welfare 
arrangement under which all coverage consists of medical care 
(described in section 607(1)) and is fully insured (as defined in 
section 701(8)).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act. The Secretary of 
Labor shall prescribe the alternative method referred to in section 
110(d) of the Employee Retirement Income Security Act of 1974, as added 
by such amendment, within 90 days after the date of the enactment of 
this Act.

              Subtitle F--Definitions; General Provisions

                                                    Title I, Subtitle F

                          PART 1--DEFINITIONS

SEC. 1901. GENERAL DEFINITIONS.

    For purposes of this Act:
            (1) Applicable regulatory authority.--The term ``applicable 
        regulatory authority'' means, with respect to a carrier 
        operating in a State--
                    (A) the State insurance commissioner, or
                    (B) the Secretary, in the case described in section 
                1302(b)(2).
            (2) Family member.--
                    (A) In general.--Individuals are considered to be 
                members of a family if--
                            (i) they are married, or
                            (ii) they have a legal parent-to-child 
                        relationship (whether by natural birth or 
                        adoption), if the child is--
                                    (I) under 19 years of age,
                                    (II) is under 25 years of age and a 
                                full-time student, or
                                    (III) an unmarried dependent 
                                regardless of age who is incapable of 
                                self-support because of mental or 
                                physical disability which existed 
                                before age 22.
                    (B) Special rules.--Family members--
                            (i) include an adopted child and a 
                        recognized natural child;
                            (ii) include a stepchild or foster child 
                        with respect to an individual but only if the 
                        child lives with the individual in a regular 
                        parent-child relationship; and
                            (iii) include such other children as the 
                        Secretary may specify, but shall not include an 
                        emancipated minor.
            (3) Prisoner.--The term ``prisoner'' means, as specified by 
        the Secretary, an individual during a period of imprisonment 
        under Federal, State, or local authority after conviction as an 
        adult.
            (4) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (5) State.--The term ``State'' means the 50 States, the 
        District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
        American Samoa, and the Northern Mariana Islands.

SEC. 1902. DEFINITIONS RELATING TO EMPLOYMENT.

    (a) Application of ERISA Definitions.--Except as otherwise provided 
in this Act, terms used in this Act shall have the meanings applicable 
to such terms under section 3 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002).
    (b) Additional Definitions.--For purposes of this title:
            (1) Countable employee.--The term ``countable employee'' 
        means, with respect to an employer for a month, any employee 
        other than an employee whose normal work week is less than 10 
        hours.
            (2) Large employer.--The term ``large employer'' means an 
        employer that is not a small employer (as defined in paragraph 
        (4)).
            (3) Qualifying employee.--
                    (A) In general.--The term ``qualifying employee'' 
                means, with respect to an employer for a month, any 
                employee other than--
                            (i) a part-time, seasonal, or temporary 
                        employee (as defined in subparagraph (B)); or
                            (ii) an employee who is a child described 
                        in section 1901(2)(A)(ii).
                    (B) Part-time, seasonal, or temporary employee 
                defined.--For purposes of subparagraph (A), the term 
                ``part-time, seasonal, or temporary employee'' means 
                any of the following employees with respect to a month:
                            (i) Certain part-time employees.--Any 
                        employee whose normal work week is reasonably 
                        expected as of the first day of such month to 
                        be less than 20 hours.
                            (ii) Seasonal or temporary employees.--Any 
                        employee who is not reasonably expected as of 
                        the first day of such month to be employed by 
                        the employer for a period of 120 consecutive 
                        days during any 365-day period that includes 
                        such first day.
                            (iii) Delay for certain part-time 
                        employees.--Any employee whose normal work week 
                        is reasonably expected as of the first day of 
                        such month to be at least 20 hours, but less 
                        than 35 hours, and the normal work week of the 
                        employee during the preceding 3 months was less 
                        than 20 hours.
            (4) Small employer.--The term ``small employer'' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but less than 100 countable employees on a 
        typical business day. For the purposes of this paragraph, the 
        term ``employee'' includes a self-employed individual. For 
        purposes of determining if an employer is a small employer, 
        rules similar to the rules of subsection (b) and (c) of section 
        414 of the Internal Revenue Code of 1986 shall apply.

SEC. 1903. DEFINITIONS RELATING TO HEALTH COVERAGE, PLANS, AND 
              CARRIERS.

    Except as otherwise provided, for purposes of this Act:
            (1) Benchmark coverage.--The term ``benchmark coverage'' 
        means the standard option of the Blue Cross-Blue Shield plan 
        offered under the Federal Employees Health Benefits Program 
        under chapter 89 of title 5, United States Code, as in effect 
        during 1994.
            (2) Carrier.--The term ``carrier'' means a licensed 
        insurance company, an entity offering prepaid hospital or 
        medical services, and a health maintenance organization, and 
        includes a similar organization regulated under State law for 
        solvency.
            (3) Certified multiple employer health plan.--The term 
        ``certified multiple employer health plan'' means a multiple 
        employer welfare arrangement treated as an employee welfare 
        benefit plan by reason of a certification under part 7 of 
        subtitle B of title I of the Employee Retirement Income 
        Security Act of 1974 (as added by section 1401(a)).
            (4) Class of family coverage.--The term ``class of family 
        coverage'' means the 4 classes described in section 1021(a)(3).
            (5) Fair rating area.--The term ``fair rating area'' means 
        a geographic area identified by a State for purposes of section 
        1021(a)(2).
            (6) Group health plan.--The term ``group health plan'' 
        means an employee welfare benefit plan providing medical care 
        (as defined in section 213(d) of the Internal Revenue Code of 
        1986) to participants or beneficiaries directly or through 
        insurance, reimbursement, or otherwise, but does not include 
        any type of coverage excluded from the definition of a health 
        insurance coverage under paragraph (8)(B).
            (7) Health coverage.--The term ``health coverage'' means 
        health insurance coverage provided by a carrier or medical care 
        provided under a group health plan.
            (8) Health insurance coverage.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``health insurance coverage'' means any 
                hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization group contract offered by a 
                carrier.
                    (B) Exception.--Such term does not include any of 
                the following (or any combination of the following):
                            (i) Coverage only for accident, dental, 
                        vision, disability income, or long-term care 
                        insurance, or any combination thereof.
                            (ii) Medicare supplemental health 
                        insurance.
                            (iii) Coverage issued as a supplement to 
                        liability insurance.
                            (iv) Liability insurance, including general 
                        liability insurance and automobile liability 
                        insurance.
                            (v) Workers' compensation or similar 
                        insurance.
                            (vi) Automobile medical-payment insurance.
                            (vii) Coverage for a specified disease or 
                        illness.
                            (viii) A hospital or fixed indemnity 
                        policy.
                            (ix) Coverage provided exclusively to 
                        individuals who are not eligible individuals.
            (9) Health maintenance organization.--The term ``health 
        maintenance organization'' includes, as defined in standards 
        established under section 1103, an organization that provides 
        health insurance coverage which meets specified standards and 
        under which health services are offered to be provided on a 
        prepaid, at-risk basis primarily through a defined set of 
        providers.
            (10) Health plan purchasing organization.--The term 
        ``health plan purchasing organization'' means an organization 
        established under subtitle A of title VI.
            (11) Individual/small group market.--The term ``individual/
        small group market'' means the insurance market offered--
                    (A) to individuals seeking health insurance 
                coverage on behalf of themselves (and their dependents) 
                insofar as no employer is seeking such coverage on 
                behalf of the individual, and
                    (B) to small employers seeking health insurance 
                coverage on behalf of their employees (and their 
                dependents),
        regardless of whether or not such coverage is made available 
        directly or through a multiple employer welfare arrangement, 
        association, or otherwise.
            (12) Managed care arrangements.--
                    (A) Managed care arrangement.--The term ``managed 
                care arrangement'' means, with respect to a group 
                health plan or under health insurance coverage, an 
                arrangement under such plan or coverage under which 
                providers agree to provide items and services covered 
                under the arrangement to individuals covered under the 
                plan or who have such coverage.
                    (B) Provider network.--The term ``provider 
                network'' means, with respect to a group health plan or 
                health insurance coverage, providers who have entered 
                into an agreement described in subparagraph (A).
            (13) Multiple employer welfare arrangement.--The term 
        ``multiple employer welfare arrangement'' shall have the 
        meaning applicable under section 3(40) of the Employee 
        Retirement Income Security Act of 1974.
            (14) NAIC.--The term ``NAIC'' means the National 
        Association of Insurance Commissioners.
            (15) Options.--Each of the following is a ``type of 
        coverage option'' in relation to standard coverage:
                    (A) Fee-for-service option.--Standard coverage is 
                considered to provide a ``fee-for-service option'' if, 
                regardless of whether covered individuals may receive 
                benefits through a provider network, benefits with 
                respect to the covered items and services in the 
                coverage are made available for such items and services 
                provided through any lawful provider of such covered 
                items and services and payment is made to such a 
                provider whether or not there is a contractual 
                arrangement between the provider and the carrier or 
                plan.
                    (B) Managed care option.--Standard coverage is 
                considered to provide a ``managed care option'' if 
                benefits with respect to the covered items and services 
                in the coverage are made available exclusively through 
                a provider network, except in the case of emergency 
                services and as otherwise required under law.
                    (C) Point-of-service option.--Standard coverage is 
                considered to provide a ``point-of-service option'' if 
                the benefits with respect to covered items and services 
                in the coverage are made available principally through 
                a managed care arrangement, with the choice of the 
                enrollee to obtain such benefits for items and services 
                provided through any lawful provider of such covered 
                items and services. The coverage may provide for 
                different cost sharing schedules based on whether the 
                items and services are provided through such an 
                arrangement or outside such an arrangement.
            (16) Qualified health coverage.--The term ``qualified 
        health coverage'' has the meaning given such term in section 
        1101.
            (17) Standard coverage.--The term ``standard coverage'' 
        means coverage provided consistent with section 1102(a).
            (18) State commissioner of insurance.--The term ``State 
        commissioner of insurance'' includes a State superintendent of 
        insurance.

SEC. 1904. DEFINITIONS RELATING TO RESIDENCE AND IMMIGRATION STATUS.

    Except as otherwise provided, for purposes of this Act:
            (1) Alien permanently residing in the united states under 
        color of law.--The term ``alien permanently residing in the 
        United States under color of law'' means an alien lawfully 
        admitted for permanent residence (within the meaning of section 
        101(a)(20) of the Immigration and Nationality Act), and 
        includes any of the following (such status not having changed):
                    (A) An alien who is admitted as a refugee under 
                section 207 of the Immigration and Nationality Act.
                    (B) An alien who is granted asylum under section 
                208 of such Act.
                    (C) An alien whose deportation is withheld under 
                section 243(h) of such Act.
                    (D) An alien whose deportation is suspended 
                pursuant to section 244 of such Act.
                    (E) An alien who is granted conditional entry 
                pursuant to section 203(a)(7) of such Act as in effect 
                before April 1, 1980.
                    (F) An alien who is admitted for temporary 
                residence under section 210, 210A, or 245A of such Act.
                    (G) An alien who is within a class of aliens 
                lawfully present in the United States pursuant to any 
                other provision of such Act, if (i) the Attorney 
                General determines that the continued presence of such 
                class of aliens serves a humanitarian or other 
                compelling public interest, and (ii) the Secretary 
                determines that such interest would be further served 
                by treating each such alien within such class as a 
                ``legal permanent resident'' for purposes of this Act 
                or who has been granted extended voluntary departure as 
                a member of a nationality group.
                    (H) An alien who is the spouse or unmarried child 
                under 21 years of age of a citizen of the United 
                States, or the parent of such a citizen if the citizen 
                is over 21 years of age, and with respect to whom an 
                application for adjustment to lawful permanent 
                residence is pending.
                    (I) An alien within such other classification of 
                permanent resident aliens as the Secretary may 
                establish by regulation.
            (2) Long-term nonimmigrant.--The term ``long-term 
        nonimmigrant'' means a nonimmigrant described in subparagraph 
        (E), (H), (I), (K), (L), (N), (O), (Q), or (R) of section 
        101(a)(15) of the Immigration and Nationality Act.
            (3) Qualifying individual.--The term ``qualifying 
        individual'' means, an individual who is a resident of the 
        United States, who is not a prisoner, and is--
                    (A) a citizen or national of the United States;
                    (B) an alien permanently residing in the United 
                States under color of law (as defined in paragraph 
                (1)); or
                    (C) a long-term nonimmigrant (as defined in 
                paragraph (2)).

SEC. 1905. EFFECTIVE DATES.

    The requirements of this title shall apply with respect to--
            (1) group health plans for plan years beginning on or after 
        January 1, 1997, and
            (2) carriers (with respect to coverage other than under a 
        group health plan) as of January 1, 1997.

    PART 2--REPORT AND RECOMMENDATIONS ON HEALTH COVERAGE AND ACCESS

SEC. 1911. OBJECTIVE OF FULL ACCESS AND COVERAGE.

    It is an objective of this Act to assure by 2002 that--
            (1) all eligible individuals in the United States have 
        access to private or public health coverage, and
            (2) at least 95 percent of such individuals have such 
        coverage.

SEC. 1912. REPORT AND RECOMMENDATIONS ON ACHIEVEMENT OF OBJECTIVE FOR 
              HEALTH COVERAGE AND ACCESS.

    (a) Study.--The Secretary shall monitor and evaluate the extent to 
which eligible individuals in the United States have access to health 
coverage and have health coverage.
    (b) Report.--Not later than January 31, 2002, the Secretary shall 
submit to Congress a report on the evaluation conducted under 
subsection (a). The Secretary shall include in the report a 
determination of whether the objective described in section 1911 has 
been met.
    (c) Recommendations.--If the Secretary determines that such 
objective has not been met, the Secretary shall include in the report 
such recommendations as may be appropriate to achieve the objective at 
the earliest possible date.

           TITLE II--REMOVAL OF FINANCIAL BARRIERS TO ACCESS

                                                               Title II

                       table of contents of title

    Subtitle A--Tax Deductibility for Individuals and Self-Employed

Sec. 2001. Deduction for health insurance costs of self-employed 
                            individuals increased and made permanent.
Sec. 2002. Deduction for health insurance costs of individuals who are 
                            not self-employed.
Sec. 2003. Restrictions on health benefits provided through cafeteria 
                            plans and flexible spending arrangements.
  Subtitle B--Premium and Cost-Sharing Subsidy Program for Low-Income 
                              Individuals

Sec. 2100. Description of transition from current medicaid system to 
                            new acute care low-income subsidy program 
                            for AFDC recipients and non-cash medicaid 
                            beneficiaries.
Sec. 2101. State premium and cost-sharing subsidy programs.
    ``TITLE XXI--STATE ACUTE CARE BENEFITS PROGRAMS FOR LOW-INCOME 
               INDIVIDUALS; FINANCING FAILSAFE MECHANISM

       ``Part A--State Premium and Cost-Sharing Subsidy Programs

        ``Sec. 2101. Establishment of State programs.
        ``Sec. 2102. Eligibility.
        ``Sec. 2103. Premium and cost-sharing assistance.
        ``Sec. 2104. Eligibility determinations.
        ``Sec. 2105. End-of-year reconciliation for premium assistance.
        ``Sec. 2106. Payments to States.
        ``Sec. 2107. Requirement of State maintenance-of-effort 
                            payments.
     ``Part C--Financing Failsafe Mechanism and General Provisions

        ``Sec. 2141. Ensuring deficit neutral spending on premium and 
                            cost-sharing assistance and supplemental 
                            acute care benefits.
        ``Sec. 2142. Payments for administrative expenses under title.
        ``Sec. 2143. Health care assurance trust fund.
        ``Sec. 2144. Limitation on use of funds for abortions.
        ``Sec. 2145. Audits.
        ``Sec. 2146. Demonstration project authority.
        ``Sec. 2147. Definitions and determinations of income.''
Sec. 2102. Operation of program as State plan requirement under 
                            medicaid.
Sec. 2103. Application of miscellaneous provisions.

                                                   Title II, Subtitle A

    Subtitle A--Tax Deductibility for Individuals and Self-Employed

SEC. 2001. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
              INDIVIDUALS INCREASED AND MADE PERMANENT.

    (a) In General.--Paragraph (1) of section 162(l) of the Internal 
Revenue Code of 1986 (relating to special rules for health insurance 
costs of self-employed individuals) is amended by striking ``25 
percent'' and inserting ``the applicable percentage''.
    (b) Deduction Made Permanent; Applicable Percentage.--Paragraph (6) 
of section 162(l) of such Code is amended to read as follows:
            ``(6) Applicable percentage.--For purposes of paragraph 
        (1)--

``In the case of taxable years beginning  The applicable percentage is: 
 in calendar year:                                                      
  1994, 1995, 1996, 1997, or 1998.......  25 percent                  
  1999..................................  50 percent                  
  2000 or thereafter....................  100 percent.''                
                                                                        

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 2002. DEDUCTION FOR HEALTH INSURANCE COSTS OF INDIVIDUALS WHO ARE 
              NOT SELF-EMPLOYED.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions) is amended by redesignating section 220 as section 221 and 
by inserting after section 219 the following new section:

``SEC. 220. HEALTH INSURANCE COSTS OF INDIVIDUALS WHO ARE NOT SELF-
              EMPLOYED.

    ``(a) In General.--In the case of an individual who is not a self-
employed individual (as defined in section 401(c)(1)), there shall be 
allowed as a deduction an amount equal to 25 percent of the amount paid 
during 
the taxable year for insurance which constitutes medical care for the 
taxpayer, his spouse, and dependents.
    ``(b) Coordination With Deduction for Self-employed Individuals.--
The amount which would (but for this paragraph) be allowed as a 
deduction under subsection (a) for the taxable year shall be reduced 
(but not below zero) by the amount (if any) allowed as a deduction 
under section 162(l) for such taxable year.
    ``(c) Other Coverage.--Subsection (a) shall not apply to any 
taxpayer for any calendar month for which the taxpayer is eligible to 
participate in any subsidized health plan maintained by any employer of 
the taxpayer or of the spouse of the taxpayer.
    ``(d) Coordination With Medical Deduction, Etc.--Any amount paid by 
a taxpayer for insurance to which subsection (a) applies shall not be 
taken into account in computing the amount allowable to the taxpayer as 
a deduction under section 213(a).''
    (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
adding at the end the following new paragraph:
            ``(16) Health insurance costs.--The deduction allowed by 
        section 220.''
    (c) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the last 
item and inserting the following new items:

                              ``Sec. 220. Health insurance costs of 
                                        individuals who are not self-
                                        employed.
                              ``Sec. 221. Cross reference.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 2003. RESTRICTIONS ON HEALTH BENEFITS PROVIDED THROUGH CAFETERIA 
              PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

    (a) Flexible Spending Arrangements.--Section 106 of the Internal 
Revenue Code of 1986 (relating to contributions by employer to accident 
and health plans) is amended to read as follows:

``SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT AND HEALTH PLANS.

    ``(a) General Rule.--Except as otherwise provided in this section, 
gross income of an employee does not include employer-provided coverage 
under an accident or health plan.
    ``(b) Inclusion of Certain Benefits Provided Through Flexible 
Spending Arrangements.--Gross income of an employee shall include such 
employer-provided coverage which is provided through a flexible 
spending or similar arrangement if any amount of deductible, copayment, 
coinsurance, or similar cost-sharing may be paid for or reimbursed 
under such arrangement.''
    (b) Cafeteria Plans.--Subsection (f) of section 125 of such Code 
(defining qualified benefits) is amended by adding at the end thereof 
the following new sentence: ``Such term shall not include any benefits 
or coverage under an accident or health plan if any amount of 
deductible, copayment, coinsurance, or similar cost-sharing under such 
a plan, or more than 20 percent of any premium (or comparable amount in 
the case of a plan not provided through insurance) for such a plan, may 
be paid for or reimbursed under the cafeteria plan.''
    (c) Employment Tax Treatment.--
            (1) Social security tax.--
                    (A) Subsection (a) of section 3121 of such Code is 
                amended by inserting after paragraph (21) the following 
                new sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
                    (B) Subsection (a) of section 209 of the Social 
                Security Act is amended by inserting after paragraph 
                (21) the following new sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b) of the Internal Revenue Code of 1986.''
            (2) Railroad retirement tax.--Paragraph (1) of section 
        3231(e) of such Code is amended by adding at the end thereof 
        the following new sentence: ``Nothing in clause (i) of the 
        second sentence of this paragraph shall exclude from the term 
        `compensation' any amount which is required to be included in 
        gross income under section 106(b).''
            (3) Unemployment tax.--Subsection (b) of section 3306 of 
        such Code is amended by inserting after paragraph (16) the 
        following new sentence:
``Nothing in paragraph (2) shall exclude from the term `wages' any 
amount which is required to be included in gross income under section 
106(b).''
            (4) Wage withholding.--Subsection (a) of section 3401 of 
        such Code is amended by adding at the end thereof the following 
        new sentence:
``Nothing in the preceding provisions of this subsection shall exclude 
from the term `wages' any amount which is required to be included in 
gross income under section 106(b).''
    (d) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

  Subtitle B--Premium and Cost-Sharing Subsidy Program for Low-Income 
                              Individuals

SEC. 2100. DESCRIPTION OF TRANSITION FROM CURRENT MEDICAID SYSTEM TO 
              NEW ACUTE CARE LOW-INCOME SUBSIDY PROGRAMS FOR AFDC 
              RECIPIENTS AND NON-CASH MEDICAID BENEFICIARIES.

                                                   Title II, Subtitle B

    The amendments made by this subtitle and title III provide for a 
transition from the current medicaid system to a new system of acute 
care low-income assistance through the following:
            (1) Immediate medicaid reforms.--During 1995, 1996, and 
        1997, States are permitted--
                    (A) to enroll medicaid recipients under coordinated 
                care arrangements, but are restricted from eliminating 
                eligibility categories currently in effect; and
                    (B) to provide certain classes of acute care 
                services to such recipients through a State 
                supplemental benefits program,
        under the amendments made by section 3101.
            (2) Establishment of new premium and cost-sharing subsidy 
        program and supplemental benefits program and integration of 
        afdc and non-cash beneficiaries.--Beginning January 1, 1998--
                    (A) States are required to establish a new premium 
                and cost-sharing subsidy program under part A of title 
                XXI of the Social Security Act (as added by section 
                2101); and
                    (B) with respect to AFDC and non-cash medicaid 
                beneficiaries and other low-income individuals--
                            (i) States are required to provide for 
                        premium and cost-sharing assistance for core 
                        benefits for premium and cost-sharing 
                        assistance eligible individuals through that 
                        program and additional benefits through a 
                        supplemental benefits grant program under part 
                        B of title XXI of the Social Security Act (as 
                        added by section 3101), and
                            (ii) States will no longer provide such 
                        individuals with medicaid coverage for acute 
                        care services.

SEC. 2101. STATE PREMIUM AND COST-SHARING SUBSIDY PROGRAMS.

    (a) Requirements for Programs.--The Social Security Act is amended 
by adding at the end the following new title:

    ``TITLE XXI--STATE ACUTE CARE BENEFITS PROGRAMS FOR LOW-INCOME 
               INDIVIDUALS; FINANCING FAILSAFE MECHANISM

       ``Part A--State Premium and Cost-Sharing Subsidy Programs

``SEC. 2101. ESTABLISHMENT OF STATE PROGRAMS.

    ``(a) In General.--As a requirement under section 1902(a)(65), 
effective January 1, 1998, each State shall establish and maintain a 
premium and cost-sharing subsidy program (in this title referred to as 
a `State subsidy program') that provides for--
            ``(1) premium assistance described in section 2103 to 
        premium assistance eligible individuals described in section 
        2102(a) in accordance with this part,
            ``(2) cost-sharing assistance described in section 2103 to 
        cost-sharing assistance eligible individuals described in 
        section 2102(b) in accordance with this part, and
            ``(3) State maintenance-of-effort payments in accordance 
        with section 2107.
    ``(b) Availability of Funds.--Each State with a State subsidy 
program approved under this part is entitled, for calendar quarters 
beginning on or after January 1, 1998, to payment under section 2106.
    ``(c) Approval of State Programs.--The Secretary may not approve a 
State subsidy program unless the State has submitted a detailed 
description that specifies the form and manner in which it will carry 
out the program and the Secretary finds that the program meets the 
requirements of this part.
  ``(d) Designation of State Agency.--A State shall designate an 
appropriate State agency to administer the State subsidy program. Such 
agency shall be the same agency as the agency designated to administer 
the State supplemental medical benefits program under part B.

``SEC. 2102. ELIGIBILITY.

    ``(a) Assistance.--
            ``(1) Premium assistance.--Each premium assistance eligible 
        individual (as defined in subsection (b)) is entitled to 
        premium assistance under section 2103(a)(1).
            ``(2) Cost-sharing assistance.--Each cost-sharing 
        assistance eligible individual (as defined in subsection (c)) 
        is entitled to cost-sharing assistance described in section 
        2103(a)(2).
    ``(b) Premium Assistance Eligible Individual Defined.--
            ``(1) In general.--In this title, subject to the succeeding 
        provisions of this section and part C, the term `premium 
        assistance eligible individual' means an individual who has 
        been determined under section 2104 to have family modified 
        adjusted income below the following applicable percentage of 
        the applicable poverty line (as defined in section 2147(2)):

                                                             Applicable
``Calendar year:
                                                            percentage:
        1998.........................................           100    
        1999.........................................           115    
        2000.........................................           130    
        2001.........................................           145    
        2002.........................................           160    
        2003.........................................           175    
        2004.........................................           200    
            ``(2) Special rule for children and pregnant women.--In 
        this title, subject to the succeeding provisions of this 
        section and part C, the term `premium assistance eligible 
        individual' includes an individual who is a child under 19 
        years of age or a pregnant woman and who has been determined 
        under section 2104 to have family modified adjusted income 
        below the following applicable percentage of the applicable 
        poverty line:

                                                             Applicable
``Calendar year:
                                                            percentage:
        1998.........................................           185    
        1999.........................................           185    
        2000.........................................           185    
        2001.........................................           185    
        2002.........................................           185    
        2003.........................................           200    
        2004.........................................           240    
    ``(c) Cost-Sharing Assistance Eligible Individual Defined.--In this 
title, subject to the succeeding provisions of this section and part C, 
the term `cost-sharing assistance eligible individual' means an 
individual who has been determined under section 2104 to have family 
modified adjusted income below 100 percent of the applicable poverty 
line.
    ``(d) Exclusion of Certain Individuals.--In this title--
            ``(1) In general.--The terms `premium assistance eligible 
        individual' and `cost-sharing assistance eligible individual' 
        do not include, with respect to a month, any of the following 
        individuals:
                    ``(A) Medicare beneficiary.--An individual who is 
                entitled to benefits under part A or B of title XVIII 
                for the month.
                    ``(B) SSI recipient.--An individual who is an SSI 
                recipient (as defined in paragraph (2)) for the month.
                    ``(C) Inmates.--An individual who as of the first 
                day of the month is an inmate of a public institution 
                (except as a patient of a medical institution).
                    ``(D) Certain aliens.--An alien who is not lawfully 
                admitted for permanent residence or not otherwise 
                permanently residing in the United States under color 
                of law (as defined in paragraph (3)).
                    ``(E) Nonresidents.--An individual who is not 
                residing in any State.
            ``(2) SSI recipient.--The term `SSI recipient' means, for a 
        month, an individual--
                    ``(A) with respect to whom supplemental security 
                income benefits are being paid under title XVI for the 
                month,
                    ``(B) who is receiving a supplemental payment under 
                section 1616 or under section 212 of Public Law 93-66 
                for the month,
                    ``(C) who is receiving monthly benefits under 
                section 1619(a) (whether or not pursuant to section 
                1616(c)(3)) for the month, or
                    ``(D) who is treated under section 1619(b) as 
                receiving supplemental security income benefits in a 
                month for purposes of title XIX.
            ``(3) Alien permanently residing in the united states under 
        color of law.--The term `alien permanently residing in the 
        United States under color of law' means an alien lawfully 
        admitted for permanent residence (within the meaning of section 
        101(a)(20) of the Immigration and Nationality Act), and 
        includes any of the following:
                    ``(A) An alien who is admitted as a refugee under 
                section 207 of the Immigration and Nationality Act.
                    ``(B) An alien who is granted asylum under section 
                208 of such Act.
                    ``(C) An alien whose deportation is withheld under 
                section 243(h) of such Act.
                    ``(D) An alien whose deportation is suspended under 
                section 244 of such Act.
                    ``(E) An alien who is granted conditional entry 
                pursuant to section 203(a)(7) of such Act, as in effect 
                before April 1, 1980.
                    ``(F) An alien who is admitted for temporary 
                residence under section 210, 210A, or 245A of such Act.
                    ``(G) An alien who has been paroled into the United 
                States under section 212(d)(5) of such Act for an 
                indefinite period or who has been granted extended 
                voluntary departure as a member of a nationality group.
                    ``(H) An alien who is the spouse or unmarried child 
                under 21 years of age of a citizen of the United 
                States, or the parent of such a citizen if the citizen 
                is over 21 years of age, and with respect to whom an 
                application for adjustment to lawful permanent 
                residence is pending.
    ``(e) Protection of Current Beneficiaries.--
            ``(1) In general.--In this title, the term `premium 
        assistance eligible individual' also includes, with respect to 
        a State as of December 31, 1997, an individual described in 
        paragraph (2) whose eligibility for premium assistance has not 
        terminated under paragraph (3).
            ``(2) Current beneficiaries described.--An individual 
        described in this paragraph is an individual who--
                    ``(A) is not excluded under subsection (d),
                    ``(B) is enrolled to receive medical assistance 
                under the State plan under title XIX (and for which 
                Federal financial participation was available) as of 
                December 31, 1997, and
                    ``(C) would remain enrolled to receive such 
                assistance under the State plan under title XIX but for 
                amendments made by the Bipartisan Health Care Reform 
                Act of 1994.
            ``(3) Limitation.--An individual is a premium assistance 
        eligible individual pursuant to this subsection only until the 
        earlier of--
                    ``(A) June 30, 1998, or
                    ``(B) the first date after December 31, 1997, on 
                which the individual's eligibility for medical 
                assistance under the State plan under title XIX would 
                have been terminated if the amendments made by the 
                Bipartisan Health Care Reform Act of 1994 had not been 
                enacted.

``SEC. 2103. PREMIUM AND COST-SHARING ASSISTANCE.

    ``(a) In General.--
            ``(1) Premium assistance.--
                    ``(A) In general.--The premium assistance under a 
                State subsidy program shall be in the form of a premium 
                assistance certificate that is in the amount computed 
                under subsection (b) and that may be applied toward 
                qualifying coverage (as defined in subparagraph (B)). A 
                carrier or group health plan providing such coverage 
                that is tendered such a certificate with respect to an 
                individual shall reduce the amount of the premium by 
                the amount of the certificate, except as provided in 
                subsection (c)(1)(C).
                    ``(B) Qualifying coverage defined.--For purposes of 
                this part--
                            ``(i) In general.--Except as provided in 
                        clause (ii), the term `qualifying coverage' 
                        means standard coverage described in section 
                        1102 of the Bipartisan Health Care Reform Act 
                        of 1994.
                            ``(ii) Optional use of high-deductible 
                        coverage.--At the election of a premium 
                        assistance eligible individual, the term 
                        `qualifying coverage' includes high-deductible 
                        coverage described in section 1103 of the 
                        Bipartisan Health Care Reform Act of 1994 with 
                        respect to an individual, but only if the 
                        individual--
                                    ``(I) has been determined under 
                                section 2104 to have family modified 
                                adjusted income not less than 100 
                                percent of the applicable poverty line 
                                (or in the case of an individual 
                                described in section 2102(a)(2), 185 
                                percent of such applicable poverty 
                                line), and
                                    ``(II) demonstrates to the 
                                satisfaction of the State that the 
                                individual meets the requirements of 
                                section 1101(b)(2) of the Bipartisan 
                                Health Care Reform Act of 1994 
                                (relating to requirement for available 
                                assets).
                            ``(iii) Treatment of va health coverage.--
                        For purposes of this part, VA health coverage 
                        (as defined in section 1801(2) of title 38, 
                        United States Code) provided by the Department 
                        of Veterans Affairs shall be considered to be 
                        standard health insurance coverage (referred to 
                        in subparagraph (A)) provided by a carrier.
            ``(2) Cost-sharing assistance.--The cost-sharing assistance 
        under a State subsidy program shall be in the form of a cost-
        sharing assistance certificate (or other means) that may be 
        applied with respect to standard coverage. A carrier providing 
        health insurance coverage or a group health plan that is 
        tendered such a certificate with respect to an individual shall 
        reduce the cost-sharing otherwise imposed with respect to 
        health coverage to amounts that are nominal (as specified by 
        the State, consistent with the regulations established to carry 
        out section 1916(a)(3)) and shall not impose any cost-sharing 
        in the case of preventive benefits described in section 
        1102(b)(4) of the Bipartisan Health Care Reform Act of 1994.
            ``(3) Consolidated and electronic certificates.--Nothing in 
        this section shall be construed as preventing a State from--
                    ``(A) in the case of an individual who is both a 
                premium assistance eligible individual and a cost-
                sharing assistance eligible individual, from 
                consolidating the premium and cost-sharing certificates 
                of the individual, and
                    ``(B) providing premium and cost-sharing assistance 
                certificates through electronic or other means.
    ``(b) Amount of Premium Assistance.--
            ``(1) Amount of assistance.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                amount of premium assistance under this subsection for 
                a month for an individual is the lesser of--
                            ``(i) the premium assistance reference 
                        amount determined under paragraph (2), or
                            ``(ii) the amount of the monthly premium 
                        for the qualifying coverage provided to the 
                        individual.
                    ``(B) Taking into account employer contributions.--
                If an employer is making a contribution for the health 
                coverage of a premium assistance eligible individual, 
                the amount of the premium assistance under this 
                subsection for a month shall not exceed the amount by 
                which the premium amount described in subparagraph 
                (A)(ii) exceeds the amount of the employer 
                contribution.
            ``(2) Premium assistance reference amount determined.--
                    ``(A) In general.--Subject to paragraph (4), the 
                premium assistance reference amount determined under 
                this paragraph is an amount equal to \1/12\ of the 
                premium assistance percentage (as defined in paragraph 
                (3)) multiplied by the weighted average annual premium 
                (determined in accordance with subparagraph (B)) for 
                the individual's family class of enrollment for 
                qualified standard health coverage offered in the fair 
                rating area (as defined in section 1903 of the 
                Bipartisan Health Care Reform Act of 1994) in the 
                individual/small group market in which the individual 
                resides.
                    ``(B) Determination of weighted average annual 
                premium.--For purposes of subparagraph (A), the 
                weighted average annual premium for a family class of 
                enrollment for qualified standard health coverage shall 
                be based on the number of families (or individuals in 
                the case of the individual class of enrollment) so 
                covered in the class and area involved.
                    ``(C) Family class of enrollment.--In this 
                paragraph, the term `family class of enrollment' means 
                a class of enrollment described in section 1021(a)(3) 
                of the Bipartisan Health Care Reform Act of 1994.
            ``(3) Premium assistance percentage.--For purposes of this 
        part and subject to section 2141(e)(3)--
                    ``(A) In general.--Subject to subparagraph (B), the 
                term `premium assistance percentage' means 100 percent 
                reduced (but not below zero) by the number of 
                percentage points (rounded to the nearest whole number) 
                by which such individual's family income (expressed as 
                a percent) exceeds 100 percent of the applicable 
                poverty line.
                    ``(B) Children and pregnant women.--In the case of 
                a premium assistance eligible individual described in 
                paragraph (2) of section 2102(b), the term `premium 
                assistance percentage' means 100 percent reduced (but 
                not below zero) by 1 percentage point for each .55 
                percentage points by which such individual's family 
                income (expressed as a percent) exceeds 185 percent of 
                the applicable poverty line.
                    ``(C) Current medicaid beneficiaries.--In the case 
                of an individual who is a premium assistance eligible 
                individual pursuant to 2102(d), the term `premium 
                assistance percentage' means 100 percent.
            ``(4) Special rule for families with children and pregnant 
        women.--In the case of a family consisting of premium 
        assistance eligible individuals in which the modified adjusted 
        gross income exceeds 100 percent of the applicable poverty 
        line, but which includes one or more individuals described in 
        paragraph (2) of section 2102(b), the premium assistance amount 
        may be computed in a manner (specified by the Secretary in 
        regulations) based on the sum of separate premium amounts for 
        family members based on individual class of enrollment, rather 
        than based on the appropriate family class of enrollment.
    ``(c) Payments of Assistance.--
            ``(1) Premium assistance.--
                    ``(A) In general.--The State issuing a premium 
                assistance certificate shall, upon tender to the State 
                of such certificate by the carrier or group health plan 
                providing qualiyfing coverage, pay the carrier or plan 
                the amount of the certificate.
                    ``(B) Timing of payments.--Payments under this 
                paragraph shall commence in the first month during 
                which the individual obtains qualifying coverage and is 
                determined under section 2104 to be a premium 
                assistance eligible individual.
                    ``(C) Treatment of surpluses and deficits.--
                            ``(i) Deficit.--If the premium for coverage 
                        is greater than the amount of the premium 
                        assistance for an individual, the individual is 
                        responsible for payment of any difference.
                            ``(ii) Surplus.--If the premium for 
                        coverage is less than the amount of the premium 
                        assistance for an individual, the difference 
                        shall not be paid to the individual or the 
                        carrier or plan but shall revert to the Federal 
                        Government.
            ``(2) Cost-sharing assistance.
                    ``(A) In general.--The State issuing a cost-sharing 
                assistance certificate shall, upon presentation to the 
                State of evidence of such certificate by the carrier or 
                group health plan providing coverage and evidence of 
                cost-sharing amounts otherwise incurred for which a 
                reduction in cost-sharing is available under the 
                certificate, pay the carrier or plan the amount of the 
                reduction in cost-sharing in relation to standard 
                coverage.
                    ``(B) Timing of payments.--Payments under this 
                paragraph shall be provided at the time an individual 
                has obtained qualified standard health coverage, is 
                determined under section 2104 to be a cost-sharing 
                assistance eligible individual, and has incurred health 
                care expenses of the type for which a cost-sharing 
                reduction is available under subparagraph (A).
            ``(3) Administrative errors.--A State is financially 
        responsible for premium or cost-sharing assistance paid based 
        on an eligibility determination error to the extent the State's 
        error rate for eligibility determinations exceeds a maximum 
        permissible error rate to be specified by the Secretary.

``SEC. 2104. ELIGIBILITY DETERMINATIONS.

    ``(a) In General.--The Secretary shall promulgate regulations 
specifying requirements for State subsidy programs with respect to 
determining eligibility for premium and cost-sharing assistance, 
including requirements with respect to--
            ``(1) application procedures;
            ``(2) information verification procedures;
            ``(3) timeliness of eligibility determinations;
            ``(4) procedures for applicants to appeal adverse 
        decisions; and
            ``(5) any other matters determined appropriate by the 
        Secretary.
    ``(b) Specifications for Regulations.--The regulations promulgated 
by the Secretary under subsection (a) shall include the following 
requirements:
            ``(1) Frequency of applications.--A State program shall 
        provide that an individual may file an application for 
        assistance with an agency designated by the State at any time, 
        in person.
            ``(2) Application form.--A State program shall provide for 
        the use of an application form developed by the Secretary under 
        subsection (c)(2).
            ``(3) Distribution of applications.--A State program shall 
        distribute applications for assistance widely, including to 
        employers, health plan purchasing organizations, brokers for 
        health coverage, and appropriate public agencies.
            ``(4) Convenient location to submit applications.--A State 
        program shall provide convenient locations for premium and 
        cost-sharing assistance eligible individuals to apply for 
        premium and cost-sharing assistance.
            ``(5) Requirement to submit revised application.--A State 
        program shall, in accordance with regulations promulgated by 
        the Secretary, require individuals to submit revised 
        applications during a year to reflect changes in estimated 
        family incomes, including changes in employment status of 
        family members, and changes in eligibility status described in 
        section 2002(c) during the year. The State shall revise the 
        amount of any premium and cost-sharing assistance based on such 
        a revised application.
            ``(6) AFDC applicants.--A State program shall include a 
        procedure under which individuals applying for benefits under 
        title IV shall have an opportunity to apply for assistance 
        under this part in connection with such application.
            ``(7) Verification.--A State program shall provide for 
        verification of the information supplied in applications under 
        this part. Such verification may include examining return 
        information disclosed to the State for such purpose under 
        section 6103(l)(15) of the Internal Revenue Code of 1986.
    ``(c) Administration of State Program.--
            ``(1) In general.--The Secretary shall establish standards 
        for States operating programs under this part which ensure that 
        such programs are operated in a uniform manner with respect to 
        application procedures, data standards, and such other 
        administrative activities as the Secretary determines to be 
        necessary.
            ``(2) Application forms.--The Secretary shall develop an 
        application form for assistance which shall--
                    ``(A) be simple in form and understandable to the 
                average individual;
                    ``(B) require the provision of information 
                necessary to make a determination as to whether an 
                individual is a premium or cost-sharing assistance 
                eligible individual including a declaration of 
                estimated family income by the individual; and
                    ``(C) require attachment of such documentation as 
                deemed necessary by the Secretary in order to ensure 
                eligibility for assistance.
            ``(3) Outreach activities.--A State operating a program 
        under this part shall conduct such outreach activities as the 
        Secretary determines appropriate.
    ``(d) Effectiveness of Eligibility for Premium and Cost-Sharing 
Assistance.--A determination by a State that an individual is a premium 
or cost-sharing assistance eligible individual shall be effective for 
the calendar year for which such determination is made unless a revised 
application submitted under subsection (b)(5) indicates that an 
individual is no longer eligible for premium or cost-sharing 
assistance.
    ``(e) Penalties for Material Misrepresentations.--
            ``(1) In general.--Any individual who knowingly makes a 
        material misrepresentation of information in an application for 
        assistance under this part shall be liable to the Federal 
        Government for the amount any premium and cost-sharing 
        assistance received by an individual on the basis of a 
        misrepresentation and interest on such amount at a rate 
        specified by the Secretary, and shall, in addition, be liable 
        to the Federal Government for $2,000 or, if greater, 3 times 
        the amount any premium and cost-sharing assistance provided on 
        the basis of a misrepresentation.
            ``(2) Collection of penalty amounts.--A State which 
        receives an application for assistance with respect to which a 
        material misrepresentation has been made shall collect the 
        penalty amount required under paragraph (1) and submit 50 
        percent of such amount to the Secretary in a timely manner.

``SEC. 2105. END-OF-YEAR RECONCILIATION FOR PREMIUM ASSISTANCE.

    ``(a) In General.--
            ``(1) Requirement to file statement.--An individual who 
        received premium assistance under this part from a State for 
        any month in a calendar year shall file with the State an 
        income reconciliation statement to verify the individual's 
        family income for the year. Such a statement shall be filed at 
        such time, and contain such information, as the State may 
        specify in accordance with regulations promulgated by the 
        Secretary.
            ``(2) Notice of requirement.--A State shall provide a 
        written notice of the requirement under paragraph (1) at the 
        end of the year to an individual who received assistance under 
        this part from such State in any month during the year.
    ``(b) Reconciliation of Premium Assistance Based on Actual 
Income.--
            ``(1) In general.--Based on and using the income reported 
        in the reconciliation statement filed under subsection (a) with 
        respect to an individual, the State shall compute the amount of 
        premium assistance that should have been provided under this 
        part with respect to the individual for the year involved.
            ``(2) Overpayment of assistance.--If the total amount of 
        the premium assistance provided was greater than the amount 
        computed under paragraph (1), the excess amount shall be 
        treated as an underpayment of a tax imposed by chapter 1 of the 
        Internal Revenue Code of 1986.
            ``(3) Underpayment of assistance.--If the total amount of 
        the premium assistance provided was less than the amount 
        computed under paragraph (1), the amount of the difference 
        shall be treated as an overpayment of tax imposed by such 
        chapter, or in the event the taxpayer involved is entitled to a 
        refund of such a tax, subject to the provisions of section 
        6402(d) of such Code.
    ``(c) Verification.--Each State may use such information as it has 
available to verify income of individuals with applications filed under 
this part, including return information disclosed to the State for such 
purpose under section 6103(l)(15) of the Internal Revenue Code of 1986.
    ``(d) Penalties for Failure To File.--In the case of an individual 
who is required to file a statement under this section in a year who 
fails to file such a statement by such date as the Secretary shall 
specify in regulations, the entire amount of the premium assistance 
provided in such year shall be considered an excess amount under 
subsection (b)(2) and such individual shall not be eligible for premium 
assistance under this part until such statement is filed. A State, 
using rules established by the Secretary, shall waive the application 
of this subsection if the individual establishes, to the satisfaction 
of the State under such rules, good cause for the failure to file the 
statement on a timely basis.
    ``(e) Penalties for False Information.--Any individual who provides 
false information in a statement filed under subsection (a) is subject 
to the same penalties as are provided under section 2104(e) for a 
misrepresentation of material fact described in such section.
    ``(f) No Reconciliation for Cost-Sharing Assistance.--No 
reconciliation statement is required under this section with respect to 
cost-sharing assistance.

``SEC. 2106. PAYMENTS TO STATES.

    ``(a) Payments for Premium and Cost-sharing Assistance.--Subject to 
subsection (b) and section 2141, the Secretary shall provide for 
payment to each State operating a State subsidy program in an amount 
equal to the sum of--
            ``(1) the amount expended by the State under the program 
        for premium assistance on behalf of premium assistance eligible 
        individuals, and
            ``(2) the amount expended by the State under the program 
        for cost-sharing assistance on behalf of cost-sharing 
        assistance eligible individuals.
    ``(b) No Payment for Maintenance-of-Effort Expenditures or 
Administration.--No payment shall be made under subsection (a)--
            ``(1) for any State maintenance-of-effort expenditures 
        required under section 2107, or
            ``(2) for any expenditures relating to administration of a 
        State subsidy program.
For payment to States for administrative expenditures for State subsidy 
programs, see section 2142.
    ``(c) Funding.--The amount paid to States under subsection (a) 
shall be paid by the Secretary, from the Health Care Assurance Trust 
Fund (established under section 2143), at such time and in such form as 
provided in regulations promulgated by the Secretary, based on the form 
and manner in which payments are made to States under section 1903.

``SEC. 2107. REQUIREMENT OF STATE MAINTENANCE-OF-EFFORT EXPENDITURES.

    ``(a) In General.--Payment to a State under section 2106 for any 
quarter in a year is conditioned upon--
            ``(1) the State making expenditures under this part from 
        non-Federal funds (consistent with subsection (d)) for premium 
        assistance on behalf of premium assistance eligible individuals 
        and for cost-sharing assistance on behalf of cost-sharing 
        assistance eligible individuals equal to at least the 
        assistance maintenance-of-effort amount computed under 
        subsection (b) for the quarter, and
            ``(2) the State meeting the maintenance-of-effort 
        requirement of section 2125(a)(1) for the quarter.
    ``(b) Assistance Maintenance-of-Effort Amount.--
            ``(1) In general.--The assistance maintenance-of-effort 
        amount computed under this subsection for a State for a quarter 
        in a year is equal to \1/4\ of the product of the Federal-to-
        State conversion factor (specified under paragraph (5)) and the 
        following:
                    ``(A) 1998.--For 1998, the product of--
                            ``(i) the 1997 per capita core benefit 
                        amount (described in paragraph (3)) for the 
                        State, and
                            ``(ii) the average monthly number of AFDC 
                        recipients and non-cash medicaid beneficiaries 
                        (as defined in section 1931(a)(2)) in the State 
                        during 1997,
                increased by the assistance increase factor (as defined 
                in paragraph (4)) for 1998.
                    ``(B) 1999 and thereafter.--For quarters in 1999 or 
                any succeeding year, the amount computed under 
                subparagraph (A) or this subparagraph for the State for 
                the preceding year increased by the assistance increase 
                factor under paragraph (4) for the year.
            ``(2) Estimations of and adjustments to state total funding 
        amount.--The Secretary shall--
                    ``(A) establish a process for estimating the 
                assistance maintenance-of-effort amount for each State 
                under paragraph (1) at the beginning of each fiscal 
                year and adjusting such amount during such fiscal year; 
                and
                    ``(B) notifying each State of the estimations and 
                adjustments referred to in subparagraph (A).
            ``(3) 1997 per capita core benefit amount defined.--For 
        purposes of paragraph (1), the `1997 per capita core benefit 
        amount' for a State is equal to the base per capita core 
        benefit Federal payment limit for AFDC recipients and non-cash 
        medicaid beneficiaries (specified in section 1931(c)(2)(A)) 
        multiplied (for each of years 1995, 1996, and 1997) by a factor 
        equal to 1 plus the FEHBP State rolling increase percentage (as 
        defined in subsection (c)(2)) for the respective year.
            ``(4) Assistance increase factor described.--For purposes 
        of paragraph (1)(A), the `assistance increase factor' for a 
        year for a State is equal to the sum of--
                    ``(A) the FEHBP State rolling increase factor 
                (described in subsection (c)(2)) for the year,
                    ``(B) the annual percentage change (which may be 
                positive or negative) in the population of the State 
                (as estimated by the Secretary), and
                    ``(C)(i) 1 percentage point for 1998,
                    ``(ii) \2/3\ percentage point for 1999,
                    ``(iii) \1/3\ percentage point for 2000, and
                    ``(iv) 0 percentage points for each subsequent 
                year.
            ``(5) Federal-to-state conversion factor.--For purposes of 
        this title, the `Federal-to-State conversion factor' for a 
        State is equal to the ratio of--
                    ``(A) 1 minus the Federal medical assistance 
                percentage (as defined in section 1905(b)) for the 
                State for 1994, to
                    ``(B) such Federal medical assistance percentage.
    ``(c) FEHBP National and State Rolling Increase Percentages.--
            ``(1) National increase percentage.--For purposes of this 
        title, the term `FEHBP national rolling increase percentage' 
        means, for a year, the 5-year weighted average of the annual 
        national percentage increase in the premiums for health plans 
        offered under the Federal Employees Health Benefits Program 
        (under chapter 89 of title 5, United States Code) for the 5-
        year period ending with the previous year.
            ``(2) State increase percentage.--For purposes of this 
        title, the term `FEHBP State rolling increase percentage' 
        means, for a year with respect to a State, the 5-year weighted 
        average of the annual percentage increase in the premiums for 
        health plans offered in the State under the Federal Employees 
        Health Benefits Program (under chapter 89 of title 5, United 
        States Code) for the 5-year period ending with the previous 
        year.
            ``(3) Determination.--The increase percentages under 
        paragraphs (1) and (2) shall be determined by the Secretary, in 
        consultation with the Director of Office of Personnel 
        Management, based on the best information available. Such 
        increases shall be adjusted--
                    ``(A) to take into account the age distribution in 
                the Federal workforce (not taking into account 
                individuals 65 years of age or older, employees of the 
                United States Postal Service, retirees, and annuitants) 
                relative to the age distribution in the population of 
                AFDC recipients and non-cash medicaid beneficiaries, 
                and
                    ``(B) to disregard any changes due to changes in 
                the benefit package under the Federal Employees Health 
                Benefits Program after 1994.
    ``(d) Use of State Funds.--Each State subsidy program shall provide 
assurances satisfactory to the Secretary that Federal funds will not be 
used, directly or indirectly, to provide for the State expenditures 
required under this section.

     ``Part C--Financing Failsafe Mechanism and General Provisions

``SEC. 2141. ENSURING DEFICIT NEUTRAL SPENDING ON PREMIUM AND COST-
              SHARING ASSISTANCE AND SUPPLEMENTAL ACUTE CARE BENEFITS.

    ``(a) Limitation on Federal Expenditures.--
            ``(1) In general.--In each fiscal year (beginning with 
        1998), Federal payments under this title shall be limited to 
        the amount by which--
                    ``(A) the aggregate limitation described in 
                subsection (b) for the year, exceeds
                    ``(B) the amount of the mandatory Federal 
                expenditures under title XVIII and XIX for the year, 
                including any offsetting receipts required under title 
                XVIII but excluding any discretionary expenditures 
                under such title or title XIX.
            ``(2) Contingency.--Any direct payment authority provided 
        under part A or B with respect to premium and cost-sharing 
        assistance or supplemental acute care benefits is subject to 
        the operation of this section.
    ``(b) Aggregate Limitation.--For purposes of this section, subject 
to subsection (d), the aggregate limitation described in this 
subsection--
            ``(1) for fiscal year 1998, is $351 billion;
            ``(2) for fiscal year 1999, is $392 billion;
            ``(3) for fiscal year 2000, is $433 billion;
            ``(4) for fiscal year 2001, is $482 billion;
            ``(5) for fiscal year 2002, is $535 billion;
            ``(6) for fiscal year 2003, is $594 billion;
            ``(7) for fiscal year 2004, is $660 billion; and
            ``(8) for each succeeding fiscal year is the aggregate 
        limitation under this subsection for the preceding fiscal year 
        increased by the same percentage as the percentage growth in 
        national health expenditures (as estimated by the Secretary) 
        from the second preceding fiscal year to the preceding fiscal 
        year.
    ``(c) Mid-Session Budget Review Estimates.--As part the President's 
supplemental summary providing revised estimates of the budget 
(commonly called the `mid-session review of the budget') for each 
fiscal year (beginning with fiscal year 1997), the President shall 
issue the following:
            ``(1) Estimate for upcoming year.--An estimate of 
        expenditures under titles XVIII and XIX and parts A and B of 
        this title for the upcoming fiscal year (determined without 
        regard to this section).
            ``(2) Information on actual expenditures for preceding 
        year.--Information on actual expenditures under titles XVIII 
        and XIX and parts A and B of this title for the preceding 
        fiscal year determined taking into account adjustments under 
        this section. Such information shall first be provide in the 
        mid-session review for the fiscal year 1999 budget.
            ``(3) Informational estimate for current year.--An estimate 
        of expenditures under titles XVIII and XIX and parts A and B of 
        this title for the current fiscal year. Such information shall 
        first be provided in the mid-session review for the fiscal year 
        1998 budget.
    ``(d) Retrospective Adjustment.--If the information provided under 
subsection (c)(2) during a fiscal year indicates (taking into account 
any adjustment under this section) that the amount of mandatory 
expenditures described in subsection (a)(1)(B) for the preceding fiscal 
year exceeded the aggregate limitation described in subsection (b) for 
the year, for the succeeding fiscal year the aggregate limitation under 
subsection (b) shall be decreased by the amount of such excess.
    ``(e) Prospective Adjustment.--
            ``(1) In general.--If the estimate provided under 
        subsection (c)(1) during a fiscal year indicates that the 
        amount of mandatory expenditures described in subsection 
        (a)(1)(B) for the upcoming fiscal year will exceed the 
        aggregate limitation described in subsection (b) for the year, 
        then for the succeeding fiscal year, the Director of the Office 
        of Management and Budget, after consultation with the 
        Secretary--
                    ``(A) shall apply the adjustments described in 
                paragraph (2) to the extent necessary to eliminate such 
                excess, and
                    ``(B) if such adjustments are insufficient to 
                eliminate such excess, shall apply the adjustments 
                described in paragraph (3).
            ``(2) Reductions in amounts available for supplemental 
        acute care benefits programs.--
                    ``(A) In general.--An adjustment under this 
                paragraph consists of reduction in the limitations on 
                payments to States established under section 2124(b).
                    ``(B) Manner of reduction.--Such reduction shall be 
                made in a proportional manner and shall provide for an 
                aggregate reduction in the limits equal to the amount 
                of such the reduction required to comply with the 
                requirement of subsection (a).
            ``(3) Reduction in premium assistance amount.--
                    ``(A) In general.--An adjustment under this 
                paragraph consists of uniform proportional reduction in 
                the premium assistance percentage applied under section 
                2103(b)(3), but only with respect to individuals who 
                are not cost-sharing assistance eligible individuals.
                    ``(B) Manner of reduction.--The proportion of the 
                uniform proportional reduction shall be calculated by 
                the Director, in consultation with the Secretary, in a 
                manner that results in an aggregate reduction in the 
                payments to States under part A in an amount that 
                assures (taking into account reductions resulting from 
                the adjustment under paragraph (2)) compliance with the 
                requirement of subsection (a).
            ``(4) Notice to congress.--Before effecting any adjustment 
        under this subsection, the Director shall submit to Congress a 
        report that describes the adjustment to be made and the basis 
        for making the adjustment.
            ``(5) No affect on state maintenance-of-effort 
        requirements.--Any adjustment under this subsection shall not 
        affect the requirements for States under sections 2107 or 2125.
    ``(f) President's Budget To Include Premium Assistance Estimates.--
            ``(1) In general.--When the President submits a budget (as 
        required by section 1105 of title 31), the President shall 
        include in such budget--
                    ``(A) estimates of Federal expenditures under 
                titles XVIII and XIX and parts A and B of this title 
                otherwise provided without regard to this section; and
                    ``(B) a comparison of the Federal expenditures 
                under titles XVIII and XIX with the aggregate 
                limitation established under subsection (b); and
                    ``(C) estimates of adjustments under subsection (d) 
                that are necessary to comply with enforcement of the 
                limitation under subsection (a).
            ``(2) Fiscal years covered.--The President shall submit 
        such estimates for the upcoming fiscal year and the following 4 
        fiscal years beginning with the budget submitted for fiscal 
        year 1997, and
                    ``(A) beginning with the budget for fiscal year 
                1998, the current fiscal year; and
                    ``(B) beginning with the budget for fiscal year 
                1999, the current fiscal year and the preceding fiscal 
                year.
    ``(g) CBO Information and Analyses.--
            ``(1) CBO technical corrections report.--In or about 
        January of each year when the Congressional Budget Office 
        changes the economic and technical assumptions in the budget 
        baseline used by such Office, the Director of such Office shall 
        submit to the Congress a report on such changes. The report 
        shall include an explanation of what the aggregate limitation 
        amounts under subsection (b) might have been if they had been 
        computed based on such changed assumptions.
            ``(2) CBO analysis.--In or about March of each year, after 
        having an opportunity to analyze the report submitted under 
        subsection (e)(1), the Director of the Congressional Budget 
        Office shall submit to Congress a report that contains an 
        analysis of the differences between the estimates contained in 
        the President's report and the estimates of such Office based 
        on the economic and technical assumptions referred to in 
        paragraph (1).

``SEC. 2142. PAYMENTS FOR ADMINISTRATIVE EXPENSES UNDER TITLE.

    ``(a) In General.--Subject to subsection (b), the Secretary shall 
pay to each State operating a State program under this part or part B, 
for each quarter beginning with the quarter commencing January 1, 1998, 
an amount equal to 50 percent of the amounts expended during the 
quarter as found necessary by the Secretary for the proper and 
efficient administration of such programs in the State, not including 
any State maintenance-of-effort expenditures required under section 
2107 or 2125.
    ``(b) Limitation.--
            ``(1) In general.--The amount of funds which the Secretary 
        is otherwise obligated to pay a State for quarters in a year 
        under subsection (a) shall not exceed such proportion of the 
        amount specified in paragraph (2) as the Secretary determines, 
        taking into account relevant factors including the proportion 
        of premium assistance eligible individuals (including cost-
        sharing assistance eligible individuals) who reside in the 
        State, the relative costs of administrative services in the 
        State (compared to the national average costs of administrative 
        services), and total non-administrative expenditures by the 
        State under this title.
            ``(2) Total available administrative amount.--For purposes 
        of this subsection, the amount specified in this paragraph for 
        all calendar quarters in a year for payments to States shall 
        not exceed--
                    ``(A) $2.3 billion for 1998,
                    ``(B) $2.5 billion for 1999,
                    ``(C) $2.7 billion for 2000,
                    ``(D) $2.9 billion for 2001,
                    ``(E) $3.1 billion for 2002,
                    ``(F) $3.3 billion for 2003, and
                    ``(G) $3.6 billion for 2004.

``SEC. 2143. HEALTH CARE ASSURANCE TRUST FUND.

    ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Health Care 
Assurance Trust Fund' (in this section referred to as the `Trust 
Fund'), consisting of such amounts as may be appropriated or credited 
to it under this section.
    ``(b) Transfers to the Trust Fund.--
            ``(1) In general.--There are hereby appropriated to the 
        Trust Fund the amount determined by the Secretary of the 
        Treasury, after consultation with the Secretary of Health and 
        Human Services, to be equal to the sum of--
                    ``(A) the decrease in Federal expenditures 
                resulting from the provisions of, and the amendments 
                made by, the Bipartisan Health Care Reform Act of 1994, 
                and
                    ``(B) amounts received by the Secretary pursuant to 
                sections 2104(e), 2105(b)(2), and 2105(e).
            ``(2) Transfers from other trust funds.--The Secretary of 
        Health and Human Services shall transfer each fiscal year to 
        the Trust Fund from the Federal Hospital Insurance Trust Fund 
        and the Federal Supplementary Medical Insurance Trust Fund the 
        amount which the Secretary estimates is equal to the decrease 
        in expenditures in each such trust fund attributable to the 
        provisions of the Bipartisan Health Care Reform Act of 1994.
            ``(3) Transfers from gifts and bequests.--The Secretary of 
        Health and Human Services shall transfer each fiscal year to 
        the Trust Fund any money gifts or bequests made to or on behalf 
        of the United States for allocation to the Trust Fund.
    ``(c) Expenditures.--Amounts in the Trust Fund shall be used as 
follows:
            ``(1) Amounts shall be appropriated to the Secretary for 
        payments to States in a fiscal year for the programs under 
        parts A and B of this title (and to the extent any such amount 
        is not expended during any fiscal year, such amount shall be 
        available for such purpose for subsequent fiscal years).
            ``(2) Amounts shall be transferred to an account in the 
        General Fund of the Treasury in an amount equal to the estimate 
        of the Secretary of the Treasury of the reductions in revenues 
        deposited in the General Fund resulting from the amendments 
        made to the Internal Revenue Code of 1986 by the Bipartisan 
        Health Care Reform Act of 1994.
    ``(d) Nature of Payment Obligation.--Subject to section 2141, 
sections 2106, 2124, and 2142 constitute budget authority in advance of 
appropriations Acts, and represent the obligation of the Federal 
Government to provide payments to States under such sections in 
accordance with the applicable provisions of this title.

``SEC. 2144. LIMITATION ON USE OF FUNDS FOR ABORTIONS.

    ``None of the funds appropriated to carry out this title shall be 
expended for premium assistance under this part that provides coverage 
of any abortion, for cost-sharing assistance under this part with 
respect to expenses incurred for any abortion, or for supplemental 
acute care benefits under part B for any abortion, except in the case 
of an abortion where the procedure is necessary to save the life of the 
mother or where the pregnancy is the result of an act of rape or 
incest.

``SEC. 2145. AUDITS.

    ``The Secretary shall conduct regular audits of the activities 
under the State programs conducted under this title.

``SEC. 2146. DEMONSTRATION PROJECT AUTHORITY.

    ``(a) In General.--In the case of any experimental, pilot, or 
demonstration project which in the judgment of the Secretary is likely 
to assist in promoting the objectives of this title in a State or 
States, the Secretary may waive compliance with any of the requirements 
of this title to the extent and for the period the Secretary finds 
necessary to enable the Secretary to carry out the project.
    ``(b) Restriction.--
            ``(1) Findings.--The Secretary may authorize a waiver under 
        subsection (a) only if the Secretary determines that under the 
        waiver--
                    ``(A) all individuals who would be premium 
                assistance eligible individuals remain eligible for 
                premium assistance,
                    ``(B) benefits under part A are not reduced below 
                the level of benefits otherwise provided, and
                    ``(C) the amount of payments made by the Federal 
                Government do not exceed the amount of payments 
                otherwise provided.
            ``(2) Limitation.--The Secretary may not authorize a waiver 
        of sections 2107 or 2125 (relating to State maintenance-of-
        effort).

``SEC. 2147. DEFINITIONS AND DETERMINATIONS OF INCOME.

    ``For purposes of this title:
            ``(1) Determinations of income.--
                    ``(A) Family income.--The term `family income' 
                means, with respect to an individual who--
                            ``(i) is not a dependent (as defined in 
                        subparagraph (B)) of another individual, the 
                        sum of the modified adjusted gross incomes (as 
                        defined in subparagraph (D)) for the 
                        individual, the individual's spouse, and 
                        dependents of the individual; or
                            ``(ii) is a dependent of another 
                        individual, the sum of the modified adjusted 
                        gross incomes for the other individual, the 
                        other individual's spouse, and dependents of 
                        the other individual.
                    ``(B) Dependent.--The term `dependent' shall have 
                the meaning given such term under paragraphs (1) or (2) 
                of section 152(a) of the Internal Revenue Code of 1986.
                    ``(C) Special rule for foster children.--For 
                purposes of subparagraph (A), a child who is placed in 
                foster care by a State agency shall not be considered a 
                dependent of another individual.
                    ``(D) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income (as defined in section 62(a) of the Internal 
                Revenue Code of 1986)--
                            ``(i) determined without regard to sections 
                        135, 162(l), 220, 911, 931, and 933 of such 
                        Code, and
                            ``(ii) increased by--
                                    ``(I) the amount of interest 
                                received or accrued by the individual 
                                during the taxable year which is exempt 
                                from tax,
                                    ``(II) the amount of the social 
                                security benefits (as defined in 
                                section 86(d) of such Code) received 
                                during the taxable year to the extent 
                                not included in gross income under 
                                section 86 of such Code,
                                    ``(III) the amount of aid to 
                                families with dependent children 
                                received during the taxable year under 
                                part A of title IV to the extent not 
                                included in gross income under such 
                                Code, and
                                    ``(IV) the amount of any 
                                supplemental security income benefits 
                                provided under title XVI.
                The determination under the preceding sentence shall be 
                made without regard to any carryover or carryback.
                    ``(E) Election with respect to income 
                determination.--As elected by a family at the time of 
                submission of an application for a premium or cost-
                sharing assistance under this part, family income shall 
                be determined either--
                            ``(i) by multiplying by a factor of 4 the 
                        individual's family income for the 3-month 
                        period immediately preceding the month in which 
                        the application is made, or
                            ``(ii) based upon estimated income for the 
                        entire year in which the application is 
                        submitted.
            ``(2) Applicable poverty line.--The term `applicable 
        poverty line' means the income official poverty line (as 
        defined by the Office of Management and Budget, and revised 
        annually in accordance with section 673(2) of the Omnibus 
        Budget Reconciliation Act of 1981) that--
                    ``(A) in the case of a family of less than five 
                individuals, is applicable to a family of the size 
                involved; and
                    ``(B) in the case of a family of more than four 
                individuals, is applicable to a family of four persons.
            ``(3) Pregnant woman.--The term `pregnant woman' includes a 
        woman during the 60-day period beginning on the last day of the 
        pregnancy.
            ``(4) Premium.--Any reference to the term `premium' 
        includes a reference to premium equivalence for self-insured 
        plans.''.

SEC. 2102. OPERATION OF PROGRAM AS STATE PLAN REQUIREMENT UNDER 
              MEDICAID.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)), as amended by sections 3303(a)(1), 3003(a), and 
3201(f)(5), is amended--
            (1) by striking ``and'' at the end of paragraph (63);
            (2) by striking the period at the end of paragraph (64) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (64) the following new 
        paragraph:
            ``(65) provide for a State program furnishing premium 
        subsidies for low-income individuals in accordance with part A 
        of title XXI.''.
    (b) Effective Date.--The requirement of section 1902(a)(65) of the 
Social Security Act (as added by subsection (a)) shall apply to Federal 
financial participation for calendar quarters beginning on or after 
January 1, 1998.

SEC. 2103. APPLICATION OF MISCELLANEOUS PROVISIONS.

    (a) Application of SAVE Provisions.--Section 1137(b) of the Social 
Security Act (42 U.S.C. 1320b-7(b)) is amended--
            (1) by striking ``and'' at the end of paragraph (4),
            (2) by striking the period at the end of paragraph (5) and 
        inserting ``; and'', and
            (3) by adding at the end the following:
            ``(6) a State subsidy program under part A of title XXI.''.
    (b) Disclosure of Certain Information.
            (1) In general.--Subsection (l) of section 6103 of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following new paragraph:
            ``(15) Disclosure of return information to carry out health 
        premium assistance certificate program.--The Secretary shall, 
        upon written request from a State, disclose to officials of the 
        State return information for purposes of determining or 
        verifying whether any individual is entitled to a premium 
        assistance certificate under part A of title XXI of the Social 
        Security Act and the amount thereof. Return information 
        disclosed under this paragraph may be used by such officers and 
        employees only for the purposes of, and to the extent necessary 
        in, making such determination or verification.''.
            (2) Conforming change.--Paragraph (4) of section 6103(p) of 
        such Code is amended by striking ``or (14)'' each place it 
        appears and inserting ``(14) or (15)''.
    (c) Application of Definition of State.--Section 1001(a)(1) of the 
Social Security Act (42 U.S.C. 1301(a)(1)) is amended by striking 
``title XX'' and inserting ``titles XX and XXI''.

                                                              Title III

                      TITLE III--MEDICAID REFORMS

                       table of contents of title

  Subtitle A--Treatment of Acute Care Benefits for AFDC and Non-cash 
                             Beneficiaries

Sec. 3001. Division of medicaid benefits into core benefits and 
                            supplemental benefits for AFDC and non-cash 
                            beneficiaries; limitation on Federal 
                            financial participation for core benefits; 
                            sunset in medical assistance.
Sec. 3002. Continuation of State medicaid eligibility categories.
 Subtitle B--Flexibility in Expenditures for Supplemental Benefits for 
                    AFDC and Non-cash Beneficiaries

Sec. 3101. Provision of supplemental acute care benefits through State 
                            supplemental acute care benefit programs.
       ``Part B--State Supplemental Acute Care Benefits Programs

        ``Sec. 2121. Establishment of State supplemental acute care 
                            benefits programs.
        ``Sec. 2122. Eligibility.
        ``Sec. 2123. Scope and provision of benefits; benefits 
                            administration.
        ``Sec. 2124. Payments to States.
        ``Sec. 2125. State maintenance of effort requirement.''
Subtitle C--Increased State Flexibility in Contracting for Coordinated 
                                  Care

Sec. 3201. Modification of Federal requirements to allow States more 
                            flexibility in contracting for coordinated 
                            care services.
                Subtitle D--Additional Medicaid Reforms

Sec. 3301. Reduction in amount of payment adjustments for 
                            disproportionate share hospitals.
Sec. 3302. Elimination of medically needy program for individuals not 
                            in an institution.
Sec. 3303. Elimination of medicaid pediatric immunization program.

  Subtitle A--Treatment of Acute Care Benefits for AFDC and Non-cash 
                             Beneficiaries

                                                  Title III, Subtitle A

SEC. 3001. DIVISION OF MEDICAID BENEFITS INTO CORE BENEFITS AND 
              SUPPLEMENTAL BENEFITS FOR AFDC AND NON-CASH 
              BENEFICIARIES; LIMITATION ON FEDERAL FINANCIAL 
              PARTICIPATION FOR CORE BENEFITS; SUNSET IN MEDICAL 
              ASSISTANCE.

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

  ``medicaid reform rules for benefits for acute medical services for 
          afdc recipients and non-cash medicaid beneficiaries

    ``Sec. 1931. (a) Application of Section.--
            ``(1) In general.--This section applies with respect to 
        medical assistance for acute medical services (as defined in 
        paragraph (2)) under State plans under this title for calendar 
        quarters beginning on or after January 1, 1995, provided to 
        AFDC recipients and non-cash medicaid categorical 
        beneficiaries. To the extent this section applies, it 
        supersedes any contrary provision of this title or of other 
        applicable law.
            ``(2) Definitions.--In this section:
                    ``(A) Acute medical services.--The term `acute 
                medical services' means items and services described in 
                section 1905(a) other than the following:
                            ``(i) Nursing facility services (as defined 
                        in section 1905(f)).
                            ``(ii) Intermediate care facility for the 
                        mentally retarded services (as defined in 
                        section 1905(d)).
                            ``(iii) Personal care services (as 
                        described in section 1905(a)(24)).
                            ``(iv) Private duty nursing services (as 
                        referred to in section 1905(a)(8)).
                            ``(v) Home or community-based services 
                        furnished under a waiver granted under 
                        subsection (c), (d), or (e) of section 1915.
                            ``(vi) Home and community care furnished to 
                        functionally disabled elderly individuals under 
                        section 1929.
                            ``(vii) Community supported living 
                        arrangements services under section 1930.
                            ``(viii) Case-management services (as 
                        described in section 1915(g)(2)).
                            ``(ix) Home health care services (as 
                        referred to in section 1905(a)(7)), clinic 
                        services, and rehabilitation services that are 
                        furnished to an individual who has a condition 
                        or disability that qualifies the individual to 
                        receive any of the services described in a 
                        previous clause.
                            ``(x) Hospice care.
                    ``(B) AFDC recipient.--The term `AFDC recipient' 
                means, for a month, an individual who is receiving aid 
                or assistance under any plan of the State approved 
                under title I, X, XIV, or XVI, or part A or part E of 
                title IV for the month.
                    ``(C) Core benefits.--The term `core benefits' 
                means benefits with respect to acute medical services 
                which the Secretary identifies under subsection (b)(1) 
                as typically included in the services covered under 
                benchmark coverage (as defined in section 1903(1) of 
                the Bipartisan Health Care Reform Act of 1994).
                    ``(D) Non-cash medicaid beneficiary.--The term 
                `non-cash medicaid beneficiary' means an individual 
                described in section 1902(a)(10)(A) who is not an AFDC 
                recipient or an SSI recipient.
                    ``(E) SSI recipient.--The term `SSI recipient' 
                means, for a month, an individual--
                            ``(i) with respect to whom supplemental 
                        security income benefits are being paid under 
                        title XVI of the Social Security Act for the 
                        month,
                            ``(ii) who is receiving a supplementary 
                        payment under section 1616 of such Act or under 
                        section 212 of Public Law 93-66 for the month,
                            ``(iii) who is receiving monthly benefits 
                        under section 1619(a) of the Social Security 
                        Act (whether or not pursuant to section 
                        1616(c)(3) of such Act) for the month, or
                            ``(iv) who is treated under section 1619(b) 
                        of the Social Security Act as receiving 
                        supplemental security income benefits in a 
                        month for purposes of title XIX of such Act.
                    ``(F) Supplemental acute care benefits.--The term 
                `supplemental acute care benefits' means benefits for 
                acute medical services which are not--
                            ``(i) core benefits, and
                            ``(ii) benefits for items or services 
                        described in clauses (i) through (x) of 
                        subparagraph (A).
    ``(b) Division of Acute Medical Service Benefits Into Core Benefits 
and Supplemental Acute Care Benefits.--The Secretary shall divide the 
class of benefits for acute medical services into the following benefit 
groups:
            ``(1) Core benefits.--A group of benefits consisting of 
        core benefits (as defined in subsection (a)(2)(C)).
            ``(2) Supplemental acute care benefits.--A group of 
        benefits consisting of supplemental acute care benefits (as 
        defined in subsection (a)(2)(F)).
    ``(c) Limitation on Amount of Federal Financial Participation for 
Benefits for Acute Medical Services for AFDC Recipient and Non-Cash 
Medicaid Beneficiaries.--
            ``(1) Limitation on core benefits for 1995 through 1997.--
        With respect to expenditures for medical assistance for core 
        benefits for AFDC recipients and non-cash medicaid 
        beneficiaries in a State the following rules shall apply:
                    ``(A) 1995.--For all quarters in calendar year 
                1995, Federal financial participation under section 
                1903(a)(1) shall not be payable to the extent that per 
                capita expenditures for such assistance exceed a per 
                capita limiting amount equal to the base per capita 
                core benefit Federal payment limit for AFDC recipients 
                and non-cash medicaid beneficiaries (specified in 
                paragraph (2)(A)) increased by the FEHBP national 
                rolling increase percentage (as defined in section 
                2107(c)(1)) for 1995.
                    ``(B) 1996 and 1997.--For all quarters in calendar 
                year 1996 and for all quarters in calendar year 1997, 
                Federal financial participation under section 
                1903(a)(1) shall not be payable to the extent that per 
                capita expenditures for such assistance for such year 
                exceed a per capita limiting amount equal to the per 
                capita limiting amount established under subparagraph 
                (A) or this subparagraph, respectively, for the 
                preceding year increased by the FEHBP national rolling 
                increase percentage (as defined in section 2107(c)(1)) 
                for 1996 or 1997, respectively.
                    ``(C) Estimations and adjustments.--The Secretary 
                shall--
                            ``(i) establish a process for estimating 
                        the limiting amounts under this paragraph at 
                        the beginning of each year and adjusting such 
                        amount during such year; and
                            ``(ii) notifying each State of the 
                        estimations and adjustments referred to in 
                        clause (i).
            ``(2) Base per capita core benefit federal payment limit 
        for afdc recipients and non-cash medicaid beneficiaries.--
                    ``(A) In general.--In paragraph (1)(A), the `base 
                per capita core benefit Federal payment limit for AFDC 
                recipients and non-cash medicaid beneficiaries' 
                specified in this subparagraph, for a State, is--
                            ``(i) the baseline Federal medicaid core 
                        benefit payments for AFDC recipients and non-
                        cash medicaid beneficiaries (as defined in 
                        subparagraph (B)) for the State, divided by
                            ``(ii) the number of AFDC recipients and 
                        non-cash medicaid beneficiaries enrolled in the 
                        State plan under this title in 1994, as 
                        determined under subparagraph (C).
                    ``(B) Determination of baseline federal medicaid 
                core benefit payments for AFDC recipients and non-cash 
                medicaid beneficiaries.--For purposes of subparagraph 
                (A)(i), the `baseline medicaid core benefit 
                expenditures for AFDC recipients and non-cash medicaid 
                beneficiaries' for a State is the amount of Federal 
                payments made under section 1903(a)(1) with respect to 
                medical assistance furnished for core benefits for AFDC 
                recipients and non-cash medicaid beneficiaries for all 
                calendar quarters in 1994.
                    ``(C) Determination of number of afdc recipients 
                and non-cash medicaid beneficiaries.--For purposes of 
                subparagraph (A)(ii), the number of AFDC recipients and 
                non-cash medicaid beneficiaries for a State for 1994 
                shall be determined based on actual reports submitted 
                by the State to the Secretary. In the case of 
                individuals who were not recipients or beneficiaries 
                for the entire fiscal year, the number shall take into 
                account only the portion of the year in which they were 
                such recipients. The Secretary may audit such reports.
            ``(3) Limitation on benefits for acute medical services 
        after 1997.--With respect to expenditures for medical 
        assistance for acute medical services benefits for AFDC 
        recipients and non-cash medicaid beneficiaries in a State for 
        quarters in a calendar year after 1997--
                    ``(A) no such Federal financial participation shall 
                be payable under section 1903(a)(1), and
                    ``(B) such a recipient or beneficiary is not 
                entitled to receive any medical assistance for such 
                benefits under the State plan under this title.
            ``(4) Additional rules.--For purposes of this subsection--
                    ``(A) Disproportionate share payments not 
                included.--Payments attributable to section 1923 shall 
                not be counted in the amount of Federal payments.
                    ``(B) Treatment of disallowances.--The amount of 
                Federal payments shall take into account amounts (or an 
                estimate of amounts) disallowed.
                    ``(C) Application to particular items and 
                services.--In determining the Federal payment with 
                respect to a category of items and services (within the 
                core benefits) furnished in a State, there shall be 
                counted only that proportion of such expenditures 
                (determined only with respect to medical assistance 
                furnished to AFDC recipients and non-cash medicaid 
                beneficiaries) that were attributable to items and 
                services included in the core benefits (taking into 
                account any limitation on amount, duration, or scope of 
                items and services included in such benefits).
    ``(d) Conditioning Federal Financial Participation on State 
Maintenance-of-Effort.--
            ``(1) In general.--Payment to a State under section 1903(a) 
        for a quarter during 1995, 1996, or 1997 is conditioned upon 
        the State making expenditures under this title from non-Federal 
        funds (consistent with paragraph (3)) for core benefits for 
        AFDC recipients and non-cash medicaid beneficiaries equal to at 
        least the State maintenance-of-effort amount computed under 
        paragraph (2) for the year.
            ``(2) State maintenance-of-effort amount.--The State 
        maintenance-of-effort amount computed under this paragraph for 
        a State for a year is equal to the product of--
                    ``(A) the amount that would be computed as the per 
                capita limiting amount under subsection (c)(1) for the 
                State for the year if the FEHBP State rolling increase 
                percentage (as defined in section 2107(c)(2)) were 
                substituted for any reference to the FEHBP national 
                rolling increase percentage in such subsection; and
                    ``(B) the Federal-to-State conversion factor (as 
                defined in section 2107(b)(5)).
            ``(3) Use of state funds.--Each State shall provide 
        assurances satisfactory to the Secretary that Federal funds 
        will not be used, directly or indirectly, to provide for the 
        State expenditures required under this subsection.''.
    (b) Conforming Amendment.--Section 1903(i) of the Social Security 
Act (42 U.S.C. 1396b(i)), as amended by section 3303(a)(3), is 
amended--
            (1) by striking ``or'' at the end of paragraph (12),
            (2) by striking the period at the end of paragraph (13) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (13) the following:
            ``(14) in accordance with section 1931, with respect to 
        amounts expended for medical assistance--
                    ``(A) for supplemental acute care benefits (as 
                defined in section 1931(a)(2)(F)) for AFDC recipients 
                and non-cash medicaid beneficiaries for calendar 
                quarters beginning on or after January 1, 1995,
                    ``(B) for core benefits (as defined in section 
                1931(a)(2)(C)) for AFDC recipients and non-cash 
                medicaid beneficiaries for calendar quarters beginning 
                on or after January 1, 1995, and before January 1, 
                1998, to the extent they exceed limits specified in 
                section 1931(c)(1), and
                    ``(C) for core benefits for AFDC recipients and 
                non-cash medicaid beneficiaries for calendar quarters 
                beginning on or after January 1, 1998.''.

SEC. 3002. CONTINUATION OF STATE MEDICAID ELIGIBILITY CATEGORIES.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1369a(a)), as amended by section 3303(a)(1), is amended--
            (1) by striking ``and'' at the end of paragraph (60);
            (2) by striking the period at the end of paragraph (61) and 
        inserting ``; and ''; and
            (3) by inserting after paragraph (61) the following new 
        paragraph:
            ``(62) provide for the continuation through December 31, 
        1997, of eligibility for medical assistance under section 
        1902(a)(10)(A) of any class or category of individuals eligible 
        for medical assistance under such section during fiscal year 
        1994.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to payments for calendar quarters beginning on or after January 
1, 1995.

 Subtitle B--Flexibility in Expenditures for Supplemental Benefits for 
                    AFDC and Non-cash Beneficiaries

                                                  Title III, Subtitle B

SEC. 3101. PROVISION OF SUPPLEMENTAL ACUTE CARE BENEFITS THROUGH STATE 
              SUPPLEMENTAL ACUTE CARE BENEFIT PROGRAMS.

    (a) In General.--Title XXI of the Social Security Act, as added by 
section 2101(a), is amended by inserting after part A the following new 
part:

       ``Part B--State Supplemental Acute Care Benefits Programs

``SEC. 2121. ESTABLISHMENT OF STATE SUPPLEMENTAL ACUTE CARE BENEFITS 
              PROGRAMS.

    ``(a) In General.--Each State shall establish a State supplemental 
acute care benefits program (each in this part referred to as a `State 
supplemental acute care benefits program') that provides supplemental 
acute care benefits for supplemental benefit eligible individuals.
    ``(b) Availability of Funds.--Each State with a State supplemental 
acute care benefits program approved under this part is entitled, for 
calendar quarters beginning on or after January 1, 1995, to payment 
under section 2124.
    ``(c) Approval of State Programs; Program Descriptions.--The 
Secretary may not approve a State supplemental acute care benefits 
program unless the State has submitted a detailed description of the 
form and manner in which it will carry out the program (consistent with 
the applicable requirements of this part) and the Secretary finds that 
the program meets such applicable requirements.

``SEC. 2122. ELIGIBILITY.

    ``(a) In General.--In this part, the term `supplemental benefit 
eligible individual' means an individual who, as of the time of 
provision of supplemental acute care benefits, is described as follows:
            ``(1) 1995 through 1997.--The individual is an AFDC 
        recipient or a non-cash medicaid beneficiary (as such terms are 
        defined in section 1931(a)(2)).
            ``(2) 1998  and thereafter.--The individual is a premium 
        assistance eligible individual (as defined in section 2102(a)).
    ``(b) Construction.--Nothing in this part shall be construed to 
create an entitlement for any specific supplemental benefit eligible 
individual.

``SEC. 2123. SCOPE AND PROVISION OF BENEFITS; BENEFITS ADMINISTRATION.

    ``(a) In General.--The supplemental acute care benefits that may be 
made available under a State supplemental acute care benefits program 
may include supplemental acute care benefits (as defined in section 
1931(a)(2)(F)).
    ``(b) Coverage of Benefits.--Each State supplemental acute care 
benefits program--
            ``(1) shall establish methods and standards to select the 
        types, and the amount, duration, and scope, of supplemental 
        acute care benefits included in the program and to assure 
        access to, and the quality of, services included in such 
        benefits;
            ``(2) in providing benefits for supplemental benefit 
        eligible individuals--
                    ``(A) may vary the supplemental acute care benefits 
                provided among reasonable classes of such individuals, 
                and
                    ``(B) may take into account the individual needs of 
                individuals; and
            ``(3) shall coordinate the provision of such benefits with 
        other health insurance coverage and health benefit programs in 
        a manner that avoids duplication of benefits.
    ``(c) Payment Methods.--Benefits under a program may be made 
available in the form of direct provision of services, reimbursement of 
providers, prepayment to providers or health plans on a capitation 
basis, reimbursement of supplemental benefit eligible individuals for 
expenses incurred for supplemental acute care benefits, or a 
combination of these methods.
    ``(d) Administration.--
            ``(1) State agency.--Each State supplemental acute care 
        benefits program shall designate any appropriate State agency 
        to administer the program.
            ``(2) Coordination.--The State supplemental acute care 
        benefits program shall specify how the program--
                    ``(A) will be coordinated with the State medicaid 
                plan, titles V and XX of the Social Security Act, part 
                A of this title, and any other Federal or State 
                programs that provide services or assistance targeted 
                to supplemental benefit eligible individuals, and
                    ``(B) will be coordinated with qualified health 
                coverage.
    ``(e) Reports and Information to Secretary; Audits.--Each State 
supplemental acute care benefits program shall furnish to the 
Secretary--
            ``(1) such reports, and cooperate with such audits, as the 
        Secretary determines are needed concerning the State's 
        administration of the program under this part, including the 
        processing of any claims under the program, and
            ``(2) such data and information as the Secretary may 
        require in order to carry out the Secretary's responsibilities.

``SEC. 2124. PAYMENTS TO STATES.

    ``(a) In General.--
            ``(1) Payments for supplemental acute care benefits.--
        Subject to paragraph (2), subsection (b), and sections 2125 and 
        2141, the Secretary shall provide for payment to each State 
        operating an approved State supplemental acute care benefits 
        program in an amount equal to the amount expended by the State 
        under the program during the quarter for supplemental acute 
        care benefits for supplemental benefit eligible individuals.
            ``(2) No payment for maintenance-of-effort expenditures or 
        administration.--No payment shall be made under paragraph (1)--
                    ``(A) for any State maintenance-of-effort 
                expenditures required under section 2125, or
                    ``(B) for any expenditures relating to 
                administration of a State subsidy program.
            ``(3) Payments for related administrative expenses.--
                    ``(A) 1995 through 1997.--
                            ``(i) In general.--Subject to sections 
                        2123(d)(2), 2124(b), 2125, and 2141, and clause 
                        (ii), the Secretary shall pay to each State 
                        operating a State supplemental acute care 
                        benefits program, for each quarter beginning 
                        with the quarter commencing January 1, 1995, 
                        and ending before January 1, 1998, an amount 
                        equal to 50 percent of the amounts expended 
                        during the quarter as found necessary by the 
                        Secretary for the proper and efficient 
                        administration of such program, not including 
                        any State maintenance-of-effort expenditures 
                        required under section 2125.
                            ``(ii) Limitation.--The Secretary shall not 
                        find under clause (i) amounts expended to be 
                        for the proper and efficient administration of 
                        a State supplemental acute care benefits 
                        program if such amounts exceed 3 percent of the 
                        total expenditures under the program in the 
                        quarter (including State maintenance-of-effort 
                        expenditures under section 2125).
                    ``(B) Reference to payment for administrative 
                expenses after 1997.--For payment for administrative 
                expenses under this part after 1997, see section 2142.
            ``(4) Funding.--Payments to States under this subsection 
        shall be made by the Secretary, from the Health Care Assurance 
        Trust Fund (established under section 2143), at such time and 
        in such form as provided in regulations promulgated by the 
        Secretary, based on the form and manner in which payments are 
        made under section 1903.
    ``(b) Limitation on Payments for Supplemental Acute Care 
Benefits.--
            ``(1) In general.--Subject to section 2141 and paragraphs 
        (2) and (3), the total amount of payments that may be made to a 
        State under subsection (a)(1) for all quarters in a calendar 
        year may not exceed the following:
                    ``(A) 1995.--For 1995, the product of--
                            ``(i) the initial per capita supplemental 
                        acute care benefit Federal payment limit 
                        (described in subsection (c)) for the State, 
                        and
                            ``(ii) the average monthly number of 
                        supplemental benefit eligible individuals in 
                        the State in 1995.
                    ``(B) 1996 and 1997.--For each of calendar years 
                1996 and 1997, the product of--
                            ``(i) the limit specified in this clause 
                        (or subparagraph (A)(i)) for the State for the 
                        previous year increased by the FEHBP national 
                        rolling increase factor for the year (as 
                        defined in section 2107)(c)(1)), and
                            ``(ii) the average monthly number of 
                        supplemental benefit eligible individuals in 
                        the State in the year.
                    ``(C) 1998 and thereafter.--For 1998 or any 
                succeeding year, the amount computed under this 
                subparagraph (or subparagraph (B)) for the State for 
                the preceding year increased by the supplemental acute 
                care benefit increase factor under subsection (d) for 
                the year.
            ``(2) Adjustment for availability of additional funds.--If 
        the Secretary determines for a year that the total amount of 
        the Federal payments under section 2124 for a year for all the 
        States is less than the sum of the limitations for the year for 
        all the States established under paragraph (1), the limitation 
        for each State under this subsection shall be increased in a 
        pro-rata manner by such an amount as will not result in such 
        total Federal payments under section 2124 exceeding the sum of 
        such limits for all the States for the year.
            ``(3) Estimations and adjustments.--The Secretary shall--
                    ``(A) establish a process for estimating the limit 
                established under this subsection for a year at the 
                beginning of the year and adjusting such amount during 
                such year; and
                    ``(B) notifying each State of the estimations and 
                adjustments referred to in subparagraph (A).
    ``(c) Initial Per Capita Supplemental Acute Care Benefit Federal 
Payment Limit Defined.--
            ``(1) In general.--For purposes of subsection (b)(1)(A), 
        the `initial per capita supplemental acute care benefit Federal 
        payment limit' for a State for a year is equal to the base per 
        capita supplemental acute care Federal payments (described in 
        paragraph (2)) increased by the FEHBP national rolling increase 
        percentage (as defined in section 2107(c)(1)) for 1995.
            ``(2) Base per capita supplemental acute care federal 
        payments.--For purposes of paragraph (1), the `base per capita 
        supplemental acute care Federal payments' described in this 
        paragraph, for a State, is--
                    ``(A) the baseline Federal medicaid supplemental 
                acute care benefit expenditures (as defined in 
                paragraph (3)) for the State, divided by
                    ``(B) the number of AFDC recipients and non-cash 
                medicaid beneficiaries (as described in section 
                1931(a)(2)) enrolled in the State plan under title XIX 
                in 1994, as determined under paragraph (4) consistent 
                with section 1931(c)(3)(C).
            ``(3) Determination of baseline federal medicaid 
        supplemental acute care payments.--
                    ``(A) In general.--For purposes of paragraph 
                (2)(A), the `baseline Federal medicaid supplemental 
                acute care payments' for a State is the amount of 
                Federal payments made under section 1903(a)(1) with 
                respect to medical assistance furnished for 
                supplemental acute care benefits (as defined in section 
                1931(b)(2)) for AFDC recipients and non-cash medicaid 
                beneficiaries for all calendar quarters in 1994.
                    ``(B) Disproportionate share payments not 
                included.--In applying subparagraph (A), payments 
                attributable to section 1923 shall not be counted in 
                the amount of payments.
                    ``(C) Treatment of disallowances.--The amount 
                determined under this paragraph shall take into account 
                amounts (or an estimate of amounts) disallowed under 
                title XIX.
            ``(4) Application to particular items and services.--For 
        purposes of this subsection, in determining the per capita 
        supplemental medical benefit expenditure limit for a category 
        of items and services (within the supplemental acute care 
        benefits) furnished in a State, there shall be counted only 
        that proportion of such expenditures (determined only with 
        respect to medical assistance furnished to AFDC recipients and 
        non-cash medicaid beneficiaries) that were attributable to 
        items and services included in the supplemental acute care 
        benefits (taking into account any limitation on amount, 
        duration, or scope of items and services included in such 
        benefits).
    ``(d) Supplemental Acute Care Benefit Increase Factor Described.--
For purposes of subsection (b)(1)(C), the `supplemental medical benefit 
increase factor' for a year for a State is equal to the sum of--
            ``(1) the FEHBP national rolling increase factor (as 
        defined in section 2107(c)(1)) for the year,
            ``(2) the annual percentage change (which may be positive 
        or negative) in the population of the State (as estimated by 
        the Secretary for purposes of section 2107(c)(4)(B)), and
            ``(3)(A) 1 percentage point for 1998,
            ``(B) \2/3\ percentage point for 1999,
            ``(C) \1/3\ percentage point for 2000, and
            ``(D) 0 percentage points for each subsequent year.

``SEC. 2125. STATE MAINTENANCE-OF-EFFORT REQUIREMENT.

    ``(a) In General.--Payment to a State under section 2124 for a 
quarter in a year (beginning with 1995) is conditioned upon--
            ``(1) the State making expenditures for supplemental acute 
        care benefits under this part from non-Federal funds 
        (consistent with subsection (d)) for supplemental benefit 
        eligible individuals equal to at least the supplemental benefit 
        maintenance-of-effort amount computed under subsection (b) for 
        the quarter, and
            ``(2) for quarters beginning on or after January 1, 1998, 
        the State meeting the maintenance-of-effort requirement under 
        section 2107(a)(1) for the quarter.
    ``(b) Supplemental Benefits Maintenance-of-Effort Amount.--The 
supplemental benefits maintenance-of-effort amount computed under this 
subsection for a State for a quarter in a year is equal to \1/4\ of the 
product of--
            ``(1) the amount that would be computed as the minimum 
        limitation under section 2124(b) for the State for all quarters 
        in the year (determined without regard to section 2124(b)(2)) 
        if the FEHBP State rolling increase percentage (as defined in 
        section 2107(b)(2)) were substituted for the FEHBP national 
        rolling increase percentage in section 2124(c)(1)(A) and in 
        determining the supplemental medical benefit increase factor 
        under 2124(d); and
            ``(2) the Federal-to-State conversion factor (specified 
        under section 2107(b)(5)).
    ``(c) Use of State Funds.--Each State supplemental acute care 
benefits program shall provide assurances satisfactory to the Secretary 
that Federal funds will not be used, directly or indirectly, to provide 
for the State expenditures required under this section.''.
    (b) Conforming Amendment to Medicaid Program.--Section 1931 of the 
Social Security Act, as added by section 3001, is amended by adding at 
the end the following:
    ``(e) Elimination of Entitlement for Supplemental Acute Care 
Benefits.--With respect to medical assistance for supplemental acute 
care benefits for AFDC recipients and non-cash medicaid beneficiaries 
in a State for quarters in 1995 or any succeeding year--
            ``(1) no Federal financial participation shall be payable 
        under section 1903(a)(1),
            ``(2) the State may receive payments for such supplemental 
        acute care benefits under part B of title XXI, and
            ``(3) such a recipient or beneficiary is not entitled to 
        receive any medical assistance for such benefits under the 
        State plan under this title.''.

Subtitle C--Increased State Flexibility in Contracting for Coordinated 
                                  Care

                                                  Title III, Subtitle C

SEC. 3201. MODIFICATION OF FEDERAL REQUIREMENTS TO ALLOW STATES MORE 
              FLEXIBILITY IN CONTRACTING FOR COORDINATED CARE SERVICES.

    (a) In General.--
            (1) Payment provisions.--Section 1903(m) of the Social 
        Security Act (42 U.S.C. 1396b(m)) is amended to read as 
        follows:
    ``(m)(1) No payment shall be made under this title to a State with 
respect to expenditures incurred by such State for payment to an entity 
which is at risk (as defined in section 1932(a)(4)) for services 
provided by such entity to individuals eligible for medical assistance 
under the State plan under this title, unless the entity is a risk 
contracting entity (as defined in section 1932(a)(3)) and the State and 
such entity comply with the applicable provisions of section 1932.
    ``(2) No payment shall be made under this title to a State with 
respect to expenditures incurred by such State for payment for services 
provided to an individual eligible for medical assistance under the 
State plan under this title if such payment by the State is contingent 
upon the individual receiving such services from a specified health 
care provider or subject to the approval of a specified health care 
provider, unless the entity receiving payment is a primary care case 
management entity (as defined in section 1932(a)(2)) and the State and 
such entity comply with the applicable provisions of section 1932.''.
            (2) Requirements for coordinated care services.--Title XIX 
        of such Act (42 U.S.C. 1396 et seq.), as amended by section 
        2001(a), is amended by redesignating section 1932 as section 
        1933 and by inserting after section 1931 the following new 
        section:

              ``requirements for coordinated care services

    ``Sec. 1932. (a) Definitions.--For purposes of this title--
          ``(1) Primary care case management program.--The term 
        `primary care case management program' means a program operated 
        by a State agency under which such State agency enters into 
        contracts with primary care case management entities for the 
        provision of health care items and services which are specified 
        in such contracts and the provision of case management services 
        to individuals who are--
                    ``(A) eligible for medical assistance under the 
                State plan,
                    ``(B) enrolled with such primary care case 
                management entities, and
                    ``(C) entitled to receive such specified health 
                care items and services and case management services 
                only as approved and arranged for, or provided, by such 
                entities.
            ``(2) Primary care case management entity.--The term 
        `primary care case management entity' means a health care 
        provider which--
                    ``(A) must be a physician, group of physicians, a 
                Federally qualified health center, a rural health 
                clinic, a community health authority (under section 
                1934), or an entity employing or having other 
                arrangements with physicians operating under a contract 
                with a State to provide services under a primary care 
                case management program,
                    ``(B) receives payment on a fee for service basis 
                (or, in the case of a Federally qualified health center 
                or a rural health clinic, on a reasonable cost per 
                encounter basis) for the provision of health care items 
                and services specified in such contract to enrolled 
                individuals,
                    ``(C) receives an additional fixed fee per enrollee 
                for a period specified in such contract for providing 
                case management services (including approving and 
                arranging for the provision of health care items and 
                services specified in such contract on a referral 
                basis) to enrolled individuals, and
                    ``(D) is not an entity that is at risk (as defined 
                in paragraph (4)) for such case management services.
            ``(3) Risk contracting entity.--The term `risk contracting 
        entity' means an entity which has a contract with the State 
        agency (or a health insuring organization described in 
        subsection (n)(2)) under which the entity--
                    ``(A) provides or arranges for the provision of 
                health care items or services which are specified in 
                such contract to individuals eligible for medical 
                assistance under the State plan, and
                    ``(B) is at risk (as defined in paragraph (4)) for 
                part or all of the cost of such items or services 
                furnished to individuals eligible for medical 
                assistance under such plan.
            ``(4) At risk.--The term `at risk' means an entity which--
                    ``(A) has a contract with the State agency under 
                which such entity is paid a fixed amount for providing 
                or arranging for the provision of health care items or 
                services specified in such contract to an individual 
                eligible for medical assistance under the State plan 
                and enrolled with such entity, regardless of whether 
                such items or services are furnished to such 
                individual, and
                    ``(B) is liable for all or part of the cost of 
                furnishing such items or services, regardless of 
                whether such cost exceeds such fixed payment.
    ``(b) General Requirements for Risk Contracting Entities.--
            ``(1) Organization.--A risk contracting entity meets the 
        requirements of this section only if such entity--
                    ``(A)(i) is a qualified health maintenance 
                organization as defined in section 1310(d) of the 
                Public Health Service Act, as determined by the 
                Secretary pursuant to section 1312 of such Act; or
                    ``(ii) is described in subparagraph (C), (D), (E), 
                (F), or (G) of subsection (e)(4);
                    ``(B) is a Federally qualified health center, a 
                rural health clinic, or a community health authority 
                (under section 1934) which has made adequate provision 
                against the risk of insolvency (pursuant to the 
                guidelines and regulations issued by the Secretary 
                under this section), and ensures that individuals 
                eligible for medical assistance under the State plan 
                are not held liable for such entity's debts in case of 
                such entity's insolvency; or
                    ``(C) is an entity which meets all applicable State 
                licensing requirements and has made adequate provision 
                against the risk of insolvency (pursuant to the 
                guidelines and regulations issued by the Secretary 
                under this section), and ensures that individuals 
                eligible for medical assistance under the State plan 
                are not held liable for such entity's debts in case of 
                such entity's insolvency.
            ``(2) Guarantees of enrollee access.--A risk contracting 
        entity meets the requirements of this section only if--
                    ``(A) the geographic locations, hours of operation, 
                patient to staff ratios, and other relevant 
                characteristics of such entity are sufficient to afford 
                individuals eligible for medical assistance under the 
                State plan access to such entities that is at least 
                equivalent to the access to health care providers that 
                would be available to such individuals if such 
                individuals were not enrolled with such entity;
                    ``(B) such entity has reasonable and adequate hours 
                of operation, including 24-hour availability of--
                            ``(i)(I) treatment for an unforeseen 
                        illness, injury, or condition of an individual 
                        eligible for medical assistance under the State 
                        plan and enrolled with such entity; or
                            ``(II) referral to other health care 
                        providers for such treatment; and
                            ``(ii) other information, as determined by 
                        the Secretary or the State; and
                    ``(C) such entity complies with such other 
                requirements relating to access to care as the 
                Secretary or the State may impose.
            ``(3) Contract with state agency.--A risk contracting 
        entity meets the requirements of this section only if such 
        entity has a written contract with the State agency which 
        provides--
                    ``(A) that the entity will comply with all 
                applicable provisions of this section, that the State 
                has the right to penalize the entity for failure to 
                comply with such requirements and to terminate the 
                contract in accordance with subsection (j), and that 
                the entity will be subject to penalties imposed by the 
                Secretary under subsection (i) for failure to comply 
                with such requirements;
                    ``(B) for a payment methodology based on experience 
                rating or another actuarially sound methodology 
                approved by the Secretary, which guarantees (as 
                demonstrated by such models or formulas as the 
                Secretary may approve) that--
                            ``(i) payments to the entity under the 
                        contract shall not exceed an amount equal to 
                        100 percent of the costs (which shall include 
                        administrative costs and which may include 
                        costs for inpatient hospital services that 
                        would have been incurred in the absence of such 
                        contract) that would have been incurred by the 
                        State agency in the absence of the contract; 
                        and
                            ``(ii) the financial risk for inpatient 
                        hospital services is limited to an extent 
                        established by the State;
                    ``(C) that the Secretary and the State (or any 
                person or organization designated by either) shall have 
                the right to audit and inspect any books and records of 
                the entity (and of any subcontractor) that pertain--
                            ``(i) to the ability of the entity (or a 
                        subcontractor) to bear the risk of potential 
                        financial losses; or
                            ``(ii) to services performed or 
                        determinations of amounts payable under the 
                        contract;
                    ``(D) that in the entity's enrollment, 
                reenrollment, or disenrollment of individuals eligible 
                for medical assistance under the State plan and 
                eligible to enroll, reenroll, or disenroll with the 
                entity pursuant to the contract, the entity will not 
                discriminate among such individuals on the basis of 
                such individuals' health status or requirements for 
                health care services;
                    ``(E)(i) individuals eligible for medical 
                assistance under the State plan who have enrolled with 
                the entity are permitted to terminate such enrollment 
                without cause as of the beginning of the first calendar 
                month (or in the case of an entity described in 
                subsection (e)(4), as of the beginning of the first 
                enrollment period) following a full calendar month 
                after a request is made for such termination;
                    ``(ii) that when an individual has relocated 
                outside the entity's service area, and the entity has 
                been notified of the relocation, services (within 
                reasonable limits) furnished by a health care provider 
                outside the service area will be reimbursed either by 
                the entity or by the State agency; and
                    ``(iii) for written notification of each such 
                individual's right to terminate enrollment, which shall 
                be provided at the time of such individual's 
                enrollment, and, in the case of a child with special 
                health care needs as defined in subsection 
                (e)(1)(B)(ii), at the time the entity identifies such a 
                child;
                    ``(F) in the case of services immediately required 
                to treat an unforeseen illness, injury, or condition, 
                of an individual eligible for medical assistance under 
                the State plan and enrolled with the entity--
                            ``(i) that such services shall not be 
                        subject to a preapproval requirement; and
                            ``(ii) where such services are furnished by 
                        a health care provider other than the entity, 
                        for reimbursement of such provider either by 
                        the entity or by the State agency;
                    ``(G) for disclosure of information in accordance 
                with subsection (h) and section 1124;
                    ``(H) that any physician incentive plan operated by 
                the entity meets the requirements of section 
                1876(i)(8);
                    ``(I) for maintenance of sufficient patient 
                encounter data to identify the physician who delivers 
                services to patients;
                    ``(J) that the entity will comply with the 
                requirement of section 1902(w) with respect to each 
                enrollee;
                    ``(K) that the entity will implement a grievance 
                system, inform enrollees in writing about how to use 
                such grievance system, ensure that grievances are 
                addressed in a timely manner, and report grievances to 
                the State at intervals to be determined by the State;
                    ``(L) that contracts between the entity and each 
                subcontractor of such entity will require each 
                subcontractor--
                            ``(i) to cooperate with the entity in the 
                        implementation of its internal quality 
                        assurance program under paragraph (4) and 
                        adhere to the standards set forth in the 
                        quality assurance program, including standards 
                        with respect to access to care, facilities in 
                        which patients receive care, and availability, 
                        maintenance, and review of medical records;
                            ``(ii) to cooperate with the Secretary, the 
                        State agency and any contractor to the State in 
                        monitoring and evaluating the quality and 
                        appropriateness of care provided to enrollees 
                        as required by Federal or State laws and 
                        regulations; and
                            ``(iii) where applicable, to adhere to 
                        regulations and program guidance with respect 
                        to reporting requirements under section 
                        1905(r);
                    ``(M) that, where the State deems it necessary to 
                ensure the timely provision to enrollees of the 
                services listed in subsection (f)(2)(C)(ii), the State 
                may arrange for the provision of such services by 
                health care providers other than the entity and may 
                adjust its payments to the entity accordingly;
                    ``(N) that the entity and the State will comply 
                with guidelines and regulations issued by the Secretary 
                with respect to procedures for marketing and 
                information that must be provided to individuals 
                eligible for medical assistance under the State plan;
                    ``(O) that the entity must provide payments to 
                hospitals for inpatient hospital services furnished to 
                infants who have not attained the age of 1 year, and to 
                children who have not attained the age of 6 years and 
                who receive such services in a disproportionate share 
                hospital, in accordance with paragraphs (2) and (3) of 
                section 1902(s);
                    ``(P) that the entity shall report to the State, at 
                such time and in such manner as the State shall 
                require, on the rates paid for hospital services (by 
                type of hospital and type of service) furnished to 
                individuals enrolled with the entity;
                    ``(Q) detailed information regarding the relative 
                responsibilities of the entity and the State, for 
                providing (or arranging for the provision of), and 
                making payment for, the following items and services:
                            ``(i) immunizations;
                            ``(ii) the purchase of vaccines;
                            ``(iii) lead screening and treatment 
                        services;
                            ``(iv) screening and treatment for 
                        tuberculosis;
                            ``(v) screening and treatment for, and 
                        preventive services related to, sexually 
                        transmitted diseases, including HIV infection;
                            ``(vi) screening, diagnostic, and treatment 
                        services required under section 1905(r);
                            ``(vii) family planning services;
                            ``(viii) services prescribed under--
                                    ``(I) an Individual Education Plan 
                                or Individualized Family Service Plan 
                                under part B or part H of the 
                                Individuals with Disabilities Education 
                                Act; and
                                    ``(II) any other individual plan of 
                                care or treatment developed under this 
                                title or title V;
                            ``(ix) transportation needed to obtain 
                        services to which the enrollee is entitled 
                        under the State plan or pursuant to an 
                        individual plan of care or treatment described 
                        in subclauses (I) and (II) of clause (viii); 
                        and
                            ``(x) such other services as the Secretary 
                        may specify;
                    ``(R) detailed information regarding the procedures 
                for coordinating the relative responsibilities of the 
                entity and the State to ensure prompt delivery of, 
                compliance with any applicable reporting requirements 
                related to, and appropriate record keeping with respect 
                to, the items and services described in subparagraph 
                (Q); and
                    ``(S) such other provisions as the Secretary may 
                require.
            ``(4) Internal quality assurance.--A risk contracting 
        entity meets the requirements of this section only if such 
        entity has in effect a written internal quality assurance 
        program which includes a systematic process to achieve 
        specified and measurable goals and objectives for access to, 
        and quality of, care, which--
                    ``(A) identifies the organizational units 
                responsible for performing specific quality assurance 
                functions, and ensures that such units are accountable 
                to the governing body of the entity and that such units 
                have adequate supervision, staff, and other necessary 
                resources to perform these functions effectively,
                    ``(B) if any quality assurance functions are 
                delegated to other entities, ensures that the risk 
                contracting entity remains accountable for all quality 
                assurance functions and has mechanisms to ensure that 
                all quality assurance activities are carried out,
                    ``(C) includes methods to ensure that physicians 
                and other health care professionals under contract with 
                the entity are licensed or certified as required by 
                State law, or are otherwise qualified to perform the 
                services such physicians and other professionals 
                provide, and that these qualifications are ensured 
                through appropriate credentialing and recredentialing 
                procedures,
                    ``(D) provides for continuous monitoring of the 
                delivery of health care, through--
                            ``(i) identification of clinical areas to 
                        be monitored, including immunizations, prenatal 
                        care, services required under section 1905(r), 
                        and other appropriate clinical areas, to 
                        reflect care provided to enrollees eligible for 
                        medical assistance under the State plan,
                            ``(ii) use of quality indicators and 
                        standards for assessing the quality and 
                        appropriateness of care delivered, and the 
                        availability and accessibility of all services 
                        for which the entity is responsible under such 
                        entity's contract with the State,
                            ``(iii) use of epidemiological data or 
                        chart review, as appropriate, and patterns of 
                        care overall,
                            ``(iv) patient surveys, spot checks, or 
                        other appropriate methods to determine 
                        whether--
                                    ``(I) enrollees are able to obtain 
                                timely appointments with primary care 
                                providers and specialists, and
                                    ``(II) enrollees are otherwise 
                                guaranteed access and care as provided 
                                under paragraph (2),
                            ``(v) provision of written information to 
                        health care providers and other personnel on 
                        the outcomes, quality, availability, 
                        accessibility, and appropriateness of care, and
                            ``(vi) implementation of corrective 
                        actions,
                    ``(E) includes standards for timely enrollee access 
                to information and care which at a minimum shall 
                incorporate standards used by the State or professional 
                or accreditation bodies for facilities furnishing 
                perinatal and neonatology care and other forms of 
                specialized medical and surgical care,
                    ``(F) includes standards for the facilities in 
                which patients receive care,
                    ``(G) includes standards for managing and treating 
                medical conditions prevalent among such entity's 
                enrollees eligible for medical assistance under the 
                State plan,
                    ``(H) includes mechanisms to ensure that enrollees 
                eligible for medical assistance under the State plan 
                receive services for which the entity is responsible 
                under the contract which are consistent with standards 
                established by the applicable professional societies or 
                government agencies,
                    ``(I) includes standards for the availability, 
                maintenance, and review of medical records consistent 
                with generally accepted medical practice,
                    ``(J) provides for dissemination of quality 
                assurance procedures to health care providers under 
                contract with the entity, and
                    ``(K) meets any other requirements prescribed by 
                the Secretary or the State.
            ``(5) Transitional agreements with essential community 
        providers.--A risk contracting entity meets the requirements of 
        this section only if such entity complies with the requirements 
        of section 1013 of the Bipartisan Health Care Reform Act of 
        1994 (subject to the sunset contained in subsection (j) of such 
        section).
    ``(c) General Requirements for Primary Care Case Management 
Programs.--A primary care case management program implemented by a 
State under this section shall--
            ``(1) provide that each primary care case management entity 
        participating in such program has a written contract with the 
        State agency,
            ``(2) include methods for selection and monitoring of 
        participating primary care case management entities to ensure--
                    ``(A) that the geographic locations, hours of 
                operation, patient to staff ratio, and other relevant 
                characteristics of such entities are sufficient to 
                afford individuals eligible for medical assistance 
                under the State plan access to such entities that is at 
                least equivalent to the access to health care providers 
                that would be available to such individuals if such 
                individuals were not enrolled with such entity,
                    ``(B) that such entities and their professional 
                personnel are licensed as required by State law and 
                qualified to provide case management services, through 
                methods such as ongoing monitoring of compliance with 
                applicable requirements and providing information and 
                technical assistance, and
                    ``(C) that such entities--
                            ``(i) provide timely and appropriate 
                        primary care to such enrollees consistent with 
                        standards established by applicable 
                        professional societies or governmental 
                        agencies, or such other standards prescribed by 
                        the Secretary or the State, and
                            ``(ii) where other items and services are 
                        determined to be medically necessary, give 
                        timely approval of such items and services and 
                        referral to appropriate health care providers,
            ``(3) provide that no preapproval shall be required for 
        emergency health care items or services, and
            ``(4) permit individuals eligible for medical assistance 
        under the State plan who have enrolled with a primary care case 
        management entity to terminate such enrollment without cause 
        not later than the beginning of the first calendar month 
        following a full calendar month after the request is made for 
        such termination.
    ``(d) Exemptions From State Plan Requirements.--A State plan may 
permit or require an individual eligible for medical assistance under 
such plan to enroll with a risk contracting entity or a primary care 
case management entity without regard to the requirements set forth in 
the following paragraphs of section 1902(a):
            ``(1) Paragraph (1) (concerning statewideness).
            ``(2) Paragraph (10)(B) (concerning comparability of 
        benefits), to the extent benefits not included in the State 
        plan are provided.
            ``(3) Paragraph (23) (concerning freedom of choice of 
        provider), except with respect to services described in section 
        1905(a)(4)(C) and except as required under subsection (e).
    ``(e) State Options With Respect to Enrollment and Disenrollment.--
            ``(1) Mandatory enrollment.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a State plan may require an 
                individual eligible for medical assistance under such 
                plan to enroll with a risk contracting entity or a 
                primary care case management entity only if the 
                individual is permitted a choice within a reasonable 
                service area (as defined by the State)--
                            ``(i) between or among 2 or more risk 
                        contracting entities,
                            ``(ii) among a risk contracting entity and 
                        a primary care case management program, or
                            ``(iii) among primary care case management 
                        entities.
                    ``(B) Special needs children.--
                            ``(i) In general.--A State may not require 
                        a child with special health care needs (as 
                        defined in clause (ii)) to enroll with a risk 
                        contracting entity or a primary care case 
                        management entity.
                            ``(ii) Definition.--For purposes of this 
                        subparagraph, the term `child with special 
                        health care needs' refers to an individual 
                        eligible for supplemental security income under 
                        title XVI, a child described under section 
                        501(a)(1)(D), or a child described in section 
                        1902(e)(3).
            ``(2) Reenrollment of individuals who regain eligibility.--
        In the case of an individual who--
                    ``(A) in a month is eligible for medical assistance 
                under the State plan and enrolled with a risk 
                contracting entity with a contract under this section,
                    ``(B) in the next month (or next 2 months) is not 
                eligible for such medical assistance, but
                    ``(C) in the succeeding month is again eligible for 
                such benefits,
        the State agency (subject to subsection (b)(3)(E)) may enroll 
        the individual for that succeeding month with such entity, if 
        the entity continues to have a contract with the State agency 
        under this subsection.
            ``(3) Disenrollment.--
                    ``(A) Restrictions on disenrollment without 
                cause.--Except as provided in subparagraph (C), a State 
                plan may restrict the period in which individuals 
                enrolled with risk contracting entities described in 
                paragraph (4) may terminate such enrollment without 
                cause to the first month of each period of enrollment 
                (as defined in subparagraph (B)), but only if the State 
                provides notification, at least once during each such 
                enrollment period, to individuals enrolled with such 
                entity of the right to terminate such enrollment and 
                the restriction on the exercise of this right. Such 
                restriction shall not apply to requests for termination 
                of enrollment for cause.
                    ``(B) Period of enrollment.--For purposes of this 
                paragraph, the term `period of enrollment' means--
                            ``(i) a period not to exceed 6 months in 
                        duration, or
                            ``(ii) a period not to exceed 1 year in 
                        duration, in the case of a State that, on the 
                        effective date of this paragraph, had in effect 
                        a waiver under section 1115 of requirements 
                        under this title under which the State could 
                        establish a 1-year minimum period of enrollment 
                        with risk contracting entities.
                    ``(C) Special needs children.--A State may not 
                restrict disenrollment of a child with special health 
                care needs (as defined in paragraph (1)(B)(ii)).
            ``(4) Entities eligible for disenrollment restrictions.--A 
        risk contracting entity described in this paragraph is--
                    ``(A) a qualified health maintenance organization 
                as defined in section 1310(d) of the Public Health 
                Service Act,
                    ``(B) an eligible organization with a contract 
                under section 1876,
                    ``(C) an entity that is receiving (and has received 
                during the previous 2 years) a grant of at least 
                $100,000 under section 329(d)(1)(A) or 330(d)(1) of the 
                Public Health Service Act,
                    ``(D) an entity that--
                            ``(i) received a grant of at least $100,000 
                        under section 329(d)(1)(A) or section 330(d)(1) 
                        of the Public Health Service Act in the fiscal 
                        year ending June 30, 1976, and has been a 
                        grantee under either such section for all 
                        periods after that date, and
                            ``(ii) provides to its enrollees, on a 
                        prepaid capitation or other risk basis, all of 
                        the services described in paragraphs (1), (2), 
                        (3), (4)(C), and (5) of section 1905(a) (and 
                        the services described in section 1905(a)(7), 
                        to the extent required by section 
                        1902(a)(10)(D)),
                    ``(E) an entity that is receiving (and has received 
                during the previous 2 years) at least $100,000 (by 
                grant, subgrant, or subcontract) under the Appalachian 
                Regional Development Act of 1965,
                    ``(F) a nonprofit primary health care entity 
                located in a rural area (as defined by the Appalachian 
                Regional Commission)--
                            ``(i) which received in the fiscal year 
                        ending June 30, 1976, at least $100,000 (by 
                        grant, subgrant, or subcontract) under the 
                        Appalachian Regional Development Act of 1965, 
                        and
                            ``(ii) which, for all periods after such 
                        date, either has been the recipient of a grant, 
                        subgrant, or subcontract under such Act or has 
                        provided services on a prepaid capitation or 
                        other risk basis under a contract with the 
                        State agency initially entered into during a 
                        year in which the entity was the recipient of 
                        such a grant, subgrant, or subcontract,
                    ``(G) an entity that had contracted with the State 
                agency prior to 1970 for the provision, on a prepaid 
                risk basis, of services (which did not include 
                inpatient hospital services) to individuals eligible 
                for medical assistance under the State plan,
                    ``(H) a program pursuant to an undertaking 
                described in subsection (n)(3) in which at least 25 
                percent of the membership enrolled on a prepaid basis 
                are individuals who--
                            ``(i) are not insured for benefits under 
                        part B of title XVIII or eligible for medical 
                        assistance under the State plan, and
                            ``(ii) (in the case of such individuals 
                        whose prepayments are made in whole or in part 
                        by any government entity) had the opportunity 
                        at the time of enrollment in the program to 
                        elect other coverage of health care costs that 
                        would have been paid in whole or in part by any 
                        governmental entity,
                    ``(I) an entity that, on the date of enactment of 
                this provision, had a contract with the State agency 
                under a waiver under section 1115 or 1915(b) and was 
                not subject to a requirement under this title to permit 
                disenrollment without cause, or
                    ``(J) an entity that has a contract with the State 
                agency under a waiver under section 1915(b)(5).
    ``(f) State Monitoring and External Review.--
            ``(1) State grievance procedure.--A State contracting with 
        a risk contracting entity or a primary care case management 
        entity under this section shall provide for a grievance 
        procedure for enrollees of such entity with at least the 
        following elements:
                    ``(A) A toll-free telephone number for enrollee 
                questions and grievances.
                    ``(B) Periodic notification of enrollees of their 
                rights with respect to such entity or program.
                    ``(C) Periodic sample reviews of grievances 
                registered with such entity or program or with the 
                State.
                    ``(D) Periodic survey and analysis of enrollee 
                satisfaction with such entity or program, including 
                interviews with individuals who disenroll from the 
                entity or program.
            ``(2) State monitoring of quality and access.--
                    ``(A) Risk contracting entities.--A State 
                contracting with a risk contracting entity under this 
                section shall provide for ongoing monitoring of such 
                entity's compliance with the requirements of subsection 
                (b), including compliance with the requirements of such 
                entity's contract under subsection (b)(3), and shall 
                undertake appropriate followup activities to ensure 
                that any problems identified are rectified and that 
                compliance with the requirements of subsection (b) and 
                the requirements of the contract under subsection 
                (b)(3) is maintained.
                    ``(B) Primary care case management entities.--A 
                State electing to implement a primary care case 
                management program shall provide for ongoing monitoring 
                of the program's compliance with the requirements of 
                subsection (c) and shall undertake appropriate followup 
                activities to ensure that any problems identified are 
                rectified and that compliance with subsection (c) is 
                maintained.
                    ``(C) Services.--
                            ``(i) In general.--The State shall 
                        establish procedures (in addition to those 
                        required under subparagraphs (A) and (B)) to 
                        ensure that the services listed in clause (ii) 
                        are available in a timely manner to an 
                        individual enrolled with a risk contracting 
                        entity or a primary care case management 
                        entity. Where necessary to ensure the timely 
                        provision of such services, the State shall 
                        arrange for the provision of such services by 
                        health care providers other than the risk 
                        contracting entity or the primary care case 
                        management entity in which an individual is 
                        enrolled.
                            ``(ii) Services listed.--The services 
                        listed in this clause are--
                                    ``(I) prenatal care;
                                    ``(II) immunizations;
                                    ``(III) lead screening and 
                                treatment;
                                    ``(IV) prevention, diagnosis and 
                                treatment of tuberculosis, sexually 
                                transmitted diseases (including HIV 
                                infection), and other communicable 
                                diseases; and
                                    ``(V) such other services as the 
                                Secretary may specify.
                            ``(iii) Report.--The procedures referred to 
                        in clause (i) shall be described in an annual 
                        report to the Secretary provided by the State.
            ``(3) External independent review.--
                    ``(A) In general.--Except as provided in paragraph 
                (4), a State contracting with a risk contracting entity 
                under this section shall provide for an annual external 
                independent review of the quality and timeliness of, 
                and access to, the items and services specified in such 
                entity's contract with the State agency. Such review 
                shall be conducted by a utilization control and peer 
                review organization with a contract under section 1153 
                or another organization unaffiliated with the State 
                government or with any risk contracting entity and 
                approved by the Secretary.
                    ``(B) Contents of review.--An external independent 
                review conducted under this paragraph shall include the 
                following:
                            ``(i) A review of the entity's medical 
                        care, through sampling of medical records or 
                        other appropriate methods, for indications of 
                        quality of care and inappropriate utilization 
                        (including overutilization) and treatment.
                            ``(ii) A review of enrollee inpatient and 
                        ambulatory data, through sampling of medical 
                        records or other appropriate methods, to 
                        determine trends in quality and appropriateness 
                        of care.
                            ``(iii) Notification of the entity and the 
                        State when the review under this paragraph 
                        indicates inappropriate care, treatment, or 
                        utilization of services (including 
                        overutilization).
                            ``(iv) Other activities as prescribed by 
                        the Secretary or the State.
                    ``(C) Availability.--The results of each external 
                independent review conducted under this paragraph shall 
                be available to the public consistent with the 
                requirements for disclosure of information contained in 
                section 1160.
            ``(4) Deemed compliance with external independent quality 
        of care review requirements.--
                    ``(A) In general.--The Secretary may deem the State 
                to have fulfilled the requirement for independent 
                external review of quality of care with respect to an 
                entity which has been accredited by an organization 
                described in subparagraph (B) and approved by the 
                Secretary.
                    ``(B) Accrediting organization.--An accrediting 
                organization described in this subparagraph must--
                            ``(i) exist for the primary purpose of 
                        accrediting coordinated care organizations;
                            ``(ii) be governed by a group of 
                        individuals representing health care providers, 
                        purchasers, regulators, and consumers (a 
                        minority of which shall be representatives of 
                        health care providers);
                            ``(iii) have substantial experience in 
                        accrediting coordinated care organizations, 
                        including an organization's internal quality 
                        assurance program;
                            ``(iv) be independent of health care 
                        providers or associations of health care 
                        providers;
                            ``(v) be a nonprofit organization; and
                            ``(vi) have an accreditation process which 
                        meets requirements specified by the Secretary.
            ``(5) Federal monitoring responsibilities.--The Secretary 
        shall review the external independent reviews conducted 
        pursuant to paragraph (3) and shall monitor the effectiveness 
        of the State's monitoring and followup activities required 
        under subparagraph (A) of paragraph (2). If the Secretary 
        determines that a State's monitoring and followup activities 
        are not adequate to ensure that the requirements of paragraph 
        (2) are met, the Secretary shall undertake appropriate followup 
        activities to ensure that the State improves its monitoring and 
        followup activities.
    ``(g) Participation of Certain Providers.--Each risk contracting 
entity shall meet the requirements of section 1013 of the Bipartisan 
Health Care Reform Act of 1994 in the same manner as they would apply 
to a group health plan (when such section becomes effective).
    ``(h) Transactions With Parties in Interest.--
            ``(1) In general.--Each risk contracting entity which is 
        not a qualified health maintenance organization (as defined in 
        section 1310(d) of the Public Health Service Act) must report 
        to the State and, upon request, to the Secretary, the Inspector 
        General of the Department of Health and Human Services, and the 
        Comptroller General of the United States a description of 
        transactions between the entity and a party in interest (as 
        defined in section 1318(b) of such Act), including the 
        following transactions:
                    ``(A) Any sale or exchange, or leasing of any 
                property between the entity and such a party.
                    ``(B) Any furnishing for consideration of goods, 
                services (including management services), or facilities 
                between the entity and such a party, but not including 
                salaries paid to employees for services provided in the 
                normal course of their employment.
                    ``(C) Any lending of money or other extension of 
                credit between the entity and such a party.
        The State or the Secretary may require that information 
        reported with respect to a risk contracting entity which 
        controls, or is controlled by, or is under common control with, 
        another entity be in the form of a consolidated financial 
        statement for the risk contracting entity and such entity.
            ``(2) Availability of information.--Each risk contracting 
        entity shall make the information reported pursuant to 
        paragraph (1) available to its enrollees upon reasonable 
        request.
    ``(i) Remedies for Failure To Comply.--
            ``(1) In general.--If the Secretary determines that a risk 
        contracting entity or a primary care case management entity--
                    ``(A) fails substantially to provide services 
                required under section 1905(r), when such an entity is 
                required to do so, or provide medically necessary items 
                and services that are required to be provided to an 
                individual enrolled with such an entity, if the failure 
                has adversely affected (or has substantial likelihood 
                of adversely affecting) the individual;
                    ``(B) imposes premiums on individuals enrolled with 
                such an entity in excess of the premiums permitted 
                under this title;
                    ``(C) acts to discriminate among individuals in 
                violation of the provision of subsection (b)(3)(D), 
                including expulsion or refusal to reenroll an 
                individual or engaging in any practice that would 
                reasonably be expected to have the effect of denying or 
                discouraging enrollment (except as permitted by this 
                section) by eligible individuals with the entity whose 
                medical condition or history indicates a need for 
                substantial future medical services;
                    ``(D) misrepresents or falsifies information that 
                is furnished--
                            ``(i) to the Secretary or the State under 
                        this section; or
                            ``(ii) to an individual or to any other 
                        entity under this section; or
                    ``(E) fails to comply with the requirements of 
                section 1876(i)(8),
        the Secretary may provide, in addition to any other remedies 
        available under law, for any of the remedies described in 
        paragraph (2).
            ``(2) Additional remedies.--The remedies described in this 
        paragraph are--
                    ``(A) civil money penalties of not more than 
                $25,000 for each determination under paragraph (1), or, 
                with respect to a determination under subparagraph (C) 
                or (D)(i) of such paragraph, of not more than $100,000 
                for each such determination, plus, with respect to a 
                determination under paragraph (1)(B), double the excess 
                amount charged in violation of such paragraph (and the 
                excess amount charged shall be deducted from the 
                penalty and returned to the individual concerned), and 
                plus, with respect to a determination under paragraph 
                (1)(C), $15,000 for each individual not enrolled as a 
                result of a practice described in such paragraph, or
                    ``(B) denial of payment to the State for medical 
                assistance furnished by a risk contracting entity or a 
                primary care case management entity under this section 
                for individuals enrolled after the date the Secretary 
                notifies the entity of a determination under paragraph 
                (1) and until the Secretary is satisfied that the basis 
                for such determination has been corrected and is not 
                likely to recur.
        The provisions of section 1128A (other than subsections (a) 
        and(b)) shall apply to a civil money penalty under subparagraph 
        (A) in the same manner as such provisions apply to a penalty or 
        proceeding under section 1128A(a).
    ``(j) Termination of Contract by State.--Any State which has a 
contract with a risk contracting entity or a primary care case 
management entity may terminate such contract if such entity fails to 
comply with the terms of such contract or any applicable provision of 
this section.
    ``(k) Fair Hearing.--Nothing in this section shall affect the 
rights of an individual eligible to receive medical assistance under 
the State plan to obtain a fair hearing under section 1902(a)(3) or 
under applicable State law.
    ``(l) Disproportionate Share Hospitals.--Nothing in this section 
shall affect any requirement on a State to comply with section 1923.
    ``(m) Referral Payments.--For 1 year following the date on which 
individuals eligible for medical assistance under the State plan in a 
service area are required to enroll with a risk contracting entity or a 
primary care case management entity, Federally qualified health centers 
and rural health centers located in such service area or providing care 
to such enrollees, shall receive a fee for educating such enrollees 
about the availability of services from the risk contracting entity or 
primary care case management entity with which such enrollees are 
enrolled.
    ``(n) Special Rules.--
            ``(1) Nonapplicability of certain provisions to certain 
        risk contracting entities.--
        In the case of any risk contracting entity which--
                    ``(A)(i) is an individual physician or a physician 
                group practice of less than 50 physicians, and
                    ``(ii) is not described in paragraphs (A) and (B) 
                of subsection (b)(1), and
                    ``(B) is at risk only for the health care items and 
                services directly provided by such entity,
        paragraphs (3)(K), (3)(L), (3)(O), (3)(P), and (4) of 
        subsection (b), and paragraph (3) of subsection (f), shall not 
        apply to such entity.
            ``(2) Exception from definition of risk contracting 
        entity.--For purposes of this section, the term `risk 
        contracting entity' shall not include a health insuring 
        organization which was used by a State before April 1, 1986, to 
        administer a portion of the State plan of such State on a 
        statewide basis.
            ``(3) New jersey.--The rules under section 1903(m)(6) as in 
        effect on the day before the effective date of this section 
        shall apply in the case of an undertaking by the State of New 
        Jersey (as described in such section 1903(m)(6)).
    ``(o) Continuation of Certain Coordinated Care Programs.--The 
Secretary may provide for the continuation of any coordinated care 
program operating under section 1115 or 1915 without requiring 
compliance with any provision of this section which conflicts with the 
continuation of such program and without requiring any additional 
waivers under such sections 1115 and 1915 if the program has been 
successful in assuring quality and containing costs (as determining by 
the Secretary) and is likely to continue to be successful in the 
future.
    ``(p) Guidelines, Regulations, and Model Contract.--
            ``(1) Guidelines and regulations on solvency.--At the 
        earliest practicable time after the date of enactment of this 
        section, the Secretary shall issue guidelines and regulations 
        concerning solvency standards for risk contracting entities and 
        subcontractors of such risk contracting entities. Such 
        guidelines and regulations shall take into account 
        characteristics that may differ among risk contracting entities 
        including whether such an entity is at risk for inpatient 
        hospital services.
            ``(2) Guidelines and regulations on marketing.--At the 
        earliest practicable time after the date of enactment of this 
        section, the Secretary shall issue guidelines and regulations 
        concerning--
                    ``(A) marketing undertaken by any risk contracting 
                entity or any primary care case management program to 
                individuals eligible for medical assistance under the 
                State plan, and
                    ``(B) information that must be provided by States 
                or any such entity to individuals eligible for medical 
                assistance under the State plan with respect to--
                            ``(i) the options and rights of such 
                        individuals to enroll with, and disenroll from, 
                        any such entity, as provided in this section, 
                        and
                            ``(ii) the availability of services from 
                        any such entity (including a list of services 
                        for which such entity is responsible or must 
                        approve and information on how to obtain 
                        services for which such entity is not 
                        responsible).
        In developing the guidelines and regulations under this 
        paragraph, the Secretary shall address the special 
        circumstances of children with special health care needs (as 
        defined in subsection (e)(1)(B)(ii)) and other individuals with 
        special health care needs.
            ``(3) Model contract.--The Secretary shall develop a model 
        contract to reflect the requirements of subsection (b)(3) and 
        such other requirements as the Secretary determines 
        appropriate.''.
    (b) Waivers From Requirements on Coordinated Care Programs.--
Section 1915(b) of such Act (42 U.S.C. 1396n) is amended--
            (1) in the matter preceding paragraph (1), by striking ``as 
        may be necessary'' and inserting ``, and section 1932 as may be 
        necessary'';
            (2) in paragraph (1), by striking ``a primary care case 
        management system or'';
            (3) by striking ``and'' at the end of paragraph (3);
            (4) by striking the period at the end of paragraph (4) and 
        inserting ``, and''; and
            (5) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) to permit a risk contracting entity (as defined in 
        section 1932(a)(3)) to restrict the period in which individuals 
        enrolled with such entity may terminate such enrollment without 
        cause in accordance with section 1932(e)(3)(A).''.
    (c) State Option To Guarantee Medicaid Eligibility.--Section 
1902(e)(2) of such Act (42 U.S.C. 1396a(e)(2)) is amended--
            (1) in subparagraph (A), by striking all that precedes 
        ``(but for this paragraph)'' and inserting ``In the case of an 
        individual who is enrolled--
                    ``(i) with a qualified health maintenance 
                organization (as defined in title XIII of the Public 
                Health Service Act) or with a risk contracting entity 
                (as defined in section 1932(a)(3)), or
                    ``(ii) with any risk contracting entity (as defined 
                in section 1932(a)(3)) in a State that, on the 
                effective date of this provision, had in effect a 
                waiver under section 1115 of requirements under this 
                title under which the State could extend eligibility 
                for medical assistance for enrollees of such entity, or
                    ``(iii) with an eligible organization with a 
                contract under section 1876,
        and who would'',
            (2) in subparagraph (B), by striking ``organization or'' 
        each place it appears, and
            (3) by adding at the end the following new subparagraph:
                    ``(C) The State plan may provide, notwithstanding 
                any other provision of this title, that an individual 
                shall be deemed to continue to be eligible for benefits 
                under this title until the end of the month following 
                the month in which such individual would (but for this 
                paragraph) lose such eligibility because of excess 
                income and resources, if the individual is enrolled 
                with a risk contracting entity or primary care case 
                management entity (as those terms are defined in 
                section 1932(a)).''.
    (d) Enhanced Match Related to Quality Review.--Section 
1903(a)(3)(C) of such Act (42 U.S.C. 1396b(a)(3)(C)) is amended--
            (1) by striking ``organization or by'' and inserting 
        ``organization, by''; and
            (2) by striking ``section 1152, as determined by the 
        Secretary,'' and inserting ``section 1152, as determined by the 
        Secretary, or by another organization approved by the Secretary 
        which is unaffiliated with the State government or with any 
        risk contracting entity (as defined in section 1932(a)(3)),''.
    (e) Accumulation of Reserves by Certain Entities.--Any organization 
referred to in section 329, 330, or 340, of the Public Health Service 
Act which has contracted with a State agency as a risk contracting 
entity under section 1932(g)(3)(A) of the Social Security Act may 
accumulate reserves with respect to payments made to such organization 
under section 1932(g)(3)(C) of such Act.
    (f) Conforming Amendments.--
            (1) Section 1128(b)(6)(C)(i) of such Act (42 U.S.C. 1320a-
        7(b)(6)(C)(i)) is amended by striking ``health maintenance 
        organization'' and inserting ``risk contracting entity''.
            (2) Section 1902(a)(23) of such Act (42 U.S.C. 
        1396a(a)(23)) is amended by striking ``primary care-case 
        management system (described in section 1915(b)(1)), a health 
        maintenance organization,'' and inserting ``primary care case 
        management program (as defined in section 1932(a)(1)), a risk 
        contracting entity (as defined in section 1932(a)(3)),''.
            (3) Section 1902(a)(30)(C) of such Act (42 U.S.C. 
        1396a(a)(30)(C)) is amended by striking ``use a utilization'' 
        and all that follows through ``with the results'' and inserting 
        ``provide for independent review and quality assurance of 
        entities with contracts under section 1932, in accordance with 
        subsection (f) of such section 1932, with the results''.
            (4) Section 1902(a)(57) of such Act (42 U.S.C. 
        1396a(a)(57)) is amended by striking ``or health maintenance 
        organization (as defined in section 1903(m)(1)(A))'' and 
        inserting ``risk contracting entity, or primary care case 
        management entity (as defined in section 1932(a))''.
            (5) Section 1902(a) of such Act (42 U.S.C. 1396a), as 
        amended by sections 3303(a)(1) and 3002(a), is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (61);
                    (B) by striking the period at the end of paragraph 
                (62) and inserting ``; and''; and
                    (C) by inserting after paragraph (62) the following 
                new paragraphs:
            ``(63) at State option, provide for a primary care case 
        management program in accordance with section 1932; and
            ``(64) at State option, provide for a program under which 
        the State contracts with risk contracting entities in 
        accordance with section 1932.''.
            (6) Section 1902(p)(2) of such Act (42 U.S.C. 1396a(p)(2)) 
        is amended by striking ``health maintenance organization (as 
        defined in section 1903(m))'' and inserting ``risk contracting 
        entity (as defined in section 1932(a)(3))''.
            (7) Section 1902(w) of such Act (42 U.S.C. 1396a(w)) is 
        amended--
                    (A) in paragraph (1), by striking ``section 
                1903(m)(1)(A)'' and inserting ``section 1932(a)(3)'', 
                and
                    (B) in paragraph (2)(E)--
                            (i) by striking ``health maintenance 
                        organization'' and inserting ``risk contracting 
                        entity'', and
                            (ii) by striking ``organization'' and 
                        inserting ``entity''.
            (8) Section 1903(k) of such Act (42 U.S.C. 1396b(k)) is 
        amended by striking ``health maintenance organization which 
        meets the requirements of subsection (m) of this section'' and 
        inserting ``risk contracting entity which meets the 
        requirements of section 1932''.
            (9) Section 1903(w)(7)(A)(viii) of such Act (42 U.S.C. 
        1396b(w)(7)(A)(viii)) is amended by striking ``health 
        maintenance organizations (and other organizations with 
        contracts under section 1903(m))'' and inserting ``risk 
        contracting entities with contracts under section 1932''.
            (10) Section 1905(a) of such Act (42 U.S.C. 1396d(a)) is 
        amended, in the matter preceding clause (i), by inserting 
        ``(which may be on a prepaid capitation or other risk basis)'' 
        after ``payment''.
            (11) Section 1916(b)(2)(D) of such Act (42 U.S.C. 
        1396o(b)(2)(D)) is amended by striking ``health maintenance 
        organization (as defined in section 1903(m))'' and inserting 
        ``risk contracting entity (as defined in section 1932(a)(3))''.
            (12) Section 1925(b)(4)(D)(iv) of such Act (42 U.S.C. 
        1396r-6(b)(4)(D)(iv)) is amended--
                    (A) in the heading, by striking ``hmo'' and 
                inserting ``risk contracting entity'',
                    (B) by striking ``health maintenance organization 
                (as defined in section 1903(m)(1)(A))'' and inserting 
                ``risk contracting entity (as defined in section 
                1932(a)(3)'', and
                    (C) by striking ``health maintenance organization 
                in accordance with section 1903(m)'' and inserting 
                ``risk contracting entity in accordance with section 
                1932''.
            (13) Paragraphs (1) and (2) of section 1926(a) of such Act 
        (42 U.S.C. 1396r-7(a)) are each amended by striking ``health 
        maintenance organizations under section 1903(m)'' and inserting 
        ``risk contracting entities under section 1932''.
            (14) Section 1927(j)(1) of such Act is amended by striking 
        ``* * * Health Maintenance Organizations, including those 
        organizations that contract under section 1903(m)'' and 
        inserting ``risk contracting entities (as defined in section 
        1932(a)(3))''.
    (g) Effective Date.--The amendments made by this section shall 
become effective with respect to calendar quarters beginning on or 
after January 1, 1995.

                Subtitle D--Additional Medicaid Reforms

                                                  Title III, Subtitle D

SEC. 3301. REDUCTION IN AMOUNT OF PAYMENT ADJUSTMENTS FOR 
              DISPROPORTIONATE SHARE HOSPITALS.

    (a) In General.--Section 1923 of the Social Security Act (42 U.S.C. 
1396r-4) is amended by adding at the end the following new subsection:
    ``(h) Reduction in Federal Financial Participation for 
Disproportionate Share Adjustments.--Notwithstanding any other 
provision of this section, the amount of payments under section 1903(a) 
with respect to any payment adjustment made under this section for 
hospitals in a State for quarters in a fiscal year shall not exceed the 
following percent of the amount otherwise determined under subsection 
(f):
            ``(1) For fiscal years 1995, 1996, 1997 and 1998, 75 
        percent.
            ``(2) For fiscal years 1999 and 2000, 70 percent.
            ``(3) For fiscal years 2001 and 2002, 65 percent.
            ``(4) For fiscal year 2003 and thereafter, 63 percent.''.
    (b) Conforming Amendment.--Section 1923(c) of such Act (42 U.S.C. 
1396r-4(c)) is amended in the matter preceding paragraph (1) by 
striking ``(f) and (g)'' and inserting ``(f), (g), and (h)''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to quarters in fiscal years beginning on or after October 
1, 1994.

SEC. 3302. ELIMINATION OF MEDICALLY NEEDY PROGRAM FOR INDIVIDUALS NOT 
              IN AN INSTITUTION.

    (a) In General.--Section 1902(a)(10)(C) of the Social Security Act 
(42 U.S.C. 1396a(a)(10)(C)) is amended by inserting ``such assistance 
is restricted to individuals in institutions and'' after ``, then''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to calendar quarters beginning on or after January 1, 1998.

SEC. 3303. ELIMINATION OF MEDICAID PEDIATRIC IMMUNIZATION PROGRAM.

    (a) In General.--Effective as if included in the enactment of the 
13621 of the Omnibus Budget Reconciliation Act of 1993, title XIX of 
the Social Security Act is amended as follows:
            (1) Section 1902(a) (42 U.S.C. 1396a(a)) is amended--
                    (A) by inserting ``and'' at the end of paragraph 
                (60),
                    (B) in paragraph (61), by striking ``; and'' and 
                inserting a period, and
                    (C) by striking paragraph (62).
            (2) Section 1928 (42 U.S.C. 1396s) is repealed.
            (3) Section 1903(i) (42 U.S.C. 1396b(i)) is amended--
                    (A) by inserting ``or'' at the end of paragraph 
                (12),
                    (B) by striking the semicolon at the end of 
                paragraph (13) and inserting a period, and
                    (C) by striking paragraphs (14) and (15).
            (4) Section 1902(a)(32)(D) is amended by striking ``before 
        October 1, 1994''.
            (5) Section 1902(a) (42 U.S.C. 1396a(a)) is amended--
                    (A) in paragraph (11)(B)--
                            (i) by inserting ``and'' before ``(ii)'', 
                        and
                            (ii) by striking ``to the individual under 
                        section 1903, and (iii) providing for 
                        coordination of information and education on 
                        pediatric vaccinations and delivery of 
                        immunization services'' and inserting ``to him 
                        under section 1903'';
                    (B) in paragraph (11)(C), by striking ``, including 
                the provision of information and education on pediatric 
                vaccinations and the delivery of immunization 
                services,'' and
                    (C) in paragraph (43)(A), by striking ``and the 
                need for age-appropriate immunizations against vaccine-
                preventable diseases''.
            (6) Section 1905(r)(1) (42 U.S.C. 1396d(r)(1)) is amended--
                    (A) in subparagraph (A)(i), by striking ``and, with 
                respect to immunizations under subparagraph (B)(iii), 
                in accordance with the schedule referred to in section 
                1928(c)(2)(B)(i) for pediatric vaccines''; and
                    (B) in subparagraph (B)(iii), by striking 
                ``(according to the schedule referred to in section 
                1928(c)(2)(B)(i) for pediatric vaccines)''.
    (b) Establishment of Alternative Delivery Programs.--
            (1) In general.--At the request of a State, the Secretary 
        of Health and Human Services shall negotiate and enter into 
        contracts with manufacturers of listed pediatric vaccines 
        (which manufacturers have entered into agreements under section 
        1902(a)(32)(D) of the Social Security Act) or with other 
        licensed distributors of such vaccines to provide for the 
        delivery of such vaccines under a replacement vaccine delivery 
        program described in section 1902(a)(32)(D) of the Social 
        Security Act or under an alternative delivery program described 
        in paragraph (2).
            (2) Alternative delivery program.--An alternative delivery 
        program described in this paragraph is a program operated by a 
        State under which listed pediatric vaccines are distributed 
        through the manufacturer (or other licensed distributor) to 
        individuals and entities providing such vaccines under the 
        State plan under title XIX of the Social Security Act and other 
        providers of vaccines to children who are in families eligible 
        for premium assistance under part A of title XXI of such Act if 
        the providers are registered to participate in the program and 
        if the State demonstrates that the operation of the program 
        under this paragraph will not result in greater delivery costs 
        or additional purchases of vaccine than would have resulted 
        under the program described in section 1902(a)(32)(D) of such 
        Act.
            (3) Listed pediatric vaccine.--In this subsection, the term 
        ``listed pediatric vaccine'' means a pediatric vaccine 
        contained on the list established (and periodically reviewed 
        and as appropriate revised) by the Advisory Committee on 
        Immunization Practices (an advisory committee established by 
        the Secretary, acting through the Director of the Centers for 
        Disease Control and Prevention).
            (4) Limitation on payment.--Section 1903(i) of the Social 
        Security Act (42 U.S.C. 1396b(i)), as amended by subsection 
        (a)(3) and section 2002(b), is amended--
                    (A) by striking ``or'' at the end of paragraph 
                (13),
                    (B) by striking the period at the end of paragraph 
                (14) and inserting ``; or'', and
                    (C) by inserting after paragraph (14) the 
                following:
            ``(15) with respect to amounts expended for a listed 
        pediatric vaccine (as defined in paragraph (3) of section 
        3303(b) of the Bipartisan Health Care Reform Act of 1994) if 
        the amounts exceed the applicable price negotiated under a 
        contract entered into under subsection (b) of such section.''.

                     TITLE IV--ACCESS IMPROVEMENTS

                                                               Title IV

                       table of contents of title

           Subtitle A--Expanding Access in Underserved Areas

Sec. 4001. Community health authorities demonstration projects.
Sec. 4002. Health center program amendments.
               Subtitle B--Improved Access in Rural Areas

      Part 1--Grants to Encourage Community Rural Health Networks

Sec. 4101. Assistance for development of access plans for chronically 
                            underserved areas.
Sec. 4102. Technical assistance grants for networks.
Sec. 4103. Development grants for networks.
Sec. 4104. Definitions.
 Part 2--Incentives for Health Professionals to Practice in Rural Areas

            Subpart A--National Health Service Corps Program

Sec. 4111. National Health Service Corps loan repayments excluded from 
                            gross income.
Sec. 4112. Modification in criteria for designation as health 
                            professional shortage area.
Sec. 4113. Other provisions regarding national health service corps.
               Subpart B--Incentives Under Other Programs

Sec. 4121. Extension of additional payment under medicare for 
                            physicians' services furnished in former 
                            shortage areas.
Sec. 4122. Refinement of geographic adjustment factor for medicare 
                            physicians' services.
Sec. 4123. Development of model State scope of practice law.
             Part 3--Assistance for Institutional Providers

            Subpart A--Community and Migrant Health Centers

Sec. 4131. Community and migrant health centers.
                  Subpart B--Emergency Medical Systems

Sec. 4141. Emergency medical services.
Sec. 4142. Grants to States regarding aircraft for transporting rural 
                            victims of medical emergencies.
        Subpart C--Assistance to Rural Providers Under Medicare

Sec. 4151. Amendments to essential access community hospital (EACH) 
                            program under medicare.
Sec. 4152. Rural emergency access care hospitals described.
Sec. 4153. Coverage of and payment for services.
Sec. 4154. Effective date.
 Subpart D--Demonstration Projects to Encourage Primary Care and Rural-
                    Based Graduate Medical Education

Sec. 4161. State and consortium demonstration projects.
Sec. 4162. Goals for projects.
Sec. 4163. Definitions.
            Part 4--Hospital Affiliated Primary Care Center

Sec. 4171. Hospital-affiliated primary care centers.
                  Subtitle C--Academic Health Centers

Sec. 4201. Study of payments for medical education at sites other than 
                            hospitals.
Sec. 4202. Study of funding needs of health professions schools.
       Subtitle D--United States-Mexico Border Health Commission

Sec. 4301. Agreement to establish binational commission.
Sec. 4302. Duties.
Sec. 4303. Other authorized functions.
Sec. 4304. Membership.
Sec. 4305. Regional offices.
Sec. 4306. Reports.
Sec. 4307. Definitions.

           Subtitle A--Expanding Access in Underserved Areas

                                                   Title IV, Subtitle A

SEC. 4001. COMMUNITY HEALTH AUTHORITIES DEMONSTRATION PROJECTS.

    (a) In General.--Title XIX of the Social Security Act, as amended 
by sections 3001(a) and 3201(a)(2), is amended--
            (1) by redesignating section 1933 as section 1934; and
            (2) by inserting after section 1932 the following new 
        section:

         ``community health authorities demonstration projects

    ``Sec. 1933. (a) In General.--In order to test the effectiveness of 
various innovative health care delivery approaches through the 
operation of community health authorities, the Secretary shall operate 
a program under which States establish projects to demonstrate the 
effectiveness of such approaches in providing access to cost-effective 
preventive and primary care and related services for various areas and 
populations, including low-income residents of medically underserved 
areas or for medically underserved populations. A State may operate 
more than one such project.
    ``(b) Selection of State Projects.--
            ``(1) In general.--A State is eligible to participate in 
        the program, and establish a demonstration project, under this 
        section only if--
                    ``(A) the State submits to the Secretary an 
                application, at such time and in such form as the 
                Secretary may require, for participation in the 
                program; and
                    ``(B) the Secretary finds that--
                            ``(i) the application contains assurances 
                        that the State will support the development of 
                        a community health authority that meets the 
                        requirements of this section,
                            ``(ii) the community health authority will 
                        meet the requirements for such an authority 
                        under subsection (c),
                            ``(iii) the State provides sufficient 
                        assurances that the demonstration project of a 
                        community health authority meets (or, when 
                        operational, will meet) the requirements of 
                        subsection (d), and
                            ``(iv) the State will comply with the 
                        requirements of subsections (g) and (h).
            ``(2) Contents of application.--Each application submitted 
        under paragraph (1) for a demonstration project shall include 
        at least the following:
                    ``(A) A description of the proposed community 
                health authority and of the area or population that the 
                authority will serve.
                    ``(B) A demonstration that the CHA will serve at 
                least one geographic area or population group that is 
                designated as medically underserved under section 330 
                of the Public Health Service Act or as having a 
                shortage of health professionals under section 332 of 
                such Act.
                    ``(C) An assessment of the area's or population's 
                need for services and an assurance that the services of 
                the CHA will be responsive to those needs.
                    ``(D) A list of the items and services to be 
                furnished by the CHA under the project, broken down by 
                those items and services that are treated as medical 
                assistance under the State plan under this title and 
                other items and services that will be provided by the 
                CHA (either directly or through coordination with other 
                entities).
                    ``(E) An assurance that the CHA has entered into 
                (or plans to enter into) written participation 
                agreements with a sufficient number of providers to 
                enable the CHA to furnish all of such items and 
                services to enrolled individuals.
                    ``(F) An assurance that the State plan under this 
                title will provide payment to the authority in 
                accordance with subsection (e).
                    ``(G) Evidence of support and assistance from other 
                State agencies with responsibility for providing or 
                supporting the provision of preventive and primary care 
                services to underserved and at-risk populations.
                    ``(H) A proposed budget for the CHA.
            ``(3) Period of approval.--Each project approved under this 
        section shall be approved for a period of not less than 3 
        years, subject to renewal for subsequent periods unless such 
        approval is withdrawn for cause by the Secretary or at the 
        request of the State.
    ``(c) Community Health Authority (CHA) Defined.--In this section, 
the terms `community health authority' and `CHA' mean a nonprofit 
entity that meets the following requirements:
            ``(1) The entity serves (or will serve at the time it 
        becomes operational under a project) a geographic area or 
        population group that includes those designated--
                    ``(A) under section 330 of the Public Health 
                Service Act as medically underserved, or
                    ``(B) under section 332 of such Act as a health 
                professions shortage area.
            ``(2) The entity enrolls--
                    ``(A) individuals and families who are medicaid-
                eligible;
                    ``(B) within the limits of its available resources 
                and capacity, other individuals who have incomes below 
                200 percent of the Federal official poverty level; and
                    ``(C) within the limits of its available resources 
                and capacity, other individuals and families who are 
                able to pay the costs of enrollment.
            ``(3) Through its participating providers, the entity 
        provides or, through contracts, arranges for the provision of 
        (or, by the time it become operational, will so provide or 
        arrange for the provision of) at least preventive services, 
        primary care services, inpatient and outpatient hospital 
        services, and any other service provided by a participating 
        provider for which payment may be made under the State plan 
        under this title to enrolled individuals.
            ``(4) The entity must include (to the maximum extent 
        practicable) as participating providers any of the following 
        providers that furnish services provided by (or arranged by) 
        the entity that are located in or serve the area or population 
        to be covered:
                    ``(A) Federally-qualified health centers.
                    ``(B) Rural health clinics.
                    ``(C) Local public health agencies that furnish 
                such services.
                    ``(D) A hospital (or other provider of inpatient or 
                outpatient hospital services) which has a participation 
                agreement in effect with the State under its plan under 
                this title, which is located in or serving the area or 
                population to be served.
            ``(5) The entity may include as participating providers 
        other providers (which may include private physicians or group 
        practice offices, other community clinics, limited service 
        providers (such as prenatal clinics), and health professionals 
        teaching programs (such as area health educational centers)) 
        and take other appropriate steps, to the extent needed to 
        assure that the network is reasonable in size and able to 
        provide (or arrange for the provision of) the services it 
        proposes to furnish to its enrollees.
            ``(6) The entity must maintain written agreements with each 
        participating provider under which the provider agrees to 
        participate in the CHA and agrees to accept payment from the 
        CHA as payment in full for services furnished to individuals 
        enrolled with the CHA.
            ``(7) Under the written agreements described in paragraph 
        (6), if a majority of the board of directors of the entity has 
        determined that a participating provider is failing to meet any 
        of the requirements of the participation agreement, the board 
        may terminate the provider's participation agreement in 
        accordance with the following requirements:
                    ``(A) Subject to subparagraph (B), prior to any 
                termination of a provider's participation agreement, 
                the provider shall be entitled to 30 days prior notice, 
                a reasonable opportunity to correct any deficiencies, 
                and an opportunity for a full and fair hearing 
                conducted by the entity to dispute the reasons for 
                termination. The provider shall be entitled to appeal 
                the board of directors' decision directly to a 
                committee consisting of representatives of all of the 
                entity's participating providers.
                    ``(B) If a majority of the board of directors of 
                the entity determines that the continued participation 
                of a provider presents an immediate threat to the 
                health and safety of patients or a substantial risk of 
                improper diversion of funds, the board may suspend the 
                provider's participation agreement (including the 
                receipt of funds under the agreement) for a period of 
                up to 60 days. During this period, the entity shall 
                take steps to ensure that patients who were assigned to 
                or cared for by the suspended provider are 
                appropriately assigned or referred to alternative 
                participating providers. The suspended provider shall 
                be entitled to a hearing within the period of the 
                suspension to show cause why the suspension should be 
                lifted and its participation agreement restored. If 
                dissatisfied with the board's decision, the provider 
                shall be entitled to appeal the decision directly to a 
                committee consisting of representatives of all of the 
                entity's participating providers.
                    ``(C) For all other disputes between the entity and 
                its participating providers (including disputes over 
                the amounts due or interim rates to be paid to a 
                provider), the entity shall provide an opportunity for 
                a full and fair hearing.
            ``(8) The entity must be governed by a board of directors 
        that includes representatives of the participating providers 
        and, as appropriate, other health professionals, civic or 
        business leaders, elected officials, and residents of the area 
        or population served. Not less than 51 percent of such board 
        shall be composed of individuals who are enrolled in the CHA 
        and who are representatives of the community served.
    ``(d) Demonstration Project Requirements.--The requirements of this 
subsection, with respect to a demonstration project of a CHA under this 
section, are as follows:
            ``(1)(A) All services furnished by the CHA under the 
        project shall be available and accessible to all enrolled 
        individuals and, except as provided in subparagraph (B), must 
        be available without regard to an individual's ability to pay 
        for such services.
            ``(B) A CHA shall prepare a schedule of discounts to be 
        applied to the payment of premiums by individuals who are not 
        medicaid-eligible individuals which shall be adjusted on the 
        basis of the individual's ability to pay.
            ``(2) The CHA shall take appropriate steps to emphasize the 
        provision of preventive and primary care services, and shall 
        ensure that each enrolled individual is assigned to a primary 
        care physician (to the greatest extent appropriate and 
        feasible), except that the CHA shall establish a process 
        through which an enrolled individual may be assigned to another 
        primary care physician for good cause shown.
            ``(3) The CHA must make reasonable efforts to reduce the 
        unnecessary or inappropriate use of hospital or other high-cost 
        services through an emphasis on preventive and primary care 
        services, the implementation of utilization review or other 
        appropriate methods.
            ``(4) The State must regularly provide the CHA with 
        information on other medical, health, and related benefits that 
        may be available to individuals enrolled with the CHA under 
        programs other than the State plan under this title, and the 
        CHA must provide its enrolled individuals with enrollment 
        information and other non-cash assistance to assist them in 
        obtaining such benefits.
            ``(5) The State and the CHA must meet such financial 
        standards and requirements and reporting requirements as the 
        Secretary specifies and must prepare and submit to the 
        Secretary an annual independent financial audit conducted in 
        accordance with requirements specified by the Secretary.
            ``(6) In collaboration with the State, the CHA must adopt 
        and use community-oriented, patient-responsive quality 
        assurance and control systems in accordance with requirements 
        specified by the Secretary. Such systems must include at least 
        an ongoing quality assurance program that measures consumer 
        satisfaction with the care provided under the network, stresses 
        improved health outcomes, and operates a community health 
        status improvement process that identifies and investigates 
        community health problems and implements measures designed to 
        remedy them.
    ``(e) Capitation Payments.--
            ``(1) In general.--Under a demonstration project under this 
        section, the State shall enter into an annual contract with the 
        CHA under which the State shall make monthly payments to the 
        CHA for covered services furnished through the CHA to 
        individuals entitled to medical assistance under this title in 
        the amount specified in paragraph (2). Payment shall be made at 
        the beginning of each month on the basis of estimates of the 
        amounts payable and amounts subsequently paid are subject to 
        adjustment to reflect the amounts by which previous payments 
        were greater or less than the amount of payments that should 
        have been made.
            ``(2) Amount of capitation payment.--The amount of a 
        monthly payment under paragraph (1) during a contract year, 
        shall be not less than \1/12\ of the product of--
                    ``(A)(i) the average per capita amounts expended 
                under this title under the State plan for covered 
                services to be furnished under the demonstration 
                project for similar Medicaid-eligible individuals for 
                the most recent 12-month period ending before the date 
                of the enactment of this section, increased by (ii) the 
                percentage change in the consumer price index for all 
                urban consumers (all items; U.S. city average) during 
                the period that begins upon the expiration of such 12-
                month period and ends upon the expiration of the most 
                recent 12-month period ending before the first month of 
                the contract year for which complete financial data on 
                such index is available, and
                    ``(B) the number of Medicaid-eligible individuals 
                enrolled under the project as of the 15th day of the 
                month prior to the first month of the contract year 
                (or, in the case of the first year for which a contract 
                is in effect under this subsection, the CHA's 
                reasonable estimate of the number of such individuals 
                who will be enrolled in the project as of the 15th day 
                of such month).
    ``(f) Additional State Assistance for Planning, Development, and 
Operations.--
            ``(1) In general.--Subject to paragraph (2), in addition to 
        the payments under subsection (e), demonstration projects 
        approved under this section are eligible to have approved 
        expenditures described in paragraph (3) treated, for purposes 
        of section 1903(a)(7), as expenditures found necessary by the 
        Secretary for the proper and efficient administration of the 
        State plan under this title.
            ``(2) Special rules.--
                    ``(A) Limitation with respect to any community 
                health authority.--The total amount of expenditures 
                with respect to any CHA that may be treated as 
                expenditures for medical assistance under paragraph (1) 
                for any 12-month period shall not exceed $250,000.
                    ``(B) Limitation on number of years.--The number of 
                12-month periods for which expenditures are treated as 
                expenditures for medical assistance under paragraph (1) 
                for a CHA shall not exceed--
                            ``(i) 2 for expenditures for planning and 
                        development assistance, described in paragraph 
                        (3)(A), and
                            ``(ii) 2 for expenditures for operational 
                        assistance, described in paragraph (3)(B).
                    ``(C) No resulting reduction in amounts provided 
                under phsa grants.--No grant to a CHA or one of its 
                participating providers under the Public Health Service 
                Act or this Act may be reduced on the ground that 
                activities of the CHA that are considered approved 
                expenditures under paragraph (3) are activities for 
                which the CHA or the participating providers received 
                funds under such Act.
            ``(3) Approved expenditures.--The approved expenditures 
        described in this paragraph are as follows:
                    ``(A) Planning and development.--Expenditures for 
                planning and development with respect to a CHA, 
                including--
                            ``(i) developing internal management, legal 
                        and financial and clinical, information, and 
                        reporting systems for the CHA, and carrying out 
                        other operating activities of the CHA;
                            ``(ii) recruiting, training and 
                        compensating management staff of the CHA and, 
                        as appropriate and necessary, management and 
                        clinical staff of any participating provider;
                            ``(iii) purchasing essential equipment and 
                        acquiring, modernizing, expanding, or (if cost-
                        effective) renovating facilities for the CHA 
                        and for participating providers (including 
                        amortization costs and payment of interest on 
                        loans); and
                            ``(iv) entering into arrangements to obtain 
                        or participate in emerging medical 
                        technologies, including telemedicine.
                    ``(B) Operations.--Expenditures in support of the 
                operations of a CHA, including--
                            ``(i) the ongoing management of the CHA, 
                        including daily program administration, 
                        recordkeeping and reporting, assurance of 
                        proper financial management (including billings 
                        and collections) and oversight of program 
                        quality;
                            ``(ii) developing and operating systems to 
                        enroll eligible individuals in the CHA;
                            ``(iii) data collection, in collaboration 
                        with the State medicaid agency and the State 
                        health department, designed to measure changes 
                        in patient access to care, the quality of care 
                        furnished, and patient health status, and 
                        health care outcomes;
                            ``(iv) ongoing community outreach and 
                        community education to all residents of the 
                        area or population served, to promote the 
                        enrollment of eligible individuals and the 
                        appropriate utilization of health services by 
                        such individuals;
                            ``(v) the establishment of necessary 
                        reserves or purchase of stop-loss coverage; and
                            ``(vi) activities relating to health 
                        professions training, including residency 
                        training at participating provider sites.
    ``(g) Additional Requirements.--
            ``(1) Mandatory enrollment of medicaid-eligible 
        individuals.--Notwithstanding any provision of section 1903(m), 
        a State participating in a demonstration project under this 
        section may, until December 31, 1997, require that each 
        medicaid-eligible resident in the service area of a CHA 
        operating under the project is not eligible to receive any 
        medical assistance under the State plan that may be obtained 
        through enrollment with the CHA unless the individual receives 
        such assistance through enrollment with the CHA.
            ``(2) Continued entitlement to additional benefits.--In the 
        case of a medicaid-eligible individual enrolled with a CHA 
        under a demonstration project under this section, the 
        individual shall remain entitled to medical assistance for 
        services which are not covered services under the project, 
        until December 31, 1997.
            ``(3) HMO-related requirements.--A CHA under this section 
        shall be deemed to meet the requirements of section 1903(m) 
        (subject to paragraph (1)) in the same manner as an entity 
        listed under section 1903(m)(2)(G).
            ``(4) Outstationing eligibility workers.--Under the 
        project, the State may (in addition to meeting the requirements 
        of section 1902(a)(55) until December 31, 1997) provide for, or 
        pay the reasonable costs of, stationing eligibility workers at 
        appropriate service sites under the project, and may permit 
        medicaid-eligible individuals to be enrolled under the State 
        plan at such a CHA or at such a site.
            ``(5) Purchase of stop-loss coverage.--The State shall 
        ensure that the CHA has purchased stop-loss coverage to protect 
        against default on its obligations under the project. If an 
        entity otherwise qualified to serve as a CHA is prohibited 
        under State law from purchasing such coverage, the State shall 
        waive the application of such law to the extent necessary to 
        permit the entity to purchase such coverage.
    ``(h) Evaluation and Reporting.--
            ``(1) CHA.--Each CHA in a State with a demonstration 
        project approved under this section shall prepare and submit to 
        the State an annual report on its activities during the 
        previous year.
            ``(2) State.--Taking into account the reports submitted 
        pursuant to paragraph (1), each State with a demonstration 
        project approved under this section shall prepare and submit to 
        the Secretary an annual evaluation of its activities and 
        services under this section. Such evaluation shall include an 
        analysis of the effectiveness of the project in providing cost-
        effective health care to enrolled individuals.
            ``(3) Report to congress.--Not later than June 30, 1997, 
        the Secretary shall submit to Congress a report on the 
        demonstration projects conducted under this section. Such 
        report shall include an analysis of the effectiveness of such 
        projects in providing cost-effective health care for the areas 
        or populations served.
    ``(i) Collaboration in Administration.--In carrying out this 
section, the Secretary shall assure the highest possible level of 
collaboration between the Health Care Financing Administration and the 
Public Health Service. Such collaboration may include (if appropriate 
and feasible) any of the following:
            ``(1) The provision by the Public Health Service of new or 
        increased grant support to eligible entities participating in a 
        CHA, in order to expand the availability of services 
        (particularly preventive and primary care services).
            ``(2) The placement of health professionals at eligible 
        locations and collaboration with Federally-assisted health 
        professions training programs located in or near the areas 
        served by community health authorities.
            ``(3) The provision of technical and other nonfinancial 
        assistance.
    ``(j) Definitions.--In this section:
            ``(1) Medicaid-eligible individual.--The term `medicaid-
        eligible individual' means an individual described in section 
        1902(a)(10)(A) and entitled to medical assistance under the 
        State plan.
            ``(2) Participating provider.--The term `participating 
        provider' means, with respect to a CHA, a provider that has 
        entered into an agreement with the CHA for the provision of 
        covered services under a project under this section.
            ``(3) Preventive and primary care services.--`Preventive' 
        and `primary' services include those services described in 
        section 1905(l)(2)(A) and included as Federally qualified 
        health center services.''.
    (b) Exception to Anti-Kickback Law.--Section 1128B(b)(3) of such 
Act (42 U.S.C. 1320a-7b(b)(3)) is amended--
            (1) by striking ``and'' at the end of subparagraph (D),
            (2) by striking the period at the end of subparagraph (E) 
        and inserting ``; and'', and
            (3) by adding at the end the following new subparagraph:
                    ``(F) any remuneration paid, or received, by a 
                Federally qualified health center, rural health clinic, 
                or other entity which is a participating provider under 
                a demonstration project under section 1933 as part of 
                an arrangement for the procurement of goods or services 
                or the referral of patients or the lease or purchase of 
                space or equipment.''.
    (c) Transition.--A premium subsidy eligible individual may use 
premium assistance certificates issued under title XXI of the Social 
Security Act to purchase qualified health coverage offered by a 
community health authority that complies with the requirements for a 
carrier under title I.
    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 4002. HEALTH CENTER PROGRAM AMENDMENTS.

    (a) Authorization of Grants for Network Development.--
            (1) Migrant health centers.--
                    (A) In general.--Section 329 of the Public Health 
                Service Act (42 U.S.C. 254b) is amended by adding at 
                the end the following:
    ``(j)(1) The Secretary may make a grant, to an entity receiving a 
grant under this section or to a group of such entities, to support the 
planning and development of health service networks (as defined in 
paragraph (3)) which will serve high impact areas, medically 
underserved areas, or medically underserved populations within the area 
they serve (or propose to serve).
    ``(2) A grant under this subsection for the planning and 
development of a health service network may be used for the following 
costs:
            ``(A) The costs of developing the network corporate entity, 
        including planning and needs assessment.
            ``(B) The costs of developing internal management for the 
        network, as well as costs of developing legal, financial, 
        clinical, information, billing, and reporting systems, and 
        other costs necessary to achieve operational status.
            ``(C) The costs of recruitment, training, and compensation 
        of management staff of the network and, as appropriate and 
        necessary, the management and clinical staff of any 
        participating provider.
            ``(D) The costs of developing additional primary health and 
        related service sites, including costs related to purchase of 
        essential equipment, acquisition, modernization, expansion, or, 
        if cost-effective, construction of facilities.
    ``(3) In this subsection, the term `health service network' means a 
nonprofit private entity that--
            ``(A) through its participating providers (which may 
        provide services directly or through contract) assures the 
        provision of primary health and related services and, as 
        appropriate, supplemental health services to residents of the 
        high impact area or medically underserved area or members of 
        the medically underserved population covered by the network,
            ``(B) includes, as participating providers, at least all 
        recipients of grants under this section or section 330, 340, or 
        340A that provide primary health and related services to the 
        residents of the area it serves (or proposes to serve), and 
        that may include, at the entity's option, any other providers 
        of primary health or supplemental health services to residents 
        of the high impact area or medically underserved area or 
        members of the medically underserved population covered by the 
        network, but only if such participating providers agree to 
        provide services without regard to an individual's ability to 
        pay, and
            ``(C) is governed by individuals a majority of whom are 
        patients, employees, or board members of its participating 
        providers that receive grants under this section or section 
        330, 340, or 340A.''.
                    (B) Conforming change.--Section 329(h)(1)(A) of 
                such Act (42 U.S.C. 254b(h)(1)(A)) is amended by 
                inserting ``and subsection (j)'' after ``through (e)''.
            (2) Community health centers.--Section 330 of such Act (42 
        U.S.C. 254c) is amended by adding at the end the following:
    ``(l)(1) The Secretary may make a grant, to an entity receiving a 
grant under this section or to a group of such entities, to support the 
planning and development of health service networks (as defined in 
section 329(j)(3)) which will serve high impact areas, medically 
underserved areas, or medically underserved populations within the area 
they serve (or propose to serve).
    ``(2) A grant under this subsection for the planning and 
development of a health service network may be used for the costs 
described in section 329(j)(2).''.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act.
    (b) Regulations Defining Medically Underserved Populations and 
Frontier Areas.--Within 1 year after the date of the enactment of this 
Act, the Secretary of Health and Human Services shall promulgate 
regulations that define medically underserved populations and frontier 
areas for purposes of title III of the Public Health Service Act.
    (c) Extension of Authorization of Appropriations.--For extension of 
authorization of appropriations for migrant health centers and 
community health centers, see section 4131.

               Subtitle B--Improved Access in Rural Areas

                                                   Title IV, Subtitle B

      PART 1--GRANTS TO ENCOURAGE COMMUNITY RURAL HEALTH NETWORKS

SEC. 4101. ASSISTANCE FOR DEVELOPMENT OF ACCESS PLANS FOR CHRONICALLY 
              UNDERSERVED AREAS.

    (a) Availability of Financial Assistance To Implement Action Plans 
To Increase Access.--
            (1) In general.--The Secretary shall provide grants (in 
        amounts determined in accordance with paragraph (3)) over a 3-
        year period to an eligible State for the development of plans 
        to increase access to health care services during such period 
        for residents of areas in the State that are designated as 
        chronically underserved areas in accordance with subsection 
        (b).
            (2) Eligibility requirements.--A State is eligible to 
        receive grants under this section if the State submits to the 
        Secretary (at such time and in such form as the Secretary may 
        require) assurances that the State has developed (or is in the 
        process of developing) a plan to increase the access of 
        residents of a chronically underserved area to health care 
        services that meets the requirements of subsection (c), 
        together with such other information and assurances as the 
        Secretary may require.
            (3) Amount of assistance.--
                    (A) In general.--Subject to subparagraph (B), the 
                amount of assistance provided to a State under this 
                subsection with respect to any plan during a 3-year 
                period shall be equal to--
                            (i) for the first year of the period, an 
                        amount equal to 100 percent of the amounts 
                        expended by the State during the year to 
                        implement the plan described in paragraph (1) 
                        (as reported to the Secretary in accordance 
                        with such requirements as the Secretary may 
                        impose);
                            (ii) for the second year of the period, an 
                        amount equal to 50 percent of the amounts 
                        expended by the State during the year to 
                        implement the plan; and
                            (iii) for the third year of the period, an 
                        amount equal to 33 percent of the amounts 
                        expended by the State during the year to 
                        implement the plan.
                    (B) Aggregate per plan limit.--The amount of 
                assistance provided to a State under this subsection 
                with respect to any plan may not exceed $100,000 during 
                any year of the 3-year period for which the State 
                receives assistance.
    (b) Designation of Areas.--
            (1) Designation by governor.--In accordance with the 
        guidelines developed under paragraph (2), the Governor of a 
        State may designate an area in the State as a chronically 
        underserved area for purposes of this section upon the request 
        of a local official of the area or upon the Governor's 
        initiative.
            (2) Guidelines for designation.--
                    (A) Development by secretary.--Not later than 1 
                year after the date of the enactment of this Act, the 
                Secretary shall develop guidelines for the designation 
                of areas as chronically underserved areas under this 
                section.
                    (B) Factors considered in development of 
                guidelines.--In developing guidelines under paragraph 
                (1), the Secretary shall consider the following 
                factors:
                            (i) Whether the area (or a significant 
                        portion of the area)--
                                    (I) is designated as a health 
                                professional shortage area (under 
                                section 332(a) of the Public Health 
                                Service Act), or meets the criteria for 
                                designation as such an area; or
                                    (II) was previously designated as 
                                such an area or previously met such 
                                criteria for an extended period prior 
                                to the designation of the area under 
                                this section (in accordance with 
                                criteria established by the Secretary).
                            (ii) The availability and adequacy of 
                        health care providers and facilities for 
                        residents of the area.
                            (iii) The extent to which the availability 
                        of assistance under other Federal and State 
                        programs has failed to alleviate the lack of 
                        access to health care services for residents of 
                        the area.
                            (iv) The percentage of residents of the 
                        area whose income is at or below the poverty 
                        level.
                            (v) The percentage of residents of the area 
                        who are age 65 or older.
                            (vi) The existence of cultural or 
                        geographic barriers to access to health care 
                        services in the area, including weather 
                        conditions.
            (3) Review by secretary.--No designation under paragraph 
        (1) shall take effect under this section unless the Secretary--
                    (A) has been notified of the proposed designation; 
                and
                    (B) has not, within 60 days after the date of 
                receipt of the notice, disapproved the designation.
            (4) Period of designation.--A designation under this 
        section shall be effective during a period specified by the 
        Governor of not longer than 3 years. The Governor may extend 
        the designation for additional 3-year periods, except that a 
        State may not receive assistance under subsection (a)(3) for 
        amounts expended during any such additional periods.
    (c) Requirements for State Access Plans.--A State plan to increase 
the access of residents of chronically underserved areas to health care 
services meets the requirements of this section if the Secretary finds 
that the plan was developed with the participation of health care 
providers and facilities and residents of the area that is the subject 
of the plan, together with such other requirements as the Secretary may 
impose.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated for assistance under this section $10,000,000 for each of 
the first 3 fiscal years beginning after the date on which the 
Secretary develops guidelines for the designation of areas as 
chronically underserved areas under subsection (b)(2).

SEC. 4102. TECHNICAL ASSISTANCE GRANTS FOR NETWORKS.

    (a) In General.--The Secretary shall make funds available under 
this section to provide technical assistance (including information 
regarding eligibility for other Federal programs) and advice for 
entities described in subsection (b) seeking to establish or enhance a 
community rural health network in an underserved rural area.
    (b) Entities Eligible To Receive Funds.--The following entities are 
eligible to receive funds for technical assistance under this section:
            (1) An entity receiving a grant under section 4103.
            (2) A State or unit of local government.
            (3) An entity providing health care services (including 
        health professional education services) in the area involved.
    (c) Use of Funds.--
            (1) In general.--Funds made available under this section 
        may be used--
                    (A) for planning a community health network and the 
                submission of the plan for the network to the Secretary 
                under section 4103(c) (subject to the limitation 
                described in paragraph (2));
                    (B) to provide assistance in conducting community-
                based needs and prioritization, identifying existing 
                regional health resources, and developing networks, 
                utilizing existing local providers and facilities where 
                appropriate;
                    (C) to provide advice on obtaining the proper 
                balance of primary and secondary facilities for the 
                population served by the network;
                    (D) to provide assistance in coordinating 
                arrangements for tertiary care;
                    (E) to provide assistance in recruitment and 
                retention of health care professionals;
                    (F) to provide assistance in coordinating the 
                delivery of emergency services with the provision of 
                other health care services in the area served by the 
                network;
                    (G) to provide assistance in coordinating 
                arrangements for mental health and substance abuse 
                treatment services; and
                    (H) to provide information regarding the area or 
                proposed network's eligibility for Federal and State 
                assistance for health care-related activities, together 
                with information on funds available through private 
                sources.
            (2) Limitation on amount available for development of 
        network.--The amount of financial assistance available for 
        activities described in paragraph (1) may not exceed $50,000 
        and may not be available for a period of time exceeding 1 year.
    (d) Use of Rural Health Offices.--In carrying out this section with 
respect to entities in rural areas, the Secretary shall make funds 
available through--
            (1) not more than 10 regional centers acting as 
        clearinghouses for the distribution of such funds; and
            (2) State Offices of Rural Health, or any combination of 
        such centers and Offices.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated $10,000,000 for each of fiscal years 1996 and 1997 and 
$30,000,000 for each of fiscal years 1998 through 2000 to carry out 
this section. Amounts appropriated under this section shall be 
available until expended.

SEC. 4103. DEVELOPMENT GRANTS FOR NETWORKS.

    (a) In General.--The Secretary shall provide financial assistance 
to eligible entities in order to provide for the development and 
implementation of community rural health networks.
    (b) Eligible Entities.--
            (1) In general.--An entity is eligible to receive financial 
        assistance under this section only if the entity--
                    (A) is (i) based in a rural area or (ii) is 
                described in paragraph (2), (3), or (4) of section 
                4102(b),
                    (B) is undertaking to develop and implement a 
                community rural health network in an underserved rural 
                area (or underserved rural areas) with the active 
                participation of at least 3 health care providers or 
                facilities in the area, and
                    (C) has consulted with the local governments of the 
                area to be served by the network and with individuals 
                who reside in the area.
            (2) Coordination with providers outside of area 
        permitted.--Nothing in this section shall be construed as 
        preventing an entity that coordinates the delivery of services 
        in an underserved rural area with an entity outside the area 
        from qualifying for financial assistance under this section, or 
        as preventing an entity consisting of a consortia of members 
        located in adjoining States from qualifying for such 
        assistance.
            (3) Permitting entities not receiving funding for 
        development of plan to receive funding for implementation.--An 
        entity that is eligible to receive financial assistance under 
        this section may receive assistance to carry out activities 
        described in subsection (c)(1)(B) notwithstanding that the 
        entity does not receive assistance to carry out activities 
        described in subsection (c)(1)(A).
    (c) Use of Funds.--
            (1) In general.--Financial assistance made available to 
        eligible entities under this section may be used only--
                    (A) for the development of a community health 
                network and the submission of the plan for the network 
                to the Secretary; and
                    (B) after the Secretary approves the plan for the 
                network, for activities to implement the network, 
                including (but not limited to)--
                            (i) establishing information systems, 
                        including telecommunications,
                            (ii) recruiting health care providers,
                            (iii) providing services to enable 
                        individuals to have access to health care 
                        services, including transportation and language 
                        interpretation services (including 
                        interpretation services for the hearing-
                        impaired), and
                            (iv) establishing and operating a community 
                        health advisor program described in paragraph 
                        (2).
            (2) Community health advisor program.--
                    (A) Program described.--In paragraph (1), a 
                ``community health advisor program'' is a program under 
                which community health advisors carry out the following 
                activities:
                            (i) Collaborating efforts with health care 
                        providers and related entities to facilitate 
                        the provision of health services and health-
                        related social services.
                            (ii) Providing public education on health 
                        promotion and disease prevention and efforts to 
                        facilitate the use of available health services 
                        and health-related social services.
                            (iii) Providing health-related counseling.
                            (iv) Making referrals for available health 
                        services and health-related social services.
                            (v) Improving the ability of individuals to 
                        use health services and health-related social 
                        services under Federal, State, and local 
                        programs through assisting individuals in 
                        establishing eligibility under the programs.
                            (vi) Providing outreach services to inform 
                        the community of the availability of the 
                        services provided under the program.
                    (B) Community health advisor defined.--In 
                subparagraph (A), the term ``community health advisor'' 
                means, with respect to a community health advisor 
                program, an individual--
                            (i) who has demonstrated the capacity to 
                        carry out one or more of the activities carried 
                        out under the program; and
                            (ii) who, for not less than one year, has 
                        been a resident of the community in which the 
                        program is to be operated.
            (3) Limitations on activities funded.--Financial assistance 
        made available under this section may not be used for any of 
        the following:
                    (A) For a telecommunications system unless such 
                system is coordinated with, and does not duplicate, a 
                system existing in the area.
                    (B) For construction or remodeling of health care 
                facilities.
            (4) Limitation on amount available for development of 
        network.--The amount of financial assistance available for 
        activities described in paragraph (1)(A) may not exceed $50,000 
        and may not be made available for a period of time exceeding 1 
        year.
    (d) Application.--
            (1) In general.--No financial assistance shall be provided 
        under this section to an entity unless the entity has submitted 
        to the Secretary, in a time and manner specified by the 
        Secretary, and had approved by the Secretary an application.
            (2) Information to be included.--Each such application 
        shall include--
                    (A) a description of the community rural health 
                network, including service area and capacity, and
                    (B) a description of how the proposed network will 
                utilize existing health care facilities in a manner 
                that avoids unnecessary duplication.
    (e) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated 
        $100,000,000 for each of fiscal years 1996 and 1997, 
        $120,000,000 for fiscal year 1998, $130,000,000 for fiscal year 
        1999, $140,000,000 for fiscal year 2000, $150,000,000 for 
        fiscal year 2001, $160,000,000 for fiscal year 2002, 
        $170,000,000 for fiscal year 2003, and $180,000,000 for fiscal 
        year 2004, to carry out this section. Amounts appropriated 
        under this section shall be available until expended.
            (2) Integration of other authorizations.--In order to 
        provide for the authorization of appropriations under paragraph 
        (1), notwithstanding any other provision of law, no funds are 
        authorized to be appropriated to carry out the following 
        programs in fiscal years after fiscal year 1994:
                    (A) The rural health transition grant program 
                (under section 4005(e) of the Omnibus Budget 
                Reconciliation Act of 1987).
                    (B) The rural health outreach program (for which 
                appropriations were annually provided under the 
                Departments of Labor, Health and Human Services, and 
                Education, and Related Agencies Appropriation Acts).
            (3) Annual limit on assistance to grantee.--The amount of 
        financial assistance provided to an entity under this section 
        during a year may not exceed $250,000.

SEC. 4104. DEFINITIONS.

    For purposes of this part:
            (1) Community rural health network.--The term ``community 
        rural health network'' means a formal cooperative arrangement 
        between participating hospitals, physicians, and other health 
        care providers which--
                    (A) is located in an underserved rural area;
                    (B) furnishes health care services to individuals 
                residing in the area; and
                    (C) is governed by a board of directors selected by 
                participating health care providers and residents of 
                the area.
            (2) Rural area.--The term ``rural area'' has the meaning 
        given such term in section 1886(d)(2)(D) of the Social Security 
        Act.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (4) State.--The term ``State'' means each of the several 
        States, the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, the Northern Mariana Islands, and American 
        Samoa.
            (5) Underserved rural area.--The term ``underserved rural 
        area'' means a rural area designated--
                    (A) as a health professional shortage area under 
                section 332(a) of the Public Health Service Act; or
                    (B) as a chronically underserved area under section 
                4101.

 PART 2--INCENTIVES FOR HEALTH PROFESSIONALS TO PRACTICE IN RURAL AREAS

            Subpart A--National Health Service Corps Program

SEC. 4111. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS EXCLUDED FROM 
              GROSS INCOME.

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

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

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

                              ``Sec. 137. National Health Service Corps 
                                        loan repayments.
                              ``Sec. 138. Cross references to other 
                                        Acts.''.

    (d) Effective Date.--The amendments made by this section shall 
apply to payments made under section 338B(g) of the Public Health 
Service Act after the date of the enactment of this Act.

SEC. 4112. MODIFICATION IN CRITERIA FOR DESIGNATION AS HEALTH 
              PROFESSIONAL SHORTAGE AREA.

    (a) Relevance of Travel Times Within Frontier Areas.--Section 
332(a) of the Public Health Service Act (42 U.S.C. 245e(a)) is amended 
by adding at the end the following new paragraph:
            ``(4) With respect to meeting the criteria under paragraph 
        (1)(A) for an area to be designated as a health professional 
        shortage area, the Secretary shall, in the case of a frontier 
        area, make the determination of whether the frontier area is a 
        rational area for the delivery of health services without 
        regard to--
                    ``(A) the travel time between population centers in 
                the frontier area; or
                    ``(B) the travel time to contiguous area resources 
                in the frontier area.''.
    (b) Regulations Defining Health Professional Shortage Areas.--
Within 1 year after the date of the enactment of this Act, the 
Secretary of Health and Human Services shall promulgate regulations 
that define health professional shortage areas for purposes of title 
III of the Public Health Service Act.
    (c) Agency Recommendations for Improvements.--Not later than July 
1, 1995, the Secretary of Health and Human Services shall submit to the 
Congress a report specifying the recommendations of the Secretary for 
improving the manner of determining the extent to which a geographic 
area has a need for assignments of members of the National Health 
Service Corps, and for equitably allocating such assignments among the 
geographic areas with a need for such assignments.
    (d) Effective Date.--This section shall take effect on October 1, 
1994, or upon the date of the enactment of this Act, whichever occurs 
later.

SEC. 4113. OTHER PROVISIONS REGARDING NATIONAL HEALTH SERVICE CORPS.

    (a) Scholarship and Loan Repayment Programs.--
            (1) Authorization of appropriations.--Section 338H(b)(1) of 
        the Public Health Service Act (42 U.S.C. 254q(b)(1)) is 
        amended--
                    (A) by striking ``and'' after ``1991,''; and
                    (B) by striking ``through 2000.'' and inserting 
                ``through 1994, $150,000,000 for fiscal year 1995, 
                $175,000,000 for fiscal year 1996, $200,000,000 for 
                fiscal year 1997, $275,000,000 for fiscal year 1998, 
                $275,000,000 for fiscal year 1999, $275,000,000 for 
                fiscal year 2000, $300,000,000 for fiscal year 2001, 
                $325,000,000 for fiscal year 2002, $350,000,000 for 
                fiscal year 2003, and $375,000,000 for fiscal year 
                2004.''.
            (2) Allocation for participation of nurses in scholarship 
        program.--Section 338H(b)(2) of the Public Health Service Act 
        (42 U.S.C. 254q(b)(2)) is amended by adding at the end the 
        following subparagraph:
                    ``(C) Of the amounts appropriated under paragraph 
                (1) for fiscal year 1995 and subsequent fiscal years, 
                the Secretary shall reserve such amounts as may be 
                necessary to ensure that, of the aggregate number of 
                individuals who are participants in the Scholarship 
                Program, the total number who are being educated as 
                nurses or are serving as nurses, respectively, is 
                increased to 20 percent.''.
    (b) Increase in Number of Mental Health Professionals in Shortage 
Areas.--
            (1) In general.--Section 338H(b) of the Public Health 
        Service Act (42 U.S.C. 254q(b)) is amended by adding at the end 
        the following paragraph:
            ``(3) Mental health professionals.--In providing contracts 
        under this subpart for scholarships and loan repayments, the 
        Secretary shall ensure that an appropriate number of mental 
        health professionals is assigned under section 333 for health 
        professional shortage areas.''.
            (2) Applicability.--With respect to contracts for 
        scholarships and loan repayments under subpart III of part D of 
        title III of the Public Health Service Act, the amendment made 
        by subsection (a) applies with respect to contracts entered 
        into on or after October 1, 1994.

               Subpart B--Incentives Under Other Programs

SEC. 4121. EXTENSION OF ADDITIONAL PAYMENT UNDER MEDICARE FOR 
              PHYSICIANS' SERVICES FURNISHED IN FORMER SHORTAGE AREAS.

    (a) In General.--Section 1833(m) of the Social Security Act (42 
U.S.C. 1395l(m)) is amended by striking ``area,'' and inserting ``area 
(or, in the case of an area for which the designation as a health 
professional shortage area under such section is withdrawn, in the case 
of physicians' services furnished to such an individual during the 3-
year period beginning on the effective date of the withdrawal of such 
designation),''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to physicians' services furnished in an area for which the 
designation as a health professional shortage area under section 
332(a)(1)(A) of the Public Health Service Act is withdrawn on or after 
January 1, 1995.

SEC. 4122. REFINEMENT OF GEOGRAPHIC ADJUSTMENT FACTOR FOR MEDICARE 
              PHYSICIANS' SERVICES.

    (a) Deadline for Initial Review and Revision.--Section 
1848(e)(1)(C) of the Social Security Act (42 U.S.C. 1395w-4(e)(1)(C)) 
is amended by adding at the end the following: ``The first such review 
and revision shall apply to services furnished on or after January 1, 
1995.''.
    (b) Authority To Adjust Index Value for Input Component Under 
Certain Circumstances.--(1) Section 1848(e)(1) of the Social Security 
Act (42 U.S.C. 1395w-4(e)(1)) is amended--
            (A) in subparagraph (A), by striking ``(B) and (C)'' and 
        inserting ``(B), (C), and (D)'';
            (B) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (C) by inserting after subparagraph (B) the following:
                    ``(C) Special adjustment to correct for unique 
                local circumstances.--The Secretary may adjust the 
                value assigned to an input component of an index in a 
                fee schedule area if the Secretary determines that the 
                value that would otherwise apply in such area does not 
                accurately reflect the relative costs of such input for 
                such area because of unique local circumstances.''.
    (2) Section 1848(i)(1)(D) of the Social Security Act (42 U.S.C. 
1395w-4(i)(1)(D)) is amended by inserting ``(including any adjustment 
under subparagraph (C) thereof)'' after ``subsection (e)''.
    (c) Report on Review Process.--Not later than April 1, 1996, the 
Secretary of Health and Human Services (in this section referred to as 
the ``Secretary'') shall study and report to the Committee on Finance 
of the Senate and the Committees on Ways and Means and Energy and 
Commerce of the House of Representatives on--
            (1) the data necessary to review and revise the indices 
        established under section 1848(e)(1)(A) of the Social Security 
        Act, including--
                    (A) the shares allocated to physicians' work 
                effort, practice expenses (other than malpractice 
                expenses), and malpractice expenses;
                    (B) the weights assigned to the input components of 
                such shares; and
                    (C) the index values assigned to such components;
            (2) any limitations on the availability of data necessary 
        to review and revise such indices at least every three years;
            (3) ways of addressing such limitations, with particular 
        attention to the development of alternative data sources for 
        input components for which current index values are based on 
        data collected less frequently than every three years; and
            (4) the costs of developing more accurate and timely data 
        sources.
    (d) Study on Low-Volume Adjustment in Isolated Areas.--(1) Not 
later than July 1, 1996, the Physician Payment Review Commission shall 
study and report to the Committee on Finance of the Senate and the 
Committees on Ways and Means and Energy and Commerce of the House of 
Representatives on the feasibility and desirability of providing for a 
special adjustment to the index value of the medical equipment and 
supplies input component of the index used under section 1848(e) of the 
Social Security Act with respect to services described in paragraph 
(2).
    (2) Services described in this paragraph are services--
            (A) furnished by a physician who practices in an isolated 
        area;
            (B) requiring the presence of expensive medical equipment 
        and supplies in the physician's office; and
            (C) with respect to which the cost per service of operating 
        the equipment is increased because of the low volume of 
        patients of such physician.

SEC. 4123. DEVELOPMENT OF MODEL STATE SCOPE OF PRACTICE LAW.

    (a) In General.--The Secretary of Health and Human Services shall 
develop and publish a model law that may be adopted by States to 
increase the access of individuals residing in underserved rural areas 
to health care services by expanding the services which non-physician 
health care professionals may provide in such areas.
    (b) Deadline.--The Secretary shall publish the model law developed 
under subsection (a) not later than 1 year after the date of the 
enactment of this Act.

             PART 3--ASSISTANCE FOR INSTITUTIONAL PROVIDERS

            Subpart A--Community and Migrant Health Centers

SEC. 4131. COMMUNITY AND MIGRANT HEALTH CENTERS.

    (a) Migrant Health Centers.--Section 329(h)(1)(A) of the Public 
Health Service Act (42 U.S.C. 254b(h)(1)(A)) is amended--
            (1) by striking ``and'' after ``1991,''; and
            (2) by inserting before the period the following: ``, 
        $75,000,000 for fiscal year 1996, $80,000,000 for fiscal year 
        1997, $155,000,000 for fiscal year 1998, $165,000,000 for 
        fiscal year 1999, $175,000,000 for fiscal year 2000, 
        $185,000,000 for fiscal year 2001, $195,000,000 for fiscal year 
        2002, $205,000,000 for fiscal year 2003, and $210,000,000 for 
        fiscal year 2004''.
    (b) Community Health Centers.--Section 330(g)(1)(A) of the Public 
Health Service Act (42 U.S.C. 254c(g)(1)(A)) is amended--
            (1) by striking ``and'' after ``1991,''; and
            (2) by inserting before the period the following: ``, 
        $638,000,000 for fiscal year 1996, $655,000,000 for fiscal year 
        1997, $845,000,000 for fiscal year 1998, $865,000,000 for 
        fiscal year 1999, $885,000,000 for fiscal year 2000, 
        $905,000,000 for fiscal year 2001, $925,000,000 for fiscal year 
        2002, $945,000,000 for fiscal year 2003, and $965,000,000 for 
        fiscal year 2004''.

                  Subpart B--Emergency Medical Systems

SEC. 4141. EMERGENCY MEDICAL SERVICES.

    (a) Establishment of Federal Office.--Title XII of the Public 
Health Service Act (42 U.S.C. 300d et seq.) is amended--
            (1) in the heading for the title, by striking ``TRAUMA 
        CARE'' and inserting ``EMERGENCY MEDICAL AND TRAUMA CARE 
        SERVICES'';
            (2) in the heading for part A, by striking ``General'' and 
        all that follows and inserting ``General Authorities and 
        Duties''; and
            (3) by amending section 1201 to read as follows:

``SEC. 1201. ESTABLISHMENT OF OFFICE OF EMERGENCY MEDICAL AND TRAUMA 
              CARE SERVICES.

    ``(a) In General.--The Secretary shall establish an office to be 
known as the Office of Emergency Medical and Trauma Care Services, 
which shall be headed by a director appointed by the Secretary. The 
Secretary shall carry out this title acting through the Director of 
such Office.
    ``(b) General Authorities and Duties.--With respect to emergency 
medical services (including trauma care), the Secretary shall--
            ``(1) conduct and support research, training, evaluations, 
        and demonstration projects;
            ``(2) foster the development of appropriate, modern systems 
        of such services through the sharing of information among 
        agencies and individuals involved in the study and provision of 
        such services;
            ``(3) foster the development of regional systems for the 
        provision of such services;
            ``(4) sponsor workshops and conferences;
            ``(5) as appropriate, disseminate to public and private 
        entities information obtained in carrying out paragraphs (1) 
        through (4);
            ``(6) provide technical assistance to State and local 
        agencies;
            ``(7) coordinate activities of the Department of Health and 
        Human Services; and
            ``(8) as appropriate, coordinate activities of such 
        Department with activities of other Federal agencies.
    ``(c) Certain Requirements.--With respect to emergency medical 
services (including trauma care), the Secretary shall ensure that 
activities under subsection (b) are carried out regarding--
            ``(1) maintaining an adequate number of health 
        professionals with expertise in the provision of the services, 
        including hospital-based professionals and prehospital-based 
        professionals;
            ``(2) developing, periodically reviewing, and revising as 
        appropriate, in collaboration with appropriate public and 
        private entities, guidelines for the provision of such services 
        (including, for various typical circumstances, guidelines on 
        the number and variety of professionals, on equipment, and on 
        training);
            ``(3) the appropriate use of available technologies, 
        including communications technologies; and
            ``(4) the unique needs of underserved inner-city areas and 
        underserved rural areas.
    ``(d) Grants, Cooperative Agreements, and Contracts.--In carrying 
out subsections (b) and (c), the Secretary may make grants and enter 
into cooperative agreements and contracts.
    ``(e) Definitions.--For purposes of this part:
            ``(1) The term `hospital-based professional' means a health 
        professional (including an allied health professional) who has 
        expertise in providing one or more emergency medical services 
        and who normally provides the services at a medical facility.
            ``(2) The term `prehospital-based professional' means a 
        health professional (including an allied health professional) 
        who has expertise in providing one or more emergency medical 
        services and who normally provides the services at the site of 
        the medical emergency or during transport to a medical 
        facility.''.
    (b) State Offices of Emergency Medical Services; Demonstration 
Program Regarding Telecommunications.--Part A of title XII of the 
Public Health Service Act (42 U.S.C. 300d et seq.), as amended by 
section 601(b) of Public Law 103-183 (107 Stat. 2238), is amended--
            (1) by redesignating sections 1202 and 1203 as sections 
        1203 and 1204, respectively;
            (2) by inserting after section 1201 the following section:

``SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL SERVICES.

    ``(a) Program of Grants.--The Secretary may make grants to States 
for the purpose of improving the availability and quality of emergency 
medical services through the operation of State offices of emergency 
medical services.
    ``(b) Requirement of Matching Funds.--
            ``(1) In general.--The Secretary may not make a grant under 
        subsection (a) unless the State involved agrees, with respect 
        to the costs to be incurred by the State in carrying out the 
        purpose described in such subsection, to provide non-Federal 
        contributions toward such costs in an amount that--
                    ``(A) for the first fiscal year of payments under 
                the grant, is not less than $1 for each $3 of Federal 
                funds provided in the grant;
                    ``(B) for any second fiscal year of such payments, 
                is not less than $1 for each $1 of Federal funds 
                provided in the grant; and
                    ``(C) for any third fiscal year of such payments, 
                is not less than $3 for each $1 of Federal funds 
                provided in the grant.
            ``(2) Determination of amount of non-federal 
        contribution.--
                    ``(A) Subject to subparagraph (B), non-Federal 
                contributions required in paragraph (1) may be in cash 
                or in kind, fairly evaluated, including plant, 
                equipment, or services. Amounts provided by the Federal 
                Government, or services assisted or subsidized to any 
                significant extent by the Federal Government, may not 
                be included in determining the amount of such non-
                Federal contributions.
                    ``(B) The Secretary may not make a grant under 
                subsection (a) unless the State involved agrees that--
                            ``(i) for the first fiscal year of payments 
                        under the grant, 100 percent or less of the 
                        non-Federal contributions required in paragraph 
                        (1) will be provided in the form of in-kind 
                        contributions;
                            ``(ii) for any second fiscal year of such 
                        payments, not more than 50 percent of such non-
                        Federal contributions will be provided in the 
                        form of in-kind contributions; and
                            ``(iii) for any third fiscal year of such 
                        payments, such non-Federal contributions will 
                        be provided solely in the form of cash.
    ``(c) Certain Required Activities.--The Secretary may not make a 
grant under subsection (a) unless the State involved agrees that 
activities carried out by an office operated pursuant to such 
subsection will include--
            ``(1) coordinating the activities carried out in the State 
        that relate to emergency medical services;
            ``(2) activities regarding the matters described in 
        paragraphs (1) through (4) section 1201(b); and
            ``(3) identifying Federal and State programs regarding 
        emergency medical services and providing technical assistance 
        to public and nonprofit private entities regarding 
        participation in such programs.
    ``(d) Requirement Regarding Annual Budget for Office.--The 
Secretary may not make a grant under subsection (a) unless the State 
involved agrees that, for any fiscal year for which the State receives 
such a grant, the office operated pursuant to subsection (a) will be 
provided with an annual budget of not less than $50,000.
    ``(e) Certain Uses of Funds.--
            ``(1) Restrictions.--The Secretary may not make a grant 
        under subsection (a) unless the State involved agrees that--
                    ``(A) if research with respect to emergency medical 
                services is conducted pursuant to the grant, not more 
                than 10 percent of the grant will be expended for such 
                research; and
                    ``(B) the grant will not be expended to provide 
                emergency medical services (including providing cash 
                payments regarding such services).
            ``(2) Establishment of office.--Activities for which a 
        State may expend a grant under subsection (a) include paying 
        the costs of establishing an office of emergency medical 
        services for purposes of such subsection.
    ``(f) Reports.--The Secretary may not make a grant under subsection 
(a) unless the State involved agrees to submit to the Secretary reports 
containing such information as the Secretary may require regarding 
activities carried out under this section by the State.
    ``(g) Requirement of Application.--The Secretary may not make a 
grant under subsection (a) unless an application for the grant is 
submitted to the Secretary and the application is in such form, is made 
in such manner, and contains such agreements, assurances, and 
information as the Secretary determines to be necessary to carry out 
this section.''; and
            (3) in section 1204 (as redesignated by paragraph (1) of 
        this subsection)--
                    (A) by redesignating subsection (c) as subsection 
                (d); and
                    (B) by inserting after subsection (b) the following 
                new subsection:
    ``(c) Demonstration Program Regarding Telecommunications.--
            ``(1) Linkages for rural facilities.--Projects under 
        subsection (a)(1) shall include demonstration projects to 
        establish telecommunications between rural medical facilities 
        and medical facilities that have expertise or equipment that 
        can be utilized by the rural facilities through the 
        telecommunications.
            ``(2) Modes of communication.--The Secretary shall ensure 
        that the telecommunications technologies demonstrated under 
        paragraph (1) include interactive video telecommunications, 
        static video imaging transmitted through the telephone system, 
        and facsimiles transmitted through such system.''.
    (c) Funding.--Section 1232 of the Public Health Service Act (42 
U.S.C. 300d-32) is amended by striking subsections (a) and (b) and 
inserting the following:
    ``(a) Emergency Medical Services Generally.--For the purpose of 
carrying out section 1201 other than with respect to trauma care, and 
for the purpose of carrying out section 1204(c), there are authorized 
to be appropriated $2,000,000 for each of the fiscal years 1996, 1997, 
and 1998.
    ``(b) State Offices.--For the purpose of carrying out section 1202, 
there are authorized to be appropriated $3,000,000 for each of the 
fiscal years 1996, 1997, and 1998.''.

SEC. 4142. GRANTS TO STATES REGARDING AIRCRAFT FOR TRANSPORTING RURAL 
              VICTIMS OF MEDICAL EMERGENCIES.

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

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

    ``(a) In General.--The Secretary shall make grants to States to 
assist such States in the creation or enhancement of air medical 
transport systems that provide victims of medical emergencies in rural 
areas with access to treatments for the injuries or other conditions 
resulting from such emergencies.
    ``(b) Application and Plan.--
            ``(1) Application.--To be eligible to receive a grant under 
        subsection (a), a State shall prepare and submit to the 
        Secretary an application in such form, made in such manner, and 
        containing such agreements, assurances, and information, 
        including a State plan as required in paragraph (2), as the 
        Secretary determines to be necessary to carry out this section.
            ``(2) State plan.--An application submitted under paragraph 
        (1) shall contain a State plan that shall--
                    ``(A) describe the intended uses of the grant 
                proceeds and the geographic areas to be served;
                    ``(B) demonstrate that the geographic areas to be 
                served, as described under subparagraph (A), are rural 
                in nature;
                    ``(C) demonstrate that there is a lack of 
                facilities available and equipped to deliver advanced 
                levels of medical care in the geographic areas to be 
                served;
                    ``(D) demonstrate that in utilizing the grant 
                proceeds for the establishment or enhancement of air 
                medical services the State would be making a cost-
                effective improvement to existing ground-based or air 
                emergency medical service systems;
                    ``(E) demonstrate that the State will not utilize 
                the grant proceeds to duplicate the capabilities of 
                existing air medical systems that are effectively 
                meeting the emergency medical needs of the populations 
                they serve;
                    ``(F) demonstrate that in utilizing the grant 
                proceeds the State is likely to achieve a reduction in 
                the morbidity and mortality rates of the areas to be 
                served, as determined by the Secretary;
                    ``(G) demonstrate that the State, in utilizing the 
                grant proceeds, will--
                            ``(i) maintain the expenditures of the 
                        State for air and ground medical transport 
                        systems at a level equal to not less than the 
                        level of such expenditures maintained by the 
                        State for the fiscal year preceding the fiscal 
                        year for which the grant is received; and
                            ``(ii) ensure that recipients of direct 
                        financial assistance from the State under such 
                        grant will maintain expenditures of such 
                        recipients for such systems at a level at least 
                        equal to the level of such expenditures 
                        maintained by such recipients for the fiscal 
                        year preceding the fiscal year for which the 
                        financial assistance is received;
                    ``(H) demonstrate that persons experienced in the 
                field of air medical service delivery were consulted in 
                the preparation of the State plan; and
                    ``(I) contain such other information as the 
                Secretary may determine appropriate.
    ``(c) Considerations in Awarding Grants.--In determining whether to 
award a grant to a State under this section, the Secretary shall--
            ``(1) consider the rural nature of the areas to be served 
        with the grant proceeds and the services to be provided with 
        such proceeds, as identified in the State plan submitted under 
        subsection (b); and
            ``(2) give preference to States with State plans that 
        demonstrate an effective integration of the proposed air 
        medical transport systems into a comprehensive network or plan 
        for regional or statewide emergency medical service delivery.
    ``(d) State Administration and Use of Grant.--
            ``(1) In general.--The Secretary may not make a grant to a 
        State under subsection (a) unless the State agrees that such 
        grant will be administered by the State agency with principal 
        responsibility for carrying out programs regarding the 
        provision of medical services to victims of medical emergencies 
        or trauma.
            ``(2) Permitted uses.--A State may use amounts received 
        under a grant awarded under this section to award subgrants to 
        public and private entities operating within the State.
            ``(3) Opportunity for public comment.--The Secretary may 
        not make a grant to a State under subsection (a) unless that 
        State agrees that, in developing and carrying out the State 
        plan under subsection (b)(2), the State will provide public 
        notice with respect to the plan (including any revisions 
        thereto) and facilitate comments from interested persons.
    ``(e) Number of Grants.--The Secretary shall award grants under 
this section to not less than 7 States.
    ``(f) Reports.--
            ``(1) Requirement.--A State that receives a grant under 
        this section shall annually (during each year in which the 
        grant proceeds are used) prepare and submit to the Secretary a 
        report that shall contain--
                    ``(A) a description of the manner in which the 
                grant proceeds were utilized;
                    ``(B) a description of the effectiveness of the air 
                medical transport programs assisted with grant 
                proceeds; and
                    ``(C) such other information as the Secretary may 
                require.
            ``(2) Termination of funding.--In reviewing reports 
        submitted under paragraph (1), if the Secretary determines that 
        a State is not using amounts provided under a grant awarded 
        under this section in accordance with the State plan submitted 
        by the State under subsection (b), the Secretary may terminate 
        the payment of amounts under such grant to the State until such 
        time as the Secretary determines that the State comes into 
        compliance with such plan.
    ``(g) Definition.--As used in this section, the term `rural areas' 
means geographic areas that are located outside of standard 
metropolitan statistical areas, as identified by the Secretary.
    ``(h) Authorization of Appropriations.--There are authorized to be 
appropriated to make grants under this section, $15,000,000 for each of 
the fiscal years 1996 and 1997, $20,000,000 for fiscal year 1998, 
$25,000,000 for fiscal year 1999, and $30,000,000 for fiscal year 
2000.''.

        Subpart C--Assistance to Rural Providers Under Medicare

SEC. 4151. AMENDMENTS TO ESSENTIAL ACCESS COMMUNITY HOSPITAL (EACH) 
              PROGRAM UNDER MEDICARE.

    (a) Increasing Number of Participating States.--Section 1820(a)(1) 
of the Social Security Act (42 U.S.C. 1395i-4(a)(1)) is amended by 
striking ``7'' and inserting ``9''.
    (b) Treatment of Inpatient Hospital Services Provided in Rural 
Primary Care Hospitals.--
            (1) In general.--Section 1820(f)(1)(F) of such Act (42 
        U.S.C. 1395i-4(f)(1)(F)) is amended to read as follows:
                    ``(F) subject to paragraph (4), provides not more 
                than 6 inpatient beds (meeting such conditions as the 
                Secretary may establish) for providing inpatient care 
                to patients requiring stabilization before discharge or 
                transfer to a hospital, except that the facility may 
                not provide any inpatient hospital services--
                            ``(i) to any patient whose attending 
                        physician does not certify that the patient may 
                        reasonably be expected to be discharged or 
                        transferred to a hospital within 72 hours of 
                        admission to the facility; or
                            ``(ii) consisting of surgery or any other 
                        service requiring the use of general anesthesia 
                        (other than surgical procedures specified by 
                        the Secretary under section 1833(i)(1)(A)), 
                        unless the attending physician certifies that 
                        the risk associated with transferring the 
                        patient to a hospital for such services 
                        outweighs the benefits of transferring the 
                        patient to a hospital for such services.''.
            (2) Limitation on average length of stay.--Section 1820(f) 
        of such Act (42 U.S.C. 1395i-4(f)) is amended by adding at the 
        end the following new paragraph:
            ``(4) Limitation on average length of inpatient stays.--The 
        Secretary may terminate a designation of a rural primary care 
        hospital under paragraph (1) if the Secretary finds that the 
        average length of stay for inpatients at the facility during 
        the previous year in which the designation was in effect 
        exceeded 72 hours. In determining the compliance of a facility 
        with the requirement of the previous sentence, there shall not 
        be taken into account periods of stay of inpatients in excess 
        of 72 hours to the extent such periods exceed 72 hours because 
        transfer to a hospital is precluded because of inclement 
        weather or other emergency conditions.''.
            (3) Conforming amendment.--Section 1814(a)(8) of such Act 
        (42 U.S.C. 1395f(a)(8)) is amended by striking ``such 
        services'' and all that follows and inserting ``the individual 
        may reasonably be expected to be discharged or transferred to a 
        hospital within 72 hours after admission to the rural primary 
        care hospital.''.
            (4) GAO reports.--Not later than 2 years after the date of 
        the enactment of this Act, the Comptroller General shall submit 
        reports to Congress on--
                    (A) the application of the requirements under 
                section 1820(f) of the Social Security Act (as amended 
                by this subsection) that rural primary care hospitals 
                provide inpatient care only to those individuals whose 
                attending physicians certify may reasonably be expected 
                to be discharged within 72 hours after admission and 
                maintain an average length of inpatient stay during a 
                year that does not exceed 72 hours; and
                    (B) the extent to which such requirements have 
                resulted in such hospitals providing inpatient care 
                beyond their capabilities or have limited the ability 
                of such hospitals to provide needed services.
    (c) Designation of Hospitals.--
            (1) Permitting designation of hospitals located in urban 
        areas.--
                    (A) In general.--Section 1820 of such Act (42 
                U.S.C. 1395i-4) is amended--
                            (i) by striking paragraph (1) of subsection 
                        (e) and redesignating paragraphs (2) through 
                        (6) as paragraphs (1) through (5);
                            (ii) in subsection (e)(1)(A) (as 
                        redesignated by subparagraph (A))--
                                    (I) by striking ``is located'' and 
                                inserting ``except in the case of a 
                                hospital located in an urban area, is 
                                located'',
                                    (II) by striking ``, (ii)'' and 
                                inserting ``or (ii)'', and
                                    (III) by striking ``or (iii)'' and 
                                all that follows through ``section,''; 
                                and
                            (iii) in subsection (i)(1)(B), by striking 
                        ``paragraph (3)'' and inserting ``paragraph 
                        (2)''.
                    (B) No change in medicare prospective payment.--
                Section 1886(d)(5)(D) of such Act (42 U.S.C. 
                1395ww(d)(5)(D)) is amended--
                            (i) in clause (iii)(III), by inserting 
                        ``located in a rural area and'' after ``that 
                        is'', and
                            (ii) in clause (v), by inserting ``located 
                        in a rural area and'' after ``in the case of a 
                        hospital''.
            (2) Permitting hospitals located in adjoining states to 
        participate in state program.--
                    (A) In general.--Section 1820 of such Act (42 
                U.S.C. 1395i-4) is amended--
                            (i) by redesignating subsection (k) as 
                        subsection (l); and
                            (ii) by inserting after subsection (j) the 
                        following new subsection:
    ``(k) Eligibility of Hospitals Not Located in Participating 
States.--Notwithstanding any other provision of this section--
            ``(1) for purposes of including a hospital or facility as a 
        member institution of a rural health network, a State may 
        designate a hospital or facility that is not located in the 
        State as an essential access community hospital or a rural 
        primary care hospital if the hospital or facility is located in 
        an adjoining State and is otherwise eligible for designation as 
        such a hospital;
            ``(2) the Secretary may designate a hospital or facility 
        that is not located in a State receiving a grant under 
        subsection (a)(1) as an essential access community hospital or 
        a rural primary care hospital if the hospital or facility is a 
        member institution of a rural health network of a State 
        receiving a grant under such subsection; and
            ``(3) a hospital or facility designated pursuant to this 
        subsection shall be eligible to receive a grant under 
        subsection (a)(2).''.
                    (B) Conforming amendments.--(i) Section 1820(c)(1) 
                of such Act (42 U.S.C. 1395i-4(c)(1)) is amended by 
                striking ``paragraph (3)'' and inserting ``paragraph 
                (3) or subsection (k)''.
                    (ii) Paragraphs (1)(A) and (2)(A) of section 
                1820(i) of such Act (42 U.S.C. 1395i-4(i)) are each 
                amended--
                            (I) in clause (i), by striking ``(a)(1)'' 
                        and inserting ``(a)(1) (except as provided in 
                        subsection (k))'', and
                            (II) in clause (ii), by striking 
                        ``subparagraph (B)'' and inserting 
                        ``subparagraph (B) or subsection (k)''.
    (d) Skilled Nursing Services in Rural Primary Care Hospitals.--
Section 1820(f)(3) of such Act (42 U.S.C. 1395i-4(f)(3)) is amended by 
striking ``because the facility'' and all that follows and inserting 
the following: ``because, at the time the facility applies to the State 
for designation as a rural primary care hospital, there is in effect an 
agreement between the facility and the Secretary under section 1883 
under which the facility's inpatient hospital facilities are used for 
the furnishing of extended care services, except that the number of 
beds used for the furnishing of such services may not exceed the total 
number of licensed inpatient beds at the time the facility applies to 
the State for such designation (minus the number of inpatient beds used 
for providing inpatient care pursuant to paragraph (1)(F)). For 
purposes of the previous sentence, the number of beds of the facility 
used for the furnishing of extended care services shall not include any 
beds of a unit of the facility that is licensed as a distinct-part 
skilled nursing facility at the time the facility applies to the State 
for designation as a rural primary care hospital.''.
    (e) Deadline for Development of Prospective Payment System for 
Inpatient Rural Primary Care Hospital Services.--Section 1814(l)(2) of 
such Act (42 U.S.C. 1395f(l)(2)) is amended by striking ``January 1, 
1993'' and inserting ``January 1, 1996''.
    (f) Payment for Outpatient Rural Primary Care Hospital Services.--
            (1) Implementation of prospective payment system.--Section 
        1834(g) of such Act (42 U.S.C. 1395m(g)) is amended--
                    (A) in paragraph (1), by striking ``during a year 
                before 1993'' and inserting ``during a year before the 
                prospective payment system described in paragraph (2) 
                is in effect''; and
                    (B) in paragraph (2), by striking ``January 1, 
                1993,'' and inserting ``January 1, 1996,''.
            (2) No use of customary charge in determining payment.--
        Section 1834(g)(1) of such Act (42 U.S.C. 1395m(g)(1)) is 
        amended by adding at the end the following new flush sentence: 
        ``The amount of payment shall be determined under either method 
        without regard to the amount of the customary or other 
        charge.''.
    (g) Clarification of Physician Staffing Requirement for Rural 
Primary Care Hospitals.--Section 1820(f)(1)(H) of such Act (42 U.S.C. 
1395i-4(f)(1)(H)) is amended by striking the period and inserting the 
following: ``, except that in determining whether a facility meets the 
requirements of this subparagraph, subparagraphs (E) and (F) of that 
paragraph shall be applied as if any reference to a `physician' is a 
reference to a physician as defined in section 1861(r)(1).''.
    (h) Technical Amendments Relating to Part A Deductible, 
Coinsurance, and Spell of Illness.--(1) Section 1812(a)(1) of such Act 
(42 U.S.C. 1395d(a)(1)) is amended--
            (A) by striking ``inpatient hospital services'' the first 
        place it appears and inserting ``inpatient hospital services or 
        inpatient rural primary care hospital services'';
            (B) by striking ``inpatient hospital services'' the second 
        place it appears and inserting ``such services''; and
            (C) by striking ``and inpatient rural primary care hospital 
        services''.
    (2) Sections 1813(a) and 1813(b)(3)(A) of such Act (42 U.S.C. 
1395e(a), 1395e(b)(3)(A)) are each amended by striking ``inpatient 
hospital services'' each place it appears and inserting ``inpatient 
hospital services or inpatient rural primary care hospital services''.
    (3) Section 1813(b)(3)(B) of such Act (42 U.S.C. 1395e(b)(3)(B)) is 
amended by striking ``inpatient hospital services'' and inserting 
``inpatient hospital services, inpatient rural primary care hospital 
services''.
    (4) Section 1861(a) of such Act (42 U.S.C. 1395x(a)) is amended--
            (A) in paragraph (1), by striking ``inpatient hospital 
        services'' and inserting ``inpatient hospital services, 
        inpatient rural primary care hospital services''; and
            (B) in paragraph (2), by striking ``hospital'' and 
        inserting ``hospital or rural primary care hospital''.
    (i) Authorization of Appropriations.--Section 1820(l) of such Act 
(42 U.S.C. 1395i-4(l)), as redesignated by subsection (c)(2)(A), is 
amended by striking ``1990, 1991, and 1992'' and inserting ``1990 
through 2000''.
    (j) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 4152. RURAL EMERGENCY ACCESS CARE HOSPITALS DESCRIBED.

    (a) In General.--Section 1861 of the Social Security Act (42 U.S.C. 
1395x) is amended by adding at the end the following new subsection:

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

    ``(oo)(1) The term `rural emergency access care hospital' means, 
for a fiscal year, a facility with respect to which the Secretary finds 
the following:
            ``(A) The facility is located in a rural area (as defined 
        in section 1886(d)(2)(D)).
            ``(B) The facility was a hospital under this title at any 
        time during the 5-year period that ends on the date of the 
        enactment of this subsection.
            ``(C) The facility is in danger of closing due to low 
        inpatient utilization rates and negative operating losses, and 
        the closure of the facility would limit the access of 
        individuals residing in the facility's service area to 
        emergency services.
            ``(D) The facility has entered into (or plans to enter 
        into) an agreement with a hospital with a participation 
        agreement in effect under section 1866(a), and under such 
        agreement the hospital shall accept patients transferred to the 
        hospital from the facility and receive data from and transmit 
        data to the facility.
            ``(E) There is a practitioner who is qualified to provide 
        advanced cardiac life support services (as determined by the 
        State in which the facility is located) on-site at the facility 
        on a 24-hour basis.
            ``(F) A physician is available on-call to provide emergency 
        medical services on a 24-hour basis.
            ``(G) The facility meets such staffing requirements as 
        would apply under section 1861(e) to a hospital located in a 
        rural area, except that--
                    ``(i) the facility need not meet hospital standards 
                relating to the number of hours during a day, or days 
                during a week, in which the facility must be open, 
                except insofar as the facility is required to provide 
                emergency care on a 24-hour basis under subparagraphs 
                (E) and (F); and
                    ``(ii) the facility may provide any services 
                otherwise required to be provided by a full-time, on-
                site dietician, pharmacist, laboratory technician, 
                medical technologist, or radiological technologist on a 
                part time, off-site basis.
            ``(H) The facility meets the requirements applicable to 
        clinics and facilities under subparagraphs (C) through (J) of 
        paragraph (2) of section 1861(aa) and of clauses (ii) and (iv) 
        of the second sentence of such paragraph (or, in the case of 
        the requirements of subparagraph (E), (F), or (J) of such 
        paragraph, would meet the requirements if any reference in such 
        subparagraph to a `nurse practitioner' or to `nurse 
        practitioners' was deemed to be a reference to a `nurse 
        practitioner or nurse' or to `nurse practitioners or nurses'); 
        except that in determining whether a facility meets the 
        requirements of this subparagraph, subparagraphs (E) and (F) of 
        that paragraph shall be applied as if any reference to a 
        `physician' is a reference to a physician as defined in section 
        1861(r)(1).
    ``(2) The term `rural emergency access care hospital services' 
means the following services provided by a rural emergency access care 
hospital:
            ``(A) An appropriate medical screening examination (as 
        described in section 1867(a)).
            ``(B) Necessary stabilizing examination and treatment 
        services for an emergency medical condition and labor (as 
        described in section 1867(b)).''.
    (b) Requiring Rural Emergency Access Care Hospitals To Meet 
Hospital Anti-Dumping Requirements.--Section 1867(e)(5) of such Act (42 
U.S.C. 1395dd(e)(5)) is amended by striking ``1861(mm)(1))'' and 
inserting ``1861(mm)(1)) and a rural emergency access care hospital (as 
defined in section 1861(oo)(1))''.

SEC. 4153. COVERAGE OF AND PAYMENT FOR SERVICES.

    (a) Coverage Under Part B.--Section 1832(a)(2) of the Social 
Security Act (42 U.S.C. 1395k(a)(2)) is amended--
            (1) by striking ``and'' at the end of subparagraph (I);
            (2) by striking the period at the end of subparagraph (J) 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(K) rural emergency access care hospital services 
                (as defined in section 1861(oo)(2)).''.
    (b) Payment Based on Payment for Outpatient Rural Primary Care 
Hospital Services.--
            (1) In general.--Section 1833(a)(6) of the Social Security 
        Act (42 U.S.C. 1395l(a)(6)) is amended by striking 
        ``services,'' and inserting ``services and rural emergency 
        access care hospital services,''.
            (2) Payment methodology described.--Section 1834(g) of such 
        Act (42 U.S.C. 1395m(g)) is amended--
                    (A) in the heading, by striking ``Services'' and 
                inserting ``Services and Rural Emergency Access Care 
                Hospital Services'';
                    (B) in paragraph (1), by striking ``during a year 
                before 1993'' and inserting ``during a year before the 
                prospective payment system described in paragraph (2) 
                is in effect'';
                    (C) in paragraph (1), by adding at the end the 
                following: ``The amount of payment shall be determined 
                under either method without regard to the amount of the 
                customary or other charge.'';
                    (D) in paragraph (2), by striking ``January 1, 
                1993,'' and inserting ``January 1, 1996,''; and
                    (E) by adding at the end the following new 
                paragraph:
            ``(3) Application of methods to payment for rural emergency 
        access care hospital services.--The amount of payment for rural 
        emergency access care hospital services provided during a year 
        shall be determined using the applicable method provided under 
        this subsection for determining payment for outpatient rural 
        primary care hospital services during the year.''.

SEC. 4154. EFFECTIVE DATE.

    The amendments made by this subpart shall apply to fiscal years 
beginning on or after October 1, 1994.

 Subpart D--Demonstration Projects to Encourage Primary Care and Rural-
                    Based Graduate Medical Education

SEC. 4161. STATE AND CONSORTIUM DEMONSTRATION PROJECTS.

    (a) In General.--
            (1) Participation of states and consortia.--The Secretary 
        shall establish and conduct a demonstration project to increase 
        the number and percentage of medical students entering primary 
        care practice relative to those entering nonprimary care 
        practice under which the Secretary shall make payments in 
        accordance with subsection (d)--
                    (A) to not more than 10 States for the purpose of 
                testing and evaluating mechanisms to meet the goals 
                described in section 4162; and
                    (B) to not more than 10 health care training 
                consortia for the purpose of testing and evaluating 
                mechanisms to meet such goals.
            (2) Exclusion of consortia in participating states.--A 
        consortia may not receive payments under the demonstration 
        project under paragraph (1)(B) if any of its members is located 
        in a State receiving payments under the project under paragraph 
        (1)(A).
    (b) Applications.--
            (1) In general.--Each State and consortium desiring to 
        conduct a demonstration project under this section shall 
        prepare and submit to the Secretary an application, at such 
        time, in such manner, and containing such information as the 
        Secretary may require to assure that the State or consortium 
        will meet the goals described in section 4162. In the case of 
        an application of a State, the application shall include--
                    (A) information demonstrating that the State has 
                consulted with interested parties with respect to the 
                project, including State medical associations, State 
                hospital associations, and medical schools located in 
                the State;
                    (B) an assurance that no hospital conducting an 
                approved medical residency training program in the 
                State will lose more than 10 percent of such hospital's 
                approved medical residency positions in any year as a 
                result of the project; and
                    (C) an explanation of a plan for evaluating the 
                impact of the project in the State.
            (2) Approval of applications.--A State or consortium that 
        submits an application under paragraph (1) may begin a 
        demonstration project under this subsection--
                    (A) upon approval of such application by the 
                Secretary; or
                    (B) at the end of the 60-day period beginning on 
                the date such application is submitted, unless the 
                Secretary denies the application during such period.
            (3) Notice and comment.--A State or consortium shall issue 
        a public notice on the date it submits an application under 
        paragraph (1) which contains a general description of the 
        proposed demonstration project. Any interested party may 
        comment on the proposed demonstration project to the State or 
        consortium or the Secretary during the 30-day period beginning 
        on the date the public notice is issued.
    (c) Specific Requirements for Participants.--
            (1) Requirements for states.--Each State participating in 
        the demonstration project under this subtitle shall use the 
        payments provided under subsection (d) to test and evaluate 
        either of the following mechanisms to increase the number and 
        percentage of medical students entering primary care practice 
        relative to those entering nonprimary care practice:
                    (A) Use of alternative weighting factors.--
                            (i) In general.--The State may make 
                        payments to hospitals in the State for direct 
                        graduate medical education costs in amounts 
                        determined under the methodology provided under 
                        section 1886(h) of the Social Security Act, 
                        except that the State shall apply weighting 
                        factors that are different than the weighting 
                        factors otherwise set forth in section 
                        1886(h)(4)(C) of the Social Security Act.
                            (ii) Use of payments for primary care 
                        residents.--In applying different weighting 
                        factors under clause (i), the State shall 
                        ensure that the amount of payment made to 
                        hospitals for costs attributable to primary 
                        care residents shall be greater than the amount 
                        that would have been paid to hospitals for 
                        costs attributable to such residents if the 
                        State had applied the weighting factors 
                        otherwise set forth in section 1886(h)(4)(C) of 
                        the Social Security Act.
                    (B) Payments for medical education through 
                consortium.--The State may make payments for graduate 
                medical education costs through payments to a health 
                care training consortium (or through any entity 
                identified by such a consortium as appropriate for 
                receiving payments on behalf of the consortium) that is 
                established in the State but that is not otherwise 
                participating in the demonstration project.
            (2) Requirements for consortium.--
                    (A) In general.--In the case of a consortium 
                participating in the demonstration project under this 
                subtitle, the Secretary shall make payments for 
                graduate medical education costs through a health care 
                training consortium whose members provide medical 
                residency training (or through any entity identified by 
                such a consortium as appropriate for receiving payments 
                on behalf of the consortium).
                    (B) Use of payments.--
                            (i) In general.--Each consortium receiving 
                        payments under subparagraph (A) shall use such 
                        funds to conduct activities which test and 
                        evaluate mechanisms to increase the number and 
                        percentage of medical students entering primary 
                        care practice relative to those entering 
                        nonprimary care practice, and may use such 
                        funds for the operation of the consortium.
                            (ii) Payments to participating programs.--
                        The consortium shall ensure that the majority 
                        of the payments received under subparagraph (A) 
                        are directed to consortium members for primary 
                        care residency programs, and shall designate 
                        for each resident assigned to the consortium a 
                        hospital operating an approved medical 
                        residency training program for purposes of 
                        enabling the Secretary to calculate the 
                        consortium's payment amount under the project. 
                        Such hospital shall be the hospital where the 
                        resident receives the majority of the 
                        resident's hospital-based, nonambulatory 
                        training experience.
    (d) Allocation of Portion of Medicare GME Payments for Activities 
Under Project.--Notwithstanding any provision of title XVIII of the 
Social Security Act, the following rules apply with respect to each 
State and each health care training consortium participating in the 
demonstration project established under this section during a year:
            (1) In the case of a State--
                    (A) the Secretary shall reduce the amount of each 
                payment made to hospitals in the State during the year 
                for direct graduate medical education costs under 
                section 1886(h) of the Social Security Act by 3 
                percent; and
                    (B) the Secretary shall pay the State an amount 
                equal to the Secretary's estimate of the sum of the 
                reductions made during the year under subparagraph (A) 
                (as adjusted by the Secretary in subsequent years for 
                over- or under-estimations in the amount estimated 
                under this subparagraph in previous years).
            (2) In the case of a consortium--
                    (A) the Secretary shall reduce the amount of each 
                payment made to hospitals who are members of the 
                consortium during the year for direct graduate medical 
                education costs under section 1886(h) of the Social 
                Security Act by 3 percent; and
                    (B) the Secretary shall pay the consortium an 
                amount equal to the Secretary's estimate of the sum of 
                the reductions made during the year under subparagraph 
                (A) (as adjusted by the Secretary in subsequent years 
                for over- or under-estimations in the amount estimated 
                under this subparagraph in previous years).
    (e) Additional Grant for Planning and Evaluation.--
            (1) In general.--The Secretary may award grants to States 
        and consortia participating in the demonstration project under 
        this section for the purpose of developing and evaluating such 
        projects. A State or consortia may conduct such an evaluation 
        or contract with a private entity to conduct the evaluation. 
        Each State and consortia desiring to receive a grant under this 
        paragraph shall prepare and submit to the Secretary an 
        application, at such time, in such manner, and containing such 
        information as the Secretary may require.
            (2) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as may be necessary for grants 
        under this paragraph for fiscal years 1996 through 2000.
    (f) Duration.--A demonstration project under this section shall be 
conducted for a period not to exceed 5 years. The Secretary may 
terminate a project if the Secretary determines that the State or 
consortium conducting the project is not in substantial compliance with 
the terms of the application approved by the Secretary.
    (g) Evaluations and Reports.--
            (1) Evaluations.--Each State or consortium participating in 
        the demonstration project shall submit to the Secretary a final 
        evaluation within 360 days of the termination of the State or 
        consortium's participation and such interim evaluations as the 
        Secretary may require.
            (2) Reports to congress.--Not later than 360 days after the 
        first demonstration project under this subtitle begins, and 
        annually thereafter for each year in which such a project is 
        conducted, the Secretary shall submit a report to Congress 
        which evaluates the effectiveness of the State and consortium 
        activities conducted under such projects and includes any 
        legislative recommendations determined appropriate by the 
        Secretary.
    (h) Maintenance of Effort.--Any funds available for the activities 
covered by a demonstration project under this subtitle shall 
supplement, and shall not supplant, funds that are expended for similar 
purposes under any State, regional, or local program.

SEC. 4162. GOALS FOR PROJECTS.

    The goals referred to in this section for a State or consortium 
participating in the demonstration project under this subtitle are as 
follows:
            (1) The training of an equal number of physician and non-
        physician primary care providers.
            (2) The recruiting of residents for graduate medical 
        education training programs who received a portion of 
        undergraduate training in a rural area.
            (3) The allocation of not less than 50 percent of the 
        training spent in a graduate medical residency training program 
        at sites at which acute care inpatient hospital services are 
        not furnished.
            (4) The rotation of residents in approved medical residency 
        training programs among practices that serve residents of rural 
        areas.
            (5) The development of a plan under which, after a 5-year 
        transition period, not less than 50 percent of the residents 
        who begin an initial residency period in an approved medical 
        residency training program shall be primary care residents.

SEC. 4163. DEFINITIONS.

    In this subpart:
            (1) Approved medical residency training program.--The term 
        ``approved medical residency training program'' has the meaning 
        given such term in section 1886(h)(5)(A) of the Social Security 
        Act.
            (2) Health care training consortium.--The term ``health 
        care training consortium'' means a State, regional, or local 
        entity consisting of at least one of each of the following:
                    (A) A hospital operating an approved medical 
                residency training program at which residents receive 
                training at ambulatory training sites located in rural 
                areas.
                    (B) A school of medicine or osteopathic medicine.
                    (C) A school of allied health or a program for the 
                training of physician assistants (as such terms are 
                defined in section 799 of the Public Health Service 
                Act).
                    (D) A school of nursing (as defined in section 853 
                of the Public Health Service Act).
            (3) Primary care.--The term ``primary care'' means family 
        practice, general internal medicine, general pediatrics, and 
        obstetrics and gynecology.
            (4) Resident.--The term ``resident'' has the meaning given 
        such term in section 1886(h)(5)(H) of the Social Security Act.
            (5) Rural area.--The term ``rural area'' has the meaning 
        given such term in section 1886(d)(2)(D) of the Social Security 
        Act.

            PART 4--HOSPITAL AFFILIATED PRIMARY CARE CENTER

SEC. 4171. HOSPITAL-AFFILIATED PRIMARY CARE CENTERS.

    (a) Definitions.--For purposes of this section:
            (1) Community hospital.--The term ``community hospital'' 
        means a public general hospital, owned and operated by a State, 
        county or local unit of government, or a private community 
        hospital that--
                    (A) has less than 50 beds; and
                    (B) primarily serves a medically underserved 
                population as defined in section 330(b)(3) of the 
                Public Health Service Act (42 U.S.C. 254c(b)(3)) or a 
                health professional shortage area as defined in section 
                322(a)(1) of such Act (42 U.S.C. 254c(a)(1).
            (2) Hospital-affiliated primary care center.--The term 
        ``hospital-affiliated primary care center'' (referred to in 
        this section as a ``primary care center'') means a distinct 
        administrative unit of a community hospital, located in, or 
        adjacent to, the hospital, that--
                    (A) delivers primary health services as defined in 
                section 330(b)(1) of such Act (42 U.S.C. 354c(b)(1)) to 
                a catchment area determined by the hospital and 
                approved by the Secretary; and
                    (B) provides referrals to providers of supplemental 
                health services as defined in section 330(b)(2) of such 
                Act (42 U.S.C. 354c(b)(2)).
            (3) Primary care group practice.--
                    (A) The term ``primary care group practice'' means 
                any combination of 3 or more primary care physicians 
                who are--
                            (i) organized to provide primary health 
                        services in a manner that is consistent with 
                        the needs of the population served;
                            (ii) located in, or adjacent to, the 
                        community hospital;
                            (iii) who have admitting privileges at the 
                        community hospital; and
                            (iv)(I) who are salaried by the hospital 
                        such that a majority of the members of the 
                        group practice is full time in the primary care 
                        center; or
                            (II) who are organized into a legal entity 
                        (partnership, corporation, or professional 
                        association) that has a contract approved by 
                        the Secretary with the community hospital to 
                        provide primary health services.
                    (B) Special rule for hpsas and near-hpsas.--In the 
                case of a group that is located in an area that--
                            (i) is designated as a primary care health 
                        professional shortage area under section 332 of 
                        the Public Health Service Act (42 U.S.C. 254e); 
                        or
                            (ii) would meet the requirements for 
                        designation as a primary care health 
                        professional shortage area if there were 25 
                        percent fewer physicians in the area;
                the requirement that a group practice have 3 or more 
                primary care physicians may be met by substituting a 
                nurse practitioner or a physician assistant for 1 
                member of the group.
                    (C) Special rule for frontier areas.--In the case 
                of a group that is located in a frontier area, 
                subparagraph (A) shall be applied by substituting 
                ``two'' for ``three'' in the matter preceding clause 
                (i).
                    (D) Other requirements for group.--
                            (i) physicians in specialties other than 
                        primary care specialties may become members of 
                        a primary care group practice as needed, but 
                        may not be used to satisfy the requirement of 
                        subsection (b)(2)(D); and
                            (ii) nonphysician providers, particularly 
                        physician assistants, certified nurse midwives, 
                        and nurse practitioners, shall be used where 
                        practicable in concert with the physicians of a 
                        primary care group practice.
            (4) Frontier area.--The term ``frontier area'' means a 
        county in which there are 6 or fewer individuals residing per 
        square mile.
            (5) Primary care physician.--The term ``primary care 
        physician'' means a physician in the specialty of family 
        practice, general internal medicine, general pediatrics, or 
        obstetrics and gynecology.
            (6) Primary care resident.--The term ``primary care 
        resident'' means a graduate physician in training, whose 
        training program is approved by appropriate certifying bodies 
        and is in a primary care specialty.
    (b) Establishment of Grant Program.--
            (1) In general.--The Secretary of Health and Human Services 
        (referred to in this section as the ``Secretary'') shall make 
        grants to community hospitals to assist such hospitals in 
        planning, developing, and operating primary care services in 
        medically underserved areas. In making such grants, the 
        Secretary shall avoid duplication of efforts in areas where 
        existing community health centers, migrant health centers, 
        rural emergency access care hospitals, federally qualified 
        health centers, and other facilities are adequate to meet the 
        needs of the medically underserved population.
            (2) Eligibility for grants.--In order to be eligible for a 
        grant under this subsection, a community hospital shall submit 
        an application that contains or is supported by assurances, 
        satisfactory to the Secretary, that--
                    (A) the services of the primary care center will be 
                delivered through a primary care group practice;
                    (B) to the extent practicable, primary health 
                services in the community hospital will be delivered 
                only through the primary care center;
                    (C) qualified personnel trained in triage will be 
                placed in the emergency room, the outpatient 
                department, and the primary care center to screen and 
                direct patients to the appropriate location for care;
                    (D) each patient of the primary care center will 
                have an identified member of the group practice 
                responsible for continuous management of the patient, 
                including emergency services and referrals of the 
                patients for inpatient or outpatient services;
                    (E) to the extent practicable, excess facilities 
                and equipment in or owned by the community hospital 
                will be covered for use in the primary care center;
                    (F) the hospital and the primary care center will 
                avoid unnecessary duplication of facilities and 
                equipment, except that the primary care center may 
                install appropriate support equipment for routine 
                primary health services;
                    (G) the primary care center will be maintained as a 
                separate and distinct cost and revenue center for 
                accounting purposes;
                    (H) the primary care center will be operated in 
                accordance with all of the requirements specified for 
                community health centers in section 330(e)(3) of the 
                Public Health Service Act (other than subparagraph 
                (G));
                    (I) the hospital has an advisory committee that--
                            (i) is composed of individuals, a majority 
                        of whom are health consumers in the catchment 
                        area of the hospital; and
                            (ii) meets at least 6 times a year to 
                        review the operations of the primary care 
                        center and develop recommendations to the 
                        governing board of the hospital about the 
                        operation of the center and the types of 
                        services to be provided; and
                    (J) the primary care center will maintain an 
                information program for its patients that fully 
                discloses--
                            (i) the covered professional services and 
                        referral capabilities offered by the primary 
                        care center; and
                            (ii) the method by which patients of the 
                        primary care center may resolve grievances 
                        about billing for covered professional services 
                        and the quality of such services.
            (3) Other requirements.--
                    (A) Use of primary care residents.--(i) Primary 
                health services may be delivered by primary care 
                residents if such services are delivered under the 
                supervision of a member of the group practice.
                    (ii)(I) Medical and other health science students 
                may receive primary care training in the primary care 
                center, except that no full-time member of the group 
                practice may also spend full time in the teaching of 
                residents and students.
                    (II) The Secretary shall issue regulations to 
                assure that teaching does not detract significantly 
                from the actual delivery of service in the primary care 
                center.
                    (B) Costs of primary care centers.--(i) Only costs 
                clearly associated with the provision of services in 
                the primary care setting may be assigned to a primary 
                care center.
                    (ii) Inpatient-related costs may not be included in 
                the costs of operating a primary care center.
                    (iii) Costs associated with the education and 
                training of residents, medical, and other health 
                science students may not be included in the costs of 
                operating a primary care center, except that salaries 
                and other costs associated with the delivery of 
                services by residents may be included in such costs as 
                long as such costs are prorated based on the actual 
                percentage of time spent by the resident in the primary 
                care center.
                    (C) Advisory committee.--(i) The advisory committee 
                referred to in paragraph (2)(I) shall participate in 
                the development of an application for a grant under 
                this section and the development of any grant renewal 
                application.
                    (ii) The Secretary may not approve the application 
                for a grant under this subsection unless the 
                application has been approved by the advisory 
                committee.
            (4) Use of grants.--(A) A grant under this subsection may 
        be used to cover costs associated with (i) planning, (ii) 
        developing (including modernization and renovation of space), 
        and (iii) operating primary care centers.
            (B) Not more than 25 percent of any grant may be used for 
        the purposes specified in subparagraph (A)(ii).
    (c) Technical Assistance.--The Secretary shall, upon request, 
provide technical and other nonfinancial assistance (including fiscal 
and program management assistance and training in such management) to a 
community hospital to assist it in developing plans for, and in 
operating, a primary care center. Funds appropriated under this section 
may be used to carry out the purposes of this section.
    (d) Retention of Earned Income.--The Secretary shall establish, by 
regulation, a plan to allow primary care centers to retain earned 
income from the operation of the center if the income is used to--
            (1) expand or improve the services of the center;
            (2) expand the population eligible to utilize the services 
        of the center;
            (3) make managerial or physical improvements to the center; 
        or
            (4) establish a reserve fund for conversion to a prepaid 
        reimbursement methodology.
    (e) Use of Appropriations.--To carry out this section, there are 
authorized to be appropriated $12,000,000 for fiscal year 1996, 
$21,000,000 for fiscal year 1997, $150,000,000 for fiscal year 1998, 
$160,000,000 for fiscal year 1999, $180,000,000 for fiscal year 2000, 
and $190,000,000 for each of fiscal years 2001 through 2004.

                  Subtitle C--Academic Health Centers

                                                   Title IV, Subtitle C

SEC. 4201. STUDY OF PAYMENTS FOR MEDICAL EDUCATION AT SITES OTHER THAN 
              HOSPITALS.

    (a) Study.--The Secretary of Health and Human Services shall 
conduct a study of the feasibility and desirability of making payments 
to facilities that are not hospitals for the direct and indirect costs 
of graduate medical education attributable to residents trained at such 
facilities. In conducting the study, the Secretary shall evaluate new 
payment methodologies--
            (1) under which each entity which incurs costs of graduate 
        medical education shall receive reimbursement for such costs; 
        and
            (2) which would encourage the training of primary care 
        physicians.
    (b) Report.--Not later than 2 years after the date of the enactment 
of this Act, the Secretary shall submit a report to Congress a report 
on the study conducted under subsection (a), and shall include in the 
report such recommendations as the Secretary considers appropriate.

SEC. 4202. STUDY OF FUNDING NEEDS OF HEALTH PROFESSIONS SCHOOLS.

    (a) In General.--The Secretary shall conduct a study for the 
purpose of determining the funding needs of health professions schools, 
including schools of medicine and osteopathic medicine, schools of 
dentistry, and schools of public health.
    (b) Consideration of Certain Costs.--In conducting the study under 
subsection (a), the Secretary shall also consider the following costs 
regarding the funding needs of health professions schools:
            (1) Uncompensated costs incurred in providing health care.
            (2) Costs resulting from reduced productivity due to 
        teaching responsibilities.
            (3) Increased costs of caring for the health needs of 
        patients with severe medical complications.
            (4) Uncompensated costs incurred by faculty, residents, and 
        students in providing consultations for hospitalized patients.
            (5) Uncompensated costs incurred in conducting clinical 
        research.
    (c) Considerations Regarding Additional Funding.--In conducting the 
study under subsection (a), the Secretary shall determine the 
following:
            (1) Whether the health professions schools involved have a 
        significant need for an increase in the amount of funds 
        available to the schools.
            (2) If there is such a need--
                    (A) recommendations regarding the sources of funds 
                to provide the increase; and
                    (B) recommendations for a methodology for 
                determining the amount that should be provided to the 
                schools involved.
    (d) Report to Congress.--Not later than 18 months after the date of 
the enactment of this Act, the Secretary shall submit to the Congress a 
report describing the findings and recommendations made in the study.

       Subtitle D--United States-Mexico Border Health Commission

                                                   Title IV, Subtitle D

SEC. 4301. AGREEMENT TO ESTABLISH BINATIONAL COMMISSION.

    The President is authorized and encouraged to conclude an agreement 
with Mexico to establish a binational commission to be known as the 
United States-Mexico Border Health Commission.

SEC. 4302. DUTIES.

    It should be the duty of the Commission--
            (1) to conduct a comprehensive needs assessment in the 
        United States-Mexico border area for the purposes of 
        identifying, evaluating, preventing, and resolving health 
        problems that affect the general population of the area;
            (2) to implement the actions recommended by the needs 
        assessment by--
                    (A) assisting in the coordination of the efforts of 
                public and private entities to prevent and resolve such 
                health problems,
                    (B) assisting in the coordination of the efforts of 
                public and private entities to educate such population 
                concerning such health problems, and
                    (C) assisting in the development and implementation 
                of programs to prevent and resolve such health problems 
                and (where necessary) to educate such population 
                concerning such health programs; and
            (3) to formulate recommendations to the Governments of the 
        United States and Mexico concerning a fair and reasonable 
        method by which the government of one country would reimburse a 
        public or private entity in the other country for the cost of a 
        health care service that the entity furnishes to a citizen of 
        the first country who is unable, through insurance or 
        otherwise, to pay for the service.

SEC. 4303. OTHER AUTHORIZED FUNCTIONS.

    In addition to the duties described in section 4302, the Commission 
should be authorized to perform the following additional functions as 
the Commission determines to be appropriate:
            (1) To conduct or sponsor investigations, research, or 
        studies designed to identify, study, and monitor health 
        problems that affect the general population in the United 
        States-Mexico border area.
            (2) To provide financial, technical, or administrative 
        assistance to public or private entities who act to prevent, 
        resolve, or educate such population concerning such health 
        problems.

SEC. 4304. MEMBERSHIP.

    (a) Number and Appointment of United States Section.--The United 
States section of the Commission should be composed of 13 members. The 
section should consist of the following members:
            (1) The Secretary of Health and Human Services or such 
        individual's delegate.
            (2) The commissioners of health from the States of Texas, 
        New Mexico, California, and Arizona or such individuals' 
        delegates.
            (3) 2 individuals from each of the States of Texas, New 
        Mexico, California, and Arizona who are nominated by the chief 
        executive officer of one of such States and are appointed by 
        the President from among individuals who have demonstrated ties 
        to community-based organizations and have a demonstrated 
        interest in health issues of the United States-Mexico border 
        area.
    (b) Commissioner.--The Commissioner of the United States section of 
the Commission should be the Secretary of Health and Human Services or 
such individual's delegate to the Commission. The Commissioner should 
be the leader of the section.

SEC. 4305. REGIONAL OFFICES.

    The Commission should establish no fewer than 2 regional border 
offices in locations selected by the Commission.

SEC. 4306. REPORTS.

    Not later than February 1 of each year that occurs more than 1 year 
after the date of the establishment of the Commission, the Commission 
should submit an annual report to both the United States Government and 
the Government of Mexico regarding all activities of the Commission 
during the preceding calendar year.

SEC. 4307. DEFINITIONS.

    For purposes of this subtitle:
            (1) Commission.--The term ``Commission'' means the United 
        States-Mexico Border Health Commission authorized in section 
        4301.
            (2) Health problem.--The term ``health problem'' means a 
        disease or medical ailment or an environmental condition that 
        poses the risk of disease or medical ailment. The term includes 
        diseases, ailments, or risks of disease or ailment caused by or 
        related to environmental factors, control of animals and 
        rabies, control of insect and rodent vectors, disposal of solid 
        and hazardous waste, and control and monitoring of air and 
        water quality.
            (3) United states-mexico border area.--The term ``United 
        States-Mexico border area'' means the area located in the 
        United States and Mexico within 100 kilometers of the border 
        between the United States and Mexico.

                TITLE V--HEALTH CARE QUALITY ENHANCEMENT

                       table of contents of title

                                                                Title V

                     Subtitle A--Quality Assurance

Sec. 5001. Health Quality Advisory Council.
Sec. 5002. Quality assessment using measures.
Sec. 5003. Definitions.
              Subtitle B--Primary Care Provider Education

Sec. 5101. Area health education centers.
Sec. 5102. Public health and preventive medicine.
Sec. 5103. Family medicine.
Sec. 5104. General internal medicine and pediatrics.
Sec. 5105. Physician assistants.
Sec. 5106. Allied health project grants and contracts.
Sec. 5107. Nurse practitioner and nurse midwife programs.

                     Subtitle A--Quality Assurance

SEC. 5001. HEALTH QUALITY ADVISORY COUNCIL.

                                                    Title V, Subtitle A

    (a) Establishment.--The Secretary shall provide for the 
establishment of an advisory council to be known as the ``Health 
Quality Advisory Council'' (in this subtitle referred to as the 
``Council'').
    (b) Duties.--
            (1) Initial measures and requirements.--
                    (A) Development of quality measures.--The Council 
                shall develop an initial set of quality measures to be 
                used to assess the quality of carriers, group health 
                plans, and multiple employer welfare arrangements. The 
                quality measures shall include measures that provide 
                information with respect to such entities on the 
                following subjects:
                            (i) Outcomes of care for specified medical 
                        conditions.
                            (ii) Health status of enrollees.
                            (iii) Health promotion activities.
                            (iv) Prevention of diseases, disorders, 
                        disabilities, injuries, and other adverse 
                        health conditions.
                            (v) Risk management and reduction.
                            (vi) Consumer satisfaction.
                    (B) Recommendations.--Not later than the date that 
                is 9 months from the date of the enactment of this Act, 
                the Council shall recommend to the Secretary--
                            (i) the initial set of quality measures 
                        developed under subparagraph (A);
                            (ii) a standard set of data to be developed 
                        and collected in a uniform form and manner by 
                        carriers, group health plans, and multiple 
                        employer welfare arrangements in order to 
                        permit such a carrier, plan, or arrangement to 
                        assess its quality using such initial set of 
                        measures;
                            (iii) a standard methodology to be used by 
                        such entities to carry out the assessments 
                        described in clause (ii);
                            (iv) a standard format to be used by such 
                        entities publicly to report the results of such 
                        assessments; and
                            (v) a schedule for implementing, in 
                        succession--
                                    (I) the data development and 
                                collection requirements recommended 
                                under clause (ii);
                                    (II) the assessment requirements 
                                recommended under clause (iii); and
                                    (III) the reporting requirements 
                                recommended under clause (iv).
            (2) Modifying measures.--The Council shall make 
        recommendations to the Secretary with respect to modifying, as 
        additional information with respect to carriers, group health 
        plans, and multiple employer welfare arrangements becomes valid 
        and available, a set of quality measures selected by the 
        Secretary under section 5002. A recommendation under the 
        preceding sentence shall be accompanied by recommendations for 
        modifications to a data set, assessment methodology, reporting 
        format, or schedule for implementation selected by the 
        Secretary under such section that the Council determines would 
        be necessary in order to implement appropriately a modification 
        in the set of quality measures.
    (c) Membership.--
            (1) In general.--The Council shall, in accordance with this 
        subsection, be composed of appointed members and ex officio 
        members. All members of the Council shall be voting members, 
        other than officials designated under paragraph (3) as ex 
        officio members of the Council.
            (2) Appointed members.--The Secretary shall appoint to the 
        Council 9 appropriately qualified individuals who are not 
        officers or employees of the United States. Members appointed 
        under this paragraph shall include--
                    (A) individuals distinguished in the field of 
                health outcomes;
                    (B) representatives of carriers, group health 
                plans, and multiple employer welfare arrangements;
                    (C) health care providers; and
                    (D) consumers of health care.
            (3) Ex officio members.--The Secretary may designate as ex 
        officio members of the Council the Director of the National 
        Institutes of Health, the Director of the Centers for Disease 
        Control, the Administrator of the Health Care Financing 
        Administration, the Assistant Secretary of Defense (Health 
        Affairs), and the Chief Medical Officer of the Department of 
        Veterans Affairs.
    (d) Terms.--
            (1) In general.--Except as provided in paragraph (2), 
        members of the Council appointed under subsection (c)(2) shall 
        serve for a term of 3 years.
            (2) Staggered rotation.--Of the members first appointed to 
        the Council under subsection (c)(2), the Secretary shall 
        appoint 3 members to serve for a term of 3 years, 3 members to 
        serve for a term of 2 years, and 3 members to serve for a term 
        of 1 year.
            (3) Service beyond term.--A member of the Council appointed 
        under subsection (c)(2) may continue to serve after the 
        expiration of the term of the member until a successor is 
        appointed.
    (e) Vacancies.--If a member of the Council appointed under 
subsection (c)(2) does not serve the full term applicable under 
subsection (d), the individual appointed to fill the resulting vacancy 
shall be appointed for the remainder of the term of the predecessor of 
the individual.
    (f) Chair.--The Secretary shall, from among the members of the 
Council appointed under subsection (c)(2), designate an individual to 
serve as the chair of the Council.
    (g) Meetings.--The Council shall meet at the call of the chair or 
the Secretary.
    (h) Compensation and Reimbursement of Expenses.--
            (1) Appointed members.--Members of the Council appointed 
        under subsection (c)(2) shall receive compensation for each day 
        (including traveltime) engaged in carrying out the duties of 
        the Council. Such compensation may not be in an amount in 
        excess of the maximum rate of basic pay payable under section 
        5376 of title 5, United States Code.
            (2) Ex officio members.--Officials designated under 
        subsection (c)(3) as ex officio members of the Council may not 
        receive compensation for service on the Council in addition to 
        the compensation otherwise received for duties carried out as 
        officers of the United States.
    (i) Staff.--The Secretary shall provide to the Council such staff, 
information, and other assistance as may be necessary to carry out the 
duties of the Council.
    (j) Duration.--Notwithstanding section 14(a) of the Federal 
Advisory Committee Act, the Council shall continue in existence until 
otherwise provided by law.

SEC. 5002. QUALITY ASSESSMENT USING MEASURES.

    (a) Initial Measures and Requirements.--
            (1) Evaluation of recommendations.--If the Council makes 
        the recommendations to the Secretary that are described in 
        section 5001(b)(1)(B) not later than the deadline described in 
        such section, the Secretary shall evaluate the recommendations 
        to determine whether they will provide for effective 
        measurement and reporting of the quality of carriers, group 
        health plans, and multiple employer welfare arrangements. The 
        Secretary shall complete such evaluation not later than the 
        date that is 90 days from the date on which the Secretary 
        receives the recommendations of the Council.
            (2) Modification.--Prior to the initiation of a rule making 
        under paragraph (3), the Secretary may, as the Secretary 
        determines appropriate based on the evaluation under paragraph 
        (1), modify any quality measure, data set, assessment 
        methodology, reporting format, or schedule for implementation 
        recommended by the Council under section 5001(b)(1)(B).
            (3) Rule making.--After notice and opportunity for public 
        comment, the Secretary shall promulgate a rule that--
                    (A) establishes an initial set of quality measures 
                of the type described in section 5001(b)(1)(A);
                    (B) establishes a standard data set, methodology, 
                reporting format, and an implementation schedule of the 
                types described in section 5001(b)(1)(B) and 
                requirements on carriers, group health plans, and 
                multiple employer welfare arrangements in accordance 
                with such standards and schedule;
                    (C) requires each carrier, group health plans, and 
                multiple employer welfare arrangement periodically to 
                publish a report, using the standard reporting format 
                established under subparagraph (B), and to send the 
                report to employers, brokers, health plan purchasing 
                organizations, and consumers in its service area;
                    (D) specifies the amount and nature of the data 
                that carriers, group health plans, and multiple 
                employer welfare arrangements shall transmit under 
                paragraphs (2) and (4) of subsection (b) in order to 
                permit States and the Secretary of Labor to conduct 
                audits under paragraphs (1) and (4) of such subsection; 
                and
                    (E) specifies the frequency with which, and the 
                method by which, such data shall be transmitted to 
                States or the Secretary of Labor.
    (b) Compliance.--
            (1) Periodic audits.--Each State shall conduct periodic 
        audits to evaluate whether carriers providing health insurance 
        coverage in the State are complying with the requirements 
        established under subsection (a). Such audits shall include an 
        assessment of the completeness, accuracy, and validity of any 
        data developed or collected by a carrier under such subsection 
        and any report published by such an entity under such 
        subsection. A State may satisfy the requirements of this 
        paragraph by entering into a contract or other agreement with 
        any appropriate individual or entity.
            (2) Data transmission.--A carrier providing health 
        insurance coverage in a State shall transmit to the State, in 
        accordance with the requirements promulgated under subsection 
        (a)(3)(E), the data determined to be necessary by the Secretary 
        under subsection (a)(3)(D).
            (3) Ensuring compliance.--A State may take appropriate 
        action to ensure compliance by carriers with the requirements 
        of subsection (a) and paragraph (2). Such action may include 
        the imposition of a penalty on a carrier that transmits 
        incomplete, false, or misleading data to the State.
            (4) Application to group health plans and multiple employer 
        welfare arrangements.--
                    (A) Audits and data transmission.--The Secretary of 
                Labor shall undertake the duties, and may exercise the 
                authorities, of States that are described in paragraph 
                (1) with respect to each group health plan, and each 
                multiple employer welfare arrangement, that does not 
                provide health coverage through a carrier. Such a plan 
                or arrangement shall transmit to the Secretary of 
                Labor, in accordance with the requirements promulgated 
                under subsection (a)(3)(E), the data determined to be 
                necessary by the Secretary of Health and Human Services 
                under subsection (a)(3)(D).
                    (B) Ensuring compliance.--For purposes of part 5 of 
                subtitle B of title I of the Employee Retirement Income 
                Security Act of 1974, the provisions of this section 
                shall be considered to be provisions of title I of such 
                Act, but only to the extent that this section applies 
                to group health plans and multiple employer welfare 
                arrangements that do not provide health coverage 
                through a carrier.
    (c) Modifying Measures.--
            (1) In general.--The Secretary may modify any set of 
        quality measures established under subsection (a). The 
        Secretary may make any modification to a set of data, standard 
        methodology, standard reporting format, implementation 
        schedule, or requirement on carriers, group health plans, and 
        multiple employer welfare arrangements established under such 
        subsection that the Secretary determines is necessary to 
        implement appropriately a modification in the set of quality 
        measures.
            (2) Procedure.--Prior to implementing a modification under 
        paragraph (1), the Secretary shall--
                    (A) receive the recommendations of the Council with 
                respect to the modification;
                    (B) provide notice and opportunity for public 
                comment; and
                    (C) promulgate a rule.

SEC. 5003. DEFINITIONS.

    For purposes of this subtitle:
            (1) The term ``carrier'' means a carrier (as defined in 
        section 1903(2)) providing health insurance coverage (as 
        defined in section 1903(7)).
            (2) The term ``multiple employer welfare arrangement'' 
        means a multiple employer welfare arrangement (as defined in 
        section 1903(12)) providing benefits consisting of medical care 
        described in section 607(1) of the Employee Retirement Income 
        Security Act of 1974.

              Subtitle B--Primary Care Provider Education

                                                    Title V, Subtitle B

SEC. 5101. AREA HEALTH EDUCATION CENTERS.

    Section 746(i)(1)(A) of the Public Health Service Act (42 U.S.C. 
293j(i)(1)(A)) is amended by striking ``through 1995'' and inserting 
``through 1994 and $30,000,000 for each of the fiscal years 1995 
through 1999''.

SEC. 5102. PUBLIC HEALTH AND PREVENTIVE MEDICINE.

    Section 765(a) of the Public Health Service Act (42 U.S.C. 294c(a)) 
is amended by striking ``through 1995'' and inserting ``through 1999''.

SEC. 5103. FAMILY MEDICINE.

    Section 747(d)(1) of the Public Health Service Act (42 U.S.C. 
293k(d)(1)) is amended by striking ``through 1995'' and inserting 
``through 1999''.

SEC. 5104. GENERAL INTERNAL MEDICINE AND PEDIATRICS.

    Section 748(c) of the Public Health Service Act (42 U.S.C. 293l(c)) 
is amended by striking ``through 1995'' and inserting ``through 1999''.

SEC. 5105. PHYSICIAN ASSISTANTS.

    Section 750(d)(1) of the Public Health Service Act (42 U.S.C. 
293n(d)(1)) is amended by striking ``through 1995'' and inserting 
``through 1999''.

SEC. 5106. ALLIED HEALTH PROJECT GRANTS AND CONTRACTS.

    Section 767(d) of the Public Health Service Act (42 U.S.C. 294e(d)) 
is amended by striking ``through 1995'' and inserting ``through 1999''.

SEC. 5107. NURSE PRACTITIONER AND NURSE MIDWIFE PROGRAMS.

    Section 822(d) of the Public Health Service Act (42 U.S.C. 296m(d)) 
is amended by striking ``and 1994'' and inserting ``through 1999''.

            TITLE VI--MARKET INCENTIVES TO CONTAINING COSTS

                       table of contents of title

   Subtitle A--Facilitating Establishment of Health Plan Purchasing 
                          Organization (HPPOs)

                                                               Title VI

              Part 1--Health Plan Purchasing Organizations

Sec. 6001. Establishment and organization.
Sec. 6002. Agreements to offer qualified health coverage.
Sec. 6003. Provision of information.
Sec. 6004. Enrolling eligible employees and qualifying individuals for 
                            qualified health coverage through a 
                            purchasing organization.
Sec. 6005. Restriction on charges.
Sec. 6006. State report on establishment of purchasing organizations.
Part 2--Encouragement of Multiple Employer Arrangements Providing Basic 
                            Health Benefits

Sec. 6011. Eliminating commonality of interest or geographic location 
                            requirement for tax exempt trust status.
               Part 3--Tax Exemption for High Risk Pools

Sec. 6021. Tax exemption for high risk insurance pools.
Subtitle B--Preemption of State Benefit Mandates and Anti-Managed Care 
                                  Laws

Sec. 6101. Preemption from State benefit mandates.
Sec. 6102. Preemption of State law restrictions on managed care 
                            arrangements.
Sec. 6103. Preemption of State laws restricting utilization review 
                            programs.
Sec. 6104. Prohibition of provisions prohibiting employer groups from 
                            purchasing health insurance.
Sec. 6105. Preemption relating to different insurance standards.
Sec. 6106. GAO study on managed care.
                     Subtitle C--Malpractice Reform

            Part 1--Uniform Standards for Malpractice Claims

Sec. 6201. Applicability.
Sec. 6202. Requirement for initial resolution of action through 
                            alternative dispute resolution.
Sec. 6203. Optional application of practice guidelines.
Sec. 6204. Treatment of noneconomic and punitive damages.
Sec. 6205. Periodic payments for future losses.
Sec. 6206. Treatment of attorney's fees and other costs.
Sec. 6207. Uniform statute of limitations.
Sec. 6208. Special provision for certain obstetric services.
Sec. 6209. Jurisdiction of Federal courts.
Sec. 6210. Preemption.
 Part 2--Requirements for State Alternative Dispute Resolution Systems 
                                 (ADR)

Sec. 6221. Basic requirements.
Sec. 6222. Certification of State systems; applicability of alternative 
                            Federal system.
Sec. 6223. Reports on implementation and effectiveness of alternative 
                            dispute resolution systems.
                          Part 3--Definitions

Sec. 6231. Definitions.
               Subtitle D--Administrative Simplification

Sec. 6300. Purpose.
Sec. 6301. Definitions.
          Part 1--Standards for Data Elements and Transactions

Sec. 6311. General requirements on Secretary.
Sec. 6312. Standards for data elements of health information.
Sec. 6313. Information transaction standards.
Sec. 6314. Timetables for adoption of standards.
     Part 2--Requirements With Respect to Certain Transactions and 
                              Information

Sec. 6321. Standard transactions and information.
Sec. 6322. Accessing health information for authorized purposes.
Sec. 6323. Ensuring availability of information.
Sec. 6324. Timetables for compliance with requirements.
                    Part 3--Miscellaneous Provisions

Sec. 6331. Standards and certification for health information network 
                            services.
Sec. 6332. Imposition of additional requirements.
Sec. 6333. Effect on State law.
Sec. 6334. Grants for demonstration projects.
                  Part 4--Assistance to the Secretary

Sec. 6341. General requirement on Secretary.
Sec. 6342. Health Information Advisory Committee.
             Subtitle E--Fair Health Information Practices

Sec. 6400. Definitions.
             Part 1--Duties of Health Information Trustees

Sec. 6401. Inspection of protected health information.
Sec. 6402. Amendment of protected health information.
Sec. 6403. Notice of information practices.
Sec. 6404. Accounting for disclosures.
Sec. 6405. Security.
       Part 2--Use and Disclosure of Protected Health Information

Sec. 6411. General limitations on use and disclosure.
Sec. 6412. Authorizations for disclosure of protected health 
                            information.
Sec. 6413. Treatment, payment, and oversight.
Sec. 6414. Next of kin and directory information.
Sec. 6415. Public health.
Sec. 6416. Health research.
Sec. 6417. Emergency circumstances.
Sec. 6418. Judicial and administrative purposes.
Sec. 6419. Law enforcement.
Sec. 6420. Subpoenas, warrants, and search warrants.
Sec. 6421. Health information service organizations.
             Part 3--Access Procedures and Challenge Rights

Sec. 6431. Access procedures for law enforcement subpoenas, warrants, 
                            and search warrants.
Sec. 6432. Challenge procedures for law enforcement subpoenas.
Sec. 6433. Access and challenge procedures for other subpoenas.
Sec. 6434. Construction of part; suspension of statute of limitations.
Sec. 6435. Responsibilities of Secretary.
                    Part 4--Miscellaneous Provisions

Sec. 6441. Payment card and electronic payment transactions.
Sec. 6442. Access to protected health information outside of the United 
                            States.
Sec. 6443. Standards for electronic documents and communications.
Sec. 6444. Duties and authorities of affiliated persons.
Sec. 6445. Agents and attorneys.
Sec. 6446. Minors.
Sec. 6447. Maintenance of certain protected health information.
                          Part 5--Enforcement

Sec. 6451. Civil actions.
Sec. 6452. Civil money penalties.
Sec. 6453. Alternative dispute resolution.
Sec. 6454. Amendments to criminal law.
           Part 6--Amendments to Title 5, United States Code

Sec. 6461. Amendments to title 5, United States Code.
    Part 7--Regulations, Research, and Education; Effective Dates; 
             Applicability; and Relationship to Other Laws

Sec. 6471. Regulations; research and education.
Sec. 6472. Effective dates.
Sec. 6473. Applicability.
Sec. 6474. Relationship to other laws.
                         Subtitle F--Antitrust

Sec. 6501. Publication of antitrust guidelines on activities of health 
                            plans.
Sec. 6502. Issuance of health care certificates of public advantage.
Sec. 6503. Study of impact on competition.
                      Subtitle G--Fraud and Abuse

Part 1--Establishment of All-payer Health Care Fraud and Abuse Control 
                                Program

Sec. 6601. All-payer health care fraud and abuse control program.
Sec. 6602. Authorization of additional appropriations for investigators 
                            and other personnel.
Sec. 6603. Establishment of anti-fraud and abuse trust fund.
       Part 2--Revisions to Current Sanctions for Fraud and Abuse

Sec. 6611. Mandatory exclusion from participation in medicare and State 
                            health care programs.
Sec. 6612. Establishment of minimum period of exclusion for certain 
                            individuals and entities subject to 
                            permissive exclusion from medicare and 
                            State health care programs.
Sec. 6613. Revisions to criminal penalties.
Sec. 6615. Revisions to limitations on physician self-referral.
Sec. 6616. Medicare health maintenance organizations.
Sec. 6617. Effective date.
                   Part 3--Amendments to Criminal Law

Sec. 6621. Penalties for health care fraud.
Sec. 6622. Rewards for information leading to prosecution and 
                            conviction.
Sec. 6623. Broadening application of mail fraud statute.
                       Part 4--Advisory Opinions

Sec. 6631. Authorizing the Secretary of Health and Human Services to 
                            issue advisory opinions under title XI.
Sec. 6632. Authorizing the Secretary of Health and Human Services to 
                            issue advisory opinions relating to 
                            physician ownership and referral.
Sec. 6633. Effective date.
       Part 5--Payments for State Health Care Fraud Control Units

Sec. 6641. Establishment of State fraud units.
Sec. 6642. Requirements for State fraud units.
Sec. 6643. Scope and purpose.
Sec. 6644. Payments to States.
              Subtitle H--Billing for Laboratory Services

Sec. 6701. Easing restrictions on billing for laboratory and other 
                            services.
                 ``TITLE XXVII--RESTRICTIONS ON BILLING

        ``Sec. 2701. Prohibition.
        ``Sec. 2702. Exceptions.
        ``Sec. 2703. Sanctions.
        ``Sec. 2704. Regulations.
        ``Sec. 2705. Definitions.
Sec. 6702. Effective date.

   Subtitle A--Facilitating Establishment of Health Plan Purchasing 
                          Organization (HPPOs)

              PART 1--HEALTH PLAN PURCHASING ORGANIZATIONS

                                                   Title VI, Subtitle A

SEC. 6001. ESTABLISHMENT AND ORGANIZATION.

    (a) In General.--Health plan purchasing organizations (each in this 
part referred to as a ``purchasing organization'') may be established 
in accordance with this part. Each purchasing organization shall be 
chartered under State law and operated as a not-for-profit corporation. 
A carrier may not form, underwrite, or possess a majority vote of a 
purchasing organization, but may administer such an organization.
    (b) Board of Directors.--
            (1) In general.--Each purchasing organization shall be 
        governed by a Board of Directors. Such Board shall initially be 
        appointed under procedures established by the State in which it 
        operates. Subsequently, the Board shall be elected by the 
        members of the organization in accordance with paragraph (3). 
        Such Board shall be composed of individuals who are small 
        employers (or representatives of small employers), eligible 
        employees of small employers (or representatives of such 
        employees), and qualifying individuals in the area in which the 
        organization operates.
            (2) Membership.--A purchasing organization shall accept all 
        small employers and eligible employees and other individuals 
        who are in the individual/small employer market within the area 
        served by the organization as members if such employers, 
        employees, or individuals request such membership.
            (3) Voting.--Members of a purchasing organization shall 
        have voting rights consistent with the rules established under 
        the bylaws governing the organization.
    (c) Duties of Purchasing Organizations.--
            (1) In general.--Subject to paragraph (2), each purchasing 
        organization shall--
                    (A) market health insurance coverage in the 
                individual/small group market throughout the entire 
                area served by the organization;
                    (B) enter into agreements under section 6002 with 
                carriers offering qualified health coverage under this 
                subtitle;
                    (C) enter into agreements with small employers 
                under section 6003;
                    (D) enroll individuals with carriers offering 
                qualified health coverage, only in accordance with 
                section 6004;
                    (E) disseminate quality information under section 
                4002; and
                    (F) carry out other functions provided for under 
                this part.
            (2) Limitation on activities.--A purchasing organization 
        shall not--
                    (A) perform any activity (including review, 
                approval, or enforcement) relating to payment rates for 
                providers;
                    (B) perform any activity (including certification 
                or enforcement) relating to compliance of carriers (and 
                health coverage provided by carriers) with the 
                requirements of subtitle A of title I;
                    (C) assume financial risk in relation to any such 
                carrier; or
                    (D) perform other activities identified by the 
                State as being inconsistent with the performance of its 
                duties under paragraph (1).
            (3) Characteristics of service area.--
                    (A) In general.--A purchasing organization need not 
                serve geographic areas that are contiguous, but the 
                geographic boundaries of such areas shall be consistent 
                with the boundaries established under section 1021 for 
                fair rating areas.
                    (B) Service of entire metropolitan statistical 
                area.--If a purchasing organization serves a part of a 
                metropolitan statistical area the organization shall 
                serve the entire area.
    (d) Establishment Not Required.--Nothing in this section shall be 
construed as requiring--
            (1) that a purchasing organization be established in each 
        area of a State in which it operates; and
            (2) that there be only one purchasing organization 
        established with respect to any area.

SEC. 6002. AGREEMENTS TO OFFER QUALIFIED HEALTH COVERAGE.

    (a) Agreements.--
            (1) In general.--Except as provided in paragraph (3), each 
        purchasing organization for an area shall enter into an 
        agreement under this section with each carrier that desires to 
        make available qualified health coverage through the purchasing 
        organization (consistent with any procedures established by the 
        State).
            (2) Termination of agreement.--An agreement under paragraph 
        (1) shall remain in effect for a 12-month period, except that 
        the purchasing organization may terminate an agreement under 
        paragraph (1) if the carrier's license or certification under 
        State law is terminated or for other good cause shown.
            (3) Limitation on renewal of agreements.--Subsequent to the 
        12-month period described in paragraph (2), a purchasing 
        organization may--
                    (A) refuse to enter into a subsequent agreement 
                with a carrier if the organization determines that the 
                number of enrollees or the premium for coverage is too 
                low, and
                    (B) if a previous agreement with a carrier was 
                terminated for good cause and the organization 
                determines appropriate actions have not been taken to 
                correct the problems, refuse to enter into a subsequent 
                agreement with the carrier.
    (b) Receipt of Premiums on Behalf of Carriers.--
            (1) In general.--Under an agreement under this section 
        between a purchasing organization and a carrier--
                    (A) premiums shall be payable, and
                    (B) payment of premiums may be made by individuals 
                (or employers on their behalf) directly to the 
                purchasing organization for the benefit of the carrier.
            (2) Timing of payment of premiums.--Premiums may be payable 
        on a monthly basis (or, at the option of an eligible employee 
        or individual, on a quarterly basis). The purchasing 
        organization may provide for reasonable penalties and grace 
        periods for late payment.
            (3) Carriers retain risk of nonpayment.--Nothing in this 
        subsection shall be construed as placing upon a purchasing 
        organization any risk associated with the failure of 
        individuals and employers to make prompt payment of premiums 
        (other than the portion of the premium representing the 
        purchasing organization administrative fee under section 6005). 
        Each small employer and qualifying individual who enrolls with 
        a carrier providing qualified health coverage through the 
        purchasing organization is liable to the carrier for premiums.
    (c) Forwarding of Premiums.--
            (1) In general.--If, under an agreement under subsection 
        (a), premium payments for qualified health coverage are made to 
        the purchasing organization, the purchasing organization shall 
        forward to the carrier the amount of the premiums.
            (2) Payments.--Payments shall be made by the purchasing 
        organization under this subsection within a period of days 
        (specified by the Secretary and not to exceed 7 days) after 
        receipt of the premium from the small employer of the eligible 
        employee or the qualifying individual, as the case may be.
    (d) Payment of Commissions.--
            (1) In general.--Subject to paragraph (2), nothing in this 
        part shall be construed to preclude a carrier from paying a 
        commission or other remuneration in connection with the 
        purchase of health care coverage by individuals or groups, 
        consistent with State law.
            (2) Limitation on variation.--A carrier may not vary such 
        compensation or remuneration based, directly or indirectly, on 
        the anticipated or actual claims experience associated with the 
        group or individuals purchasing health care coverage.

SEC. 6003. PROVISION OF INFORMATION.

    (a) In General.--Each purchasing organization for an area shall 
make available to small employers that employ individuals in the area 
and to qualifying individuals who reside in the area--
            (1) information provided to the purchasing organization by 
        the State or carriers, and
            (2) the opportunity to enter into an agreement with the 
        organization for the purchase of qualified health coverage.
    (b) Forwarding Information and Payroll Deductions.--As part of an 
agreement entered into under this section, a small employer shall 
forward the information and make the payroll deductions required under 
section 1201(a).

SEC. 6004. ENROLLING ELIGIBLE EMPLOYEES AND QUALIFYING INDIVIDUALS FOR 
              QUALIFIED HEALTH COVERAGE THROUGH A PURCHASING 
              ORGANIZATION.

    A purchasing organization shall offer, on behalf of each carrier 
with which an agreement was entered into under section 6002 and in 
accordance with the enrollment procedures of such carriers and the 
enrollment periods provided under 1005, enrollment for the coverage 
only to individuals in the individual/small group market in the area 
served by the purchasing organization. Each purchasing organization 
shall coordinate annual open enrollment periods (described in section 
1005(c)) of all carriers through which coverage is offered by the 
organization so that there is one common annual open enrollment period 
for all such carriers with respect to each individual enrolled for 
coverage through the organization. Nothing in this section shall 
preclude a purchasing organization from having different common annual 
open enrollment periods for different individuals.

SEC. 6005. RESTRICTION ON CHARGES.

    (a) In General.--A purchasing organization may impose an 
administrative fee with respect to an eligible employee or qualifying 
individual enrolled for qualified health coverage offered through the 
purchasing organization.
    (b) Fee.--A purchasing organization that elects to impose a fee 
under subsection (a) shall ensure that such fee is set as a percentage 
of the premium for each such coverage option, is imposed uniformly with 
respect to all coverage options offered through the organization, and 
is disclosed explicitly as an addition to the premium.

SEC. 6006. STATE REPORT ON ESTABLISHMENT OF PURCHASING ORGANIZATIONS.

    (a) In General.--Not later than January 1, 2000, each State shall 
conduct a review of access of residents of the State who are not 
employees of large employers or medicare beneficiaries to obtaining 
standard health insurance coverage through a purchasing organization.
    (b) Response.--If the State determines, based on such review, that 
such residents are unable to obtain such coverage through such an 
organization, the State shall take such actions as the State determines 
appropriate to ensure public or private entities provide access to such 
an organization by such residents.

PART 2--ENCOURAGEMENT OF MULTIPLE EMPLOYER ARRANGEMENTS PROVIDING BASIC 
                            HEALTH BENEFITS

SEC. 6011. ELIMINATING COMMONALITY OF INTEREST OR GEOGRAPHIC LOCATION 
              REQUIREMENT FOR TAX EXEMPT TRUST STATUS.

    (a) In General.--Paragraph (9) of section 501(c) of the Internal 
Revenue Code of 1986 (relating to exempt organizations) is amended--
            (1) by inserting ``(A)'' after ``(9)''; and
            (2) by adding at the end the following:
            ``(B) Any determination of whether a certified multiple 
        employer health plan (as defined in section 701(9) of the 
        Employee Retirement Income Security Act of 1974), a multiple 
        employer welfare arrangement which is fully insured, or a plan 
        described in clause (ii) or (iii) of section 3(40)(A) of such 
        Act is a voluntary employees' beneficiary association meeting 
        the requirements of this paragraph shall be made without regard 
        to any determination of commonality of interest or geographic 
        location.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to determinations made on or after the date of the 
enactment of this Act.

               PART 3--TAX EXEMPTION FOR HIGH RISK POOLS

SEC. 6021. TAX EXEMPTION FOR HIGH RISK INSURANCE POOLS.

    (a) In General.--Subsection (c) of section 501 of the Internal 
Revenue Code of 1986 (relating to list of exempt organizations) is 
amended by adding at the end the following new paragraph:
            ``(27) In the case of taxable years beginning before 
        January 1, 1997, any corporation, association, or similar legal 
        entity which is created by any State or political subdivision 
        thereof to establish a risk pool to provide health insurance 
        coverage to any person unable to obtain health insurance 
        coverage in the private insurance market because of health 
        conditions and no part of the net earnings of which inures to 
        the benefit of any private shareholder, member, or 
        individual.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1989.

Subtitle B--Preemption of State Benefit Mandates and Anti-Managed Care 
                                  Laws

SEC. 6101. PREEMPTION FROM STATE BENEFIT MANDATES.

                                                   Title VI, Subtitle B

    Effective as of January 1, 1997, no State shall establish or 
enforce any law or regulation that--
            (1) requires the offering, as part of health insurance 
        coverage, of any services, category of care, or services of any 
        class or type of provider, except as provided in section 1013; 
        or
            (2) specifies the individuals to be provided health 
        insurance coverage or the duration of such coverage.

SEC. 6102. PREEMPTION OF STATE LAW RESTRICTIONS ON MANAGED CARE 
              ARRANGEMENTS.

    (a) Limitation on Restrictions on Network Plans.--Effective as of 
January 1, 1997--
            (1) a State may not prohibit or limit a carrier or group 
        health plan providing health coverage from including incentives 
        for enrollees to use the services of participating providers;
            (2) a State may not prohibit or limit such a carrier or 
        plan from limiting coverage of services to those provided by a 
        participating provider, except as provided in section 1013;
            (3) a State may not prohibit or limit the negotiation of 
        rates and forms of payments for providers by such a carrier or 
        plan with respect to health coverage;
            (4) a State may not prohibit or limit such a carrier or 
        plan from limiting the number of participating providers;
            (5) a State may not prohibit or limit such a carrier or 
        plan from requiring that services be provided (or authorized) 
        by a practitioner selected by the enrollee from a list of 
        available participating providers or, except as provided in 
        section 1011(e), from requiring enrollees to obtain referral in 
        order to have coverage for treatment by a specialist or health 
        institution; and
            (6) a State may not prohibit or limit the corporate 
        practice of medicine.
    (b) Definitions.--In this section:
            (1) Managed care coverage.--The term ``managed care 
        coverage'' means health coverage to the extent the coverage is 
        provided through a managed care arrangement (as defined in 
        section 1903(11)(A)) that meets the applicable requirements of 
        such section.
            (2) Participating provider.--The term ``participating 
        provider'' means an entity or individual which provides, sells, 
        or leases health care services as part of a provider network 
        (as defined in section 1903(11)(B)).
    (c) Reference to Standards for Managed Care Arrangements.--For 
requirements relating to managed care arrangements, see section 1011.

SEC. 6103. PREEMPTION OF STATE LAWS RESTRICTING UTILIZATION REVIEW 
              PROGRAMS.

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

SEC. 6104. PROHIBITION OF PROVISIONS PROHIBITING EMPLOYER GROUPS FROM 
              PURCHASING HEALTH INSURANCE.

    No provision of State or local law shall apply that prohibits 2 or 
more employers from obtaining coverage that is fully insured (within 
the meaning of section 701(8) of the Employee Retirement Income 
Security Act of 1974, as added by section 1401(a) of this Act) under a 
multiple employer health plan.

SEC. 6105. PREEMPTION RELATING TO DIFFERENT INSURANCE STANDARDS.

    A State may not establish or enforce standards for health insurance 
coverage made available in the individual and small group markets that 
are different from the standards established under title I.

SEC. 6106. GAO STUDY ON MANAGED CARE.

    (a) In General.--The Comptroller General shall conduct a study of 
the benefits and cost effectiveness of the use of managed care in the 
delivery of health services.
    (b) Report.--By not later than 4 years after the date of the 
enactment of this Act, the Comptroller General shall submit a report to 
Congress on the study conducted under subsection (a) and shall include 
in the report such recommendations as may be appropriate.

                     Subtitle C--Malpractice Reform

            PART 1--UNIFORM STANDARDS FOR MALPRACTICE CLAIMS

                                                   Title VI, Subtitle C

SEC. 6201. APPLICABILITY.

    Except as provided in section 6221, this part shall apply to any 
medical malpractice liability action brought in a Federal or State 
court, and to any medical malpractice claim subject to an alternative 
dispute resolution system, that is initiated on or after January 1, 
1996.

SEC. 6202. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION THROUGH 
              ALTERNATIVE DISPUTE RESOLUTION.

    (a) In General.--
            (1) State cases.--A medical malpractice liability action 
        may not be brought in any State court during a calendar year 
        unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under an 
        alternative dispute resolution system certified for the year by 
        the Secretary under section 6212(a), or, in the case of a State 
        in which such a system is not in effect for the year, under the 
        alternative Federal system established under section 6222(b).
            (2) Federal diversity actions.--A medical malpractice 
        liability action may not be brought in any Federal court under 
        section 1332 of title 28, United States Code, during a calendar 
        year unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under the 
        alternative dispute resolution system referred to in paragraph 
        (1) that applied in the State whose law applies in such action.
            (3) Claims against united states.--
                    (A) Establishment of process for claims.--The 
                Attorney General shall establish an alternative dispute 
                resolution process for the resolution of tort claims 
                consisting of medical malpractice liability claims 
                brought against the United States under chapter 171 of 
                title 28, United States Code. Under such process, the 
                resolution of a claim shall occur after the completion 
                of the administrative claim process applicable to the 
                claim under section 2675 of such title.
                    (B) Requirement for initial resolution under 
                process.--A medical malpractice liability action based 
                on a medical malpractice liability claim described in 
                subparagraph (A) may not be brought in any Federal 
                court unless the claim has been initially resolved 
                under the alternative dispute resolution process 
                established by the Attorney General under such 
                subparagraph.
    (b) Initial Resolution of Claims Under ADR.--For purposes of 
subsection (a), an action is ``initially resolved'' under an 
alternative dispute resolution system if--
            (1) the ADR reaches a decision on whether the defendant is 
        liable to the plaintiff for damages; and
            (2) if the ADR determines that the defendant is liable, the 
        ADR reaches a decision on the amount of damages assessed 
        against the defendant.
    (c) Procedures for Filing Actions.--
            (1) Notice of intent to contest decision.--Not later than 
        60 days after a decision is issued with respect to a medical 
        malpractice liability claim under an alternative dispute 
        resolution system, each party affected by the decision shall 
        submit a sealed statement to a court of competent jurisdiction 
        indicating whether or not the party intends to contest the 
        decision.
            (2) Deadline for filing action.--A medical malpractice 
        liability action may not be brought by a party unless--
                    (A) the party has filed the notice of intent 
                required by paragraph (1); and
                    (B) the party files the action in a court of 
                competent jurisdiction not later than 90 days after the 
                decision resolving the medical malpractice liability 
                claim that is the subject of the action is issued under 
                the applicable alternative dispute resolution system.
            (3) Court of competent jurisdiction.--For purposes of this 
        subsection, the term ``court of competent jurisdiction'' 
        means--
                    (A) with respect to actions filed in a State court, 
                the appropriate State trial court; and
                    (B) with respect to actions filed in a Federal 
                court, the appropriate United States district court.
    (d) Legal Effect of Uncontested ADR Decision.--The decision reached 
under an alternative dispute resolution system shall, for purposes of 
enforcement by a court of competent jurisdiction, have the same status 
in the court as the verdict of a medical malpractice liability action 
adjudicated in a State or Federal trial court. The previous sentence 
shall not apply to a decision that is contested by a party affected by 
the decision pursuant to subsection (c)(1).

SEC. 6203. OPTIONAL APPLICATION OF PRACTICE GUIDELINES.

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

SEC. 6204. TREATMENT OF NONECONOMIC AND PUNITIVE DAMAGES.

    (a) Limitation on Noneconomic Damages.--The total amount of 
noneconomic damages that may be awarded to a claimant and the members 
of the claimant's family for losses resulting from the injury which is 
the subject of a medical malpractice liability action may not exceed 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of actions brought with respect to the injury.
    (b) No Award of Punitive Damages Against Manufacturer of Medical 
Product.--In the case of a medical malpractice liability action in 
which the plaintiff alleges a claim against the manufacturer of a 
medical product, no punitive or exemplary damages may be awarded 
against such manufacturer.
    (c) Joint and Several Liability for Noneconomic Damages.--The 
liability of each defendant for noneconomic damages shall be several 
only and shall not be joint, and each defendant shall be liable only 
for the amount of noneconomic damages allocated to the defendant in 
direct proportion to the defendant's percentage of responsibility (as 
determined by the trier of fact).
    (d) Use of Punitive Damage Awards for Operation of ADR Systems in 
States.--
            (1) In general.--The total amount of any punitive damages 
        awarded in a medical malpractice liability action shall be paid 
        to the State in which the action is brought (or, in a case 
        brought in Federal court, in the State in which the health care 
        services that caused the injury that is the subject of the 
        action were provided), and shall be used by the State solely to 
        implement and operate the State alternative dispute resolution 
        system certified by the Secretary under section 6222 (except as 
        provided in paragraph (2)).
            (2) Use of remaining amounts for provider licensing and 
        disciplinary activities.--If the amount of punitive damages 
        paid to a State under paragraph (1) for a year is greater than 
        the State's costs of implementing and operating the State 
        alternative dispute resolution system during the year, the 
        balance of such punitive damages paid to the State shall be 
        used solely to carry out activities to assure the safety and 
        quality of health care services provided in the State, 
        including (but not limited to)--
                    (A) licensing or certifying health care 
                professionals and health care providers in the State; 
                and
                    (B) carrying out programs to reduce malpractice-
                related costs for providers volunteering to provide 
                services in medically underserved areas.
            (3) Maintenance of effort.--A State shall use any amounts 
        paid pursuant to paragraph (1) to supplement and not to replace 
        amounts spent by the State for implementing and operating the 
        State alternative dispute resolution system or carrying out the 
        activities described in paragraph (2).

SEC. 6205. PERIODIC PAYMENTS FOR FUTURE LOSSES.

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

SEC. 6206. TREATMENT OF ATTORNEY'S FEES AND OTHER COSTS.

    (a) Requiring Party Contesting ADR Ruling To Pay Attorney's Fees 
and Other Costs.--
            (1) In general.--The court in a medical malpractice 
        liability action shall require the party that (pursuant to 
        section 6202(c)(1)) contested the ruling of the alternative 
        dispute resolution system with respect to the medical 
        malpractice liability claim that is the subject of the action 
        to pay to the opposing party the costs incurred by the opposing 
        party under the action, including attorney's fees, fees paid to 
        expert witnesses, and other litigation expenses (but not 
        including court costs, filing fees, or other expenses paid 
        directly by the party to the court, or any fees or costs 
        associated with the resolution of the claim under the 
        alternative dispute resolution system), but only if--
                    (A) in the case of an action in which the party 
                that contested the ruling is the claimant, the amount 
                of damages awarded to the party under the action is 
                less than the amount of damages awarded to the party 
                under the ADR system; and
                    (B) in the case of an action in which the party 
                that contested the ruling is the defendant, the amount 
                of damages assessed against the party under the action 
                is greater than the amount of damages assessed under 
                the ADR system.
            (2) Exceptions.--Paragraph (1) shall not apply if--
                    (A) the party contesting the ruling made under the 
                previous alternative dispute resolution system shows 
                that--
                            (i) the ruling was procured by corruption, 
                        fraud, or undue means,
                            (ii) there was partiality or corruption 
                        under the system,
                            (iii) there was other misconduct under the 
                        system that materially prejudiced the party's 
                        rights, or
                            (iv) the ruling was based on an error of 
                        law;
                    (B) the party contesting the ruling made under the 
                alternative dispute resolution system presents new 
                evidence before the trier of fact that was not 
                available for presentation under the ADR system;
                    (C) the medical malpractice liability action raised 
                a novel issue of law; or
                    (D) the court finds that the application of such 
                paragraph to a party would constitute an undue 
                hardship, and issues an order waiving or modifying the 
                application of such paragraph that specifies the 
                grounds for the court's decision.
            (3) Limit on attorneys' fees paid.--Attorneys' fees that 
        are required to be paid under paragraph (1) by the contesting 
        party shall not exceed the amount of the attorneys' fees 
        incurred by the contesting party in the action. If the 
        attorneys' fees of the contesting party are based on a 
        contingency fee agreement, the amount of attorneys' fees for 
        purposes of the preceding sentence shall not exceed the 
        reasonable value of those services.
            (4) Records.--In order to receive attorneys' fees under 
        paragraph (1), counsel of record in the medical malpractice 
        liability action involved shall maintain accurate, complete 
        records of hours worked on the action, regardless of the fee 
        arrangement with the client involved.
    (b) Contingency Fee Defined.--As used in this section, the term 
``contingency fee'' means any fee for professional legal services which 
is, in whole or in part, contingent upon the recovery of any amount of 
damages, whether through judgment or settlement.

SEC. 6207. UNIFORM STATUTE OF LIMITATIONS.

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

SEC. 6208. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

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

SEC. 6209. JURISDICTION OF FEDERAL COURTS.

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

SEC. 6210. PREEMPTION.

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

 PART 2--REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION SYSTEMS 
                                 (ADR)

SEC. 6221. BASIC REQUIREMENTS.

    (a) In General.--A State's alternative dispute resolution system 
meets the requirements of this section if the system--
            (1) applies to all medical malpractice liability claims 
        under the jurisdiction of the courts of that State;
            (2) requires that a written opinion resolving the dispute 
        be issued not later than 6 months after the date by which each 
        party against whom the claim is filed has received notice of 
        the claim (other than in exceptional cases for which a longer 
        period is required for the issuance of such an opinion), and 
        that the opinion contain--
                    (A) findings of fact relating to the dispute, and
                    (B) a description of the costs incurred in 
                resolving the dispute under the system (including any 
                fees paid to the individuals hearing and resolving the 
                claim), together with an appropriate assessment of the 
                costs against any of the parties;
            (3) requires individuals who hear and resolve claims under 
        the system to meet such qualifications as the State may require 
        (in accordance with regulations of the Secretary);
            (4) is approved by the State or by local governments in the 
        State;
            (5) with respect to a State system that consists of 
        multiple dispute resolution procedures--
                    (A) permits the parties to a dispute to select the 
                procedure to be used for the resolution of the dispute 
                under the system, and
                    (B) if the parties do not agree on the procedure to 
                be used for the resolution of the dispute, assigns a 
                particular procedure to the parties;
            (6) provides for the transmittal to the State agency 
        responsible for monitoring or disciplining health care 
        professionals and health care providers of any findings made 
        under the system that such a professional or provider committed 
        malpractice, unless, during the 90-day period beginning on the 
        date the system resolves the claim against the professional or 
        provider, the professional or provider brings an action 
        contesting the decision made under the system; and
            (7) provides for the regular transmittal to the 
        Administrator for Health Care Policy and Research of 
        information on disputes resolved under the system, in a manner 
        that assures that the identity of the parties to a dispute 
        shall not be revealed.
    (b) Application of Malpractice Liability Standards to Alternative 
Dispute Resolution.--The provisions of part 1 (other than section 6202) 
shall apply with respect to claims brought under a State alternative 
dispute resolution system or the alternative Federal system in the same 
manner as such provisions apply with respect to medical malpractice 
liability actions brought in the State.

SEC. 6222. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF ALTERNATIVE 
              FEDERAL SYSTEM.

    (a) Certification.--
            (1) In general.--Not later than October 1 of each year 
        (beginning with 1995), the Secretary, in consultation with the 
        Attorney General, shall determine whether a State's alternative 
        dispute resolution system meets the requirements of this part 
        for the following calendar year.
            (2) Basis for certification.--The Secretary shall certify a 
        State's alternative dispute resolution system under this 
        subsection for a calendar year if the Secretary determines 
        under paragraph (1) that the system meets the requirements of 
        section 6221, including the requirement described in section 
        6204 that punitive damages awarded under the system are paid to 
        the State for the uses described in such section.
    (b) Applicability of Alternative Federal System.--
            (1) Establishment and applicability.--Not later than 
        October 1, 1995, the Secretary, in consultation with the 
        Attorney General, shall establish by rule an alternative 
        Federal ADR system for the resolution of medical malpractice 
        liability claims during a calendar year in States that do not 
        have in effect an alternative dispute resolution system 
        certified under subsection (a) for the year.
            (2) Requirements for system.--Under the alternative Federal 
        ADR system established under paragraph (1)--
                    (A) paragraphs (1), (2), (6), and (7) of section 
                6221(a) shall apply to claims brought under the system;
                    (B) if the system provides for the resolution of 
                claims through arbitration, the claims brought under 
                the system shall be heard and resolved by arbitrators 
                appointed by the Secretary in consultation with the 
                Attorney General; and
                    (C) with respect to a State in which the system is 
                in effect, the Secretary may (at the State's request) 
                modify the system to take into account the existence of 
                dispute resolution procedures in the State that affect 
                the resolution of medical malpractice liability claims.
            (3) Treatment of States with alternative system in 
        effect.--If the alternative Federal ADR system established 
        under this subsection is applied with respect to a State for a 
        calendar year, the State shall make a payment to the United 
        States (at such time and in such manner as the Secretary may 
        require) in an amount equal to 110 percent of the costs 
        incurred by the United States during the year as a result of 
        the application of the system with respect to the State.

SEC. 6223. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF ALTERNATIVE 
              DISPUTE RESOLUTION SYSTEMS.

    (a) In General.--Not later than 5 years after the date of the 
enactment of this Act, the Secretary shall prepare and submit to the 
Congress a report describing and evaluating State alternative dispute 
resolution systems operated pursuant to this part and the alternative 
Federal system established under section 6222(b).
    (b) Contents of Report.--The Secretary shall include in the report 
prepared and submitted under subsection (a)--
            (1) information on--
                    (A) the effect of the alternative dispute 
                resolution systems on the cost of health care within 
                each State,
                    (B) the impact of such systems on the access of 
                individuals to health care within the State, and
                    (C) the effect of such systems on the quality of 
                health care provided within the State; and
            (2) to the extent that such report does not provide 
        information on no-fault systems operated by States as 
        alternative dispute resolution systems pursuant to this part, 
        an analysis of the feasibility and desirability of establishing 
        a system under which medical malpractice liability claims shall 
        be resolved on a no-fault basis.

                          PART 3--DEFINITIONS

SEC. 6231. DEFINITIONS.

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

               Subtitle D--Administrative Simplification

                                                   Title VI, Subtitle D

SEC. 6300. PURPOSE.

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

SEC. 6301. DEFINITIONS.

    For purposes of this subtitle:
            (1) Code set.--The term ``code set'' means any set of codes 
        used for encoding data elements, such as tables of terms, 
        medical concepts, medical diagnostic codes, or medical 
        procedure codes.
            (2) Coordination of benefits.--The term ``coordination of 
        benefits'' means determining and coordinating the financial 
        obligations of plan sponsors when health care benefits are 
        payable by more than one such sponsor.
            (3) Health information.--The term ``health information'' 
        means any information that relates to the past, present, or 
        future physical or mental health or condition or functional 
        status of an individual, the provision of health care to an 
        individual, or payment for the provision of health care to an 
        individual.
            (4) Health information network.--The term ``health 
        information network'' means the health information system that 
        is formed through the application of the requirements and 
        standards established under this subtitle.
            (5) Health information network service.--The term ``health 
        information network service''--
                    (A) means a private entity or an entity operated by 
                a State that enters into contracts--
                            (i) to process or facilitate the processing 
                        of nonstandard data elements of health 
                        information into standard data elements;
                            (ii) to provide the means by which persons 
                        are connected to the health information network 
                        for purposes of meeting the requirements of 
                        this subtitle, including the holding of 
                        standard data elements of health information;
                            (iii) to provide authorized access to 
                        health information through the health 
                        information network; or
                            (iv) to provide specific information 
                        processing services, such as automated 
                        coordination of benefits and claims transaction 
                        routing; and
                    (B) includes a health information security 
                organization.
            (6) Health information security organization.--The term 
        ``health information security organization'' means a private 
        entity or an entity operated by a State that accesses standard 
        data elements of health information through the health 
        information network, processes such information into non-
        identifiable health information, and may store such 
        information.
            (7) Health provider.--The term ``health provider'' includes 
        a provider of services (as defined in section 1861(u) of the 
        Social Security Act), a provider of medical or other health 
        services (as defined in section 1861(s) of such Act), and any 
        other person (other than a plan sponsor) furnishing health care 
        items or services.
            (8) Non-identifiable health information.--The term ``non-
        identifiable health information'' means health information that 
        is not protected health information (as defined in subtitle E).
            (9) Plan sponsor.--The term ``plan sponsor'' means--
                    (A) a carrier (as defined in section 1903(2)) 
                providing health insurance coverage (as defined in 
                section 1903(7));
                    (B) a group health plan;
                    (C) an association or other entity which 
                establishes or maintains a multiple employer welfare 
                arrangement (as defined in section 1903(12)) providing 
                benefits consisting of medical care described in 
                section 607(1) of the Employee Retirement Income 
                Security Act of 1974; and
                    (D) a State, or the Federal Government, acting in a 
                capacity as a provider of health benefits to eligible 
                individuals that is equivalent to that of a carrier.
            (10) Standard.--The term ``standard'', when used with 
        reference to a transaction or to data elements of health 
        information, means that the transaction or data elements meet 
        any standard adopted by the Secretary under part 1 that applies 
        to the transaction or data elements.

          PART 1--STANDARDS FOR DATA ELEMENTS AND TRANSACTIONS

SEC. 6311. GENERAL REQUIREMENTS ON SECRETARY.

    (a) In General.--The Secretary shall adopt standards and 
modifications to standards under this part that are--
            (1) consistent with the objective of reducing the costs of 
        providing and paying for health care; and
            (2) in use and generally accepted, developed, or modified 
        by the standard-setting organizations accredited by the 
        American National Standard Institute.
    (b) Initial Standards.--The Secretary may develop an expedited 
process for the adoption of initial standards under this part.
    (c) Protection of Commercial Information.--In adopting standards 
under this part, the Secretary may not require disclosure of trade 
secrets and confidential commercial information by any person.

SEC. 6312. STANDARDS FOR DATA ELEMENTS OF HEALTH INFORMATION.

    (a) In General.--The Secretary shall adopt standards necessary to 
make uniform and compatible for electronic transmission through the 
health information network the data elements of any health information 
that the Secretary determines is appropriate for transmission in 
connection with a transaction described in section 6321.
    (b) Additions.--The Secretary may make additions to any set of data 
elements adopted under subsection (a) as the Secretary determines 
appropriate in a manner that minimizes the disruption and cost of 
compliance with such additions.
    (c) Certain Data Elements.--
            (1) Unique health identifiers.--The Secretary shall 
        establish a system to provide for a standard unique health 
        identifier for each individual, employer, plan sponsor, and 
        health provider for use in the health care system.
            (2) Code sets.--
                    (A) In general.--The Secretary, in consultation 
                with experts from the private sector and Federal 
                agencies, shall--
                            (i) select code sets for appropriate data 
                        elements from among the code sets that have 
                        been developed by private and public entities; 
                        or
                            (ii) establish code sets for such data 
                        elements if no code sets for the data elements 
                        have been developed.
                    (B) Distribution.--The Secretary shall establish 
                efficient and low-cost procedures for distribution of 
                code sets and modifications to code sets.

SEC. 6313. INFORMATION TRANSACTION STANDARDS.

    (a) In General.--The Secretary shall adopt technical standards that 
are consistent with subtitle E relating to the method by which standard 
data elements of health information may be transmitted electronically, 
including standards with respect to the format in which such data 
elements may be transmitted.
    (b) Special Rule for Coordination of Benefits.--Any standard 
adopted by the Secretary under paragraph (1) that relates to 
coordination of benefits shall provide that a claim for reimbursement 
for health services furnished shall be tested, by an algorithm 
specified by the Secretary, against all records of enrollment and 
eligibility for the individual who received such services that are 
available to the recipient of the claim through the health information 
network to determine any primary and secondary obligors for payment.
    (c) Electronic Signature.--The Secretary, in coordination with the 
Secretary of Commerce, shall promulgate regulations specifying 
procedures for the electronic transmission and authentication of 
signatures, compliance with which shall be deemed to satisfy State and 
Federal statutory requirements for written signatures with respect to 
transactions described in section 6321 and written signatures on health 
records and prescriptions.
    (d) Standards for Claims for Clinical Laboratory Tests.--The 
standards under this section shall provide that claims for clinical 
laboratory tests for which benefits are payable by a plan sponsor shall 
be submitted directly by the person or entity that performed (or 
supervised the performance of) the tests to the sponsor in a manner 
consistent with (and subject to such exceptions as are provided under) 
the requirement for direct submission of such claims under the medicare 
program.

SEC. 6314. TIMETABLES FOR ADOPTION OF STANDARDS.

    (a) Initial Standards for Data Elements.--The Secretary shall adopt 
standards relating to--
            (1) the data elements for the information described in 
        section 6312(a) not later than 9 months after the date of the 
        enactment of this Act (except in the case of standards with 
        respect to data elements for claims attachments, which shall be 
        adopted not later than 24 months after the date of the 
        enactment of this Act); and
            (2) any addition to a set of data elements, in conjunction 
        with making such an addition.
    (b) Initial Standards for Information Transactions.--The Secretary 
shall adopt standards relating to information transactions under 
section 6313 not later than 9 months after the date of the enactment of 
this Act (except in the case of standards for claims attachments, which 
shall be adopted not later than 24 months after the date of the 
enactment of this Act).
    (c) Modifications to Standards.--
            (1) In general.--Except as provided in paragraph (2), the 
        Secretary shall review the standards adopted under this part 
        and shall adopt modified standards as determined appropriate, 
        but not more frequently than once every 6 months. Any 
        modification to standards shall be completed in a manner which 
        minimizes the disruption to, and costs of compliance incurred 
        by, a plan sponsor, health provider, or health plan purchasing 
        organization that is required to comply with part 2.
            (2) Special rules.--
                    (A) Modifications during first 12-month period.--
                Except with respect to additions and modifications to 
                code sets under subparagraph (B), the Secretary may not 
                adopt any modification to a standard adopted under this 
                part during the 12-month period beginning on the date 
                the standard is adopted, unless the Secretary 
                determines that the modification is necessary in order 
                to permit a plan sponsor, a health provider, or a 
                health plan purchasing organization to comply with part 
                2.
                    (B) Additions and modifications to code sets.--
                            (i) In general.--The Secretary shall ensure 
                        that procedures exist for the routine 
                        maintenance, testing, enhancement, and 
                        expansion of code sets.
                            (ii) Additional rules.--If a code set is 
                        modified under this subsection, the modified 
                        code set shall include instructions on how data 
                        elements that were encoded prior to the 
                        modification are to be converted or translated 
                        so as to preserve the value of the data 
                        elements. Any modification to a code set under 
                        this subsection shall be implemented in a 
                        manner that minimizes the disruption to, and 
                        costs of compliance incurred by, a plan 
                        sponsor, health provider, or health plan 
                        purchasing organization that is required to 
                        comply with part 2.
    (d) Evaluation of Standards.--The Secretary may establish a process 
to measure or verify the consistency of standards adopted or modified 
under this part. Such process may include demonstration projects and 
analyses of the cost of implementing such standards and modifications.

     PART 2--REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND 
                              INFORMATION

SEC. 6321. STANDARD TRANSACTIONS AND INFORMATION.

    (a) Transactions by Sponsors.--
            (1) Transactions with providers.--If a plan sponsor 
        conducts any of the transactions described in paragraph (3) 
        with a health provider--
                    (A) the transaction shall be a standard 
                transaction; and
                    (B) the health information transmitted by the 
                sponsor to the provider or by the provider to the 
                sponsor in connection with the transaction shall be in 
                the form of standard data elements.
            (2) Transactions with sponsors.--If a plan sponsor conducts 
        any of the transactions described in paragraph (3) with another 
        plan sponsor--
                    (A) the transaction shall be a standard 
                transaction; and
                    (B) the health information transmitted by either 
                sponsor in connection with the transaction shall be in 
                the form of standard data elements.
            (3) Transactions.--The transactions referred to in 
        paragraphs (1) and (2) are the following:
                    (A) Verification of eligibility for benefits.
                    (B) Coordination of benefits.
                    (C) Claim submission.
                    (D) Claim attachment submission.
                    (E) Claim status notification.
                    (F) Claim status verification.
                    (G) Claim adjudication.
                    (H) Payment and remittance advice.
                    (I) Certification or authorization of a referral to 
                a health provider who is not part of a provider 
                network.
    (b) Transactions by Purchasing Organizations.--
            (1) In general.--If a health plan purchasing organization 
        conducts any of the transactions described in paragraph (2) 
        with a plan sponsor--
                    (A) the transaction shall be a standard 
                transaction; and
                    (B) the health information transmitted by the 
                organization to the sponsor or by the sponsor to the 
                organization in connection with the transaction shall 
                be in the form of standard data elements.
            (2) Transactions.--The transactions referred to in 
        paragraph (1) are the following:
                    (A) Enrollment and disenrollment.
                    (B) Premium payment.
    (c) Use of Health Information Network Services.--A plan sponsor, a 
health provider, or a health plan purchasing organization may comply 
with any provision of this section by entering into an agreement or 
other arrangement with a health information network service certified 
under section 6331 pursuant to which the service undertakes the duties 
applicable to the sponsor, provider, or organization under the 
provision.

SEC. 6322. ACCESSING HEALTH INFORMATION FOR AUTHORIZED PURPOSES.

    (a) Procurement Rule for Government Agencies.--
            (1) In general.--A health information security organization 
        that is certified under section 6331 shall make available to a 
        Federal or State agency, pursuant to a cost-type contract (as 
        defined under the Federal Acquisition Regulation), any non-
        identifiable health information, including non-identifiable 
        health information that is derived from protected health 
        information, that--
                    (A) is held by the service or may be obtained by 
                the service under paragraph (2) or subsection (b);
                    (B) consists of data elements that are subject to a 
                standard under part 1; and
                    (C) is requested by the agency to fulfill a 
                requirement under this Act.
            (2) Certain information available at low cost.--If a health 
        information security organization requires health information 
        consisting of data elements that are subject to a standard 
        under part 1 from a plan sponsor or a health provider in order 
        to comply with a request made by a Federal or State agency 
        under paragraph (1), the sponsor or provider shall make such 
        information available to such organization for a charge that 
        does not exceed the reasonable cost of transmitting the 
        information.
    (b) Procurement Rule for Information Security Organizations.--A 
health information security organization that makes non-identifiable 
health information available to a Federal or State agency under 
subsection (a) shall make such non-identifiable information available, 
for a charge that does not exceed the reasonable cost of transmitting 
the information, to any other health information security organization 
that--
            (A) is certified under section 6331; and
            (B) requests the information.

SEC. 6323. ENSURING AVAILABILITY OF INFORMATION.

    The Secretary shall establish a procedure under which a plan 
sponsor or health provider that does not have the ability to transmit 
standard data elements directly, and does not have access to a health 
information network service certified under section 6331, may comply 
with the provisions of this part.

SEC. 6324. TIMETABLES FOR COMPLIANCE WITH REQUIREMENTS.

    (a) Initial Compliance.--
            (1) In general.--Not later than 12 months after the date on 
        which standards are adopted under part 1 with respect to a type 
        of transaction, or data elements for a type of health 
        information, a plan sponsor, health provider, or health plan 
        purchasing organization shall comply with the requirements of 
        this part with respect to such transaction or information.
            (2) Additional data elements.--Not later than 12 months 
        after the date on which the Secretary adopts an addition to a 
        set of data elements for health information under section 6312, 
        a plan sponsor, health provider, or health plan purchasing 
        organization shall comply with the requirements of this part 
        using such data elements.
    (b) Compliance With Modified Standards.--
            (1) In general.--If the Secretary adopts a modified 
        standard under section 6314(c), a plan sponsor, health 
        provider, or health plan purchasing organization shall comply 
        with the modified standard at such time as the Secretary 
        determines appropriate, taking into account the time needed to 
        comply due to the nature and extent of the modification.
            (2) Special rule.--In the case of a modification to a 
        standard that does not occur within the 12-month period 
        beginning on the date the standard is adopted, the time 
        determined appropriate by the Secretary under paragraph (1) may 
        not be--
                    (A) earlier than the last day of the 90-day period 
                beginning on the date the modified standard is adopted; 
                or
                    (B) later than the last day of the 12-month period 
                beginning on the date the modified standard is adopted.

                    PART 3--MISCELLANEOUS PROVISIONS

SEC. 6331. STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK 
              SERVICES.

    (a) Standards for Operation.--The Secretary shall establish 
standards with respect to the operation of health information network 
services, including standards ensuring that such services--
            (1) develop, operate, and cooperate with one another to 
        form the health information network;
            (2) meet all of the requirements under subtitle E that are 
        applicable to the services;
            (3) make public information concerning their performance, 
        as measured by uniform indicators such as accessibility, 
        transaction responsiveness, administrative efficiency, 
        reliability, dependability, and any other indicator determined 
        appropriate by the Secretary;
            (4) have security procedures that are consistent with the 
        requirements under subtitle E, including secure methods of 
        accessing and transmitting data; and
            (5) if they are part of a larger organization, have 
        policies and procedures in place which isolate their activities 
        with respect to processing information in a manner that 
        prevents access to such information by such larger 
        organization.
    (b) Certification by the Secretary.--
            (1) Establishment.--Not later than 12 months after the date 
        of the enactment of this Act, the Secretary shall establish a 
        certification procedure for health information network services 
        which ensures that certified services are qualified to meet the 
        requirements of this subtitle and the standards established by 
        the Secretary under this section. Such certification procedure 
        shall be implemented in a manner that minimizes the costs and 
        delays of operations for such services.
            (2) Application.--Each entity desiring to be certified as a 
        health information network service shall apply to the Secretary 
        for certification in a form and manner determined appropriate 
        by the Secretary.
            (3) Audits and reports.--The procedure established under 
        paragraph (1) shall provide for audits by the Secretary and 
        reports by an entity certified under this section as the 
        Secretary determines appropriate in order to monitor such 
        entity's compliance with the requirements of this subtitle, 
        subtitle E, and the standards established by the Secretary 
        under this section.
            (4) Recertification.--A health information network service 
        shall be recertified under this subsection at least every 3 
        years.
    (c) Loss of Certification.--
            (1) Mandatory termination.--Except as provided in paragraph 
        (2), if a health information network service violates a 
        requirement imposed on such service under subtitle E, its 
        certification under this section shall be terminated unless the 
        Secretary determines that appropriate corrective action has 
        been taken.
            (2) Conditional certification--The Secretary may establish 
        a procedure under which a health information network service 
        may remain certified on a conditional basis if the service is 
        operating consistently with a plan intended to correct any 
        violations described in paragraph (1). Such procedure may 
        provide for the appointment of a trustee to continue operation 
        of the service until the requirements for full certification 
        are met.
    (d) Certification by Private Entities.--The Secretary may designate 
private entities to conduct the certification procedures established by 
the Secretary under this section. A health information network service 
certified by such an entity in accordance with such designation shall 
be considered to be certified by the Secretary.
    (e) Information Held by Health Information Network Services.--If a 
health information network service certified under this section loses 
its certified status or takes any action that would threaten the 
continued availability of the standard data elements of health 
information held by such service, such data elements shall be 
transferred to another health information network service certified 
under this section that has been designated by the Secretary.

SEC. 6332. IMPOSITION OF ADDITIONAL REQUIREMENTS.

    (a) In General.--Except as provided in subsection (c), after the 
Secretary has established standards under section 6312 that are 
necessary to make uniform and compatible for electronic transmission 
the data elements that the Secretary determines are appropriate for 
transmission in connection with a transaction described in part 2, an 
individual or entity may not require an individual or entity, to 
provide in any manner any additional data element in connection with--
            (1) the transaction; or
            (2) an inquiry with respect to the transaction.
    (b) Transmission Method.--Except as provided in subsection (c), 
after the Secretary has established standards under section 6313 
relating to the method by which data elements that the Secretary 
determines are appropriate for transmission in connection with a 
transaction described in part 2 may be transmitted electronically, an 
individual or entity may not require an individual or entity to 
transmit any data element in a manner inconsistent with the standards 
in connection with--
            (1) the transaction; or
            (2) an inquiry with respect to the transaction.
    (c) Exception.--Subsections (a) and (b) do not apply if--
            (1) an individual or entity voluntarily agrees to provide 
        the additional data element; or
            (2) a waiver is granted under subsection (d) to permit the 
        requirement to be imposed.
    (d) Conditions for Waivers.--
            (1) In general.--An individual or entity may request a 
        waiver from the Secretary in order to impose on an individual 
        or entity a requirement otherwise prohibited under subsection 
        (a) or (b). Subject to paragraph (2), the Secretary may grant 
        such a waiver.
            (2) Consideration of waiver requests.--A waiver may not be 
        granted under this subsection to impose an otherwise prohibited 
        requirement unless the Secretary determines that the value of 
        any additional information to be provided under the requirement 
        for research or other purposes significantly outweighs the 
        administrative cost of the imposition of the requirement, 
        taking into account the burden of the timing of the imposition 
        of the requirement.
    (e) Anonymous Reporting.--If an individual or entity attempts to 
impose on an individual or entity a requirement prohibited under 
subsection (a) or (b), the individual or entity on whom the requirement 
is being imposed may contact the Secretary. The Secretary shall develop 
a procedure under which an individual or entity that contacts the 
Secretary under the preceding sentence shall remain anonymous. The 
Secretary shall notify the individual or entity imposing the 
requirement that the requirement may not be imposed unless the other 
individual or entity voluntarily agrees to such requirement or a waiver 
is obtained under subsection (d).

SEC. 6333. EFFECT ON STATE LAW.

    (a) In General.--Except as otherwise provided in this section, a 
provision, requirement, or standard under this subtitle shall supersede 
any contrary provision of State law.
    (b) State ``Quill and Pen'' Laws.--A State may not establish, 
continue in effect, or enforce any provision of State law that requires 
medical or health plan records (including billing information) to be 
maintained or transmitted in written rather than electronic form, 
except where the Secretary determines that the provision is necessary 
to prevent fraud and abuse, with respect to controlled substances, or 
for other purposes.
    (c) Public Health Reporting.--Nothing in this subtitle shall be 
construed to invalidate or limit the authority, power, or procedures 
established under any law providing for the reporting of disease or 
injury, child abuse, birth, or death, public health surveillance, or 
public health investigation or intervention.
    (d) Public Use Functions.--Nothing in this subtitle shall be 
construed to limit the authority of a Federal or State agency to make 
non-identifiable health information available for public use.
    (e) Payment for Health Care Services or Premiums.--Nothing in this 
subtitle shall be construed to prohibit a consumer from paying for 
health care items or services, or plan or health insurance coverage 
premiums, by debit, credit, or other payment cards or numbers or other 
electronic payment means.

SEC. 6334. GRANTS FOR DEMONSTRATION PROJECTS.

    (a) In General.--The Secretary may make grants for demonstration 
projects to promote the development and use of electronically 
integrated community-based clinical information systems and 
computerized patient medical records.
    (b) Applications.--
            (1) Submission.--To apply for a grant under this section 
        for any fiscal year, an applicant shall submit an application 
        to the Secretary in accordance with the procedures established 
        by the Secretary.
            (2) Criteria for approval.--The Secretary may not approve 
        an application submitted under paragraph (1) unless the 
        application includes assurances satisfactory to the Secretary 
        regarding the following:
                    (A) Use of existing technology.--Funds received 
                under this section will be used to apply 
                telecommunications and information systems technology 
                that is in existence on the date the application is 
                submitted in a manner that improves the quality of 
                health care, reduces the costs of such care, and 
                protects the privacy and confidentiality of information 
                relating to the physical or mental condition of an 
                individual.
                    (B) Use of existing information systems.--Funds 
                received under this section will be used--
                            (i) to enhance telecommunications or 
                        information systems that are operating on the 
                        date the application is submitted;
                            (ii) to integrate telecommunications or 
                        information systems that are operating on the 
                        date the application is submitted; or
                            (iii) to connect additional users to 
                        telecommunications or information networks or 
                        systems that are operating on the date the 
                        application is submitted.
                    (C) Consistency with other provisions.--Funds 
                received under this section will be used for 
                demonstration projects whose information collection and 
                disclosure requirements are consistent with this 
                subtitle and subtitle A of title V.
                    (D) Matching funds.--The applicant shall make 
                available funds for the demonstration project in an 
                amount that equals at least 20 percent of the cost of 
                the project.
    (c) Geographic Diversity.--In making any grants under this section, 
the Secretary shall, to the extent practicable, make grants to persons 
representing different geographic areas of the United States, including 
urban and rural areas.
    (d) Review and Sanctions.--The Secretary shall review at least 
annually the compliance of a person receiving a grant under this 
section with the provisions of this section. The Secretary shall 
establish a procedure for determining whether such a person has failed 
to comply substantially within the provisions of this section and the 
sanctions to be imposed for any such noncompliance.
    (e) Annual Report.--The Secretary shall submit an annual report to 
the President for transmittal to Congress containing a description of 
the activities carried out under this section. The report shall evalute 
each demonstration project that received funds under this section in 
the year to which the report pertains with respect to the following:
            (1) The usefulness of the project in facilitating outcomes 
        measurement, health provider decisionmaking, and health 
        research.
            (2) The cost and burden of the project on health providers 
        and other participants in the project.
            (3) Efficiency and effectiveness of the project in 
        improving health care delivery and evaluation.

                  PART 4--ASSISTANCE TO THE SECRETARY

SEC. 6341. GENERAL REQUIREMENT ON SECRETARY.

    In complying with any requirements imposed on the Secretary under 
this subtitle, the Secretary shall rely on recommendations of the 
Health Information Advisory Committee established under section 6342 
and shall consult with appropriate Federal agencies.

SEC. 6342. HEALTH INFORMATION ADVISORY COMMITTEE.

    (a) Establishment.--There is established a committee to be known as 
the Health Care Information Advisory Committee.
    (b) Duty.--
            (1) In general.--The committee shall--
                    (A) provide assistance to the Secretary in 
                complying with the requirements imposed on the 
                Secretary under this subtitle and subtitle E;
                    (B) be generally responsible for advising the 
                Secretary and the Congress on the status of the health 
                information network; and
                    (C) make recommendations to correct any problems 
                that may occur in the network's implementation and 
                ongoing operations and to refine and improve the 
                network.
            (2) Technical assistance.--In performing its duties under 
        this subsection, the committee shall receive technical 
        assistance from appropriate Federal agencies.
    (c) Membership.--
            (1) In general.--The committee shall consist of 15 members 
        to be appointed by the President not later than 60 days after 
        the date of the enactment of this Act. The President shall 
        designate 1 member as the Chair.
            (2) Expertise.--The membership of the committee shall 
        consist of individuals who are of recognized standing and 
        distinction and who possess the demonstrated capacity to 
        discharge the duties imposed on the committee. At least 1 
        member of the committee shall be a member of the Health Quality 
        Advisory Council established under section 4001.
            (3) Terms.--Each member of the committee shall be appointed 
        for a term of 5 years, except that the members first appointed 
        shall serve staggered terms such that the terms of no more than 
        3 members expire at one time.
            (4) Vacancies.--
                    (A) In general.--A vacancy on the committee shall 
                be filled in the manner in which the original 
                appointment was made and shall be subject to any 
                conditions which applied with respect to the original 
                appointment.
                    (B) Filling unexpired term.--An individual chosen 
                to fill a vacancy shall be appointed for the unexpired 
                term of the member replaced.
                    (C) Expiration of terms.--The term of any member 
                shall not expire before the date on which the member's 
                successor takes office.
            (5) Conflicts of interest.--Members of the committee shall 
        disclose upon appointment to the committee or at any subsequent 
        time that it may occur, conflicts of interest.
    (d) Meetings.--
            (1) In general.--Except as provided in paragraph (2), the 
        committee shall meet at the call of the Chair.
            (2) Initial meeting.--Not later than 30 days after the date 
        on which all members of the committee have been appointed, the 
        committee shall hold its first meeting.
            (3) Quorum.--A majority of the members of the committee 
        shall constitute a quorum, but a lesser number of members may 
        hold hearings.
    (e) Power To Hold Hearings.--The committee may hold such hearings, 
sit and act at such times and places, take such testimony, and receive 
such evidence as the committee considers advisable to carry out the 
purposes of this section.
    (f) Other Administrative Provisions.--Subparagraphs (C), (D), and 
(H) of section 1886(e)(6) of the Social Security Act shall apply to the 
committee in the same manner as they apply to the Prospective Payment 
Assessment Commission.
    (g) Reports.--
            (1) In general.--The committee shall annually prepare and 
        submit to Congress and the Secretary a report including at 
        least an analysis of--
                    (A) the status of the health information network 
                established under this subtitle, including whether the 
                network is fulfilling the purpose described in section 
                6300;
                    (B) the savings and costs of the network;
                    (C) the activities of health information network 
                services certified under section 6331, health 
                providers, and plan sponsors under this subtitle;
                    (D) the extent to which entities described in 
                subparagraph (C) are meeting the standards adopted 
                under this subtitle and working together to form an 
                integrated network that meets the needs of its users;
                    (E) the extent to which entities described in 
                subparagraph (C) are meeting the privacy and security 
                protections of subtitle E;
                    (F) whether the Federal Government and State 
                Governments are receiving information of sufficient 
                quality to meet their responsibilities under this Act;
                    (G) any problems with respect to implementation of 
                the network;
                    (H) the extent to which timetables under this 
                subtitle for the adoption and implementation of 
                standards are being met; and
                    (I) any legislative recommendations related to the 
                health information network.
            (2) Availability to the public.--Any information in the 
        report submitted to Congress under paragraph (1) shall be made 
        available to the public, unless such information may not be 
        disclosed by law.
    (h) Duration.--Notwithstanding section 14(a) of the Federal 
Advisory Committee Act, the committee shall continue in existence until 
otherwise provided by law.

             Subtitle E--Fair Health Information Practices

                                                   Title VI, Subtitle E

SEC. 6400. DEFINITIONS.

    (a) Definitions Relating to Protected Health Information.--For 
purposes of this subtitle:
            (1) Disclose.--The term ``disclose'', when used with 
        respect to protected health information that is held by a 
        health information trustee, means to provide access to the 
        information, but only if such access is provided by the trustee 
        to a person other than--
                    (A) the trustee or an officer or employee of the 
                trustee;
                    (B) an affiliated person of the trustee; or
                    (C) a protected individual who is a subject of the 
                information.
            (2) Disclosure.--The term ``disclosure'' means the act or 
        an instance of disclosing.
            (3) Protected health information.--The term ``protected 
        health information'' means any information, whether oral or 
        recorded in any form or medium--
                    (A) that is created or received in a State by--
                            (i) a health care provider;
                            (ii) a health benefit plan sponsor;
                            (iii) a health oversight agency;
                            (iv) a health information service 
                        organization; or
                            (v) a public health authority;
                    (B) that relates in any way to the past, present, 
                or future physical or mental health or condition or 
                functional status of a protected individual, the 
                provision of health care to a protected individual, or 
                payment for the provision of health care to a protected 
                individual; and
                    (C) that--
                            (i) identifies the individual; or
                            (ii) with respect to which there is a 
                        reasonable basis to believe that the 
                        information can be used to identify the 
                        individual.
            (4) Protected individual.--The term ``protected 
        individual'' means an individual who, with respect to a date--
                    (A) is living on the date; or
                    (B) has died within the 2-year period ending on the 
                date.
            (5) Use.--The term ``use'', when used with respect to 
        protected health information that is held by a health 
        information trustee, means--
                    (A) to use, or provide access to, the information 
                in any manner that does not constitute a disclosure; or
                    (B) any act or instance of using, or providing 
                access, described in subparagraph (A).
    (b) Definitions Relating to Health Information Trustees.--For 
purposes of this subtitle:
            (1) Health benefit plan.--The term ``health benefit plan'' 
        means--
                    (A) any contract of health insurance, including any 
                hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization group contract, that is 
                provided by a carrier; and
                    (B) an employee welfare benefit plan or other 
                arrangement insofar as the plan or arrangement provides 
                health benefits and is funded in a manner other than 
                through the purchase of one or more policies or 
                contracts described in subparagraph (A).
            (2) Health benefit plan sponsor.--The term ``health benefit 
        plan sponsor'' means a person who, with respect to a specific 
        item of protected health information, receives, creates, uses, 
        maintains, or discloses the information while acting in whole 
        or in part in the capacity of--
                    (A) a carrier providing a health benefit plan;
                    (B) any other provider of a health benefit plan, 
                including any public entity that provides payments for 
                health care items and services under a health benefit 
                plan that are equivalent to payments provided by a 
                private person under such a plan; or
                    (C) an officer or employee of a person described in 
                subparagraph (A) or (B).
            (3) Health care provider.--The term ``health care 
        provider'' means a person who, with respect to a specific item 
        of protected health information, receives, creates, uses, 
        maintains, or discloses the information while acting in whole 
        or in part in the capacity of--
                    (A) a person who is licensed, certified, 
                registered, or otherwise authorized by law to provide 
                an item or service that constitutes health care in the 
                ordinary course of business or practice of a 
                profession;
                    (B) a Federal or State program that directly 
                provides items or services that constitute health care 
                to beneficiaries; or
                    (C) an officer or employee of a person described in 
                subparagraph (A) or (B).
            (4) Health information service organization.--The term 
        ``health information service organization'' means a person who, 
        with respect to a specific item of protected health 
        information, receives, creates, uses, maintains, or discloses 
        the information while acting in whole or in part in the 
        capacity of--
                    (A) a person, other than an affiliated person, who 
                performs specific functions for which the Secretary has 
                authorized (by means of a designation or certification) 
                the person to receive access to health care data in 
                electronic or magnetic form that are regulated by this 
                Act; or
                    (B) an officer or employee of a person described in 
                subparagraph (A).
            (5) Health information trustee.--The term ``health 
        information trustee'' means--
                    (A) a health care provider;
                    (B) a health information service organization;
                    (C) a health oversight agency;
                    (D) a health benefit plan sponsor;
                    (E) a public health authority;
                    (F) a health researcher;
                    (G) a person who, with respect to a specific item 
                of protected health information, is not described in 
                subparagraphs (A) through (F) but receives the 
                information--
                            (i) pursuant to--
                                    (I) section 6417 (relating to 
                                emergency circumstances);
                                    (II) section 6418 (relating to 
                                judicial and administrative purposes);
                                    (III) section 6419 (relating to law 
                                enforcement); or
                                    (IV) section 6420 (relating to 
                                subpoenas, warrants, and search 
                                warrants); or
                            (ii) while acting in whole or in part in 
                        the capacity of an officer or employee of a 
                        person described in clause (i).
            (6) Health oversight agency.--The term ``health oversight 
        agency'' means a person who, with respect to a specific item of 
        protected health information, receives, creates, uses, 
        maintains, or discloses the information while acting in whole 
        or in part in the capacity of--
                    (A) a person who performs or oversees the 
                performance of an assessment, evaluation, 
                determination, or investigation relating to the 
                licensing, accreditation, or certification of health 
                care providers;
                    (B) a person who--
                            (i) performs or oversees the performance of 
                        an audit, assessment, evaluation, 
                        determination, or investigation relating to the 
                        effectiveness of, compliance with, or 
                        applicability of, legal, fiscal, medical, or 
                        scientific standards or aspects of performance 
                        related to the delivery of, or payment for, 
                        health care; and
                            (ii) is a public agency, acting on behalf 
                        of a public agency, acting pursuant to a 
                        requirement of a public agency, or carrying out 
                        activities under a State or Federal statute 
                        regulating the assessment, evaluation, 
                        determination, or investigation; or
                    (C) an officer or employee of a person described in 
                subparagraph (A) or (B).
            (7) Health researcher.--The term ``health researcher'' 
        means a person who, with respect to a specific item of 
        protected health information, receives the information--
                    (A) pursuant to section 6416 (relating to health 
                research); or
                    (B) while acting in whole or in part in the 
                capacity of an officer or employee of a person 
                described in subparagraph (A).
            (8) Public health authority.--The term ``public health 
        authority'' means a person who, with respect to a specific item 
        of protected health information, receives, creates, uses, 
        maintains, or discloses the information while acting in whole 
        or in part in the capacity of--
                    (A) an authority of the United States, a State, or 
                a political subdivision of a State that is responsible 
                for public health matters;
                    (B) a person acting under the direction of such an 
                authority; or
                    (C) an officer or employee of a person described in 
                subparagraph (A) or (B).
    (c) Other Definitions.--For purposes of this subtitle:
            (1) Affiliated person.--The term ``affiliated person'' 
        means a person who--
                    (A) is not a health information trustee;
                    (B) is a contractor, subcontractor, associate, or 
                subsidiary of a person who is a health information 
                trustee; and
                    (C) pursuant to an agreement or other relationship 
                with such trustee, receives, creates, uses, maintains, 
                or discloses protected health information.
            (2) Approved health research project.--The term ``approved 
        health research project'' means a biomedical, epidemiological, 
        or health services research or statistics project, or a 
        research project on behavioral and social factors affecting 
        health, that has been approved by a certified institutional 
        review board.
            (3) Certified institutional review board.--The term 
        ``certified institutional review board'' means a board--
                    (A) established by an entity to review research 
                involving protected health information and the rights 
                of protected individuals conducted at or supported by 
                the entity;
                    (B) established in accordance with regulations of 
                the Secretary under section 6416(e)(1); and
                    (C) certified by the Secretary under section 
                6416(e)(2).
            (4) Health care.--The term ``health care''--
                    (A) means--
                            (i) any preventive, diagnostic, 
                        therapeutic, rehabilitative, maintenance, or 
                        palliative care, counseling, service, or 
                        procedure--
                                    (I) with respect to the physical or 
                                mental condition, or functional status, 
                                of an individual; or
                                    (II) affecting the structure or 
                                function of the human body or any part 
                                of the human body, including banking of 
                                blood, sperm, organs, or any other 
                                tissue; or
                            (ii) any sale or dispensing of a drug, 
                        device, equipment, or other item to an 
                        individual, or for the use of an individual, 
                        pursuant to a prescription; but
                    (B) does not include any item or service that is 
                not furnished for the purpose of maintaining or 
                improving the health of an individual.
            (5) Law enforcement inquiry.--The term ``law enforcement 
        inquiry'' means a lawful investigation or official proceeding 
        inquiring into a violation of, or failure to comply with, any 
        criminal or civil statute or any regulation, rule, or order 
        issued pursuant to such a statute.
            (6) Person.--The term ``person'' includes an authority of 
        the United States, a State, or a political subdivision of a 
        State.

             PART 1--DUTIES OF HEALTH INFORMATION TRUSTEES

SEC. 6401. INSPECTION OF PROTECTED HEALTH INFORMATION.

    (a) In General.--Except as provided in subsection (b), a health 
information trustee described in subsection (g)--
            (1) shall permit a protected individual to inspect any 
        protected health information about the individual that the 
        trustee maintains, any accounting with respect to such 
        information required under section 6404, and any copy of an 
        authorization required under section 6412 that pertains to such 
        information;
            (2) shall provide the protected individual with a copy of 
        the information upon request by the individual and subject to 
        any conditions imposed by the trustee under subsection (d);
            (3) shall permit a person who has been designated in 
        writing by the protected individual to inspect the information 
        on behalf of the individual or to accompany the individual 
        during the inspection; and
            (4) may offer to explain or interpret information that is 
        inspected or copied under this subsection.
    (b) Exceptions.--A health information trustee is not required by 
this section to permit inspection or copying of protected health 
information by a protected individual if any of the following 
conditions apply:
            (1) Mental health treatment notes.--The information 
        consists of psychiatric, psychological, or mental health 
        treatment notes about the individual, the trustee determines in 
        the exercise of reasonable professional judgment that 
        inspection or copying of the notes would cause sufficient harm 
        to the protected individual so as to outweigh the desirability 
        of permitting access, and the trustee does not disclose the 
        notes to any person not directly engaged in treating the 
        individual, except with the authorization of the individual or 
        under compulsion of law.
            (2) Information about others.--The information relates to 
        an individual, other than the protected individual or a health 
        care provider, and the trustee determines in the exercise of 
        reasonable professional judgment that inspection or copying of 
        the information would cause sufficient harm to one or both of 
        the individuals so as to outweigh the desirability of 
        permitting access.
            (3) Endangerment to life or safety.--Inspection or copying 
        of the information could reasonably be expected to endanger the 
        life or physical safety of an individual.
            (4) Confidential source.--The information identifies or 
        could reasonably lead to the identification of an individual 
        (other than a health care provider) who provided information 
        under a promise of confidentiality to a health care provider 
        concerning a protected individual who is a subject of the 
        information.
            (5) Administrative purposes.--The information--
                    (A) is used by the trustee solely for 
                administrative purposes and not in the provision of 
                health care to a protected individual who is a subject 
                of the information; and
                    (B) is not disclosed by the trustee to any person.
            (6) Duplicative information.--The information duplicates 
        information available for inspection under subsection (a).
            (7) Information compiled in anticipation of litigation.--
        The information is compiled principally--
                    (A) in anticipation of a civil, criminal, or 
                administrative action or proceeding; or
                    (B) for use in such an action or proceeding.
    (c) Inspection and Copying of Segregable Portion.--A health 
information trustee shall permit inspection and copying under 
subsection (a) of any reasonably segregable portion of a record after 
deletion of any portion that is exempt under subsection (b).
    (d) Conditions.--A health information trustee may--
            (1) require a written request for the inspection and 
        copying of protected health information under this section; and
            (2) charge a reasonable cost-based fee for--
                    (A) permitting inspection of information under this 
                section; and
                    (B) providing a copy of protected health 
                information under this section.
    (e) Statement of Reasons for Denial.--If a health information 
trustee denies in whole or in part a request for inspection or copying 
under this section, the trustee shall provide the protected individual 
who made the request with a written statement of the reasons for the 
denial.
    (f) Deadline.--A health information trustee shall comply with or 
deny a request for inspection or copying of protected health 
information under this section within the 30-day period beginning on 
the date the trustee receives the request.
    (g) Applicability.--This section applies to a health information 
trustee who is--
            (1) a health benefit plan sponsor;
            (2) a health care provider;
            (3) a health information service organization;
            (4) a health oversight agency; or
            (5) a public health authority.

SEC. 6402. AMENDMENT OF PROTECTED HEALTH INFORMATION.

    (a) In General.--A health information trustee described in 
subsection (f) shall, within the 45-day period beginning on the date 
the trustee receives from a protected individual about whom the trustee 
maintains protected health information a written request that the 
trustee correct or amend the information, complete the duties described 
in one of the following paragraphs:
            (1) Correction or amendment and notification.--The trustee 
        shall--
                    (A) make the correction or amendment requested;
                    (B) inform the protected individual of the 
                amendment or correction that has been made;
                    (C) make reasonable efforts to inform any person 
                who is identified by the protected individual, who is 
                not an employee of the trustee, and to whom the 
                uncorrected or unamended portion of the information was 
                previously disclosed of the correction or amendment 
                that has been made; and
                    (D) at the request of the individual, make 
                reasonable efforts to inform any known source of the 
                uncorrected or unamended portion of the information 
                about the correction or amendment that has been made.
            (2) Reasons for refusal and review procedures.--The trustee 
        shall inform the protected individual of--
                    (A) the reasons for the refusal of the trustee to 
                make the correction or amendment;
                    (B) any procedures for further review of the 
                refusal; and
                    (C) the individual's right to file with the trustee 
                a concise statement setting forth the requested 
                correction or amendment and the individual's reasons 
                for disagreeing with the refusal of the trustee.
    (b) Standards for Correction or Amendment.--A trustee shall correct 
or amend protected health information in accordance with a request made 
under subsection (a) if the trustee determines that the information is 
not accurate, relevant, timely, or complete for the purposes for which 
the information may be used or disclosed by the trustee.
    (c) Statement of Disagreement.--After a protected individual has 
filed a statement of disagreement under subsection (a)(2)(C), the 
trustee, in any subsequent disclosure of the disputed portion of the 
information, shall include a copy of the individual's statement and may 
include a concise statement of the trustee's reasons for not making the 
requested correction or amendment.
    (d) Construction.--This section may not be construed to require a 
health information trustee to conduct a hearing or proceeding 
concerning a request for a correction or amendment to protected health 
information the trustee maintains.
    (e) Correction.--For purposes of subsection (a), a correction is 
deemed to have been made to protected health information when--
            (1) information that is not timely, accurate, relevant, or 
        complete is clearly marked as incorrect; or
            (2) supplementary correct information is made part of the 
        information and adequately cross-referenced.
    (f) Applicability.--This section applies to a health information 
trustee who is--
            (1) a health benefit plan sponsor;
            (2) a health care provider;
            (3) a health information service organization;
            (4) a health oversight agency; or
            (5) a public health authority.

SEC. 6403. NOTICE OF INFORMATION PRACTICES.

    (a) Preparation of Notice.--A health information trustee described 
in subsection (d) shall prepare a written notice of information 
practices describing the following:
            (1) The rights under this subtitle of a protected 
        individual who is the subject of protected health information, 
        including the right to inspect and copy such information and 
        the right to seek amendments to such information, and the 
        procedures for authorizing disclosures of protected health 
        information and for revoking such authorizations.
            (2) The procedures established by the trustee for the 
        exercise of such rights.
            (3) The uses and disclosures of protected health 
        information that are authorized under this subtitle.
    (b) Dissemination of Notice.--A health information trustee--
            (1) shall, upon request, provide any person with a copy of 
        the trustee's notice of information practices (described in 
        subsection (a)); and
            (2) shall make reasonable efforts to inform persons in a 
        clear and conspicuous manner of the existence and availability 
        of such notice.
    (c) Model Notices.--Not later than July 1, 1996, the Secretary, 
after notice and opportunity for public comment, shall develop and 
disseminate model notices of information practices for use by health 
information trustees under this section.
    (d) Applicability.--This section applies to a health information 
trustee who is--
            (1) a health benefit plan sponsor;
            (2) a health care provider;
            (3) a health information service organization; or
            (4) a health oversight agency.

SEC. 6404. ACCOUNTING FOR DISCLOSURES.

    (a) In General.--Except as provided in subsection (b) and section 
6414, each health information trustee shall create and maintain, with 
respect to any protected health information the trustee discloses, a 
record of--
            (1) the date and purpose of the disclosure;
            (2) the name of the person to whom the disclosure was made;
            (3) the address of the person to whom the disclosure was 
        made or the location to which the disclosure was made; and
            (4) where practicable, a description of the information 
        disclosed.
    (b) Regulations.--Not later than July 1, 1996, the Secretary shall 
promulgate regulations that exempt a health information trustee from 
maintaining a record under subsection (a) with respect protected health 
information disclosed by the trustee for purposes of peer review, 
licensing, certification, accreditation, and similar activities.

SEC. 6405. SECURITY.

    (a) In General.--Each health information trustee who receives or 
creates protected health information that is subject to this subtitle 
shall maintain reasonable and appropriate administrative, technical, 
and physical safeguards--
            (1) to ensure the integrity and confidentiality of the 
        information;
            (2) to protect against any reasonably anticipated--
                    (A) threats or hazards to the security or integrity 
                of the information; and
                    (B) unauthorized uses or disclosures of the 
                information; and
            (3) otherwise ensure compliance with this subtitle by the 
        trustee and the officers and employees of the trustee.
    (b) Guidelines.--Not later than July 1, 1996, the Secretary, after 
notice and opportunity for public comment, shall develop and 
disseminate guidelines for the implementation of this section. The 
guidelines shall take into account--
            (1) the technical capabilities of record systems used to 
        maintain protected health information;
            (2) the costs of security measures;
            (3) the need for training persons who have access to 
        protected health information; and
            (4) the value of audit trails in computerized record 
        systems.

       PART 2--USE AND DISCLOSURE OF PROTECTED HEALTH INFORMATION

SEC. 6411. GENERAL LIMITATIONS ON USE AND DISCLOSURE.

    (a) Use.--Except as otherwise provided under this subtitle, a 
health information trustee may use protected health information only 
for a purpose--
            (1) that is compatible with and directly related to the 
        purpose for which the information--
                    (A) was collected; or
                    (B) was received by the trustee; or
            (2) for which the trustee is authorized to disclose the 
        information under this subtitle.
    (b) Disclosure.--A health information trustee may disclose 
protected health information only as authorized under this subtitle.
    (c) Scope of Uses and Disclosures.--
            (1) In general.--A use or disclosure of protected health 
        information by a health information trustee shall be limited, 
        when practicable, to the minimum amount of information 
        necessary to accomplish the purpose for which the information 
        is used or disclosed.
            (2) Guidelines.--Not later than July 1, 1996, the 
        Secretary, after notice and opportunity for public comment, 
        shall issue guidelines to implement paragraph (1), which shall 
        take into account the technical capabilities of the record 
        systems used to maintain protected health information and the 
        costs of limiting use and disclosure.
    (d) Identification of Disclosed Information as Protected 
Information.--Except with respect to protected health information that 
is disclosed under section 6414 (relating to next of kin and directory 
information), a health information trustee may disclose protected 
health information only if the recipient has been notified that the 
information is protected health information that is subject to this 
subtitle.
    (e) Agreement To Limit Use or Disclosure.--A health information 
trustee who receives protected health information from any person 
pursuant to a written agreement to restrict use or disclosure of the 
information to a greater extent than otherwise would be required under 
this subtitle shall comply with the terms of the agreement, except 
where use or disclosure of the information in violation of the 
agreement is required by law. A trustee who fails to comply with the 
preceding sentence shall be subject to section 6451 (relating to civil 
actions) with respect to such failure.
    (f) No General Requirement To Disclose.--Nothing in this subtitle 
shall be construed to require a health information trustee to disclose 
protected health information not otherwise required to be disclosed by 
law.

SEC. 6412. AUTHORIZATIONS FOR DISCLOSURE OF PROTECTED HEALTH 
              INFORMATION.

    (a) Written Authorizations.--A health information trustee, other 
than a health information service organization, may disclose protected 
health information pursuant to an authorization executed by the 
protected individual who is the subject of the information, if each of 
the following requirements is satisfied:
            (1) Writing.--The authorization is in writing, signed by 
        the individual, and dated on the date of such signature.
            (2) Separate form.--The authorization is not on a form used 
        to authorize or facilitate the provision of, or payment for, 
        health care.
            (3) Trustee described.--The trustee is specifically named 
        or generically described in the authorization as authorized to 
        disclose such information.
            (4) Recipient described.--The person to whom the 
        information is to be disclosed is specifically named or 
        generically described in the authorization as a person to whom 
        such information may be disclosed.
            (5) Statement of intended uses and disclosures received.--
        The authorization contains an acknowledgment that the 
        individual has received a statement described in subsection (b) 
        from such person.
            (6) Information described.--The information to be disclosed 
        is described in the authorization.
            (7) Authorization timely received.--The authorization is 
        received by the trustee during a period described in subsection 
        (c)(1).
            (8) Disclosure timely made.--The disclosure occurs during a 
        period described in subsection (c)(2).
    (b) Statement of Intended Uses and Disclosures.--
            (1) In general.--A person who wishes to receive from a 
        health information trustee protected health information about a 
        protected individual pursuant to an authorization executed by 
        the individual shall supply the individual, in writing and on a 
        form that is distinct from the authorization, with a statement 
        of the uses for which the person intends the information and 
        the disclosures the person intends to make of the information. 
        Such statement shall be supplied before the authorization is 
        executed.
            (2) Enforcement.--If the person uses or discloses the 
        information in a manner that is inconsistent with such 
        statement, the person shall be subject to section 6451 
        (relating to civil actions) with respect to such failure, 
        except where such use or disclosure is required by law.
            (3) Model statements.--Not later than July 1, 1996, the 
        Secretary, after notice and opportunity for public comment, 
        shall develop and disseminate model statements of intended uses 
        and disclosures of the type described in paragraph (1).
    (c) Time Limitations on Authorizations.--
            (1) Receipt by trustee.--For purposes of subsection (a)(7), 
        an authorization is timely received if it is received by the 
        trustee during--
                    (A) the 1-year period beginning on the date that 
                the authorization is signed under subsection (a)(1), if 
                the authorization permits the disclosure of protected 
                health information to--
                            (i) a health benefit plan sponsor;
                            (ii) a health care provider;
                            (iii) a health oversight agency;
                            (iv) a public health authority;
                            (v) a health researcher; or
                            (vi) a person who provides counseling or 
                        social services to individuals; or
                    (B) the 30-day period beginning on the date that 
                the authorization is signed under subsection (a)(1), if 
                the authorization permits the disclosure of protected 
                health information to a person other than a person 
                described in subparagraph (A).
            (2) Disclosure by trustee.--For purposes of subsection 
        (a)(8), a disclosure is timely made if it occurs before--
                    (A) the date or event (if any) specified in the 
                authorization upon which the authorization expires; and
                    (B) the expiration of the 6-month period beginning 
                on the date the trustee receives the authorization.
    (d) Revocation or Amendment of Authorization.--
            (1) In general.--A protected individual in writing may 
        revoke or amend an authorization described in subsection (a), 
        in whole or in part, at any time, except insofar as--
                    (A) disclosure of protected health information has 
                been authorized to permit validation of expenditures 
                based on health condition by a government authority; or
                    (B) action has been taken in reliance on the 
                authorization.
            (2) Notice of revocation.--A health information trustee who 
        discloses protected health information in reliance on an 
        authorization that has been revoked shall not be subject to any 
        liability or penalty under this subtitle if--
                    (A) the reliance was in good faith;
                    (B) the trustee had no notice of the revocation; 
                and
                    (C) the disclosure was otherwise in accordance with 
                the requirements of this section.
    (e) Additional Requirements of Trustee.--A health information 
trustee may impose requirements for an authorization that are in 
addition to the requirements in this section.
    (f) Copy.--A health information trustee who discloses protected 
health information pursuant to an authorization under this section 
shall maintain a copy of the authorization.
    (g) Construction.--This section may not be construed--
            (1) to require a health information trustee to disclose 
        protected health information; or
            (2) to limit the right of a health information trustee to 
        charge a fee for the disclosure or reproduction of protected 
        health information.
    (h) Subpoenas, Warrants, and Search Warrants.--If a health 
information trustee discloses protected health information pursuant to 
an authorization in order to comply with an administrative subpoena or 
warrant or a judicial subpoena or search warrant, the authorization--
            (1) shall specifically authorize the disclosure for the 
        purpose of permitting the trustee to comply with the subpoena, 
        warrant, or search warrant; and
            (2) shall otherwise meet the requirements in this section.

SEC. 6413. TREATMENT, PAYMENT, AND OVERSIGHT.

    (a) Disclosures by Plans, Providers, and Oversight Agencies.--A 
health information trustee described in subsection (d) may disclose 
protected health information to a health benefit plan sponsor, health 
care provider, or health oversight agency if the disclosure is--
            (1) for the purpose of providing health care and a 
        protected individual who is a subject of the information has 
        not previously objected to the disclosure in writing;
            (2) for the purpose of providing for the payment for health 
        care furnished to an individual; or
            (3) for use by a health oversight agency for a purpose that 
        is described in subparagraph (A) or (B)(i) of section 
        6400(b)(6).
    (b) Disclosures by Certain Other Trustees.--A health information 
trustee may disclose protected health information to a health care 
provider if--
            (1) the disclosure is for the purpose described in 
        subsection (a)(1); and
            (2) the trustee--
                    (A) is a public health authority;
                    (B) received protected health information pursuant 
                to section 6417 (relating to emergency circumstances); 
                or
                    (C) is an officer or employee of a trustee 
                described in subsection (B).
    (c) Use in Action Against Individual.--A person who receives 
protected health information about a protected individual through a 
disclosure under this section may not use or disclose the information 
in any administrative, civil, or criminal action or investigation 
directed against the individual, except an action or investigation 
arising out of and related to receipt of health care or payment for 
health care.
    (d) Applicability.--A health information trustee referred to in 
subsection (a) is any of the following:
            (1) A health benefit plan sponsor.
            (2) A health care provider.
            (3) A health oversight agency.
            (4) A health information service organization.

SEC. 6414. NEXT OF KIN AND DIRECTORY INFORMATION.

    (a) Next of Kin.--A health information trustee who is a health care 
provider, who received protected health information pursuant to section 
6417 (relating to emergency circumstances), or who is an officer or 
employee of such a recipient may orally disclose protected health 
information about a protected individual to the next of kin of the 
individual (as defined under State law), or to a person with whom the 
individual has a close personal relationship, if--
            (1) the trustee has no reason to believe that the 
        individual would consider the information especially sensitive;
            (2) the individual has not previously objected to the 
        disclosure;
            (3) the disclosure is consistent with good medical or other 
        professional practice; and
            (4) the information disclosed is limited to information 
        about health care that is being provided to the individual at 
        or about the time of the disclosure.
    (b) Directory Information.--
            (1) In General.--A health information trustee who is a 
        health care provider, who received protected health information 
        pursuant to section 6417 (relating to emergency circumstances), 
        or who is an officer or employee of a such a recipient may 
        disclose to any person the information described in paragraph 
        (2) if--
                    (A) a protected individual who is a subject of the 
                information has not objected in writing to the 
                disclosure;
                    (B) the disclosure is otherwise consistent with 
                good medical and other professional practice; and
                    (C) the information does not reveal specific 
                information about the physical or mental condition or 
                functional status of a protected individual or about 
                the health care provided to a protected individual.
            (2) Information described.--The information referred to in 
        paragraph (1) is the following:
                    (A) The name of an individual receiving health care 
                from a health care provider on a premises controlled by 
                the provider.
                    (B) The location of the individual on such 
                premises.
                    (C) The general health status of the individual, 
                described in terms of critical, poor, fair, stable, 
                satisfactory, or terms denoting similar conditions.
    (c) No Accounting Required.--A health information trustee who 
discloses protected health information under this section is not 
required to maintain an accounting of the disclosure under section 
6404.
    (d) Recipients.--A person to whom protected health information is 
disclosed under this section shall not, by reason of such disclosure, 
be subject to any requirement under this subtitle.

SEC. 6415. PUBLIC HEALTH.

    (a) In General.--A health information trustee who is a health care 
provider or a public health authority may disclose protected health 
information to--
            (1) a public health authority for use in legally 
        authorized--
                    (A) disease or injury reporting;
                    (B) public health surveillance; or
                    (C) public health investigation or intervention; or
            (2) an individual who is authorized by law to receive the 
        information in a public health intervention.
    (b) Use in Action Against Individual.--A public health authority 
who receives protected health information about a protected individual 
through a disclosure under this section may not use or disclose the 
information in any administrative, civil, or criminal action or 
investigation directed against the individual, except where the use or 
disclosure is authorized by law for protection of the public health.
    (c) Individual Recipients.--An individual to whom protected health 
information is disclosed under subsection (a)(2) shall not, by reason 
of such disclosure, be subject to any requirement under this subtitle.

SEC. 6416. HEALTH RESEARCH.

    (a) In General.--A health information trustee described in 
subsection (d) may disclose protected health information to a person 
if--
            (1) the person is conducting an approved health research 
        project;
            (2) the information is to be used in the project; and
            (3) the project has been determined by a certified 
        institutional review board to be--
                    (A) of sufficient importance so as to outweigh the 
                intrusion into the privacy of the protected individual 
                who is the subject of the information that would result 
                from the disclosure; and
                    (B) impracticable to conduct without the 
                information.
    (b) Disclosures by Health Information Service Organizations.--A 
health information service organization may disclose protected health 
information under subsection (a) only if the certified institutional 
review board referred to in subsection (a)(3) has been certified as 
being qualified to make determinations under such subsection with 
respect to disclosures by such organizations.
    (c) Limitations on Use and Disclosure; Obligations of Recipient.--A 
health researcher who receives protected health information about a 
protected individual pursuant to subsection (a)--
            (1) may use the information solely for purposes of an 
        approved health research project;
            (2) may not use or disclose the information in any 
        administrative, civil, or criminal action or investigation 
        directed against the individual; and
            (3) shall remove or destroy, at the earliest opportunity 
        consistent with the purposes of the approved health research 
        project in connection with which the disclosure was made, 
        information that would enable an individual to be identified, 
        unless a certified institutional review board has determined 
        that there is a health or research justification for retention 
        of such identifiers and there is an adequate plan to protect 
        the identifiers from use and disclosure that is inconsistent 
        with this subtitle.
    (d) Applicability.--A health information trustee referred to in 
subsection (a) is any health information trustee other than a person 
who, with respect to the specific protected health information to be 
disclosed under such subsection, received the information--
            (1) pursuant to--
                    (A) section 6418 (relating to judicial and 
                administrative purposes);
                    (B) paragraph (1), (2), or (3) of section 6419(a) 
                (relating to law enforcement); or
                    (C) section 6420 (relating to subpoenas, warrants, 
                and search warrants); or
            (2) while acting in whole or in part in the capacity of an 
        officer or employee of a person described in paragraph (1).
    (e) Requirements for Institutional Review Boards.--
            (1) Regulations.--Not later than July 1, 1996, the 
        Secretary, after opportunity for notice and comment, shall 
        promulgate regulations establishing requirements for certified 
        institutional review boards under this subtitle. The 
        regulations shall be based on regulations promulgated under 
        section 491(a) of the Public Health Service Act and shall 
        ensure that certified institutional review boards are qualified 
        to assess and protect the confidentiality of research subjects. 
        The regulations shall include specific requirements for 
        certified institutional review boards that make determinations 
        under subsection (a)(3) with respect to disclosures by health 
        information service organizations.
            (2) Certification.--The Secretary shall certify that an 
        institutional review board satisfies the requirements of the 
        regulations promulgated under paragraph (1).

SEC. 6417. EMERGENCY CIRCUMSTANCES.

    (a) In General.--A health information trustee may disclose 
protected health information if the trustee believes, on reasonable 
grounds, that the disclosure is necessary to prevent or lessen a 
serious and imminent threat to the health or safety of an individual.
    (b) Use in Action Against Individual.--A person who receives 
protected health information about a protected individual through a 
disclosure under this section may not use or disclose the information 
in any administrative, civil, or criminal action or investigation 
directed against the individual, except an action or investigation 
arising out of and related to receipt of health care or payment for 
health care.

SEC. 6418. JUDICIAL AND ADMINISTRATIVE PURPOSES.

    (a) In General.--A health information trustee described in 
subsection (d) may disclose protected health information--
            (1) pursuant to the Federal Rules of Civil Procedure, the 
        Federal Rules of Criminal Procedure, or comparable rules of 
        other courts or administrative agencies in connection with 
        litigation or proceedings to which a protected individual who 
        is a subject of the information is a party and in which the 
        individual has placed the individual's physical or mental 
        condition or functional status in issue;
            (2) if directed by a court in connection with a court-
        ordered examination of an individual; or
            (3) to assist in the identification of a dead individual.
    (b) Written Statement.--A person seeking protected health 
information about a protected individual held by health information 
trustee under--
            (1) subsection (a)(1)--
                    (A) shall notify the protected individual or the 
                attorney of the protected individual of the request for 
                the information;
                    (B) shall provide the trustee with a signed 
                document attesting--
                            (i) that the protected individual is a 
                        party to the litigation or proceedings for 
                        which the information is sought;
                            (ii) that the individual has placed the 
                        individual's physical or mental condition or 
                        functional status in issue; and
                            (iii) the date on which the protected 
                        individual or the attorney of the protected 
                        individual was notified under subparagraph (A); 
                        and
                    (C) shall not accept any requested protected health 
                information from the trustee until the termination of 
                the 10-day period beginning on the date notice was 
                given under subparagraph (A); or
            (2) subsection (a)(3) shall provide the trustee with a 
        written statement that the information is sought to assist in 
        the identification of a dead individual.
    (c) Use and Disclosure.--A person to whom protected health 
information is disclosed under this section may use and disclose the 
information only to accomplish the purpose for which the disclosure was 
made.
    (d) Applicability.--A health information trustee referred to in 
subsection (a) is any of the following:
            (1) A health benefit plan sponsor.
            (2) A health care provider.
            (3) A health oversight agency.
            (4) A person who, with respect to the specific protected 
        health information to be disclosed under such subsection, 
        received the information--
                    (A) pursuant to--
                            (i) section 6417 (relating to emergency 
                        circumstances); or
                            (ii) section 6420 (relating to subpoenas, 
                        warrants, and search warrants); or
                    (B) while acting in whole or in part in the 
                capacity of an officer or employee of a person 
                described in subparagraph (A).

SEC. 6419. LAW ENFORCEMENT.

    (a) In General.--A health information trustee, other than a health 
information service organization, may disclose protected health 
information to a law enforcement agency, other than a health oversight 
agency--
            (1) if the information is disclosed for use in an 
        investigation or prosecution of a health information trustee;
            (2) in connection with criminal activity committed against 
        the trustee or an affiliated person of the trustee or on 
        premises controlled by the trustee; or
            (3) if the information is needed to determine whether a 
        crime has been committed and the nature of any crime that may 
        have been committed (other than a crime that may have been 
        committed by the protected individual who is the subject of the 
        information).
    (b) Additional Authority of Certain Trustees.--A health information 
trustee who is not a health information service organization, a public 
health authority, or a health researcher may disclose protected health 
information to a law enforcement agency (other than a health oversight 
agency)--
            (1) to assist in the identification or location of a 
        victim, fugitive, or witness in a law enforcement inquiry;
            (2) pursuant to a law requiring the reporting of specific 
        health care information to law enforcement authorities; or
            (3) if the information is specific health information 
        described in paragraph (2) and the trustee is operated by a 
        Federal agency;
    (c) Certification.--Where a law enforcement agency requests a 
health information trustee to disclose protected health information 
under subsection (a) or (b)(1), the agency shall provide the trustee 
with a written certification that--
            (1) is signed by a supervisory official of a rank 
        designated by the head of the agency;
            (2) specifies the information requested; and
            (3) states that the information is needed for a lawful 
        purpose under this section.
    (d) Restrictions on Disclosure and Use.--A person who receives 
protected health information about a protected individual through a 
disclosure under this section may not use or disclose the information--
            (1) in any administrative, civil, or criminal action or 
        investigation directed against the individual, except an action 
        or investigation arising out of and directly related to the 
        action or investigation for which the information was obtained; 
        and
            (2) otherwise unless the use or disclosure is necessary to 
        fulfill the purpose for which the information was obtained and 
        is not prohibited by any other provision of law.

SEC. 6420. SUBPOENAS, WARRANTS, AND SEARCH WARRANTS.

    (a) In General.--A health information trustee described in 
subsection (g) may disclose protected health information if the 
disclosure is pursuant to any of the following:
            (1) A subpoena issued under the authority of a grand jury 
        and the trustee is provided a written certification by the 
        grand jury that the grand jury has complied with the applicable 
        access provisions of section 6431.
            (2) An administrative subpoena or warrant or a judicial 
        subpoena or search warrant and the trustee is provided a 
        written certification by the person seeking the information 
        that the person has complied with the applicable access 
        provisions of section 6431 or 6433(a).
            (3) An administrative subpoena or warrant or a judicial 
        subpoena or search warrant and the disclosure otherwise meets 
        the conditions of one of sections 6413 through 6419.
    (b) Authority of All Trustees.--Any health information trustee may 
disclose protected health information if the disclosure is pursuant to 
subsection (a)(3).
    (c) Restrictions on Use and Disclosure.--Protected health 
information about a protected individual that is disclosed by a health 
information trustee pursuant to--
            (1) subsection (a)(2) may not be otherwise used or 
        disclosed by the recipient unless the use or disclosure is 
        necessary to fulfill the purpose for which the information was 
        obtained; and
            (2) subsection (a)(3) may not be used or disclosed by the 
        recipient unless the recipient complies with the conditions and 
        restrictions on use and disclosure with which the recipient 
        would have been required to comply if the disclosure by the 
        trustee had been made under the section referred to in 
        subsection (a)(3) the conditions of which were met by the 
        disclosure.
    (d) Restrictions on Grand Juries.--Protected health information 
that is disclosed by a health information trustee under subsection 
(a)(1)--
            (1) shall be returnable on a date when the grand jury is in 
        session and actually presented to the grand jury;
            (2) shall be used only for the purpose of considering 
        whether to issue an indictment or report by that grand jury, or 
        for the purpose of prosecuting a crime for which that 
        indictment or report is issued, or for a purpose authorized by 
        rule 6(e) of the Federal Rules of Criminal Procedure or a 
        comparable State rule;
            (3) shall be destroyed or returned to the trustee if not 
        used for one of the purposes specified in paragraph (2); and
            (4) shall not be maintained, or a description of the 
        contents of such information shall not be maintained, by any 
        government authority other than in the sealed records of the 
        grand jury, unless such information has been used in the 
        prosecution of a crime for which the grand jury issued an 
        indictment or presentment or for a purpose authorized by rule 
        6(e) of the Federal Rules of Criminal Procedure or a comparable 
        State rule.
    (e) Use in Action Against Individual.--A person who receives 
protected health information about a protected individual through a 
disclosure under this section may not use or disclose the information 
in any administrative, civil, or criminal action or investigation 
directed against the individual, except an action or investigation 
arising out of and directly related to the inquiry for which the 
information was obtained;
    (f) Construction.--Nothing in this section shall be construed as 
authority for a health information trustee to refuse to comply with a 
valid administrative subpoena or warrant or a valid judicial subpoena 
or search warrant that meets the requirements of this subtitle.
    (g) Applicability.--A health information trustee referred to in 
subsection (a) is any trustee other than the following:
            (1) A health information service organization.
            (2) A public health authority.
            (3) A health researcher.

SEC. 6421. HEALTH INFORMATION SERVICE ORGANIZATIONS.

    A health information trustee may disclose protected health 
information to a health information service organization for the 
purpose of permitting the organization to perform a function for which 
the Secretary has authorized (by means of a designation or 
certification) the organization to receive access to health care data 
in electronic or magnetic form that are regulated by this Act.

             PART 3--ACCESS PROCEDURES AND CHALLENGE RIGHTS

SEC. 6431. ACCESS PROCEDURES FOR LAW ENFORCEMENT SUBPOENAS, WARRANTS, 
              AND SEARCH WARRANTS.

    (a) Probable Cause Requirement.--A government authority may not 
obtain protected health information about a protected individual from a 
health information trustee under paragraph (1) or (2) of section 
6420(a) for use in a law enforcement inquiry unless there is probable 
cause to believe that the information is relevant to a legitimate law 
enforcement inquiry being conducted by the government authority.
    (b) Warrants and Search Warrants.--A government authority that 
obtains protected health information about a protected individual from 
a health information trustee under circumstances described in 
subsection (a) and pursuant to a warrant or search warrant shall, not 
later than 30 days after the date the warrant was served on the 
trustee, serve the individual with, or mail to the last known address 
of the individual, a copy of the warrant.
    (c) Subpoenas.--Except as provided in subsection (d), a government 
authority may not obtain protected health information about a protected 
individual from a health information trustee under circumstances 
described in subsection (a) and pursuant to a subpoena unless a copy of 
the subpoena has been served by hand delivery upon the individual, or 
mailed to the last known address of the individual, on or before the 
date on which the subpoena was served on the trustee, together with a 
notice (published by the Secretary under section 6435(1)) of the 
individual's right to challenge the subpoena in accordance with section 
6432, and--
            (1) 30 days have passed from the date of service, or 30 
        days have passed from the date of mailing, and within such time 
        period the individual has not initiated a challenge in 
        accordance with section 6432; or
            (2) disclosure is ordered by a court under section 6432.
    (d) Application for Delay.--
            (1) In general.--A government authority may apply to an 
        appropriate court to delay (for an initial period of not longer 
        than 90 days) serving a copy of a subpoena and a notice 
        otherwise required under subsection (c) with respect to a law 
        enforcement inquiry. The government authority may apply to the 
        court for extensions of the delay.
            (2) Reasons for delay.--An application for a delay, or 
        extension of a delay, under this subsection shall state, with 
        reasonable specificity, the reasons why the delay or extension 
        is being sought.
            (3) Ex parte order.--The court shall enter an ex parte 
        order delaying, or extending the delay of, the notice and an 
        order prohibiting the trustee from revealing the request for, 
        or the disclosure of, the protected health information being 
        sought if the court finds that--
                    (A) the inquiry being conducted is within the 
                lawful jurisdiction of the government authority seeking 
                the protected health information;
                    (B) there is probable cause to believe that the 
                protected health information being sought is relevant 
                to a legitimate law enforcement inquiry being conducted 
                by the government authority;
                    (C) the government authority's need for the 
                information outweighs the privacy interest of the 
                protected individual who is the subject of the 
                information; and
                    (D) there are reasonable grounds to believe that 
                receipt of a notice by the individual will result in--
                            (i) endangering the life or physical safety 
                        of any individual;
                            (ii) flight from prosecution;
                            (iii) destruction of or tampering with 
                        evidence or the information being sought; or
                            (iv) intimidation of potential witnesses.
            (4) Service of application on individual.--Upon the 
        expiration of a period of delay of notice under this 
        subsection, the government authority shall serve upon the 
        individual, with the service of the subpoena and the notice, a 
        copy of any applications filed and approved under this 
        subsection.

SEC. 6432. CHALLENGE PROCEDURES FOR LAW ENFORCEMENT SUBPOENAS.

    (a) Motion To Quash Subpoena.--Within 30 days of the date of 
service, or 30 days of the date of mailing, of a subpoena of a 
government authority seeking protected health information about a 
protected individual from a health information trustee under paragraph 
(1) or (2) of section 6420(a) (except a subpoena to which section 6433 
applies), the individual may file (without filing fee) a motion to 
quash the subpoena--
            (1) in the case of a State judicial subpoena, in the court 
        which issued the subpoena;
            (2) in the case of a subpoena issued under the authority of 
        a State that is not a State judicial subpoena, in a court of 
        competent jurisdiction;
            (3) in the case of a subpoena issued under the authority of 
        a Federal court, in any court of the United States of competent 
        jurisdiction; or
            (4) in the case of any other subpoena issued under the 
        authority of the United States, in--
                    (A) the United States district court for the 
                district in which the individual resides or in which 
                the subpoena was issued; or
                    (B) another United States district court of 
                competent jurisdiction.
    (b) Copy.--A copy of the motion shall be served by the individual 
upon the government authority by delivery of registered or certified 
mail.
    (c) Affidavits and Sworn Documents.--The government authority may 
file with the court such affidavits and other sworn documents as 
sustain the validity of the subpoena. The individual may file with the 
court, within 5 days of the date of the authority's filing, affidavits 
and sworn documents in response to the authority's filing. The court, 
upon the request of the individual, the government authority, or both, 
may proceed in camera.
    (d) Proceedings and Decision on Motion.--The court may conduct such 
proceedings as it deems appropriate to rule on the motion. All such 
proceedings shall be completed, and the motion ruled on, within 10 
calendar days of the date of the government authority's filing.
    (e) Extension of Time Limits for Good Cause.--The court, for good 
cause shown, may at any time in its discretion enlarge the time limits 
established by subsections (c) and (d).
    (f) Standard for Decision.--A court may deny a motion under 
subsection (a) if it finds that there is probable cause to believe that 
the protected health information being sought is relevant to a 
legitimate law enforcement inquiry being conducted by the government 
authority, unless the court finds that the individual's privacy 
interest outweighs the government authority's need for the information. 
The individual shall have the burden of demonstrating that the 
individual's privacy interest outweighs the need established by the 
government authority for the information.
    (g) Specific Considerations With Respect to Privacy Interest.--In 
determining under subsection (f) whether an individual's privacy 
interest outweighs the government authority's need for the information, 
the court shall consider--
            (1) the particular purpose for which the information was 
        collected by the trustee;
            (2) the degree to which disclosure of the information will 
        embarrass, injure, or invade the privacy of the individual;
            (3) the effect of the disclosure on the individual's future 
        health care;
            (4) the importance of the inquiry being conducted by the 
        government authority, and the importance of the information to 
        that inquiry; and
            (5) any other factor deemed relevant by the court.
    (h) Attorney's Fees.--In the case of any motion brought under 
subsection (a) in which the individual has substantially prevailed, the 
court, in its discretion, may assess against a government authority a 
reasonable attorney's fee and other litigation costs (including expert 
fees) reasonably incurred.
    (i) No Interlocutory Appeal.--A court ruling denying a motion to 
quash under this section shall not be deemed a final order and no 
interlocutory appeal may be taken therefrom by the individual. An 
appeal of such a ruling may be taken by the individual within such 
period of time as is provided by law as part of any appeal from a final 
order in any legal proceeding initiated against the individual arising 
out of or based upon the protect health information disclosed.

SEC. 6433. ACCESS AND CHALLENGE PROCEDURES FOR OTHER SUBPOENAS.

    (a) In General.--A person (other than a government authority 
seeking protected health information under circumstances described in 
section 6431(a)) may not obtain protected health information about a 
protected individual from a health information trustee pursuant to a 
subpoena under section 6420(a)(2) unless--
            (1) a copy of the subpoena has been served upon the 
        individual or mailed to the last known address of the 
        individual on or before the date on which the subpoena was 
        served on the trustee, together with a notice (published by the 
        Secretary under section 6435(2)) of the individual's right to 
        challenge the subpoena, in accordance with subsection (b); and
            (2) either--
                    (A) 30 days have passed from the date of service or 
                30 days have passed from the date of the mailing and 
                within such time period the individual has not 
                initiated a challenge in accordance with subsection 
                (b); or
                    (B) disclosure is ordered by a court under such 
                subsection.
    (b) Motion To Quash.--Within 30 days of the date of service or 30 
days of the date of mailing of a subpoena seeking protected health 
information about a protected individual from a health information 
trustee under subsection (a), the individual may file (without filing 
fee) in any court of competent jurisdiction, a motion to quash the 
subpoena, with a copy served on the person seeking the information. The 
individual may oppose, or seek to limit, the subpoena on any grounds 
that would otherwise be available if the individual were in possession 
of the information.
    (c) Standard for Decision.--The court shall grant an individual's 
motion under subsection (b) if the person seeking the information has 
not sustained the burden of demonstrating that--
            (1) there are reasonable grounds to believe that the 
        information will be relevant to a lawsuit or other judicial or 
        administrative proceeding; and
            (2) the need of the person for the information outweighs 
        the privacy interest of the individual.
    (d) Specific Considerations With Respect to Privacy Interest.--In 
determining under subsection (c) whether the need of the person for the 
information outweighs the privacy interest of the individual, the court 
shall consider--
            (1) the particular purpose for which the information was 
        collected by the trustee;
            (2) the degree to which disclosure of the information will 
        embarrass, injure, or invade the privacy of the individual;
            (3) the effect of the disclosure on the individual's future 
        health care;
            (4) the importance of the information to the lawsuit or 
        proceeding; and
            (5) any other factor deemed relevant by the court.
    (e) Attorney's Fees.--In the case of any motion brought under 
subsection (b) by an individual against a person in which the 
individual has substantially prevailed, the court, in its discretion, 
may assess against the person a reasonable attorney's fee and other 
litigation costs (including expert fees) reasonably incurred.

SEC. 6434. CONSTRUCTION OF PART; SUSPENSION OF STATUTE OF LIMITATIONS.

    (a) In General.--Nothing in this part shall affect the right of a 
health information trustee to challenge a request for protected health 
information. Nothing in this part shall entitle a protected individual 
to assert the rights of a health information trustee.
    (b) Effect of Motion on Statute of Limitations.--If an individual 
who is the subject of protected health information files a motion under 
this part which has the effect of delaying the access of a government 
authority to such information, the period beginning on the date such 
motion was filed and ending on the date on which the motion is decided 
shall be excluded in computing any period of limitations within which 
the government authority may commence any civil or criminal action in 
connection with which the access is sought.

SEC. 6435. RESPONSIBILITIES OF SECRETARY.

    Not later than July 1, 1996, the Secretary, after notice and 
opportunity for public comment, shall develop and disseminate brief, 
clear, and easily understood model notices--
            (1) for use under subsection (c) of section 6431, detailing 
        the rights of a protected individual who wishes to challenge, 
        under section 6432, the disclosure of protected health 
        information about the individual under such subsection; and
            (2) for use under subsection (a) of section 6433, detailing 
        the rights of a protected individual who wishes to challenge, 
        under subsection (b) of such section, the disclosure of 
        protected health information about the individual under such 
        section.

                    PART 4--MISCELLANEOUS PROVISIONS

SEC. 6441. PAYMENT CARD AND ELECTRONIC PAYMENT TRANSACTIONS.

    (a) Payment for Health Care Through Card or Electronic Means.--If a 
protected individual pays a health information trustee for health care 
by presenting a debit, credit, or other payment card or account number, 
or by any other electronic payment means, the trustee may disclose to a 
person described in subsection (b) only such protected health 
information about the individual as is necessary for the processing of 
the payment transaction or the billing or collection of amounts charged 
to, debited from, or otherwise paid by, the individual using the card, 
number, or other electronic payment means.
    (b) Transaction Processing.--A person who is a debit, credit, or 
other payment card issuer, is otherwise directly involved in the 
processing of payment transactions involving such cards or other 
electronic payment transactions, or is otherwise directly involved in 
the billing or collection of amounts paid through such means, may only 
use or disclose protected health information about a protected 
individual that has been disclosed in accordance with subsection (a) 
when necessary for--
            (1) the authorization, settlement, billing or collection of 
        amounts charged to, debited from, or otherwise paid by, the 
        individual using a debit, credit, or other payment card or 
        account number, or by other electronic payment means;
            (2) the transfer of receivables, accounts, or interest 
        therein;
            (3) the audit of the credit, debit, or other payment card 
        account information;
            (4) compliance with Federal, State, or local law; or
            (5) a properly authorized civil, criminal, or regulatory 
        investigation by Federal, State, or local authorities.

SEC. 6442. ACCESS TO PROTECTED HEALTH INFORMATION OUTSIDE OF THE UNITED 
              STATES.

    (a) In General.--Notwithstanding the provisions of part 2, and 
except as provided in subsection (b), a health information trustee may 
not permit any person who is not in a State to have access to protected 
health information about a protected individual unless one or more of 
the following conditions exist:
            (1) Specific authorization.--The individual has 
        specifically consented to the provision of such access outside 
        of the United States in an authorization that meets the 
        requirements of section 6412.
            (2) Equivalent protection.--The provision of such access is 
        authorized under this subtitle and the Secretary has determined 
        that there are fair information practices for protected health 
        information in the jurisdiction where the access will be 
        provided that provide protections for individuals and protected 
        health information that are equivalent to the protections 
        provided for by this subtitle.
            (3) Access required by law.--The provision of such access 
        is required under--
                    (A) a Federal statute; or
                    (B) a treaty or other international agreement 
                applicable to the United States.
    (b) Exceptions.--Subsection (a) does not apply where the provision 
of access to protected health information--
            (1) is to a foreign public health authority;
            (2) is authorized under section 6414 (relating to next of 
        kin and directory information), 6416 (relating to health 
        research), or 6417 (relating to emergency circumstances); or
            (3) is necessary for the purpose of providing for payment 
        for health care that has been provided to an individual.

SEC. 6443. STANDARDS FOR ELECTRONIC DOCUMENTS AND COMMUNICATIONS.

    (a) Standards.--Not later than July 1, 1996, the Secretary, after 
notice and opportunity for public comment and in consultation with 
appropriate private standard-setting organizations and other interested 
parties, shall establish standards with respect to the creation, 
transmission, receipt, and maintenance, in electronic and magnetic 
form, of each type of written document specifically required or 
authorized under this subtitle. Where a signature is required under any 
other provision of this part, such standards shall provide for an 
electronic or magnetic substitute that serves the functional equivalent 
of a signature.
    (b) Treatment of Complying Documents and Communications.--An 
electronic or magnetic document or communication that satisfies the 
standards established under subsection (a) with respect to such 
document or communication shall be treated as satisfying the 
requirements of this subtitle that apply to an equivalent written 
document.

SEC. 6444. DUTIES AND AUTHORITIES OF AFFILIATED PERSONS.

    (a) Requirements on Trustees.--
            (1) Provision of information.--A health information trustee 
        may provide protected health information to a person who, with 
        respect to the trustee, is an affiliated person and may permit 
        the affiliated person to use such information, only for the 
        purpose of conducting, supporting, or facilitating an activity 
        that the trustee is authorized to undertake.
            (2) Notice to affiliated person.--A health information 
        trustee shall notify a person who, with respect to the trustee, 
        is an affiliated person of any duties under this subtitle that 
        the affiliated person is required to fulfill and of any 
        authorities under this subtitle that the affiliated person is 
        authorized to exercise.
    (b) Duties of Affiliated Persons.--
            (1) In general.--An affiliated person shall fulfill any 
        duty under this subtitle that--
                    (A) the health information trustee with whom the 
                person has an agreement or relationship described in 
                section 6400(c)(1)(C) is required to fulfill; and
                    (B) the person has undertaken to fulfill pursuant 
                to such agreement or relationship.
            (2) Construction of other parts.--With respect to a duty 
        described in paragraph (1) that an affiliated person is 
        required to fulfill, the person shall be considered a health 
        information trustee for purposes of this subtitle. The person 
        shall be subject to part 5 (relating to enforcement) with 
        respect to any such duty that the person fails to fulfill.
            (3) Effect on trustee.--An agreement or relationship with 
        an affiliated person does not relieve a health information 
        trustee of any duty or liability under this subtitle.
    (c) Authorities of Affiliated Persons.--
            (1) In general.--An affiliated person may only exercise an 
        authority under this subtitle that the health information 
        trustee with whom the person is affiliated may exercise and 
        that the person has been given by the trustee pursuant to an 
        agreement or relationship described in section 6400(c)(1)(C). 
        With respect to any such authority, the person shall be 
        considered a health information trustee for purposes of this 
        subtitle. The person shall be subject to part 5 (relating to 
        enforcement) with respect to any act that exceeds such 
        authority.
            (2) Effect on trustee.--An agreement or relationship with 
        an affiliated person does not affect the authority of a health 
        information trustee under this subtitle.

SEC. 6445. AGENTS AND ATTORNEYS.

    (a) In General.--Except as provided in subsections (b) and (c), a 
person who is authorized by law (on grounds other than an individual's 
minority), or by an instrument recognized under law, to act as an 
agent, attorney, proxy, or other legal representative for a protected 
individual or the estate of a protected individual, or otherwise to 
exercise the rights of the individual or estate, may, to the extent 
authorized, exercise and discharge the rights of the individual or 
estate under this subtitle.
    (b) Health Care Power of Attorney.--A person who is authorized by 
law (on grounds other than an individual's minority), or by an 
instrument recognized under law, to make decisions about the provision 
of health care to an individual who is incapacitated may exercise and 
discharge the rights of the individual under this subtitle to the 
extent necessary to effectuate the terms or purposes of the grant of 
authority.
    (c) No Court Declaration.--If a health care provider determines 
that an individual, who has not been declared to be legally 
incompetent, suffers from a medical condition that prevents the 
individual from acting knowingly or effectively on the individual's own 
behalf, the right of the individual to authorize disclosure under 
section 6412 may be exercised and discharged in the best interest of 
the individual by--
            (1) a person described in subsection (b) with respect to 
        the individual;
            (2) a person described in subsection (a) with respect to 
        the individual, but only if a person described in paragraph (1) 
        cannot be contacted after a reasonable effort;
            (3) the next of kin of the individual, but only if a person 
        described in paragraph (1) or (2) cannot be contacted after a 
        reasonable effort; or
            (4) the health care provider, but only if a person 
        described in paragraph (1), (2), or (3) cannot be contacted 
        after a reasonable effort.

SEC. 6446. MINORS.

    (a) Individuals Who Are 18 or Legally Capable.--In the case of an 
individual--
            (1) who is 18 years of age or older, all rights of the 
        individual shall be exercised by the individual, except as 
        provided in section 6445; or
            (2) who, acting alone, has the legal capacity to apply for 
        and obtain health care and has sought such care, the individual 
        shall exercise all rights of an individual under this subtitle 
        with respect to protected health information relating to such 
        care.
    (b) Individuals Under 18.--Except as provided in subsection (a)(2), 
in the case of an individual who is--
            (1) under 14 years of age, all the individual's rights 
        under this subtitle shall be exercised through the parent or 
        legal guardian of the individual; or
            (2) 14, 15, 16, or 17 years of age, the right of inspection 
        (under section 6401), the right of amendment (under section 
        6402), and the right to authorize disclosure of protected 
        health information (under section 6412) of the individual may 
        be exercised either by the individual or by the parent or legal 
        guardian of the individual.

SEC. 6447. MAINTENANCE OF CERTAIN PROTECTED HEALTH INFORMATION.

    (a) In General.--A State shall establish a process under which the 
protected health information described in subsection (b) that is 
maintained by a person described in subsection (c) is delivered to, and 
maintained by, the State or an individual or entity designated by the 
State.
    (b) Information Described.--The protected health information 
referred to in subsection (a) is protected health information that--
            (1) is recorded in any form or medium;
            (2) is created by--
                    (A) a health care provider; or
                    (B) a health benefit plan sponsor that provides 
                benefits in the form of items and services to enrollees 
                and not in the form of reimbursement for items and 
                services; and
            (3) relates in any way to the past, present, or future 
        physical or mental health or condition or functional status of 
        a protected individual or the provision of health care to a 
        protected individual.
    (c) Persons Described.--A person referred to in subsection (a) is 
any of the following:
            (1) A health care facility previously located in the State 
        that has closed.
            (2) A professional practice previously operated by a health 
        care provider in the State that has closed.
            (3) A health benefit plan sponsor that--
                    (A) previously provided benefits in the form of 
                items and services to enrollees in the State; and
                    (B) has ceased to do business.

                          PART 5--ENFORCEMENT

SEC. 6451. CIVIL ACTIONS.

    (a) In General.--Any individual whose right under this subtitle has 
been knowingly or negligently violated--
            (1) by a health information trustee, or any other person, 
        who is not described in paragraph (2), (3), (4), or (5) may 
        maintain a civil action for actual damages and for equitable 
        relief against the health information trustee or other person;
            (2) by an officer or employee of the United States while 
        the officer or employee was acting within the scope of the 
        office or employment may maintain a civil action for actual 
        damages and for equitable relief against the United States;
            (3) by an officer or employee of any government authority 
        of a State that has waived its sovereign immunity to a claim 
        for damages resulting from a violation of this subtitle while 
        the officer or employee was acting within the scope of the 
        office or employment may maintain a civil action for actual 
        damages 
        and for equitable relief against the State government;
            (4) by an officer or employee of a government of a State 
        that is not described in paragraph (3) may maintain a civil 
        action for actual damages and for equitable relief against the 
        officer or employee; or
            (5) by an officer or employee of a government authority 
        while the officer or employee was not acting within the scope 
        of the office or employment may maintain a civil action for 
        actual damages and for equitable relief against the officer or 
        employee.
    (b) Knowing Violations.--Any individual entitled to recover actual 
damages under this section because of a knowing violation of a 
provision of this subtitle (other than subsection (c) or (d) of section 
6411) shall be entitled to recover the amount of the actual damages 
demonstrated or $5,000, whichever is greater.
    (c) Actual Damages.--For purposes of this section, the term 
``actual damages'' includes damages paid to compensate an individual 
for nonpecuniary losses such as physical and mental injury as well as 
damages paid to compensate for pecuniary losses.
    (d) Punitive Damages; Attorney's Fees.--In any action brought under 
this section in which the complainant has prevailed because of a 
knowing violation of a provision of this subtitle (other than 
subsection (c) or (d) of section 6411), the court may, in addition to 
any relief awarded under subsections (a) and (b), award such punitive 
damages as may be warranted. In such an action, the court, in its 
discretion, may allow the prevailing party a reasonable attorney's fee 
(including expert fees) as part of the costs, and the United States 
shall be liable for costs the same as a private person.
    (e) Limitation.--A civil action under this section may not be 
commenced more than 2 years after the date on which the aggrieved 
individual discovered the violation or the date on which the aggrieved 
individual had a reasonable opportunity to discover the violation, 
whichever occurs first.
    (f) Inspection and Amendment.--If a health information trustee has 
established a formal internal procedure that allows an individual who 
has been denied inspection or amendment of protected health information 
to appeal the denial, the individual may not maintain a civil action in 
connection with the denial until the earlier of--
            (1) the date the appeal procedure has been exhausted; or
            (2) the date that is 4 months after the date on which the 
        appeal procedure was initiated.
    (g) No Liability for Permissible Disclosures.--A health information 
trustee who makes a disclosure of protected health information about a 
protected individual that is permitted by this subtitle and not 
otherwise prohibited by State or Federal statute shall not be liable to 
the individual for the disclosure under common law.
    (h) No Liability for Institutional Review Board Determinations.--If 
the members of a certified institutional review board have in good 
faith determined that an approved health research project is of 
sufficient importance so as to outweigh the intrusion into the privacy 
of an individual pursuant to section 6416(a)(1), the members, the 
board, and the parent institution of the board shall not be liable to 
the individual as a result of such determination.
    (i) Good Faith Reliance on Certification.--A health information 
trustee who relies in good faith on a certification by a government 
authority or other person and discloses protected health information 
about an individual in accordance with this subtitle shall not be 
liable to the individual for such disclosure.

SEC. 6452. CIVIL MONEY PENALTIES.

    (a) Violation.--Any health information trustee who the Secretary 
determines has demonstrated a pattern or practice of failure to comply 
with the provisions of this subtitle shall be subject, in addition to 
any other penalties that may be prescribed by law, to a civil money 
penalty of not more than $10,000 for each such failure. In determining 
the amount of any penalty to be assessed under the procedures 
established under subsection (b), the Secretary shall take into account 
the previous record of compliance of the person being assessed with the 
applicable requirements of this subtitle and the gravity of the 
violation.
    (b) Procedures for Imposition of Penalties.--The provisions of 
section 1128A of the Social Security Act (other than subsections (a) 
and (b)) shall apply to the imposition of a civil monetary penalty 
under this section in the same manner as such provisions apply with 
respect to the imposition of a penalty under section 1128A of such Act.

SEC. 6453. ALTERNATIVE DISPUTE RESOLUTION.

    (a) In General.--Not later than July 1, 1996, the Secretary shall, 
by regulation, develop alternative dispute resolution methods for use 
by individuals, health information trustees, and other persons in 
resolving claims under section 6451.
    (b) Effect on Initiation of Civil Actions.--
            (1) In general.--Subject to paragraph (2), the regulations 
        established under subsection (a) may provide that an individual 
        alleging that a right of the individual under this subtitle has 
        been violated shall pursue at least one alternative dispute 
        resolution method developed under such subsection as a 
        condition precedent to commencing a civil action under section 
        6451.
            (2) Limitation.--Such regulations may not require an 
        individual to refrain from commencing a civil action to pursue 
        one or more alternative dispute resolution method for a period 
        that is greater than 6 months.
            (3) Suspension of statute of limitations.--The regulations 
        established by the Secretary under subsection (a) may provide 
        that a period in which an individual described in paragraph (1) 
        pursues (as defined by the Secretary) an alternative dispute 
        resolution method under this section shall be excluded in 
        computing the period of limitations under section 6451(e).
    (c) Methods.--The methods under subsection (a) shall include at 
least the following:
            (1) Arbitration.--The use of arbitration.
            (2) Mediation.--The use of mediation.
            (3) Early offers of settlement.--The use of a process under 
        which parties make early offers of settlement.
    (d) Standards for Establishing Methods.--In developing alternative 
dispute resolution methods under subsection (a), the Secretary shall 
ensure that the methods promote the resolution of claims in a manner 
that--
            (1) is affordable for the parties involved;
            (2) provides for timely and fair resolution of claims; and
            (3) provides for reasonably convenient access to dispute 
        resolution for individuals.

SEC. 6454. AMENDMENTS TO CRIMINAL LAW.

    (a) In General.--Title 18, United States Code, is amended by 
inserting after chapter 89 the following:

               ``CHAPTER 90--PROTECTED HEALTH INFORMATION

``Sec.
``1831. Definitions.
``1832. Obtaining protected health information under false pretenses.
``1833. Monetary gain from obtaining protected health information under 
                            false pretenses.
``1834. Knowing and unlawful obtaining of protected health information.
``1835. Monetary gain from knowing and unlawful obtaining of protected 
                            health information.
``1836. Knowing and unlawful use or disclosure of protected health 
                            information.
``1837. Monetary gain from knowing and unlawful sale, transfer, or use 
                            of protected health information.
``Sec. 1831. Definitions
    ``As used in this chapter--
            ``(1) the term `health information trustee' has the meaning 
        given such term in section 6400(b)(5) of the Bipartisan Health 
        Care Reform Act of 1994;
            ``(2) the term `protected health information' has the 
        meaning given such term in section 6400(a)(3) of such Act; and
            ``(3) the term `protected individual' has the meaning given 
        such term in section 6400(a)(4) of such Act.
``Sec. 1832. Obtaining protected health information under false 
              pretenses
    ``Whoever under false pretenses--
            ``(1) requests or obtains protected health information from 
        a health information trustee; or
            ``(2) obtains from a protected individual an authorization 
        for the disclosure of protected health information about the 
        individual maintained by a health information trustee;
shall be fined under this title or imprisoned not more than 5 years, or 
both.
``Sec. 1833. Monetary gain from obtaining protected health information 
              under false pretenses
    ``Whoever under false pretenses--
            ``(1) requests or obtains protected health information from 
        a health information trustee with the intent to sell, transfer, 
        or use such information for profit or monetary gain; or
            ``(2) obtains from a protected individual an authorization 
        for the disclosure of protected health information about the 
        individual maintained by a health information trustee with the 
        intent to sell, transfer, or use such authorization for profit 
        or monetary gain;
and knowingly sells, transfers, or uses such information or 
authorization for profit or monetary gain shall be fined under this 
title or imprisoned not more than 10 years, or both.
``Sec. 1834. Knowing and unlawful obtaining of protected health 
              information
    ``Whoever knowingly obtains protected health information from a 
health information trustee in violation of subtitle E of title VI of 
the Bipartisan Health Care Reform Act of 1994, knowing that such 
obtaining is unlawful, shall be fined under this title or imprisoned 
not more than 5 years, or both.
``Sec. 1835. Monetary gain from knowing and unlawful obtaining of 
              protected health information
    ``Whoever knowingly--
            ``(1) obtains protected health information from a health 
        information trustee in violation of subtitle E of title VI of 
        the Bipartisan Health Care Reform Act of 1994, knowing that 
        such obtaining is unlawful and with the intent to sell, 
        transfer, or use such information for profit or monetary gain; 
        and
            ``(2) knowingly sells, transfers, or uses such information 
        for profit or monetary gain;
shall be fined under this title or imprisoned not more than 10 years, 
or both.
``Sec. 1836. Knowing and unlawful use or disclosure of protected health 
              information
    ``Whoever knowingly uses or discloses protected health information 
in violation of subtitle E of title VI of the Bipartisan Health Care 
Reform Act of 1994, knowing that such use or disclosure is unlawful, 
shall be fined under this title or imprisoned not more than 5 years, or 
both.
``Sec. 1837. Monetary gain from knowing and unlawful sale, transfer, or 
              use of protected health information
    ``Whoever knowingly sells, transfers, or uses protected health 
information in violation of subtitle E of title VI of the Bipartisan 
Health Care Reform Act of 1994, knowing that such sale, transfer, or 
use is unlawful, shall be fined under this title or imprisoned not more 
than 10 years, or both.''.
    (b) Clerical Amendment.--The table of chapters for part I of title 
18, United States Code, is amended by inserting after the item relating 
to chapter 89 the following:

``90. Protected health information..........................    1831''.

           PART 6--AMENDMENTS TO TITLE 5, UNITED STATES CODE

SEC. 6461. AMENDMENTS TO TITLE 5, UNITED STATES CODE.

    (a) New Subsection.--Section 552a of title 5, United States Code, 
is amended by adding at the end the following:
    ``(w) Medical Exemptions.--The head of an agency that is a health 
information trustee (as defined in section 6400(b)(5) of the Bipartisan 
Health Care Reform Act of 1994) shall promulgate rules, in accordance 
with the requirements (including general notice) of subsections (b)(1), 
(b)(2), (b)(3), (c), and (e) of section 553 of this title, to exempt a 
system of records within the agency, to the extent that the system of 
records contains protected health information (as defined in section 
6400(a)(3) of such Act), from all provisions of this section except 
subsections (e)(1), (e)(2), subparagraphs (A) through (C) and (E) 
through (I) of subsection (e)(4), and subsections 
(e)(5), (e)(6), (e)(9), (e)(12), (l), (n), (o), (p), (q), (r), and 
(u).''.
    (b) Repeal.--Section 552a(f)(3) of title 5, United States Code, is 
amended by striking ``pertaining to him,'' and all that follows through 
the semicolon and inserting ``pertaining to the individual;''.

    PART 7--REGULATIONS, RESEARCH, AND EDUCATION; EFFECTIVE DATES; 
             APPLICABILITY; AND RELATIONSHIP TO OTHER LAWS

SEC. 6471. REGULATIONS; RESEARCH AND EDUCATION.

    (a) Regulations.--Not later than July 1, 1996, the Secretary shall 
prescribe regulations to carry out this subtitle.
    (b) Research and Technical Support.--The Secretary may sponsor--
            (1) research relating to the privacy and security of 
        protected health information;
            (2) the development of consent forms governing disclosure 
        of such information; and
            (3) the development of technology to implement standards 
        regarding such information.
    (c) Education.--The Secretary shall establish education and 
awareness programs--
            (1) to foster adequate security practices by health 
        information trustees;
            (2) to train personnel of health information trustees 
        respecting the duties of such personnel with respect to 
        protected health information; and
            (3) to inform individuals and employers who purchase health 
        care respecting their rights with respect to such information.

SEC. 6472. EFFECTIVE DATES.

    (a) In General.--Except as provided in subsection (b), this 
subtitle, and the amendments made by this subtitle, shall take effect 
on January 1, 1997.
    (b) Provisions Effective Immediately.--A provision of this subtitle 
shall take effect on the date of the enactment of this Act if the 
provision--
            (1) imposes a duty on the Secretary to develop, establish, 
        or promulgate regulations, guidelines, notices, statements, or 
        education and awareness programs; or
            (2) authorizes the Secretary to sponsor research or the 
        development of forms or technology.

SEC. 6473. APPLICABILITY.

    (a) Protected Health Information.--Except as provided in 
subsections (b) and (c), the provisions of this subtitle shall apply to 
any protected health information that is received, created, used, 
maintained, or disclosed by a health information trustee in a State on 
or after January 1, 1997, regardless of whether the information existed 
or was disclosed prior to such date.
    (b) Exception.--
            (1) In general.--The provisions of this subtitle shall not 
        apply to a trustee described in paragraph (2), except with 
        respect to protected health information that is received by the 
        trustee on or after January 1, 1997.
            (2) Applicability.--A trustee referred to in paragraph (1) 
        is--
                    (A) a health researcher; or
                    (B) a person who, with respect to specific 
                protected health information, received the 
                information--
                            (i) pursuant to--
                                    (I) section 6417 (relating to 
                                emergency circumstances);
                                    (II) section 6418 (relating to 
                                judicial and administrative purposes);
                                    (III) section 6419 (relating to law 
                                enforcement); or
                                    (IV) section 6420 (relating to 
                                subpoenas, warrants, and search 
                                warrants); or
                            (ii) while acting in whole or in part in 
                        the capacity of an officer or employee of a 
                        person described in clause (i).
    (c) Authorizations for Disclosures.--An authorization for the 
disclosure of protected health information about a protected individual 
that is executed by the individual before January 1, 1997, and is 
recognized and valid under State law on December 31, 1996, shall remain 
valid and shall not be subject to the requirements of section 6412 
until January 1, 1998, or the occurrence of the date or event (if any) 
specified in the authorization upon which the authorization expires, 
whichever occurs earlier.

SEC. 6474. RELATIONSHIP TO OTHER LAWS.

    (a) State Law.--Except as otherwise provided in subsections (b), 
(c), (d), and (f), a State may not establish, continue in effect, or 
enforce any State law to the extent that the law is inconsistent with, 
or imposes additional requirements with respect to, any of the 
following:
            (1) A duty of a health information trustee under this 
        subtitle.
            (2) An authority of a health information trustee under this 
        subtitle to disclose protected health information.
            (3) A provision of part 3 (relating to access procedures 
        and challenge rights), part 4 (miscellaneous provisions), or 
        part 5 (relating to enforcement).
    (b) Laws Relating to Public Health and Mental Health.--This 
subtitle does not preempt, supersede, or modify the operation of any 
State law regarding public health or mental health to the extent that 
the law prohibits or regulates a disclosure of protected health 
information that is permitted under this subtitle.
    (c) Criminal Penalties.--A State may establish and enforce criminal 
penalties with respect to a failure to comply with a provision of this 
subtitle.
    (d) Privileges.--A privilege that a person has under law in a court 
of a State or the United States or under the rules of any agency of a 
State or the United States may not be diminished, waived, or otherwise 
affected by--
            (1) the execution by a protected individual of an 
        authorization for disclosure of protected health information 
        under this subtitle, if the authorization is executed for the 
        purpose of receiving health care or providing for the payment 
        for health care; or
            (2) any provision of this subtitle that authorizes the 
        disclosure of protected health information for the purpose of 
        receiving health care or providing for the payment for health 
        care.
    (e) Department of Veterans Affairs.--The limitations on use and 
disclosure of protected health information under this subtitle shall 
not be construed to prevent any exchange of such information within and 
among components of the Department of Veterans Affairs that determine 
eligibility for or entitlement to, or that provide, benefits under laws 
administered by the Secretary of Veterans Affairs.
    (f) Certain Duties Under State or Federal Law.--This subtitle shall 
not be construed to preempt, supersede, or modify the operation of any 
of the following:
            (1) Any law that provides for the reporting of vital 
        statistics such as birth or death information.
            (2) Any law requiring the reporting of abuse or neglect 
        information about any individual.
            (3) Subpart II of part E of title XXVI of the Public Health 
        Service Act (relating to notifications of emergency response 
        employees of possible exposure to infectious diseases).
            (4) The Americans with Disabilities Act of 1990.
            (5) Any Federal or State statute that establishes a 
        privilege for records used in health professional peer review 
        activities.
    (g) Secretarial Authority.--
            (1) Secretary of health and human services.--A provision of 
        this subtitle does not preempt, supersede, or modify the 
        operation of section 543 of the Public Health Service Act, 
        except to the extent that the Secretary of Health and Human 
        Services determines through regulations promulgated by such 
        Secretary that the provision provides greater protection for 
        protected health information, and the rights of protected 
        individuals, than is provided under such section 543.
            (2) Secretary of veterans affairs.--A provision of this 
        subtitle does not preempt, supersede, or modify the operation 
        of section 7332 of title 38, United States Code, except to the 
        extent that the Secretary of Veterans Affairs determines 
        through regulations promulgated by such Secretary that the 
        provision provides greater protection for protected health 
        information, and the rights of protected individuals, than is 
        provided under such section 7332.

                         Subtitle F--Antitrust

                                                   Title VI, Subtitle F

SEC. 6501. PUBLICATION OF ANTITRUST GUIDELINES ON ACTIVITIES OF HEALTH 
              PLANS.

    (a) In General.--The Attorney General shall provide for the 
development and publication of explicit guidelines on the application 
of antitrust laws to the activities of health plans. The guidelines 
shall be designed to facilitate development and operation of plans, 
consistent with the antitrust laws.
    (b) Review Process.--The Attorney General shall establish a review 
process under which the administrator or sponsor of a health plan (or 
organization that proposes to administer or sponsor a health plan) may 
submit a request to the Attorney General to obtain a prompt opinion 
(but in no event later than 90 days after the Attorney General receives 
the request) from the Department of Justice on the plan's conformity 
with the Federal antitrust laws.
    (c) Definitions.--In this section--
            (1) the term ``antitrust laws''--
                    (A) has the meaning given it in subsection (a) of 
                the first section of the Clayton Act (15 U.S.C. 12(a)), 
                except that such term includes section 5 of the Federal 
                Trade Commission Act (15 U.S.C. 45) to the extent such 
                section applies to unfair methods of competition, and
                    (B) includes any State law similar to the laws 
                referred to in subparagraph (A); and
            (2) the term ``health plan'' means any contract or 
        arrangement under which an entity bears all or part of the cost 
        of providing health care items and services, including a 
        hospital or medical expense incurred policy or certificate, 
        hospital or medical service plan contract, or health 
        maintenance subscriber contract, but does not include--
                    (A) coverage only for accident, dental, vision, 
                disability, or long term care, medicare supplemental 
                health insurance, or any combination thereof,
                    (B) coverage issued as a supplement to liability 
                insurance,
                    (C) workers' compensation or similar insurance, or
                    (D) automobile medical-payment insurance.

SEC. 6502. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC ADVANTAGE.

    (a) Issuance and Effect of Certificate.--The Attorney General, 
after consultation with the Secretary, shall issue in accordance with 
this section a certificate of public advantage to each eligible health 
care collaborative activity that complies with the requirements in 
effect under this section on or after the expiration of the 1-year 
period that begins on the date of the enactment of this Act (without 
regard to whether or not the Attorney General has promulgated 
regulations to carry out this section by such date). Such activity, and 
the parties to such activity, shall not be liable under any of the 
antitrust laws for conduct described in such certificate and engaged in 
by such activity if such conduct occurs while such certificate is in 
effect.
    (b) Requirements Applicable to Issuance of Certificates.--
            (1) Standards to be met.--The Attorney General shall issue 
        a certificate to an eligible health care collaborative activity 
        if the Attorney General finds that--
                    (A) the benefits that are likely to result from 
                carrying out the activity outweigh the reduction in 
                competition (if any) that is likely to result from the 
                activity, and
                    (B) such reduction in competition is necessary to 
                obtain such benefits.
            (2) Factors to be considered.--
                    (A) Weighing of benefits against reduction in 
                competition.--For purposes of making the finding 
                described in paragraph (1)(A), the Attorney General 
                shall consider whether the activity is likely--
                            (i) to maintain or to increase the quality 
                        of health care by providing new services not 
                        currently offered in the relevant market,
                            (ii) to increase access to health care,
                            (iii) to achieve cost efficiencies that 
                        will be passed on to health care consumers, 
                        such as economies of scale, reduced transaction 
                        costs, and reduced administrative costs, that 
                        cannot be achieved by the provision of 
                        available services and facilities in the 
                        relevant market,
                            (iv) to preserve the operation of health 
                        care facilities located in underserved 
                        geographical areas,
                            (v) to improve utilization of health care 
                        resources, and
                            (vi) to reduce inefficient health care 
                        resource duplication.
                    (B) Necessity of reduction in competition.--For 
                purposes of making the finding described in paragraph 
                (1)(B), the Attorney General shall consider--
                            (i) the ability of the providers of health 
                        care services that are (or likely to be) 
                        affected by the health care collaborative 
                        activity and the entities responsible for 
                        making payments to such providers to negotiate 
                        societally optimal payment and service 
                        arrangements,
                            (ii) the effects of the health care 
                        collaborative activity on premiums and other 
                        charges imposed by the entities described in 
                        clause (i), and
                            (iii) the availability of equally 
                        efficient, less restrictive alternatives to 
                        achieve the benefits that are intended to be 
                        achieved by carrying out the activity.
    (c) Establishment of Criteria and Procedures.--Subject to 
subsections (d) and (e), not later than 1 year after the date of the 
enactment of this Act, the Attorney General and the Secretary shall 
establish jointly by rule the criteria and procedures applicable to the 
issuance of certificates under subsection (a). The rules shall specify 
the form and content of the application to be submitted to the Attorney 
General to request a certificate, the information required to be 
submitted in support of such application, the procedures applicable to 
denying and to revoking a certificate, and the procedures applicable to 
the administrative appeal (if such appeal is authorized by rule) of the 
denial and the revocation of a certificate. Such information may 
include the terms of the health care collaborative activity (in the 
case of an activity in existence as of the time of the application) and 
implementation plan for the collaborative activity.
    (d) Eligible Health Care Collaborative Activity.--To be an eligible 
health care collaborative activity for purposes of this section, a 
health care collaborative activity shall submit to the Attorney General 
an application that complies with the rules in effect under subsection 
(c) and that includes--
            (1) an agreement by the parties to the activity that the 
        activity will not foreclose competition by entering into 
        contracts that prevent health care providers from providing 
        health care in competition with the activity,
            (2) an agreement that the activity will submit to the 
        Attorney General annually a report that describes the 
        operations of the activity and information regarding the impact 
        of the activity on health care and on competition in health 
        care, and
            (3) an agreement that the parties to the activity will 
        notify the Attorney General and the Secretary of the 
        termination of the activity not later than 30 days after such 
        termination occurs.
    (e) Review of Applications for Certificates.--Not later than 90 
days after an eligible health care collaborative activity submits to 
the Attorney General an application that complies with the rules in 
effect under subsection (c) and with subsection (d), the Attorney 
General shall issue or deny the issuance of such certificate. If, 
before the expiration of such 90-day period, the Attorney General may 
extend the time for issuance for good cause.
    (f) Revocation of Certificate.--Whenever the Attorney General finds 
that a health care collaborative activity with respect to which a 
certificate is in effect does not meet the standards specified in 
subsection (b), the Attorney General shall revoke such certificate.
    (g) Written Reasons; Judicial Review.--
            (1) Denial and revocation of certificates.--If the Attorney 
        General denies an application for a certificate or revokes a 
        certificate, the Attorney General shall include in the notice 
        of denial or revocation a statement of the reasons relied upon 
        for the denial or revocation of such certificate.
            (2) Judicial review.--
                    (A) After administrative proceeding.--(i) If the 
                Attorney General denies an application submitted or 
                revokes a certificate issued under this section after 
                an opportunity for hearing on the record, then any 
                party to the health care collaborative activity 
                involved may commence a civil action, not later than 60 
                days after receiving notice of the denial or 
                revocation, in an appropriate district court of the 
                United States for review of the record of such denial 
                or revocation.
                    (ii) As part of the Attorney General's answer, the 
                Attorney General shall file in such court a certified 
                copy of the record on which such denial or revocation 
                is based. The findings of fact of the Attorney General 
                may be set aside only if found to be unsupported by 
                substantial evidence in such record taken as a whole.
                    (B) Denial or revocation without administrative 
                proceeding.--If the Attorney General denies an 
                application submitted or revokes a certificate issued 
                under this section without an opportunity for hearing 
                on the record, then any party to the health care 
                collaborative activity involved may commence a civil 
                action, not later than 60 days after receiving notice 
                of the denial or revocation, in an appropriate district 
                court of the United States for de novo review of such 
                denial or revocation.
    (h) Exemption.--A person shall not be liable under any of the 
antitrust laws for conduct necessary--
            (1) to prepare, agree to prepare, or attempt to agree to 
        prepare an application to request a certificate under this 
        section, or
            (2) to attempt to enter into any health care collaborative 
        activity with respect to which such a certificate is in effect.
    (i) Definitions.--In this section:
            (1) The term ``antitrust laws'' has the meaning given it in 
        section 6501(c)(1).
            (2) The term ``certificate'' means a certificate of public 
        advantage authorized to be issued under subsection (a).
            (3) The term ``health care collaborative activity'' means 
        an agreement (whether existing or proposed) between 2 or more 
        providers of health care services that is entered into solely 
        for the purpose of sharing in the provision and coordination of 
        health care services and that involves substantial integration 
        and financial risk-sharing between the parties, but does not 
        include the exchanging of information, the entering into of any 
        agreement, or the engagement in any other conduct that is not 
        reasonably required to carry out such agreement.
            (4) The term ``health care services'' includes services 
        related to the delivery or administration of health care 
        services.
            (5) The term ``liable'' means liable for any civil or 
        criminal violation of the antitrust laws.
            (6) The term ``provider of health care services'' means any 
        individual or entity that is engaged in the delivery of health 
        care services in a State and that is required by State law or 
        regulation to be licensed or certified by the State to engage 
        in the delivery of such services in the State.

SEC. 6503. STUDY OF IMPACT ON COMPETITION.

    The Attorney General, in consultation with the Chairman of the 
Federal Trade Commission, annually shall submit to the Congress a 
report as part of the annual budget oversight proceedings concerning 
the Antitrust Division of the Department of Justice. The report shall 
enable the Congress to determine how enforcement of antitrust laws is 
affecting the formation of efficient, cost-saving joint ventures and if 
the certificate of public advantage procedure set forth in section 6502 
has resulted in undesirable reduction in competition in the health care 
marketplace. The report shall include an evaluation of the factors set 
forth in paragraphs (2)(A) and (2)(B) of section 6502(b).

                      Subtitle G--Fraud and Abuse

PART 1--ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL 
                                PROGRAM

                                                   Title VI, Subtitle G

SEC. 6601. ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL PROGRAM.

    (a) In General.--Not later than January 1, 1996, the Attorney 
General shall establish a program--
            (1) to coordinate Federal, State, and local law enforcement 
        programs to control fraud and abuse with respect to the 
        delivery of and payment for health care in the United States,
            (2) to conduct investigations, audits, evaluations, and 
        inspections relating to the delivery of and payment for health 
        care in the United States, and
            (3) in consultation with the Inspector General of the 
        Department of Health and Human Services, to facilitate the 
        enforcement of the provisions of sections 1128, 1128A, and 
        1128B of the Social Security Act and other statutes applicable 
        to health care fraud and abuse.
    (b) Coordination With Law Enforcement Agencies.--In carrying out 
the program under subsection (a), the Attorney General shall consult 
with, and arrange for the sharing of data and resources with Federal, 
State and local law enforcement agencies, State Medicaid Fraud Control 
Units, and State agencies responsible for the licensing and 
certification of health care providers.
    (c) Coordination With Third Party Insurers.--In carrying out the 
program established under subsection (a), the Attorney General shall 
consult with, and arrange for the sharing of data with representatives 
of private sponsors of health benefit plans and other providers of 
health insurance.
    (d) Regulations.--
            (1) In general.--The Attorney General shall by regulation 
        establish standards to carry out the program under subsection 
        (a).
            (2) Information standards.--
                    (A) In general.--Such standards shall include 
                standards relating to the furnishing of information by 
                health insurers (including self-insured health benefit 
                plans), providers, and others to enable the Attorney 
                General to carry out the program (including 
                coordination with law enforcement agencies under 
                subsection (b) and third party insurers under 
                subsection (c)).
                    (B) Confidentiality.--Such standards shall include 
                procedures to assure that such information is provided 
                and utilized in a manner that protects the 
                confidentiality of the information and the privacy of 
                individuals receiving health care services.
                    (C) Qualified immunity for providing information.--
                The provisions of section 1157(a) of the Social 
                Security Act (relating to limitation on liability) 
                shall apply to a person providing information to the 
                Attorney General under the program under this section, 
                with respect to the Attorney General's performance of 
                duties under the program, in the same manner as such 
                section applies to information provided to 
                organizations with a contract under part B of title XI 
                of such Act, with respect to the performance of such a 
                contract.

SEC. 6602. AUTHORIZATION OF ADDITIONAL APPROPRIATIONS FOR INVESTIGATORS 
              AND OTHER PERSONNEL.

    In addition to any other amounts authorized to be appropriated to 
the Attorney General for health care anti-fraud and abuse activities 
for a fiscal year, there are authorized to be appropriated such sums as 
may be necessary to enable the Attorney General to conduct 
investigations of allegations of health care fraud and otherwise carry 
out the program established under section 6601 in a fiscal year.

SEC. 6603. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE TRUST FUND.

    (a) Establishment.--There is hereby created on the books of the 
Treasury of the United States a trust fund to be known as the ``Anti-
Fraud and Abuse Trust Fund'' (in this section referred to as the 
``Trust Fund''). The Trust Fund shall consist of such amounts as may be 
deposited in, or appropriated to, such Trust Fund as provided in this 
part and section 1128A(f)(3) of the Social Security Act.
    (b) Management.--
            (1) In general.--The Trust Fund shall be managed by the 
        Attorney General through a Managing Trustee designated by the 
        Attorney General.
            (2) Investment of funds.--It shall be the duty of the 
        Managing Trustee to invest such portion of the Trust Fund as is 
        not, in the trustee's judgment, required to meet current 
        withdrawals. Such investments may be made only in interest-
        bearing obligations of the United States or in obligations 
        guaranteed as to both principal and interest by the United 
        States. For such purpose such obligations may be acquired on 
        original issue at the issue price, or by purchase of 
        outstanding obligations at market price. The purposes for which 
        obligations of the United States may be issued under chapter 31 
        of title 31, United States Code, are hereby extended to 
        authorize the issuance at par of public-debt obligations for 
        purchase by the Trust Fund. Such obligations issued for 
        purchase by the Trust Fund shall have maturities fixed with due 
        regard for the needs of the Trust Fund and shall bear interest 
        at a rate equal to the average market yield (computed by the 
        Managing Trustee on the basis of market quotations as of the 
        end of the calendar month next preceding the date of such 
        issue) on all marketable interest-bearing obligations of the 
        United States then forming a part of the public debt which are 
        not due or callable until after the expiration of 4 years from 
        the end of such calendar month, except that where such average 
        is not a multiple of \1/8\ of 1 percent, the rate of interest 
        on such obligations shall be the multiple of \1/8\ of 1 percent 
        nearest such market yield. The Managing Trustee may purchase 
        other interest-bearing obligations of the United States or 
        obligations guaranteed as to both principal and interest by the 
        United States, on original issue or at the market price, only 
        where the Trustee determines that the purchase of such other 
        obligations is in the public interest.
            (3) Any obligations acquired by the Trust Fund (except 
        public-debt obligations issued exclusively to the Trust Fund) 
        may be sold by the Managing Trustee at the market price, and 
        such public-debt obligations may be redeemed at par plus 
        accrued interest.
            (4) The interest on, and the proceeds from the sale or 
        redemption of, any obligations held in the Trust Fund shall be 
        credited to and form a part of the Trust Fund.
            (5) The receipts and disbursements of the Attorney General 
        in the discharge of the functions of the Attorney General shall 
        not be included in the totals of the budget of the United 
        States Government. For purposes of part C of the Balanced 
        Budget and Emergency Deficit Control Act of 1985, the Attorney 
        General and the Trust Fund shall be treated in the same manner 
        as the Federal Retirement Thrift Investment Board and the 
        Thrift Savings Fund, respectively. The United States is not 
        liable for any obligation or liability incurred by the Trust 
        Fund.
    (c) Use of Funds.--Of the amounts in the Trust Fund--
            (1) not less than 60 percent shall be used to support 
        educational activities to prevent the occurrence of violations 
        of anti-fraud and abuse laws, including the issuance of 
        advisory opinions under section 1129 and 1877(i) of the Social 
        Security Act (as added by part 4) and fraud alerts, seminars 
        for providers, and program updates; and
            (2) any amounts remaining after use for activities under 
        paragraph (1) shall be used to assist the Attorney General in 
        carrying out the all-payer fraud and abuse control program 
        established under section 6601(a) in the fiscal year involved.
    (d) Deposit of Federal Health Anti-Fraud and Abuse Penalties Into 
Trust Fund.--Section 1128A(f)(3) of the Social Security Act (42 U.S.C. 
1320a-7a(f)(3)) is amended by striking ``as miscellaneous receipts of 
the Treasury of the United States'' and inserting ``in the Anti-Fraud 
and Abuse Trust Fund established under section 6603(a) of the 
Bipartisan Health Care Reform Act of 1994''.
    (e) Use of Federal Health Anti-Fraud and Abuse Penalties To Repay 
Beneficiaries for Cost-Sharing.--Section 1128A(f) of the Social 
Security Act (42 U.S.C. 1320a-7a(f)) is amended in the matter preceding 
paragraph (1) by striking ``Secretary and disposed of as follows:'' and 
inserting the following: ``Secretary. If the person against whom such a 
penalty or assessment was assessed collected a payment from an 
individual for providing to the individual the service that is the 
subject of the penalty or assessment, the Secretary shall pay a portion 
of the amount recovered to the individual in the nature of restitution 
in an amount equal to the payment so collected. The Secretary shall 
dispose of any remaining amounts recovered under this section as 
follows:''.

       PART 2--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

SEC. 6611. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE AND STATE 
              HEALTH CARE PROGRAMS.

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

SEC. 6612. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR CERTAIN 
              INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE EXCLUSION 
              FROM MEDICARE AND STATE HEALTH CARE PROGRAMS.

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

SEC. 6613. REVISIONS TO CRIMINAL PENALTIES.

    (a) Clarification of Discount Exception to Anti-Kickback 
Provisions.--Section 1128B(b)(3)(A) of the Social Security Act (42 
U.S.C. 1320a-7b(b)(3)(A)) is amended--
            (1) by inserting ``(regardless of its timing or 
        availability)'' after ``in price''; and
            (2) by striking ``program;'' and inserting ``program and is 
        not paid in the form of currency or coin;''.
    (b) Exemption From Anti-Kickback Penalties for Certain Managed Care 
Arrangements.--Section 1128B(b)(3) of such Act (42 U.S.C. 1320a-
7b(b)(3)) is amended--
            (1) by striking ``and'' at the end of subparagraph (D);
            (2) by striking the period at the end of subparagraph (E) 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
            ``(F) any reduction in cost sharing or increased benefits 
        given to an individual, any amounts paid to a provider for an 
        item or service furnished to an individual, or any discount or 
        reduction in price given by the provider for such an item or 
        service, if--
                    ``(A) the item or service is provided through an 
                organization described in section 1877(b)(3), or
                    ``(B) the item or service is provided through such 
                an organization on behalf of another entity (including 
                but not limited to a self-insured employer or indemnity 
                plan) that assumes financial risk for the provision of 
                the item or service.''.
    (c) Exemption From Anti-Kickback Penalties for Certain Protected 
Financial Relationships.--Section 1128B(b)(3) of such Act (42 U.S.C. 
1320a-7b(b)(3)), as amended by subsection (b), is further amended--
            (1) by striking ``and'' at the end of subparagraph (E);
            (2) by striking the period at the end of subparagraph (F) 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
            ``(G) any amount in a financial relationship of a physician 
        (or an immediate family member of such physician) with an 
        entity specified in section 1877(a)(2), if section 1877(a)(1) 
        does not apply to that amount or financial relationship.''.
    (d) Exemption From Anti-Kickback Penalties for Certain 
Collaborative Efforts That Benefit Medically Underserved Persons.--
            (1) In general.--Section 1128B(b)(3) of such Act (42 U.S.C. 
        1320a-7b(b)(3)), as amended by subsections (b) and (c), is 
        further amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (F);
                    (B) by striking the period at the end of 
                subparagraph (G) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(F) any remuneration paid by or to a recipient or 
                subrecipient of Federal grant funds under or in 
                connection with an arrangement for the procurement of 
                goods or services by the recipient or subrecipient, the 
                referral of patients, or the lease or purchase of space 
                or equipment, if--
                            ``(i) the arrangement is in writing and 
                        signed by the parties;
                            ``(ii) the arrangement will result in the 
                        savings of Federal grant funds or increased 
                        revenues to the recipient or subrecipient that 
                        will be used to increase the availability or 
                        accessibility of services to a medically 
                        underserved population served by the recipient 
                        or subrecipient or an improvement in the 
                        quality of services to such population, except 
                        that the recipient or subrecipient may seek a 
                        prior determination from the Public Health 
                        Service that this requirement is met and, if 
                        the recipient or subrecipient does so, Public 
                        Health Service approval shall be conclusive and 
                        binding on the Federal Government;
                            ``(iii) the arrangement will not result in 
                        private inurement to any current employees or 
                        members of the Board of Directors of the 
                        recipient or subrecipient, or to agents of the 
                        recipient or subrecipient who were involved in 
                        recommending or negotiating the arrangement;
                            ``(iv) with respect to an arrangement under 
                        which a recipient or subrecipient is procuring 
                        goods or services, the provider of the goods or 
                        services is the only provider able to supply 
                        such goods or services, or the recipient or 
                        subrecipient has engaged in a competitive 
                        process to procure the goods or services that 
                        meets the requirements for competition under 
                        Federal grant awards;
                            ``(v) with respect to an arrangement for a 
                        referral of patients, the arrangement will 
                        assure that all patients covered or affected by 
                        the arrangement are advised that they may 
                        request a referral to any person or entity of 
                        their choosing, subject to appropriate 
                        contractual limitations under which the 
                        recipient or subrecipient may operate as a 
                        health plan or as a contract health plan 
                        provider and such limitations as the patient 
                        may be under as an enrollee of a health plan;
                            ``(vi) with respect to an arrangement for a 
                        referral of patients, the arrangement will not 
                        interfere with the discretion of health 
                        professionals to refer patients in a manner 
                        they believe will most appropriately deal with 
                        a patient's particular circumstances, subject 
                        to appropriate contractual limitations under 
                        which the recipient or subrecipient may operate 
                        as a health plan or as a contract health plan 
                        provider and such limitations as the patient 
                        may be under as an enrollee of a health plan; 
                        and
                            ``(vii) with respect to an arrangement that 
                        does not meet the requirements of any of the 
                        preceding clauses, the recipient or 
                        subrecipient of Federal grant funds involved 
                        has applied to the Secretary for approval of 
                        the arrangement and the Secretary, after 
                        consultation with the Inspector General of the 
                        Department of Health and Human Services, has 
                        approved the arrangement based upon a finding 
                        that the arrangement will produce a substantial 
                        benefit to a medically underserved population 
                        that outweighs the arrangement's failure to 
                        fully satisfy all of the above requirements.
                In this subparagraph, a `recipient' means a public or 
                nonprofit private entity that receives a grant or 
                cooperative agreement under the Public Health Service 
                Act or title V, and a `subrecipient' means a public or 
                nonprofit private entity that performs substantive work 
                under a grant or cooperative agreement under the Public 
                Health Service Act or title V to a recipient.''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall take effect after the expiration of the 6-month period 
        that begins on the date of the enactment of this Act.

SEC. 6615. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRAL.

    (a) Clarification of Coverage of Radiology or Diagnostic 
Services.--Section 1877(h)(6) of the Social Security Act (42 U.S.C. 
1395nn(h)(6)) is amended by striking subparagraph (D).
    (b) New Exception for Shared Facility Services.--Section 1877(b) of 
such Act (42 U.S.C. 1395nn(b)) is amended--
            (1) by redesignating paragraph (4) as paragraph (5); and
            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) Shared facility services.--
                    ``(A) In general.--In the case of a shared facility 
                service of a shared facility--
                            ``(i) that is furnished--
                                    ``(I) personally by the referring 
                                physician who is a shared facility 
                                physician or personally by an 
                                individual directly employed or 
                                directly supervised by such a 
                                physician,
                                    ``(II) by a shared facility in a 
                                building in which the referring 
                                physician furnishes substantially all 
                                of the services of the physician that 
                                are unrelated to the furnishing of 
                                shared facility services, and
                                    ``(III) to a patient of a shared 
                                facility physician; and
                            ``(ii) that is billed by the referring 
                        physician.
                    ``(B) Shared facility related definitions.--
                            ``(i) Shared facility service.--The term 
                        `shared facility service' means, with respect 
                        to a shared facility, a designated health 
                        service furnished by the facility to patients 
                        of shared facility physicians.
                            ``(ii) Shared facility.--The term `shared 
                        facility' means an entity that furnishes shared 
                        facility services under a shared facility 
                        arrangement.
                            ``(iii) Shared facility physician.--The 
                        term `shared facility physician' means, with 
                        respect to a shared facility, a physician who 
                        has a financial relationship under a shared 
                        facility arrangement with the facility.
                            ``(iv) Shared facility arrangement.--The 
                        term `shared facility arrangement' means, with 
                        respect to the provision of shared facility 
                        services in a building, a financial 
                        arrangement--
                                    ``(I) which is only between 
                                physicians who are providing services 
                                (unrelated to shared facility services) 
                                in the same building,
                                    ``(II) in which the overhead 
                                expenses of the facility are shared, in 
                                accordance with methods previously 
                                determined by the physicians in the 
                                arrangement, among the physicians in 
                                the arrangement, and
                                    ``(III) which, in the case of a 
                                corporation, is wholly owned and 
                                controlled by shared facility 
                                physicians.''.
    (c) Revision to Rural Provider Exception.--Section 1877(d)(2) of 
such Act (42 U.S.C. 1395nn(d)(2)) is amended by striking 
``substantially all'' and inserting ``not less than 75 percent (as 
determined in accordance with regulations of the Secretary)''.
    (d) Clarification of Referrals by Nephrologists.--Section 
1877(h)(5)(C) of such Act (42 U.S.C. 1395nn(H)(5)(C)) is amended--
            (1) by striking ``and a request'' and inserting ``a 
        request'';
            (2) by inserting after ``radiation therapy,'' the 
        following: ``and a request by a nephrologist for items or 
        services related to renal dialysis,''; and
            (3) by striking ``or radiation oncologist'' and inserting 
        ``radiation oncologist, or nephrologist''.
    (e) Revision of Reporting Requirements.--Section 1877(f) of such 
Act (42 U.S.C. 1395nn(f)) is amended--
            (1) by striking ``Each entity'' and all that follows 
        through paragraph (2) and inserting the following: ``The 
        Secretary may require each entity (other than a physician or 
        physician group practice) providing designated health services 
        to provide the Secretary with the following information 
        concerning the entity's ownership, investment, and compensation 
        arrangements:
            ``(1) the designated health services provided by the 
        entity; and
            ``(2) the names and unique physician identifier numbers of 
        all physicians with an ownership or investment interest (as 
        described in subsection (a)(2)(A)) or with a compensation 
        interest (as described in subsection (a)(2)(B)) in the entity, 
        or whose immediate relatives have such an ownership, 
        investment, or compensation interest in the entity.''; and
            (2) by striking the fifth sentence.
    (f) Exception for Certain Managed Care Arrangements.--Section 
1877(b)(3) of such Act (42 U.S.C. 1395nn(b)(3)) is amended--
            (1) by striking ``or'' at the end of subparagraph (C);
            (2) by striking the period at the end of subparagraph (D) 
        and inserting a comma; and
            (3) by adding at the end the following new subparagraphs:
                    ``(E) with a contract with a State to provide 
                services under the State plan under title XIX (in 
                accordance with section 1903(m)); or
                    ``(F) which meets State regulatory requirements 
                applicable to health maintenance organizations and 
                which--
                            ``(i) provides designated health services 
                        directly or through contractual arrangements 
                        with providers;
                            ``(ii) assumes financial risk for the 
                        provision of services or provides services on 
                        behalf of another individual or entity 
                        (including but not limited to a self-insured 
                        employer, indemnity plan, physician, or 
                        physician group) that assumes financial risk 
                        for the provision of the item or service; and
                            ``(iii) subjects the services to a program 
                        of utilization review offered by an 
                        organization described in a preceding 
                        subparagraph, an organization meeting State 
                        regulatory requirements applicable to 
                        utilization review, or an organization 
                        accredited to perform utilization review 
                        considered appropriate by the Secretary.''.
    (g) Preemption of State Law.--Section 1877(g) of such Act (42 
U.S.C. 1395nn(g)) is amended by adding at the end the following new 
paragraph:
            ``(6) Preemption of state law.--The provisions of this 
        section shall supersede any State law to the extent State law 
        prohibits a physician from making a referral, or an entity from 
        presenting a bill, for the furnishing of a service which is not 
        subject to the restrictions applicable under paragraph (1).''.
    (h) Revision of Effective Date Exception Provision.--Section 
13562(b)(2) of the Omnibus Budget Reconciliation Act of 1993 is amended 
by striking subparagraphs (A) and (B) and inserting the following:
                    ``(A) the second sentence of subsection (a)(2), and 
                subsections (b)(2)(B) and (d)(2), of section 1877 of 
                the Social Security Act (as in effect on the day before 
                the date of the enactment of this Act) shall apply 
                instead of the corresponding provisions in section 1877 
                (as amended by this Act);
                    ``(B) section 1877(b)(4) of the Social Security Act 
                (as in effect on the day before the date of the 
                enactment of this Act) shall apply;
                    ``(C) the requirements of section 1877(c)(2) of the 
                Social Security Act (as amended by this Act) shall not 
                apply to any securities of a corporation that meets the 
                requirements of section 1877(c)(2) of the Social 
                Security Act (as in effect on the day before the date 
                of the enactment of this Act);
                    ``(D) section 1877(e)(3) of the Social Security Act 
                (as amended by this Act) shall apply, except that it 
                shall not apply to any arrangement that meets the 
                requirements of subsection (e)(2) or subsection (e)(3) 
                of section 1877 of the Social Security Act (as in 
                effect on the day before the date of the enactment of 
                this Act);
                    ``(E) the requirements of clauses (iv) and (v) of 
                section 1877(h)(4)(A), and of clause (i) of section 
                1877(h)(4)(B), of the Social Security Act (as amended 
                by this Act) shall not apply; and
                    ``(F) section 1877(h)(4)(B) of the Social Security 
                Act (as in effect on the day before the date of the 
                enactment of this Act) shall apply instead of section 
                1877(h)(4)(A)(ii) of such Act (as amended by this 
                Act).''.
    (i) Effective Date.--The amendments made by this section shall 
apply to referrals made on or after January 1, 1995, except that the 
amendments made by subsection (h) shall apply as if included in the 
enactment of the Omnibus Budget Reconciliation Act of 1993.

SEC. 6616. MEDICARE HEALTH MAINTENANCE ORGANIZATIONS.

    (a) Study on Costs of Peer Review Contracts for Medicare HMO's.--
The Comptroller General shall conduct a study of the costs incurred by 
eligible organizations with risk-sharing contracts under section 
1876(b) of the Social Security Act of complying with the requirement of 
entering into a written agreement with an entity providing peer review 
services with respect to services provided by the organization, 
together with an analysis of how information generated by such entities 
is used by the Secretary of Health and Human Services to assess the 
quality of services provided by such eligible organizations.
    (b) Report to Congress.--Not later than July 1, 1997, the 
Comptroller General shall submit a report to the Committee on Ways and 
Means and the Committee on Energy and Commerce of the House of 
Representatives and the Committee on Finance and the Special Committee 
on Aging of the Senate on the study conducted under subsection (a).

SEC. 6617. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this part 
shall take effect January 1, 1996.

                   PART 3--AMENDMENTS TO CRIMINAL LAW

SEC. 6621. PENALTIES FOR HEALTH CARE FRAUD.

    (a) In General.--
            (1) Fines and imprisonment for health care fraud 
        violations.--Chapter 63 of title 18, United States Code, is 
        amended by adding at the end the following:
``Sec. 1347. Health care fraud
    ``(a) Whoever knowingly executes, or attempts to execute, a scheme 
or artifice--
            ``(1) to defraud any health care plan or other person, in 
        connection with the delivery of or payment for health care 
        benefits, items, or services; or
            ``(2) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any of the money or property 
        owned by, or under the custody or control of, any health care 
        plan, or person in connection with the delivery of or payment 
        for health care benefits, items, or services;
shall be guilty of a felony, and fined under this title or imprisoned 
not more than 5 years, or both.
    ``(b) In determining the amount or scope of any penalty or 
assessment, the court shall take into account--
            ``(1) the nature of the false or fraudulent claims and the 
        circumstances under which they are presented;
            ``(2) the degree of culpability and history of prior 
        offenses by the convicted health care provider;
            ``(3) the extent to which restitution is paid; and
            ``(4) such other matters as justice may require.
    ``(c) A principal is liable for penalties and assessments under 
this section for the acts of the principal's agents acting within the 
scope of the agency.
    ``(d) For purposes of this section, the term `health care plan' 
means a Federally-funded public program or private program for the 
delivery of or payment for health care items or services.''.
            (2) Clerical amendment.--The table of sections at the 
        beginning of chapter 63 of title 18, United States Code, is 
        amended by adding at the end the following:

``1347. Health care fraud.''.

SEC. 6622. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
              CONVICTION.

    Section 3059 of title 18, United States Code, is amended by adding 
at the end the following new subsection:
    ``(c)(1) In special circumstances and in the Attorney General's 
sole discretion, the Attorney General may make a payment of up to 
$10,000 to a person who furnishes information unknown to the Government 
relating to a possible prosecution under section 1347.
    ``(2) A person is not eligible for a payment under paragraph (1) 
if--
            ``(A) the person is a current or former officer or employee 
        of a Federal or State government agency or instrumentality who 
        furnishes information discovered or gathered in the course of 
        government employment;
            ``(B) the person knowingly participated in the offense;
            ``(C) the information furnished by the person consists of 
        allegations or transactions that have been disclosed to the 
        public--
                    ``(i) in a criminal, civil, or administrative 
                proceeding;
                    ``(ii) in a congressional, administrative or 
                General Accounting Office report, hearing, audit or 
                investigation; or
                    ``(iii) by the news media, unless the person is the 
                original source of the information; or
            ``(D) when, in the judgment of the Attorney General, it 
        appears that a person whose illegal activities are being 
        prosecuted or investigated could benefit from the award.
    ``(3) For the purposes of paragraph (2)(C)(iii), the term `original 
source' means a person who has direct and independent knowledge of the 
information that is furnished and has voluntarily provided the 
information to the Government prior to disclosure by the news media.
    ``(4) Neither the failure of the Attorney General to authorize a 
payment under paragraph (1) nor the amount authorized shall be subject 
to judicial review.''.

SEC. 6623. BROADENING APPLICATION OF MAIL FRAUD STATUTE.

    Section 1341 of title 18, United States Code, is amended--
            (1) by inserting ``or deposits or causes to be deposited 
        any matter or thing whatever to be sent or delivered by any 
        private or commercial interstate carrier,'' after ``Postal 
        Service,''; and
            (2) by inserting ``or such carrier'' after ``causes to be 
        delivered by mail''.

                       PART 4--ADVISORY OPINIONS

SEC. 6631. AUTHORIZING THE SECRETARY OF HEALTH AND HUMAN SERVICES TO 
              ISSUE ADVISORY OPINIONS UNDER TITLE XI.

    Title XI of the Social Security Act (42 U.S.C. 1301 et seq.) is 
amended by inserting after section 1128B the following new section:

                          ``advisory opinions

    ``Sec. 1129. (a) Issuance of Advisory Opinions.--The Secretary 
shall issue advisory opinions as provided in this section.
    ``(b) Matters Subject to Advisory Opinions.--The Secretary shall 
issue advisory opinions as to the following matters:
            ``(1) What constitutes prohibited remuneration within the 
        meaning of section 1128B(b).
            ``(2) Whether an arrangement or proposed arrangement 
        satisfies the criteria set forth in section 1128B(b)(3) for 
        activities which do not result in prohibited remuneration.
            ``(3) Whether an arrangement or proposed arrangement 
        satisfies the criteria which the Secretary has established, or 
        shall establish by regulation for activities which do not 
        result in prohibited remuneration.
            ``(4) What constitutes an inducement to reduce or limit 
        services to individuals entitled to benefits under title XVIII 
        or title XIX within the meaning of section 1128B(b).
            ``(5) Whether an arrangement, activity or proposed 
        arrangement or proposed activity violates any other provision 
        of this Act.
    ``(c) Matters Not Subject to Advisory Opinions.--Such advisory 
opinions shall not address the following matters:
            ``(1) Whether the fair market value shall be, or was paid 
        or received for any goods, services or property.
            ``(2) Whether an individual is a bona fide employee within 
        the requirements of section 3121(d)(2) of the Internal Revenue 
        Code of 1986.
    ``(d) Effect of Advisory Opinions.--
            ``(1) Each advisory opinion issued by the Secretary shall 
        be binding as to the Secretary and the party or parties 
        requesting the opinion.
            ``(2) The failure of a party to seek an advisory opinion 
        may not be introduced into evidence to prove that the party 
        intended to violate the provisions of sections 1128, 1128A, or 
        1128B.
    ``(e) Regulations.--The Secretary within 180 days of the date of 
enactment, shall issue regulations establishing a system for the 
issuance of advisory opinions. Such regulations shall provide for--
            ``(1) the procedure to be followed by a party applying for 
        an advisory opinion;
            ``(2) the procedure to be followed by the Secretary in 
        responding to a request for an advisory opinion;
            ``(3) the interval in which the Secretary shall respond;
            ``(4) the reasonable fee to be charged to the party 
        requesting an advisory opinion; and
            ``(5) the manner in which advisory opinions will be made 
        available to the public.
    ``(f) Interval for Issuance of Advisory Opinions.--Under no 
circumstances shall the interval in which the Secretary shall respond 
to a party requesting an advisory opinion exceed 30 days.''.

SEC. 6632. AUTHORIZING THE SECRETARY OF HEALTH AND HUMAN SERVICES TO 
              ISSUE ADVISORY OPINIONS RELATING TO PHYSICIAN OWNERSHIP 
              AND REFERRAL.

    Section 1877 of the Social Security Act (42 U.S.C. 1395nn) is 
amended by the addition of the following new subsection:
    ``(i) Advisory Opinions.--
            ``(1) In general.--The Secretary shall issue advisory 
        opinions on whether an arrangement or proposed arrangement will 
        result in a prohibited referral within the meaning of this 
        section.
            ``(2) Effect of Advisory Opinions.--
                    ``(A) Each advisory opinion issued by the Secretary 
                shall be binding as to the Secretary and the party or 
                parties requesting the opinion.
                    ``(B) The failure of a party to seek an advisory 
                opinion may not be introduced into evidence to prove 
                that the party intended to violate the provisions of 
                this section.
            ``(3) Regulations.--The Secretary within one hundred and 
        eighty days of the date of enactment, shall issue regulations 
        establishing a system for the issuance of advisory opinions. 
        Such regulations shall provide for--
                    ``(A) the procedure to be followed by a party 
                applying for an advisory opinion;
                    ``(B) the procedure to be followed by the Secretary 
                in responding to a request for an advisory opinion;
                    ``(C) the interval in which the Secretary shall 
                respond;
                    ``(D) the reasonable fee to be charged to the party 
                requesting an advisory opinion; and
                    ``(E) the manner in which advisory opinions will be 
                made available to the public.
            ``(4) Interval for issuance of advisory opinions.--Under no 
        circumstances shall the interval in which the Secretary shall 
        respond to a party requesting an advisory opinion exceed thirty 
        days.''.

SEC. 6633. EFFECTIVE DATE.

    Unless otherwise specified, the amendments made by this part shall 
be effective upon the enactment of this Act.

       PART 5--PAYMENTS FOR STATE HEALTH CARE FRAUD CONTROL UNITS

SEC. 6641. ESTABLISHMENT OF STATE FRAUD UNITS.

    (a) Establishment of Health Care Fraud and Abuse Control Unit.--
Each State shall, consistent with State law, establish and maintain in 
accordance with subsection (b) a State agency to act as a Health Care 
Fraud and Abuse Control Unit for purposes of this part.
    (b) Definition.--In this section, a ``State Fraud Unit'' means a 
Health Care Fraud and Abuse Control Unit designated under subsection 
(a) that the Attorney General certifies meets the requirements of this 
part.

SEC. 6642. REQUIREMENTS FOR STATE FRAUD UNITS.

    (a) In General.--The State Fraud Unit must--
            (1) be a single identifiable entity of the State 
        government;
            (2) be separate and distinct from any State agency with 
        principal responsibility for the administration of any 
        Federally-funded or mandated health care program; and
            (3) meet the other requirements of this section.
    (b) Specific Requirements Described.--The State Fraud Unit shall--
            (1) be a Unit of the office of the State Attorney General 
        or of another department of State government which possesses 
        statewide authority to prosecute individuals for criminal 
        violations;
            (2) if it is in a State the constitution of which does not 
        provide for the criminal prosecution of individuals by a 
        statewide authority and has formal procedures, (A) assure its 
        referral of suspected criminal violations to the appropriate 
        authority or authorities in the State for prosecution, and (B) 
        assure its assistance of, and coordination with, such authority 
        or authorities in such prosecutions; or
            (3) have a formal working relationship with the office of 
        the State Attorney General or the appropriate authority or 
        authorities for prosecution and have formal procedures 
        (including procedures for its referral of suspected criminal 
        violations to such office) which provide effective coordination 
        of activities between the Fraud Unit and such office with 
        respect to the detection, investigation, and prosecution of 
        suspected criminal violations relating to any Federally-funded 
        or mandated health care programs.
    (c) Staffing Requirements.--The Fraud Unit must--
            (1) employ attorneys, auditors, investigators and other 
        necessary personnel; and
            (2) be organized in such a manner and provide sufficient 
        resources as is necessary to promote the effective and 
        efficient conduct of Fraud Unit activities.
    (d) Cooperative Agreements; Memoranda of Understanding.--The Fraud 
Unit must have cooperative agreements with--
            (1) Federally-funded or mandated health care programs;
            (2) similar Fraud Units in other States, as exemplified 
        through membership and participation in the National 
        Association of Medicaid Fraud Control Units or its successor; 
        and
            (3) the Attorney General of the United States and the 
        Inspector General of the Department of Health and Human 
        Services.
    (e) Reports.--The Fraud Unit shall submit to the Attorney General 
an application and an annual report containing such information as the 
Attorney General determines to be necessary to determine whether the 
Fraud Unit meets the requirements of this section.
    (f) Funding Source; Participation in All-Payer Program.--The Fraud 
Unit may receive funding for its activities from such sources as the 
State considers appropriate. The Fraud Unit shall participate in the 
all-payer fraud and abuse control program established under section 
6601.
    (g) Use of Medicaid Fraud Control Units.--If a State has a medicaid 
fraud control unit under title XIX of the Social Security Act in 
operation as of the date of the enactment of this Act, such unit shall 
be deemed to meet the requirements of this part and to serve as the 
State Fraud Unit under this part if the State demonstrates that the 
Unit will be able to carry out the activities described in section 
6643.

SEC. 6643. SCOPE AND PURPOSE.

    The Fraud Unit shall carry out the following activities:
            (1) The Fraud Unit shall conduct a statewide program for 
        the investigation and prosecution (or referring for 
        prosecution) of violations of all applicable state laws 
        regarding any and all aspects of fraud in connection with any 
        aspect of the administration and provision of health care 
        services and activities of providers of such services under any 
        Federally-funded or mandated health care programs.
            (2) The Fraud Unit shall have procedures for reviewing 
        complaints of the abuse or neglect of patients of facilities 
        (including patients in residential facilities and home health 
        care programs) that receive payments under any Federally-funded 
        or mandated health care programs, and, where appropriate, to 
        investigate and prosecute such complaints under the criminal 
        laws of the State or for referring the complaints to other 
        State agencies for action.
            (3) The Fraud Unit shall provide for the collection, or 
        referral for collection to the appropriate agency, of 
        overpayments that are made under any Federally-funded or 
        mandated health care program and that are discovered by the 
        Fraud Unit in carrying out its activities.

SEC. 6644. PAYMENTS TO STATES.

    (a) In General.--
            (1) Matching payments to states.--Subject to subsection 
        (c), for each year for which a State has a Fraud Unit approved 
        under section 6642(b) in operation the Attorney General shall 
        pay to the State for each quarter in a fiscal year an amount 
        equal to the applicable percentage of the sums expended during 
        the quarter by the Fraud Unit.
            (2) Time of payment.--The Attorney General shall make a 
        payment under paragraph (1) for a quarter by not later than 30 
        days after the end of the quarter.
    (b) Applicable Percentage Defined.--
            (1) In general.--In subsection (a), the ``applicable 
        percentage'' with respect to a State for a fiscal year is--
                    (A) 90 percent, for quarters occurring during the 
                first 3 years for which the Fraud Unit is in operation; 
                or
                    (B) 75 percent, for any other quarters.
            (2) Treatment of states with medicaid fraud control 
        units.--In the case of a State with a State medicaid fraud 
        control unit in operation prior to or as of the date of the 
        enactment of this Act, in determining the number of years for 
        which the State's Fraud Unit under this part has been in 
        operation, there shall be included the number of years for 
        which such State medicaid fraud control unit was in operation.
    (c) Limit on Payment.--Notwithstanding subsection (a), the total 
amount of payments made to a State under this section for a fiscal year 
may not exceed--
            (1) for fiscal year 1996, 4 times the amount paid to the 
        State under section 1903(a)(6) of the Social Security Act 
        during the first quarter of 1995; and
            (2) for each succeeding fiscal year, the amount determined 
        under this subsection in the previous fiscal year, increased by 
        the percentage increase in the consumer price index for all 
        urban consumers (U.S. city average) for the year.

                                                   Title VI, Subtitle H

              Subtitle H--Billing for Laboratory Services

SEC. 6701. EASING RESTRICTIONS ON BILLING FOR LABORATORY AND OTHER 
              SERVICES.

    (a) In General.--The Public Health Service Act is amended--
            (1) by redesignating title XXVII (42 U.S.C. 300cc et seq.) 
        as title XXVIII; and
            (2) by inserting after title XXVI the following new title:

                 ``TITLE XXVII--RESTRICTIONS ON BILLING

``SEC. 2701. PROHIBITION.

    ``(a) Billing of Others for Ancillary Health Services.--Except as 
provided in section 2702, it shall be unlawful for any person 
(including any individual or entity) who furnishes ancillary health 
services (as defined in section 2705(1)) to present or cause to be 
presented, a claim, bill, or demand for payment to any person other 
than the patient receiving such services.
    ``(b) Billing of Recipient of Services.--Except as provided in 
section 2702, it shall be unlawful for any physician, or the agent of 
any physician, to present, or cause to be presented, a claim, bill, or 
demand for payment for ancillary health services to any recipient of 
such services unless the services covered by the claim, bill, or demand 
were furnished--
            ``(1) personally by, or under the supervision of, the 
        referring physician;
            ``(2) personally by, or under the supervision of, a 
        physician who is a member of the same group practice as the 
        referring physician; or
            ``(3) personally by individuals who are employed by such 
        physician or group practice and who are personally supervised 
        by the physician or by another physician in the group practice.
    ``(c) General Exception for Services Under Medicare.--This section 
does not apply with respect to any ancillary health services for which 
payment may be made under title XVIII of the Social Security Act.

``SEC. 2702. EXCEPTIONS.

    ``Notwithstanding the provisions of section 2701, a person who 
furnishes ancillary health services to an individual may present, or 
cause to be presented, for payment for actual services rendered a 
claim, bill, or demand to--
            ``(1) an immediate family member of the recipient of the 
        services or any other person legally responsible for the debts 
        or care of the recipient of the services;
            ``(2) a third party payer designated by the recipient of 
        the services;
            ``(3) a health maintenance organization, or other health 
        plan providing coverage through a managed care arrangement, in 
        which the recipient of the services is enrolled;
            ``(4) a hospital or skilled nursing facility where the 
        recipient of the services was an inpatient or outpatient at the 
        time the services were provided;
            ``(5) an employer where the recipient of the services is an 
        employee of such employer and the employer is responsible for 
        payment for the services;
            ``(6) a governmental agency or specified agent, on behalf 
        of the recipient of the services;
            ``(7) a substance abuse program where the clients of such a 
        program were the recipient of the services;
            ``(8) a clinic or other health care provider that has been 
        designated (or that is operated by an organization that has 
        been designated) as tax-exempt pursuant to section 501(c)(3) of 
        the Internal Revenue Code of 1986 whose purpose is the 
        promotion of public health, if the services rendered relate to 
        testing for sexually transmitted disease, acquired immune 
        deficiency syndrome, pregnancy, pregnancy termination, or other 
        conditions where the Secretary has determined that compliance 
        with section 2701 could seriously compromise the recipient's 
        need for confidentiality;
            ``(9) a person engaged in bona fide research studies;
            ``(10) the party requesting the ancillary health services 
        where Federal, State, or local law requires that the identity 
        of the recipient be kept confidential;
            ``(11) another person furnishing the same ancillary health 
        services for which payment is sought (hereafter referred to in 
        this paragraph as the `requesting party') where the person 
        presenting, or causing to be presented, the claim, bill, or 
        demand for payment furnished the services at the request of the 
        requesting party, except that the requesting party may not be a 
        facility owned or operated by the physician requesting the 
        ancillary health service; and
            ``(12) an entity approved to receive such claims, bills or 
        demands by the Secretary in regulations.
The persons described in paragraphs (1) through (12) who have received 
a claim, bill, or demand for payment for such ancillary health services 
may present, or cause to be presented, such claim, bill, or demand to 
the responsible party.

``SEC. 2703. SANCTIONS.

    ``(a) Payment.--No payment may be made for a service that is 
provided in violation of section 2701.
    ``(b) Collection of Amounts.--
            ``(1) Liability on collection.--If a person collects any 
        amounts that were billed in violation of section 2701(a), such 
        person shall be liable for, and shall refund on a timely basis 
        to the individual whom such amounts were collected, any amounts 
        so collected.
            ``(2) Collection by physician.--If a physician collects any 
        amounts from a recipient of services, or from another person on 
        behalf of the recipient of services (including a third-party 
        payer) that were billed in violation of section 2701(b), such 
        physician shall be liable for, and shall refund on a timely 
        basis to the recipient or person, any amounts so collected.
    ``(c) Repeated Claims.--Any person that presents, or causes to be 
presented, on a repeated basis, a bill or a claim that such person 
knows, or should have known, is for a service for which payment may not 
be made under subsection (a), or for which a refund has not been made 
under subsection (b), shall be subject to a civil money penalty of not 
more than $5,000 for each such bill or claim. The provisions of section 
1128A of the Social Security Act (other than the first sentence of 
subsection (a) and subsection (b)) shall apply to a civil money penalty 
assessed under the previous sentence in the same manner as such 
provisions apply to a penalty or proceeding under such section 
1128A(a).
    ``(d) Suspension of Laboratory Certification.--If the Secretary 
finds, after reasonable notice and opportunity for a hearing, that a 
laboratory which holds a certificate pursuant to section 353 has 
violated section 2701, the Secretary may suspend, revoke or limit such 
certification in accordance with the procedures established in section 
353(k).
    ``(e) Exclusion From Other Programs.--
            ``(1) Authority.--The Secretary may exclude from 
        participation in any program under title XVIII of the Social 
        Security Act, any individual or entity that the Secretary 
        determines has violated section 2701 and may direct that such 
        individual and entity be excluded from participation in any 
        State health care program receiving Federal funds.
            ``(2) Application of other law.--The provisions of section 
        1128(e) of the Social Security Act shall apply to any exclusion 
        under paragraph (1) in the same manner as such provisions apply 
        to a proceeding under such section 1128.

``SEC. 2704. REGULATIONS.

    ``The Secretary shall by regulation impose such other requirements 
as may be necessary to implement the purposes of this title.

``SEC. 2705. DEFINITIONS.

    ``As used in this title:
            ``(1) Ancillary health services.--The term `ancillary 
        health services' means--
                    ``(A) clinical laboratory services;
                    ``(B) diagnostic x-ray tests and other diagnostic 
                imaging services including CT and magnetic resonance 
                imaging services;
                    ``(C) other diagnostic tests;
                    ``(D) durable medical equipment; and
                    ``(E) physical therapy services.
            ``(2) Group practices.--The term `group practice' means a 
        group of 2 or more physicians legally organized as a 
        partnership, professional corporation, foundation, not-for-
        profit corporation, faculty practice plan, or similar 
        association--
                    ``(A) in which each physician who is a member of 
                the group provides substantially the full range of 
                services that the physician routinely provides 
                (including medical care, consultation, diagnosis, or 
                treatment) through the joint use of shared office 
                space, facilities, equipment, and personnel;
                    ``(B) for which substantially all of the services 
                of the physicians who are members of the group are 
                provided through the group and are billed in the name 
                of the group and amounts so received are treated as 
                receipts of the group;
                    ``(C) in which the overhead expenses of and the 
                income from the practice are distributed in accordance 
                with methods previously determined by members of the 
                group; and
                    ``(D) which meets such other standards as the 
                Secretary may impose by regulation.
        In the case of a faculty practice plan associated with a 
        hospital with an approved medical residency training program in 
        which physician members may provide a variety of different 
        specialty services and provide professional services both 
        within and outside the group (as well as perform other tasks, 
        such as research), the definition of such term shall be limited 
        with respect to the services provided outside of the faculty 
        practice plan.
            ``(3) Immediate family member.--The term `immediate family 
        member' shall include spouses, natural and adoptive parents, 
        natural and adoptive children, natural and adopted siblings, 
        stepparents, stepchildren and stepsiblings, fathers-in-law, 
        mothers-in-law, brothers-in-law, sisters-in-law, sons-in-law 
        and daughters-in-law, grandparents and grandchildren, and such 
        additional family members as may be specified in regulations 
        adopted by the Secretary.
            ``(4) Physician.--The term `physician' means--
                    ``(A) a doctor of medicine or osteopathy legally 
                authorized to practice medicine and perform surgery by 
                the State in which such individual performs such 
                function or action;
                    ``(B) a doctor of dental surgery or of dental 
                medicine who is legally authorized to practice 
                dentistry in the State in which such individual 
                performs such functions;
                    ``(C) a doctor of podiatric medicine;
                    ``(D) a doctor of optometry; or
                    ``(E) a chiropractor.
            ``(5) Third party payer.--The term `third party payer' 
        means any health care insurer, including any hospital services 
        corporation, health services corporation, medical expense 
        indemnity corporation, mutual insurance company, or self-
        insured corporation, that provides coverage for health or 
        health-related items or service.''.
    (b) Conforming Amendments.--
            (1) Sections 2701 through 2714 of the Public Health Service 
        Act (42 U.S.C. 300cc through 300cc-15) are redesignated as 
        sections 2801 through 2814, respectively.
            (2)(A) Sections 465(f) and 497 of such Act (42 U.S.C. 
        286(f) and 289) are amended by striking out ``2701'' each place 
        that such appears and inserting in lieu thereof ``2801''.
            (B) Section 305(i) of such Act (42 U.S.C. 242c(i)) is 
        amended by striking out ``2711'' each place that such appears 
        and inserting in lieu thereof ``2811''.

SEC. 6702. EFFECTIVE DATE.

    (a) In General.--Title XXVII of the Public Health Service Act, as 
added by section 6701(a), shall become effective December 31, 1994.
    (b) Regulations.--Not later than July 1, 1995, the Secretary of 
Health and Human Services shall promulgate such regulations as may be 
appropriate to carry out such title.

                                                              Title VII

                          TITLE VII--MEDICARE

                       table of contents of title

 Subtitle A--Increased Beneficiary Choice; Improved Program Efficiency

                  Part 1--Increased Beneficiary Choice

Sec. 7001. Requirements for health maintenance organizations under 
                            medicare.
Sec. 7002. Expansion and revision of medicare select policies.
Sec. 7003. Including notice of available health maintenance 
                            organizations in annual notice to 
                            beneficiaries.
Sec. 7004. Legislative proposal on enrolling medicare beneficiaries in 
                            qualified health plans.
Sec. 7005. Optional interim enrollment of medicare beneficiaries in 
                            private health plans.
                  Part 2--Improved Program Efficiency

Sec. 7011. Improved efficiency through consolidation of administration 
                            of parts A and B.
               Part 3--Notice of Advance Directive Rights

Sec. 7021. Providing notice of rights regarding medical care to 
                            individuals entering medicare.
                          Subtitle B--Savings

                   Part 1--Savings Relating to Part A

Sec. 7101. Reduction in update for payments for inpatient hospital 
                            services.
Sec. 7102. Reduction in payments for capital-related costs for 
                            inpatient hospital services.
                   Part 2--Savings Relating to Part B

Sec. 7111. Establishment of cumulative expenditure goals for physician 
                            services.
Sec. 7112. Imposition of coinsurance on laboratory services.
Sec. 7113. Increase in medicare part B premium for individuals with 
                            high income.
Sec. 7114. Extension of 25 percent part B premium.
Sec. 7115. Reduction in hospital outpatient services through 
                            establishment of prospective payment 
                            system.
               Part 3--Savings Relating to Parts A and B

Sec. 7121. Reduction in home health services through establishment of 
                            prospective payment system.
Sec. 7122. Medicare secondary payer.

                                                  Title VII, Subtitle A

 Subtitle A--Increased Beneficiary Choice; Improved Program Efficiency

                  PART 1--INCREASED BENEFICIARY CHOICE

SEC. 7001. REQUIREMENTS FOR HEALTH MAINTENANCE ORGANIZATIONS UNDER 
              MEDICARE.

    (a) Use of Metropolitan Statistical Areas to Determine Adjusted 
Average Per Capita Cost.--Section 1876(a)(4) of the Social Security Act 
(42 U.S.C. 1395mm(a)(4)) is amended by striking ``in a geographic area 
served by an eligible organization or in a similar area'' and inserting 
``in the metropolitan statistical area (as defined by the Office of 
Management and Budget) in which the individual resides, or in the 
entire portion of the State in which the individual resides which is 
not located in a metropolitan statistical area in the case of an 
individual who does not reside in a metropolitan statistical area''.
    (b) Determination of Model Additional Health Benefit Packages.--
Section 1876(g) of such Act (42 U.S.C. 1395mm(g)) is amended by 
inserting after paragraph (3) the following new paragraph:
    ``(4) The Secretary shall develop the following model packages of 
additional health benefits (referred to in paragraph (3)(B)) which an 
eligible organization may provide (at its option) under paragraph (2):
            ``(A) Coverage for catastrophic illness (subject to a limit 
        on out-of-pocket expenditures).
            ``(B) Coverage for prescription drugs.
            ``(C) Coverage for preventive services.''.
    (c) Revision of Membership Limitation.--Section 1876(f) of such Act 
(42 U.S.C. 1395mm(f)) is amended--
            (1) in paragraph (1), by striking ``one-half'' and 
        inserting ``25 percent''; and
            (2) in paragraph (2)(A), by striking ``50 percent'' and 
        inserting ``75 percent''.
    (d) Enrollment Periods for Medicare Health Maintenance 
Organizations.--
            (1) Uniform open enrollment period.--Section 
        1876(c)(3)(A)(i) of such Act (42 U.S.C. 1395mm(c)(3)(A)(i)) is 
        amended by striking ``must have'' and all that follows through 
        ``and including'' and inserting the following: ``shall have 
        open enrollment during an annual uniform open enrollment period 
        established by the Secretary for all eligible organizations, 
        together with''.
            (2) Open enrollment for certain disenrolled individuals.--
        Section 1876(c)(3)(A)(ii)(I) of such Act (42 U.S.C. 
        1395mm(c)(3)(A)(ii)(I)) is amended by adding at the end the 
        following: ``Each eligible organization with a risk-sharing 
        contract under this section shall have an open enrollment 
        period for individuals residing in the organization's service 
        area who disenroll from another eligible organization with a 
        risk-sharing contract under this section on the grounds that 
        the individual's primary care physician is no longer a member 
        of the organization's provider network or for cause (in 
        accordance with such standards, and as demonstrated through an 
        appeals process that meets such requirements, as the Secretary 
        may establish).
    (e) Effective Date.--The amendments made by this section shall 
apply to contracts entered into on or after the date of the enactment 
of this Act.

SEC. 7002. EXPANSION AND REVISION OF MEDICARE SELECT POLICIES.

    (a) Permitting Medicare Select Policies in All States.--
            (1) In general.--Subsection (c) of section 4358 of the 
        Omnibus Budget Reconciliation Act of 1990 (hereafter referred 
        to as ``OBRA-1990'') is hereby repealed.
            (2) Conforming amendment.--Section 4358 of OBRA-1990 is 
        amended by redesignating subsection (d) as subsection (c).
    (b) Requirements of Medicare Select Policies.--Section 1882(t)(1) 
of the Social Security Act (42 U.S.C. 1395ss(t)(1)) is amended to read 
as follows:
    ``(1)(A) If a medicare supplemental policy meets the 1991 NAIC 
Model Regulation or 1991 Federal Regulation and otherwise complies with 
the requirements of this section except that--
            ``(i) the benefits under such policy are restricted to 
        items and services furnished by certain entities (or reduced 
        benefits are provided when items or services are furnished by 
        other entities), and
            ``(ii) in the case of a policy described in subparagraph 
        (C)(i)--
                    ``(I) the benefits under such policy are not one of 
                the groups or packages of benefits described in 
                subsection (p)(2)(A),
                    ``(II) except for nominal copayments imposed for 
                services covered under part B of this title, such 
                benefits include at least the core group of basic 
                benefits described in subsection (p)(2)(B), and
                    ``(III) an enrollee's liability under such policy 
                for physician's services covered under part B of this 
                title is limited to the nominal copayments described in 
                subclause (II),
the policy shall nevertheless be treated as meeting those standards if 
the policy meets the requirements of subparagraph (B).
    ``(B) A policy meets the requirements of this subparagraph if--
            ``(i) full benefits are provided for items and services 
        furnished through a network of entities which have entered into 
        contracts or agreements with the issuer of the policy,
            ``(ii) full benefits are provided for items and services 
        furnished by other entities if the services are medically 
        necessary and immediately required because of an unforeseen 
        illness, injury, or condition and it is not reasonable given 
        the circumstances to obtain the services through the network,
            ``(iii) the network offers sufficient access,
            ``(iv) the issuer of the policy has arrangements for an 
        ongoing quality assurance program for items and services 
        furnished through the network,
            ``(v)(I) the issuer of the policy provides to each enrollee 
        at the time of enrollment an explanation of--
                    ``(aa) the restrictions on payment under the policy 
                for services furnished other than by or through the 
                network,
                    ``(bb) out of area coverage under the policy,
                    ``(cc) the policy's coverage of emergency services 
                and urgently needed care, and
                    ``(dd) the availability of a policy through the 
                entity that meets the 1991 Model NAIC Regulation or 
                1991 Federal Regulation without regard to this 
                subsection and the premium charged for such policy, and
            ``(II) each enrollee prior to enrollment acknowledges 
        receipt of the explanation provided under subclause (I), and
            ``(vi) the issuer of the policy makes available to 
        individuals, in addition to the policy described in this 
        subsection, any policy (otherwise offered by the issuer to 
        individuals in the State) that meets the 1991 Model NAIC 
        Regulation or 1991 Federal Regulation and other requirements of 
        this section without regard to this subsection.
    ``(C)(i) A policy described in this subparagraph--
            ``(I) is offered by an eligible organization (as defined in 
        section 1876(b)),
            ``(II) is not a policy or plan providing benefits pursuant 
        to a contract under section 1876 or an approved demonstration 
        project described in section 603(c) of the Social Security 
        Amendments of 1983, section 2355 of the Deficit Reduction Act 
        of 1984, or section 9412(b) of the Omnibus Budget 
        Reconciliation Act of 1986, and
            ``(III) provides benefits which, when combined with 
        benefits which are available under this title, are 
        substantially similar to benefits under policies offered to 
        individuals who are not entitled to benefits under this title.
    ``(ii) In making a determination under subclause (III) of clause 
(i) as to whether certain benefits are substantially similar, there 
shall not be taken into account, except in the case of preventive 
services, benefits provided under policies offered to individuals who 
are not entitled to benefits under this title which are in addition to 
the benefits covered by this title and which are benefits an entity 
must provide in order to meet the definition of an eligible 
organization under section 1876(b)(1).''.
    (c) Renewability of Medicare Select Policies.--Section 1882(q)(1) 
of the Social Security Act (42 U.S.C. 1395ss(q)(1)) is amended--
            (1) by striking ``(1) Each'' and inserting ``(1)(A) Except 
        as provided in subparagraph (B), each'';
            (2) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively; and
            (3) by adding at the end the following new subparagraph:
            ``(B)(i) Except as provided in clause (ii), in the case of 
        a policy that meets the requirements of subsection (t), an 
        issuer may cancel or nonrenew such policy with respect to an 
        individual who leaves the service area of such policy.
            ``(ii) If an individual described in clause (i) moves to a 
        geographic area where an issuer described in clause (i), or 
        where an affiliate of such issuer, is issuing medicare 
        supplemental policies, such individual must be permitted to 
        enroll in any medicare supplemental policy offered by such 
        issuer or affiliate that provides benefits comparable to or 
        less than the benefits provided in the policy being canceled or 
        nonrenewed. An individual whose coverage is canceled or 
        nonrenewed under this subparagraph shall, as part of the notice 
        of termination or nonrenewal, be notified of the right to 
        enroll in other medicare supplemental policies offered by the 
        issuer or its affiliates.
            ``(iii) For purposes of this subparagraph, the term 
        `affiliate' shall have the meaning given such term by the 1991 
        NAIC Model Regulation.''.
    (d) Civil Money Penalty.--Section 1882(t)(2) of the Social Security 
Act (42 U.S.C. 1395ss(t)(2)) is amended--
            (1) by striking ``(2)'' and inserting ``(2)(A)'';
            (2) by redesignating subparagraphs (A), (B), (C), and (D) 
        as clauses (i), (ii), (iii), and (iv), respectively;
            (3) in clause (iv), as so redesignated--
                    (A) by striking ``paragraph (1)(E)(i)'' and 
                inserting ``paragraph (1)(B)(v)(I), and
                    (B) by striking ``paragraph (1)(E)(ii)'' and 
                inserting ``paragraph (1)(B)(v)(II)'';
            (4) by striking ``the previous sentence'' and inserting 
        ``this subparagraph''; and
            (5) by adding at the end the following new subparagraph:
    ``(B) If the Secretary determines that an issuer of a policy 
approved under paragraph (1) has made a misrepresentation to the 
Secretary or has provided the Secretary with false information 
regarding such policy, the issuer is subject to a civil money penalty 
in an amount not to exceed $100,000 for each such determination. The 
provisions of section 1128A (other than the first sentence of 
subsection (a) and other than subsection (b)) shall apply to a civil 
money penalty under this subparagraph in the same manner as such 
provisions apply to a penalty or proceeding under section 1128A(a).''.
    (e) Effective Dates.--
            (1) NAIC standards.--If, within 6 months after the date of 
        the enactment of this Act, the National Association of 
        Insurance Commissioners (hereafter in this subsection referred 
        to as the ``NAIC'') makes changes in the 1991 NAIC Model 
        Regulation (as defined in section 1882(p)(1)(A) of the Social 
        Security Act) to incorporate the additional requirements 
        imposed by the amendments made by this section, section 
        1882(g)(2)(A) of such Act shall be applied in each State, 
        effective for policies issued to policyholders on and after the 
        date specified in paragraph (3), as if the reference to the 
        Model Regulation adopted on June 6, 1979, were a reference to 
        the 1991 NAIC Model Regulation (as so defined) as changed under 
        this paragraph (such changed Regulation referred to in this 
        subsection as the ``1994 NAIC Model Regulation'').
            (2) Secretary standards.--If the NAIC does not make changes 
        in the 1991 NAIC Model Regulation (as so defined) within the 6-
        month period specified in paragraph (1), the Secretary of 
        Health and Human Services (in this subsection as the 
        ``Secretary'') shall promulgate a regulation and section 
        1882(g)(2)(A) of the Social Security Act shall be applied in 
        each State, effective for policies issued to policyholders on 
        and after the date specified in paragraph (3), as if the 
        reference to the Model Regulation adopted in June 6, 1979, were 
        a reference to the 1991 NAIC Model Regulation (as so defined) 
        as changed by the Secretary under this paragraph (such changed 
        Regulation referred to in this subsection as the ``1994 Federal 
        Regulation'').
            (3) Date specified.--
                    (A) In general.--Subject to subparagraph (B), the 
                date specified in this paragraph for a State is the 
                earlier of--
                            (i) the date the State adopts the 1994 NAIC 
                        Model Regulation or the 1994 Federal 
                        Regulation; or
                            (ii) 1 year after the date the NAIC or the 
                        Secretary first adopts such regulations.
                    (B) Additional legislative action required.--In the 
                case of a State which the Secretary identifies, in 
                consultation with the NAIC, as--
                            (i) requiring State legislation (other than 
                        legislation appropriating funds) in order for 
                        medicare supplemental policies to meet the 1994 
                        NAIC Model Regulation or the 1994 Federal 
                        Regulation, but
                            (ii) having a legislature which is not 
                        scheduled to meet in 1995 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1995. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.

SEC. 7003. INCLUDING NOTICE OF AVAILABLE HEALTH MAINTENANCE 
              ORGANIZATIONS IN ANNUAL NOTICE TO BENEFICIARIES.

    Section 1804 of the Social Security Act (42 U.S.C. 1395b-2) is 
amended--
            (1) by striking ``and'' at the end of paragraph (2);
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``, and''; and
            (3) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) with respect to the area in which the individual 
        receiving the notice resides, a description of the eligible 
        organizations under section 1833(a)(1) or section 1876 and the 
        carriers offering a medicare supplemental policy described in 
        section 1882(t)(1) which serve the area in which the individual 
        receiving the notice resides.''.

SEC. 7004. LEGISLATIVE PROPOSAL ON ENROLLING MEDICARE BENEFICIARIES IN 
              QUALIFIED HEALTH PLANS.

    (a) In General.--
            (1) Legislative proposal.--Not later than 1 year after the 
        date of the enactment of this Act, the Secretary shall develop 
        and submit to Congress a proposal for legislation which 
        provides for the voluntary enrollment of medicare beneficiaries 
        in private health insurance plans.
            (2) Medicare beneficiary.--For purposes of this section, 
        the term ``medicare beneficiary'' means an individual who is 
        eligible for benefits under part A of title XVIII of the Social 
        Security Act and is enrolled under part B of such title.
    (b) Contents of the Proposal.--A proposal for legislation submitted 
under subsection (a) shall--
            (1) provide for an appropriate methodology by which the 
        Secretary shall make payment to private health insurance plans 
        for the enrollment of medicare beneficiaries;
            (2) provide individuals the opportunity to remain enrolled 
        in such a plan without an interruption in coverage upon 
        becoming medicare beneficiaries; and
            (3) provide medicare beneficiaries with the opportunity to 
        enroll in a private health insurance plan.

SEC. 7005. OPTIONAL INTERIM ENROLLMENT OF MEDICARE BENEFICIARIES IN 
              PRIVATE HEALTH PLANS.

    (a) Interim Enrollment of Medicare Beneficiaries in Qualified 
Health Plans.--
            (1) In general.--Notwithstanding title XVIII of the Social 
        Security Act, the Secretary shall provide for a monthly payment 
        as provided under subsection (b)(1) to a private health 
        insurance plan on behalf of enrolled medicare beneficiaries who 
        choose to enroll in such a plan.
            (2) Medicare beneficiary.--For purposes of this section, 
        the term ``medicare beneficiary'' means an individual who is 
        eligible for benefits under part A of title XVIII of the Social 
        Security Act and is enrolled under part B of such title.
    (b) Payment Specified.--
            (1) Federal payment.--
                    (A) In general.--The amount of payment specified in 
                this paragraph for an individual who is enrolled in a 
                private health insurance plan is the lesser of--
                            (i) the applicable rate specified in 
                        section 1876(a)(1)(C) of the Social Security 
                        Act; or
                            (ii) the monthly premium charged the 
                        individual for coverage under the private 
                        health insurance plan.
                    (B) Source of payment.--The payment to a private 
                health insurance plan under this paragraph for 
                individuals entitled to benefits under part A and 
                enrolled under part B of title XVIII of the Social 
                Security Act shall be made from the Federal Hospital 
                Insurance Trust Fund and the Federal Supplementary 
                Medical Insurance Trust Fund, with the allocation to be 
                determined by the Secretary.
            (2) Individual's share.--If the monthly premium for the 
        private plan in which the individual is enrolled is greater 
        than the amount specified under paragraph (1)(A)(i), the 
        individual shall be responsible for paying to the plan the 
        difference between the monthly premium charged the individual 
        for coverage under the plan and the amount specified in 
        paragraph (1)(A)(i).
            (3) Budget-neutrality.--The total amount of payments made 
        by the Secretary under this section with respect to a 
        beneficiary for a year may not exceed the amount of payment 
        that would have been made under title XVIII of the Social 
        Security Act during the year if the beneficiary did not choose 
        to enroll in a private health insurance plan during the year.
    (c) Payments Under This Section as Sole Medicare Benefits.--
Payments made under this section shall be instead of the amounts that 
would otherwise be payable, pursuant to sections 1814(b) and 1833(a) of 
the Social Security Act, for services furnished to medicare 
beneficiaries.
    (d) Inclusion in Annual Notice to Beneficiaries.--Section 1804 of 
the Social Security Act (42 U.S.C. 1395b-2), as amended by section 
7003, is amended--
            (1) by striking ``and'' at the end of paragraph (3);
            (2) by striking the period at the end of paragraph (4) and 
        inserting ``, and''; and
            (3) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) a description of the option provided pursuant to 
        section 7005 of the Bipartisan Health Care Reform Act of 1994 
        for payment to be made by the Secretary on the individual's 
        behalf for enrollment in a private health insurance plan.''.

                  PART 2--IMPROVED PROGRAM EFFICIENCY

SEC. 7011. IMPROVED EFFICIENCY THROUGH CONSOLIDATION OF ADMINISTRATION 
              OF PARTS A AND B.

    (a) In General.--The Secretary of Health and Human Services shall 
take such steps as may be necessary to consolidate the administration 
(including processing systems) of parts A and B of the medicare program 
(under title XVIII of the Social Security Act) over a 5-year period.
    (b) Combination of Intermediary and Carrier Functions.--In taking 
such steps, the Secretary shall contract with a single entity that 
combines the fiscal intermediary and carrier functions in each area 
except where the Secretary finds that special regional or national 
contracts are appropriate.
    (c) Superseding Conflicting Requirements.--The provisions of 
sections 1816 and 1842 of the Social Security Act (including provider 
nominating provisions in such section 1816) are superseded to the 
extent required to carry out this section.

               PART 3--NOTICE OF ADVANCE DIRECTIVE RIGHTS

SEC. 7021. PROVIDING NOTICE OF RIGHTS REGARDING MEDICAL CARE TO 
              INDIVIDUALS ENTERING MEDICARE.

    (a) In General.--Section 1804 of the Social Security Act (42 U.S.C. 
1395b-2) is amended--
            (1) in paragraph (2), by striking ``and'' at the end;
            (2) in paragraph (3), by striking the period at the end and 
        inserting ``, and''; and
            (3) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) a description of an individual's rights under State 
        law to make decisions concerning medical care, including the 
        right to accept or refuse medical or surgical treatment and the 
        right to formulate advance directives (as defined in section 
        1866(f)(3)).''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to notices provided under section 1804 of the Social Security Act 
on or after January 1 of the first year beginning after the date of the 
enactment of this Act.

                          Subtitle B--Savings

                   PART 1--SAVINGS RELATING TO PART A

SEC. 7101. REDUCTION IN UPDATE FOR PAYMENTS FOR INPATIENT HOSPITAL 
              SERVICES.

                                                  Title VII, Subtitle B

    Section 1886(b)(3)(B)(i) of the Social Security Act (42 U.S.C. 
1395ww(b)(3)(B)(i)) is amended--
            (1) in subclause (XII)--
                    (A) by striking ``fiscal year 1997'' and inserting 
                ``for each of the fiscal years 1997 through 2000'', and
                    (B) by striking ``0.5 percentage point'' and 
                inserting ``2.0 percentage points''; and
            (2) in subclause (XIII), by striking ``fiscal year 1998'' 
        and inserting ``fiscal year 2005''.

SEC. 7102. REDUCTION IN PAYMENTS FOR CAPITAL-RELATED COSTS FOR 
              INPATIENT HOSPITAL SERVICES.

    (a) PPS Hospitals.--
            (1) Reduction in base payment rates.--Section 1886(g)(1)(A) 
        of the Social Security Act (42 U.S.C. 1395ww(g)(1)(A)) is 
        amended by adding at the end the following new sentence: ``In 
        addition to the reduction described in the preceding sentence, 
        for discharges occurring after September 30, 1995, the 
        Secretary shall reduce by 7.31 percent the unadjusted standard 
        Federal capital payment rate (as described in 42 CFR 
        412.308(c), as in effect on the date of the enactment of the 
        Bipartisan Health Care Reform Act of 1994) and shall reduce by 
        10.41 percent the unadjusted hospital-specific rate (as 
        described in 42 CFR 412.328(e)(1), as in effect on the date of 
        the enactment of the Health Security Act).''.
            (2) Reduction in update.--Section 1886(g)(1) of such Act 
        (42 U.S.C. 1395ww(g)(1)) is amended--
                    (A) in subparagraph (B)(i)--
                            (i) by striking ``and (II)'' and inserting 
                        ``(II)'', and
                            (ii) by striking the semicolon at the end 
                        and inserting the following: ``, and (III) an 
                        annual update factor established for the 
                        prospective payment rates applicable to 
                        discharges in a fiscal year which (subject to 
                        reduction under subparagraph (C)) will be based 
                        upon such factor as the Secretary determines 
                        appropriate to take into account amounts 
                        necessary for the efficient and effective 
                        delivery of medically appropriate and necessary 
                        care of high quality;'';
                    (B) by redesignating subparagraph (C) as 
                subparagraph (D); and
                    (C) by inserting after subparagraph (B) the 
                following new subparagraph:
            ``(C)(i) With respect to payments attributable to portions 
        of cost reporting periods or discharges occurring during each 
        of the fiscal years 1996 through 2005, the Secretary shall 
        include a reduction in the annual update factor established 
        under subparagraph (B)(i)(III) for discharges in the year equal 
        to the applicable update reduction described in clause (ii) to 
        adjust for excessive increases in capital costs per discharge 
        for fiscal years prior to fiscal year 1992 (but in no event may 
        such reduction result in an annual update factor less than 
        zero).
            ``(ii) In clause (i), the term `applicable update 
        reduction' means, with respect to the update factor for a 
        fiscal year--
                    ``(I) 4.9 percentage points; or
                    ``(II) if the annual update factor for the previous 
                fiscal year was less than the applicable update 
                reduction for the previous year, the sum of 4.9 
                percentage points and the difference between the annual 
                update factor for the previous year and the applicable 
                update reduction for the previous year.''.
    (b) PPS-Exempt Hospitals.--Section 1861(v)(1) of such Act (42 
U.S.C. 1395x(v)(1)) is further amended by adding at the end the 
following new subparagraph:
    ``(T) Such regulations shall provide that, in determining the 
amount of the payments that may be made under this title with respect 
to the capital-related costs of inpatient hospital services furnished 
by a hospital that is not a subsection (d) hospital (as defined in 
section 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital (as 
defined in section 1886(d)(9)(A)), the Secretary shall reduce the 
amounts of such payments otherwise established under this title by 15 
percent for payments attributable to portions of cost reporting periods 
occurring during each of the fiscal years 1996 through 2005.''.

                   PART 2--SAVINGS RELATING TO PART B

SEC. 7111. ESTABLISHMENT OF CUMULATIVE EXPENDITURE GOALS FOR PHYSICIAN 
              SERVICES.

    (a) Use of Cumulative Performance Standard.--Section 1848(f)(2) of 
the Social Security Act (42 U.S.C. 1395w-4(f)(2)) is amended--
            (1) in subparagraph (A)--
                    (A) in the heading, by striking ``In general'' and 
                inserting ``Fiscal years 1991 through 1994.--'',
                    (B) in the matter preceding clause (i), by striking 
                ``a fiscal year (beginning with fiscal year 1991)'' and 
                inserting ``fiscal years 1991, 1992, 1993, and 1994'', 
                and
                    (C) in the matter following clause (iv), by 
                striking ``subparagraph (B)'' and inserting 
                ``subparagraph (C)'';
            (2) in subparagraph (B), by striking ``subparagraph (A)'' 
        and inserting ``subparagraphs (A) and (B)'';
            (3) by redesignating subparagraphs (B) and (C) as 
        subparagraphs (C) and (D); and
            (4) by inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) Fiscal years beginning with fiscal year 
                1995.--Unless Congress otherwise provides, the 
                performance standard rate of increase, for all 
                physicians' services and for each category of 
                physicians' services, for a fiscal year beginning with 
                fiscal year 1995 shall be equal to the performance 
                standard rate of increase determined under this 
                paragraph for the previous fiscal year, increased by 
                the product of--
                            ``(i) 1 plus the Secretary's estimate of 
                        the weighted average percentage increase 
                        (divided by 100) in the fees for all 
                        physicians' services or for the category of 
                        physicians' services, respectively, under this 
                        part for portions of calendar years included in 
                        the fiscal year involved,
                            ``(ii) 1 plus the Secretary's estimate of 
                        the percentage increase or decrease (divided by 
                        100) in the average number of individuals 
                        enrolled under this part (other than HMO 
                        enrollees) from the previous fiscal year to the 
                        fiscal year involved,
                            ``(iii) 1 plus the Secretary's estimate of 
                        the average annual percentage growth (divided 
                        by 100) in volume and intensity of all 
                        physicians' services or of the category of 
                        physicians' services, respectively, under this 
                        part for the 5-fiscal-year period ending with 
                        the preceding fiscal year (based upon 
                        information contained in the most recent annual 
                        report made pursuant to section 1841(b)(2)), 
                        and
                            ``(iv) 1 plus the Secretary's estimate of 
                        the percentage increase or decrease (divided by 
                        100) in expenditures for all physicians' 
                        services or of the category of physicians' 
                        services, respectively, in the fiscal year 
                        (compared with the previous fiscal year) which 
                        are estimated to result from changes in law or 
                        regulations affecting the percentage increase 
                        described in clause (i) and which is not taken 
                        into account in the percentage increase 
                        described in clause (i),
                minus 1, multiplied by 100, and reduced by the 
                performance standard factor (specified in subparagraph 
                (C)).''.
    (b) Treatment of Default Update.--
            (1) In general.--Section 1848(d)(3)(B) of such Act (42 
        U.S.C. 1395w-4(d)(3)(B)) is amended--
                    (A) in clause (i)--
                            (i) in the heading, by striking ``In 
                        general'' and inserting ``1992 through 1996'', 
                        and
                            (ii) by striking ``for a year'' and 
                        inserting ``for 1992, 1993, 1994, 1995, and 
                        1996''; and
                    (B) by adding after clause (ii) the following new 
                clause:
                            ``(iii) Years beginning with 1997.--
                                    ``(I) In general.--The update for a 
                                category of physicians' services for a 
                                year beginning with 1997 provided under 
                                subparagraph (A) shall be increased or 
                                decreased by the same percentage by 
                                which the cumulative percentage 
                                increase in actual expenditures for 
                                such category of physicians' services 
                                for such year was less or greater, 
                                respectively, than the performance 
                                standard rate of increase (established 
                                under subsection (f)) for such category 
                                of services for such year.
                                    ``(II) Cumulative percentage 
                                increase defined.--In subclause (I), 
                                the `cumulative percentage increase in 
                                actual expenditures' for a year shall 
                                be equal to the product of the adjusted 
                                increases for each year beginning with 
                                1995 up to and including the year 
                                involved, minus 1 and multiplied by 
                                100. In the previous sentence, the 
                                `adjusted increase' for a year is equal 
                                to 1 plus the percentage increase in 
                                actual expenditures for the year.''.
            (2) Conforming amendment.--Section 1848(d)(3)(A)(i) of such 
        Act (42 U.S.C. 1395w-4(d)(3)(A)(i)) is amended by striking 
        ``subparagraph (B)'' and inserting ``subparagraphs (B) and 
        (C)''.
    (c) Use of Real GDP To Adjust for Volume and Intensity.--Section 
1848(f)(2)(B)(iii) of such Act (42 U.S.C. 1395w-4(f)(2)(B)(iii)), as 
added by subsection (a), is amended to read as follows:
                            ``(iii) 1 plus the average per capita 
                        growth in the real gross domestic product 
                        (divided by 100) for the 5-fiscal-year period 
                        ending with the previous fiscal year (increased 
                        by 1.5 percentage points for the category of 
                        services consisting of primary care services), 
                        and''.
    (d) Repeal of Restriction on Maximum Reduction.--Section 
1848(d)(3)(B)(ii) of such Act (42 U.S.C. 1395w-4(d)(3)(B)(ii)) is 
amended--
            (1) in the heading, by inserting ``in certain years'' after 
        ``adjustment'';
            (2) in the matter preceding subclause (I), by striking 
        ``for a year'';
            (3) in subclause (I), by adding ``and'' at the end;
            (4) in subclause (II), by striking ``, and'' and inserting 
        a period; and
            (5) by striking subclause (III).
    (e) Repeal of Performance Standard Factor.--
            (1) In general.--Section 1842(f)(2) of such Act, as amended 
        by subsection (a)(3), is amended by striking subparagraph (C) 
        and redesignating subparagraph (D) as subparagraph (C).
            (2) Conforming amendment.--Section 1842(f)(2)(B) of such 
        Act, as added by subsection (a), is amended in the matter 
        following clause (iv) by striking ``1, multiplied by 100'' and 
        all that follows through ``subparagraph (C))'' and inserting 
        ``1 and multiplied by 100''.
    (f) Reduction in Conversion Factor for Physician Fee Schedule for 
1995.--Section 1848(d)(1) of the Social Security Act (42 U.S.C. 1395w-
4(d)(1)) is amended--
            (1) in subparagraph (A), by inserting after ``subparagraph 
        (B)'' the following: ``, and, in the case of 1995, specified in 
        subparagraph (C)'';
            (2) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (3) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) Special provision for 1995.--For purposes of 
                subparagraph (A), the conversion factor specified in 
                this subparagraph for 1995 is--
                            ``(i) in the case of physicians' services 
                        included in the category of primary care 
                        services (as defined in subsection (j)(1)), the 
                        conversion factor established under this 
                        subsection for 1994 adjusted by the update 
                        established under paragraph (3) for 1995; and
                            ``(ii) in the case of any other physicians' 
                        services, the conversion factor established 
                        under this subsection for 1994 reduced by 3 
                        percentage points and adjusted by the update 
                        established under paragraph (3) for 1995.''.

SEC. 7112. IMPOSITION OF COINSURANCE ON LABORATORY SERVICES.

    (a) In General.--Paragraphs (1)(D) and (2)(D) of section 1833(a) of 
the Social Security Act (42 U.S.C. 1395l(a)) are each amended--
            (1) by striking ``(or 100 percent'' and all that follows 
        through ``the first opinion))''; and
            (2) by striking ``100 percent of such negotiated rate'' and 
        inserting ``80 percent of such negotiated rate''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to tests furnished on or after January 1, 1995.

SEC. 7113. INCREASE IN MEDICARE PART B PREMIUM FOR INDIVIDUALS WITH 
              HIGH INCOME.

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

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

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

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

    ``(a) Imposition of Tax.--In the case of an individual to whom this 
section applies for the taxable year, there is hereby imposed (in 
addition to any other tax imposed by this subtitle) a tax for such 
taxable year equal to the aggregate of the Medicare part B premium 
taxes for each of the months during such year that such individual is 
covered by Medicare part B.
    ``(b) Individuals to Whom Section Applies.--This section shall 
apply to any individual for any taxable year if--
            ``(1) such individual is covered under Medicare part B for 
        any month during such year, and
            ``(2) the modified adjusted gross income of the taxpayer 
        for such taxable year exceeds the threshold amount.
    ``(c) Medicare Part B Premium Tax for Month.--
            ``(1) In general.--The Medicare part B premium tax for any 
        month is the applicable percentage (as defined in paragraph 
        (2)) of the amount equal to the excess of--
                    ``(A) 150 percent of the monthly actuarial rate for 
                enrollees age 65 and over determined for that calendar 
                year under section 1839(b) of the Social Security Act, 
                over
                    ``(B) the total monthly premium under section 1839 
                of the Social Security Act (determined without regard 
                to subsections (b) and (f) of section 1839 of such 
                Act).
            ``(2) Phase-in of tax.--If the modified adjusted gross 
        income of the taxpayer for any taxable years exceeds the 
        threshold amount by--
                    ``(A) less than $25,000, the applicable percentage 
                under this paragraph is 33\1/3\ percent,
                    ``(B) at least $25,000, but less than $50,000, the 
                applicable percentage under this paragraph is 66\2/3\ 
                percent,
                    ``(C) at least $50,000, but less than $75,000, the 
                applicable percentage under this paragraph is 65/75 
                (expressed as a percent), or
                    ``(D) at least $75,000, the applicable percentage 
                under this paragraph is 100 percent.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) except as otherwise provided in this 
                paragraph, $75,000,
                    ``(B) $100,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married at the close of the 
                        taxable year but does not file a joint return 
                        for such year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during the taxable year.
            ``(2) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Medicare part b coverage.--An individual shall be 
        treated as covered under Medicare part B for any month if a 
        premium is paid under part B of title XVIII of the Social 
        Security Act for the coverage of the individual under such part 
        for the month.
            ``(4) Married individual.--The determination of whether an 
        individual is married shall be made in accordance with section 
        7703.''.
    (b) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 of such Code is amended by adding at the end thereof the 
following new item:

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

SEC. 7114. EXTENSION OF 25 PERCENT PART B PREMIUM.

    Section 1839(e) of the Social Security Act (42 U.S.C. 1395r(e)) is 
amended--
            (1) in paragraph (1)(A), by striking ``after after December 
        1995 and prior to January 1999'' and inserting ``after December 
        1995'';
            (2) by striking ``(1)(A)'' and inserting ``(1)'';
            (3) by striking paragraph (2); and
            (4) by redesignating subparagraph (B) of paragraph (1) as 
        paragraph (2) (and redesignating the clauses of such 
        subparagraph accordingly).

SEC. 7115. REDUCTION IN HOSPITAL OUTPATIENT SERVICES THROUGH 
              ESTABLISHMENT OF PROSPECTIVE PAYMENT SYSTEM.

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

               PART 3--SAVINGS RELATING TO PARTS A AND B

SEC. 7121. REDUCTION IN HOME HEALTH SERVICES THROUGH ESTABLISHMENT OF 
              PROSPECTIVE PAYMENT SYSTEM.

    (a) In General.--
            (1) Payments under part a.--Section 1814 of the Social 
        Security Act (42 U.S.C. 1395f) is amended--
                    (A) in subsection (b) in the matter preceding 
                paragraph (1)--
                            (i) by striking ``(other than'' and all 
                        that follows through ``medical equipment)'', 
                        and
                            (ii) by striking ``the provisions of'' and 
                        inserting ``the succeeding provisions of this 
                        section and''; and
                    (B) by adding at the end the following new 
                subsection:

                  ``Payments for Home Health Services

    ``(m) The amount of payment under this part for home health 
services shall be equal to a prospectively determined payment rate 
established by the Secretary that provides for payments for such 
services to be based upon a national rate adjusted to take into account 
the relative costs of furnishing such services in various geographic 
areas, except that for services furnished during cost reporting periods 
(or portions thereof) in years beginning with 1996, such amount shall 
be equal to 95 percent of the amount that would otherwise have been 
determined.''.
            (2) Payments under part b.--Section 1833(a)(2)(A) of the 
        Social Security Act (42 U.S.C. 1395l(a)(2)(A)) is amended by 
        striking ``section 1861(s)(10)(A), the lesser of--'' and all 
        that follows and inserting the following: ``section 
        1861(s)(10)(A), an amount equal to a prospectively determined 
        payment rate established by the Secretary that provides for 
        payments for such services to be based upon a national rate 
        adjusted to take into account the relative costs of furnishing 
        such services in various geographic areas, except that for 
        services furnished during cost reporting periods (or portions 
        thereof) in years beginning with 1996, such amount shall be 
        equal to 95 percent of the amount that would otherwise have 
        been determined;''.
    (b) Establishment of Prospective Payment System.--Not later than 
July 1, 1995, the Secretary of Health and Human Services shall 
establish the prospective payment system for home health services 
necessary to carry out sections 1814(m) and 1833(a)(2)(A) of the Social 
Security Act (as amended by subsection (a)).
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to items and services furnished on or after January 1, 1996.

SEC. 7122. MEDICARE SECONDARY PAYER.

    (a) Delay in Sunset of Data Matching Requirements.--(1) Section 
1862(b)(5)(C)(iii) of the Social Security Act (42 U.S.C. 
1395y(b)(5)(C)(iii)) is amended by striking ``1998'' and inserting 
``2005''.
    (2) Section 6103(l)(12)(F) of the Internal Revenue Code of 1986 is 
amended--
            (A) in clause (i), by striking ``1998'' and inserting 
        ``2005'',
            (B) in clause (ii)(I), by striking ``1997'' and inserting 
        ``2004'', and
            (C) in clause (ii)(II), by striking ``1998'' and inserting 
        ``2005''.
    (b) Extension of Medicare Secondary Payer to Disabled 
Beneficiaries.--Section 1862(b)(1)(B)(iii) of the Social Security Act 
(42 U.S.C. 1395y(b)(1)(B)(iii)) is amended by striking ``1998'' and 
inserting ``2005''.
    (c) Extension of Coverage for Individuals With End Stage Renal 
Disease.--Section 1862(b)(1)(C) of such Act (42 U.S.C. 1395y(b)(1)(C)) 
is amended--
            (1) in the second sentence, by striking ``October 1, 1998'' 
        and inserting ``October 1, 1995''; and
            (2) by adding at the end the following: ``Effective for 
        items and services furnished on or after October 1, 1995, and 
        before October 1, 2005 (with respect to periods beginning on or 
        after April 1, 1994), clauses (i) and (ii) shall be applied by 
        substituting `24-month' for `12-month' each place it 
        appears.''.
    (d) Application to Disabled Beneficiaries in All Group Health 
Plans.--Section 1862(b)(1)(B) of such Act (42 U.S.C. 1395y(b)(1)(B)) is 
amended--
            (1) in the heading, by striking ``in large group health 
        plans'';
            (2) in clause (i), by striking ``large group health plan 
        (as defined in clause (v))'' and inserting ``group health plan 
        (as defined in subparagraph (A)(v))''; and
            (3) by striking clause (iv) and inserting the following:
                            ``(iv) Small employer exemption.--Clauses 
                        (ii) and (iii) of subparagraph (A) shall apply 
                        with respect to clause (i) in the same manner 
                        as they apply to subparagraph (A)(i).''.

                                                             Title VIII

      TITLE VIII--INCENTIVES TO PURCHASE LONG-TERM CARE INSURANCE

                       table of contents of title

   Subtitle A--Establishment of Federal Standards for Long-Term Care 
                               Insurance

Sec. 8001. Establishment of Federal standards for long-term care 
                            insurance.
            ``TITLE XXII--LONG-TERM CARE INSURANCE STANDARDS

         ``Part A--Promulgation of Standards and Model Benefits

        ``Sec. 2201. Standards.
``Part B--Establishment and Implementation of Long-Term Care Insurance 
                            Policy Standards

        ``Sec. 2211. Implementation of policy standards.
        ``Sec. 2212. Regulation of sales practices.
        ``Sec. 2213. Additional responsibilities for carriers.
        ``Sec. 2214. Renewability standards for issuance, and basis for 
                            cancellation of policies.
        ``Sec. 2215. Benefit standards.
        ``Sec. 2216. Offer of nonforfeiture benefits.
        ``Sec. 2217. Limit of period of contestability and right to 
                            return.
        ``Sec. 2218. Civil money penalty.
      ``Part C--Long-Term Care Insurance Policies, Definition and 
                              Endorsements

        ``Sec. 2221. Long-term care insurance policy defined.
        ``Sec. 2222. Code of conduct with respect to endorsements.
                   ``Part D--Miscellaneous Provisions

        ``Sec. 2231. Definitions.''
         Subtitle B--Tax Treatment of Long-Term Care Insurance

Sec. 8101. Treatment of long-term care insurance or plans.
Sec. 8102. Exclusion for benefits provided under long-term care 
                            insurance and for certain employer-provided 
                            coverage.
Sec. 8103. Qualified long-term services treated as medical care.
Sec. 8104. Exclusion from gross income for amounts otherwise includible 
                            on the surrender or cancellation of any 
                            life insurance policy which are used for 
                            long-term care insurance premiums.
Sec. 8105. Effective date.
                          Subtitle C--Studies

Sec. 8201. Feasibility of encouraging health care providers to donate 
                            services to homebound patients.
Sec. 8202. Feasibility of tax credit for heads of households who care 
                            for elderly family members in their homes.
Sec. 8203. Case management of current long-term care benefits.
Sec. 8204. Subacute care study.
Sec. 8205. Study of long-term care insurance.

   Subtitle A--Establishment of Federal Standards for Long-Term Care 
                               Insurance

SEC. 8001. ESTABLISHMENT OF FEDERAL STANDARDS FOR LONG-TERM CARE 
              INSURANCE.

                                                 Title VIII, Subtitle A

    (a) In General.--The Social Security Act, as amended by section 
2101(a), is amended by adding at the end the following new title:

            ``TITLE XXII--LONG-TERM CARE INSURANCE STANDARDS

         ``Part A--Promulgation of Standards and Model Benefits

``SEC. 2201. STANDARDS.

    ``(a) Application of Standards.--
            ``(1) NAIC.--The Secretary shall request that the National 
        Association of Insurance Commissioners (hereinafter in this 
        title referred to as the `NAIC'), in consultation with the 
        advisory committee provided under subsection (d)--
                    ``(A) to develop specific standards that 
                incorporate the requirements of this title; and
                    ``(B) to report to the Secretary on such standards,
        by not later than 12 months after enactment of this title. If 
        the NAIC develops such model standards that incorporate the 
        requirements of this title within such period and the Secretary 
        finds that such standards implement the requirements of this 
        title, such standards shall be the standards applied under this 
        title.
            ``(2) Default.--If the NAIC does not promulgate the model 
        standards under paragraph (1) by the deadline established in 
        that paragraph, the Secretary shall promulgate, within 12 
        months after such deadline, a regulation that provides 
        standards that incorporate the requirements of this title and 
        such standards shall apply as provided for in this title.
            ``(3) State standards.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B)--
                            ``(i) a State may not establish, implement, 
                        or continue in effect standards different from 
                        those established under this title;
                            ``(ii) carriers shall be exempt from any 
                        State law, rule, regulation, or order not 
                        meeting the requirements of this title; and
                            ``(iii) nothing in this title shall prevent 
                        carriers from marketing or selling long-term 
                        care insurance policies in any State in which 
                        the carrier is licensed to sell such policies, 
                        if the carrier and such policies meet the 
                        applicable requirements established under 
                        Federal law.
                    ``(B) Exception.--
                            ``(i) In general.--If, upon application by 
                        an appropriate State agency and taking into 
                        account the considerations described in clause 
                        (iii), the Secretary determines that a State 
                        has a law that establishes a standard which is 
                        different from the standards established under 
                        section 2701(a) and the standard meets the 
                        requirements of clause (ii), the Secretary may 
                        permit by order or regulation implementation 
                        and enforcement of the standard.
                            ``(ii) Requirements for standard.--The 
                        requirements of this clause are, with respect 
                        to a standard, that--
                                    ``(I) the standard would more 
                                effectively and to an appreciable 
                                greater degree promote the availability 
                                and affordability of long-term care 
                                insurance than the standards 
                                established under this title,
                                    ``(II) the standard would not be 
                                directly inconsistent with or in 
                                conflict with the specific requirements 
                                of this title, and
                                    ``(III) the standard would not 
                                unduly burden interstate commerce.
                            ``(iii) Considerations.--In permitting such 
                        a State standard under clause (i), the 
                        Secretary shall consider a standard favorably 
                        to the extent that the Secretary finds that 
                        following apply with respect to the standard:
                                    ``(I) There will be no negative 
                                economic impact of such a standard on 
                                carriers and employers.
                                    ``(II) The cost of complying with 
                                the standard will be low.
                                    ``(III) There will be a minimal 
                                impact of the standard on the solvency 
                                of carriers.
                                    ``(IV) The standard will promote 
                                the continuation of a competitive 
                                market for long-term care insurance 
                                policies.
                                    ``(V) There is a high probability 
                                of other States applying for such an 
                                exception under this subparagraph with 
                                respect to the standard.
                                    ``(VI) There will be no significant 
                                negative impact on national uniformity 
                                in long-term care insurance policy 
                                standards.
                            ``(iv) Periodic review.--The Secretary 
                        shall periodically review the impact of 
                        standards permitted under this subparagraph, 
                        taking into account the considerations 
                        described in clause (iii) and the requirements 
                        of clause (ii). If the Secretary determines 
                        that a standard of a State permitted under 
                        clause (i) should no longer be permitted 
                        because it no longer meets such requirements 
                        taking into account such considerations, the 
                        Secretary, after notice and opportunity for 
                        rebuttal by the State, may revoke or rescind 
                        the order or regulation permitting the State to 
                        implement the standard.
    ``(b) Deadline for Application of Standards.--
            ``(1) In general.--Subject to paragraph (2), the date 
        specified in this subsection for a State is--
                    ``(A) the date the State adopts the standards 
                established under subsection (a)(1); or
                    ``(B) the date that is 1 year after the first day 
                of the first regular legislative session that begins 
                after the date such standards are first established 
                under subsection (a)(2);
        whichever is earlier.
            ``(2) State requiring legislation.--In the case of a State 
        which the Secretary identifies, in consultation with the NAIC, 
        as--
                    ``(A) requiring State legislation (other than 
                legislation appropriating funds) in order for the 
                standards established under subsection (a) to be 
                applied; but
                    ``(B) having a legislature which is not scheduled 
                to meet within 1 year following the beginning of the 
                next regular legislative session in which such 
                legislation may be considered;
        the date specified in this subsection is the first day of the 
        first calendar quarter beginning after the close of the first 
        legislative session of the State legislature that begins on or 
        after January 1, 1995. For purposes of the previous sentence, 
        in the case of a State that has a 2-year legislative session, 
        each year of such session shall be deemed to be a separate 
        regular session of the State legislature.
    ``(c) Items Included in Standards.--The standards promulgated under 
subsection (a) shall include--
            ``(1) minimum Federal standards for long-term care 
        insurance consistent with the provisions of this title;
            ``(2) standards for the enhanced protection of consumers 
        with long-term care insurance;
            ``(3) procedures for the modification of the standards 
        established under paragraph (1) in a manner consistent with 
        future laws to expand existing Federal or State long-term care 
        benefits or establish a comprehensive Federal or State long-
        term care benefit program; and
            ``(4) other activities determined appropriate by Congress.
    ``(d) Consultation.--In establishing standards and models of 
benefits under this section, the Secretary shall provide for and 
consult with an advisory committee to be chosen by the Secretary, and 
composed of--
            ``(1) three individuals who are representatives of 
        carriers;
            ``(2) three individuals who are representatives of consumer 
        groups;
            ``(3) three representatives who are representatives of 
        providers of long-term care services;
            ``(4) three other individuals who are not representatives 
        of carriers or of providers of long-term care services and who 
        have expertise in the delivery and financing of such services; 
        and
            ``(5) the Secretary of Veterans Affairs.
    ``(e) Duties.--The advisory committee established under subsection 
(d) shall--
            ``(1) recommend the appropriate inflationary index to be 
        used with respect to the inflation protection benefit portion 
        of the standards;
            ``(2) recommend the uniform needs assessment mechanism to 
        be used in determining the eligibility of individuals for 
        benefits under a policy;
            ``(3) recommend appropriate standards for benefits under 
        section 2215(c); and
            ``(4) perform such other activities as determined 
        appropriate by the Secretary.
    ``(f) Administrative Provisions.--The following provisions of 
section 1886(e)(6) shall apply to the advisory committee chosen under 
subsection (d) in the same manner as such provisions apply under such 
section:
            ``(1) Subparagraph (C) (relating to staffing and 
        administration).
            ``(2) Subparagraph (D) (relating to compensation of 
        members).
            ``(3) Subparagraph (F) (relating to access to information).
            ``(4) Subparagraph (G) (relating to use of funds).
            ``(5) Subparagraph (H) (relating to periodic GAO audits).
            ``(6) Subparagraph (J) (relating to requests for 
        appropriations).

``Part B--Establishment and Implementation of Long-Term Care Insurance 
                            Policy Standards

``SEC. 2211. IMPLEMENTATION OF POLICY STANDARDS.

    ``(a) In General.--
            ``(1) Regulatory program.--No long-term care policy (as 
        defined in section 2221) may be issued, sold, or offered for 
        sale as a long-term care insurance policy in a State on or 
        after the date specified in section 2201(b) unless--
                    ``(A) the Secretary determines that the State has 
                established a regulatory program that--
                            ``(i) provides for the application and 
                        enforcement of the standards established under 
                        section 2201(a); and
                            ``(ii) complies with the requirements of 
                        subsection (b);
                by the date specified in section 2201(b), and the 
                policy has been approved by the State commissioner or 
                superintendent of insurance under such program; or
                    ``(B) if the State has not established such a 
                program, or if the State's regulatory program has been 
                decertified, the policy has been certified by the 
                Secretary (in accordance with such procedures as the 
                Secretary may establish) as meeting the standards 
                established under section 2201(a) by the date specified 
                in section 2201(b).
        For purposes of this subsection, the advertising or soliciting 
        with respect to a policy, directly or indirectly, shall be 
        deemed the offering for sale of the policy.
            ``(2) Review of state regulatory programs.--The Secretary 
        periodically shall review regulatory programs described in 
        paragraph (1)(A) to determine if they continue to provide for 
        the application and enforcement of the standards and procedures 
        established under section 2201(a) and (b). If the Secretary 
        determines that a State regulatory program no longer meets such 
        standards and requirements, before making a final 
        determination, the Secretary shall provide the State an 
        opportunity to adopt such a plan of correction as would permit 
        the program to continue to meet such standards and 
        requirements. If the Secretary makes a final determination that 
        the State regulatory program, after such an opportunity, fails 
        to meet such standards and requirements, the Secretary shall 
        assume responsibility under paragraph (1)(B) with respect to 
        certifying policies in the State and shall exercise full 
        authority under section 2201 for carriers, agents, or 
        associations or its subsidiary in the State plans in the State.
    ``(b) Additional Requirements for Approval of State Regulatory 
Programs.--For purposes of subsection (a)(1)(A)(ii), the requirements 
of this subsection for a State regulatory program are as follows:
            ``(1) Enforcement.--The enforcement under the program--
                    ``(A) shall be designed in a manner so as to secure 
                compliance with the standards within 30 days after the 
                date of a finding of noncompliance with such standards;
                    ``(B) shall provide for notice in the annual report 
                required under paragraph (5) to the Secretary of cases 
                where such compliance is not secured within such 30-day 
                period; and
                    ``(C) shall provide, in addition to any other 
                penalties provided by the laws of a State, that any 
                carrier, agent, or association that is found under the 
                program to have violated such standards shall each be 
                subject to a fine of up to 3 times the amount of any 
                commissions paid for each policy involved or $10,000, 
                whichever is greater.
            ``(2) Process.--The enforcement process under each State 
        regulatory program shall provide for--
                    ``(A) procedures for individuals and entities to 
                file written, signed complaints respecting alleged 
                violations of the standards;
                    ``(B) responding on a timely basis to such 
                complaints;
                    ``(C) the investigation of--
                            ``(i) those complaints which have a 
                        reasonable probability of validity, and
                            ``(ii) such other alleged violations of the 
                        standards as the program finds appropriate; and
                    ``(D) the imposition of appropriate sanctions 
                (which include, in appropriate cases, the imposition of 
                a civil money penalty as provided for in section 2218) 
                in the case of a carrier, agent, or association or its 
                subsidiary determined to have violated the standards.
            ``(3) Consumer access to compliance information.--
                    ``(A) In general.--A State regulatory program must 
                provide for consumer access to complaints filed with 
                the State commissioner or superintendent of insurance 
                with respect to long-term care insurance policies.
                    ``(B) Confidentiality.--The access provided under 
                subparagraph (A) shall be limited to the extent 
                required to protect the confidentiality of the identity 
                of individual policyholders.
            ``(4) Process for approval of premiums.--
                    ``(A) In general.--Each State regulatory program 
                shall--
                            ``(i) provide for a process for approving 
                        or disapproving proposed premium increases or 
                        decreases with respect to long-term care 
                        insurance policies; and
                            ``(ii) establish a policy for receipt and 
                        consideration of public comments before 
                        approving such a premium increase or decrease.
                    ``(B) Conditions for approval.--No premium increase 
                shall be approved (or deemed approved) under 
                subparagraph (A) unless the proposed increase is 
                accompanied by an actuarial memorandum which--
                            ``(i) includes a description of the 
                        assumptions that justify the increase;
                            ``(ii) contains such information as may be 
                        required under the standards established under 
                        section 2701(a); and
                            ``(iii) is made available to the public.
                    ``(C) Application.--Except as provided in 
                subparagraph (D), this paragraph shall not apply to a 
                group long-term care insurance policy issued to a group 
                described in section 4(E)(1) of the NAIC Long Term Care 
                Insurance Model Act (effective January 1991), except 
                that such group policy shall, pursuant to guidelines 
                developed by the NAIC, provide notice to policyholders 
                and certificate holders of any premium change under 
                such group policy.
                    ``(D) Exception.--Subparagraph (C) shall not apply 
                to--
                            ``(i) group conversion policies;
                            ``(ii) the group continuation feature of a 
                        group policy if the carrier separately rates 
                        employee and continuation coverages; and
                            ``(iii) group policies where the function 
                        of the employer is limited solely to collecting 
                        premiums (through payroll deductions or dues 
                        checkoff) and remitting them to the carrier.
                    ``(E) Construction.--Nothing in this paragraph 
                shall be construed as preventing the NAIC from 
                promulgating standards, or a State from enacting and 
                enforcing laws, with respect to premium rates or loss 
                ratios for all, including group, long-term care 
                insurance policies.
            ``(5) Annual reports.--Each State regulatory program shall 
        provide for annual reports to be submitted to the Secretary on 
        the implementation and enforcement of the standards in the 
        State, including information concerning violations in excess of 
        30 days.
            ``(6) Access to other information.--The State regulatory 
        program must provide for consumer access to actuarial memoranda 
        provided under paragraph (4).
            ``(7) Default.--In the case of a State without a regulatory 
        program approved under subsection (a), the Secretary shall 
        provide for the enforcement activities described in subsection 
        (c).
    ``(c) Secretarial Enforcement Authority.--
            ``(1) In general.--The Secretary shall exercise authority 
        under this subsection in the case of a State that does not have 
        a regulatory program approved under this section.
            ``(2) Complaints and investigations.--The Secretary shall 
        establish procedures--
                    ``(A) for individuals and entities to file written, 
                signed complaints respecting alleged violations of the 
                requirements of this title;
                    ``(B) for responding on a timely basis to such 
                complaints; and
                    ``(C) for the investigation of--
                            ``(i) those complaints that have a 
                        reasonable probability of validity; and
                            ``(ii) such other alleged violations of the 
                        requirements of this title as the Secretary 
                        determines to be appropriate.
        In conducting investigations under this subsection, agents of 
        the Secretary shall have reasonable access necessary to enable 
        such agents to examine evidence of any carrier, agent, or 
        association or its subsidiary being investigated.
            ``(3) Hearings.--
                    ``(A) In general.--Prior to imposing an order 
                described in paragraph (4) against a carrier, agent, or 
                association or its subsidiary under this section for a 
                violation of the requirements of this title, the 
                Secretary shall provide the carrier, agent, association 
                or subsidiary with notice and, upon request made within 
                a reasonable time (of not less than 30 days, as 
                established by the Secretary by regulation) of the date 
                of the notice, a hearing respecting the violation.
                    ``(B) Conduct of hearing.--Any hearing requested 
                under subparagraph (A) shall be conducted before an 
                administrative law judge. If no hearing is so 
                requested, the Secretary's imposition of the order 
                shall constitute a final and unappealable order.
                    ``(C) Authority in hearings.--In conducting 
                hearings under this paragraph--
                            ``(i) agents of the Secretary and 
                        administrative law judges shall have reasonable 
                        access necessary to enable such agents and 
                        judges to examine evidence of any carrier, 
                        agent, or association or its subsidiary being 
                        investigated; and
                            ``(ii) administrative law judges, may, if 
                        necessary, compel by subpoena the attendance of 
                        witnesses and the production of evidence at any 
                        designated place or hearing.
                In case of contumacy or refusal to obey a subpoena 
                lawfully issued under this subparagraph and upon 
                application of the Secretary, an appropriate district 
                court of the United States may issue an order requiring 
                compliance with such subpoena and any failure to obey 
                such order may be punished by such court as a contempt 
                thereof.
                    ``(D) Issuance of orders.--If an administrative law 
                judge determines in a hearing under this paragraph, 
                upon the preponderance of the evidence received, that a 
                carrier, agent, or association or its subsidiary named 
                in the complaint has violated the requirements of this 
                title, the administrative law judge shall state the 
                findings of fact and issue and cause to be served on 
                such carrier, agent, association, or subsidiary an 
                order described in paragraph (4).
            ``(4) Cease and desist order with civil money penalty.--
                    ``(A) In general.--Subject to the provisions of 
                subparagraphs (B) through (F), an order under this 
                paragraph--
                            ``(i) shall require the agent, association 
                        or its subsidiary, or a carrier--
                                    ``(I) to cease and desist from such 
                                violations; and
                                    ``(II) to pay a civil penalty in an 
                                amount not to exceed 3 times the amount 
                                of any commissions paid for each policy 
                                involved or $10,000, whichever is 
                                greater, for each such violation; and
                            ``(ii) may require the agent, association 
                        or its subsidiary, or a carrier to take such 
                        other remedial action as is appropriate.
                    ``(B) Corrections within 30 days.--No order shall 
                be imposed under this paragraph by reason of any 
                violation if the carrier, agent, or association or its 
                subsidiary establishes to the satisfaction of the 
                Secretary that--
                            ``(i) such violation was due to reasonable 
                        cause and was not intentional and was not due 
                        to willful neglect; and
                            ``(ii) such violation is corrected within 
                        the 30-day period beginning on the earliest 
                        date the carrier, agent, association, or 
                        subsidiary knew, or exercising reasonable 
                        diligence could have known, that such a 
                        violation was occurring.
                    ``(C) Waiver by secretary.--In the case of a 
                violation under this title that is due to reasonable 
                cause and not to willful neglect, the Secretary may 
                waive part or all of the civil money penalty imposed 
                under subparagraph (A)(i)(II) to the extent that 
                payment of such penalty would be grossly excessive 
                relative to the violation involved and to the need for 
                deterrence of violations.
                    ``(D) Administrative appellate review.--The 
                decision and order of an administrative law judge under 
                this paragraph shall become the final agency decision 
                and order of the Secretary unless, within 30 days, the 
                Secretary modifies or vacates the decision and order, 
                in which case the decision and order of the Secretary 
                shall become a final order under this paragraph.
                    ``(E) Judicial review.--A carrier, agent, or 
                association or its subsidiary or any other individual 
                adversely affected by a final order issued under this 
                paragraph may, within 45 days after the date the final 
                order is issued, file a petition in the Court of 
                Appeals for the appropriate circuit for review of the 
                order.
                    ``(F) Enforcement of orders.--If a carrier, agent, 
                or association or its subsidiary fails to comply with a 
                final order issued under this paragraph against the 
                carrier, agent, association or subsidiary after 
                opportunity for judicial review under subparagraph (E), 
                the Secretary shall file a suit to seek compliance with 
                the order in any appropriate district court of the 
                United States. In any such suit, the validity and 
                appropriateness of the final order shall not be subject 
                to review.

``SEC. 2212. REGULATION OF SALES PRACTICES.

    ``(a) Duty of Good Faith and Fair Dealing.--
            ``(1) In general.--Each agent (as defined in section 2233) 
        or association that is selling or offering for sale a long-term 
        care insurance policy has the duty of good faith and fair 
        dealing to the purchaser or potential purchaser of such a 
        policy.
            ``(2) Prohibited practices.--An agent or association is 
        considered to have violated paragraph (1) if the agent or 
        association engages in any of the following practices:
                    ``(A) Twisting.--
                            ``(i) In general.--Knowingly making any 
                        misleading representation (including the 
                        inaccurate completion of medical histories) or 
                        incomplete or fraudulent comparison of any 
                        long-term care insurance policy or carriers for 
                        the purpose of inducing, or tending to induce, 
                        any person to retain or effect a change with 
                        respect to a long-term care insurance policy.
                            ``(ii) Policy replacement form.--With 
                        respect to any person who elects to replace or 
                        effect a change in a long-term care insurance 
                        policy, the individual that is selling such 
                        policy shall ensure that such person completes 
                        a policy replacement form developed by the 
                        NAIC. A copy of such form shall be provided to 
                        such person and additional copies shall be 
                        delivered by the selling individual to the old 
                        policy issuer and the new issuer and kept on 
                        file for inspection by the State regulatory 
                        agency.
                    ``(B) High pressure tactics.--Employing any method 
                of marketing having the effect of, or intending to, 
                induce the purchase of long-term care insurance policy 
                through force, fright, threat or undue pressure, 
                whether explicit or implicit.
                    ``(C) Cold lead advertising.--Making use directly 
                or indirectly of any method of marketing which fails to 
                disclose in a conspicuous manner that a purpose of the 
                method of marketing is solicitation of insurance and 
                that contact will be made by an insurance agent or 
                insurance company.
                    ``(D) Others.--Engaging in such other practices 
                determined inappropriate under guidelines issued by the 
                NAIC.
    ``(b) Financial Standards.--The NAIC shall develop recommended 
financial minimum standards (including both income and asset criteria) 
for the purpose of advising individuals considering the purchase of a 
long-term care insurance policy.
    ``(c) Prohibition of Sale or Issuance to Medicaid Beneficiaries.--
An agent, an association, or a carrier may not knowingly sell or issue 
a long-term care insurance policy to an individual who is eligible for 
medical assistance under title XIX of the Social Security Act.
    ``(d) Prohibition of Sale or Issuance of Duplicate Service Benefit 
Policies.--An agent, association or its subsidiary, or a carrier may 
not sell or issue a service-benefit long-term care insurance policy to 
an individual knowing that the policy provides for coverage that 
duplicates existing coverage already provided in another service-
benefit long-term care insurance policy held by such individual 
unless--
            ``(1) the policy is intended to replace such other policy, 
        or
            ``(2) the benefits under the new policy are fully payable 
        directly to or on behalf of the individual without regard to 
        other long-term care coverage of the individual.
In this subsection, the term `service-benefit long-term care insurance 
policy' means a long-term care insurance policy which provides for 
benefits based on the type and amount of services furnished.
    ``(e) Prohibition Based on Eligibility for Other Benefits.--A 
carrier may not sell or issue a long-term care insurance policy that 
reduces, limits or coordinates the benefits provided under the policy 
on the basis that the policyholder has or is eligible for other long-
term care insurance coverage or benefits.
    ``(f) Provision of Outline of Coverage.--No agent, association or 
its subsidiary, or carrier may sell or offer for a sale a long-term 
care insurance policy (or for a certificate under a group long-term 
care insurance policy) without providing to the purchaser or potential 
purchaser (or representative) an outline of coverage that complies with 
the standards established under section 2201(a).
    ``(g) Agent Training and Certification Requirements.--The NAIC, 
shall establish requirements for long-term care insurance agent 
training and certification that--
            ``(1) specify requirements for training insurance agents 
        who desire to sell or offer for sale long-term care insurance 
        policies; and
            ``(2) specify procedures for certifying agents who have 
        completed such training and who are as qualified to sell or 
        offer for sale long-term care insurance policies.

``SEC. 2213. ADDITIONAL RESPONSIBILITIES FOR CARRIERS.

    ``(a) Refund of Premiums.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is denied or an applicant returns a policy or 
certificate within 30 days of the date of its issuance pursuant to 
subsection 2217, the carrier shall refund directly to the applicant, or 
in the case of an employer to whomever remits the premium, and not by 
delivery by the agent, not later than 30 days after the date of the 
denial or return, any premiums paid with respect to such a policy (or 
certificate).
    ``(b) Mailing of Policy.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is approved, the carrier shall provide the applicant, 
or in the case of a group plan the employer, the policy (or 
certificate) of insurance not later than 30 days after the date of the 
approval.
    ``(c) Information on Denials of Claims.--If a claim under a long-
term care insurance policy is denied, the carrier shall, within 30 days 
of the date of a written request by the policyholder or certificate 
holder (or representative)--
            ``(1) provide a written explanation of the reasons for the 
        denial; and
            ``(2) make available all medical and patient records 
        directly relating to such denial.
Except as provided in subsection (e) of section 2215, no claim under 
such a policy may be denied on the basis of a failure to disclose a 
condition at the time of issuance of the policy if the application for 
the policy failed to request information respecting the condition.
    ``(d) Reporting of Information.--A carrier that issues one or more 
long-term care insurance policies shall periodically (not less often 
than annually) report, in a form and in a manner determined by the 
NAIC, to the commissioner or superintendent of insurance of each State 
in which the policy is delivered, and shall make available to the 
Secretary, upon request, information in a form and manner determined by 
the NAIC concerning--
            ``(1) the long-term care insurance policies of the carrier 
        that are in force;
            ``(2) the most recent premiums for such policies and the 
        premiums imposed for such policies since their initial 
        issuance;
            ``(3) the lapse rate, replacement rate, and rescission 
        rates by policy;
            ``(4) the names of that 10 percent of its agents that--
                    ``(A) have the greatest lapse and replacement rate; 
                and
                    ``(B) have produced at least $50,000 of long-term 
                care insurance sales in the previous year; and
            ``(5) the claims denied (expressed as a number and as a 
        percentage of claims submitted) by policy.
Information required under this subsection shall be reported in a 
format specified in the standards established under section 2201(a). 
For purposes of paragraph (3), there shall be included (but reported 
separately) data concerning lapses due to the death of the 
policyholder. For purposes of paragraph (4), there shall not be 
included as a claim any claim that is denied solely because of the 
failure to meet a deductible, waiting period, or exclusionary period.
    ``(e) Information on Agent Commissions.--A carrier that issues one 
or more long-term care insurance policies shall provide to the State 
commissioner or superintendent of insurance such information relating 
to agent sales commissions and compensation as the commissioner or 
superintendent may require in order to monitor and make recommendations 
for regulatory action relating to such commissions and compensation.

``SEC. 2214. RENEWABILITY STANDARDS FOR ISSUANCE, AND BASIS FOR 
              CANCELLATION OF POLICIES.

    ``(a) In General.--No long-term care insurance policy may be 
canceled or nonrenewed for any reason other than nonpayment of premium, 
material misrepresentation or fraud.
    ``(b) Continuation and Conversion Rights for Group Policies.--
            ``(1) In general.--Each group long-term care insurance 
        policy shall provide covered individuals with a basis for 
        continuation or conversion in accordance with this subsection.
            ``(2) Basis for continuation.--For purposes of paragraph 
        (1), a policy provides a basis for continuation of coverage if 
        the policy maintains coverage under the existing group policy 
        when such coverage would otherwise terminate and which is 
        subject only to the continued timely payment of premium when 
        due. A group policy which restricts provision of benefits and 
        services to or contains incentives to use certain providers or 
        facilities, may provide continuation benefits which are 
        substantially equivalent to the benefits of the existing group 
        policy.
            ``(3) Basis for conversion.--For purposes of paragraph (1), 
        a policy provides a basis for conversion of coverage if the 
        policy entitles each individual--
                    ``(A) whose coverage under the group policy would 
                otherwise be terminated for any reason; and
                    ``(B) who has been continuously insured under the 
                policy (or group policy which was replaced) for at 
                least 6 months before the date of the termination;
        to issuance of a policy providing benefits identical to, 
        substantially equivalent to, or in excess of, those of the 
        policy being terminated, without evidence of insurability.
            ``(4) Treatment of substantial equivalence.--In determining 
        under this subsection whether benefits are substantially 
        equivalent, consideration should be given to the difference 
        between managed care and non-managed care plans.
            ``(5) Group replacement of policies.--If a group long-term 
        care insurance policy is replaced by another long-term care 
        insurance policy purchased by the same policyholder, the 
        succeeding issuer shall offer coverage to all persons covered 
        under the old group policy on its date of termination. Coverage 
        under the new group policy shall not result in any exclusion 
        for preexisting conditions that would have been covered under 
        the group policy being replaced.
    ``(c) Standards for Issuance.--
            ``(1) In general.--
                    ``(A) Guarantee.--An agent, association or carrier 
                that sells or issues long-term care insurance policies 
                shall guarantee that such policies shall be sold or 
                issued to an individual, or eligible individual in the 
                case of a group plan, if such individual meets the 
                minimum medical underwriting requirements of such 
                policy.
                    ``(B) Premium for converted policy.--If a group 
                policy from which conversion is made is a replacement 
                for a previous group policy, the premium for the 
                converted policy shall be calculated on the basis of 
                the insured's age at the inception of coverage under 
                the group policy from which conversion is made. Where 
                the group policy from which conversion is made replaced 
                previous group coverage, the premium for the converted 
                policy shall be calculated on the basis of the 
                insured's age at inception of coverage under the group 
                policy replaced.
            ``(2) Upgrade for policies.--
                    ``(A) Current policies.--Each long-term care 
                insurance policy in effect as of the effective date of 
                the standards established under section 2701(a) shall 
                permit the policyholder to purchase a policy that 
                complies with all such standards and the carrier shall 
                directly inform each such policyholder of the right to 
                purchase an upgraded policy under this paragraph.
                    ``(B) Future upgrades.--
                            ``(i) In general.--If a carrier providing a 
                        long-term care insurance policy provides for 
                        the issuance of policies with benefits that are 
                        greater than the benefits previously provided 
                        under such policies, the policyholder of a 
                        long-term care insurance policy previous issued 
                        by that carrier and still in force has the 
                        right to purchase a policy that provides for 
                        such upgraded benefits and the carrier shall 
                        directly inform each such policyholder of the 
                        existence of such an upgraded policy and the 
                        right to purchase an upgraded policy under this 
                        paragraph.
                            ``(ii) Limitation.--Clause (i) shall not 
                        apply to a policyholder who is eligible (or was 
                        eligible at any time within the previous 6 
                        months) for benefits under the long-term care 
                        insurance policy.
                    ``(C) Limitation on medical underwriting of 
                upgraded policies required under federal or state 
                law.--With respect to a long-term care insurance policy 
                that offers upgraded benefits in accordance with a 
                requirement of Federal or State law, the carrier 
                issuing the policy may not impose additional medical 
                underwriting criteria, except that--
                            ``(i) the carrier may utilize an age rate 
                        for such policy, and
                            ``(ii) the carrier may impose additional 
                        medical underwriting criteria in relation to 
                        benefits to the extent they were not included 
                        in the previously issued policy.
                    ``(D) Limitation on medical underwriting on other 
                upgraded policies.--With respect to an upgraded long-
                term care insurance policy that offers benefits that 
                are greater than the benefits required under Federal or 
                State requirements, the carrier issuing the policy--
                            ``(i) except as provided in clause (ii), 
                        may not impose additional medical underwriting 
                        criteria in relation to benefits that are the 
                        same as the benefits under the previously 
                        issued policy and the premiums charged with 
                        respect to such benefits may not be greater 
                        than the premiums charged with respect to such 
                        benefits under the previously issued policy, 
                        but
                            ``(ii) may impose additional medical 
                        underwriting criteria in relation to benefits 
                        to the extent they were not included in the 
                        previously issued policy.
    ``(d) Effect of Incapacitation.--
            ``(1) In general.--
                    ``(A) Prohibition.--Except as provided in paragraph 
                (2), a long-term care insurance policy in effect as of 
                the effective date of the standards established under 
                section 2201(a) may not be canceled for nonpayment if 
                the policy holder is determined by a long-term care 
                provider, physician or other health care provider, 
                independent of the issuer of the policy, to be 
                cognitively or mentally incapacitated so as to not make 
                payments in a timely manner.
                    ``(B) Reinstatement.--A long-term care policy shall 
                include a provision that provides for the reinstatement 
                of such coverage, in the event of lapse, if the carrier 
                is provided with proof of cognitive or mental 
                incapacitation. Such reinstatement option shall remain 
                available for a period of not less than 5 months after 
                termination and shall allow for the collection of past 
                due premium.
            ``(2) Permitted cancellation.--A long-term care insurance 
        policy may be canceled under paragraph (1) for nonpayment if--
                    ``(A) the period of such nonpayment is in excess of 
                30 days; and
                    ``(B) notice of intent to cancel is provided to the 
                policyholder or designated representative of the policy 
                holder not less than 30 days prior to such 
                cancellation, except that notice may not be provided 
                until the expiration of 30 days after a premium is due 
                and unpaid.
        Notice under this paragraph shall be deemed to have been given 
        as of 5 days after the mailing date.

``SEC. 2215. BENEFIT STANDARDS.

    ``(a) Use of Standard Definitions and Terminology and Uniform 
Format.--Each long-term care insurance policy shall, with respect to 
services, providers or facilities, pursuant to standards established 
under section 2201(a)--
            ``(1) use uniform language and definitions, except that 
        such language and definitions may take into account the 
        differences between States with respect to definitions and 
        terminology used for long-term care services and providers; and
            ``(2) use a uniform format for presenting the outline of 
        coverage under such a policy;
as prescribed under guidelines issued by the NAIC, after consultation 
with the advisory committee provided for under section 2701(d), and 
periodically updated.
    ``(b) Disclosure.--
            ``(1) Outline of coverage.--
                    ``(A) Requirement.--Each carrier that sells or 
                offers for sale a long-term care insurance policy shall 
                provide an outline of coverage under such policy that 
                meets the applicable standards established pursuant to 
                section 2201(a), complies with the requirements of 
                subparagraph (B), and is in a uniform format as 
                prescribed in guidelines issued by the NAIC and 
                periodically updated.
                    ``(B) Contents.--The outline of coverage for each 
                long-term care insurance policy shall include at least 
                the following:
                            ``(i) A description of the principal 
                        benefits and coverage under the policy.
                            ``(ii) A statement of the principal 
                        exclusions, reductions, and limitations 
                        contained in the policy.
                            ``(iii) A statement of the terms under 
                        which the policy (or certificate) may be 
                        continued in force or discontinued, the terms 
                        for continuation or conversion, and any 
                        reservation in the policy of a right to change 
                        premiums.
                            ``(iv) A statement, in bold face type on 
                        the face of the document in language that is 
                        understandable to an average individual, that 
                        the outline of coverage is a summary only, not 
                        a contract of insurance, and that the policy 
                        (or master policy) contains the contractual 
                        provisions that govern, except that such 
                        summary shall substantially and accurately 
                        reflect the contents of the policy or the 
                        master policy.
                            ``(v) A description of the terms, specified 
                        in section 2217, under which a policy or 
                        certificate may be returned and premium 
                        refunded.
                            ``(vi) A statement of the percentage limit 
                        on annual premium increases that is provided 
                        under the policy pursuant to this section.
            ``(2) Certificates.--A certificate issued pursuant to a 
        group long-term care insurance policy shall include--
                    ``(A) a description of the principal benefits and 
                coverage provided in the policy;
                    ``(B) a statement of the principal exclusions, 
                reductions, and limitations contained in the policy; 
                and
                    ``(C) a statement that the group master policy 
                determines governing contractual provisions.
            ``(3) Long-term care as part of life insurance.--In the 
        case of a long-term care insurance policy issued as a part of, 
        or a rider on, a life insurance policy, at the time of policy 
        delivery there shall be provided a policy summary that 
        includes--
                    ``(A) an explanation of how the long-term care 
                benefits interact with other components of the policy 
                (including deductions from death benefits);
                    ``(B) an illustration of the amount of benefits, 
                the length of benefit, and the guaranteed lifetime 
                benefits (if any) for each covered person; and
                    ``(C) any exclusions, reductions, and limitations 
                on benefits of long-term care.
            ``(4) Additional information.--The Secretary shall collect 
        and distribute to each State commissioner or superintendent of 
        insurance on an annual basis information on national average 
        costs for nursing facility and home care. This information 
        shall be delivered to prospective policyholders of long-term 
        care insurance policies in the following manner:
                    ``(A) In the case of agent solicitations, agents 
                shall deliver the information to prospective 
                policyholders prior to the presentation of an 
                application or enrollment form.
                    ``(B) In the case of direct response solicitations, 
                the information shall be presented in conjunction with 
                any application or enrollment form.
    ``(c) Limiting Conditions on Benefits; Minimum Benefits.--
            ``(1) In general.--A long-term care insurance policy may 
        not condition or limit eligibility--
                    ``(A) for benefits for a type of services to the 
                need for or receipt of any other services;
                    ``(B) for any benefit on the medical necessity for 
                such benefit;
                    ``(C) for benefits furnished by licensed or 
                certified providers in compliance with conditions which 
                are in addition to those required for licensure or 
                certification under State law, except that if no State 
                licensure or certification laws exists, in compliance 
                with qualifications developed by the NAIC; or
                    ``(D) for residential care (if covered under the 
                policy) only--
                            ``(i) to care provided in facilities which 
                        provide a higher level of care; or
                            ``(ii) to care provided in facilities which 
                        provide for 24-hour or other nursing care not 
                        required in order to be licensed by the State.
            ``(2) Home health care or community-based services.--If a 
        long-term care insurance policy provides benefits for the 
        payment of specified home health care or community-based 
        services, the policy--
                    ``(A) may not limit such benefits to services 
                provided by registered nurses or licensed practical 
                nurses;
                    ``(B) may not require benefits for such services to 
                be provided by a nurse or therapist that can be 
                provided by a home health aide or licensed or certified 
                home care worker, except that if no State licensure or 
                certification laws exists, in compliance with 
                qualifications developed by the NAIC;
                    ``(C) may not limit such benefits to services 
                provided by agencies or providers certified under title 
                XVIII of the Social Security Act; and
                    ``(D) must provide, at a minimum, benefits for 
                personal care services (including home health aide and 
                home care worker services as defined by the NAIC) home 
                health services, adult day care, and respite care in an 
                individual's home or in another setting in the 
                community, or any of these benefits on a respite care 
                basis.
            ``(3) Nursing facility services.--If a long-term care 
        insurance policy provides benefits for the payment of specified 
        nursing facility services, the policy must provide such 
        benefits with respect to all nursing facilities (as defined in 
        section 1919(a) or until such time as subsequently provided for 
        by the NAIC in establishing uniform language and definitions 
        under section 2215(a)(1)) in the State.
            ``(4) Per diem policies.--
                    ``(A) Definition.--For purposes of this title, the 
                term `per diem long-term care insurance policy' means a 
                long-term care insurance policy (or certificate under a 
                group long-term care insurance policy) that provides 
                for benefit payments on a periodic basis due to 
                cognitive impairment or loss of functional capacity 
                without regard to the expenses incurred or services 
                rendered during the period to which the payments 
                relate.
                    ``(B) Limitation.--No per diem long-term care 
                insurance policy (or certificate) may condition or 
                otherwise exclude benefit payments based on the receipt 
                of any type of nursing facility, home health care or 
                community-based services.
    ``(d) Prohibition of Discrimination.--A long-term care insurance 
policy may not treat benefits under the policy in the case of an 
individual with Alzheimer's disease, with any related progressive 
degenerative dementia of an organic origin, with any organic or 
inorganic mental illness, or with mental retardation or any other 
cognitive or mental impairment differently from an individual having 
another medical condition for which benefits may be made available.
    ``(e) Limitation on Use of Preexisting Condition Limits.--
            ``(1) Initial issuance.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                long-term care insurance policy may not exclude or 
                condition benefits based on a medical condition for 
                which the policyholder received treatment or was 
                otherwise diagnosed before the issuance of the policy.
                    ``(B) 6-month limit.--
                            ``(i) In general.--No long-term care 
                        insurance policy or certificate issued under 
                        this title shall utilize a definition of 
                        `preexisting condition' that is more 
                        restrictive than the following: The term 
                        `preexisting condition' means a condition for 
                        which medical advice or treatment was 
                        recommended by, or received from a provider of 
                        health care services, within 6 months preceding 
                        the effective date of coverage of an insured 
                        individual.
                            ``(ii) Prohibition on exclusion of 
                        coverage.--No long-term care insurance policy 
                        or certificate may exclude coverage for a loss 
                        or confinement that is the result of a 
                        preexisting condition unless such loss or 
                        confinement begins within 6 months following 
                        the effective date of the coverage of the 
                        insured individual.
            ``(2) Replacement policies.--If a long-term care insurance 
        policy replaces another long-term care insurance policy, the 
        issuer of the replacing policy shall waive any time periods 
        applicable to preexisting conditions, waiting period, 
        elimination periods and probationary periods in the new policy 
        for similar benefits to the extent such time was spent under 
        the original policy.
    ``(f) Eligibility for Benefits.--
            ``(1) Long-term care policies.--Each long-term care 
        insurance policy shall--
                    ``(A) describe the level of benefits available 
                under the policy; and
                    ``(B) specify in clear, understandable terms, the 
                level (or levels) of physical, cognitive, or mental 
                impairment required in order to receive benefits under 
                the policy.
            ``(2) Functional assessment.--In order to submit a claim 
        under any long-term care insurance policy, each claimant shall 
        have a professional functional assessment of his or her 
        physical, cognitive, and mental abilities. Such initial 
        assessment shall be conducted by an individual or entity, 
        meeting the qualifications established by the NAIC to assure 
        the professional competence and credibility of such individual 
        or entity and that such individual meets any applicable State 
        licensure and certification requirements. The individual or 
        entity conducting such assessment may not control, or be 
        controlled by, the issuer of the policy. For purposes of this 
        paragraph and paragraph (4), the term `control' means the 
        direct or indirect possession of the power to direct the 
        management and policies of a person. Control is presumed to 
        exist, if any person directly or indirectly, owns, controls, 
        holds with the power to vote, or holds proxies representing 10 
        percent of the voting securities of another person.
            ``(3) Claims review.--Except as provided in paragraph (4), 
        each long-term care insurance policy shall be subject to final 
        claims review by the carrier pursuant to the terms of the long-
        term care insurance policy.
            ``(4) Appeals process.--
                    ``(A) In general.--Each long-term care insurance 
                policy shall provide for a timely and independent 
                appeals process, meeting standards established by the 
                NAIC, for individuals who dispute the results of the 
                claims review, conducted under paragraph (3), of the 
                claimant's functional assessment, conducted under 
                paragraph (2).
                    ``(B) Independent assessment.--An appeals process 
                under this paragraph shall include, at the request of 
                the claimant, an independent assessment of the 
                claimant's physical, cognitive or mental abilities.
                    ``(C) Conduct.--An independent assessment under 
                subparagraph (B) shall be conducted by an individual or 
                entity meeting the qualifications established by the 
                NAIC to assure the professional competence and 
                credibility of such individual or entity and any 
                applicable State licensure and certification 
                requirements and may not be conducted--
                            ``(i) by an individual who has a direct or 
                        indirect significant or controlling interest 
                        in, or direct affiliation or relationship with, 
                        the issuer of the policy;
                            ``(ii) by an entity that provides services 
                        to the policyholder or certificateholder for 
                        which benefits are available under the long-
                        term care insurance policy; or
                            ``(iii) by an individual or entity in 
                        control of, or controlled by, the issuer of the 
                        policy.
            ``(5) Standard assessments.--Not later than 2 years after 
        the date of enactment of this title, the advisory committee 
        established under section 2201(d) shall recommend uniform needs 
        assessment mechanisms for the determination of eligibility for 
        benefits under such assessments.
    ``(g) Inflation Protection.--
            ``(1) Option to purchase.--A carrier may not offer a long-
        term care insurance policy unless the carrier also offers to 
        the proposed policyholder, including each group policyholder, 
        the option to purchase a policy that provides for increases in 
        benefit levels, with benefit maximums or reasonable durations 
        that are meaningful, to account for reasonably anticipated 
        increases in the costs of long-term care services covered by 
        the policy. A carrier may not offer to a policyholder an 
        inflation protection feature that is less favorable to the 
        policyholder than one of the following:
                    ``(A) With respect to policies that provide for 
                automatic periodic increases in benefits, the policy 
                provides for an annual increase in benefits in a manner 
                so that such increases are computed annually at a rate 
                of not less than 5 percent.
                    ``(B) With respect to policies that provide for 
                periodic opportunities to elect an increase in 
                benefits, the policy guarantees that the insured 
                individual will have the right to periodically increase 
                the benefit levels under the policy without providing 
                evidence of insurability or health status so long as 
                the option for the previous period was not declined. 
                The amount of any such additional benefit may not be 
                less than the difference between--
                            ``(i) the existing policy benefit; and
                            ``(ii) such existing benefit compounded 
                        annually at a rate of at least 5 percent for 
                        the period beginning on the date on which the 
                        existing benefit is purchased and extending 
                        until the year in which the offer of increase 
                        is made.
                    ``(C) With respect to service benefit policies, the 
                policy covers a specified percentage of the actual or 
                reasonable charges and does not include a maximum 
                specified indemnity amount or limit.
            ``(2) Exception.--The requirements of paragraph (1) shall 
        not apply to life insurance policies or riders containing 
        accelerated long-term care benefits.
            ``(3) Required information.--Carriers shall include the 
        following information in or together with the outline of 
        coverage provided under this title:
                    ``(A) A graphic comparison of the benefit levels of 
                a policy that increases benefits over the policy period 
                with a policy that does not increase benefits. Such 
                comparison shall show benefit levels over not less than 
                a 20-year period.
                    ``(B) Any expected premium increases or additional 
                premiums required to pay for any automatic or optional 
                benefit increases, whether the individual who purchases 
                the policy obtains the inflation protection initially 
                or whether such individual delays purchasing such 
                protection until a future time.
            ``(4) Continuation of protection.--Inflation protection 
        benefit increases under this subsection under a policy that 
        contains such protection shall continue without regard to an 
        insured's age, claim status or claim history, or the length of 
        time the individual has been insured under the policy.
            ``(5) Constant premium.--An offer of inflation protection 
        under this subsection that provides for automatic benefit 
        increases shall include an offer of a premium that the carrier 
        expects to remain constant. Such offer shall disclose in a 
        conspicuous manner that the premium may change in the future 
        unless the premium is guaranteed to remain constant.
            ``(6) Rejection.--Inflation protection under this 
        subsection shall be included in a long-term care insurance 
        policy unless a carrier obtains a written rejection of such 
        protection signed by the policyholder.

``SEC. 2216. OFFER OF NONFORFEITURE BENEFITS.

    ``The issuer of a long-term care insurance policy shall offer to 
the policyholder (including any certificate holder under the policy) a 
nonforfeiture benefit provision that meets the following requirements:
            ``(1) The provision is appropriately captioned.
            ``(2) The provision provides for a benefit available in the 
        event of a default in the payment of any premiums and the 
        amount of such benefit may be adjusted subsequent to being 
        initially granted only as necessary to reflect changes in 
        claims, persistency, and interest as reflected in changes in 
        premiums rates. The percent or amount of benefits shall 
        increase based upon the policyholder's equity in the policy.
            ``(3) The provision includes at least one of the following:
                    ``(A) Reduced paid-up insurance.
                    ``(B) Extended term insurance.
                    ``(C) Shortened benefit period.
                    ``(D) Another similar offering specified under the 
                standards established under section 2701(a).

``SEC. 2217. LIMIT OF PERIOD OF CONTESTABILITY AND RIGHT TO RETURN.

    ``(a) Contestability.--A carrier may not cancel or renew a long-
term care insurance policy or deny a claim under the policy based on 
fraud or material misrepresentation relating to the issuance of the 
policy unless notice of such fraud or material misrepresentation is 
provided within a time period to be determined by the NAIC.
    ``(b) Right To Return.--Each applicant for a long-term care 
insurance policy shall have the right to return the policy (or 
certificates) within 30 days of the date of its delivery (and to have 
the premium refunded) if, after examination of the policy or 
certificate, the applicant is not satisfied for any reason.

``SEC. 2218. CIVIL MONEY PENALTY.

    ``(a) Carrier.--Any carrier, association or its subsidiary that 
sells or offers for sale a long-term care insurance policy and that--
            ``(1) fails to make a refund in accordance with section 
        2213(a);
            ``(2) fails to transmit a policy in accordance with section 
        2213(b);
            ``(3) fails to provide, make available, or report 
        information in accordance with subsections (c), (d), or (e) of 
        section 2213;
            ``(4) fails to provide an outline of coverage in violation 
        of section 2215(b)(1); or
            ``(5) issues a policy without obtaining certain information 
        in violation of section 2215(f);
is subject to a civil money penalty of not to exceed $25,000 for each 
such violation.
    ``(b) Agents.--Any agent that sells or offers for sale a long-term 
care insurance policy and that--
            ``(1) fails to make a refund in accordance with section 
        2213(a);
            ``(2) fails to transmit a policy in accordance with section 
        2213(b);
            ``(3) fails to provide, make available, or report 
        information in accordance with subsections (c) or (d) of 
        section 2213;
            ``(4) fails to provide an outline of coverage in violation 
        of section 2215(b)(1); or
            ``(5) issues a policy without obtaining certain information 
        in violation of section 2215(f);
is subject to a civil money penalty of not to exceed $15,000 for each 
such violation.

      ``Part C--Long-Term Care Insurance Policies, Definition and 
                              Endorsements

``SEC. 2221. LONG-TERM CARE INSURANCE POLICY DEFINED.

    ``(a) In General.--As used in this section, the term `long-term 
care insurance policy' means any insurance policy, rider or certificate 
advertised, marketed, offered or designed to provide coverage for not 
less than 12 consecutive months for each covered person on an expense 
incurred, indemnity prepaid or other basis, for one or more necessary 
diagnostic, preventive, therapeutic, rehabilitative, maintenance or 
personal care services, provided in a setting other than an acute care 
unit of a hospital. Such term includes--
            ``(1) group and individual annuities and life insurance 
        policies, riders or certificates that provide directly, or that 
        supplement long-term care insurance; and
            ``(2) a policy, rider or certificates that provides for 
        payment of benefits based on cognitive impairment or the loss 
        of functional capacity.
    ``(b) Issuance.--Long-term care insurance policies may be issued 
by--
            ``(1) carriers;
            ``(2) fraternal benefit societies;
            ``(3) nonprofit health, hospital, and medical service 
        corporations;
            ``(4) prepaid health plans;
            ``(5) health maintenance organizations; or
            ``(6) any similar organization to the extent they are 
        otherwise authorized to issue life or health insurance.
    ``(c) Policies Excluded.--The term `long-term care insurance 
policy' shall not include any insurance policy, rider or certificate 
that is offered primarily to provide basic Medicare supplement 
coverage, basic hospital expense coverage, basic medical-surgical 
expense coverage, hospital confinement indemnity coverage, major 
medical expense coverage, disability income or related asset-protection 
coverage, accident only coverage, specified disease or specified 
accident coverage, or limited benefit health coverage. With respect to 
life insurance, such term shall not include life insurance policies, 
riders or certificates that accelerate the death benefit specifically 
for one or more of the qualifying events of terminal illness, medical 
conditions requiring extraordinary medical intervention, or permanent 
institutional confinement, and that provide the option of a lump-sum 
payment for those benefits and in which neither the benefits nor the 
eligibility for the benefits is conditioned upon the receipt of long-
term care.
    ``(d) Applications.--Notwithstanding any other provision of this 
title, this title shall apply to any product advertised, marketed or 
offered as a long-term insurance policy, rider or certificate.

``SEC. 2222. CODE OF CONDUCT WITH RESPECT TO ENDORSEMENTS.

    ``Not later than 1 year after the date of enactment of this title 
the NAIC shall issue guidelines that shall apply to organizations and 
associations, other than employers and labor organizations that do not 
accept compensation, and their subsidiaries that provide endorsements 
of long-term care insurance policies, or that permit such policies to 
be offered for sale through the organization or association. Such 
guidelines shall include at minimum the following:
            ``(1) In endorsing or selling long-term care insurance 
        policies, the primary responsibility of an organization or 
        association shall be to educate their members concerning such 
        policies and assist such members in making informed decisions. 
        Such organizations and associations may not function primarily 
        as sales agents for insurance companies.
            ``(2) Organizations and associations shall provide 
        objective information regarding long-term care insurance 
        policies sold or endorsed by such organizations and 
        associations to ensure that members of such organizations and 
        associations have a balanced and complete understanding of both 
        the strengths and weaknesses of the policies that are being 
        endorsed or sold.
            ``(3) Organizations and associations selling or endorsing 
        long-term care insurance policies shall disclose in marketing 
        literature provided to their members concerning such policies 
        the manner in which such policies and the insurance company 
        issuing such policies were selected. If the organization or 
        association and the insurance company have interlocking 
        directorates, the organization or association shall disclose 
        such fact to their members.
            ``(4) Organizations and associations selling or endorsing 
        long-term care insurance policies shall disclose in marketing 
        literature provided to their members concerning such policies 
        the nature and amount of the compensation arrangements 
        (including all fees, commissions, administrative fees and other 
        forms of financial support that the organization or association 
        receives) from the endorsement or sale of the policy to its 
        members.
            ``(5) The Boards of Directors of organizations and 
        associations selling or endorsing long-term care insurance 
        policies, if such organizations and associations have a Board 
        of Directors, shall review and approve such insurance policies, 
        the compensation arrangements and the marketing materials used 
        to promote sales of such policies.

                   ``Part D--Miscellaneous Provisions

``SEC. 2231. DEFINITIONS.

    ``As used in this title:
            ``(1) Agent.--The term `agent' means--
                    ``(A) prior to 2 years after the date of enactment 
                of this Act, an individual who sells or offers for sale 
                a long-term care insurance policy subject to the 
                requirements of this title and is licensed or required 
                to be licensed under State law for such purpose; and
                    ``(B) after the date referred to in subparagraph 
                (A), an individual who meets the training and 
                certification requirements established under section 
                2212(f).
            ``(2) Association.--The term `association' includes the 
        association and its subsidiaries.
            ``(3) Carrier.--The term `carrier' means any person that 
        offers a health benefit plan, whether through insurance or 
        otherwise, including a licensed insurance company, a prepaid 
        hospital or medical service plan, a health maintenance 
        organization, a self-insured carrier, a reinsurance carrier, 
        and a multiple employer welfare arrangement (a combination of 
        employers associated for the purpose of providing health 
        benefit plan coverage for their employees).''.

                                                 Title VIII, Subtitle B

         Subtitle B--Tax Treatment of Long-Term Care Insurance

SEC. 8101. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    (a) General Rule.--Subpart E of part I of subchapter L of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 818 the following new section:

``SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    ``(a) General Rule.--For purposes of this part, a long-term care 
insurance contract shall be treated as an accident or health insurance 
contract.
    ``(b) Long-Term Care Insurance Contract.--
            ``(1) In general.--For purposes of this part, the term 
        `long-term care insurance contract' means any insurance 
        contract issued if--
                    ``(A) the only insurance protection provided under 
                such contract is coverage of qualified long-term care 
                services and benefits incidental to such coverage,
                    ``(B) the maximum benefit under the policy for 
                expenses incurred for any day does not exceed $200,
                    ``(C) such contract does not cover expenses 
                incurred for services or items to the extent that such 
                expenses are reimbursable under title XVIII of the 
                Social Security Act or would be so reimbursable but for 
                the application of a deductible or coinsurance amount,
                    ``(D) such contract is guaranteed renewable,
                    ``(E) such contract does not have any cash 
                surrender value, and
                    ``(F) all refunds of premiums, and all policyholder 
                dividends or similar amounts, under such contract are 
                to be applied as a reduction in future premiums or to 
                increase future benefits.
            ``(2) Special rules.--
                    ``(A) Per diem, etc. payments permitted.--A 
                contract shall not fail to be treated as described in 
                paragraph (1)(A) by reason of payments being made on a 
                per diem or other periodic basis without regard to the 
                expenses incurred during the period to which the 
                payments relate.
                    ``(B) Contract may cover medicare reimbursable 
                expenses where medicare is secondary payor.--Paragraph 
                (1)(C) shall not apply to expenses which are 
                reimbursable under title XVIII of the Social Security 
                Act only as a secondary payor.
                    ``(C) Refunds of premiums.--Paragraph (1)(F) shall 
                not apply to any refund of premiums on surrender or 
                cancellation of the contract.
            ``(3) Treatment of coverage provided as part of a life 
        insurance contract.--Except as otherwise provided in 
        regulations prescribed by the Secretary, in the case of any 
        long-term care insurance coverage provided by rider on a life 
        insurance contract--
                    ``(A) In general.--This subsection shall be applied 
                as if the portion of the contract providing such 
                coverage were a separate contract.
                    ``(B) Premiums and charges for long-term care 
                coverage.--Premium payments for coverage under a long-
                term care insurance contract and charges against the 
                life insurance contract's cash surrender value (within 
                the meaning of section 7702(f)(2)(A)) for such coverage 
                shall be treated as premiums for purposes of paragraph 
                (1)(F).
                    ``(C) Application of section 7702.--Section 
                7702(c)(2) (relating to the guideline premium 
                limitation) shall be applied by increasing the 
                guideline premium limitation with respect to a life 
                insurance contract, as of any date, by the excess of--
                            ``(i) the sum of any charges (but not 
                        premium payments) described in subparagraph (B) 
                        made on or before such date under the contract, 
                        over
                            ``(ii) any such charges the imposition of 
                        which reduces the premiums paid for the 
                        contract (within the meaning of section 
                        7702(f)(1)).
                    ``(D) Application of section 213.--No deduction 
                shall be allowed under section 213(a) for charges 
                against the life insurance contract's cash surrender 
                value described in subparagraph (B), unless such 
                charges are includible in income as a result of the 
                application of section 72(e)(10) and the coverage 
                provided by the rider is a long-term care insurance 
                contract under subsection (b)(1).
                    ``(E) Amount of distribution under rider.--This 
                paragraph shall not apply to any rider on a life 
                insurance contract unless the percentage reduction in 
                the cash surrender value of the contract by reason of 
                any payment under the rider does not exceed the 
                percentage reduction in the death benefit payable under 
                the contract by reason of the payment.
        For purposes of this paragraph, the term `portion' means only 
        the terms and benefits under a life insurance contract that are 
        in addition to the terms and benefits under the contract 
        without regard to the coverage under a long-term care insurance 
        contract, except that the coverage under a rider described in 
        this paragraph shall not fail to be treated as such an addition 
        by reason of a reduction in the contract's death benefit or 
        cash surrender value resulting from any payment under the 
        rider.
    ``(c) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, preventive, therapeutic, 
        and rehabilitative services, and maintenance or personal care 
        services, which--
                    ``(A) are required by a chronically ill individual 
                in a qualified facility, and
                    ``(B) are provided pursuant to a plan of care 
                prescribed by a licensed health care practitioner.
            ``(2) Chronically ill individual.--
                    ``(A) In general.--The term `chronically ill 
                individual' means any individual who has been certified 
                by a licensed health care practitioner as--
                            ``(i)(I) being unable to perform (without 
                        substantial assistance from another individual) 
                        at least 2 activities of daily living (as 
                        defined in subparagraph (B)) for a period of at 
                        least 90 days due to a loss of functional 
                        capacity, or
                            ``(II) having a level of disability similar 
                        (as determined by the Secretary in consultation 
                        with the Secretary of Health and Human 
                        Services) to the level of disability described 
                        in subclause (I), or
                            ``(ii) having a similar level of disability 
                        due to cognitive impairment.
                    ``(B) Activities of daily living.--For purposes of 
                subparagraph (A), each of the following is an activity 
                of daily living:
                            ``(i) Mobility.--The process of walking or 
                        wheeling on a level surface which may include 
                        the use of an assistive device such as a cane, 
                        walker, wheelchair, or brace.
                            ``(ii) Dressing.--The overall complex 
                        behavior of getting clothes from closets and 
                        drawers and then getting dressed.
                            ``(iii) Toileting.--The act of going to the 
                        toilet room for bowel and bladder function, 
                        transferring on and off the toilet, cleaning 
                        after elimination, and arranging clothes or the 
                        ability to voluntarily control bowel and 
                        bladder function, or in the event of 
                        incontinence, the ability to maintain a 
                        reasonable level of personal hygiene.
                            ``(iv) Transfer.--The process of getting in 
                        and out of bed or in and out of a chair or 
                        wheelchair.
                            ``(v) Eating.--The process of getting food 
                        from a plate or its equivalent into the mouth.
            ``(3) Qualified facility.--The term `qualified facility' 
        means--
                    ``(A) a nursing, rehabilitative, hospice, or adult 
                day care facility (including a hospital, retirement 
                home, nursing home, skilled nursing facility, 
                intermediate care facility, or similar institution)--
                            ``(i) which is licensed under State law, or
                            ``(ii) which is a certified facility for 
                        purposes of title XVIII or XIX of the Social 
                        Security Act, or
                    ``(B) an individual's home if a licensed health 
                care practitioner certifies that without home care the 
                individual would have to be cared for in a facility 
                described in subparagraph (A).
            ``(4) Maintenance or personal care services.--The term 
        `maintenance or personal care services' means any care the 
        primary purpose of which is to provide needed assistance with 
        any of the activities of daily living described in paragraph 
        (2)(B).
            ``(5) Licensed health care practitioner.--The term 
        `licensed health care practitioner' means any physician (as 
        defined in section 1861(r) of the Social Security Act) and any 
        registered professional nurse, licensed social worker, or other 
        individual who meets such requirements as may be prescribed by 
        the Secretary.
    ``(d) Continuation Coverage Excise Tax Not To Apply.--This section 
shall not apply in determining whether section 4980B (relating to 
failure to satisfy continuation coverage requirements of group health 
plans) applies.
    ``(e) Inflation Adjustment of $200 Benefit Limit.--
            ``(1) In general.--In the case of a calendar year after 
        1994, the $200 amount contained in subsection (b)(1)(B) shall 
        be increased for such calendar year by the medical care cost 
        adjustment for such calendar year. If any increase determined 
        under the preceding sentence is not a multiple of $10, such 
        increase shall be rounded to the nearest multiple of $10.
            ``(2) Medical care cost adjustment.--For purposes of 
        paragraph (1), the medical care cost adjustment for any 
        calendar year is the percentage (if any) by which--
                    ``(A) the medical care component of the Consumer 
                Price Index (as defined in section 1(f)(5)) for August 
                of the preceding calendar year, exceeds
                    ``(B) such component for August of 1993.''
    (b) Reserves.--Clause (iii) of section 807(d)(3)(A) of such Code is 
amended by inserting ``(other than a long-term care insurance contract 
within the meaning of section 818A)'' after ``contract''.
    (c) Clerical Amendment.--The table of sections for subpart E of 
part I of subchapter L of chapter 1 of such Code is amended by 
inserting after the item relating to section 818 the following new 
item:

                              ``Sec. 818A. Treatment of long-term care 
                                        insurance or plans.''

SEC. 8102. EXCLUSION FOR BENEFITS PROVIDED UNDER LONG-TERM CARE 
              INSURANCE AND FOR CERTAIN EMPLOYER-PROVIDED COVERAGE.

    (a) In General.--Subsection (a) of section 104 of the Internal 
Revenue Code of 1986 (relating to compensation for injuries or 
sickness) is amended by striking ``and'' at the end of paragraph (4), 
by striking the period at the end of paragraph (5) and inserting ``, 
and'', and by inserting after paragraph (5) the following new 
paragraph:
            ``(6) benefits under a long-term care insurance contract 
        (as defined in section 818A(b)).''
    (b) Employer-Provided Coverage.--Section 106 of such Code (relating 
to contributions by employer to accident and health plans), as amended 
by section 2003, is amended by adding at the end the following new 
subsection:
    ``(c) Treatment of Long-Term Care Insurance Contracts.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        long-term care insurance contract (as defined in section 
        818A(b)) shall be treated as a health plan for purposes of 
        subsection (a).
            ``(2) Exception for cafeteria plans and flexible spending 
        arrangements.--Paragraph (1) shall not apply to coverage under 
        a long-term care insurance contract (as so defined) which is 
        provided through a cafeteria plan (as defined in section 
        125(c)) or flexible spending or similar arrangement.''.

SEC. 8103. QUALIFIED LONG-TERM SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) of the Internal 
Revenue Code of 1986 (defining medical care) is amended by striking 
``or'' at the end of subparagraph (B), by redesignating subparagraph 
(C) as subparagraph (D), and by inserting after subparagraph (B) the 
following new subparagraph:
                    ``(C) for qualified long-term care services (as 
                defined in section 818A(c)), or''.
    (b) Deduction for Long-Term Care Expenses for Parent or 
Grandparent.--Section 213 of such Code (relating to deduction for 
medical expenses) is amended by adding at the end the following new 
subsection:
    ``(g) Special Rule for Certain Long-Term Care Expenses.--For 
purposes of subsection (a), the term `dependent' shall include any 
parent or grandparent of the taxpayer for whom the taxpayer has 
expenses for long-term care services described in section 818A(c), but 
only to the extent of such expenses.''
    (c) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) of such Code (as 
        redesignated by subsection (a)) is amended by striking 
        ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
        (A), (B), and (C)''.
            (2)(A) Paragraph (1) of section 213(d) of such Code is 
        amended by adding at the end thereof the following new flush 
        sentence:
        ``In the case of a long-term care insurance contract (as 
        defined in section 818A), only eligible long-term care premiums 
        (as defined in paragraph (10)) shall be taken into account 
        under subparagraph (D).''
            (B) Subsection (d) of section 213 is amended by adding at 
        the end the following new paragraph:
            ``(10) Eligible long-term care premiums.--
                    ``(A) In general.--For purposes of this section, 
                the term `eligible long-term care premiums' means the 
                amount paid during a taxable year for any long-term 
                care insurance contract (as defined in section 818A) 
                covering an individual, to the extent such amount does 
                not exceed the limitation determined under the 
                following table:

        ``In the case of an individual
                                                                       
          with an attained age before the
                                                         The limitation
          close of the taxable year of:
                                                              is:      
                40 or less...........................          $200    
                More than 40 but not more than 50....           375    
                More than 50 but not more than 60....           750    
                More than 60 but not more than 70....         1,600    
                More than 70.........................        2,000.    

                    ``(B) Indexing.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        1993, each dollar amount contained in paragraph 
                        (1) shall be increased by the medical care cost 
                        adjustment of such amount for such calendar 
                        year. If any increase determined under the 
                        preceding sentence is not a multiple of $10, 
                        such increase shall be rounded to the nearest 
                        multiple of $10.
                            ``(ii) Medical care cost adjustment.--For 
                        purposes of clause (i), the medical care cost 
                        adjustment for any calendar year is the 
                        percentage (if any) by which--
                                    ``(I) the medical care component of 
                                the Consumer Price Index (as defined in 
                                section 1(f)(5)) for August of the 
                                preceding calendar year, exceeds
                                    ``(II) such component for August of 
                                1991.''
            (3) Paragraph (6) of section 213(d) of such Code is 
        amended--
                    (A) by striking ``subparagraphs (A) and (B)'' and 
                inserting ``subparagraphs (A), (B), and (C)'', and
                    (B) by striking ``paragraph (1)(C)'' in 
                subparagraph (A) and inserting ``paragraph (1)(D)''.
            (4) Paragraph (7) of section 213(d) of such Code is amended 
        by striking ``subparagraphs (A) and (B)'' and inserting 
        ``subparagraphs (A), (B), and (C)''.

SEC. 8104. EXCLUSION FROM GROSS INCOME FOR AMOUNTS OTHERWISE INCLUDIBLE 
              ON THE SURRENDER OR CANCELLATION OF ANY LIFE INSURANCE 
              POLICY WHICH ARE USED FOR LONG-TERM CARE INSURANCE 
              PREMIUMS.

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

``SEC. 137. AMOUNTS RECEIVED ON CANCELLATION, ETC., OF LIFE INSURANCE 
              CONTRACTS AND USED TO PAY PREMIUMS FOR QUALIFIED LONG-
              TERM CARE INSURANCE.

    ``No amount which would (but for this section) be includible in the 
gross income of an individual shall be included in gross income on the 
whole or partial surrender, cancellation, or exchange of any life 
insurance contract during the taxable year if--
            ``(1) such individual has attained age 65 on or before the 
        date of the transaction, and
            ``(2) the amount otherwise includible in gross income is 
        used during such year to pay premiums for any qualified long-
        term care insurance policy (as defined in section 2721(a) of 
        the Public Health Service Act) for the benefit of such 
        individual or the spouse of such individual if such spouse has 
        attained age 65 on or before the date of the transaction.''.
    (b) Clerical Amendment.--The table of sections for such part III is 
amended by striking the last item and inserting the following new 
items:

                              ``Sec. 137. Amounts received on 
                                        cancellation, etc., of life 
                                        insurance contracts and used to 
                                        pay premiums for qualified 
                                        long-term care insurance.
                              ``Sec. 138. Cross references to other 
                                        Acts.''.

SEC. 8105. EFFECTIVE DATE.

    (a) In General.--The amendments made by this subtitle shall apply 
to taxable years beginning after December 31, 1995.
    (b) Transition Rule.--If, after the date of enactment of this Act 
and before January 1, 1996, a contract providing for long-term care 
insurance coverage is exchanged solely for a long-term care insurance 
contract, no gain or loss shall be recognized on the exchange. If, in 
addition to a long-term care insurance contract, money or other 
property is received in the exchange, then any gain shall be recognized 
to the extent of the sum of the money and the fair market value of the 
other property received. For purposes of this subsection, the 
cancellation of a contract providing for long-term care insurance 
coverage and reinvestment of the cancellation proceeds in a long-term 
care insurance contract within 60 days thereafter shall be treated as 
an exchange. For purposes of this subsection, the term ``long-term care 
insurance contract'' has the meaning given to such term by section 
818A(b) of the Internal Revenue Code of 1986.
    (c) Issuance of Rider Not Treated as Material Change.--For purposes 
of applying sections 101(f), 7702, and 7702A of the Internal Revenue 
Code of 1986 to any contract, the issuance of a rider on a life 
insurance contract providing long-term care insurance coverage shall 
not be treated as a modification or material change of such contract.

                                                 Title VIII, Subtitle C

                          Subtitle C--Studies

SEC. 8201. FEASIBILITY OF ENCOURAGING HEALTH CARE PROVIDERS TO DONATE 
              SERVICES TO HOMEBOUND PATIENTS.

    The Comptroller General of the United States shall conduct a study 
on the feasibility of encouraging health care providers to donate their 
services to homebound patients. Such study shall include an examination 
of the effects of qualifying such services as a charitable 
contribution.

SEC. 8202. FEASIBILITY OF TAX CREDIT FOR HEADS OF HOUSEHOLDS WHO CARE 
              FOR ELDERLY FAMILY MEMBERS IN THEIR HOMES.

    The Comptroller General of the United States shall conduct a study 
on the feasibility of providing heads of households who care for 
elderly family members in their homes with a tax credit. Such study 
shall estimate the cost of such a tax credit which would apply to 
expenses incurred in the custodial care of such an elderly family 
member to the extent such expenses exceed 5 percent of adjusted gross 
income.

SEC. 8203. CASE MANAGEMENT OF CURRENT LONG-TERM CARE BENEFITS.

    (a) In General.--The Secretary of Health and Human Services shall 
conduct a study of the feasibility of encouraging or requiring the use 
of a single designated public or nonprofit agency (such as an area 
agency on aging) to coordinate, through case management, the provision 
of long-term care benefits under current Federal, State, and local 
programs in a geographic area.
    (b) Report.--The Secretary shall submit to Congress a report on the 
study conducted under subsection (a) by not later than 1 year after the 
date of the enactment of this Act. Such report shall include such 
recommendations regarding changes in legislation to encourage or 
require the use (described in subsection (a)) of an agency to 
coordinate long-term care benefits as may be appropriate.

SEC. 8204. SUBACUTE CARE STUDY.

    (a) Study.--The Secretary of Health and Human Services shall--
            (1) define the level and type of care that should 
        constitute subacute care;
            (2) determine the appropriateness of furnishing subacute 
        care in different settings by evaluating the quality of care 
        and patient outcomes;
            (3) determine the cost and effectiveness of providing 
        subacute care under the medicare program under title XVIII of 
        the Social Security Act to individuals who are eligible for 
        benefits under part A of such title;
            (4) determine the extent to which hospital DRG prospective 
        payment rates under section 1886(d) of such Act (42 U.S.C. 
        1395ww(d)) are appropriate for the less restrictive 
        institutional settings that provide subacute care; and
            (5) study the relationships between institutions and their 
        payment methodologies in order to develop ways in which to 
        maximize the continuity of care for each patient episode in 
        which subacute care is furnished.
    (b) Report.--Not later than October 1, 1996, the Secretary shall 
submit to the Congress a report on the matters described in subsection 
(a).

SEC. 8205. STUDY OF LONG-TERM CARE INSURANCE.

    (a) Report.--Not later than one year after the date of enactment of 
this Act, the Secretary of Health and Human Services shall report to 
Congress on alternatives for extending access to long-term care through 
the private insurance market. The Secretary shall specifically study 
the cost of current policies, their effectiveness in providing care and 
their availability to the general population.
    (b) Recommendations.--The Secretary shall recommend any changes in 
Federal law which may be necessary to increase access to long-term care 
for all Americans through the private insurance market. In conducting 
this study, the Secretary shall consult with the National Association 
of Insurance Commissioners and other private entities with expertise in 
private health insurance and long-term care.

                                                               Title IX

                TITLE IX--DEPARTMENT OF VETERANS AFFAIRS

                       table of contents of title

Sec. 9001. Benefits and eligibility through Department of Veterans 
                            Affairs medical system.
  ``CHAPTER 18--ELIGIBILITY AND BENEFITS UNDER ENROLLMENT-BASED SYSTEM

                        ``SUBCHAPTER I--GENERAL

        ``1801. Definitions.
                      ``SUBCHAPTER II--ENROLLMENT

        ``1811. Enrollment: veterans.
        ``1812. Enrollment: CHAMPVA eligibles.
        ``1813. Enrollment: family members.
        ``1814. Enrollment ceilings.
                       ``SUBCHAPTER III--BENEFITS

        ``1821. Benefits for VA enrollees.
        ``1822. Chapter 17 benefits.
        ``1823. Supplemental benefits packages and policies.
        ``1824. Limitation regarding veterans who elect not to enroll 
                            to obtain VA health coverage.
        ``1825. Limitation on use of funds for abortions.
                   ``SUBCHAPTER IV--FINANCIAL MATTERS

        ``1831. Premiums, copayments, etc.
        ``1832. Recovery of cost of certain care and services.
        ``1833. Health Coverage Fund.''
Sec. 9002. Organization of Department of Veterans Affairs facilities as 
                            facilities offering qualified health 
                            coverage.
 ``SUBCHAPTER IV--PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM

        ``7341. Organization of health care facilities as facilities 
                            offering qualified health coverage.
        ``7342. Operation of health care facilities within States 
                            operating as single payer areas.
        ``7343. Health care resource agreements.
        ``7344. Administrative and personnel flexibility.
        ``7345. Veterans Health Care Transition Fund.
        ``7346. Funding provisions: grants and other sources of 
                            assistance.''
Sec. 9003. Eligibility for Chapter 17 care.
Sec. 9004. Authority to provide health care for herbicide and radiation 
                            exposure.
Sec. 9005. Extension of authority to provide priority outpatient health 
                            care for exposure to environmental hazards.
Sec. 9006. Report on waiving cost-sharing for certain medical care for 
                            dependents of Persian Gulf veterans who may 
                            have been exposed to environmental hazards.
Sec. 9007. Study of the effect of telemedicine on the delivery of VA 
                            health care services.
Sec. 9008. Legislative proposal on VA health coverage for medicare 
                            beneficiaries.
Sec. 9009. Outpatient clinic pilot program.

SEC. 9001. BENEFITS AND ELIGIBILITY THROUGH DEPARTMENT OF VETERANS 
              AFFAIRS MEDICAL SYSTEM.

    (a) DVA as a Participant in Health Care Reform.--
            (1) In general.--Title 38, United States Code, is amended 
        by inserting after chapter 17 the following new chapter:

  ``CHAPTER 18--ELIGIBILITY AND BENEFITS UNDER ENROLLMENT-BASED SYSTEM

                        ``subchapter i--general
``1801. Definitions.  ``subchapter ii--enrollment
``1811. Enrollment: veterans.
``1812. Enrollment: CHAMPVA eligibles.
``1813. Enrollment: family members.
``1814. Enrollment ceil``subchapter iii--benefits
``1821. Benefits for VA enrollees.
``1822. Chapter 17 benefits.
``1823. Supplemental benefits packages and policies.
``1824. Limitation regarding veterans who elect not to enroll with a VA 
                   ``subchapter iv--financial matters
``1831. Premiums, copayments, etc.
``1832. Medicare coverage and reimbursement.
``1833. Recovery of cost of certain care and services.
``1834. Health Plan Fund.
``1835. Guaranteed funding of Government costs

                        ``SUBCHAPTER I--GENERAL

``Sec. 1801. Definitions
    ``For purposes of this chapter:
            ``(1) The term `qualified health coverage' has the meaning 
        given such term in section 1101 of the Bipartisan Health Care 
        Reform Act of 1994.
            ``(2) The term `VA health coverage' means qualified health 
        coverage provided by the Secretary under section 7341 of this 
        title.
            ``(3) The term `VA enrollee' means an individual enrolled 
        under subchapter II of this chapter with VA health coverage.
            ``(4) The term `standard coverage' has the meaning given 
        such term in section 1102 of the Bipartisan Health Care Reform 
        Act of 1994.

                      ``SUBCHAPTER II--ENROLLMENT

``Sec. 1811. Enrollment: veterans
    ``Subject to section 1814, each veteran residing in the United 
States may enroll to obtain VA health coverage. A veteran who wants to 
receive the standard coverage through the Department shall enroll to 
obtain VA health coverage.
``Sec. 1812. Enrollment: CHAMPVA eligibles
    ``(a) Eligibility.--Subject to section 1814, an individual 
described in subsection (b) who resides in the United States may enroll 
to obtain VA health coverage.
    ``(b) Applicability.--This section applies to the following 
individuals who are not otherwise eligible for medical care under 
chapter 55 of title 10 (CHAMPUS):
            ``(1) The surviving spouse or child of a veteran who (A) 
        died as a result of a service-connected disability, or (B) at 
        the time of death had a total disability permanent in nature, 
        resulting from a service-connected disability.
            ``(2) The surviving spouse or child of a person who died in 
        the active military, naval, or air service in the line of duty 
        and not due to such person's own misconduct.
    ``(c) Definition of Child.--For purposes of this section, the term 
`child' includes a child described in section 1901(2)(B) of the 
Bipartisan Health Care Reform Act of 1994.
``Sec. 1813. Enrollment: family members
    ``(a) Eligibility.--Subject to section 1814, members of the family 
of an enrollee under section 1811 or 1812 of this title may enroll to 
obtain VA health coverage. The enrollee shall have the option of 
enrolling to obtain VA health coverage as an individual or with family 
members. If the enrollee chooses to enroll to obtain VA health coverage 
with family members, all such family members must be so enrolled.
    ``(b) Required Payments.--Any family member with VA health coverage 
shall (except as provided in section 1831(c)(2)(B) of this title) be 
subject to payment of premiums, deductibles, copayments, and 
coinsurance in accordance with the Bipartisan Health Care Reform Act of 
1994.
    ``(c) Enrollment Eligibility To Survive Death of Veteran.--An 
individual with VA health coverage pursuant to subsection (a) as a 
member of the family of a veteran enrolled under section 1811 of this 
title shall not lose eligibility to obtain such coverage by reason of 
the death of that veteran.
    ``(d) Members of Family.--For purposes of this section, the members 
of the family of an enrollee are those individuals (other than the 
enrollee) included as family members under section 1901(2) of the 
Bipartisan Health Care Reform Act of 1994.
``Sec. 1814. Enrollment ceilings
    ``(a) The Secretary shall limit the number of individuals eligible 
to enroll for VA health coverage by establishing and applying 
enrollment ceilings in accordance with this section.
    ``(b) The Secretary shall establish separate enrollment ceilings 
under subsection (a) applicable to individuals described in subsections 
(b), (c)(1), and (c)(2), respectively, of section 1831 of this title. 
The Secretary shall set such enrollment ceilings for each applicable 
enrollment period at levels that, when multiplied by an estimate (based 
on prior Department experience) of the cost to the Secretary of 
providing the items and services in standard coverage under the 
Bipartisan Health Care Reform Act of 1994, would (1) result in a total 
cost that can be accommodated within the appropriation available for 
this purpose in each fiscal year, and (2) avoid any need for the 
Secretary to take actions described in section 1821(b) of this title.
    ``(c) In establishing and managing enrollment ceilings under this 
section applicable to individuals described in section 1831(b), the 
Secretary shall establish and implement priorities for enrollment 
consistent with priorities in chapter 17 of this title in effect on the 
day preceding the date of the enactment of the Bipartisan Health Care 
Reform Act of 1994.

                       ``SUBCHAPTER III--BENEFITS

``Sec. 1821. Benefits for VA enrollees
    ``(a) To the extent that such items and services can be provided 
consistent with appropriations for that purpose, the Secretary shall 
ensure that each individual enrolled with VA health coverage is 
provided the items and services in standard coverage under the 
Bipartisan Health Care Reform Act of 1994 which the Secretary 
determines are clinically necessary for such individual.
    ``(b) In the event that the Secretary determines at any time during 
a fiscal year that appropriations are insufficient to provide 
individuals enrolled with VA health coverage all needed items and 
services in standard coverage under the Bipartisan Health Care Reform 
Act of 1994, the Secretary shall take appropriate action to limit 
expenditures to the amount appropriated. Such actions may include 
revising the scope of coverage described in subsection (a). At least 15 
days before taking an action under this subsection, the Secretary shall 
submit to the Committees on Veterans Affairs of the House of 
Representatives and the Senate a report describing such proposed action 
and the circumstances requiring the Secretary to take such proposed 
action.
``Sec. 1822. Chapter 17 benefits
    ``(a) Care and Services Not Included in Standard Coverage.--In the 
case of care and services that may be provided under chapter 17 of this 
title that are not included in standard coverage, the Secretary shall 
provide to any veteran (whether or not enrolled with qualified health 
coverage) the care and services authorized under that chapter in 
accordance with the terms and conditions applicable to that veteran and 
that care under that chapter.
    ``(b) Veterans Who Are Not Eligible To Enroll Under the Bipartisan 
Health Care Reform Act of 1994.--In the case of a veteran who is not 
eligible for enrollment under this chapter, the Secretary shall provide 
to the veteran the care and services that may be provided under chapter 
17 of this title through any facility of the department, whether or not 
the facility is operating pursuant to VA health coverage.
    ``(c) Preservation of Specialized DVA Treatment Capacities.--In 
carrying out subsection (a), the Secretary shall ensure that the 
Department maintains the capacity to provide for the specialized 
treatment and rehabilitative needs of disabled veterans (including 
veterans with spinal cord dysfunction, blindness, and mental illness) 
within distinct programs or facilities of the Department that are 
dedicated to the specialized needs of those veterans in a manner that 
affords those veterans reasonable access to care and services for those 
specialized needs. The Secretary shall ensure that overall capacity of 
the Department to provide such specialized services is not reduced 
below the capacity of the Department, nationwide, to provide those 
services, as of the date of the enactment of this chapter. Nothing in 
this subsection precludes the Secretary from expanding the number or 
type of facilities or programs that provide treatment and 
rehabilitation services for the specialized needs of such veterans, 
including provision of specialized services on an outpatient basis.
    ``(d) Annual Report.--Not later than March 1 of each year, the 
Secretary shall submit to the Committees on Veterans' Affairs of the 
Senate and House of Representatives a report describing the actions the 
Secretary has taken to carry out subsection (c) during the preceding 
fiscal year. Each such report shall include a statement of the number 
of veterans to whom the Department provided specialized services that 
are covered by the report and the expense of providing those services, 
and a description of the alternatives available in the private sector 
for the provision of those services to veterans.
``Sec. 1823. Supplemental benefits packages and policies
    ``Subject to section 1814, VA health coverage may include 
supplemental health benefits packages and supplemental cost sharing 
policies consistent with the Bipartisan Health Care Reform Act of 1994. 
However, such coverage may not include a supplemental health benefits 
package to a veteran that provides coverage for services that the 
Department is required to provide to that veteran under chapter 17 of 
this title.
``Sec. 1824. Limitation regarding veterans who elect not to enroll to 
              obtain VA health coverage
    ``(a) Reimbursement Required.--A veteran who is residing in an area 
in which the Department offers VA health coverage and who elects not to 
enroll to obtain such coverage may be provided the items and services 
in standard coverage through VA health coverage offered in that area 
only if (except as provided in subsection (b)) the Secretary is 
reimbursed for the cost of the care provided.
    ``(b) Exception.--The Secretary may not impose on or collect from a 
veteran described in subsection (a) a cost-share charge of any kind in 
the case of treatment for a service-connected disability that (as 
determined by the Secretary) requires a specialized treatment capacity 
for which the Department has particular expertise.
``Sec. 1825. Limitation on use of funds for abortions
    ``None of the funds appropriated to carry out this title shall be 
expended for any abortion except when it is made known to the Secretary 
that such procedure is necessary to save the life of the mother or that 
the pregnancy is the result of an act of rape or incest.

                   ``SUBCHAPTER IV--FINANCIAL MATTERS

``Sec. 1831. Premiums, copayments, etc.
    ``(a) Exemption of Certain Veterans.--Subject to subsection (f), in 
the case of a veteran described in subsection (b) who is a VA enrollee, 
there may not be imposed or collected from the veteran a cost-share 
charge of any kind (whether a premium, copayment, deductible, 
coinsurance charge, or other charge) for items and services in standard 
coverage that are provided to the veteran by the Secretary within a VA 
plan provider network.
    ``(b) Veterans Exempt From Charges.--The veterans referred to in 
subsection (a) are the following:
            ``(1) Any veteran with a service-connected disability rated 
        at 10 percent or greater.
            ``(2) Any veteran whose discharge or release from the 
        active military, naval or air service was for a disability 
        incurred or aggravated in the line of duty.
            ``(3) Any veteran who is in receipt of, or who, but for a 
        suspension pursuant to section 1151 of this title (or both such 
        a suspension and the receipt of retired pay), would be entitled 
        to disability compensation, but only to the extent that such a 
        veteran's continuing eligibility for such care is provided for 
        in the judgment or settlement provided for in such section.
            ``(4) Any veteran who is a former prisoner of war.
            ``(5) Any veteran of the Mexican border period or World War 
        I.
            ``(6) Any veteran who is unable to defray the expenses of 
        necessary care as determined under section 1722(a) of this 
        title.
    ``(c) Other Enrollees.--(1) In the case of a VA enrollee who is not 
described in subsection (b), the Secretary shall (except as provided in 
paragraph (2)) charge premiums and shall establish copayments, 
deductibles, and coinsurance amounts.
    ``(2) The Secretary may not collect from an enrollee a premium in 
the case of--
            ``(A) an individual with VA health coverage by reason of 
        eligibility under section 1812 of this title; or
            ``(B) an individual with VA health coverage by reason of 
        eligibility under section 1813 of this title and who is 
        described in paragraph (1) of section 1713(a) of this title.
    ``(3) The Secretary may not charge a copayment, deductible, or 
other coinsurance amount in the case of care for any disease covered 
under section 1710(e)(1) of this title.
    ``(d) Establishment of Rates.--The premium rate, and the rates for 
deductibles and copayments, applicable under VA health coverage shall 
be established by the Secretary based on rules applicable to all health 
coverage offered in the geographic area in which such VA health 
coverage is offered.
    ``(e) Duties of Employers.--The obligations (including obligations 
with respect to payment of premiums) under the Bipartisan Health Care 
Reform Act of 1994 of an employer with respect to employees with VA 
health coverage, and with respect to such coverage, shall be the same 
as those that apply with respect to other employees and other health 
coverage.
    ``(f) Acceptance of Premium Certificates.--In the case of a veteran 
who has been issued a premium certificate or voucher under the 
Bipartisan Health Care Reform Act of 1994, the Secretary may require 
the veteran to tender the certificate to the Secretary as a condition 
of enrollment and the Secretary may accept the certificate.
``Sec. 1832. Recovery of cost of certain care and services
    ``(a) Recovery From Third Parties.--In the case of an individual 
provided care or services through VA health coverage who has coverage 
under any supplemental health insurance policy, including a Medicare 
supplemental health insurance plan, the Secretary has the right to 
recover or collect charges for care or services (as determined by the 
Secretary, but not including care or services for a service-connected 
disability) from the party providing that coverage to the extent that 
the individual (or the provider of the care or services) would be 
eligible to receive payment for such care or services from such party 
if the care or services had not been furnished by a department or 
agency of the United States.
    ``(b) Procedures.--The provisions of subsections (b) through (f) of 
section 1729 of this title shall apply with respect to claims by the 
United States under subsection (a) in the same manner as they apply to 
claims under subsection (a) of that section.
``Sec. 1833. Health Coverage Fund
    ``(a) Establishment of Fund.--There is hereby established in the 
Treasury a revolving fund to be known as the `Department of Veterans 
Affairs Health Coverage Fund'.
    ``(b) Crediting of Amounts to Fund.--There shall be credited to the 
revolving fund any amount received by the Department by reason of the 
furnishing of health care under VA health coverage and any amount 
received by the Department by reason of the enrollment of an individual 
with VA health coverage (including amounts received as premiums, 
premium certificates or vouchers, copayments or coinsurance, and 
deductibles), any amount received as a third-party reimbursement, and 
any amount received as a reimbursement from other health coverage for 
care furnished to one of its enrollees.
    ``(c) Crediting to Treasury.--Any amounts deposited to the 
revolving fund that are attributable to amounts received by the 
Department as a premium, including a premium certificate or voucher, by 
reason of the enrollment with VA health coverage of a veteran described 
in section 1831(b) of this title shall be covered into the General Fund 
of the Treasury.
    ``(d) Amounts Not Permitted To Be Retained.--Notwithstanding 
subsection (b), the Department may not retain amounts received for care 
furnished to a VA enrollee in a case in which the costs of such care 
have been covered by appropriations. Such amounts shall be deposited in 
the General Fund of the Treasury.
    ``(e) Availability of Funds.--Amounts in the revolving fund are 
hereby made available for all expenses, both direct and indirect, 
related to the delivery through VA health coverage of the items and 
services in standard coverage and any supplemental benefits package or 
policy offered through such coverage.''.
    (b) Preservation of Existing Benefits for Facilities Not Offering 
Services Through Qualified Health Coverage.--(1) Chapter 17 of title 
38, United States Code, is amended by inserting after section 1704 the 
following new section:
``Sec. 1705. Facilities not offering qualified health coverage; 
              veterans not eligible to enroll to obtain coverage
    ``The provisions of this chapter shall apply with respect to the 
furnishing of care and services--
            ``(1) by any facility of the Department that (A) is not 
        offering qualified health coverage under the Bipartisan Health 
        Care Reform Act of 1994, and (B) is not located in a State (or 
        portion of a State) that is a single payer area; and
            ``(2) by any facility of the Department (whether or not 
        offering qualified health coverage under the Bipartisan Health 
        Care Reform Act of 1994) in the case of a veteran who is not 
        eligible for enrollment under chapter 18 of this title.''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 1704 the 
following new item:

``1705. Facilities not offering qualified health coverage; veterans not 
                            eligible to enroll to obtain coverage.''.

SEC. 9002. ORGANIZATION OF DEPARTMENT OF VETERANS AFFAIRS FACILITIES AS 
              FACILITIES OFFERING QUALIFIED HEALTH COVERAGE.

    (a) In General.--Chapter 73 of title 38, United States Code, is 
amended--
            (1) by redesignating subchapter IV as subchapter V; and
            (2) by inserting after subchapter III the following new 
        subchapter:

 ``SUBCHAPTER IV--PARTICIPATION AS PART OF NATIONAL HEALTH CARE REFORM

``Sec. 7341. Organization of health care facilities as facilities 
              offering qualified health coverage
    ``(a) Except as provided in section 7342 of this title, the 
Secretary may, subject to the availability of appropriations, organize 
Department plans and facilities as entities and facilities offering 
qualified health coverage under the Bipartisan Health Care Reform Act 
of 1994 subject to adjustment under subsection (g). The Secretary shall 
prescribe regulations establishing standards for the operation of 
Department health care facilities as facilities offering qualified 
health coverage under the Bipartisan Health Care Reform Act of 1994. In 
prescribing those standards, the Secretary shall assure that they 
conform, to the maximum extent practicable, to the requirements for 
qualified health coverage generally set forth in the Bipartisan Health 
Care Reform Act of 1994.
    ``(b) Within a geographic area or region, health care facilities of 
the Department located within that area or region may be organized to 
operate as a single entity offering qualified health coverage 
encompassing all Department facilities within that area or region or 
may be organized to operate as several entities offering qualified 
health coverage.
    ``(c) A health plan purchasing organization operating within one or 
more fair rating areas shall offer as an option to eligible individuals 
enrollment to obtain VA health coverage that is offered in such area.
    ``(d) Any health insurance program that is provided for Federal 
employees shall include enrollment to obtain VA health coverage as 
enrollment options for eligible individuals. Premiums shall be paid for 
VA health coverage under any such insurance program based upon 
enrollment with that program in the same manner as to any other health 
coverage.
    ``(e)(1) In establishing and operating standard health coverage, 
the Secretary, in consultation with the Comptroller General, shall take 
appropriate steps to ensure the financial solvency and stability of the 
VA health coverage and of contractors and subcontractors providing 
services pursuant to section 7343 of this title.
    ``(2) In carrying out paragraph (1), the Secretary may purchase 
from commercial sources insurance to insure the Department against the 
financial risks involved in the offering of VA health coverage.
    ``(3) Notwithstanding any other provision of law, there shall be no 
requirements applicable to the offering of VA health coverage with 
respect to the maintenance of a reserve fund, requirements to reinsure, 
or payments into any other financial integrity fund other than as 
established pursuant to paragraph (1).
    ``(f) In carrying out responsibilities under the Bipartisan Health 
Care Reform Act of 1994, a State (or a State-established entity)--
            ``(1) may not impose any standard or requirement on VA 
        health coverage that is inconsistent with this section or any 
        regulation prescribed under this section or other Federal laws 
        regarding the operation of this section; and
            ``(2) may not deny certification of VA health coverage 
        under the Bipartisan Health Care Reform Act of 1994 on the 
        basis of a conflict between a rule of a State (or State-
        established entity) and this section or regulations prescribed 
        under this section or other Federal laws regarding the 
        operation of this section.
    ``(g) Notwithstanding any provision of the Bipartisan Health Care 
Reform Act of 1994 or this subchapter, any reference in this subchapter 
to `qualified health coverage' under such Act shall, subject to section 
1821(b) of this title, be considered a reference to coverage of a 
standardized package of benefits established by the Secretary with an 
actuarial value not less than the actuarial value of qualified health 
coverage under such Act.
``Sec. 7342. Operation of health care facilities within States 
              operating as single payer areas
    ``(a) In a State (or portion of a State) that operates as a single 
payer system, Department health care facilities in that State (or 
portion of a State) shall serve as providers to individuals residing in 
that State (or portion of a State) who would be eligible to enroll 
under chapter 18 of this title to obtain VA health coverage if they 
were residing in an area where qualified health coverage was offered 
under the Bipartisan Health Care Reform Act of 1994. Such facilities 
may provide those individuals any covered service in standard coverage.
    ``(b) A Department facility providing care to residents of a single 
payer area pursuant to subsection (a) shall be reimbursed for that care 
on the same basis as any other provider furnishing the same services in 
that area.
    ``(c) A veteran described in section 1831(b) of this title shall be 
exempt from any otherwise applicable charges for such care. Any other 
individual provided care pursuant to subsection (a) shall be subject to 
all applicable requirements respecting copayments, deductibles, and 
coinsurance. Notwithstanding the preceding sentence, section 1831(c)(3) 
of this title shall apply to any such charge.
``Sec. 7343. Health care resource agreements
    ``(a)(1) In accordance with policies established under subsection 
(b), an official specified in paragraph (2) may, without regard to any 
law or regulation specified in paragraph (3), enter into agreements 
with health care plans, with insurers, and with health care providers, 
and with any other entity or individual, to furnish or obtain any 
health-care resource.
    ``(2) An official specified in this paragraph is any of the 
following:
            ``(A) The head official offering VA health coverage.
            ``(B) The director of a Department health care facility 
        that is providing service through VA health coverage.
            ``(C) The director of a Department health care facility 
        that is operating in a State (or portion of a State) that is 
        operating under a single payer system.
    ``(3) A law or regulation specified in this paragraph is any of the 
following:
            ``(A) Section 1703 of this title.
            ``(B) Any other law or regulation pertaining to--
                    ``(i) competitive procedures;
                    ``(ii) acquisition procedures or policies (other 
                than contract dispute settlement procedures); or
                    ``(iii) bid protests.
    ``(4) For purposes of this subsection, the term `health-care 
resource' has the meaning given that term in section 8152 of this 
title.
    ``(b) Policies established by the Secretary under subsection (a) 
shall include appropriate provisions to ensure that procurements under 
that subsection are carried out in a manner consistent with (1) Federal 
acquisition policies regarding nondiscrimination, equal opportunity, 
business integrity, and safeguarding against fraud and abuse, and (2) 
the goal of a streamlined process for the acquisition of health-care 
resources.
    ``(c) Any proceeds to the Government received from an agreement 
under subsection (a) shall be credited to the Department of Veterans 
Affairs Health Coverage Fund established under section 1834 of this 
title and to funds that have been allotted to the facility that 
furnished the resource involved.
``Sec. 7344. Administrative and personnel flexibility
    ``(a) In order to carry out this subchapter, the Secretary may--
            ``(1) subject to section 1822(c) of this title, carry out 
        administrative reorganizations of the Department without regard 
        to those provisions of section 510 of this title following 
        subsection (a) of that section; and
            ``(2) when the Secretary finds it is cost-effective or 
        necessary in order to provide health care services in a timely 
        manner--
                    ``(A) enter into contracts for procurement of any 
                commercially available item at a cost of under $100,000 
                without regard to any provision of law or regulation 
                (i) requiring competitive procedures; (ii) mandating or 
                giving priority to any source of supply; or (iii) 
                pertaining to protests; and
                    ``(B) enter into contracts without regard to 
                section 8110(c) of this title for the performance of 
                services previously performed by employees of the 
                Department.
    ``(b)(1) The Secretary may establish alternative personnel systems 
or procedures for personnel at facilities offering qualified health 
coverage under this title, or for personnel at facilities operating in 
a State (or portion of a State) that is operating under a single payer 
system, whenever the Secretary considers such action necessary, except 
that the Secretary shall provide for preference eligibles (as defined 
in section 2108 of title 5) in a manner comparable to the preference 
for such eligibles under subchapter I of chapter 33, and subchapter I 
of chapter 35, of such title.
    ``(2) In establishing alternative personnel systems or procedures 
under this subsection, the Secretary shall include the following:
            ``(A) A system that ensures that applicants for employment 
        and employees are appointed, promoted, and assigned on the 
        basis of merit and fitness.
            ``(B) An equal employment opportunity program.
            ``(C) Compensation systems which will be used to set rates 
        of pay that are competitive with rates of pay paid by health-
        care providers other than the Department and that take into 
        consideration the difficulty, responsibility, and qualification 
        requirements of the work performed.
            ``(D) A formal performance appraisal system.
            ``(E) A system to address unacceptable conduct and 
        performance by employees, including a general statement of 
        violations, sanctions, and procedures which shall be made known 
        to all employees, and a dispute resolution procedure.
            ``(F) A formal policy regarding the accrual and use of sick 
        leave and annual leave.
    ``(c) The Secretary may carry out appropriate promotional, 
advertising, and marketing activities to inform individuals of the 
availability of facilities of the Department offering qualified health 
coverage.
``Sec. 7345. Veterans Health Care Transition Fund
    ``(a) For each of fiscal years 1995 and 1996, the Secretary of the 
Treasury shall credit to a special fund (in this section referred to as 
the `Fund') of the Treasury an amount equal to--
            ``(1) $1,200,000,000 for fiscal year 1995; and
            ``(2) $800,000,000 for fiscal year 1996.
    ``(b) Amounts in the Fund shall be available to the Secretary only 
for VA health coverage authorized under this chapter. Such amounts are 
available without fiscal year limitation for costs of commencing the 
offering of VA health coverage, including consulting services, 
equipment, marketing, and other costs, minor construction, and (subject 
to section 8104 of this title) major construction.
    ``(c) The Secretary shall submit to Congress, no later than March 
1, 1996, a report concerning the operation of the Department of 
Veterans Affairs health care system in preparing for, and operating 
under, national health care reform under the Bipartisan Health Care 
Reform Act of 1994 during fiscal years 1995 and 1996. The report shall 
include a discussion of--
            ``(1) the adequacy of amounts in the Fund for the offering 
        of VA health coverage;
            ``(2) the quality of care provided by the Department; and
            ``(3) the ability of the Department to attract patients.
``Sec. 7346. Funding provisions: grants and other sources of assistance
    ``The Secretary may apply for and accept, if awarded, any grant or 
other source of funding that is intended to meet the needs of special 
populations and that but for this section is unavailable to facilities 
of the Department or to qualified health coverage offered by the 
Government if funds obtained through the grant or other source of 
funding will be used through a facility of the Department offering 
qualified health coverage.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 is amended by striking out the item relating to the heading 
for subchapter IV and inserting in lieu thereof the following:

 ``subchapter iv--participation as part of national health care reform

``7341. Organization of health care facilities as facilities offering 
                            qualified health coverage
``7342. Operation of health care facilities within States operating as 
                            single payer areas.
``7343. Health care resource agreements.
``7344. Administrative and personnel flexibility.
``7345. Veterans Health Coverage Transition Fund.
``7346. Funding provisions: grants and other sources of assistance.
                ``subchapter v--research corporations''.

SEC. 9003. ELIGIBILITY FOR CHAPTER 17 CARE.

    (a) Nursing Home Care.--Section 1710(a)(1) of title 38, United 
States Code, is amended by inserting ``(or, in the case of a veteran 
described in subparagraph (A) or (D) below, shall furnish nursing home 
care)'' after ``may furnish nursing home care''.
    (b) Outpatient Care for Enrolled Veterans.--Paragraph (1) of 
section 1712(a) of such title is amended--
            (1) by striking out ``and'' at the end of subparagraph (C);
            (2) by striking out the period at the end of subparagraph 
        (D) and inserting in lieu thereof a semicolon; and
            (3) by adding at the end the following:
            ``(E) to any veteran described in section 1831(b) of this 
        title who is enrolled under section 1811 of this title and the 
        Bipartisan Health Care Reform Act of 1994 with VA health 
        coverage (as defined in section 1801 of this title), for any 
        disability to the extent that care and treatment of that 
        disability is not included within standard coverage (as defined 
        in section 1801 of this title);''.
    (c) Obviate-the-Need Outpatient Care.--(1) Paragraph (2) of such 
section is amended by striking out ``The Secretary'' and all that 
follows through ``this subsection--'' and inserting in lieu thereof 
``Except as provided in subsection (b) of this section, the Secretary 
shall furnish on an ambulatory or outpatient basis such medical 
services as the Secretary determines are needed--''.
    (2) Paragraph (4) of such section is amended by striking out 
``medical services for a purpose described in paragraph (5) of this 
subsection'' and inserting in lieu thereof ``, to the extent that 
facilities are available, such medical services as the Secretary 
determines are needed''.
    (3) Such section is further amended--
            (A) by striking out paragraph (5); and
            (B) by redesignating paragraphs (6) and (7) as paragraphs 
        (5) and (6), respectively.
    (d) Conforming Amendments.--(1) Section 1701(6)(A)(i) of such title 
is amended by striking out ``(except under the conditions described in 
section 1712(a)(5)(A) of this title)''.
    (2) Section 1701(6)(B)(i)(II) of such title is amended by striking 
``section 1712(a)(5)(B)'' and inserting in lieu thereof ``section 
1712''.
    (3) Section 1703(a)(2)(B) of such title is amended by striking out 
``for a purpose described in section 1712(a)(5)(B) of this title'' and 
inserting in lieu thereof ``to complete treatment incident to hospital, 
nursing home, or domiciliary care that has been provided by the 
Department''.
    (4) Section 1712A(b)(1) of such title is amended by striking out 
``section 1712(a)(5)(B)'' and inserting in lieu thereof ``section 
1703(a)(2)(B)''.

SEC. 9004. AUTHORITY TO PROVIDE HEALTH CARE FOR HERBICIDE AND RADIATION 
              EXPOSURE.

    (a) Authorized Inpatient Care.--Section 1710(e) of title 38, United 
States Code, is amended to read as follows:
    ``(e)(1)(A) Subject to paragraph (4), a herbicide-exposed veteran 
is eligible for hospital care and nursing home care under subsection 
(a)(1)(G) for any disease specified in subparagraph (B).
    ``(B) The diseases referred to in subparagraph (A) are those for 
which the National Academy of Sciences, in a report issued in 
accordance with section 2 of the Agent Orange Act of 1991, has 
determined--
            ``(i) that there is sufficient evidence to conclude that 
        there is a positive association between occurrence of the 
        disease in humans and exposure to a herbicide agent;
            ``(ii) that there is evidence which is suggestive of an 
        association between occurrence of the disease in humans and 
        exposure to a herbicide agent, but such evidence is limited in 
        nature; or
            ``(iii) that available studies are insufficient to permit a 
        conclusion about the presence or absence of an association 
        between occurrence of the disease in humans and exposure to a 
        herbicide agent.
    ``(2) A radiation-exposed veteran is eligible for hospital care and 
nursing home care under subsection (a)(1)(G) for--
            ``(A) any disease listed in section 1112(c)(2) of this 
        title; and
            ``(B) any other disease for which the Secretary, based on 
        the advice of the Advisory Committee on Environmental Hazards, 
        determines that there is credible evidence of a positive 
        association between occurrence of the disease in humans and 
        exposure to ionizing radiation.
    ``(3) Subject to paragraph (4), a veteran who the Secretary finds 
may have been exposed while serving on active duty in the Southwest 
Asia theater of operations during the Persian Gulf War to a toxic 
substance or environmental hazard is eligible for hospital care and 
nursing home care under subsection (a)(1)(G) of this section for any 
disability which becomes manifest before October 1, 1996, 
notwithstanding that there is insufficient medical evidence to conclude 
that such disability may be associated with such exposure.
    ``(4) Hospital and nursing home care may not be provided under or 
by virtue of paragraph (1) after September 30, 1996, or, in the case of 
a veteran described in paragraph (3), after September 30, 1998.
    ``(5) For purposes of this subsection and section 1712 of this 
title--
            ``(A) the term `herbicide-exposed veteran' means a veteran 
        (i) who served on active duty in the Republic of Vietnam during 
        the Vietnam era, and (ii) who the Secretary finds may have been 
        exposed during such service to a herbicide agent;
            ``(B) the term `herbicide agent' has the meaning given that 
        term in section 1116(a)(4) of this title; and
            ``(C) the term `radiation-exposed veteran' has the meaning 
        given that term in section 1112(c)(4) of this title.''.
    (b) Authorized Outpatient Care.--Section 1712 of such title is 
amended--
            (1) in subsection (a)(1) (as amended by section 9003(b)), 
        by adding at the end the following:
            ``(F) during the period before October 1, 1996, to any 
        herbicide-exposed veteran for any disease listed in section 
        1710(e)(1)(B) of this title; and
            ``(G) to any radiation-exposed veteran for any disease 
        covered under section 1710(e)(1)(C) of this title.''; and
            (2) in subsection (i)(3)--
                    (A) by striking out ``(A)''; and
                    (B) by striking out ``, or (B)'' and all that 
                follows through ``title''.
    (c) Savings Provision.--The provisions of sections 1710(e) and 
1712(a) of title 38, United States Code, as in effect on the day before 
the date of the enactment of this Act, shall apply with respect to 
hospital care, nursing home care, and medical services in the case of 
any veteran furnished care or services before such date of enactment on 
the basis of presumed exposure to a substance or radiation under the 
authority of those provisions.

SEC. 9005. EXTENSION OF AUTHORITY TO PROVIDE PRIORITY OUTPATIENT HEALTH 
              CARE FOR EXPOSURE TO ENVIRONMENTAL HAZARDS.

    Section 1712(a)(1)(D) of title 38, United States Code, is amended 
by striking out ``December 31, 1994, for any disability'' and inserting 
in lieu thereof ``October 1, 1998, for any disability which becomes 
manifest before October 1, 1996,''.

SEC. 9006. REPORT ON WAIVING COST-SHARING FOR CERTAIN MEDICAL CARE FOR 
              DEPENDENTS OF PERSIAN GULF VETERANS WHO MAY HAVE BEEN 
              EXPOSED TO ENVIRONMENTAL HAZARDS.

    (a) Report.--The Secretary of Veterans Affairs shall submit to 
Congress a report on the desirability and the feasibility of waiving 
any requirement for cost-sharing in the case of medical care described 
in subsection (b) that is provided through VA health coverage under 
chapter 18 of title 38, United States Code (as added by section 9001), 
to an individual who is a VA enrollee enrolled under family-member 
eligibility under section 1813 of that chapter.
    (b) Persian Gulf War Illness.--Medical care referred to in 
subsection (a) is medical care provided to a family member of a veteran 
described in subparagraph (C) of section 1710(e)(1) of title 38, United 
States Code, for any disease or disability occurring in that family 
member which the Secretary finds may be related to the service of the 
veteran in the Southwest Asia theater of operations during the Persian 
Gulf War.
    (c) Matters To Be Considered.--In preparing the report under 
subsection (a), the Secretary shall consider relevant studies, 
including those that have been (or that are being) conducted by the 
Department of Veterans Affairs, the Department of Defense, the National 
Institutes of Health, the National Academy of Sciences, and private 
health care providers.
    (d) Submission of Report.--The report under subsection (a) shall be 
submitted not later than 60 days after the date of the enactment of 
this Act.

SEC. 9007. STUDY OF THE EFFECT OF TELEMEDICINE ON THE DELIVERY OF VA 
              HEALTH CARE SERVICES.

    (a) In General.--During each of fiscal years 1995 through 1997, the 
Secretary of Veterans Affairs shall carry out a study of the effect of 
telemedicine on the delivery, accessibility, and quality of health care 
services available to individuals who are eligible for coverage through 
the Department of Veterans Affairs.
    (b) Reports.--Not later than 120 days after the date of the 
enactment of this Act and annually thereafter through 1998, the 
Secretary shall submit to the Committees on Veterans' Affairs of the 
Senate and House of Representatives a report, including descriptions of 
the telemedicine applications benefiting veterans, relating to the 
study conducted under subsection (a).
    (c) Consultation.--Each study under subsection (a) shall be carried 
out in consultation with the Secretary of Health and Human Services, 
the Secretary of Defense, the Chair of the White House Information 
Infrastructure Task Force, and the Director of High Performance 
Computing and Communications in the Executive Office of the President.

SEC. 9008. LEGISLATIVE PROPOSAL ON VA HEALTH COVERAGE FOR MEDICARE 
              BENEFICIARIES.

    (a) In General.--
            (1) Legislative proposal.--Not later than 1 year after the 
        date of the enactment of this Act, the Secretary, in 
        consultation with the Secretary of Veterans Affairs, shall 
        develop and submit to Congress a proposal for legislation which 
        provides for obtaining VA health coverage for medicare 
        beneficiaries who are veterans.
            (2) Medicare beneficiary.--For purposes of this section, 
        the term ``medicare beneficiary'' means an individual who is 
        eligible for benefits under part A of title XVIII of the Social 
        Security Act and is enrolled under part B of such title.
    (b) Contents of the Proposal.--A proposal for legislation submitted 
under subsection (a) shall--
            (1) provide for an appropriate methodology by which the 
        Secretary shall make payment to the Secretary of Veterans 
        Affairs for the enrollment of medicare beneficiaries;
            (2) provide individuals the opportunity to remain enrolled 
        to obtain VA health coverage without an interruption in 
        coverage upon becoming medicare beneficiaries; and
            (3) provide medicare beneficiaries who are veterans with 
        the opportunity to enroll to obtain VA health coverage as an 
        individual or with family members.

SEC. 9009. OUTPATIENT CLINIC PILOT PROGRAM.

    (a) Pilot Program.--The Secretary of Veterans Affairs shall carry 
out a pilot program to reduce waiting times for patients seeking 
health-care services in outpatient clinics of the Department of 
Veterans Affairs and the traveling distance to such clinics.
    (b) Additional Clinics.--Under the pilot program, the Secretary 
shall provide for the operation of approximately 20 new outpatient 
clinics around 2 medical centers of the Department of Veterans Affairs. 
The Secretary shall select the locations for the clinics so that 
veterans served by one of the clinics would be within a one-hour drive 
of such a clinic.
    (c) Services.--The Secretary shall ensure that the clinics provide 
a wide range of services, including x-ray, laboratory, physical 
therapy, respiratory therapy, pharmaceutical services, and 
psychological services, to be available at those clinics.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated, for each of fiscal years 1998 through 2004, such sums are 
may be necessary to carry out this section.

                                                    Title X, Subtitle A

               TITLE X--MISCELLANEOUS SAVINGS PROVISIONS

                       table of contents of title

             Subtitle A--Automobile Insurance Coordination

Sec. 10001. Definitions.
Sec. 10002. Provision of automobile insurance medical services through 
                            health plans.
Sec. 10003. Payment for automobile insurance medical services.
Sec. 10004. Payment facilitation.
Sec. 10005. Payment of State administrative expenses.
Sec. 10006. Construction.
    Subtitle B--Prefunding Government Health Benefits Contributions

Sec. 10101. Requirement that certain agencies prefund government health 
                            benefits contributions for their 
                            annuitants.

             Subtitle A--Automobile Insurance Coordination

SEC. 10001. DEFINITIONS.

    In this subtitle--
            (1) Injured individual.--The term ``injured individual'' 
        means an individual who has a bodily injury or illness 
        sustained in an automobile accident and who is entitled to 
        receive automobile insurance medical services from a health 
        plan.
            (2) Automobile insurance medical services.--The term 
        ``automobile insurance medical services'' means services and 
        items covered by automobile insurance that are medically 
        necessary or appropriate for treatment of bodily injuries or 
        illnesses sustained in automobile accidents and that are within 
        the scope of the benefits to which an injured individual is 
        entitled under his or her health plan.
            (3) Automobile insurance carrier.--The term ``automobile 
        insurance carrier'' means an insurance company, employer, or 
        fund that is liable for payment for automobile insurance 
        medical services based either on a direct contractual 
        obligation to an injured individual or an obligation on behalf 
        of a person responsible for causation of an injured 
        individual's bodily injury or illness.
            (4) Health plan.--The term ``health plan'' means a plan or 
        organization that pays for the services of health care 
        providers and is subject to Federal or State regulation.

SEC. 10002. PROVISION OF AUTOMOBILE INSURANCE MEDICAL SERVICES THROUGH 
              HEALTH PLANS.

    (a) In General.--An individual enrolled in a health plan shall 
receive automobile insurance medical services exclusively through the 
provision (or arrangement for the provision) of such services by the 
health plan. Such services shall be subject to all quality, cost 
containment, and anti-fraud and abuse provisions that apply generally 
to medical services provided by or through health plans.
    (b) Alternative Permitted.--
            (1) By agreement.--Subsection (a) shall not prevent an 
        individual and an automobile insurance carrier from agreeing 
        that treatment for bodily injury or illness sustained in an 
        automobile accident shall be provided other than by or through 
        the health plan in which the individual is enrolled. Notice of 
        any such agreement shall be filed with the injured individual's 
        health plan. Upon receipt of such notice, the health plan shall 
        be absolved of all responsibility for payment of any services 
        covered by the agreement.
            (2) Medicare and medicaid.--Subsection (a) shall not 
        prevent a State from requiring automobile insurance carrier to 
        make direct payment to health care providers for automobile 
        insurance medical services that are covered both by (A) 
        medicare or medicaid, and (B) and automobile insurance contract 
        that is required by law and provides for direct payment of 
        medical services regardless of fault. Payment for automobile 
        insurance medical services in such circumstances shall be made 
        to the extent of the automobile insurance carrier's liability 
        under the applicable contract, in accordance with fee schedules 
        prescribed under section 10003(d), and such services shall be 
        subject to all quality, cost containment, and anti-fraud and 
        abuse provisions that apply generally to medical services 
        provided by or through health plans.

SEC. 10003. PAYMENT FOR AUTOMOBILE INSURANCE MEDICAL SERVICES.

    (a) Payment to Health Plans.--Each automobile insurance carrier 
that is liable for payment for automobile insurance medical services 
provided to an injured individual by a health plan shall make payment 
to the health plan for such services to the extent of its obligations 
under the applicable automobile insurance contract. Any federally 
funded health care plan shall have first priority, over the right of 
any other person, to receive payment pursuant to any obligation under 
an automobile insurance policy covering automobile insurance medical 
services.
    (b) Reimbursement for Cost Sharing.--Each automobile insurance 
carrier shall remain liable, to the extent of its obligations under the 
applicable automobile insurance contract, for reimbursement of any 
deductibles or coinsurance paid by an injured individual for automobile 
insurance medical services.
    (c) Limitation of Liability.--Except with respect to payments to 
health plans as required by subsection (a) and to reimbursement of 
deductibles and coinsurance in accordance with subsection (b), nothing 
in this subtitle or any other provision of law shall require an 
automobile insurance carrier or any person insured by such a carrier to 
make any payment to a health plan, health care provider, or any other 
person for (1) automobile insurance medical services, or (2) other 
health care services or items used to treat an injury or illness 
sustained in an automobile accident that are not medically necessary or 
appropriate.
    (d) Use of Fee Schedules.--
            (1) In general.--Irrespective of the type of health plan 
        providing automobile insurance medical services, payment by 
        automobile insurance carriers for such services shall be made 
        to the plan in accordance with any fee schedule or schedules 
        established for health care services generally. Each State 
        shall develop or approve a fee schedule applicable to payment 
        for any automobile insurance medical services that are not 
        covered by a generally applicable fee schedule or schedules.
            (2) Alternative payment methodologies.--Fee schedules shall 
        not be required in any case in which an automobile insurance 
        carrier and a health plan have agreed on an alternative payment 
        arrangement.
    (e) Reimbursement for Payments Made.--Nothing in this subtitle or 
any other provision of law shall impair the right of a health plan or 
automobile insurance carrier to seek reimbursement from any person 
liable for a bodily injury or illness sustained in an automobile 
accident for payments made for automobile insurance medical services to 
treat such injury or illness.
    (f) Rights to Coverage for Additional Treatment.--Subject to the 
provisions of subsection (c), nothing in this subtitle shall impair any 
rights with respect to medically necessary or appropriate services and 
items to which an individual injured in an automobile accident is 
entitled that are not automobile insurance medical services as defined 
in this subtitle.

SEC. 10004. PAYMENT FACILITATION.

    (a) In General.--In each State, an efficient and effective system 
shall be established for prompt payment for automobile insurance 
medical services by automobile insurance carriers to health plans. Such 
systems shall require automobile insurance carriers and health plans to 
interface effectively, including through the use of cost-effective 
computer data programs, in order to specify the automobile insurance 
carrier or carriers liable for payment for automobile insurance medical 
services. Such systems also shall include mechanisms for resolution, 
including arbitration, of any issues or disputes that may arise in 
connection with such payment. The results of the resolution of issues 
and disputes under the mechanisms prescribed pursuant to this 
subsection, including the use of any fee schedule under section 
10003(d), shall be admissible in evidence only for purposes of recovery 
under section 10003(e).
    (b) Sanctions.--In each State, appropriate sanctions shall be 
prescribed for the failure of a health plan, an automobile insurance 
carrier, or any other person to comply with the requirements 
established pursuant to subsection (a). Such sanctions shall include a 
penalty for late payment, which shall be imposed on any automobile 
insurance carrier that delays payment to a health plan after the amount 
of reimbursement is established pursuant to the procedures prescribed 
under subsection (a).

SEC. 10005. PAYMENT OF STATE ADMINISTRATIVE EXPENSES.

    (a) In General.--The Secretary of Health and Human Services shall 
provide for payment to each State, from the allotment to the State 
provided under subsection (b), of an amount equal to the amount 
expended by the State for administrative expenses in carrying out this 
subtitle in the State. Such payments shall be made at a time and manner 
specified by the Secretary and shall be conditioned upon the State 
providing the Secretary with such information as the Secretary may 
require in order to compute the appropriate amount of payments to be 
made. This subsection constitutes budget authority in advance of 
appropriations Acts, and represents the obligation of the Federal 
Government to provide payments to States in accordance with the 
applicable provisions of this section.
    (b) State Allotment.--
            (1) In general.--The Secretary shall establish a formula 
        for allotting among the States for each fiscal year the total 
        amount of funds made available under paragraph (2) for the 
        fiscal year.
            (2) Funds available.--The total amount of funds available 
        under this paragraph--
                    (A) for fiscal year 1997 is $300,000,000, and
                    (B) for each succeeding fiscal year (through fiscal 
                year 2004) is $100,000,000.

SEC. 10006. CONSTRUCTION.

    (a) Coordination With Other Provisions of This Act.--The provisions 
of this subtitle shall be construed to be consistent with and shall be 
implemented in accordance with the other provisions of this Act.
    (b) Effect on Workers' Compensation Law.--Nothing in this subtitle 
shall affect rights or obligations under workers' compensation law.

                                                    Title X, Subtitle B

    Subtitle B--Prefunding Government Health Benefits Contributions

SEC. 10101. REQUIREMENT THAT CERTAIN AGENCIES PREFUND GOVERNMENT HEALTH 
              BENEFITS CONTRIBUTIONS FOR THEIR ANNUITANTS.

    (a) Definitions.--For the purpose of this section--
            (1) the term ``agency'' means any agency or other 
        instrumentality within the executive branch of the Government, 
        the receipts and disbursements of which are not generally 
        included in the totals of the budget of the United States 
        Government submitted by the President;
            (2) the term ``health benefits plan'' means, with respect 
        to an agency, a health benefits plan, established by or under 
        Federal law, in which employees or annuitants of such agency 
        may participate;
            (3) the term ``health-benefits coverage'' means coverage 
        under a health benefits plan'';
            (4) an individual shall be considered to be an ``annuitant 
        of an agency'' if such individual is entitled to an annuity, 
        under a retirement system established by or under Federal law, 
        by virtue of--
                    (A) such individual's service with, and separation 
                from, such agency; or
                    (B) being the survivor of an annuitant under 
                subparagraph (A) or of an individual who died while 
                employed by such agency; and
            (5) the term ``Office'' means the Office of Personnel 
        Management.
    (b) Prefunding Requirement.--
            (1) In general.--Effective as of October 1, 1994, each 
        agency (or February 1, 1995, in the case of the agency with the 
        greatest number of employees, as determined by the Office) 
        shall be required to prepay the Government contributions which 
        are or will be required in connection with providing health-
        benefits coverage for annuitants of such agency.
            (2) Regulations.--The Office shall prescribe such 
        regulations as may be necessary to carry out this section. The 
        regulations shall be designed to ensure at least the following:
                    (A) Amounts paid by each agency shall be sufficient 
                to cover the amounts which would otherwise be payable 
                by such agency (on a ``pay-as-you-go'' basis), on or 
                after the applicable effective date under paragraph 
                (1), on behalf of--
                            (i) individuals who are annuitants of the 
                        agency as of such effective date; and
                            (ii) individuals who are employed by the 
                        agency as of such effective date, or who become 
                        employed by the agency after such effective 
                        date, after such individuals have become 
                        annuitants of the agency (including their 
                        survivors).
                    (B)(i) For purposes of determining any amounts 
                payable by an agency--
                            (I) this section shall be treated as if it 
                        had taken effect at the beginning of the 20-
                        year period which ends on the effective date 
                        applicable under paragraph (1) with respect to 
                        such agency; and
                            (II) in addition to any amounts payable 
                        under subparagraph (A), each agency shall also 
                        be responsible for paying any amounts for which 
                        it would have been responsible, with respect to 
                        the 20-year period described in subclause (I), 
                        in connection with any individuals who are 
                        annuitants or employees of the agency as of the 
                        applicable effective date under paragraph (1).
                    (ii) Any amounts payable under this subparagraph 
                for periods preceding the applicable effective date 
                under paragraph (1) shall be payable in equal 
                installments over the 20-year period beginning on such 
                effective date.
    (c) FASB Standards.--Regulations under subsection (b) shall be in 
conformance with the provisions of standard 106 of the Financial 
Accounting Standards Board, issued in December 1990.
    (d) Clarification.--Nothing in this section shall be considered to 
permit or require duplicative payments on behalf of any individuals.
    (e) Draft Legislation.--The Office shall prepare and submit to 
Congress any draft legislation which may be necessary in order to carry 
out this section.
                                 <all>
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