I

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; TABLE OF TITLES AND SUB2 TITLES.

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

4 ‘‘Bipartisan Health Care Reform Act of 1994’’.

5 (b) TABLE OF TITLES AND SUBTITLES IN ACT.—The

6 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
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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

1 TITLE I—ASSURING

2 AVAILABILITY AND CONTINUITY

3 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.
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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.
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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.

1 Subtitle A—Insurance Reform

2 PART 1—GUARANTEED ACCESS TO HEALTH

3 COVERAGE

4 SEC. 1001. GUARANTEED OFFER BY CARRIERS.

5 (a) IN GENERAL.—Each carrier that offers health in6 surance coverage in the individual/small group market in

7 a fair rating area (as defined in section 1903) shall make

8 available, to each qualifying individual (as defined in sec9 tion 1904(3)) or small employer (covered in such market)

10 in such fair rating area—
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1 (1) qualified standard coverage consistent with

2 section 1102, and

3 (2) subject to subsection (b), qualified high-de4 ductible coverage consistent with section 1103.

5 (b) HIGH-DEDUCTIBLE COVERAGE.—

6 (1) EXCEPTION FOR HEALTH MAINTENANCE

7 ORGANIZATIONS.—The requirement of subsection

8 (a)(2) shall not apply with respect to health insur9 ance coverage that—

10 (A) is provided by a Federally qualified

11 health maintenance organization (as defined in

12 section 1301(a) of the Public Health Service

13 Act), or

14 (B) is not provided by such an organiza15 tion but is provided by an organization recog16 nized under State law as a health maintenance

17 organization or managed care organization or a

18 similar organization regulated under State law

19 for solvency.

20 (2) LIMITATION ON OFFER OF HIGH-DEDUCT21 IBLE COVERAGE.—Qualified high-deductible coverage

22 may not be made available by a carrier to a qualify23 ing individual (or to a small employer with respect

24 to an employee) unless the carrier also makes avail25 able qualified standard coverage that has identical
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1 benefits (other than the amount of the deductible)

2 and the individual or employee demonstrates to the

3 carrier that the individual or employee has available

4 assets (as defined by the Secretary) equal to at least

5 the deductible amount established under section

6 1104(b)(1) applicable to the high-deductible cov7 erage. A carrier may not make available to an indi8 vidual health coverage (other than coverage for sup9 plemental benefits) the actuarial value of which is

10 less than the actuarial value of qualified high-de11 ductible coverage, unless the individual has available

12 assets (as defined by the Secretary) equal to at least

13 the deductible amount of the coverage offered.

14 (3) OPTION TO OFFER MEDISAVE COVERAGE.—

15 The offer of high-deductible coverage under sub16 section (a)(2) may be accompanied by the contribu17 tion by an employer to a medical savings account (in

18 accordance with section 7705 of the Internal Reve19 nue Code of 1986).

20 (c) COVERAGE OF ENTIRE RATING AREA.—

21 (1) IN GENERAL.—With respect to each fair

22 rating area for which a carrier offers health insur23 ance coverage, the carrier shall provide for coverage

24 of benefits for items and services furnished through25 out the fair rating area.
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1 (2) SPECIAL RULE FOR CARRIERS OFFERING

2 COVERAGE IN MULTI-STATE METROPOLITAN STATIS3 TICAL AREAS.—In the case of a carrier that offers

4 qualified health insurance coverage in the individual/

5 small employer market in a portion of a State that

6 is located in an interstate metropolitan statistical

7 area, the carrier may not provide such coverage with

8 respect to an individual or employer in such metro9 politan statistical area unless the carrier also offers

10 such coverage in other portions of the area located

11 in other States.

12 (3) SPECIAL RULE FOR COVERAGE THROUGH

13 MANAGED CARE ARRANGEMENT.—In the case of cov14 erage offered by a carrier or under a group health

15 plan to the extent that it provides benefits through

16 a managed care arrangement in a fair rating area,

17 this subsection shall not be construed as requiring

18 the establishment of facilities throughout the area, if

19 the facilities are located consistent with section

20 1002(b)(1).

21 (d) FAMILY COVERAGE OPTION.—The offer of cov22 erage under this section with respect to an individual shall

23 include the option of coverage of family members of the

24 individual.
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1 (e) LIMITATION ON CARRIERS.—A carrier may not

2 require an employer under a group health plan to impose

3 through a waiting period for health coverage under a plan

4 or similarly require a limitation or condition on health cov5 erage or benefits based on—

6 (1) the health status of an individual,

7 (2) claims experience of an individual,

8 (3) receipt of health care by an individual,

9 (4) medical history of an individual,

10 (5) receipt of public subsidies by an individual,

11 or

12 (6) lack of evidence of insurability of an individ13 ual.

14 SEC. 1002. GUARANTEED ISSUE BY CARRIERS.

15 (a) IN GENERAL.—Subject to subsections (b) and (c)

16 and section 1003, each carrier that offers health insurance

17 coverage in the individual/small group market in a fair rat18 ing area—

19 (1) must accept every small employer in the

20 area that applies for such coverage during an enroll21 ment period provided under section 1005; and

22 (2) must accept for enrollment under such cov23 erage every qualifying individual (and family mem24 ber of such an individual) who applies for enrollment

25 during an enrollment period provided under section
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1 1005 and may not place any restriction on the eligi2 bility of an individual to enroll so long as such indi3 vidual is a qualifying individual.

4 (b) SPECIAL RULES FOR MANAGED CARE ARRANGE5 MENTS.—In the case of coverage offered by a carrier or

6 under a group health plan that provides benefits through

7 a managed care arrangement in a fair rating area, the

8 carrier or plan—

9 (1) need not establish facilities for the delivery

10 of health care services throughout the area so long

11 as such facilities are located in a manner that does

12 not discriminate on the basis of health status of in13 dividuals residing in proximity to such facilities, and

14 (2) may deny such coverage in a fair rating

15 area to employers or individuals if the organization

16 demonstrates to the applicable regulatory authority

17 that—

18 (A) it will not have the capacity to deliver

19 services adequately to enrollees of any addi20 tional groups or additional enrollees because of

21 its obligations to existing group contract hold22 ers and enrollees, and

23 (B) it is applying this paragraph uniformly

24 to all employers and individuals without regard

25 to the health status, claims experience, or dura-
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1 tion of coverage of those employers and their

2 employees.

3 Coverage may be denied under paragraph (2) only if the

4 denial is applied during a consecutive period of at least

5 180 days.

6 (c) SPECIAL RULE FOR FINANCIAL CAPACITY LIM7 ITS.—In addition to the authority provided under sub8 section (b)(2), in the case of coverage offered by any car9 rier, the carrier may deny coverage to a small employer

10 or individual if the carrier demonstrates to the applicable

11 regulatory authority that—

12 (1) it does not have the financial reserves nec13 essary to underwrite additional coverage, and

14 (2) it is applying this subsection uniformly to

15 all employers and individuals without regard to the

16 health status, claims experience, or duration of cov17 erage of those employers and their employees.

18 Coverage may be denied under this subsection only if the

19 denial is applied during a consecutive period of at least

20 180 days.

21 SEC. 1003. GUARANTEED RENEWAL.

22 (a) LIMITATION ON TERMINATION BY CARRIERS.—

23 A carrier may not deny, cancel, or refuse to renew health

24 coverage of a qualifying individual or eligible employer
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1 within a type of coverage option described in section

2 1903(15) except—

3 (1) on the basis of nonpayment of premiums,

4 (2) on the basis of fraud or misrepresentation,

5 or

6 (3) subject to subsection (b), in a fair rating

7 area because the carrier is ceasing to provide any

8 health insurance coverage in the individual/small

9 group market within such type of coverage option in

10 the area.

11 (b) LIMITATIONS ON MARKET EXIT BY CARRIERS.—

12 (1) NOTICE, ETC.—Subsection (a)(3) shall not

13 apply to a carrier ceasing to provide health insur14 ance coverage unless—

15 (A) such termination of coverage takes ef16 fect at the end of a contract year, and

17 (B) the carrier provides notice of such ter18 mination to employers and individuals covered

19 at least 30 days before the date of an annual

20 open enrollment period established with respect

21 to the employer or individual under section

22 1005.

23 (2) LIMITATION ON REENTRY IN INDIVIDUAL/

24 SMALL GROUP MARKET.—If a carrier ceases to offer

25 or provide health insurance coverage in an area with
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1 respect to the individual/small group market for a

2 type of coverage option, the insurer may not offer

3 health insurance coverage in the area in such market

4 within such type of coverage option until 5 years

5 after the date of the termination.

6 (c) RULE FOR MULTIEMPLOYER PLANS AND CER7 TIFIED MULTIPLE EMPLOYER HEALTH.—A multiem8 ployer plan and a certified multiple employer health plan

9 may not cancel coverage or deny renewal of coverage

10 under such a plan with respect to an employer other

11 than—

12 (1) for nonpayment of contributions,

13 (2) for fraud or other misrepresentation by the

14 employer, or

15 (3) because the plan is ceasing to provide any

16 coverage in a geographic area.

17 SEC. 1004. RESTRICTING PREEXISTING CONDITION EXCLU18 SIONS.

19 (a) IN GENERAL.—Except as provided in this section,

20 a carrier or group health plan providing health coverage

21 may not exclude health coverage with respect to services

22 related to treatment of a condition based on the fact that

23 the condition of an individual existed before the effective

24 date of coverage of the individual.

25 (b) LIMITED 6-MONTH EXCLUSION PERMITTED.—
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1 (1) IN GENERAL.—Subject to paragraph (2)

2 and subsections (c) through (e), a carrier or group

3 health plan providing health coverage may exclude

4 health coverage with respect to services related to

5 treatment of a condition of an individual based on

6 the fact that the condition existed before the effec7 tive date of coverage of the individual only if the pe8 riod of the exclusion does not exceed 6 months be9 ginning on the date of coverage.

10 (2) CREDITING OF PREVIOUS COVERAGE.—

11 (A) IN GENERAL.—A carrier or group

12 health plan providing health coverage shall pro13 vide that if a covered individual is in a period

14 of continuous coverage (as defined in subpara15 graph (C)) as of a date upon which coverage is

16 initiated or reinitiated, any period of exclusion

17 of coverage with respect to a preexisting condi18 tion (as defined in subparagraph (B)) for such

19 services or type of services shall be reduced by

20 1 month for each month in the period of contin21 uous coverage.

22 (B) PREEXISTING CONDITION DEFINED.—

23 In this paragraph, the term ‘‘preexisting condi24 tion’’ means, with respect to health coverage, a

25 condition which has been diagnosed or treated
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1 during the 3-month period ending on the day

2 before the first date of such coverage (without

3 regard to any waiting period).

4 (C) PERIOD OF CONTINUOUS COVERAGE.—

5 In this part, the term ‘‘period of continuous

6 coverage’’ means the period beginning on the

7 date an individual has health coverage (or cov8 erage under a public plan providing medical

9 benefits) and ends on the date the individual

10 does not have such coverage for a continuous

11 period of more than 3 months (or 6 months in

12 the case of an individual who loses coverage due

13 to involuntary termination of employment, other

14 than by reason of an employee’s gross mis15 conduct).

16 (c) EXCLUSION NOT APPLICABLE TO PREGNANCY.—

17 Any exclusion of coverage under subsection (b)(1) shall

18 not apply if the exclusion relates to pregnancy.

19 (d) EXCLUSION NOT APPLICABLE TO NEWBORNS

20 AND ADOPTED CHILDREN.—

21 (1) NEWBORNS.—Any exclusion of coverage

22 under subsection (b)(1) shall not apply to a child

23 who is covered at the time of birth and remains in

24 a period of continuous coverage after such time.
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1 (2) ADOPTED CHILDREN.—Any exclusion of

2 coverage under subsection (b)(1) shall not apply (be3 ginning on the date of adoption) to an adopted child

4 who is covered at the time of adoption and remains

5 in a period of continuous coverage after such time.

6 (e) EXCLUSION NOT APPLICABLE TO INDIVIDUALS

7 ENROLLED OR ENROLLING DURING CERTAIN OPEN EN8 ROLLMENT PERIODS.—

9 (1) INDIVIDUALS ENROLLING DURING PE10 RIOD.—In the case of an individual who enrolls and

11 obtains coverage during an open enrollment period

12 described in section 1005(b), any exclusion of cov13 erage under subsection (b)(1) shall not apply so long

14 as the individual remains in a period of continuous

15 coverage.

16 (2) INDIVIDUALS ENROLLED AT BEGINNING OF

17 PERIOD.—In the case of an individual who has

18 health coverage as of the first day of the initial open

19 enrollment period described in section 1005(b)(1),

20 any exclusion of coverage under subsection (b)(1)

21 shall not apply as of such date and so long as the

22 individual is in a period of continuous coverage.

23 (f) APPLICATION OF RULES BY CERTAIN HEALTH

24 MAINTENANCE ORGANIZATIONS.—A health maintenance

25 organization that provides health insurance coverage shall
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1 not be considered as failing to meet the requirements of

2 section 1301 of the Public Health Service Act notwith3 standing that it provides for an exclusion of the coverage

4 based on a preexisting condition consistent with the provi5 sions of this part so long as such exclusion is applied con6 sistent with the provisions of this part.

7 SEC. 1005. ENROLLMENT PERIODS.

8 (a) IN GENERAL.—Each carrier and each group

9 health plan providing health coverage (and each health

10 plan purchasing organization under subtitle A of title V)

11 in the individual/small group market shall permit qualify12 ing individuals and eligible employers to obtain health cov13 erage from the carrier or group health plan during each

14 enrollment period provided under this section.

15 (b) OPEN ENROLLMENT PERIODS FOR WHICH PRE16 EXISTING CONDITION EXCLUSIONS WAIVED.—

17 (1) INITIAL PERIOD.—There shall be an initial

18 open enrollment period, with respect to individuals

19 and employees who are residents of a State, during

20 the 60-day period beginning on January 1, 1997.

21 (2) INDIVIDUALS ELIGIBLE FOR SUBSIDIES.—

22 There shall be an individual open enrollment period

23 with respect to an individual at the time the individ24 ual first becomes eligible for any premium assistance

25 under part A of title XXI of the Social Security Act,
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1 during the 60-day period beginning on the first date

2 the individual meets eligibility criteria within any

3 12-month period.

4 (3) COURT ORDERS.—If a court has ordered

5 that coverage be provided for a spouse or child of an

6 employee or individual under health coverage of the

7 employee or individual, there shall be an open enroll8 ment period during the 30-day period beginning on

9 the date of issuance of the court order.

10 (4) ENROLLMENT OF NEWBORNS AND NEWLY

11 ADOPTED CHILDREN.—There shall be an open en12 rollment period with respect to a newborn child and

13 a newly adopted child during the 30-day period be14 ginning on the date of the birth or adoption of a

15 child, if family coverage is available as of such date.

16 (c) ANNUAL OPEN ENROLLMENT PERIODS FOR

17 WHICH PREEXISTING CONDITION EXCLUSIONS MAY

18 APPLY.—

19 (1) IN GENERAL.—Each carrier and each group

20 health plan providing health coverage (and each

21 health plan purchasing organization under subtitle A

22 of title V) in the individual/small group market shall

23 provide for at least one annual open enrollment pe24 riod (of not less than 30 days) each year. Such pe-
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1 riod shall be in addition to the open enrollment peri2 ods described in subsection (b).

3 (2) COORDINATION.—

4 (A) CARRIERS IN INDIVIDUAL/SMALL

5 GROUP MARKET.—Such annual open enrollment

6 periods with respect to carriers in the individ7 ual/small group market are subject to coordina8 tion by States.

9 (B) GROUP HEALTH PLANS.—Such annual

10 open enrollment periods with respect to any

11 group health plan are subject to coordination in

12 order to meet the requirement of section

13 1201(a)(2)(F).

14 (d) OTHER OPEN ENROLLMENT PERIODS FOR

15 WHICH PREEXISTING CONDITION EXCLUSIONS MAY

16 APPLY.—

17 (1) TERMINATION OF RESIDENCE AREA.—For

18 each qualifying individual, at the time the individual

19 terminates residence in the service area of coverage

20 provided by a carrier to the individual, there shall be

21 an open enrollment period (of not less than 30 days)

22 during which the individual may enroll in health cov23 erage.

24 (2) FAMILY OR EMPLOYMENT CHANGES.—In

25 the case of a qualifying individual who—
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1 (A) through divorce or death of a family

2 member experiences a change in family com3 position, or

4 (B) experiences a change in employment

5 status (including a significant change in the

6 terms and conditions of employment or the

7 terms and conditions of employment of a

8 spouse),

9 there shall be an open enrollment period (of at least

10 30 days) in which the individual is permitted to

11 change the individual or family basis of coverage or

12 the health coverage in which the individual is en13 rolled. The circumstances under which such enroll14 ment periods are required and the duration of such

15 periods shall be specified by the Secretary.

16 (3) ENROLLMENT DUE TO LOSS OF PREVIOUS

17 COVERAGE.—In the case of a qualifying individual

18 who—

19 (A) had health coverage at the time of an

20 individual’s enrollment period,

21 (B) stated at the time of such period that

22 having other health coverage was the reason for

23 declining enrollment, and

24 (C) lost the other health coverage as a re25 sult of the termination of the coverage, termi-
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1 nation or reduction of employment, or other

2 reason, except termination at the option of the

3 individual,

4 there shall be an open enrollment period during the

5 30-day period beginning on the date of termination

6 of the other coverage.

7 (4) ENROLLMENT AT TIME OF MARRIAGE.—

8 There shall be an open enrollment period with re9 spect to the spouse of an individual (including chil10 dren of the spouse) during the 30-day period begin11 ning on the date of the marriage, if family coverage

12 is available as of such date.

13 (5) NO EFFECT ON COBRA CONTINUATION BEN14 EFITS.—Nothing in this subsection shall be con15 strued as affecting rights of individuals to continu16 ation coverage under section 4980B of the Internal

17 Revenue Code of 1986, part 6 of subtitle B of title

18 I of the Employee Retirement Income Security Act

19 of 1974, or title XXII of the Public Health Service

20 Act.

21 (e) PERIOD OF COVERAGE.—

22 (1) IN GENERAL.—In the case of a qualifying

23 individual who enrolls under health coverage during

24 an open enrollment period under this section, cov25 erage shall begin on such date (not later than the
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1 first day of the first month that begins at least 15

2 days after the date of enrollment) as the Secretary

3 shall specify, consistent with this subsection.

4 (2) COVERAGE OF FAMILY MEMBERS.—In the

5 case of an open enrollment period described in sub6 section (b)(3), (b)(4), or (d)(4), the Secretary shall

7 provide for coverage of family members to begin as

8 soon as possible on or after the date of the event

9 that gives rise to the special enrollment period (or,

10 in the case of birth or adoption, as of the date of

11 birth or adoption).

12 SEC. 1006. TREATMENT OF RELIGIOUS FRATERNAL BENE13 FIT SOCIETIES.

14 (a) IN GENERAL.—Sections 1001 and 1002 shall not

15 apply to any religious fraternal benefit society in existence

16 as of September 1993, which—

17 (1) bears the risk of providing insurance to its

18 members, and

19 (2) is an organization described in section

20 501(c)(8) of the Internal Revenue Code of 1986

21 which is exempt from taxation under section 501(a)

22 of such Code.

23 (b) DEFINITION.—In subsection (a), the term ‘‘fra24 ternal benefit society’’ includes any affiliate or wholly25 owned subsidiary of a fraternal benefit society, including
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1 a health maintenance organization insofar as it is utilized

2 directly or indirectly to provide managed care to members

3 of the society.

4 PART 2—PROVISION OF BENEFITS

5 SEC. 1011. STANDARDS FOR MANAGED CARE ARRANGE6 MENTS.

7 (a) APPLICATION OF REQUIREMENTS.—Each group

8 health plan, and each carrier providing health insurance

9 coverage, that provides for health care through a managed

10 care arrangement (as defined in section 1903(12)(A))

11 shall comply with the applicable requirements of this sec12 tion.

13 (b) SCOPE OF ARRANGEMENTS WITH PROVIDERS.—

14 (1) ACCESS TO CARE.—The entity providing for

15 a managed care arrangement with respect to health

16 coverage shall enter into such agreements with

17 health care providers (including primary and spe18 cialty providers, such as providers for children) or

19 have such other arrangements as may be necessary

20 to assure that covered individuals have reasonably

21 prompt access through the entity’s provider network

22 to all items and services contained in the package of

23 benefits for which coverage is provided (including ac24 cess to emergency services on a 24-hour basis where

25 medically necessary), in a manner that assures the
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1 continuity of the provision of such items and serv2 ices. Such access shall take into account the diverse

3 needs of enrollees and proximity to the workplaces

4 or residences of enrollees.

5 (2) ACCESS TO CENTERS OF EXCELLENCE.—

6 (A) IN GENERAL.—The entity providing

7 for a managed care arrangement under health

8 coverage shall demonstrate that covered individ9 uals (including individuals with chronic dis10 eases) have access through the entity’s provider

11 network to specialized treatment expertise.

12 Such entity may demonstrate such access

13 through contracts with centers of excellence de14 scribed in subparagraph (B).

15 (B) DESIGNATION OF CENTERS OF EXCEL16 LENCE.—The Secretary shall establish a proc17 ess for the designation of facilities, including

18 children’s hospitals and other pediatric facili19 ties, as centers of excellence for purposes of this

20 paragraph. A facility may not be designated un21 less the facility is determined—

22 (i) to provide specialty care,

23 (ii) to deliver care for complex cases

24 requiring specialized treatment and for in25 dividuals with chronic diseases, and
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1 (iii) to meet other requirements that

2 may be established by the Secretary relat3 ing to specialized education and training of

4 health professionals, participation in peer5 reviewed research, or treatment of patients

6 from outside the geographic area of the fa7 cility.

8 (3) CHOICE OF PERSONAL PHYSICIAN.—The en9 tity providing for a managed care arrangement

10 under health coverage shall permit each enrollee to

11 choose a personal physician from among available

12 participating physicians and change that selection as

13 appropriate.

14 (c) PROVISION OF EMERGENCY CARE SERVICES.—

15 (1) IN GENERAL.—The entity providing for a

16 managed care arrangement under health coverage

17 must cover medically necessary emergency care serv18 ices provided to covered individuals (including trau19 ma services, such as those provided by designated

20 trauma centers), without regard to whether or not

21 the provider furnishing such services has a contrac22 tual (or other) arrangement with the entity to pro23 vide items or services to covered individuals and, in

24 the case of services furnished for the treatment of

25 an emergency medical condition (as defined in sec-
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1 tion 1867(e)(1) of the Social Security Act), without

2 regard to prior authorization.

3 (2) DESIGNATED TRAUMA CENTERS DE4 FINED.—In paragraph (1), the term ‘‘designated

5 trauma center’’—

6 (A) has the meaning given such term in

7 section 1231 of the Public Health Service Act,

8 and

9 (B) includes (for years prior to 2001) a

10 trauma center that—

11 (i) is located in a State that has not

12 designated trauma centers under section

13 1213 of such Act, and

14 (ii) the Secretary finds it meets the

15 standards under such section to be a des16 ignated trauma center.

17 (d) DUE PROCESS STANDARDS RELATING TO PRO18 VIDER NETWORKS.—

19 (1) STANDARDS FOR SELECTION OF PROVIDERS

20 FOR NETWORK.—

21 (A) ESTABLISHMENT.—The entity provid22 ing for a managed care arrangement under

23 health coverage shall establish standards (in24 cluding criteria for quality, efficiency,

25 credentialing, and services) to be used by the
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1 entity for contracting with health care providers

2 with respect to the entity’s provider network.

3 Such standards shall be established in consulta4 tion with providers who are members of the net5 work, including providers who are members of

6 the advisory committee established under para7 graph (3)(D).

8 (B) DISTRIBUTION OF INFORMATION.—

9 Descriptive information regarding these stand10 ards and criteria shall be made available to en11 rollees, providers who are members of the net12 work, and prospective enrollees and prospective

13 participating providers, including notice of when

14 applications for participation will be accepted.

15 (C) NOTICE OF DENIALS.—The entity

16 shall provide written notice to the provider of

17 any denial of an application to participate in

18 the provider network.

19 (2) TERMINATION PROCESS.—

20 (A) IN GENERAL.—The entity may not ter21 minate or refuse to renew a participation agree22 ment with a provider in the entity’s provider

23 network unless the entity provides written noti24 fication to the provider of the entity’s decision

25 to terminate or refuse to renew the agreement.
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1 The notification shall include a statement of the

2 reasons for the entity’s decision, consistent with

3 the standards established under paragraph (1).

4 (B) TIMING OF NOTIFICATION.—The en5 tity shall provide the notification required under

6 subparagraph (A) at least 45 days prior to the

7 effective date of the termination or expiration of

8 the agreement (whichever is applicable). The

9 previous sentence shall not apply if failure to

10 terminate the agreement prior to the deadline

11 would adversely affect the health or safety of a

12 covered individual.

13 (3) REVIEW PROCESS.—

14 (A) IN GENERAL.—The entity shall provide

15 a process under which the provider may request

16 a review of the entity’s decision to terminate or

17 refuse to renew the provider’s participation

18 agreement. Such review shall be conducted by a

19 group of individuals the majority of whom are

20 health care providers who are members of the

21 entity’s provider network or employees of the

22 entity, and who are members of the same pro23 fession as the provider who requests the review.

24 (B) COUNSEL.—If the provider requests in

25 advance, the entity shall permit an attorney
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1 representing the provider to be present at the

2 provider’s review.

3 (C) REVIEW ADVISORY.—The findings and

4 conclusions of a review under this paragraph

5 may be advisory and non-binding.

6 (D) ADVISORY COMMITTEE.—The entity

7 shall establish an advisory committee of partici8 pating physicians with whom it consults, on an

9 advisory basis, on the termination of physicians

10 who have been participating in the provider net11 work. In making recommendations to the en12 tity, such an advisory committee shall consider

13 such features of the physician’s practice, relat14 ing to case mix and age of patients, as may

15 lead the physician to have higher than expected

16 treatment costs for the patients of the physician

17 who are enrollees.

18 (4) CONSTRUCTION.—Nothing in this sub19 section shall be construed to affect any other provi20 sion of law that provides an appeals process or other

21 form of relief to a provider of health care services

22 or an entity providing for a managed care arrange23 ment.

24 (e) NO REFERRAL REQUIRED FOR OBSTETRICS AND

25 GYNECOLOGY.—A carrier or group health plan may not
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1 require an individual to obtain a referral from a physician

2 in order to obtain covered items and services from a physi3 cian who specializes in obstetrics and gynecology.

4 SEC. 1012. UTILIZATION REVIEW.

5 (a) ESTABLISHMENT OF STANDARDS BY SEC6 RETARY.—The Secretary shall establish standards for uti7 lization review programs, consistent with subsection (c),

8 and shall periodically review and update such standards

9 to reflect changes in the delivery of health care services.

10 The Secretary shall establish such standards in consulta11 tion with appropriate parties.

12 (b) REQUIRING REVIEW TO MEET STANDARDS.—A

13 group health plan or carrier providing health insurance

14 coverage may not deny coverage of or payment for items

15 and services on the basis of a utilization review program

16 unless the program meets the standards established by the

17 Secretary under this section.

18 (c) REQUIREMENTS FOR STANDARDS.—Under the

19 standards established under subsection (a)—

20 (1) individuals performing utilization review

21 may not receive financial compensation based upon

22 the number of denials of coverage;

23 (2) negative determinations of the medical ne24 cessity or appropriateness of services or the site at
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1 which services are furnished may be made only by

2 clinically qualified personnel;

3 (3) the utilization review program shall provide

4 for a process under which an enrollee or provider

5 may obtain timely review of a denial of coverage, in6 cluding upon request a review conducted by the med7 ical director of the carrier or plan or a physician

8 designated by the carrier or plan;

9 (4) utilization review shall be conducted in ac10 cordance with uniformly applied standards that are

11 based on currently available medical evidence; and

12 (5) providers shall participate in the develop13 ment of the utilization review program.

14 (d) PREEMPTION.—For provision preempting State

15 laws relating to utilization review, see section 6103.

16 SEC. 1013. REQUIREMENTS FOR ARRANGEMENTS WITH ES17 SENTIAL COMMUNITY PROVIDERS.

18 (a) REQUIREMENT.—

19 (1) IN GENERAL.—Subject to subsection (d),

20 each group health plan and each carrier providing

21 qualified health coverage to individuals residing in a

22 fair rating area (or service area in the case of a car23 rier that is a health maintenance organization) shall,

24 with respect to at least one essential community pro25 vider (as defined in subsection (c)) within each class
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1 of such a provider (as described in paragraph (2))

2 located within the area, enter into a written provider

3 participation agreement (described in subsection (b))

4 with the provider, unless all the providers in the

5 class have declined to enter into such a contract with

6 the plan or carrier.

7 (2) CLASS DEFINED.—For purposes of the

8 paragraph (1), providers described in each para9 graph of subsection (c) shall constitute a separate

10 ‘‘class’’ of providers.

11 (b) PARTICIPATION AGREEMENT.—A participation

12 agreement between a group health plan or carrier and an

13 essential community provider under this subsection shall

14 provide that the plan or carrier agrees to treat the pro15 vider in accordance with terms and conditions at least as

16 favorable as those that are applicable to other providers

17 with a participation agreement with the plan or carrier

18 with respect to the scope of services for which payment

19 is made by the plan or carrier to the provider.

20 (c) ESSENTIAL COMMUNITY PROVIDERS DE21 SCRIBED.—In this section, an ‘‘essential community pro22 vider’’ means any of the following:

23 (1) CERTAIN MEDICARE DISPROPORTIONATE

24 SHARE HOSPITALS.—A hospital—
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1 (A) described in section

2 1886(d)(5)(F)(i)(II) of the Social Security Act;

3 (B) described in section

4 1886(d)(5)(F)(iv)(I) of such Act with a dis5 proportionate patient percentage (as defined in

6 section 1886(d)(5)(F)(vi) of such Act) greater

7 than 20.2; or

8 (C) that would be described in subpara9 graph (A) or (B) if the hospital were a sub10 section (d) hospital (as defined in section

11 1886(d)(1)(B) of such Act).

12 (2) SOLE COMMUNITY HOSPITALS.—A sole com13 munity hospital (as described in section

14 1886(d)(5)(D)(iii) of such Act).

15 (3) MEDICARE-DEPENDENT, SMALL RURAL

16 HOSPITALS.—A medicare-dependent, small rural

17 hospital (as described in section 1886(d)(5)(G)(iii)

18 of such Act), or a hospital that would be a medicare19 dependent, small rural hospital if the hospital were

20 a subsection (d) hospital (as defined in section

21 1886(d)(1)(B) of such Act).

22 (4) FEDERALLY QUALIFIED HEALTH CEN23 TERS.—A Federally qualified health center (as de24 fined in section 1861(aa)(4) of the Social Security

25 Act) or an entity that would be such a center but
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1 for its failure to meet the requirement described in

2 section 329(f)(2)(G)(i) of the Public Health Service

3 Act or the requirement described in section

4 330(e)(3)(G)(i) of such Act (relating to the composi5 tion of the entity’s governing board).

6 (5) RURAL HEALTH CLINICS.—A rural health

7 clinic (as defined in section 1861(aa)(2) of the So8 cial Security Act).

9 (6) LOCAL HEALTH DEPARTMENTS.—A health

10 department of a unit of State or local government

11 which provides health services directly to individuals.

12 (7) CERTAIN CHILDREN’S HOSPITALS.—A hos13 pital whose inpatients are predominantly individuals

14 under 18 years of age and that would be described

15 in subparagraph (A) or (B) of paragraph (1) if the

16 hospital were a subsection (d) hospital (as defined in

17 section 1886(d)(1)(B) of the Social Security Act)

18 with more than 100 beds.

19 (d) SUNSET.—The requirement of subsection (a)

20 shall not apply to health coverage provided after December

21 31, 1999.

22 SEC. 1014. MEDICAL SAVINGS ACCOUNTS.

23 (a) IN GENERAL.—Chapter 79 of the Internal Reve24 nue Code of 1986 is amended by adding at the end the

25 following new section:
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1 ‘‘SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

2 ‘‘(a) GENERAL RULE.—For purposes of this title, the

3 term ‘medical savings account’ means a trust created or

4 organized in the United States for the exclusive benefit

5 of an individual or his beneficiaries, but only if the written

6 instrument creating the trust meets the following require7 ments:

8 ‘‘(1) Except in the case of a rollover contribu9 tion described in subsection (d)(3), no contribution

10 will be accepted unless—

11 ‘‘(A) it is in cash, and

12 ‘‘(B) such individual is an eligible employee

13 for the period for which such contribution is

14 made.

15 ‘‘(2) The trustee is a bank (as defined in sec16 tion 408(n)), insurance company (as defined in sec17 tion 816), or such other person who demonstrates to

18 the satisfaction of the Secretary that the manner in

19 which such other person will administer the trust

20 will be consistent with the requirements of this sec21 tion.

22 ‘‘(3) No part of the trust funds will be invested

23 in life insurance contracts.

24 ‘‘(4) The interest of an individual in the bal25 ance of the account is nonforfeitable.
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1 ‘‘(5) The assets of the trust will not be commin2 gled with other property except in a common trust

3 fund or common investment fund.

4 ‘‘(b) ELIGIBLE EMPLOYEE.—For purposes of this

5 section—

6 ‘‘(1) IN GENERAL.—The term ‘eligible em7 ployee’ means any employee who has high-deductible

8 coverage (as defined in section 1103 of the Biparti9 san Health Care Reform Act of 1994) offered by the

10 employer.

11 ‘‘(2) EXCEPTION.—An employee shall be treat12 ed as not being an eligible employee for any calendar

13 year if, for any month during such year, it is reason14 ably expected that such employee—

15 ‘‘(A) will have adjusted gross income that

16 is less than 100 percent of the income official

17 poverty line (as determined by the Director of

18 the Office of Management and Budget) for a

19 family of the size involved; or

20 ‘‘(B) is an AFDC recipient or SSI recipi21 ent.

22 ‘‘(3) DEFINITIONS.—For purposes of paragraph

23 (2)—

24 ‘‘(A) AFDC RECIPIENT.—The term

25 ‘AFDC recipient’ means, for a month, an indi-
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1 vidual who is receiving aid or assistance under

2 any plan of the State approved under title I, X,

3 XIV, or XVI, or part A or part E of title IV,

4 of the Social Security Act for the month.

5 ‘‘(B) SSI RECIPIENT.—The term ‘SSI re6 cipient’ means, for a month, an individual—

7 ‘‘(i) with respect to whom supple8 mental security income benefits are being

9 paid under title XVI of the Social Security

10 Act for the month,

11 ‘‘(ii) who is receiving a supplementary

12 payment under section 1616 of such Act or

13 under section 212 of Public Law 93–66 for

14 the month,

15 ‘‘(iii) who is receiving monthly bene16 fits under section 1619(a) of the Social Se17 curity Act (whether or not pursuant to sec18 tion 1616(c)(3) of such Act) for the

19 month, or

20 ‘‘(iv) who is treated under section

21 1619(b) of the Social Security Act as re22 ceiving supplemental security income bene23 fits in a month for purposes of title XIX

24 of such Act.

25 ‘‘(c) TAX TREATMENT OF ACCOUNTS.—
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1 ‘‘(1) ACCOUNT TAXED AS GRANTOR TRUST.—

2 ‘‘(A) IN GENERAL.—Except as provided in

3 subparagraph (B), the account beneficiary of a

4 medical savings account shall be treated for

5 purposes of this title as the owner of such ac6 count and shall be subject to tax thereon in ac7 cordance with subpart E of part I of subchapter

8 J of this chapter (relating to grantors and oth9 ers treated as substantial owners).

10 ‘‘(B) TREATMENT OF CAPITAL LOSSES.—

11 With respect to assets held in a medical savings

12 account, any capital loss for a taxable year

13 from the sale or exchange of such an asset shall

14 be allowed only to the extent of capital gains

15 from such assets for such taxable year. Any

16 capital loss which is disallowed under the pre17 ceding sentence shall be treated as a capital

18 loss from the sale or exchange of such an asset

19 in the next taxable year. For purposes of this

20 subparagraph, all medical savings accounts of

21 the account beneficiary shall be treated as 1 ac22 count.

23 ‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN24 GAGES IN PROHIBITED TRANSACTION.—
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1 ‘‘(A) IN GENERAL.—If, during any taxable

2 year of the account beneficiary, such beneficiary

3 engages in any transaction prohibited by section

4 4975 with respect to the account, the account

5 shall cease to be a medical savings account as

6 of the first day of such taxable year.

7 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

8 ALL ITS ASSETS.—In any case in which any ac9 count ceases to be a medical savings account by

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

11 any taxable year, subsection (d) shall be applied

12 as if—

13 ‘‘(i) there were a distribution on such

14 first day in an amount equal to the fair

15 market value (on such first day) of all as16 sets in the account (on such first day), and

17 ‘‘(ii) no portion of such distribution

18 were used to pay qualified medical ex19 penses.

20 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU21 RITY.—If, during any taxable year, the account ben22 eficiary uses the account or any portion thereof as

23 security for a loan, the portion so used is treated as

24 distributed and not used to pay qualified medical ex25 penses.
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1 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

2 ‘‘(1) INCLUSION OF AMOUNTS NOT USED FOR

3 QUALIFIED MEDICAL EXPENSES.—

4 ‘‘(A) IN GENERAL.—Any amount paid or

5 distributed out of a medical savings account

6 which is not used exclusively to pay the quali7 fied medical expenses of the account beneficiary

8 or of the spouse or dependents (as defined in

9 section 152) of such beneficiary shall be in10 cluded in the gross income of such beneficiary

11 to the extent such amount does not exceed the

12 excess of—

13 ‘‘(i) the aggregate contributions to

14 such account which were not includible in

15 gross income by reason of section 106(2),

16 over

17 ‘‘(ii) the aggregate prior payments or

18 distributions from such account which were

19 includible in gross income under this para20 graph.

21 ‘‘(B) SPECIAL RULES.—For purposes of

22 subparagraph (A)—

23 ‘‘(i) all medical savings accounts of

24 the account beneficiary shall be treated as

25 1 account,
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1 ‘‘(ii) all payments and distributions

2 during any taxable year shall be treated as

3 1 distribution, and

4 ‘‘(iii) any distribution of property

5 shall be taken into account at its fair mar6 ket value on the date of the distribution.

7 ‘‘(2) PENALTY FOR DISTRIBUTIONS NOT USED

8 FOR QUALIFIED MEDICAL EXPENSES.—

9 ‘‘(A) IN GENERAL.—The tax imposed by

10 chapter 1 on the account beneficiary for any

11 taxable year in which there is a payment or dis12 tribution from a medical savings account of

13 such beneficiary which is includible in gross in14 come under paragraph (1) shall be increased by

15 100 percent of the amount which is so includ16 ible.

17 ‘‘(B) EXCEPTION FOR DISTRIBUTIONS

18 AFTER AGE 65.—Subparagraph (A) shall not

19 apply to any payment or distribution after the

20 date on which the account beneficiary attains

21 age 65.

22 ‘‘(C) EXCEPTION FOR DISABILITY OR

23 DEATH.—Subparagraph (A) shall not apply if

24 the payment or distribution is made after the
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1 account beneficiary becomes disabled within the

2 meaning of section 72(m)(7) or dies.

3 ‘‘(3) ROLLOVER CONTRIBUTION.—An amount is

4 described in this paragraph as a rollover contribu5 tion if it meets the requirements of subparagraphs

6 (A) and (B).

7 ‘‘(A) IN GENERAL.—Paragraph (1) shall

8 not apply to any amount paid or distributed

9 from a medical savings account to the account

10 beneficiary to the extent the amount received is

11 paid into a medical savings account for the ben12 efit of such beneficiary not later than the 60th

13 day after the day on which he receives the pay14 ment or distribution.

15 ‘‘(B) LIMITATION.—This paragraph shall

16 not apply to any amount described in subpara17 graph (A) received by an individual from a

18 medical savings account if, at any time during

19 the 1-year period ending on the day of such re20 ceipt, such individual received any other amount

21 described in subparagraph (A) from a medical

22 savings account which was not includible in his

23 gross income because of the application of this

24 paragraph.
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1 ‘‘(4) COORDINATION WITH MEDICAL EXPENSE

2 DEDUCTION.—For purposes of section 213, any pay3 ment or distribution out of a medical savings ac4 count for qualified medical expenses shall not be

5 treated as an expense paid for medical care to the

6 extent of the amount of such payment or distribu7 tion which is excludable from gross income solely by

8 reason of paragraph (1)(A).

9 ‘‘(e) DEFINITIONS.—For purposes of this section—

10 ‘‘(1) QUALIFIED MEDICAL EXPENSES.—The

11 term ‘qualified medical expenses’ means any expense

12 for medical care (as defined in section 213(d)); ex13 cept that such term shall not include any amount

14 paid for insurance.

15 ‘‘(2) ACCOUNT BENEFICIARY.—The term ‘ac16 count beneficiary’ means the individual for whose

17 benefit the medical savings account is maintained.

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

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

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

21 bank (as defined in section 408(n)), insurance com22 pany (as defined in section 816), or another person

23 who demonstrates to the satisfaction of the Sec24 retary that the manner in which he will administer
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1 the account will be consistent with the requirements

2 of this section, and

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

4 fact that it is not a trust, constitute a medical sav5 ings account described in subsection (a).

6 For purposes of this title, in the case of a custodial ac7 count treated as a trust by reason of the preceding sen8 tence, the custodian of such account shall be treated as

9 the trustee thereof.

10 ‘‘(g) REPORTS.—The trustee of a medical savings ac11 count shall keep such records and make such reports re12 garding such account to the Secretary and to the account

13 beneficiary with respect to contributions, distributions,

14 and such other matters as the Secretary may require

15 under regulations. The reports required by this subsection

16 shall be filed at such time and in such manner and fur17 nished to such individuals at such time and in such man18 ner as may be required by such regulations.’’

19 (b) INCOME AND EMPLOYMENT TAX TREATMENT OF

20 EMPLOYER CONTRIBUTIONS.—

21 (1) EMPLOYER PAYMENTS EXCLUDED FROM

22 GROSS INCOME.—The text of section 106 of such

23 Code is amended to read as follows:

24 ‘‘Gross income of an employee does not include—
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1 ‘‘(1) employer-provided coverage under an acci2 dent or health plan, and

3 ‘‘(2) employer contributions to any medical sav4 ings account (as defined in section 7705) of an eligi5 ble employee, but only to the extent that the amount

6 contributed does not exceed the excess of premium

7 for standard coverage over the premium for high-de8 ductible coverage (as such terms are defined in sec9 tion 1903 of the Bipartisan Health Care Reform Act

10 of 1994).’’

11 (2) EMPLOYER PAYMENTS EXCLUDED FROM

12 EMPLOYMENT TAX BASE.—

13 (A) SOCIAL SECURITY TAXES.—

14 (i) Subsection (a) of section 3121 of

15 such Code is amended by striking ‘‘or’’ at

16 the end of paragraph (20), by striking the

17 period at the end of paragraph (21) and

18 inserting ‘‘; or’’, and by inserting after

19 paragraph (21) the following new para20 graph:

21 ‘‘(22) any payment made to or for the benefit

22 of an employee if at the time of such payment it is

23 reasonable to believe that the employee will be able

24 to exclude such payment from income under section

25 106(2).’’
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1 (ii) Subsection (a) of section 209 of

2 the Social Security Act is amended by

3 striking ‘‘or’’ at the end of paragraph (18),

4 by striking the period at the end of para5 graph (19) and inserting ‘‘; or’’, and by in6 serting after paragraph (19) the following

7 new paragraph:

8 ‘‘(20) any payment made to or for the benefit

9 of an employee if at the time of such payment it is

10 reasonable to believe that the employee will be able

11 to exclude such payment from income under section

12 106(2) of the Internal Revenue Code of 1986.’’

13 (B) RAILROAD RETIREMENT TAX.—Sub14 section (e) of section 3231 of such Code is

15 amended by adding at the end the following

16 new paragraph:

17 ‘‘(10) MEDICAL SAVINGS ACCOUNT CONTRIBU18 TIONS.—The term ‘compensation’ shall not include

19 any payment made to or for the benefit of an em20 ployee if at the time of such payment it is reason21 able to believe that the employee will be able to ex22 clude such payment from income under section

23 106(2).’’

24 (C) UNEMPLOYMENT TAX.—Subsection (b)

25 of section 3306 of such Code is amended by
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1 striking ‘‘or’’ at the end of paragraph (15), by

2 striking the period at the end of paragraph (16)

3 and inserting ‘‘; or’’, and by inserting after

4 paragraph (16) the following new paragraph:

5 ‘‘(17) any payment made to or for the benefit

6 of an employee if at the time of such payment it is

7 reasonable to believe that the employee will be able

8 to exclude such payment from income under section

9 106(2).’’

10 (D) WITHHOLDING TAX.—Subsection (a)

11 of section 3401 of such Code is amended by

12 striking ‘‘or’’ at the end of paragraph (19), by

13 striking the period at the end of paragraph (20)

14 and inserting ‘‘; or’’, and by inserting after

15 paragraph (20) the following new paragraph:

16 ‘‘(21) any payment made to or for the benefit

17 of an employee if at the time of such payment it is

18 reasonable to believe that the employee will be able

19 to exclude such payment from income under section

20 106(2).’’

21 (c) TECHNICAL AMENDMENTS.—

22 (1) TAX ON PROHIBITED TRANSACTIONS.—Sec23 tion 4975 of such Code (relating to prohibited trans24 actions) is amended—
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1 (A) by adding at the end of subsection (c)

2 the following new paragraph:

3 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC4 COUNTS.—An individual for whose benefit a medical

5 savings account (within the meaning of section

6 7705) is established shall be exempt from the tax

7 imposed by this section with respect to any trans8 action concerning such account (which would other9 wise be taxable under this section) if, with respect

10 to such transaction, the account ceases to be a medi11 cal savings account by reason of the application of

12 section 7705(c)(2)(A) to such account.’’, and

13 (B) by inserting ‘‘or a medical savings ac14 count described in section 7705’’ in subsection

15 (e)(1) after ‘‘described in section 408(a)’’.

16 (2) FAILURE TO PROVIDE REPORTS ON MEDI17 CAL SAVINGS ACCOUNTS.—Section 6693 of such

18 Code (relating to failure to provide reports on indi19 vidual retirement account or annuities) is amend20 ed—

21 (A) by inserting ‘‘OR ON MEDICAL SAV22 INGS ACCOUNTS’’ after ‘‘ANNUITIES’’ in the

23 heading of such section, and

24 (B) by adding at the end of subsection (a)

25 the following: ‘‘The person required by section
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1 7705(g) to file a report regarding a medical

2 savings account at the time and in the manner

3 required by such section shall pay a penalty of

4 $50 for each failure unless it is shown that

5 such failure is due to reasonable cause.’’

6 (3) CLERICAL AMENDMENTS.—

7 (A) The table of sections for chapter 79 of

8 such Code is amended by adding at the end the

9 following:

‘‘Sec. 7705. Medical savings accounts.’’

10 (B) The table of sections for subchapter B

11 of chapter 68 of such Code is amended by in12 serting ‘‘or on medical savings accounts’’ after

13 ‘‘annuities’’ in the item relating to section

14 6693.

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

16 this section shall apply to taxable years beginning after

17 December 31, 1996.

18 PART 3—FAIR RATING PRACTICES

19 SEC. 1021. USE OF FAIR RATING PRACTICES.

20 (a) USE OF FAIR RATING PRACTICES.—The pre21 mium rate established by a carrier for health insurance

22 coverage in the individual/small group market (including

23 the premium rate for coverage for a small employer

24 through a multiple employer welfare arrangement that is

25 fully-insured) may not vary except by the following:
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1 (1) AGE.—By age, based on classes of age es2 tablished by the Secretary, in consultation with the

3 NAIC, consistent with subsection (b).

4 (2) GEOGRAPHIC AREA.—By geographic area,

5 as identified by a State consistent with subsection

6 (c).

7 (3) FAMILY CLASS.—By family class, based on

8 the following 4 classes of family coverage: individual,

9 individual with one or more children, married couple

10 without a child, and married couple with one or

11 more children.

12 (4) BENEFIT DESIGN.—By benefit design of

13 coverage, including by type of coverage, such as

14 standard coverage and high-deductible coverage, and

15 by type of coverage option (described in section

16 1903(15)) with respect to standard coverage.

17 (5) ADMINISTRATIVE CATEGORIES.—By per18 mitted expense category, based on differences in ex19 penses among such categories, consistent with sub20 section (d).

21 The premiums shall be established for the different benefit

22 designs (including standard coverage and high-deductible

23 coverage) based on the actuarial value of the coverage for

24 the population of the individual/small group market in the

25 fair rating area, without regard to the distribution of such
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1 population among the types of coverage or type of cov2 erage options.

3 (b) LIMITATION ON VARIATION BY AGE.—

4 (1) IN GENERAL.—Any variation in premium

5 rates by age under subsection (a)(1) for age classes

6 of individuals under 65 years of age may not result

7 in the ratio of the highest age rate to the lowest age

8 rate exceeding the limiting ratio described in para9 graph (2).

10 (2) LIMITING RATIO.—For purposes of para11 graph (1), the limiting ratio described in this para12 graph is—

13 (A) 4-to-1, for premiums for months in

14 1997,

15 (B) 3.67-to-1, for premiums for months in

16 1998,

17 (C) 3.33-to-1, for premiums for months in

18 1999, and

19 (D) 3-to-1, for premiums for months in

20 2000 and any succeeding year.

21 (3) SEPARATE AGE CLASSES FOR INDIVIDUALS

22 65 YEARS OF AGE OR OLDER.—The Secretary shall

23 establish one or more separate age classes for indi24 viduals 65 years of age or older.
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1 (4) PREEMPTION.—For preemption of State

2 laws relating to establishment of premium rates, see

3 section 6105.

4 (c) GEOGRAPHIC AREA VARIATIONS.—For purposes

5 of subsection (a)(2), a State—

6 (1) may not identify an area that divides a 3-

7 digit zip code, a county, or all portions of a metro8 politan statistical area,

9 (2) shall not permit premium rates for coverage

10 offered in a portion of an interstate metropolitan

11 statistical area to vary based on the State in which

12 the coverage is offered, and

13 (3) may, upon agreement with one or more ad14 jacent States, identify multi-state geographic areas

15 consistent with paragraphs (1) and (2).

16 (d) ADMINISTRATIVE VARIATIONS.—

17 (1) EXPENSE CATEGORIES.—Expense cat18 egories shall be established under subsection (a)(5)

19 by a carrier in a manner that only reflects dif20 ferences based on marketing, commissions, and simi21 lar expenses. Such categories shall take into account

22 health plan purchasing organizations.

23 (2) LIMITATION ON VARIATIONS.—The vari24 ation provided among expense categories under sub25 section (a)(5) may not result in a premium for the
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1 highest expense category exceeding 120 percent of

2 the premium for the lowest expense category.

3 (e) PREMIUM RATING IN GROUP HEALTH PLANS.—

4 The premium rate established under a group health plan

5 for health insurance coverage may not vary within a bene6 fit design except by the factors described in subsection (a)

7 and subject to the limitation specified in subsection (b).

8 (f) ACTUARIAL CERTIFICATION.—Each carrier that

9 offers health insurance coverage in a State shall file annu10 ally with the State commissioner of insurance a written

11 statement by a member of the American Academy of Actu12 aries (or other individual acceptable to the commissioner)

13 that, based upon an examination by the individual which

14 includes a review of the appropriate records and of the

15 actuarial assumptions of the carrier and methods used by

16 the carrier in establishing premium rates for applicable

17 health insurance coverage—

18 (1) the carrier is in compliance with the appli19 cable provisions of this section, and

20 (2) the rating methods are actuarially sound.

21 Each such carrier shall retain a copy of such statement

22 for examination at its principal place of business.

23 (g) CONSTRUCTION.—The provisions of this section

24 shall apply to premium rates established by carriers for

25 multiple employer welfare arrangements that are fully-in-
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1 sured or for fully-insured coverage offered with respect to

2 individuals and small employers in the individual/small

3 group market. Such premium rates shall apply based on

4 the fair rating area in which the covered individual or em5 ployee resides to reflect the population in the individual/

6 small group market.

7 SEC. 1022. COORDINATION WITH PREMIUM ASSISTANCE

8 CERTIFICATE PROGRAM.

9 Each carrier or group health plan providing qualified

10 health coverage shall accept and apply (as a reduction

11 against premiums otherwise imposed) any premium cer12 tificate issued under a State premium assistance program

13 under part A of title XXI of the Social Security Act.

14 SEC. 1023. ESTABLISHMENT OF RISK ADJUSTMENT MECHA15 NISMS.

16 (a) ESTABLISHMENT OF STANDARDS.—

17 (1) DEVELOPMENT OF MODELS.—

18 (A) IN GENERAL.—The Secretary shall re19 quest the NAIC to develop, within 9 months

20 after the date of the enactment of this Act and

21 in consultation with the American Academy of

22 Actuaries, a model risk adjustment system com23 posed of one or more risk adjustment mecha24 nisms under which premiums applicable to

25 health insurance coverage in the individual/
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1 small group market and coverage under small

2 employer pooling arrangements and under mul3 tiple employer welfare arrangements that are

4 fully insured (without regard to whether such

5 an arrangement is offered through an associa6 tion) would be adjusted to take into account

7 such factors as may be appropriate to predict

8 the future need and the efficient use of services

9 by covered individuals in the market. Such fac10 tors may include the age, gender, geographic

11 residence, health status, or other demographic

12 characteristics of individuals enrolled in such

13 plans and shall include consideration of enroll14 ment of a disproportionate share of individuals

15 who enroll during the initial open enrollment

16 period under section 1005(b)(1).

17 (B) PROMULGATION AS PROPOSED

18 RULE.—If the NAIC develops such model with19 in such period, the Secretary shall publish the

20 model as a proposed rule under section 553 of

21 title 5, United States Code. If the NAIC has

22 not developed such model within such period,

23 the Secretary shall publish (not later than 60

24 days after the end of such period) a proposed
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1 rule that specifies a proposed model that pro2 vides for effective risk adjustment mechanisms.

3 (2) RULE MAKING PROCESS.—The Secretary

4 shall provide for a period (described in section

5 553(c) of title 5, United States Code) of not less

6 than 30 days for public comment on a proposed rule

7 published under paragraph (1)(B). The Secretary

8 shall publish a final rule, by not later than January

9 1, 1996, that specifies risk adjustment mechanisms

10 that the Secretary finds are effective for purposes of

11 carrying out this section. Such rule shall include

12 models developed by the NAIC if the Secretary finds

13 that such models provide for effective risk adjust14 ment mechanisms.

15 (3) MODIFICATION.—The Secretary, at the re16 quest of the NAIC or otherwise, may by regulation

17 modify the model risk adjustment system established

18 under this subsection.

19 (b) IMPLEMENTATION OF RISK ADJUSTMENT SYS20 TEM.—Each State shall establish and maintain a risk ad21 justment system that conforms with the model established

22 under this section by not later than January 1, 1997. A

23 State may establish and maintain such a system jointly

24 with one or more other States.
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1 (c) APPLICATION TO SMALL EMPLOYER POOLING

2 ARRANGEMENTS AND FULLY-INSURED MEWAS.—As re3 quired under sections 704(b)(6)(B) and 711(c)(1)(B) of

4 the Employee Retirement Income Security Act of 1974,

5 as added by section 1401 of this Act, this section applies

6 to small employer pooling arrangements and to multiple

7 employer welfare arrangements that are fully insured

8 (without regard to whether such an arrangement is offered

9 through an association), with respect to individuals cov10 ered in the individual/small employer market, in such form

11 and manner as the Secretary of Labor prescribes in regu12 lation, in consultation with the Secretary of Health and

13 Human Services. In applying this section to a small em14 ployer pooling arrangement, the regulation shall provide

15 that assessments and credits under this section shall be

16 provided through coordination with an insurer that pro17 vides excess/stop loss coverage (as defined in section 701

18 of such Act) with respect to the arrangement.

19 PART 4—CONSUMER PROTECTIONS

20 SEC. 1031. REQUIREMENT FOR PROVISION OF INFORMA21 TION.

22 (a) CARRIERS.—

23 (1) IN GENERAL.—Each carrier that offers

24 health insurance coverage to small employers (or eli25 gible employees of small employers) or qualifying in-
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1 dividuals must disclose to such prospective enrollees,

2 to brokers, and to health plan purchasing organiza3 tions the information that the Secretary may specify

4 relating to the performance of the carrier in provid5 ing such coverage, consistent with any quality meas6 ures established under section 5002, and relating to

7 differences between the coverage provided and the

8 most similar model benefit package established

9 under section 1104(b)(2). If a carrier offers to indi10 viduals or employers coverage the actuarial value of

11 which is more than the actuarial value for high-de12 ductible coverage but less than such value for stand13 ard coverage, the carrier must disclose to such em14 ployers or individuals detailed information on how

15 the coverage offered compares to any standard and

16 high-deductible coverage offered by the carrier to

17 such individuals and employers.

18 (2) MARKETING MATERIAL.—Each carrier that

19 provides any health insurance coverage in a State

20 shall file with the State those marketing materials

21 relating to the offer and sale of health insurance

22 coverage to be used for distribution before the mate23 rials are used. Such materials shall be in a uniform

24 format specified under the standards established

25 under section 1301.
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1 (b) GROUP HEALTH PLANS.—Each group health

2 plan that provides health coverage must disclose to enroll3 ees and potential enrollees information, similar to the in4 formation described in subsection (a), relating to perform5 ance of the plan in providing such coverage, consistent

6 with any quality measures established under section 5002,

7 and relating to differences between the coverage provided

8 and the most similar model benefit package established

9 under section 1104(b)(2).

10 (c) INFORMATION RELATING TO RISK ADJUST11 MENT.—Each carrier or group health plan providing cov12 erage in the individual/small group market (including

13 small employer pooling arrangements and certified mul14 tiple employer health plans that are fully insured, without

15 regard to whether such an arrangement or plan is offered

16 through an association) shall provide to the State such in17 formation as the State may require in order to carry out

18 section 1023 (relating to risk adjustment mechanisms).

19 SEC. 1032. PROHIBITION OF IMPROPER INCENTIVES.

20 (a) LIMITATION ON FINANCIAL INCENTIVES.—No

21 carrier that provides health insurance coverage may vary

22 the commission or financial or other remuneration to a

23 person based on the claims experience or health status of

24 individuals enrolled by or through the person.
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1 (b) NONDISCRIMINATION IN AGENT COMPENSA2 TION.—A carrier—

3 (1) may not vary or condition the compensation

4 provided to an agent or broker related to the sale or

5 renewal of health insurance coverage because of the

6 health status or claims experience of any individuals

7 enrolled with the carrier through the agent or

8 broker; and

9 (2) may not terminate, fail to renew, or limit its

10 contract or agreement of representation with an

11 agent or broker for any reason related to the health

12 status or claims experience of any individuals en13 rolled with the carrier through the agent or broker.

14 (c) PROHIBITION OF TIE-IN ARRANGEMENTS.—No

15 carrier that offers health insurance coverage may require

16 the purchase of any other insurance or product as a condi17 tion for the purchase of such coverage.

18 SEC. 1033. WRITTEN POLICIES AND PROCEDURES RESPECT19 ING ADVANCE DIRECTIVES.

20 A carrier and a group health plan offering health cov21 erage shall meet the requirements of section 1866(f) of

22 the Social Security Act (relating to maintaining written

23 policies and procedures respecting advance directives), in24 sofar as such requirements would apply to the carrier or

25 plan if the carrier or plan were an eligible organization.
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1 Subtitle B—Benefits

2 SEC. 1101. QUALIFIED HEALTH COVERAGE.

3 In this Act, the term ‘‘qualified health coverage’’

4 means health coverage that—

5 (1) provides—

6 (A) standard coverage consistent with sec7 tion 1102(a), or

8 (B) high-deductible coverage consistent

9 with section 1103; and

10 (2) meets other requirements of subtitle A ap11 plicable to the coverage and the carrier or group

12 health plan providing the coverage.

13 SEC. 1102. STANDARD COVERAGE.

14 (a) IN GENERAL.—Health insurance coverage is con15 sidered to provide standard coverage consistent with this

16 subsection and for preventive benefits under subsection

17 (b)(4) if—

18 (1) benefits under such coverage are provided

19 within at least each of the required categories of

20 benefits described in paragraph (1) of subsection (b)

21 and consistent with such subsection;

22 (2) the actuarial value of the benefits meets the

23 requirements of subsection (c), and

24 (3) the benefits comply with the minimum re25 quirements specified in subsection (d).
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1 (b) REQUIRED CATEGORIES OF COVERED BENE2 FITS.—

3 (1) IN GENERAL.—The categories of covered

4 benefits described in this paragraph are the types of

5 benefits specified in each of subparagraphs (A), (B),

6 (C), (D), (E), and (F) of paragraph (1), and sub7 paragraphs (E) and (F) of paragraph (2), of section

8 8904(a) of title 5, United States Code (relating to

9 types of benefits required to be in health insurance

10 offered to Federal employees).

11 (2) COVERAGE OF TREATMENTS IN APPROVED

12 RESEARCH TRIALS.—

13 (A) IN GENERAL.—Coverage of the routine

14 medical costs (as defined in subparagraph (B))

15 associated with the delivery of treatments shall

16 be considered to be medically appropriate if the

17 treatment is part of an approved research trial

18 (as defined in subparagraph (C)).

19 (B) ROUTINE MEDICAL COSTS DEFINED.—

20 In subparagraph (A), the term ‘‘routine medical

21 costs’’ means the cost of health services re22 quired to provide treatment according to the de23 sign of the trial, except those costs normally

24 paid for by other funding sources (as defined by

25 the Secretary). Such costs do not include the
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1 cost of the investigational agent, devices or pro2 cedures themselves, the costs of any nonhealth

3 services that might be required for a person to

4 receive the treatment, or the costs of managing

5 the research.

6 (C) APPROVED RESEARCH TRIAL DE7 FINED.—In subparagraph (A), the term ‘‘ap8 proved research trial’’ means a trial—

9 (i) conducted for the primary purpose

10 of determining the safety, effectiveness, ef11 ficacy, or health outcomes of a treatment,

12 compared with the best available alter13 native treatment, and

14 (ii) approved by the Secretary.

15 A trial is deemed to be approved under clause

16 (ii) if it is approved by the National Institutes

17 of Health, the Food and Drug Administration

18 (through an investigational new drug exemp19 tion), the Department of Veterans Affairs, or

20 by a qualified nongovernmental research entity

21 (as identified in guidelines issued by one or

22 more of the National Institutes of Health).

23 (3) COVERAGE OF OFF-LABEL USE.—An off24 label use for a drug that has been found to be safe

25 and effective under section 505 of the Federal Food,
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1 Drug, and Cosmetic Act shall be covered if the medi2 cal indication for which it is used is listed in one of

3 the following 3 compendia: the American Hospital

4 Formulary Service-Drug Information, the American

5 Medical Association Drug Evaluations, and the

6 United States Pharmacopeia-Drug Information.

7 (4) PREVENTIVE BENEFITS.—The following are

8 preventive benefits that shall be covered without any

9 deductibles, copayment, coinsurance, or other cost10 sharing:

11 (A) NEWBORN, WELL-BABY AND WELL12 CHILD CARE.—Newborn care, well-baby care,

13 and well-child care for individuals under 19

14 years of age, including routine physical exami15 nations, routine immunizations, and routine

16 tests, as specified by the Secretary based on the

17 schedule recommended by the American Acad18 emy of Pediatricians.

19 (B) MAMMOGRAMS.—Routine screening

20 mammograms (including their interpretation),

21 limited to 1 mammogram for a woman who is

22 at least 35 (but less than 40) years of age, 1

23 mammogram every 2 years for a woman who is

24 at least 40 (but less than 50) years of age, and
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1 1 mammogram every year for a woman who is

2 at least 50 years of age.

3 (C) SCREENING PAP SMEARS AND PELVIC

4 EXAMS.—Screening pap smears and pelvic

5 exams for women over 17 years of age, limited

6 to 1 each year.

7 (D) COLORECTAL SCREENING.—Colorectal

8 screening for individuals over 18 years of age at

9 high risk, consisting of 1 fecal occult blood

10 screening test every year, 1 screening

11 sigmoidoscopy every 5 years, and 1 screening

12 colonoscopy every 4 years.

13 (E) SCREENING TUBERCULIN TESTS.—

14 Screening tuberculin tests annually for individ15 uals at risk of contracting tuberculosis.

16 (F) PRENATAL CARE.—Prenatal care.

17 (G) ADULT IMMUNIZATIONS.—Routine im18 munizations for an individual over 17 years of

19 age (including booster immunizations against

20 tetanus and diphtheria, but limited to 1 such

21 immunization every 10 years).

22 (H) PROSTATE CANCER SCREENING.—

23 Routine cancer screening for a man who is at

24 least 40 years of age through a prostate specific

25 antigen test, limited to 1 test each year.
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1 (c) STANDARD ACTUARIAL VALUE.—

2 (1) IN GENERAL.—The actuarial value of the

3 benefits under standard coverage in a fair rating

4 area meets the requirements of this subsection if

5 such value is equivalent to the standard actuarial

6 value described in paragraph (2) for the area. The

7 actuarial value of benefits under standard coverage

8 shall be determined using the adjustment under

9 paragraph (3) for a standardized population and set

10 of standardized utilization and cost factors.

11 (2) STANDARD ACTUARIAL VALUE DE12 SCRIBED.—The standard actuarial value described

13 in this paragraph for coverage in a geographic area

14 is the actuarial value of benchmark coverage during

15 1994 in such area. Such actuarial value shall be de16 termined using the adjustment under paragraph (3)

17 for a standardized population and set of standard18 ized utilization and cost factors and updated annu19 ally in accordance with section 1104(a).

20 (3) ADJUSTMENTS FOR STANDARDIZED POPU21 LATION, STANDARDIZED UTILIZATION AND COST

22 FACTORS, AND GEOGRAPHIC AREA.—The adjustment

23 under this paragraph—

24 (A) for a standardized population shall be

25 made by not taking into account individuals 65
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1 years of age or older, employees of the United

2 States Postal Service, retirees, and annuitants;

3 and

4 (B)(i) except as provided in clause (ii), for

5 a geographic area shall be made in a manner

6 that reflects the ratio of the actuarial value of

7 benchmark coverage in such geographic area

8 (as adjusted under subparagraph (A)) to such

9 actuarial value for such benchmark coverage for

10 the United States as a whole, taking into ac11 count standardized actuarial utilization and

12 cost factors, and

13 (ii) in the case of a group health plan oper14 ating in more than one geographic area, the

15 ratio described in clause (i) shall be determined

16 in accordance with regulations promulgated by

17 the Secretary.

18 At the election of a group health plan under sub19 paragraph (B)(ii), the ratio under such subpara20 graph shall be 1.

21 (d) MINIMUM REQUIREMENTS WITHIN A CAT22 EGORY.—Benefits offered in any standard coverage within

23 any category of benefits shall be not less than the narrow24 est scope and shortest duration of benefits within that cat25 egory in any of the approved health benefits plans offered
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1 under chapter 89 of title 5, United States Code (relating

2 to Federal Employees Health Benefits Program) in 1994.

3 Benefits offered in the standard plan within the category

4 of preventive services shall not require payment of cost5 sharing for covered items and services.

6 (e) NO COVERAGE OF SPECIFIC TREATMENT, PRO7 CEDURES, OR CLASSES REQUIRED.—Nothing in this sec8 tion (or section 1103) may be construed to require the

9 coverage of any specific procedure or treatment or class

10 of service in health coverage under this Act or through

11 regulation.

12 (f) CONSTRUCTION.—Nothing in this section (or sec13 tion 1103) shall be construed as requiring coverage to in14 clude benefits for items and services that are not medically

15 necessary or appropriate.

16 SEC. 1103. HIGH-DEDUCTIBLE COVERAGE.

17 Health insurance coverage is considered to provide

18 high-deductible coverage consistent with this section if—

19 (1) benefits under such coverage comply with—

20 (A) the requirements described in section

21 1102(b) (relating to required categories of cov22 ered benefits), and

23 (B) the requirements described in section

24 1102(d) (relating to minimum requirements

25 within a category);
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1 (2) the deductible amount is the amount estab2 lished under section 1104(b)(1);

3 (3) benefits under the coverage in any year

4 (other than preventive benefits described in section

5 1102(b)(4)) are covered only to the extent expenses

6 incurred for items and services included in the cov7 erage for the year exceed the deductible amount

8 specified in paragraph (2); and

9 (4) the actuarial value of the coverage (as de10 termined under rules consistent with section

11 1102(c)) is equivalent to 80 percent of the actuarial

12 value established under such section for standard

13 coverage.

14 SEC. 1104. ACTUARIAL VALUATION OF BENEFITS.

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

16 with the NAIC and the American Academy of Actuaries,

17 shall establish (and may from time to time modify) proce18 dures by which health insurance benefits are valued for

19 purposes of this subtitle.

20 (b) DEDUCTIBLE; MODEL BENEFIT PACKAGES.—

21 The Secretary, in consultation with the NAIC and the

22 American Academy of Actuaries, shall establish—

23 (1) the deductible amount for high-deductible

24 coverage for the purposes of section 1103(2) such

25 that the actuarial value of high-deductible coverage
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1 described in section 1103 is 20 percent less than the

2 actuarial value of standard coverage described in

3 section 1102(a); and

4 (2) model benefit packages that may be treated,

5 for purposes of this title, as meeting the require6 ments for standard or high-deductible coverage

7 under sections 1102(a) and 1103, respectively, and

8 which shall include model cost sharing arrangements

9 for fee-for-service options, managed care options,

10 and point-of-service options.

11 SEC. 1105. LIMITATION ON OFFERING SUPPLEMENTAL BEN12 EFITS.

13 A carrier or group health plan offering qualified

14 health coverage may offer coverage of items and services

15 only in addition to the qualified standard coverage offered

16 (whether in the form of coverage of additional items and

17 services or a reduction in cost sharing) and only if—

18 (1) such supplemental coverage is offered and

19 priced separately from the standard coverage offered

20 and is only made available to individuals who obtain

21 qualified standard coverage through the carrier or

22 plan;

23 (2) the purchase of the qualified health cov24 erage is not conditioned upon the purchase of such

25 supplemental coverage; and
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1 (3) in the case of supplemental coverage that

2 consists of a reduction in the cost-sharing otherwise

3 applicable, the premium for the supplemental cov4 erage takes into account any expected increase in

5 utilization of items and services included in the

6 qualified health coverage resulting from obtaining

7 the supplemental coverage.

8 SEC. 1106. FAMILY COVERAGE OPTION; SUPPLEMENTAL

9 COVERAGE.

10 (a) FAMILY COVERAGE OPTION.—Each carrier and

11 group health plan that offers health insurance coverage

12 shall provide for an option under which children under 26

13 years of age (without regard to whether they are full-time

14 students or disabled) will be treated (with respect to fam15 ily coverage) as family members. The carrier or plan may

16 impose an additional premium for such option.

17 (b) CONSTRUCTION.—Nothing in this title shall be

18 construed as limiting the benefits that may be offered as

19 part of a group health plan or health insurance coverage.

20 SEC. 1107. LEVEL PLAYING FIELD FOR PROVIDERS.

21 (a) IN GENERAL.—Nothing in this subtitle may be

22 construed to require or prohibit the use of a particular

23 class of provider, among the providers that are legally au24 thorized to provide such treatment.

25 (b) COVERAGE OF CERTAIN OTHER PROVIDERS.—
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1 (1) IN GENERAL.—For purposes of this sub2 title, benefits under standard coverage shall include

3 the following:

4 (A) Coverage provided at an individual’s

5 home by a Christian Science practitioner or

6 Christian Science nurse.

7 (B) Coverage provided in a Christian

8 Science Sanitorium (as defined in section

9 1861(y) of the Social Security Act), including

10 coverage provided by a Christian Science practi11 tioner.

12 (2) QUALIFICATIONS OF PROVIDERS.—A Chris13 tian Science practitioner or Christian Science nurse

14 is qualified for purposes of paragraph (1) if the

15 practitioner or nurse is listed as such a practitioner

16 or nurse by the First Church of Christ, Scientist, in

17 Boston, Massachusetts.

18 Subtitle C—Employer

19 Responsibilities

20 SEC. 1201. REQUIRING EMPLOYERS TO OFFER OPTION OF

21 COVERAGE.

22 (a) IN GENERAL.—Subject to subsections (c) and (d),

23 each employer shall make available with respect to each

24 qualifying employee qualified health coverage under a

25 group health plan (whether fully-insured or self-insured)
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1 which meets the following requirements (and the applica2 ble requirements of subtitle A):

3 (1) ANNUAL OFFERING.—The employee may

4 elect health coverage for the employee and family

5 members on an annual basis for each plan year and

6 at such other times as may be specified by the Sec7 retary of Labor, in a manner consistent with the

8 standards established to carry out section 1105.

9 (2) CHOICE OF COVERAGE.—

10 (A) IN GENERAL.—Subject to subsection

11 (c) and subparagraph (G), such coverage is pro12 vided for at least—

13 (i) a competing choice of qualified

14 standard coverage (consistent with section

15 1102(a)), including at least one option (ei16 ther a fee-for-service option or a point-of17 service option) that permits covered indi18 viduals to obtain benefits through an unre19 stricted choice of the lawful providers for

20 which benefits are made available; and

21 (ii) high-deductible coverage (consist22 ent with section 1103).

23 (B) COVERAGE FLOOR.—With respect to

24 any health coverage (other than coverage for
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1 supplemental benefits or qualified standard cov2 erage) offered under the group health plan—

3 (i) the coverage shall meet the re4 quirements specified in paragraphs (1) and

5 (3) of section 1102(a), and

6 (ii) the actuarial value of such cov7 erage shall not be less than the actuarial

8 value of high-deductible coverage.

9 (C) DISCLOSURE FOR CERTAIN COV10 ERAGE.—If an employer offers, in addition to

11 the coverage required to be offered under sub12 paragraph (A), coverage the actuarial value of

13 which is more than the actuarial value for high14 deductible coverage but less than such value for

15 standard coverage, the employer must disclose

16 to the employees detailed information on how

17 the coverage offered compares to the standard

18 and high-deductible coverage offered by the em19 ployer.

20 (D) USE OF STANDARDIZED FACTORS.—

21 For purposes of this paragraph, the actuarial

22 value of coverage shall be determined using the

23 standardized population and standardized utili24 zation and cost factors described in section

25 1102(c)(3).
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1 (E) FAMILY COVERAGE OPTION.—The

2 offer of coverage under this section with respect

3 to a qualifying employee shall include the option

4 of coverage of family members of the employee.

5 (F) ANNUAL ENROLLMENT PERIOD FOR

6 CHOICE OF COVERAGE.—The group health plan

7 provides, with respect to any qualifying em8 ployee, a single annual open enrollment period

9 (of not less than 30 days) in which the em10 ployee may choose among the coverage options

11 required under this paragraph.

12 (G) LIMITATION ON OFFER OF HIGH-DE13 DUCTIBLE COVERAGE.—Qualified high-deduct14 ible coverage may not be made available under

15 a group health plan with respect to an employee

16 unless the employee demonstrates to the plan

17 administrator that the employee has available

18 assets (as defined by the Secretary) equal to at

19 least the deductible amount established under

20 section 1104(b)(1) applicable to the high-de21 ductible coverage.

22 (3) PAYROLL WITHHOLDING.—The employee

23 electing such coverage may elect to have any pre24 miums owed by the employee collected through pay25 roll deduction.
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1 (4) NONDISCRIMINATION IN CONTRIBUTIONS

2 BASED ON PRICE OF COVERAGE SELECTED WITH RE3 SPECT TO INDIVIDUAL EMPLOYEES.—

4 (A) IN GENERAL.—The employer may not

5 vary the dollar amount of any employer con6 tribution, within a class of family coverage, with

7 respect to such coverage for an individual em8 ployee, solely on the basis of the total premium

9 price of the coverage selected by the employee.

10 (B) SPECIAL RULES.—In applying sub11 paragraph (A)—

12 (i) the ‘‘total premium price’’ shall in13 clude, in the case of high-deductible cov14 erage, amounts paid by an employer into a

15 medical savings account (established under

16 section 7705 of the Internal Revenue Code

17 of 1986); and

18 (ii) if the employee selects health cov19 erage the premium for which is less than

20 the amount of the employer contribution,

21 the employer shall pay the amount of such

22 difference to the employee (or, at the em23 ployee’s option in the case of an employee

24 who has high-deductible coverage, to such

25 a medical savings account).
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1 (b) NO EMPLOYER MANDATE.—Subject to subsection

2 (a)(4) (relating to equal contribution rule), an employer

3 is not required under this section to make any contribution

4 to the cost of health coverage.

5 (c) GRANDFATHER FOR EXISTING COLLECTIVE BAR6 GAINING AGREEMENTS.—

7 (1) IN GENERAL.—The requirement of sub8 section (a)(2) shall not apply to a group health plan

9 for a plan year if—

10 (A) the group health plan is in effect in

11 the plan year in which July 1, 1994, occurs,

12 and

13 (B) the employer makes (or offers to

14 make), in such plan year and the plan year in15 volved, a contribution to the plan on behalf of

16 each employee who is eligible to participate in

17 the plan under a collective bargaining agree18 ment or similar contract.

19 (2) SUNSET.—Paragraph (1) shall only apply to

20 a group health plan until the expiration of the collec21 tive bargaining agreement or similar contract in ef22 fect on the date of the enactment of this Act or, if

23 earlier, January 1, 2000.

24 (d) SPECIAL RULES.—
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1 (1) EMPLOYERS CONTRACTING WITH HEALTH

2 PLAN PURCHASING ORGANIZATIONS, ETC.—An em3 ployer is deemed to have satisfied the requirements

4 of subsection (a) with respect to an employee if the

5 employer enters into a contract with a health plan

6 purchasing organization (established under subtitle

7 A of title VI), a small employer pooling arrangement

8 (described in section 711 of the Employee Retire9 ment Income Security Act of 1974), a multiemployer

10 plan providing health benefits, or a certified multiple

11 employer health plan (as defined in section 701(9)

12 of the Employee Retirement Income Security Act of

13 1974) to offer coverage with respect to the employee.

14 (2) EXCLUSION OF NEW EMPLOYERS AND CER15 TAIN SMALL EMPLOYERS.—Subsection (a) shall not

16 apply to any small employer for any plan year if, as

17 of the beginning of such plan year—

18 (A) such employer (including any prede19 cessor thereof) has been an employer for less

20 than 1 year,

21 (B) such employer has no more than 2

22 qualifying employees, or

23 (C) no more than 2 qualifying employees

24 of the employer are not covered under any

25 group health plan.
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1 (3) EXCLUSION OF FAMILY MEMBERS.—Under

2 such procedures as the Secretary may prescribe, any

3 relative of an employer may be, at the election of the

4 employer, excluded from consideration as a qualify5 ing employee for purposes of applying the require6 ments of subsection (a). In the case of an employer

7 that is not an individual, an employee who is a rel8 ative of a key employee (as defined in section

9 416(i)(1) of the Internal Revenue Code of 1986) of

10 the employer may, at the election of the key em11 ployee, be considered a relative excludable under this

12 paragraph.

13 (e) CONSTRUCTION ON RANGE OF COVERAGE OF14 FERINGS.—Nothing in this section shall be construed—

15 (1) as limiting the number of standard and

16 high-deductible coverage options that an employer

17 may offer to an employee,

18 (2) as preventing employers from offering sup19 plemental coverage described in section 1105, or

20 (3) as preventing an employer from providing

21 for contributions to a medical savings account in

22 connection with the offering of high-deductible cov23 erage, subject to subsection (a)(4) and the require24 ments of section 7705 of the Internal Revenue Code

25 of 1986.
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1 SEC. 1202. NONDISCRIMINATION UNDER GROUP HEALTH

2 PLANS.

3 (a) APPLICATION OF RULES SIMILAR TO MEDICARE

4 NONDISCRIMINATION RULES.—The provisions of para5 graphs (1)(A), (1)(D), (1)(E), (3)(A), and (3)(C) of sec6 tion 1862(b) of the Social Security Act shall apply to a

7 premium or cost-sharing assistance eligible individual

8 under part A of title XXI of such Act in relation to an

9 employer in the same manner as such provisions apply to

10 an individual age 65 or over who is entitled to benefits

11 under title XVIII of such Act under section 226(a) of such

12 Act in relation to such employer.

13 (b) RULES OF APPLICATION.—In applying subsection

14 (a)—

15 (1) in applying clauses (ii) and (iii) of section

16 1862(b)(1)(A) of the Social Security Act, any ref17 erence to ‘‘20 or more employees’’ is deemed a ref18 erence to ‘‘5 or more employees’’;

19 (2) clause (iv) of section 1862(b)(1)(A) of such

20 Act shall not apply; and

21 (3) any reference to title XVIII of such Act is

22 deemed a reference to assistance under part A of

23 title XXI of such Act (as added by subtitle A of title

24 II of this Act).

25 (c) ENFORCEMENT.—
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1 (1) IN GENERAL.—Chapter 47 of the Internal

2 Revenue Code of 1986 (relating to excise taxes on

3 qualified pension, etc. plans) is amended by inserting

4 after section 5000 the following new section:

5 ‘‘SEC. 5000A. EMPLOYER REQUIREMENTS.

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

7 tax on the failure of any employer to comply with the re8 quirements of section 1201 and section 1202 of the Bipar9 tisan Health Care Reform Act of 1994.

10 ‘‘(b) AMOUNT OF TAX.—The amount of tax imposed

11 by subsection (a) shall be equal to $100 for each day for

12 each individual for which such a failure occurs.

13 ‘‘(c) LIMITATION ON TAX.—

14 ‘‘(1) TAX NOT TO APPLY WHERE FAILURES

15 CORRECTED WITHIN 30 DAYS.—No tax shall be im16 posed by subsection (a) with respect to any failure

17 if—

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

19 cause and not to willful neglect, and

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

21 30-day period (or such period as the Secretary

22 may determine appropriate) beginning on the

23 1st date any of the individuals on whom the tax

24 is imposed knew, or exercising reasonable dili-
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1 gence would have known, that such failure ex2 isted.

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

4 failure which is due to reasonable cause and not to

5 willful neglect, the Secretary may waive part or all

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

7 that the payment of such tax would be excessive rel8 ative to the failure involved.’’.

9 (2) CLERICAL AMENDMENT.—The table of sec10 tions for such chapter 47 is amended by adding at

11 the end the following new item:

‘‘Sec. 5000A. Employer requirements.’’.

12 (3) EFFECTIVE DATE.—The amendments made

13 by this subsection shall take effect on January 1,

14 1997.

15 SEC. 1203. EFFECTIVE DATES.

16 Except as otherwise provided, the requirements of

17 sections 1201 and 1202 shall apply to plan years begin18 ning after December 31, 1996.

19 Subtitle D—Standards and Certifi20 cation; Enforcement; Preemp21 tion; General Provisions

22 SEC. 1301. ESTABLISHMENT OF STANDARDS.

23 (a) ROLE OF NAIC.—
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1 (1) IN GENERAL.—The Secretary shall request

2 the NAIC to develop, within 9 months after the date

3 of the enactment of this Act, model regulations that

4 specify standards with respect to the requirements of

5 this subtitle as applicable to carriers and health in6 surance coverage.

7 (2) REVIEW OF STANDARDS.—If the NAIC de8 velops recommended regulations specifying such

9 standards within such period, the Secretary shall re10 view the standards. Such review shall be completed

11 within 60 days after the date the regulations are de12 veloped. Unless the Secretary determines within

13 such period that the standards do not meet the re14 quirements, such standards shall serve as the stand15 ards under this subtitle, with such amendments as

16 the Secretary deems necessary.

17 (b) CONTINGENCY.—If the NAIC does not develop

18 such model regulations within such period or the Secretary

19 determines that such regulations do not specify standards

20 that meet the requirements described in subsection (a),

21 the Secretary shall specify, within 15 months after the

22 date of the enactment of this Act, standards to carry out

23 those requirements.
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1 SEC. 1302. APPLICATION OF STANDARDS TO CARRIERS

2 THROUGH STATES.

3 (a) APPLICATION OF STANDARDS.—

4 (1) IN GENERAL.—Each State shall submit to

5 the Secretary, by the deadline specified in paragraph

6 (2), a report on steps the State is taking to imple7 ment and enforce the standards established under

8 section 1301 with respect to carriers and health in9 surance coverage offered or renewed not later than

10 such deadline.

11 (2) DEADLINE FOR REPORT.—The deadline

12 under this paragraph is 1 year after the date the

13 standards are established under section 1301.

14 (b) FEDERAL ROLE.—

15 (1) NOTICE OF DEFICIENCY.—If the Secretary

16 determines that a State has failed to submit a report

17 by the deadline specified under subsection (a)(2) or

18 finds that the State has not implemented and pro19 vided adequate enforcement of the standards estab20 lished under section 1301, the Secretary shall notify

21 the State and provide the State a period of 60 days

22 in which to submit such report or to implement and

23 enforce such standards.

24 (2) IMPLEMENTATION OF ALTERNATIVE.—

25 (A) IN GENERAL.—If, after such 60-day

26 period, the Secretary finds that such a failure
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1 has not been corrected, the Secretary shall pro2 vide for such mechanism for the implementation

3 and enforcement of such standards in the State

4 as the Secretary determines to be appropriate.

5 (B) EFFECTIVE PERIOD.—Such implemen6 tation and enforcement shall take effect with

7 respect to carriers, and health insurance cov8 erage offered or renewed, on or after 3 months

9 after the date of the Secretary’s finding under

10 subparagraph (A), and until the date the Sec11 retary finds that such a failure has been cor12 rected.

13 SEC. 1303. APPLICATION TO GROUP HEALTH PLANS.

14 (a) IN GENERAL.—Subject to subsection (b), sections

15 1301 and 1302 shall apply to group health plans providing

16 health coverage in the same manner as they apply to car17 riers providing health insurance coverage.

18 (b) SUBSTITUTION OF REFERENCES.—For purposes

19 of subsection (a), any reference in section 1301 or 1302

20 to—

21 (1) a State or the Secretary of Health and

22 Human Services is deemed a reference to the Sec23 retary of Labor, and
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1 (2) a carrier or health insurance coverage is

2 deemed a reference to a group health plan and

3 health coverage, respectively.

4 SEC. 1304. ENFORCEMENT.

5 (a) ENFORCEMENT BY DEPARTMENT OF LABOR FOR

6 EMPLOYERS AND GROUP HEALTH PLANS.—

7 (1) IN GENERAL.—For purposes of part 5 of

8 subtitle B of title I of the Employee Retirement In9 come Security Act of 1974, the provisions of this

10 title insofar as they relate to group health plans or

11 employers shall be deemed to be provisions of title

12 I of such Act irrespective of exclusions under section

13 4(b) of such Act.

14 (2) REGULATORY AUTHORITY.—With respect to

15 the regulatory authority of the Secretary of Labor

16 under this subtitle pursuant to paragraph (1), sec17 tion 505 of the Employee Retirement Income Secu18 rity Act of 1974 (29 U.S.C. 1135) shall apply.

19 (b) ENFORCEMENT BY EXCISE TAX FOR CAR20 RIERS.—

21 (1) IN GENERAL.—Chapter 43 of the Internal

22 Revenue Code of 1986 (relating to qualified pension

23 plans, etc.) is amended by adding at the end thereof

24 the following new section:
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1 ‘‘SEC. 4980C. FAILURE OF CARRIER TO COMPLY WITH

2 HEALTH INSURANCE STANDARDS.

3 ‘‘(a) IMPOSITION OF TAX.—

4 ‘‘(1) IN GENERAL.—There is hereby imposed a

5 tax on the failure of a carrier to comply with the re6 quirements applicable to the carrier under parts 1

7 through 4 of subtitle A and subtitle B of title I of

8 the Bipartisan Health Care Reform Act of 1994.

9 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

10 apply to a failure by a carrier in a State if the Sec11 retary of Health and Human Services determines

12 that the State has in effect a regulatory enforcement

13 mechanism that provides adequate sanctions with re14 spect to such a failure by such a carrier.

15 ‘‘(b) AMOUNT OF TAX.—

16 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

17 the amount of the tax imposed by subsection (a)

18 shall be $100 for each day during which such failure

19 persists for each individual to which such failure re20 lates. A rule similar to the rule of section

21 4980B(b)(3) shall apply for purposes of this section.

22 ‘‘(2) LIMITATION.—The amount of the tax im23 posed by subsection (a) for a carrier with respect to

24 health insurance coverage shall not exceed 25 per25 cent of the amounts received for such coverage dur26 ing the period such failure persists.
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1 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

2 section shall be paid by the carrier.

3 ‘‘(d) EXCEPTIONS.—

4 ‘‘(1) CORRECTIONS WITHIN 30 DAYS.—No tax

5 shall be imposed by subsection (a) by reason of any

6 failure if—

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

8 cause and not to willful neglect, and

9 ‘‘(B) such failure is corrected within the

10 30-day period beginning on the earliest date the

11 carrier knew, or exercising reasonable diligence

12 would have known, that such failure existed.

13 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

14 failure which is due to reasonable cause and not to

15 willful neglect, the Secretary may waive part or all

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

17 that payment of such tax would be excessive relative

18 to the failure involved.

19 ‘‘(e) DEFINITIONS.—For purposes of this section, the

20 terms ‘health insurance coverage’ and ‘carrier’ have the

21 respective meanings given such terms in section 1903 of

22 the Bipartisan Health Care Reform Act of 1994.’’

23 (2) CLERICAL AMENDMENT.—The table of sec24 tions for chapter 43 of such Code is amended by

25 adding at the end thereof the following new item:
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‘‘Sec. 4980C. Failure of carrier to comply with health insurance

standards.’’

1 SEC. 1305. LIMITATION ON SELF INSURANCE FOR SMALL

2 EMPLOYERS.

3 A single employer plan (as defined in section

4 3(40)(B) of the Employee Retirement Income Security

5 Act of 1974) may not offer health coverage other than

6 through a carrier unless the plan has at least 100 eligible

7 employees.

8 Subtitle E—Multiple Employer

9 Health Benefits Protections and

10 Related Provisions

11 PART 1—MULTIPLE EMPLOYER HEALTH

12 BENEFITS PROTECTIONS

13 SEC. 1401. LIMITED EXEMPTION FROM CERTAIN RESTRIC14 TIONS ON ERISA PREEMPTION OF STATE LAW

15 FOR HEALTH PLANS MAINTAINED BY MUL16 TIPLE EMPLOYERS SUBJECT TO CERTAIN

17 FEDERAL STANDARDS.

18 (a) IN GENERAL.—Subtitle B of title I of the Em19 ployee Retirement Income Security Act of 1974 is amend20 ed by adding at the end the following new part:

21 ‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS

22 ‘‘SEC. 701. DEFINITIONS.

23 ‘‘For purposes of this part—
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1 ‘‘(1) INSURER.—The term ‘insurer’ means an

2 insurance company, insurance service, or insurance

3 organization, licensed to engage in the business of

4 insurance by a State.

5 ‘‘(2) PARTICIPATING EMPLOYER.—The term

6 ‘participating employer’ means, in connection with a

7 multiple employer welfare arrangement, any em8 ployer if any of its employees, or any of the depend9 ents of its employees, are or were covered under

10 such arrangement in connection with the employ11 ment of the employees.

12 ‘‘(3) EXCESS/STOP LOSS COVERAGE.—The term

13 ‘excess/stop loss coverage’ means, in connection with

14 a multiple employer welfare arrangement, a contract

15 under which an insurer provides for payment with

16 respect to claims under the arrangement, relating to

17 participants or beneficiaries individually or other18 wise, in excess of an amount or amounts specified in

19 such contract.

20 ‘‘(4) QUALIFIED ACTUARY.—The term ‘quali21 fied actuary’ means an individual who is a member

22 of the American Academy of Actuaries or meets

23 such reasonable standards and qualifications as the

24 Secretary may provide by regulation.
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1 ‘‘(5) SPONSOR.—The term ‘sponsor’ means, in

2 connection with a multiple employer welfare arrange3 ment, the association or other entity which estab4 lishes or maintains the arrangement.

5 ‘‘(6) STATE INSURANCE COMMISSIONER.—The

6 term ‘State insurance commissioner’ means the in7 surance commissioner (or similar official) of a State.

8 ‘‘(7) DOMICILE STATE.—The term ‘domicile

9 State’ means, in connection with a multiple employer

10 welfare arrangement, the State in which, according

11 to the application for a certification under this part,

12 most individuals to be covered under the arrange13 ment are located, except that, in any case in which

14 information contained in the latest annual report of

15 the arrangement filed under this part indicates that

16 most individuals covered under the arrangement are

17 located in a different State, such term means such

18 different State.

19 ‘‘(8) FULLY INSURED.—Coverage under a mul20 tiple employer welfare arrangement is ‘fully insured’

21 if one or more insurers, health maintenance organi22 zations, similar organizations regulated under State

23 law for solvency, or any combination thereof are lia24 ble under one or more insurance policies or contracts

25 for all benefits under the arrangement (irrespective
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1 of any recourse they may have against other par2 ties).

3 ‘‘(9) CERTIFIED MULTIPLE EMPLOYER HEALTH

4 PLAN.—The term ‘certified multiple employer health

5 plan’ means a multiple employer welfare arrange6 ment treated as an employee welfare benefit plan by

7 reason of certification under this part.

8 ‘‘SEC. 702. CERTIFIED MULTIPLE EMPLOYER HEALTH

9 PLANS RELIEVED OF CERTAIN RESTRIC10 TIONS ON PREEMPTION OF STATE LAW AND

11 TREATED AS EMPLOYEE WELFARE BENEFIT

12 PLANS.

13 ‘‘(a) IN GENERAL.—Subject to subsection (b), a mul14 tiple employer welfare arrangement under which coverage

15 is not fully insured and with respect to which there is in

16 effect a certification granted by the Secretary under this

17 part (or with respect to which there is pending a complete

18 application for such a certification and the Secretary de19 termines that provisional protection under this part is ap20 propriate)—

21 ‘‘(1) shall be treated for purposes of subtitle A

22 and the preceding parts of this subtitle as an em23 ployee welfare benefit plan, irrespective of whether

24 such arrangement is an employee welfare benefit

25 plan, and
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1 ‘‘(2) shall be exempt from section

2 514(b)(6)(A)(ii).

3 ‘‘(b) BENEFITS MUST CONSIST OF MEDICAL

4 CARE.—Subsection (a) shall apply to a multiple employer

5 welfare arrangement only if the benefits provided there6 under consist solely of medical care described in section

7 607(1) (disregarding such incidental benefits as the

8 Secretary shall specify by regulation).

9 ‘‘SEC. 703. CERTIFICATION PROCEDURE.

10 ‘‘(a) IN GENERAL.—The Secretary shall grant a cer11 tification described in section 702(a) to a multiple em12 ployer welfare arrangement if—

13 ‘‘(1) an application for such certification with

14 respect to such arrangement, identified individually

15 or by class, has been duly filed in complete form

16 with the Secretary in accordance with this part,

17 ‘‘(2) such application demonstrates compliance

18 with the requirements of section 704 with respect to

19 such arrangement, and

20 ‘‘(3) the Secretary finds that such certification

21 is—

22 ‘‘(A) administratively feasible,

23 ‘‘(B) not adverse to the interests of the in24 dividuals covered under the arrangement, and
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1 ‘‘(C) protective of the rights and benefits

2 of the individuals covered under the arrange3 ment.

4 ‘‘(b) NOTICE AND HEARING.—Before granting a cer5 tification under this section, the Secretary shall publish

6 notice in the Federal Register of the pendency of the cer7 tification, shall require that adequate notice be given to

8 interested persons, including the State insurance commis9 sioner of each State in which covered individuals under

10 the arrangement are, or are expected to be, located, and

11 shall afford interested persons opportunity to present

12 views. The Secretary may not grant a certification under

13 this section unless the Secretary affords an opportunity

14 for a hearing and makes a determination on the record

15 with respect to the findings required under subsection

16 (a)(3). The Secretary shall, to the maximum extent prac17 ticable, make a final determination with respect to any ap18 plication filed under this section in the case of a newly

19 established arrangement within 90 days after the date

20 which the Secretary determines is the date on which such

21 application is filed in complete form.

22 ‘‘SEC. 704. ELIGIBILITY REQUIREMENTS.

23 ‘‘(a) APPLICATION FOR CERTIFICATION.—

24 ‘‘(1) IN GENERAL.—A certification may be

25 granted by the Secretary under this part only on the
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1 basis of an application filed with the Secretary in

2 such form and manner as shall be prescribed in reg3 ulations of the Secretary. Any such application shall

4 be signed by the operating committee and the spon5 sor of the arrangement.

6 ‘‘(2) FILING FEE.—The arrangement shall pay

7 to the Secretary at the time of filing an application

8 under this section a filing fee in the amount of

9 $5,000, which shall be available, to the extent pro10 vided in appropriation Acts, to the Secretary for the

11 sole purpose of administering the certification proce12 dures under this part.

13 ‘‘(3) INFORMATION INCLUDED.—An application

14 filed under this section shall include, in a manner

15 and form prescribed in regulations of the Secretary,

16 at least the following information:

17 ‘‘(A) IDENTIFYING INFORMATION.—The

18 names and addresses of—

19 ‘‘(i) the sponsor, and

20 ‘‘(ii) the members of the operating

21 committee of the arrangement.

22 ‘‘(B) STATES IN WHICH ARRANGEMENT IN23 TENDS TO DO BUSINESS.—The States in which

24 individuals covered under the arrangement are
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1 to be located and the number of such individ2 uals expected to be located in each such State.

3 ‘‘(C) BONDING REQUIREMENTS.—Evidence

4 provided by the operating committee that the

5 bonding requirements of section 412 will be met

6 as of the date of the application.

7 ‘‘(D) PLAN DOCUMENTS.—A copy of the

8 documents governing the arrangement (includ9 ing any bylaws and trust agreements), the sum10 mary plan description, and other material de11 scribing the benefits and coverage that will be

12 provided to individuals covered under the ar13 rangement.

14 ‘‘(E) AGREEMENTS WITH SERVICE PROVID15 ERS.—A copy of any agreements between the

16 arrangement and contract administrators and

17 other service providers.

18 ‘‘(F) FUNDING REPORT.—A report setting

19 forth information determined as of a date with20 in the 120-day period ending with the date of

21 the application, including the following:

22 ‘‘(i) RESERVES.—A statement, cer23 tified by the operating committee of the ar24 rangement, and a statement of actuarial

25 opinion, signed by a qualified actuary, that
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1 all applicable requirements of section 707

2 are or will be met in accordance with regu3 lations which the Secretary shall prescribe.

4 ‘‘(ii) ADEQUACY OF CONTRIBUTION

5 RATES.—A statement of actuarial opinion,

6 signed by a qualified actuary, which sets

7 forth a description of the extent to which

8 contribution rates are adequate to provide

9 for the payment of all obligations and the

10 maintenance of required reserves under the

11 arrangement for the 12-month period be12 ginning with such date within such 120-

13 day period, taking into account the ex14 pected coverage and experience of the ar15 rangement. If the contribution rates are

16 not fully adequate, the statement of actu17 arial opinion shall indicate the extent to

18 which the rates are inadequate and the

19 changes needed to ensure adequacy.

20 ‘‘(iii) CURRENT AND PROJECTED

21 VALUE OF ASSETS AND LIABILITIES.—A

22 statement of actuarial opinion signed by a

23 qualified actuary, which sets forth the cur24 rent value of the assets and liabilities accu25 mulated under the arrangement and a pro-
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1 jection of the assets, liabilities, income,

2 and expenses of the arrangement for the

3 12-month period referred to in clause (ii).

4 The income statement shall identify sepa5 rately the arrangement’s administrative ex6 penses and claims.

7 ‘‘(iv) COSTS OF COVERAGE TO BE

8 CHARGED AND OTHER EXPENSES.—A

9 statement of the costs of coverage to be

10 charged, including an itemization of

11 amounts for administration, reserves, and

12 other expenses associated with the oper13 ation of the arrangement.

14 ‘‘(v) OTHER INFORMATION.—Any

15 other information which may be prescribed

16 in regulations of the Secretary as nec17 essary to carry out the purposes of this

18 part.

19 ‘‘(b) OTHER REQUIREMENTS.—A complete applica20 tion for a certification under this part shall include infor21 mation which the Secretary determines to be complete and

22 accurate and sufficient to demonstrate that the following

23 requirements are met with respect to the arrangement:

24 ‘‘(1) SPONSOR.—
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1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), the sponsor is, and has been (to3 gether with its immediate predecessor, if any)

4 for a continuous period of not less than 3 years

5 before the date of the application, organized

6 and maintained in good faith, with a constitu7 tion and bylaws specifically stating its purpose,

8 as a trade association, an industry association,

9 a professional association, or a chamber of com10 merce (or similar business group), for substan11 tial purposes other than that of obtaining or

12 providing medical care described in section

13 607(1), and the applicant demonstrates to the

14 satisfaction of the Secretary that the sponsor is

15 established as a permanent entity which re16 ceives the active support of its members.

17 ‘‘(B) SPECIAL RULE FOR EMPLOYERS IN

18 THE SAME TRADE OR BUSINESS.—In the case

19 of an arrangement under which all participating

20 employers are engaged in a common type of

21 trade or business, the sponsor is the operating

22 committee of the arrangement.

23 ‘‘(2) OPERATING COMMITTEE.—The arrange24 ment is operated, pursuant to a trust agreement, by

25 an operating committee which has complete fiscal
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1 control over the arrangement and which is respon2 sible for all operations of the arrangement, and the

3 operating committee has in effect rules of operation

4 and financial controls, based on a 3-year plan of op5 eration, adequate to carry out the terms of the ar6 rangement and to meet all requirements of this title

7 applicable to the arrangement. The members of the

8 committee are individuals selected from individuals

9 who are the owners, officers, directors, or employees

10 of the participating employers or who are partners

11 in the participating employers and actively partici12 pate in the business. No such member is an owner,

13 officer, director, or employee of, or partner in, a con14 tract administrator or other service provider to the

15 arrangement, except that officers or employees of a

16 sponsor which is a service provider (other than a

17 contract administrator) to the arrangement may be

18 members of the committee if they constitute not

19 more than 25 percent of the membership of the com20 mittee and they do not provide services to the ar21 rangement other than on behalf of the sponsor. The

22 committee has sole authority to approve applications

23 for participation in the arrangement and to contract

24 with a service provider to administer the day-to-day

25 affairs of the arrangement.
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1 ‘‘(3) CONTENTS OF GOVERNING INSTRU2 MENTS.—The instruments governing the arrange3 ment include a written instrument, meeting the re4 quirements of an instrument required under section

5 402(a)(1), which—

6 ‘‘(A) provides that the committee serves as

7 the named fiduciary required for plans under

8 such section and serves in the capacity of a

9 plan administrator (referred to in section

10 3(16)(A)),

11 ‘‘(B) provides that the sponsor is to serve

12 as plan sponsor (referred to in section

13 3(16)(B)),

14 ‘‘(C) incorporates the requirements of sec15 tion 707, and

16 ‘‘(D) provides that, effective upon the

17 granting of a certification under this part—

18 ‘‘(i) all participating employers must

19 be members or affiliated members of the

20 sponsor, except that, in the case of a spon21 sor which is a professional association or

22 other individual-based association, if at

23 least one of the officers, directors, or em24 ployees of an employer, or at least one of

25 the individuals who are partners in an em-
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1 ployer and who actively participates in the

2 business, is a member or affiliated member

3 of the sponsor, participating employers

4 may also include such employer, and

5 ‘‘(ii) all individuals thereafter com6 mencing coverage under the arrangement

7 must be—

8 ‘‘(I) active or retired owners, offi9 cers, directors, or employees of, or

10 partners in, participating employers,

11 or

12 ‘‘(II) the beneficiaries of individ13 uals described in subclause (I).

14 ‘‘(4) CONTRIBUTION RATES.—The contribution

15 rates referred to in subsection (a)(3)(F)(ii) are

16 adequate.

17 ‘‘(5) OPTION OF FAMILY COVERAGE.—If the ar18 rangement provides for coverage with respect to an

19 employee, the arrangement shall make available the

20 option of coverage of family members of the individ21 ual (as defined in section 1901(2) of the Bipartisan

22 Health Care Reform Act of 1994).

23 ‘‘(6) MISCELLANEOUS REQUIREMENTS.—(A)

24 The requirements of the title I of the Bipartisan
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1 Health Care Reform Act of 1994 (insofar as they

2 apply to group health plans), including the following:

3 ‘‘(i) Section 1003(c) (relating to guaran4 teed renewal).

5 ‘‘(ii) Section 1004 (relating to restricting

6 preexisting condition exclusions).

7 ‘‘(iii) Section 1005 (relating to choice of

8 coverage through open enrollment).

9 ‘‘(iv) Section 1011 (relating to standards

10 for managed care arrangements).

11 ‘‘(v) Section 1012 (relating to utilization

12 review).

13 ‘‘(vi) Section 1013 (relating to standards

14 for essential community providers).

15 ‘‘(vii) Section 1021(d) (relating to use of

16 fair rating practices).

17 ‘‘(viii) Section 1022 (relating to coordina18 tion with premium assistance certificate pro19 gram).

20 ‘‘(B) The requirements of section 1023 of the

21 Bipartisan Health Care Reform Act of 1994 (relat22 ing to establishment of risk adjustment mechanisms)

23 insofar as such requirements apply to carriers but

24 only with respect to covered individuals in the indi25 vidual/small group market.
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1 ‘‘(7) REGULATORY REQUIREMENTS.—Such

2 other requirements as the Secretary may prescribe

3 by regulation as necessary to carry out the purposes

4 of this part.

5 ‘‘(c) TREATMENT OF PARTY SEEKING CERTIFI6 CATION WHERE PARTY IS SUBJECT TO DISQUALIFICA7 TION.—

8 ‘‘(1) IN GENERAL.—In the case of any applica9 tion for a certification under this part with respect

10 to a multiple employer welfare arrangement, if the

11 Secretary determines that the sponsor of the ar12 rangement or any other person associated with the

13 arrangement is subject to disqualification under

14 paragraph (2), the Secretary may deny the certifi15 cation with respect to such arrangement.

16 ‘‘(2) DISQUALIFICATION.—A person is subject

17 to disqualification under this paragraph if such

18 person—

19 ‘‘(A) has intentionally made a material

20 misstatement in the application for certifi21 cation;

22 ‘‘(B) has obtained or attempted to obtain

23 a certification under this part through mis24 representation or fraud;
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1 ‘‘(C) has misappropriated or converted to

2 such person’s own use, or improperly withheld,

3 money held under a plan or any multiple

4 employer welfare arrangement;

5 ‘‘(D) is prohibited (or would be prohibited

6 if the arrangement were a plan) from serving in

7 any capacity in connection with the arrange8 ment under section 411;

9 ‘‘(E) has failed to appear without reason10 able cause or excuse in response to a subpoena,

11 examination, warrant, or any other order law12 fully issued by the Secretary compelling such

13 response;

14 ‘‘(F) has previously been subject to a de15 termination under this part resulting in the de16 nial, suspension, or revocation of a certification

17 under this part on similar grounds; or

18 ‘‘(G) has otherwise violated any provision

19 of this title with respect to a matter which the

20 Secretary determines of sufficient consequence

21 to merit disqualification for purposes of this

22 part.

23 ‘‘(d) FRANCHISE NETWORKS.—In the case of a mul24 tiple employer welfare arrangement established and main25 tained by a franchisor for a franchise network consisting
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1 of its franchisees, such franchisor shall be treated as the

2 sponsor referred to in the preceding provisions of this sec3 tion, such network shall be treated as an association re4 ferred to in such provisions, and each franchisee shall be

5 treated as a member (of the association and the sponsor)

6 referred to in such provisions, if all participating employ7 ers are such franchisees and the requirements of sub8 section (b)(1) with respect to a sponsor are met with

9 respect to the network.

10 ‘‘(e) CERTAIN COLLECTIVELY BARGAINED ARRANGE11 MENTS.—In applying the preceding provisions of this sec12 tion in the case of a multiple employer welfare arrange13 ment which would be described in section 3(40)(A)(i) but

14 for the failure to meet any requirement of section

15 3(40)(C)—

16 ‘‘(1) paragraphs (1) and (2) of subsection (b)

17 and subparagraphs (A), (B), and (D) of paragraph

18 (3) of subsection (b) shall be disregarded, and

19 ‘‘(2) the joint board of trustees shall be consid20 ered the operating committee of the arrangement.

21 ‘‘(f) CERTAIN ARRANGEMENTS NOT MEETING SIN22 GLE EMPLOYER REQUIREMENT.—

23 ‘‘(1) IN GENERAL.—In any case in which the

24 majority of the employees covered under a multiple

25 employer welfare arrangement are employees of a
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1 single employer (within the meaning of clauses (i)

2 and (ii) of section 3(40)(B)), if all other employees

3 covered under the arrangement are employed by em4 ployers who are related to such single employer, sub5 section (b)(3)(D) shall be disregarded.

6 ‘‘(2) RELATED EMPLOYERS.—For purposes of

7 paragraph (1), employers are ‘related’ if there is

8 among all such employers a common ownership in9 terest or a substantial commonality of business oper10 ations based on common suppliers or customers.

11 ‘‘SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO

12 CERTIFIED MULTIPLE EMPLOYER HEALTH

13 PLANS.

14 ‘‘(a) NOTICE OF MATERIAL CHANGES.—In the case

15 of any certified multiple employer health plan, descriptions

16 of material changes in any information which was required

17 to be submitted with the application for the certification

18 granted under this part shall be filed in such form and

19 manner as shall be prescribed in regulations of the Sec20 retary. The Secretary may require by regulation prior no21 tice of material changes with respect to specified matters

22 which might serve as the basis for suspension or revoca23 tion of the certification.

24 ‘‘(b) REPORTING REQUIREMENTS.—Under regula25 tions of the Secretary, the requirements of sections 102,
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1 103, and 104 shall apply with respect to any multiple em2 ployer welfare arrangement which is or has been a cer3 tified multiple employer health plan in the same manner

4 and to the same extent as such requirements apply to em5 ployee welfare benefit plans, irrespective of whether such

6 certification continues in effect. The annual report re7 quired under section 103 for any plan year in the case

8 of any such multiple employer welfare arrangement shall

9 also include information described in section 704(a)(3)(F)

10 with respect to the plan year and, notwithstanding section

11 104(a)(1)(A), shall be filed not later than 90 days after

12 the close of the plan year.

13 ‘‘(c) ENGAGEMENT OF QUALIFIED ACTUARY.—The

14 operating committee of each multiple employer welfare ar15 rangement which is or has been a certified multiple em16 ployer health plan shall engage, on behalf of all covered

17 individuals, a qualified actuary who shall be responsible

18 for the preparation of the materials comprising informa19 tion necessary to be submitted by a qualified actuary

20 under this part. The qualified actuary shall utilize such

21 assumptions and techniques as are necessary to enable

22 such actuary to form an opinion as to whether the con23 tents of the matters reported under this part—
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1 ‘‘(1) are in the aggregate reasonably related to

2 the experience of the arrangement and to reasonable

3 expectations, and

4 ‘‘(2) represent such actuary’s best estimate of

5 anticipated experience under the arrangement.

6 The opinion by the qualified actuary shall be made with

7 respect to, and shall be made a part of, the annual report.

8 ‘‘(d) FILING NOTICE OF CERTIFICATION WITH

9 STATES.—A certification granted to a multiple employer

10 welfare arrangement under this part shall not be effective

11 unless written notice of such certification is filed with the

12 State insurance commissioner of each State in which at

13 least 5 percent of the individuals covered under the ar14 rangement are located. For purposes of this subsection,

15 an individual shall be considered to be located in the State

16 in which a known address of such individual is located or

17 in which such individual is employed. The Secretary may

18 by regulation provide in specified cases for the application

19 of the preceding sentence with lesser percentages in lieu

20 of such 5 percent amount.

21 ‘‘SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY

22 ARRANGEMENTS PROVIDING MEDICAL CARE.

23 ‘‘(a) IN GENERAL.—A multiple employer welfare ar24 rangement providing benefits consisting of medical care
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1 described in section 607(1) shall issue to each participat2 ing employer—

3 ‘‘(1) a document equivalent to the summary

4 plan description required of plans under part 1,

5 ‘‘(2) information describing the contribution

6 rates applicable to participating employers, and

7 ‘‘(3) a statement indicating—

8 ‘‘(A) that the arrangement is not a li9 censed insurer under the laws of any State,

10 ‘‘(B) whether coverage under the arrange11 ment is fully insured, and

12 ‘‘(C) if coverage under the arrangement if

13 not fully insured, (i) whether the arrangement

14 is (or has ceased to be) a certified multiple em15 ployer health plan, and (ii) if such an arrange16 ment is a certified multiple employer health

17 plan, that such arrangement is treated as an

18 employee welfare benefit plan under this title.

19 ‘‘(b) TIME FOR DISCLOSURE.—Such information

20 shall be issued to employers within such reasonable period

21 of time before becoming participating employers as may

22 be prescribed in regulations of the Secretary.

23 ‘‘SEC. 707. MAINTENANCE OF RESERVES.

24 ‘‘(a) IN GENERAL.—Each multiple employer welfare

25 arrangement which is or has been a certified multiple em-
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1 ployer health plan and under which coverage is not fully

2 insured shall establish and maintain such excess/stop loss

3 coverage as the Secretary considers appropriate and shall

4 establish and maintain reserves, consisting of—

5 ‘‘(1) a reserve for unearned contributions,

6 ‘‘(2) a reserve for payment of claims reported

7 and not yet paid and claims incurred but not yet re8 ported, and for expected administrative costs with

9 respect to such claims, and

10 ‘‘(3) a reserve, in an amount recommended by

11 the qualified actuary, for any other obligations of

12 the arrangement.

13 ‘‘(b) MINIMUM AMOUNT FOR CERTAIN RESERVES.—

14 The total of the reserves described in subsection (a)(2)

15 shall not be less than an amount equal to 25 percent of

16 expected incurred claims and expenses for the plan year.

17 ‘‘(c) REQUIRED MARGIN.—In determining the

18 amounts of reserves required under this section in connec19 tion with any multiple employer welfare arrangement, the

20 qualified actuary shall include a margin for error and

21 other fluctuations taking into account the specific

22 circumstances of such arrangement.

23 ‘‘(d) ADDITIONAL REQUIREMENTS.—The Secretary

24 may provide such additional requirements relating to re25 serves and excess/stop loss coverage as the Secretary con-
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1 siders appropriate. Such requirements may be provided,

2 by regulation or otherwise, with respect to any arrange3 ment or any class of arrangements.

4 ‘‘(e) ADJUSTMENTS FOR EXCESS/STOP LOSS COV5 ERAGE.—The Secretary may provide for adjustments to

6 the levels of reserves otherwise required under subsections

7 (a) and (b) with respect to any arrangement or class of

8 arrangements to take into account excess/stop loss cov9 erage provided with respect to such arrangement or ar10 rangements.

11 ‘‘(f) ALTERNATIVE MEANS OF COMPLIANCE.—The

12 Secretary may permit an arrangement to substitute, for

13 all or part of the reserves required under subsection (a),

14 such security, guarantee, or other financial arrangement

15 as the Secretary determines to be adequate to enable the

16 arrangement to fully meet all its financial obligations on

17 a timely basis.

18 ‘‘SEC. 708. CORRECTIVE ACTIONS.

19 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE20 SERVES.—A multiple employer welfare arrangement with

21 respect to which there is or has been in effect a certifi22 cation granted under this part shall continue to meet the

23 requirements of section 707, irrespective of whether such

24 certification continues in effect. The operating committee

25 of such arrangement shall determine semiannually wheth-
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1 er the requirements of section 707 are met. In any case

2 in which the committee determines that there is reason

3 to believe that there is or will be a failure to meet such

4 requirements, or the Secretary makes such a determina5 tion and so notifies the committee, the committee shall

6 immediately notify the qualified actuary engaged by the

7 arrangement, and such actuary shall, not later than the

8 end of the next following month, make such recommenda9 tions to the committee for corrective action as the actuary

10 determines necessary to ensure compliance with section

11 707. Not later than 10 days after receiving from the actu12 ary recommendations for corrective actions, the committee

13 shall notify the Secretary (in such form and manner as

14 the Secretary may prescribe by regulation) of such rec15 ommendations of the actuary for corrective action, to16 gether with a description of the actions (if any) that the

17 committee has taken or plans to take in response to such

18 recommendations. The committee shall thereafter report

19 to the Secretary, in such form and frequency as the Sec20 retary may specify to the committee, regarding corrective

21 action taken by the committee until the requirements of

22 section 707 are met.

23 ‘‘(b) TERMINATION.—

24 ‘‘(1) NOTICE OF TERMINATION.—In any case in

25 which the operating committee of a multiple em-
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1 ployer welfare arrangement which is or has been a

2 certified multiple employer health plan determines

3 that there is reason to believe that the arrangement

4 will terminate, the committee shall so inform the

5 Secretary, shall develop a plan for winding up the

6 affairs of the arrangement in connection with such

7 termination in a manner which will result in timely

8 payment of all benefits for which the arrangement is

9 obligated, and shall submit such plan in writing to

10 the Secretary. Actions required under this paragraph

11 shall be taken in such form and manner as may be

12 prescribed in regulations of the Secretary.

13 ‘‘(2) ACTIONS REQUIRED IN CONNECTION WITH

14 TERMINATION.—In any case in which—

15 ‘‘(A) the Secretary has been notified under

16 subsection (a) of a failure of a multiple em17 ployer welfare arrangement which is or has

18 been a certified multiple employer health plan

19 to meet the requirements of section 707 and

20 has not been notified by the operating commit21 tee of the arrangement that corrective action

22 has restored compliance with such require23 ments, and

24 ‘‘(B) the Secretary determines that the

25 continuing failure to meet the requirements of
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1 section 707 can be reasonably expected to result

2 in a continuing failure to pay benefits for which

3 the arrangement is obligated,

4 the operating committee of the arrangement shall, at

5 the direction of the Secretary, terminate the ar6 rangement and, in the course of the termination,

7 take such actions as the Secretary may require as

8 necessary to ensure that the affairs of the arrange9 ment will be, to the maximum extent possible, wound

10 up in a manner which will result in timely payment

11 of all benefits for which the arrangement is

12 obligated.

13 ‘‘SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF

14 CERTIFICATION.

15 ‘‘(a) EXPIRATION AND RENEWAL OF CERTIFI16 CATION.—A certification granted to a multiple employer

17 welfare arrangement under this part shall expire 3 years

18 after the date on which the certification is granted. A cer19 tification which has expired may be renewed by means of

20 application for a certification in accordance with section

21 704.

22 ‘‘(b) SUSPENSION OR REVOCATION OF CERTIFI23 CATION BY SECRETARY.—The Secretary may suspend or

24 revoke a certification granted to a multiple employer wel25 fare arrangement under this part—
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1 ‘‘(1) for any cause that may serve as the basis

2 for the denial of an initial application for such a cer3 tification under section 704, or

4 ‘‘(2) if the Secretary finds that—

5 ‘‘(A) the arrangement, or the sponsor

6 thereof, in the transaction of business while

7 under the certification, has used fraudulent, co8 ercive, or dishonest practices, or has dem9 onstrated incompetence, untrustworthiness, or

10 financial irresponsibility,

11 ‘‘(B) the arrangement, or the sponsor

12 thereof, is using such methods or practices in

13 the conduct of its operations, so as to render its

14 further transaction of operations hazardous or

15 injurious to participating employers, or covered

16 individuals,

17 ‘‘(C) the arrangement, or the sponsor

18 thereof, has refused to be examined in accord19 ance with this part or to produce its accounts,

20 records, and files for examination in accordance

21 with this part, or

22 ‘‘(D) any of the officers of the arrange23 ment, or the sponsor thereof, has refused to

24 give information with respect to the affairs of

25 the arrangement or the sponsor or to perform
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1 any other legal obligation relating to such an

2 examination when required by the Secretary in

3 accordance with this part.

4 Any such suspension or revocation under this subsection

5 shall be effective only upon a final decision of the Sec6 retary made after notice and opportunity for a hearing

7 is provided in accordance with section 710.

8 ‘‘(c) SUSPENSION OR REVOCATION OF CERTIFI9 CATION UNDER COURT PROCEEDINGS.—A certification

10 granted to a multiple employer welfare arrangement under

11 this part may be suspended or revoked by a court of com12 petent jurisdiction in an action by the Secretary brought

13 under paragraph (2), (5), or (6) of section 502(a), except

14 that the suspension or revocation under this subsection

15 shall be effective only upon notification of the Secretary

16 of such suspension or revocation.

17 ‘‘(d) NOTIFICATION OF PARTICIPATING EMPLOY18 ERS.—All participating employers in a multiple employer

19 welfare arrangement shall be notified of the expiration,

20 suspension, or revocation of a certification granted to such

21 arrangement under this part, by such persons and in such

22 form and manner as shall be prescribed in regulations of

23 the Secretary, not later than 20 days after such expiration

24 or after receipt of notice of a final decision requiring such

25 suspension or revocation.
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1 ‘‘(e) PUBLICATION OF EXPIRATIONS, SUSPENSIONS,

2 AND REVOCATIONS.—The Secretary shall publish all expi3 rations of, and all final decisions to suspend or revoke,

4 certifications granted under this part.

5 ‘‘SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.

6 ‘‘(a) IN GENERAL.—Any decision by the Secretary

7 which involves the denial of an application by a multiple

8 employer welfare arrangement for a certification under

9 this part or the suspension or revocation of such a certifi10 cation shall contain a statement of the specific reason or

11 reasons supporting the Secretary’s action, including ref12 erence to the specific terms of the certification and the

13 statutory provision or provisions relevant to the deter14 mination.

15 ‘‘(b) DENIALS OF APPLICATIONS.—In the case of the

16 denial of an application for a certification under this part,

17 the Secretary shall send a copy of the decision to the appli18 cant by certified or registered mail at the address specified

19 in the records of the Secretary. Such decision shall con20 stitute the final decision of the Secretary unless the ar21 rangement, or any party that would be prejudiced by the

22 decision, files a written appeal of the denial within 30 days

23 after the mailing of such decision. The Secretary may af24 firm, modify, or reverse the initial decision. The decision

25 on appeal shall become final upon the mailing of a copy
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1 by certified or registered mail to the arrangement or party

2 that filed the appeal.

3 ‘‘(c) SUSPENSIONS OR REVOCATIONS OF CERTIFI4 CATION.—In the case of the suspension or revocation of

5 a certification granted under this part, the Secretary shall

6 send a copy of the decision to the arrangement by certified

7 or registered mail at its address, as specified in the

8 records of the Secretary. Upon the request of the arrange9 ment, or any party that would be prejudiced by the sus10 pension or revocation, filed within 15 days of the mailing

11 of the Secretary’s decision, the Secretary shall schedule

12 a hearing on such decision by written notice, sent by cer13 tified or registered mail to the arrangement or party

14 requesting such hearing. Such notice shall set forth—

15 ‘‘(1) a specific date and time for the hearing,

16 which shall be within the 10-day period commencing

17 20 days after the date of the mailing of the notice,

18 and

19 ‘‘(2) a specific place for the hearing, which shall

20 be in the District of Columbia or in the State and

21 county thereof (or parish or other similar political

22 subdivision thereof) in which is located the arrange23 ment’s principal place of business.
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1 The decision as affirmed or modified in such hearing shall

2 constitute the final decision of the Secretary, unless such

3 decision is reversed in such hearing.

4 ‘‘SEC. 711. SMALL EMPLOYER POOLING ARRANGEMENTS.

5 ‘‘(a) REQUIREMENTS FOR SEPAS APPLICABLE

6 WHERE SIGNIFICANT NUMBER OF SMALL EMPLOYERS

7 PARTICIPATE.—In any case in which coverage is provided

8 for the current plan year under a multiple employer health

9 plan and more than 10 percent of the participating em10 ployers in the arrangement are small employers (as de11 fined in section 1902 of the Bipartisan Health Care Re12 form Act of 1994), the entity sponsoring such arrange13 ment shall ensure that such arrangement is maintained

14 for such year in the form of a small employer pooling ar15 rangement.

16 ‘‘(b) REQUIREMENTS FOR SMALL EMPLOYER POOL17 ING ARRANGEMENTS.—For purposes of this part, an ar18 rangement is maintained in the form of a small employer

19 pooling arrangement for any applicable fiscal year, if—

20 ‘‘(1) the benefits under the arrangement consist

21 solely of medical care described in section 607(1)

22 (disregarding such incidental benefits as the Sec23 retary of Labor shall specify by regulations),

24 ‘‘(2) the general requirements of subsection (c)

25 are met with respect to the arrangement, and
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1 ‘‘(3) the arrangement constitutes a certified

2 multiple employer health plan under this part and

3 the requirements of subsection (c) are met with re4 spect to the arrangement.

5 ‘‘(c) REQUIREMENTS FOR ARRANGEMENTS PROVID6 ING SELF-INSURED COVERAGE.—

7 ‘‘(1) IN GENERAL.—The requirements of this

8 subsection with respect to a small employer purchas9 ing arrangement are as follows:

10 ‘‘(A) The arrangement meets the guaran11 teed issue requirements specified in paragraph

12 (2).

13 ‘‘(B) The arrangement participates in any

14 risk adjustment mechanisms established under

15 section 1023 of the Bipartisan Health Care Re16 form Act of 1994.

17 ‘‘(C) Under the arrangement, with respect

18 to all participating employers as of the begin19 ning of each plan year, the total number of eli20 gible employees is not less than 100.

21 ‘‘(2) REQUIRED SCOPE OF ELIGIBILITY FOR

22 PARTICIPATING EMPLOYERS.—

23 ‘‘(A) IN GENERAL.—Under the terms of

24 the written instruments governing the arrange25 ment, all restrictions on the eligibility of em-
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1 ployers to be participating employers in the ar2 rangement are specifically set forth and consist

3 solely of criteria described in subparagraph (B),

4 and all employers with respect to whom such

5 criteria are met may be participating employers.

6 No such restrictions under the arrangement

7 shall be considered enforceable unless they are

8 so specified.

9 ‘‘(B) CRITERIA FOR RESTRICTIONS ON

10 PARTICIPATING EMPLOYERS.—The terms of the

11 arrangement shall define restrictions on eligi12 bility of employers to be participating employers

13 only by reference to one or more of the follow14 ing criteria:

15 ‘‘(i) Participating employers are re16 stricted to those located in one or more

17 specified geographic locations.

18 ‘‘(ii) Participating employers are re19 stricted to those who are (or whose owners,

20 officers, or employees are) members of one

21 or more trade associations, industry asso22 ciations, professional associations, or

23 chambers of commerce (or similar business

24 groups).
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1 ‘‘(iii) Participating employers are re2 stricted to those who are otherwise related

3 by specified supply contracts, franchise ar4 rangements, or common ownership inter5 ests.

6 ‘‘(iv) Participating employers are re7 stricted to employers whose employees are

8 covered under one or more specified collec9 tive bargaining agreements.

10 ‘‘(d) REFERENCE TO LIMITATION ON SELF-INSUR11 ANCE BY SMALL EMPLOYERS.—For restriction on self-in12 surance by small employers, see section 1305 of the Bipar13 tisan Health Care Reform Act of 1994.’’.

14 (b) CONFORMING AMENDMENT TO DEFINITION OF

15 PLAN SPONSOR.—Section 3(16)(B) of such Act (29

16 U.S.C. 1002(16)(B)) is amended by adding at the end the

17 following new sentence: ‘‘Such term also includes the spon18 sor (as defined in section 701(5)) of a multiple employer

19 welfare arrangement which is or has been a certified mul20 tiple employer health plan (as defined in section 701(9)).’’.

21 (c) ALTERNATIVE MEANS OF DISTRIBUTION OF

22 SUMMARY PLAN DESCRIPTIONS.—Section 110 of such

23 Act (29 U.S.C. 1030) is amended by adding at the end

24 the following new subsection:
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1 ‘‘(c) The Secretary shall prescribe, as an alternative

2 method for distributing summary plan descriptions in

3 order to meet the requirements of section 104(b)(1) in the

4 case of multiple employer welfare arrangements providing

5 benefits consisting of medical care described in section

6 607(1), a means of distribution of such descriptions by

7 participating employers.’’.

8 (d) CLERICAL AMENDMENT.—The table of contents

9 in section 1 of the Employee Retirement Income Security

10 Act of 1974 is amended by inserting after the item relat11 ing 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.’’.

12 SEC. 1402. CLARIFICATION OF SCOPE OF PREEMPTION

13 RULES.

14 (a) IN GENERAL.—Section 514(b)(6)(A)(ii) of the

15 Employee Retirement Income Security Act of 1974 (29

16 U.S.C. 1144(b)(6)(A)(ii)) is amended by inserting ‘‘, but

17 only, in the case of an arrangement which provides medi-
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1 cal care described in section 607(1) and with respect to

2 which a certification under part 7 is not in effect,’’ before

3 ‘‘to the extent not inconsistent with the preceding sections

4 of this title’’.

5 (b) CROSS-REFERENCE.—Section 514(b)(6) of such

6 Act (29 U.S.C. 1144(b)(6)) is amended by adding at the

7 end the following new subparagraph:

8 ‘‘(E) For additional rules relating to exemption from

9 subparagraph (A)(ii) of multiple employer welfare ar10 rangements providing medical care, see part 7.’’.

11 SEC. 1403. CLARIFICATION OF TREATMENT OF SINGLE EM12 PLOYER ARRANGEMENTS.

13 Section 3(40)(B) of the Employee Retirement Income

14 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is

15 amended—

16 (1) in clause (i), by inserting ‘‘for any plan year

17 of any such plan, or any fiscal year of any such

18 other arrangement,’’ after ‘‘single employer’’, and by

19 inserting ‘‘during such year or at any time during

20 the preceding 1-year period’’ after ‘‘common con21 trol’’;

22 (2) in clause (iii), by striking ‘‘common control

23 shall not be based on an interest of less than 25 per24 cent’’ and inserting ‘‘an interest of greater than 25

25 percent may not be required as the minimum inter-
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1 est necessary for common control’’, and by striking

2 ‘‘and’’ at the end;

3 (3) by redesignating clauses (iv) and (v) as

4 clauses (v) and (vi); and

5 (4) by inserting after clause (iii) the following

6 new clause:

7 ‘‘(iv) in determining, after the application of

8 clause (i), whether benefits are provided to employ9 ees of two or more employers, the arrangement shall

10 be treated as having only 1 participating employer

11 if, at the time the determination under clause (i) is

12 made, the number of individuals who are employees

13 and former employees of any one participating em14 ployer and who are covered under the arrangement

15 is greater than 95 percent of the aggregate number

16 of all individuals who are employees or former em17 ployees of participating employers and who are

18 covered under the arrangement,’’.

19 SEC. 1404. CLARIFICATION OF TREATMENT OF CERTAIN

20 COLLECTIVELY BARGAINED ARRANGE21 MENTS.

22 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em23 ployee Retirement Income Security Act of 1974 (29

24 U.S.C. 1002(40)(A)(i)) is amended to read as follows:
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1 ‘‘(i) under or pursuant to one or more collective

2 bargaining agreements,’’.

3 (b) LIMITATIONS.—Section 3(40) of such Act (29

4 U.S.C. 1002(40)) is amended by adding at the end the

5 following new subparagraphs:

6 ‘‘(C) Clause (i) of subparagraph (A) shall apply only

7 if—

8 ‘‘(i) the plan or other arrangement, and the em9 ployee organization or any other entity sponsoring

10 the plan or other arrangement, do not—

11 ‘‘(I) utilize the services of any licensed in12 surance agent or broker for soliciting or enroll13 ing employers or individuals as participating

14 employers or covered individuals under the plan

15 or other arrangement, or

16 ‘‘(II) pay a commission or any other type

17 of compensation to a person that is related ei18 ther to the volume or number of employers or

19 individuals solicited or enrolled as participating

20 employers or covered individuals under the plan

21 or other arrangement, or to the dollar amount

22 or size of the contributions made by participat23 ing employers or covered individuals to the plan

24 or other arrangement,
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1 ‘‘(ii) not less than 85 percent of the covered in2 dividuals under the plan or other arrangement are

3 individuals who—

4 ‘‘(I) are employed within a bargaining unit

5 covered by at least one of the collective bargain6 ing agreements with a participating employer

7 (or are covered on the basis of an individual’s

8 employment in such a bargaining unit), or

9 ‘‘(II) are present or former employees of

10 the sponsoring employee organization, of an

11 employer who is or was a party to at least one

12 of the collective bargaining agreements, or of

13 the plan or other arrangement or a related plan

14 or arrangement (or are covered on the basis of

15 such present or former employment),

16 ‘‘(iii) the plan or other arrangement does not

17 provide benefits to individuals (other than individ18 uals described in clause (ii)(II)) who work outside

19 the standard metropolitan statistical area in which

20 the sponsoring employee organization represents em21 ployees (or to individuals (other than individuals de22 scribed in clause (ii)(II)) on the basis of such work

23 by others), except that in the case of a sponsoring

24 employee organization that represents employees

25 who work outside of any standard metropolitan sta-
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1 tistical area, this clause shall be applied by reference

2 to the State in which the sponsoring organization

3 represents employees, and

4 ‘‘(iv) the employee organization or other entity

5 sponsoring the plan or other arrangement certifies

6 to the Secretary each year, in a form and manner

7 which shall be prescribed in regulations of the Sec8 retary—

9 ‘‘(I) that the plan or other arrangement

10 meets the requirements of clauses (i), (ii), and

11 (iii), and

12 ‘‘(II) if, for any year, 10 percent or more

13 of the covered individuals under the plan are in14 dividuals not described in subclause (I) or (II)

15 of clause (ii), the total number of covered indi16 viduals and the total number of covered individ17 uals not so described.

18 ‘‘(D)(i) Clause (i) of subparagraph (A) shall not

19 apply to a plan or other arrangement that is established

20 or maintained pursuant to one or more collective bargain21 ing agreements which the National Labor Relations Board

22 determines to have been negotiated or otherwise agreed

23 to in a manner or through conduct which violates section

24 8(a)(2) of the National Labor Relations Act (29 U.S.C.

25 158(a)(2)).
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1 ‘‘(ii)(I) Whenever a State insurance commissioner

2 has reason to believe that this subparagraph is applicable

3 to part or all of a plan or other arrangement, the State

4 insurance commissioner may file a petition with the Na5 tional Labor Relations Board for a determination under

6 clause (i), along with sworn written testimony supporting

7 the petition.

8 ‘‘(II) The Board shall give any such petition priority

9 over all other petitions and cases, other than other peti10 tions under subclause (I) or cases given priority under sec11 tion 10 of the National Labor Relations Act (29 U.S.C.

12 160).

13 ‘‘(III) The Board shall determine, upon the petition

14 and any response, whether, on the facts before it, the plan

15 or other arrangement was negotiated, created, or other16 wise agreed to in a manner or through conduct which vio17 lates section 8(a)(2) of the National Labor Relations Act

18 (29 U.S.C. 158(a)(2)). Such determination shall con19 stitute a final determination for purposes of this subpara20 graph and shall be binding in all Federal or State actions

21 with respect to the status of the plan or other arrangement

22 under this subparagraph.

23 ‘‘(IV) A person aggrieved by the determination of the

24 Board under subclause (III) may obtain review of the de25 termination in any United States court of appeals in the
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1 circuit in which the collective bargaining at issue occurred.

2 Commencement of proceedings under this subclause shall

3 not, unless specifically ordered by the court, operate as

4 a stay of any State administrative or judicial action or

5 proceeding related to the status of the plan or other ar6 rangement, except that in no case may the court stay, be7 fore the completion of the review, an order which prohibits

8 the enrollment of new individuals into coverage under a

9 plan or arrangement.’’.

10 SEC. 1405. EMPLOYEE LEASING HEALTH CARE ARRANGE11 MENTS.

12 (a) EMPLOYEE LEASING HEALTH CARE ARRANGE13 MENT DEFINED.—Section 3 of the Employee Retirement

14 Income Security Act of 1974 (29 U.S.C. 1002) is amended

15 by adding at the end the following new paragraph:

16 ‘‘(43)(A) Subject to subparagraph (B), the term ‘em17 ployee leasing health care arrangement’ means any labor

18 leasing arrangement, staff leasing arrangement, extended

19 employee staffing or supply arrangement, or other ar20 rangement under which—

21 ‘‘(i) one business or other entity (hereinafter in

22 this paragraph referred to as the ‘lessee’), under a

23 lease or other arrangement entered into with any

24 other business or other entity (hereinafter in this

25 paragraph referred to as the ‘lessor’), receives from
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1 the lessor the services of individuals to be performed

2 under such lease or other arrangement, and

3 ‘‘(ii) benefits consisting of medical care de4 scribed in section 607(1) are provided to such indi5 viduals or such individuals and their dependents as

6 participants and beneficiaries.

7 ‘‘(B) Such term does not include an arrangement de8 scribed in subparagraph (A) if, under such arrangement,

9 the lessor retains, both legally and in fact, a complete

10 right of direction and control within the scope of employ11 ment over the individuals whose services are supplied

12 under such lease or other arrangement, and such individ13 uals perform a specified function for the lessee which is

14 separate and divisible from the primary business or oper15 ations of the lessee.’’.

16 (b) TREATMENT OF EMPLOYEE LEASING HEALTH

17 CARE ARRANGEMENTS AS MULTIPLE EMPLOYER WEL18 FARE ARRANGEMENTS.—Section 3(40) of such Act (29

19 U.S.C. 1002(40)) (as amended by section 1404(b)) is fur20 ther amended by adding at the end the following new sub21 paragraph:

22 ‘‘(E) The term ‘multiple employer welfare arrange23 ment’ includes any employee leasing health care arrange24 ment.’’.
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1 (c) SPECIAL RULES FOR EMPLOYEE LEASING

2 HEALTH CARE ARRANGEMENTS.—

3 (1) IN GENERAL.—Part 7 of subtitle B of title

4 I of such Act (as added by section 1401(a)) is

5 amended by adding at the end the following new sec6 tion:

7 ‘‘SEC. 712. SPECIAL RULES FOR EMPLOYEE LEASING

8 HEALTH CARE ARRANGEMENTS.

9 ‘‘(a) IN GENERAL.—The requirements of paragraphs

10 (1), (2), and (3) of section 704(b) shall be treated as satis11 fied in the case of a multiple employer welfare arrange12 ment that is an employee leasing health care arrangement

13 if the application for certification includes information

14 which the Secretary determines to be complete and accu15 rate and sufficient to demonstrate that the following

16 requirements are met with respect to the arrangement:

17 ‘‘(1) 3-YEAR TENURE.—The lessor has been in

18 operation for not less than 3 years.

19 ‘‘(2) SOLICITATION RESTRICTIONS.—Employee

20 leasing services provided under the arrangement are

21 not solicited, advertised, or marketed through li22 censed insurance agents or brokers acting in such

23 capacity.

24 ‘‘(3) CREATION OF EMPLOYMENT RELATION25 SHIP.—
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1 ‘‘(A) DISCLOSURE STATEMENT.—Written

2 notice is provided to each applicant for employ3 ment subject to coverage under the arrange4 ment, at the time of application for employment

5 and before commencing coverage under the ar6 rangement, stating that the employer is the les7 sor under the arrangement.

8 ‘‘(B) INFORMED CONSENT.—Each such

9 applicant signs a written statement consenting

10 to the employment relationship with the lessor.

11 ‘‘(C) INFORMED RECRUITMENT OF LES12 SEE’S EMPLOYEES.—In any case in which the

13 lessor offers employment to an employee of a

14 lessee under the arrangement, the lessor in15 forms each employee in writing that his or her

16 acceptance of employment with the lessor is vol17 untary and that refusal of such offer will not be

18 deemed to be resignation from or abandonment

19 of current employment.

20 ‘‘(4) REQUISITE EMPLOYER-EMPLOYEE RELA21 TIONSHIP UNDER ARRANGEMENT.—Under the em22 ployer-employee relationship with the employees of

23 the lessor—
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1 ‘‘(A) the lessor retains the ultimate author2 ity to hire, terminate, and reassign such em3 ployees,

4 ‘‘(B) the lessor is responsible for the pay5 ment of wages, payroll-related taxes, and em6 ployee benefits, without regard to payment by

7 the lessee to the lessor for its services,

8 ‘‘(C) the lessor maintains the right of di9 rection and control over its employees, except to

10 the extent that the lessee is responsible for su11 pervision of the work performed consistent with

12 the lessee’s responsibility for its product or

13 service, and

14 ‘‘(D) in accordance with section 301(a) of

15 the Labor Management Relations Act, 1947 (29

16 U.S.C. 185(a)), the lessor retains in the ab17 sence of an applicable collective bargaining

18 agreement, the right to enter into arbitration

19 and to decide employee grievances, and

20 ‘‘(E) no owner, officer, or director of, or

21 partner in, a lessee is an employee of the lessor,

22 and not more than 10 percent of the individuals

23 covered under the arrangement consist of own24 ers, officers, or directors of, or partners in,

25 such a lessee (or any combination thereof).
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1 ‘‘(b) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) LESSOR.—The term ‘lessor’ means the

3 business or other entity from which services of indi4 viduals are obtained under an employee leasing

5 health care arrangement.

6 ‘‘(2) LESSEE.—The term ‘lessee’ means a busi7 ness or other entity which receives the services of in8 dividuals provided under an employee leasing health

9 care arrangement.’’.

10 (2) CLERICAL AMENDMENT.—The table of con11 tents in section 1 of such Act (as amended by sec12 tion 1401(d)) is further amended by inserting after

13 the item relating to section 711 the following new

14 item:

‘‘Sec. 712. Employee leasing health care arrangements.’’.

15 SEC. 1406. ENFORCEMENT PROVISIONS RELATING TO MUL16 TIPLE EMPLOYER WELFARE ARRANGEMENTS

17 AND EMPLOYEE LEASING HEALTH CARE AR18 RANGEMENTS.

19 (a) ENFORCEMENT OF FILING REQUIREMENTS.—

20 Section 502 of the Employee Retirement Income Security

21 Act of 1974 (29 U.S.C. 1132) is amended—

22 (1) in subsection (a)(6), by striking ‘‘subsection

23 (c)(2) or (i) or (l)’’ and inserting ‘‘paragraph (2) or

24 (4) of subsection (c) or subsection (i) or (l)’’; and
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1 (2) by adding at the end of subsection (c) the

2 following new paragraph:

3 ‘‘(4) The Secretary may assess a civil penalty against

4 any person of up to $1,000 a day from the date of such

5 person’s failure or refusal to file the information required

6 to be filed with the Secretary under section 101(g).’’.

7 (b) ACTIONS BY STATES IN FEDERAL COURT.—Sec8 tion 502(a) of such Act (29 U.S.C. 1132(a)) is amended—

9 (1) in paragraph (5), by striking ‘‘or’’ at the

10 end;

11 (2) in paragraph (6), by striking the period and

12 inserting ‘‘, or’’; and

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

14 ‘‘(7) by a State official having authority under

15 the law of such State to enforce the laws of such

16 State regulating insurance, to enjoin any act or

17 practice which violates any provision of part 7 which

18 such State has the power to enforce under part 7.’’.

19 (c) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

20 MISREPRESENTATIONS.—Section 501 of such Act (29

21 U.S.C. 1131) is amended—

22 (1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and

23 (2) by adding at the end the following new sub24 section:
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1 ‘‘(b) Any person who, either willfully or with willful

2 blindness, falsely represents, to any employee, any employ3 ee’s beneficiary, any employer, the Secretary, or any State,

4 an arrangement established or maintained for the purpose

5 of offering or providing any benefit described in section

6 3(1) to employees or their beneficiaries as—

7 ‘‘(1) being a certified multiple employer health

8 plan (as defined in section 701(9)),

9 ‘‘(2) being an employee leasing health care ar10 rangement under a certification granted under part

11 7, or

12 ‘‘(3) having been established or maintained

13 under or pursuant to a collective bargaining agree14 ment,

15 shall, upon conviction, be imprisoned not more than five

16 years, be fined under title 18, United States Code, or

17 both.’’.

18 (d) CEASE ACTIVITIES ORDERS.—Section 502 of

19 such Act (29 U.S.C. 1132) is amended by adding at the

20 end the following new subsection:

21 ‘‘(m)(1) Subject to paragraph (2), upon application

22 by the Secretary showing the operation, promotion, or

23 marketing of a multiple employer welfare arrangement

24 providing benefits consisting of medical care described in

25 section 607(1) that—
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1 ‘‘(A) is not licensed, registered, or otherwise ap2 proved under the insurance laws of the States in

3 which the arrangement offers or provides benefits, or

4 ‘‘(B) is not operating in accordance with the

5 terms of a certification granted by the Secretary

6 under part 7,

7 a district court of the United States shall enter an order

8 requiring that the arrangement cease activities.

9 ‘‘(2) Paragraph (1) shall not apply in the case of a

10 multiple employer welfare arrangement if the arrangement

11 shows that—

12 ‘‘(A) coverage under it is fully insured, within

13 the meaning of section 701(8),

14 ‘‘(B) it is licensed, registered, or otherwise ap15 proved in each State in which it offers or provides

16 benefits, except to the extent that such State does

17 not require licensing, registration, or approval of

18 multiple employer welfare arrangements under which

19 all coverage is fully insured, and

20 ‘‘(C) with respect to each such State, it is oper21 ating in accordance with applicable State insurance

22 laws that are not superseded under section 514.

23 ‘‘(3) The court may grant such additional equitable

24 or remedial relief, including any relief available under this

25 title, as it deems necessary to protect the interests of the
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1 public and of persons having claims for benefits against

2 the arrangement.’’.

3 (e) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

4 Section 503 of such Act (29 U.S.C. 1133) is amended by

5 adding at the end (after and below paragraph (2)) the fol6 lowing new sentence: ‘‘The terms of each multiple em7 ployer welfare arrangement to which this section applies

8 and which provides benefits consisting of medical care de9 scribed in section 607(1) shall require the operating com10 mittee or the named fiduciary (as applicable) to ensure

11 that the requirements of this section are met in connection

12 with claims filed under the arrangement.’’.

13 SEC. 1407. FILING REQUIREMENTS FOR MULTIPLE EM14 PLOYER WELFARE ARRANGEMENTS PROVID15 ING HEALTH BENEFITS.

16 Section 101 of the Employee Retirement Income Se17 curity Act of 1974 (29 U.S.C. 1021) is amended—

18 (1) by redesignating subsection (g) as sub19 section (h); and

20 (2) by inserting after subsection (f) the follow21 ing new subsection:

22 ‘‘(g)(1) Each multiple employer welfare arrangement

23 shall file with the Secretary a registration statement de24 scribed in paragraph (2) within 60 days before commenc25 ing operations (in the case of an arrangement commencing
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1 operations on or after January 1, 1997) and no later than

2 February 15 of each year (in the case of an arrangement

3 in operation since the beginning of such year), unless, as

4 of the date by which such filing otherwise must be made,

5 such arrangement provides no benefits consisting of medi6 cal care described in section 607(1).

7 ‘‘(2) Each registration statement—

8 ‘‘(A) shall be filed in such form, and contain

9 such information concerning the multiple employer

10 welfare arrangement and any persons involved in its

11 operation (including whether coverage under the ar12 rangement is fully insured), as shall be provided in

13 regulations which shall be prescribed by the Sec14 retary, and

15 ‘‘(B) if coverage under the arrangement is not

16 fully insured, shall contain a certification that copies

17 of such registration statement have been transmitted

18 by certified mail to—

19 ‘‘(i) in the case of an arrangement which

20 is a certified multiple employer health plan (as

21 defined in section 701(9)), the State insurance

22 commissioner of the domicile State of such ar23 rangement, or

24 ‘‘(ii) in the case of an arrangement which

25 is not a certified multiple employer health plan,
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1 the State insurance commissioner of each State

2 in which the arrangement is located.

3 ‘‘(3) The person or persons responsible for filing the

4 annual registration statement are—

5 ‘‘(A) the trustee or trustees so designated by

6 the terms of the instrument under which the mul7 tiple employer welfare arrangement is established or

8 maintained, or

9 ‘‘(B) in the case of a multiple employer welfare

10 arrangement for which the trustee or trustees can11 not be identified, or upon the failure of the trustee

12 or trustees of an arrangement to file, the person or

13 persons actually responsible for the acquisition, dis14 position, control, or management of the cash or

15 property of the arrangement, irrespective of whether

16 such acquisition, disposition, control, or management

17 is exercised directly by such person or persons or

18 through an agent designated by such person or

19 persons.

20 ‘‘(4) Any agreement entered into under section

21 506(c) with a State as the primary domicile State with

22 respect to any multiple employer welfare arrangement

23 shall provide for simultaneous filings of reports required

24 under this subsection with the Secretary and with the

25 State insurance commissioner of such State.’’.
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1 SEC. 1408. COOPERATION BETWEEN FEDERAL AND STATE

2 AUTHORITIES.

3 Section 506 of the Employee Retirement Income Se4 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

5 at the end the following new subsection:

6 ‘‘(c) RESPONSIBILITY WITH RESPECT TO MULTIPLE

7 EMPLOYER WELFARE ARRANGEMENTS.—

8 ‘‘(1) STATE ENFORCEMENT.—

9 ‘‘(A) AGREEMENTS WITH STATES.—A

10 State may enter into an agreement with the

11 Secretary for delegation to the State of some or

12 all of the Secretary’s authority under sections

13 502 and 504 to enforce the provisions of this

14 title applicable to multiple employer welfare ar15 rangements which are or have been certified

16 multiple employer health plans (as defined in

17 section 701(9)). The Secretary shall enter into

18 the agreement if the Secretary determines that

19 the delegation provided for therein would not

20 result in a lower level or quality of enforcement

21 of the provisions of this title.

22 ‘‘(B) DELEGATIONS.—Any department,

23 agency, or instrumentality of a State to which

24 authority is delegated pursuant to an agree25 ment entered into under this paragraph may, if

26 authorized under State law and to the extent
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1 consistent with such agreement, exercise the

2 powers of the Secretary under this title which

3 relate to such authority.

4 ‘‘(C) CONCURRENT AUTHORITY OF THE

5 SECRETARY.—If the Secretary delegates author6 ity to a State in an agreement entered into

7 under subparagraph (A), the Secretary may

8 continue to exercise such authority concurrently

9 with the State.

10 ‘‘(D) RECOGNITION OF PRIMARY DOMICILE

11 STATE.—In entering into any agreement with a

12 State under subparagraph (A), the Secretary

13 shall ensure that, as a result of such agreement

14 and all other agreements entered into under

15 subparagraph (A), only one State will be recog16 nized, with respect to any particular multiple

17 employer welfare arrangement, as the primary

18 domicile State to which authority has been dele19 gated pursuant to such agreements.

20 ‘‘(2) ASSISTANCE TO STATES.—The Secretary

21 shall—

22 ‘‘(A) provide enforcement assistance to the

23 States with respect to multiple employer welfare

24 arrangements, including, but not limited to, co25 ordinating Federal and State efforts through
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1 the establishment of cooperative agreements

2 with appropriate State agencies under which

3 the Pension and Welfare Benefits Administra4 tion keeps the States informed of the status of

5 its cases and makes available to the States in6 formation obtained by it,

7 ‘‘(B) provide continuing technical assist8 ance to the States with respect to issues involv9 ing multiple employer welfare arrangements

10 and this Act,

11 ‘‘(C) assist the States in obtaining from

12 the Office of Regulations and Interpretations

13 timely and complete responses to requests for

14 advisory opinions on issues described in sub15 paragraph (B), and

16 ‘‘(D) distribute copies of all advisory opin17 ions described in subparagraph (C) to the State

18 insurance commissioner of each State.’’.

19 SEC. 1409. EFFECTIVE DATE; TRANSITIONAL RULES.

20 (a) EFFECTIVE DATE.—The amendments made by

21 this part shall take effect January 1, 1997, except that

22 the Secretary of Labor shall first issue regulations to carry

23 out such amendments by not later than January 1, 1996.

24 The Secretary shall issue all regulations necessary to carry

25 out such amendments before the effective date thereof.
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1 (b) TRANSITIONAL RULES.—If the sponsor of a mul2 tiple employer welfare arrangement which, as of January

3 1, 1996, provides benefits consisting of medical care de4 scribed in section 607(1) of the Employee Retirement In5 come Security Act of 1974 (29 U.S.C. 1167(1)) files with

6 the Secretary of Labor an application for a certification

7 under part 7 of subtitle B of title I of such Act within

8 180 days after such date and the Secretary has not, as

9 of 90 days after receipt of such application, found such

10 application to be materially deficient, section 514(b)(6)(A)

11 of such Act (29 U.S.C. 1144(b)(6)(A)) shall not apply

12 with respect to such arrangement during the 18-month pe13 riod following such date. If the Secretary determines, at

14 any time after the date of enactment of this Act, that any

15 such exclusion from coverage under the provisions of such

16 section 514(b)(6)(A) of such Act of a multiple employer

17 welfare arrangement would be detrimental to the interests

18 of individuals covered under such arrangement, such ex19 clusion shall cease as of the date of the determination.

20 Any determination made by the Secretary under this sub21 section shall be in the Secretary’s sole discretion.
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1 PART 2—SIMPLIFYING FILING OF REPORTS FOR

2 EMPLOYERS COVERED UNDER MULTIPLE

3 EMPLOYER WELFARE ARRANGEMENTS PRO4 VIDING FULLY INSURED COVERAGE CON5 SISTING OF MEDICAL CARE

6 SEC. 1411. SINGLE ANNUAL FILING FOR ALL PARTICIPAT7 ING EMPLOYERS.

8 (a) IN GENERAL.—Section 110 of the Employee Re9 tirement Income Security Act of 1974 (29 U.S.C. 1030),

10 as amended by section 1401(c) of this subtitle, is amended

11 by adding at the end the following new subsection:

12 ‘‘(d) The Secretary shall prescribe by regulation or

13 otherwise an alternative method providing for the filing

14 of a single annual report (as referred to in section

15 104(a)(1)(A)) with respect to all employers who are par16 ticipating employers under a multiple employer welfare ar17 rangement under which all coverage consists of medical

18 care (described in section 607(1)) and is fully insured (as

19 defined in section 701(8)).’’

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

21 subsection (a) shall take effect on the date of the enact22 ment of this Act. The Secretary of Labor shall prescribe

23 the alternative method referred to in section 110(d) of the

24 Employee Retirement Income Security Act of 1974, as

25 added by such amendment, within 90 days after the date

26 of the enactment of this Act.
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1 Subtitle F—Definitions; General

2 Provisions

3 PART 1—DEFINITIONS

4 SEC. 1901. GENERAL DEFINITIONS.

5 For purposes of this Act:

6 (1) APPLICABLE REGULATORY AUTHORITY.—

7 The term ‘‘applicable regulatory authority’’ means,

8 with respect to a carrier operating in a State—

9 (A) the State insurance commissioner, or

10 (B) the Secretary, in the case described in

11 section 1302(b)(2).

12 (2) FAMILY MEMBER.—

13 (A) IN GENERAL.—Individuals are consid14 ered to be members of a family if—

15 (i) they are married, or

16 (ii) they have a legal parent-to-child

17 relationship (whether by natural birth or

18 adoption), if the child is—

19 (I) under 19 years of age,

20 (II) is under 25 years of age and

21 a full-time student, or

22 (III) an unmarried dependent re23 gardless of age who is incapable of

24 self-support because of mental or
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1 physical disability which existed before

2 age 22.

3 (B) SPECIAL RULES.—Family members—

4 (i) include an adopted child and a rec5 ognized natural child;

6 (ii) include a stepchild or foster child

7 with respect to an individual but only if

8 the child lives with the individual in a reg9 ular parent-child relationship; and

10 (iii) include such other children as the

11 Secretary may specify, but shall not in12 clude an emancipated minor.

13 (3) PRISONER.—The term ‘‘prisoner’’ means,

14 as specified by the Secretary, an individual during a

15 period of imprisonment under Federal, State, or

16 local authority after conviction as an adult.

17 (4) SECRETARY.—The term ‘‘Secretary’’ means

18 the Secretary of Health and Human Services.

19 (5) STATE.—The term ‘‘State’’ means the 50

20 States, the District of Columbia, Puerto Rico, the

21 Virgin Islands, Guam, American Samoa, and the

22 Northern Mariana Islands.

23 SEC. 1902. DEFINITIONS RELATING TO EMPLOYMENT.

24 (a) APPLICATION OF ERISA DEFINITIONS.—Except

25 as otherwise provided in this Act, terms used in this Act
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1 shall have the meanings applicable to such terms under

2 section 3 of the Employee Retirement Income Security Act

3 of 1974 (29 U.S.C. 1002).

4 (b) ADDITIONAL DEFINITIONS.—For purposes of this

5 title:

6 (1) COUNTABLE EMPLOYEE.—The term ‘‘count7 able employee’’ means, with respect to an employer

8 for a month, any employee other than an employee

9 whose normal work week is less than 10 hours.

10 (2) LARGE EMPLOYER.—The term ‘‘large em11 ployer’’ means an employer that is not a small em12 ployer (as defined in paragraph (4)).

13 (3) QUALIFYING EMPLOYEE.—

14 (A) IN GENERAL.—The term ‘‘qualifying

15 employee’’ means, with respect to an employer

16 for a month, any employee other than—

17 (i) a part-time, seasonal, or temporary

18 employee (as defined in subparagraph

19 (B)); or

20 (ii) an employee who is a child de21 scribed in section 1901(2)(A)(ii).

22 (B) PART-TIME, SEASONAL, OR TEM23 PORARY EMPLOYEE DEFINED.—For purposes of

24 subparagraph (A), the term ‘‘part-time, sea25 sonal, or temporary employee’’ means any of
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1 the following employees with respect to a

2 month:

3 (i) CERTAIN PART-TIME EMPLOY4 EES.—Any employee whose normal work

5 week is reasonably expected as of the first

6 day of such month to be less than 20

7 hours.

8 (ii) SEASONAL OR TEMPORARY EM9 PLOYEES.—Any employee who is not rea10 sonably expected as of the first day of such

11 month to be employed by the employer for

12 a period of 120 consecutive days during

13 any 365-day period that includes such first

14 day.

15 (iii) DELAY FOR CERTAIN PART-TIME

16 EMPLOYEES.—Any employee whose normal

17 work week is reasonably expected as of the

18 first day of such month to be at least 20

19 hours, but less than 35 hours, and the nor20 mal work week of the employee during the

21 preceding 3 months was less than 20

22 hours.

23 (4) SMALL EMPLOYER.—The term ‘‘small em24 ployer’’ means, with respect to a calendar year, an

25 employer that normally employs more than 1 but
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1 less than 100 countable employees on a typical busi2 ness day. For the purposes of this paragraph, the

3 term ‘‘employee’’ includes a self-employed individual.

4 For purposes of determining if an employer is a

5 small employer, rules similar to the rules of sub6 section (b) and (c) of section 414 of the Internal

7 Revenue Code of 1986 shall apply.

8 SEC. 1903. DEFINITIONS RELATING TO HEALTH COVERAGE,

9 PLANS, AND CARRIERS.

10 Except as otherwise provided, for purposes of this

11 Act:

12 (1) BENCHMARK COVERAGE.—The term

13 ‘‘benchmark coverage’’ means the standard option of

14 the Blue Cross-Blue Shield plan offered under the

15 Federal Employees Health Benefits Program under

16 chapter 89 of title 5, United States Code, as in ef17 fect during 1994.

18 (2) CARRIER.—The term ‘‘carrier’’ means a li19 censed insurance company, an entity offering pre20 paid hospital or medical services, and a health main21 tenance organization, and includes a similar organi22 zation regulated under State law for solvency.

23 (3) CERTIFIED MULTIPLE EMPLOYER HEALTH

24 PLAN.—The term ‘‘certified multiple employer health

25 plan’’ means a multiple employer welfare arrange-
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1 ment treated as an employee welfare benefit plan by

2 reason of a certification under part 7 of subtitle B

3 of title I of the Employee Retirement Income Secu4 rity Act of 1974 (as added by section 1401(a)).

5 (4) CLASS OF FAMILY COVERAGE.—The term

6 ‘‘class of family coverage’’ means the 4 classes de7 scribed in section 1021(a)(3).

8 (5) FAIR RATING AREA.—The term ‘‘fair rating

9 area’’ means a geographic area identified by a State

10 for purposes of section 1021(a)(2).

11 (6) GROUP HEALTH PLAN.—The term ‘‘group

12 health plan’’ means an employee welfare benefit plan

13 providing medical care (as defined in section 213(d)

14 of the Internal Revenue Code of 1986) to partici15 pants or beneficiaries directly or through insurance,

16 reimbursement, or otherwise, but does not include

17 any type of coverage excluded from the definition of

18 a health insurance coverage under paragraph (8)(B).

19 (7) HEALTH COVERAGE.—The term ‘‘health

20 coverage’’ means health insurance coverage provided

21 by a carrier or medical care provided under a group

22 health plan.

23 (8) HEALTH INSURANCE COVERAGE.—

24 (A) IN GENERAL.—Except as provided in

25 subparagraph (B), the term ‘‘health insurance
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1 coverage’’ means any hospital or medical service

2 policy or certificate, hospital or medical service

3 plan contract, or health maintenance organiza4 tion group contract offered by a carrier.

5 (B) EXCEPTION.—Such term does not in6 clude any of the following (or any combination

7 of the following):

8 (i) Coverage only for accident, dental,

9 vision, disability income, or long-term care

10 insurance, or any combination thereof.

11 (ii) Medicare supplemental health in12 surance.

13 (iii) Coverage issued as a supplement

14 to liability insurance.

15 (iv) Liability insurance, including gen16 eral liability insurance and automobile li17 ability insurance.

18 (v) Workers’ compensation or similar

19 insurance.

20 (vi) Automobile medical-payment in21 surance.

22 (vii) Coverage for a specified disease

23 or illness.

24 (viii) A hospital or fixed indemnity

25 policy.
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1 (ix) Coverage provided exclusively to

2 individuals who are not eligible individuals.

3 (9) HEALTH MAINTENANCE ORGANIZATION.—

4 The term ‘‘health maintenance organization’’ in5 cludes, as defined in standards established under

6 section 1103, an organization that provides health

7 insurance coverage which meets specified standards

8 and under which health services are offered to be

9 provided on a prepaid, at-risk basis primarily

10 through a defined set of providers.

11 (10) HEALTH PLAN PURCHASING ORGANIZA12 TION.—The term ‘‘health plan purchasing organiza13 tion’’ means an organization established under sub14 title A of title VI.

15 (11) INDIVIDUAL/SMALL GROUP MARKET.—The

16 term ‘‘individual/small group market’’ means the in17 surance market offered—

18 (A) to individuals seeking health insurance

19 coverage on behalf of themselves (and their de20 pendents) insofar as no employer is seeking

21 such coverage on behalf of the individual, and

22 (B) to small employers seeking health in23 surance coverage on behalf of their employees

24 (and their dependents),
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1 regardless of whether or not such coverage is made

2 available directly or through a multiple employer

3 welfare arrangement, association, or otherwise.

4 (12) MANAGED CARE ARRANGEMENTS.—

5 (A) MANAGED CARE ARRANGEMENT.—The

6 term ‘‘managed care arrangement’’ means, with

7 respect to a group health plan or under health

8 insurance coverage, an arrangement under such

9 plan or coverage under which providers agree to

10 provide items and services covered under the ar11 rangement to individuals covered under the

12 plan or who have such coverage.

13 (B) PROVIDER NETWORK.—The term

14 ‘‘provider network’’ means, with respect to a

15 group health plan or health insurance coverage,

16 providers who have entered into an agreement

17 described in subparagraph (A).

18 (13) MULTIPLE EMPLOYER WELFARE AR19 RANGEMENT.—The term ‘‘multiple employer welfare

20 arrangement’’ shall have the meaning applicable

21 under section 3(40) of the Employee Retirement In22 come Security Act of 1974.

23 (14) NAIC.—The term ‘‘NAIC’’ means the Na24 tional Association of Insurance Commissioners.
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1 (15) OPTIONS.—Each of the following is a

2 ‘‘type of coverage option’’ in relation to standard

3 coverage:

4 (A) FEE-FOR-SERVICE OPTION.—Standard

5 coverage is considered to provide a ‘‘fee-for6 service option’’ if, regardless of whether covered

7 individuals may receive benefits through a pro8 vider network, benefits with respect to the cov9 ered items and services in the coverage are

10 made available for such items and services pro11 vided through any lawful provider of such cov12 ered items and services and payment is made to

13 such a provider whether or not there is a con14 tractual arrangement between the provider and

15 the carrier or plan.

16 (B) MANAGED CARE OPTION.—Standard

17 coverage is considered to provide a ‘‘managed

18 care option’’ if benefits with respect to the cov19 ered items and services in the coverage are

20 made available exclusively through a provider

21 network, except in the case of emergency serv22 ices and as otherwise required under law.

23 (C) POINT-OF-SERVICE OPTION.—Standard

24 coverage is considered to provide a ‘‘point-of25 service option’’ if the benefits with respect to
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1 covered items and services in the coverage are

2 made available principally through a managed

3 care arrangement, with the choice of the en4 rollee to obtain such benefits for items and

5 services provided through any lawful provider of

6 such covered items and services. The coverage

7 may provide for different cost sharing schedules

8 based on whether the items and services are

9 provided through such an arrangement or out10 side such an arrangement.

11 (16) QUALIFIED HEALTH COVERAGE.—The

12 term ‘‘qualified health coverage’’ has the meaning

13 given such term in section 1101.

14 (17) STANDARD COVERAGE.—The term ‘‘stand15 ard coverage’’ means coverage provided consistent

16 with section 1102(a).

17 (18) STATE COMMISSIONER OF INSURANCE.—

18 The term ‘‘State commissioner of insurance’’ in19 cludes a State superintendent of insurance.

20 SEC. 1904. DEFINITIONS RELATING TO RESIDENCE AND IM21 MIGRATION STATUS.

22 Except as otherwise provided, for purposes of this

23 Act:

24 (1) ALIEN PERMANENTLY RESIDING IN THE

25 UNITED STATES UNDER COLOR OF LAW.—The term
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1 ‘‘alien permanently residing in the United States

2 under color of law’’ means an alien lawfully admitted

3 for permanent residence (within the meaning of sec4 tion 101(a)(20) of the Immigration and Nationality

5 Act), and includes any of the following (such status

6 not having changed):

7 (A) An alien who is admitted as a refugee

8 under section 207 of the Immigration and Na9 tionality Act.

10 (B) An alien who is granted asylum under

11 section 208 of such Act.

12 (C) An alien whose deportation is withheld

13 under section 243(h) of such Act.

14 (D) An alien whose deportation is sus15 pended pursuant to section 244 of such Act.

16 (E) An alien who is granted conditional

17 entry pursuant to section 203(a)(7) of such Act

18 as in effect before April 1, 1980.

19 (F) An alien who is admitted for tem20 porary residence under section 210, 210A, or

21 245A of such Act.

22 (G) An alien who is within a class of aliens

23 lawfully present in the United States pursuant

24 to any other provision of such Act, if (i) the At25 torney General determines that the continued
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1 presence of such class of aliens serves a human2 itarian or other compelling public interest, and

3 (ii) the Secretary determines that such interest

4 would be further served by treating each such

5 alien within such class as a ‘‘legal permanent

6 resident’’ for purposes of this Act or who has

7 been granted extended voluntary departure as a

8 member of a nationality group.

9 (H) An alien who is the spouse or unmar10 ried child under 21 years of age of a citizen of

11 the United States, or the parent of such a citi12 zen if the citizen is over 21 years of age, and

13 with respect to whom an application for adjust14 ment to lawful permanent residence is pending.

15 (I) An alien within such other classification

16 of permanent resident aliens as the Secretary

17 may establish by regulation.

18 (2) LONG-TERM NONIMMIGRANT.—The term

19 ‘‘long-term nonimmigrant’’ means a nonimmigrant

20 described in subparagraph (E), (H), (I), (K), (L),

21 (N), (O), (Q), or (R) of section 101(a)(15) of the

22 Immigration and Nationality Act.

23 (3) QUALIFYING INDIVIDUAL.—The term

24 ‘‘qualifying individual’’ means, an individual who is
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1 a resident of the United States, who is not a pris2 oner, and is—

3 (A) a citizen or national of the United

4 States;

5 (B) an alien permanently residing in the

6 United States under color of law (as defined in

7 paragraph (1)); or

8 (C) a long-term nonimmigrant (as defined

9 in paragraph (2)).

10 SEC. 1905. EFFECTIVE DATES.

11 The requirements of this title shall apply with respect

12 to—

13 (1) group health plans for plan years beginning

14 on or after January 1, 1997, and

15 (2) carriers (with respect to coverage other than

16 under a group health plan) as of January 1, 1997.

17 PART 2—REPORT AND RECOMMENDATIONS ON

18 HEALTH COVERAGE AND ACCESS

19 SEC. 1911. OBJECTIVE OF FULL ACCESS AND COVERAGE.

20 It is an objective of this Act to assure by 2002 that—

21 (1) all eligible individuals in the United States

22 have access to private or public health coverage, and

23 (2) at least 95 percent of such individuals have

24 such coverage.
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1 SEC. 1912. REPORT AND RECOMMENDATIONS ON ACHIEVE2 MENT OF OBJECTIVE FOR HEALTH COV3 ERAGE AND ACCESS.

4 (a) STUDY.—The Secretary shall monitor and evalu5 ate the extent to which eligible individuals in the United

6 States have access to health coverage and have health cov7 erage.

8 (b) REPORT.—Not later than January 31, 2002, the

9 Secretary shall submit to Congress a report on the evalua10 tion conducted under subsection (a). The Secretary shall

11 include in the report a determination of whether the objec12 tive described in section 1911 has been met.

13 (c) RECOMMENDATIONS.—If the Secretary deter14 mines that such objective has not been met, the Secretary

15 shall include in the report such recommendations as may

16 be appropriate to achieve the objective at the earliest pos17 sible date.

18 TITLE II—REMOVAL OF FINAN19 CIAL BARRIERS TO ACCESS

TABLE OF CONTENTS OF TITLE

Subtitle A—Tax Deductibility for Individuals and SelfEmployed

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 selfemployed.

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
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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.

1 Subtitle A—Tax Deductibility for

2 Individuals and Self-Employed

3 SEC. 2001. DEDUCTION FOR HEALTH INSURANCE COSTS OF

4 SELF-EMPLOYED INDIVIDUALS INCREASED

5 AND MADE PERMANENT.

6 (a) IN GENERAL.—Paragraph (1) of section 162(l)

7 of the Internal Revenue Code of 1986 (relating to special

8 rules for health insurance costs of self-employed individ9 uals) is amended by striking ‘‘25 percent’’ and inserting

10 ‘‘the applicable percentage’’.
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1 (b) DEDUCTION MADE PERMANENT; APPLICABLE

2 PERCENTAGE.—Paragraph (6) of section 162(l) of such

3 Code is amended to read as follows:

4 ‘‘(6) APPLICABLE PERCENTAGE.—For purposes

5 of paragraph (1)—

‘‘In the case of taxable years

beginning in calendar year:

The applicable

percentage is:

1994, 1995, 1996, 1997, or 1998 .......... 25 percent

1999 ........................................................ 50 percent

2000 or thereafter ................................... 100 percent.’’

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

7 this section shall apply to taxable years beginning after

8 December 31, 1993.

9 SEC. 2002. DEDUCTION FOR HEALTH INSURANCE COSTS OF

10 INDIVIDUALS WHO ARE NOT SELF-EM11 PLOYED.

12 (a) IN GENERAL.—Part VII of subchapter B of chap13 ter 1 of the Internal Revenue Code of 1986 (relating to

14 additional itemized deductions) is amended by redesignat15 ing section 220 as section 221 and by inserting after sec16 tion 219 the following new section:

17 ‘‘SEC. 220. HEALTH INSURANCE COSTS OF INDIVIDUALS

18 WHO ARE NOT SELF-EMPLOYED.

19 ‘‘(a) IN GENERAL.—In the case of an individual who

20 is not a self-employed individual (as defined in section

21 401(c)(1)), there shall be allowed as a deduction an

22 amount equal to 25 percent of the amount paid during
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1 the taxable year for insurance which constitutes medical

2 care for the taxpayer, his spouse, and dependents.

3 ‘‘(b) COORDINATION WITH DEDUCTION FOR SELF4 EMPLOYED INDIVIDUALS.—The amount which would (but

5 for this paragraph) be allowed as a deduction under sub6 section (a) for the taxable year shall be reduced (but not

7 below zero) by the amount (if any) allowed as a deduction

8 under section 162(l) for such taxable year.

9 ‘‘(c) OTHER COVERAGE.—Subsection (a) shall not

10 apply to any taxpayer for any calendar month for which

11 the taxpayer is eligible to participate in any subsidized

12 health plan maintained by any employer of the taxpayer

13 or of the spouse of the taxpayer.

14 ‘‘(d) COORDINATION WITH MEDICAL DEDUCTION,

15 ETC.—Any amount paid by a taxpayer for insurance to

16 which subsection (a) applies shall not be taken into ac17 count in computing the amount allowable to the taxpayer

18 as a deduction under section 213(a).’’

19 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX20 PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

21 of section 62 of such Code is amended by adding at the

22 end the following new paragraph:

23 ‘‘(16) HEALTH INSURANCE COSTS.—The deduc24 tion allowed by section 220.’’
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1 (c) CLERICAL AMENDMENT.—The table of sections

2 for part VII of subchapter B of chapter 1 of such Code

3 is amended by striking the last item and inserting the fol4 lowing new items:

‘‘Sec. 220. Health insurance costs of individuals who are not selfemployed.

‘‘Sec. 221. Cross reference.’’

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

6 this section shall apply to taxable years beginning after

7 December 31, 1995.

8 SEC. 2003. RESTRICTIONS ON HEALTH BENEFITS PRO9 VIDED THROUGH CAFETERIA PLANS AND

10 FLEXIBLE SPENDING ARRANGEMENTS.

11 (a) FLEXIBLE SPENDING ARRANGEMENTS.—Section

12 106 of the Internal Revenue Code of 1986 (relating to

13 contributions by employer to accident and health plans)

14 is amended to read as follows:

15 ‘‘SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT

16 AND HEALTH PLANS.

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

18 in this section, gross income of an employee does not in19 clude employer-provided coverage under an accident or

20 health plan.

21 ‘‘(b) INCLUSION OF CERTAIN BENEFITS PROVIDED

22 THROUGH FLEXIBLE SPENDING ARRANGEMENTS.—

23 Gross income of an employee shall include such employer24 provided coverage which is provided through a flexible
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1 spending or similar arrangement if any amount of deduct2 ible, copayment, coinsurance, or similar cost-sharing may

3 be paid for or reimbursed under such arrangement.’’

4 (b) CAFETERIA PLANS.—Subsection (f) of section

5 125 of such Code (defining qualified benefits) is amended

6 by adding at the end thereof the following new sentence:

7 ‘‘Such term shall not include any benefits or coverage

8 under an accident or health plan if any amount of deduct9 ible, copayment, coinsurance, or similar cost-sharing

10 under such a plan, or more than 20 percent of any pre11 mium (or comparable amount in the case of a plan not

12 provided through insurance) for such a plan, may be paid

13 for or reimbursed under the cafeteria plan.’’

14 (c) EMPLOYMENT TAX TREATMENT.—

15 (1) SOCIAL SECURITY TAX.—

16 (A) Subsection (a) of section 3121 of such

17 Code is amended by inserting after paragraph

18 (21) the following new sentence:

19 ‘‘Nothing in paragraph (2) shall exclude from the term

20 ‘wages’ any amount which is required to be included in

21 gross income under section 106(b).’’

22 (B) Subsection (a) of section 209 of the

23 Social Security Act is amended by inserting

24 after paragraph (21) the following new sen25 tence:
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1 ‘‘Nothing in paragraph (2) shall exclude from the term

2 ‘wages’ any amount which is required to be included in

3 gross income under section 106(b) of the Internal Revenue

4 Code of 1986.’’

5 (2) RAILROAD RETIREMENT TAX.—Paragraph

6 (1) of section 3231(e) of such Code is amended by

7 adding at the end thereof the following new sen8 tence: ‘‘Nothing in clause (i) of the second sentence

9 of this paragraph shall exclude from the term ‘com10 pensation’ any amount which is required to be in11 cluded in gross income under section 106(b).’’

12 (3) UNEMPLOYMENT TAX.—Subsection (b) of

13 section 3306 of such Code is amended by inserting

14 after paragraph (16) the following new sentence:

15 ‘‘Nothing in paragraph (2) shall exclude from the term

16 ‘wages’ any amount which is required to be included in

17 gross income under section 106(b).’’

18 (4) WAGE WITHHOLDING.—Subsection (a) of

19 section 3401 of such Code is amended by adding at

20 the end thereof the following new sentence:

21 ‘‘Nothing in the preceding provisions of this subsection

22 shall exclude from the term ‘wages’ any amount which is

23 required to be included in gross income under section

24 106(b).’’
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect on January 1, 1996.

3 Subtitle B—Premium and Cost4 Sharing Subsidy Program for

5 Low-Income Individuals

6 SEC. 2100. DESCRIPTION OF TRANSITION FROM CURRENT

7 MEDICAID SYSTEM TO NEW ACUTE CARE

8 LOW-INCOME SUBSIDY PROGRAMS FOR AFDC

9 RECIPIENTS AND NON-CASH MEDICAID BENE10 FICIARIES.

11 The amendments made by this subtitle and title III

12 provide for a transition from the current medicaid system

13 to a new system of acute care low-income assistance

14 through the following:

15 (1) IMMEDIATE MEDICAID REFORMS.—During

16 1995, 1996, and 1997, States are permitted—

17 (A) to enroll medicaid recipients under co18 ordinated care arrangements, but are restricted

19 from eliminating eligibility categories currently

20 in effect; and

21 (B) to provide certain classes of acute care

22 services to such recipients through a State sup23 plemental benefits program,

24 under the amendments made by section 3101.
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1 (2) ESTABLISHMENT OF NEW PREMIUM AND

2 COST-SHARING SUBSIDY PROGRAM AND SUPPLE3 MENTAL BENEFITS PROGRAM AND INTEGRATION OF

4 AFDC AND NON-CASH BENEFICIARIES.—Beginning

5 January 1, 1998—

6 (A) States are required to establish a new

7 premium and cost-sharing subsidy program

8 under part A of title XXI of the Social Security

9 Act (as added by section 2101); and

10 (B) with respect to AFDC and non-cash

11 medicaid beneficiaries and other low-income in12 dividuals—

13 (i) States are required to provide for

14 premium and cost-sharing assistance for

15 core benefits for premium and cost-sharing

16 assistance eligible individuals through that

17 program and additional benefits through a

18 supplemental benefits grant program under

19 part B of title XXI of the Social Security

20 Act (as added by section 3101), and

21 (ii) States will no longer provide such

22 individuals with medicaid coverage for

23 acute care services.
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1 SEC. 2101. STATE PREMIUM AND COST-SHARING SUBSIDY

2 PROGRAMS.

3 (a) REQUIREMENTS FOR PROGRAMS.—The Social Se4 curity Act is amended by adding at the end the following

5 new title:

6 ‘‘TITLE XXI—STATE ACUTE CARE BENEFITS

7 PROGRAMS FOR LOW-INCOME INDIVID8 UALS; FINANCING FAILSAFE MECHANISM

9 ‘‘PART A—STATE PREMIUM AND COST-SHARING

10 SUBSIDY PROGRAMS

11 ‘‘SEC. 2101. ESTABLISHMENT OF STATE PROGRAMS.

12 ‘‘(a) IN GENERAL.—As a requirement under section

13 1902(a)(65), effective January 1, 1998, each State shall

14 establish and maintain a premium and cost-sharing sub15 sidy program (in this title referred to as a ‘State subsidy

16 program’) that provides for—

17 ‘‘(1) premium assistance described in section

18 2103 to premium assistance eligible individuals de19 scribed in section 2102(a) in accordance with this

20 part,

21 ‘‘(2) cost-sharing assistance described in section

22 2103 to cost-sharing assistance eligible individuals

23 described in section 2102(b) in accordance with this

24 part, and

25 ‘‘(3) State maintenance-of-effort payments in

26 accordance with section 2107.
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1 ‘‘(b) AVAILABILITY OF FUNDS.—Each State with a

2 State subsidy program approved under this part is enti3 tled, for calendar quarters beginning on or after January

4 1, 1998, to payment under section 2106.

5 ‘‘(c) APPROVAL OF STATE PROGRAMS.—The Sec6 retary may not approve a State subsidy program unless

7 the State has submitted a detailed description that speci8 fies the form and manner in which it will carry out the

9 program and the Secretary finds that the program meets

10 the requirements of this part.

11 ‘‘(d) DESIGNATION OF STATE AGENCY.—A State shall

12 designate an appropriate State agency to administer the

13 State subsidy program. Such agency shall be the same

14 agency as the agency designated to administer the State

15 supplemental medical benefits program under part B.

16 ‘‘SEC. 2102. ELIGIBILITY.

17 ‘‘(a) ASSISTANCE.—

18 ‘‘(1) PREMIUM ASSISTANCE.—Each premium

19 assistance eligible individual (as defined in sub20 section (b)) is entitled to premium assistance under

21 section 2103(a)(1).

22 ‘‘(2) COST-SHARING ASSISTANCE.—Each cost23 sharing assistance eligible individual (as defined in

24 subsection (c)) is entitled to cost-sharing assistance

25 described in section 2103(a)(2).
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1 ‘‘(b) PREMIUM ASSISTANCE ELIGIBLE INDIVIDUAL

2 DEFINED.—

3 ‘‘(1) IN GENERAL.—In this title, subject to the

4 succeeding provisions of this section and part C, the

5 term ‘premium assistance eligible individual’ means

6 an individual who has been determined under section

7 2104 to have family modified adjusted income below

8 the following applicable percentage of the applicable

9 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

10 ‘‘(2) SPECIAL RULE FOR CHILDREN AND PREG11 NANT WOMEN.—In this title, subject to the succeed12 ing provisions of this section and part C, the term

13 ‘premium assistance eligible individual’ includes an

14 individual who is a child under 19 years of age or

15 a pregnant woman and who has been determined

16 under section 2104 to have family modified adjusted

17 income below the following applicable percentage of

18 the applicable poverty line:

Applicable

‘‘Calendar year: percentage:

1998 .................................................................................. 185

1999 .................................................................................. 185

2000 .................................................................................. 185

2001 .................................................................................. 185
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2002 .................................................................................. 185

2003 .................................................................................. 200

2004 .................................................................................. 240

1 ‘‘(c) COST-SHARING ASSISTANCE ELIGIBLE INDIVID2 UAL DEFINED.—In this title, subject to the succeeding

3 provisions of this section and part C, the term ‘cost-shar4 ing assistance eligible individual’ means an individual who

5 has been determined under section 2104 to have family

6 modified adjusted income below 100 percent of the appli7 cable poverty line.

8 ‘‘(d) EXCLUSION OF CERTAIN INDIVIDUALS.—In this

9 title—

10 ‘‘(1) IN GENERAL.—The terms ‘premium assist11 ance eligible individual’ and ‘cost-sharing assistance

12 eligible individual’ do not include, with respect to a

13 month, any of the following individuals:

14 ‘‘(A) MEDICARE BENEFICIARY.—An indi15 vidual who is entitled to benefits under part A

16 or B of title XVIII for the month.

17 ‘‘(B) SSI RECIPIENT.—An individual who

18 is an SSI recipient (as defined in paragraph

19 (2)) for the month.

20 ‘‘(C) INMATES.—An individual who as of

21 the first day of the month is an inmate of a

22 public institution (except as a patient of a med23 ical institution).
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1 ‘‘(D) CERTAIN ALIENS.—An alien who is

2 not lawfully admitted for permanent residence

3 or not otherwise permanently residing in the

4 United States under color of law (as defined in

5 paragraph (3)).

6 ‘‘(E) NONRESIDENTS.—An individual who

7 is not residing in any State.

8 ‘‘(2) SSI RECIPIENT.—The term ‘SSI recipient’

9 means, for a month, an individual—

10 ‘‘(A) with respect to whom supplemental

11 security income benefits are being paid under

12 title XVI for the month,

13 ‘‘(B) who is receiving a supplemental pay14 ment under section 1616 or under section 212

15 of Public Law 93–66 for the month,

16 ‘‘(C) who is receiving monthly benefits

17 under section 1619(a) (whether or not pursuant

18 to section 1616(c)(3)) for the month, or

19 ‘‘(D) who is treated under section 1619(b)

20 as receiving supplemental security income bene21 fits in a month for purposes of title XIX.

22 ‘‘(3) ALIEN PERMANENTLY RESIDING IN THE

23 UNITED STATES UNDER COLOR OF LAW.—The term

24 ‘alien permanently residing in the United States

25 under color of law’ means an alien lawfully admitted
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1 for permanent residence (within the meaning of sec2 tion 101(a)(20) of the Immigration and Nationality

3 Act), and includes any of the following:

4 ‘‘(A) An alien who is admitted as a refugee

5 under section 207 of the Immigration and Na6 tionality Act.

7 ‘‘(B) An alien who is granted asylum

8 under section 208 of such Act.

9 ‘‘(C) An alien whose deportation is with10 held under section 243(h) of such Act.

11 ‘‘(D) An alien whose deportation is sus12 pended under section 244 of such Act.

13 ‘‘(E) An alien who is granted conditional

14 entry pursuant to section 203(a)(7) of such

15 Act, as in effect before April 1, 1980.

16 ‘‘(F) An alien who is admitted for tem17 porary residence under section 210, 210A, or

18 245A of such Act.

19 ‘‘(G) An alien who has been paroled into

20 the United States under section 212(d)(5) of

21 such Act for an indefinite period or who has

22 been granted extended voluntary departure as a

23 member of a nationality group.

24 ‘‘(H) An alien who is the spouse or unmar25 ried child under 21 years of age of a citizen of
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1 the United States, or the parent of such a citi2 zen if the citizen is over 21 years of age, and

3 with respect to whom an application for adjust4 ment to lawful permanent residence is pending.

5 ‘‘(e) PROTECTION OF CURRENT BENEFICIARIES.—

6 ‘‘(1) IN GENERAL.—In this title, the term ‘pre7 mium assistance eligible individual’ also includes,

8 with respect to a State as of December 31, 1997, an

9 individual described in paragraph (2) whose eligi10 bility for premium assistance has not terminated

11 under paragraph (3).

12 ‘‘(2) CURRENT BENEFICIARIES DESCRIBED.—

13 An individual described in this paragraph is an indi14 vidual who—

15 ‘‘(A) is not excluded under subsection (d),

16 ‘‘(B) is enrolled to receive medical assist17 ance under the State plan under title XIX (and

18 for which Federal financial participation was

19 available) as of December 31, 1997, and

20 ‘‘(C) would remain enrolled to receive such

21 assistance under the State plan under title XIX

22 but for amendments made by the Bipartisan

23 Health Care Reform Act of 1994.
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1 ‘‘(3) LIMITATION.—An individual is a premium

2 assistance eligible individual pursuant to this sub3 section only until the earlier of—

4 ‘‘(A) June 30, 1998, or

5 ‘‘(B) the first date after December 31,

6 1997, on which the individual’s eligibility for

7 medical assistance under the State plan under

8 title XIX would have been terminated if the

9 amendments made by the Bipartisan Health

10 Care Reform Act of 1994 had not been enacted.

11 ‘‘SEC. 2103. PREMIUM AND COST-SHARING ASSISTANCE.

12 ‘‘(a) IN GENERAL.—

13 ‘‘(1) PREMIUM ASSISTANCE.—

14 ‘‘(A) IN GENERAL.—The premium assist15 ance under a State subsidy program shall be in

16 the form of a premium assistance certificate

17 that is in the amount computed under sub18 section (b) and that may be applied toward

19 qualifying coverage (as defined in subparagraph

20 (B)). A carrier or group health plan providing

21 such coverage that is tendered such a certificate

22 with respect to an individual shall reduce the

23 amount of the premium by the amount of the

24 certificate, except as provided in subsection

25 (c)(1)(C).
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1 ‘‘(B) QUALIFYING COVERAGE DEFINED.—

2 For purposes of this part—

3 ‘‘(i) IN GENERAL.—Except as pro4 vided in clause (ii), the term ‘qualifying

5 coverage’ means standard coverage de6 scribed in section 1102 of the Bipartisan

7 Health Care Reform Act of 1994.

8 ‘‘(ii) OPTIONAL USE OF HIGH-DE9 DUCTIBLE COVERAGE.—At the election of

10 a premium assistance eligible individual,

11 the term ‘qualifying coverage’ includes

12 high-deductible coverage described in sec13 tion 1103 of the Bipartisan Health Care

14 Reform Act of 1994 with respect to an in15 dividual, but only if the individual—

16 ‘‘(I) has been determined under

17 section 2104 to have family modified

18 adjusted income not less than 100

19 percent of the applicable poverty line

20 (or in the case of an individual de21 scribed in section 2102(a)(2), 185

22 percent of such applicable poverty

23 line), and

24 ‘‘(II) demonstrates to the satis25 faction of the State that the individual
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1 meets the requirements of section

2 1101(b)(2) of the Bipartisan Health

3 Care Reform Act of 1994 (relating to

4 requirement for available assets).

5 ‘‘(iii) TREATMENT OF VA HEALTH

6 COVERAGE.—For purposes of this part, VA

7 health coverage (as defined in section

8 1801(2) of title 38, United States Code)

9 provided by the Department of Veterans

10 Affairs shall be considered to be standard

11 health insurance coverage (referred to in

12 subparagraph (A)) provided by a carrier.

13 ‘‘(2) COST-SHARING ASSISTANCE.—The cost14 sharing assistance under a State subsidy program

15 shall be in the form of a cost-sharing assistance cer16 tificate (or other means) that may be applied with

17 respect to standard coverage. A carrier providing

18 health insurance coverage or a group health plan

19 that is tendered such a certificate with respect to an

20 individual shall reduce the cost-sharing otherwise

21 imposed with respect to health coverage to amounts

22 that are nominal (as specified by the State, consist23 ent with the regulations established to carry out sec24 tion 1916(a)(3)) and shall not impose any cost-shar25 ing in the case of preventive benefits described in
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1 section 1102(b)(4) of the Bipartisan Health Care

2 Reform Act of 1994.

3 ‘‘(3) CONSOLIDATED AND ELECTRONIC CER4 TIFICATES.—Nothing in this section shall be con5 strued as preventing a State from—

6 ‘‘(A) in the case of an individual who is

7 both a premium assistance eligible individual

8 and a cost-sharing assistance eligible individual,

9 from consolidating the premium and cost-shar10 ing certificates of the individual, and

11 ‘‘(B) providing premium and cost-sharing

12 assistance certificates through electronic or

13 other means.

14 ‘‘(b) AMOUNT OF PREMIUM ASSISTANCE.—

15 ‘‘(1) AMOUNT OF ASSISTANCE.—

16 ‘‘(A) IN GENERAL.—Subject to subpara17 graph (B), the amount of premium assistance

18 under this subsection for a month for an indi19 vidual is the lesser of—

20 ‘‘(i) the premium assistance reference

21 amount determined under paragraph (2),

22 or

23 ‘‘(ii) the amount of the monthly pre24 mium for the qualifying coverage provided

25 to the individual.
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1 ‘‘(B) TAKING INTO ACCOUNT EMPLOYER

2 CONTRIBUTIONS.—If an employer is making a

3 contribution for the health coverage of a pre4 mium assistance eligible individual, the amount

5 of the premium assistance under this subsection

6 for a month shall not exceed the amount by

7 which the premium amount described in sub8 paragraph (A)(ii) exceeds the amount of the

9 employer contribution.

10 ‘‘(2) PREMIUM ASSISTANCE REFERENCE

11 AMOUNT DETERMINED.—

12 ‘‘(A) IN GENERAL.—Subject to paragraph

13 (4), the premium assistance reference amount

14 determined under this paragraph is an amount

equal to 1 15 ⁄12 of the premium assistance percent16 age (as defined in paragraph (3)) multiplied by

17 the weighted average annual premium (deter18 mined in accordance with subparagraph (B))

19 for the individual’s family class of enrollment

20 for qualified standard health coverage offered in

21 the fair rating area (as defined in section 1903

22 of the Bipartisan Health Care Reform Act of

23 1994) in the individual/small group market in

24 which the individual resides.
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1 ‘‘(B) DETERMINATION OF WEIGHTED AV2 ERAGE ANNUAL PREMIUM.—For purposes of

3 subparagraph (A), the weighted average annual

4 premium for a family class of enrollment for

5 qualified standard health coverage shall be

6 based on the number of families (or individuals

7 in the case of the individual class of enrollment)

8 so covered in the class and area involved.

9 ‘‘(C) FAMILY CLASS OF ENROLLMENT.—In

10 this paragraph, the term ‘family class of enroll11 ment’ means a class of enrollment described in

12 section 1021(a)(3) of the Bipartisan Health

13 Care Reform Act of 1994.

14 ‘‘(3) PREMIUM ASSISTANCE PERCENTAGE.—For

15 purposes of this part and subject to section

16 2141(e)(3)—

17 ‘‘(A) IN GENERAL.—Subject to subpara18 graph (B), the term ‘premium assistance per19 centage’ means 100 percent reduced (but not

20 below zero) by the number of percentage points

21 (rounded to the nearest whole number) by

22 which such individual’s family income (ex23 pressed as a percent) exceeds 100 percent of

24 the applicable poverty line.
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1 ‘‘(B) CHILDREN AND PREGNANT

2 WOMEN.—In the case of a premium assistance

3 eligible individual described in paragraph (2) of

4 section 2102(b), the term ‘premium assistance

5 percentage’ means 100 percent reduced (but

6 not below zero) by 1 percentage point for each

7 .55 percentage points by which such individual’s

8 family income (expressed as a percent) exceeds

9 185 percent of the applicable poverty line.

10 ‘‘(C) CURRENT MEDICAID BENE11 FICIARIES.—In the case of an individual who is

12 a premium assistance eligible individual pursu13 ant to 2102(d), the term ‘premium assistance

14 percentage’ means 100 percent.

15 ‘‘(4) SPECIAL RULE FOR FAMILIES WITH CHIL16 DREN AND PREGNANT WOMEN.—In the case of a

17 family consisting of premium assistance eligible indi18 viduals in which the modified adjusted gross income

19 exceeds 100 percent of the applicable poverty line,

20 but which includes one or more individuals described

21 in paragraph (2) of section 2102(b), the premium

22 assistance amount may be computed in a manner

23 (specified by the Secretary in regulations) based on

24 the sum of separate premium amounts for family

25 members based on individual class of enrollment,
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1 rather than based on the appropriate family class of

2 enrollment.

3 ‘‘(c) PAYMENTS OF ASSISTANCE.—

4 ‘‘(1) PREMIUM ASSISTANCE.—

5 ‘‘(A) IN GENERAL.—The State issuing a

6 premium assistance certificate shall, upon ten7 der to the State of such certificate by the car8 rier or group health plan providing qualiyfing

9 coverage, pay the carrier or plan the amount of

10 the certificate.

11 ‘‘(B) TIMING OF PAYMENTS.—Payments

12 under this paragraph shall commence in the

13 first month during which the individual obtains

14 qualifying coverage and is determined under

15 section 2104 to be a premium assistance eligible

16 individual.

17 ‘‘(C) TREATMENT OF SURPLUSES AND

18 DEFICITS.—

19 ‘‘(i) DEFICIT.—If the premium for

20 coverage is greater than the amount of the

21 premium assistance for an individual, the

22 individual is responsible for payment of

23 any difference.

24 ‘‘(ii) SURPLUS.—If the premium for

25 coverage is less than the amount of the
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1 premium assistance for an individual, the

2 difference shall not be paid to the individ3 ual or the carrier or plan but shall revert

4 to the Federal Government.

5 ‘‘(2) COST-SHARING ASSISTANCE.

6 ‘‘(A) IN GENERAL.—The State issuing a

7 cost-sharing assistance certificate shall, upon

8 presentation to the State of evidence of such

9 certificate by the carrier or group health plan

10 providing coverage and evidence of cost-sharing

11 amounts otherwise incurred for which a reduc12 tion in cost-sharing is available under the cer13 tificate, pay the carrier or plan the amount of

14 the reduction in cost-sharing in relation to

15 standard coverage.

16 ‘‘(B) TIMING OF PAYMENTS.—Payments

17 under this paragraph shall be provided at the

18 time an individual has obtained qualified stand19 ard health coverage, is determined under sec20 tion 2104 to be a cost-sharing assistance eligi21 ble individual, and has incurred health care ex22 penses of the type for which a cost-sharing re23 duction is available under subparagraph (A).

24 ‘‘(3) ADMINISTRATIVE ERRORS.—A State is fi25 nancially responsible for premium or cost-sharing as-
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1 sistance paid based on an eligibility determination

2 error to the extent the State’s error rate for eligi3 bility determinations exceeds a maximum permissible

4 error rate to be specified by the Secretary.

5 ‘‘SEC. 2104. ELIGIBILITY DETERMINATIONS.

6 ‘‘(a) IN GENERAL.—The Secretary shall promulgate

7 regulations specifying requirements for State subsidy pro8 grams with respect to determining eligibility for premium

9 and cost-sharing assistance, including requirements with

10 respect to—

11 ‘‘(1) application procedures;

12 ‘‘(2) information verification procedures;

13 ‘‘(3) timeliness of eligibility determinations;

14 ‘‘(4) procedures for applicants to appeal adverse

15 decisions; and

16 ‘‘(5) any other matters determined appropriate

17 by the Secretary.

18 ‘‘(b) SPECIFICATIONS FOR REGULATIONS.—The reg19 ulations promulgated by the Secretary under subsection

20 (a) shall include the following requirements:

21 ‘‘(1) FREQUENCY OF APPLICATIONS.—A State

22 program shall provide that an individual may file an

23 application for assistance with an agency designated

24 by the State at any time, in person.
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1 ‘‘(2) APPLICATION FORM.—A State program

2 shall provide for the use of an application form de3 veloped by the Secretary under subsection (c)(2).

4 ‘‘(3) DISTRIBUTION OF APPLICATIONS.—A

5 State program shall distribute applications for as6 sistance widely, including to employers, health plan

7 purchasing organizations, brokers for health cov8 erage, and appropriate public agencies.

9 ‘‘(4) CONVENIENT LOCATION TO SUBMIT APPLI10 CATIONS.—A State program shall provide convenient

11 locations for premium and cost-sharing assistance el12 igible individuals to apply for premium and cost13 sharing assistance.

14 ‘‘(5) REQUIREMENT TO SUBMIT REVISED AP15 PLICATION.—A State program shall, in accordance

16 with regulations promulgated by the Secretary, re17 quire individuals to submit revised applications dur18 ing a year to reflect changes in estimated family in19 comes, including changes in employment status of

20 family members, and changes in eligibility status de21 scribed in section 2002(c) during the year. The

22 State shall revise the amount of any premium and

23 cost-sharing assistance based on such a revised ap24 plication.
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1 ‘‘(6) AFDC APPLICANTS.—A State program

2 shall include a procedure under which individuals

3 applying for benefits under title IV shall have an op4 portunity to apply for assistance under this part in

5 connection with such application.

6 ‘‘(7) VERIFICATION.—A State program shall

7 provide for verification of the information supplied

8 in applications under this part. Such verification

9 may include examining return information disclosed

10 to the State for such purpose under section

11 6103(l)(15) of the Internal Revenue Code of 1986.

12 ‘‘(c) ADMINISTRATION OF STATE PROGRAM.—

13 ‘‘(1) IN GENERAL.—The Secretary shall estab14 lish standards for States operating programs under

15 this part which ensure that such programs are oper16 ated in a uniform manner with respect to application

17 procedures, data standards, and such other adminis18 trative activities as the Secretary determines to be

19 necessary.

20 ‘‘(2) APPLICATION FORMS.—The Secretary

21 shall develop an application form for assistance

22 which shall—

23 ‘‘(A) be simple in form and understandable

24 to the average individual;
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1 ‘‘(B) require the provision of information

2 necessary to make a determination as to wheth3 er an individual is a premium or cost-sharing

4 assistance eligible individual including a dec5 laration of estimated family income by the indi6 vidual; and

7 ‘‘(C) require attachment of such docu8 mentation as deemed necessary by the Sec9 retary in order to ensure eligibility for assist10 ance.

11 ‘‘(3) OUTREACH ACTIVITIES.—A State operat12 ing a program under this part shall conduct such

13 outreach activities as the Secretary determines ap14 propriate.

15 ‘‘(d) EFFECTIVENESS OF ELIGIBILITY FOR PREMIUM

16 AND COST-SHARING ASSISTANCE.—A determination by a

17 State that an individual is a premium or cost-sharing as18 sistance eligible individual shall be effective for the cal19 endar year for which such determination is made unless

20 a revised application submitted under subsection (b)(5) in21 dicates that an individual is no longer eligible for premium

22 or cost-sharing assistance.

23 ‘‘(e) PENALTIES FOR MATERIAL MISREPRESENTA24 TIONS.—
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1 ‘‘(1) IN GENERAL.—Any individual who know2 ingly makes a material misrepresentation of infor3 mation in an application for assistance under this

4 part shall be liable to the Federal Government for

5 the amount any premium and cost-sharing assist6 ance received by an individual on the basis of a mis7 representation and interest on such amount at a

8 rate specified by the Secretary, and shall, in addi9 tion, be liable to the Federal Government for $2,000

10 or, if greater, 3 times the amount any premium and

11 cost-sharing assistance provided on the basis of a

12 misrepresentation.

13 ‘‘(2) COLLECTION OF PENALTY AMOUNTS.—A

14 State which receives an application for assistance

15 with respect to which a material misrepresentation

16 has been made shall collect the penalty amount re17 quired under paragraph (1) and submit 50 percent

18 of such amount to the Secretary in a timely manner.

19 ‘‘SEC. 2105. END-OF-YEAR RECONCILIATION FOR PREMIUM

20 ASSISTANCE.

21 ‘‘(a) IN GENERAL.—

22 ‘‘(1) REQUIREMENT TO FILE STATEMENT.—An

23 individual who received premium assistance under

24 this part from a State for any month in a calendar

25 year shall file with the State an income reconcili-
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1 ation statement to verify the individual’s family in2 come for the year. Such a statement shall be filed

3 at such time, and contain such information, as the

4 State may specify in accordance with regulations

5 promulgated by the Secretary.

6 ‘‘(2) NOTICE OF REQUIREMENT.—A State shall

7 provide a written notice of the requirement under

8 paragraph (1) at the end of the year to an individual

9 who received assistance under this part from such

10 State in any month during the year.

11 ‘‘(b) RECONCILIATION OF PREMIUM ASSISTANCE

12 BASED ON ACTUAL INCOME.—

13 ‘‘(1) IN GENERAL.—Based on and using the in14 come reported in the reconciliation statement filed

15 under subsection (a) with respect to an individual,

16 the State shall compute the amount of premium as17 sistance that should have been provided under this

18 part with respect to the individual for the year in19 volved.

20 ‘‘(2) OVERPAYMENT OF ASSISTANCE.—If the

21 total amount of the premium assistance provided

22 was greater than the amount computed under para23 graph (1), the excess amount shall be treated as an

24 underpayment of a tax imposed by chapter 1 of the

25 Internal Revenue Code of 1986.
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1 ‘‘(3) UNDERPAYMENT OF ASSISTANCE.—If the

2 total amount of the premium assistance provided

3 was less than the amount computed under para4 graph (1), the amount of the difference shall be

5 treated as an overpayment of tax imposed by such

6 chapter, or in the event the taxpayer involved is enti7 tled to a refund of such a tax, subject to the provi8 sions of section 6402(d) of such Code.

9 ‘‘(c) VERIFICATION.—Each State may use such infor10 mation as it has available to verify income of individuals

11 with applications filed under this part, including return

12 information disclosed to the State for such purpose under

13 section 6103(l)(15) of the Internal Revenue Code of 1986.

14 ‘‘(d) PENALTIES FOR FAILURE TO FILE.—In the

15 case of an individual who is required to file a statement

16 under this section in a year who fails to file such a state17 ment by such date as the Secretary shall specify in regula18 tions, the entire amount of the premium assistance pro19 vided in such year shall be considered an excess amount

20 under subsection (b)(2) and such individual shall not be

21 eligible for premium assistance under this part until such

22 statement is filed. A State, using rules established by the

23 Secretary, shall waive the application of this subsection

24 if the individual establishes, to the satisfaction of the State
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1 under such rules, good cause for the failure to file the

2 statement on a timely basis.

3 ‘‘(e) PENALTIES FOR FALSE INFORMATION.—Any in4 dividual who provides false information in a statement

5 filed under subsection (a) is subject to the same penalties

6 as are provided under section 2104(e) for a misrepresenta7 tion of material fact described in such section.

8 ‘‘(f) NO RECONCILIATION FOR COST-SHARING AS9 SISTANCE.—No reconciliation statement is required under

10 this section with respect to cost-sharing assistance.

11 ‘‘SEC. 2106. PAYMENTS TO STATES.

12 ‘‘(a) PAYMENTS FOR PREMIUM AND COST-SHARING

13 ASSISTANCE.—Subject to subsection (b) and section 2141,

14 the Secretary shall provide for payment to each State op15 erating a State subsidy program in an amount equal to

16 the sum of—

17 ‘‘(1) the amount expended by the State under

18 the program for premium assistance on behalf of

19 premium assistance eligible individuals, and

20 ‘‘(2) the amount expended by the State under

21 the program for cost-sharing assistance on behalf of

22 cost-sharing assistance eligible individuals.

23 ‘‘(b) NO PAYMENT FOR MAINTENANCE-OF-EFFORT

24 EXPENDITURES OR ADMINISTRATION.—No payment shall

25 be made under subsection (a)—
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1 ‘‘(1) for any State maintenance-of-effort ex2 penditures required under section 2107, or

3 ‘‘(2) for any expenditures relating to adminis4 tration of a State subsidy program.

5 For payment to States for administrative expenditures for

6 State subsidy programs, see section 2142.

7 ‘‘(c) FUNDING.—The amount paid to States under

8 subsection (a) shall be paid by the Secretary, from the

9 Health Care Assurance Trust Fund (established under

10 section 2143), at such time and in such form as provided

11 in regulations promulgated by the Secretary, based on the

12 form and manner in which payments are made to States

13 under section 1903.

14 ‘‘SEC. 2107. REQUIREMENT OF STATE MAINTENANCE-OF15 EFFORT EXPENDITURES.

16 ‘‘(a) IN GENERAL.—Payment to a State under sec17 tion 2106 for any quarter in a year is conditioned upon—

18 ‘‘(1) the State making expenditures under this

19 part from non-Federal funds (consistent with sub20 section (d)) for premium assistance on behalf of pre21 mium assistance eligible individuals and for cost22 sharing assistance on behalf of cost-sharing assist23 ance eligible individuals equal to at least the assist24 ance maintenance-of-effort amount computed under

25 subsection (b) for the quarter, and
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1 ‘‘(2) the State meeting the maintenance-of2 effort requirement of section 2125(a)(1) for the

3 quarter.

4 ‘‘(b) ASSISTANCE MAINTENANCE-OF-EFFORT

5 AMOUNT.—

6 ‘‘(1) IN GENERAL.—The assistance mainte7 nance-of-effort amount computed under this sub8 section for a State for a quarter in a year is equal

to 1 9 ⁄4 of the product of the Federal-to-State conver10 sion factor (specified under paragraph (5)) and the

11 following:

12 ‘‘(A) 1998.—For 1998, the product of—

13 ‘‘(i) the 1997 per capita core benefit

14 amount (described in paragraph (3)) for

15 the State, and

16 ‘‘(ii) the average monthly number of

17 AFDC recipients and non-cash medicaid

18 beneficiaries (as defined in section

19 1931(a)(2)) in the State during 1997,

20 increased by the assistance increase factor (as

21 defined in paragraph (4)) for 1998.

22 ‘‘(B) 1999 AND THEREAFTER.—For quar23 ters in 1999 or any succeeding year, the

24 amount computed under subparagraph (A) or

25 this subparagraph for the State for the preced-
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1 ing year increased by the assistance increase

2 factor under paragraph (4) for the year.

3 ‘‘(2) ESTIMATIONS OF AND ADJUSTMENTS TO

4 STATE TOTAL FUNDING AMOUNT.—The Secretary

5 shall—

6 ‘‘(A) establish a process for estimating the

7 assistance maintenance-of-effort amount for

8 each State under paragraph (1) at the begin9 ning of each fiscal year and adjusting such

10 amount during such fiscal year; and

11 ‘‘(B) notifying each State of the esti12 mations and adjustments referred to in sub13 paragraph (A).

14 ‘‘(3) 1997 PER CAPITA CORE BENEFIT AMOUNT

15 DEFINED.—For purposes of paragraph (1), the

16 ‘1997 per capita core benefit amount’ for a State is

17 equal to the base per capita core benefit Federal

18 payment limit for AFDC recipients and non-cash

19 medicaid beneficiaries (specified in section

20 1931(c)(2)(A)) multiplied (for each of years 1995,

21 1996, and 1997) by a factor equal to 1 plus the

22 FEHBP State rolling increase percentage (as de23 fined in subsection (c)(2)) for the respective year.

24 ‘‘(4) ASSISTANCE INCREASE FACTOR DE25 SCRIBED.—For purposes of paragraph (1)(A), the
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1 ‘assistance increase factor’ for a year for a State is

2 equal to the sum of—

3 ‘‘(A) the FEHBP State rolling increase

4 factor (described in subsection (c)(2)) for the

5 year,

6 ‘‘(B) the annual percentage change (which

7 may be positive or negative) in the population

8 of the State (as estimated by the Secretary),

9 and

10 ‘‘(C)(i) 1 percentage point for 1998,

‘‘(ii) 2 11 ⁄3 percentage point for 1999,

‘‘(iii) 1 12 ⁄3 percentage point for 2000, and

13 ‘‘(iv) 0 percentage points for each subse14 quent year.

15 ‘‘(5) FEDERAL-TO-STATE CONVERSION FAC16 TOR.—For purposes of this title, the ‘Federal-to17 State conversion factor’ for a State is equal to the

18 ratio of—

19 ‘‘(A) 1 minus the Federal medical assist20 ance percentage (as defined in section 1905(b))

21 for the State for 1994, to

22 ‘‘(B) such Federal medical assistance per23 centage.

24 ‘‘(c) FEHBP NATIONAL AND STATE ROLLING IN25 CREASE PERCENTAGES.—
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1 ‘‘(1) NATIONAL INCREASE PERCENTAGE.—For

2 purposes of this title, the term ‘FEHBP national

3 rolling increase percentage’ means, for a year, the 5-

4 year weighted average of the annual national per5 centage increase in the premiums for health plans

6 offered under the Federal Employees Health Bene7 fits Program (under chapter 89 of title 5, United

8 States Code) for the 5-year period ending with the

9 previous year.

10 ‘‘(2) STATE INCREASE PERCENTAGE.—For pur11 poses of this title, the term ‘FEHBP State rolling

12 increase percentage’ means, for a year with respect

13 to a State, the 5-year weighted average of the an14 nual percentage increase in the premiums for health

15 plans offered in the State under the Federal Em16 ployees Health Benefits Program (under chapter 89

17 of title 5, United States Code) for the 5-year period

18 ending with the previous year.

19 ‘‘(3) DETERMINATION.—The increase percent20 ages under paragraphs (1) and (2) shall be deter21 mined by the Secretary, in consultation with the Di22 rector of Office of Personnel Management, based on

23 the best information available. Such increases shall

24 be adjusted—
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1 ‘‘(A) to take into account the age distribu2 tion in the Federal workforce (not taking into

3 account individuals 65 years of age or older,

4 employees of the United States Postal Service,

5 retirees, and annuitants) relative to the age dis6 tribution in the population of AFDC recipients

7 and non-cash medicaid beneficiaries, and

8 ‘‘(B) to disregard any changes due to

9 changes in the benefit package under the Fed10 eral Employees Health Benefits Program after

11 1994.

12 ‘‘(d) USE OF STATE FUNDS.—Each State subsidy

13 program shall provide assurances satisfactory to the Sec14 retary that Federal funds will not be used, directly or indi15 rectly, to provide for the State expenditures required

16 under this section.

17 ‘‘PART C—FINANCING FAILSAFE MECHANISM AND

18 GENERAL PROVISIONS

19 ‘‘SEC. 2141. ENSURING DEFICIT NEUTRAL SPENDING ON

20 PREMIUM AND COST-SHARING ASSISTANCE

21 AND SUPPLEMENTAL ACUTE CARE BENEFITS.

22 ‘‘(a) LIMITATION ON FEDERAL EXPENDITURES.—

23 ‘‘(1) IN GENERAL.—In each fiscal year (begin24 ning with 1998), Federal payments under this title

25 shall be limited to the amount by which—
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1 ‘‘(A) the aggregate limitation described in

2 subsection (b) for the year, exceeds

3 ‘‘(B) the amount of the mandatory Federal

4 expenditures under title XVIII and XIX for the

5 year, including any offsetting receipts required

6 under title XVIII but excluding any discre7 tionary expenditures under such title or title

8 XIX.

9 ‘‘(2) CONTINGENCY.—Any direct payment au10 thority provided under part A or B with respect to

11 premium and cost-sharing assistance or supple12 mental acute care benefits is subject to the operation

13 of this section.

14 ‘‘(b) AGGREGATE LIMITATION.—For purposes of this

15 section, subject to subsection (d), the aggregate limitation

16 described in this subsection—

17 ‘‘(1) for fiscal year 1998, is $351 billion;

18 ‘‘(2) for fiscal year 1999, is $392 billion;

19 ‘‘(3) for fiscal year 2000, is $433 billion;

20 ‘‘(4) for fiscal year 2001, is $482 billion;

21 ‘‘(5) for fiscal year 2002, is $535 billion;

22 ‘‘(6) for fiscal year 2003, is $594 billion;

23 ‘‘(7) for fiscal year 2004, is $660 billion; and

24 ‘‘(8) for each succeeding fiscal year is the ag25 gregate limitation under this subsection for the pre-
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1 ceding fiscal year increased by the same percentage

2 as the percentage growth in national health expendi3 tures (as estimated by the Secretary) from the sec4 ond preceding fiscal year to the preceding fiscal

5 year.

6 ‘‘(c) MID-SESSION BUDGET REVIEW ESTIMATES.—

7 As part the President’s supplemental summary providing

8 revised estimates of the budget (commonly called the ‘mid9 session review of the budget’) for each fiscal year (begin10 ning with fiscal year 1997), the President shall issue the

11 following:

12 ‘‘(1) ESTIMATE FOR UPCOMING YEAR.—An esti13 mate of expenditures under titles XVIII and XIX

14 and parts A and B of this title for the upcoming fis15 cal year (determined without regard to this section).

16 ‘‘(2) INFORMATION ON ACTUAL EXPENDITURES

17 FOR PRECEDING YEAR.—Information on actual ex18 penditures under titles XVIII and XIX and parts A

19 and B of this title for the preceding fiscal year de20 termined taking into account adjustments under this

21 section. Such information shall first be provide in

22 the mid-session review for the fiscal year 1999

23 budget.

24 ‘‘(3) INFORMATIONAL ESTIMATE FOR CURRENT

25 YEAR.—An estimate of expenditures under titles
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1 XVIII and XIX and parts A and B of this title for

2 the current fiscal year. Such information shall first

3 be provided in the mid-session review for the fiscal

4 year 1998 budget.

5 ‘‘(d) RETROSPECTIVE ADJUSTMENT.—If the infor6 mation provided under subsection (c)(2) during a fiscal

7 year indicates (taking into account any adjustment under

8 this section) that the amount of mandatory expenditures

9 described in subsection (a)(1)(B) for the preceding fiscal

10 year exceeded the aggregate limitation described in sub11 section (b) for the year, for the succeeding fiscal year the

12 aggregate limitation under subsection (b) shall be de13 creased by the amount of such excess.

14 ‘‘(e) PROSPECTIVE ADJUSTMENT.—

15 ‘‘(1) IN GENERAL.—If the estimate provided

16 under subsection (c)(1) during a fiscal year indicates

17 that the amount of mandatory expenditures de18 scribed in subsection (a)(1)(B) for the upcoming fis19 cal year will exceed the aggregate limitation de20 scribed in subsection (b) for the year, then for the

21 succeeding fiscal year, the Director of the Office of

22 Management and Budget, after consultation with the

23 Secretary—
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1 ‘‘(A) shall apply the adjustments described

2 in paragraph (2) to the extent necessary to

3 eliminate such excess, and

4 ‘‘(B) if such adjustments are insufficient

5 to eliminate such excess, shall apply the adjust6 ments described in paragraph (3).

7 ‘‘(2) REDUCTIONS IN AMOUNTS AVAILABLE FOR

8 SUPPLEMENTAL ACUTE CARE BENEFITS PRO9 GRAMS.—

10 ‘‘(A) IN GENERAL.—An adjustment under

11 this paragraph consists of reduction in the limi12 tations on payments to States established under

13 section 2124(b).

14 ‘‘(B) MANNER OF REDUCTION.—Such re15 duction shall be made in a proportional manner

16 and shall provide for an aggregate reduction in

17 the limits equal to the amount of such the re18 duction required to comply with the require19 ment of subsection (a).

20 ‘‘(3) REDUCTION IN PREMIUM ASSISTANCE

21 AMOUNT.—

22 ‘‘(A) IN GENERAL.—An adjustment under

23 this paragraph consists of uniform proportional

24 reduction in the premium assistance percentage

25 applied under section 2103(b)(3), but only with
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1 respect to individuals who are not cost-sharing

2 assistance eligible individuals.

3 ‘‘(B) MANNER OF REDUCTION.—The pro4 portion of the uniform proportional reduction

5 shall be calculated by the Director, in consulta6 tion with the Secretary, in a manner that re7 sults in an aggregate reduction in the payments

8 to States under part A in an amount that

9 assures (taking into account reductions result10 ing from the adjustment under paragraph (2))

11 compliance with the requirement of subsection

12 (a).

13 ‘‘(4) NOTICE TO CONGRESS.—Before effecting

14 any adjustment under this subsection, the Director

15 shall submit to Congress a report that describes the

16 adjustment to be made and the basis for making the

17 adjustment.

18 ‘‘(5) NO AFFECT ON STATE MAINTENANCE-OF19 EFFORT REQUIREMENTS.—Any adjustment under

20 this subsection shall not affect the requirements for

21 States under sections 2107 or 2125.

22 ‘‘(f) PRESIDENT’S BUDGET TO INCLUDE PREMIUM

23 ASSISTANCE ESTIMATES.—
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1 ‘‘(1) IN GENERAL.—When the President sub2 mits a budget (as required by section 1105 of title

3 31), the President shall include in such budget—

4 ‘‘(A) estimates of Federal expenditures

5 under titles XVIII and XIX and parts A and B

6 of this title otherwise provided without regard

7 to this section; and

8 ‘‘(B) a comparison of the Federal expendi9 tures under titles XVIII and XIX with the ag10 gregate limitation established under subsection

11 (b); and

12 ‘‘(C) estimates of adjustments under sub13 section (d) that are necessary to comply with

14 enforcement of the limitation under subsection

15 (a).

16 ‘‘(2) FISCAL YEARS COVERED.—The President

17 shall submit such estimates for the upcoming fiscal

18 year and the following 4 fiscal years beginning with

19 the budget submitted for fiscal year 1997, and

20 ‘‘(A) beginning with the budget for fiscal

21 year 1998, the current fiscal year; and

22 ‘‘(B) beginning with the budget for fiscal

23 year 1999, the current fiscal year and the pre24 ceding fiscal year.

25 ‘‘(g) CBO INFORMATION AND ANALYSES.—
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1 ‘‘(1) CBO TECHNICAL CORRECTIONS RE2 PORT.—In or about January of each year when the

3 Congressional Budget Office changes the economic

4 and technical assumptions in the budget baseline

5 used by such Office, the Director of such Office shall

6 submit to the Congress a report on such changes.

7 The report shall include an explanation of what the

8 aggregate limitation amounts under subsection (b)

9 might have been if they had been computed based on

10 such changed assumptions.

11 ‘‘(2) CBO ANALYSIS.—In or about March of

12 each year, after having an opportunity to analyze

13 the report submitted under subsection (e)(1), the Di14 rector of the Congressional Budget Office shall sub15 mit to Congress a report that contains an analysis

16 of the differences between the estimates contained in

17 the President’s report and the estimates of such Of18 fice based on the economic and technical assump19 tions referred to in paragraph (1).

20 ‘‘SEC. 2142. PAYMENTS FOR ADMINISTRATIVE EXPENSES

21 UNDER TITLE.

22 ‘‘(a) IN GENERAL.—Subject to subsection (b), the

23 Secretary shall pay to each State operating a State pro24 gram under this part or part B, for each quarter begin25 ning with the quarter commencing January 1, 1998, an
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1 amount equal to 50 percent of the amounts expended dur2 ing the quarter as found necessary by the Secretary for

3 the proper and efficient administration of such programs

4 in the State, not including any State maintenance-of-effort

5 expenditures required under section 2107 or 2125.

6 ‘‘(b) LIMITATION.—

7 ‘‘(1) IN GENERAL.—The amount of funds which

8 the Secretary is otherwise obligated to pay a State

9 for quarters in a year under subsection (a) shall not

10 exceed such proportion of the amount specified in

11 paragraph (2) as the Secretary determines, taking

12 into account relevant factors including the propor13 tion of premium assistance eligible individuals (in14 cluding cost-sharing assistance eligible individuals)

15 who reside in the State, the relative costs of admin16 istrative services in the State (compared to the na17 tional average costs of administrative services), and

18 total non-administrative expenditures by the State

19 under this title.

20 ‘‘(2) TOTAL AVAILABLE ADMINISTRATIVE

21 AMOUNT.—For purposes of this subsection, the

22 amount specified in this paragraph for all calendar

23 quarters in a year for payments to States shall not

24 exceed—

25 ‘‘(A) $2.3 billion for 1998,
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1 ‘‘(B) $2.5 billion for 1999,

2 ‘‘(C) $2.7 billion for 2000,

3 ‘‘(D) $2.9 billion for 2001,

4 ‘‘(E) $3.1 billion for 2002,

5 ‘‘(F) $3.3 billion for 2003, and

6 ‘‘(G) $3.6 billion for 2004.

7 ‘‘SEC. 2143. HEALTH CARE ASSURANCE TRUST FUND.

8 ‘‘(a) CREATION OF TRUST FUND.—There is estab9 lished in the Treasury of the United States a trust fund

10 to be known as the ‘Health Care Assurance Trust Fund’

11 (in this section referred to as the ‘Trust Fund’), consisting

12 of such amounts as may be appropriated or credited to

13 it under this section.

14 ‘‘(b) TRANSFERS TO THE TRUST FUND.—

15 ‘‘(1) IN GENERAL.—There are hereby appro16 priated to the Trust Fund the amount determined

17 by the Secretary of the Treasury, after consultation

18 with the Secretary of Health and Human Services,

19 to be equal to the sum of—

20 ‘‘(A) the decrease in Federal expenditures

21 resulting from the provisions of, and the

22 amendments made by, the Bipartisan Health

23 Care Reform Act of 1994, and
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1 ‘‘(B) amounts received by the Secretary

2 pursuant to sections 2104(e), 2105(b)(2), and

3 2105(e).

4 ‘‘(2) TRANSFERS FROM OTHER TRUST

5 FUNDS.—The Secretary of Health and Human Serv6 ices shall transfer each fiscal year to the Trust Fund

7 from the Federal Hospital Insurance Trust Fund

8 and the Federal Supplementary Medical Insurance

9 Trust Fund the amount which the Secretary esti10 mates is equal to the decrease in expenditures in

11 each such trust fund attributable to the provisions

12 of the Bipartisan Health Care Reform Act of 1994.

13 ‘‘(3) TRANSFERS FROM GIFTS AND BE14 QUESTS.—The Secretary of Health and Human

15 Services shall transfer each fiscal year to the Trust

16 Fund any money gifts or bequests made to or on be17 half of the United States for allocation to the Trust

18 Fund.

19 ‘‘(c) EXPENDITURES.—Amounts in the Trust Fund

20 shall be used as follows:

21 ‘‘(1) Amounts shall be appropriated to the Sec22 retary for payments to States in a fiscal year for the

23 programs under parts A and B of this title (and to

24 the extent any such amount is not expended during
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1 any fiscal year, such amount shall be available for

2 such purpose for subsequent fiscal years).

3 ‘‘(2) Amounts shall be transferred to an ac4 count in the General Fund of the Treasury in an

5 amount equal to the estimate of the Secretary of the

6 Treasury of the reductions in revenues deposited in

7 the General Fund resulting from the amendments

8 made to the Internal Revenue Code of 1986 by the

9 Bipartisan Health Care Reform Act of 1994.

10 ‘‘(d) NATURE OF PAYMENT OBLIGATION.—Subject

11 to section 2141, sections 2106, 2124, and 2142 constitute

12 budget authority in advance of appropriations Acts, and

13 represent the obligation of the Federal Government to pro14 vide payments to States under such sections in accordance

15 with the applicable provisions of this title.

16 ‘‘SEC. 2144. LIMITATION ON USE OF FUNDS FOR ABOR17 TIONS.

18 ‘‘None of the funds appropriated to carry out this

19 title shall be expended for premium assistance under this

20 part that provides coverage of any abortion, for cost-shar21 ing assistance under this part with respect to expenses in22 curred for any abortion, or for supplemental acute care

23 benefits under part B for any abortion, except in the case

24 of an abortion where the procedure is necessary to save
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1 the life of the mother or where the pregnancy is the result

2 of an act of rape or incest.

3 ‘‘SEC. 2145. AUDITS.

4 ‘‘The Secretary shall conduct regular audits of the

5 activities under the State programs conducted under this

6 title.

7 ‘‘SEC. 2146. DEMONSTRATION PROJECT AUTHORITY.

8 ‘‘(a) IN GENERAL.—In the case of any experimental,

9 pilot, or demonstration project which in the judgment of

10 the Secretary is likely to assist in promoting the objectives

11 of this title in a State or States, the Secretary may waive

12 compliance with any of the requirements of this title to

13 the extent and for the period the Secretary finds necessary

14 to enable the Secretary to carry out the project.

15 ‘‘(b) RESTRICTION.—

16 ‘‘(1) FINDINGS.—The Secretary may authorize

17 a waiver under subsection (a) only if the Secretary

18 determines that under the waiver—

19 ‘‘(A) all individuals who would be premium

20 assistance eligible individuals remain eligible for

21 premium assistance,

22 ‘‘(B) benefits under part A are not reduced

23 below the level of benefits otherwise provided,

24 and
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1 ‘‘(C) the amount of payments made by the

2 Federal Government do not exceed the amount

3 of payments otherwise provided.

4 ‘‘(2) LIMITATION.—The Secretary may not au5 thorize a waiver of sections 2107 or 2125 (relating

6 to State maintenance-of-effort).

7 ‘‘SEC. 2147. DEFINITIONS AND DETERMINATIONS OF IN8 COME.

9 ‘‘For purposes of this title:

10 ‘‘(1) DETERMINATIONS OF INCOME.—

11 ‘‘(A) FAMILY INCOME.—The term ‘family

12 income’ means, with respect to an individual

13 who—

14 ‘‘(i) is not a dependent (as defined in

15 subparagraph (B)) of another individual,

16 the sum of the modified adjusted gross in17 comes (as defined in subparagraph (D))

18 for the individual, the individual’s spouse,

19 and dependents of the individual; or

20 ‘‘(ii) is a dependent of another indi21 vidual, the sum of the modified adjusted

22 gross incomes for the other individual, the

23 other individual’s spouse, and dependents

24 of the other individual.
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1 ‘‘(B) DEPENDENT.—The term ‘dependent’

2 shall have the meaning given such term under

3 paragraphs (1) or (2) of section 152(a) of the

4 Internal Revenue Code of 1986.

5 ‘‘(C) SPECIAL RULE FOR FOSTER CHIL6 DREN.—For purposes of subparagraph (A), a

7 child who is placed in foster care by a State

8 agency shall not be considered a dependent of

9 another individual.

10 ‘‘(D) MODIFIED ADJUSTED GROSS IN11 COME.—The term ‘modified adjusted gross in12 come’ means adjusted gross income (as defined

13 in section 62(a) of the Internal Revenue Code

14 of 1986)—

15 ‘‘(i) determined without regard to sec16 tions 135, 162(l), 220, 911, 931, and 933

17 of such Code, and

18 ‘‘(ii) increased by—

19 ‘‘(I) the amount of interest re20 ceived or accrued by the individual

21 during the taxable year which is ex22 empt from tax,

23 ‘‘(II) the amount of the social se24 curity benefits (as defined in section

25 86(d) of such Code) received during
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1 the taxable year to the extent not in2 cluded in gross income under section

3 86 of such Code,

4 ‘‘(III) the amount of aid to fami5 lies with dependent children received

6 during the taxable year under part A

7 of title IV to the extent not included

8 in gross income under such Code, and

9 ‘‘(IV) the amount of any supple10 mental security income benefits pro11 vided under title XVI.

12 The determination under the preceding sen13 tence shall be made without regard to any car14 ryover or carryback.

15 ‘‘(E) ELECTION WITH RESPECT TO IN16 COME DETERMINATION.—As elected by a family

17 at the time of submission of an application for

18 a premium or cost-sharing assistance under this

19 part, family income shall be determined

20 either—

21 ‘‘(i) by multiplying by a factor of 4

22 the individual’s family income for the 3-

23 month period immediately preceding the

24 month in which the application is made, or
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1 ‘‘(ii) based upon estimated income for

2 the entire year in which the application is

3 submitted.

4 ‘‘(2) APPLICABLE POVERTY LINE.—The term

5 ‘applicable poverty line’ means the income official

6 poverty line (as defined by the Office of Manage7 ment and Budget, and revised annually in accord8 ance with section 673(2) of the Omnibus Budget

9 Reconciliation Act of 1981) that—

10 ‘‘(A) in the case of a family of less than

11 five individuals, is applicable to a family of the

12 size involved; and

13 ‘‘(B) in the case of a family of more than

14 four individuals, is applicable to a family of

15 four persons.

16 ‘‘(3) PREGNANT WOMAN.—The term ‘pregnant

17 woman’ includes a woman during the 60-day period

18 beginning on the last day of the pregnancy.

19 ‘‘(4) PREMIUM.—Any reference to the term

20 ‘premium’ includes a reference to premium equiva21 lence for self-insured plans.’’.
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1 SEC. 2102. OPERATION OF PROGRAM AS STATE PLAN RE2 QUIREMENT UNDER MEDICAID.

3 (a) IN GENERAL.—Section 1902(a) of the Social Se4 curity Act (42 U.S.C. 1396a(a)), as amended by sections

5 3303(a)(1), 3003(a), and 3201(f)(5), is amended—

6 (1) by striking ‘‘and’’ at the end of paragraph

7 (63);

8 (2) by striking the period at the end of para9 graph (64) and inserting ‘‘; and’’; and

10 (3) by inserting after paragraph (64) the fol11 lowing new paragraph:

12 ‘‘(65) provide for a State program furnishing

13 premium subsidies for low-income individuals in ac14 cordance with part A of title XXI.’’.

15 (b) EFFECTIVE DATE.—The requirement of section

16 1902(a)(65) of the Social Security Act (as added by sub17 section (a)) shall apply to Federal financial participation

18 for calendar quarters beginning on or after January 1,

19 1998.

20 SEC. 2103. APPLICATION OF MISCELLANEOUS PROVISIONS.

21 (a) APPLICATION OF SAVE PROVISIONS.—Section

22 1137(b) of the Social Security Act (42 U.S.C. 1320b–

23 7(b)) is amended—

24 (1) by striking ‘‘and’’ at the end of paragraph

25 (4),
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1 (2) by striking the period at the end of para2 graph (5) and inserting ‘‘; and’’, and

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

4 ‘‘(6) a State subsidy program under part A of

5 title XXI.’’.

6 (b) DISCLOSURE OF CERTAIN INFORMATION.

7 (1) IN GENERAL.—Subsection (l) of section

8 6103 of the Internal Revenue Code of 1986 is

9 amended by adding at the end the following new

10 paragraph:

11 ‘‘(15) DISCLOSURE OF RETURN INFORMATION

12 TO CARRY OUT HEALTH PREMIUM ASSISTANCE CER13 TIFICATE PROGRAM.—The Secretary shall, upon

14 written request from a State, disclose to officials of

15 the State return information for purposes of deter16 mining or verifying whether any individual is enti17 tled to a premium assistance certificate under part

18 A of title XXI of the Social Security Act and the

19 amount thereof. Return information disclosed under

20 this paragraph may be used by such officers and em21 ployees only for the purposes of, and to the extent

22 necessary in, making such determination or verifica23 tion.’’.

24 (2) CONFORMING CHANGE.—Paragraph (4) of

25 section 6103(p) of such Code is amended by striking
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1 ‘‘or (14)’’ each place it appears and inserting ‘‘(14)

2 or (15)’’.

3 (c) APPLICATION OF DEFINITION OF STATE.—Sec4 tion 1001(a)(1) of the Social Security Act (42 U.S.C.

5 1301(a)(1)) is amended by striking ‘‘title XX’’ and insert6 ing ‘‘titles XX and XXI’’.

7 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.
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1 Subtitle A—Treatment of Acute

2 Care Benefits for AFDC and

3 Non-cash Beneficiaries

4 SEC. 3001. DIVISION OF MEDICAID BENEFITS INTO CORE

5 BENEFITS AND SUPPLEMENTAL BENEFITS

6 FOR AFDC AND NON-CASH BENEFICIARIES;

7 LIMITATION ON FEDERAL FINANCIAL PAR8 TICIPATION FOR CORE BENEFITS; SUNSET IN

9 MEDICAL ASSISTANCE.

10 (a) IN GENERAL.—Title XIX of the Social Security

11 Act is amended by redesignating section 1931 as section

12 1932 and by inserting after section 1930 the following new

13 section:

14 ‘‘MEDICAID REFORM RULES FOR BENEFITS FOR ACUTE

15 MEDICAL SERVICES FOR AFDC RECIPIENTS AND

16 NON-CASH MEDICAID BENEFICIARIES

17 ‘‘SEC. 1931. (a) APPLICATION OF SECTION.—

18 ‘‘(1) IN GENERAL.—This section applies with

19 respect to medical assistance for acute medical serv20 ices (as defined in paragraph (2)) under State plans

21 under this title for calendar quarters beginning on

22 or after January 1, 1995, provided to AFDC recipi23 ents and non-cash medicaid categorical beneficiaries.

24 To the extent this section applies, it supersedes any
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Title III, Subtitle A

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1 contrary provision of this title or of other applicable

2 law.

3 ‘‘(2) DEFINITIONS.—In this section:

4 ‘‘(A) ACUTE MEDICAL SERVICES.—The

5 term ‘acute medical services’ means items and

6 services described in section 1905(a) other than

7 the following:

8 ‘‘(i) Nursing facility services (as de9 fined in section 1905(f)).

10 ‘‘(ii) Intermediate care facility for the

11 mentally retarded services (as defined in

12 section 1905(d)).

13 ‘‘(iii) Personal care services (as de14 scribed in section 1905(a)(24)).

15 ‘‘(iv) Private duty nursing services (as

16 referred to in section 1905(a)(8)).

17 ‘‘(v) Home or community-based serv18 ices furnished under a waiver granted

19 under subsection (c), (d), or (e) of section

20 1915.

21 ‘‘(vi) Home and community care fur22 nished to functionally disabled elderly indi23 viduals under section 1929.

24 ‘‘(vii) Community supported living ar25 rangements services under section 1930.
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Title III, Subtitle A

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1 ‘‘(viii) Case-management services (as

2 described in section 1915(g)(2)).

3 ‘‘(ix) Home health care services (as

4 referred to in section 1905(a)(7)), clinic

5 services, and rehabilitation services that

6 are furnished to an individual who has a

7 condition or disability that qualifies the in8 dividual to receive any of the services de9 scribed in a previous clause.

10 ‘‘(x) Hospice care.

11 ‘‘(B) AFDC RECIPIENT.—The term

12 ‘AFDC recipient’ means, for a month, an indi13 vidual who is receiving aid or assistance under

14 any plan of the State approved under title I, X,

15 XIV, or XVI, or part A or part E of title IV

16 for the month.

17 ‘‘(C) CORE BENEFITS.—The term ‘core

18 benefits’ means benefits with respect to acute

19 medical services which the Secretary identifies

20 under subsection (b)(1) as typically included in

21 the services covered under benchmark coverage

22 (as defined in section 1903(1) of the Bipartisan

23 Health Care Reform Act of 1994).

24 ‘‘(D) NON-CASH MEDICAID BENE25 FICIARY.—The term ‘non-cash medicaid bene-
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Title III, Subtitle A

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1 ficiary’ means an individual described in section

2 1902(a)(10)(A) who is not an AFDC recipient

3 or an SSI recipient.

4 ‘‘(E) SSI RECIPIENT.—The term ‘SSI re5 cipient’ means, for a month, an individual—

6 ‘‘(i) with respect to whom supple7 mental security income benefits are being

8 paid under title XVI of the Social Security

9 Act for the month,

10 ‘‘(ii) who is receiving a supplementary

11 payment under section 1616 of such Act or

12 under section 212 of Public Law 93–66 for

13 the month,

14 ‘‘(iii) who is receiving monthly bene15 fits under section 1619(a) of the Social Se16 curity Act (whether or not pursuant to sec17 tion 1616(c)(3) of such Act) for the

18 month, or

19 ‘‘(iv) who is treated under section

20 1619(b) of the Social Security Act as re21 ceiving supplemental security income bene22 fits in a month for purposes of title XIX

23 of such Act.

24 ‘‘(F) SUPPLEMENTAL ACUTE CARE BENE25 FITS.—The term ‘supplemental acute care bene-
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Title III, Subtitle A

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1 fits’ means benefits for acute medical services

2 which are not—

3 ‘‘(i) core benefits, and

4 ‘‘(ii) benefits for items or services de5 scribed in clauses (i) through (x) of sub6 paragraph (A).

7 ‘‘(b) DIVISION OF ACUTE MEDICAL SERVICE BENE8 FITS INTO CORE BENEFITS AND SUPPLEMENTAL ACUTE

9 CARE BENEFITS.—The Secretary shall divide the class of

10 benefits for acute medical services into the following bene11 fit groups:

12 ‘‘(1) CORE BENEFITS.—A group of benefits

13 consisting of core benefits (as defined in subsection

14 (a)(2)(C)).

15 ‘‘(2) SUPPLEMENTAL ACUTE CARE BENE16 FITS.—A group of benefits consisting of supple17 mental acute care benefits (as defined in subsection

18 (a)(2)(F)).

19 ‘‘(c) LIMITATION ON AMOUNT OF FEDERAL FINAN20 CIAL PARTICIPATION FOR BENEFITS FOR ACUTE MEDI21 CAL SERVICES FOR AFDC RECIPIENT AND NON-CASH

22 MEDICAID BENEFICIARIES.—

23 ‘‘(1) LIMITATION ON CORE BENEFITS FOR 1995

24 THROUGH 1997.—With respect to expenditures for

25 medical assistance for core benefits for AFDC re-
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Title III, Subtitle A

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1 cipients and non-cash medicaid beneficiaries in a

2 State the following rules shall apply:

3 ‘‘(A) 1995.—For all quarters in calendar

4 year 1995, Federal financial participation under

5 section 1903(a)(1) shall not be payable to the

6 extent that per capita expenditures for such as7 sistance exceed a per capita limiting amount

8 equal to the base per capita core benefit Fed9 eral payment limit for AFDC recipients and

10 non-cash medicaid beneficiaries (specified in

11 paragraph (2)(A)) increased by the FEHBP

12 national rolling increase percentage (as defined

13 in section 2107(c)(1)) for 1995.

14 ‘‘(B) 1996 AND 1997.—For all quarters in

15 calendar year 1996 and for all quarters in cal16 endar year 1997, Federal financial participation

17 under section 1903(a)(1) shall not be payable

18 to the extent that per capita expenditures for

19 such assistance for such year exceed a per cap20 ita limiting amount equal to the per capita lim21 iting amount established under subparagraph

22 (A) or this subparagraph, respectively, for the

23 preceding year increased by the FEHBP na24 tional rolling increase percentage (as defined in
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Title III, Subtitle A

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1 section 2107(c)(1)) for 1996 or 1997, respec2 tively.

3 ‘‘(C) ESTIMATIONS AND ADJUSTMENTS.—

4 The Secretary shall—

5 ‘‘(i) establish a process for estimating

6 the limiting amounts under this paragraph

7 at the beginning of each year and adjust8 ing such amount during such year; and

9 ‘‘(ii) notifying each State of the esti10 mations and adjustments referred to in

11 clause (i).

12 ‘‘(2) BASE PER CAPITA CORE BENEFIT FED13 ERAL PAYMENT LIMIT FOR AFDC RECIPIENTS AND

14 NON-CASH MEDICAID BENEFICIARIES.—

15 ‘‘(A) IN GENERAL.—In paragraph (1)(A),

16 the ‘base per capita core benefit Federal pay17 ment limit for AFDC recipients and non-cash

18 medicaid beneficiaries’ specified in this subpara19 graph, for a State, is—

20 ‘‘(i) the baseline Federal medicaid

21 core benefit payments for AFDC recipients

22 and non-cash medicaid beneficiaries (as de23 fined in subparagraph (B)) for the State,

24 divided by
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Title III, Subtitle A

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1 ‘‘(ii) the number of AFDC recipients

2 and non-cash medicaid beneficiaries en3 rolled in the State plan under this title in

4 1994, as determined under subparagraph

5 (C).

6 ‘‘(B) DETERMINATION OF BASELINE FED7 ERAL MEDICAID CORE BENEFIT PAYMENTS FOR

8 AFDC RECIPIENTS AND NON-CASH MEDICAID

9 BENEFICIARIES.—For purposes of subpara10 graph (A)(i), the ‘baseline medicaid core benefit

11 expenditures for AFDC recipients and non-cash

12 medicaid beneficiaries’ for a State is the

13 amount of Federal payments made under sec14 tion 1903(a)(1) with respect to medical assist15 ance furnished for core benefits for AFDC re16 cipients and non-cash medicaid beneficiaries for

17 all calendar quarters in 1994.

18 ‘‘(C) DETERMINATION OF NUMBER OF

19 AFDC RECIPIENTS AND NON-CASH MEDICAID

20 BENEFICIARIES.—For purposes of subpara21 graph (A)(ii), the number of AFDC recipients

22 and non-cash medicaid beneficiaries for a State

23 for 1994 shall be determined based on actual

24 reports submitted by the State to the Secretary.

25 In the case of individuals who were not recipi-
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Title III, Subtitle A

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1 ents or beneficiaries for the entire fiscal year,

2 the number shall take into account only the

3 portion of the year in which they were such re4 cipients. The Secretary may audit such reports.

5 ‘‘(3) LIMITATION ON BENEFITS FOR ACUTE

6 MEDICAL SERVICES AFTER 1997.—With respect to

7 expenditures for medical assistance for acute medical

8 services benefits for AFDC recipients and non-cash

9 medicaid beneficiaries in a State for quarters in a

10 calendar year after 1997—

11 ‘‘(A) no such Federal financial participa12 tion shall be payable under section 1903(a)(1),

13 and

14 ‘‘(B) such a recipient or beneficiary is not

15 entitled to receive any medical assistance for

16 such benefits under the State plan under this

17 title.

18 ‘‘(4) ADDITIONAL RULES.—For purposes of this

19 subsection—

20 ‘‘(A) DISPROPORTIONATE SHARE PAY21 MENTS NOT INCLUDED.—Payments attributable

22 to section 1923 shall not be counted in the

23 amount of Federal payments.

24 ‘‘(B) TREATMENT OF DISALLOWANCES.—

25 The amount of Federal payments shall take
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Title III, Subtitle A

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1 into account amounts (or an estimate of

2 amounts) disallowed.

3 ‘‘(C) APPLICATION TO PARTICULAR ITEMS

4 AND SERVICES.—In determining the Federal

5 payment with respect to a category of items

6 and services (within the core benefits) furnished

7 in a State, there shall be counted only that pro8 portion of such expenditures (determined only

9 with respect to medical assistance furnished to

10 AFDC recipients and non-cash medicaid bene11 ficiaries) that were attributable to items and

12 services included in the core benefits (taking

13 into account any limitation on amount, dura14 tion, or scope of items and services included in

15 such benefits).

16 ‘‘(d) CONDITIONING FEDERAL FINANCIAL PARTICI17 PATION ON STATE MAINTENANCE-OF-EFFORT.—

18 ‘‘(1) IN GENERAL.—Payment to a State under

19 section 1903(a) for a quarter during 1995, 1996, or

20 1997 is conditioned upon the State making expendi21 tures under this title from non-Federal funds (con22 sistent with paragraph (3)) for core benefits for

23 AFDC recipients and non-cash medicaid bene24 ficiaries equal to at least the State maintenance-of-
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Title III, Subtitle A

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1 effort amount computed under paragraph (2) for the

2 year.

3 ‘‘(2) STATE MAINTENANCE-OF-EFFORT

4 AMOUNT.—The State maintenance-of-effort amount

5 computed under this paragraph for a State for a

6 year is equal to the product of—

7 ‘‘(A) the amount that would be computed

8 as the per capita limiting amount under sub9 section (c)(1) for the State for the year if the

10 FEHBP State rolling increase percentage (as

11 defined in section 2107(c)(2)) were substituted

12 for any reference to the FEHBP national roll13 ing increase percentage in such subsection; and

14 ‘‘(B) the Federal-to-State conversion factor

15 (as defined in section 2107(b)(5)).

16 ‘‘(3) USE OF STATE FUNDS.—Each State shall

17 provide assurances satisfactory to the Secretary that

18 Federal funds will not be used, directly or indirectly,

19 to provide for the State expenditures required under

20 this subsection.’’.

21 (b) CONFORMING AMENDMENT.—Section 1903(i) of

22 the Social Security Act (42 U.S.C. 1396b(i)), as amended

23 by section 3303(a)(3), is amended—

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

25 (12),
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Title III, Subtitle A

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1 (2) by striking the period at the end of para2 graph (13) and inserting ‘‘; or’’, and

3 (3) by inserting after paragraph (13) the

4 following:

5 ‘‘(14) in accordance with section 1931, with re6 spect to amounts expended for medical assistance—

7 ‘‘(A) for supplemental acute care benefits

8 (as defined in section 1931(a)(2)(F)) for AFDC

9 recipients and non-cash medicaid beneficiaries

10 for calendar quarters beginning on or after

11 January 1, 1995,

12 ‘‘(B) for core benefits (as defined in sec13 tion 1931(a)(2)(C)) for AFDC recipients and

14 non-cash medicaid beneficiaries for calendar

15 quarters beginning on or after January 1,

16 1995, and before January 1, 1998, to the ex17 tent they exceed limits specified in section

18 1931(c)(1), and

19 ‘‘(C) for core benefits for AFDC recipients

20 and non-cash medicaid beneficiaries for cal21 endar quarters beginning on or after January

22 1, 1998.’’.
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Title III, Subtitle A

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1 SEC. 3002. CONTINUATION OF STATE MEDICAID ELIGI2 BILITY CATEGORIES.

3 (a) IN GENERAL.—Section 1902(a) of the Social Se4 curity Act (42 U.S.C. 1369a(a)), as amended by section

5 3303(a)(1), is amended—

6 (1) by striking ‘‘and’’ at the end of paragraph

7 (60);

8 (2) by striking the period at the end of para9 graph (61) and inserting ‘‘; and ’’; and

10 (3) by inserting after paragraph (61) the fol11 lowing new paragraph:

12 ‘‘(62) provide for the continuation through De13 cember 31, 1997, of eligibility for medical assistance

14 under section 1902(a)(10)(A) of any class or cat15 egory of individuals eligible for medical assistance

16 under such section during fiscal year 1994.’’.

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

18 subsection (a) shall apply to payments for calendar quar19 ters beginning on or after January 1, 1995.
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Title III, Subtitle B

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1 Subtitle B—Flexibility in Expendi2 tures for Supplemental Benefits

3 for AFDC and Non-cash Bene4 ficiaries

5 SEC. 3101. PROVISION OF SUPPLEMENTAL ACUTE CARE

6 BENEFITS THROUGH STATE SUPPLEMENTAL

7 ACUTE CARE BENEFIT PROGRAMS.

8 (a) IN GENERAL.—Title XXI of the Social Security

9 Act, as added by section 2101(a), is amended by inserting

10 after part A the following new part:

11 ‘‘PART B—STATE SUPPLEMENTAL ACUTE CARE

12 BENEFITS PROGRAMS

13 ‘‘SEC. 2121. ESTABLISHMENT OF STATE SUPPLEMENTAL

14 ACUTE CARE BENEFITS PROGRAMS.

15 ‘‘(a) IN GENERAL.—Each State shall establish a

16 State supplemental acute care benefits program (each in

17 this part referred to as a ‘State supplemental acute care

18 benefits program’) that provides supplemental acute care

19 benefits for supplemental benefit eligible individuals.

20 ‘‘(b) AVAILABILITY OF FUNDS.—Each State with a

21 State supplemental acute care benefits program approved

22 under this part is entitled, for calendar quarters beginning

23 on or after January 1, 1995, to payment under section

24 2124.
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Title III, Subtitle B

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1 ‘‘(c) APPROVAL OF STATE PROGRAMS; PROGRAM DE2 SCRIPTIONS.—The Secretary may not approve a State

3 supplemental acute care benefits program unless the State

4 has submitted a detailed description of the form and man5 ner in which it will carry out the program (consistent with

6 the applicable requirements of this part) and the Secretary

7 finds that the program meets such applicable require8 ments.

9 ‘‘SEC. 2122. ELIGIBILITY.

10 ‘‘(a) IN GENERAL.—In this part, the term ‘supple11 mental benefit eligible individual’ means an individual

12 who, as of the time of provision of supplemental acute care

13 benefits, is described as follows:

14 ‘‘(1) 1995 THROUGH 1997.—The individual is

15 an AFDC recipient or a non-cash medicaid bene16 ficiary (as such terms are defined in section

17 1931(a)(2)).

18 ‘‘(2) 1998 AND THEREAFTER.—The individual

19 is a premium assistance eligible individual (as de20 fined in section 2102(a)).

21 ‘‘(b) CONSTRUCTION.—Nothing in this part shall be

22 construed to create an entitlement for any specific supple23 mental benefit eligible individual.
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Title III, Subtitle B

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1 ‘‘SEC. 2123. SCOPE AND PROVISION OF BENEFITS; BENE2 FITS ADMINISTRATION.

3 ‘‘(a) IN GENERAL.—The supplemental acute care

4 benefits that may be made available under a State supple5 mental acute care benefits program may include supple6 mental acute care benefits (as defined in section

7 1931(a)(2)(F)).

8 ‘‘(b) COVERAGE OF BENEFITS.—Each State supple9 mental acute care benefits program—

10 ‘‘(1) shall establish methods and standards to

11 select the types, and the amount, duration, and

12 scope, of supplemental acute care benefits included

13 in the program and to assure access to, and the

14 quality of, services included in such benefits;

15 ‘‘(2) in providing benefits for supplemental ben16 efit eligible individuals—

17 ‘‘(A) may vary the supplemental acute care

18 benefits provided among reasonable classes of

19 such individuals, and

20 ‘‘(B) may take into account the individual

21 needs of individuals; and

22 ‘‘(3) shall coordinate the provision of such bene23 fits with other health insurance coverage and health

24 benefit programs in a manner that avoids duplica25 tion of benefits.
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Title III, Subtitle B

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1 ‘‘(c) PAYMENT METHODS.—Benefits under a pro2 gram may be made available in the form of direct provi3 sion of services, reimbursement of providers, prepayment

4 to providers or health plans on a capitation basis, reim5 bursement of supplemental benefit eligible individuals for

6 expenses incurred for supplemental acute care benefits, or

7 a combination of these methods.

8 ‘‘(d) ADMINISTRATION.—

9 ‘‘(1) STATE AGENCY.—Each State supplemental

10 acute care benefits program shall designate any ap11 propriate State agency to administer the program.

12 ‘‘(2) COORDINATION.—The State supplemental

13 acute care benefits program shall specify how the

14 program—

15 ‘‘(A) will be coordinated with the State

16 medicaid plan, titles V and XX of the Social

17 Security Act, part A of this title, and any other

18 Federal or State programs that provide services

19 or assistance targeted to supplemental benefit

20 eligible individuals, and

21 ‘‘(B) will be coordinated with qualified

22 health coverage.

23 ‘‘(e) REPORTS AND INFORMATION TO SECRETARY;

24 AUDITS.—Each State supplemental acute care benefits

25 program shall furnish to the Secretary—
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Title III, Subtitle B

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1 ‘‘(1) such reports, and cooperate with such au2 dits, as the Secretary determines are needed con3 cerning the State’s administration of the program

4 under this part, including the processing of any

5 claims under the program, and

6 ‘‘(2) such data and information as the Sec7 retary may require in order to carry out the Sec8 retary’s responsibilities.

9 ‘‘SEC. 2124. PAYMENTS TO STATES.

10 ‘‘(a) IN GENERAL.—

11 ‘‘(1) PAYMENTS FOR SUPPLEMENTAL ACUTE

12 CARE BENEFITS.—Subject to paragraph (2), sub13 section (b), and sections 2125 and 2141, the Sec14 retary shall provide for payment to each State oper15 ating an approved State supplemental acute care

16 benefits program in an amount equal to the amount

17 expended by the State under the program during the

18 quarter for supplemental acute care benefits for sup19 plemental benefit eligible individuals.

20 ‘‘(2) NO PAYMENT FOR MAINTENANCE-OF-EF21 FORT EXPENDITURES OR ADMINISTRATION.—No

22 payment shall be made under paragraph (1)—

23 ‘‘(A) for any State maintenance-of-effort

24 expenditures required under section 2125, or
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Title III, Subtitle B

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1 ‘‘(B) for any expenditures relating to ad2 ministration of a State subsidy program.

3 ‘‘(3) PAYMENTS FOR RELATED ADMINISTRA4 TIVE EXPENSES.—

5 ‘‘(A) 1995 THROUGH 1997.—

6 ‘‘(i) IN GENERAL.—Subject to sec7 tions 2123(d)(2), 2124(b), 2125, and

8 2141, and clause (ii), the Secretary shall

9 pay to each State operating a State supple10 mental acute care benefits program, for

11 each quarter beginning with the quarter

12 commencing January 1, 1995, and ending

13 before January 1, 1998, an amount equal

14 to 50 percent of the amounts expended

15 during the quarter as found necessary by

16 the Secretary for the proper and efficient

17 administration of such program, not in18 cluding any State maintenance-of-effort ex19 penditures required under section 2125.

20 ‘‘(ii) LIMITATION.—The Secretary

21 shall not find under clause (i) amounts ex22 pended to be for the proper and efficient

23 administration of a State supplemental

24 acute care benefits program if such

25 amounts exceed 3 percent of the total ex-
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Title III, Subtitle B

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1 penditures under the program in the quar2 ter (including State maintenance-of-effort

3 expenditures under section 2125).

4 ‘‘(B) REFERENCE TO PAYMENT FOR AD5 MINISTRATIVE EXPENSES AFTER 1997.—For

6 payment for administrative expenses under this

7 part after 1997, see section 2142.

8 ‘‘(4) FUNDING.—Payments to States under this

9 subsection shall be made by the Secretary, from the

10 Health Care Assurance Trust Fund (established

11 under section 2143), at such time and in such form

12 as provided in regulations promulgated by the Sec13 retary, based on the form and manner in which pay14 ments are made under section 1903.

15 ‘‘(b) LIMITATION ON PAYMENTS FOR SUPPLE16 MENTAL ACUTE CARE BENEFITS.—

17 ‘‘(1) IN GENERAL.—Subject to section 2141

18 and paragraphs (2) and (3), the total amount of

19 payments that may be made to a State under sub20 section (a)(1) for all quarters in a calendar year may

21 not exceed the following:

22 ‘‘(A) 1995.—For 1995, the product of—

23 ‘‘(i) the initial per capita supple24 mental acute care benefit Federal payment
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Title III, Subtitle B

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1 limit (described in subsection (c)) for the

2 State, and

3 ‘‘(ii) the average monthly number of

4 supplemental benefit eligible individuals in

5 the State in 1995.

6 ‘‘(B) 1996 AND 1997.—For each of cal7 endar years 1996 and 1997, the product of—

8 ‘‘(i) the limit specified in this clause

9 (or subparagraph (A)(i)) for the State for

10 the previous year increased by the FEHBP

11 national rolling increase factor for the year

12 (as defined in section 2107)(c)(1)), and

13 ‘‘(ii) the average monthly number of

14 supplemental benefit eligible individuals in

15 the State in the year.

16 ‘‘(C) 1998 AND THEREAFTER.—For 1998

17 or any succeeding year, the amount computed

18 under this subparagraph (or subparagraph (B))

19 for the State for the preceding year increased

20 by the supplemental acute care benefit increase

21 factor under subsection (d) for the year.

22 ‘‘(2) ADJUSTMENT FOR AVAILABILITY OF ADDI23 TIONAL FUNDS.—If the Secretary determines for a

24 year that the total amount of the Federal payments

25 under section 2124 for a year for all the States is
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Title III, Subtitle B

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1 less than the sum of the limitations for the year for

2 all the States established under paragraph (1), the

3 limitation for each State under this subsection shall

4 be increased in a pro-rata manner by such an

5 amount as will not result in such total Federal pay6 ments under section 2124 exceeding the sum of such

7 limits for all the States for the year.

8 ‘‘(3) ESTIMATIONS AND ADJUSTMENTS.—The

9 Secretary shall—

10 ‘‘(A) establish a process for estimating the

11 limit established under this subsection for a

12 year at the beginning of the year and adjusting

13 such amount during such year; and

14 ‘‘(B) notifying each State of the esti15 mations and adjustments referred to in sub16 paragraph (A).

17 ‘‘(c) INITIAL PER CAPITA SUPPLEMENTAL ACUTE

18 CARE BENEFIT FEDERAL PAYMENT LIMIT DEFINED.—

19 ‘‘(1) IN GENERAL.—For purposes of subsection

20 (b)(1)(A), the ‘initial per capita supplemental acute

21 care benefit Federal payment limit’ for a State for

22 a year is equal to the base per capita supplemental

23 acute care Federal payments (described in para24 graph (2)) increased by the FEHBP national rolling
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Title III, Subtitle B

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1 increase percentage (as defined in section

2 2107(c)(1)) for 1995.

3 ‘‘(2) BASE PER CAPITA SUPPLEMENTAL ACUTE

4 CARE FEDERAL PAYMENTS.—For purposes of para5 graph (1), the ‘base per capita supplemental acute

6 care Federal payments’ described in this paragraph,

7 for a State, is—

8 ‘‘(A) the baseline Federal medicaid supple9 mental acute care benefit expenditures (as de10 fined in paragraph (3)) for the State, divided

11 by

12 ‘‘(B) the number of AFDC recipients and

13 non-cash medicaid beneficiaries (as described in

14 section 1931(a)(2)) enrolled in the State plan

15 under title XIX in 1994, as determined under

16 paragraph (4) consistent with section

17 1931(c)(3)(C).

18 ‘‘(3) DETERMINATION OF BASELINE FEDERAL

19 MEDICAID SUPPLEMENTAL ACUTE CARE PAY20 MENTS.—

21 ‘‘(A) IN GENERAL.—For purposes of para22 graph (2)(A), the ‘baseline Federal medicaid

23 supplemental acute care payments’ for a State

24 is the amount of Federal payments made under

25 section 1903(a)(1) with respect to medical as-
243

Title III, Subtitle B

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1 sistance furnished for supplemental acute care

2 benefits (as defined in section 1931(b)(2)) for

3 AFDC recipients and non-cash medicaid bene4 ficiaries for all calendar quarters in 1994.

5 ‘‘(B) DISPROPORTIONATE SHARE PAY6 MENTS NOT INCLUDED.—In applying subpara7 graph (A), payments attributable to section

8 1923 shall not be counted in the amount of

9 payments.

10 ‘‘(C) TREATMENT OF DISALLOWANCES.—

11 The amount determined under this paragraph

12 shall take into account amounts (or an estimate

13 of amounts) disallowed under title XIX.

14 ‘‘(4) APPLICATION TO PARTICULAR ITEMS AND

15 SERVICES.—For purposes of this subsection, in de16 termining the per capita supplemental medical bene17 fit expenditure limit for a category of items and

18 services (within the supplemental acute care bene19 fits) furnished in a State, there shall be counted only

20 that proportion of such expenditures (determined

21 only with respect to medical assistance furnished to

22 AFDC recipients and non-cash medicaid bene23 ficiaries) that were attributable to items and services

24 included in the supplemental acute care benefits

25 (taking into account any limitation on amount, dura-
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Title III, Subtitle B

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1 tion, or scope of items and services included in such

2 benefits).

3 ‘‘(d) SUPPLEMENTAL ACUTE CARE BENEFIT IN4 CREASE FACTOR DESCRIBED.—For purposes of sub5 section (b)(1)(C), the ‘supplemental medical benefit in6 crease factor’ for a year for a State is equal to the sum

7 of—

8 ‘‘(1) the FEHBP national rolling increase fac9 tor (as defined in section 2107(c)(1)) for the year,

10 ‘‘(2) the annual percentage change (which may

11 be positive or negative) in the population of the

12 State (as estimated by the Secretary for purposes of

13 section 2107(c)(4)(B)), and

14 ‘‘(3)(A) 1 percentage point for 1998,

‘‘(B) 2 15 ⁄3 percentage point for 1999,

‘‘(C) 1 16 ⁄3 percentage point for 2000, and

17 ‘‘(D) 0 percentage points for each subsequent

18 year.

19 ‘‘SEC. 2125. STATE MAINTENANCE-OF-EFFORT REQUIRE20 MENT.

21 ‘‘(a) IN GENERAL.—Payment to a State under sec22 tion 2124 for a quarter in a year (beginning with 1995)

23 is conditioned upon—

24 ‘‘(1) the State making expenditures for supple25 mental acute care benefits under this part from non-
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1 Federal funds (consistent with subsection (d)) for

2 supplemental benefit eligible individuals equal to at

3 least the supplemental benefit maintenance-of-effort

4 amount computed under subsection (b) for the quar5 ter, and

6 ‘‘(2) for quarters beginning on or after January

7 1, 1998, the State meeting the maintenance-of-effort

8 requirement under section 2107(a)(1) for the quar9 ter.

10 ‘‘(b) SUPPLEMENTAL BENEFITS MAINTENANCE-OF11 EFFORT AMOUNT.—The supplemental benefits mainte12 nance-of-effort amount computed under this subsection

for a State for a quarter in a year is equal to 1 13 ⁄4 of the

14 product of—

15 ‘‘(1) the amount that would be computed as the

16 minimum limitation under section 2124(b) for the

17 State for all quarters in the year (determined with18 out regard to section 2124(b)(2)) if the FEHBP

19 State rolling increase percentage (as defined in sec20 tion 2107(b)(2)) were substituted for the FEHBP

21 national rolling increase percentage in section

22 2124(c)(1)(A) and in determining the supplemental

23 medical benefit increase factor under 2124(d); and

24 ‘‘(2) the Federal-to-State conversion factor

25 (specified under section 2107(b)(5)).
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1 ‘‘(c) USE OF STATE FUNDS.—Each State supple2 mental acute care benefits program shall provide assur3 ances satisfactory to the Secretary that Federal funds will

4 not be used, directly or indirectly, to provide for the State

5 expenditures required under this section.’’.

6 (b) CONFORMING AMENDMENT TO MEDICAID PRO7 GRAM.—Section 1931 of the Social Security Act, as added

8 by section 3001, is amended by adding at the end the fol9 lowing:

10 ‘‘(e) ELIMINATION OF ENTITLEMENT FOR SUPPLE11 MENTAL ACUTE CARE BENEFITS.—With respect to medi12 cal assistance for supplemental acute care benefits for

13 AFDC recipients and non-cash medicaid beneficiaries in

14 a State for quarters in 1995 or any succeeding year—

15 ‘‘(1) no Federal financial participation shall be

16 payable under section 1903(a)(1),

17 ‘‘(2) the State may receive payments for such

18 supplemental acute care benefits under part B of

19 title XXI, and

20 ‘‘(3) such a recipient or beneficiary is not enti21 tled to receive any medical assistance for such bene22 fits under the State plan under this title.’’.
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1 Subtitle C—Increased State Flexi2 bility in Contracting for Coordi3 nated Care

4 SEC. 3201. MODIFICATION OF FEDERAL REQUIREMENTS TO

5 ALLOW STATES MORE FLEXIBILITY IN CON6 TRACTING FOR COORDINATED CARE SERV7 ICES.

8 (a) IN GENERAL.—

9 (1) PAYMENT PROVISIONS.—Section 1903(m)

10 of the Social Security Act (42 U.S.C. 1396b(m)) is

11 amended to read as follows:

12 ‘‘(m)(1) No payment shall be made under this title

13 to a State with respect to expenditures incurred by such

14 State for payment to an entity which is at risk (as defined

15 in section 1932(a)(4)) for services provided by such entity

16 to individuals eligible for medical assistance under the

17 State plan under this title, unless the entity is a risk con18 tracting entity (as defined in section 1932(a)(3)) and the

19 State and such entity comply with the applicable provi20 sions of section 1932.

21 ‘‘(2) No payment shall be made under this title to

22 a State with respect to expenditures incurred by such

23 State for payment for services provided to an individual

24 eligible for medical assistance under the State plan under

25 this title if such payment by the State is contingent upon
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Title III, Subtitle C

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1 the individual receiving such services from a specified

2 health care provider or subject to the approval of a speci3 fied health care provider, unless the entity receiving pay4 ment is a primary care case management entity (as de5 fined in section 1932(a)(2)) and the State and such entity

6 comply with the applicable provisions of section 1932.’’.

7 (2) REQUIREMENTS FOR COORDINATED CARE

8 SERVICES.—Title XIX of such Act (42 U.S.C. 1396

9 et seq.), as amended by section 2001(a), is amended

10 by redesignating section 1932 as section 1933 and

11 by inserting after section 1931 the following new

12 section:

13 ‘‘REQUIREMENTS FOR COORDINATED CARE SERVICES

14 ‘‘SEC. 1932. (a) DEFINITIONS.—For purposes of this

15 title—

16 ‘‘(1) PRIMARY CARE CASE MANAGEMENT PRO17 GRAM.—The term ‘primary care case management

18 program’ means a program operated by a State

19 agency under which such State agency enters into

20 contracts with primary care case management enti21 ties for the provision of health care items and serv22 ices which are specified in such contracts and the

23 provision of case management services to individuals

24 who are—

25 ‘‘(A) eligible for medical assistance under

26 the State plan,
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Title III, Subtitle C

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1 ‘‘(B) enrolled with such primary care case

2 management entities, and

3 ‘‘(C) entitled to receive such specified

4 health care items and services and case man5 agement services only as approved and ar6 ranged for, or provided, by such entities.

7 ‘‘(2) PRIMARY CARE CASE MANAGEMENT EN8 TITY.—The term ‘primary care case management

9 entity’ means a health care provider which—

10 ‘‘(A) must be a physician, group of physi11 cians, a Federally qualified health center, a

12 rural health clinic, a community health author13 ity (under section 1934), or an entity employing

14 or having other arrangements with physicians

15 operating under a contract with a State to pro16 vide services under a primary care case man17 agement program,

18 ‘‘(B) receives payment on a fee for service

19 basis (or, in the case of a Federally qualified

20 health center or a rural health clinic, on a rea21 sonable cost per encounter basis) for the provi22 sion of health care items and services specified

23 in such contract to enrolled individuals,

24 ‘‘(C) receives an additional fixed fee per

25 enrollee for a period specified in such contract
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Title III, Subtitle C

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1 for providing case management services (includ2 ing approving and arranging for the provision

3 of health care items and services specified in

4 such contract on a referral basis) to enrolled

5 individuals, and

6 ‘‘(D) is not an entity that is at risk (as de7 fined in paragraph (4)) for such case manage8 ment services.

9 ‘‘(3) RISK CONTRACTING ENTITY.—The term

10 ‘risk contracting entity’ means an entity which has

11 a contract with the State agency (or a health insur12 ing organization described in subsection (n)(2))

13 under which the entity—

14 ‘‘(A) provides or arranges for the provision

15 of health care items or services which are speci16 fied in such contract to individuals eligible for

17 medical assistance under the State plan, and

18 ‘‘(B) is at risk (as defined in paragraph

19 (4)) for part or all of the cost of such items or

20 services furnished to individuals eligible for

21 medical assistance under such plan.

22 ‘‘(4) AT RISK.—The term ‘at risk’ means an

23 entity which—

24 ‘‘(A) has a contract with the State agency

25 under which such entity is paid a fixed amount
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Title III, Subtitle C

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1 for providing or arranging for the provision of

2 health care items or services specified in such

3 contract to an individual eligible for medical as4 sistance under the State plan and enrolled with

5 such entity, regardless of whether such items or

6 services are furnished to such individual, and

7 ‘‘(B) is liable for all or part of the cost of

8 furnishing such items or services, regardless of

9 whether such cost exceeds such fixed payment.

10 ‘‘(b) GENERAL REQUIREMENTS FOR RISK CON11 TRACTING ENTITIES.—

12 ‘‘(1) ORGANIZATION.—A risk contracting entity

13 meets the requirements of this section only if such

14 entity—

15 ‘‘(A)(i) is a qualified health maintenance

16 organization as defined in section 1310(d) of

17 the Public Health Service Act, as determined by

18 the Secretary pursuant to section 1312 of such

19 Act; or

20 ‘‘(ii) is described in subparagraph (C), (D),

21 (E), (F), or (G) of subsection (e)(4);

22 ‘‘(B) is a Federally qualified health center,

23 a rural health clinic, or a community health au24 thority (under section 1934) which has made

25 adequate provision against the risk of insol-
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Title III, Subtitle C

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1 vency (pursuant to the guidelines and regula2 tions issued by the Secretary under this sec3 tion), and ensures that individuals eligible for

4 medical assistance under the State plan are not

5 held liable for such entity’s debts in case of

6 such entity’s insolvency; or

7 ‘‘(C) is an entity which meets all applicable

8 State licensing requirements and has made ade9 quate provision against the risk of insolvency

10 (pursuant to the guidelines and regulations is11 sued by the Secretary under this section), and

12 ensures that individuals eligible for medical as13 sistance under the State plan are not held liable

14 for such entity’s debts in case of such entity’s

15 insolvency.

16 ‘‘(2) GUARANTEES OF ENROLLEE ACCESS.—A

17 risk contracting entity meets the requirements of

18 this section only if—

19 ‘‘(A) the geographic locations, hours of op20 eration, patient to staff ratios, and other rel21 evant characteristics of such entity are suffi22 cient to afford individuals eligible for medical

23 assistance under the State plan access to such

24 entities that is at least equivalent to the access

25 to health care providers that would be available
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Title III, Subtitle C

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1 to such individuals if such individuals were not

2 enrolled with such entity;

3 ‘‘(B) such entity has reasonable and ade4 quate hours of operation, including 24-hour

5 availability of—

6 ‘‘(i)(I) treatment for an unforeseen ill7 ness, injury, or condition of an individual

8 eligible for medical assistance under the

9 State plan and enrolled with such entity;

10 or

11 ‘‘(II) referral to other health care pro12 viders for such treatment; and

13 ‘‘(ii) other information, as determined

14 by the Secretary or the State; and

15 ‘‘(C) such entity complies with such other

16 requirements relating to access to care as the

17 Secretary or the State may impose.

18 ‘‘(3) CONTRACT WITH STATE AGENCY.—A risk

19 contracting entity meets the requirements of this

20 section only if such entity has a written contract

21 with the State agency which provides—

22 ‘‘(A) that the entity will comply with all

23 applicable provisions of this section, that the

24 State has the right to penalize the entity for

25 failure to comply with such requirements and to
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Title III, Subtitle C

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1 terminate the contract in accordance with sub2 section (j), and that the entity will be subject

3 to penalties imposed by the Secretary under

4 subsection (i) for failure to comply with such

5 requirements;

6 ‘‘(B) for a payment methodology based on

7 experience rating or another actuarially sound

8 methodology approved by the Secretary, which

9 guarantees (as demonstrated by such models or

10 formulas as the Secretary may approve) that—

11 ‘‘(i) payments to the entity under the

12 contract shall not exceed an amount equal

13 to 100 percent of the costs (which shall in14 clude administrative costs and which may

15 include costs for inpatient hospital services

16 that would have been incurred in the ab17 sence of such contract) that would have

18 been incurred by the State agency in the

19 absence of the contract; and

20 ‘‘(ii) the financial risk for inpatient

21 hospital services is limited to an extent

22 established by the State;

23 ‘‘(C) that the Secretary and the State (or

24 any person or organization designated by ei25 ther) shall have the right to audit and inspect
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Title III, Subtitle C

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1 any books and records of the entity (and of any

2 subcontractor) that pertain—

3 ‘‘(i) to the ability of the entity (or a

4 subcontractor) to bear the risk of potential

5 financial losses; or

6 ‘‘(ii) to services performed or deter7 minations of amounts payable under the

8 contract;

9 ‘‘(D) that in the entity’s enrollment,

10 reenrollment, or disenrollment of individuals eli11 gible for medical assistance under the State

12 plan and eligible to enroll, reenroll, or disenroll

13 with the entity pursuant to the contract, the en14 tity will not discriminate among such individ15 uals on the basis of such individuals’ health

16 status or requirements for health care services;

17 ‘‘(E)(i) individuals eligible for medical as18 sistance under the State plan who have enrolled

19 with the entity are permitted to terminate such

20 enrollment without cause as of the beginning of

21 the first calendar month (or in the case of an

22 entity described in subsection (e)(4), as of the

23 beginning of the first enrollment period) follow24 ing a full calendar month after a request is

25 made for such termination;
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Title III, Subtitle C

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1 ‘‘(ii) that when an individual has relocated

2 outside the entity’s service area, and the entity

3 has been notified of the relocation, services

4 (within reasonable limits) furnished by a health

5 care provider outside the service area will be re6 imbursed either by the entity or by the State

7 agency; and

8 ‘‘(iii) for written notification of each such

9 individual’s right to terminate enrollment,

10 which shall be provided at the time of such indi11 vidual’s enrollment, and, in the case of a child

12 with special health care needs as defined in sub13 section (e)(1)(B)(ii), at the time the entity iden14 tifies such a child;

15 ‘‘(F) in the case of services immediately re16 quired to treat an unforeseen illness, injury, or

17 condition, of an individual eligible for medical

18 assistance under the State plan and enrolled

19 with the entity—

20 ‘‘(i) that such services shall not be

21 subject to a preapproval requirement; and

22 ‘‘(ii) where such services are furnished

23 by a health care provider other than the

24 entity, for reimbursement of such provider

25 either by the entity or by the State agency;
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Title III, Subtitle C

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1 ‘‘(G) for disclosure of information in ac2 cordance with subsection (h) and section 1124;

3 ‘‘(H) that any physician incentive plan op4 erated by the entity meets the requirements of

5 section 1876(i)(8);

6 ‘‘(I) for maintenance of sufficient patient

7 encounter data to identify the physician who de8 livers services to patients;

9 ‘‘(J) that the entity will comply with the

10 requirement of section 1902(w) with respect to

11 each enrollee;

12 ‘‘(K) that the entity will implement a

13 grievance system, inform enrollees in writing

14 about how to use such grievance system, ensure

15 that grievances are addressed in a timely man16 ner, and report grievances to the State at inter17 vals to be determined by the State;

18 ‘‘(L) that contracts between the entity and

19 each subcontractor of such entity will require

20 each subcontractor—

21 ‘‘(i) to cooperate with the entity in the

22 implementation of its internal quality as23 surance program under paragraph (4) and

24 adhere to the standards set forth in the

25 quality assurance program, including
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Title III, Subtitle C

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1 standards with respect to access to care,

2 facilities in which patients receive care,

3 and availability, maintenance, and review

4 of medical records;

5 ‘‘(ii) to cooperate with the Secretary,

6 the State agency and any contractor to the

7 State in monitoring and evaluating the

8 quality and appropriateness of care pro9 vided to enrollees as required by Federal or

10 State laws and regulations; and

11 ‘‘(iii) where applicable, to adhere to

12 regulations and program guidance with re13 spect to reporting requirements under sec14 tion 1905(r);

15 ‘‘(M) that, where the State deems it nec16 essary to ensure the timely provision to enroll17 ees of the services listed in subsection

18 (f)(2)(C)(ii), the State may arrange for the pro19 vision of such services by health care providers

20 other than the entity and may adjust its pay21 ments to the entity accordingly;

22 ‘‘(N) that the entity and the State will

23 comply with guidelines and regulations issued

24 by the Secretary with respect to procedures for

25 marketing and information that must be pro-
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Title III, Subtitle C

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1 vided to individuals eligible for medical assist2 ance under the State plan;

3 ‘‘(O) that the entity must provide pay4 ments to hospitals for inpatient hospital serv5 ices furnished to infants who have not attained

6 the age of 1 year, and to children who have not

7 attained the age of 6 years and who receive

8 such services in a disproportionate share hos9 pital, in accordance with paragraphs (2) and

10 (3) of section 1902(s);

11 ‘‘(P) that the entity shall report to the

12 State, at such time and in such manner as the

13 State shall require, on the rates paid for hos14 pital services (by type of hospital and type of

15 service) furnished to individuals enrolled with

16 the entity;

17 ‘‘(Q) detailed information regarding the

18 relative responsibilities of the entity and the

19 State, for providing (or arranging for the provi20 sion of), and making payment for, the following

21 items and services:

22 ‘‘(i) immunizations;

23 ‘‘(ii) the purchase of vaccines;

24 ‘‘(iii) lead screening and treatment

25 services;
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Title III, Subtitle C

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1 ‘‘(iv) screening and treatment for tu2 berculosis;

3 ‘‘(v) screening and treatment for, and

4 preventive services related to, sexually

5 transmitted diseases, including HIV infec6 tion;

7 ‘‘(vi) screening, diagnostic, and treat8 ment services required under section

9 1905(r);

10 ‘‘(vii) family planning services;

11 ‘‘(viii) services prescribed under—

12 ‘‘(I) an Individual Education

13 Plan or Individualized Family Service

14 Plan under part B or part H of the

15 Individuals with Disabilities Edu16 cation Act; and

17 ‘‘(II) any other individual plan of

18 care or treatment developed under

19 this title or title V;

20 ‘‘(ix) transportation needed to obtain

21 services to which the enrollee is entitled

22 under the State plan or pursuant to an in23 dividual plan of care or treatment de24 scribed in subclauses (I) and (II) of clause

25 (viii); and
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Title III, Subtitle C

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1 ‘‘(x) such other services as the Sec2 retary may specify;

3 ‘‘(R) detailed information regarding the

4 procedures for coordinating the relative respon5 sibilities of the entity and the State to ensure

6 prompt delivery of, compliance with any appli7 cable reporting requirements related to, and ap8 propriate record keeping with respect to, the

9 items and services described in subparagraph

10 (Q); and

11 ‘‘(S) such other provisions as the Secretary

12 may require.

13 ‘‘(4) INTERNAL QUALITY ASSURANCE.—A risk

14 contracting entity meets the requirements of this

15 section only if such entity has in effect a written in16 ternal quality assurance program which includes a

17 systematic process to achieve specified and measur18 able goals and objectives for access to, and quality

19 of, care, which—

20 ‘‘(A) identifies the organizational units re21 sponsible for performing specific quality assur22 ance functions, and ensures that such units are

23 accountable to the governing body of the entity

24 and that such units have adequate supervision,
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Title III, Subtitle C

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1 staff, and other necessary resources to perform

2 these functions effectively,

3 ‘‘(B) if any quality assurance functions are

4 delegated to other entities, ensures that the risk

5 contracting entity remains accountable for all

6 quality assurance functions and has mecha7 nisms to ensure that all quality assurance ac8 tivities are carried out,

9 ‘‘(C) includes methods to ensure that phy10 sicians and other health care professionals

11 under contract with the entity are licensed or

12 certified as required by State law, or are other13 wise qualified to perform the services such phy14 sicians and other professionals provide, and

15 that these qualifications are ensured through

16 appropriate credentialing and recredentialing

17 procedures,

18 ‘‘(D) provides for continuous monitoring of

19 the delivery of health care, through—

20 ‘‘(i) identification of clinical areas to

21 be monitored, including immunizations,

22 prenatal care, services required under sec23 tion 1905(r), and other appropriate clinical

24 areas, to reflect care provided to enrollees
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Title III, Subtitle C

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1 eligible for medical assistance under the

2 State plan,

3 ‘‘(ii) use of quality indicators and

4 standards for assessing the quality and ap5 propriateness of care delivered, and the

6 availability and accessibility of all services

7 for which the entity is responsible under

8 such entity’s contract with the State,

9 ‘‘(iii) use of epidemiological data or

10 chart review, as appropriate, and patterns

11 of care overall,

12 ‘‘(iv) patient surveys, spot checks, or

13 other appropriate methods to determine

14 whether—

15 ‘‘(I) enrollees are able to obtain

16 timely appointments with primary

17 care providers and specialists, and

18 ‘‘(II) enrollees are otherwise

19 guaranteed access and care as pro20 vided under paragraph (2),

21 ‘‘(v) provision of written information

22 to health care providers and other person23 nel on the outcomes, quality, availability,

24 accessibility, and appropriateness of care,

25 and
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Title III, Subtitle C

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1 ‘‘(vi) implementation of corrective ac2 tions,

3 ‘‘(E) includes standards for timely enrollee

4 access to information and care which at a mini5 mum shall incorporate standards used by the

6 State or professional or accreditation bodies for

7 facilities furnishing perinatal and neonatology

8 care and other forms of specialized medical and

9 surgical care,

10 ‘‘(F) includes standards for the facilities in

11 which patients receive care,

12 ‘‘(G) includes standards for managing and

13 treating medical conditions prevalent among

14 such entity’s enrollees eligible for medical as15 sistance under the State plan,

16 ‘‘(H) includes mechanisms to ensure that

17 enrollees eligible for medical assistance under

18 the State plan receive services for which the en19 tity is responsible under the contract which are

20 consistent with standards established by the ap21 plicable professional societies or government

22 agencies,

23 ‘‘(I) includes standards for the availability,

24 maintenance, and review of medical records
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Title III, Subtitle C

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1 consistent with generally accepted medical prac2 tice,

3 ‘‘(J) provides for dissemination of quality

4 assurance procedures to health care providers

5 under contract with the entity, and

6 ‘‘(K) meets any other requirements pre7 scribed by the Secretary or the State.

8 ‘‘(5) TRANSITIONAL AGREEMENTS WITH ESSEN9 TIAL COMMUNITY PROVIDERS.—A risk contracting

10 entity meets the requirements of this section only if

11 such entity complies with the requirements of section

12 1013 of the Bipartisan Health Care Reform Act of

13 1994 (subject to the sunset contained in subsection

14 (j) of such section).

15 ‘‘(c) GENERAL REQUIREMENTS FOR PRIMARY CARE

16 CASE MANAGEMENT PROGRAMS.—A primary care case

17 management program implemented by a State under this

18 section shall—

19 ‘‘(1) provide that each primary care case man20 agement entity participating in such program has a

21 written contract with the State agency,

22 ‘‘(2) include methods for selection and monitor23 ing of participating primary care case management

24 entities to ensure—
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Title III, Subtitle C

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1 ‘‘(A) that the geographic locations, hours

2 of operation, patient to staff ratio, and other

3 relevant characteristics of such entities are suf4 ficient to afford individuals eligible for medical

5 assistance under the State plan access to such

6 entities that is at least equivalent to the access

7 to health care providers that would be available

8 to such individuals if such individuals were not

9 enrolled with such entity,

10 ‘‘(B) that such entities and their profes11 sional personnel are licensed as required by

12 State law and qualified to provide case manage13 ment services, through methods such as ongo14 ing monitoring of compliance with applicable re15 quirements and providing information and tech16 nical assistance, and

17 ‘‘(C) that such entities—

18 ‘‘(i) provide timely and appropriate

19 primary care to such enrollees consistent

20 with standards established by applicable

21 professional societies or governmental

22 agencies, or such other standards pre23 scribed by the Secretary or the State, and

24 ‘‘(ii) where other items and services

25 are determined to be medically necessary,
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Title III, Subtitle C

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1 give timely approval of such items and

2 services and referral to appropriate health

3 care providers,

4 ‘‘(3) provide that no preapproval shall be re5 quired for emergency health care items or services,

6 and

7 ‘‘(4) permit individuals eligible for medical as8 sistance under the State plan who have enrolled with

9 a primary care case management entity to terminate

10 such enrollment without cause not later than the be11 ginning of the first calendar month following a full

12 calendar month after the request is made for such

13 termination.

14 ‘‘(d) EXEMPTIONS FROM STATE PLAN REQUIRE15 MENTS.—A State plan may permit or require an individ16 ual eligible for medical assistance under such plan to en17 roll with a risk contracting entity or a primary care case

18 management entity without regard to the requirements set

19 forth in the following paragraphs of section 1902(a):

20 ‘‘(1) Paragraph (1) (concerning statewideness).

21 ‘‘(2) Paragraph (10)(B) (concerning com22 parability of benefits), to the extent benefits not in23 cluded in the State plan are provided.

24 ‘‘(3) Paragraph (23) (concerning freedom of

25 choice of provider), except with respect to services
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Title III, Subtitle C

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1 described in section 1905(a)(4)(C) and except as re2 quired under subsection (e).

3 ‘‘(e) STATE OPTIONS WITH RESPECT TO ENROLL4 MENT AND DISENROLLMENT.—

5 ‘‘(1) MANDATORY ENROLLMENT.—

6 ‘‘(A) IN GENERAL.—Except as provided in

7 subparagraph (B), a State plan may require an

8 individual eligible for medical assistance under

9 such plan to enroll with a risk contracting en10 tity or a primary care case management entity

11 only if the individual is permitted a choice with12 in a reasonable service area (as defined by the

13 State)—

14 ‘‘(i) between or among 2 or more risk

15 contracting entities,

16 ‘‘(ii) among a risk contracting entity

17 and a primary care case management pro18 gram, or

19 ‘‘(iii) among primary care case man20 agement entities.

21 ‘‘(B) SPECIAL NEEDS CHILDREN.—

22 ‘‘(i) IN GENERAL.—A State may not

23 require a child with special health care

24 needs (as defined in clause (ii)) to enroll
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1 with a risk contracting entity or a primary

2 care case management entity.

3 ‘‘(ii) DEFINITION.—For purposes of

4 this subparagraph, the term ‘child with

5 special health care needs’ refers to an indi6 vidual eligible for supplemental security in7 come under title XVI, a child described

8 under section 501(a)(1)(D), or a child de9 scribed in section 1902(e)(3).

10 ‘‘(2) REENROLLMENT OF INDIVIDUALS WHO

11 REGAIN ELIGIBILITY.—In the case of an individual

12 who—

13 ‘‘(A) in a month is eligible for medical as14 sistance under the State plan and enrolled with

15 a risk contracting entity with a contract under

16 this section,

17 ‘‘(B) in the next month (or next 2 months)

18 is not eligible for such medical assistance, but

19 ‘‘(C) in the succeeding month is again eli20 gible for such benefits,

21 the State agency (subject to subsection (b)(3)(E))

22 may enroll the individual for that succeeding month

23 with such entity, if the entity continues to have a

24 contract with the State agency under this sub25 section.
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1 ‘‘(3) DISENROLLMENT.—

2 ‘‘(A) RESTRICTIONS ON DISENROLLMENT

3 WITHOUT CAUSE.—Except as provided in sub4 paragraph (C), a State plan may restrict the

5 period in which individuals enrolled with risk

6 contracting entities described in paragraph (4)

7 may terminate such enrollment without cause to

8 the first month of each period of enrollment (as

9 defined in subparagraph (B)), but only if the

10 State provides notification, at least once during

11 each such enrollment period, to individuals en12 rolled with such entity of the right to terminate

13 such enrollment and the restriction on the exer14 cise of this right. Such restriction shall not

15 apply to requests for termination of enrollment

16 for cause.

17 ‘‘(B) PERIOD OF ENROLLMENT.—For pur18 poses of this paragraph, the term ‘period of en19 rollment’ means—

20 ‘‘(i) a period not to exceed 6 months

21 in duration, or

22 ‘‘(ii) a period not to exceed 1 year in

23 duration, in the case of a State that, on

24 the effective date of this paragraph, had in

25 effect a waiver under section 1115 of re-
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1 quirements under this title under which

2 the State could establish a 1-year mini3 mum period of enrollment with risk con4 tracting entities.

5 ‘‘(C) SPECIAL NEEDS CHILDREN.—A State

6 may not restrict disenrollment of a child with

7 special health care needs (as defined in para8 graph (1)(B)(ii)).

9 ‘‘(4) ENTITIES ELIGIBLE FOR DISENROLLMENT

10 RESTRICTIONS.—A risk contracting entity described

11 in this paragraph is—

12 ‘‘(A) a qualified health maintenance orga13 nization as defined in section 1310(d) of the

14 Public Health Service Act,

15 ‘‘(B) an eligible organization with a con16 tract under section 1876,

17 ‘‘(C) an entity that is receiving (and has

18 received during the previous 2 years) a grant of

19 at least $100,000 under section 329(d)(1)(A)

20 or 330(d)(1) of the Public Health Service Act,

21 ‘‘(D) an entity that—

22 ‘‘(i) received a grant of at least

23 $100,000 under section 329(d)(1)(A) or

24 section 330(d)(1) of the Public Health

25 Service Act in the fiscal year ending June
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1 30, 1976, and has been a grantee under ei2 ther such section for all periods after that

3 date, and

4 ‘‘(ii) provides to its enrollees, on a

5 prepaid capitation or other risk basis, all

6 of the services described in paragraphs (1),

7 (2), (3), (4)(C), and (5) of section 1905(a)

8 (and the services described in section

9 1905(a)(7), to the extent required by sec10 tion 1902(a)(10)(D)),

11 ‘‘(E) an entity that is receiving (and has

12 received during the previous 2 years) at least

13 $100,000 (by grant, subgrant, or subcontract)

14 under the Appalachian Regional Development

15 Act of 1965,

16 ‘‘(F) a nonprofit primary health care en17 tity located in a rural area (as defined by the

18 Appalachian Regional Commission)—

19 ‘‘(i) which received in the fiscal year

20 ending June 30, 1976, at least $100,000

21 (by grant, subgrant, or subcontract) under

22 the Appalachian Regional Development Act

23 of 1965, and

24 ‘‘(ii) which, for all periods after such

25 date, either has been the recipient of a
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1 grant, subgrant, or subcontract under such

2 Act or has provided services on a prepaid

3 capitation or other risk basis under a con4 tract with the State agency initially en5 tered into during a year in which the entity

6 was the recipient of such a grant,

7 subgrant, or subcontract,

8 ‘‘(G) an entity that had contracted with

9 the State agency prior to 1970 for the provi10 sion, on a prepaid risk basis, of services (which

11 did not include inpatient hospital services) to

12 individuals eligible for medical assistance under

13 the State plan,

14 ‘‘(H) a program pursuant to an undertak15 ing described in subsection (n)(3) in which at

16 least 25 percent of the membership enrolled on

17 a prepaid basis are individuals who—

18 ‘‘(i) are not insured for benefits under

19 part B of title XVIII or eligible for medical

20 assistance under the State plan, and

21 ‘‘(ii) (in the case of such individuals

22 whose prepayments are made in whole or

23 in part by any government entity) had the

24 opportunity at the time of enrollment in

25 the program to elect other coverage of
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1 health care costs that would have been

2 paid in whole or in part by any govern3 mental entity,

4 ‘‘(I) an entity that, on the date of enact5 ment of this provision, had a contract with the

6 State agency under a waiver under section 1115

7 or 1915(b) and was not subject to a require8 ment under this title to permit disenrollment

9 without cause, or

10 ‘‘(J) an entity that has a contract with the

11 State agency under a waiver under section

12 1915(b)(5).

13 ‘‘(f) STATE MONITORING AND EXTERNAL REVIEW.—

14 ‘‘(1) STATE GRIEVANCE PROCEDURE.—A State

15 contracting with a risk contracting entity or a pri16 mary care case management entity under this sec17 tion shall provide for a grievance procedure for en18 rollees of such entity with at least the following ele19 ments:

20 ‘‘(A) A toll-free telephone number for en21 rollee questions and grievances.

22 ‘‘(B) Periodic notification of enrollees of

23 their rights with respect to such entity or pro24 gram.
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1 ‘‘(C) Periodic sample reviews of grievances

2 registered with such entity or program or with

3 the State.

4 ‘‘(D) Periodic survey and analysis of en5 rollee satisfaction with such entity or program,

6 including interviews with individuals who

7 disenroll from the entity or program.

8 ‘‘(2) STATE MONITORING OF QUALITY AND AC9 CESS.—

10 ‘‘(A) RISK CONTRACTING ENTITIES.—A

11 State contracting with a risk contracting entity

12 under this section shall provide for ongoing

13 monitoring of such entity’s compliance with the

14 requirements of subsection (b), including com15 pliance with the requirements of such entity’s

16 contract under subsection (b)(3), and shall un17 dertake appropriate followup activities to ensure

18 that any problems identified are rectified and

19 that compliance with the requirements of sub20 section (b) and the requirements of the contract

21 under subsection (b)(3) is maintained.

22 ‘‘(B) PRIMARY CARE CASE MANAGEMENT

23 ENTITIES.—A State electing to implement a

24 primary care case management program shall

25 provide for ongoing monitoring of the pro-
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1 gram’s compliance with the requirements of

2 subsection (c) and shall undertake appropriate

3 followup activities to ensure that any problems

4 identified are rectified and that compliance with

5 subsection (c) is maintained.

6 ‘‘(C) SERVICES.—

7 ‘‘(i) IN GENERAL.—The State shall

8 establish procedures (in addition to those

9 required under subparagraphs (A) and

10 (B)) to ensure that the services listed in

11 clause (ii) are available in a timely manner

12 to an individual enrolled with a risk con13 tracting entity or a primary care case man14 agement entity. Where necessary to ensure

15 the timely provision of such services, the

16 State shall arrange for the provision of

17 such services by health care providers

18 other than the risk contracting entity or

19 the primary care case management entity

20 in which an individual is enrolled.

21 ‘‘(ii) SERVICES LISTED.—The services

22 listed in this clause are—

23 ‘‘(I) prenatal care;

24 ‘‘(II) immunizations;
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1 ‘‘(III) lead screening and treat2 ment;

3 ‘‘(IV) prevention, diagnosis and

4 treatment of tuberculosis, sexually

5 transmitted diseases (including HIV

6 infection), and other communicable

7 diseases; and

8 ‘‘(V) such other services as the

9 Secretary may specify.

10 ‘‘(iii) REPORT.—The procedures re11 ferred to in clause (i) shall be described in

12 an annual report to the Secretary provided

13 by the State.

14 ‘‘(3) EXTERNAL INDEPENDENT REVIEW.—

15 ‘‘(A) IN GENERAL.—Except as provided in

16 paragraph (4), a State contracting with a risk

17 contracting entity under this section shall pro18 vide for an annual external independent review

19 of the quality and timeliness of, and access to,

20 the items and services specified in such entity’s

21 contract with the State agency. Such review

22 shall be conducted by a utilization control and

23 peer review organization with a contract under

24 section 1153 or another organization unaffili25 ated with the State government or with any
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1 risk contracting entity and approved by the

2 Secretary.

3 ‘‘(B) CONTENTS OF REVIEW.—An external

4 independent review conducted under this para5 graph shall include the following:

6 ‘‘(i) A review of the entity’s medical

7 care, through sampling of medical records

8 or other appropriate methods, for indica9 tions of quality of care and inappropriate

10 utilization (including overutilization) and

11 treatment.

12 ‘‘(ii) A review of enrollee inpatient

13 and ambulatory data, through sampling of

14 medical records or other appropriate meth15 ods, to determine trends in quality and ap16 propriateness of care.

17 ‘‘(iii) Notification of the entity and

18 the State when the review under this para19 graph indicates inappropriate care, treat20 ment, or utilization of services (including

21 overutilization).

22 ‘‘(iv) Other activities as prescribed by

23 the Secretary or the State.

24 ‘‘(C) AVAILABILITY.—The results of each

25 external independent review conducted under
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1 this paragraph shall be available to the public

2 consistent with the requirements for disclosure

3 of information contained in section 1160.

4 ‘‘(4) DEEMED COMPLIANCE WITH EXTERNAL

5 INDEPENDENT QUALITY OF CARE REVIEW REQUIRE6 MENTS.—

7 ‘‘(A) IN GENERAL.—The Secretary may

8 deem the State to have fulfilled the requirement

9 for independent external review of quality of

10 care with respect to an entity which has been

11 accredited by an organization described in sub12 paragraph (B) and approved by the Secretary.

13 ‘‘(B) ACCREDITING ORGANIZATION.—An

14 accrediting organization described in this sub15 paragraph must—

16 ‘‘(i) exist for the primary purpose of

17 accrediting coordinated care organizations;

18 ‘‘(ii) be governed by a group of indi19 viduals representing health care providers,

20 purchasers, regulators, and consumers (a

21 minority of which shall be representatives

22 of health care providers);

23 ‘‘(iii) have substantial experience in

24 accrediting coordinated care organizations,
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1 including an organization’s internal quality

2 assurance program;

3 ‘‘(iv) be independent of health care

4 providers or associations of health care

5 providers;

6 ‘‘(v) be a nonprofit organization; and

7 ‘‘(vi) have an accreditation process

8 which meets requirements specified by the

9 Secretary.

10 ‘‘(5) FEDERAL MONITORING RESPONSIBIL11 ITIES.—The Secretary shall review the external inde12 pendent reviews conducted pursuant to paragraph

13 (3) and shall monitor the effectiveness of the State’s

14 monitoring and followup activities required under

15 subparagraph (A) of paragraph (2). If the Secretary

16 determines that a State’s monitoring and followup

17 activities are not adequate to ensure that the re18 quirements of paragraph (2) are met, the Secretary

19 shall undertake appropriate followup activities to en20 sure that the State improves its monitoring and fol21 lowup activities.

22 ‘‘(g) PARTICIPATION OF CERTAIN PROVIDERS.—

23 Each risk contracting entity shall meet the requirements

24 of section 1013 of the Bipartisan Health Care Reform Act
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1 of 1994 in the same manner as they would apply to a

2 group health plan (when such section becomes effective).

3 ‘‘(h) TRANSACTIONS WITH PARTIES IN INTEREST.—

4 ‘‘(1) IN GENERAL.—Each risk contracting en5 tity which is not a qualified health maintenance or6 ganization (as defined in section 1310(d) of the

7 Public Health Service Act) must report to the State

8 and, upon request, to the Secretary, the Inspector

9 General of the Department of Health and Human

10 Services, and the Comptroller General of the United

11 States a description of transactions between the en12 tity and a party in interest (as defined in section

13 1318(b) of such Act), including the following trans14 actions:

15 ‘‘(A) Any sale or exchange, or leasing of

16 any property between the entity and such a

17 party.

18 ‘‘(B) Any furnishing for consideration of

19 goods, services (including management serv20 ices), or facilities between the entity and such

21 a party, but not including salaries paid to em22 ployees for services provided in the normal

23 course of their employment.
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1 ‘‘(C) Any lending of money or other exten2 sion of credit between the entity and such a

3 party.

4 The State or the Secretary may require that infor5 mation reported with respect to a risk contracting

6 entity which controls, or is controlled by, or is under

7 common control with, another entity be in the form

8 of a consolidated financial statement for the risk

9 contracting entity and such entity.

10 ‘‘(2) AVAILABILITY OF INFORMATION.—Each

11 risk contracting entity shall make the information

12 reported pursuant to paragraph (1) available to its

13 enrollees upon reasonable request.

14 ‘‘(i) REMEDIES FOR FAILURE TO COMPLY.—

15 ‘‘(1) IN GENERAL.—If the Secretary determines

16 that a risk contracting entity or a primary care case

17 management entity—

18 ‘‘(A) fails substantially to provide services

19 required under section 1905(r), when such an

20 entity is required to do so, or provide medically

21 necessary items and services that are required

22 to be provided to an individual enrolled with

23 such an entity, if the failure has adversely af24 fected (or has substantial likelihood of adversely

25 affecting) the individual;
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1 ‘‘(B) imposes premiums on individuals en2 rolled with such an entity in excess of the pre3 miums permitted under this title;

4 ‘‘(C) acts to discriminate among individ5 uals in violation of the provision of subsection

6 (b)(3)(D), including expulsion or refusal to

7 reenroll an individual or engaging in any prac8 tice that would reasonably be expected to have

9 the effect of denying or discouraging enrollment

10 (except as permitted by this section) by eligible

11 individuals with the entity whose medical condi12 tion or history indicates a need for substantial

13 future medical services;

14 ‘‘(D) misrepresents or falsifies information

15 that is furnished—

16 ‘‘(i) to the Secretary or the State

17 under this section; or

18 ‘‘(ii) to an individual or to any other

19 entity under this section; or

20 ‘‘(E) fails to comply with the requirements

21 of section 1876(i)(8),

22 the Secretary may provide, in addition to any other

23 remedies available under law, for any of the rem24 edies described in paragraph (2).
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1 ‘‘(2) ADDITIONAL REMEDIES.—The remedies

2 described in this paragraph are—

3 ‘‘(A) civil money penalties of not more

4 than $25,000 for each determination under

5 paragraph (1), or, with respect to a determina6 tion under subparagraph (C) or (D)(i) of such

7 paragraph, of not more than $100,000 for each

8 such determination, plus, with respect to a de9 termination under paragraph (1)(B), double the

10 excess amount charged in violation of such

11 paragraph (and the excess amount charged

12 shall be deducted from the penalty and returned

13 to the individual concerned), and plus, with re14 spect to a determination under paragraph

15 (1)(C), $15,000 for each individual not enrolled

16 as a result of a practice described in such para17 graph, or

18 ‘‘(B) denial of payment to the State for

19 medical assistance furnished by a risk contract20 ing entity or a primary care case management

21 entity under this section for individuals enrolled

22 after the date the Secretary notifies the entity

23 of a determination under paragraph (1) and

24 until the Secretary is satisfied that the basis for
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1 such determination has been corrected and is

2 not likely to recur.

3 The provisions of section 1128A (other than sub4 sections (a) and(b)) shall apply to a civil money pen5 alty under subparagraph (A) in the same manner as

6 such provisions apply to a penalty or proceeding

7 under section 1128A(a).

8 ‘‘(j) TERMINATION OF CONTRACT BY STATE.—Any

9 State which has a contract with a risk contracting entity

10 or a primary care case management entity may terminate

11 such contract if such entity fails to comply with the terms

12 of such contract or any applicable provision of this section.

13 ‘‘(k) FAIR HEARING.—Nothing in this section shall

14 affect the rights of an individual eligible to receive medical

15 assistance under the State plan to obtain a fair hearing

16 under section 1902(a)(3) or under applicable State law.

17 ‘‘(l) DISPROPORTIONATE SHARE HOSPITALS.—Noth18 ing in this section shall affect any requirement on a State

19 to comply with section 1923.

20 ‘‘(m) REFERRAL PAYMENTS.—For 1 year following

21 the date on which individuals eligible for medical assist22 ance under the State plan in a service area are required

23 to enroll with a risk contracting entity or a primary care

24 case management entity, Federally qualified health cen25 ters and rural health centers located in such service area
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1 or providing care to such enrollees, shall receive a fee for

2 educating such enrollees about the availability of services

3 from the risk contracting entity or primary care case man4 agement entity with which such enrollees are enrolled.

5 ‘‘(n) SPECIAL RULES.—

6 ‘‘(1) NONAPPLICABILITY OF CERTAIN PROVI7 SIONS TO CERTAIN RISK CONTRACTING ENTITIES.—

8 In the case of any risk contracting entity which—

9 ‘‘(A)(i) is an individual physician or a phy10 sician group practice of less than 50 physicians,

11 and

12 ‘‘(ii) is not described in paragraphs (A)

13 and (B) of subsection (b)(1), and

14 ‘‘(B) is at risk only for the health care

15 items and services directly provided by such en16 tity,

17 paragraphs (3)(K), (3)(L), (3)(O), (3)(P), and (4)

18 of subsection (b), and paragraph (3) of subsection

19 (f), shall not apply to such entity.

20 ‘‘(2) EXCEPTION FROM DEFINITION OF RISK

21 CONTRACTING ENTITY.—For purposes of this sec22 tion, the term ‘risk contracting entity’ shall not in23 clude a health insuring organization which was used

24 by a State before April 1, 1986, to administer a por-
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1 tion of the State plan of such State on a statewide

2 basis.

3 ‘‘(3) NEW JERSEY.—The rules under section

4 1903(m)(6) as in effect on the day before the effec5 tive date of this section shall apply in the case of an

6 undertaking by the State of New Jersey (as de7 scribed in such section 1903(m)(6)).

8 ‘‘(o) CONTINUATION OF CERTAIN COORDINATED

9 CARE PROGRAMS.—The Secretary may provide for the

10 continuation of any coordinated care program operating

11 under section 1115 or 1915 without requiring compliance

12 with any provision of this section which conflicts with the

13 continuation of such program and without requiring any

14 additional waivers under such sections 1115 and 1915 if

15 the program has been successful in assuring quality and

16 containing costs (as determining by the Secretary) and is

17 likely to continue to be successful in the future.

18 ‘‘(p) GUIDELINES, REGULATIONS, AND MODEL CON19 TRACT.—

20 ‘‘(1) GUIDELINES AND REGULATIONS ON SOL21 VENCY.—At the earliest practicable time after the

22 date of enactment of this section, the Secretary shall

23 issue guidelines and regulations concerning solvency

24 standards for risk contracting entities and sub25 contractors of such risk contracting entities. Such
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1 guidelines and regulations shall take into account

2 characteristics that may differ among risk contract3 ing entities including whether such an entity is at

4 risk for inpatient hospital services.

5 ‘‘(2) GUIDELINES AND REGULATIONS ON MAR6 KETING.—At the earliest practicable time after the

7 date of enactment of this section, the Secretary shall

8 issue guidelines and regulations concerning—

9 ‘‘(A) marketing undertaken by any risk

10 contracting entity or any primary care case

11 management program to individuals eligible for

12 medical assistance under the State plan, and

13 ‘‘(B) information that must be provided by

14 States or any such entity to individuals eligible

15 for medical assistance under the State plan

16 with respect to—

17 ‘‘(i) the options and rights of such in18 dividuals to enroll with, and disenroll from,

19 any such entity, as provided in this section,

20 and

21 ‘‘(ii) the availability of services from

22 any such entity (including a list of services

23 for which such entity is responsible or

24 must approve and information on how to
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1 obtain services for which such entity is not

2 responsible).

3 In developing the guidelines and regulations under

4 this paragraph, the Secretary shall address the spe5 cial circumstances of children with special health

6 care needs (as defined in subsection (e)(1)(B)(ii))

7 and other individuals with special health care needs.

8 ‘‘(3) MODEL CONTRACT.—The Secretary shall

9 develop a model contract to reflect the requirements

10 of subsection (b)(3) and such other requirements as

11 the Secretary determines appropriate.’’.

12 (b) WAIVERS FROM REQUIREMENTS ON COORDI13 NATED CARE PROGRAMS.—Section 1915(b) of such Act

14 (42 U.S.C. 1396n) is amended—

15 (1) in the matter preceding paragraph (1), by

16 striking ‘‘as may be necessary’’ and inserting ‘‘, and

17 section 1932 as may be necessary’’;

18 (2) in paragraph (1), by striking ‘‘a primary

19 care case management system or’’;

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

21 (3);

22 (4) by striking the period at the end of para23 graph (4) and inserting ‘‘, and’’; and

24 (5) by inserting after paragraph (4) the follow25 ing new paragraph:
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1 ‘‘(5) to permit a risk contracting entity (as de2 fined in section 1932(a)(3)) to restrict the period in

3 which individuals enrolled with such entity may ter4 minate such enrollment without cause in accordance

5 with section 1932(e)(3)(A).’’.

6 (c) STATE OPTION TO GUARANTEE MEDICAID ELIGI7 BILITY.—Section 1902(e)(2) of such Act (42 U.S.C.

8 1396a(e)(2)) is amended—

9 (1) in subparagraph (A), by striking all that

10 precedes ‘‘(but for this paragraph)’’ and inserting

11 ‘‘In the case of an individual who is enrolled—

12 ‘‘(i) with a qualified health maintenance

13 organization (as defined in title XIII of the

14 Public Health Service Act) or with a risk con15 tracting entity (as defined in section

16 1932(a)(3)), or

17 ‘‘(ii) with any risk contracting entity (as

18 defined in section 1932(a)(3)) in a State that,

19 on the effective date of this provision, had in ef20 fect a waiver under section 1115 of require21 ments under this title under which the State

22 could extend eligibility for medical assistance

23 for enrollees of such entity, or

24 ‘‘(iii) with an eligible organization with a

25 contract under section 1876,
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1 and who would’’,

2 (2) in subparagraph (B), by striking ‘‘organiza3 tion or’’ each place it appears, and

4 (3) by adding at the end the following new sub5 paragraph:

6 ‘‘(C) The State plan may provide, notwith7 standing any other provision of this title, that

8 an individual shall be deemed to continue to be

9 eligible for benefits under this title until the end

10 of the month following the month in which such

11 individual would (but for this paragraph) lose

12 such eligibility because of excess income and re13 sources, if the individual is enrolled with a risk

14 contracting entity or primary care case manage15 ment entity (as those terms are defined in sec16 tion 1932(a)).’’.

17 (d) ENHANCED MATCH RELATED TO QUALITY

18 REVIEW.—Section 1903(a)(3)(C) of such Act (42 U.S.C.

19 1396b(a)(3)(C)) is amended—

20 (1) by striking ‘‘organization or by’’ and insert21 ing ‘‘organization, by’’; and

22 (2) by striking ‘‘section 1152, as determined by

23 the Secretary,’’ and inserting ‘‘section 1152, as de24 termined by the Secretary, or by another organiza25 tion approved by the Secretary which is unaffiliated
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1 with the State government or with any risk contract2 ing entity (as defined in section 1932(a)(3)),’’.

3 (e) ACCUMULATION OF RESERVES BY CERTAIN EN4 TITIES.—Any organization referred to in section 329, 330,

5 or 340, of the Public Health Service Act which has con6 tracted with a State agency as a risk contracting entity

7 under section 1932(g)(3)(A) of the Social Security Act

8 may accumulate reserves with respect to payments made

9 to such organization under section 1932(g)(3)(C) of such

10 Act.

11 (f) CONFORMING AMENDMENTS.—

12 (1) Section 1128(b)(6)(C)(i) of such Act (42

13 U.S.C. 1320a–7(b)(6)(C)(i)) is amended by striking

14 ‘‘health maintenance organization’’ and inserting

15 ‘‘risk contracting entity’’.

16 (2) Section 1902(a)(23) of such Act (42 U.S.C.

17 1396a(a)(23)) is amended by striking ‘‘primary

18 care-case management system (described in section

19 1915(b)(1)), a health maintenance organization,’’

20 and inserting ‘‘primary care case management pro21 gram (as defined in section 1932(a)(1)), a risk con22 tracting entity (as defined in section 1932(a)(3)),’’.

23 (3) Section 1902(a)(30)(C) of such Act (42

24 U.S.C. 1396a(a)(30)(C)) is amended by striking

25 ‘‘use a utilization’’ and all that follows through
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1 ‘‘with the results’’ and inserting ‘‘provide for inde2 pendent review and quality assurance of entities with

3 contracts under section 1932, in accordance with

4 subsection (f) of such section 1932, with the re5 sults’’.

6 (4) Section 1902(a)(57) of such Act (42 U.S.C.

7 1396a(a)(57)) is amended by striking ‘‘or health

8 maintenance organization (as defined in section

9 1903(m)(1)(A))’’ and inserting ‘‘risk contracting en10 tity, or primary care case management entity (as de11 fined in section 1932(a))’’.

12 (5) Section 1902(a) of such Act (42 U.S.C.

13 1396a), as amended by sections 3303(a)(1) and

14 3002(a), is amended—

15 (A) by striking ‘‘and’’ at the end of para16 graph (61);

17 (B) by striking the period at the end of

18 paragraph (62) and inserting ‘‘; and’’; and

19 (C) by inserting after paragraph (62) the

20 following new paragraphs:

21 ‘‘(63) at State option, provide for a primary

22 care case management program in accordance with

23 section 1932; and
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1 ‘‘(64) at State option, provide for a program

2 under which the State contracts with risk contract3 ing entities in accordance with section 1932.’’.

4 (6) Section 1902(p)(2) of such Act (42 U.S.C.

5 1396a(p)(2)) is amended by striking ‘‘health mainte6 nance organization (as defined in section 1903(m))’’

7 and inserting ‘‘risk contracting entity (as defined in

8 section 1932(a)(3))’’.

9 (7) Section 1902(w) of such Act (42 U.S.C.

10 1396a(w)) is amended—

11 (A) in paragraph (1), by striking ‘‘section

12 1903(m)(1)(A)’’ and inserting ‘‘section

13 1932(a)(3)’’, and

14 (B) in paragraph (2)(E)—

15 (i) by striking ‘‘health maintenance

16 organization’’ and inserting ‘‘risk contract17 ing entity’’, and

18 (ii) by striking ‘‘organization’’ and in19 serting ‘‘entity’’.

20 (8) Section 1903(k) of such Act (42 U.S.C.

21 1396b(k)) is amended by striking ‘‘health mainte22 nance organization which meets the requirements of

23 subsection (m) of this section’’ and inserting ‘‘risk

24 contracting entity which meets the requirements of

25 section 1932’’.
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1 (9) Section 1903(w)(7)(A)(viii) of such Act (42

2 U.S.C. 1396b(w)(7)(A)(viii)) is amended by striking

3 ‘‘health maintenance organizations (and other orga4 nizations with contracts under section 1903(m))’’

5 and inserting ‘‘risk contracting entities with con6 tracts under section 1932’’.

7 (10) Section 1905(a) of such Act (42 U.S.C.

8 1396d(a)) is amended, in the matter preceding

9 clause (i), by inserting ‘‘(which may be on a prepaid

10 capitation or other risk basis)’’ after ‘‘payment’’.

11 (11) Section 1916(b)(2)(D) of such Act (42

12 U.S.C. 1396o(b)(2)(D)) is amended by striking

13 ‘‘health maintenance organization (as defined in sec14 tion 1903(m))’’ and inserting ‘‘risk contracting en15 tity (as defined in section 1932(a)(3))’’.

16 (12) Section 1925(b)(4)(D)(iv) of such Act (42

17 U.S.C. 1396r–6(b)(4)(D)(iv)) is amended—

18 (A) in the heading, by striking ‘‘HMO’’

19 and inserting ‘‘RISK CONTRACTING ENTITY’’,

20 (B) by striking ‘‘health maintenance orga21 nization (as defined in section 1903(m)(1)(A))’’

22 and inserting ‘‘risk contracting entity (as de23 fined in section 1932(a)(3)’’, and

24 (C) by striking ‘‘health maintenance orga25 nization in accordance with section 1903(m)’’
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1 and inserting ‘‘risk contracting entity in accord2 ance with section 1932’’.

3 (13) Paragraphs (1) and (2) of section 1926(a)

4 of such Act (42 U.S.C. 1396r–7(a)) are each amend5 ed by striking ‘‘health maintenance organizations

6 under section 1903(m)’’ and inserting ‘‘risk con7 tracting entities under section 1932’’.

8 (14) Section 1927(j)(1) of such Act is amended

9 by striking ‘‘ * * * Health Maintenance Organiza10 tions, including those organizations that contract

11 under section 1903(m)’’ and inserting ‘‘risk con12 tracting entities (as defined in section 1932(a)(3))’’.

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

14 this section shall become effective with respect to calendar

15 quarters beginning on or after January 1, 1995.

16 Subtitle D—Additional Medicaid

17 Reforms

18 SEC. 3301. REDUCTION IN AMOUNT OF PAYMENT ADJUST19 MENTS FOR DISPROPORTIONATE SHARE

20 HOSPITALS.

21 (a) IN GENERAL.—Section 1923 of the Social Secu22 rity Act (42 U.S.C. 1396r–4) is amended by adding at

23 the end the following new subsection:

24 ‘‘(h) REDUCTION IN FEDERAL FINANCIAL PARTICI25 PATION FOR DISPROPORTIONATE SHARE ADJUST-
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1 MENTS.—Notwithstanding any other provision of this sec2 tion, the amount of payments under section 1903(a) with

3 respect to any payment adjustment made under this sec4 tion for hospitals in a State for quarters in a fiscal year

5 shall not exceed the following percent of the amount other6 wise determined under subsection (f):

7 ‘‘(1) For fiscal years 1995, 1996, 1997 and

8 1998, 75 percent.

9 ‘‘(2) For fiscal years 1999 and 2000, 70 per10 cent.

11 ‘‘(3) For fiscal years 2001 and 2002, 65 per12 cent.

13 ‘‘(4) For fiscal year 2003 and thereafter, 63

14 percent.’’.

15 (b) CONFORMING AMENDMENT.—Section 1923(c) of

16 such Act (42 U.S.C. 1396r–4(c)) is amended in the matter

17 preceding paragraph (1) by striking ‘‘(f) and (g)’’ and in18 serting ‘‘(f), (g), and (h)’’.

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

20 subsections (a) and (b) shall apply to quarters in fiscal

21 years beginning on or after October 1, 1994.

22 SEC. 3302. ELIMINATION OF MEDICALLY NEEDY PROGRAM

23 FOR INDIVIDUALS NOT IN AN INSTITUTION.

24 (a) IN GENERAL.—Section 1902(a)(10)(C) of the So25 cial Security Act (42 U.S.C. 1396a(a)(10)(C)) is amended
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1 by inserting ‘‘such assistance is restricted to individuals

2 in institutions and’’ after ‘‘, then’’.

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

4 subsection (a) shall apply to calendar quarters beginning

5 on or after January 1, 1998.

6 SEC. 3303. ELIMINATION OF MEDICAID PEDIATRIC IMMUNI7 ZATION PROGRAM.

8 (a) IN GENERAL.—Effective as if included in the en9 actment of the 13621 of the Omnibus Budget Reconcili10 ation Act of 1993, title XIX of the Social Security Act

11 is amended as follows:

12 (1) Section 1902(a) (42 U.S.C. 1396a(a)) is

13 amended—

14 (A) by inserting ‘‘and’’ at the end of para15 graph (60),

16 (B) in paragraph (61), by striking ‘‘; and’’

17 and inserting a period, and

18 (C) by striking paragraph (62).

19 (2) Section 1928 (42 U.S.C. 1396s) is repealed.

20 (3) Section 1903(i) (42 U.S.C. 1396b(i)) is

21 amended—

22 (A) by inserting ‘‘or’’ at the end of para23 graph (12),

24 (B) by striking the semicolon at the end of

25 paragraph (13) and inserting a period, and
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1 (C) by striking paragraphs (14) and (15).

2 (4) Section 1902(a)(32)(D) is amended by

3 striking ‘‘before October 1, 1994’’.

4 (5) Section 1902(a) (42 U.S.C. 1396a(a)) is

5 amended—

6 (A) in paragraph (11)(B)—

7 (i) by inserting ‘‘and’’ before ‘‘(ii)’’,

8 and

9 (ii) by striking ‘‘to the individual

10 under section 1903, and (iii) providing for

11 coordination of information and education

12 on pediatric vaccinations and delivery of

13 immunization services’’ and inserting ‘‘to

14 him under section 1903’’;

15 (B) in paragraph (11)(C), by striking ‘‘,

16 including the provision of information and edu17 cation on pediatric vaccinations and the delivery

18 of immunization services,’’ and

19 (C) in paragraph (43)(A), by striking ‘‘and

20 the need for age-appropriate immunizations

21 against vaccine-preventable diseases’’.

22 (6) Section 1905(r)(1) (42 U.S.C. 1396d(r)(1))

23 is amended—

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

25 ‘‘and, with respect to immunizations under sub-
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1 paragraph (B)(iii), in accordance with the

2 schedule referred to in section 1928(c)(2)(B)(i)

3 for pediatric vaccines’’; and

4 (B) in subparagraph (B)(iii), by striking

5 ‘‘(according to the schedule referred to in sec6 tion 1928(c)(2)(B)(i) for pediatric vaccines)’’.

7 (b) ESTABLISHMENT OF ALTERNATIVE DELIVERY

8 PROGRAMS.—

9 (1) IN GENERAL.—At the request of a State,

10 the Secretary of Health and Human Services shall

11 negotiate and enter into contracts with manufactur12 ers of listed pediatric vaccines (which manufacturers

13 have entered into agreements under section

14 1902(a)(32)(D) of the Social Security Act) or with

15 other licensed distributors of such vaccines to pro16 vide for the delivery of such vaccines under a re17 placement vaccine delivery program described in sec18 tion 1902(a)(32)(D) of the Social Security Act or

19 under an alternative delivery program described in

20 paragraph (2).

21 (2) ALTERNATIVE DELIVERY PROGRAM.—An al22 ternative delivery program described in this para23 graph is a program operated by a State under which

24 listed pediatric vaccines are distributed through the

25 manufacturer (or other licensed distributor) to indi-
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1 viduals and entities providing such vaccines under

2 the State plan under title XIX of the Social Security

3 Act and other providers of vaccines to children who

4 are in families eligible for premium assistance under

5 part A of title XXI of such Act if the providers are

6 registered to participate in the program and if the

7 State demonstrates that the operation of the pro8 gram under this paragraph will not result in greater

9 delivery costs or additional purchases of vaccine

10 than would have resulted under the program de11 scribed in section 1902(a)(32)(D) of such Act.

12 (3) LISTED PEDIATRIC VACCINE.—In this sub13 section, the term ‘‘listed pediatric vaccine’’ means a

14 pediatric vaccine contained on the list established

15 (and periodically reviewed and as appropriate re16 vised) by the Advisory Committee on Immunization

17 Practices (an advisory committee established by the

18 Secretary, acting through the Director of the Cen19 ters for Disease Control and Prevention).

20 (4) LIMITATION ON PAYMENT.—Section 1903(i)

21 of the Social Security Act (42 U.S.C. 1396b(i)), as

22 amended by subsection (a)(3) and section 2002(b),

23 is amended—

24 (A) by striking ‘‘or’’ at the end of para25 graph (13),
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1 (B) by striking the period at the end of

2 paragraph (14) and inserting ‘‘; or’’, and

3 (C) by inserting after paragraph (14) the

4 following:

5 ‘‘(15) with respect to amounts expended for a

6 listed pediatric vaccine (as defined in paragraph (3)

7 of section 3303(b) of the Bipartisan Health Care

8 Reform Act of 1994) if the amounts exceed the ap9 plicable price negotiated under a contract entered

10 into under subsection (b) of such section.’’.

11 TITLE IV—ACCESS

12 IMPROVEMENTS

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
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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.
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1 Subtitle A—Expanding Access in

2 Underserved Areas

3 SEC. 4001. COMMUNITY HEALTH AUTHORITIES DEM4 ONSTRATION PROJECTS.

5 (a) IN GENERAL.—Title XIX of the Social Security

6 Act, as amended by sections 3001(a) and 3201(a)(2), is

7 amended—

8 (1) by redesignating section 1933 as section

9 1934; and

10 (2) by inserting after section 1932 the following

11 new section:

12 ‘‘COMMUNITY HEALTH AUTHORITIES DEMONSTRATION

13 PROJECTS

14 ‘‘SEC. 1933. (a) IN GENERAL.—In order to test the

15 effectiveness of various innovative health care delivery ap16 proaches through the operation of community health au17 thorities, the Secretary shall operate a program under

18 which States establish projects to demonstrate the effec19 tiveness of such approaches in providing access to cost20 effective preventive and primary care and related services

21 for various areas and populations, including low-income

22 residents of medically underserved areas or for medically

23 underserved populations. A State may operate more than

24 one such project.

25 ‘‘(b) SELECTION OF STATE PROJECTS.—
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1 ‘‘(1) IN GENERAL.—A State is eligible to par2 ticipate in the program, and establish a demonstra3 tion project, under this section only if—

4 ‘‘(A) the State submits to the Secretary an

5 application, at such time and in such form as

6 the Secretary may require, for participation in

7 the program; and

8 ‘‘(B) the Secretary finds that—

9 ‘‘(i) the application contains assur10 ances that the State will support the devel11 opment of a community health authority

12 that meets the requirements of this sec13 tion,

14 ‘‘(ii) the community health authority

15 will meet the requirements for such an au16 thority under subsection (c),

17 ‘‘(iii) the State provides sufficient as18 surances that the demonstration project of

19 a community health authority meets (or,

20 when operational, will meet) the require21 ments of subsection (d), and

22 ‘‘(iv) the State will comply with the

23 requirements of subsections (g) and (h).

24 ‘‘(2) CONTENTS OF APPLICATION.—Each appli25 cation submitted under paragraph (1) for a dem-
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1 onstration project shall include at least the follow2 ing:

3 ‘‘(A) A description of the proposed commu4 nity health authority and of the area or popu5 lation that the authority will serve.

6 ‘‘(B) A demonstration that the CHA will

7 serve at least one geographic area or population

8 group that is designated as medically under9 served under section 330 of the Public Health

10 Service Act or as having a shortage of health

11 professionals under section 332 of such Act.

12 ‘‘(C) An assessment of the area’s or popu13 lation’s need for services and an assurance that

14 the services of the CHA will be responsive to

15 those needs.

16 ‘‘(D) A list of the items and services to be

17 furnished by the CHA under the project, bro18 ken down by those items and services that are

19 treated as medical assistance under the State

20 plan under this title and other items and serv21 ices that will be provided by the CHA (either

22 directly or through coordination with other

23 entities).

24 ‘‘(E) An assurance that the CHA has en25 tered into (or plans to enter into) written par-
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1 ticipation agreements with a sufficient number

2 of providers to enable the CHA to furnish all of

3 such items and services to enrolled individuals.

4 ‘‘(F) An assurance that the State plan

5 under this title will provide payment to the au6 thority in accordance with subsection (e).

7 ‘‘(G) Evidence of support and assistance

8 from other State agencies with responsibility for

9 providing or supporting the provision of preven10 tive and primary care services to underserved

11 and at-risk populations.

12 ‘‘(H) A proposed budget for the CHA.

13 ‘‘(3) PERIOD OF APPROVAL.—Each project ap14 proved under this section shall be approved for a pe15 riod of not less than 3 years, subject to renewal for

16 subsequent periods unless such approval is with17 drawn for cause by the Secretary or at the request

18 of the State.

19 ‘‘(c) COMMUNITY HEALTH AUTHORITY (CHA) DE20 FINED.—In this section, the terms ‘community health au21 thority’ and ‘CHA’ mean a nonprofit entity that meets the

22 following requirements:

23 ‘‘(1) The entity serves (or will serve at the time

24 it becomes operational under a project) a geographic
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1 area or population group that includes those

2 designated—

3 ‘‘(A) under section 330 of the Public

4 Health Service Act as medically underserved, or

5 ‘‘(B) under section 332 of such Act as a

6 health professions shortage area.

7 ‘‘(2) The entity enrolls—

8 ‘‘(A) individuals and families who are med9 icaid-eligible;

10 ‘‘(B) within the limits of its available re11 sources and capacity, other individuals who

12 have incomes below 200 percent of the Federal

13 official poverty level; and

14 ‘‘(C) within the limits of its available re15 sources and capacity, other individuals and

16 families who are able to pay the costs of enroll17 ment.

18 ‘‘(3) Through its participating providers, the

19 entity provides or, through contracts, arranges for

20 the provision of (or, by the time it become oper21 ational, will so provide or arrange for the provision

22 of) at least preventive services, primary care serv23 ices, inpatient and outpatient hospital services, and

24 any other service provided by a participating pro-
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1 vider for which payment may be made under the

2 State plan under this title to enrolled individuals.

3 ‘‘(4) The entity must include (to the maximum

4 extent practicable) as participating providers any of

5 the following providers that furnish services provided

6 by (or arranged by) the entity that are located in or

7 serve the area or population to be covered:

8 ‘‘(A) Federally-qualified health centers.

9 ‘‘(B) Rural health clinics.

10 ‘‘(C) Local public health agencies that fur11 nish such services.

12 ‘‘(D) A hospital (or other provider of inpa13 tient or outpatient hospital services) which has

14 a participation agreement in effect with the

15 State under its plan under this title, which is

16 located in or serving the area or population to

17 be served.

18 ‘‘(5) The entity may include as participating

19 providers other providers (which may include private

20 physicians or group practice offices, other commu21 nity clinics, limited service providers (such as pre22 natal clinics), and health professionals teaching pro23 grams (such as area health educational centers))

24 and take other appropriate steps, to the extent need25 ed to assure that the network is reasonable in size
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1 and able to provide (or arrange for the provision of)

2 the services it proposes to furnish to its enrollees.

3 ‘‘(6) The entity must maintain written agree4 ments with each participating provider under which

5 the provider agrees to participate in the CHA and

6 agrees to accept payment from the CHA as payment

7 in full for services furnished to individuals enrolled

8 with the CHA.

9 ‘‘(7) Under the written agreements described in

10 paragraph (6), if a majority of the board of directors

11 of the entity has determined that a participating

12 provider is failing to meet any of the requirements

13 of the participation agreement, the board may termi14 nate the provider’s participation agreement in ac15 cordance with the following requirements:

16 ‘‘(A) Subject to subparagraph (B), prior to

17 any termination of a provider’s participation

18 agreement, the provider shall be entitled to 30

19 days prior notice, a reasonable opportunity to

20 correct any deficiencies, and an opportunity for

21 a full and fair hearing conducted by the entity

22 to dispute the reasons for termination. The pro23 vider shall be entitled to appeal the board of di24 rectors’ decision directly to a committee consist-
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1 ing of representatives of all of the entity’s par2 ticipating providers.

3 ‘‘(B) If a majority of the board of directors

4 of the entity determines that the continued par5 ticipation of a provider presents an immediate

6 threat to the health and safety of patients or a

7 substantial risk of improper diversion of funds,

8 the board may suspend the provider’s participa9 tion agreement (including the receipt of funds

10 under the agreement) for a period of up to 60

11 days. During this period, the entity shall take

12 steps to ensure that patients who were assigned

13 to or cared for by the suspended provider are

14 appropriately assigned or referred to alternative

15 participating providers. The suspended provider

16 shall be entitled to a hearing within the period

17 of the suspension to show cause why the sus18 pension should be lifted and its participation

19 agreement restored. If dissatisfied with the

20 board’s decision, the provider shall be entitled

21 to appeal the decision directly to a committee

22 consisting of representatives of all of the enti23 ty’s participating providers.

24 ‘‘(C) For all other disputes between the en25 tity and its participating providers (including
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1 disputes over the amounts due or interim rates

2 to be paid to a provider), the entity shall pro3 vide an opportunity for a full and fair hearing.

4 ‘‘(8) The entity must be governed by a board of

5 directors that includes representatives of the partici6 pating providers and, as appropriate, other health

7 professionals, civic or business leaders, elected offi8 cials, and residents of the area or population served.

9 Not less than 51 percent of such board shall be com10 posed of individuals who are enrolled in the CHA

11 and who are representatives of the community

12 served.

13 ‘‘(d) DEMONSTRATION PROJECT REQUIREMENTS.—

14 The requirements of this subsection, with respect to a

15 demonstration project of a CHA under this section, are

16 as follows:

17 ‘‘(1)(A) All services furnished by the CHA

18 under the project shall be available and accessible to

19 all enrolled individuals and, except as provided in

20 subparagraph (B), must be available without regard

21 to an individual’s ability to pay for such services.

22 ‘‘(B) A CHA shall prepare a schedule of dis23 counts to be applied to the payment of premiums by

24 individuals who are not medicaid-eligible individuals
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1 which shall be adjusted on the basis of the individ2 ual’s ability to pay.

3 ‘‘(2) The CHA shall take appropriate steps to

4 emphasize the provision of preventive and primary

5 care services, and shall ensure that each enrolled in6 dividual is assigned to a primary care physician (to

7 the greatest extent appropriate and feasible), except

8 that the CHA shall establish a process through

9 which an enrolled individual may be assigned to an10 other primary care physician for good cause shown.

11 ‘‘(3) The CHA must make reasonable efforts to

12 reduce the unnecessary or inappropriate use of hos13 pital or other high-cost services through an emphasis

14 on preventive and primary care services, the imple15 mentation of utilization review or other appropriate

16 methods.

17 ‘‘(4) The State must regularly provide the CHA

18 with information on other medical, health, and relat19 ed benefits that may be available to individuals en20 rolled with the CHA under programs other than the

21 State plan under this title, and the CHA must pro22 vide its enrolled individuals with enrollment informa23 tion and other non-cash assistance to assist them in

24 obtaining such benefits.
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1 ‘‘(5) The State and the CHA must meet such

2 financial standards and requirements and reporting

3 requirements as the Secretary specifies and must

4 prepare and submit to the Secretary an annual inde5 pendent financial audit conducted in accordance with

6 requirements specified by the Secretary.

7 ‘‘(6) In collaboration with the State, the CHA

8 must adopt and use community-oriented, patient-re9 sponsive quality assurance and control systems in

10 accordance with requirements specified by the Sec11 retary. Such systems must include at least an ongo12 ing quality assurance program that measures

13 consumer satisfaction with the care provided under

14 the network, stresses improved health outcomes, and

15 operates a community health status improvement

16 process that identifies and investigates community

17 health problems and implements measures designed

18 to remedy them.

19 ‘‘(e) CAPITATION PAYMENTS.—

20 ‘‘(1) IN GENERAL.—Under a demonstration

21 project under this section, the State shall enter into

22 an annual contract with the CHA under which the

23 State shall make monthly payments to the CHA for

24 covered services furnished through the CHA to indi25 viduals entitled to medical assistance under this title
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1 in the amount specified in paragraph (2). Payment

2 shall be made at the beginning of each month on the

3 basis of estimates of the amounts payable and

4 amounts subsequently paid are subject to adjust5 ment to reflect the amounts by which previous pay6 ments were greater or less than the amount of pay7 ments that should have been made.

8 ‘‘(2) AMOUNT OF CAPITATION PAYMENT.—The

9 amount of a monthly payment under paragraph (1)

during a contract year, shall be not less than 1 10 ⁄12 of

11 the product of—

12 ‘‘(A)(i) the average per capita amounts ex13 pended under this title under the State plan for

14 covered services to be furnished under the dem15 onstration project for similar Medicaid-eligible

16 individuals for the most recent 12-month period

17 ending before the date of the enactment of this

18 section, increased by (ii) the percentage change

19 in the consumer price index for all urban con20 sumers (all items; U.S. city average) during the

21 period that begins upon the expiration of such

22 12-month period and ends upon the expiration

23 of the most recent 12-month period ending be24 fore the first month of the contract year for
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1 which complete financial data on such index is

2 available, and

3 ‘‘(B) the number of Medicaid-eligible indi4 viduals enrolled under the project as of the

5 15th day of the month prior to the first month

6 of the contract year (or, in the case of the first

7 year for which a contract is in effect under this

8 subsection, the CHA’s reasonable estimate of

9 the number of such individuals who will be en10 rolled in the project as of the 15th day of such

11 month).

12 ‘‘(f) ADDITIONAL STATE ASSISTANCE FOR PLAN13 NING, DEVELOPMENT, AND OPERATIONS.—

14 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

15 in addition to the payments under subsection (e),

16 demonstration projects approved under this section

17 are eligible to have approved expenditures described

18 in paragraph (3) treated, for purposes of section

19 1903(a)(7), as expenditures found necessary by the

20 Secretary for the proper and efficient administration

21 of the State plan under this title.
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1 ‘‘(2) SPECIAL RULES.—

2 ‘‘(A) LIMITATION WITH RESPECT TO ANY

3 COMMUNITY HEALTH AUTHORITY.—The total

4 amount of expenditures with respect to any

5 CHA that may be treated as expenditures for

6 medical assistance under paragraph (1) for any

7 12-month period shall not exceed $250,000.

8 ‘‘(B) LIMITATION ON NUMBER OF

9 YEARS.—The number of 12-month periods for

10 which expenditures are treated as expenditures

11 for medical assistance under paragraph (1) for

12 a CHA shall not exceed—

13 ‘‘(i) 2 for expenditures for planning

14 and development assistance, described in

15 paragraph (3)(A), and

16 ‘‘(ii) 2 for expenditures for oper17 ational assistance, described in paragraph

18 (3)(B).

19 ‘‘(C) NO RESULTING REDUCTION IN

20 AMOUNTS PROVIDED UNDER PHSA GRANTS.—

21 No grant to a CHA or one of its participating

22 providers under the Public Health Service Act

23 or this Act may be reduced on the ground that

24 activities of the CHA that are considered ap25 proved expenditures under paragraph (3) are
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1 activities for which the CHA or the participat2 ing providers received funds under such Act.

3 ‘‘(3) APPROVED EXPENDITURES.—The ap4 proved expenditures described in this paragraph are

5 as follows:

6 ‘‘(A) PLANNING AND DEVELOPMENT.—Ex7 penditures for planning and development with

8 respect to a CHA, including—

9 ‘‘(i) developing internal management,

10 legal and financial and clinical, informa11 tion, and reporting systems for the CHA,

12 and carrying out other operating activities

13 of the CHA;

14 ‘‘(ii) recruiting, training and com15 pensating management staff of the CHA

16 and, as appropriate and necessary, man17 agement and clinical staff of any partici18 pating provider;

19 ‘‘(iii) purchasing essential equipment

20 and acquiring, modernizing, expanding, or

21 (if cost-effective) renovating facilities for

22 the CHA and for participating providers

23 (including amortization costs and payment

24 of interest on loans); and
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1 ‘‘(iv) entering into arrangements to

2 obtain or participate in emerging medical

3 technologies, including telemedicine.

4 ‘‘(B) OPERATIONS.—Expenditures in sup5 port of the operations of a CHA, including—

6 ‘‘(i) the ongoing management of the

7 CHA, including daily program administra8 tion, recordkeeping and reporting, assur9 ance of proper financial management (in10 cluding billings and collections) and over11 sight of program quality;

12 ‘‘(ii) developing and operating systems

13 to enroll eligible individuals in the CHA;

14 ‘‘(iii) data collection, in collaboration

15 with the State medicaid agency and the

16 State health department, designed to

17 measure changes in patient access to care,

18 the quality of care furnished, and patient

19 health status, and health care outcomes;

20 ‘‘(iv) ongoing community outreach

21 and community education to all residents

22 of the area or population served, to pro23 mote the enrollment of eligible individuals

24 and the appropriate utilization of health

25 services by such individuals;
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1 ‘‘(v) the establishment of necessary

2 reserves or purchase of stop-loss coverage;

3 and

4 ‘‘(vi) activities relating to health pro5 fessions training, including residency train6 ing at participating provider sites.

7 ‘‘(g) ADDITIONAL REQUIREMENTS.—

8 ‘‘(1) MANDATORY ENROLLMENT OF MEDICAID9 ELIGIBLE INDIVIDUALS.—Notwithstanding any pro10 vision of section 1903(m), a State participating in a

11 demonstration project under this section may, until

12 December 31, 1997, require that each medicaid-eli13 gible resident in the service area of a CHA operating

14 under the project is not eligible to receive any medi15 cal assistance under the State plan that may be ob16 tained through enrollment with the CHA unless the

17 individual receives such assistance through enroll18 ment with the CHA.

19 ‘‘(2) CONTINUED ENTITLEMENT TO ADDI20 TIONAL BENEFITS.—In the case of a medicaid-eligi21 ble individual enrolled with a CHA under a dem22 onstration project under this section, the individual

23 shall remain entitled to medical assistance for serv24 ices which are not covered services under the project,

25 until December 31, 1997.
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1 ‘‘(3) HMO-RELATED REQUIREMENTS.—A CHA

2 under this section shall be deemed to meet the re3 quirements of section 1903(m) (subject to paragraph

4 (1)) in the same manner as an entity listed under

5 section 1903(m)(2)(G).

6 ‘‘(4) OUTSTATIONING ELIGIBILITY WORKERS.—

7 Under the project, the State may (in addition to

8 meeting the requirements of section 1902(a)(55)

9 until December 31, 1997) provide for, or pay the

10 reasonable costs of, stationing eligibility workers at

11 appropriate service sites under the project, and may

12 permit medicaid-eligible individuals to be enrolled

13 under the State plan at such a CHA or at such a

14 site.

15 ‘‘(5) PURCHASE OF STOP-LOSS COVERAGE.—

16 The State shall ensure that the CHA has purchased

17 stop-loss coverage to protect against default on its

18 obligations under the project. If an entity otherwise

19 qualified to serve as a CHA is prohibited under

20 State law from purchasing such coverage, the State

21 shall waive the application of such law to the extent

22 necessary to permit the entity to purchase such cov23 erage.

24 ‘‘(h) EVALUATION AND REPORTING.—
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1 ‘‘(1) CHA.—Each CHA in a State with a dem2 onstration project approved under this section shall

3 prepare and submit to the State an annual report on

4 its activities during the previous year.

5 ‘‘(2) STATE.—Taking into account the reports

6 submitted pursuant to paragraph (1), each State

7 with a demonstration project approved under this

8 section shall prepare and submit to the Secretary an

9 annual evaluation of its activities and services under

10 this section. Such evaluation shall include an analy11 sis of the effectiveness of the project in providing

12 cost-effective health care to enrolled individuals.

13 ‘‘(3) REPORT TO CONGRESS.—Not later than

14 June 30, 1997, the Secretary shall submit to Con15 gress a report on the demonstration projects con16 ducted under this section. Such report shall include

17 an analysis of the effectiveness of such projects in

18 providing cost-effective health care for the areas or

19 populations served.

20 ‘‘(i) COLLABORATION IN ADMINISTRATION.—In car21 rying out this section, the Secretary shall assure the high22 est possible level of collaboration between the Health Care

23 Financing Administration and the Public Health Service.

24 Such collaboration may include (if appropriate and fea25 sible) any of the following:
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1 ‘‘(1) The provision by the Public Health Service

2 of new or increased grant support to eligible entities

3 participating in a CHA, in order to expand the avail4 ability of services (particularly preventive and pri5 mary care services).

6 ‘‘(2) The placement of health professionals at

7 eligible locations and collaboration with Federally8 assisted health professions training programs located

9 in or near the areas served by community health

10 authorities.

11 ‘‘(3) The provision of technical and other non12 financial assistance.

13 ‘‘(j) DEFINITIONS.—In this section:

14 ‘‘(1) MEDICAID-ELIGIBLE INDIVIDUAL.—The

15 term ‘medicaid-eligible individual’ means an individ16 ual described in section 1902(a)(10)(A) and entitled

17 to medical assistance under the State plan.

18 ‘‘(2) PARTICIPATING PROVIDER.—The term

19 ‘participating provider’ means, with respect to a

20 CHA, a provider that has entered into an agreement

21 with the CHA for the provision of covered services

22 under a project under this section.

23 ‘‘(3) PREVENTIVE AND PRIMARY CARE SERV24 ICES.—‘Preventive’ and ‘primary’ services include

25 those services described in section 1905(l)(2)(A) and
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1 included as Federally qualified health center

2 services.’’.

3 (b) EXCEPTION TO ANTI-KICKBACK LAW.—Section

4 1128B(b)(3) of such Act (42 U.S.C. 1320a-7b(b)(3)) is

5 amended—

6 (1) by striking ‘‘and’’ at the end of subpara7 graph (D),

8 (2) by striking the period at the end of sub9 paragraph (E) and inserting ‘‘; and’’, and

10 (3) by adding at the end the following new sub11 paragraph:

12 ‘‘(F) any remuneration paid, or received,

13 by a Federally qualified health center, rural

14 health clinic, or other entity which is a partici15 pating provider under a demonstration project

16 under section 1933 as part of an arrangement

17 for the procurement of goods or services or the

18 referral of patients or the lease or purchase of

19 space or equipment.’’.

20 (c) TRANSITION.—A premium subsidy eligible indi21 vidual may use premium assistance certificates issued

22 under title XXI of the Social Security Act to purchase

23 qualified health coverage offered by a community health

24 authority that complies with the requirements for a carrier

25 under title I.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect on the date of the enactment

3 of this Act.

4 SEC. 4002. HEALTH CENTER PROGRAM AMENDMENTS.

5 (a) AUTHORIZATION OF GRANTS FOR NETWORK DE6 VELOPMENT.—

7 (1) MIGRANT HEALTH CENTERS.—

8 (A) IN GENERAL.—Section 329 of the

9 Public Health Service Act (42 U.S.C. 254b) is

10 amended by adding at the end the following:

11 ‘‘(j)(1) The Secretary may make a grant, to an entity

12 receiving a grant under this section or to a group of such

13 entities, to support the planning and development of

14 health service networks (as defined in paragraph (3))

15 which will serve high impact areas, medically underserved

16 areas, or medically underserved populations within the

17 area they serve (or propose to serve).

18 ‘‘(2) A grant under this subsection for the planning

19 and development of a health service network may be used

20 for the following costs:

21 ‘‘(A) The costs of developing the network cor22 porate entity, including planning and needs assess23 ment.

24 ‘‘(B) The costs of developing internal manage25 ment for the network, as well as costs of developing
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1 legal, financial, clinical, information, billing, and re2 porting systems, and other costs necessary to

3 achieve operational status.

4 ‘‘(C) The costs of recruitment, training, and

5 compensation of management staff of the network

6 and, as appropriate and necessary, the management

7 and clinical staff of any participating provider.

8 ‘‘(D) The costs of developing additional primary

9 health and related service sites, including costs relat10 ed to purchase of essential equipment, acquisition,

11 modernization, expansion, or, if cost-effective, con12 struction of facilities.

13 ‘‘(3) In this subsection, the term ‘health service net14 work’ means a nonprofit private entity that—

15 ‘‘(A) through its participating providers (which

16 may provide services directly or through contract)

17 assures the provision of primary health and related

18 services and, as appropriate, supplemental health

19 services to residents of the high impact area or

20 medically underserved area or members of the medi21 cally underserved population covered by the network,

22 ‘‘(B) includes, as participating providers, at

23 least all recipients of grants under this section or

24 section 330, 340, or 340A that provide primary

25 health and related services to the residents of the
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1 area it serves (or proposes to serve), and that may

2 include, at the entity’s option, any other providers of

3 primary health or supplemental health services to

4 residents of the high impact area or medically un5 derserved area or members of the medically under6 served population covered by the network, but only

7 if such participating providers agree to provide serv8 ices without regard to an individual’s ability to pay,

9 and

10 ‘‘(C) is governed by individuals a majority of

11 whom are patients, employees, or board members of

12 its participating providers that receive grants under

13 this section or section 330, 340, or 340A.’’.

14 (B) CONFORMING CHANGE.—Section

15 329(h)(1)(A) of such Act (42 U.S.C.

16 254b(h)(1)(A)) is amended by inserting ‘‘and

17 subsection (j)’’ after ‘‘through (e)’’.

18 (2) COMMUNITY HEALTH CENTERS.—Section

19 330 of such Act (42 U.S.C. 254c) is amended by

20 adding at the end the following:

21 ‘‘(l)(1) The Secretary may make a grant, to an entity

22 receiving a grant under this section or to a group of such

23 entities, to support the planning and development of

24 health service networks (as defined in section 329(j)(3))

25 which will serve high impact areas, medically underserved
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1 areas, or medically underserved populations within the

2 area they serve (or propose to serve).

3 ‘‘(2) A grant under this subsection for the planning

4 and development of a health service network may be used

5 for the costs described in section 329(j)(2).’’.

6 (3) EFFECTIVE DATE.—The amendments made

7 by this subsection shall take effect on the date of the

8 enactment of this Act.

9 (b) REGULATIONS DEFINING MEDICALLY UNDER10 SERVED POPULATIONS AND FRONTIER AREAS.—Within 1

11 year after the date of the enactment of this Act, the Sec12 retary of Health and Human Services shall promulgate

13 regulations that define medically underserved populations

14 and frontier areas for purposes of title III of the Public

15 Health Service Act.

16 (c) EXTENSION OF AUTHORIZATION OF APPROPRIA17 TIONS.—For extension of authorization of appropriations

18 for migrant health centers and community health centers,

19 see section 4131.
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1 Subtitle B—Improved Access in

2 Rural Areas

3 PART 1—GRANTS TO ENCOURAGE COMMUNITY

4 RURAL HEALTH NETWORKS

5 SEC. 4101. ASSISTANCE FOR DEVELOPMENT OF ACCESS

6 PLANS FOR CHRONICALLY UNDERSERVED

7 AREAS.

8 (a) AVAILABILITY OF FINANCIAL ASSISTANCE TO IM9 PLEMENT ACTION PLANS TO INCREASE ACCESS.—

10 (1) IN GENERAL.—The Secretary shall provide

11 grants (in amounts determined in accordance with

12 paragraph (3)) over a 3-year period to an eligible

13 State for the development of plans to increase access

14 to health care services during such period for resi15 dents of areas in the State that are designated as

16 chronically underserved areas in accordance with

17 subsection (b).

18 (2) ELIGIBILITY REQUIREMENTS.—A State is

19 eligible to receive grants under this section if the

20 State submits to the Secretary (at such time and in

21 such form as the Secretary may require) assurances

22 that the State has developed (or is in the process of

23 developing) a plan to increase the access of residents

24 of a chronically underserved area to health care serv25 ices that meets the requirements of subsection (c),
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1 together with such other information and assurances

2 as the Secretary may require.

3 (3) AMOUNT OF ASSISTANCE.—

4 (A) IN GENERAL.—Subject to subpara5 graph (B), the amount of assistance provided to

6 a State under this subsection with respect to

7 any plan during a 3-year period shall be equal

8 to—

9 (i) for the first year of the period, an

10 amount equal to 100 percent of the

11 amounts expended by the State during the

12 year to implement the plan described in

13 paragraph (1) (as reported to the Sec14 retary in accordance with such require15 ments as the Secretary may impose);

16 (ii) for the second year of the period,

17 an amount equal to 50 percent of the

18 amounts expended by the State during the

19 year to implement the plan; and

20 (iii) for the third year of the period,

21 an amount equal to 33 percent of the

22 amounts expended by the State during the

23 year to implement the plan.

24 (B) AGGREGATE PER PLAN LIMIT.—The

25 amount of assistance provided to a State under
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1 this subsection with respect to any plan may

2 not exceed $100,000 during any year of the 3-

3 year period for which the State receives assist4 ance.

5 (b) DESIGNATION OF AREAS.—

6 (1) DESIGNATION BY GOVERNOR.—In accord7 ance with the guidelines developed under paragraph

8 (2), the Governor of a State may designate an area

9 in the State as a chronically underserved area for

10 purposes of this section upon the request of a local

11 official of the area or upon the Governor’s initiative.

12 (2) GUIDELINES FOR DESIGNATION.—

13 (A) DEVELOPMENT BY SECRETARY.—Not

14 later than 1 year after the date of the enact15 ment of this Act, the Secretary shall develop

16 guidelines for the designation of areas as chron17 ically underserved areas under this section.

18 (B) FACTORS CONSIDERED IN DEVELOP19 MENT OF GUIDELINES.—In developing guide20 lines under paragraph (1), the Secretary shall

21 consider the following factors:

22 (i) Whether the area (or a significant

23 portion of the area)—

24 (I) is designated as a health pro25 fessional shortage area (under section
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1 332(a) of the Public Health Service

2 Act), or meets the criteria for des3 ignation as such an area; or

4 (II) was previously designated as

5 such an area or previously met such

6 criteria for an extended period prior

7 to the designation of the area under

8 this section (in accordance with cri9 teria established by the Secretary).

10 (ii) The availability and adequacy of

11 health care providers and facilities for resi12 dents of the area.

13 (iii) The extent to which the availabil14 ity of assistance under other Federal and

15 State programs has failed to alleviate the

16 lack of access to health care services for

17 residents of the area.

18 (iv) The percentage of residents of the

19 area whose income is at or below the pov20 erty level.

21 (v) The percentage of residents of the

22 area who are age 65 or older.

23 (vi) The existence of cultural or geo24 graphic barriers to access to health care
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1 services in the area, including weather con2 ditions.

3 (3) REVIEW BY SECRETARY.—No designation

4 under paragraph (1) shall take effect under this sec5 tion unless the Secretary—

6 (A) has been notified of the proposed des7 ignation; and

8 (B) has not, within 60 days after the date

9 of receipt of the notice, disapproved the des10 ignation.

11 (4) PERIOD OF DESIGNATION.—A designation

12 under this section shall be effective during a period

13 specified by the Governor of not longer than 3 years.

14 The Governor may extend the designation for addi15 tional 3-year periods, except that a State may not

16 receive assistance under subsection (a)(3) for

17 amounts expended during any such additional peri18 ods.

19 (c) REQUIREMENTS FOR STATE ACCESS PLANS.—A

20 State plan to increase the access of residents of chronically

21 underserved areas to health care services meets the re22 quirements of this section if the Secretary finds that the

23 plan was developed with the participation of health care

24 providers and facilities and residents of the area that is
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1 the subject of the plan, together with such other require2 ments as the Secretary may impose.

3 (d) AUTHORIZATION OF APPROPRIATIONS.—There

4 are authorized to be appropriated for assistance under this

5 section $10,000,000 for each of the first 3 fiscal years

6 beginning after the date on which the Secretary develops

7 guidelines for the designation of areas as chronically un8 derserved areas under subsection (b)(2).

9 SEC. 4102. TECHNICAL ASSISTANCE GRANTS FOR NET10 WORKS.

11 (a) IN GENERAL.—The Secretary shall make funds

12 available under this section to provide technical assistance

13 (including information regarding eligibility for other Fed14 eral programs) and advice for entities described in sub15 section (b) seeking to establish or enhance a community

16 rural health network in an underserved rural area.

17 (b) ENTITIES ELIGIBLE TO RECEIVE FUNDS.—The

18 following entities are eligible to receive funds for technical

19 assistance under this section:

20 (1) An entity receiving a grant under section

21 4103.

22 (2) A State or unit of local government.

23 (3) An entity providing health care services (in24 cluding health professional education services) in the

25 area involved.
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1 (c) USE OF FUNDS.—

2 (1) IN GENERAL.—Funds made available under

3 this section may be used—

4 (A) for planning a community health net5 work and the submission of the plan for the

6 network to the Secretary under section 4103(c)

7 (subject to the limitation described in para8 graph (2));

9 (B) to provide assistance in conducting

10 community-based needs and prioritization, iden11 tifying existing regional health resources, and

12 developing networks, utilizing existing local pro13 viders and facilities where appropriate;

14 (C) to provide advice on obtaining the

15 proper balance of primary and secondary facili16 ties for the population served by the network;

17 (D) to provide assistance in coordinating

18 arrangements for tertiary care;

19 (E) to provide assistance in recruitment

20 and retention of health care professionals;

21 (F) to provide assistance in coordinating

22 the delivery of emergency services with the pro23 vision of other health care services in the area

24 served by the network;
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1 (G) to provide assistance in coordinating

2 arrangements for mental health and substance

3 abuse treatment services; and

4 (H) to provide information regarding the

5 area or proposed network’s eligibility for Fed6 eral and State assistance for health care-related

7 activities, together with information on funds

8 available through private sources.

9 (2) LIMITATION ON AMOUNT AVAILABLE FOR

10 DEVELOPMENT OF NETWORK.—The amount of fi11 nancial assistance available for activities described in

12 paragraph (1) may not exceed $50,000 and may not

13 be available for a period of time exceeding 1 year.

14 (d) USE OF RURAL HEALTH OFFICES.—In carrying

15 out this section with respect to entities in rural areas, the

16 Secretary shall make funds available through—

17 (1) not more than 10 regional centers acting as

18 clearinghouses for the distribution of such funds;

19 and

20 (2) State Offices of Rural Health, or any com21 bination of such centers and Offices.

22 (e) AUTHORIZATION OF APPROPRIATIONS.—There

23 are authorized to be appropriated $10,000,000 for each

24 of fiscal years 1996 and 1997 and $30,000,000 for each

25 of fiscal years 1998 through 2000 to carry out this sec-
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1 tion. Amounts appropriated under this section shall be

2 available until expended.

3 SEC. 4103. DEVELOPMENT GRANTS FOR NETWORKS.

4 (a) IN GENERAL.—The Secretary shall provide finan5 cial assistance to eligible entities in order to provide for

6 the development and implementation of community rural

7 health networks.

8 (b) ELIGIBLE ENTITIES.—

9 (1) IN GENERAL.—An entity is eligible to re10 ceive financial assistance under this section only if

11 the entity—

12 (A) is (i) based in a rural area or (ii) is

13 described in paragraph (2), (3), or (4) of sec14 tion 4102(b),

15 (B) is undertaking to develop and imple16 ment a community rural health network in an

17 underserved rural area (or underserved rural

18 areas) with the active participation of at least

19 3 health care providers or facilities in the area,

20 and

21 (C) has consulted with the local govern22 ments of the area to be served by the network

23 and with individuals who reside in the area.

24 (2) COORDINATION WITH PROVIDERS OUTSIDE

25 OF AREA PERMITTED.—Nothing in this section shall
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1 be construed as preventing an entity that coordi2 nates the delivery of services in an underserved rural

3 area with an entity outside the area from qualifying

4 for financial assistance under this section, or as pre5 venting an entity consisting of a consortia of mem6 bers located in adjoining States from qualifying for

7 such assistance.

8 (3) PERMITTING ENTITIES NOT RECEIVING

9 FUNDING FOR DEVELOPMENT OF PLAN TO RECEIVE

10 FUNDING FOR IMPLEMENTATION.—An entity that is

11 eligible to receive financial assistance under this sec12 tion may receive assistance to carry out activities de13 scribed in subsection (c)(1)(B) notwithstanding that

14 the entity does not receive assistance to carry out

15 activities described in subsection (c)(1)(A).

16 (c) USE OF FUNDS.—

17 (1) IN GENERAL.—Financial assistance made

18 available to eligible entities under this section may

19 be used only—

20 (A) for the development of a community

21 health network and the submission of the plan

22 for the network to the Secretary; and

23 (B) after the Secretary approves the plan

24 for the network, for activities to implement the

25 network, including (but not limited to)—
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1 (i) establishing information systems,

2 including telecommunications,

3 (ii) recruiting health care providers,

4 (iii) providing services to enable indi5 viduals to have access to health care serv6 ices, including transportation and language

7 interpretation services (including interpre8 tation services for the hearing-impaired),

9 and

10 (iv) establishing and operating a com11 munity health advisor program described

12 in paragraph (2).

13 (2) COMMUNITY HEALTH ADVISOR PROGRAM.—

14 (A) PROGRAM DESCRIBED.—In paragraph

15 (1), a ‘‘community health advisor program’’ is

16 a program under which community health advi17 sors carry out the following activities:

18 (i) Collaborating efforts with health

19 care providers and related entities to facili20 tate the provision of health services and

21 health-related social services.

22 (ii) Providing public education on

23 health promotion and disease prevention

24 and efforts to facilitate the use of available
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1 health services and health-related social

2 services.

3 (iii) Providing health-related counsel4 ing.

5 (iv) Making referrals for available

6 health services and health-related social

7 services.

8 (v) Improving the ability of individ9 uals to use health services and health10 related social services under Federal,

11 State, and local programs through assist12 ing individuals in establishing eligibility

13 under the programs.

14 (vi) Providing outreach services to in15 form the community of the availability of

16 the services provided under the program.

17 (B) COMMUNITY HEALTH ADVISOR DE18 FINED.—In subparagraph (A), the term ‘‘com19 munity health advisor’’ means, with respect to

20 a community health advisor program, an

21 individual—

22 (i) who has demonstrated the capacity

23 to carry out one or more of the activities

24 carried out under the program; and
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1 (ii) who, for not less than one year,

2 has been a resident of the community in

3 which the program is to be operated.

4 (3) LIMITATIONS ON ACTIVITIES FUNDED.—Fi5 nancial assistance made available under this section

6 may not be used for any of the following:

7 (A) For a telecommunications system un8 less such system is coordinated with, and does

9 not duplicate, a system existing in the area.

10 (B) For construction or remodeling of

11 health care facilities.

12 (4) LIMITATION ON AMOUNT AVAILABLE FOR

13 DEVELOPMENT OF NETWORK.—The amount of fi14 nancial assistance available for activities described in

15 paragraph (1)(A) may not exceed $50,000 and may

16 not be made available for a period of time exceeding

17 1 year.

18 (d) APPLICATION.—

19 (1) IN GENERAL.—No financial assistance shall

20 be provided under this section to an entity unless

21 the entity has submitted to the Secretary, in a time

22 and manner specified by the Secretary, and had ap23 proved by the Secretary an application.

24 (2) INFORMATION TO BE INCLUDED.—Each

25 such application shall include—
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1 (A) a description of the community rural

2 health network, including service area and ca3 pacity, and

4 (B) a description of how the proposed net5 work will utilize existing health care facilities in

6 a manner that avoids unnecessary duplication.

7 (e) AUTHORIZATION OF APPROPRIATIONS.—

8 (1) IN GENERAL.—There are authorized to be

9 appropriated $100,000,000 for each of fiscal years

10 1996 and 1997, $120,000,000 for fiscal year 1998,

11 $130,000,000 for fiscal year 1999, $140,000,000 for

12 fiscal year 2000, $150,000,000 for fiscal year 2001,

13 $160,000,000 for fiscal year 2002, $170,000,000 for

14 fiscal year 2003, and $180,000,000 for fiscal year

15 2004, to carry out this section. Amounts appro16 priated under this section shall be available until ex17 pended.

18 (2) INTEGRATION OF OTHER AUTHORIZA19 TIONS.—In order to provide for the authorization of

20 appropriations under paragraph (1), notwithstanding

21 any other provision of law, no funds are authorized

22 to be appropriated to carry out the following pro23 grams in fiscal years after fiscal year 1994:
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1 (A) The rural health transition grant pro2 gram (under section 4005(e) of the Omnibus

3 Budget Reconciliation Act of 1987).

4 (B) The rural health outreach program

5 (for which appropriations were annually pro6 vided under the Departments of Labor, Health

7 and Human Services, and Education, and Re8 lated Agencies Appropriation Acts).

9 (3) ANNUAL LIMIT ON ASSISTANCE TO

10 GRANTEE.—The amount of financial assistance pro11 vided to an entity under this section during a year

12 may not exceed $250,000.

13 SEC. 4104. DEFINITIONS.

14 For purposes of this part:

15 (1) COMMUNITY RURAL HEALTH NETWORK.—

16 The term ‘‘community rural health network’’ means

17 a formal cooperative arrangement between partici18 pating hospitals, physicians, and other health care

19 providers which—

20 (A) is located in an underserved rural

21 area;

22 (B) furnishes health care services to indi23 viduals residing in the area; and
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1 (C) is governed by a board of directors se2 lected by participating health care providers

3 and residents of the area.

4 (2) RURAL AREA.—The term ‘‘rural area’’ has

5 the meaning given such term in section

6 1886(d)(2)(D) of the Social Security Act.

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

8 the Secretary of Health and Human Services.

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

10 the several States, the District of Columbia, Puerto

11 Rico, the Virgin Islands, Guam, the Northern Mari12 ana Islands, and American Samoa.

13 (5) UNDERSERVED RURAL AREA.—The term

14 ‘‘underserved rural area’’ means a rural area des15 ignated—

16 (A) as a health professional shortage area

17 under section 332(a) of the Public Health Serv18 ice Act; or

19 (B) as a chronically underserved area

20 under section 4101.
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1 PART 2—INCENTIVES FOR HEALTH

2 PROFESSIONALS TO PRACTICE IN RURAL AREAS

3 Subpart A—National Health Service Corps

4 Program

5 SEC. 4111. NATIONAL HEALTH SERVICE CORPS LOAN RE6 PAYMENTS EXCLUDED FROM GROSS INCOME.

7 (a) IN GENERAL.—Part III of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 (relating to

9 items specifically excluded from gross income) is amended

10 by redesignating section 137 as section 138 and by insert11 ing after section 136 the following new section:

12 ‘‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN RE13 PAYMENTS.

14 ‘‘(a) GENERAL RULE.—Gross income shall not in15 clude any qualified loan repayment.

16 ‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes

17 of this section, the term ‘qualified loan repayment’ means

18 any payment made on behalf of the taxpayer by the Na19 tional Health Service Corps Loan Repayment Program

20 under section 338B(g) of the Public Health Service Act.’’.

21 (b) CONFORMING AMENDMENT.—Paragraph (3) of

22 section 338B(g) of the Public Health Service Act is

23 amended by striking ‘‘Federal, State, or local’’ and insert24 ing ‘‘State or local’’.

25 (c) CLERICAL AMENDMENT.—The table of sections

26 for part III of subchapter B of chapter 1 of the Internal
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1 Revenue Code of 1986 is amended by striking the item

2 relating to section 137 and inserting the following:

‘‘Sec. 137. National Health Service Corps loan repayments.

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

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

4 this section shall apply to payments made under section

5 338B(g) of the Public Health Service Act after the date

6 of the enactment of this Act.

7 SEC. 4112. MODIFICATION IN CRITERIA FOR DESIGNATION

8 AS HEALTH PROFESSIONAL SHORTAGE AREA.

9 (a) RELEVANCE OF TRAVEL TIMES WITHIN FRON10 TIER AREAS.—Section 332(a) of the Public Health Service

11 Act (42 U.S.C. 245e(a)) is amended by adding at the end

12 the following new paragraph:

13 ‘‘(4) With respect to meeting the criteria under

14 paragraph (1)(A) for an area to be designated as a

15 health professional shortage area, the Secretary

16 shall, in the case of a frontier area, make the deter17 mination of whether the frontier area is a rational

18 area for the delivery of health services without re19 gard to—

20 ‘‘(A) the travel time between population

21 centers in the frontier area; or

22 ‘‘(B) the travel time to contiguous area re23 sources in the frontier area.’’.
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1 (b) REGULATIONS DEFINING HEALTH PROFES2 SIONAL SHORTAGE AREAS.—Within 1 year after the date

3 of the enactment of this Act, the Secretary of Health and

4 Human Services shall promulgate regulations that define

5 health professional shortage areas for purposes of title III

6 of the Public Health Service Act.

7 (c) AGENCY RECOMMENDATIONS FOR IMPROVE8 MENTS.—Not later than July 1, 1995, the Secretary of

9 Health and Human Services shall submit to the Congress

10 a report specifying the recommendations of the Secretary

11 for improving the manner of determining the extent to

12 which a geographic area has a need for assignments of

13 members of the National Health Service Corps, and for

14 equitably allocating such assignments among the geo15 graphic areas with a need for such assignments.

16 (d) EFFECTIVE DATE.—This section shall take effect

17 on October 1, 1994, or upon the date of the enactment

18 of this Act, whichever occurs later.

19 SEC. 4113. OTHER PROVISIONS REGARDING NATIONAL

20 HEALTH SERVICE CORPS.

21 (a) SCHOLARSHIP AND LOAN REPAYMENT PRO22 GRAMS.—

23 (1) AUTHORIZATION OF APPROPRIATIONS.—

24 Section 338H(b)(1) of the Public Health Service Act

25 (42 U.S.C. 254q(b)(1)) is amended—
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1 (A) by striking ‘‘and’’ after ‘‘1991,’’; and

2 (B) by striking ‘‘through 2000.’’ and in3 serting ‘‘through 1994, $150,000,000 for fiscal

4 year 1995, $175,000,000 for fiscal year 1996,

5 $200,000,000 for fiscal year 1997,

6 $275,000,000 for fiscal year 1998,

7 $275,000,000 for fiscal year 1999,

8 $275,000,000 for fiscal year 2000,

9 $300,000,000 for fiscal year 2001,

10 $325,000,000 for fiscal year 2002,

11 $350,000,000 for fiscal year 2003, and

12 $375,000,000 for fiscal year 2004.’’.

13 (2) ALLOCATION FOR PARTICIPATION OF

14 NURSES IN SCHOLARSHIP PROGRAM.—Section

15 338H(b)(2) of the Public Health Service Act (42

16 U.S.C. 254q(b)(2)) is amended by adding at the end

17 the following subparagraph:

18 ‘‘(C) Of the amounts appropriated under

19 paragraph (1) for fiscal year 1995 and subse20 quent fiscal years, the Secretary shall reserve

21 such amounts as may be necessary to ensure

22 that, of the aggregate number of individuals

23 who are participants in the Scholarship Pro24 gram, the total number who are being educated
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1 as nurses or are serving as nurses, respectively,

2 is increased to 20 percent.’’.

3 (b) INCREASE IN NUMBER OF MENTAL HEALTH

4 PROFESSIONALS IN SHORTAGE AREAS.—

5 (1) IN GENERAL.—Section 338H(b) of the Pub6 lic Health Service Act (42 U.S.C. 254q(b)) is

7 amended by adding at the end the following para8 graph:

9 ‘‘(3) MENTAL HEALTH PROFESSIONALS.—In

10 providing contracts under this subpart for scholar11 ships and loan repayments, the Secretary shall en12 sure that an appropriate number of mental health

13 professionals is assigned under section 333 for

14 health professional shortage areas.’’.

15 (2) APPLICABILITY.—With respect to contracts

16 for scholarships and loan repayments under subpart

17 III of part D of title III of the Public Health Service

18 Act, the amendment made by subsection (a) applies

19 with respect to contracts entered into on or after Oc20 tober 1, 1994.
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1 Subpart B—Incentives Under Other

2 Programs

3 SEC. 4121. EXTENSION OF ADDITIONAL PAYMENT UNDER

4 MEDICARE FOR PHYSICIANS’ SERVICES FUR5 NISHED IN FORMER SHORTAGE AREAS.

6 (a) IN GENERAL.—Section 1833(m) of the Social Se7 curity Act (42 U.S.C. 1395l(m)) is amended by striking

8 ‘‘area,’’ and inserting ‘‘area (or, in the case of an area

9 for which the designation as a health professional shortage

10 area under such section is withdrawn, in the case of physi11 cians’ services furnished to such an individual during the

12 3-year period beginning on the effective date of the with13 drawal of such designation),’’.

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

15 subsection (a) shall apply to physicians’ services furnished

16 in an area for which the designation as a health profes17 sional shortage area under section 332(a)(1)(A) of the

18 Public Health Service Act is withdrawn on or after Janu19 ary 1, 1995.

20 SEC. 4122. REFINEMENT OF GEOGRAPHIC ADJUSTMENT

21 FACTOR FOR MEDICARE PHYSICIANS’ SERV22 ICES.

23 (a) DEADLINE FOR INITIAL REVIEW AND REVI24 SION.—Section 1848(e)(1)(C) of the Social Security Act

25 (42 U.S.C. 1395w–4(e)(1)(C)) is amended by adding at
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1 the end the following: ‘‘The first such review and revision

2 shall apply to services furnished on or after January 1,

3 1995.’’.

4 (b) AUTHORITY TO ADJUST INDEX VALUE FOR

5 INPUT COMPONENT UNDER CERTAIN CIRCUMSTANCES.—

6 (1) Section 1848(e)(1) of the Social Security Act (42

7 U.S.C. 1395w–4(e)(1)) is amended—

8 (A) in subparagraph (A), by striking ‘‘(B) and

9 (C)’’ and inserting ‘‘(B), (C), and (D)’’;

10 (B) by redesignating subparagraph (C) as sub11 paragraph (D); and

12 (C) by inserting after subparagraph (B) the fol13 lowing:

14 ‘‘(C) SPECIAL ADJUSTMENT TO CORRECT

15 FOR UNIQUE LOCAL CIRCUMSTANCES.—The

16 Secretary may adjust the value assigned to an

17 input component of an index in a fee schedule

18 area if the Secretary determines that the value

19 that would otherwise apply in such area does

20 not accurately reflect the relative costs of such

21 input for such area because of unique local cir22 cumstances.’’.

23 (2) Section 1848(i)(1)(D) of the Social Security Act

24 (42 U.S.C. 1395w–4(i)(1)(D)) is amended by inserting
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1 ‘‘(including any adjustment under subparagraph (C)

2 thereof)’’ after ‘‘subsection (e)’’.

3 (c) REPORT ON REVIEW PROCESS.—Not later than

4 April 1, 1996, the Secretary of Health and Human Serv5 ices (in this section referred to as the ‘‘Secretary’’) shall

6 study and report to the Committee on Finance of the Sen7 ate and the Committees on Ways and Means and Energy

8 and Commerce of the House of Representatives on—

9 (1) the data necessary to review and revise the

10 indices established under section 1848(e)(1)(A) of

11 the Social Security Act, including—

12 (A) the shares allocated to physicians’

13 work effort, practice expenses (other than mal14 practice expenses), and malpractice expenses;

15 (B) the weights assigned to the input com16 ponents of such shares; and

17 (C) the index values assigned to such com18 ponents;

19 (2) any limitations on the availability of data

20 necessary to review and revise such indices at least

21 every three years;

22 (3) ways of addressing such limitations, with

23 particular attention to the development of alternative

24 data sources for input components for which current
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1 index values are based on data collected less fre2 quently than every three years; and

3 (4) the costs of developing more accurate and

4 timely data sources.

5 (d) STUDY ON LOW-VOLUME ADJUSTMENT IN ISO6 LATED AREAS.—(1) Not later than July 1, 1996, the Phy7 sician Payment Review Commission shall study and report

8 to the Committee on Finance of the Senate and the Com9 mittees on Ways and Means and Energy and Commerce

10 of the House of Representatives on the feasibility and de11 sirability of providing for a special adjustment to the index

12 value of the medical equipment and supplies input compo13 nent of the index used under section 1848(e) of the Social

14 Security Act with respect to services described in para15 graph (2).

16 (2) Services described in this paragraph are serv17 ices—

18 (A) furnished by a physician who practices in

19 an isolated area;

20 (B) requiring the presence of expensive medical

21 equipment and supplies in the physician’s office; and

22 (C) with respect to which the cost per service

23 of operating the equipment is increased because of

24 the low volume of patients of such physician.
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1 SEC. 4123. DEVELOPMENT OF MODEL STATE SCOPE OF

2 PRACTICE LAW.

3 (a) IN GENERAL.—The Secretary of Health and

4 Human Services shall develop and publish a model law

5 that may be adopted by States to increase the access of

6 individuals residing in underserved rural areas to health

7 care services by expanding the services which non-physi8 cian health care professionals may provide in such areas.

9 (b) DEADLINE.—The Secretary shall publish the

10 model law developed under subsection (a) not later than

11 1 year after the date of the enactment of this Act.

12 PART 3—ASSISTANCE FOR INSTITUTIONAL

13 PROVIDERS

14 Subpart A—Community and Migrant Health

15 Centers

16 SEC. 4131. COMMUNITY AND MIGRANT HEALTH CENTERS.

17 (a) MIGRANT HEALTH CENTERS.—Section

18 329(h)(1)(A) of the Public Health Service Act (42 U.S.C.

19 254b(h)(1)(A)) is amended—

20 (1) by striking ‘‘and’’ after ‘‘1991,’’; and

21 (2) by inserting before the period the following:

22 ‘‘, $75,000,000 for fiscal year 1996, $80,000,000

23 for fiscal year 1997, $155,000,000 for fiscal year

24 1998, $165,000,000 for fiscal year 1999,

25 $175,000,000 for fiscal year 2000, $185,000,000 for

26 fiscal year 2001, $195,000,000 for fiscal year 2002,
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1 $205,000,000 for fiscal year 2003, and

2 $210,000,000 for fiscal year 2004’’.

3 (b) COMMUNITY HEALTH CENTERS.—Section

4 330(g)(1)(A) of the Public Health Service Act (42 U.S.C.

5 254c(g)(1)(A)) is amended—

6 (1) by striking ‘‘and’’ after ‘‘1991,’’; and

7 (2) by inserting before the period the following:

8 ‘‘, $638,000,000 for fiscal year 1996, $655,000,000

9 for fiscal year 1997, $845,000,000 for fiscal year

10 1998, $865,000,000 for fiscal year 1999,

11 $885,000,000 for fiscal year 2000, $905,000,000 for

12 fiscal year 2001, $925,000,000 for fiscal year 2002,

13 $945,000,000 for fiscal year 2003, and

14 $965,000,000 for fiscal year 2004’’.

15 Subpart B—Emergency Medical Systems

16 SEC. 4141. EMERGENCY MEDICAL SERVICES.

17 (a) ESTABLISHMENT OF FEDERAL OFFICE.—Title

18 XII of the Public Health Service Act (42 U.S.C. 300d et

19 seq.) is amended—

20 (1) in the heading for the title, by striking

21 ‘‘TRAUMA CARE’’ and inserting ‘‘EMER22 GENCY MEDICAL AND TRAUMA CARE

23 SERVICES’’;
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1 (2) in the heading for part A, by striking ‘‘Gen2 eral’’ and all that follows and inserting ‘‘General Au3 thorities and Duties’’; and

4 (3) by amending section 1201 to read as fol5 lows:

6 ‘‘SEC. 1201. ESTABLISHMENT OF OFFICE OF EMERGENCY

7 MEDICAL AND TRAUMA CARE SERVICES.

8 ‘‘(a) IN GENERAL.—The Secretary shall establish an

9 office to be known as the Office of Emergency Medical

10 and Trauma Care Services, which shall be headed by a

11 director appointed by the Secretary. The Secretary shall

12 carry out this title acting through the Director of such

13 Office.

14 ‘‘(b) GENERAL AUTHORITIES AND DUTIES.—With

15 respect to emergency medical services (including trauma

16 care), the Secretary shall—

17 ‘‘(1) conduct and support research, training,

18 evaluations, and demonstration projects;

19 ‘‘(2) foster the development of appropriate,

20 modern systems of such services through the sharing

21 of information among agencies and individuals in22 volved in the study and provision of such services;

23 ‘‘(3) foster the development of regional systems

24 for the provision of such services;

25 ‘‘(4) sponsor workshops and conferences;
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1 ‘‘(5) as appropriate, disseminate to public and

2 private entities information obtained in carrying out

3 paragraphs (1) through (4);

4 ‘‘(6) provide technical assistance to State and

5 local agencies;

6 ‘‘(7) coordinate activities of the Department of

7 Health and Human Services; and

8 ‘‘(8) as appropriate, coordinate activities of

9 such Department with activities of other Federal

10 agencies.

11 ‘‘(c) CERTAIN REQUIREMENTS.—With respect to

12 emergency medical services (including trauma care), the

13 Secretary shall ensure that activities under subsection (b)

14 are carried out regarding—

15 ‘‘(1) maintaining an adequate number of health

16 professionals with expertise in the provision of the

17 services, including hospital-based professionals and

18 prehospital-based professionals;

19 ‘‘(2) developing, periodically reviewing, and re20 vising as appropriate, in collaboration with appro21 priate public and private entities, guidelines for the

22 provision of such services (including, for various typ23 ical circumstances, guidelines on the number and va24 riety of professionals, on equipment, and on train25 ing);
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1 ‘‘(3) the appropriate use of available tech2 nologies, including communications technologies; and

3 ‘‘(4) the unique needs of underserved inner-city

4 areas and underserved rural areas.

5 ‘‘(d) GRANTS, COOPERATIVE AGREEMENTS, AND

6 CONTRACTS.—In carrying out subsections (b) and (c), the

7 Secretary may make grants and enter into cooperative

8 agreements and contracts.

9 ‘‘(e) DEFINITIONS.—For purposes of this part:

10 ‘‘(1) The term ‘hospital-based professional’

11 means a health professional (including an allied

12 health professional) who has expertise in providing

13 one or more emergency medical services and who

14 normally provides the services at a medical facility.

15 ‘‘(2) The term ‘prehospital-based professional’

16 means a health professional (including an allied

17 health professional) who has expertise in providing

18 one or more emergency medical services and who

19 normally provides the services at the site of the med20 ical emergency or during transport to a medical fa21 cility.’’.

22 (b) STATE OFFICES OF EMERGENCY MEDICAL SERV23 ICES; DEMONSTRATION PROGRAM REGARDING TELE24 COMMUNICATIONS.—Part A of title XII of the Public

25 Health Service Act (42 U.S.C. 300d et seq.), as amended
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1 by section 601(b) of Public Law 103-183 (107 Stat.

2 2238), is amended—

3 (1) by redesignating sections 1202 and 1203 as

4 sections 1203 and 1204, respectively;

5 (2) by inserting after section 1201 the following

6 section:

7 ‘‘SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL

8 SERVICES.

9 ‘‘(a) PROGRAM OF GRANTS.—The Secretary may

10 make grants to States for the purpose of improving the

11 availability and quality of emergency medical services

12 through the operation of State offices of emergency medi13 cal services.

14 ‘‘(b) REQUIREMENT OF MATCHING FUNDS.—

15 ‘‘(1) IN GENERAL.—The Secretary may not

16 make a grant under subsection (a) unless the State

17 involved agrees, with respect to the costs to be in18 curred by the State in carrying out the purpose de19 scribed in such subsection, to provide non-Federal

20 contributions toward such costs in an amount that—

21 ‘‘(A) for the first fiscal year of payments

22 under the grant, is not less than $1 for each $3

23 of Federal funds provided in the grant;
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1 ‘‘(B) for any second fiscal year of such

2 payments, is not less than $1 for each $1 of

3 Federal funds provided in the grant; and

4 ‘‘(C) for any third fiscal year of such pay5 ments, is not less than $3 for each $1 of Fed6 eral funds provided in the grant.

7 ‘‘(2) DETERMINATION OF AMOUNT OF NON8 FEDERAL CONTRIBUTION.—

9 ‘‘(A) Subject to subparagraph (B), non10 Federal contributions required in paragraph (1)

11 may be in cash or in kind, fairly evaluated, in12 cluding plant, equipment, or services. Amounts

13 provided by the Federal Government, or serv14 ices assisted or subsidized to any significant ex15 tent by the Federal Government, may not be in16 cluded in determining the amount of such non17 Federal contributions.

18 ‘‘(B) The Secretary may not make a grant

19 under subsection (a) unless the State involved

20 agrees that—

21 ‘‘(i) for the first fiscal year of pay22 ments under the grant, 100 percent or less

23 of the non-Federal contributions required

24 in paragraph (1) will be provided in the

25 form of in-kind contributions;
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1 ‘‘(ii) for any second fiscal year of such

2 payments, not more than 50 percent of

3 such non-Federal contributions will be pro4 vided in the form of in-kind contributions;

5 and

6 ‘‘(iii) for any third fiscal year of such

7 payments, such non-Federal contributions

8 will be provided solely in the form of cash.

9 ‘‘(c) CERTAIN REQUIRED ACTIVITIES.—The Sec10 retary may not make a grant under subsection (a) unless

11 the State involved agrees that activities carried out by an

12 office operated pursuant to such subsection will include—

13 ‘‘(1) coordinating the activities carried out in

14 the State that relate to emergency medical services;

15 ‘‘(2) activities regarding the matters described

16 in paragraphs (1) through (4) section 1201(b); and

17 ‘‘(3) identifying Federal and State programs re18 garding emergency medical services and providing

19 technical assistance to public and nonprofit private

20 entities regarding participation in such programs.

21 ‘‘(d) REQUIREMENT REGARDING ANNUAL BUDGET

22 FOR OFFICE.—The Secretary may not make a grant

23 under subsection (a) unless the State involved agrees that,

24 for any fiscal year for which the State receives such a

25 grant, the office operated pursuant to subsection (a) will
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1 be provided with an annual budget of not less than

2 $50,000.

3 ‘‘(e) CERTAIN USES OF FUNDS.—

4 ‘‘(1) RESTRICTIONS.—The Secretary may not

5 make a grant under subsection (a) unless the State

6 involved agrees that—

7 ‘‘(A) if research with respect to emergency

8 medical services is conducted pursuant to the

9 grant, not more than 10 percent of the grant

10 will be expended for such research; and

11 ‘‘(B) the grant will not be expended to pro12 vide emergency medical services (including pro13 viding cash payments regarding such services).

14 ‘‘(2) ESTABLISHMENT OF OFFICE.—Activities

15 for which a State may expend a grant under sub16 section (a) include paying the costs of establishing

17 an office of emergency medical services for purposes

18 of such subsection.

19 ‘‘(f) REPORTS.—The Secretary may not make a

20 grant under subsection (a) unless the State involved

21 agrees to submit to the Secretary reports containing such

22 information as the Secretary may require regarding activi23 ties carried out under this section by the State.

24 ‘‘(g) REQUIREMENT OF APPLICATION.—The Sec25 retary may not make a grant under subsection (a) unless
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1 an application for the grant is submitted to the Secretary

2 and the application is in such form, is made in such man3 ner, and contains such agreements, assurances, and infor4 mation as the Secretary determines to be necessary to

5 carry out this section.’’; and

6 (3) in section 1204 (as redesignated by para7 graph (1) of this subsection)—

8 (A) by redesignating subsection (c) as sub9 section (d); and

10 (B) by inserting after subsection (b) the

11 following new subsection:

12 ‘‘(c) DEMONSTRATION PROGRAM REGARDING TELE13 COMMUNICATIONS.—

14 ‘‘(1) LINKAGES FOR RURAL FACILITIES.—

15 Projects under subsection (a)(1) shall include dem16 onstration projects to establish telecommunications

17 between rural medical facilities and medical facilities

18 that have expertise or equipment that can be utilized

19 by the rural facilities through the telecommuni20 cations.

21 ‘‘(2) MODES OF COMMUNICATION.—The Sec22 retary shall ensure that the telecommunications

23 technologies demonstrated under paragraph (1) in24 clude interactive video telecommunications, static

25 video imaging transmitted through the telephone
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1 system, and facsimiles transmitted through such sys2 tem.’’.

3 (c) FUNDING.—Section 1232 of the Public Health

4 Service Act (42 U.S.C. 300d-32) is amended by striking

5 subsections (a) and (b) and inserting the following:

6 ‘‘(a) EMERGENCY MEDICAL SERVICES GEN7 ERALLY.—For the purpose of carrying out section 1201

8 other than with respect to trauma care, and for the pur9 pose of carrying out section 1204(c), there are authorized

10 to be appropriated $2,000,000 for each of the fiscal years

11 1996, 1997, and 1998.

12 ‘‘(b) STATE OFFICES.—For the purpose of carrying

13 out section 1202, there are authorized to be appropriated

14 $3,000,000 for each of the fiscal years 1996, 1997, and

15 1998.’’.

16 SEC. 4142. GRANTS TO STATES REGARDING AIRCRAFT FOR

17 TRANSPORTING RURAL VICTIMS OF MEDICAL

18 EMERGENCIES.

19 Part E of title XII of the Public Health Service Act

20 (42 U.S.C. 300d-51 et seq.) is amended by adding at the

21 end the following new section:

22 ‘‘SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL

23 VICTIMS OF MEDICAL EMERGENCIES.

24 ‘‘(a) IN GENERAL.—The Secretary shall make grants

25 to States to assist such States in the creation or enhance-
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1 ment of air medical transport systems that provide victims

2 of medical emergencies in rural areas with access to treat3 ments for the injuries or other conditions resulting from

4 such emergencies.

5 ‘‘(b) APPLICATION AND PLAN.—

6 ‘‘(1) APPLICATION.—To be eligible to receive a

7 grant under subsection (a), a State shall prepare

8 and submit to the Secretary an application in such

9 form, made in such manner, and containing such

10 agreements, assurances, and information, including

11 a State plan as required in paragraph (2), as the

12 Secretary determines to be necessary to carry out

13 this section.

14 ‘‘(2) STATE PLAN.—An application submitted

15 under paragraph (1) shall contain a State plan that

16 shall—

17 ‘‘(A) describe the intended uses of the

18 grant proceeds and the geographic areas to be

19 served;

20 ‘‘(B) demonstrate that the geographic

21 areas to be served, as described under subpara22 graph (A), are rural in nature;

23 ‘‘(C) demonstrate that there is a lack of

24 facilities available and equipped to deliver ad-
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1 vanced levels of medical care in the geographic

2 areas to be served;

3 ‘‘(D) demonstrate that in utilizing the

4 grant proceeds for the establishment or en5 hancement of air medical services the State

6 would be making a cost-effective improvement

7 to existing ground-based or air emergency medi8 cal service systems;

9 ‘‘(E) demonstrate that the State will not

10 utilize the grant proceeds to duplicate the capa11 bilities of existing air medical systems that are

12 effectively meeting the emergency medical needs

13 of the populations they serve;

14 ‘‘(F) demonstrate that in utilizing the

15 grant proceeds the State is likely to achieve a

16 reduction in the morbidity and mortality rates

17 of the areas to be served, as determined by the

18 Secretary;

19 ‘‘(G) demonstrate that the State, in utiliz20 ing the grant proceeds, will—

21 ‘‘(i) maintain the expenditures of the

22 State for air and ground medical transport

23 systems at a level equal to not less than

24 the level of such expenditures maintained

25 by the State for the fiscal year preceding
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1 the fiscal year for which the grant is re2 ceived; and

3 ‘‘(ii) ensure that recipients of direct

4 financial assistance from the State under

5 such grant will maintain expenditures of

6 such recipients for such systems at a level

7 at least equal to the level of such expendi8 tures maintained by such recipients for the

9 fiscal year preceding the fiscal year for

10 which the financial assistance is received;

11 ‘‘(H) demonstrate that persons experienced

12 in the field of air medical service delivery were

13 consulted in the preparation of the State plan;

14 and

15 ‘‘(I) contain such other information as the

16 Secretary may determine appropriate.

17 ‘‘(c) CONSIDERATIONS IN AWARDING GRANTS.—In

18 determining whether to award a grant to a State under

19 this section, the Secretary shall—

20 ‘‘(1) consider the rural nature of the areas to

21 be served with the grant proceeds and the services

22 to be provided with such proceeds, as identified in

23 the State plan submitted under subsection (b); and

24 ‘‘(2) give preference to States with State plans

25 that demonstrate an effective integration of the pro-
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1 posed air medical transport systems into a com2 prehensive network or plan for regional or statewide

3 emergency medical service delivery.

4 ‘‘(d) STATE ADMINISTRATION AND USE OF

5 GRANT.—

6 ‘‘(1) IN GENERAL.—The Secretary may not

7 make a grant to a State under subsection (a) unless

8 the State agrees that such grant will be adminis9 tered by the State agency with principal responsibil10 ity for carrying out programs regarding the provi11 sion of medical services to victims of medical emer12 gencies or trauma.

13 ‘‘(2) PERMITTED USES.—A State may use

14 amounts received under a grant awarded under this

15 section to award subgrants to public and private en16 tities operating within the State.

17 ‘‘(3) OPPORTUNITY FOR PUBLIC COMMENT.—

18 The Secretary may not make a grant to a State

19 under subsection (a) unless that State agrees that,

20 in developing and carrying out the State plan under

21 subsection (b)(2), the State will provide public notice

22 with respect to the plan (including any revisions

23 thereto) and facilitate comments from interested

24 persons.
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1 ‘‘(e) NUMBER OF GRANTS.—The Secretary shall

2 award grants under this section to not less than 7 States.

3 ‘‘(f) REPORTS.—

4 ‘‘(1) REQUIREMENT.—A State that receives a

5 grant under this section shall annually (during each

6 year in which the grant proceeds are used) prepare

7 and submit to the Secretary a report that shall con8 tain—

9 ‘‘(A) a description of the manner in which

10 the grant proceeds were utilized;

11 ‘‘(B) a description of the effectiveness of

12 the air medical transport programs assisted

13 with grant proceeds; and

14 ‘‘(C) such other information as the Sec15 retary may require.

16 ‘‘(2) TERMINATION OF FUNDING.—In reviewing

17 reports submitted under paragraph (1), if the Sec18 retary determines that a State is not using amounts

19 provided under a grant awarded under this section

20 in accordance with the State plan submitted by the

21 State under subsection (b), the Secretary may termi22 nate the payment of amounts under such grant to

23 the State until such time as the Secretary deter24 mines that the State comes into compliance with

25 such plan.
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1 ‘‘(g) DEFINITION.—As used in this section, the term

2 ‘rural areas’ means geographic areas that are located out3 side of standard metropolitan statistical areas, as identi4 fied by the Secretary.

5 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There

6 are authorized to be appropriated to make grants under

7 this section, $15,000,000 for each of the fiscal years 1996

8 and 1997, $20,000,000 for fiscal year 1998, $25,000,000

9 for fiscal year 1999, and $30,000,000 for fiscal year

10 2000.’’.

11 Subpart C—Assistance to Rural Providers

12 Under Medicare

13 SEC. 4151. AMENDMENTS TO ESSENTIAL ACCESS COMMU14 NITY HOSPITAL (EACH) PROGRAM UNDER

15 MEDICARE.

16 (a) INCREASING NUMBER OF PARTICIPATING

17 STATES.—Section 1820(a)(1) of the Social Security Act

18 (42 U.S.C. 1395i-4(a)(1)) is amended by striking ‘‘7’’ and

19 inserting ‘‘9’’.

20 (b) TREATMENT OF INPATIENT HOSPITAL SERVICES

21 PROVIDED IN RURAL PRIMARY CARE HOSPITALS.—

22 (1) IN GENERAL.—Section 1820(f)(1)(F) of

23 such Act (42 U.S.C. 1395i-4(f)(1)(F)) is amended to

24 read as follows:
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1 ‘‘(F) subject to paragraph (4), provides not

2 more than 6 inpatient beds (meeting such con3 ditions as the Secretary may establish) for pro4 viding inpatient care to patients requiring sta5 bilization before discharge or transfer to a hos6 pital, except that the facility may not provide

7 any inpatient hospital services—

8 ‘‘(i) to any patient whose attending

9 physician does not certify that the patient

10 may reasonably be expected to be dis11 charged or transferred to a hospital within

12 72 hours of admission to the facility; or

13 ‘‘(ii) consisting of surgery or any

14 other service requiring the use of general

15 anesthesia (other than surgical procedures

16 specified by the Secretary under section

17 1833(i)(1)(A)), unless the attending physi18 cian certifies that the risk associated with

19 transferring the patient to a hospital for

20 such services outweighs the benefits of

21 transferring the patient to a hospital for

22 such services.’’.

23 (2) LIMITATION ON AVERAGE LENGTH OF

24 STAY.—Section 1820(f) of such Act (42 U.S.C.
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1 1395i-4(f)) is amended by adding at the end the fol2 lowing new paragraph:

3 ‘‘(4) LIMITATION ON AVERAGE LENGTH OF IN4 PATIENT STAYS.—The Secretary may terminate a

5 designation of a rural primary care hospital under

6 paragraph (1) if the Secretary finds that the average

7 length of stay for inpatients at the facility during

8 the previous year in which the designation was in ef9 fect exceeded 72 hours. In determining the compli10 ance of a facility with the requirement of the pre11 vious sentence, there shall not be taken into account

12 periods of stay of inpatients in excess of 72 hours

13 to the extent such periods exceed 72 hours because

14 transfer to a hospital is precluded because of inclem15 ent weather or other emergency conditions.’’.

16 (3) CONFORMING AMENDMENT.—Section

17 1814(a)(8) of such Act (42 U.S.C. 1395f(a)(8)) is

18 amended by striking ‘‘such services’’ and all that fol19 lows and inserting ‘‘the individual may reasonably be

20 expected to be discharged or transferred to a hos21 pital within 72 hours after admission to the rural

22 primary care hospital.’’.

23 (4) GAO REPORTS.—Not later than 2 years

24 after the date of the enactment of this Act, the
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1 Comptroller General shall submit reports to Con2 gress on—

3 (A) the application of the requirements

4 under section 1820(f) of the Social Security Act

5 (as amended by this subsection) that rural pri6 mary care hospitals provide inpatient care only

7 to those individuals whose attending physicians

8 certify may reasonably be expected to be dis9 charged within 72 hours after admission and

10 maintain an average length of inpatient stay

11 during a year that does not exceed 72 hours;

12 and

13 (B) the extent to which such requirements

14 have resulted in such hospitals providing inpa15 tient care beyond their capabilities or have lim16 ited the ability of such hospitals to provide

17 needed services.

18 (c) DESIGNATION OF HOSPITALS.—

19 (1) PERMITTING DESIGNATION OF HOSPITALS

20 LOCATED IN URBAN AREAS.—

21 (A) IN GENERAL.—Section 1820 of such

22 Act (42 U.S.C. 1395i-4) is amended—

23 (i) by striking paragraph (1) of sub24 section (e) and redesignating paragraphs
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1 (2) through (6) as paragraphs (1) through

2 (5);

3 (ii) in subsection (e)(1)(A) (as redes4 ignated by subparagraph (A))—

5 (I) by striking ‘‘is located’’ and

6 inserting ‘‘except in the case of a hos7 pital located in an urban area, is lo8 cated’’,

9 (II) by striking ‘‘, (ii)’’ and in10 serting ‘‘or (ii)’’, and

11 (III) by striking ‘‘or (iii)’’ and all

12 that follows through ‘‘section,’’; and

13 (iii) in subsection (i)(1)(B), by strik14 ing ‘‘paragraph (3)’’ and inserting ‘‘para15 graph (2)’’.

16 (B) NO CHANGE IN MEDICARE PROSPEC17 TIVE PAYMENT.—Section 1886(d)(5)(D) of

18 such Act (42 U.S.C. 1395ww(d)(5)(D)) is

19 amended—

20 (i) in clause (iii)(III), by inserting ‘‘lo21 cated in a rural area and’’ after ‘‘that is’’,

22 and

23 (ii) in clause (v), by inserting ‘‘located

24 in a rural area and’’ after ‘‘in the case of

25 a hospital’’.
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1 (2) PERMITTING HOSPITALS LOCATED IN AD2 JOINING STATES TO PARTICIPATE IN STATE PRO3 GRAM.—

4 (A) IN GENERAL.—Section 1820 of such

5 Act (42 U.S.C. 1395i-4) is amended—

6 (i) by redesignating subsection (k) as

7 subsection (l); and

8 (ii) by inserting after subsection (j)

9 the following new subsection:

10 ‘‘(k) ELIGIBILITY OF HOSPITALS NOT LOCATED IN

11 PARTICIPATING STATES.—Notwithstanding any other

12 provision of this section—

13 ‘‘(1) for purposes of including a hospital or fa14 cility as a member institution of a rural health net15 work, a State may designate a hospital or facility

16 that is not located in the State as an essential access

17 community hospital or a rural primary care hospital

18 if the hospital or facility is located in an adjoining

19 State and is otherwise eligible for designation as

20 such a hospital;

21 ‘‘(2) the Secretary may designate a hospital or

22 facility that is not located in a State receiving a

23 grant under subsection (a)(1) as an essential access

24 community hospital or a rural primary care hospital

25 if the hospital or facility is a member institution of
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1 a rural health network of a State receiving a grant

2 under such subsection; and

3 ‘‘(3) a hospital or facility designated pursuant

4 to this subsection shall be eligible to receive a grant

5 under subsection (a)(2).’’.

6 (B) CONFORMING AMENDMENTS.—(i) Sec7 tion 1820(c)(1) of such Act (42 U.S.C. 1395i8 4(c)(1)) is amended by striking ‘‘paragraph

9 (3)’’ and inserting ‘‘paragraph (3) or subsection

10 (k)’’.

11 (ii) Paragraphs (1)(A) and (2)(A) of sec12 tion 1820(i) of such Act (42 U.S.C. 1395i-4(i))

13 are each amended—

14 (I) in clause (i), by striking ‘‘(a)(1)’’

15 and inserting ‘‘(a)(1) (except as provided

16 in subsection (k))’’, and

17 (II) in clause (ii), by striking ‘‘sub18 paragraph (B)’’ and inserting ‘‘subpara19 graph (B) or subsection (k)’’.

20 (d) SKILLED NURSING SERVICES IN RURAL PRIMARY

21 CARE HOSPITALS.—Section 1820(f)(3) of such Act (42

22 U.S.C. 1395i-4(f)(3)) is amended by striking ‘‘because the

23 facility’’ and all that follows and inserting the following:

24 ‘‘because, at the time the facility applies to the State for

25 designation as a rural primary care hospital, there is in
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1 effect an agreement between the facility and the Secretary

2 under section 1883 under which the facility’s inpatient

3 hospital facilities are used for the furnishing of extended

4 care services, except that the number of beds used for the

5 furnishing of such services may not exceed the total num6 ber of licensed inpatient beds at the time the facility ap7 plies to the State for such designation (minus the number

8 of inpatient beds used for providing inpatient care pursu9 ant to paragraph (1)(F)). For purposes of the previous

10 sentence, the number of beds of the facility used for the

11 furnishing of extended care services shall not include any

12 beds of a unit of the facility that is licensed as a distinct13 part skilled nursing facility at the time the facility applies

14 to the State for designation as a rural primary care hos15 pital.’’.

16 (e) DEADLINE FOR DEVELOPMENT OF PROSPECTIVE

17 PAYMENT SYSTEM FOR INPATIENT RURAL PRIMARY

18 CARE HOSPITAL SERVICES.—Section 1814(l)(2) of such

19 Act (42 U.S.C. 1395f(l)(2)) is amended by striking ‘‘Jan20 uary 1, 1993’’ and inserting ‘‘January 1, 1996’’.

21 (f) PAYMENT FOR OUTPATIENT RURAL PRIMARY

22 CARE HOSPITAL SERVICES.—

23 (1) IMPLEMENTATION OF PROSPECTIVE PAY24 MENT SYSTEM.—Section 1834(g) of such Act (42

25 U.S.C. 1395m(g)) is amended—
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1 (A) in paragraph (1), by striking ‘‘during

2 a year before 1993’’ and inserting ‘‘during a

3 year before the prospective payment system de4 scribed in paragraph (2) is in effect’’; and

5 (B) in paragraph (2), by striking ‘‘January

6 1, 1993,’’ and inserting ‘‘January 1, 1996,’’.

7 (2) NO USE OF CUSTOMARY CHARGE IN DETER8 MINING PAYMENT.—Section 1834(g)(1) of such Act

9 (42 U.S.C. 1395m(g)(1)) is amended by adding at

10 the end the following new flush sentence: ‘‘The

11 amount of payment shall be determined under either

12 method without regard to the amount of the cus13 tomary or other charge.’’.

14 (g) CLARIFICATION OF PHYSICIAN STAFFING RE15 QUIREMENT FOR RURAL PRIMARY CARE HOSPITALS.—

16 Section 1820(f)(1)(H) of such Act (42 U.S.C. 1395i–

17 4(f)(1)(H)) is amended by striking the period and insert18 ing the following: ‘‘, except that in determining whether

19 a facility meets the requirements of this subparagraph,

20 subparagraphs (E) and (F) of that paragraph shall be ap21 plied as if any reference to a ‘physician’ is a reference

22 to a physician as defined in section 1861(r)(1).’’.

23 (h) TECHNICAL AMENDMENTS RELATING TO PART

24 A DEDUCTIBLE, COINSURANCE, AND SPELL OF ILL-
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1 NESS.—(1) Section 1812(a)(1) of such Act (42 U.S.C.

2 1395d(a)(1)) is amended—

3 (A) by striking ‘‘inpatient hospital services’’ the

4 first place it appears and inserting ‘‘inpatient hos5 pital services or inpatient rural primary care hos6 pital services’’;

7 (B) by striking ‘‘inpatient hospital services’’ the

8 second place it appears and inserting ‘‘such serv9 ices’’; and

10 (C) by striking ‘‘and inpatient rural primary

11 care hospital services’’.

12 (2) Sections 1813(a) and 1813(b)(3)(A) of such Act

13 (42 U.S.C. 1395e(a), 1395e(b)(3)(A)) are each amended

14 by striking ‘‘inpatient hospital services’’ each place it ap15 pears and inserting ‘‘inpatient hospital services or inpa16 tient rural primary care hospital services’’.

17 (3) Section 1813(b)(3)(B) of such Act (42 U.S.C.

18 1395e(b)(3)(B)) is amended by striking ‘‘inpatient hos19 pital services’’ and inserting ‘‘inpatient hospital services,

20 inpatient rural primary care hospital services’’.

21 (4) Section 1861(a) of such Act (42 U.S.C. 1395x(a))

22 is amended—

23 (A) in paragraph (1), by striking ‘‘inpatient

24 hospital services’’ and inserting ‘‘inpatient hospital
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1 services, inpatient rural primary care hospital serv2 ices’’; and

3 (B) in paragraph (2), by striking ‘‘hospital’’

4 and inserting ‘‘hospital or rural primary care hos5 pital’’.

6 (i) AUTHORIZATION OF APPROPRIATIONS.—Section

7 1820(l) of such Act (42 U.S.C. 1395i–4(l)), as redesig8 nated by subsection (c)(2)(A), is amended by striking

9 ‘‘1990, 1991, and 1992’’ and inserting ‘‘1990 through

10 2000’’.

11 (j) EFFECTIVE DATE.—The amendments made by

12 this section shall take effect on the date of the enactment

13 of this Act.

14 SEC. 4152. RURAL EMERGENCY ACCESS CARE HOSPITALS

15 DESCRIBED.

16 (a) IN GENERAL.—Section 1861 of the Social Secu17 rity Act (42 U.S.C. 1395x) is amended by adding at the

18 end the following new subsection:

19 ‘‘Rural Emergency Access Care Hospital; Rural

20 Emergency Access Care Hospital Services

21 ‘‘(oo)(1) The term ‘rural emergency access care hos22 pital’ means, for a fiscal year, a facility with respect to

23 which the Secretary finds the following:

24 ‘‘(A) The facility is located in a rural area (as

25 defined in section 1886(d)(2)(D)).
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1 ‘‘(B) The facility was a hospital under this title

2 at any time during the 5-year period that ends on

3 the date of the enactment of this subsection.

4 ‘‘(C) The facility is in danger of closing due to

5 low inpatient utilization rates and negative operating

6 losses, and the closure of the facility would limit the

7 access of individuals residing in the facility’s service

8 area to emergency services.

9 ‘‘(D) The facility has entered into (or plans to

10 enter into) an agreement with a hospital with a par11 ticipation agreement in effect under section 1866(a),

12 and under such agreement the hospital shall accept

13 patients transferred to the hospital from the facility

14 and receive data from and transmit data to the facil15 ity.

16 ‘‘(E) There is a practitioner who is qualified to

17 provide advanced cardiac life support services (as de18 termined by the State in which the facility is lo19 cated) on-site at the facility on a 24-hour basis.

20 ‘‘(F) A physician is available on-call to provide

21 emergency medical services on a 24-hour basis.

22 ‘‘(G) The facility meets such staffing require23 ments as would apply under section 1861(e) to a

24 hospital located in a rural area, except that—
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1 ‘‘(i) the facility need not meet hospital

2 standards relating to the number of hours dur3 ing a day, or days during a week, in which the

4 facility must be open, except insofar as the fa5 cility is required to provide emergency care on

6 a 24-hour basis under subparagraphs (E) and

7 (F); and

8 ‘‘(ii) the facility may provide any services

9 otherwise required to be provided by a full-time,

10 on-site dietician, pharmacist, laboratory techni11 cian, medical technologist, or radiological tech12 nologist on a part time, off-site basis.

13 ‘‘(H) The facility meets the requirements appli14 cable to clinics and facilities under subparagraphs

15 (C) through (J) of paragraph (2) of section

16 1861(aa) and of clauses (ii) and (iv) of the second

17 sentence of such paragraph (or, in the case of the

18 requirements of subparagraph (E), (F), or (J) of

19 such paragraph, would meet the requirements if any

20 reference in such subparagraph to a ‘nurse practi21 tioner’ or to ‘nurse practitioners’ was deemed to be

22 a reference to a ‘nurse practitioner or nurse’ or to

23 ‘nurse practitioners or nurses’); except that in deter24 mining whether a facility meets the requirements of

25 this subparagraph, subparagraphs (E) and (F) of
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1 that paragraph shall be applied as if any reference

2 to a ‘physician’ is a reference to a physician as de3 fined in section 1861(r)(1).

4 ‘‘(2) The term ‘rural emergency access care hospital

5 services’ means the following services provided by a rural

6 emergency access care hospital:

7 ‘‘(A) An appropriate medical screening exam8 ination (as described in section 1867(a)).

9 ‘‘(B) Necessary stabilizing examination and

10 treatment services for an emergency medical condi11 tion and labor (as described in section 1867(b)).’’.

12 (b) REQUIRING RURAL EMERGENCY ACCESS CARE

13 HOSPITALS TO MEET HOSPITAL ANTI-DUMPING RE14 QUIREMENTS.—Section 1867(e)(5) of such Act (42 U.S.C.

15 1395dd(e)(5)) is amended by striking ‘‘1861(mm)(1))’’

16 and inserting ‘‘1861(mm)(1)) and a rural emergency ac17 cess care hospital (as defined in section 1861(oo)(1))’’.

18 SEC. 4153. COVERAGE OF AND PAYMENT FOR SERVICES.

19 (a) COVERAGE UNDER PART B.—Section 1832(a)(2)

20 of the Social Security Act (42 U.S.C. 1395k(a)(2)) is

21 amended—

22 (1) by striking ‘‘and’’ at the end of subpara23 graph (I);

24 (2) by striking the period at the end of sub25 paragraph (J) and inserting ‘‘; and’’; and
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1 (3) by adding at the end the following new sub2 paragraph:

3 ‘‘(K) rural emergency access care hospital

4 services (as defined in section 1861(oo)(2)).’’.

5 (b) PAYMENT BASED ON PAYMENT FOR OUTPATIENT

6 RURAL PRIMARY CARE HOSPITAL SERVICES.—

7 (1) IN GENERAL.—Section 1833(a)(6) of the

8 Social Security Act (42 U.S.C. 1395l(a)(6)) is

9 amended by striking ‘‘services,’’ and inserting ‘‘serv10 ices and rural emergency access care hospital serv11 ices,’’.

12 (2) PAYMENT METHODOLOGY DESCRIBED.—

13 Section 1834(g) of such Act (42 U.S.C. 1395m(g))

14 is amended—

15 (A) in the heading, by striking ‘‘SERV16 ICES’’ and inserting ‘‘SERVICES AND RURAL

17 EMERGENCY ACCESS CARE HOSPITAL SERV18 ICES’’;

19 (B) in paragraph (1), by striking ‘‘during

20 a year before 1993’’ and inserting ‘‘during a

21 year before the prospective payment system de22 scribed in paragraph (2) is in effect’’;

23 (C) in paragraph (1), by adding at the end

24 the following: ‘‘The amount of payment shall be

25 determined under either method without regard
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1 to the amount of the customary or other

2 charge.’’;

3 (D) in paragraph (2), by striking ‘‘Janu4 ary 1, 1993,’’ and inserting ‘‘January 1,

5 1996,’’; and

6 (E) by adding at the end the following new

7 paragraph:

8 ‘‘(3) APPLICATION OF METHODS TO PAYMENT

9 FOR RURAL EMERGENCY ACCESS CARE HOSPITAL

10 SERVICES.—The amount of payment for rural emer11 gency access care hospital services provided during

12 a year shall be determined using the applicable

13 method provided under this subsection for determin14 ing payment for outpatient rural primary care hos15 pital services during the year.’’.

16 SEC. 4154. EFFECTIVE DATE.

17 The amendments made by this subpart shall apply

18 to fiscal years beginning on or after October 1, 1994.

19 Subpart D—Demonstration Projects to En20 courage Primary Care and Rural-Based

21 Graduate Medical Education

22 SEC. 4161. STATE AND CONSORTIUM DEMONSTRATION

23 PROJECTS.

24 (a) IN GENERAL.—
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1 (1) PARTICIPATION OF STATES AND CONSOR2 TIA.—The Secretary shall establish and conduct a

3 demonstration project to increase the number and

4 percentage of medical students entering primary

5 care practice relative to those entering nonprimary

6 care practice under which the Secretary shall make

7 payments in accordance with subsection (d)—

8 (A) to not more than 10 States for the

9 purpose of testing and evaluating mechanisms

10 to meet the goals described in section 4162;

11 and

12 (B) to not more than 10 health care train13 ing consortia for the purpose of testing and

14 evaluating mechanisms to meet such goals.

15 (2) EXCLUSION OF CONSORTIA IN PARTICIPAT16 ING STATES.—A consortia may not receive payments

17 under the demonstration project under paragraph

18 (1)(B) if any of its members is located in a State

19 receiving payments under the project under para20 graph (1)(A).

21 (b) APPLICATIONS.—

22 (1) IN GENERAL.—Each State and consortium

23 desiring to conduct a demonstration project under

24 this section shall prepare and submit to the Sec25 retary an application, at such time, in such manner,
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1 and containing such information as the Secretary

2 may require to assure that the State or consortium

3 will meet the goals described in section 4162. In the

4 case of an application of a State, the application

5 shall include—

6 (A) information demonstrating that the

7 State has consulted with interested parties with

8 respect to the project, including State medical

9 associations, State hospital associations, and

10 medical schools located in the State;

11 (B) an assurance that no hospital conduct12 ing an approved medical residency training pro13 gram in the State will lose more than 10 per14 cent of such hospital’s approved medical resi15 dency positions in any year as a result of the

16 project; and

17 (C) an explanation of a plan for evaluating

18 the impact of the project in the State.

19 (2) APPROVAL OF APPLICATIONS.—A State or

20 consortium that submits an application under para21 graph (1) may begin a demonstration project under

22 this subsection—

23 (A) upon approval of such application by

24 the Secretary; or
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1 (B) at the end of the 60-day period begin2 ning on the date such application is submitted,

3 unless the Secretary denies the application dur4 ing such period.

5 (3) NOTICE AND COMMENT.—A State or con6 sortium shall issue a public notice on the date it

7 submits an application under paragraph (1) which

8 contains a general description of the proposed dem9 onstration project. Any interested party may com10 ment on the proposed demonstration project to the

11 State or consortium or the Secretary during the 30-

12 day period beginning on the date the public notice

13 is issued.

14 (c) SPECIFIC REQUIREMENTS FOR PARTICIPANTS.—

15 (1) REQUIREMENTS FOR STATES.—Each State

16 participating in the demonstration project under this

17 subtitle shall use the payments provided under sub18 section (d) to test and evaluate either of the follow19 ing mechanisms to increase the number and percent20 age of medical students entering primary care prac21 tice relative to those entering nonprimary care prac22 tice:

23 (A) USE OF ALTERNATIVE WEIGHTING

24 FACTORS.—
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1 (i) IN GENERAL.—The State may

2 make payments to hospitals in the State

3 for direct graduate medical education costs

4 in amounts determined under the meth5 odology provided under section 1886(h) of

6 the Social Security Act, except that the

7 State shall apply weighting factors that are

8 different than the weighting factors other9 wise set forth in section 1886(h)(4)(C) of

10 the Social Security Act.

11 (ii) USE OF PAYMENTS FOR PRIMARY

12 CARE RESIDENTS.—In applying different

13 weighting factors under clause (i), the

14 State shall ensure that the amount of pay15 ment made to hospitals for costs attrib16 utable to primary care residents shall be

17 greater than the amount that would have

18 been paid to hospitals for costs attributable

19 to such residents if the State had applied

20 the weighting factors otherwise set forth in

21 section 1886(h)(4)(C) of the Social Secu22 rity Act.

23 (B) PAYMENTS FOR MEDICAL EDUCATION

24 THROUGH CONSORTIUM.—The State may make

25 payments for graduate medical education costs
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1 through payments to a health care training con2 sortium (or through any entity identified by

3 such a consortium as appropriate for receiving

4 payments on behalf of the consortium) that is

5 established in the State but that is not other6 wise participating in the demonstration project.

7 (2) REQUIREMENTS FOR CONSORTIUM.—

8 (A) IN GENERAL.—In the case of a consor9 tium participating in the demonstration project

10 under this subtitle, the Secretary shall make

11 payments for graduate medical education costs

12 through a health care training consortium

13 whose members provide medical residency train14 ing (or through any entity identified by such a

15 consortium as appropriate for receiving pay16 ments on behalf of the consortium).

17 (B) USE OF PAYMENTS.—

18 (i) IN GENERAL.—Each consortium

19 receiving payments under subparagraph

20 (A) shall use such funds to conduct activi21 ties which test and evaluate mechanisms to

22 increase the number and percentage of

23 medical students entering primary care

24 practice relative to those entering

25 nonprimary care practice, and may use
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1 such funds for the operation of the consor2 tium.

3 (ii) PAYMENTS TO PARTICIPATING

4 PROGRAMS.—The consortium shall ensure

5 that the majority of the payments received

6 under subparagraph (A) are directed to

7 consortium members for primary care resi8 dency programs, and shall designate for

9 each resident assigned to the consortium a

10 hospital operating an approved medical

11 residency training program for purposes of

12 enabling the Secretary to calculate the con13 sortium’s payment amount under the

14 project. Such hospital shall be the hospital

15 where the resident receives the majority of

16 the resident’s hospital-based, non17 ambulatory training experience.

18 (d) ALLOCATION OF PORTION OF MEDICARE GME

19 PAYMENTS FOR ACTIVITIES UNDER PROJECT.—Notwith20 standing any provision of title XVIII of the Social Security

21 Act, the following rules apply with respect to each State

22 and each health care training consortium participating in

23 the demonstration project established under this section

24 during a year:

25 (1) In the case of a State—
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1 (A) the Secretary shall reduce the amount

2 of each payment made to hospitals in the State

3 during the year for direct graduate medical

4 education costs under section 1886(h) of the

5 Social Security Act by 3 percent; and

6 (B) the Secretary shall pay the State an

7 amount equal to the Secretary’s estimate of the

8 sum of the reductions made during the year

9 under subparagraph (A) (as adjusted by the

10 Secretary in subsequent years for over- or

11 under-estimations in the amount estimated

12 under this subparagraph in previous years).

13 (2) In the case of a consortium—

14 (A) the Secretary shall reduce the amount

15 of each payment made to hospitals who are

16 members of the consortium during the year for

17 direct graduate medical education costs under

18 section 1886(h) of the Social Security Act by 3

19 percent; and

20 (B) the Secretary shall pay the consortium

21 an amount equal to the Secretary’s estimate of

22 the sum of the reductions made during the year

23 under subparagraph (A) (as adjusted by the

24 Secretary in subsequent years for over- or
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1 under-estimations in the amount estimated

2 under this subparagraph in previous years).

3 (e) ADDITIONAL GRANT FOR PLANNING AND EVAL4 UATION.—

5 (1) IN GENERAL.—The Secretary may award

6 grants to States and consortia participating in the

7 demonstration project under this section for the pur8 pose of developing and evaluating such projects. A

9 State or consortia may conduct such an evaluation

10 or contract with a private entity to conduct the eval11 uation. Each State and consortia desiring to receive

12 a grant under this paragraph shall prepare and sub13 mit to the Secretary an application, at such time, in

14 such manner, and containing such information as

15 the Secretary may require.

16 (2) AUTHORIZATION OF APPROPRIATIONS.—

17 There are authorized to be appropriated such sums

18 as may be necessary for grants under this paragraph

19 for fiscal years 1996 through 2000.

20 (f) DURATION.—A demonstration project under this

21 section shall be conducted for a period not to exceed 5

22 years. The Secretary may terminate a project if the Sec23 retary determines that the State or consortium conducting

24 the project is not in substantial compliance with the terms

25 of the application approved by the Secretary.
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1 (g) EVALUATIONS AND REPORTS.—

2 (1) EVALUATIONS.—Each State or consortium

3 participating in the demonstration project shall sub4 mit to the Secretary a final evaluation within 360

5 days of the termination of the State or consortium’s

6 participation and such interim evaluations as the

7 Secretary may require.

8 (2) REPORTS TO CONGRESS.—Not later than

9 360 days after the first demonstration project under

10 this subtitle begins, and annually thereafter for each

11 year in which such a project is conducted, the Sec12 retary shall submit a report to Congress which eval13 uates the effectiveness of the State and consortium

14 activities conducted under such projects and includes

15 any legislative recommendations determined appro16 priate by the Secretary.

17 (h) MAINTENANCE OF EFFORT.—Any funds available

18 for the activities covered by a demonstration project under

19 this subtitle shall supplement, and shall not supplant,

20 funds that are expended for similar purposes under any

21 State, regional, or local program.

22 SEC. 4162. GOALS FOR PROJECTS.

23 The goals referred to in this section for a State or

24 consortium participating in the demonstration project

25 under this subtitle are as follows:
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1 (1) The training of an equal number of physi2 cian and non-physician primary care providers.

3 (2) The recruiting of residents for graduate

4 medical education training programs who received a

5 portion of undergraduate training in a rural area.

6 (3) The allocation of not less than 50 percent

7 of the training spent in a graduate medical residency

8 training program at sites at which acute care inpa9 tient hospital services are not furnished.

10 (4) The rotation of residents in approved medi11 cal residency training programs among practices

12 that serve residents of rural areas.

13 (5) The development of a plan under which,

14 after a 5-year transition period, not less than 50

15 percent of the residents who begin an initial resi16 dency period in an approved medical residency train17 ing program shall be primary care residents.

18 SEC. 4163. DEFINITIONS.

19 In this subpart:

20 (1) APPROVED MEDICAL RESIDENCY TRAINING

21 PROGRAM.—The term ‘‘approved medical residency

22 training program’’ has the meaning given such term

23 in section 1886(h)(5)(A) of the Social Security Act.

24 (2) HEALTH CARE TRAINING CONSORTIUM.—

25 The term ‘‘health care training consortium’’ means
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1 a State, regional, or local entity consisting of at

2 least one of each of the following:

3 (A) A hospital operating an approved med4 ical residency training program at which resi5 dents receive training at ambulatory training

6 sites located in rural areas.

7 (B) A school of medicine or osteopathic

8 medicine.

9 (C) A school of allied health or a program

10 for the training of physician assistants (as such

11 terms are defined in section 799 of the Public

12 Health Service Act).

13 (D) A school of nursing (as defined in sec14 tion 853 of the Public Health Service Act).

15 (3) PRIMARY CARE.—The term ‘‘primary care’’

16 means family practice, general internal medicine,

17 general pediatrics, and obstetrics and gynecology.

18 (4) RESIDENT.—The term ‘‘resident’’ has the

19 meaning given such term in section 1886(h)(5)(H)

20 of the Social Security Act.

21 (5) RURAL AREA.—The term ‘‘rural area’’ has

22 the meaning given such term in section

23 1886(d)(2)(D) of the Social Security Act.
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1 PART 4—HOSPITAL AFFILIATED PRIMARY CARE

2 CENTER

3 SEC. 4171. HOSPITAL-AFFILIATED PRIMARY CARE CEN4 TERS.

5 (a) DEFINITIONS.—For purposes of this section:

6 (1) COMMUNITY HOSPITAL.—The term ‘‘com7 munity hospital’’ means a public general hospital,

8 owned and operated by a State, county or local unit

9 of government, or a private community hospital

10 that—

11 (A) has less than 50 beds; and

12 (B) primarily serves a medically under13 served population as defined in section

14 330(b)(3) of the Public Health Service Act (42

15 U.S.C. 254c(b)(3)) or a health professional

16 shortage area as defined in section 322(a)(1) of

17 such Act (42 U.S.C. 254c(a)(1).

18 (2) HOSPITAL-AFFILIATED PRIMARY CARE CEN19 TER.—The term ‘‘hospital-affiliated primary care

20 center’’ (referred to in this section as a ‘‘primary

21 care center’’) means a distinct administrative unit of

22 a community hospital, located in, or adjacent to, the

23 hospital, that—

24 (A) delivers primary health services as de25 fined in section 330(b)(1) of such Act (42

26 U.S.C. 354c(b)(1)) to a catchment area deter-
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1 mined by the hospital and approved by the Sec2 retary; and

3 (B) provides referrals to providers of sup4 plemental health services as defined in section

5 330(b)(2) of such Act (42 U.S.C. 354c(b)(2)).

6 (3) PRIMARY CARE GROUP PRACTICE.—

7 (A) The term ‘‘primary care group prac8 tice’’ means any combination of 3 or more pri9 mary care physicians who are—

10 (i) organized to provide primary

11 health services in a manner that is consist12 ent with the needs of the population

13 served;

14 (ii) located in, or adjacent to, the

15 community hospital;

16 (iii) who have admitting privileges at

17 the community hospital; and

18 (iv)(I) who are salaried by the hos19 pital such that a majority of the members

20 of the group practice is full time in the pri21 mary care center; or

22 (II) who are organized into a legal en23 tity (partnership, corporation, or profes24 sional association) that has a contract ap25 proved by the Secretary with the commu-
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1 nity hospital to provide primary health

2 services.

3 (B) SPECIAL RULE FOR HPSAS AND NEAR4 HPSAS.—In the case of a group that is located

5 in an area that—

6 (i) is designated as a primary care

7 health professional shortage area under

8 section 332 of the Public Health Service

9 Act (42 U.S.C. 254e); or

10 (ii) would meet the requirements for

11 designation as a primary care health pro12 fessional shortage area if there were 25

13 percent fewer physicians in the area;

14 the requirement that a group practice have 3 or

15 more primary care physicians may be met by

16 substituting a nurse practitioner or a physician

17 assistant for 1 member of the group.

18 (C) SPECIAL RULE FOR FRONTIER

19 AREAS.—In the case of a group that is located

20 in a frontier area, subparagraph (A) shall be

21 applied by substituting ‘‘two’’ for ‘‘three’’ in the

22 matter preceding clause (i).

23 (D) OTHER REQUIREMENTS FOR GROUP.—

24 (i) physicians in specialties other than

25 primary care specialties may become mem-
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1 bers of a primary care group practice as

2 needed, but may not be used to satisfy the

3 requirement of subsection (b)(2)(D); and

4 (ii) nonphysician providers, particu5 larly physician assistants, certified nurse

6 midwives, and nurse practitioners, shall be

7 used where practicable in concert with the

8 physicians of a primary care group prac9 tice.

10 (4) FRONTIER AREA.—The term ‘‘frontier

11 area’’ means a county in which there are 6 or fewer

12 individuals residing per square mile.

13 (5) PRIMARY CARE PHYSICIAN.—The term ‘‘pri14 mary care physician’’ means a physician in the spe15 cialty of family practice, general internal medicine,

16 general pediatrics, or obstetrics and gynecology.

17 (6) PRIMARY CARE RESIDENT.—The term ‘‘pri18 mary care resident’’ means a graduate physician in

19 training, whose training program is approved by ap20 propriate certifying bodies and is in a primary care

21 specialty.

22 (b) ESTABLISHMENT OF GRANT PROGRAM.—

23 (1) IN GENERAL.—The Secretary of Health and

24 Human Services (referred to in this section as the

25 ‘‘Secretary’’) shall make grants to community hos-
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1 pitals to assist such hospitals in planning, develop2 ing, and operating primary care services in medically

3 underserved areas. In making such grants, the Sec4 retary shall avoid duplication of efforts in areas

5 where existing community health centers, migrant

6 health centers, rural emergency access care hos7 pitals, federally qualified health centers, and other

8 facilities are adequate to meet the needs of the medi9 cally underserved population.

10 (2) ELIGIBILITY FOR GRANTS.—In order to be

11 eligible for a grant under this subsection, a commu12 nity hospital shall submit an application that con13 tains or is supported by assurances, satisfactory to

14 the Secretary, that—

15 (A) the services of the primary care center

16 will be delivered through a primary care group

17 practice;

18 (B) to the extent practicable, primary

19 health services in the community hospital will

20 be delivered only through the primary care cen21 ter;

22 (C) qualified personnel trained in triage

23 will be placed in the emergency room, the out24 patient department, and the primary care cen-
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1 ter to screen and direct patients to the appro2 priate location for care;

3 (D) each patient of the primary care cen4 ter will have an identified member of the group

5 practice responsible for continuous management

6 of the patient, including emergency services and

7 referrals of the patients for inpatient or out8 patient services;

9 (E) to the extent practicable, excess facili10 ties and equipment in or owned by the commu11 nity hospital will be covered for use in the pri12 mary care center;

13 (F) the hospital and the primary care cen14 ter will avoid unnecessary duplication of facili15 ties and equipment, except that the primary

16 care center may install appropriate support

17 equipment for routine primary health services;

18 (G) the primary care center will be main19 tained as a separate and distinct cost and reve20 nue center for accounting purposes;

21 (H) the primary care center will be oper22 ated in accordance with all of the requirements

23 specified for community health centers in sec24 tion 330(e)(3) of the Public Health Service Act

25 (other than subparagraph (G));
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1 (I) the hospital has an advisory committee

2 that—

3 (i) is composed of individuals, a ma4 jority of whom are health consumers in the

5 catchment area of the hospital; and

6 (ii) meets at least 6 times a year to

7 review the operations of the primary care

8 center and develop recommendations to the

9 governing board of the hospital about the

10 operation of the center and the types of

11 services to be provided; and

12 (J) the primary care center will maintain

13 an information program for its patients that

14 fully discloses—

15 (i) the covered professional services

16 and referral capabilities offered by the pri17 mary care center; and

18 (ii) the method by which patients of

19 the primary care center may resolve griev20 ances about billing for covered professional

21 services and the quality of such services.

22 (3) OTHER REQUIREMENTS.—

23 (A) USE OF PRIMARY CARE RESIDENTS.—

24 (i) Primary health services may be delivered by

25 primary care residents if such services are deliv-
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1 ered under the supervision of a member of the

2 group practice.

3 (ii)(I) Medical and other health science

4 students may receive primary care training in

5 the primary care center, except that no full6 time member of the group practice may also

7 spend full time in the teaching of residents and

8 students.

9 (II) The Secretary shall issue regulations

10 to assure that teaching does not detract signifi11 cantly from the actual delivery of service in the

12 primary care center.

13 (B) COSTS OF PRIMARY CARE CENTERS.—

14 (i) Only costs clearly associated with the provi15 sion of services in the primary care setting may

16 be assigned to a primary care center.

17 (ii) Inpatient-related costs may not be in18 cluded in the costs of operating a primary care

19 center.

20 (iii) Costs associated with the education

21 and training of residents, medical, and other

22 health science students may not be included in

23 the costs of operating a primary care center, ex24 cept that salaries and other costs associated

25 with the delivery of services by residents may be
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1 included in such costs as long as such costs are

2 prorated based on the actual percentage of time

3 spent by the resident in the primary care

4 center.

5 (C) ADVISORY COMMITTEE.—(i) The advi6 sory committee referred to in paragraph (2)(I)

7 shall participate in the development of an appli8 cation for a grant under this section and the

9 development of any grant renewal application.

10 (ii) The Secretary may not approve the ap11 plication for a grant under this subsection un12 less the application has been approved by the

13 advisory committee.

14 (4) USE OF GRANTS.—(A) A grant under this

15 subsection may be used to cover costs associated

16 with (i) planning, (ii) developing (including mod17 ernization and renovation of space), and (iii) operat18 ing primary care centers.

19 (B) Not more than 25 percent of any grant

20 may be used for the purposes specified in subpara21 graph (A)(ii).

22 (c) TECHNICAL ASSISTANCE.—The Secretary shall,

23 upon request, provide technical and other nonfinancial as24 sistance (including fiscal and program management assist25 ance and training in such management) to a community
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1 hospital to assist it in developing plans for, and in operat2 ing, a primary care center. Funds appropriated under this

3 section may be used to carry out the purposes of this sec4 tion.

5 (d) RETENTION OF EARNED INCOME.—The Sec6 retary shall establish, by regulation, a plan to allow pri7 mary care centers to retain earned income from the oper8 ation of the center if the income is used to—

9 (1) expand or improve the services of the

10 center;

11 (2) expand the population eligible to utilize the

12 services of the center;

13 (3) make managerial or physical improvements

14 to the center; or

15 (4) establish a reserve fund for conversion to a

16 prepaid reimbursement methodology.

17 (e) USE OF APPROPRIATIONS.—To carry out this sec18 tion, there are authorized to be appropriated $12,000,000

19 for fiscal year 1996, $21,000,000 for fiscal year 1997,

20 $150,000,000 for fiscal year 1998, $160,000,000 for fis21 cal year 1999, $180,000,000 for fiscal year 2000, and

22 $190,000,000 for each of fiscal years 2001 through 2004.
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1 Subtitle C—Academic Health

2 Centers

3 SEC. 4201. STUDY OF PAYMENTS FOR MEDICAL EDUCATION

4 AT SITES OTHER THAN HOSPITALS.

5 (a) STUDY.—The Secretary of Health and Human

6 Services shall conduct a study of the feasibility and desir7 ability of making payments to facilities that are not hos8 pitals for the direct and indirect costs of graduate medical

9 education attributable to residents trained at such facili10 ties. In conducting the study, the Secretary shall evaluate

11 new payment methodologies—

12 (1) under which each entity which incurs costs

13 of graduate medical education shall receive reim14 bursement for such costs; and

15 (2) which would encourage the training of pri16 mary care physicians.

17 (b) REPORT.—Not later than 2 years after the date

18 of the enactment of this Act, the Secretary shall submit

19 a report to Congress a report on the study conducted

20 under subsection (a), and shall include in the report such

21 recommendations as the Secretary considers appropriate.

22 SEC. 4202. STUDY OF FUNDING NEEDS OF HEALTH PROFES23 SIONS SCHOOLS.

24 (a) IN GENERAL.—The Secretary shall conduct a

25 study for the purpose of determining the funding needs
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1 of health professions schools, including schools of medicine

2 and osteopathic medicine, schools of dentistry, and schools

3 of public health.

4 (b) CONSIDERATION OF CERTAIN COSTS.—In con5 ducting the study under subsection (a), the Secretary shall

6 also consider the following costs regarding the funding

7 needs of health professions schools:

8 (1) Uncompensated costs incurred in providing

9 health care.

10 (2) Costs resulting from reduced productivity

11 due to teaching responsibilities.

12 (3) Increased costs of caring for the health

13 needs of patients with severe medical complications.

14 (4) Uncompensated costs incurred by faculty,

15 residents, and students in providing consultations

16 for hospitalized patients.

17 (5) Uncompensated costs incurred in conduct18 ing clinical research.

19 (c) CONSIDERATIONS REGARDING ADDITIONAL

20 FUNDING.—In conducting the study under subsection (a),

21 the Secretary shall determine the following:

22 (1) Whether the health professions schools in23 volved have a significant need for an increase in the

24 amount of funds available to the schools.

25 (2) If there is such a need—
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1 (A) recommendations regarding the

2 sources of funds to provide the increase; and

3 (B) recommendations for a methodology

4 for determining the amount that should be pro5 vided to the schools involved.

6 (d) REPORT TO CONGRESS.—Not later than 18

7 months after the date of the enactment of this Act, the

8 Secretary shall submit to the Congress a report describing

9 the findings and recommendations made in the study.

10 Subtitle D—United States-Mexico

11 Border Health Commission

12 SEC. 4301. AGREEMENT TO ESTABLISH BINATIONAL COM13 MISSION.

14 The President is authorized and encouraged to con15 clude an agreement with Mexico to establish a binational

16 commission to be known as the United States-Mexico Bor17 der Health Commission.

18 SEC. 4302. DUTIES.

19 It should be the duty of the Commission—

20 (1) to conduct a comprehensive needs assess21 ment in the United States-Mexico border area for

22 the purposes of identifying, evaluating, preventing,

23 and resolving health problems that affect the general

24 population of the area;
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1 (2) to implement the actions recommended by

2 the needs assessment by—

3 (A) assisting in the coordination of the ef4 forts of public and private entities to prevent

5 and resolve such health problems,

6 (B) assisting in the coordination of the ef7 forts of public and private entities to educate

8 such population concerning such health prob9 lems, and

10 (C) assisting in the development and im11 plementation of programs to prevent and re12 solve such health problems and (where nec13 essary) to educate such population concerning

14 such health programs; and

15 (3) to formulate recommendations to the Gov16 ernments of the United States and Mexico concern17 ing a fair and reasonable method by which the gov18 ernment of one country would reimburse a public or

19 private entity in the other country for the cost of a

20 health care service that the entity furnishes to a citi21 zen of the first country who is unable, through in22 surance or otherwise, to pay for the service.

23 SEC. 4303. OTHER AUTHORIZED FUNCTIONS.

24 In addition to the duties described in section 4302,

25 the Commission should be authorized to perform the fol-
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1 lowing additional functions as the Commission determines

2 to be appropriate:

3 (1) To conduct or sponsor investigations, re4 search, or studies designed to identify, study, and

5 monitor health problems that affect the general pop6 ulation in the United States-Mexico border area.

7 (2) To provide financial, technical, or adminis8 trative assistance to public or private entities who

9 act to prevent, resolve, or educate such population

10 concerning such health problems.

11 SEC. 4304. MEMBERSHIP.

12 (a) NUMBER AND APPOINTMENT OF UNITED STATES

13 SECTION.—The United States section of the Commission

14 should be composed of 13 members. The section should

15 consist of the following members:

16 (1) The Secretary of Health and Human Serv17 ices or such individual’s delegate.

18 (2) The commissioners of health from the

19 States of Texas, New Mexico, California, and Ari20 zona or such individuals’ delegates.

21 (3) 2 individuals from each of the States of

22 Texas, New Mexico, California, and Arizona who are

23 nominated by the chief executive officer of one of

24 such States and are appointed by the President from

25 among individuals who have demonstrated ties to
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1 community-based organizations and have a dem2 onstrated interest in health issues of the United

3 States-Mexico border area.

4 (b) COMMISSIONER.—The Commissioner of the Unit5 ed States section of the Commission should be the Sec6 retary of Health and Human Services or such individual’s

7 delegate to the Commission. The Commissioner should be

8 the leader of the section.

9 SEC. 4305. REGIONAL OFFICES.

10 The Commission should establish no fewer than 2 re11 gional border offices in locations selected by the Commis12 sion.

13 SEC. 4306. REPORTS.

14 Not later than February 1 of each year that occurs

15 more than 1 year after the date of the establishment of

16 the Commission, the Commission should submit an annual

17 report to both the United States Government and the Gov18 ernment of Mexico regarding all activities of the Commis19 sion during the preceding calendar year.

20 SEC. 4307. DEFINITIONS.

21 For purposes of this subtitle:

22 (1) COMMISSION.—The term ‘‘Commission’’

23 means the United States-Mexico Border Health

24 Commission authorized in section 4301.
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1 (2) HEALTH PROBLEM.—The term ‘‘health

2 problem’’ means a disease or medical ailment or an

3 environmental condition that poses the risk of dis4 ease or medical ailment. The term includes diseases,

5 ailments, or risks of disease or ailment caused by or

6 related to environmental factors, control of animals

7 and rabies, control of insect and rodent vectors, dis8 posal of solid and hazardous waste, and control and

9 monitoring of air and water quality.

10 (3) UNITED STATES-MEXICO BORDER AREA.—

11 The term ‘‘United States-Mexico border area’’

12 means the area located in the United States and

13 Mexico within 100 kilometers of the border between

14 the United States and Mexico.

15 TITLE V—HEALTH CARE

16 QUALITY ENHANCEMENT

TABLE OF CONTENTS OF TITLE

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.
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1 Subtitle A—Quality Assurance

2 SEC. 5001. HEALTH QUALITY ADVISORY COUNCIL.

3 (a) ESTABLISHMENT.—The Secretary shall provide

4 for the establishment of an advisory council to be known

5 as the ‘‘Health Quality Advisory Council’’ (in this subtitle

6 referred to as the ‘‘Council’’).

7 (b) DUTIES.—

8 (1) INITIAL MEASURES AND REQUIREMENTS.—

9 (A) DEVELOPMENT OF QUALITY MEAS10 URES.—The Council shall develop an initial set

11 of quality measures to be used to assess the

12 quality of carriers, group health plans, and mul13 tiple employer welfare arrangements. The qual14 ity measures shall include measures that pro15 vide information with respect to such entities on

16 the following subjects:

17 (i) Outcomes of care for specified

18 medical conditions.

19 (ii) Health status of enrollees.

20 (iii) Health promotion activities.

21 (iv) Prevention of diseases, disorders,

22 disabilities, injuries, and other adverse

23 health conditions.

24 (v) Risk management and reduction.

25 (vi) Consumer satisfaction.
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1 (B) RECOMMENDATIONS.—Not later than

2 the date that is 9 months from the date of the

3 enactment of this Act, the Council shall rec4 ommend to the Secretary—

5 (i) the initial set of quality measures

6 developed under subparagraph (A);

7 (ii) a standard set of data to be devel8 oped and collected in a uniform form and

9 manner by carriers, group health plans,

10 and multiple employer welfare arrange11 ments in order to permit such a carrier,

12 plan, or arrangement to assess its quality

13 using such initial set of measures;

14 (iii) a standard methodology to be

15 used by such entities to carry out the as16 sessments described in clause (ii);

17 (iv) a standard format to be used by

18 such entities publicly to report the results

19 of such assessments; and

20 (v) a schedule for implementing, in

21 succession—

22 (I) the data development and col23 lection requirements recommended

24 under clause (ii);
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1 (II) the assessment requirements

2 recommended under clause (iii); and

3 (III) the reporting requirements

4 recommended under clause (iv).

5 (2) MODIFYING MEASURES.—The Council shall

6 make recommendations to the Secretary with respect

7 to modifying, as additional information with respect

8 to carriers, group health plans, and multiple em9 ployer welfare arrangements becomes valid and

10 available, a set of quality measures selected by the

11 Secretary under section 5002. A recommendation

12 under the preceding sentence shall be accompanied

13 by recommendations for modifications to a data set,

14 assessment methodology, reporting format, or sched15 ule for implementation selected by the Secretary

16 under such section that the Council determines

17 would be necessary in order to implement appro18 priately a modification in the set of quality meas19 ures.

20 (c) MEMBERSHIP.—

21 (1) IN GENERAL.—The Council shall, in accord22 ance with this subsection, be composed of appointed

23 members and ex officio members. All members of the

24 Council shall be voting members, other than officials
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1 designated under paragraph (3) as ex officio mem2 bers of the Council.

3 (2) APPOINTED MEMBERS.—The Secretary

4 shall appoint to the Council 9 appropriately qualified

5 individuals who are not officers or employees of the

6 United States. Members appointed under this para7 graph shall include—

8 (A) individuals distinguished in the field of

9 health outcomes;

10 (B) representatives of carriers, group

11 health plans, and multiple employer welfare ar12 rangements;

13 (C) health care providers; and

14 (D) consumers of health care.

15 (3) EX OFFICIO MEMBERS.—The Secretary may

16 designate as ex officio members of the Council the

17 Director of the National Institutes of Health, the

18 Director of the Centers for Disease Control, the Ad19 ministrator of the Health Care Financing Adminis20 tration, the Assistant Secretary of Defense (Health

21 Affairs), and the Chief Medical Officer of the De22 partment of Veterans Affairs.

23 (d) TERMS.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), members of the Council appointed under

3 subsection (c)(2) shall serve for a term of 3 years.

4 (2) STAGGERED ROTATION.—Of the members

5 first appointed to the Council under subsection

6 (c)(2), the Secretary shall appoint 3 members to

7 serve for a term of 3 years, 3 members to serve for

8 a term of 2 years, and 3 members to serve for a

9 term of 1 year.

10 (3) SERVICE BEYOND TERM.—A member of the

11 Council appointed under subsection (c)(2) may con12 tinue to serve after the expiration of the term of the

13 member until a successor is appointed.

14 (e) VACANCIES.—If a member of the Council ap15 pointed under subsection (c)(2) does not serve the full

16 term applicable under subsection (d), the individual ap17 pointed to fill the resulting vacancy shall be appointed for

18 the remainder of the term of the predecessor of the indi19 vidual.

20 (f) CHAIR.—The Secretary shall, from among the

21 members of the Council appointed under subsection (c)(2),

22 designate an individual to serve as the chair of the Coun23 cil.

24 (g) MEETINGS.—The Council shall meet at the call

25 of the chair or the Secretary.
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1 (h) COMPENSATION AND REIMBURSEMENT OF EX2 PENSES.—

3 (1) APPOINTED MEMBERS.—Members of the

4 Council appointed under subsection (c)(2) shall re5 ceive compensation for each day (including travel6 time) engaged in carrying out the duties of the

7 Council. Such compensation may not be in an

8 amount in excess of the maximum rate of basic pay

9 payable under section 5376 of title 5, United States

10 Code.

11 (2) EX OFFICIO MEMBERS.—Officials des12 ignated under subsection (c)(3) as ex officio mem13 bers of the Council may not receive compensation for

14 service on the Council in addition to the compensa15 tion otherwise received for duties carried out as offi16 cers of the United States.

17 (i) STAFF.—The Secretary shall provide to the Coun18 cil such staff, information, and other assistance as may

19 be necessary to carry out the duties of the Council.

20 (j) DURATION.—Notwithstanding section 14(a) of the

21 Federal Advisory Committee Act, the Council shall con22 tinue in existence until otherwise provided by law.

23 SEC. 5002. QUALITY ASSESSMENT USING MEASURES.

24 (a) INITIAL MEASURES AND REQUIREMENTS.—
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1 (1) EVALUATION OF RECOMMENDATIONS.—If

2 the Council makes the recommendations to the Sec3 retary that are described in section 5001(b)(1)(B)

4 not later than the deadline described in such section,

5 the Secretary shall evaluate the recommendations to

6 determine whether they will provide for effective

7 measurement and reporting of the quality of car8 riers, group health plans, and multiple employer wel9 fare arrangements. The Secretary shall complete

10 such evaluation not later than the date that is 90

11 days from the date on which the Secretary receives

12 the recommendations of the Council.

13 (2) MODIFICATION.—Prior to the initiation of a

14 rule making under paragraph (3), the Secretary

15 may, as the Secretary determines appropriate based

16 on the evaluation under paragraph (1), modify any

17 quality measure, data set, assessment methodology,

18 reporting format, or schedule for implementation

19 recommended by the Council under section

20 5001(b)(1)(B).

21 (3) RULE MAKING.—After notice and oppor22 tunity for public comment, the Secretary shall pro23 mulgate a rule that—
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1 (A) establishes an initial set of quality

2 measures of the type described in section

3 5001(b)(1)(A);

4 (B) establishes a standard data set, meth5 odology, reporting format, and an implementa6 tion schedule of the types described in section

7 5001(b)(1)(B) and requirements on carriers,

8 group health plans, and multiple employer wel9 fare arrangements in accordance with such

10 standards and schedule;

11 (C) requires each carrier, group health

12 plans, and multiple employer welfare arrange13 ment periodically to publish a report, using the

14 standard reporting format established under

15 subparagraph (B), and to send the report to

16 employers, brokers, health plan purchasing or17 ganizations, and consumers in its service area;

18 (D) specifies the amount and nature of the

19 data that carriers, group health plans, and mul20 tiple employer welfare arrangements shall

21 transmit under paragraphs (2) and (4) of sub22 section (b) in order to permit States and the

23 Secretary of Labor to conduct audits under

24 paragraphs (1) and (4) of such subsection; and
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1 (E) specifies the frequency with which, and

2 the method by which, such data shall be trans3 mitted to States or the Secretary of Labor.

4 (b) COMPLIANCE.—

5 (1) PERIODIC AUDITS.—Each State shall con6 duct periodic audits to evaluate whether carriers

7 providing health insurance coverage in the State are

8 complying with the requirements established under

9 subsection (a). Such audits shall include an assess10 ment of the completeness, accuracy, and validity of

11 any data developed or collected by a carrier under

12 such subsection and any report published by such an

13 entity under such subsection. A State may satisfy

14 the requirements of this paragraph by entering into

15 a contract or other agreement with any appropriate

16 individual or entity.

17 (2) DATA TRANSMISSION.—A carrier providing

18 health insurance coverage in a State shall transmit

19 to the State, in accordance with the requirements

20 promulgated under subsection (a)(3)(E), the data

21 determined to be necessary by the Secretary under

22 subsection (a)(3)(D).

23 (3) ENSURING COMPLIANCE.—A State may

24 take appropriate action to ensure compliance by car25 riers with the requirements of subsection (a) and
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1 paragraph (2). Such action may include the imposi2 tion of a penalty on a carrier that transmits incom3 plete, false, or misleading data to the State.

4 (4) APPLICATION TO GROUP HEALTH PLANS

5 AND MULTIPLE EMPLOYER WELFARE ARRANGE6 MENTS.—

7 (A) AUDITS AND DATA TRANSMISSION.—

8 The Secretary of Labor shall undertake the du9 ties, and may exercise the authorities, of States

10 that are described in paragraph (1) with respect

11 to each group health plan, and each multiple

12 employer welfare arrangement, that does not

13 provide health coverage through a carrier. Such

14 a plan or arrangement shall transmit to the

15 Secretary of Labor, in accordance with the re16 quirements promulgated under subsection

17 (a)(3)(E), the data determined to be necessary

18 by the Secretary of Health and Human Services

19 under subsection (a)(3)(D).

20 (B) ENSURING COMPLIANCE.—For pur21 poses of part 5 of subtitle B of title I of the

22 Employee Retirement Income Security Act of

23 1974, the provisions of this section shall be con24 sidered to be provisions of title I of such Act,

25 but only to the extent that this section applies
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1 to group health plans and multiple employer

2 welfare arrangements that do not provide

3 health coverage through a carrier.

4 (c) MODIFYING MEASURES.—

5 (1) IN GENERAL.—The Secretary may modify

6 any set of quality measures established under sub7 section (a). The Secretary may make any modifica8 tion to a set of data, standard methodology, stand9 ard reporting format, implementation schedule, or

10 requirement on carriers, group health plans, and

11 multiple employer welfare arrangements established

12 under such subsection that the Secretary determines

13 is necessary to implement appropriately a modifica14 tion in the set of quality measures.

15 (2) PROCEDURE.—Prior to implementing a

16 modification under paragraph (1), the Secretary

17 shall—

18 (A) receive the recommendations of the

19 Council with respect to the modification;

20 (B) provide notice and opportunity for

21 public comment; and

22 (C) promulgate a rule.

23 SEC. 5003. DEFINITIONS.

24 For purposes of this subtitle:
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1 (1) The term ‘‘carrier’’ means a carrier (as de2 fined in section 1903(2)) providing health insurance

3 coverage (as defined in section 1903(7)).

4 (2) The term ‘‘multiple employer welfare ar5 rangement’’ means a multiple employer welfare ar6 rangement (as defined in section 1903(12)) provid7 ing benefits consisting of medical care described in

8 section 607(1) of the Employee Retirement Income

9 Security Act of 1974.

10 Subtitle B—Primary Care Provider

11 Education

12 SEC. 5101. AREA HEALTH EDUCATION CENTERS.

13 Section 746(i)(1)(A) of the Public Health Service Act

14 (42 U.S.C. 293j(i)(1)(A)) is amended by striking

15 ‘‘through 1995’’ and inserting ‘‘through 1994 and

16 $30,000,000 for each of the fiscal years 1995 through

17 1999’’.

18 SEC. 5102. PUBLIC HEALTH AND PREVENTIVE MEDICINE.

19 Section 765(a) of the Public Health Service Act (42

20 U.S.C. 294c(a)) is amended by striking ‘‘through 1995’’

21 and inserting ‘‘through 1999’’.

22 SEC. 5103. FAMILY MEDICINE.

23 Section 747(d)(1) of the Public Health Service Act

24 (42 U.S.C. 293k(d)(1)) is amended by striking ‘‘through

25 1995’’ and inserting ‘‘through 1999’’.
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1 SEC. 5104. GENERAL INTERNAL MEDICINE AND PEDIAT2 RICS.

3 Section 748(c) of the Public Health Service Act (42

4 U.S.C. 293l(c)) is amended by striking ‘‘through 1995’’

5 and inserting ‘‘through 1999’’.

6 SEC. 5105. PHYSICIAN ASSISTANTS.

7 Section 750(d)(1) of the Public Health Service Act

8 (42 U.S.C. 293n(d)(1)) is amended by striking ‘‘through

9 1995’’ and inserting ‘‘through 1999’’.

10 SEC. 5106. ALLIED HEALTH PROJECT GRANTS AND CON11 TRACTS.

12 Section 767(d) of the Public Health Service Act (42

13 U.S.C. 294e(d)) is amended by striking ‘‘through 1995’’

14 and inserting ‘‘through 1999’’.

15 SEC. 5107. NURSE PRACTITIONER AND NURSE MIDWIFE

16 PROGRAMS.

17 Section 822(d) of the Public Health Service Act (42

18 U.S.C. 296m(d)) is amended by striking ‘‘and 1994’’ and

19 inserting ‘‘through 1999’’.

20 TITLE VI—MARKET INCENTIVES

21 TO CONTAINING COSTS

TABLE OF CONTENTS OF TITLE

Subtitle A—Facilitating Establishment of Health Plan

Purchasing Organization (HPPOs)

PART 1—HEALTH PLAN PURCHASING ORGANIZATIONS

Sec. 6001. Establishment and organization.

Sec. 6002. Agreements to offer qualified health coverage.

Sec. 6003. Provision of information.
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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 AntiManaged 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.
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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.
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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.
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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.

1 Subtitle A—Facilitating Establish2 ment of Health Plan Purchasing

3 Organization (HPPOs)

4 PART 1—HEALTH PLAN PURCHASING

5 ORGANIZATIONS

6 SEC. 6001. ESTABLISHMENT AND ORGANIZATION.

7 (a) IN GENERAL.—Health plan purchasing organiza8 tions (each in this part referred to as a ‘‘purchasing orga9 nization’’) may be established in accordance with this part.

10 Each purchasing organization shall be chartered under

11 State law and operated as a not-for-profit corporation. A
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1 carrier may not form, underwrite, or possess a majority

2 vote of a purchasing organization, but may administer

3 such an organization.

4 (b) BOARD OF DIRECTORS.—

5 (1) IN GENERAL.—Each purchasing organiza6 tion shall be governed by a Board of Directors. Such

7 Board shall initially be appointed under procedures

8 established by the State in which it operates. Subse9 quently, the Board shall be elected by the members

10 of the organization in accordance with paragraph

11 (3). Such Board shall be composed of individuals

12 who are small employers (or representatives of small

13 employers), eligible employees of small employers (or

14 representatives of such employees), and qualifying

15 individuals in the area in which the organization op16 erates.

17 (2) MEMBERSHIP.—A purchasing organization

18 shall accept all small employers and eligible employ19 ees and other individuals who are in the individual/

20 small employer market within the area served by the

21 organization as members if such employers, employ22 ees, or individuals request such membership.

23 (3) VOTING.—Members of a purchasing organi24 zation shall have voting rights consistent with the
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1 rules established under the bylaws governing the or2 ganization.

3 (c) DUTIES OF PURCHASING ORGANIZATIONS.—

4 (1) IN GENERAL.—Subject to paragraph (2),

5 each purchasing organization shall—

6 (A) market health insurance coverage in

7 the individual/small group market throughout

8 the entire area served by the organization;

9 (B) enter into agreements under section

10 6002 with carriers offering qualified health cov11 erage under this subtitle;

12 (C) enter into agreements with small em13 ployers under section 6003;

14 (D) enroll individuals with carriers offering

15 qualified health coverage, only in accordance

16 with section 6004;

17 (E) disseminate quality information under

18 section 4002; and

19 (F) carry out other functions provided for

20 under this part.

21 (2) LIMITATION ON ACTIVITIES.—A purchasing

22 organization shall not—

23 (A) perform any activity (including review,

24 approval, or enforcement) relating to payment

25 rates for providers;
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1 (B) perform any activity (including certifi2 cation or enforcement) relating to compliance of

3 carriers (and health coverage provided by car4 riers) with the requirements of subtitle A of

5 title I;

6 (C) assume financial risk in relation to any

7 such carrier; or

8 (D) perform other activities identified by

9 the State as being inconsistent with the per10 formance of its duties under paragraph (1).

11 (3) CHARACTERISTICS OF SERVICE AREA.—

12 (A) IN GENERAL.—A purchasing organiza13 tion need not serve geographic areas that are

14 contiguous, but the geographic boundaries of

15 such areas shall be consistent with the bound16 aries established under section 1021 for fair

17 rating areas.

18 (B) SERVICE OF ENTIRE METROPOLITAN

19 STATISTICAL AREA.—If a purchasing organiza20 tion serves a part of a metropolitan statistical

21 area the organization shall serve the entire

22 area.

23 (d) ESTABLISHMENT NOT REQUIRED.—Nothing in

24 this section shall be construed as requiring—
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1 (1) that a purchasing organization be estab2 lished in each area of a State in which it operates;

3 and

4 (2) that there be only one purchasing organiza5 tion established with respect to any area.

6 SEC. 6002. AGREEMENTS TO OFFER QUALIFIED HEALTH

7 COVERAGE.

8 (a) AGREEMENTS.—

9 (1) IN GENERAL.—Except as provided in para10 graph (3), each purchasing organization for an area

11 shall enter into an agreement under this section with

12 each carrier that desires to make available qualified

13 health coverage through the purchasing organization

14 (consistent with any procedures established by the

15 State).

16 (2) TERMINATION OF AGREEMENT.—An agree17 ment under paragraph (1) shall remain in effect for

18 a 12-month period, except that the purchasing orga19 nization may terminate an agreement under para20 graph (1) if the carrier’s license or certification

21 under State law is terminated or for other good

22 cause shown.

23 (3) LIMITATION ON RENEWAL OF AGREE24 MENTS.—Subsequent to the 12-month period de-
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1 scribed in paragraph (2), a purchasing organization

2 may—

3 (A) refuse to enter into a subsequent

4 agreement with a carrier if the organization de5 termines that the number of enrollees or the

6 premium for coverage is too low, and

7 (B) if a previous agreement with a carrier

8 was terminated for good cause and the organi9 zation determines appropriate actions have not

10 been taken to correct the problems, refuse to

11 enter into a subsequent agreement with the car12 rier.

13 (b) RECEIPT OF PREMIUMS ON BEHALF OF CAR14 RIERS.—

15 (1) IN GENERAL.—Under an agreement under

16 this section between a purchasing organization and

17 a carrier—

18 (A) premiums shall be payable, and

19 (B) payment of premiums may be made by

20 individuals (or employers on their behalf) di21 rectly to the purchasing organization for the

22 benefit of the carrier.

23 (2) TIMING OF PAYMENT OF PREMIUMS.—Pre24 miums may be payable on a monthly basis (or, at

25 the option of an eligible employee or individual, on
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1 a quarterly basis). The purchasing organization may

2 provide for reasonable penalties and grace periods

3 for late payment.

4 (3) CARRIERS RETAIN RISK OF

5 NONPAYMENT.—Nothing in this subsection shall be

6 construed as placing upon a purchasing organization

7 any risk associated with the failure of individuals

8 and employers to make prompt payment of pre9 miums (other than the portion of the premium rep10 resenting the purchasing organization administrative

11 fee under section 6005). Each small employer and

12 qualifying individual who enrolls with a carrier pro13 viding qualified health coverage through the pur14 chasing organization is liable to the carrier for pre15 miums.

16 (c) FORWARDING OF PREMIUMS.—

17 (1) IN GENERAL.—If, under an agreement

18 under subsection (a), premium payments for quali19 fied health coverage are made to the purchasing or20 ganization, the purchasing organization shall for21 ward to the carrier the amount of the premiums.

22 (2) PAYMENTS.—Payments shall be made by

23 the purchasing organization under this subsection

24 within a period of days (specified by the Secretary

25 and not to exceed 7 days) after receipt of the pre-
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1 mium from the small employer of the eligible em2 ployee or the qualifying individual, as the case may

3 be.

4 (d) PAYMENT OF COMMISSIONS.—

5 (1) IN GENERAL.—Subject to paragraph (2),

6 nothing in this part shall be construed to preclude

7 a carrier from paying a commission or other remu8 neration in connection with the purchase of health

9 care coverage by individuals or groups, consistent

10 with State law.

11 (2) LIMITATION ON VARIATION.—A carrier may

12 not vary such compensation or remuneration based,

13 directly or indirectly, on the anticipated or actual

14 claims experience associated with the group or indi15 viduals purchasing health care coverage.

16 SEC. 6003. PROVISION OF INFORMATION.

17 (a) IN GENERAL.—Each purchasing organization for

18 an area shall make available to small employers that em19 ploy individuals in the area and to qualifying individuals

20 who reside in the area—

21 (1) information provided to the purchasing or22 ganization by the State or carriers, and

23 (2) the opportunity to enter into an agreement

24 with the organization for the purchase of qualified

25 health coverage.
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1 (b) FORWARDING INFORMATION AND PAYROLL DE2 DUCTIONS.—As part of an agreement entered into under

3 this section, a small employer shall forward the informa4 tion and make the payroll deductions required under sec5 tion 1201(a).

6 SEC. 6004. ENROLLING ELIGIBLE EMPLOYEES AND QUALI7 FYING INDIVIDUALS FOR QUALIFIED HEALTH

8 COVERAGE THROUGH A PURCHASING ORGA9 NIZATION.

10 A purchasing organization shall offer, on behalf of

11 each carrier with which an agreement was entered into

12 under section 6002 and in accordance with the enrollment

13 procedures of such carriers and the enrollment periods

14 provided under 1005, enrollment for the coverage only to

15 individuals in the individual/small group market in the

16 area served by the purchasing organization. Each purchas17 ing organization shall coordinate annual open enrollment

18 periods (described in section 1005(c)) of all carriers

19 through which coverage is offered by the organization so

20 that there is one common annual open enrollment period

21 for all such carriers with respect to each individual en22 rolled for coverage through the organization. Nothing in

23 this section shall preclude a purchasing organization from

24 having different common annual open enrollment periods

25 for different individuals.
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1 SEC. 6005. RESTRICTION ON CHARGES.

2 (a) IN GENERAL.—A purchasing organization may

3 impose an administrative fee with respect to an eligible

4 employee or qualifying individual enrolled for qualified

5 health coverage offered through the purchasing organiza6 tion.

7 (b) FEE.—A purchasing organization that elects to

8 impose a fee under subsection (a) shall ensure that such

9 fee is set as a percentage of the premium for each such

10 coverage option, is imposed uniformly with respect to all

11 coverage options offered through the organization, and is

12 disclosed explicitly as an addition to the premium.

13 SEC. 6006. STATE REPORT ON ESTABLISHMENT OF

14 PURCHASING ORGANIZATIONS.

15 (a) IN GENERAL.—Not later than January 1, 2000,

16 each State shall conduct a review of access of residents

17 of the State who are not employees of large employers or

18 medicare beneficiaries to obtaining standard health insur19 ance coverage through a purchasing organization.

20 (b) RESPONSE.—If the State determines, based on

21 such review, that such residents are unable to obtain such

22 coverage through such an organization, the State shall

23 take such actions as the State determines appropriate to

24 ensure public or private entities provide access to such an

25 organization by such residents.
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1 PART 2—ENCOURAGEMENT OF MULTIPLE

2 EMPLOYER ARRANGEMENTS PROVIDING

3 BASIC HEALTH BENEFITS

4 SEC. 6011. ELIMINATING COMMONALITY OF INTEREST OR

5 GEOGRAPHIC LOCATION REQUIREMENT FOR

6 TAX EXEMPT TRUST STATUS.

7 (a) IN GENERAL.—Paragraph (9) of section 501(c)

8 of the Internal Revenue Code of 1986 (relating to exempt

9 organizations) is amended—

10 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

11 (2) by adding at the end the following:

12 ‘‘(B) Any determination of whether a certified

13 multiple employer health plan (as defined in section

14 701(9) of the Employee Retirement Income Security

15 Act of 1974), a multiple employer welfare arrange16 ment which is fully insured, or a plan described in

17 clause (ii) or (iii) of section 3(40)(A) of such Act is

18 a voluntary employees’ beneficiary association meet19 ing the requirements of this paragraph shall be

20 made without regard to any determination of com21 monality of interest or geographic location.’’.

22 (b) EFFECTIVE DATE.—The amendments made by

23 subsection (a) shall apply with respect to determinations

24 made on or after the date of the enactment of this Act.
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1 PART 3—TAX EXEMPTION FOR HIGH RISK POOLS

2 SEC. 6021. TAX EXEMPTION FOR HIGH RISK INSURANCE

3 POOLS.

4 (a) IN GENERAL.—Subsection (c) of section 501 of

5 the Internal Revenue Code of 1986 (relating to list of ex6 empt organizations) is amended by adding at the end the

7 following new paragraph:

8 ‘‘(27) In the case of taxable years beginning be9 fore January 1, 1997, any corporation, association,

10 or similar legal entity which is created by any State

11 or political subdivision thereof to establish a risk

12 pool to provide health insurance coverage to any per13 son unable to obtain health insurance coverage in

14 the private insurance market because of health con15 ditions and no part of the net earnings of which in16 ures to the benefit of any private shareholder, mem17 ber, or individual.’’

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

19 subsection (a) shall apply to taxable years beginning after

20 December 31, 1989.

21 Subtitle B—Preemption of State

22 Benefit Mandates and Anti-Man23 aged Care Laws

24 SEC. 6101. PREEMPTION FROM STATE BENEFIT MANDATES.

25 Effective as of January 1, 1997, no State shall estab26 lish or enforce any law or regulation that—
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1 (1) requires the offering, as part of health in2 surance coverage, of any services, category of care,

3 or services of any class or type of provider, except

4 as provided in section 1013; or

5 (2) specifies the individuals to be provided

6 health insurance coverage or the duration of such

7 coverage.

8 SEC. 6102. PREEMPTION OF STATE LAW RESTRICTIONS ON

9 MANAGED CARE ARRANGEMENTS.

10 (a) LIMITATION ON RESTRICTIONS ON NETWORK

11 PLANS.—Effective as of January 1, 1997—

12 (1) a State may not prohibit or limit a carrier

13 or group health plan providing health coverage from

14 including incentives for enrollees to use the services

15 of participating providers;

16 (2) a State may not prohibit or limit such a

17 carrier or plan from limiting coverage of services to

18 those provided by a participating provider, except as

19 provided in section 1013;

20 (3) a State may not prohibit or limit the nego21 tiation of rates and forms of payments for providers

22 by such a carrier or plan with respect to health

23 coverage;
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1 (4) a State may not prohibit or limit such a

2 carrier or plan from limiting the number of partici3 pating providers;

4 (5) a State may not prohibit or limit such a

5 carrier or plan from requiring that services be pro6 vided (or authorized) by a practitioner selected by

7 the enrollee from a list of available participating pro8 viders or, except as provided in section 1011(e),

9 from requiring enrollees to obtain referral in order

10 to have coverage for treatment by a specialist or

11 health institution; and

12 (6) a State may not prohibit or limit the

13 corporate practice of medicine.

14 (b) DEFINITIONS.—In this section:

15 (1) MANAGED CARE COVERAGE.—The term

16 ‘‘managed care coverage’’ means health coverage to

17 the extent the coverage is provided through a man18 aged care arrangement (as defined in section

19 1903(11)(A)) that meets the applicable requirements

20 of such section.

21 (2) PARTICIPATING PROVIDER.—The term

22 ‘‘participating provider’’ means an entity or individ23 ual which provides, sells, or leases health care serv24 ices as part of a provider network (as defined in sec25 tion 1903(11)(B)).
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1 (c) REFERENCE TO STANDARDS FOR MANAGED

2 CARE ARRANGEMENTS.—For requirements relating to

3 managed care arrangements, see section 1011.

4 SEC. 6103. PREEMPTION OF STATE LAWS RESTRICTING UTI5 LIZATION REVIEW PROGRAMS.

6 (a) IN GENERAL.—Effective January 1, 1997, no

7 State law or regulation shall prohibit or regulate activities

8 under a utilization review program (as defined in sub9 section (b)).

10 (b) UTILIZATION REVIEW PROGRAM DEFINED.—In

11 this section, the term ‘‘utilization review program’’ means

12 a system of reviewing the medical necessity and appro13 priateness of patient services (which may include inpatient

14 and outpatient services) using specified guidelines. Such

15 a system may include preadmission certification, the appli16 cation of practice guidelines, continued stay review, dis17 charge planning, preauthorization of ambulatory proce18 dures, and retrospective review.

19 (c) EXEMPTION OF LAWS PREVENTING DENIAL OF

20 LIFESAVING MEDICAL TREATMENT PENDING TRANSFER

21 TO ANOTHER HEALTH CARE PROVIDER.—Nothing in this

22 subtitle shall be construed to invalidate any State law that

23 has the effect of preventing involuntary denial of life-pre24 serving medical treatment when such denial would cause

25 the involuntary death of the patient pending transfer of
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1 the patient to a health care provider willing to provide

2 such treatment.

3 SEC. 6104. PROHIBITION OF PROVISIONS PROHIBITING EM4 PLOYER GROUPS FROM PURCHASING

5 HEALTH INSURANCE.

6 No provision of State or local law shall apply that

7 prohibits 2 or more employers from obtaining coverage

8 that is fully insured (within the meaning of section 701(8)

9 of the Employee Retirement Income Security Act of 1974,

10 as added by section 1401(a) of this Act) under a multiple

11 employer health plan.

12 SEC. 6105. PREEMPTION RELATING TO DIFFERENT INSUR13 ANCE STANDARDS.

14 A State may not establish or enforce standards for

15 health insurance coverage made available in the individual

16 and small group markets that are different from the

17 standards established under title I.

18 SEC. 6106. GAO STUDY ON MANAGED CARE.

19 (a) IN GENERAL.—The Comptroller General shall

20 conduct a study of the benefits and cost effectiveness of

21 the use of managed care in the delivery of health services.

22 (b) REPORT.—By not later than 4 years after the

23 date of the enactment of this Act, the Comptroller General

24 shall submit a report to Congress on the study conducted
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1 under subsection (a) and shall include in the report such

2 recommendations as may be appropriate.

3 Subtitle C—Malpractice Reform

4 PART 1—UNIFORM STANDARDS FOR

5 MALPRACTICE CLAIMS

6 SEC. 6201. APPLICABILITY.

7 Except as provided in section 6221, this part shall

8 apply to any medical malpractice liability action brought

9 in a Federal or State court, and to any medical mal10 practice claim subject to an alternative dispute resolution

11 system, that is initiated on or after January 1, 1996.

12 SEC. 6202. REQUIREMENT FOR INITIAL RESOLUTION OF AC13 TION THROUGH ALTERNATIVE DISPUTE RES14 OLUTION.

15 (a) IN GENERAL.—

16 (1) STATE CASES.—A medical malpractice li17 ability action may not be brought in any State court

18 during a calendar year unless the medical mal19 practice liability claim that is the subject of the ac20 tion has been initially resolved under an alternative

21 dispute resolution system certified for the year by

22 the Secretary under section 6212(a), or, in the case

23 of a State in which such a system is not in effect

24 for the year, under the alternative Federal system

25 established under section 6222(b).
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1 (2) FEDERAL DIVERSITY ACTIONS.—A medical

2 malpractice liability action may not be brought in

3 any Federal court under section 1332 of title 28,

4 United States Code, during a calendar year unless

5 the medical malpractice liability claim that is the

6 subject of the action has been initially resolved

7 under the alternative dispute resolution system re8 ferred to in paragraph (1) that applied in the State

9 whose law applies in such action.

10 (3) CLAIMS AGAINST UNITED STATES.—

11 (A) ESTABLISHMENT OF PROCESS FOR

12 CLAIMS.—The Attorney General shall establish

13 an alternative dispute resolution process for the

14 resolution of tort claims consisting of medical

15 malpractice liability claims brought against the

16 United States under chapter 171 of title 28,

17 United States Code. Under such process, the

18 resolution of a claim shall occur after the com19 pletion of the administrative claim process ap20 plicable to the claim under section 2675 of such

21 title.

22 (B) REQUIREMENT FOR INITIAL RESOLU23 TION UNDER PROCESS.—A medical malpractice

24 liability action based on a medical malpractice

25 liability claim described in subparagraph (A)
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1 may not be brought in any Federal court unless

2 the claim has been initially resolved under the

3 alternative dispute resolution process estab4 lished by the Attorney General under such sub5 paragraph.

6 (b) INITIAL RESOLUTION OF CLAIMS UNDER

7 ADR.—For purposes of subsection (a), an action is ‘‘ini8 tially resolved’’ under an alternative dispute resolution

9 system if—

10 (1) the ADR reaches a decision on whether the

11 defendant is liable to the plaintiff for damages; and

12 (2) if the ADR determines that the defendant

13 is liable, the ADR reaches a decision on the amount

14 of damages assessed against the defendant.

15 (c) PROCEDURES FOR FILING ACTIONS.—

16 (1) NOTICE OF INTENT TO CONTEST DECI17 SION.—Not later than 60 days after a decision is is18 sued with respect to a medical malpractice liability

19 claim under an alternative dispute resolution system,

20 each party affected by the decision shall submit a

21 sealed statement to a court of competent jurisdiction

22 indicating whether or not the party intends to con23 test the decision.
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1 (2) DEADLINE FOR FILING ACTION.—A medical

2 malpractice liability action may not be brought by a

3 party unless—

4 (A) the party has filed the notice of intent

5 required by paragraph (1); and

6 (B) the party files the action in a court of

7 competent jurisdiction not later than 90 days

8 after the decision resolving the medical mal9 practice liability claim that is the subject of the

10 action is issued under the applicable alternative

11 dispute resolution system.

12 (3) COURT OF COMPETENT JURISDICTION.—

13 For purposes of this subsection, the term ‘‘court of

14 competent jurisdiction’’ means—

15 (A) with respect to actions filed in a State

16 court, the appropriate State trial court; and

17 (B) with respect to actions filed in a Fed18 eral court, the appropriate United States dis19 trict court.

20 (d) LEGAL EFFECT OF UNCONTESTED ADR DECI21 SION.—The decision reached under an alternative dispute

22 resolution system shall, for purposes of enforcement by a

23 court of competent jurisdiction, have the same status in

24 the court as the verdict of a medical malpractice liability

25 action adjudicated in a State or Federal trial court. The
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1 previous sentence shall not apply to a decision that is con2 tested by a party affected by the decision pursuant to sub3 section (c)(1).

4 SEC. 6203. OPTIONAL APPLICATION OF PRACTICE GUIDE5 LINES.

6 (a) DEVELOPMENT AND CERTIFICATION OF GUIDE7 LINES.—Each State may develop, for certification by the

8 Secretary, a set of specialty clinical practice guidelines,

9 based on recommended guidelines from national specialty

10 societies, to be updated annually. In the absence of rec11 ommended guidelines from such societies, each State may

12 develop such guidelines based on such criteria as the State

13 considers appropriate (including based on recommended

14 guidelines developed by the Agency for Health Care Policy

15 and Research).

16 (b) PROVISION OF HEALTH CARE UNDER GUIDE17 LINES.—Notwithstanding any other provision of law, in

18 any medical malpractice liability action arising from the

19 conduct of a health care provider or health care profes20 sional, if such conduct was in accordance with a guideline

21 developed by the State in which the conduct occurred and

22 certified by the Secretary under subsection (a), the guide23 line—
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1 (1) may be introduced by any party to the ac2 tion (including a health care provider, health care

3 professional, or patient); and

4 (2) if introduced, shall establish a rebuttable

5 presumption that the conduct was in accordance

6 with the appropriate standard of medical care, which

7 may only be overcome by the presentation of clear

8 and convincing evidence on behalf of the party

9 against whom the presumption operates.

10 SEC. 6204. TREATMENT OF NONECONOMIC AND PUNITIVE

11 DAMAGES.

12 (a) LIMITATION ON NONECONOMIC DAMAGES.—The

13 total amount of noneconomic damages that may be award14 ed to a claimant and the members of the claimant’s family

15 for losses resulting from the injury which is the subject

16 of a medical malpractice liability action may not exceed

17 $250,000, regardless of the number of parties against

18 whom the action is brought or the number of actions

19 brought with respect to the injury.

20 (b) NO AWARD OF PUNITIVE DAMAGES AGAINST

21 MANUFACTURER OF MEDICAL PRODUCT.—In the case of

22 a medical malpractice liability action in which the plaintiff

23 alleges a claim against the manufacturer of a medical

24 product, no punitive or exemplary damages may be award25 ed against such manufacturer.
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1 (c) JOINT AND SEVERAL LIABILITY FOR NON2 ECONOMIC DAMAGES.—The liability of each defendant for

3 noneconomic damages shall be several only and shall not

4 be joint, and each defendant shall be liable only for the

5 amount of noneconomic damages allocated to the defend6 ant in direct proportion to the defendant’s percentage of

7 responsibility (as determined by the trier of fact).

8 (d) USE OF PUNITIVE DAMAGE AWARDS FOR OPER9 ATION OF ADR SYSTEMS IN STATES.—

10 (1) IN GENERAL.—The total amount of any pu11 nitive damages awarded in a medical malpractice li12 ability action shall be paid to the State in which the

13 action is brought (or, in a case brought in Federal

14 court, in the State in which the health care services

15 that caused the injury that is the subject of the ac16 tion were provided), and shall be used by the State

17 solely to implement and operate the State alternative

18 dispute resolution system certified by the Secretary

19 under section 6222 (except as provided in paragraph

20 (2)).

21 (2) USE OF REMAINING AMOUNTS FOR PRO22 VIDER LICENSING AND DISCIPLINARY ACTIVITIES.—

23 If the amount of punitive damages paid to a State

24 under paragraph (1) for a year is greater than the

25 State’s costs of implementing and operating the
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1 State alternative dispute resolution system during

2 the year, the balance of such punitive damages paid

3 to the State shall be used solely to carry out activi4 ties to assure the safety and quality of health care

5 services provided in the State, including (but not

6 limited to)—

7 (A) licensing or certifying health care pro8 fessionals and health care providers in the

9 State; and

10 (B) carrying out programs to reduce mal11 practice-related costs for providers volunteering

12 to provide services in medically underserved

13 areas.

14 (3) MAINTENANCE OF EFFORT.—A State shall

15 use any amounts paid pursuant to paragraph (1) to

16 supplement and not to replace amounts spent by the

17 State for implementing and operating the State al18 ternative dispute resolution system or carrying out

19 the activities described in paragraph (2).

20 SEC. 6205. PERIODIC PAYMENTS FOR FUTURE LOSSES.

21 (a) IN GENERAL.—In any medical malpractice liabil22 ity action in which the damages awarded for future eco23 nomic loss exceeds $100,000, a defendant may not be re24 quired to pay such damages in a single, lump-sum pay25 ment, but may be permitted to make such payments on
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1 a periodic basis. The periods for such payments shall be

2 determined by the court, based upon projections of when

3 such expenses are likely to be incurred.

4 (b) WAIVER.—A court may waive the application of

5 subsection (a) with respect to a defendant if the court de6 termines that it is not in the best interests of the plaintiff

7 to receive payments for damages on such a periodic basis.

8 SEC. 6206. TREATMENT OF ATTORNEY’S FEES AND OTHER

9 COSTS.

10 (a) REQUIRING PARTY CONTESTING ADR RULING

11 TO PAY ATTORNEY’S FEES AND OTHER COSTS.—

12 (1) IN GENERAL.—The court in a medical mal13 practice liability action shall require the party that

14 (pursuant to section 6202(c)(1)) contested the ruling

15 of the alternative dispute resolution system with re16 spect to the medical malpractice liability claim that

17 is the subject of the action to pay to the opposing

18 party the costs incurred by the opposing party under

19 the action, including attorney’s fees, fees paid to ex20 pert witnesses, and other litigation expenses (but not

21 including court costs, filing fees, or other expenses

22 paid directly by the party to the court, or any fees

23 or costs associated with the resolution of the claim

24 under the alternative dispute resolution system), but

25 only if—
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1 (A) in the case of an action in which the

2 party that contested the ruling is the claimant,

3 the amount of damages awarded to the party

4 under the action is less than the amount of

5 damages awarded to the party under the ADR

6 system; and

7 (B) in the case of an action in which the

8 party that contested the ruling is the defendant,

9 the amount of damages assessed against the

10 party under the action is greater than the

11 amount of damages assessed under the ADR

12 system.

13 (2) EXCEPTIONS.—Paragraph (1) shall not

14 apply if—

15 (A) the party contesting the ruling made

16 under the previous alternative dispute resolu17 tion system shows that—

18 (i) the ruling was procured by corrup19 tion, fraud, or undue means,

20 (ii) there was partiality or corruption

21 under the system,

22 (iii) there was other misconduct under

23 the system that materially prejudiced the

24 party’s rights, or
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1 (iv) the ruling was based on an error

2 of law;

3 (B) the party contesting the ruling made

4 under the alternative dispute resolution system

5 presents new evidence before the trier of fact

6 that was not available for presentation under

7 the ADR system;

8 (C) the medical malpractice liability action

9 raised a novel issue of law; or

10 (D) the court finds that the application of

11 such paragraph to a party would constitute an

12 undue hardship, and issues an order waiving or

13 modifying the application of such paragraph

14 that specifies the grounds for the court’s deci15 sion.

16 (3) LIMIT ON ATTORNEYS’ FEES PAID.—Attor17 neys’ fees that are required to be paid under para18 graph (1) by the contesting party shall not exceed

19 the amount of the attorneys’ fees incurred by the

20 contesting party in the action. If the attorneys’ fees

21 of the contesting party are based on a contingency

22 fee agreement, the amount of attorneys’ fees for

23 purposes of the preceding sentence shall not exceed

24 the reasonable value of those services.
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1 (4) RECORDS.—In order to receive attorneys’

2 fees under paragraph (1), counsel of record in the

3 medical malpractice liability action involved shall

4 maintain accurate, complete records of hours worked

5 on the action, regardless of the fee arrangement

6 with the client involved.

7 (b) CONTINGENCY FEE DEFINED.—As used in this

8 section, the term ‘‘contingency fee’’ means any fee for pro9 fessional legal services which is, in whole or in part, con10 tingent upon the recovery of any amount of damages,

11 whether through judgment or settlement.

12 SEC. 6207. UNIFORM STATUTE OF LIMITATIONS.

13 (a) IN GENERAL.—Except as provided in subsection

14 (b), no medical malpractice claim may be initiated after

15 the expiration of the 2-year period that begins on the date

16 on which the alleged injury that is the subject of such

17 claim was discovered, but in no event may such a claim

18 be initiated after the expiration of the 4-year period that

19 begins on the date on which the alleged injury that is the

20 subject of such claim occurred.

21 (b) EXCEPTION FOR MINORS.—In the case of an al22 leged injury suffered by a minor who has not attained 6

23 years of age, a medical malpractice claim may not be initi24 ated after the expiration of the 2-year period that begins

25 on the date on which the alleged injury that is the subject
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1 of such claim was discovered or should reasonably have

2 been discovered, but in no event may such a claim be initi3 ated after the date on which the minor attains 12 years

4 of age.

5 SEC. 6208. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

6 SERVICES.

7 (a) IN GENERAL.—In the case of a medical mal8 practice claim relating to services provided during labor

9 or the delivery of a baby, if the health care professional

10 or health care provider against whom the claim is brought

11 did not previously treat the claimant for the pregnancy,

12 the trier of fact may not find that such professional or

13 provider committed malpractice and may not assess dam14 ages against such professional or provider unless the mal15 practice is proven by clear and convincing evidence.

16 (b) APPLICABILITY TO GROUP PRACTICES OR

17 AGREEMENTS AMONG PROVIDERS.—For purposes of sub18 section (a), a health care professional shall be considered

19 to have previously treated an individual for a pregnancy

20 if the professional is a member of a group practice whose

21 members previously treated the individual for the preg22 nancy or is providing services to the individual during

23 labor or the delivery of a baby pursuant to an agreement

24 with another professional.
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1 SEC. 6209. JURISDICTION OF FEDERAL COURTS.

2 Nothing in this part shall be construed to establish

3 any jurisdiction over any medical malpractice liability ac4 tion in the district courts of the United States on the basis

5 of sections 1331 or 1337 of title 28, United States Code.

6 SEC. 6210. PREEMPTION.

7 (a) IN GENERAL.—The provisions of this part shall

8 preempt any State law to the extent such law is inconsist9 ent with such provisions, except that the provisions of this

10 part shall not preempt any State law that provides for de11 fenses or places limitations on a person’s liability in addi12 tion to those contained in this part, places greater limita13 tions on the amount of attorneys’ fees that can be col14 lected, or otherwise imposes greater restrictions than those

15 provided in this part.

16 (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

17 OF LAW OR VENUE.—Nothing in this part shall be con18 strued to—

19 (1) waive or affect any defense of sovereign im20 munity asserted by any State under any provision of

21 law;

22 (2) waive or affect any defense of sovereign im23 munity asserted by the United States;

24 (3) affect the applicability of any provision of

25 the Foreign Sovereign Immunities Act of 1976;
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1 (4) preempt State choice-of-law rules with re2 spect to claims brought by a foreign nation or a citi3 zen of a foreign nation; or

4 (5) affect the right of any court to transfer

5 venue or to apply the law of a foreign nation or to

6 dismiss a claim of a foreign nation or of a citizen

7 of a foreign nation on the ground in inconvenient

8 forum.

9 PART 2—REQUIREMENTS FOR STATE ALTER10 NATIVE DISPUTE RESOLUTION SYSTEMS

11 (ADR)

12 SEC. 6221. BASIC REQUIREMENTS.

13 (a) IN GENERAL.—A State’s alternative dispute reso14 lution system meets the requirements of this section if the

15 system—

16 (1) applies to all medical malpractice liability

17 claims under the jurisdiction of the courts of that

18 State;

19 (2) requires that a written opinion resolving the

20 dispute be issued not later than 6 months after the

21 date by which each party against whom the claim is

22 filed has received notice of the claim (other than in

23 exceptional cases for which a longer period is re24 quired for the issuance of such an opinion), and that

25 the opinion contain—
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1 (A) findings of fact relating to the dispute,

2 and

3 (B) a description of the costs incurred in

4 resolving the dispute under the system (includ5 ing any fees paid to the individuals hearing and

6 resolving the claim), together with an appro7 priate assessment of the costs against any of

8 the parties;

9 (3) requires individuals who hear and resolve

10 claims under the system to meet such qualifications

11 as the State may require (in accordance with regula12 tions of the Secretary);

13 (4) is approved by the State or by local govern14 ments in the State;

15 (5) with respect to a State system that consists

16 of multiple dispute resolution procedures—

17 (A) permits the parties to a dispute to se18 lect the procedure to be used for the resolution

19 of the dispute under the system, and

20 (B) if the parties do not agree on the pro21 cedure to be used for the resolution of the dis22 pute, assigns a particular procedure to the

23 parties;

24 (6) provides for the transmittal to the State

25 agency responsible for monitoring or disciplining
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1 health care professionals and health care providers

2 of any findings made under the system that such a

3 professional or provider committed malpractice, un4 less, during the 90-day period beginning on the date

5 the system resolves the claim against the profes6 sional or provider, the professional or provider

7 brings an action contesting the decision made under

8 the system; and

9 (7) provides for the regular transmittal to the

10 Administrator for Health Care Policy and Research

11 of information on disputes resolved under the sys12 tem, in a manner that assures that the identity of

13 the parties to a dispute shall not be revealed.

14 (b) APPLICATION OF MALPRACTICE LIABILITY

15 STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—

16 The provisions of part 1 (other than section 6202) shall

17 apply with respect to claims brought under a State alter18 native dispute resolution system or the alternative Federal

19 system in the same manner as such provisions apply with

20 respect to medical malpractice liability actions brought in

21 the State.

22 SEC. 6222. CERTIFICATION OF STATE SYSTEMS; APPLICA23 BILITY OF ALTERNATIVE FEDERAL SYSTEM.

24 (a) CERTIFICATION.—
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1 (1) IN GENERAL.—Not later than October 1 of

2 each year (beginning with 1995), the Secretary, in

3 consultation with the Attorney General, shall deter4 mine whether a State’s alternative dispute resolution

5 system meets the requirements of this part for the

6 following calendar year.

7 (2) BASIS FOR CERTIFICATION.—The Secretary

8 shall certify a State’s alternative dispute resolution

9 system under this subsection for a calendar year if

10 the Secretary determines under paragraph (1) that

11 the system meets the requirements of section 6221,

12 including the requirement described in section 6204

13 that punitive damages awarded under the system are

14 paid to the State for the uses described in such

15 section.

16 (b) APPLICABILITY OF ALTERNATIVE FEDERAL

17 SYSTEM.—

18 (1) ESTABLISHMENT AND APPLICABILITY.—

19 Not later than October 1, 1995, the Secretary, in

20 consultation with the Attorney General, shall estab21 lish by rule an alternative Federal ADR system for

22 the resolution of medical malpractice liability claims

23 during a calendar year in States that do not have

24 in effect an alternative dispute resolution system

25 certified under subsection (a) for the year.
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1 (2) REQUIREMENTS FOR SYSTEM.—Under the

2 alternative Federal ADR system established under

3 paragraph (1)—

4 (A) paragraphs (1), (2), (6), and (7) of

5 section 6221(a) shall apply to claims brought

6 under the system;

7 (B) if the system provides for the resolu8 tion of claims through arbitration, the claims

9 brought under the system shall be heard and

10 resolved by arbitrators appointed by the Sec11 retary in consultation with the Attorney Gen12 eral; and

13 (C) with respect to a State in which the

14 system is in effect, the Secretary may (at the

15 State’s request) modify the system to take into

16 account the existence of dispute resolution pro17 cedures in the State that affect the resolution

18 of medical malpractice liability claims.

19 (3) TREATMENT OF STATES WITH ALTER20 NATIVE SYSTEM IN EFFECT.—If the alternative Fed21 eral ADR system established under this subsection is

22 applied with respect to a State for a calendar year,

23 the State shall make a payment to the United States

24 (at such time and in such manner as the Secretary

25 may require) in an amount equal to 110 percent of
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1 the costs incurred by the United States during the

2 year as a result of the application of the system with

3 respect to the State.

4 SEC. 6223. REPORTS ON IMPLEMENTATION AND EFFEC5 TIVENESS OF ALTERNATIVE DISPUTE RESO6 LUTION SYSTEMS.

7 (a) IN GENERAL.—Not later than 5 years after the

8 date of the enactment of this Act, the Secretary shall pre9 pare and submit to the Congress a report describing and

10 evaluating State alternative dispute resolution systems op11 erated pursuant to this part and the alternative Federal

12 system established under section 6222(b).

13 (b) CONTENTS OF REPORT.—The Secretary shall in14 clude in the report prepared and submitted under sub15 section (a)—

16 (1) information on—

17 (A) the effect of the alternative dispute

18 resolution systems on the cost of health care

19 within each State,

20 (B) the impact of such systems on the ac21 cess of individuals to health care within the

22 State, and

23 (C) the effect of such systems on the qual24 ity of health care provided within the State; and
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1 (2) to the extent that such report does not pro2 vide information on no-fault systems operated by

3 States as alternative dispute resolution systems pur4 suant to this part, an analysis of the feasibility and

5 desirability of establishing a system under which

6 medical malpractice liability claims shall be resolved

7 on a no-fault basis.

8 PART 3—DEFINITIONS

9 SEC. 6231. DEFINITIONS.

10 As used in this subtitle:

11 (1) ALTERNATIVE DISPUTE RESOLUTION SYS12 TEM.—The term ‘‘alternative dispute resolution sys13 tem’’ means a system that is enacted or adopted by

14 a State to resolve medical malpractice claims other

15 than through a medical malpractice liability action.

16 (2) CLAIMANT.—The term ‘‘claimant’’ means

17 any person who brings a health care liability action

18 and, in the case of an individual who is deceased, in19 competent, or a minor, the person on whose behalf

20 such an action is brought.

21 (3) CLEAR AND CONVINCING EVIDENCE.—The

22 term ‘‘clear and convincing evidence’’ is that meas23 ure or degree of proof that will produce in the mind

24 of the trier of fact a firm belief or conviction as to

25 the truth of the allegations sought to be established,
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1 except that such measure or degree of proof is more

2 than that required under preponderance of the evi3 dence, but less than that required for proof beyond

4 a reasonable doubt.

5 (4) ECONOMIC DAMAGES.—The term ‘‘economic

6 damages’’ means damages paid to compensate an in7 dividual for losses for hospital and other medical ex8 penses, lost wages, lost employment, and other pecu9 niary losses.

10 (5) HEALTH CARE PROFESSIONAL.—The term

11 ‘‘health care professional’’ means any individual who

12 provides health care services in a State and who is

13 required by State law or regulation to be licensed or

14 certified by the State to provide such services in the

15 State.

16 (6) HEALTH CARE PROVIDER.—The term

17 ‘‘health care provider’’ means any organization or

18 institution that is engaged in the delivery of health

19 care services in a State that is required by State law

20 or regulation to be licensed or certified by the State

21 to engage in the delivery of such services in the

22 State.

23 (7) INJURY.—The term ‘‘injury’’ means any ill24 ness, disease, or other harm that is the subject of

25 a medical malpractice claim.
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1 (8) MEDICAL MALPRACTICE LIABILITY AC2 TION.—The term ‘‘medical malpractice liability ac3 tion’’ means any civil action brought pursuant to

4 State law in which a plaintiff alleges a medical mal5 practice claim against a health care provider or

6 health care professional, but does not include any

7 action in which the plaintiff’s sole allegation is an al8 legation of an intentional tort.

9 (9) MEDICAL MALPRACTICE CLAIM.—The term

10 ‘‘medical malpractice claim’’ means any claim relat11 ing to the provision of (or the failure to provide)

12 health care services or the use of a medical product,

13 without regard to the theory of liability asserted,

14 and includes any third-party claim, cross-claim,

15 counterclaim, or contribution claim in a medical

16 malpractice liability action.

17 (10) MEDICAL PRODUCT.—

18 (A) IN GENERAL.—The term ‘‘medical

19 product’’ means, with respect to the allegation

20 of a claimant, a drug (as defined in section

21 201(g)(1) of the Federal Food, Drug, and Cos22 metic Act (21 U.S.C. 321(g)(1)) or a medical

23 device (as defined in section 201(h) of the Fed24 eral Food, Drug, and Cosmetic Act (21 U.S.C.

25 321(h)) if—
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1 (i) such drug or device was subject to

2 premarket approval under section 505,

3 507, or 515 of the Federal Food, Drug,

4 and Cosmetic Act (21 U.S.C. 355, 357, or

5 360e) or section 351 of the Public Health

6 Service Act (42 U.S.C. 262) with respect

7 to the safety of the formulation or per8 formance of the aspect of such drug or de9 vice which is the subject of the claimant’s

10 allegation or the adequacy of the packag11 ing or labeling of such drug or device, and

12 such drug or device is approved by the

13 Food and Drug Administration; or

14 (ii) the drug or device is generally rec15 ognized as safe and effective under regula16 tions issued by the Secretary of Health

17 and Human Services under section 201(p)

18 of the Federal Food, Drug, and Cosmetic

19 Act (21 U.S.C. 321(p)).

20 (B) EXCEPTION IN CASE OF MISREPRE21 SENTATION OR FRAUD.—Notwithstanding sub22 paragraph (A), the term ‘‘medical product’’

23 shall not include any product described in such

24 subparagraph if the claimant shows that the

25 product is approved by the Food and Drug Ad-
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1 ministration for marketing as a result of with2 held information, misrepresentation, or an ille3 gal payment by manufacturer of the product.

4 (11) NONECONOMIC DAMAGES.—The term

5 ‘‘noneconomic damages’’ means damages paid to

6 compensate an individual for losses for physical and

7 emotional pain, suffering, inconvenience, physical

8 impairment, mental anguish, disfigurement, loss of

9 enjoyment of life, loss of consortium, and other

10 nonpecuniary losses, but does not include punitive

11 damages.

12 (12) PUNITIVE DAMAGES.—The term ‘‘punitive

13 damages’’ means compensation, in addition to com14 pensation for actual harm suffered, that is awarded

15 for the purpose of punishing a person for conduct

16 deemed to be malicious, wanton, willful, or exces17 sively reckless.

18 Subtitle D—Administrative

19 Simplification

20 SEC. 6300. PURPOSE.

21 It is the purpose of this subtitle to improve the effi22 ciency and effectiveness of the health care system, includ23 ing the medicare program under title XVIII of the Social

24 Security Act and the medicaid program under title XIX

25 of such Act, by encouraging the development of a health
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1 information network through the adoption of standards

2 and the establishment of requirements for the electronic

3 transmission of certain health information.

4 SEC. 6301. DEFINITIONS.

5 For purposes of this subtitle:

6 (1) CODE SET.—The term ‘‘code set’’ means

7 any set of codes used for encoding data elements,

8 such as tables of terms, medical concepts, medical

9 diagnostic codes, or medical procedure codes.

10 (2) COORDINATION OF BENEFITS.—The term

11 ‘‘coordination of benefits’’ means determining and

12 coordinating the financial obligations of plan spon13 sors when health care benefits are payable by more

14 than one such sponsor.

15 (3) HEALTH INFORMATION.—The term ‘‘health

16 information’’ means any information that relates to

17 the past, present, or future physical or mental health

18 or condition or functional status of an individual,

19 the provision of health care to an individual, or pay20 ment for the provision of health care to an individ21 ual.

22 (4) HEALTH INFORMATION NETWORK.—The

23 term ‘‘health information network’’ means the health

24 information system that is formed through the appli-
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1 cation of the requirements and standards established

2 under this subtitle.

3 (5) HEALTH INFORMATION NETWORK SERV4 ICE.—The term ‘‘health information network serv5 ice’’—

6 (A) means a private entity or an entity op7 erated by a State that enters into contracts—

8 (i) to process or facilitate the process9 ing of nonstandard data elements of health

10 information into standard data elements;

11 (ii) to provide the means by which

12 persons are connected to the health infor13 mation network for purposes of meeting

14 the requirements of this subtitle, including

15 the holding of standard data elements of

16 health information;

17 (iii) to provide authorized access to

18 health information through the health in19 formation network; or

20 (iv) to provide specific information

21 processing services, such as automated co22 ordination of benefits and claims trans23 action routing; and

24 (B) includes a health information security

25 organization.
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1 (6) HEALTH INFORMATION SECURITY ORGANI2 ZATION.—The term ‘‘health information security or3 ganization’’ means a private entity or an entity oper4 ated by a State that accesses standard data elements

5 of health information through the health information

6 network, processes such information into non-identi7 fiable health information, and may store such infor8 mation.

9 (7) HEALTH PROVIDER.—The term ‘‘health

10 provider’’ includes a provider of services (as defined

11 in section 1861(u) of the Social Security Act), a pro12 vider of medical or other health services (as defined

13 in section 1861(s) of such Act), and any other per14 son (other than a plan sponsor) furnishing health

15 care items or services.

16 (8) NON-IDENTIFIABLE HEALTH INFORMA17 TION.—The term ‘‘non-identifiable health informa18 tion’’ means health information that is not protected

19 health information (as defined in subtitle E).

20 (9) PLAN SPONSOR.—The term ‘‘plan sponsor’’

21 means—

22 (A) a carrier (as defined in section

23 1903(2)) providing health insurance coverage

24 (as defined in section 1903(7));

25 (B) a group health plan;
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1 (C) an association or other entity which es2 tablishes or maintains a multiple employer wel3 fare arrangement (as defined in section

4 1903(12)) providing benefits consisting of medi5 cal care described in section 607(1) of the Em6 ployee Retirement Income Security Act of 1974;

7 and

8 (D) a State, or the Federal Government,

9 acting in a capacity as a provider of health ben10 efits to eligible individuals that is equivalent to

11 that of a carrier.

12 (10) STANDARD.—The term ‘‘standard’’, when

13 used with reference to a transaction or to data ele14 ments of health information, means that the trans15 action or data elements meet any standard adopted

16 by the Secretary under part 1 that applies to the

17 transaction or data elements.

18 PART 1—STANDARDS FOR DATA ELEMENTS AND

19 TRANSACTIONS

20 SEC. 6311. GENERAL REQUIREMENTS ON SECRETARY.

21 (a) IN GENERAL.—The Secretary shall adopt stand22 ards and modifications to standards under this part that

23 are—

24 (1) consistent with the objective of reducing the

25 costs of providing and paying for health care; and
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1 (2) in use and generally accepted, developed, or

2 modified by the standard-setting organizations ac3 credited by the American National Standard Insti4 tute.

5 (b) INITIAL STANDARDS.—The Secretary may de6 velop an expedited process for the adoption of initial

7 standards under this part.

8 (c) PROTECTION OF COMMERCIAL INFORMATION.—

9 In adopting standards under this part, the Secretary may

10 not require disclosure of trade secrets and confidential

11 commercial information by any person.

12 SEC. 6312. STANDARDS FOR DATA ELEMENTS OF HEALTH

13 INFORMATION.

14 (a) IN GENERAL.—The Secretary shall adopt stand15 ards necessary to make uniform and compatible for elec16 tronic transmission through the health information net17 work the data elements of any health information that the

18 Secretary determines is appropriate for transmission in

19 connection with a transaction described in section 6321.

20 (b) ADDITIONS.—The Secretary may make additions

21 to any set of data elements adopted under subsection (a)

22 as the Secretary determines appropriate in a manner that

23 minimizes the disruption and cost of compliance with such

24 additions.

25 (c) CERTAIN DATA ELEMENTS.—
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1 (1) UNIQUE HEALTH IDENTIFIERS.—The Sec2 retary shall establish a system to provide for a

3 standard unique health identifier for each individual,

4 employer, plan sponsor, and health provider for use

5 in the health care system.

6 (2) CODE SETS.—

7 (A) IN GENERAL.—The Secretary, in con8 sultation with experts from the private sector

9 and Federal agencies, shall—

10 (i) select code sets for appropriate

11 data elements from among the code sets

12 that have been developed by private and

13 public entities; or

14 (ii) establish code sets for such data

15 elements if no code sets for the data ele16 ments have been developed.

17 (B) DISTRIBUTION.—The Secretary shall

18 establish efficient and low-cost procedures for

19 distribution of code sets and modifications to

20 code sets.

21 SEC. 6313. INFORMATION TRANSACTION STANDARDS.

22 (a) IN GENERAL.—The Secretary shall adopt tech23 nical standards that are consistent with subtitle E relating

24 to the method by which standard data elements of health

25 information may be transmitted electronically, including
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1 standards with respect to the format in which such data

2 elements may be transmitted.

3 (b) SPECIAL RULE FOR COORDINATION OF BENE4 FITS.—Any standard adopted by the Secretary under

5 paragraph (1) that relates to coordination of benefits shall

6 provide that a claim for reimbursement for health services

7 furnished shall be tested, by an algorithm specified by the

8 Secretary, against all records of enrollment and eligibility

9 for the individual who received such services that are avail10 able to the recipient of the claim through the health infor11 mation network to determine any primary and secondary

12 obligors for payment.

13 (c) ELECTRONIC SIGNATURE.—The Secretary, in co14 ordination with the Secretary of Commerce, shall promul15 gate regulations specifying procedures for the electronic

16 transmission and authentication of signatures, compliance

17 with which shall be deemed to satisfy State and Federal

18 statutory requirements for written signatures with respect

19 to transactions described in section 6321 and written sig20 natures on health records and prescriptions.

21 (d) STANDARDS FOR CLAIMS FOR CLINICAL LABORA22 TORY TESTS.—The standards under this section shall pro23 vide that claims for clinical laboratory tests for which ben24 efits are payable by a plan sponsor shall be submitted di25 rectly by the person or entity that performed (or super-
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1 vised the performance of) the tests to the sponsor in a

2 manner consistent with (and subject to such exceptions

3 as are provided under) the requirement for direct submis4 sion of such claims under the medicare program.

5 SEC. 6314. TIMETABLES FOR ADOPTION OF STANDARDS.

6 (a) INITIAL STANDARDS FOR DATA ELEMENTS.—

7 The Secretary shall adopt standards relating to—

8 (1) the data elements for the information de9 scribed in section 6312(a) not later than 9 months

10 after the date of the enactment of this Act (except

11 in the case of standards with respect to data ele12 ments for claims attachments, which shall be adopt13 ed not later than 24 months after the date of the

14 enactment of this Act); and

15 (2) any addition to a set of data elements, in

16 conjunction with making such an addition.

17 (b) INITIAL STANDARDS FOR INFORMATION TRANS18 ACTIONS.—The Secretary shall adopt standards relating

19 to information transactions under section 6313 not later

20 than 9 months after the date of the enactment of this Act

21 (except in the case of standards for claims attachments,

22 which shall be adopted not later than 24 months after the

23 date of the enactment of this Act).

24 (c) MODIFICATIONS TO STANDARDS.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the Secretary shall review the standards

3 adopted under this part and shall adopt modified

4 standards as determined appropriate, but not more

5 frequently than once every 6 months. Any modifica6 tion to standards shall be completed in a manner

7 which minimizes the disruption to, and costs of com8 pliance incurred by, a plan sponsor, health provider,

9 or health plan purchasing organization that is re10 quired to comply with part 2.

11 (2) SPECIAL RULES.—

12 (A) MODIFICATIONS DURING FIRST 12-

13 MONTH PERIOD.—Except with respect to addi14 tions and modifications to code sets under sub15 paragraph (B), the Secretary may not adopt

16 any modification to a standard adopted under

17 this part during the 12-month period beginning

18 on the date the standard is adopted, unless the

19 Secretary determines that the modification is

20 necessary in order to permit a plan sponsor, a

21 health provider, or a health plan purchasing or22 ganization to comply with part 2.

23 (B) ADDITIONS AND MODIFICATIONS TO

24 CODE SETS.—
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1 (i) IN GENERAL.—The Secretary shall

2 ensure that procedures exist for the rou3 tine maintenance, testing, enhancement,

4 and expansion of code sets.

5 (ii) ADDITIONAL RULES.—If a code

6 set is modified under this subsection, the

7 modified code set shall include instructions

8 on how data elements that were encoded

9 prior to the modification are to be con10 verted or translated so as to preserve the

11 value of the data elements. Any modifica12 tion to a code set under this subsection

13 shall be implemented in a manner that

14 minimizes the disruption to, and costs of

15 compliance incurred by, a plan sponsor,

16 health provider, or health plan purchasing

17 organization that is required to comply

18 with part 2.

19 (d) EVALUATION OF STANDARDS.—The Secretary

20 may establish a process to measure or verify the consist21 ency of standards adopted or modified under this part.

22 Such process may include demonstration projects and

23 analyses of the cost of implementing such standards and

24 modifications.
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1 PART 2—REQUIREMENTS WITH RESPECT TO

2 CERTAIN TRANSACTIONS AND INFORMATION

3 SEC. 6321. STANDARD TRANSACTIONS AND INFORMATION.

4 (a) TRANSACTIONS BY SPONSORS.—

5 (1) TRANSACTIONS WITH PROVIDERS.—If a

6 plan sponsor conducts any of the transactions de7 scribed in paragraph (3) with a health provider—

8 (A) the transaction shall be a standard

9 transaction; and

10 (B) the health information transmitted by

11 the sponsor to the provider or by the provider

12 to the sponsor in connection with the trans13 action shall be in the form of standard data ele14 ments.

15 (2) TRANSACTIONS WITH SPONSORS.—If a plan

16 sponsor conducts any of the transactions described

17 in paragraph (3) with another plan sponsor—

18 (A) the transaction shall be a standard

19 transaction; and

20 (B) the health information transmitted by

21 either sponsor in connection with the trans22 action shall be in the form of standard data ele23 ments.

24 (3) TRANSACTIONS.—The transactions referred

25 to in paragraphs (1) and (2) are the following:

26 (A) Verification of eligibility for benefits.
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1 (B) Coordination of benefits.

2 (C) Claim submission.

3 (D) Claim attachment submission.

4 (E) Claim status notification.

5 (F) Claim status verification.

6 (G) Claim adjudication.

7 (H) Payment and remittance advice.

8 (I) Certification or authorization of a re9 ferral to a health provider who is not part of a

10 provider network.

11 (b) TRANSACTIONS BY PURCHASING ORGANIZA12 TIONS.—

13 (1) IN GENERAL.—If a health plan purchasing

14 organization conducts any of the transactions de15 scribed in paragraph (2) with a plan sponsor—

16 (A) the transaction shall be a standard

17 transaction; and

18 (B) the health information transmitted by

19 the organization to the sponsor or by the spon20 sor to the organization in connection with the

21 transaction shall be in the form of standard

22 data elements.

23 (2) TRANSACTIONS.—The transactions referred

24 to in paragraph (1) are the following:

25 (A) Enrollment and disenrollment.
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1 (B) Premium payment.

2 (c) USE OF HEALTH INFORMATION NETWORK SERV3 ICES.—A plan sponsor, a health provider, or a health plan

4 purchasing organization may comply with any provision

5 of this section by entering into an agreement or other ar6 rangement with a health information network service cer7 tified under section 6331 pursuant to which the service

8 undertakes the duties applicable to the sponsor, provider,

9 or organization under the provision.

10 SEC. 6322. ACCESSING HEALTH INFORMATION FOR AU11 THORIZED PURPOSES.

12 (a) PROCUREMENT RULE FOR GOVERNMENT AGEN13 CIES.—

14 (1) IN GENERAL.—A health information secu15 rity organization that is certified under section 6331

16 shall make available to a Federal or State agency,

17 pursuant to a cost-type contract (as defined under

18 the Federal Acquisition Regulation), any non-identi19 fiable health information, including non-identifiable

20 health information that is derived from protected

21 health information, that—

22 (A) is held by the service or may be ob23 tained by the service under paragraph (2) or

24 subsection (b);
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1 (B) consists of data elements that are sub2 ject to a standard under part 1; and

3 (C) is requested by the agency to fulfill a

4 requirement under this Act.

5 (2) CERTAIN INFORMATION AVAILABLE AT LOW

6 COST.—If a health information security organization

7 requires health information consisting of data ele8 ments that are subject to a standard under part 1

9 from a plan sponsor or a health provider in order to

10 comply with a request made by a Federal or State

11 agency under paragraph (1), the sponsor or provider

12 shall make such information available to such orga13 nization for a charge that does not exceed the rea14 sonable cost of transmitting the information.

15 (b) PROCUREMENT RULE FOR INFORMATION SECU16 RITY ORGANIZATIONS.—A health information security or17 ganization that makes non-identifiable health information

18 available to a Federal or State agency under subsection

19 (a) shall make such non-identifiable information available,

20 for a charge that does not exceed the reasonable cost of

21 transmitting the information, to any other health informa22 tion security organization that—

23 (A) is certified under section 6331; and

24 (B) requests the information.
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1 SEC. 6323. ENSURING AVAILABILITY OF INFORMATION.

2 The Secretary shall establish a procedure under

3 which a plan sponsor or health provider that does not have

4 the ability to transmit standard data elements directly,

5 and does not have access to a health information network

6 service certified under section 6331, may comply with the

7 provisions of this part.

8 SEC. 6324. TIMETABLES FOR COMPLIANCE WITH REQUIRE9 MENTS.

10 (a) INITIAL COMPLIANCE.—

11 (1) IN GENERAL.—Not later than 12 months

12 after the date on which standards are adopted under

13 part 1 with respect to a type of transaction, or data

14 elements for a type of health information, a plan

15 sponsor, health provider, or health plan purchasing

16 organization shall comply with the requirements of

17 this part with respect to such transaction or infor18 mation.

19 (2) ADDITIONAL DATA ELEMENTS.—Not later

20 than 12 months after the date on which the Sec21 retary adopts an addition to a set of data elements

22 for health information under section 6312, a plan

23 sponsor, health provider, or health plan purchasing

24 organization shall comply with the requirements of

25 this part using such data elements.

26 (b) COMPLIANCE WITH MODIFIED STANDARDS.—
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1 (1) IN GENERAL.—If the Secretary adopts a

2 modified standard under section 6314(c), a plan

3 sponsor, health provider, or health plan purchasing

4 organization shall comply with the modified standard

5 at such time as the Secretary determines appro6 priate, taking into account the time needed to com7 ply due to the nature and extent of the modification.

8 (2) SPECIAL RULE.—In the case of a modifica9 tion to a standard that does not occur within the 12-

10 month period beginning on the date the standard is

11 adopted, the time determined appropriate by the

12 Secretary under paragraph (1) may not be—

13 (A) earlier than the last day of the 90-day

14 period beginning on the date the modified

15 standard is adopted; or

16 (B) later than the last day of the 12-

17 month period beginning on the date the modi18 fied standard is adopted.

19 PART 3—MISCELLANEOUS PROVISIONS

20 SEC. 6331. STANDARDS AND CERTIFICATION FOR HEALTH

21 INFORMATION NETWORK SERVICES.

22 (a) STANDARDS FOR OPERATION.—The Secretary

23 shall establish standards with respect to the operation of

24 health information network services, including standards

25 ensuring that such services—
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1 (1) develop, operate, and cooperate with one an2 other to form the health information network;

3 (2) meet all of the requirements under subtitle

4 E that are applicable to the services;

5 (3) make public information concerning their

6 performance, as measured by uniform indicators

7 such as accessibility, transaction responsiveness, ad8 ministrative efficiency, reliability, dependability, and

9 any other indicator determined appropriate by the

10 Secretary;

11 (4) have security procedures that are consistent

12 with the requirements under subtitle E, including se13 cure methods of accessing and transmitting data;

14 and

15 (5) if they are part of a larger organization,

16 have policies and procedures in place which isolate

17 their activities with respect to processing informa18 tion in a manner that prevents access to such infor19 mation by such larger organization.

20 (b) CERTIFICATION BY THE SECRETARY.—

21 (1) ESTABLISHMENT.—Not later than 12

22 months after the date of the enactment of this Act,

23 the Secretary shall establish a certification proce24 dure for health information network services which

25 ensures that certified services are qualified to meet
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1 the requirements of this subtitle and the standards

2 established by the Secretary under this section. Such

3 certification procedure shall be implemented in a

4 manner that minimizes the costs and delays of oper5 ations for such services.

6 (2) APPLICATION.—Each entity desiring to be

7 certified as a health information network service

8 shall apply to the Secretary for certification in a

9 form and manner determined appropriate by the

10 Secretary.

11 (3) AUDITS AND REPORTS.—The procedure es12 tablished under paragraph (1) shall provide for au13 dits by the Secretary and reports by an entity cer14 tified under this section as the Secretary determines

15 appropriate in order to monitor such entity’s compli16 ance with the requirements of this subtitle, subtitle

17 E, and the standards established by the Secretary

18 under this section.

19 (4) RECERTIFICATION.—A health information

20 network service shall be recertified under this sub21 section at least every 3 years.

22 (c) LOSS OF CERTIFICATION.—

23 (1) MANDATORY TERMINATION.—Except as

24 provided in paragraph (2), if a health information

25 network service violates a requirement imposed on
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1 such service under subtitle E, its certification under

2 this section shall be terminated unless the Secretary

3 determines that appropriate corrective action has

4 been taken.

5 (2) CONDITIONAL CERTIFICATION—The Sec6 retary may establish a procedure under which a

7 health information network service may remain cer8 tified on a conditional basis if the service is operat9 ing consistently with a plan intended to correct any

10 violations described in paragraph (1). Such proce11 dure may provide for the appointment of a trustee

12 to continue operation of the service until the require13 ments for full certification are met.

14 (d) CERTIFICATION BY PRIVATE ENTITIES.—The

15 Secretary may designate private entities to conduct the

16 certification procedures established by the Secretary under

17 this section. A health information network service certified

18 by such an entity in accordance with such designation

19 shall be considered to be certified by the Secretary.

20 (e) INFORMATION HELD BY HEALTH INFORMATION

21 NETWORK SERVICES.—If a health information network

22 service certified under this section loses its certified status

23 or takes any action that would threaten the continued

24 availability of the standard data elements of health infor25 mation held by such service, such data elements shall be
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1 transferred to another health information network service

2 certified under this section that has been designated by

3 the Secretary.

4 SEC. 6332. IMPOSITION OF ADDITIONAL REQUIREMENTS.

5 (a) IN GENERAL.—Except as provided in subsection

6 (c), after the Secretary has established standards under

7 section 6312 that are necessary to make uniform and com8 patible for electronic transmission the data elements that

9 the Secretary determines are appropriate for transmission

10 in connection with a transaction described in part 2, an

11 individual or entity may not require an individual or en12 tity, to provide in any manner any additional data element

13 in connection with—

14 (1) the transaction; or

15 (2) an inquiry with respect to the transaction.

16 (b) TRANSMISSION METHOD.—Except as provided in

17 subsection (c), after the Secretary has established stand18 ards under section 6313 relating to the method by which

19 data elements that the Secretary determines are appro20 priate for transmission in connection with a transaction

21 described in part 2 may be transmitted electronically, an

22 individual or entity may not require an individual or entity

23 to transmit any data element in a manner inconsistent

24 with the standards in connection with—

25 (1) the transaction; or
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1 (2) an inquiry with respect to the transaction.

2 (c) EXCEPTION.—Subsections (a) and (b) do not

3 apply if—

4 (1) an individual or entity voluntarily agrees to

5 provide the additional data element; or

6 (2) a waiver is granted under subsection (d) to

7 permit the requirement to be imposed.

8 (d) CONDITIONS FOR WAIVERS.—

9 (1) IN GENERAL.—An individual or entity may

10 request a waiver from the Secretary in order to im11 pose on an individual or entity a requirement other12 wise prohibited under subsection (a) or (b). Subject

13 to paragraph (2), the Secretary may grant such a

14 waiver.

15 (2) CONSIDERATION OF WAIVER REQUESTS.—A

16 waiver may not be granted under this subsection to

17 impose an otherwise prohibited requirement unless

18 the Secretary determines that the value of any addi19 tional information to be provided under the require20 ment for research or other purposes significantly

21 outweighs the administrative cost of the imposition

22 of the requirement, taking into account the burden

23 of the timing of the imposition of the requirement.

24 (e) ANONYMOUS REPORTING.—If an individual or en25 tity attempts to impose on an individual or entity a re-
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1 quirement prohibited under subsection (a) or (b), the indi2 vidual or entity on whom the requirement is being imposed

3 may contact the Secretary. The Secretary shall develop a

4 procedure under which an individual or entity that con5 tacts the Secretary under the preceding sentence shall re6 main anonymous. The Secretary shall notify the individual

7 or entity imposing the requirement that the requirement

8 may not be imposed unless the other individual or entity

9 voluntarily agrees to such requirement or a waiver is ob10 tained under subsection (d).

11 SEC. 6333. EFFECT ON STATE LAW.

12 (a) IN GENERAL.—Except as otherwise provided in

13 this section, a provision, requirement, or standard under

14 this subtitle shall supersede any contrary provision of

15 State law.

16 (b) STATE ‘‘QUILL AND PEN’’ LAWS.—A State may

17 not establish, continue in effect, or enforce any provision

18 of State law that requires medical or health plan records

19 (including billing information) to be maintained or trans20 mitted in written rather than electronic form, except

21 where the Secretary determines that the provision is nec22 essary to prevent fraud and abuse, with respect to con23 trolled substances, or for other purposes.

24 (c) PUBLIC HEALTH REPORTING.—Nothing in this

25 subtitle shall be construed to invalidate or limit the au-
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1 thority, power, or procedures established under any law

2 providing for the reporting of disease or injury, child

3 abuse, birth, or death, public health surveillance, or public

4 health investigation or intervention.

5 (d) PUBLIC USE FUNCTIONS.—Nothing in this sub6 title shall be construed to limit the authority of a Federal

7 or State agency to make non-identifiable health informa8 tion available for public use.

9 (e) PAYMENT FOR HEALTH CARE SERVICES OR PRE10 MIUMS.—Nothing in this subtitle shall be construed to

11 prohibit a consumer from paying for health care items or

12 services, or plan or health insurance coverage premiums,

13 by debit, credit, or other payment cards or numbers or

14 other electronic payment means.

15 SEC. 6334. GRANTS FOR DEMONSTRATION PROJECTS.

16 (a) IN GENERAL.—The Secretary may make grants

17 for demonstration projects to promote the development

18 and use of electronically integrated community-based clini19 cal information systems and computerized patient medical

20 records.

21 (b) APPLICATIONS.—

22 (1) SUBMISSION.—To apply for a grant under

23 this section for any fiscal year, an applicant shall

24 submit an application to the Secretary in accordance

25 with the procedures established by the Secretary.
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1 (2) CRITERIA FOR APPROVAL.—The Secretary

2 may not approve an application submitted under

3 paragraph (1) unless the application includes assur4 ances satisfactory to the Secretary regarding the fol5 lowing:

6 (A) USE OF EXISTING TECHNOLOGY.—

7 Funds received under this section will be used

8 to apply telecommunications and information

9 systems technology that is in existence on the

10 date the application is submitted in a manner

11 that improves the quality of health care, re12 duces the costs of such care, and protects the

13 privacy and confidentiality of information relat14 ing to the physical or mental condition of an in15 dividual.

16 (B) USE OF EXISTING INFORMATION SYS17 TEMS.—Funds received under this section will

18 be used—

19 (i) to enhance telecommunications or

20 information systems that are operating on

21 the date the application is submitted;

22 (ii) to integrate telecommunications or

23 information systems that are operating on

24 the date the application is submitted; or
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1 (iii) to connect additional users to

2 telecommunications or information net3 works or systems that are operating on the

4 date the application is submitted.

5 (C) CONSISTENCY WITH OTHER PROVI6 SIONS.—Funds received under this section will

7 be used for demonstration projects whose infor8 mation collection and disclosure requirements

9 are consistent with this subtitle and subtitle A

10 of title V.

11 (D) MATCHING FUNDS.—The applicant

12 shall make available funds for the demonstra13 tion project in an amount that equals at least

14 20 percent of the cost of the project.

15 (c) GEOGRAPHIC DIVERSITY.—In making any grants

16 under this section, the Secretary shall, to the extent prac17 ticable, make grants to persons representing different geo18 graphic areas of the United States, including urban and

19 rural areas.

20 (d) REVIEW AND SANCTIONS.—The Secretary shall

21 review at least annually the compliance of a person receiv22 ing a grant under this section with the provisions of this

23 section. The Secretary shall establish a procedure for de24 termining whether such a person has failed to comply sub-
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1 stantially within the provisions of this section and the

2 sanctions to be imposed for any such noncompliance.

3 (e) ANNUAL REPORT.—The Secretary shall submit

4 an annual report to the President for transmittal to Con5 gress containing a description of the activities carried out

6 under this section. The report shall evalute each dem7 onstration project that received funds under this section

8 in the year to which the report pertains with respect to

9 the following:

10 (1) The usefulness of the project in facilitating

11 outcomes measurement, health provider decision12 making, and health research.

13 (2) The cost and burden of the project on

14 health providers and other participants in the

15 project.

16 (3) Efficiency and effectiveness of the project in

17 improving health care delivery and evaluation.

18 PART 4—ASSISTANCE TO THE SECRETARY

19 SEC. 6341. GENERAL REQUIREMENT ON SECRETARY.

20 In complying with any requirements imposed on the

21 Secretary under this subtitle, the Secretary shall rely on

22 recommendations of the Health Information Advisory

23 Committee established under section 6342 and shall con24 sult with appropriate Federal agencies.
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1 SEC. 6342. HEALTH INFORMATION ADVISORY COMMITTEE.

2 (a) ESTABLISHMENT.—There is established a com3 mittee to be known as the Health Care Information Advi4 sory Committee.

5 (b) DUTY.—

6 (1) IN GENERAL.—The committee shall—

7 (A) provide assistance to the Secretary in

8 complying with the requirements imposed on

9 the Secretary under this subtitle and subtitle E;

10 (B) be generally responsible for advising

11 the Secretary and the Congress on the status of

12 the health information network; and

13 (C) make recommendations to correct any

14 problems that may occur in the network’s im15 plementation and ongoing operations and to re16 fine and improve the network.

17 (2) TECHNICAL ASSISTANCE.—In performing

18 its duties under this subsection, the committee shall

19 receive technical assistance from appropriate Federal

20 agencies.

21 (c) MEMBERSHIP.—

22 (1) IN GENERAL.—The committee shall consist

23 of 15 members to be appointed by the President not

24 later than 60 days after the date of the enactment

25 of this Act. The President shall designate 1 member

26 as the Chair.
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1 (2) EXPERTISE.—The membership of the com2 mittee shall consist of individuals who are of recog3 nized standing and distinction and who possess the

4 demonstrated capacity to discharge the duties im5 posed on the committee. At least 1 member of the

6 committee shall be a member of the Health Quality

7 Advisory Council established under section 4001.

8 (3) TERMS.—Each member of the committee

9 shall be appointed for a term of 5 years, except that

10 the members first appointed shall serve staggered

11 terms such that the terms of no more than 3 mem12 bers expire at one time.

13 (4) VACANCIES.—

14 (A) IN GENERAL.—A vacancy on the com15 mittee shall be filled in the manner in which the

16 original appointment was made and shall be

17 subject to any conditions which applied with re18 spect to the original appointment.

19 (B) FILLING UNEXPIRED TERM.—An indi20 vidual chosen to fill a vacancy shall be ap21 pointed for the unexpired term of the member

22 replaced.

23 (C) EXPIRATION OF TERMS.—The term of

24 any member shall not expire before the date on

25 which the member’s successor takes office.
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1 (5) CONFLICTS OF INTEREST.—Members of the

2 committee shall disclose upon appointment to the

3 committee or at any subsequent time that it may

4 occur, conflicts of interest.

5 (d) MEETINGS.—

6 (1) IN GENERAL.—Except as provided in para7 graph (2), the committee shall meet at the call of

8 the Chair.

9 (2) INITIAL MEETING.—Not later than 30 days

10 after the date on which all members of the commit11 tee have been appointed, the committee shall hold its

12 first meeting.

13 (3) QUORUM.—A majority of the members of

14 the committee shall constitute a quorum, but a less15 er number of members may hold hearings.

16 (e) POWER TO HOLD HEARINGS.—The committee

17 may hold such hearings, sit and act at such times and

18 places, take such testimony, and receive such evidence as

19 the committee considers advisable to carry out the pur20 poses of this section.

21 (f) OTHER ADMINISTRATIVE PROVISIONS.—Subpara22 graphs (C), (D), and (H) of section 1886(e)(6) of the So23 cial Security Act shall apply to the committee in the same

24 manner as they apply to the Prospective Payment Assess25 ment Commission.
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1 (g) REPORTS.—

2 (1) IN GENERAL.—The committee shall annu3 ally prepare and submit to Congress and the Sec4 retary a report including at least an analysis of—

5 (A) the status of the health information

6 network established under this subtitle, includ7 ing whether the network is fulfilling the pur8 pose described in section 6300;

9 (B) the savings and costs of the network;

10 (C) the activities of health information net11 work services certified under section 6331,

12 health providers, and plan sponsors under this

13 subtitle;

14 (D) the extent to which entities described

15 in subparagraph (C) are meeting the standards

16 adopted under this subtitle and working to17 gether to form an integrated network that

18 meets the needs of its users;

19 (E) the extent to which entities described

20 in subparagraph (C) are meeting the privacy

21 and security protections of subtitle E;

22 (F) whether the Federal Government and

23 State Governments are receiving information of

24 sufficient quality to meet their responsibilities

25 under this Act;
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1 (G) any problems with respect to imple2 mentation of the network;

3 (H) the extent to which timetables under

4 this subtitle for the adoption and implementa5 tion of standards are being met; and

6 (I) any legislative recommendations related

7 to the health information network.

8 (2) AVAILABILITY TO THE PUBLIC.—Any infor9 mation in the report submitted to Congress under

10 paragraph (1) shall be made available to the public,

11 unless such information may not be disclosed by law.

12 (h) DURATION.—Notwithstanding section 14(a) of

13 the Federal Advisory Committee Act, the committee shall

14 continue in existence until otherwise provided by law.

15 Subtitle E—Fair Health

16 Information Practices

17 SEC. 6400. DEFINITIONS.

18 (a) DEFINITIONS RELATING TO PROTECTED

19 HEALTH INFORMATION.—For purposes of this subtitle:

20 (1) DISCLOSE.—The term ‘‘disclose’’, when

21 used with respect to protected health information

22 that is held by a health information trustee, means

23 to provide access to the information, but only if such

24 access is provided by the trustee to a person other

25 than—
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1 (A) the trustee or an officer or employee of

2 the trustee;

3 (B) an affiliated person of the trustee; or

4 (C) a protected individual who is a subject

5 of the information.

6 (2) DISCLOSURE.—The term ‘‘disclosure’’

7 means the act or an instance of disclosing.

8 (3) PROTECTED HEALTH INFORMATION.—The

9 term ‘‘protected health information’’ means any in10 formation, whether oral or recorded in any form or

11 medium—

12 (A) that is created or received in a State

13 by—

14 (i) a health care provider;

15 (ii) a health benefit plan sponsor;

16 (iii) a health oversight agency;

17 (iv) a health information service orga18 nization; or

19 (v) a public health authority;

20 (B) that relates in any way to the past,

21 present, or future physical or mental health or

22 condition or functional status of a protected in23 dividual, the provision of health care to a pro24 tected individual, or payment for the provision

25 of health care to a protected individual; and
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1 (C) that—

2 (i) identifies the individual; or

3 (ii) with respect to which there is a

4 reasonable basis to believe that the infor5 mation can be used to identify the individ6 ual.

7 (4) PROTECTED INDIVIDUAL.—The term ‘‘pro8 tected individual’’ means an individual who, with re9 spect to a date—

10 (A) is living on the date; or

11 (B) has died within the 2-year period end12 ing on the date.

13 (5) USE.—The term ‘‘use’’, when used with re14 spect to protected health information that is held by

15 a health information trustee, means—

16 (A) to use, or provide access to, the infor17 mation in any manner that does not constitute

18 a disclosure; or

19 (B) any act or instance of using, or provid20 ing access, described in subparagraph (A).

21 (b) DEFINITIONS RELATING TO HEALTH INFORMA22 TION TRUSTEES.—For purposes of this subtitle:

23 (1) HEALTH BENEFIT PLAN.—The term

24 ‘‘health benefit plan’’ means—
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1 (A) any contract of health insurance, in2 cluding any hospital or medical service policy or

3 certificate, hospital or medical service plan con4 tract, or health maintenance organization group

5 contract, that is provided by a carrier; and

6 (B) an employee welfare benefit plan or

7 other arrangement insofar as the plan or ar8 rangement provides health benefits and is fund9 ed in a manner other than through the pur10 chase of one or more policies or contracts de11 scribed in subparagraph (A).

12 (2) HEALTH BENEFIT PLAN SPONSOR.—The

13 term ‘‘health benefit plan sponsor’’ means a person

14 who, with respect to a specific item of protected

15 health information, receives, creates, uses, main16 tains, or discloses the information while acting in

17 whole or in part in the capacity of—

18 (A) a carrier providing a health benefit

19 plan;

20 (B) any other provider of a health benefit

21 plan, including any public entity that provides

22 payments for health care items and services

23 under a health benefit plan that are equivalent

24 to payments provided by a private person under

25 such a plan; or
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1 (C) an officer or employee of a person de2 scribed in subparagraph (A) or (B).

3 (3) HEALTH CARE PROVIDER.—The term

4 ‘‘health care provider’’ means a person who, with re5 spect to a specific item of protected health informa6 tion, receives, creates, uses, maintains, or discloses

7 the information while acting in whole or in part in

8 the capacity of—

9 (A) a person who is licensed, certified, reg10 istered, or otherwise authorized by law to pro11 vide an item or service that constitutes health

12 care in the ordinary course of business or prac13 tice of a profession;

14 (B) a Federal or State program that di15 rectly provides items or services that constitute

16 health care to beneficiaries; or

17 (C) an officer or employee of a person de18 scribed in subparagraph (A) or (B).

19 (4) HEALTH INFORMATION SERVICE ORGANIZA20 TION.—The term ‘‘health information service organi21 zation’’ means a person who, with respect to a spe22 cific item of protected health information, receives,

23 creates, uses, maintains, or discloses the information

24 while acting in whole or in part in the capacity of—
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1 (A) a person, other than an affiliated per2 son, who performs specific functions for which

3 the Secretary has authorized (by means of a

4 designation or certification) the person to re5 ceive access to health care data in electronic or

6 magnetic form that are regulated by this Act;

7 or

8 (B) an officer or employee of a person de9 scribed in subparagraph (A).

10 (5) HEALTH INFORMATION TRUSTEE.—The

11 term ‘‘health information trustee’’ means—

12 (A) a health care provider;

13 (B) a health information service organiza14 tion;

15 (C) a health oversight agency;

16 (D) a health benefit plan sponsor;

17 (E) a public health authority;

18 (F) a health researcher;

19 (G) a person who, with respect to a spe20 cific item of protected health information, is not

21 described in subparagraphs (A) through (F) but

22 receives the information—

23 (i) pursuant to—

24 (I) section 6417 (relating to

25 emergency circumstances);
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1 (II) section 6418 (relating to ju2 dicial and administrative purposes);

3 (III) section 6419 (relating to

4 law enforcement); or

5 (IV) section 6420 (relating to

6 subpoenas, warrants, and search war7 rants); or

8 (ii) while acting in whole or in part in

9 the capacity of an officer or employee of a

10 person described in clause (i).

11 (6) HEALTH OVERSIGHT AGENCY.—The term

12 ‘‘health oversight agency’’ means a person who, with

13 respect to a specific item of protected health infor14 mation, receives, creates, uses, maintains, or dis15 closes the information while acting in whole or in

16 part in the capacity of—

17 (A) a person who performs or oversees the

18 performance of an assessment, evaluation, de19 termination, or investigation relating to the li20 censing, accreditation, or certification of health

21 care providers;

22 (B) a person who—

23 (i) performs or oversees the perform24 ance of an audit, assessment, evaluation,

25 determination, or investigation relating to
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1 the effectiveness of, compliance with, or

2 applicability of, legal, fiscal, medical, or

3 scientific standards or aspects of perform4 ance related to the delivery of, or payment

5 for, health care; and

6 (ii) is a public agency, acting on be7 half of a public agency, acting pursuant to

8 a requirement of a public agency, or carry9 ing out activities under a State or Federal

10 statute regulating the assessment, evalua11 tion, determination, or investigation; or

12 (C) an officer or employee of a person de13 scribed in subparagraph (A) or (B).

14 (7) HEALTH RESEARCHER.—The term ‘‘health

15 researcher’’ means a person who, with respect to a

16 specific item of protected health information, re17 ceives the information—

18 (A) pursuant to section 6416 (relating to

19 health research); or

20 (B) while acting in whole or in part in the

21 capacity of an officer or employee of a person

22 described in subparagraph (A).

23 (8) PUBLIC HEALTH AUTHORITY.—The term

24 ‘‘public health authority’’ means a person who, with

25 respect to a specific item of protected health infor-
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1 mation, receives, creates, uses, maintains, or dis2 closes the information while acting in whole or in

3 part in the capacity of—

4 (A) an authority of the United States, a

5 State, or a political subdivision of a State that

6 is responsible for public health matters;

7 (B) a person acting under the direction of

8 such an authority; or

9 (C) an officer or employee of a person de10 scribed in subparagraph (A) or (B).

11 (c) OTHER DEFINITIONS.—For purposes of this sub12 title:

13 (1) AFFILIATED PERSON.—The term ‘‘affiliated

14 person’’ means a person who—

15 (A) is not a health information trustee;

16 (B) is a contractor, subcontractor, associ17 ate, or subsidiary of a person who is a health

18 information trustee; and

19 (C) pursuant to an agreement or other re20 lationship with such trustee, receives, creates,

21 uses, maintains, or discloses protected health

22 information.

23 (2) APPROVED HEALTH RESEARCH PROJECT.—

24 The term ‘‘approved health research project’’ means

25 a biomedical, epidemiological, or health services re-
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1 search or statistics project, or a research project on

2 behavioral and social factors affecting health, that

3 has been approved by a certified institutional review

4 board.

5 (3) CERTIFIED INSTITUTIONAL REVIEW

6 BOARD.—The term ‘‘certified institutional review

7 board’’ means a board—

8 (A) established by an entity to review re9 search involving protected health information

10 and the rights of protected individuals con11 ducted at or supported by the entity;

12 (B) established in accordance with regula13 tions of the Secretary under section 6416(e)(1);

14 and

15 (C) certified by the Secretary under section

16 6416(e)(2).

17 (4) HEALTH CARE.—The term ‘‘health care’’—

18 (A) means—

19 (i) any preventive, diagnostic, thera20 peutic, rehabilitative, maintenance, or pal21 liative care, counseling, service, or proce22 dure—

23 (I) with respect to the physical or

24 mental condition, or functional status,

25 of an individual; or
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1 (II) affecting the structure or

2 function of the human body or any

3 part of the human body, including

4 banking of blood, sperm, organs, or

5 any other tissue; or

6 (ii) any sale or dispensing of a drug,

7 device, equipment, or other item to an indi8 vidual, or for the use of an individual, pur9 suant to a prescription; but

10 (B) does not include any item or service

11 that is not furnished for the purpose of main12 taining or improving the health of an individual.

13 (5) LAW ENFORCEMENT INQUIRY.—The term

14 ‘‘law enforcement inquiry’’ means a lawful investiga15 tion or official proceeding inquiring into a violation

16 of, or failure to comply with, any criminal or civil

17 statute or any regulation, rule, or order issued pur18 suant to such a statute.

19 (6) PERSON.—The term ‘‘person’’ includes an

20 authority of the United States, a State, or a political

21 subdivision of a State.
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1 PART 1—DUTIES OF HEALTH INFORMATION

2 TRUSTEES

3 SEC. 6401. INSPECTION OF PROTECTED HEALTH INFORMA4 TION.

5 (a) IN GENERAL.—Except as provided in subsection

6 (b), a health information trustee described in subsection

7 (g)—

8 (1) shall permit a protected individual to in9 spect any protected health information about the in10 dividual that the trustee maintains, any accounting

11 with respect to such information required under sec12 tion 6404, and any copy of an authorization re13 quired under section 6412 that pertains to such in14 formation;

15 (2) shall provide the protected individual with a

16 copy of the information upon request by the individ17 ual and subject to any conditions imposed by the

18 trustee under subsection (d);

19 (3) shall permit a person who has been des20 ignated in writing by the protected individual to in21 spect the information on behalf of the individual or

22 to accompany the individual during the inspection;

23 and

24 (4) may offer to explain or interpret informa25 tion that is inspected or copied under this sub26 section.
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1 (b) EXCEPTIONS.—A health information trustee is

2 not required by this section to permit inspection or copy3 ing of protected health information by a protected individ4 ual if any of the following conditions apply:

5 (1) MENTAL HEALTH TREATMENT NOTES.—

6 The information consists of psychiatric, psycho7 logical, or mental health treatment notes about the

8 individual, the trustee determines in the exercise of

9 reasonable professional judgment that inspection or

10 copying of the notes would cause sufficient harm to

11 the protected individual so as to outweigh the desir12 ability of permitting access, and the trustee does not

13 disclose the notes to any person not directly engaged

14 in treating the individual, except with the authoriza15 tion of the individual or under compulsion of law.

16 (2) INFORMATION ABOUT OTHERS.—The infor17 mation relates to an individual, other than the pro18 tected individual or a health care provider, and the

19 trustee determines in the exercise of reasonable pro20 fessional judgment that inspection or copying of the

21 information would cause sufficient harm to one or

22 both of the individuals so as to outweigh the desir23 ability of permitting access.

24 (3) ENDANGERMENT TO LIFE OR SAFETY.—In25 spection or copying of the information could reason-
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1 ably be expected to endanger the life or physical

2 safety of an individual.

3 (4) CONFIDENTIAL SOURCE.—The information

4 identifies or could reasonably lead to the identifica5 tion of an individual (other than a health care pro6 vider) who provided information under a promise of

7 confidentiality to a health care provider concerning

8 a protected individual who is a subject of the infor9 mation.

10 (5) ADMINISTRATIVE PURPOSES.—The informa11 tion—

12 (A) is used by the trustee solely for admin13 istrative purposes and not in the provision of

14 health care to a protected individual who is a

15 subject of the information; and

16 (B) is not disclosed by the trustee to any

17 person.

18 (6) DUPLICATIVE INFORMATION.—The informa19 tion duplicates information available for inspection

20 under subsection (a).

21 (7) INFORMATION COMPILED IN ANTICIPATION

22 OF LITIGATION.—The information is compiled prin23 cipally—

24 (A) in anticipation of a civil, criminal, or

25 administrative action or proceeding; or
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1 (B) for use in such an action or proceed2 ing.

3 (c) INSPECTION AND COPYING OF SEGREGABLE POR4 TION.—A health information trustee shall permit inspec5 tion and copying under subsection (a) of any reasonably

6 segregable portion of a record after deletion of any portion

7 that is exempt under subsection (b).

8 (d) CONDITIONS.—A health information trustee

9 may—

10 (1) require a written request for the inspection

11 and copying of protected health information under

12 this section; and

13 (2) charge a reasonable cost-based fee for—

14 (A) permitting inspection of information

15 under this section; and

16 (B) providing a copy of protected health

17 information under this section.

18 (e) STATEMENT OF REASONS FOR DENIAL.—If a

19 health information trustee denies in whole or in part a

20 request for inspection or copying under this section, the

21 trustee shall provide the protected individual who made

22 the request with a written statement of the reasons for

23 the denial.

24 (f) DEADLINE.—A health information trustee shall

25 comply with or deny a request for inspection or copying
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1 of protected health information under this section within

2 the 30-day period beginning on the date the trustee re3 ceives the request.

4 (g) APPLICABILITY.—This section applies to a health

5 information trustee who is—

6 (1) a health benefit plan sponsor;

7 (2) a health care provider;

8 (3) a health information service organization;

9 (4) a health oversight agency; or

10 (5) a public health authority.

11 SEC. 6402. AMENDMENT OF PROTECTED HEALTH INFORMA12 TION.

13 (a) IN GENERAL.—A health information trustee de14 scribed in subsection (f) shall, within the 45-day period

15 beginning on the date the trustee receives from a protected

16 individual about whom the trustee maintains protected

17 health information a written request that the trustee cor18 rect or amend the information, complete the duties de19 scribed in one of the following paragraphs:

20 (1) CORRECTION OR AMENDMENT AND NOTIFI21 CATION.—The trustee shall—

22 (A) make the correction or amendment re23 quested;

24 (B) inform the protected individual of the

25 amendment or correction that has been made;
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1 (C) make reasonable efforts to inform any

2 person who is identified by the protected indi3 vidual, who is not an employee of the trustee,

4 and to whom the uncorrected or unamended

5 portion of the information was previously dis6 closed of the correction or amendment that has

7 been made; and

8 (D) at the request of the individual, make

9 reasonable efforts to inform any known source

10 of the uncorrected or unamended portion of the

11 information about the correction or amendment

12 that has been made.

13 (2) REASONS FOR REFUSAL AND REVIEW PRO14 CEDURES.—The trustee shall inform the protected

15 individual of—

16 (A) the reasons for the refusal of the trust17 ee to make the correction or amendment;

18 (B) any procedures for further review of

19 the refusal; and

20 (C) the individual’s right to file with the

21 trustee a concise statement setting forth the re22 quested correction or amendment and the indi23 vidual’s reasons for disagreeing with the refusal

24 of the trustee.
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1 (b) STANDARDS FOR CORRECTION OR AMEND2 MENT.—A trustee shall correct or amend protected health

3 information in accordance with a request made under sub4 section (a) if the trustee determines that the information

5 is not accurate, relevant, timely, or complete for the pur6 poses for which the information may be used or disclosed

7 by the trustee.

8 (c) STATEMENT OF DISAGREEMENT.—After a pro9 tected individual has filed a statement of disagreement

10 under subsection (a)(2)(C), the trustee, in any subsequent

11 disclosure of the disputed portion of the information, shall

12 include a copy of the individual’s statement and may in13 clude a concise statement of the trustee’s reasons for not

14 making the requested correction or amendment.

15 (d) CONSTRUCTION.—This section may not be con16 strued to require a health information trustee to conduct

17 a hearing or proceeding concerning a request for a correc18 tion or amendment to protected health information the

19 trustee maintains.

20 (e) CORRECTION.—For purposes of subsection (a), a

21 correction is deemed to have been made to protected

22 health information when—

23 (1) information that is not timely, accurate, rel24 evant, or complete is clearly marked as incorrect; or
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1 (2) supplementary correct information is made

2 part of the information and adequately cross-ref3 erenced.

4 (f) APPLICABILITY.—This section applies to a health

5 information trustee who is—

6 (1) a health benefit plan sponsor;

7 (2) a health care provider;

8 (3) a health information service organization;

9 (4) a health oversight agency; or

10 (5) a public health authority.

11 SEC. 6403. NOTICE OF INFORMATION PRACTICES.

12 (a) PREPARATION OF NOTICE.—A health information

13 trustee described in subsection (d) shall prepare a written

14 notice of information practices describing the following:

15 (1) The rights under this subtitle of a protected

16 individual who is the subject of protected health in17 formation, including the right to inspect and copy

18 such information and the right to seek amendments

19 to such information, and the procedures for author20 izing disclosures of protected health information and

21 for revoking such authorizations.

22 (2) The procedures established by the trustee

23 for the exercise of such rights.

24 (3) The uses and disclosures of protected health

25 information that are authorized under this subtitle.
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1 (b) DISSEMINATION OF NOTICE.—A health informa2 tion trustee—

3 (1) shall, upon request, provide any person with

4 a copy of the trustee’s notice of information prac5 tices (described in subsection (a)); and

6 (2) shall make reasonable efforts to inform per7 sons in a clear and conspicuous manner of the exist8 ence and availability of such notice.

9 (c) MODEL NOTICES.—Not later than July 1, 1996,

10 the Secretary, after notice and opportunity for public com11 ment, shall develop and disseminate model notices of infor12 mation practices for use by health information trustees

13 under this section.

14 (d) APPLICABILITY.—This section applies to a health

15 information trustee who is—

16 (1) a health benefit plan sponsor;

17 (2) a health care provider;

18 (3) a health information service organization; or

19 (4) a health oversight agency.

20 SEC. 6404. ACCOUNTING FOR DISCLOSURES.

21 (a) IN GENERAL.—Except as provided in subsection

22 (b) and section 6414, each health information trustee shall

23 create and maintain, with respect to any protected health

24 information the trustee discloses, a record of—

25 (1) the date and purpose of the disclosure;
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1 (2) the name of the person to whom the disclo2 sure was made;

3 (3) the address of the person to whom the dis4 closure was made or the location to which the disclo5 sure was made; and

6 (4) where practicable, a description of the infor7 mation disclosed.

8 (b) REGULATIONS.—Not later than July 1, 1996, the

9 Secretary shall promulgate regulations that exempt a

10 health information trustee from maintaining a record

11 under subsection (a) with respect protected health infor12 mation disclosed by the trustee for purposes of peer re13 view, licensing, certification, accreditation, and similar ac14 tivities.

15 SEC. 6405. SECURITY.

16 (a) IN GENERAL.—Each health information trustee

17 who receives or creates protected health information that

18 is subject to this subtitle shall maintain reasonable and

19 appropriate administrative, technical, and physical safe20 guards—

21 (1) to ensure the integrity and confidentiality of

22 the information;

23 (2) to protect against any reasonably antici24 pated—
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1 (A) threats or hazards to the security or

2 integrity of the information; and

3 (B) unauthorized uses or disclosures of the

4 information; and

5 (3) otherwise ensure compliance with this sub6 title by the trustee and the officers and employees

7 of the trustee.

8 (b) GUIDELINES.—Not later than July 1, 1996, the

9 Secretary, after notice and opportunity for public com10 ment, shall develop and disseminate guidelines for the im11 plementation of this section. The guidelines shall take into

12 account—

13 (1) the technical capabilities of record systems

14 used to maintain protected health information;

15 (2) the costs of security measures;

16 (3) the need for training persons who have ac17 cess to protected health information; and

18 (4) the value of audit trails in computerized

19 record systems.
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1 PART 2—USE AND DISCLOSURE OF PROTECTED

2 HEALTH INFORMATION

3 SEC. 6411. GENERAL LIMITATIONS ON USE AND DISCLO4 SURE.

5 (a) USE.—Except as otherwise provided under this

6 subtitle, a health information trustee may use protected

7 health information only for a purpose—

8 (1) that is compatible with and directly related

9 to the purpose for which the information—

10 (A) was collected; or

11 (B) was received by the trustee; or

12 (2) for which the trustee is authorized to dis13 close the information under this subtitle.

14 (b) DISCLOSURE.—A health information trustee may

15 disclose protected health information only as authorized

16 under this subtitle.

17 (c) SCOPE OF USES AND DISCLOSURES.—

18 (1) IN GENERAL.—A use or disclosure of pro19 tected health information by a health information

20 trustee shall be limited, when practicable, to the

21 minimum amount of information necessary to ac22 complish the purpose for which the information is

23 used or disclosed.

24 (2) GUIDELINES.—Not later than July 1, 1996,

25 the Secretary, after notice and opportunity for pub26 lic comment, shall issue guidelines to implement
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1 paragraph (1), which shall take into account the

2 technical capabilities of the record systems used to

3 maintain protected health information and the costs

4 of limiting use and disclosure.

5 (d) IDENTIFICATION OF DISCLOSED INFORMATION

6 AS PROTECTED INFORMATION.—Except with respect to

7 protected health information that is disclosed under sec8 tion 6414 (relating to next of kin and directory informa9 tion), a health information trustee may disclose protected

10 health information only if the recipient has been notified

11 that the information is protected health information that

12 is subject to this subtitle.

13 (e) AGREEMENT TO LIMIT USE OR DISCLOSURE.—

14 A health information trustee who receives protected health

15 information from any person pursuant to a written agree16 ment to restrict use or disclosure of the information to

17 a greater extent than otherwise would be required under

18 this subtitle shall comply with the terms of the agreement,

19 except where use or disclosure of the information in viola20 tion of the agreement is required by law. A trustee who

21 fails to comply with the preceding sentence shall be subject

22 to section 6451 (relating to civil actions) with respect to

23 such failure.

24 (f) NO GENERAL REQUIREMENT TO DISCLOSE.—

25 Nothing in this subtitle shall be construed to require a
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1 health information trustee to disclose protected health in2 formation not otherwise required to be disclosed by law.

3 SEC. 6412. AUTHORIZATIONS FOR DISCLOSURE OF PRO4 TECTED HEALTH INFORMATION.

5 (a) WRITTEN AUTHORIZATIONS.—A health informa6 tion trustee, other than a health information service orga7 nization, may disclose protected health information pursu8 ant to an authorization executed by the protected individ9 ual who is the subject of the information, if each of the

10 following requirements is satisfied:

11 (1) WRITING.—The authorization is in writing,

12 signed by the individual, and dated on the date of

13 such signature.

14 (2) SEPARATE FORM.—The authorization is not

15 on a form used to authorize or facilitate the provi16 sion of, or payment for, health care.

17 (3) TRUSTEE DESCRIBED.—The trustee is spe18 cifically named or generically described in the au19 thorization as authorized to disclose such informa20 tion.

21 (4) RECIPIENT DESCRIBED.—The person to

22 whom the information is to be disclosed is specifi23 cally named or generically described in the author24 ization as a person to whom such information may

25 be disclosed.
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1 (5) STATEMENT OF INTENDED USES AND DIS2 CLOSURES RECEIVED.—The authorization contains

3 an acknowledgment that the individual has received

4 a statement described in subsection (b) from such

5 person.

6 (6) INFORMATION DESCRIBED.—The informa7 tion to be disclosed is described in the authorization.

8 (7) AUTHORIZATION TIMELY RECEIVED.—The

9 authorization is received by the trustee during a pe10 riod described in subsection (c)(1).

11 (8) DISCLOSURE TIMELY MADE.—The disclo12 sure occurs during a period described in subsection

13 (c)(2).

14 (b) STATEMENT OF INTENDED USES AND DISCLO15 SURES.—

16 (1) IN GENERAL.—A person who wishes to re17 ceive from a health information trustee protected

18 health information about a protected individual pur19 suant to an authorization executed by the individual

20 shall supply the individual, in writing and on a form

21 that is distinct from the authorization, with a state22 ment of the uses for which the person intends the

23 information and the disclosures the person intends

24 to make of the information. Such statement shall be

25 supplied before the authorization is executed.
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1 (2) ENFORCEMENT.—If the person uses or dis2 closes the information in a manner that is inconsist3 ent with such statement, the person shall be subject

4 to section 6451 (relating to civil actions) with re5 spect to such failure, except where such use or dis6 closure is required by law.

7 (3) MODEL STATEMENTS.—Not later than July

8 1, 1996, the Secretary, after notice and opportunity

9 for public comment, shall develop and disseminate

10 model statements of intended uses and disclosures of

11 the type described in paragraph (1).

12 (c) TIME LIMITATIONS ON AUTHORIZATIONS.—

13 (1) RECEIPT BY TRUSTEE.—For purposes of

14 subsection (a)(7), an authorization is timely received

15 if it is received by the trustee during—

16 (A) the 1-year period beginning on the

17 date that the authorization is signed under sub18 section (a)(1), if the authorization permits the

19 disclosure of protected health information to—

20 (i) a health benefit plan sponsor;

21 (ii) a health care provider;

22 (iii) a health oversight agency;

23 (iv) a public health authority;

24 (v) a health researcher; or
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1 (vi) a person who provides counseling

2 or social services to individuals; or

3 (B) the 30-day period beginning on the

4 date that the authorization is signed under sub5 section (a)(1), if the authorization permits the

6 disclosure of protected health information to a

7 person other than a person described in sub8 paragraph (A).

9 (2) DISCLOSURE BY TRUSTEE.—For purposes

10 of subsection (a)(8), a disclosure is timely made if

11 it occurs before—

12 (A) the date or event (if any) specified in

13 the authorization upon which the authorization

14 expires; and

15 (B) the expiration of the 6-month period

16 beginning on the date the trustee receives the

17 authorization.

18 (d) REVOCATION OR AMENDMENT OF AUTHORIZA19 TION.—

20 (1) IN GENERAL.—A protected individual in

21 writing may revoke or amend an authorization de22 scribed in subsection (a), in whole or in part, at any

23 time, except insofar as—

24 (A) disclosure of protected health informa25 tion has been authorized to permit validation of
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1 expenditures based on health condition by a

2 government authority; or

3 (B) action has been taken in reliance on

4 the authorization.

5 (2) NOTICE OF REVOCATION.—A health infor6 mation trustee who discloses protected health infor7 mation in reliance on an authorization that has been

8 revoked shall not be subject to any liability or pen9 alty under this subtitle if—

10 (A) the reliance was in good faith;

11 (B) the trustee had no notice of the rev12 ocation; and

13 (C) the disclosure was otherwise in accord14 ance with the requirements of this section.

15 (e) ADDITIONAL REQUIREMENTS OF TRUSTEE.—A

16 health information trustee may impose requirements for

17 an authorization that are in addition to the requirements

18 in this section.

19 (f) COPY.—A health information trustee who dis20 closes protected health information pursuant to an author21 ization under this section shall maintain a copy of the au22 thorization.

23 (g) CONSTRUCTION.—This section may not be con24 strued—
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1 (1) to require a health information trustee to

2 disclose protected health information; or

3 (2) to limit the right of a health information

4 trustee to charge a fee for the disclosure or repro5 duction of protected health information.

6 (h) SUBPOENAS, WARRANTS, AND SEARCH WAR7 RANTS.—If a health information trustee discloses pro8 tected health information pursuant to an authorization in

9 order to comply with an administrative subpoena or war10 rant or a judicial subpoena or search warrant, the author11 ization—

12 (1) shall specifically authorize the disclosure for

13 the purpose of permitting the trustee to comply with

14 the subpoena, warrant, or search warrant; and

15 (2) shall otherwise meet the requirements in

16 this section.

17 SEC. 6413. TREATMENT, PAYMENT, AND OVERSIGHT.

18 (a) DISCLOSURES BY PLANS, PROVIDERS, AND

19 OVERSIGHT AGENCIES.—A health information trustee de20 scribed in subsection (d) may disclose protected health in21 formation to a health benefit plan sponsor, health care

22 provider, or health oversight agency if the disclosure is—

23 (1) for the purpose of providing health care and

24 a protected individual who is a subject of the infor-
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1 mation has not previously objected to the disclosure

2 in writing;

3 (2) for the purpose of providing for the pay4 ment for health care furnished to an individual; or

5 (3) for use by a health oversight agency for a

6 purpose that is described in subparagraph (A) or

7 (B)(i) of section 6400(b)(6).

8 (b) DISCLOSURES BY CERTAIN OTHER TRUSTEES.—

9 A health information trustee may disclose protected health

10 information to a health care provider if—

11 (1) the disclosure is for the purpose described

12 in subsection (a)(1); and

13 (2) the trustee—

14 (A) is a public health authority;

15 (B) received protected health information

16 pursuant to section 6417 (relating to emergency

17 circumstances); or

18 (C) is an officer or employee of a trustee

19 described in subsection (B).

20 (c) USE IN ACTION AGAINST INDIVIDUAL.—A person

21 who receives protected health information about a pro22 tected individual through a disclosure under this section

23 may not use or disclose the information in any administra24 tive, civil, or criminal action or investigation directed

25 against the individual, except an action or investigation
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1 arising out of and related to receipt of health care or pay2 ment for health care.

3 (d) APPLICABILITY.—A health information trustee

4 referred to in subsection (a) is any of the following:

5 (1) A health benefit plan sponsor.

6 (2) A health care provider.

7 (3) A health oversight agency.

8 (4) A health information service organization.

9 SEC. 6414. NEXT OF KIN AND DIRECTORY INFORMATION.

10 (a) NEXT OF KIN.—A health information trustee who

11 is a health care provider, who received protected health

12 information pursuant to section 6417 (relating to emer13 gency circumstances), or who is an officer or employee of

14 such a recipient may orally disclose protected health infor15 mation about a protected individual to the next of kin of

16 the individual (as defined under State law), or to a person

17 with whom the individual has a close personal relationship,

18 if—

19 (1) the trustee has no reason to believe that the

20 individual would consider the information especially

21 sensitive;

22 (2) the individual has not previously objected to

23 the disclosure;

24 (3) the disclosure is consistent with good medi25 cal or other professional practice; and
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1 (4) the information disclosed is limited to infor2 mation about health care that is being provided to

3 the individual at or about the time of the disclosure.

4 (b) DIRECTORY INFORMATION.—

5 (1) IN GENERAL.—A health information trustee

6 who is a health care provider, who received protected

7 health information pursuant to section 6417 (relat8 ing to emergency circumstances), or who is an offi9 cer or employee of a such a recipient may disclose

10 to any person the information described in para11 graph (2) if—

12 (A) a protected individual who is a subject

13 of the information has not objected in writing

14 to the disclosure;

15 (B) the disclosure is otherwise consistent

16 with good medical and other professional prac17 tice; and

18 (C) the information does not reveal specific

19 information about the physical or mental condi20 tion or functional status of a protected individ21 ual or about the health care provided to a pro22 tected individual.

23 (2) INFORMATION DESCRIBED.—The informa24 tion referred to in paragraph (1) is the following:
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1 (A) The name of an individual receiving

2 health care from a health care provider on a

3 premises controlled by the provider.

4 (B) The location of the individual on such

5 premises.

6 (C) The general health status of the indi7 vidual, described in terms of critical, poor, fair,

8 stable, satisfactory, or terms denoting similar

9 conditions.

10 (c) NO ACCOUNTING REQUIRED.—A health informa11 tion trustee who discloses protected health information

12 under this section is not required to maintain an account13 ing of the disclosure under section 6404.

14 (d) RECIPIENTS.—A person to whom protected

15 health information is disclosed under this section shall not,

16 by reason of such disclosure, be subject to any require17 ment under this subtitle.

18 SEC. 6415. PUBLIC HEALTH.

19 (a) IN GENERAL.—A health information trustee who

20 is a health care provider or a public health authority may

21 disclose protected health information to—

22 (1) a public health authority for use in legally

23 authorized—

24 (A) disease or injury reporting;

25 (B) public health surveillance; or
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1 (C) public health investigation or interven2 tion; or

3 (2) an individual who is authorized by law to

4 receive the information in a public health interven5 tion.

6 (b) USE IN ACTION AGAINST INDIVIDUAL.—A public

7 health authority who receives protected health information

8 about a protected individual through a disclosure under

9 this section may not use or disclose the information in any

10 administrative, civil, or criminal action or investigation di11 rected against the individual, except where the use or dis12 closure is authorized by law for protection of the public

13 health.

14 (c) INDIVIDUAL RECIPIENTS.—An individual to

15 whom protected health information is disclosed under sub16 section (a)(2) shall not, by reason of such disclosure, be

17 subject to any requirement under this subtitle.

18 SEC. 6416. HEALTH RESEARCH.

19 (a) IN GENERAL.—A health information trustee de20 scribed in subsection (d) may disclose protected health in21 formation to a person if—

22 (1) the person is conducting an approved health

23 research project;

24 (2) the information is to be used in the project;

25 and
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1 (3) the project has been determined by a cer2 tified institutional review board to be—

3 (A) of sufficient importance so as to out4 weigh the intrusion into the privacy of the pro5 tected individual who is the subject of the infor6 mation that would result from the disclosure;

7 and

8 (B) impracticable to conduct without the

9 information.

10 (b) DISCLOSURES BY HEALTH INFORMATION SERV11 ICE ORGANIZATIONS.—A health information service orga12 nization may disclose protected health information under

13 subsection (a) only if the certified institutional review

14 board referred to in subsection (a)(3) has been certified

15 as being qualified to make determinations under such sub16 section with respect to disclosures by such organizations.

17 (c) LIMITATIONS ON USE AND DISCLOSURE; OBLIGA18 TIONS OF RECIPIENT.—A health researcher who receives

19 protected health information about a protected individual

20 pursuant to subsection (a)—

21 (1) may use the information solely for purposes

22 of an approved health research project;

23 (2) may not use or disclose the information in

24 any administrative, civil, or criminal action or inves25 tigation directed against the individual; and
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1 (3) shall remove or destroy, at the earliest op2 portunity consistent with the purposes of the ap3 proved health research project in connection with

4 which the disclosure was made, information that

5 would enable an individual to be identified, unless a

6 certified institutional review board has determined

7 that there is a health or research justification for re8 tention of such identifiers and there is an adequate

9 plan to protect the identifiers from use and disclo10 sure that is inconsistent with this subtitle.

11 (d) APPLICABILITY.—A health information trustee

12 referred to in subsection (a) is any health information

13 trustee other than a person who, with respect to the spe14 cific protected health information to be disclosed under

15 such subsection, received the information—

16 (1) pursuant to—

17 (A) section 6418 (relating to judicial and

18 administrative purposes);

19 (B) paragraph (1), (2), or (3) of section

20 6419(a) (relating to law enforcement); or

21 (C) section 6420 (relating to subpoenas,

22 warrants, and search warrants); or

23 (2) while acting in whole or in part in the ca24 pacity of an officer or employee of a person de25 scribed in paragraph (1).
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1 (e) REQUIREMENTS FOR INSTITUTIONAL REVIEW

2 BOARDS.—

3 (1) REGULATIONS.—Not later than July 1,

4 1996, the Secretary, after opportunity for notice and

5 comment, shall promulgate regulations establishing

6 requirements for certified institutional review boards

7 under this subtitle. The regulations shall be based

8 on regulations promulgated under section 491(a) of

9 the Public Health Service Act and shall ensure that

10 certified institutional review boards are qualified to

11 assess and protect the confidentiality of research

12 subjects. The regulations shall include specific re13 quirements for certified institutional review boards

14 that make determinations under subsection (a)(3)

15 with respect to disclosures by health information

16 service organizations.

17 (2) CERTIFICATION.—The Secretary shall cer18 tify that an institutional review board satisfies the

19 requirements of the regulations promulgated under

20 paragraph (1).

21 SEC. 6417. EMERGENCY CIRCUMSTANCES.

22 (a) IN GENERAL.—A health information trustee may

23 disclose protected health information if the trustee be24 lieves, on reasonable grounds, that the disclosure is nec-
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1 essary to prevent or lessen a serious and imminent threat

2 to the health or safety of an individual.

3 (b) USE IN ACTION AGAINST INDIVIDUAL.—A person

4 who receives protected health information about a pro5 tected individual through a disclosure under this section

6 may not use or disclose the information in any administra7 tive, civil, or criminal action or investigation directed

8 against the individual, except an action or investigation

9 arising out of and related to receipt of health care or pay10 ment for health care.

11 SEC. 6418. JUDICIAL AND ADMINISTRATIVE PURPOSES.

12 (a) IN GENERAL.—A health information trustee de13 scribed in subsection (d) may disclose protected health in14 formation—

15 (1) pursuant to the Federal Rules of Civil Pro16 cedure, the Federal Rules of Criminal Procedure, or

17 comparable rules of other courts or administrative

18 agencies in connection with litigation or proceedings

19 to which a protected individual who is a subject of

20 the information is a party and in which the individ21 ual has placed the individual’s physical or mental

22 condition or functional status in issue;

23 (2) if directed by a court in connection with a

24 court-ordered examination of an individual; or
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1 (3) to assist in the identification of a dead indi2 vidual.

3 (b) WRITTEN STATEMENT.—A person seeking pro4 tected health information about a protected individual held

5 by health information trustee under—

6 (1) subsection (a)(1)—

7 (A) shall notify the protected individual or

8 the attorney of the protected individual of the

9 request for the information;

10 (B) shall provide the trustee with a signed

11 document attesting—

12 (i) that the protected individual is a

13 party to the litigation or proceedings for

14 which the information is sought;

15 (ii) that the individual has placed the

16 individual’s physical or mental condition or

17 functional status in issue; and

18 (iii) the date on which the protected

19 individual or the attorney of the protected

20 individual was notified under subparagraph

21 (A); and

22 (C) shall not accept any requested pro23 tected health information from the trustee until

24 the termination of the 10-day period beginning
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1 on the date notice was given under subpara2 graph (A); or

3 (2) subsection (a)(3) shall provide the trustee

4 with a written statement that the information is

5 sought to assist in the identification of a dead indi6 vidual.

7 (c) USE AND DISCLOSURE.—A person to whom pro8 tected health information is disclosed under this section

9 may use and disclose the information only to accomplish

10 the purpose for which the disclosure was made.

11 (d) APPLICABILITY.—A health information trustee

12 referred to in subsection (a) is any of the following:

13 (1) A health benefit plan sponsor.

14 (2) A health care provider.

15 (3) A health oversight agency.

16 (4) A person who, with respect to the specific

17 protected health information to be disclosed under

18 such subsection, received the information—

19 (A) pursuant to—

20 (i) section 6417 (relating to emer21 gency circumstances); or

22 (ii) section 6420 (relating to subpoe23 nas, warrants, and search warrants); or
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1 (B) while acting in whole or in part in the

2 capacity of an officer or employee of a person

3 described in subparagraph (A).

4 SEC. 6419. LAW ENFORCEMENT.

5 (a) IN GENERAL.—A health information trustee,

6 other than a health information service organization, may

7 disclose protected health information to a law enforcement

8 agency, other than a health oversight agency—

9 (1) if the information is disclosed for use in an

10 investigation or prosecution of a health information

11 trustee;

12 (2) in connection with criminal activity commit13 ted against the trustee or an affiliated person of the

14 trustee or on premises controlled by the trustee; or

15 (3) if the information is needed to determine

16 whether a crime has been committed and the nature

17 of any crime that may have been committed (other

18 than a crime that may have been committed by the

19 protected individual who is the subject of the infor20 mation).

21 (b) ADDITIONAL AUTHORITY OF CERTAIN TRUST22 EES.—A health information trustee who is not a health

23 information service organization, a public health author24 ity, or a health researcher may disclose protected health
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1 information to a law enforcement agency (other than a

2 health oversight agency)—

3 (1) to assist in the identification or location of

4 a victim, fugitive, or witness in a law enforcement

5 inquiry;

6 (2) pursuant to a law requiring the reporting of

7 specific health care information to law enforcement

8 authorities; or

9 (3) if the information is specific health informa10 tion described in paragraph (2) and the trustee is

11 operated by a Federal agency;

12 (c) CERTIFICATION.—Where a law enforcement agen13 cy requests a health information trustee to disclose pro14 tected health information under subsection (a) or (b)(1),

15 the agency shall provide the trustee with a written certifi16 cation that—

17 (1) is signed by a supervisory official of a rank

18 designated by the head of the agency;

19 (2) specifies the information requested; and

20 (3) states that the information is needed for a

21 lawful purpose under this section.

22 (d) RESTRICTIONS ON DISCLOSURE AND USE.—A

23 person who receives protected health information about a

24 protected individual through a disclosure under this sec25 tion may not use or disclose the information—
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1 (1) in any administrative, civil, or criminal ac2 tion or investigation directed against the individual,

3 except an action or investigation arising out of and

4 directly related to the action or investigation for

5 which the information was obtained; and

6 (2) otherwise unless the use or disclosure is

7 necessary to fulfill the purpose for which the infor8 mation was obtained and is not prohibited by any

9 other provision of law.

10 SEC. 6420. SUBPOENAS, WARRANTS, AND SEARCH WAR11 RANTS.

12 (a) IN GENERAL.—A health information trustee de13 scribed in subsection (g) may disclose protected health in14 formation if the disclosure is pursuant to any of the fol15 lowing:

16 (1) A subpoena issued under the authority of a

17 grand jury and the trustee is provided a written cer18 tification by the grand jury that the grand jury has

19 complied with the applicable access provisions of sec20 tion 6431.

21 (2) An administrative subpoena or warrant or

22 a judicial subpoena or search warrant and the trust23 ee is provided a written certification by the person

24 seeking the information that the person has com-
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1 plied with the applicable access provisions of section

2 6431 or 6433(a).

3 (3) An administrative subpoena or warrant or

4 a judicial subpoena or search warrant and the dis5 closure otherwise meets the conditions of one of sec6 tions 6413 through 6419.

7 (b) AUTHORITY OF ALL TRUSTEES.—Any health in8 formation trustee may disclose protected health informa9 tion if the disclosure is pursuant to subsection (a)(3).

10 (c) RESTRICTIONS ON USE AND DISCLOSURE.—Pro11 tected health information about a protected individual that

12 is disclosed by a health information trustee pursuant to—

13 (1) subsection (a)(2) may not be otherwise used

14 or disclosed by the recipient unless the use or disclo15 sure is necessary to fulfill the purpose for which the

16 information was obtained; and

17 (2) subsection (a)(3) may not be used or dis18 closed by the recipient unless the recipient complies

19 with the conditions and restrictions on use and dis20 closure with which the recipient would have been re21 quired to comply if the disclosure by the trustee had

22 been made under the section referred to in sub23 section (a)(3) the conditions of which were met by

24 the disclosure.
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1 (d) RESTRICTIONS ON GRAND JURIES.—Protected

2 health information that is disclosed by a health informa3 tion trustee under subsection (a)(1)—

4 (1) shall be returnable on a date when the

5 grand jury is in session and actually presented to

6 the grand jury;

7 (2) shall be used only for the purpose of consid8 ering whether to issue an indictment or report by

9 that grand jury, or for the purpose of prosecuting a

10 crime for which that indictment or report is issued,

11 or for a purpose authorized by rule 6(e) of the Fed12 eral Rules of Criminal Procedure or a comparable

13 State rule;

14 (3) shall be destroyed or returned to the trustee

15 if not used for one of the purposes specified in para16 graph (2); and

17 (4) shall not be maintained, or a description of

18 the contents of such information shall not be main19 tained, by any government authority other than in

20 the sealed records of the grand jury, unless such in21 formation has been used in the prosecution of a

22 crime for which the grand jury issued an indictment

23 or presentment or for a purpose authorized by rule

24 6(e) of the Federal Rules of Criminal Procedure or

25 a comparable State rule.
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1 (e) USE IN ACTION AGAINST INDIVIDUAL.—A person

2 who receives protected health information about a pro3 tected individual through a disclosure under this section

4 may not use or disclose the information in any administra5 tive, civil, or criminal action or investigation directed

6 against the individual, except an action or investigation

7 arising out of and directly related to the inquiry for which

8 the information was obtained;

9 (f) CONSTRUCTION.—Nothing in this section shall be

10 construed as authority for a health information trustee to

11 refuse to comply with a valid administrative subpoena or

12 warrant or a valid judicial subpoena or search warrant

13 that meets the requirements of this subtitle.

14 (g) APPLICABILITY.—A health information trustee

15 referred to in subsection (a) is any trustee other than the

16 following:

17 (1) A health information service organization.

18 (2) A public health authority.

19 (3) A health researcher.

20 SEC. 6421. HEALTH INFORMATION SERVICE ORGANIZA21 TIONS.

22 A health information trustee may disclose protected

23 health information to a health information service organi24 zation for the purpose of permitting the organization to

25 perform a function for which the Secretary has authorized
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1 (by means of a designation or certification) the organiza2 tion to receive access to health care data in electronic or

3 magnetic form that are regulated by this Act.

4 PART 3—ACCESS PROCEDURES AND CHALLENGE

5 RIGHTS

6 SEC. 6431. ACCESS PROCEDURES FOR LAW ENFORCEMENT

7 SUBPOENAS, WARRANTS, AND SEARCH WAR8 RANTS.

9 (a) PROBABLE CAUSE REQUIREMENT.—A govern10 ment authority may not obtain protected health informa11 tion about a protected individual from a health informa12 tion trustee under paragraph (1) or (2) of section 6420(a)

13 for use in a law enforcement inquiry unless there is prob14 able cause to believe that the information is relevant to

15 a legitimate law enforcement inquiry being conducted by

16 the government authority.

17 (b) WARRANTS AND SEARCH WARRANTS.—A govern18 ment authority that obtains protected health information

19 about a protected individual from a health information

20 trustee under circumstances described in subsection (a)

21 and pursuant to a warrant or search warrant shall, not

22 later than 30 days after the date the warrant was served

23 on the trustee, serve the individual with, or mail to the

24 last known address of the individual, a copy of the

25 warrant.
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1 (c) SUBPOENAS.—Except as provided in subsection

2 (d), a government authority may not obtain protected

3 health information about a protected individual from a

4 health information trustee under circumstances described

5 in subsection (a) and pursuant to a subpoena unless a

6 copy of the subpoena has been served by hand delivery

7 upon the individual, or mailed to the last known address

8 of the individual, on or before the date on which the sub9 poena was served on the trustee, together with a notice

10 (published by the Secretary under section 6435(1)) of the

11 individual’s right to challenge the subpoena in accordance

12 with section 6432, and—

13 (1) 30 days have passed from the date of serv14 ice, or 30 days have passed from the date of mailing,

15 and within such time period the individual has not

16 initiated a challenge in accordance with section

17 6432; or

18 (2) disclosure is ordered by a court under sec19 tion 6432.

20 (d) APPLICATION FOR DELAY.—

21 (1) IN GENERAL.—A government authority may

22 apply to an appropriate court to delay (for an initial

23 period of not longer than 90 days) serving a copy of

24 a subpoena and a notice otherwise required under

25 subsection (c) with respect to a law enforcement in-
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1 quiry. The government authority may apply to the

2 court for extensions of the delay.

3 (2) REASONS FOR DELAY.—An application for

4 a delay, or extension of a delay, under this sub5 section shall state, with reasonable specificity, the

6 reasons why the delay or extension is being sought.

7 (3) EX PARTE ORDER.—The court shall enter

8 an ex parte order delaying, or extending the delay

9 of, the notice and an order prohibiting the trustee

10 from revealing the request for, or the disclosure of,

11 the protected health information being sought if the

12 court finds that—

13 (A) the inquiry being conducted is within

14 the lawful jurisdiction of the government

15 authority seeking the protected health

16 information;

17 (B) there is probable cause to believe that

18 the protected health information being sought is

19 relevant to a legitimate law enforcement inquiry

20 being conducted by the government authority;

21 (C) the government authority’s need for

22 the information outweighs the privacy interest

23 of the protected individual who is the subject of

24 the information; and
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1 (D) there are reasonable grounds to believe

2 that receipt of a notice by the individual will re3 sult in—

4 (i) endangering the life or physical

5 safety of any individual;

6 (ii) flight from prosecution;

7 (iii) destruction of or tampering with

8 evidence or the information being sought;

9 or

10 (iv) intimidation of potential wit11 nesses.

12 (4) SERVICE OF APPLICATION ON INDIVID13 UAL.—Upon the expiration of a period of delay of

14 notice under this subsection, the government author15 ity shall serve upon the individual, with the service

16 of the subpoena and the notice, a copy of any appli17 cations filed and approved under this subsection.

18 SEC. 6432. CHALLENGE PROCEDURES FOR LAW ENFORCE19 MENT SUBPOENAS.

20 (a) MOTION TO QUASH SUBPOENA.—Within 30 days

21 of the date of service, or 30 days of the date of mailing,

22 of a subpoena of a government authority seeking protected

23 health information about a protected individual from a

24 health information trustee under paragraph (1) or (2) of

25 section 6420(a) (except a subpoena to which section 6433
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1 applies), the individual may file (without filing fee) a mo2 tion to quash the subpoena—

3 (1) in the case of a State judicial subpoena, in

4 the court which issued the subpoena;

5 (2) in the case of a subpoena issued under the

6 authority of a State that is not a State judicial sub7 poena, in a court of competent jurisdiction;

8 (3) in the case of a subpoena issued under the

9 authority of a Federal court, in any court of the

10 United States of competent jurisdiction; or

11 (4) in the case of any other subpoena issued

12 under the authority of the United States, in—

13 (A) the United States district court for the

14 district in which the individual resides or in

15 which the subpoena was issued; or

16 (B) another United States district court of

17 competent jurisdiction.

18 (b) COPY.—A copy of the motion shall be served by

19 the individual upon the government authority by delivery

20 of registered or certified mail.

21 (c) AFFIDAVITS AND SWORN DOCUMENTS.—The gov22 ernment authority may file with the court such affidavits

23 and other sworn documents as sustain the validity of the

24 subpoena. The individual may file with the court, within

25 5 days of the date of the authority’s filing, affidavits and
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1 sworn documents in response to the authority’s filing. The

2 court, upon the request of the individual, the government

3 authority, or both, may proceed in camera.

4 (d) PROCEEDINGS AND DECISION ON MOTION.—The

5 court may conduct such proceedings as it deems appro6 priate to rule on the motion. All such proceedings shall

7 be completed, and the motion ruled on, within 10 calendar

8 days of the date of the government authority’s filing.

9 (e) EXTENSION OF TIME LIMITS FOR GOOD

10 CAUSE.—The court, for good cause shown, may at any

11 time in its discretion enlarge the time limits established

12 by subsections (c) and (d).

13 (f) STANDARD FOR DECISION.—A court may deny a

14 motion under subsection (a) if it finds that there is prob15 able cause to believe that the protected health information

16 being sought is relevant to a legitimate law enforcement

17 inquiry being conducted by the government authority, un18 less the court finds that the individual’s privacy interest

19 outweighs the government authority’s need for the infor20 mation. The individual shall have the burden of dem21 onstrating that the individual’s privacy interest outweighs

22 the need established by the government authority for the

23 information.

24 (g) SPECIFIC CONSIDERATIONS WITH RESPECT TO

25 PRIVACY INTEREST.—In determining under subsection (f)
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1 whether an individual’s privacy interest outweighs the gov2 ernment authority’s need for the information, the court

3 shall consider—

4 (1) the particular purpose for which the infor5 mation was collected by the trustee;

6 (2) the degree to which disclosure of the infor7 mation will embarrass, injure, or invade the privacy

8 of the individual;

9 (3) the effect of the disclosure on the individ10 ual’s future health care;

11 (4) the importance of the inquiry being con12 ducted by the government authority, and the impor13 tance of the information to that inquiry; and

14 (5) any other factor deemed relevant by the

15 court.

16 (h) ATTORNEY’S FEES.—In the case of any motion

17 brought under subsection (a) in which the individual has

18 substantially prevailed, the court, in its discretion, may as19 sess against a government authority a reasonable attor20 ney’s fee and other litigation costs (including expert fees)

21 reasonably incurred.

22 (i) NO INTERLOCUTORY APPEAL.—A court ruling de23 nying a motion to quash under this section shall not be

24 deemed a final order and no interlocutory appeal may be

25 taken therefrom by the individual. An appeal of such a
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1 ruling may be taken by the individual within such period

2 of time as is provided by law as part of any appeal from

3 a final order in any legal proceeding initiated against the

4 individual arising out of or based upon the protect health

5 information disclosed.

6 SEC. 6433. ACCESS AND CHALLENGE PROCEDURES FOR

7 OTHER SUBPOENAS.

8 (a) IN GENERAL.—A person (other than a govern9 ment authority seeking protected health information under

10 circumstances described in section 6431(a)) may not ob11 tain protected health information about a protected indi12 vidual from a health information trustee pursuant to a

13 subpoena under section 6420(a)(2) unless—

14 (1) a copy of the subpoena has been served

15 upon the individual or mailed to the last known ad16 dress of the individual on or before the date on

17 which the subpoena was served on the trustee, to18 gether with a notice (published by the Secretary

19 under section 6435(2)) of the individual’s right to

20 challenge the subpoena, in accordance with sub21 section (b); and

22 (2) either—

23 (A) 30 days have passed from the date of

24 service or 30 days have passed from the date of

25 the mailing and within such time period the in-
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1 dividual has not initiated a challenge in accord2 ance with subsection (b); or

3 (B) disclosure is ordered by a court under

4 such subsection.

5 (b) MOTION TO QUASH.—Within 30 days of the date

6 of service or 30 days of the date of mailing of a subpoena

7 seeking protected health information about a protected in8 dividual from a health information trustee under sub9 section (a), the individual may file (without filing fee) in

10 any court of competent jurisdiction, a motion to quash the

11 subpoena, with a copy served on the person seeking the

12 information. The individual may oppose, or seek to limit,

13 the subpoena on any grounds that would otherwise be

14 available if the individual were in possession of the infor15 mation.

16 (c) STANDARD FOR DECISION.—The court shall

17 grant an individual’s motion under subsection (b) if the

18 person seeking the information has not sustained the bur19 den of demonstrating that—

20 (1) there are reasonable grounds to believe that

21 the information will be relevant to a lawsuit or other

22 judicial or administrative proceeding; and

23 (2) the need of the person for the information

24 outweighs the privacy interest of the individual.
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1 (d) SPECIFIC CONSIDERATIONS WITH RESPECT TO

2 PRIVACY INTEREST.—In determining under subsection (c)

3 whether the need of the person for the information out4 weighs the privacy interest of the individual, the court

5 shall consider—

6 (1) the particular purpose for which the infor7 mation was collected by the trustee;

8 (2) the degree to which disclosure of the infor9 mation will embarrass, injure, or invade the privacy

10 of the individual;

11 (3) the effect of the disclosure on the individ12 ual’s future health care;

13 (4) the importance of the information to the

14 lawsuit or proceeding; and

15 (5) any other factor deemed relevant by the

16 court.

17 (e) ATTORNEY’S FEES.—In the case of any motion

18 brought under subsection (b) by an individual against a

19 person in which the individual has substantially prevailed,

20 the court, in its discretion, may assess against the person

21 a reasonable attorney’s fee and other litigation costs (in22 cluding expert fees) reasonably incurred.
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1 SEC. 6434. CONSTRUCTION OF PART; SUSPENSION OF STAT2 UTE OF LIMITATIONS.

3 (a) IN GENERAL.—Nothing in this part shall affect

4 the right of a health information trustee to challenge a

5 request for protected health information. Nothing in this

6 part shall entitle a protected individual to assert the rights

7 of a health information trustee.

8 (b) EFFECT OF MOTION ON STATUTE OF LIMITA9 TIONS.—If an individual who is the subject of protected

10 health information files a motion under this part which

11 has the effect of delaying the access of a government au12 thority to such information, the period beginning on the

13 date such motion was filed and ending on the date on

14 which the motion is decided shall be excluded in computing

15 any period of limitations within which the government au16 thority may commence any civil or criminal action in con17 nection with which the access is sought.

18 SEC. 6435. RESPONSIBILITIES OF SECRETARY.

19 Not later than July 1, 1996, the Secretary, after no20 tice and opportunity for public comment, shall develop and

21 disseminate brief, clear, and easily understood model no22 tices—

23 (1) for use under subsection (c) of section

24 6431, detailing the rights of a protected individual

25 who wishes to challenge, under section 6432, the dis-
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1 closure of protected health information about the in2 dividual under such subsection; and

3 (2) for use under subsection (a) of section

4 6433, detailing the rights of a protected individual

5 who wishes to challenge, under subsection (b) of

6 such section, the disclosure of protected health infor7 mation about the individual under such section.

8 PART 4—MISCELLANEOUS PROVISIONS

9 SEC. 6441. PAYMENT CARD AND ELECTRONIC PAYMENT

10 TRANSACTIONS.

11 (a) PAYMENT FOR HEALTH CARE THROUGH CARD

12 OR ELECTRONIC MEANS.—If a protected individual pays

13 a health information trustee for health care by presenting

14 a debit, credit, or other payment card or account number,

15 or by any other electronic payment means, the trustee may

16 disclose to a person described in subsection (b) only such

17 protected health information about the individual as is

18 necessary for the processing of the payment transaction

19 or the billing or collection of amounts charged to, debited

20 from, or otherwise paid by, the individual using the card,

21 number, or other electronic payment means.

22 (b) TRANSACTION PROCESSING.—A person who is a

23 debit, credit, or other payment card issuer, is otherwise

24 directly involved in the processing of payment transactions

25 involving such cards or other electronic payment trans-
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1 actions, or is otherwise directly involved in the billing or

2 collection of amounts paid through such means, may only

3 use or disclose protected health information about a pro4 tected individual that has been disclosed in accordance

5 with subsection (a) when necessary for—

6 (1) the authorization, settlement, billing or col7 lection of amounts charged to, debited from, or oth8 erwise paid by, the individual using a debit, credit,

9 or other payment card or account number, or by

10 other electronic payment means;

11 (2) the transfer of receivables, accounts, or in12 terest therein;

13 (3) the audit of the credit, debit, or other pay14 ment card account information;

15 (4) compliance with Federal, State, or local law;

16 or

17 (5) a properly authorized civil, criminal, or reg18 ulatory investigation by Federal, State, or local au19 thorities.

20 SEC. 6442. ACCESS TO PROTECTED HEALTH INFORMATION

21 OUTSIDE OF THE UNITED STATES.

22 (a) IN GENERAL.—Notwithstanding the provisions of

23 part 2, and except as provided in subsection (b), a health

24 information trustee may not permit any person who is not

25 in a State to have access to protected health information
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1 about a protected individual unless one or more of the fol2 lowing conditions exist:

3 (1) SPECIFIC AUTHORIZATION.—The individual

4 has specifically consented to the provision of such

5 access outside of the United States in an authoriza6 tion that meets the requirements of section 6412.

7 (2) EQUIVALENT PROTECTION.—The provision

8 of such access is authorized under this subtitle and

9 the Secretary has determined that there are fair in10 formation practices for protected health information

11 in the jurisdiction where the access will be provided

12 that provide protections for individuals and pro13 tected health information that are equivalent to the

14 protections provided for by this subtitle.

15 (3) ACCESS REQUIRED BY LAW.—The provision

16 of such access is required under—

17 (A) a Federal statute; or

18 (B) a treaty or other international agree19 ment applicable to the United States.

20 (b) EXCEPTIONS.—Subsection (a) does not apply

21 where the provision of access to protected health informa22 tion—

23 (1) is to a foreign public health authority;

24 (2) is authorized under section 6414 (relating

25 to next of kin and directory information), 6416 (re-
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1 lating to health research), or 6417 (relating to emer2 gency circumstances); or

3 (3) is necessary for the purpose of providing for

4 payment for health care that has been provided to

5 an individual.

6 SEC. 6443. STANDARDS FOR ELECTRONIC DOCUMENTS AND

7 COMMUNICATIONS.

8 (a) STANDARDS.—Not later than July 1, 1996, the

9 Secretary, after notice and opportunity for public com10 ment and in consultation with appropriate private stand11 ard-setting organizations and other interested parties,

12 shall establish standards with respect to the creation,

13 transmission, receipt, and maintenance, in electronic and

14 magnetic form, of each type of written document specifi15 cally required or authorized under this subtitle. Where a

16 signature is required under any other provision of this

17 part, such standards shall provide for an electronic or

18 magnetic substitute that serves the functional equivalent

19 of a signature.

20 (b) TREATMENT OF COMPLYING DOCUMENTS AND

21 COMMUNICATIONS.—An electronic or magnetic document

22 or communication that satisfies the standards established

23 under subsection (a) with respect to such document or

24 communication shall be treated as satisfying the require-
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1 ments of this subtitle that apply to an equivalent written

2 document.

3 SEC. 6444. DUTIES AND AUTHORITIES OF AFFILIATED PER4 SONS.

5 (a) REQUIREMENTS ON TRUSTEES.—

6 (1) PROVISION OF INFORMATION.—A health in7 formation trustee may provide protected health in8 formation to a person who, with respect to the trust9 ee, is an affiliated person and may permit the affili10 ated person to use such information, only for the

11 purpose of conducting, supporting, or facilitating an

12 activity that the trustee is authorized to undertake.

13 (2) NOTICE TO AFFILIATED PERSON.—A health

14 information trustee shall notify a person who, with

15 respect to the trustee, is an affiliated person of any

16 duties under this subtitle that the affiliated person

17 is required to fulfill and of any authorities under

18 this subtitle that the affiliated person is authorized

19 to exercise.

20 (b) DUTIES OF AFFILIATED PERSONS.—

21 (1) IN GENERAL.—An affiliated person shall

22 fulfill any duty under this subtitle that—

23 (A) the health information trustee with

24 whom the person has an agreement or relation-
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1 ship described in section 6400(c)(1)(C) is re2 quired to fulfill; and

3 (B) the person has undertaken to fulfill

4 pursuant to such agreement or relationship.

5 (2) CONSTRUCTION OF OTHER PARTS.—With

6 respect to a duty described in paragraph (1) that an

7 affiliated person is required to fulfill, the person

8 shall be considered a health information trustee for

9 purposes of this subtitle. The person shall be subject

10 to part 5 (relating to enforcement) with respect to

11 any such duty that the person fails to fulfill.

12 (3) EFFECT ON TRUSTEE.—An agreement or

13 relationship with an affiliated person does not relieve

14 a health information trustee of any duty or liability

15 under this subtitle.

16 (c) AUTHORITIES OF AFFILIATED PERSONS.—

17 (1) IN GENERAL.—An affiliated person may

18 only exercise an authority under this subtitle that

19 the health information trustee with whom the person

20 is affiliated may exercise and that the person has

21 been given by the trustee pursuant to an agreement

22 or relationship described in section 6400(c)(1)(C).

23 With respect to any such authority, the person shall

24 be considered a health information trustee for pur25 poses of this subtitle. The person shall be subject to
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1 part 5 (relating to enforcement) with respect to any

2 act that exceeds such authority.

3 (2) EFFECT ON TRUSTEE.—An agreement or

4 relationship with an affiliated person does not affect

5 the authority of a health information trustee under

6 this subtitle.

7 SEC. 6445. AGENTS AND ATTORNEYS.

8 (a) IN GENERAL.—Except as provided in subsections

9 (b) and (c), a person who is authorized by law (on grounds

10 other than an individual’s minority), or by an instrument

11 recognized under law, to act as an agent, attorney, proxy,

12 or other legal representative for a protected individual or

13 the estate of a protected individual, or otherwise to exer14 cise the rights of the individual or estate, may, to the ex15 tent authorized, exercise and discharge the rights of the

16 individual or estate under this subtitle.

17 (b) HEALTH CARE POWER OF ATTORNEY.—A person

18 who is authorized by law (on grounds other than an indi19 vidual’s minority), or by an instrument recognized under

20 law, to make decisions about the provision of health care

21 to an individual who is incapacitated may exercise and dis22 charge the rights of the individual under this subtitle to

23 the extent necessary to effectuate the terms or purposes

24 of the grant of authority.
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1 (c) NO COURT DECLARATION.—If a health care pro2 vider determines that an individual, who has not been de3 clared to be legally incompetent, suffers from a medical

4 condition that prevents the individual from acting know5 ingly or effectively on the individual’s own behalf, the right

6 of the individual to authorize disclosure under section

7 6412 may be exercised and discharged in the best interest

8 of the individual by—

9 (1) a person described in subsection (b) with re10 spect to the individual;

11 (2) a person described in subsection (a) with re12 spect to the individual, but only if a person de13 scribed in paragraph (1) cannot be contacted after

14 a reasonable effort;

15 (3) the next of kin of the individual, but only

16 if a person described in paragraph (1) or (2) cannot

17 be contacted after a reasonable effort; or

18 (4) the health care provider, but only if a per19 son described in paragraph (1), (2), or (3) cannot be

20 contacted after a reasonable effort.

21 SEC. 6446. MINORS.

22 (a) INDIVIDUALS WHO ARE 18 OR LEGALLY CAPA23 BLE.—In the case of an individual—
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1 (1) who is 18 years of age or older, all rights

2 of the individual shall be exercised by the individual,

3 except as provided in section 6445; or

4 (2) who, acting alone, has the legal capacity to

5 apply for and obtain health care and has sought

6 such care, the individual shall exercise all rights of

7 an individual under this subtitle with respect to pro8 tected health information relating to such care.

9 (b) INDIVIDUALS UNDER 18.—Except as provided in

10 subsection (a)(2), in the case of an individual who is—

11 (1) under 14 years of age, all the individual’s

12 rights under this subtitle shall be exercised through

13 the parent or legal guardian of the individual; or

14 (2) 14, 15, 16, or 17 years of age, the right of

15 inspection (under section 6401), the right of amend16 ment (under section 6402), and the right to author17 ize disclosure of protected health information (under

18 section 6412) of the individual may be exercised ei19 ther by the individual or by the parent or legal

20 guardian of the individual.

21 SEC. 6447. MAINTENANCE OF CERTAIN PROTECTED

22 HEALTH INFORMATION.

23 (a) IN GENERAL.—A State shall establish a process

24 under which the protected health information described in

25 subsection (b) that is maintained by a person described
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1 in subsection (c) is delivered to, and maintained by, the

2 State or an individual or entity designated by the State.

3 (b) INFORMATION DESCRIBED.—The protected

4 health information referred to in subsection (a) is pro5 tected health information that—

6 (1) is recorded in any form or medium;

7 (2) is created by—

8 (A) a health care provider; or

9 (B) a health benefit plan sponsor that pro10 vides benefits in the form of items and services

11 to enrollees and not in the form of reimburse12 ment for items and services; and

13 (3) relates in any way to the past, present, or

14 future physical or mental health or condition or

15 functional status of a protected individual or the

16 provision of health care to a protected individual.

17 (c) PERSONS DESCRIBED.—A person referred to in

18 subsection (a) is any of the following:

19 (1) A health care facility previously located in

20 the State that has closed.

21 (2) A professional practice previously operated

22 by a health care provider in the State that has

23 closed.

24 (3) A health benefit plan sponsor that—
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1 (A) previously provided benefits in the

2 form of items and services to enrollees in the

3 State; and

4 (B) has ceased to do business.

5 PART 5—ENFORCEMENT

6 SEC. 6451. CIVIL ACTIONS.

7 (a) IN GENERAL.—Any individual whose right under

8 this subtitle has been knowingly or negligently violated—

9 (1) by a health information trustee, or any

10 other person, who is not described in paragraph (2),

11 (3), (4), or (5) may maintain a civil action for actual

12 damages and for equitable relief against the health

13 information trustee or other person;

14 (2) by an officer or employee of the United

15 States while the officer or employee was acting with16 in the scope of the office or employment may main17 tain a civil action for actual damages and for equi18 table relief against the United States;

19 (3) by an officer or employee of any government

20 authority of a State that has waived its sovereign

21 immunity to a claim for damages resulting from a

22 violation of this subtitle while the officer or employee

23 was acting within the scope of the office or employ24 ment may maintain a civil action for actual damages
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1 and for equitable relief against the State govern2 ment;

3 (4) by an officer or employee of a government

4 of a State that is not described in paragraph (3)

5 may maintain a civil action for actual damages and

6 for equitable relief against the officer or employee;

7 or

8 (5) by an officer or employee of a government

9 authority while the officer or employee was not act10 ing within the scope of the office or employment

11 may maintain a civil action for actual damages and

12 for equitable relief against the officer or employee.

13 (b) KNOWING VIOLATIONS.—Any individual entitled

14 to recover actual damages under this section because of

15 a knowing violation of a provision of this subtitle (other

16 than subsection (c) or (d) of section 6411) shall be entitled

17 to recover the amount of the actual damages demonstrated

18 or $5,000, whichever is greater.

19 (c) ACTUAL DAMAGES.—For purposes of this section,

20 the term ‘‘actual damages’’ includes damages paid to com21 pensate an individual for nonpecuniary losses such as

22 physical and mental injury as well as damages paid to

23 compensate for pecuniary losses.

24 (d) PUNITIVE DAMAGES; ATTORNEY’S FEES.—In

25 any action brought under this section in which the com-
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1 plainant has prevailed because of a knowing violation of

2 a provision of this subtitle (other than subsection (c) or

3 (d) of section 6411), the court may, in addition to any

4 relief awarded under subsections (a) and (b), award such

5 punitive damages as may be warranted. In such an action,

6 the court, in its discretion, may allow the prevailing party

7 a reasonable attorney’s fee (including expert fees) as part

8 of the costs, and the United States shall be liable for costs

9 the same as a private person.

10 (e) LIMITATION.—A civil action under this section

11 may not be commenced more than 2 years after the date

12 on which the aggrieved individual discovered the violation

13 or the date on which the aggrieved individual had a rea14 sonable opportunity to discover the violation, whichever oc15 curs first.

16 (f) INSPECTION AND AMENDMENT.—If a health in17 formation trustee has established a formal internal proce18 dure that allows an individual who has been denied inspec19 tion or amendment of protected health information to ap20 peal the denial, the individual may not maintain a civil

21 action in connection with the denial until the earlier of—

22 (1) the date the appeal procedure has been ex23 hausted; or

24 (2) the date that is 4 months after the date on

25 which the appeal procedure was initiated.
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1 (g) NO LIABILITY FOR PERMISSIBLE DISCLO2 SURES.—A health information trustee who makes a disclo3 sure of protected health information about a protected in4 dividual that is permitted by this subtitle and not other5 wise prohibited by State or Federal statute shall not be

6 liable to the individual for the disclosure under common

7 law.

8 (h) NO LIABILITY FOR INSTITUTIONAL REVIEW

9 BOARD DETERMINATIONS.—If the members of a certified

10 institutional review board have in good faith determined

11 that an approved health research project is of sufficient

12 importance so as to outweigh the intrusion into the privacy

13 of an individual pursuant to section 6416(a)(1), the mem14 bers, the board, and the parent institution of the board

15 shall not be liable to the individual as a result of such

16 determination.

17 (i) GOOD FAITH RELIANCE ON CERTIFICATION.—A

18 health information trustee who relies in good faith on a

19 certification by a government authority or other person

20 and discloses protected health information about an indi21 vidual in accordance with this subtitle shall not be liable

22 to the individual for such disclosure.

23 SEC. 6452. CIVIL MONEY PENALTIES.

24 (a) VIOLATION.—Any health information trustee who

25 the Secretary determines has demonstrated a pattern or
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1 practice of failure to comply with the provisions of this

2 subtitle shall be subject, in addition to any other penalties

3 that may be prescribed by law, to a civil money penalty

4 of not more than $10,000 for each such failure. In deter5 mining the amount of any penalty to be assessed under

6 the procedures established under subsection (b), the Sec7 retary shall take into account the previous record of com8 pliance of the person being assessed with the applicable

9 requirements of this subtitle and the gravity of the

10 violation.

11 (b) PROCEDURES FOR IMPOSITION OF PENALTIES.—

12 The provisions of section 1128A of the Social Security Act

13 (other than subsections (a) and (b)) shall apply to the im14 position of a civil monetary penalty under this section in

15 the same manner as such provisions apply with respect

16 to the imposition of a penalty under section 1128A of such

17 Act.

18 SEC. 6453. ALTERNATIVE DISPUTE RESOLUTION.

19 (a) IN GENERAL.—Not later than July 1, 1996, the

20 Secretary shall, by regulation, develop alternative dispute

21 resolution methods for use by individuals, health informa22 tion trustees, and other persons in resolving claims under

23 section 6451.

24 (b) EFFECT ON INITIATION OF CIVIL ACTIONS.—
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1 (1) IN GENERAL.—Subject to paragraph (2),

2 the regulations established under subsection (a) may

3 provide that an individual alleging that a right of

4 the individual under this subtitle has been violated

5 shall pursue at least one alternative dispute resolu6 tion method developed under such subsection as a

7 condition precedent to commencing a civil action

8 under section 6451.

9 (2) LIMITATION.—Such regulations may not re10 quire an individual to refrain from commencing a

11 civil action to pursue one or more alternative dispute

12 resolution method for a period that is greater than

13 6 months.

14 (3) SUSPENSION OF STATUTE OF LIMITA15 TIONS.—The regulations established by the Sec16 retary under subsection (a) may provide that a pe17 riod in which an individual described in paragraph

18 (1) pursues (as defined by the Secretary) an alter19 native dispute resolution method under this section

20 shall be excluded in computing the period of limita21 tions under section 6451(e).

22 (c) METHODS.—The methods under subsection (a)

23 shall include at least the following:

24 (1) ARBITRATION.—The use of arbitration.

25 (2) MEDIATION.—The use of mediation.
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1 (3) EARLY OFFERS OF SETTLEMENT.—The use

2 of a process under which parties make early offers

3 of settlement.

4 (d) STANDARDS FOR ESTABLISHING METHODS.—In

5 developing alternative dispute resolution methods under

6 subsection (a), the Secretary shall ensure that the meth7 ods promote the resolution of claims in a manner that—

8 (1) is affordable for the parties involved;

9 (2) provides for timely and fair resolution of

10 claims; and

11 (3) provides for reasonably convenient access to

12 dispute resolution for individuals.

13 SEC. 6454. AMENDMENTS TO CRIMINAL LAW.

14 (a) IN GENERAL.—Title 18, United States Code, is

15 amended by inserting after chapter 89 the following:

16 ‘‘CHAPTER 90—PROTECTED HEALTH

17 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.

18 ‘‘§ 1831. Definitions

19 ‘‘As used in this chapter—
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1 ‘‘(1) the term ‘health information trustee’ has

2 the meaning given such term in section 6400(b)(5)

3 of the Bipartisan Health Care Reform Act of 1994;

4 ‘‘(2) the term ‘protected health information’ has

5 the meaning given such term in section 6400(a)(3)

6 of such Act; and

7 ‘‘(3) the term ‘protected individual’ has the

8 meaning given such term in section 6400(a)(4) of

9 such Act.

10 ‘‘§ 1832. Obtaining protected health information

11 under false pretenses

12 ‘‘Whoever under false pretenses—

13 ‘‘(1) requests or obtains protected health infor14 mation from a health information trustee; or

15 ‘‘(2) obtains from a protected individual an au16 thorization for the disclosure of protected health in17 formation about the individual maintained by a

18 health information trustee;

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

20 5 years, or both.

21 ‘‘§ 1833. Monetary gain from obtaining protected

22 health information under false pretenses

23 ‘‘Whoever under false pretenses—

24 ‘‘(1) requests or obtains protected health infor25 mation from a health information trustee with the
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1 intent to sell, transfer, or use such information for

2 profit or monetary gain; or

3 ‘‘(2) obtains from a protected individual an au4 thorization for the disclosure of protected health in5 formation about the individual maintained by a

6 health information trustee with the intent to sell,

7 transfer, or use such authorization for profit or

8 monetary gain;

9 and knowingly sells, transfers, or uses such information

10 or authorization for profit or monetary gain shall be fined

11 under this title or imprisoned not more than 10 years, or

12 both.

13 ‘‘§ 1834. Knowing and unlawful obtaining of pro14 tected health information

15 ‘‘Whoever knowingly obtains protected health infor16 mation from a health information trustee in violation of

17 subtitle E of title VI of the Bipartisan Health Care Re18 form Act of 1994, knowing that such obtaining is unlaw19 ful, shall be fined under this title or imprisoned not more

20 than 5 years, or both.

21 ‘‘§ 1835. Monetary gain from knowing and unlawful

22 obtaining of protected health information

23 ‘‘Whoever knowingly—

24 ‘‘(1) obtains protected health information from

25 a health information trustee in violation of subtitle
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1 E of title VI of the Bipartisan Health Care Reform

2 Act of 1994, knowing that such obtaining is unlaw3 ful and with the intent to sell, transfer, or use such

4 information for profit or monetary gain; and

5 ‘‘(2) knowingly sells, transfers, or uses such in6 formation for profit or monetary gain;

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

8 10 years, or both.

9 ‘‘§ 1836. Knowing and unlawful use or disclosure of

10 protected health information

11 ‘‘Whoever knowingly uses or discloses protected

12 health information in violation of subtitle E of title VI of

13 the Bipartisan Health Care Reform Act of 1994, knowing

14 that such use or disclosure is unlawful, shall be fined

15 under this title or imprisoned not more than 5 years, or

16 both.

17 ‘‘§ 1837. Monetary gain from knowing and unlawful

18 sale, transfer, or use of protected health

19 information

20 ‘‘Whoever knowingly sells, transfers, or uses pro21 tected health information in violation of subtitle E of title

22 VI of the Bipartisan Health Care Reform Act of 1994,

23 knowing that such sale, transfer, or use is unlawful, shall

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

25 years, or both.’’.
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1 (b) CLERICAL AMENDMENT.—The table of chapters

2 for part I of title 18, United States Code, is amended by

3 inserting after the item relating to chapter 89 the follow4 ing:

‘‘90. Protected health information .............................................. 1831’’.

5 PART 6—AMENDMENTS TO TITLE 5, UNITED

6 STATES CODE

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

8 CODE.

9 (a) NEW SUBSECTION.—Section 552a of title 5,

10 United States Code, is amended by adding at the end the

11 following:

12 ‘‘(w) MEDICAL EXEMPTIONS.—The head of an agen13 cy that is a health information trustee (as defined in sec14 tion 6400(b)(5) of the Bipartisan Health Care Reform Act

15 of 1994) shall promulgate rules, in accordance with the

16 requirements (including general notice) of subsections

17 (b)(1), (b)(2), (b)(3), (c), and (e) of section 553 of this

18 title, to exempt a system of records within the agency, to

19 the extent that the system of records contains protected

20 health information (as defined in section 6400(a)(3) of

21 such Act), from all provisions of this section except sub22 sections (e)(1), (e)(2), subparagraphs (A) through (C) and

23 (E) through (I) of subsection (e)(4), and subsections
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1 (e)(5), (e)(6), (e)(9), (e)(12), (l), (n), (o), (p), (q), (r), and

2 (u).’’.

3 (b) REPEAL.—Section 552a(f)(3) of title 5, United

4 States Code, is amended by striking ‘‘pertaining to him,’’

5 and all that follows through the semicolon and inserting

6 ‘‘pertaining to the individual;’’.

7 PART 7—REGULATIONS, RESEARCH, AND EDU8 CATION; EFFECTIVE DATES; APPLICABILITY;

9 AND RELATIONSHIP TO OTHER LAWS

10 SEC. 6471. REGULATIONS; RESEARCH AND EDUCATION.

11 (a) REGULATIONS.—Not later than July 1, 1996, the

12 Secretary shall prescribe regulations to carry out this sub13 title.

14 (b) RESEARCH AND TECHNICAL SUPPORT.—The

15 Secretary may sponsor—

16 (1) research relating to the privacy and security

17 of protected health information;

18 (2) the development of consent forms governing

19 disclosure of such information; and

20 (3) the development of technology to implement

21 standards regarding such information.

22 (c) EDUCATION.—The Secretary shall establish edu23 cation and awareness programs—

24 (1) to foster adequate security practices by

25 health information trustees;
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1 (2) to train personnel of health information

2 trustees respecting the duties of such personnel with

3 respect to protected health information; and

4 (3) to inform individuals and employers who

5 purchase health care respecting their rights with re6 spect to such information.

7 SEC. 6472. EFFECTIVE DATES.

8 (a) IN GENERAL.—Except as provided in subsection

9 (b), this subtitle, and the amendments made by this sub10 title, shall take effect on January 1, 1997.

11 (b) PROVISIONS EFFECTIVE IMMEDIATELY.—A pro12 vision of this subtitle shall take effect on the date of the

13 enactment of this Act if the provision—

14 (1) imposes a duty on the Secretary to develop,

15 establish, or promulgate regulations, guidelines, no16 tices, statements, or education and awareness pro17 grams; or

18 (2) authorizes the Secretary to sponsor research

19 or the development of forms or technology.

20 SEC. 6473. APPLICABILITY.

21 (a) PROTECTED HEALTH INFORMATION.—Except as

22 provided in subsections (b) and (c), the provisions of this

23 subtitle shall apply to any protected health information

24 that is received, created, used, maintained, or disclosed by

25 a health information trustee in a State on or after Janu-
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1 ary 1, 1997, regardless of whether the information existed

2 or was disclosed prior to such date.

3 (b) EXCEPTION.—

4 (1) IN GENERAL.—The provisions of this sub5 title shall not apply to a trustee described in para6 graph (2), except with respect to protected health in7 formation that is received by the trustee on or after

8 January 1, 1997.

9 (2) APPLICABILITY.—A trustee referred to in

10 paragraph (1) is—

11 (A) a health researcher; or

12 (B) a person who, with respect to specific

13 protected health information, received the

14 information—

15 (i) pursuant to—

16 (I) section 6417 (relating to

17 emergency circumstances);

18 (II) section 6418 (relating to ju19 dicial and administrative purposes);

20 (III) section 6419 (relating to

21 law enforcement); or

22 (IV) section 6420 (relating to

23 subpoenas, warrants, and search war24 rants); or
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1 (ii) while acting in whole or in part in

2 the capacity of an officer or employee of a

3 person described in clause (i).

4 (c) AUTHORIZATIONS FOR DISCLOSURES.—An au5 thorization for the disclosure of protected health informa6 tion about a protected individual that is executed by the

7 individual before January 1, 1997, and is recognized and

8 valid under State law on December 31, 1996, shall remain

9 valid and shall not be subject to the requirements of sec10 tion 6412 until January 1, 1998, or the occurrence of the

11 date or event (if any) specified in the authorization upon

12 which the authorization expires, whichever occurs earlier.

13 SEC. 6474. RELATIONSHIP TO OTHER LAWS.

14 (a) STATE LAW.—Except as otherwise provided in

15 subsections (b), (c), (d), and (f), a State may not estab16 lish, continue in effect, or enforce any State law to the

17 extent that the law is inconsistent with, or imposes addi18 tional requirements with respect to, any of the following:

19 (1) A duty of a health information trustee

20 under this subtitle.

21 (2) An authority of a health information trustee

22 under this subtitle to disclose protected health infor23 mation.
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1 (3) A provision of part 3 (relating to access

2 procedures and challenge rights), part 4 (miscellane3 ous provisions), or part 5 (relating to enforcement).

4 (b) LAWS RELATING TO PUBLIC HEALTH AND MEN5 TAL HEALTH.—This subtitle does not preempt, supersede,

6 or modify the operation of any State law regarding public

7 health or mental health to the extent that the law prohibits

8 or regulates a disclosure of protected health information

9 that is permitted under this subtitle.

10 (c) CRIMINAL PENALTIES.—A State may establish

11 and enforce criminal penalties with respect to a failure to

12 comply with a provision of this subtitle.

13 (d) PRIVILEGES.—A privilege that a person has

14 under law in a court of a State or the United States or

15 under the rules of any agency of a State or the United

16 States may not be diminished, waived, or otherwise af17 fected by—

18 (1) the execution by a protected individual of an

19 authorization for disclosure of protected health in20 formation under this subtitle, if the authorization is

21 executed for the purpose of receiving health care or

22 providing for the payment for health care; or

23 (2) any provision of this subtitle that authorizes

24 the disclosure of protected health information for the
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1 purpose of receiving health care or providing for the

2 payment for health care.

3 (e) DEPARTMENT OF VETERANS AFFAIRS.—The lim4 itations on use and disclosure of protected health informa5 tion under this subtitle shall not be construed to prevent

6 any exchange of such information within and among com7 ponents of the Department of Veterans Affairs that deter8 mine eligibility for or entitlement to, or that provide, bene9 fits under laws administered by the Secretary of Veterans

10 Affairs.

11 (f) CERTAIN DUTIES UNDER STATE OR FEDERAL

12 LAW.—This subtitle shall not be construed to preempt,

13 supersede, or modify the operation of any of the following:

14 (1) Any law that provides for the reporting of

15 vital statistics such as birth or death information.

16 (2) Any law requiring the reporting of abuse or

17 neglect information about any individual.

18 (3) Subpart II of part E of title XXVI of the

19 Public Health Service Act (relating to notifications

20 of emergency response employees of possible expo21 sure to infectious diseases).

22 (4) The Americans with Disabilities Act of

23 1990.
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1 (5) Any Federal or State statute that estab2 lishes a privilege for records used in health profes3 sional peer review activities.

4 (g) SECRETARIAL AUTHORITY.—

5 (1) SECRETARY OF HEALTH AND HUMAN SERV6 ICES.—A provision of this subtitle does not preempt,

7 supersede, or modify the operation of section 543 of

8 the Public Health Service Act, except to the extent

9 that the Secretary of Health and Human Services

10 determines through regulations promulgated by such

11 Secretary that the provision provides greater protec12 tion for protected health information, and the rights

13 of protected individuals, than is provided under such

14 section 543.

15 (2) SECRETARY OF VETERANS AFFAIRS.—A

16 provision of this subtitle does not preempt, super17 sede, or modify the operation of section 7332 of title

18 38, United States Code, except to the extent that

19 the Secretary of Veterans Affairs determines

20 through regulations promulgated by such Secretary

21 that the provision provides greater protection for

22 protected health information, and the rights of pro23 tected individuals, than is provided under such sec24 tion 7332.
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1 Subtitle F—Antitrust

2 SEC. 6501. PUBLICATION OF ANTITRUST GUIDELINES ON

3 ACTIVITIES OF HEALTH PLANS.

4 (a) IN GENERAL.—The Attorney General shall pro5 vide for the development and publication of explicit guide6 lines on the application of antitrust laws to the activities

7 of health plans. The guidelines shall be designed to facili8 tate development and operation of plans, consistent with

9 the antitrust laws.

10 (b) REVIEW PROCESS.—The Attorney General shall

11 establish a review process under which the administrator

12 or sponsor of a health plan (or organization that proposes

13 to administer or sponsor a health plan) may submit a re14 quest to the Attorney General to obtain a prompt opinion

15 (but in no event later than 90 days after the Attorney

16 General receives the request) from the Department of Jus17 tice on the plan’s conformity with the Federal antitrust

18 laws.

19 (c) DEFINITIONS.—In this section—

20 (1) the term ‘‘antitrust laws’’—

21 (A) has the meaning given it in subsection

22 (a) of the first section of the Clayton Act (15

23 U.S.C. 12(a)), except that such term includes

24 section 5 of the Federal Trade Commission Act
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1 (15 U.S.C. 45) to the extent such section ap2 plies to unfair methods of competition, and

3 (B) includes any State law similar to the

4 laws referred to in subparagraph (A); and

5 (2) the term ‘‘health plan’’ means any contract

6 or arrangement under which an entity bears all or

7 part of the cost of providing health care items and

8 services, including a hospital or medical expense in9 curred policy or certificate, hospital or medical serv10 ice plan contract, or health maintenance subscriber

11 contract, but does not include—

12 (A) coverage only for accident, dental, vi13 sion, disability, or long term care, medicare

14 supplemental health insurance, or any combina15 tion thereof,

16 (B) coverage issued as a supplement to li17 ability insurance,

18 (C) workers’ compensation or similar in19 surance, or

20 (D) automobile medical-payment insur21 ance.

22 SEC. 6502. ISSUANCE OF HEALTH CARE CERTIFICATES OF

23 PUBLIC ADVANTAGE.

24 (a) ISSUANCE AND EFFECT OF CERTIFICATE.—The

25 Attorney General, after consultation with the Secretary,
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1 shall issue in accordance with this section a certificate of

2 public advantage to each eligible health care collaborative

3 activity that complies with the requirements in effect

4 under this section on or after the expiration of the 1-year

5 period that begins on the date of the enactment of this

6 Act (without regard to whether or not the Attorney Gen7 eral has promulgated regulations to carry out this section

8 by such date). Such activity, and the parties to such activ9 ity, shall not be liable under any of the antitrust laws for

10 conduct described in such certificate and engaged in by

11 such activity if such conduct occurs while such certificate

12 is in effect.

13 (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF

14 CERTIFICATES.—

15 (1) STANDARDS TO BE MET.—The Attorney

16 General shall issue a certificate to an eligible health

17 care collaborative activity if the Attorney General

18 finds that—

19 (A) the benefits that are likely to result

20 from carrying out the activity outweigh the re21 duction in competition (if any) that is likely to

22 result from the activity, and

23 (B) such reduction in competition is nec24 essary to obtain such benefits.

25 (2) FACTORS TO BE CONSIDERED.—
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1 (A) WEIGHING OF BENEFITS AGAINST RE2 DUCTION IN COMPETITION.—For purposes of

3 making the finding described in paragraph

4 (1)(A), the Attorney General shall consider

5 whether the activity is likely—

6 (i) to maintain or to increase the

7 quality of health care by providing new

8 services not currently offered in the rel9 evant market,

10 (ii) to increase access to health care,

11 (iii) to achieve cost efficiencies that

12 will be passed on to health care consumers,

13 such as economies of scale, reduced trans14 action costs, and reduced administrative

15 costs, that cannot be achieved by the provi16 sion of available services and facilities in

17 the relevant market,

18 (iv) to preserve the operation of

19 health care facilities located in underserved

20 geographical areas,

21 (v) to improve utilization of health

22 care resources, and

23 (vi) to reduce inefficient health care

24 resource duplication.
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1 (B) NECESSITY OF REDUCTION IN COM2 PETITION.—For purposes of making the finding

3 described in paragraph (1)(B), the Attorney

4 General shall consider—

5 (i) the ability of the providers of

6 health care services that are (or likely to

7 be) affected by the health care collabo8 rative activity and the entities responsible

9 for making payments to such providers to

10 negotiate societally optimal payment and

11 service arrangements,

12 (ii) the effects of the health care col13 laborative activity on premiums and other

14 charges imposed by the entities described

15 in clause (i), and

16 (iii) the availability of equally effi17 cient, less restrictive alternatives to achieve

18 the benefits that are intended to be

19 achieved by carrying out the activity.

20 (c) ESTABLISHMENT OF CRITERIA AND PROCE21 DURES.—Subject to subsections (d) and (e), not later than

22 1 year after the date of the enactment of this Act, the

23 Attorney General and the Secretary shall establish jointly

24 by rule the criteria and procedures applicable to the issu25 ance of certificates under subsection (a). The rules shall
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1 specify the form and content of the application to be sub2 mitted to the Attorney General to request a certificate,

3 the information required to be submitted in support of

4 such application, the procedures applicable to denying and

5 to revoking a certificate, and the procedures applicable to

6 the administrative appeal (if such appeal is authorized by

7 rule) of the denial and the revocation of a certificate. Such

8 information may include the terms of the health care col9 laborative activity (in the case of an activity in existence

10 as of the time of the application) and implementation plan

11 for the collaborative activity.

12 (d) ELIGIBLE HEALTH CARE COLLABORATIVE AC13 TIVITY.—To be an eligible health care collaborative activ14 ity for purposes of this section, a health care collaborative

15 activity shall submit to the Attorney General an applica16 tion that complies with the rules in effect under subsection

17 (c) and that includes—

18 (1) an agreement by the parties to the activity

19 that the activity will not foreclose competition by en20 tering into contracts that prevent health care provid21 ers from providing health care in competition with

22 the activity,

23 (2) an agreement that the activity will submit

24 to the Attorney General annually a report that de25 scribes the operations of the activity and information
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1 regarding the impact of the activity on health care

2 and on competition in health care, and

3 (3) an agreement that the parties to the activity

4 will notify the Attorney General and the Secretary of

5 the termination of the activity not later than 30

6 days after such termination occurs.

7 (e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—

8 Not later than 90 days after an eligible health care col9 laborative activity submits to the Attorney General an ap10 plication that complies with the rules in effect under sub11 section (c) and with subsection (d), the Attorney General

12 shall issue or deny the issuance of such certificate. If, be13 fore the expiration of such 90-day period, the Attorney

14 General may extend the time for issuance for good cause.

15 (f) REVOCATION OF CERTIFICATE.—Whenever the

16 Attorney General finds that a health care collaborative ac17 tivity with respect to which a certificate is in effect does

18 not meet the standards specified in subsection (b), the At19 torney General shall revoke such certificate.

20 (g) WRITTEN REASONS; JUDICIAL REVIEW.—

21 (1) DENIAL AND REVOCATION OF CERTIFI22 CATES.—If the Attorney General denies an applica23 tion for a certificate or revokes a certificate, the At24 torney General shall include in the notice of denial
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1 or revocation a statement of the reasons relied upon

2 for the denial or revocation of such certificate.

3 (2) JUDICIAL REVIEW.—

4 (A) AFTER ADMINISTRATIVE PROCEED5 ING.—(i) If the Attorney General denies an ap6 plication submitted or revokes a certificate is7 sued under this section after an opportunity for

8 hearing on the record, then any party to the

9 health care collaborative activity involved may

10 commence a civil action, not later than 60 days

11 after receiving notice of the denial or revoca12 tion, in an appropriate district court of the

13 United States for review of the record of such

14 denial or revocation.

15 (ii) As part of the Attorney General’s an16 swer, the Attorney General shall file in such

17 court a certified copy of the record on which

18 such denial or revocation is based. The findings

19 of fact of the Attorney General may be set aside

20 only if found to be unsupported by substantial

21 evidence in such record taken as a whole.

22 (B) DENIAL OR REVOCATION WITHOUT AD23 MINISTRATIVE PROCEEDING.—If the Attorney

24 General denies an application submitted or re25 vokes a certificate issued under this section
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1 without an opportunity for hearing on the

2 record, then any party to the health care col3 laborative activity involved may commence a

4 civil action, not later than 60 days after receiv5 ing notice of the denial or revocation, in an ap6 propriate district court of the United States for

7 de novo review of such denial or revocation.

8 (h) EXEMPTION.—A person shall not be liable under

9 any of the antitrust laws for conduct necessary—

10 (1) to prepare, agree to prepare, or attempt to

11 agree to prepare an application to request a certifi12 cate under this section, or

13 (2) to attempt to enter into any health care col14 laborative activity with respect to which such a cer15 tificate is in effect.

16 (i) DEFINITIONS.—In this section:

17 (1) The term ‘‘antitrust laws’’ has the meaning

18 given it in section 6501(c)(1).

19 (2) The term ‘‘certificate’’ means a certificate

20 of public advantage authorized to be issued under

21 subsection (a).

22 (3) The term ‘‘health care collaborative activ23 ity’’ means an agreement (whether existing or pro24 posed) between 2 or more providers of health care

25 services that is entered into solely for the purpose of
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1 sharing in the provision and coordination of health

2 care services and that involves substantial integra3 tion and financial risk-sharing between the parties,

4 but does not include the exchanging of information,

5 the entering into of any agreement, or the engage6 ment in any other conduct that is not reasonably re7 quired to carry out such agreement.

8 (4) The term ‘‘health care services’’ includes

9 services related to the delivery or administration of

10 health care services.

11 (5) The term ‘‘liable’’ means liable for any civil

12 or criminal violation of the antitrust laws.

13 (6) The term ‘‘provider of health care services’’

14 means any individual or entity that is engaged in the

15 delivery of health care services in a State and that

16 is required by State law or regulation to be licensed

17 or certified by the State to engage in the delivery of

18 such services in the State.

19 SEC. 6503. STUDY OF IMPACT ON COMPETITION.

20 The Attorney General, in consultation with the Chair21 man of the Federal Trade Commission, annually shall sub22 mit to the Congress a report as part of the annual budget

23 oversight proceedings concerning the Antitrust Division of

24 the Department of Justice. The report shall enable the

25 Congress to determine how enforcement of antitrust laws
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1 is affecting the formation of efficient, cost-saving joint

2 ventures and if the certificate of public advantage proce3 dure set forth in section 6502 has resulted in undesirable

4 reduction in competition in the health care marketplace.

5 The report shall include an evaluation of the factors set

6 forth in paragraphs (2)(A) and (2)(B) of section 6502(b).

7 Subtitle G—Fraud and Abuse

8 PART 1—ESTABLISHMENT OF ALL-PAYER

9 HEALTH CARE FRAUD AND ABUSE CONTROL

10 PROGRAM

11 SEC. 6601. ALL-PAYER HEALTH CARE FRAUD AND ABUSE

12 CONTROL PROGRAM.

13 (a) IN GENERAL.—Not later than January 1, 1996,

14 the Attorney General shall establish a program—

15 (1) to coordinate Federal, State, and local law

16 enforcement programs to control fraud and abuse

17 with respect to the delivery of and payment for

18 health care in the United States,

19 (2) to conduct investigations, audits, evalua20 tions, and inspections relating to the delivery of and

21 payment for health care in the United States, and

22 (3) in consultation with the Inspector General

23 of the Department of Health and Human Services,

24 to facilitate the enforcement of the provisions of sec25 tions 1128, 1128A, and 1128B of the Social Secu-
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1 rity Act and other statutes applicable to health care

2 fraud and abuse.

3 (b) COORDINATION WITH LAW ENFORCEMENT

4 AGENCIES.—In carrying out the program under sub5 section (a), the Attorney General shall consult with, and

6 arrange for the sharing of data and resources with Fed7 eral, State and local law enforcement agencies, State Med8 icaid Fraud Control Units, and State agencies responsible

9 for the licensing and certification of health care providers.

10 (c) COORDINATION WITH THIRD PARTY INSUR11 ERS.—In carrying out the program established under sub12 section (a), the Attorney General shall consult with, and

13 arrange for the sharing of data with representatives of pri14 vate sponsors of health benefit plans and other providers

15 of health insurance.

16 (d) REGULATIONS.—

17 (1) IN GENERAL.—The Attorney General shall

18 by regulation establish standards to carry out the

19 program under subsection (a).

20 (2) INFORMATION STANDARDS.—

21 (A) IN GENERAL.—Such standards shall

22 include standards relating to the furnishing of

23 information by health insurers (including self24 insured health benefit plans), providers, and

25 others to enable the Attorney General to carry
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1 out the program (including coordination with

2 law enforcement agencies under subsection (b)

3 and third party insurers under subsection (c)).

4 (B) CONFIDENTIALITY.—Such standards

5 shall include procedures to assure that such in6 formation is provided and utilized in a manner

7 that protects the confidentiality of the informa8 tion and the privacy of individuals receiving

9 health care services.

10 (C) QUALIFIED IMMUNITY FOR PROVIDING

11 INFORMATION.—The provisions of section

12 1157(a) of the Social Security Act (relating to

13 limitation on liability) shall apply to a person

14 providing information to the Attorney General

15 under the program under this section, with re16 spect to the Attorney General’s performance of

17 duties under the program, in the same manner

18 as such section applies to information provided

19 to organizations with a contract under part B

20 of title XI of such Act, with respect to the per21 formance of such a contract.
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1 SEC. 6602. AUTHORIZATION OF ADDITIONAL APPROPRIA2 TIONS FOR INVESTIGATORS AND OTHER PER3 SONNEL.

4 In addition to any other amounts authorized to be

5 appropriated to the Attorney General for health care anti6 fraud and abuse activities for a fiscal year, there are au7 thorized to be appropriated such sums as may be nec8 essary to enable the Attorney General to conduct inves9 tigations of allegations of health care fraud and otherwise

10 carry out the program established under section 6601 in

11 a fiscal year.

12 SEC. 6603. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE

13 TRUST FUND.

14 (a) ESTABLISHMENT.—There is hereby created on

15 the books of the Treasury of the United States a trust

16 fund to be known as the ‘‘Anti-Fraud and Abuse Trust

17 Fund’’ (in this section referred to as the ‘‘Trust Fund’’).

18 The Trust Fund shall consist of such amounts as may be

19 deposited in, or appropriated to, such Trust Fund as pro20 vided in this part and section 1128A(f)(3) of the Social

21 Security Act.

22 (b) MANAGEMENT.—

23 (1) IN GENERAL.—The Trust Fund shall be

24 managed by the Attorney General through a Manag25 ing Trustee designated by the Attorney General.
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1 (2) INVESTMENT OF FUNDS.—It shall be the

2 duty of the Managing Trustee to invest such portion

3 of the Trust Fund as is not, in the trustee’s judg4 ment, required to meet current withdrawals. Such

5 investments may be made only in interest-bearing

6 obligations of the United States or in obligations

7 guaranteed as to both principal and interest by the

8 United States. For such purpose such obligations

9 may be acquired on original issue at the issue price,

10 or by purchase of outstanding obligations at market

11 price. The purposes for which obligations of the

12 United States may be issued under chapter 31 of

13 title 31, United States Code, are hereby extended to

14 authorize the issuance at par of public-debt obliga15 tions for purchase by the Trust Fund. Such obliga16 tions issued for purchase by the Trust Fund shall

17 have maturities fixed with due regard for the needs

18 of the Trust Fund and shall bear interest at a rate

19 equal to the average market yield (computed by the

20 Managing Trustee on the basis of market quotations

21 as of the end of the calendar month next preceding

22 the date of such issue) on all marketable interest23 bearing obligations of the United States then form24 ing a part of the public debt which are not due or

25 callable until after the expiration of 4 years from the
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1 end of such calendar month, except that where such

average is not a multiple of 1 2 ⁄8 of 1 percent, the rate

3 of interest on such obligations shall be the multiple

of 1 4 ⁄8 of 1 percent nearest such market yield. The

5 Managing Trustee may purchase other interest-bear6 ing obligations of the United States or obligations

7 guaranteed as to both principal and interest by the

8 United States, on original issue or at the market

9 price, only where the Trustee determines that the

10 purchase of such other obligations is in the public

11 interest.

12 (3) Any obligations acquired by the Trust Fund

13 (except public-debt obligations issued exclusively to

14 the Trust Fund) may be sold by the Managing

15 Trustee at the market price, and such public-debt

16 obligations may be redeemed at par plus accrued in17 terest.

18 (4) The interest on, and the proceeds from the

19 sale or redemption of, any obligations held in the

20 Trust Fund shall be credited to and form a part of

21 the Trust Fund.

22 (5) The receipts and disbursements of the At23 torney General in the discharge of the functions of

24 the Attorney General shall not be included in the to25 tals of the budget of the United States Government.
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1 For purposes of part C of the Balanced Budget and

2 Emergency Deficit Control Act of 1985, the Attor3 ney General and the Trust Fund shall be treated in

4 the same manner as the Federal Retirement Thrift

5 Investment Board and the Thrift Savings Fund, re6 spectively. The United States is not liable for any

7 obligation or liability incurred by the Trust Fund.

8 (c) USE OF FUNDS.—Of the amounts in the Trust

9 Fund—

10 (1) not less than 60 percent shall be used to

11 support educational activities to prevent the occur12 rence of violations of anti-fraud and abuse laws, in13 cluding the issuance of advisory opinions under sec14 tion 1129 and 1877(i) of the Social Security Act (as

15 added by part 4) and fraud alerts, seminars for pro16 viders, and program updates; and

17 (2) any amounts remaining after use for activi18 ties under paragraph (1) shall be used to assist the

19 Attorney General in carrying out the all-payer fraud

20 and abuse control program established under section

21 6601(a) in the fiscal year involved.

22 (d) DEPOSIT OF FEDERAL HEALTH ANTI-FRAUD

23 AND ABUSE PENALTIES INTO TRUST FUND.—Section

24 1128A(f)(3) of the Social Security Act (42 U.S.C. 1320a–

25 7a(f)(3)) is amended by striking ‘‘as miscellaneous re-
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1 ceipts of the Treasury of the United States’’ and inserting

2 ‘‘in the Anti-Fraud and Abuse Trust Fund established

3 under section 6603(a) of the Bipartisan Health Care Re4 form Act of 1994’’.

5 (e) USE OF FEDERAL HEALTH ANTI-FRAUD AND

6 ABUSE PENALTIES TO REPAY BENEFICIARIES FOR COST7 SHARING.—Section 1128A(f) of the Social Security Act

8 (42 U.S.C. 1320a–7a(f)) is amended in the matter preced9 ing paragraph (1) by striking ‘‘Secretary and disposed of

10 as follows:’’ and inserting the following: ‘‘Secretary. If the

11 person against whom such a penalty or assessment was

12 assessed collected a payment from an individual for pro13 viding to the individual the service that is the subject of

14 the penalty or assessment, the Secretary shall pay a por15 tion of the amount recovered to the individual in the na16 ture of restitution in an amount equal to the payment so

17 collected. The Secretary shall dispose of any remaining

18 amounts recovered under this section as follows:’’.

19 PART 2—REVISIONS TO CURRENT SANCTIONS

20 FOR FRAUD AND ABUSE

21 SEC. 6611. MANDATORY EXCLUSION FROM PARTICIPATION

22 IN MEDICARE AND STATE HEALTH CARE PRO23 GRAMS.

24 (a) INDIVIDUAL CONVICTED OF FELONY RELATING

25 TO FRAUD.—
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1 (1) IN GENERAL.—Section 1128(a) of the So2 cial Security Act (42 U.S.C. 1320a–7(a)) is amend3 ed by adding at the end the following new para4 graph:

5 ‘‘(3) FELONY CONVICTION RELATING TO

6 FRAUD.—Any individual or entity that has been con7 victed, under Federal or State law, in connection

8 with the delivery of a health care item or service on

9 or after the date of the enactment of this paragraph,

10 or with respect to any act or omission on or after

11 such date in a program (other than those specifically

12 described in paragraph (1)) operated by or financed

13 in whole or in part by any Federal, State, or local

14 government agency, of a criminal offense consisting

15 of a felony relating to fraud, theft, embezzlement,

16 breach of fiduciary responsibility, or other financial

17 misconduct.’’.

18 (2) CONFORMING AMENDMENT.—Section

19 1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))

20 is amended—

21 (A) in the heading, by striking ‘‘CONVIC22 TION’’ and inserting ‘‘MISDEMEANOR CONVIC23 TION’’; and
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1 (B) by striking ‘‘criminal offense’’ and in2 serting ‘‘criminal offense consisting of a mis3 demeanor’’.

4 (b) INDIVIDUAL CONVICTED OF FELONY RELATING

5 TO CONTROLLED SUBSTANCE.—

6 (1) IN GENERAL.—Section 1128(a) of the So7 cial Security Act (42 U.S.C. 1320a–7(a)), as amend8 ed by subsection (a), is amended by adding at the

9 end the following new paragraph:

10 ‘‘(4) FELONY CONVICTION RELATING TO CON11 TROLLED SUBSTANCE.—Any individual or entity

12 that has been convicted, under Federal or State law,

13 of a criminal offense consisting of a felony relating

14 to the unlawful manufacture, distribution, prescrip15 tion, or dispensing of a controlled substance.’’.

16 (2) CONFORMING AMENDMENT.—Section

17 1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))

18 is amended—

19 (A) in the heading, by striking ‘‘CONVIC20 TION’’ and inserting ‘‘MISDEMEANOR CONVIC21 TION’’; and

22 (B) by striking ‘‘criminal offense’’ and in23 serting ‘‘criminal offense consisting of a mis24 demeanor’’.
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1 SEC. 6612. ESTABLISHMENT OF MINIMUM PERIOD OF EX2 CLUSION FOR CERTAIN INDIVIDUALS AND

3 ENTITIES SUBJECT TO PERMISSIVE EXCLU4 SION FROM MEDICARE AND STATE HEALTH

5 CARE PROGRAMS.

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

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

8 the following new subparagraphs:

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

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

11 the period of the exclusion shall be 3 years, unless the

12 Secretary determines in accordance with published regula13 tions that a shorter period is appropriate because of miti14 gating circumstances or that a longer period is appro15 priate because of aggravating circumstances.

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

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

18 exclusion shall not be less than the period during which

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

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

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

22 State health care program.

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

24 entity under subsection (b)(6)(B), the period of the exclu25 sion shall be not less than 1 year.’’.
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1 SEC. 6613. REVISIONS TO CRIMINAL PENALTIES.

2 (a) CLARIFICATION OF DISCOUNT EXCEPTION TO

3 ANTI-KICKBACK PROVISIONS.—Section 1128B(b)(3)(A)

4 of the Social Security Act (42 U.S.C. 1320a–7b(b)(3)(A))

5 is amended—

6 (1) by inserting ‘‘(regardless of its timing or

7 availability)’’ after ‘‘in price’’; and

8 (2) by striking ‘‘program;’’ and inserting ‘‘pro9 gram and is not paid in the form of currency or

10 coin;’’.

11 (b) EXEMPTION FROM ANTI-KICKBACK PENALTIES

12 FOR CERTAIN MANAGED CARE ARRANGEMENTS.—Section

13 1128B(b)(3) of such Act (42 U.S.C. 1320a–7b(b)(3)) is

14 amended—

15 (1) by striking ‘‘and’’ at the end of subpara16 graph (D);

17 (2) by striking the period at the end of sub18 paragraph (E) and inserting ‘‘; and’’; and

19 (3) by adding at the end the following new sub20 paragraph:

21 ‘‘(F) any reduction in cost sharing or increased

22 benefits given to an individual, any amounts paid to

23 a provider for an item or service furnished to an in24 dividual, or any discount or reduction in price given

25 by the provider for such an item or service, if—
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1 ‘‘(A) the item or service is provided

2 through an organization described in section

3 1877(b)(3), or

4 ‘‘(B) the item or service is provided

5 through such an organization on behalf of an6 other entity (including but not limited to a self7 insured employer or indemnity plan) that as8 sumes financial risk for the provision of the

9 item or service.’’.

10 (c) EXEMPTION FROM ANTI-KICKBACK PENALTIES

11 FOR CERTAIN PROTECTED FINANCIAL RELATIONSHIPS.—

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

13 7b(b)(3)), as amended by subsection (b), is further

14 amended—

15 (1) by striking ‘‘and’’ at the end of subpara16 graph (E);

17 (2) by striking the period at the end of sub18 paragraph (F) and inserting ‘‘; and’’; and

19 (3) by adding at the end the following new sub20 paragraph:

21 ‘‘(G) any amount in a financial relationship of

22 a physician (or an immediate family member of such

23 physician) with an entity specified in section

24 1877(a)(2), if section 1877(a)(1) does not apply to

25 that amount or financial relationship.’’.
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1 (d) EXEMPTION FROM ANTI-KICKBACK PENALTIES

2 FOR CERTAIN COLLABORATIVE EFFORTS THAT BENEFIT

3 MEDICALLY UNDERSERVED PERSONS.—

4 (1) IN GENERAL.—Section 1128B(b)(3) of such

5 Act (42 U.S.C. 1320a–7b(b)(3)), as amended by

6 subsections (b) and (c), is further amended—

7 (A) by striking ‘‘and’’ at the end of sub8 paragraph (F);

9 (B) by striking the period at the end of

10 subparagraph (G) and inserting ‘‘; and’’; and

11 (C) by adding at the end the following new

12 subparagraph:

13 ‘‘(F) any remuneration paid by or to a re14 cipient or subrecipient of Federal grant funds

15 under or in connection with an arrangement for

16 the procurement of goods or services by the re17 cipient or subrecipient, the referral of patients,

18 or the lease or purchase of space or equipment,

19 if—

20 ‘‘(i) the arrangement is in writing and

21 signed by the parties;

22 ‘‘(ii) the arrangement will result in

23 the savings of Federal grant funds or in24 creased revenues to the recipient or sub25 recipient that will be used to increase the
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1 availability or accessibility of services to a

2 medically underserved population served by

3 the recipient or subrecipient or an im4 provement in the quality of services to

5 such population, except that the recipient

6 or subrecipient may seek a prior deter7 mination from the Public Health Service

8 that this requirement is met and, if the re9 cipient or subrecipient does so, Public

10 Health Service approval shall be conclusive

11 and binding on the Federal Government;

12 ‘‘(iii) the arrangement will not result

13 in private inurement to any current em14 ployees or members of the Board of Direc15 tors of the recipient or subrecipient, or to

16 agents of the recipient or subrecipient who

17 were involved in recommending or nego18 tiating the arrangement;

19 ‘‘(iv) with respect to an arrangement

20 under which a recipient or subrecipient is

21 procuring goods or services, the provider of

22 the goods or services is the only provider

23 able to supply such goods or services, or

24 the recipient or subrecipient has engaged

25 in a competitive process to procure the
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1 goods or services that meets the require2 ments for competition under Federal grant

3 awards;

4 ‘‘(v) with respect to an arrangement

5 for a referral of patients, the arrangement

6 will assure that all patients covered or af7 fected by the arrangement are advised that

8 they may request a referral to any person

9 or entity of their choosing, subject to ap10 propriate contractual limitations under

11 which the recipient or subrecipient may op12 erate as a health plan or as a contract

13 health plan provider and such limitations

14 as the patient may be under as an enrollee

15 of a health plan;

16 ‘‘(vi) with respect to an arrangement

17 for a referral of patients, the arrangement

18 will not interfere with the discretion of

19 health professionals to refer patients in a

20 manner they believe will most appro21 priately deal with a patient’s particular cir22 cumstances, subject to appropriate con23 tractual limitations under which the recipi24 ent or subrecipient may operate as a

25 health plan or as a contract health plan
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1 provider and such limitations as the pa2 tient may be under as an enrollee of a

3 health plan; and

4 ‘‘(vii) with respect to an arrangement

5 that does not meet the requirements of any

6 of the preceding clauses, the recipient or

7 subrecipient of Federal grant funds in8 volved has applied to the Secretary for ap9 proval of the arrangement and the Sec10 retary, after consultation with the Inspec11 tor General of the Department of Health

12 and Human Services, has approved the ar13 rangement based upon a finding that the

14 arrangement will produce a substantial

15 benefit to a medically underserved popu16 lation that outweighs the arrangement’s

17 failure to fully satisfy all of the above re18 quirements.

19 In this subparagraph, a ‘recipient’ means a

20 public or nonprofit private entity that receives

21 a grant or cooperative agreement under the

22 Public Health Service Act or title V, and a

23 ‘subrecipient’ means a public or nonprofit pri24 vate entity that performs substantive work

25 under a grant or cooperative agreement under
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1 the Public Health Service Act or title V to a re2 cipient.’’.

3 (2) EFFECTIVE DATE.—The amendments made

4 by paragraph (1) shall take effect after the expira5 tion of the 6-month period that begins on the date

6 of the enactment of this Act.

7 SEC. 6615. REVISIONS TO LIMITATIONS ON PHYSICIAN

8 SELF-REFERRAL.

9 (a) CLARIFICATION OF COVERAGE OF RADIOLOGY OR

10 DIAGNOSTIC SERVICES.—Section 1877(h)(6) of the Social

11 Security Act (42 U.S.C. 1395nn(h)(6)) is amended by

12 striking subparagraph (D).

13 (b) NEW EXCEPTION FOR SHARED FACILITY SERV14 ICES.—Section 1877(b) of such Act (42 U.S.C.

15 1395nn(b)) is amended—

16 (1) by redesignating paragraph (4) as para17 graph (5); and

18 (2) by inserting after paragraph (3) the follow19 ing new paragraph:

20 ‘‘(4) SHARED FACILITY SERVICES.—

21 ‘‘(A) IN GENERAL.—In the case of a

22 shared facility service of a shared facility—

23 ‘‘(i) that is furnished—

24 ‘‘(I) personally by the referring

25 physician who is a shared facility phy-
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1 sician or personally by an individual

2 directly employed or directly super3 vised by such a physician,

4 ‘‘(II) by a shared facility in a

5 building in which the referring physi6 cian furnishes substantially all of the

7 services of the physician that are un8 related to the furnishing of shared fa9 cility services, and

10 ‘‘(III) to a patient of a shared fa11 cility physician; and

12 ‘‘(ii) that is billed by the referring

13 physician.

14 ‘‘(B) SHARED FACILITY RELATED DEFINI15 TIONS.—

16 ‘‘(i) SHARED FACILITY SERVICE.—

17 The term ‘shared facility service’ means,

18 with respect to a shared facility, a des19 ignated health service furnished by the fa20 cility to patients of shared facility physi21 cians.

22 ‘‘(ii) SHARED FACILITY.—The term

23 ‘shared facility’ means an entity that fur24 nishes shared facility services under a

25 shared facility arrangement.
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1 ‘‘(iii) SHARED FACILITY PHYSICIAN.—

2 The term ‘shared facility physician’ means,

3 with respect to a shared facility, a physi4 cian who has a financial relationship under

5 a shared facility arrangement with the fa6 cility.

7 ‘‘(iv) SHARED FACILITY ARRANGE8 MENT.—The term ‘shared facility arrange9 ment’ means, with respect to the provision

10 of shared facility services in a building, a

11 financial arrangement—

12 ‘‘(I) which is only between physi13 cians who are providing services (un14 related to shared facility services) in

15 the same building,

16 ‘‘(II) in which the overhead ex17 penses of the facility are shared, in

18 accordance with methods previously

19 determined by the physicians in the

20 arrangement, among the physicians in

21 the arrangement, and

22 ‘‘(III) which, in the case of a cor23 poration, is wholly owned and con24 trolled by shared facility physicians.’’.
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1 (c) REVISION TO RURAL PROVIDER EXCEPTION.—

2 Section 1877(d)(2) of such Act (42 U.S.C. 1395nn(d)(2))

3 is amended by striking ‘‘substantially all’’ and inserting

4 ‘‘not less than 75 percent (as determined in accordance

5 with regulations of the Secretary)’’.

6 (d) CLARIFICATION OF REFERRALS BY

7 NEPHROLOGISTS.—Section 1877(h)(5)(C) of such Act (42

8 U.S.C. 1395nn(H)(5)(C)) is amended—

9 (1) by striking ‘‘and a request’’ and inserting

10 ‘‘a request’’;

11 (2) by inserting after ‘‘radiation therapy,’’ the

12 following: ‘‘and a request by a nephrologist for items

13 or services related to renal dialysis,’’; and

14 (3) by striking ‘‘or radiation oncologist’’ and in15 serting ‘‘radiation oncologist, or nephrologist’’.

16 (e) REVISION OF REPORTING REQUIREMENTS.—Sec17 tion 1877(f) of such Act (42 U.S.C. 1395nn(f)) is

18 amended—

19 (1) by striking ‘‘Each entity’’ and all that fol20 lows through paragraph (2) and inserting the follow21 ing: ‘‘The Secretary may require each entity (other

22 than a physician or physician group practice) provid23 ing designated health services to provide the Sec24 retary with the following information concerning the
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1 entity’s ownership, investment, and compensation ar2 rangements:

3 ‘‘(1) the designated health services provided by

4 the entity; and

5 ‘‘(2) the names and unique physician identifier

6 numbers of all physicians with an ownership or in7 vestment interest (as described in subsection

8 (a)(2)(A)) or with a compensation interest (as de9 scribed in subsection (a)(2)(B)) in the entity, or

10 whose immediate relatives have such an ownership,

11 investment, or compensation interest in the entity.’’;

12 and

13 (2) by striking the fifth sentence.

14 (f) EXCEPTION FOR CERTAIN MANAGED CARE AR15 RANGEMENTS.—Section 1877(b)(3) of such Act (42

16 U.S.C. 1395nn(b)(3)) is amended—

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

18 (C);

19 (2) by striking the period at the end of sub20 paragraph (D) and inserting a comma; and

21 (3) by adding at the end the following new sub22 paragraphs:

23 ‘‘(E) with a contract with a State to pro24 vide services under the State plan under title

25 XIX (in accordance with section 1903(m)); or
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1 ‘‘(F) which meets State regulatory require2 ments applicable to health maintenance organi3 zations and which—

4 ‘‘(i) provides designated health serv5 ices directly or through contractual ar6 rangements with providers;

7 ‘‘(ii) assumes financial risk for the

8 provision of services or provides services on

9 behalf of another individual or entity (in10 cluding but not limited to a self-insured

11 employer, indemnity plan, physician, or

12 physician group) that assumes financial

13 risk for the provision of the item or serv14 ice; and

15 ‘‘(iii) subjects the services to a pro16 gram of utilization review offered by an or17 ganization described in a preceding sub18 paragraph, an organization meeting State

19 regulatory requirements applicable to utili20 zation review, or an organization accred21 ited to perform utilization review consid22 ered appropriate by the Secretary.’’.

23 (g) PREEMPTION OF STATE LAW.—Section 1877(g)

24 of such Act (42 U.S.C. 1395nn(g)) is amended by adding

25 at the end the following new paragraph:
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1 ‘‘(6) PREEMPTION OF STATE LAW.—The provi2 sions of this section shall supersede any State law to

3 the extent State law prohibits a physician from mak4 ing a referral, or an entity from presenting a bill, for

5 the furnishing of a service which is not subject to

6 the restrictions applicable under paragraph (1).’’.

7 (h) REVISION OF EFFECTIVE DATE EXCEPTION PRO8 VISION.—Section 13562(b)(2) of the Omnibus Budget

9 Reconciliation Act of 1993 is amended by striking sub10 paragraphs (A) and (B) and inserting the following:

11 ‘‘(A) the second sentence of subsection

12 (a)(2), and subsections (b)(2)(B) and (d)(2), of

13 section 1877 of the Social Security Act (as in

14 effect on the day before the date of the enact15 ment of this Act) shall apply instead of the cor16 responding provisions in section 1877 (as

17 amended by this Act);

18 ‘‘(B) section 1877(b)(4) of the Social Se19 curity Act (as in effect on the day before the

20 date of the enactment of this Act) shall apply;

21 ‘‘(C) the requirements of section

22 1877(c)(2) of the Social Security Act (as

23 amended by this Act) shall not apply to any se24 curities of a corporation that meets the require25 ments of section 1877(c)(2) of the Social Secu-
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1 rity Act (as in effect on the day before the date

2 of the enactment of this Act);

3 ‘‘(D) section 1877(e)(3) of the Social Secu4 rity Act (as amended by this Act) shall apply,

5 except that it shall not apply to any arrange6 ment that meets the requirements of subsection

7 (e)(2) or subsection (e)(3) of section 1877 of

8 the Social Security Act (as in effect on the day

9 before the date of the enactment of this Act);

10 ‘‘(E) the requirements of clauses (iv) and

11 (v) of section 1877(h)(4)(A), and of clause (i)

12 of section 1877(h)(4)(B), of the Social Security

13 Act (as amended by this Act) shall not apply;

14 and

15 ‘‘(F) section 1877(h)(4)(B) of the Social

16 Security Act (as in effect on the day before the

17 date of the enactment of this Act) shall apply

18 instead of section 1877(h)(4)(A)(ii) of such Act

19 (as amended by this Act).’’.

20 (i) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to referrals made on or after Janu22 ary 1, 1995, except that the amendments made by sub23 section (h) shall apply as if included in the enactment of

24 the Omnibus Budget Reconciliation Act of 1993.
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1 SEC. 6616. MEDICARE HEALTH MAINTENANCE ORGANIZA2 TIONS.

3 (a) STUDY ON COSTS OF PEER REVIEW CONTRACTS

4 FOR MEDICARE HMO’S.—The Comptroller General shall

5 conduct a study of the costs incurred by eligible organiza6 tions with risk-sharing contracts under section 1876(b) of

7 the Social Security Act of complying with the requirement

8 of entering into a written agreement with an entity provid9 ing peer review services with respect to services provided

10 by the organization, together with an analysis of how in11 formation generated by such entities is used by the Sec12 retary of Health and Human Services to assess the quality

13 of services provided by such eligible organizations.

14 (b) REPORT TO CONGRESS.—Not later than July 1,

15 1997, the Comptroller General shall submit a report to

16 the Committee on Ways and Means and the Committee

17 on Energy and Commerce of the House of Representatives

18 and the Committee on Finance and the Special Committee

19 on Aging of the Senate on the study conducted under sub20 section (a).

21 SEC. 6617. EFFECTIVE DATE.

22 Except as otherwise provided, the amendments made

23 by this part shall take effect January 1, 1996.

24 PART 3—AMENDMENTS TO CRIMINAL LAW

25 SEC. 6621. PENALTIES FOR HEALTH CARE FRAUD.

26 (a) IN GENERAL.—
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1 (1) FINES AND IMPRISONMENT FOR HEALTH

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

3 United States Code, is amended by adding at the

4 end the following:

5 ‘‘§ 1347. Health care fraud

6 ‘‘(a) Whoever knowingly executes, or attempts to exe7 cute, a scheme or artifice—

8 ‘‘(1) to defraud any health care plan or other

9 person, in connection with the delivery of or pay10 ment for health care benefits, items, or services; or

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

12 pretenses, representations, or promises, any of the

13 money or property owned by, or under the custody

14 or control of, any health care plan, or person in con15 nection with the delivery of or payment for health

16 care benefits, items, or services;

17 shall be guilty of a felony, and fined under this title or

18 imprisoned not more than 5 years, or both.

19 ‘‘(b) In determining the amount or scope of any pen20 alty or assessment, the court shall take into account—

21 ‘‘(1) the nature of the false or fraudulent

22 claims and the circumstances under which they are

23 presented;

24 ‘‘(2) the degree of culpability and history of

25 prior offenses by the convicted health care provider;
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1 ‘‘(3) the extent to which restitution is paid; and

2 ‘‘(4) such other matters as justice may require.

3 ‘‘(c) A principal is liable for penalties and assess4 ments under this section for the acts of the principal’s

5 agents acting within the scope of the agency.

6 ‘‘(d) For purposes of this section, the term ‘health

7 care plan’ means a Federally-funded public program or

8 private program for the delivery of or payment for health

9 care items or services.’’.

10 (2) CLERICAL AMENDMENT.—The table of sec11 tions at the beginning of chapter 63 of title 18,

12 United States Code, is amended by adding at the

13 end the following:

‘‘1347. Health care fraud.’’.

14 SEC. 6622. REWARDS FOR INFORMATION LEADING TO

15 PROSECUTION AND CONVICTION.

16 Section 3059 of title 18, United States Code, is

17 amended by adding at the end the following new sub18 section:

19 ‘‘(c)(1) In special circumstances and in the Attorney

20 General’s sole discretion, the Attorney General may make

21 a payment of up to $10,000 to a person who furnishes

22 information unknown to the Government relating to a pos23 sible prosecution under section 1347.

24 ‘‘(2) A person is not eligible for a payment under

25 paragraph (1) if—
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1 ‘‘(A) the person is a current or former officer

2 or employee of a Federal or State government agen3 cy or instrumentality who furnishes information dis4 covered or gathered in the course of government em5 ployment;

6 ‘‘(B) the person knowingly participated in the

7 offense;

8 ‘‘(C) the information furnished by the person

9 consists of allegations or transactions that have been

10 disclosed to the public—

11 ‘‘(i) in a criminal, civil, or administrative

12 proceeding;

13 ‘‘(ii) in a congressional, administrative or

14 General Accounting Office report, hearing,

15 audit or investigation; or

16 ‘‘(iii) by the news media, unless the person

17 is the original source of the information; or

18 ‘‘(D) when, in the judgment of the Attorney

19 General, it appears that a person whose illegal ac20 tivities are being prosecuted or investigated could

21 benefit from the award.

22 ‘‘(3) For the purposes of paragraph (2)(C)(iii), the

23 term ‘original source’ means a person who has direct and

24 independent knowledge of the information that is fur-
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1 nished and has voluntarily provided the information to the

2 Government prior to disclosure by the news media.

3 ‘‘(4) Neither the failure of the Attorney General to

4 authorize a payment under paragraph (1) nor the amount

5 authorized shall be subject to judicial review.’’.

6 SEC. 6623. BROADENING APPLICATION OF MAIL FRAUD

7 STATUTE.

8 Section 1341 of title 18, United States Code, is

9 amended—

10 (1) by inserting ‘‘or deposits or causes to be de11 posited any matter or thing whatever to be sent or

12 delivered by any private or commercial interstate

13 carrier,’’ after ‘‘Postal Service,’’; and

14 (2) by inserting ‘‘or such carrier’’ after ‘‘causes

15 to be delivered by mail’’.

16 PART 4—ADVISORY OPINIONS

17 SEC. 6631. AUTHORIZING THE SECRETARY OF HEALTH AND

18 HUMAN SERVICES TO ISSUE ADVISORY OPIN19 IONS UNDER TITLE XI.

20 Title XI of the Social Security Act (42 U.S.C. 1301

21 et seq.) is amended by inserting after section 1128B the

22 following new section:

23 ‘‘ADVISORY OPINIONS

24 ‘‘SEC. 1129. (a) ISSUANCE OF ADVISORY OPIN25 IONS.—The Secretary shall issue advisory opinions as pro26 vided in this section.
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1 ‘‘(b) MATTERS SUBJECT TO ADVISORY OPINIONS.—

2 The Secretary shall issue advisory opinions as to the fol3 lowing matters:

4 ‘‘(1) What constitutes prohibited remuneration

5 within the meaning of section 1128B(b).

6 ‘‘(2) Whether an arrangement or proposed ar7 rangement satisfies the criteria set forth in section

8 1128B(b)(3) for activities which do not result in

9 prohibited remuneration.

10 ‘‘(3) Whether an arrangement or proposed ar11 rangement satisfies the criteria which the Secretary

12 has established, or shall establish by regulation for

13 activities which do not result in prohibited remu14 neration.

15 ‘‘(4) What constitutes an inducement to reduce

16 or limit services to individuals entitled to benefits

17 under title XVIII or title XIX within the meaning

18 of section 1128B(b).

19 ‘‘(5) Whether an arrangement, activity or pro20 posed arrangement or proposed activity violates any

21 other provision of this Act.

22 ‘‘(c) MATTERS NOT SUBJECT TO ADVISORY OPIN23 IONS.—Such advisory opinions shall not address the fol24 lowing matters:
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1 ‘‘(1) Whether the fair market value shall be, or

2 was paid or received for any goods, services or prop3 erty.

4 ‘‘(2) Whether an individual is a bona fide em5 ployee within the requirements of section 3121(d)(2)

6 of the Internal Revenue Code of 1986.

7 ‘‘(d) EFFECT OF ADVISORY OPINIONS.—

8 ‘‘(1) Each advisory opinion issued by the Sec9 retary shall be binding as to the Secretary and the

10 party or parties requesting the opinion.

11 ‘‘(2) The failure of a party to seek an advisory

12 opinion may not be introduced into evidence to prove

13 that the party intended to violate the provisions of

14 sections 1128, 1128A, or 1128B.

15 ‘‘(e) REGULATIONS.—The Secretary within 180 days

16 of the date of enactment, shall issue regulations establish17 ing a system for the issuance of advisory opinions. Such

18 regulations shall provide for—

19 ‘‘(1) the procedure to be followed by a party ap20 plying for an advisory opinion;

21 ‘‘(2) the procedure to be followed by the Sec22 retary in responding to a request for an advisory

23 opinion;

24 ‘‘(3) the interval in which the Secretary shall

25 respond;
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1 ‘‘(4) the reasonable fee to be charged to the

2 party requesting an advisory opinion; and

3 ‘‘(5) the manner in which advisory opinions will

4 be made available to the public.

5 ‘‘(f) INTERVAL FOR ISSUANCE OF ADVISORY OPIN6 IONS.—Under no circumstances shall the interval in which

7 the Secretary shall respond to a party requesting an advi8 sory opinion exceed 30 days.’’.

9 SEC. 6632. AUTHORIZING THE SECRETARY OF HEALTH AND

10 HUMAN SERVICES TO ISSUE ADVISORY OPIN11 IONS RELATING TO PHYSICIAN OWNERSHIP

12 AND REFERRAL.

13 Section 1877 of the Social Security Act (42 U.S.C.

14 1395nn) is amended by the addition of the following new

15 subsection:

16 ‘‘(i) ADVISORY OPINIONS.—

17 ‘‘(1) IN GENERAL.—The Secretary shall issue

18 advisory opinions on whether an arrangement or

19 proposed arrangement will result in a prohibited re20 ferral within the meaning of this section.

21 ‘‘(2) EFFECT OF ADVISORY OPINIONS.—

22 ‘‘(A) Each advisory opinion issued by the

23 Secretary shall be binding as to the Secretary

24 and the party or parties requesting the opinion.
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1 ‘‘(B) The failure of a party to seek an ad2 visory opinion may not be introduced into evi3 dence to prove that the party intended to vio4 late the provisions of this section.

5 ‘‘(3) REGULATIONS.—The Secretary within one

6 hundred and eighty days of the date of enactment,

7 shall issue regulations establishing a system for the

8 issuance of advisory opinions. Such regulations shall

9 provide for—

10 ‘‘(A) the procedure to be followed by a

11 party applying for an advisory opinion;

12 ‘‘(B) the procedure to be followed by the

13 Secretary in responding to a request for an ad14 visory opinion;

15 ‘‘(C) the interval in which the Secretary

16 shall respond;

17 ‘‘(D) the reasonable fee to be charged to

18 the party requesting an advisory opinion; and

19 ‘‘(E) the manner in which advisory opin20 ions will be made available to the public.

21 ‘‘(4) INTERVAL FOR ISSUANCE OF ADVISORY

22 OPINIONS.—Under no circumstances shall the inter23 val in which the Secretary shall respond to a party

24 requesting an advisory opinion exceed thirty days.’’.
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1 SEC. 6633. EFFECTIVE DATE.

2 Unless otherwise specified, the amendments made by

3 this part shall be effective upon the enactment of this Act.

4 PART 5—PAYMENTS FOR STATE HEALTH CARE

5 FRAUD CONTROL UNITS

6 SEC. 6641. ESTABLISHMENT OF STATE FRAUD UNITS.

7 (a) ESTABLISHMENT OF HEALTH CARE FRAUD AND

8 ABUSE CONTROL UNIT.—Each State shall, consistent

9 with State law, establish and maintain in accordance with

10 subsection (b) a State agency to act as a Health Care

11 Fraud and Abuse Control Unit for purposes of this part.

12 (b) DEFINITION.—In this section, a ‘‘State Fraud

13 Unit’’ means a Health Care Fraud and Abuse Control

14 Unit designated under subsection (a) that the Attorney

15 General certifies meets the requirements of this part.

16 SEC. 6642. REQUIREMENTS FOR STATE FRAUD UNITS.

17 (a) IN GENERAL.—The State Fraud Unit must—

18 (1) be a single identifiable entity of the State

19 government;

20 (2) be separate and distinct from any State

21 agency with principal responsibility for the adminis22 tration of any Federally-funded or mandated health

23 care program; and

24 (3) meet the other requirements of this section.

25 (b) SPECIFIC REQUIREMENTS DESCRIBED.—The

26 State Fraud Unit shall—
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1 (1) be a Unit of the office of the State Attorney

2 General or of another department of State govern3 ment which possesses statewide authority to pros4 ecute individuals for criminal violations;

5 (2) if it is in a State the constitution of which

6 does not provide for the criminal prosecution of indi7 viduals by a statewide authority and has formal pro8 cedures, (A) assure its referral of suspected criminal

9 violations to the appropriate authority or authorities

10 in the State for prosecution, and (B) assure its as11 sistance of, and coordination with, such authority or

12 authorities in such prosecutions; or

13 (3) have a formal working relationship with the

14 office of the State Attorney General or the appro15 priate authority or authorities for prosecution and

16 have formal procedures (including procedures for its

17 referral of suspected criminal violations to such of18 fice) which provide effective coordination of activities

19 between the Fraud Unit and such office with respect

20 to the detection, investigation, and prosecution of

21 suspected criminal violations relating to any Feder22 ally-funded or mandated health care programs.

23 (c) STAFFING REQUIREMENTS.—The Fraud Unit

24 must—
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1 (1) employ attorneys, auditors, investigators

2 and other necessary personnel; and

3 (2) be organized in such a manner and provide

4 sufficient resources as is necessary to promote the

5 effective and efficient conduct of Fraud Unit activi6 ties.

7 (d) COOPERATIVE AGREEMENTS; MEMORANDA OF

8 UNDERSTANDING.—The Fraud Unit must have coopera9 tive agreements with—

10 (1) Federally-funded or mandated health care

11 programs;

12 (2) similar Fraud Units in other States, as ex13 emplified through membership and participation in

14 the National Association of Medicaid Fraud Control

15 Units or its successor; and

16 (3) the Attorney General of the United States

17 and the Inspector General of the Department of

18 Health and Human Services.

19 (e) REPORTS.—The Fraud Unit shall submit to the

20 Attorney General an application and an annual report con21 taining such information as the Attorney General deter22 mines to be necessary to determine whether the Fraud

23 Unit meets the requirements of this section.

24 (f) FUNDING SOURCE; PARTICIPATION IN ALL25 PAYER PROGRAM.—The Fraud Unit may receive funding
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1 for its activities from such sources as the State considers

2 appropriate. The Fraud Unit shall participate in the all3 payer fraud and abuse control program established under

4 section 6601.

5 (g) USE OF MEDICAID FRAUD CONTROL UNITS.—

6 If a State has a medicaid fraud control unit under title

7 XIX of the Social Security Act in operation as of the date

8 of the enactment of this Act, such unit shall be deemed

9 to meet the requirements of this part and to serve as the

10 State Fraud Unit under this part if the State dem11 onstrates that the Unit will be able to carry out the activi12 ties described in section 6643.

13 SEC. 6643. SCOPE AND PURPOSE.

14 The Fraud Unit shall carry out the following activi15 ties:

16 (1) The Fraud Unit shall conduct a statewide

17 program for the investigation and prosecution (or re18 ferring for prosecution) of violations of all applicable

19 state laws regarding any and all aspects of fraud in

20 connection with any aspect of the administration

21 and provision of health care services and activities of

22 providers of such services under any Federally-fund23 ed or mandated health care programs.

24 (2) The Fraud Unit shall have procedures for

25 reviewing complaints of the abuse or neglect of pa-
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1 tients of facilities (including patients in residential

2 facilities and home health care programs) that re3 ceive payments under any Federally-funded or man4 dated health care programs, and, where appropriate,

5 to investigate and prosecute such complaints under

6 the criminal laws of the State or for referring the

7 complaints to other State agencies for action.

8 (3) The Fraud Unit shall provide for the collec9 tion, or referral for collection to the appropriate

10 agency, of overpayments that are made under any

11 Federally-funded or mandated health care program

12 and that are discovered by the Fraud Unit in carry13 ing out its activities.

14 SEC. 6644. PAYMENTS TO STATES.

15 (a) IN GENERAL.—

16 (1) MATCHING PAYMENTS TO STATES.—Subject

17 to subsection (c), for each year for which a State

18 has a Fraud Unit approved under section 6642(b) in

19 operation the Attorney General shall pay to the

20 State for each quarter in a fiscal year an amount

21 equal to the applicable percentage of the sums ex22 pended during the quarter by the Fraud Unit.

23 (2) TIME OF PAYMENT.—The Attorney General

24 shall make a payment under paragraph (1) for a
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1 quarter by not later than 30 days after the end of

2 the quarter.

3 (b) APPLICABLE PERCENTAGE DEFINED.—

4 (1) IN GENERAL.—In subsection (a), the ‘‘ap5 plicable percentage’’ with respect to a State for a

6 fiscal year is—

7 (A) 90 percent, for quarters occurring dur8 ing the first 3 years for which the Fraud Unit

9 is in operation; or

10 (B) 75 percent, for any other quarters.

11 (2) TREATMENT OF STATES WITH MEDICAID

12 FRAUD CONTROL UNITS.—In the case of a State

13 with a State medicaid fraud control unit in oper14 ation prior to or as of the date of the enactment of

15 this Act, in determining the number of years for

16 which the State’s Fraud Unit under this part has

17 been in operation, there shall be included the num18 ber of years for which such State medicaid fraud

19 control unit was in operation.

20 (c) LIMIT ON PAYMENT.—Notwithstanding sub21 section (a), the total amount of payments made to a State

22 under this section for a fiscal year may not exceed—

23 (1) for fiscal year 1996, 4 times the amount

24 paid to the State under section 1903(a)(6) of the
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1 Social Security Act during the first quarter of 1995;

2 and

3 (2) for each succeeding fiscal year, the amount

4 determined under this subsection in the previous fis5 cal year, increased by the percentage increase in the

6 consumer price index for all urban consumers (U.S.

7 city average) for the year.

8 Subtitle H—Billing for Laboratory

9 Services

10 SEC. 6701. EASING RESTRICTIONS ON BILLING FOR LAB11 ORATORY AND OTHER SERVICES.

12 (a) IN GENERAL.—The Public Health Service Act is

13 amended—

14 (1) by redesignating title XXVII (42 U.S.C.

15 300cc et seq.) as title XXVIII; and

16 (2) by inserting after title XXVI the following

17 new title:

18 ‘‘TITLE XXVII—RESTRICTIONS

19 ON BILLING

20 ‘‘SEC. 2701. PROHIBITION.

21 ‘‘(a) BILLING OF OTHERS FOR ANCILLARY HEALTH

22 SERVICES.—Except as provided in section 2702, it shall

23 be unlawful for any person (including any individual or

24 entity) who furnishes ancillary health services (as defined

25 in section 2705(1)) to present or cause to be presented,
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1 a claim, bill, or demand for payment to any person other

2 than the patient receiving such services.

3 ‘‘(b) BILLING OF RECIPIENT OF SERVICES.—Except

4 as provided in section 2702, it shall be unlawful for any

5 physician, or the agent of any physician, to present, or

6 cause to be presented, a claim, bill, or demand for pay7 ment for ancillary health services to any recipient of such

8 services unless the services covered by the claim, bill, or

9 demand were furnished—

10 ‘‘(1) personally by, or under the supervision of,

11 the referring physician;

12 ‘‘(2) personally by, or under the supervision of,

13 a physician who is a member of the same group

14 practice as the referring physician; or

15 ‘‘(3) personally by individuals who are employed

16 by such physician or group practice and who are

17 personally supervised by the physician or by another

18 physician in the group practice.

19 ‘‘(c) GENERAL EXCEPTION FOR SERVICES UNDER

20 MEDICARE.—This section does not apply with respect to

21 any ancillary health services for which payment may be

22 made under title XVIII of the Social Security Act.

23 ‘‘SEC. 2702. EXCEPTIONS.

24 ‘‘Notwithstanding the provisions of section 2701, a

25 person who furnishes ancillary health services to an indi-
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1 vidual may present, or cause to be presented, for payment

2 for actual services rendered a claim, bill, or demand to—

3 ‘‘(1) an immediate family member of the recipi4 ent of the services or any other person legally re5 sponsible for the debts or care of the recipient of the

6 services;

7 ‘‘(2) a third party payer designated by the re8 cipient of the services;

9 ‘‘(3) a health maintenance organization, or

10 other health plan providing coverage through a man11 aged care arrangement, in which the recipient of the

12 services is enrolled;

13 ‘‘(4) a hospital or skilled nursing facility where

14 the recipient of the services was an inpatient or out15 patient at the time the services were provided;

16 ‘‘(5) an employer where the recipient of the

17 services is an employee of such employer and the

18 employer is responsible for payment for the services;

19 ‘‘(6) a governmental agency or specified agent,

20 on behalf of the recipient of the services;

21 ‘‘(7) a substance abuse program where the cli22 ents of such a program were the recipient of the

23 services;

24 ‘‘(8) a clinic or other health care provider that

25 has been designated (or that is operated by an orga-
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1 nization that has been designated) as tax-exempt

2 pursuant to section 501(c)(3) of the Internal Reve3 nue Code of 1986 whose purpose is the promotion

4 of public health, if the services rendered relate to

5 testing for sexually transmitted disease, acquired im6 mune deficiency syndrome, pregnancy, pregnancy

7 termination, or other conditions where the Secretary

8 has determined that compliance with section 2701

9 could seriously compromise the recipient’s need for

10 confidentiality;

11 ‘‘(9) a person engaged in bona fide research

12 studies;

13 ‘‘(10) the party requesting the ancillary health

14 services where Federal, State, or local law requires

15 that the identity of the recipient be kept confiden16 tial;

17 ‘‘(11) another person furnishing the same ancil18 lary health services for which payment is sought

19 (hereafter referred to in this paragraph as the ‘re20 questing party’) where the person presenting, or

21 causing to be presented, the claim, bill, or demand

22 for payment furnished the services at the request of

23 the requesting party, except that the requesting

24 party may not be a facility owned or operated by the

25 physician requesting the ancillary health service; and
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1 ‘‘(12) an entity approved to receive such claims,

2 bills or demands by the Secretary in regulations.

3 The persons described in paragraphs (1) through (12) who

4 have received a claim, bill, or demand for payment for

5 such ancillary health services may present, or cause to be

6 presented, such claim, bill, or demand to the responsible

7 party.

8 ‘‘SEC. 2703. SANCTIONS.

9 ‘‘(a) PAYMENT.—No payment may be made for a

10 service that is provided in violation of section 2701.

11 ‘‘(b) COLLECTION OF AMOUNTS.—

12 ‘‘(1) LIABILITY ON COLLECTION.—If a person

13 collects any amounts that were billed in violation of

14 section 2701(a), such person shall be liable for, and

15 shall refund on a timely basis to the individual

16 whom such amounts were collected, any amounts so

17 collected.

18 ‘‘(2) COLLECTION BY PHYSICIAN.—If a physi19 cian collects any amounts from a recipient of serv20 ices, or from another person on behalf of the recipi21 ent of services (including a third-party payer) that

22 were billed in violation of section 2701(b), such phy23 sician shall be liable for, and shall refund on a time24 ly basis to the recipient or person, any amounts so

25 collected.
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1 ‘‘(c) REPEATED CLAIMS.—Any person that presents,

2 or causes to be presented, on a repeated basis, a bill or

3 a claim that such person knows, or should have known,

4 is for a service for which payment may not be made under

5 subsection (a), or for which a refund has not been made

6 under subsection (b), shall be subject to a civil money pen7 alty of not more than $5,000 for each such bill or claim.

8 The provisions of section 1128A of the Social Security Act

9 (other than the first sentence of subsection (a) and sub10 section (b)) shall apply to a civil money penalty assessed

11 under the previous sentence in the same manner as such

12 provisions apply to a penalty or proceeding under such

13 section 1128A(a).

14 ‘‘(d) SUSPENSION OF LABORATORY CERTIFI15 CATION.—If the Secretary finds, after reasonable notice

16 and opportunity for a hearing, that a laboratory which

17 holds a certificate pursuant to section 353 has violated

18 section 2701, the Secretary may suspend, revoke or limit

19 such certification in accordance with the procedures estab20 lished in section 353(k).

21 ‘‘(e) EXCLUSION FROM OTHER PROGRAMS.—

22 ‘‘(1) AUTHORITY.—The Secretary may exclude

23 from participation in any program under title XVIII

24 of the Social Security Act, any individual or entity

25 that the Secretary determines has violated section
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1 2701 and may direct that such individual and entity

2 be excluded from participation in any State health

3 care program receiving Federal funds.

4 ‘‘(2) APPLICATION OF OTHER LAW.—The provi5 sions of section 1128(e) of the Social Security Act

6 shall apply to any exclusion under paragraph (1) in

7 the same manner as such provisions apply to a pro8 ceeding under such section 1128.

9 ‘‘SEC. 2704. REGULATIONS.

10 ‘‘The Secretary shall by regulation impose such other

11 requirements as may be necessary to implement the pur12 poses of this title.

13 ‘‘SEC. 2705. DEFINITIONS.

14 ‘‘As used in this title:

15 ‘‘(1) ANCILLARY HEALTH SERVICES.—The term

16 ‘ancillary health services’ means—

17 ‘‘(A) clinical laboratory services;

18 ‘‘(B) diagnostic x-ray tests and other diag19 nostic imaging services including CT and mag20 netic resonance imaging services;

21 ‘‘(C) other diagnostic tests;

22 ‘‘(D) durable medical equipment; and

23 ‘‘(E) physical therapy services.

24 ‘‘(2) GROUP PRACTICES.—The term ‘group

25 practice’ means a group of 2 or more physicians le-
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1 gally organized as a partnership, professional cor2 poration, foundation, not-for-profit corporation, fac3 ulty practice plan, or similar association—

4 ‘‘(A) in which each physician who is a

5 member of the group provides substantially the

6 full range of services that the physician rou7 tinely provides (including medical care, con8 sultation, diagnosis, or treatment) through the

9 joint use of shared office space, facilities, equip10 ment, and personnel;

11 ‘‘(B) for which substantially all of the serv12 ices of the physicians who are members of the

13 group are provided through the group and are

14 billed in the name of the group and amounts so

15 received are treated as receipts of the group;

16 ‘‘(C) in which the overhead expenses of

17 and the income from the practice are distrib18 uted in accordance with methods previously de19 termined by members of the group; and

20 ‘‘(D) which meets such other standards as

21 the Secretary may impose by regulation.

22 In the case of a faculty practice plan associated with

23 a hospital with an approved medical residency train24 ing program in which physician members may pro25 vide a variety of different specialty services and pro-
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1 vide professional services both within and outside the

2 group (as well as perform other tasks, such as re3 search), the definition of such term shall be limited

4 with respect to the services provided outside of the

5 faculty practice plan.

6 ‘‘(3) IMMEDIATE FAMILY MEMBER.—The term

7 ‘immediate family member’ shall include spouses,

8 natural and adoptive parents, natural and adoptive

9 children, natural and adopted siblings, stepparents,

10 stepchildren and stepsiblings, fathers-in-law, moth11 ers-in-law, brothers-in-law, sisters-in-law, sons-in-law

12 and daughters-in-law, grandparents and grand13 children, and such additional family members as

14 may be specified in regulations adopted by the Sec15 retary.

16 ‘‘(4) PHYSICIAN.—The term ‘physician’

17 means—

18 ‘‘(A) a doctor of medicine or osteopathy le19 gally authorized to practice medicine and per20 form surgery by the State in which such indi21 vidual performs such function or action;

22 ‘‘(B) a doctor of dental surgery or of den23 tal medicine who is legally authorized to prac24 tice dentistry in the State in which such indi25 vidual performs such functions;
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1 ‘‘(C) a doctor of podiatric medicine;

2 ‘‘(D) a doctor of optometry; or

3 ‘‘(E) a chiropractor.

4 ‘‘(5) THIRD PARTY PAYER.—The term ‘third

5 party payer’ means any health care insurer, includ6 ing any hospital services corporation, health services

7 corporation, medical expense indemnity corporation,

8 mutual insurance company, or self-insured corpora9 tion, that provides coverage for health or health-re10 lated items or service.’’.

11 (b) CONFORMING AMENDMENTS.—

12 (1) Sections 2701 through 2714 of the Public

13 Health Service Act (42 U.S.C. 300cc through

14 300cc–15) are redesignated as sections 2801

15 through 2814, respectively.

16 (2)(A) Sections 465(f) and 497 of such Act (42

17 U.S.C. 286(f) and 289) are amended by striking out

18 ‘‘2701’’ each place that such appears and inserting

19 in lieu thereof ‘‘2801’’.

20 (B) Section 305(i) of such Act (42 U.S.C.

21 242c(i)) is amended by striking out ‘‘2711’’ each

22 place that such appears and inserting in lieu thereof

23 ‘‘2811’’.
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1 SEC. 6702. EFFECTIVE DATE.

2 (a) IN GENERAL.—Title XXVII of the Public Health

3 Service Act, as added by section 6701(a), shall become ef4 fective December 31, 1994.

5 (b) REGULATIONS.—Not later than July 1, 1995, the

6 Secretary of Health and Human Services shall promulgate

7 such regulations as may be appropriate to carry out such

8 title.

9 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
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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.

1 Subtitle A—Increased Beneficiary

2 Choice; Improved Program

3 Efficiency

4 PART 1—INCREASED BENEFICIARY CHOICE

5 SEC. 7001. REQUIREMENTS FOR HEALTH MAINTENANCE

6 ORGANIZATIONS UNDER MEDICARE.

7 (a) USE OF METROPOLITAN STATISTICAL AREAS TO

8 DETERMINE ADJUSTED AVERAGE PER CAPITA COST.—

9 Section 1876(a)(4) of the Social Security Act (42 U.S.C.

10 1395mm(a)(4)) is amended by striking ‘‘in a geographic

11 area served by an eligible organization or in a similar

12 area’’ and inserting ‘‘in the metropolitan statistical area

13 (as defined by the Office of Management and Budget) in

14 which the individual resides, or in the entire portion of

15 the State in which the individual resides which is not lo16 cated in a metropolitan statistical area in the case of an

17 individual who does not reside in a metropolitan statistical

18 area’’.
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1 (b) DETERMINATION OF MODEL ADDITIONAL

2 HEALTH BENEFIT PACKAGES.—Section 1876(g) of such

3 Act (42 U.S.C. 1395mm(g)) is amended by inserting after

4 paragraph (3) the following new paragraph:

5 ‘‘(4) The Secretary shall develop the following model

6 packages of additional health benefits (referred to in para7 graph (3)(B)) which an eligible organization may provide

8 (at its option) under paragraph (2):

9 ‘‘(A) Coverage for catastrophic illness (subject

10 to a limit on out-of-pocket expenditures).

11 ‘‘(B) Coverage for prescription drugs.

12 ‘‘(C) Coverage for preventive services.’’.

13 (c) REVISION OF MEMBERSHIP LIMITATION.—Sec14 tion 1876(f) of such Act (42 U.S.C. 1395mm(f)) is

15 amended—

16 (1) in paragraph (1), by striking ‘‘one-half’’

17 and inserting ‘‘25 percent’’; and

18 (2) in paragraph (2)(A), by striking ‘‘50 per19 cent’’ and inserting ‘‘75 percent’’.

20 (d) ENROLLMENT PERIODS FOR MEDICARE HEALTH

21 MAINTENANCE ORGANIZATIONS.—

22 (1) UNIFORM OPEN ENROLLMENT PERIOD.—

23 Section 1876(c)(3)(A)(i) of such Act (42 U.S.C.

24 1395mm(c)(3)(A)(i)) is amended by striking ‘‘must

25 have’’ and all that follows through ‘‘and including’’
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1 and inserting the following: ‘‘shall have open enroll2 ment during an annual uniform open enrollment pe3 riod established by the Secretary for all eligible orga4 nizations, together with’’.

5 (2) OPEN ENROLLMENT FOR CERTAIN

6 DISENROLLED INDIVIDUALS.—Section

7 1876(c)(3)(A)(ii)(I) of such Act (42 U.S.C.

8 1395mm(c)(3)(A)(ii)(I)) is amended by adding at

9 the end the following: ‘‘Each eligible organization

10 with a risk-sharing contract under this section shall

11 have an open enrollment period for individuals resid12 ing in the organization’s service area who disenroll

13 from another eligible organization with a risk-shar14 ing contract under this section on the grounds that

15 the individual’s primary care physician is no longer

16 a member of the organization’s provider network or

17 for cause (in accordance with such standards, and as

18 demonstrated through an appeals process that meets

19 such requirements, as the Secretary may establish).

20 (e) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to contracts entered into on or

22 after the date of the enactment of this Act.
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1 SEC. 7002. EXPANSION AND REVISION OF MEDICARE SE2 LECT POLICIES.

3 (a) PERMITTING MEDICARE SELECT POLICIES IN

4 ALL STATES.—

5 (1) IN GENERAL.—Subsection (c) of section

6 4358 of the Omnibus Budget Reconciliation Act of

7 1990 (hereafter referred to as ‘‘OBRA–1990’’) is

8 hereby repealed.

9 (2) CONFORMING AMENDMENT.—Section 4358

10 of OBRA–1990 is amended by redesignating sub11 section (d) as subsection (c).

12 (b) REQUIREMENTS OF MEDICARE SELECT POLI13 CIES.—Section 1882(t)(1) of the Social Security Act (42

14 U.S.C. 1395ss(t)(1)) is amended to read as follows:

15 ‘‘(1)(A) If a medicare supplemental policy meets the

16 1991 NAIC Model Regulation or 1991 Federal Regulation

17 and otherwise complies with the requirements of this sec18 tion except that—

19 ‘‘(i) the benefits under such policy are re20 stricted to items and services furnished by certain

21 entities (or reduced benefits are provided when items

22 or services are furnished by other entities), and

23 ‘‘(ii) in the case of a policy described in sub24 paragraph (C)(i)—
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1 ‘‘(I) the benefits under such policy are not

2 one of the groups or packages of benefits de3 scribed in subsection (p)(2)(A),

4 ‘‘(II) except for nominal copayments im5 posed for services covered under part B of this

6 title, such benefits include at least the core

7 group of basic benefits described in subsection

8 (p)(2)(B), and

9 ‘‘(III) an enrollee’s liability under such pol10 icy for physician’s services covered under part

11 B of this title is limited to the nominal

12 copayments described in subclause (II),

13 the policy shall nevertheless be treated as meeting those

14 standards if the policy meets the requirements of subpara15 graph (B).

16 ‘‘(B) A policy meets the requirements of this sub17 paragraph if—

18 ‘‘(i) full benefits are provided for items and

19 services furnished through a network of entities

20 which have entered into contracts or agreements

21 with the issuer of the policy,

22 ‘‘(ii) full benefits are provided for items and

23 services furnished by other entities if the services are

24 medically necessary and immediately required be25 cause of an unforeseen illness, injury, or condition
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1 and it is not reasonable given the circumstances to

2 obtain the services through the network,

3 ‘‘(iii) the network offers sufficient access,

4 ‘‘(iv) the issuer of the policy has arrangements

5 for an ongoing quality assurance program for items

6 and services furnished through the network,

7 ‘‘(v)(I) the issuer of the policy provides to each

8 enrollee at the time of enrollment an explanation

9 of—

10 ‘‘(aa) the restrictions on payment under

11 the policy for services furnished other than by

12 or through the network,

13 ‘‘(bb) out of area coverage under the pol14 icy,

15 ‘‘(cc) the policy’s coverage of emergency

16 services and urgently needed care, and

17 ‘‘(dd) the availability of a policy through

18 the entity that meets the 1991 Model NAIC

19 Regulation or 1991 Federal Regulation without

20 regard to this subsection and the premium

21 charged for such policy, and

22 ‘‘(II) each enrollee prior to enrollment acknowl23 edges receipt of the explanation provided under

24 subclause (I), and
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1 ‘‘(vi) the issuer of the policy makes available to

2 individuals, in addition to the policy described in this

3 subsection, any policy (otherwise offered by the is4 suer to individuals in the State) that meets the 1991

5 Model NAIC Regulation or 1991 Federal Regulation

6 and other requirements of this section without re7 gard to this subsection.

8 ‘‘(C)(i) A policy described in this subparagraph—

9 ‘‘(I) is offered by an eligible organization (as

10 defined in section 1876(b)),

11 ‘‘(II) is not a policy or plan providing benefits

12 pursuant to a contract under section 1876 or an ap13 proved demonstration project described in section

14 603(c) of the Social Security Amendments of 1983,

15 section 2355 of the Deficit Reduction Act of 1984,

16 or section 9412(b) of the Omnibus Budget Reconcili17 ation Act of 1986, and

18 ‘‘(III) provides benefits which, when combined

19 with benefits which are available under this title, are

20 substantially similar to benefits under policies of21 fered to individuals who are not entitled to benefits

22 under this title.

23 ‘‘(ii) In making a determination under subclause (III)

24 of clause (i) as to whether certain benefits are substan25 tially similar, there shall not be taken into account, except
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1 in the case of preventive services, benefits provided under

2 policies offered to individuals who are not entitled to bene3 fits under this title which are in addition to the benefits

4 covered by this title and which are benefits an entity must

5 provide in order to meet the definition of an eligible orga6 nization under section 1876(b)(1).’’.

7 (c) RENEWABILITY OF MEDICARE SELECT POLI8 CIES.—Section 1882(q)(1) of the Social Security Act (42

9 U.S.C. 1395ss(q)(1)) is amended—

10 (1) by striking ‘‘(1) Each’’ and inserting

11 ‘‘(1)(A) Except as provided in subparagraph (B),

12 each’’;

13 (2) by redesignating subparagraphs (A) and

14 (B) as clauses (i) and (ii), respectively; and

15 (3) by adding at the end the following new sub16 paragraph:

17 ‘‘(B)(i) Except as provided in clause (ii), in the

18 case of a policy that meets the requirements of sub19 section (t), an issuer may cancel or nonrenew such

20 policy with respect to an individual who leaves the

21 service area of such policy.

22 ‘‘(ii) If an individual described in clause (i)

23 moves to a geographic area where an issuer de24 scribed in clause (i), or where an affiliate of such is25 suer, is issuing medicare supplemental policies, such
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1 individual must be permitted to enroll in any medi2 care supplemental policy offered by such issuer or

3 affiliate that provides benefits comparable to or less

4 than the benefits provided in the policy being can5 celed or nonrenewed. An individual whose coverage

6 is canceled or nonrenewed under this subparagraph

7 shall, as part of the notice of termination or

8 nonrenewal, be notified of the right to enroll in other

9 medicare supplemental policies offered by the issuer

10 or its affiliates.

11 ‘‘(iii) For purposes of this subparagraph, the

12 term ‘affiliate’ shall have the meaning given such

13 term by the 1991 NAIC Model Regulation.’’.

14 (d) CIVIL MONEY PENALTY.—Section 1882(t)(2) of

15 the Social Security Act (42 U.S.C. 1395ss(t)(2)) is

16 amended—

17 (1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;

18 (2) by redesignating subparagraphs (A), (B),

19 (C), and (D) as clauses (i), (ii), (iii), and (iv), re20 spectively;

21 (3) in clause (iv), as so redesignated—

22 (A) by striking ‘‘paragraph (1)(E)(i)’’ and

23 inserting ‘‘paragraph (1)(B)(v)(I), and

24 (B) by striking ‘‘paragraph (1)(E)(ii)’’ and

25 inserting ‘‘paragraph (1)(B)(v)(II)’’;
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1 (4) by striking ‘‘the previous sentence’’ and in2 serting ‘‘this subparagraph’’; and

3 (5) by adding at the end the following new sub4 paragraph:

5 ‘‘(B) If the Secretary determines that an issuer of

6 a policy approved under paragraph (1) has made a mis7 representation to the Secretary or has provided the Sec8 retary with false information regarding such policy, the

9 issuer is subject to a civil money penalty in an amount

10 not to exceed $100,000 for each such determination. The

11 provisions of section 1128A (other than the first sentence

12 of subsection (a) and other than subsection (b)) shall

13 apply to a civil money penalty under this subparagraph

14 in the same manner as such provisions apply to a penalty

15 or proceeding under section 1128A(a).’’.

16 (e) EFFECTIVE DATES.—

17 (1) NAIC STANDARDS.—If, within 6 months

18 after the date of the enactment of this Act, the Na19 tional Association of Insurance Commissioners

20 (hereafter in this subsection referred to as the

21 ‘‘NAIC’’) makes changes in the 1991 NAIC Model

22 Regulation (as defined in section 1882(p)(1)(A) of

23 the Social Security Act) to incorporate the additional

24 requirements imposed by the amendments made by

25 this section, section 1882(g)(2)(A) of such Act shall
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1 be applied in each State, effective for policies issued

2 to policyholders on and after the date specified in

3 paragraph (3), as if the reference to the Model Reg4 ulation adopted on June 6, 1979, were a reference

5 to the 1991 NAIC Model Regulation (as so defined)

6 as changed under this paragraph (such changed

7 Regulation referred to in this subsection as the

8 ‘‘1994 NAIC Model Regulation’’).

9 (2) SECRETARY STANDARDS.—If the NAIC

10 does not make changes in the 1991 NAIC Model

11 Regulation (as so defined) within the 6-month period

12 specified in paragraph (1), the Secretary of Health

13 and Human Services (in this subsection as the ‘‘Sec14 retary’’) shall promulgate a regulation and section

15 1882(g)(2)(A) of the Social Security Act shall be ap16 plied in each State, effective for policies issued to

17 policyholders on and after the date specified in para18 graph (3), as if the reference to the Model Regula19 tion adopted in June 6, 1979, were a reference to

20 the 1991 NAIC Model Regulation (as so defined) as

21 changed by the Secretary under this paragraph

22 (such changed Regulation referred to in this sub23 section as the ‘‘1994 Federal Regulation’’).

24 (3) DATE SPECIFIED.—
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1 (A) IN GENERAL.—Subject to subpara2 graph (B), the date specified in this paragraph

3 for a State is the earlier of—

4 (i) the date the State adopts the 1994

5 NAIC Model Regulation or the 1994 Fed6 eral Regulation; or

7 (ii) 1 year after the date the NAIC or

8 the Secretary first adopts such regulations.

9 (B) ADDITIONAL LEGISLATIVE ACTION RE10 QUIRED.—In the case of a State which the Sec11 retary identifies, in consultation with the NAIC,

12 as—

13 (i) requiring State legislation (other

14 than legislation appropriating funds) in

15 order for medicare supplemental policies to

16 meet the 1994 NAIC Model Regulation or

17 the 1994 Federal Regulation, but

18 (ii) having a legislature which is not

19 scheduled to meet in 1995 in a legislative

20 session in which such legislation may be

21 considered,

22 the date specified in this paragraph is the first

23 day of the first calendar quarter beginning after

24 the close of the first legislative session of the

25 State legislature that begins on or after Janu-
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1 ary 1, 1995. For purposes of the previous sen2 tence, in the case of a State that has a 2-year

3 legislative session, each year of such session

4 shall be deemed to be a separate regular session

5 of the State legislature.

6 SEC. 7003. INCLUDING NOTICE OF AVAILABLE HEALTH

7 MAINTENANCE ORGANIZATIONS IN ANNUAL

8 NOTICE TO BENEFICIARIES.

9 Section 1804 of the Social Security Act (42 U.S.C.

10 1395b–2) is amended—

11 (1) by striking ‘‘and’’ at the end of paragraph

12 (2);

13 (2) by striking the period at the end of para14 graph (3) and inserting ‘‘, and’’; and

15 (3) by inserting after paragraph (3) the follow16 ing new paragraph:

17 ‘‘(4) with respect to the area in which the indi18 vidual receiving the notice resides, a description of

19 the eligible organizations under section 1833(a)(1)

20 or section 1876 and the carriers offering a medicare

21 supplemental policy described in section 1882(t)(1)

22 which serve the area in which the individual receiv23 ing the notice resides.’’.
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1 SEC. 7004. LEGISLATIVE PROPOSAL ON ENROLLING MEDI2 CARE BENEFICIARIES IN QUALIFIED HEALTH

3 PLANS.

4 (a) IN GENERAL.—

5 (1) LEGISLATIVE PROPOSAL.—Not later than 1

6 year after the date of the enactment of this Act, the

7 Secretary shall develop and submit to Congress a

8 proposal for legislation which provides for the vol9 untary enrollment of medicare beneficiaries in pri10 vate health insurance plans.

11 (2) MEDICARE BENEFICIARY.—For purposes of

12 this section, the term ‘‘medicare beneficiary’’ means

13 an individual who is eligible for benefits under part

14 A of title XVIII of the Social Security Act and is en15 rolled under part B of such title.

16 (b) CONTENTS OF THE PROPOSAL.—A proposal for

17 legislation submitted under subsection (a) shall—

18 (1) provide for an appropriate methodology by

19 which the Secretary shall make payment to private

20 health insurance plans for the enrollment of medi21 care beneficiaries;

22 (2) provide individuals the opportunity to re23 main enrolled in such a plan without an interruption

24 in coverage upon becoming medicare beneficiaries;

25 and
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1 (3) provide medicare beneficiaries with the op2 portunity to enroll in a private health insurance

3 plan.

4 SEC. 7005. OPTIONAL INTERIM ENROLLMENT OF MEDICARE

5 BENEFICIARIES IN PRIVATE HEALTH PLANS.

6 (a) INTERIM ENROLLMENT OF MEDICARE BENE7 FICIARIES IN QUALIFIED HEALTH PLANS.—

8 (1) IN GENERAL.—Notwithstanding title XVIII

9 of the Social Security Act, the Secretary shall pro10 vide for a monthly payment as provided under sub11 section (b)(1) to a private health insurance plan on

12 behalf of enrolled medicare beneficiaries who choose

13 to enroll in such a plan.

14 (2) MEDICARE BENEFICIARY.—For purposes of

15 this section, the term ‘‘medicare beneficiary’’ means

16 an individual who is eligible for benefits under part

17 A of title XVIII of the Social Security Act and is en18 rolled under part B of such title.

19 (b) PAYMENT SPECIFIED.—

20 (1) FEDERAL PAYMENT.—

21 (A) IN GENERAL.—The amount of pay22 ment specified in this paragraph for an individ23 ual who is enrolled in a private health insurance

24 plan is the lesser of—
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1 (i) the applicable rate specified in sec2 tion 1876(a)(1)(C) of the Social Security

3 Act; or

4 (ii) the monthly premium charged the

5 individual for coverage under the private

6 health insurance plan.

7 (B) SOURCE OF PAYMENT.—The payment

8 to a private health insurance plan under this

9 paragraph for individuals entitled to benefits

10 under part A and enrolled under part B of title

11 XVIII of the Social Security Act shall be made

12 from the Federal Hospital Insurance Trust

13 Fund and the Federal Supplementary Medical

14 Insurance Trust Fund, with the allocation to be

15 determined by the Secretary.

16 (2) INDIVIDUAL’S SHARE.—If the monthly pre17 mium for the private plan in which the individual is

18 enrolled is greater than the amount specified under

19 paragraph (1)(A)(i), the individual shall be respon20 sible for paying to the plan the difference between

21 the monthly premium charged the individual for cov22 erage under the plan and the amount specified in

23 paragraph (1)(A)(i).

24 (3) BUDGET-NEUTRALITY.—The total amount

25 of payments made by the Secretary under this sec-
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1 tion with respect to a beneficiary for a year may not

2 exceed the amount of payment that would have been

3 made under title XVIII of the Social Security Act

4 during the year if the beneficiary did not choose to

5 enroll in a private health insurance plan during the

6 year.

7 (c) PAYMENTS UNDER THIS SECTION AS SOLE MED8 ICARE BENEFITS.—Payments made under this section

9 shall be instead of the amounts that would otherwise be

10 payable, pursuant to sections 1814(b) and 1833(a) of the

11 Social Security Act, for services furnished to medicare

12 beneficiaries.

13 (d) INCLUSION IN ANNUAL NOTICE TO BENE14 FICIARIES.—Section 1804 of the Social Security Act (42

15 U.S.C. 1395b–2), as amended by section 7003, is amend16 ed—

17 (1) by striking ‘‘and’’ at the end of paragraph

18 (3);

19 (2) by striking the period at the end of para20 graph (4) and inserting ‘‘, and’’; and

21 (3) by inserting after paragraph (4) the follow22 ing new paragraph:

23 ‘‘(5) a description of the option provided pursu24 ant to section 7005 of the Bipartisan Health Care

25 Reform Act of 1994 for payment to be made by the
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1 Secretary on the individual’s behalf for enrollment in

2 a private health insurance plan.’’.

3 PART 2—IMPROVED PROGRAM EFFICIENCY

4 SEC. 7011. IMPROVED EFFICIENCY THROUGH CONSOLIDA5 TION OF ADMINISTRATION OF PARTS A

6 AND B.

7 (a) IN GENERAL.—The Secretary of Health and

8 Human Services shall take such steps as may be necessary

9 to consolidate the administration (including processing

10 systems) of parts A and B of the medicare program (under

11 title XVIII of the Social Security Act) over a 5-year pe12 riod.

13 (b) COMBINATION OF INTERMEDIARY AND CARRIER

14 FUNCTIONS.—In taking such steps, the Secretary shall

15 contract with a single entity that combines the fiscal

16 intermediary and carrier functions in each area except

17 where the Secretary finds that special regional or national

18 contracts are appropriate.

19 (c) SUPERSEDING CONFLICTING REQUIREMENTS.—

20 The provisions of sections 1816 and 1842 of the Social

21 Security Act (including provider nominating provisions in

22 such section 1816) are superseded to the extent required

23 to carry out this section.
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1 PART 3—NOTICE OF ADVANCE DIRECTIVE

2 RIGHTS

3 SEC. 7021. PROVIDING NOTICE OF RIGHTS REGARDING

4 MEDICAL CARE TO INDIVIDUALS ENTERING

5 MEDICARE.

6 (a) IN GENERAL.—Section 1804 of the Social Secu7 rity Act (42 U.S.C. 1395b–2) is amended—

8 (1) in paragraph (2), by striking ‘‘and’’ at the

9 end;

10 (2) in paragraph (3), by striking the period at

11 the end and inserting ‘‘, and’’; and

12 (3) by inserting after paragraph (3) the follow13 ing new paragraph:

14 ‘‘(4) a description of an individual’s rights

15 under State law to make decisions concerning medi16 cal care, including the right to accept or refuse med17 ical or surgical treatment and the right to formulate

18 advance directives (as defined in section

19 1866(f)(3)).’’.

20 (b) EFFECTIVE DATE.—The amendments made by

21 subsection (a) shall apply to notices provided under section

22 1804 of the Social Security Act on or after January 1

23 of the first year beginning after the date of the enactment

24 of this Act.
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1 Subtitle B—Savings

2 PART 1—SAVINGS RELATING TO PART A

3 SEC. 7101. REDUCTION IN UPDATE FOR PAYMENTS FOR IN4 PATIENT HOSPITAL SERVICES.

5 Section 1886(b)(3)(B)(i) of the Social Security Act

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

7 (1) in subclause (XII)—

8 (A) by striking ‘‘fiscal year 1997’’ and in9 serting ‘‘for each of the fiscal years 1997

10 through 2000’’, and

11 (B) by striking ‘‘0.5 percentage point’’ and

12 inserting ‘‘2.0 percentage points’’; and

13 (2) in subclause (XIII), by striking ‘‘fiscal year

14 1998’’ and inserting ‘‘fiscal year 2005’’.

15 SEC. 7102. REDUCTION IN PAYMENTS FOR CAPITAL-RELAT16 ED COSTS FOR INPATIENT HOSPITAL SERV17 ICES.

18 (a) PPS HOSPITALS.—

19 (1) REDUCTION IN BASE PAYMENT RATES.—

20 Section 1886(g)(1)(A) of the Social Security Act (42

21 U.S.C. 1395ww(g)(1)(A)) is amended by adding at

22 the end the following new sentence: ‘‘In addition to

23 the reduction described in the preceding sentence,

24 for discharges occurring after September 30, 1995,

25 the Secretary shall reduce by 7.31 percent the
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1 unadjusted standard Federal capital payment rate

2 (as described in 42 CFR 412.308(c), as in effect on

3 the date of the enactment of the Bipartisan Health

4 Care Reform Act of 1994) and shall reduce by 10.41

5 percent the unadjusted hospital-specific rate (as de6 scribed in 42 CFR 412.328(e)(1), as in effect on the

7 date of the enactment of the Health Security Act).’’.

8 (2) REDUCTION IN UPDATE.—Section

9 1886(g)(1) of such Act (42 U.S.C. 1395ww(g)(1)) is

10 amended—

11 (A) in subparagraph (B)(i)—

12 (i) by striking ‘‘and (II)’’ and insert13 ing ‘‘(II)’’, and

14 (ii) by striking the semicolon at the

15 end and inserting the following: ‘‘, and

16 (III) an annual update factor established

17 for the prospective payment rates applica18 ble to discharges in a fiscal year which

19 (subject to reduction under subparagraph

20 (C)) will be based upon such factor as the

21 Secretary determines appropriate to take

22 into account amounts necessary for the ef23 ficient and effective delivery of medically

24 appropriate and necessary care of high

25 quality;’’;
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1 (B) by redesignating subparagraph (C) as

2 subparagraph (D); and

3 (C) by inserting after subparagraph (B)

4 the following new subparagraph:

5 ‘‘(C)(i) With respect to payments attributable

6 to portions of cost reporting periods or discharges

7 occurring during each of the fiscal years 1996

8 through 2005, the Secretary shall include a reduc9 tion in the annual update factor established under

10 subparagraph (B)(i)(III) for discharges in the year

11 equal to the applicable update reduction described in

12 clause (ii) to adjust for excessive increases in capital

13 costs per discharge for fiscal years prior to fiscal

14 year 1992 (but in no event may such reduction re15 sult in an annual update factor less than zero).

16 ‘‘(ii) In clause (i), the term ‘applicable update

17 reduction’ means, with respect to the update factor

18 for a fiscal year—

19 ‘‘(I) 4.9 percentage points; or

20 ‘‘(II) if the annual update factor for the

21 previous fiscal year was less than the applicable

22 update reduction for the previous year, the sum

23 of 4.9 percentage points and the difference be24 tween the annual update factor for the previous
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1 year and the applicable update reduction for the

2 previous year.’’.

3 (b) PPS-EXEMPT HOSPITALS.—Section 1861(v)(1)

4 of such Act (42 U.S.C. 1395x(v)(1)) is further amended

5 by adding at the end the following new subparagraph:

6 ‘‘(T) Such regulations shall provide that, in determin7 ing the amount of the payments that may be made under

8 this title with respect to the capital-related costs of inpa9 tient hospital services furnished by a hospital that is not

10 a subsection (d) hospital (as defined in section

11 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital

12 (as defined in section 1886(d)(9)(A)), the Secretary shall

13 reduce the amounts of such payments otherwise estab14 lished under this title by 15 percent for payments attrib15 utable to portions of cost reporting periods occurring dur16 ing each of the fiscal years 1996 through 2005.’’.

17 PART 2—SAVINGS RELATING TO PART B

18 SEC. 7111. ESTABLISHMENT OF CUMULATIVE EXPENDI19 TURE GOALS FOR PHYSICIAN SERVICES.

20 (a) USE OF CUMULATIVE PERFORMANCE STAND21 ARD.—Section 1848(f)(2) of the Social Security Act (42

22 U.S.C. 1395w–4(f)(2)) is amended—

23 (1) in subparagraph (A)—
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1 (A) in the heading, by striking ‘‘IN GEN2 ERAL’’ and inserting ‘‘FISCAL YEARS 1991

3 THROUGH 1994.—’’,

4 (B) in the matter preceding clause (i), by

5 striking ‘‘a fiscal year (beginning with fiscal

6 year 1991)’’ and inserting ‘‘fiscal years 1991,

7 1992, 1993, and 1994’’, and

8 (C) in the matter following clause (iv), by

9 striking ‘‘subparagraph (B)’’ and inserting

10 ‘‘subparagraph (C)’’;

11 (2) in subparagraph (B), by striking ‘‘subpara12 graph (A)’’ and inserting ‘‘subparagraphs (A) and

13 (B)’’;

14 (3) by redesignating subparagraphs (B) and

15 (C) as subparagraphs (C) and (D); and

16 (4) by inserting after subparagraph (A) the fol17 lowing new subparagraph:

18 ‘‘(B) FISCAL YEARS BEGINNING WITH FIS19 CAL YEAR 1995.—Unless Congress otherwise

20 provides, the performance standard rate of in21 crease, for all physicians’ services and for each

22 category of physicians’ services, for a fiscal year

23 beginning with fiscal year 1995 shall be equal

24 to the performance standard rate of increase
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1 determined under this paragraph for the pre2 vious fiscal year, increased by the product of—

3 ‘‘(i) 1 plus the Secretary’s estimate of

4 the weighted average percentage increase

5 (divided by 100) in the fees for all physi6 cians’ services or for the category of physi7 cians’ services, respectively, under this part

8 for portions of calendar years included in

9 the fiscal year involved,

10 ‘‘(ii) 1 plus the Secretary’s estimate of

11 the percentage increase or decrease (di12 vided by 100) in the average number of in13 dividuals enrolled under this part (other

14 than HMO enrollees) from the previous fis15 cal year to the fiscal year involved,

16 ‘‘(iii) 1 plus the Secretary’s estimate

17 of the average annual percentage growth

18 (divided by 100) in volume and intensity of

19 all physicians’ services or of the category

20 of physicians’ services, respectively, under

21 this part for the 5-fiscal-year period ending

22 with the preceding fiscal year (based upon

23 information contained in the most recent

24 annual report made pursuant to section

25 1841(b)(2)), and
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1 ‘‘(iv) 1 plus the Secretary’s estimate

2 of the percentage increase or decrease (di3 vided by 100) in expenditures for all physi4 cians’ services or of the category of physi5 cians’ services, respectively, in the fiscal

6 year (compared with the previous fiscal

7 year) which are estimated to result from

8 changes in law or regulations affecting the

9 percentage increase described in clause (i)

10 and which is not taken into account in the

11 percentage increase described in clause (i),

12 minus 1, multiplied by 100, and reduced by the

13 performance standard factor (specified in sub14 paragraph (C)).’’.

15 (b) TREATMENT OF DEFAULT UPDATE.—

16 (1) IN GENERAL.—Section 1848(d)(3)(B) of

17 such Act (42 U.S.C. 1395w–4(d)(3)(B)) is amend18 ed—

19 (A) in clause (i)—

20 (i) in the heading, by striking ‘‘IN

21 GENERAL’’ and inserting ‘‘1992 THROUGH

22 1996’’, and

23 (ii) by striking ‘‘for a year’’ and in24 serting ‘‘for 1992, 1993, 1994, 1995, and

25 1996’’; and
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1 (B) by adding after clause (ii) the follow2 ing new clause:

3 ‘‘(iii) YEARS BEGINNING WITH 1997.—

4 ‘‘(I) IN GENERAL.—The update

5 for a category of physicians’ services

6 for a year beginning with 1997 pro7 vided under subparagraph (A) shall be

8 increased or decreased by the same

9 percentage by which the cumulative

10 percentage increase in actual expendi11 tures for such category of physicians’

12 services for such year was less or

13 greater, respectively, than the per14 formance standard rate of increase

15 (established under subsection (f)) for

16 such category of services for such

17 year.

18 ‘‘(II) CUMULATIVE PERCENTAGE

19 INCREASE DEFINED.—In subclause

20 (I), the ‘cumulative percentage in21 crease in actual expenditures’ for a

22 year shall be equal to the product of

23 the adjusted increases for each year

24 beginning with 1995 up to and includ25 ing the year involved, minus 1 and
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1 multiplied by 100. In the previous

2 sentence, the ‘adjusted increase’ for a

3 year is equal to 1 plus the percentage

4 increase in actual expenditures for the

5 year.’’.

6 (2) CONFORMING AMENDMENT.—Section

7 1848(d)(3)(A)(i) of such Act (42 U.S.C. 1395w–

8 4(d)(3)(A)(i)) is amended by striking ‘‘subparagraph

9 (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’.

10 (c) USE OF REAL GDP TO ADJUST FOR VOLUME

11 AND INTENSITY.—Section 1848(f)(2)(B)(iii) of such Act

12 (42 U.S.C. 1395w–4(f)(2)(B)(iii)), as added by subsection

13 (a), is amended to read as follows:

14 ‘‘(iii) 1 plus the average per capita

15 growth in the real gross domestic product

16 (divided by 100) for the 5-fiscal-year pe17 riod ending with the previous fiscal year

18 (increased by 1.5 percentage points for the

19 category of services consisting of primary

20 care services), and’’.

21 (d) REPEAL OF RESTRICTION ON MAXIMUM REDUC22 TION.—Section 1848(d)(3)(B)(ii) of such Act (42 U.S.C.

23 1395w–4(d)(3)(B)(ii)) is amended—

24 (1) in the heading, by inserting ‘‘IN CERTAIN

25 YEARS’’ after ‘‘ADJUSTMENT’’;
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1 (2) in the matter preceding subclause (I), by

2 striking ‘‘for a year’’;

3 (3) in subclause (I), by adding ‘‘and’’ at the

4 end;

5 (4) in subclause (II), by striking ‘‘, and’’ and

6 inserting a period; and

7 (5) by striking subclause (III).

8 (e) REPEAL OF PERFORMANCE STANDARD FAC9 TOR.—

10 (1) IN GENERAL.—Section 1842(f)(2) of such

11 Act, as amended by subsection (a)(3), is amended by

12 striking subparagraph (C) and redesignating sub13 paragraph (D) as subparagraph (C).

14 (2) CONFORMING AMENDMENT.—Section

15 1842(f)(2)(B) of such Act, as added by subsection

16 (a), is amended in the matter following clause (iv)

17 by striking ‘‘1, multiplied by 100’’ and all that fol18 lows through ‘‘subparagraph (C))’’ and inserting ‘‘1

19 and multiplied by 100’’.

20 (f) REDUCTION IN CONVERSION FACTOR FOR PHYSI21 CIAN FEE SCHEDULE FOR 1995.—Section 1848(d)(1) of

22 the Social Security Act (42 U.S.C. 1395w–4(d)(1)) is

23 amended—
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1 (1) in subparagraph (A), by inserting after

2 ‘‘subparagraph (B)’’ the following: ‘‘, and, in the

3 case of 1995, specified in subparagraph (C)’’;

4 (2) by redesignating subparagraph (C) as sub5 paragraph (D); and

6 (3) by inserting after subparagraph (B) the fol7 lowing new subparagraph:

8 ‘‘(C) SPECIAL PROVISION FOR 1995.—For

9 purposes of subparagraph (A), the conversion

10 factor specified in this subparagraph for 1995

11 is—

12 ‘‘(i) in the case of physicians’ services

13 included in the category of primary care

14 services (as defined in subsection (j)(1)),

15 the conversion factor established under this

16 subsection for 1994 adjusted by the update

17 established under paragraph (3) for 1995;

18 and

19 ‘‘(ii) in the case of any other physi20 cians’ services, the conversion factor estab21 lished under this subsection for 1994 re22 duced by 3 percentage points and adjusted

23 by the update established under paragraph

24 (3) for 1995.’’.
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1 SEC. 7112. IMPOSITION OF COINSURANCE ON LABORATORY

2 SERVICES.

3 (a) IN GENERAL.—Paragraphs (1)(D) and (2)(D) of

4 section 1833(a) of the Social Security Act (42 U.S.C.

5 1395l(a)) are each amended—

6 (1) by striking ‘‘(or 100 percent’’ and all that

7 follows through ‘‘the first opinion))’’; and

8 (2) by striking ‘‘100 percent of such negotiated

9 rate’’ and inserting ‘‘80 percent of such negotiated

10 rate’’.

11 (b) EFFECTIVE DATE.—The amendments made by

12 subsection (a) shall apply to tests furnished on or after

13 January 1, 1995.

14 SEC. 7113. INCREASE IN MEDICARE PART B PREMIUM FOR

15 INDIVIDUALS WITH HIGH INCOME.

16 (a) IN GENERAL.—Subchapter A of chapter 1 of the

17 Internal Revenue Code of 1986 is amended by adding at

18 the end thereof the following new part:

19 ‘‘PART VIII—MEDICARE PART B PREMIUMS FOR

20 HIGH-INCOME INDIVIDUALS

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

21 ‘‘SEC. 59B. MEDICARE PART B PREMIUM TAX.

22 ‘‘(a) IMPOSITION OF TAX.—In the case of an individ23 ual to whom this section applies for the taxable year, there

24 is hereby imposed (in addition to any other tax imposed

25 by this subtitle) a tax for such taxable year equal to the
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1 aggregate of the Medicare part B premium taxes for each

2 of the months during such year that such individual is

3 covered by Medicare part B.

4 ‘‘(b) INDIVIDUALS TO WHOM SECTION APPLIES.—

5 This section shall apply to any individual for any taxable

6 year if—

7 ‘‘(1) such individual is covered under Medicare

8 part B for any month during such year, and

9 ‘‘(2) the modified adjusted gross income of the

10 taxpayer for such taxable year exceeds the threshold

11 amount.

12 ‘‘(c) MEDICARE PART B PREMIUM TAX FOR

13 MONTH.—

14 ‘‘(1) IN GENERAL.—The Medicare part B pre15 mium tax for any month is the applicable percentage

16 (as defined in paragraph (2)) of the amount equal

17 to the excess of—

18 ‘‘(A) 150 percent of the monthly actuarial

19 rate for enrollees age 65 and over determined

20 for that calendar year under section 1839(b) of

21 the Social Security Act, over

22 ‘‘(B) the total monthly premium under sec23 tion 1839 of the Social Security Act (deter24 mined without regard to subsections (b) and (f)

25 of section 1839 of such Act).
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1 ‘‘(2) PHASE-IN OF TAX.—If the modified ad2 justed gross income of the taxpayer for any taxable

3 years exceeds the threshold amount by—

4 ‘‘(A) less than $25,000, the applicable percentage under this paragraph is 331 5 ⁄3 percent,

6 ‘‘(B) at least $25,000, but less than

7 $50,000, the applicable percentage under this

paragraph is 662 8 ⁄3 percent,

9 ‘‘(C) at least $50,000, but less than

10 $75,000, the applicable percentage under this

11 paragraph is 65/75 (expressed as a percent), or

12 ‘‘(D) at least $75,000, the applicable per13 centage under this paragraph is 100 percent.

14 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

15 For purposes of this section—

16 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh17 old amount’ means—

18 ‘‘(A) except as otherwise provided in this

19 paragraph, $75,000,

20 ‘‘(B) $100,000 in the case of a joint re21 turn, and

22 ‘‘(C) zero in the case of a taxpayer who—

23 ‘‘(i) is married at the close of the tax24 able year but does not file a joint return

25 for such year, and
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1 ‘‘(ii) does not live apart from his

2 spouse at all times during the taxable year.

3 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

4 The term ‘modified adjusted gross income’ means

5 adjusted gross income—

6 ‘‘(A) determined without regard to sections

7 135, 911, 931, and 933, and

8 ‘‘(B) increased by the amount of interest

9 received or accrued by the taxpayer during the

10 taxable year which is exempt from tax.

11 ‘‘(3) MEDICARE PART B COVERAGE.—An indi12 vidual shall be treated as covered under Medicare

13 part B for any month if a premium is paid under

14 part B of title XVIII of the Social Security Act for

15 the coverage of the individual under such part for

16 the month.

17 ‘‘(4) MARRIED INDIVIDUAL.—The determina18 tion of whether an individual is married shall be

19 made in accordance with section 7703.’’.

20 (b) CLERICAL AMENDMENT.—The table of parts for

21 subchapter A of chapter 1 of such Code is amended by

22 adding at the end thereof the following new item:

‘‘Part VIII. Medicare Part B Premiums For High-Income Individuals.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to months after December 1995

3 in taxable years ending after December 31, 1995.

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

5 Section 1839(e) of the Social Security Act (42 U.S.C.

6 1395r(e)) is amended—

7 (1) in paragraph (1)(A), by striking ‘‘after after

8 December 1995 and prior to January 1999’’ and in9 serting ‘‘after December 1995’’;

10 (2) by striking ‘‘(1)(A)’’ and inserting ‘‘(1)’’;

11 (3) by striking paragraph (2); and

12 (4) by redesignating subparagraph (B) of para13 graph (1) as paragraph (2) (and redesignating the

14 clauses of such subparagraph accordingly).

15 SEC. 7115. REDUCTION IN HOSPITAL OUTPATIENT SERV16 ICES THROUGH ESTABLISHMENT OF PRO17 SPECTIVE PAYMENT SYSTEM.

18 (a) IN GENERAL.—Section 1833(a)(2)(B) of the So19 cial Security Act (42 U.S.C. 1395l(a)(2)(B)) is amended

20 by striking ‘‘section 1886)—’’ and all that follows and in21 serting the following: ‘‘section 1886), an amount equal to

22 a prospectively determined payment rate established by

23 the Secretary that provides for payments for such items

24 and services to be based upon a national rate adjusted

25 to take into account the relative costs of furnishing such
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1 items and services in various geographic areas, except that

2 for items and services furnished during cost reporting pe3 riods (or portions thereof) in years beginning with 1996,

4 such amount shall be equal to 95 percent of the amount

5 that would otherwise have been determined;’’.

6 (b) ESTABLISHMENT OF PROSPECTIVE PAYMENT

7 SYSTEM.—Not later than July 1, 1995, the Secretary of

8 Health and Human Services shall establish the prospective

9 payment system for hospital outpatient services necessary

10 to carry out section 1833(a)(2)(B) of the Social Security

11 Act (as amended by subsection (a)).

12 (c) EFFECTIVE DATE.—The amendment made by

13 subsection (a) shall apply to items and services furnished

14 on or after January 1, 1996.

15 PART 3—SAVINGS RELATING TO PARTS A AND B

16 SEC. 7121. REDUCTION IN HOME HEALTH SERVICES

17 THROUGH ESTABLISHMENT OF PROSPEC18 TIVE PAYMENT SYSTEM.

19 (a) IN GENERAL.—

20 (1) PAYMENTS UNDER PART A.—Section 1814

21 of the Social Security Act (42 U.S.C. 1395f) is

22 amended—

23 (A) in subsection (b) in the matter preced24 ing paragraph (1)—
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1 (i) by striking ‘‘(other than’’ and all

2 that follows through ‘‘medical equip3 ment)’’, and

4 (ii) by striking ‘‘the provisions of’’

5 and inserting ‘‘the succeeding provisions of

6 this section and’’; and

7 (B) by adding at the end the following new

8 subsection:

9 ‘‘Payments for Home Health Services

10 ‘‘(m) The amount of payment under this part for

11 home health services shall be equal to a prospectively de12 termined payment rate established by the Secretary that

13 provides for payments for such services to be based upon

14 a national rate adjusted to take into account the relative

15 costs of furnishing such services in various geographic

16 areas, except that for services furnished during cost re17 porting periods (or portions thereof) in years beginning

18 with 1996, such amount shall be equal to 95 percent of

19 the amount that would otherwise have been determined.’’.

20 (2) PAYMENTS UNDER PART B.—Section

21 1833(a)(2)(A) of the Social Security Act (42 U.S.C.

22 1395l(a)(2)(A)) is amended by striking ‘‘section

23 1861(s)(10)(A), the lesser of—’’ and all that follows

24 and inserting the following: ‘‘section 1861(s)(10)(A),

25 an amount equal to a prospectively determined pay-
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1 ment rate established by the Secretary that provides

2 for payments for such services to be based upon a

3 national rate adjusted to take into account the rel4 ative costs of furnishing such services in various geo5 graphic areas, except that for services furnished dur6 ing cost reporting periods (or portions thereof) in

7 years beginning with 1996, such amount shall be

8 equal to 95 percent of the amount that would other9 wise have been determined;’’.

10 (b) ESTABLISHMENT OF PROSPECTIVE PAYMENT

11 SYSTEM.—Not later than July 1, 1995, the Secretary of

12 Health and Human Services shall establish the prospective

13 payment system for home health services necessary to

14 carry out sections 1814(m) and 1833(a)(2)(A) of the So15 cial Security Act (as amended by subsection (a)).

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

17 subsection (a) shall apply to items and services furnished

18 on or after January 1, 1996.

19 SEC. 7122. MEDICARE SECONDARY PAYER.

20 (a) DELAY IN SUNSET OF DATA MATCHING RE21 QUIREMENTS.—(1) Section 1862(b)(5)(C)(iii) of the So22 cial Security Act (42 U.S.C. 1395y(b)(5)(C)(iii)) is

23 amended by striking ‘‘1998’’ and inserting ‘‘2005’’.

24 (2) Section 6103(l)(12)(F) of the Internal Revenue

25 Code of 1986 is amended—
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1 (A) in clause (i), by striking ‘‘1998’’ and insert2 ing ‘‘2005’’,

3 (B) in clause (ii)(I), by striking ‘‘1997’’ and in4 serting ‘‘2004’’, and

5 (C) in clause (ii)(II), by striking ‘‘1998’’ and

6 inserting ‘‘2005’’.

7 (b) EXTENSION OF MEDICARE SECONDARY PAYER

8 TO DISABLED BENEFICIARIES.—Section

9 1862(b)(1)(B)(iii) of the Social Security Act (42 U.S.C.

10 1395y(b)(1)(B)(iii)) is amended by striking ‘‘1998’’ and

11 inserting ‘‘2005’’.

12 (c) EXTENSION OF COVERAGE FOR INDIVIDUALS

13 WITH END STAGE RENAL DISEASE.—Section

14 1862(b)(1)(C) of such Act (42 U.S.C. 1395y(b)(1)(C)) is

15 amended—

16 (1) in the second sentence, by striking ‘‘October

17 1, 1998’’ and inserting ‘‘October 1, 1995’’; and

18 (2) by adding at the end the following: ‘‘Effec19 tive for items and services furnished on or after Oc20 tober 1, 1995, and before October 1, 2005 (with re21 spect to periods beginning on or after April 1,

22 1994), clauses (i) and (ii) shall be applied by sub23 stituting ‘24-month’ for ‘12-month’ each place it ap24 pears.’’.
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1 (d) APPLICATION TO DISABLED BENEFICIARIES IN

2 ALL GROUP HEALTH PLANS.—Section 1862(b)(1)(B) of

3 such Act (42 U.S.C. 1395y(b)(1)(B)) is amended—

4 (1) in the heading, by striking ‘‘IN LARGE

5 GROUP HEALTH PLANS’’;

6 (2) in clause (i), by striking ‘‘large group health

7 plan (as defined in clause (v))’’ and inserting ‘‘group

8 health plan (as defined in subparagraph (A)(v))’’;

9 and

10 (3) by striking clause (iv) and inserting the fol11 lowing:

12 ‘‘(iv) SMALL EMPLOYER EXEMP13 TION.—Clauses (ii) and (iii) of subpara14 graph (A) shall apply with respect to

15 clause (i) in the same manner as they

16 apply to subparagraph (A)(i).’’.

17 TITLE VIII—INCENTIVES TO

18 PURCHASE LONG-TERM CARE

19 INSURANCE

TABLE OF CONTENTS OF TITLE

Subtitle A—Establishment of Federal Standards for LongTerm 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
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‘‘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.

1 Subtitle A—Establishment of Fed2 eral Standards for Long-Term

3 Care Insurance

4 SEC. 8001. ESTABLISHMENT OF FEDERAL STANDARDS FOR

5 LONG-TERM CARE INSURANCE.

(a) IN GENERAL.—The Social Security Act, as

amended by section 2101(a), is amended by adding at the

end the following new title:
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‘‘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 Sec-
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retary 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.

1 ‘‘(3) STATE STANDARDS.—

2 ‘‘(A) IN GENERAL.—Except as provided in

3 subparagraph (B)—

4 ‘‘(i) a State may not establish, imple5 ment, or continue in effect standards dif6 ferent from those established under this

7 title;

8 ‘‘(ii) carriers shall be exempt from

9 any State law, rule, regulation, or order

10 not meeting the requirements of this title;

11 and

12 ‘‘(iii) nothing in this title shall prevent

13 carriers from marketing or selling long14 term care insurance policies in any State

15 in which the carrier is licensed to sell such

16 policies, if the carrier and such policies

17 meet the applicable requirements estab18 lished under Federal law.

19 ‘‘(B) EXCEPTION.—

20 ‘‘(i) IN GENERAL.—If, upon applica21 tion by an appropriate State agency and
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1 taking into account the considerations de2 scribed in clause (iii), the Secretary deter3 mines that a State has a law that estab4 lishes a standard which is different from

5 the standards established under section

6 2701(a) and the standard meets the re7 quirements of clause (ii), the Secretary

8 may permit by order or regulation imple9 mentation and enforcement of the stand10 ard.

11 ‘‘(ii) REQUIREMENTS FOR STAND12 ARD.—The requirements of this clause are,

13 with respect to a standard, that—

14 ‘‘(I) the standard would more ef15 fectively and to an appreciable greater

16 degree promote the availability and

17 affordability of long-term care insur18 ance than the standards established

19 under this title,

20 ‘‘(II) the standard would not be

21 directly inconsistent with or in conflict

22 with the specific requirements of this

23 title, and

24 ‘‘(III) the standard would not

25 unduly burden interstate commerce.
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1 ‘‘(iii) CONSIDERATIONS.—In permit2 ting such a State standard under clause

3 (i), the Secretary shall consider a standard

4 favorably to the extent that the Secretary

5 finds that following apply with respect to

6 the standard:

7 ‘‘(I) There will be no negative

8 economic impact of such a standard

9 on carriers and employers.

10 ‘‘(II) The cost of complying with

11 the standard will be low.

12 ‘‘(III) There will be a minimal

13 impact of the standard on the sol14 vency of carriers.

15 ‘‘(IV) The standard will promote

16 the continuation of a competitive mar17 ket for long-term care insurance poli18 cies.

19 ‘‘(V) There is a high probability

20 of other States applying for such an

21 exception under this subparagraph

22 with respect to the standard.

23 ‘‘(VI) There will be no significant

24 negative impact on national uniform-
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1 ity in long-term care insurance policy

2 standards.

3 ‘‘(iv) PERIODIC REVIEW.—The Sec4 retary shall periodically review the impact

5 of standards permitted under this subpara6 graph, taking into account the consider7 ations described in clause (iii) and the re8 quirements of clause (ii). If the Secretary

9 determines that a standard of a State per10 mitted under clause (i) should no longer be

11 permitted because it no longer meets such

12 requirements taking into account such con13 siderations, the Secretary, after notice and

14 opportunity for rebuttal by the State, may

15 revoke or rescind the order or regulation

16 permitting the State to implement the

17 standard.

18 ‘‘(b) DEADLINE FOR APPLICATION OF STAND19 ARDS.—

20 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

21 the date specified in this subsection for a State is—

22 ‘‘(A) the date the State adopts the stand23 ards established under subsection (a)(1); or

24 ‘‘(B) the date that is 1 year after the first

25 day of the first regular legislative session that
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1 begins after the date such standards are first

2 established under subsection (a)(2);

3 whichever is earlier.

4 ‘‘(2) STATE REQUIRING LEGISLATION.—In the

5 case of a State which the Secretary identifies, in

6 consultation with the NAIC, as—

7 ‘‘(A) requiring State legislation (other than

8 legislation appropriating funds) in order for the

9 standards established under subsection (a) to be

10 applied; but

11 ‘‘(B) having a legislature which is not

12 scheduled to meet within 1 year following the

13 beginning of the next regular legislative session

14 in which such legislation may be considered;

15 the date specified in this subsection is the first day

16 of the first calendar quarter beginning after the

17 close of the first legislative session of the State legis18 lature that begins on or after January 1, 1995. For

19 purposes of the previous sentence, in the case of a

20 State that has a 2-year legislative session, each year

21 of such session shall be deemed to be a separate reg22 ular session of the State legislature.

23 ‘‘(c) ITEMS INCLUDED IN STANDARDS.—The stand24 ards promulgated under subsection (a) shall include—
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1 ‘‘(1) minimum Federal standards for long-term

2 care insurance consistent with the provisions of this

3 title;

4 ‘‘(2) standards for the enhanced protection of

5 consumers with long-term care insurance;

6 ‘‘(3) procedures for the modification of the

7 standards established under paragraph (1) in a

8 manner consistent with future laws to expand exist9 ing Federal or State long-term care benefits or es10 tablish a comprehensive Federal or State long-term

11 care benefit program; and

12 ‘‘(4) other activities determined appropriate by

13 Congress.

14 ‘‘(d) CONSULTATION.—In establishing standards and

15 models of benefits under this section, the Secretary shall

16 provide for and consult with an advisory committee to be

17 chosen by the Secretary, and composed of—

18 ‘‘(1) three individuals who are representatives

19 of carriers;

20 ‘‘(2) three individuals who are representatives

21 of consumer groups;

22 ‘‘(3) three representatives who are representa23 tives of providers of long-term care services;

24 ‘‘(4) three other individuals who are not rep25 resentatives of carriers or of providers of long-term
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1 care services and who have expertise in the delivery

2 and financing of such services; and

3 ‘‘(5) the Secretary of Veterans Affairs.

4 ‘‘(e) DUTIES.—The advisory committee established

5 under subsection (d) shall—

6 ‘‘(1) recommend the appropriate inflationary

7 index to be used with respect to the inflation protec8 tion benefit portion of the standards;

9 ‘‘(2) recommend the uniform needs assessment

10 mechanism to be used in determining the eligibility

11 of individuals for benefits under a policy;

12 ‘‘(3) recommend appropriate standards for ben13 efits under section 2215(c); and

14 ‘‘(4) perform such other activities as deter15 mined appropriate by the Secretary.

16 ‘‘(f) ADMINISTRATIVE PROVISIONS.—The following

17 provisions of section 1886(e)(6) shall apply to the advisory

18 committee chosen under subsection (d) in the same man19 ner as such provisions apply under such section:

20 ‘‘(1) Subparagraph (C) (relating to staffing and

21 administration).

22 ‘‘(2) Subparagraph (D) (relating to compensa23 tion of members).

24 ‘‘(3) Subparagraph (F) (relating to access to

25 information).
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1 ‘‘(4) Subparagraph (G) (relating to use of

2 funds).

3 ‘‘(5) Subparagraph (H) (relating to periodic

4 GAO audits).

5 ‘‘(6) Subparagraph (J) (relating to requests for

6 appropriations).

7 ‘‘PART B—ESTABLISHMENT AND IMPLEMENTATION OF

8 LONG-TERM CARE INSURANCE POLICY STANDARDS

9 ‘‘SEC. 2211. IMPLEMENTATION OF POLICY STANDARDS.

10 ‘‘(a) IN GENERAL.—

11 ‘‘(1) REGULATORY PROGRAM.—No long-term

12 care policy (as defined in section 2221) may be is13 sued, sold, or offered for sale as a long-term care in14 surance policy in a State on or after the date speci15 fied in section 2201(b) unless—

16 ‘‘(A) the Secretary determines that the

17 State has established a regulatory program

18 that—

19 ‘‘(i) provides for the application and

20 enforcement of the standards established

21 under section 2201(a); and

22 ‘‘(ii) complies with the requirements

23 of subsection (b);

24 by the date specified in section 2201(b), and

25 the policy has been approved by the State com-
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1 missioner or superintendent of insurance under

2 such program; or

3 ‘‘(B) if the State has not established such

4 a program, or if the State’s regulatory program

5 has been decertified, the policy has been cer6 tified by the Secretary (in accordance with such

7 procedures as the Secretary may establish) as

8 meeting the standards established under section

9 2201(a) by the date specified in section

10 2201(b).

11 For purposes of this subsection, the advertising or

12 soliciting with respect to a policy, directly or indi13 rectly, shall be deemed the offering for sale of the

14 policy.

15 ‘‘(2) REVIEW OF STATE REGULATORY PRO16 GRAMS.—The Secretary periodically shall review reg17 ulatory programs described in paragraph (1)(A) to

18 determine if they continue to provide for the applica19 tion and enforcement of the standards and proce20 dures established under section 2201(a) and (b). If

21 the Secretary determines that a State regulatory

22 program no longer meets such standards and re23 quirements, before making a final determination, the

24 Secretary shall provide the State an opportunity to

25 adopt such a plan of correction as would permit the
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1 program to continue to meet such standards and re2 quirements. If the Secretary makes a final deter3 mination that the State regulatory program, after

4 such an opportunity, fails to meet such standards

5 and requirements, the Secretary shall assume re6 sponsibility under paragraph (1)(B) with respect to

7 certifying policies in the State and shall exercise full

8 authority under section 2201 for carriers, agents, or

9 associations or its subsidiary in the State plans in

10 the State.

11 ‘‘(b) ADDITIONAL REQUIREMENTS FOR APPROVAL

12 OF STATE REGULATORY PROGRAMS.—For purposes of

13 subsection (a)(1)(A)(ii), the requirements of this sub14 section for a State regulatory program are as follows:

15 ‘‘(1) ENFORCEMENT.—The enforcement under

16 the program—

17 ‘‘(A) shall be designed in a manner so as

18 to secure compliance with the standards within

19 30 days after the date of a finding of non20 compliance with such standards;

21 ‘‘(B) shall provide for notice in the annual

22 report required under paragraph (5) to the Sec23 retary of cases where such compliance is not se24 cured within such 30-day period; and
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1 ‘‘(C) shall provide, in addition to any other

2 penalties provided by the laws of a State, that

3 any carrier, agent, or association that is found

4 under the program to have violated such stand5 ards shall each be subject to a fine of up to 3

6 times the amount of any commissions paid for

7 each policy involved or $10,000, whichever is

8 greater.

9 ‘‘(2) PROCESS.—The enforcement process

10 under each State regulatory program shall provide

11 for—

12 ‘‘(A) procedures for individuals and enti13 ties to file written, signed complaints respecting

14 alleged violations of the standards;

15 ‘‘(B) responding on a timely basis to such

16 complaints;

17 ‘‘(C) the investigation of—

18 ‘‘(i) those complaints which have a

19 reasonable probability of validity, and

20 ‘‘(ii) such other alleged violations of

21 the standards as the program finds appro22 priate; and

23 ‘‘(D) the imposition of appropriate sanc24 tions (which include, in appropriate cases, the

25 imposition of a civil money penalty as provided
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1 for in section 2218) in the case of a carrier,

2 agent, or association or its subsidiary deter3 mined to have violated the standards.

4 ‘‘(3) CONSUMER ACCESS TO COMPLIANCE IN5 FORMATION.—

6 ‘‘(A) IN GENERAL.—A State regulatory

7 program must provide for consumer access to

8 complaints filed with the State commissioner or

9 superintendent of insurance with respect to

10 long-term care insurance policies.

11 ‘‘(B) CONFIDENTIALITY.—The access pro12 vided under subparagraph (A) shall be limited

13 to the extent required to protect the confiden14 tiality of the identity of individual policyholders.

15 ‘‘(4) PROCESS FOR APPROVAL OF PREMIUMS.—

16 ‘‘(A) IN GENERAL.—Each State regulatory

17 program shall—

18 ‘‘(i) provide for a process for approv19 ing or disapproving proposed premium in20 creases or decreases with respect to long21 term care insurance policies; and

22 ‘‘(ii) establish a policy for receipt and

23 consideration of public comments before

24 approving such a premium increase or de25 crease.
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1 ‘‘(B) CONDITIONS FOR APPROVAL.—No

2 premium increase shall be approved (or deemed

3 approved) under subparagraph (A) unless the

4 proposed increase is accompanied by an actuar5 ial memorandum which—

6 ‘‘(i) includes a description of the as7 sumptions that justify the increase;

8 ‘‘(ii) contains such information as

9 may be required under the standards es10 tablished under section 2701(a); and

11 ‘‘(iii) is made available to the public.

12 ‘‘(C) APPLICATION.—Except as provided in

13 subparagraph (D), this paragraph shall not

14 apply to a group long-term care insurance pol15 icy issued to a group described in section

16 4(E)(1) of the NAIC Long Term Care Insur17 ance Model Act (effective January 1991), ex18 cept that such group policy shall, pursuant to

19 guidelines developed by the NAIC, provide no20 tice to policyholders and certificate holders of

21 any premium change under such group policy.

22 ‘‘(D) EXCEPTION.—Subparagraph (C)

23 shall not apply to—

24 ‘‘(i) group conversion policies;
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1 ‘‘(ii) the group continuation feature of

2 a group policy if the carrier separately

3 rates employee and continuation coverages;

4 and

5 ‘‘(iii) group policies where the func6 tion of the employer is limited solely to col7 lecting premiums (through payroll deduc8 tions or dues checkoff) and remitting them

9 to the carrier.

10 ‘‘(E) CONSTRUCTION.—Nothing in this

11 paragraph shall be construed as preventing the

12 NAIC from promulgating standards, or a State

13 from enacting and enforcing laws, with respect

14 to premium rates or loss ratios for all, including

15 group, long-term care insurance policies.

16 ‘‘(5) ANNUAL REPORTS.—Each State regu17 latory program shall provide for annual reports to be

18 submitted to the Secretary on the implementation

19 and enforcement of the standards in the State, in20 cluding information concerning violations in excess

21 of 30 days.

22 ‘‘(6) ACCESS TO OTHER INFORMATION.—The

23 State regulatory program must provide for consumer

24 access to actuarial memoranda provided under para25 graph (4).
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1 ‘‘(7) DEFAULT.—In the case of a State without

2 a regulatory program approved under subsection (a),

3 the Secretary shall provide for the enforcement ac4 tivities described in subsection (c).

5 ‘‘(c) SECRETARIAL ENFORCEMENT AUTHORITY.—

6 ‘‘(1) IN GENERAL.—The Secretary shall exer7 cise authority under this subsection in the case of a

8 State that does not have a regulatory program ap9 proved under this section.

10 ‘‘(2) COMPLAINTS AND INVESTIGATIONS.—The

11 Secretary shall establish procedures—

12 ‘‘(A) for individuals and entities to file

13 written, signed complaints respecting alleged

14 violations of the requirements of this title;

15 ‘‘(B) for responding on a timely basis to

16 such complaints; and

17 ‘‘(C) for the investigation of—

18 ‘‘(i) those complaints that have a rea19 sonable probability of validity; and

20 ‘‘(ii) such other alleged violations of

21 the requirements of this title as the Sec22 retary determines to be appropriate.

23 In conducting investigations under this subsection,

24 agents of the Secretary shall have reasonable access

25 necessary to enable such agents to examine evidence
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1 of any carrier, agent, or association or its subsidiary

2 being investigated.

3 ‘‘(3) HEARINGS.—

4 ‘‘(A) IN GENERAL.—Prior to imposing an

5 order described in paragraph (4) against a car6 rier, agent, or association or its subsidiary

7 under this section for a violation of the require8 ments of this title, the Secretary shall provide

9 the carrier, agent, association or subsidiary

10 with notice and, upon request made within a

11 reasonable time (of not less than 30 days, as

12 established by the Secretary by regulation) of

13 the date of the notice, a hearing respecting the

14 violation.

15 ‘‘(B) CONDUCT OF HEARING.—Any hear16 ing requested under subparagraph (A) shall be

17 conducted before an administrative law judge.

18 If no hearing is so requested, the Secretary’s

19 imposition of the order shall constitute a final

20 and unappealable order.

21 ‘‘(C) AUTHORITY IN HEARINGS.—In con22 ducting hearings under this paragraph—

23 ‘‘(i) agents of the Secretary and ad24 ministrative law judges shall have reason25 able access necessary to enable such agents
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1 and judges to examine evidence of any car2 rier, agent, or association or its subsidiary

3 being investigated; and

4 ‘‘(ii) administrative law judges, may,

5 if necessary, compel by subpoena the at6 tendance of witnesses and the production

7 of evidence at any designated place or

8 hearing.

9 In case of contumacy or refusal to obey a sub10 poena lawfully issued under this subparagraph

11 and upon application of the Secretary, an ap12 propriate district court of the United States

13 may issue an order requiring compliance with

14 such subpoena and any failure to obey such

15 order may be punished by such court as a con16 tempt thereof.

17 ‘‘(D) ISSUANCE OF ORDERS.—If an admin18 istrative law judge determines in a hearing

19 under this paragraph, upon the preponderance

20 of the evidence received, that a carrier, agent,

21 or association or its subsidiary named in the

22 complaint has violated the requirements of this

23 title, the administrative law judge shall state

24 the findings of fact and issue and cause to be
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1 served on such carrier, agent, association, or

2 subsidiary an order described in paragraph (4).

3 ‘‘(4) CEASE AND DESIST ORDER WITH CIVIL

4 MONEY PENALTY.—

5 ‘‘(A) IN GENERAL.—Subject to the provi6 sions of subparagraphs (B) through (F), an

7 order under this paragraph—

8 ‘‘(i) shall require the agent, associa9 tion or its subsidiary, or a carrier—

10 ‘‘(I) to cease and desist from

11 such violations; and

12 ‘‘(II) to pay a civil penalty in an

13 amount not to exceed 3 times the

14 amount of any commissions paid for

15 each policy involved or $10,000,

16 whichever is greater, for each such

17 violation; and

18 ‘‘(ii) may require the agent, associa19 tion or its subsidiary, or a carrier to take

20 such other remedial action as is appro21 priate.

22 ‘‘(B) CORRECTIONS WITHIN 30 DAYS.—No

23 order shall be imposed under this paragraph by

24 reason of any violation if the carrier, agent, or
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1 association or its subsidiary establishes to the

2 satisfaction of the Secretary that—

3 ‘‘(i) such violation was due to reason4 able cause and was not intentional and was

5 not due to willful neglect; and

6 ‘‘(ii) such violation is corrected within

7 the 30-day period beginning on the earliest

8 date the carrier, agent, association, or sub9 sidiary knew, or exercising reasonable dili10 gence could have known, that such a viola11 tion was occurring.

12 ‘‘(C) WAIVER BY SECRETARY.—In the case

13 of a violation under this title that is due to rea14 sonable cause and not to willful neglect, the

15 Secretary may waive part or all of the civil

16 money penalty imposed under subparagraph

17 (A)(i)(II) to the extent that payment of such

18 penalty would be grossly excessive relative to

19 the violation involved and to the need for deter20 rence of violations.

21 ‘‘(D) ADMINISTRATIVE APPELLATE RE22 VIEW.—The decision and order of an adminis23 trative law judge under this paragraph shall be24 come the final agency decision and order of the

25 Secretary unless, within 30 days, the Secretary
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1 modifies or vacates the decision and order, in

2 which case the decision and order of the Sec3 retary shall become a final order under this

4 paragraph.

5 ‘‘(E) JUDICIAL REVIEW.—A carrier, agent,

6 or association or its subsidiary or any other in7 dividual adversely affected by a final order is8 sued under this paragraph may, within 45 days

9 after the date the final order is issued, file a pe10 tition in the Court of Appeals for the appro11 priate circuit for review of the order.

12 ‘‘(F) ENFORCEMENT OF ORDERS.—If a

13 carrier, agent, or association or its subsidiary

14 fails to comply with a final order issued under

15 this paragraph against the carrier, agent, asso16 ciation or subsidiary after opportunity for judi17 cial review under subparagraph (E), the Sec18 retary shall file a suit to seek compliance with

19 the order in any appropriate district court of

20 the United States. In any such suit, the validity

21 and appropriateness of the final order shall not

22 be subject to review.

23 ‘‘SEC. 2212. REGULATION OF SALES PRACTICES.

24 ‘‘(a) DUTY OF GOOD FAITH AND FAIR DEALING.—
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1 ‘‘(1) IN GENERAL.—Each agent (as defined in

2 section 2233) or association that is selling or offer3 ing for sale a long-term care insurance policy has

4 the duty of good faith and fair dealing to the pur5 chaser or potential purchaser of such a policy.

6 ‘‘(2) PROHIBITED PRACTICES.—An agent or as7 sociation is considered to have violated paragraph

8 (1) if the agent or association engages in any of the

9 following practices:

10 ‘‘(A) TWISTING.—

11 ‘‘(i) IN GENERAL.—Knowingly making

12 any misleading representation (including

13 the inaccurate completion of medical his14 tories) or incomplete or fraudulent com15 parison of any long-term care insurance

16 policy or carriers for the purpose of induc17 ing, or tending to induce, any person to re18 tain or effect a change with respect to a

19 long-term care insurance policy.

20 ‘‘(ii) POLICY REPLACEMENT FORM.—

21 With respect to any person who elects to

22 replace or effect a change in a long-term

23 care insurance policy, the individual that is

24 selling such policy shall ensure that such

25 person completes a policy replacement
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1 form developed by the NAIC. A copy of

2 such form shall be provided to such person

3 and additional copies shall be delivered by

4 the selling individual to the old policy is5 suer and the new issuer and kept on file

6 for inspection by the State regulatory

7 agency.

8 ‘‘(B) HIGH PRESSURE TACTICS.—Employ9 ing any method of marketing having the effect

10 of, or intending to, induce the purchase of long11 term care insurance policy through force, fright,

12 threat or undue pressure, whether explicit or

13 implicit.

14 ‘‘(C) COLD LEAD ADVERTISING.—Making

15 use directly or indirectly of any method of mar16 keting which fails to disclose in a conspicuous

17 manner that a purpose of the method of mar18 keting is solicitation of insurance and that con19 tact will be made by an insurance agent or in20 surance company.

21 ‘‘(D) OTHERS.—Engaging in such other

22 practices determined inappropriate under guide23 lines issued by the NAIC.

24 ‘‘(b) FINANCIAL STANDARDS.—The NAIC shall de25 velop recommended financial minimum standards (includ-
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1 ing both income and asset criteria) for the purpose of ad2 vising individuals considering the purchase of a long-term

3 care insurance policy.

4 ‘‘(c) PROHIBITION OF SALE OR ISSUANCE TO MEDIC5 AID BENEFICIARIES.—An agent, an association, or a car6 rier may not knowingly sell or issue a long-term care in7 surance policy to an individual who is eligible for medical

8 assistance under title XIX of the Social Security Act.

9 ‘‘(d) PROHIBITION OF SALE OR ISSUANCE OF DUPLI10 CATE SERVICE BENEFIT POLICIES.—An agent, associa11 tion or its subsidiary, or a carrier may not sell or issue

12 a service-benefit long-term care insurance policy to an in13 dividual knowing that the policy provides for coverage that

14 duplicates existing coverage already provided in another

15 service-benefit long-term care insurance policy held by

16 such individual unless—

17 ‘‘(1) the policy is intended to replace such other

18 policy, or

19 ‘‘(2) the benefits under the new policy are fully

20 payable directly to or on behalf of the individual

21 without regard to other long-term care coverage of

22 the individual.

23 In this subsection, the term ‘service-benefit long-term care

24 insurance policy’ means a long-term care insurance policy
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1 which provides for benefits based on the type and amount

2 of services furnished.

3 ‘‘(e) PROHIBITION BASED ON ELIGIBILITY FOR

4 OTHER BENEFITS.—A carrier may not sell or issue a

5 long-term care insurance policy that reduces, limits or co6 ordinates the benefits provided under the policy on the

7 basis that the policyholder has or is eligible for other long8 term care insurance coverage or benefits.

9 ‘‘(f) PROVISION OF OUTLINE OF COVERAGE.—No

10 agent, association or its subsidiary, or carrier may sell or

11 offer for a sale a long-term care insurance policy (or for

12 a certificate under a group long-term care insurance pol13 icy) without providing to the purchaser or potential pur14 chaser (or representative) an outline of coverage that com15 plies with the standards established under section

16 2201(a).

17 ‘‘(g) AGENT TRAINING AND CERTIFICATION RE18 QUIREMENTS.—The NAIC, shall establish requirements

19 for long-term care insurance agent training and certifi20 cation that—

21 ‘‘(1) specify requirements for training insurance

22 agents who desire to sell or offer for sale long-term

23 care insurance policies; and

24 ‘‘(2) specify procedures for certifying agents

25 who have completed such training and who are as
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1 qualified to sell or offer for sale long-term care in2 surance policies.

3 ‘‘SEC. 2213. ADDITIONAL RESPONSIBILITIES FOR CAR4 RIERS.

5 ‘‘(a) REFUND OF PREMIUMS.—If an application for

6 a long-term care insurance policy (or for a certificate

7 under a group long-term care insurance policy) is denied

8 or an applicant returns a policy or certificate within 30

9 days of the date of its issuance pursuant to subsection

10 2217, the carrier shall refund directly to the applicant,

11 or in the case of an employer to whomever remits the pre12 mium, and not by delivery by the agent, not later than

13 30 days after the date of the denial or return, any pre14 miums paid with respect to such a policy (or certificate).

15 ‘‘(b) MAILING OF POLICY.—If an application for a

16 long-term care insurance policy (or for a certificate under

17 a group long-term care insurance policy) is approved, the

18 carrier shall provide the applicant, or in the case of a

19 group plan the employer, the policy (or certificate) of in20 surance not later than 30 days after the date of the ap21 proval.

22 ‘‘(c) INFORMATION ON DENIALS OF CLAIMS.—If a

23 claim under a long-term care insurance policy is denied,

24 the carrier shall, within 30 days of the date of a written
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1 request by the policyholder or certificate holder (or rep2 resentative)—

3 ‘‘(1) provide a written explanation of the rea4 sons for the denial; and

5 ‘‘(2) make available all medical and patient

6 records directly relating to such denial.

7 Except as provided in subsection (e) of section 2215, no

8 claim under such a policy may be denied on the basis of

9 a failure to disclose a condition at the time of issuance

10 of the policy if the application for the policy failed to re11 quest information respecting the condition.

12 ‘‘(d) REPORTING OF INFORMATION.—A carrier that

13 issues one or more long-term care insurance policies shall

14 periodically (not less often than annually) report, in a

15 form and in a manner determined by the NAIC, to the

16 commissioner or superintendent of insurance of each State

17 in which the policy is delivered, and shall make available

18 to the Secretary, upon request, information in a form and

19 manner determined by the NAIC concerning—

20 ‘‘(1) the long-term care insurance policies of the

21 carrier that are in force;

22 ‘‘(2) the most recent premiums for such policies

23 and the premiums imposed for such policies since

24 their initial issuance;
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1 ‘‘(3) the lapse rate, replacement rate, and re2 scission rates by policy;

3 ‘‘(4) the names of that 10 percent of its agents

4 that—

5 ‘‘(A) have the greatest lapse and replace6 ment rate; and

7 ‘‘(B) have produced at least $50,000 of

8 long-term care insurance sales in the previous

9 year; and

10 ‘‘(5) the claims denied (expressed as a number

11 and as a percentage of claims submitted) by policy.

12 Information required under this subsection shall be re13 ported in a format specified in the standards established

14 under section 2201(a). For purposes of paragraph (3),

15 there shall be included (but reported separately) data con16 cerning lapses due to the death of the policyholder. For

17 purposes of paragraph (4), there shall not be included as

18 a claim any claim that is denied solely because of the fail19 ure to meet a deductible, waiting period, or exclusionary

20 period.

21 ‘‘(e) INFORMATION ON AGENT COMMISSIONS.—A

22 carrier that issues one or more long-term care insurance

23 policies shall provide to the State commissioner or super24 intendent of insurance such information relating to agent

25 sales commissions and compensation as the commissioner
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1 or superintendent may require in order to monitor and

2 make recommendations for regulatory action relating to

3 such commissions and compensation.

4 ‘‘SEC. 2214. RENEWABILITY STANDARDS FOR ISSUANCE,

5 AND BASIS FOR CANCELLATION OF POLICIES.

6 ‘‘(a) IN GENERAL.—No long-term care insurance pol7 icy may be canceled or nonrenewed for any reason other

8 than nonpayment of premium, material misrepresentation

9 or fraud.

10 ‘‘(b) CONTINUATION AND CONVERSION RIGHTS FOR

11 GROUP POLICIES.—

12 ‘‘(1) IN GENERAL.—Each group long-term care

13 insurance policy shall provide covered individuals

14 with a basis for continuation or conversion in ac15 cordance with this subsection.

16 ‘‘(2) BASIS FOR CONTINUATION.—For purposes

17 of paragraph (1), a policy provides a basis for con18 tinuation of coverage if the policy maintains cov19 erage under the existing group policy when such cov20 erage would otherwise terminate and which is sub21 ject only to the continued timely payment of pre22 mium when due. A group policy which restricts pro23 vision of benefits and services to or contains incen24 tives to use certain providers or facilities, may pro25 vide continuation benefits which are substantially
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1 equivalent to the benefits of the existing group pol2 icy.

3 ‘‘(3) BASIS FOR CONVERSION.—For purposes of

4 paragraph (1), a policy provides a basis for conver5 sion of coverage if the policy entitles each individ6 ual—

7 ‘‘(A) whose coverage under the group pol8 icy would otherwise be terminated for any rea9 son; and

10 ‘‘(B) who has been continuously insured

11 under the policy (or group policy which was re12 placed) for at least 6 months before the date of

13 the termination;

14 to issuance of a policy providing benefits identical to,

15 substantially equivalent to, or in excess of, those of

16 the policy being terminated, without evidence of in17 surability.

18 ‘‘(4) TREATMENT OF SUBSTANTIAL EQUIVA19 LENCE.—In determining under this subsection

20 whether benefits are substantially equivalent, consid21 eration should be given to the difference between

22 managed care and non-managed care plans.

23 ‘‘(5) GROUP REPLACEMENT OF POLICIES.—If a

24 group long-term care insurance policy is replaced by

25 another long-term care insurance policy purchased
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1 by the same policyholder, the succeeding issuer shall

2 offer coverage to all persons covered under the old

3 group policy on its date of termination. Coverage

4 under the new group policy shall not result in any

5 exclusion for preexisting conditions that would have

6 been covered under the group policy being replaced.

7 ‘‘(c) STANDARDS FOR ISSUANCE.—

8 ‘‘(1) IN GENERAL.—

9 ‘‘(A) GUARANTEE.—An agent, association

10 or carrier that sells or issues long-term care in11 surance policies shall guarantee that such poli12 cies shall be sold or issued to an individual, or

13 eligible individual in the case of a group plan,

14 if such individual meets the minimum medical

15 underwriting requirements of such policy.

16 ‘‘(B) PREMIUM FOR CONVERTED POL17 ICY.—If a group policy from which conversion

18 is made is a replacement for a previous group

19 policy, the premium for the converted policy

20 shall be calculated on the basis of the insured’s

21 age at the inception of coverage under the

22 group policy from which conversion is made.

23 Where the group policy from which conversion

24 is made replaced previous group coverage, the

25 premium for the converted policy shall be cal-
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1 culated on the basis of the insured’s age at in2 ception of coverage under the group policy re3 placed.

4 ‘‘(2) UPGRADE FOR POLICIES.—

5 ‘‘(A) CURRENT POLICIES.—Each long-term

6 care insurance policy in effect as of the effective

7 date of the standards established under section

8 2701(a) shall permit the policyholder to pur9 chase a policy that complies with all such

10 standards and the carrier shall directly inform

11 each such policyholder of the right to purchase

12 an upgraded policy under this paragraph.

13 ‘‘(B) FUTURE UPGRADES.—

14 ‘‘(i) IN GENERAL.—If a carrier pro15 viding a long-term care insurance policy

16 provides for the issuance of policies with

17 benefits that are greater than the benefits

18 previously provided under such policies, the

19 policyholder of a long-term care insurance

20 policy previous issued by that carrier and

21 still in force has the right to purchase a

22 policy that provides for such upgraded ben23 efits and the carrier shall directly inform

24 each such policyholder of the existence of

25 such an upgraded policy and the right to
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1 purchase an upgraded policy under this

2 paragraph.

3 ‘‘(ii) LIMITATION.—Clause (i) shall

4 not apply to a policyholder who is eligible

5 (or was eligible at any time within the pre6 vious 6 months) for benefits under the

7 long-term care insurance policy.

8 ‘‘(C) LIMITATION ON MEDICAL UNDER9 WRITING OF UPGRADED POLICIES REQUIRED

10 UNDER FEDERAL OR STATE LAW.—With re11 spect to a long-term care insurance policy that

12 offers upgraded benefits in accordance with a

13 requirement of Federal or State law, the carrier

14 issuing the policy may not impose additional

15 medical underwriting criteria, except that—

16 ‘‘(i) the carrier may utilize an age

17 rate for such policy, and

18 ‘‘(ii) the carrier may impose addi19 tional medical underwriting criteria in rela20 tion to benefits to the extent they were not

21 included in the previously issued policy.

22 ‘‘(D) LIMITATION ON MEDICAL UNDER23 WRITING ON OTHER UPGRADED POLICIES.—

24 With respect to an upgraded long-term care in25 surance policy that offers benefits that are
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1 greater than the benefits required under Fed2 eral or State requirements, the carrier issuing

3 the policy—

4 ‘‘(i) except as provided in clause (ii),

5 may not impose additional medical under6 writing criteria in relation to benefits that

7 are the same as the benefits under the pre8 viously issued policy and the premiums

9 charged with respect to such benefits may

10 not be greater than the premiums charged

11 with respect to such benefits under the

12 previously issued policy, but

13 ‘‘(ii) may impose additional medical

14 underwriting criteria in relation to benefits

15 to the extent they were not included in the

16 previously issued policy.

17 ‘‘(d) EFFECT OF INCAPACITATION.—

18 ‘‘(1) IN GENERAL.—

19 ‘‘(A) PROHIBITION.—Except as provided

20 in paragraph (2), a long-term care insurance

21 policy in effect as of the effective date of the

22 standards established under section 2201(a)

23 may not be canceled for nonpayment if the pol24 icy holder is determined by a long-term care

25 provider, physician or other health care pro-
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1 vider, independent of the issuer of the policy, to

2 be cognitively or mentally incapacitated so as to

3 not make payments in a timely manner.

4 ‘‘(B) REINSTATEMENT.—A long-term care

5 policy shall include a provision that provides for

6 the reinstatement of such coverage, in the event

7 of lapse, if the carrier is provided with proof of

8 cognitive or mental incapacitation. Such rein9 statement option shall remain available for a

10 period of not less than 5 months after termi11 nation and shall allow for the collection of past

12 due premium.

13 ‘‘(2) PERMITTED CANCELLATION.—A long-term

14 care insurance policy may be canceled under para15 graph (1) for nonpayment if—

16 ‘‘(A) the period of such nonpayment is in

17 excess of 30 days; and

18 ‘‘(B) notice of intent to cancel is provided

19 to the policyholder or designated representative

20 of the policy holder not less than 30 days prior

21 to such cancellation, except that notice may not

22 be provided until the expiration of 30 days after

23 a premium is due and unpaid.

24 Notice under this paragraph shall be deemed to have

25 been given as of 5 days after the mailing date.
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1 ‘‘SEC. 2215. BENEFIT STANDARDS.

2 ‘‘(a) USE OF STANDARD DEFINITIONS AND TERMI3 NOLOGY AND UNIFORM FORMAT.—Each long-term care

4 insurance policy shall, with respect to services, providers

5 or facilities, pursuant to standards established under sec6 tion 2201(a)—

7 ‘‘(1) use uniform language and definitions, ex8 cept that such language and definitions may take

9 into account the differences between States with re10 spect to definitions and terminology used for long11 term care services and providers; and

12 ‘‘(2) use a uniform format for presenting the

13 outline of coverage under such a policy;

14 as prescribed under guidelines issued by the NAIC, after

15 consultation with the advisory committee provided for

16 under section 2701(d), and periodically updated.

17 ‘‘(b) DISCLOSURE.—

18 ‘‘(1) OUTLINE OF COVERAGE.—

19 ‘‘(A) REQUIREMENT.—Each carrier that

20 sells or offers for sale a long-term care insur21 ance policy shall provide an outline of coverage

22 under such policy that meets the applicable

23 standards established pursuant to section

24 2201(a), complies with the requirements of sub25 paragraph (B), and is in a uniform format as
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1 prescribed in guidelines issued by the NAIC

2 and periodically updated.

3 ‘‘(B) CONTENTS.—The outline of coverage

4 for each long-term care insurance policy shall

5 include at least the following:

6 ‘‘(i) A description of the principal

7 benefits and coverage under the policy.

8 ‘‘(ii) A statement of the principal ex9 clusions, reductions, and limitations con10 tained in the policy.

11 ‘‘(iii) A statement of the terms under

12 which the policy (or certificate) may be

13 continued in force or discontinued, the

14 terms for continuation or conversion, and

15 any reservation in the policy of a right to

16 change premiums.

17 ‘‘(iv) A statement, in bold face type

18 on the face of the document in language

19 that is understandable to an average indi20 vidual, that the outline of coverage is a

21 summary only, not a contract of insurance,

22 and that the policy (or master policy) con23 tains the contractual provisions that gov24 ern, except that such summary shall sub-
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1 stantially and accurately reflect the con2 tents of the policy or the master policy.

3 ‘‘(v) A description of the terms, speci4 fied in section 2217, under which a policy

5 or certificate may be returned and pre6 mium refunded.

7 ‘‘(vi) A statement of the percentage

8 limit on annual premium increases that is

9 provided under the policy pursuant to this

10 section.

11 ‘‘(2) CERTIFICATES.—A certificate issued pur12 suant to a group long-term care insurance policy

13 shall include—

14 ‘‘(A) a description of the principal benefits

15 and coverage provided in the policy;

16 ‘‘(B) a statement of the principal exclu17 sions, reductions, and limitations contained in

18 the policy; and

19 ‘‘(C) a statement that the group master

20 policy determines governing contractual provi21 sions.

22 ‘‘(3) LONG-TERM CARE AS PART OF LIFE IN23 SURANCE.—In the case of a long-term care insur24 ance policy issued as a part of, or a rider on, a life
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1 insurance policy, at the time of policy delivery there

2 shall be provided a policy summary that includes—

3 ‘‘(A) an explanation of how the long-term

4 care benefits interact with other components of

5 the policy (including deductions from death

6 benefits);

7 ‘‘(B) an illustration of the amount of bene8 fits, the length of benefit, and the guaranteed

9 lifetime benefits (if any) for each covered per10 son; and

11 ‘‘(C) any exclusions, reductions, and limi12 tations on benefits of long-term care.

13 ‘‘(4) ADDITIONAL INFORMATION.—The Sec14 retary shall collect and distribute to each State com15 missioner or superintendent of insurance on an an16 nual basis information on national average costs for

17 nursing facility and home care. This information

18 shall be delivered to prospective policyholders of

19 long-term care insurance policies in the following

20 manner:

21 ‘‘(A) In the case of agent solicitations,

22 agents shall deliver the information to prospec23 tive policyholders prior to the presentation of an

24 application or enrollment form.
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1 ‘‘(B) In the case of direct response solicita2 tions, the information shall be presented in con3 junction with any application or enrollment

4 form.

5 ‘‘(c) LIMITING CONDITIONS ON BENEFITS; MINIMUM

6 BENEFITS.—

7 ‘‘(1) IN GENERAL.—A long-term care insurance

8 policy may not condition or limit eligibility—

9 ‘‘(A) for benefits for a type of services to

10 the need for or receipt of any other services;

11 ‘‘(B) for any benefit on the medical neces12 sity for such benefit;

13 ‘‘(C) for benefits furnished by licensed or

14 certified providers in compliance with conditions

15 which are in addition to those required for li16 censure or certification under State law, except

17 that if no State licensure or certification laws

18 exists, in compliance with qualifications devel19 oped by the NAIC; or

20 ‘‘(D) for residential care (if covered under

21 the policy) only—

22 ‘‘(i) to care provided in facilities

23 which provide a higher level of care; or

24 ‘‘(ii) to care provided in facilities

25 which provide for 24-hour or other nursing
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1 care not required in order to be licensed by

2 the State.

3 ‘‘(2) HOME HEALTH CARE OR COMMUNITY4 BASED SERVICES.—If a long-term care insurance

5 policy provides benefits for the payment of specified

6 home health care or community-based services, the

7 policy—

8 ‘‘(A) may not limit such benefits to serv9 ices provided by registered nurses or licensed

10 practical nurses;

11 ‘‘(B) may not require benefits for such

12 services to be provided by a nurse or therapist

13 that can be provided by a home health aide or

14 licensed or certified home care worker, except

15 that if no State licensure or certification laws

16 exists, in compliance with qualifications devel17 oped by the NAIC;

18 ‘‘(C) may not limit such benefits to serv19 ices provided by agencies or providers certified

20 under title XVIII of the Social Security Act;

21 and

22 ‘‘(D) must provide, at a minimum, benefits

23 for personal care services (including home

24 health aide and home care worker services as

25 defined by the NAIC) home health services,
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1 adult day care, and respite care in an individ2 ual’s home or in another setting in the commu3 nity, or any of these benefits on a respite care

4 basis.

5 ‘‘(3) NURSING FACILITY SERVICES.—If a long6 term care insurance policy provides benefits for the

7 payment of specified nursing facility services, the

8 policy must provide such benefits with respect to all

9 nursing facilities (as defined in section 1919(a) or

10 until such time as subsequently provided for by the

11 NAIC in establishing uniform language and defini12 tions under section 2215(a)(1)) in the State.

13 ‘‘(4) PER DIEM POLICIES.—

14 ‘‘(A) DEFINITION.—For purposes of this

15 title, the term ‘per diem long-term care insur16 ance policy’ means a long-term care insurance

17 policy (or certificate under a group long-term

18 care insurance policy) that provides for benefit

19 payments on a periodic basis due to cognitive

20 impairment or loss of functional capacity with21 out regard to the expenses incurred or services

22 rendered during the period to which the pay23 ments relate.

24 ‘‘(B) LIMITATION.—No per diem long-term

25 care insurance policy (or certificate) may condi-
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1 tion or otherwise exclude benefit payments

2 based on the receipt of any type of nursing fa3 cility, home health care or community-based

4 services.

5 ‘‘(d) PROHIBITION OF DISCRIMINATION.—A long6 term care insurance policy may not treat benefits under

7 the policy in the case of an individual with Alzheimer’s

8 disease, with any related progressive degenerative demen9 tia of an organic origin, with any organic or inorganic

10 mental illness, or with mental retardation or any other

11 cognitive or mental impairment differently from an indi12 vidual having another medical condition for which benefits

13 may be made available.

14 ‘‘(e) LIMITATION ON USE OF PREEXISTING CONDI15 TION LIMITS.—

16 ‘‘(1) INITIAL ISSUANCE.—

17 ‘‘(A) IN GENERAL.—Subject to subpara18 graph (B), a long-term care insurance policy

19 may not exclude or condition benefits based on

20 a medical condition for which the policyholder

21 received treatment or was otherwise diagnosed

22 before the issuance of the policy.

23 ‘‘(B) 6-MONTH LIMIT.—

24 ‘‘(i) IN GENERAL.—No long-term care

25 insurance policy or certificate issued under
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1 this title shall utilize a definition of ‘pre2 existing condition’ that is more restrictive

3 than the following: The term ‘preexisting

4 condition’ means a condition for which

5 medical advice or treatment was rec6 ommended by, or received from a provider

7 of health care services, within 6 months

8 preceding the effective date of coverage of

9 an insured individual.

10 ‘‘(ii) PROHIBITION ON EXCLUSION OF

11 COVERAGE.—No long-term care insurance

12 policy or certificate may exclude coverage

13 for a loss or confinement that is the result

14 of a preexisting condition unless such loss

15 or confinement begins within 6 months fol16 lowing the effective date of the coverage of

17 the insured individual.

18 ‘‘(2) REPLACEMENT POLICIES.—If a long-term

19 care insurance policy replaces another long-term

20 care insurance policy, the issuer of the replacing pol21 icy shall waive any time periods applicable to pre22 existing conditions, waiting period, elimination peri23 ods and probationary periods in the new policy for

24 similar benefits to the extent such time was spent

25 under the original policy.
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1 ‘‘(f) ELIGIBILITY FOR BENEFITS.—

2 ‘‘(1) LONG-TERM CARE POLICIES.—Each long3 term care insurance policy shall—

4 ‘‘(A) describe the level of benefits available

5 under the policy; and

6 ‘‘(B) specify in clear, understandable

7 terms, the level (or levels) of physical, cognitive,

8 or mental impairment required in order to re9 ceive benefits under the policy.

10 ‘‘(2) FUNCTIONAL ASSESSMENT.—In order to

11 submit a claim under any long-term care insurance

12 policy, each claimant shall have a professional func13 tional assessment of his or her physical, cognitive,

14 and mental abilities. Such initial assessment shall be

15 conducted by an individual or entity, meeting the

16 qualifications established by the NAIC to assure the

17 professional competence and credibility of such indi18 vidual or entity and that such individual meets any

19 applicable State licensure and certification require20 ments. The individual or entity conducting such as21 sessment may not control, or be controlled by, the

22 issuer of the policy. For purposes of this paragraph

23 and paragraph (4), the term ‘control’ means the di24 rect or indirect possession of the power to direct the

25 management and policies of a person. Control is pre-
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1 sumed to exist, if any person directly or indirectly,

2 owns, controls, holds with the power to vote, or

3 holds proxies representing 10 percent of the voting

4 securities of another person.

5 ‘‘(3) CLAIMS REVIEW.—Except as provided in

6 paragraph (4), each long-term care insurance policy

7 shall be subject to final claims review by the carrier

8 pursuant to the terms of the long-term care insur9 ance policy.

10 ‘‘(4) APPEALS PROCESS.—

11 ‘‘(A) IN GENERAL.—Each long-term care

12 insurance policy shall provide for a timely and

13 independent appeals process, meeting standards

14 established by the NAIC, for individuals who

15 dispute the results of the claims review, con16 ducted under paragraph (3), of the claimant’s

17 functional assessment, conducted under para18 graph (2).

19 ‘‘(B) INDEPENDENT ASSESSMENT.—An

20 appeals process under this paragraph shall in21 clude, at the request of the claimant, an inde22 pendent assessment of the claimant’s physical,

23 cognitive or mental abilities.

24 ‘‘(C) CONDUCT.—An independent assess25 ment under subparagraph (B) shall be con-
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1 ducted by an individual or entity meeting the

2 qualifications established by the NAIC to as3 sure the professional competence and credibility

4 of such individual or entity and any applicable

5 State licensure and certification requirements

6 and may not be conducted—

7 ‘‘(i) by an individual who has a direct

8 or indirect significant or controlling inter9 est in, or direct affiliation or relationship

10 with, the issuer of the policy;

11 ‘‘(ii) by an entity that provides serv12 ices to the policyholder or certificateholder

13 for which benefits are available under the

14 long-term care insurance policy; or

15 ‘‘(iii) by an individual or entity in con16 trol of, or controlled by, the issuer of the

17 policy.

18 ‘‘(5) STANDARD ASSESSMENTS.—Not later than

19 2 years after the date of enactment of this title, the

20 advisory committee established under section

21 2201(d) shall recommend uniform needs assessment

22 mechanisms for the determination of eligibility for

23 benefits under such assessments.

24 ‘‘(g) INFLATION PROTECTION.—
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1 ‘‘(1) OPTION TO PURCHASE.—A carrier may

2 not offer a long-term care insurance policy unless

3 the carrier also offers to the proposed policyholder,

4 including each group policyholder, the option to pur5 chase a policy that provides for increases in benefit

6 levels, with benefit maximums or reasonable dura7 tions that are meaningful, to account for reasonably

8 anticipated increases in the costs of long-term care

9 services covered by the policy. A carrier may not

10 offer to a policyholder an inflation protection feature

11 that is less favorable to the policyholder than one of

12 the following:

13 ‘‘(A) With respect to policies that provide

14 for automatic periodic increases in benefits, the

15 policy provides for an annual increase in bene16 fits in a manner so that such increases are

17 computed annually at a rate of not less than 5

18 percent.

19 ‘‘(B) With respect to policies that provide

20 for periodic opportunities to elect an increase in

21 benefits, the policy guarantees that the insured

22 individual will have the right to periodically in23 crease the benefit levels under the policy with24 out providing evidence of insurability or health

25 status so long as the option for the previous pe-
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1 riod was not declined. The amount of any such

2 additional benefit may not be less than the dif3 ference between—

4 ‘‘(i) the existing policy benefit; and

5 ‘‘(ii) such existing benefit compounded

6 annually at a rate of at least 5 percent for

7 the period beginning on the date on which

8 the existing benefit is purchased and ex9 tending until the year in which the offer of

10 increase is made.

11 ‘‘(C) With respect to service benefit poli12 cies, the policy covers a specified percentage of

13 the actual or reasonable charges and does not

14 include a maximum specified indemnity amount

15 or limit.

16 ‘‘(2) EXCEPTION.—The requirements of para17 graph (1) shall not apply to life insurance policies or

18 riders containing accelerated long-term care benefits.

19 ‘‘(3) REQUIRED INFORMATION.—Carriers shall

20 include the following information in or together with

21 the outline of coverage provided under this title:

22 ‘‘(A) A graphic comparison of the benefit

23 levels of a policy that increases benefits over the

24 policy period with a policy that does not in25 crease benefits. Such comparison shall show
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1 benefit levels over not less than a 20-year pe2 riod.

3 ‘‘(B) Any expected premium increases or

4 additional premiums required to pay for any

5 automatic or optional benefit increases, whether

6 the individual who purchases the policy obtains

7 the inflation protection initially or whether such

8 individual delays purchasing such protection

9 until a future time.

10 ‘‘(4) CONTINUATION OF PROTECTION.—Infla11 tion protection benefit increases under this sub12 section under a policy that contains such protection

13 shall continue without regard to an insured’s age,

14 claim status or claim history, or the length of time

15 the individual has been insured under the policy.

16 ‘‘(5) CONSTANT PREMIUM.—An offer of infla17 tion protection under this subsection that provides

18 for automatic benefit increases shall include an offer

19 of a premium that the carrier expects to remain con20 stant. Such offer shall disclose in a conspicuous

21 manner that the premium may change in the future

22 unless the premium is guaranteed to remain con23 stant.

24 ‘‘(6) REJECTION.—Inflation protection under

25 this subsection shall be included in a long-term care
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Title VIII, Subtitle A

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1 insurance policy unless a carrier obtains a written

2 rejection of such protection signed by the policy3 holder.

4 ‘‘SEC. 2216. OFFER OF NONFORFEITURE BENEFITS.

5 ‘‘The issuer of a long-term care insurance policy shall

6 offer to the policyholder (including any certificate holder

7 under the policy) a nonforfeiture benefit provision that

8 meets the following requirements:

9 ‘‘(1) The provision is appropriately captioned.

10 ‘‘(2) The provision provides for a benefit avail11 able in the event of a default in the payment of any

12 premiums and the amount of such benefit may be

13 adjusted subsequent to being initially granted only

14 as necessary to reflect changes in claims, persist15 ency, and interest as reflected in changes in pre16 miums rates. The percent or amount of benefits

17 shall increase based upon the policyholder’s equity in

18 the policy.

19 ‘‘(3) The provision includes at least one of the

20 following:

21 ‘‘(A) Reduced paid-up insurance.

22 ‘‘(B) Extended term insurance.

23 ‘‘(C) Shortened benefit period.
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1 ‘‘(D) Another similar offering specified

2 under the standards established under section

3 2701(a).

4 ‘‘SEC. 2217. LIMIT OF PERIOD OF CONTESTABILITY AND

5 RIGHT TO RETURN.

6 ‘‘(a) CONTESTABILITY.—A carrier may not cancel or

7 renew a long-term care insurance policy or deny a claim

8 under the policy based on fraud or material misrepresenta9 tion relating to the issuance of the policy unless notice

10 of such fraud or material misrepresentation is provided

11 within a time period to be determined by the NAIC.

12 ‘‘(b) RIGHT TO RETURN.—Each applicant for a long13 term care insurance policy shall have the right to return

14 the policy (or certificates) within 30 days of the date of

15 its delivery (and to have the premium refunded) if, after

16 examination of the policy or certificate, the applicant is

17 not satisfied for any reason.

18 ‘‘SEC. 2218. CIVIL MONEY PENALTY.

19 ‘‘(a) CARRIER.—Any carrier, association or its sub20 sidiary that sells or offers for sale a long-term care insur21 ance policy and that—

22 ‘‘(1) fails to make a refund in accordance with

23 section 2213(a);

24 ‘‘(2) fails to transmit a policy in accordance

25 with section 2213(b);
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1 ‘‘(3) fails to provide, make available, or report

2 information in accordance with subsections (c), (d),

3 or (e) of section 2213;

4 ‘‘(4) fails to provide an outline of coverage in

5 violation of section 2215(b)(1); or

6 ‘‘(5) issues a policy without obtaining certain

7 information in violation of section 2215(f);

8 is subject to a civil money penalty of not to exceed $25,000

9 for each such violation.

10 ‘‘(b) AGENTS.—Any agent that sells or offers for sale

11 a long-term care insurance policy and that—

12 ‘‘(1) fails to make a refund in accordance with

13 section 2213(a);

14 ‘‘(2) fails to transmit a policy in accordance

15 with section 2213(b);

16 ‘‘(3) fails to provide, make available, or report

17 information in accordance with subsections (c) or (d)

18 of section 2213;

19 ‘‘(4) fails to provide an outline of coverage in

20 violation of section 2215(b)(1); or

21 ‘‘(5) issues a policy without obtaining certain

22 information in violation of section 2215(f);

23 is subject to a civil money penalty of not to exceed $15,000

24 for each such violation.
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1 ‘‘PART C—LONG-TERM CARE INSURANCE POLICIES,

2 DEFINITION AND ENDORSEMENTS

3 ‘‘SEC. 2221. LONG-TERM CARE INSURANCE POLICY DE4 FINED.

5 ‘‘(a) IN GENERAL.—As used in this section, the term

6 ‘long-term care insurance policy’ means any insurance pol7 icy, rider or certificate advertised, marketed, offered or de8 signed to provide coverage for not less than 12 consecutive

9 months for each covered person on an expense incurred,

10 indemnity prepaid or other basis, for one or more nec11 essary diagnostic, preventive, therapeutic, rehabilitative,

12 maintenance or personal care services, provided in a set13 ting other than an acute care unit of a hospital. Such term

14 includes—

15 ‘‘(1) group and individual annuities and life in16 surance policies, riders or certificates that provide

17 directly, or that supplement long-term care insur18 ance; and

19 ‘‘(2) a policy, rider or certificates that provides

20 for payment of benefits based on cognitive impair21 ment or the loss of functional capacity.

22 ‘‘(b) ISSUANCE.—Long-term care insurance policies

23 may be issued by—

24 ‘‘(1) carriers;

25 ‘‘(2) fraternal benefit societies;
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1 ‘‘(3) nonprofit health, hospital, and medical

2 service corporations;

3 ‘‘(4) prepaid health plans;

4 ‘‘(5) health maintenance organizations; or

5 ‘‘(6) any similar organization to the extent they

6 are otherwise authorized to issue life or health insur7 ance.

8 ‘‘(c) POLICIES EXCLUDED.—The term ‘long-term

9 care insurance policy’ shall not include any insurance pol10 icy, rider or certificate that is offered primarily to provide

11 basic Medicare supplement coverage, basic hospital ex12 pense coverage, basic medical-surgical expense coverage,

13 hospital confinement indemnity coverage, major medical

14 expense coverage, disability income or related asset-protec15 tion coverage, accident only coverage, specified disease or

16 specified accident coverage, or limited benefit health cov17 erage. With respect to life insurance, such term shall not

18 include life insurance policies, riders or certificates that

19 accelerate the death benefit specifically for one or more

20 of the qualifying events of terminal illness, medical condi21 tions requiring extraordinary medical intervention, or per22 manent institutional confinement, and that provide the op23 tion of a lump-sum payment for those benefits and in

24 which neither the benefits nor the eligibility for the bene25 fits is conditioned upon the receipt of long-term care.
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1 ‘‘(d) APPLICATIONS.—Notwithstanding any other

2 provision of this title, this title shall apply to any product

3 advertised, marketed or offered as a long-term insurance

4 policy, rider or certificate.

5 ‘‘SEC. 2222. CODE OF CONDUCT WITH RESPECT TO EN6 DORSEMENTS.

7 ‘‘Not later than 1 year after the date of enactment

8 of this title the NAIC shall issue guidelines that shall

9 apply to organizations and associations, other than em10 ployers and labor organizations that do not accept com11 pensation, and their subsidiaries that provide endorse12 ments of long-term care insurance policies, or that permit

13 such policies to be offered for sale through the organiza14 tion or association. Such guidelines shall include at mini15 mum the following:

16 ‘‘(1) In endorsing or selling long-term care in17 surance policies, the primary responsibility of an or18 ganization or association shall be to educate their

19 members concerning such policies and assist such

20 members in making informed decisions. Such organi21 zations and associations may not function primarily

22 as sales agents for insurance companies.

23 ‘‘(2) Organizations and associations shall pro24 vide objective information regarding long-term care

25 insurance policies sold or endorsed by such organiza-
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Title VIII, Subtitle A

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1 tions and associations to ensure that members of

2 such organizations and associations have a balanced

3 and complete understanding of both the strengths

4 and weaknesses of the policies that are being en5 dorsed or sold.

6 ‘‘(3) Organizations and associations selling or

7 endorsing long-term care insurance policies shall dis8 close in marketing literature provided to their mem9 bers concerning such policies the manner in which

10 such policies and the insurance company issuing

11 such policies were selected. If the organization or as12 sociation and the insurance company have interlock13 ing directorates, the organization or association shall

14 disclose such fact to their members.

15 ‘‘(4) Organizations and associations selling or

16 endorsing long-term care insurance policies shall dis17 close in marketing literature provided to their mem18 bers concerning such policies the nature and amount

19 of the compensation arrangements (including all

20 fees, commissions, administrative fees and other

21 forms of financial support that the organization or

22 association receives) from the endorsement or sale of

23 the policy to its members.

24 ‘‘(5) The Boards of Directors of organizations

25 and associations selling or endorsing long-term care
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1 insurance policies, if such organizations and associa2 tions have a Board of Directors, shall review and ap3 prove such insurance policies, the compensation ar4 rangements and the marketing materials used to

5 promote sales of such policies.

6 ‘‘PART D—MISCELLANEOUS PROVISIONS

7 ‘‘SEC. 2231. DEFINITIONS.

8 ‘‘As used in this title:

9 ‘‘(1) AGENT.—The term ‘agent’ means—

10 ‘‘(A) prior to 2 years after the date of en11 actment of this Act, an individual who sells or

12 offers for sale a long-term care insurance policy

13 subject to the requirements of this title and is

14 licensed or required to be licensed under State

15 law for such purpose; and

16 ‘‘(B) after the date referred to in subpara17 graph (A), an individual who meets the training

18 and certification requirements established under

19 section 2212(f).

20 ‘‘(2) ASSOCIATION.—The term ‘association’ in21 cludes the association and its subsidiaries.

22 ‘‘(3) CARRIER.—The term ‘carrier’ means any

23 person that offers a health benefit plan, whether

24 through insurance or otherwise, including a licensed

25 insurance company, a prepaid hospital or medical
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1 service plan, a health maintenance organization, a

2 self-insured carrier, a reinsurance carrier, and a

3 multiple employer welfare arrangement (a combina4 tion of employers associated for the purpose of pro5 viding health benefit plan coverage for their employ6 ees).’’.

7 Subtitle B—Tax Treatment of Long8 Term Care Insurance

9 SEC. 8101. TREATMENT OF LONG-TERM CARE INSURANCE

10 OR PLANS.

11 (a) GENERAL RULE.—Subpart E of part I of sub12 chapter L of chapter 1 of the Internal Revenue Code of

13 1986 is amended by inserting after section 818 the follow14 ing new section:

15 ‘‘SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE

16 OR PLANS.

17 ‘‘(a) GENERAL RULE.—For purposes of this part, a

18 long-term care insurance contract shall be treated as an

19 accident or health insurance contract.

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

21 ‘‘(1) IN GENERAL.—For purposes of this part,

22 the term ‘long-term care insurance contract’ means

23 any insurance contract issued if—

24 ‘‘(A) the only insurance protection pro25 vided under such contract is coverage of quali-
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Title VIII, Subtitle B

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1 fied long-term care services and benefits inci2 dental to such coverage,

3 ‘‘(B) the maximum benefit under the pol4 icy for expenses incurred for any day does not

5 exceed $200,

6 ‘‘(C) such contract does not cover expenses

7 incurred for services or items to the extent that

8 such expenses are reimbursable under title

9 XVIII of the Social Security Act or would be so

10 reimbursable but for the application of a de11 ductible or coinsurance amount,

12 ‘‘(D) such contract is guaranteed renew13 able,

14 ‘‘(E) such contract does not have any cash

15 surrender value, and

16 ‘‘(F) all refunds of premiums, and all pol17 icyholder dividends or similar amounts, under

18 such contract are to be applied as a reduction

19 in future premiums or to increase future bene20 fits.

21 ‘‘(2) SPECIAL RULES.—

22 ‘‘(A) PER DIEM, ETC. PAYMENTS PER23 MITTED.—A contract shall not fail to be treated

24 as described in paragraph (1)(A) by reason of

25 payments being made on a per diem or other
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1 periodic basis without regard to the expenses

2 incurred during the period to which the pay3 ments relate.

4 ‘‘(B) CONTRACT MAY COVER MEDICARE

5 REIMBURSABLE EXPENSES WHERE MEDICARE

6 IS SECONDARY PAYOR.—Paragraph (1)(C) shall

7 not apply to expenses which are reimbursable

8 under title XVIII of the Social Security Act

9 only as a secondary payor.

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

11 (1)(F) shall not apply to any refund of pre12 miums on surrender or cancellation of the con13 tract.

14 ‘‘(3) TREATMENT OF COVERAGE PROVIDED AS

15 PART OF A LIFE INSURANCE CONTRACT.—Except as

16 otherwise provided in regulations prescribed by the

17 Secretary, in the case of any long-term care insur18 ance coverage provided by rider on a life insurance

19 contract—

20 ‘‘(A) IN GENERAL.—This subsection shall

21 be applied as if the portion of the contract pro22 viding such coverage were a separate contract.

23 ‘‘(B) PREMIUMS AND CHARGES FOR LONG24 TERM CARE COVERAGE.—Premium payments

25 for coverage under a long-term care insurance
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Title VIII, Subtitle B

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1 contract and charges against the life insurance

2 contract’s cash surrender value (within the

3 meaning of section 7702(f)(2)(A)) for such cov4 erage shall be treated as premiums for purposes

5 of paragraph (1)(F).

6 ‘‘(C) APPLICATION OF SECTION 7702.—

7 Section 7702(c)(2) (relating to the guideline

8 premium limitation) shall be applied by increas9 ing the guideline premium limitation with re10 spect to a life insurance contract, as of any

11 date, by the excess of—

12 ‘‘(i) the sum of any charges (but not

13 premium payments) described in subpara14 graph (B) made on or before such date

15 under the contract, over

16 ‘‘(ii) any such charges the imposition

17 of which reduces the premiums paid for

18 the contract (within the meaning of section

19 7702(f)(1)).

20 ‘‘(D) APPLICATION OF SECTION 213.—No

21 deduction shall be allowed under section 213(a)

22 for charges against the life insurance contract’s

23 cash surrender value described in subparagraph

24 (B), unless such charges are includible in in25 come as a result of the application of section
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Title VIII, Subtitle B

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1 72(e)(10) and the coverage provided by the

2 rider is a long-term care insurance contract

3 under subsection (b)(1).

4 ‘‘(E) AMOUNT OF DISTRIBUTION UNDER

5 RIDER.—This paragraph shall not apply to any

6 rider on a life insurance contract unless the

7 percentage reduction in the cash surrender

8 value of the contract by reason of any payment

9 under the rider does not exceed the percentage

10 reduction in the death benefit payable under

11 the contract by reason of the payment.

12 For purposes of this paragraph, the term ‘portion’

13 means only the terms and benefits under a life in14 surance contract that are in addition to the terms

15 and benefits under the contract without regard to

16 the coverage under a long-term care insurance con17 tract, except that the coverage under a rider de18 scribed in this paragraph shall not fail to be treated

19 as such an addition by reason of a reduction in the

20 contract’s death benefit or cash surrender value re21 sulting from any payment under the rider.

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

23 purposes of this section—

24 ‘‘(1) IN GENERAL.—The term ‘qualified long25 term care services’ means necessary diagnostic, pre-
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1 ventive, therapeutic, and rehabilitative services, and

2 maintenance or personal care services, which—

3 ‘‘(A) are required by a chronically ill indi4 vidual in a qualified facility, and

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

6 care prescribed by a licensed health care practi7 tioner.

8 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

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

10 ill individual’ means any individual who has

11 been certified by a licensed health care practi12 tioner as—

13 ‘‘(i)(I) being unable to perform (with14 out substantial assistance from another in15 dividual) at least 2 activities of daily living

16 (as defined in subparagraph (B)) for a pe17 riod of at least 90 days due to a loss of

18 functional capacity, or

19 ‘‘(II) having a level of disability simi20 lar (as determined by the Secretary in con21 sultation with the Secretary of Health and

22 Human Services) to the level of disability

23 described in subclause (I), or

24 ‘‘(ii) having a similar level of disabil25 ity due to cognitive impairment.
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Title VIII, Subtitle B

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

2 purposes of subparagraph (A), each of the fol3 lowing is an activity of daily living:

4 ‘‘(i) MOBILITY.—The process of walk5 ing or wheeling on a level surface which

6 may include the use of an assistive device

7 such as a cane, walker, wheelchair, or

8 brace.

9 ‘‘(ii) DRESSING.—The overall complex

10 behavior of getting clothes from closets

11 and drawers and then getting dressed.

12 ‘‘(iii) TOILETING.—The act of going

13 to the toilet room for bowel and bladder

14 function, transferring on and off the toilet,

15 cleaning after elimination, and arranging

16 clothes or the ability to voluntarily control

17 bowel and bladder function, or in the event

18 of incontinence, the ability to maintain a

19 reasonable level of personal hygiene.

20 ‘‘(iv) TRANSFER.—The process of get21 ting in and out of bed or in and out of a

22 chair or wheelchair.

23 ‘‘(v) EATING.—The process of getting

24 food from a plate or its equivalent into the

25 mouth.
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Title VIII, Subtitle B

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1 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali2 fied facility’ means—

3 ‘‘(A) a nursing, rehabilitative, hospice, or

4 adult day care facility (including a hospital, re5 tirement home, nursing home, skilled nursing

6 facility, intermediate care facility, or similar in7 stitution)—

8 ‘‘(i) which is licensed under State law,

9 or

10 ‘‘(ii) which is a certified facility for

11 purposes of title XVIII or XIX of the So12 cial Security Act, or

13 ‘‘(B) an individual’s home if a licensed

14 health care practitioner certifies that without

15 home care the individual would have to be cared

16 for in a facility described in subparagraph (A).

17 ‘‘(4) MAINTENANCE OR PERSONAL CARE SERV18 ICES.—The term ‘maintenance or personal care serv19 ices’ means any care the primary purpose of which

20 is to provide needed assistance with any of the ac21 tivities of daily living described in paragraph (2)(B).

22 ‘‘(5) LICENSED HEALTH CARE PRACTI23 TIONER.—The term ‘licensed health care practi24 tioner’ means any physician (as defined in section

25 1861(r) of the Social Security Act) and any reg-
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Title VIII, Subtitle B

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1 istered professional nurse, licensed social worker, or

2 other individual who meets such requirements as

3 may be prescribed by the Secretary.

4 ‘‘(d) CONTINUATION COVERAGE EXCISE TAX NOT

5 TO APPLY.—This section shall not apply in determining

6 whether section 4980B (relating to failure to satisfy con7 tinuation coverage requirements of group health plans) ap8 plies.

9 ‘‘(e) INFLATION ADJUSTMENT OF $200 BENEFIT

10 LIMIT.—

11 ‘‘(1) IN GENERAL.—In the case of a calendar

12 year after 1994, the $200 amount contained in sub13 section (b)(1)(B) shall be increased for such cal14 endar year by the medical care cost adjustment for

15 such calendar year. If any increase determined

16 under the preceding sentence is not a multiple of

17 $10, such increase shall be rounded to the nearest

18 multiple of $10.

19 ‘‘(2) MEDICAL CARE COST ADJUSTMENT.—For

20 purposes of paragraph (1), the medical care cost ad21 justment for any calendar year is the percentage (if

22 any) by which—

23 ‘‘(A) the medical care component of the

24 Consumer Price Index (as defined in section
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Title VIII, Subtitle B

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1 1(f)(5)) for August of the preceding calendar

2 year, exceeds

3 ‘‘(B) such component for August of 1993.’’

4 (b) RESERVES.—Clause (iii) of section 807(d)(3)(A)

5 of such Code is amended by inserting ‘‘(other than a long6 term care insurance contract within the meaning of sec7 tion 818A)’’ after ‘‘contract’’.

8 (c) CLERICAL AMENDMENT.—The table of sections

9 for subpart E of part I of subchapter L of chapter 1 of

10 such Code is amended by inserting after the item relating

11 to section 818 the following new item:

‘‘Sec. 818A. Treatment of long-term care insurance or plans.’’

12 SEC. 8102. EXCLUSION FOR BENEFITS PROVIDED UNDER

13 LONG-TERM CARE INSURANCE AND FOR CER14 TAIN EMPLOYER-PROVIDED COVERAGE.

15 (a) IN GENERAL.—Subsection (a) of section 104 of

16 the Internal Revenue Code of 1986 (relating to compensa17 tion for injuries or sickness) is amended by striking ‘‘and’’

18 at the end of paragraph (4), by striking the period at the

19 end of paragraph (5) and inserting ‘‘, and’’, and by insert20 ing after paragraph (5) the following new paragraph:

21 ‘‘(6) benefits under a long-term care insurance

22 contract (as defined in section 818A(b)).’’

23 (b) EMPLOYER-PROVIDED COVERAGE.—Section 106

24 of such Code (relating to contributions by employer to ac25 cident and health plans), as amended by section 2003, is
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Title VIII, Subtitle B

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1 amended by adding at the end the following new sub2 section:

3 ‘‘(c) TREATMENT OF LONG-TERM CARE INSURANCE

4 CONTRACTS.—

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (2), a long-term care insurance contract (as

7 defined in section 818A(b)) shall be treated as a

8 health plan for purposes of subsection (a).

9 ‘‘(2) EXCEPTION FOR CAFETERIA PLANS AND

10 FLEXIBLE SPENDING ARRANGEMENTS.—Paragraph

11 (1) shall not apply to coverage under a long-term

12 care insurance contract (as so defined) which is pro13 vided through a cafeteria plan (as defined in section

14 125(c)) or flexible spending or similar arrange15 ment.’’.

16 SEC. 8103. QUALIFIED LONG-TERM SERVICES TREATED AS

17 MEDICAL CARE.

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

19 213(d) of the Internal Revenue Code of 1986 (defining

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

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

22 subparagraph (D), and by inserting after subparagraph

23 (B) the following new subparagraph:

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

25 (as defined in section 818A(c)), or’’.
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1 (b) DEDUCTION FOR LONG-TERM CARE EXPENSES

2 FOR PARENT OR GRANDPARENT.—Section 213 of such

3 Code (relating to deduction for medical expenses) is

4 amended by adding at the end the following new sub5 section:

6 ‘‘(g) SPECIAL RULE FOR CERTAIN LONG-TERM CARE

7 EXPENSES.—For purposes of subsection (a), the term ‘de8 pendent’ shall include any parent or grandparent of the

9 taxpayer for whom the taxpayer has expenses for long10 term care services described in section 818A(c), but only

11 to the extent of such expenses.’’

12 (c) TECHNICAL AMENDMENTS.—

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

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

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

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

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

18 Code is amended by adding at the end thereof the

19 following new flush sentence:

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

21 (as defined in section 818A), only eligible long-term

22 care premiums (as defined in paragraph (10)) shall

23 be taken into account under subparagraph (D).’’

24 (B) Subsection (d) of section 213 is amended

25 by adding at the end the following new paragraph:
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Title VIII, Subtitle B

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1 ‘‘(10) ELIGIBLE LONG-TERM CARE PRE2 MIUMS.—

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

4 section, the term ‘eligible long-term care pre5 miums’ means the amount paid during a tax6 able year for any long-term care insurance con7 tract (as defined in section 818A) covering an

8 individual, to the extent such amount does not

9 exceed the limitation determined under the fol10 lowing 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.

11 ‘‘(B) INDEXING.—

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

13 taxable year beginning in a calendar year

14 after 1993, each dollar amount contained

15 in paragraph (1) shall be increased by the

16 medical care cost adjustment of such

17 amount for such calendar year. If any in18 crease determined under the preceding sen19 tence is not a multiple of $10, such in20 crease shall be rounded to the nearest mul21 tiple of $10.
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Title VIII, Subtitle B

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1 ‘‘(ii) MEDICAL CARE COST ADJUST2 MENT.—For purposes of clause (i), the

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

5 which—

6 ‘‘(I) the medical care component

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

9 the preceding calendar year, exceeds

10 ‘‘(II) such component for August

11 of 1991.’’

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

13 Code is amended—

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

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

16 and (C)’’, and

17 (B) by striking ‘‘paragraph (1)(C)’’ in sub18 paragraph (A) and inserting ‘‘paragraph

19 (1)(D)’’.

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

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

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

23 and (C)’’.
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1 SEC. 8104. EXCLUSION FROM GROSS INCOME FOR

2 AMOUNTS OTHERWISE INCLUDIBLE ON THE

3 SURRENDER OR CANCELLATION OF ANY LIFE

4 INSURANCE POLICY WHICH ARE USED FOR

5 LONG-TERM CARE INSURANCE PREMIUMS.

6 (a) IN GENERAL.—Part III of subchapter B of chap7 ter 1 of the Internal Revenue Code of 1986 (relating to

8 items specifically excluded from gross income) is amended

9 by redesignating section 137 as section 138 and by insert10 ing after section 136 the following new section:

11 ‘‘SEC. 137. AMOUNTS RECEIVED ON CANCELLATION, ETC.,

12 OF LIFE INSURANCE CONTRACTS AND USED

13 TO PAY PREMIUMS FOR QUALIFIED LONG14 TERM CARE INSURANCE.

15 ‘‘No amount which would (but for this section) be in16 cludible in the gross income of an individual shall be in17 cluded in gross income on the whole or partial surrender,

18 cancellation, or exchange of any life insurance contract

19 during the taxable year if—

20 ‘‘(1) such individual has attained age 65 on or

21 before the date of the transaction, and

22 ‘‘(2) the amount otherwise includible in gross

23 income is used during such year to pay premiums

24 for any qualified long-term care insurance policy (as

25 defined in section 2721(a) of the Public Health

26 Service Act) for the benefit of such individual or the
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Title VIII, Subtitle B

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1 spouse of such individual if such spouse has attained

2 age 65 on or before the date of the transaction.’’.

3 (b) CLERICAL AMENDMENT.—The table of sections

4 for such part III is amended by striking the last item and

5 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.’’.

6 SEC. 8105. EFFECTIVE DATE.

7 (a) IN GENERAL.—The amendments made by this

8 subtitle shall apply to taxable years beginning after De9 cember 31, 1995.

10 (b) TRANSITION RULE.—If, after the date of enact11 ment of this Act and before January 1, 1996, a contract

12 providing for long-term care insurance coverage is ex13 changed solely for a long-term care insurance contract, no

14 gain or loss shall be recognized on the exchange. If, in

15 addition to a long-term care insurance contract, money or

16 other property is received in the exchange, then any gain

17 shall be recognized to the extent of the sum of the money

18 and the fair market value of the other property received.

19 For purposes of this subsection, the cancellation of a con20 tract providing for long-term care insurance coverage and

21 reinvestment of the cancellation proceeds in a long-term

22 care insurance contract within 60 days thereafter shall be

23 treated as an exchange. For purposes of this subsection,
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1 the term ‘‘long-term care insurance contract’’ has the

2 meaning given to such term by section 818A(b) of the In3 ternal Revenue Code of 1986.

4 (c) ISSUANCE OF RIDER NOT TREATED AS MATE5 RIAL CHANGE.—For purposes of applying sections 101(f),

6 7702, and 7702A of the Internal Revenue Code of 1986

7 to any contract, the issuance of a rider on a life insurance

8 contract providing long-term care insurance coverage shall

9 not be treated as a modification or material change of

10 such contract.

11 Subtitle C—Studies

12 SEC. 8201. FEASIBILITY OF ENCOURAGING HEALTH CARE

13 PROVIDERS TO DONATE SERVICES TO HOME14 BOUND PATIENTS.

15 The Comptroller General of the United States shall

16 conduct a study on the feasibility of encouraging health

17 care providers to donate their services to homebound pa18 tients. Such study shall include an examination of the ef19 fects of qualifying such services as a charitable contribu20 tion.

21 SEC. 8202. FEASIBILITY OF TAX CREDIT FOR HEADS OF

22 HOUSEHOLDS WHO CARE FOR ELDERLY FAM23 ILY MEMBERS IN THEIR HOMES.

24 The Comptroller General of the United States shall

25 conduct a study on the feasibility of providing heads of
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Title VIII, Subtitle C

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1 households who care for elderly family members in their

2 homes with a tax credit. Such study shall estimate the

3 cost of such a tax credit which would apply to expenses

4 incurred in the custodial care of such an elderly family

5 member to the extent such expenses exceed 5 percent of

6 adjusted gross income.

7 SEC. 8203. CASE MANAGEMENT OF CURRENT LONG-TERM

8 CARE BENEFITS.

9 (a) IN GENERAL.—The Secretary of Health and

10 Human Services shall conduct a study of the feasibility

11 of encouraging or requiring the use of a single designated

12 public or nonprofit agency (such as an area agency on

13 aging) to coordinate, through case management, the provi14 sion of long-term care benefits under current Federal,

15 State, and local programs in a geographic area.

16 (b) REPORT.—The Secretary shall submit to Con17 gress a report on the study conducted under subsection

18 (a) by not later than 1 year after the date of the enact19 ment of this Act. Such report shall include such rec20 ommendations regarding changes in legislation to encour21 age or require the use (described in subsection (a)) of an

22 agency to coordinate long-term care benefits as may be

23 appropriate.
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1 SEC. 8204. SUBACUTE CARE STUDY.

2 (a) STUDY.—The Secretary of Health and Human

3 Services shall—

4 (1) define the level and type of care that should

5 constitute subacute care;

6 (2) determine the appropriateness of furnishing

7 subacute care in different settings by evaluating the

8 quality of care and patient outcomes;

9 (3) determine the cost and effectiveness of pro10 viding subacute care under the medicare program

11 under title XVIII of the Social Security Act to indi12 viduals who are eligible for benefits under part A of

13 such title;

14 (4) determine the extent to which hospital DRG

15 prospective payment rates under section 1886(d) of

16 such Act (42 U.S.C. 1395ww(d)) are appropriate for

17 the less restrictive institutional settings that provide

18 subacute care; and

19 (5) study the relationships between institutions

20 and their payment methodologies in order to develop

21 ways in which to maximize the continuity of care for

22 each patient episode in which subacute care is fur23 nished.

24 (b) REPORT.—Not later than October 1, 1996, the

25 Secretary shall submit to the Congress a report on the

26 matters described in subsection (a).
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1 SEC. 8205. STUDY OF LONG-TERM CARE INSURANCE.

2 (a) REPORT.—Not later than one year after the date

3 of enactment of this Act, the Secretary of Health and

4 Human Services shall report to Congress on alternatives

5 for extending access to long-term care through the private

6 insurance market. The Secretary shall specifically study

7 the cost of current policies, their effectiveness in providing

8 care and their availability to the general population.

9 (b) RECOMMENDATIONS.—The Secretary shall rec10 ommend any changes in Federal law which may be nec11 essary to increase access to long-term care for all Ameri12 cans through the private insurance market. In conducting

13 this study, the Secretary shall consult with the National

14 Association of Insurance Commissioners and other private

15 entities with expertise in private health insurance and

16 long-term care.

17 TITLE IX—DEPARTMENT OF

18 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.
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‘‘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.

1 SEC. 9001. BENEFITS AND ELIGIBILITY THROUGH DEPART2 MENT OF VETERANS AFFAIRS MEDICAL SYS3 TEM.

4 (a) DVA AS A PARTICIPANT IN HEALTH CARE RE5 FORM.—
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1 (1) IN GENERAL.—Title 38, United States

2 Code, is amended by inserting after chapter 17 the

3 following new chapter:

4 ‘‘CHAPTER 18—ELIGIBILITY AND BENE5 FITS UNDER ENROLLMENT-BASED

6 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 with a VA health

plan.

‘‘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

7 ‘‘SUBCHAPTER I—GENERAL

8 ‘‘§ 1801. Definitions

9 ‘‘For purposes of this chapter:

10 ‘‘(1) The term ‘qualified health coverage’ has

11 the meaning given such term in section 1101 of the

12 Bipartisan Health Care Reform Act of 1994.
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1 ‘‘(2) The term ‘VA health coverage’ means

2 qualified health coverage provided by the Secretary

3 under section 7341 of this title.

4 ‘‘(3) The term ‘VA enrollee’ means an individ5 ual enrolled under subchapter II of this chapter with

6 VA health coverage.

7 ‘‘(4) The term ‘standard coverage’ has the

8 meaning given such term in section 1102 of the Bi9 partisan Health Care Reform Act of 1994.

10 ‘‘SUBCHAPTER II—ENROLLMENT

11 ‘‘§ 1811. Enrollment: veterans

12 ‘‘Subject to section 1814, each veteran residing in the

13 United States may enroll to obtain VA health coverage.

14 A veteran who wants to receive the standard coverage

15 through the Department shall enroll to obtain VA health

16 coverage.

17 ‘‘§ 1812. Enrollment: CHAMPVA eligibles

18 ‘‘(a) ELIGIBILITY.—Subject to section 1814, an indi19 vidual described in subsection (b) who resides in the Unit20 ed States may enroll to obtain VA health coverage.

21 ‘‘(b) APPLICABILITY.—This section applies to the fol22 lowing individuals who are not otherwise eligible for medi23 cal care under chapter 55 of title 10 (CHAMPUS):

24 ‘‘(1) The surviving spouse or child of a veteran

25 who (A) died as a result of a service-connected dis-
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1 ability, or (B) at the time of death had a total dis2 ability permanent in nature, resulting from a serv3 ice-connected disability.

4 ‘‘(2) The surviving spouse or child of a person

5 who died in the active military, naval, or air service

6 in the line of duty and not due to such person’s own

7 misconduct.

8 ‘‘(c) DEFINITION OF CHILD.—For purposes of this

9 section, the term ‘child’ includes a child described in sec10 tion 1901(2)(B) of the Bipartisan Health Care Reform

11 Act of 1994.

12 ‘‘§ 1813. Enrollment: family members

13 ‘‘(a) ELIGIBILITY.—Subject to section 1814, mem14 bers of the family of an enrollee under section 1811 or

15 1812 of this title may enroll to obtain VA health coverage.

16 The enrollee shall have the option of enrolling to obtain

17 VA health coverage as an individual or with family mem18 bers. If the enrollee chooses to enroll to obtain VA health

19 coverage with family members, all such family members

20 must be so enrolled.

21 ‘‘(b) REQUIRED PAYMENTS.—Any family member

22 with VA health coverage shall (except as provided in sec23 tion 1831(c)(2)(B) of this title) be subject to payment of

24 premiums, deductibles, copayments, and coinsurance in
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1 accordance with the Bipartisan Health Care Reform Act

2 of 1994.

3 ‘‘(c) ENROLLMENT ELIGIBILITY TO SURVIVE DEATH

4 OF VETERAN.—An individual with VA health coverage

5 pursuant to subsection (a) as a member of the family of

6 a veteran enrolled under section 1811 of this title shall

7 not lose eligibility to obtain such coverage by reason of

8 the death of that veteran.

9 ‘‘(d) MEMBERS OF FAMILY.—For purposes of this

10 section, the members of the family of an enrollee are those

11 individuals (other than the enrollee) included as family

12 members under section 1901(2) of the Bipartisan Health

13 Care Reform Act of 1994.

14 ‘‘§ 1814. Enrollment ceilings

15 ‘‘(a) The Secretary shall limit the number of individ16 uals eligible to enroll for VA health coverage by establish17 ing and applying enrollment ceilings in accordance with

18 this section.

19 ‘‘(b) The Secretary shall establish separate enroll20 ment ceilings under subsection (a) applicable to individ21 uals described in subsections (b), (c)(1), and (c)(2), re22 spectively, of section 1831 of this title. The Secretary shall

23 set such enrollment ceilings for each applicable enrollment

24 period at levels that, when multiplied by an estimate

25 (based on prior Department experience) of the cost to the
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1 Secretary of providing the items and services in standard

2 coverage under the Bipartisan Health Care Reform Act

3 of 1994, would (1) result in a total cost that can be accom4 modated within the appropriation available for this pur5 pose in each fiscal year, and (2) avoid any need for the

6 Secretary to take actions described in section 1821(b) of

7 this title.

8 ‘‘(c) In establishing and managing enrollment ceilings

9 under this section applicable to individuals described in

10 section 1831(b), the Secretary shall establish and imple11 ment priorities for enrollment consistent with priorities in

12 chapter 17 of this title in effect on the day preceding the

13 date of the enactment of the Bipartisan Health Care Re14 form Act of 1994.

15 ‘‘SUBCHAPTER III—BENEFITS

16 ‘‘§ 1821. Benefits for VA enrollees

17 ‘‘(a) To the extent that such items and services can

18 be provided consistent with appropriations for that pur19 pose, the Secretary shall ensure that each individual en20 rolled with VA health coverage is provided the items and

21 services in standard coverage under the Bipartisan Health

22 Care Reform Act of 1994 which the Secretary determines

23 are clinically necessary for such individual.

24 ‘‘(b) In the event that the Secretary determines at

25 any time during a fiscal year that appropriations are in-
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1 sufficient to provide individuals enrolled with VA health

2 coverage all needed items and services in standard cov3 erage under the Bipartisan Health Care Reform Act of

4 1994, the Secretary shall take appropriate action to limit

5 expenditures to the amount appropriated. Such actions

6 may include revising the scope of coverage described in

7 subsection (a). At least 15 days before taking an action

8 under this subsection, the Secretary shall submit to the

9 Committees on Veterans Affairs of the House of Rep10 resentatives and the Senate a report describing such pro11 posed action and the circumstances requiring the Sec12 retary to take such proposed action.

13 ‘‘§ 1822. Chapter 17 benefits

14 ‘‘(a) CARE AND SERVICES NOT INCLUDED IN STAND15 ARD COVERAGE.—In the case of care and services that

16 may be provided under chapter 17 of this title that are

17 not included in standard coverage, the Secretary shall pro18 vide to any veteran (whether or not enrolled with qualified

19 health coverage) the care and services authorized under

20 that chapter in accordance with the terms and conditions

21 applicable to that veteran and that care under that chap22 ter.

23 ‘‘(b) VETERANS WHO ARE NOT ELIGIBLE TO EN24 ROLL UNDER THE BIPARTISAN HEALTH CARE REFORM

25 ACT OF 1994.—In the case of a veteran who is not eligible
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1 for enrollment under this chapter, the Secretary shall pro2 vide to the veteran the care and services that may be pro3 vided under chapter 17 of this title through any facility

4 of the department, whether or not the facility is operating

5 pursuant to VA health coverage.

6 ‘‘(c) PRESERVATION OF SPECIALIZED DVA TREAT7 MENT CAPACITIES.—In carrying out subsection (a), the

8 Secretary shall ensure that the Department maintains the

9 capacity to provide for the specialized treatment and reha10 bilitative needs of disabled veterans (including veterans

11 with spinal cord dysfunction, blindness, and mental ill12 ness) within distinct programs or facilities of the Depart13 ment that are dedicated to the specialized needs of those

14 veterans in a manner that affords those veterans reason15 able access to care and services for those specialized needs.

16 The Secretary shall ensure that overall capacity of the De17 partment to provide such specialized services is not re18 duced below the capacity of the Department, nationwide,

19 to provide those services, as of the date of the enactment

20 of this chapter. Nothing in this subsection precludes the

21 Secretary from expanding the number or type of facilities

22 or programs that provide treatment and rehabilitation

23 services for the specialized needs of such veterans, includ24 ing provision of specialized services on an outpatient basis.
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1 ‘‘(d) ANNUAL REPORT.—Not later than March 1 of

2 each year, the Secretary shall submit to the Committees

3 on Veterans’ Affairs of the Senate and House of Rep4 resentatives a report describing the actions the Secretary

5 has taken to carry out subsection (c) during the preceding

6 fiscal year. Each such report shall include a statement of

7 the number of veterans to whom the Department provided

8 specialized services that are covered by the report and the

9 expense of providing those services, and a description of

10 the alternatives available in the private sector for the pro11 vision of those services to veterans.

12 ‘‘§ 1823. Supplemental benefits packages and policies

13 ‘‘Subject to section 1814, VA health coverage may

14 include supplemental health benefits packages and supple15 mental cost sharing policies consistent with the Bipartisan

16 Health Care Reform Act of 1994. However, such coverage

17 may not include a supplemental health benefits package

18 to a veteran that provides coverage for services that the

19 Department is required to provide to that veteran under

20 chapter 17 of this title.

21 ‘‘§ 1824. Limitation regarding veterans who elect not

22 to enroll to obtain VA health coverage

23 ‘‘(a) REIMBURSEMENT REQUIRED.—A veteran who is

24 residing in an area in which the Department offers VA

25 health coverage and who elects not to enroll to obtain such
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1 coverage may be provided the items and services in stand2 ard coverage through VA health coverage offered in that

3 area only if (except as provided in subsection (b)) the Sec4 retary is reimbursed for the cost of the care provided.

5 ‘‘(b) EXCEPTION.—The Secretary may not impose on

6 or collect from a veteran described in subsection (a) a cost7 share charge of any kind in the case of treatment for a

8 service-connected disability that (as determined by the

9 Secretary) requires a specialized treatment capacity for

10 which the Department has particular expertise.

11 ‘‘§ 1825. Limitation on use of funds for abortions

12 ‘‘None of the funds appropriated to carry out this

13 title shall be expended for any abortion except when it is

14 made known to the Secretary that such procedure is nec15 essary to save the life of the mother or that the pregnancy

16 is the result of an act of rape or incest.

17 ‘‘SUBCHAPTER IV—FINANCIAL MATTERS

18 ‘‘§ 1831. Premiums, copayments, etc.

19 ‘‘(a) EXEMPTION OF CERTAIN VETERANS.—Subject

20 to subsection (f), in the case of a veteran described in sub21 section (b) who is a VA enrollee, there may not be imposed

22 or collected from the veteran a cost-share charge of any

23 kind (whether a premium, copayment, deductible, coinsur24 ance charge, or other charge) for items and services in
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1 standard coverage that are provided to the veteran by the

2 Secretary within a VA plan provider network.

3 ‘‘(b) VETERANS EXEMPT FROM CHARGES.—The vet4 erans referred to in subsection (a) are the following:

5 ‘‘(1) Any veteran with a service-connected dis6 ability rated at 10 percent or greater.

7 ‘‘(2) Any veteran whose discharge or release

8 from the active military, naval or air service was for

9 a disability incurred or aggravated in the line of

10 duty.

11 ‘‘(3) Any veteran who is in receipt of, or who,

12 but for a suspension pursuant to section 1151 of

13 this title (or both such a suspension and the receipt

14 of retired pay), would be entitled to disability com15 pensation, but only to the extent that such a veter16 an’s continuing eligibility for such care is provided

17 for in the judgment or settlement provided for in

18 such section.

19 ‘‘(4) Any veteran who is a former prisoner of

20 war.

21 ‘‘(5) Any veteran of the Mexican border period

22 or World War I.

23 ‘‘(6) Any veteran who is unable to defray the

24 expenses of necessary care as determined under sec25 tion 1722(a) of this title.
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1 ‘‘(c) OTHER ENROLLEES.—(1) In the case of a VA

2 enrollee who is not described in subsection (b), the Sec3 retary shall (except as provided in paragraph (2)) charge

4 premiums and shall establish copayments, deductibles, and

5 coinsurance amounts.

6 ‘‘(2) The Secretary may not collect from an enrollee

7 a premium in the case of—

8 ‘‘(A) an individual with VA health coverage by

9 reason of eligibility under section 1812 of this title;

10 or

11 ‘‘(B) an individual with VA health coverage by

12 reason of eligibility under section 1813 of this title

13 and who is described in paragraph (1) of section

14 1713(a) of this title.

15 ‘‘(3) The Secretary may not charge a copayment, de16 ductible, or other coinsurance amount in the case of care

17 for any disease covered under section 1710(e)(1) of this

18 title.

19 ‘‘(d) ESTABLISHMENT OF RATES.—The premium

20 rate, and the rates for deductibles and copayments, appli21 cable under VA health coverage shall be established by the

22 Secretary based on rules applicable to all health coverage

23 offered in the geographic area in which such VA health

24 coverage is offered.
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1 ‘‘(e) DUTIES OF EMPLOYERS.—The obligations (in2 cluding obligations with respect to payment of premiums)

3 under the Bipartisan Health Care Reform Act of 1994

4 of an employer with respect to employees with VA health

5 coverage, and with respect to such coverage, shall be the

6 same as those that apply with respect to other employees

7 and other health coverage.

8 ‘‘(f) ACCEPTANCE OF PREMIUM CERTIFICATES.—In

9 the case of a veteran who has been issued a premium cer10 tificate or voucher under the Bipartisan Health Care Re11 form Act of 1994, the Secretary may require the veteran

12 to tender the certificate to the Secretary as a condition

13 of enrollment and the Secretary may accept the certificate.

14 ‘‘§ 1832. Recovery of cost of certain care and services

15 ‘‘(a) RECOVERY FROM THIRD PARTIES.—In the case

16 of an individual provided care or services through VA

17 health coverage who has coverage under any supplemental

18 health insurance policy, including a Medicare supple19 mental health insurance plan, the Secretary has the right

20 to recover or collect charges for care or services (as deter21 mined by the Secretary, but not including care or services

22 for a service-connected disability) from the party providing

23 that coverage to the extent that the individual (or the pro24 vider of the care or services) would be eligible to receive

25 payment for such care or services from such party if the
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1 care or services had not been furnished by a department

2 or agency of the United States.

3 ‘‘(b) PROCEDURES.—The provisions of subsections

4 (b) through (f) of section 1729 of this title shall apply

5 with respect to claims by the United States under sub6 section (a) in the same manner as they apply to claims

7 under subsection (a) of that section.

8 ‘‘§ 1833. Health Coverage Fund

9 ‘‘(a) ESTABLISHMENT OF FUND.—There is hereby

10 established in the Treasury a revolving fund to be known

11 as the ‘Department of Veterans Affairs Health Coverage

12 Fund’.

13 ‘‘(b) CREDITING OF AMOUNTS TO FUND.—There

14 shall be credited to the revolving fund any amount received

15 by the Department by reason of the furnishing of health

16 care under VA health coverage and any amount received

17 by the Department by reason of the enrollment of an indi18 vidual with VA health coverage (including amounts re19 ceived as premiums, premium certificates or vouchers,

20 copayments or coinsurance, and deductibles), any amount

21 received as a third-party reimbursement, and any amount

22 received as a reimbursement from other health coverage

23 for care furnished to one of its enrollees.

24 ‘‘(c) CREDITING TO TREASURY.—Any amounts de25 posited to the revolving fund that are attributable to
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1 amounts received by the Department as a premium, in2 cluding a premium certificate or voucher, by reason of the

3 enrollment with VA health coverage of a veteran described

4 in section 1831(b) of this title shall be covered into the

5 General Fund of the Treasury.

6 ‘‘(d) AMOUNTS NOT PERMITTED TO BE RE7 TAINED.—Notwithstanding subsection (b), the Depart8 ment may not retain amounts received for care furnished

9 to a VA enrollee in a case in which the costs of such care

10 have been covered by appropriations. Such amounts shall

11 be deposited in the General Fund of the Treasury.

12 ‘‘(e) AVAILABILITY OF FUNDS.—Amounts in the re13 volving fund are hereby made available for all expenses,

14 both direct and indirect, related to the delivery through

15 VA health coverage of the items and services in standard

16 coverage and any supplemental benefits package or policy

17 offered through such coverage.’’.

18 (b) PRESERVATION OF EXISTING BENEFITS FOR FA19 CILITIES NOT OFFERING SERVICES THROUGH QUALIFIED

20 HEALTH COVERAGE.—(1) Chapter 17 of title 38, United

21 States Code, is amended by inserting after section 1704

22 the following new section:
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1 ‘‘§ 1705. Facilities not offering qualified health cov2 erage; veterans not eligible to enroll to

3 obtain coverage

4 ‘‘The provisions of this chapter shall apply with re5 spect to the furnishing of care and services—

6 ‘‘(1) by any facility of the Department that (A)

7 is not offering qualified health coverage under the

8 Bipartisan Health Care Reform Act of 1994, and

9 (B) is not located in a State (or portion of a State)

10 that is a single payer area; and

11 ‘‘(2) by any facility of the Department (whether

12 or not offering qualified health coverage under the

13 Bipartisan Health Care Reform Act of 1994) in the

14 case of a veteran who is not eligible for enrollment

15 under chapter 18 of this title.’’.

16 (2) The table of sections at the beginning of such

17 chapter is amended by inserting after the item relating

18 to section 1704 the following new item:

‘‘1705. Facilities not offering qualified health coverage; veterans not eligible to

enroll to obtain coverage.’’.

19 SEC. 9002. ORGANIZATION OF DEPARTMENT OF VETERANS

20 AFFAIRS FACILITIES AS FACILITIES OFFER21 ING QUALIFIED HEALTH COVERAGE.

22 (a) IN GENERAL.—Chapter 73 of title 38, United

23 States Code, is amended—
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1 (1) by redesignating subchapter IV as sub2 chapter V; and

3 (2) by inserting after subchapter III the follow4 ing new subchapter:

5 ‘‘SUBCHAPTER IV—PARTICIPATION AS PART OF

6 NATIONAL HEALTH CARE REFORM

7 ‘‘§ 7341. Organization of health care facilities as fa8 cilities offering qualified health coverage

9 ‘‘(a) Except as provided in section 7342 of this title,

10 the Secretary may, subject to the availability of appropria11 tions, organize Department plans and facilities as entities

12 and facilities offering qualified health coverage under the

13 Bipartisan Health Care Reform Act of 1994 subject to

14 adjustment under subsection (g). The Secretary shall pre15 scribe regulations establishing standards for the operation

16 of Department health care facilities as facilities offering

17 qualified health coverage under the Bipartisan Health

18 Care Reform Act of 1994. In prescribing those standards,

19 the Secretary shall assure that they conform, to the maxi20 mum extent practicable, to the requirements for qualified

21 health coverage generally set forth in the Bipartisan

22 Health Care Reform Act of 1994.

23 ‘‘(b) Within a geographic area or region, health care

24 facilities of the Department located within that area or

25 region may be organized to operate as a single entity offer-
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1 ing qualified health coverage encompassing all Depart2 ment facilities within that area or region or may be orga3 nized to operate as several entities offering qualified

4 health coverage.

5 ‘‘(c) A health plan purchasing organization operating

6 within one or more fair rating areas shall offer as an op7 tion to eligible individuals enrollment to obtain VA health

8 coverage that is offered in such area.

9 ‘‘(d) Any health insurance program that is provided

10 for Federal employees shall include enrollment to obtain

11 VA health coverage as enrollment options for eligible indi12 viduals. Premiums shall be paid for VA health coverage

13 under any such insurance program based upon enrollment

14 with that program in the same manner as to any other

15 health coverage.

16 ‘‘(e)(1) In establishing and operating standard health

17 coverage, the Secretary, in consultation with the Comp18 troller General, shall take appropriate steps to ensure the

19 financial solvency and stability of the VA health coverage

20 and of contractors and subcontractors providing services

21 pursuant to section 7343 of this title.

22 ‘‘(2) In carrying out paragraph (1), the Secretary

23 may purchase from commercial sources insurance to in24 sure the Department against the financial risks involved

25 in the offering of VA health coverage.
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1 ‘‘(3) Notwithstanding any other provision of law,

2 there shall be no requirements applicable to the offering

3 of VA health coverage with respect to the maintenance of

4 a reserve fund, requirements to reinsure, or payments into

5 any other financial integrity fund other than as estab6 lished pursuant to paragraph (1).

7 ‘‘(f) In carrying out responsibilities under the Bipar8 tisan Health Care Reform Act of 1994, a State (or a

9 State-established entity)—

10 ‘‘(1) may not impose any standard or require11 ment on VA health coverage that is inconsistent with

12 this section or any regulation prescribed under this

13 section or other Federal laws regarding the oper14 ation of this section; and

15 ‘‘(2) may not deny certification of VA health

16 coverage under the Bipartisan Health Care Reform

17 Act of 1994 on the basis of a conflict between a rule

18 of a State (or State-established entity) and this sec19 tion or regulations prescribed under this section or

20 other Federal laws regarding the operation of this

21 section.

22 ‘‘(g) Notwithstanding any provision of the Bipartisan

23 Health Care Reform Act of 1994 or this subchapter, any

24 reference in this subchapter to ‘qualified health coverage’

25 under such Act shall, subject to section 1821(b) of this
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1 title, be considered a reference to coverage of a standard2 ized package of benefits established by the Secretary with

3 an actuarial value not less than the actuarial value of

4 qualified health coverage under such Act.

5 ‘‘§ 7342. Operation of health care facilities within

6 States operating as single payer areas

7 ‘‘(a) In a State (or portion of a State) that operates

8 as a single payer system, Department health care facilities

9 in that State (or portion of a State) shall serve as provid10 ers to individuals residing in that State (or portion of a

11 State) who would be eligible to enroll under chapter 18

12 of this title to obtain VA health coverage if they were re13 siding in an area where qualified health coverage was of14 fered under the Bipartisan Health Care Reform Act of

15 1994. Such facilities may provide those individuals any

16 covered service in standard coverage.

17 ‘‘(b) A Department facility providing care to resi18 dents of a single payer area pursuant to subsection (a)

19 shall be reimbursed for that care on the same basis as

20 any other provider furnishing the same services in that

21 area.

22 ‘‘(c) A veteran described in section 1831(b) of this

23 title shall be exempt from any otherwise applicable charges

24 for such care. Any other individual provided care pursuant

25 to subsection (a) shall be subject to all applicable require-
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1 ments respecting copayments, deductibles, and coinsur2 ance. Notwithstanding the preceding sentence, section

3 1831(c)(3) of this title shall apply to any such charge.

4 ‘‘§ 7343. Health care resource agreements

5 ‘‘(a)(1) In accordance with policies established under

6 subsection (b), an official specified in paragraph (2) may,

7 without regard to any law or regulation specified in para8 graph (3), enter into agreements with health care plans,

9 with insurers, and with health care providers, and with

10 any other entity or individual, to furnish or obtain any

11 health-care resource.

12 ‘‘(2) An official specified in this paragraph is any of

13 the following:

14 ‘‘(A) The head official offering VA health cov15 erage.

16 ‘‘(B) The director of a Department health care

17 facility that is providing service through VA health

18 coverage.

19 ‘‘(C) The director of a Department health care

20 facility that is operating in a State (or portion of a

21 State) that is operating under a single payer system.

22 ‘‘(3) A law or regulation specified in this paragraph

23 is any of the following:

24 ‘‘(A) Section 1703 of this title.
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1 ‘‘(B) Any other law or regulation pertaining

2 to—

3 ‘‘(i) competitive procedures;

4 ‘‘(ii) acquisition procedures or policies

5 (other than contract dispute settlement proce6 dures); or

7 ‘‘(iii) bid protests.

8 ‘‘(4) For purposes of this subsection, the term

9 ‘health-care resource’ has the meaning given that term in

10 section 8152 of this title.

11 ‘‘(b) Policies established by the Secretary under sub12 section (a) shall include appropriate provisions to ensure

13 that procurements under that subsection are carried out

14 in a manner consistent with (1) Federal acquisition poli15 cies regarding nondiscrimination, equal opportunity, busi16 ness integrity, and safeguarding against fraud and abuse,

17 and (2) the goal of a streamlined process for the acquisi18 tion of health-care resources.

19 ‘‘(c) Any proceeds to the Government received from

20 an agreement under subsection (a) shall be credited to the

21 Department of Veterans Affairs Health Coverage Fund

22 established under section 1834 of this title and to funds

23 that have been allotted to the facility that furnished the

24 resource involved.
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1 ‘‘§ 7344. Administrative and personnel flexibility

2 ‘‘(a) In order to carry out this subchapter, the Sec3 retary may—

4 ‘‘(1) subject to section 1822(c) of this title,

5 carry out administrative reorganizations of the De6 partment without regard to those provisions of sec7 tion 510 of this title following subsection (a) of that

8 section; and

9 ‘‘(2) when the Secretary finds it is cost-effective

10 or necessary in order to provide health care services

11 in a timely manner—

12 ‘‘(A) enter into contracts for procurement

13 of any commercially available item at a cost of

14 under $100,000 without regard to any provision

15 of law or regulation (i) requiring competitive

16 procedures; (ii) mandating or giving priority to

17 any source of supply; or (iii) pertaining to pro18 tests; and

19 ‘‘(B) enter into contracts without regard to

20 section 8110(c) of this title for the performance

21 of services previously performed by employees

22 of the Department.

23 ‘‘(b)(1) The Secretary may establish alternative per24 sonnel systems or procedures for personnel at facilities of25 fering qualified health coverage under this title, or for per26 sonnel at facilities operating in a State (or portion of a
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1 State) that is operating under a single payer system,

2 whenever the Secretary considers such action necessary,

3 except that the Secretary shall provide for preference eligi4 bles (as defined in section 2108 of title 5) in a manner

5 comparable to the preference for such eligibles under sub6 chapter I of chapter 33, and subchapter I of chapter 35,

7 of such title.

8 ‘‘(2) In establishing alternative personnel systems or

9 procedures under this subsection, the Secretary shall in10 clude the following:

11 ‘‘(A) A system that ensures that applicants for

12 employment and employees are appointed, promoted,

13 and assigned on the basis of merit and fitness.

14 ‘‘(B) An equal employment opportunity pro15 gram.

16 ‘‘(C) Compensation systems which will be used

17 to set rates of pay that are competitive with rates

18 of pay paid by health-care providers other than the

19 Department and that take into consideration the dif20 ficulty, responsibility, and qualification requirements

21 of the work performed.

22 ‘‘(D) A formal performance appraisal system.

23 ‘‘(E) A system to address unacceptable conduct

24 and performance by employees, including a general

25 statement of violations, sanctions, and procedures
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1 which shall be made known to all employees, and a

2 dispute resolution procedure.

3 ‘‘(F) A formal policy regarding the accrual and

4 use of sick leave and annual leave.

5 ‘‘(c) The Secretary may carry out appropriate pro6 motional, advertising, and marketing activities to inform

7 individuals of the availability of facilities of the Depart8 ment offering qualified health coverage.

9 ‘‘§ 7345. Veterans Health Care Transition Fund

10 ‘‘(a) For each of fiscal years 1995 and 1996, the Sec11 retary of the Treasury shall credit to a special fund (in

12 this section referred to as the ‘Fund’) of the Treasury an

13 amount equal to—

14 ‘‘(1) $1,200,000,000 for fiscal year 1995; and

15 ‘‘(2) $800,000,000 for fiscal year 1996.

16 ‘‘(b) Amounts in the Fund shall be available to the

17 Secretary only for VA health coverage authorized under

18 this chapter. Such amounts are available without fiscal

19 year limitation for costs of commencing the offering of VA

20 health coverage, including consulting services, equipment,

21 marketing, and other costs, minor construction, and (sub22 ject to section 8104 of this title) major construction.

23 ‘‘(c) The Secretary shall submit to Congress, no later

24 than March 1, 1996, a report concerning the operation

25 of the Department of Veterans Affairs health care system
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1 in preparing for, and operating under, national health care

2 reform under the Bipartisan Health Care Reform Act of

3 1994 during fiscal years 1995 and 1996. The report shall

4 include a discussion of—

5 ‘‘(1) the adequacy of amounts in the Fund for

6 the offering of VA health coverage;

7 ‘‘(2) the quality of care provided by the Depart8 ment; and

9 ‘‘(3) the ability of the Department to attract

10 patients.

11 ‘‘§ 7346. Funding provisions: grants and other sources

12 of assistance

13 ‘‘The Secretary may apply for and accept, if awarded,

14 any grant or other source of funding that is intended to

15 meet the needs of special populations and that but for this

16 section is unavailable to facilities of the Department or

17 to qualified health coverage offered by the Government if

18 funds obtained through the grant or other source of fund19 ing will be used through a facility of the Department offer20 ing qualified health coverage.’’.

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

22 at the beginning of chapter 73 is amended by striking out

23 the item relating to the heading for subchapter IV and

24 inserting in lieu thereof the following:
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‘‘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’’.

1 SEC. 9003. ELIGIBILITY FOR CHAPTER 17 CARE.

2 (a) NURSING HOME CARE.—Section 1710(a)(1) of

3 title 38, United States Code, is amended by inserting ‘‘(or,

4 in the case of a veteran described in subparagraph (A)

5 or (D) below, shall furnish nursing home care)’’ after

6 ‘‘may furnish nursing home care’’.

7 (b) OUTPATIENT CARE FOR ENROLLED VETER8 ANS.—Paragraph (1) of section 1712(a) of such title is

9 amended—

10 (1) by striking out ‘‘and’’ at the end of sub11 paragraph (C);

12 (2) by striking out the period at the end of sub13 paragraph (D) and inserting in lieu thereof a semi14 colon; and

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

16 ‘‘(E) to any veteran described in section

17 1831(b) of this title who is enrolled under section

18 1811 of this title and the Bipartisan Health Care

19 Reform Act of 1994 with VA health coverage (as de-
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1 fined in section 1801 of this title), for any disability

2 to the extent that care and treatment of that disabil3 ity is not included within standard coverage (as de4 fined in section 1801 of this title);’’.

5 (c) OBVIATE-THE-NEED OUTPATIENT CARE.—(1)

6 Paragraph (2) of such section is amended by striking out

7 ‘‘The Secretary’’ and all that follows through ‘‘this sub8 section—’’ and inserting in lieu thereof ‘‘Except as pro9 vided in subsection (b) of this section, the Secretary shall

10 furnish on an ambulatory or outpatient basis such medical

11 services as the Secretary determines are needed—’’.

12 (2) Paragraph (4) of such section is amended by

13 striking out ‘‘medical services for a purpose described in

14 paragraph (5) of this subsection’’ and inserting in lieu

15 thereof ‘‘, to the extent that facilities are available, such

16 medical services as the Secretary determines are needed’’.

17 (3) Such section is further amended—

18 (A) by striking out paragraph (5); and

19 (B) by redesignating paragraphs (6) and (7) as

20 paragraphs (5) and (6), respectively.

21 (d) CONFORMING AMENDMENTS.—(1) Section

22 1701(6)(A)(i) of such title is amended by striking out

23 ‘‘(except under the conditions described in section

24 1712(a)(5)(A) of this title)’’.
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1 (2) Section 1701(6)(B)(i)(II) of such title is amended

2 by striking ‘‘section 1712(a)(5)(B)’’ and inserting in lieu

3 thereof ‘‘section 1712’’.

4 (3) Section 1703(a)(2)(B) of such title is amended

5 by striking out ‘‘for a purpose described in section

6 1712(a)(5)(B) of this title’’ and inserting in lieu thereof

7 ‘‘to complete treatment incident to hospital, nursing home,

8 or domiciliary care that has been provided by the Depart9 ment’’.

10 (4) Section 1712A(b)(1) of such title is amended by

11 striking out ‘‘section 1712(a)(5)(B)’’ and inserting in lieu

12 thereof ‘‘section 1703(a)(2)(B)’’.

13 SEC. 9004. AUTHORITY TO PROVIDE HEALTH CARE FOR

14 HERBICIDE AND RADIATION EXPOSURE.

15 (a) AUTHORIZED INPATIENT CARE.—Section

16 1710(e) of title 38, United States Code, is amended to

17 read as follows:

18 ‘‘(e)(1)(A) Subject to paragraph (4), a herbicide-ex19 posed veteran is eligible for hospital care and nursing

20 home care under subsection (a)(1)(G) for any disease

21 specified in subparagraph (B).

22 ‘‘(B) The diseases referred to in subparagraph (A)

23 are those for which the National Academy of Sciences, in

24 a report issued in accordance with section 2 of the Agent

25 Orange Act of 1991, has determined—
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1 ‘‘(i) that there is sufficient evidence to conclude

2 that there is a positive association between occur3 rence of the disease in humans and exposure to a

4 herbicide agent;

5 ‘‘(ii) that there is evidence which is suggestive

6 of an association between occurrence of the disease

7 in humans and exposure to a herbicide agent, but

8 such evidence is limited in nature; or

9 ‘‘(iii) that available studies are insufficient to

10 permit a conclusion about the presence or absence of

11 an association between occurrence of the disease in

12 humans and exposure to a herbicide agent.

13 ‘‘(2) A radiation-exposed veteran is eligible for hos14 pital care and nursing home care under subsection

15 (a)(1)(G) for—

16 ‘‘(A) any disease listed in section 1112(c)(2) of

17 this title; and

18 ‘‘(B) any other disease for which the Secretary,

19 based on the advice of the Advisory Committee on

20 Environmental Hazards, determines that there is

21 credible evidence of a positive association between

22 occurrence of the disease in humans and exposure to

23 ionizing radiation.

24 ‘‘(3) Subject to paragraph (4), a veteran who the Sec25 retary finds may have been exposed while serving on active
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1 duty in the Southwest Asia theater of operations during

2 the Persian Gulf War to a toxic substance or environ3 mental hazard is eligible for hospital care and nursing

4 home care under subsection (a)(1)(G) of this section for

5 any disability which becomes manifest before October 1,

6 1996, notwithstanding that there is insufficient medical

7 evidence to conclude that such disability may be associated

8 with such exposure.

9 ‘‘(4) Hospital and nursing home care may not be pro10 vided under or by virtue of paragraph (1) after September

11 30, 1996, or, in the case of a veteran described in para12 graph (3), after September 30, 1998.

13 ‘‘(5) For purposes of this subsection and section

14 1712 of this title—

15 ‘‘(A) the term ‘herbicide-exposed veteran’

16 means a veteran (i) who served on active duty in the

17 Republic of Vietnam during the Vietnam era, and

18 (ii) who the Secretary finds may have been exposed

19 during such service to a herbicide agent;

20 ‘‘(B) the term ‘herbicide agent’ has the mean21 ing given that term in section 1116(a)(4) of this

22 title; and

23 ‘‘(C) the term ‘radiation-exposed veteran’ has

24 the meaning given that term in section 1112(c)(4) of

25 this title.’’.
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1 (b) AUTHORIZED OUTPATIENT CARE.—Section 1712

2 of such title is amended—

3 (1) in subsection (a)(1) (as amended by section

4 9003(b)), by adding at the end the following:

5 ‘‘(F) during the period before October 1, 1996,

6 to any herbicide-exposed veteran for any disease list7 ed in section 1710(e)(1)(B) of this title; and

8 ‘‘(G) to any radiation-exposed veteran for any

9 disease covered under section 1710(e)(1)(C) of this

10 title.’’; and

11 (2) in subsection (i)(3)—

12 (A) by striking out ‘‘(A)’’; and

13 (B) by striking out ‘‘, or (B)’’ and all that

14 follows through ‘‘title’’.

15 (c) SAVINGS PROVISION.—The provisions of sections

16 1710(e) and 1712(a) of title 38, United States Code, as

17 in effect on the day before the date of the enactment of

18 this Act, shall apply with respect to hospital care, nursing

19 home care, and medical services in the case of any veteran

20 furnished care or services before such date of enactment

21 on the basis of presumed exposure to a substance or radi22 ation under the authority of those provisions.
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1 SEC. 9005. EXTENSION OF AUTHORITY TO PROVIDE PRIOR2 ITY OUTPATIENT HEALTH CARE FOR EXPO3 SURE TO ENVIRONMENTAL HAZARDS.

4 Section 1712(a)(1)(D) of title 38, United States

5 Code, is amended by striking out ‘‘December 31, 1994,

6 for any disability’’ and inserting in lieu thereof ‘‘October

7 1, 1998, for any disability which becomes manifest before

8 October 1, 1996,’’.

9 SEC. 9006. REPORT ON WAIVING COST-SHARING FOR CER10 TAIN MEDICAL CARE FOR DEPENDENTS OF

11 PERSIAN GULF VETERANS WHO MAY HAVE

12 BEEN EXPOSED TO ENVIRONMENTAL HAZ13 ARDS.

14 (a) REPORT.—The Secretary of Veterans Affairs

15 shall submit to Congress a report on the desirability and

16 the feasibility of waiving any requirement for cost-sharing

17 in the case of medical care described in subsection (b) that

18 is provided through VA health coverage under chapter 18

19 of title 38, United States Code (as added by section 9001),

20 to an individual who is a VA enrollee enrolled under fam21 ily-member eligibility under section 1813 of that chapter.

22 (b) PERSIAN GULF WAR ILLNESS.—Medical care re23 ferred to in subsection (a) is medical care provided to a

24 family member of a veteran described in subparagraph (C)

25 of section 1710(e)(1) of title 38, United States Code, for

26 any disease or disability occurring in that family member
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1 which the Secretary finds may be related to the service

2 of the veteran in the Southwest Asia theater of operations

3 during the Persian Gulf War.

4 (c) MATTERS TO BE CONSIDERED.—In preparing

5 the report under subsection (a), the Secretary shall con6 sider relevant studies, including those that have been (or

7 that are being) conducted by the Department of Veterans

8 Affairs, the Department of Defense, the National Insti9 tutes of Health, the National Academy of Sciences, and

10 private health care providers.

11 (d) SUBMISSION OF REPORT.—The report under sub12 section (a) shall be submitted not later than 60 days after

13 the date of the enactment of this Act.

14 SEC. 9007. STUDY OF THE EFFECT OF TELEMEDICINE ON

15 THE DELIVERY OF VA HEALTH CARE SERV16 ICES.

17 (a) IN GENERAL.—During each of fiscal years 1995

18 through 1997, the Secretary of Veterans Affairs shall

19 carry out a study of the effect of telemedicine on the deliv20 ery, accessibility, and quality of health care services avail21 able to individuals who are eligible for coverage through

22 the Department of Veterans Affairs.

23 (b) REPORTS.—Not later than 120 days after the

24 date of the enactment of this Act and annually thereafter

25 through 1998, the Secretary shall submit to the Commit-
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1 tees on Veterans’ Affairs of the Senate and House of Rep2 resentatives a report, including descriptions of the

3 telemedicine applications benefiting veterans, relating to

4 the study conducted under subsection (a).

5 (c) CONSULTATION.—Each study under subsection

6 (a) shall be carried out in consultation with the Secretary

7 of Health and Human Services, the Secretary of Defense,

8 the Chair of the White House Information Infrastructure

9 Task Force, and the Director of High Performance Com10 puting and Communications in the Executive Office of the

11 President.

12 SEC. 9008. LEGISLATIVE PROPOSAL ON VA HEALTH COV13 ERAGE FOR MEDICARE BENEFICIARIES.

14 (a) IN GENERAL.—

15 (1) LEGISLATIVE PROPOSAL.—Not later than 1

16 year after the date of the enactment of this Act, the

17 Secretary, in consultation with the Secretary of Vet18 erans Affairs, shall develop and submit to Congress

19 a proposal for legislation which provides for obtain20 ing VA health coverage for medicare beneficiaries

21 who are veterans.

22 (2) MEDICARE BENEFICIARY.—For purposes of

23 this section, the term ‘‘medicare beneficiary’’ means

24 an individual who is eligible for benefits under part
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1 A of title XVIII of the Social Security Act and is en2 rolled under part B of such title.

3 (b) CONTENTS OF THE PROPOSAL.—A proposal for

4 legislation submitted under subsection (a) shall—

5 (1) provide for an appropriate methodology by

6 which the Secretary shall make payment to the Sec7 retary of Veterans Affairs for the enrollment of med8 icare beneficiaries;

9 (2) provide individuals the opportunity to re10 main enrolled to obtain VA health coverage without

11 an interruption in coverage upon becoming medicare

12 beneficiaries; and

13 (3) provide medicare beneficiaries who are vet14 erans with the opportunity to enroll to obtain VA

15 health coverage as an individual or with family mem16 bers.

17 SEC. 9009. OUTPATIENT CLINIC PILOT PROGRAM.

18 (a) PILOT PROGRAM.—The Secretary of Veterans Af19 fairs shall carry out a pilot program to reduce waiting

20 times for patients seeking health-care services in out21 patient clinics of the Department of Veterans Affairs and

22 the traveling distance to such clinics.

23 (b) ADDITIONAL CLINICS.—Under the pilot program,

24 the Secretary shall provide for the operation of approxi25 mately 20 new outpatient clinics around 2 medical centers
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1 of the Department of Veterans Affairs. The Secretary

2 shall select the locations for the clinics so that veterans

3 served by one of the clinics would be within a one-hour

4 drive of such a clinic.

5 (c) SERVICES.—The Secretary shall ensure that the

6 clinics provide a wide range of services, including x-ray,

7 laboratory, physical therapy, respiratory therapy, pharma8 ceutical services, and psychological services, to be available

9 at those clinics.

10 (d) AUTHORIZATION OF APPROPRIATIONS.—There

11 are authorized to be appropriated, for each of fiscal years

12 1998 through 2004, such sums are may be necessary to

13 carry out this section.

14 TITLE X—MISCELLANEOUS

15 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.
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1 Subtitle A—Automobile Insurance

2 Coordination

3 SEC. 10001. DEFINITIONS.

4 In this subtitle—

5 (1) INJURED INDIVIDUAL.—The term ‘‘injured

6 individual’’ means an individual who has a bodily in7 jury or illness sustained in an automobile accident

8 and who is entitled to receive automobile insurance

9 medical services from a health plan.

10 (2) AUTOMOBILE INSURANCE MEDICAL SERV11 ICES.—The term ‘‘automobile insurance medical

12 services’’ means services and items covered by auto13 mobile insurance that are medically necessary or ap14 propriate for treatment of bodily injuries or illnesses

15 sustained in automobile accidents and that are with16 in the scope of the benefits to which an injured indi17 vidual is entitled under his or her health plan.

18 (3) AUTOMOBILE INSURANCE CARRIER.—The

19 term ‘‘automobile insurance carrier’’ means an in20 surance company, employer, or fund that is liable for

21 payment for automobile insurance medical services

22 based either on a direct contractual obligation to an

23 injured individual or an obligation on behalf of a

24 person responsible for causation of an injured indi25 vidual’s bodily injury or illness.
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1 (4) HEALTH PLAN.—The term ‘‘health plan’’

2 means a plan or organization that pays for the serv3 ices of health care providers and is subject to Fed4 eral or State regulation.

5 SEC. 10002. PROVISION OF AUTOMOBILE INSURANCE MEDI6 CAL SERVICES THROUGH HEALTH PLANS.

7 (a) IN GENERAL.—An individual enrolled in a health

8 plan shall receive automobile insurance medical services

9 exclusively through the provision (or arrangement for the

10 provision) of such services by the health plan. Such serv11 ices shall be subject to all quality, cost containment, and

12 anti-fraud and abuse provisions that apply generally to

13 medical services provided by or through health plans.

14 (b) ALTERNATIVE PERMITTED.—

15 (1) BY AGREEMENT.—Subsection (a) shall not

16 prevent an individual and an automobile insurance

17 carrier from agreeing that treatment for bodily in18 jury or illness sustained in an automobile accident

19 shall be provided other than by or through the

20 health plan in which the individual is enrolled. No21 tice of any such agreement shall be filed with the in22 jured individual’s health plan. Upon receipt of such

23 notice, the health plan shall be absolved of all re24 sponsibility for payment of any services covered by

25 the agreement.
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1 (2) MEDICARE AND MEDICAID.—Subsection (a)

2 shall not prevent a State from requiring automobile

3 insurance carrier to make direct payment to health

4 care providers for automobile insurance medical

5 services that are covered both by (A) medicare or

6 medicaid, and (B) and automobile insurance con7 tract that is required by law and provides for direct

8 payment of medical services regardless of fault. Pay9 ment for automobile insurance medical services in

10 such circumstances shall be made to the extent of

11 the automobile insurance carrier’s liability under the

12 applicable contract, in accordance with fee schedules

13 prescribed under section 10003(d), and such services

14 shall be subject to all quality, cost containment, and

15 anti-fraud and abuse provisions that apply generally

16 to medical services provided by or through health

17 plans.

18 SEC. 10003. PAYMENT FOR AUTOMOBILE INSURANCE MEDI19 CAL SERVICES.

20 (a) PAYMENT TO HEALTH PLANS.—Each automobile

21 insurance carrier that is liable for payment for automobile

22 insurance medical services provided to an injured individ23 ual by a health plan shall make payment to the health

24 plan for such services to the extent of its obligations under

25 the applicable automobile insurance contract. Any feder-
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1 ally funded health care plan shall have first priority, over

2 the right of any other person, to receive payment pursuant

3 to any obligation under an automobile insurance policy

4 covering automobile insurance medical services.

5 (b) REIMBURSEMENT FOR COST SHARING.—Each

6 automobile insurance carrier shall remain liable, to the ex7 tent of its obligations under the applicable automobile in8 surance contract, for reimbursement of any deductibles or

9 coinsurance paid by an injured individual for automobile

10 insurance medical services.

11 (c) LIMITATION OF LIABILITY.—Except with respect

12 to payments to health plans as required by subsection (a)

13 and to reimbursement of deductibles and coinsurance in

14 accordance with subsection (b), nothing in this subtitle or

15 any other provision of law shall require an automobile in16 surance carrier or any person insured by such a carrier

17 to make any payment to a health plan, health care pro18 vider, or any other person for (1) automobile insurance

19 medical services, or (2) other health care services or items

20 used to treat an injury or illness sustained in an auto21 mobile accident that are not medically necessary or appro22 priate.

23 (d) USE OF FEE SCHEDULES.—

24 (1) IN GENERAL.—Irrespective of the type of

25 health plan providing automobile insurance medical
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1 services, payment by automobile insurance carriers

2 for such services shall be made to the plan in ac3 cordance with any fee schedule or schedules estab4 lished for health care services generally. Each State

5 shall develop or approve a fee schedule applicable to

6 payment for any automobile insurance medical serv7 ices that are not covered by a generally applicable

8 fee schedule or schedules.

9 (2) ALTERNATIVE PAYMENT METHODOLO10 GIES.—Fee schedules shall not be required in any

11 case in which an automobile insurance carrier and a

12 health plan have agreed on an alternative payment

13 arrangement.

14 (e) REIMBURSEMENT FOR PAYMENTS MADE.—Noth15 ing in this subtitle or any other provision of law shall im16 pair the right of a health plan or automobile insurance

17 carrier to seek reimbursement from any person liable for

18 a bodily injury or illness sustained in an automobile acci19 dent for payments made for automobile insurance medical

20 services to treat such injury or illness.

21 (f) RIGHTS TO COVERAGE FOR ADDITIONAL TREAT22 MENT.—Subject to the provisions of subsection (c), noth23 ing in this subtitle shall impair any rights with respect

24 to medically necessary or appropriate services and items

25 to which an individual injured in an automobile accident
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1 is entitled that are not automobile insurance medical serv2 ices as defined in this subtitle.

3 SEC. 10004. PAYMENT FACILITATION.

4 (a) IN GENERAL.—In each State, an efficient and ef5 fective system shall be established for prompt payment for

6 automobile insurance medical services by automobile in7 surance carriers to health plans. Such systems shall re8 quire automobile insurance carriers and health plans to

9 interface effectively, including through the use of cost-ef10 fective computer data programs, in order to specify the

11 automobile insurance carrier or carriers liable for payment

12 for automobile insurance medical services. Such systems

13 also shall include mechanisms for resolution, including ar14 bitration, of any issues or disputes that may arise in con15 nection with such payment. The results of the resolution

16 of issues and disputes under the mechanisms prescribed

17 pursuant to this subsection, including the use of any fee

18 schedule under section 10003(d), shall be admissible in

19 evidence only for purposes of recovery under section

20 10003(e).

21 (b) SANCTIONS.—In each State, appropriate sanc22 tions shall be prescribed for the failure of a health plan,

23 an automobile insurance carrier, or any other person to

24 comply with the requirements established pursuant to sub25 section (a). Such sanctions shall include a penalty for late
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1 payment, which shall be imposed on any automobile insur2 ance carrier that delays payment to a health plan after

3 the amount of reimbursement is established pursuant to

4 the procedures prescribed under subsection (a).

5 SEC. 10005. PAYMENT OF STATE ADMINISTRATIVE EX6 PENSES.

7 (a) IN GENERAL.—The Secretary of Health and

8 Human Services shall provide for payment to each State,

9 from the allotment to the State provided under subsection

10 (b), of an amount equal to the amount expended by the

11 State for administrative expenses in carrying out this sub12 title in the State. Such payments shall be made at a time

13 and manner specified by the Secretary and shall be condi14 tioned upon the State providing the Secretary with such

15 information as the Secretary may require in order to com16 pute the appropriate amount of payments to be made.

17 This subsection constitutes budget authority in advance

18 of appropriations Acts, and represents the obligation of

19 the Federal Government to provide payments to States in

20 accordance with the applicable provisions of this section.

21 (b) STATE ALLOTMENT.—

22 (1) IN GENERAL.—The Secretary shall establish

23 a formula for allotting among the States for each

24 fiscal year the total amount of funds made available

25 under paragraph (2) for the fiscal year.
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1 (2) FUNDS AVAILABLE.—The total amount of

2 funds available under this paragraph—

3 (A) for fiscal year 1997 is $300,000,000,

4 and

5 (B) for each succeeding fiscal year

6 (through fiscal year 2004) is $100,000,000.

7 SEC. 10006. CONSTRUCTION.

8 (a) COORDINATION WITH OTHER PROVISIONS OF

9 THIS ACT.—The provisions of this subtitle shall be con10 strued to be consistent with and shall be implemented in

11 accordance with the other provisions of this Act.

12 (b) EFFECT ON WORKERS’ COMPENSATION LAW.—

13 Nothing in this subtitle shall affect rights or obligations

14 under workers’ compensation law.

15 Subtitle B—Prefunding Govern16 ment Health Benefits Contribu17 tions

18 SEC. 10101. REQUIREMENT THAT CERTAIN AGENCIES

19 PREFUND GOVERNMENT HEALTH BENEFITS

20 CONTRIBUTIONS FOR THEIR ANNUITANTS.

21 (a) DEFINITIONS.—For the purpose of this section—

22 (1) the term ‘‘agency’’ means any agency or

23 other instrumentality within the executive branch of

24 the Government, the receipts and disbursements of

25 which are not generally included in the totals of the
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1 budget of the United States Government submitted

2 by the President;

3 (2) the term ‘‘health benefits plan’’ means, with

4 respect to an agency, a health benefits plan, estab5 lished by or under Federal law, in which employees

6 or annuitants of such agency may participate;

7 (3) the term ‘‘health-benefits coverage’’ means

8 coverage under a health benefits plan’’;

9 (4) an individual shall be considered to be an

10 ‘‘annuitant of an agency’’ if such individual is enti11 tled to an annuity, under a retirement system estab12 lished by or under Federal law, by virtue of—

13 (A) such individual’s service with, and sep14 aration from, such agency; or

15 (B) being the survivor of an annuitant

16 under subparagraph (A) or of an individual who

17 died while employed by such agency; and

18 (5) the term ‘‘Office’’ means the Office of Per19 sonnel Management.

20 (b) PREFUNDING REQUIREMENT.—

21 (1) IN GENERAL.—Effective as of October 1,

22 1994, each agency (or February 1, 1995, in the case

23 of the agency with the greatest number of employ24 ees, as determined by the Office) shall be required

25 to prepay the Government contributions which are
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1 or will be required in connection with providing

2 health-benefits coverage for annuitants of such agen3 cy.

4 (2) REGULATIONS.—The Office shall prescribe

5 such regulations as may be necessary to carry out

6 this section. The regulations shall be designed to en7 sure at least the following:

8 (A) Amounts paid by each agency shall be

9 sufficient to cover the amounts which would

10 otherwise be payable by such agency (on a

11 ‘‘pay-as-you-go’’ basis), on or after the applica12 ble effective date under paragraph (1), on be13 half of—

14 (i) individuals who are annuitants of

15 the agency as of such effective date; and

16 (ii) individuals who are employed by

17 the agency as of such effective date, or

18 who become employed by the agency after

19 such effective date, after such individuals

20 have become annuitants of the agency (in21 cluding their survivors).

22 (B)(i) For purposes of determining any

23 amounts payable by an agency—

24 (I) this section shall be treated as if

25 it had taken effect at the beginning of the
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1 20-year period which ends on the effective

2 date applicable under paragraph (1) with

3 respect to such agency; and

4 (II) in addition to any amounts pay5 able under subparagraph (A), each agency

6 shall also be responsible for paying any

7 amounts for which it would have been re8 sponsible, with respect to the 20-year pe9 riod described in subclause (I), in connec10 tion with any individuals who are annu11 itants or employees of the agency as of the

12 applicable effective date under paragraph

13 (1).

14 (ii) Any amounts payable under this sub15 paragraph for periods preceding the applicable

16 effective date under paragraph (1) shall be pay17 able in equal installments over the 20-year pe18 riod beginning on such effective date.

19 (c) FASB STANDARDS.—Regulations under sub20 section (b) shall be in conformance with the provisions of

21 standard 106 of the Financial Accounting Standards

22 Board, issued in December 1990.

23 (d) CLARIFICATION.—Nothing in this section shall be

24 considered to permit or require duplicative payments on

25 behalf of any individuals.
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1 (e) DRAFT LEGISLATION.—The Office shall prepare

2 and submit to Congress any draft legislation which may

3 be necessary in order to carry out this section.

Æ