I

104TH CONGRESS

1ST SESSION H. R. 2071

To promote cost containment and reform in health care.

IN THE HOUSE OF REPRESENTATIVES

JULY 19, 1995

Mr. PETERSON of Florida (for himself, Mr. MORAN, Mr. DOOLEY, Mr. CLEMENT, Mr. POSHARD, Mr. STENHOLM, Mr. MARTINEZ, Mr. GIBBONS, Mrs.

MEEK of Florida, and Mr. COLEMAN) introduced the following bill; which

was referred to the Committee on Commerce, and in addition to the Committees on Ways and Means, Economic and Educational Opportunities,

and the Judiciary, for a period to be subsequently determined by the

Speaker, in each case for consideration of such provisions as fall within

the jurisdiction of the committee concerned

A BILL

To promote cost containment and reform in health care.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Health Care Improvement Act of 1995’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:

Sec. 1. Short title; table of contents.
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TITLE I—ASSURING AVAILABILITY AND CONTINUITY OF HEALTH

COVERAGE

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.

PART 2—PROVISION OF BENEFITS

Sec. 1011. Standards for managed care arrangements.

Sec. 1012. Utilization review.

Sec. 1013. Medical savings accounts.

PART 3—FAIR RATING PRACTICES

Sec. 1021. Use of fair rating practices.

Sec. 1022. Coordination with premium assistance certificate program.

Sec. 1023. Establishment of risk adjustment mechanisms.

PART 4—CONSUMER PROTECTIONS

Sec. 1031. Requirement for provision of information.

Sec. 1032. Prohibition of improper incentives.

Sec. 1033. Written policies and procedures respecting advance directives.

Subtitle B—Benefits

Sec. 1101. Qualified health coverage.

Sec. 1102. Standard coverage.

Sec. 1103. High-deductible coverage.

Sec. 1104. Actuarial valuation of benefits.

Sec. 1105. Limitation on offering supplemental benefits.

Sec. 1106. Family coverage option; supplemental coverage.

Sec. 1107. Level playing field for providers.

Subtitle C—Standards and Certification; Enforcement; Preemption; General

Provisions

Sec. 1201. Establishment of standards.

Sec. 1202. Application of standards to carriers through States.

Sec. 1203. Application to group health plans.

Sec. 1204. Enforcement.

Sec. 1205. Limitation on self insurance for small employers.

Subtitle D—Definitions; General Provisions

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.

TITLE II—REMOVAL OF FINANCIAL BARRIERS TO ACCESS
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Subtitle A—Tax Deductibility for Individuals and Self-Employed

Sec. 2001. Deduction for health insurance costs of self-employed individuals increased and made permanent.

Sec. 2002. Deduction for health insurance costs of individuals who are not selfemployed.

Sec. 2003. Restrictions on health benefits provided through cafeteria plans and

flexible spending arrangements.

Subtitle B—Premium and Cost-Sharing Subsidy Program and Supplemental

Benefits Program for Low-Income Individuals

Sec. 2101. State premium and cost-sharing subsidy programs and supplemental

benefits programs.

‘‘TITLE XXI—STATE ACUTE CARE BENEFITS PROGRAMS FOR

LOW-INCOME INDIVIDUALS

‘‘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. Federal title XXI matching percentage.

‘‘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.

‘‘PART C—GENERAL PROVISIONS

‘‘Sec. 2141. Nature of payment obligation.

‘‘Sec. 2142. Audits.

‘‘Sec. 2143. Demonstration project authority.

‘‘Sec. 2144. Definitions and determinations of income.

Sec. 2102. Division of medicaid benefits into core benefits and supplemental

benefits for AFDC, SSI, and non-cash beneficiaries; limitation

on Federal financial participation for core and supplemental

benefits.

Sec. 2103. Operation of program as State plan requirement under medicaid.

Sec. 2104. Application of miscellaneous provisions.

TITLE III—ACCESS IMPROVEMENTS

SUBTITLE A—IMPROVED ACCESS IN RURAL AREAS

PART 1—GRANTS TO ENCOURAGE COMMUNITY RURAL HEALTH NETWORKS

Sec. 3001. Assistance for development of access plans for chronically underserved areas.

Sec. 3002. Technical assistance grants for networks.
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Sec. 3003. Development grants for networks.

Sec. 3004. Definitions.

PART 2—INCENTIVES FOR HEALTH PROFESSIONALS TO PRACTICE IN RURAL

AREAS THROUGH THE NATIONAL HEALTH SERVICE CORPS PROGRAM

Sec. 3011. National Health Service Corps loan repayments excluded from gross

income.

Sec. 3012. Modification in criteria for designation as health professional shortage area.

Sec. 3013. Other provisions regarding National Health Service Corps.

PART 3—ASSISTANCE FOR INSTITUTIONAL PROVIDERS

Subpart A—Emergency Medical Systems

Sec. 3021. Emergency medical services.

Sec. 3022. Grants to States regarding aircraft for transporting rural victims of

medical emergencies.

Subpart B—Demonstration Projects to Encourage Primary

Care and Rural-Based Graduate Medical Education

Sec. 3031. State and consortium demonstration projects.

Sec. 3032. Goals for projects.

Sec. 3033. Definitions.

Subpart C—Medicare Demonstration Regarding Consortia of

Hospitals

Sec. 3041. Medicare demonstration regarding consortia of hospitals.

Subtitle B—Public Health Grants

Sec. 3101. Grants to States for public health programs.

Sec. 3102. Scholarship and loan repayment programs regarding service in public health positions.

Subtitle C—Academic Health Centers

Sec. 3201. Study of payments for medical education at sites other than hospitals.

Sec. 3202. Study of funding needs of health professions schools.

TITLE IV—MALPRACTICE REFORM

Subtitle A—Findings; Purpose; Definitions

Sec. 4001. Findings; purpose.

Sec. 4002. Definitions.

Subtitle B—Uniform Standards for Malpractice Claims

Sec. 4101. Applicability.

Sec. 4102. Requirement for initial resolution of action through alternative dispute resolution.

Sec. 4103. Procedural requirements for filing of actions.

Sec. 4104. Treatment of noneconomic and punitive damages.

Sec. 4105. Periodic payments for future losses.
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Sec. 4106. Uniform statute of limitations.

Sec. 4107. Special provision for certain obstetric services.

Sec. 4108. Uniform standard for determining liability in actions based on negligence.

Sec. 4109. Jurisdiction of Federal courts.

Sec. 4110. Preemption.

Subtitle C—Requirements for State Alternative Dispute Resolution Systems

(ADR)

Sec. 4201. Basic requirements.

Sec. 4202. Certification of State systems; applicability of alternative Federal

system.

Sec. 4203. Grants to States.

Sec. 4204. Reports on implementation and effectiveness of alternative dispute

resolution systems.

Subtitle D—Grants to States for Development of Practice Guidelines

Sec. 4301. Grants to States.

TITLE V—MARKET INCENTIVES TO CONTAINING COSTS

Subtitle A—Administrative Simplification

Sec. 5000. Purpose.

Sec. 5001. Definitions.

PART 1—STANDARDS FOR DATA ELEMENTS AND TRANSACTIONS

Sec. 5011. General requirements on Secretary.

Sec. 5012. Standards for data elements of health information.

Sec. 5013. Information transaction standards.

Sec. 5014. Health information network privacy standards.

Sec. 5015. Timetables for adoption of standards.

PART 2—REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND

INFORMATION

Sec. 5021. Standard transactions and information.

Sec. 5022. Accessing health information for authorized purposes.

Sec. 5023. Ensuring availability of information.

Sec. 5024. Timetables for compliance with requirements.

PART 3—MISCELLANEOUS PROVISIONS

Sec. 5031. Standards and certification for health information network services.

Sec. 5032. Imposition of additional requirements.

Sec. 5033. Effect on State law.

Subtitle B—Antitrust

Sec. 5101. Publication of antitrust guidelines on activities of health plans.

Sec. 5102. Issuance of health care certificates of public advantage.

Sec. 5103. Study of impact on competition.

TITLE VI—MEDICARE

Subtitle A—Increased Beneficiary Choice; Improved Program Efficiency
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PART 1—INCREASED BENEFICIARY CHOICE

Sec. 6001. Requirements for health maintenance organizations under medicare.

Sec. 6002. Expansion and revision of medicare select policies.

Sec. 6003. Including notice of available health maintenance organizations in annual notice to beneficiaries.

Sec. 6004. Legislative proposal on enrolling medicare beneficiaries in qualified

health plans.

Sec. 6005. Optional interim enrollment of medicare beneficiaries in private

health plans.

PART 2—IMPROVED PROGRAM EFFICIENCY

Sec. 6011. Improved efficiency through consolidation of administration of parts

A and B.

PART 3—NOTICE OF ADVANCE DIRECTIVE RIGHTS

Sec. 6021. Providing notice of rights regarding medical care to individuals entering medicare.

Subtitle B—Savings

Sec. 6101. Reduction in conversion factor for physician fee schedule for nonprimary care services.

Sec. 6102. Reduction in hospital outpatient services through establishment of

prospective payment system.

Sec. 6103. Increase in medicare part B premium for individuals with high income.

Sec. 6104. Phased-in elimination of medicare hospital disproportionate share

adjustment payments.

Sec. 6105. Imposition of coinsurance on laboratory services.

1 TITLE I—ASSURING AVAILABIL2 ITY AND CONTINUITY OF

3 HEALTH COVERAGE

4 Subtitle A—Insurance Reform

5 PART 1—GUARANTEED ACCESS TO HEALTH

6 COVERAGE

7 SEC. 1001. GUARANTEED OFFER BY CARRIERS.

8 (a) IN GENERAL.—Each carrier that offers health in9 surance coverage in the individual/small group market in

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

11 available, to each qualifying individual (as defined in sec-
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1 tion 1904(3)) or small employer (covered in such market)

2 in such fair rating area—

3 (1) qualified standard coverage consistent with

4 section 1102, and

5 (2) subject to subsection (b), qualified high-de6 ductible coverage consistent with section 1103.

7 (b) HIGH-DEDUCTIBLE COVERAGE.—

8 (1) EXCEPTION FOR HEALTH MAINTENANCE

9 ORGANIZATIONS.—The requirement of subsection

10 (a)(2) shall not apply with respect to health insur11 ance coverage that—

12 (A) is provided by a Federally qualified

13 health maintenance organization (as defined in

14 section 1301(a) of the Public Health Service

15 Act), or

16 (B) is not provided by such an organiza17 tion but is provided by an organization recog18 nized under State law as a health maintenance

19 organization or managed care organization or a

20 similar organization regulated under State law

21 for solvency.

22 (2) LIMITATION ON OFFER OF HIGH-DEDUCT23 IBLE COVERAGE.—Qualified high-deductible coverage

24 may not be made available by a carrier to a qualify25 ing individual (or to a small employer with respect
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1 to an employee) unless the carrier also makes avail2 able qualified standard coverage that has identical

3 benefits (other than the amount of the deductible)

4 and the individual or employee demonstrates to the

5 carrier that the individual or employee has available

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

7 the deductible amount established under section

8 1104(b)(1) applicable to the high-deductible cov9 erage. A carrier may not make available to an indi10 vidual health coverage (other than coverage for sup11 plemental benefits) the actuarial value of which is

12 less than the actuarial value of qualified high-de13 ductible coverage, unless the individual has available

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

15 the deductible amount of the coverage offered.

16 (3) OPTION TO OFFER MEDISAVE COVERAGE.—

17 The offer of high-deductible coverage under sub18 section (a)(2) may be accompanied by the contribu19 tion by an employer to a medical savings account (in

20 accordance with section 7705 of the Internal Reve21 nue Code of 1986).

22 (c) COVERAGE OF ENTIRE RATING AREA.—

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

24 rating area for which a carrier offers health insur25 ance coverage, the carrier shall provide for coverage
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1 of benefits for items and services furnished through2 out the fair rating area.

3 (2) SPECIAL RULE FOR CARRIERS OFFERING

4 COVERAGE IN MULTI-STATE METROPOLITAN STATIS5 TICAL AREAS.—In the case of a carrier that offers

6 qualified health insurance coverage in the individual/

7 small employer market in a portion of a State that

8 is located in an interstate metropolitan statistical

9 area, the carrier may not provide such coverage with

10 respect to an individual or employer in such metro11 politan statistical area unless the carrier also offers

12 such coverage in other portions of the area located

13 in other States.

14 (3) SPECIAL RULE FOR COVERAGE THROUGH

15 MANAGED CARE ARRANGEMENT.—In the case of cov16 erage offered by a carrier or under a group health

17 plan to the extent that it provides benefits through

18 a managed care arrangement in a fair rating area,

19 this subsection shall not be construed as requiring

20 the establishment of facilities throughout the area, if

21 the facilities are located consistent with section

22 1002(b)(1).

23 (d) FAMILY COVERAGE OPTION.—The offer of cov24 erage under this section with respect to an individual shall
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1 include the option of coverage of family members of the

2 individual.

3 (e) LIMITATION ON CARRIERS.—A carrier may not

4 require an employer under a group health plan to impose

5 through a waiting period for health coverage under a plan

6 or similarly require a limitation or condition on health cov7 erage or benefits based on—

8 (1) the health status of an individual,

9 (2) claims experience of an individual,

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

11 (4) medical history of an individual,

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

13 or

14 (6) lack of evidence of insurability of an individ15 ual.

16 (f) CONSTRUCTION FOR MEWAS.—Nothing in this

17 section shall be construed as requiring a multiple employer

18 welfare arrangement that provides health coverage other

19 than through a carrier to meet the requirements of this

20 section.

21 SEC. 1002. GUARANTEED ISSUE BY CARRIERS.

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

23 and section 1003, each carrier that offers health insurance

24 coverage in the individual/small group market in a fair rat25 ing area—
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1 (1) must accept every small employer in the

2 area that applies for such coverage during an enroll3 ment period provided under section 1005; and

4 (2) must accept for enrollment under such cov5 erage every qualifying individual (and family mem6 ber of such an individual) who applies for enrollment

7 during an enrollment period provided under section

8 1005 and may not place any restriction on the eligi9 bility of an individual to enroll so long as such indi10 vidual is a qualifying individual.

11 (b) SPECIAL RULES FOR MANAGED CARE ARRANGE12 MENTS.—In the case of coverage offered by a carrier or

13 under a group health plan that provides benefits through

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

15 carrier or plan—

16 (1) need not establish facilities for the delivery

17 of health care services throughout the area so long

18 as such facilities are located in a manner that does

19 not discriminate on the basis of health status of in20 dividuals residing in proximity to such facilities, and

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

22 area to employers or individuals if the organization

23 demonstrates to the applicable regulatory authority

24 that—
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1 (A) it will not have the capacity to deliver

2 services adequately to enrollees of any addi3 tional groups or additional enrollees because of

4 its obligations to existing group contract hold5 ers and enrollees, and

6 (B) it is applying this paragraph uniformly

7 to all employers and individuals without regard

8 to the health status, claims experience, or dura9 tion of coverage of those employers and their

10 employees.

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

12 denial is applied during a consecutive period of at least

13 180 days.

14 (c) SPECIAL RULE FOR FINANCIAL CAPACITY LIM15 ITS.—In addition to the authority provided under sub16 section (b)(2), in the case of coverage offered by any car17 rier, the carrier may deny coverage to a small employer

18 or individual if the carrier demonstrates to the applicable

19 regulatory authority that—

20 (1) it does not have the financial reserves nec21 essary to underwrite additional coverage, and

22 (2) it is applying this subsection uniformly to

23 all employers and individuals without regard to the

24 health status, claims experience, or duration of cov25 erage of those employers and their employees.
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1 Coverage may be denied under this subsection only if the

2 denial is applied during a consecutive period of at least

3 180 days.

4 (d) TREATMENT OF CERTAIN MEWAS.—Subsection

5 (a) shall not apply to a carrier if the only coverage offered

6 by the carrier in the individual/small group market is

7 through one or more multiple employer welfare arrange8 ments. In the case of coverage offered by a carrier in the

9 individual/small group market through a multiple em10 ployer welfare arrangement and to which the previous sen11 tence does not apply, the requirements of subsection (a)

12 shall apply to the carrier and not to the arrangement.

13 SEC. 1003. GUARANTEED RENEWAL.

14 (a) LIMITATION ON TERMINATION BY CARRIERS.—

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

16 coverage of a qualifying individual or eligible employer

17 within a type of coverage option described in section

18 1903(14) except—

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

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

21 or

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

23 area because the carrier is ceasing to provide any

24 health insurance coverage in the individual/small
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1 group market within such type of coverage option in

2 the area.

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

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

5 apply to a carrier ceasing to provide health insur6 ance coverage unless—

7 (A) such termination of coverage takes ef8 fect at the end of a contract year, and

9 (B) the carrier provides notice of such ter10 mination to employers and individuals covered

11 at least 30 days before the date of an annual

12 open enrollment period established with respect

13 to the employer or individual under section

14 1005.

15 (2) LIMITATION ON REENTRY IN INDIVIDUAL/

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

17 or provide health insurance coverage in an area with

18 respect to the individual/small group market for a

19 type of coverage option, the insurer may not offer

20 health insurance coverage in the area in such market

21 within such type of coverage option until 5 years

22 after the date of the termination.

23 (c) RULE FOR MULTIEMPLOYER PLANS AND MUL24 TIPLE EMPLOYER HEALTH.—A multiemployer plan and

25 a multiple employer health plan may not cancel coverage
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1 or deny renewal of coverage under such a plan with re2 spect to an employer other than—

3 (1) for nonpayment of contributions,

4 (2) for fraud or other misrepresentation by the

5 employer, or

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

7 coverage in a geographic area.

8 SEC. 1004. RESTRICTING PREEXISTING CONDITION EXCLU9 SIONS.

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

11 a carrier or group health plan providing health coverage

12 may not exclude health coverage with respect to services

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

14 the condition of an individual existed before the effective

15 date of coverage of the individual.

16 (b) LIMITED 6-MONTH EXCLUSION PERMITTED.—

17 (1) IN GENERAL.—Subject to paragraph (2)

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

19 health plan providing health coverage may exclude

20 health coverage with respect to services related to

21 treatment of a condition of an individual based on

22 the fact that the condition existed before the effec23 tive date of coverage of the individual only if the pe24 riod of the exclusion does not exceed 6 months be25 ginning on the date of coverage.
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1 (2) CREDITING OF PREVIOUS COVERAGE.—

2 (A) IN GENERAL.—A carrier or group

3 health plan providing health coverage shall pro4 vide that if a covered individual is in a period

5 of continuous coverage (as defined in subpara6 graph (C)) as of a date upon which coverage is

7 initiated or reinitiated, any period of exclusion

8 of coverage with respect to a preexisting condi9 tion (as defined in subparagraph (B)) for such

10 services or type of services shall be reduced by

11 1 month for each month in the period of contin12 uous coverage.

13 (B) PREEXISTING CONDITION DEFINED.—

14 In this paragraph, the term ‘‘preexisting condi15 tion’’ means, with respect to health coverage, a

16 condition which has been diagnosed or treated

17 during the 6-month period ending on the day

18 before the first date of such coverage (without

19 regard to any waiting period).

20 (C) PERIOD OF CONTINUOUS COVERAGE.—

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

22 coverage’’ means the period beginning on the

23 date an individual has health coverage (or cov24 erage under a public plan providing medical

25 benefits) and ends on the date the individual
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1 does not have such coverage for a continuous

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

3 the case of an individual who loses coverage due

4 to involuntary termination of employment, other

5 than by reason of an employee’s gross mis6 conduct).

7 (c) EXCLUSION NOT APPLICABLE TO PREGNANCY.—

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

9 not apply if the exclusion relates to pregnancy.

10 (d) EXCLUSION NOT APPLICABLE TO NEWBORNS

11 AND ADOPTED CHILDREN.—

12 (1) NEWBORNS.—Any exclusion of coverage

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

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

15 a period of continuous coverage after such time.

16 (2) ADOPTED CHILDREN.—Any exclusion of

17 coverage under subsection (b)(1) shall not apply (be18 ginning on the date of adoption) to an adopted child

19 who is covered at the time of adoption and remains

20 in a period of continuous coverage after such time.

21 (e) EXCLUSION NOT APPLICABLE TO INDIVIDUALS

22 ENROLLED OR ENROLLING DURING CERTAIN OPEN EN23 ROLLMENT PERIODS.—

24 (1) INDIVIDUALS ENROLLING DURING PE25 RIOD.—In the case of an individual who enrolls and
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1 obtains coverage during an open enrollment period

2 described in section 1005(b), any exclusion of cov3 erage under subsection (b)(1) shall not apply so long

4 as the individual remains in a period of continuous

5 coverage.

6 (2) INDIVIDUALS ENROLLED AT BEGINNING OF

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

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

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

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

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

12 individual is in a period of continuous coverage.

13 (f) APPLICATION OF RULES BY CERTAIN HEALTH

14 MAINTENANCE ORGANIZATIONS.—A health maintenance

15 organization that provides health insurance coverage shall

16 not be considered as failing to meet the requirements of

17 section 1301 of the Public Health Service Act notwith18 standing that it provides for an exclusion of the coverage

19 based on a preexisting condition consistent with the provi20 sions of this part so long as such exclusion is applied con21 sistent with the provisions of this part.

22 SEC. 1005. ENROLLMENT PERIODS.

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

24 health plan providing health coverage (and each health

25 plan purchasing organization under subtitle A of title V)
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1 in the individual/small group market shall permit qualify2 ing individuals and eligible employers to obtain health cov3 erage from the carrier or group health plan during each

4 enrollment period provided under this section.

5 (b) OPEN ENROLLMENT PERIODS FOR WHICH PRE6 EXISTING CONDITION EXCLUSIONS WAIVED.—

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

8 open enrollment period, with respect to individuals

9 and employees who are residents of a State, during

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

11 (2) INDIVIDUALS ELIGIBLE FOR SUBSIDIES.—

12 There shall be an individual open enrollment period

13 with respect to an individual at the time the individ14 ual first becomes eligible for any premium assistance

15 under part A of title XXI of the Social Security Act,

16 during the 60-day period beginning on the first date

17 the individual meets eligibility criteria within any

18 12-month period.

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

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

21 employee or individual under health coverage of the

22 employee or individual, there shall be an open enroll23 ment period during the 30-day period beginning on

24 the date of issuance of the court order.
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1 (4) ENROLLMENT OF NEWBORNS AND NEWLY

2 ADOPTED CHILDREN.—There shall be an open en3 rollment period with respect to a newborn child and

4 a newly adopted child during the 30-day period be5 ginning on the date of the birth or adoption of a

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

7 (c) ANNUAL OPEN ENROLLMENT PERIODS FOR

8 WHICH PREEXISTING CONDITION EXCLUSIONS MAY

9 APPLY.—

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

11 health plan providing health coverage (and each

12 health plan purchasing organization under subtitle A

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

14 provide for at least one annual open enrollment pe15 riod (of not less than 30 days) each year. Such pe16 riod shall be in addition to the open enrollment peri17 ods described in subsection (b).

18 (2) COORDINATION.—

19 (A) CARRIERS IN INDIVIDUAL/SMALL

20 GROUP MARKET.—Such annual open enrollment

21 periods with respect to carriers in the individ22 ual/small group market are subject to coordina23 tion by States.
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1 (d) OTHER OPEN ENROLLMENT PERIODS FOR

2 WHICH PREEXISTING CONDITION EXCLUSIONS MAY

3 APPLY.—

4 (1) TERMINATION OF RESIDENCE AREA.—For

5 each qualifying individual, at the time the individual

6 terminates residence in the service area of coverage

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

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

9 during which the individual may enroll in health cov10 erage.

11 (2) FAMILY OR EMPLOYMENT CHANGES.—In

12 the case of a qualifying individual who—

13 (A) through divorce or death of a family

14 member experiences a change in family com15 position, or

16 (B) experiences a change in employment

17 status (including a significant change in the

18 terms and conditions of employment or the

19 terms and conditions of employment of a

20 spouse),

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

22 30 days) in which the individual is permitted to

23 change the individual or family basis of coverage or

24 the health coverage in which the individual is en25 rolled. The circumstances under which such enroll-
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1 ment periods are required and the duration of such

2 periods shall be specified by the Secretary.

3 (3) ENROLLMENT DUE TO LOSS OF PREVIOUS

4 COVERAGE.—In the case of a qualifying individual

5 who—

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

7 individual’s enrollment period,

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

9 having other health coverage was the reason for

10 declining enrollment, and

11 (C) lost the other health coverage as a re12 sult of the termination of the coverage, termi13 nation or reduction of employment, or other

14 reason, except termination at the option of the

15 individual,

16 there shall be an open enrollment period during the

17 30-day period beginning on the date of termination

18 of the other coverage.

19 (4) ENROLLMENT AT TIME OF MARRIAGE.—

20 There shall be an open enrollment period with re21 spect to the spouse of an individual (including chil22 dren of the spouse) during the 30-day period begin23 ning on the date of the marriage, if family coverage

24 is available as of such date.
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1 (5) NO EFFECT ON COBRA CONTINUATION BEN2 EFITS.—Nothing in this subsection shall be con3 strued as affecting rights of individuals to continu4 ation coverage under section 4980B of the Internal

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

6 I of the Employee Retirement Income Security Act

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

8 Act.

9 (e) PERIOD OF COVERAGE.—

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

11 individual who enrolls under health coverage during

12 an open enrollment period under this section, cov13 erage shall begin on such date (not later than the

14 first day of the first month that begins at least 15

15 days after the date of enrollment) as the Secretary

16 shall specify, consistent with this subsection.

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

18 case of an open enrollment period described in sub19 section (b)(3), (b)(4), or (d)(4), the Secretary shall

20 provide for coverage of family members to begin as

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

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

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

24 birth or adoption).
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1 PART 2—PROVISION OF BENEFITS

2 SEC. 1011. STANDARDS FOR MANAGED CARE ARRANGE3 MENTS.

4 (a) APPLICATION OF REQUIREMENTS.—Each group

5 health plan, and each carrier providing health insurance

6 coverage, that provides for health care through a managed

7 care arrangement (as defined in section 1903(11)(A))

8 shall comply with the applicable requirements of this sec9 tion.

10 (b) CONSUMER DISCLOSURE.—

11 (1) IN GENERAL.—The group health plan, or

12 carrier providing health insurance coverage, that

13 provides for health care shall assure that, before an

14 individual is enrolled with the plan or carrier, the in15 dividual is provided with information about the ar16 rangements between the entity providing for the

17 managed care arrangement and health care provid18 ers for the provision of covered benefits, including

19 the following:

20 (A) EMERGENCY SERVICES.—Arrange21 ments for access to emergency care services in22 side and outside the provider network (includ23 ing designated trauma centers), including any

24 requirements for prior authorization.
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1 (B) SPECIALIZED TREATMENT.—Arrange2 ments for access to specialized treatment pro3 viders (such as centers of excellence).

4 (C) CHOICE OF PERSONAL PHYSICIAN.—

5 Ability of enrollees to choose (and change the

6 selection of) a personal physician from among

7 available participating physicians and change

8 that selection as appropriate.

9 (D) ESSENTIAL COMMUNITY PROVIDERS.—

10 Arrangements for access to essential community

11 providers, including disproportionate share hos12 pitals, sole community hospitals, medicare-de13 pendent, small rural hospitals, Federally quali14 fied health centers, rural health clinics, local

15 health departments, and children’s hospitals.

16 (2) DESIGNATION OF CENTERS OF EXCEL17 LENCE.—The Secretary shall establish a process for

18 the designation of facilities, including children’s hos19 pitals and other pediatric facilities, as centers of ex20 cellence for purposes of this subsection. A facility

21 may not be designated unless the facility is deter22 mined—

23 (A) to provide specialty care,
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1 (B) to deliver care for complex cases re2 quiring specialized treatment and for individ3 uals with chronic diseases, and

4 (C) to meet other requirements that may

5 be established by the Secretary relating to spe6 cialized education and training of health profes7 sionals, participation in peer-reviewed research,

8 or treatment of patients from outside the geo9 graphic area of the facility.

10 (c) PROVIDER DISCLOSURE AND DUE PROCESS RE11 LATING TO PROVIDER NETWORKS.—

12 (1) DISCLOSURE.—The entity providing for a

13 managed care arrangement under which health cov14 erage shall provide that before entering into a con15 tract with health care providers with respect to the

16 entity’s provider network, the provider is given infor17 mation concerning the terms and conditions of the

18 provider’s involvement with the network, including

19 the following:

20 (A) STANDARDS FOR SELECTION OF PRO21 VIDERS FOR NETWORK.—Information concern22 ing the standards (including criteria for quality,

23 efficiency, credentialing, and services) to be

24 used by the entity for contracting with health
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1 care providers with respect to the entity’s pro2 vider network.

3 (B) REVIEW PROCESS.—Information con4 cerning the process under which a provider may

5 request a review of the entity’s decision to ter6 minate or refuse to renew the provider’s partici7 pation agreement.

8 (2) WRITTEN NOTICE OF DENIALS.—The entity

9 providing for the managed care arrangement shall

10 provide written notice to the provider of any denial

11 of an application to participate in the provider net12 work.

13 (3) TERMINATION PROCESS.—

14 (A) IN GENERAL.—The entity may not ter15 minate or refuse to renew a participation agree16 ment with a provider in the entity’s provider

17 network unless the entity provides written noti18 fication to the provider of the entity’s decision

19 to terminate or refuse to renew the agreement.

20 The notification shall include a statement of the

21 reasons for the entity’s decision, consistent with

22 any standards described in paragraph (1)(A).

23 (B) TIMING OF NOTIFICATION.—The en24 tity shall provide the notification required under

25 subparagraph (A) at least 30 days prior to the
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1 effective date of the termination or expiration

2 of the agreement (whichever is applicable). The

3 previous sentence shall not apply if failure to

4 terminate the agreement prior to the deadline

5 would adversely affect the health or safety of

6 a covered individual.

7 (d) NO REFERRAL REQUIRED FOR OBSTETRICS AND

8 GYNECOLOGY.—A carrier or group health plan may not

9 require an individual to obtain a referral from a physician

10 in order to obtain covered items and services from a physi11 cian who specializes in obstetrics and gynecology.

12 (e) PREEMPTION OF STATE LAW RESTRICTIONS ON

13 MANAGED CARE ARRANGEMENTS.—

14 (1) LIMITATION ON RESTRICTIONS ON NET15 WORK PLANS.—Effective as of January 1, 1997—

16 (A) a State may not prohibit or limit a

17 carrier or group health plan providing health

18 coverage from including incentives for enrollees

19 to use the services of participating providers;

20 (B) a State may not prohibit or limit such

21 a carrier or plan from limiting coverage of serv22 ices to those provided by a participating pro23 vider;

24 (C) a State may not prohibit or limit the

25 negotiation of rates and forms of payments for
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1 providers by such a carrier or plan with respect

2 to health coverage;

3 (D) a State may not prohibit or limit such

4 a carrier or plan from limiting the number of

5 participating providers;

6 (E) a State may not prohibit or limit such

7 a carrier or plan from requiring that services be

8 provided (or authorized) by a practitioner se9 lected by the enrollee from a list of available

10 participating providers or, except as provided in

11 subsection 1011(d), from requiring enrollees to

12 obtain referral in order to have coverage for

13 treatment by a specialist or health institution;

14 and

15 (F) a State may not prohibit or limit the

16 corporate practice of medicine.

17 (2) DEFINITIONS.—In this subsection:

18 (A) MANAGED CARE COVERAGE.—The

19 term ‘‘managed care coverage’’ means health

20 coverage to the extent the coverage is provided

21 through a managed care arrangement (as de22 fined in section 1903(11)(A)) that meets the

23 applicable requirements of this section.

24 (B) PARTICIPATING PROVIDER.—The term

25 ‘‘participating provider’’ means an entity or in-
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1 dividual which provides, sells, or leases health

2 care services as part of a provider network (as

3 defined in section 1903(11)(B)).

4 SEC. 1012. REPORT ON UTILIZATION REVIEW STANDARDS.

5 (a) STUDY.—The Secretary shall provide for a study

6 on the feasibility and appropriateness of—

7 (1) establishing standards for utilization review

8 programs, and

9 (2) prohibiting group health plans and carriers

10 providing health insurance coverage from denying

11 coverage of or payment for items and services on the

12 basis of a utilization review program unless the pro13 gram meets such standards.

14 (b) REPORT.—Not later than 18 months after the

15 date of the enactment of this Act, the Secretary shall sub16 mit to Congress a report on the study under subsection

17 (a). The Secretary shall include the report recommenda18 tions regarding the application of standards for utilization

19 review programs to group health plans and carriers pro20 viding health insurance coverage.

21 (c) PREEMPTION.—For provision preempting State

22 laws relating to utilization review, see section 6103.
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1 SEC. 1013. MEDICAL SAVINGS ACCOUNTS.

2 (a) IN GENERAL.—Chapter 79 of the Internal Reve3 nue Code of 1986 is amended by adding at the end the

4 following new section:

5 ‘‘SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

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

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

8 organized in the United States for the exclusive benefit

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

10 instrument creating the trust meets the following require11 ments:

12 ‘‘(1) Except in the case of a rollover contribu13 tion described in subsection (d)(3), no contribution

14 will be accepted unless—

15 ‘‘(A) it is in cash, and

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

17 for the period for which such contribution is

18 made.

19 ‘‘(2) The trustee is a bank (as defined in sec20 tion 408(n)), insurance company (as defined in sec21 tion 816), or such other person who demonstrates to

22 the satisfaction of the Secretary that the manner in

23 which such other person will administer the trust

24 will be consistent with the requirements of this sec25 tion.
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1 ‘‘(3) No part of the trust funds will be invested

2 in life insurance contracts.

3 ‘‘(4) The interest of an individual in the bal4 ance of the account is nonforfeitable.

5 ‘‘(5) The assets of the trust will not be commin6 gled with other property except in a common trust

7 fund or common investment fund.

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

9 section—

10 ‘‘(1) IN GENERAL.—The term ‘eligible em11 ployee’ means any employee who has high-deductible

12 coverage (as defined in section 1103 of the Health

13 Care Improvement Act of 1995) offered by the em14 ployer.

15 ‘‘(2) EXCEPTION.—An employee shall be treat16 ed as not being an eligible employee for any calendar

17 year if, for any month during such year, it is reason18 ably expected that such employee—

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

20 is less than 100 percent of the income official

21 poverty line (as determined by the Director of

22 the Office of Management and Budget) for a

23 family of the size involved; or

24 ‘‘(B) is an AFDC recipient or SSI recipi25 ent.
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1 ‘‘(3) DEFINITIONS.—For purposes of paragraph

2 (2)—

3 ‘‘(A) AFDC RECIPIENT.—The term

4 ‘AFDC recipient’ means, for a month, an indi5 vidual who is receiving aid or assistance under

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

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

8 of the Social Security Act for the month.

9 ‘‘(B) SSI RECIPIENT.—The term ‘SSI re10 cipient’ means, for a month, an individual—

11 ‘‘(i) with respect to whom supple12 mental security income benefits are being

13 paid under title XVI of the Social Security

14 Act for the month,

15 ‘‘(ii) who is receiving a supplementary

16 payment under section 1616 of such Act or

17 under section 212 of Public Law 93–66 for

18 the month,

19 ‘‘(iii) who is receiving monthly bene20 fits under section 1619(a) of the Social Se21 curity Act (whether or not pursuant to sec22 tion 1616(c)(3) of such Act) for the

23 month, or

24 ‘‘(iv) who is treated under section

25 1619(b) of the Social Security Act as re-
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1 ceiving supplemental security income bene2 fits in a month for purposes of title XIX

3 of such Act.

4 ‘‘(c) TAX TREATMENT OF ACCOUNTS.—

5 ‘‘(1) ACCOUNT TAXED AS GRANTOR TRUST.—

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

7 subparagraph (B), the account beneficiary of a

8 medical savings account shall be treated for

9 purposes of this title as the owner of such ac10 count and shall be subject to tax thereon in ac11 cordance with subpart E of part I of subchapter

12 J of this chapter (relating to grantors and oth13 ers treated as substantial owners).

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

15 With respect to assets held in a medical savings

16 account, any capital loss for a taxable year

17 from the sale or exchange of such an asset shall

18 be allowed only to the extent of capital gains

19 from such assets for such taxable year. Any

20 capital loss which is disallowed under the pre21 ceding sentence shall be treated as a capital

22 loss from the sale or exchange of such an asset

23 in the next taxable year. For purposes of this

24 subparagraph, all medical savings accounts of
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1 the account beneficiary shall be treated as 1 ac2 count.

3 ‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN4 GAGES IN PROHIBITED TRANSACTION.—

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

6 year of the account beneficiary, such beneficiary

7 engages in any transaction prohibited by section

8 4975 with respect to the account, the account

9 shall cease to be a medical savings account as

10 of the first day of such taxable year.

11 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

12 ALL ITS ASSETS.—In any case in which any ac13 count ceases to be a medical savings account by

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

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

16 as if—

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

18 first day in an amount equal to the fair

19 market value (on such first day) of all as20 sets in the account (on such first day), and

21 ‘‘(ii) no portion of such distribution

22 were used to pay qualified medical ex23 penses.

24 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU25 RITY.—If, during any taxable year, the account ben-
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1 eficiary uses the account or any portion thereof as

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

3 distributed and not used to pay qualified medical ex4 penses.

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

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

7 QUALIFIED MEDICAL EXPENSES.—

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

9 distributed out of a medical savings account

10 which is not used exclusively to pay the quali11 fied medical expenses of the account beneficiary

12 or of the spouse or dependents (as defined in

13 section 152) of such beneficiary shall be in14 cluded in the gross income of such beneficiary

15 to the extent such amount does not exceed the

16 excess of—

17 ‘‘(i) the aggregate contributions to

18 such account which were not includible in

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

20 over

21 ‘‘(ii) the aggregate prior payments or

22 distributions from such account which were

23 includible in gross income under this para24 graph.
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1 ‘‘(B) SPECIAL RULES.—For purposes of

2 subparagraph (A)—

3 ‘‘(i) all medical savings accounts of

4 the account beneficiary shall be treated as

5 1 account,

6 ‘‘(ii) all payments and distributions

7 during any taxable year shall be treated as

8 1 distribution, and

9 ‘‘(iii) any distribution of property

10 shall be taken into account at its fair mar11 ket value on the date of the distribution.

12 ‘‘(2) PENALTY FOR DISTRIBUTIONS NOT USED

13 FOR QUALIFIED MEDICAL EXPENSES.—

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

15 chapter 1 on the account beneficiary for any

16 taxable year in which there is a payment or dis17 tribution from a medical savings account of

18 such beneficiary which is includible in gross in19 come under paragraph (1) shall be increased by

20 100 percent of the amount which is so includ21 ible.

22 ‘‘(B) EXCEPTION FOR DEATH.—Subpara23 graph (A) shall not apply if the payment or dis24 tribution is made after the account beneficiary

25 dies.
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1 ‘‘(3) ROLLOVER CONTRIBUTION.—An amount is

2 described in this paragraph as a rollover contribu3 tion if it meets the requirements of subparagraphs

4 (A) and (B).

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

6 not apply to any amount paid or distributed

7 from a medical savings account to the account

8 beneficiary to the extent the amount received is

9 paid into a medical savings account for the ben10 efit of such beneficiary not later than the 60th

11 day after the day on which he receives the pay12 ment or distribution.

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

14 not apply to any amount described in subpara15 graph (A) received by an individual from a

16 medical savings account if, at any time during

17 the 1-year period ending on the day of such re18 ceipt, such individual received any other amount

19 described in subparagraph (A) from a medical

20 savings account which was not includible in his

21 gross income because of the application of this

22 paragraph.

23 ‘‘(4) COORDINATION WITH MEDICAL EXPENSE

24 DEDUCTION.—For purposes of section 213, any pay25 ment or distribution out of a medical savings ac-
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1 count for qualified medical expenses shall not be

2 treated as an expense paid for medical care to the

3 extent of the amount of such payment or distribu4 tion which is excludable from gross income solely by

5 reason of paragraph (1)(A).

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

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

8 term ‘qualified medical expenses’ means any expense

9 for medical care (as defined in section 213(d)); ex10 cept that such term shall not include any amount

11 paid for insurance.

12 ‘‘(2) ACCOUNT BENEFICIARY.—The term ‘ac13 count beneficiary’ means the individual for whose

14 benefit the medical savings account is maintained.

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

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

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

18 bank (as defined in section 408(n)), insurance com19 pany (as defined in section 816), or another person

20 who demonstrates to the satisfaction of the Sec21 retary that the manner in which he will administer

22 the account will be consistent with the requirements

23 of this section, and
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1 ‘‘(2) the custodial account would, except for the

2 fact that it is not a trust, constitute a medical sav3 ings account described in subsection (a).

4 For purposes of this title, in the case of a custodial ac5 count treated as a trust by reason of the preceding sen6 tence, the custodian of such account shall be treated as

7 the trustee thereof.

8 ‘‘(g) REPORTS.—The trustee of a medical savings ac9 count shall keep such records and make such reports re10 garding such account to the Secretary and to the account

11 beneficiary with respect to contributions, distributions,

12 and such other matters as the Secretary may require

13 under regulations. The reports required by this subsection

14 shall be filed at such time and in such manner and fur15 nished to such individuals at such time and in such man16 ner as may be required by such regulations.’’

17 (b) INCOME AND EMPLOYMENT TAX TREATMENT OF

18 EMPLOYER CONTRIBUTIONS.—

19 (1) EMPLOYER PAYMENTS EXCLUDED FROM

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

21 Code is amended to read as follows:

22 ‘‘Gross income of an employee does not include—

23 ‘‘(1) employer-provided coverage under an acci24 dent or health plan, and
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1 ‘‘(2) employer contributions to any medical sav2 ings account (as defined in section 7705) of an eligi3 ble employee, but only to the extent that the amount

4 contributed does not exceed the excess of premium

5 for standard coverage over the premium for high-de6 ductible coverage (as such terms are defined in sec7 tion 1903 of the Health Care Improvement Act of

8 1995).’’

9 (2) EMPLOYER PAYMENTS EXCLUDED FROM

10 EMPLOYMENT TAX BASE.—

11 (A) SOCIAL SECURITY TAXES.—

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

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

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

15 period at the end of paragraph (21) and

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

17 paragraph (21) the following new para18 graph:

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

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

21 reasonable to believe that the employee will be able

22 to exclude such payment from income under section

23 106(2).’’

24 (ii) Subsection (a) of section 209 of

25 the Social Security Act is amended by
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1 striking ‘‘or’’ at the end of paragraph (18),

2 by striking the period at the end of para3 graph (19) and inserting ‘‘; or’’, and by in4 serting after paragraph (19) the following

5 new paragraph:

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

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

8 reasonable to believe that the employee will be able

9 to exclude such payment from income under section

10 106(2) of the Internal Revenue Code of 1986.’’

11 (B) RAILROAD RETIREMENT TAX.—Sub12 section (e) of section 3231 of such Code is

13 amended by adding at the end the following

14 new paragraph:

15 ‘‘(10) MEDICAL SAVINGS ACCOUNT CONTRIBU16 TIONS.—The term ‘compensation’ shall not include

17 any payment made to or for the benefit of an em18 ployee if at the time of such payment it is reason19 able to believe that the employee will be able to ex20 clude such payment from income under section

21 106(2).’’

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

23 of section 3306 of such Code is amended by

24 striking ‘‘or’’ at the end of paragraph (15), by

25 striking the period at the end of paragraph (16)
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1 and inserting ‘‘; or’’, and by inserting after

2 paragraph (16) the following new paragraph:

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

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

5 reasonable to believe that the employee will be able

6 to exclude such payment from income under section

7 106(2).’’

8 (D) WITHHOLDING TAX.—Subsection (a)

9 of section 3401 of such Code is amended by

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

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

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

13 paragraph (20) the following new paragraph:

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

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

16 reasonable to believe that the employee will be able

17 to exclude such payment from income under section

18 106(2).’’

19 (c) TECHNICAL AMENDMENTS.—

20 (1) TAX ON PROHIBITED TRANSACTIONS.—Sec21 tion 4975 of such Code (relating to prohibited trans22 actions) is amended—

23 (A) by adding at the end of subsection (c)

24 the following new paragraph:
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1 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC2 COUNTS.—An individual for whose benefit a medical

3 savings account (within the meaning of section

4 7705) is established shall be exempt from the tax

5 imposed by this section with respect to any trans6 action concerning such account (which would other7 wise be taxable under this section) if, with respect

8 to such transaction, the account ceases to be a medi9 cal savings account by reason of the application of

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

11 (B) by inserting ‘‘or a medical savings ac12 count described in section 7705’’ in subsection

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

14 (2) FAILURE TO PROVIDE REPORTS ON MEDI15 CAL SAVINGS ACCOUNTS.—Section 6693 of such

16 Code (relating to failure to provide reports on indi17 vidual retirement account or annuities) is amend18 ed—

19 (A) by inserting ‘‘OR ON MEDICAL SAV20 INGS ACCOUNTS’’ after ‘‘ANNUITIES’’ in the

21 heading of such section, and

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

23 the following: ‘‘The person required by section

24 7705(g) to file a report regarding a medical

25 savings account at the time and in the manner
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1 required by such section shall pay a penalty of

2 $50 for each failure unless it is shown that

3 such failure is due to reasonable cause.’’

4 (3) CLERICAL AMENDMENTS.—

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

6 such Code is amended by adding at the end the

7 following:

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

8 (B) The table of sections for subchapter B

9 of chapter 68 of such Code is amended by in10 serting ‘‘or on medical savings accounts’’ after

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

12 6693.

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

14 this section shall apply to taxable years beginning after

15 December 31, 1996.

16 PART 3—FAIR RATING PRACTICES

17 SEC. 1021. USE OF FAIR RATING PRACTICES.

18 (a) USE OF FAIR RATING PRACTICES.—The pre19 mium rate established by a carrier for health insurance

20 coverage in the individual/small group market (including

21 the premium rate for coverage for a small employer

22 through a multiple employer welfare arrangement that is

23 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(14)) 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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Title I, Subtitle A

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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 5005.

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 mul2 tiple employer welfare arrangements that are

3 fully insured (without regard to whether such

4 an arrangement is offered through an associa5 tion) would be adjusted to take into account

6 such factors as may be appropriate to predict

7 the future need and the efficient use of services

8 by covered individuals in the market. Such fac9 tors may include the age, gender, geographic

10 residence, health status, or other demographic

11 characteristics of individuals enrolled in such

12 plans and shall include consideration of enroll13 ment of a disproportionate share of individuals

14 who enroll during the initial open enrollment

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

16 (B) PROMULGATION AS PROPOSED

17 RULE.—If the NAIC develops such model with18 in such period, the Secretary shall publish the

19 model as a proposed rule under section 553 of

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

21 not developed such model within such period,

22 the Secretary shall publish (not later than 60

23 days after the end of such period) a proposed

24 rule that specifies a proposed model that pro25 vides for effective risk adjustment mechanisms.
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1 (2) RULE MAKING PROCESS.—The Secretary

2 shall provide for a period (described in section

3 553(c) of title 5, United States Code) of not less

4 than 30 days for public comment on a proposed rule

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

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

7 1, 1996, that specifies risk adjustment mechanisms

8 that the Secretary finds are effective for purposes of

9 carrying out this section. Such rule shall include

10 models developed by the NAIC if the Secretary finds

11 that such models provide for effective risk adjust12 ment mechanisms.

13 (3) MODIFICATION.—The Secretary, at the re14 quest of the NAIC or otherwise, may by regulation

15 modify the model risk adjustment system established

16 under this subsection.

17 (b) IMPLEMENTATION OF RISK ADJUSTMENT SYS18 TEM.—Each State shall establish and maintain a risk ad19 justment system that conforms with the model established

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

21 State may establish and maintain such a system jointly

22 with one or more other States.
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1 PART 4—CONSUMER PROTECTIONS

2 SEC. 1031. REQUIREMENT FOR PROVISION OF INFORMA3 TION.

4 (a) CARRIERS.—

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

6 health insurance coverage to small employers (or eli7 gible employees of small employers) or qualifying in8 dividuals must disclose to such prospective enrollees,

9 to brokers, and to health plan purchasing organiza10 tions the information that the Secretary may specify

11 relating to the performance of the carrier in provid12 ing such coverage and relating to differences be13 tween the coverage provided and the most similar

14 model benefit package established under section

15 1104(b)(2). If a carrier offers to individuals or em16 ployers coverage the actuarial value of which is more

17 than the actuarial value for high-deductible coverage

18 but less than such value for standard coverage, the

19 carrier must disclose to such employers or individ20 uals detailed information on how the coverage of21 fered compares to any standard and high-deductible

22 coverage offered by the carrier to such individuals

23 and employers.

24 (2) MARKETING MATERIAL.—Each carrier that

25 provides any health insurance coverage in a State

26 shall file with the State those marketing materials
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1 relating to the offer and sale of health insurance

2 coverage to be used for distribution before the mate3 rials are used. Such materials shall be in a uniform

4 format specified under the standards established

5 under section 1301.

6 (b) GROUP HEALTH PLANS.—Each group health

7 plan that provides health coverage must disclose to enroll8 ees and potential enrollees information, similar to the in9 formation described in subsection (a), relating to perform10 ance of the plan in providing such coverage and relating

11 to differences between the coverage provided and the most

12 similar model benefit package established under section

13 1104(b)(2).

14 (c) INFORMATION RELATING TO RISK ADJUST15 MENT.—Each carrier or group health plan providing cov16 erage in the individual/small group market (including mul17 tiple employer health plans that are fully insured, without

18 regard to whether such an arrangement or plan is offered

19 through an association) shall provide to the State such in20 formation as the State may require in order to carry out

21 section 1023 (relating to risk adjustment mechanisms).

22 SEC. 1032. PROHIBITION OF IMPROPER INCENTIVES.

23 (a) LIMITATION ON FINANCIAL INCENTIVES.—No

24 carrier that provides health insurance coverage may vary

25 the commission or financial or other remuneration to a
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1 person based on the claims experience or health status of

2 individuals enrolled by or through the person.

3 (b) NONDISCRIMINATION IN AGENT COMPENSA4 TION.—A carrier—

5 (1) may not vary or condition the compensation

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

7 renewal of health insurance coverage because of the

8 health status or claims experience of any individuals

9 enrolled with the carrier through the agent or

10 broker; and

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

12 contract or agreement of representation with an

13 agent or broker for any reason related to the health

14 status or claims experience of any individuals en15 rolled with the carrier through the agent or broker.

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

17 carrier that offers health insurance coverage may require

18 the purchase of any other insurance or product as a condi19 tion for the purchase of such coverage.

20 SEC. 1033. WRITTEN POLICIES AND PROCEDURES RESPECT21 ING ADVANCE DIRECTIVES.

22 A carrier and a group health plan offering health cov23 erage shall meet the requirements of section 1866(f) of

24 the Social Security Act (relating to maintaining written

25 policies and procedures respecting advance directives), in-
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1 sofar as such requirements would apply to the carrier or

2 plan if the carrier or plan were an eligible organization.

3 Subtitle B—Benefits

4 SEC. 1101. QUALIFIED HEALTH COVERAGE.

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

6 means health coverage that—

7 (1) provides—

8 (A) standard coverage consistent with sec9 tion 1102(a); or

10 (B) high-deductible coverage consistent

11 with section 1103; and

12 (2) meets other requirements of subtitle A ap13 plicable to the coverage and the carrier or group

14 health plan providing the coverage.

15 SEC. 1102. STANDARD COVERAGE.

16 (a) IN GENERAL.—Health insurance coverage is con17 sidered to provide standard coverage consistent with this

18 subsection and for preventive benefits under subsection

19 (b)(4) if—

20 (1) benefits under such coverage are provided

21 within at least each of the required categories of

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

23 and consistent with such subsection;

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

25 requirements of subsection (c); and
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1 (3) the benefits comply with the minimum re2 quirements specified in subsection (d).

3 (b) REQUIRED CATEGORIES OF COVERED BENE4 FITS.—

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

6 benefits described in this paragraph are the types of

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

8 (C), (D), (E), and (F) of paragraph (1), and sub9 paragraphs (E) and (F) of paragraph (2), of section

10 8904(a) of title 5, United States Code (relating to

11 types of benefits required to be in health insurance

12 offered to Federal employees).

13 (2) COVERAGE OF TREATMENTS IN APPROVED

14 RESEARCH TRIALS.—

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

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

17 associated with the delivery of treatments shall

18 be considered to be medically appropriate if the

19 treatment is part of an approved research trial

20 (as defined in subparagraph (C)).

21 (B) ROUTINE MEDICAL COSTS DEFINED.—

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

23 costs’’ means the cost of health services re24 quired to provide treatment according to the de25 sign of the trial, except those costs normally
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1 paid for by other funding sources (as defined by

2 the Secretary). Such costs do not include the

3 cost of the investigational agent, devices or pro4 cedures themselves, the costs of any nonhealth

5 services that might be required for a person to

6 receive the treatment, or the costs of managing

7 the research.

8 (C) APPROVED RESEARCH TRIAL DE9 FINED.—In subparagraph (A), the term ‘‘ap10 proved research trial’’ means a trial—

11 (i) conducted for the primary purpose

12 of determining the safety, effectiveness, ef13 ficacy, or health outcomes of a treatment,

14 compared with the best available alter15 native treatment, and

16 (ii) approved by the Secretary.

17 A trial is deemed to be approved under clause

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

19 of Health, the Food and Drug Administration

20 (through an investigational new drug exemp21 tion), the Department of Veterans Affairs, or

22 by a qualified nongovernmental research entity

23 (as identified in guidelines issued by one or

24 more of the National Institutes of Health).
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1 (3) COVERAGE OF OFF-LABEL USE.—An off2 label use for a drug that has been found to be safe

3 and effective under section 505 of the Federal Food,

4 Drug, and Cosmetic Act shall be covered if the medi5 cal indication for which it is used is listed in one of

6 the following 3 compendia: the American Hospital

7 Formulary Service-Drug Information, the American

8 Medical Association Drug Evaluations, and the

9 United States Pharmacopeia-Drug Information.

10 (4) PREVENTIVE BENEFITS.—The following are

11 preventive benefits that shall be covered without any

12 deductibles, copayment, coinsurance, or other cost13 sharing:

14 (A) NEWBORN, WELL-BABY AND WELL15 CHILD CARE.—Newborn care, well-baby care,

16 and well-child care for individuals under 19

17 years of age, including routine physical exami18 nations, routine immunizations, and routine

19 tests, as specified by the Secretary based on the

20 schedule recommended by the American Acad21 emy of Pediatricians.

22 (B) MAMMOGRAMS.—Routine screening

23 mammograms (including their interpretation),

24 limited to 1 mammogram for a woman who is

25 at least 35 (but less than 40) years of age, 1
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1 mammogram every 2 years for a woman who is

2 at least 40 (but less than 50) years of age, and

3 1 mammogram every year for a woman who is

4 at least 50 years of age.

5 (C) SCREENING PAP SMEARS AND PELVIC

6 EXAMS.—Screening pap smears and pelvic

7 exams for women over 17 years of age, limited

8 to 1 each year.

9 (D) COLORECTAL SCREENING.—Colorectal

10 screening for individuals over 18 years of age at

11 high risk, consisting of 1 fecal occult blood

12 screening test every year, 1 screening

13 sigmoidoscopy every 5 years, and 1 screening

14 colonoscopy every 4 years.

15 (E) SCREENING TUBERCULIN TESTS.—

16 Screening tuberculin tests annually for individ17 uals at risk of contracting tuberculosis.

18 (F) PRENATAL CARE.—Prenatal care.

19 (G) ADULT IMMUNIZATIONS.—Routine im20 munizations for an individual over 17 years of

21 age (including booster immunizations against

22 tetanus and diphtheria, but limited to 1 such

23 immunization every 10 years).

24 (H) PROSTATE CANCER SCREENING.—

25 Routine cancer screening for a man who is at
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1 least 40 years of age through a prostate specific

2 antigen test, limited to 1 test each year.

3 (c) STANDARD ACTUARIAL VALUE.—

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

5 benefits under standard coverage in a fair rating

6 area meets the requirements of this subsection if

7 such value is equivalent to the standard actuarial

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

9 actuarial value of benefits under standard coverage

10 shall be determined using the adjustment under

11 paragraph (3) for a standardized population and set

12 of standardized utilization and cost factors.

13 (2) STANDARD ACTUARIAL VALUE DE14 SCRIBED.—The standard actuarial value described

15 in this paragraph for coverage in a geographic area

16 is the actuarial value of benchmark coverage during

17 1994 in such area. Such actuarial value shall be de18 termined using the adjustment under paragraph (3)

19 for a standardized population and set of standard20 ized utilization and cost factors and updated annu21 ally in accordance with section 1104(a).

22 (3) ADJUSTMENTS FOR STANDARDIZED POPU23 LATION, STANDARDIZED UTILIZATION AND COST

24 FACTORS, AND GEOGRAPHIC AREA.—The adjustment

25 under this paragraph—
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1 (A) for a standardized population shall be

2 made by not taking into account individuals 65

3 years of age or older, employees of the United

4 States Postal Service, retirees, and annuitants;

5 and

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

7 a geographic area shall be made in a manner

8 that reflects the ratio of the actuarial value of

9 benchmark coverage in such geographic area

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

11 actuarial value for such benchmark coverage for

12 the United States as a whole, taking into ac13 count standardized actuarial utilization and

14 cost factors, and

15 (ii) in the case of a group health plan oper16 ating in more than one geographic area, the

17 ratio described in clause (i) shall be determined

18 in accordance with regulations promulgated by

19 the Secretary.

20 At the election of a group health plan under sub21 paragraph (B)(ii), the ratio under such subpara22 graph shall be 1.

23 (d) MINIMUM REQUIREMENTS WITHIN A CAT24 EGORY.—Benefits offered in any standard coverage within

25 any category of benefits shall be not less than the narrow-
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1 est scope and shortest duration of benefits within that cat2 egory in any of the approved health benefits plans offered

3 under chapter 89 of title 5, United States Code (relating

4 to Federal Employees Health Benefits Program) in 1994.

5 Benefits offered in the standard plan within the category

6 of preventive services shall not require payment of cost7 sharing for covered items and services.

8 (e) NO COVERAGE OF SPECIFIC TREATMENT, PRO9 CEDURES, OR CLASSES REQUIRED.—Nothing in this sec10 tion (or section 1103) may be construed to require the

11 coverage of any specific procedure or treatment or class

12 of service in health coverage under this Act or through

13 regulation.

14 (f) CONSTRUCTION.—Nothing in this section (or sec15 tion 1103) shall be construed as requiring coverage to in16 clude benefits for items and services that are not medically

17 necessary or appropriate.

18 SEC. 1103. HIGH-DEDUCTIBLE COVERAGE.

19 Health insurance coverage is considered to provide

20 high-deductible coverage consistent with this section if—

21 (1) benefits under such coverage comply with—

22 (A) the requirements described in section

23 1102(b) (relating to required categories of cov24 ered benefits), and
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1 (B) the requirements described in section

2 1102(d) (relating to minimum requirements

3 within a category);

4 (2) the deductible amount is the amount estab5 lished under section 1104(b)(1);

6 (3) benefits under the coverage in any year

7 (other than preventive benefits described in section

8 1102(b)(4)) are covered only to the extent expenses

9 incurred for items and services included in the cov10 erage for the year exceed the deductible amount

11 specified in paragraph (2); and

12 (4) the actuarial value of the coverage (as de13 termined under rules consistent with section

14 1102(c)) is equivalent to 80 percent of the actuarial

15 value established under such section for standard

16 coverage.

17 SEC. 1104. ACTUARIAL VALUATION OF BENEFITS.

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

19 with the NAIC and the American Academy of Actuaries,

20 shall establish (and may from time to time modify) proce21 dures by which health insurance benefits are valued for

22 purposes of this subtitle.

23 (b) DEDUCTIBLE; MODEL BENEFIT PACKAGES.—

24 The Secretary, in consultation with the NAIC and the

25 American Academy of Actuaries, shall establish—
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1 (1) the deductible amount for high-deductible

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

3 that the actuarial value of high-deductible coverage

4 described in section 1103 is 20 percent less than the

5 actuarial value of standard coverage described in

6 section 1102(a); and

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

8 for purposes of this title, as meeting the require9 ments for standard or high-deductible coverage

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

11 which shall include model cost sharing arrangements

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

13 and point-of-service options.

14 SEC. 1105. LIMITATION ON OFFERING SUPPLEMENTAL BEN15 EFITS.

16 A carrier or group health plan offering qualified

17 health coverage may offer coverage of items and services

18 only in addition to the qualified standard coverage offered

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

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

21 (1) such supplemental coverage is offered and

22 priced separately from the standard coverage offered

23 and is only made available to individuals who obtain

24 qualified standard coverage through the carrier or

25 plan;
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1 (2) the purchase of the qualified health cov2 erage is not conditioned upon the purchase of such

3 supplemental coverage; and

4 (3) in the case of supplemental coverage that

5 consists of a reduction in the cost-sharing otherwise

6 applicable, the premium for the supplemental cov7 erage takes into account any expected increase in

8 utilization of items and services included in the

9 qualified health coverage resulting from obtaining

10 the supplemental coverage.

11 SEC. 1106. FAMILY COVERAGE OPTION; SUPPLEMENTAL

12 COVERAGE.

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

14 group health plan that offers health insurance coverage

15 shall provide for an option under which children under 26

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

17 students or disabled) will be treated (with respect to fam18 ily coverage) as family members. The carrier or plan may

19 impose an additional premium for such option.

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

21 construed as limiting the benefits that may be offered as

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

23 SEC. 1107. LEVEL PLAYING FIELD FOR PROVIDERS.

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

25 construed to require or prohibit the use of a particular
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1 class of provider, among the providers that are legally au2 thorized to provide such treatment.

3 (b) COVERAGE OF CERTAIN OTHER PROVIDERS.—

4 (1) IN GENERAL.—For purposes of this sub5 title, benefits under standard coverage shall include

6 the following:

7 (A) Coverage provided at an individual’s

8 home by a Christian Science practitioner or

9 Christian Science nurse.

10 (B) Coverage provided in a Christian

11 Science Sanitorium (as defined in section

12 1861(y) of the Social Security Act), including

13 coverage provided by a Christian Science practi14 tioner.

15 (2) QUALIFICATIONS OF PROVIDERS.—A Chris16 tian Science practitioner or Christian Science nurse

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

18 practitioner or nurse is listed as such a practitioner

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

20 Boston, Massachusetts.

21 Subtitle C—Standards and Certifi22 cation; Enforcement; Preemp23 tion; General Provisions

24 SEC. 1201. ESTABLISHMENT OF STANDARDS.

25 (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. 1202. 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 1201 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 1201.

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 1201, 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. 1203. APPLICATION TO GROUP HEALTH PLANS.

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

15 1201 and 1202 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 1201 or 1202

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. 1204. 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 Health Care Improvement Act of 1995.

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 Health Care Improvement Act of 1995.’’
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1 (2) CLERICAL AMENDMENT.—The table of sec2 tions for chapter 43 of such Code is amended by

3 adding at the end thereof the following new item:

‘‘Sec. 4980C. Failure of carrier to comply with health insurance

standards.’’

4 SEC. 1205. LIMITATION ON SELF INSURANCE FOR SMALL

5 EMPLOYERS.

6 A single employer plan (as defined in section

7 3(40)(B) of the Employee Retirement Income Security

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

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

10 employees.

11 Subtitle D—Definitions; General

12 Provisions

13 SEC. 1901. GENERAL DEFINITIONS.

14 For purposes of this Act:

15 (1) APPLICABLE REGULATORY AUTHORITY.—

16 The term ‘‘applicable regulatory authority’’ means,

17 with respect to a carrier operating in a State—

18 (A) the State insurance commissioner, or

19 (B) the Secretary, in the case described in

20 section 1202(b)(2).

21 (2) FAMILY MEMBER.—

22 (A) IN GENERAL.—Individuals are consid23 ered to be members of a family if—

24 (i) they are married, or
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1 (ii) they have a legal parent-to-child

2 relationship (whether by natural birth or

3 adoption), if the child is—

4 (I) under 19 years of age,

5 (II) under 25 years of age and a

6 full-time student, or

7 (III) an unmarried dependent re8 gardless of age who is incapable of

9 self-support because of mental or

10 physical disability which existed before

11 age 22.

12 (B) SPECIAL RULES.—Family members—

13 (i) include an adopted child and a rec14 ognized natural child;

15 (ii) include a stepchild or foster child

16 with respect to an individual but only if

17 the child lives with the individual in a reg18 ular parent-child relationship; and

19 (iii) include such other children as the

20 Secretary may specify, but shall not in21 clude an emancipated minor.

22 (3) PRISONER.—The term ‘‘prisoner’’ means,

23 as specified by the Secretary, an individual during a

24 period of imprisonment under Federal, State, or

25 local authority after conviction as an adult.
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1 (4) SECRETARY.—The term ‘‘Secretary’’ means

2 the Secretary of Health and Human Services.

3 (5) STATE.—The term ‘‘State’’ means the 50

4 States, the District of Columbia, Puerto Rico, the

5 Virgin Islands, Guam, American Samoa, and the

6 Northern Mariana Islands.

7 SEC. 1902. DEFINITIONS RELATING TO EMPLOYMENT.

8 (a) APPLICATION OF ERISA DEFINITIONS.—Except

9 as otherwise provided in this Act, terms used in this Act

10 shall have the meanings applicable to such terms under

11 section 3 of the Employee Retirement Income Security Act

12 of 1974 (29 U.S.C. 1002).

13 (b) ADDITIONAL DEFINITIONS.—For purposes of this

14 title:

15 (1) COUNTABLE EMPLOYEE.—The term ‘‘count16 able employee’’ means, with respect to an employer

17 for a month, any employee other than an employee

18 whose normal work week is less than 10 hours.

19 (2) LARGE EMPLOYER.—The term ‘‘large em20 ployer’’ means an employer that is not a small em21 ployer (as defined in paragraph (4)).

22 (3) QUALIFYING EMPLOYEE.—

23 (A) IN GENERAL.—The term ‘‘qualifying

24 employee’’ means, with respect to an employer

25 for a month, any employee other than—
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1 (i) a part-time, seasonal, or temporary

2 employee (as defined in subparagraph

3 (B)); or

4 (ii) an employee who is a child de5 scribed in section 1901(2)(A)(ii).

6 (B) PART-TIME, SEASONAL, OR TEM7 PORARY EMPLOYEE DEFINED.—For purposes of

8 subparagraph (A), the term ‘‘part-time, sea9 sonal, or temporary employee’’ means any of

10 the following employees with respect to a

11 month:

12 (i) CERTAIN PART-TIME EMPLOY13 EES.—Any employee whose normal work

14 week is reasonably expected as of the first

15 day of such month to be less than 20

16 hours.

17 (ii) SEASONAL OR TEMPORARY EM18 PLOYEES.—Any employee who is not rea19 sonably expected as of the first day of such

20 month to be employed by the employer for

21 a period of 120 consecutive days during

22 any 365-day period that includes such first

23 day.

24 (iii) DELAY FOR CERTAIN PART-TIME

25 EMPLOYEES.—Any employee whose normal
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1 work week is reasonably expected as of the

2 first day of such month to be at least 20

3 hours, but less than 35 hours, and the nor4 mal work week of the employee during the

5 preceding 3 months was less than 20

6 hours.

7 (4) SMALL EMPLOYER.—The term ‘‘small em8 ployer’’ means, with respect to a calendar year, an

9 employer that normally employs more than 1 but

10 less than 100 countable employees on a typical busi11 ness day. For the purposes of this paragraph, the

12 term ‘‘employee’’ includes a self-employed individual.

13 For purposes of determining if an employer is a

14 small employer, rules similar to the rules of sub15 section (b) and (c) of section 414 of the Internal

16 Revenue Code of 1986 shall apply.

17 SEC. 1903. DEFINITIONS RELATING TO HEALTH COVERAGE,

18 PLANS, AND CARRIERS.

19 Except as otherwise provided, for purposes of this

20 Act:

21 (1) BENCHMARK COVERAGE.—The term

22 ‘‘benchmark coverage’’ means the standard option of

23 the Blue Cross-Blue Shield plan offered under the

24 Federal Employees Health Benefits Program under
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1 chapter 89 of title 5, United States Code, as in ef2 fect during 1994.

3 (2) CARRIER.—The term ‘‘carrier’’ means a li4 censed insurance company, an entity offering pre5 paid hospital or medical services, and a health main6 tenance organization, and includes a similar organi7 zation regulated under State law for solvency.

8 (3) CLASS OF FAMILY COVERAGE.—The term

9 ‘‘class of family coverage’’ means the 4 classes de10 scribed in section 1021(a)(3).

11 (4) FAIR RATING AREA.—The term ‘‘fair rating

12 area’’ means a geographic area identified by a State

13 for purposes of section 1021(a)(2).

14 (5) GROUP HEALTH PLAN.—The term ‘‘group

15 health plan’’ means an employee welfare benefit plan

16 providing medical care (as defined in section 213(d)

17 of the Internal Revenue Code of 1986) to partici18 pants or beneficiaries directly or through insurance,

19 reimbursement, or otherwise, but does not include

20 any type of coverage excluded from the definition of

21 a health insurance coverage under paragraph (7)(B).

22 (6) HEALTH COVERAGE.—The term ‘‘health

23 coverage’’ means health insurance coverage provided

24 by a carrier or medical care provided under a group

25 health plan.
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1 (7) HEALTH INSURANCE COVERAGE.—

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

3 subparagraph (B), the term ‘‘health insurance

4 coverage’’ means any hospital or medical service

5 policy or certificate, hospital or medical service

6 plan contract, or health maintenance organiza7 tion group contract offered by a carrier.

8 (B) EXCEPTION.—Such term does not in9 clude any of the following (or any combination

10 of the following):

11 (i) Coverage only for accident, dental,

12 vision, disability income, or long-term care

13 insurance, or any combination thereof.

14 (ii) Medicare supplemental health in15 surance.

16 (iii) Coverage issued as a supplement

17 to liability insurance.

18 (iv) Liability insurance, including gen19 eral liability insurance and automobile li20 ability insurance.

21 (v) Workers’ compensation or similar

22 insurance.

23 (vi) Automobile medical-payment in24 surance.
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1 (vii) Coverage for a specified disease

2 or illness.

3 (viii) A hospital or fixed indemnity

4 policy.

5 (ix) Coverage provided exclusively to

6 individuals who are not eligible individuals.

7 (8) HEALTH MAINTENANCE ORGANIZATION.—

8 The term ‘‘health maintenance organization’’ in9 cludes, as defined in standards established under

10 section 1103, an organization that provides health

11 insurance coverage which meets specified standards

12 and under which health services are offered to be

13 provided on a prepaid, at-risk basis primarily

14 through a defined set of providers.

15 (9) HEALTH PLAN PURCHASING ORGANIZA16 TION.—The term ‘‘health plan purchasing organiza17 tion’’ means an organization established under sub18 title A of title VI.

19 (10) INDIVIDUAL/SMALL GROUP MARKET.—The

20 term ‘‘individual/small group market’’ means the in21 surance market offered—

22 (A) to individuals seeking health insurance

23 coverage on behalf of themselves (and their de24 pendents) insofar as no employer is seeking

25 such coverage on behalf of the individual, and
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1 (B) to small employers seeking health in2 surance coverage on behalf of their employees

3 (and their dependents),

4 regardless of whether or not such coverage is made

5 available directly or through a multiple employer

6 welfare arrangement, association, or otherwise.

7 (11) MANAGED CARE ARRANGEMENTS.—

8 (A) MANAGED CARE ARRANGEMENT.—The

9 term ‘‘managed care arrangement’’ means, with

10 respect to a group health plan or under health

11 insurance coverage, an arrangement under such

12 plan or coverage under which providers agree to

13 provide items and services covered under the ar14 rangement to individuals covered under the

15 plan or who have such coverage.

16 (B) PROVIDER NETWORK.—The term

17 ‘‘provider network’’ means, with respect to a

18 group health plan or health insurance coverage,

19 providers who have entered into an agreement

20 described in subparagraph (A).

21 (12) MULTIPLE EMPLOYER WELFARE AR22 RANGEMENT.—The term ‘‘multiple employer welfare

23 arrangement’’ shall have the meaning applicable

24 under section 3(40) of the Employee Retirement In25 come Security Act of 1974.
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1 (13) NAIC.—The term ‘‘NAIC’’ means the Na2 tional Association of Insurance Commissioners.

3 (14) OPTIONS.—Each of the following is a

4 ‘‘type of coverage option’’ in relation to standard

5 coverage:

6 (A) FEE-FOR-SERVICE OPTION.—Standard

7 coverage is considered to provide a ‘‘fee-for8 service option’’ if, regardless of whether covered

9 individuals may receive benefits through a pro10 vider network, benefits with respect to the cov11 ered items and services in the coverage are

12 made available for such items and services pro13 vided through any lawful provider of such cov14 ered items and services and payment is made to

15 such a provider whether or not there is a con16 tractual arrangement between the provider and

17 the carrier or plan.

18 (B) MANAGED CARE OPTION.—Standard

19 coverage is considered to provide a ‘‘managed

20 care option’’ if benefits with respect to the cov21 ered items and services in the coverage are

22 made available exclusively through a provider

23 network, except in the case of emergency serv24 ices and as otherwise required under law.
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1 (C) POINT-OF-SERVICE OPTION.—Standard

2 coverage is considered to provide a ‘‘point-of3 service option’’ if the benefits with respect to

4 covered items and services in the coverage are

5 made available principally through a managed

6 care arrangement, with the choice of the en7 rollee to obtain such benefits for items and

8 services provided through any lawful provider of

9 such covered items and services. The coverage

10 may provide for different cost sharing schedules

11 based on whether the items and services are

12 provided through such an arrangement or out13 side such an arrangement.

14 (15) QUALIFIED HEALTH COVERAGE.—The

15 term ‘‘qualified health coverage’’ has the meaning

16 given such term in section 1101.

17 (16) STANDARD COVERAGE.—The term ‘‘stand18 ard coverage’’ means coverage provided consistent

19 with section 1102(a).

20 (17) STATE COMMISSIONER OF INSURANCE.—

21 The term ‘‘State commissioner of insurance’’ in22 cludes a State superintendent of insurance.
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1 SEC. 1904. DEFINITIONS RELATING TO RESIDENCE AND IM2 MIGRATION STATUS.

3 Except as otherwise provided, for purposes of this

4 Act:

5 (1) ALIEN PERMANENTLY RESIDING IN THE

6 UNITED STATES UNDER COLOR OF LAW.—The term

7 ‘‘alien permanently residing in the United States

8 under color of law’’ means an alien lawfully admitted

9 for permanent residence (within the meaning of sec10 tion 101(a)(20) of the Immigration and Nationality

11 Act), and includes any of the following (such status

12 not having changed):

13 (A) An alien who is admitted as a refugee

14 under section 207 of the Immigration and Na15 tionality Act.

16 (B) An alien who is granted asylum under

17 section 208 of such Act.

18 (C) An alien whose deportation is withheld

19 under section 243(h) of such Act.

20 (D) An alien whose deportation is sus21 pended pursuant to section 244 of such Act.

22 (E) An alien who is granted conditional

23 entry pursuant to section 203(a)(7) of such Act

24 as in effect before April 1, 1980.
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1 (F) An alien who is admitted for tem2 porary residence under section 210, 210A, or

3 245A of such Act.

4 (G) An alien who is within a class of aliens

5 lawfully present in the United States pursuant

6 to any other provision of such Act, if (i) the At7 torney General determines that the continued

8 presence of such class of aliens serves a human9 itarian or other compelling public interest, and

10 (ii) the Secretary determines that such interest

11 would be further served by treating each such

12 alien within such class as a ‘‘legal permanent

13 resident’’ for purposes of this Act or who has

14 been granted extended voluntary departure as a

15 member of a nationality group.

16 (H) An alien who is the spouse or unmar17 ried child under 21 years of age of a citizen of

18 the United States, or the parent of such a citi19 zen if the citizen is over 21 years of age, and

20 with respect to whom an application for adjust21 ment to lawful permanent residence is pending.

22 (I) An alien within such other classification

23 of permanent resident aliens as the Secretary

24 may establish by regulation.
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1 (2) LONG-TERM NONIMMIGRANT.—The term

2 ‘‘long-term nonimmigrant’’ means a nonimmigrant

3 described in subparagraph (E), (H), (I), (K), (L),

4 (N), (O), (Q), or (R) of section 101(a)(15) of the

5 Immigration and Nationality Act.

6 (3) QUALIFYING INDIVIDUAL.—The term

7 ‘‘qualifying individual’’ means, an individual who is

8 a resident of the United States, who is not a pris9 oner, and is—

10 (A) a citizen or national of the United

11 States;

12 (B) an alien permanently residing in the

13 United States under color of law (as defined in

14 paragraph (1)); or

15 (C) a long-term nonimmigrant (as defined

16 in paragraph (2)).

17 SEC. 1905. EFFECTIVE DATES.

18 The requirements of this title shall apply with respect

19 to—

20 (1) group health plans for plan years beginning

21 on or after January 1, 1997, and

22 (2) carriers (with respect to coverage other than

23 under a group health plan) as of January 1, 1997.
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1 TITLE II—REMOVAL OF FINAN2 CIAL BARRIERS TO ACCESS

3 Subtitle A—Tax Deductibility for

4 Individuals and Self-Employed

5 SEC. 2001. DEDUCTION FOR HEALTH INSURANCE COSTS OF

6 SELF-EMPLOYED INDIVIDUALS INCREASED

7 AND MADE PERMANENT.

8 (a) IN GENERAL.—Paragraph (1) of section 162(l)

9 of the Internal Revenue Code of 1986 (relating to special

10 rules for health insurance costs of self-employed individ11 uals) is amended by striking ‘‘25 percent’’ and inserting

12 ‘‘the applicable percentage’’.

13 (b) DEDUCTION MADE PERMANENT; APPLICABLE

14 PERCENTAGE.—Paragraph (6) of section 162(l) of such

15 Code is amended to read as follows:

16 ‘‘(6) APPLICABLE PERCENTAGE.—For purposes

17 of paragraph (1)—

‘‘In the case of taxable years beginning in calendar year:The applicable

percentage is:

1996, 1997, or 1998 ............................... 30 percent

1999 ........................................................ 50 percent

2000 or thereafter ................................... 100 percent.’’

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

19 this section shall apply to taxable years beginning after

20 December 31, 1995.
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1 SEC. 2002. DEDUCTION FOR HEALTH INSURANCE COSTS OF

2 INDIVIDUALS WHO ARE NOT SELF-EM3 PLOYED.

4 (a) IN GENERAL.—Part VII of subchapter B of chap5 ter 1 of the Internal Revenue Code of 1986 (relating to

6 additional itemized deductions) is amended by redesignat7 ing section 220 as section 221 and by inserting after sec8 tion 219 the following new section:

9 ‘‘SEC. 220. HEALTH INSURANCE COSTS OF INDIVIDUALS

10 WHO ARE NOT SELF-EMPLOYED.

11 ‘‘(a) IN GENERAL.—In the case of an individual who

12 is not a self-employed individual (as defined in section

13 401(c)(1)), there shall be allowed as a deduction an

14 amount equal to 25 percent of the amount paid during

15 the taxable year for insurance which constitutes medical

16 care for the taxpayer, his spouse, and dependents.

17 ‘‘(b) COORDINATION WITH DEDUCTION FOR SELF18 EMPLOYED INDIVIDUALS.—The amount which would (but

19 for this paragraph) be allowed as a deduction under sub20 section (a) for the taxable year shall be reduced (but not

21 below zero) by the amount (if any) allowed as a deduction

22 under section 162(l) for such taxable year.

23 ‘‘(c) OTHER COVERAGE.—Subsection (a) shall not

24 apply to any taxpayer for any calendar month for which

25 the taxpayer is eligible to participate in any subsidized
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1 health plan maintained by any employer of the taxpayer

2 or of the spouse of the taxpayer.

3 ‘‘(d) COORDINATION WITH MEDICAL DEDUCTION,

4 ETC..—Any amount paid by a taxpayer for insurance to

5 which subsection (a) applies shall not be taken into ac6 count in computing the amount allowable to the taxpayer

7 as a deduction under section 213(a).’’

8 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX9 PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

10 of section 62 of such Code is amended by adding at the

11 end the following new paragraph:

12 ‘‘(16) HEALTH INSURANCE COSTS.—The deduc13 tion allowed by section 220.’’

14 (c) CLERICAL AMENDMENT.—The table of sections

15 for part VII of subchapter B of chapter 1 of such Code

16 is amended by striking the last item and inserting the fol17 lowing new items:

‘‘Sec. 220. Health insurance costs of individuals who are not selfemployed.

‘‘Sec. 221. Cross reference.’’

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

19 this section shall apply to taxable years beginning after

20 December 31, 1995.
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1 SEC. 2003. RESTRICTIONS ON HEALTH BENEFITS PRO2 VIDED THROUGH CAFETERIA PLANS AND

3 FLEXIBLE SPENDING ARRANGEMENTS.

4 (a) FLEXIBLE SPENDING ARRANGEMENTS.—Section

5 106 of the Internal Revenue Code of 1986 (relating to

6 contributions by employer to accident and health plans)

7 is amended to read as follows:

8 ‘‘SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT

9 AND HEALTH PLANS.

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

11 in this section, gross income of an employee does not in12 clude employer-provided coverage under an accident or

13 health plan.

14 ‘‘(b) INCLUSION OF CERTAIN BENEFITS PROVIDED

15 THROUGH FLEXIBLE SPENDING ARRANGEMENTS.—

16 Gross income of an employee shall include such employer17 provided coverage which is provided through a flexible

18 spending or similar arrangement if any amount of deduct19 ible, copayment, coinsurance, or similar cost-sharing may

20 be paid for or reimbursed under such arrangement.’’

21 (b) CAFETERIA PLANS.—Subsection (f) of section

22 125 of such Code (defining qualified benefits) is amended

23 by adding at the end thereof the following new sentence:

24 ‘‘Such term shall not include any benefits or coverage

25 under an accident or health plan if any amount of deduct26 ible, copayment, coinsurance, or similar cost-sharing
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1 under such a plan, or more than 20 percent of any pre2 mium (or comparable amount in the case of a plan not

3 provided through insurance) for such a plan, may be paid

4 for or reimbursed under the cafeteria plan.’’

5 (c) EMPLOYMENT TAX TREATMENT.—

6 (1) SOCIAL SECURITY TAX.—

7 (A) Subsection (a) of section 3121 of such

8 Code is amended by inserting after paragraph

9 (21) the following new sentence:

10 ‘‘Nothing in paragraph (2) shall exclude from the term

11 ‘wages’ any amount which is required to be included in

12 gross income under section 106(b).’’

13 (B) Subsection (a) of section 209 of the

14 Social Security Act is amended by inserting

15 after paragraph (21) the following new sen16 tence:

17 ‘‘Nothing in paragraph (2) shall exclude from the term

18 ‘wages’ any amount which is required to be included in

19 gross income under section 106(b) of the Internal Revenue

20 Code of 1986.’’

21 (2) RAILROAD RETIREMENT TAX.—Paragraph

22 (1) of section 3231(e) of such Code is amended by

23 adding at the end thereof the following new sen24 tence: ‘‘Nothing in clause (i) of the second sentence

25 of this paragraph shall exclude from the term ‘com-
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1 pensation’ any amount which is required to be in2 cluded in gross income under section 106(b).’’

3 (3) UNEMPLOYMENT TAX.—Subsection (b) of

4 section 3306 of such Code is amended by inserting

5 after paragraph (16) the following new sentence:

6 ‘‘Nothing in paragraph (2) shall exclude from the term

7 ‘wages’ any amount which is required to be included in

8 gross income under section 106(b).’’

9 (4) WAGE WITHHOLDING.—Subsection (a) of

10 section 3401 of such Code is amended by adding at

11 the end thereof the following new sentence:

12 ‘‘Nothing in the preceding provisions of this subsection

13 shall exclude from the term ‘wages’ any amount which is

14 required to be included in gross income under section

15 106(b).’’

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

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

18 (e) TRANSFERS FROM FLEXIBLE SPENDING AR19 RANGEMENTS TO MEDICAL SAVINGS ACCOUNTS PER20 MITTED DURING 1997.—A flexible spending arrangement

21 for health shall not cease to be treated as such an arrange22 ment, and no amount shall be includible in the gross in23 come of the employee, solely because amounts not paid out

24 as reimbursements under such arrangement during 1996

25 are contributed to a medical savings account (as defined
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1 in section 7705 of the Internal Revenue Code of 1986)

2 of such employee if such contributions are made before

3 April 1, 1997, and such employee is an eligible employee

4 (as defined in such section) at the time of the contribu5 tions.

6 Subtitle B—Premium and Cost7 Sharing Subsidy Program and

8 Supplemental Benefits Program

9 for Low-Income Individuals

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

11 PROGRAMS AND SUPPLEMENTAL BENEFITS

12 PROGRAMS.

13 (a) REQUIREMENTS FOR PROGRAMS.—The Social Se14 curity Act is amended by adding at the end the following

15 new title:

16 ‘‘TITLE XXI—STATE ACUTE CARE BENEFITS

17 PROGRAMS FOR LOW-INCOME INDIVIDUALS

18 ‘‘PART A—STATE PREMIUM AND COST-SHARING

19 SUBSIDY PROGRAMS

20 ‘‘SEC. 2101. ESTABLISHMENT OF STATE PROGRAMS.

21 ‘‘(a) IN GENERAL.—As a requirement under section

22 1902(a)(63), effective January 1, 1998, each State shall

23 establish and maintain a premium and cost-sharing sub24 sidy program (in this title referred to as a ‘State subsidy

25 program’) that provides for—
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1 ‘‘(1) premium assistance described in section

2 2103 to premium assistance eligible individuals de3 scribed in section 2102(a) in accordance with this

4 part,

5 ‘‘(2) cost-sharing assistance described in section

6 2103 to cost-sharing assistance eligible individuals

7 described in section 2102(b) in accordance with this

8 part, and

9 ‘‘(3) State maintenance-of-effort payments in

10 accordance with section 2107.

11 ‘‘(b) AVAILABILITY OF FUNDS.—Each State with a

12 State subsidy program approved under this part is enti13 tled, for calendar quarters beginning on or after January

14 1, 1998, to payment under section 2106.

15 ‘‘(c) APPROVAL OF STATE PROGRAMS.—The Sec16 retary may not approve a State subsidy program unless

17 the State has submitted a detailed description that speci18 fies the form and manner in which it will carry out the

19 program and the Secretary finds that the program meets

20 the requirements of this part.

21 ‘‘(d) DESIGNATION OF STATE AGENCY.—A State shall

22 designate an appropriate State agency to administer the

23 State subsidy program. Such agency shall be the same

24 agency as the agency designated to administer the State

25 supplemental medical benefits program under part B.
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1 ‘‘SEC. 2102. ELIGIBILITY.

2 ‘‘(a) ASSISTANCE.—

3 ‘‘(1) PREMIUM ASSISTANCE.—Each premium

4 assistance eligible individual (as defined in sub5 section (b)) is entitled to premium assistance under

6 section 2103(a)(1).

7 ‘‘(2) COST-SHARING ASSISTANCE.—Each cost8 sharing assistance eligible individual (as defined in

9 subsection (c)) is entitled to cost-sharing assistance

10 described in section 2103(a)(2).

11 ‘‘(b) PREMIUM ASSISTANCE ELIGIBLE INDIVIDUAL

12 DEFINED.—

13 ‘‘(1) IN GENERAL.—In this title, subject to the

14 succeeding provisions of this section, the term ‘pre15 mium assistance eligible individual’ means an indi16 vidual who has been determined under section 2104

17 to have family modified adjusted income below 100

18 percent of the applicable poverty line (as defined in

19 section 2144(2)).

20 ‘‘(2) SPECIAL RULE FOR CHILDREN AND PREG21 NANT WOMEN.—In this title, subject to the succeed22 ing provisions of this section, the term ‘premium as23 sistance eligible individual’ includes an individual

24 who is a child under 19 years of age or a pregnant

25 woman and who has been determined under section
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1 2104 to have family modified adjusted income below

2 185 percent of the applicable poverty line.

3 ‘‘(c) COST-SHARING ASSISTANCE ELIGIBLE INDIVID4 UAL DEFINED.—In this title, subject to the succeeding

5 provisions of this section, the term ‘cost-sharing assistance

6 eligible individual’ means an individual who has been de7 termined under section 2104 to have family modified ad8 justed income below 100 percent of the applicable poverty

9 line.

10 ‘‘(d) EXCLUSION OF CERTAIN INDIVIDUALS.—In this

11 title—

12 ‘‘(1) IN GENERAL.—The terms ‘premium assist13 ance eligible individual’ and ‘cost-sharing assistance

14 eligible individual’ do not include, with respect to a

15 month, any of the following individuals:

16 ‘‘(A) MEDICARE BENEFICIARY.—An indi17 vidual who is entitled to benefits under part A

18 or B of title XVIII for the month.

19 ‘‘(B) INMATES.—An individual who as of

20 the first day of the month is an inmate of a

21 public institution (except as a patient of a med22 ical institution).

23 ‘‘(C) CERTAIN ALIENS.—An alien who is

24 not lawfully admitted for permanent residence

25 or not otherwise permanently residing in the
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1 United States under color of law (as defined in

2 paragraph (2)).

3 ‘‘(D) NONRESIDENTS.—An individual who

4 is not residing in any State.

5 ‘‘(2) ALIEN PERMANENTLY RESIDING IN THE

6 UNITED STATES UNDER COLOR OF LAW.—The term

7 ‘alien permanently residing in the United States

8 under color of law’ means an alien lawfully admitted

9 for permanent residence (within the meaning of sec10 tion 101(a)(20) of the Immigration and Nationality

11 Act), and includes any of the following:

12 ‘‘(A) An alien who is admitted as a refugee

13 under section 207 of the Immigration and Na14 tionality Act.

15 ‘‘(B) An alien who is granted asylum

16 under section 208 of such Act.

17 ‘‘(C) An alien whose deportation is with18 held under section 243(h) of such Act.

19 ‘‘(D) An alien whose deportation is sus20 pended under section 244 of such Act.

21 ‘‘(E) An alien who is granted conditional

22 entry pursuant to section 203(a)(7) of such

23 Act, as in effect before April 1, 1980.
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1 ‘‘(F) An alien who is admitted for tem2 porary residence under section 210, 210A, or

3 245A of such Act.

4 ‘‘(G) An alien who has been paroled into

5 the United States under section 212(d)(5) of

6 such Act for an indefinite period 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 ‘‘(e) PROTECTION OF CURRENT BENEFICIARIES.—

16 ‘‘(1) IN GENERAL.—In this title, the term ‘pre17 mium assistance eligible individual’ also includes,

18 with respect to a State as of December 31, 1997, an

19 individual described in paragraph (2) whose eligi20 bility for premium assistance has not terminated

21 under paragraph (3).

22 ‘‘(2) CURRENT BENEFICIARIES DESCRIBED.—

23 An individual described in this paragraph is an indi24 vidual who—

25 ‘‘(A) is not excluded under subsection (d),
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1 ‘‘(B) is enrolled to receive medical assist2 ance under the State plan under title XIX (and

3 for which Federal financial participation was

4 available) as of December 31, 1997, and

5 ‘‘(C) would remain enrolled to receive such

6 assistance under the State plan under title XIX

7 but for amendments made by the Health Care

8 Improvement Act of 1995.

9 ‘‘(3) LIMITATION.—An individual is a premium

10 assistance eligible individual pursuant to this sub11 section only until the earlier of—

12 ‘‘(A) June 30, 1998, or

13 ‘‘(B) the first date after December 31,

14 1997, on which the individual’s eligibility for

15 medical assistance under the State plan under

16 title XIX would have been terminated if the

17 amendments made by the Health Care Improve18 ment Act of 1995 had not been enacted.

19 ‘‘SEC. 2103. PREMIUM AND COST-SHARING ASSISTANCE.

20 ‘‘(a) IN GENERAL.—

21 ‘‘(1) PREMIUM ASSISTANCE.—

22 ‘‘(A) IN GENERAL.—The premium assist23 ance under a State subsidy program shall be in

24 the form of a premium assistance certificate

25 that is in the amount computed under sub-
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1 section (b) and that may be applied toward

2 qualifying coverage (as defined in subparagraph

3 (B)). A carrier or group health plan providing

4 such coverage that is tendered such a certificate

5 with respect to an individual shall reduce the

6 amount of the premium by the amount of the

7 certificate, except as provided in subsection

8 (c)(1)(C).

9 ‘‘(B) QUALIFYING COVERAGE DEFINED.—

10 For purposes of this part—

11 ‘‘(i) IN GENERAL.—Except as pro12 vided in clause (ii), the term ‘qualifying

13 coverage’ means standard coverage de14 scribed in section 1102 of the Health Care

15 Improvement Act of 1995.

16 ‘‘(ii) OPTIONAL USE OF HIGH-DE17 DUCTIBLE COVERAGE.—At the election of

18 a premium assistance eligible individual,

19 the term ‘qualifying coverage’ includes

20 high-deductible coverage described in sec21 tion 1103 of the Health Care Improvement

22 Act of 1995 with respect to an individual,

23 but only if the individual—

24 ‘‘(I) is not described in section

25 2102(a)(2) and has been determined
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1 under section 2104 to have family

2 modified adjusted income not less

3 than 100 percent of the applicable

4 poverty line, and

5 ‘‘(II) demonstrates to the satis6 faction of the State that the individual

7 meets the requirements of section

8 1101(b)(2) of the Health Care Im9 provement Act of 1995 (relating to re10 quirement for available assets).

11 ‘‘(2) COST-SHARING ASSISTANCE.—The cost12 sharing assistance under a State subsidy program

13 shall be in the form of a cost-sharing assistance cer14 tificate (or other means) that may be applied with

15 respect to standard coverage. A carrier providing

16 health insurance coverage or a group health plan

17 that is tendered such a certificate with respect to an

18 individual shall reduce the cost-sharing otherwise

19 imposed with respect to health coverage to amounts

20 that are nominal (as specified by the State, consist21 ent with the regulations established to carry out sec22 tion 1916(a)(3)) and shall not impose any cost-shar23 ing in the case of preventive benefits described in

24 section 1102(b)(4) of the Health Care Improvement

25 Act of 1995.
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1 ‘‘(3) CONSOLIDATED AND ELECTRONIC CER2 TIFICATES.—Nothing in this section shall be con3 strued as preventing a State from—

4 ‘‘(A) in the case of an individual who is

5 both a premium assistance eligible individual

6 and a cost-sharing assistance eligible individual,

7 from consolidating the premium and cost-shar8 ing certificates of the individual, and

9 ‘‘(B) providing premium and cost-sharing

10 assistance certificates through electronic or

11 other means.

12 ‘‘(b) AMOUNT OF PREMIUM ASSISTANCE.—

13 ‘‘(1) AMOUNT OF ASSISTANCE.—

14 ‘‘(A) IN GENERAL.—Subject to subpara15 graph (B), the amount of premium assistance

16 under this subsection for a month for an indi17 vidual is the lesser of—

18 ‘‘(i) the premium assistance reference

19 amount determined under paragraph (2),

20 or

21 ‘‘(ii) the amount of the monthly pre22 mium for the qualifying coverage provided

23 to the individual.

24 ‘‘(B) TAKING INTO ACCOUNT EMPLOYER

25 CONTRIBUTIONS.—If an employer is making a
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1 contribution for the health coverage of a pre2 mium assistance eligible individual, the amount

3 of the premium assistance under this subsection

4 for a month shall not exceed the amount by

5 which the premium amount described in sub6 paragraph (A)(ii) exceeds the amount of the

7 employer contribution.

8 ‘‘(2) PREMIUM ASSISTANCE REFERENCE

9 AMOUNT DETERMINED.—

10 ‘‘(A) IN GENERAL.—Subject to paragraph

11 (4), the premium assistance reference amount

12 determined under this paragraph is an amount

equal to 1 13 ⁄12 of the weighted average annual

14 premium (determined in accordance with sub15 paragraph (B)) for the individual’s family class

16 of enrollment for qualified standard health cov17 erage offered in the fair rating area (as defined

18 in section 1903 of the Health Care Improve19 ment Act of 1995) in the individual/small group

20 market in which the individual resides.

21 ‘‘(B) DETERMINATION OF WEIGHTED AV22 ERAGE ANNUAL PREMIUM.—For purposes of

23 subparagraph (A), the weighted average annual

24 premium for a family class of enrollment for

25 qualified standard health coverage shall be
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1 based on the number of families (or individuals

2 in the case of the individual class of enrollment)

3 so covered in the class and area involved.

4 ‘‘(C) FAMILY CLASS OF ENROLLMENT.—In

5 this paragraph, the term ‘family class of enroll6 ment’ means a class of enrollment described in

7 section 1021(a)(3) of the Health Care Improve8 ment Act of 1995.

9 ‘‘(c) PAYMENTS OF ASSISTANCE.—

10 ‘‘(1) PREMIUM ASSISTANCE.—

11 ‘‘(A) IN GENERAL.—The State issuing a

12 premium assistance certificate shall, upon ten13 der to the State of such certificate by the car14 rier or group health plan providing qualifying

15 coverage, pay the carrier or plan the amount of

16 the certificate.

17 ‘‘(B) TIMING OF PAYMENTS.—Payments

18 under this paragraph shall commence in the

19 first month during which the individual obtains

20 qualifying coverage and is determined under

21 section 2104 to be a premium assistance eligible

22 individual.

23 ‘‘(C) TREATMENT OF SURPLUSES AND

24 DEFICITS.—
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1 ‘‘(i) DEFICIT.—If the premium for

2 coverage is greater than the amount of the

3 premium assistance for an individual, the

4 individual is responsible for payment of

5 any difference.

6 ‘‘(ii) SURPLUS.—If the premium for

7 coverage is less than the amount of the

8 premium assistance for an individual, the

9 difference shall not be paid to the individ10 ual or the carrier or plan but shall revert

11 to the Federal Government.

12 ‘‘(2) COST-SHARING ASSISTANCE.

13 ‘‘(A) IN GENERAL.—The State issuing a

14 cost-sharing assistance certificate shall, upon

15 presentation to the State of evidence of such

16 certificate by the carrier or group health plan

17 providing coverage and evidence of cost-sharing

18 amounts otherwise incurred for which a reduc19 tion in cost-sharing is available under the cer20 tificate, pay the carrier or plan the amount of

21 the reduction in cost-sharing in relation to

22 standard coverage.

23 ‘‘(B) TIMING OF PAYMENTS.—Payments

24 under this paragraph shall be provided at the

25 time an individual has obtained qualified stand-
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1 ard health coverage, is determined under sec2 tion 2104 to be a cost-sharing assistance eligi3 ble individual, and has incurred health care ex4 penses of the type for which a cost-sharing re5 duction is available under subparagraph (A).

6 ‘‘(3) ADMINISTRATIVE ERRORS.—A State is fi7 nancially responsible for premium or cost-sharing as8 sistance paid based on an eligibility determination

9 error to the extent the State’s error rate for eligi10 bility determinations exceeds a maximum permissible

11 error rate to be specified by the Secretary.

12 ‘‘SEC. 2104. ELIGIBILITY DETERMINATIONS.

13 ‘‘(a) IN GENERAL.—The Secretary shall promulgate

14 regulations specifying requirements for State subsidy pro15 grams with respect to determining eligibility for premium

16 and cost-sharing assistance, including requirements with

17 respect to—

18 ‘‘(1) application procedures;

19 ‘‘(2) information verification procedures;

20 ‘‘(3) timeliness of eligibility determinations;

21 ‘‘(4) procedures for applicants to appeal adverse

22 decisions; and

23 ‘‘(5) any other matters determined appropriate

24 by the Secretary.
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1 ‘‘(b) SPECIFICATIONS FOR REGULATIONS.—The reg2 ulations promulgated by the Secretary under subsection

3 (a) shall include the following requirements:

4 ‘‘(1) FREQUENCY OF APPLICATIONS.—A State

5 program shall provide that an individual may file an

6 application for assistance with an agency designated

7 by the State at any time, in person.

8 ‘‘(2) APPLICATION FORM.—A State program

9 shall provide for the use of an application form de10 veloped by the Secretary under subsection (c)(2).

11 ‘‘(3) DISTRIBUTION OF APPLICATIONS.—A

12 State program shall distribute applications for as13 sistance widely, including to employers, health plan

14 purchasing organizations, brokers for health cov15 erage, and appropriate public agencies.

16 ‘‘(4) CONVENIENT LOCATION TO SUBMIT APPLI17 CATIONS.—A State program shall provide convenient

18 locations for premium and cost-sharing assistance el19 igible individuals to apply for premium and cost20 sharing assistance.

21 ‘‘(5) REQUIREMENT TO SUBMIT REVISED AP22 PLICATION.—A State program shall, in accordance

23 with regulations promulgated by the Secretary, re24 quire individuals to submit revised applications dur25 ing a year to reflect changes in estimated family in-
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1 comes, including changes in employment status of

2 family members, and changes in eligibility status de3 scribed in section 2002(c) during the year. The

4 State shall revise the amount of any premium and

5 cost-sharing assistance based on such a revised ap6 plication.

7 ‘‘(6) AFDC AND SSI APPLICANTS.—A State

8 program shall include a procedure under which indi9 viduals applying for benefits under part A of title IV

10 or title XVI shall have an opportunity to apply for

11 assistance under this part in connection with such

12 application.

13 ‘‘(7) VERIFICATION.—A State program shall

14 provide for verification of the information supplied

15 in applications under this part. Such verification

16 may include examining return information disclosed

17 to the State for such purpose under section

18 6103(l)(15) of the Internal Revenue Code of 1986.

19 ‘‘(c) ADMINISTRATION OF STATE PROGRAM.—

20 ‘‘(1) IN GENERAL.—The Secretary shall estab21 lish standards for States operating programs under

22 this part which ensure that such programs are oper23 ated in a uniform manner with respect to application

24 procedures, data standards, and such other adminis-
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1 trative activities as the Secretary determines to be

2 necessary.

3 ‘‘(2) APPLICATION FORMS.—The Secretary

4 shall develop an application form for assistance

5 which shall—

6 ‘‘(A) be simple in form and understandable

7 to the average individual;

8 ‘‘(B) require the provision of information

9 necessary to make a determination as to wheth10 er an individual is a premium or cost-sharing

11 assistance eligible individual including a dec12 laration of estimated family income by the indi13 vidual; and

14 ‘‘(C) require attachment of such docu15 mentation as deemed necessary by the Sec16 retary in order to ensure eligibility for assist17 ance.

18 ‘‘(3) OUTREACH ACTIVITIES.—A State operat19 ing a program under this part shall conduct such

20 outreach activities as the Secretary determines ap21 propriate.

22 ‘‘(d) EFFECTIVENESS OF ELIGIBILITY FOR PREMIUM

23 AND COST-SHARING ASSISTANCE.—A determination by a

24 State that an individual is a premium or cost-sharing as25 sistance eligible individual shall be effective for the cal-
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1 endar year for which such determination is made unless

2 a revised application submitted under subsection (b)(5) in3 dicates that an individual is no longer eligible for premium

4 or cost-sharing assistance.

5 ‘‘(e) PENALTIES FOR MATERIAL MISREPRESENTA6 TIONS.—

7 ‘‘(1) IN GENERAL.—Any individual who know8 ingly makes a material misrepresentation of infor9 mation in an application for assistance under this

10 part shall be liable to the Federal Government for

11 the amount any premium and cost-sharing assist12 ance received by an individual on the basis of a mis13 representation and interest on such amount at a

14 rate specified by the Secretary, and shall, in addi15 tion, be liable to the Federal Government for $2,000

16 or, if greater, 3 times the amount any premium and

17 cost-sharing assistance provided on the basis of a

18 misrepresentation.

19 ‘‘(2) COLLECTION OF PENALTY AMOUNTS.—A

20 State which receives an application for assistance

21 with respect to which a material misrepresentation

22 has been made shall collect the penalty amount re23 quired under paragraph (1) and submit 50 percent

24 of such amount to the Secretary in a timely manner.
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1 ‘‘SEC. 2105. END-OF-YEAR RECONCILIATION FOR PREMIUM

2 ASSISTANCE.

3 ‘‘(a) IN GENERAL.—

4 ‘‘(1) REQUIREMENT TO FILE STATEMENT.—An

5 individual who received premium assistance under

6 this part from a State for any month in a calendar

7 year shall file with the State an income reconcili8 ation statement to verify the individual’s family in9 come for the year. Such a statement shall be filed

10 at such time, and contain such information, as the

11 State may specify in accordance with regulations

12 promulgated by the Secretary.

13 ‘‘(2) NOTICE OF REQUIREMENT.—A State shall

14 provide a written notice of the requirement under

15 paragraph (1) at the end of the year to an individual

16 who received assistance under this part from such

17 State in any month during the year.

18 ‘‘(b) RECONCILIATION OF PREMIUM ASSISTANCE

19 BASED ON ACTUAL INCOME.—

20 ‘‘(1) IN GENERAL.—Based on and using the in21 come reported in the reconciliation statement filed

22 under subsection (a) with respect to an individual,

23 the State shall compute the amount of premium as24 sistance that should have been provided under this

25 part with respect to the individual for the year in26 volved.
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1 ‘‘(2) OVERPAYMENT OF ASSISTANCE.—If the

2 total amount of the premium assistance provided

3 was greater than the amount computed under para4 graph (1), the excess amount shall be treated as an

5 underpayment of a tax imposed by chapter 1 of the

6 Internal Revenue Code of 1986.

7 ‘‘(3) UNDERPAYMENT OF ASSISTANCE.—If the

8 total amount of the premium assistance provided

9 was less than the amount computed under para10 graph (1), the amount of the difference shall be

11 treated as an overpayment of tax imposed by such

12 chapter, or in the event the taxpayer involved is enti13 tled to a refund of such a tax, subject to the provi14 sions of section 6402(d) of such Code.

15 ‘‘(c) VERIFICATION.—Each State may use such infor16 mation as it has available to verify income of individuals

17 with applications filed under this part, including return

18 information disclosed to the State for such purpose under

19 section 6103(l)(15) of the Internal Revenue Code of 1986.

20 ‘‘(d) PENALTIES FOR FAILURE TO FILE.—In the

21 case of an individual who is required to file a statement

22 under this section in a year who fails to file such a state23 ment by such date as the Secretary shall specify in regula24 tions, the entire amount of the premium assistance pro25 vided in such year shall be considered an excess amount
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1 under subsection (b)(2) and such individual shall not be

2 eligible for premium assistance under this part until such

3 statement is filed. A State, using rules established by the

4 Secretary, shall waive the application of this subsection

5 if the individual establishes, to the satisfaction of the State

6 under such rules, good cause for the failure to file the

7 statement on a timely basis.

8 ‘‘(e) PENALTIES FOR FALSE INFORMATION.—Any in9 dividual who provides false information in a statement

10 filed under subsection (a) is subject to the same penalties

11 as are provided under section 2104(e) for a misrepresenta12 tion of material fact described in such section.

13 ‘‘(f) NO RECONCILIATION FOR COST-SHARING AS14 SISTANCE.—No reconciliation statement is required under

15 this section with respect to cost-sharing assistance.

16 ‘‘SEC. 2106. PAYMENTS TO STATES.

17 ‘‘(a) PAYMENTS FOR PREMIUM AND COST-SHARING

18 ASSISTANCE.—Subject to subsection (b), the Secretary

19 shall provide for payment to each State operating a State

20 subsidy program in an amount equal to the sum of—

21 ‘‘(1) the Federal title XXI matching percentage

22 (specified under section 2107(a)) of the amount ex23 pended by the State under the program during the

24 quarter for premium assistance on behalf of pre25 mium assistance eligible individuals and for cost-
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1 sharing assistance on behalf of cost-sharing assist2 ance eligible individuals; plus

3 ‘‘(2) 50 percent of the amounts expended by

4 the State during the quarter as found necessary by

5 the Secretary for the proper and efficient adminis6 tration of such program in the State.

7 ‘‘(b) LIMITATION ON PAYMENTS.—

8 ‘‘(1) IN GENERAL.—The total amount of pay9 ments that may be made to a State under subsection

10 (a)(1) for all quarters in a calendar year may not

11 exceed the lesser of—

12 ‘‘(A) subject to paragraph (3), the product

13 of—

14 ‘‘(i) the per capita core benefit Fed15 eral payment limit applicable to the cal16 endar year under subsection (c), and

17 ‘‘(ii) the average monthly number of

18 premium assistance eligible individuals in

19 the State in the year; or

20 ‘‘(B) 110 percent of the total amount that

21 would otherwise have been paid to the State

22 under title XIX in the year with respect to

23 medical assistance described in section

24 1903(i)(16).
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1 ‘‘(2) ESTIMATIONS AND ADJUSTMENTS.—The

2 Secretary shall—

3 ‘‘(A) establish a process for estimating the

4 limit established under this subsection for a

5 year at the beginning of the year and adjusting

6 such amount during such year; and

7 ‘‘(B) notifying each State of the esti8 mations and adjustments referred to in sub9 paragraph (A).

10 ‘‘(3) ADJUSTMENT FOR CERTAIN STATES.—In

11 the case of a State in a year in which the product

12 described in paragraph (1)(A) (as adjusted under

13 this paragraph) exceeds the amount described in

14 paragraph (1)(B), the amount described in para15 graph (1)(A) shall be increased by a proportion

16 equal to the ratio of—

17 ‘‘(A) the total amount of the reductions in

18 payment made by the application of paragraph

19 (1)(B) in the year, to

20 ‘‘(B) the total of the limitations in pay21 ment for all such States in the year under para22 graph (1)(A), determined without regard to any

23 adjustment under this paragraph.

24 ‘‘(c) PER CAPITA CORE BENEFIT FEDERAL PAY25 MENT LIMIT DEFINED.—
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1 ‘‘(1) IN GENERAL.—For purposes of subsection

2 (b)(1)(A), the ‘per capita core benefit Federal pay3 ment limit’ for a State for a year is equal to the

4 base per capita core Federal payments (described in

5 paragraph (2)) increased by the FEHBP State roll6 ing increase percentage (as defined in subsection

7 (d)(2)) for each year after 1995 and up to the year

8 involved.

9 ‘‘(2) BASE PER CAPITA CORE FEDERAL PAY10 MENTS.—For purposes of paragraph (1), the ‘base

11 per capita core Federal payments’ described in this

12 paragraph, for a State, is—

13 ‘‘(A) the baseline Federal medicaid core

14 benefit expenditures (as defined in paragraph

15 (3)) for the State, divided by

16 ‘‘(B) the number of AFDC recipients, SSI

17 recipients, and non-cash medicaid beneficiaries

18 (as described in section 1931(a)(2)) enrolled in

19 the State plan under title XIX in 1995, as de20 termined under paragraph (4).

21 ‘‘(3) DETERMINATION OF BASELINE FEDERAL

22 MEDICAID CORE PAYMENTS.—

23 ‘‘(A) IN GENERAL.—For purposes of para24 graph (2)(A), the ‘baseline Federal medicaid

25 core payments’ for a State is the amount of
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1 Federal payments made under section

2 1903(a)(1) with respect to medical assistance

3 furnished for core benefits (as defined in sec4 tion 1931(b)(1)) for AFDC recipients, SSI re5 cipients, and non-cash medicaid beneficiaries

6 for all calendar quarters in 1995.

7 ‘‘(B) DISPROPORTIONATE SHARE PAY8 MENTS NOT INCLUDED.—In applying subpara9 graph (A), payments attributable to section

10 1923 shall not be counted in the amount of

11 payments.

12 ‘‘(C) TREATMENT OF DISALLOWANCES.—

13 The amount determined under this paragraph

14 shall take into account amounts (or an estimate

15 of amounts) disallowed under title XIX.

16 ‘‘(4) APPLICATION TO PARTICULAR ITEMS AND

17 SERVICES.—For purposes of this subsection, in de18 termining the per capita core benefit expenditure

19 limit for a category of items and services (within

20 core benefits) furnished in a State, there shall be

21 counted only that proportion of such expenditures

22 (determined only with respect to medical assistance

23 furnished to AFDC recipients, SSI recipients, and

24 non-cash medicaid beneficiaries) that were attrib25 utable to items and services included in the core
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1 benefits (taking into account any limitation on

2 amount, duration, or scope of items and services in3 cluded in such benefits).

4 ‘‘(5) DETERMINATION OF NUMBER OF RECIPI5 ENTS AND BENEFICIARIES.—For purposes of para6 graph (2)(B), the number of AFDC recipients, SSI

7 recipients, and non-cash medicaid beneficiaries for a

8 State for 1995 shall be determined based on actual

9 reports submitted by the State to the Secretary. In

10 the case of individuals who were not recipients or

11 beneficiaries for the entire fiscal year, the number

12 shall take into account only the portion of the year

13 in which they were such recipients. The Secretary

14 may audit such reports.

15 ‘‘(d) FEHBP NATIONAL AND STATE ROLLING IN16 CREASE PERCENTAGES.—

17 ‘‘(1) NATIONAL INCREASE PERCENTAGE.—For

18 purposes of this title, the term ‘FEHBP national

19 rolling increase percentage’ means, for a year, the 5-

20 year weighted average of the annual national per21 centage increase in the premiums for health plans

22 offered under the Federal Employees Health Bene23 fits Program (under chapter 89 of title 5, United

24 States Code) for the 5-year period ending with the

25 previous year.
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1 ‘‘(2) STATE INCREASE PERCENTAGE.—For pur2 poses of this title, the term ‘FEHBP State rolling

3 increase percentage’ means, for a year with respect

4 to a State, the 5-year weighted average of the an5 nual percentage increase in the premiums for health

6 plans offered in the State under the Federal Em7 ployees Health Benefits Program (under chapter 89

8 of title 5, United States Code) for the 5-year period

9 ending with the previous year.

10 ‘‘(3) DETERMINATION.—The increase percent11 ages under paragraphs (1) and (2) shall be deter12 mined by the Secretary, in consultation with the Di13 rector of Office of Personnel Management, based on

14 the best information available. Such increases shall

15 be adjusted—

16 ‘‘(A) to take into account the age distribu17 tion in the Federal workforce (not taking into

18 account individuals 65 years of age or older,

19 employees of the United States Postal Service,

20 retirees, and annuitants) relative to the age dis21 tribution in the population of AFDC recipients

22 and non-cash medicaid beneficiaries, and

23 ‘‘(B) to disregard any changes due to

24 changes in the benefit package under the Fed-
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1 eral Employees Health Benefits Program after

2 1994.

3 ‘‘SEC. 2107. FEDERAL TITLE XXI MATCHING PERCENTAGE.

4 ‘‘(a) COMPUTATION.—

5 ‘‘(1) IN GENERAL.—In this title, except as pro6 vided in subsections (c) and (e), the term ‘Federal

7 title XXI matching percentage’ means, for each of

8 the 50 States, 100 percent reduced by the product

9 of the applicable percentage (as defined in para10 graph (2)) and the ratio of—

11 ‘‘(A) the total taxable resources ratio (as

12 defined in paragraph (3)) of the State, to—

13 ‘‘(B) the population in poverty ratio (as

14 defined in paragraph (4)) of the State.

15 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

16 of this section, the term ‘applicable percentage’

17 means a percentage estimated by the Secretary with

18 the advice of the General Accounting Office that, if

19 it were substituted for the Federal medical assist20 ance percentage for purposes of title XIX with re21 spect to core benefits, would have resulted in an

22 amount of aggregate payments under section

23 1903(a) for calendar years 1994 through 1998 equal

24 to the amount of aggregate payments that would

25 have been made under such section for quarters in
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1 such years if such percentage had not been so sub2 stituted. The applicable percentage estimated by the

3 Secretary under the previous sentence shall apply

4 with respect to quarters beginning on or after Janu5 ary 1, 1998.

6 ‘‘(3) TOTAL TABLE RESOURCES RATIO DE7 FINED.—For purposes of this section, the term

8 ‘total taxable resources ratio’ means—

9 ‘‘(A) an amount equal to the most recent

10 3-year average of the total taxable resources of

11 the State, as determined by the Secretary of the

12 Treasury, divided by

13 ‘‘(B) an amount equal to the sum of the 3-

14 year averages determined under subparagraph

15 (A) for each of the 50 States.

16 ‘‘(4) POPULATION IN POVERTY RATIO DE17 FINED.—For purposes of this section, the term ‘pop18 ulation in poverty ratio’ means—

19 ‘‘(A) an amount equal to the 3-year-aver20 age of the number of individuals in the State

21 whose family income is below 100 percent of

22 the income official poverty line (as defined by

23 the Office of Management and Budget and re24 vised annually in accordance with section
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1 673(2) of the Omnibus Budget Reconciliation

2 Act of 1981), divided by

3 ‘‘(B) an amount equal to the sum of the

4 averages determined under subparagraph (A)

5 for the 50 States.

6 ‘‘(b) RULE FOR TERRITORIES AND THE DISTRICT OF

7 COLUMBIA.—The Federal title XXI matching percent8 age—

9 ‘‘(1) for Puerto Rico, the Virgin Islands, Guam,

10 the Northern Mariana Islands, and American Samoa

11 shall be 40 percent, and

12 ‘‘(2) for the District of Columbia shall be 50

13 percent.

14 ‘‘(c) LIMITATION FOR STATES.—

15 ‘‘(1) IN GENERAL.—Except as provided in para16 graph (2) and subsections (b) and (e), the Federal

17 title XXI matching percentage shall in no case be

18 less than 50 percent or greater than 75 percent.

19 ‘‘(2) TREATMENT OF INDIAN FACILITIES.—The

20 Federal title XXI matching percentage shall be 100

21 percent with respect to amounts expended for pre22 mium assistance or cost-sharing assistance or for

23 supplemental acute care benefits with respect to

24 services which are received through an Indian

25 Health Service facility whether operated by the In-
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1 dian Health Service or by an Indian tribe or tribal

2 organization (as defined in section 4 of the Indian

3 Health Care Improvement Act).

4 ‘‘(d) 3 PERCENT BONUS FOR PROMOTING PURCHAS5 ING MECHANISMS.—Except in the case described in sub6 section (c) or in subsection (e), in the case of a State that

7 has established and is operating a system of health plan

8 purchasing organizations or other mechanism that—

9 ‘‘(1) promotes pooling of risk and competition

10 among carriers offering qualified health coverage to

11 residents of the State (including premium subsidy el12 igible individuals), and

13 ‘‘(2) provides information to such consumers

14 about their health plan options,

15 the Federal title XXI matching percentage otherwise com16 puted (without regard to this subsection) shall be in17 creased by 3 percentage points.

18 ‘‘PART B—STATE SUPPLEMENTAL ACUTE CARE

19 BENEFITS PROGRAMS

20 ‘‘SEC. 2121. ESTABLISHMENT OF STATE SUPPLEMENTAL

21 ACUTE CARE BENEFITS PROGRAMS.

22 ‘‘(a) IN GENERAL.—Each State shall establish a

23 State supplemental acute care benefits program (each in

24 this part referred to as a ‘State supplemental acute care
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1 benefits program’) that provides supplemental acute care

2 benefits for supplemental benefit eligible individuals.

3 ‘‘(b) AVAILABILITY OF FUNDS.—Each State with a

4 State supplemental acute care benefits program approved

5 under this part is entitled, for calendar quarters beginning

6 on or after January 1, 1998, to payment under section

7 2124.

8 ‘‘(c) APPROVAL OF STATE PROGRAMS; PROGRAM DE9 SCRIPTIONS.—The Secretary may not approve a State

10 supplemental acute care benefits program unless the State

11 has submitted a detailed description of the form and man12 ner in which it will carry out the program (consistent with

13 the applicable requirements of this part) and the Secretary

14 finds that the program meets such applicable require15 ments.

16 ‘‘SEC. 2122. ELIGIBILITY.

17 ‘‘(a) IN GENERAL.—In this part, the term ‘supple18 mental benefit eligible individual’ means an individual

19 who, as of the time of provision of supplemental acute care

20 benefits, is a premium assistance eligible individual (as de21 fined in section 2102(a)).

22 ‘‘(b) CONSTRUCTION.—Nothing in this part shall be

23 construed to create an entitlement for any specific supple24 mental benefit eligible individual.
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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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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, part A of this

17 title, and any other Federal or State programs

18 that provide services or assistance targeted to

19 supplemental benefit eligible individuals, and

20 ‘‘(B) will be coordinated with qualified

21 health coverage.

22 ‘‘(e) REPORTS AND INFORMATION TO SECRETARY;

23 AUDITS.—Each State supplemental acute care benefits

24 program shall furnish to the Secretary—
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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.—Subject to subsection (b), the

11 Secretary shall provide for payment to each State operat12 ing an approved State supplemental acute care benefits

13 program for a quarter in an amount equal to the sum of—

14 ‘‘(1) the Federal title XXI matching percentage

15 (specified under section 2107(a)) of the amount ex16 pended by the State under the program during the

17 quarter for supplemental acute care benefits for sup18 plemental benefit eligible individuals; and

19 ‘‘(2) 50 percent of the amounts expended by

20 the State during the quarter as found necessary by

21 the Secretary for the proper and efficient adminis22 tration of such program in the State.

23 ‘‘(b) LIMITATION ON PAYMENTS FOR SUPPLE24 MENTAL ACUTE CARE BENEFITS.—
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1 ‘‘(1) IN GENERAL.—The total amount of pay2 ments that may be made to a State under subsection

3 (a)(1) for all quarters in a calendar year may not

4 exceed the product of—

5 ‘‘(A) the per capita supplemental acute

6 care benefit Federal payment limit applicable to

7 the calendar year under subsection (c), and

8 ‘‘(B) the average monthly number of sup9 plemental benefit eligible individuals in the

10 State in the year.

11 ‘‘(2) ESTIMATIONS AND ADJUSTMENTS.—The

12 Secretary shall—

13 ‘‘(A) establish a process for estimating the

14 limit established under this subsection for a

15 year at the beginning of the year and adjusting

16 such amount during such year; and

17 ‘‘(B) notifying each State of the esti18 mations and adjustments referred to in sub19 paragraph (A).

20 ‘‘(c) PER CAPITA SUPPLEMENTAL ACUTE CARE

21 BENEFIT FEDERAL PAYMENT LIMIT DEFINED.—

22 ‘‘(1) IN GENERAL.—For purposes of subsection

23 (b)(1)(A), the ‘per capita supplemental acute care

24 benefit Federal payment limit’ for a State for a year

25 is equal to the base per capita supplemental acute
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1 care Federal payments (described in paragraph (2))

2 increased by the FEHBP national rolling increase

3 percentage (as defined in section 2106(d)(1)) for

4 each year after 1995 and up to the year involved.

5 ‘‘(2) BASE PER CAPITA SUPPLEMENTAL ACUTE

6 CARE FEDERAL PAYMENTS.—For purposes of para7 graph (1), the ‘base per capita supplemental acute

8 care Federal payments’ described in this paragraph,

9 for a State, is—

10 ‘‘(A) the baseline Federal medicaid supple11 mental acute care benefit expenditures (as de12 fined in paragraph (3)) for the State, divided

13 by

14 ‘‘(B) the number of AFDC recipients, SSI

15 recipients, and non-cash medicaid beneficiaries

16 (as described in section 1931(a)(2)) enrolled in

17 the State plan under title XIX in 1995, as de18 termined under paragraph (4).

19 ‘‘(3) DETERMINATION OF BASELINE FEDERAL

20 MEDICAID SUPPLEMENTAL ACUTE CARE PAY21 MENTS.—

22 ‘‘(A) IN GENERAL.—For purposes of para23 graph (2)(A), the ‘baseline Federal medicaid

24 supplemental acute care payments’ for a State

25 is the amount of Federal payments made under
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1 section 1903(a)(1) with respect to medical as2 sistance furnished for supplemental acute care

3 benefits (as defined in section 1931(b)(2)) for

4 AFDC recipients, SSI recipients, and non-cash

5 medicaid beneficiaries for all calendar quarters

6 in 1995.

7 ‘‘(B) DISPROPORTIONATE SHARE PAY8 MENTS NOT INCLUDED.—In applying subpara9 graph (A), payments attributable to section

10 1923 shall not be counted in the amount of

11 payments.

12 ‘‘(C) TREATMENT OF DISALLOWANCES.—

13 The amount determined under this paragraph

14 shall take into account amounts (or an estimate

15 of amounts) disallowed under title XIX.

16 ‘‘(4) APPLICATION TO PARTICULAR ITEMS AND

17 SERVICES.—For purposes of this subsection, in de18 termining the per capita supplemental medical bene19 fit expenditure limit for a category of items and

20 services (within the supplemental acute care bene21 fits) furnished in a State, there shall be counted only

22 that proportion of such expenditures (determined

23 only with respect to medical assistance furnished to

24 AFDC recipients, SSI recipients, and non-cash med25 icaid beneficiaries) that were attributable to items
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1 and services included in the supplemental acute care

2 benefits (taking into account any limitation on

3 amount, duration, or scope of items and services in4 cluded in such benefits).

5 ‘‘(5) DETERMINATION OF NUMBER OF RECIPI6 ENTS AND BENEFICIARIES.—For purposes of para7 graph (2)(B), the number of AFDC recipients, SSI

8 recipients, and non-cash medicaid beneficiaries for a

9 State for 1995 shall be determined based on actual

10 reports submitted by the State to the Secretary. In

11 the case of individuals who were not recipients or

12 beneficiaries for the entire fiscal year, the number

13 shall take into account only the portion of the year

14 in which they were such recipients. The Secretary

15 may audit such reports.

16 ‘‘(d) SUPPLEMENTAL ACUTE CARE BENEFIT IN17 CREASE FACTOR DESCRIBED.—For purposes of sub18 section (b)(1)(C), the ‘supplemental medical benefit in19 crease factor’ for a year for a State is equal to the

20 FEHBP national rolling increase factor (as defined in sec21 tion 2107(c)(1)) for the year.

22 ‘‘(e) FUNDING.—Payments to States under this sec23 tion shall be made by the Secretary at such time and in

24 such form as provided in regulations promulgated by the
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1 Secretary, based on the form and manner in which pay2 ments are made under section 1903.

3 ‘‘PART C—GENERAL PROVISIONS

4 ‘‘SEC. 2141. NATURE OF PAYMENT OBLIGATION.

5 ‘‘Sections 2106 and 2124 constitute budget authority

6 in advance of appropriations Acts, and represent the obli7 gation of the Federal Government to provide payments to

8 States under such sections in accordance with the applica9 ble provisions of this title.

10 ‘‘SEC. 2142. AUDITS.

11 ‘‘The Secretary shall conduct regular audits of the

12 activities under the State programs conducted under this

13 title.

14 ‘‘SEC. 2143. DEMONSTRATION PROJECT AUTHORITY.

15 ‘‘(a) IN GENERAL.—In the case of any experimental,

16 pilot, or demonstration project which in the judgment of

17 the Secretary is likely to assist in promoting the objectives

18 of this title in a State or States, the Secretary may waive

19 compliance with any of the requirements of this title to

20 the extent and for the period the Secretary finds necessary

21 to enable the Secretary to carry out the project.

22 ‘‘(b) RESTRICTION.—The Secretary may authorize a

23 waiver under subsection (a) only if the Secretary deter24 mines that under the waiver—
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1 ‘‘(1) all individuals who would be premium as2 sistance eligible individuals remain eligible for pre3 mium assistance,

4 ‘‘(2) benefits under part A are not reduced

5 below the level of benefits otherwise provided, and

6 ‘‘(3) the amount of payments made by the Fed7 eral Government do not exceed the amount of pay8 ments otherwise provided.

9 ‘‘SEC. 2144. DEFINITIONS AND DETERMINATIONS OF IN10 COME.

11 ‘‘For purposes of this title:

12 ‘‘(1) DETERMINATIONS OF INCOME.—

13 ‘‘(A) FAMILY INCOME.—The term ‘family

14 income’ means, with respect to an individual

15 who—

16 ‘‘(i) is not a dependent (as defined in

17 subparagraph (B)) of another individual,

18 the sum of the modified adjusted gross in19 comes (as defined in subparagraph (D))

20 for the individual, the individual’s spouse,

21 and dependents of the individual; or

22 ‘‘(ii) is a dependent of another indi23 vidual, the sum of the modified adjusted

24 gross incomes for the other individual, the
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1 other individual’s spouse, and dependents

2 of the other individual.

3 ‘‘(B) DEPENDENT.—The term ‘dependent’

4 shall have the meaning given such term under

5 paragraphs (1) or (2) of section 152(a) of the

6 Internal Revenue Code of 1986.

7 ‘‘(C) SPECIAL RULE FOR FOSTER CHIL8 DREN.—For purposes of subparagraph (A), a

9 child who is placed in foster care by a State

10 agency shall not be considered a dependent of

11 another individual.

12 ‘‘(D) MODIFIED ADJUSTED GROSS IN13 COME.—The term ‘modified adjusted gross in14 come’ means adjusted gross income (as defined

15 in section 62(a) of the Internal Revenue Code

16 of 1986)—

17 ‘‘(i) determined without regard to sec18 tions 135, 162(l), 220, 911, 931, and 933

19 of such Code, and

20 ‘‘(ii) increased by—

21 ‘‘(I) the amount of interest re22 ceived or accrued by the individual

23 during the taxable year which is ex24 empt from tax,
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1 ‘‘(II) the amount of the social se2 curity benefits (as defined in section

3 86(d) of such Code) received during

4 the taxable year to the extent not in5 cluded in gross income under section

6 86 of such Code,

7 ‘‘(III) the amount of aid to fami8 lies with dependent children received

9 during the taxable year under part A

10 of title IV to the extent not included

11 in gross income under such Code, and

12 ‘‘(IV) the amount of any supple13 mental security income benefits pro14 vided under title XVI.

15 The determination under the preceding sen16 tence shall be made without regard to any car17 ryover or carryback.

18 ‘‘(E) ELECTION WITH RESPECT TO IN19 COME DETERMINATION.—As elected by a family

20 at the time of submission of an application for

21 a premium or cost-sharing assistance under this

22 part, family income shall be determined ei23 ther—

24 ‘‘(i) by multiplying by a factor of 4

25 the individual’s family income for the 3-
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1 month period immediately preceding the

2 month in which the application is made, or

3 ‘‘(ii) based upon estimated income for

4 the entire year in which the application is

5 submitted.

6 ‘‘(2) APPLICABLE POVERTY LINE.—The term

7 ‘applicable poverty line’ means the income official

8 poverty line (as defined by the Office of Manage9 ment and Budget, and revised annually in accord10 ance with section 673(2) of the Omnibus Budget

11 Reconciliation Act of 1981) that—

12 ‘‘(A) in the case of a family of less than

13 five individuals, is applicable to a family of the

14 size involved; and

15 ‘‘(B) in the case of a family of more than

16 four individuals, is applicable to a family of

17 four persons.

18 ‘‘(3) PREGNANT WOMAN.—The term ‘pregnant

19 woman’ includes a woman during the 60-day period

20 beginning on the last day of the pregnancy.

21 ‘‘(4) PREMIUM.—Any reference to the term

22 ‘premium’ includes a reference to premium equiva23 lence for self-insured plans.’’.
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1 SEC. 2102. DIVISION OF MEDICAID BENEFITS INTO CORE

2 BENEFITS AND SUPPLEMENTAL BENEFITS

3 FOR AFDC, SSI, AND NON-CASH BENE4 FICIARIES; LIMITATION ON FEDERAL FINAN5 CIAL PARTICIPATION FOR CORE AND SUP6 PLEMENTAL BENEFITS.

7 (a) IN GENERAL.—Title XIX of the Social Security

8 Act is amended by redesignating section 1931 as section

9 1932 and by inserting after section 1930 the following new

10 section:

11 ‘‘MEDICAID REFORM RULES FOR BENEFITS FOR ACUTE

12 MEDICAL AND SUPPLEMENTAL SERVICES FOR AFDC

13 RECIPIENTS, SSI RECIPIENTS, AND NON-CASH MED14 ICAID BENEFICIARIES

15 ‘‘SEC. 1931. (a) APPLICATION OF SECTION.—

16 ‘‘(1) IN GENERAL.—This section applies with

17 respect to medical assistance for acute medical serv18 ices (as defined in paragraph (2)) under State plans

19 under this title for calendar quarters beginning on

20 or after January 1, 1998, provided to AFDC recipi21 ents, SSI recipients, and non-cash medicaid categor22 ical beneficiaries. To the extent this section applies,

23 it supersedes any contrary provision of this title or

24 of other applicable law.

25 ‘‘(2) DEFINITIONS.—In this section:
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1 ‘‘(A) ACUTE MEDICAL SERVICES.—The

2 term ‘acute medical services’ means items and

3 services described in section 1905(a) other than

4 the following:

5 ‘‘(i) Nursing facility services (as de6 fined in section 1905(f)).

7 ‘‘(ii) Intermediate care facility for the

8 mentally retarded services (as defined in

9 section 1905(d)).

10 ‘‘(iii) Personal care services (as de11 scribed in section 1905(a)(24)).

12 ‘‘(iv) Private duty nursing services (as

13 referred to in section 1905(a)(8)).

14 ‘‘(v) Home or community-based serv15 ices furnished under a waiver granted

16 under subsection (c), (d), or (e) of section

17 1915.

18 ‘‘(vi) Home and community care fur19 nished to functionally disabled elderly indi20 viduals under section 1929.

21 ‘‘(vii) Community supported living ar22 rangements services under section 1930.

23 ‘‘(viii) Case-management services (as

24 described in section 1915(g)(2)).
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1 ‘‘(ix) Home health care services (as

2 referred to in section 1905(a)(7)), clinic

3 services, and rehabilitation services that

4 are furnished to an individual who has a

5 condition or disability that qualifies the in6 dividual to receive any of the services de7 scribed in a previous clause.

8 ‘‘(x) Hospice care.

9 ‘‘(B) AFDC RECIPIENT.—The term

10 ‘AFDC recipient’ means, for a month, an indi11 vidual who is receiving aid or assistance under

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

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

14 for the month.

15 ‘‘(C) CORE BENEFITS.—The term ‘core

16 benefits’ means benefits with respect to acute

17 medical services which the Secretary identifies

18 under subsection (b)(1) as typically included in

19 the services covered under benchmark coverage

20 (as defined in section 1903(1) of the Health

21 Care Improvement Act of 1995).

22 ‘‘(D) NON-CASH MEDICAID BENE23 FICIARY.—The term ‘non-cash medicaid bene24 ficiary’ means an individual described in section
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1 1902(a)(10)(A) who is not an AFDC recipient

2 or a SSI recipient.

3 ‘‘(E) SSI RECIPIENT.—The term ‘SSI re4 cipient’ means, for a month, an individual—

5 ‘‘(i) with respect to whom supple6 mental security income benefits are being

7 paid under title XVI for the month,

8 ‘‘(ii) who is receiving a supplementary

9 payment under section 1616 or under sec10 tion 212 of Public Law 93–66 for the

11 month,

12 ‘‘(iii) who is receiving monthly bene13 fits under section 1619(a) (whether or not

14 pursuant to section 1616(c)(3)) for the

15 month, or

16 ‘‘(iv) who is treated under section

17 1619(b) as receiving supplemental security

18 income benefits in a month for purposes of

19 title XIX.

20 ‘‘(F) SUPPLEMENTAL ACUTE CARE BENE21 FITS.—The term ‘supplemental acute care bene22 fits’ means benefits for acute medical services

23 which are not—

24 ‘‘(i) core benefits, and
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1 ‘‘(ii) benefits for items or services de2 scribed in clauses (i) through (x) of sub3 paragraph (A).

4 ‘‘(b) DIVISION OF ACUTE MEDICAL SERVICE BENE5 FITS INTO CORE BENEFITS AND SUPPLEMENTAL ACUTE

6 CARE BENEFITS.—The Secretary shall divide the class of

7 benefits for acute medical services into the following bene8 fit groups:

9 ‘‘(1) CORE BENEFITS.—A group of benefits

10 consisting of core benefits (as defined in subsection

11 (a)(2)(C)).

12 ‘‘(2) SUPPLEMENTAL ACUTE CARE BENE13 FITS.—A group of benefits consisting of supple14 mental acute care benefits (as defined in subsection

15 (a)(2)(F)).

16 ‘‘(c) LIMITATION ON AMOUNT OF FEDERAL FINAN17 CIAL PARTICIPATION FOR BENEFITS FOR ACUTE MEDI18 CAL SERVICES FOR AFDC RECIPIENTS, SSI RECIPIENTS,

19 AND NON-CASH MEDICAID BENEFICIARIES.—With re20 spect to expenditures for medical assistance for acute med21 ical services benefits for AFDC recipients, SSI recipients,

22 and non-cash medicaid beneficiaries who are not entitled

23 to benefits under part A of title XVIII in a State for quar24 ters in a calendar year after 1998—
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1 ‘‘(1) no such Federal financial participation

2 shall be payable under section 1903(a)(1), and

3 ‘‘(2) such a recipient or beneficiary is not enti4 tled to receive any medical assistance for such bene5 fits under the State plan under this title.

6 ‘‘(d) ELIMINATION OF ENTITLEMENT FOR SUPPLE7 MENTAL ACUTE CARE BENEFITS.—With respect to medi8 cal assistance for supplemental acute care benefits for

9 AFDC recipients and non-cash medicaid beneficiaries who

10 are not entitled to benefits under part A of title XVIII

11 in a State for quarters in 1998 or any succeeding year—

12 ‘‘(1) no Federal financial participation shall be

13 payable under section 1903(a)(1),

14 ‘‘(2) the State may receive payments for such

15 supplemental acute care benefits under part B of

16 title XXI, and

17 ‘‘(3) such a recipient or beneficiary is not enti18 tled to receive any medical assistance for such bene19 fits under the State plan under this title.’’.

20 (b) CONFORMING AMENDMENT.—Section 1903(i) of

21 the Social Security Act (42 U.S.C. 1396b(i)) is amend22 ed—

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

24 (14),
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1 (2) by striking the period at the end of para2 graph (15) and inserting ‘‘; or’’, and

3 (3) by inserting after paragraph (15) the fol4 lowing:

5 ‘‘(16) in accordance with section 1931, with re6 spect to amounts expended for medical assistance

7 for core benefits for AFDC recipients, SSI recipi8 ents, and non-cash medicaid beneficiaries who are

9 not entitled to benefits under part A of title XVIII

10 for calendar quarters beginning on or after January

11 1, 1998.’’.

12 SEC. 2103. OPERATION OF PROGRAM AS STATE PLAN RE13 QUIREMENT UNDER MEDICAID.

14 (a) IN GENERAL.—Section 1902(a) of the Social Se15 curity Act (42 U.S.C. 1396a(a)) is amended—

16 (1) by striking ‘‘and’’ at the end of paragraph

17 (61);

18 (2) by striking the period at the end of para19 graph (62) and inserting ‘‘; and’’; and

20 (3) by inserting after paragraph (62) the fol21 lowing new paragraph:

22 ‘‘(63) provide for a State program furnishing

23 premium subsidies for low-income individuals in ac24 cordance with part A of title XXI.’’.
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1 (b) EFFECTIVE DATE.—The requirement of section

2 1902(a)(63) of the Social Security Act (as added by sub3 section (a)) shall apply to Federal financial participation

4 for calendar quarters beginning on or after January 1,

5 1998.

6 SEC. 2104. APPLICATION OF MISCELLANEOUS PROVISIONS.

7 (a) APPLICATION OF SAVE PROVISIONS.—Section

8 1137(b) of the Social Security Act (42 U.S.C. 1320b–

9 7(b)) is amended—

10 (1) by striking ‘‘and’’ at the end of paragraph

11 (4),

12 (2) by striking the period at the end of para13 graph (5) and inserting ‘‘; and’’, and

14 (3) by adding at the end the following:

15 ‘‘(6) a State subsidy program under part A of

16 title XXI.’’.

17 (b) DISCLOSURE OF CERTAIN INFORMATION.

18 (1) IN GENERAL.—Subsection (l) of section

19 6103 of the Internal Revenue Code of 1986 is

20 amended by adding at the end the following new

21 paragraph:

22 ‘‘(15) DISCLOSURE OF RETURN INFORMATION

23 TO CARRY OUT HEALTH PREMIUM ASSISTANCE CER24 TIFICATE PROGRAM.—The Secretary shall, upon

25 written request from a State, disclose to officials of
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1 the State return information for purposes of deter2 mining or verifying whether any individual is enti3 tled to a premium assistance certificate under part

4 A of title XXI of the Social Security Act and the

5 amount thereof. Return information disclosed under

6 this paragraph may be used by such officers and em7 ployees only for the purposes of, and to the extent

8 necessary in, making such determination or verifica9 tion.’’.

10 (2) CONFORMING CHANGE.—Paragraph (4) of

11 section 6103(p) of such Code is amended by striking

12 ‘‘or (14)’’ each place it appears and inserting ‘‘(14)

13 or (15)’’.

14 (c) APPLICATION OF DEFINITION OF STATE.—Sec15 tion 1001(a)(1) of the Social Security Act (42 U.S.C.

16 1301(a)(1)) is amended by striking ‘‘title XX’’ and insert17 ing ‘‘titles XX and XXI’’.

18 (d) CONSTRUCTION.—Nothing in this title shall be

19 construed as preventing the Secretary of Health and

20 Human Services from continuing in effect waivers (in ef21 fect as of the date of the enactment of this Act) of require22 ments under title XIX of the Social Security Act.
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1 TITLE III—ACCESS

2 IMPROVEMENTS

3 Subtitle A—Improved Access in

4 Rural Areas

5 PART 1—GRANTS TO ENCOURAGE COMMUNITY

6 RURAL HEALTH NETWORKS

7 SEC. 3001. ASSISTANCE FOR DEVELOPMENT OF ACCESS

8 PLANS FOR CHRONICALLY UNDERSERVED

9 AREAS.

10 (a) AVAILABILITY OF FINANCIAL ASSISTANCE TO IM11 PLEMENT ACTION PLANS TO INCREASE ACCESS.—

12 (1) IN GENERAL.—The Secretary shall provide

13 grants (in amounts determined in accordance with

14 paragraph (3)) over a 3-year period to an eligible

15 State for the development of plans to increase access

16 to health care services during such period for resi17 dents of areas in the State that are designated as

18 chronically underserved areas in accordance with

19 subsection (b).

20 (2) ELIGIBILITY REQUIREMENTS.—A State is

21 eligible to receive grants under this section if the

22 State submits to the Secretary (at such time and in

23 such form as the Secretary may require) assurances

24 that the State has developed (or is in the process of

25 developing) a plan to increase the access of residents
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1 of a chronically underserved area to health care serv2 ices that meets the requirements of subsection (c),

3 together with such other information and assurances

4 as the Secretary may require.

5 (3) AMOUNT OF ASSISTANCE.—

6 (A) IN GENERAL.—Subject to subpara7 graph (B), the amount of assistance provided to

8 a State under this subsection with respect to

9 any plan during a 3-year period shall be equal

10 to—

11 (i) for the first year of the period, an

12 amount equal to 100 percent of the

13 amounts expended by the State during the

14 year to implement the plan described in

15 paragraph (1) (as reported to the Sec16 retary in accordance with such require17 ments as the Secretary may impose);

18 (ii) for the second year of the period,

19 an amount equal to 50 percent of the

20 amounts expended by the State during the

21 year to implement the plan; and

22 (iii) for the third year of the period,

23 an amount equal to 33 percent of the

24 amounts expended by the State during the

25 year to implement the plan.
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1 (B) AGGREGATE PER PLAN LIMIT.—The

2 amount of assistance provided to a State under

3 this subsection with respect to any plan may

4 not exceed $100,000 during any year of the 3-

5 year period for which the State receives assist6 ance.

7 (b) DESIGNATION OF AREAS.—

8 (1) DESIGNATION BY GOVERNOR.—In accord9 ance with the guidelines developed under paragraph

10 (2), the Governor of a State may designate an area

11 in the State as a chronically underserved area for

12 purposes of this section upon the request of a local

13 official of the area or upon the Governor’s initiative.

14 (2) GUIDELINES FOR DESIGNATION.—

15 (A) DEVELOPMENT BY SECRETARY.—Not

16 later than 1 year after the date of the enact17 ment of this Act, the Secretary shall develop

18 guidelines for the designation of areas as chron19 ically underserved areas under this section.

20 (B) FACTORS CONSIDERED IN DEVELOP21 MENT OF GUIDELINES.—In developing guide22 lines under paragraph (1), the Secretary shall

23 consider the following factors:

24 (i) Whether the area (or a significant

25 portion of the area)—
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1 (I) is designated as a health pro2 fessional shortage area (under section

3 332(a) of the Public Health Service

4 Act), or meets the criteria for des5 ignation as such an area; or

6 (II) was previously designated as

7 such an area or previously met such

8 criteria for an extended period prior

9 to the designation of the area under

10 this section (in accordance with cri11 teria established by the Secretary).

12 (ii) The availability and adequacy of

13 health care providers and facilities for resi14 dents of the area.

15 (iii) The extent to which the availabil16 ity of assistance under other Federal and

17 State programs has failed to alleviate the

18 lack of access to health care services for

19 residents of the area.

20 (iv) The percentage of residents of the

21 area whose income is at or below the pov22 erty level.

23 (v) The percentage of residents of the

24 area who are age 65 or older.
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1 (vi) The existence of cultural or geo2 graphic barriers to access to health care

3 services in the area, including weather con4 ditions.

5 (3) REVIEW BY SECRETARY.—No designation

6 under paragraph (1) shall take effect under this sec7 tion unless the Secretary—

8 (A) has been notified of the proposed des9 ignation; and

10 (B) has not, within 60 days after the date

11 of receipt of the notice, disapproved the des12 ignation.

13 (4) PERIOD OF DESIGNATION.—A designation

14 under this section shall be effective during a period

15 specified by the Governor of not longer than 3 years.

16 The Governor may extend the designation for addi17 tional 3-year periods, except that a State may not

18 receive assistance under subsection (a)(3) for

19 amounts expended during any such additional peri20 ods.

21 (c) REQUIREMENTS FOR STATE ACCESS PLANS.—A

22 State plan to increase the access of residents of chronically

23 underserved areas to health care services meets the re24 quirements of this section if the Secretary finds that the

25 plan was developed with the participation of health care
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1 providers and facilities and residents of the area that is

2 the subject of the plan, together with such other require3 ments as the Secretary may impose.

4 (d) AUTHORIZATION OF APPROPRIATIONS.—There

5 are authorized to be appropriated for assistance under this

6 section $10,000,000 for each of the first 3 fiscal years

7 beginning after the date on which the Secretary develops

8 guidelines for the designation of areas as chronically un9 derserved areas under subsection (b)(2).

10 SEC. 3002. TECHNICAL ASSISTANCE GRANTS FOR NET11 WORKS.

12 (a) IN GENERAL.—The Secretary shall make funds

13 available under this section to provide technical assistance

14 (including information regarding eligibility for other Fed15 eral programs) and advice for entities described in sub16 section (b) seeking to establish or enhance a community

17 rural health network in an underserved rural area.

18 (b) ENTITIES ELIGIBLE TO RECEIVE FUNDS.—The

19 following entities are eligible to receive funds for technical

20 assistance under this section:

21 (1) An entity receiving a grant under section

22 3003.

23 (2) A State or unit of local government.
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1 (3) An entity providing health care services (in2 cluding health professional education services) in the

3 area involved.

4 (c) USE OF FUNDS.—

5 (1) IN GENERAL.—Funds made available under

6 this section may be used—

7 (A) for planning a community health net8 work and the submission of the plan for the

9 network to the Secretary under section 3003(c)

10 (subject to the limitation described in para11 graph (2));

12 (B) to provide assistance in conducting

13 community-based needs and prioritization, iden14 tifying existing regional health resources, and

15 developing networks, utilizing existing local pro16 viders and facilities where appropriate;

17 (C) to provide advice on obtaining the

18 proper balance of primary and secondary facili19 ties for the population served by the network;

20 (D) to provide assistance in coordinating

21 arrangements for tertiary care;

22 (E) to provide assistance in recruitment

23 and retention of health care professionals;

24 (F) to provide assistance in coordinating

25 the delivery of emergency services with the pro-
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1 vision of other health care services in the area

2 served by the network;

3 (G) to provide assistance in coordinating

4 arrangements for mental health and substance

5 abuse treatment services; and

6 (H) to provide information regarding the

7 area or proposed network’s eligibility for Fed8 eral and State assistance for health care-related

9 activities, together with information on funds

10 available through private sources.

11 (2) LIMITATION ON AMOUNT AVAILABLE FOR

12 DEVELOPMENT OF NETWORK.—The amount of fi13 nancial assistance available for activities described in

14 paragraph (1) may not exceed $50,000 and may not

15 be available for a period of time exceeding 1 year.

16 (d) USE OF RURAL HEALTH OFFICES.—In carrying

17 out this section with respect to entities in rural areas, the

18 Secretary shall make funds available through—

19 (1) not more than 10 regional centers acting as

20 clearinghouses for the distribution of such funds;

21 and

22 (2) State Offices of Rural Health, or any com23 bination of such centers and Offices.

24 (e) AUTHORIZATION OF APPROPRIATIONS.—There

25 are authorized to be appropriated $10,000,000 for each
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1 of fiscal years 1996 and 1997 and $30,000,000 for each

2 of fiscal years 1998 through 2000 to carry out this sec3 tion. Amounts appropriated under this section shall be

4 available until expended.

5 SEC. 3003. DEVELOPMENT GRANTS FOR NETWORKS.

6 (a) IN GENERAL.—The Secretary shall provide finan7 cial assistance to eligible entities in order to provide for

8 the development and implementation of community rural

9 health networks.

10 (b) ELIGIBLE ENTITIES.—

11 (1) IN GENERAL.—An entity is eligible to re12 ceive financial assistance under this section only if

13 the entity—

14 (A) is (i) based in a rural area or (ii) is

15 described in paragraph (2), (3), or (4) of sec16 tion 3002(b),

17 (B) is undertaking to develop and imple18 ment a community rural health network in an

19 underserved rural area (or underserved rural

20 areas) with the active participation of at least

21 3 health care providers or facilities in the area,

22 and

23 (C) has consulted with the local govern24 ments of the area to be served by the network

25 and with individuals who reside in the area.
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1 (2) COORDINATION WITH PROVIDERS OUTSIDE

2 OF AREA PERMITTED.—Nothing in this section shall

3 be construed as preventing an entity that coordi4 nates the delivery of services in an underserved rural

5 area with an entity outside the area from qualifying

6 for financial assistance under this section, or as pre7 venting an entity consisting of a consortia of mem8 bers located in adjoining States from qualifying for

9 such assistance.

10 (3) PERMITTING ENTITIES NOT RECEIVING

11 FUNDING FOR DEVELOPMENT OF PLAN TO RECEIVE

12 FUNDING FOR IMPLEMENTATION.—An entity that is

13 eligible to receive financial assistance under this sec14 tion may receive assistance to carry out activities de15 scribed in subsection (c)(1)(B) notwithstanding that

16 the entity does not receive assistance to carry out

17 activities described in subsection (c)(1)(A).

18 (c) USE OF FUNDS.—

19 (1) IN GENERAL.—Financial assistance made

20 available to eligible entities under this section may

21 be used only—

22 (A) for the development of a community

23 health network and the submission of the plan

24 for the network to the Secretary; and
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1 (B) after the Secretary approves the plan

2 for the network, for activities to implement the

3 network, including (but not limited to)—

4 (i) establishing information systems,

5 including telecommunications,

6 (ii) recruiting health care providers,

7 (iii) providing services to enable indi8 viduals to have access to health care serv9 ices, including transportation and language

10 interpretation services (including interpre11 tation services for the hearing-impaired),

12 and

13 (iv) establishing and operating a com14 munity health advisor program described

15 in paragraph (2).

16 (2) COMMUNITY HEALTH ADVISOR PROGRAM.—

17 (A) PROGRAM DESCRIBED.—In paragraph

18 (1), a ‘‘community health advisor program’’ is

19 a program under which community health advi20 sors carry out the following activities:

21 (i) Collaborating efforts with health

22 care providers and related entities to facili23 tate the provision of health services and

24 health-related social services.
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1 (ii) Providing public education on

2 health promotion and disease prevention

3 and efforts to facilitate the use of available

4 health services and health-related social

5 services.

6 (iii) Providing health-related counsel7 ing.

8 (iv) Making referrals for available

9 health services and health-related social

10 services.

11 (v) Improving the ability of individ12 uals to use health services and health-relat13 ed social services under Federal, State,

14 and local programs through assisting indi15 viduals in establishing eligibility under the

16 programs.

17 (vi) Providing outreach services to in18 form the community of the availability of

19 the services provided under the program.

20 (B) COMMUNITY HEALTH ADVISOR DE21 FINED.—In subparagraph (A), the term ‘‘com22 munity health advisor’’ means, with respect to

23 a community health advisor program, an indi24 vidual—
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1 (i) who has demonstrated the capacity

2 to carry out one or more of the activities

3 carried out under the program; and

4 (ii) who, for not less than one year,

5 has been a resident of the community in

6 which the program is to be operated.

7 (3) LIMITATIONS ON ACTIVITIES FUNDED.—Fi8 nancial assistance made available under this section

9 may not be used for any of the following:

10 (A) For a telecommunications system un11 less such system is coordinated with, and does

12 not duplicate, a system existing in the area.

13 (B) For construction or remodeling of

14 health care facilities.

15 (4) LIMITATION ON AMOUNT AVAILABLE FOR

16 DEVELOPMENT OF NETWORK.—The amount of fi17 nancial assistance available for activities described in

18 paragraph (1)(A) may not exceed $50,000 and may

19 not be made available for a period of time exceeding

20 1 year.

21 (d) APPLICATION.—

22 (1) IN GENERAL.—No financial assistance shall

23 be provided under this section to an entity unless

24 the entity has submitted to the Secretary, in a time
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1 and manner specified by the Secretary, and had ap2 proved by the Secretary an application.

3 (2) INFORMATION TO BE INCLUDED.—Each

4 such application shall include—

5 (A) a description of the community rural

6 health network, including service area and ca7 pacity, and

8 (B) a description of how the proposed net9 work will utilize existing health care facilities in

10 a manner that avoids unnecessary duplication.

11 (e) AUTHORIZATION OF APPROPRIATIONS.—

12 (1) IN GENERAL.—There are authorized to be

13 appropriated $100,000,000 for each of fiscal years

14 1996 and 1997, $120,000,000 for fiscal year 1998,

15 $130,000,000 for fiscal year 1999, $140,000,000 for

16 fiscal year 2000, $150,000,000 for fiscal year 2001,

17 $160,000,000 for fiscal year 2002, $170,000,000 for

18 fiscal year 2003, and $180,000,000 for fiscal year

19 2004, to carry out this section. Amounts appro20 priated under this section shall be available until ex21 pended.

22 (2) INTEGRATION OF OTHER AUTHORIZA23 TIONS.—In order to provide for the authorization of

24 appropriations under paragraph (1), notwithstanding

25 any other provision of law, no funds are authorized
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1 to be appropriated to carry out the following pro2 grams in fiscal years after fiscal year 1996:

3 (A) The rural health transition grant pro4 gram (under section 4005(e) of the Omnibus

5 Budget Reconciliation Act of 1987).

6 (B) The rural health outreach program

7 (for which appropriations were annually pro8 vided under the Departments of Labor, Health

9 and Human Services, and Education, and Re10 lated Agencies Appropriation Acts).

11 (3) ANNUAL LIMIT ON ASSISTANCE TO GRANT12 EE.—The amount of financial assistance provided to

13 an entity under this section during a year may not

14 exceed $250,000.

15 SEC. 3004. DEFINITIONS.

16 For purposes of this part:

17 (1) COMMUNITY RURAL HEALTH NETWORK.—

18 The term ‘‘community rural health network’’ means

19 a formal cooperative arrangement between partici20 pating hospitals, physicians, and other health care

21 providers which—

22 (A) is located in an underserved rural

23 area;

24 (B) furnishes health care services to indi25 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 3001.
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1 PART 2—INCENTIVES FOR HEALTH PROFES2 SIONALS TO PRACTICE IN RURAL AREAS

3 THROUGH THE NATIONAL HEALTH SERVICE

4 CORPS PROGRAM

5 SEC. 3011. 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. 3012. 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, 1996, 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, 1995, or upon the date of the enactment

18 of this Act, whichever occurs later.

19 SEC. 3013. 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 2004.’’.

4 (2) ALLOCATION FOR PARTICIPATION OF

5 NURSES IN SCHOLARSHIP PROGRAM.—Section

6 338H(b)(2) of the Public Health Service Act (42

7 U.S.C. 254q(b)(2)) is amended by adding at the end

8 the following subparagraph:

9 ‘‘(C) Of the amounts appropriated under

10 paragraph (1) for fiscal year 1995 and subse11 quent fiscal years, the Secretary shall reserve

12 such amounts as may be necessary to ensure

13 that, of the aggregate number of individuals

14 who are participants in the Scholarship Pro15 gram, the total number who are being educated

16 as nurses or are serving as nurses, respectively,

17 is increased to 20 percent.’’.

18 (b) INCREASE IN NUMBER OF MENTAL HEALTH

19 PROFESSIONALS IN SHORTAGE AREAS.—

20 (1) IN GENERAL.—Section 338H(b) of the Pub21 lic Health Service Act (42 U.S.C. 254q(b)) is

22 amended by adding at the end the following para23 graph:

24 ‘‘(3) MENTAL HEALTH PROFESSIONALS.—In

25 providing contracts under this subpart for scholar-
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1 ships and loan repayments, the Secretary shall en2 sure that an appropriate number of mental health

3 professionals is assigned under section 333 for

4 health professional shortage areas.’’.

5 (2) APPLICABILITY.—With respect to contracts

6 for scholarships and loan repayments under subpart

7 III of part D of title III of the Public Health Service

8 Act, the amendment made by subsection (a) applies

9 with respect to contracts entered into on or after Oc10 tober 1, 1995.

11 PART 3—ASSISTANCE FOR INSTITUTIONAL

12 PROVIDERS

13 Subpart A—Emergency Medical Systems

14 SEC. 3021. EMERGENCY MEDICAL SERVICES.

15 (a) HEADINGS.—Title XII of the Public Health Serv16 ice Act (42 U.S.C. 300d et seq.) is amended—

17 (1) in the heading for the title, by striking

18 ‘‘TRAUMA CARE’’ and inserting ‘‘EMER19 GENCY MEDICAL AND TRAUMA CARE

20 SERVICES’’; and

21 (2) in the heading for part A, by striking ‘‘Gen22 eral’’ and all that follows and inserting ‘‘General Au23 thorities and Duties’’.

24 (b) STATE OFFICES OF EMERGENCY MEDICAL SERV25 ICES; DEMONSTRATION PROGRAM REGARDING TELE-
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1 COMMUNICATIONS.—Part A of title XII of the Public

2 Health Service Act (42 U.S.C. 300d et seq.), as amended

3 by section 601(b) of Public Law 103-183 (107 Stat.

4 2238), is amended—

5 (1) by redesignating sections 1202 and 1203 as

6 sections 1203 and 1204, respectively;

7 (2) by inserting after section 1201 the following

8 section:

9 ‘‘SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL

10 SERVICES.

11 ‘‘(a) PROGRAM OF GRANTS.—The Secretary may

12 make grants to States for the purpose of improving the

13 availability and quality of emergency medical services

14 through the operation of State offices of emergency medi15 cal services.

16 ‘‘(b) REQUIREMENT OF MATCHING FUNDS.—

17 ‘‘(1) IN GENERAL.—The Secretary may not

18 make a grant under subsection (a) unless the State

19 involved agrees, with respect to the costs to be in20 curred by the State in carrying out the purpose de21 scribed in such subsection, to provide non-Federal

22 contributions toward such costs in an amount that—

23 ‘‘(A) for the first fiscal year of payments

24 under the grant, is not less than $1 for each $3

25 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(a); 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 1997, 1998, and 1999.

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 1997, 1998, and

15 1999.’’.

16 SEC. 3022. 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, such sums as may be necessary for each of

8 fiscal years 1997 through 2000.’’.

9 Subpart B—Demonstration Projects to En10 courage Primary Care and Rural-Based

11 Graduate Medical Education

12 SEC. 3031. STATE AND CONSORTIUM DEMONSTRATION

13 PROJECTS.

14 (a) IN GENERAL.—

15 (1) PARTICIPATION OF STATES AND CONSOR16 TIA.—The Secretary shall establish and conduct a

17 demonstration project to increase the number and

18 percentage of medical students entering primary

19 care practice relative to those entering nonprimary

20 care practice under which the Secretary shall make

21 payments in accordance with subsection (d)—

22 (A) to not more than 10 States for the

23 purpose of testing and evaluating mechanisms

24 to meet the goals described in section 3032;

25 and
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1 (B) to not more than 10 health care train2 ing consortia for the purpose of testing and

3 evaluating mechanisms to meet such goals.

4 (2) EXCLUSION OF CONSORTIA IN PARTICIPAT5 ING STATES.—A consortia may not receive payments

6 under the demonstration project under paragraph

7 (1)(B) if any of its members is located in a State

8 receiving payments under the project under para9 graph (1)(A).

10 (b) APPLICATIONS.—

11 (1) IN GENERAL.—Each State and consortium

12 desiring to conduct a demonstration project under

13 this section shall prepare and submit to the Sec14 retary an application, at such time, in such manner,

15 and containing such information as the Secretary

16 may require to assure that the State or consortium

17 will meet the goals described in section 3032. In the

18 case of an application of a State, the application

19 shall include—

20 (A) information demonstrating that the

21 State has consulted with interested parties with

22 respect to the project, including State medical

23 associations, State hospital associations, and

24 medical schools located in the State;
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1 (B) an assurance that no hospital conduct2 ing an approved medical residency training pro3 gram in the State will lose more than 10 per4 cent of such hospital’s approved medical resi5 dency positions in any year as a result of the

6 project; and

7 (C) an explanation of a plan for evaluating

8 the impact of the project in the State.

9 (2) APPROVAL OF APPLICATIONS.—A State or

10 consortium that submits an application under para11 graph (1) may begin a demonstration project under

12 this subsection—

13 (A) upon approval of such application by

14 the Secretary; or

15 (B) at the end of the 60-day period begin16 ning on the date such application is submitted,

17 unless the Secretary denies the application dur18 ing such period.

19 (3) NOTICE AND COMMENT.—A State or con20 sortium shall issue a public notice on the date it

21 submits an application under paragraph (1) which

22 contains a general description of the proposed dem23 onstration project. Any interested party may com24 ment on the proposed demonstration project to the

25 State or consortium or the Secretary during the 30-
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1 day period beginning on the date the public notice

2 is issued.

3 (c) SPECIFIC REQUIREMENTS FOR PARTICIPANTS.—

4 (1) REQUIREMENTS FOR STATES.—Each State

5 participating in the demonstration project under this

6 subtitle shall use the payments provided under sub7 section (d) to test and evaluate either of the follow8 ing mechanisms to increase the number and percent9 age of medical students entering primary care prac10 tice relative to those entering nonprimary care prac11 tice:

12 (A) USE OF ALTERNATIVE WEIGHTING

13 FACTORS.—

14 (i) IN GENERAL.—The State may

15 make payments to hospitals in the State

16 for direct graduate medical education costs

17 in amounts determined under the meth18 odology provided under section 1886(h) of

19 the Social Security Act, except that the

20 State shall apply weighting factors that are

21 different than the weighting factors other22 wise set forth in section 1886(h)(4)(C) of

23 the Social Security Act.

24 (ii) USE OF PAYMENTS FOR PRIMARY

25 CARE RESIDENTS.—In applying different
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1 weighting factors under clause (i), the

2 State shall ensure that the amount of pay3 ment made to hospitals for costs attrib4 utable to primary care residents shall be

5 greater than the amount that would have

6 been paid to hospitals for costs attributable

7 to such residents if the State had applied

8 the weighting factors otherwise set forth in

9 section 1886(h)(4)(C) of the Social Secu10 rity Act.

11 (B) PAYMENTS FOR MEDICAL EDUCATION

12 THROUGH CONSORTIUM.—The State may make

13 payments for graduate medical education costs

14 through payments to a health care training con15 sortium (or through any entity identified by

16 such a consortium as appropriate for receiving

17 payments on behalf of the consortium) that is

18 established in the State but that is not other19 wise participating in the demonstration project.

20 (2) REQUIREMENTS FOR CONSORTIUM.—

21 (A) IN GENERAL.—In the case of a consor22 tium participating in the demonstration project

23 under this subtitle, the Secretary shall make

24 payments for graduate medical education costs

25 through a health care training consortium
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1 whose members provide medical residency train2 ing (or through any entity identified by such a

3 consortium as appropriate for receiving pay4 ments on behalf of the consortium).

5 (B) USE OF PAYMENTS.—

6 (i) IN GENERAL.—Each consortium

7 receiving payments under subparagraph

8 (A) shall use such funds to conduct activi9 ties which test and evaluate mechanisms to

10 increase the number and percentage of

11 medical students entering primary care

12 practice relative to those entering

13 nonprimary care practice, and may use

14 such funds for the operation of the consor15 tium.

16 (ii) PAYMENTS TO PARTICIPATING

17 PROGRAMS.—The consortium shall ensure

18 that the majority of the payments received

19 under subparagraph (A) are directed to

20 consortium members for primary care resi21 dency programs, and shall designate for

22 each resident assigned to the consortium a

23 hospital operating an approved medical

24 residency training program for purposes of

25 enabling the Secretary to calculate the con-
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1 sortium’s payment amount under the

2 project. Such hospital shall be the hospital

3 where the resident receives the majority of

4 the resident’s hospital-based, non5 ambulatory training experience.

6 (d) ALLOCATION OF PORTION OF MEDICARE GME

7 PAYMENTS FOR ACTIVITIES UNDER PROJECT.—Notwith8 standing any provision of title XVIII of the Social Security

9 Act, the following rules apply with respect to each State

10 and each health care training consortium participating in

11 the demonstration project established under this section

12 during a year:

13 (1) In the case of a State—

14 (A) the Secretary shall reduce the amount

15 of each payment made to hospitals in the State

16 during the year for direct graduate medical

17 education costs under section 1886(h) of the

18 Social Security Act by 3 percent; and

19 (B) the Secretary shall pay the State an

20 amount equal to the Secretary’s estimate of the

21 sum of the reductions made during the year

22 under subparagraph (A) (as adjusted by the

23 Secretary in subsequent years for over- or

24 under-estimations in the amount estimated

25 under this subparagraph in previous years).
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1 (2) In the case of a consortium—

2 (A) the Secretary shall reduce the amount

3 of each payment made to hospitals who are

4 members of the consortium during the year for

5 direct graduate medical education costs under

6 section 1886(h) of the Social Security Act by 3

7 percent; and

8 (B) the Secretary shall pay the consortium

9 an amount equal to the Secretary’s estimate of

10 the sum of the reductions made during the year

11 under subparagraph (A) (as adjusted by the

12 Secretary in subsequent years for over- or

13 under-estimations in the amount estimated

14 under this subparagraph in previous years).

15 (e) ADDITIONAL GRANT FOR PLANNING AND EVAL16 UATION.—

17 (1) IN GENERAL.—The Secretary may award

18 grants to States and consortia participating in the

19 demonstration project under this section for the pur20 pose of developing and evaluating such projects. A

21 State or consortia may conduct such an evaluation

22 or contract with a private entity to conduct the eval23 uation. Each State and consortia desiring to receive

24 a grant under this paragraph shall prepare and sub25 mit to the Secretary an application, at such time, in
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1 such manner, and containing such information as

2 the Secretary may require.

3 (2) AUTHORIZATION OF APPROPRIATIONS.—

4 There are authorized to be appropriated such sums

5 as may be necessary for grants under this paragraph

6 for fiscal years 1997 through 2001.

7 (f) DURATION.—A demonstration project under this

8 section shall be conducted for a period not to exceed 5

9 years. The Secretary may terminate a project if the Sec10 retary determines that the State or consortium conducting

11 the project is not in substantial compliance with the terms

12 of the application approved by the Secretary.

13 (g) EVALUATIONS AND REPORTS.—

14 (1) EVALUATIONS.—Each State or consortium

15 participating in the demonstration project shall sub16 mit to the Secretary a final evaluation within 360

17 days of the termination of the State or consortium’s

18 participation and such interim evaluations as the

19 Secretary may require.

20 (2) REPORTS TO CONGRESS.—Not later than

21 360 days after the first demonstration project under

22 this subtitle begins, and annually thereafter for each

23 year in which such a project is conducted, the Sec24 retary shall submit a report to Congress which eval25 uates the effectiveness of the State and consortium
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1 activities conducted under such projects and includes

2 any legislative recommendations determined appro3 priate by the Secretary.

4 (h) MAINTENANCE OF EFFORT.—Any funds available

5 for the activities covered by a demonstration project under

6 this subtitle shall supplement, and shall not supplant,

7 funds that are expended for similar purposes under any

8 State, regional, or local program.

9 SEC. 3032. GOALS FOR PROJECTS.

10 The goals referred to in this section for a State or

11 consortium participating in the demonstration project

12 under this subtitle are as follows:

13 (1) The training of an equal number of physi14 cian and non-physician primary care providers.

15 (2) The recruiting of residents for graduate

16 medical education training programs who received a

17 portion of undergraduate training in a rural area.

18 (3) The allocation of not less than 50 percent

19 of the training spent in a graduate medical residency

20 training program at sites at which acute care inpa21 tient hospital services are not furnished.

22 (4) The rotation of residents in approved medi23 cal residency training programs among practices

24 that serve residents of rural areas.
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1 (5) The development of a plan under which,

2 after a 5-year transition period, not less than 50

3 percent of the residents who begin an initial resi4 dency period in an approved medical residency train5 ing program shall be primary care residents.

6 SEC. 3033. DEFINITIONS.

7 In this subpart:

8 (1) APPROVED MEDICAL RESIDENCY TRAINING

9 PROGRAM.—The term ‘‘approved medical residency

10 training program’’ has the meaning given such term

11 in section 1886(h)(5)(A) of the Social Security Act.

12 (2) HEALTH CARE TRAINING CONSORTIUM.—

13 The term ‘‘health care training consortium’’ means

14 a State, regional, or local entity consisting of at

15 least one of each of the following:

16 (A) A hospital operating an approved med17 ical residency training program at which resi18 dents receive training at ambulatory training

19 sites located in rural areas.

20 (B) A school of medicine or osteopathic

21 medicine.

22 (C) A school of allied health or a program

23 for the training of physician assistants (as such

24 terms are defined in section 799 of the Public

25 Health Service Act).
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1 (D) A school of nursing (as defined in sec2 tion 853 of the Public Health Service Act).

3 (3) PRIMARY CARE.—The term ‘‘primary care’’

4 means family practice, general internal medicine,

5 general pediatrics, and obstetrics and gynecology.

6 (4) RESIDENT.—The term ‘‘resident’’ has the

7 meaning given such term in section 1886(h)(5)(H)

8 of the Social Security Act.

9 (5) RURAL AREA.—The term ‘‘rural area’’ has

10 the meaning given such term in section

11 1886(d)(2)(D) of the Social Security Act.

12 Subpart C—Medicare Demonstration

13 Regarding Consortia of Hospitals

14 SEC. 3041. MEDICARE DEMONSTRATION REGARDING CON15 SORTIA OF HOSPITALS.

16 (a) IN GENERAL.—The Secretary shall establish and

17 conduct not more than 10 demonstration projects to in18 crease the number and percentage of medical students en19 tering primary care practice relative to those entering

20 nonprimary care practice under which the Secretary shall

21 make payments in accordance with subsection (c) to par22 ticipating health care training consortia.

23 (b) APPLICATIONS.—Each consortium desiring to

24 participate in a demonstration project under this section

25 shall prepare and submit to the Secretary an application
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1 at such time and in such manner as the Secretary may

2 require, and containing—

3 (1) an explanation of a plan with the goal of

4 training at least 50 percent of all residents partici5 pating in approved residency training programs con6 ducted by members of the consortium as primary

7 care residents (as defined in subsection (f)(4)); and

8 (2) such other information and assurances as

9 the Secretary may require.

10 (c) PAYMENTS TO PARTICIPANTS.—

11 (1) IN GENERAL.—Notwithstanding any provi12 sion of title XVIII of the Social Security Act—

13 (A) in the case of a consortium participat14 ing in a demonstration project under this sub15 title, the Secretary shall make payments under

16 such title for the direct and indirect costs of

17 graduate medical education of members of the

18 consortium to the consortium (or through any

19 entity identified by such a consortium as appro20 priate for receiving payments on behalf of the

21 consortium), except that the amount paid to the

22 consortium shall be based on the designations

23 described in paragraph (2); and

24 (B) the Secretary may not make any pay25 ment under such title to a member of a consor-
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1 tium for the direct and indirect costs of grad2 uate medical education during the period of the

3 consortium’s participation in the demonstration

4 project.

5 (2) DESIGNATION OF RESIDENTS BY CONSOR6 TIUM.—Each consortium participating in a dem7 onstration project shall designate for each resident

8 assigned to the consortium a hospital operating an

9 approved medical residency training program for

10 purposes of enabling the Secretary to calculate the

11 amount paid to the consortium under paragraph

12 (1)(A). Such hospital shall be the hospital where the

13 resident receives the majority of the resident’s hos14 pital-based, nonambulatory training experience.

15 (3) LIMIT ON PAYMENT.—The amount paid to

16 a consortium under paragraph (1)(A) during a year

17 may not exceed the Secretary’s estimate of the sum

18 of the payments that would have been made under

19 title XVIII to each member of the consortium during

20 the year but for the application of this section, de21 termined as if such payments were based on—

22 (A) the number of full-time-equivalent resi23 dents in approved medical residency training

24 programs of the member calculated under sec25 tion 1886(h)(4) of the Social Security Act dur-
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1 ing the academic year beginning July 1, 1994;

2 and

3 (B) the ratio of the member’s full-time

4 equivalent interns and residents to beds applica5 ble under section 1886(d)(5)(B)(ii) of such Act

6 for discharges occurring during the 12-month

7 cost reporting period beginning or after July 1,

8 1994.

9 (d) DURATION.—A demonstration project under this

10 section shall be conducted for a period not to exceed 10

11 years. The Secretary may terminate a project if the Sec12 retary determines that the consortium participating in the

13 project is not in substantial compliance with the terms of

14 the application approved by the Secretary.

15 (e) EVALUATIONS AND REPORTS.—

16 (1) EVALUATIONS.—Each consortium partici17 pating in a demonstration project shall submit to the

18 Secretary a final evaluation within 360 days of the

19 termination of the consortium’s participation and

20 such interim evaluations as the Secretary may re21 quire.

22 (2) REPORTS TO CONGRESS.—Not later than

23 360 days after the first demonstration project under

24 this section begins, and annually thereafter for each

25 year in which such a project is conducted, the Sec-
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1 retary shall submit a report to Congress which eval2 uates the effectiveness of the consortium activities

3 conducted under such projects and includes any leg4 islative recommendations determined appropriate by

5 the Secretary.

6 (f) DEFINITIONS.—In this section:

7 (1) APPROVED MEDICAL RESIDENCY TRAINING

8 PROGRAM.—The term ‘‘approved medical residency

9 training program’’ has the meaning given such term

10 in section 1886(h)(5)(A) of the Social Security Act.

11 (2) HEALTH CARE TRAINING CONSORTIUM.—

12 The term ‘‘health care training consortium’’ means

13 a State, regional, or local entity consisting of at

14 least 2 hospitals operating approved medical resi15 dency training programs.

16 (3) RESIDENT.—The term ‘‘resident’’ has the

17 meaning given such term in section 1886(h)(5)(H)

18 of the Social Security Act.

19 (4) PRIMARY CARE RESIDENT.—The term ‘‘pri20 mary care resident’’ means a resident enrolled in an

21 approved medical residency training program in fam22 ily medicine, general internal medicine, general pedi23 atrics, preventive medicine, geriatric medicine, osteo24 pathic general practice, or obstetrics and gynecology.
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1 Subtitle B—Public Health Grants

2 SEC. 3101. GRANTS TO STATES FOR PUBLIC HEALTH PRO3 GRAMS.

4 Part B of title III of the Public Health Service Act

5 (42 U.S.C. 243 et seq.), as amended by section 703 of

6 Public Law 103–183 (107 Stat. 2240), is amended by in7 serting after section 317F the following section:

8 ‘‘GRANTS TO STATES FOR PUBLIC HEALTH PROGRAMS

9 ‘‘SEC. 317G. (a) IN GENERAL.—The Secretary may

10 make grants to States for the following purposes:

11 ‘‘(1) Education and training of public health

12 professionals.

13 ‘‘(2) Prevention and control of poisoning.

14 ‘‘(3) Prevention and control of infectious dis15 eases.

16 ‘‘(4) Laboratory services regarding public

17 health.

18 ‘‘(5) Community and school-based health edu19 cation.

20 ‘‘(6) Prevention programs regarding public

21 health.

22 ‘‘(7) Community and school-based public-health

23 services.

24 ‘‘(8) Collection and reporting of data regarding

25 public health.
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1 ‘‘(b) AUTHORIZATION OF APPROPRIATIONS.—For the

2 purpose of carrying out this section, there are authorized

3 to be appropriated such sums as may be necessary for

4 each of the fiscal years 1996 through 1998.’’.

5 SEC. 3102. SCHOLARSHIP AND LOAN REPAYMENT PRO6 GRAMS REGARDING SERVICE IN PUBLIC

7 HEALTH POSITIONS.

8 Part D of title VII of the Public Health Service Act

9 (42 U.S.C. 294 et seq.) is amended—

10 (1) by redesignating subparts II and III as sub11 parts III and IV, respectively; and

12 (2) by inserting after subpart I the following

13 subpart:

14 ‘‘Subpart II—Scholarship and Loan Repayment Pro15 grams Regarding Service in Public Health Posi16 tions

17 ‘‘SEC. 765A. SCHOLARSHIP AND LOAN REPAYMENT PRO18 GRAMS.

19 ‘‘(a) SCHOLARSHIP PROGRAM.

20 ‘‘(1) IN GENERAL.—The Secretary, acting

21 through the Administrator of the Health Resources

22 and Services Administration and in consultation

23 with the Director of the Centers for Disease Control

24 and Prevention, shall carry out a program under

25 which the Secretary awards scholarships to individ-
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1 uals described in paragraph (2) for the purpose of

2 assisting the individuals with the costs of attending

3 public and nonprofit private schools of public health

4 (or other public or nonprofit private institutions pro5 viding graduate or specialized training in public

6 health).

7 ‘‘(2) ELIGIBLE INDIVIDUALS.—An individual

8 referred to in paragraph (1) is any individual meet9 ing the following conditions:

10 ‘‘(A) The individual is enrolled (or accept11 ed for enrollment) at a school or other institu12 tion referred to in paragraph (1) as a full-time

13 or part-time student in a program providing

14 training in a health profession in a field of pub15 lic health (including the fields of epidemiology,

16 biostatistics, environmental health, health ad17 ministration and planning, behavioral sciences,

18 maternal and child health, occupational safety,

19 public health nursing, nutrition, and toxi20 cology).

21 ‘‘(B) The individual enters into the con22 tract required pursuant to subsection (c) as a

23 condition of receiving the scholarship (relating

24 to an agreement to provide services in approved
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1 public health positions, as defined in subsection

2 (c).

3 ‘‘(3) ELIGIBLE SCHOOLS.—For fiscal year 1997

4 and subsequent fiscal years, the Secretary may make

5 an award of a scholarship under paragraph (1) only

6 if the Secretary determines that—

7 ‘‘(A) the school or other institution with

8 respect to which the award is to be provided

9 has coordinated the activities of the school or

10 institution with relevant activities of the Health

11 Resources and Services Administration and the

12 Centers for Disease Control and Prevention;

13 and

14 ‘‘(B) not fewer than 60 percent of the

15 graduates of the school or institution are in

16 public health positions determined by the Sec17 retary to be consistent with the needs of the

18 United States regarding such professionals.

19 ‘‘(4) APPLICABILITY OF CERTAIN PROVI20 SIONS.—Except as inconsistent with this subsection

21 or subsection (c), the provisions of subpart III of

22 part D of title III (relating to the Scholarship and

23 Loan Repayment Programs of the National Health

24 Service Corps) apply to an award of a scholarship

25 under paragraph (1) to the same extent and in the
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1 same manner as such provisions apply to an award

2 of a scholarship under section 338A.

3 ‘‘(b) LOAN REPAYMENT PROGRAM.—

4 ‘‘(1) IN GENERAL.—The Secretary, acting

5 through the Administrator of the Health Resources

6 and Services Administration and in consultation

7 with the Director of the Centers for Disease Control

8 and Prevention, shall carry out a program under

9 which the Federal Government enters into agree10 ments to repay all or part of the educational loans

11 of individuals meeting the following conditions:

12 ‘‘(A) The individual involved is a graduate

13 of a school or other institution described in sub14 section (a)(1).

15 ‘‘(B) The individual meets the applicable

16 legal requirements to provide services as a pub17 lic health professional (including a professional

18 in any of the fields specified in subsection

19 (a)(2)(A)).

20 ‘‘(C) The individual enters into the con21 tract required pursuant to subsection (c) as a

22 condition of the Federal Government repaying

23 such loans (relating to an agreement to provide

24 services in approved public health positions, as

25 defined in subsection (c)).
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1 ‘‘(2) APPLICABILITY OF CERTAIN PROVI2 SIONS.—Except as inconsistent with this subsection

3 or subsection (c), the provisions of subpart III of

4 part D of title III (relating to the Scholarship and

5 Loan Repayment Programs of the National Health

6 Service Corps) apply to an agreement regarding re7 payment under paragraph (1) to the same extent

8 and in the same manner as such provisions apply to

9 an agreement regarding repayment under section

10 338B.

11 ‘‘(3) AMOUNT OF REPAYMENTS.—For each year

12 for which an individual contracts to serve in an ap13 proved public health position pursuant to paragraph

14 (2), the Secretary may repay not more than $20,000

15 of the principal and interest of the educational loans

16 of the individual.

17 ‘‘(c) APPROVED PUBLIC HEALTH POSITIONS.—

18 ‘‘(1) POSITION REGARDING POPULATIONS WITH

19 SIGNIFICANT NEED FOR SERVICES.—

20 ‘‘(A) With respect to the programs under

21 this section, the obligated service of a program

22 participant pursuant to subsections (a)(4) and

23 (b)(2) shall be provided through an assignment,

24 to an entity described in paragraph (2), for a

25 position in which the participant provides serv-
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1 ices as a public health professional to a popu2 lation determined by the Secretary to have a

3 significant unmet need for the services of such

4 a professional.

5 ‘‘(B) For purposes of subsection (a)(4) and

6 (b)(2), the period of obligated service is the fol7 lowing, as applicable to the program participant

8 involved:

9 ‘‘(i) In the case of scholarships under

10 subsection (a) for full-time students, the

11 greater of—

12 ‘‘(I) 1 year for each year for

13 which such a scholarship is provided;

14 or

15 ‘‘(II) 2 years.

16 ‘‘(ii) In the case of scholarships under

17 subsection (a) for part-time students, a pe18 riod determined by the Secretary on the

19 basis of the number of hours of education

20 or training received under the scholarship,

21 considering the percentage constituted by

22 the ratio of such number to the number of

23 hours for a full-time student in the pro24 gram involved.
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1 ‘‘(iii) In the case of the loan repay2 ments under subsection (b), such period as

3 the Secretary and the participant may

4 agree, except that the period may not be

5 less than 2 years.

6 ‘‘(2) APPROVAL OF ENTITIES FOR ASSIGNMENT

7 OF PROGRAM PARTICIPANTS.—The entities referred

8 to in paragraph (1)(A) are public and nonprofit pri9 vate entities approved by the Secretary as meeting

10 such requirements for the assignment of a program

11 participant as the Secretary may establish. The enti12 ties that the Secretary may so approve include State

13 and local departments of health, public hospitals,

14 community and neighborhood health clinics, migrant

15 health clinics, community-based health-related orga16 nizations, certified regional poison control centers,

17 purchasing cooperatives regarding health insurance,

18 and any other public or nonprofit private entity.

19 ‘‘(3) DEFINITIONS.—For purposes of this sec20 tion:

21 ‘‘(1) The term ‘approved public health position’,

22 with respect to a program participant, means a posi23 tion to which the participant is assigned pursuant to

24 paragraph (1).
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1 ‘‘(B) The term ‘program participant’

2 means an individual who enters into a contract

3 pursuant to subsection (a)(2)(B) or subsection

4 (b)(1)(C).

5 ‘‘(d) CERTAIN CONSIDERATIONS.—

6 ‘‘(1) SPECIAL CONSIDERATION FOR CERTAIN

7 INDIVIDUALS.—In making awards of scholarships

8 under subsection (a) and making repayments under

9 subsection (b), the Secretary shall give special con10 sideration to individuals who are in the armed forces

11 of the United States or who are veterans of the

12 armed forces.

13 ‘‘(2) SCHOOL HEALTH EDUCATION PRO14 GRAMS.—The Secretary shall ensure that the ap15 proved public health positions to which the Secretary

16 assigns program participants under this part include

17 positions in programs that provide education on the

18 promotion of health and the prevention of diseases

19 and that are carried out on the premises of public

20 or nonprofit private elementary and secondary

21 schools.

22 ‘‘(e) FUNDING.—

23 ‘‘(1) AUTHORIZATION OF APPROPRIATIONS.—

24 For the purpose of carrying out this section, there

25 are authorized to be appropriated such sums as may
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1 be necessary for each of the fiscal years 1996

2 through 1998.

3 ‘‘(2) ALLOCATIONS.—Of the amounts appro4 priated under subsection (a) for a fiscal year, the

5 Secretary shall obligate not less than 30 percent for

6 the purpose of providing awards for scholarships

7 under subsection (a) to individuals who have not

8 previously received such scholarships.’’.

9 Subtitle C—Academic Health

10 Centers

11 SEC. 3201. STUDY OF PAYMENTS FOR MEDICAL EDUCATION

12 AT SITES OTHER THAN HOSPITALS.

13 (a) STUDY.—The Secretary of Health and Human

14 Services shall conduct a study of the feasibility and desir15 ability of making payments to facilities that are not hos16 pitals for the direct and indirect costs of graduate medical

17 education attributable to residents trained at such facili18 ties. In conducting the study, the Secretary shall evaluate

19 new payment methodologies—

20 (1) under which each entity which incurs costs

21 of graduate medical education shall receive reim22 bursement for such costs; and

23 (2) which would encourage the training of pri24 mary care physicians.
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1 (b) REPORT.—Not later than 2 years after the date

2 of the enactment of this Act, the Secretary shall submit

3 a report to Congress a report on the study conducted

4 under subsection (a), and shall include in the report such

5 recommendations as the Secretary considers appropriate.

6 SEC. 3202. STUDY OF FUNDING NEEDS OF HEALTH PROFES7 SIONS SCHOOLS.

8 (a) IN GENERAL.—The Secretary shall conduct a

9 study for the purpose of determining the funding needs

10 of health professions schools, including schools of medicine

11 and osteopathic medicine, schools of dentistry, and schools

12 of public health.

13 (b) CONSIDERATION OF CERTAIN COSTS.—In con14 ducting the study under subsection (a), the Secretary shall

15 also consider the following costs regarding the funding

16 needs of health professions schools:

17 (1) Uncompensated costs incurred in providing

18 health care.

19 (2) Costs resulting from reduced productivity

20 due to teaching responsibilities.

21 (3) Increased costs of caring for the health

22 needs of patients with severe medical complications.

23 (4) Uncompensated costs incurred by faculty,

24 residents, and students in providing consultations

25 for hospitalized patients.
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1 (5) Uncompensated costs incurred in conduct2 ing clinical research.

3 (c) CONSIDERATIONS REGARDING ADDITIONAL

4 FUNDING.—In conducting the study under subsection (a),

5 the Secretary shall determine the following:

6 (1) Whether the health professions schools in7 volved have a significant need for an increase in the

8 amount of funds available to the schools.

9 (2) If there is such a need—

10 (A) recommendations regarding the

11 sources of funds to provide the increase; and

12 (B) recommendations for a methodology

13 for determining the amount that should be pro14 vided to the schools involved.

15 (d) REPORT TO CONGRESS.—Not later than 18

16 months after the date of the enactment of this Act, the

17 Secretary shall submit to the Congress a report describing

18 the findings and recommendations made in the study.

19 TITLE IV—MALPRACTICE

20 REFORM

21 Subtitle A—Findings; Purpose;

22 Definitions

23 SEC. 4001. FINDINGS; PURPOSE.

24 (a) FINDINGS.—Congress finds that—
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1 (1) the health care and insurance industries are

2 industries affecting interstate commerce and the

3 medical malpractice litigation systems existing

4 throughout the United States affect interstate com5 merce by contributing to the high cost of health care

6 and premiums for malpractice insurance purchased

7 by health care providers; and

8 (2) the Federal Government has a major inter9 est in health care as a direct provider of health care

10 and as a source of payment for health care, and has

11 a demonstrated interest in assessing the quality of

12 care, access to care, and the costs of care through

13 the evaluative activities of several Federal agencies.

14 (b) PURPOSE.—It is the purpose of this title to—

15 (1) provide grants to States to develop alter16 native dispute resolution procedures to attain a more

17 efficient, expeditious, and equitable resolution of

18 health care malpractice disputes;

19 (2) enhance general knowledge concerning the

20 benefits of different forms of alternative dispute res21 olution mechanisms; and

22 (3) establish uniformity and curb excesses in

23 the State-based medical liability systems through

24 Federally-mandated reforms.
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1 SEC. 4002. DEFINITIONS.

2 As used in this title:

3 (1) ALTERNATIVE DISPUTE RESOLUTION SYS4 TEM.—The term ‘‘alternative dispute resolution sys5 tem’’ means a system that is enacted or adopted by

6 a State to resolve medical malpractice claims other

7 than through a medical malpractice liability action.

8 (2) CLAIMANT.—The term ‘‘claimant’’ means

9 any person who brings a health care liability action

10 and, in the case of an individual who is deceased, in11 competent, or a minor, the person on whose behalf

12 such an action is brought.

13 (3) CLEAR AND CONVINCING EVIDENCE.—The

14 term ‘‘clear and convincing evidence’’ is that meas15 ure or degree of proof that will produce in the mind

16 of the trier of fact a firm belief or conviction as to

17 the truth of the allegations sought to be established,

18 except that such measure or degree of proof is more

19 than that required under a preponderance of the evi20 dence, but less than that required for proof beyond

21 a reasonable doubt.

22 (4) ECONOMIC DAMAGES.—The term ‘‘economic

23 damages’’ means damages paid to compensate an in24 dividual for losses for hospital and other medical ex25 penses, lost wages, lost employment, and other pecu26 niary losses.
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1 (5) HEALTH CARE PROFESSIONAL.—The term

2 ‘‘health care professional’’ means any individual who

3 provides health care services in a State and who is

4 required by State law or regulation to be licensed or

5 certified by the State to provide such services in the

6 State.

7 (6) HEALTH CARE PROVIDER.—The term

8 ‘‘health care provider’’ means any organization or

9 institution that is engaged in the delivery of health

10 care services in a State that is required by State law

11 or regulation to be licensed or certified by the State

12 to engage in the delivery of such services in the

13 State.

14 (7) INJURY.—The term ‘‘injury’’ means any ill15 ness, disease, or other harm that is the subject of

16 a medical malpractice claim.

17 (8) MEDICAL MALPRACTICE LIABILITY AC18 TION.—The term ‘‘medical malpractice liability ac19 tion’’ means any civil action brought pursuant to

20 State law in which a plaintiff alleges a medical mal21 practice claim against a health care provider or

22 health care professional, but does not include any

23 action in which the plaintiff’s sole allegation is an al24 legation of an intentional tort.
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1 (9) MEDICAL MALPRACTICE CLAIM.—The term

2 ‘‘medical malpractice claim’’ means any claim relat3 ing to the provision of (or the failure to provide)

4 health care services or the use of a medical product,

5 without regard to the theory of liability asserted,

6 and includes any third-party claim, cross-claim,

7 counterclaim, or contribution claim in a medical

8 malpractice liability action.

9 (10) MEDICAL PRODUCT.—

10 (A) IN GENERAL.—The term ‘‘medical

11 product’’ means, with respect to the allegation

12 of a claimant, a drug (as defined in section

13 201(g)(1) of the Federal Food, Drug, and Cos14 metic Act (21 U.S.C. 321(g)(1)) or a medical

15 device (as defined in section 201(h) of the Fed16 eral Food, Drug, and Cosmetic Act (21 U.S.C.

17 321(h)) if—

18 (i) such drug or device was subject to

19 premarket approval under section 505,

20 507, or 515 of the Federal Food, Drug,

21 and Cosmetic Act (21 U.S.C. 355, 357, or

22 360e) or section 351 of the Public Health

23 Service Act (42 U.S.C. 262) with respect

24 to the safety of the formulation or per25 formance of the aspect of such drug or de-
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1 vice which is the subject of the claimant’s

2 allegation or the adequacy of the packag3 ing or labeling of such drug or device, and

4 such drug or device is approved by the

5 Food and Drug Administration; or

6 (ii) the drug or device is generally rec7 ognized as safe and effective under regula8 tions issued by the Secretary of Health

9 and Human Services under section 201(p)

10 of the Federal Food, Drug, and Cosmetic

11 Act (21 U.S.C. 321(p)).

12 (B) EXCEPTION IN CASE OF MISREPRE13 SENTATION OR FRAUD.—Notwithstanding sub14 paragraph (A), the term ‘‘medical product’’

15 shall not include any product described in such

16 subparagraph if the claimant shows that the

17 product is approved by the Food and Drug Ad18 ministration for marketing as a result of with19 held information, misrepresentation, or an ille20 gal payment by manufacturer of the product.

21 (11) NONECONOMIC DAMAGES.—The term

22 ‘‘noneconomic damages’’ means damages paid to

23 compensate an individual for losses for physical and

24 emotional pain, suffering, inconvenience, physical

25 impairment, mental anguish, disfigurement, loss of
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1 enjoyment of life, loss of consortium, and other

2 nonpecuniary losses, but does not include punitive

3 damages.

4 (12) PUNITIVE DAMAGES.—The term ‘‘punitive

5 damages’’ means compensation, in addition to com6 pensation for actual harm suffered, that is awarded

7 for the purpose of punishing a person for conduct

8 deemed to be malicious, wanton, willful, or exces9 sively reckless.

10 (13) SECRETARY.—The term ‘‘Secretary’’

11 means the Secretary of Health and Human Services.

12 (14) STATE.—The term ‘‘State’’ means each of

13 the several States, the District of Columbia, the

14 Commonwealth of Puerto Rico, the Virgin Islands,

15 and Guam.

16 Subtitle B—Uniform Standards for

17 Malpractice Claims

18 SEC. 4101. APPLICABILITY.

19 Except as provided in section 4110, this subtitle shall

20 apply to any medical malpractice liability action brought

21 in a Federal or State court, and to any medical mal22 practice claim subject to an alternative dispute resolution

23 system, that is initiated on or after January 1, 1996.
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1 SEC. 4102. REQUIREMENT FOR INITIAL RESOLUTION OF AC2 TION THROUGH ALTERNATIVE DISPUTE RES3 OLUTION.

4 (a) IN GENERAL.—

5 (1) STATE CASES.—A medical malpractice li6 ability action may not be brought in any State court

7 during a calendar year unless the medical mal8 practice liability claim that is the subject of the ac9 tion has been initially resolved under an alternative

10 dispute resolution system certified for the year by

11 the Secretary under section 4202(a), or, in the case

12 of a State in which such a system is not in effect

13 for the year, under the alternative Federal system

14 established under section 4202(b).

15 (2) FEDERAL DIVERSITY ACTIONS.—A medical

16 malpractice liability action may not be brought in

17 any Federal court under section 1332 of title 28,

18 United States Code, during a calendar year unless

19 the medical malpractice liability claim that is the

20 subject of the action has been initially resolved

21 under the alternative dispute resolution system re22 ferred to in paragraph (1) that applied in the State

23 whose law applies in such action.

24 (3) CLAIMS AGAINST UNITED STATES.—

25 (A) ESTABLISHMENT OF PROCESS FOR

26 CLAIMS.—The Attorney General shall establish
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1 an alternative dispute resolution process for the

2 resolution of tort claims consisting of medical

3 malpractice liability claims brought against the

4 United States under chapter 171 of title 28,

5 United States Code. Under such process, the

6 resolution of a claim shall occur after the com7 pletion of the administrative claim process ap8 plicable to the claim under section 2675 of such

9 title.

10 (B) REQUIREMENT FOR INITIAL RESOLU11 TION UNDER PROCESS.—A medical malpractice

12 liability action based on a medical malpractice

13 liability claim described in subparagraph (A)

14 may not be brought in any Federal court unless

15 the claim has been initially resolved under the

16 alternative dispute resolution process estab17 lished by the Attorney General under such sub18 paragraph.

19 (b) INITIAL RESOLUTION OF CLAIMS UNDER

20 ADR.—For purposes of subsection (a), an action is ‘‘ini21 tially resolved’’ under an alternative dispute resolution

22 system if—

23 (1) the ADR reaches a decision on whether the

24 defendant is liable to the plaintiff for damages; and
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1 (2) if the ADR determines that the defendant

2 is liable, the ADR reaches a decision on the amount

3 of damages assessed against the defendant.

4 (c) PROCEDURES FOR FILING ACTIONS.—

5 (1) NOTICE OF INTENT TO CONTEST DECI6 SION.—Not later than 60 days after a decision is is7 sued with respect to a medical malpractice liability

8 claim under an alternative dispute resolution system,

9 each party affected by the decision shall submit a

10 sealed statement to a court of competent jurisdiction

11 indicating whether or not the party intends to con12 test the decision.

13 (2) DEADLINE FOR FILING ACTION.—A medical

14 malpractice liability action may not be brought by a

15 party unless—

16 (A) the party has filed the notice of intent

17 required by paragraph (1); and

18 (B) the party files the action in a court of

19 competent jurisdiction not later than 90 days

20 after the decision resolving the medical mal21 practice liability claim that is the subject of the

22 action is issued under the applicable alternative

23 dispute resolution system.
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1 (3) COURT OF COMPETENT JURISDICTION.—

2 For purposes of this subsection, the term ‘‘court of

3 competent jurisdiction’’ means—

4 (A) with respect to actions filed in a State

5 court, the appropriate State trial court; and

6 (B) with respect to actions filed in a Fed7 eral court, the appropriate United States dis8 trict court.

9 (d) LEGAL EFFECT OF UNCONTESTED ADR DECI10 SION.—The decision reached under an alternative dispute

11 resolution system shall, for purposes of enforcement by a

12 court of competent jurisdiction, have the same status in

13 the court as the verdict of a medical malpractice liability

14 action adjudicated in a State or Federal trial court. The

15 previous sentence shall not apply to a decision that is con16 tested by a party affected by the decision pursuant to sub17 section (c)(1).

18 SEC. 4103. PROCEDURAL REQUIREMENTS FOR FILING OF

19 ACTIONS.

20 (a) CERTIFICATE OF MERIT.—

21 (1) IN GENERAL.—Each individual who files a

22 medical malpractice liability action shall, not later

23 than 90 days after filing the action—

24 (A) submit a certificate of merit described

25 in subsection (b); or
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1 (B) post a surety (or equivalent security)

2 bond of $4,000 (or, during the 45-day period

3 that begins on the date the action is filed, a

4 cost bond of $2,000) with the court.

5 (2) EXTENSION OF DEADLINE.—On the motion

6 of any party to the action or upon a written agree7 ment of the parties filed with the court, the court

8 may extend the deadline specified in paragraph (1)

9 for a period not to exceed 30 days.

10 (3) DISMISSAL FOR FAILURE TO MEET RE11 QUIREMENT.—If an individual filing a medical mal12 practice liability action fails to meet the require13 ments of paragraph (1)—

14 (A) the court shall dismiss the action with15 out prejudice to the refiling of the action by the

16 individual; and

17 (B) require the individual to pay any court

18 costs incurred by the defendants as a result of

19 the filing of the action.

20 (4) WAIVER FOR GOOD CAUSE.—The court may

21 waive the application of paragraph (1) to a plaintiff

22 if the plaintiff shows good cause that such para23 graph should not apply.

24 (5) CERTIFICATE OF MERIT DESCRIBED.—In

25 paragraph (1), a ‘‘certificate of merit’’ is, with re-
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1 spect to an individual filing a medical malpractice li2 ability action, an affidavit declaring that the individ3 ual (or the individual’s attorney) has obtained a

4 written opinion from a medical expert who is knowl5 edgeable of the relevant medical issues involved in

6 the action that the defendant was negligent and the

7 defendant’s conduct was a proximate cause of the al8 leged injury that is the subject of the action.

9 (b) RESPONSE TO STANDARD INTERROGATORIES

10 AND REQUESTS FOR DOCUMENTS.—

11 (1) DEADLINE.—Each party to a medical mal12 practice liability action shall respond to the standard

13 set of interrogatories and requests for production of

14 documents developed pursuant to paragraph (4) as

15 follows:

16 (A) In the case of a plaintiff, the party

17 shall provide the defendant (or the defendant’s

18 attorney) with full and complete responses not

19 later than 45 days after filing the action.

20 (B) In the case of a defendant, the party

21 shall provide the plaintiff (or the plaintiff’s at22 torney) with full and complete responses not

23 later than 45 days after receiving the plaintiff’s

24 responses under subparagraph (A).
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1 (C) In the case of a party who is added to

2 the action after the action is filed, the party

3 shall provide all other parties (or such parties’

4 attorneys) with full and complete responses not

5 later than 45 days after the date of the filing

6 of the pleading by which the party is added to

7 the action.

8 (2) EXTENSION OF DEADLINE.—On the motion

9 of any party to the action that is supported by good

10 cause, or upon a written agreement of the parties

11 filed with the court, the court shall extend the dead12 line specified in paragraph (1) for a period not to

13 exceed 30 days.

14 (3) IMPOSITION OF SANCTIONS FOR FAILURE

15 TO RESPOND.—If a party to a medical malpractice

16 liability action fails to respond to the standard set

17 of interrogatories and requests for production of

18 documents as required under paragraph (1), the

19 party shall be subject to sanctions by the court

20 under any applicable laws, rules, and regulations

21 governing the imposition of sanctions by the court.

22 (4) DEVELOPMENT OF STANDARD INTERROG23 ATORIES AND REQUESTS.—

24 (A) APPOINTMENT OF EXPERT PANELS.—

25 The Governor of each State shall appoint a
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1 panel to develop the standard set of interrog2 atories and requests for production of docu3 ments that will be used for purposes of this

4 subsection in the courts of the State. The set

5 shall be comprehensive and designed to expedite

6 the discovery process in the courts. The Attor7 ney General shall appoint a panel to develop

8 such set that will be used for purposes of this

9 subsection in the Federal courts.

10 (B) COMPOSITION.—Each panel appointed

11 pursuant to subparagraph (A) shall consist of

12 not less than 6 and not more than 12 members,

13 of whom an equal number shall be attorneys

14 who customarily represent plaintiffs in medical

15 malpractice liability actions and attorneys who

16 customarily represent defendants in such ac17 tions.

18 (C) DEADLINES.—Not later than October

19 1, 1996, each panel appointed pursuant to sub20 paragraph (A) shall complete and publish the

21 standard set of interrogatories and requests for

22 production of documents.
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1 SEC. 4104. TREATMENT OF NONECONOMIC AND PUNITIVE

2 DAMAGES.

3 (a) LIMITATION ON NONECONOMIC DAMAGES.—The

4 total amount of noneconomic damages that may be award5 ed to a claimant and the members of the claimant’s family

6 for losses resulting from the injury which is the subject

7 of a medical malpractice liability action may not exceed

8 $250,000, regardless of the number of parties against

9 whom the action is brought or the number of actions

10 brought with respect to the injury.

11 (b) NO AWARD OF PUNITIVE DAMAGES AGAINST

12 MANUFACTURER OF MEDICAL PRODUCT.—In the case of

13 a medical malpractice liability action in which the plaintiff

14 alleges a claim against the manufacturer of a medical

15 product, no punitive or exemplary damages may be award16 ed against such manufacturer.

17 (c) SEVERAL LIABILITY FOR NONECONOMIC DAM18 AGES.—The liability of each defendant for noneconomic

19 damages shall be several only and shall not be joint, and

20 each defendant shall be liable only for the amount of non21 economic damages allocated to the defendant in direct pro22 portion to the defendant’s percentage of responsibility (as

23 determined by the trier of fact). The previous sentence

24 shall not apply if the defendant has been found to be liable

25 as a result of gross negligence or fraud.
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1 (d) ALLOCATION OF PUNITIVE DAMAGE AWARDS

2 FOR PROVIDER LICENSING AND DISCIPLINARY ACTIVI3 TIES.—

4 (1) IN GENERAL.—The total amount of any pu5 nitive damages awarded in a medical malpractice li6 ability action shall be paid to the State in which the

7 action is brought (or, in a case brought in Federal

8 court, in the State in which the health care services

9 that caused the injury that is the subject of the ac10 tion were provided) for the purposes of carrying out

11 the activities described in paragraph (2).

12 (2) ACTIVITIES DESCRIBED.—A State shall use

13 amounts paid pursuant to paragraph (1) to carry

14 out activities to assure the safety and quality of

15 health care services provided in the State, including

16 (but not limited to)—

17 (A) licensing or certifying health care pro18 fessionals and health care providers in the

19 State;

20 (B) implementing health care quality as21 surance programs;

22 (C) carrying out public education programs

23 to increase awareness of the availability of com24 parative quality information on accountable

25 health plans;
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1 (D) carrying out programs to reduce mal2 practice-related costs for providers volunteering

3 to provide services in medically underserved

4 areas; and

5 (E) implementing and operating a State

6 alternative dispute resolution system certified

7 by the Secretary under section 4202.

8 (3) MAINTENANCE OF EFFORT.—A State shall

9 use any amounts paid pursuant to paragraph (1) to

10 supplement and not to replace amounts spent by the

11 State for the activities described in paragraph (2).

12 (e) DEVELOPMENT OF ALTERNATIVE LIMITS ON

13 NONECONOMIC DAMAGES.—

14 (1) IN GENERAL.—Not later than 1 year after

15 the date of the enactment of this Act, the Secretary

16 in consultation with the Attorney General shall de17 velop and transmit to Congress alternative limits on

18 the amount of noneconomic damages that may be

19 awarded with respect to medical malpractice liability

20 claims, together with legislative specifications nec21 essary to replace the limit imposed under subsection

22 (a) on the amount of such damages with such alter23 native limits. The purpose of the development of the

24 limits is to provide certainty and fairness in mal25 practice awards and to avoid unwarranted disparities
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1 among health care providers and health care profes2 sionals who have engaged in similar conduct.

3 (2) ESTABLISHMENT OF SEPARATE LIMITS FOR

4 CATEGORIES OF INJURIES.—In developing limits

5 under paragraph (1), the Secretary shall establish

6 separate limits for noneconomic damages resulting

7 from each of the following categories of injuries:

8 (A) Non-physical injuries.

9 (B) Insignificant physical injuries.

10 (C) Temporary minor physical injuries.

11 (D) Temporary major physical injuries.

12 (E) Permanent minor physical injuries.

13 (F) Permanent substantial physical inju14 ries.

15 (G) Permanent major physical injuries.

16 (H) Permanent grave physical injuries.

17 (I) Death.

18 (3) FACTORS CONSIDERED.—In developing lim19 its under paragraph (1) for each of the categories

20 described in paragraph (2), the Secretary shall—

21 (A) examine the most recent available data

22 on the amount of damages awarded with re23 spect to such claims; and

24 (B) set specific limits that reasonably com25 pensate most injured parties at the level of
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1 compensation currently provided, excluding

2 those levels of compensation that the Secretary

3 finds unreasonably large.

4 (4) CONSULTATION.—In developing limits

5 under this subsection, the Secretary shall consult

6 with representatives of each of the following:

7 (A) Attorneys who represent plaintiffs in

8 medical malpractice liability actions.

9 (B) Attorneys who represent health care

10 professionals and health care providers in medi11 cal malpractice liability actions.

12 (C) Physicians and other health care pro13 fessionals and providers.

14 (D) Individuals who have suffered injury

15 as a result of medical malpractice.

16 (E) Judges who preside over medical mal17 practice liability actions.

18 (F) Medical ethicists.

19 (G) Health care economists.

20 (H) Liability insurers.

21 (5) GUIDANCE TO ENTITIES RESOLVING

22 CLAIMS.—If Congress enacts legislation that imposes

23 the limits developed by the Secretary under this sub24 section on the amount of noneconomic damages that

25 may be awarded with respect to medical malpractice
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1 liability claims, the Secretary shall prepare and dis2 seminate guidelines to assist courts and other enti3 ties resolving such claims in the determination of the

4 particular category of injury specified in paragraph

5 (2) to which a claimant’s injury shall be assigned for

6 purposes of applying the appropriate limit on such

7 damages.

8 SEC. 4105. PERIODIC PAYMENTS FOR FUTURE LOSSES.

9 (a) IN GENERAL.—In any medical malpractice liabil10 ity action in which the damages awarded for future eco11 nomic loss exceeds $100,000, a defendant may not be re12 quired to pay such damages in a single, lump-sum pay13 ment, but may be permitted to make such payments on

14 a periodic basis. The periods for such payments shall be

15 determined by the court, based upon projections of when

16 such expenses are likely to be incurred.

17 (b) WAIVER.—A court may waive the application of

18 subsection (a) with respect to a defendant if the court de19 termines that it is not in the best interests of the plaintiff

20 to receive payments for damages on such a periodic basis.

21 SEC. 4106. UNIFORM STATUTE OF LIMITATIONS.

22 (a) IN GENERAL.—No medical malpractice claim

23 may be initiated after the expiration of the 2-year period

24 that begins on the date on which the alleged injury that

25 is the subject of such claim was discovered or the date
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1 on which the alleged injury that is the subject of such

2 claim was discovered or the date on which such injury

3 should reasonably have been discovered, whichever is ear4 lier.

5 (b) EXCEPTION FOR MINORS.—In the case of an al6 leged injury suffered by a minor who has not attained 6

7 years of age, a medical malpractice claim may be initiated

8 after the expiration of the period described in subsection

9 (a) if the claim is initiated before the minor attains 8

10 years of age.

11 SEC. 4107. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

12 SERVICES.

13 (a) IN GENERAL.—In the case of a medical mal14 practice claim relating to services provided during labor

15 or the delivery of a baby, if the health care professional

16 or health care provider against whom the claim is brought

17 did not previously treat the claimant for the pregnancy,

18 the trier of fact may not find that such professional or

19 provider committed malpractice and may not assess dam20 ages against such professional or provider unless the mal21 practice is proven by clear and convincing evidence.

22 (b) APPLICABILITY TO GROUP PRACTICES OR

23 AGREEMENTS AMONG PROVIDERS.—For purposes of sub24 section (a), a health care professional shall be considered

25 to have previously treated an individual for a pregnancy
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1 if the professional is a member of a group practice whose

2 members previously treated the individual for the preg3 nancy or is providing services to the individual during

4 labor or the delivery of a baby pursuant to an agreement

5 with another professional.

6 SEC. 4108. UNIFORM STANDARD FOR DETERMINING LIABIL7 ITY IN ACTIONS BASED ON NEGLIGENCE.

8 (a) STANDARD OF REASONABLENESS.—Except as

9 provided in subsection (b), a defendant in a medical mal10 practice liability action may not be found to have commit11 ted malpractice unless the defendant’s conduct at the time

12 of providing the health care services that are the subject

13 of the action was not reasonable.

14 (b) ACTIONS BROUGHT UNDER STRICT LIABILITY.—

15 Subsection (a) shall not apply with respect to a medical

16 malpractice action if (in accordance with applicable State

17 law) the theory of liability upon which the action is based

18 is a theory of strict liability.

19 SEC. 4109. JURISDICTION OF FEDERAL COURTS.

20 Nothing in this subtitle shall be construed to estab21 lish jurisdiction over any medical malpractice liability ac22 tion in the district courts of the United States on the basis

23 of sections 1331 or 1337 of title 28, United States Code.
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1 SEC. 4110. PREEMPTION.

2 (a) IN GENERAL.—This subtitle supersedes any State

3 law only to the extent that the State law permits the recov4 ery by a claimant or the assessment against a defendant

5 of a greater amount of damages or establishes a less strict

6 standard of proof for determining whether a defendant has

7 committed malpractice, than the provisions of this sub8 title.

9 (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

10 OF LAW OR VENUE.—Nothing in this subtitle shall be con11 strued to—

12 (1) waive or affect any defense of sovereign im13 munity asserted by any State under any provision of

14 law;

15 (2) waive or affect any defense of sovereign im16 munity asserted by the United States;

17 (3) affect the applicability of any provision of

18 the Foreign Sovereign Immunities Act of 1976;

19 (4) preempt State choice-of-law rules with re20 spect to claims brought by a foreign nation or a citi21 zen of a foreign nation; or

22 (5) affect the right of any court to transfer

23 venue or to apply the law of a foreign nation or to

24 dismiss a claim of a foreign nation or of a citizen

25 of a foreign nation on the ground in inconvenient

26 forum.
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1 Subtitle C—Requirements for State

2 Alternative Dispute Resolution

3 Systems (ADR)

4 SEC. 4201. BASIC REQUIREMENTS.

5 (a) IN GENERAL.—A State’s alternative dispute reso6 lution system meets the requirements of this section if the

7 system—

8 (1) applies to all medical malpractice liability

9 claims under the jurisdiction of the courts of that

10 State;

11 (2) requires that a written opinion resolving the

12 dispute be issued not later than 6 months after the

13 date by which each party against whom the claim is

14 filed has received notice of the claim (other than in

15 exceptional cases for which a longer period is re16 quired for the issuance of such an opinion), and that

17 the opinion contain—

18 (A) findings of fact relating to the dispute,

19 and

20 (B) a description of the costs incurred in

21 resolving the dispute under the system (includ22 ing any fees paid to the individuals hearing and

23 resolving the claim), together with an appro24 priate assessment of the costs against any of

25 the parties;
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1 (3) requires individuals who hear and resolve

2 claims under the system to meet such qualifications

3 as the State may require (in accordance with regula4 tions of the Secretary);

5 (4) is approved by the State or by local govern6 ments in the State;

7 (5) with respect to a State system that consists

8 of multiple dispute resolution procedures—

9 (A) permits the parties to a dispute to se10 lect the procedure to be used for the resolution

11 of the dispute under the system, and

12 (B) if the parties do not agree on the pro13 cedure to be used for the resolution of the dis14 pute, assigns a particular procedure to the par15 ties;

16 (6) provides for the transmittal to the State

17 agency responsible for monitoring or disciplining

18 health care professionals and health care providers

19 of any findings made under the system that such a

20 professional or provider committed malpractice, un21 less, during the 90-day period beginning on the date

22 the system resolves the claim against the profes23 sional or provider, the professional or provider

24 brings an action contesting the decision made under

25 the system; and
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1 (7) provides for the regular transmittal to the

2 Administrator for Health Care Policy and Research

3 of information on disputes resolved under the sys4 tem, in a manner that assures that the identity of

5 the parties to a dispute shall not be revealed.

6 (b) APPLICATION OF MALPRACTICE LIABILITY

7 STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—

8 The provisions of subtitle B (other than sections 4102 and

9 4103) shall apply with respect to claims brought under

10 a State alternative dispute resolution system or the alter11 native Federal system in the same manner as such provi12 sions apply with respect to medical malpractice liability

13 actions brought in the State.

14 SEC. 4202. CERTIFICATION OF STATE SYSTEMS; APPLICA15 BILITY OF ALTERNATIVE FEDERAL SYSTEM.

16 (a) CERTIFICATION.—

17 (1) IN GENERAL.—Not later than October 1 of

18 each year (beginning with 1996), the Secretary, in

19 consultation with the Attorney General, shall deter20 mine whether a State’s alternative dispute resolution

21 system meets the requirements of this part for the

22 following calendar year.

23 (2) BASIS FOR CERTIFICATION.—The Secretary

24 shall certify a State’s alternative dispute resolution

25 system under this subsection for a calendar year if
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1 the Secretary determines under paragraph (1) that

2 the system meets the requirements of section 4201.

3 (b) APPLICABILITY OF ALTERNATIVE FEDERAL SYS4 TEM.—

5 (1) ESTABLISHMENT AND APPLICABILITY.—

6 Not later than October 1, 1996, the Secretary, in

7 consultation with the Attorney General, shall estab8 lish by rule an alternative Federal ADR system for

9 the resolution of medical malpractice liability claims

10 during a calendar year in States that do not have

11 in effect an alternative dispute resolution system

12 certified under subsection (a) for the year.

13 (2) REQUIREMENTS FOR SYSTEM.—Under the

14 alternative Federal ADR system established under

15 paragraph (1)—

16 (A) paragraphs (1), (2), (6), and (7) of

17 section 4201(a) shall apply to claims brought

18 under the system;

19 (B) if the system provides for the resolu20 tion of claims through arbitration, the claims

21 brought under the system shall be heard and

22 resolved by arbitrators appointed by the Sec23 retary in consultation with the Attorney Gen24 eral; and
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1 (C) with respect to a State in which the

2 system is in effect, the Secretary may (at the

3 State’s request) modify the system to take into

4 account the existence of dispute resolution pro5 cedures in the State that affect the resolution

6 of medical malpractice liability claims.

7 (3) TREATMENT OF STATES WITH ALTER8 NATIVE SYSTEM IN EFFECT.—If the alternative Fed9 eral ADR system established under this subsection is

10 applied with respect to a State for a calendar year,

11 the State shall make a payment to the United States

12 (at such time and in such manner as the Secretary

13 may require) in an amount equal to 110 percent of

14 the costs incurred by the United States during the

15 year as a result of the application of the system with

16 respect to the State.

17 SEC. 4203. GRANTS TO STATES.

18 (a) IN GENERAL.—The Secretary shall make grants

19 to States for a 2-year period to assist States in implement20 ing and operating alternative dispute resolution systems

21 that meet the requirements of section 4201.

22 (b) ELIGIBILITY.—A State is eligible to receive a

23 grant under this section if the Secretary has certified the

24 State’s alternative dispute resolution system under section

25 4202(b).
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1 (c) LIMITATION ON AMOUNT OF GRANT.—The

2 amount of funds provided to a State under a grant under

3 this section may not exceed $5,000,000 during the 2-year

4 period of the grant.

5 SEC. 4204. REPORTS ON IMPLEMENTATION AND EFFEC6 TIVENESS OF ALTERNATIVE DISPUTE RESO7 LUTION SYSTEMS.

8 (a) IN GENERAL.—Not later than 5 years after the

9 date of the enactment of this Act, the Secretary shall pre10 pare and submit to the Congress a report describing and

11 evaluating State alternative dispute resolution systems op12 erated pursuant to this subtitle and the alternative Fed13 eral system established under section 4202(b).

14 (b) CONTENTS OF REPORT.—The Secretary shall in15 clude in the report prepared and submitted under sub16 section (a)—

17 (1) information on—

18 (A) the effect of the alternative dispute

19 resolution systems on the cost of health care

20 within each State,

21 (B) the impact of such systems on the ac22 cess of individuals to health care within the

23 State, and

24 (C) the effect of such systems on the qual25 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 Subtitle D—Grants to States for

9 Development of Practice Guide10 lines

11 SEC. 4301. GRANTS TO STATES.

12 (a) IN GENERAL.—The Secretary shall make grants

13 to States for a 2-year period for the development of medi14 cal practice guidelines for health care professionals (in15 cluding mid-level practitioners) that may be applied to re16 solve medical malpractice liability claims and actions in

17 the State.

18 (b) ELIGIBILITY.—A State is eligible to receive a

19 grant under this section if the State submits to the Sec20 retary an application at such time, in such form, and con21 taining such information and assurances as the Secretary

22 may require, including assurances that the State will sub23 mit such periodic reports on the development and applica24 tion of the State’s medical practice guidelines as the Sec25 retary may require.
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1 (c) NUMBER OF GRANTS.—

2 (1) IN GENERAL.—Except as provided in para3 graph (2), the Secretary shall award not less than

4 10 grants under this section.

5 (2) EXCEPTION.—Notwithstanding paragraph

6 (1), the Secretary may award less than 10 grants

7 under this section if the Secretary determines that

8 there are an inadequate number of applications sub9 mitted that meet the eligibility and approval require10 ments of this section.

11 (d) LIMITATION ON AMOUNT OF GRANT.—The

12 amount of funds provided to a State under a grant under

13 this section may not exceed $5,000,000 during the 2-year

14 period of the grant.

15 TITLE V—MARKET INCENTIVES

16 TO CONTAINING COSTS

17 Subtitle A—Administrative

18 Simplification

19 SEC. 5000. PURPOSE.

20 It is the purpose of this subtitle to improve the effi21 ciency and effectiveness of the health care system, includ22 ing the medicare program under title XVIII of the Social

23 Security Act and the medicaid program under title XIX

24 of such Act, by encouraging the development of a health

25 information network through the adoption of standards
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1 and the establishment of requirements for the electronic

2 transmission of certain health information.

3 SEC. 5001. DEFINITIONS.

4 For purposes of this subtitle:

5 (1) CODE SET.—The term ‘‘code set’’ means

6 any set of codes used for encoding data elements,

7 such as tables of terms, medical concepts, medical

8 diagnostic codes, or medical procedure codes.

9 (2) COORDINATION OF BENEFITS.—The term

10 ‘‘coordination of benefits’’ means determining and

11 coordinating the financial obligations of plan spon12 sors when health care benefits are payable by more

13 than one such sponsor.

14 (3) HEALTH INFORMATION.—The term ‘‘health

15 information’’ means any information that relates to

16 the past, present, or future physical or mental health

17 or condition or functional status of an individual,

18 the provision of health care to an individual, or pay19 ment for the provision of health care to an individ20 ual.

21 (4) HEALTH INFORMATION NETWORK.—The

22 term ‘‘health information network’’ means the health

23 information system that is formed through the appli24 cation of the requirements and standards established

25 under this subtitle.
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1 (5) HEALTH INFORMATION NETWORK SERV2 ICE.—The term ‘‘health information network serv3 ice’’—

4 (A) means a private entity or an entity op5 erated by a State that enters into contracts—

6 (i) to process or facilitate the process7 ing of nonstandard data elements of health

8 information into standard data elements;

9 (ii) to provide the means by which

10 persons are connected to the health infor11 mation network for purposes of meeting

12 the requirements of this subtitle, including

13 the holding of standard data elements of

14 health information;

15 (iii) to provide authorized access to

16 health information through the health in17 formation network; or

18 (iv) to provide specific information

19 processing services, such as automated co20 ordination of benefits and claims trans21 action routing; and

22 (B) includes a health information security

23 organization.

24 (6) HEALTH INFORMATION SECURITY ORGANI25 ZATION.—The term ‘‘health information security or-
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1 ganization’’ means a private entity or an entity oper2 ated by a State that accesses standard data elements

3 of health information through the health information

4 network, processes such information into non-identi5 fiable health information, and may store such infor6 mation.

7 (7) HEALTH PROVIDER.—The term ‘‘health

8 provider’’ includes a provider of services (as defined

9 in section 1861(u) of the Social Security Act), a pro10 vider of medical or other health services (as defined

11 in section 1861(s) of such Act), and any other per12 son (other than a plan sponsor) furnishing health

13 care items or services.

14 (8) INDIVIDUALLY IDENTIFIABLE HEALTH IN15 FORMATION.—The term ‘‘individually identifiable

16 health information’’ means health information in the

17 health information network—

18 (A) that identifies an individual who is the

19 subject of the information; or

20 (B) with respect to which there is a rea21 sonable basis to believe that the information

22 can be used to identify such an individual.

23 (9) NON-IDENTIFIABLE HEALTH INFORMA24 TION.—The term ‘‘non-identifiable health informa-
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1 tion’’ means health information that is not individ2 ually identifiable health information.

3 (10) PLAN SPONSOR.—The term ‘‘plan spon4 sor’’ means—

5 (A) a carrier (as defined in section

6 1903(2)) providing health insurance coverage

7 (as defined in section 1903(7));

8 (B) a group health plan;

9 (C) an association or other entity which es10 tablishes or maintains a multiple employer wel11 fare arrangement (as defined in section

12 1903(12)) providing benefits consisting of medi13 cal care described in section 607(1) of the Em14 ployee Retirement Income Security Act of 1974;

15 and

16 (D) a State, or the Federal Government,

17 acting in a capacity as a provider of health ben18 efits to eligible individuals that is equivalent to

19 that of a carrier.

20 (11) STANDARD.—The term ‘‘standard’’, when

21 used with reference to a transaction or to data ele22 ments of health information, means that the trans23 action or data elements meet any standard adopted

24 by the Secretary under part 1 that applies to the

25 transaction or data elements.
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1 PART 1—STANDARDS FOR DATA ELEMENTS AND

2 TRANSACTIONS

3 SEC. 5011. GENERAL REQUIREMENTS ON SECRETARY.

4 (a) IN GENERAL.—The Secretary shall adopt stand5 ards and modifications to standards under this part that

6 are—

7 (1) consistent with the objective of reducing the

8 costs of providing and paying for health care; and

9 (2) in use and generally accepted, developed, or

10 modified by the standard-setting organizations ac11 credited by the American National Standard Insti12 tute.

13 (b) INITIAL STANDARDS.—The Secretary may de14 velop an expedited process for the adoption of initial

15 standards under this part.

16 (c) PROTECTION OF COMMERCIAL INFORMATION.—

17 In adopting standards under this part, the Secretary may

18 not require disclosure of trade secrets or confidential com19 mercial information by any person.

20 SEC. 5012. STANDARDS FOR DATA ELEMENTS OF HEALTH

21 INFORMATION.

22 (a) IN GENERAL.—The Secretary shall adopt stand23 ards necessary to make uniform and compatible for elec24 tronic transmission through the health information net25 work the data elements of any health information that the
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1 Secretary determines is appropriate for transmission in

2 connection with a transaction described in section 5021.

3 (b) ADDITIONS.—The Secretary may make additions

4 to any set of data elements adopted under subsection (a)

5 as the Secretary determines appropriate in a manner that

6 minimizes the disruption and cost of compliance with such

7 additions.

8 (c) CERTAIN DATA ELEMENTS.—

9 (1) UNIQUE HEALTH IDENTIFIERS.—The Sec10 retary shall establish a system to provide for a

11 standard unique health identifier for each individual,

12 employer, plan sponsor, and health provider for use

13 in the health care system.

14 (2) CODE SETS.—

15 (A) IN GENERAL.—The Secretary, in con16 sultation with experts from the private sector

17 and Federal agencies, shall—

18 (i) select code sets for appropriate

19 data elements from among the code sets

20 that have been developed by private and

21 public entities; or

22 (ii) establish code sets for such data

23 elements if no code sets for the data ele24 ments have been developed.
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1 (B) DISTRIBUTION.—The Secretary shall

2 establish efficient and low-cost procedures for

3 distribution of code sets and modifications to

4 code sets.

5 SEC. 5013. INFORMATION TRANSACTION STANDARDS.

6 (a) IN GENERAL.—The Secretary shall adopt tech7 nical standards that are consistent with the health infor8 mation network privacy standards adopted under section

9 5014 relating to the method by which standard data ele10 ments of health information may be transmitted electroni11 cally, including standards with respect to the format in

12 which such data elements may be transmitted.

13 (b) SPECIAL RULE FOR COORDINATION OF BENE14 FITS.—Any standard adopted by the Secretary under

15 paragraph (1) that relates to coordination of benefits shall

16 provide that a claim for reimbursement for health services

17 furnished shall be tested, by an algorithm specified by the

18 Secretary, against all records of enrollment and eligibility

19 for the individual who received such services that are avail20 able to the recipient of the claim through the health infor21 mation network to determine any primary and secondary

22 obligors for payment.

23 (c) ELECTRONIC SIGNATURE.—The Secretary, in co24 ordination with the Secretary of Commerce, shall promul25 gate regulations specifying procedures for the electronic
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1 transmission and authentication of signatures, compliance

2 with which shall be deemed to satisfy State and Federal

3 statutory requirements for written signatures with respect

4 to transactions described in section 5021 and written sig5 natures on health records and prescriptions.

6 (d) STANDARDS FOR CLAIMS FOR CLINICAL LABORA7 TORY TESTS.—The standards under this section shall pro8 vide that claims for clinical laboratory tests for which ben9 efits are payable by a plan sponsor shall be submitted di10 rectly by the person or entity that performed (or super11 vised the performance of) the tests to the sponsor in a

12 manner consistent with (and subject to such exceptions

13 as are provided under) the requirement for direct submis14 sion of such claims under the medicare program.

15 SEC. 5014. HEALTH INFORMATION NETWORK PRIVACY

16 STANDARDS.

17 The Secretary shall adopt standards respecting the

18 privacy of individually identifiable health information that

19 is in the health information network. Such standards shall

20 include standards concerning at least the following:

21 (1) The rights of an individual who is the sub22 ject of such information.

23 (2) The procedures to be established for the ex24 ercise of such rights.
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1 (3) The uses and disclosures of such informa2 tion that are authorized or required.

3 (4) Safeguards for the security of such informa4 tion and adequate security practices.

5 SEC. 5015. 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 5012(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 PRIVACY STANDARDS.—The Secretary

18 shall adopt standards relating to the privacy of individ19 ually identifiable health information in the health informa20 tion network under section 5014 not later than 12 months

21 after the date of the enactment of this Act.

22 (c) INITIAL STANDARDS FOR INFORMATION TRANS23 ACTIONS.—The Secretary shall adopt standards relating

24 to information transactions under section 5013 not later

25 than 18 months after the date of the enactment of this
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1 Act (except in the case of standards for claims attach2 ments, which shall be adopted not later than 24 months

3 after the date of the enactment of this Act).

4 (d) MODIFICATIONS TO STANDARDS.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), the Secretary shall review the standards

7 adopted under this part and shall adopt modified

8 standards as determined appropriate, but not more

9 frequently than once every 6 months. Any modifica10 tion to standards shall be completed in a manner

11 which minimizes the disruption to, and costs of com12 pliance incurred by, a plan sponsor, health provider,

13 or health plan purchasing organization that is re14 quired to comply with part 2.

15 (2) SPECIAL RULES.—

16 (A) MODIFICATIONS DURING FIRST 12-

17 MONTH PERIOD.—Except with respect to addi18 tions and modifications to code sets under sub19 paragraph (B), the Secretary may not adopt

20 any modification to a standard adopted under

21 this part during the 12-month period beginning

22 on the date the standard is adopted, unless the

23 Secretary determines that the modification is

24 necessary in order to permit a plan sponsor, a
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1 health provider, or a health plan purchasing or2 ganization to comply with part 2.

3 (B) ADDITIONS AND MODIFICATIONS TO

4 CODE SETS.—

5 (i) IN GENERAL.—The Secretary shall

6 ensure that procedures exist for the rou7 tine maintenance, testing, enhancement,

8 and expansion of code sets.

9 (ii) ADDITIONAL RULES.—If a code

10 set is modified under this subsection, the

11 modified code set shall include instructions

12 on how data elements that were encoded

13 prior to the modification are to be con14 verted or translated so as to preserve the

15 value of the data elements. Any modifica16 tion to a code set under this subsection

17 shall be implemented in a manner that

18 minimizes the disruption to, and costs of

19 compliance incurred by, a plan sponsor,

20 health provider, or health plan purchasing

21 organization that is required to comply

22 with part 2.

23 (e) EVALUATION OF STANDARDS.—The Secretary

24 may establish a process to measure or verify the consist25 ency of standards adopted or modified under this part.
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1 Such process may include demonstration projects and

2 analyses of the cost of implementing such standards and

3 modifications.

4 PART 2—REQUIREMENTS WITH RESPECT TO

5 CERTAIN TRANSACTIONS AND INFORMATION

6 SEC. 5021. STANDARD TRANSACTIONS AND INFORMATION.

7 (a) TRANSACTIONS BY SPONSORS.—

8 (1) TRANSACTIONS WITH PROVIDERS.—If a

9 plan sponsor conducts any of the transactions de10 scribed in paragraph (3) with a health provider—

11 (A) the transaction shall be a standard

12 transaction; and

13 (B) the health information transmitted by

14 the sponsor to the provider or by the provider

15 to the sponsor in connection with the trans16 action shall be in the form of standard data ele17 ments.

18 (2) TRANSACTIONS WITH SPONSORS.—If a plan

19 sponsor conducts any of the transactions described

20 in paragraph (3) with another plan sponsor—

21 (A) the transaction shall be a standard

22 transaction; and

23 (B) the health information transmitted by

24 either sponsor in connection with the trans-
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1 action shall be in the form of standard data ele2 ments.

3 (3) TRANSACTIONS.—The transactions referred

4 to in paragraphs (1) and (2) are the following:

5 (A) Verification of eligibility for benefits.

6 (B) Coordination of benefits.

7 (C) Claim submission.

8 (D) Claim attachment submission.

9 (E) Claim status notification.

10 (F) Claim status verification.

11 (G) Claim adjudication.

12 (H) Payment and remittance advice.

13 (I) Certification or authorization of a re14 ferral to a health provider who is not part of a

15 provider network.

16 (b) USE OF HEALTH INFORMATION NETWORK SERV17 ICES.—A plan sponsor, a health provider, or a health plan

18 purchasing organization may comply with any provision

19 of this section by entering into an agreement or other ar20 rangement with a health information network service cer21 tified under section 5031 pursuant to which the service

22 undertakes the duties applicable to the sponsor, provider,

23 or organization under the provision.
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1 SEC. 5022. ACCESSING HEALTH INFORMATION FOR AU2 THORIZED PURPOSES.

3 (a) PROCUREMENT RULE FOR GOVERNMENT AGEN4 CIES.—

5 (1) IN GENERAL.—A health information secu6 rity organization that is certified under section 5031

7 shall make available to a Federal or State agency,

8 pursuant to a cost-type contract (as defined under

9 the Federal Acquisition Regulation), any non-identi10 fiable health information, including non-identifiable

11 health information that is derived from individually

12 identifiable health information, that—

13 (A) is held by the service or may be ob14 tained by the service under paragraph (2) or

15 subsection (b);

16 (B) consists of data elements that are sub17 ject to a standard under part 1; and

18 (C) is requested by the agency to fulfill a

19 requirement under this Act.

20 (2) CERTAIN INFORMATION AVAILABLE AT LOW

21 COST.—If a health information security organization

22 requires health information consisting of data ele23 ments that are subject to a standard under part 1

24 from a plan sponsor or a health provider in order to

25 comply with a request made by a Federal or State

26 agency under paragraph (1), the sponsor or provider
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1 shall make such information available to such orga2 nization for a charge that does not exceed the rea3 sonable cost of transmitting the information.

4 (b) PROCUREMENT RULE FOR INFORMATION SECU5 RITY ORGANIZATIONS.—A health information security or6 ganization that makes non-identifiable health information

7 available to a Federal or State agency under subsection

8 (a) shall make such non-identifiable information available,

9 for a charge that does not exceed the reasonable cost of

10 transmitting the information, to any other health informa11 tion security organization that—

12 (A) is certified under section 5031; and

13 (B) requests the information.

14 SEC. 5023. ENSURING AVAILABILITY OF INFORMATION.

15 The Secretary shall establish a procedure under

16 which a plan sponsor or health provider that does not have

17 the ability to transmit standard data elements directly,

18 and does not have access to a health information network

19 service certified under section 5031, may comply with the

20 provisions of this part.

21 SEC. 5024. TIMETABLES FOR COMPLIANCE WITH REQUIRE22 MENTS.

23 (a) INITIAL COMPLIANCE.—

24 (1) IN GENERAL.—Not later than 12 months

25 after the date on which standards are adopted under
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1 part 1 with respect to a type of transaction, or data

2 elements for a type of health information, a plan

3 sponsor, health provider, or health plan purchasing

4 organization shall comply with the requirements of

5 this part with respect to such transaction or infor6 mation.

7 (2) ADDITIONAL DATA ELEMENTS.—Not later

8 than 12 months after the date on which the Sec9 retary adopts an addition to a set of data elements

10 for health information under section 5012, a plan

11 sponsor, health provider, or health plan purchasing

12 organization shall comply with the requirements of

13 this part using such data elements.

14 (b) COMPLIANCE WITH MODIFIED STANDARDS.—

15 (1) IN GENERAL.—If the Secretary adopts a

16 modified standard under section 5015(c), a plan

17 sponsor, health provider, or health plan purchasing

18 organization shall comply with the modified standard

19 at such time as the Secretary determines appro20 priate, taking into account the time needed to com21 ply due to the nature and extent of the modification.

22 (2) SPECIAL RULE.—In the case of a modifica23 tion to a standard that does not occur within the 12-

24 month period beginning on the date the standard is
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1 adopted, the time determined appropriate by the

2 Secretary under paragraph (1) may not be—

3 (A) earlier than the last day of the 90-day

4 period beginning on the date the modified

5 standard is adopted; or

6 (B) later than the last day of the 12-

7 month period beginning on the date the modi8 fied standard is adopted.

9 PART 3—MISCELLANEOUS PROVISIONS

10 SEC. 5031. STANDARDS AND CERTIFICATION FOR HEALTH

11 INFORMATION NETWORK SERVICES.

12 (a) STANDARDS FOR OPERATION.—The Secretary

13 shall establish standards with respect to the operation of

14 health information network services, including standards

15 ensuring that such services—

16 (1) develop, operate, and cooperate with one an17 other to form the health information network;

18 (2) meet all of the standards adopted under

19 part 1 that are applicable to the services;

20 (3) make public information concerning their

21 performance, as measured by uniform indicators

22 such as accessibility, transaction responsiveness, ad23 ministrative efficiency, reliability, dependability, and

24 any other indicator determined appropriate by the

25 Secretary; and
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1 (4) if they are part of a larger organization,

2 have policies and procedures in place which isolate

3 their activities with respect to processing informa4 tion in a manner that prevents access to such infor5 mation by such larger organization.

6 (b) CERTIFICATION BY THE SECRETARY.—

7 (1) ESTABLISHMENT.—Not later than 18

8 months after the date of the enactment of this Act,

9 the Secretary shall establish a certification proce10 dure for health information network services which

11 ensures that certified services are qualified to meet

12 the requirements of this subtitle and the standards

13 established by the Secretary under this section. Such

14 certification procedure shall be implemented in a

15 manner that minimizes the costs and delays of oper16 ations for such services.

17 (2) APPLICATION.—Each entity desiring to be

18 certified as a health information network service

19 shall apply to the Secretary for certification in a

20 form and manner determined appropriate by the

21 Secretary.

22 (3) AUDITS AND REPORTS.—The procedure es23 tablished under paragraph (1) shall provide for au24 dits by the Secretary and reports by an entity cer25 tified under this section as the Secretary determines
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1 appropriate in order to monitor such entity’s compli2 ance with the requirements of this subtitle and the

3 standards established by the Secretary under this

4 section.

5 (4) RECERTIFICATION.—A health information

6 network service shall be recertified under this sub7 section at least every 3 years.

8 (c) LOSS OF CERTIFICATION.—

9 (1) MANDATORY TERMINATION.—Except as

10 provided in paragraph (2), if a health information

11 network service violates a health information net12 work privacy standard adopted under section 5014

13 that is applicable to the service, its certification

14 under this section shall be terminated unless the

15 Secretary determines that appropriate corrective ac16 tion has been taken.

17 (2) CONDITIONAL CERTIFICATION—The Sec18 retary may establish a procedure under which a

19 health information network service may remain cer20 tified on a conditional basis if the service is operat21 ing consistently with a plan intended to correct any

22 violations described in paragraph (1). Such proce23 dure may provide for the appointment of a trustee

24 to continue operation of the service until the require25 ments for full certification are met.
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1 (d) CERTIFICATION BY PRIVATE ENTITIES.—The

2 Secretary may designate private entities to conduct the

3 certification procedures established by the Secretary under

4 this section. A health information network service certified

5 by such an entity in accordance with such designation

6 shall be considered to be certified by the Secretary.

7 (e) INFORMATION HELD BY HEALTH INFORMATION

8 NETWORK SERVICES.—If a health information network

9 service certified under this section loses its certified status

10 or takes any action that would threaten the continued

11 availability of the standard data elements of health infor12 mation held by such service, such data elements shall be

13 transferred to another health information network service

14 certified under this section that has been designated by

15 the Secretary.

16 SEC. 5032. IMPOSITION OF ADDITIONAL REQUIREMENTS.

17 (a) IN GENERAL.—Except as provided in subsection

18 (c), after the Secretary has established standards under

19 section 5012 that are necessary to make uniform and com20 patible for electronic transmission the data elements that

21 the Secretary determines are appropriate for transmission

22 in connection with a transaction described in part 2, an

23 individual or entity may not require an individual or en24 tity, to provide in any manner any additional data element

25 in connection with—
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1 (1) the transaction; or

2 (2) an inquiry with respect to the transaction.

3 (b) TRANSMISSION METHOD.—Except as provided in

4 subsection (c), after the Secretary has established stand5 ards under section 5013 relating to the method by which

6 data elements that the Secretary determines are appro7 priate for transmission in connection with a transaction

8 described in part 2 may be transmitted electronically, an

9 individual or entity may not require an individual or entity

10 to transmit any data element in a manner inconsistent

11 with the standards in connection with—

12 (1) the transaction; or

13 (2) an inquiry with respect to the transaction.

14 (c) EXCEPTION.—Subsections (a) and (b) do not

15 apply if—

16 (1) an individual or entity voluntarily agrees to

17 provide the additional data element; or

18 (2) a waiver is granted under subsection (d) to

19 permit the requirement to be imposed.

20 (d) CONDITIONS FOR WAIVERS.—

21 (1) IN GENERAL.—An individual or entity may

22 request a waiver from the Secretary in order to im23 pose on an individual or entity a requirement other24 wise prohibited under subsection (a) or (b). Subject
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1 to paragraph (2), the Secretary may grant such a

2 waiver.

3 (2) CONSIDERATION OF WAIVER REQUESTS.—A

4 waiver may not be granted under this subsection to

5 impose an otherwise prohibited requirement unless

6 the Secretary determines that the value of any addi7 tional information to be provided under the require8 ment for research or other purposes significantly

9 outweighs the administrative cost of the imposition

10 of the requirement, taking into account the burden

11 of the timing of the imposition of the requirement.

12 (e) ANONYMOUS REPORTING.—If an individual or en13 tity attempts to impose on an individual or entity a re14 quirement prohibited under subsection (a) or (b), the indi15 vidual or entity on whom the requirement is being imposed

16 may contact the Secretary. The Secretary shall develop a

17 procedure under which an individual or entity that con18 tacts the Secretary under the preceding sentence shall re19 main anonymous. The Secretary shall notify the individual

20 or entity imposing the requirement that the requirement

21 may not be imposed unless the other individual or entity

22 voluntarily agrees to such requirement or a waiver is ob23 tained under subsection (d).
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1 SEC. 5033. EFFECT ON STATE LAW.

2 (a) IN GENERAL.—Except as otherwise provided in

3 this section, a provision, requirement, or standard under

4 this subtitle shall supersede any contrary provision of

5 State law.

6 (b) STATE ‘‘QUILL AND PEN’’ LAWS.—A State may

7 not establish, continue in effect, or enforce any provision

8 of State law that requires medical or health plan records

9 (including billing information) to be maintained or trans10 mitted in written rather than electronic form, except

11 where the Secretary determines that the provision is nec12 essary to prevent fraud and abuse, with respect to con13 trolled substances, or for other purposes.

14 (c) PUBLIC HEALTH REPORTING.—Nothing in this

15 subtitle shall be construed to invalidate or limit the au16 thority, power, or procedures established under any law

17 providing for the reporting of disease or injury, child

18 abuse, birth, or death, public health surveillance, or public

19 health investigation or intervention.

20 (d) PUBLIC USE FUNCTIONS.—Nothing in this sub21 title shall be construed to limit the authority of a Federal

22 or State agency to make non-identifiable health informa23 tion available for public use.

24 (e) PAYMENT FOR HEALTH CARE SERVICES OR PRE25 MIUMS.—Nothing in this subtitle shall be construed to

26 prohibit a consumer from paying for health care items or
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1 services, or plan or health insurance coverage premiums,

2 by debit, credit, or other payment cards or numbers or

3 other electronic payment means.

4 Subtitle B—Antitrust

5 SEC. 5101. PUBLICATION OF ANTITRUST GUIDELINES ON

6 ACTIVITIES OF HEALTH PLANS.

7 (a) IN GENERAL.—The Attorney General shall pro8 vide for the development and publication of explicit guide9 lines on the application of antitrust laws to the activities

10 of health plans. The guidelines shall be designed to facili11 tate development and operation of plans, consistent with

12 the antitrust laws.

13 (b) REVIEW PROCESS.—The Attorney General shall

14 establish a review process under which the administrator

15 or sponsor of a health plan (or organization that proposes

16 to administer or sponsor a health plan) may submit a re17 quest to the Attorney General to obtain a prompt opinion

18 (but in no event later than 90 days after the Attorney

19 General receives the request) from the Department of Jus20 tice on the plan’s conformity with the Federal antitrust

21 laws.

22 (c) DEFINITIONS.—In this section—

23 (1) the term ‘‘antitrust laws’’—

24 (A) has the meaning given it in subsection

25 (a) of the first section of the Clayton Act (15
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1 U.S.C. 12(a)), except that such term includes

2 section 5 of the Federal Trade Commission Act

3 (15 U.S.C. 45) to the extent such section ap4 plies to unfair methods of competition, and

5 (B) includes any State law similar to the

6 laws referred to in subparagraph (A); and

7 (2) the term ‘‘health plan’’ means any contract

8 or arrangement under which an entity bears all or

9 part of the cost of providing health care items and

10 services, including a hospital or medical expense in11 curred policy or certificate, hospital or medical serv12 ice plan contract, or health maintenance subscriber

13 contract, but does not include—

14 (A) coverage only for accident, dental, vi15 sion, disability, or long term care, medicare

16 supplemental health insurance, or any combina17 tion thereof,

18 (B) coverage issued as a supplement to li19 ability insurance,

20 (C) workers’ compensation or similar in21 surance, or

22 (D) automobile medical-payment insur23 ance.
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1 SEC. 5102. ISSUANCE OF HEALTH CARE CERTIFICATES OF

2 PUBLIC ADVANTAGE.

3 (a) ISSUANCE AND EFFECT OF CERTIFICATE.—The

4 Attorney General, after consultation with the Secretary,

5 shall issue in accordance with this section a certificate of

6 public advantage to each eligible health care collaborative

7 activity that complies with the requirements in effect

8 under this section on or after the expiration of the 1-year

9 period that begins on the date of the enactment of this

10 Act (without regard to whether or not the Attorney Gen11 eral has promulgated regulations to carry out this section

12 by such date). Such activity, and the parties to such activ13 ity, shall not be liable under any of the antitrust laws for

14 conduct described in such certificate and engaged in by

15 such activity if such conduct occurs while such certificate

16 is in effect.

17 (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF

18 CERTIFICATES.—

19 (1) STANDARDS TO BE MET.—The Attorney

20 General shall issue a certificate to an eligible health

21 care collaborative activity if the Attorney General

22 finds that—

23 (A) the benefits that are likely to result

24 from carrying out the activity outweigh the re25 duction in competition (if any) that is likely to

26 result from the activity, and
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1 (B) such reduction in competition is nec2 essary to obtain such benefits.

3 (2) FACTORS TO BE CONSIDERED.—

4 (A) WEIGHING OF BENEFITS AGAINST RE5 DUCTION IN COMPETITION.—For purposes of

6 making the finding described in paragraph

7 (1)(A), the Attorney General shall consider

8 whether the activity is likely—

9 (i) to maintain or to increase the

10 quality of health care by providing new

11 services not currently offered in the rel12 evant market,

13 (ii) to increase access to health care,

14 (iii) to achieve cost efficiencies that

15 will be passed on to health care consumers,

16 such as economies of scale, reduced trans17 action costs, and reduced administrative

18 costs, that cannot be achieved by the provi19 sion of available services and facilities in

20 the relevant market,

21 (iv) to preserve the operation of

22 health care facilities located in underserved

23 geographical areas,

24 (v) to improve utilization of health

25 care resources, and
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1 (vi) to reduce inefficient health care

2 resource duplication.

3 (B) NECESSITY OF REDUCTION IN COM4 PETITION.—For purposes of making the finding

5 described in paragraph (1)(B), the Attorney

6 General shall consider—

7 (i) the ability of the providers of

8 health care services that are (or likely to

9 be) affected by the health care collabo10 rative activity and the entities responsible

11 for making payments to such providers to

12 negotiate societally optimal payment and

13 service arrangements,

14 (ii) the effects of the health care col15 laborative activity on premiums and other

16 charges imposed by the entities described

17 in clause (i), and

18 (iii) the availability of equally effi19 cient, less restrictive alternatives to achieve

20 the benefits that are intended to be

21 achieved by carrying out the activity.

22 (c) ESTABLISHMENT OF CRITERIA AND PROCE23 DURES.—Subject to subsections (d) and (e), not later than

24 1 year after the date of the enactment of this Act, the

25 Attorney General and the Secretary shall establish jointly
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1 by rule the criteria and procedures applicable to the issu2 ance of certificates under subsection (a). The rules shall

3 specify the form and content of the application to be sub4 mitted to the Attorney General to request a certificate,

5 the information required to be submitted in support of

6 such application, the procedures applicable to denying and

7 to revoking a certificate, and the procedures applicable to

8 the administrative appeal (if such appeal is authorized by

9 rule) of the denial and the revocation of a certificate. Such

10 information may include the terms of the health care col11 laborative activity (in the case of an activity in existence

12 as of the time of the application) and implementation plan

13 for the collaborative activity.

14 (d) ELIGIBLE HEALTH CARE COLLABORATIVE AC15 TIVITY.—To be an eligible health care collaborative activ16 ity for purposes of this section, a health care collaborative

17 activity shall submit to the Attorney General an applica18 tion that complies with the rules in effect under subsection

19 (c) and that includes—

20 (1) an agreement by the parties to the activity

21 that the activity will not foreclose competition by en22 tering into contracts that prevent health care provid23 ers from providing health care in competition with

24 the activity,
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1 (2) an agreement that the activity will submit

2 to the Attorney General annually a report that de3 scribes the operations of the activity and information

4 regarding the impact of the activity on health care

5 and on competition in health care, and

6 (3) an agreement that the parties to the activity

7 will notify the Attorney General and the Secretary of

8 the termination of the activity not later than 30

9 days after such termination occurs.

10 (e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—

11 Not later than 90 days after an eligible health care col12 laborative activity submits to the Attorney General an ap13 plication that complies with the rules in effect under sub14 section (c) and with subsection (d), the Attorney General

15 shall issue or deny the issuance of such certificate. If, be16 fore the expiration of such 90-day period, the Attorney

17 General may extend the time for issuance for good cause.

18 (f) REVOCATION OF CERTIFICATE.—Whenever the

19 Attorney General finds that a health care collaborative ac20 tivity with respect to which a certificate is in effect does

21 not meet the standards specified in subsection (b), the At22 torney General shall revoke such certificate.

23 (g) WRITTEN REASONS; JUDICIAL REVIEW.—

24 (1) DENIAL AND REVOCATION OF CERTIFI25 CATES.—If the Attorney General denies an applica-
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1 tion for a certificate or revokes a certificate, the At2 torney General shall include in the notice of denial

3 or revocation a statement of the reasons relied upon

4 for the denial or revocation of such certificate.

5 (2) JUDICIAL REVIEW.—

6 (A) AFTER ADMINISTRATIVE PROCEED7 ING.—(i) If the Attorney General denies an ap8 plication submitted or revokes a certificate is9 sued under this section after an opportunity for

10 hearing on the record, then any party to the

11 health care collaborative activity involved may

12 commence a civil action, not later than 60 days

13 after receiving notice of the denial or revoca14 tion, in an appropriate district court of the

15 United States for review of the record of such

16 denial or revocation.

17 (ii) As part of the Attorney General’s an18 swer, the Attorney General shall file in such

19 court a certified copy of the record on which

20 such denial or revocation is based. The findings

21 of fact of the Attorney General may be set aside

22 only if found to be unsupported by substantial

23 evidence in such record taken as a whole.

24 (B) DENIAL OR REVOCATION WITHOUT AD25 MINISTRATIVE PROCEEDING.—If the Attorney
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1 General denies an application submitted or re2 vokes a certificate issued under this section

3 without an opportunity for hearing on the

4 record, then any party to the health care col5 laborative activity involved may commence a

6 civil action, not later than 60 days after receiv7 ing notice of the denial or revocation, in an ap8 propriate district court of the United States for

9 de novo review of such denial or revocation.

10 (h) EXEMPTION.—A person shall not be liable under

11 any of the antitrust laws for conduct necessary—

12 (1) to prepare, agree to prepare, or attempt to

13 agree to prepare an application to request a certifi14 cate under this section, or

15 (2) to attempt to enter into any health care col16 laborative activity with respect to which such a cer17 tificate is in effect.

18 (i) DEFINITIONS.—In this section:

19 (1) The term ‘‘antitrust laws’’ has the meaning

20 given it in section 5101(c)(1).

21 (2) The term ‘‘certificate’’ means a certificate

22 of public advantage authorized to be issued under

23 subsection (a).

24 (3) The term ‘‘health care collaborative activ25 ity’’ means an agreement (whether existing or pro-
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1 posed) between 2 or more providers of health care

2 services that is entered into solely for the purpose of

3 sharing in the provision and coordination of health

4 care services and that involves substantial integra5 tion and financial risk-sharing between the parties,

6 but does not include the exchanging of information,

7 the entering into of any agreement, or the engage8 ment in any other conduct that is not reasonably re9 quired to carry out such agreement.

10 (4) The term ‘‘health care services’’ includes

11 services related to the delivery or administration of

12 health care services.

13 (5) The term ‘‘liable’’ means liable for any civil

14 or criminal violation of the antitrust laws.

15 (6) The term ‘‘provider of health care services’’

16 means any individual or entity that is engaged in the

17 delivery of health care services in a State and that

18 is required by State law or regulation to be licensed

19 or certified by the State to engage in the delivery of

20 such services in the State.

21 SEC. 5103. STUDY OF IMPACT ON COMPETITION.

22 The Attorney General, in consultation with the Chair23 man of the Federal Trade Commission, annually shall sub24 mit to the Congress a report as part of the annual budget

25 oversight proceedings concerning the Antitrust Division of
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1 the Department of Justice. The report shall enable the

2 Congress to determine how enforcement of antitrust laws

3 is affecting the formation of efficient, cost-saving joint

4 ventures and if the certificate of public advantage proce5 dure set forth in section 5102 has resulted in undesirable

6 reduction in competition in the health care marketplace.

7 The report shall include an evaluation of the factors set

8 forth in paragraphs (2)(A) and (2)(B) of section 5102(b).

9 TITLE VI—MEDICARE

10 Subtitle A—Increased Beneficiary

11 Choice; Improved Program Effi12 ciency

13 PART 1—INCREASED BENEFICIARY CHOICE

14 SEC. 6001. REQUIREMENTS FOR HEALTH MAINTENANCE

15 ORGANIZATIONS UNDER MEDICARE.

16 (a) USE OF METROPOLITAN STATISTICAL AREAS TO

17 DETERMINE ADJUSTED AVERAGE PER CAPITA COST.—

18 Section 1876(a)(4) of the Social Security Act (42 U.S.C.

19 1395mm(a)(4)) is amended by striking ‘‘in a geographic

20 area served by an eligible organization or in a similar

21 area’’ and inserting ‘‘in the metropolitan statistical area

22 (as defined by the Office of Management and Budget) in

23 which the individual resides, or in the entire portion of

24 the State in which the individual resides which is not lo25 cated in a metropolitan statistical area in the case of an
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1 individual who does not reside in a metropolitan statistical

2 area’’.

3 (b) DETERMINATION OF MODEL ADDITIONAL

4 HEALTH BENEFIT PACKAGES.—Section 1876(g) of such

5 Act (42 U.S.C. 1395mm(g)) is amended by inserting after

6 paragraph (3) the following new paragraph:

7 ‘‘(4) The Secretary shall develop the following model

8 packages of additional health benefits (referred to in para9 graph (3)(B)) which an eligible organization may provide

10 (at its option) under paragraph (2):

11 ‘‘(A) Coverage for catastrophic illness (subject

12 to a limit on out-of-pocket expenditures).

13 ‘‘(B) Coverage for prescription drugs.

14 ‘‘(C) Coverage for preventive services.’’.

15 (c) REVISION OF MEMBERSHIP LIMITATION.—Sec16 tion 1876(f) of such Act (42 U.S.C. 1395mm(f)) is

17 amended—

18 (1) in paragraph (1), by striking ‘‘one-half’’

19 and inserting ‘‘25 percent’’; and

20 (2) in paragraph (2)(A), by striking ‘‘50 per21 cent’’ and inserting ‘‘75 percent’’.

22 (d) ENROLLMENT PERIODS FOR MEDICARE HEALTH

23 MAINTENANCE ORGANIZATIONS.—

24 (1) UNIFORM OPEN ENROLLMENT PERIOD.—

25 Section 1876(c)(3)(A)(i) of such Act (42 U.S.C.
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1 1395mm(c)(3)(A)(i)) is amended by striking ‘‘must

2 have’’ and all that follows through ‘‘and including’’

3 and inserting the following: ‘‘shall have open enroll4 ment during an annual uniform open enrollment pe5 riod established by the Secretary for all eligible orga6 nizations, together with’’.

7 (2) OPEN ENROLLMENT FOR CERTAIN

8 DISENROLLED INDIVIDUALS.—Section

9 1876(c)(3)(A)(ii)(I) of such Act (42 U.S.C.

10 1395mm(c)(3)(A)(ii)(I)) is amended by adding at

11 the end the following: ‘‘Each eligible organization

12 with a risk-sharing contract under this section shall

13 have an open enrollment period for individuals resid14 ing in the organization’s service area who disenroll

15 from another eligible organization with a risk-shar16 ing contract under this section on the grounds that

17 the individual’s primary care physician is no longer

18 a member of the organization’s provider network or

19 for cause (in accordance with such standards, and as

20 demonstrated through an appeals process that meets

21 such requirements, as the Secretary may establish).

22 (e) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to contracts entered into on or

24 after the date of the enactment of this Act.
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1 SEC. 6002. 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. 6003. 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. 6004. 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. 6005. 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 6003, 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 6005 of the Health Care Improvement

25 Act of 1995 for payment to be made by the Sec-
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1 retary on the individual’s behalf for enrollment in a

2 private health insurance plan.’’.

3 PART 2—IMPROVED PROGRAM EFFICIENCY

4 SEC. 6011. IMPROVED EFFICIENCY THROUGH CONSOLIDA5 TION OF ADMINISTRATION OF PARTS A AND

6 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 4-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. 6021. 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 SEC. 6101. REDUCTION IN CONVERSION FACTOR FOR PHY3 SICIAN FEE SCHEDULE FOR NON-PRIMARY

4 CARE SERVICES.

5 Section 1848(d)(3)(A) of the Social Security Act (42

6 U.S.C. 1395w–4(d)(3)(A)) is amended—

7 (1) in clause (i), by striking ‘‘through (v)’’ and

8 inserting ‘‘through (vi)’’;

9 (2) in clause (vi), by striking ‘‘(iv) and (v)’’ and

10 inserting ‘‘(iv), (v), and (vi)’’;

11 (3) by redesignating clause (vi) as clause (vii);

12 and

13 (4) by inserting after clause (v) the following

14 new clause:

15 ‘‘(vi) ADJUSTMENT IN PERCENTAGE

16 INCREASE FOR YEARS FROM 1998

17 THROUGH 2001.—In applying clause (i) for

18 services furnished during the period begin19 ning January 1, 1998, and ending Decem20 ber 31, 2001, the percentage increase in

21 the appropriate update index shall be re22 duced by such percent as the Secretary de23 termines will result in a reduction in ag24 gregate payments for physicians’ services

25 under this part during such period of at
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1 least $6,300,000,000 from the amount of

2 aggregate payments for such services that

3 would otherwise have been made during

4 the period.’’.

5 SEC. 6102. REDUCTION IN HOSPITAL OUTPATIENT SERV6 ICES THROUGH ESTABLISHMENT OF PRO7 SPECTIVE PAYMENT SYSTEM.

8 (a) IN GENERAL.—Section 1833(a)(2)(B) of the So9 cial Security Act (42 U.S.C. 1395l(a)(2)(B)) is amended

10 by striking ‘‘section 1886)—’’ and all that follows and in11 serting the following: ‘‘section 1886), an amount equal to

12 a prospectively determined payment rate established by

13 the Secretary that provides for payments for such items

14 and services to be based upon a national rate adjusted

15 to take into account the relative costs of furnishing such

16 items and services in various geographic areas, except that

17 for items and services furnished during cost reporting pe18 riods (or portions thereof) in years beginning with 1997,

19 such amount shall be equal to 90 percent of the amount

20 that would otherwise have been determined;’’.

21 (b) ESTABLISHMENT OF PROSPECTIVE PAYMENT

22 SYSTEM.—Not later than July 1, 1996, the Secretary of

23 Health and Human Services shall establish the prospective

24 payment system for hospital outpatient services necessary
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1 to carry out section 1833(a)(2)(B) of the Social Security

2 Act (as amended by subsection (a)).

3 (c) EFFECTIVE DATE.—The amendment made by

4 subsection (a) shall apply to items and services furnished

5 on or after January 1, 1997.

6 SEC. 6103. INCREASE IN MEDICARE PART B PREMIUM FOR

7 INDIVIDUALS WITH HIGH INCOME.

8 (a) IN GENERAL.—Subchapter A of chapter 1 of the

9 Internal Revenue Code of 1986 is amended by adding at

10 the end thereof the following new part:

11 ‘‘PART VIII—MEDICARE PART B PREMIUMS FOR

12 HIGH-INCOME INDIVIDUALS

‘‘Sec. 49B. Medicare part B premium tax.

13 ‘‘SEC. 59B. MEDICARE PART B PREMIUM TAX.

14 ‘‘(a) IMPOSITION OF TAX.—In the case of an individ15 ual to whom this section applies for the taxable year, there

16 is hereby imposed (in addition to any other tax imposed

17 by this subtitle) a tax for such taxable year equal to the

18 aggregate of the Medicare part B premium taxes for each

19 of the months during such year that such individual is

20 covered by Medicare part B.

21 ‘‘(b) INDIVIDUALS TO WHOM SECTION APPLIES.—

22 This section shall apply to any individual for any taxable

23 year if—
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1 ‘‘(1) such individual is covered under Medicare

2 part B for any month during such year, and

3 ‘‘(2) the modified adjusted gross income of the

4 taxpayer for such taxable year exceeds the threshold

5 amount.

6 ‘‘(c) MEDICARE PART B PREMIUM TAX FOR

7 MONTH.—

8 ‘‘(1) IN GENERAL.—The Medicare part B pre9 mium tax for any month is the applicable percentage

10 (as defined in paragraph (2)) of the amount equal

11 to the excess of—

12 ‘‘(A) 150 percent of the monthly actuarial

13 rate for enrollees age 65 and over determined

14 for that calendar year under section 1839(b) of

15 the Social Security Act, over

16 ‘‘(B) the total monthly premium under sec17 tion 1839 of the Social Security Act (deter18 mined without regard to subsections (b) and (f)

19 of section 1839 of such Act).

20 ‘‘(2) PHASE-IN OF TAX.—If the modified ad21 justed gross income of the taxpayer for any taxable

22 years exceeds the threshold amount by—

23 ‘‘(A) less than $25,000, the applicable per24 centage under this paragraph is 33 percent;
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1 ‘‘(B) at least $25,000, but less than

2 $50,000, the applicable percentage under this

3 paragraph is 66 percent,

4 ‘‘(C) at least $50,000, but less than

5 $75,000, the applicable percentage under this

6 paragraph is 75 percent, or

7 ‘‘(D) at least $75,000, the applicable per8 centage under this paragraph is 100 percent.

9 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

10 For purposes of this section—

11 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh12 old amount’ means—

13 ‘‘(A) except as otherwise provided in this

14 paragraph, $75,000,

15 ‘‘(B) $100,000 in the case of a joint re16 turn, and

17 ‘‘(C) zero in the case of a taxpayer who—

18 ‘‘(i) is married at the close of the tax19 able year but does not file a joint return

20 for such year, and

21 ‘‘(ii) does not live apart from his

22 spouse at all times during the taxable year.

23 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

24 The term ‘modified adjusted gross income’ means

25 adjusted gross income—
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1 ‘‘(A) determined without regard to sections

2 135, 911, 931, and 933, and

3 ‘‘(B) increased by the amount of interest

4 received or accrued by the taxpayer during the

5 taxable year which is exempt from tax.

6 ‘‘(3) MEDICARE PART B COVERAGE.—An indi7 vidual shall be treated as covered under Medicare

8 part B for any month if a premium is paid under

9 part B of title XVIII of the Social Security Act for

10 the coverage of the individual under such part for

11 the month.

12 ‘‘(4) MARRIED INDIVIDUAL.—The determina13 tion of whether an individual is married shall be

14 made in accordance with section 7703.’’.

15 (b) CLERICAL AMENDMENT.—The table of parts for

16 subchapter A of chapter 1 of such Code is amended by

17 adding at the end thereof the following new item:

‘‘Part VIII. Medicare Part B Premiums For High-Income Individuals.’’.

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

19 this section shall apply to months after December 1995

20 in taxable years ending after December 31, 1995.
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1 SEC. 6104. PHASED-IN ELIMINATION OF MEDICARE HOS2 PITAL DISPROPORTIONATE SHARE ADJUST3 MENT PAYMENTS.

4 Section 1886(d)(5)(F) of the Social Security Act (42

5 U.S.C. 1395ww(d)(5)(F)) is amended—

6 (1) in clause (i), by inserting ‘‘and before Sep7 tember 30, 2000,’’ after ‘‘1986,’’;

8 (2) in clause (ii), by striking ‘‘The amount of

9 such payment’’ and inserting ‘‘Subject to clause (ix),

10 the amount of such payment’’; and

11 (3) by adding at the end the following new

12 clause:

13 ‘‘(ix) The amount of the additional payment made

14 under this paragraph for a discharge shall be equal to—

15 ‘‘(I) for discharges occurring during fiscal year

16 1997, 80 percent of the amount otherwise deter17 mined for the discharge under clause (ii);

18 ‘‘(II) for discharges occurring during fiscal year

19 1998, 60 percent of the amount otherwise deter20 mined for the discharge under clause (ii);

21 ‘‘(III) for discharges occurring during fiscal

22 year 1999, 40 percent of the amount otherwise de23 termined for the discharge under clause (ii); and

24 ‘‘(IV) for discharges occurring during fiscal

25 year 2000, 20 percent of the amount otherwise de26 termined for the discharge under clause (ii).’’.
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1 SEC. 6105. 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, 1996.

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