I

103D CONGRESS

2D SESSION H. R. 3960

To provide for health care for every American and to control the cost and

enhance the quality of the health care system.

IN THE HOUSE OF REPRESENTATIVES

MARCH 3, 1994

Mr. MILLER of California (for himself, Mr. MCDERMOTT, Mr. BECERRA, Mr.

CLAY, Mr. DELUGO, Mr. ENGEL, Mr. FALEOMAVAEGA, Mrs. MINK, Mr.

MURPHY, Mr. OWENS, Mr. PAYNE of New Jersey, Mr. ROMEROBARCELO ́, Mr. SCOTT, and Ms. WOOLSEY) introduced the following bill;

which was referred to the Committee on Energy and Commerce, Ways

and Means, Armed Services, Post Office and Civil Service, Natural Resources, and Education and Labor

A BILL

To provide for health care for every American and to control

the cost and enhance the quality of the health care system.

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 ‘‘American Health Security Act of 1994’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.
2

•HR 3960 IH

TITLE I—ESTABLISHMENT OF A STATE-BASED AMERICAN

HEALTH SECURITY PROGRAM; UNIVERSAL ENTITLEMENT; ENROLLMENT

Sec. 101. Establishment of a State-based American Health Security Program.

Sec. 102. Universal entitlement.

Sec. 103. Enrollment.

Sec. 104. Portability of benefits.

Sec. 105. Effective date of benefits.

Sec. 106. Relationship to existing Federal health programs.

TITLE II—COMPREHENSIVE BENEFITS, INCLUDING PREVENTIVE

BENEFITS AND BENEFITS FOR LONG TERM CARE

Sec. 201. Comprehensive benefits.

Sec. 202. Definitions relating to services.

Sec. 203. Special rules for home and community-based long-term care services.

Sec. 204. Exclusions and limitations.

Sec. 205. Certification; quality review; plans of care.

TITLE III—PROVIDER PARTICIPATION

Sec. 301. Provider participation and standards.

Sec. 302. Qualifications for providers.

Sec. 303. Qualifications for comprehensive health service organizations.

Sec. 304. Limitation on certain physician referrals.

TITLE IV—ADMINISTRATION

Subtitle A—General Administrative Provisions

Sec. 401. American Health Security Standards Board.

Sec. 402. American Health Security Advisory Council.

Sec. 403. Professional, technical, and temporary advisory committees.

Sec. 404. American Health Security Quality Council.

Sec. 405. State health security programs.

Sec. 406. Complementary conduct of related health programs.

Subtitle B—Control Over Fraud and Abuse

Sec. 411. Application of Federal sanctions to all fraud and abuse under American Health Security Program.

Sec. 412. National health care fraud data base.

Sec. 413. Requirements for operation of State health care fraud and abuse control units.

Sec. 414. Assignment of unique provider and patient identifiers.

TITLE V—QUALITY ASSESSMENT

Sec. 501. Functions of Quality Council; development of practice guidelines and

application to outliers.

Sec. 502. State quality review programs.

Sec. 503. Elimination of existing utilization review programs; transition.

Sec. 504. Development of national electronic data base.

TITLE VI—NATIONAL HEALTH SECURITY BUDGET; PAYMENTS;

COST CONTAINMENT MEASURES
3

•HR 3960 IH

Subtitle A—Budgeting and Payments to States

Sec. 601. National health security budget.

Sec. 602. Computation of individual and State capitation amounts.

Sec. 603. State health security budgets.

Sec. 604. Federal payments to States.

Sec. 605. Account for health professional education expenditures.

Subtitle B—Payments by States to Providers

Sec. 611. Payments to hospitals and other facility-based services for operating

expenses on the basis of approved global budgets.

Sec. 612. Payments to health care practitioners based on prospective fee

schedule.

Sec. 613. Payments to comprehensive health service organizations.

Sec. 614. Payments for community-based primary health services.

Sec. 615. Payments for prescription drugs.

Sec. 616. Approved devices and equipment.

Sec. 617. Payments for other items and services.

Sec. 618. Payment incentives for medically underserved areas.

Sec. 619. Authority for alternative payment methodologies.

Subtitle C—Mandatory Assignment and Administrative Provisions

Sec. 621. Mandatory assignment.

Sec. 622. Procedures for reimbursement; appeals.

TITLE VII—PROMOTION OF PRIMARY HEALTH CARE; DEVELOPMENT OF HEALTH SERVICE CAPACITY; PROGRAMS TO ASSIST

THE MEDICALLY UNDERSERVED

Subtitle A—Promotion and Expansion of Primary Care Professional Training

Sec. 701. Role of Board; establishment of primary care professional output

goals.

Sec. 702. Establishment of Advisory Committee on Health Professional Education.

Sec. 703. Grants for health professions education, nurse education, and the National Health Service Corps.

Subtitle B—Direct Health Care Delivery

Sec. 711. Setaside for public health block grants.

Sec. 712. Setaside for primary health care delivery.

Sec. 713. Primary care service expansion grants.

Subtitle C—Primary Care and Outcomes Research

Sec. 721. Set-aside for outcomes research.

Sec. 722. Office of Primary Care and Prevention Research.

Subtitle D—School-Related Health Services

Sec. 731. Authorizations of appropriations.

Sec. 732. Eligibility for development and operation grants.

Sec. 733. Preferences.

Sec. 734. Grants for development of projects.

Sec. 735. Grants for operation of projects.
4

•HR 3960 IH

Sec. 736. Federal administrative costs.

Sec. 737. Definitions.

TITLE VIII—FINANCING PROVISIONS; AMERICAN HEALTH

SECURITY TRUST FUND

Sec. 800. Amendment of 1986 code; section 15 not to apply.

Subtitle A—American Health Security Trust Fund

Sec. 801. American health security trust fund.

Subtitle B—Taxes Based on Income and Wages

Sec. 811. Payroll tax on employers.

Sec. 812. Health care income tax.

Subtitle C—Increase in Excise Taxes on Tobacco Products

Sec. 821. Increase in excise taxes on tobacco products.

Subtitle D—Increase in Taxes on Firearms and Ammunition

Sec. 831. Increase in taxes on firearms and ammunition.

TITLE IX—CONFORMING AMENDMENTS TO THE EMPLOYEE

RETIREMENT INCOME SECURITY ACT OF 1974

Sec. 901. ERISA inapplicable to health coverage arrangements under State

health security programs.

Sec. 902. Exemption of State health security programs from ERISA preemption.

Sec. 903. Prohibition of employee benefits duplicative of benefits under State

health security programs.

Sec. 903. Repeal of continuation coverage requirements under ERISA and certain other requirements relating to group health plans.

Sec. 904. Effective date of title.

1 TITLE I—ESTABLISHMENT OF A

2 STATE-BASED AMERICAN

3 HEALTH SECURITY PRO4 GRAM; UNIVERSAL ENTITLE5 MENT; ENROLLMENT

6 SEC. 101. ESTABLISHMENT OF A STATE-BASED AMERICAN

7 HEALTH SECURITY PROGRAM.

8 (a) IN GENERAL.—There is hereby established in the

9 United States a State-Based American Health Security
5

•HR 3960 IH

1 Program to be administered by the individual States in

2 accordance with Federal standards specified in, or estab3 lished under, this Act.

4 (b) STATE HEALTH SECURITY PROGRAMS.—In order

5 for a State to be eligible to receive payment under section

6 604, a State must establish a State health security pro7 gram in accordance with this Act.

8 (c) STATE DEFINED.—

9 (1) IN GENERAL.—In this Act, subject to para10 graph (2), the term ‘‘State’’ means each of the fifty

11 States and the District of Columbia.

12 (2) ELECTION.—If the Governor of Puerto

13 Rico, the Virgin Islands, Guam, American Samoa, or

14 the Northern Mariana Islands certifies to the Presi15 dent that the legislature of the Commonwealth or

16 territory has enacted legislation desiring that the

17 Commonwealth or territory be included as a State

18 under the provisions of this Act, such Common19 wealth or territory shall be included as a ‘‘State’’

20 under this Act beginning January 1 of the first year

21 beginning ninety days after the President receives

22 the notification.

23 SEC. 102. UNIVERSAL ENTITLEMENT.

24 (a) IN GENERAL.—Every individual who is a resident

25 of the United States and is a citizen or national of the
6

•HR 3960 IH

1 United States or lawful resident alien (as defined in sub2 section (d) is entitled to benefits for health care services

3 under this Act under the appropriate State health security

4 program. In this section, the term ‘‘appropriate State

5 health security program’’ means, with respect to an indi6 vidual, the State health security program for the State in

7 which the individual maintains a primary residence.

8 (b) TREATMENT OF CERTAIN NONIMMIGRANTS.—

9 (1) IN GENERAL.—The American Health Secu10 rity Standards Board (in this Act referred to as the

11 ‘‘Board’’) may make eligible for benefits for health

12 care services under the appropriate State health se13 curity program under this Act such classes of aliens

14 admitted to the United States as nonimmigrants as

15 the Board may provide.

16 (2) CONSIDERATION.—In providing for eligi17 bility under paragraph (1), the Board shall consider

18 reciprocity in health care services offered to United

19 States citizens who are nonimmigrants in other for20 eign states, and such other factors as the Board

21 determines to be appropriate.

22 (c) TREATMENT OF OTHER INDIVIDUALS.—

23 (1) BY BOARD.—The Board also may make eli24 gible for benefits for health care services under the

25 appropriate State health security program under this
7

•HR 3960 IH

1 Act other individuals not described in subsection (a)

2 or (b), and regulate the nature of the eligibility of

3 such individuals, in order—

4 (A) to preserve the public health of

5 communities,

6 (B) to compensate States for the addi7 tional health care financing burdens created by

8 such individuals, and

9 (C) to prevent adverse financial and medi10 cal consequences of uncompensated care,

11 while inhibiting travel and immigration to the

12 United States for the sole purpose of obtaining

13 health care services.

14 (2) BY STATES.—Any State health security pro15 gram may make individuals described in paragraph

16 (1) eligible for benefits at the expense of the State.

17 (d) LAWFUL RESIDENT ALIEN DEFINED.—For pur18 poses of this section, the term ‘‘lawful resident alien’’

19 means an alien lawfully admitted for permanent residence

20 and any other alien lawfully residing permanently in the

21 United States under color of law, including an alien with

22 lawful temporary resident status under section 210, 210A,

23 or 234A of the Immigration and Nationality Act (8 U.S.C.

24 1160, 1161, or 1255a).
8

•HR 3960 IH

1 SEC. 103. ENROLLMENT.

2 (a) IN GENERAL.—Each State health security pro3 gram shall provide a mechanism for the enrollment of indi4 viduals entitled or eligible for benefits under this Act. The

5 mechanism shall—

6 (1) include a process for the automatic enroll7 ment of individuals at the time of birth in the

8 United States and at the time of immigration into

9 the United States or other acquisition of lawful resi10 dent status in the United States,

11 (2) provide for the enrollment, as of January 1,

12 1996, of all individuals who are eligible to be en13 rolled as of such date, and

14 (3) include a process for the enrollment of indi15 viduals made eligible for health care services under

16 subsections (b) and (c) of section 102.

17 (b) AVAILABILITY OF APPLICATIONS.—Each State

18 health security program shall make applications for enroll19 ment under the program available—

20 (1) at employment and payroll offices of em21 ployers located in the State,

22 (2) at local offices of the Social Security

23 Administration,

24 (3) at social services locations,

25 (4) at out-reach sites (such as provider and

26 practitioner locations), and
9

•HR 3960 IH

1 (5) at other locations (including post offices

2 and schools) accessible to a broad cross-section of

3 individuals eligible to enroll.

4 (c) ISSUANCE OF HEALTH SECURITY CARDS.—In

5 conjunction with an individual’s enrollment for benefits

6 under this Act, the State health security program shall

7 provide for the issuance of a health security card which

8 shall be used for purposes of identification and processing

9 of claims for benefits under the program. The State health

10 security program may provide for issuance of such cards

11 by employers for purposes of carrying out enrollment pur12 suant to subsection (a)(2).

13 SEC. 104. PORTABILITY OF BENEFITS.

14 (a) IN GENERAL.—To ensure continuous access to

15 benefits for health care services covered under this Act,

16 each State health security program—

17 (1) shall not impose any minimum period of

18 residence in the State, or waiting period, in excess

19 of three months before residents of the State are

20 entitled to, or eligible for, such benefits under the

21 program;

22 (2) shall provide continuation of payment for

23 covered health care services to individuals who have

24 terminated their residence in the State and estab25 lished their residence in another State, for the dura-
10

•HR 3960 IH

1 tion of any waiting period imposed in the State of

2 new residency for establishing entitlement to, or

3 eligibility for, such services; and

4 (3) shall provide for the payment for health

5 care services covered under this Act provided to indi6 viduals while temporarily absent from the State

7 based on the following principles:

8 (A) Payment for such health care services

9 is at the rate that is approved by the State

10 health security program in the State in which

11 the services are provided, unless the States con12 cerned agree to apportion the cost between

13 them in a different manner.

14 (B) Payment for such health care services

15 provided outside the United States is made on

16 the basis of the amount that would have been

17 paid by the State health security program for

18 similar services rendered in the State, with due

19 regard, in the case of hospital services, to the

20 size of the hospital, standards of service, and

21 other relevant factors.

22 (b) CROSS-BORDER ARRANGEMENTS.—A State

23 health security program for a State may negotiate with

24 such a program in an adjacent State a reciprocal arrange-
11

•HR 3960 IH

1 ment for the coverage under such other program of health

2 care services to enrollees residing in the border region.

3 SEC. 105. EFFECTIVE DATE OF BENEFITS.

4 Benefits shall first be available under this Act for

5 items and services furnished on or after January 1, 1996.

6 SEC. 106. RELATIONSHIP TO EXISTING FEDERAL HEALTH

7 PROGRAMS.

8 (a) MEDICARE AND MEDICAID.—

9 (1) IN GENERAL.—Notwithstanding any other

10 provision of law, subject to paragraph (2)—

11 (A) no benefits shall be available under

12 title XVIII of the Social Security Act for any

13 item or service furnished after December 31,

14 1995,

15 (B) no individual is entitled to medical as16 sistance under a State plan approved under

17 title XIX of such Act for any item or service

18 furnished after such date, and

19 (C) no payment shall be made to a State

20 under section 1903(a) of such Act with respect

21 to medical assistance for any item or service

22 furnished after such date.

23 (2) TRANSITION.—In the case of inpatient hos24 pital services and extended care services during a

25 continuous period of stay which began before Janu-
12

•HR 3960 IH

1 ary 1, 1996, and which had not ended as of such

2 date, for which benefits are provided under title

3 XVIII, or under a State plan under title XIX, of the

4 Social Security Act, the Secretary of Health and

5 Human Services and each State plan, respectively,

6 shall provide for continuation of benefits under such

7 title or plan until the end of the period of stay.

8 (b) FEDERAL EMPLOYEES HEALTH BENEFITS PRO9 GRAM.—No benefits shall be made available under chapter

10 89 of title 5, United States Code, for any part of a cov11 erage period occurring after December 31, 1995.

12 (c) CHAMPUS.—No benefits shall be made available

13 under sections 1079 and 1086 of title 10, United States

14 Code, for items or services furnished after December 31,

15 1995.

16 (d) TREATMENT OF BENEFITS FOR VETERANS AND

17 NATIVE AMERICANS.—Nothing in this Act shall affect the

18 eligibility of veterans for the medical benefits and services

19 provided under title 38, United States Code, or of Indians

20 for the medical benefits and services provided by or

21 through the Indian Health Service.
13

•HR 3960 IH

1 TITLE II—COMPREHENSIVE BEN2 EFITS, INCLUDING PREVEN3 TIVE BENEFITS AND BENE4 FITS FOR LONG TERM CARE

5 SEC. 201. COMPREHENSIVE BENEFITS.

6 (a) IN GENERAL.—Subject to the succeeding provi7 sions of this title, individuals enrolled for benefits under

8 this Act are entitled to have payment made under a State

9 health security program for the following items and serv10 ices if medically necessary or appropriate for the mainte11 nance of health or for the diagnosis, treatment, or rehabili12 tation of a health condition:

13 (1) HOSPITAL SERVICES.—Inpatient and out14 patient hospital care, including 24-hour a day emer15 gency services.

16 (2) PROFESSIONAL SERVICES.—Professional

17 services of health care practitioners authorized to

18 provide health care services under State law.

19 (3) COMMUNITY-BASED PRIMARY HEALTH

20 SERVICES.—Community-based primary health serv21 ices (as defined in section 202(a)).

22 (4) PREVENTIVE SERVICES.—Preventive serv23 ices (as defined in section 202(b)).

24 (5) LONG-TERM AND CHRONIC CARE SERV25 ICES.—
14

•HR 3960 IH

1 (A) Nursing facility services.

2 (B) Home health services.

3 (C) Home and community-based long term

4 care services (as defined in section 202(c)) for

5 individuals described in section 203(a).

6 (D) Hospice care.

7 (6) PRESCRIPTION DRUGS, BIOLOGICALS, INSU8 LIN, MEDICAL FOODS.—

9 (A) Outpatient prescription drugs and

10 biologicals, as specified by the Board consistent

11 with section 515.

12 (B) Insulin.

13 (C) Medical foods (as defined in section

14 202(d)).

15 (7) DENTAL SERVICES.—Dental services (as de16 fined in section 202(h)).

17 (8) MENTAL HEALTH SERVICES.—Mental

18 health services (as defined in section 202(e)).

19 (9) SUBSTANCE ABUSE TREATMENT SERV20 ICES.—Substance abuse treatment services (as de21 fined in section 202(f)).

22 (10) DIAGNOSTIC TESTS.—Diagnostic tests.

23 (11) OTHER ITEMS AND SERVICES.—

24 (A) OUTPATIENT THERAPY.—Outpatient

25 physical therapy services, outpatient speech pa-
15

•HR 3960 IH

1 thology services, and outpatient occupational

2 therapy services in all settings.

3 (B) DURABLE MEDICAL EQUIPMENT.—Du4 rable medical equipment.

5 (C) HOME DIALYSIS.—Home dialysis sup6 plies and equipment.

7 (D) AMBULANCE.—Emergency ambulance

8 service.

9 (E) PROSTHETIC DEVICES.—Prosthetic de10 vices, including replacements of such devices.

11 (F) ADDITIONAL ITEMS AND SERVICES.—

12 Such other medical or health care items or

13 services as the Board may specify.

14 (b) COST-SHARING.—There are no deductibles, coin15 surance, or copayments applicable to acute care and pre16 ventive benefits provided under this title.

17 (c) PROHIBITION OF BALANCE BILLING.—As pro18 vided in section 531, no person may impose a charge for

19 covered services for which benefits are provided under this

20 Act.

21 (d) NO DUPLICATE HEALTH INSURANCE.—Each

22 State health security program shall prohibit the sale of

23 health insurance in the State if payment under the insur24 ance duplicates payment for any items or services for

25 which payment may be made under such a program.
16

•HR 3960 IH

1 (e) STATE PROGRAM MAY PROVIDE ADDITIONAL

2 BENEFITS.—Nothing in this Act shall be construed as

3 limiting the benefits that may be made available under a

4 State health security program to residents of the State

5 at the expense of the State.

6 (f) EMPLOYERS MAY PROVIDE ADDITIONAL BENE7 FITS.—Nothing in this Act shall be construed as limiting

8 the additional benefits that an employer may provide to

9 employees or their dependents, or to former employees or

10 their dependents.

11 SEC. 202. DEFINITIONS RELATING TO SERVICES.

12 (a) COMMUNITY-BASED PRIMARY HEALTH SERV13 ICES.—In this title, the term ‘‘community-based primary

14 health services’’ means ambulatory health services fur15 nished—

16 (1) by a rural health clinic;

17 (2) by a Federally-qualified health center, and

18 which, for purposes of this Act, include services

19 furnished by State and local health agencies;

20 (3) in a school-based setting;

21 (4) by public educational agencies and other

22 providers of services to children entitled to assist23 ance under the Individuals with Disabilities Edu24 cation Act for services furnished pursuant to a
17

•HR 3960 IH

1 written Individualized Family Services Plan or

2 Individual Education Plan under such Act; and

3 (5) public and private non-profit entities receiv4 ing Federal assistance under the Public Health

5 Service Act.

6 (b) PREVENTIVE SERVICES.—

7 (1) IN GENERAL.—In this title, the term ‘‘pre8 ventive services’’ means items and services—

9 (A) which—

10 (i) are specified in paragraph (2), or

11 (ii) the Board determines to be effec12 tive in the maintenance and promotion of

13 health or minimizing the effect of illness,

14 disease, or medical condition; and

15 (B) which are provided consistent with the

16 periodicity schedule established under para17 graph (3).

18 (2) SPECIFIED PREVENTIVE SERVICES.—The

19 services specified in this paragraph are as follows:

20 (A) Basic immunizations.

21 (B) Prenatal and well-baby care (for in22 fants under one year of age).

23 (C) Well-child care (including periodic

24 physical examinations, hearing and vision

25 screening, and developmental screening and ex-
18

•HR 3960 IH

1 aminations) for individuals under 18 years of

2 age.

3 (D) Periodic screening mammography, Pap

4 smears, and colorectal examinations and exami5 nations for prostate cancer.

6 (E) Physical examinations.

7 (F) Family planning services.

8 (G) Routine eye examinations, eyeglasses,

9 and contact lenses.

10 (H) Hearing aids, but only upon a deter11 mination of a certified audiologist or physician

12 that a hearing problem exists and is caused by

13 a condition that can be corrected by use of a

14 hearing aid.

15 (3) SCHEDULE.—The Board shall establish, in

16 consultation with experts in preventive medicine and

17 public health and taking into consideration those

18 preventive services recommended by the Preventive

19 Services Task Force and published as the Guide to

20 Clinical Preventive Services, a periodicity schedule

21 for the coverage of preventive services under para22 graph (1). Such schedule shall take into consider23 ation the cost-effectiveness of appropriate preventive

24 care and shall be revised not less frequently than
19

•HR 3960 IH

1 once every 5 years, in consultation with experts in

2 preventive medicine and public health.

3 (c) HOME AND COMMUNITY-BASED LONG-TERM

4 CARE SERVICES.—In this title, the term ‘‘home and com5 munity-based long term care services’’ means the following

6 services provided to an individual to enable the individual

7 to remain in such individual’s place of residence within

8 the community:

9 (1) Homemaker services, including meals.

10 (2) Home health aide services.

11 (3) Adult day health care, social day care or

12 psychiatric day care.

13 (4) Medical social work services.

14 (5) Care coordination services, as defined in

15 subsection (g)(1).

16 (6) Respite care, including training for informal

17 caregivers.

18 (d) MEDICAL FOODS.—In this title, the term ‘‘medi19 cal foods’’ means foods which are formulated to be

20 consumed or administered enterally under the supervision

21 of a physician and which are intended for the specific die22 tary management of a disease or condition for which

23 distinctive nutritional requirements, based on recognized

24 scientific principles, are established by medical evaluation.
20

•HR 3960 IH

1 (e) MENTAL HEALTH SERVICES.—In this title, the

2 term ‘‘mental health services’’ means services related to

3 the prevention, diagnosis, treatment, and rehabilitation of

4 mental illness and promotion of mental health, including

5 the following services:

6 (1) Crisis intervention.

7 (2) Outpatient mental health services.

8 (3) Partial hospitalization and day and evening

9 treatment programs.

10 (4) Psychosocial rehabilitation services.

11 (5) Pharmacotherapeutic interventions.

12 (6) Other rehabilitation services, including half13 way and three-quarter-way house care.

14 (7) Inpatient mental health services.

15 (8) Care coordination services (as defined in

16 subsection (g)(1)).

17 (f) SUBSTANCE ABUSE TREATMENT SERVICES.—In

18 this title, the term ‘‘substance abuse treatment services’’

19 means services for the treatment of dependency on alcohol

20 or controlled substances provided through a treatment

21 program meeting State qualification standards and in22 cludes the following services:

23 (1) Crisis intervention, including assessment,

24 diagnosis, and referral.
21

•HR 3960 IH

1 (2) Detoxification services, in ambulatory and

2 inpatient settings.

3 (3) Outpatient services, including intensive day

4 and evening programs, continuing care, and family

5 services.

6 (4) Short-term residential services in a hospital

7 or free-standing program.

8 (5) Long-term residential services, including

9 therapeutic communities and halfway houses.

10 (6) Pharmacotherapeutic interventions.

11 (7) Care coordination services (as defined in

12 subsection (g)(1)).

13 (g) CARE COORDINATION SERVICES.—

14 (1) IN GENERAL.—In this title, the term ‘‘care

15 coordination services’’ means services provided by

16 care coordinators (as defined in paragraph (2)) to

17 individuals described in paragraph (3) for the co18 ordination and monitoring of mental health services,

19 substance abuse treatment services, and home and

20 community-based long term care services to ensure

21 appropriate, cost-effective utilization of such services

22 in a comprehensive and continuous manner, and in23 cludes—

24 (A) transition management between inpa25 tient facilities and community-based services,
22

•HR 3960 IH

1 including assisting patients in identifying and

2 gaining access to appropriate ancillary services;

3 and

4 (B) evaluating and recommending appro5 priate treatment services, in cooperation with

6 patients and other providers and in conjunction

7 with any quality review program or plan of care

8 under section 205.

9 (2) CARE COORDINATOR.—

10 (A) IN GENERAL.—In this title, the term

11 ‘‘care coordinator’’ means an individual or non12 profit or public agency or organization which

13 the State health security program determines—

14 (i) is capable of performing directly,

15 efficiently, and effectively the duties of a

16 care coordinator described in paragraph

17 (1), and

18 (ii) demonstrates capability in estab19 lishing and periodically reviewing and re20 vising plans of care, and in arranging for

21 and monitoring the provision and quality

22 of services under any plan.

23 (B) INDEPENDENCE.—State health secu24 rity programs shall establish safeguards to as25 sure that care coordinators have no financial in-
23

•HR 3960 IH

1 terest in treatment decisions or placements.

2 Care coordination may not be provided through

3 any structure or mechanism through which

4 quality review is performed.

5 (3) ELIGIBLE INDIVIDUALS.—An individual de6 scribed in this paragraph is an individual—

7 (A) described in section 203 (relating to

8 individuals qualifying for long term and chronic

9 care services); or

10 (B) determined (in a manner specified by

11 the Board)—

12 (i) to have a serious mental illness (as

13 defined by the Board), or

14 (ii) to have a history of substance

15 abuse displaying severe associated illness

16 or previous treatment failure (as defined

17 by the Board).

18 (h) DENTAL SERVICES.—In this title, the term ‘‘den19 tal services’’ means preventive and prophylactic dental

20 treatment consistent with a periodicity schedule estab21 lished by the Board and treatment for dental disease and

22 injury in children under 18 years of age, and does not

23 include orthodontic services.

24 (i) NURSING FACILITY; NURSING FACILITY SERV25 ICES.—Except as may be provided by the Board, the
24

•HR 3960 IH

1 terms ‘‘nursing facility’’ and ‘‘nursing facility services’’

2 have the meanings given such terms in sections 1919(a)

3 and 1905(f), respectively, of the Social Security Act.

4 (j) OTHER TERMS.—Except as may be provided by

5 the Board, the definitions contained in section 1861 of the

6 Social Security Act shall apply.

7 SEC. 203. SPECIAL RULES FOR HOME AND COMMUNITY8 BASED LONG-TERM CARE SERVICES.

9 (a) QUALIFYING INDIVIDUALS.—For purposes of sec10 tion 201(a)(5)(C), individuals described in this subsection

11 are the following individuals:

12 (1) ADULTS.—Individuals 18 years of age or

13 older determined (in a manner specified by the

14 Board)—

15 (A) to be unable to perform, without the

16 assistance of an individual, at least 2 of the fol17 lowing 5 activities of daily living (or who has a

18 similar level of disability due to cognitive

19 impairment)—

20 (i) bathing;

21 (ii) eating;

22 (iii) dressing;

23 (iv) toileting; and

24 (v) transferring in and out of a bed or

25 in and out of a chair; or
25

•HR 3960 IH

1 (B) due to cognitive or mental impair2 ments, requires supervision because the individ3 ual behaves in a manner that poses health or

4 safety hazards to himself or herself or others.

5 (2) CHILDREN.—Individuals under 18 years of

6 age determined (in a manner specified by the Board)

7 to meet such alternative standard of disability for

8 children as the Board develops.

9 (b) LIMIT ON SERVICES.—

10 (1) IN GENERAL.—No individual is entitled to

11 receive benefits under a State health security pro12 gram with respect to home and community-based

13 long term care services in a period (specified by the

14 Board) to the extent the amount of payments for

15 such benefits exceeds 65 percent (or such alternative

16 ratio as the Board establishes under paragraph (2))

17 of the average of amount of payment that would

18 have been made under the program during the pe19 riod if the individual were a resident of a nursing fa20 cility in the same area in which the services were

21 provided.

22 (2) ALTERNATIVE RATIO.—The Board may es23 tablish for purposes of paragraph (1) an alternative

24 ratio (of payments for home and community-based

25 long term care services to payments for nursing fa-
26

•HR 3960 IH

1 cility services) as the Board determines to be more

2 consistent with the goal of providing cost-effective

3 long-term care in the most appropriate and least

4 restrictive setting.

5 SEC. 204. EXCLUSIONS AND LIMITATIONS.

6 (a) IN GENERAL.—Subject to section 201(e), benefits

7 for service are not available under this Act unless the

8 services meet the standards specified in section 201(a).

9 (b) MENTAL HEALTH SERVICES AND SUBSTANCE

10 ABUSE TREATMENT SERVICES.—

11 (1) IN GENERAL.—Mental health services and

12 substance abuse treatment services furnished for an

13 individual in excess of a threshold specified in para14 graph (2) are not covered services unless the services

15 are determined under a utilization review program to

16 meet the standards specified in section 201(a) and,

17 with respect to inpatient or residential treatment

18 services, to be provided in the least restrictive and

19 most appropriate setting.

20 (2) UTILIZATION REVIEW THRESHOLD.—

21 (A) IN GENERAL.—Subject to subpara22 graphs (B) and (C), the thresholds specified in

23 this paragraph are—

24 (i) 20 outpatient visits in a year, and
27

•HR 3960 IH

1 (ii) 15 days of inpatient services in a

2 year.

3 (B) ALTERNATIVE NATIONAL THRESH4 OLDS.—The Board may specify alternative

5 thresholds to those specified in subparagraph

6 (A).

7 (C) ADDITIONAL STATE THRESHOLDS.—A

8 State health security program may specify

9 thresholds in addition to those established

10 under the previous subparagraphs, which

11 thresholds may be higher or lower than the

12 number of outpatient visits or days of inpatient

13 services otherwise specified.

14 (c) TREATMENT OF EXPERIMENTAL SERVICES.—In

15 applying subsection (a), the Board shall make, after con16 sultation with a technical advisory committee, national

17 coverage determinations with respect to those services that

18 are experimental in nature. Such determinations shall be

19 made consistent with a process that provides for profes20 sional input and public comment.

21 (d) APPLICATION OF NATIONAL PRACTICE GUIDE22 LINES.—In the case of services for which the Board has

23 recognized national practice guidelines, the services are

24 considered to meet the standards specified in section

25 201(a) only if they have been provided in accordance with
28

•HR 3960 IH

1 such guidelines or in accordance with such guidelines as

2 are provided by the State health security program consist3 ent with title V.

4 (e) SPECIFIC LIMITATIONS.—

5 (1) LIMITATIONS ON EYEGLASSES, CONTACT

6 LENSES, HEARING AIDS, AND DURABLE MEDICAL

7 EQUIPMENT.—Subject to section 201(e), the Board

8 may impose such limits relating to the costs and fre9 quency of replacement of eyeglasses, contact lenses,

10 hearing aids, and durable medical equipment to

11 which individuals enrolled for benefits under this Act

12 are entitled to have payment made under a State

13 health security program as the Board deems appro14 priate.

15 (2) OVERLAP WITH PREVENTIVE SERVICES.—

16 The coverage of services described in section 201(a)

17 (other than paragraph (3)) which also are preventive

18 services are required to be covered only to the extent

19 that they are required to be covered as preventive

20 services.

21 (3) MISCELLANEOUS EXCLUSIONS FROM COV22 ERED SERVICES.—Covered services under this Act

23 do not include the following:

24 (A) Surgery and other procedures (such as

25 orthodontia) performed solely for cosmetic pur-
29

•HR 3960 IH

1 poses (as defined in regulations) and hospital or

2 other services incident thereto, unless—

3 (i) required to correct a congenital

4 anomaly;

5 (ii) required to restore or correct a

6 part of the body which has been altered as

7 a result of accidental injury, disease, or

8 surgery; or

9 (iii) otherwise determined to be medi10 cally necessary and appropriate under sec11 tion 201(a).

12 (B) Personal comfort items or private

13 rooms in inpatient facilities, unless determined

14 to be medically necessary and appropriate

15 under section 201(a).

16 (C) The services of a professional practi17 tioner if they are furnished in a hospital or

18 other facility which is not a participating pro19 vider.

20 (f) NURSING FACILITY SERVICES AND HOME

21 HEALTH SERVICES.—Nursing facility services and home

22 health services (other than post-hospital services, as de23 fined by the Board) furnished to an individual who is not

24 described in section 203(a) are not covered services unless

25 the services are determined to meet the standards speci-
30

•HR 3960 IH

1 fied in section 201(a) and, with respect to nursing facility

2 services, to be provided in the least restrictive and most

3 appropriate setting.

4 SEC. 205. CERTIFICATION; QUALITY REVIEW; PLANS OF

5 CARE.

6 (a) CERTIFICATIONS.—State health security pro7 grams may require, as a condition of payment for institu8 tional health care services and other services of the type

9 described in such sections 1814(a) and 1835(a) of the So10 cial Security Act, periodic professional certifications of the

11 kind described in such sections.

12 (b) QUALITY REVIEW.—For requirement that each

13 State health security program establish a quality review

14 program that meets the requirements for such a program

15 under title V, see section 405(b)(1)(H).

16 (c) PLAN OF CARE REQUIREMENTS.—A State health

17 security program may require, consistent with standards

18 established by the Board, that payment for services ex19 ceeding specified levels or duration be provided only as

20 consistent with a plan of care or treatment formulated by

21 one or more providers of the services or other qualified

22 professionals. Such a plan may include, consistent with

23 subsection (b), case management at specified intervals as

24 a further condition of payment for services.
31

•HR 3960 IH

1 TITLE III—PROVIDER

2 PARTICIPATION

3 SEC. 301. PROVIDER PARTICIPATION AND STANDARDS.

4 (a) IN GENERAL.—An individual or other entity fur5 nishing any covered service under a State health security

6 program under this Act is not a qualified provider unless

7 the individual or entity—

8 (1) is a qualified provider of the services under

9 section 302;

10 (2) has filed with the State health security pro11 gram a participation agreement described in sub12 section (b); and

13 (3) meets such other qualifications and condi14 tions as are established by the Board or the State

15 health security program under this Act.

16 (b) REQUIREMENTS IN PARTICIPATION AGREE17 MENT.—

18 (1) IN GENERAL.—A participation agreement

19 described in this subsection between a State health

20 security program and a provider shall provide at

21 least for the following:

22 (A) Services to eligible persons will be fur23 nished by the provider without discrimination

24 on the ground of race, national origin, income,

25 religion, age, sex or sexual orientation, disabil-
32

•HR 3960 IH

1 ity, handicapping condition, or (subject to the

2 professional qualifications of the provider) ill3 ness. Nothing in this subparagraph shall be

4 construed as requiring the provision of a type

5 or class of services which services are outside

6 the scope of the provider’s normal practice.

7 (B) No charge will be made for any cov8 ered services other than for payment authorized

9 by this Act.

10 (C) The provider agrees to furnish such in11 formation as may be reasonably required by the

12 Board or a State health security program, in

13 accordance with uniform reporting standards

14 established under section 401(g)(1), for—

15 (i) quality review by designated enti16 ties;

17 (ii) the making of payments under

18 this Act (including the examination of

19 records as may be necessary for the ver20 ification of information on which payments

21 are based);

22 (iii) statistical or other studies re23 quired for the implementation of this Act;

24 and
33

•HR 3960 IH

1 (iv) such other purposes as the Board

2 or State may specify.

3 (D) The provider agrees not to bill the pro4 gram for any services for which benefits are not

5 available because of section 204(d).

6 (E) In the case of a provider that is not

7 an individual, the provider agrees not to employ

8 or use for the provision of health services any

9 individual or other provider who or which has

10 had a participation agreement under this sub11 section terminated for cause.

12 (F) In the case of a provider paid under a

13 fee-for-service basis under section 612, the pro14 vider agrees to submit bills and any required

15 supporting documentation relating to the provi16 sion of covered services within 30 days (or such

17 shorter period as a State health security pro18 gram may require) after the date of providing

19 such services.

20 (2) TERMINATION OF PARTICIPATION AGREE21 MENTS.—

22 (A) IN GENERAL.—Participation agree23 ments may be terminated, with appropriate no24 tice—
34

•HR 3960 IH

1 (i) by the Board or a State health se2 curity program for failure to meet the

3 requirements of this title, or

4 (ii) by a provider.

5 (B) TERMINATION PROCESS.—Providers

6 shall be provided notice and a reasonable oppor7 tunity to correct deficiencies before the Board

8 or a State health security program terminates

9 an agreement unless a more immediate termi10 nation is required for public safety or similar

11 reasons.

12 SEC. 302. QUALIFICATIONS FOR PROVIDERS.

13 (a) IN GENERAL.—A health care provider is consid14 ered to be qualified to provide covered services if the pro15 vider is licensed or certified and meets—

16 (1) all the requirements of State law to provide

17 such services,

18 (2) applicable requirements of Federal law to

19 provide such services, and

20 (3) any applicable standards established under

21 subsection (b).

22 (b) MINIMUM PROVIDER STANDARDS.—

23 (1) IN GENERAL.—The Board shall establish,

24 evaluate, and update national minimum standards to

25 assure the quality of services provided under this
35

•HR 3960 IH

1 Act and to monitor efforts by State health security

2 programs to assure the quality of such services. A

3 State health security program may also establish ad4 ditional minimum standards which providers must

5 meet.

6 (2) NATIONAL MINIMUM STANDARDS.—The na7 tional minimum standards under paragraph (1) shall

8 be established for institutional providers of services,

9 individual health care practitioners, and comprehen10 sive health service organizations. Except as the

11 Board may specify in order to carry out this title,

12 a hospital, nursing facility, or other institutional

13 provider of services shall meet standards for such a

14 facility under the medicare program under title

15 XVIII of the Social Security Act. Such standards

16 also may include, where appropriate, elements relat17 ing to—

18 (A) adequacy and quality of facilities;

19 (B) training and competence of personnel

20 (including continuing education requirements);

21 (C) comprehensiveness of service;

22 (D) continuity of service;

23 (E) patient satisfaction (including waiting

24 time and access to services); and
36

•HR 3960 IH

1 (F) performance standards (including or2 ganization, facilities, structure of services, effi3 ciency of operation, and outcome in palliation,

4 improvement of health, stabilization, cure, or

5 rehabilitation).

6 (3) TRANSITION IN APPLICATION.—If the

7 Board provides for additional requirements for pro8 viders under this subsection, any such additional re9 quirement shall be implemented in a manner that

10 provides for a reasonable period during which a pre11 viously qualified provider is permitted to meet such

12 an additional requirement.

13 (4) EXCHANGE OF INFORMATION.—The Board

14 shall provide for an exchange, at least annually,

15 among State health security programs of informa16 tion with respect to quality assurance and cost

17 containment.

18 SEC. 303. QUALIFICATIONS FOR COMPREHENSIVE HEALTH

19 SERVICE ORGANIZATIONS.

20 (a) IN GENERAL.—For purposes of this Act, a com21 prehensive health service organization (in this section re22 ferred to as a ‘‘CHSO’’) is a public or private organization

23 which, in return for a capitated payment amount, under24 takes to furnish, arrange for the provision of, or provide

25 payment with respect to—
37

•HR 3960 IH

1 (1) a full range of health services (as identified

2 by the Board), including at least hospital services

3 and physicians services, and

4 (2) out-of-area coverage in the case of urgently

5 needed services,

6 to an identified population which is living in or near a

7 specified service area and which enrolls voluntarily in the

8 organization.

9 (b) ENROLLMENT.—

10 (1) IN GENERAL.—All eligible persons living in

11 or near the specified service area of a CHSO are eli12 gible to enroll in the organization; except that the

13 number of enrollees may be limited to avoid overtax14 ing the resources of the organization.

15 (2) MINIMUM ENROLLMENT PERIOD.—Subject

16 to paragraph (3), the minimum period of enrollment

17 with a CHSO shall be twelve months, unless the en18 rolled individual becomes ineligible to enroll with the

19 organization.

20 (3) WITHDRAWAL FOR CAUSE.—Each CHSO

21 shall permit an enrolled individual to disenroll from

22 the organization for cause at any time.

23 (c) REQUIREMENTS FOR CHSOS.—

24 (1) ACCESSIBLE SERVICES.—Each CHSO, to

25 the maximum extent feasible, shall make all services
38

•HR 3960 IH

1 readily and promptly accessible to enrollees who live

2 in the specified service area.

3 (2) CONTINUITY OF CARE.—Each CHSO shall

4 furnish services in such manner as to provide con5 tinuity of care and (when services are furnished by

6 different providers) shall provide ready referral of

7 patients to such services and at such times as may

8 be medically appropriate.

9 (3) BOARD OF DIRECTORS.—In the case of a

10 CHSO that is a private organization—

11 (A) CONSUMER REPRESENTATION.—At

12 least one-third of the members of the CHSO’s

13 board of directors must be consumer members

14 with no direct or indirect, personal or family

15 financial relationship to the organization.

16 (B) PROVIDER REPRESENTATION.—The

17 CHSO’s board of directors must include at

18 least one member who represents health care

19 providers.

20 (4) PATIENT GRIEVANCE PROGRAM.—Each

21 CHSO must have in effect a patient grievance pro22 gram and must conduct regularly surveys of the sat23 isfaction of members with services provided by or

24 through the organization.
39

•HR 3960 IH

1 (5) MEDICAL STANDARDS.—Each CHSO must

2 provide that a committee or committees of health

3 care practitioners associated with the organization

4 will promulgate medical standards, oversee the pro5 fessional aspects of the delivery of care, perform the

6 functions of a pharmacy and drug therapeutics com7 mittee, and monitor and review the quality of all

8 health services (including drugs, education, and pre9 ventive services).

10 (6) PREMIUMS.—Premiums or other charges by

11 a CHSO for any services not paid for under this Act

12 must be reasonable.

13 (7) UTILIZATION AND BONUS INFORMATION.—

14 Each CHSO must—

15 (A) comply with the requirements of sec16 tion 1876(i)(8) of the Social Security Act (re17 lating to prohibiting physician incentive plans

18 that provide specific inducements to reduce or

19 limit medically necessary services), and

20 (B) make available to its membership utili21 zation information and data regarding financial

22 performance, including bonus or incentive pay23 ment arrangements to practitioners.

24 (8) PROVISION OF SERVICES TO ENROLLEES AT

25 INSTITUTIONS OPERATING UNDER GLOBAL BUDG-
40

•HR 3960 IH

1 ETS.—The organization shall arrange to reimburse

2 for hospital services and other facility-based services

3 (as identified by the Board) for services provided to

4 members of the organization in accordance with the

5 global operating budget of the hospital or facility ap6 proved under section 611.

7 (9) BROAD MARKETING.—Each CHSO must

8 provide for the marketing of its services (including

9 dissemination of marketing materials) to potential

10 enrollees in a manner that is designed to enroll indi11 viduals representative of the different population

12 groups and geographic areas included within its

13 service area and meets such requirements as the

14 Board or a State health security program may

15 specify.

16 (10) ADDITIONAL REQUIREMENTS.—Each

17 CHSO must meet—

18 (A) such requirements relating to mini19 mum enrollment,

20 (B) such requirements relating to financial

21 solvency,

22 (C) such requirements relating to quality

23 and availability of care, and

24 (D) such other requirements,
41

•HR 3960 IH

1 as the Board or a State health security program

2 may specify.

3 (d) PROVISION OF EMERGENCY SERVICES TO

4 NONENROLLEES.—A CHSO may furnish emergency serv5 ices to persons who are not enrolled in the organization.

6 Payment for such services, if they are covered services to

7 eligible persons, shall be made to the organization unless

8 the organization requests that it be made to the individual

9 provider who furnished the services.

10 SEC. 304. LIMITATION ON CERTAIN PHYSICIAN REFERRALS.

11 (a) APPLICATION TO AMERICAN HEALTH SECURITY

12 PROGRAM.—Section 1877 of the Social Security Act, as

13 amended by subsections (b) and (c), shall apply under this

14 Act in the same manner as it applies under title XVIII

15 of the Social Security Act; except that in applying such

16 section under this Act any references in such section to

17 the Secretary or title XVIII of the Social Security Act are

18 deemed references to the Board and the American Health

19 Security Program under this Act, respectively.

20 (b) EXPANSION OF PROHIBITION TO CERTAIN DES21 IGNATED SERVICES.—Section 1877 of the Social Security

22 Act (42 U.S.C. 1395nn) is amended—

23 (1) by striking ‘‘clinical laboratory services’’

24 and ‘‘CLINICAL LABORATORY SERVICES’’ and insert25 ing ‘‘designated health services’’ and ‘‘DESIGNATED
42

•HR 3960 IH

1 HEALTH SERVICES’’, respectively, each place either

2 appears in subsections (a)(1), (b)(2)(A)(ii)(I),

3 (b)(4), (d)(1), (d)(2), and (d)(3);

4 (2) by adding at the end of such section the fol5 lowing new subsection:

6 ‘‘(i) DESIGNATED HEALTH SERVICES DEFINED.—In

7 this section, the term ‘designated health services’ means—

8 ‘‘(1) clinical laboratory services;

9 ‘‘(2) physical therapy services;

10 ‘‘(3) radiology services, including magnetic reso11 nance imaging, computerized axial tomography

12 scans, and ultrasound services;

13 ‘‘(4) radiation therapy services;

14 ‘‘(5) the furnishing of durable medical equip15 ment;

16 ‘‘(6) the furnishing of parenteral and enteral

17 nutrition equipment and supplies;

18 ‘‘(7) the furnishing of outpatient prescription

19 drugs;

20 ‘‘(8) ambulance services;

21 ‘‘(9) home infusion therapy services;

22 ‘‘(10) occupational therapy services; and

23 ‘‘(11) inpatient and outpatient hospital services

24 (including services furnished at a psychiatric or re25 habilitation hospital).’’;
43

•HR 3960 IH

1 (3) in subsection (d)(2), by striking ‘‘labora2 tory’’ and by inserting ‘‘entity’’;

3 (4) in subsection (g)(1), by striking ‘‘clinical

4 laboratory service’’ and by inserting ‘‘designated

5 health service’’; and

6 (5) in subsection (h)(7)(B), by striking ‘‘clinical

7 laboratory service’’ and by inserting ‘‘designated

8 health service’’.

9 (c) CONFORMING AMENDMENTS.—Such section is

10 further amended—

11 (1) in subsection (a)(1)(A), by striking ‘‘for

12 which payment otherwise may be made under this

13 title’’ and by inserting ‘‘for which a charge is

14 imposed’’;

15 (2) in subsection (a)(1)(B), by striking ‘‘under

16 this title’’;

17 (3) by amending paragraph (1) of subsection

18 (g) to read as follows:

19 ‘‘(1) DENIAL OF PAYMENT.—No payment may

20 be made under a State health security program for

21 a designated health service for which a claim is pre22 sented in violation of subsection (a)(1)(B). No indi23 vidual, third party payor, or other entity is liable for

24 payment for designated health services for which a
44

•HR 3960 IH

1 claim is presented in violation of such subsection.’’;

2 and

3 (4) In subsection (g)(3), by striking ‘‘for which

4 payment may not be made under paragraph (1)’’

5 and by inserting ‘‘for which such a claim may not

6 be presented under subsection (a)(1)’’.

7 TITLE IV—ADMINISTRATION

8 Subtitle A—General Administrative

9 Provisions

10 SEC. 401. AMERICAN HEALTH SECURITY STANDARDS

11 BOARD.

12 (a) ESTABLISHMENT.—There is hereby established

13 an American Health Security Standards Board.

14 (b) APPOINTMENT AND TERMS OF MEMBERS.—

15 (1) IN GENERAL.—The Board shall be com16 posed of—

17 (A) the Secretary of Health and Human

18 Services, and

19 (B) 6 other individuals (described in para20 graph (2)) appointed by the President with the

21 advice and consent of the Senate.

22 The President shall first nominate individuals under

23 subparagraph (B) on a timely basis so as to provide

24 for the operation of the Board by not later than

25 January 1, 1995.
45

•HR 3960 IH

1 (2) SELECTION OF APPOINTED MEMBERS.—

2 With respect to the individuals appointed under

3 paragraph (1)(B):

4 (A) They shall be chosen on the basis of

5 backgrounds in health policy, health economics,

6 the healing professions, and the administration

7 of health care institutions.

8 (B) They shall provide a balanced point of

9 view with respect to the various health care in10 terests and at least two of them shall represent

11 the interests of individual consumers.

12 (C) Not more than three of them shall be

13 from the same political party.

14 (3) TERMS OF APPOINTED MEMBERS.—Individ15 uals appointed under paragraph (1)(B) shall serve

16 for a term of 6 years, except that the terms of 5 of

17 the individuals initially appointed shall be, as des18 ignated by the President at the time of their ap19 pointment, for 1, 2, 3, 4, and 5 years. During a

20 term of membership on the Board, no member shall

21 engage in any other business, vocation or employ22 ment.

23 (c) VACANCIES.—

24 (1) IN GENERAL.—The President shall fill any

25 vacancy in the membership of the Board in the same
46

•HR 3960 IH

1 manner as the original appointment. The vacancy

2 shall not affect the power of the remaining members

3 to execute the duties of the Board.

4 (2) VACANCY APPOINTMENTS.—Any member

5 appointed to fill a vacancy shall serve for the re6 mainder of the term for which the predecessor of the

7 member was appointed.

8 (3) REAPPOINTMENT.—The President may re9 appoint an appointed member of the Board for a

10 second term in the same manner as the original ap11 pointment. A member who has served for two con12 secutive 6-year terms shall not be eligible for re13 appointment until two years after the member has

14 ceased to serve.

15 (4) REMOVAL FOR CAUSE.—Upon confirmation,

16 members of the Board may not be removed except

17 by the President for cause.

18 (d) CHAIR.—The President shall designate one of the

19 members of the Board, other than the Secretary, to serve

20 at the will of the President as Chair of the Board.

21 (e) COMPENSATION.—Members of the Board (other

22 than the Secretary) shall be entitled to compensation at

23 a level equivalent to level II of the Executive Schedule,

24 in accordance with section 5313 of title 5, United States

25 Code.
47

•HR 3960 IH

1 (f) GENERAL DUTIES OF THE BOARD.—

2 (1) IN GENERAL.—The Board shall develop

3 policies, procedures, guidelines, and requirements to

4 carry out this Act, including those related to—

5 (A) eligibility;

6 (B) enrollment;

7 (C) benefits;

8 (D) provider participation standards and

9 qualifications, as defined in title III;

10 (E) national and State funding levels;

11 (F) methods for determining amounts of

12 payments to providers of covered services, con13 sistent with subtitle B of title VI;

14 (G) the determination of medical necessity

15 and appropriateness with respect to coverage of

16 certain services;

17 (H) assisting State health security pro18 grams with planning for capital expenditures

19 and service delivery;

20 (I) planning for health professional edu21 cation funding (as specified in title VI);

22 (J) allocating funds provided under title

23 VII; and
48

•HR 3960 IH

1 (K) encouraging States to develop regional

2 planning mechanisms (described in section

3 405(a)(3)).

4 (2) REGULATIONS.—Regulations authorized by

5 this Act shall be issued by the Board in accordance

6 with the provisions of section 553 of title 5, United

7 States Code.

8 (g) UNIFORM REPORTING STANDARDS; ANNUAL RE9 PORT; STUDIES.—

10 (1) UNIFORM REPORTING STANDARDS.—

11 (A) IN GENERAL.—The Board shall estab12 lish uniform reporting requirements and stand13 ards to ensure an adequate national data base

14 regarding health services practitioners, services

15 and finances of State health security programs,

16 approved plans, providers, and the costs of fa17 cilities and practitioners providing services.

18 Such standards shall include, to the maximum

19 extent feasible, health outcome measures.

20 (B) REPORTS.—The Board shall analyze

21 regularly information reported to it, and to

22 State health security programs pursuant to

23 such requirements and standards.

24 (2) ANNUAL REPORT.—Beginning January 1,

25 of the second year beginning after the date of the
49

•HR 3960 IH

1 enactment of this Act, the Board shall annually

2 report to Congress on the following:

3 (A) The status of implementation of the

4 Act.

5 (B) Enrollment under this Act.

6 (C) Benefits under this Act.

7 (D) Expenditures and financing under this

8 Act.

9 (E) Cost-containment measures and

10 achievements under this Act.

11 (F) Quality assurance.

12 (G) Health care utilization patterns, in13 cluding any changes attributable to the pro14 gram.

15 (H) Long-range plans and goals for the de16 livery of health services.

17 (I) Differences in the health status of the

18 populations of the different States, including in19 come and racial characteristics.

20 (J) Necessary changes in the education of

21 health personnel.

22 (K) Plans for improving service to medi23 cally underserved populations.

24 (L) Transition problems as a result of im25 plementation of this Act.
50

•HR 3960 IH

1 (M) Opportunities for improvements under

2 this Act.

3 (3) STATISTICAL ANALYSES AND OTHER STUD4 IES.—The Board may, either directly or by con5 tract—

6 (A) make statistical and other studies, on

7 a nationwide, regional, state, or local basis, of

8 any aspect of the operation of this Act, includ9 ing studies of the effect of the Act upon the

10 health of the people of the United States and

11 the effect of comprehensive health services upon

12 the health of persons receiving such services;

13 (B) develop and test methods of providing

14 through payment for services or otherwise, ad15 ditional incentives for adherence by providers to

16 standards of adequacy, access, and quality;

17 methods of consumer and peer review and peer

18 control of the utilization of drugs, of laboratory

19 services, and of other services; and methods of

20 consumer and peer review of the quality of serv21 ices;

22 (C) develop and test, for use by the Board,

23 records and information retrieval systems and

24 budget systems for health services administra-
51

•HR 3960 IH

1 tion, and develop and test model systems for

2 use by providers of services;

3 (D) develop and test, for use by providers

4 of services, records and information retrieval

5 systems useful in the furnishing of preventive

6 or diagnostic services;

7 (E) develop, in collaboration with the phar8 maceutical profession, and test, improved ad9 ministrative practices or improved methods for

10 the reimbursement of independent pharmacies

11 for the cost of furnishing drugs as a covered

12 service; and

13 (F) make such other studies as it may con14 sider necessary or promising for the evaluation,

15 or for the improvement, of the operation of this

16 Act.

17 (4) REPORT ON USE OF EXISTING FEDERAL

18 HEALTH CARE FACILITIES.—Not later than one year

19 after the date of the enactment of this Act, the

20 Board shall recommend to the Congress one or more

21 proposals for the treatment of health care facilities

22 of the Federal Government.

23 (h) EXECUTIVE DIRECTOR.—

24 (1) APPOINTMENT.—There is hereby estab25 lished the position of Executive Director of the
52

•HR 3960 IH

1 Board. The Director shall be appointed by the

2 Board and shall serve as secretary to the Board and

3 perform such duties in the administration of this

4 title as the Board may assign.

5 (2) DELEGATION.—The Board is authorized to

6 delegate to the Director or to any other officer or

7 employee of the Board or, with the approval of the

8 Secretary of Health and Human Services (and sub9 ject to reimbursement of identifiable costs), to any

10 other officer or employee of the Department of

11 Health and Human Services, any of its functions or

12 duties under this Act other than—

13 (A) the issuance of regulations; or

14 (B) the determination of the availability of

15 funds and their allocation to implement this

16 Act.

17 (3) COMPENSATION.—The Executive Director

18 of the Board shall be entitled to compensation at a

19 level equivalent to level III of the Executive Sched20 ule, in accordance with section 5314 of title 5,

21 United States Code.

22 (i) INSPECTOR GENERAL.—The Inspector General

23 Act of 1978 (5 U.S.C. App.) is amended—
53

•HR 3960 IH

1 (1) in section 11(1) by inserting after ‘‘Cor2 poration;’’ the following: ‘‘the Chair of the American

3 Health Security Standards Board;’’;

4 (2) in section 11(2) by inserting after ‘‘Infor5 mation Agency,’’ the following: ‘‘the American

6 Health Security Standards Board,’’; and

7 (3) by inserting after section 8F the following:

8 ‘‘§ 8G. Special provisions concerning American

9 Health Security Standards Board

10 ‘‘The Inspector General of the American Health Se11 curity Standards Board, in addition to the other authori12 ties vested by this Act, shall have the same authority, with

13 respect to the Board and the American Health Security

14 Program under this Act, as the Inspector General for the

15 Department of Health and Human Services has with re16 spect to the Secretary of Health and Human Services and

17 the medicare and medicaid programs, respectively.’’.

18 (j) STAFF.—The Board shall employ such staff as the

19 Board may deem necessary.

20 (k) ACCESS TO INFORMATION.—The Secretary of

21 Health and Human Services shall make available to the

22 Board all information available from sources within the

23 Department or from other sources, pertaining to the

24 duties of the Board.
54

•HR 3960 IH

1 SEC. 402. AMERICAN HEALTH SECURITY ADVISORY COUN2 CIL.

3 (a) IN GENERAL.—The Board shall provide for an

4 American Health Security Advisory Council (in this sec5 tion referred to as the ‘‘Council’’) to advise the Board on

6 its activities.

7 (b) MEMBERSHIP.—The Council shall be composed

8 of—

9 (1) the Chair of the Board, who shall serve as

10 Chair of the Council, and

11 (2) twenty members, not otherwise in the em12 ploy of the United States, appointed by the Board

13 without regard to the provisions of title 5, United

14 States Code, governing appointments in the competi15 tive service.

16 The appointed members shall include, in accordance with

17 subsection (e), individuals who are representative of State

18 health security programs, public health professionals, pro19 viders of health services, and of individuals (who shall con20 stitute a majority of the Council) who are representative

21 of consumers of such services, including a balanced rep22 resentation of employers, unions, consumer organizations,

23 and population groups with special health care needs.

24 (c) TERMS OF MEMBERS.—Each appointed member

25 shall hold office for a term of four years, except that—
55

•HR 3960 IH

1 (1) any member appointed to fill a vacancy oc2 curring during the term for which the member’s

3 predecessor was appointed shall be appointed for the

4 remainder of that term; and

5 (2) the terms of the members first taking office

6 shall expire, as designated by the Board at the time

7 of appointment, five at the end of the first year, five

8 at the end of the second year, five at the end of the

9 third year, and five at the end of the fourth year

10 after the date of enactment of this Act.

11 (d) VACANCIES.—

12 (1) IN GENERAL.—The Board shall fill any va13 cancy in the membership of the Council in the same

14 manner as the original appointment. The vacancy

15 shall not affect the power of the remaining members

16 to execute the duties of the Council.

17 (2) VACANCY APPOINTMENTS.—Any member

18 appointed to fill a vacancy shall serve for the re19 mainder of the term for which the predecessor of the

20 member was appointed.

21 (3) REAPPOINTMENT.—The Board may re22 appoint an appointed member of the Council for a

23 second term in the same manner as the original

24 appointment.

25 (e) QUALIFICATIONS.—
56

•HR 3960 IH

1 (1) PUBLIC HEALTH REPRESENTATIVES.—

2 Members of the Council who are representative of

3 State health security programs and public health

4 professionals shall be individuals who have extensive

5 experience in the financing and delivery of care

6 under public health programs.

7 (2) PROVIDERS.—Members of the Council who

8 are representative of providers of health care shall

9 be individuals who are outstanding in fields related

10 to medical, hospital, or other health activities, or

11 who are representative of organizations or associa12 tions of professional health practitioners.

13 (3) CONSUMERS.—Members who are represent14 ative of consumers of such care shall be individuals,

15 not engaged in and having no financial interest in

16 the furnishing of health services, who are familiar

17 with the needs of various segments of the population

18 for personal health services and are experienced in

19 dealing with problems associated with the consump20 tion of such services.

21 (f) DUTIES.—

22 (1) IN GENERAL.—It shall be the duty of the

23 Council—

24 (A) to advise the Board on matters of gen25 eral policy in the administration of this Act, in
57

•HR 3960 IH

1 the formulation of regulations, and in the per2 formance of the Board’s duties under section

3 401; and

4 (B) to study the operation of this Act and

5 the utilization of health services under it, with

6 a view to recommending any changes in the ad7 ministration of the Act or in its provisions

8 which may appear desirable.

9 (2) REPORT.—The Council shall make an an10 nual report to the Board on the performance of its

11 functions, including any recommendations it may

12 have with respect thereto, and the Board shall

13 promptly transmit the report to the Congress, to14 gether with a report by the Board on any rec15 ommendations of the Council that have not been

16 followed.

17 (g) STAFF.—The Council, its members, and any com18 mittees of the Council shall be provided with such sec19 retarial, clerical, or other assistance as may be authorized

20 by the Board for carrying out their respective functions.

21 (h) MEETINGS.—The Council shall meet as fre22 quently as the Board deems necessary, but not less than

23 four times each year. Upon request by seven or more mem24 bers it shall be the duty of the Chair to call a meeting

25 of the Council.
58

•HR 3960 IH

1 (i) COMPENSATION.—Members of the Council shall

2 be reimbursed by the Board for travel and per diem in

3 lieu of subsistence expenses during the performance of du4 ties of the Board in accordance with subchapter I of chap5 ter 57 of title 5, United States Code.

6 (j) FACA NOT APPLICABLE.—The provisions of the

7 Federal Advisory Committee Act shall not apply to the

8 Council.

9 SEC. 403. PROFESSIONAL, TECHNICAL, AND TEMPORARY

10 ADVISORY COMMITTEES.

11 (a) IN GENERAL.—The Board shall appoint the

12 standing advisory committees specified in subsections (b)

13 through (f), and such other standing professional and

14 technical committees in order to advise it in carrying out

15 its duties under this Act.

16 (b) ADVISORY COMMITTEE ON BENEFITS.—

17 (1) IN GENERAL.—The Board shall appoint a

18 standing Advisory Committee on Benefits to advise

19 it with respect to the several classes of covered

20 services under this Act.

21 (2) MEMBERSHIP.—The membership of the

22 committee shall include individuals (in such number

23 as the Board may determine) drawn from the health

24 professions, from consumers of health services, from

25 providers of health services (including non-medical
59

•HR 3960 IH

1 licensed and non-licensed providers), or from other

2 sources, whom the Board deems best qualified to ad3 vise it with respect to the professional and technical

4 aspects of the furnishing and utilization of, and the

5 evaluation of, a class of covered services designated

6 by the Board, and with respect to the relationship

7 of that class of services to other covered services. In

8 appointing such individuals, the Board shall assure

9 significant representation of consumers of health

10 services and providers of health services.

11 (c) ADVISORY COMMITTEE ON COST CONTAIN12 MENT.—

13 (1) IN GENERAL.—The Board shall appoint a

14 standing Advisory Committee on Cost Containment

15 to advise it with respect to the payments and cost

16 containment measures contained in title VI of this

17 Act.

18 (2) MEMBERSHIP.—The membership of the

19 committee shall include individuals (in such number

20 as the Board may determine) with national recogni21 tion for their expertise in health economics, health

22 care financing, provider reimbursement, and related

23 fields. In appointing individuals the Board shall as24 sure significant representation of consumers of

25 health services and providers of health services.
60

•HR 3960 IH

1 (d) ADVISORY COMMITTEE ON PRIMARY CARE AND

2 THE MEDICALLY UNDERSERVED.—

3 (1) IN GENERAL.—The Board shall appoint a

4 standing Advisory Committee on Primary Care and

5 the Medically Underserved to advise it with respect

6 to title VII of this Act, including with respect to the

7 delivery of services and the education and training

8 of health professionals, and to consider means of in9 creasing the supply and expanding the scope of

10 practice of mid-level professionals and the use of

11 community health outreach workers and other non12 professional health care workers.

13 (2) MEMBERSHIP.—The membership of the

14 committee shall include individuals (in such number

15 as the Board may determine) from the health pro16 fessions and health services with expertise in—

17 (A) primary care services;

18 (B) the education and training of primary

19 care practitioners;

20 (C) the special health needs of medically

21 underserved populations;

22 (D) the training, educational, and financial

23 incentives that would encourage health practi24 tioners to serve in medically underserved areas;
61

•HR 3960 IH

1 (E) the delivery of health services through

2 community-based and public facilities; and

3 (F) developing alternative models of deliv4 ering primary health services to medically un5 derserved populations.

6 In appointing such individuals, the Board shall as7 sure significant representation of consumers of

8 health services and providers of health services.

9 (e) ADVISORY COMMITTEE ON MENTAL HEALTH AND

10 SUBSTANCE ABUSE TREATMENT SERVICES.—

11 (1) IN GENERAL.—The Board shall appoint a

12 standing Advisory Committee on Mental Health and

13 Substance Abuse Treatment Services to advise it

14 with respect to the manner in which the benefits

15 under this Act for mental health services and sub16 stance abuse treatment services should be modified

17 to best meet the objectives of this Act.

18 (2) MEMBERSHIP.—The membership of the

19 committee shall include individuals (in such number

20 as the Board may determine) with expertise in

21 health care economics, who are representative of the

22 multi-disciplinary range of providers of such serv23 ices, who are consumers of such services, and who

24 represent advocacy groups representing consumers

25 of such services.
62

•HR 3960 IH

1 (3) RESPONSIBILITIES.—The committee shall—

2 (A) study changes in the utilization pat3 terns and costs which accompany the provision

4 of mental health services and substance abuse

5 treatment services;

6 (B) study and make recommendations on

7 any changes that may be advisable in the utili8 zation review thresholds specified in section

9 204(b)(2)(A);

10 (C) make recommendations on ways to cre11 ate a continuum of care and encourage the pro12 vision of care in the least restrictive appropriate

13 setting;

14 (D) develop a standard set of practices for

15 care coordination services, including—

16 (i) the range of care coordination

17 services that should be offered for a spe18 cific target population,

19 (ii) the organizational structure in

20 which care coordination services should be

21 based,

22 (iii) the minimum training require23 ments for care coordinators, and

24 (iv) the standards for the clinical ne25 cessity of care coordination services,
63

•HR 3960 IH

1 and study (and make recommendations con2 cerning) peer care coordination services; and

3 (E) report any initial recommendations to

4 the Board by January 1, 1996.

5 (4) ROLE OF SUBSTANCE ABUSE AND MENTAL

6 HEALTH SERVICES ADMINISTRATION.—The Board

7 shall consult with the Administrator of the Sub8 stance Abuse and Mental Health Services Adminis9 tration in the appointment of members to, and

10 operation of, the committee.

11 (f) ADVISORY COMMITTEE ON PRESCRIPTION

12 DRUGS.—

13 (1) IN GENERAL.—The Board shall appoint a

14 standing Advisory Committee on Prescription Drugs

15 to advise it with respect to the list of approved pre16 scription drugs and biologicals under section

17 616(a)(1) and other matters relating to the coverage

18 of prescription drugs under this Act.

19 (2) MEMBERSHIP.—

20 (A) IN GENERAL.—The membership of the

21 committee shall include individuals (in such

22 number as the Board may determine) with ex23 pertise in appropriate utilization of prescription

24 and nonprescription drug and biological thera-
64

•HR 3960 IH

1 pies and of the relative safety and efficacy of

2 prescription drugs and biologicals.

3 (B) AREAS OF EXPERTISE.—A majority of

4 the members of the committee shall be physi5 cians. Members of the committee shall include

6 at least a dentist, a nurse, and a pharmacist,

7 and individuals with special knowledge or exper8 tise in at least the following areas: geriatric, ob9 stetric, pediatric, psychiatric, and neurological

10 problems associated with drug therapies; clini11 cal pharmacology; pharmacoepidemiology; and

12 comparative clinical trials of drugs (including

13 statisticians and biopharmaceutic specialists).

14 (C) CONFLICT OF INTEREST PROHIBI15 TION.—No individual who is an employee of a

16 manufacturer of a drug or biological or who

17 otherwise has a material financial interest di18 rectly or indirectly with respect to such a manu19 facturer, or who has an immediate family mem20 ber (as defined by the Board) who is such an

21 employee or has such an interest, shall serve as

22 a member of the committee.

23 (3) RESPONSIBILITIES.—The committee shall—

24 (A) continuously review scientific and med25 ical information pertaining to the relative safety
65

•HR 3960 IH

1 and efficacy, and the comparability, of prescrip2 tion drugs and biologicals approved for market3 ing in the United States; and

4 (B) recommend drug use classifications

5 and identify, within such a classification, drugs

6 that are therapeutic alternates for a given indi7 cation and indications for which particular

8 drugs are superior based on safety and efficacy.

9 The committee is not authorized to engage in drug

10 price negotiations nor define acceptable costs for any

11 product.

12 (4) CONSUMER INPUT.—In conducting its ac13 tivities, the committee shall solicit advice and com14 ments from a panel of consumer advocates.

15 (g) TEMPORARY COMMITTEES.—The Board is au16 thorized to appoint such temporary professional and tech17 nical committees as it deems necessary to advise it on spe18 cial problems not encompassed in the assignments of

19 standing committees appointed under this section or to

20 supplement the advice of standing committees.

21 (h) REPORTING.—Committees appointed under this

22 section shall report from time to time (but not less often

23 than biannually) to the Board, and copies of their reports

24 shall be transmitted by the Board to the American Health
66

•HR 3960 IH

1 Security Advisory Council and be made readily available

2 to the public.

3 (i) COMPENSATION.—All members of the committees

4 established under this section shall be reimbursed by the

5 Board for travel and per diem in lieu of subsistence ex6 penses during the performance of duties of the Board in

7 accordance with subchapter I of chapter 57 of title 5,

8 United States Code.

9 (j) ADVICE FROM PROSPECTIVE PAYMENT ASSESS10 MENT COMMISSION, PRACTITIONER PAYMENT REVIEW

11 COMMISSION, ETC.—For provisions relating to role of cer12 tain commissions in reviewing payment rates, see section

13 620.

14 SEC. 404. AMERICAN HEALTH SECURITY QUALITY COUNCIL.

15 (a) ESTABLISHMENT.—There is hereby established

16 an American Health Security Quality Council.

17 (b) APPOINTMENT AND TERMS OF MEMBERS.—

18 (1) IN GENERAL.—The Council shall be com19 posed of 10 members appointed by the President.

20 The President shall first appoint individuals on a

21 timely basis so as to provide for the operation of the

22 Council by not later than January 1, 1995.

23 (2) SELECTION OF MEMBERS.—Each member

24 of the Council shall be a member of a health profes25 sion. Six members of the Council shall be physicians.
67

•HR 3960 IH

1 Individuals shall be appointed to the Council on the

2 basis of national reputations for clinical and aca3 demic excellence.

4 (3) TERMS OF MEMBERS.—Individuals ap5 pointed to the Council shall serve for a term of 5

6 years, except that the terms of 4 of the individuals

7 initially appointed shall be, as designated by the

8 President at the time of their appointment, for 1, 2,

9 3, and 4 years.

10 (c) VACANCIES.—

11 (1) IN GENERAL.—The President shall fill any

12 vacancy in the membership of the Council in the

13 same manner as the original appointment. The va14 cancy shall not affect the power of the remaining

15 members to execute the duties of the Council.

16 (2) VACANCY APPOINTMENTS.—Any member

17 appointed to fill a vacancy shall serve for the re18 mainder of the term for which the predecessor of the

19 member was appointed.

20 (3) REAPPOINTMENT.—The President may re21 appoint a member of the Council for a second term

22 in the same manner as the original appointment. A

23 member who has served for two consecutive 5-year

24 terms shall not be eligible for reappointment until

25 two years after the member has ceased to serve.
68

•HR 3960 IH

1 (d) CHAIR.—The President shall designate one of the

2 members of the Council to serve at the will of the Presi3 dent as Chair of the Council.

4 (e) COMPENSATION.—Members of the Council who

5 are not employees of the Federal Government shall be en6 titled to compensation at a level equivalent to level II of

7 the Executive Schedule, in accordance with section 5313

8 of title 5, United States Code.

9 (f) GENERAL DUTIES OF THE COUNCIL.—The Coun10 cil is responsible for quality review activities under title

11 V. The Council shall report to the Board annually on the

12 conduct of activities under such title and shall report to

13 the Board annually specifically on findings from outcomes

14 research and development of practice guidelines that may

15 affect the Board’s determination of coverage of services

16 under section 401(f)(1)(G).

17 SEC. 405. STATE HEALTH SECURITY PROGRAMS.

18 (a) SUBMISSION OF PLANS.—

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

20 the Board a plan for a State health security pro21 gram for providing for health care services to the

22 residents of the State in accordance with this Act.

23 (2) REGIONAL PROGRAMS.—A State may join

24 with one or more neighboring States to submit to

25 the Board a plan for a regional health security pro-
69

•HR 3960 IH

1 gram instead of separate State health security

2 programs.

3 (3) REGIONAL PLANNING MECHANISMS.—The

4 Board shall provide incentives for States to develop

5 regional planning mechanisms to promote the ration6 al distribution of, adequate access to, and efficient

7 use of, tertiary care facilities, equipment, and

8 services.

9 (b) REVIEW AND APPROVAL OF PLANS.—

10 (1) IN GENERAL.—The Board shall review

11 plans submitted under subsection (a) and determine

12 whether such plans meet the requirements for ap13 proval. The Board shall not approve such a plan un14 less it finds that the plan (or State law) provides,

15 consistent with the provisions of this Act, for the

16 following:

17 (A) Payment for required health services

18 for eligible individuals in the State in accord19 ance with this Act.

20 (B) Adequate administration, including the

21 designation of a single State agency responsible

22 for the administration (or supervision of the

23 administration) of the program.

24 (C) The establishment of a State health

25 security budget.
70

•HR 3960 IH

1 (D) Establishment of payment methodolo2 gies (consistent with subtitle B of title VII).

3 (E) Assurances that individuals have the

4 freedom to choose practitioners and other

5 health care providers for services covered under

6 this Act.

7 (F) A procedure for carrying out long-term

8 regional management and planning functions

9 with respect to the delivery and distribution of

10 health care services that—

11 (i) ensures participation of consumers

12 of health services and providers of health

13 services, and

14 (ii) gives priority to the most acute

15 shortages and maldistributions of health

16 personnel and facilities and the most seri17 ous deficiencies in the delivery of covered

18 services and to the means for the speedy

19 alleviation of these shortcomings.

20 (G) The licensure and regulation of all

21 health providers and facilities to ensure compli22 ance with Federal and State laws and to

23 promote quality of care.

24 (H) Establishment of a quality review sys25 tem in accordance with section 502.
71

•HR 3960 IH

1 (I) Establishment of an independent om2 budsman for consumers to register complaints

3 about the organization and administration of

4 the State health security program and to help

5 resolve complaints and disputes between con6 sumers and providers.

7 (J) Publication of an annual report on the

8 operation of the State health security program,

9 which report shall include information on cost,

10 progress towards achieving full enrollment, pub11 lic access to health services, quality review,

12 health outcomes, health professional training,

13 and the needs of medically underserved

14 populations.

15 (K) Provision of a fraud and abuse preven16 tion and control unit that the Inspector General

17 determines meets the requirements of section

18 413(a).

19 (L) Provision that—

20 (i) all claims or requests for payment

21 for services shall be accompanied by the

22 unique provider identifier assigned under

23 section 414(a) to the provider and the

24 unique patient identifier assigned to the

25 individual under section 414(b);
72

•HR 3960 IH

1 (ii) no payment shall be made under

2 the program for the provision of health

3 care services by any provider unless the

4 provider has furnished the program with

5 the unique provider identifier assigned

6 under section 414(a);

7 (iii) the plan shall use the unique pa8 tient identifier assigned under section

9 414(b) to an individual as the identifier of

10 the individual in the processing of claims

11 and other purposes (as specified by the

12 Board); and

13 (iv) queries made under section

14 412(c)(2) shall be made using the unique

15 provider identifier specified under section

16 414(a).

17 (M) Prohibit payment in cases of prohib18 ited physician referrals under section 304.

19 (N) Effective January 1, 2001, provide for

20 use of a uniform electronic data base in accord21 ance with section 504(a).

22 (2) CONSEQUENCES OF FAILURE TO COMPLY.—

23 If the Board finds that a State plan submitted

24 under paragraph (1) does not meet the requirements

25 for approval under this section or that a State
73

•HR 3960 IH

1 health security program or specific portion of such

2 program, the plan for which was previously ap3 proved, no longer meets such requirements, the

4 Board shall provide notice to the State of such fail5 ure and that unless corrective action is taken within

6 a period specified by the Board, the Board shall

7 place the State health security program (or specific

8 portions of such program) in receivership under the

9 jurisdiction of the Board.

10 (c) STATE HEALTH SECURITY ADVISORY COUN11 CILS.—

12 (1) IN GENERAL.—For each State, the Gov13 ernor shall provide for appointment of a State

14 Health Security Advisory Council to advise and

15 make recommendations to the Governor and State

16 with respect to the implementation of the State

17 health security program in the State.

18 (2) MEMBERSHIP.—Each State Health Security

19 Advisory Council shall be composed of at least 11 in20 dividuals. The appointed members shall include indi21 viduals who are representative of the State health

22 security program, public health professionals, provid23 ers of health services, and of individuals (who shall

24 constitute a majority) who are representative of con25 sumers of such services, including a balanced
74

•HR 3960 IH

1 representation of employers, unions and consumer

2 organizations.

3 (3) DUTIES.—

4 (A) IN GENERAL.—Each State Health Se5 curity Advisory Council shall review, and sub6 mit comments to the Governor concerning the

7 implementation of the State health security pro8 gram in the State.

9 (B) ASSISTANCE.—Each State Health Se10 curity Advisory Council shall provide assistance

11 and technical support to community organiza12 tions and public and private non-profit agencies

13 submitting applications for funding under ap14 propriate State and Federal public health pro15 grams, with particular emphasis placed on as16 sisting those applicants with broad consumer

17 representation.

18 (d) STATE USE OF FISCAL AGENTS.—

19 (1) IN GENERAL.—Each State health security

20 program, using competitive bidding procedures, may

21 enter into such contracts with qualified entities, such

22 as voluntary associations, as the State determines to

23 be appropriate to process claims and to perform

24 other related functions of fiscal agents under the

25 State health security program.
75

•HR 3960 IH

1 (2) RESTRICTION.—Except as the Board may

2 provide for good cause shown, in no case may more

3 than one contract described in paragraph (1) be

4 entered into under a State health security program.

5 SEC. 406. COMPLEMENTARY CONDUCT OF RELATED

6 HEALTH PROGRAMS.

7 In performing functions with respect to health per8 sonnel education and training, health research, environ9 mental health, disability insurance, vocational rehabilita10 tion, the regulation of food and drugs, and all other mat11 ters pertaining to health, the Secretary of Health and

12 Human Services shall direct all activities of the Depart13 ment of Health and Human Services toward contributions

14 to the health of the people complementary to this Act.

15 Subtitle B—Control Over Fraud

16 and Abuse

17 SEC. 411. APPLICATION OF FEDERAL SANCTIONS TO ALL

18 FRAUD AND ABUSE UNDER AMERICAN

19 HEALTH SECURITY PROGRAM.

20 The following sections of the Social Security Act shall

21 apply to State health security programs in the same man22 ner as they apply to State medical assistance plans under

23 title XIX of such Act (except that in applying such provi24 sions any reference to the Secretary is deemed a reference

25 to the Board):
76

•HR 3960 IH

1 (1) Section 1128 (relating to exclusion of indi2 viduals and entities).

3 (2) Section 1128A (civil monetary penalties).

4 (3) Section 1128B (criminal penalties).

5 (4) Section 1124 (relating to disclosure of own6 ership and related information).

7 (5) Section 1126 (relating to disclosure of cer8 tain owners).

9 SEC. 412. NATIONAL HEALTH CARE FRAUD DATA BASE.

10 (a) ESTABLISHMENT.—The American Health Secu11 rity Standards Board, through the Inspector General,

12 shall establish a national data base (in this section

13 referred to as the ‘‘data base’’) containing information

14 relating to health care fraud and abuse.

15 (b) DATA INCLUDED.—

16 (1) IN GENERAL.—The data base shall include

17 such information as the Inspector General, in con18 sultation with the Board, shall specify, and shall

19 include at least the information described in

20 paragraph (2).

21 (2) SPECIFIED INFORMATION.—The informa22 tion specified in this paragraph is, with respect to

23 providers of health care services, the identity of any

24 provider—
77

•HR 3960 IH

1 (A) that has been convicted of a crime for

2 which the provider may be excluded from par3 ticipation under a health program (as defined

4 in paragraph (3));

5 (B) whose license to provide health care

6 has been revoked or suspended (as described in

7 section 1128(b)(5) of the Social Security Act);

8 (C) that has been excluded or suspended

9 from a health program under section 1128 of

10 the Social Security Act or from any other

11 Federal or State health care program;

12 (D) with respect to whom a civil money

13 penalty has been imposed under this Act or the

14 Social Security Act; or

15 (E) that otherwise is subject to exclusion

16 from participation under a health program.

17 (3) HEALTH PROGRAM DEFINED.—In this sec18 tion, the term ‘‘health program’’ means a State

19 health security program and includes the medicare

20 program (under title XVIII of the Social Security

21 Act) and a State health care program (as defined in

22 section 1128(h) of such Act).

23 (c) REPORTING REQUIREMENT.—

24 (1) REPORTING.—Each State health security

25 program shall provide such information to the In-
78

•HR 3960 IH

1 spector General as the Inspector General may re2 quire in order to carry out fraud and abuse control

3 activities and for purposes of maintaining the data

4 base.

5 (2) QUERYING.—In accordance with rules es6 tablished by the Board (in consultation with the In7 spector General), each State health security program

8 shall query periodically (as specified by the Inspector

9 General)—

10 (A) the data base to determine if providers

11 of health services for which the program makes

12 payment are not disqualified from providing

13 such services, and

14 (B) the Secretary of Health and Human

15 Services, concerning information obtained by

16 the Secretary under part B of the Health Care

17 Quality Improvement Act of 1986 relating to

18 practitioners.

19 (3) COORDINATION WITH MALPRACTICE DATA

20 BASE.—The Secretary of Health and Human Serv21 ices shall provide for the coordination of the report22 ing and disclosure of information under this section

23 with information under part B of the Health Care

24 Quality Improvement Act of 1986.
79

•HR 3960 IH

1 (4) UNIFORM MANNER.—Information shall be

2 reported under this subsection in a uniform manner

3 (in accordance with standards of the Inspector Gen4 eral) that permits aggregation of reported informa5 tion.

6 (5) ACCESS FOR AUDIT.—Each State health se7 curity program shall provide the Inspector General

8 such access to information as may be required to

9 verify the information reported under this sub10 section.

11 (6) PENALTY FOR FALSE INFORMATION.—Any

12 person that submits false information required to be

13 provided under this subsection or that denies access

14 to information under paragraph (5) may be impris15 oned for not more than 5 years, or fined, or both,

16 in accordance with title 18, United States Code.

17 (7) CONFIDENTIALITY.—The Board shall estab18 lish rules that protect the confidentiality of the

19 information in the data base.

20 SEC. 413. REQUIREMENTS FOR OPERATION OF STATE

21 HEALTH CARE FRAUD AND ABUSE CONTROL

22 UNITS.

23 (a) REQUIREMENT.—In order to meet the require24 ment of section 405(b)(1)(K), each State health security

25 program must establish and maintain a health care fraud
80

•HR 3960 IH

1 and abuse control unit (in this section referred to as a

2 ‘‘fraud unit’’) that meets requirements of this section and

3 other requirements of the Board. Such a unit may be a

4 State medicaid fraud control unit (described in section

5 1903(q) of the Social Security Act).

6 (b) STRUCTURE OF UNIT.—The fraud unit must—

7 (1) be a single identifiable entity of the State

8 government;

9 (2) be separate and distinct from the State

10 agency with principal responsibility for the adminis11 tration of the State health security program; and

12 (3) meet 1 of the following requirements:.

13 (A) It must be a unit of the office of the

14 State Attorney General or of another depart15 ment of State government which possesses

16 statewide authority to prosecute individuals for

17 criminal violations.

18 (B) If it is in a State the constitution of

19 which does not provide for the criminal prosecu20 tion of individuals by a statewide authority and

21 has formal procedures, approved by the Board,

22 that (i) assure its referral of suspected criminal

23 violations relating to the State health insurance

24 plan to the appropriate authority or authorities

25 in the States for prosecution, and (ii) assure its
81

•HR 3960 IH

1 assistance of, and coordination with, such au2 thority or authorities in such prosecutions.

3 (C) It must have a formal working rela4 tionship with the office of the State Attorney

5 General and have formal procedures (including

6 procedures for its referral of suspected criminal

7 violations to such office) which are approved by

8 the Board and which provide effective coordina9 tion of activities between the fraud unit and

10 such office with respect to the detection, inves11 tigation, and prosecution of suspected criminal

12 violations relating to the State health insurance

13 plan.

14 (c) FUNCTIONS.—The fraud unit must—

15 (1) have the function of conducting a statewide

16 program for the investigation and prosecution of vio17 lations of all applicable State laws regarding any

18 and all aspects of fraud in connection with any as19 pect of the provision of health care services and ac20 tivities of providers of such services under the State

21 health security program;

22 (2) have procedures for reviewing complaints of

23 the abuse and neglect of patients of providers and

24 facilities that receive payments under the State

25 health security program, and, where appropriate, for
82

•HR 3960 IH

1 acting upon such complaints under the criminal laws

2 of the State or for referring them to other State

3 agencies for action; and

4 (3) provide for the collection, or referral for col5 lection to a single State agency, of overpayments

6 that are made under the State health security pro7 gram to providers and that are discovered by the

8 fraud unit in carrying out its activities.

9 (d) RESOURCES.—The fraud unit must—

10 (1) employ such auditors, attorneys, investiga11 tors, and other necessary personnel,

12 (2) be organized in such a manner, and

13 (3) provide sufficient resources (as specified by

14 the Board),

15 as is necessary to promote the effective and efficient con16 duct of the unit’s activities.

17 (e) COOPERATIVE AGREEMENTS.—The fraud unit

18 must have cooperative agreements (as specified by the

19 Board) with—

20 (1) similar fraud units in other States,

21 (2) the Inspector General, and

22 (3) the Attorney General of the United States.

23 (f) REPORTS.—The fraud unit must submit to the

24 Inspector General an application and annual reports con25 taining such information as the Inspector General deter-
83

•HR 3960 IH

1 mines to be necessary to determine whether the unit meets

2 the previous requirements of this section.

3 SEC. 414. ASSIGNMENT OF UNIQUE PROVIDER AND PA4 TIENT IDENTIFIERS.

5 (a) PROVIDER IDENTIFIERS.—

6 (1) IN GENERAL.—The Board shall provide for

7 the assignment, to each individual or entity provid8 ing health care services under a State health secu9 rity program, of a unique provider identifier.

10 (2) RESPONSE TO QUERIES.—Upon the request

11 of a State health security program with respect to

12 a provider, the Board shall provide the program with

13 the unique provider identifier (if any) assigned to

14 the provider under paragraph (1).

15 (b) PATIENT IDENTIFIERS.—The Board shall provide

16 for the assignment, to each eligible individual, of a unique

17 patient identifier. The identifier so assigned may be the

18 Social Security account number of the individual.

19 (c) REQUIREMENT TO USE IDENTIFIERS.—Each

20 State health security program is required under section

21 405(b)(1)(L) to use the unique identifiers assigned under

22 this section.
84

•HR 3960 IH

1 TITLE V—QUALITY ASSESSMENT

2 SEC. 501. FUNCTIONS OF QUALITY COUNCIL; DEVELOP3 MENT OF PRACTICE GUIDELINES AND APPLI4 CATION TO OUTLIERS.

5 (a) DEVELOPMENT OF PRACTICE GUIDELINES.—The

6 American Health Security Quality Council (in this title

7 referred to as the ‘‘Council’’)—

8 (1) shall collect data from outcomes research,

9 including data on patient satisfaction and post-hos10 pital discharge experience, on an ongoing basis

11 (whether conducted by the Federal Government or

12 other entities), and

13 (2) on the basis of such data and existing

14 clinical knowledge, shall develop practice guidelines.

15 Such guidelines may vary based upon the area in which

16 the services are provided and the degree of training, spe17 cialization, or similar characteristics of providers. Such

18 guidelines must be updated on an annual basis and based

19 on monitoring of outcomes research and other clinical

20 data. Such guidelines shall be based on the degree to

21 which a process of care increases the probability of desired

22 patient outcomes.

23 (b) PROFILING OF PATTERNS OF PRACTICE; IDENTI24 FICATION OF OUTLIERS.—The Council shall adopt meth25 odologies for profiling the patterns of practice of health
85

•HR 3960 IH

1 care professionals and for identifying outliers (as defined

2 in subsection (f)).

3 (c) CENTERS OF EXCELLENCE.—The Council shall

4 develop guidelines for certain medical procedures des5 ignated by the Board to be performed only at tertiary care

6 centers which can meet standards for frequency of proce7 dure performance and intensity of support mechanisms

8 that are consistent with the high probability of desired pa9 tient outcome. Reimbursement under this Act for such a

10 designated procedure may only be provided if the

11 procedure was performed at a center that meets such

12 standards.

13 (d) REMEDIAL ACTIONS.—The Council shall develop

14 standards for education and sanctions with respect to

15 outliers so as to assure the quality of health care services

16 provided under this Act.

17 (e) DISSEMINATION.—The Council shall disseminate

18 to the State—

19 (1) the guidelines developed under subsections

20 (a) and (c),

21 (2) the methodologies adopted under subsection

22 (b), and

23 (3) the standards developed under subsection

24 (d),

25 for use by the States under section 502.
86

•HR 3960 IH

1 (f) OUTLIER DEFINED.—In this title, the term

2 ‘‘outlier’’ means a health care provider whose pattern of

3 practice, relative to applicable practice guidelines, suggests

4 deficiencies in the quality of health care services being

5 provided.

6 SEC. 502. STATE QUALITY REVIEW PROGRAMS.

7 (a) REQUIREMENT.—In order to meet the require8 ment of section 405(b)(1)(H), each State health security

9 program shall establish one or more qualified entities to

10 conduct quality reviews of persons providing covered serv11 ices under the program, in accordance with standards es12 tablished under subsection (b)(1) (except as provided in

13 subsection (b)(2)) and subsection (d).

14 (b) FEDERAL STANDARDS.—

15 (1) IN GENERAL.—The Council shall establish

16 standards with respect to—

17 (A) the adoption of practice guidelines (de18 veloped under section 501(a)),

19 (B) the identification of outliers (consist20 ent with methodologies adopted under section

21 501(b)),

22 (C) the development of remedial programs

23 and monitoring for outliers, and
87

•HR 3960 IH

1 (D) the application of sanctions (consistent

2 with the standards developed under section

3 501(c)).

4 (2) STATE DISCRETION.—A State may apply

5 under subsection (a) standards other than those es6 tablished under paragraph (1) so long as the State

7 demonstrates to the satisfaction of the Council on an

8 annual basis that the standards applied have been as

9 efficacious in promoting and achieving improved

10 quality of care as the application of the standards

11 established under paragraph (1). Positive improve12 ments in quality shall be documented by reductions

13 in the variations of clinical care process and

14 improvement in patient outcomes.

15 (c) QUALIFICATIONS.—

16 (1) IN GENERAL.—An entity is not qualified to

17 conduct quality reviews under subsection (a) unless

18 the entity—

19 (A) is administratively independent of the

20 individual or board that administers the State

21 health security program, and

22 (B) does not provide any financial incen23 tive to reviewers to favor one pattern of practice

24 over another.
88

•HR 3960 IH

1 (2) PROVIDER-SPECIFIC ENTITIES.—Subject to

2 paragraph (1), a State may provide that an individ3 ual hospital (or other institutional provider) may

4 serve as a qualified entity to conduct quality reviews

5 under subsection (a).

6 SEC. 503. ELIMINATION OF UTILIZATION REVIEW PRO7 GRAMS; TRANSITION.

8 (a) INTENT.—It is the intention of this title to re9 place by January 1, 1998, random utilization controls with

10 a systematic review of patterns of practice that com11 promise the quality of care.

12 (b) SUPERSEDING CASE REVIEWS.—

13 (1) IN GENERAL.—Subject to the succeeding

14 provisions of this subsection, the program of quality

15 review provided under the previous sections of this

16 title supersede all existing Federal requirements for

17 utilization review programs, including requirements

18 for random case-by-case reviews and programs re19 quiring pre-certification of medical procedures on a

20 case-by-case basis.

21 (2) TRANSITION.—Before January 1, 1998, the

22 Board and the States may employ existing utiliza23 tion review standards and mechanisms as may be

24 necessary to effect the transition to pattern of prac25 tice-based reviews.
89

•HR 3960 IH

1 (3) CONSTRUCTION.—Nothing in this sub2 section shall be construed—

3 (A) as precluding the case-by-case review

4 of the provision of care—

5 (i) in individual incidents where the

6 quality of care has significantly deviated

7 from acceptable standards of practice, and

8 (ii) with respect to a provider who has

9 been determined to be an outlier; or

10 (B) as precluding the case management of

11 catastrophic, mental health, or substance abuse

12 cases where such management is necessary to

13 achieve appropriate, cost-effective, and bene14 ficial comprehensive medical care, as provided

15 for in section 204.

16 SEC. 504. DEVELOPMENT OF NATIONAL ELECTRONIC DATA

17 BASE.

18 (a) USE BY STATES.—In order to meet the require19 ment of this section, for purposes of section

20 405(b)(1)(N)), each State health security program shall

21 develop and use a uniform electronic data base which uses

22 the software designated under subsection (b) and which

23 assures confidentiality under subsection (c), for all patient

24 records in order to enable systematic quality review and

25 outcomes analysis. Subject to subsection (c), data in such
90

•HR 3960 IH

1 data base shall be made available, under rules established

2 by the Board, in order to facilitate the portability of pa3 tient records and comparative outcomes research analysis.

4 (b) UNIFORM SOFTWARE.—The Board shall des5 ignate the uniform software that shall be used by States

6 in the operation of their electronic data bases, in order

7 to facilitate the portability of patient records and com8 parative outcomes research analysis. The Board shall not

9 grant any waiver of the requirement of the previous

10 sentence.

11 (c) CONFIDENTIALITY.—The Board shall establish

12 standards that are designed to protect the privacy and

13 otherwise shield the identity of the patients whose records

14 are included in the data base. Under such standards, gov15 ernment agencies shall not have access to information in

16 the data base that will identify individual patients except

17 in cases of quality review procedures which require that

18 individual patients be informed of necessary changes in

19 their treatment.
91

•HR 3960 IH

1 TITLE VI—HEALTH SECURITY

2 BUDGET; PAYMENTS; COST

3 CONTAINMENT MEASURES

4 Subtitle A—Budgeting and

5 Payments to States

6 SEC. 601. NATIONAL HEALTH SECURITY BUDGET.

7 (a) NATIONAL HEALTH SECURITY BUDGET.—

8 (1) IN GENERAL.—By not later than September

9 1 before the beginning of each year (beginning with

10 1995), the Board shall establish a national health

11 security budget, which—

12 (A) specifies the total expenditures (includ13 ing expenditures for administrative costs) to be

14 made by the Federal Government and the

15 States for covered health care services under

16 this Act, and

17 (B) allocates those expenditures among the

18 States consistent with section 604.

19 Pursuant to subsection (b), such budget for a year

20 shall not exceed the budget for the preceding year

21 increased by the percentage increase in gross domes22 tic product.

23 (2) DIVISION OF BUDGET INTO COMPONENTS.—

24 The national health security budget shall consist of

25 at least 4 components:
92

•HR 3960 IH

1 (A) A component for quality assessment

2 activities (described in title V).

3 (B) A component for health professional

4 education expenditures.

5 (C) A component for administrative costs.

6 (D) A component (in this title referred to

7 as the ‘‘operating component’’) for operating

8 and other expenditures not described in sub9 paragraphs (A) through (C), consisting of

10 amounts not included in the other components.

11 A State may provide for the allocation of this

12 component between capital expenditures and

13 other expenditures.

14 (3) ALLOCATION AMONG COMPONENTS.—Tak15 ing into account the State health security budgets

16 established and submitted under section 603, the

17 Board shall allocate the national health security

18 budget among the components in a manner that—

19 (A) assures a fair allocation for quality as20 sessment activities (consistent with the national

21 health security spending growth limit); and

22 (B) assures that the health professional

23 education expenditure component is sufficient

24 to provide for the amount of health professional

25 education expenditures sufficient to meet the
93

•HR 3960 IH

1 need for covered health care services (consistent

2 with the national health security spending

3 growth limit under subsection (b)(2)).

4 (b) BASIS FOR TOTAL EXPENDITURES.—

5 (1) IN GENERAL.—The total expenditures speci6 fied in such budget shall be the sum of the capita7 tion amounts computed under section 602(a) and

8 the amount of Federal administrative expenditures

9 needed to carry out this Act.

10 (2) NATIONAL HEALTH SECURITY SPENDING

11 GROWTH LIMIT.—For purposes of this subtitle, the

12 national health security spending growth limit de13 scribed in this paragraph for a year is zero, or, if

14 greater, the percentage increase in the gross domes15 tic product (in current dollars) from the first quar16 ter of the second previous year to the first quarter

17 of the previous year.

18 (c) DEFINITIONS.—In this title:

19 (1) CAPITAL EXPENDITURES.—The term ‘‘cap20 ital expenditures’’ means expenses for the purchase,

21 lease, construction, or renovation of capital facilities

22 and for equipment and includes return on equity

23 capital.

24 (2) HEALTH PROFESSIONAL EDUCATION EX25 PENDITURES.—The term ‘‘health professional edu-
94

•HR 3960 IH

1 cation expenditures’’ means expenditures in hospitals

2 and other health care facilities to cover costs associ3 ated with teaching and related research activities.

4 SEC. 602. COMPUTATION OF INDIVIDUAL AND STATE CAPI5 TATION AMOUNTS.

6 (a) CAPITATION AMOUNTS.—

7 (1) INDIVIDUAL CAPITATION AMOUNTS.—In es8 tablishing the national health security budget under

9 section 601(a) and in computing the national aver10 age per capita cost under subsection (b) for each

11 year, the Board shall establish a method for comput12 ing the capitation amount for each eligible individual

13 residing in each State. The capitation amount for an

14 eligible individual in a State classified within a risk

15 group (established under subsection (d)(2)) is the

16 product of—

17 (A) a national average per capita cost for

18 all covered health care services (computed

19 under subsection (b)),

20 (B) the State adjustment factor (estab21 lished under subsection (c)) for the State, and

22 (C) the risk adjustment factor (established

23 under subsection (d)) for the risk group.

24 (2) STATE CAPITATION AMOUNT.—
95

•HR 3960 IH

1 (A) IN GENERAL.—For purposes of this

2 title, the term ‘‘State capitation amount’’

3 means, for a State for a year, the sum of the

4 capitation amounts computed under paragraph

5 (1) for all the residents of the State in the year,

6 as estimated by the Board before the beginning

7 of the year involved.

8 (B) USE OF STATISTICAL MODEL.—The

9 Board may provide for the computation of

10 State capitation amounts based on statistical

11 models that fairly reflect the elements that com12 prise the State capitation amount described in

13 subparagraph (A).

14 (C) POPULATION INFORMATION.—The Bu15 reau of the Census shall assist the Board in de16 termining the number, place of residence, and

17 risk group classification of eligible individuals.

18 (b) COMPUTATION OF NATIONAL AVERAGE PER CAP19 ITA COST.—

20 (1) FOR 1995.—For 1995, the national average

21 per capita cost under this paragraph is equal to—

22 (A) the average per capita health care ex23 penditures in the United States in 1993 (as

24 estimated by the Board),
96

•HR 3960 IH

1 (B) increased to 1994 by the Board’s esti2 mate of the actual amount of such per capita

3 expenditures during 1994, and

4 (C) updated to 1995 by the national health

5 security spending growth limit specified in sec6 tion 601(b)(2) for 1995.

7 (2) FOR SUCCEEDING YEARS.—For each suc8 ceeding year, the national average per capita cost

9 under this subsection is equal to the national aver10 age per capita cost computed under this subsection

11 for the previous year increased by the national

12 health security spending growth limit (specified in

13 section 601(b)(2)) for the year involved.

14 (c) STATE ADJUSTMENT FACTORS.—

15 (1) IN GENERAL.—Subject to the succeeding

16 paragraphs of this subsection, the Board shall de17 velop for each State a factor to adjust the national

18 average per capita costs to reflect differences

19 between the State and the United States in—

20 (A) average labor and nonlabor costs that

21 are necessary to provide covered health services;

22 (B) any social, environmental, or geo23 graphic condition affecting health status or the

24 need for health care services, to the extent such
97

•HR 3960 IH

1 a condition is not taken into account in the es2 tablishment of risk groups under subsection (d);

3 (C) the geographic distribution of the

4 State’s population, particularly the proportion

5 of the population residing in medically under6 served areas, to the extent such a condition is

7 not taken into account in the establishment of

8 risk groups under subsection (d); and

9 (D) any other factor relating to operating

10 costs required to assure equitable distribution

11 of funds among the States.

12 (2) MODIFICATION OF HEALTH PROFESSIONAL

13 EDUCATION COMPONENT.—With respect to the por14 tion of the national health security budget allocated

15 to expenditures for health professional education, the

16 Board shall modify the State adjustment factors so

17 as to take into account—

18 (A) differences among States in health

19 professional education programs in operation as

20 of the date of the enactment of this Act, and

21 (B) differences among States in their rel22 ative need for expenditures for health profes23 sional education, taking into account the health

24 professional education expenditures proposed in
98

•HR 3960 IH

1 State health security budgets under section

2 603(a).

3 (3) BUDGET NEUTRALITY.—The State adjust4 ment factors, as modified under paragraph (2), shall

5 be applied under this subsection in a manner that

6 results in neither an increase nor a decrease in the

7 total amount of the Federal contributions to all

8 State health security programs under subsection (b)

9 as a result of the application of such factors.

10 (4) PHASE-IN.—In applying State adjustment

11 factors under this subsection during the five-year pe12 riod beginning with 1995, the Board shall phase-in,

13 over such period, the use of factors described in

14 paragraph (1) in a manner so that the adjustment

15 factor for a State is based on a blend of such factors

16 and a factor that reflects the relative actual average

17 per capita costs of health services of the different

18 States as of the time of enactment of this Act.

19 (5) PERIODIC ADJUSTMENT.—In establishing

20 the national health security budget before the begin21 ning of each year, the Board shall provide for appro22 priate adjustments in the State adjustment factors

23 under this subsection.

24 (d) ADJUSTMENTS FOR RISK GROUP CLASSIFICA25 TION.—
99

•HR 3960 IH

1 (1) IN GENERAL.—The Board shall develop an

2 adjustment factor to the national average per capita

3 costs computed under subsection (b) for individuals

4 classified in each risk group (as designated under

5 paragraph (2)) to reflect the difference between the

6 average national average per capita costs and the

7 national average per capita cost for individuals clas8 sified in the risk group.

9 (2) RISK GROUPS.—The Board shall designate

10 a series of risk groups, determined by age, health in11 dicators, and other factors that represent distinct

12 patterns of health care services utilization and costs.

13 (3) PERIODIC ADJUSTMENT.—In establishing

14 the national health security budget before the begin15 ning of each year, the Board shall provide for appro16 priate adjustments in the risk adjustment factors

17 under this subsection.

18 SEC. 603. STATE HEALTH SECURITY BUDGETS.

19 (a) ESTABLISHMENT AND SUBMISSION OF BUDG20 ETS.—

21 (1) IN GENERAL.—Each State health security

22 program shall establish and submit to the Board for

23 each year a proposed and a final State health secu24 rity budget, which specifies the following:
100

•HR 3960 IH

1 (A) The total expenditures (including ex2 penditures for administrative costs) to be made

3 under the program in the State for covered

4 health care services under this Act, consistent

5 with subsection (b), broken down as follows:

6 (i) By the 4 components (described in

7 section 601(a)(2)), consistent with sub8 section (b).

9 (ii) Within the operating component—

10 (I) expenditures for operating

11 costs of hospitals and other facility12 based services in the State,

13 (II) expenditures for payment to

14 comprehensive health service organiza15 tions,

16 (III) expenditures for payment of

17 services provided by health care prac18 titioners, and

19 (IV) expenditures for other cov20 ered items and services.

21 Amounts included in the operating compo22 nent include amounts that may be used by

23 providers for capital expenditures.

24 (B) The total revenues required to meet

25 the State health security expenditures.
101

•HR 3960 IH

1 (2) PROPOSED BUDGET DEADLINE.—The pro2 posed budget for a year shall be submitted under

3 paragraph (1) not later than June 1 before the year.

4 (3) FINAL BUDGET.—The final budget for a

5 year shall—

6 (A) be established and submitted under

7 paragraph (1) not later than October 1 before

8 the year, and

9 (B) take into account the amounts estab10 lished under the national health security budget

11 under section 601 for the year.

12 (4) ADJUSTMENT IN ALLOCATIONS PER13 MITTED.—

14 (A) IN GENERAL.—Subject to subpara15 graphs (B) and (C), in the case of a final

16 budget, a State may change the allocation of

17 amounts among components.

18 (B) NOTICE.—No such change may be

19 made unless the State has provided prior notice

20 of the change to the Board.

21 (C) DENIAL.—Such a change may not be

22 made if the Board, within such time period as

23 the Board specifies, disapproves such change.

24 (b) EXPENDITURE LIMITS.—
102

•HR 3960 IH

1 (1) IN GENERAL.—The total expenditures speci2 fied in each State health security budget under sub3 section (a)(1) shall take into account Federal

4 contributions made under section 604.

5 (2) LIMIT ON CLAIMS PROCESSING AND BILL6 ING EXPENDITURES.—Each State health security

7 budget shall provide that State administrative ex8 penditures, including expenditures for claims proc9 essing and billing, shall not exceed 3 percent of the

10 total expenditures under the State health security

11 program, unless the Board determines, on a case-by12 case basis, that additional administrative expendi13 tures would improve health care quality and cost

14 effectiveness.

15 (3) WORKER ASSISTANCE.—A State health se16 curity program may provide that, for budgets for

17 years before 2000, up to 1 percent of the budget

18 may be used for purposes of programs providing as19 sistance to workers who are currently performing

20 functions in the administration of the health insur21 ance system and who may experience economic dis22 location as a result of the implementation of the

23 program.

24 (c) APPROVAL PROCESS FOR CAPITAL EXPENDI25 TURES PERMITTED.—Nothing in this title shall be con-
103

•HR 3960 IH

1 strued as preventing a State health security program from

2 providing for a process for the approval of capital expendi3 tures based on information derived from regional planning

4 agencies.

5 SEC. 604. FEDERAL PAYMENTS TO STATES.

6 (a) IN GENERAL.—Each State with an approved

7 State health security program is entitled to receive, from

8 amounts in the National Health Security Trust Fund, on

9 a monthly basis each year, of an amount equal to one10 twelfth of the product of—

11 (1) the State capitation amount (computed

12 under section 602(a)(2)) for the State for the year,

13 and

14 (2) the Federal contribution percentage (estab15 lished under subsection (b)).

16 (b) FEDERAL CONTRIBUTION PERCENTAGE.—The

17 Board shall establish a formula for the establishment of

18 a Federal contribution percentage for each State. Such

19 formula shall take into consideration a State’s per capita

20 income and revenue capacity and such other relevant eco21 nomic indicators as the Board determines to be appro22 priate. In addition, during the 5-year period beginning

23 with 1995, the Board may provide for a transition adjust24 ment to the formula in order to take into account current

25 expenditures by the State (and local governments thereof)
104

•HR 3960 IH

1 for health services covered under the State health security

2 program. The weighted-average Federal contribution per3 centage for all States shall equal 86 percent and in no

4 event shall such percentage be less than 81 percent nor

5 more than 91 percent.

6 (c) USE OF PAYMENTS.—All payments made under

7 this section may only be used to carry out the State health

8 security program.

9 (d) EFFECT OF SPENDING EXCESS OR SURPLUS.—

10 (1) SPENDING EXCESS.—If a State exceeds it’s

11 budget in a given year, the State shall continue to

12 fund covered health services from its own revenues.

13 (2) SURPLUS.—If a State provides all covered

14 health services for less than the budgeted amount

15 for a year, it may retain its Federal payment for

16 that year for uses consistent with this Act.

17 SEC. 605. ACCOUNT FOR HEALTH PROFESSIONAL EDU18 CATION EXPENDITURES.

19 (a) SEPARATE ACCOUNT.—Each State health secu20 rity program shall—

21 (1) include a separate account for health pro22 fessional education expenditures, and

23 (2) specify the general manner, consistent with

24 subsection (b), in which such expenditures are to be
105

•HR 3960 IH

1 distributed among different types of institutions and

2 the different areas of the State.

3 (b) DISTRIBUTION RULES.—The distribution of

4 funds to hospitals and other health care facilities from the

5 account must conform to the following principles:

6 (1) The disbursement of funds must be consist7 ent with achievement of the national and program

8 goals (specified in section 701(b)) within the State

9 health security program and the distribution of

10 funds from the account must be conditioned upon

11 the receipt of such reports as the Board may require

12 in order to monitor compliance with such goals.

13 (2) The distribution of funds from the account

14 must take into account the potentially higher costs

15 of placing health professional students in clinical

16 education programs in health professional shortage

17 areas.

18 Subtitle B—Payments by States to

19 Providers

20 SEC. 611. PAYMENTS TO HOSPITALS AND OTHER FACILITY21 BASED SERVICES FOR OPERATING EXPENSES

22 ON THE BASIS OF APPROVED GLOBAL

23 BUDGETS.

24 (a) DIRECT PAYMENT UNDER GLOBAL BUDGET.—

25 Payment for operating expenses for institutional and facil-
106

•HR 3960 IH

1 ity-based care, including hospital services and nursing fa2 cility services, under State health security programs shall

3 be made directly to each institution or facility by each

4 State health security program under an annual prospec5 tive global budget approved under the program. Such a

6 budget shall include payment for outpatient care and non7 facility-based care that is furnished by or through the fa8 cility. In the case of a hospital that is wholly owned (or

9 controlled) by a comprehensive health service organization

10 that is paid under section 614 on the basis of a global

11 budget, the global budget of the organization shall include

12 the budget for the hospital.

13 (b) ANNUAL NEGOTIATIONS; BUDGET APPROVAL.—

14 (1) IN GENERAL.—The prospective global budg15 et for an institution or facility shall be developed

16 through annual negotiations between the State

17 health security program and the institution or facil18 ity and be based on a nationally uniform system of

19 cost accounting established under standards of the

20 Board.

21 (2) CONSIDERATIONS.—In developing a budget

22 through negotiations, there shall be taken into

23 account at least the following:
107

•HR 3960 IH

1 (A) With respect to inpatient hospital serv2 ices, the number, and classification by diag3 nosis-related group, of discharges.

4 (B) An institution’s or facility’s past ex5 penditures.

6 (C) The extent to which debt service for

7 capital expenditures has been included in the

8 proposed operating budget.

9 (D) Change in the consumer price index

10 and other price indices.

11 (E) The cost of reasonable compensation

12 to health care practitioners.

13 (F) The compensation level of the institu14 tion’s or facility’s workforce.

15 (G) The extent to which the institution or

16 facility is providing health care services to meet

17 the needs of residents in the area served by the

18 institution or facility, including the institution’s

19 or facility’s occupancy level.

20 (H) The institution’s or facility’s previous

21 financial and clinical performance, based on uti22 lization and outcomes data provided under this

23 Act.

24 (I) The type of institution or facility, in25 cluding whether the institution or facility is
108

•HR 3960 IH

1 part of a clinical education program or serves

2 a health professional education, research or

3 other training purpose.

4 (J) Technological advances or changes.

5 (K) Costs of the institution or facility asso6 ciated with meeting Federal and State regula7 tions.

8 (L) The costs associated with necessary

9 public outreach activities.

10 (M) In the case of a for-profit facility, a

11 reasonable rate of return on equity capital,

12 independent of those operating expenses nec13 essary to fulfill the objectives of this Act.

14 (N) Incentives to facilities that maintain

15 costs below previous reasonable budgeted levels

16 without reducing the care provided.

17 (O) With respect to facilities that provide

18 mental health services and substance abuse

19 treatment services, any additional costs involved

20 in the treatment of dually diagnosed individ21 uals.

22 The portion of such a budget that relates to expendi23 tures for health professional education shall be con24 sistent with the State health security budget for

25 such expenditures.
109

•HR 3960 IH

1 (3) PROVISION OF REQUIRED INFORMATION; DI2 AGNOSIS-RELATED GROUP.—No budget for an insti3 tution or facility for a year may be approved unless

4 the institution or facility has submitted on a timely

5 basis to the State health security program such in6 formation as the program or the Board shall specify,

7 including in the case of hospitals information on dis8 charges classified by diagnosis-related group.

9 (c) ADJUSTMENTS IN APPROVED BUDGETS.—

10 (1) ADJUSTMENTS TO GLOBAL BUDGETS THAT

11 CONTRACT WITH COMPREHENSIVE HEALTH SERVICE

12 ORGANIZATIONS.—Each State health security pro13 gram shall develop an administrative mechanism for

14 reducing operating funds to institutions or facilities

15 in proportion to payments made to such institutions

16 or facilities for services contracted for by a com17 prehensive health service organization.

18 (2) AMENDMENTS.—In accordance with stand19 ards established by the Board, an operating and

20 capital budget approved under this section for a year

21 may be amended before, during, or after the year if

22 there is a substantial change in any of the factors

23 relevant to budget approval.

24 (d) DONATIONS PERMISSIBLE.—The States health

25 security programs may permit institutions and facilities
110

•HR 3960 IH

1 to raise funds from private sources to pay for newly con2 structed facilities, major renovations, and equipment. The

3 expenditure of such funds, whether for operating or cap4 ital expenditures, does not obligate the State health secu5 rity program to provide for continued support for such ex6 penditures unless included in an approved global budget.

7 SEC. 612. PAYMENTS TO HEALTH CARE PRACTITIONERS

8 BASED ON PROSPECTIVE FEE SCHEDULE.

9 (a) FEE FOR SERVICE.—

10 (1) IN GENERAL.—Every independent health

11 care practitioner is entitled to be paid, for the provi12 sion of covered health services under the State

13 health security program, a fee for each billable cov14 ered service.

15 (2) GLOBAL FEE PAYMENT METHODOLOGIES.—

16 The Board shall establish models and encourage

17 State health security programs to implement alter18 native payment methodologies that incorporate glob19 al fees for related services (such as all outpatient

20 procedures for treatment of a condition) or for a

21 basic group of services (such as primary care serv22 ices) furnished to an individual over a period of

23 time, in order to encourage continuity and efficiency

24 in the provision of services. Such methodologies shall

25 be designed to ensure a high quality of care.
111

•HR 3960 IH

1 (3) BILLING DEADLINES; ELECTRONIC BILL2 ING.—A State health security program may deny

3 payment for any service of an independent health

4 care practitioner for which it did not receive a bill

5 and appropriate supporting documentation (which

6 had been previously specified) within 30 days after

7 the date the service was provided. Such a program

8 may require that bills for services for which payment

9 may be made under this section, or for any class of

10 such services, be submitted electronically.

11 (b) PAYMENT RATES BASED ON NEGOTIATED PRO12 SPECTIVE FEE SCHEDULES.—With respect to any pay13 ment method for a class of services of practitioners, the

14 State health security program shall establish, on a pro15 spective basis, a payment schedule. The State health secu16 rity program may establish such a schedule after negotia17 tions with organizations representing the practitioners in18 volved. Such fee schedules shall be designed to provide in19 centives for practitioners to choose primary care medicine,

20 including general internal medicine and pediatrics, over

21 medical specialization. Nothing in this section shall be con22 strued as preventing a State from adjusting the payment

23 schedule amounts on a quarterly or other periodic basis

24 depending on whether expenditures under the schedule will
112

•HR 3960 IH

1 exceed the budgeted amount with respect to such expendi2 tures.

3 (c) BILLABLE COVERED SERVICE DEFINED.—In this

4 section, the term ‘‘billable covered service’’ means a service

5 covered under section 201 for which a practitioner is enti6 tled to compensation by payment of a fee determined

7 under this section.

8 SEC. 613. PAYMENTS TO COMPREHENSIVE HEALTH SERV9 ICE ORGANIZATIONS.

10 (a) IN GENERAL.—Payment under a State health se11 curity program to a comprehensive health service organi12 zation to its enrollees shall be determined by the State—

13 (1) based on a global budget described in sec14 tion 611, or

15 (2) based on the basic capitation amount de16 scribed in subsection (b) for each of its enrollees.

17 (b) BASIC CAPITATION AMOUNT.—

18 (1) IN GENERAL.—The basic capitation amount

19 described in this subsection for an enrollee shall be

20 determined by the State health security program on

21 the basis of the average amount of expenditures that

22 is estimated would be made under the State health

23 security program for covered health care services for

24 an enrollee, based on actuarial characteristics (as de25 fined by the State health security program).
113

•HR 3960 IH

1 (2) ADJUSTMENT FOR SPECIAL HEALTH

2 NEEDS.—The State health security program shall

3 adjust such average amounts to take into account

4 the special health needs, including a disproportionate

5 number of medically underserved individuals, of pop6 ulations served by the organization.

7 (3) ADJUSTMENT FOR SERVICES NOT PRO8 VIDED.—The State health security program shall ad9 just such average amounts to take into account the

10 cost of covered health care services that are not pro11 vided by the comprehensive health service organiza12 tion under section 303(a).

13 SEC. 614. PAYMENTS FOR COMMUNITY-BASED PRIMARY

14 HEALTH SERVICES.

15 (a) IN GENERAL.—In the case of community-based

16 primary health services, subject to subsection (b), pay17 ments under a State health security program shall—

18 (1) be based on a global budget described in

19 section 611,

20 (2) be based on the basic primary care capita21 tion amount described in subsection (c) for each in22 dividual enrolled with the provider of such services,

23 or

24 (3) be made on a fee-for-service basis under

25 section 612.
114

•HR 3960 IH

1 (b) PAYMENT ADJUSTMENT.—Payments under sub2 section (a) may include, consistent with the budgets devel3 oped under this title—

4 (1) an additional amount, as set by the State

5 health security program, to cover the costs incurred

6 by a provider which serves persons not covered by

7 this Act whose health care is essential to overall

8 community health and the control of communicable

9 disease, and for whom the cost of such care is other10 wise uncompensated,

11 (2) an additional amount, as set by the State

12 health security program, to cover the reasonable

13 costs incurred by a provider that furnishes case

14 management services (as defined in section

15 1915(g)(2) of the Social Security Act), transpor16 tation services, and translation services, and

17 (3) an additional amount, as set by the State

18 health security program, to cover the costs incurred

19 by a provider in conducting health professional edu20 cation programs in connection with the provision of

21 such services.

22 (c) BASIC PRIMARY CARE CAPITATION AMOUNT.—

23 (1) IN GENERAL.—The basic primary care capi24 tation amount described in this subsection for an en25 rollee with a provider of community-based primary
115

•HR 3960 IH

1 health services shall be determined by the State

2 health security program on the basis of the average

3 amount of expenditures that is estimated would be

4 made under the State health security program for

5 such an enrollee, based on actuarial characteristics

6 (as defined by the State health security program).

7 (2) ADJUSTMENT FOR SPECIAL HEALTH

8 NEEDS.—The State health security program shall

9 adjust such average amounts to take into account

10 the special health needs, including a disproportionate

11 number of medically underserved individuals, of pop12 ulations served by the provider.

13 (3) ADJUSTMENT FOR SERVICES NOT PRO14 VIDED.—The State health security program shall ad15 just such average amounts to take into account the

16 cost of community-based primary health services

17 that are not provided by the provider.

18 (d) COMMUNITY-BASED PRIMARY HEALTH SERVICES

19 DEFINED.—In this section, the term ‘‘community-based

20 primary health services’’ has the meaning given such term

21 in section 202(a).

22 SEC. 615. PAYMENTS FOR PRESCRIPTION DRUGS.

23 (a) ESTABLISHMENT OF LIST.—

24 (1) IN GENERAL.—Based upon the rec25 ommendations of the Advisory Committee on Pre-
116

•HR 3960 IH

1 scription Drugs under section 403, the Board shall

2 establish a list of approved prescription drugs and

3 biologicals that the Board determines are necessary

4 for the maintenance or restoration of health or of

5 employability or self-management and eligible for

6 coverage under this Act.

7 (2) EXCLUSIONS.—The Board may exclude re8 imbursement under this Act for ineffective, unsafe,

9 or over-priced products where better alternatives are

10 determined to be available.

11 (b) PRICES.—For each such listed prescription drug

12 or biological covered under this Act, for insulin, and for

13 medical foods, the Board shall from time to time deter14 mine a product price or prices which shall constitute the

15 maximum to be recognized under this Act as the cost of

16 a drug to a provider thereof. The Board may conduct ne17 gotiations, on behalf of State health security programs,

18 with product manufacturers and distributors in determin19 ing the applicable product price or prices.

20 (c) CHARGES BY INDEPENDENT PHARMACIES.—

21 Each State health security program shall provide for pay22 ment for a prescription drug or biological or insulin fur23 nished by an independent pharmacy based on the drug’s

24 cost to the pharmacy (not in excess of the applicable prod25 uct price established under subsection (b)) plus a dispens-
117

•HR 3960 IH

1 ing fee. In accordance with standards established by the

2 Board, each State health security program, after consulta3 tion with representatives of the pharmaceutical profession,

4 shall establish schedules of dispensing fees, designed to af5 ford reasonable compensation to independent pharmacies

6 after taking into account variations in their cost of oper7 ation resulting from regional differences, differences in the

8 volume of prescription drugs dispensed, differences in

9 services provided, the need to maintain expenditures with10 in the budgets established under this title, and other

11 relevant factors.

12 SEC. 616. PAYMENTS FOR APPROVED DEVICES AND EQUIP13 MENT.

14 (a) ESTABLISHMENT OF LIST.—The Board shall es15 tablish a list of approved durable medical equipment and

16 therapeutic devices and equipment (including eyeglasses,

17 hearing aids, and prosthetic appliances), that the Board

18 determines are necessary for the maintenance or restora19 tion of health or of employability or self-management and

20 eligible for coverage under this Act.

21 (b) CONSIDERATIONS AND CONDITIONS.—In estab22 lishing the list under subsection (a), the Board shall take

23 into consideration the efficacy, safety, and cost of each

24 item contained on such list, and shall attach to any item

25 such conditions as the Board determines appropriate with
118

•HR 3960 IH

1 respect to the circumstances under which, or the frequency

2 with which, the item may be prescribed.

3 (c) PRICES.—For each such listed item covered under

4 this Act, the Board shall from time to time determine a

5 product price or prices which shall constitute the maxi6 mum to be recognized under this Act as the cost of the

7 item to a provider thereof. The Board may conduct nego8 tiations, on behalf of State health security programs, with

9 equipment and device manufacturers and distributors in

10 determining the applicable product price or prices.

11 (d) EXCLUSIONS.—The Board may exclude from cov12 erage under this Act ineffective, unsafe, or overpriced

13 products where better alternatives are determined to be

14 available.

15 SEC. 617. PAYMENTS FOR OTHER ITEMS AND SERVICES.

16 In the case of payment for other covered health serv17 ices, the amount of payment under a State health security

18 program shall be established by the program—

19 (1) in accordance with payment methodologies

20 which are specified by the Board, after consultation

21 with the American Health Security Advisory Coun22 cil, or methodologies established by the State under

23 section 620, and

24 (2) consistent with the State health security

25 budget.
119

•HR 3960 IH

1 SEC. 618. PAYMENT INCENTIVES FOR MEDICALLY UNDER2 SERVED AREAS.

3 (a) MODEL PAYMENT METHODOLOGIES.—In addi4 tion to the payment amounts otherwise provided in this

5 title, the Board shall establish model payment methodolo6 gies and other incentives that promote the provision of

7 covered health care services in medically underserved

8 areas, particularly in rural and inner-city underserved

9 areas.

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

11 construed as limiting the authority of State health security

12 programs to increase payment amounts or otherwise pro13 vide additional incentives, consistent with the State health

14 security budget, to encourage the provision of medically

15 necessary and appropriate services in underserved areas.

16 SEC. 619. AUTHORITY FOR ALTERNATIVE PAYMENT METH17 ODOLOGIES.

18 A State health security program, as part of its plan

19 under section 405(a), may use a payment methodology

20 other than a methodology required under this subtitle so

21 long as—

22 (1) such payment methodology does not affect

23 the entitlement of individuals to coverage, the

24 weighting of fee schedules to encourage an increase

25 in the number of primary care providers, the ability

26 of individuals to choose among qualified providers,
120

•HR 3960 IH

1 the benefits covered under the program, or the com2 pliance of the program with the State health security

3 budget under subtitle A, and

4 (2) the program submits periodic reports to the

5 Board showing the operation and effectiveness of the

6 alternative methodology, in order for the Board to

7 evaluate the appropriateness of applying the alter8 native methodology to other States.

9 Subtitle C—Mandatory Assignment

10 and Administrative Provisions

11 SEC. 631. MANDATORY ASSIGNMENT.

12 (a) NO BALANCE BILLING.—Payments for benefits

13 under this Act shall constitute payment in full for such

14 benefits and the entity furnishing an item or service for

15 which payment is made under this Act shall accept such

16 payment as payment in full for the item or service and

17 may not accept any payment or impose any charge for

18 any such item or service other than accepting payment

19 from the State health security program in accordance with

20 this Act.

21 (b) ENFORCEMENT.—If an entity knowingly and will22 fully bills for an item or service or accepts payment in

23 violation of subsection (a), the Board may apply sanctions

24 against the entity in the same manner as sanctions could

25 have been imposed under section 1842(j)(2) of the Social
121

•HR 3960 IH

1 Security Act for a violation of section 1842(j)(1) of such

2 Act. Such sanctions are in addition to any sanctions that

3 a State may impose under its State health security

4 program.

5 SEC. 632. PROCEDURES FOR REIMBURSEMENT; APPEALS.

6 (a) PROCEDURES FOR REIMBURSEMENT.—In accord7 ance with standards issued by the Board, a State health

8 security program shall establish a timely and administra9 tively simple procedure to assure payment within 60 days

10 of the date of submission of clean claims by providers

11 under this Act.

12 (b) APPEALS PROCESS.—Each State health security

13 program shall establish an appeals process to handle all

14 grievances pertaining to payment to providers under this

15 title.
122

•HR 3960 IH

1 TITLE VII—PROMOTION OF PRI2 MARY HEALTH CARE; DEVEL3 OPMENT OF HEALTH SERV4 ICE CAPACITY; PROGRAMS TO

5 ASSIST THE MEDICALLY UN6 DERSERVED

7 Subtitle A—Promotion and Expan8 sion of Primary Care Profes9 sional Training

10 SEC. 701. ROLE OF BOARD; ESTABLISHMENT OF PRIMARY

11 CARE PROFESSIONAL OUTPUT GOALS.

12 (a) IN GENERAL.—The Board is responsible for—

13 (1) coordinating health professional education

14 policies and goals, in consultation with the Secretary

15 of Health and Human Services (in this title referred

16 to as the ‘‘Secretary’’), to achieve the national goals

17 specified in subsection (b);

18 (2) overseeing the health professional education

19 expenditures of the State health security programs

20 from the account established under section 602(c);

21 (3) developing and maintaining, in cooperation

22 with the Secretary, a system to monitor the number

23 and specialties of individuals through their health

24 professional education, any postgraduate training,

25 and professional practice; and
123

•HR 3960 IH

1 (4) developing, coordinating, and promoting

2 other policies that expand the number of primary

3 care practitioners.

4 (b) NATIONAL GOALS.—The national goals specified

5 in this subsection are as follows:

6 (1) GRADUATE MEDICAL EDUCATION.—By not

7 later than 5 years after the date of the enactment

8 of this Act, at least 50 percent of the residents in

9 medical residency education programs (as defined in

10 subsection (e)(1)) are primary care residents (as

11 defined in subsection (e)(3)).

12 (2) MIDLEVEL PRIMARY CARE PRACTITION13 ERS.—To assure an adequate supply of primary care

14 practitioners, there shall be a number, specified by

15 the Board, of midlevel primary care practitioners (as

16 defined in subsection (e)(2)) employed in the health

17 care system as of January 1, 2000.

18 (c) METHOD FOR ATTAINMENT OF NATIONAL GOAL

19 FOR GRADUATE MEDICAL EDUCATION; PROGRAM

20 GOALS.—

21 (1) IN GENERAL.—The Board shall establish a

22 method of applying the national goal in subsection

23 (b)(1) to program goals for each medical residency

24 education program or to medical residency education

25 consortia.
124

•HR 3960 IH

1 (2) CONSIDERATION.—The program goals

2 under paragraph (1) shall be based on the distribu3 tion of medical schools and other teaching facilities

4 within each State health security program, and the

5 number of positions for graduate medical education.

6 (3) MEDICAL RESIDENCY EDUCATION CONSOR7 TIUM.—In this subsection, the term ‘‘medical resi8 dency education consortium’’ means a consortium of

9 medical residency education programs in a contig10 uous geographic area (which may be an interstate

11 area) if the consortium—

12 (A) includes at least one medical school

13 with a teaching hospital and related teaching

14 settings, and

15 (B) has an affiliation with qualified com16 munity-based primary health service providers

17 described in section 202(a) and with at least

18 one comprehensive health service organization

19 established under section 303.

20 (4) ENFORCEMENT THROUGH STATE HEALTH

21 SECURITY BUDGETS.—The Board shall develop a

22 formula for reducing payments to State health secu23 rity programs (that provide for payments to a medi24 cal residency education program) that failed to meet
125

•HR 3960 IH

1 the goal for the program established under this sub2 section.

3 (d) METHOD FOR ATTAINMENT OF NATIONAL GOAL

4 FOR MIDLEVEL PRIMARY CARE PRACTITIONERS.—To as5 sist in attaining the national goal identified in subsection

6 (b)(2), the Board shall—

7 (1) advise the Public Health Service on alloca8 tions of funding under titles VII and VIII of the

9 Public Health Service Act, the National Health

10 Service Corps, and other programs in order to in11 crease the supply of midlevel primary care practi12 tioners, and

13 (2) commission a study of the potential benefits

14 and disadvantages of expanding the scope of practice

15 authorized under State laws for any class of midlevel

16 primary care practitioners.

17 (e) DEFINITIONS.—In this title:

18 (1) MEDICAL RESIDENCY EDUCATION PRO19 GRAM.—The term ‘‘medical residency education pro20 gram’’ means a program that provides education

21 and training to graduates of medical schools in order

22 to meet requirements for licensing and certification

23 as a physician, and includes the medical school su24 pervising the program and includes the hospital or

25 other facility in which the program is operated.
126

•HR 3960 IH

1 (2) MIDLEVEL PRIMARY CARE PRACTI2 TIONER.—The term ‘‘midlevel primary care practi3 tioner’’ means a clinical nurse practitioner, certified

4 nurse midwife, physician assistance, or other non5 physician practitioner, specified by the Board, as

6 authorized to practice under State law.

7 (3) PRIMARY CARE RESIDENT.—The term ‘‘pri8 mary care resident’’ means (in accordance with cri9 teria established by the Board) a resident being

10 trained in a distinct program of family practice med11 icine, general practice, general internal medicine, or

12 general pediatrics.

13 SEC. 702. ESTABLISHMENT OF ADVISORY COMMITTEE ON

14 HEALTH PROFESSIONAL EDUCATION.

15 (a) IN GENERAL.—The Board shall provide for an

16 Advisory Committee on Health Professional Education (in

17 this section referred to as the ‘‘Committee’’) to advise the

18 Board on its activities under section 701.

19 (b) MEMBERSHIP.—The Committee shall be com20 posed of—

21 (1) the Chair of the Board, who shall serve as

22 Chair of the Committee, and

23 (2) 12 members, not otherwise in the employ of

24 the United States, appointed by the Board without

25 regard to the provisions of title 5, United States
127

•HR 3960 IH

1 Code, governing appointments in the competitive

2 service.

3 The appointed members shall provide a balanced point of

4 view with respect to health professional education, primary

5 care disciplines, and health care policy and shall include

6 individuals who are representative of medical schools,

7 other health professional schools, residency programs, pri8 mary care practitioners, teaching hospitals, professional

9 associations, public health organizations, State health

10 security programs, and consumers.

11 (c) TERMS OF MEMBERS.—Each appointed member

12 shall hold office for a term of five years, except that—

13 (1) any member appointed to fill a vacancy oc14 curring during the term for which the member’s

15 predecessor was appointed shall be appointed for the

16 remainder of that term; and

17 (2) the terms of the members first taking office

18 shall expire, as designated by the Board at the time

19 of appointment, two at the end of the second year,

20 two at the end of the third year, two at the end of

21 the fourth year, and three at the end of the fifth

22 year after the date of enactment of this Act.

23 (d) VACANCIES.—

24 (1) IN GENERAL.—The Board shall fill any va25 cancy in the membership of the Committee in the
128

•HR 3960 IH

1 same manner as the original appointment. The va2 cancy shall not affect the power of the remaining

3 members to execute the duties of the Committee.

4 (2) VACANCY APPOINTMENTS.—Any member

5 appointed to fill a vacancy shall serve for the re6 mainder of the term for which the predecessor of the

7 member was appointed.

8 (3) REAPPOINTMENT.—The Board may re9 appoint an appointed member of the Committee for

10 a second term in the same manner as the original

11 appointment.

12 (e) DUTIES.—It shall be the duty of the Committee

13 to advise the Board concerning graduate medical edu14 cation policies under this title.

15 (f) STAFF.—The Committee, its members, and any

16 committees of the Committee shall be provided with such

17 secretarial, clerical, or other assistance as may be author18 ized by the Board for carrying out their respective

19 functions.

20 (g) MEETINGS.—The Committee shall meet as fre21 quently as the Board deems necessary, but not less than

22 4 times each year. Upon request by four or more members

23 it shall be the duty of the Chair to call a meeting of the

24 Committee.
129

•HR 3960 IH

1 (h) COMPENSATION.—Members of the Committee

2 shall be reimbursed by the Board for travel and per diem

3 in lieu of subsistence expenses during the performance of

4 duties of the Board in accordance with subchapter I of

5 chapter 57 of title 5, United States Code.

6 (i) FACA NOT APPLICABLE.—The provisions of the

7 Federal Advisory Committee Act shall not apply to the

8 Committee.

9 SEC. 703. GRANTS FOR HEALTH PROFESSIONS EDUCATION,

10 NURSE EDUCATION, AND THE NATIONAL

11 HEALTH SERVICE CORPS.

12 (a) TRANSFERS TO PUBLIC HEALTH SERVICE.—

13 From the amounts provided under subsection (c), the

14 Board shall make transfers from the American Health Se15 curity Trust Fund to the Public Health Service under sub16 part II of part D of title III, title VII, and title VIII of

17 the Public Health Service Act for the support of the Na18 tional Health Service Corps, health professions education,

19 and nursing education, including education of clinical

20 nurse practitioners, certified registered nurse anesthetists,

21 certified nurse midwives, and physician assistants. Of the

22 amounts so transferred in each year, not less than 50 per23 cent shall be expended for the support of the National

24 Health Service Corps.
130

•HR 3960 IH

1 (b) RANGE OF FUNDS.—The amount of transfers

2 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 4 3 ⁄100 percent and not to exceed 6 4 ⁄100 percent of the amounts the

5 Board estimates will be expended from the Trust Fund

6 in the fiscal year.

7 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

8 funds provided under this section with respect to provision

9 of services are in addition to, and not in replacement of,

10 funds made available under the provisions referred to in

11 subsection (a) and shall be administered in accordance

12 with the terms of such provisions. The Board shall make

13 no transfer of funds under this section for any fiscal year

14 for which the total appropriations for the programs au15 thorized by such provisions are less than the total amount

16 appropriated for such programs in fiscal year 1993.

17 Subtitle B—Direct Health Care

18 Delivery

19 SEC. 711. SETASIDE FOR PUBLIC HEALTH BLOCK GRANTS.

20 (a) TRANSFERS TO PUBLIC HEALTH SERVICE.—

21 From the amounts provided under subsection (c), the

22 Board shall make transfers from the American Health Se23 curity Trust Fund to the Public Health Service for the

24 following purposes:
131

•HR 3960 IH

1 (1) For payments to States under the maternal

2 and child health block grants under title V of the

3 Social Security Act.

4 (2) Preventive health block grants under part A

5 of title XIX of the Public Health Service Act.

6 (3) Grants to States for community mental

7 health services under subpart I of part B of title

8 XIX of the Public Health Service Act.

9 (4) Grants to States for prevention and treat10 ment of substance abuse under subpart II of part B

11 of title XIX of the Public Health Service Act.

12 (5) Grants for HIV health care services under

13 parts A, B, and C of title XXVI of the Public

14 Health Service Act.

15 (b) RANGE OF FUNDS.—The amount of transfers

16 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 1 17 ⁄10 percent and not to exceed 14 18 ⁄100 percent of the amounts the

19 Board estimates will be expended from the Trust Fund

20 in the fiscal year.

21 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

22 funds provided under this section with respect to provision

23 of services are in addition to, and not in replacement of,

24 funds made available under the programs referred to in

25 subsection (a) and shall be administered in accordance
132

•HR 3960 IH

1 with the terms of such programs. The Board shall make

2 no transfer of funds under this section for any fiscal year

3 for which the total appropriations for such programs are

4 less than the total amount appropriated for such programs

5 in fiscal year 1993.

6 SEC. 712. SETASIDE FOR PRIMARY HEALTH CARE DELIV7 ERY.

8 (a) TRANSFERS TO PUBLIC HEALTH SERVICE.—

9 From the amounts provided under subsection (c), the

10 Board shall make transfers from the American Health Se11 curity Trust Fund to the Public Health Service for the

12 program of primary care service expansion grants under

13 subpart V of part D of title III of the Public Health

14 Service Act (as added by section 713 of this Act).

15 (b) RANGE OF FUNDS.—The amount of transfers

16 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 6 17 ⁄100 percent and not to exceed 1 18 ⁄10 percent of the amounts the

19 Board estimates will be expended from the Trust Fund

20 in the fiscal year.

21 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

22 funds provided under this section with respect to provision

23 of services are in addition to, and not in replacement of,

24 funds made available under the sections 329, 330, 340,

25 340A, 1001, and 2655 of the Public Health Service Act.
133

•HR 3960 IH

1 The Board shall make no transfer of funds under this sec2 tion for any fiscal year for which the total appropriations

3 for such sections are less than the total amount appro4 priated under such sections in fiscal year 1993.

5 SEC. 713. PRIMARY CARE SERVICE EXPANSION GRANTS.

6 Part D of title III of the Public Health Service Act

7 (42 U.S.C. 254b et seq.) is amended by adding at the end

8 thereof the following new subpart:

9 ‘‘Subpart V—Primary Care Expansion

10 ‘‘SEC. 340D. EXPANDING PRIMARY CARE DELIVERY CAPAC11 ITY IN URBAN AND RURAL AREAS.

12 ‘‘(a) GRANTS FOR PRIMARY CARE CENTERS.—From

13 the amounts described in subsection (c), the American

14 Health Security Standards Board shall make grants to

15 public and nonprofit private entities for projects to plan

16 and develop primary care centers which will serve medi17 cally underserved populations (as defined in section

18 330(b)(3)) in urban and rural areas and to deliver primary

19 care services to such populations in such areas. The funds

20 provided under such a grant may be used for the same

21 purposes for which a grant may be made under subsection

22 (c) or (d) of section 330.

23 ‘‘(b) PROCESS OF AWARDING GRANTS.—The provi24 sions of subsection (e)(1) of section 330 shall apply to a

25 grant under this section in the same manner as they apply
134

•HR 3960 IH

1 to a grant under subsection (c) of such section. The provi2 sions of subsection (g)(3) of such section shall apply to

3 grants for projects to plan and develop primary care cen4 ters under this section in the same manner as they apply

5 to grants under such section.

6 ‘‘(c) FUNDING AS SET-ASIDE FROM TRUST FUND.—

7 Funding to carry out this section is provided from the

8 American Health Security Trust Fund in accordance with

9 section 912 of the American Health Security Act.

10 ‘‘(d) PRIMARY CARE CENTER DEFINED.—In this sec11 tion, the term ‘primary care center’ means—

12 ‘‘(1) a migrant health center (as defined in sec13 tion 329(a)(1)),

14 ‘‘(2) a community health center (as defined in

15 section 330(a)),

16 ‘‘(3) an entity qualified to receive a grant under

17 section 340, 340A, 1001, or 2655, or

18 ‘‘(4) a Federally-qualified health center (as de19 fined in section 1905(l)(2)(B) of the Social Security

20 Act).’’.

21 Subtitle C—Primary Care and

22 Outcomes Research

23 SEC. 721. SET-ASIDE FOR OUTCOMES RESEARCH.

24 (a) GRANTS FOR OUTCOMES RESEARCH.—From the

25 amounts provided under subsection (c), the Board shall
135

•HR 3960 IH

1 make transfers from the Trust Fund to the Agency for

2 Health Care Policy and Research under title IX of the

3 Public Health Service Act for the purpose of carrying out

4 activities under such title.

5 (b) RANGE OF FUNDS.—The amount of transfers

6 under subsection (a) for any fiscal year shall be an amount

(specified by the Board each year) not less than 1 7 ⁄100 percent and not to exceed 2 8 ⁄100 percent of the amounts the

9 Board estimates will be expended from the Trust Fund

10 in the fiscal year.

11 (c) FUNDS SUPPLEMENTAL TO OTHER FUNDS.—The

12 funds provided under this section with respect to provision

13 of services are in addition to, and not in replacement of,

14 funds made available to the Agency for Health Care Policy

15 and Research under section 926 of the Public Health

16 Service Act. The Board shall make no transfer of funds

17 under this section for any fiscal year for which the total

18 appropriations under such section are less than the total

19 amount appropriated under such section and title in fiscal

20 year 1993.

21 (d) CONFORMING AMENDMENT.—Section 926(a) of

22 the Public Health Service Act (42 U.S.C. 299c–5(a)) is

23 amended by striking ‘‘$35,000,000’’ and all that follows

24 through the end and inserting ‘‘for each fiscal year (begin-
136

•HR 3960 IH

1 ning with fiscal year 1994) such sums as may be

2 necessary.’’.

3 SEC. 722. OFFICE OF PRIMARY CARE AND PREVENTION RE4 SEARCH.

5 (a) IN GENERAL.—Title IV of the Public Health

6 Service Act, as amended by section 2 of Public Law 101–

7 613, is amended—

8 (1) by redesignating section 486 as section

9 485A;

10 (2) by redesignating parts F through H as

11 parts G through I, respectively; and

12 (3) by inserting after part E the following new

13 part:

14 ‘‘PART F—RESEARCH ON PRIMARY CARE AND

15 PREVENTION

16 ‘‘SEC. 486. OFFICE OF PRIMARY CARE AND PREVENTION

17 RESEARCH.

18 ‘‘(a) ESTABLISHMENT.—There is established within

19 the Office of the Director of NIH an office to be known

20 as the Office of Primary Care and Prevention Research

21 (in this part referred to as the ‘Office’). The Office shall

22 be headed by a director, who shall be appointed by the

23 Director of NIH.

24 ‘‘(b) PURPOSE.—The Director of the Office shall—
137

•HR 3960 IH

1 ‘‘(1) identify projects of research on primary

2 care and prevention that should be conducted or

3 supported by the national research institutes, with

4 particular emphasis on—

5 ‘‘(A) clinical patient care,

6 ‘‘(B) diagnostic effectiveness,

7 ‘‘(C) primary care education,

8 ‘‘(D) health and family planning services,

9 ‘‘(E) medical effectiveness outcomes of pri10 mary care procedures and interventions,

11 ‘‘(F) the use of multidisciplinary teams of

12 health care practitioners.

13 ‘‘(2) identify multidisciplinary research related

14 to primary care and prevention that should be so

15 conducted;

16 ‘‘(3) promote coordination and collaboration

17 among entities conducting research identified under

18 any of paragraphs (1) and (2);

19 ‘‘(4) encourage the conduct of such research by

20 entities receiving funds from the national research

21 institutes;

22 ‘‘(5) recommend an agenda for conducting and

23 supporting such research;
138

•HR 3960 IH

1 ‘‘(6) promote the sufficient allocation of the re2 sources of the national research institutes for con3 ducting and supporting such research; and

4 ‘‘(7) prepare the report required in section

5 486B.

6 ‘‘(c) PRIMARY CARE AND PREVENTION RESEARCH

7 DEFINED.—For purposes of this part, the term ‘primary

8 care and prevention research’ means research on improve9 ment of the practice of family medicine, general internal

10 medicine, and general pediatrics, and includes research

11 relating to—

12 ‘‘(1) obstetrics and gynecology, dentistry, or

13 mental health or substance abuse treatment when

14 provided by a primary care physician or other

15 primary care practitioner, and

16 ‘‘(2) primary care provided by multidisciplinary

17 teams.

18 ‘‘SEC. 486A. NATIONAL DATA SYSTEM AND CLEARINGHOUSE

19 ON PRIMARY CARE AND PREVENTION RE20 SEARCH.

21 ‘‘(a) DATA SYSTEM.—The Director of NIH, in con22 sultation with the Director of the Office, shall establish

23 a data system for the collection, storage, analysis, re24 trieval, and dissemination of information regarding pri25 mary care and prevention research that is conducted or
139

•HR 3960 IH

1 supported by the national research institutes. Information

2 from the data system shall be available through informa3 tion systems available to health care professionals and pro4 viders, researchers, and members of the public.

5 ‘‘(b) CLEARINGHOUSE.—The Director of NIH, in

6 consultation with the Director of the Office and with the

7 National Library of Medicine, shall establish, maintain,

8 and operate a program to provide, and encourage the use

9 of, information on research and prevention activities of the

10 national research institutes that relate to primary care

11 and prevention research.

12 ‘‘SEC. 486B. BIENNIAL REPORT.

13 ‘‘(a) IN GENERAL.—With respect to primary care

14 and prevention research, the Director of the Office shall,

15 not later than one year after the date of the enactment

16 of this part, and biennially thereafter, prepare a report—

17 ‘‘(1) describing and evaluating the progress

18 made during the preceding two fiscal years in re19 search and treatment conducted or supported by the

20 National Institutes of Health;

21 ‘‘(2) summarizing and analyzing expenditures

22 made by the agencies of such Institutes (and by

23 such Office) during the preceding two fiscal years;

24 and
140

•HR 3960 IH

1 ‘‘(3) making such recommendations for legisla2 tive and administrative initiatives as the Director of

3 the Office determines to be appropriate.

4 ‘‘(b) INCLUSION IN BIENNIAL REPORT OF DIRECTOR

5 OF NIH.—The Director of the Office shall submit each

6 report prepared under subsection (a) to the Director of

7 NIH for inclusion in the report submitted to the President

8 and the Congress under section 403.’’.

9 (b) REQUIREMENT OF SUFFICIENT ALLOCATION OF

10 RESOURCES OF INSTITUTES.—Section 402(b) of the Pub11 lic Health Service Act (42 U.S.C. 282(b)) is amended—

12 (1) in paragraph (10), by striking ‘‘and’’ after

13 the semicolon at the end;

14 (2) in paragraph (11), by striking the period at

15 the end and inserting ‘‘; and’’; and

16 (3) by inserting after paragraph (11) the fol17 lowing new paragraph:

18 ‘‘(12) after consultation with the Director of

19 the Office of Primary Care and Prevention Re20 search, shall ensure that resources of the National

21 Institutes of Health are sufficiently allocated for

22 projects on primary care and prevention research

23 that are identified under section 486(b).’’.

24 (c) AUTHORIZATION OF APPROPRIATIONS.—Section

25 408 of the Public Health Service Act (42 U.S.C. 284(a))
141

•HR 3960 IH

1 is amended by adding at the end the following new

2 paragraph:

3 ‘‘(3) For the Office of Primary Care and Pre4 vention Research, there are authorized to be appro5 priated $150,000,000 for fiscal year 1994,

6 $180,000,000 for fiscal year 1995, and

7 $216,000,000 for fiscal year 1996.’’.

8 (d) CONFORMING AMENDMENT.—Section 485(g) of

9 the Public Health Service Act (42 U.S.C. 287c–2(g)) is

10 amended by striking ‘‘section 486’’ and inserting ‘‘section

11 485A’’.

12 Subtitle D—School-Related Health

13 Services

14 SEC. 731. AUTHORIZATIONS OF APPROPRIATIONS.

15 (a) FUNDING FOR SCHOOL-RELATED HEALTH SERV16 ICES.—For the purpose of carrying out this subtitle, there

17 are authorized to be appropriated $100,000,000 for fiscal

18 year 1997, $275,000,000 for fiscal year 1998,

19 $350,000,000 for fiscal year 1999, and $400,000,000 for

20 each of the fiscal years 2000 and 2001.

21 (b) RELATION TO OTHER FUNDS.—The authoriza22 tions of appropriations established in subsection (a) are

23 in addition to any other authorizations of appropriations

24 that are available for the purpose described in such sub25 section.
142

•HR 3960 IH

1 SEC. 732. ELIGIBILITY FOR DEVELOPMENT AND OPER2 ATION GRANTS.

3 (a) IN GENERAL.—Entities eligible to apply for and

4 receive grants under section 734 or 735 are the following:

5 (1) State health agencies that apply on behalf

6 of local community partnerships and other commu7 nities in need of health services for school-aged chil8 dren within the State.

9 (2) Local community partnerships in States in

10 which health agencies have not applied.

11 (b) LOCAL COMMUNITY PARTNERSHIPS.—

12 (1) IN GENERAL.—A local community partner13 ship under subsection (a)(2) is an entity that, at a

14 minimum, includes—

15 (A) a local health care provider with expe16 rience in delivering services to school-aged chil17 dren;

18 (B) one or more local public schools; and

19 (C) at least one community based organi20 zation located in the community to be served

21 that has a history of providing services to

22 school-aged children in the community who are

23 at-risk.

24 (2) PARTICIPATION.—A partnership described

25 in paragraph (1) shall, to the maximum extent fea26 sible, involve broad based community participation
143

•HR 3960 IH

1 from parents and adolescent children to be served,

2 health and social service providers, teachers and

3 other public school and school board personnel, de4 velopment and service organizations for adolescent

5 children, and interested business leaders. Such par6 ticipation may be evidenced through an expanded

7 partnership, or an advisory board to such partner8 ship.

9 (c) DEFINITIONS REGARDING CHILDREN.—For pur10 poses of this subtitle:

11 (1) The term ‘‘adolescent children’’ means

12 school-aged children who are adolescents.

13 (2) The term ‘‘school-aged children’’ means in14 dividuals who are between the ages of 4 and 19 (in15 clusive).

16 SEC. 733. PREFERENCES.

17 (a) IN GENERAL.—In making grants under sections

18 734 and 735, the Secretary shall give preference to appli19 cants whose communities to be served show the most sub20 stantial level of need for such services among school-aged

21 children, as measured by indicators of community health

22 including the following:

23 (1) High levels of poverty.

24 (2) The presence of a medically underserved

25 population.
144

•HR 3960 IH

1 (3) The presence of a health professional short2 age area.

3 (4) High rates of indicators of health risk

4 among school-aged children, including a high propor5 tion of such children receiving services through the

6 Individuals with Disabilities Education Act, adoles7 cent pregnancy, sexually transmitted disease (includ8 ing infection with the human immunodeficiency

9 virus), preventable disease, communicable disease,

10 intentional and unintentional injuries, community

11 and gang violence, unemployment among adolescent

12 children, juvenile justice involvement, and high rates

13 of drug and alcohol exposure.

14 (b) LINKAGE TO COMMUNITY HEALTH CENTERS.—

15 In making grants under sections 734 and 735, the Sec16 retary shall give preference to applicants that demonstrate

17 a linkage to community health centers.

18 SEC. 734. GRANTS FOR DEVELOPMENT OF PROJECTS.

19 (a) IN GENERAL.—The Secretary may make grants

20 to State health agencies or to local community partner21 ships to develop school health service sites.

22 (b) USE OF FUNDS.—A project for which a grant

23 may be made under subsection (a) may include but not

24 be limited to the cost of the following:
145

•HR 3960 IH

1 (1) Planning for the provision of school health

2 services.

3 (2) Recruitment, compensation, and training of

4 health and administrative staff.

5 (3) The development of agreements, and the ac6 quisition and development of equipment and infor7 mation services, necessary to support information

8 exchange between school health service sites and

9 health plans, health providers, and other entities au10 thorized to collect information under this Act.

11 (4) Other activities necessary to assume oper12 ational status.

13 (c) APPLICATION FOR GRANT.—

14 (1) IN GENERAL.—Applicants shall submit ap15 plications in a form and manner prescribed by the

16 Secretary.

17 (2) APPLICATIONS BY STATE HEALTH AGEN18 CIES.—

19 (A) In the case of applicants that are State

20 health agencies, the application shall contain

21 assurances that the State health agency is ap22 plying for funds—

23 (i) on behalf of at least one local com24 munity partnership; and
146

•HR 3960 IH

1 (ii) on behalf of at least one other

2 community identified by the State as in

3 need of the services funded under this sub4 title but without a local community part5 nership.

6 (B) In the case of the communities identi7 fied in applications submitted by State health

8 agencies that do not yet have local community

9 partnerships (including the community identi10 fied under subparagraph (A)(ii)), the State

11 shall describe the steps that will be taken to aid

12 the communities in developing a local commu13 nity partnership.

14 (C) A State applying on behalf of local

15 community partnerships and other communities

16 may retain not more than 10 percent of grants

17 awarded under this subtitle for administrative

18 costs.

19 (d) CONTENTS OF APPLICATION.—In order to receive

20 a grant under this section, an applicant must include in

21 the application the following information:

22 (1) An assessment of the need for school health

23 services in the communities to be served, using the

24 latest available health data and health goals and ob25 jectives established by the Secretary.
147

•HR 3960 IH

1 (2) A description of how the applicant will de2 sign the proposed school health services to reach the

3 maximum number of school-aged children who are at

4 risk.

5 (3) An explanation of how the applicant will in6 tegrate its services with those of other health and

7 social service programs within the community.

8 (4) A description of a quality assurance pro9 gram which complies with standards that the Sec10 retary may prescribe.

11 (e) NUMBER OF GRANTS.—Not more than one plan12 ning grant may be made to a single applicant. A planning

13 grant may not exceed two years in duration.

14 SEC. 735. GRANTS FOR OPERATION OF PROJECTS.

15 (a) IN GENERAL.—The Secretary may make grants

16 to State health agencies or to local community partner17 ships for the cost of operating school health service sites.

18 (b) USE OF GRANT.—The costs for which a grant

19 may be made under this section include but are not limited

20 to the following:

21 (1) The cost of furnishing health services that

22 are not otherwise covered under this Act or by any

23 other public or private insurer.

24 (2) The cost of furnishing services whose pur25 pose is to increase the capacity of individuals to uti-
148

•HR 3960 IH

1 lize available health services, including transpor2 tation, community and patient outreach, patient

3 education, translation services, and such other serv4 ices as the Secretary determines to be appropriate in

5 carrying out such purpose.

6 (3) Training, recruitment and compensation of

7 health professionals and other staff.

8 (4) Outreach services to school-aged children

9 who are at-risk and to the parents of such children.

10 (5) Linkage of individuals to health plans, com11 munity health services and social services.

12 (6) Other activities deemed necessary by the

13 Secretary.

14 (c) APPLICATION FOR GRANT.—Applicants shall sub15 mit applications in a form and manner prescribed by the

16 Secretary. In order to receive a grant under this section,

17 an applicant must include in the application the following

18 information:

19 (1) A description of the services to be furnished

20 by the applicant.

21 (2) The amounts and sources of funding that

22 the applicant will expend, including estimates of the

23 amount of payments the applicant will receive from

24 sources other than the grant.
149

•HR 3960 IH

1 (3) Such other information as the Secretary de2 termines to be appropriate.

3 (d) ADDITIONAL CONTENTS OF APPLICATION.—In

4 order to receive a grant under this section, an applicant

5 must meet the following conditions:

6 (1) The applicant furnishes the following serv7 ices:

8 (A) Diagnosis and treatment of simple ill9 nesses and minor injuries.

10 (B) Preventive health services, including

11 health screenings.

12 (C) Services provided for the purpose de13 scribed in subsection (b)(2).

14 (D) Referrals and followups in situations

15 involving illness or injury.

16 (E) Health and social services, counseling

17 services, and necessary referrals, including re18 ferrals regarding mental health and substance

19 abuse.

20 (F) Such other services as the Secretary

21 determines to be appropriate.

22 (2) The applicant is a participating provider in

23 the State’s program for medical assistance under

24 title XIX of the Social Security Act.
150

•HR 3960 IH

1 (3) The applicant does not impose charges on

2 students or their families for services (including col3 lection of any cost-sharing for services under the

4 comprehensive benefit package that otherwise would

5 be required).

6 (4) The applicant has reviewed and will periodi7 cally review the needs of the population served by

8 the applicant in order to ensure that its services are

9 accessible to the maximum number of school-aged

10 children in the area, and that, to the maximum ex11 tent possible, barriers to access to services of the ap12 plicant are removed (including barriers resulting

13 from the area’s physical characteristics, its eco14 nomic, social and cultural grouping, the health care

15 utilization patterns of such children, and available

16 transportation).

17 (5) In the case of an applicant which serves a

18 population that includes a substantial proportion of

19 individuals of limited English speaking ability, the

20 applicant has developed a plan to meet the needs of

21 such population to the extent practicable in the lan22 guage and cultural context most appropriate to such

23 individuals.
151

•HR 3960 IH

1 (6) The applicant will provide non-Federal con2 tributions toward the cost of the project in an

3 amount determined by the Secretary.

4 (7) The applicant will operate a quality assur5 ance program consistent with section 734(d).

6 (e) DURATION OF GRANT.—A grant under this sec7 tion shall be for a period determined by the Secretary.

8 (f) REPORTS.—A recipient of funding under this sec9 tion shall provide such reports and information as are re10 quired in regulations of the Secretary.

11 SEC. 736. FEDERAL ADMINISTRATIVE COSTS.

12 Of the amounts made available under section 731, the

13 Secretary may reserve not more than 5 percent for admin14 istrative expenses regarding this subtitle.

15 SEC. 737. DEFINITIONS.

16 For purposes of this subtitle:

17 (1) The term ‘‘adolescent children’’ has the

18 meaning given such term in section 732(c).

19 (2) The term ‘‘at risk’’ means at-risk with re20 spect to health.

21 (3) The term ‘‘community health center’’ has

22 the meaning given such term in section 330 of the

23 Public Health Service Act.

24 (4) The term ‘‘health professional shortage

25 area’’ means a health professional shortage area des-
152

•HR 3960 IH

1 ignated under section 332 of the Public Health Serv2 ice Act.

3 (5) The term ‘‘medically underserved popu4 lation’’ has the meaning given such term in section

5 330 of the Public Health Service Act.

6 (6) The term ‘‘school-aged children’’ has the

7 meaning given such term in section 732(c).

8 TITLE VIII—FINANCING PROVI9 SIONS; AMERICAN HEALTH

10 SECURITY TRUST FUND

11 SEC. 800. AMENDMENT OF 1986 CODE; SECTION 15 NOT TO

12 APPLY.

13 (a) AMENDMENT OF 1986 CODE.—Except as other14 wise expressly provided, whenever in this title an amend15 ment or repeal is expressed in terms of an amendment

16 to, or repeal of, a section or other provision, the reference

17 shall be considered to be made to a section or other provi18 sion of the Internal Revenue Code of 1986.

19 (b) SECTION 15 NOT TO APPLY.—The amendments

20 made by subtitle B shall not be treated as a change in

21 a rate of tax for purposes of section 15 of the Internal

22 Revenue Code of 1986.
153

•HR 3960 IH

1 Subtitle A—American Health

2 Security Trust Fund

3 SEC. 801. AMERICAN HEALTH SECURITY TRUST FUND.

4 (a) IN GENERAL.—There is hereby created on the

5 books of the Treasury of the United States a trust fund

6 to be known as the American Health Security Trust Fund

7 (in this section referred to as the ‘‘Trust Fund’’). The

8 Trust Fund shall consist of such gifts and bequests as

9 may be made and such amounts as may be deposited in,

10 or appropriated to, such Trust Fund as provided in this

11 Act.

12 (b) APPROPRIATIONS INTO TRUST FUND.—

13 (1) TAXES.—There are hereby appropriated to

14 the Trust Fund for each fiscal year (beginning with

15 fiscal year 1995), out of any moneys in the Treasury

16 not otherwise appropriated, amounts equivalent to

17 100 percent of the aggregate increase in tax liabil18 ities under the Internal Revenue Code of 1986 which

19 is attributable to the application of the amendments

20 made by this title. The amounts appropriated by the

21 preceding sentence shall be transferred from time to

22 time (but not less frequently than monthly) from the

23 general fund in the Treasury to the Trust Fund,

24 such amounts to be determined on the basis of esti25 mates by the Secretary of the Treasury of the taxes
154

•HR 3960 IH

1 paid to or deposited into the Treasury; and proper

2 adjustments shall be made in amounts subsequently

3 transferred to the extent prior estimates were in ex4 cess of or were less than the amounts that should

5 have been so transferred.

6 (2) CURRENT PROGRAM RECEIPTS.—Notwith7 standing any other provision of law, there are hereby

8 appropriated to the Trust Fund for each fiscal year

9 (beginning with fiscal year 1995) the amounts that

10 would otherwise have been appropriated to carry out

11 the following programs:

12 (A) The medicare program, under parts A

13 and B of title XVIII of the Social Security Act

14 (other than amounts attributable to any pre15 miums under such parts).

16 (B) The medicaid program, under State

17 plans approved under title XIX of such Act.

18 (C) The Federal employees health benefit

19 program, under chapter 89 of title 5, United

20 States Code.

21 (D) The CHAMPUS program, under chap22 ter 55 of title 10, United States Code.

23 (E) The maternal and child health pro24 gram (under title V of the Social Security Act),

25 vocational rehabilitation programs, programs
155

•HR 3960 IH

1 for drug abuse and mental health services

2 under the Public Health Service Act, programs

3 providing general hospital or medical assistance,

4 and any other Federal program identified by

5 the Board, in consultation with the Secretary of

6 the Treasury, to the extent the programs pro7 vide for payment for health services the pay8 ment of which may be made under this Act.

9 (c) INCORPORATION OF PROVISIONS.—The provisions

10 of subsections (b) through (i) of section 1817 of the Social

11 Security Act shall apply to the Trust Fund under this Act

12 in the same manner as they applied to the Federal Hos13 pital Insurance Trust Fund under part A of title XVIII

14 of such Act, except that the American Health Security

15 Standards Board shall constitute the Board of Trustees

16 of the Trust Fund.

17 (d) TRANSFER OF FUNDS.—Any amounts remaining

18 in the Federal Hospital Insurance Trust Fund or the Fed19 eral Supplementary Medical Insurance Trust Fund after

20 the settlement of claims for payments under title XVIII

21 have been completed, shall be transferred into the Amer22 ican Health Security Trust Fund.
156

•HR 3960 IH

1 Subtitle B—Taxes Based on Income

2 and Wages

3 SEC. 811. PAYROLL TAX ON EMPLOYERS.

4 (a) IN GENERAL.—Section 3111 (relating to tax on

5 employers) is amended by redesignating subsection (c) as

6 subsection (d) and by inserting after subsection (b) the

7 following new subsection:

8 ‘‘(c) HEALTH CARE.—

9 ‘‘(1) IN GENERAL.—In addition to other taxes,

10 there is hereby imposed on every employer an excise

11 tax, with respect to having individuals in his employ,

12 equal to the applicable percentage of the wages (as

13 defined in section 3121(a)) paid by him with respect

14 to employment (as defined in section 3121(b)).

15 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

16 of paragraph (1), the term ‘applicable percentage’

17 means—

18 ‘‘(A) 4 percent in the case of a small em19 ployer, and

20 ‘‘(B) 8.4 percent in the case of any other

21 employer.

22 ‘‘(3) SMALL EMPLOYER.—

23 ‘‘(A) IN GENERAL.—For purposes of para24 graph (2), the term ‘small employer’ means any

25 employer if—
157

•HR 3960 IH

1 ‘‘(i) the average number of full-time

2 employees (or the equivalent) of such em3 ployer during the preceding calendar year

4 is less than 75, and

5 ‘‘(ii) the average annual wages (as de6 fined in section 3121(a)) paid by such em7 ployer to such employees during such year

8 is less than $24,000.

9 ‘‘(B) CONTROLLED GROUPS.—All persons

10 treated as a single employer under subsection

11 (a) or (b) of section 52 or subsection (m) or (o)

12 of section 414 shall be treated as 1 employer

13 for purposes of subparagraph (A).’’

14 (b) SELF-EMPLOYMENT INCOME.—Section 1401 (re15 lating to rate of tax on self-employment income) is amend16 ed by redesignating subsection (c) as subsection (d) and

17 by inserting after subsection (b) the following new sub18 section:

19 ‘‘(c) HEALTH CARE.—

20 ‘‘(1) IN GENERAL.—In addition to other taxes,

21 there shall be imposed for each taxable year, on the

22 self-employment income of every individual, a tax

23 equal to the applicable percentage (as defined in sec24 tion 3111(c)) of the amount of the self-employment

25 income for such taxable year.
158

•HR 3960 IH

1 ‘‘(2) SPECIAL RULE FOR DETERMINING APPLI2 CABLE PERCENTAGE.—In determining the applicable

3 percentage for purposes of paragraph (1), section

4 3111(c) shall be applied by treating such individual

5 as an employee receiving wages equal to such indi6 vidual’s self-employment income for the taxable

7 year.’’

8 (c) COMPARABLE TAXES FOR RAILROAD SERV9 ICES.—

10 (1) TAX ON EMPLOYERS.—Section 3221 is

11 amended by redesignating subsections (c), (d), and

12 (e) as subsections (d), (e), and (f), respectively, and

13 by inserting after subsection (b) the following new

14 subsection:

15 ‘‘(c) HEALTH CARE.—In addition to other taxes,

16 there is hereby imposed on every employer an excise tax,

17 with respect to having individuals in his employ, equal to

18 the applicable percentage (as defined in section 3111(c))

19 of the compensation paid by such employer for services

20 rendered to such employer.’’

21 (2) TAX ON EMPLOYEE REPRESENTATIVES.—

22 Subsection (a) of section 3211 (relating to tax on

23 employee representatives) is amended by redesignat24 ing paragraph (3) as paragraph (4) and by inserting

25 after paragraph (2) the following new paragraph:
159

•HR 3960 IH

1 ‘‘(3) HEALTH CARE.—

2 ‘‘(A) IN GENERAL.—In addition to other

3 taxes, there is hereby imposed on the income of

4 each employee representative a tax equal to the

5 applicable percentage of the compensation re6 ceived during the calendar year by such em7 ployee representative for services rendered by

8 such employee representative.

9 ‘‘(B) SPECIAL RULE FOR DETERMINING

10 APPLICABLE PERCENTAGE.—In determining the

11 applicable percentage for purposes of subpara12 graph (A), section 3111(c) shall be applied by

13 treated such individual as an employee receiving

14 wages equal to such individual’s compensation

15 for the taxable year.’’

16 (3) NO APPLICABLE BASE.—Subparagraph (A)

17 of section 3231(e)(2) is amended by adding at the

18 end thereof the following new clause:

19 ‘‘(iv) HEALTH CARE TAXES.—Clause

20 (i) shall not apply to the taxes imposed by

21 sections 3221(c) and 3211(a)(3).’’

22 (4) TECHNICAL AMENDMENTS.—

23 (A) Paragraph (4) of section 3211, as re24 designated by paragraph (2), is amended by
160

•HR 3960 IH

1 striking ‘‘and (2)’’ and inserting ‘‘, (2), and

2 (3)’’.

3 (B) Subsection (f) of section 3221, as re4 designated by paragraph (1), is amended by

5 striking ‘‘and (b)’’ and inserting ‘‘, (b), and

6 (c)’’.

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

8 this section shall apply to remuneration paid after Decem9 ber 31, 1996.

10 SEC. 812. HEALTH CARE INCOME TAX.

11 (a) GENERAL RULE.—Subchapter A of chapter 1 (re12 lating to determination of tax liability) is amended by add13 ing at the end thereof the following new part:

14 ‘‘PART VIII—HEALTH CARE INCOME TAX ON

15 INDIVIDUALS

‘‘Sec. 59B. Health care income tax.

16 ‘‘SEC. 59B. HEALTH CARE INCOME TAX.

17 ‘‘(a) IMPOSITION OF TAX.—In the case of an individ18 ual, there is hereby imposed a tax (in addition to any other

19 tax imposed by this subtitle) equal to 2.1 percent of the

20 taxable income of the taxpayer for the taxable year.

21 ‘‘(b) NO CREDITS AGAINST TAX; NO EFFECT ON

22 MINIMUM TAX.—The tax imposed by this section shall not

23 be treated as a tax imposed by this chapter for purposes

24 of determining—
161

•HR 3960 IH

1 ‘‘(1) the amount of any credit allowable under

2 this chapter, or

3 ‘‘(2) the amount of the minimum tax imposed

4 by section 55.

5 ‘‘(c) SPECIAL RULES.—

6 ‘‘(1) TAX TO BE WITHHELD, ETC.—For pur7 poses of this title, the tax imposed by this section

8 shall be treated as imposed by section 1.

9 ‘‘(2) REIMBURSEMENT OF TAX BY EMPLOYER

10 NOT INCLUDIBLE IN GROSS INCOME.—The gross in11 come of an employee shall not include any payment

12 by his employer to reimburse the employee for the

13 tax paid by the employee under this section.

14 ‘‘(3) OTHER RULES.—The rules of section

15 59A(d) shall apply to the tax imposed by this sec16 tion.’’

17 (b) CLERICAL AMENDMENT.—The table of parts for

18 subchapter A of chapter 1 is amended by adding at the

19 end the following new item:

‘‘Part VIII. Health care income tax on individuals.’’

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

21 this section shall apply to taxable years beginning after

22 December 31, 1996.
162

•HR 3960 IH

1 Subtitle C—Increase in Excise

2 Taxes on Tobacco Products

3 SEC. 821. INCREASE IN EXCISE TAXES ON TOBACCO PROD4 UCTS.

5 (a) CIGARETTES.—Subsection (b) of section 5701 is

6 amended—

7 (1) by striking ‘‘$12 per thousand ($10 per

8 thousand on cigarettes removed during 1991 or

9 1992)’’ in paragraph (1) and inserting ‘‘$100 per

10 thousand’’, and

11 (2) by striking ‘‘$25.20 per thousand ($21 per

12 thousand on cigarettes removed during 1991 or

13 1992)’’ in paragraph (2) and inserting ‘‘$210 per

14 thousand’’.

15 (b) CIGARS.—Subsection (a) of section 5701 is

16 amended—

17 (1) by striking ‘‘$1.125 cents per thousand

18 (93.75 cents per thousand on cigars removed during

19 1991 or 1992)’’ in paragraph (1) and inserting

20 ‘‘$9.38 per thousand’’, and

21 (2) by striking ‘‘equal to’’ and all that follows

22 in paragraph (2) and inserting ‘‘equal to 106.25 per23 cent of the price for which sold but not more than

24 $250 per thousand.’’
163

•HR 3960 IH

1 (c) CIGARETTE PAPERS.—Subsection (c) of section

2 5701 is amended by striking ‘‘0.75 cent (0.625 cent on

3 cigarette papers removed during 1991 or 1992)’’ and in4 serting ‘‘6.25 cents’’.

5 (d) CIGARETTE TUBES.—Subsection (d) of section

6 5701 is amended by striking ‘‘1.5 cents (1.25 cents on

7 cigarette tubes removed during 1991 or 1992)’’ and in8 serting ‘‘12.5 cents’’.

9 (e) SMOKELESS TOBACCO.—Subsection (e) of section

10 5701 is amended—

11 (1) by striking ‘‘36 cents (30 cents on snuff re12 moved during 1991 or 1992)’’ in paragraph (1) and

13 inserting ‘‘$3.00’’, and

14 (2) by striking ‘‘12 cents (10 cents on chewing

15 tobacco removed during 1991 or 1992)’’ in para16 graph (2) and inserting ‘‘$1.00’’.

17 (f) PIPE TOBACCO.—Subsection (f) of section 5701

18 is amended by striking ‘‘67.5 cents (56.25 cents on pipe

19 tobacco removed during 1991 or 1992)’’ and inserting

20 ‘‘$5.63’’.

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

22 this section shall apply to articles removed (as defined in

23 section 5702(k) of the Internal Revenue Code of 1986)

24 after December 31, 1996.

25 (h) FLOOR STOCKS TAXES.—
164

•HR 3960 IH

1 (1) IMPOSITION OF TAX.—On tobacco products

2 and cigarette papers and tubes manufactured in or

3 imported into the United States which are removed

4 before January 1, 1997, and held on such date for

5 sale by any person, there is hereby imposed a tax in

6 an amount equal to the excess of—

7 (A) the tax which would be imposed under

8 section 5701 of the Internal Revenue Code of

9 1986 on the article if the article had been re10 moved on such date, over

11 (B) the prior tax (if any) imposed under

12 section 5701 or 7652 of such Code on such ar13 ticle.

14 (2) AUTHORITY TO EXEMPT CIGARETTES HELD

15 IN VENDING MACHINES.—To the extent provided in

16 regulations prescribed by the Secretary, no tax shall

17 be imposed by paragraph (1) on cigarettes held for

18 retail sale on January 1, 1997, by any person in any

19 vending machine. If the Secretary provides such a

20 benefit with respect to any person, the Secretary

21 may reduce the $500 amount in paragraph (3) with

22 respect to such person.

23 (3) CREDIT AGAINST TAX.—Each person shall

24 be allowed as a credit against the taxes imposed by

25 paragraph (1) an amount equal to $500. Such credit
165

•HR 3960 IH

1 shall not exceed the amount of taxes imposed by

2 paragraph (1) for which such person is liable.

3 (4) LIABILITY FOR TAX AND METHOD OF PAY4 MENT.—

5 (A) LIABILITY FOR TAX.—A person hold6 ing any article on January 1, 1997, to which

7 any tax imposed by paragraph (1) applies shall

8 be liable for such tax.

9 (B) METHOD OF PAYMENT.—The tax im10 posed by paragraph (1) shall be paid in such

11 manner as the Secretary shall prescribe by reg12 ulations.

13 (C) TIME FOR PAYMENT.—The tax im14 posed by paragraph (1) shall be paid on or be15 fore July 31, 1997.

16 (5) ARTICLES IN FOREIGN TRADE ZONES.—

17 Notwithstanding the Act of June 18, 1934 (48 Stat.

18 998, 19 U.S.C. 81a) and any other provision of law,

19 any article which is located in a foreign trade zone

20 on January 1, 1997, shall be subject to the tax im21 posed by paragraph (1) if—

22 (A) internal revenue taxes have been deter23 mined, or customs duties liquidated, with re24 spect to such article before such date pursuant
166

•HR 3960 IH

1 to a request made under the 1st proviso of sec2 tion 3(a) of such Act, or

3 (B) such article is held on such date under

4 the supervision of a customs officer pursuant to

5 the 2d proviso of such section 3(a).

6 (6) DEFINITIONS.—For purposes of this sub7 section—

8 (A) IN GENERAL.—Terms used in this sub9 section which are also used in section 5702 of

10 the Internal Revenue Code of 1986 shall have

11 the respective meanings such terms have in

12 such section.

13 (B) SECRETARY.—The term ‘‘Secretary’’

14 means the Secretary of the Treasury or his del15 egate.

16 (7) CONTROLLED GROUPS.—Rules similar to

17 the rules of section 5061(e)(3) of such Code shall

18 apply for purposes of this subsection.

19 (8) OTHER LAWS APPLICABLE.—All provisions

20 of law, including penalties, applicable with respect to

21 the taxes imposed by section 5701 of such Code

22 shall, insofar as applicable and not inconsistent with

23 the provisions of this subsection, apply to the floor

24 stocks taxes imposed by paragraph (1), to the same

25 extent as if such taxes were imposed by such section
167

•HR 3960 IH

1 5701. The Secretary may treat any person who bore

2 the ultimate burden of the tax imposed by para3 graph (1) as the person to whom a credit or refund

4 under such provisions may be allowed or made.

5 Subtitle D—Increase in Taxes on

6 Firearms and Ammunition

7 SEC. 831. INCREASE IN TAXES ON FIREARMS AND AMMUNI8 TION.

9 (a) PISTOLS AND REVOLVERS.—The text of section

10 4181 (relating to imposition of tax on firearms) is amend11 ed to read as follows:

12 ‘‘There is hereby imposed upon the sale by the manu13 facturer, producer, or importer of any pistol, revolver, fire14 arm, shell, or cartridge a tax equal to 50 percent of the

15 price for which so sold.’’

16 (b) ADDITIONAL TAXES NOT ADDED TO WILDLIFE

17 FUND.—Section 3(a) of the Act of September 2, 1937 (16

18 U.S.C. 669b(a)), commonly referred to as the ‘‘Pittman19 Robertson Wildlife Restoration Act’’, is amended by add20 ing at the end the following new sentence: ‘‘There shall

21 not be covered into the fund the portion of the tax imposed

22 by such section 4181 that is attributable to any increase

23 in amounts received in the Treasury under such section

24 by reason of the amendment made by section 831 of the
168

•HR 3960 IH

1 American Health Security Act, as estimated by the Sec2 retary.’’.

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

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

5 (d) FLOOR STOCKS TAX.—

6 (1) IMPOSITION OF TAX.—In the case of any

7 taxable article on which tax was imposed under sec8 tion 4181 of the Internal Revenue Code of 1986 be9 fore January 1, 1997, and which is held by a dealer

10 on such date, there is hereby imposed a floor stocks

11 tax equal to the excess of—

12 (A) the tax which would be imposed by

13 such section if such article had been sold by the

14 manufacturer, producer, or importer on such

15 date, over

16 (B) the tax imposed by such section on

17 such article.

18 (2) LIABILITY FOR TAX AND METHOD OF PAY19 MENT.—

20 (A) LIABILITY FOR TAX.—The dealer hold21 ing the taxable article on January 1, 1997, to

22 which the tax imposed by paragraph (1) applies

23 shall be liable for such tax.

24 (B) METHOD OF PAYMENT.—The tax im25 posed by paragraph (1) shall be paid in such
169

•HR 3960 IH

1 manner as the Secretary of the Treasury or his

2 delegate shall prescribe.

3 (C) TIME FOR PAYMENT.—The tax im4 posed by paragraph (1) shall be paid on or be5 fore July 31, 1997.

6 (3) DEFINITIONS.—For purposes of this sub7 section—

8 (A) TAXABLE ARTICLE.—The term ‘tax9 able article’ means any article subject to tax

10 under section 4181 of such Code, other than an

11 article exempt from such tax under section

12 4182 of such Code.

13 (B) HELD BY A DEALER.—The term ‘held

14 by a dealer’ has the meaning given such term

15 by section 6412 of such Code.

16 (4) ARTICLES IN FOREIGN TRADE ZONES.—

17 Notwithstanding the Act of June 18, 1934 (48 Stat.

18 998, 19 U.S.C. 81a) and any other provision of law,

19 any article which is located in a foreign trade zone

20 on January 1, 1997, shall be subject to the tax im21 posed by paragraph (1) if—

22 (A) internal revenue taxes have been deter23 mined, or customs duties liquidated, with re24 spect to such article before such date pursuant
170

•HR 3960 IH

1 to a request made under the 1st proviso of sec2 tion 3(a) of such Act, or

3 (B) such article is held on such date under

4 the supervision of a customs officer pursuant to

5 the 2d proviso of such section 3(a).

6 (5) OTHER LAWS APPLICABLE.—All provisions

7 of law, including penalties, applicable with respect to

8 the taxes imposed by section 4181 of such Code

9 shall, insofar as applicable and not inconsistent with

10 the provisions of this subsection, apply with respect

11 to the floor stock taxes imposed by paragraph (1) to

12 the same extent as if such taxes were imposed by

13 such section 4181.

14 TITLE IX—CONFORMING AMEND15 MENTS TO THE EMPLOYEE

16 RETIREMENT INCOME SECU17 RITY ACT OF 1974

18 SEC. 901. ERISA INAPPLICABLE TO HEALTH COVERAGE AR19 RANGEMENTS UNDER STATE HEALTH SECU20 RITY PROGRAMS.

21 Section 4 of the Employee Retirement Income Secu22 rity Act of 1974 (29 U.S.C. 1003) is amended—

23 (1) in subsection (a), by striking ‘‘subsection

24 (b)’’ and inserting ‘‘subsections (b) and (c)’’; and
171

•HR 3960 IH

1 (2) by adding at the end the following new sub2 section:

3 ‘‘(c) The provisions of this title shall not apply to any

4 arrangement forming a part of a State health security pro5 gram established pursuant to section 101(b) of the Amer6 ican Health Security Act of 1994.’’.

7 SEC. 902. EXEMPTION OF STATE HEALTH SECURITY PRO8 GRAMS FROM ERISA PREEMPTION.

9 Section 514(b) of the Employee Retirement Income

10 Security Act of 1974 (29 U.S.C. 1144(b)) is amended by

11 adding at the end the following new paragraph:

12 ‘‘(9) Subsection (a) of this section shall not apply to

13 State health security programs established pursuant to

14 section 101(b) of the American Health Security Act of

15 1994.’’.

16 SEC. 903. PROHIBITION OF EMPLOYEE BENEFITS DUPLICA17 TIVE OF BENEFITS UNDER STATE HEALTH

18 SECURITY PROGRAMS.

19 Part 5 of subtitle B of title I of the Employee Retire20 ment Income Security Act of 1974 is amended by adding

21 at the end the following new section:

22 ‘‘PROHIBITION OF EMPLOYEE BENEFITS DUPLICATIVE OF

23 STATE HEALTH SECURITY PROGRAM BENEFITS

24 ‘‘SEC. 516. No employee benefit plan may provide

25 benefits which duplicate payment for any items or services

26 for which payment may be made under a State health se-
172

•HR 3960 IH

1 curity program established pursuant to section 101(b) of

2 the American Health Security Act of 1994.’’.

3 SEC. 903. REPEAL OF CONTINUATION COVERAGE REQUIRE4 MENTS UNDER ERISA AND CERTAIN OTHER

5 REQUIREMENTS RELATING TO GROUP

6 HEALTH PLANS.

7 (a) IN GENERAL.—Part 6 of subtitle B of title I of

8 the Employee Retirement Income Security Act of 1974

9 (29 U.S.C. 1161 et seq.) is repealed.

10 (b) CONFORMING AMENDMENTS.—

11 (1) Section 502(a)(7) of such Act (29 U.S.C.

12 1132(a)(7)) is amended—

13 (A) by striking paragraph (7); and

14 (B) by redesignating paragraph (8) as

15 paragraph (7).

16 (2) Section 502(c)(1) of such Act (29 U.S.C.

17 1132(c)(1)) is amended by striking ‘‘paragraph (1)

18 or (4) of section 606 or’’.

19 (3) Section 4301(c)(4) of the Omnibus Budget

20 Reconciliation Act of 1993 (Public Law 103–66; 107

21 Stat. 377) and the amendments made thereby are

22 repealed.

23 (4) The table of contents in section 1 of the

24 Employee Retirement Income Security Act of 1974
173

•HR 3960 IH

1 is amended by striking the items relating to part 6

2 of subtitle B of title I of such Act.

3 SEC. 904. EFFECTIVE DATE OF TITLE.

4 The amendments made by this title shall take effect

5 January 1, 1996.

Æ

HR 3960 IH——2

HR 3960 IH——3

HR 3960 IH——4

HR 3960 IH——5

HR 3960 IH——6

HR 3960 IH——7

HR 3960 IH——8

HR 3960 IH——9

HR 3960 IH——10

HR 3960 IH——11

HR 3960 IH——12