II

104TH CONGRESS

1ST SESSION S. 294

To increase the availability and affordability of health care coverage for

individuals and their families, to reduce paperwork and simplify the

administration of health care claims, to increase access to care in rural

and underserved areas, to improve quality and protect consumers from

health care fraud and abuse, to promote preventive care, to make longterm care more affordable, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 30, 1995

Mr. COHEN introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To increase the availability and affordability of health care

coverage for individuals and their families, to reduce

paperwork and simplify the administration of health care

claims, to increase access to care in rural and underserved areas, to improve quality and protect consumers

from health care fraud and abuse, to promote preventive

care, to make long-term care more affordable, and for

other purposes.

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

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

3 ‘‘Access to Affordable Health Care Act’’.

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

5 this Act is as follows:

Sec. 1. Short title and table of contents.

TITLE I—HEALTH INSURANCE MARKET REFORM

Subtitle A—Insurance Market Standards

Sec. 1001. Nondiscrimination based on health status.

Sec. 1002. Guaranteed issue and renewal.

Sec. 1003. Rating limitations.

Sec. 1004. Delivery system quality standards.

Sec. 1005. Risk adjustment.

Sec. 1006. Effective dates.

Subtitle B—Establishment and Application of Standards

Sec. 1011. General rules.

Sec. 1012. Encouragement of State reforms.

Sec. 1013. Enforcement of standards.

Subtitle C—Definitions

Sec. 1021. Definitions.

TITLE II—GRANTS TO STATES FOR SMALL GROUP HEALTH

INSURANCE PURCHASING ARRANGEMENTS

Sec. 2001. Grants to States for small group health insurance purchasing arrangements.

TITLE III—TAX INCENTIVES TO ENCOURAGE THE PURCHASE OF

HEALTH INSURANCE

Sec. 3001. Permanent extension and increase of deduction for health insurance

costs of self-employed individuals.

Sec. 3002. Credit for health insurance expenses.

TITLE IV—INCENTIVES TO INCREASE THE ACCESS OF RURAL

AND UNDERSERVED AREAS TO HEALTH CARE

Sec. 4001. Nonrefundable credit for certain primary health services providers.

Sec. 4002. Expensing of medical equipment.

Sec. 4003. Expanded services for medically underserved individuals.

Sec. 4004. Increase in National Health Service Corps and area health education center funding.

Sec. 4005. Assistant Secretary for Rural Health.

Sec. 4006. Study on transitional measures to ensure access.
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TITLE V—QUALITY AND CONSUMER PROTECTION

Subtitle A—Quality Improvement Foundations

Sec. 5001. Quality improvement foundations.

Subtitle B—Administrative Simplification

PART 1—PURPOSE AND DEFINITIONS

Sec. 5101. Purpose.

Sec. 5102. Definitions.

PART 2—STANDARDS FOR DATA ELEMENTS AND INFORMATION

TRANSACTIONS

Sec. 5111. General requirements on secretary.

Sec. 5112. Standards for transactions and data elements.

Sec. 5113. Timetables for adoption of standards.

PART 3—REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND

INFORMATION

Sec. 5121. Requirements on health plans.

Sec. 5122. Timetables for compliance with requirements.

PART 4—ACCESSING HEALTH INFORMATION

Sec. 5131. Access for authorized purposes.

Sec. 5132. Responding to access requests.

Sec. 5133. Timetables for adoption of standards and compliance.

PART 5—STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION

NETWORK

Sec. 5141. Standards and certification for health information network services.

Sec. 5142. Ensuring availability of information.

PART 6—PENALTIES

Sec. 5151. General penalty for failure to comply with requirements and standards.

PART 7—MISCELLANEOUS PROVISIONS

Sec. 5161. Effect on State law.

Sec. 5162. Health information continuity.

Sec. 5163. Health Information Advisory Committee.

Sec. 5164. Authorization of appropriations.

Subtitle C—Privacy of Health Information

PART 1—DEFINITIONS

Sec. 5201. Definitions.

PART 2—AUTHORIZED DISCLOSURES

SUBPART A—GENERAL PROVISIONS

Sec. 5206. General rules regarding disclosure.

Sec. 5207. Authorizations for disclosure of protected health information.
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Sec. 5208. Certified health information network services.

SUBPART B—SPECIFIC DISCLOSURES RELATING TO PATIENT

Sec. 5211. Disclosures for treatment and financial and administrative transactions.

Sec. 5212. Next of kin and directory information.

Sec. 5213. Emergency circumstances.

SUBPART C—DISCLOSURE FOR OVERSIGHT, PUBLIC HEALTH, AND RESEARCH

PURPOSES

Sec. 5216. Oversight.

Sec. 5217. Public health.

Sec. 5218. Health research.

SUBPART D—DISCLOSURE FOR JUDICIAL, ADMINISTRATIVE, AND LAW

ENFORCEMENT PURPOSES

Sec. 5221. Judicial and administrative purposes.

Sec. 5222. Law enforcement.

SUBPART E—DISCLOSURE PURSUANT TO GOVERNMENT SUBPOENA OR

WARRANT

Sec. 5226. Government subpoenas and warrants.

Sec. 5227. Access procedures for law enforcement subpoenas and warrants.

Sec. 5228. Challenge procedures for law enforcement warrants, subpoenas, and

summons.

SUBPART F—DISCLOSURE PURSUANT TO PARTY SUBPOENA

Sec. 5231. Party subpoenas.

Sec. 5232. Access procedures for party subpoenas.

Sec. 5233. Challenge procedures for party subpoenas.

PART 3—PROCEDURES FOR ENSURING SECURITY OF PROTECTED HEALTH

INFORMATION

SUBPART A—ESTABLISHMENT OF SAFEGUARDS

Sec. 5236. Establishment of safeguards.

Sec. 5237. Accounting for disclosures.

SUBPART B—REVIEW OF PROTECTED HEALTH INFORMATION BY SUBJECTS OF

THE INFORMATION

Sec. 5241. Inspection of protected health information.

Sec. 5242. Amendment of protected health information.

Sec. 5243. Notice of information practices.

SUBPART C—STANDARDS FOR ELECTRONIC DISCLOSURES

Sec. 5246. Standards for electronic disclosures.

PART 4—SANCTIONS

SUBPART A—NO SANCTIONS FOR PERMISSIBLE ACTIONS

Sec. 5251. No liability for permissible disclosures.
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SUBPART B—CIVIL SANCTIONS

Sec. 5256. Civil penalty.

Sec. 5257. Civil action.

SUBPART C—CRIMINAL SANCTIONS

Sec. 5261. Wrongful disclosure of protected health information.

PART 5—ADMINISTRATIVE PROVISIONS

Sec. 5266. Relationship to other laws.

Sec. 5267. Rights of incompetents.

Sec. 5268. Exercise of rights.

Subtitle D—Health Care Fraud Prevention

Sec. 5301. Short title; table of contents.

PART A—ALL-PAYER FRAUD AND ABUSE CONTROL PROGRAM

Sec. 5311. All-payer fraud and abuse control program.

Sec. 5312. Application of certain Federal health anti-fraud and abuse sanctions

to fraud and abuse against any health plan.

Sec. 5313. Health care fraud and abuse guidance.

Sec. 5314. Reporting of fraudulent actions under medicare.

PART B—REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

Sec. 5321. Mandatory exclusion from participation in medicare and State

health care programs.

Sec. 5322. Establishment of minimum period of exclusion for certain individuals and entities subject to permissive exclusion from medicare

and State health care programs.

Sec. 5323. Permissive exclusion of individuals with ownership or control interest in sanctioned entities.

Sec. 5324. Sanctions against practitioners and persons for failure to comply

with statutory obligations.

Sec. 5325. Intermediate sanctions for medicare health maintenance organizations.

Sec. 5326. Effective date.

PART C—ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

Sec. 5331. Establishment of the health care fraud and abuse data collection

program.

PART D—CIVIL MONETARY PENALTIES

Sec. 5341. Civil monetary penalties.

PART E—AMENDMENTS TO CRIMINAL LAW

Sec. 5351. Health care fraud.

Sec. 5352. Forfeitures for Federal health care offenses.

Sec. 5353. Injunctive relief relating to Federal health care offenses.

Sec. 5354. Grand jury disclosure.

Sec. 5355. False Statements.

Sec. 5356. Voluntary disclosure program.
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Sec. 5357. Obstruction of criminal investigations of Federal health care offenses.

Sec. 5358. Theft or embezzlement.

Sec. 5359. Laundering of monetary instruments.

PART F—PAYMENTS FOR STATE HEALTH CARE FRAUD CONTROL UNITS

Sec. 5361. Establishment of State fraud units.

Sec. 5362. Requirements for State fraud units.

Sec. 5363. Scope and purpose.

Sec. 5364. Payments to States.

TITLE VI—MALPRACTICE REFORM

Sec. 6001. Alternative dispute resolution.

Sec. 6002. Basic requirements.

Sec. 6003. Alternative dispute resolution advisory board.

Sec. 6004. Certification of State systems; applicability of alternative Federal

system.

Sec. 6005. Reports on implementation and effectiveness of alternative dispute

resolution systems.

Sec. 6006. Optional application of practice guidelines.

TITLE VII—HEALTH PROMOTION AND DISEASE PREVENTION

Sec. 7001. Disease prevention and health promotion programs treated as medical care.

Sec. 7002. Worksite wellness grant program.

Sec. 7003. Expanding and improving school health education.

TITLE VIII—TAX INCENTIVES FOR LONG-TERM CARE

Sec. 8001. Short title.

Sec. 8002. Amendment of 1986 Code.

Subtitle A—Tax Treatment of Long-Term Care Insurance

Sec. 8101. Qualified long-term care services treated as medical care.

Sec. 8102. Treatment of long-term care insurance.

Sec. 8103. Treatment of qualified long-term care plans.

Sec. 8104. Tax reserves for qualified long-term care insurance policies.

Sec. 8105. Tax treatment of accelerated death benefits under life insurance

contracts.

Sec. 8106. Tax treatment of companies issuing qualified accelerated death benefit riders.

Subtitle B—Standards For Long-Term Care Insurance

Sec. 8201. National Long-Term Care Insurance Advisory Council.

Sec. 8202. Additional requirements for issuers of long-term care insurance policies.

Sec. 8203. Coordination with State requirements.

Sec. 8204. Uniform language and definitions.

Subtitle C—Incentives to Encourage the Purchase of Private Insurance

Sec. 8301. Assets or resources disregarded under the medicaid program.
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Sec. 8302. Distributions from individual retirement accounts for the purchase

of long-term care insurance coverage.

Subtitle D—Effective Date

Sec. 8401. Effective date of tax provisions.

TITLE IX—BUDGET NEUTRALITY

Sec. 9001. Assurance of budget neutrality.

1 TITLE I—HEALTH INSURANCE

2 MARKET REFORM

3 Subtitle A—Insurance Market

4 Standards

5 SEC. 1001. NONDISCRIMINATION BASED ON HEALTH STA6 TUS.

7 (a) IN GENERAL.—Except as provided in subsection

8 (b) and section 1003(d), a health plan may not deny, limit,

9 or condition the coverage under (or benefits of) the plan,

10 or vary the premium, for an individual based on the health

11 status, medical condition, claims experience, receipt of

12 health care, medical history, anticipated need for health

13 care services, disability, or lack of evidence of insurability.

14 (b) TREATMENT OF PREEXISTING CONDITION EX15 CLUSIONS FOR ALL SERVICES.—

16 (1) IN GENERAL.—A health plan may impose a

17 limitation or exclusion of benefits relating to treat18 ment of a condition based on the fact that the condi19 tion preexisted the effective date of the plan with re20 spect to an individual only if—
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1 (A) the condition was diagnosed or treated

2 during the 3-month period ending on the day

3 before the date of enrollment under the plan;

4 (B) the limitation or exclusion extends for

5 a period not more than 6 months after the date

6 of enrollment under the plan;

7 (C) the limitation or exclusion does not

8 apply to an individual who, as of the date of

9 birth, was covered under the plan; or

10 (D) the limitation or exclusion does not

11 apply to pregnancy.

12 (2) CREDITING OF PREVIOUS COVERAGE.—A

13 health plan shall provide that if an individual under

14 such plan is in a period of continuous coverage as

15 of the date of enrollment under such plan, any pe16 riod of exclusion of coverage with respect to a pre17 existing condition shall be reduced by 1 month for

18 each month in the period of continuous coverage.

19 (3) DEFINITIONS.—For purposes of this sub20 section:

21 (A) PERIOD OF CONTINUOUS COVERAGE.—

22 (i) IN GENERAL.—The term ‘‘period

23 of continuous coverage’’ means the period

24 beginning on the date an individual is en25 rolled under a health plan or an equivalent
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1 health care program and ends on the date

2 the individual is not so enrolled for a con3 tinuous period of more than 3 months.

4 (ii) EQUIVALENT HEALTH CARE PRO5 GRAM.—The term ‘‘equivalent health care

6 program’’ means—

7 (I) part A or part B of the medi8 care program under title XVIII of the

9 Social Security Act (42 U.S.C. 1395

10 et seq.),

11 (II) the medicaid program under

12 title XIX of the Social Security Act

13 (42 U.S.C. 1396 et seq.),

14 (III) the health care program for

15 active military personnel under title

16 10, United States Code,

17 (IV) the veterans health care pro18 gram under chapter 17 of title 38,

19 United States Code,

20 (V) the Civilian Health and Med21 ical Program of the Uniformed Serv22 ices (CHAMPUS), as defined in sec23 tion 1073(4) of title 10, United States

24 Code, and
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1 (VI) the Indian health service

2 program under the Indian Health

3 Care Improvement Act (25 U.S.C.

4 1601 et seq.).

5 (B) PREEXISTING CONDITION.—The term

6 ‘‘preexisting condition’’ means, with respect to

7 coverage under a health plan, a condition which

8 was diagnosed, or which was treated, within the

9 3-month period ending on the day before the

10 date of enrollment (without regard to any wait11 ing period).

12 (c) LIMITATIONS PROHIBITED.—

13 (1) IN GENERAL.—A health plan may not im14 pose a lifetime limitation on the provision of benefits

15 under the plan.

16 (2) RULE OF CONSTRUCTION.—The prohibition

17 contained in paragraph (1) shall not be construed as

18 prohibiting limitations on the scope or duration of

19 particular items or services covered by a health plan.

20 SEC. 1002. GUARANTEED ISSUE AND RENEWAL.

21 (a) SMALL GROUP MARKET.—Each health plan of22 fering coverage in the small group market shall guarantee

23 each individual purchaser and small employer (and each

24 eligible employee of such small employer) applying for cov25 erage in such market the opportunity to enroll in the plan.
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1 (b) LARGE EMPLOYER MARKET.—Each health plan

2 offering coverage in the large employer market shall guar3 antee any individual eligible for coverage under the plan

4 the opportunity to enroll in such plan.

5 (c) CAPACITY LIMITS.—Notwithstanding this section,

6 a health plan may apply a capacity limit based on limited

7 financial or provider capacity if the plan enrolls individ8 uals in a manner that provides prospective enrollees with

9 a fair chance of enrollment regardless of the method by

10 which the individual seeks enrollment.

11 (d) RENEWAL OF POLICY.—

12 (1) SMALL GROUP MARKET.—A health plan is13 sued to a small employer or an individual purchaser

14 in the small group market shall be renewed at the

15 option of the employer or individual, if such em16 ployer or individual purchaser remains eligible for

17 coverage under the plan.

18 (2) LARGE EMPLOYER MARKET.—A health plan

19 issued to an individual eligible for coverage under a

20 large employer plan shall be renewed at the option

21 of the individual, if such individual remains eligible

22 for coverage under the plan.

23 (e) GROUNDS FOR REFUSAL TO RENEW.—A health

24 plan may refuse to renew a policy only in the case of—

25 (1) the nonpayment of premiums;
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1 (2) fraud on the part of the employer or indi2 vidual relating to such plan; or

3 (3) the misrepresentation by the employer or in4 dividual of material facts relating to an application

5 for coverage of a claim or benefit.

6 (f) NOTIFICATION OF AVAILABILITY.—Each health

7 plan sponsor shall publicly disclose the availability of each

8 health plan that such sponsor provides or offers in a small

9 group market. Such disclosure shall be accompanied by

10 information describing the method by which eligible em11 ployers and individuals may enroll in such plans.

12 SEC. 1003. RATING LIMITATIONS.

13 (a) IN GENERAL.—A health plan offering coverage

14 in the small group market shall comply with the standards

15 developed under this section.

16 (b) ROLE OF NAIC.—The Secretary shall request

17 that the NAIC—

18 (1) develop specific standards in the form of a

19 model Act and model regulations that provide for

20 the implementation of the rating limitations de21 scribed in subsection (d); and

22 (2) report to the Secretary concerning such

23 standards within 6 months after the date of enact24 ment of this Act.
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1 (c) ROLE OF THE SECRETARY.—The Secretary, upon

2 review of the report received under subsection (b)(2), shall

3 not later than January 1, 1997, promulgate final stand4 ards implementing this section. Such standards shall be

5 the applicable health plan standards under this section.

6 (d) RATING STANDARDS.—The standards described

7 in this section shall provide for the following:

8 (1) A determination of factors that health plans

9 may use to vary the premium rates of such plans.

10 Such factors—

11 (A) shall be applied in a uniform fashion

12 to all enrollees covered by a plan;

13 (B) shall include age (as specified in para14 graph (3)), family type, and geography; and

15 (C) except as provided in paragraph

16 (2)(A), shall not include gender, health status,

17 or health expenditures.

18 (2)(A) Factors prohibited under paragraph

19 (1)(C) shall be phased out over a period not to ex20 ceed 3 years after the effective date of this section.

21 (B) Other rating factors (other than age) may

22 be phased out to the extent necessary to minimize

23 market disruption and maximize coverage rates.

24 (3) Uniform age categories and age adjustment

25 factors that reflect the relative actuarial costs of
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1 benefit packages among enrollees. By the end of the

2 3-year period beginning on the effective date of this

3 section, for individuals who have attained age 18 but

4 not age 65, the highest age adjustment factor may

5 not exceed 3 times the lowest age adjustment factor.

6 (e) DISCOUNTS.—Standards developed under this

7 section shall permit health plans to provide premium dis8 counts based on workplace health promoting activities.

9 SEC. 1004. DELIVERY SYSTEM QUALITY STANDARDS.

10 (a) IN GENERAL.—Each health plan shall comply

11 with the standards developed under this section.

12 (b) ROLE OF THE SECRETARY.—Not later than 9

13 months after the date of enactment of this Act, the Sec14 retary, in consultation with the NAIC and other organiza15 tions with expertise in the areas of quality assurance (in16 cluding the Joint Commission on Accreditation of Health

17 Care Organizations, the National Committee for Quality

18 Assurance, and peer review organizations), shall establish

19 minimum guidelines specified in subsection (c) for the is20 suance by each State of delivery system quality standards.

21 Such standards shall be the applicable health plan stand22 ards under this section.

23 (c) MINIMUM GUIDELINES.—The minimum guide24 lines specified in this subsection are as follows:
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1 (1) Establishing and maintaining health plan

2 quality assurance, including—

3 (A) quality management;

4 (B) credentialing;

5 (C) utilization management;

6 (D) health care provider selection and due

7 process in selection; and

8 (E) practice guidelines and protocols.

9 (2) Providing consumer protection for health

10 plan enrollees, including—

11 (A) comparative standardized consumer in12 formation with respect to health plan premiums

13 and quality measures, including health care re14 port cards;

15 (B) nondiscrimination in plan enrollment,

16 disenrollment, and service provision;

17 (C) continuation of treatment with respect

18 to health plans that become insolvent; and

19 (D) grievance procedures.

20 (3) Ensuring reasonable access to health care

21 services, including access for vulnerable populations

22 in underserved areas.

23 SEC. 1005. RISK ADJUSTMENT.

24 Each health plan offering coverage in the small group

25 market in a State shall participate in a risk adjustment
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1 program developed by such State under standards estab2 lished by the Secretary.

3 SEC. 1006. EFFECTIVE DATES.

4 (a) IN GENERAL.—Except as provided in subsection

5 (b), this title shall take effect on January 1, 1996.

6 (b) RATING LIMITATIONS AND RISK ADJUST7 MENTS.—The standards promulgated under sections 1003

8 and 1005 shall apply to plans that are issued or renewed

9 after December 31, 1996.

10 Subtitle B—Establishment and

11 Application of Standards

12 SEC. 1011. GENERAL RULES.

13 (a) CONSTRUCTION.—

14 (1) IN GENERAL.—A requirement or standard

15 imposed on a health plan under this Act shall be

16 deemed to be a requirement or standard imposed on

17 the insurer or sponsor of such plan.

18 (2) PREEMPTION OF STATE LAW.—

19 (A) IN GENERAL.—No requirement of this

20 title shall be construed as preempting any State

21 law unless such State law directly conflicts with

22 such requirement. The provision of additional

23 consumer protections under State law as de24 scribed in subparagraph (B) shall not be con-
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1 sidered to directly conflict with any such re2 quirement.

3 (B) CONSUMER PROTECTION LAWS.—State

4 laws referred to in subparagraph (A) that are

5 not preempted by this title include—

6 (i) laws that limit the exclusions or

7 limitations for preexisting medical condi8 tions to periods that are less than those

9 provided for under section 1001;

10 (ii) laws that limit variations in pre11 mium rates beyond the variations per12 mitted under section 1003; and

13 (iii) laws that would expand the small

14 group market in excess of that provided for

15 under this title.

16 (C) LIMITED PREEMPTION OF STATE MAN17 DATED BENEFITS.—No State law or regulation

18 in effect in a State that requires health plans

19 offered to small employers in the State to in20 clude specified items and services other than

21 those described in section 1005(b)(2)(B) shall

22 apply with respect to a health plan offered by

23 an insurer to a small employer.

24 (b) REGULATIONS.—The Secretary, in consultation

25 with NAIC, and the Secretary of Labor are each author-
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1 ized to issue regulations as are necessary to implement

2 this Act.

3 SEC. 1012. ENCOURAGEMENT OF STATE REFORMS.

4 Nothing in this Act shall be construed as prohibiting

5 States from enacting health care reform measures that ex6 ceed the measures established under this Act, including

7 reforms that expand access to health care services, control

8 health care costs, and enhance quality of care.

9 SEC. 1013. ENFORCEMENT OF STANDARDS.

10 (a) IN GENERAL.—Except as provided in subsection

11 (b), each State shall require that each health plan issued,

12 sold, offered for sale, or operated in such State meets the

13 insurance reform standards established under this title

14 pursuant to an enforcement plan filed by the State with,

15 and approved by, the Secretary. If the State does not file

16 an acceptable plan, the Secretary shall enforce such stand17 ards until a plan is filed and approved.

18 (b) SECRETARY OF LABOR.—With respect to any

19 health plan for which the application of State insurance

20 laws are preempted under section 514 of Employee Retire21 ment Income Security Act of 1974 (29 U.S.C. 1144), the

22 enforcement of the insurance reform standards established

23 under this title shall be by the Secretary of Labor.
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1 Subtitle C—Definitions

2 SEC. 1021. DEFINITIONS.

3 (a) HEALTH PLAN.—For purposes of this title and

4 title II, the term ‘‘health plan’’ means a plan that pro5 vides, or pays the cost of, health benefits. Such term does

6 not include the following, or any combination thereof:

7 (1) Coverage only for accidental death, dis8 memberment, dental, or vision.

9 (2) Coverage providing wages or payments in

10 lieu of wages for any period during which the em11 ployee is absent from work on account of sickness or

12 injury.

13 (3) A medicare supplemental policy (as defined

14 in section 1882(g)(1) of the Social Security Act (42

15 U.S.C. 1395ss(g)(1)).

16 (4) Coverage issued as a supplement to liability

17 insurance.

18 (5) Worker’s compensation or similar insurance.

19 (6) Automobile medical-payment insurance.

20 (7) A long-term care insurance policy, including

21 a nursing home fixed indemnity policy (unless the

22 Secretary determines that such a policy provides suf23 ficiently comprehensive coverage of a benefit so that

24 it should be treated as a health plan).
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1 (8) Any plan or arrangement not described in

2 any preceding subparagraph which provides for ben3 efit payments, on a periodic basis, for a specified

4 disease or illness or period of hospitalization without

5 regard to the costs incurred or services rendered

6 during the period to which the payments relate.

7 (9) Such other plan or arrangement as the Sec8 retary determines is not a health plan.

9 (b) TERMS AND RULES RELATING TO THE SMALL

10 GROUP AND LARGE EMPLOYER MARKETS.—For purposes

11 of this title and title II:

12 (1) SMALL GROUP MARKET.—The term ‘‘small

13 group market’’ means the market for health plans

14 which is composed of small employers and individual

15 purchasers.

16 (2) SMALL EMPLOYER.—The term ‘‘small em17 ployer’’ means, with respect to any calendar year,

18 any employer if, on each of 20 days during the pre19 ceding calendar year (each day being in a different

20 week), such employer (or any predecessor) employed

21 less than 51 employees for some portion of the day.

22 (3) INDIVIDUAL PURCHASER.—The term ‘‘indi23 vidual purchaser’’ means an individual who is not el24 igible to enroll in a health plan sponsored by a large

25 or small employer.
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1 (4) LARGE EMPLOYER MARKET.—The term

2 ‘‘large employer market’’ means the market for

3 health plans which is composed of large employers.

4 (5) LARGE EMPLOYER.—The term ‘‘large em5 ployer’’—

6 (A) means an employer that is not a small

7 employer; and

8 (B) includes a multiemployer plan as de9 fined in section 3(37) of the Employment Re10 tirement Income Security Act of 1974 (29

11 U.S.C. 1002(37)) and a plan which is main12 tained by a rural electric cooperative or a rural

13 telephone cooperative association (within the

14 meaning of section 3(40) of such Act (29

15 U.S.C. 1002(40)).

16 (c) ADDITIONAL DEFINITIONS.—For purposes of this

17 title and title II:

18 (1) NAIC.—The term ‘‘NAIC’’ means the Na19 tional Association of Insurance Commissioners.

20 (2) SECRETARY.—The term ‘‘Secretary’’ means

21 the Secretary of Health and Human Services.
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1 TITLE II—GRANTS TO STATES

2 FOR SMALL GROUP HEALTH

3 INSURANCE PURCHASING AR4 RANGEMENTS

5 SEC. 2001. GRANTS TO STATES FOR SMALL GROUP HEALTH

6 INSURANCE PURCHASING ARRANGEMENTS.

7 (a) IN GENERAL.—The Secretary shall make grants

8 to States that submit applications meeting the require9 ments of this section for the establishment and operation

10 of small group health insurance purchasing arrangements.

11 (b) USE OF FUNDS.—Grant funds awarded under

12 this section to a State may be used to finance administra13 tive costs associated with developing and operating a small

14 group health insurance purchasing arrangement, including

15 the costs associated with—

16 (1) engaging in marketing and outreach efforts

17 to inform individuals and small employers about the

18 small group health insurance purchasing arrange19 ment, which may include the payment of sales com20 missions;

21 (2) negotiating with insurers to provide health

22 insurance through the small group health insurance

23 purchasing arrangement; or
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1 (3) providing administrative functions, such as

2 eligibility screening, claims administration, and cus3 tomer service.

4 (c) APPLICATION REQUIREMENTS.—An application

5 submitted by a State to the Secretary shall describe—

6 (1) whether the program will be operated di7 rectly by the State or through 1 or more State-spon8 sored private organizations and the details of such

9 operation;

10 (2) program goals for reducing the cost of

11 health insurance for, and increasing insurance cov12 erage in, the small group market;

13 (3) the approaches proposed for enlisting par14 ticipation by insurers and small employers, including

15 any plans to use State funds to subsidize the cost

16 of insurance for participating individuals and em17 ployers; and

18 (4) the methods proposed for evaluating the ef19 fectiveness of the program in reducing the number

20 of uninsured in the State and on lowering the cost

21 of health insurance for the small group market in

22 the State.

23 (d) GRANT CRITERIA.—In awarding grants, the Sec24 retary shall consider the potential impact of the State’s

25 proposal on the cost of health insurance for the small
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1 group market and on the number of uninsured, and the

2 need for regional variation in the awarding of grants. To

3 the extent the Secretary deems appropriate, grants shall

4 be awarded to fund programs employing a variety of ap5 proaches for establishing small group health insurance

6 purchasing arrangements.

7 (e) PROHIBITION ON GRANTS.—No grant funds shall

8 be paid to States that do not meet the requirements of

9 this title with respect to small group health plans, or to

10 States with group purchasing programs involving small

11 group health plans that do not meet the requirements of

12 this title.

13 (f) ANNUAL REPORT BY STATES.—States receiving

14 grants under this section shall report to the Secretary an15 nually on the numbers and rates of participation by eligi16 ble insurers and small employers, on the estimated impact

17 of the program on reducing the number of uninsured, and

18 on the cost of insurance available to the small group mar19 ket in the State.

20 (g) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated for each of the fiscal

22 years 1996, 1997, and 1998, such sums as may be nec23 essary to carry out this section.

24 (h) SECRETARIAL REPORT.—The Secretary shall re25 port to Congress by not later than January 1, 1997, on
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1 the number and amount of grants awarded under this sec2 tion, and include with such report an evaluation of the

3 impact of the grant program on the number of uninsured

4 and cost of health insurance to small group markets in

5 participating States.

6 TITLE III—TAX INCENTIVES TO

7 ENCOURAGE THE PURCHASE

8 OF HEALTH INSURANCE

9 SEC. 3001. PERMANENT EXTENSION AND INCREASE OF DE10 DUCTION FOR HEALTH INSURANCE COSTS OF

11 SELF-EMPLOYED INDIVIDUALS.

12 (a) DEDUCTION MADE PERMANENT.—Section 162(l)

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

14 rules for health insurance costs of self-employed individ15 uals) is amended by striking paragraph (6).

16 (b) INCREASE IN DEDUCTION.—Section 162(l) of

17 such Code, as amended by subsection (a), is amended—

18 (1) by striking ‘‘25 percent’’ in paragraph (1)

19 and inserting ‘‘the applicable percentage’’, and

20 (2) by adding at the end the following new

21 paragraph:

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

23 of paragraph (1), the applicable percentage shall be

24 determined as follows:

For taxable years beginning

in:

The applicable percentage is:

1994, 1995 and 1996 .................... 25
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For taxable years beginning

in:

The applicable percentage is:

1997 ............................................... 50

1998 and 1999 .............................. 75

2000 and thereafter ....................... 100.’’

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

2 this section shall apply to taxable years beginning after

3 December 31, 1993.

4 SEC. 3002. CREDIT FOR HEALTH INSURANCE EXPENSES.

5 (a) IN GENERAL.—Subpart C of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code of

7 1986 (relating to refundable personal credits) is amended

8 by inserting after section 34 the following new section:

9 ‘‘SEC. 34A. HEALTH INSURANCE EXPENSES.

10 ‘‘(a) ALLOWANCE OF CREDIT.—

11 ‘‘(1) IN GENERAL.—In the case of an eligible

12 individual, there shall be allowed as a credit against

13 the tax imposed by this subtitle for the taxable year

14 an amount equal to the applicable percentage of the

15 qualified health insurance expenses paid by such in16 dividual during the taxable year.

17 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

18 of paragraph (1), the term ‘applicable percentage’

19 means 60 percent reduced (but not below zero) by

20 10 percentage points for each $1,000 (or fraction

21 thereof) by which the taxpayer’s adjusted gross in22 come for the taxable year exceeds the applicable dol23 lar amount.
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1 ‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur2 poses of this subsection, the term ‘applicable dollar

3 amount’ means—

4 ‘‘(A) in the case of a taxpayer filing a joint

5 return, $28,000,

6 ‘‘(B) in the case of any other taxpayer

7 (other than a married individual filing a sepa8 rate return), $18,000, and

9 ‘‘(C) in the case of a married individual fil10 ing a separate return, zero.

11 For purposes of this subsection, the rule of section

12 219(g)(4) shall apply.

13 ‘‘(b) QUALIFIED HEALTH INSURANCE EXPENSES.—

14 For purposes of this section—

15 ‘‘(1) IN GENERAL.—The term ‘qualified health

16 insurance expenses’ means amounts paid during the

17 taxable year for insurance which constitutes medical

18 care (within the meaning of section 213(d)(1)(C)).

19 For purposes of the preceding sentence, the rules of

20 section 213(d)(6) shall apply.

21 ‘‘(2) DOLLAR LIMIT ON QUALIFIED HEALTH IN22 SURANCE EXPENSES.—The amount of the qualified

23 health insurance expenses paid during any taxable

24 year which may be taken into account under sub-
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1 section (a)(1) shall not exceed $1,200 ($2,400 in the

2 case of a taxpayer filing a joint return).

3 ‘‘(3) ELECTION NOT TO TAKE CREDIT.—A tax4 payer may elect for any taxable year to have

5 amounts described in paragraph (1) not treated as

6 qualified health insurance expenses.

7 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this

8 section, the term ‘eligible individual’ means, with respect

9 to any period, an individual who is not covered during such

10 period by a health plan maintained by an employer of such

11 individual or such individual’s spouse.

12 ‘‘(d) SPECIAL RULES.—For purposes of this sec13 tion—

14 ‘‘(1) COORDINATION WITH ADVANCE PAYMENT

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

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

17 any credit to which this section applies.

18 ‘‘(2) MEDICARE-ELIGIBLE INDIVIDUALS.—No

19 expense shall be treated as a qualified health insur20 ance expense if it is an amount paid for insurance

21 for an individual for any period with respect to

22 which such individual is entitled (or, on application

23 without the payment of an additional premium,

24 would be entitled to) benefits under part A of title

25 XVIII of the Social Security Act.
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1 ‘‘(3) SUBSIDIZED EXPENSES.—No expense shall

2 be treated as a qualified health insurance expense to

3 the extent—

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

5 subsidized (whether by being disregarded for

6 purposes of another program or otherwise) by

7 the Federal Government, a State or local gov8 ernment, or any agency or instrumentality

9 thereof, and

10 ‘‘(B) the payment, reimbursement, or sub11 sidy of such expense is not includible in the

12 gross income of the recipient.

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

14 such regulations as may be necessary to carry out the pur15 poses of this section.’’.

16 (b) ADVANCE PAYMENT OF CREDIT.—

17 (1) IN GENERAL.—Chapter 25 of the Internal

18 Revenue Code of 1986 is amended by inserting after

19 section 3507 the following new section:

20 ‘‘SEC. 3507A. ADVANCE PAYMENT OF HEALTH INSURANCE

21 EXPENSES CREDIT.

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

23 in this section, every employer making payment of wages

24 with respect to whom a health insurance expenses eligi25 bility certificate is in effect shall, at the time of paying
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1 such wages, make an additional payment equal to such

2 employee’s dependent care advance amount.

3 ‘‘(b) HEALTH INSURANCE EXPENSES ELIGIBILITY

4 CERTIFICATE.—For purposes of this title, a health insur5 ance expenses eligibility certificate is a statement fur6 nished by an employee to the employer which—

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

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

9 taxable year,

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

11 a health insurance expenses eligibility certificate in

12 effect for the calendar year with respect to the pay13 ment of wages by another employer,

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

15 spouse has a health insurance expenses eligibility

16 certificate in effect, and

17 ‘‘(4) estimates the amount of qualified health

18 insurance expenses (as defined in section 34A(b))

19 for the calendar year.

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

21 as being in effect with respect to a spouse if such a certifi22 cate will be in effect on the first status determination date

23 following the date on which the employee furnishes the

24 statement in question.
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1 ‘‘(c) HEALTH INSURANCE EXPENSES ADVANCE

2 AMOUNT.—

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

4 the term ‘health insurance expenses advance

5 amount’ means, with respect to any payroll period,

6 the amount determined—

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

8 from the employer for such period,

9 ‘‘(B) on the basis of the employee’s esti10 mated qualified health insurance expenses in11 cluded in the health insurance expenses eligi12 bility certificate, and

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

14 the Secretary.

15 ‘‘(2) ADVANCE AMOUNT TABLES.—The tables

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

17 form to the tables prescribed under section 3402(a)

18 and, to the maximum extent feasible, shall be coordi19 nated with such tables and the tables prescribed

20 under section 3507(c).

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

22 rules similar to the rules of subsections (d) and (e) of sec23 tion 3507 shall apply.
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1 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

2 such regulations as may be necessary to carry out the pur3 poses of this section.’’.

4 (2) CONFORMING AMENDMENT.—The table of

5 sections for chapter 25 of such Code is amended by

6 adding after the item relating to section 3507 the

7 following new item:

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

8 (c) COORDINATION WITH DEDUCTIONS FOR HEALTH

9 INSURANCE EXPENSES.—

10 (1) SELF-EMPLOYED INDIVIDUALS.—Section

11 162(l) of the Internal Revenue Code of 1986, as

12 amended by section 8001, is further amended by

13 adding after paragraph (6) the following new para14 graph:

15 ‘‘(7) COORDINATION WITH HEALTH INSURANCE

16 PREMIUM CREDIT.—Paragraph (1) shall not apply to

17 any amount taken into account in computing the

18 amount of the credit allowed under section 34A.’’.

19 (2) MEDICAL, DENTAL, ETC., EXPENSES.—Sub20 section (e) of section 213 of such Code is amended

21 by inserting ‘‘or section 34A’’ after ‘‘section 21’’.

22 (d) CLERICAL AMENDMENT.—The table of sections

23 for subpart A of part IV of subchapter A of chapter 1

24 of the Internal Revenue Code of 1986 is amended by in-
33

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1 serting after the item relating to section 34 the following

2 new item:

‘‘Sec. 34A. Health insurance expenses.’’.

3 (e) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to taxable years beginning after

5 December 31, 1995.

6 TITLE IV—INCENTIVES TO IN7 CREASE THE ACCESS OF

8 RURAL AND UNDERSERVED

9 AREAS TO HEALTH CARE

10 SEC. 4001. NONREFUNDABLE CREDIT FOR CERTAIN PRI11 MARY HEALTH SERVICES PROVIDERS.

12 (a) IN GENERAL.—Subpart A of part IV of sub13 chapter A of chapter 1 of the Internal Revenue Code of

14 1986 (relating to nonrefundable personal credits) is

15 amended by inserting after section 22 the following new

16 section:

17 ‘‘SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS.

18 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al19 lowed as a credit against the tax imposed by this chapter

20 for the taxable year an amount equal to the product of—

21 ‘‘(1) the number of months during such taxable

22 year—

23 ‘‘(A) during which the taxpayer is a quali24 fied primary health services provider, and
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1 ‘‘(B) which are within the taxpayer’s man2 datory service period, and

3 ‘‘(2) $1,000 ($500 in the case of a qualified

4 practitioner who is not a physician).

5 ‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO6 VIDER.—For purposes of this section, the term ‘qualified

7 primary health services provider’ means, with respect to

8 any month, any qualified practitioner who—

9 ‘‘(1) has in effect a certification by the Bureau

10 as a provider of primary health services and such

11 certification is, when issued, for a health profes12 sional shortage area in which the qualified practi13 tioner is commencing the providing of primary

14 health services,

15 ‘‘(2) is providing primary health services full

16 time in the health professional shortage area identi17 fied in such certification, and

18 ‘‘(3) has not received a scholarship under the

19 National Health Service Corps Scholarship Program

20 or any loan repayments under the National Health

21 Service Corps Loan Repayment Program.

22 For purposes of paragraph (2) and subsection (e)(3), a

23 provider shall be treated as providing services in a health

24 professional shortage area when such area ceases to be
35

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1 such an area if it was such an area when the provider

2 commenced providing services in the area.

3 ‘‘(c) MANDATORY SERVICE PERIOD.—For purposes

4 of this section, the term ‘mandatory service period’ means

5 the period of 60 consecutive calendar months beginning

6 with the first month the taxpayer is a qualified primary

7 health services provider. A taxpayer shall not have more

8 than 1 mandatory service period.

9 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur10 poses of this section—

11 ‘‘(1) BUREAU.—The term ‘Bureau’ means the

12 Bureau of Primary Health Care, Health Resources

13 and Services Administration of the United States

14 Public Health Service.

15 ‘‘(2) QUALIFIED PRACTITIONER.—The term

16 ‘qualified practitioner’ means a physician, a physi17 cian assistant, a nurse practitioner, or a certified

18 nurse-midwife.

19 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the

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

21 the Social Security Act.

22 ‘‘(4) PHYSICIAN ASSISTANT; NURSE PRACTI23 TIONER.—The terms ‘physician assistant’ and ‘nurse

24 practitioner’ have the meanings given to such terms

25 by section 1861(aa)(5) of the Social Security Act.
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1 ‘‘(5) CERTIFIED NURSE-MIDWIFE.—The term

2 ‘certified nurse-midwife’ has the meaning given to

3 such term by section 1861(gg)(2) of the Social Secu4 rity Act.

5 ‘‘(6) PRIMARY HEALTH SERVICES.—The term

6 ‘primary health services’ has the meaning given such

7 term by section 330(b)(1) of the Public Health Serv8 ice Act.

9 ‘‘(7) HEALTH PROFESSIONAL SHORTAGE

10 AREA.—The term ‘health professional shortage area’

11 has the meaning given such term by section

12 332(a)(1)(A) of the Public Health Service Act.

13 ‘‘(e) RECAPTURE OF CREDIT.—

14 ‘‘(1) IN GENERAL.—If there is a recapture

15 event during any taxable year, then—

16 ‘‘(A) no credit shall be allowed under sub17 section (a) for such taxable year and any suc18 ceeding taxable year, and

19 ‘‘(B) the tax of the taxpayer under this

20 chapter for such taxable year shall be increased

21 by an amount equal to the product of—

22 ‘‘(i) the applicable percentage, and

23 ‘‘(ii) the aggregate unrecaptured cred24 its allowed to such taxpayer under this sec25 tion for all prior taxable years.
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1 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

2 ‘‘(A) IN GENERAL.—For purposes of this

3 subsection, the applicable recapture percentage

4 shall be determined from the following table:

‘‘If the recapture The applicable recapevent occurs during: true percentage is:

Months 1–24 .............................................. 100

Months 25–36 ............................................ 75

Months 37–48 ............................................ 50

Months 49–60 ............................................ 25

Month 61 or thereafter .............................. 0.

5 ‘‘(B) TIMING.—For purposes of subpara6 graph (A), month 1 shall begin on the first day

7 of the mandatory service period.

8 ‘‘(3) RECAPTURE EVENT DEFINED.—

9 ‘‘(A) IN GENERAL.—For purposes of this

10 subsection, the term ‘recapture event’ means

11 the failure of the taxpayer to be a qualified pri12 mary health services provider for any month

13 during the taxpayer’s mandatory service period.

14 ‘‘(B) SECRETARIAL WAIVER.—The Sec15 retary, in consultation with the Secretary of

16 Health and Human Services, may waive any re17 capture event caused by extraordinary cir18 cumstances.

19 ‘‘(4) NO CREDITS AGAINST TAX; MINIMUM

20 TAX.—Any increase in tax under this subsection

21 shall not be treated as a tax imposed by this chapter

22 for purposes of determining the amount of any cred-
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1 it under subpart A, B, or D of this part or for pur2 poses of section 55.’’

3 (b) CLERICAL AMENDMENT.—The table of sections

4 for subpart A of part IV of subchapter A of chapter 1

5 of such Code is amended by inserting after the item relat6 ing to section 22 the following new item:

‘‘Sec. 23. Primary health services providers.’’

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

8 this section shall apply to taxable years beginning after

9 December 31, 1994.

10 SEC. 4002. EXPENSING OF MEDICAL EQUIPMENT.

11 (a) IN GENERAL.—Paragraph (1) of section 179(b)

12 of the Internal Revenue Code of 1986 (relating to dollar

13 limitation on expensing of certain depreciable business as14 sets) is amended to read as follows:

15 ‘‘(1) DOLLAR LIMITATION.—

16 ‘‘(A) GENERAL RULE.—The aggregate cost

17 which may be taken into account under sub18 section (a) for any taxable year shall not exceed

19 $17,500.

20 ‘‘(B) HEALTH CARE PROPERTY.—The ag21 gregate cost which may be taken into account

22 under subsection (a) shall be increased by the

23 lesser of—
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1 ‘‘(i) the cost of section 179 property

2 which is health care property placed in

3 service during the taxable year, or

4 ‘‘(ii) $10,000.’’

5 (b) DEFINITION.—Section 179(d) of such Code (re6 lating to definitions) is amended by adding at the end the

7 following new paragraph:

8 ‘‘(11) HEALTH CARE PROPERTY.—For purposes

9 of this section, the term ‘health care property’

10 means section 179 property—

11 ‘‘(A) which is medical equipment used in

12 the screening, monitoring, observation, diag13 nosis, or treatment of patients in a laboratory,

14 medical, or hospital environment,

15 ‘‘(B) which is owned (directly or indirectly)

16 and used by a physician (as defined in section

17 1861(r) of the Social Security Act) in the active

18 conduct of such physician’s full-time trade or

19 business of providing primary health services

20 (as defined in section 330(b)(1) of the Public

21 Health Service Act) in a health professional

22 shortage area (as defined in section

23 332(a)(1)(A) of the Public Health Service Act),

24 and
40

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1 ‘‘(C) substantially all the use of which is in

2 such area.’’

3 (c) RECAPTURE.—Paragraph (10) of section 179(d)

4 of such Code is amended by inserting before the period

5 ‘‘and with respect to any health care property which ceases

6 (other than by an area failing to be treated as a health

7 professional shortage area) to be health care property at

8 any time’’.

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

10 this section shall apply to property placed in service in

11 taxable years beginning after December 31, 1994.

12 SEC. 4003. EXPANDED SERVICES FOR MEDICALLY UNDER13 SERVED INDIVIDUALS.

14 (a) IN GENERAL.—Subpart I of part D of title III

15 of the Public Health Service Act (42 U.S.C. 254b et seq.)

16 (as amended by section 313) is amended by adding at the

17 end the following new section:

18 ‘‘SEC. 330B. EXPANDED SERVICES FOR MEDICALLY UNDER19 SERVED INDIVIDUALS.

20 ‘‘(a) ESTABLISHMENT OF HEALTH SERVICES AC21 CESS PROGRAM.—From amounts appropriated under this

22 section, the Secretary shall, acting through the Bureau of

23 Health Care Delivery Assistance, award grants under this

24 section to federally qualified health centers (hereinafter re25 ferred to in this section as ‘FQHC’s’) and other entities
41

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1 and organizations submitting applications under this sec2 tion (as described in subsection (c)) for the purpose of

3 providing access to services for medically underserved pop4 ulations (as defined in section 330(b)(3)) or in high im5 pact areas (as defined in section 329(a)(5)) not currently

6 being served by a FQHC.

7 ‘‘(b) ELIGIBILITY FOR GRANTS.—

8 ‘‘(1) IN GENERAL.—The Secretary shall award

9 grants under this section to entities or organizations

10 described in this paragraph and paragraph (2) which

11 have submitted a proposal to the Secretary to ex12 pand such entities or organizations operations (in13 cluding expansions to new sites (as determined nec14 essary by the Secretary)) to serve medically under15 served populations or high impact areas not cur16 rently served by a FQHC and which—

17 ‘‘(A) have as of January 1, 1991, been cer18 tified by the Secretary as a FQHC under sec19 tion 1905(l)(2)(B) of the Social Security Act;

20 or

21 ‘‘(B) have submitted applications to the

22 Secretary to qualify as FQHC’s under such sec23 tion 1905(l)(2)(B); or

24 ‘‘(C) have submitted a plan to the Sec25 retary which provides that the entity will meet
42

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1 the requirements to qualify as a FQHC when

2 operational.

3 ‘‘(2) NON FQHC ENTITIES.—

4 ‘‘(A) ELIGIBILITY.—The Secretary shall

5 also make grants under this section to public or

6 private nonprofit agencies, health care entities

7 or organizations which meet the requirements

8 necessary to qualify as a FQHC except, the re9 quirement that such entity have a consumer

10 majority governing board and which have sub11 mitted a proposal to the Secretary to provide

12 those services provided by a FQHC as defined

13 in section 1905(l)(2)(B) of the Social Security

14 Act and which are designed to promote access

15 to primary care services or to reduce reliance on

16 hospital emergency rooms or other high cost

17 providers of primary health care services, pro18 vided such proposal is developed by the entity

19 or organizations (or such entities or organiza20 tions acting in a consortium in a community)

21 with the review and approval of the Governor of

22 the State in which such entity or organization

23 is located.

24 ‘‘(B) LIMITATION.—The Secretary shall

25 provide in making grants to entities or organi-
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1 zations described in this paragraph that no

2 more than 10 percent of the funds provided for

3 grants under this section shall be made avail4 able for grants to such entities or organizations.

5 ‘‘(c) APPLICATION REQUIREMENTS.—

6 ‘‘(1) IN GENERAL.—In order to be eligible to

7 receive a grant under this section, a FQHC or other

8 entity or organization must submit an application in

9 such form and at such time as the Secretary shall

10 prescribe and which meets the requirements of this

11 subsection.

12 ‘‘(2) REQUIREMENTS.—An application submit13 ted under this section must provide—

14 ‘‘(A)(i) for a schedule of fees or payments

15 for the provision of the services provided by the

16 entity designed to cover its reasonable costs of

17 operations; and

18 ‘‘(ii) for a corresponding schedule of dis19 counts to be applied to such fees or payments,

20 based upon the patient’s ability to pay (deter21 mined by using a sliding scale formula based on

22 the income of the patient);

23 ‘‘(B) assurances that the entity or organi24 zation provides services to persons who are eli25 gible for benefits under title XVIII of the Social
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1 Security Act, for medical assistance under title

2 XIX of such Act or for assistance for medical

3 expenses under any other public assistance pro4 gram or private health insurance program; and

5 ‘‘(C) assurances that the entity or organi6 zation has made and will continue to make

7 every reasonable effort to collect reimbursement

8 for services—

9 ‘‘(i) from persons eligible for assist10 ance under any of the programs described

11 in subparagraph (B); and

12 ‘‘(ii) from patients not entitled to ben13 efits under any such programs.

14 ‘‘(d) LIMITATIONS ON USE OF FUNDS.—

15 ‘‘(1) IN GENERAL.—From the amounts award16 ed to an entity or organization under this section,

17 funds may be used for purposes of planning but may

18 only be expended for the costs of—

19 ‘‘(A) assessing the needs of the populations

20 or proposed areas to be served;

21 ‘‘(B) preparing a description of how the

22 needs identified will be met; and

23 ‘‘(C) development of an implementation

24 plan that addresses—
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1 ‘‘(i) recruitment and training of per2 sonnel; and

3 ‘‘(ii) activities necessary to achieve

4 operational status in order to meet FQHC

5 requirements under 1905(l)(2)(B) of the

6 Social Security Act.

7 ‘‘(2) RECRUITING, TRAINING AND COMPENSA8 TION OF STAFF.—From the amounts awarded to an

9 entity or organization under this section, funds may

10 be used for the purposes of paying for the costs of

11 recruiting, training and compensating staff (clinical

12 and associated administrative personnel (to the ex13 tent such costs are not already reimbursed under

14 title XIX of the Social Security Act or any other

15 State or Federal program)) to the extent necessary

16 to allow the entity to operate at new or expanded ex17 isting sites.

18 ‘‘(3) FACILITIES AND EQUIPMENT.—From the

19 amounts awarded to an entity or organization under

20 this section, funds may be expended for the purposes

21 of acquiring facilities and equipment but only for the

22 cost of—

23 ‘‘(A) construction of new buildings (to the

24 extent that new construction is found to be the

25 most cost-efficient approach by the Secretary);
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1 ‘‘(B) acquiring, expanding, and moderniz2 ing of existing facilities;

3 ‘‘(C) purchasing essential (as determined

4 by the Secretary) equipment; and

5 ‘‘(D) amortization of principal and pay6 ment of interest on loans obtained for purposes

7 of site construction, acquisition, modernization,

8 or expansion, as well as necessary equipment.

9 ‘‘(4) SERVICES.—From the amounts awarded

10 to an entity or organization under this section, funds

11 may be expended for the payment of services but

12 only for the costs of—

13 ‘‘(A) providing or arranging for the provi14 sion of all services through the entity necessary

15 to qualify such entity as a FQHC under section

16 1905(l)(2)(B) of the Social Security Act;

17 ‘‘(B) providing or arranging for any other

18 service that a FQHC may provide and be reim19 bursed for under title XIX of such Act; and

20 ‘‘(C) providing any unreimbursed costs of

21 providing services as described in section 330(a)

22 to patients.

23 ‘‘(e) PRIORITIES IN THE AWARDING OF GRANTS.—

24 ‘‘(1) CERTIFIED FQHC’s.—The Secretary shall

25 give priority in awarding grants under this section
47

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1 to entities which have, as of January 1, 1991, been

2 certified as a FQHC under section 1905(l)(2)(B) of

3 the Social Security Act and which have submitted

4 a proposal to the Secretary to expand their oper5 ations (including expansion to new sites) to serve

6 medically underserved populations for high impact

7 areas not currently served by a FQHC. The Sec8 retary shall give first priority in awarding grants

9 under this section to those FQHCs or other entities

10 which propose to serve populations with the highest

11 degree of unmet need, and which can demonstrate

12 the ability to expand their operations in the most

13 efficient manner.

14 ‘‘(2) QUALIFIED FQHC’s.—The Secretary shall

15 give second priority in awarding grants to entities

16 which have submitted applications to the Secretary

17 which demonstrate that the entity will qualify as a

18 FQHC under section 1905(l)(2)(B) of the Social Se19 curity Act before it provides or arranges for the pro20 vision of services supported by funds awarded under

21 this section, and which are serving or proposing to

22 serve medically underserved populations or high im23 pact areas which are not currently served (or pro24 posed to be served) by a FQHC.
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1 ‘‘(3) EXPANDED SERVICES AND PROJECTS.—

2 The Secretary shall give third priority in awarding

3 grants in subsequent years to those FQHCs or other

4 entities which have provided for expanded services

5 and project and are able to demonstrate that such

6 entity will incur significant unreimbursed costs in

7 providing such expanded services.

8 ‘‘(f) RETURN OF FUNDS TO SECRETARY FOR COSTS

9 REIMBURSED FROM OTHER SOURCES.—To the extent

10 that an entity or organization receiving funds under this

11 section is reimbursed from another source for the provi12 sion of services to an individual, and does not use such

13 increased reimbursement to expand services furnished,

14 areas served, to compensate for costs of unreimbursed

15 services provided to patients, or to promote recruitment,

16 training, or retention of personnel, such excess revenues

17 shall be returned to the Secretary.

18 ‘‘(g) TERMINATION OF GRANTS.—

19 ‘‘(1) FAILURE TO MEET FQHC REQUIRE20 MENTS.—

21 ‘‘(A) IN GENERAL.—With respect to any

22 entity that is receiving funds awarded under

23 this section and which subsequently fails to

24 meet the requirements to qualify as a FQHC

25 under section 1905(l)(2)(B) or is an entity that
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1 is not required to meet the requirements to

2 qualify as a FQHC under section 1905(l)(2)(B)

3 of the Social Security Act but fails to meet the

4 requirements of this section, the Secretary shall

5 terminate the award of funds under this section

6 to such entity.

7 ‘‘(B) NOTICE.—Prior to any termination

8 of funds under this section to an entity, the en9 tities shall be entitled to 60 days prior notice of

10 termination and, as provided by the Secretary

11 in regulations, an opportunity to correct any de12 ficiencies in order to allow the entity to con13 tinue to receive funds under this section.

14 ‘‘(2) REQUIREMENTS.—Upon any termination

15 of funding under this section, the Secretary may (to

16 the extent practicable)—

17 ‘‘(A) sell any property (including equip18 ment) acquired or constructed by the entity

19 using funds made available under this section

20 or transfer such property to another FQHC,

21 provided, that the Secretary shall reimburse

22 any costs which were incurred by the entity in

23 acquiring or constructing such property (includ24 ing equipment) which were not supported by

25 grants under this section; and
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1 ‘‘(B) recoup any funds provided to an en2 tity terminated under this section.

3 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There

4 are authorized to be appropriated such sums as may be

5 necessary for each of the fiscal years 1996 through 1999

6 to carry out this section.’’.

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

8 subsection (a) shall become effective with respect to serv9 ices furnished by a federally qualified health center or

10 other qualifying entity described in this section beginning

11 on or after October 1, 1996.

12 SEC. 4004. INCREASE IN NATIONAL HEALTH SERVICE

13 CORPS AND AREA HEALTH EDUCATION CEN14 TER FUNDING.

15 (a) NATIONAL HEALTH SERVICE CORPS.—Section

16 338H(b)(1) of the Public Health Service Act (42 U.S.C.

17 254q(b)(1)) is amended—

18 (1) by striking ‘‘1991, and’’ and inserting

19 ‘‘1991,’’; and

20 (2) by striking ‘‘through 2000’’ and inserting ‘‘,

21 1994, and 1995, and $20,000,000 for each of the

22 fiscal years 1996 through 2000’’.

23 (b) AREA HEALTH EDUCATION CENTERS.—Section

24 746(i)(1) of such Act (42 U.S.C. 293j(i)(1)) is amended—
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1 (1) in subparagraph (A), by striking ‘‘1995’’

2 and inserting ‘‘1995, and $20,000,000 for each of

3 the fiscal years 1996 through 2000’’; and

4 (2) in subparagraph (C), by striking ‘‘and

5 1995’’ and inserting ‘‘1995, and $20,000,000 for

6 each of the fiscal years 1996 through 2000’’.

7 SEC. 4005. ASSISTANT SECRETARY FOR RURAL HEALTH.

8 (a) APPOINTMENT OF ASSISTANT SECRETARY.—

9 (1) IN GENERAL.—Section 711(a) of the Social

10 Security Act (42 U.S.C. 912(a)) is amended—

11 (A) by striking ‘‘by a Director, who shall

12 advise the Secretary’’ and inserting ‘‘by an As13 sistant Secretary for Rural Health (in this sec14 tion referred to as the ‘Assistant Secretary’),

15 who shall report directly to the Secretary’’; and

16 (B) by adding at the end the following new

17 sentence: ‘‘The Office shall not be a component

18 of any other office, service, or component of the

19 Department.’’.

20 (2) CONFORMING AMENDMENTS.—(A) Section

21 711(b) of the Social Security Act (42 U.S.C. 912(b))

22 is amended by striking ‘‘the Director’’ and inserting

23 ‘‘the Assistant Secretary’’.

24 (B) Section 338J(a) of the Public Health Serv25 ice Act (42 U.S.C. 254r(a)) is amended by striking
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1 ‘‘Director of the Office of Rural Health Policy’’ and

2 inserting ‘‘Assistant Secretary for Rural Health’’.

3 (C) Section 464T(b) of the Public Health Serv4 ice Act (42 U.S.C. 285p–2(b)) is amended in the

5 matter preceding paragraph (1) by striking ‘‘Direc6 tor of the Office of Rural Health Policy’’ and insert7 ing ‘‘Assistant Secretary for Rural Health’’.

8 (D) Section 6213 of the Omnibus Budget Rec9 onciliation Act of 1989 (42 U.S.C. 1395x note) is

10 amended in subsection (e)(1) by striking ‘‘Director

11 of the Office of Rural Health Policy’’ and inserting

12 ‘‘Assistant Secretary for Rural Health’’.

13 (E) Section 403 of the Ryan White Comprehen14 sive AIDS Resources Emergency Act of 1990 (42

15 U.S.C. 300ff–11 note) is amended in the matter pre16 ceding paragraph (1) of subsection (a) by striking

17 ‘‘Director of the Office of Rural Health Policy’’ and

18 inserting ‘‘Assistant Secretary for Rural Health’’.

19 (3) AMENDMENT TO THE EXECUTIVE SCHED20 ULE.—Section 5315 of title 5, United States Code,

21 is amended by striking ‘‘Assistant Secretaries of

22 Health and Human Services (5)’’ and inserting ‘‘As23 sistant Secretaries of Health and Human Services

24 (6)’’.
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1 (b) EXPANSION OF DUTIES.—Section 711(a) of the

2 Social Security Act (42 U.S.C. 912(a)) is amended by

3 striking ‘‘and access to (and the quality of) health care

4 in rural areas’’ and inserting ‘‘access to, and quality of,

5 health care in rural areas, and reforms to the health care

6 system and the implications of such reforms for rural

7 areas’’.

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

9 this section shall take effect on January 1, 1996.

10 SEC. 4006. STUDY ON TRANSITIONAL MEASURES TO EN11 SURE ACCESS.

12 (a) IN GENERAL.—The Prospective Payment Assess13 ment Commission shall conduct a study concerning the

14 need for legislation or regulations to ensure that vulner15 able populations have adequate access to health plans and

16 health care providers and services.

17 (b) REPORT.—Not later than 1 year after the date

18 of enactment of this Act, the Prospective Payment Assess19 ment Commission shall prepare and submit to Congress

20 a report concerning the findings and recommendations of

21 the Commission based on the study conducted under sub22 section (a).
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1 TITLE V—QUALITY AND

2 CONSUMER PROTECTION

3 Subtitle A—Quality Improvement

4 Foundations

5 SEC. 5001. QUALITY IMPROVEMENT FOUNDATIONS.

6 (a) ESTABLISHMENT.—

7 (1) GRANT PROCESS.—The Secretary shall,

8 through a competitive grantmaking process, award

9 demonstration grants for the establishment and op10 eration of quality improvement foundations. In

11 awarding such grants the Secretary shall consider

12 geographic diversity, regional economics of scale,

13 population density, regional needs and other regional

14 differences.

15 (2) ELIGIBLE APPLICANTS.—To be eligible to

16 receive a grant for the establishment of a quality im17 provement foundation under paragraph (1), and ap18 plicant entity shall—

19 (A) be a not-for-profit entity; and

20 (B) have a board that includes health care

21 providers, representatives from relevant institu22 tions of higher education in the region, consum23 ers, purchasers of health care, and other inter24 ested parties.

25 (b) DUTIES.—
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1 (1) IN GENERAL.—Each quality improvement

2 foundation shall carry out the duties described in

3 paragraph (2). The foundation shall establish a pro4 gram of activities incorporating such duties and

5 shall be able to demonstrate the involvement of a

6 broad cross-section of the providers and health care

7 institutions throughout the State or region.

8 (2) DUTIES DESCRIBED.—The duties described

9 in this paragraph include the following:

10 (A) Collaboration with and technical assist11 ance to providers and health plans in ongoing

12 efforts to improve the quality of health care

13 provided to individuals in the State.

14 (B) Population-based monitoring of prac15 tice patterns and patient outcomes, on an other

16 than a case-by-case basis.

17 (C) Developing programs in lifetime learn18 ing for health professionals to improve the qual19 ity of health care by ensuring that health pro20 fessionals remain informed about new knowl21 edge, acquire new skills, and adopt new roles as

22 technology and societal demands change.

23 (D) Disseminating information about suc24 cessful quality improvement programs, practice

25 guidelines, and research findings, including in-
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1 formation on innovative staffing of health pro2 fessionals.

3 (E) Assist in developing innovative patient

4 education systems that enhance patient involve5 ment in decisions relating to their health care,

6 including an emphasis on shared decisionmak7 ing between patients and health care providers.

8 (F) Issuing a report to the public regard9 ing the foundation’s activities for the previous

10 year including areas of success during the pre11 vious year and areas for opportunities in im12 proving health outcomes for the community,

13 and the adoption of guidelines.

14 (c) RESTRICTIONS ON DISCLOSURE.—The restric15 tions on disclosure of information under section 1160 of

16 the Social Security Act shall apply to quality improvement

17 foundations under this section, except that—

18 (1) such foundations shall make data available

19 to qualified organizations and individuals for re20 search for public benefit under the terms set forth

21 in section 5218;

22 (2) individuals and qualified organizations shall

23 meet standards consistent with the Public Health

24 Service Act and policies regarding the conduct of

25 scientific research, including provisions related to
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1 confidentiality, privacy, protection of humans and

2 shall pay reasonable costs for data; and

3 (3) such foundations may exchange information

4 with other quality improvement foundations.

5 (d) AUTHORIZATION OF APPROPRIATIONS.—For the

6 purpose of carrying out this section, there are authorized

7 to be appropriated such sums as may be necessary for

8 each of the fiscal years 1996 through 2000.

9 Subtitle B—Administrative

10 Simplification

11 PART 1—PURPOSE AND DEFINITIONS

12 SEC. 5101. PURPOSE.

13 It is the purpose of this subtitle to improve the effi14 ciency and effectiveness of the health care system, includ15 ing the medicare program under title XVIII of the Social

16 Security Act and the medicaid program under title XIX

17 of such Act, by encouraging the development of a health

18 information network through the establishment of stand19 ards and requirements for the electronic transmission of

20 certain health information.

21 SEC. 5102. DEFINITIONS.

22 For purposes of this subtitle:

23 (1) CERTIFIED.—The term ‘‘certified’’ means,

24 with respect to a health information network service,

25 that such service is certified under section 5141.
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1 (2) CODE SET.—The term ‘‘code set’’ means

2 any set of codes used for encoding data elements,

3 such as tables of terms, medical concepts, medical

4 diagnostic codes, or medical procedure codes.

5 (3) COORDINATION OF BENEFITS.—The term

6 ‘‘coordination of benefits’’ means determining and

7 coordinating the financial obligations of health plans

8 when health care benefits are payable under two or

9 more health plans.

10 (4) HEALTH CARE PROVIDER.—The term

11 ‘‘health care provider’’ includes a provider of services

12 (as defined in section 1861(u) of the Social Security

13 Act), a provider of medical or other health services

14 (as defined in section 1861(s) of the Social Security

15 Act), and any other person furnishing health care

16 services or supplies.

17 (5) HEALTH INFORMATION.—The term ‘‘health

18 information’’ means any information, whether oral

19 or recorded in any form or medium that—

20 (A) is created or received by a health care

21 provider, health plan, health oversight agency

22 (as defined in section 5202), health researcher,

23 public health authority (as defined in section

24 5202), employer, life insurer, school or univer-
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1 sity, or certified health information network

2 service; and

3 (B) relates to the past, present, or future

4 physical or mental health or condition of an in5 dividual, the provision of health care to an indi6 vidual, or the past, present, or future payment

7 for the provision of health care to an individual.

8 (6) HEALTH INFORMATION NETWORK.—The

9 term ‘‘health information network’’ means the health

10 information system that is formed through the appli11 cation of the requirements and standards established

12 under this subtitle.

13 (7) HEALTH INFORMATION PROTECTION ORGA14 NIZATION.—The term ‘‘health information protection

15 organization’’ means a private entity or an entity op16 erated by a State that accesses standard data ele17 ments of health information through the health in18 formation network and—

19 (A) processes such information into non20 identifiable health information and discloses

21 such information;

22 (B) if such information is protected health

23 information (as defined in section 5202), dis24 closes such information only in accordance with

25 subtitle C; and
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1 (C) may store such information.

2 (8) HEALTH INFORMATION NETWORK SERV3 ICE.—The term ‘‘health information network serv4 ice’’—

5 (A) means a private entity or an entity op6 erated by a State that enters into contracts

7 to—

8 (i) process or facilitate the processing

9 of nonstandard data elements of health in10 formation into standard data elements;

11 (ii) provide the means by which per12 sons are connected to the health informa13 tion network for purposes of meeting the

14 requirements of this subtitle, including the

15 holding of standard data elements of

16 health information;

17 (iii) provide authorized access to

18 health information through the health in19 formation network; or

20 (iv) provide specific information proc21 essing services, such as automated coordi22 nation of benefits and claims transaction

23 routing; and

24 (B) includes a health information protec25 tion organization.
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1 (9) HEALTH PLAN.—The term ‘‘health plan’’

2 has the meaning given such term in section 1021(a).

3 (10) NON-IDENTIFIABLE HEALTH INFORMA4 TION.—The term ‘‘non-identifiable health informa5 tion’’ means health information that is not protected

6 health information as defined in section 5202.

7 (11) PATIENT MEDICAL RECORD INFORMA8 TION.—The term ‘‘patient medical record informa9 tion’’ means health information derived from a clini10 cal encounter that relates to the physical or mental

11 condition of an individual.

12 (12) STANDARD.—The term ‘‘standard’’ when

13 referring to an information transaction or to data

14 elements of health information means the trans15 action or data elements meet any standard adopted

16 by the Secretary under part 2 that applies to such

17 information transaction or data elements.

18 PART 2—STANDARDS FOR DATA ELEMENTS AND

19 INFORMATION TRANSACTIONS

20 SEC. 5111. GENERAL REQUIREMENTS ON SECRETARY.

21 (a) IN GENERAL.—The Secretary shall adopt stand22 ards and modifications to standards under this subtitle

23 that are—

24 (1) consistent with the objective of reducing the

25 costs of providing and paying for health care;
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1 (2) in use and generally accepted or developed

2 or modified by the standards setting organizations

3 accredited by the American National Standard Insti4 tute (ANSI); and

5 (3) consistent with the objective of protecting

6 the privacy of protected health information (as de7 fined in section 5202).

8 (b) INITIAL STANDARDS.—The Secretary may de9 velop an expedited process for the adoption of initial

10 standards under this subtitle.

11 (c) FAILSAFE.—If the Secretary is unable to adopt

12 standards or modified standards in accordance with sub13 section (a) that meet the requirements of this subtitle—

14 (1) the Secretary may develop or modify such

15 standards and, after providing public notice and an

16 adequate period for public comment, adopt such

17 standards; and

18 (2) if the Secretary adopts standards under

19 paragraph (1), the Secretary shall submit a report

20 to the appropriate committees of Congress on the

21 actions taken by the Secretary under this subsection.

22 (d) ASSISTANCE TO THE SECRETARY.—In complying

23 with the requirements of this subtitle, the Secretary shall

24 rely on recommendations of the Health Information Advi-
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1 sory Committee established under section 5163 and shall

2 consult with appropriate Federal agencies.

3 SEC. 5112. STANDARDS FOR TRANSACTIONS AND DATA ELE4 MENTS.

5 (a) IN GENERAL.—The Secretary shall adopt stand6 ards for transactions and data elements to make uniform

7 and able to be exchanged electronically health information

8 that is—

9 (1) appropriate for the following financial and

10 administrative transactions: claims (including coordi11 nation of benefits) or equivalent encounter informa12 tion, claims attachments, enrollment and

13 disenrollment, eligibility, payment and remittance

14 advice, premium payments, first report of injury,

15 claims status, and referral certification and author16 ization;

17 (2) related to other transactions determined ap18 propriate by the Secretary consistent with the goals

19 of improving the health care system and reducing

20 administrative costs; and

21 (3) related to research inquiries by a health re22 searcher with respect to information standardized

23 under paragraph (1) or (2).

24 (b) UNIQUE HEALTH IDENTIFIERS.—The Secretary

25 shall adopt standards providing for a standard unique
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1 health identifier for each individual, employer, health plan,

2 and health care provider for use in the health care system.

3 (c) CODE SETS.—

4 (1) IN GENERAL.—The Secretary, in consulta5 tion with experts from the private sector and Fed6 eral agencies, shall—

7 (A) select code sets for appropriate data

8 elements from among the code sets that have

9 been developed by private and public entities; or

10 (B) establish code sets for such data ele11 ments if no code sets for the data elements

12 have been developed.

13 (2) DISTRIBUTION.—The Secretary shall estab14 lish efficient and low-cost procedures for distribution

15 of code sets and modifications made to such code

16 sets under section 5113(b).

17 (d) ELECTRONIC SIGNATURE.—The Secretary, in co18 ordination with the Secretary of Commerce, shall promul19 gate regulations specifying procedures for the electronic

20 transmission and authentication of signatures, compliance

21 with which will be deemed to satisfy Federal and State

22 statutory requirements for written signatures with respect

23 to information transactions required by this subtitle and

24 written signatures on medical records and prescriptions.

25 (e) SPECIAL RULES—
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1 (1) COORDINATION OF BENEFITS.—Any stand2 ards adopted under subsection (a) that relate to co3 ordination of benefits shall provide that a claim for

4 reimbursement for medical services furnished is test5 ed by an algorithm specified by the Secretary

6 against all records that are electronically available

7 through the health information network relating to

8 enrollment and eligibility for the individual who re9 ceived such services to determine any primary and

10 secondary obligors for payment.

11 (2) CLINICAL LABORATORY TESTS.—

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

13 subparagraph (B), any standards adopted

14 under subsection (a) shall provide that claims

15 for clinical laboratory tests for which benefits

16 are payable by a plan sponsor shall be submit17 ted directly by the person or entity that per18 formed (or supervised the performance of) the

19 tests to the sponsor in a manner consistent with

20 (and subject to such exceptions as are provided

21 under) the requirement for direct submission of

22 such claims under the medicare program.

23 (B) EXCEPTION.—Payment for a clinical

24 laboratory test may be made—
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1 (i) to a physician with whom the phy2 sician who performed or supervised the

3 test shares a practice; or

4 (ii) on a pre-paid, at-risk basis to the

5 person or entity who performs or super6 vises the test.

7 SEC. 5113. TIMETABLES FOR ADOPTION OF STANDARDS.

8 (a) INITIAL STANDARDS.—The Secretary shall adopt

9 standards relating to the data elements and transactions

10 for the information described in section 5112(a) not later

11 than 9 months after the date of the enactment of this sub12 title (except in the case of standards for claims attach13 ments which shall be adopted not later than 24 months

14 after the date of the enactment of this subtitle).

15 (b) ADDITIONS AND MODIFICATIONS TO STAND16 ARDS.—

17 (1) IN GENERAL.—Except as provided in para18 graph (2), the Secretary shall review the standards

19 adopted under this subtitle and shall adopt addi20 tional or modified standards as determined appro21 priate, but no more frequently than once every 6

22 months. Any addition or modification to standards

23 shall be completed in a manner which minimizes the

24 disruption and cost of compliance.

25 (2) SPECIAL RULES.—
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1 (A) FIRST 12-MONTH PERIOD.—Except

2 with respect to additions and modifications to

3 code sets under subparagraph (B), the Sec4 retary shall not adopt any modifications to

5 standards adopted under this subtitle during

6 the 12-month period beginning on the date such

7 standards are adopted unless the Secretary de8 termines that a modification is necessary in

9 order to permit compliance with requirements

10 relating to the standards.

11 (B) ADDITIONS AND MODIFICATIONS TO

12 CODE SETS.—

13 (i) IN GENERAL.—The Secretary shall

14 ensure that procedures exist for the rou15 tine maintenance, testing, enhancement,

16 and expansion of code sets.

17 (ii) ADDITIONAL RULES.—If a code

18 set is modified under this subsection, the

19 modified code set shall include instructions

20 on how data elements that were encoded

21 prior to the modification are to be con22 verted or translated so as to preserve the

23 value of the data elements. Any modifica24 tion to a code set under this subsection

25 shall be implemented in a manner that
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1 minimizes the disruption and cost of com2 plying with such modification.

3 (c) EVALUATION OF STANDARDS.—The Secretary

4 may establish a process to measure or verify the consist5 ency of standards adopted or modified under this subtitle.

6 Such process may include demonstration projects and

7 analysis of the cost of implementing such standards and

8 modifications.

9 PART 3—REQUIREMENTS WITH RESPECT TO

10 CERTAIN TRANSACTIONS AND INFORMATION

11 SEC. 5121. REQUIREMENTS ON HEALTH PLANS.

12 (a) IN GENERAL.—If a person desires to conduct any

13 of the transactions described in section 5112(a) with a

14 health plan as a standard transaction, the health plan

15 shall conduct such standard transaction in a timely man16 ner and the information transmitted or received in connec17 tion with such transaction shall be in the form of standard

18 data elements.

19 (b) SATISFACTION OF REQUIREMENTS.—A health

20 plan may satisfy the requirement imposed on such plan

21 under subsection (a) by directly transmitting standard

22 data elements or submitting nonstandard data elements

23 to a certified health information network service for proc24 essing into standard data elements and transmission.
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1 SEC. 5122. TIMETABLES FOR COMPLIANCE WITH REQUIRE2 MENTS.

3 (a) INITIAL COMPLIANCE.—Not later than 12

4 months after the date on which standards are adopted

5 under part 2 with respect to any type of transaction or

6 data elements, a health plan shall comply with the require7 ments of this subtitle with respect to such transaction or

8 data elements.

9 (b) COMPLIANCE WITH MODIFIED STANDARDS.—

10 (1) IN GENERAL.—If the Secretary adopts a

11 modified standard under part 2, a health plan shall

12 be required to comply with the modified standard at

13 such time as the Secretary determines appropriate

14 taking into account the time needed to comply due

15 to the nature and extent of the modification.

16 (2) SPECIAL RULE.—In the case of modifica17 tions to standards that do not occur within the 12-

18 month period beginning on the date such standards

19 are adopted, the time determined appropriate by the

20 Secretary under paragraph (1) shall be no sooner

21 than the last day of the 90-day period beginning on

22 the date such modified standard is adopted and no

23 later than the last day of the 12 month period begin24 ning on the date such modified standard is adopted.
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1 PART 4—ACCESSING HEALTH INFORMATION

2 SEC. 5131. ACCESS FOR AUTHORIZED PURPOSES.

3 (a) IN GENERAL.—The Secretary shall adopt tech4 nical standards for appropriate persons, including health

5 plans, health care providers, certified health information

6 network services, health researchers, and Federal and

7 State agencies, to locate and access the health information

8 that is available through the health information network

9 due to the requirements of this subtitle. Such technical

10 standards shall ensure that any request to locate or access

11 information shall be authorized under subtitle C.

12 (b) GOVERNMENT AGENCIES.—

13 (1) IN GENERAL.—Certified Health information

14 protection organizations shall make available to a

15 Federal or State agency pursuant to a Federal Ac16 quisition Regulation (or an equivalent State system),

17 any non-identifiable health information that is re18 quested by such agency.

19 (2) CERTAIN INFORMATION AVAILABLE AT LOW

20 COST.—If a health information protection organiza21 tion described in paragraph (1) needs information

22 from a health plan in order to comply with a request

23 of a Federal or State agency that is necessary to

24 comply with a requirement under this Act, such plan

25 shall make such information available to such orga26 nization for a charge that does not exceed the rea-
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1 sonable cost of transmitting the information. An or2 ganization that receives information under the pre3 ceding sentence shall, upon request from any cer4 tified health information protection organization,

5 make such information available to such an organi6 zation for a charge that does not exceed the reason7 able cost of transmitting the information.

8 (c) FUNCTIONAL SEPARATION.—The standards

9 adopted by the Secretary under subsection (a) shall ensure

10 that any health information disclosed under such sub11 section shall not, after such disclosure, be used or released

12 for an administrative, regulatory, or law enforcement pur13 pose unless such disclosure was made for such purpose.

14 SEC. 5132. RESPONDING TO ACCESS REQUESTS.

15 (a) IN GENERAL.—The Secretary shall adopt, and

16 modify as appropriate, standards under which a health

17 plan shall respond to requests for access to health infor18 mation consistent with this subtitle and subtitle C.

19 (b) STANDARDS DESCRIBED.—The standards under

20 subsection (a) shall provide—

21 (1) for a standard format under which a plan

22 will respond to each request either by satisfying the

23 request or by responding with a negative response,

24 which may include an explanation of the failure to

25 satisfy the request; and
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1 (2) that a plan shall respond to a request in a

2 timely manner taking into account the age and

3 amount of the information being requested.

4 (c) LENGTH OF TIME INFORMATION SHOULD BE AC5 CESSIBLE.—The Secretary shall adopt standards with re6 spect to the length of time any standard data elements

7 for a type of health information should be accessible

8 through the health information network.

9 SEC. 5133. TIMETABLES FOR ADOPTION OF STANDARDS

10 AND COMPLIANCE.

11 (a) INITIAL STANDARDS.—The Secretary shall adopt

12 standards under this part not later than 9 months after

13 the date of the enactment of this subtitle and such stand14 ards shall be effective upon adoption.

15 (b) MODIFICATIONS TO STANDARDS.—The provisions

16 of paragraphs (1) and (2)(A) of section 5114(b) shall

17 apply to modifications to standards under this part.

18 PART 5—STANDARDS AND CERTIFICATION FOR

19 HEALTH INFORMATION NETWORK

20 SEC. 5141. STANDARDS AND CERTIFICATION FOR HEALTH

21 INFORMATION NETWORK SERVICES.

22 (a) STANDARDS FOR OPERATION.—The Secretary

23 shall establish standards with respect to the operation of

24 health information network services ensuring that—
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1 (1) such services have policies and security pro2 cedures that are consistent with the privacy require3 ments under subtitle C, including secure methods of

4 access to and transmission of data; and

5 (2) such services, if they are part of a larger or6 ganization, have policies and procedures in place

7 which isolate their activities with respect to process8 ing information in a manner that prevents unauthor9 ized access to such information by such larger orga10 nization.

11 (b) CERTIFICATION BY THE SECRETARY.—

12 (1) ESTABLISHMENT.—Not later than 12

13 months after the date of the enactment of this sub14 title, the Secretary shall establish a certification pro15 cedure for health information network services which

16 ensures that certified services are qualified to meet

17 the requirements of this subtitle.

18 (2) AUDITS AND REPORTS.—The procedure es19 tablished under paragraph (1) shall provide for au20 dits and reports as the Secretary determines appro21 priate in order to monitor such entity’s compliance

22 with the requirements of this subtitle.

23 (c) LOSS OF CERTIFICATION.—

24 (1) MANDATORY TERMINATION.—If a health in25 formation network service violates a requirement im-
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1 posed under subtitle C, its certification under this

2 section shall be terminated unless the Secretary de3 termines that appropriate corrective action has been

4 taken.

5 (2) DISCRETIONARY TERMINATION.—If a health

6 information network service violates a requirement

7 or standard imposed under this subtitle and a pen8 alty has been imposed under section 5151, the Sec9 retary shall review the certification of such service

10 and may terminate such certification.

11 (d) CERTIFICATION BY PRIVATE ENTITIES.—The

12 Secretary may designate private entities to conduct the

13 certification procedures established by the Secretary under

14 this section. A health information network service certified

15 by such an entity in accordance with such designation

16 shall be considered to be certified by the Secretary.

17 SEC. 5142. ENSURING AVAILABILITY OF INFORMATION.

18 The Secretary shall establish a procedure under

19 which a health plan which does not have the ability to

20 transmit standard data elements directly or does not have

21 access to a certified health information network service

22 shall be able to make health information available for dis23 closure as authorized by this subtitle.
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1 PART 6—PENALTIES

2 SEC. 5151. GENERAL PENALTY FOR FAILURE TO COMPLY

3 WITH REQUIREMENTS AND STANDARDS.

4 (a) IN GENERAL.—Except as provided in subsection

5 (b), the Secretary shall impose on any person that violates

6 a requirement or standard imposed under this subtitle a

7 penalty of not more than $1,000 for each violation. The

8 provisions of section 1128A of the Social Security Act

9 (other than subsections (a) and (b) and the second sen10 tence of subsection (f)) shall apply to the imposition of

11 a civil money penalty under this subsection in the same

12 manner as such provisions apply to the imposition of a

13 penalty under section 1128A of the Social Security Act.

14 (b) LIMITATIONS.—

15 (1) NONCOMPLIANCE NOT DISCOVERED.—A

16 penalty may not be imposed under subsection (a) if

17 it is established to the satisfaction of the Secretary

18 that the person liable for the penalty did not know,

19 and by exercising reasonable diligence would not

20 have known, that such person failed to comply with

21 the requirement or standard described in subsection

22 (a).

23 (2) FAILURES DUE TO REASONABLE CAUSE.—

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

25 subparagraph (B), a penalty may not be im26 posed under subsection (a) if—
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1 (i) the failure to comply was due to

2 reasonable cause and not to willful neglect;

3 and

4 (ii) the failure to comply is corrected

5 during the 30-day period beginning on the

6 1st date the person liable for the penalty

7 knew, or by exercising reasonable diligence

8 would have known, that the failure to com9 ply occurred.

10 (B) EXTENSION OF PERIOD.—

11 (i) NO PENALTY.—The period re12 ferred to in subparagraph (A)(ii) may be

13 extended as determined appropriate by the

14 Secretary based on the nature and extent

15 of the failure to comply.

16 (ii) ASSISTANCE.—If the Secretary

17 determines that a health plan failed to

18 comply because such plan was unable to

19 comply, the Secretary may provide tech20 nical assistance to such plan during the pe21 riod described in clause (i). Such assist22 ance shall be provided in any manner de23 termined appropriate by the Secretary.

24 (3) REDUCTION.—In the case of a failure to

25 comply which is due to reasonable cause and not to
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1 willful neglect, any penalty under subsection (a) that

2 is not entirely waived under paragraph (2) may be

3 waived to the extent that the payment of such pen4 alty would be excessive relative to the compliance

5 failure involved.

6 PART 7—MISCELLANEOUS PROVISIONS

7 SEC. 5161. EFFECT ON STATE LAW.

8 (a) IN GENERAL.—Except as provided in subsection

9 (b), a provision, requirement, or standard under this sub10 title shall supersede any contrary provision of State law,

11 including—

12 (1) a provision of State law that requires medi13 cal or health plan records (including billing informa14 tion) to be maintained or transmitted in written

15 rather than electronic form, and

16 (2) a provision of State law which provides for

17 requirements or standards that are more stringent

18 than the requirements or standards under this sub19 title;

20 except where the Secretary determines that the provision

21 is necessary to prevent fraud and abuse, with respect to

22 controlled substances, or for other purposes.

23 (b) PUBLIC HEALTH REPORTING.—Nothing in this

24 subtitle shall be construed to invalidate or limit the au25 thority, power, or procedures established under any law
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1 providing for the reporting of disease or injury, child

2 abuse, birth, or death, public health surveillance, or public

3 health investigation or intervention.

4 SEC. 5162. HEALTH INFORMATION CONTINUITY.

5 (a) HEALTH PLANS.—If a health plan takes any ac6 tion that would threaten the continued availability of

7 standard data elements of health information held by such

8 plan, such data elements shall be transferred to a health

9 plan in accordance with procedures established by the Sec10 retary.

11 (b) HEALTH INFORMATION NETWORK SERVICES.—

12 If a certified health information network service loses its

13 certified status or takes any action that would threaten

14 the continued availability of the standard data elements

15 of health information held by such service, such data ele16 ments shall be transferred to another such service, as des17 ignated by the Secretary.

18 SEC. 5163. HEALTH INFORMATION ADVISORY COMMITTEE.

19 (a) ESTABLISHMENT.—There is established a com20 mittee to be known as the Health Information Advisory

21 Committee.

22 (b) DUTIES.—The committee shall—

23 (1) provide assistance to the Secretary in com24 plying with the requirements imposed on the Sec25 retary under this subtitle and subtitle C; and
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1 (2) be generally responsible for advising the

2 Secretary and the Congress on the status and the

3 future of the health information network.

4 (c) MEMBERSHIP.—

5 (1) IN GENERAL.—The committee shall consist

6 of 15 members to be appointed by the President not

7 later than 60 days after the date of the enactment

8 of this subtitle. The President shall designate 1

9 member as the Chair.

10 (2) EXPERTISE.—The membership of the com11 mittee shall consist of individuals who are of recog12 nized standing and distinction in the areas of infor13 mation systems, consumer health, or privacy, and

14 who possess the demonstrated capacity to discharge

15 the duties imposed on the committee.

16 (3) TERMS.—Each member of the committee

17 shall be appointed for a term of 5 years, except that

18 the members first appointed shall serve staggered

19 terms such that the terms of no more than 3 mem20 bers expire at one time.

21 SEC. 5164. AUTHORIZATION OF APPROPRIATIONS.

22 There are authorized to be appropriated such sums

23 as may be necessary to carry out the purposes of this sub24 title.
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1 Subtitle C—Privacy of Health

2 Information

3 PART 1—DEFINITIONS

4 SEC. 5201. DEFINITIONS.

5 For purposes of this subtitle:

6 (1) PROTECTED HEALTH INFORMATION.—The

7 term ‘‘protected health information’’ means any in8 formation, including demographic information col9 lected from an individual, whether oral or recorded

10 in any form or medium, that—

11 (A) is created or received by a health care

12 provider, health plan, health oversight agency,

13 health researcher, public health authority, em14 ployer, life insurer, school or university, or cer15 tified health information network service; and

16 (B) relates to the past, present, or future

17 physical or mental health or condition of an in18 dividual, the provision of health care to an indi19 vidual, or the past, present, or future payment

20 for the provision of health care to an individual,

21 and—

22 (i) identifies an individual; or

23 (ii) with respect to which there is a

24 reasonable basis to believe that the infor-
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1 mation can be used to identify an individ2 ual.

3 (2) DISCLOSE.—The term ‘‘disclose’’, when

4 used with respect to protected health information,

5 means to provide access to the information, but only

6 if such access is provided to a person other than the

7 individual who is the subject of the information.

8 (3) HEALTH INFORMATION TRUSTEE.—The

9 term ‘‘health information trustee’’ means—

10 (A) a health care provider, health plan,

11 health oversight agency, certified health infor12 mation network service, employer, life insurer,

13 or school or university insofar as it creates, re14 ceives, maintains, uses, or transmits protected

15 health information;

16 (B) any person who obtains protected

17 health information under section 5213, 5217,

18 5218, 5221, 5222, 5226, or 5231; and

19 (C) any employee or agent of a person cov20 ered under subparagraphs (A) or (B).

21 (4) HEALTH OVERSIGHT AGENCY.—The term

22 ‘‘health oversight agency’’ means a person who—

23 (A) performs or oversees the performance

24 of an assessment, evaluation, determination, or

25 investigation relating to the licensing, accredita-
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1 tion, or certification of health care

2 providers; or

3 (B)(i) performs or oversees the perform4 ance of an assessment, evaluation, determina5 tion, investigation, or prosecution relating to

6 the effectiveness of, compliance with, or applica7 bility of legal, fiscal, medical, or scientific

8 standards or aspects of performance related to

9 the delivery of, or payment for health care,

10 health services, equipment, or research or relat11 ing to health care fraud or fraudulent claims

12 regarding health care, health services or equip13 ment, or related activities and items; and

14 (ii) is a public agency, acting on behalf of

15 a public agency, acting pursuant to a require16 ment of a public agency, or carrying out activi17 ties under a Federal or State law governing the

18 assessment, evaluation, determination, inves19 tigation, or prosecution described in clause (i).

20 (5) PUBLIC HEALTH AUTHORITY.—The term

21 ‘‘public health authority’’ means an authority or in22 strumentality of the United States, a State, or a po23 litical subdivision of a State that is (A) responsible

24 for public health matters; and (B) engaged in such

25 activities as injury reporting, public health surveil-
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1 lance, and public health investigation or interven2 tion.

3 (6) INDIVIDUAL REPRESENTATIVE.—The term

4 ‘‘individual representative’’ means any individual le5 gally empowered to make decisions concerning the

6 provision of health care to an individual (where the

7 individual lacks the legal capacity under State law to

8 make such decisions) or the administrator or execu9 tor of the estate of a deceased individual.

10 (7) PERSON.—The term ‘‘person’’ includes an

11 authority of the United States, a State, or a political

12 subdivision of a State.

13 PART 2—AUTHORIZED DISCLOSURES

14 Subpart A—General Provisions

15 SEC. 5206. GENERAL RULES REGARDING DISCLOSURE.

16 (a) GENERAL RULE.—A health information trustee

17 may disclose protected health information only for a pur18 pose that is authorized under this subtitle.

19 (b) DISCLOSURE WITHIN A TRUSTEE.—A health in20 formation trustee may disclose protected health informa21 tion to an officer, employee, or agent of the trustee for

22 a purpose that is compatible with and related to the pur23 pose for which the information was collected or received

24 by that trustee.
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1 (c) SCOPE OF DISCLOSURE.—Every disclosure of pro2 tected health information by a health information trustee

3 shall be limited to the minimum amount of information

4 necessary to accomplish the purpose for which the infor5 mation is disclosed.

6 (d) NO GENERAL REQUIREMENT TO DISCLOSE.—

7 Nothing in this subtitle that permits a disclosure of health

8 information shall be construed to require such disclosure.

9 (e) USE AND REDISCLOSURE OF INFORMATION.—

10 Protected health information about an individual that is

11 disclosed under this subtitle may not be used in, or dis12 closed to any person for use in, any administrative, civil,

13 or criminal action or investigation directed against the in14 dividual unless the action or investigation arises out of or

15 is directly related to the law enforcement inquiry for which

16 the information was obtained.

17 (f) IDENTIFICATION OF DISCLOSED INFORMATION AS

18 PROTECTED INFORMATION.—Except as provided in this

19 subtitle, a health information trustee may not disclose pro20 tected health information unless such information is clear21 ly identified as protected health information that is subject

22 to this subtitle.

23 (g) INFORMATION IN WHICH PROVIDERS ARE IDEN24 TIFIED.—The Secretary may issue regulations protecting
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1 information identifying providers in order to promote the

2 availability of health care services.

3 SEC. 5207. AUTHORIZATIONS FOR DISCLOSURE OF PRO4 TECTED HEALTH INFORMATION.

5 A health information trustee may disclose protected

6 health information pursuant to an authorization executed

7 by the individual who is the subject of the information

8 pursuant to regulations issued by the Secretary with re9 gard to the form of such authorization, the information

10 that must be provided to the individual for authorization,

11 and the scope of the authorization.

12 SEC. 5208. CERTIFIED HEALTH INFORMATION NETWORK

13 SERVICES.

14 A health information trustee may disclose protected

15 health information to a certified health information pro16 tection organization for the purpose of creating non-identi17 fiable health information.

18 Subpart B—Specific Disclosures Relating to Patient

19 SEC. 5211. DISCLOSURES FOR TREATMENT AND FINANCIAL

20 AND ADMINISTRATIVE TRANSACTIONS.

21 (a) HEALTH CARE TREATMENT.—A health care pro22 vider, health plan, employer, or person who receives pro23 tected health information under section 5213, may dis24 close protected health information to a health care pro25 vider for the purpose of providing health care to an indi-
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1 vidual if the individual who is the subject of the informa2 tion has been notified of the individual’s right to object

3 and has not previously objected in writing to the disclo4 sure.

5 (b) DISCLOSURE FOR FINANCIAL AND ADMINISTRA6 TIVE PURPOSES.—A health care provider or employer may

7 disclose protected health information to a health care pro8 vider or health plan for the purpose of providing for the

9 payment for, or reviewing the payment of, health care fur10 nished to an individual.

11 SEC. 5212. NEXT OF KIN AND DIRECTORY INFORMATION.

12 (a) NEXT OF KIN.—A health care provider or person

13 who receives protected health information under section

14 5213 may disclose protected health information to the

15 next of kin, an individual representative of the individual

16 who is the subject of the information, or an individual with

17 whom that individual has a close personal relationship if—

18 (1) the individual who is the subject of the in19 formation—

20 (A) has been notified of the individual’s

21 right to object and has not objected to the dis22 closure;

23 (B) is not competent to be notified about

24 the right to object; or
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1 (C) exigent circumstances exist such that

2 it would not be practicable to notify the individ3 ual of the right to object; and

4 (2) the information disclosed relates to health

5 care currently being provided to that individual.

6 (b) DIRECTORY INFORMATION.—A health care pro7 vider and a person receiving protected health information

8 under section 5213 may disclose protected health informa9 tion to any person if—

10 (1) the information does not reveal specific in11 formation about the physical or mental condition of

12 the individual who is the subject of the information

13 or health care provided to that person;

14 (2) the individual who is the subject of the in15 formation—

16 (A) has been notified of the individual’s

17 right to object and has not objected to the dis18 closure;

19 (B) is not competent to be notified about

20 the right to object; or

21 (C) exigent circumstances exist such that

22 it would not be practicable to notify the individ23 ual of the right to object; and

24 (3) the information consists only of 1 or more

25 of the following items:
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1 (A) The name of the individual who is the

2 subject of the information.

3 (B) If the individual who is the subject of

4 the information is receiving health care from a

5 health care provider on a premises controlled by

6 the provider—

7 (i) the location of the individual on

8 the premises; and

9 (ii) the general health status of the in10 dividual, described as critical, poor, fair,

11 stable, or satisfactory or in terms denoting

12 similar conditions.

13 (c) IDENTIFICATION OF DECEASED INDIVIDUAL.—A

14 health care provider, health plan, employer, or life insurer,

15 may disclose protected health information if necessary to

16 assist in the identification of a deceased individual.

17 SEC. 5213. EMERGENCY CIRCUMSTANCES.

18 A health care provider, health plan, employer, or per19 son who receives protected health information under this

20 section may disclose protected health information in emer21 gency circumstances where there is a reasonable belief

22 that such information is needed to protect the health or

23 safety of an individual from imminent harm.
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1 Subpart C—Disclosure for Oversight, Public Health,

2 and Research Purposes

3 SEC. 5216. OVERSIGHT.

4 (a) IN GENERAL.—A health information trustee may

5 disclose protected health information to a health oversight

6 agency for an oversight function authorized by law.

7 (b) USE IN ACTION AGAINST INDIVIDUALS.—Not8 withstanding section 5206(e), protected health informa9 tion about an individual that is disclosed under this sec10 tion may be used in, or disclosed in, an administrative,

11 civil, or criminal action or investigation directed against

12 the individual who is the subject of the information if the

13 action or investigation arises out of or is directly related

14 to—

15 (1) receipt of health care or payment for health

16 care;

17 (2) an action involving a fraudulent claim relat18 ed to health; or

19 (3) an action involving a misrepresentation of

20 the health of the individual who is the subject of the

21 information.

22 SEC. 5217. PUBLIC HEALTH.

23 A health care provider, health plan, public health au24 thority, employer, or person who receives protected health

25 information under section 5213 may disclose protected
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1 health information to a public health authority or other

2 person authorized by law for use in a legally authorized—

3 (1) disease or injury reporting;

4 (2) public health surveillance; or

5 (3) public health investigation or intervention.

6 SEC. 5218. HEALTH RESEARCH.

7 (a) IN GENERAL.—A health information trustee may

8 disclose protected health information to a health re9 searcher if an institutional review board determines that

10 the research project engaged in by the health researcher—

11 (1) requires use of the protected health infor12 mation for the effectiveness of the project; and

13 (2) is of sufficient importance to outweigh the

14 intrusion into the privacy of the individual who is

15 the subject of the information that would result from

16 the disclosure.

17 (b) RESEARCH REQUIRING DIRECT CONTACT.—A

18 health care provider or health plan may disclose protected

19 health information to a health researcher for a research

20 project that includes direct contact with an individual who

21 is the subject of protected health information if an institu22 tional review board determines that direct contact is nec23 essary and will be made in a manner that minimizes the

24 risk of harm, embarrassment, or other adverse con25 sequences to the individual.
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1 (c) SPECIAL RULE FOR TRUSTEES OTHER THAN

2 ACADEMIC CENTERS OR HEALTH CARE FACILITIES.—If

3 a health researcher described in subsection (a) or (b) is

4 not an academic center or a health care facility, the deter5 minations required by an institutional review board shall

6 be made by such a board that is certified by the Secretary.

7 (d) USE OF HEALTH INFORMATION NETWORK.—A

8 health information trustee may disclose protected health

9 information to a health researcher using the health infor10 mation network only if the research project satisfies re11 quirements established by the Secretary for protecting the

12 confidentiality of information in the health information

13 network.

14 Subpart D—Disclosure For Judicial, Administrative,

15 and Law Enforcement Purposes

16 SEC. 5221. JUDICIAL AND ADMINISTRATIVE PURPOSES.

17 A health care provider, health plan, health oversight

18 agency, employer, or life insurer may disclose protected

19 health information in connection with litigation or pro20 ceedings to which the individual who is the subject of the

21 information—

22 (1) is a party and in which the individual has

23 placed the individual’s physical or mental condition

24 in issue; or
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1 (2) is deceased and in which the individual’s

2 physical or mental condition is in issue.

3 SEC. 5222. LAW ENFORCEMENT.

4 A health care provider, health plan, health oversight

5 agency, employer, life insurer, or person who receives pro6 tected health information under section 5213 may disclose

7 protected health information to a law enforcement agency

8 (other than a health oversight agency governed by section

9 5216) if the information is requested for use—

10 (1) in an investigation or prosecution of a

11 health information trustee;

12 (2) in the identification of a victim or witness

13 in a law enforcement inquiry;

14 (3) in connection with the investigation of

15 criminal activity committed against the trustee or on

16 premises controlled by the trustee; or

17 (4) in the investigation or prosecution of crimi18 nal activity relating to or arising from the provision

19 of health care or payment for health care.

20 Subpart E—Disclosure Pursuant to Government

21 Subpoena or Warrant

22 SEC. 5226. GOVERNMENT SUBPOENAS AND WARRANTS.

23 A health care provider, health plan, health oversight

24 agency, employer, life insurer, or person who receives pro25 tected health information under section 5213 shall disclose
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1 protected health information under this section if the dis2 closure is pursuant to—

3 (1) a subpoena issued under the authority of a

4 grand jury;

5 (2) an administrative subpoena or summons or

6 a judicial subpoena or warrant; or

7 (3) an administrative subpoena or summons, a

8 judicial subpoena or warrant, or a grand jury sub9 poena, and the disclosure otherwise meets the condi10 tions of section 5216, 5217, 5218, 5221, or 5222.

11 SEC. 5227. ACCESS PROCEDURES FOR LAW ENFORCEMENT

12 SUBPOENAS AND WARRANTS.

13 (a) PROBABLE CAUSE REQUIREMENT.—A govern14 ment authority may not obtain protected health informa15 tion about an individual under paragraph (1) or (2) of

16 section 5226 for use in a law enforcement inquiry unless

17 there is probable cause to believe that the information is

18 relevant to a legitimate law enforcement inquiry being con19 ducted by the government authority.

20 (b) WARRANTS.—A government authority that ob21 tains protected health information about an individual

22 under circumstances described in subsection (a) and pur23 suant to a warrant shall, not later than 30 days after the

24 date the warrant was executed, serve the individual with,

25 or mail to the last known address of the individual, a no-
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1 tice that protected health information about the individual

2 was so obtained, together with a notice of the individual’s

3 right to challenge the warrant.

4 (c) SUBPOENA OR SUMMONS.—Except as provided in

5 subsection (d), a government authority may not obtain

6 protected health information about an individual under

7 circumstances described in subsection (a) and pursuant to

8 a subpoena or summons unless a copy of the subpoena

9 or summons has been served on the individual, if the iden10 tity of the individual is known, on or before the date of

11 return of the subpoena or summons, together with notice

12 of the individual’s right to challenge the subpoena or sum13 mons. If the identity of the individual is not known at the

14 time the subpoena or summons is served, the individual

15 shall be served not later than 30 days thereafter, with no16 tice that protected health information about the individual

17 was so obtained together with notice of the individual’s

18 right to challenge the subpoena or summons.

19 (d) APPLICATION FOR DELAY.—

20 (1) IN GENERAL.—A government authority may

21 apply ex parte and under seal to an appropriate

22 court to delay serving a notice or copy of a warrant,

23 subpoena, or summons required under subsection (b)

24 or (c).
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1 (2) EX PARTE ORDER.—The court shall enter

2 an ex parte order delaying or extending the delay of

3 notice, an order prohibiting the disclosure of the re4 quest for, or disclosure of, the protected health in5 formation, and an order requiring the disclosure of

6 the protected health information if the court finds

7 that—

8 (A) the inquiry being conducted is within

9 the lawful jurisdiction of the government au10 thority seeking the protected health informa11 tion;

12 (B) there is probable cause to believe that

13 the protected health information being sought is

14 relevant to a legitimate law enforcement in15 quiry;

16 (C) the government authority’s need for

17 the information outweighs the privacy interest

18 of the individual who is the subject of the infor19 mation; and

20 (D) there is reasonable ground to believe

21 that receipt of notice by the individual will re22 sult in—

23 (i) endangering the life or physical

24 safety of any individual;

25 (ii) flight from prosecution;
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1 (iii) destruction of or tampering with

2 evidence or the information being sought;

3 (iv) intimidation of potential wit4 nesses; or

5 (v) disclosure of the existence or na6 ture of a confidential law enforcement in7 vestigation or grand jury investigation is

8 likely to seriously jeopardize such inves9 tigation.

10 SEC. 5228. CHALLENGE PROCEDURES FOR LAW ENFORCE11 MENT WARRANTS, SUBPOENAS, AND SUM12 MONS.

13 (a) MOTION TO QUASH.—Within 15 days after the

14 date of service of a notice of execution or a copy of a war15 rant, subpoena, or summons of a government authority

16 seeking protected health information about an individual

17 under paragraph (1) or (2) of section 5226, the individual

18 may file a motion to quash.

19 (b) STANDARD FOR DECISION.—The court shall

20 grant a motion under subsection (a) unless the govern21 ment demonstrates that there is probable cause to believe

22 the protected health information is relevant to a legitimate

23 law enforcement inquiry being conducted by the govern24 ment authority and the government authority’s need for
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1 the information outweighs the privacy interest of the indi2 vidual.

3 (c) ATTORNEY’S FEES.—In the case of a motion

4 brought under subsection (a) in which the individual has

5 substantially prevailed, the court may assess against the

6 government authority a reasonable attorney’s fee and

7 other litigation costs (including expert’s fees) reasonably

8 incurred.

9 (d) NO INTERLOCUTORY APPEAL.—A ruling denying

10 a motion to quash under this section shall not be deemed

11 to be a final order, and no interlocutory appeal may be

12 taken therefrom by the individual.

13 Subpart F—Disclosure Pursuant to Party Subpoena

14 SEC. 5231. PARTY SUBPOENAS.

15 A health care provider, health plan, employer, life in16 surer, or person who receives protected health information

17 under section 5213 may disclose protected health informa18 tion under this section if the disclosure is pursuant to a

19 subpoena issued on behalf of a party who has complied

20 with the access provisions of section 5232.

21 SEC. 5232. ACCESS PROCEDURES FOR PARTY SUBPOENAS.

22 A party may not obtain protected health information

23 about an individual pursuant to a subpoena unless a copy

24 of the subpoena together with a notice of the individual’s

25 right to challenge the subpoena in accordance with section
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1 5233 has been served upon the individual on or before the

2 date of return of the subpoena.

3 SEC. 5233. CHALLENGE PROCEDURES FOR PARTY SUBPOE4 NAS.

5 (a) MOTION TO QUASH SUBPOENA.—After service of

6 a copy of the subpoena seeking protected health informa7 tion under section 5231, the individual who is the subject

8 of the protected health information may file in any court

9 of competent jurisdiction a motion to quash the subpoena.

10 (b) STANDARD FOR DECISION.—The court shall

11 grant a motion under subsection (a) unless the respondent

12 demonstrates that—

13 (1) there is reasonable ground to believe the in14 formation is relevant to a lawsuit or other judicial

15 or administrative proceeding; and

16 (2) the need of the respondent for the informa17 tion outweighs the privacy interest of the individual.

18 (c) ATTORNEY’S FEES.—In the case of a motion

19 brought under subsection (a) in which the individual has

20 substantially prevailed, the court may assess against the

21 respondent a reasonable attorney’s fee and other litigation

22 costs and expenses (including expert’s fees) reasonably in23 curred.
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1 PART 3—PROCEDURES FOR ENSURING SECURITY

2 OF PROTECTED HEALTH INFORMATION

3 Subpart A—Establishment of Safeguards

4 SEC. 5236. ESTABLISHMENT OF SAFEGUARDS.

5 A health information trustee shall establish and

6 maintain appropriate administrative, technical, and phys7 ical safeguards to ensure the integrity and confidentiality

8 of protected health information created or received by the

9 trustee.

10 SEC. 5237. ACCOUNTING FOR DISCLOSURES.

11 A health information trustee shall create and main12 tain, with respect to any protected health information dis13 closed in exceptional circumstances, a record of the disclo14 sure in accordance with regulations issued by the Sec15 retary.

16 Subpart B—Review of Protected Health Information

17 By Subjects of the Information

18 SEC. 5241. INSPECTION OF PROTECTED HEALTH INFORMA19 TION.

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

21 (b), a health care provider or health plan shall permit an

22 individual who is the subject of protected health informa23 tion or the individual’s designee to inspect any such infor24 mation that the provider or plan maintains. A health care

25 provider or health plan may require an individual to reim26 burse the provider or plan for the cost of such inspection.
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1 (b) EXCEPTIONS.—A health care provider or health

2 plan is not required by this section to permit inspection

3 or copying of protected health information if any of the

4 following conditions apply:

5 (1) MENTAL HEALTH TREATMENT NOTES.—

6 The information consists of psychiatric, psycho7 logical, or mental health treatment notes, and the

8 provider or plan determines, based on reasonable

9 medical judgment, that inspection or copying of the

10 notes would cause sufficient harm.

11 (2) ENDANGERMENT TO LIFE OR SAFETY.—

12 The provider or plan determines that disclosure of

13 the information could reasonably be expected to en14 danger the life or physical safety of any individual.

15 (3) CONFIDENTIAL SOURCE.—The information

16 identifies or could reasonably lead to the identifica17 tion of a person (other than a health care provider)

18 who provided information under a promise of con19 fidentiality to a health care provider concerning the

20 individual who is the subject of the information.

21 (4) ADMINISTRATIVE PURPOSES.—The informa22 tion is used by the provider or plan solely for admin23 istrative purposes and not in the provision of health

24 care to the individual who is the subject of the infor25 mation.
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1 (c) DEADLINE.—A health care provider or health

2 plan shall comply with or deny (with a statement of the

3 reasons for such denial) a request for inspection or copy4 ing of protected health information under this section

5 within the 30-day period beginning on the date on which

6 the provider or plan receives the request.

7 SEC. 5242. AMENDMENT OF PROTECTED HEALTH INFORMA8 TION.

9 A health care provider or health plan shall, within

10 45 days after receiving a written request to correct or

11 amend protected health information from the individual

12 who is the subject of the information—

13 (1) correct or amend such information; or

14 (2) provide the individual with a statement of

15 the reasons for refusing to correct or amend such in16 formation and include a copy of such statement in

17 the provider’s or plan’s records.

18 SEC. 5243. NOTICE OF INFORMATION PRACTICES.

19 A health care provider or health plan shall provide

20 written notice of the provider’s or plan’s information prac21 tices, including notice of individual rights with respect to

22 protected health information.
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1 Subpart C—Standards for Electronic Disclosures

2 SEC. 5246. STANDARDS FOR ELECTRONIC DISCLOSURES.

3 The Secretary shall promulgate standards for disclos4 ing protected health information in accordance with this

5 subtitle in electronic form.

6 PART 4—SANCTIONS

7 Subpart A—No Sanctions for Permissible Actions

8 SEC. 5251. NO LIABILITY FOR PERMISSIBLE DISCLOSURES.

9 A health information trustee who makes a disclosure

10 of protected health information about an individual that

11 is permitted by this subtitle shall not be liable to the indi12 vidual for the disclosure under common law and shall not

13 be subject to criminal prosecution under this subtitle.

14 Subpart B—Civil Sanctions

15 SEC. 5256. CIVIL PENALTY.

16 (a) VIOLATION.—Any health information trustee who

17 the Secretary determines has substantially and materially

18 failed to comply with this subtitle shall be subject, in addi19 tion to any other penalties that may be prescribed by law,

20 to a civil penalty of not more than $10,000 for each such

21 violation.

22 (b) PROCEDURES FOR IMPOSITION OF PENALTIES.—

23 Section 1128A of the Social Security Act, other than sub24 sections (a) and (b) and the second sentence of subsection

25 (f) of that section, shall apply to the imposition of a civil

26 monetary penalty under this section in the same manner
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1 as such provisions apply with respect to the imposition of

2 a penalty under section 1128A of such Act.

3 SEC. 5257. CIVIL ACTION.

4 (a) IN GENERAL.—An individual who is aggrieved by

5 negligent conduct in violation of this subtitle may bring

6 a civil action to recover—

7 (1) the greater of actual damages or liquidated

8 damages of $5,000, not to exceed $50,000;

9 (2) punitive damages;

10 (3) a reasonable attorney’s fee and expenses of

11 litigation;

12 (4) costs of litigation; and

13 (5) such preliminary and equitable relief as the

14 court determines to be appropriate.

15 (b) LIMITATION.—No action may be commenced

16 under this section more than 3 years after the date on

17 which the violation was or should reasonably have been

18 discovered.

19 Subpart C—Criminal Sanctions

20 SEC. 5261. WRONGFUL DISCLOSURE OF PROTECTED

21 HEALTH INFORMATION.

22 (a) OFFENSE.—A person who knowingly—

23 (1) obtains protected health information relat24 ing to an individual in violation of this subtitle; or
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1 (2) discloses protected health information to an2 other person in violation of this subtitle,

3 shall be punished as provided in subsection (b).

4 (b) PENALTIES.—A person described in subsection

5 (a) shall—

6 (1) be fined not more than $50,000, imprisoned

7 not more than 1 year, or both;

8 (2) if the offense is committed under false pre9 tenses, be fined not more than $100,000, imprisoned

10 not more than 5 years, or both; and

11 (3) if the offense is committed with intent to

12 sell, transfer, or use protected health information for

13 commercial advantage, personal gain, or malicious

14 harm, fined not more than $250,000, imprisoned not

15 more than 10 years, or both.

16 PART 5—ADMINISTRATIVE PROVISIONS

17 SEC. 5266. RELATIONSHIP TO OTHER LAWS.

18 (a) STATE LAW.—Except as provided in subsections

19 (b), (c), and (d), this subtitle preempts State law.

20 (b) LAWS RELATING TO PUBLIC OR MENTAL

21 HEALTH.—Nothing in this subtitle shall be construed to

22 preempt or operate to the exclusion of any State law relat23 ing to public health or mental health that prevents or reg24 ulates disclosure of protected health information otherwise

25 allowed under this subtitle.
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1 (c) PRIVILEGES.—Nothing in this subtitle is intended

2 to preempt or modify State common or statutory law to

3 the extent such law concerns a privilege of a witness or

4 person in a court of the State. This subtitle does not su5 persede or modify Federal common or statutory law to the

6 extent such law concerns a privilege of a witness or person

7 in a court of the United States. Authorizations pursuant

8 to section 5207 shall not be construed as a waiver of any

9 such privilege.

10 (d) CERTAIN DUTIES UNDER STATE OR FEDERAL

11 LAW.—This subtitle shall not be construed to preempt,

12 supersede, or modify the operation of—

13 (1) any law that provides for the reporting of

14 vital statistics such as birth or death information;

15 (2) any law requiring the reporting of abuse or

16 neglect information about any individual;

17 (3) subpart II of part E of title XXVI of the

18 Public Health Service Act (relating to notifications

19 of emergency response employees of possible expo20 sure to infectious diseases); or

21 (4) any Federal law or regulation governing

22 confidentiality of alcohol and drug patient records.

23 SEC. 5267. RIGHTS OF INCOMPETENTS.

24 (a) EFFECT OF DECLARATION OF INCOMPETENCE.—

25 Except as provided in section 5268, if an individual has
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1 been declared to be incompetent by a court of competent

2 jurisdiction, the rights of the individual under this subtitle

3 shall be exercised and discharged in the best interests of

4 the individual through the individual’s representative.

5 (b) NO COURT DECLARATION.—Except as provided

6 in section 5268, if a health care provider determines that

7 an individual, who has not been declared to be incom8 petent by a court of competent jurisdiction, suffers from

9 a medical condition that prevents the individual from act10 ing knowingly or effectively on the individual’s own behalf,

11 the right of the individual to authorize disclosure may be

12 exercised and discharged in the best interest of the individ13 ual by the individual’s representative.

14 SEC. 5268. EXERCISE OF RIGHTS.

15 (a) INDIVIDUALS WHO ARE 18 OR LEGALLY CAPA16 BLE.—In the case of an individual—

17 (1) who is 18 years of age or older, all rights

18 of the individual shall be exercised by the individual;

19 or

20 (2) who, acting alone, has the legal right, as de21 termined by State law, to apply for and obtain a

22 type of medical examination, care, or treatment and

23 who has sought such examination, care, or treat24 ment, the individual shall exercise all rights of an in25 dividual under this subtitle with respect to protected
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1 health information relating to such examination,

2 care, or treatment.

3 (b) INDIVIDUALS UNDER 18.—Except as provided in

4 subsection (a)(2), in the case of an individual who is—

5 (1) under 14 years of age, all the individual’s

6 rights under this subtitle shall be exercised through

7 the parent or legal guardian of the individual; or

8 (2) 14, 15, 16, or 17 years of age, the rights

9 of inspection and amendment, and the right to au10 thorize disclosure of protected health information of

11 the individual may be exercised either by the individ12 ual or by the parent or legal guardian of the individ13 ual.

14 Subtitle D—Health Care Fraud

15 Prevention

16 SEC. 5301. SHORT TITLE.

17 This title may be cited as the ‘‘Health Care Fraud

18 Prevention Act of 1995’’.

19 PART A—ALL-PAYER FRAUD AND ABUSE

20 CONTROL PROGRAM

21 SEC. 5311. ALL-PAYER FRAUD AND ABUSE CONTROL PRO22 GRAM.

23 (a) ESTABLISHMENT OF PROGRAM.—

24 (1) IN GENERAL.—Not later than January 1,

25 1996, the Secretary of Health and Human Services
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1 (in this title referred to as the ‘‘Secretary’’), acting

2 through the Office of the Inspector General of the

3 Department of Health and Human Services, and the

4 Attorney General shall establish a program—

5 (A) to coordinate Federal, State, and local

6 law enforcement programs to control fraud and

7 abuse with respect to the delivery of and pay8 ment for health care in the United States,

9 (B) to conduct investigations, audits, eval10 uations, and inspections relating to the delivery

11 of and payment for health care in the United

12 States,

13 (C) to facilitate the enforcement of the

14 provisions of sections 1128, 1128A, and 1128B

15 of the Social Security Act and other statutes

16 applicable to health care fraud and abuse, and

17 (D) to provide for the modification and es18 tablishment of safe harbors and to issue inter19 pretative rulings and special fraud alerts pursu20 ant to section 5313.

21 (2) COORDINATION WITH HEALTH PLANS.—In

22 carrying out the program established under para23 graph (1), the Secretary and the Attorney General

24 shall consult with, and arrange for the sharing of

25 data with representatives of health plans.
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1 (3) REGULATIONS.—

2 (A) IN GENERAL.—The Secretary and the

3 Attorney General shall by regulation establish

4 standards to carry out the program under para5 graph (1).

6 (B) INFORMATION STANDARDS.—

7 (i) IN GENERAL.—Such standards

8 shall include standards relating to the fur9 nishing of information by health plans,

10 providers, and others to enable the Sec11 retary and the Attorney General to carry

12 out the program (including coordination

13 with health plans under paragraph (2)).

14 (ii) CONFIDENTIALITY.—Such stand15 ards shall include procedures to assure

16 that such information is provided and uti17 lized in a manner that appropriately pro18 tects the confidentiality of the information

19 and the privacy of individuals receiving

20 health care services and items.

21 (iii) QUALIFIED IMMUNITY FOR PRO22 VIDING INFORMATION.—The provisions of

23 section 1157(a) of the Social Security Act

24 (relating to limitation on liability) shall

25 apply to a person providing information to
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1 the Secretary or the Attorney General in

2 conjunction with their performance of du3 ties under this section.

4 (C) DISCLOSURE OF OWNERSHIP INFOR5 MATION.—

6 (i) IN GENERAL.—Such standards

7 shall include standards relating to the dis8 closure of ownership information described

9 in clause (ii) by any entity providing health

10 care services and items.

11 (ii) OWNERSHIP INFORMATION DE12 SCRIBED.—The ownership information de13 scribed in this clause includes—

14 (I) a description of such items

15 and services provided by such entity;

16 (II) the names and unique physi17 cian identification numbers of all phy18 sicians with a financial relationship

19 (as defined in section 1877(a)(2) of

20 the Social Security Act) with such en21 tity;

22 (III) the names of all other indi23 viduals with such an ownership or in24 vestment interest in such entity; and
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1 (IV) any other ownership and re2 lated information required to be dis3 closed by such entity under section

4 1124 or section 1124A of the Social

5 Security Act, except that the Sec6 retary shall establish procedures

7 under which the information required

8 to be submitted under this subclause

9 will be reduced with respect to health

10 care provider entities that the Sec11 retary determines will be unduly bur12 dened if such entities are required to

13 comply fully with this subclause.

14 (4) AUTHORIZATION OF APPROPRIATIONS FOR

15 INVESTIGATORS AND OTHER PERSONNEL.—In addi16 tion to any other amounts authorized to be appro17 priated to the Secretary, the Attorney General, the

18 Director of the Federal Bureau of Investigation, and

19 the Inspectors General of the Departments of De20 fense, Labor, and Veterans Affairs and of the Office

21 of Personnel Management, for health care anti-fraud

22 and abuse activities for a fiscal year, there are au23 thorized to be appropriated additional amounts,

24 from the Health Care Fraud and Abuse Account de25 scribed in subsection (b), as may be necessary to en-
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1 able the Secretary, the Attorney General, and such

2 Inspectors General to conduct investigations and au3 dits of allegations of health care fraud and abuse

4 and otherwise carry out the program established

5 under paragraph (1) in a fiscal year.

6 (5) ENSURING ACCESS TO DOCUMENTATION.—

7 The Inspector General of the Department of Health

8 and Human Services is authorized to exercise the

9 authority described in paragraphs (4) and (5) of sec10 tion 6 of the Inspector General Act of 1978 (relating

11 to subpoenas and administration of oaths) with re12 spect to the activities under the all-payer fraud and

13 abuse control program established under this sub14 section to the same extent as such Inspector General

15 may exercise such authorities to perform the func16 tions assigned by such Act.

17 (6) AUTHORITY OF INSPECTOR GENERAL.—

18 Nothing in this Act shall be construed to diminish

19 the authority of any Inspector General, including

20 such authority as provided in the Inspector General

21 Act of 1978.

22 (7) HEALTH PLAN DEFINED.—For the pur23 poses of this subsection, the term ‘‘health plan’’

24 shall have the meaning given such term in section

25 1128(i) of the Social Security Act.
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1 (b) HEALTH CARE FRAUD AND ABUSE CONTROL AC2 COUNT.—

3 (1) ESTABLISHMENT.—

4 (A) IN GENERAL.—There is hereby estab5 lished an account to be known as the ‘‘Health

6 Care Fraud and Abuse Control Account’’ (in

7 this section referred to as the ‘‘Anti-Fraud Ac8 count’’). The Anti-Fraud Account shall consist

9 of—

10 (i) such gifts and bequests as may be

11 made as provided in subparagraph (B);

12 (ii) such amounts as may be deposited

13 in the Anti-Fraud Account as provided in

14 subsection (a)(4), sections 5311(b) and

15 5312(b), and title XI of the Social Security

16 Act; and

17 (iii) such amounts as are transferred

18 to the Anti-Fraud Account under subpara19 graph (C).

20 (B) AUTHORIZATION TO ACCEPT GIFTS.—

21 The Anti-Fraud Account is authorized to accept

22 on behalf of the United States money gifts and

23 bequests made unconditionally to the Anti24 Fraud Account, for the benefit of the Anti-
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1 Fraud Account or any activity financed through

2 the Anti-Fraud Account.

3 (C) TRANSFER OF AMOUNTS.—

4 (i) IN GENERAL.—The Secretary of

5 the Treasury shall transfer to the Anti6 Fraud Account an amount equal to the

7 sum of the following:

8 (I) Criminal fines imposed in

9 cases involving a Federal health care

10 offense (as defined in section

11 982(a)(6)(B) of title 18, United

12 States Code).

13 (ii) Administrative penalties and as14 sessments imposed under titles XI, XVIII,

15 and XIX of the Social Security Act (except

16 as otherwise provided by law).

17 (iii) Amounts resulting from the for18 feiture of property by reason of a Federal

19 health care offense.

20 (iv) Penalties and damages imposed

21 under the False Claims Act (31 U.S.C.

22 3729 et seq.), in cases involving claims re23 lated to the provision of health care items

24 and services (other than funds awarded to

25 a relator or for restitution).
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1 (2) USE OF FUNDS.—

2 (A) IN GENERAL.—Amounts in the Anti3 Fraud Account shall be available to carry out

4 the health care fraud and abuse control pro5 gram established under subsection (a) (includ6 ing the administration of the program), and

7 may be used to cover costs incurred in operat8 ing the program, including costs (including

9 equipment, salaries and benefits, and travel and

10 training) of—

11 (i) prosecuting health care matters

12 (through criminal, civil, and administrative

13 proceedings);

14 (ii) investigations;

15 (iii) financial and performance audits

16 of health care programs and operations;

17 (iv) inspections and other evaluations;

18 and

19 (v) provider and consumer education

20 regarding compliance with the provisions of

21 this part.

22 (B) FUNDS USED TO SUPPLEMENT AGEN23 CY APPROPRIATIONS.—It is intended that dis24 bursements made from the Anti-Fraud Account

25 to any Federal agency be used to increase and
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1 not supplant the recipient agency’s appro2 priated operating budget.

3 (3) ANNUAL REPORT.—The Secretary and the

4 Attorney General shall submit jointly an annual re5 port to Congress on the amount of revenue which is

6 generated and disbursed by the Anti-Fraud Account

7 in each fiscal year.

8 (4) USE OF FUNDS BY INSPECTOR GENERAL.—

9 (A) REIMBURSEMENTS FOR INVESTIGA10 TIONS.—The Inspector General is authorized to

11 receive and retain for current use reimburse12 ment for the costs of conducting investigations,

13 when such restitution is ordered by a court, vol14 untarily agreed to by the payer, or otherwise.

15 (B) CREDITING.—Funds received by the

16 Inspector General or the Inspectors General of

17 the Departments of Defense, Labor, and Veter18 ans Affairs and of the Office of Personnel Man19 agement, as reimbursement for costs of con20 ducting investigations shall be deposited to the

21 credit of the appropriation from which initially

22 paid, or to appropriations for similar purposes

23 currently available at the time of deposit, and

24 shall remain available for obligation for 1 year

25 from the date of their deposit.
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1 SEC. 5312. APPLICATION OF CERTAIN FEDERAL HEALTH

2 ANTI-FRAUD AND ABUSE SANCTIONS TO

3 FRAUD AND ABUSE AGAINST ANY HEALTH

4 PLAN.

5 (a) CRIMES.—

6 (1) SOCIAL SECURITY ACT.—Section 1128B of

7 the Social Security Act (42 U.S.C. 1320a–7b) is

8 amended as follows:

9 (A) In the heading, by adding at the end

10 the following: ‘‘OR HEALTH PLANS’’.

11 (B) In subsection (a)(1)—

12 (i) by striking ‘‘title XVIII or’’ and

13 inserting ‘‘title XVIII,’’, and

14 (ii) by adding at the end the follow15 ing: ‘‘or a health plan (as defined in sec16 tion 1128(i)),’’.

17 (C) In subsection (a)(5), by striking ‘‘title

18 XVIII or a State health care program’’ and in19 serting ‘‘title XVIII, a State health care pro20 gram, or a health plan’’.

21 (D) In the second sentence of subsection

22 (a)—

23 (i) by inserting after ‘‘title XIX’’ the

24 following: ‘‘or a health plan’’, and

25 (ii) by inserting after ‘‘the State’’ the

26 following: ‘‘or the plan’’.
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1 (2) IDENTIFICATION OF COMMUNITY SERVICE

2 OPPORTUNITIES.—Section 1128B of such Act (42

3 U.S.C. 1320a–7b) is further amended by adding at

4 the end the following new subsection:

5 ‘‘(f) The Secretary may—

6 ‘‘(1) in consultation with State and local health

7 care officials, identify opportunities for the satisfac8 tion of community service obligations that a court

9 may impose upon the conviction of an offense under

10 this section, and

11 ‘‘(2) make information concerning such oppor12 tunities available to Federal and State law enforce13 ment officers and State and local health care

14 officials.’’.

15 (b) HEALTH PLAN DEFINED.—Section 1128 of the

16 Social Security Act (42 U.S.C. 1320a–7) is amended by

17 redesignating subsection (i) as subsection (j) and by in18 serting after subsection (h) the following new subsection:

19 ‘‘(i) HEALTH PLAN DEFINED.—For purposes of sec20 tions 1128A and 1128B, the term ‘health plan’ means a

21 plan that provides health benefits, whether through di22 rectly, through insurance, or otherwise, and includes a pol23 icy of health insurance, a contract of a service benefit or24 ganization, or a membership agreement with a health

25 maintenance organization or other prepaid health plan,
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1 and also includes an employee welfare benefit plan or a

2 multiple employer welfare plan (as such terms are defined

3 in section 3 of the Employee Retirement Income Security

4 Act of 1974).’’.

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

6 this section shall take effect on January 1, 1996.

7 SEC. 5313. HEALTH CARE FRAUD AND ABUSE GUIDANCE.

8 (a) SOLICITATION AND PUBLICATION OF MODIFICA9 TIONS TO EXISTING SAFE HARBORS AND NEW SAFE

10 HARBORS.—

11 (1) IN GENERAL.—

12 (A) SOLICITATION OF PROPOSALS FOR

13 SAFE HARBORS.—Not later than January 1,

14 1996, and not less than annually thereafter, the

15 Secretary shall publish a notice in the Federal

16 Register soliciting proposals, which will be ac17 cepted during a 60-day period, for—

18 (i) modifications to existing safe har19 bors issued pursuant to section 14(a) of

20 the Medicare and Medicaid Patient and

21 Program Protection Act of 1987 (42

22 U.S.C. 1320a–7b note);

23 (ii) additional safe harbors specifying

24 payment practices that shall not be treated

25 as a criminal offense under section
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1 1128B(b) of the Social Security Act the

2 (42 U.S.C. 1320a–7b(b)) and shall not

3 serve as the basis for an exclusion under

4 section 1128(b)(7) of such Act (42 U.S.C.

5 1320a–7(b)(7));

6 (iii) interpretive rulings to be issued

7 pursuant to subsection (b); and

8 (iv) special fraud alerts to be issued

9 pursuant to subsection (c).

10 (B) PUBLICATION OF PROPOSED MODI11 FICATIONS AND PROPOSED ADDITIONAL STATE

12 HARBORS.—After considering the proposals de13 scribed in clauses (i) and (ii) of subparagraph

14 (A), the Secretary, in consultation with the At15 torney General, shall publish in the Federal

16 Register proposed modifications to existing safe

17 harbors and proposed additional safe harbors, if

18 appropriate, with a 60-day comment period.

19 After considering any public comments received

20 during this period, the Secretary shall issue

21 final rules modifying the existing safe harbors

22 and establishing new safe harbors, as appro23 priate.

24 (C) REPORT.—The Inspector General of

25 the Department of Health and Human Services
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1 (hereafter in this section referred to as the ‘‘In2 spector General’’) shall, in an annual report to

3 Congress or as part of the year-end semiannual

4 report required by section 5 of the Inspector

5 General Act of 1978 (5 U.S.C. App.), describe

6 the proposals received under clauses (i) and (ii)

7 of subparagraph (A) and explain which propos8 als were included in the publication described

9 in subparagraph (B), which proposals were not

10 included in that publication, and the reasons for

11 the rejection of the proposals that were not in12 cluded.

13 (2) CRITERIA FOR MODIFYING AND ESTABLISH14 ING SAFE HARBORS.—In modifying and establishing

15 safe harbors under paragraph (1)(B), the Secretary

16 may consider the extent to which providing a safe

17 harbor for the specified payment practice may result

18 in any of the following:

19 (A) An increase or decrease in access to

20 health care services.

21 (B) An increase or decrease in the quality

22 of health care services.

23 (C) An increase or decrease in patient free24 dom of choice among health care providers.
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1 (D) An increase or decrease in competition

2 among health care providers.

3 (E) An increase or decrease in the ability

4 of health care facilities to provide services in

5 medically underserved areas or to medically un6 derserved populations.

7 (F) An increase or decrease in the cost to

8 Government health care programs.

9 (G) An increase or decrease in the poten10 tial overutilization of health care services.

11 (H) The existence or nonexistence of any

12 potential financial benefit to a health care pro13 fessional or provider which may vary based on

14 their decisions of—

15 (i) whether to order a health care

16 item or service; or

17 (ii) whether to arrange for a referral

18 of health care items or services to a par19 ticular practitioner or provider.

20 (I) Any other factors the Secretary deems

21 appropriate in the interest of preventing fraud

22 and abuse in Government health care programs.

23 (b) INTERPRETIVE RULINGS.—

24 (1) IN GENERAL.—
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1 (A) REQUEST FOR INTERPRETIVE RUL2 ING.—Any person may present, at any time, a

3 request to the Inspector General for a state4 ment of the Inspector General’s current inter5 pretation of the meaning of a specific aspect of

6 the application of sections 1128A and 1128B of

7 the Social Security Act (hereafter in this sec8 tion referred to as an ‘‘interpretive ruling’’).

9 (B) ISSUANCE AND EFFECT OF INTERPRE10 TIVE RULING.—

11 (i) IN GENERAL.—If appropriate, the

12 Inspector General shall in consultation

13 with the Attorney General, issue an inter14 pretive ruling in response to a request de15 scribed in subparagraph (A). Interpretive

16 rulings shall not have the force of law and

17 shall be treated as an interpretive rule

18 within the meaning of section 553(b) of

19 title 5, United States Code. All interpretive

20 rulings issued pursuant to this provision

21 shall be published in the Federal Register

22 or otherwise made available for public in23 spection.

24 (ii) REASONS FOR DENIAL.—If the In25 spector General does not issue an interpre-
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1 tive ruling in response to a request de2 scribed in subparagraph (A), the Inspector

3 General shall notify the requesting party of

4 such decision and shall identify the reasons

5 for such decision.

6 (2) CRITERIA FOR INTERPRETIVE RULINGS.—

7 (A) IN GENERAL.—In determining whether

8 to issue an interpretive ruling under paragraph

9 (1)(B), the Inspector General may consider—

10 (i) whether and to what extent the re11 quest identifies an ambiguity within the

12 language of the statute, the existing safe

13 harbors, or previous interpretive rulings;

14 and

15 (ii) whether the subject of the re16 quested interpretive ruling can be ade17 quately addressed by interpretation of the

18 language of the statute, the existing safe

19 harbor rules, or previous interpretive rul20 ings, or whether the request would require

21 a substantive ruling not authorized under

22 this subsection.

23 (B) NO RULINGS ON FACTUAL ISSUES.—

24 The Inspector General shall not give an inter25 pretive ruling on any factual issue, including
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1 the intent of the parties or the fair market

2 value of particular leased space or equipment.

3 (c) SPECIAL FRAUD ALERTS.—

4 (1) IN GENERAL.—

5 (A) REQUEST FOR SPECIAL FRAUD

6 ALERTS.—Any person may present, at any

7 time, a request to the Inspector General for a

8 notice which informs the public of practices

9 which the Inspector General considers to be

10 suspect or of particular concern under section

11 1128B(b) of the Social Security Act (42 U.S.C.

12 1320a–7b(b)) (hereafter in this subsection re13 ferred to as a ‘‘special fraud alert’’).

14 (B) ISSUANCE AND PUBLICATION OF SPE15 CIAL FRAUD ALERTS.—Upon receipt of a re16 quest described in subparagraph (A), the In17 spector General shall investigate the subject

18 matter of the request to determine whether a

19 special fraud alert should be issued. If appro20 priate, the Inspector General shall in consulta21 tion with the Attorney General, issue a special

22 fraud alert in response to the request. All spe23 cial fraud alerts issued pursuant to this sub24 paragraph shall be published in the Federal

25 Register.
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1 (2) CRITERIA FOR SPECIAL FRAUD ALERTS.—

2 In determining whether to issue a special fraud alert

3 upon a request described in paragraph (1), the In4 spector General may consider—

5 (A) whether and to what extent the prac6 tices that would be identified in the special

7 fraud alert may result in any of the con8 sequences described in subsection (a)(2); and

9 (B) the volume and frequency of the con10 duct that would be identified in the special

11 fraud alert.

12 SEC. 5314. REPORTING OF FRAUDULENT ACTIONS UNDER

13 MEDICARE.

14 Not later than 1 year after the date of the enactment

15 of this Act, the Secretary shall establish a program

16 through which individuals entitled to benefits under the

17 medicare program may report to the Secretary on a con18 fidential basis (at the individual’s request) instances of

19 suspected fraudulent actions arising under the program by

20 providers of items and services under the program.
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1 PART B—REVISIONS TO CURRENT SANCTIONS

2 FOR FRAUD AND ABUSE

3 SEC. 5321. MANDATORY EXCLUSION FROM PARTICIPATION

4 IN MEDICARE AND STATE HEALTH CARE PRO5 GRAMS.

6 (a) INDIVIDUAL CONVICTED OF FELONY RELATING

7 TO FRAUD.—

8 (1) IN GENERAL.—Section 1128(a) of the So9 cial Security Act (42 U.S.C. 1320a–7(a)) is amend10 ed by adding at the end the following new para11 graph:

12 ‘‘(3) FELONY CONVICTION RELATING TO

13 FRAUD.—Any individual or entity that has been con14 victed after the date of the enactment of the Health

15 Care Fraud Prevention Act of 1995, under Federal

16 or State law, in connection with the delivery of a

17 health care item or service or with respect to any act

18 or omission in a program (other than those specifi19 cally described in paragraph (1)) operated by or fi20 nanced in whole or in part by any Federal, State, or

21 local government agency, of a criminal offense con22 sisting of a felony relating to fraud, theft, embezzle23 ment, breach of fiduciary responsibility, or other fi24 nancial misconduct.’’.
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1 (2) CONFORMING AMENDMENT.—Section

2 1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))

3 is amended—

4 (A) in the heading, by striking ‘‘CONVIC5 TION’’ and inserting ‘‘MISDEMEANOR CONVIC6 TION’’; and

7 (B) by striking ‘‘criminal offense’’ and in8 serting ‘‘criminal offense consisting of a mis9 demeanor’’.

10 (b) INDIVIDUAL CONVICTED OF FELONY RELATING

11 TO CONTROLLED SUBSTANCE.—

12 (1) IN GENERAL.—Section 1128(a) of the So13 cial Security Act (42 U.S.C. 1320a–7(a)), as amend14 ed by subsection (a), is amended by adding at the

15 end the following new paragraph:

16 ‘‘(4) FELONY CONVICTION RELATING TO CON17 TROLLED SUBSTANCE.—Any individual or entity

18 that has been convicted after the date of the enact19 ment of the Health Care Fraud Prevention Act of

20 1995, under Federal or State law, of a criminal of21 fense consisting of a felony relating to the unlawful

22 manufacture, distribution, prescription, or dispens23 ing of a controlled substance.’’.
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1 (2) CONFORMING AMENDMENT.—Section

2 1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))

3 is amended—

4 (A) in the heading, by striking ‘‘CONVIC5 TION’’ and inserting ‘‘MISDEMEANOR CONVIC6 TION’’; and

7 (B) by striking ‘‘criminal offense’’ and in8 serting ‘‘criminal offense consisting of a mis9 demeanor’’.

10 SEC. 5322. ESTABLISHMENT OF MINIMUM PERIOD OF EX11 CLUSION FOR CERTAIN INDIVIDUALS AND

12 ENTITIES SUBJECT TO PERMISSIVE EXCLU13 SION FROM MEDICARE AND STATE HEALTH

14 CARE PROGRAMS.

15 Section 1128(c)(3) of the Social Security Act (42

16 U.S.C. 1320a–7(c)(3)) is amended by adding at the end

17 the following new subparagraphs:

18 ‘‘(D) In the case of an exclusion of an individual or

19 entity under paragraph (1), (2), or (3) of subsection (b),

20 the period of the exclusion shall be 3 years, unless the

21 Secretary determines in accordance with published regula22 tions that a shorter period is appropriate because of miti23 gating circumstances or that a longer period is appro24 priate because of aggravating circumstances.
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1 ‘‘(E) In the case of an exclusion of an individual or

2 entity under subsection (b)(4) or (b)(5), the period of the

3 exclusion shall not be less than the period during which

4 the individual’s or entity’s license to provide health care

5 is revoked, suspended, or surrendered, or the individual

6 or the entity is excluded or suspended from a Federal or

7 State health care program.

8 ‘‘(F) In the case of an exclusion of an individual or

9 entity under subsection (b)(6)(B), the period of the exclu10 sion shall be not less than 1 year.’’.

11 SEC. 5323. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

12 OWNERSHIP OR CONTROL INTEREST IN

13 SANCTIONED ENTITIES.

14 Section 1128(b) of the Social Security Act (42 U.S.C.

15 1320a–7(b)) is amended by adding at the end the follow16 ing new paragraph:

17 ‘‘(15) INDIVIDUALS CONTROLLING A SANC18 TIONED ENTITY.—Any individual who has a direct

19 or indirect ownership or control interest of 5 percent

20 or more, or an ownership or control interest (as de21 fined in section 1124(a)(3)) in, or who is an officer,

22 director, agent, or managing employee (as defined in

23 section 1126(b)) of, an entity—
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1 ‘‘(A) that has been convicted of any of2 fense described in subsection (a) or in para3 graph (1), (2), or (3) of this subsection;

4 ‘‘(B) against which a civil monetary pen5 alty has been assessed under section 1128A; or

6 ‘‘(C) that has been excluded from partici7 pation under a program under title XVIII or

8 under a State health care program.’’.

9 SEC. 5324. SANCTIONS AGAINST PRACTITIONERS AND PER10 SONS FOR FAILURE TO COMPLY WITH STATU11 TORY OBLIGATIONS.

12 (a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI13 TIONERS AND PERSONS FAILING TO MEET STATUTORY

14 OBLIGATIONS.—

15 (1) IN GENERAL.—The second sentence of sec16 tion 1156(b)(1) of the Social Security Act (42

17 U.S.C. 1320c–5(b)(1)) is amended by striking ‘‘may

18 prescribe)’’ and inserting ‘‘may prescribe, except

19 that such period may not be less than 1 year)’’.

20 (2) CONFORMING AMENDMENT.—Section

21 1156(b)(2) of such Act (42 U.S.C. 1320c–5(b)(2)) is

22 amended by striking ‘‘shall remain’’ and inserting

23 ‘‘shall (subject to the minimum period specified in

24 the second sentence of paragraph (1)) remain’’.
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1 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI2 TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)

3 of the Social Security Act (42 U.S.C. 1320c–5(b)(1)) is

4 amended—

5 (1) in the second sentence, by striking ‘‘and de6 termines’’ and all that follows through ‘‘such obliga7 tions,’’; and

8 (2) by striking the third sentence.

9 SEC. 5325. INTERMEDIATE SANCTIONS FOR MEDICARE

10 HEALTH MAINTENANCE ORGANIZATIONS.

11 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

12 ANY PROGRAM VIOLATIONS.—

13 (1) IN GENERAL.—Section 1876(i)(1) of the

14 Social Security Act (42 U.S.C. 1395mm(i)(1)) is

15 amended by striking ‘‘the Secretary may terminate’’

16 and all that follows and inserting the following: ‘‘in

17 accordance with procedures established under para18 graph (9), the Secretary may at any time terminate

19 any such contract or may impose the intermediate

20 sanctions described in paragraph (6)(B) or (6)(C)

21 (whichever is applicable) on the eligible organization

22 if the Secretary determines that the organization—

23 ‘‘(A) has failed substantially to carry out

24 the contract;
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1 ‘‘(B) is carrying out the contract in a man2 ner inconsistent with the efficient and effective

3 administration of this section; or

4 ‘‘(C) no longer substantially meets the ap5 plicable conditions of subsections (b), (c), (e),

6 and (f).’’.

7 (2) OTHER INTERMEDIATE SANCTIONS FOR

8 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

9 1876(i)(6) of such Act (42 U.S.C. 1395mm(i)(6)) is

10 amended by adding at the end the following new

11 subparagraph:

12 ‘‘(C) In the case of an eligible organization for which

13 the Secretary makes a determination under paragraph (1)

14 the basis of which is not described in subparagraph (A),

15 the Secretary may apply the following intermediate sanc16 tions:

17 ‘‘(i) Civil money penalties of not more than

18 $25,000 for each determination under paragraph (1)

19 if the deficiency that is the basis of the determina20 tion has directly adversely affected (or has the sub21 stantial likelihood of adversely affecting) an individ22 ual covered under the organization’s contract.

23 ‘‘(ii) Civil money penalties of not more than

24 $10,000 for each week beginning after the initiation

25 of procedures by the Secretary under paragraph (9)
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1 during which the deficiency that is the basis of a

2 determination under paragraph (1) exists.

3 ‘‘(iii) Suspension of enrollment of individuals

4 under this section after the date the Secretary noti5 fies the organization of a determination under para6 graph (1) and until the Secretary is satisfied that

7 the deficiency that is the basis for the determination

8 has been corrected and is not likely to recur.’’.

9 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

10 Section 1876(i) of such Act (42 U.S.C. 1395mm(i))

11 is amended by adding at the end the following new

12 paragraph:

13 ‘‘(9) The Secretary may terminate a contract with an

14 eligible organization under this section or may impose the

15 intermediate sanctions described in paragraph (6) on the

16 organization in accordance with formal investigation and

17 compliance procedures established by the Secretary under

18 which—

19 ‘‘(A) the Secretary provides the organization

20 with the opportunity to develop and implement a

21 corrective action plan to correct the deficiencies that

22 were the basis of the Secretary’s determination

23 under paragraph (1);

24 ‘‘(B) in deciding whether to impose sanctions,

25 the Secretary considers aggravating factors such as
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1 whether an entity has a history of deficiencies or has

2 not taken action to correct deficiencies the Secretary

3 has brought to their attention;

4 ‘‘(C) there are no unreasonable or unnecessary

5 delays between the finding of a deficiency and the

6 imposition of sanctions; and

7 ‘‘(D) the Secretary provides the organization

8 with reasonable notice and opportunity for hearing

9 (including the right to appeal an initial decision) be10 fore imposing any sanction or terminating the con11 tract.’’.

12 (4) CONFORMING AMENDMENTS.—Section

13 1876(i)(6)(B) of such Act (42 U.S.C.

14 1395mm(i)(6)(B)) is amended by striking the sec15 ond sentence.

16 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA17 TIONS.—

18 (1) REQUIREMENT FOR WRITTEN AGREE19 MENT.—Section 1876(i)(7)(A) of the Social Security

20 Act (42 U.S.C. 1395mm(i)(7)(A)) is amended by

21 striking ‘‘an agreement’’ and inserting ‘‘a written

22 agreement’’.

23 (2) DEVELOPMENT OF MODEL AGREEMENT.—

24 Not later than July 1, 1996, the Secretary shall de25 velop a model of the agreement that an eligible orga-
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1 nization with a risk-sharing contract under section

2 1876 of the Social Security Act must enter into with

3 an entity providing peer review services with respect

4 to services provided by the organization under sec5 tion 1876(i)(7)(A) of such Act.

6 (3) REPORT BY GAO.—

7 (A) STUDY.—The Comptroller General of

8 the United States shall conduct a study of the

9 costs incurred by eligible organizations with

10 risk-sharing contracts under section 1876(b) of

11 such Act of complying with the requirement of

12 entering into a written agreement with an en13 tity providing peer review services with respect

14 to services provided by the organization, to15 gether with an analysis of how information gen16 erated by such entities is used by the Secretary

17 to assess the quality of services provided by

18 such eligible organizations.

19 (B) REPORT TO CONGRESS.—Not later

20 than July 1, 1998, the Comptroller General

21 shall submit a report to the Committee on

22 Ways and Means and the Committee on Energy

23 and Commerce of the House of Representatives

24 and the Committee on Finance and the Special
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1 Committee on Aging of the Senate on the study

2 conducted under subparagraph (A).

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

4 this section shall apply with respect to contract years be5 ginning on or after January 1, 1996.

6 SEC. 5326. EFFECTIVE DATE.

7 The amendments made by this part shall take effect

8 January 1, 1996.

9 PART C—ADMINISTRATIVE AND MISCELLANEOUS

10 PROVISIONS

11 SEC. 5331. ESTABLISHMENT OF THE HEALTH CARE FRAUD

12 AND ABUSE DATA COLLECTION PROGRAM.

13 (a) GENERAL PURPOSE.—Not later than January 1,

14 1996, the Secretary shall establish a national health care

15 fraud and abuse data collection program for the reporting

16 of final adverse actions (not including settlements in which

17 no findings of liability have been made) against health

18 care providers, suppliers, or practitioners as required by

19 subsection (b), with access as set forth in subsection (c).

20 (b) REPORTING OF INFORMATION.—

21 (1) IN GENERAL.—Each government agency

22 and health plan shall report any final adverse action

23 (not including settlements in which no findings of li24 ability have been made) taken against a health care

25 provider, supplier, or practitioner.
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1 (2) INFORMATION TO BE REPORTED.—The in2 formation to be reported under paragraph (1) in3 cludes:

4 (A) The name of any health care provider,

5 supplier, or practitioner who is the subject of a

6 final adverse action.

7 (B) The name (if known) of any health

8 care entity with which a health care provider,

9 supplier, or practitioner is affiliated or associ10 ated.

11 (C) The nature of the final adverse action.

12 (D) A description of the acts or omissions

13 and injuries upon which the final adverse action

14 was based, and such other information as the

15 Secretary determines by regulation is required

16 for appropriate interpretation of information re17 ported under this section.

18 (3) CONFIDENTIALITY.—In determining what

19 information is required, the Secretary shall include

20 procedures to assure that the privacy of individuals

21 receiving health care services is appropriately pro22 tected.

23 (4) TIMING AND FORM OF REPORTING.—The

24 information required to be reported under this sub25 section shall be reported regularly (but not less often
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1 than monthly) and in such form and manner as the

2 Secretary prescribes. Such information shall first be

3 required to be reported on a date specified by the

4 Secretary.

5 (5) TO WHOM REPORTED.—The information re6 quired to be reported under this subsection shall be

7 reported to the Secretary.

8 (c) DISCLOSURE AND CORRECTION OF INFORMA9 TION.—

10 (1) DISCLOSURE.—With respect to the informa11 tion about final adverse actions (not including settle12 ments in which no findings of liability have been

13 made) reported to the Secretary under this section

14 respecting a health care provider, supplier, or practi15 tioner, the Secretary shall, by regulation, provide

16 for—

17 (A) disclosure of the information, upon re18 quest, to the health care provider, supplier, or

19 licensed practitioner, and

20 (B) procedures in the case of disputed ac21 curacy of the information.

22 (2) CORRECTIONS.—Each Government agency

23 and health plan shall report corrections of informa24 tion already reported about any final adverse action

25 taken against a health care provider, supplier, or
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1 practitioner, in such form and manner that the Sec2 retary prescribes by regulation.

3 (d) ACCESS TO REPORTED INFORMATION.—

4 (1) AVAILABILITY.—The information in this

5 database shall be available to Federal and State gov6 ernment agencies and health plans pursuant to pro7 cedures that the Secretary shall provide by regula8 tion.

9 (2) FEES FOR DISCLOSURE.—The Secretary

10 may establish or approve reasonable fees for the dis11 closure of information in this database. The amount

12 of such a fee may not exceed the costs of processing

13 the requests for disclosure and of providing such in14 formation. Such fees shall be available to the Sec15 retary or, in the Secretary’s discretion, to the agency

16 designated under this section to cover such costs.

17 (e) PROTECTION FROM LIABILITY FOR REPORT18 ING.—No person or entity, including the agency des19 ignated by the Secretary in subsection (b)(5) shall be held

20 liable in any civil action with respect to any report made

21 as required by this section, without knowledge of the fal22 sity of the information contained in the report.

23 (f) DEFINITIONS AND SPECIAL RULES.—For pur24 poses of this section:

25 (1) The term ‘‘final adverse action’’ includes:
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1 (A) Civil judgments against a health care

2 provider in Federal or State court related to the

3 delivery of a health care item or service.

4 (B) Federal or State criminal convictions

5 related to the delivery of a health care item or

6 service.

7 (C) Actions by Federal or State agencies

8 responsible for the licensing and certification of

9 health care providers, suppliers, and licensed

10 health care practitioners, including—

11 (i) formal or official actions, such as

12 revocation or suspension of a license (and

13 the length of any such suspension), rep14 rimand, censure or probation,

15 (ii) any other loss of license of the

16 provider, supplier, or practitioner, by oper17 ation of law, or

18 (iii) any other negative action or find19 ing by such Federal or State agency that

20 is publicly available information.

21 (D) Exclusion from participation in Fed22 eral or State health care programs.

23 (E) Any other adjudicated actions or deci24 sions that the Secretary shall establish by regu25 lation.
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1 (2) The terms ‘‘licensed health care practi2 tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’

3 mean, with respect to a State, an individual who is

4 licensed or otherwise authorized by the State to pro5 vide health care services (or any individual who,

6 without authority holds himself or herself out to be

7 so licensed or authorized).

8 (3) The term ‘‘health care provider’’ means a

9 provider of services as defined in section 1861(u) of

10 the Social Security Act, and any entity, including a

11 health maintenance organization, group medical

12 practice, or any other entity listed by the Secretary

13 in regulation, that provides health care services.

14 (4) The term ‘‘supplier’’ means a supplier of

15 health care items and services described in section

16 1819(a) and (b), and section 1861 of the Social Se17 curity Act.

18 (5) The term ‘‘Government agency’’ shall in19 clude:

20 (A) The Department of Justice.

21 (B) The Department of Health and

22 Human Services.

23 (C) Any other Federal agency that either

24 administers or provides payment for the deliv25 ery of health care services, including, but not
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1 limited to the Department of Defense and the

2 Veterans’ Administration.

3 (D) State law enforcement agencies.

4 (E) State medicaid fraud and abuse units.

5 (F) Federal or State agencies responsible

6 for the licensing and certification of health care

7 providers and licensed health care practitioners.

8 (6) The term ‘‘health plan’’ has the meaning

9 given to such term by section 1128(i) of the Social

10 Security Act.

11 (7) For purposes of paragraph (2), the exist12 ence of a conviction shall be determined under para13 graph (4) of section 1128(j) of the Social Security

14 Act.

15 (g) CONFORMING AMENDMENT.—Section 1921(d) of

16 the Social Security Act is amended by inserting ‘‘and sec17 tion 301 of the Health Care Fraud Prevention Act of

18 1995’’ after ‘‘section 422 of the Health Care Quality Im19 provement Act of 1986’’.

20 PART D—CIVIL MONETARY PENALTIES

21 SEC. 5341. CIVIL MONETARY PENALTIES.

22 (a) GENERAL CIVIL MONETARY PENALTIES.—Sec23 tion 1128A of the Social Security Act (42 U.S.C. 1320a–

24 7a) is amended as follows:
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1 (1) In subsection (a)(1), by inserting ‘‘or of any

2 health plan (as defined in section 1128(i)),’’ after

3 ‘‘subsection (i)(1)),’’.

4 (2) In subsection (f)—

5 (A) by redesignating paragraph (3) as

6 paragraph (4); and

7 (B) by inserting after paragraph (2) the

8 following new paragraphs:

9 ‘‘(3) With respect to amounts recovered arising

10 out of a claim under a health plan, the portion of

11 such amounts as is determined to have been paid by

12 the plan shall be repaid to the plan, and the portion

13 of such amounts attributable to the amounts recov14 ered under this section by reason of the amendments

15 made by the Health Care Fraud Prevention Act of

16 1995 (as estimated by the Secretary) shall be depos17 ited into the Health Care Fraud and Abuse Control

18 Account established under section 101(b) of such

19 Act.’’.

20 (3) In subsection (i)—

21 (A) in paragraph (2), by inserting ‘‘or

22 under a health plan’’ before the period at the

23 end, and

24 (B) in paragraph (5), by inserting ‘‘or

25 under a health plan’’ after ‘‘or XX’’.
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1 (b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

2 OR CONTROL INTEREST IN PARTICIPATING ENTITY.—

3 Section 1128A(a) of the Social Security Act (42 U.S.C.

4 1320a–7a(a)) is amended—

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

6 (1)(D);

7 (2) by striking ‘‘, or’’ at the end of paragraph

8 (2) and inserting a semicolon;

9 (3) by striking the semicolon at the end of

10 paragraph (3) and inserting ‘‘; or’’; and

11 (4) by inserting after paragraph (3) the follow12 ing new paragraph:

13 ‘‘(4) in the case of a person who is not an orga14 nization, agency, or other entity, is excluded from

15 participating in a program under title XVIII or a

16 State health care program in accordance with this

17 subsection or under section 1128 and who, at the

18 time of a violation of this subsection, retains a direct

19 or indirect ownership or control interest of 5 percent

20 or more, or an ownership or control interest (as de21 fined in section 1124(a)(3)) in, or who is an officer,

22 director, agent, or managing employee (as defined in

23 section 1126(b)) of, an entity that is participating in

24 a program under title XVIII or a State health care

25 program;’’.
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1 (c) MODIFICATIONS OF AMOUNTS OF PENALTIES

2 AND ASSESSMENTS.—Section 1128A(a) of the Social Se3 curity Act (42 U.S.C. 1320a–7a(a)), as amended by sub4 section (b), is amended in the matter following paragraph

5 (4)—

6 (1) by striking ‘‘$2,000’’ and inserting

7 ‘‘$10,000’’;

8 (2) by inserting ‘‘; in cases under paragraph

9 (4), $10,000 for each day the prohibited relationship

10 occurs’’ after ‘‘false or misleading information was

11 given’’; and

12 (3) by striking ‘‘twice the amount’’ and insert13 ing ‘‘3 times the amount’’.

14 (d) CLAIM FOR ITEM OR SERVICE BASED ON INCOR15 RECT CODING OR MEDICALLY UNNECESSARY SERV16 ICES.—Section 1128A(a)(1) of the Social Security Act (42

17 U.S.C. 1320a–7a(a)(1)) is amended—

18 (1) in subparagraph (A) by striking ‘‘claimed,’’

19 and inserting the following: ‘‘claimed, including any

20 person who repeatedly presents or causes to be pre21 sented a claim for an item or service that is based

22 on a code that the person knows or should know will

23 result in a greater payment to the person than the

24 code the person knows or should know is applicable

25 to the item or service actually provided,’’;
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1 (2) in subparagraph (C), by striking ‘‘or’’ at

2 the end;

3 (3) in subparagraph (D), by striking ‘‘; or’’ and

4 inserting ‘‘, or’’; and

5 (4) by inserting after subparagraph (D) the fol6 lowing new subparagraph:

7 ‘‘(E) is for a medical or other item or serv8 ice that a person repeatedly knows or should

9 know is not medically necessary; or’’.

10 (e) PERMITTING SECRETARY TO IMPOSE CIVIL MON11 ETARY PENALTY.—Section 1128A(b) of the Social Secu12 rity Act (42 U.S.C. 1320a–7a(a)) is amended by adding

13 the following new paragraph:

14 ‘‘(3) Any person (including any organization,

15 agency, or other entity, but excluding a beneficiary

16 as defined in subsection (i)(5)) who the Secretary

17 determines has violated section 1128B(b) of this

18 title shall be subject to a civil monetary penalty of

19 not more than $10,000 for each such violation. In

20 addition, such person shall be subject to an assess21 ment of not more than twice the total amount of the

22 remuneration offered, paid, solicited, or received in

23 violation of section 1128B(b). The total amount of

24 remuneration subject to an assessment shall be cal25 culated without regard to whether some portion
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1 thereof also may have been intended to serve a pur2 pose other than one proscribed by section

3 1128B(b).’’.

4 (f) SANCTIONS AGAINST PRACTITIONERS AND PER5 SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLI6 GATIONS.—Section 1156(b)(3) of the Social Security Act

7 (42 U.S.C. 1320c–5(b)(3)) is amended by striking ‘‘the

8 actual or estimated cost’’ and inserting the following: ‘‘up

9 to $10,000 for each instance’’.

10 (g) PROCEDURAL PROVISIONS.—Section 1876(i)(6)

11 of such Act (42 U.S.C. 1395mm(i)(6)) is further amended

12 by adding at the end the following new subparagraph:

13 ‘‘(D) The provisions of section 1128A (other than

14 subsections (a) and (b)) shall apply to a civil money pen15 alty under subparagraph (A) or (B) in the same manner

16 as they apply to a civil money penalty or proceeding under

17 section 1128A(a).’’.

18 (h) PROHIBITION AGAINST OFFERING INDUCEMENTS

19 TO INDIVIDUALS ENROLLED UNDER PROGRAMS OR

20 PLANS.—

21 (1) OFFER OF REMUNERATION.—Section

22 1128A(a) of the Social Security Act (42 U.S.C.

23 1320a–7a(a)) is amended—

24 (A) by striking ‘‘or’’ at the end of para25 graph (1)(D);
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1 (B) by striking ‘‘, or’’ at the end of para2 graph (2) and inserting a semicolon;

3 (C) by striking the semicolon at the end of

4 paragraph (3) and inserting ‘‘; or’’; and

5 (D) by inserting after paragraph (3) the

6 following new paragraph:

7 ‘‘(4) offers to or transfers remuneration to any

8 individual eligible for benefits under title XVIII of

9 this Act, or under a State health care program (as

10 defined in section 1128(h)) that such person knows

11 or should know is likely to influence such individual

12 to order or receive from a particular provider, practi13 tioner, or supplier any item or service for which pay14 ment may be made, in whole or in part, under title

15 XVIII, or a State health care program;’’.

16 (2) REMUNERATION DEFINED.—Section

17 1128A(i) of such Act (42 U.S.C. 1320a–7a(i)) is

18 amended by adding the following new paragraph:

19 ‘‘(6) The term ‘remuneration’ includes the waiv20 er of coinsurance and deductible amounts (or any

21 part thereof), and transfers of items or services for

22 free or for other than fair market value. The term

23 ‘remuneration’ does not include—

24 ‘‘(A) the waiver of coinsurance and deduct25 ible amounts by a person, if—
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1 ‘‘(i) the waiver is not offered as part

2 of any advertisement or solicitation;

3 ‘‘(ii) the person does not routinely

4 waive coinsurance or deductible amounts;

5 and

6 ‘‘(iii) the person—

7 ‘‘(I) waives the coinsurance and

8 deductible amounts after determining

9 in good faith that the individual is in

10 financial need;

11 ‘‘(II) fails to collect coinsurance

12 or deductible amounts after making

13 reasonable collection efforts; or

14 ‘‘(III) provides for any permis15 sible waiver as specified in section

16 1128B(b)(3) or in regulations issued

17 by the Secretary;

18 ‘‘(B) differentials in coinsurance and de19 ductible amounts as part of a benefit plan de20 sign as long as the differentials have been dis21 closed in writing to all third party payors to

22 whom claims are presented and as long as the

23 differentials meet the standards as defined in

24 regulations promulgated by the Secretary; or
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1 ‘‘(C) incentives given to individuals to pro2 mote the delivery of preventive care as deter3 mined by the Secretary in regulations.’’.

4 (i) EFFECTIVE DATE.—The amendments made by

5 this section shall take effect January 1, 1996.

6 PART E—AMENDMENTS TO CRIMINAL LAW

7 SEC. 5351. HEALTH CARE FRAUD.

8 (a) IN GENERAL.—

9 (1) FINES AND IMPRISONMENT FOR HEALTH

10 CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,

11 United States Code, is amended by adding at the

12 end the following new section:

13 ‘‘§ 1347. Health care fraud

14 ‘‘(a) Whoever knowingly executes, or attempts to exe15 cute, a scheme or artifice—

16 ‘‘(1) to defraud any health plan or other per17 son, in connection with the delivery of or payment

18 for health care benefits, items, or services; or

19 ‘‘(2) to obtain, by means of false or fraudulent

20 pretenses, representations, or promises, any of the

21 money or property owned by, or under the custody

22 or control of, any health plan, or person in connec23 tion with the delivery of or payment for health care

24 benefits, items, or services;
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1 shall be fined under this title or imprisoned not more than

2 10 years, or both. If the violation results in serious bodily

3 injury (as defined in section 1365(g)(3) of this title), such

4 person shall be imprisoned for any term of years.

5 ‘‘(b) For purposes of this section, the term ‘health

6 plan’ has the same meaning given such term in section

7 1128(i) of the Social Security Act.’’.

8 (2) CLERICAL AMENDMENT.—The table of sec9 tions at the beginning of chapter 63 of title 18,

10 United States Code, is amended by adding at the

11 end the following:

‘‘1347. Health care fraud.’’.

12 (b) CRIMINAL FINES DEPOSITED IN THE HEALTH

13 CARE FRAUD AND ABUSE CONTROL ACCOUNT.—The Sec14 retary of the Treasury shall deposit into the Health Care

15 Fraud and Abuse Control Account established under sec16 tion 5311(b) an amount equal to the criminal fines im17 posed under section 1347 of title 18, United States Code

18 (relating to health care fraud).

19 SEC. 5352. FORFEITURES FOR FEDERAL HEALTH CARE OF20 FENSES.

21 (a) IN GENERAL.—Section 982(a) of title 18, United

22 States Code, is amended by adding after paragraph (5)

23 the following new paragraph:
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1 ‘‘(6)(A) The court, in imposing sentence on a person

2 convicted of a Federal health care offense, shall order the

3 person to forfeit property, real or personal, that—

4 ‘‘(i) is used in the commission of the offense if

5 the offense results in a financial loss or gain of

6 $50,000 or more; or

7 ‘‘(ii) constitutes or is derived from proceeds

8 traceable to the commission of the offense.

9 ‘‘(B) For purposes of this paragraph, the term ‘Fed10 eral health care offense’ means a violation of, or a criminal

11 conspiracy to violate—

12 ‘‘(i) section 1347 of this title;

13 ‘‘(ii) section 1128B of the Social Security Act;

14 ‘‘(iii) sections 287, 371, 664, 666, 1001, 1027,

15 1341, 1343, or 1954 of this title if the violation or

16 conspiracy relates to health care fraud; and

17 ‘‘(iv) section 501 or 511 of the Employee Re18 tirement Income Security Act of 1974, if the viola19 tion or conspiracy relates to health care fraud.’’.

20 (b) PROPERTY FORFEITED DEPOSITED IN HEALTH

21 CARE FRAUD AND ABUSE CONTROL ACCOUNT.—The Sec22 retary of the Treasury shall deposit into the Health Care

23 Fraud and Abuse Control Account established under sec24 tion 5311(b) an amount equal to amounts resulting from

25 forfeiture of property by reason of a Federal health care
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1 offense pursuant to section 982(a)(6) of title 18, United

2 States Code.

3 SEC. 5353. INJUNCTIVE RELIEF RELATING TO FEDERAL

4 HEALTH CARE OFFENSES.

5 (a) IN GENERAL.—Section 1345(a)(1) of title 18,

6 United States Code, is amended—

7 (1) by striking ‘‘or’’ at the end of subparagraph

8 (A);

9 (2) by inserting ‘‘or’’ at the end of subpara10 graph (B); and

11 (3) by adding at the end the following:

12 ‘‘(C) committing or about to commit a

13 Federal health care offense (as defined in sec14 tion 982(a)(6)(B) of this title);’’.

15 (b) FREEZING OF ASSETS.—Section 1345(a)(2) of

16 title 18, United States Code, is amended by inserting ‘‘or

17 a Federal health care offense (as defined in section

18 982(a)(6)(B))’’ after ‘‘title)’’.

19 SEC. 5354. GRAND JURY DISCLOSURE.

20 Section 3322 of title 18, United States Code, is

21 amended—

22 (1) by redesignating subsections (c) and (d) as

23 subsections (d) and (e), respectively; and

24 (2) by inserting after subsection (b) the follow25 ing:
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1 ‘‘(c) A person who is privy to grand jury information

2 concerning a Federal health care offense (as defined in

3 section 982(a)(6)(B))—

4 ‘‘(1) received in the course of duty as an attor5 ney for the Government; or

6 ‘‘(2) disclosed under rule 6(e)(3)(A)(ii) of the

7 Federal Rules of Criminal Procedure;

8 may disclose that information to an attorney for the Gov9 ernment to use in any investigation or civil proceeding re10 lating to health care fraud.’’.

11 SEC. 5355. FALSE STATEMENTS.

12 (a) IN GENERAL.—Chapter 47, of title 18, United

13 States Code, is amended by adding at the end the follow14 ing:

15 ‘‘§ 1033. False statements relating to health care mat16 ters

17 ‘‘Whoever, in any matter involving a health plan,

18 knowingly and willfully falsifies, conceals, or covers up by

19 any trick, scheme, or device a material fact, or makes any

20 false, fictitious, or fraudulent statements or representa21 tions, or makes or uses any false writing or document

22 knowing the same to contain any false, fictitious, or fraud23 ulent statement or entry, shall be fined under this title

24 or imprisoned not more than 5 years, or both.’’.
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 at the beginning of chapter 47 of title 18, United States

3 Code, is amended by adding at the end the following:

‘‘1033. False statements relating to health care matters.’’.

4 SEC. 5356. VOLUNTARY DISCLOSURE PROGRAM.

5 In consultation with the Attorney General of the

6 United States, the Secretary of Health and Human Serv7 ices shall publish proposed regulations not later than 9

8 months after the date of enactment of this Act, and final

9 regulations not later than 18 months after such date of

10 enactment, establishing a program of voluntary disclosure

11 that would facilitate the enforcement of sections 1128A

12 and 1128B of the Social Security Act (42 U.S.C. 1320a–

13 7a and 1320a–7b) and other relevant provisions of Fed14 eral law relating to health care fraud and abuse. Such pro15 gram should promote and provide incentives for disclo16 sures of potential violations of such sections and provi17 sions by providing that, under certain circumstances, the

18 voluntary disclosure of wrongdoing would result in the im19 position of penalties and punishments less substantial

20 than those that would be assessed for the same wrong21 doing if voluntary disclosure did not occur.
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1 SEC. 5357. OBSTRUCTION OF CRIMINAL INVESTIGATIONS

2 OF FEDERAL HEALTH CARE OFFENSES.

3 (a) IN GENERAL.—Chapter 73 of title 18, United

4 States Code, is amended by adding at the end the follow5 ing new section:

6 ‘‘§ 1518. Obstruction of Criminal Investigations of

7 Federal Health Care Offenses.

8 ‘‘(a) IN GENERAL.—Whoever willfully prevents, ob9 structs, misleads, delays or attempts to prevent, obstruct,

10 mislead, or delay the communication of information or

11 records relating to a Federal health care offense to a

12 criminal investigator shall be fined under this title or im13 prisoned not more than 5 years, or both.

14 ‘‘(b) FEDERAL HEALTH CARE OFFENSE.—As used

15 in this section the term ‘Federal health care offense’ has

16 the same meaning given such term in section 982(a)(6)(B)

17 of this title.

18 ‘‘(c) CRIMINAL INVESTIGATOR.—As used in this sec19 tion the term ‘criminal investigator’ means any individual

20 duly authorized by a department, agency, or armed force

21 of the United States to conduct or engage in investigations

22 for prosecutions for violations of health care offenses.’’.

23 (b) CLERICAL AMENDMENT.—The table of sections

24 at the beginning of chapter 73 of title 18, United States

25 Code, is amended by adding at the end the following:
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‘‘1518. Obstruction of Criminal Investigations of Federal Health Care Offenses.’’.

1 SEC. 5358. THEFT OR EMBEZZLEMENT.

2 (a) IN GENERAL.—Chapter 31 of title 18, United

3 States Code, is amended by adding at the end the follow4 ing new section:

5 ‘‘§ 669. Theft or Embezzlement in Connection with

6 Health Care.

7 ‘‘(a) IN GENERAL.—Whoever willfully embezzles,

8 steals, or otherwise without authority willfully and unlaw9 fully converts to the use of any person other than the

10 rightful owner, or intentionally misapplies any of the mon11 eys, funds, securities, premiums, credits, property, or

12 other assets of a health care benefit program, shall be

13 fined under this title or imprisoned not more than 10

14 years, or both.

15 ‘‘(b) FEDERAL HEALTH CARE OFFENSE.—As used

16 in this section the term ‘Federal health care offense’ has

17 the same meaning given such term in section 982(a)(6)(B)

18 of this title.’’.

19 (b) CLERICAL AMENDMENT.—The table of sections

20 at the beginning of chapter 31 of title 18, United States

21 Code, in amended by adding at the end the following:

‘‘669. Theft or Embezzlement in Connection with Health Care.’’.
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1 SEC. 5359. LAUNDERING OF MONETARY INSTRUMENTS.

2 Section 1956(c)(7) of title 18, United States Code,

3 is amended by adding at the end the following new sub4 paragraph:

5 ‘‘(F) Any act or activity constituting an of6 fense involving a Federal health care offense as

7 that term is defined in section 982(a)(6)(B) of

8 this title.’’.

9 PART F—PAYMENTS FOR STATE HEALTH CARE

10 FRAUD CONTROL UNITS

11 SEC. 5361. ESTABLISHMENT OF STATE FRAUD UNITS.

12 (a) ESTABLISHMENT OF HEALTH CARE FRAUD AND

13 ABUSE CONTROL UNIT.—The Governor of each State

14 shall, consistent with State law, establish and maintain in

15 accordance with subsection (b) a State agency to act as

16 a Health Care Fraud and Abuse Control Unit for purposes

17 of this part.

18 (b) DEFINITION.—In this section, a ‘‘State Fraud

19 Unit’’ means a Health Care Fraud and Abuse Control

20 Unit designated under subsection (a) that the Secretary

21 certifies meets the requirements of this part.

22 SEC. 5362. REQUIREMENTS FOR STATE FRAUD UNITS.

23 (a) IN GENERAL.—The State Fraud Unit must—

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

25 government;
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1 (2) be separate and distinct from any State

2 agency with principal responsibility for the adminis3 tration of any Federally-funded or mandated health

4 care program;

5 (3) meet the other requirements of this section.

6 (b) SPECIFIC REQUIREMENTS DESCRIBED.—The

7 State Fraud Unit shall—

8 (1) be a Unit of the office of the State Attorney

9 General or of another department of State govern10 ment which possesses statewide authority to pros11 ecute individuals for criminal violations;

12 (2) if it is in a State the constitution of which

13 does not provide for the criminal prosecution of indi14 viduals by a statewide authority and has formal pro15 cedures, (A) assure its referral of suspected criminal

16 violations to the appropriate authority or authorities

17 in the State for prosecution, and (B) assure its as18 sistance of, and coordination with, such authority or

19 authorities in such prosecutions; or

20 (3) have a formal working relationship with the

21 office of the State Attorney General or the appro22 priate authority or authorities for prosecution and

23 have formal procedures (including procedures for its

24 referral of suspected criminal violations to such of25 fice) which provide effective coordination of activities
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1 between the Fraud Unit and such office with respect

2 to the detection, investigation, and prosecution of

3 suspected criminal violations relating to any Feder4 ally-funded or mandated health care programs.

5 (c) STAFFING REQUIREMENTS.—The State Fraud

6 Unit shall—

7 (1) employ attorneys, auditors, investigators

8 and other necessary personnel; and

9 (2) be organized in such a manner and provide

10 sufficient resources as is necessary to promote the

11 effective and efficient conduct of State Fraud Unit

12 activities.

13 (d) COOPERATIVE AGREEMENTS; MEMORANDA OF

14 UNDERSTANDING.—The State Fraud Unit shall have co15 operative agreements with—

16 (1) Federally-funded or mandated health care

17 programs.

18 (2) similar Fraud Units in other States, as ex19 emplified through membership and participation in

20 the National Association of Medicaid Fraud Control

21 Units or its successor; and

22 (3) the Secretary.

23 (e) REPORTS.—The State Fraud Unit shall submit

24 to the Secretary an application and an annual report con25 taining such information as the Secretary determines to
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1 be necessary to determine whether the State Fraud Unit

2 meets the requirements of this section.

3 (f) FUNDING SOURCE; PARTICIPATION IN ALL4 PAYER PROGRAM.—In addition to those sums expended

5 by a State under section 5364(a) for purposes of deter6 mining the amount of the Secretary’s payments, a State

7 Fraud Unit may receive funding for its activities from

8 other sources, the identity of which shall be reported to

9 the Secretary in its application or annual report. The

10 State Fraud Unit shall participate in the all-payer fraud

11 and abuse control program established under section

12 5311.

13 SEC. 5363. SCOPE AND PURPOSE.

14 The State Fraud Unit shall carry out the following

15 activities:

16 (1) The State Fraud Unit shall conduct a state17 wide program for the investigation and prosecution

18 (or referring for prosecution) of violations of all ap19 plicable state laws regarding any and all aspects of

20 fraud in connection with any aspect of the adminis21 tration and provision of health care services and ac22 tivities of providers of such services under any Fed23 erally-funded or mandated health care programs.

24 (2) The State Fraud Unit shall have procedures

25 for reviewing complaints of the abuse or neglect of
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1 patients of facilities (including patients in residential

2 facilities and home health care programs) that re3 ceive payments under any Federally-funded or man4 dated health care programs, and, where appropriate,

5 to investigate and prosecute such complaints under

6 the criminal laws of the State or for referring the

7 complaints to other State agencies for action.

8 (3) The State Fraud Unit shall provide for the

9 collection, or referral for collection to the appro10 priate agency, of overpayments that are made under

11 any Federally-funded or mandated health care pro12 gram and that are discovered by the State Fraud

13 Unit in carrying out its activities.

14 SEC. 5364. PAYMENTS TO STATES.

15 (a) MATCHING PAYMENTS TO STATES.—Subject to

16 subsection (c), for each year for which a State has a State

17 Fraud Unit approved under section 5362(b) in operation

18 the Secretary shall provide for a payment to the State for

19 each quarter in a fiscal year in an amount equal to the

20 applicable percentage of the sums expended during the

21 quarter by the State Fraud Unit.

22 (b) APPLICABLE PERCENTAGE DEFINED.—

23 (1) IN GENERAL.—In subsection (a), the ‘‘ap24 plicable percentage’’ with respect to a State for a

25 fiscal year is—
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1 (A) 90 percent, for quarters occurring dur2 ing the first 3 years for which the State Fraud

3 Unit is in operation; or

4 (B) 75 percent, for any other quarters.

5 (2) TREATMENT OF STATES WITH MEDICAID

6 FRAUD CONTROL UNITS.—In the case of a State

7 with a State medicaid fraud control in operation

8 prior to or as of the date of the enactment of this

9 Act, in determining the number of years for which

10 the State Fraud Unit under this part has been in

11 operation, there shall be included the number of

12 years for which such State medicaid fraud control

13 unit was in operation.

14 (c) LIMIT ON PAYMENT.—Notwithstanding sub15 section (a), the total amount of payments made to a State

16 under this section for a fiscal year may not exceed the

17 amounts as authorized pursuant to section 1903(b)(3) of

18 the Social Security Act.

19 TITLE VI—MALPRACTICE

20 REFORM

21 SEC. 6001. ALTERNATIVE DISPUTE RESOLUTION.

22 (a) ESTABLISHMENT.—The Secretary of Health and

23 Human Services (hereafter referred to in this title as the

24 ‘‘Secretary’’) shall establish a program of grants to assist
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1 States in establishing alternative dispute resolution sys2 tems.

3 (b) USE OF FUNDS.—A State may use a grant

4 awarded under subsection (a) to establish alternative dis5 pute resolution systems that—

6 (1) identify claims of professional negligence

7 that merit compensation;

8 (2) encourage early resolution of meritorious

9 claims prior to commencement of a lawsuit; and

10 (3) encourage early withdrawal or dismissal of

11 nonmeritorious claims.

12 (c) AWARD OF GRANTS.—The Secretary shall allo13 cate grants under this section in accordance with criteria

14 issued by the Secretary.

15 (d) APPLICATION.—To be eligible to receive a grant

16 under this section, a State, acting through the appropriate

17 State health authority, shall submit an application at such

18 time, in such manner, and containing such agreements,

19 assurances, and information as the Assistant Secretary

20 determines to be necessary to carry out this section, in21 cluding an assurance that the State system meets the re22 quirements of section 6002.

23 (e) AUTHORIZATION OF APPROPRIATIONS.—There

24 are authorized to be appropriated to carry out this section
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1 such sums as may be necessary for each of the 1996

2 through 1999 fiscal years.

3 SEC. 6002. BASIC REQUIREMENTS.

4 A State’s alternative dispute resolution system meets

5 the requirements of this section if the system—

6 (1) applies to all medical malpractice liability

7 claims under the jurisdiction of the courts of that

8 State;

9 (2) requires that a written opinion resolving the

10 dispute be issued not later than 6 months after the

11 date by which each party against whom the claim is

12 filed has received notice of the claim (other than in

13 exceptional cases for which a longer period is re14 quired for the issuance of such an opinion), and that

15 the opinion contain—

16 (A) findings of fact relating to the dispute,

17 and

18 (B) a description of the costs incurred in

19 resolving the dispute under the system (includ20 ing any fees paid to the individuals hearing and

21 resolving the claim), together with an appro22 priate assessment of the costs against any of

23 the parties;

24 (3) requires individuals who hear and resolve

25 claims under the system to meet such qualifications
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1 as the State may require (in accordance with regula2 tions of the Secretary);

3 (4) is approved by the State or by local govern4 ments in the State;

5 (5) with respect to a State system that consists

6 of multiple dispute resolution procedures—

7 (A) permits the parties to a dispute to se8 lect the procedure to be used for the resolution

9 of the dispute under the system, and

10 (B) if the parties do not agree on the pro11 cedure to be used for the resolution of the dis12 pute, assigns a particular procedure to the par13 ties;

14 (6) provides for the transmittal to the State

15 agency responsible for monitoring or disciplining

16 health care professionals and health care providers

17 of any findings made under the system that such a

18 professional or provider committed malpractice, un19 less, during the 90-day period beginning on the date

20 the system resolves the claim against the profes21 sional or provider, the professional or provider

22 brings an action contesting the decision made under

23 the system; and

24 (7) provides for the regular transmittal to the

25 Administrator for Health Care Policy and Research
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1 of information on disputes resolved under the sys2 tem, in a manner that assures that the identity of

3 the parties to a dispute shall not be revealed.

4 SEC. 6003. ALTERNATIVE DISPUTE RESOLUTION ADVISORY

5 BOARD.

6 (a) ESTABLISHMENT.—Not later than 1 year after

7 the date of the enactment of this Act, the Secretary shall

8 establish an Alternative Dispute Resolution Advisory

9 Board to advise the Secretary regarding the establishment

10 of alternative dispute resolution systems at the State and

11 Federal levels.

12 (b) COMPOSITION.—The ADR Advisory Board shall

13 be composed of members appointed by the Secretary from

14 among representatives of the following:

15 (1) Physicians.

16 (2) Hospitals.

17 (3) Patient advocacy groups.

18 (4) State governments.

19 (5) Academic experts from applicable disciplines

20 (including medicine, law, public health, and econom21 ics) and specialists in arbitration and dispute resolu22 tion.

23 (6) Health insurers and medical malpractice in24 surers.

25 (7) Medical product manufacturers.
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1 (8) Pharmaceutical companies.

2 (9) Other professions and groups determined

3 appropriate by the Secretary.

4 (c) DUTIES.—The ADR Advisory Board shall—

5 (1) examine various dispute resolution systems

6 and provide advice and assistance to States regard7 ing the establishment of such systems;

8 (2) not later than 1 year after the appointment

9 of its members, submit to the Secretary—

10 (A) a model alternative dispute resolution

11 system that may be used by a State for pur12 poses of this title, and

13 (B) a model alternative Federal system

14 that may be used by the Secretary; and

15 (3) review the applications of States for certifi16 cation of State alternative dispute resolution systems

17 and make recommendations to the Secretary regard18 ing whether the systems should be certified under

19 section 6004.

20 SEC. 6004. CERTIFICATION OF STATE SYSTEMS; APPLICA21 BILITY OF ALTERNATIVE FEDERAL SYSTEM.

22 (a) CERTIFICATION.—

23 (1) APPLICATION BY STATE.—Each State shall

24 submit an application to the ADR Advisory Board

25 describing its alternative dispute resolution system
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1 and containing such information as the ADR Advi2 sory Board may require to make a recommendation

3 regarding whether the system meets the require4 ments of this title.

5 (2) BASIS FOR CERTIFICATION.—Not later than

6 October 1 of each year (beginning with 1995), the

7 Secretary, taking into consideration the rec8 ommendations of the ADR Advisory Board, shall

9 certify a State’s alternative dispute resolution sys10 tem under this subsection for the following calendar

11 year if the Secretary determines that the system

12 meets the requirements of section 6002.

13 (b) APPLICABILITY OF ALTERNATIVE FEDERAL SYS14 TEM.—

15 (1) ESTABLISHMENT AND APPLICABILITY.—

16 Not later than October 1, 1995, the Secretary, tak17 ing into consideration the model alternative Federal

18 system submitted by the ADR Advisory Board under

19 section 6003(c)(2)(B), shall establish by rule an al20 ternative Federal ADR system for the resolution of

21 medical malpractice liability claims during a cal22 endar year in States that do not have in effect an

23 alternative dispute resolution system certified under

24 subsection (a) for the year.
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1 (2) REQUIREMENTS FOR SYSTEM.—Under the

2 alternative Federal ADR system established under

3 paragraph (1)—

4 (A) paragraphs (1), (2), (6), and (7) of

5 section 6002(a) shall apply to claims brought

6 under the system;

7 (B) if the system provides for the resolu8 tion of claims through arbitration, the claims

9 brought under the system shall be heard and

10 resolved by arbitrators appointed by the Sec11 retary in consultation with the Attorney Gen12 eral; and

13 (C) with respect to a State in which the

14 system is in effect, the Secretary may (at the

15 State’s request) modify the system to take into

16 account the existence of dispute resolution pro17 cedures in the State that affect the resolution

18 of medical malpractice liability claims.

19 (3) TREATMENT OF STATES WITH ALTER20 NATIVE SYSTEM IN EFFECT.—If the alternative Fed21 eral ADR system established under this subsection is

22 applied with respect to a State for a calendar year,

23 the State shall make a payment to the United States

24 (at such time and in such manner as the Secretary

25 may require) in an amount equal to 110 percent of
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1 the costs incurred by the United States during the

2 year as a result of the application of the system with

3 respect to the State.

4 SEC. 6005. REPORTS ON IMPLEMENTATION AND EFFEC5 TIVENESS OF ALTERNATIVE DISPUTE RESO6 LUTION SYSTEMS.

7 (a) IN GENERAL.—Not later than 5 years after the

8 date of the enactment of this Act, the Secretary shall pre9 pare and submit to the Congress a report describing and

10 evaluating State alternative dispute resolution systems op11 erated pursuant to this title and the alternative Federal

12 system established under section 6004(b).

13 (b) CONTENTS OF REPORT.—The Secretary shall in14 clude in the report prepared and submitted under sub15 section (a)—

16 (1) information on—

17 (A) the effect of the alternative dispute

18 resolution systems on the cost of health care

19 within each State,

20 (B) the impact of such systems on the ac21 cess of individuals to health care within the

22 State, and

23 (C) the effect of such systems on the qual24 ity of health care provided within the State; and
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1 (2) to the extent that such report does not pro2 vide information on no-fault systems operated by

3 States as alternative dispute resolution systems pur4 suant to this part, an analysis of the feasibility and

5 desirability of establishing a system under which

6 medical malpractice liability claims shall be resolved

7 on a no-fault basis.

8 SEC. 6006. OPTIONAL APPLICATION OF PRACTICE GUIDE9 LINES.

10 (a) DEVELOPMENT AND CERTIFICATION OF GUIDE11 LINES.—Each State may develop, for certification by the

12 Secretary if the Secretary determines appropriate, a set

13 of specialty clinical practice guidelines.

14 (b) PROVISION OF HEALTH CARE UNDER GUIDE15 LINES.—Notwithstanding any other provision of law, in

16 any medical malpractice liability action arising from the

17 conduct of a health care provider or health care profes18 sional, if such conduct was in accordance with a guideline

19 developed by the State in which the conduct occurred and

20 certified by the Secretary under subsection (a), the guide21 line—

22 (1) may be introduced by any party to the ac23 tion (including a health care provider, health care

24 professional, or patient); and
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1 (2) if introduced, shall establish a rebuttable

2 presumption that the conduct was in accordance

3 with the appropriate standard of medical care, which

4 may only be overcome by the presentation of clear

5 and convincing evidence on behalf of the party

6 against whom the presumption operates.

7 (c) RESTRICTION ON PARAMETERS CONSIDERED AP8 PROPRIATE.—

9 (1) PARAMETERS SANCTIONED BY SEC10 RETARY.—For purposes of subsection (a), a spe11 cialty clinical practice guideline may not be consid12 ered appropriate with respect to actions brought

13 during a year unless the Secretary has sanctioned

14 the use of the guideline for purposes of an affirma15 tive defense to medical malpractice liability actions

16 brought during the year in accordance with para17 graph (2).

18 (2) PROCESS FOR SANCTIONING PARAM19 ETERS.—Not less frequently than October 1 of each

20 year (beginning with 1996), the Secretary shall re21 view the practice guidelines and standards submitted

22 by the State under subsection (a), and shall sanction

23 those guidelines which the Secretary considers ap24 propriate for purposes of an affirmative defense to

25 medical malpractice liability actions brought during
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1 the next calendar year as appropriate practice pa2 rameters for purposes of subsection (a).

3 (d) PROHIBITING APPLICATION OF FAILURE TO FOL4 LOW PARAMETERS AS PRIMA FACIE EVIDENCE OF NEG5 LIGENCE.—No plaintiff in a medical malpractice liability

6 action may be deemed to have presented prima facie evi7 dence that a defendant was negligent solely by showing

8 that the defendant failed to follow the appropriate practice

9 guidelines.

10 TITLE VII—HEALTH PROMOTION

11 AND DISEASE PREVENTION

12 SEC. 7001. DISEASE PREVENTION AND HEALTH PRO13 MOTION PROGRAMS TREATED AS MEDICAL

14 CARE.

15 (a) IN GENERAL.—For purposes of section 213(d)(1)

16 of the Internal Revenue Code of 1986 (defining medical

17 care), qualified expenditures (as defined by the Secretary

18 of Health and Human Services) for disease prevention and

19 health promotion programs shall be considered amounts

20 paid for medical care.

21 (b) EFFECTIVE DATE.—Subsection (a) shall apply to

22 amounts paid in taxable years beginning after December

23 31, 1995.
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1 SEC. 7002. WORKSITE WELLNESS GRANT PROGRAM.

2 (a) GRANTS.—The Secretary of Health and Human

3 Services (hereafter referred to in this title as the ‘‘Sec4 retary’’) shall award grants to States (through State

5 health departments or other State agencies working in

6 consultation with the State health agency) to enable such

7 States to provide assistance to businesses with not to ex8 ceed 100 employees for the establishment and operation

9 of worksite wellness programs for their employees.

10 (b) APPLICATION.—To be eligible for a grant under

11 subsection (a), a State shall prepare and submit to the

12 Secretary an application at such time, in such manner,

13 and containing such information as the Secretary may re14 quire, including—

15 (1) a description of the manner in which the

16 State intends to use amounts received under the

17 grant; and

18 (2) assurances that the State will only use

19 amounts provided under such grant to provide as20 sistance to businesses that can demonstrate that

21 they are in compliance with minimum program char22 acteristics (relative to scope and regularity of serv23 ices offered) that are developed by the Secretary in

24 consultation with experts in public health and rep25 resentatives of small business.
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1 Grants shall be distributed to States based on the popu2 lation of individuals employed by small businesses.

3 (c) PROGRAM CHARACTERISTICS.—In developing

4 minimum program characteristics under subsection (b)(2),

5 the Secretary shall ensure that all activities established or

6 enhanced under a grant under this section have clearly

7 defined goals and objectives and demonstrate how receipt

8 of such assistance will help to achieve established State

9 or local health objectives based on the National Health

10 Promotion and Disease Prevention Objectives.

11 (d) USE OF FUNDS.—Amounts received under a

12 grant awarded under subsection (a) shall be used by a

13 State to provide grants to businesses (as described in sub14 section (a)), nonprofit organizations, or public authorities,

15 or to operate State-run worksite wellness programs.

16 (e) SPECIAL EMPHASIS.—In funding business work17 site wellness projects under this section, a State shall give

18 special emphasis to—

19 (1) the development of joint wellness programs

20 between employers;

21 (2) the development of employee assistance pro22 grams dealing with substance abuse;

23 (3) maximizing the use and coordination with

24 existing community resources such as nonprofit

25 health organizations; and
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1 (4) encourage participation of dependents of

2 employees and retirees in wellness programs.

3 (f) AUTHORIZATION OF APPROPRIATIONS.—There

4 are authorized to be appropriated to carry out this section,

5 such sums as may be necessary in each of the fiscal years

6 1995 through 1999.

7 SEC. 7003. EXPANDING AND IMPROVING SCHOOL HEALTH

8 EDUCATION.

9 (a) AUTHORIZATION OF APPROPRIATIONS.—There

10 are authorized to be appropriated to carry out subsection

11 (b), such sums as may be necessary for each of the fiscal

12 years 1995 through 1999.

13 (b) GENERAL USE OF FUNDS.—The Secretary shall

14 use amounts appropriated under subsection (a) to expand

15 comprehensive school health education programs adminis16 tered by the Centers for Disease Control and Prevention

17 under sections 301 and 311 of the Public Health Service

18 Act (42 U.S.C. 241 and 243).

19 (c) SPECIFIC USE OF FUNDS.—In meeting the re20 quirement of subsection (b), the Secretary shall expand

21 the number of children receiving planned, sequential kin22 dergarten through 12th grade comprehensive school edu23 cation as a component of comprehensive programs of

24 school health, including—
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1 (1) physical education programs that promote

2 lifelong physical activity;

3 (2) healthy school food service selections;

4 (3) programs that promote a healthy and safe

5 school environment;

6 (4) schoolsite health promotion for faculty and

7 staff;

8 (5) integrated school and community health

9 promotion efforts; and

10 (6) school nursing disease prevention and

11 health promotion services.

12 (d) COORDINATION OF EXISTING PROGRAMS.—The

13 Secretary of Health and Human Services, the Secretary

14 of Education and the Secretary of Agriculture shall work

15 cooperatively to coordinate existing school health edu16 cation programs within their Departments in a manner

17 that maximized the efficiency and effectiveness of Federal

18 expenditures in this area.

19 TITLE VIII—TAX INCENTIVES

20 FOR LONG-TERM CARE

21 SEC. 8001. SHORT TITLE.

22 This title may be cited as the ‘‘Private Long-Term

23 Care Family Protection Act of 1995’’.
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1 SEC. 8002. AMENDMENT OF 1986 CODE.

2 Except as otherwise expressly provided, whenever in

3 this title an amendment or repeal is expressed in terms

4 of an amendment to, or repeal of, a section or other provi5 sion, the reference shall be considered to be made to a

6 section or other provision of the Internal Revenue Code

7 of 1986.

8 Subtitle A—Tax Treatment of Long9 Term Care Insurance

10 SEC. 8101. QUALIFIED LONG-TERM CARE SERVICES TREAT11 ED AS MEDICAL CARE.

12 (a) GENERAL RULE.—Paragraph (1) of section

13 213(d) (defining medical care) is amended by striking

14 ‘‘or’’ at the end of subparagraph (B), by striking subpara15 graph (C), and by inserting after subparagraph (B) the

16 following new subparagraphs:

17 ‘‘(C) for qualified long-term care services

18 (as defined in subsection (f)),

19 ‘‘(D) for insurance covering medical care

20 referred to in—

21 ‘‘(i) subparagraphs (A) and (B), or

22 ‘‘(ii) subparagraph (C), but only if

23 such insurance is provided under a quali24 fied long-term care insurance policy (as de25 fined in section 7702B(b)) and the deduc26 tion under this section for amounts paid
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1 for such insurance is not disallowed under

2 section 7702B(d)(4), or

3 ‘‘(E) for premiums under part B of title

4 XVIII of the Social Security Act, relating to

5 supplementary medical insurance for the

6 aged.’’.

7 (b) QUALIFIED LONG-TERM CARE SERVICES DE8 FINED.—Section 213 (relating to the deduction for medi9 cal, dental, etc., expenses) is amended by adding at the

10 end the following new subsection:

11 ‘‘(f) QUALIFIED LONG-TERM CARE SERVICES.—For

12 purposes of this section—

13 ‘‘(1) IN GENERAL.—The term ‘qualified long14 term care services’ means necessary diagnostic, cur15 ing, mitigating, treating, preventive, therapeutic, and

16 rehabilitative services, and maintenance and per17 sonal care services (whether performed in a residen18 tial or nonresidential setting), which—

19 ‘‘(A) are required by an individual during

20 any period the individual is an incapacitated in21 dividual (as defined in paragraph (2)),

22 ‘‘(B) have as their primary purpose—

23 ‘‘(i) the provision of needed assistance

24 with 1 or more activities of daily living (as

25 defined in paragraph (3)), or
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1 ‘‘(ii) protection from threats to health

2 and safety due to severe cognitive impair3 ment, and

4 ‘‘(C) are provided pursuant to a continuing

5 plan of care prescribed by a licensed profes6 sional (as defined in paragraph (4)).

7 ‘‘(2) INCAPACITATED INDIVIDUAL.—The term

8 ‘incapacitated individual’ means any individual who

9 has been certified by a licensed professional as—

10 ‘‘(A) being unable to perform, without sub11 stantial assistance from another individual, at

12 least 2 activities of daily living (as defined in

13 paragraph (3)),

14 ‘‘(B) having moderate cognitive impair15 ment as defined by the Secretary in consulta16 tion with the Secretary of Health and Human

17 Services, or

18 ‘‘(C) having a level of disability similar (as

19 determined by the Secretary in consultation

20 with the Secretary of Health and Human Serv21 ices) to the level of disability described in sub22 paragraph (A).

23 ‘‘(3) ACTIVITIES OF DAILY LIVING.—

24 ‘‘(A) IN GENERAL.—Each of the following

25 is an activity of daily living:
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1 ‘‘(i) Eating.

2 ‘‘(ii) Toileting.

3 ‘‘(iii) Transferring.

4 ‘‘(iv) Bathing.

5 ‘‘(v) Dressing.

6 ‘‘(vi) Continence.

7 ‘‘(B) DEFINITIONS.—For purposes of this

8 paragraph:

9 ‘‘(i) EATING.—The term ‘eating’

10 means the process of getting food from a

11 plate or its equivalent into the mouth.

12 ‘‘(ii) TOILETING.—The term

13 ‘toileting’ means the act of going to the

14 toilet room for bowel and bladder function,

15 transferring on and off of the toilet, clean16 ing oneself after elimination, and arrang17 ing clothes.

18 ‘‘(iii) TRANSFERRING.—The term

19 ‘transferring’ means the process of getting

20 in and out of bed or in and out of a chair

21 or wheelchair.

22 ‘‘(iv) BATHING.—The term ‘bathing’

23 means the overall complex behavior of

24 using water for cleansing the whole body,

25 including cleansing as part of a bath,
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1 shower, or sponge bath, getting to, in, and

2 out of a tub or shower, and washing and

3 drying oneself.

4 ‘‘(v) DRESSING.—The term ‘dressing’

5 means the overall complex behavior of get6 ting clothes from closets and drawers and

7 then getting dressed.

8 ‘‘(vi) CONTINENCE.—The term ‘con9 tinence’ means the ability to voluntarily

10 control bowel and bladder function and to

11 maintain a reasonable level of personal hy12 giene.

13 ‘‘(4) LICENSED PROFESSIONAL.—

14 ‘‘(A) IN GENERAL.—The term ‘licensed

15 professional’ means—

16 ‘‘(i) a physician or registered profes17 sional nurse,

18 ‘‘(ii) a qualified community care case

19 manager (as defined in subparagraph (B)),

20 or

21 ‘‘(iii) any other individual who meets

22 such requirements as may be prescribed by

23 the Secretary after consultation with the

24 Secretary of Health and Human Services.
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1 ‘‘(B) QUALIFIED COMMUNITY CARE CASE

2 MANAGER.—The term ‘qualified community

3 care case manager’ means an individual or en4 tity which—

5 ‘‘(i) has experience or has been

6 trained in providing case management

7 services and in preparing individual care

8 plans,

9 ‘‘(ii) has experience in assessing indi10 viduals to determine their functional and

11 cognitive impairment, and

12 ‘‘(iii) meets such requirements as may

13 be prescribed by the Secretary after con14 sultation with the Secretary of Health and

15 Human Services.

16 ‘‘(5) CERTAIN SERVICES NOT INCLUDED.—The

17 term ‘qualified long-term care services’ shall not in18 clude any services provided to an individual—

19 ‘‘(A) by a relative (directly or through a

20 partnership, corporation, or other entity) unless

21 the relative is a licensed professional with re22 spect to such services, or

23 ‘‘(B) by a corporation or partnership which

24 is related (within the meaning of section 267(b)

25 or 707(b)) to the individual.
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1 For purposes of this paragraph, the term ‘relative’

2 means an individual bearing a relationship to the in3 dividual which is described in paragraphs (1)

4 through (8) of section 152(a).’’.

5 (c) TECHNICAL AMENDMENTS.—Paragraph (6) of

6 section 213(d) is amended—

7 (1) by striking ‘‘subparagraphs (A) and (B)’’

8 and inserting ‘‘subparagraphs (A), (B), and (C)’’,

9 and

10 (2) by striking ‘‘paragraph (1)(C) applies’’ in

11 subparagraph (A) and inserting ‘‘subparagraphs (C)

12 and (D) of paragraph (1) apply’’.

13 SEC. 8102. TREATMENT OF LONG-TERM CARE INSURANCE.

14 (a) GENERAL RULE.—Chapter 79 (relating to defini15 tions) is amended by inserting after section 7702A the fol16 lowing new section:

17 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR18 ANCE.

19 ‘‘(a) IN GENERAL.—For purposes of this subtitle—

20 ‘‘(1) a qualified long-term care insurance policy

21 (as defined in subsection (b)) shall be treated as an

22 accident and health insurance contract,

23 ‘‘(2) any plan of an employer providing cov24 erage under a qualified long-term care insurance pol-
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1 icy shall be treated as an accident and health plan

2 with respect to such coverage,

3 ‘‘(3) amounts (other than policyholder dividends

4 (as defined in section 808) or premium refunds) re5 ceived under a qualified long-term care insurance

6 policy (including nonreimbursement payments de7 scribed in subsection (b)(6)) shall be treated—

8 ‘‘(A) as amounts received for personal in9 juries and sickness, and

10 ‘‘(B) as amounts received for the perma11 nent loss of a function of the body and as

12 amounts computed with reference to the nature

13 of injury under section 105(c) to the extent

14 that such amounts do not exceed the dollar

15 amount in effect under subsection (f) for the

16 taxable year,

17 ‘‘(4) amounts paid for a qualified long-term

18 care insurance policy described in subsection (b)(11)

19 shall be treated as payments made for insurance for

20 purposes of section 213(d)(1)(D), and

21 ‘‘(5) a qualified long-term care insurance policy

22 shall be treated as a guaranteed renewable contract

23 subject to the rules of section 816(e).

24 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE POL25 ICY.—For purposes of this title—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified long2 term care insurance policy’ means any long-term

3 care insurance policy (as defined in paragraph (10))

4 that—

5 ‘‘(A) limits benefits under such policy to

6 incapacitated individuals (as defined in section

7 213(f)(2)), and

8 ‘‘(B) satisfies the requirements of para9 graphs (2) through (9).

10 ‘‘(2) PREMIUM REQUIREMENTS.—The require11 ments of this paragraph are met with respect to a

12 long-term care insurance policy if such policy pro13 vides that premium payments may not be made ear14 lier than the date such payments would have been

15 made if the policy provided for level annual pay16 ments over the life expectancy of the insured or 20

17 years, whichever is shorter. A policy shall not be

18 treated as failing to meet the requirements of the

19 preceding sentence solely by reason of a provision in

20 the policy providing for a waiver of premiums if the

21 insured becomes an incapacitated individual (as de22 fined in section 213(f)(2)).

23 ‘‘(3) PROHIBITION OF CASH VALUE.—The re24 quirements of this paragraph are met with respect

25 to a long-term care insurance policy if such policy
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1 does not provide for a cash value or other money

2 that can be paid, assigned, pledged as collateral for

3 a loan, or borrowed, other than as provided in para4 graph (4).

5 ‘‘(4) REFUNDS OF PREMIUMS AND DIVI6 DENDS.—The requirements of this paragraph are

7 met with respect to a long-term care insurance pol8 icy if such policy provides that—

9 ‘‘(A) policyholder dividends are required to

10 be applied as a reduction in future premiums or

11 to increase benefits described in subsection

12 (a)(2),

13 ‘‘(B) refunds of premiums upon a partial

14 surrender or a partial cancellation are required

15 to be applied as a reduction in future pre16 miums, and

17 ‘‘(C) any refund on the death of the in18 sured, or on a complete surrender or cancella19 tion of the policy, cannot exceed the aggregate

20 premiums paid under the policy.

21 Any refund on a complete surrender or cancellation

22 of the policy shall be includable in gross income to

23 the extent that any deduction or exclusion was allow24 able with respect to the premiums.
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1 ‘‘(5) COORDINATION WITH OTHER ENTITLE2 MENTS.—The requirements of this paragraph are

3 met with respect to a long-term care insurance pol4 icy if such policy does not cover expenses incurred

5 to the extent that such expenses are also covered

6 under title XVIII of the Social Security Act. For

7 purposes of this paragraph, a long-term care insur8 ance policy which coordinates expenses incurred

9 under such policy with expenses incurred under title

10 XVIII of such Act shall not be considered to dupli11 cate such expenses.

12 ‘‘(6) REQUIREMENTS OF MODEL REGULATION

13 AND ACT.—

14 ‘‘(A) IN GENERAL.—The requirements of

15 this paragraph are met with respect to a long16 term care insurance policy if such policy

17 meets—

18 ‘‘(i) MODEL REGULATION.—The fol19 lowing requirements of the model regula20 tion:

21 ‘‘(I) Section 7A (relating to guar22 anteed renewal or noncancellability),

23 and the requirements of section 6B of

24 the model Act relating to such section

25 7A.
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1 ‘‘(II) Section 7B (relating to pro2 hibitions on limitations and exclu3 sions).

4 ‘‘(III) Section 7C (relating to ex5 tension of benefits).

6 ‘‘(IV) Section 7D (relating to

7 continuation or conversion of cov8 erage).

9 ‘‘(V) Section 7E (relating to dis10 continuance and replacement of poli11 cies).

12 ‘‘(VI) Section 8 (relating to unin13 tentional lapse).

14 ‘‘(VII) Section 9 (relating to dis15 closure), other than section 9F there16 of.

17 ‘‘(VIII) Section 10 (relating to

18 prohibitions against post-claims un19 derwriting).

20 ‘‘(IX) Section 11 (relating to

21 minimum standards).

22 ‘‘(X) Section 12 (relating to re23 quirement to offer inflation protec24 tion), except that any requirement for

25 a signature on a rejection of inflation
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1 protection shall permit the signature

2 to be on an application or on a sepa3 rate form.

4 ‘‘(XI) Section 23 (relating to pro5 hibition against preexisting conditions

6 and probationary periods in replace7 ment policies or certificates).

8 ‘‘(ii) MODEL ACT.—The following re9 quirements of the model Act:

10 ‘‘(I) Section 6C (relating to pre11 existing conditions).

12 ‘‘(II) Section 6D (relating to

13 prior hospitalization).

14 ‘‘(B) DEFINITIONS.—For purposes of this

15 paragraph—

16 ‘‘(i) MODEL PROVISIONS.—The terms

17 ‘model regulation’ and ‘model Act’ mean

18 the long-term care insurance model regula19 tion, and the long-term care insurance

20 model Act, respectively, promulgated by

21 the National Association of Insurance

22 Commissioners (as adopted in January of

23 1993).

24 ‘‘(ii) COORDINATION.—Any provision

25 of the model regulation or model Act listed
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1 under clause (i) or (ii) of subparagraph

2 (A) shall be treated as including any other

3 provision of such regulation or Act nec4 essary to implement the provision.

5 ‘‘(7) TAX DISCLOSURE REQUIREMENT.—The re6 quirement of this paragraph is met with respect to

7 a long-term care insurance policy if such policy

8 meets the requirements of section 4980C(d)(1).

9 ‘‘(8) NONFORFEITURE REQUIREMENTS.—

10 ‘‘(A) IN GENERAL.—The requirements of

11 this paragraph are met with respect to a long12 term care insurance policy, if the issuer of such

13 policy offers to the policyholder, including any

14 group policyholder, a nonforfeiture provision

15 meeting the requirements specified in subpara16 graph (B).

17 ‘‘(B) REQUIREMENTS OF PROVISION.—The

18 requirements specified in this subparagraph are

19 as follows:

20 ‘‘(i) The nonforfeiture provision shall

21 be appropriately captioned.

22 ‘‘(ii) The nonforfeiture provision shall

23 provide for a benefit available in the event

24 of a default in the payment of any pre25 miums and the amount of the benefit may
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1 be adjusted subsequent to being initially

2 granted only as necessary to reflect

3 changes in claims, persistency, and interest

4 as reflected in changes in rates for pre5 mium paying policies approved by the Sec6 retary for the same policy form.

7 ‘‘(iii) The nonforfeiture provision shall

8 provide at least 1 of the following:

9 ‘‘(I) Reduced paid-up insurance.

10 ‘‘(II) Extended term insurance.

11 ‘‘(III) Shortened benefit period.

12 ‘‘(IV) Other similar offerings ap13 proved by the Secretary.

14 ‘‘(9) RATE STABILIZATION.—

15 ‘‘(A) IN GENERAL.—The requirements of

16 this paragraph are met with respect to a long17 term care insurance policy, including any group

18 master policy, if—

19 ‘‘(i) such policy contains the minimum

20 rate guarantees specified in subparagraph

21 (B), and

22 ‘‘(ii) the issuer of such policy meets

23 the requirements specified in subparagraph

24 (C).
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1 ‘‘(B) MINIMUM RATE GUARANTEES.—The

2 minimum rate guarantees specified in this sub3 paragraph are as follows:

4 ‘‘(i) Rates under the policy shall be

5 guaranteed for a period of at least 3 years

6 from the date of issue of the policy.

7 ‘‘(ii) After the expiration of the 3-year

8 period required under clause (i), any rate

9 increase shall be guaranteed for a period of

10 at least 2 years from the effective date of

11 such rate increase.

12 ‘‘(iii) In the case of any individual age

13 75 or older who has maintained coverage

14 under a long-term care insurance policy for

15 10 years, rate increases under such policy

16 shall not exceed 10 percent in any 12-

17 month period.

18 ‘‘(C) INCREASES IN PREMIUMS.—The re19 quirements specified in this subparagraph are

20 as follows:

21 ‘‘(i) IN GENERAL.—If an issuer of a

22 long-term care insurance policy, including

23 any group master policy, plans to increase

24 the premium rates for a policy, such issuer

25 shall, at least 90 days before the effective
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1 date of the rate increase, offer to each in2 dividual policyholder under such policy the

3 option to remain insured under the policy

4 at a reduced level of benefits that main5 tains the premium rate at the rate in effect

6 on the day before the effective date of the

7 rate increase.

8 ‘‘(ii) INCREASES OF MORE THAN 50

9 PERCENT.—If an issuer of a long-term

10 care insurance policy, including any group

11 master policy, increases premium rates for

12 a policy by more than 50 percent in any 3-

13 year period—

14 ‘‘(I) in the case of an individual

15 long-term care insurance policy, the

16 issuer shall discontinue issuing all in17 dividual long-term care policies in any

18 State in which the issuer issues such

19 policy for a period of 2 years from the

20 effective date of such premium in21 crease, and

22 ‘‘(II) in the case of a group mas23 ter long-term care insurance policy,

24 the issuer shall discontinue issuing all

25 group master long-term care insur-
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1 ance policies in any State in which the

2 issuer issues such policy for a period

3 of 2 years from the effective date of

4 such premium increase.

5 This clause shall apply to any issuer of

6 long-term care insurance policies or any

7 other person that purchases or otherwise

8 acquires any long-term care insurance poli9 cies from another issuer or person.

10 ‘‘(D) MODIFICATIONS OR WAIVERS OF RE11 QUIREMENTS.—The Secretary may modify or

12 waive any of the requirements under this para13 graph if—

14 ‘‘(i) such requirements will adversely

15 affect an issuer’s solvency,

16 ‘‘(ii) such modification or waiver is re17 quired for the issuer to meet other State or

18 Federal requirements,

19 ‘‘(iii) medical developments, new dis20 abling diseases, changes in long-term care

21 delivery, or a new method of financing

22 long-term care will result in changes to

23 mortality and morbidity patterns or as24 sumptions,
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1 ‘‘(iv) judicial interpretation of a pol2 icy’s benefit features results in unintended

3 claim liabilities, or

4 ‘‘(v) in the case of a purchase or other

5 acquisition of long-term care insurance

6 policies of an issuer or other person, the

7 continued sale of other long-term care in8 surance policies by the purchasing issuer

9 or person is in the best interests of individ10 ual consumers.

11 ‘‘(10) LONG-TERM CARE INSURANCE POLICY

12 DEFINED.—

13 ‘‘(A) IN GENERAL.—For purposes of this

14 section, the term ‘long-term care insurance pol15 icy’ means any product which is advertised,

16 marketed, or offered as long-term care insur17 ance (as defined in subparagraph (B)).

18 ‘‘(B) LONG-TERM CARE INSURANCE.—

19 ‘‘(i) IN GENERAL.—The term ‘long20 term care insurance’ means any insurance

21 policy or rider—

22 ‘‘(I) advertised, marketed, of23 fered, or designed to provide coverage

24 for not less than 12 consecutive

25 months for each covered person on an
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1 expense incurred, indemnity, prepaid

2 or other basis for 1 or more necessary

3 or medically necessary diagnostic, pre4 ventive, therapeutic, rehabilitative,

5 maintenance, or personal care services

6 provided in a setting other than an

7 acute care unit of a hospital, and

8 ‘‘(II) issued by insurers, fraternal

9 benefit societies, nonprofit health, hos10 pital, and medical service corpora11 tions, prepaid health plans, health

12 maintenance organizations or any

13 similar organization to the extent such

14 organizations are otherwise authorized

15 to issue life or health insurance.

16 Such term includes group and individual

17 annuities and life insurance policies or rid18 ers which provide directly or which supple19 ment long-term care insurance and in20 cludes a policy or rider which provides for

21 payment of benefits based on cognitive im22 pairment or the loss of functional capacity.

23 ‘‘(ii) EXCLUSIONS.—The term ‘long24 term care insurance’ shall not include—
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1 ‘‘(I) any insurance policy which

2 is offered primarily to provide basic

3 coverage to supplement coverage

4 under the medicare program under

5 title XVIII of the Social Security Act,

6 basic hospital expense coverage, basic

7 medical-surgical expense coverage,

8 hospital confinement coverage, major

9 medical expense coverage, disability

10 income or related asset-protection cov11 erage, accident only coverage, speci12 fied disease or specified accident cov13 erage, or limited benefit health cov14 erage, or

15 ‘‘(II) life insurance policies—

16 ‘‘(aa) which accelerate the

17 death benefit specifically for 1 or

18 more of the qualifying events of

19 terminal illness or medical condi20 tions requiring extraordinary

21 medical intervention or perma22 nent institutional confinement,

23 ‘‘(bb) which provide the op24 tion of a lump-sum payment for

25 such benefits, and
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1 ‘‘(cc) under which neither

2 such benefits nor the eligibility

3 for the benefits is conditioned

4 upon the receipt of long-term

5 care.

6 ‘‘(11) NONREIMBURSEMENT PAYMENTS PER7 MITTED.—For purposes of subsection (a)(4), a pol8 icy is described in this paragraph if, under the pol9 icy, payments are made to (or on behalf of) an in10 sured individual on a per diem or other periodic

11 basis without regard to the expenses incurred or

12 services rendered during the period to which the

13 payments relate.

14 ‘‘(c) TREATMENT OF LONG-TERM CARE INSURANCE

15 POLICIES.—For purposes of this title, any amount re16 ceived or coverage provided under a long-term care insur17 ance policy that is not a qualified long-term care insurance

18 policy shall not be treated as an amount received for per19 sonal injuries or sickness or provided under an accident

20 and health plan and shall not be treated as excludable

21 from gross income under any provision of this title.

22 ‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART

23 OF A LIFE INSURANCE CONTRACT.—Except as otherwise

24 provided in regulations, in the case of any long-term care
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1 insurance coverage provided by rider on a life insurance

2 contract, the following rules shall apply:

3 ‘‘(1) IN GENERAL.—This section shall apply as

4 if the portion of the contract providing such cov5 erage is a separate contract or policy.

6 ‘‘(2) PREMIUMS AND CHARGES FOR LONG-TERM

7 CARE COVERAGE.—Premium payments for long-term

8 care insurance policy coverage and charges against

9 the life insurance contract’s cash surrender value

10 (within the meaning of section 7702(f)(2)(A)) for

11 such coverage, shall be treated as premiums for pur12 poses of subsection (b)(2).

13 ‘‘(3) APPLICATION OF SECTION 7702.—Section

14 7702(c)(2) (relating to the guideline premium limi15 tation) shall be applied by increasing, as of any date,

16 the guideline premium limitation with respect to a

17 life insurance contract by an amount equal to—

18 ‘‘(A) the sum of any charges (but not pre19 mium payments) described in paragraph (2)

20 made to that date under the contract, reduced

21 by

22 ‘‘(B) any such charges the imposition of

23 which reduces the premiums paid for the con24 tract (within the meaning of section

25 7702(f)(1)).
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1 ‘‘(4) APPLICATION OF SECTION 213.—No deduc2 tion shall be allowed under section 213(a) for

3 charges against the life insurance contract’s cash

4 surrender value described in paragraph (2), unless

5 such charges are includable in income as a result of

6 the application of section 72(e)(10) and the coverage

7 provided by the rider is a qualified long-term care

8 insurance policy under subsection (b).

9 For purposes of this subsection, the term ‘portion’ means

10 only the terms and benefits under a life insurance contract

11 that are in addition to the terms and benefits under the

12 contract without regard to the coverage under a qualified

13 long-term care insurance policy.

14 ‘‘(e) EMPLOYER PLANS NOT TREATED AS DE15 FERRED COMPENSATION PLANS.—For purposes of this

16 title, a plan of an employer providing coverage under a

17 qualified long-term care insurance policy shall not be

18 treated as a plan which provides for deferred compensa19 tion by reason of providing such coverage.

20 ‘‘(f) DOLLAR AMOUNT FOR PURPOSES OF GROSS IN21 COME EXCLUSION.—

22 ‘‘(1) DOLLAR AMOUNT.—

23 ‘‘(A) IN GENERAL.—The dollar amount in

24 effect under this subsection shall be $200 per

25 day.
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1 ‘‘(B) INFLATION ADJUSTMENTS.—In the

2 case of any taxable year beginning in a calendar

3 year after 1996, the dollar amount contained in

4 subparagraph (A) shall be increased by an

5 amount equal to—

6 ‘‘(i) such dollar amount, multiplied by

7 ‘‘(ii) the cost-of-living adjustment de8 termined under section 1(f)(3) for the cal9 endar year in which the taxable year be10 gins, by substituting ‘calendar year 1995’

11 for ‘calendar year 1992’ in subparagraph

12 (B) thereof.

13 ‘‘(2) AGGREGATION RULE.—For purposes of

14 this subsection, all policies issued with respect to the

15 same taxpayer shall be treated as 1 policy.

16 ‘‘(g) REGULATIONS.—The Secretary shall prescribe

17 such regulations as may be necessary to carry out the re18 quirements of this section, including regulations to prevent

19 the avoidance of this section by providing long-term care

20 insurance coverage under a life insurance contract and to

21 provide for the proper allocation of amounts between the

22 long-term care and life insurance portions of a contract.’’.

23 (b) CLERICAL AMENDMENT.—The table of sections

24 for chapter 79 is amended by inserting after the item re25 lating to section 7702A the following new item:

‘‘Sec. 7702B. Treatment of long-term care insurance.’’.
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1 (c) EFFECTIVE DATE.—

2 (1) IN GENERAL.—The amendments made by

3 this section shall apply to policies issued after De4 cember 31, 1995. Solely for purposes of the preced5 ing sentence, a policy issued prior to January 1,

6 1996, that satisfies the requirements of a qualified

7 long-term care insurance policy as set forth in sec8 tion 7702B(b) of the Internal Revenue Code of 1986

9 (as added by this section) shall, on and after Janu10 ary 1, 1996, be treated as having been issued after

11 December 31, 1995.

12 (2) TRANSITION RULE.—If, after the date of

13 enactment of this Act and before January 1, 1996,

14 a policy providing for long-term care insurance cov15 erage is exchanged solely for a qualified long-term

16 care insurance policy (as defined in such section

17 7702B(b)), no gain or loss shall be recognized on

18 the exchange. If, in addition to a qualified long-term

19 care insurance policy, money or other property is re20 ceived in the exchange, then any gain shall be recog21 nized to the extent of the sum of the money and the

22 fair market value of the other property received. For

23 purposes of this paragraph, the cancellation of a pol24 icy providing for long-term care insurance coverage

25 and reinvestment of the cancellation proceeds in a
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1 qualified long-term care insurance policy within 60

2 days thereafter shall be treated as an exchange.

3 (3) ISSUANCE OF CERTAIN RIDERS PER4 MITTED.—For purposes of determining whether sec5 tion 7702 or 7702A of the Internal Revenue Code

6 of 1986 applies to any contract, the issuance, wheth7 er before, on, or after December 31, 1995, of a rider

8 on a life insurance contract providing long-term care

9 insurance coverage shall not be treated as a modi10 fication or material change of such contract.

11 SEC. 8103. TREATMENT OF QUALIFIED LONG-TERM CARE

12 PLANS.

13 (a) EXCLUSION FROM COBRA CONTINUATION RE14 QUIREMENTS.—Subparagraph (A) of section 4980B(f)(2)

15 (defining continuation coverage) is amended by adding at

16 the end the following new sentence: ‘‘The coverage shall

17 not include coverage for qualified long-term care services

18 (as defined in section 213(f)).’’.

19 (b) BENEFITS INCLUDED IN CAFETERIA PLANS.—

20 Section 125(f) (defining qualified benefits) is amended by

21 adding at the end the following new sentence: ‘‘Such term

22 includes coverage under a qualified long-term care insur23 ance policy (as defined in section 7702B(b)) which is in24 cludible in gross income only because it exceeds the dollar

25 limitation of section 105(c)(2).’’.
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1 SEC. 8104. TAX RESERVES FOR QUALIFIED LONG-TERM

2 CARE INSURANCE POLICIES.

3 (a) IN GENERAL.—Subparagraph (A) of section

4 807(d)(3) (relating to tax reserve methods) is amended

5 by redesignating clause (iv) as clause (v) and by inserting

6 after clause (iii) the following new clause:

7 ‘‘(iv) QUALIFIED LONG-TERM CARE

8 INSURANCE POLICIES.—In the case of any

9 qualified long-term care insurance policy

10 (as defined in section 7702B(b)), a 1 year

11 full preliminary term method, as prescribed

12 by the National Association of Insurance

13 Commissioners.’’.

14 (b) CONFORMING AMENDMENTS.—Section

15 807(d)(3)(A) (relating to tax reserve methods), is amend16 ed—

17 (1) in clause (v), as redesignated by subsection

18 (a), by striking ‘‘or (iii)’’ each place it appears and

19 inserting ‘‘(iii), or (iv)’’; and

20 (2) in clause (iii), by inserting ‘‘(other than a

21 qualified long-term care insurance policy)’’ after ‘‘in22 surance contract’’.
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1 SEC. 8105. TAX TREATMENT OF ACCELERATED DEATH BEN2 EFITS UNDER LIFE INSURANCE CONTRACTS.

3 Section 101 (relating to certain death benefits) is

4 amended by adding at the end the following new sub5 section:

6 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

7 DEATH BENEFITS.—

8 ‘‘(1) IN GENERAL.—For purposes of this sec9 tion, any amount distributed to an individual under

10 a life insurance contract on the life of an insured

11 who is a terminally ill individual (as defined in para12 graph (3)) shall be treated as an amount paid by

13 reason of the death of such insured.

14 ‘‘(2) NECESSARY CONDITIONS.—

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

16 not apply to any distribution unless—

17 ‘‘(i) the distribution is not less than

18 the present value (determined under sub19 paragraph (B)) of the reduction in the

20 death benefit otherwise payable in the

21 event of the death of the insured, and

22 ‘‘(ii) the percentage derived by divid23 ing the cash surrender value of the con24 tract, if any, immediately after the dis25 tribution by the cash surrender value of

26 the contract immediately before the dis-
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1 tribution is equal to or greater than the

2 percentage derived by dividing the death

3 benefit immediately after the distribution

4 by the death benefit immediately before the

5 distribution.

6 ‘‘(B) REDUCTION VALUE.—The present

7 value of the reduction in the death benefit oc8 curring by reason of the distribution shall be

9 determined by—

10 ‘‘(i) using as the discount rate a rate

11 not in excess of the highest rate set forth

12 in subparagraph (C), and

13 ‘‘(ii) assuming that the death benefit

14 (or the portion thereof) would have been

15 paid at the end of a period that is no more

16 than the insured’s life expectancy from the

17 date of the distribution or 12 months,

18 whichever is shorter.

19 ‘‘(C) RATES.—The rates set forth in this

20 subparagraph are the following:

21 ‘‘(i) the 90-day Treasury bill yield,

22 ‘‘(ii) the rate described as Moody’s

23 Corporate Bond Yield Average-Monthly

24 Average Corporates as published by

25 Moody’s Investors Service, Inc., or any
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1 successor thereto, for the calendar month

2 ending 2 months before the date on which

3 the rate is determined,

4 ‘‘(iii) the rate used to compute the

5 cash surrender values under the contract

6 during the applicable period plus 1 percent

7 per annum, and

8 ‘‘(iv) the maximum permissible inter9 est rate applicable to policy loans under

10 the contract.

11 ‘‘(3) TERMINALLY ILL INDIVIDUAL.—For pur12 poses of this subsection, the term ‘terminally ill indi13 vidual’ means an individual who, as determined by

14 the insurer on the basis of an acceptable certifi15 cation by a licensed physician, has an illness or

16 physical condition which can reasonably be expected

17 to result in death within 12 months of the date of

18 certification.

19 ‘‘(4) APPLICATION OF SECTION 72(e)(10).—For

20 purposes of section 72(e)(10) (relating to the treat21 ment of modified endowment contracts), section

22 72(e)(4)(A)(i) shall not apply to distributions de23 scribed in paragraph (1).’’.
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1 SEC. 8106. TAX TREATMENT OF COMPANIES ISSUING

2 QUALIFIED ACCELERATED DEATH BENEFIT

3 RIDERS.

4 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID5 ERS TREATED AS LIFE INSURANCE.—Section 818 (relat6 ing to other definitions and special rules) is amended by

7 adding at the end the following new subsection:

8 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

9 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

10 this part—

11 ‘‘(1) IN GENERAL.—Any reference to a life in12 surance contract shall be treated as including a ref13 erence to a qualified accelerated death benefit rider

14 on such contract.

15 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE16 FIT RIDERS.—For purposes of this subsection, the

17 term ‘qualified accelerated death benefit rider’

18 means any rider on a life insurance contract which

19 provides for a distribution to an individual upon the

20 insured becoming a terminally ill individual (as de21 fined in section 101(g)(3)).’’.

22 (b) DEFINITIONS OF LIFE INSURANCE AND MODI23 FIED ENDOWMENT CONTRACTS.—Paragraph (5)(A) of

24 section 7702(f) (defining qualified additional benefits) is

25 amended by striking ‘‘or’’ at the end of clause (iv), by
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1 redesignating clause (v) as clause (vi), and by inserting

2 after clause (iv) the following new clause:

3 ‘‘(v) any qualified accelerated death

4 benefit rider (as defined in section 818(g)),

5 or’’.

6 (c) EFFECTIVE DATE.—

7 (1) IN GENERAL.—The amendments made by

8 this section shall apply to contracts issued after

9 December 31, 1995.

10 (2) TRANSITIONAL RULE.—For purposes of de11 termining whether section 7702 or 7702A of the In12 ternal Revenue Code of 1986 applies to any con13 tract, the issuance, whether before, on, or after De14 cember 31, 1995, of a rider on a life insurance con15 tract permitting the acceleration of death benefits

16 (as described in section 101(g) of such Code (as

17 added by section 8105)) shall not be treated as a

18 modification or material change of such contract.

19 Subtitle B—Standards For Long20 Term Care Insurance

21 SEC. 8201. NATIONAL LONG-TERM CARE INSURANCE ADVI22 SORY COUNCIL.

23 (a) IN GENERAL.—Congress shall appoint an advi24 sory board to be known as the National Long-Term Care
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1 Insurance Advisory Council (hereafter referred to in this

2 subtitle as the ‘‘Advisory Council’’).

3 (b) MEMBERSHIP.—The Advisory Council shall con4 sist of 5 members, each of whom has substantial expertise

5 in matters relating to the provision and regulation of long6 term care insurance or long-term care financing and deliv7 ery systems.

8 (c) DUTIES.—The Advisory Council shall—

9 (1) provide advice, recommendations on the im10 plementation of standards for long-term care insur11 ance, and assistance to Congress on matters relating

12 to long-term care insurance as specified in this sec13 tion and as otherwise required by the Secretary of

14 Health and Human Services;

15 (2) collect, analyze, and disseminate informa16 tion relating to long-term care insurance in order to

17 increase the understanding of insurers, providers,

18 consumers, and regulatory bodies of the issues relat19 ing to, and to facilitate improvements in, such insur20 ance;

21 (3) develop educational models to inform the

22 public on the risks of incurring long-term care ex23 penses and private financing options available to

24 them; and
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1 (4) monitor the development of the long-term

2 care insurance market and advise Congress concern3 ing the need for statutory changes.

4 (d) ADMINISTRATION.—In order to carry out its re5 sponsibilities under this section, the Advisory Council is

6 authorized to—

7 (1) consult individuals and public and private

8 entities with experience and expertise in matters re9 lating to long-term care insurance;

10 (2) conduct meetings and hold hearings;

11 (3) conduct research (either directly or under

12 grant or contract);

13 (4) collect, analyze, publish, and disseminate

14 data and information (either directly or under grant

15 or contract); and

16 (5) develop model formats and procedures for

17 insurance products, and develop proposed standards,

18 rules and procedures for regulatory programs, as

19 appropriate.

20 (e) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated, for activities of the Ad22 visory Council, $1,500,000 for fiscal year 1996, and each

23 subsequent year.
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1 SEC. 8202. ADDITIONAL REQUIREMENTS FOR ISSUERS OF

2 LONG-TERM CARE INSURANCE POLICIES.

3 (a) IN GENERAL.—Chapter 43 is amended by adding

4 at the end the following new section:

5 ‘‘SEC. 4980C. FAILURE TO MEET REQUIREMENTS FOR

6 QUALIFIED LONG-TERM CARE INSURANCE

7 POLICIES.

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

9 the issuer of any qualified long-term care insurance policy

10 with respect to which any requirement of subsection (c)

11 or (d) is not met a tax in the amount determined under

12 subsection (b).

13 ‘‘(b) AMOUNT OF TAX.—

14 ‘‘(1) IN GENERAL.—

15 ‘‘(A) PER POLICY.—The amount of the tax

16 imposed by subsection (a) shall be $100 per

17 policy for each day any requirement of sub18 section (c) or (d) is not met with respect to the

19 policy.

20 ‘‘(B) LIMITATIONS.—

21 ‘‘(i) PER CARRIER.—The amount of

22 the tax imposed under subparagraph (A)

23 against any insurance carrier, association,

24 or any subsidiary thereof, shall not exceed

25 $25,000 per policy.
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1 ‘‘(ii) PER AGENT.—The amount of the

2 tax imposed under subparagraph (A)

3 against insurance agent or broker shall not

4 exceed $15,000 per policy.

5 ‘‘(2) WAIVER.—In the case of a failure which is

6 due to reasonable cause and not to willful neglect,

7 the Secretary may waive part or all of the tax im8 posed by subsection (a) to the extent that payment

9 of the tax would be excessive relative to the failure

10 involved.

11 ‘‘(c) ADDITIONAL RESPONSIBILITIES.—The require12 ments of this subsection with respect to any qualified long13 term care insurance policy are as follows:

14 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.—

15 ‘‘(A) MODEL REGULATION.—The following

16 requirements of the model regulation shall be

17 met:

18 ‘‘(i) Section 13 (relating to application

19 forms and replacement coverage).

20 ‘‘(ii) Section 14 (relating to reporting

21 requirements), except that the issuer shall

22 also report at least annually the number of

23 claims denied during the reporting period

24 for each class of business (expended as a

25 percentage of claims denied), other than
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1 claims denied for failure to meet the wait2 ing period or because of any applicable

3 preexisting condition.

4 ‘‘(iii) Section 20 (relating to filing re5 quirements for marketing).

6 ‘‘(iv) Section 21 (relating to standards

7 for marketing), including inaccurate com8 pletion of medical histories, other than sec9 tions 21C(1) and 21C(6) thereof, except

10 that—

11 ‘‘(I) in addition to such require12 ments, no person shall, in selling or

13 offering to sell a qualified long-term

14 care insurance policy, misrepresent a

15 material fact; and

16 ‘‘(II) no such requirements shall

17 include a requirement to inquire or

18 identify whether a prospective appli19 cant or enrollee for qualified long20 term care insurance has accident and

21 sickness insurance.

22 ‘‘(v) Section 22 (relating to appro23 priateness of recommended purchase).

24 ‘‘(vi) Section 24 (relating to standard

25 format outline of coverage).
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1 ‘‘(vii) Section 25 (relating to require2 ment to deliver shopper’s guide).

3 ‘‘(B) MODEL ACT.—The following require4 ments of the model Act must be met:

5 ‘‘(i) Section 6F (relating to right to

6 return), except that such section shall also

7 apply to denials of applications and any re8 fund shall be made within 30 days of the

9 return or denial.

10 ‘‘(ii) Section 6G (relating to outline of

11 coverage).

12 ‘‘(iii) Section 6H (relating to require13 ments for certificates under group plans).

14 ‘‘(iv) Section 6I (relating to policy

15 summary).

16 ‘‘(v) Section 6J (relating to monthly

17 reports on accelerated death benefits).

18 ‘‘(vi) Section 7 (relating to incontest19 ability period).

20 ‘‘(C) DEFINITIONS.—For purposes of this

21 paragraph, the terms ‘model regulation’ and

22 ‘model Act’ have the meanings given such terms

23 by section 7702B(b)(6)(B).

24 ‘‘(2) DELIVERY OF POLICY.—If an application

25 for a qualified long-term care insurance policy (or
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1 for a certificate under a group qualified long-term

2 care insurance policy) is approved, the issuer shall

3 deliver to the applicant (or policyholder or certifi4 cate-holder) the policy (or certificate) of insurance

5 not later than 30 days after the date of the ap6 proval.

7 ‘‘(3) INFORMATION ON DENIALS OF CLAIMS.—

8 If a claim under a qualified long-term care insurance

9 policy is denied, the issuer shall, within 60 days of

10 the date of a written request by the policyholder or

11 certificate-holder (or representative)—

12 ‘‘(A) provide a written explanation of the

13 reasons for the denial, and

14 ‘‘(B) make available all information di15 rectly relating to such denial.

16 ‘‘(d) DISCLOSURE.—The requirements of this sub17 section are met with respect to any qualified long-term

18 care insurance policy if the following statement is promi19 nently displayed on the front page of the policy and in

20 the outline of coverage required under subsection

21 (c)(1)(B)(ii):

22 ‘‘ ‘This is a federally qualified long-term care

23 insurance contract. The policy meets all the Federal

24 consumer protection standards necessary to receive
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1 favorable tax treatment under section 7702B(b) of

2 the Internal Revenue Code of 1986.’.

3 ‘‘(e) QUALIFIED LONG-TERM CARE INSURANCE POL4 ICY DEFINED.—For purposes of this section, the term

5 ‘qualified long-term care insurance policy’ has the mean6 ing given such term by section 7702B(b).’’.

7 (b) CONFORMING AMENDMENT.—The table of sec8 tions for chapter 43 is amended by adding at the end the

9 following new item:

‘‘Sec. 4980C. Failure to meet requirements for long-term care insurance policies.’’.

10 SEC. 8203. COORDINATION WITH STATE REQUIREMENTS.

11 Nothing in this subtitle shall be construed as prevent12 ing a State from applying standards that provide greater

13 protection of policyholders of qualified long-term care in14 surance policies (as defined in section 7702B(b) of the In15 ternal Revenue Code of 1986 (as added by section 8102)).

16 SEC. 8204. UNIFORM LANGUAGE AND DEFINITIONS.

17 (a) IN GENERAL.—Not later than June 30, 1996, the

18 Advisory Council shall promulgate standards for the use

19 of uniform language and definitions in qualified long-term

20 care insurance policies (as defined in section 7702B(b) of

21 the Internal Revenue Code of 1986 (as added by section

22 8102)).

23 (b) VARIATIONS.—Standards under subsection (a)

24 may permit the use of nonuniform language to the extent
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1 required to take into account differences among States in

2 the licensing of nursing facilities and other providers of

3 long-term care.

4 Subtitle C—Incentives to Encour5 age the Purchase of Private In6 surance

7 SEC. 8301. ASSETS OR RESOURCES DISREGARDED UNDER

8 THE MEDICAID PROGRAM.

9 (a) MEDICAID ESTATE RECOVERIES.—

10 (1) IN GENERAL.—Section 1917(b) of the So11 cial Security Act (42 U.S.C. 1396p(b)) is amend12 ed—

13 (A) in paragraph (1), by striking subpara14 graph (C);

15 (B) in paragraph (3), by striking ‘‘(other

16 than paragraph (1)(C))’’; and

17 (C) in paragraph (4)(B), by striking ‘‘(and

18 shall include, in the case of an individual to

19 whom paragraph (1)(C)(i) applies)’’.

20 (2) EFFECTIVE DATE.—Section 1917(b) of the

21 Social Security Act (42 U.S.C. 1396p(b)) shall be

22 applied and administered as if the provisions strick23 en by paragraph (1) had not been enacted.

24 (b) REPORTING REQUIREMENTS FOR CERTAIN

25 ASSET PROTECTION PROGRAMS.—Section 1902 of the So-
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1 cial Security Act (42 U.S.C. 1396a) is amended by adding

2 at the end the following new subsection:

3 ‘‘(aa)(1) The Secretary shall not approve any State

4 plan amendment providing for an asset protection pro5 gram (as described in paragraph (2)) unless the State re6 quires all insurers participating in such program to submit

7 reports to the State and the Secretary at such times, and

8 containing such information, as the Secretary determines

9 appropriate. The information included in the reports re10 quired to be submitted under the preceding sentence shall

11 be submitted in accordance with the data standards estab12 lished by the Secretary under paragraph (3).

13 ‘‘(2) An asset protection program described in this

14 paragraph is a program under which an individual’s assets

15 and resources are disregarded for purposes of the program

16 under this subtitle—

17 ‘‘(A) to the extent that payments are made

18 under a qualified long-term care insurance policy (as

19 defined in section 7702B(b) of the Internal Revenue

20 Code of 1986); or

21 ‘‘(B) because an individual has received (or is

22 entitled to receive) benefits under a qualified long23 term care insurance policy (as defined in section

24 7702B(b) of such Code).
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1 ‘‘(3)(A) Not later than 90 days after the date of the

2 enactment of the Private Long-Term Care Family Protec3 tion Act of 1995, the Secretary shall select data standards

4 for the information required to be included in reports sub5 mitted in accordance with paragraph (1). Such data

6 standards shall be selected from the data standards in7 cluded in the Long-Term Care Insurance Uniform Data

8 Set developed by the University of Maryland Center on

9 Aging and Laguna Research Associates, and used by the

10 States of California, Connecticut, Indiana, and New York

11 for reports submitted by insurers under the asset protec12 tion programs conducted by such States.

13 ‘‘(B) The Secretary shall modify the standards se14 lected under subparagraph (A) as the Secretary deter15 mines appropriate.’’.

16 SEC. 8302. DISTRIBUTIONS FROM INDIVIDUAL RETIRE17 MENT ACCOUNTS FOR THE PURCHASE OF

18 LONG-TERM CARE INSURANCE COVERAGE.

19 (a) EXCLUSION FROM GROSS INCOME FOR CERTAIN

20 INDIVIDUALS.—Subsection (d) of section 408 (relating to

21 tax treatment of distributions from individual retirement

22 accounts) is amended by adding at the end the following

23 new paragraph:

24 ‘‘(8) DISTRIBUTIONS TO PURCHASE LONG-TERM

25 CARE INSURANCE.—Paragraph (1) shall not apply to
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1 any amount paid or distributed out of an individual

2 retirement account or individual retirement annuity

3 to the individual for whose benefit the account or

4 annuity is maintained if—

‘‘(A) the individual has attained age 591 5 ⁄2

6 by the date of the payment or distribution, and

7 ‘‘(B) the entire amount received (including

8 money and any other property) is used within

9 90 days to purchase a qualified long-term care

10 insurance policy (as defined in section

11 7702B(b)) for the benefit of the individual or

12 the spouse of the individual (if the spouse has

attained age 591 13 ⁄2 by the date of the payment

14 or distribution).’’.

15 (b) NO PENALTY FOR DISTRIBUTIONS.—

16 (1) IN GENERAL.—Subparagraph (B) of section

17 72(t)(2) (relating to distributions from qualified re18 tirement plans not subject to 10 percent additional

19 tax) is amended to read as follows:

20 ‘‘(B) MEDICAL EXPENSES.—

21 ‘‘(i) IN GENERAL.—Distributions

22 made to the employee (other than distribu23 tions described in clause (ii) or subpara24 graph (A) or (C)) to the extent such dis25 tributions do not exceed the amount allow-
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1 able as a deduction under section 213 to

2 the employee for amounts paid during the

3 taxable year for medical care (determined

4 without regard to whether the employee

5 itemizes deductions for such taxable year).

6 ‘‘(ii) CERTAIN DISTRIBUTIONS TO

7 PURCHASE LONG-TERM CARE INSUR8 ANCE.—Distributions made to the taxpayer

9 out of an individual retirement plan if the

10 entire amount received (including money

11 and any other property) is used within 90

12 days to purchase a qualified long-term care

13 insurance policy (as defined in section

14 7702B(b)) for the benefit of the individual

15 or the spouse of the individual.’’.

16 (2) CONFORMING AMENDMENT.—Subparagraph

17 (A) of section 72(t)(3) is amended by striking ‘‘(B)’’

18 and inserting ‘‘(B)(i)’’.

19 (c) DEDUCTION FOR EXPENSES TO PURCHASE A

20 QUALIFIED LONG-TERM CARE INSURANCE POLICY.—

21 (1) IN GENERAL.—Paragraph (8) of section

22 408(d) (relating to distributions from individual re23 tirement accounts to purchase long-term care insur24 ance), as added by subsection (a), is amended by

25 adding at the end the following new subparagraph:
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1 ‘‘(D) APPLICATION OF SECTION 213.—No

2 deduction shall be allowed under section 213(a)

3 for expenses incurred to purchase a qualified

4 long-term care insurance policy (as defined in

5 section 7702B(b)) using amounts paid or dis6 tributed out of an individual retirement account

7 or individual retirement annuity in accordance

8 with this paragraph.’’.

9 (2) CONFORMING AMENDMENT.—Clause (ii) of

10 section 213(d)(1)(D) (relating to definition of medi11 cal care), as added by section 8101(a), is amended

12 by striking ‘‘section 7702(d)(4)’’ and inserting ‘‘sec13 tion 408(d)(8)(D) or section 7702(d)(4)’’.

14 Subtitle D—Effective Date

15 SEC. 8401. EFFECTIVE DATE OF TAX PROVISIONS.

16 Except as otherwise provided in this title, the amend17 ments made by this title to the Internal Revenue Code

18 of 1986 shall apply to taxable years beginning after De19 cember 31, 1995.

20 TITLE IX—BUDGET NEUTRALITY

21 SEC. 9001. ASSURANCE OF BUDGET NEUTRALITY.

22 Notwithstanding any other provision of law, this Act

23 and the amendments made by this Act shall not become

24 effective until the date of the enactment of a provision

25 of law, specifically referring to this section, that by its
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1 terms provides for the Federal budget neutrality of this

2 Act.

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