I

103D CONGRESS

1ST SESSION H. R. 101

To improve access to health insurance and contain health care costs, and

for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

Mr. MICHEL (for himself, Mr. GINGRICH, Mr. HUNTER, Mr. MCCOLLUM, Mr.

ARCHER, Mr. CRAPO, Mr. KASICH, Mr. MCDADE, Mr. MCMILLAN, Mr.

SOLOMON, Mr. BILIRAKIS, Mr. BLILEY, Mr. GOSS, Mr. GRADISON, Mr.

GRANDY, Mr. GUNDERSON, Mr. HASTERT, Mr. HOBSON, Mrs. JOHNSON

of Connecticut, Mr. ROBERTS, Mr. WALKER, Mr. BAKER of Louisiana,

Mr. BARRETT of Nebraska, Mr. DOOLITTLE, Mrs. FOWLER, Mr. GEKAS,

Mr. GILLMOR, Mr. GOODLING, Mr. KOLBE, Mr. MCCRERY, Mr.

MCHUGH, Mr. MOORHEAD, Mr. OXLEY, Mr. PETRI, Mr. SANTORUM, Mr.

SENSENBRENNER, Mr. SHAW, Mr. SHAYS, Mr. SMITH of Oregon, Ms.

SNOWE, Mr. TAYLOR of North Carolina, Mr. THOMAS of Wyoming, and

Mr. WOLF) introduced the following bill; which was referred jointly to the

Committees on Energy and Commerce, Ways and Means, Education and

Labor, and the Judiciary

MARCH 24, 1993

Additional sponsors: Mr. HOUGHTON, Mr. SUNDQUIST, Mr. EWING, Mr.

GALLEGLY, Mr. INGLIS of South Carolina, Mr. SKEEN, Mr. FRANKS of

Connecticut, Mr. MANZULLO, Mr. BALLENGER, Mr. CUNNINGHAM, Mr.

LINDER, Mr. QUINN, Mr. BARTLETT of Maryland, Mrs. MEYERS of Kansas, Mr. LEWIS of Florida, Mr. SAM JOHNSON of Texas, Mr. CALVERT,

Mr. UPTON, Mr. YOUNG of Alaska, Mr. GRAMS, Mr. BARTON of Texas,

Mr. ROTH, Mr. KYL, and Mr. HANCOCK

A BILL

To improve access to health insurance and contain health

care costs, and for other purposes.
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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Action Now Health Care Reform Act of 1993’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—IMPROVED ACCESS TO AFFORDABLE HEALTH

CARE COVERAGE

Subtitle A—Increased Affordability and Availability for

Employees

Sec. 101. Establishment and enforcement of standards for health benefit plans.

Sec. 102. Preemption of State benefit mandates for small employer health benefit plans that meet consumer protection standards.

Sec. 103. Requirement for small employer carrier offering of MedAccess plans.

Sec. 104. Limitation on pre-existing condition clauses; assurance of continuity

of coverage.

Sec. 105. Limits on premiums and miscellaneous consumer protections.

Sec. 106. Requirements relating to renewability generally.

Sec. 107. Limitation on annual premium increases.

Sec. 108. Establishment of reinsurance or allocation of risk mechanisms for

high risk individuals.

Sec. 109. Registration of all health benefit plans.

Sec. 110. Office of Private Health Care Coverage; annual reports on evaluation

of health care coverage reform.

Sec. 111. Research and demonstration projects; development of a health risk

pooling model.

Sec. 112. General definitions.

Subtitle B—Improved Small Employer Purchasing Power of

Affordable Health Insurance

Sec. 121. Preemption from insurance mandates for qualified small employer

purchasing groups.

Subtitle C—Health Deduction Fairness

Sec. 131. Permanent extension and increase in health insurance tax deduction

for self-employed individuals.

Subtitle D—Improved Access to Community Health Services

PART 1—INCREASED AUTHORIZATION FOR COMMUNITY AND MIGRANT

HEALTH CENTERS
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Sec. 141. Grant program to promote primary health care services for underserved populations.

PART 2—GRANTS FOR PROJECTS FOR COORDINATING DELIVERY OF

SERVICES

Sec. 151. Projects for coordinating delivery of outpatient primary health services.

Subtitle E—Improved Access to Rural Health Services

PART 1—RURAL EMERGENCY MEDICAL SERVICES AMENDMENTS

Sec. 171. Office of Emergency Medical Services.

Sec. 172. State offices of emergency medical services.

Sec. 173. Programs for rural areas.

Sec. 174. Funding.

Sec. 175. Conforming amendments.

Sec. 176. Effective date.

PART 2—AIR TRANSPORT FOR RURAL VICTIMS OF MEDICAL EMERGENCIES

Sec. 181. Grants to States regarding aircraft for transporting rural victims of

medical emergencies.

PART 3—EXTENSION OF SPECIAL TREATMENT RULES FOR MEDICAREDEPENDENT, SMALL RURAL HOSPITALS

Sec. 191. Extension of special treatment rules for medicare-dependent, small

rural hospitals.

TITLE II—HEALTH CARE COST CONTAINMENT AND

QUALITY ENHANCEMENT

Subtitle A—Medical Malpractice Liability Reform

PART 1—GENERAL PROVISIONS

Sec. 201. Federal reform of medical malpractice liability actions.

Sec. 202. Definitions.

Sec. 203. Effective date.

PART 2—UNIFORM STANDARDS FOR MEDICAL MALPRACTICE LIABILITY

ACTIONS

Sec. 211. Statute of limitations.

Sec. 212. Requirement for initial resolution of action through alternative dispute resolution.

Sec. 213. Establishment of process for resolution of claims against United

States.

Sec. 214. Mandatory pre-trial settlement conference.

Sec. 215. Calculation and payment of damages.

Sec. 216. Treatment of attorney’s fees and other costs.

Sec. 217. Joint and several liability.

Sec. 218. Uniform standard for determining negligence.

Sec. 219. Application of medical practice guidelines in malpractice liability actions.

Sec. 220. Special provision for certain obstetric services.
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Sec. 221. Preemption.

PART 3—REQUIREMENTS FOR ALTERNATIVE DISPUTE RESOLUTION SYSTEMS

(ADR)

Sec. 231. Basic requirements for ADR.

Sec. 232. Certification of State systems; applicability of alternative Federal system.

Sec. 233. Reports on implementation and effectiveness of alternative dispute

resolution systems.

PART 4—OTHER REQUIREMENTS AND PROGRAMS

Sec. 241. Facilitating development and use of medical practice guidelines.

Sec. 242. Permitting State professional societies to participate in disciplinary

activities.

Sec. 243. Requirements for risk management programs.

Sec. 244. Grants for medical safety promotion.

Sec. 245. Study of barriers to voluntary service by physicians.

Subtitle B—Administrative Cost Savings

PART 1—STANDARDIZATION OF CLAIMS PROCESSING

Sec. 251. Adoption of data elements, uniform claims, and uniform electronic

transmission standards.

Sec. 252. Application of standards.

Sec. 253. Periodic review and revision of standards.

Sec. 254. Health benefit plan defined.

PART 2—ELECTRONIC MEDICAL DATA STANDARDS

Sec. 261. Medical data standards for hospitals and other providers.

Sec. 262. Application of electronic data standards to certain hospitals.

Sec. 263. Electronic transmission to Federal agencies.

Sec. 264. Limitation on data requirements where standards in effect.

Sec. 265. Advisory commission.

PART 3—DEVELOPMENT AND DISTRIBUTION OF COMPARATIVE VALUE

INFORMATION

Sec. 271. State comparative value information programs for health care purchasing.

Sec. 272. Federal implementation.

Sec. 273. Comparative value information concerning Federal programs.

Sec. 274. Development of model systems.

PART 4—ADDITIONAL STANDARDS AND REQUIREMENTS; RESEARCH AND

DEMONSTRATIONS

Sec. 281. Standards relating to use of Medicare and Medicaid magnetized

health benefit cards; secondary payor data bank.

Sec. 282. Preemption of State quill pen laws.

Sec. 283. Use of standard identification numbers.

Sec. 284. Coordination of benefit standards.

Sec. 285. Research and demonstrations.

Subtitle C—Medical Savings Accounts (Medisave)
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Sec. 291. Medical savings accounts.

Subtitle D—Medicaid Program Flexibility

Sec. 301. Modification of Federal requirements to allow States more flexibility

in contracting for coordinated care services under medicaid.

Sec. 302. Period of certain waivers.

Subtitle E—Limitations on Physician Self-Referrals

Sec. 311. Extension of physician self-referral limitations to all payors.

Sec. 312. Extension of physician self-referral limitations to certain additional

services.

Sec. 313. Changes in exceptions.

Sec. 314. Study and report on changes in costs.

Sec. 315. Effective date.

Subtitle F—Removing Restrictions on Managed Care

Sec. 321. Removing restrictions on managed care.

Subtitle G—Medicare Payment Changes

Sec. 331. Revisions to methodology for determining updates to Medicare hospital payments.

Sec. 332. Reduction in Medicare payment for clinical diagnostic laboratory

tests.

Subtitle H—Limitation of Antitrust Recovery for Certain

Hospital Joint Ventures

Sec. 341. Purpose.

Sec. 342. Definitions.

Sec. 343. Limitation on damages for antitrust violations.

Sec. 344. Disclosure of hospital joint venture.

Sec. 345. Interagency committee on competition, antitrust policy, and health

care.

Subtitle I—Encouraging Enforcement Activities of Medical

Self-Regulatory Entities

PART 1—APPLICATION OF THE CLAYTON ACT TO MEDICAL SELFREGULATORY ENTITIES

Sec. 351. Antitrust exemption for medical self-regulatory entities.

Sec. 352. Definitions.

PART 2—CONSULTATION BY FEDERAL AGENCIES

Sec. 357. Consultation with medical self-regulatory entities respecting medical

professional guidelines and standards.
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1 TITLE I—IMPROVED ACCESS TO

2 AFFORDABLE HEALTH CARE

3 COVERAGE

4 Subtitle A—Increased Affordability

5 and Availability for Employees

6 SEC. 101. ESTABLISHMENT AND ENFORCEMENT OF STAND7 ARDS FOR HEALTH BENEFIT PLANS.

8 (a) ESTABLISHMENT OF GENERAL STANDARDS.—

9 (1) ROLE OF NAIC.—The Secretary of Health

10 and Human Services shall request the National As11 sociation of Insurance Commissioners (in this sub12 title referred to as the ‘‘NAIC’’) to develop, within

13 9 months after the date of the enactment of this

14 Act, model regulations that specify standards with

15 respect to each of the following:

16 (A) MEDACCESS STANDARDS.—(i) The re17 quirement, under section 103(a), that small em18 ployer carriers make available MedAccess plans.

19 (ii) The uniform benefit levels to be in20 cluded in MedAccess basic and standard plans

21 under section 103(b).

22 (iii) The requirements of guaranteed avail23 ability of MedAccess plans to small employers

24 under section 103(c).
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1 (B) CONSUMER PROTECTION STAND2 ARDS.—(i) The requirements of section 104 (re3 lating to limitations on treatment of pre-exist4 ing conditions and assurance of continuity of

5 coverage).

6 (ii) The requirements of section 105 (relat7 ing to limits on premiums and miscellaneous

8 consumer protections).

9 (iii) The requirements of section 106 (re10 lating to renewability generally).

11 (iv) The requirement of section 107 (relat12 ing to limitation on annual premium increases).

13 If the NAIC develops recommended regulations

14 specifying such standards within such period, the

15 Secretary shall review the standards. Such review

16 shall be completed within 60 days after the date the

17 regulations are developed. Unless the Secretary de18 termines within such period that the standards do

19 not meet the requirements, such standards shall

20 serve as the standards under this section, with such

21 amendments as the Secretary deems necessary.

22 (2) CONTINGENCY.—If the NAIC does not de23 velop such model regulations within such period or

24 the Secretary determines that such regulations do

25 not specify standards that meet the requirements de-
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1 scribed in paragraph (1), the Secretary shall specify,

2 within 15 months after the date of the enactment of

3 this Act, standards to carry out those requirements.

4 (3) EFFECTIVE DATES.—

5 (A) MEDACCESS STANDARDS.—The

6 MedAccess standards (as defined in section

7 112(8)) shall apply to carriers in a State on or

8 after the date the standards are implemented in

9 the State under subsection (b).

10 (B) CONSUMER PROTECTION STAND11 ARDS.—For employer health benefit plans other

12 than MedAccess plans, the consumer protection

13 standards (as defined in section 112(2)) shall

14 apply to plans offered or renewed on or after 4

15 years after the date such standards are imple16 mented in the State under subsection (b).

17 (b) APPLICATION OF STANDARDS THROUGH

18 STATES.—

19 (1) APPLICATION OF MEDACCESS STAND20 ARDS.—

21 (A) IN GENERAL.—Each State shall sub22 mit to the Secretary, by the deadline specified

23 in subparagraph (B), a report on steps the

24 State is taking to implement and enforce the

25 MedAccess standards with respect to small em-
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1 ployer carriers, and small employer health bene2 fit plans offered, not later than such deadline.

3 (B) DEADLINE FOR REPORT.—

4 (i) 1 YEAR AFTER STANDARDS ESTAB5 LISHED.—Subject to clause (ii), the dead6 line under this subparagraph is 1 year

7 after the date the MedAccess standards

8 are established under subsection (a).

9 (ii) EXCEPTION FOR LEGISLATION.—

10 In the case of a State which the Secretary

11 identifies, in consultation with the NAIC,

12 as—

13 (I) requiring State legislation

14 (other than legislation appropriating

15 funds) in order for carriers and health

16 benefit plans offered to small employ17 ers to meet the MedAccess standards

18 established under subsection (a), but

19 (II) having a legislature which is

20 not scheduled to meet in 1994 in a

21 legislative session in which such legis22 lation may be considered,

23 the date specified in this subparagraph is

24 the first day of the first calendar quarter

25 beginning after the close of the first legis-
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1 lative session of the State legislature that

2 begins on or after January 1, 1996. For

3 purposes of the previous sentence, in the

4 case of a State that has a 2-year legislative

5 session, each year of such session shall be

6 deemed to be a separate regular session of

7 the State legislature.

8 (2) APPLICATION OF CONSUMER PROTECTION

9 STANDARDS TO NON-MEDACCESS EMPLOYER

10 HEALTH BENEFIT PLANS.—Each State shall submit

11 to the Secretary, by not later than 4 years after the

12 date consumer protection standards are established

13 under subsection (a), a report on steps the State is

14 taking to implement and enforce the consumer pro15 tection standards with respect to all employer health

16 benefit plans (other than MedAccess plans) which

17 are subject to regulation by the State and which are

18 offered or renewed not later than 4 years after the

19 date the standards were established.

20 (3) FEDERAL ROLE.—

21 (A) SECRETARIAL AUTHORITY.—

22 (i) IN GENERAL.—If the Secretary de23 termines that a State has failed to submit

24 a report by the deadline specified under

25 paragraph (1) or (2) or finds that the
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1 State has not implemented and provided

2 adequate enforcement of the MedAccess

3 standards or consumer protection stand4 ards under the respective paragraph, the

5 Secretary shall notify the State and pro6 vide the State a period of 60 days in which

7 to submit such report or to implement and

8 enforce such standards under the respec9 tive paragraph. If, after such 60-day pe10 riod, the Secretary finds that such a fail11 ure has not been corrected, the Secretary

12 shall provide for such mechanism for the

13 implementation and enforcement of the ap14 plicable standards in the State as the Sec15 retary determines to be appropriate. Such

16 implementation and enforcement shall take

17 effect with respect to carriers, and health

18 benefit plans offered or renewed, on or

19 after 3 months after the date of the Sec20 retary’s finding under the previous sen21 tence, and until the date the Secretary

22 finds that such a failure has been cor23 rected. In exercising authority under this

24 subparagraph, the Secretary shall deter25 mine whether the use of a risk-allocation
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1 mechanism, described in section 103(d),

2 would be more consistent with the small

3 employer group health coverage market in

4 the State than the guaranteed availability

5 provisions of section 103(c).

6 (ii) NON-STATE REGULATED ENTI7 TIES.—In the case of carriers that are not

8 subject to State regulation, the Secretary

9 shall be responsible for implementation and

10 enforcement of standards under this sub11 title.

12 (B) ENFORCEMENT THROUGH EXCISE

13 TAX.—

14 (i) IN GENERAL.—Chapter 43 of the

15 Internal Revenue Code of 1986 (relating to

16 qualified pension, etc., plans) is amended

17 by adding at the end thereof the following

18 new section:

19 ‘‘SEC. 4980C. FAILURE TO COMPLY WITH EMPLOYER

20 HEALTH BENEFIT PLAN STANDARDS.

21 ‘‘(a) IMPOSITION OF TAX.—

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

23 tax on the failure of a carrier or an employer health

24 benefit plan to comply with the applicable standards
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1 established under section 101(a) of the Action Now

2 Health Care Reform Act of 1993.

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

4 apply to a failure by a small employer carrier or

5 plan in a State if the Secretary of Health and

6 Human Services determines that the State has in ef7 fect a regulatory enforcement mechanism that pro8 vides adequate sanctions with respect to such a fail9 ure by such a carrier or of such a plan.

10 ‘‘(b) AMOUNT OF TAX.—

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

12 the tax imposed by subsection (a) shall be an

13 amount not to exceed 25 percent of the amounts re14 ceived by the carrier or under the plan for coverage

15 during the period such failure persists.

16 ‘‘(2) LIMITATION IN CASE OF INDIVIDUAL FAIL17 URES.—In the case of a failure that only relates to

18 specified individuals or employers (and not to the

19 plan generally), the amount of the tax imposed by

20 subsection (a) shall not exceed the aggregate of

21 $100 for each day during which such failure persists

22 for each individual to which such failure relates. A

23 rule similar to the rule of section 4980B(b)(3) shall

24 apply for purposes of this section.
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1 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

2 section shall be paid by the carrier.

3 ‘‘(d) EXCEPTIONS.—

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

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

6 failure if—

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

8 cause and not to willful neglect, and

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

10 30-day period beginning on earliest date the

11 carrier knew, or exercising reasonable diligence

12 would have known, that such failure existed.

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

14 failure which is due to reasonable cause and not to

15 willful neglect, the Secretary may waive part or all

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

17 that payment of such tax would be excessive relative

18 to the failure involved.

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

20 terms ‘carrier’, ‘employer health benefit plan’, and ‘small

21 employer carrier’ have the respective meanings given such

22 terms in section 112 of the Action Now Health Care Re23 form Act of 1993.’’

24 (ii) CLERICAL AMENDMENT.—The

25 table of sections for chapter 43 of such
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1 Code is amended by adding at the end

2 thereof the following new items:

‘‘Sec. 4980C. Failure to comply with employer health plan standards.’’.

3 (iii) EFFECTIVE DATE.—The amend4 ments made by this subparagraph shall

5 apply to plan years beginning after Decem6 ber 31, 1993.

7 SEC. 102. PREEMPTION OF STATE BENEFIT MANDATES FOR

8 SMALL EMPLOYER HEALTH BENEFIT PLANS

9 THAT MEET CONSUMER PROTECTION STAND10 ARDS.

11 (a) FINDING.—Congress finds that health benefit

12 plans offered with respect to small employers affect inter13 state commerce.

14 (b) PREEMPTION.—In the case of a MedAccess plan

15 or other small employer health benefit plan that meets the

16 consumer protection standards, no provision of State law

17 shall apply that requires the offering, as part of the health

18 benefit plan with respect to such an employer, of any serv19 ices, category of care, or services of any class or type of

20 provider.

21 SEC. 103. REQUIREMENT FOR SMALL EMPLOYER CARRIER

22 OFFERING OF MEDACCESS PLANS.

23 (a) IN GENERAL.—
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1 (1) IN GENERAL.—Each carrier that makes

2 available in a State any small employer health bene3 fit plan shall make available to each small employer

4 in the State—

5 (A) a MedAccess basic plan, and

6 (B) a MedAccess standard plan.

7 (2) EXCEPTION IF ALTERNATE PLAN IN A

8 STATE.—Paragraph (1) shall not apply to a carrier

9 in a State if the State is providing access to each

10 small employer in the State to a MedAccess basic

11 plan and to a MedAccess standard plan under a risk

12 allocation mechanism described in subsection (d).

13 (b) MEDACCESS PLAN DEFINED.—In this subtitle:

14 (1) IN GENERAL.—The term ‘‘MedAccess plan’’

15 means a health benefits plan (whether a managed16 care plan, indemnity plan, or other plan) that—

17 (A) subject to paragraph (3)—

18 (i) is designed to provide benefits typi19 cal of the benefits offered in the small em20 ployer health coverage market, or

21 (ii)(I) is designed to provide only ben22 efits for essential preventive and medical

23 services and (II) has an average actuarial

24 value (in the overall small employer group

25 market for the same type of coverage)
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1 which does not exceed 60 percent of the

2 average actuarial value of the benefits de3 scribed in clause (i) for such type of cov4 erage;

5 (B) meets the applicable requirements of

6 subsection (c) (relating to guaranteed issue);

7 and

8 (C) meets the consumer protection stand9 ards.

10 (2) MEDACCESS BASIC AND STANDARD

11 PLANS.—The terms ‘‘MedAccess basic plan’’ and

12 ‘‘MedAccess standard plan’’ mean a MedAccess plan

13 that provides for benefit levels described in clause

14 (ii) or clause (i), respectively, of paragraph (1)(A).

15 (3) SPECIAL RULES FOR HEALTH MAINTE16 NANCE ORGANIZATIONS.—With respect to a carrier

17 that—

18 (A) is a Federally qualified health mainte19 nance organization (as defined in section

20 1301(a) of the Public Health Service Act), the

21 benefits required under paragraphs (1)(A) or

22 (2)(A) shall be modified to the extent required

23 to be consistent with the requirements for the

24 plans of such an organization under title XIII

25 of such Act, or
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1 (B) is not such an organization but is rec2 ognized under State law as a health mainte3 nance organization, the benefits required under

4 paragraph (1)(A) shall be modified to the ex5 tent required to be consistent with the require6 ments for the plans of such an organization

7 under State law.

8 (4) REVIEW OF BENEFIT STANDARDS.—The

9 NAIC is requested to periodically review the stand10 ards for benefits described in paragraph (1)(A). The

11 NAIC is requested to submit to the Secretary and

12 the Congress its recommendations on changes that

13 should be made in such standards.

14 (c) GUARANTEED AVAILABILITY OF MEDACCESS

15 PLANS.—Subject to subsection (d)—

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

17 each MedAccess plan in a State—

18 (A) must accept every small employer in

19 the State that applies for coverage under the

20 plan; and

21 (B) must accept for enrollment every eligi22 ble individual (as defined in paragraph (4)) who

23 applies for enrollment on a timely basis (con24 sistent with paragraph (3)) and may not place

25 any restriction on the eligibility of an individual
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1 to enroll so long as such individual is an eligible

2 individual.

3 (2) SPECIAL RULES FOR HEALTH MAINTE4 NANCE ORGANIZATIONS.—In the case of a plan of5 fered by a health maintenance organization, the plan

6 shall—

7 (A) limit the employers that may apply for

8 coverage to those with eligible individuals resid9 ing in the service area of the plan,

10 (B) limit the individuals who may be en11 rolled under the plan to those who reside in the

12 service area of the plan, and

13 (C) within the service area of the plan,

14 deny coverage to such employers if the plan

15 demonstrates that—

16 (i) it will not have the capacity to de17 liver services adequately to enrollees of any

18 additional groups because of its obligations

19 to existing group contract holders and en20 rollees, and

21 (ii) it is applying this subparagraph

22 uniformly to all employers without regard

23 to the health status, claims experience, or

24 duration of coverage of those employers

25 and their employees.
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1 (3) CLARIFICATION OF TIMELY ENROLL2 MENT.—

3 (A) GENERAL INITIAL ENROLLMENT RE4 QUIREMENT.—Except as provided in this para5 graph, a MedAccess plan may consider enroll6 ment of an eligible individual not to be timely

7 if the eligible employee or dependent fails to en8 roll in the plan during an initial enrollment pe9 riod, if such period is at least 30 days long.

10 (B) ENROLLMENT DUE TO LOSS OF PRE11 VIOUS EMPLOYER COVERAGE.—Enrollment in a

12 MedAccess plan is considered to be timely in

13 the case of an eligible individual who—

14 (i) was covered under another em15 ployer health benefit plan at the time of

16 the individual’s initial enrollment period,

17 (ii) stated at the time of initial enroll18 ment period that coverage under another

19 employer health benefit plan was the rea20 son for declining enrollment,

21 (iii) lost coverage under another em22 ployer health benefit plan (as a result of

23 the termination of the other plan’s cov24 erage, termination or reduction of employ25 ment, or other reason), and
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1 (iv) requests enrollment within 30

2 days after termination of coverage under

3 another employer health benefit plan.

4 (C) REQUIREMENT APPLIES DURING OPEN

5 ENROLLMENT PERIODS.—Each MedAccess plan

6 shall provide for at least one period (of not less

7 than 30 days) each year during which enroll8 ment under the plan shall be considered to be

9 timely.

10 (D) EXCEPTION FOR COURT ORDERS.—

11 Enrollment of spouse or minor child of an em12 ployee shall be considered to be timely if—

13 (i) a court has ordered that coverage

14 be provided for the spouse or child under

15 a covered employee’s health benefit plan,

16 and

17 (ii) a request for enrollment is made

18 within 30 days after the date the court is19 sues the order.

20 (E) ENROLLMENT OF SPOUSES AND DE21 PENDENTS.—

22 (i) IN GENERAL.—Enrollment of the

23 spouse (including a child of the spouse)

24 and any child (including an adopted child)

25 of an eligible employee shall be considered
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1 to be timely if a request for enrollment is

2 made either—

3 (I) within 30 days of the date of

4 the marriage or of the date of the

5 birth or adoption of a child, if family

6 coverage is available as of such date,

7 or

8 (II) within 30 days of the date

9 family coverage is first made avail10 able.

11 (ii) COVERAGE.—If a plan makes

12 family coverage available and enrollment is

13 made under the plan on a timely basis

14 under clause (i)(I), the coverage shall be15 come effective not later than the first day

16 of the first month beginning after the date

17 of the marriage or the date of birth or

18 adoption of the child (as the case may be).

19 (4) ELIGIBLE INDIVIDUAL DEFINED.—In this

20 subsection, the term ‘‘eligible individual’’ means,

21 with respect to a small employer—

22 (A) an individual who is a full-time em23 ployee of the employer, and

24 (B) if family coverage is offered, the em25 ployee’s spouse and the employee’s dependents
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1 who are under 19 years of age or who are full2 time students and under 25 years of age.

3 (d) STATE OPTION OF GUARANTEED AVAILABILITY

4 THROUGH ALLOCATION OF RISK (RATHER THAN

5 THROUGH GUARANTEED ISSUE).—The requirement of

6 subsection (c) shall not apply in a State if the State has

7 provided (in accordance with standards established under

8 this subtitle) a mechanism under which—

9 (1) each carrier offering a health benefit plan

10 to a small employer in the State must participate in

11 a program for assigning high-risk small employer

12 groups (or individuals within such a group) among

13 some or all such carriers, and

14 (2) the carriers to which such high-risk small

15 employer groups or individuals are so assigned com16 plies with the requirement of subsection (c).

17 SEC. 104. LIMITATION ON PRE-EXISTING CONDITION

18 CLAUSES; ASSURANCE OF CONTINUITY OF

19 COVERAGE.

20 (a) LIMITATIONS ON TREATMENT OF PRE-EXISTING

21 CONDITIONS.—A carrier may not impose (or require an

22 employer to impose through a waiting period for coverage

23 under a health benefit policy or similar requirement) a

24 limitation or exclusion of benefits under an employer

25 health benefit plan relating to treatment of a condition
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1 based on the fact that the condition pre-existed the effec2 tiveness of the policy if—

3 (1) the condition relates to a condition that was

4 not diagnosed or treated within 3 months before the

5 date of coverage under the plan;

6 (2) the limitation or exclusion extends over

7 more than 6 months after the date of coverage

8 under the plan;

9 (3) the limitation or exclusion applies to an in10 dividual who, as of the date of birth, was covered

11 under the plan; or

12 (4) the limitation or exclusion relates to preg13 nancy.

14 In the case of an individual who is eligible for coverage

15 under an employer health benefit plan but for a waiting

16 period imposed by the employer, in applying paragraphs

17 (1) and (2), the individual shall be treated as have been

18 covered under the plan as of the earliest date of the begin19 ning of the waiting period.

20 (b) ASSURANCE OF CONTINUITY OF COVERAGE

21 THROUGH PREVIOUS SATISFACTION OF PRE-EXISTING

22 CONDITION REQUIREMENT.—

23 (1) IN GENERAL.—Each carrier shall waive any

24 period applicable to a preexisting condition for simi25 lar benefits with respect to an individual to the ex-
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1 tent that the individual was covered for the condi2 tion under any health benefit plan (as defined in

3 paragraph (3)) that was in effect before the date of

4 the enrollment under the carrier’s plan.

5 (2) CONTINUOUS COVERAGE REQUIRED.—

6 (A) IN GENERAL.—Paragraph (1) shall no

7 longer apply if there is a continuous period of

8 more than 60 days (or, in the case of an indi9 vidual described in subparagraph (C), 6

10 months) on which the individual was not cov11 ered under an health benefit plan.

12 (B) TREATMENT OF WAITING PERIODS.—

13 In applying subparagraph (A), any waiting pe14 riod imposed by an employer before an em15 ployee is eligible to be covered under a policy

16 shall be treated as a period in which the em17 ployee was covered under a health benefit plan.

18 (C) JOB TERMINATION.—An individual is

19 described in this subparagraph if the individual

20 loses coverage under an employer health plan

21 due to termination of employment.

22 (3) EXCLUSION OF CASH-ONLY AND DREAD

23 DISEASE POLICIES.—In this subsection, the term

24 ‘‘health benefit plan’’ does not include any insurance

25 which is offered primarily to provide—
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1 (A) coverage for a specified disease or ill2 ness, or

3 (B) hospital or fixed indemnity policy, un4 less the Secretary (or in the case of a plan in

5 a State, the State) determines that such a pol6 icy provides sufficiently comprehensive coverage

7 of a benefit so that it should be treated as a

8 health benefit plan under this subsection.

9 SEC. 105. LIMITS ON PREMIUMS AND MISCELLANEOUS

10 CONSUMER PROTECTIONS.

11 (a) LIMITS ON PREMIUMS.—

12 (1) LIMIT ON VARIATION OF INDEX RATES BE13 TWEEN CLASSES OF BUSINESS.—

14 (A) IN GENERAL.—As a standard under

15 section 101(a)(1)(B)(ii), the index rate for a

16 rating period for any class of business of a

17 small employer carrier may not exceed by more

18 than 20 percent the index rate for any other

19 class of business.

20 (B) EXCEPTIONS.—The limitation of sub21 paragraph (A) shall not apply to a class of busi22 ness if—

23 (i) the class is one for which the car24 rier does not reject, and never has rejected,

25 small employers included within the defini-
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1 tion of employers eligible for the class of

2 business or otherwise eligible employees

3 and dependents who enroll on a timely

4 basis, based upon their claim experience or

5 health status,

6 (ii) the carrier does not involuntarily

7 transfer, and never has involuntarily trans8 ferred, a health benefit plan into or out of

9 the class of business, and

10 (iii) the class of business is currently

11 available for purchase.

12 (2) LIMIT ON VARIATION OF PREMIUM RATES

13 WITHIN A CLASS OF BUSINESS.—For a class of busi14 ness of a small employer carrier, as a standard

15 under section 101(a)(1)(B)(ii), the premium rates

16 charged during a rating period to small employers

17 with similar demographic or other objective charac18 teristics (not relating to claims experience, health

19 status, or duration of coverage) for the same or

20 similar coverage, or the rates which could be charged

21 to such employers under the rating system for that

22 class of business, shall not vary from the index rate

23 by more than 25 percent of the index rate.

24 (3) OBJECTIVE BASIS FOR DIFFERENCES IN

25 PREMIUMS FOR STANDARD AND BASIC MEDACCESS
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1 PLANS.—The difference between the index rate for

2 the MedAccess basic plan and the index rate for the

3 MedAccess standard plan shall be reasonable and

4 shall reflect the difference in plan design and shall

5 not take into account differences due to the nature

6 of the groups assumed to select particular health

7 plans.

8 (4) LIMIT ON TRANSFER OF EMPLOYERS

9 AMONG CLASSES OF BUSINESS.—As a standard

10 under section 101(a)(1)(B)(ii), a small employer car11 rier may not involuntarily transfer a small employer

12 into or out of a class of business. A small employer

13 carrier may not offer to transfer a small employer

14 into or out of a class of business unless such offer

15 is made to transfer all small employers in the class

16 of business without regard to demographic charac17 teristics, claim experience, health status, or duration

18 since issue.

19 (5) DEFINITIONS.—In this subsection:

20 (A) BASE PREMIUM RATE.—The term

21 ‘‘base premium rate’’ means, for each class of

22 business for each rating period, the lowest pre23 mium rate charged or which could have been

24 charged under a rating system for that class of

25 business by the small employer carrier to small
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1 employers with similar demographic or other

2 objective characteristics (not relating to claims

3 experience, health status, or duration of cov4 erage) for health benefit plans with the same or

5 similar coverage.

6 (B) CLASS OF BUSINESS.—The term

7 ‘‘class of business’’ means, with respect to a

8 carrier, all (or a distinct group of) small em9 ployers as shown on the records of the carrier.

10 (C) RULES FOR ESTABLISHING CLASSES

11 OF BUSINESS.—For purposes of subparagraph

12 (B)—

13 (i) a carrier may establish, subject to

14 clause (ii), a distinct group of small em15 ployers on the basis that the applicable

16 health benefit plans either—

17 (I) are marketed and sold

18 through individuals and organizations

19 which are not participating in the

20 marketing or sale of other distinct

21 groups of small employers for the car22 rier,

23 (II) have been acquired from an24 other carrier as a distinct group, or
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1 (III) are provided through an as2 sociation that has a membership of

3 not less than 100 small employers and

4 that has been formed for purposes

5 other than obtaining health coverage;

6 (ii) a carrier may not establish more

7 than 2 groupings under each class of busi8 ness based on the carrier’s use of man9 aged-care techniques if the techniques are

10 expected to produce substantial variation

11 in health care costs; and

12 (iii) notwithstanding clauses (i) and

13 (ii), a State commissioner of Insurance of

14 a State, upon application and if authorized

15 under State law, may approve additional

16 distinct groups upon a finding that such

17 approval would enhance the efficiency and

18 fairness of the small employer marketplace.

19 (D) INDEX RATE.—The term ‘‘index rate’’

20 means, with respect to a class of business, the

21 arithmetic average of the applicable base pre22 mium rate and the corresponding highest pre23 mium rate for the class.

24 (E) DEMOGRAPHIC CHARACTERISTICS.—

25 Except as otherwise permitted under the stand-
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1 ard under section 101(b)(1)(B)(ii), the term

2 ‘‘demographic characteristics’’ means age, gen3 der, industry, geographic area, family composi4 tion, and group size.

5 (b) FULL DISCLOSURE OF RATING PRACTICES.—At

6 the time a carrier offers a health benefit plan to a small

7 employer, the carrier shall fully disclose to the employer

8 rating practices for small employer health benefit plans,

9 including rating practices for different industries, popu10 lations, and benefit designs.

11 (c) ACTUARIAL CERTIFICATION.—Each carrier shall

12 file annually with the State commissioner of insurance a

13 written statement by a member of the American Academy

14 of Actuaries (or other individual acceptable to the commis15 sioner) that, based upon an examination by the individual

16 which includes a review of the appropriate records and of

17 the actuarial assumptions of the carrier and methods used

18 by the carrier in establishing premium rates for applicable

19 small employer health benefit plans—

20 (1) the carrier is in compliance with the appli21 cable provisions of this section, and

22 (2) the rating methods are actuarially sound.

23 Each carrier shall retain a copy of such statement for ex24 amination at its principal place of business.
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1 (d) REGISTRATION AND REPORTING.—Each carrier

2 that issues any small employer health benefit plan in a

3 State shall be registered or licensed with the State com4 missioner of insurance and shall comply with any report5 ing requirements of the commissioner relating to such a

6 plan.

7 (e) USE OF MINIMUM PARTICIPATION REQUIRE8 MENT.—A carrier may condition issuance, or renewal, of

9 a health benefit plan to a small employer on the enroll10 ment of a minimum number (or percentage) of its full11 time employees, only in accordance with standards estab12 lished to carry out this section. Such standards shall re13 quire that any such conditions be imposed uniformly on

14 employers of the same size.

15 SEC. 106. REQUIREMENTS RELATING TO RENEWABILITY

16 GENERALLY.

17 (a) IN GENERAL.—A carrier may not cancel an em18 ployer health benefit plan or deny renewal of coverage

19 under such a plan other than—

20 (1) for nonpayment of premiums,

21 (2) for fraud or other misrepresentation by the

22 insured,

23 (3) for noncompliance with plan provisions,

24 (4) for failure to maintain (in accordance with

25 standards established under section 105(e)) the
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1 number of enrollees under the plan at the number

2 (or percentage) required under the plan,

3 (5) for misuse of a provider network provision,

4 or

5 (6) because the carrier is ceasing to provide any

6 employer health benefit plan in a State, or, in the

7 case of a health maintenance organization, in a geo8 graphic area.

9 (b) LIMITATION ON MARKET REENTRY.—If a carrier

10 terminates the offering of employer health benefit plans

11 in an area, the carrier may not offer such a health benefit

12 plan to any employer in the area until 5 years have elapsed

13 since the date of the termination.

14 SEC. 107. LIMITATION ON ANNUAL PREMIUM INCREASES.

15 A carrier may not provide for an increase in the pre16 mium charged a small employer for a small employer

17 health benefit plan in a percentage that exceeds the per18 centage change in the premium charged under the plan

19 for a newly covered employer within the same class of busi20 ness rate plus 15 percentage points.

21 SEC. 108. ESTABLISHMENT OF REINSURANCE OR ALLOCA22 TION OF RISK MECHANISMS FOR HIGH RISK

23 INDIVIDUALS.

24 (a) ESTABLISHMENT OF STANDARDS.—
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1 (1) ROLE OF NAIC.—The Secretary of Health

2 and Human Services shall request the NAIC to de3 velop, within 9 months after the date of the enact4 ment of this Act, models for reinsurance or alloca5 tion of risk mechanisms (each in this section re6 ferred to as a ‘‘reinsurance or allocation of risk

7 mechanism’’) for individuals and small employers

8 who are enrolled under a small employer health ben9 efit plan that meets the consumer protection stand10 ards and for whom a carrier is at risk of incurring

11 high costs under the plan. If the NAIC develops

12 such models within such period, the Secretary shall

13 review such models to determine if they provide for

14 an effective reinsurance or allocation of risk mecha15 nism. Such review shall be completed within 30 days

16 after the date the models are developed. Unless the

17 Secretary determines within such period that such a

18 model is not an effective reinsurance or allocation of

19 risk mechanism, such remaining models shall serve

20 as the models under this section, with such amend21 ments as the Secretary deems necessary.

22 (2) CONTINGENCY.—If the NAIC does not de23 velop such models within such period or the Sec24 retary determines that all such models do not pro25 vide for an effective reinsurance or allocation of risk
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1 mechanism, the Secretary shall specify, within 15

2 months after the date of the enactment of this Act,

3 models to carry out this section.

4 (b) IMPLEMENTATION OF REINSURANCE OR ALLOCA5 TION OF RISK MECHANISMS.—

6 (1) BY STATES.—Each State shall establish

7 and fund one or more reinsurance or allocation of

8 risk mechanisms that are consistent with a model es9 tablished under subsection (a) by not later than the

10 deadline specified in section 101(b)(1)(B). In order

11 to assure the financial solvency of the mechanism,

12 the State may, notwithstanding any provision of law

13 to the contrary, impose charges on any entity pro14 viding employee-related health benefits, so long as

15 such charges do not discriminate with respect to en16 tities that would (but for this provision) not be sub17 ject to such charges.

18 (2) FEDERAL ROLE.—

19 (A) IN GENERAL.—If the Secretary deter20 mines that a State has failed to establish a re21 insurance or allocation of risk mechanism in ac22 cordance with paragraph (1), the Secretary

23 shall establish such a reinsurance or allocation

24 of risk mechanism meeting the requirements of

25 this paragraph.
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1 (B) REINSURANCE MECHANISM.—Unless

2 the Secretary determines under subparagraph

3 (C) that an allocation of risk mechanism is the

4 appropriate mechanism to use in a State under

5 this paragraph, the Secretary shall establish for

6 use under this section for each State an appro7 priate reinsurance mechanism.

8 (C) ALLOCATION OF RISK MECHANISM.—If

9 the Secretary determines that, due to the na10 ture of the health coverage market in the State

11 (including a relatively small number of small

12 employer health benefit plans offered or a rel13 atively small number of uninsurable small em14 ployers or individuals), an allocation of risk

15 mechanism would be a better mechanism than

16 a reinsurance mechanism, the Secretary shall

17 establish for use under this section for a State

18 an allocation of risk mechanism under which

19 uninsurable individuals and small employers

20 would be equitably assigned among small em21 ployer health benefit plans.

22 (D) FINANCING DEFICIT FOR REINSUR23 ANCE MECHANISMS.—

24 (i) IN GENERAL.—Chapter 43 of the

25 Internal Revenue Code of 1986 (relating to
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1 qualified pension plans, etc.) is amended

2 by adding at the end thereof the following

3 new section:

4 ‘‘SEC. 4980D. ADDITIONAL TAX TO FUND REINSURANCE IN

5 STATES UNDER FEDERAL REINSURANCE.

6 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

7 a tax on the providing of any health benefit plan which

8 covers any employee in a Federal reinsurance State.

9 ‘‘(b) AMOUNT OF TAX.—

10 ‘‘(1) IN GENERAL.—The tax imposed by sub11 section (a) shall be equal to the applicable percent12 age of the amount received by the carrier for provid13 ing such plan in such Federal reinsurance State.

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

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

16 means, with respect to any State for any period, the

17 lowest percentage estimated by the Secretary as gen18 erating sufficient revenues to carry out section

19 108(b)(2) of the Action Now Health Care Reform

20 Act of 1993 in such State for such period.

21 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

22 section shall be paid by the carrier.

23 ‘‘(d) DEFINITIONS.—For purposes of this section—
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1 ‘‘(1) CARRIER.—The term ‘carrier’ has the

2 meaning given such term in section 112(2) of the

3 Action Now Health Care Reform Act of 1993.

4 ‘‘(2) FEDERAL REINSURANCE STATE.—The

5 term ‘Federal reinsurance State’ means any State

6 with respect to which a determination is in effect

7 under section 108(b)(2) of the Action Now Health

8 Care Reform Act of 1993 and for which the Sec9 retary of Health and Human Services has estab10 lished a reinsurance mechanism under subparagraph

11 (B) of such section for the State.’’

12 (ii) CLERICAL AMENDMENT.—The

13 table of sections for chapter 43 of such

14 Code is amended by adding at the end

15 thereof the following new item:

‘‘Sec. 4980D. Additional tax to fund reinsurance in States under

Federal reinsurance.’’

16 (c) CONSTRUCTION.—Nothing in this section shall be

17 construed to prohibit reinsurance or allocation of risk ar18 rangements, whether on a State or regional basis, not re19 quired under this section.

20 SEC. 109. REGISTRATION OF ALL HEALTH BENEFIT PLANS.

21 (a) IN GENERAL.—Notwithstanding any other provi22 sion of law, each State commissioner of insurance may,

23 under State law, require each employer health benefit plan

24 (including a self-insured plan)—
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1 (1) to be registered with such official, if the

2 plan is not otherwise required to be registered or li3 censed with the official under section 105(d), and

4 (2) to provide the official with such information

5 on the plan as may be necessary to carry out section

6 108.

7 Insofar as the Secretary is exercising authority under sec8 tion 108(b)(2), the Secretary may impose the requirement

9 under the previous sentence in the same manner as a

10 State commissioner of insurance may impose the require11 ment.

12 (b) PROVISION OF LIST TO SECRETARY.—By not

13 later than the deadline specified in section 101(b)(1)(B),

14 each State shall provide the Secretary with a list of all

15 employer health benefit plans registered in the State under

16 subsection (a).

17 SEC. 110. OFFICE OF PRIVATE HEALTH CARE COVERAGE;

18 ANNUAL REPORTS ON EVALUATION OF

19 HEALTH CARE COVERAGE REFORM.

20 (a) IN GENERAL.—In order to carry out the respon21 sibilities of the Secretary under this subtitle, the Secretary

22 shall establish an Office of Private Health Care Coverage,

23 to be headed by a Director appointed by the Secretary.

24 (b) ANNUAL REPORT.—
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1 (1) IN GENERAL.—The Director shall submit to

2 Congress an annual report on the implementation of

3 this subtitle.

4 (2) INFORMATION TO BE INCLUDED.—Each an5 nual report shall include information concerning at

6 least the following:

7 (A) Implementation and enforcement of

8 the applicable MedAccess standards and

9 consumer protection standards under this sub10 title by the States and by the Secretary.

11 (B) An evaluation of the impact of the re12 forms under this subtitle on the availability of

13 affordable health coverage for small employers

14 that purchase group health coverage and for

15 their employees, and, in particular, the impact

16 of—

17 (i) guaranteed availability of health

18 coverage,

19 (ii) limitations of restrictions from

20 coverage of preexisting conditions,

21 (iii) requirement for continuity of cov22 erage,

23 (iv) risk-management mechanisms for

24 health coverage,

25 (v) limits on premium variations,
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1 (vi) limits on annual premium in2 creases, and

3 (vii) preemption of State benefit man4 dates.

5 In performing such evaluation, the Secretary

6 shall seek to discount the effect of the insur7 ance cycle on health insurance premiums.

8 (C) An assessment of the implications of

9 the reforms on adverse selection among small

10 employer health benefit plans and the distribu11 tion of risk among small employer health bene12 fit plans.

13 (c) ADVISORY COMMITTEE.—The Secretary shall pro14 vide for appointment of an advisory committee to advise

15 the Director concerning activities of the Office under this

16 subtitle. Membership on the committee shall consist of 17

17 individuals and shall include individuals from the general

18 public, small and large business, labor, insurance and

19 other health benefit plans, and health care providers, and

20 shall include experts in the fields of the actuarial science,

21 health economics, and health services research. The Sec22 retary may include, as additional, ex officio members of

23 the committee, such representatives of government agen24 cies as the Secretary deems appropriate. The chairperson

25 of the committee shall not be a health care provider or
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1 receive any direct or indirect compensation from an in2 surer, health benefit plan, or a health care provider.

3 SEC. 111. RESEARCH AND DEMONSTRATION PROJECTS; DE4 VELOPMENT OF A HEALTH RISK POOLING

5 MODEL.

6 (a) RESEARCH AND DEMONSTRATIONS.—The Direc7 tor is authorized, directly, by contract, and through grants

8 and cooperative agreements within the Department of

9 Health and Human Services and outside the Depart10 ment—

11 (1) to conduct research on the the impact of

12 this subtitle on the availability of affordable health

13 coverage for employees and dependents in the small

14 employers group health care coverage market and

15 other topics described in section 110(b), and

16 (2) to conduct demonstration projects relating

17 to such topics.

18 (b) DEVELOPMENT OF METHODS OF MEASURING

19 RELATIVE HEALTH RISK.—

20 (1) IN GENERAL.—The Director shall develop

21 methods for measuring, in terms of the expected

22 costs of providing benefits under small employer

23 health benefit plans and, in particular, MedAccess

24 plans, the relative health risks of eligible individuals.

25 (2) METHODOLOGY.—The methods—
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1 (A) shall rely on diagnosis or other health2 related information that is predictive of individ3 ual health care needs,

4 (B) may rely upon information routinely

5 collected in the process of making payments

6 under health benefit plans, and

7 (C) may provide for such random, sample

8 audits of records as may be necessary to verify

9 the accuracy of measurements.

10 (c) DEVELOPMENT OF A HEALTH RISK POOLING

11 MODEL.—

12 (1) IN GENERAL.—The Director shall develop a

13 model, based on the methods of measuring risks

14 under subsection (b), for equitably distributing

15 health risks among carriers in the small employer

16 health care coverage market.

17 (2) REDISTRIBUTION OF RISK.—Under such

18 model, carriers with below average health risks

19 would be required to contribute to a common fund

20 for payment to carriers with above average health

21 risks, each in relation to the degree of their favor22 able or adverse risk selection.

23 (3) INCENTIVES.—Such model shall include in24 centives to encourage continuous coverage of eligible

25 individuals and small employers.
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1 (d) CONSULTATION.—The methods and model under

2 this section shall be developed in consultation with the

3 NAIC and the advisory committee established under sec4 tion 110(c).

5 (e) REPORT.—By not later than January 1, 1995,

6 the Director shall submit to Congress a report on the

7 methods and model developed under this section (as well

8 as on research and demonstration projects conducted

9 under subsection (a)). The Director shall include in the

10 report such recommendations respecting the application of

11 the model to small employer carriers (and, in particular,

12 to MedAccess plans) under this subtitle as the Director

13 deems appropriate.

14 (f) AUTHORIZATION OF APPROPRIATIONS.—There

15 are authorized to be appropriated to carry out this section,

16 $5,000,000 in each of fiscal years 1994 through 1998.

17 SEC. 112. GENERAL DEFINITIONS.

18 In this subtitle:

19 (1) The term ‘‘carrier’’ means any entity which

20 provides health insurance or health benefits in a

21 State, and includes a licensed insurance company, a

22 prepaid hospital or medical service plan, a health

23 maintenance organization, the plan sponsor of a

24 multiple employer welfare arrangement or an em25 ployee benefit plan (as defined under the Employee
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1 Retirement Income Security Act of 1974), or any

2 other entity providing a plan of health insurance

3 subject to State insurance regulation, but such term

4 does not include for purposes of section 103 an en5 tity that provides health insurance or health benefits

6 under a multiple employer welfare arrangement.

7 (2) The term ‘‘consumer protection standards’’

8 means the standards established under section

9 101(a) to carry out the requirements of the follow10 ing sections:

11 (A) Section 104 (relating to limitation on

12 pre-existing condition clauses; assurance of con13 tinuity of coverage).

14 (B) Section 106 (relating to renewability

15 generally).

16 (C) With respect only to small employer

17 health benefit plans—

18 (i) section 105 (relating to limits on

19 premiums and other requirements for ini20 tial writing of plans), and

21 (ii) section 107 (relating to limits on

22 annual premium increases).

23 (3) The term ‘‘Director’’ means the Director of

24 the Office of Private Health Care Coverage estab25 lished under section 110(a).
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1 (4)(A) Subject to subparagraph (B), the term

2 ‘‘employer health benefit plan’’ means a health bene3 fit plan (including an employee welfare benefit plan,

4 as defined in section 3(1) of the Employee Retire5 ment Income Security Act of 1974) which is offered

6 to employees through an employer and for which the

7 employer provides for any contribution to such plan

8 or any premium for such plan are deducted by the

9 employer from compensation to the employee.

10 (B) A State may provide (for a plan in a State)

11 that the term ‘‘employer health benefit plan’’ does

12 not include an association plan (as defined in sub13 paragraph (C)) for purposes of some or all of the

14 provisions of this subtitle.

15 (C) For purposes of subparagraph (B), the

16 term ‘‘association plan’’ means a health benefit plan

17 offered by an organization to its members if the or18 ganization was formed other than for purposes of

19 purchasing insurance.

20 (5) The term ‘‘full-time employee’’ means, with

21 respect to an employer, an individual who normally

22 is employed for at least 30 hours per week by the

23 employer.

24 (6) The term ‘‘health benefit plan’’ means any

25 hospital or medical expense incurred policy or certifi-
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1 cate, hospital or medical service plan contract, or

2 health maintenance subscriber contract, or a mul3 tiple employer welfare arrangement or employee ben4 efit plan (as defined under the Employee Retirement

5 Income Security Act of 1974) which provides bene6 fits with respect to health care services, but does not

7 include—

8 (A) coverage only for accident, dental, vi9 sion, disability income, or long-term care insur10 ance, or any combination thereof,

11 (B) medicare supplemental health insur12 ance,

13 (C) coverage issued as a supplement to li14 ability insurance,

15 (D) worker’s compensation or similar in16 surance, or

17 (E) automobile medical-payment insurance,

18 or any combination thereof.

19 (7) The term ‘‘health maintenance organiza20 tion’’ includes, as defined in standards established

21 under section 101, a carrier that meets specified

22 standards and that offers to provide health services

23 on a prepaid, at-risk basis primarily through a de24 fined set of providers.
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1 (8) The term ‘‘MedAccess standards’’ means

2 the standards established under section 101(a)(1)(A)

3 relating to the requirements of section 103, and in4 cludes the consumer protection standards insofar as

5 such standards apply to MedAccess plans.

6 (9) The term ‘‘Secretary’’ means the Secretary

7 of Health and Human Services.

8 (10) The term ‘‘small employer’’ means an en9 tity actively engaged in business which, on at least

10 50 percent of its working days during the preceding

11 year, employed at least 2, but fewer than 36, full12 time employees. For purposes of determining if an

13 employer is a small employer, rules similar to the

14 rules of subsection (b) and (c) of section 414 of the

15 Internal Revenue Code of 1986 shall apply.

16 (11) The term ‘‘small employer carrier’’ means

17 a carrier with respect to the issuance of a small em18 ployer health benefit plan.

19 (12) The term ‘‘small employer health benefit

20 plan’’ means an employer health benefit plan which

21 provides coverage to one or more full-time employees

22 of a small employer.

23 (13) The term ‘‘State’’ means the 50 States,

24 the District of Columbia, Puerto Rico, the Virgin Is25 lands, Guam, and American Samoa.
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1 (14) The term ‘‘State commissioner of insur2 ance’’ includes a State superintendent of insurance.

3 Subtitle B—Improved Small

4 Employer Purchasing Power of

5 Affordable Health Insurance

6 SEC. 121. PREEMPTION FROM INSURANCE MANDATES FOR

7 QUALIFIED SMALL EMPLOYER PURCHASING

8 GROUPS.

9 (a) QUALIFIED SMALL EMPLOYER PURCHASING

10 GROUP DEFINED.—For purposes of this section, an asso11 ciation is a qualified small employer purchasing group if—

12 (1) the association submits an application to

13 the Secretary of Health and Human Services at such

14 time and in such form as the Secretary may require;

15 and

16 (2) on the basis of information contained in the

17 application and any other information the Secretary

18 may require, the Secretary determines that—

19 (A) the association is administered solely

20 under the authority and control of its member

21 employers,

22 (B) the association’s membership consists

23 solely of employers with not more than 100 em24 ployees (except that an employer member of the

25 group may retain its membership in the group
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1 if, after the Secretary determines that the asso2 ciation meets the requirements of this para3 graph, the number of employees of the employer

4 member increases to more than 100),

5 (C) with respect to each State in which its

6 members are located, the association consists of

7 not fewer than 100 employers, and

8 (D) at the time the association submits its

9 application, the health benefit plans with re10 spect to the employer members of the associa11 tion are in compliance with applicable State

12 laws relating to health benefit plans.

13 (b) PREEMPTION FROM INSURANCE MANDATES.—

14 (1) FINDING.—Congress finds that employer

15 purchasing groups organized for the purpose of ob16 taining health insurance for employer members af17 fect interstate commerce.

18 (2) PREEMPTION OF STATE MANDATES.—In the

19 case of a qualified small employer purchasing group

20 described in subsection (a), no provision of State law

21 shall apply that requires the offering, as part of the

22 health benefit plan with respect to an employer

23 member of such a group, of any services, category

24 of care, or services of any class or type of provider.
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1 (3) PREEMPTION OF PROVISIONS PROHIBITING

2 EMPLOYER GROUPS FROM PURCHASING HEALTH IN3 SURANCE.—In the case of a qualified small employer

4 purchasing group described in subsection (a), no

5 provision of State or local law shall apply that pro6 hibits a group of employers from purchasing health

7 insurance with respect to member employers of the

8 group or their employees.

9 (c) EFFECTIVE DATE.—This section shall take effect

10 60 days after the date of the enactment of this Act.

11 Subtitle C—Health Deduction

12 Fairness

13 SEC. 131. PERMANENT EXTENSION AND INCREASE IN

14 HEALTH INSURANCE TAX DEDUCTION FOR

15 SELF-EMPLOYED INDIVIDUALS.

16 (a) PERMANENT EXTENSION OF DEDUCTION.—

17 (1) IN GENERAL.—Subsection (l) of section 162

18 of the Internal Revenue Code of 1986 (relating to

19 special rules for health insurance costs of self-em20 ployed individuals) is amended by striking paragraph

21 (6).

22 (2) CONFORMING AMENDMENT.—Paragraph (2)

23 of section 110(a) of the Tax Extension Act of 1991

24 is hereby repealed.
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1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to taxable years begin3 ning after December 31, 1991.

4 (b) INCREASE IN AMOUNT OF DEDUCTION.—

5 (1) IN GENERAL.—Paragraph (1) of section

6 162(l) of such Code is amended by striking ‘‘25 per7 cent of’’ and inserting ‘‘100 percent (50 percent in

8 the case of taxable years beginning in 1995 or 1996)

9 of’’.

10 (2) EFFECTIVE DATE.—The amendment made

11 by paragraph (1) shall apply to taxable years begin12 ning after December 31, 1994.

13 Subtitle D—Improved Access to

14 Community Health Services

15 PART 1—INCREASED AUTHORIZATION FOR COMMUNITY

16 AND MIGRANT HEALTH CENTERS

17 SEC. 141. GRANT PROGRAM TO PROMOTE PRIMARY

18 HEALTH CARE SERVICES FOR UNDERSERVED

19 POPULATIONS.

20 (a) AUTHORIZATION.—The Secretary of Health and

21 Human Services shall provide for a program of grants to

22 migrant and community health centers (receiving grants

23 or contracts under section 329, 330, or 340 of the Public

24 Health Service Act) in order to promote the provision of
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1 primary health care services for underserved individuals.

2 Such grants may be used—

3 (1) to promote the provision of off-site services

4 (through means such as mobile medical clinics);

5 (2) to improve birth outcomes in areas with

6 high infant mortality and morbidity;

7 (3) to establish primary care clinics in areas

8 identified as in need of such clinics; and

9 (4) for recruitment and training costs of nec10 essary providers and operating costs for unreim11 bursed services.

12 (b) CONDITIONS.—(1) Grants under this subsection

13 shall only be made upon application, approved by the Sec14 retary.

15 (2) The amount of grants made under this section

16 shall be determined by the Secretary.

17 (c) AUTHORIZATION OF APPROPRIATIONS.—There

18 are authorized to be appropriated—

19 (1) in fiscal year 1994, $100,000,000,

20 (2) in fiscal year 1995, $200,000,000,

21 (3) in fiscal year 1996, $300,000,000,

22 (4) in fiscal year 1997, $400,000,000, and

23 (5) in fiscal year 1998, $500,000,000,

24 to carry out this section. Of the amounts appropriated

25 each fiscal year under this section, at least 10 percent
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1 shall be used for grants described in subsection (a)(1) and

2 at least 10 percent shall be used for grants described in

3 subsection (a)(2).

4 (d) STUDY AND REPORT.—The Secretary shall con5 duct a study of the impact of the grants made under this

6 section to migrant and community health centers on ac7 cess to health care, birth outcomes, and the use of emer8 gency room services. Not later than 2 years after the date

9 of the enactment of this Act, the Secretary shall submit

10 to Congress a report on such study and on recommenda11 tions for changes in the programs under this section in

12 order to promote the appropriate use of cost-effective out13 patient services.

14 PART 2—GRANTS FOR PROJECTS FOR COORDINATING

15 DELIVERY OF SERVICES

16 SEC. 151. PROJECTS FOR COORDINATING DELIVERY OF

17 OUTPATIENT PRIMARY HEALTH SERVICES.

18 Part D of title III of the Public Health Service Act

19 (42 U.S.C. 254b et seq.) is amended by adding at the end

20 the following new subpart:

21 ‘‘Subpart VII—Delivery of Services

22 ‘‘PROJECTS FOR COORDINATING DELIVERY OF SERVICES

23 ‘‘SEC. 340E. (a) AUTHORITY FOR GRANTS.—

24 ‘‘(1) IN GENERAL.—The Secretary may make

25 grants to public and nonprofit private entities to
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1 carry out demonstration projects for the purpose of

2 increasing access to outpatient primary health serv3 ices in geographic areas described in subsection (b)

4 through coordinating the delivery of such services

5 under Federal, State, local, and private programs.

6 ‘‘(2) REQUIREMENT REGARDING PLAN.—The

7 Secretary may make a grant under paragraph (1)

8 only if—

9 ‘‘(A) the applicant involved has received a

10 grant under subsection (l) and the Secretary

11 has approved the plan developed with such

12 grant; and

13 ‘‘(B) the applicant agrees to carry out the

14 project under paragraph (1) in accordance with

15 the plan.

16 ‘‘(b) QUALIFIED HEALTH SERVICE AREAS.—

17 ‘‘(1) IN GENERAL.—A geographic area de18 scribed in this subsection is a geographic area

19 that—

20 ‘‘(A) is a rational area for the delivery of

21 health services;

22 ‘‘(B) has a population of not more than

23 500,000 individuals; and
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1 ‘‘(C)(i) has been designated by the Sec2 retary as an area with a shortage of personal

3 health services; or

4 ‘‘(ii) has a significant number of individ5 uals who have low incomes or who have insuffi6 cient insurance regarding health care.

7 ‘‘(2) AUTHORITY REGARDING MULTIPLE POLIT8 ICAL SUBDIVISIONS.—The Secretary shall make a

9 determination of whether a geographic area is a geo10 graphic area described in paragraph (1) without re11 gard to whether the area is a political subdivision,

12 without regard to whether the area is located in 2

13 or more political subdivisions or States, and without

14 regard to whether the area encompasses 2 or more

15 political subdivisions.

16 ‘‘(c) PREFERENCES IN MAKING GRANTS.—In making

17 grants under subsection (a), the Secretary shall give pref18 erence to applicants demonstrating that, with respect to

19 the outpatient primary health services that will be the sub20 ject of the project conducted by the applicant under such

21 subsection—

22 ‘‘(1)(A) the project will result in the reduction

23 of administrative expenses associated with such serv24 ices by increasing the efficiency of the administrative

25 processes of the providers participating in the
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1 project, and (B) the resulting savings will be ex2 pended for the direct provision of such services for

3 the designated population; or

4 ‘‘(2) the services that will be the subject of the

5 project will be provided in facilities that are

6 underutilized.

7 ‘‘(d) ACTIVITIES OF PROJECT MUST SERVE DES8 IGNATED POPULATION.—The Secretary may make a

9 grant under subsection (a) to an applicant only if the ap10 plicant demonstrates that carrying out the project under

11 such subsection will increase access to outpatient primary

12 health services for a significant segment of the designated

13 population.

14 ‘‘(e) MATCHING FUNDS.—

15 ‘‘(1) IN GENERAL.—With respect to the costs of

16 the project to be carried out under subsection (a) by

17 an applicant, the Secretary may make a grant under

18 such subsection only if the applicant agrees to make

19 available (directly or through donations from public

20 or private entities) non-Federal contributions toward

21 such costs in an amount that is not less than 50

22 percent of such costs.

23 ‘‘(2) DETERMINATION OF AMOUNT CONTRIB24 UTED.—Non-Federal contributions required in para25 graph (1) may be in cash or in kind, fairly evalu-
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1 ated, including plant, equipment, or services.

2 Amounts provided by the Federal Government, or

3 services assisted or subsidized to any significant ex4 tent by the Federal Government, may not be in5 cluded in determining the amount of such non-Fed6 eral contributions.

7 ‘‘(f) CERTAIN LIMITATIONS REGARDING GRANTS.—

8 ‘‘(1) PROVISION OF HEALTH SERVICES; CON9 STRUCTION OF FACILITIES.—The Secretary may

10 make a grant under subsection (a) only if the appli11 cant involved agrees that the grant will not be ex12 pended for the direct provision of any health service

13 or for the construction or renovation of facilities.

14 ‘‘(2) DURATION AND AMOUNT OF GRANT.—The

15 period during which payments are made for a

16 project under subsection (a) may not exceed 4 years,

17 and the aggregate amount of such payments for the

18 period may not exceed $200,000. The provision of

19 such payments shall be subject to annual approval

20 by the Secretary of the payments and subject to the

21 availability of appropriations for the fiscal year in22 volved to make the payments.

23 ‘‘(3) FINANCIAL CAPACITY FOR CONTINUATION

24 OF PROJECT AFTER TERMINATION OF GRANT.—The

25 Secretary may make a grant under subsection (a)
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1 only if the Secretary determines that there is a rea2 sonable basis for believing that, after termination of

3 payments under such subsection pursuant to para4 graph (2), the project under such subsection will

5 have the financial capacity to continue operating.

6 ‘‘(g) AGREEMENTS AMONG PARTICIPANTS IN

7 PROJECTS.—

8 ‘‘(1) REQUIRED PARTICIPANTS.—The Secretary

9 may make a grant under subsection (a) only if the

10 applicant for the grant has, for purposes of carrying

11 out a project under such subsection, entered into

12 agreements with—

13 ‘‘(A) the chief public health officers, and

14 the chief health officers for the elementary and

15 secondary schools, of each of the political sub16 divisions of the qualified health service area in

17 which the project under such subsection is to be

18 carried out (or, in the case of a political sub19 division that does not have such an official,

20 with another appropriate official of such sub21 division);

22 ‘‘(B) each hospital in the qualified health

23 service area;

24 ‘‘(C) representatives of entities in such

25 area that provide outpatient primary health
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1 services under Federal, State, local, or private

2 programs;

3 ‘‘(D) representatives of businesses in such

4 area, including small businesses; and

5 ‘‘(E) representatives of nonprofit private

6 entities in such area.

7 ‘‘(2) OPTIONAL PARTICIPANTS.—With respect

8 to compliance with this section, a grantee under sub9 section (a) may, for purposes of carrying out a

10 project under such subsection, enter into such agree11 ments with public and private entities in the quali12 fied health service area involved (in addition to the

13 entities specified in paragraph (1)) as the grantee

14 may elect.

15 ‘‘(h) EXPENDITURES OF GRANT.—With respect to a

16 project under subsection (a), the purposes for which a

17 grant under such subsection may be expended include (but

18 are not limited to) expenditures to increase the efficiency

19 of the administrative processes of providers participating

20 in the project, paying the costs of hiring and compensating

21 staff, obtaining computers and other equipment (including

22 vehicles to transport individuals to programs providing

23 outpatient primary health services), and developing and

24 operating provider networks.
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1 ‘‘(i) MAINTENANCE OF EFFORT.—In the case of serv2 ices and populations that are the subject of a project

3 under subsection (a), the Secretary may make such a

4 grant for a fiscal year only if the applicant involved agrees

5 that the applicant, and each entity making an agreement

6 under subsection (g), will maintain expenditures of non7 Federal amounts for such services and populations at a

8 level that is not less than the level of such expenditures

9 maintained by the applicant and the entity, respectively,

10 for the fiscal year preceding the first fiscal year for which

11 the applicant receives such a grant.

12 ‘‘(j) REPORTS TO SECRETARY.—The Secretary may

13 make a grant under subsection (a) only if the applicant

14 involved agrees to submit to the Secretary such reports

15 on the project carried out under such subsection as the

16 Secretary may require.

17 ‘‘(k) EVALUATIONS AND DISSEMINATION OF INFOR18 MATION.—The Secretary shall provide for evaluations of

19 projects carried out under subsection (a), and for the col20 lection and dissemination of information developed as a

21 result of such projects and as a result of similar projects.

22 ‘‘(l) PLANNING GRANTS.—

23 ‘‘(1) IN GENERAL.—The Secretary may make

24 grants to public and nonprofit private entities for

25 the purpose of developing plans to carry out projects
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1 under subsection (a). Such a grant may be made

2 only if the applicant involved submits to the Sec3 retary information—

4 ‘‘(A) providing a detailed statement of the

5 proposal of the applicant for carrying out the

6 project;

7 ‘‘(B) identifying the geographic area in

8 which the project is to be carried out; and

9 ‘‘(C) demonstrating that the area is a

10 qualified health service area and that the pro11 posal otherwise is in accordance with the re12 quirements established in this section for the

13 receipt of a grant under subsection (a).

14 ‘‘(2) DURATION AND AMOUNT OF GRANT.—The

15 period during which payments are made under para16 graph (1) for the development of a plan under such

17 paragraph may not exceed 1 year, and the amount

18 of such payments may not exceed $100,000.

19 ‘‘(m) APPLICATION FOR GRANT.—The Secretary may

20 make a grant under subsection (a) or (l) only if the appli21 cant for the grant submits an application to the Secretary

22 that—

23 ‘‘(1) contains any agreements, assurances, and

24 information required in this section with respect to

25 the grant; and
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1 ‘‘(2) is in such form, is made in such manner,

2 and contains such other agreements, assurances, and

3 information as the Secretary determines to be nec4 essary to carry out the purpose for which the grant

5 is to be provided.

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

7 ‘‘(1) The term ‘‘designated population’’ means

8 individuals described in subsection (b)(1)(C)(ii).

9 ‘‘(2) The term ‘primary health services’ includes

10 preventive health services.

11 ‘‘(3) The term ‘qualified health service area’

12 means a geographic area described in subsection (b).

13 ‘‘(o) AUTHORIZATION OF APPROPRIATIONS.—

14 ‘‘(1) PLANNING FOR PROJECTS.—For the pur15 pose of grants under subsection (l), there is author16 ized to be appropriated $5,000,000 for fiscal year

17 1994, to remain available until expended.

18 ‘‘(2) OPERATION OF PROJECTS.—For the pur19 pose of grants under subsection (a), there is author20 ized to be appropriated an aggregate $10,000,000

21 for the fiscal years 1995 through 1998.’’.
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1 Subtitle E—Improved Access to

2 Rural Health Services

3 PART 1—RURAL EMERGENCY MEDICAL SERVICES

4 AMENDMENTS

5 SEC. 171. OFFICE OF EMERGENCY MEDICAL SERVICES.

6 Title XII of the Public Health Service Act (42 U.S.C.

7 300d et seq.) is amended—

8 (1) in the heading for the title, by striking

9 ‘‘TRAUMA CARE’’ and inserting ‘‘EMERGENCY

10 MEDICAL SERVICES’’;

11 (2) in the heading for part A, by striking

12 ‘‘GENERAL’’ and all that follows and inserting

13 ‘‘GENERAL AUTHORITIES AND DUTIES’’; and

14 (3) by amending section 1201 to read as fol15 lows:

16 ‘‘SEC. 1201. OFFICE OF EMERGENCY MEDICAL SERVICES.

17 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab18 lish an office to be known as the Office of Emergency

19 Medical Services, which shall be headed by a director ap20 pointed by the Secretary. The Secretary shall carry out

21 this title acting through the Director of such Office.

22 ‘‘(b) GENERAL AUTHORITIES AND DUTIES.—With

23 respect to emergency medical services (including trauma

24 care), the Secretary shall—
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1 ‘‘(1) conduct and support research, training,

2 evaluations, and demonstration projects;

3 ‘‘(2) foster the development of appropriate,

4 modern systems of such services through the sharing

5 of information among agencies and individuals in6 volved in the study and provision of such services;

7 ‘‘(3) sponsor workshops and conferences;

8 ‘‘(4) as appropriate, disseminate to public and

9 private entities information obtained in carrying out

10 paragraphs (1) through (3);

11 ‘‘(5) provide technical assistance to State and

12 local agencies;

13 ‘‘(6) coordinate activities of the Department of

14 Health and Human Services; and

15 ‘‘(7) as appropriate, coordinate activities of

16 such Department with activities of other Federal

17 agencies.

18 ‘‘(c) CERTAIN REQUIREMENTS.—With respect to

19 emergency medical services (including trauma care), the

20 Secretary shall ensure that activities under subsection (b)

21 are carried out regarding—

22 ‘‘(1) maintaining an adequate number of health

23 professionals with expertise in the provision of the

24 services, including hospital-based professionals and

25 prehospital-based professionals;
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1 ‘‘(2) developing, periodically reviewing, and re2 vising as appropriate, in collaboration with appro3 priate public and private entities, guidelines for the

4 provision of such services (including, for various typ5 ical circumstances, guidelines on the number and va6 riety of professionals, on equipment, and on train7 ing);

8 ‘‘(3) the appropriate use of available tech9 nologies, including communications technologies; and

10 ‘‘(4) the unique needs of underserved inner-city

11 areas and underserved rural areas.

12 ‘‘(d) GRANTS, COOPERATIVE AGREEMENTS, AND

13 CONTRACTS.—In carrying out subsections (b) and (c), the

14 Secretary may make grants and enter into cooperative

15 agreements and contracts.

16 ‘‘(e) DEFINITIONS.—For purposes of this part:

17 ‘‘(1) The term ‘hospital-based professional’

18 means a health professional (including an allied

19 health professional) who has expertise in providing

20 one or more emergency medical services and who

21 normally provides the services at a medical facility.

22 ‘‘(2) The term ‘prehospital-based professional’

23 means a health professional (including an allied

24 health professional) who has expertise in providing

25 one or more emergency medical services and who
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1 normally provides the services at the site of the med2 ical emergency or during transport to a medical fa3 cility.’’.

4 SEC. 172. STATE OFFICES OF EMERGENCY MEDICAL

5 SERVICES.

6 (a) TECHNICAL AMENDMENTS TO FACILITATE ES7 TABLISHMENT OF PROGRAM.—

8 (1) IN GENERAL.—Title XII of the Public

9 Health Service Act (42 U.S.C. 300d et seq.) is

10 amended—

11 (A) by redesignating section 1232 as sec12 tion 1251;

13 (B) by redesignating sections 1231 and

14 1233 as sections 1241 and 1242, respectively;

15 and

16 (C) by redesignating sections 1211 through

17 1222 as sections 1221 through 1232, respec18 tively.

19 (2) MODIFICATIONS IN FORMAT OF TITLE

20 XII.—Title XII of the Public Health Service Act, as

21 amended by paragraph (1) of this subsection, is

22 amended—

23 (A) by striking ‘‘PART B’’ and all that fol24 lows through ‘‘STATE PLANS’’ and inserting the

25 following:
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1 ‘‘Subpart II—Formula Grants With Respect to

2 Modifications of State Plans’’;

3 (B) by striking ‘‘PART C—GENERAL PRO4 VISIONS’’ and inserting the following:

5 ‘‘Subpart III—General Provisions’’;

6 (C) by redesignating sections 1202 and

7 1203 as sections 1211 and 1212, respectively;

8 and

9 (D) by inserting before section 1211 (as so

10 redesignated) the following:

11 ‘‘PART B—TRAUMA CARE

12 ‘‘Subpart I—Advisory Council; Clearinghouse’’.

13 (b) STATE OFFICES.—Title XII of the Public Health

14 Service Act, as amended by subsection (a) of this section,

15 is amended by inserting after section 1201 the following

16 new section:

17 ‘‘SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL

18 SERVICES.

19 ‘‘(a) PROGRAM OF GRANTS.—The Secretary may

20 make grants to States for the purpose of improving the

21 availability and quality of emergency medical services

22 through the operation of State offices of emergency medi23 cal services.

24 ‘‘(b) REQUIREMENT OF MATCHING FUNDS.—
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1 ‘‘(1) IN GENERAL.—The Secretary may not

2 make a grant under subsection (a) unless the State

3 involved agrees, with respect to the costs to be in4 curred by the State in carrying out the purpose de5 scribed in such subsection, to provide non-Federal

6 contributions toward such costs in an amount that—

7 ‘‘(A) for the first fiscal year of payments

8 under the grant, is not less than $1 for each $3

9 of Federal funds provided in the grant;

10 ‘‘(B) for any second fiscal year of such

11 payments, is not less than $1 for each $1 of

12 Federal funds provided in the grant; and

13 ‘‘(C) for any third fiscal year of such pay14 ments, is not less than $3 for each $1 of Fed15 eral funds provided in the grant.

16 ‘‘(2) DETERMINATION OF AMOUNT OF NON17 FEDERAL CONTRIBUTION.—

18 ‘‘(A) Subject to subparagraph (B), non19 Federal contributions required in paragraph (1)

20 may be in cash or in kind, fairly evaluated, in21 cluding plant, equipment, or services. Amounts

22 provided by the Federal Government, or serv23 ices assisted or subsidized to any significant ex24 tent by the Federal Government, may not be in-
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1 cluded in determining the amount of such non2 Federal contributions.

3 ‘‘(B) The Secretary may not make a grant

4 under subsection (a) unless the State involved

5 agrees that—

6 ‘‘(i) for the first fiscal year of pay7 ments under the grant, 100 percent or less

8 of the non-Federal contributions required

9 in paragraph (1) will be provided in the

10 form of in-kind contributions;

11 ‘‘(ii) for any second fiscal year of such

12 payments, not more than 50 percent of

13 such non-Federal contributions will be pro14 vided in the form of in-kind contributions;

15 and

16 ‘‘(iii) for any third fiscal year of such

17 payments, such non-Federal contributions

18 will be provided solely in the form of cash.

19 ‘‘(c) CERTAIN REQUIRED ACTIVITIES.—The Sec20 retary may not make a grant under subsection (a) unless

21 the State involved agrees that activities carried out by an

22 office operated pursuant to such subsection will include—

23 ‘‘(1) coordinating the activities carried out in

24 the State that relate to emergency medical services;
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1 ‘‘(2) activities regarding the matters described

2 in paragraphs (1) through (4) section 1201(b); and

3 ‘‘(3) identifying Federal and State programs re4 garding emergency medical services and providing

5 technical assistance to public and nonprofit private

6 entities regarding participation in such programs.

7 ‘‘(d) REQUIREMENT REGARDING ANNUAL BUDGET

8 FOR OFFICE.—The Secretary may not make a grant

9 under subsection (a) unless the State involved agrees that,

10 for any fiscal year for which the State receives such a

11 grant, the office operated pursuant to subsection (a) will

12 be provided with an annual budget of not less than

13 $50,000.

14 ‘‘(e) CERTAIN USES OF FUNDS.—

15 ‘‘(1) RESTRICTIONS.—The Secretary may not

16 make a grant under subsection (a) unless the State

17 involved agrees that—

18 ‘‘(A) if research with respect to emergency

19 medical services is conducted pursuant to the

20 grant, not more than 10 percent of the grant

21 will be expended for such research; and

22 ‘‘(B) the grant will not be expended to pro23 vide emergency medical services (including pro24 viding cash payments regarding such services).
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1 ‘‘(2) ESTABLISHMENT OF OFFICE.—Activities

2 for which a State may expend a grant under sub3 section (a) include paying the costs of establishing

4 an office of emergency medical services for purposes

5 of such subsection.

6 ‘‘(f) REPORTS.—The Secretary may not make a

7 grant under subsection (a) unless the State involved

8 agrees to submit to the Secretary reports containing such

9 information as the Secretary may require regarding activi10 ties carried out under this section by the State.

11 ‘‘(g) REQUIREMENT OF APPLICATION.—The Sec12 retary may not make a grant under subsection (a) unless

13 an application for the grant is submitted to the Secretary

14 and the application is in such form, is made in such man15 ner, and contains such agreements, assurances, and infor16 mation as the Secretary determines to be necessary to

17 carry out this section.’’.

18 SEC. 173. PROGRAMS FOR RURAL AREAS.

19 (a) IN GENERAL.—Title XII of the Public Health

20 Service Act, as amended by section 172 of this Act, is

21 amended—

22 (1) by transferring section 1204 to part A;

23 (2) by redesignating such section as section

24 1203;
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1 (3) by inserting such section after section 1202;

2 and

3 (4) in section 1203 (as so redesignated)—

4 (A) by redesignating subsection (c) as sub5 section (d); and

6 (B) by inserting after subsection (b) the

7 following new subsection:

8 ‘‘(c) DEMONSTRATION PROGRAM REGARDING TELE9 COMMUNICATIONS.—

10 ‘‘(1) LINKAGES FOR RURAL FACILITIES.—

11 Projects under subsection (a)(1) shall include dem12 onstration projects to establish telecommunications

13 between rural medical facilities and medical facilities

14 that have expertise or equipment that can be utilized

15 by the rural facilities through the telecommuni16 cations.

17 ‘‘(2) MODES OF COMMUNICATION.—The Sec18 retary shall ensure that the telecommunications

19 technologies demonstrated under paragraph (1) in20 clude (interactive) video telecommunications, (static

21 video imaging transmitted through the telephone

22 system), and facsimiles transmitted through such

23 system.’’.

24 (b) CONFORMING AMENDMENT.—Section 1203 of the

25 Public Health Service Act, as redesignated by subsection
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1 (a)(2) of this section, is amended in the heading for the

2 section by striking ‘‘ESTABLISHMENT’’ and all that fol3 lows and inserting ‘‘PROGRAMS FOR RURAL AREAS.’’.

4 SEC. 174. FUNDING.

5 Title XII of the Public Health Service Act, as amend6 ed by the preceding provisions of this part, is amended—

7 (1) by adding at the end the following new part:

8 ‘‘PART C—FUNDING’’;

9 (2) by transferring section 1251 to part C (as

10 so added); and

11 (3) in such section, by striking subsections (a)

12 and (b) and inserting the following:

13 ‘‘(a) EMERGENCY MEDICAL SERVICES GEN14 ERALLY.—

15 ‘‘(1) IN GENERAL.—For the purpose of carry16 ing out section 1201 other than with respect to trau17 ma care, there are authorized to be appropriated

18 $2,000,000 for fiscal year 1994, and such sums as

19 may be necessary for each of the fiscal years 1995

20 and 1996.

21 ‘‘(2) STATE OFFICES.—For the purpose of car22 rying out section 1202, there are authorized to be

23 appropriated $3,000,000 for fiscal year 1994, and

24 such sums as may be necessary for each of the fiscal

25 years 1995 and 1996.
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1 ‘‘(3) CERTAIN TELECOMMUNICATIONS DEM2 ONSTRATIONS.—For the purpose of carrying out sec3 tion 1203(c), there are authorized to be appro4 priated $10,000,000 for fiscal year 1994, and such

5 sums as may be necessary for each of the fiscal

6 years 1995 and 1996.

7 ‘‘(b) TRAUMA CARE AND CERTAIN OTHER ACTIVI8 TIES.—

9 ‘‘(1) IN GENERAL.—For the purpose of carry10 ing out part B, section 1201 with respect to trauma

11 care, and section 1203 (other than subsection (c) of

12 such section), there are authorized to be appro13 priated $60,000,000 for fiscal year 1994, and such

14 sums as may be necessary for each of the fiscal

15 years 1995 and 1996.

16 ‘‘(2) ALLOCATION OF FUNDS BY SECRETARY.—

17 ‘‘(A) For the purpose of carrying out sub18 part I of part B, section 1201 with respect to

19 trauma care, and section 1203 (other than sub20 section (c) of such section), the Secretary shall

21 make available 10 percent of the amounts ap22 propriated for a fiscal year under paragraph

23 (1).

24 ‘‘(B) For the purpose of carrying out sec25 tion 1203 (other than subsection (c) of such
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1 section), the Secretary shall make available 10

2 percent of the amounts appropriated for a fiscal

3 year under paragraph (1).

4 ‘‘(C)(i) For the purpose of making allot5 ments under section 1221(a), the Secretary

6 shall, subject to subsection (c), make available

7 80 percent of the amounts appropriated for a

8 fiscal year under paragraph (1).

9 ‘‘(ii) Amounts paid to a State under sec10 tion 1221(a) for a fiscal year shall, for the pur11 poses for which the amounts were paid, remain

12 available for obligation until the end of the fis13 cal year immediately following the fiscal year

14 for which the amounts were paid.’’.

15 SEC. 175. CONFORMING AMENDMENTS.

16 Title XII of the Public Health Service Act, as amend17 ed by the preceding provisions of this part, is amended—

18 (1) in section 1203(b), by striking ‘‘1214(c)(1)’’

19 and inserting ‘‘1224(c)(1)’’;

20 (2) in section 1211(b)(3), by striking ‘‘1213(c)’’

21 and inserting ‘‘1223(c)’’;

22 (3) in section 1221—

23 (A) in subsection (a)—

24 (i) by striking ‘‘1218’’ and inserting

25 ‘‘1228’’; and
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1 (ii) by striking ‘‘1217’’ and inserting

2 ‘‘1227’’; and

3 (B) in subsection (b)—

4 (i) by striking ‘‘1233’’ and inserting

5 ‘‘1242’’; and

6 (ii) by striking ‘‘1213’’ and inserting

7 ‘‘1223’’;

8 (4) in section 1222—

9 (A) in subsection (a)—

10 (i) in paragraph (1), by striking

11 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’; and

12 (ii) in paragraph (2)(A), by striking

13 ‘‘1211(c)’’ and inserting ‘‘1221(c)’’; and

14 (B) in subsection (b), by striking

15 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’;

16 (5) in section 1223—

17 (A) in subsection (a), by striking

18 ‘‘1211(b)’’ and inserting ‘‘1221(b)’’;

19 (B) in subsection (b)—

20 (i) in paragraph (1), by striking

21 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’; and

22 (ii) in paragraph (3), by striking

23 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’; and

24 (C) in subsection (d), by striking

25 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’;
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1 (6) in section 1224—

2 (A) in each of subsections (a) through (c),

3 by striking ‘‘1211(a)’’ and inserting ‘‘1221(a)’’;

4 and

5 (B) in subsection (b), by striking

6 ‘‘1213(a)(7)’’ and inserting ‘‘1223(a)(7)’’;

7 (7) in section 1225—

8 (A) in subsection (a)—

9 (i) by striking ‘‘1211(a)’’ and insert10 ing ‘‘1221(a)’’; and

11 (ii) by striking ‘‘1233’’ and inserting

12 ‘‘1242’’; and

13 (B) in subsection (b), by striking

14 ‘‘1211(b)’’ and inserting ‘‘1221(b)’’;

15 (8) in section 1226, in each of subsections (a)

16 through (c), by striking ‘‘1211(a)’’ and inserting

17 ‘‘1221(a)’’;

18 (9) in section 1227—

19 (A) by striking ‘‘1211(a)’’ and inserting

20 ‘‘1221(a)’’; and

21 (B) by striking ‘‘1214’’ and inserting

22 ‘‘1224’’;

23 (10) in section 1228—
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1 (A) in each of subsections (a) through (c),

2 by striking ‘‘1211(a)’’ each place such term ap3 pears and inserting ‘‘1221(a)’’;

4 (B) in subsection (b), in each of para5 graphs (2)(A) and (3)(A), by striking

6 ‘‘1232(a)’’ and inserting ‘‘1251(a)’’; and

7 (C) in subsection (c)(2)—

8 (i) by striking ‘‘1232(b)(3)’’ and in9 serting ‘‘1251(b)(3)’’; and

10 (ii) by striking ‘‘1217’’ and inserting

11 ‘‘1227’’;

12 (11) in section 1229(a), by striking ‘‘1211(a)’’

13 each place such term appears and inserting

14 ‘‘1221(a)’’;

15 (12) in section 1230(a), by striking ‘‘1211(a)’’

16 each place such term appears and inserting

17 ‘‘1221(a)’’;

18 (13) in section 1231—

19 (A) in each of subsections (a) and (b), by

20 striking ‘‘1211(a)’’ each place such term ap21 pears and inserting ‘‘1221(a)’’; and

22 (B) in each of subsections (a) and (b), by

23 striking ‘‘1211(b)’’ and inserting ‘‘1221(b)’’;

24 (14) in section 1232, by striking ‘‘1211’’ and

25 inserting ‘‘1221’’;
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1 (15) in section 1241—

2 (A) in the matter preceding paragraph (1),

3 by striking ‘‘this title’’ and inserting ‘‘this

4 part’’; and

5 (B) in paragraph (1), by striking ‘‘1213’’

6 and inserting ‘‘1223’’;

7 (16) in section 1242—

8 (A) in each of subsections (a) and (b), by

9 striking ‘‘1211’’ each place such term appears

10 and inserting ‘‘1221’’;

11 (B) in subsection (b)—

12 (i) by striking ‘‘part B’’ and inserting

13 ‘‘subpart II’’; and

14 (ii) by striking ‘‘1214(c)(1)’’ and in15 serting ‘‘1224(c)(1)’’; and

16 (C) in subsection (c), by striking ‘‘1213’’

17 and inserting ‘‘1223’’; and

18 (17) in section 1251(c)(1)—

19 (A) by striking ‘‘1211(a)’’ and inserting

20 ‘‘1221(a)’’;

21 (B) by striking ‘‘1218(a)(2)’’ and inserting

22 ‘‘1228(a)(2)’’; and

23 (C) by striking ‘‘part B’’ and inserting

24 ‘‘subpart II’’.
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1 SEC. 176. EFFECTIVE DATE.

2 The amendments made by this part shall take effect

3 October 1, 1993, or upon the date of the enactment of

4 this Act, whichever occurs later.

5 PART 2—AIR TRANSPORT FOR RURAL VICTIMS OF

6 MEDICAL EMERGENCIES

7 SEC. 181. GRANTS TO STATES REGARDING AIRCRAFT FOR

8 TRANSPORTING RURAL VICTIMS OF MEDICAL

9 EMERGENCIES.

10 Title XII of the Public Health Service Act (42 U.S.C.

11 300d et seq.), as amended by part 1, is amended by adding

12 at the end thereof the following new part:

13 ‘‘PART D—MISCELLANEOUS GRANT PROGRAMS AND

14 REQUIREMENTS

15 ‘‘SEC. 1261. GRANTS FOR SYSTEMS TO TRANSPORT RURAL

16 VICTIMS OF MEDICAL EMERGENCIES.

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

18 to States to assist such States in the creation or enhance19 ment of air medical transport systems that provide victims

20 of medical emergencies in rural areas with access to treat21 ments for the injuries or other conditions resulting from

22 such emergencies.

23 ‘‘(b) APPLICATION AND PLAN.—

24 ‘‘(1) APPLICATION.—To be eligible to receive a

25 grant under subsection (a), a State shall prepare

26 and submit to the Secretary an application in such
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1 form, made in such manner, and containing such

2 agreements, assurances, and information, including

3 a State plan as required in paragraph (2), as the

4 Secretary determines to be necessary to carry out

5 this section.

6 ‘‘(2) STATE PLAN.—An application submitted

7 under paragraph (1) shall contain a State plan that

8 shall—

9 ‘‘(A) describe the intended uses of the

10 grant proceeds and the geographic areas to be

11 served;

12 ‘‘(B) demonstrates that the geographic

13 areas to be served, as described under subpara14 graph (A), are rural in nature;

15 ‘‘(C) demonstrate that there is a lack of

16 facilities available and equipped to deliver ad17 vanced levels of medical care in the geographic

18 areas to be served;

19 ‘‘(D) demonstrate that in utilizing the

20 grant proceeds for the establishment or en21 hancement of air medical services the State

22 would be making a cost-effective improvement

23 to existing ground-based or air emergency medi24 cal service systems;
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1 ‘‘(E) demonstrate that the State will not

2 utilize the grant proceeds to duplicate the capa3 bilities of existing air medical systems that are

4 effectively meeting the emergency medical needs

5 of the populations they serve;

6 ‘‘(F) demonstrate that in utilizing the

7 grant proceeds the State is likely to achieve a

8 reduction in the morbidity and mortality rates

9 of the areas to be served, as determined by the

10 Secretary;

11 ‘‘(G) demonstrate that the State, in utiliz12 ing the grant proceeds, will—

13 ‘‘(i) maintain the expenditures of the

14 State for air and ground medical transport

15 systems at a level equal to not less than

16 the level of such expenditures maintained

17 by the State for the fiscal year preceding

18 the fiscal year for which the grant is re19 ceived; and

20 ‘‘(ii) ensure that recipients of direct

21 financial assistance from the State under

22 such grant will maintain expenditures of

23 such recipients for such systems at a level

24 at least equal to the level of such expendi25 tures maintained by such recipients for the
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1 fiscal year preceding the fiscal year for

2 which the financial assistance is received;

3 ‘‘(H) demonstrate that persons experienced

4 in the field of air medical service delivery were

5 consulted in the preparation of the State plan;

6 and

7 ‘‘(I) contain such other information as the

8 Secretary may determine appropriate.

9 ‘‘(c) CONSIDERATIONS IN AWARDING GRANTS.—In

10 determining whether to award a grant to a State under

11 this section, the Secretary shall—

12 ‘‘(1) consider the rural nature of the areas to

13 be served with the grant proceeds and the services

14 to be provided with such proceeds, as identified in

15 the State plan submitted under subsection (b); and

16 ‘‘(2) give preference to States with State plans

17 that demonstrate an effective integration of the pro18 posed air medical transport systems into a com19 prehensive network or plan for regional or statewide

20 emergency medical service delivery.

21 ‘‘(d) STATE ADMINISTRATION AND USE OF

22 GRANT.—

23 ‘‘(1) IN GENERAL.—The Secretary may not

24 make a grant to a State under subsection (a) unless

25 the State agrees that such grant will be adminis-
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1 tered by the State agency with principal responsibil2 ity for carrying out programs regarding the provi3 sion of medical services to victims of medical emer4 gencies or trauma.

5 ‘‘(2) PERMITTED USES.—A State may use

6 amounts received under a grant awarded under this

7 section to award subgrants to public and private en8 tities operating within the State.

9 ‘‘(3) OPPORTUNITY FOR PUBLIC COMMENT.—

10 The Secretary may not make a grant to a State

11 under subsection (a) unless that State agrees that,

12 in developing and carrying out the State plan under

13 subsection (b)(2), the State will provide public notice

14 with respect to the plan (including any revisions

15 thereto) and facilitate comments from interested

16 persons.

17 ‘‘(e) NUMBER OF GRANTS.—The Secretary shall

18 award grants under this section to not less than 7 States.

19 ‘‘(f) REPORTS.—

20 ‘‘(1) REQUIREMENT.—A State that receives a

21 grant under this section shall annually (during each

22 year in which the grant proceeds are used) prepare

23 and submit to the Secretary a report that shall con24 tain—
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1 ‘‘(A) a description of the manner in which

2 the grant proceeds were utilized;

3 ‘‘(B) a description of the effectiveness of

4 the air medical transport programs assisted

5 with grant proceeds; and

6 ‘‘(C) such other information as the Sec7 retary may require.

8 ‘‘(2) TERMINATION OF FUNDING.—In reviewing

9 reports submitted under paragraph (1), if the Sec10 retary determines that a State is not using amounts

11 provided under a grant awarded under this section

12 in accordance with the State plan submitted by the

13 State under subsection (b), the Secretary may termi14 nate the payment of amounts under such grant to

15 the State until such time as the Secretary deter16 mines that the State comes into compliance with

17 such plan.

18 ‘‘(g) DEFINITION.—As used in this section, the term

19 ‘rural areas’ means geographic areas that are located out20 side of standard metropolitan statistical areas, as identi21 fied by the Secretary.

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

23 are authorized to be appropriated to make grants under

24 this section, $15,000,000 for fiscal year 1994, and such
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1 sums as may be necessary for each of the fiscal years 1995

2 and 1996.’’.

3 PART 3—EXTENSION OF SPECIAL TREATMENT RULES

4 FOR MEDICARE-DEPENDENT, SMALL RURAL HOSPITALS

5 SEC. 191. EXTENSION OF SPECIAL TREATMENT RULES FOR

6 MEDICARE-DEPENDENT, SMALL RURAL HOS7 PITALS.

8 (a) IN GENERAL.—

9 (1) DETERMINATION OF PAYMENT AMOUNT.—

10 Section 1886(b)(3)(D) of the Social Security Act (42

11 U.S.C. 1395ww(b)(3)(D)) is amended by striking

12 ‘‘March 31, 1993,’’ and inserting ‘‘March 31,

13 1994,’’.

14 (2) ELIGIBILITY FOR DESIGNATION.—Section

15 1886(d)(5)(G)(i) of such Act (42 U.S.C.

16 1395ww(d)(5)(G)(i)) is amended by striking ‘‘March

17 31, 1993,’’ and inserting ‘‘March 31, 1994,’’.

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

19 subsection (a) shall take effect as if included in the enact20 ment of section 6003(f) of the Omnibus Budget Reconcili21 ation Act of 1989.
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1 TITLE II—HEALTH CARE COST

2 CONTAINMENT AND QUALITY

3 ENHANCEMENT

4 Subtitle A—Medical Malpractice

5 Liability Reform

6 PART 1—GENERAL PROVISIONS

7 SEC. 201. FEDERAL REFORM OF MEDICAL MALPRACTICE

8 LIABILITY ACTIONS.

9 (a) CONGRESSIONAL FINDINGS.—

10 (1) EFFECT ON INTERSTATE COMMERCE.—

11 Congress finds that the health care and insurance

12 industries are industries affecting interstate com13 merce and the medical malpractice litigation systems

14 existing throughout the United States affect inter15 state commerce by contributing to the high cost of

16 health care and premiums for malpractice insurance

17 purchased by health care providers.

18 (2) EFFECT ON FEDERAL SPENDING.—Con19 gress finds that the medical malpractice litigation

20 systems existing throughout the United States have

21 a significant effect on the amount, distribution, and

22 use of Federal funds because of—

23 (A) the large number of individuals who

24 receive health care benefits under programs op25 erated or financed by the Federal Government;
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1 (B) the large number of individuals who

2 benefit because of the exclusion from Federal

3 taxes of the amounts spent by their employers

4 to provide them with health insurance benefits;

5 (C) the large number of health care provid6 ers and health care professionals who provide

7 items or services for which the Federal Govern8 ment makes payments; and

9 (D) the large number of such providers

10 and professionals who have received direct or

11 indirect financial assistance from the Federal

12 Government because of their status as such

13 professionals or providers.

14 (b) APPLICABILITY.—This subtitle shall apply with

15 respect to any medical malpractice liability claim and to

16 any medical malpractice liability action brought in any

17 State or Federal court, except that this subtitle shall not

18 apply to—

19 (1) a claim or action for damages arising from

20 a vaccine-related injury or death to the extent that

21 title XXI of the Public Health Service Act applies to

22 the action; or

23 (2) a claim or action in which the plaintiff’s

24 sole allegation is an allegation of an injury arising

25 from the use of a medical product.
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1 (c) PREEMPTION OF STATE LAW.—Subject to section

2 221, this subtitle supersedes State law only to the extent

3 that State law differs from any provision of law estab4 lished by or under this subtitle. Any issue that is not gov5 erned by any provision of law established by or under this

6 subtitle shall be governed by otherwise applicable State or

7 Federal law.

8 (d) FEDERAL COURT JURISDICTION NOT ESTAB9 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

10 this subtitle shall be construed to establish any jurisdiction

11 in the district courts of the United States over medical

12 malpractice liability actions on the basis of sections 1331

13 or 1337 of title 28, United States Code.

14 SEC. 202. DEFINITIONS.

15 As used in this subtitle:

16 (1) ALTERNATIVE DISPUTE RESOLUTION SYS17 TEM; ADR.—The term ‘‘alternative dispute resolu18 tion system’’ or ‘‘ADR’’ means a system established

19 by a State that provides for the resolution of medical

20 malpractice liability claims in a manner other than

21 through medical malpractice liability actions.

22 (2) CLAIMANT.—The term ‘‘claimant’’ means

23 any person who alleges a medical malpractice liabil24 ity claim, or, in the case of an individual who is de-
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1 ceased, incompetent, or a minor, the person on

2 whose behalf such a claim is alleged.

3 (3) ECONOMIC DAMAGES.—The term ‘‘economic

4 damages’’ means damages paid to compensate an in5 dividual for losses for hospital and other medical ex6 penses, lost wages, lost employment, and other pecu7 niary losses.

8 (4) HEALTH CARE PROFESSIONAL.—The term

9 ‘‘health care professional’’ means any individual who

10 provides health care services in a State and who is

11 required by State law or regulation to be licensed or

12 certified by the State to provide such services in the

13 State.

14 (5) HEALTH CARE PROVIDER.—The term

15 ‘‘health care provider’’ means any organization or

16 institution that is engaged in the delivery of health

17 care services in a State and that is required by State

18 law or regulation to be licensed or certified by the

19 State to engage in the delivery of such services in

20 the State.

21 (6) INJURY.—The term ‘‘injury’’ means any ill22 ness, disease, or other harm that is the subject of

23 a medical malpractice liability action or claim.

24 (7) MEDICAL MALPRACTICE LIABILITY AC25 TION.—The term ‘‘medical malpractice liability ac-
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1 tion’’ means a civil action (other than an action in

2 which the plaintiff’s sole allegation is an allegation

3 of an intentional tort) brought in a State or Federal

4 court against a health care provider or health care

5 professional (regardless of the theory of liability on

6 which the action is based) in which the plaintiff al7 leges a medical malpractice liability claim.

8 (8) MEDICAL MALPRACTICE LIABILITY

9 CLAIM.—The term ‘‘medical malpractice liability

10 claim’’ means a claim in which the claimant alleges

11 that injury was caused by the provision of (or the

12 failure to provide) health care services.

13 (9) MEDICAL PRODUCT.—The term ‘‘medical

14 product’’ means a device (as defined in section

15 201(h) of the Federal Food, Drug, and Cosmetic

16 Act) or a drug (as defined in section 201(g)(1) of

17 the Federal Food, Drug, and Cosmetic Act).

18 (10) NONECONOMIC DAMAGES.—The term

19 ‘‘noneconomic damages’’ means damages paid to

20 compensate an individual for losses for physical and

21 emotional pain, suffering, inconvenience, physical

22 impairment, mental anguish, disfigurement, loss of

23 enjoyment of life, loss of consortium, and other

24 nonpecuniary losses, but does not include punitive

25 damages.
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1 (11) SECRETARY.—The term ‘‘Secretary’’

2 means the Secretary of Health and Human Services.

3 (12) STATE.—The term ‘‘State’’ means each of

4 the several States, the District of Columbia, the

5 Commonwealth of Puerto Rico, the Virgin Islands,

6 Guam, and American Samoa.

7 SEC. 203. EFFECTIVE DATE.

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

9 (b) and sections 219, 242, and 243, this subtitle shall

10 apply with respect to claims accruing or actions brought

11 on or after the expiration of the 3-year period that begins

12 on the date of the enactment of this Act.

13 (b) EXCEPTION FOR STATES REQUESTING EARLIER

14 IMPLEMENTATION OF REFORMS.—

15 (1) APPLICATION.—A State may submit an ap16 plication to the Secretary requesting the early imple17 mentation of this subtitle with respect to claims or

18 actions brought in the State.

19 (2) DECISION BY SECRETARY.—The Secretary

20 shall issue a response to a State’s application under

21 paragraph (1) not later than 90 days after receiving

22 the application. If the Secretary determines that the

23 State meets the requirements of this subtitle at the

24 time of submitting its application, the Secretary

25 shall approve the State’s application, and this sub-
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1 title shall apply with respect to actions brought in

2 the State on or after the expiration of the 90-day

3 period that begins on the date the Secretary issues

4 the response. If the Secretary denies the State’s ap5 plication, the Secretary shall provide the State with

6 a written explanation of the grounds for the deci7 sion.

8 PART 2—UNIFORM STANDARDS FOR MEDICAL

9 MALPRACTICE LIABILITY ACTIONS

10 SEC. 211. STATUTE OF LIMITATIONS.

11 (a) IN GENERAL.—No medical malpractice liability

12 claim may be brought after the expiration of the 2-year

13 period that begins on the date the alleged injury that is

14 the subject of the action should reasonably have been dis15 covered, but in no event after the expiration of the 4-year

16 period that begins on the date the alleged injury occurred.

17 (b) EXCEPTION FOR MINORS.—In the case of an al18 leged injury suffered by a minor who has not attained 6

19 years of age, no medical malpractice liability claim may

20 be brought after the expiration of the 2-year period that

21 begins on the date the alleged injury that is the subject

22 of the action should reasonably have been discovered, but

23 in no event after the date on which the minor attains 10

24 years of age.
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1 SEC. 212. REQUIREMENT FOR INITIAL RESOLUTION OF AC2 TION THROUGH ALTERNATIVE DISPUTE RES3 OLUTION.

4 (a) IN GENERAL.—No medical malpractice liability

5 action may be brought in any State court during a cal6 endar year unless the medical malpractice liability claim

7 that is the subject of the action has been initially resolved

8 under an alternative dispute resolution system certified for

9 the year by the Secretary under section 232(a), or, in the

10 case of a State in which such a system is not in effect

11 for the year, under the alternative Federal system estab12 lished under section 232(b).

13 (b) INITIAL RESOLUTION OF CLAIMS UNDER

14 ADR.—For purposes of subsection (a), an action is ‘‘ini15 tially resolved’’ under an alternative dispute resolution

16 system if—

17 (1) the ADR reaches a decision on whether the

18 defendant is liable to the plaintiff for damages; and

19 (2) if the ADR determines that the defendant

20 is liable, the ADR reaches a decision on the amount

21 of damages assessed against the defendant.

22 (c) PROCEDURES FOR FILING ACTIONS.—

23 (1) NOTICE OF INTENT TO CONTEST DECI24 SION.—Not later than 60 days after a decision is is25 sued with respect to a medical malpractice liability

26 claim under an alternative dispute resolution system,
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1 each party affected by the decision shall submit a

2 sealed statement to a court of competent jurisdiction

3 indicating whether or not the party intends to con4 test the decision.

5 (2) DEADLINE FOR FILING ACTION.—No medi6 cal malpractice liability action may be brought un7 less the action is filed in a court of competent juris8 diction not later than 90 days after the decision re9 solving the medical malpractice liability claim that is

10 the subject of the action is issued under the applica11 ble alternative dispute resolution system.

12 (3) COURT OF COMPETENT JURISDICTION.—

13 For purposes of this subsection, the term ‘‘court of

14 competent jurisdiction’’ means—

15 (A) with respect to actions filed in a State

16 court, the appropriate State trial court; and

17 (B) with respect to actions filed in a Fed18 eral court, the appropriate United States dis19 trict court.

20 (d) EFFECT OF ADR DECISION ON BURDEN OF

21 PROOF IN SUBSEQUENT ACTION.—In any medical mal22 practice liability action, the trier of fact shall uphold the

23 decision made under the previous alternative dispute reso24 lution system with respect to the claim that is the subject

25 of the action unless the party contesting the decision
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1 proves by a preponderance of the evidence that the deci2 sion was incorrect.

3 (e) LEGAL EFFECT OF UNCONTESTED ADR DECI4 SION.—The decision reached under an alternative dispute

5 resolution system shall, for purposes of enforcement by a

6 court of competent jurisdiction, have the same status in

7 the court as the verdict of a medical malpractice liability

8 action adjudicated in a State or Federal trial court. The

9 previous sentence shall not apply to a decision that is con10 tested by a party affected by the decision pursuant to sub11 section (c)(1).

12 SEC. 213. ESTABLISHMENT OF PROCESS FOR RESOLUTION

13 OF CLAIMS AGAINST UNITED STATES.

14 The Attorney General shall establish an alternative

15 dispute resolution process for the resolution of tort claims

16 consisting of medical malpractice liability claims brought

17 against the United States under the Federal Tort Claims

18 Act. Under such process, the resolution of the claim shall

19 occur after the completion of the administrative claim

20 process applicable to the claim under section 2675 of title

21 28, United States Code.

22 SEC. 214. MANDATORY PRE-TRIAL SETTLEMENT CON23 FERENCE.

24 (a) IN GENERAL.—Before the beginning of the trial

25 phase of any medical malpractice liability action, the par-
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1 ties shall attend a conference called by the court for pur2 poses of determining whether grounds exist upon which

3 the parties may negotiate a settlement for the action.

4 (b) REQUIRING PARTIES TO SUBMIT SETTLEMENT

5 OFFERS.—At the conference called pursuant to subsection

6 (a), each party to a medical malpractice liability action

7 shall present an offer of settlement for the action.

8 SEC. 215. CALCULATION AND PAYMENT OF DAMAGES.

9 (a) LIMITATION ON NONECONOMIC DAMAGES.—The

10 total amount of noneconomic damages that may be award11 ed to a plaintiff and the members of the plaintiff’s family

12 for losses resulting from the injury which is the subject

13 of a medical malpractice liability action may not exceed

14 $250,000, regardless of the number of parties against

15 whom the action is brought or the number of actions

16 brought with respect to the injury.

17 (b) TREATMENT OF PUNITIVE DAMAGES.—

18 (1) LIMITATION ON AMOUNT.—The total

19 amount of punitive damages that may be imposed

20 under a medical malpractice liability action may not

21 exceed twice the total of the damages awarded to the

22 plaintiff and the members of the plaintiff’s family.

23 (2) PAYMENTS TO STATE FOR MEDICAL QUAL24 ITY ASSURANCE ACTIVITIES.—
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1 (A) IN GENERAL.—Any punitive damages

2 imposed under a medical malpractice liability

3 action shall be paid to the State in which the

4 action is brought.

5 (B) ACTIVITIES DESCRIBED.—A State

6 shall use amount paid pursuant to subpara7 graph (A) to carry out activities to assure the

8 safety and quality of health care services pro9 vided in the State, including (but not limited

10 to)—

11 (i) licensing or certifying health care

12 professionals and health care providers in

13 the State;

14 (ii) operating alternative dispute reso15 lution systems;

16 (iii) carrying out public education pro17 grams relating to medical malpractice and

18 the availability of alternative dispute reso19 lution systems in the State; and

20 (iv) carrying out programs to reduce

21 malpractice-related costs for retired provid22 ers or other providers volunteering to pro23 vide services in medically underserved

24 areas.
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1 (C) MAINTENANCE OF EFFORT.—A State

2 shall use any amounts paid pursuant to sub3 paragraph (A) to supplement and not to replace

4 amounts spent by the State for the activities

5 described in subparagraph (B).

6 (c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—If

7 more than $100,000 in damages for expenses to be in8 curred in the future is awarded to the plaintiff in a medi9 cal malpractice liability action, the defendant shall provide

10 for payment for such damages on a periodic basis deter11 mined appropriate by the court (based upon projections

12 of when such expenses are likely to be incurred), unless

13 the court determines that it is not in the plaintiff’s best

14 interest to receive payments for such damages on such a

15 periodic basis.

16 (d) MANDATORY OFFSETS FOR DAMAGES PAID BY

17 A COLLATERAL SOURCE.—

18 (1) IN GENERAL.—The total amount of dam19 ages received by a plaintiff in a medical malpractice

20 liability action shall be reduced (in accordance with

21 paragraph (2)) by any other payment that has been

22 or will be made to the individual to compensate the

23 plaintiff for the injury that was the subject of the

24 action, including payment under—
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1 (A) Federal or State disability or sickness

2 programs;

3 (B) Federal, State, or private health insur4 ance programs;

5 (C) private disability insurance programs;

6 (D) employer wage continuation programs;

7 and

8 (E) any other source of payment intended

9 to compensate the plaintiff for such injury.

10 (2) AMOUNT OF REDUCTION.—The amount by

11 which an award of damages to a plaintiff shall be re12 duced under paragraph (1) shall be—

13 (A) the total amount of any payments

14 (other than such award) that have been made

15 or that will be made to the plaintiff to com16 pensate the plaintiff for the injury that was the

17 subject of the action; minus

18 (B) the amount paid by the plaintiff (or by

19 the spouse, parent, or legal guardian of the

20 plaintiff) to secure the payments described in

21 subparagraph (A).

22 SEC. 216. TREATMENT OF ATTORNEY’S FEES AND OTHER

23 COSTS.

24 (a) LIMITATION ON ATTORNEY’S FEES.—If the

25 plaintiff in a medical malpractice liability action has en-
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1 tered into an agreement with the plaintiff’s attorney to

2 pay the attorney’s fees on a contingency basis, the attor3 ney’s fees for the action may not exceed—

4 (1) 25 percent of the first $150,000 of any

5 award or settlement paid to the plaintiff; or

6 (2) 15 percent of any additional amounts paid

7 to the plaintiff.

8 (b) REQUIRING PARTY CONTESTING ADR RULING

9 TO PAY ATTORNEY’S FEES AND OTHER COSTS.—

10 (1) IN GENERAL.—The court in a medical mal11 practice liability action shall require the party that

12 (pursuant to section 212(c)(1)) contested the ruling

13 of the alternative dispute resolution system with re14 spect to the medical malpractice liability claim that

15 is the subject of the action to pay to the opposing

16 party the costs incurred by the opposing party under

17 the action, including attorney’s fees, fees paid to ex18 pert witnesses, and other litigation expenses (but not

19 including court costs, filing fees, or other expenses

20 paid directly by the party to the court, or any fees

21 or costs associated with the resolution of the claim

22 under the alternative dispute resolution system), but

23 only if—

24 (A) in the case of an action in which the

25 party that contested the ruling is the plaintiff,
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1 the amount of damages awarded to the party

2 under the action does not exceed the amount of

3 damages awarded to the party under the ADR

4 system by at least 10 percent; and

5 (B) in the case of an action in which the

6 party that contested the ruling is the defendant,

7 the amount of damages assessed against the

8 party under the action is not at least 10 per9 cent less than the amount of damages assessed

10 under the ADR system.

11 (2) EXCEPTIONS.—Paragraph (1) shall not

12 apply if—

13 (A) the party contesting the ruling made

14 under the previous alternative dispute resolu15 tion system shows that—

16 (i) the ruling was procured by corrup17 tion, fraud, or undue means,

18 (ii) there was partiality or corruption

19 under the system,

20 (iii) there was other misconduct under

21 the system that materially prejudiced the

22 party’s rights, or

23 (iv) the ruling was based on an error

24 of law;
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1 (B) the party contesting the ruling made

2 under the previous alternative dispute resolu3 tion system presents new evidence before the

4 trier of fact that was not available for presen5 tation under the ADR system;

6 (C) the medical malpractice liability action

7 raised a novel issue of law; or

8 (D) the court finds that the application of

9 such paragraph to a party would constitute an

10 undue hardship, and issues an order waiving or

11 modifying the application of such paragraph

12 that specifies the grounds for the court’s deci13 sion.

14 SEC. 217. JOINT AND SEVERAL LIABILITY.

15 The liability of each defendant in a medical mal16 practice liability action shall be several only and shall not

17 be joint, and each defendant shall be liable only for the

18 amount of damages allocated to the defendant in direct

19 proportion to the defendant’s percentage of responsibility

20 (as determined by the trier of fact).

21 SEC. 218. UNIFORM STANDARD FOR DETERMINING NEG22 LIGENCE.

23 Except as provided in subsection (b), a defendant in

24 a medical malpractice liability action may not be found

25 to have acted negligently unless the defendant’s conduct
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1 at the time of providing the health care services that are

2 the subject of the action was not reasonable.

3 SEC. 219. APPLICATION OF MEDICAL PRACTICE GUIDE4 LINES IN MALPRACTICE LIABILITY ACTIONS.

5 (a) USE OF GUIDELINES AS AFFIRMATIVE DE6 FENSE.—In any medical malpractice liability action, it

7 shall be a complete defense to any allegation that the de8 fendant was negligent that, in the provision of (or the fail9 ure to provide) the services that are the subject of the

10 action, the defendant followed the appropriate practice

11 guideline.

12 (b) RESTRICTION ON GUIDELINES CONSIDERED AP13 PROPRIATE.—

14 (1) GUIDELINES SANCTIONED BY SEC15 RETARY.—For purposes of subsection (a), a practice

16 guideline may not be considered appropriate with re17 spect to actions brought during a year unless the

18 Secretary has sanctioned the use of the guideline for

19 purposes of an affirmative defense to medical mal20 practice liability actions brought during the year in

21 accordance with paragraph (2) or (3).

22 (2) PROCESS FOR SANCTIONING GUIDELINES.—

23 Not less frequently than October 1 of each year (be24 ginning with 1994), the Secretary shall review the

25 practice guidelines and standards developed by the
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1 Administrator for Health Care Policy and Research

2 pursuant to section 1142 of the Social Security Act,

3 and shall sanction those guidelines which the Sec4 retary considers appropriate for purposes of an af5 firmative defense to medical malpractice liability ac6 tions brought during the next calendar year as ap7 propriate practice guidelines for purposes of sub8 section (a).

9 (3) USE OF STATE GUIDELINES.—Upon the ap10 plication of a State, the Secretary may sanction

11 practice guidelines selected by the State for purposes

12 of an affirmative defense to medical malpractice li13 ability actions brought in the State as appropriate

14 practice guidelines for purposes of subsection (a) if

15 the guidelines meet such requirements as the Sec16 retary may impose.

17 (c) PROHIBITING APPLICATION OF FAILURE TO FOL18 LOW GUIDELINES AS PRIMA FACIE EVIDENCE OF NEG19 LIGENCE.—No plaintiff in a medical malpractice liability

20 action may be deemed to have presented prima facie evi21 dence that a defendant was negligent solely by showing

22 that the defendant failed to follow the appropriate practice

23 guideline.
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1 SEC. 220. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

2 SERVICES.

3 (a) IMPOSITION OF HIGHER STANDARD OF PROOF.—

4 (1) IN GENERAL.—In the case of a medical

5 malpractice liability action relating to services pro6 vided during labor or the delivery of a baby, if the

7 defendant health care professional did not previously

8 treat the plaintiff for the pregnancy, the trier of fact

9 may not find that the defendant committed mal10 practice and may not assess damages against the de11 fendant unless the malpractice is proven by clear

12 and convincing evidence.

13 (2) APPLICABILITY TO GROUP PRACTICES OR

14 AGREEMENTS AMONG PROVIDERS.—For purposes of

15 paragraph (1), a health care professional shall be

16 considered to have previously treated an individual

17 for a pregnancy if the professional is a member of

18 a group practice whose members previously treated

19 the individual for the pregnancy or is providing serv20 ices to the individual during labor or the delivery of

21 a baby pursuant to an agreement with another pro22 fessional.

23 (b) CLEAR AND CONVINCING EVIDENCE DEFINED.—

24 In subsection (a), the term ‘‘clear and convincing evi25 dence’’ is that measure or degree of proof that will

26 produce in the mind of the trier of fact a firm belief or
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1 conviction as to the truth of the allegations sought to be

2 established, except that such measure or degree of proof

3 is more than that required under preponderance of the evi4 dence, but less than that required for proof beyond a rea5 sonable doubt.

6 (c) EFFECTIVE DATE.—This section shall apply to

7 claims accruing or actions brought on or after the expira8 tion of the 2-year period that begins on the date of the

9 enactment of this Act.

10 SEC. 221. PREEMPTION.

11 (a) IN GENERAL.—This part supersedes any State

12 law only to the extent that State law—

13 (1) permits the recovery of a greater amount of

14 damages by a plaintiff;

15 (2) permits the collection of a greater amount

16 of attorneys’ fees by a plaintiff’s attorney;

17 (3) establishes a longer period during which a

18 medical malpractice liability claim may be initiated;

19 or

20 (4) establishes a stricter standard for determin21 ing whether a defendant was negligent or for deter22 mining the liability of defendants described in sec23 tion 220(a) in actions described in such section.
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1 (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

2 OF LAW OR VENUE.—Nothing in subsection (a) shall be

3 construed to—

4 (1) waive or affect any defense of sovereign im5 munity asserted by any State under any provision of

6 law;

7 (2) waive or affect any defense of sovereign im8 munity asserted by the United States;

9 (3) affect the applicability of any provision of

10 the Foreign Sovereign Immunities Act of 1976;

11 (4) preempt State choice-of-law rules with re12 spect to claims brought by a foreign nation or a citi13 zen of a foreign nation; or

14 (5) affect the right of any court to transfer

15 venue or to apply the law of a foreign nation or to

16 dismiss a claim of a foreign nation or of a citizen

17 of a foreign nation on the ground of inconvenient

18 forum.

19 PART 3—REQUIREMENTS FOR ALTERNATIVE DISPUTE

20 RESOLUTION SYSTEMS (ADR)

21 SEC. 231. BASIC REQUIREMENTS.

22 (a) IN GENERAL.—A State’s alternative dispute reso23 lution system meets the requirements of this section if the

24 system—
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1 (1) applies to all medical malpractice liability

2 claims under the jurisdiction of the State courts;

3 (2) requires that a written opinion resolving the

4 dispute be issued not later than 6 months after the

5 date by which each party against whom the claim is

6 filed has received notice of the claim (other than in

7 exceptional cases for which a longer period is re8 quired for the issuance of such an opinion), and that

9 the opinion contain—

10 (A) findings of fact relating to the dispute,

11 and

12 (B) a description of the costs incurred in

13 resolving the dispute under the system (includ14 ing any fees paid to the individuals hearing and

15 resolving the claim), together with an appro16 priate assessment of the costs against any of

17 the parties;

18 (3) requires individuals who hear and resolve

19 claims under the system to meet such qualifications

20 as the State may require (in accordance with regula21 tions of the Secretary);

22 (4) is approved by the State or by local govern23 ments in the State;

24 (5) with respect to a State system that consists

25 of multiple dispute resolution procedures—
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1 (A) permits the parties to a dispute to se2 lect the procedure to be used for the resolution

3 of the dispute under the system, and

4 (B) if the parties do not agree on the pro5 cedure to be used for the resolution of the dis6 pute, assigns a particular procedure to the par7 ties;

8 (6) provides for the transmittal to the State

9 agency responsible for monitoring or disciplining

10 health care professionals and health care providers

11 of any findings made under the system that such a

12 professional or provider committed malpractice, un13 less, during the 90-day period beginning on the date

14 the system resolves the claim against the profes15 sional or provider, the professional or provider

16 brings a medical malpractice liability action contest17 ing the decision made under the system; and

18 (7) provides for the regular transmittal to the

19 Administrator for Health Care Policy and Research

20 of information on disputes resolved under the sys21 tem, in a manner that assures that the identity of

22 the parties to a dispute shall not be revealed.

23 (b) APPLICATION OF MALPRACTICE LIABILITY

24 STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—

25 The provisions of part 2 shall apply with respect to claims
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1 brought under a State alternative dispute resolution sys2 tem or the alternative Federal system in the same manner

3 as such provisions apply with respect to medical mal4 practice liability actions brought in the State.

5 SEC. 232. CERTIFICATION OF STATE SYSTEMS; APPLICABIL6 ITY OF ALTERNATIVE FEDERAL SYSTEM.

7 (a) CERTIFICATION.—

8 (1) IN GENERAL.—Not later than October 1 of

9 each year (beginning with 1994), the Secretary, in

10 consultation with the Attorney General, shall deter11 mine whether a State’s alternative dispute resolution

12 system meets the requirements of this part for the

13 following calendar year.

14 (2) BASIS FOR CERTIFICATION.—The Secretary

15 shall certify a State’s alternative dispute resolution

16 system under this subsection for a calendar year if

17 the Secretary determines under paragraph (1) that

18 the system meets the requirements of section 231.

19 (b) APPLICABILITY OF ALTERNATIVE FEDERAL SYS20 TEM.—

21 (1) ESTABLISHMENT AND APPLICABILITY.—

22 Not later than October 1, 1994, the Secretary, in

23 consultation with the Attorney General, shall estab24 lish by rule an alternative Federal ADR system for

25 the resolution of medical malpractice liability claims
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1 during a calendar year in States that do not have

2 in effect an alternative dispute resolution system

3 certified under subsection (a) for the year.

4 (2) REQUIREMENTS FOR SYSTEM.—Under the

5 alternative Federal ADR system established under

6 paragraph (1)—

7 (A) paragraphs (1), (2), (6), and (7) of

8 section 231(a) shall apply to claims brought

9 under the system;

10 (B) claims brought under the system shall

11 be heard and resolved by arbitrators appointed

12 by the Secretary in consultation with the Attor13 ney General; and

14 (C) with respect to a State in which the

15 system is in effect, the Secretary may (at the

16 State’s request) modify the system to take into

17 account the existence of dispute resolution pro18 cedures in the State that affect the resolution

19 of medical malpractice liability claims.

20 SEC. 233. REPORTS ON IMPLEMENTATION AND EFFECTIVE21 NESS OF ALTERNATIVE DISPUTE RESOLU22 TION SYSTEMS.

23 (a) IN GENERAL.—Not later than 5 years after the

24 date of the enactment of this Act, the Secretary shall pre25 pare and submit to Congress a report describing and eval-
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1 uating State alternative dispute resolution systems oper2 ated pursuant to this part and the alternative Federal sys3 tem established under section 232(b).

4 (b) CONTENTS OF REPORT.—The Secretary shall in5 clude in the report prepared and submitted under sub6 section (a)—

7 (1) information on—

8 (A) the effect of such systems on the cost

9 of health care within each State,

10 (B) the impact of such systems on the ac11 cess of individuals to health care within the

12 State, and

13 (C) the effect of such systems on the qual14 ity of health care provided within the State; and

15 (2) to the extent that such report does not pro16 vide information on no-fault systems operated by

17 States as alternative dispute resolution systems pur18 suant to this part, an analysis of the feasibility and

19 desirability of establishing a system under which

20 medical malpractice liability claims shall be resolved

21 on a no-fault basis.
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1 PART 4—OTHER REQUIREMENTS AND PROGRAMS

2 SEC. 241. FACILITATING DEVELOPMENT AND USE OF

3 MEDICAL PRACTICE GUIDELINES.

4 (a) INCREASE IN AUTHORIZATION OF APPROPRIA5 TIONS.—Section 1142(i)(1) of the Social Security Act (42

6 U.S.C. 1320b–12(i)(1)) is amended by striking ‘‘and’’ at

7 the end of subparagraph (D) and by striking subpara8 graph (E) and inserting the following:

9 ‘‘(E) $195,000,000 for fiscal year 1994 (of

10 which $10,000,000 shall be used for sanction11 ing practice guidelines for purposes of an af12 firmative defense in medical malpractice liabil13 ity actions); and

14 ‘‘(F) $20,000,000 for each of fiscal year

15 1995 and 1996, to be used for sanctioning

16 practice guidelines for purposes of an affirma17 tive defense in medical malpractice liability ac18 tions.’’.

19 (b) CONSIDERATION OF MALPRACTICE LIABILITY

20 DATA IN DEVELOPING AND UPDATING GUIDELINES.—

21 Section 1142(c)(5) of such Act (42 U.S.C. 1320b–

22 12(c)(5)) is amended by striking ‘‘claims data’’ and all

23 that follows through ‘‘patients’’ and inserting the follow24 ing: ‘‘claims data, data on clinical and functional status
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1 of patients, and data on medical malpractice liability ac2 tions’’.

3 (c) DEVELOPMENT OF REPORTING FORMS FOR

4 STATE ADR SYSTEMS.—The Secretary, in consulation

5 with the Administrator for Health Care Policy and Re6 search, shall develop a standard reporting form to be used

7 by State alternative dispute resolution systems in trans8 mitting information to the Administrator pursuant to sec9 tion 231(a)(6) on disputes resolved under such systems.

10 (d) STUDY OF EFFECT OF GUIDELINES ON MEDICAL

11 MALPRACTICE.—

12 (1) STUDY.—The Secretary shall conduct a

13 study of the effect of the use of the medical practice

14 guidelines developed by the Administrator for Health

15 Care Policy and Research on the incidence of and

16 the costs associated with medical malpractice.

17 (2) REPORTS.—(A) Not later than 1 year after

18 the date of the enactment of this Act, the Secretary

19 shall submit an interim report to Congress describ20 ing the availability and use of medical practice

21 guidelines and the aggregate costs associated with

22 medical malpractice.

23 (B) Not later than 5 years after the date of the

24 enactment of this Act, the Secretary shall submit a

25 report to Congress on the study conducted under
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1 paragraph (1), together with recommendations re2 garding expanding the use of medical practice guide3 lines for determining the liability of health care pro4 fessionals and health care providers for medical mal5 practice.

6 SEC. 242. PERMITTING STATE PROFESSIONAL SOCIETIES

7 TO PARTICIPATE IN DISCIPLINARY ACTIVI8 TIES.

9 (a) ROLE OF PROFESSIONAL SOCIETIES.—Notwith10 standing any other provision of State or Federal law, a

11 State agency responsible for the conduct of disciplinary

12 actions for a type of health care practitioner may enter

13 into agreements with State or county professional societies

14 of such type of health care practitioner to permit such so15 cieties to participate in the licensing of such health care

16 practitioner, and to review any health care malpractice ac17 tion, health care malpractice claim or allegation, or other

18 information concerning the practice patterns of any such

19 health care practitioner. Any such agreement shall comply

20 with subsection (b).

21 (b) REQUIREMENTS OF AGREEMENTS.—Any agree22 ment entered into under subsection (a) for licensing activi23 ties or the review of any health care malpractice action,

24 health care malpractice claim or allegation, or other infor-
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1 mation concerning the practice patterns of a health care

2 practitioner shall provide that—

3 (1) the health care professional society conducts

4 such activities or review as expeditiously as possible;

5 (2) after the completion of such review, such so6 ciety shall report its findings to the State agency

7 with which it entered into such agreement;

8 (3) the conduct of such activities or review and

9 the reporting of such findings be conducted in a

10 manner which assures the preservation of confiden11 tiality of health care information and of the review

12 process; and

13 (4) no individual affiliated with such society is

14 liable for any damages or injury directly caused by

15 the individual’s actions in conducting such activities

16 or review.

17 (c) AGREEMENTS NOT MANDATORY.—Nothing in

18 this section may be construed to require a State to enter

19 into agreements with societies described in subsection (a)

20 to conduct the activities described in such subsection.

21 (d) EFFECTIVE DATE.—This section shall take effect

22 2 years after the date of the enactment of this Act.
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1 SEC. 243. REQUIREMENTS FOR RISK MANAGEMENT PRO2 GRAMS.

3 (a) REQUIREMENTS FOR PROVIDERS.—Each State

4 shall require each health care professional and health care

5 provider providing services in the State to participate in

6 a risk management program to prevent and provide early

7 warning of practices which may result in injuries to pa8 tients or which otherwise may endanger patient safety.

9 (b) REQUIREMENTS FOR INSURERS.—Each State

10 shall require each entity which provides health care profes11 sional or provider liability insurance to health care profes12 sionals and health care providers in the State to—

13 (1) establish risk management programs based

14 on data available to such entity or sanction pro15 grams of risk management for health care profes16 sionals and health care providers provided by other

17 entities; and

18 (2) require each such professional or provider,

19 as a condition of maintaining insurance, to partici20 pate in one program described in paragraph (1) at

21 least once in each 3-year period.

22 (c) EFFECTIVE DATE.—This section shall take effect

23 2 years after the date of the enactment of this Act.

24 SEC. 244. GRANTS FOR MEDICAL SAFETY PROMOTION.

25 (a) RESEARCH ON MEDICAL INJURY PREVENTION

26 AND COMPENSATION.—
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1 (1) IN GENERAL.—The Secretary shall make

2 grants for the conduct of basic research in the pre3 vention of and compensation for injuries resulting

4 from health care professional or health care provider

5 malpractice, and research of the outcomes of health

6 care procedures.

7 (2) PREFERENCE FOR RESEARCH ON CERTAIN

8 ACTIVITIES.—In making grants under paragraph

9 (1), the Secretary shall give preference to applica10 tions for grants to conduct research on the behavior

11 of health care providers and health care profes12 sionals in carrying out their professional duties and

13 of other participants in systems for compensating in14 dividuals injured by medical malpractice, the effects

15 of financial and other incentives on such behavior,

16 the determinants of compensation system outcomes,

17 and the costs and benefits of alternative compensa18 tion policy options.

19 (3) APPLICATION.—The Secretary may not

20 make a grant under paragraph (1) unless an appli21 cant submits an application to the Secretary at such

22 time, in such form, in such manner, and containing

23 such information as the Secretary may require.

24 (b) GRANTS FOR LICENSING AND DISCIPLINARY AC25 TIVITIES.—
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1 (1) IN GENERAL.—The Secretary shall make

2 grants to States to assist States in improving the

3 States’ ability to license and discipline health care

4 professionals.

5 (2) USES FOR GRANTS.—A State may use a

6 grant awarded under subsection (a) to develop and

7 implement improved mechanisms for monitoring the

8 practices of health care professionals or for conduct9 ing disciplinary activities.

10 (3) TECHNICAL ASSISTANCE.—The Secretary

11 shall provide technical assistance to States receiving

12 grants under paragraph (1) to assist them in evalu13 ating their medical practice acts and procedures and

14 to encourage the use of efficient and effective early

15 warning systems and other mechanisms for detecting

16 practices which endanger patient safety and for dis17 ciplining health care professionals.

18 (4) APPLICATIONS.—The Secretary may not

19 make a grant under paragraph (1) unless the appli20 cant submits an application to the Secretary at such

21 time, in such form, in such manner, and containing

22 such information as the Secretary shall require.

23 (c) GRANTS FOR PUBLIC EDUCATION PROGRAMS.—

24 (1) IN GENERAL.—The Secretary shall make

25 grants to States and to local governments, private
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1 nonprofit organizations, and health professional

2 schools (as defined in paragraph (3)) for—

3 (A) educating the general public about the

4 appropriate use of health care and realistic ex5 pectations of medical intervention;

6 (B) educating the public about the re7 sources and role of health care professional li8 censing and disciplinary boards in investigating

9 claims of incompetence or health care mal10 practice; and

11 (C) developing programs of faculty train12 ing and curricula for educating health care pro13 fessionals in quality assurance, risk manage14 ment, and medical injury prevention.

15 (2) APPLICATIONS.—The Secretary may not

16 make a grant under paragraph (1) unless the appli17 cant submits an application to the Secretary at such

18 time, in such form, in such manner, and containing

19 such information as the Secretary shall require.

20 (3) HEALTH PROFESSIONAL SCHOOL DE21 FINED.—In paragraph (1), the term ‘‘health profes22 sional school’’ means a school of nursing (as defined

23 in section 853(2) of the Public Health Service Act)

24 or an institution described in section 701(4) of such

25 Act.
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1 (d) AUTHORIZATION OF APPROPRIATIONS.—There

2 are authorized to be appropriated not more than

3 $15,000,000 for each of the first 5 fiscal years beginning

4 on or after the date of the enactment of this Act for grants

5 under this section.

6 SEC. 245. STUDY OF BARRIERS TO VOLUNTARY SERVICE BY

7 PHYSICIANS.

8 (a) STUDY.—The Secretary shall conduct a study to

9 determine the factors preventing or discouraging physi10 cians (whether practicing or retired) from volunteering to

11 provide health care services in medically underserved

12 areas.

13 (b) REPORTS.—(1) Not later than 1 year after the

14 date of the enactment of this Act, the Secretary shall sub15 mit an interim report to Congress on the study conducted

16 under subsection (a), together with the Secretary’s rec17 ommendations for actions to increase the number of physi18 cians volunteering to provide health care services in medi19 cally underserved areas.

20 (2) Not later than 5 years after the date of the enact21 ment of this Act, the Secretary shall submit a final report

22 to Congress on the study conducted under subsection (a)

23 (taking into account the effects of this subtitle on the inci24 dence and costs of medical malpractice), together with the

25 Secretary’s recommendations for actions to increase the
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1 number of physicians volunteering to provide health care

2 services in medically underserved areas.

3 Subtitle B—Administrative Cost

4 Savings

5 PART 1—STANDARDIZATION OF CLAIMS PROCESSING

6 SEC. 251. ADOPTION OF DATA ELEMENTS, UNIFORM

7 CLAIMS, AND UNIFORM ELECTRONIC TRANS8 MISSION STANDARDS.

9 (a) IN GENERAL.—The Secretary of Health and

10 Human Services (in this subtitle referred to as the ‘‘Sec11 retary’’) shall adopt standards relating to each of the fol12 lowing:

13 (1) Data elements for use in paper and elec14 tronic claims processing under health benefit plans,

15 as well as for use in utilization review and manage16 ment of care (including data fields, formats, and

17 medical nomenclature, and including plan benefit

18 and insurance information).

19 (2) Uniform claims forms (including uniform

20 procedure and billing codes for uses with such forms

21 and including information on other health benefit

22 plans that may be liable for benefits).

23 (3) Uniform electronic transmission of the data

24 elements (for purposes of billing and utilization re25 view).
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1 Standards under paragraph (3) relating to electronic

2 transmission of data elements for claims for services shall

3 supersede (to the extent specified in such standards) the

4 standards adopted under paragraph (2) relating to the

5 submission of paper claims for such services. Standards

6 under paragraph (3) shall include protections to assure

7 the confidentiality of patient-specific information and to

8 protect against the unauthorized use and disclosure of in9 formation.

10 (b) USE OF TASK FORCES.—In adopting standards

11 under this section—

12 (1) the Secretary shall take into account the

13 recommendations of current taskforces, including at

14 least the Workgroup on Electronic Data Inter15 change, National Uniform Billing Committee, the

16 Uniform Claim Task Force, and the Computer-based

17 Patient Record Institute;

18 (2) the Secretary shall consult with the Na19 tional Association of Insurance Commissioners (and,

20 with respect to standards under subsection (a)(3),

21 the American National Standards Institute); and

22 (3) the Secretary shall, to the maximum extent

23 practicable, seek to make the standards consistent

24 with any uniform clinical data sets which have been

25 adopted and are widely recognized.
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1 (c) DEADLINES FOR PROMULGATION.—The Sec2 retary shall promulgate the standards under—

3 (1) subsection (a)(1) relating to claims process4 ing data, by not later than 12 months after the date

5 of the enactment of this Act;

6 (2) subsection (a)(2) (relating to uniform

7 claims forms) by not later than 12 months after the

8 date of the enactment of this Act; and

9 (3)(A) subsection (a)(3) relating to trans10 mission of information concerning hospital and phy11 sicians services, by not later than 24 months after

12 the date of the enactment of this Act, and

13 (B) subsection (a)(3) relating to transmission

14 of information on other services, by such later date

15 as the Secretary may determine it to be feasible.

16 (d) REPORT TO CONGRESS.—Not later than 3 years

17 after the date of the enactment of this Act, the Secretary

18 shall report to Congress recommendations regarding re19 structuring the medicare peer review quality assurance

20 program given the availability of hospital data in elec21 tronic form.

22 SEC. 252. APPLICATION OF STANDARDS.

23 (a) IN GENERAL.—If the Secretary determines, at

24 the end of the 2-year period beginning on the date that

25 standards are adopted under section 251 with respect to
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1 classes of services, that a significant number of claims for

2 benefits for such services under health benefit plans are

3 not being submitted in accordance with such standards,

4 the Secretary may require, after notice in the Federal

5 Register of not less than 6 months, that all providers of

6 such services must submit claims to health benefit plans

7 in accordance with such standards. The Secretary may

8 waive the application of such a requirement in such cases

9 as the Secretary finds that the imposition of the require10 ment would not be economically practicable.

11 (b) SIGNIFICANT NUMBER.—The Secretary shall

12 make an affirmative determination described in subsection

13 (a) for a class of services only if the Secretary finds that

14 there would be a significant, measurable additional gain

15 in efficiencies in the health care system that would be ob16 tained by imposing the requirement described in such

17 paragraph with respect to such services.

18 (c) APPLICATION OF REQUIREMENT.—

19 (1) IN GENERAL.—If the Secretary imposes the

20 requirement under subsection (a)—

21 (A) in the case of a requirement that imposes

22 the standards relating to electronic trans23 mission of claims for a class of services, each

24 health care provider that furnishes such services

25 for which benefits are payable under a health
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1 benefit plan shall transmit electronically and di2 rectly to the plan on behalf of the beneficiary

3 involved a claim for such services in accordance

4 with such standards;

5 (B) any health benefit plan may reject any

6 claim subject to the standards adopted under

7 section 251 but which is not submitted in ac8 cordance with such standards;

9 (C) it is unlawful for a health benefit plan

10 (i) to reject any such claim on the basis of the

11 form in which it is submitted if it is submitted

12 in accordance with such standards or (ii) to re13 quire, for the purpose of utilization review or as

14 a condition of providing benefits under the plan,

15 a provider to transmit medical data elements

16 that are inconsistent with the standards estab17 lished under section 251(a)(1); and

18 (D) the Secretary may impose a civil

19 money penalty on any provider that knowingly

20 and repeatedly submits claims in violation of

21 such standards or on any health benefit plan

22 (other than a health benefit plan described in

23 paragraph (2)) that knowingly and repeatedly

24 rejects claims in violation of subparagraph (B),
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1 in an amount not to exceed $100 for each such

2 claim.

3 The provisions of section 1128A of the Social Secu4 rity Act (other than the first sentence of subsection

5 (a) and other than subsection (b)) shall apply to a

6 civil money penalty under subparagraph (D) in the

7 same manner as such provisions apply to a penalty

8 or proceeding under section 1128A(a) of such Act.

9 (2) PLANS SUBJECT TO EFFECTIVE STATE REG10 ULATION.—A plan described in this paragraph is a

11 health benefit plan—

12 (A) that is subject to regulation by a

13 State, and

14 (B) with respect to which the Secretary

15 finds that—

16 (i) the State provides for application

17 of the standards established under section

18 251, and

19 (ii) the State regulatory program pro20 vides for the appropriate and effective en21 forcement of such standards.

22 (d) TREATMENT OF REJECTIONS.—If a plan rejects

23 a claim pursuant to subsection (c)(1), the plan shall per24 mit the person submitting the claim a reasonable oppor25 tunity to resubmit the claim on a form or in an electronic
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1 manner that meets the requirements for acceptance of the

2 claim under such subsection.

3 SEC. 253. PERIODIC REVIEW AND REVISION OF

4 STANDARDS.

5 (a) IN GENERAL.—The Secretary shall—

6 (1) provide for the ongoing receipt and review

7 of comments and suggestions for changes in the

8 standards adopted and promulgated under section

9 251;

10 (2) establish a schedule for the periodic review

11 of such standards; and

12 (3) based upon such comments, suggestions,

13 and review, revise such standards and promulgate

14 such revisions.

15 (b) APPLICATION OF REVISED STANDARDS.—If the

16 Secretary under subsection (a) revises the standards de17 scribed in 251, then, in the case of any claim for benefits

18 submitted under a health benefit plan more than the mini19 mum period (of not less than 6 months specified by the

20 Secretary) after the date the revision is promulgated

21 under subsection (a)(3), such standards shall apply under

22 section 252 instead of the standards previously promul23 gated.
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1 SEC. 254. HEALTH BENEFIT PLAN DEFINED.

2 In this subtitle, the term ‘‘health benefit plan’’ has

3 the meaning given such term in section 112(6) and in4 cludes—

5 (1) the medicare program (under title XVIII of

6 the Social Security Act) and medicare supplemental

7 health insurance, and

8 (2) a State medicaid plan (approved under title

9 XIX of such Act).

10 PART 2—ELECTRONIC MEDICAL DATA STANDARDS

11 SEC. 261. MEDICAL DATA STANDARDS FOR HOSPITALS AND

12 OTHER PROVIDERS.

13 (a) PROMULGATION OF HOSPITAL DATA STAND14 ARDS.—

15 (1) IN GENERAL.—Between July 1, 1994, and

16 January 1, 1995, the Secretary shall promulgate

17 standards described in subsection (b) for hospitals

18 concerning electronic medical data.

19 (2) REVISION.—The Secretary may from time

20 to time revise the standards promulgated under this

21 subsection.

22 (b) CONTENTS OF DATA STANDARDS.—The stand23 ards promulgated under subsection (a) shall include at

24 least the following:
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1 (1) A definition of a standard set of data ele2 ments for use by utilization and quality control peer

3 review organizations.

4 (2) A definition of the set of comprehensive

5 data elements, which set shall include for hospitals

6 the standard set of data elements defined under

7 paragraph (1).

8 (3) Standards for an electronic patient care in9 formation system with data obtained at the point of

10 care, including standards to protect against the un11 authorized use and disclosure of information.

12 (4) A specification of, and manner of presen13 tation of, the individual data elements of the sets

14 and system under this subsection.

15 (5) Standards concerning the transmission of

16 electronic medical data.

17 (6) Standards relating to confidentiality of pa18 tient-specific information.

19 The standards under this section shall be consistent with

20 standards for data elements established under section 251.

21 (c) OPTIONAL DATA STANDARDS FOR OTHER PRO22 VIDERS.—

23 (1) IN GENERAL.—The Secretary may promul24 gate standards described in paragraph (2) concern25 ing electronic medical data for providers that are not
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1 hospitals. The Secretary may from time to time re2 vise the standards promulgated under this sub3 section.

4 (2) CONTENTS OF DATA STANDARDS.—The

5 standards promulgated under paragraph (1) for non6 hospital providers may include standards comparable

7 to the standards described in paragraphs (2), (4),

8 and (5) of subsection (b) for hospitals.

9 (d) CONSULTATION.—In promulgating and revising

10 standards under this section, the Secretary shall—

11 (1) consult with the American National Stand12 ards Institute, hospitals, with the advisory commis13 sion established under section 265, and with other

14 affected providers, health benefit plans, and other

15 interested parties, and

16 (2) take into consideration, in developing stand17 ards under subsection (b)(1), the data set used by

18 the utilization and quality control peer review pro19 gram under part B of title XI of the Social Security

20 Act.

21 SEC. 262. APPLICATION OF ELECTRONIC DATA STANDARDS

22 TO CERTAIN HOSPITALS.

23 (a) MEDICARE REQUIREMENT FOR SHARING OF

24 HOSPITAL INFORMATION.—As of January 1, 1996, sub25 ject to paragraph (2), each hospital, as a requirement of
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1 each participation agreement under section 1866 of the

2 Social Security Act, shall—

3 (1) maintain clinical data included in the set of

4 comprehensive data elements under section

5 261(b)(2) in electronic form on all inpatients,

6 (2) upon request of the Secretary or of a utili7 zation and quality control peer review organization

8 (with which the Secretary has entered into a con9 tract under part B of title XI of such Act), transmit

10 electronically the data set, and

11 (3) upon request of the Secretary, or of a fiscal

12 intermediary or carrier, transmit electronically any

13 data (with respect to a claim) from such data set,

14 in accordance with the standards promulgated under sec15 tion 261(a).

16 (b) WAIVER AUTHORITY.—Until January 1, 2000:

17 (1) The Secretary may waive the application of

18 the requirements of subsection (a) for a hospital

19 that is a small rural hospital, for such period as the

20 hospital demonstrates compliance with such require21 ments would constitute an undue financial hardship.

22 (2) The Secretary may waive the application of

23 the requirements of subsection (a) for a hospital

24 that is in the process of developing a system to pro25 vide the required data set and executes agreements
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1 with its fiscal intermediary and its utilization and

2 quality control peer review organization that the hos3 pital will meet the requirements of subsection (a) by

4 a specified date (not later than January 1, 2000).

5 (3) The Secretary may waive the application of

6 the requirement of subsection (a)(1) for a hospital

7 that agrees to obtain from its records the data ele8 ments that are needed to meet the requirements of

9 paragraphs (2) and (3) of subsection (a) and agrees

10 to subject its data transfer process to a quality as11 surance program specified by the Secretary.

12 (c) APPLICATION TO HOSPITALS OF THE DEPART13 MENT OF VETERANS AFFAIRS.—

14 (1) IN GENERAL.—The Secretary of Veterans

15 Affairs shall provide that each hospital of the De16 partment of Veterans Affairs shall comply with the

17 requirements of subsection (a) in the same manner

18 as such requirements would apply to the hospital if

19 it were participating in the Medicare program.

20 (2) WAIVER.—Such Secretary may waive the

21 application of such requirements to a hospital in the

22 same manner as the Secretary of Health and

23 Human Services may waive under subsection (b) the

24 application of the requirements of subsection (a).
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1 SEC. 263. ELECTRONIC TRANSMISSION TO FEDERAL AGEN2 CIES.

3 (a) IN GENERAL.—Effective January 1, 2000, if a

4 provider is required under a Federal program to transmit

5 a data element that is subject to a presentation or trans6 mission standard (as defined in subsection (b)), the head

7 of the Federal agency responsible for such program (if not

8 otherwise authorized) is authorized to require the provider

9 to present and transmit the data element electronically in

10 accordance with such a standard.

11 (b) PRESENTATION OR TRANSMISSION STANDARD

12 DEFINED.—In subsection (a), the term ‘‘presentation or

13 transmission standard’’ means a standard, promulgated

14 under subsection (b) or (c) of section 261, described in

15 paragraph (4) or (5) of section 261(b).

16 SEC. 264. LIMITATION ON DATA REQUIREMENTS WHERE

17 STANDARDS IN EFFECT.

18 (a) IN GENERAL.—If standards with respect to data

19 elements are promulgated under section 261 with respect

20 to a class of provider, a health benefit plan may not re21 quire, for the purpose of utilization review or as a condi22 tion of providing benefits under the plan, that a provider

23 in the class—

24 (1) provide any data element not in the set of

25 comprehensive data elements specified under such

26 standards, or
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1 (2) transmit or present any such data element

2 in a manner inconsistent with the applicable stand3 ards for such transmission or presentation.

4 (b) COMPLIANCE.—

5 (1) IN GENERAL.—The Secretary may impose a

6 civil money penalty on any health benefit plan (other

7 than a health benefit plan described in paragraph

8 (2)) that fails to comply with subsection (a) in an

9 amount not to exceed $100 for each such failure.

10 The provisions of section 1128A of the Social Secu11 rity Act (other than the first sentence of subsection

12 (a) and other than subsection (b)) shall apply to a

13 civil money penalty under this paragraph in the

14 same manner as such provisions apply to a penalty

15 or proceeding under section 1128A(a) of such Act.

16 (2) PLANS SUBJECT TO EFFECTIVE STATE REG17 ULATION.—A plan described in this paragraph is a

18 health benefit plan that is subject to regulation by

19 a State, if the Secretary finds that—

20 (A) the State provides for application of

21 the requirement of subsection (a), and

22 (B) the State regulatory program provides

23 for the appropriate and effective enforcement of

24 such requirement with respect to such plans.
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1 SEC. 265. ADVISORY COMMISSION.

2 (a) IN GENERAL.—The Secretary shall establish an

3 advisory commission including hospital executives, hospital

4 data base managers, physicians, health services research5 ers, and technical experts in collection and use of data

6 and operation of data systems. Such commission shall in7 clude, as ex officio members, a representative of the Direc8 tor of the National Institutes of Health, the Administrator

9 for Health Care Policy and Research, the Secretary of

10 Veterans Affairs, and the Director of the Centers for Dis11 ease Control.

12 (b) FUNCTIONS.—The advisory commission shall

13 monitor and advise the Secretary concerning—

14 (1) the standards established under this part,

15 and

16 (2) operational concerns about the implementa17 tion of such standards under this part.

18 (c) STAFF.—From the amounts appropriated under

19 subsection (d), the Secretary shall provide sufficient staff

20 to assist the advisory commission in its activities under

21 this section.

22 (d) AUTHORIZATION OF APPROPRIATIONS.—There

23 are authorized to be appropriated $2,000,000 for each of

24 fiscal years 1994 through 1999 to carry out this section.
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1 PART 3—DEVELOPMENT AND DISTRIBUTION OF

2 COMPARATIVE VALUE INFORMATION

3 SEC. 271. STATE COMPARATIVE VALUE INFORMATION PRO4 GRAMS FOR HEALTH CARE PURCHASING.

5 (a) PURPOSE.—In order to assure the availability of

6 comparative value information to purchasers of health

7 care in each State, the Secretary shall determine whether

8 each State is developing and implementing a health care

9 value information program that meets the criteria and

10 schedule set forth in subsection (b).

11 (b) CRITERIA AND SCHEDULE FOR STATE PRO12 GRAMS.—The criteria and schedule for a State health care

13 value information program in this subsection shall be spec14 ified by the Secretary as follows:

15 (1) The State begins promptly after enactment

16 of this Act to develop (directly or through contrac17 tual or other arrangements with one or more States,

18 coalitions of health insurance purchasers, other enti19 ties, or any combination of such arrangements) in20 formation systems regarding comparative health val21 ues.

22 (2) The information contained in such systems

23 covers at least the average prices of common health

24 care services (as defined in subsection (d)) and

25 health insurance plans, and, where available, meas-
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1 ures of the variability of these prices within a State

2 or other market areas.

3 (3) The information described in paragraph (2)

4 is made available within the State beginning not

5 later than one year after the date of the enactment

6 of this Act, and is revised as frequently as reason7 ably necessary, but at intervals of no greater than

8 one year.

9 (4) Not later than 6 years after the date of the

10 enactment of this Act the State has developed infor11 mation systems that provide comparative costs, qual12 ity, and outcomes data with respect to health insur13 ance plans and hospitals and made the information

14 broadly available within the relevant market areas.

15 Nothing in this section shall preclude a State from provid16 ing additional information, such as information on prices

17 and benefits of different health benefit plans, available.

18 (c) GRANTS TO STATES FOR THE DEVELOPMENT OF

19 STATE PROGRAMS.—

20 (1) GRANT AUTHORITY.—The Secretary may

21 make grants to each State to enable such State to

22 plan the development of its health care value infor23 mation program and, if necessary, to initiate the im24 plementation of such program. Each State seeking

25 such a grant shall submit an application therefore,
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1 containing such information as the Secretary finds

2 necessary to assure that the State is likely to de3 velop and implement a program in accordance with

4 the criteria and schedule in subsection (b).

5 (2) OFFSET AUTHORITY.—If, at any time with6 in the 3-year period following the receipt by a State

7 of a grant under this subsection, the Secretary is re8 quired by section 272 to implement a health care in9 formation program in the State, the Secretary may

10 recover the amount of the grant under this sub11 section by offset against any other amount payable

12 to the State under the Social Security Act. The

13 amount of the offset shall be made available (from

14 the appropriation account with respect to which the

15 offset was taken) to the Secretary to carry out such

16 section.

17 (3) AUTHORIZATION OF APPROPRIATIONS.—

18 There are authorized to be appropriated such sums

19 as are necessary to make grants under this sub20 section, to remain available until expended.

21 (d) COMMON HEALTH CARE SERVICES DEFINED.—

22 In this section, the term ‘‘common health care services’’

23 includes such procedures as the Secretary may specify and

24 any additional health care services which a State may wish

25 to include in its comparative value information program.
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1 (e) STATE DEFINED.—In this subtitle, the term

2 ‘‘State’’ includes the District of Columbia, Puerto Rico,

3 the Virgin Islands, Guam, and American Samoa.

4 SEC. 272. FEDERAL IMPLEMENTATION.

5 (a) IN GENERAL.—If the Secretary finds, at any

6 time, that a State has failed to develop or to continue to

7 implement a health care value information program in ac8 cordance with the criteria and schedule in section 271(b),

9 the Secretary shall take the actions necessary, directly or

10 through grants or contract, to implement a comparable

11 program in the State.

12 (b) FEES.—Fees may be charged by the Secretary

13 for the information materials provided pursuant to a pro14 gram under this section. Any amounts so collected shall

15 be deposited in the appropriation account from which the

16 Secretary’s costs of providing such materials were met,

17 and shall remain available for such purposes until ex18 pended.

19 SEC. 273. COMPARATIVE VALUE INFORMATION CONCERN20 ING FEDERAL PROGRAMS.

21 (a) DEVELOPMENT.—The head of each Federal agen22 cy with responsibility for the provision of health insurance

23 or of health care services to individuals shall promptly de24 velop health care value information relating to each pro25 gram that such head administers and covering the same
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1 types of data that a State program meeting the criteria

2 of section 271(b) would provide.

3 (b) DISSEMINATION OF INFORMATION.—Such infor4 mation shall be made generally available to States and to

5 providers and consumers of health care services.

6 SEC. 274. DEVELOPMENT OF MODEL SYSTEMS.

7 (a) IN GENERAL.—The Secretary shall, directly or

8 through grant or contract, develop model systems to facili9 tate—

10 (1) the gathering of data on health care cost,

11 quality, and outcome described in section 271(b)(4),

12 and

13 (2) analyzing such data in a manner that will

14 permit the valid comparison of such data among

15 providers and among health plans.

16 (b) EXPERIMENTATION.—The Secretary shall sup17 port experimentation with different approaches to achieve

18 the objectives of subsection (a) in the most cost effective

19 manner (relative to the accuracy and timeliness of the

20 data secured) and shall evaluate the various methods to

21 determine their relative success.

22 (c) STANDARDS.—When the Secretary considers it

23 appropriate, the Secretary may establish standards for the

24 collection and reporting of data on health care cost, qual-
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1 ity and outcomes in order to facilitate analysis and com2 parisons among States and nationally.

3 (e) REPORT.—By not later than 3 years after the

4 date of the enactment of this Act, the Secretary shall re5 port to the Congress and the States on the models devel6 oped, and experiments conducted, under this section.

7 (e) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated such sums as are nec9 essary for each fiscal year beginning with fiscal year 1993

10 to enable the Secretary to carry out this section, including

11 evaluation of the different approaches tested under sub12 section (b) and their relative cost effectiveness.

13 PART 4—ADDITIONAL STANDARDS AND REQUIREMENTS;

14 RESEARCH AND DEMONSTRATIONS

15 SEC. 281. STANDARDS RELATING TO USE OF MEDICARE

16 AND MEDICAID MAGNETIZED HEALTH BENE17 FIT CARDS; SECONDARY PAYOR DATA BANK.

18 (a) MAGNETIZED IDENTIFICATION CARDS UNDER

19 MEDICARE PROGRAM.—The Secretary shall adopt stand20 ards relating to the design and use of magnetized medi21 care identification cards in order to assist health care pro22 viders providing medicare covered services to individuals—

23 (1) in determining whether individuals are eligi24 ble for benefits under the medicare program, and
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1 (2) in billing the medicare program for such

2 services provided to eligible individuals.

3 Such cards shall be designed to be compatible with ma4 chines currently employed to transmit information on

5 credit cards. Such cards also shall be designed to be able

6 to be used with respect to the provision of benefits under

7 medicare supplemental policies.

8 (b) ADOPTION UNDER MEDICAID PLANS.—

9 (1) IN GENERAL.—The Secretary shall take

10 such steps as may be necessary to encourage and as11 sist States to design and use magnetized medicaid

12 identification cards that meet such standards, for

13 use under their medicaid plans.

14 (2) LIMITATION ON MMIS FUNDS.—In applying

15 section 1903(a)(3) of the Social Security Act, the

16 Secretary may determine that Federal financial par17 ticipation is not available under that section to a

18 State which has provided for a magnetized card sys19 tem that is inconsistent with the standards adopted

20 under subsection (a).

21 (c) MEDICARE AND MEDICAID SECONDARY PAYOR

22 DATA BANK.—The Secretary shall establish a medicare

23 and medicaid information system which is designed to pro24 vide information on those group health plans and other

25 health benefit plans that are primary payors to the medi-
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1 care program and medicaid program under section

2 1862(b) or section 1905(a)(25) of the Social Security Act.

3 (d) AUTHORIZATION OF APPROPRIATIONS.—There

4 are authorized to be appropriated, in equal proportions

5 from the Federal Hospital Insurance Trust Fund and

6 from the Federal Supplementary Medical Insurance Trust

7 Fund, a total of $25,000,000 to carry out subsections (a)

8 and (c), including the issuance of magnetized cards to

9 medicare beneficiaries.

10 SEC. 282. PREEMPTION OF STATE QUILL PEN LAWS.

11 (a) IN GENERAL.—Effective January 1, 1994, no ef12 fect shall be given to any provision of State law that re13 quires medical or health insurance records (including bill14 ing information) to be maintained in written, rather than

15 electronic form.

16 (b) SECRETARIAL AUTHORITY.—The Secretary of

17 Health and Human Services may issue regulations to

18 carry out subsection (a). Such regulations may provide for

19 such exceptions to subsection (a) as the Secretary deter20 mines to be necessary to prevent fraud and abuse, with

21 respect to controlled substances, and in such other cases

22 as the Secretary deems appropriate.

23 SEC. 283. USE OF STANDARD IDENTIFICATION NUMBERS.

24 (a) IN GENERAL.—Effective January 1, 1994, each

25 health benefit plan shall—
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1 (1) for each of its beneficiaries that has a social

2 security account number, use that number as the

3 personal identifier for claims processing and related

4 purposes, and

5 (2) for each provider that has a unique identi6 fier for purposes of title XVIII of the Social Security

7 Act and that furnishes health care items or services

8 to a beneficiary under the plan, use that identifier

9 as the identifier of that provider for claims process10 ing and related purposes.

11 (b) COMPLIANCE.—

12 (1) IN GENERAL.—The Secretary may impose a

13 civil money penalty on any health benefit plan (other

14 than a health benefit plan described in paragraph

15 (2)) that fails to comply with standards established

16 under subsection (a) in an amount not to exceed

17 $100 for each such failure. The provisions of section

18 1128A of the Social Security Act (other than the

19 first sentence of subsection (a) and other than sub20 section (b)) shall apply to a civil money penalty

21 under this paragraph in the same manner as such

22 provisions apply to a penalty or proceeding under

23 section 1128A(a) of such Act.

24 (2) PLANS SUBJECT TO EFFECTIVE STATE REG25 ULATION.—A plan described in this paragraph is a
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1 health benefit plan that is subject to regulation by

2 a State, if the Secretary finds that—

3 (A) the State provides for application of

4 the requirement of subsection (a), and

5 (B) the State regulatory program provides

6 for the appropriate and effective enforcement of

7 such requirement with respect to such plans.

8 SEC. 284. COORDINATION OF BENEFIT STANDARDS.

9 (a) REVIEW OF COORDINATION OF BENEFIT PROB10 LEMS.—Between July 1, 1994, and January 1, 1995, the

11 Secretary shall determine whether problems relating to—

12 (1) the rules for determining the liability of

13 health benefit plans when benefits are payable under

14 two or more such plans, or

15 (2) the availability of information among such

16 health benefit plans when benefits are so payable,

17 cause significant administrative costs.

18 (b) CONTINGENT PROMULGATION OF STANDARDS.—

19 (1) IN GENERAL.—If the Secretary determines

20 that such problems do cause significant administra21 tive costs that could be significantly reduced through

22 the implementation of standards, the Secretary shall

23 promulgate standards concerning—
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1 (A) the liability of health benefit plans

2 when benefits are payable under two or more

3 such plans, and

4 (B) the transfer among health benefit

5 plans of appropriate information (which may in6 clude standards for the use of unique identifi7 ers, and for the listing of all individuals covered

8 under a health benefit plan) in determining li9 ability in cases when benefits are payable under

10 two or more such plans.

11 (2) EFFECTIVE DATE.—The standards promul12 gated under paragraph (1) shall become effective on

13 a date specified by the Secretary, which date shall

14 be not earlier than one year after the date of pro15 mulgation of the standards.

16 (c) COMPLIANCE.—

17 (1) IN GENERAL.—The Secretary may impose a

18 civil money penalty on any health benefit plan (other

19 than a health benefit plan described in paragraph

20 (2)) that fails to comply with standards promulgated

21 under subsection (b) in an amount not to exceed

22 $100 for each such failure. The provisions of section

23 1128A of the Social Security Act (other than the

24 first sentence of subsection (a) and other than sub25 section (b)) shall apply to a civil money penalty
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1 under this paragraph in the same manner as such

2 provisions apply to a penalty or proceeding under

3 section 1128A(a) of such Act.

4 (2) PLANS SUBJECT TO EFFECTIVE STATE REG5 ULATION.—A plan described in this paragraph is a

6 health benefit plan that is subject to regulation by

7 a State, if the Secretary finds that—

8 (A) the State provides for application of

9 the standards established under subsection (b),

10 and

11 (B) the State regulatory program provides

12 for the appropriate and effective enforcement of

13 such standards with respect to such plans.

14 (d) REVISION OF STANDARDS.—If the Secretary es15 tablishes standards under subsection (b), the Secretary

16 may revise such standards from time to time and such

17 revised standards shall be applied under subsection (c) on

18 or after such date (not earlier than 6 months after the

19 date the revision is promulgated) as the Secretary shall

20 specify.

21 SEC. 285. RESEARCH AND DEMONSTRATIONS.

22 (a) DEMONSTRATIONS AND RESEARCH ON MONITOR23 ING AND IMPROVING PATIENT CARE.—

24 (1) The Secretary shall provide grants to quali25 fied entities to demonstrate (and conduct research
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1 concerning) the application of comprehensive infor2 mation systems—

3 (A) in continuously monitoring patient

4 care, and

5 (B) in improving patient care.

6 (2) To make grants under this subsection, there

7 are authorized to be appropriated from the Federal

8 Hospital Insurance Trust Fund $10,000,000 for

9 each fiscal year (beginning with fiscal year 1994 and

10 ending with fiscal year 1998).

11 (b) COMMUNICATION LINKS.—

12 (1) The Secretary may make grants to at least

13 two, but not more than five, community organiza14 tions, or coalitions of health care providers, health

15 benefit plans, and purchasers, to establish and docu16 ment the efficacy of communication links between

17 the information systems of health benefit plans and

18 of health care providers.

19 (2) To make grants under this subsection, there

20 are authorized to be appropriated such sums as may

21 be necessary for fiscal year 1994, to remain avail22 able until expended.

23 (c) REGIONAL OR COMMUNITY BASED CLINICAL IN24 FORMATION SYSTEMS.—
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1 (1) The Secretary may make grants to at least

2 two, but not more than five, public or private non3 profit entities for the development of regional or

4 community-based clinical information systems.

5 (2) To make grants under this subsection, there

6 are authorized to be appropriated such sums as may

7 be necessary for fiscal year 1994, to remain avail8 able until expended.

9 (d) AMBULATORY CARE DATA SETS.—

10 (1) The Secretary may make grants to public or

11 private non-profit entities to develop and test, for

12 electronic medical data generated by physicians and

13 other entities (other than hospitals) that provide

14 health care services—

15 (A) the definition of a comprehensive set of

16 data elements, and

17 (B) the specification of, and manner of

18 presentation of, the individual data elements of

19 the set under subparagraph (A).

20 (2) To make grants under this subsection, there

21 are authorized to be appropriated such sums as may

22 be necessary for fiscal year 1994, to remain avail23 able until expended.
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1 Subtitle C—Medical Savings

2 Accounts (Medisave)

3 SEC. 291. MEDICAL SAVINGS ACCOUNTS.

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

6 items specifically excluded from gross income) is amended

7 by redesignating section 136 as section 137 and by insert8 ing after section 135 the following new section:

9 ‘‘SEC. 136. MEDICAL SAVINGS ACCOUNTS.

10 ‘‘(a) EXCLUSION.—Gross income of an employee

11 shall not include any amount contributed during the tax12 able year by the employer to a medical savings account

13 of such employee pursuant to a qualified medical savings

14 account plan.

15 ‘‘(b) LIMITATION.—The amount contributed by an

16 employer which may be excluded under subsection (a) by

17 any employee for any taxable year shall not exceed the

18 excess (if any) of—

19 ‘‘(1) the applicable limit for such taxable year

20 with respect to such employer, over

21 ‘‘(2) the employer health plan contributions as

22 defined in subsection (e), if any, by such employer

23 with respect to such employee for such taxable year.

24 ‘‘(c) APPLICABLE LIMIT.—For purposes of this sec25 tion—
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1 ‘‘(1) EMPLOYERS MAKING HEALTH PLAN CON2 TRIBUTIONS FOR PRIOR PERIOD.—

3 ‘‘(A) IN GENERAL.—In the case of an em4 ployer to whom this paragraph applies, the ap5 plicable limit for any taxable year is the least

6 of—

7 ‘‘(i) the adjusted base year employer

8 health plan contributions with respect to

9 the employee,

10 ‘‘(ii) the amount equal to the 70th

11 percentile of the per employee health plan

12 expenditures (for the calendar year in

13 which such taxable year begins) for the

14 type of coverage applicable to such em15 ployee estimated by the Secretary of

16 Health and Human Services based on a

17 broad, representative survey, or

18 ‘‘(iii) the participation adjusted con19 tribution limit (as defined in subparagraph

20 (E)).

21 ‘‘(B) EMPLOYERS TO WHOM PARAGRAPH

22 APPLIES.—This paragraph shall apply to an

23 employer if—
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1 ‘‘(i) for a period of consecutive cal2 endar years (but not less than 3) during

3 each of which—

4 ‘‘(I) the employer made employer

5 health plan contributions for any em6 ployee for coverage throughout the

7 calendar year, and

8 ‘‘(II) no employee of the em9 ployer participated in any medical

10 savings account plan of the employer,

11 and

12 ‘‘(ii) there has not been a period of 3

13 consecutive calendar years after the close

14 of such period during each of which the re15 quirements of both subclauses (I) and (II)

16 of clause (i) were not met.

17 ‘‘(C) ADJUSTED BASE YEAR EMPLOYER

18 HEALTH PLAN CONTRIBUTIONS.—For purposes

19 of subparagraph (A), the adjusted base year

20 employer health plan contributions with respect

21 to an employee are, with respect to the taxable

22 year, the sum of—

23 ‘‘(i) the employer health plan con24 tributions with respect to a similarly situ25 ated employee for the base year, plus
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1 ‘‘(ii) the product of such amount and

2 the cost-of-living adjustment for the cal3 endar year in which such taxable year be4 gins, determined under section 1(f)(3) by

5 substituting the calendar year in which the

6 base year begins for the calendar year

7 specified in section 1(f)(3)(B) (and, in the

8 case of a taxable year which is not a cal9 endar year, by substituting the last day of

10 the 8th month of such taxable year for

11 ‘August 31’).

12 ‘‘(D) BASE YEAR.—For purposes of this

13 section, the term ‘base year’ means the last cal14 endar year of the period described in subpara15 graph (B)(i) (or, if later, the last calendar year

16 ending before the date of the enactment of this

17 section).

18 ‘‘(E) PARTICIPATION ADJUSTED CON19 TRIBUTION LIMIT.—

20 ‘‘(i) IN GENERAL.—For purposes of

21 subparagraph (A), the participation ad22 justed contribution limit is the adjusted

23 base year employer health plan contribu24 tions (as defined in subparagraph (C))

25 multiplied by the ratio of—
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1 ‘‘(I) the participation rate for the

2 base year, to

3 ‘‘(II) the participation rate for

4 the taxable year for which the deter5 mination under subsection (a) is being

6 made.

7 ‘‘(ii) PARTICIPATION RATE.—For pur8 poses of clause (i), the participation rate

9 for a year is—

10 ‘‘(I) the average number of em11 ployees receiving employer-provided

12 health plan coverage (including cov13 erage provided under a cafeteria plan,

14 as defined in section 125) for the

15 year, divided by

16 ‘‘(II) the average total number of

17 employees for the year.

18 ‘‘(2) OTHER EMPLOYERS.—In the case of an

19 employer to whom paragraph (1) does not apply—

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

21 subparagraph (B), the applicable limit is the

22 amount described in paragraph (1)(A)(ii), de23 termined by substituting ‘50th percentile’ for

24 ‘70th percentile’.
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1 ‘‘(B) EMPLOYEES OF NEW EMPLOYERS,

2 ETC. INELIGIBLE FOR 3 YEARS.—The applica3 ble limit shall be zero for any taxable year be4 fore the later of—

5 ‘‘(i) the 4th calendar year beginning

6 after the date of the enactment of this sec7 tion, or

8 ‘‘(ii) the 4th calendar year of the ear9 liest 4-year period throughout which the

10 employer is actively engaged in a trade or

11 business.

12 ‘‘(d) QUALIFIED MEDICAL SAVINGS ACCOUNT

13 PLAN.—

14 ‘‘(1) IN GENERAL.—For purposes of this sec15 tion, a qualified medical savings account plan is a

16 separate written plan of the employer for the exclu17 sive benefit of his employees and their beneficiaries

18 to provide contributions to medical savings accounts

19 of such employees, but only if such plan meets the

20 requirements of paragraphs (2) through (4).

21 ‘‘(2) ELIGIBILITY.—

22 ‘‘(A) IN GENERAL.—A plan meets the re23 quirements of this paragraph only if—

24 ‘‘(i) all employees who participate in

25 the plan are also participants in a health
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1 insurance plan maintained by the em2 ployer, and

3 ‘‘(ii) the employer does not offer to

4 any employee who is eligible to participate

5 in a qualified medical savings account plan

6 any health insurance plan that does not in7 volve medical savings accounts.

8 ‘‘(B) COLLECTIVE BARGAINING UNITS.—

9 The requirements of this paragraph shall be ap10 plied separately to—

11 ‘‘(i) employees covered by an agree12 ment which the Secretary of Labor finds to

13 be a collective bargaining agreement be14 tween employee representatives and one or

15 more employers, and

16 ‘‘(ii) other employees.

17 ‘‘(3) ALTERNATIVES MUST HAVE SAME ACTUAR18 IAL VALUE.—If an employer offers more than 1

19 health plan, a plan of such employer meets the re20 quirements of this paragraph only if—

21 ‘‘(A) the value of the employer-provided

22 coverage (not including contributions to medical

23 savings accounts) under all such plans is the

24 same for all employees electing the same type of

25 coverage under such plans, and
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1 ‘‘(B) the value of the employer-provided

2 coverage (including contributions to medical

3 savings accounts) under all such plans is the

4 same for all employees electing the same type of

5 coverage under such plans.

6 ‘‘(4) NOTIFICATION OF EMPLOYEES.—A plan

7 meets the requirements of this paragraph if reason8 able notification of the availability and terms of the

9 plan is provided to eligible employees.

10 ‘‘(5) TREATMENT UNDER ERISA.—A qualified

11 medical savings account plan shall be treated as an

12 employee welfare benefit plan and not as an em13 ployee pension benefit plan for purposes of the Em14 ployee Retirement Income Security Act of 1974.

15 ‘‘(e) EMPLOYER HEALTH PLAN CONTRIBUTIONS.—

16 For purposes of this section—

17 ‘‘(1) BASE YEAR.—

18 ‘‘(A) IN GENERAL.—The term ‘employer

19 health plan contributions’ means, with respect

20 to any employee for the base year, the average

21 cost per covered employee of employer-provided

22 health plan coverage (including coverage pro23 vided under a cafeteria plan (as defined in sec24 tion 125)).
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1 ‘‘(B) SPECIAL RULE FOR SMALL EMPLOY2 ERS.—If fewer than 100 individuals were em3 ployed by the employer at any time during the

4 base year, subparagraph (A) shall be applied by

5 substituting for the amount described therein

6 such amount as is determined by the Secretary

7 of Health and Human Services to reflect actu8 arially determined values of costs of similar em9 ployer health plans for employers who employ

10 fewer than 100 individuals.

11 ‘‘(2) CURRENT YEAR.—The term ‘employer

12 health plan contributions’ means, with respect to an

13 employee for the taxable year for which the deter14 mination under subsection (a) is being made, the

15 sum of—

16 ‘‘(A) the average cost per covered employee

17 of employer-provided health plan coverage

18 (other than coverage provided under a cafeteria

19 plan (as defined in section 125)) for such year

20 under each health plan for such employer’s em21 ployees, their spouses, and dependents (as de22 fined in section 152), plus

23 ‘‘(B) the cost of employer-provided health

24 plan coverage for such employee for such year
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1 provided under a cafeteria plan (within the

2 meaning of section 125).

3 ‘‘(3) SEPARATE DETERMINATIONS FOR CAT4 EGORIES OF EMPLOYEES AND SEPARATE LINES OF

5 BUSINESS.—Employer health plan contributions

6 shall be separately determined (both for the base

7 year and the current taxable year) on the basis of:

8 ‘‘(A) Types of coverage.

9 ‘‘(B) Averages for employees described in

10 each of the following clauses:

11 ‘‘(i) Reasonable classifications of em12 ployees based on normal work hours per

13 week.

14 ‘‘(ii) Retired employees.

15 ‘‘(iii) Former employees, other than

16 retired employees.

17 ‘‘(iv) Employees covered by an agree18 ment which the Secretary of Labor finds to

19 be a collective bargaining agreement be20 tween employee representatives and one or

21 more employers, if there is evidence that

22 medical savings account benefits were the

23 subject of good faith bargaining between

24 such employee representatives and such

25 employer or employers. Employees de-
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1 scribed in this clause shall be treated as

2 not described in any other clause of this

3 subparagraph.

4 ‘‘(C) Employees in separate lines of busi5 ness (within the meaning of section 414(r)).

6 ‘‘(4) PREDECESSORS.—An employer shall be

7 treated as making the health plan contributions

8 made by any predecessor of such employer (deter9 mined under rules similar to the rules applicable

10 under section 414(a)).

11 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec12 tion—

13 ‘‘(1) EMPLOYER.—The term ‘employer’ includes

14 persons treated as an employer under section

15 401(c)(4).

16 ‘‘(2) EMPLOYEE.—The term ‘employee’ in17 cludes—

18 ‘‘(A) an individual who is an employee

19 within the meaning of section 401(c)(1), and

20 ‘‘(B) former employees.

21 ‘‘(3) TYPE OF COVERAGE.—The types of cov22 erage are—

23 ‘‘(A) self-only coverage, and

24 ‘‘(B) coverage other than self-only cov25 erage.
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1 ‘‘(4) HEALTH INSURANCE PLAN.—The term

2 ‘health insurance plan’ means any contract or ar3 rangement under which an insurer bears all or part

4 of the cost or risk of providing health care items and

5 services, including a hospital or medical expense in6 curred policy or certificate, hospital or medical serv7 ice plan contract, or health maintenance subscriber

8 contract (including any self-insured health insurance

9 plan), but does not include—

10 ‘‘(A) coverage only for accident, dental, vi11 sion, disability, or long term care, medicare

12 supplemental health insurance, or any combina13 tion thereof,

14 ‘‘(B) coverage issued as a supplement to li15 ability insurance,

16 ‘‘(C) workers’ compensation or similar in17 surance, or

18 ‘‘(D) automobile medical-payment insur19 ance.

20 ‘‘(g) DEFINITIONS AND SPECIAL RULES RELATING

21 TO MEDICAL SAVINGS ACCOUNTS.—For purposes of this

22 section—

23 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—The term

24 ‘medical savings account’ means a trust created or

25 organized in the United States exclusively for the
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1 purpose of paying the medical expenses (as defined

2 in paragraph (2)) with respect to the individual for

3 whose benefit the trust is established, but only if the

4 written governing instrument creating the trust

5 meets the following requirements:

6 ‘‘(A) Except in the case of a rollover con7 tribution described in subsection (h)(5), no con8 tribution will be accepted unless it is in cash

9 and unless it is made by an employer of such

10 individual pursuant to a qualified medical sav11 ings account plan of such employer.

12 ‘‘(B) The trustee is a bank (as defined in

13 section 408(n)) or another person who dem14 onstrates to the satisfaction of the Secretary

15 that the manner in which such person will ad16 minister the trust will be consistent with the re17 quirements of this section.

18 ‘‘(C) No part of the trust assets will be in19 vested in life insurance contracts.

20 ‘‘(D) The assets of the trust will not be

21 commingled with other property except in a

22 common trust fund or common investment

23 fund.

24 ‘‘(E) The interest of an individual in the

25 balance in his account is nonforfeitable.
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1 ‘‘(2) MEDICAL EXPENSES.—The term ‘medical

2 expenses’ means, with respect to an individual,

3 amounts paid or incurred by the individual for

4 whose benefit the account was established for medi5 cal care (as defined in section 213), or long-term

6 care (as defined in paragraph (3)), of such individ7 ual, the spouse of such individual, and any depend8 ent (as defined in section 152) of such individual,

9 but only to the extent such amounts are not com10 pensated for by insurance or otherwise.

11 ‘‘(3) LONG-TERM CARE.—

12 ‘‘(A) IN GENERAL.—The term ‘long-term

13 care’ means diagnostic, preventive, therapeutic,

14 rehabilitative, maintenance, or personal care

15 services which are required by, and provided to,

16 a chronically ill individual, which have as their

17 primary purpose the direct provision of needed

18 assistance with 1 or more activities of daily liv19 ing (or the alleviation of the conditions neces20 sitating such assistance) that the individual is

21 certified under subparagraph (B) as being un22 able to perform, and which are provided in a

23 setting other than an acute care unit of a hos24 pital pursuant to a continuing plan of care pre25 scribed by a physician or registered professional
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1 nurse. Such term does not include food or lodg2 ing provided in an institutional or other setting,

3 or basic living services associated with the

4 maintenance of a household or participation in

5 community life, such as case management,

6 transportation or legal services, or the perform7 ance of home maintenance or household chores.

8 ‘‘(B) CHRONICALLY ILL INDIVIDUAL.—The

9 term ‘chronically ill individual’ means an indi10 vidual who is certified by a physician or reg11 istered professional nurse as being unable to

12 perform at least 3 activities of daily living with13 out substantial assistance from another individ14 ual. For purposes of this paragraph, the term

15 ‘activities of daily living’ means bathing, dress16 ing, eating, toileting, transferring, and walking.

17 ‘‘(4) TIME WHEN CONTRIBUTIONS DEEMED

18 MADE.—A contribution shall be deemed to be made

19 on the last day of the preceding taxable year if the

20 contribution is made on account of such taxable year

21 and is made not later than the time prescribed by

22 law for filing the return for such taxable year (not

23 including extensions thereof).

24 ‘‘(h) TAX TREATMENT OF DISTRIBUTIONS.—
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1 ‘‘(1) IN GENERAL.—Any amount paid or dis2 tributed out of a medical savings account shall be in3 cluded in the gross income of the individual for

4 whose benefit such account was established unless—

5 ‘‘(A) such amount is used exclusively to

6 pay the medical expenses with respect to such

7 individual, or

8 ‘‘(B) such amount is treated as a payment

9 or distribution of amounts which are, or have

10 been, includible in the gross income of the indi11 vidual under subsection (i).

12 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE13 FORE DUE DATE OF RETURN.—Paragraph (1) shall

14 not apply to the distribution of any contribution paid

15 during a taxable year to a medical savings account

16 to the extent that such contribution exceeds the

17 amount excludable under subsection (a) if—

18 ‘‘(A) such distribution is received by the

19 individual on or before the last day prescribed

20 by law (including extensions of time) for filing

21 such individual’s return for such taxable year,

22 and

23 ‘‘(B) such distribution is accompanied by

24 the amount of net income attributable to such

25 excess contribution.
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1 Any net income described in subparagraph (B) shall

2 be included in the gross income of the individual for

3 the taxable year in which it is received.

4 ‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED

5 FOR MEDICAL EXPENSES.—The tax imposed by this

6 chapter for any taxable year in which there is a pay7 ment or distribution from a medical savings account

8 which is not used to pay the medical expenses with

9 respect to the individual for whose benefit the ac10 count was established shall be increased by 10 per11 cent of the amount of such payment or distribution

12 which is includible in gross income under paragraph

13 (1).

14 ‘‘(4) ORDERING RULE.—

15 ‘‘(A) DISTRIBUTIONS FOR MEDICAL EX16 PENSES.—Any payment or distribution from a

17 medical savings account which is used exclu18 sively to pay the medical expenses with respect

19 to the individual for whose benefit such account

20 was established shall be treated as first attrib21 utable to untaxed amounts and then to pre22 viously taxed amounts.

23 ‘‘(B) DISTRIBUTIONS NOT FOR MEDICAL

24 EXPENSES.—Any payment or distribution from

25 a medical savings account which is not used ex-
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1 clusively to pay the medical expenses with re2 spect to the individual for whose benefit such

3 account was established shall be treated as first

4 attributable to previously taxed amounts and

5 then to untaxed amounts.

6 ‘‘(C) DEFINITIONS.—For purposes of this

7 paragraph—

8 ‘‘(i) the term ‘previously taxed

9 amount’ means any amount which is or

10 was includible under subsection (i) in the

11 gross income of the individual for whose

12 benefit such account was established, and

13 ‘‘(ii) the term ‘untaxed amount’

14 means any amount which is not a pre15 viously taxed amount.

16 ‘‘(5) ROLLOVERS.—Paragraph (1) shall not

17 apply to any amount paid or distributed out of a

18 medical savings account to the individual for whose

19 benefit the account is maintained if the entire

20 amount received (including money and any other

21 property) is paid into another medical savings ac22 count for the benefit of such individual not later

23 than the 60th day after the day on which he received

24 the payment or distribution.

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

2 The individual for whose benefit a medical savings

3 account is established shall be treated for purposes

4 of this title as the owner thereof and shall be subject

5 to tax thereon in accordance with subpart E of part

6 I of subchapter J of this chapter (relating to

7 grantors and others treated as substantial owners).

8 ‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN9 GAGES IN PROHIBITED TRANSACTION.—

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

11 year of the individual for whose benefit the

12 medical savings account was established, such

13 individual engages in any transaction prohibited

14 by section 4975 with respect to the account, the

15 account ceases to be a medical savings account

16 as of the first day of that taxable year.

17 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

18 ALL ITS ASSETS.—In any case in which any ac19 count ceases to be a medical savings account by

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

21 any taxable year, paragraph (1) of subsection

22 (h) shall be applied as if there were a distribu23 tion on such first day in an amount equal to

24 the fair market value (on such first day) of all

25 assets in the account (on such first day) and no
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1 portion of such distribution were used to pay

2 medical expenses.

3 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU4 RITY.—If, during any taxable year, the individual for

5 whose benefit a medical savings account was estab6 lished uses the account or any portion thereof as se7 curity for a loan, the portion so used is treated as

8 distributed to that individual and not used to pay

9 medical expenses.

10 ‘‘(j) CUSTODIAL ACCOUNTS.—For purposes of this

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

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

13 bank (as defined in section 408(n)) or another per14 son who demonstrates to the satisfaction of the Sec15 retary that the manner in which he will administer

16 the account will be consistent with the requirements

17 of this section, and

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

19 fact that it is not a trust, constitute a medical sav20 ings account described in subsection (g).

21 For purposes of this title, in the case of a custodial ac22 count treated as a trust by reason of the preceding sen23 tence, the custodian of such account shall be treated as

24 the trustee thereof.
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1 ‘‘(k) REPORTS.—The trustee of a medical savings ac2 count shall make such reports regarding such account to

3 the Secretary and to the individual for whose benefit the

4 account is maintained with respect to contributions, dis5 tributions, and such other matters as the Secretary may

6 require under regulations. The reports required by this

7 subsection shall be filed at such time and in such manner

8 and furnished to such individuals at such time and in such

9 manner as may be required by those regulations.’’

10 (b) EXCLUSION APPLIES FOR EMPLOYMENT TAX

11 PURPOSES.—

12 (1) SOCIAL SECURITY TAXES.—

13 (A) Paragraph (20) of section 3121(a) of

14 such Code is amended by striking ‘‘or 132’’ and

15 inserting ‘‘132, or 136’’.

16 (B) Paragraph (17) of section 209(a) of

17 the Social Security Act is amended by striking

18 ‘‘or 132’’ and inserting ‘‘132, or 136’’.

19 (2) RAILROAD RETIREMENT TAX.—Paragraph

20 (5) of section 3231(e) of such Code is amended by

21 striking ‘‘or 132’’ and inserting ‘‘132, or 136’’.

22 (3) UNEMPLOYMENT TAX.—Paragraph (16) of

23 section 3306(b) of such Code is amended by striking

24 ‘‘or 132’’ and inserting ‘‘132, or 136’’.
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1 (4) WITHHOLDING TAX.—Paragraph (19) of

2 section 3401(a) of such Code is amended by striking

3 ‘‘or 132’’ and inserting ‘‘, 132, or 136’’.

4 (c) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

5 of such Code (relating to tax on excess contributions to

6 individual retirement accounts, certain section 403(b) con7 tracts, and certain individual retirement annuities) is

8 amended—

9 (1) by inserting ‘‘MEDICAL SAVINGS AC10 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

11 such section,

12 (2) by redesignating paragraph (2) of sub13 section (a) as paragraph (3) and by inserting after

14 paragraph (1) the following:

15 ‘‘(2) a medical savings account (within the

16 meaning of section 136(g)),’’,

17 (3) by striking ‘‘or’’ at the end of paragraph

18 (1) of subsection (a), and

19 (4) by adding at the end thereof the following

20 new subsection:

21 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

22 ACCOUNTS.—For purposes of this section, in the case of

23 a medical savings account (within the meaning of section

24 136(g)), the term ‘excess contributions’ means the amount

25 by which the amount contributed for the taxable year to
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1 the account exceeds the amount excludable from gross in2 come under section 136 for such taxable year. For pur3 poses of this subsection, any contribution which is distrib4 uted out of the medical savings account in a distribution

5 to which section 136(h)(2) applies shall be treated as an

6 amount not contributed.’’

7 (d) TAX ON PROHIBITED TRANSACTIONS.—Section

8 4975 of such Code (relating to prohibited transactions)

9 is amended—

10 (1) by adding at the end of subsection (c) the

11 following new paragraph:

12 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC13 COUNTS.—An individual for whose benefit a medical

14 savings account (within the meaning of section

15 136(g)) is established shall be exempt from the tax

16 imposed by this section with respect to any trans17 action concerning such account (which would other18 wise be taxable under this section) if, with respect

19 to such transaction, the account ceases to be a medi20 cal savings account by reason of the application of

21 section 136(h)(2)(A) to such account.’’, and

22 (2) by inserting ‘‘or a medical savings account

23 described in section 136(g)’’ in subsection (e)(1)

24 after ‘‘described in section 408(a)’’.
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1 (e) FAILURE TO PROVIDE REPORTS ON MEDICAL

2 SAVINGS ACCOUNTS.—Section 6693 of such Code (relat3 ing to failure to provide reports on individual retirement

4 account or annuities) is amended—

5 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

6 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

7 such section, and

8 (2) by adding at the end of subsection (a) the

9 following: ‘‘The person required by section 136(k) to

10 file a report regarding a medical savings account at

11 the time and in the manner required by such section

12 shall pay a penalty of $50 for each failure unless it

13 is shown that such failure is due to reasonable

14 cause.’’

15 (f) MEDICAL SAVINGS ACCOUNTS NOT TREATED AS

16 WELFARE BENEFIT FUNDS.—Paragraph (3)(B) of sec17 tion 419(e) of such Code (defining a fund) is amended

18 by inserting ‘‘other than a medical savings account within

19 the meaning of section 136’’ after ‘‘this chapter’’.

20 (g) CLERICAL AMENDMENTS.—

21 (1) The table of sections for part III of sub22 chapter B of chapter 1 of such Code is amended by

23 striking the last item and inserting the following:

‘‘Sec. 136. Medical savings accounts.

‘‘Sec. 137. Cross references to other Acts.’’
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1 (2) The table of sections for chapter 43 of such

2 Code is amended by striking the item relating to sec3 tion 4973 and inserting the following:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, medical savings accounts, certain 403(b)

contracts, and certain individual retirement annuities.’’

4 (3) The table of sections for subchapter B of

5 chapter 68 of such Code is amended by inserting ‘‘or

6 on medical savings accounts’’ after ‘‘annuities’’ in

7 the item relating to section 6693.

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

9 this section shall apply to taxable years beginning after

10 December 31, 1993.

11 Subtitle D—Medicaid Program

12 Flexibility

13 SEC. 301. MODIFICATION OF FEDERAL REQUIREMENTS TO

14 ALLOW STATES MORE FLEXIBILITY IN CON15 TRACTING FOR COORDINATED CARE SERV16 ICES UNDER MEDICAID.

17 (a) IN GENERAL.—Section 1903(m) of the Social Se18 curity Act (42 U.S.C. 1396b(m)) is amended—

19 (1) by striking all that precedes paragraph (4)

20 and inserting the following:

21 ‘‘(m) COORDINATED CARE.—

22 ‘‘(1) PAYMENT CONDITIONED ON COMPLI23 ANCE.—
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1 ‘‘(A) GENERAL RULE.—No payment shall

2 be made under this title to a State with respect

3 to expenditures incurred by it for payment to a

4 risk contracting entity or primary care case

5 management entity (as defined in subparagraph

6 (B)), or with respect to an undertaking de7 scribed in paragraph (6), unless the State and

8 the entity or undertaking meet the applicable

9 requirements of this subsection. For purposes

10 of determining whether payment may be made

11 under this section, the Secretary may reject a

12 State’s determination of compliance with any

13 provision of this subsection.

14 ‘‘(B) GENERAL DEFINITIONS.—For pur15 poses of this title—

16 ‘‘(i) RISK CONTRACTING ENTITY.—

17 The term ‘risk contracting entity’ means

18 an entity that has a contract with the

19 State agency under which the entity—

20 ‘‘(I) provides or arranges for the

21 provision of health care items or serv22 ices to individuals eligible for medical

23 assistance under the State plan under

24 this title, and
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1 ‘‘(II) is at risk (as defined in

2 clause (iv)) for part or all of the cost

3 of such items or services furnished to

4 such individuals.

5 ‘‘(ii) PRIMARY CARE CASE MANAGE6 MENT PROGRAM.—The term ‘primary care

7 case management program’ means a State

8 program under which individuals eligible

9 for medical assistance under the State plan

10 under this title are enrolled with primary

11 care case management entities, and are en12 titled to receive specified health care items

13 and services covered under such plan only

14 as arranged for and approved by such enti15 ties.

16 ‘‘(iii) AT RISK.—An entity is ‘at risk’,

17 for purposes of this subparagraph, if it has

18 a contract with the State agency under

19 which it is paid a fixed amount for provid20 ing or arranging for the provision of speci21 fied health care items or services to an in22 dividual eligible for medical assistance and

23 enrolled with the entity, regardless of

24 whether such items or services are fur25 nished to such individual, and is liable for
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1 all or part of the cost of furnishing such

2 items or services, regardless of whether or

3 the extent to which such cost exceeds such

4 fixed payment.

5 ‘‘(iv) PRIMARY CARE CASE MANAGE6 MENT ENTITY.—The term ‘primary care

7 case management entity’ means a health

8 care provider (whether an individual or an

9 entity) that, under a State primary care

10 case management program meeting the re11 quirements of paragraph (7), has a con12 tract with the State agency under which

13 the entity arranges for or authorizes the

14 provision of health care items and services

15 to individuals eligible for medical assist16 ance under the State plan under this title,

17 but is not at risk (as defined in clause (iv))

18 for the cost of such items or services pro19 vided to such individuals.

20 ‘‘(2) GENERAL REQUIREMENTS FOR RISK CON21 TRACTING ENTITIES.—

22 ‘‘(A) FEDERAL OR STATE QUALIFICA23 TION.—Subject to paragraph (3), a risk con24 tracting entity meets the requirements of this

25 subsection only if it either—
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1 ‘‘(i) is a qualified health maintenance

2 organization as defined in section 1310(d)

3 of the Public Health Service Act, as deter4 mined by the Secretary pursuant to section

5 1312 of that Act, or

6 ‘‘(ii) is an entity which the State

7 agency has determined—

8 ‘‘(I) affords, to individuals eligi9 ble for medical assistance under the

10 State plan and enrolled with the en11 tity, access to health care items and

12 services furnished by the entity, with13 in the area served by the entity, at

14 least equivalent to the access such in15 dividuals would have to such health

16 care items and services in such area if

17 not enrolled with the entity, and

18 ‘‘(II) has made adequate provi19 sion against the risk of insolvency,

20 and assures that individuals eligible

21 for medical assistance under this title

22 are not held liable for the entity’s

23 debts in case of the entity’s insol24 vency.
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1 ‘‘(B) INTERNAL QUALITY ASSURANCE.—

2 Subject to paragraph (3), a risk contracting en3 tity meets the requirements of this subsection

4 only if it has in effect an internal quality assur5 ance program that meets the requirements of

6 paragraph (9).

7 ‘‘(C) CONTRACT WITH STATE AGENCY.—

8 Subject to paragraph (3), a risk contracting en9 tity meets the requirements of this subsection

10 only if the entity has a written contract with

11 the State agency that provides—

12 ‘‘(i) that the entity will comply with

13 all applicable provisions of this subsection;

14 ‘‘(ii) for a payment methodology based

15 on experience rating or another actuarially

16 sound methodology approved by the Sec17 retary, which guarantees (as demonstrated

18 by such models or formulas as the Sec19 retary may approve) that payments to the

20 entity under the contract shall not exceed

21 100 percent of expenditures that would

22 have been made by the State agency in the

23 absence of the contract;

24 ‘‘(iii) that the Secretary and the State

25 (or any person or organization designated
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1 by either) shall have the right to audit and

2 inspect any books and records of the entity

3 (and of any subcontractor) that pertain—

4 ‘‘(I) to the ability of the entity to

5 bear the risk of potential financial

6 losses, or

7 ‘‘(II) to services performed or de8 terminations of amounts payable

9 under the contract;

10 ‘‘(iv) that in the entity’s enrollment,

11 reenrollment, or disenrollment of individ12 uals eligible for medical assistance under

13 this title and eligible to enroll, reenroll, or

14 disenroll with the entity pursuant to the

15 contract, the entity will not discriminate

16 among such individuals on the basis of

17 their health status or requirements for

18 health care services;

19 ‘‘(v)(I) that individuals eligible for

20 medical assistance under the State plan

21 who have enrolled with the entity are per22 mitted to terminate such enrollment with23 out cause as of the beginning of the first

24 calendar month following a full calendar

25 month after the request is made for such
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1 termination (or at such times as required

2 pursuant to paragraph (8)), and

3 ‘‘(II) for notification of each such in4 dividual, at the time of the individual’s en5 rollment, of the right to terminate enroll6 ment;

7 ‘‘(vi) for reimbursement, either by the

8 entity or by the State agency, for medically

9 necessary services provided—

10 ‘‘(I) to an individual eligible for

11 medical assistance under the State

12 plan and enrolled with the entity, and

13 ‘‘(II) other than through the en14 tity because the services were imme15 diately required due to an unforeseen

16 illness, injury, or condition;

17 ‘‘(vii) for disclosure of information in

18 accordance with paragraph (4) and section

19 1124;

20 ‘‘(viii) in the case of an entity that

21 has entered into a contract with a Feder22 ally-qualified health center for the provi23 sion of services of such center—

24 ‘‘(I) that rates of prepayment

25 from the State are adjusted to reflect
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1 fully the rates of payment specified in

2 section 1902(a)(13)(E), and

3 ‘‘(II) that, at the election of such

4 center, payments made by the entity

5 to such center for services described

6 in section 1905(a)(2)(C) are made at

7 the rates of payment specified in sec8 tion 1902(a)(13)(E);

9 ‘‘(ix) that any physician incentive plan

10 that the entity operates meets the require11 ments of section 1876(i)(8);

12 ‘‘(x) for maintenance of sufficient pa13 tient encounter data to identify the physi14 cian who delivers services to patients; and

15 ‘‘(xi) that the entity complies with the

16 requirement of section 1902(w) with re17 spect to each enrollee.

18 ‘‘(3) EXCEPTIONS TO REQUIREMENTS FOR RISK

19 CONTRACTING ENTITIES.—The requirements of

20 paragraph (2) (other than subparagraph (C)(viii))

21 do not apply to an entity that—

22 ‘‘(A)(i) received a grant of at least

23 $100,000 in the fiscal year ending June 30,

24 1976, under section 329(d)(1)(A) or 330(d)(1)

25 of the Public Health Service Act, and for the
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1 period beginning July 1, 1976, and ending on

2 the expiration of the period for which payments

3 are to be made under this title, has been the re4 cipient of a grant under either such section;

5 and

6 ‘‘(ii) provides to its enrollees, on a prepaid

7 capitation or other risk basis, all of the services

8 described in paragraphs (1), (2), (3), (4)(C),

9 and (5) of section 1905(a) and, to the extent

10 required by section 1902(a)(10)(D) to be pro11 vided under the State plan, the services de12 scribed in section 1905(a)(7);

13 ‘‘(B) is a nonprofit primary health care en14 tity located in a rural area (as defined by the

15 Appalachian Regional Commission)—

16 ‘‘(i) which received in the fiscal year

17 ending June 30, 1976, at least $100,000

18 (by grant, subgrant, or subcontract) under

19 the Appalachian Regional Development Act

20 of 1965), and

21 ‘‘(ii) for the period beginning July 1,

22 1976, and ending on the expiration of the

23 period for which payments are to be made

24 under this title either has been the recipi25 ent of a grant, subgrant, or subcontract
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1 under such Act or has provided services

2 under a contract (initially entered into dur3 ing a year in which the entity was the re4 cipient of such a grant, subgrant, or sub5 contract) with a State agency under this

6 title on a prepaid capitation or other risk

7 basis; or

8 ‘‘(C) which has contracted with the State

9 agency for the provision of services (but not in10 cluding inpatient hospital services) to persons

11 eligible for medical assistance under this title

12 on a prepaid risk basis prior to 1970.’’; and

13 (2) by adding after paragraph (6) the following

14 new paragraphs:

15 ‘‘(7) GENERAL REQUIREMENTS FOR PRIMARY

16 CARE CASE MANAGEMENT.—A State that elects in

17 its State plan under this title to implement a pri18 mary care case management program under this

19 subsection shall include in the plan methods for the

20 selection and monitoring of participating primary

21 care case management entities to ensure that—

22 ‘‘(A) the numbers, geographic locations,

23 hours of operation, and other relevant charac24 teristics of such entities are sufficient to afford

25 individuals eligible for medical assistance rea-
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1 sonable access to and choice among such enti2 ties;

3 ‘‘(B) such entities and their professional

4 personnel are qualified to provide health care

5 case management services, through methods in6 cluding ongoing monitoring of compliance with

7 applicable requirements for licensing of health

8 care providers, providing training and certifi9 cation of primary care case managers, and pro10 viding information and technical assistance; and

11 ‘‘(C) such entities are making timely and

12 appropriate decisions with respect to enrollees’

13 need for health care items and services, and are

14 giving timely approval and referral to providers

15 of adequate quality where such items and serv16 ices are determined to be medically necessary.

17 ‘‘(8) STATE OPTIONS WITH RESPECT TO EN18 ROLLMENT AND DISENROLLMENT.—

19 ‘‘(A) MANDATORY ENROLLMENT OP20 TION.—A State plan may require an individual

21 eligible for medical assistance under the State

22 plan (other than a medicare qualified bene23 ficiary) to enroll with a risk contracting entity

24 or primary care case management entity, with25 out regard to the requirement of section
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1 1902(a)(1) (concerning Statewideness), the re2 quirements of section 1902(a)(10)(B) (concern3 ing comparability of benefits), or the require4 ments of section 1902(a)(23) (concerning free5 dom of choice of provider), if the individual is

6 permitted a choice—

7 ‘‘(i) between or among two or more

8 risk contracting entities,

9 ‘‘(ii) between a risk contracting entity

10 and a primary care case management en11 tity, or

12 ‘‘(iii) between or among two or more

13 primary care case management entities.

14 ‘‘(B)(i) RESTRICTIONS ON

15 DISENROLLMENT WITHOUT CAUSE.—A State

16 plan may restrict the period in which individ17 uals enrolled with a qualifying risk contracting

18 entity (as defined in clause (ii)) may terminate

19 such enrollment without cause to the first

20 month of each period of enrollment (as defined

21 in clause (iii)), but only if the State provides

22 notification, at least once during each such en23 rollment period, to individuals enrolled with

24 such entity of the right to terminate such en25 rollment and the restriction on the exercise of
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1 this right. Such restriction shall not apply to

2 requests for termination of enrollment for

3 cause.

4 ‘‘(ii) For purposes of this subparagraph,

5 the term ‘qualifying risk contracting entity’

6 means a risk contracting entity that is—

7 ‘‘(I) a qualified health maintenance

8 organization as defined in section 1310(d)

9 of the Public Health Service Act;

10 ‘‘(II) an eligible organization with a

11 contract under section 1876;

12 ‘‘(III) an entity that is receiving (and

13 has received during the previous 2 years)

14 a grant of at least $100,000 under section

15 329(d)(1)(A) or 330(d)(1) of the Public

16 Health Service Act;

17 ‘‘(IV) an entity that is receiving (and

18 has received during the previous 2 years)

19 at least $100,000 (by grant, subgrant, or

20 subcontract) under the Appalachian Re21 gional Development Act of 1965;

22 ‘‘(V) a program pursuant to an under23 taking described in paragraph (6) in which

24 at least 25 percent of the membership en25 rolled on a prepaid basis are individuals
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1 who (I) are not insured for benefits under

2 part B of title XVIII or eligible for medical

3 assistance under this title, and (II) (in the

4 case of such individuals whose prepay5 ments are made in whole or in part by any

6 government entity) had the opportunity at

7 the time of enrollment in the program to

8 elect other coverage of health care costs

9 that would have been paid in whole or in

10 part by any governmental entity; or

11 ‘‘(VI) an entity that, on the date of

12 enactment of this provision, had a contract

13 with the State agency under a waiver

14 under section 1115 or 1915(b) and was

15 not subject to a requirement under this

16 subsection to permit disenrollment without

17 cause.

18 ‘‘(iii) For purposes of this subparagraph,

19 the term ‘period of enrollment’ means—

20 ‘‘(I) a period not to exceed 6 months

21 in duration, or

22 ‘‘(II) a period not to exceed one year

23 in duration, in the case of a State that, on

24 the effective date of this subparagraph,

25 had in effect a waiver under section 1115
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1 of requirements under this title under

2 which the State could establish a 1-year

3 minimum period of enrollment with risk

4 contracting entities.

5 ‘‘(C) REENROLLMENT OF INDIVIDUALS

6 WHO REGAIN ELIGIBILITY.—In the case of an

7 individual who—

8 ‘‘(i) in a month is eligible for medical

9 assistance under the State plan and en10 rolled with a risk contracting entity with a

11 contract under this subsection,

12 ‘‘(ii) in the next month (or next 2

13 months) is not eligible for such medical as14 sistance, but

15 ‘‘(iii) in the succeeding month is again

16 eligible for such benefits,

17 the State plan may enroll the individual for

18 that succeeding month with such entity, if the

19 entity continues to have a contract with the

20 State agency under this subsection.

21 ‘‘(9) REQUIREMENTS FOR INTERNAL QUALITY

22 ASSURANCE PROGRAMS.—The requirements for an

23 internal quality assurance program of a risk con24 tracting entity are that program is written and the

25 program—
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1 ‘‘(A) specifies a systematic process includ2 ing ongoing monitoring, corrective action, and

3 other appropriate activities to achieve specified

4 and measurable goals and objectives for quality

5 of care, and including annual evaluation of the

6 program;

7 ‘‘(B) identifies the organizational units re8 sponsible for performing specific quality assur9 ance functions, and ensure that they are ac10 countable to the governing body of the entity

11 and that they have adequate supervision, staff,

12 and other necessary resources to perform these

13 functions effectively;

14 ‘‘(C) if any quality assistance functions are

15 delegated to other entities, ensures that the risk

16 contracting entity remains accountable for all

17 quality assurance functions, and has mecha18 nisms to ensure that all quality assurance ac19 tivities are carried out;

20 ‘‘(D) includes methods to ensure that phy21 sicians and other health care professionals

22 under contract with the entity are qualified to

23 perform the services they provide, and that

24 these qualifications are ensured through appro-
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1 priate credentialing and recredentialing proce2 dures;

3 ‘‘(E) includes policies addressing enrollee

4 rights and responsibilities, including grievance

5 mechanisms and mechanisms to inform enroll6 ees about access to and use of services provided

7 by the entity;

8 ‘‘(F) provides for continuous monitoring of

9 the delivery of health care, including—

10 ‘‘(i) identification of clinical areas to

11 be monitored,

12 ‘‘(ii) use of quality indicators and

13 standards for assessing care delivered, in14 cluding availability and accessibility of

15 care,

16 ‘‘(iii) monitoring, through use of epi17 demiological data or chart review, the care

18 of individuals, as appropriate, and patterns

19 of care overall, and

20 ‘‘(iv) implementation of corrective ac21 tions; and

22 ‘‘(G) meets any other requirements pre23 scribed by the Secretary after consultation with

24 States.
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1 ‘‘(10) INDEPENDENT REVIEW AND QUALITY AS2 SURANCE.—

3 ‘‘(A) STATE GRIEVANCE PROCEDURE.—A

4 State contracting with a risk contracting entity

5 or primary care case management entity under

6 this subsection shall provide for a grievance

7 procedure for enrollees of such entity with at

8 least the following elements:

9 ‘‘(i) A toll-free telephone number for

10 enrollee questions and grievances.

11 ‘‘(ii) A State-operated enrollee griev12 ance procedure.

13 ‘‘(iii) Periodic notification of enrollees

14 of their rights with respect to such entity

15 or program.

16 ‘‘(iv) Periodic sample reviews of griev17 ances registered with such entity or pro18 gram or with the State.

19 ‘‘(v) Periodic survey and analysis of

20 enrollee satisfaction with such entity or

21 program.

22 ‘‘(B) STATE MONITORING OF RISK CON23 TRACTING ENTITIES’ QUALITY ASSURANCE PRO24 GRAMS.—A State contracting with a risk con25 tracting entity under this subsection shall peri-
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1 odically review such entity’s quality assurance

2 program to ensure that it meets the require3 ments of paragraph (9).

4 ‘‘(C) EXTERNAL INDEPENDENT REVIEW

5 OF INTERNAL QUALITY ASSURANCE.—A State

6 contracting with a risk contracting entity under

7 this subsection shall provide for annual external

8 independent review (by a utilization control and

9 peer review organization with a contract under

10 section 1153, or another organization unaffili11 ated with the State government approved by the

12 Secretary) of such entity’s internal quality as13 surance activities. Such independent review

14 shall include—

15 ‘‘(i) review of the entity’s medical

16 care, through sampling of medical records

17 or other appropriate methods, for indica18 tions of inappropriate utilization and treat19 ment,

20 ‘‘(ii) review of enrollee inpatient and

21 ambulatory data, through sampling of

22 medical records or other appropriate meth23 ods, to determine quality trends,

24 ‘‘(iii) review of the entity’s internal

25 quality assurance activities, and
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1 ‘‘(iv) notification of the entity and the

2 State, and appropriate followup activities,

3 when the review under this subparagraph

4 indicates inappropriate care or treat5 ment.’’.

6 (b) STATE OPTION TO GUARANTEE MEDICAID ELIGI7 BILITY.—Section 1902(e)(2) of such Act (42 U.S.C.

8 1396a(e)(2)) is amended—

9 (A) in subparagraph (A), by striking all

10 that precedes ‘‘(but for this paragraph)’’ and

11 inserting ‘‘In the case of an individual who is

12 enrolled—

13 ‘‘(i) with a risk contracting entity (as

14 defined in section 1903(m)(1)(B)(i)) re15 sponsible for the provision of inpatient hos16 pital services and any other service de17 scribed in paragraphs (2), (3), (4), (5),

18 and (7) of section 1905(a),

19 ‘‘(ii) with any risk contracting entity

20 (as so defined) in a State that, on the ef21 fective date of this provision, had in effect

22 a waiver under section 1115 of require23 ments under this title under which the

24 State could extend eligibility for medical

25 assistance for enrollees of such entity, or
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1 ‘‘(iii) with an eligible organization

2 with a contract under section 1876 and

3 who would’’, and

4 (B) in subparagraph (B), by striking ‘‘or5 ganization or’’ each place it appears.

6 (c) CONFORMING AMENDMENTS.—

7 (1) Section 1128(b)(6)(C)(i) of such Act (42

8 U.S.C. 1320a–7(b)(6)(C)(i)) is amended by striking

9 ‘‘health maintenance organization’’ and inserting

10 ‘‘risk contracting entity’’.

11 (2) Section 1902(a)(30)(C) of such Act (42

12 U.S.C. 1396a(a)(30)(C)) is amended by striking all

13 that precedes ‘‘with the results’’ and inserting ‘‘pro14 vide for independent review and quality assurance of

15 entities with contracts under section 1903(m), in ac16 cordance with paragraph (10) of such section,’’.

17 (3) Section 1902(a)(57) of such Act (42 U.S.C.

18 1396a(a)(57)) is amended by striking ‘‘or health

19 maintenance organization’’ and inserting ‘‘or risk

20 contracting entity’’.

21 (4) Section 1902(a) of such Act (42 U.S.C.

22 1396a(a)) is amended—

23 (A) by striking ‘‘and’’ at the end of para24 graph (54);
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1 (B) in the paragraph (55) inserted by sec2 tion 4602(a)(3) of Public Law 101–508, by

3 striking the period at the end and inserting a

4 semicolon;

5 (C) by redesignating the paragraph (55)

6 inserted by section 4604(b)(3) of Public Law

7 101–508 as paragraph (56), by transferring

8 and inserting it after the paragraph (55) in9 serted by section 4602(a)(3) of such Act, and

10 by striking the period at the end and inserting

11 a semicolon;

12 (D) by placing paragraphs (57) and (58),

13 inserted by section 4751(a)(1)(C) of Public

14 Law 101–508, immediately after paragraph

15 (56), as redesignated by paragraph (3);

16 (E) in the paragraph (58) inserted by sec17 tion 4751(a)(1)(C) of Public Law 101–508, by

18 striking the period at the end and inserting a

19 semicolon;

20 (F) by redesignating the paragraph (58)

21 inserted by section 4752(c)(1)(C) of Public Law

22 101–508 as paragraph (59), by transferring

23 and inserting it after the paragraph (58) in24 serted by section 4751(a)(1)(C) of such Act,
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1 and by striking the period at the end and in2 serting ‘‘; and’’; and

3 (G) by inserting after such paragraph (59)

4 the following new paragraph:

5 ‘‘(60) at State option, provide for a primary

6 care case management program in accordance with

7 section 1903(m)(7).’’.

8 (5) Section 1902(p)(2) of such Act (42 U.S.C.

9 1396a(p)(2)) is amended by striking ‘‘health mainte10 nance organization’’ and inserting ‘‘risk contracting

11 entity’’.

12 (6) Section 1902(w) of such Act (42 U.S.C.

13 1396a(w)) is amended—

14 (A) in paragraph (1), by striking ‘‘section

15 1903(m)(1)(A)’’ and inserting ‘‘section

16 1903(m)(2)(C)(xi)’’, and

17 (B) in paragraph (2)(E), by striking

18 ‘‘health maintenance organization’’ and ‘‘the or19 ganization’’ and inserting ‘‘risk contracting en20 tity’’ and ‘‘the entity’’, respectively.

21 (7) Section 1903(k) of such Act (42 U.S.C.

22 1396b(k)) is amended by striking ‘‘health mainte23 nance organization’’ and inserting ‘‘risk contracting

24 entity’’.
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1 (8) Section 1903(m)(4)(A) of such Act (42

2 U.S.C. 1396b(m)(4)(A)) is amended—

3 (A) in the first sentence, by striking ‘‘Each

4 health maintenance organization’’ and inserting

5 ‘‘Each risk contracting entity’’,

6 (B) in the first sentence, by striking ‘‘the

7 organization’’ each place it appears and insert8 ing ‘‘the entity’’, and

9 (C) in the second sentence, by striking ‘‘an

10 organization’’ and ‘‘the organization’’ and in11 serting ‘‘a risk contracting entity’’ and ‘‘the

12 risk contracting entity’’, respectively.

13 (9) Section 1903(m)(4)(B) of such Act (42

14 U.S.C. 1396b(m)(4)(B)) is amended by striking ‘‘or15 ganization’’ and inserting ‘‘risk contracting entity’’.

16 (10) Section 1903(m)(5) of such Act (42

17 U.S.C. 1396b(m)(5)) is amended in paragraphs

18 (A)(iii) and (B)(ii) by striking ‘‘organization’’ and

19 inserting ‘‘entity’’.

20 (11) Section 1903(w)(7)(A)(viii) of such Act

21 (42 U.S.C. 1396b(w)(7)(A)(viii)) is amended by

22 striking ‘‘health maintenance organizations (and

23 other organizations with contracts under section

24 1903(m))’’ and inserting ‘‘risk contracting entities

25 with contracts under section 1903(m)’’.
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1 (12) Section 1905(a) of such Act (42 U.S.C.

2 1396d(a)) is amended, in the matter preceding

3 clause (i), by inserting ‘‘(which may be on a prepaid

4 capitation or other risk basis)’’ after ‘‘payment’’ the

5 first place it appears.

6 (13) Section 1916(b)(2)(D) of such Act (42

7 U.S.C. 1396o(b)(2)(D)) is amended by striking

8 ‘‘health maintenance organization’’ and inserting

9 ‘‘risk contracting entity’’.

10 (14) Section 1925(b)(4)(D)(iv) of such Act (42

11 U.S.C. 1396r–6(b)(4)(D)(iv)) is amended—

12 (A) in the heading, by striking ‘‘HMO’’ and

13 inserting ‘‘RISK CONTRACTING ENTITY’’,

14 (B) by striking ‘‘health maintenance orga15 nization’’ and inserting ‘‘risk contracting en16 tity’’ each place it appears, and

17 (C) by striking ‘‘section 1903(m)(1)(A)’’

18 and inserting ‘‘section 1903(m)(1)(B)(i)’’.

19 (15) Paragraphs (1) and (2) of section 1926(a)

20 of such Act (42 U.S.C. 1396r–7(a)) are each amend21 ed by striking ‘‘health maintenance organizations’’

22 and inserting ‘‘risk contracting entities’’.

23 (16) Section 1927(j)(1) of such Act (42 U.S.C.

24 1396s(j)(1)) is amended by striking ‘‘*** Health
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1 Maintenance Organizations, including those organi2 zations’’ and inserting ‘‘risk contracting entities’’.

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

4 this section shall become effective with respect to calendar

5 quarters beginning on or after January 1, 1994.

6 SEC. 302. PERIOD OF CERTAIN WAIVERS.

7 (a) IN GENERAL.—Section 1915(h) of the Social Se8 curity Act (42 U.S.C. 1396n(h)) is amended by striking

9 ‘‘No waiver’’ and all that follows through ‘‘unless the Sec10 retary’’ and inserting ‘‘A waiver under this section (other

11 than under subsection (c), (d), or (e)) shall be for an ini12 tial term of 3 years and, upon the request of a State, shall

13 be extended for additional 5 year periods unless the Sec14 retary’’.

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

16 subsection (a) shall apply to waivers pursuant to applica17 tions which are approved, and with respect to continu18 ations of waivers for which requests are made, later than

19 30 days after the date of the enactment of this Act.

20 Subtitle E—Limitations on

21 Physician Self-Referrals

22 SEC. 311. EXTENSION OF PHYSICIAN SELF-REFERRAL

23 LIMITATIONS TO ALL PAYORS.

24 Section 1877 of the Social Security Act (42 U.S.C.

25 1395nn) is amended—
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1 (1) in subsection (a)—

2 (A) in paragraph (1)(A), by striking ‘‘for

3 which payment otherwise may be made under

4 this title’’ and inserting ‘‘for which a charge is

5 imposed’’, and

6 (B) in paragraph (1)(B), by striking

7 ‘‘under this title’’;

8 (2) by amending paragraph (1) of subsection

9 (g) to read as follows:

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

11 be made under this title, under another Federal

12 health care program, or under a State health care

13 program (as defined in section 1128(h)) for a des14 ignated health service for which a claim is presented

15 in violation of subsection (a)(1)(B). No individual,

16 third party payor, or other entity is liable for pay17 ment for designated health services for which a

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

19 and

20 (3) in subsection (g)(3), by striking ‘‘for which

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

22 and inserting ‘‘for which such a claim may not be

23 presented under subsection (a)(1)’’.
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1 SEC. 312. EXTENSION OF PHYSICIAN SELF-REFERRAL

2 LIMITATIONS TO CERTAIN ADDITIONAL

3 SERVICES.

4 (a) IN GENERAL.—Section 1877 of the Social Secu5 rity Act is further amended—

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

7 and ‘‘CLINICAL LABORATORY SERVICES’’ and insert8 ing ‘‘designated health services’’ and ‘‘DESIGNATED

9 HEALTH SERVICES’’, respectively, each place either

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

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

12 (2) by adding at the end the following new sub13 section:

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

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

16 ‘‘(1) clinical laboratory services,

17 ‘‘(2) physical therapy services,

18 ‘‘(3) radiology and diagnostic imaging services,

19 ‘‘(4) radiation therapy services, and

20 ‘‘(5) the furnishing of durable medical equip21 ment.’’.

22 (b) CONFORMING AMENDMENTS.—Section 1877 of

23 such Act is further amended—

24 (1) in subsection (d)(2), by striking ‘‘labora25 tory’’ and inserting ‘‘entity’’,
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1 (2) in subsection (g)(1), by striking ‘‘clinical

2 laboratory service’’ and inserting ‘‘designated health

3 service’’, and

4 (3) in subsection (h)(7)(B), by striking ‘‘clinical

5 laboratory service’’ and inserting ‘‘designated health

6 service’’.

7 SEC. 313. CHANGES IN EXCEPTIONS.

8 (a) HEALTH MAINTENANCE ORGANIZATIONS AND

9 MANAGED CARE PLANS.—Paragraph (3) of section

10 1877(b) of the Social Security Act is amended to read as

11 follows:

12 ‘‘(3) HEALTH MAINTENANCE ORGANIZATIONS

13 AND MANAGED CARE PLANS.—

14 ‘‘(A) HEALTH MAINTENANCE ORGANIZA15 TIONS.—In the case of services furnished by a

16 health maintenance organization to an individ17 ual enrolled with the health maintenance orga18 nization, including services furnished by—

19 ‘‘(i) an eligible organization (as de20 fined in section 1876(b));

21 ‘‘(ii) an organization described in sec22 tion 1833(a)(1)(A);

23 ‘‘(iii) an organization receiving pay24 ments on a prepaid basis under a dem25 onstration project under section 402(a) of
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1 the Social Security Amendments of 1967

2 or under section 222(a) of the Social Secu3 rity Amendments of 1972; and

4 ‘‘(iv) any other entity designated by

5 the Secretary as a health maintenance or6 ganization for purposes of this subpara7 graph.

8 ‘‘(B) CERTAIN MANAGED CARE PLANS.—In

9 the case of services furnished by a managed

10 care plan (as defined by the Secretary) to an

11 individual enrolled under the plan if—

12 ‘‘(i) the plan selectively contracts with

13 physicians and with providers of des14 ignated health services; and

15 ‘‘(ii) under the plan physicians bear a

16 significant financial risk for the cost of

17 designated health services furnished upon

18 referral.’’.

19 (b) EXCEPTION FOR SHARED FACILITY SERVICES.—

20 Section 1877 of such Act is amended—

21 (1) in subsection (b), by redesignating para22 graphs (3), (4), and (5) as paragraphs (4), (6), and

23 (7), respectively, and by inserting after paragraph

24 (2) the following new paragraph:

25 ‘‘(3) SHARED FACILITY SERVICES.—
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1 ‘‘(A) IN GENERAL.—In the case of shared

2 facility services of a shared facility—

3 ‘‘(i) that are furnished—

4 ‘‘(I) personally by the referring

5 physician who is a shared facility phy6 sician or personally by an individual

7 supervised by such a physician or by

8 another shared facility physician and

9 employed under the shared facility ar10 rangement,

11 ‘‘(II) by a shared facility in a

12 building in which the referring physi13 cian furnishes physician’s services un14 related to the furnishing of shared fa15 cility services, and

16 ‘‘(III) to a patient of a shared fa17 cility physician;

18 ‘‘(ii) that are billed by the referring

19 physician or by an entity that is wholly

20 owned by such physician; and

21 ‘‘(iii) with respect to the referral for

22 which the disclosure requirements of sub23 paragraph (B) are met.

24 ‘‘(B) CONFLICT OF INTEREST DISCLOSURE

25 REQUIREMENTS.—A shared facility meets the
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1 disclosure requirements of this subparagraph,

2 with respect to a referral of an individual for

3 the furnishing of shared facility services, if at

4 the time of the referral (and before the provi5 sion of shared facility services under the refer6 ral) and in a form and manner specified by the

7 Secretary—

8 ‘‘(i) the individual (I) is given infor9 mation on the financial relationship be10 tween the referring physician and the

11 shared facility, and (II) is informed that a

12 list of alternative providers (if any) that

13 are available to provide such services will

14 be given upon request,

15 ‘‘(ii) the individual is given, upon re16 quest, a list of alternative providers (if

17 any) that are available to provide such

18 services, and

19 ‘‘(iii) the individual is informed that

20 (I) the individual has the option to use any

21 of the alternative providers and (II) the re22 ferring physician will not treat the individ23 ual differently if an alternative provider is

24 selected to provide the designated health

25 services.
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1 ‘‘(C) CONSTRUCTION.—Nothing in sub2 paragraph (B) shall be construed to limit the

3 information that a shared facility or shared fa4 cility physician may provide to an individual.’’;

5 and

6 (2) in subsection (h), by adding at the end the

7 following new paragraph:

8 ‘‘(8) SHARED FACILITY RELATED DEFINI9 TIONS.—

10 ‘‘(A) SHARED FACILITY SERVICES.—The

11 term ‘shared facility services’ means, with re12 spect to a shared facility, a type of designated

13 health services which is furnished by the facility

14 to patients of shared facility physicians.

15 ‘‘(B) SHARED FACILITY.—The term

16 ‘shared facility’ means an entity that furnishes

17 shared facility services under a shared facility

18 arrangement.

19 ‘‘(C) SHARED FACILITY PHYSICIAN.—The

20 term ‘shared facility physician’ means, with re21 spect to a shared facility, a physician who has

22 a financial relationship under a shared facility

23 arrangement with the facility.

24 ‘‘(D) SHARED FACILITY ARRANGEMENT.—

25 The term ‘shared facility arrangement’ means,
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1 with respect to the provision of a type of des2 ignated health services by a shared facility in a

3 building, a financial arrangement—

4 ‘‘(i) which is only between physicians

5 who are providing services (unrelated to

6 shared facility services) in the same build7 ing,

8 ‘‘(ii) which makes one or more of the

9 shared facility physicians responsible for

10 the provision of shared facility services by

11 the facility,

12 ‘‘(iii) in which the overhead expenses

13 of the facility are shared, in accordance

14 with methods previously determined by the

15 physicians in the arrangement, among the

16 physicians in the arrangement, and

17 ‘‘(iv) which, in the case of a corpora18 tion, is wholly owned and controlled by

19 shared facility physicians.’’.

20 (c) EXCEPTION FOR VALUABLE COMMUNITY SERV21 ICES.—Section 1877(b) of such Act is further amended

22 by inserting after paragraph (4), as redesignated by sub23 section (b)(1), the following new paragraph:

24 ‘‘(5) VALUABLE COMMUNITY SERVICES.—
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1 ‘‘(A) IN GENERAL.—In the case of services

2 furnished by an entity to individuals in a com3 munity if the Secretary determines that—

4 ‘‘(i) individuals in the community will

5 be deprived of adequate health care serv6 ices without an exception under this para7 graph for the entity and the services, and

8 ‘‘(ii) the requirements of subpara9 graph (B) are met.

10 ‘‘(B) REQUIREMENTS.—The requirements

11 of this subparagraph for an exception under

12 subparagraph (A), for the furnishing of des13 ignated health services by an entity, are as fol14 lows:

15 ‘‘(i) EQUAL INVESTMENT OPPOR16 TUNITY.—(I) Individuals who are not re17 ferring physicians must be given a bona

18 fide opportunity to invest in the entity on

19 the same terms that are offered to refer20 ring physicians.

21 ‘‘(II) The terms on which investment

22 interests are offered to physicians must not

23 be related to the past or expected volume

24 of referrals or other business from the phy25 sicians.
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1 ‘‘(III) The return on investment for

2 interested investors must be tied to the in3 vestor’s equity in the entity and not be re4 lated to the volume of referrals attributable

5 to the investor.

6 ‘‘(IV) There is no requirement that

7 any interested or other investor make re8 ferrals to the entity or otherwise generate

9 business as a condition for remaining an

10 investor.

11 ‘‘(V) The entity must not loan funds

12 or guarantee a loan for interested investors

13 or physicians in a position to refer to the

14 entity.

15 ‘‘(VI) The entity must not market or

16 furnish its items or services to interested

17 investors differently from other investors.

18 ‘‘(ii) PROHIBITION OF

19 NONCOMPETITION CLAUSES.—Investment

20 contracts must not include a

21 ‘noncompetition clause’ that prevents phy22 sicians or interested investors from invest23 ing in other entities furnishing such serv24 ices.
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1 ‘‘(iii) DISCLOSURE REQUIREMENTS.—

2 (I) The disclosure requirements of para3 graph (3)(B) must be met.

4 ‘‘(II) The financial relationship with

5 the referring physician must be disclosed,

6 when required, to any third-party payor.

7 ‘‘(iv) INTERNAL UTILIZATION RE8 VIEW.—There must be in operation an in9 ternal utilization review program to ensure

10 that physicians who are interested inves11 tors do not exploit their patients in any

12 way through inappropriate utilization or

13 otherwise.

14 ‘‘(C) REVIEW.—In the case of any excep15 tion provided an entity under this paragraph,

16 the Secretary shall periodically review the entity

17 to determine if the requirements of subpara18 graph (B) continue to be met.

19 ‘‘(D) TERMINATION OF EXCEPTION.—The

20 Secretary shall, after notice and opportunity for

21 a hearing, terminate an exception granted an

22 entity under this paragraph if the Secretary de23 termines that—
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1 ‘‘(i) there was a misrepresentation of

2 material fact in the application for the ex3 ception; or

4 ‘‘(ii) the entity has failed to comply

5 substantially with the requirements of sub6 paragraph (B).

7 ‘‘(E) COMMUNITY DEFINED.—In this para8 graph, the term ‘community’ means—

9 ‘‘(i) part or all of a metropolitan sta10 tistical area (or equivalent area), or

11 ‘‘(ii) a county (or equivalent area)

12 outside such a metropolitan statistical area

13 (or equivalent area).’’.

14 (d) EXCEPTION FOR HOSPITALS.—Subparagraph (A)

15 of subsection (d)(3) of such section is amended to read

16 as follows:

17 ‘‘(A) at the time the services are furnished,

18 the hospital has a participation agreement in

19 effect under section 1866, and’’.

20 SEC. 314. STUDY AND REPORT ON CHANGES IN COSTS.

21 The Secretary of Health and Human Services shall

22 conduct a study in order to estimate the changes in aggre23 gate costs for designated health services, under the medi24 care program and other health plans, which will result

25 from the implementation of the amendments made by this
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1 subtitle. Not later than 2 years after the date of the enact2 ment of this Act the Secretary shall submit to Congress

3 a report on such study.

4 SEC. 315. EFFECTIVE DATE.

5 (a) IN GENERAL.—Subject to subsection (b), the

6 amendments made by this subtitle shall apply with respect

7 to a referral by a physician for designated health services

8 (as described in section 1877(i) of the Social Security Act)

9 made on or after the first day of the first month beginning

10 6 months after the date of the enactment of this Act.

11 (b) TIME-LIMITED EXCEPTION FOR CURRENT FI12 NANCIAL RELATIONSHIPS.—

13 (1) IN GENERAL.—Subject to paragraph (3),

14 the amendments made by this subtitle shall not

15 apply in the case of a patient referral with respect

16 to which a prohibited financial relationship (de17 scribed in paragraph (3)) existed as of the date of

18 the enactment of this Act if, at the time of the refer19 ral (and before the receipt of services under the re20 ferral), the patient is provided information on the

21 prohibited financial relationship. Such information

22 shall be disclosed in the same manner information

23 must be disclosed under section 1877(b)(3)(B) of

24 the Social Security Act (as amended by this sub25 title). If such information is not so provided, the re-
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1 ferral shall be subject to such amendments (as pro2 vided in subsection (a)).

3 (2) PROHIBITED FINANCIAL RELATIONSHIP.—A

4 prohibited financial relationship described in this

5 paragraph is a financial relationship described in

6 subsection (a)(2) of section 1877 of the Social Secu7 rity Act for which an exception described in sub8 section (b), (c), (d), or (e) of such section (as

9 amended by this subtitle) does not apply.

10 (3) TIME LIMIT.—Paragraph (1) shall only

11 apply to referrals made before the first day of the

12 first month beginning 4 years after the date of the

13 enactment of this Act.

14 Subtitle F—Removing Restrictions

15 on Managed Care

16 SEC. 321. REMOVING RESTRICTIONS ON MANAGED CARE.

17 (a) PREEMPTION OF STATE LAW PROVISIONS.—Sub18 ject to subsection (c), the following provisions of State law

19 are preempted and may not be enforced:

20 (1) RESTRICTIONS ON REIMBURSEMENT RATES

21 OR SELECTIVE CONTRACTING.—Any law that re22 stricts the ability of a carrier to negotiate reimburse23 ment rates with providers or to contract selectively

24 with one provider or a limited number of providers.
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1 (2) RESTRICTIONS ON DIFFERENTIAL FINAN2 CIAL INCENTIVES.—Any law that limits the financial

3 incentives that a health benefit plan may require a

4 beneficiary to pay when a non-plan provider is used

5 on a non-emergency basis.

6 (3) RESTRICTIONS ON UTILIZATION REVIEW

7 METHODS.—Any law that—

8 (A) prohibits utilization review of any or

9 all treatments and conditions,

10 (B) requires that such review be made (i)

11 by a resident of the State in which the treat12 ment is to be offered or by an individual li13 censed in such State, or (ii) by a physician in

14 any particular specialty or with any board cer15 tified specialty of the same medical specialty as

16 the provider whose services are being reviewed,

17 (C) requires the use of specified standards

18 of health care practice in such reviews or re19 quires the disclosure of the specific criteria used

20 in such reviews,

21 (D) requires payments to providers for the

22 expenses of responding to utilization review re23 quests, or

24 (E) imposes liability for delays in perform25 ing such review.
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1 Nothing in subparagraph (B) shall be construed as

2 prohibiting a State from (i) requiring that utilization

3 review be conducted by a licensed health care profes4 sional or (ii) requiring that any appeal from such a

5 review be made by a licensed physician or by a li6 censed physician in any particular specialty or with

7 any board certified specialty of the same medical

8 specialty as the provider whose services are being re9 viewed.

10 (b) GAO STUDY.—

11 (1) IN GENERAL.—The Comptroller General

12 shall conduct a study of the benefits and cost effec13 tiveness of the use of managed care in the delivery

14 of health services.

15 (2) REPORT.—By not later than 4 years after

16 the date of the enactment of this Act, the Comptrol17 ler General shall submit a report to Congress on the

18 study conducted under paragraph (1) and shall in19 clude in the report such recommendations (including

20 whether the provisions of subsection (a) should be

21 extended) as may be appropriate.

22 (c) SUNSET.—Unless otherwise provided, subsection

23 (a) shall not apply 5 years after the date of the enactment

24 of this Act.
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1 Subtitle G—Medicare Payment

2 Changes

3 SEC. 331. REVISIONS TO METHODOLOGY FOR DETERMIN4 ING UPDATES TO MEDICARE HOSPITAL PAY5 MENTS.

6 (a) UPDATES FOR PPS HOSPITALS ON CALENDAR

7 YEAR BASIS.—

8 (1) IN GENERAL.—Section 1886(b)(3)(B)(i) of

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

10 1395ww(b)(3)(B)(i)) is amended—

11 (A) in the matter preceding subclause (i),

12 by striking ‘‘fiscal year’’ and inserting ‘‘particu13 lar time period’’;

14 (B) in subclause (VIII), by striking

15 ‘‘1993,’’ and inserting ‘‘1993 and the first 3

16 months of fiscal year 1994’’; and

17 (C) in subclause (XI) through (X), by

18 striking ‘‘fiscal year’’ each place it appears and

19 inserting ‘‘calendar year’’.

20 (2) UPDATES TO STANDARDIZED AMOUNTS.—

21 Section 1886(d)(3)(A) of such Act (42 U.S.C.

22 1395ww(d)(3)(A)) is amended—

23 (A) in clause (ii)—

24 (i) by striking ‘‘1994,’’ and inserting

25 the following: ‘‘1992, a 15-month period
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1 beginning October 1, 1992, and calendar

2 year 1994’’, and

3 (ii) by striking ‘‘fiscal year’’ the sec4 ond and third place it appears and insert5 ing ‘‘fiscal year, particular time period, or

6 calendar year’’;

7 (B) in clause (iii), by striking ‘‘the fiscal

8 year beginning on October 1, 1994,’’ and in9 serting ‘‘calendar year 1995,’’; and

10 (C) in clause (iv)—

11 (i) by striking ‘‘a fiscal year beginning

12 on or after October 1, 1995,’’ and insert13 ing ‘‘a calendar year beginning on or after

14 January 1, 1996,’’, and

15 (ii) by striking ‘‘fiscal year’’ each

16 place it appears and inserting ‘‘calendar

17 year’’.

18 (3) CONFORMING AMENDMENTS.—Section

19 1886(b)(3)(B)(iii) of such Act (42 U.S.C.

20 1395ww(b)(3)(B)(iii)) is amended—

21 (A) by striking ‘‘fiscal year’’ the first place

22 it appears and inserting ‘‘particular time pe23 riod’’,
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1 (B) by striking ‘‘period or fiscal year’’ the

2 first place it appears and inserting ‘‘cost report3 ing period or particular time period’’, and

4 (C) by striking ‘‘for the period or fiscal

5 year’’ and inserting ‘‘for the cost reporting pe6 riod or fiscal year ending in the particular time

7 period’’.

8 (b) REDUCTION IN UPDATES FOR NON-PPS HOS9 PITALS.—Section 1886(b)(3)(B)(ii) of such Act (42

10 U.S.C. 1395ww(b)(3)(B)(ii)) is amended—

11 (1) by redesignating subclause (IV) and

12 subclause (VI); and

13 (2) by striking ‘‘and’’ at the end of subclause

14 (III) and by inserting after subclause (III) the fol15 lowing:

16 ‘‘(IV) fiscal years 1989, 1990, 1991, 1992, and

17 1993, the market basket percentage increase,

18 ‘‘(V) fiscal year 1994, 75 percent of the market

19 basket percentage increase, and’’.

20 SEC. 332. REDUCTION IN MEDICARE PAYMENT FOR CLINI21 CAL DIAGNOSTIC LABORATORY TESTS.

22 (a) LOWERING CAP ON PAYMENT AMOUNT.—Section

23 1833(h)(4)(B) of the Social Security Act (42 U.S.C.

24 1395l(h)(4)(B)) is amended—

25 (1) by striking ‘‘and’’ at the end of clause (iii);
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1 (2) in clause (iv), by inserting ‘‘and before Oc2 tober 1, 1993,’’ after ‘‘1990,’’;

3 (3) by striking the period at the end of clause

4 (iv) and inserting ‘‘, and’’; and

5 (4) by adding at the end the following:

6 ‘‘(v) after September 30, 1993, is equal to 76

7 percent of the median of all the fee schedules estab8 lished for that test for that laboratory setting under

9 paragraph (1).’’.

10 (b) REPEAL OF ANNUAL UPDATE IN PAYMENTS FOR

11 CLINICAL DIAGNOSTIC LABORATORY TESTS.—Section

12 1833(h)(2)(A)(ii) of such Act (42 U.S.C.

13 1395l(h)(2)(A)(ii)) is amended—

14 (1) by striking ‘‘and’’ at the end of subclause

15 (II);

16 (2) in subclause (III), by striking the period at

17 the end and inserting a semicolon; and

18 (3) by adding at the end the following:

19 ‘‘(IV) no annual adjustment in the fee sched20 ules shall be made under clause (i) for any of the

21 years 1994 through 1998.’’.
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1 Subtitle H—Limitation of Antitrust

2 Recovery for Certain Hospital

3 Joint Ventures

4 SEC. 341. PURPOSE.

5 The purpose of this subtitle is to encourage coopera6 tion among hospitals in order to contain costs and achieve

7 a more efficient health care delivery system through the

8 elimination of unnecessary duplication and proliferation of

9 expensive high technology equipment, medical services, or

10 ancillary services.

11 SEC. 342. DEFINITIONS.

12 For the purposes of this subtitle:

13 (1) The term ‘‘antitrust laws’’ has the meaning

14 given it in subsection (a) of the first section of the

15 Clayton Act (15 U.S.C. 12(a)), except that such

16 term includes—

17 (A) section 5 of the Federal Trade Com18 mission Act (15 U.S.C. 45) to the extent such

19 section applies to unfair methods of competi20 tion, and

21 (B) any State law similar to the antitrust

22 laws.

23 (2) The term ‘‘high technology equipment’’

24 means equipment and devices utilized in medical
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1 care, and the technical support systems for them,

2 that—

3 (A) have acquisition costs greater than

4 $1,000,000 or annual operating costs greater

5 than $500,000, and

6 (B) use technologies with respect to which

7 there is a reasonable expectation that shared

8 ownership will avoid a significant degree of ac9 tual or anticipated excess capacity of service in

10 the geographical area to be served.

11 (3) The term ‘‘medical services’’ means services

12 that are involved in providing medical care to pa13 tients and that—

14 (A) have annual operating costs greater

15 than $1,000,000, and

16 (B) with respect to which there is a rea17 sonable expectation that shared ownership will

18 avoid a significant degree of the actual or an19 ticipated excess capacity of such services in the

20 geographical area to be served,

21 and may include mobile services.

22 (4) The term ‘‘ancillary services’’ means sup23 port functions associated with operating a hospital

24 (laundry, billing, patient transportation, data proc25 essing, and other similar services) the predominant
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1 function of which does not involve the provision of

2 medical treatment to patients.

3 (5) The term ‘‘hospital’’ means a hospital

4 that—

5 (A) has entered into, and has in effect a

6 participation agreement under section 1866(a)

7 of the Social Security Act (42 U.S.C.

8 1395cc(a)), or

9 (B) has in effect a participation agreement

10 under title XIX of such Act (42 U.S.C. 1396 et

11 seq.) with the State in which the hospital is lo12 cated.

13 (6) The term ‘‘hospital joint venture’’ means an

14 agreement between 2 or more hospitals that is en15 tered into solely for the purpose of sharing in the

16 purchase or operation of high technology equipment,

17 medical services, or ancillary services, and that in18 volves substantial integration or financial risk-shar19 ing between the parties. The term excludes—

20 (A) exchanging information among com21 petitors relating to costs, sales, profitability,

22 prices, marketing, or distribution of any prod23 uct, process, or service that is not reasonably

24 required to carry out such agreement,
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1 (B) entering into any arrangement or en2 gaging in any other conduct to restrict, require,

3 or otherwise involve the marketing by any party

4 to such agreement of any product, process, or

5 service that is not reasonably required to carry

6 out such agreement, and

7 (C) entering into any arrangement or en8 gaging in any other conduct to restrict or re9 quire the participation by any party to such

10 agreement in conduct that is not reasonably re11 quired to carry out such agreement.

12 (7) The term ‘‘Attorney General’’ means the

13 Attorney General of the United States.

14 (8) The term ‘‘Secretary’’ means the Secretary

15 of Health and Human Services.

16 (9) The term ‘‘Commission’’ means the Federal

17 Trade Commission.

18 SEC. 343. LIMITATION ON DAMAGES FOR ANTITRUST VIO19 LATIONS.

20 Monetary recovery on a claim in any action brought

21 under the antitrust laws against a hospital that is a party

22 to a hospital joint venture shall be limited to actual dam23 ages if—

24 (1) the hospitals forming such venture meet the

25 notification requirements specified in section 344,
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1 (2) the claim results from conduct that is with2 in the scope of the notification filed under section

3 344, and

4 (3) the action is filed after such notification be5 comes effective pursuant to section 344(c).

6 SEC. 344. DISCLOSURE OF HOSPITAL JOINT VENTURE.

7 (a) WRITTEN NOTIFICATIONS; FILING.—Any hos8 pital that is a party to a hospital joint venture, acting on

9 the venture’s behalf, not later than 90 days after entering

10 into a written agreement to form the venture, or not later

11 than 90 days after, the date of the enactment of this Act,

12 whichever is later, may file simultaneously with the Attor13 ney General, the Secretary, and the Commission, a written

14 notification disclosing—

15 (1) the identities of the parties to the venture,

16 and

17 (2) the nature, objectives, and planned activity

18 of the venture.

19 Any hospital that is a party to a hospital joint venture,

20 acting on the venture’s behalf, may file additional disclo21 sure notifications pursuant to this section as are appro22 priate to extend the protections of section 343. In order

23 to maintain the protections of section 343, the venture,

24 not later than 90 days after a change in its membership

25 or its planned activity, shall file simultaneously with the
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1 Attorney General, the Secretary, and the Commission a

2 written notification disclosing such change.

3 (b) PUBLICATION; FEDERAL REGISTER; NOTICE.—

4 Not later than 30 days after receiving a notification filed

5 under subsection (a), the Secretary, after consultation

6 with the Attorney General and the Commission, shall pub7 lish in the Federal Register a notice with respect to the

8 hospital joint venture that identifies the parties to the ven9 ture and that describes the planned activity of the venture.

10 Prior to its publication, the contents of such notice shall

11 be made available to the parties to the venture.

12 (c) EFFECT OF THE NOTICE.—If with respect to a

13 notification filed under subsection (a) of this section, no14 tice is published in the Federal Register, then such notifi15 cation shall operate to convey the protections of section

16 343 as of the earlier of—

17 (1) the date of the publication of notice under

18 subsection (b), or

19 (2) if such notice is not so published within the

20 time required by subsection (b) of this section, after

21 the expiration of the 30-day period beginning on the

22 date that the Attorney General, the Secretary, or the

23 Commission receives the applicable information de24 scribed in subsection (a).
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1 (d) EXEMPTION; DISCLOSURE; INFORMATION.—Ex2 cept with respect to the information published pursuant

3 to subsection (b)—

4 (1) all information and documentary material

5 submitted as part of a notification filed pursuant to

6 this section, and

7 (2) all other information obtained by the Attor8 ney General, the Secretary, or the Commission in

9 the course of any investigation, administrative pro10 ceeding, or case, with respect to a potential violation

11 of the antitrust laws by the joint venture with re12 spect to which such notification was filed,

13 shall be exempt from disclosure under section 552 of title

14 5, United States Code, and shall not be made publicly

15 available by any agency of the United States to which such

16 section applies, except as relevant to a law enforcement

17 investigation or in a judicial or administrative proceeding

18 in which such information and material is subject to any

19 protective order.

20 (e) WITHDRAWAL OF NOTIFICATION.—Any party

21 that files a notification pursuant to this section may with22 draw such notification before notice of the hospital joint

23 venture involved is published under subsection (b) of this

24 section. Any notification so withdrawn shall not be subject
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1 to subsection (b) and shall not confer the protections of

2 section 343.

3 (f) JUDICIAL REVIEW: INAPPLICABLE WITH RE4 SPECT TO NOTIFICATIONS.—Any action taken or not

5 taken by the Attorney General, the Secretary, or the Com6 mission with respect to notifications filed pursuant to this

7 section shall not be subject to judicial review.

8 (g) ADMISSIBILITY INTO EVIDENCE: DISCLOSURE OF

9 CONDUCT; PUBLICATION OF NOTICE; SUPPORTING OR

10 ANSWERING CLAIMS UNDER ANTITRUST LAWS.—

11 (1) Except as provided in paragraph (2), the

12 fact of disclosure of conduct under subsection (a)

13 and the fact of publication of a notice under sub14 section (b) shall be admissible into evidence in any

15 judicial or administrative proceeding for the sole

16 purpose of establishing that a person is entitled to

17 the protections of section 343.

18 (2) No action by the Attorney General, the Sec19 retary, or the Commission taken pursuant to this

20 section shall be admissible into evidence in any pro21 ceeding for the purpose of supporting or answering

22 any claim under the antitrust laws.
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1 SEC. 345. INTERAGENCY COMMITTEE ON COMPETITION,

2 ANTITRUST POLICY, AND HEALTH CARE.

3 (a) ESTABLISHMENT.—There is hereby established

4 the Interagency Committee on Competition, Antitrust Pol5 icy, and Health Care (hereinafter in this section referred

6 to as the ‘‘Committee’’). The Committee shall be composed

7 of—

8 (1) the Secretary of Health and Human Serv9 ices (or the designee of the Secretary),

10 (2) the Attorney General (or the designee of the

11 Attorney General)

12 (3) the Director of the Office of Management

13 and Budget (or the designee of the Director), and

14 (4) a representative of the Federal Trade Com15 mission.

16 (b) DUTIES.—The Duties of the Committee are—

17 (1) to discuss and evaluate competition and

18 antitrust policy, and their implications with respect

19 to the performance of health care markets, and

20 (2) to make such recommendations to the Con21 gress not later than 1 year after the date of the en22 actment of this Act, and thereafter as the Commit23 tee considers to be appropriate, regarding achieving

24 both health-care cost containment and greater access

25 to quality health care through cooperation among

26 health care providers.
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1 Subtitle I—Encouraging Enforcement

2 Activities of Medical Self-Regulatory Entities

3 PART 1—APPLICATION OF THE CLAYTON ACT TO

4 MEDICAL SELF-REGULATORY ENTITIES

5 SEC. 351. ANTITRUST EXEMPTION FOR MEDICAL SELF-REG6 ULATORY ENTITIES.

7 (a) IN GENERAL.—(1) Except as provided in para8 graph (2), no damages, interest on damages, cost of suit,

9 or attorney’s fee may be recovered under section 4, 4A,

10 or 4C of the Clayton Act (15 U.S.C. 15, 15a, 15c), or

11 under any State law similar to such section, from any

12 medical self-regulatory entity (including its members, offi13 cers, employees, consultants, and volunteers or committees

14 thereof) as a result of engaging in standard setting or en15 forcement activities that are—

16 (A) designed to promote the quality of health

17 care provided to patients, and

18 (B) not conducted for purposes of financial

19 gain.

20 (2) Paragraph (1) shall not prohibit the recovery of

21 actual damages, interest on damages, the cost of suit, or

22 a reasonable attorney’s fee under section 4 or 4A of the

23 Clayton Act (15 U.S.C. 15, 15a), or under any State law

24 similar to such section, by a State or the United States

25 from a medical self-regulatory entity (including its mem-
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1 bers, officers, employees, consultants, and volunteers or

2 committees thereof) for injury sustained as a result of en3 gaging in the conduct described in such paragraph.

4 (b) FEES.—In any action under section 4, 4C, or 16

5 of the Clayton Act (15 U.S.C. 15, 15c, 26), or under a

6 similar State law, brought against any medical self-regu7 latory entity (including its members, officers, employees,

8 consultants, and volunteers or committees thereof) as a

9 result of engaging in conduct described in subsection

10 (a)(1), the court shall award the cost of suit, including

11 a reasonable attorney’s fee, to a substantially prevailing

12 defendant.

13 SEC. 352. DEFINITIONS.

14 For purposes of this subtitle:

15 (1) The term ‘‘medical self-regulatory entity’’

16 means a medical society or association, a specialty

17 board, a recognized accrediting agency, or a hospital

18 medical staff.

19 (2) The term ‘‘standard setting and enforce20 ment activities’’ means—

21 (A) accreditation of health care practition22 ers, health care providers, medical education in23 stitutions, or medical education programs,

24 (B) technology assessment and risk man25 agement activities,
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1 (C) the development and implementation of

2 practice guidelines or practice parameters, or

3 (D) official peer review proceedings under4 taken by a hospital medical staff (or committee

5 thereof) for purposes of evaluating the quality

6 of health care provided by a medical profes7 sional.

8 PART 2—CONSULTATION BY FEDERAL AGENCIES

9 SEC. 357. CONSULTATION WITH MEDICAL SELF-REGU10 LATORY ENTITIES RESPECTING MEDICAL

11 PROFESSIONAL GUIDELINES AND STAND12 ARDS.

13 Any Federal agency engaged in the establishment of

14 medical professional standards shall consult with appro15 priate medical societies or associations, specialty boards,

16 or recognized accrediting agencies, if available, in carrying

17 out medical professional standard setting and guidelines

18 or standards relating to the practice of medicine.

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