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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 1743 Introduced in Senate (IS)]

103d CONGRESS
  2d Session
                                S. 1743

 To provide Americans with secure, portable health insurance benefits 
 and greater choice of health insurance plans, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

            November 20 (legislative day, November 2), 1993

Mr. Nickles (for himself, Mr. Hatch, Mr. Mack, Mr. Bennett, Mr. Brown, 
Mr. Burns, Mr. Coats, Mr. Cochran, Mr. Coverdell, Mr. Craig, Mr. Dole, 
 Mr. Faircloth, Mr. Gregg, Mr. Helms, Mrs. Hutchison, Mr. Kempthorne, 
    Mr. Lott, Mr. Lugar, Mr. Murkowski, Mr. Simpson, Mr. Smith, Mr. 
  Stevens, Mr. Thurmond, Mr. Wallop, and Mr. Grassley) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL

 
 To provide Americans with secure, portable health insurance benefits 
 and greater choice of health insurance plans, and for other purposes.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Consumer Choice 
Health Security Act of 1994''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. Purposes.
                 TITLE I--TAX AND INSURANCE PROVISIONS

           Subtitle A--Tax Treatment of Health Care Expenses

Sec. 101. Refundable health care expenses tax credit.
Sec. 102. Medical savings accounts.
Sec. 103. Other tax provisions.
                    Subtitle B--Insurance Provisions

           Part I--Federally Qualified Health Insurance Plan

Sec. 111. Federally qualified health insurance plan.
Sec. 112. Family security benefits package.
Sec. 113. Rating practices.
Sec. 114. Guaranteed issue.
Sec. 115. Guaranteed renewability.
  Part II--Certification of Federally Qualified Health Insurance Plans

Sec. 117. Establishment of regulatory program for certification of 
                            plans.
Sec. 118. Standards for regulatory programs.
                    Subtitle C--Employer Provisions

Sec. 121. General provisions relating to employers.
Sec. 122. Conversion of non-self-insured plans.
Sec. 123. Provisions relating to existing self-insured plans.
Sec. 124. Continuation of employer-provided health coverage required 
                            until effective date of new coverage under 
                            this Act.
Sec. 125. Requirements with respect to cashing out employer-sponsored 
                            plans.
Sec. 126. Enforcement.
                     Subtitle D--Federal Preemption

Sec. 131. Federal preemption of certain State laws.
                           Subtitle E--Report

Sec. 141. Report on health insurance coverage.
                TITLE II--MEDICARE AND MEDICAID REFORMS

                          Subtitle A--Medicare

Sec. 201. Study of medicare private health insurance program.
Sec. 202. Elimination of medicare hospital disproportionate share 
                            adjustment payments.
Sec. 203. Reduction in adjustment for indirect medical education.
Sec. 204. Imposition of copayment on laboratory services.
Sec. 205. Imposition of copayment for certain home health visits.
Sec. 206. Imposition of copayment for skilled nursing facility 
                            services.
Sec. 207. Shift payment updates to January for all payment rates under 
                            hospital insurance program.
Sec. 208. Acceleration of transition to prospective rates for facility 
                            costs in hospital outpatient departments.
                          Subtitle B--Medicaid

Sec. 211. Cap on Federal payments made for acute medical services under 
                            the medicaid program.
Sec. 212. Waivers for the furnishing of acute medical services under 
                            the medicaid program.
Sec. 213. Termination of disproportionate share payments.
Sec. 214. Grants for health insurance coverage, acute medical services, 
                            preventive care, and disease prevention.
                TITLE III--HEALTH CARE LIABILITY REFORM

Sec. 301. Short title.
Sec. 302. Definitions.
Sec. 303. Health care malpractice.
Sec. 304. Health care product liability of manufacturer or seller.
Sec. 305. General provisions relating to health care liability.
Sec. 306. Punitive damages.
Sec. 307. Exceptions.
Sec. 308. Rules of construction.
                 TITLE IV--ADMINISTRATIVE COST SAVINGS

            Subtitle A--Standardization of Claims Processing

Sec. 401. Adoption of data elements, uniform claims, and uniform 
                            electronic transmission standards.
Sec. 402. Application of standards.
Sec. 403. Periodic review and revision of standards.
Sec. 404. Health insurance plan defined.
             Subtitle B--Electronic Medical Data Standards

Sec. 411. Medical data standards for hospitals and other providers.
Sec. 412. Application of electronic data standards to certain 
                            hospitals.
Sec. 413. Electronic transmission to Federal agencies.
Sec. 414. Limitation on data requirements where standards in effect.
Sec. 415. Advisory commission.
     Subtitle C--Development and Distribution of Comparative Value 
                              Information

Sec. 421. State comparative value information programs for health care 
                            purchasing.
Sec. 422. Federal implementation.
Sec. 423. Comparative value information concerning Federal programs.
             Subtitle D--Preemption of State Quill Pen Laws

Sec. 431. Preemption of State quill pen laws.
                          TITLE V--ANTI-FRAUD

         Subtitle A--Criminal Prosecution of Health Care Fraud

Sec. 501. Penalties for health care fraud.
Sec. 502. Rewards for information leading to prosecution and 
                            conviction.
Subtitle B--Coordination of Health Care Anti-Fraud and Abuse Activities

Sec. 511. Application of Federal health anti-fraud and abuse sanctions 
                            to all fraud and abuse against any health 
                            insurance plan.
                     TITLE VI--ANTITRUST PROVISIONS

Sec. 601. Exemption from antitrust laws for certain competitive and 
                            collaborative activities.
Sec. 602. Safe harbors.
Sec. 603. Designation of additional safe harbors.
Sec. 604. Certificates of review.
Sec. 605. Notifications providing reduction in certain penalties under 
                            antitrust law for health care cooperative 
                            ventures.
Sec. 606. Review and reports on safe harbors and certificates of 
                            review.
Sec. 607. Rules, regulations, and guidelines.
Sec. 608. Definitions.
                       TITLE VII--LONG-TERM CARE

Sec. 701. Exclusion from gross income for amounts withdrawn from 
                            individual retirement plans or 401(k) plans 
                            for long-term care insurance.
Sec. 702. Certain exchanges of life insurance contracts for long-term 
                            care insurance contracts not taxable.
Sec. 703. Tax treatment of accelerated death benefits under life 
                            insurance contracts.
Sec. 704. Effective date.

SEC. 2. PURPOSES.

    The purposes of this Act are to--
            (1) provide Americans with secure, portable health 
        insurance benefits and greater choice of health insurance 
        plans,
            (2) make the American health care system responsive to 
        consumer needs and encourage the provision of quality medical 
        care at reasonable prices through enhanced competition,
            (3) provide more equitable tax treatment of health 
        insurance and medical care expenses, and
            (4) assist low-income and uninsured Americans in purchasing 
        health insurance and receiving primary medical care.

                 TITLE I--TAX AND INSURANCE PROVISIONS

           Subtitle A--Tax Treatment of Health Care Expenses

SEC. 101. REFUNDABLE HEALTH CARE EXPENSES TAX CREDIT.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable personal 
credits) is amended by inserting after section 34 the following new 
section:

``SEC. 34A. HEALTH CARE EXPENSES.

    ``(a) Allowance of Credit.--In the case of a qualified individual, 
there shall be allowed as a credit against the tax imposed by this 
subtitle for the taxable year an amount equal to the applicable 
percentage of the sum of--
            ``(1) 25 percent of the sum of the qualified health 
        insurance premiums and the unreimbursed expenses for medical 
        care paid by such individual during the taxable year which does 
        not exceed 10 percent of the adjusted gross income of such 
        individual for such year, plus
            ``(2) 50 percent of the sum of such premiums and such 
        unreimbursed expenses so paid which exceeds 10 percent but does 
        not exceed 20 percent of such adjusted gross income, plus
            ``(3) 75 percent of the sum of such premiums and such 
        unreimbursed expenses so paid which exceeds 20 percent of such 
        adjusted gross income.
    ``(b) Qualified Individuals.--For purposes of this section--
            ``(1) In general.--The term `qualified individual' means 
        the taxpayer, the spouse of the taxpayer, and each dependent of 
        the taxpayer (as defined in section 152) who is enrolled in a 
        federally qualified health insurance plan.
            ``(2) Federally covered individuals.--The term `qualified 
        individual' does not include any individual whose medical care 
        is covered under--
                    ``(A) title XVIII or XIX of the Social Security 
                Act,
                    ``(B) chapter 55 of title 10, United States Code,
                    ``(C) chapter 17 of title 38, United States Code, 
                or
                    ``(D) the Indian Health Care Improvement Act.
            ``(3) Special rule in the case of child of divorced 
        parents, etc.--Any child to whom section 152(e) applies shall 
        be treated as a dependent of both parents.
            ``(4) Marriage rules.--The determination of whether an 
        individual is married at any time during the taxable year shall 
        be made in accordance with the provisions of section 6013(d) 
        (relating to determination of status as husband and wife).
    ``(c) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage for any taxable year is determined by the number 
of whole months in such year in which the taxpayer is a qualified 
individual.
    ``(d) Qualified Health Insurance Premiums.--For purposes of this 
section, the term `qualified health insurance premiums' means premiums 
for--
            ``(1) a federally qualified health insurance plan, and
            ``(2) any other benefits or plans supplementary to such a 
        federally qualified health insurance plan.
    ``(e) Federally Qualified Health Insurance Plan.--For purposes of 
this section, the term `federally qualified health insurance plan' 
means a health insurance plan which is described in section 111 of the 
Consumer Choice Health Security Act of 1994.
    ``(f) Medical Care.--For purposes of this section:
            ``(1) In general.--The term `medical care' means amounts 
        paid--
                    ``(A) for the diagnosis, cure, mitigation, 
                treatment, or prevention of disease, or for the purpose 
                of affecting any structure or function of the body, and
                    ``(B) for transportation primarily for and 
                essential to medical care referred to in subparagraph 
                (A).
            ``(2) Amounts paid for certain lodging away from home 
        treated as paid for medical care.--Amounts paid for lodging 
        (not lavish or extravagant under the circumstances) while away 
        from home primarily for and essential to medical care referred 
        to in paragraph (1)(A) shall be treated as amounts paid for 
        medical care if--
                    ``(A) the medical care referred to in paragraph 
                (1)(A) is provided by a physician in a licensed 
                hospital (or in a medical care facility which is 
                related to, or the equivalent of, a licensed hospital), 
                and
                    ``(B) there is no significant element of personal 
                pleasure, recreation, or vacation in the travel away 
                from home.
        The amount taken into account under the preceding sentence 
        shall not exceed $50 for each night for each individual.
            ``(3) Cosmetic surgery.--
                    ``(A) In general.--The term `medical care' does not 
                include cosmetic surgery or other similar procedures, 
                unless the surgery or procedure is necessary to 
                ameliorate a deformity arising from, or directly 
                related to, a congenital abnormality, a personal injury 
                resulting from an accident or trauma, or disfiguring 
                disease.
                    ``(B) Cosmetic surgery defined.--For purposes of 
                this paragraph, the term `cosmetic surgery' means any 
                procedure which is directed at improving the patient's 
                appearance and does not meaningfully promote the proper 
                function of the body or prevent or treat illness or 
                disease.
            ``(4) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r) of the Social Security 
        Act (42 U.S.C. 1395x(r)).
    ``(g) Special Rules.--For purposes of this section--
            ``(1) Limitation with respect to medicine and drugs.--
                    ``(A) In general.--An amount paid during the 
                taxable year for medicine or a drug shall be taken into 
                account under subsection (a) only if such medicine or 
                drug is a prescribed drug or is insulin.
                    ``(B) Prescribed drug.--The term `prescribed drug' 
                means a drug or biological which requires a 
                prescription of a physician for its use by an 
                individual.
            ``(2) Special rule for decedents.--
                    ``(A) Treatment of expenses paid after death.--
                Expenses for the medical care of the taxpayer which are 
                paid out of the taxpayer's estate during the 1-year 
                period beginning with the day after the date of the 
                taxpayer's death shall be treated as paid by the 
                taxpayer at the time incurred.
                    ``(B) Limitation.--Subparagraph (A) shall not apply 
                if the amount paid is allowable under section 2053 as a 
                deduction in computing the taxable estate of the 
                decedent, but this subparagraph shall not apply if 
                (within the time and in the manner and form prescribed 
                by the Secretary) there is filed--
                            ``(i) a statement that such amount has not 
                        been allowed as a deduction under section 2053, 
                        and
                            ``(ii) a waiver of the right to have such 
                        amount allowed at any time as a deduction under 
                        section 2053.
            ``(3) Form of insurance contract.--In the case of an 
        insurance contract under which amounts are payable for other 
        than medical care--
                    ``(A) no amount shall be treated as paid for 
                insurance to which subsection (a) applies unless the 
                charge for such insurance is either separately stated 
                in the contract, or furnished to the policyholder by 
                the insurance company in a separate statement,
                    ``(B) the amount taken into account as the amount 
                paid for such insurance shall not exceed such charge, 
                and
                    ``(C) no amount shall be treated as paid for such 
                insurance if the amount specified in the contract (or 
                furnished to the policyholder by the insurance company 
                in a separate statement) as the charge for such 
                insurance is unreasonably large in relation to the 
                total charges under the contract.
            ``(4) Exclusion of amounts allowed for care of certain 
        dependents.--Any expense allowed as a credit under section 21 
        shall not be treated as an expense paid for medical care.
            ``(5) Coordination with advance payment and minimum tax.--
        Rules similar to the rules of subsections (g) and (h) of 
        section 32 shall apply to any credit to which this section 
        applies.
            ``(6) Subsidized expenses.--No expense shall be taken into 
        account under subsection (a), if--
                    ``(A) such expense is paid, reimbursed, or 
                subsidized (whether by being disregarded for purposes 
                of another program or otherwise) by the Federal 
                Government, a State or local government, or any agency 
                or instrumentality thereof, and
                    ``(B) the payment, reimbursement, or subsidy of 
                such expense is not includable in the gross income of 
                the recipient.
            ``(7) Coordination with medical savings accounts.--The 
        amount otherwise taken into account under subsection (a) shall 
        be reduced by the amount (if any) of the distributions from any 
        medical savings account of the taxpayer during the taxable year 
        which is not includible in gross income by reason of being used 
        for qualified medical expenses (as defined in section 
        25A(c)(2)).
    ``(h) Indexing of Percentages.--For each year after 1997, the 
Secretary, in consultation with the Secretary of Health and Human 
Services, shall adjust the references to 10 percent and 20 percent in 
subsection (a) by the ratio of--
            ``(1) the percentage increase in medical care inflation 
        between 1996 and the year before the year involved, to
            ``(2) the national average percentage increase in adjusted 
        gross income of individuals between such years.
    ``(i) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (b) Advance Payment of Credit.--Chapter 25 of the Internal Revenue 
Code of 1986 (relating to general provisions relating to employment 
taxes) is amended by inserting after section 3507 the following new 
section:

``SEC. 3507A. ADVANCE PAYMENT OF HEALTH EXPENSES CREDIT.

    ``(a) General Rule.--Except as otherwise provided in this section, 
every employer making payment of wages with respect to whom a health 
care expenses eligibility certificate is in effect shall, at the time 
of paying such wages, make an additional payment equal to such 
employee's health care expenses advance amount.
    ``(b) Health Care Expenses Eligibility Certificate.--For purposes 
of this title, a health care expenses eligibility certificate is a 
statement furnished by an employee to the employer which--
            ``(1) certifies that the employee will be eligible to 
        receive the credit provided by section 34A for the taxable 
        year,
            ``(2) certifies that the employee does not have a health 
        care expenses eligibility certificate in effect for the 
        calendar year with respect to the payment of wages by another 
        employer,
            ``(3) states whether or not the employee's spouse has a 
        health care expenses eligibility certificate in effect, and
            ``(4) estimates the amount of premiums for a federally 
        qualified health insurance plan and unreimbursed expenses for 
        medical care (as defined in section 34A) for the calendar year.
For purposes of this section, a certificate shall be treated as being 
in effect with respect to a spouse if such a certificate will be in 
effect on the first status determination date following the date on 
which the employee furnishes the statement in question.
    ``(c) Health Care Expenses Advance Amount.--
            ``(1) In general.--For purposes of this title, the term 
        `health expenses advance amount' means, with respect to any 
        payroll period, the amount determined--
                    ``(A) on the basis of the employee's wages from the 
                employer for such period,
                    ``(B) on the basis of the employee's estimated 
                premiums for a federally qualified health insurance 
                plan and unreimbursed expenses for medical care 
                included in the health care expenses eligibility 
                certificate, and
                    ``(C) in accordance with tables provided by the 
                Secretary.
            ``(2) Advance amount tables.--The tables referred to in 
        paragraph (1)(C) shall be similar in form to the tables 
        prescribed under section 3402 and, to the maximum extent 
        feasible, shall be coordinated with such tables and the tables 
        prescribed under section 3507(c).
    ``(d) Other Rules.--For purposes of this section, rules similar to 
the rules of subsections (d) and (e) of section 3507 shall apply.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (c) Clerical Amendments.--
            (1) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by inserting after the item relating to section 34 
        the following new item:

                              ``Sec. 34A. Health care expenses.''.
            (2) The table of sections for chapter 25 of such Code is 
        amended by adding after the item relating to section 3507 the 
        following new item:

                              ``Sec. 3507A. Advance payment of health 
                                        care expenses credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1997.

SEC. 102. MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25 the 
following new section:

``SEC. 25A. MEDICAL SAVINGS ACCOUNTS.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to 25 percent of the amount paid 
in cash during such year by or on behalf of such individual to a 
medical savings account.
    ``(b) Limitations.--For purposes of this section:
            ``(1) Only 1 account per family.--No credit shall be 
        allowed under subsection (a) for amounts paid to any medical 
        savings account for the benefit of an individual, such 
        individual's spouse, or any dependent (as defined in section 
        152) of such individual if such individual, spouse, or 
        dependent is a beneficiary of any other medical savings 
        account.
            ``(2) Dollar limitation.--The aggregate amount of 
        contributions which may be taken into account under subsection 
        (a) with respect to any individual for any taxable year shall 
        not exceed the sum of--
                    ``(A) $3,000, plus
                    ``(B) $500 for each individual who is a dependent 
                (as so defined) of the individual for whose benefit the 
                account is established.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Medical savings account.--
                    ``(A) In general.--The term `medical savings 
                account' means a trust created or organized in the 
                United States exclusively for the purpose of paying the 
                qualified medical expenses of the individual for whose 
                benefit the trust is established, but only if the 
                written governing instrument creating the trust meets 
                the following requirements:
                            ``(i) Except in the case of a rollover 
                        contribution described in subsection (d)(4), no 
                        contribution will be accepted unless it is in 
                        cash and contributions will not be accepted for 
                        any taxable year in excess of the amount 
                        determined under subsection (b)(1).
                            ``(ii) The trustee is a bank (as defined in 
                        section 408(n)) or another person who 
                        demonstrates to the satisfaction of the 
                        Secretary that the manner in which such person 
                        will administer the trust will be consistent 
                        with the requirements of this section.
                            ``(iii) No part of the trust assets will be 
                        invested in life insurance contracts.
                            ``(iv) The assets of the trust will not be 
                        commingled with other property except in a 
                        common trust fund or common investment fund.
                            ``(v) The interest of an individual in the 
                        balance in such individual's account is 
                        nonforfeitable.
                            ``(vi) Under regulations prescribed by the 
                        Secretary, rules similar to the rules of 
                        section 401(a)(9) shall apply to the 
                        distribution of the entire interest of 
                        beneficiaries of such trust.
                    ``(B) Treatment of comparable accounts held by 
                insurance companies.--An account held by an insurance 
                company in the United States shall be treated as a 
                medical savings account (and such company shall be 
                treated as a bank) if--
                            ``(i) such account is part of a federally 
                        qualified health insurance plan (as defined in 
                        section 34A(e)),
                            ``(ii) such account is exclusively for the 
                        purpose of paying the medical expenses of the 
                        beneficiaries of such account who are covered 
                        under such health insurance plan, and
                            ``(iii) the written instrument governing 
                        the account meets the requirements of clauses 
                        (i), (v), and (vi) of subparagraph (A).
            ``(2) Qualified medical expenses.--The term `qualified 
        medical expenses' means amounts paid by the individual for 
        whose benefit the account was established for premiums for a 
        federally qualified health insurance plan (as so defined) and 
        the unreimbursed expenses for medical care (as determined under 
        section 34A) of such individual, the spouse of such individual, 
        and any dependent (as so defined) of such individual.
            ``(3) Time when contributions deemed made.--A contribution 
        shall be deemed to be made on the last day of the preceding 
        taxable year if the contribution is made on account of such 
        taxable year and is made not later than the time prescribed by 
        law for filing the return for such taxable year (not including 
        extensions thereof).
    ``(d) Tax Treatment of Distributions.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, any amount paid or distributed out of a medical 
        savings account shall be included in the gross income of the 
        individual for whose benefit such account was established 
        unless such amount is used exclusively to pay the qualified 
        medical expenses of such individual.
            ``(2) Excess contributions returned before due date of 
        return.--Paragraph (1) shall not apply to the distribution of 
        any contribution paid during a taxable year to a medical 
        savings account to the extent that such contribution exceeds 
        the amount allowable under subsection (b) if--
                    ``(A) such distribution is received on or before 
                the day prescribed by law (including extensions of 
                time) for filing such individual's return for such 
                taxable year,
                    ``(B) no credit is allowed under subsection (a) 
                with respect to such excess contribution, and
                    ``(C) such distribution is accompanied by the 
                amount of net income attributable to such excess 
                contribution.
        Any net income described in subparagraph (C) shall be included 
        in the gross income of the individual for the taxable year in 
        which it is received.
            ``(3) Penalty for distributions not used for medical 
        expenses.--The tax imposed by this chapter for any taxable year 
        in which there is a payment or distribution from a medical 
        savings account which is not used to pay the medical expenses 
        of the individual for whose benefit the account was 
        established, shall be increased by 10 percent of the amount of 
        such payment or distribution which is includible in gross 
        income under paragraph (1).
            ``(4) Rollovers.--Paragraph (1) shall not apply to any 
        amount paid or distributed out of a medical savings account to 
        the individual for whose benefit the account is maintained, if 
        the entire amount received (including money and any other 
        property) is paid into another medical savings account for the 
        benefit of such individual not later than the 60th day after 
        the day on which the individual received the payment or 
        distribution.
    ``(e) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--Any medical savings account is 
        exempt from taxation under this subtitle unless such account 
        has ceased to be a medical savings account by reason of 
        paragraph (2) or (3). Notwithstanding the preceding sentence, 
        any such account shall be subject to the taxes imposed by 
        section 511 (relating to imposition of tax on unrelated 
        business income of charitable, etc. organizations).
            ``(2) Loss of exemption of account where individual engages 
        in prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the individual for whose benefit the medical savings 
                account was established, such individual engages in any 
                transaction prohibited by section 4975 with respect to 
                the account, the account ceases to be a medical savings 
                account as of the first day of that taxable year.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical savings account by reason of subparagraph (A) 
                on the first day of any taxable year, paragraph (1) of 
                subsection (d) applies as if there were a distribution 
                on such first day in an amount equal to the fair market 
                value (on such first day) of all assets in the account 
                (on such first day) and no portion of such distribution 
                were used to pay qualified medical expenses.
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the individual for whose benefit a medical 
        savings account was established uses the account or any portion 
        thereof as security for a loan, the portion so used is treated 
        as distributed to that individual and not used to pay qualified 
        medical expenses.
    ``(f) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if--
            ``(1) the assets of such account are held by a bank (as 
        defined in section 408(n)) or another person who demonstrates 
        to the satisfaction of the Secretary that the manner in which 
        he will administer the account will be consistent with the 
        requirements of this section, and
            ``(2) the custodial account would, except for the fact that 
        it is not a trust, constitute a medical savings account 
        described in subsection (c).
        For purposes of this title, in the case of a custodial account 
        treated as a trust by reason of the preceding sentence, the 
        custodian of such account shall be treated as the trustee 
        thereof.
    ``(g) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 1998, each applicable dollar 
        amount shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment for the 
                calendar year in which the taxable year begins.
            ``(2) Cost-of-living adjustment.--For purposes of paragraph 
        (1), the cost-of-living adjustment for any calendar year is the 
        percentage (if any) by which--
                    ``(A) the deemed average total wages (as defined in 
                section 209(k) of the Social Security Act) for the 
                preceding calendar year, exceeds
                    ``(B) the deemed average total wages (as so 
                defined) for calendar year 1997.
            ``(3) Applicable dollar amount.--For purposes of paragraph 
        (1), the term `applicable dollar amount' means the $3,000 and 
        $500 amounts in subsection (b)(2).
            ``(4) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $10, such amount shall be rounded to 
        the nearest multiple of $10 (or, if such amount is a multiple 
        of $5 and not of $10, such amount shall be rounded to the next 
        highest multiple of $10).
    ``(h) Reports.--The trustee of a medical savings account shall make 
such reports regarding such account to the Secretary and to the 
individual for whose benefit the account is maintained with respect to 
contributions, distributions, and such other matters as the Secretary 
may require under regulations. The reports required by this subsection 
shall be filed at such time and in such manner and furnished to such 
individuals at such time and in such manner as may be required by those 
regulations.''.
    (b) Tax on Excess Contributions.--Section 4973 of the Internal 
Revenue Code of 1986 (relating to tax on excess contributions to 
individual retirement accounts, certain section 403(b) contracts, and 
certain individual retirement annuities) is amended--
            (1) by inserting ``medical savings accounts,'' after 
        ``accounts,'' in the heading of such section,
            (2) by redesignating paragraph (2) of subsection (a) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following:
            ``(2) a medical savings account (within the meaning of 
        section 25A(c)(1)),'',
            (3) by striking ``or'' at the end of paragraph (1) of 
        subsection (a), and
            (4) by adding at the end thereof the following new 
        subsection:
    ``(d) Excess Contributions to Medical Savings Accounts.--For 
purposes of this section, in the case of a medical savings account 
(within the meaning of section 25A(c)(1)), the term `excess 
contributions' means the amount by which the amount contributed for the 
taxable year to the account exceeds the amount allowable under section 
25A(b)(2) for such taxable year. For purposes of this subsection, any 
contribution which is distributed out of the medical savings account 
and a distribution to which section 25A(d)(2) applies shall be treated 
as an amount not contributed.''.
    (c) Tax on Prohibited Transactions.--Section 4975 of the Internal 
Revenue Code of 1986 (relating to prohibited transactions) is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for medical savings accounts.--An 
        individual for whose benefit a medical savings account (within 
        the meaning of section 25A(c)(1)) is established shall be 
        exempt from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medical savings account 
        by reason of the application of section 25A(e)(2)(A) to such 
        account.'', and
            (2) by inserting ``or a medical savings account described 
        in section 25A(c)(1)'' in subsection (e)(1) after ``described 
        in section 408(a)''.
    (d) Failure To Provide Reports on Medical Savings Accounts.--
Section 6693 of the Internal Revenue Code of 1986 (relating to failure 
to provide reports on individual retirement account or annuities) is 
amended--
            (1) by inserting ``or on medical savings accounts'' after 
        ``annuities'' in the heading of such section, and
            (2) by adding at the end of subsection (a) the following: 
        ``The person required by section 25A(h) to file a report 
        regarding a medical savings account at the time and in the 
        manner required by such section shall pay a penalty of $50 for 
        each failure unless it is shown that such failure is due to 
        reasonable cause.''.
    (e) Clerical Amendments.--
            (1) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by inserting after the item relating to section 25 
        the following:

                              ``Sec. 25A. Medical savings accounts.''.
            (2) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 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.''.
            (3) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by inserting ``or on medical savings 
        accounts'' after ``annuities'' in the item relating to section 
        6693.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1997.

SEC. 103. OTHER TAX PROVISIONS.

    (a) Termination of Medical Expense Deduction.--Section 213 of the 
Internal Revenue Code of 1986 (relating to medical, dental, etc., 
expenses) is amended by adding at the end thereof the following new 
subsection:
    ``(g) Termination.--No amount paid after December 31, 1997, shall 
be treated as an expense paid for medical care.''.
    (b) Termination of Exclusion for Employer-Provided Health 
Insurance.--Section 106 of the Internal Revenue Code of 1986 (relating 
to contributions by employer to accident and health plans) is amended 
by adding at the end the following new sentence: ``The preceding 
sentence shall not apply to any amount paid after December 31, 1997.''.

                    Subtitle B--Insurance Provisions

           PART I--FEDERALLY QUALIFIED HEALTH INSURANCE PLAN

SEC. 111. FEDERALLY QUALIFIED HEALTH INSURANCE PLAN.

    (a) In General.--A federally qualified health insurance plan is a 
health insurance plan offered, issued, or renewed on or after January 
1, 1998, which is certified by the applicable regulatory authority as 
meeting, at a minimum, the requirements of sections 112, 113, 114, and 
115, and the regulatory program described in section 117.
    (b) General Definitions.--As used in this Act:
            (1) Health insurance plan.--The term ``health insurance 
        plan'' means any hospital or medical service policy or 
        certificate, hospital or medical service plan contract, or 
        health maintenance organization group contract and, in States 
        which have distinct licensure requirements, a multiple employer 
        welfare arrangement, but does not include any of the following 
        offered by an insurer:
                    (A) Accident only, dental only, disability only, or 
                long-term care only insurance.
                    (B) Coverage issued as a supplement to liability 
                insurance.
                    (C) Workers' compensation or similar insurance.
                    (D) Automobile medical-payment insurance.
            (2) Applicable regulatory authority.--The term `applicable 
        regulatory authority' means--
                    (A) in the case of a State with a program described 
                in section 117, the State commissioner or 
                superintendent of insurance or other State authority 
                responsible for regulation of health insurance; or
                    (B) if the State has not established such a program 
                or such program has been decertified under section 
                117(b), the Secretary.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (4) State.--The term ``State'' means each of the several 
        States of the United States, the District of Columbia, the 
        Commonwealth of Puerto Rico, the United States Virgin Islands, 
        Guam, America Samoa, and the Commonwealth of the Northern 
        Mariana Islands.

SEC. 112. FAMILY SECURITY BENEFITS PACKAGE.

    (a) In General.--The requirements of this section are met, if the 
health insurance plan--
            (1) provides coverage for all medically necessary acute 
        medical care described in subsection (b),
            (2) does not exclude coverage for selected illnesses or 
        selected treatments if consistent with medically accepted 
        practices, and
            (3) meets the patient cost sharing requirements of 
        subsection (c).
    (b) Acute Medical Care.--Coverage for all medically necessary acute 
medical care is described in this subsection if such coverage 
includes--
            (1) physician services,
            (2) inpatient, outpatient, and emergency hospital services 
        and appropriate alternatives to hospitalization, and
            (3) inpatient prescription drugs.
Nothing in this subsection may be construed to require the inclusion of 
abortion services.
    (c) Limitation on Cost Sharing.--
            (1) In general.--A health insurance plan may not require 
        the payment of any deductible, copayment, or coinsurance for an 
        item or service for which coverage is required under this 
        section after an individual or a family covered under the plan 
        has incurred out-of-pocket expenses under the plan that are 
        equal to the out-of-pocket limit for a plan year.
            (2) Limit on out-of-pocket expenses.--As used in this 
        paragraph:
                    (A) Out-of-pocket expenses defined.--The term 
                ``out-of-pocket expenses'' means, with respect to an 
                individual or a family in a plan year, amounts payable 
                under the plan as deductibles, coinsurance, and 
                copayments with respect to items and services provided 
                under the plan and furnished in the plan year on behalf 
                of the individual or the family covered under the plan.
                    (B) Out-of-pocket limit defined.--
                            (i) In general.--The term ``out-of-pocket 
                        limit'' means--
                                    (I) the amount specified under 
                                clause (ii), or
                                    (II) 10 percent of the adjusted 
                                gross income of the family involved,
                        whichever is greater.
                            (ii) Minimum amount.--The amount specified 
                        in this clause for a plan year beginning in--
                                    (I) a calendar year prior to 1998, 
                                is $5,000; or
                                    (II) for a subsequent calendar 
                                year, is the amount specified in this 
                                clause for the previous calendar year 
                                increased by the percentage increase in 
                                the consumer price index for all urban 
                                consumers (United States city average, 
                                as published by the Bureau of Labor 
                                Statistics) for the 12-month period 
                                ending on September 30 of the preceding 
                                calendar year.
                        If the amount computed under subclause (II) is 
                        not a multiple of $10, it shall be rounded to 
                        the next highest multiple of $10.

SEC. 113. RATING PRACTICES.

    (a) In General.--The requirements of this section are met, if, 
except as provided in subsection (b), the health insurance plan 
provides for--
            (1) a variation in premium rates only on the basis of age, 
        sex, and geography, and
            (2) a charge of the same premium rates to new applicants 
        and existing policyholders with the same age, sex, and 
        geographic characteristics.
    (b) Incentive Discounts.--A plan may discount an individual's 
premium rate as an incentive for participating in a program, approved 
by the applicable regulatory authority to be offered in conjunction 
with the coverage, which has as its objective, 1 or more of the 
following:
            (1) To promote healthy behavior.
            (2) To prevent or delay the onset of illness.
            (3) To provide for screening or early detection of illness.

SEC. 114. GUARANTEED ISSUE.

    (a) In General.--Except as provided in paragraph (2), in the case 
of applications made on and after January 1, 1999, the following rules 
apply:
            (1) In general.--The requirements of this section are met, 
        if, except as provided in paragraph (2), the health insurance 
        plan--
                    (A) provides guaranteed issue at standard rates to 
                all applicants, and
                    (B) does not exclude from coverage, or limit 
                coverage for, any preexisting medical condition of any 
                applicant who, on the date the application is made, has 
                been continuously insured for a period of at least 1 
                year prior to the date of the application under 1 or 
                more of the following health insurance plans or 
                programs:
                            (i) Another federally qualified health 
                        insurance plan.
                            (ii) An employer-sponsored group health 
                        insurance plan in effect before the date of the 
                        enactment of this Act.
                            (iii) An individual health insurance plan 
                        in effect before such date.
                            (iv) A program described in--
                                    (I) title XVIII or XIX of the 
                                Social Security Act,
                                    (II) chapter 55 of title 10, United 
                                States Code,
                                    (III) chapter 17 of title 38, 
                                United States Code,
                                    (IV) chapter 89 of title 5, United 
                                States Code, or
                                    (V) the Indian Health Care 
                                Improvement Act.
            (2) Break in coverage.--In the case of an applicant who has 
        not been continuously insured for a period of 1 year prior to 
        the date the application is made, the health insurance plan may 
        exclude from coverage, or limit coverage for, any preexisting 
        medical condition for a period no greater than the lesser of--
                    (A) the number of months immediately prior to the 
                date of the application during which the individual was 
                not insured since the illness or condition in question 
                was first diagnosed, or
                    (B) 1 year.
    (b) Transition Rule.--In the case of applications made in 1998, the 
requirements of this section are met, if the health insurance plan--
            (1) provides guaranteed issue at standard rates to all 
        applicants, and
            (2) does not exclude from coverage, or limit coverage for, 
        any preexisting medical condition of any applicant.

SEC. 115. GUARANTEED RENEWABILITY.

    The requirements of this section are met, if the health insurance 
plan provides the policyholder with a contractual right to renew the 
coverage which stipulates that the insurer cannot cancel or refuse to 
renew the coverage except for cases of--
            (1) nonpayment of premiums by the policyholder, or
            (2) fraud or misrepresentation by the policyholder.

  PART II--CERTIFICATION OF FEDERALLY QUALIFIED HEALTH INSURANCE PLANS

SEC. 117. ESTABLISHMENT OF REGULATORY PROGRAM FOR CERTIFICATION OF 
              PLANS.

    (a) In General.--Each State shall establish no later than January 
1, 1998, a regulatory program which meets the standards referred to in 
section 118.
    (b) Periodic Secretarial Review of State Regulatory Program.--The 
Secretary periodically shall review each State regulatory program to 
determine if such program continues to meet and enforce the standards 
referred to in section 118. If the Secretary initially determines that 
a State regulatory program no longer meets and enforces such standards, 
the Secretary shall provide the State an opportunity to adopt a plan of 
correction that would bring such program into compliance with such 
standards. If the Secretary makes a final determination that the State 
regulatory program fails to meet and enforce such standards after such 
an opportunity, the Secretary shall decertify such program and assume 
responsibility with respect to health insurance plans in the State.

SEC. 118. STANDARDS FOR REGULATORY PROGRAMS.

    (a) In General.--The Secretary, in consultation with the National 
Association of Insurance Commissioners (hereafter in this section 
referred to as ``NAIC'') shall develop by not later than 1 year after 
the date of the enactment of this Act, in the form of model Acts and 
model regulations, State regulatory program standards which include--
            (1) procedures for certifying that the requirements of part 
        I of this subtitle have been met by a health insurance plan 
        applying for certification as a federally qualified health 
        insurance plan,
            (2) the requirements described in subsections (b), (c), and 
        (d),
            (3) requirements with respect to solvency standards and 
        guaranty funds for carriers of federally qualified health 
        insurance plans, and
            (4) reporting requirements under which carriers report to 
        the Internal Revenue Service regarding the acquisition and 
        termination by individuals of coverage under federally 
        qualified health insurance plans.
    (b) Passback of Claims and Premiums.--The requirements of this 
subsection are met, if, in the case of an applicant who has been 
continuously insured, as described in section 114(b)(1)(B), and is at 
the time of the application receiving treatment for a preexisting 
medical condition--
            (1) the federally qualified health insurance plan is 
        allowed to pass back to the applicant's previous plan any 
        claims relating to such condition, together with a portion of 
        the premium, and
            (2) such previous plan is required to pay such claims and 
        premium incurred during the lesser of--
                    (A) the duration of the course of the treatment or 
                spell of illness, or
                    (B) 2 years from the date at which coverage 
                commenced under the federally qualified health 
                insurance plan.
    (c) Marketing Practices.--The requirements of this subsection are 
met, if the carrier offering the federally qualified health insurance 
plan retains the right to select agents with whom such plan contracts 
and to determine the amount and form of compensation to such agents, 
except that--
            (1) if the carrier chooses to contract with an agent, the 
        carrier may not terminate or refuse to renew the agency 
        contract for any reason related to the age, sex, health status, 
        claims experience, occupation, or geographic location of the 
        insureds placed by the agent with such plan, and
            (2) the carrier may not, directly or indirectly, enter into 
        any contract, agreement, or arrangement with an agent that 
        provides for, or results in, any consideration provided to such 
        agent for the issuance or renewal of such a plan to vary on 
        account of the age, sex, health status, claims experience, 
        occupation, or geographic location of the insureds placed by 
        the agent with such plan.
    (d) Risk Adjustment or Reinsurance Programs.--The requirements of 
this subsection are met, if the carrier offering the federally 
qualified health insurance plan participates in a State-administered 
risk adjustment program (or, at the option of the State, a reinsurance 
program) designed to compensate for the potential occurrence of grossly 
disproportionate distributions of above-standard or below-standard 
insured risks among federally qualified health insurance plans.
    (e) Nonbinding Standards.--The Secretary, in consultation with 
NAIC, shall also develop within the 1-year period described in 
subsection (a), nonbinding standards for premium rating practices and 
guaranteed renewability of coverage which, if the insurer so elects, is 
more generous (additional benefits or lower cost sharing or both) than 
the requirements under part I of this subtitle for federally qualified 
health insurance plans.

                    Subtitle C--Employer Provisions

SEC. 121. GENERAL PROVISIONS RELATING TO EMPLOYERS.

    (a) Premiums Withheld.--Each employer shall--
            (1) withhold from each employee's wages the amount of the 
        employee's health insurance premium and remit, directly or 
        indirectly, such premium to the insurance plan of the 
        employee's choice according to an agreed upon schedule, and
            (2) within the first 30 days of any calendar year or the 
        date of the hire of an employee, notify each employee of the 
        employee's right to claim an advance refundable tax credit for 
        such premium under section 34A of the Internal Revenue Code of 
        1986.
    (b) Effective Date.--The requirements under subsection (a) shall 
apply with respect to calendar year 1998 and thereafter.

SEC. 122. CONVERSION OF NON-SELF-INSURED PLANS.

    In the case of an employer-sponsored health insurance plan in force 
on the date of the enactment of this Act, and which is not a self-
insured plan, the insurer from whom the plan was purchased (or, in the 
event such insurer refuses, any new subsidiary, corporation, insurer, 
union, cooperative, or association willing to become the new sponsor of 
the plan) shall--
            (1) notify, not later than October 1, 1997, all of the 
        primary insured beneficiaries of the employer-sponsored plan of 
        their rights to convert their insurance coverage to a federally 
        qualified health insurance plan (as defined in section 111) 
        offered by the insurer with benefits identical to, or 
        actuarially equivalent to, those of the employer-sponsored plan 
        and the rates of that coverage, and provide such beneficiaries 
        60 additional days to decline or accept the new coverage, and
            (2) offer such coverage beginning January 1, 1998, at 
        premium rates which vary only by age, sex, and geography, 
        except that the combined total of the new rates charged 
        separately to the various beneficiaries may not exceed the 
        total group rate paid by the employer or employees or both 
        under the employer-sponsored plan on the last day it is, or 
        was, in force.

SEC. 123. PROVISIONS RELATING TO EXISTING SELF-INSURED PLANS.

    (a) In General.--In the case of an employer-sponsored health 
insurance plan in force on the date of the enactment of this Act, and 
which is a self-insured plan, the employer sponsoring the plan may, at 
anytime following such date sell, transfer, or assign the plan to any 
existing or new, subsidiary, corporation, insurer, union, cooperative 
or association, willing to become the new sponsor of the plan, except 
that--
            (1) such sale, transfer, or assignment may not take effect 
        unless first approved by a two-thirds majority vote of all the 
        primary-insured beneficiaries of the plan, and
            (2) the terms or conditions and benefits or coverage of the 
        plan, and the eligibility criteria for participation in the 
        plan, may not be altered before such date.
    (b) Provisions Governing Plan.--As of the date of the enactment of 
this Act, the sponsor of the plan described in subsection (a) becomes 
subject to all laws governing the operation of a corporation selling 
health insurance in the applicable State or States and to the 
provisions of section 122.

SEC. 124. CONTINUATION OF EMPLOYER-PROVIDED HEALTH COVERAGE REQUIRED 
              UNTIL EFFECTIVE DATE OF NEW COVERAGE UNDER THIS ACT.

    (a) In General.--Clause (i) of section 4980B(f)(2)(B) of the 
Internal Revenue Code of 1986 (relating to period of coverage) is 
amended by inserting after subclause (V) the following new subclause:
                                    ``(VI) Qualifying event involving 
                                end of plan.--In the case of an event 
                                described in paragraph (3)(G), December 
                                31, 1997.''.
    (b) Qualifying Event Involving End of Plan.--Paragraph (3) of 
section 4980B(f) of the Internal Revenue Code of 1986 (defining 
qualifying event) is amended by inserting after subparagraph (F) the 
following new subparagraph:
                    ``(G) The termination by the employer of the group 
                health plan after the date of the enactment of the 
                Consumer Choice Health Security Act of 1994.''.
    (c) Conforming Amendment.--Clause (ii) of section 4980B(f)(2)(B) of 
the Internal Revenue Code of 1986 is amended by striking ``The date'' 
and inserting ``Except in the case of a qualifying event described in 
paragraph (3)(G), the date''.
    (d) Effective Date.--The amendments made by this section shall 
apply to qualifying events occurring after the date of the enactment of 
this Act.

SEC. 125. REQUIREMENTS WITH RESPECT TO CASHING OUT EMPLOYER-SPONSORED 
              PLANS.

    (a) Non-Federal Employers.--
            (1) In general.--Each employer contributing in whole or in 
        part to an employer-sponsored health insurance plan on December 
        1, 1997, shall, within 30 days after such date--
                    (A) notify each employee participating in the plan 
                of the amount spent by the employer on the employee's 
                health insurance, as determined under paragraph (2),
                    (B) add such amount to the cash wages of the 
                employee commencing with pay periods beginning on and 
                after January 1, 1998, and
                    (C) hold each employee harmless for the employer's 
                share of any payroll taxes due under chapter 31 of the 
                Internal Revenue Code of 1986 on such amount.
            (2) Amount of inclusion.--The amount described in paragraph 
        (1)(A) shall equal the actuarial value of the employer's 
        contribution for group health insurance coverage apportioned to 
        the plan's beneficiaries according to the new premiums for 
        individual and family coverage determined by the insurer.
            (3) Prior termination.--Any beneficiary of an employer-
        sponsored health insurance plan who voluntarily terminates 
        coverage under such a plan before December 1, 1997, forfeits 
        the right to receive the value of the beneficiary's coverage in 
        cash.
    (b) Commission on Cashing Out FEHBP Benefits.--
            (1) Establishment.--
                    (A) In general.--There is established an 
                independent board to be known as the ``Benefits Cash 
                Out Commission'' (in this subtitle, referred to as the 
                ``Commission'').
                    (B) Duties.--The Commission shall study and propose 
                a procedure under which individuals may cash out health 
                benefits under chapter 89 of title 5, United States 
                Code, and pay scales and retirement benefits would be 
                adjusted accordingly. The Commission shall report to 
                Congress regarding such study and proposal not later 
                than 1 year after the date of the enactment of this 
                Act.
                    (C) Membership.--
                            (i) In general.--The Commission shall be 
                        composed of 13 members appointed by the 
                        President by and with the advice and consent of 
                        the Senate.
                            (ii) Consultation.--In selecting 
                        individuals for nominations for appointments 
                        for the Commission, the President should 
                        consult with--
                                    (I) the Speaker of the House of 
                                Representatives concerning the 
                                appointment of 3 members;
                                    (II) the Majority Leader of the 
                                Senate concerning the appointment of 3 
                                members;
                                    (III) the Minority Leader of the 
                                House of Representatives concerning the 
                                appointment of 3 members; and
                                    (IV) the Minority Leader of the 
                                Senate concerning the appointment of 3 
                                members.
                            (iii) Chair.--The President shall designate 
                        1 individual described in clause (ii) who shall 
                        serve as Chair of the Commission.
                            (iv) Composition of commission.--The 
                        membership of the Commission shall include 
                        individuals with national recognition for 
                        expertise in the valuation of health insurance 
                        benefits and of Federal civilian pay and 
                        retirement benefits.
                    (D) Administrative provisions.--
                            (i) Meetings.--Each meeting of the 
                        Commission shall be open to the public.
                            (ii) Pay and travel expenses.--
                                    (I) In general.--Each member, other 
                                than the Chair, shall be paid at a rate 
                                equal to the daily equivalent of the 
                                minimum annual rate of basic pay 
                                payable for level IV of the Executive 
                                Schedule under section 5315 of title 5, 
                                United States Code, for each day 
                                (including travel time) during which 
                                the member is engaged in the actual 
                                performance of duties vested in the 
                                Commission.
                                    (II) Chair.--The Chair shall be 
                                paid for each day referred to in 
                                subclause (I) at a rate equal to the 
                                daily equivalent of the minimum annual 
                                rate of basic pay payable for level III 
                                of the Executive Schedule under section 
                                5314 of title 5, United States Code.
                                    (III) Travel expenses.--Members 
                                shall receive travel expenses, 
                                including per diem in lieu of 
                                subsistence, in accordance with 
                                sections 5702 and 5703 of title 5, 
                                United States Code.
                            (iii) Staff.--
                                    (I) In general.--Subject to 
                                subclauses (II) and (III), the Chair, 
                                with the approval of the Commission, 
                                may appoint and fix the pay of 
                                additional personnel.
                                    (II) Pay.--The Chair may make such 
                                appointments without regard to the 
                                provisions of title 5, United States 
                                Code, governing appointments in the 
                                competitive service, and any personnel 
                                so appointed may be paid without regard 
                                to the provisions of chapter 51 and 
                                subchapter III of chapter 53 of such 
                                title, relating to classification and 
                                General Schedule pay rates, except that 
                                an individual so appointed may not 
                                receive pay in excess of 120 percent of 
                                the annual rate of basic pay payable 
                                for GS-15 of the General Schedule.
                                    (III) Detailed personnel.--Upon 
                                request of the Chair, the head of any 
                                Federal department or agency may detail 
                                any of the personnel of that department 
                                or agency to the Commission to assist 
                                the Commission in carrying out its 
                                duties under this Act.
                            (iv) Other authority.--
                                    (I) Contract services.--The 
                                Commission may procure by contract, to 
                                the extent funds are available, the 
                                temporary or intermittent services of 
                                experts or consultants pursuant to 
                                section 3109 of title 5, United States 
                                Code.
                                    (II) Leases, etc.--The Commission 
                                may lease space and acquire personal 
                                property to the extent funds are 
                                available.
            (2) Consideration.--
                    (A) In general.--The proposal described in 
                paragraph (1)(B) shall be considered by the Congress 
                under the procedures for consideration of an ``approval 
                resolution'' as described in subparagraph (D).
                    (B) Effective date of implementation.--The 
                provisions of the proposal shall become effective on 
                January 1, 1997.
                    (C) Period for resubmission of proposal in case of 
                nonapproval.--If the proposal of the Commission 
                described in subparagraph (A) is not approved by 
                Congress, the Commission shall by not later than 
                January 1, 1996, submit a new proposal to Congress.
                    (D) Rules governing congressional consideration.--
                            (i) Rules of house of representatives and 
                        senate.--This subparagraph is enacted by the 
                        Congress--
                                    (I) as an exercise of the 
                                rulemaking power of the House of 
                                Representatives and the Senate, 
                                respectively, and as such is deemed a 
                                part of the rules of each House, 
                                respectively, but applicable only with 
                                respect to the procedure to be followed 
                                in that House in the case of approval 
                                resolutions described in clause (ii), 
                                and supersedes other rules only to the 
                                extent that such rules are inconsistent 
                                therewith; and
                                    (II) with full recognition of the 
                                constitutional right of either House to 
                                change the rules (so far as relating to 
                                the procedure of that House) at any 
                                time, in the same manner and to the 
                                same extent as in the case of any other 
                                rule of that House.
                            (ii) Terms of the resolution.--For purposes 
                        of subparagraph (A), the term ``approval 
                        resolution'' means only a joint resolution of 
                        the 2 Houses of the Congress, providing in--
                                    (I) the matter after the resolving 
                                clause of which is as follows: ``That 
                                the Congress approves the 
                                recommendations of the Benefits Cash 
                                Out Commission as submitted by the 
                                Commission on 
                                ____________________________'', the 
                                blank space being filled in with the 
                                appropriate date; and
                                    (II) the title of which is as 
                                follows: ``Joint Resolution approving 
                                the recommendation of the Benefits Cash 
                                Out Commission''.
                            (iii) Introduction and referral.--On the 
                        day on which the recommendation of the 
                        Commission is transmitted to the House of 
                        Representatives and the Senate, an approval 
                        resolution with respect to such recommendation 
                        shall be introduced (by request) in the House 
                        of Representatives by the Majority Leader of 
                        the House, for himself or herself and the 
                        Minority Leader of the House, or by Members of 
                        the House designated by the Majority Leader and 
                        Minority Leader of the House; and shall be 
                        introduced (by request) in the Senate by the 
                        Majority Leader of the Senate, for himself or 
                        herself and the Minority Leader of the Senate, 
                        or by Members of the Senate designated by the 
                        Majority Leader and Minority Leader of the 
                        Senate. If either House is not in session on 
                        the day on which such recommendation is 
                        transmitted, the approval resolution with 
                        respect to such recommendation shall be 
                        introduced in the House, as provided in the 
                        preceding sentence, on the first day thereafter 
                        on which the House is in session. The approval 
                        resolution introduced in the House of 
                        Representatives and the Senate shall be 
                        referred to the appropriate committees of each 
                        House.
                            (iv) Amendments prohibited.--No amendment 
                        to an approval resolution shall be in order in 
                        either the House of Representatives or the 
                        Senate; and no motion to suspend the 
                        application of this clause shall be in order in 
                        either House, nor shall it be in order in 
                        either House for the Presiding Officer to 
                        entertain a request to suspend the application 
                        of this clause by unanimous consent.
                            (v) Period for committee and floor 
                        consideration.--
                                    (I) In general.--Except as provided 
                                in subclause (II), if the committee or 
                                committees of either House to which an 
                                approval resolution has been referred 
                                have not reported it at the close of 
                                the 30th day after its introduction, 
                                such committee or committees shall be 
                                automatically discharged from further 
                                consideration of the approval 
                                resolution and it shall be placed on 
                                the appropriation calendar. A vote on 
                                final passage of the approval 
                                resolution shall be taken in each House 
                                on or before the close of the 30th day 
                                after the approval resolution is 
                                reported by the committees or committee 
                                of that House to which it was referred, 
                                or after such committee or committees 
                                have been discharged from further 
                                consideration of the approval 
                                resolution. If prior to the passage by 
                                1 House of an approval resolution of 
                                that House, that House receives the 
                                same approval resolution from the other 
                                House then the procedure in that House 
                                shall be the same as if no approval 
                                resolution had been received from the 
                                other House, but the vote on final 
                                passage shall be on the approval 
                                resolution of the other House.
                                    (II) Computation of days.--For 
                                purposes of subclause (I), in computing 
                                a number of days in either House, there 
                                shall be excluded any day on which the 
                                House is not in session.
                            (vi) Floor consideration in the house of 
                        representatives.--
                                    (I) Motion to proceed.--A motion in 
                                the House of Representatives to proceed 
                                to the consideration of an approval 
                                resolution shall be highly privileged 
                                and not debatable. An amendment to the 
                                motion shall not be in order, nor shall 
                                it be in order to move to reconsider 
                                the vote by which the motion is agreed 
                                to or disagreed to.
                                    (II) Debate.--Debate in the House 
                                of Representatives on an approval 
                                resolution shall be limited to not more 
                                than 20 hours, which shall be divided 
                                equally between those favoring and 
                                those opposing the bill or resolution. 
                                A motion further to limit debate shall 
                                not be debatable. It shall not be in 
                                order to move to recommit an approval 
                                resolution or to move to reconsider the 
                                vote by which an approval resolution is 
                                agreed to or disagreed to.
                                    (III) Motion to postpone.--Motions 
                                to postpone, made in the House of 
                                Representatives with respect to the 
                                consideration of an approval 
                                resolution, and motions to proceed to 
                                the consideration of other business, 
                                shall be decided without debate.
                                    (IV) Appeals.--All appeals from the 
                                decisions of the Chair relating to the 
                                application of the Rules of the House 
                                of Representatives to the procedure 
                                relating to an approval resolution 
                                shall be decided without debate.
                                    (V) General rules apply.--Except to 
                                the extent specifically provided in the 
                                preceding provisions of this clause, 
                                consideration of an approval resolution 
                                shall be governed by the Rules of the 
                                House of Representatives applicable to 
                                other bills and resolutions in similar 
                                circumstances.
                            (vii) Floor consideration in the senate.--
                                    (I) Motion to proceed.--A motion in 
                                the Senate to proceed to the 
                                consideration of an approval resolution 
                                shall be privileged and not debatable. 
                                An amendment to the motion shall not be 
                                in order, nor shall it be in order to 
                                move to reconsider the vote by which 
                                the motion is agreed to or disagreed 
                                to.
                                    (II) General debate.--Debate in the 
                                Senate on an approval resolution, and 
                                all debatable motions and appeals in 
                                connection therewith, shall be limited 
                                to not more than 20 hours. The time 
                                shall be equally divided between, and 
                                controlled by, the Majority Leader and 
                                the Minority Leader or their designees.
                                    (III) Debate of motions and 
                                appeals.--Debate in the Senate on any 
                                debatable motion or appeal in 
                                connection with an approval resolution 
                                shall be limited to not more than 1 
                                hour, to be equally divided between, 
                                and controlled by, the mover and the 
                                manager of the approval resolution, 
                                except that in the event the manager of 
                                the approval resolution is in favor of 
                                any such motion or appeal, the time in 
                                opposition thereto, shall be controlled 
                                by the Minority Leader or his designee. 
                                Such leaders, or either of them, may, 
                                from time under their control on the 
                                passage of an approval resolution, 
                                allot additional time to any Senator 
                                during the consideration of any 
                                debatable motion or appeal.
                                    (IV) Other motions.--A motion in 
                                the Senate to further limit debate is 
                                not debatable. A motion to recommit an 
                                approval resolution is not in order.

SEC. 126. ENFORCEMENT.

    (a) In General.--Chapter 47 of the Internal Revenue Code of 1986 
(relating to excise taxes on qualified pension, etc. plans) is amended 
by inserting after section 5000 the following new sections:

``SEC. 5000A. FAILURE OF EMPLOYERS WITH RESPECT TO HEALTH INSURANCE.

    ``(a) General Rule.--There is hereby imposed a tax on the failure 
of any person to comply with the requirements of sections 121 and 
125(a) of the Consumer Choice Health Security Act of 1994 with respect 
to any employee of the person.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to an employee shall 
        be $50 for each day in the noncompliance period with respect to 
        such failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period--
                    ``(A) beginning on the date such failure first 
                occurs, and
                    ``(B) ending on the date such failure is corrected.
            ``(3) Correction.--A failure of a person to comply with the 
        requirements of section 121 or 125(a) of the Consumer Choice 
        Health Security Act of 1994 with respect to any employee of the 
        person shall be treated as corrected if--
                    ``(A) such failure is retroactively undone to the 
                extent possible, and
                    ``(B) the employee is placed in a financial 
                position which is as good as such employee would have 
                been in had such failure not occurred.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered 
        exercising reasonable diligence.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that none of 
        the persons referred to in subsection (d) knew, or exercising 
        reasonable diligence would have known, that such failure 
        existed.
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period beginning on the first date any of the persons 
                referred to in subsection (d) knew, or exercising 
                reasonable diligence would have known, that such 
                failure existed.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
    ``(d) Liability for Tax.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the following shall be liable for the tax imposed 
        by subsection (a) on a failure:
                    ``(A) In the case of a health insurance plan other 
                than a multiemployer plan, the employer.
                    ``(B) In the case of a multiemployer plan, the 
                plan.
                    ``(C) Each person who is responsible (other than in 
                a capacity as an employee) for administering or 
                providing benefits under the health insurance plan and 
                whose act or failure to act caused (in whole or in 
                part) the failure.
            ``(2) Special rules for persons described in paragraph 
        (1)(c).--A person described in subparagraph (C) (and not in 
        subparagraphs (A) and (B)) of paragraph (1) shall be liable for 
        the tax imposed by subsection (a) on any failure only if such 
        person assumed (under a legally enforceable written agreement) 
        responsibility for the performance of the act to which the 
        failure relates.

``SEC. 5000B. FAILURE OF CARRIERS WITH RESPECT TO HEALTH INSURANCE.

    ``(a) General Rule.--There is hereby imposed a tax on the failure 
of any carrier offering any health insurance plan to comply with the 
requirements of sections 122 and 123 of the Consumer Choice Health 
Security Act of 1994.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of tax imposed by subsection 
        (a) by reason of 1 or more failures during a taxable year shall 
        be equal to 50 percent of the gross premiums received during 
        such taxable year with respect to all health insurance plans 
        issued by the carrier on whom such tax is imposed.
            ``(2) Gross premiums.--For purposes of paragraph (1), gross 
        premiums shall include any consideration received with respect 
        to any health insurance contract.
            ``(3) Controlled groups.--For purposes of paragraph (1)--
                    ``(A) Controlled group of corporations.--All 
                corporations which are members of the same controlled 
                group of corporations shall be treated as 1 carrier. 
                For purposes of the preceding sentence, the term 
                `controlled group of corporations' has the meaning 
                given to such term by section 1563(a), except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears in section 1563(a)(1), and
                            ``(ii) the determination shall be made 
                        without regard to subsections (a)(4) and 
                        (e)(3)(C) of section 1563.
                    ``(B) Partnerships, proprietorships, etc., which 
                are under common control.--Under regulations prescribed 
                by the Secretary, all trades or business (whether or 
                not incorporated) which are under common control shall 
                be treated as 1 carrier. The regulations prescribed 
                under this subparagraph shall be based on principles 
                similar to the principles which apply in the case of 
                subparagraph (A).
    ``(c) Limitation on Tax.--
            ``(1) Tax not to apply where failure not discovered 
        exercising reasonable diligence.--No tax shall be imposed by 
        subsection (a) with respect to any failure for which it is 
        established to the satisfaction of the Secretary that the 
        carrier on whom the tax is imposed did not know, and exercising 
        reasonable diligence would not have known, that such failure 
        existed.
            ``(2) Tax not to apply where failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) with respect 
        to any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period beginning on the 1st date any of the carriers on 
                whom the tax is imposed knew, or exercising reasonable 
                diligence would have known, that such failure existed.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.''.
    (b) Clerical Amendments.--The table of sections for such chapter 47 
is amended by adding at the end thereof the following new items:

                              ``Sec. 5000A. Failure of employers with 
                                        respect to health insurance.
                              ``Sec. 5000B. Failure of carriers with 
                                        respect to health insurance.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1998.

                     Subtitle D--Federal Preemption

SEC. 131. FEDERAL PREEMPTION OF CERTAIN STATE LAWS.

    All State laws in existence on January 1, 1998, in the following 
areas are preempted:
            (1) Mandated insurance benefit laws.--Laws requiring health 
        insurance policies to cover specific diseases, services, or 
        providers.
            (2) Anti-managed care laws.--Laws restricting the ability 
        of managed care plans to selectively contract with providers of 
        their choice.
            (3) Mandated cost-sharing laws.--Laws restricting the 
        extent to which insurers may require enrollee cost sharing as 
        part of their plans, or restricting the extent to which managed 
        care plans may impose different levels of cost sharing on 
        enrollee claims for treatment by providers not participating in 
        the plan.

                           Subtitle E--Report

SEC. 141. REPORT ON HEALTH INSURANCE COVERAGE.

    The Secretary shall submit to the Congress, not later than 5 years 
after the date of the enactment of this Act, a report on the following:
            (1) The number and demographic profile of Americans who 
        have purchased health insurance pursuant to the provisions of 
        this Act, including information concerning the type of coverage 
        purchased and its cost.
            (2) The number and demographic profile of Americans who 
        have chosen to forgo health insurance coverage.
            (3) The estimated health care costs incurred by the insured 
        and the extent to which such costs have been--
                    (A) paid for directly by the uninsured, or
                    (B) shifted to individuals with health insurance 
                coverage and to Federal, State, and local governmental 
                entities.

                TITLE II--MEDICARE AND MEDICAID REFORMS

                          Subtitle A--Medicare

SEC. 201. STUDY OF MEDICARE PRIVATE HEALTH INSURANCE PROGRAM.

    (a) Study.--The Secretary shall conduct a study of the feasibility 
of permitting future medicare beneficiaries to elect, upon attaining 
medicare eligibility, to retain private health insurance coverage and 
receive, in lieu of the medicare benefits such beneficiaries would 
otherwise be entitled to, certificates for use in purchasing private 
health insurance coverage. The study shall recommend--
            (1) certificate amounts which--
                    (A) provide the maximum assistance possible to 
                eligible individuals,
                    (B) are adjusted for different classes of 
                beneficiaries on the basis of age, sex, and geography 
                to reflect actuarial differences in the cost of 
                insurance, and
                    (C) will not further jeopardize the future solvency 
                of the medicare program, as projected by the trustees 
                of the medicare trust funds as of the date of the 
                report of the study,
            (2) a mechanism for annually adjusting such amounts, and
            (3) legislative, regulatory, and administrative reforms 
        necessary or desirable for establishing such a program.
    (b) Report.--The Secretary shall submit a report regarding the 
study described in subsection (a) to the Congress no later than January 
1, 1997.

SEC. 202. ELIMINATION OF MEDICARE HOSPITAL DISPROPORTIONATE SHARE 
              ADJUSTMENT PAYMENTS.

    Section 1886(d)(5)(F)(i) of the Social Security Act (42 U.S.C. 
1395ww(d)(5)(F)(i)) is amended by inserting ``and before September 30, 
1994,'' after ``1986,''.

SEC. 203. REDUCTION IN ADJUSTMENT FOR INDIRECT MEDICAL EDUCATION.

    Section 1886(d)(5)(B)(ii) of the Social Security Act (42 U.S.C. 
1395ww(d)(5)(B)(ii)) is amended to read as follows:
            ``(ii) For purposes of clause (i)(II), the indirect 
        teaching adjustment factor is equal to c * (((1+r) to the nth 
        power) - 1), where `r' is the ratio of the hospital's full-time 
        equivalent interns and residents to beds and `n' equals .405. 
        For discharges occurring on or after--
                    ``(I) May 1, 1986, and before October 1, 1994, `c' 
                is equal to 1.89,
                    ``(II) October 1, 1994, and before October 1, 1995, 
                `c' is equal to 1.395, and
                    ``(III) October 1, 1995, `c' is equal to 0.74.''.

SEC. 204. IMPOSITION OF COPAYMENT ON LABORATORY SERVICES.

    (a) In General.--Paragraphs (1)(D) and (2)(D) of section 1833(a) of 
the Social Security Act (42 U.S.C. 1395l(a)) are each amended--
            (1) by striking ``(or 100 percent'' and all that follows 
        through ``the first opinion))''; and
            (2) by striking ``100 percent of such negotiated rate'' and 
        inserting ``80 percent of such negotiated rate''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to tests furnished on or after October 1, 1994.

SEC. 205. IMPOSITION OF COPAYMENT FOR CERTAIN HOME HEALTH VISITS.

    (a) In General.--
            (1) Part a.--Section 1813(a) of the Social Security Act (42 
        U.S.C. 1395e(a)) is amended by adding at the end the following 
        new paragraph:
    ``(5) The amount payable for home health services furnished to an 
individual under this part shall be reduced by a copayment amount equal 
to 20 percent of the average of all per visit costs for home health 
services furnished under this title determined under section 
1861(v)(1)(L) (as determined by the Secretary on a prospective basis 
for services furnished during a calendar year), unless such services 
were furnished to the individual during the 30-day period that begins 
on the date the individual is discharged as an inpatient from a 
hospital.''.
            (2) Part b.--Section 1833(a)(2) of such Act (42 U.S.C. 
        1395l(a)(2)) is amended--
                    (A) in subparagraph (A), by striking ``to home 
                health services,'' and by striking the comma after 
                ``opinion)'';
                    (B) in subparagraph (D), by striking ``and'' at the 
                end;
                    (C) in subparagraph (E), by striking the semicolon 
                at the end and inserting ``; and''; and
                    (D) by adding at the end the following new 
                subparagraph:
                    ``(F) with respect to home health services--
                            ``(i) the lesser of --
                                    ``(I) the reasonable cost of such 
                                services, as determined under section 
                                1861(v), or
                                    ``(II) the customary charges with 
                                respect to such services,
                        less the amount a provider may charge as 
                        described in clause (ii) of section 
                        1866(a)(2)(A),
                            ``(ii) if such services are furnished by a 
                        public provider of services, or by another 
                        provider which demonstrates to the satisfaction 
                        of the Secretary that a significant portion of 
                        its patients are low-income (and requests that 
                        payment be made under this clause), free of 
                        charge or at nominal charges to the public, the 
                        amount determined in accordance with section 
                        1814(b)(2), or
                            ``(iii) if (and for so long as) the 
                        conditions described in section 1814(b)(3) are 
                        met, the amounts determined under the 
                        reimbursement system described in such section,
                less a copayment amount equal to 20 percent of the 
                average of all per visit costs for home health services 
                furnished under this title determined under section 
                1861(v)(1)(L) (as determined by the Secretary on a 
                prospective basis for services furnished during a 
                calendar year), unless such services were furnished to 
                the individual during the 30-day period that begins on 
                the date the individual is discharged as an inpatient 
                from a hospital;''.
            (3) Provider charges.--Section 1866(a)(2)(A)(i) of such Act 
        (42 U.S.C. 1395cc(a)(2)(A)(i)) is amended--
                    (A) by striking ``deduction or coinsurance'' and 
                inserting ``deduction, coinsurance, or copayment''; and
                    (B) by striking ``or (a)(4)'' and inserting 
                ``(a)(4), or (a)(5)''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to home health services furnished on or after October 1, 1994.

SEC. 206. IMPOSITION OF COPAYMENT FOR SKILLED NURSING FACILITY 
              SERVICES.

    (a) In General.--Paragraph (3) of section 1813(b) of the Social 
Security Act (42 U.S.C. 1395e(b)) is amended to read as follows:
    ``(3) The amount payable for post-hospital extended care services 
furnished an individual during any spell of illness shall be reduced by 
a copayment amount equal to 20 percent of the average of all per day 
costs for such services furnished under this title (as determined by 
the Secretary on a prospective basis for services furnished during a 
calendar year).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to post-hospital extended care services furnished on or after 
October 1, 1994.

SEC. 207. SHIFT PAYMENT UPDATES TO JANUARY FOR ALL PAYMENT RATES UNDER 
              HOSPITAL INSURANCE PROGRAM.

    (a) PPS Hospitals.--
            (1) In general.--Section 1886(b)(3)(B)(i) of the Social 
        Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)) is amended--
                    (A) in the matter preceding subclause (I), by 
                striking ``fiscal year'' and inserting ``particular 
                time period'',
                    (B) in subclause (IX), by striking ``fiscal year 
                1994'', and inserting ``the 15-month period beginning 
                on October 1, 1993'',
                    (C) in subclauses (X), (XI), and (XII), by striking 
                ``fiscal year'', and
                    (D) in subclause (XIII), by striking ``fiscal year 
                1998 and each subsequent fiscal year'' and inserting 
                ``1998 and each subsequent calendar year''.
            (2) Other hospitals.--
                    (A) In general.--Section 1886(b)(3)(B)(ii) of such 
                Act (42 U.S.C. 1395ww(b)(3)(B)(ii)) is amended--
                    (A) in subclause (V)--
                            (i) by striking ``fiscal years 1994 through 
                        1997'' and inserting ``the 15-month period 
                        beginning on October 1, 1993,'', and
                            (ii) by striking ``and'' at the end, and
                    (B) by striking subclause (VI) and insert the 
                following:
            ``(VI) 1995 through 1997, is the market basket percentage 
        increase minus the applicable reduction (as defined in clause 
        (vi)(II)), or in the case of a hospital for a calendar year for 
        which the hospital's update adjustment percentage (as defined 
        in clause (vi)(I)) is at least 10 percent, the market basket 
        percentage increase, and
            ``(VII) subsequent calendar years is the market basket 
        percentage increase.''.
                    (B) Conforming amendment.--Section 1886(b)(3)(B) of 
                such Act (42 U.S.C. 1395ww(b)(3)(B)) is amended by 
                adding at the end the following new clause:
    ``(vi) For purposes of clause (ii)(VI)--
            ``(I) a hospital's `update adjustment percentage' for a 
        calendar year is the percentage by which the hospital's 
        allowable operating cost of inpatient hospital services 
        recognized under this title for the cost reporting period 
        beginning in fiscal year 1990 exceeds the hospital's target 
        amount (as determined under subparagraph (A)) for such cost 
        reporting period, increased for each calendar year (beginning 
        with 1995) by the sum of any of the hospital's applicable 
        reductions under subclause (VI) for previous years; and
            ``(II) the `applicable reduction' with respect to a 
        hospital for a calendar year is the lesser of 1 percentage 
        point or the percentage point difference between 10 percent and 
        the hospital's update adjustment percentage for the calendar 
        year.''.
            (3) Sole community and medicare-dependent, small rural 
        hospitals.--
                    (A) In general.--Section 1886(b)(3)(B)(iv) of such 
                Act (42 U.S.C. 1395ww(b)(3)(B)(iv)) is amended--
                            (i) in subclause (II), by striking ``fiscal 
                        year 1994'' and inserting ``the 15-month period 
                        beginning on October 1, 1993'',
                            (ii) in subclause (III), by striking 
                        ``fiscal year'', and
                            (iii) in subclause (IV), by striking 
                        ``fiscal year 1996 and each subsequent fiscal 
                        year'' and inserting ``1996 and each subsequent 
                        calendar year''.
                    (B) Target amount adjustment.--Section 
                1886(b)(3)(C) of such Act (42 U.S.C. 1395ww(b)(3)(C)) 
                is amended--
                            (i) in clause (iii), by inserting ``or 
                        portion of a cost reporting period occurring 
                        before December 31, 1994,'' before ``the target 
                        amount'', and
                            (ii) in clause (iv), by striking ``fiscal 
                        year 1995 and each subsequent fiscal year'' and 
                        inserting ``1995 and each subsequent year''.
                    (C) Extension of regional floor.--Section 
                1886(d)(1)(A)(iii)(II) of such Act (42 U.S.C. 
                1395ww(d)(1)(A)(iii)(II)) is amended--
                            (i) by striking ``for discharges occurring 
                        during a fiscal year ending on or before 
                        September 30, 1996'' and inserting ``for 
                        discharges occurring during the 15-month period 
                        beginning on October 1, 1993, and during any 
                        calendar year ending on or before December 31, 
                        1996'', and
                            (ii) by striking ``such fiscal year'' and 
                        inserting ``such 15-month period or such 
                        calendar year, as the case may be''.
            (4) Conforming amendments.--
                    (A) Section 1886(b)(3)(B)(iii) of such Act (42 
                U.S.C. 1395ww(b)(3)(B)(iii)) is amended--
                            (i) by inserting ``beginning in'' after 
                        ``cost reporting periods'',
                            (ii) by striking ``fiscal year'' the first 
                        place it appears and inserting ``particular 
                        time period'',
                            (iii) by striking ``or fiscal year'' the 
                        first and second place it appears, and
                            (iv) by striking ``cost reporting period or 
                        fiscal year'' and inserting ``period''.
                    (B) Section 1886(d)(1)(A) of such Act (42 U.S.C. 
                1395ww(d)(1)(A)) is amended in the matter preceding 
                clause (i) by inserting ``or calendar'' after 
                ``fiscal''.
                    (C) Section 1886(d)(2)(D) of such Act (42 U.S.C. 
                1395ww(d)(2)(D)) is amended by inserting ``or 
                calendar'' after ``fiscal'' each place it appears.
                    (D) Section 1886(d)(3) of such Act (42 U.S.C. 
                1395ww(d)(3)) is amended in the first sentence by 
                inserting ``or calendar'' after ``fiscal'' the first 
                place it appears and by inserting ``for each fiscal 
                year through 1994'' after ``in the United States, 
                and''.
                    (E) Section 1886(d)(3)(A)(ii) of such Act (42 
                U.S.C. 1395ww(d)(3)(A)(ii)) is amended--
                            (i) by striking ``1994,'' and inserting 
                        ``1993, and occurring in the 15-month period 
                        beginning on October 1, 1993,'', and
                            (ii) by striking ``fiscal year'' the second 
                        and last place it appears and inserting ``time 
                        period''.
                    (F) Section 1886(d)(3)(A)(iii) of such Act (42 
                U.S.C. 1395ww(d)(3)(A)(iii)) is amended by striking 
                ``the fiscal year beginning on October 1, 1994'' and 
                inserting ``1995''.
                    (G) Section 1886(d)(3)(A)(iv) of such Act (42 
                U.S.C. 1395ww(d)(3)(A)(iv)) is amended--
                            (i) by striking ``fiscal year beginning on 
                        or after October 1, 1995'' and inserting ``year 
                        beginning on or after January 1, 1996'',
                            (ii) by striking ``and within each 
                        region'', and
                            (iii) by striking ``fiscal'' each place it 
                        appears.
                    (H) Section 1886(d)(3)(D) of such Act (42 U.S.C. 
                1395ww(d)(3)(D)) is amended--
                            (i) by inserting ``or calendar'' after 
                        ``fiscal'' each place it appears, and
                            (ii) by inserting ``for each fiscal year 
                        through 1994'' after ``and shall establish''.
                    (I) Section 1886(d)(3)(E) of such Act (42 U.S.C. 
                1395ww(d)(3)(E)) is amended--
                            (i) in the second sentence, by striking 
                        ``at least every 12 months thereafter'' and 
                        inserting ``beginning January 1, 1995, at least 
                        every 12 months thereafter'', and
                            (ii) in the last sentence, by inserting 
                        ``or calendar'' after ``fiscal'' the first and 
                        last place it appears.
                    (J)(i) Section 1886(d)(4)(C)(iii) of such Act (42 
                U.S.C. 1395ww(d)(4)(C)(iii)) is amended--
                            (I) by inserting ``or calendar'' after 
                        ``fiscal'' the first place it appears, and
                            (II) by deleting ``fiscal'' the last place 
                        it appears.
                    (ii) The requirements of paragraphs (3)(E) and 
                (4)(C)(iii) of section 1886(d) of the Social Security 
                Act (42 U.S.C. 1395ww(d)(4)(C)(iii)) shall be applied 
                on a 15-month basis for the period beginning on October 
                1, 1993, and ending on December 31, 1994.
                    (K)(i) Section 1886(d)(5)(A) of such Act (42 U.S.C. 
                1395ww(d)(5)(A)) is amended--
                            (I) in clause (i), by striking ``fiscal 
                        years ending on or before September 30, 1997'' 
                        and inserting ``calendar years ending on or 
                        before December 31, 1997'',
                            (II) in clause (ii), by striking ``fiscal 
                        years beginning on or after October 1, 1994'' 
                        and inserting ``calendar years beginning on or 
                        after January 1, 1995'',
                            (III) in clause (iv), by inserting ``or 
                        calendar'' after ``fiscal'',
                            (IV) in clause (v), by striking ``fiscal 
                        year'' each place it appears, and
                            (V) in clause (vi), by striking ``fiscal'' 
                        and inserting ``calendar''.
                    (ii) The requirement of section 1886(d)(5)(A)(iv) 
                of the Social Security Act (42 U.S.C. 
                1395ww(d)(5)(A)(iv)) shall be applied on a 15-month 
                basis for the period beginning on October 1, 1993, and 
                ending on December 31, 1994.
                    (L) Section 1886(d)(5)(E)(ii) of such Act (42 
                U.S.C. 1395ww(d)(5)(E)(ii)) is amended by inserting 
                ``or calendar'' after ``fiscal''.
                    (M) Section 1886(d)(6) of such Act (42 U.S.C. 
                1395ww(d)(6)) is amended by inserting ``or December 1 
                of each calendar year (beginning with calendar year 
                1995)'' after ``1984)''.
                    (N) Section 1886(d)(9)(A) of such Act (42 U.S.C. 
                1395ww(d)(9)(A)) is amended in the matter preceding 
                clause (i) by striking ``fiscal year'' and inserting 
                ``particular time period''.
                    (O) Section 1886(d)(9)(C)(i) of such Act (42 U.S.C. 
                1395ww(d)(9)(C)(i)) is amended--
                            (i) by striking ``fiscal year'' the first 
                        place it appears and inserting ``time period'',
                            (ii) by striking ``for fiscal year 1989'', 
                        and
                            (iii) by striking ``fiscal years'' and 
                        inserting ``time periods''.
                    (P) Section 1886(d)(10)(C) of such Act (42 U.S.C. 
                1395ww(d)(10)(C)) is amended--
                            (i) in clause (i), by striking ``fiscal 
                        year'' and inserting ``particular time 
                        period'', and
                            (ii) in clause (ii), by inserting ``or 
                        calendar'' after ``fiscal'' the first place it 
                        appears and striking ``fiscal'' the last place 
                        it appears.
                    (Q) Section 1886(e)(2) of such Act (42 U.S.C. 
                1395ww(e)(2)) is amended--
                            (i) in subparagraph (A), by striking 
                        ``fiscal years'' and inserting ``particular 
                        time periods'', and
                            (ii) in subparagraph (B), by striking 
                        ``fiscal year'' each place it appears and 
                        inserting ``particular time period''.
                    (R) Section 1886(e)(3) of such Act (42 U.S.C. 
                1395ww(e)(3)) is amended--
                            (i) in subparagraph (A)--
                                    (I) by striking ``before the 
                                beginning of each fiscal year 
                                (beginning with fiscal year 1986)'', 
                                and
                                    (II) by striking ``that fiscal 
                                year'' and inserting ``the succeeding 
                                year'', and
                            (ii) in subparagraph (B)--
                                    (I) by striking ``before the 
                                beginning of each fiscal year 
                                (beginning with fiscal year 1989)'', 
                                and
                                    (II) by striking ``that fiscal 
                                year'' and inserting ``the succeeding 
                                year''.
                    (S) Section 1886(e)(4)(A) of such Act (42 U.S.C. 
                1395ww(e)(4)(A)) is amended in the first sentence by 
                striking ``fiscal'' the first and last place it appears 
                and by striking ``(beginning with fiscal year 1988)''.
                    (T) Section 1886(e)(4)(B) of such Act (42 U.S.C. 
                1395ww(e)(4)(B)) is amended by striking ``fiscal'' the 
                first place it appears and by striking ``(beginning 
                with fiscal year 1992)''.
                    (U) Section 1886(e)(5) of such Act (42 U.S.C. 
                1395ww(e)(5)) is amended--
                            (i) in subparagraph (A), by striking ``the 
                        May 1 before each fiscal year (beginning with 
                        fiscal year 1986) and inserting ``May 1'' and 
                        by striking ``that fiscal year'' and inserting 
                        ``the succeeding year'', and
                            (ii) in subparagraph (B), by striking 
                        ``fiscal''.
                    (V) The second and third sentences of section 
                1886(e)(5) of such Act (42 U.S.C. 1395ww(e)(5)) are 
                each amended by striking ``fiscal'' each place it 
                appears.
                    (W) Section 1886(g)(1)(A) of such Act (42 U.S.C. 
                1395ww(g)(1)(A)) is amended--
                            (i) by striking ``fiscal years 1992, 
                        through 1995'' and inserting ``fiscal years 
                        1992 and 1993, the 15-month period beginning on 
                        October 1, 1993, and calendar year 1995'', and
                            (ii) by striking ``such fiscal year'' and 
                        inserting ``such period''.
            (5) Clerical amendments concerning transitional payments 
        for a reclassified hospital.--
                    (A) Section 1886(d)(8)(A) of such Act (42 U.S.C. 
                1395ww(d)(8)(A)) is amended in the matter preceding 
                clause (i), by striking ``cost reporting periods'' and 
                inserting ``years''.
                    (B) Section 1886(d)(8)(A)(i) of such Act (42 U.S.C. 
                1395ww(d)(8)(A)(i)) is amended--
                            (i) in the matter preceding subclause (I), 
                        by striking ``cost reporting period'' and 
                        inserting ``year'' and by striking ``reporting 
                        period'' and inserting ``year'',
                            (ii) in subclause (I), by striking 
                        ``reporting period'' and inserting ``year'', 
                        and
                            (iii) in subclause (II), by striking 
                        ``reporting period'' and inserting ``year''.
                    (C) Section 1886(d)(8)(A)(ii) of such Act (42 
                U.S.C. 1395ww(d)(8)(A)(ii)) is amended--
                            (i) in the matter preceding subclause (I), 
                        by striking ``cost reporting period'' and 
                        inserting ``year'' and by striking ``reporting 
                        period'' and inserting ``year'',
                            (ii) in subclause (I), by striking 
                        ``reporting period'' and inserting ``year'', 
                        and
                            (iii) in subclause (II), by striking 
                        ``reporting period'' and inserting ``year''.
    (b) Home Health Agencies.--Clause (iii) of section 1861(v)(1)(L) of 
such Act (42 U.S.C. 1395x(v)(1)(L)) is amended by striking ``July 1, 
1991, and annually thereafter (but not for cost reporting periods 
beginning on and after July 1, 1994, and before July 1, 1996)'' and 
inserting ``July 1 of 1991, 1992, and 1993 (but not for cost reporting 
periods beginning on and after July 1, 1994, and before January 1, 
1997), and annually thereafter ''.
    (c) Hospice Care.--
            (1) In general.--Clause (ii) of section 1814(i)(1)(C) of 
        such Act (42 U.S.C. 1395f(i)(1)(C)) is amended--
                    (A) in subclause (II), by striking ``fiscal year 
                1994'' and inserting ``the 15-month period beginning on 
                October 1, 1993'', and
                    (B) in subclauses (III), (IV), (V), and (VI), by 
                striking ``fiscal year'' each place it appears and 
                inserting ``calendar year''.
            (2) Conforming amendment.--Section 1814(i)(2) of such Act 
        (42 U.S.C. 1395f(i)(2)) is amended by adding at the end the 
        following new subparagraph:
    ``(D) For purposes of subparagraph (A), the term `accounting year' 
means--
            ``(i) fiscal years 1985 through 1993,
            ``(ii) the 15-month period beginning on October 1, 1993, 
        and
            ``(iii) calendar years beginning on or after January 1, 
        1995.''.
    (d) Skilled Nursing Facility Services.--
            (1) In general.--The last sentence of section 1888(a) of 
        such Act (42 U.S.C. 1395yy(b)) is amended by striking ``October 
        1, 1995'' and inserting ``January 1, 1996''.
            (2) Conforming amendments.--
                    (A) Section 1888(d)(4) of such Act (42 U.S.C. 
                1395yy(d)(4)) is amended by striking ``fiscal'' each 
                place it appears.
                    (B) Subsections (a)(1) and (b) of section 13503 of 
                the Omnibus Budget Reconciliation Act of 1993 are 
                amended by striking ``fiscal years 1994 and 1995'' each 
                place it appears and inserting ``the 15-month period 
                beginning on October 1, 1993, and calendar year 1995''.

SEC. 208. ACCELERATION OF TRANSITION TO PROSPECTIVE RATES FOR FACILITY 
              COSTS IN HOSPITAL OUTPATIENT DEPARTMENTS.

    (a) Outpatient Surgery.--Section 1833(i)(3)(B)(ii) of the Social 
Security Act (42 U.S.C. 1395l(i)(3)(B)(ii)) is amended--
            (1) in subclause (I)--
                    (A) by striking ``and 42 percent'' and inserting 
                ``42 percent'', and
                    (B) by striking ``1991'' and inserting ``1991, and 
                beginning on or before September 30, 1994, 25 percent 
                for portions of cost reporting periods beginning in 
                fiscal year 1995, and 0 percent for portions of cost 
                reporting periods beginning on or after October 1, 
                1995'', and
            (2) in subclause (II)--
                    (A) by striking ``and 58 percent'' and inserting 
                ``58 percent'', and
                    (B) by striking ``1991'' and inserting ``1991, and 
                beginning on or before September 30, 1994, 75 percent 
                for portions of cost reporting periods beginning in 
                fiscal year 1995, and 100 percent for portions of cost 
                reporting periods beginning on or after October 1, 
                1995''.
    (b) Outpatient Radiology and Diagnostic Services.--Section 
1833(n)(1)(B)(ii)(I) of the Social Security Act (42 U.S.C. 
1395l(n)(1)(B)(ii)(I)) is amended by striking ``January 1, 1991.'' and 
inserting ``January 1, 1991, and beginning on or before September 30, 
1994. The term means 25 percent for portions of cost reporting periods 
beginning in fiscal year 1995 and 0 percent for portions of cost 
reporting periods beginning on or after October 1, 1995.''.

                          Subtitle B--Medicaid

SEC. 211. CAP ON FEDERAL PAYMENTS MADE FOR ACUTE MEDICAL SERVICES UNDER 
              THE MEDICAID PROGRAM.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended by redesignating section 1931 as section 1932 
and by inserting after section 1930 the following new section:

  ``cap on federal payment made for acute medical services furnished 
                       under the medicaid program

    ``Sec. 1931. (a) Annual Federal Cap.--For purposes of furnishing 
acute medical services to eligible individuals, the Secretary shall pay 
to a State for a fiscal year under section 1903 an amount that does not 
exceed the State's total funding amount for such fiscal year determined 
under subsection (b).
    ``(b) State Total Funding Amount.--
            ``(1) In general.--A State's total funding amount for a 
        fiscal year is an amount equal to the lesser of--
                    ``(A) the sum of--
                            ``(i) the product of--
                                    ``(I) the per-adult funding amount 
                                for the State for such fiscal year, and
                                    ``(II) the total number of eligible 
                                individuals who are at least 21 years 
                                of age who will receive acute medical 
                                services in the State during the fiscal 
                                year; and
                            ``(ii) the product of--
                                    ``(I) the per-child funding amount 
                                for the State for such fiscal year, and
                                    ``(II) the total number of eligible 
                                individuals who are under 21 years of 
                                age who will receive acute medical 
                                services in the State during the fiscal 
                                year; or
                    ``(B) the maximum Federal amount for such State (as 
                determined under paragraph (3)).
            ``(2) Per-adult and per-child funding amounts.--The 
        Secretary shall calculate for each State a per-adult funding 
        amount and a per-child funding amount for each fiscal year as 
        follows:
                    ``(A) In general.--
                            ``(i) Fiscal year 1995.--For fiscal year 
                        1995--
                                    ``(I) the per-adult funding amount 
                                for a State shall be an amount equal to 
                                the base per-adult funding amount 
                                determined under subparagraph (B) 
                                increased by 20 percent of such amount; 
                                and
                                    ``(II) the per-child funding amount 
                                for the State shall be an amount equal 
                                to the base per-child funding amount 
                                for the State determined under 
                                subparagraph (C) increased by 20 
                                percent of such amount.
                            ``(ii) Subsequent fiscal years.--For fiscal 
                        year 1996 and subsequent fiscal years, the per-
                        adult funding amount for a State and the per-
                        child funding amount for a State, respectively, 
                        shall be an amount equal to the amount 
                        determined under this subparagraph for the 
                        previous fiscal year updated, through the 
                        midpoint of the period, by the estimated 
                        percentage change in the Consumer Price Index 
                        during the 12-month period ending at that 
                        midpoint, with appropriate adjustments to 
                        reflect previous underestimations or 
                        overestimations under this clause in the 
                        projected percentage change in the Consumer 
                        Price Index, plus 1 percentage point.
                    ``(B) Base per-adult funding amount.--The base per-
                adult funding amount for a State is an amount equal 
                to--
                            ``(i) the total amount of Federal funds 
                        paid to such State under section 1903(a) for 
                        fiscal year 1993 for providing acute medical 
                        services to eligible individuals who were at 
                        least 21 years of age; divided by
                            ``(ii) the total number of eligible 
                        individuals who were at least 21 years of age 
                        who received acute medical services in such 
                        State during fiscal year 1993.
                    ``(C) Base per-child funding amount.--The base per-
                child funding amount for a State is an amount equal 
                to--
                            ``(i) the total amount of Federal funds 
                        paid to such State under section 1903(a) for 
                        fiscal year 1993 for providing acute medical 
                        services to eligible individuals who were under 
                        21 years of age; divided by
                            ``(ii) the total number of eligible 
                        individuals who were under 21 years of age who 
                        received acute medical services in such State 
                        during fiscal year 1993.
            ``(3) Maximum federal amount.--The Secretary shall 
        calculate for each State a maximum Federal amount for each 
        fiscal year as follows:
                    ``(A) In general.--
                            ``(i) Fiscal year 1995.--For fiscal year 
                        1995, the maximum Federal amount for a State 
                        shall be an amount equal to the base maximum 
                        Federal amount determined under subparagraph 
                        (C) increased by 20 percent of such amount.
                            ``(ii) Subsequent fiscal years.--For fiscal 
                        year 1996 and subsequent fiscal years, the 
                        maximum Federal amount for a State shall be an 
                        amount equal to the amount determined under 
                        this subparagraph for the previous fiscal year 
                        updated, through the midpoint of the period, by 
                        the estimated percentage change in the Consumer 
                        Price Index during the 12-month period ending 
                        at that midpoint, with appropriate adjustments 
                        to reflect previous underestimations or 
                        overestimations under this clause in the 
                        projected percentage change in the Consumer 
                        Price Index, plus 2.5 percentage points.
                    ``(B) Base maximum federal amount.--
                            ``(i) In general.--The base maximum Federal 
                        amount for a State is an amount equal to the 
                        State's applicable percentage (as determined 
                        under clause (ii)) of the State's total maximum 
                        amount (as determined under clause (iii)).
                            ``(ii) State's applicable percentage.--A 
                        State's applicable percentage determined under 
                        this clause is a percentage equal to the 
                        quotient of--
                                    ``(I) the amount of Federal funds 
                                paid to the State for the furnishing of 
                                acute medical services to eligible 
                                individuals and the provision of 
                                administrative services to such 
                                individuals in fiscal year 1993, 
                                divided by
                                    ``(II) the amount of Federal funds 
                                paid to all States for the furnishing 
                                of acute medical services to eligible 
                                individuals and the provision of 
                                administrative services to such 
                                individuals in fiscal year 1993.
                            ``(iii) State's total maximum amount.--A 
                        State's total maximum amount determined under 
                        this clause is an amount equal to the 
                        applicable percentage of the total amount of 
                        Federal funds paid to all States for the 
                        furnishing of acute medical services to 
                        eligible individuals and the provision of 
                        administrative services to such individuals in 
                        fiscal year 1993.
    ``(c) Minimum Expenditure by States.--
            ``(1) In general.--For the purpose of furnishing acute 
        medical services to eligible individuals and providing 
        administrative services to such individuals in a fiscal year, a 
        State shall incur expenditures which are at least equal to the 
        product of--
                    ``(A) the State's updated per capita amount, and
                    ``(B) the total number of eligible individual's 
                receiving acute medical services in the State during 
                such fiscal year.
            ``(2) Updated per capita amount.--For purposes of paragraph 
        (1)(A)--
                    ``(A) In general.--The updated per capita amount 
                for a State shall be--
                            ``(i) for fiscal year 1995, an amount equal 
                        to the State's base per capita amount, and
                            ``(ii) for fiscal year 1996 and each 
                        succeeding fiscal year, an amount equal to the 
                        amount determined under this subparagraph for 
                        the first preceding fiscal year updated by the 
                        percentage change in the consumer price index 
                        between such first preceding fiscal year and 
                        the second preceding fiscal year (as determined 
                        by the Secretary of Commerce).
                    ``(B) Base per capita amount.--The base per capita 
                amount for a State shall be an amount equal to the 
                quotient of--
                            ``(i) the total amount of State 
                        expenditures in fiscal year 1993 for the 
                        furnishing of acute medical services to 
                        eligible individuals and the provision of 
                        administrative services to such individuals, 
                        divided by
                            ``(ii) the total number of eligible 
                        individuals receiving acute medical services 
                        during fiscal year 1993.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Acute medical services.--The term `acute medical 
        services' means all of the care and services furnished to 
        individuals eligible under a State plan under this title except 
        the following:
                    ``(A) Nursing facility services (as defined in 
                section 1905(f)).
                    ``(B) Intermediate care facility for the mentally 
                retarded services (as defined in section 1905(d)).
                    ``(C) Personal care services (as described in 
                section 1905(a)(24)).
                    ``(D) Private duty nursing services (as referred to 
                in section 1905(a)(8)).
                    ``(E) Home or community-based services furnished 
                under a waiver granted under subsection (c), (d), or 
                (e) of section 1915.
                    ``(F) Home and community care furnished to 
                functionally disabled elderly individuals under section 
                1929.
                    ``(G) Community supported living arrangements 
                services under section 1930.
                    ``(H) Case-management services (as described in 
                section 1915(g)(2)).
                    ``(I) Home health care services (as referred to in 
                section 1905(a)(7)).
                    ``(J) Hospice care (as defined in section 1905(o)).
            ``(2) Eligible individual.--The term `eligible individual' 
        means an individual who is eligible to receive medical 
        assistance under the State plan under this title.
            ``(3) Federal funds.--The term `Federal funds' means funds 
        paid to a State under section 1903, excluding funds paid under 
        such section with respect to expenditures by such State in the 
        form of payment adjustments made by such State in order to 
        comply with the requirement under section 1902(a)(13)(A) (as in 
        effect on the date of the enactment of this section) that 
        payments to hospitals to take into account the situation of 
        hospitals which serve a disproportionate number of low income 
        patients with special needs.
            ``(4) State expenditures.--The term `State expenditures' 
        means expenditures by a State under its plan under this title, 
        excluding expenditures in the form of payment adjustments made 
        by such State in order to comply with the requirement under 
        section 1902(a)(13)(A) (as in effect on the date of the 
        enactment of this section) that payments made by the State to 
        hospitals take into account the situation of hospitals which 
        serve a disproportionate number of low income patients with 
        special needs.''.
    (b) Effective Date.--The amendment made by subsection (a) shall be 
effective with respect to fiscal years beginning after September 30, 
1994.

SEC. 212. WAIVERS FOR THE FURNISHING OF ACUTE MEDICAL SERVICES UNDER 
              THE MEDICAID PROGRAM.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended by redesignating section 1932 as section 1933 
and by inserting after section 1931 the following new section:

   ``waivers for the furnishing of acute medical services under the 
                            medicaid program

    ``Sec. 1932. (a) In General.--The Secretary shall establish a 
process under which a State with a State plan approved under this title 
may apply for waivers of any of the requirements under this title in 
order to establish innovative and cost effective programs for 
furnishing acute medical services (as defined in section 1931(d)(1)) to 
eligible individuals (as defined in section 1931(d)(2)).
    ``(b) Application for Waivers.--
            ``(1) In general.--In order to receive a waiver under 
        subsection (a), a State shall submit an application to the 
        Secretary at such time and containing such information as the 
        Secretary determines appropriate.
            ``(2) Approval of application.--
                    ``(A) Initial review.--Within 60 days after an 
                application is submitted by the State under this 
                subsection, the Secretary shall review and approve such 
                application or provide the State with a list of the 
                modifications that are necessary for such application 
                to be approved.
                    ``(B) Additional review.--Within 60 days after a 
                State resubmits any application under this subsection, 
                the Secretary shall review and approve such application 
                or provide the State with a summary of which items 
                included on the list provided to the State under 
                subparagraph (A) remain unsatisfied. A State may 
                resubmit an application under this subparagraph as many 
                times as necessary to gain approval.
    ``(c) Duration of Waivers.--Except as provided in subsection (d), 
any waiver under this section shall be granted for a period of 5 years, 
and renewed for subsequent 5-year periods, unless the Secretary 
determines that the State has failed to furnish acute medical services 
in accordance with the terms of the waiver and any provisions of this 
title with respect to which the Secretary has not granted a waiver.
    ``(d) Termination of Waivers.--The Secretary may terminate a waiver 
granted under this section at any time if the Secretary determines that 
the State has failed to furnish acute medical services in accordance 
with the terms of the waiver and any provisions of this title with 
respect to which the Secretary has not granted a waiver.
    ``(e) Reports.--
            ``(1) In general.--The State shall, through an independent 
        entity, evaluate the programs operated under a waiver granted 
        under this section and submit interim and final reports to the 
        Secretary at such times and containing such information as the 
        Secretary shall require.
            ``(2) Report to congress.--Not later than 60 days after the 
        receipt of a final report by the State regarding a waiver 
        granted under this section, the Secretary shall submit a report 
        to Congress.''.
    (b) Effective Date.--The amendment made by subsection (a) shall be 
effective with respect to fiscal years beginning after September 30, 
1994.

SEC. 213. TERMINATION OF DISPROPORTIONATE SHARE PAYMENTS.

    (a) In General.--
            (1) Elimination of state plan requirement.--Section 
        1902(a)(13) of the Social Security Act (42 U.S.C. 1396a(a)(13)) 
        is amended by striking ``which, in the case of hospitals, take 
        into account the situation of hospitals which serve a 
        disproportionate number of low income patients with special 
        needs and''.
            (2) Conforming amendments.--(A) Section 1923 of such Act 
        (42 U.S.C. 1396r-4) is repealed.
            (B) Section 1902(a)(55) of such Act (42 U.S.C. 
        1396a(a)(55)) is amended by striking ``facilities defined as 
        disproportionate share hospitals under section 1923(a)(1)(A) 
        and''.
            (C) Section 1902(s) of such Act (42 U.S.C. 1396a(s)) is 
        amended by striking ``, and to children who have not attained 
        the age of 6 years and who receive such services in a 
        disproportionate share hospital described in section 
        1923(b)(1),''.
            (D) Section 1903(a)(1) of such Act (42 U.S.C. 1396b(a)(1)) 
        is amended by striking ``and subsection 1923(f)''.
            (E) Section 1903(d)(6) of such Act (42 U.S.C. 1396b(d)(6)) 
        is amended--
                    (i) by striking ``(6)(A)'' and inserting ``(6)'',
                    (ii) by striking ``(i)'' and ``(ii)'' and inserting 
                ``(A)'' and ``(B)'', respectively, and
                    (iii) by striking subparagraph (B).
    (b) Effective Date.--The amendments made by this section shall be 
effective on and after October 1, 1996.

SEC. 214. GRANTS FOR HEALTH INSURANCE COVERAGE, ACUTE MEDICAL SERVICES, 
              PREVENTIVE CARE, AND DISEASE PREVENTION.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended by redesignating section 1933 as section 1934 
and by inserting after section 1932 the following new section:

    ``grants for health insurance coverage, acute medical services, 
                preventive care, and disease prevention

    ``Sec. 1933. (a) In General.--The Secretary shall provide grants to 
States for the purpose of conducting State programs under which 
individuals with incomes below 150 percent of the income official 
poverty line are provided health insurance coverage, acute medical 
services, preventive care, and disease prevention services. A State 
receiving a grant under this section shall conduct a program described 
in this section in consultation with the Secretary and in any manner 
determined appropriate by the State which is in accordance with 
subsection (b).
    ``(b) Requirements on Programs.--
            ``(1) Priority of benefits.--A State program conducted 
        under this section shall give priority to individuals who--
                    ``(A) are ineligible for benefits under a State 
                plan under this title,
                    ``(B) are eligible for the tax credit established 
                under section 34A of the Internal Revenue Code of 1986, 
                and
                    ``(C) have unreimbursed expenses for health 
                insurance coverage and medical care--
                            ``(i) exceeding 5 percent of the 
                        individual's adjusted gross income, and
                            ``(ii) not otherwise taken into account in 
                        determining the credit under section 34A of the 
                        Internal Revenue Code of 1986 for such 
                        individual.
            ``(2) Services.--
                    ``(A) Mandatory.--A State program conducted under 
                this section shall provide financial assistance as 
                determined by the State for purchasing health insurance 
                coverage and paying medical bills to individuals 
                described in paragraph (1).
                    ``(B) Optional.-- A State program conducted under 
                this section may provide--
                            ``(i) medical services directly to eligible 
                        individuals,
                            ``(ii) primary and preventive care services 
                        to underserved populations,
                            ``(iii) funding for community and migrant 
                        health centers,
                            ``(iv) delivery of outpatient primary and 
                        preventive health services,
                            ``(v) improvements to the availability and 
                        quality of emergency medical services and 
                        trauma care,
                            ``(vi) transportation of victims of medical 
                        emergencies, including air transportation for 
                        victims of medical emergencies in rural areas, 
                        and
                            ``(vii) telecommunications systems between 
                        rural medical facilities and other medical 
                        facilities which have expertise in certain 
                        areas or equipment that can be utilized by 
                        rural facilities through such systems.
    ``(c) Federal Funds Available for Grants.--
            ``(1) In general.--The total amount of Federal funds 
        available under this title for grants to States under this 
        section shall be--
                    ``(A) $8,500,000,000 for fiscal year 1998, and
                    ``(B) for each fiscal year thereafter, the amount 
                for the preceding fiscal year increased by 10 percent 
                of such amount.
            ``(2) Formula for distribution of grants.--
                    ``(A) In general.--The Secretary shall pay to each 
                State conducting a program under this section for a 
                fiscal year an amount equal to the State's percentage 
                (as determined under subparagraph (B)) of the total 
                amount available for grants under this section as 
                provided in paragraph (1).
                    ``(B) State percentage.--
                            ``(i) In general.--A State's percentage 
                        determined under this subparagraph for a fiscal 
                        year is a percentage equal to the quotient of--
                                    ``(I) the number of individuals in 
                                the State's needy population (as 
                                defined in clause (ii)) for such fiscal 
                                year, divided by
                                    ``(II) the total number of 
                                individuals in the needy populations of 
                                all States for the fiscal year.
                            ``(ii) State needy population.--The term 
                        (State's needy population) means, with respect 
                        to a fiscal year, the number of individuals 
                        equal to the product of--
                                    ``(I) the average number of 
                                individuals in the State with incomes 
                                below the income official poverty line 
                                during the 3 preceding fiscal years (as 
                                determined by the Secretary), and
                                    (II) the State's Federal percentage 
                                (as determined under clause (iii)).
                            ``(iii) State federal percentage.--
                                    ``(I) In general.--A State's 
                                Federal percentage for a fiscal year is 
                                the greater of--
                                            ``(aa) 1 minus the 
                                        percentage determined under 
                                        subclause (II), or
                                            ``(bb) 25 percent.
                                    ``(II) Percentage determined.--The 
                                percentage determined under this 
                                subclause is the product of--
                                            ``(aa) .5157, and
                                            ``(bb) the amount 
                                        determined under subclause 
                                        (III).
                                    ``(III) Amount determined.--The 
                                amount determined under this subclause 
                                is the quotient of--
                                            ``(aa) the State's share of 
                                        total taxable resources, 
                                        divided by
                                            ``(bb) the State's share of 
                                        need.
    ``(d) State Expenditures.--
            ``(1) In general.--For a fiscal year, a State shall expend 
        for purposes of conducting the State program described in 
        subsection (a) an amount at least equal to the State share 
        percentage for the State (determined under paragraph (2)) of 
        the amount the State is eligible to receive under subsection 
        (c)(2) for the fiscal year.
            ``(2) State share percentage.--The State share percentage 
        for a State determined under this paragraph for a fiscal year 
        is a percentage equal to the quotient of--
                    ``(A) the percentage determined under subsection 
                (c)(2)(B)(iii)(II) for the fiscal year, divided by
                    ``(B) the State's Federal percentage determined 
                under subsection (c)(2)(B)(iii) for the fiscal year.
    ``(e) Other Definitions.--
            ``(1) Income official poverty line.--For purposes of this 
        section, the term `income official poverty line' means the 
        income official poverty line (as defined by the Office of 
        Management and Budget, and revised annually in accordance with 
        section 673(2) of the Omnibus Budget Reconciliation Act of 
        1981).
            ``(2) State's share of total taxable resources.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `State share of total 
                taxable resources' for a fiscal year means an amount 
                equal to the quotient of--
                            ``(i) the average of total taxable 
                        resources for the State (as determined by the 
                        Secretary of the Treasury based on data 
                        available for the 3 most recent calendar 
                        years), divided by
                            ``(ii) the average of the total taxable 
                        resources for all States (as determined by the 
                        Secretary of the Treasury based on data 
                        available for the 3 most recent calendar 
                        years).
                    ``(B) Special rule for the district of columbia.--
                Notwithstanding subparagraph (A), with respect to the 
                District of Columbia, the term `State share of total 
                taxable resources' for a fiscal year means an amount 
                equal to the quotient of--
                            ``(i) the average of the total personal 
                        income in such District for the 3 preceding 
                        calendar years (as determined by the Secretary 
                        of Commerce), divided by
                            ``(ii) the average of the total personal 
                        income for all States for the 3 preceding 
                        calendar years (as determined by the Secretary 
                        of Commerce).
            ``(3) State's share of need.--The term `State's share of 
        need' for a fiscal year means the quotient of--
                    ``(A) the average number of individuals in the 
                State with incomes below the income official poverty 
                line for the 3 preceding fiscal years (as determined by 
                the Secretary), divided by
                    ``(B) the average number of individuals in all 
                States with incomes below the income official poverty 
                line for the 3 preceding fiscal years (as determined by 
                the Secretary).''.
    (b) Effective Date.--The amendment made by subsection (a) shall be 
effective with respect to fiscal years beginning after September 30, 
1997.

                TITLE III--HEALTH CARE LIABILITY REFORM

SEC. 301. SHORT TITLE.

    This title may be cited as the ``Health Care Liability Reform Act 
of 1994''.

SEC. 302. DEFINITIONS.

    For purposes of this title the term--
            (1) ``approved by the Food and Drug Administration'' means, 
        with respect to a health care product, that the health care 
        product--
                    (A) was subject to premarket approval by the Food 
                and Drug Administration with respect to the safety of 
                the formulation or performance of the aspect of such 
                drug or device which caused the claimant's harm or the 
                adequacy of the packaging or labeling of such drug or 
                device, and such drug or device was approved by the 
                Food and Drug Administration; or
                    (B) is generally recognized as safe and effective 
                under conditions established by the Food and Drug 
                Administration and applicable regulations, including 
                packaging and labeling regulations;
            (2) ``arbitration'' means a dispute resolution process in 
        which the parties submit the dispute outside of a Federal or 
        State civil justice system for resolution by a person or panel 
        of persons;
            (3) ``economic losses'' means losses for hospital and 
        medical expenses, lost wages, lost employment, and other 
        pecuniary losses;
            (4) ``health care malpractice action'' means a civil action 
        alleging a health care malpractice claim against a health care 
        provider or health care professional;
            (5) ``health care malpractice claim'' means any claim 
        relating to the provision of (or the failure to provide) health 
        care services based on negligence or gross negligence, breach 
        of express or implied warranty or contract, or failure to 
        discharge a duty to warn or instruct to obtain consent;
            (6) ``health care product'' means a drug, as defined under 
        section 201(g)(1) of the Federal Food, Drug, and Cosmetic Act 
        (21 U.S.C. 321(g)(1)) or a medical device, as defined under 
        section 201(h) of the Federal Food, Drug, and Cosmetic Act (21 
        U.S.C. 321(h)), or any combination thereof;
            (7) ``health care product liability action'' means a civil 
        action alleging a health care product liability claim against a 
        manufacturer or seller of a health care product or against a 
        health care provider or health care professional;
            (8) ``health care product liability claim'' means any claim 
        relating to harm alleged to have been caused by a health care 
        product;
            (9) ``health care professional'' means any individual who 
        provides health care services in a State and who is required by 
        State law or regulation to be licensed or certified by the 
        State to provide such services in the State, including a 
        physician, nurse, chiropractor, nurse midwife, physical 
        therapist, social worker, or physician assistant;
            (10) ``health care provider'' means any organization or 
        institution that is engaged in the delivery of health care 
        services in a State and that is required by State law or 
        regulation to be licensed or certified by the State to engage 
        in the delivery of such services in the State;
            (11) ``injury'' means any injury, illness, disease, or 
        other harm that is the subject of a health care malpractice 
        claim; and
            (12) ``noneconomic losses'' means losses for physical and 
        emotional pain, suffering, inconvenience, physical impairment, 
        mental anguish, disfigurement, loss of enjoyment of life, and 
        other nonpecuniary losses.

SEC. 303. HEALTH CARE MALPRACTICE.

    (a) Application.--The provisions of this section shall apply to any 
health care malpractice action filed in any Federal or State court and 
any health care malpractice claim resolved through arbitration.
    (b) Payments.--No person may be required to pay more than $100,000 
in a single payment in damages for expenses to be incurred in the 
future, but such person shall be permitted to make such payments on a 
periodic basis. The periods for such payments shall be determined by 
the court, based on projections of when expenses are likely to be 
incurred.
    (c) Damages.--(1) The total amount of damages received by an 
individual shall be reduced, in accordance with paragraph (2), by any 
other payment which has been made or which will be made to such 
individual to compensate such individual for an injury, including 
payments under--
            (A) Federal or State disability or sickness programs;
            (B) Federal, State, or private health insurance programs;
            (C) private disability insurance programs;
            (D) employer wage continuation programs; and
            (E) any other source of payment intended to compensate such 
        individual for such injury.
    (2) The amount by which an award of damages to an individual for an 
injury shall be reduced under paragraph (1) shall be--
            (A) the total amount of any payments (other than such 
        award) which have been made or which will be made to such 
        individual to compensate such individual for such injury; minus
            (B) the amount paid by such individual (or by the spouse, 
        parent, or legal guardian of such individual) to secure the 
        payments described under subparagraph (A).
    (d) Statute of Limitations.--(1) Except as provided under paragraph 
(2), no health care malpractice claim may be initiated after the 
expiration of the 2-year period that begins on the date the alleged 
injury should reasonably have been discovered, or the expiration of the 
4-year period that begins on the date the alleged injury occurred, 
whichever is later.
    (2) In the case of an alleged injury suffered by a minor who has 
not attained 6 years of age, no health care malpractice claim may be 
initiated after the expiration of the 2-year period that begins on the 
date the alleged injury should reasonably have been discovered, or the 
date on which the minor attains 10 years of age, whichever is later.
    (e) Attorneys' Fees.--With respect to any health care malpractice 
action or any health care malpractice claim, attorneys' fees may not 
exceed--
            (1) 25 percent of the first $150,000 of any award or 
        settlement under such action or claim; and
            (2) 15 percent of any additional amounts in excess of 
        $150,000.

SEC. 304. HEALTH CARE PRODUCT LIABILITY OF MANUFACTURER OR SELLER.

    (a) Nonapplication of Strict Liability.--A manufacturer or seller 
of a health care product approved by the Food and Drug Administration 
shall not be strictly liable for any injury alleged to have resulted 
from--
            (1) a defect in the design of the health care product; or
            (2) a failure to warn or instruct regarding a risk posed by 
        the health care product that was neither known nor reasonably 
        knowable at the time the health care product left the control 
        of the manufacturer or seller.
    (b) Duty To Warn.--(1) A manufacturer or seller of a health care 
product that is to be prescribed by, or used at the direction of, a 
health care professional shall not be liable for harm allegedly caused 
by a failure to warn or instruct the ultimate user or recipient of the 
product about a risk if the manufacturer or seller provided adequate 
warning or instruction to the user's or recipient's health care 
professional.
    (2) This subsection shall not apply to any health care product to 
which the Food and Drug Administration specifically provides that a 
warning or instruction regarding such product shall be given by the 
manufacturer or seller directly to the ultimate user or recipient.

SEC. 305. GENERAL PROVISIONS RELATING TO HEALTH CARE LIABILITY.

    (a) Limitation on Noneconomic Damages.--(1) Except as provided 
under paragraph (2), the total amount of damages which may be awarded 
to an individual and the family members of such individual for 
noneconomic losses resulting from an injury which is the subject of a 
health care malpractice claim or a health care product liability claim 
may not exceed $250,000, regardless of the number of defendants against 
whom the claim is brought, the number of claims brought with respect to 
the injury, or the number of actions brought with respect to the 
injury.
    (2)(A) In any jury trial, the jury shall not be informed of the 
limitation established under paragraph (1). If the jury awards an 
amount for noneconomic damages that exceeds $250,000, the court shall 
reduce the award to $250,000 unless the court finds that special 
circumstances (such as egregious injury) would make such reduction 
unjust.
    (B) In any case in which the court finds a reduction under 
subparagraph (A) would be unjust, the court may--
            (i) decline to reduce such award; or
            (ii) reduce such award by a lesser amount than provided for 
        under subparagraph (A).
    (b) Several Liability for Noneconomic Loss.--(1) In any health care 
malpractice action or health care product liability action the 
liability of each defendant for noneconomic loss and for punitive 
damages shall be several only and shall not be joint. Each defendant 
shall be liable only for the amount of noneconomic loss and punitive 
damages allocated to such defendant in direct proportion to such 
defendant's percentage of responsibility as determined under paragraph 
(2). A separate judgment shall be rendered against such defendant for 
that amount.
    (2) For purposes of this subsection, the trier of fact shall 
determine the proportion of responsibility of each party for the 
claimant's harm.

SEC. 306. PUNITIVE DAMAGES.

    (a) In General.--Punitive damages may, if otherwise permitted by 
applicable law, be awarded against a defendant in a health care 
malpractice action or a health care product liability action only if 
the claimant establishes by clear and convincing evidence that the harm 
suffered by the claimant was the result of conduct manifesting 
conscious, flagrant indifference to the health of the claimant or to 
the health of those persons who might be harmed by the health care 
product.
    (b) Determination of Amount.--The amount of any punitive damages 
award shall be determined (subject to appellate review as permitted by 
applicable law) by the trial judge.
    (c) Limitation Concerning Certain Health Care Products.--Punitive 
damages shall not be awarded against a manufacturer or seller of a 
health care product approved by the Food and Drug Administration where 
that health care product caused the claimant's harm.

SEC. 307. EXCEPTIONS.

    The provisions of sections 304(a) and 306(c) shall not apply in any 
case in which--
            (1) the defendant, before or after premarket approval of a 
        drug or device, withheld from or misrepresented to the Food and 
        Drug Administration or any other agency or official of the 
        Federal Government required information that is material and 
        relevant to the performance of such drug or device and is 
        causally related to the harm which the claimant allegedly 
        suffered; or
            (2) the defendant made an illegal payment to an official of 
        the Food and Drug Administration for the purpose of either 
        securing or maintaining approval of such drug or device.

SEC. 308. RULES OF CONSTRUCTION.

    Nothing in this title shall be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any provision of law;
            (2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            (3) affect the applicability of any provision of the 
        Foreign Sovereign Immunities Act of 1976;
            (4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation;
            (5) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        grounds of inconvenient forum;
            (6) restrict or limit the preemptive effect of any other 
        Federal law; or
            (7) create any cause of action under Federal law.

                 TITLE IV--ADMINISTRATIVE COST SAVINGS

            Subtitle A--Standardization of Claims Processing

SEC. 401. ADOPTION OF DATA ELEMENTS, UNIFORM CLAIMS, AND UNIFORM 
              ELECTRONIC TRANSMISSION STANDARDS.

    (a) In General.--The Secretary shall adopt standards relating to 
each of the following:
            (1) Data elements for use in paper and electronic claims 
        processing under health insurance plans, as well as for use in 
        utilization review and management of care (including data 
        fields, formats, and medical nomenclature, and including plan 
        benefit and insurance information).
            (2) Uniform claims forms (including uniform procedure and 
        billing codes for uses with such forms and including 
        information on other health insurance plans that may be liable 
        for benefits).
            (3) Uniform electronic transmission of the data elements 
        (for purposes of billing and utilization review).
Standards under paragraph (3) relating to electronic transmission of 
data elements for claims for services shall supersede (to the extent 
specified in such standards) the standards adopted under paragraph (2) 
relating to the submission of paper claims for such services. Standards 
under paragraph (3) shall include protections to assure the 
confidentiality of patient-specific information and to protect against 
the unauthorized use and disclosure of information.
    (b) Use of Task Forces.--In adopting standards under this section--
            (1) the Secretary shall take into account the 
        recommendations of current task forces, including at least the 
        Workgroup on Electronic Data Interchange, National Uniform 
        Billing Committee, the Uniform Claim Task Force, and the 
        Computer-based Patient Record Institute;
            (2) the Secretary shall consult with the National 
        Association of Insurance Commissioners (and, with respect to 
        standards under subsection (a)(3), the American National 
        Standards Institute); and
            (3) the Secretary shall, to the maximum extent practicable, 
        seek to make the standards consistent with any uniform clinical 
        data sets which have been adopted and are widely recognized.
    (c) Deadlines for Promulgation.--The Secretary shall promulgate the 
standards under--
            (1) subsection (a)(1) relating to claims processing data, 
        by not later than 12 months after the date of the enactment of 
        this Act;
            (2) subsection (a)(2) (relating to uniform claims forms) by 
        not later than 12 months after the date of the enactment of 
        this Act; and
            (3)(A) subsection (a)(3) relating to transmission of 
        information concerning hospital and physicians services, by not 
        later than 24 months after the date of the enactment of this 
        Act, and
            (B) subsection (a)(3) relating to transmission of 
        information on other services, by such later date as the 
        Secretary may determine it to be feasible.
    (d) Report to Congress.--Not later than 3 years after the date of 
the enactment of this Act, the Secretary shall report to Congress 
recommendations regarding restructuring the medicare peer review 
quality assurance program given the availability of hospital data in 
electronic form.

SEC. 402. APPLICATION OF STANDARDS.

    (a) In General.--If the Secretary determines, at the end of the 2-
year period beginning on the date that standards are adopted under 
section 401 with respect to classes of services, that a significant 
number of claims for benefits for such services under health insurance 
plans are not being submitted in accordance with such standards, the 
Secretary may require, after notice in the Federal Register of not less 
than 6 months, that all providers of such services must submit claims 
to health insurance plans in accordance with such standards. The 
Secretary may waive the application of such a requirement in such cases 
as the Secretary finds that the imposition of the requirement would not 
be economically practicable.
    (b) Significant Number.--The Secretary shall make an affirmative 
determination described in subsection (a) for a class of services only 
if the Secretary finds that there would be a significant, measurable 
additional gain in efficiencies in the health care system that would be 
obtained by imposing the requirement described in such paragraph with 
respect to such services.
    (c) Application of Requirement.--
            (1) In general.--If the Secretary imposes the requirement 
        under subsection (a)--
                    (A) in the case of a requirement that imposes the 
                standards relating to electronic transmission of claims 
                for a class of services, each health care provider that 
                furnishes such services for which benefits are payable 
                under a health insurance plan shall transmit 
                electronically and directly to the plan on behalf of 
                the beneficiary involved a claim for such services in 
                accordance with such standards;
                    (B) any health insurance plan may reject any claim 
                subject to the standards adopted under section 401 but 
                which is not submitted in accordance with such 
                standards;
                    (C) it is unlawful for a health insurance plan (i) 
                to reject any such claim on the basis of the form in 
                which it is submitted if it is submitted in accordance 
                with such standards or (ii) to require, for the purpose 
                of utilization review or as a condition of providing 
                benefits under the plan, a provider to transmit medical 
                data elements that are inconsistent with the standards 
                established under section 401(a)(1); and
                    (D) the Secretary may impose a civil money penalty 
                on any provider that knowingly and repeatedly submits 
                claims in violation of such standards or on any health 
                insurance plan (other than a health insurance plan 
                described in paragraph (2)) that knowingly and 
                repeatedly rejects claims in violation of subparagraph 
                (B), in an amount not to exceed $100 for each such 
                claim.
        The provisions of section 1128A of the Social Security Act 
        (other than the first sentence of subsection (a) and other than 
        subsection (b)) shall apply to a civil money penalty under 
        subparagraph (D) in the same manner as such provisions apply to 
        a penalty or proceeding under section 1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health insurance plan--
                    (A) that is subject to regulation by a State, and
                    (B) with respect to which the Secretary finds 
                that--
                            (i) the State provides for application of 
                        the standards established under section 401, 
                        and
                            (ii) the State regulatory program provides 
                        for the appropriate and effective enforcement 
                        of such standards.
    (d) Treatment of Rejections.--If a plan rejects a claim pursuant to 
subsection (c)(1), the plan shall permit the person submitting the 
claim a reasonable opportunity to resubmit the claim on a form or in an 
electronic manner that meets the requirements for acceptance of the 
claim under such subsection.

SEC. 403. PERIODIC REVIEW AND REVISION OF STANDARDS.

    (a) In General.--The Secretary shall--
            (1) provide for the ongoing receipt and review of comments 
        and suggestions for changes in the standards adopted and 
        promulgated under section 401;
            (2) establish a schedule for the periodic review of such 
        standards; and
            (3) based upon such comments, suggestions, and review, 
        revise such standards and promulgate such revisions.
    (b) Application of Revised Standards.--If the Secretary under 
subsection (a) revises the standards described in 401, then, in the 
case of any claim for benefits submitted under a health insurance plan 
more than the minimum period (of not less than 6 months specified by 
the Secretary) after the date the revision is promulgated under 
subsection (a)(3), such standards shall apply under section 402 instead 
of the standards previously promulgated.

SEC. 404. HEALTH INSURANCE PLAN DEFINED.

    In this title, the term ``health insurance plan'' has the meaning 
given such term in section 111(b) and includes--
            (1) the medicare program (under title XVIII of the Social 
        Security Act) and medicare supplemental health insurance, and
            (2) a State medicaid plan (approved under title XIX of such 
        Act).

             Subtitle B--Electronic Medical Data Standards

SEC. 411. MEDICAL DATA STANDARDS FOR HOSPITALS AND OTHER PROVIDERS.

    (a) Promulgation of Hospital Data Standards.--
            (1) In general.--Between July 1, 1995, and January 1, 1996, 
        the Secretary shall promulgate standards described in 
        subsection (b) for hospitals concerning electronic medical 
        data.
            (2) Revision.--The Secretary may from time to time revise 
        the standards promulgated under this subsection.
    (b) Contents of Data Standards.--The standards promulgated under 
subsection (a) shall include at least the following:
            (1) A definition of a standard set of data elements for use 
        by utilization and quality control peer review organizations.
            (2) A definition of the set of comprehensive data elements, 
        which set shall include for hospitals the standard set of data 
        elements defined under paragraph (1).
            (3) Standards for an electronic patient care information 
        system with data obtained at the point of care, including 
        standards to protect against the unauthorized use and 
        disclosure of information.
            (4) A specification of, and manner of presentation of, the 
        individual data elements of the sets and system under this 
        subsection.
            (5) Standards concerning the transmission of electronic 
        medical data.
            (6) Standards relating to confidentiality of patient-
        specific information.
The standards under this section shall be consistent with standards for 
data elements established under section 401.
    (c) Optional Data Standards for Other Providers.--
            (1) In general.--The Secretary may promulgate standards 
        described in paragraph (2) concerning electronic medical data 
        for providers that are not hospitals. The Secretary may from 
        time to time revise the standards promulgated under this 
        subsection.
            (2) Contents of data standards.--The standards promulgated 
        under paragraph (1) for non-hospital providers may include 
        standards comparable to the standards described in paragraphs 
        (2), (4), and (5) of subsection (b) for hospitals.
    (d) Consultation.--In promulgating and revising standards under 
this section, the Secretary shall--
            (1) consult with the American National Standards Institute, 
        hospitals, with the advisory commission established under 
        section 415, and with other affected providers, health 
        insurance plans, and other interested parties, and
            (2) take into consideration, in developing standards under 
        subsection (b)(1), the data set used by the utilization and 
        quality control peer review program under part B of title XI of 
        the Social Security Act.

SEC. 412. APPLICATION OF ELECTRONIC DATA STANDARDS TO CERTAIN 
              HOSPITALS.

    (a) Medicare Requirement for Sharing of Hospital Information.--As 
of January 1, 1996, subject to paragraph (2), each hospital, as a 
requirement of each participation agreement under section 1866 of the 
Social Security Act, shall--
            (1) maintain clinical data included in the set of 
        comprehensive data elements under section 411(b)(2) in 
        electronic form on all inpatients,
            (2) upon request of the Secretary or of a utilization and 
        quality control peer review organization (with which the 
        Secretary has entered into a contract under part B of title XI 
        of such Act), transmit electronically the data set, and
            (3) upon request of the Secretary, or of a fiscal 
        intermediary or carrier, transmit electronically any data (with 
        respect to a claim) from such data set,
in accordance with the standards promulgated under section 411(a).
    (b) Waiver Authority.--Until January 1, 2000:
            (1) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is a small 
        rural hospital, for such period as the hospital demonstrates 
        compliance with such requirements would constitute an undue 
        financial hardship.
            (2) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is in the 
        process of developing a system to provide the required data set 
        and executes agreements with its fiscal intermediary and its 
        utilization and quality control peer review organization that 
        the hospital will meet the requirements of subsection (a) by a 
        specified date (not later than January 1, 2000).
            (3) The Secretary may waive the application of the 
        requirement of subsection (a)(1) for a hospital that agrees to 
        obtain from its records the data elements that are needed to 
        meet the requirements of paragraphs (2) and (3) of subsection 
        (a) and agrees to subject its data transfer process to a 
        quality assurance program specified by the Secretary.
    (c) Application to Hospitals of the Department of Veterans 
Affairs.--
            (1) In general.--The Secretary of Veterans Affairs shall 
        provide that each hospital of the Department of Veterans 
        Affairs shall comply with the requirements of subsection (a) in 
        the same manner as such requirements would apply to the 
        hospital if it were participating in the Medicare program.
            (2) Waiver.--The Secretary of Veterans Affairs may waive 
        the application of such requirements to a hospital in the same 
        manner as the Secretary of Health and Human Services may waive 
        under subsection (b) the application of the requirements of 
        subsection (a).

SEC. 413. ELECTRONIC TRANSMISSION TO FEDERAL AGENCIES.

    (a) In General.--Effective January 1, 2000, if a provider is 
required under a Federal program to transmit a data element that is 
subject to a presentation or transmission standard (as defined in 
subsection (b)), the head of the Federal agency responsible for such 
program (if not otherwise authorized) is authorized to require the 
provider to present and transmit the data element electronically in 
accordance with such a standard.
    (b) Presentation or Transmission Standard Defined.--In subsection 
(a), the term ``presentation or transmission standard'' means a 
standard, promulgated under subsection (b) or (c) of section 411, 
described in paragraph (4) or (5) of section 411(b).

SEC. 414. LIMITATION ON DATA REQUIREMENTS WHERE STANDARDS IN EFFECT.

    (a) In General.--If standards with respect to data elements are 
promulgated under section 411 with respect to a class of provider, a 
health insurance plan may not require, for the purpose of utilization 
review or as a condition of providing benefits under the plan, that a 
provider in the class--
            (1) provide any data element not in the set of 
        comprehensive data elements specified under such standards, or
            (2) transmit or present any such data element in a manner 
        inconsistent with the applicable standards for such 
        transmission or presentation.
    (b) Compliance.--
            (1) In general.--The Secretary may impose a civil money 
        penalty on any health insurance plan (other than a health 
        insurance plan described in paragraph (2)) that fails to comply 
        with subsection (a) in an amount not to exceed $100 for each 
        such failure. The provisions of section 1128A of the Social 
        Security Act (other than the first sentence of subsection (a) 
        and other than subsection (b)) shall apply to a civil money 
        penalty under this paragraph in the same manner as such 
        provisions apply to a penalty or proceeding under section 
        1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health insurance plan that is 
        subject to regulation by a State, if the Secretary finds that--
                    (A) the State provides for application of the 
                requirement of subsection (a), and
                    (B) the State regulatory program provides for the 
                appropriate and effective enforcement of such 
                requirement with respect to such plans.

SEC. 415. ADVISORY COMMISSION.

    (a) In General.--The Secretary shall establish an advisory 
commission including hospital executives, hospital data base managers, 
physicians, health services researchers, and technical experts in 
collection and use of data and operation of data systems. Such 
commission shall include, as ex officio members, a representative of 
the Director of the National Institutes of Health, the Administrator 
for Health Care Policy and Research, the Secretary of Veterans Affairs, 
and the Director of the Centers for Disease Control.
    (b) Functions.--The advisory commission shall monitor and advise 
the Secretary concerning--
            (1) the standards established under this subtitle, and
            (2) operational concerns about the implementation of such 
        standards under this subtitle.
    (c) Staff.--From the amounts appropriated under subsection (d), the 
Secretary shall provide sufficient staff to assist the advisory 
commission in its activities under this section.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated $2,000,000 for each of fiscal years 1995 through 2000 to 
carry out this section.

     Subtitle C--Development and Distribution of Comparative Value 
                              Information

SEC. 421. STATE COMPARATIVE VALUE INFORMATION PROGRAMS FOR HEALTH CARE 
              PURCHASING.

    (a) Purpose.--In order to assure the availability of comparative 
value information to purchasers of health care in each State, the 
Secretary shall determine whether each State is developing and 
implementing a health care value information program that meets the 
criteria and schedule set forth in subsection (b).
    (b) Criteria and Schedule for State Programs.--The criteria and 
schedule for a State health care value information program in this 
subsection shall be specified by the Secretary as follows:
            (1) The State begins promptly after enactment of this Act 
        to develop (directly or through contractual or other 
        arrangements with 1 or more States, coalitions of health 
        insurance purchasers, other entities, or any combination of 
        such arrangements) information systems regarding comparative 
        health values.
            (2) The information contained in such systems covers at 
        least the average prices of common health care services (as 
        defined in subsection (d)) and health insurance plans, and, 
        where available, measures of the variability of these prices 
        within a State or other market areas.
            (3) The information described in paragraph (2) is made 
        available within the State beginning not later than 1 year 
        after the date of the enactment of this Act, and is revised as 
        frequently as reasonably necessary, but at intervals of no 
        greater than 1 year.
            (4) Not later than 6 years after the date of the enactment 
        of this Act the State has developed information systems that 
        provide comparative costs, quality, and outcomes data with 
        respect to health insurance plans and hospitals and made the 
        information broadly available within the relevant market areas.
Nothing in this section shall preclude a State from providing 
additional information, such as information on prices and benefits of 
different health insurance plans, available.
    (c) Grants to States for the Development of State Programs.--
            (1) Grant authority.--The Secretary may make grants to each 
        State to enable such State to plan the development of its 
        health care value information program and, if necessary, to 
        initiate the implementation of such program. Each State seeking 
        such a grant shall submit an application therefor, containing 
        such information as the Secretary finds necessary to assure 
        that the State is likely to develop and implement a program in 
        accordance with the criteria and schedule in subsection (b).
            (2) Offset authority.--If, at any time within the 3-year 
        period following the receipt by a State of a grant under this 
        subsection, the Secretary is required by section 422 to 
        implement a health care information program in the State, the 
        Secretary may recover the amount of the grant under this 
        subsection by offset against any other amount payable to the 
        State under the Social Security Act. The amount of the offset 
        shall be made available (from the appropriation account with 
        respect to which the offset was taken) to the Secretary to 
        carry out such section.
            (3) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as are necessary to make grants 
        under this subsection, to remain available until expended.
    (d) Common Health Care Services Defined.--In this section, the term 
``common health care services'' includes such procedures as the 
Secretary may specify and any additional health care services which a 
State may wish to include in its comparative value information program.
    (e) State Defined.--In this title, the term ``State'' includes the 
District of Columbia, Puerto Rico, the Virgin Islands, Guam, and 
American Samoa.

SEC. 422. FEDERAL IMPLEMENTATION.

    (a) In General.--If the Secretary finds, at any time, that a State 
has failed to develop or to continue to implement a health care value 
information program in accordance with the criteria and schedule in 
section 421(b), the Secretary shall take the actions necessary, 
directly or through grants or contract, to implement a comparable 
program in the State.
    (b) Fees.--Fees may be charged by the Secretary for the information 
materials provided pursuant to a program under this section. Any 
amounts so collected shall be deposited in the appropriation account 
from which the Secretary's costs of providing such materials were met, 
and shall remain available for such purposes until expended.

SEC. 423. COMPARATIVE VALUE INFORMATION CONCERNING FEDERAL PROGRAMS.

    (a) Development.--The head of each Federal agency with 
responsibility for the provision of health insurance or of health care 
services to individuals shall promptly develop health care value 
information relating to each program that such head administers and 
covering the same types of data that a State program meeting the 
criteria of section 421(b) would provide.
    (b) Dissemination of Information.--Such information shall be made 
generally available to States and to providers and consumers of health 
care services.

             Subtitle D--Preemption of State Quill Pen Laws

SEC. 431. PREEMPTION OF STATE QUILL PEN LAWS.

    (a) In General.--Effective January 1, 1996, no effect shall be 
given to any provision of State law that requires medical or health 
insurance records (including billing information) to be maintained in 
written, rather than electronic form.
    (b) Secretarial Authority.--The Secretary may issue regulations to 
carry out subsection (a). Such regulations may provide for such 
exceptions to subsection (a) as the Secretary determines to be 
necessary to prevent fraud and abuse, with respect to controlled 
substances, and in such other cases as the Secretary deems appropriate.

                          TITLE V--ANTI-FRAUD

         Subtitle A--Criminal Prosecution of Health Care Fraud

SEC. 501. PENALTIES FOR HEALTH CARE FRAUD.

    (a) In General.--Chapter 63 of title 18, United States Code, is 
amended by adding at the end the following:
``Sec. 1347. Health care fraud
    ``(a) Offense.--Whoever, being a health care provider, knowingly 
engages in any scheme or artifice to defraud any person in connection 
with the provision of health care shall be fined under this title or 
imprisoned not more than 5 years, or both.
    ``(b) Definition.--In this section, the term `health care provider' 
means--
            ``(1) a physician, nurse, dentist, therapist, pharmacist, 
        or other professional provider of health care; and
            ``(2) a hospital, health maintenance organization, 
        pharmacy, laboratory, clinic, or other health care facility or 
        a provider of medical services, medical devices, medical 
        equipment, or other medical supplies.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 63 of title 18, United States Code, is amended by adding at the 
end the following new item:

``1347. Health care fraud.''.

SEC. 502. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
              CONVICTION.

    Section 3059 of title 18, United States Code, is amended by adding 
at the end the following new subsection:
    ``(c)(1) In special circumstances and in the Attorney General's 
sole discretion, the Attorney General may make a payment of up to 
$10,000 to a person who furnishes information unknown to the Government 
relating to a possible prosecution under section 1101.
    ``(2) A person is not eligible for a payment under paragraph (1) 
if--
            ``(A) the person is a current or former officer or employee 
        of a Federal or State government agency or instrumentality who 
        furnishes information discovered or gathered in the course of 
        government employment;
            ``(B) the person knowingly participated in the offense;
            ``(C) the information furnished by the person consists of 
        allegations or transactions that have been disclosed to the 
        public--
                    ``(i) in a criminal, civil, or administrative 
                proceeding;
                    ``(ii) in a congressional, administrative or 
                General Accounting Office report, hearing, audit, or 
                investigation; or
                    ``(iii) by the news media, unless the person is the 
                original source of the information; or
            ``(D) when, in the judgment of the Attorney General, it 
        appears that a person whose illegal activities are being 
        prosecuted or investigated could benefit from the award.
    ``(3) For the purposes of paragraph (2)(C)(iii), the term `original 
source' means a person who has direct and independent knowledge of the 
information that is furnished and has voluntarily provided the 
information to the Government prior to disclosure by the news media.
    ``(4) Neither the failure of the Attorney General to authorize a 
payment under paragraph (1) nor the amount authorized shall be subject 
to judicial review.''.

Subtitle B--Coordination of Health Care Anti-Fraud and Abuse Activities

SEC. 511. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD AND ABUSE SANCTIONS 
              TO ALL FRAUD AND ABUSE AGAINST ANY HEALTH INSURANCE PLAN.

    (a) Civil Monetary Penalties.--Section 1128A of the Social Security 
Act (42 U.S.C. 1320a-7a) is amended as follows:
            (1) In subsection (a)(1), in the matter before subparagraph 
        (A), by inserting ``or of any health insurance plan,'' after 
        ``subsection (i)(1)),''.
            (2) In subsection (b)(1)(A), by inserting ``or under a 
        health insurance plan'' after ``title XIX''.
            (3) In subsection (f)--
                    (A) by redesignating paragraph (3) as paragraph 
                (4); and
                    (B) by inserting after paragraph (2) the following 
                new paragraph:
            ``(3) With respect to amounts recovered arising out of a 
        claim under a health insurance plan, the portion of such 
        amounts as is determined to have been paid by the plan shall be 
        repaid to the plan.''.
            (4) In subsection (i)--
                    (A) in paragraph (2), by inserting ``or under a 
                health insurance plan'' before the period at the end, 
                and
                    (B) in paragraph (5), by inserting ``or under a 
                health insurance plan'' after ``or XX''.
    (b) Crimes.--
            (1) Social security act.--Section 1128B of such Act (42 
        U.S.C. 1320a-7b) is amended as follows:
                    (A) In the heading, by adding at the end the 
                following: ``or health insurance plans''.
                    (B) In subsection (a)(1)--
                            (i) by striking ``title XVIII or'' and 
                        inserting ``title XVIII,'', and
                            (ii) by adding at the end the following: 
                        ``or a health insurance plan (as defined in 
                        section 1128(i)),''.
                    (C) In subsection (a)(5), by striking ``title XVIII 
                or a State health care program'' and inserting ``title 
                XVIII, a State health care program, or a health 
                insurance plan''.
                    (D) In the second sentence of subsection (a)--
                            (i) by inserting after ``title XIX'' the 
                        following: ``or a health insurance plan'', and
                            (ii) by inserting after ``the State'' the 
                        following: ``or the plan''.
                    (E) In subsection (b)(1), by striking ``title XVIII 
                or a State health care program'' each place it appears 
                and inserting ``title XVIII, a State health care 
                program, or a health insurance plan''.
                    (F) In subsection (b)(2), by striking ``title XVIII 
                or a State health care program'' each place it appears 
                and inserting ``title XVIII, a State health care 
                program, or a health insurance plan''.
                    (G) In subsection (b)(3), by striking ``title XVIII 
                or a State health care program'' each place it appears 
                in subparagraphs (A) and (C) and inserting ``title 
                XVIII, a State health care program, or a health 
                insurance plan''.
                    (H) In subsection (d)(2)--
                            (i) by striking ``title XIX,'' and 
                        inserting ``title XIX or under a health 
                        insurance plan,'', and
                            (ii) by striking ``State plan,'' and 
                        inserting ``State plan or the health insurance 
                        plan,''.
            (2) Treble damages for criminal sanctions.--Section 1128B 
        of such Act (42 U.S.C. 1320a-7b) is amended by adding at the 
        end the following new subsection:
    ``(f) In addition to the fines that may be imposed under subsection 
(a), (b), or (c), any individual found to have violated the provisions 
of any of such subsections may be subject to treble damages.''.
            (3) Identification of community service opportunities.--
        Section 1128B of such Act (42 U.S.C. 1320a-7b) is further 
        amended by adding at the end the following new subsection:
    ``(g) The Secretary shall--
            ``(1) in consultation with State and local health care 
        officials, identify opportunities for the satisfaction of 
        community service obligations that a court may impose upon the 
        conviction of an offense under this section, and
            ``(2) make information concerning such opportunities 
        available to Federal and State law enforcement officers and 
        State and local health care officials.''.
    (c) Health Insurance Plan Defined.--Section 1128 of such Act (42 
U.S.C. 1320a-7) is amended by redesignating subsection (i) as 
subsection (j) and by inserting after subsection (h) the following new 
subsection:
    ``(i) Health Insurance Plan Defined.--For purposes of sections 
1128A and 1128B, the term `health insurance plan' means a health 
insurance program other than the medicare program, the medicaid 
program, or a State health care program.''.
    (d) Conforming Amendment.--Section 1128(b)(8)(B)(ii) of such Act 
(42 U.S.C. 1320a-7(b)(8)(B)(ii)) is amended by striking ``1128A'' and 
inserting ``1128A (other than a penalty arising from a health insurance 
plan, as defined in subsection (i))''.
    (e) Effective Date.--The amendments made by this section shall take 
effect January 1, 1995.

                     TITLE VI--ANTITRUST PROVISIONS

SEC. 601. EXEMPTION FROM ANTITRUST LAWS FOR CERTAIN COMPETITIVE AND 
              COLLABORATIVE ACTIVITIES.

    (a) Exemption Described.--An activity relating to the provision of 
health care services shall be exempt from the antitrust laws if--
            (1) the activity is within one of the categories of safe 
        harbors described in section 602;
            (2) the activity is within an additional safe harbor 
        designated by the Attorney General under section 603; or
            (3) the activity is specified in and in compliance with the 
        terms of a certificate of review issued by the Attorney General 
        under section 604 and the activity occurs--
                    (A) while the certificate is in effect, or
                    (B) in the case of a certificate issued during the 
                2-year period beginning on the date of the enactment of 
                this Act, at any time on or after the first day of the 
                2-year period that ends on the date the certificate 
                takes effect.
    (b) Award of Attorney's Fees and Costs of Suit.--
            (1) In general.--If any person brings an action alleging a 
        claim under the antitrust laws and the activity on which the 
        claim is based is found by the court to be exempt from such 
        laws under subsection (a), the court shall, at the conclusion 
        of the action--
                    (A) award to a substantially prevailing claimant 
                the cost of suit attributable to such claim, including 
                a reasonable attorney's fee, or
                    (B) award to a substantially prevailing party 
                defending against such claim the cost of such suit 
                attributable to such claim, including reasonable 
                attorney's fee, if the claim, or the claimant's conduct 
                during litigation of the claim, was frivolous, 
                unreasonable, without foundation, or in bad faith.
            (2) Offset in cases of bad faith.--The court may reduce an 
        award made pursuant to paragraph (1) in whole or in part by an 
        award in favor of another party for any part of the cost of 
        suit (including a reasonable attorney's fee) attributable to 
        conduct during the litigation by any prevailing party that the 
        court finds to be frivolous, unreasonable, without foundation, 
        or in bad faith.

SEC. 602. SAFE HARBORS.

    The following activities are safe harbors for purposes of section 
601(a)(1):
            (1) Combinations with market share below threshold.--
        Activities relating to health care services of any combination 
        of health care providers if the number of each type or 
        specialty of provider in question does not exceed 20 percent of 
        the total number of such type or specialty of provider in the 
        relevant market area.
            (2) Activities of medical self-regulatory entities.--
                    (A) In general.--Subject to subparagraph (B), any 
                activity of a medical self-regulatory entity relating 
                to standard setting or standard enforcement activities 
                that are designed to promote the quality of health care 
                provided to patients.
                    (B) Exception.--No activity of a medical self-
                regulatory entity may be deemed to fall under the safe 
                harbor established under this paragraph if the activity 
                is conducted for purposes of financial gain.
            (3) Participation in surveys.--The participation of a 
        provider of health care services in a written survey of the 
        prices of services, reimbursement levels, or the compensation 
        and benefits of employees and personnel, but only if--
                    (A) the survey is conducted by a third party, such 
                as a purchaser of health care services, governmental 
                entity, institution of higher education, or trade 
                association;
                    (B) the information provided by participants in the 
                survey is based on prices charged, reimbursements 
                received, or compensation and benefits paid prior to 
                the third month preceding the month in which the 
                information is provided; and
                    (C) if the results of the survey are disseminated, 
                the results are aggregated in a manner that ensures 
                that no recipient of the results may identify the 
                prices charged, reimbursement received, or compensation 
                and benefits paid by any particular provider.
            (4) Joint ventures for high technology and costly equipment 
        and services.--Any activity of a health care cooperative 
        venture relating to the purchase, operation, or marketing of 
        high technology or other expensive medical equipment, or the 
        provision of high cost or complex services, but only if the 
        number of participants in the venture does not exceed the 
        lowest number needed to support the venture. Other providers 
        may be included in the venture, but only if such other 
        providers could not purchase, operate, or market such equipment 
        or provide a competing service either alone or through the 
        formation of a competing venture.
            (5) Hospital mergers.--Activities relating to a merger of 2 
        hospitals if, during the 3-year period preceding the merger, 
        one of the hospitals had an average of 150 or fewer operational 
        beds and an average daily inpatient census of less than 50 
        percent of such beds.
            (6) Joint purchasing arrangements.--Any joint purchasing 
        arrangement among health care providers if--
                    (A) the purchases under the arrangement represent 
                less than 35 percent of the total sales of the product 
                or service purchased in the relevant market; and
                    (B) the cost of the products and services purchased 
                jointly accounts for less than 20 percent of the total 
                revenues from all products or services sold by each 
                participant in the joint purchasing arrangement.
            (7) Negotiations.--Activities consisting of good faith 
        negotiations to carry out any activity--
                    (A) described in this section,
                    (B) within an additional safe harbor designated by 
                the Attorney General under section 603,
                    (C) that is the subject of an application for a 
                certificate of review under section 604, or
                    (D) that is deemed a submission of a notification 
                under section 605(a)(2)(B),
        without regard to whether such an activity is carried out.

SEC. 603. DESIGNATION OF ADDITIONAL SAFE HARBORS.

    (a) In General.--
            (1) Solicitation of proposals.--Not later than 30 days 
        after the date of the enactment of this Act, the Attorney 
        General shall publish a notice in the Federal Register 
        soliciting proposals for additional safe harbors.
            (2) Review and report on proposed safe harbors.--Not later 
        than 180 days after the date of the enactment of this Act, the 
        Attorney General (in consultation with the Secretary and the 
        Chair) shall--
                    (A) review the proposed safe harbors submitted 
                under paragraph (1); and
                    (B) submit a report to Congress describing the 
                proposals to be included in the publication of 
                additional safe harbors described in paragraph (3) and 
                the proposals that are not to be so included, together 
                with explanations therefore.
            (3) Publication of additional safe harbors.--Not later than 
        180 days after the date of the enactment of this Act, the 
        Attorney General (in consultation with the Secretary and the 
        Chair) shall publish in the Federal Register proposed 
        additional safe harbors for purposes of section 601(a)(2) for 
        providers of health care services. Not later than 180 days 
        after publishing such proposed safe harbors in the Federal 
        Register, the Attorney General shall issue final rules 
        establishing such safe harbors.
    (b) Criteria for Safe Harbors.--In establishing safe harbors under 
subsection (a), the Attorney General shall take into account the 
following:
            (1) The extent to which a competitive or collaborative 
        activity will accomplish any of the following:
                    (A) An increase in access to health care services.
                    (B) The enhancement of the quality of health care 
                services.
                    (C) The establishment of cost efficiencies that 
                will be passed on to consumers, including economies of 
                scale and reduced transaction and administrative costs.
                    (D) An increase in the ability of health care 
                facilities to provide services in medically underserved 
                areas or to medically underserved populations.
                    (E) An improvement in the utilization of health 
                care resources or the reduction in the inefficient 
                duplication of the use of such resources.
            (2) Whether the designation of an activity as a safe harbor 
        under subsection (a) will result in the following outcomes:
                    (A) Health plans and other health care insurers, 
                consumers of health care services, and health care 
                providers will be better able to negotiate payment and 
                service arrangements which will reduce costs to 
                consumers.
                    (B) Taking into consideration the characteristics 
                of the particular purchasers and providers involved, 
                competition will not be unduly restricted.
                    (C) Equally efficient and less restrictive 
                alternatives do not exist to meet the criteria 
                described in paragraph (1).
                    (D) The activity will not unreasonably foreclose 
                competition by denying competitors a necessary element 
                of competition.

SEC. 604. CERTIFICATES OF REVIEW.

    (a) Establishment of Program.--In consultation with the Secretary 
and the Chair, the Attorney General shall (not later than 180 days 
after the date of the enactment of this Act) issue certificates of 
review in accordance with this section for providers of health care 
services and advise and assist any person with respect to applying for 
such a certificate of review.
    (b) Procedures for Application for Certificate.--
            (1) Form; content.--To apply for a certificate of review, a 
        person shall submit to the Attorney General a written 
        application which--
                    (A) specifies the activities relating to the 
                provision of health care services which satisfy the 
                criteria described in section 603(b) and which will be 
                included in the certificate; and
                    (B) is in a form and contains any information, 
                including information pertaining to the overall market 
                in which the applicant operates, required by rule or 
                regulation promulgated under section 607.
            (2) Publication of notice in federal register.--Within 10 
        days after an application submitted under paragraph (1) is 
        received by the Attorney General, the Attorney General shall 
        publish in the Federal Register a notice that announces that an 
        application for a certificate of review has been submitted, 
        identifies each person submitting the application, and 
        describes the conduct for which the application is submitted.
            (3) Establishment of procedures for issuance of 
        certificate.--In consultation with the Chair and the Secretary, 
        the Attorney General shall establish procedures to be used in 
        applying for and in determining whether to approve an 
        application for a certificate of review under this title. Under 
        such procedures the Attorney General shall approve an 
        application if the Attorney General determines that the 
        activities to be covered under the certificate will satisfy the 
        criteria described in section 603(b) for additional safe 
        harbors designated under such section and that the benefits of 
        the issuance of the certificate will outweigh any disadvantages 
        that may result from reduced competition.
            (4) Timing for decision on application.--
                    (A) In general.--Within 90 days after the Attorney 
                General receives an application for a certificate of 
                review, the Attorney General shall determine whether 
                the applicant's health care market activities are in 
                accordance with the procedures described in paragraph 
                (3). If the Attorney General, with the concurrence of 
                the Secretary, determines that such procedures are met, 
                the Attorney General shall issue to the applicant a 
                certificate of review. The certificate of review shall 
                specify--
                            (i) the health care market activities to 
                        which the certificate applies,
                            (ii) the person to whom the certificate of 
                        review is issued, and
                            (iii) any terms and conditions the Attorney 
                        General or the Secretary deems necessary to 
                        assure compliance with the applicable 
                        procedures described in paragraph (3).
                    (B) Applications deemed approved.--If the Attorney 
                General does not reject an application before the 
                expiration of the 90-period beginning on the date the 
                Attorney General receives the application, the Attorney 
                General shall be deemed to have approved the 
                application and to have issued a certificate of review 
                relating to the applicant's health care market 
                activities covered under the application.
            (5) Expedited action.--If the applicant indicates a special 
        need for prompt disposition, the Attorney General and the 
        Secretary may expedite action on the application, except that 
        no certificate of review may be issued within 30 days of 
        publication of notice in the Federal Register under subsection 
        (b)(2).
            (6) Actions upon denial.--
                    (A) Notification.--If the Attorney General denies 
                in whole or in part an application for a certificate, 
                the Attorney General shall notify the applicant of the 
                Attorney General's determination and the reasons for 
                it.
                    (B) Request for reconsideration.--An applicant may, 
                within 30 days of receipt of notification that the 
                application has been denied in whole or in part, 
                request the Attorney General to reconsider the 
                determination. The Attorney General, with the 
                concurrence of the Secretary, shall notify the 
                applicant of the determination upon reconsideration 
                within 30 days of receipt of the request.
                    (C) Return of documents.--If the Attorney General 
                denies an application for the issuance of a certificate 
                of review and thereafter receives from the applicant a 
                request for the return of documents submitted by the 
                applicant in connection with the application for the 
                certificate, the Attorney General and the Secretary 
                shall return to the applicant, not later than 30 days 
                after receipt of the request, the documents and all 
                copies of the documents available to the Attorney 
                General and the Secretary, except to the extent that 
                the information has been made public under an exception 
                to the rule against public disclosure described in 
                subsection (g)(2)(B).
            (7) Fraudulent procurement.--A certificate of review shall 
        be void ab initio with respect to any health care market 
        activities for which the certificate was procured by fraud.
    (c) Amendment and Revocation of Certificates.--
            (1) Notification of changes.--Any applicant who receives a 
        certificate of review--
                    (A) shall promptly report to the Attorney General 
                any change relevant to the matters specified in the 
                certificate; and
                    (B) may submit to the Attorney General an 
                application to amend the certificate to reflect the 
                effect of the change on the conduct specified in the 
                certificate.
            (2) Amendment to certificate.--An application for an 
        amendment to a certificate of review shall be treated as an 
        application for the issuance of a certificate. The effective 
        date of an amendment shall be the date on which the application 
        for the amendment is submitted to the Attorney General.
            (3) Revocation.--
                    (A) Grounds for revocation.--In accordance with 
                this paragraph, the Attorney General may revoke in 
                whole or in part a certificate of review issued under 
                this section. The following shall be considered grounds 
                for the revocation of a certificate:
                            (i) After the expiration of the 2-year 
                        period beginning on the date a person's 
                        certificate is issued, the activities of the 
                        person have not substantially accomplished the 
                        purposes for the issuance of the certificate.
                            (ii) The person has failed to comply with 
                        any of the terms or conditions imposed under 
                        the certificate by the Attorney General or the 
                        Secretary under subsection (b)(4).
                            (iii) The activities covered under the 
                        certificate no longer satisfy the criteria set 
                        forth in section 603(b).
                    (B) Request for compliance information.--If the 
                Attorney General or Secretary has reason to believe 
                that any of the grounds for revocation of a certificate 
                of review described in subparagraph (A) may apply to a 
                person holding the certificate, the Attorney General 
                shall request such information from such person as the 
                Attorney General or the Secretary deems necessary to 
                resolve the matter of compliance. Failure to comply 
                with such request shall be grounds for revocation of 
                the certificate under this paragraph.
                    (C) Procedures for revocation.--If the Attorney 
                General or the Secretary determines that any of the 
                grounds for revocation of a certificate of review 
                described in subparagraph (A) apply to a person holding 
                the certificate, or that such person has failed to 
                comply with a request made under subparagraph (B), the 
                Attorney General shall give written notice of the 
                determination to such person. The notice shall include 
                a statement of the circumstances underlying, and the 
                reasons in support of, the determination. In the 60-day 
                period beginning 30 days after the notice is given, the 
                Attorney General shall revoke the certificate or modify 
                it as the Attorney General or the Secretary deems 
                necessary to cause the certificate to apply only to 
                activities that meet the procedures for the issuance of 
                certificates described in subsection (b)(2).
                    (D) Investigation Authority.--For purposes of 
                carrying out this paragraph, the Attorney General may 
                conduct investigations in the same manner as the 
                Attorney General conducts investigations under section 
                3 of the Antitrust Civil Process Act, except that no 
                civil investigative demand may be issued to a person to 
                whom a certificate of review is issued if such person 
                is the target of such investigation.
    (d) Review of Determinations.--
            (1) Availability of review for certain actions.--If the 
        Attorney General denies, in whole or in part, an application 
        for a certificate of review or for an amendment to a 
        certificate, or revokes or modifies a certificate pursuant to 
        paragraph (3), the applicant or certificate holder (as the case 
        may be) may, within 30 days of the denial or revocation, bring 
        an action in any appropriate district court of the United 
        States to set aside the determination on the ground that such 
        determination is erroneous based on the preponderance of the 
        evidence.
            (2) No other review permitted.--Except as provided in 
        paragraph (1), no action by the Attorney General or the 
        Secretary pursuant to this title shall be subject to judicial 
        review.
            (3) Effect of rejected application.--If the Attorney 
        General denies, in whole or in part, an application for a 
        certificate of review or for an amendment to a certificate, or 
        revokes or amends a certificate, neither the negative 
        determination nor the statement of reasons therefore shall be 
        admissible in evidence, in any administrative or judicial 
        proceeding, concerning any claim under the antitrust laws.
    (e) Publication of Decisions.--The Attorney General shall publish a 
notice in the Federal Register on a timely basis of each decision made 
with respect to an application for a certificate of review under this 
section or the amendment or revocation of such a certificate, in a 
manner that protects the confidentiality of any proprietary information 
relating to the application.
    (f) Annual Reports.--Every person to whom a certificate of review 
is issued shall submit to the Attorney General an annual report, in 
such form and at such time as the Attorney General may require, that 
contains any necessary updates to the information required under 
subsection (b) and a description of the activities of the holder under 
the certificate during the preceding year.
    (g) Restrictions on Disclosure of Information.--
            (1) Waiver of disclosure requirements under administrative 
        procedure act.--Information submitted by any person in 
        connection with the issuance, amendment, or revocation of a 
        certificate of review shall be exempt from disclosure under 
        section 552 of title 5, United States Code.
            (2) Restrictions on disclosure of commercial or financial 
        information.--
                    (A) In general.--Except as provided in subparagraph 
                (B), no officer or employee of the United States shall 
                disclose commercial or financial information submitted 
                in connection with the issuance, amendment, or 
                revocation of a certificate of review if the 
                information is privileged or confidential and if 
                disclosure of the information would cause harm to the 
                person who submitted the information.
                    (B) Exceptions.--Subparagraph (A) shall not apply 
                with respect to information disclosed--
                            (i) upon a request made by the Congress or 
                        any committee of the Congress,
                            (ii) in a judicial or administrative 
                        proceeding, subject to appropriate protective 
                        orders,
                            (iii) with the consent of the person who 
                        submitted the information,
                            (iv) in the course of making a 
                        determination with respect to the issuance, 
                        amendment, or revocation of a certificate of 
                        review, if the Attorney General deems 
                        disclosure of the information to be necessary 
                        in connection with making the determination,
                            (v) in accordance with any requirement 
                        imposed by a statute of the United States, or
                            (vi) in accordance with any rule or 
                        regulation promulgated under subsection (i) 
                        permitting the disclosure of the information to 
                        an agency of the United States or of a State on 
                        the condition that the agency will disclose the 
                        information only under the circumstances 
                        specified in clauses (i) through (v).
            (3) Prohibition against use of information to support or 
        answer claims under antitrust laws.--Any information disclosed 
        in an application for a certificate of review under this 
        section shall only be admissible into evidence in a judicial or 
        administrative proceeding for the sole purpose of establishing 
        that a person is entitled to the protections provided by such a 
        certificate.

SEC. 605. NOTIFICATIONS PROVIDING REDUCTION IN CERTAIN PENALTIES UNDER 
              ANTITRUST LAW FOR HEALTH CARE COOPERATIVE VENTURES.

    (a) Notifications Described.--
            (1) Submission of notification by venture.--Any party to a 
        health care cooperative venture, acting on such venture's 
        behalf, may, not later than 90 days after entering into a 
        written agreement to form such venture or not later than 90 
        days after the date of the enactment of this Act, whichever is 
        later, file with the Attorney General a written notification 
        disclosing--
                    (A) the identities of the parties to such venture,
                    (B) the nature and objectives of such venture, and
                    (C) such additional information as the Attorney 
                General may require by regulation.
            (2) Activities deemed submission of notification.--The 
        following health care cooperative ventures shall be deemed to 
        have filed a written notification with respect to the venture 
        under paragraph (1):
                    (A) Submission of application for certificate of 
                review.--Any health care cooperative venture for which 
                an application for a certificate of review is filed 
                with the Attorney General under section 603.
                    (B) Certain ventures.--Any health care cooperative 
                venture meeting the following requirements:
                            (i) The venture consists of a network of 
                        non-institutional providers not greater than--
                                    (I) in the case of a nonexclusive 
                                network in which the participating 
                                members are permitted to create or join 
                                other competing networks, 50 percent of 
                                the providers of health care services 
                                in the relevant geographic area and 50 
                                percent of the members of the provider 
                                specialty group in the relevant market; 
                                or
                                    (II) in the case of an exclusive 
                                network in which the participating 
                                members are not permitted to create or 
                                join other competing networks, 35 
                                percent of the providers of health care 
                                services in the relevant geographic 
                                area and 35 percent of the members of 
                                the provider specialty group in the 
                                relevant market.
                            (ii) Each member of the venture assumes 
                        substantial financial risk for the operation of 
                        the venture through risk-sharing arrangements, 
                        including (but not limited to)--
                                    (I) the acceptance of capitation 
                                contracts;
                                    (II) the acceptance of contracts 
                                with fee withholding mechanisms 
                                relating to the ability to meet 
                                established goals for utilization 
                                review and management; and
                                    (III) the holding by members of 
                                significant ownership or equity 
                                interests in the venture, where the 
                                capital contributed by the members is 
                                used to fund the operational costs of 
                                the venture such as administration, 
                                marketing, and computer-operated 
                                medical information, if the venture 
                                develops and operates comprehensive 
                                programs for utilization management and 
                                quality assurance that include controls 
                                over the use of institutional, 
                                specialized, and ancillary medical 
                                services.
            (3) Submission of additional information.--
                    (A) Request of attorney general.--At any time after 
                receiving a notification filed under paragraph (1), the 
                Attorney General may require the submission of 
                additional information or documentary material relevant 
                to the proposed health care cooperative venture.
                    (B) Parties to venture.--Any party to a health care 
                cooperative venture may submit such additional 
                information on the venture's behalf as may be 
                appropriate to ensure that the venture will receive the 
                protections provided under subsection (b).
                    (C) Required submission of information on changes 
                to venture.--A health care cooperative venture for 
                which a notification is in effect under this section 
                shall submit information on any change in the 
                membership of the venture not later than 90 days after 
                such change occurs.
            (4) Publication of notification.--
                    (A) Information made publicly available.--Not later 
                than 30 days after receiving a notification with 
                respect to a venture under paragraph (1), the Attorney 
                General shall publish in the Federal Register a notice 
                with respect to the venture that identifies the parties 
                to the venture and generally describes the purpose and 
                planned activity of the venture. Prior to its 
                publication, the contents of the notice shall be made 
                available to the parties to the venture.
                    (B) Restriction on disclosure of other 
                information.--All information and documentary material 
                submitted pursuant to this section and all information 
                obtained by the Attorney General in the course of any 
                investigation or case with respect to a potential 
                violation of the antitrust laws by the health care 
                cooperative venture (other than information and 
                material described in subparagraph (A)) shall be exempt 
                from disclosure under section 552 of title 5, United 
                States Code, and shall not be made publicly available 
                by any agency of the United States to which such 
                section applies except in a judicial proceeding in 
                which such information and material is subject to any 
                protective order.
            (5) Withdrawal of notification.--Any person who files a 
        notification pursuant to this section may withdraw such 
        notification before a publication by the Attorney General 
        pursuant to paragraph (4). Any person who is deemed to have 
        filed a notification under paragraph (2)(A) shall be deemed to 
        have withdrawn the notification if the certificate of review in 
        question is revoked or withdrawn under section 604.
            (6) No judicial review permitted.--Any action taken or not 
        taken by the Attorney General with respect to notifications 
        filed pursuant to this subsection shall not be subject to 
        judicial review.
    (b) Protections for Ventures Subject to Notification.--
            (1) In general.--
                    (A) Protections described.--The provisions of 
                paragraphs (2), (3), (4), and (5) shall apply with 
                respect to any action under the antitrust laws 
                challenging conduct within the scope of a notification 
                which is in effect pursuant to subsection (a)(1).
                    (B) Timing of protections.--The protections 
                described in this subsection shall apply to the venture 
                that is the subject of a notification under subsection 
                (a)(1) as of the earlier of--
                            (i) the date of the publication in the 
                        Federal Register of the notice published with 
                        respect to the notification; or
                            (ii) if such notice is not published during 
                        the period required under subsection (a)(4), 
                        the expiration of the 30-day period that begins 
                        on the date the Attorney General receives any 
                        necessary information required to be submitted 
                        under subsection (a)(1) or any additional 
                        information required by the Attorney General 
                        under subsection (a)(3)(A).
            (2) Applicability of rule of reason standard.--In any 
        action under the antitrust laws, the conduct of any person 
        which is within the scope of a notification filed under 
        subsection (a) shall not be deemed illegal per se, but shall be 
        judged on the basis of its reasonableness, taking into account 
        all relevant factors affecting competition, including, but not 
        limited to, effects on competition in relevant markets.
            (3) Limitation on recovery to actual damages and 
        interest.--Notwithstanding section 4 of the Clayton Act, any 
        person who is entitled to recovery under the antitrust laws for 
        conduct that is within the scope of a notification filed under 
        subsection (a) shall recover the actual damages sustained by 
        such person and interest calculated at the rate specified in 
        section 1961 of title 28, United States Code, for the period 
        beginning on the earliest date for which injury can be 
        established and ending on the date of judgment, unless the 
        court finds that the award of all or part of such interest is 
        unjust under the circumstances.
            (4) Award of attorney's fees and costs of suit.--
                    (A) In general.--In any action under the antitrust 
                laws brought against a health care cooperative venture 
                for conduct that is within the scope of a notification 
                filed under subsection (a), the court shall, at the 
                conclusion of the action--
                            (i) award to a substantially prevailing 
                        claimant the cost of suit attributable to such 
                        claim, including a reasonable attorney's fee, 
                        or
                            (ii) award to a substantially prevailing 
                        party defending against such claim the cost of 
                        such suit attributable to such claim, including 
                        reasonable attorney's fee, if the claim, or the 
                        claimant's conduct during litigation of the 
                        claim, was frivolous, unreasonable, without 
                        foundation, or in bad faith.
                    (B) Offset in cases of bad faith.--The court may 
                reduce an award made pursuant to subparagraph (A) in 
                whole or in part by an award in favor of another party 
                for any part of the cost of suit (including a 
                reasonable attorney's fee) attributable to conduct 
                during the litigation by any prevailing party that the 
                court finds to be frivolous, unreasonable, without 
                foundation, or in bad faith.
            (5) Restrictions on admissibility of information.--
                    (A) In general.--Any information disclosed in a 
                notification submitted under subsection (a)(1) and the 
                fact of the publication of a notification by the 
                Attorney General under subsection (a)(4) shall only be 
                admissible into evidence in a judicial or 
                administrative proceeding for the sole purpose of 
                establishing that a party to a health care cooperative 
                venture is entitled to the protections described in 
                this subsection.
                    (B) Actions of attorney general.--No action taken 
                by the Attorney General pursuant to this section shall 
                be admissible into evidence in any judicial or 
                administrative proceeding for the purpose of supporting 
                or answering any claim under the antitrust laws.

SEC. 606. REVIEW AND REPORTS ON SAFE HARBORS AND CERTIFICATES OF 
              REVIEW.

    (a) In General.--The Attorney General (in consultation with the 
Secretary and the Chair) shall periodically review the safe harbors 
described in section 602, the additional safe harbors designated under 
section 603, and the certificates of review issued under section 604, 
and--
            (1) with respect to the safe harbors described in section 
        602, submit such recommendations to Congress as the Attorney 
        General considers appropriate for modifications of such safe 
        harbors;
            (2) with respect to the additional safe harbors under 
        designated under section 603, issue proposed revisions to such 
        activities and publish the revisions in the Federal Register; 
        and
            (3) with respect to the certificates of review, submit a 
        report to Congress on the issuance of such certificates, and 
        shall include in the report a description of the effect of such 
        certificates on increasing access to high quality health care 
        services at reduced costs.
    (b) Recommendations for Legislation.--The Attorney General shall 
include in the reports submitted under subsection (a)(3) any 
recommendations of the Attorney General for legislation to improve the 
program for the issuance of certificates of review established under 
this title.

SEC. 607. RULES, REGULATIONS, AND GUIDELINES.

    (a) Safe Harbors, Certificates, and Notifications.--The Attorney 
General, with the concurrence of the Secretary, shall promulgate such 
rules, regulations, and guidelines as are necessary to carry out 
sections 602, 603, 604, and 605, including guidelines defining or 
relating to relevant geographic and product markets for health care 
services and providers of health care services.
    (b) Guidance for Providers.--
            (1) In general.--To promote greater certainty regarding the 
        application of the antitrust laws to activities in the health 
        care market, the Attorney General, in consultation with the 
        Secretary and the Chair, shall (not later than 1 year after the 
        date of the enactment of this Act), taking into account the 
        criteria used to designate additional safe harbors under 
        section 603 and grant certificates of review under section 604, 
        publish guidelines--
                    (A) to assist providers of health care services in 
                analyzing whether the activities of such providers may 
                be subject to a safe harbor under sections 602 or 603; 
                and
                    (B) describing specific types of activities which 
                would meet the requirements for a certificate of review 
                under section 604, and summarizing the factual and 
                legal bases on which the activities would meet the 
                requirements.
            (2) Periodic update.--The Attorney General shall 
        periodically update the guidelines published under paragraph 
        (1) as the Attorney General considers appropriate.
            (3) Waiver of administrative procedure act.--Section 553 of 
        title 5, United States Code, shall not apply to the issuance of 
        guidelines under paragraph (1).

SEC. 608. DEFINITIONS.

    In this title, the following definitions shall apply:
            (1) The term ``antitrust laws''--
                    (A) has the meaning given it in subsection (a) of 
                the first section of the Clayton Act (15 U.S.C. 12(a)), 
                except that such term includes section 5 of the Federal 
                Trade Commission Act (15 U.S.C. 45) to the extent such 
                section applies to unfair methods of competition; and
                    (B) includes any State law similar to the laws 
                referred to in subparagraph (A).
            (2) The term ``Chair'' means the Chair of the Federal Trade 
        Commission.
            (3) The term ``health insurance plan'' has the meaning 
        given such term in section 111(b).
            (4) The term ``health care cooperative venture'' means any 
        activities, including attempts to enter into or perform a 
        contract or agreement, carried out by 2 or more persons for the 
        purpose of providing health care services.
            (5) The term ``health care services'' means any services 
        for which payment may be made under a health insurance plan, 
        including services related to the delivery or administration of 
        such services.
            (6) The term ``medical self-regulatory entity'' means a 
        medical society or association, a specialty board, a recognized 
        accrediting agency, or a hospital medical staff, and includes 
        the members, officers, employees, consultants, and volunteers 
        or committees of such an entity.
            (7) The term ``person'' includes a State or unit of local 
        government.
            (8) The term ``provider of health care services'' means any 
        individual or entity that is engaged in the delivery of health 
        care services in a State and that is required by State law or 
        regulation to be licensed or certified by the State to engage 
        in the delivery of such services in the State.
            (9) The term ``specialty group'' means a medical specialty 
        or subspecialty in which a provider of health care services may 
        be licensed to practice by a State (as determined by the 
        Secretary in consultation with the certification boards for 
        such specialties and subspecialties).
            (10) The term ``standard setting and enforcement 
        activities'' means--
                    (A) accreditation of health care practitioners, 
                health care providers, medical education institutions, 
                or medical education programs,
                    (B) technology assessment and risk management 
                activities,
                    (C) the development and implementation of practice 
                guidelines or practice parameters, or
                    (D) official peer review proceedings undertaken by 
                a hospital medical staff (or committee thereof) or a 
                medical society or association for purposes of 
                evaluating the professional conduct or quality of 
                health care provided by a medical professional.

                       TITLE VII--LONG-TERM CARE

SEC. 701. EXCLUSION FROM GROSS INCOME FOR AMOUNTS WITHDRAWN FROM 
              INDIVIDUAL RETIREMENT PLANS OR 401(k) PLANS FOR LONG-TERM 
              CARE INSURANCE.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by redesignating section 137 as section 
138 and by inserting after section 136 the following new section:

``SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS AND 
              SECTION 401(k) PLANS FOR LONG-TERM CARE INSURANCE.

    ``(a) General Rule.--The amount includible in the gross income of 
an individual for the taxable year by reason of qualified distributions 
during such taxable year shall not exceed the excess of--
            ``(1) the amount which would (but for this section) be so 
        includible by reason of such distributions, over
            ``(2) the aggregate premiums paid by such individual during 
        such taxable year for any long-term care insurance contract for 
        the benefit of such individual or the spouse of such 
        individual.
    ``(b) Qualified Distribution.--For purposes of this section, the 
term `qualified distribution' means any distribution to an individual 
from an individual retirement account or a section 401(k) plan if such 
individual has attained age 59\1/2\ on or before the date of the 
distribution (and, in the case of a distribution used to pay premiums 
for the benefit of the spouse of such individual, such spouse has 
attained age 59\1/2\ on or before the date of the distribution).
    ``(c) Definitions and Special Rules Relating to Long-Term Insurance 
Contracts.--
            ``(1) Long-term care insurance contract.--
                    ``(A) In general.--For purposes of this section, 
                the term `long-term care insurance contract' means any 
                insurance contract issued if--
                            ``(i) the only insurance protection 
                        provided under such contract is coverage of 
                        qualified long-term care services and benefits 
                        incidental to such coverage,
                            ``(ii) the maximum benefit under the policy 
                        for expenses incurred for any day does not 
                        exceed $200,
                            ``(iii) such contract does not cover 
                        expenses incurred for services or items to the 
                        extent that such expenses are reimbursable 
                        under title XVIII of the Social Security Act or 
                        would be so reimbursable but for the 
                        application of a deductible or coinsurance 
                        amount,
                            ``(iv) such contract is guaranteed 
                        renewable,
                            ``(v) such contract does not have any cash 
                        surrender value, and
                            ``(vi) all refunds of premiums, and all 
                        policyholder dividends or similar amounts, 
                        under such contract are to be applied as a 
                        reduction in future premiums or to increase 
                        future benefits.
                    ``(B) Special rules.--
                            ``(i) Per diem, etc. payments permitted.--A 
                        contract shall not fail to be treated as 
                        described in subparagraph (A)(i) by reason of 
                        payments being made on a per diem or other 
                        periodic basis without regard to the expenses 
                        incurred during the period to which the 
                        payments relate.
                            ``(ii) Contract may cover medicare 
                        reimbursable expenses where medicare is 
                        secondary payor.--Subparagraph (A)(iii) shall 
                        not apply to expenses which are reimbursable 
                        under title XVIII of the Social Security Act 
                        only as a secondary payor.
                            ``(iii) Refunds of premiums.--Subparagraph 
                        (A)(vi) shall not apply to any refund of 
                        premiums on surrender or cancellation of the 
                        contract.
            ``(2) Qualified long-term care services.--For purposes of 
        this subsection--
                    ``(A) In general.--The term `qualified long-term 
                care services' means necessary diagnostic, preventive, 
                therapeutic, and rehabilitative services, and 
                maintenance or personal care services, which--
                            ``(i) are required by a chronically ill 
                        individual in a qualified facility, and
                            ``(ii) are provided pursuant to a plan of 
                        care prescribed by a licensed health care 
                        practitioner.
                    ``(B) Chronically ill individual.--
                            ``(i) In general.--The term `chronically 
                        ill individual' means any individual who has 
                        been certified by a licensed health care 
                        practitioner as--
                                    ``(I) being unable to perform 
                                (without substantial assistance from 
                                another individual) at least 2 
                                activities of daily living (as defined 
                                in clause (ii)) for a period of at 
                                least 90 days due to a loss of 
                                functional capacity, or having a 
                                similar level of disability (as 
                                determined by the Secretary in 
                                consultation with the Secretary of 
                                Health and Human Services), or
                                    ``(II) having a similar level of 
                                disability due to cognitive impairment.
                            ``(ii) Activities of daily living.--For 
                        purposes of clause (i), each of the following 
                        is an activity of daily living:
                                    ``(I) Mobility.--The process of 
                                walking or wheeling on a level surface 
                                which may include the use of an 
                                assistive device such as a cane, 
                                walker, wheelchair, or brace.
                                    ``(II) Dressing.--The overall 
                                complex behavior of getting clothes 
                                from closets and drawers and then 
                                getting dressed.
                                    ``(III) Toileting.--The act of 
                                going to the toilet room for bowel and 
                                bladder function, transferring on and 
                                off the toilet, cleaning after 
                                elimination, and arranging clothes or 
                                the ability to voluntarily control 
                                bowel and bladder function, or in the 
                                event of incontinence, the ability to 
                                maintain a reasonable level of personal 
                                hygiene.
                                    ``(IV) Transfer.--The process of 
                                getting in and out of bed or in and out 
                                of a chair or wheelchair.
                                    ``(V) Eating.--The process of 
                                getting food from a plate or its 
                                equivalent into the mouth.
                    ``(C) Qualified facility.--The term `qualified 
                facility' means--
                            ``(i) a nursing, rehabilitative, hospice, 
                        or adult day care facility (including a 
                        hospital, retirement home, nursing home, 
                        skilled nursing facility, intermediate care 
                        facility, or similar institution)--
                                    ``(I) which is licensed under State 
                                law, or
                                    ``(II) which is a certified 
                                facility for purposes of title XVIII or 
                                XIX of the Social Security Act, or
                            ``(ii) an individual's home if a licensed 
                        health care practitioner certifies that without 
                        home care the individual would have to be cared 
                        for in a facility described in clause (i).
                    ``(D) Maintenance or personal care services.--The 
                term `maintenance or personal care services' means any 
                care the primary purpose of which is to provide needed 
                assistance with any of the activities of daily living 
                described in subparagraph (B)(ii).
                    ``(E) Licensed health care practitioner.--The term 
                `licensed health care practitioner' means any physician 
                (as defined in section 1861(r) of the Social Security 
                Act) and any registered professional nurse, licensed 
                social worker, or other individual who meets such 
                requirements as may be prescribed by the Secretary.
            ``(3) Inflation adjustment of $200 benefit limit.--
                    ``(A) In general.--In the case of a calendar year 
                after 1995, the $200 amount contained in paragraph 
                (1)(A)(ii) shall be increased for such calendar year by 
                the medical care cost adjustment for such calendar 
                year. If any increase determined under the preceding 
                sentence is not a multiple of $10, such increase shall 
                be rounded to the nearest multiple of $10.
                    ``(B) Medical care cost adjustment.--For purposes 
                of subparagraph (A), the medical care cost adjustment 
                for any calendar year is the percentage (if any) by 
                which--
                            ``(i) the medical care component of the 
                        Consumer Price Index (as defined in section 
                        1(f)(5)) for August of the preceding calendar 
                        year, exceeds
                            ``(ii) such component for August of 1994.''
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) Individual retirement account.--The term `individual 
        retirement account' has the meaning given such term by section 
        408(a).
            ``(2) Section 401(k) plan.--The term `section 401(k) plan' 
        means any employer plan which meets the requirements of section 
        401(a) and which includes a qualified cash or deferred 
        arrangement (as defined in section 401(k)).
    ``(e) Special Rules for Section 401(k) Plans.--
            ``(1) Withdrawals cannot exceed elective contributions 
        under qualified cash or deferred arrangement.--This section 
        shall not apply to any distribution from a section 401(k) plan 
        to the extent the aggregate amount of such distributions for 
        the use described in subsection (a) exceeds the aggregate 
        employer contributions made pursuant to the employee's election 
        under section 401(k)(2).
            ``(2) Withdrawals not to cause disqualification.--A plan 
        shall not be treated as failing to satisfy the requirements of 
        section 401, and an arrangement shall not be treated as failing 
        to be a qualified cash or deferred arrangement (as defined in 
        section 401(k)(2)), merely because under the plan or 
        arrangement distributions are permitted which are excludable 
        from gross income by reason of this section.''
    (b) Conforming Amendments.--
            (1) Section 401(k) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(11) Cross reference.--

                                ``For provision permitting tax-free 
withdrawals for payment of long-term care premiums, see section 137.''
            (2) Section 408(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(8) Cross reference.--

                                ``For provision permitting tax-free 
withdrawals from individual retirement accounts for payment of long-
term care premiums, see section 137.''
            (3) The table of sections for such part III is amended by 
        striking the last item and inserting the following new items:

                              ``Sec. 137. Distributions from individual 
                                        retirement accounts and section 
                                        401(k) plans for long-term care 
                                        insurance.
                              ``Sec. 138. Cross references to other 
                                        Acts.''

SEC. 702. CERTAIN EXCHANGES OF LIFE INSURANCE CONTRACTS FOR LONG-TERM 
              CARE INSURANCE CONTRACTS NOT TAXABLE.

    Subsection (a) of section 1035 of the Internal Revenue Code of 1986 
(relating to certain exchanges of insurance contracts) is amended by 
striking the period at the end of paragraph (3) and inserting ``; or'', 
and by adding at the end thereof the following new paragraph:
            ``(4) a contract of life insurance or an endowment or 
        annuity contract for a long-term care insurance contract (as 
        defined in section 137(c)(1)).''

SEC. 703. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    Section 101 of the Internal Revenue Code of 1986 (relating to 
certain death benefits) is amended by adding at the end thereof the 
following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        paid or advanced to an individual under a life insurance 
        contract on the life of an insured--
                    ``(A) who is a terminally ill individual, or
                    ``(B) who is a chronically ill individual (as 
                defined in section 137(c)(2)(B)) who is confined to a 
                qualified facility (as defined in section 
                137(c)(2)(C)(i)),
        shall be treated as an amount paid by reason of the death of 
        such insured.
            ``(2) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who has been certified by a physician as having an 
        illness or physical condition which can reasonably be expected 
        to result in death in 12 months or less.
            ``(3) Physician.--For purposes of this subsection, the term 
        `physician' has the meaning given to such term by section 
        137(c)(2)(E).''

SEC. 704. EFFECTIVE DATE.

    The amendments made by this subtitle shall apply to taxable years 
beginning after December 31, 1994.

                                 <all>

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