Calendar No. 338

103D CONGRESS

1ST SESSION S. 1770

A BILL

To provide comprehensive reform of the health care

poses.system of the United States, and for other purNOVEMBER 23, 1993

Read the second time and placed on the calendar
II

★(Star Print)

Calendar No. 338

103D CONGRESS

1ST SESSION S. 1770

To provide comprehensive reform of the health care system of the United

States, and for other purposes.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 22, 1993

Mr. CHAFEE (for himself, Mr. DOLE, Mr. BOND, Mr. HATFIELD, Mr. BENNETT, Mr. HATCH, Mr. DANFORTH, Mr. BROWN, Mr. GORTON, Mr.

SIMPSON, Mr. STEVENS, Mr. COHEN, Mrs. KASSEBAUM, Mr. WARNER,

Mr. SPECTER, Mr. FAIRCLOTH, Mr. DOMENICI, Mr. LUGAR, Mr. GRASSLEY, Mr. DURENBERGER Mr. BOREN, and Mr. KERREY) introduced the

following bill; which was read the first time

NOVEMBER 23, 1993

Read the second time and placed on the calendar

A BILL

To provide comprehensive reform of the health care system

of the United States, and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Health Equity and Access Reform Today Act of 1993’’.
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1 (b) TABLE OF CONTENTS.—The table of contents is

2 as follows:

TITLE I—BASIC REFORMS TO EXPAND ACCESS TO

HEALTH INSURANCE COVERAGE AND TO ENSURE UNIVERSAL COVERAGE

Subtitle A—Universal Access

Sec. 1001. Access for each individual.

Sec. 1002. Promotion of coverage through expanded tax deductibility.

Sec. 1003. Low-income assistance with qualified health plan premiums.

Sec. 1004. Expanded access to employer plans.

Subtitle B—Qualified General Access Plans in the Small

Employer and Individual Marketplace

PART I—STANDARDS FOR GENERAL ACCESS PLANS

SUBPART A—ESTABLISHMENT AND APPLICATION OF STANDARDS

Sec. 1101. Qualified general access plans.

Sec. 1102. Establishment of standards.

Sec. 1103. Application of interim requirements.

SUBPART B—STANDARDS

Sec. 1111. Guaranteed eligibility, availability, and renewability.

Sec. 1112. Nondiscrimination based on health status.

Sec. 1113. Benefits offered.

Sec. 1114. Financial solvency requirements.

Sec. 1115. Enrollment.

Sec. 1116. Rating limitations.

Sec. 1117. Risk adjustment.

Sec. 1118. Collection and provision of standardized information.

Sec. 1119. Quality assurance.

Sec. 1120. Mediation procedures relating to malpractice claims.

Sec. 1121. Service to designated underserved areas.

Sec. 1122. Additional requirements.

PART II—INDIVIDUAL AND SMALL EMPLOYER PURCHASING GROUPS

Sec. 1141. Establishment and organization.

Sec. 1142. Agreements with qualified general access plans.

Sec. 1143. Provision of information.

Sec. 1144. Enrolling eligible employees and eligible individuals in qualified general access plans through a purchasing group.

Sec. 1145. Restriction on charges.

PART III—CONSUMER PROTECTION AND MARKET REFORMS

Sec. 1161. Requirement for provision of information by brokers.

Sec. 1162. Prohibition of improper incentives.

Subtitle C—Qualified Health Plans in the Large Employer

Marketplace
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PART I—REQUIREMENTS ON LARGE EMPLOYER PLANS

Sec. 1201. Standards applied to large employer plans.

Sec. 1202. Establishment of standards applicable to large employer plans.

Sec. 1203. Offer of different benefit packages required.

Sec. 1204. Enrollment in large employer plans in satisfaction of enrollment requirement.

Sec. 1205. Development of large or multiple employer purchasing groups.

Sec. 1207. Corrective actions.

PART II—AMENDMENTS TO ERISA

Sec. 1221. Limitation on coverage of group health plans under title I of

ERISA.

PART III—REVISION OF COBRA CONTINUATION COVERAGE REQUIREMENTS

Sec. 1231. Amendments to the Employee Retirement Income Security Act of

1974

Sec. 1232. Amendment to Public Health Service Act.

Sec. 1233. Additional revisions.

Subtitle D—Benefits; Benefits Commission

PART I—BENEFITS

Sec. 1301. Offering of benefit packages.

PART II—BENEFITS COMMISSION

Sec. 1311. Establishment.

Sec. 1312. Duties.

Sec. 1313. Operation of the Commission.

Sec. 1314. Congressional consideration of Commission proposals.

Sec. 1315. Implementation.

Subtitle E—State and Federal Responsibilities in Relation to

Qualified Health Plans

PART I—STATE RESPONSIBILITIES

SUBPART A—GENERAL RESPONSIBILITIES

Sec. 1401. Establishment of State insurance market reform programs.

Sec. 1402. Certification of insured health plans.

Sec. 1403. Establishment of health care coverage areas.

Sec. 1404. Procedures for purchasing groups.

Sec. 1405. Preparation of information concerning plans and purchasing groups.

Sec. 1406. Risk adjustment program.

Sec. 1407 Development of binding arbitration process.

Sec. 1408. Specification of annual general enrollment period.

SUBPART B—WAIVER OF REQUIREMENTS.

Sec. 1421. Alternate State systems allowed.

Sec. 1422. State opt-out.

Sec. 1423. Waiver of certain medicare requirements.
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SUBPART C—PREEMPTION OF CERTAIN STATE LAWS

Sec. 1431. Preemption from State benefit mandates.

Sec. 1432. Preemption of State law restrictions on network plans.

PART II—FEDERAL RESPONSIBILITIES

Sec. 1441. Federal role with respect to multi-State employer plans.

Sec. 1442. Federal role in the case of a default by a State.

Sec. 1443. Establishment of residency rules.

Sec. 1444. Rules determining separate employer status.

Subtitle F—Universal Coverage

Sec. 1501. Requirement of coverage.

Subtitle G—Definitions

Sec. 1601. Definitions.

TITLE II—TAX AND ENFORCEMENT PROVISIONS

Sec. 2000. Amendment of 1986 Code.

Subtitle A—General Tax Provisions

Sec. 2001. Certain employer health plan contributions included in income.

Sec. 2002. Deductions for costs of qualified health plans.

Sec. 2003. Medical savings accounts.

Sec. 2004. Eliminating commonality of interest or geographic location requirement for tax exempt trust status.

Sec. 2005. Revision of COBRA continuation coverage requirements.

Subtitle B—Provisions Relating to Acceleration of Death

Benefits

Sec. 2101. Tax treatment of payments under life insurance contracts for terminally ill individuals.

Sec. 2102. Tax treatment of companies issuing qualified terminal illness riders.

Subtitle C—Long-Term Care Tax Provisions

PART I—GENERAL PROVISIONS

Sec. 2201. Qualified long-term care services treated as medical care.

Sec. 2202. Treatment of long-term care insurance or plans.

Sec. 2203. Effective dates.

PART II—CONSUMER PROTECTION PROVISIONS

Sec. 2301. Policy requirements.

Sec. 2302. Additional requirements for issuers of long-term care insurance policies.

Sec. 2303. Coordination with State requirements.

Sec. 2304. Uniform language and definitions.

Sec. 2305. Effective dates.

Subtitle D—Enforcement Provisions

PART I—GENERAL PROVISIONS
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Sec. 2401. Universal coverage.

Sec. 2402. Role of employers and large employer plans.

Sec. 2403. Enforcement before State certification programs or standards in

place.

Sec. 2404. Disclosure of information regarding reconciliation of assistance.

PART II—OTHER ENFORCEMENT PROVISIONS

Sec. 2411. Conforming ERISA changes regarding enforcement of employer failures.

Sec. 2412. Equitable relief regarding insurers failing to comply with qualified

health plan standards.

TITLE III—QUALITY ASSURANCE AND SIMPLIFICATION

Subtitle A—Quality Assurance

PART I—STANDARDS AND MEASUREMENTS OF QUALITY

Sec. 3001. Standards for quality assurance and performance measures programs.

Sec. 3002. National health data system.

Sec. 3003. Measures of quality of care of specialized centers of care.

Sec. 3004. Clinical evaluations.

Sec. 3005. Report and recommendations on achieving universal coverage.

Sec. 3006. Monitoring reinsurance market.

Sec. 3007. Authorization of appropriations.

PART II—AGENCY FOR HEALTH CARE POLICY AND RESEARCH

Sec. 3101. Agency for Health Care Policy and Research.

PART III—NATIONAL FUND FOR MEDICAL RESEARCH

Sec. 3201. National Fund for Medical Research.

Subtitle B—Administrative Simplification

Sec. 3301. Establishment of health care data interchange system.

Sec. 3302. Development of proposed regulations by Panel.

Sec. 3303. Promulgation and implementation of proposed regulations by OMB.

Sec. 3304. Selection and establishment of data and transaction standards, conventions, and requirements for the data interchange system.

Sec. 3305. Standards for operation of a uniform working file.

Sec. 3306. Code sets for system.

Sec. 3307. Establishment of unique identifiers.

Sec. 3308. Privacy and confidentiality standards.

Sec. 3309. Transfer of information between health plans.

Sec. 3310. Fines and penalties for failure to comply.

Sec. 3311. Oversight of uniform working file, health care information clearinghouses, and value-added networks.

Sec. 3312. Annual reports to Congress.

Sec. 3313. Health Care Data Panel.

Sec. 3314. National Health Informatics Commission.

Sec. 3315. Definitions.

TITLE IV—JUDICIAL REFORMS
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Subtitle A—Medical Liability Reform

Sec. 4001. Definitions.

PART I—MEDIATION AND ALTERNATIVE DISPUTE RESOLUTION

Sec. 4011. Mediation.

Sec. 4012. Failure of mediation.

Sec. 4013. Alternative dispute resolution.

Sec. 4014. Court actions.

PART II—LIABILITY REFORM

Sec. 4021. Applicability.

Sec. 4022. Limitation on amount of attorney’s contingency fees.

Sec. 4023. Reform of damages.

Sec. 4024. Reform of procedures.

Sec. 4025. Practice guidelines.

Sec. 4026. Drugs and devices.

Sec. 4027. Report.

Subtitle B—Anti-Fraud and Abuse Control Program

PART I—ALL-PAYER FRAUD AND ABUSE CONTROL PROGRAM

Sec. 4101. All-payer fraud and abuse control program.

Sec. 4102. Application of Federal health anti-fraud and abuse sanctions to all

fraud and abuse against any health care plan.

Sec. 4103. Reporting of fraudulent actions under medicare.

PART II—REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

Sec. 4111. Mandatory exclusion from participation in Medicare and State

health care programs.

Sec. 4112. Establishment of minimum period of exclusion for certain individuals and entities subject to permissive exclusion from Medicare

and State health care programs.

Sec. 4113. Permissive exclusion of individuals with ownership or control interest in sanctioned entities.

Sec. 4114. Civil monetary penalties.

Sec. 4115. Actions subject to criminal penalties.

Sec. 4116. Sanctions against practitioners and persons for failure to comply

with statutory obligations.

Sec. 4117. Intermediate sanctions for Medicare health maintenance organizations.

Sec. 4118. Effective date.

PART III—ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

Sec. 4121. Establishment of the health care fraud and abuse data collection

program.

Sec. 4122. Quarterly publication of adverse actions taken.

PART IV—AMENDMENTS TO CRIMINAL LAW

Sec. 4131. Health care fraud.

Sec. 4132. Forfeitures for Federal health care offenses.

Sec. 4133. Injunctive relief relating to Federal health care offenses.
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Sec. 4134. Racketeering activity relating to Federal health care offenses.

PART V—AMENDMENTS TO CIVIL FALSE CLAIMS ACT

Sec. 4141. Amendments to Civil False Claims Act.

Subtitle C—Treatment of Certain Activities Under the

Antitrust Laws

Sec. 4201. Exemption from antitrust laws for certain competitive and collaborative activities.

Sec. 4202. Safe harbors.

Sec. 4203. Designation of additional safe harbors.

Sec. 4204. Certificates of review.

Sec. 4205. Notifications providing reduction in certain penalties under antitrust

law for health care cooperative ventures.

Sec. 4206. Review and reports on safe harbors and certificates of review.

Sec. 4207. Rules, regulations, and guidelines.

Sec. 4208. Establishment of HHS office of health care competition policy.

Sec. 4209. Definitions.

TITLE V—SPECIAL ASSISTANCE FOR FRONTIER, RURAL,

AND URBAN UNDERSERVED AREAS

Subtitle A—Frontier, Rural, and Urban Underserved Areas

Sec. 5001. Establishment of grant program.

Sec. 5002. Establishment of new program to provide funds to allow federally

qualified health centers and other entities or organizations to

provide expanded services to medically underserved individuals.

Sec. 5003. Tax incentives for practice in frontier, rural, and urban underserved

areas.

Sec. 5004. Rural emergency access care hospitals.

Sec. 5005. Grants to States regarding aircraft for transporting rural victims of

medical emergencies.

Sec. 5006. Demonstration projects to encourage the development and operation

of rural health networks.

Sec. 5007. Study on expanding benefits under qualified health plans for individuals residing in rural areas.

Subtitle B—Primary Care Provider Education

Sec. 5101. Graduate medical education demonstration projects.

Sec. 5102. Funding under medicare for training in nonhospital-owned facilities.

Sec. 5103. Increase in National Health Service Corps funding.

Sec. 5104. Increase in health professions funding for primary care physicians.

Sec. 5105. Health professions funding for nurse practitioners and physician assistants programs.

Sec. 5106. State grants to increase the number of primary care providers.

Subtitle C—Programs Relating to Primary and Preventive

Care Services

Sec. 5201. Maternal and infant care coordination.

Sec. 5202. Comprehensive school health education program.

Sec. 5203. Frontier States.
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TITLE VI—TREATMENT OF EXISTING FEDERAL

PROGRAMS

Sec. 6000. References in title.

Subtitle A—Medicaid Program

PART I—OPTIONAL COVERAGE UNDER QUALIFIED HEALTH PLANS

Sec. 6001. Optional coverage under qualified health plans.

PART II—LIMITATION ON CERTAIN FEDERAL MEDICAID PAYMENTS

Sec. 6011. Cap on Federal payments made for acute medical services furnished

under the medicaid program.

PART III—STATE FLEXIBILITY TO CONTRACT FOR COORDINATED CARE

SERVICES

Sec. 6021. Modification of Federal requirements to allow States more flexibility

in contracting for coordinated care services under medicaid.

PART IV—OTHER PROVISIONS

Sec. 6031. Phased-in elimination of medicaid hospital disproportionate share

adjustment payments.

Subtitle B—Medicare

PART I—ENROLLMENT OF MEDICARE BENEFICIARIES IN QUALIFIED

HEALTH PLANS

Sec. 6101. Legislative proposal on enrolling medicare beneficiaries in qualified

health plans.

Sec. 6102. Interim enrollment of medicare beneficiaries in qualified health

plans.

PART II—ENHANCEMENT OF MEDICARE RISK CONTRACTS

Sec. 6111. Revisions in the payment methodology for risk contractors.

Sec. 6112. Adjustment in medicare capitation payments to take into account

secondary payer status.

Sec. 6113. Establishment of outlier pool.

PART III—MEDICARE SELECT

Sec. 6121. Medicare select.

PART IV—OTHER PROVISIONS

Sec. 6131. Medicare part B premium.

Sec. 6132. Increase in medicare part B premium for individuals with high income.

Sec. 6133. Permanent 10-percent reduction in payments for capital-related

costs of outpatient hospital services.

Sec. 6134. Permanent reduction in payments for other costs of outpatient hospital services.

Sec. 6135. Imposition of coinsurance on laboratory services.

Sec. 6136. Imposition of copayment for certain home health visits.
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Sec. 6137. Phased-in elimination of medicare hospital disproportionate share

adjustment payments.

Sec. 6138. Elimination of bad debt recognition for hospital services.

Sec. 6139. Medicare as secondary payer.

TITLE VII—PATIENT’S RIGHT TO SELF-DETERMINATION

REGARDING HEALTH CARE

Sec. 7001. Treatment of advance directives.

Sec. 7002. Effect on other laws.

Sec. 7003. Information provided to certain individuals.

Sec. 7004. Recommendations to the Congress on issues relating to a patient’s

right of self-determination.

Sec. 7005. Effective date.

1 TITLE I—BASIC REFORMS TO EX2 PAND ACCESS TO HEALTH IN3 SURANCE COVERAGE AND TO

4 ENSURE UNIVERSAL COV5 ERAGE

6 Subtitle A—Universal Access

7 SEC. 1001. ACCESS FOR EACH INDIVIDUAL.

8 Each individual who is a citizen or lawful permanent

9 resident of the United States is provided access to health

10 insurance coverage under a qualified health plan under

11 this title.

12 SEC. 1002. PROMOTION OF COVERAGE THROUGH EX13 PANDED TAX DEDUCTIBILITY.

14 For provisions expanding health insurance tax de15 ductibility, see section 2002.

16 SEC. 1003. LOW-INCOME ASSISTANCE WITH QUALIFIED

17 HEALTH PLAN PREMIUMS.

18 (a) PREMIUM ASSISTANCE TO QUALIFIED INDIVID19 UALS AND FAMILIES.—With respect to each calendar
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1 year, in the case of a qualified family (as defined in sub2 section (b)), the Secretary shall provide for payment

3 through a voucher of the voucher amount (specified in

4 subsection (c)), which may be applied against the cost of

5 the premium for a qualified health plan under this title.

6 (b) QUALIFIED FAMILY.—For purposes of this sec7 tion—

8 (1) IN GENERAL.—Subject to paragraph (3),

9 the term ‘‘qualified family’’ means a family (as de10 fined in section 1601(8)) the family income of which

11 does not exceed the phase-in eligibility percentage

12 (specified in paragraph (2)) of the poverty line for

13 a family of the size involved.

14 (2) PHASE-IN ELIGIBILITY PERCENTAGE.—For

15 purposes of paragraph (1) and subject to subsection

16 (d), the phase-in eligibility percentage shall be deter17 mined under the following table:

Applicable

Calendar year: phase-in percentage:

1997 .................................................................................. 90

1998 .................................................................................. 110

1999 .................................................................................. 130

2000 .................................................................................. 150

2001 .................................................................................. 170

2002 .................................................................................. 190

2003 .................................................................................. 210

2004 .................................................................................. 230

2005 .................................................................................. 240.

18 (3) NOT QUALIFIED DURING PERIOD OF COV19 ERAGE UNDER MEDICAID.—No family is eligible for

20 a voucher if such family is a member of a class or
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1 category described in 1902(a)(64) of the Social Se2 curity Act (as added by section 6011(b)).

3 (c) AMOUNT OF VOUCHER.—

4 (1) IN GENERAL.—The amount of a voucher

5 specified in this subsection for a qualified family is

6 the lesser of—

7 (A) the annual premium paid the individ8 ual or family for such year for coverage under

9 a qualified health plan in which the family is

10 enrolled, or

11 (B) the voucher percentage (specified in

12 paragraph (2)) of the applicable dollar limit for

13 such year for such family (determined under

14 section 91(b)(2) of the Internal Revenue Code

15 of 1986, as added by section 2001 of this Act,

16 and determined on an annual basis).

17 (2) VOUCHER PERCENTAGE.—For purposes of

18 paragraph (1), the term ‘‘voucher percentage’’

19 means, for a family, 100 percent reduced (but not

20 below zero percent) by the ratio of 100 to 140 for

21 each 1 percentage point (or portion thereof) such

22 family’s income equals or exceeds 100 percent of the

23 income official poverty line (as defined by the Office

24 of Management and Budget, and revised annually in

25 accordance with section 673(2) of the Omnibus
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1 Budget Reconciliation Act of 1981) applicable to a

2 family of the size involved.

3 (d) MODIFICATION OF PHASE-IN OF ELIGIBILITY.—

4 (1) ESTIMATION OF TOTAL EXPENDITURES.—

5 Between July 15 and August 1 of each calendar

6 year (beginning with 1997), the Director of the Of7 fice of Management and Budget (in this subsection

8 referred to as the ‘‘Director’’) shall estimate the sum

9 of—

10 (A) the expenditures under titles XVIII

11 and XIX of the Social Security Act for the fis12 cal year beginning in such year, and

13 (B) the total amount of the vouchers to be

14 provided under this section in that fiscal year.

15 (2) COMPARISON WITH BASELINE.—

16 (A) MORE SAVINGS THAN ANTICIPATED.—

17 If the sum estimated under paragraph (1) for

18 a fiscal year is less than the baseline amount

19 under paragraph (3) for the fiscal year, then

20 paragraph (4) shall apply for the fiscal year.

21 (B) LESS SAVINGS THAN ANTICIPATED.—

22 If the sum estimated under paragraph (1) for

23 a fiscal year is more than the baseline amount

24 under paragraph (3), then paragraph (5)(B)
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1 shall apply for the fiscal year (except as pro2 vided in paragraph (5)(A)).

3 (C) REPORT TO CONGRESS.—The Director

4 shall promptly report to Congress on determina5 tions under subparagraph (A).

6 (3) BASELINE.—For purposes of this sub7 section, the baseline amount under this paragraph

8 for fiscal year—

9 (A) 1997, is $318,000,000,000;

10 (B) 1998, is $352,000,000,000;

11 (C) 1999, is $391,000,000,000;

12 (D) 2000, is $435,000,000,000;

13 (E) 2001, is $483,000,000,000;

14 (F) 2002, is $535,000,000,000;

15 (G) 2003, is $593,000,000,000; or

16 (H) 2004 and any succeeding fiscal year,

17 is the baseline under this paragraph for the

18 previous fiscal year increased by the percentage

19 increase in the per capita Gross Domestic Prod20 uct for the previous fiscal year.

21 (4) APPLICATION OF SAVINGS TO INCREASE

22 ELIGIBILITY FOR VOUCHERS.—

23 (A) IN GENERAL.—If this paragraph ap24 plies for a year (before 2005), subject to sub25 paragraph (B), the applicable percentage under
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1 subsection (b)(2) for the year shall be increased

2 by such whole number of percentage points as

3 the Director estimates will result in aggregate

4 additional expenditures in the year that do not

5 exceed the amount by which the baseline

6 amount under paragraph (3) for the fiscal year

7 will exceed the sum estimated under paragraph

8 (1) for the fiscal year. Such increase shall only

9 apply to that calendar year involved.

10 (B) LIMITATION.—In no case shall the in11 crease under subparagraph (A) for a year result

12 in an applicable percentage exceeding the appli13 cable percentage specified in the table in sub14 section (b)(2) for the following year.

15 (5) RECOVERY OF DEFICIT THROUGH ADJUST16 MENT MECHANISM.—

17 (A) IN GENERAL.—In the case described in

18 paragraph (2)(B), the Director shall submit to

19 the Benefits Commission a report on the deficit

20 for the year. With respect to a fiscal year in

21 which subparagraph (B)(i) applies, the Com22 mission may submit recommended modifications

23 under section 1312(c)(2) in response to such a

24 deficit. With respect to a fiscal year in which

25 subparagraph (B)(ii) applies, the Commission
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1 shall submit recommended modifications under

2 section 1312(c)(2) in response to such a deficit.

3 If Congress adopts the modifications rec4 ommended by the Commission under such sec5 tion, then subparagraph (B) shall not apply for

6 such year.

7 (B) ADJUSTMENT MECHANISM.—

8 (i) BEFORE FULL PHASE-IN.—If this

9 subparagraph applies for a year (up to the

10 full phase-in year) (as defined in clause

11 (iii)), then for the following year the

12 phase-in eligibility percentage under sub13 section (b)(2) shall be decreased by such

14 whole number of percentage points as the

15 Director estimates will result in aggregate

16 decrease in expenditures that are equal to

17 the amount by which the sum estimated

18 under paragraph (1) for the fiscal year will

19 exceed the baseline amount under para20 graph (3) for the fiscal year. Such decrease

21 shall only apply to the year involved.

22 (ii) AFTER FULL PHASE-IN.—If this

23 subparagraph applies for a year (after the

24 full phase-in year), then for the following

25 year the phase-in eligibility percentage
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1 under subsection (b)(2) shall be decreased

2 by such whole number of percentage points

3 as the Director estimates will result in ag4 gregate decrease in expenditures that are

5 equal to the amount by which the sum esti6 mated under paragraph (1) for the fiscal

7 year will exceed the baseline amount under

8 paragraph (3) for the fiscal year. Such de9 crease shall only apply to the year involved.

10 (iii) FULL PHASE-IN DEFINED.—In

11 this subparagraph, the term ‘‘full phase-in

12 year’’ means the first year in which the

13 phase-in eligibility percentage under sub14 section (b)(2) has equaled 240 percent.

15 (C) REPORT TO CONGRESS.—The Director

16 shall submit to Congress a report on any deter17 minations and any adjustments under this

18 paragraph.

19 (6) ACCUMULATION OF SMALL DEFICITS.—If

20 the sum estimated under paragraph (1) for a fiscal

21 year is determined by the Director to be such a

22 small amount as to not be administratively cost effi23 cient, no adjustments need be made.
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1 (7) NO ADMINISTRATIVE OR JUDICIAL RE2 VIEW.—There shall be no administrative or judicial

3 review of any determination under this subsection.

4 (e) APPLICATION FOR ASSISTANCE.—

5 (1) IN GENERAL.—Any family may file an ap6 plication for a voucher under this section at any

7 time in accordance with this subsection.

8 (2) USE OF SIMPLE FORM.—The Secretary

9 shall use an application which shall be as simple in

10 form as possible and understandable to the average

11 individual. The application may require attachment

12 of such documentation as deemed necessary by the

13 Secretary in order to ensure eligibility for assistance.

14 The Secretary shall use, as deemed practicable by

15 the Secretary, any existing forms employed for Fed16 eral income tax filings as an application for assist17 ance.

18 (3) AVAILABILITY OF FORMS.—The Secretary

19 shall make application forms available through

20 health care providers and plans, public assistance of21 fices, public libraries, and at other locations (includ22 ing post offices) accessible to a broad cross-section

23 of families.

24 (4) SUBMISSION OF APPLICATION FORM.—An

25 application form under this subsection may be sub-
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1 mitted in such manner as the Secretary shall pro2 vide.

3 (5) PERMITTING SUBMISSION OF REVISED AP4 PLICATION.—During a year, a family may submit a

5 revised application to reflect changes in the esti6 mated income of the family, including changes in

7 employment status of family members, during the

8 year. The voucher amount shall be revised to reflect

9 such a revised application.

10 (6) ENROLLMENT AT POINT OF APPLICA11 TION.—To the extent practicable, the Secretary shall

12 provide for the option of enrollment in a qualified

13 health plan as part of the application and approval

14 process for assistance under this section. In provid15 ing for such an option, the Secretary may require

16 the State of residence to provide such information

17 and assistance regarding qualified health plans and

18 purchasing groups as may be necessary.

19 (f) DETERMINATION OF ELIGIBILITY.—

20 (1) IN GENERAL.—The Secretary shall provide

21 in a prompt manner for—

22 (A) a determination of eligibility on each

23 application for a voucher submitted under sub24 section (e), and
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1 (B) notice of such determination to the

2 family involved.

3 (2) ELECTION WITH RESPECT TO INCOME DE4 TERMINATION.—As elected by a family at the time

5 of submission of an application for a voucher under

6 this section, income shall be determined either—

7 (A) by multiplying by a factor of 4 the in8 come for the 3-month period immediately pre9 ceding the month in which the application is

10 made, or

11 (B) based upon estimated income for the

12 entire year in which the application is submit13 ted.

14 (g) USE OF VOUCHER.—A voucher provided to a

15 family under this section shall be remitted by any individ16 ual in such family to the qualified health plan, the pur17 chasing group, or, in the case of an employment-related

18 qualified health plan, to the employee’s employer, as the

19 case may be, for payment by the Secretary. The qualified

20 health plan, purchasing group, or employer shall make

21 proper adjustments in billing statements to reflect such

22 family’s remaining premium obligations (if any).

23 (h) RECONCILIATION.—

24 (1) NOTICE OF VOUCHER AMOUNT BY SEC25 RETARY.—In the case of a qualified family that has
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1 received a voucher under this section for any month

2 in a year, the Secretary shall, not later than Janu3 ary 31 of the following year, notify such family of

4 the total amount of the vouchers that such family

5 received during the year.

6 (2) FILING OF NOTICE.—A family that receives

7 a notice under paragraph (1) shall attach such no8 tice to the tax return filed by such family for the

9 year involved. The Secretary of the Treasury shall

10 establish a procedure to enable a family that is not

11 required to file a tax return for the year involved to

12 file the notice received under paragraph (1).

13 (3) RECONCILIATION OF ASSISTANCE BASED ON

14 ACTUAL INCOME.—

15 (A) IN GENERAL.—Based on and using the

16 information contained in the notice filed under

17 paragraph (2) with respect to a family, the Sec18 retary of the Treasury shall compute the

19 amount of the voucher that should have been

20 provided under this section with respect to the

21 family in the year involved.

22 (B) OVERPAYMENT OF VOUCHER.—If the

23 amount of the voucher provided was greater

24 than the amount computed under subparagraph

25 (A), the excess amount shall be treated as an
21

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1 underpayment of a tax imposed by chapter 1 of

2 the Internal Revenue Code of 1986 and paid by

3 the Secretary of the Treasury to the family in4 volved.

5 (C) UNDERPAYMENT OF VOUCHER.—If the

6 amount computed under subparagraph (A) is

7 greater than the amount of the voucher pro8 vided, the amount of the difference shall be

9 treated as an overpayment of tax imposed by

10 such chapter, or in the event such family is en11 titled to a refund of such a tax, subject to the

12 provisions of section 6402(d) of such Code.

13 (4) FAILURE TO FILE.—In the case of any fam14 ily that is required to file a notice under paragraph

15 (2) for a year and that fails to file such a notice by

16 the deadline specified by the Secretary, the entire

17 amount of the voucher provided in such year shall

18 be considered the excess amount under paragraph

19 (3)(B). The Secretary shall waive the application of

20 this paragraph if the family establishes, to the satis21 faction of the Secretary, good cause for the failure

22 to file the notice on a timely basis.

23 (5) PENALTIES FOR FALSE INFORMATION.—

24 Any individual who knowingly makes a material mis25 representation of information in an application for
22

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1 assistance under this section, shall be liable to the

2 Federal Government for excess payments made

3 based on such misrepresentation and interest on

4 such excess payments at a rate specified by the Sec5 retary, and, in addition, shall be liable to the Fed6 eral Government for $1,000 or, if greater, 3 times

7 the excess payments made based on such misrepre8 sentation.

9 (6) INSTRUCTIONS FOR FILING NOTICE.—The

10 Secretary shall provide instructions for filing the no11 tice described in paragraph (2) (in such form as the

12 Secretary prescribes) no later than January 31 of

13 the year following the year involved.

14 (i) ADMINISTRATION BY A STATE.—Upon application

15 of a State, the Secretary may provide for the administra16 tion of this section in a State through an appropriate

17 State agency.

18 (j) DEFINITIONS AND DETERMINATION OF IN19 COME.—For purposes of this section:

20 (1) POVERTY LINE.—The term ‘‘poverty line’’

21 means the income official poverty line (as defined by

22 the Office of Management and Budget, and revised

23 annually in accordance with section 673(2) of the

24 Omnibus Budget Reconciliation Act of 1981) appli25 cable to a family of the size involved.
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1 (2) DETERMINATIONS OF INCOME.—

2 (A) IN GENERAL.—The term ‘‘income’’

3 means adjusted gross income (as defined in sec4 tion 62(a) of the Internal Revenue Code of

5 1986)—

6 (i) determined without regard to sec7 tions 135, 162(l), 911, 931, and 933 of

8 such Code; and

9 (ii) increased by—

10 (I) the amount of interest re11 ceived or accrued which is exempt

12 from tax, plus

13 (II) the amount of social security

14 benefits (described in section 86(d) of

15 such Code) which is not includible in

16 gross income under section 86 of such

17 Code.

18 (B) FAMILY INCOME.—The term ‘‘family

19 income’’ means, with respect to a family, the

20 sum of the income for all members of the family

21 (as defined in section 1601(8)), not including

22 the income of a dependent child with respect to

23 which no return is required under the Internal

24 Revenue Code of 1986.
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1 (C) FAMILY SIZE.—The family size to be

2 applied under this section, with respect to fam3 ily income, is the number of individuals in4 cluded in the family for purposes of coverage

5 under a qualified health plan.

6 SEC. 1004. EXPANDED ACCESS TO EMPLOYER PLANS.

7 (a) QUALIFIED HEALTH PLANS MADE AVAIL8 ABLE.—Each employer shall make available, either di9 rectly, through a purchasing group, or otherwise, enroll10 ment in a qualified health plan to each eligible employee

11 of such employer. A small employer may meet the require12 ment of the previous sentence only through a qualified in13 sured health plan.

14 (b) FORWARDING INFORMATION.—

15 (1) INFORMATION REGARDING PLANS.—An em16 ployer must provide each employee of such employer

17 (including any part-time or seasonal employee) with

18 information provided by the State under section

19 1405 regarding all qualified health plans offered in

20 the health care coverage area (in this title referred

21 to as a ‘‘HCCA’’) in which the employer is located

22 and, if the employee resides in another HCCA, infor23 mation regarding how to obtain information on

24 qualified health plans offered to residents of such

25 other HCCA.
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1 (2) INFORMATION REGARDING EMPLOYEES.—

2 An employer must forward the name and address

3 (and any other necessary identifying information

4 specified by the Secretary) of each eligible em5 ployee—

6 (A) to the qualified health plan in which

7 such employee is enrolled, or

8 (B) to the purchasing group (if any)

9 through which such enrollment is made.

10 (c) PAYROLL DEDUCTION.—

11 (1) IN GENERAL.—If any employer is advised

12 by a qualified health plan (or by a purchasing group

13 on behalf of a qualified insured health plan) that an

14 eligible employee is enrolled in such a plan, the em15 ployer, upon authorization by the employee, shall

16 provide for the deduction, from the employee’s wages

17 or other compensation, of the premium amount due

18 (less any employer contribution) to the plan or pur19 chasing group.

20 (2) APPLICATION OF VOUCHER.—The employer

21 shall reduce the amount so deducted by the amount

22 of any voucher (described in section 1003) presented

23 by the employee to the employer.

24 (d) LIMITED EMPLOYER OBLIGATION.—Nothing in

25 this section shall be construed as requiring an employer
26

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1 to make, or preventing such employer from making, an

2 employer contribution toward coverage of employees (and

3 their dependents) under a qualified health plan.

4 (e) NO REQUIREMENT TO ENROLL IN EMPLOYER5 PROVIDED PLAN.—An eligible employee of a small em6 ployer may elect not to enroll in a qualified health plan

7 offered by an employer under this section. Such an em8 ployee may enroll—

9 (1) in any qualified health plan offered in the

10 HCCA in which the employee works or in which the

11 employee resides (including qualified health plans of12 fered through purchasing groups serving such

13 HCCA), or

14 (2) in a plan offered by an association which is

15 organized for purposes other than to offer health

16 plan coverage to the association’s members and

17 which is offering such coverage as of the date of the

18 enactment of this Act.
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1 Subtitle B—Qualified General Ac2 cess Plans in the Small Em3 ployer and Individual Market4 place

5 PART I—STANDARDS FOR GENERAL ACCESS

6 PLANS

7 Subpart A—Establishment and Application of

8 Standards

9 SEC. 1101. QUALIFIED GENERAL ACCESS PLANS.

10 (a) IN GENERAL.—In order to be a qualified general

11 access plan, a health plan must be certified under subtitle

12 E as meeting the applicable standards established under

13 section 1102 for a qualified general access plan.

14 (b) SPECIAL RULES FOR LARGE EMPLOYER

15 PLANS.—For special rules regarding the application of

16 similar standards to large employer plans, see part I of

17 subtitle C.

18 (c) CONSTRUCTION.—Whenever in this title a re19 quirement or standard is imposed on a health plan, the

20 requirement or standard is deemed to have been imposed

21 on the insurer or health plan sponsor of the plan in rela22 tion to that plan.
28

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1 SEC. 1102. ESTABLISHMENT OF STANDARDS.

2 (a) ROLE OF THE NAIC.—The Secretary shall re3 quest that the National Association of Insurance Commis4 sioners—

5 (1) develop specific standards, in the form of a

6 model Act and model regulations, to implement the

7 requirements of sections 1111 through 1117 and

8 1122 of subpart B; and

9 (2) report to the Secretary on such standards,

10 within 6 months after the date of the enactment of

11 this Act. If such Association develops such standards

12 within such period and the Secretary finds that such

13 standards implement the requirements of such sec14 tion, such standards shall be applicable under this

15 part.

16 (b) ROLE OF THE SECRETARY.—If the National As17 sociation of Insurance Commissioners Association fails to

18 develop and report on the standards described in sub19 section (a) by the date specified in such subsection or the

20 Secretary finds that such standards do not implement the

21 requirements of sections 1111 through 1117 and 1122,

22 the Secretary shall develop and publish such standards,

23 by not later than the date that is 1 year after the date

24 of enactment of this Act, and such standards shall be ap25 plicable under this part.
29

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1 (c) REFERENCE TO INSURANCE REFORM STAND2 ARDS.—For purposes of this subtitle, the term ‘‘insurance

3 reform standards’’ means the standards developed under

4 this section and applicable under this part and includes

5 the requirements under sections 1118 through 1122 of

6 subpart B.

7 SEC. 1103. APPLICATION OF INTERIM REQUIREMENTS.

8 (a) IN GENERAL.—Prior to the date on which a State

9 establishes a certification program under subsection (a),

10 an insurer may only offer an insured health plan in such

11 State if such plan meets the requirements specified in sub12 section (c) applicable to qualified general access plans.

13 (b) NONCOMPLIANCE.—An insurer that offers an in14 sured health plan in a State referred to in subsection (a)

15 that fails to meet the requirements of subsection (c) shall

16 be subject to a sanction under the amendment made by

17 section 2403(a).

18 (c) REQUIREMENTS APPLICABLE.—For purposes of

19 this section, the requirements of this subsection are the

20 requirements specified in the following provisions:

21 (1) Subsections (a), (e), and (f) of section 1111

22 (relating to guaranteed eligibility, availability, and

23 renewability).
30

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1 (2) Section 1112 (relating to nondiscrimination

2 based on health status), except (for purposes of this

3 section) that—

4 (A) any reference to 3 months in section

5 1112(b)(1)(A) is deemed a reference to 6

6 months,

7 (B) any reference to 6 months in section

8 1112(b)(1)(B) is deemed a reference to 9

9 months, and

10 (C) any reference to 3-month period in sec11 tion 1112(b)(3)(B) is deemed a reference to 6-

12 month period.

13 (3) Section 1114 (relating to financial solvency

14 requirements).

15 (4) Section 1116(d) (relating to rating limita16 tions).

17 (5) Section 1120 (relating to mediation proce18 dures).

19 Subpart B—Standards

20 SEC. 1111. GUARANTEED ELIGIBILITY, AVAILABILITY, AND

21 RENEWABILITY.

22 (a) IN GENERAL.—Except as otherwise provided in

23 this section, no insurer may exclude from coverage under

24 a qualified general access plan any eligible employee or

25 eligible individual applying for coverage.
31

•S 1770 PCS1S

1 (b) STANDARDS.—The insurance reform standards

2 shall prohibit marketing or other practices by an insurer

3 intended to discourage or limit the issuance of a qualified

4 general access plan to an eligible employee or eligible indi5 vidual on the basis of health status, employer size or in6 dustry, geographic area, or other risk factors.

7 (c) AVAILABILITY.—A qualified general access plan

8 must be made available throughout the entire HCCA in

9 which such plan is offered.

10 (d) GEOGRAPHIC LIMITATIONS.—A qualified general

11 access plan may deny coverage under the plan to an eligi12 ble employee or eligible individual who resides outside the

13 HCCA in which such plan is offered, but only if such de14 nial is applied uniformly, without regard to health status

15 or insurability of individuals.

16 (e) APPLICATION OF CAPACITY LIMITS.—

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

18 qualified general access plan may apply to the ap19 propriate certifying authority (as defined in section

20 1601(1)) to cease enrolling eligible employees and el21 igible individuals under the plan if—

22 (A) the plan ceases to enroll any new eligi23 ble employees and eligible individuals; and

24 (B) the plan can demonstrate to the appli25 cable certifying authority that its financial or
32

•S 1770 PCS1S

1 provider capacity to serve previously covered

2 groups or individuals (and additional individ3 uals who will be expected to enroll because of

4 affiliation with such previously covered groups

5 or individuals) will be impaired if it is required

6 to enroll other eligible employees and eligible in7 dividuals.

8 (2) FIRST-COME-FIRST-SERVED.—A qualified

9 general access plan is only eligible to exercise the

10 limitations provided for in paragraph (1) if such

11 plan provides for enrollment of eligible employees

12 and eligible individuals on a first-come-first-served

13 basis (except in the case of additional individuals de14 scribed in paragraph (1)(B)).

15 (f) RENEWABILITY.—

16 (1) IN GENERAL.—A qualified general access

17 plan that is issued to a small employer, eligible em18 ployee, or eligible individual shall be renewed, at the

19 option of the employer, employee, or individual, un20 less the plan is terminated for a reason specified in

21 paragraph (2) or (3).

22 (2) GROUNDS FOR REFUSAL TO RENEW.—An

23 insurer may refuse to renew, or may terminate, a

24 qualified general access plan under this subtitle only

25 for—
33

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1 (A) nonpayment of premiums;

2 (B) fraud or misrepresentation; or

3 (C) change in residence to a HCCA not

4 served under the plan.

5 (3) TERMNATION.—

6 (A) IN GENERAL.—An insurer is not re7 quired to renew or make available a qualified

8 general access plan through a particular type of

9 delivery system (as defined in section 1601)

10 with respect to a small employer, eligible em11 ployee, or eligible individual, is the insurer—

12 (i) elects not to renew all of its quali13 fied general access plans using such deliv14 ery system issued to small employers, eligi15 ble employees, and eligible individuals in a

16 HCCA; and

17 (ii) provides notice to the appropriate

18 certifying authority and to each small em19 ployer and eligible individual covered under

20 the plan of such termination at least 180

21 days before the date of expiration of the

22 plan.

23 (B) PROHIBITION ON MARKET REENTRY.—

24 In the case of such a termination, the insurer

25 may not provide for issuance of any qualified
34

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1 general access plan using such a delivery sys2 tem to an eligible employer, eligible employee,

3 or eligible individual in the State during the 5-

4 year period beginning on the date of the termi5 nation of the last plan not so renewed.

6 (g) EXCEPTION DURING TRANSITION.—

7 (1) IN GENERAL.—Until the date specified in

8 section 1501, an insurer may exclude from coverage

9 any individual who does not apply for enrollment on

10 a timely basis, consistent with this subsection.

11 (2) CLARIFICATION OF TIMELY ENROLL12 MENT.—

13 (A) GENERAL INITIAL ENROLLMENT RE14 QUIREMENT.—Except as provided in this para15 graph, an insurer may consider enrollment of

16 an eligible employee or eligible individual in a

17 plan not to be timely if such employee or indi18 vidual fails to enroll in the plan during an ini19 tial enrollment period, if such period is at least

20 30 days long.

21 (B) ENROLLMENT DUE TO LOSS OF PRE22 VIOUS EMPLOYER COVERAGE.—Enrollment in a

23 qualified general access plan is considered to be

24 timely in the case of an eligible employee or eli25 gible individual who—
35

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1 (i) was covered under another health

2 plan at the time of the individual’s initial

3 enrollment period;

4 (ii) stated at the time of the initial en5 rollment period that coverage under a

6 health plan was the reason for declining

7 enrollment;

8 (iii) lost coverage under another

9 health plan (as a result of the termination

10 of the other plan’s coverage, termination or

11 reduction of employment, or other reason);

12 and

13 (iv) requests enrollment within 30

14 days after termination of such coverage.

15 (C) REQUIREMENT APPLIES DURING OPEN

16 ENROLLMENT PERIODS.—Each qualified gen17 eral access plan shall provide for at least one

18 period (of not less than 30 days) each year dur19 ing which enrollment under the plan shall be

20 considered to be timely.

21 (D) EXCEPTION FOR COURT ORDERS.—

22 Enrollment of a spouse or minor child of an eli23 gible employee or eligible individual shall be

24 considered to be timely if—
36

•S 1770 PCS1S

1 (i) a court has ordered that coverage

2 be provided for the spouse or child under

3 a covered employee’s or individual’s health

4 plan, and

5 (ii) a request for enrollment is made

6 within 30 days after the date the court is7 sues the order.

8 (E) ENROLLMENT OF SPOUSES AND DE9 PENDENTS.—

10 (i) IN GENERAL.—Enrollment of the

11 spouse (including a child of the spouse)

12 and any dependent child of an eligible em13 ployee or eligible individual shall be consid14 ered to be timely if a request for enroll15 ment is made either—

16 (I) within 30 days of the date of

17 the marriage or of the date of the

18 birth or adoption of a child, if family

19 coverage is available as of such date,

20 or

21 (II) within 30 days of the date

22 family coverage is first made avail23 able.

24 (ii) COVERAGE.—If a plan makes

25 family coverage available and enrollment is
37

•S 1770 PCS1S

1 made under the plan on a timely basis

2 under clause (i)(I), the coverage shall be3 come effective not later than the first day

4 of the first month beginning after the date

5 of the marriage or the date of birth or

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

7 SEC. 1112. NONDISCRIMINATION BASED ON HEALTH STA8 TUS.

9 (a) IN GENERAL.—Except as provided under sub10 section (b), a qualified health plan may not deny, limit,

11 or condition the coverage under (or benefits of) the plan

12 based on the health status, claims experience, receipt of

13 health care, execution of an advance directive, medical his14 tory, or lack of evidence of insurability, of an individual.

15 (b) TREATMENT OF PREEXISTING CONDITION EX16 CLUSIONS FOR ALL SERVICES.—

17 (1) IN GENERAL.—A qualified health plan may

18 not impose (and an insurer may not require a small

19 employer under a qualified health plan to impose

20 through a waiting period for coverage under a plan

21 or similar requirement) a limitation or exclusion of

22 benefits relating to treatment of a condition based

23 on the fact that the condition preexisted the effective

24 date of the plan with respect to an individual if—
38

•S 1770 PCS1S

1 (A) the condition relates to a condition

2 that was not diagnosed or treated during the 3-

3 month period ending on the day before the first

4 date of coverage under the plan;

5 (B) the limitation or exclusion extends over

6 more than 6 months after the date of coverage

7 under the plan;

8 (C) the limitation or exclusion applies to

9 an individual who, as of the date of birth, was

10 covered under the plan; or

11 (D) the limitation or exclusion relates to

12 pregnancy.

13 In the case of an individual who is eligible for cov14 erage under a qualified health plan but for a waiting

15 period imposed by an employer, in applying subpara16 graphs (A) and (B), the individual shall be treated

17 as having been covered under the plan as of the ear18 liest date of the beginning of the waiting period.

19 (2) CREDITING OF PREVIOUS COVERAGE.—A

20 qualified health plan shall provide that if an individ21 ual under such plan is in a period of continuous cov22 erage with respect to particular services as of the

23 date of initial coverage under such plan, any period

24 of exclusion of coverage with respect to a preexisting

25 condition for such services or type of services shall
39

•S 1770 PCS1S

1 be reduced by 1 month for each month in the period

2 of continuous coverage.

3 (3) DEFINITIONS.—As used in this subsection:

4 (A) PERIOD OF CONTINUOUS COVERAGE.—

5 The term ‘‘period of continuous coverage’’

6 means, with respect to particular services, the

7 period beginning on the date an individual is

8 enrolled under a qualified health plan or an

9 equivalent health care program which provides

10 benefits with respect to such services and ends

11 on the date the individual is not so enrolled for

12 a continuous period of more than 3 months.

13 (B) PREEXISTING CONDITION.—The term

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

15 coverage under a qualified health plan, a condi16 tion the diagnosis of which was known or which

17 was treated, within the 3-month period ending

18 on the day before the first date of such cov19 erage (without regard to any waiting period).

20 SEC. 1113. BENEFITS OFFERED.

21 (a) IN GENERAL.—A qualified general access plan

22 shall—

23 (1) offer to all enrollees in the plan coverage for

24 the covered items and services specified under sub25 title D;
40

•S 1770 PCS1S

1 (2) imposes on such enrollees the cost sharing

2 requirements for such items and services specified

3 under such subtitle;

4 (3) demonstrate the ability to provide such

5 items and services throughout the HCCA in which

6 the plan enrolls individuals; and

7 (4) covers the routine medical costs of certain

8 investigational treatments referred to in section

9 1301(d)(3).

10 However, no specific procedure or treatment is required

11 to be covered in such a plan.

12 (b) AVAILABILITY OF SERVICES IN ENTIRE COV13 ERAGE AREA.—Each qualified general access plan offered

14 in a HCCA shall provide assurances to the appropriate

15 certifying authority that it has the capacity to deliver the

16 full range of covered items and services to potential enroll17 ees who reside within the HCCA served by the plan.

18 (c) LIMITATION ON OFFERING ADDITIONAL BENE19 FITS.—An insurer offering a qualified general access plan

20 may only offer coverage of items and services that are not

21 covered items or services, or a reduction in cost sharing

22 below the cost sharing specified under subtitle D for the

23 benefit package applicable, if—
41

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1 (1) such additional coverage is offered and

2 priced separately from the standard or catastrophic

3 package offered;

4 (2) the purchase of the plan is not conditioned

5 upon the purchase of such additional coverage; and

6 (3) coverage of such additional items and serv7 ices is offered to individuals who are not enrolled in

8 such plan.

9 (d) APPLICATION OF ARBITRATION.—A qualified

10 general access plan shall provide for a mandatory binding

11 arbitration in accordance with the process described in

12 section 1407.

13 SEC. 1114. FINANCIAL SOLVENCY REQUIREMENTS.

14 (a) SOLVENCY PROTECTION.—Each insurer offering

15 a qualified general access plan shall meet financial sol16 vency requirements to assure protection of enrollees with

17 respect to potential insolvency.

18 (b) PROTECTION AGAINST PROVIDER CLAIMS.—In

19 the case of a failure of a qualified general access plan to

20 make payments with respect to covered items and services,

21 an individual who is enrolled under the plan is not liable

22 to any health care provider or practitioner with respect

23 to the provision of such items and services for payments

24 in excess of the amount for which the enrollee would have
42

•S 1770 PCS1S

1 been liable if the plan were to have made payments in a

2 timely manner.

3 SEC. 1115. ENROLLMENT.

4 (a) ENROLLMENT PROCESS.—

5 (1) IN GENERAL.—A qualified general access

6 plan shall establish an enrollment process consistent

7 with this subsection.

8 (2) INITIAL ENROLLMENT PERIOD.—Each eligi9 ble employee or eligible individual, at the time the

10 individual first becomes an eligible employee or eligi11 ble individual in the HCCA in which a qualified gen12 eral access plan is offered, shall have an initial en13 rollment period (of not less than 30 days) in which

14 to enroll in the plan.

15 (3) GENERAL ENROLLMENT PERIOD.—Each

16 qualified general access plan shall permit eligible

17 employees and eligible individuals to enroll (or

18 change enrollment) in the plan during each general

19 annual enrollment period specified by the appro20 priate certifying authority under section 1408.

21 (4) SPECIAL ENROLLMENT PERIODS.—In the

22 case of an eligible employee or eligible individual

23 who—
43

•S 1770 PCS1S

1 (A) through marriage, divorce, birth, or

2 adoption of a child, or similar circumstances,

3 experiences a change in family composition;

4 (B) experiences a change in employment

5 status (including a significant change in the

6 terms and conditions of employment); or

7 (C) changes residence to another HCCA;

8 each qualified general access plan shall provide for

9 a special enrollment period in which the employee or

10 individual is permitted to change the individual or

11 family basis of coverage or the plan in which the em12 ployee or individual is enrolled. The circumstances

13 under which such special enrollment periods are re14 quired and the duration of such periods shall be

15 specified in the insurance reform standards.

16 (5) TRANSITIONAL ENROLLMENT PERIOD.—

17 Each qualified general access plan that will be of18 fered at the beginning of the first certification year

19 (as defined in section 1601(9)) shall provide for a

20 special transitional enrollment period (during a pe21 riod beginning in the months of October through

22 December of the previous year) during which eligible

23 employees and eligible individuals may first enroll.

24 (b) PERIOD OF COVERAGE.—
44

•S 1770 PCS1S

1 (1) INITIAL ENROLLMENT PERIOD.—In the case

2 of an eligible employee or eligible individual who en3 rolls with a qualified general access plan during an

4 initial enrollment period, coverage under the plan

5 shall begin on such date (not later than the first day

6 of the first month that begins at least 15 days after

7 the date of enrollment) as the insurance reform

8 standards specify.

9 (2) GENERAL ENROLLMENT PERIODS.—In the

10 case of an eligible employee or eligible individual who

11 enrolls with a qualified general access plan during a

12 general enrollment period, coverage under the plan

13 shall begin on the first day of the first month begin14 ning at least 15 days after the end of such period.

15 (3) SPECIAL ENROLLMENT PERIODS.—

16 (A) IN GENERAL.—In the case of an eligi17 ble employee or eligible individual who enrolls

18 with a qualified general access plan during a

19 special enrollment period described in sub20 section (a)(4), coverage under the plan shall

21 begin on such date (not later than the first day

22 of the first month that begins at least 15 days

23 after the date of enrollment) as the insurance

24 reform standards specify, except that coverage

25 of family members shall begin as soon as pos-
45

•S 1770 PCS1S

1 sible on or after the date of the event that gives

2 rise to the special enrollment period.

3 (B) TRANSITIONAL SPECIAL ENROLLMENT

4 PERIOD.—In the case of an eligible employee or

5 eligible individual who enrolls with a qualified

6 general access plan during the transitional spe7 cial enrollment period described in subsection

8 (a)(5), coverage under the plan shall begin on

9 January 1 of the first certification year.

10 (4) MINIMUM PERIOD OF ENROLLMENT.—

11 (A) IN GENERAL.—In order to avoid ad12 verse selection, each qualified general access

13 plan may require, consistent with the insurance

14 reform standards, that enrollments with the

15 plan be for not less than a specified minimum

16 enrollment period (with exceptions permitted

17 for such exceptional circumstances as the stand18 ards may recognize).

19 (B) SUNSET.—Subparagraph (A) shall not

20 apply on and after the date that the universal

21 coverage requirement of section 1501 first ap22 plies.

23 SEC. 1116. RATING LIMITATIONS.

24 (a) LIMIT ON VARIATION OF PREMIUMS FOR EN25 ROLLEES UNDER AGE 65.—
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1 (1) IN GENERAL.—Subject to paragraph (2),

2 the premium charged by an insurer for coverage

3 under a qualified general access plan offered to all

4 eligible employees and eligible individuals within an

5 age band specified under subsection (b) for a class

6 of family enrollment in a HCCA may not exceed

7 such premium within another age band for such

8 class and HCCA so specified by more than—

9 (A) 20 percent, for the first certification

10 year,

11 (B) 18, 16, 14, and 12 percent, for each

12 of the next 4 respective years, and

13 (C) 10 percent for each succeeding year

14 thereafter.

15 (2) ADJUSTMENT BASED ON DIFFERENCES IN

16 ADMINISTRATIVE COSTS.—In accordance with the in17 surance reform standards, an insurer may vary the

18 premiums based on identifiable differences in mar19 keting and other legitimate administrative costs (as

20 defined in such standards), except that such pre21 miums may not vary under this paragraph with re22 spect to enrollees within a particular purchasing

23 group.

24 (b) ESTABLISHMENT OF CLASSES OF FAMILY EN25 ROLLMENT AND AGE BANDS.—
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1 (1) CLASSES OF FAMILY ENROLLMENT.—For

2 purposes of this title, there are 2 classes of family

3 enrollment:

4 (A) Enrollment of an individual without

5 dependents (in this section referred to as ‘‘indi6 vidual enrollment’’).

7 (B) Enrollment of an individual with de8 pendents.

9 (2) AGE BANDS.—For purposes of this title, the

10 insurance reform standards shall specify age bands

11 for individuals under 65 years of age, which shall be

12 applied to the premium for each class of family en13 rollment based on the age of the principal or other

14 enrollee (as specified under such standards).

15 (c) STANDARD PREMIUMS WITH RESPECT TO ELIGI16 BLE EMPLOYEES AND ELIGIBLE INDIVIDUALS.—

17 (1) IN GENERAL.—Each qualified general ac18 cess plan to be offered to an eligible employee or eli19 gible individual which provides for—

20 (A) the standard package, shall establish a

21 standard premium for such package, or

22 (B) the catastrophic package, shall estab23 lish a standard premium for such package,,

24 for individual enrollment within each HCCA in

25 which the plan is offered. Subject to paragraph (2),
48

•S 1770 PCS1S

1 within a HCCA for eligible employees and eligible in2 dividuals, the standard premium for each such pack3 age for all such employees and individuals shall be

4 the same.

5 (2) APPLICATION TO INDIVIDUALS.—The pre6 mium charged for coverage in a qualified general ac7 cess plan shall be the product of—

8 (A) the standard premium (established

9 under paragraph (1));

10 (B) in the case of enrollment other than

11 individual enrollment, the family adjustment

12 factor specified under paragraph (3); and

13 (C) the age factor (specified under para14 graph (4)) for the age band in which the enroll15 ment is classified.

16 (3) FAMILY ADJUSTMENT FACTOR.—The insur17 ance reform standards shall specify a family adjust18 ment factor that reflects the relative actuarial costs

19 of benefit packages based on a family enrollment (as

20 compared with such costs for individual enrollment).

21 Such factor may be different for the standard pack22 age and the catastrophic package, but may not differ

23 based on the geographic area in which the plan is

24 offered.

25 (4) AGE ADJUSTMENT FACTOR.—
49

•S 1770 PCS1S

1 (A) IN GENERAL.—The insurance reform

2 standards shall specify, for each age band es3 tablished under subsection (b)(2), an age ad4 justment factor that reflects the relative actuar5 ial costs of benefit packages among enrollees

6 classified in the different age bands. Such fac7 tors may be different for the standard package

8 and the catastrophic package.

9 (B) LIMIT ON VARIATION IN AGE ADJUST10 MENT FACTORS.—The highest age adjustment

11 factor may not exceed twice the lowest age ad12 justment factor.

13 (d) FULL DISCLOSURE OF RATING PRACTICES.—

14 (1) IN GENERAL.—At the time an insurer offers

15 a qualified general access plan, the insurer shall

16 fully disclose rating practices for such plan.

17 (2) NOTICE ON EXPIRATION.—An insurer pro18 viding a qualified general access plan shall provide

19 for notice, at least 60 days before the date of expira20 tion of the plan, of the terms for renewal of the

21 plan. Such notice shall include an explanation of the

22 extent to which any increase in premiums is due to

23 actual or expected claims experience of the individ24 uals covered under the plan contract.
50

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1 (e) NOTIFICATION OF FAILURE TO RECEIVE PRE2 MIUM.—If a qualified general access plan fails to receive

3 payment on a premium due with respect to an individual

4 covered under the plan, the plan shall provide notice of

5 such failure to the individual within the 20-day period

6 after the date on which such premium payment was due.

7 (f) ACTUARIAL CERTIFICATION.—Each insurer shall

8 file annually with the appropriate certifying authority a

9 written statement by a member of the American Academy

10 of Actuaries (or other individual acceptable to such au11 thority) certifying that, based upon an examination by the

12 individual which includes a review of the appropriate

13 records and of the actuarial assumptions of the insurer

14 and methods used by the insurer in establishing premium

15 rates for qualified general access plans—

16 (1) the insurer is in compliance with the appli17 cable provisions of this section; and

18 (2) the rating methods are actuarially sound.

19 Each insurer shall retain a copy of such statement for ex20 amination by any individual at its principal place of busi21 ness.

22 (g) PAYMENT OF PREMIUMS.—

23 (1) IN GENERAL.—With respect to a new en24 rollee in a qualified general access plan, the plan

25 may require advanced payment of an amount equal
51

•S 1770 PCS1S

1 to monthly applicable premium for the plan at the

2 time such individual is enrolled.

3 (2) REQUIREMENT FOR PAYROLL DEDUC4 TIONS.—

5 (A) IN GENERAL.—Subject to subpara6 graph (C)(ii), a qualified general access plan

7 may require, in the case of an individual en8 rolled under the plan as an eligible employee,

9 that payment of premiums with respect to the

10 individual be made through payroll deduction.

11 (B) FREQUENCY.—In the case of an eligi12 ble employee who is paid wages or other com13 pensation—

14 (i) on a monthly or more frequent

15 basis, a qualified general access plan may

16 not require the employer to provide for

17 payment of such an amount other than at

18 the same time at which such an amount is

19 deducted from such wages or other com20 pensation, or

21 (ii) less frequently than monthly, a

22 qualified general access plan may require

23 the employer to provide for payment of

24 such an amount on a monthly basis.

25 (C) EMPLOYEE PROTECTIONS.—
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1 (i) WITHHOLDING CONSTITUTES SAT2 ISFACTION OF OBLIGATION.—Withholding

3 of an amount by an employer under this

4 paragraph shall constitute satisfaction of

5 the employee’s obligation to pay the quali6 fied general access plan with respect to

7 such amount.

8 (ii) DIRECT PAYMENT ALLOWED IN

9 CASE OF NONPAYMENT.—In the case of

10 the nonpayment to a qualified general ac11 cess plan of any amount withheld by an

12 employer, the plan shall notify such em13 ployee of such nonpayment and shall allow

14 the employee to make direct payments to

15 the plan effective with the next succeeding

16 payment period.

17 SEC. 1117. RISK ADJUSTMENT.

18 (a) IN GENERAL.—Each qualified general access plan

19 shall participate in a risk adjustment program of the State

20 (or the Secretary if the Secretary is the appropriate cer21 tifying authority) described in section 1406.

22 (b) RISK ADJUSTMENT PROCESS AND FACTORS.—

23 (1) IN GENERAL.—The insurance reform stand24 ards shall specify the risk adjustment process and
53

•S 1770 PCS1S

1 factors to be used under such risk adjustment pro2 grams.

3 (2) FACTORS.—

4 (A) IN GENERAL.—Such risk-adjustment

5 factors shall be established for each class of

6 family enrollment in a qualified general access

7 plan based on all individuals in such class en8 rolled in the plan. Each factor shall be cor9 related with increased or diminished risk for

10 consumption of the type of health services in11 cluded in the covered items and services under

12 section 1301. To the maximum extent prac13 ticable, such factors shall be determined with14 out regard to the delivery system used by indi15 vidual qualified general access plans in the pro16 vision of such items and services.

17 (B) RULES.—In determining such a factor

18 for a class, in the case of a qualified general ac19 cess plan that—

20 (i) on average has a lower-than-aver21 age risk for consumption of the covered

22 items and services, the factor shall be a

23 number, less than zero, reflecting the de24 gree of such lower risk;
54

•S 1770 PCS1S

1 (ii) has an average risk for consump2 tion of such items and services, the factor

3 shall be zero; or

4 (iii) on average has a higher-than-av5 erage risk for consumption of such items

6 and services, the factor shall be a number,

7 greater than zero, reflecting the degree of

8 such higher risk.

9 SEC. 1118. COLLECTION AND PROVISION OF STANDARD10 IZED INFORMATION.

11 (a) IN GENERAL.—A qualified health plan shall pro12 vide the State (at a time, not less frequently than annu13 ally) such information as the Secretary shall prescribe by

14 regulation as necessary, consistent with this section and

15 sections 1405 and 3301, to evaluate the performance of

16 the qualified health plan and to prepare the comparative

17 materials described in section 1405. A qualified general

18 access plan shall provide each State with such additional

19 information as such State may determine to be necessary

20 with respect to qualified general access plans. The data

21 collection standards shall specify the standardized format

22 for such information (including model forms) for use by

23 qualified health plans in providing information under this

24 subsection. Such standards shall be consistent with sub25 title B of title III.
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•S 1770 PCS1S

1 (b) USE OF UNIFORM CLAIMS FORMS.—Each quali2 fied health plan shall use standardized forms, including

3 uniform claims forms, identified by the insurance reform

4 standards.

5 (c) CONDITIONING CERTAIN PROVIDER PAY6 MENTS.—

7 (1) IN GENERAL.—In order to assure the collec8 tion of all information required from the direct pro9 viders of services for which benefits are available

10 through a qualified general access plan, a qualified

11 general access plan may not provide payment for

12 services (other than emergency services) furnished

13 under a benefits package unless the provider has

14 given the plan standard information (specified in or

15 pursuant to the insurance reform standards) re16 specting the services.

17 (2) FORWARDING INFORMATION.—If informa18 tion under paragraph (1) is given to the qualified

19 general access plan, the plan is responsible for for20 warding the information to the State (or the Sec21 retary) under subsection (a).

22 (d) INFORMATION REGARDING A PATIENT’S RIGHT

23 TO SELF DETERMINATION REGARDING HEALTH CARE.—

24 Each qualified health plan shall provide written informa25 tion to each individual enrolling in such plan of such indi-
56

•S 1770 PCS1S

1 vidual’s right under State law (whether statutory or as

2 recognized by the courts of the State) to make decisions

3 concerning medical care, including the right to accept or

4 refuse medical treatment and the right to formulate ad5 vance directives (as defined in section 1866(f)(3) of the

6 Social Security Act (42 U.S.C. 1395cc(f)(3))), and the

7 written policies of the qualified health plan with respect

8 to such right.

9 SEC. 1119. QUALITY ASSURANCE.

10 Each qualified general access plan shall establish and

11 maintain a quality assurance program that complies with

12 the standards developed under section 3001.

13 SEC. 1120. MEDIATION PROCEDURES RELATING TO MAL14 PRACTICE CLAIMS.

15 Each qualified general access plan shall establish and

16 maintain a mediation procedures program that complies

17 with the standards developed under section 4011.

18 SEC. 1121. SERVICE TO DESIGNATED UNDERSERVED

19 AREAS.

20 Each qualified general access plan shall contain as21 surances of compliance with any requirements relating to

22 the provision of covered items and services in designated

23 underserved areas as determined by the appropriate cer24 tifying authority.
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1 SEC. 1122. ADDITIONAL REQUIREMENTS.

2 Each qualified general access plan shall comply with

3 the requirements of part III and meet such other require4 ments as may be imposed under the insurance reform

5 standards or by the appropriate certifying authority. If

6 such authority is a State, the authority may require such

7 a plan to enter into an agreement under section

8 1933(b)(3) of the Social Security Act, as added by section

9 6021(a) of this Act, for the provision of items and services

10 on a capitated basis under the medicaid program.

11 PART II—INDIVIDUAL AND SMALL EMPLOYER

12 PURCHASING GROUPS

13 SEC. 1141. ESTABLISHMENT AND ORGANIZATION.

14 (a) IN GENERAL.—Individual and small employer

15 purchasing groups (in this Act referred to as ‘‘purchasing

16 groups’’) may be established in accordance with this part.

17 Each purchasing group shall be chartered under State law

18 and operated as a not-for-profit corporation. An insurer

19 may not form, underwrite, or possess a majority vote of

20 a purchasing group, but may administer such a group.

21 (b) BOARD OF DIRECTORS.—

22 (1) IN GENERAL.—Each purchasing group shall

23 be governed by a Board of Directors. Such Board

24 shall initially be appointed under procedures under

25 section 1404(a). Subsequently, the Board shall be

26 elected by the members of the group in accordance
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•S 1770 PCS1S

1 with paragraph (3). Such Board shall be composed

2 of individuals who are small employers (or represent3 atives of small employers), eligible employees of

4 small employers (or representatives of such employ5 ees), and eligible individuals in the HCCA in which

6 the group operates.

7 (2) MEMBERSHIP.—A purchasing group shall

8 accept all small employers, eligible employees, and

9 eligible individuals residing within the HCCA served

10 by the group as members if such employers, employ11 ees or individuals request such membership.

12 (3) VOTING.—Members of a purchasing group

13 shall have voting rights consistent with the rules es14 tablished under section 1404(b).

15 (c) DUTIES OF PURCHASING GROUPS.—

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

17 each purchasing group shall—

18 (A) market qualified general access plans

19 to members throughout the entire HCCA served

20 by the group;

21 (B) enter into agreements with qualified

22 general access plans under section 1142;

23 (C) enter into agreements with small em24 ployers under section 1143;
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1 (D) enroll individuals in qualified general

2 access plans, only in accordance with section

3 1144; and

4 (E) carry out other functions provided for

5 under this title.

6 (2) LIMITATION ON ACTIVITIES.—A purchasing

7 group shall not—

8 (A) perform any activity (including review,

9 approval, or enforcement) relating to payment

10 rates for providers;

11 (B) perform any activity (including certifi12 cation or enforcement) relating to compliance of

13 general access plans with the requirements of

14 part 1 of this subtitle;

15 (C) assume financial risk in relation to any

16 such plan; or

17 (D) perform other activities identified by

18 the State as being inconsistent with the per19 formance of its duties under paragraph (1).

20 (d) RULES OF CONSTRUCTION.—

21 (1) ESTABLISHMENT NOT REQUIRED.—Nothing

22 in this section shall be construed as requiring—

23 (A) that a purchasing group be established

24 in each HCCA; and
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•S 1770 PCS1S

1 (B) that there be only one purchasing

2 group established with respect to a HCCA.

3 (2) SINGLE ORGANIZATION SERVING MULTIPLE

4 HCCAS.—Nothing in this section shall be construed

5 as preventing a single not-for-profit corporation

6 from being the purchasing group for more than one

7 HCCA.

8 SEC. 1142. AGREEMENTS WITH QUALIFIED GENERAL AC9 CESS PLANS.

10 (a) AGREEMENTS.—

11 (1) IN GENERAL.—Except as provided in para12 graph (3), each purchasing group for a HCCA shall

13 enter into an agreement under this section with each

14 qualified general access plan that desires to be made

15 available through the purchasing group in accord16 ance with procedures under section 1404.

17 (2) TERMINATION OF AGREEMENT.—An agree18 ment under paragraph (1) shall remain in effect for

19 a 12-month period, except that the purchasing group

20 may terminate an agreement under paragraph (1) if

21 the qualified general access plan’s certification under

22 section 1402 is terminated or for other good cause

23 shown.
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1 (3) LIMITATION ON RENEWAL OF AGREE2 MENTS.—Subsequent to the 12-month period de3 scribed in paragraph (2), a purchasing group may—

4 (A) refuse to enter into a subsequent

5 agreement with a qualified general access plan

6 if the group determines that the plan enroll7 ment or plan premium is too low, and

8 (B) if a previous agreement with a quali9 fied general access plan was terminated for

10 good cause and the group determines appro11 priate actions have not been taken to correct

12 the problems, refuse to enter into a subsequent

13 agreement with the plan.

14 (4) NO PROHIBITION ON OFFERING OF

15 PLANS.—Nothing in this subsection shall be con16 strued as prohibiting a qualified general access plan

17 that does not enter into an agreement under para18 graph (1) from being offered to small employers and

19 eligible individuals within a HCCA.

20 (b) RECEIPT OF PREMIUMS ON BEHALF OF

21 PLANS.—

22 (1) IN GENERAL.—Under an agreement under

23 this section between a purchasing group and a quali24 fied general access plan, payment of premiums may

25 be made by individuals (or employers on their be-
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1 half) directly to the purchasing group for the benefit

2 of the plan.

3 (2) TIMING OF PAYMENT OF PREMIUMS.—Pre4 miums may be payable on a monthly basis (or, at

5 the option of an eligible employee or individual, on

6 a quarterly basis). The purchasing group may pro7 vide for reasonable penalties and grace periods for

8 late payment.

9 (3) QUALIFIED GENERAL ACCESS PLANS RE10 TAIN RISK OF NONPAYMENT.—Nothing in this sub11 section shall be construed as placing upon a pur12 chasing group any risk associated with the failure of

13 individuals and employers to make prompt payment

14 of premiums (other than the portion of the premium

15 representing the purchasing group administrative fee

16 under section 1145). Each small employer and eligi17 ble individual who enrolls with a qualified general

18 access plan through the purchasing group is liable to

19 the plan for premiums.

20 (c) FORWARDING OF PREMIUMS.—

21 (1) IN GENERAL.—If, under an agreement

22 under subsection (a), premium payments under a

23 qualified general access plan are made to the pur24 chasing group, the purchasing group shall forward

25 to the plan the amount of the premiums.
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1 (2) PAYMENTS.—Payments shall be made by

2 the purchasing group under this subsection within a

3 period of days (specified by the Secretary and not to

4 exceed 7 days) after receipt of the premium from the

5 small employer of the eligible employee or the eligi6 ble individual, as the case may be.

7 SEC. 1143. PROVISION OF INFORMATION.

8 (a) IN GENERAL.—Each purchasing group for a

9 HCCA shall provide to each small employer that employs

10 individuals in the HCCA and to each eligible individual

11 who resides in the HCCA—

12 (1) information provided to the purchasing

13 group under section 1405 by the State in which such

14 group is located, and

15 (2) the opportunity to enter into an agreement

16 with the group for the purchase of a qualified gen17 eral access plan.

18 (b) FORWARDING INFORMATION AND PAYROLL DE19 DUCTIONS.—As part of an agreement entered into under

20 this section, a small employer shall forward the informa21 tion and make the payroll deductions required under sec22 tion 1004.
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1 SEC. 1144. ENROLLING ELIGIBLE EMPLOYEES AND ELIGI2 BLE INDIVIDUALS IN QUALIFIED GENERAL

3 ACCESS PLANS THROUGH A PURCHASING

4 GROUP.

5 A purchasing group shall offer, on behalf of each

6 qualified general access plan with which an agreement was

7 entered into under section 1142 and in accordance with

8 the enrollment procedures of such plans, enrollment in the

9 plan only to—

10 (1) all eligible employees employed by small em11 ployers in the HCCA served by the purchasing

12 group; and

13 (2) all eligible individuals residing in such

14 HCCA.

15 SEC. 1145. RESTRICTION ON CHARGES.

16 (a) IN GENERAL.—A purchasing group may impose

17 an administrative fee with respect to an eligible employee

18 or eligible individual enrolled under a qualified general ac19 cess plan offered through the purchasing group.

20 (b) FEE.—A purchasing group that elects to impose

21 a fee under subsection (a) shall ensure that such fee is

22 set as a percentage of the premium for each such plan

23 and is imposed uniformly with respect to all qualified gen24 eral access plans offered through the group.
65

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1 PART III—CONSUMER PROTECTION AND MARKET

2 REFORMS

3 SEC. 1161. REQUIREMENT FOR PROVISION OF INFORMA4 TION BY BROKERS.

5 Brokers or insurers who offer coverage under a quali6 fied general access plan to small employers (or eligible em7 ployees of small employers) or eligible individuals must

8 disclose to such prospective enrollees the information de9 veloped by the State under section 1405.

10 SEC. 1162. PROHIBITION OF IMPROPER INCENTIVES.

11 (a) LIMITATION ON FINANCIAL INCENTIVES.—No in12 surer that offers a qualified general access plan may vary

13 the commission or financial or other remuneration to a

14 person based on the claims experience or health status of

15 individuals enrolled by or through the person.

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

17 insurer that offers a qualified general access plan may re18 quire the purchase of any other insurance or product as

19 a condition for the purchase of a qualified general access

20 plan.

21 SEC. 1163. PROHIBITION OF SALE OF DUPLICATE COV22 ERAGE OR SALE TO CERTAIN POPULATIONS.

23 (a) DUPLICATE COVERAGE PROHIBITION.—It is un24 lawful for a person to sell or issue a qualified insured gen25 eral access plan to an individual—
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•S 1770 PCS1S

1 (1) with knowledge that the individual is cov2 ered under a qualified health plan or under an

3 equivalent health care program, or

4 (2) without obtaining such information as the

5 Secretary may specify (taking into account the type

6 of information described in section 1882(d)(1)(B) of

7 the Social Security Act).

8 (b) EXCEPTION.—Subsection (a) shall not apply to

9 a plan the sale or issuance of which is intended to replace

10 another qualified health plan. Subsection (a) also does not

11 apply in the case of coverage for insurance described in

12 section 1601(14)(B).

13 (c) ENFORCEMENT.—Any person who violates sub14 section (a) is subject to a civil money penalty not to exceed

15 $10,000 for each such violation. The provisions of section

16 1128A of the Social Security Act (other than subsections

17 (a) and (b)) shall apply to civil money penalties under this

18 subsection in the same manner as they apply to a penalty

19 or proceeding under section 1128A(a) of such Act.
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1 Subtitle C—Qualified Health Plans

2 in the Large Employer Market3 place

4 PART I—REQUIREMENTS ON LARGE EMPLOYER

5 PLANS

6 SEC. 1201. STANDARDS APPLIED TO LARGE EMPLOYER

7 PLANS.

8 Each large employer plan (as defined in section

9 1601(16)) shall meet the applicable standards developed

10 under section 1202.

11 SEC. 1202. ESTABLISHMENT OF STANDARDS APPLICABLE

12 TO LARGE EMPLOYER PLANS.

13 (a) ESTABLISHMENT OF STANDARDS BY SECRETARY

14 OF HEALTH AND HUMAN SERVICES.—

15 (1) IN GENERAL.—The Secretary of Health and

16 Human Services, in consultation with the Secretary

17 of Labor, shall develop and publish standards appli18 cable to large employer plans relating to the require19 ments described in paragraph (2). The Secretary

20 shall develop and publish such standards by not

21 later than the date that is 6 months after the date

22 of enactment of this Act. Such standards shall be

23 the insurance standards applicable under this part.

24 (2) REQUIREMENTS SPECIFIED.—Subject to

25 paragraph (3), the requirements referred to in para-
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•S 1770 PCS1S

1 graph (1) are requirements specified in the following

2 provisions:

3 (A) Subsection (a) of section 1111 (relat4 ing to guaranteed eligibility), subject to sub5 sections (d) and (e) of such section, except that

6 such subsection shall be applied (for purposes

7 of this subsection) only with respect to eligible

8 employees of the large employer.

9 (B) Section 1112 (relating to non10 discrimination based on health status).

11 (C) Section 1113 (relating to benefits).

12 (D) Section 1115 (relating to enrollment)

13 or establish such comparable enrollment proce14 dures as the Secretary of Labor specifies, other

15 than the requirement for a general enrollment

16 period under subsection (a)(3) of such section.

17 (E) Section 1118 (relating to collection

18 and provision of standardized information).

19 (F) Section 1119 (relating to quality as20 surance).

21 (3) COLLECTIVE BARGAINING EXCEPTION.—

22 Paragraph (2)(A) shall not apply to a large em23 ployer plan that is providing benefits pursuant to a

24 collective bargaining agreement.
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•S 1770 PCS1S

1 (4) REFERENCE TO ENFORCEMENT.—For pro2 vision enforcing requirements of this subsection, see

3 the amendments made by sections 2402, 2411, and

4 2412.

5 (b) ESTABLISHMENT OF STANDARDS BY SECRETARY

6 OF LABOR.—

7 (1) IN GENERAL.—The Secretary of Labor, in

8 consultation with the Secretary of Health and

9 Human Services, shall develop and publish stand10 ards applicable to large employer plans relating to

11 the requirements specified in paragraph (2). The

12 Secretary shall develop and publish such standards

13 by not later than the date that is 6 months after the

14 date of enactment of this Act. Such standards shall

15 be the insurance standards applicable under this

16 part.

17 (2) REQUIREMENTS SPECIFIED.—Subject to

18 paragraph (3), the requirements referred to in para19 graph (1) are requirements specified in the following

20 provisions:

21 (A) Section 1114 (relating to financial sol22 vency) or such standards similar to the stand23 ards established under such section as the Sec24 retary of Labor specifies, except that such

25 standards shall be consistent with the applicable
70

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1 rules under section 414 of the Employee Retire2 ment Income Security Act of 1974.

3 (B) Section 1116(g) (relating to payment

4 of premiums).

5 (C) Section 1120 (relating to mediation

6 procedures relating to malpractice claims).

7 (D) Section 1203 (relating to required

8 offer of different benefit packages).

9 (c) CONSIDERATION OF NAIC STANDARDS.—In es10 tablishing standards under this section, the Secretary of

11 Health and Human Services and the Secretary of Labor

12 shall take into account standards established under sub13 title B relating to comparable requirements.

14 (d) APPLICATION OF STANDARDS TO HEALTH PLANS

15 OFFERED UNDER FEHBP.—Notwithstanding any other

16 provision of law, each health plan offered under chapter

17 89 of title 5, United States Code, shall meet the standards

18 applicable to large employer plans under this subtitle, in

19 the same manner and as of the same date such standards

20 first apply to such plans.

21 SEC. 1203. OFFER OF DIFFERENT BENEFIT PACKAGES RE22 QUIRED.

23 (a) IN GENERAL.—Each large employer shall make

24 available to each eligible employee at least—
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•S 1770 PCS1S

1 (1) a qualified large employer plan that includes

2 the standard package, and

3 (2) a qualified large employer plan that includes

4 the catastrophic package.

5 (b) SELECTION OF PLANS BY MAJORITY OF EMPLOY6 EES.—

7 (1) IN GENERAL.—The large employer shall

8 make the selections of qualified large employer plans

9 under paragraphs (1) and (2) of subsection (a) on

10 an annual basis. In making each such selection, the

11 large employer shall comply with any selection of a

12 qualified large employer plan made by at least 50

13 percent of the eligible employees of the large em14 ployer. The Secretary of Labor shall prescribe rules

15 which shall govern the manner in which employees

16 may make such a selection. Nothing in this sub17 section shall be construed to require an employer to

18 make any financial contribution towards the cost of

19 such a qualified large employer plan or for such an

20 employer to refuse to offer such a plan for good

21 cause.

22 (2) LIMITATION.—Paragraph (1) shall not

23 apply in the case of a large employer that contrib24 utes to the cost of the qualified large employer plan.
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1 (c) ENFORCEMENT.—For enforcement of the require2 ment of this section, see amendment made by section

3 2402(b) of this Act.

4 SEC. 1204. ENROLLMENT IN LARGE EMPLOYER PLANS IN

5 SATISFACTION OF ENROLLMENT REQUIRE6 MENT.

7 In the case of an individual who qualifies for coverage

8 under large employer plan (and is not eligible for coverage

9 under an equivalent health care program or under a quali10 fied health plan that is not a large employer plan), the

11 individual shall satisfy the requirement of section 1501

12 through enrollment in the large employer plan.

13 SEC. 1205. DEVELOPMENT OF LARGE OR MULTIPLE EM14 PLOYER PURCHASING GROUPS.

15 (a) IN GENERAL.—Nothing in this title shall be con16 strued as prohibiting 2 or more large employers from

17 forming a purchasing group with respect to the employees

18 of such employer or employers.

19 (b) NO USE OF INDIVIDUAL AND SMALL EMPLOYER

20 PURCHASING GROUPS.—A large employer shall be ineli21 gible to purchase health insurance through an individual

22 and small employer purchasing group.

23 SEC. 1207. CORRECTIVE ACTIONS.

24 (a) IN GENERAL.—The plan sponsor of each large

25 employer plan shall determine semiannually whether the
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1 requirements of this part are met. In any case in which

2 the plan sponsor determines that there is reason to believe

3 that there is or will be a failure to meet such requirements,

4 or the Secretary or the Secretary of Labor makes such

5 a determination and so notifies the plan sponsor, the plan

6 sponsor shall, within 90 days after making such deter7 mination or receiving such notification, notify such Sec8 retary (in such form and manner as such Secretary may

9 prescribe by regulation) of a description of the corrective

10 actions (if any) that the plan sponsor has taken or plans

11 to take in response to such recommendations. The plan

12 sponsor shall thereafter report to such Secretary, in such

13 form and frequency as such Secretary may specify to the

14 plan sponsor, regarding corrective action taken by the plan

15 sponsor until such requirements are met. Either such Sec16 retary may make a determination that a large employer

17 plan has ceased to be a qualified large employer plan only

18 if such Secretary is satisfied that the necessary corrective

19 action cannot reasonably be expected to occur on a timely

20 basis necessary to avoid failure to provide benefits for

21 which the plan is obligated.

22 (b) DISQUALIFIED OR TERMINATION OF PLAN.—

23 (1) IN GENERAL.—In any case in which the

24 plan sponsor of a large employer plan determines

25 that there is reason to believe that the plan will
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1 cease to be a qualified large employer plan or will

2 terminate, the plan sponsor shall so inform the Sec3 retary and the Secretary of Labor, shall develop a

4 plan for winding up the affairs of the plan in con5 nection with such disqualification or termination in

6 a manner which will result in timely payment of all

7 benefits for which the plan is obligated, and shall

8 submit such plan in writing to such Secretaries. Ac9 tions required under this subparagraph shall be

10 taken in such form and manner as may be pre11 scribed in regulations jointly prescribed by such Sec12 retaries.

13 (2) ACTIONS REQUIRED IN CONNECTION WITH

14 DISQUALIFICATION OR TERMINATION.—

15 (A) IN GENERAL.—In any case in which—

16 (i) the Secretary or the Secretary of

17 Labor has been notified under paragraph

18 (1) of a failure of a large employer plan to

19 meet the requirements of this part and has

20 not been notified by the plan sponsor that

21 corrective action has restored compliance

22 with such requirements, and

23 (ii) such Secretary determines, in con24 sultation with the other Secretary referred

25 to in clause (i), that the continuing failure
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1 to meet such requirements can be reason2 ably expected to result in a continuing fail3 ure to pay benefits for which the plan is

4 obligated,

5 the plan sponsor and the large employer shall

6 comply with the requirements of subparagraph

7 (B) or (C), as applicable.

8 (B) ACTIONS BY PLAN SPONSOR.—Upon a

9 determination by the Secretary or the Secretary

10 of Labor under subparagraph (A)(ii), the plan

11 sponsor shall, at the direction of such Sec12 retary, terminate the plan and, in the course of

13 the termination, take such actions as such Sec14 retary, in consultation with the other Secretary

15 referred to in subparagraph (A)(i), may require

16 as necessary to ensure that the affairs of the

17 plan will be, to the maximum extent possible,

18 wound up in a manner which will result in time19 ly payment of all benefits for which the plan is

20 obligated.

21 (C) ACTIONS BY LARGE EMPLOYER.—

22 Upon a determination by the Secretary or the

23 Secretary of Labor under subparagraph (A)(ii),

24 the large employer shall provide for such con25 tingency coverage for all eligible employees of
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1 the employer in accordance with regulations

2 which shall be prescribed in joint regulations of

3 such Secretaries. Such regulations may provide

4 for temporary coverage of such employees under

5 a plan provided by a purchasing group in the

6 appropriate HCCA, a plan provided under

7 chapter 89 of title 5, United States Code, or

8 other appropriate means established in such

9 regulations.’’.

10 PART II—AMENDMENTS TO ERISA

11 SEC. 1221. LIMITATION ON COVERAGE OF GROUP HEALTH

12 PLANS UNDER TITLE I OF ERISA.

13 (a) IN GENERAL.—Section 4 of the Employee Retire14 ment Income Security Act of 1974 (29 U.S.C. 1003) is

15 amended—

16 (1) in subsection (a), by striking ‘‘subsection

17 (b)’’ and inserting ‘‘subsections (b) and (c)’’;

18 (2) in subsection (b), by striking ‘‘The provi19 sions’’ and inserting ‘‘Except as provided in sub20 section (c), the provisions’’; and

21 (3) by adding at the end the following new sub22 section:

23 ‘‘(c) COVERAGE OF GROUP HEALTH PLANS.—

24 ‘‘(1) LIMITED INCLUSION.—This title shall

25 apply to a group health plan to the extent provided
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1 in this subsection. For purposes of this title, a plan,

2 fund, or program shall not be treated as a group

3 health plan solely because an employer makes the

4 plan available (and takes related actions) in compli5 ance with the applicable requirements of section

6 1004 or section 1203 of the Health Equity and Ac7 cess Reform Today Act of 1993.

8 ‘‘(2) COVERAGE UNDER CERTAIN PROVISIONS

9 WITH RESPECT TO LARGE EMPLOYER PLANS.—

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

11 subparagraph (B), parts 1 and 4 of subtitle B

12 shall apply to a large employer plan.

13 ‘‘(B) INAPPLICABILITY WITH RESPECT TO

14 INSURED QUALIFIED HEALTH PLANS.—Sub15 paragraph (A) shall not apply with respect to

16 any employee welfare benefit plan to the extent

17 such plan provides for health benefits under or

18 through a qualified insured health plan (as de19 fined in section 1601 of the Health Equity and

20 Access Reform Today Act of 1993).

21 ‘‘(3) CLAIMS PROCEDURES.—Section 503 shall

22 apply in the case of any large employer plan.

23 ‘‘(4) CIVIL ACTIONS BY PARTICIPANTS, BENE24 FICIARIES, AND FIDUCIARIES AND BY THE SEC25 RETARY.—Section 502 shall apply in the case of any
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1 large employer plan and any other group health plan

2 for which the plan sponsor makes a contribution.

3 ‘‘(5) DEFINITIONS AND ENFORCEMENT PROVI4 SIONS.—Sections 3, 501, 504, 505, 506, 510, and

5 511 and the preceding provisions of this section

6 shall apply to a group health plan to the extent nec7 essary to effectively carry out, and enforce the re8 quirements under, the provisions of this title as they

9 apply pursuant to this subsection.

10 ‘‘(6) APPLICABILITY OF PREEMPTION RULES.—

11 Section 514 shall apply in the case of any group

12 health plan to the extent that parts 1 and 4 of sub13 title B apply to such plan under paragraph (2).’’.

14 (b) REPORTING AND DISCLOSURE REQUIREMENTS

15 APPLICABLE TO GROUP HEALTH PLANS.—

16 (1) IN GENERAL.—Part 1 of subtitle B of title

17 I of such Act is amended—

18 (A) in the heading for section 110, by add19 ing ‘‘BY PENSION PLANS’’ at the end;

20 (B) by redesignating section 111 as section

21 112; and

22 (C) by inserting after section 110 the fol23 lowing new section:

24 ‘‘SPECIAL RULES FOR GROUP HEALTH PLANS

25 ‘‘SEC. 111. IN GENERAL.—The Secretary may by

26 regulation provide special rules for the application of this
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1 part to group health plans which are consistent with the

2 purposes of this title and the Health Equity and Access

3 Reform Today Act of 1993 and which take into account

4 the special needs of participants, beneficiaries, and health

5 care providers under such plans.

6 ‘‘(b) EXPEDITIOUS REPORTING AND DISCLOSURE.—

7 Such special rules may include rules providing for—

8 ‘‘(1) reductions in the periods of time referred

9 to in this part,

10 ‘‘(2) increases in the frequency of reports and

11 disclosures required under this part, and

12 ‘‘(3) such other changes in the provisions of

13 this part as may result in more expeditious reporting

14 and disclosure of plan terms and changes in such

15 terms to the Secretary and to plan participants and

16 beneficiaries,

17 to the extent that the Secretary determines that the rules

18 described in this subsection are necessary to ensure timely

19 reporting and disclosure of information consistent with the

20 purposes of this part and the Health Equity and Access

21 Reform Today Act of 1993 as they relate to group health

22 plans.

23 ‘‘(c) ADDITIONAL REQUIREMENTS.—Such special

24 rules may include rules providing for reporting and disclo25 sure to the Secretary and to participants and beneficiaries
80

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1 of additional information or at additional times with re2 spect to group health plans to which this part applies

3 under section 4(c)(2), if such reporting and disclosure

4 would be comparable to and consistent with similar re5 quirements applicable under the Health Equity and Access

6 Reform Today Act of 1993 with respect to small employer

7 plans and applicable regulations of the Secretary of

8 Health and Human Services prescribed thereunder.’’.

9 (2) CLERICAL AMENDMENT.—The table of con10 tents in section 1 of such Act is amended by striking

11 the items relating to sections 110 and 111 and in12 serting the following new items:

‘‘Sec. 110. Alternative methods of compliance by pension plans.

‘‘Sec. 111. Special rules for group health plans.

‘‘Sec. 112. Repeal and effective date.’’.

13 (c) TREATMENT OF MULTIPLE EMPLOYER WELFARE

14 ARRANGEMENTS.—

15 (1) INAPPLICABILITY OF PREEMPTION

16 RULES.—Section 514(b)(6)(A) of such Act (29

17 U.S.C. 1144(b)(6)(A)) is amended by adding at the

18 end (after and below clause (ii)) the following new

19 sentence:

20 ‘‘This paragraph shall not apply in the case of a group

21 health plan.’’.

22 (2) SPECIAL RULES FOR MULTIPLE EMPLOYER

23 WELFARE ARRANGEMENT PROVIDING HEALTH BEN24 EFITS.—
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1 (A) IN GENERAL.—Subject to subpara2 graph (B), any multiple employer welfare ar3 rangement with respect to which there is in ef4 fect a certification by the Secretary of Labor

5 under this paragraph shall be treated for pur6 poses of this title as a large employer plan.

7 (B) REQUIREMENTS.—Subparagraph (A)

8 shall apply to a multiple employer welfare ar9 rangement only if—

10 (i) the benefits provided under the ar11 rangement consist solely of medical care

12 (as defined in section 213(d) of the Inter13 nal Revenue Code of 1986),

14 (ii) such arrangement meets the re15 quirements of clause (i) of section

16 514(b)(6)(A) of the Employee Retirement

17 Income Security Act of 1974 (as in effect

18 immediately before the amendment made

19 by paragraph (1)), and

20 (iii) the sponsoring entity is organized

21 and maintained in good faith, with a con22 stitution and bylaws specifically stating its

23 purpose, as a trade association, an indus24 try association, a professional association,

25 or a chamber of commerce or other busi-
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•S 1770 PCS1S

1 ness group, for substantial purposes other

2 than that of obtaining or providing medical

3 care described in section 213(d) of the In4 ternal Revenue Code of 1986, and the ap5 plicant demonstrates to the satisfaction of

6 the Secretary that the sponsoring entity is

7 established as a permanent entity which

8 receives the active support of its members.

9 (C) RESTRICTION ON COMMENCEMENT OF

10 NEW ARRANGEMENTS.—A multiple employer

11 welfare arrangement providing benefits which

12 consist of medical care (as defined in section

13 213(d) of the Internal Revenue Code of 1986)

14 which has not commenced operations as of Jan15 uary 1, 1994, may commence operations only if

16 a certification of the arrangement under this

17 paragraph is in effect.

18 (D) CERTIFICATION PROCEDURE.—The

19 Secretary of Labor shall certify a multiple em20 ployer welfare arrangement under this para21 graph if—

22 (i) an application for such certifi23 cation with respect to such arrangement,

24 identified individually or by class, has been

25 duly filed in complete form with the Sec-
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1 retary of Labor in accordance with this

2 paragraph,

3 (ii) such application demonstrates

4 compliance with the requirements of sec5 tion 1202, and

6 (iii) the Secretary of Labor finds that

7 such certification is—

8 (I) administratively feasible,

9 (II) not adverse to the interests

10 of the individuals covered under the

11 arrangement, and

12 (III) protective of the rights and

13 benefits of the individuals covered

14 under the arrangement.

15 In the case of an arrangement which has com16 menced operations as of January 1, 1994, an

17 application under this paragraph must be filed

18 not later than January 1, 1996.

19 (E) DESIGNATION OF PLAN SPONSOR.—

20 The Secretary of Labor shall provide by regula21 tion for designation of the entities to be treated

22 as the plan sponsor.

23 (F) REVOCATION OF CERTIFICATION.—

24 The Secretary of Labor may revoke a certifi25 cation under this paragraph for any cause that
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1 may serve as the basis for the denial of an ini2 tial application for such a certification under

3 this paragraph.

4 (G) REVIEW OF ACTIONS BY SECRETARY

5 OF LABOR.—Any decision by the Secretary of

6 Labor which involves the denial of an applica7 tion by a multiple employee welfare arrange8 ment for certification under this paragraph or

9 the revocation of such a certification shall con10 tain a statement of the specific reason or rea11 sons supporting the Secretary’s action, includ12 ing reference to the specific terms of the certifi13 cation and the statutory provision or provisions

14 relevant to the determination. Any such denial

15 or revocation shall be subject to review as pro16 vided in section 502 of the Employee Retire17 ment Income Security Act of 1974.

18 PART III—REVISION OF COBRA CONTINUATION

19 COVERAGE REQUIREMENTS

20 SEC. 1231. AMENDMENTS TO THE EMPLOYEE RETIREMENT

21 INCOME SECURITY ACT OF 1974.

22 (A) PERIOD OF COVERAGE.—Subparagraph (D) of

23 section 602(2) of the Employee Retirement Income Secu24 rity Act of 1974 (29 U.S.C. 1161(2)) is amended—
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•S 1770 PCS1S

1 (1) by striking ‘‘or’’ at the end of clause (i), by

2 striking the period at the end of clause (ii) and in3 serting ‘‘, or’’, and by adding at the end the follow4 ing new clause:

5 ‘‘(iii) eligible for coverage under a

6 qualified health plan in accordance with

7 title I of the Health Equity and Access Re8 form Today Act of 1993.’’, and

9 (2) by striking ‘‘OR MEDICARE ENTITLEMENT’’

10 in the heading and inserting ‘‘, MEDICARE ENTITLE11 MENT, OR QUALIFIED HEALTH PLAN ELIGIBILITY’’.

12 (b) QUALIFIED BENEFICIARY.—Section 607(3) of

13 such Act (29 U.S.C. 1167(2)) is amended by adding at

14 the end the following new subparagraph:

15 ‘‘(D) SPECIAL RULE FOR INDIVIDUALS

16 COVERED BY HEALTH EQUITY AND ACCESS RE17 FORM TODAY ACT OF 1993.—The term ‘qualified

18 beneficiary’ shall not include any individual

19 who, upon termination of coverage under a

20 group health plan, is eligible for coverage under

21 a qualified health plan in accordance with title

22 I of the Health Equity and Access Reform

23 Today Act of 1993.’’

24 (c) REPEAL UPON IMPLEMENTATION OF HEALTH

25 EQUITY AND ACCESS REFORM TODAY ACT OF 1993.—
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1 (1) IN GENERAL.—Part 6 of subtitle B of title

2 I of such Act (29 U.S.C. 601 et seq.) is amended

3 by striking sections 601 through 608 and by redesig4 nating section 609 as section 601.

5 (2) CONFORMING AMENDMENTS.—

6 (A) Section 502(a)(7) of such Act (29

7 U.S.C. 1132(a)(7)) is amended by striking

8 ‘‘609(a)(2)(A)’’ and inserting ‘‘601(a)(2)(A)’’.

9 (B) Section 502(c)(1) is amended by strik10 ing ‘‘paragraph (1) or (4) of section 606’’.

11 (C) Section 514 of such Act (29 U.S.C.

12 1144) is amended by striking ‘‘609’’ each place

13 it appears in subsections (b)(7) and (b)(8) and

14 inserting ‘‘601’’.

15 (D) The table of contents in section 1 of

16 such Act is amended by striking the items relat17 ing to sections 601 through 609 and inserting

18 the following new item:

‘‘Sec. 601. Additional standards for group health plans.’’

19 (d) EFFECTIVE DATE.—

20 (1) SUBSECTIONS (a) AND (b).—The amend21 ments made by subsections (a) and (b) shall take ef22 fect on the date of the enactment of this Act.

23 (2) SUBSECTION (c).—The amendments made

24 by subsection (c) shall take effect on the first Janu-
87

•S 1770 PCS1S

1 ary 1 following the deadline specified in section

2 1401(c)(2) of this Act.

3 SEC. 1232. AMENDMENT TO PUBLIC HEALTH SERVICE ACT.

4 (a) PERIOD OF COVERAGE.—Subparagraph (D) of

5 section 2202(2) of the Public Health Service Act (42

6 U.S.C. 300bb–2(2)) is amended—

7 (1) by striking ‘‘or’’ at the end of clause (i), by

8 striking the period at the end of clause (ii) and in9 serting ‘‘, or’’, and by adding at the end the follow10 ing new clause:

11 ‘‘(iii) eligible for coverage under a

12 qualified health plan in accordance with

13 title I of the Health Equity and Access Re14 form Today Act of 1993,’’, and

15 (2) by striking ‘‘OR MEDICARE ENTITLEMENT’’

16 in the heading and inserting ‘‘, MEDICARE ENTITLE17 MENT, OR QUALIFIED HEALTH PLAN ELIGIBILITY’’.

18 (b) QUALIFIED BENEFICIARY.—Section 2208(3) of

19 such Act (42 U.S.C. 300bb–8(3)) is amended by adding

20 at the end the following new subparagraph:

21 ‘‘(C) SPECIAL RULE FOR INDIVIDUALS

22 COVERED BY THE HEALTH EQUITY AND ACCESS

23 REFORM TODAY ACT OF 1993.—The term ‘quali24 fied beneficiary’ shall not include any individual

25 who, upon termination of coverage under a
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1 group health plan, is eligible for coverage under

2 a qualified health plan in accordance with title

3 I of the Health Equity and Access Reform

4 Today Act of 1993.’’.

5 (c) REPEAL UPON IMPLEMENTATION OF HEALTH

6 EQUITY AND ACCESS REFORM TODAY ACT OF 1993.—

7 (1) IN GENERAL.—Title XXII of such Act (42

8 U.S.C. 300bb–1 et seq.) is hereby repealed.

9 (2) CONFORMING AMENDMENT.—The table of

10 contents of such Act is amended by striking the item

11 relating to title XXII.

12 (d) EFFECTIVE DATE.—

13 (1) SUBSECTIONS (a) AND (b).—The amend14 ments made by subsections (a) and (b) shall take ef15 fect on the date of the enactment of this Act.

16 (2) SUBSECTION (c).—The amendments made

17 by subsection (c) shall take effect on the first Janu18 ary 1 following the deadline specified in section

19 1401(c)(2) of this Act.

20 SEC. 1233. ADDITIONAL REVISIONS.

21 For additional revisions, see the amendments made

22 by section 2005 of this Act.
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1 Subtitle D—Benefits; Benefits

2 Commission

3 PART I—BENEFITS

4 SEC. 1301. OFFERING OF BENEFIT PACKAGES.

5 (a) BENEFIT PACKAGES.—Each qualified health plan

6 shall provide one (or both) of the following benefit pack7 ages:

8 (1) STANDARD PACKAGE.—The standard pack9 age consists of the covered items and services speci10 fied under subsection (b), subject to the applicable

11 cost sharing requirement specified under subsection

12 (c)(1) for such a package.

13 (2) CATASTROPHIC PACKAGE.—The cata14 strophic package consists of the covered items and

15 services (specified under subsection (b)), subject to

16 the applicable cost sharing requirement specified

17 under subsection (c)(2) for such a package.

18 (b) COVERED ITEMS AND SERVICES.—Subject to the

19 procedures for clarification and modification described in

20 part II, covered items and services consist of the following

21 items and services, but only when the provision of the item

22 or service is medically necessary or appropriate;

23 (1) Medical and surgical services (and supplies

24 incident to such services).

25 (2) Medical equipment.
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1 (3) Prescription drugs and biologicals.

2 (4) Preventive services.

3 (5) Rehabilitation and home health services re4 lated to an acute care episode.

5 (6) Services for severe mental illness.

6 (7) Substance abuse services.

7 (8) Hospice services.

8 (9) Emergency transportation and transpor9 tation for non-elective medically necessary services in

10 frontier and similar areas.

11 (c) COST SHARING.—

12 (1) STANDARD PACKAGE.—The standard pack13 age shall include deductibles, copayments, coinsur14 ance, and out-of-pocket limits on cost sharing estab15 lished for such package pursuant to part II.

16 (2) CATASTROPHIC PACKAGE.—The cata17 strophic package shall include a general deductible

18 amount and an out-of-pocket limit on cost sharing

19 established for such package pursuant to part II

20 (and may include such other deductibles,

21 copayments, and coinsurance as a qualified health

22 plan may provide consistent with such part).

23 (3) LIMITATION.—In establishing cost sharing

24 requirements under part II, the Commission shall

25 establish a limit on the total amount of cost-sharing
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1 that may be incurred by a family within a class of

2 family enrollment in a year.

3 (d) CRITERIA FOR DETERMINATION OF MEDICAL

4 NECESSITY AND APPROPRIATENESS.—

5 (1) IN GENERAL.—A qualified health plan shall

6 provide for coverage of the items and services de7 scribed in subsection (b) only for treatments and di8 agnostic procedures that are medically necessary or

9 appropriate. In the case of dispute concerning a de10 termination of medical necessity or appropriateness

11 and subject to the succeeding provisions of this sub12 section, for purposes of this title, a treatment (as de13 fined in subparagraph (6)(A)) or diagnostic proce14 dure shall be considered to be ‘‘medically necessary

15 or appropriate’’ if the following criteria are met:

16 (A) TREATMENT OR DIAGNOSIS OF MEDI17 CAL CONDITION.—

18 (i) IN GENERAL.—The treatment or

19 diagnostic procedure is for a medical con20 dition.

21 (ii) MEDICAL CONDITION DEFINED.—

22 The term ‘‘medial condition’’ means a dis23 ease, illness, injury, or biological or psycho24 logical condition or status for which treat25 ment is indicated to improve, maintain, or
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1 stabilize a health outcome (as defined in

2 paragraph (6)(B)) or which, in the absence

3 of treatment, could lead to an adverse

4 change in a health outcome.

5 (iii) ADVERSE CHANGE IN HEALTH

6 OUTCOME DEFINED.—In clause (ii), an ad7 verse change in a health outcome occurs if

8 there is a biological or psychological

9 decremental change in a health status.

10 (B) NOT INVESTIGATIONAL.—There must

11 be sufficient evidence on which to base conclu12 sions about the existence and magnitude of the

13 change in health outcome resulting from the

14 treatment or diagnostic procedure compared

15 with the best available alternative (or with no

16 treatment or diagnostic procedure if no alter17 native treatment or procedure is available).

18 (C) EFFECTIVE AND SAFE.—The evidence

19 must demonstrate that the treatment or diag20 nostic procedure can reasonably be expected to

21 produce the intended health result or provide

22 intended information and is safe and the treat23 ment or diagnostic procedure provides a clini24 cally meaningful benefit with respect to safety

25 and effectiveness in comparison to other avail-
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1 able alternatives or the patients current health

2 status.

3 (2) RELATIONSHIP TO FDA REVIEW.—

4 (A) APPROVED DRUGS, BIOLOGICALS, AND

5 MEDICAL DEVICES.—

6 (i) DRUGS.—A drug that has been

7 found to be safe and effective under sec8 tion 505 of the Federal Food, Drug, and

9 Cosmetic Act is deemed to meet the re10 quirements of paragraphs (1)(B) and

11 (1)(C) (relating to not investigational and

12 safety and effectiveness.)

13 (ii) BIOLOGICALS.—A biological that

14 has been found to be safe and effective

15 under section 351 of the Public Health

16 Service Act is deemed to meet the require17 ments of paragraphs (1)(B) and (1)(C)

18 (relating to not investigational and safety

19 and effectiveness).

20 (iii) MEDICAL DEVICES.—A medical

21 device that is marketed after the provision

22 of a notice under section 510(k) of the

23 Federal Food, Drug, and Cosmetic Act or

24 that has an application for premarket ap25 proval approved under section 515 of such
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•S 1770 PCS1S

1 Act is deemed to meet the requirements of

2 paragraphs (1)(B) and (1)(C) (relating to

3 not investigational and safety and effec4 tiveness).

5 (B) OTHER DRUGS, BIOLOGICALS, AND DE6 VICES.—A drug, biological, or medical device

7 not described in subparagraph (A) shall be con8 sidered to be investigational. Nothing shall pro9 hibit a qualified health plan from covering (nor

10 as compelling such a plan to cover) such drugs,

11 biologicals, and medical devices, including treat12 ment investigational new drugs.

13 (3) COVERAGE OF INVESTIGATIONAL TREAT14 MENTS IN APPROVED RESEARCH TRIALS.—

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

16 medial costs (as defined in subparagraph (C))

17 associated with the delivery of investigational

18 treatments (as defined in subparagraph (B))

19 shall be considered to be medically necessary or

20 appropriate only if the treatment is part of an

21 approved research trial (as defined in subpara22 graph (D)).

23 (B) INVESTIGATIONAL TREATMENT DE24 FINED.—In subparagraph (A), the term ‘‘inves25 tigational treatment’’ means a treatment for
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1 which there is not sufficient evidence to deter2 mine the health outcome of the treatment com3 pared with the best available alternative treat4 ment (or with no treatment if there is no alter5 native treatment).

6 (C) ROUTINE MEDICAL COSTS DEFINED.—

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

8 costs’’ means the cost of health services re9 quired to provide treatment according to the de10 sign of the trial, except those costs normally

11 paid for by other funding sources (as defined by

12 the Secretary). Such costs do not include the

13 cost of the investigational agent, devices or pro14 cedures themselves, the costs of any nonhealth

15 services that might be required for a person to

16 receive the treatment, or the costs of managing

17 the research.

18 (D) APPROVED RESEARCH TRIAL DE19 FINED.—In subparagraph (A), the term ‘‘ap20 proved research trial’’ means a trial—

21 (i) conducted for the primary purpose

22 of determining the safety, effectiveness, ef23 ficacy, or health outcomes of a treatment,

24 compared with the best available alter25 native treatment, and
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1 (ii) approved by the Secretary.

2 A trial is deemed to be approved under clause

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

4 of Health, the Food and Drug Administration

5 (through an investigational new drug exemp6 tion), the Department of Veterans Affairs, the

7 Department of Defense, or by a qualified non8 governmental research entity (as identified in

9 guidelines issued by one or more of the Na10 tional Institutes of Health).

11 (4) DOCUMENTATION.—

12 (A) IN GENERAL.—Each qualified health

13 plan is responsible for maintaining documentary

14 evidence supporting the plan’s decisions to

15 cover or to deny coverage based on the criteria

16 specified in this subsection.

17 (B) DISCLOSURE.—Each qualified health

18 plan shall disclose to its enrollees, in a manner

19 specified by the State, its coverage decisions

20 and must submit information on such decisions

21 to the State.

22 (5) BINDING ARBITRATION EVIDENCE.—The

23 evidence that may be used in making coverage deci24 sions under a binding arbitration process under this

25 section and section 1407 includes—
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1 (A) published peer-reviewed literature,

2 (B) opinions of medical specialty groups

3 and other medical experts; and

4 (C) evidence of general acceptance by the

5 medical community.

6 (6) TREATMENT AND HEALTH OUTCOME DE7 FINED.—As used in this subsection:

8 (A) IN GENERAL.—The term ‘‘treatment’’

9 means any health care intervention undertaken,

10 with respect to a specific indication, to improve,

11 maintain, or stabilize a health outcome or to

12 prevent or mitigate an adverse change in a

13 health outcome.

14 (B) HEALTH OUTCOME.—The term

15 ‘‘health outcome’’ means an outcome that af16 fects the length and quality of an enrollee’s life.

17 (e) APPLICATION IN BINDING ARBITRATION PROC18 ESS.—The criteria specified in subsection (d) shall be ap19 plied by arbitrators under the binding arbitration process

20 for disputes described in paragraphs (1)(C) and (2) of sec21 tion 1407.

22 (f) FREEDOM TO OFFER BENEFITS.—Nothing in

23 this section shall be construed to prohibit a health plan

24 that is not a qualified health plan from offering any health

25 care benefits.
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1 PART II—BENEFITS COMMISSION

2 SEC. 1311. ESTABLISHMENT.

3 There is established a commission to be known as the

4 Benefits Commission (in this part referred to as the

5 ‘‘Commission’’).

6 SEC. 1312. DUTIES.

7 (a) INITIAL PROPOSAL.—Not later than the termi8 nation of the 6-month period beginning on the date of the

9 enactment of this Act, the Commission shall develop and

10 submit to the Congress a proposal for legislation that in11 cludes the following:

12 (1) CLARIFICATION OF COVERED ITEMS AND

13 SERVICES.—A clarification of the items and services

14 to be included in the covered items and services

15 under section 1301(b). Such clarification—

16 (A) may eliminate a category of items or

17 services described in paragraphs (1) through

18 (7) of such section;

19 (B) may not specify the categories of

20 health care providers who are authorized to de21 liver items or services;

22 (C) with respect to covered items and serv23 ices, may not specify (in this Act or by regula24 tions) particular procedures or treatments, or

25 classes thereof;
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1 (D) may not establish limitations or cost

2 sharing requirements with respect to services

3 for severe mental illness that do not apply with

4 respect to other items or services; and

5 (E) with respect to section 1301(b)(9),

6 shall, after consultation with the Federal Avia7 tion Administration, provide for maximum flexi8 bility to air ambulance services, consistent with

9 basic public safety requirements, in order to

10 avoid an adverse change in health outcomes

11 (within the meaning of section 1301(d)(1)(A))

12 for persons using such services.

13 (2) SPECIFICATION OF COST SHARING.—A spec14 ification of the precise deductibles, copayments, coin15 insurance, and out-of-pocket limits on cost sharing

16 that are to apply to the standard package and the

17 catastrophic package under section 1301(c). Such

18 specification—

19 (A) shall establish multiple cost sharing

20 schedules that vary depending on the delivery

21 system by which health care is delivered to indi22 viduals enrolled in a qualified health plan; and

23 (B) shall provide that the general deduct24 ible amount described in section 1301(c)(2) is
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1 greater than any general deductible amount ap2 plicable to the standard package.

3 (3) COST ESTIMATE.—An estimate of the cost

4 of the standard package and the catastrophic pack5 age in 5 diverse regions of the United States.

6 (4) NO ADDITION OF BENEFITS.—A clarifica7 tion under this subsection may not add a new cat8 egory of items or services.

9 (b) RESUBMISSION OF INITIAL PROPOSAL.—If the

10 proposal described in subsection (a) is not approved by

11 the Congress, the Commission shall submit to the Con12 gress a second proposal conforming to the requirements

13 of subsection (a) not later than the termination of the 6-

14 month period beginning on the date an approval resolution

15 with respect to the first proposal is subject to a vote on

16 final passage in the last House to consider the resolution

17 under section 1314. If such second proposal is not ap18 proved, the Commission shall submit to the Congress a

19 third proposal in accordance with the procedure described

20 in the preceding sentence. If such third proposal is not

21 approved by the Congress, the members of the Commis22 sion shall vacate their positions, and new members shall

23 be appointed under section 1313 to fill such vacancies.

24 Such new members shall submit to the Congress not more

25 than three proposals conforming to the requirements of
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1 subsection (a) in accordance with the procedure described

2 in this subsection.

3 (c) PROPOSED MODIFICATIONS.—

4 (1) IN GENERAL.—Not earlier than January 1

5 of the year that occurs 1 year after a legislative pro6 posal described in subsection (a) or (b) is enacted,

7 and not more frequently than annually, the Commis8 sion may submit to the Congress a proposal for leg9 islation containing recommended modifications to

10 such enactment. Such a proposal shall be treated as

11 an initial proposal under subsection (a) for purposes

12 of consideration in the Congress under section 1314

13 and implementation under section 1315. Subsection

14 (a)(4) shall not apply to such a proposal.

15 (2) SUBMISSION OF PROPOSAL IF DEFICIT.—If

16 the Commission receives a report concerning a defi17 cit under section 1003(d)(5)(A) for a year, within 60

18 days after receiving such report, the Commission

19 may submit under paragraph (1) a propsal to make

20 modifications (which may only include modifications

21 described in paragraph (3)) that will result in the

22 sum of—

23 (A) the amount of the reduction in Federal

24 expenditures for vouchers under section 1003,

25 and
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1 (B) the amount of the increase in Federal

2 revenues,

3 for the next fiscal year being equal to the aggregate

4 amount of such deficit. The Commission shall sub5 mit such a proposal in the case of any year after the

6 full phase-in year (as defined in section

7 1003(d)(5)(B)(iii)).

8 (3) MODIFICATIONS.—Modifications described

9 in this paragraph are—

10 (A) changes in the items, services, and cost

11 sharing under sections 1301(b) and 1301(c);

12 (B) a reduction in the applicable phase-in

13 percentage (specified in the table under section

14 1003(b)(2));

15 (C) reductions in expenditures under the

16 medicare program, the medicaid program, or

17 both; and

18 (D) a reduction in the applicable dollar

19 limit determined under section 91(b)(2) of the

20 Internal Revenue Code of 1986, based on fam21 ily income.

22 SEC. 1313. OPERATION OF THE COMMISSION.

23 (a) MEMBERSHIP.—

24 (1) IN GENERAL.—The Commission shall be

25 composed of 5 members appointed by the President.
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1 (2) CONSULTATION.—In selecting individuals

2 for nominations for appointments for the Commis3 sion, the President should consult with—

4 (A) the Speaker of the House of Rep5 resentatives concerning the appointment of 1

6 member;

7 (B) the Majority Leader of the Senate con8 cerning the appointment of 1 member;

9 (C) the Minority Leader of the House of

10 Representatives concerning the appointment of

11 1 member; and

12 (D) the Minority Leader of the Senate con13 cerning the appointment of 1 member.

14 (3) CHAIRPERSON.—The President shall des15 ignate 1 individual described in paragraph (1) who

16 shall serve as Chairperson of the Commission.

17 (b) COMPOSITION.—The membership of the Commis18 sion shall include individuals with national recognition for

19 their expertise in health economics, hospital and health

20 plan management, health services, medical research and

21 effectiveness, and other related fields, who provide a mix

22 of different professions, broad geographic representation,

23 and a balance between urban and rural representatives,

24 including physicians and other providers of health care

25 services, employers, third party payors, individuals skilled
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1 in the conduct and interpretation of biomedical, health

2 services, and health economics research, and individuals

3 having expertise in the research and development of tech4 nological and scientific advances in health care.

5 (c) TERMS.—The terms of members of the Commis6 sion shall be for 3 years, except that of the members first

7 appointed 2 shall be appointed for a term of 1 year and

8 2 shall be appointed for a term of 2 years.

9 (d) VACANCIES.—A vacancy in the Commission shall

10 be filled in the same manner as the original appointment,

11 but the individual appointed to fill the vacancy shall serve

12 only for the unexpired portion of the term for which the

13 individual’s predecessor was appointed.

14 (e) ADMINISTRATIVE PROVISIONS.—

15 (1) MEETINGS.—Each meeting of the Commis16 sion shall be open to the public.

17 (2) PAY AND TRAVEL EXPENSES.—

18 (A) IN GENERAL.—Each member, other

19 than the chairperson of the Commission, shall

20 be paid at a rate equal to the daily equivalent

21 of the minimum annual rate of basic pay pay22 able for level IV of the Executive Schedule

23 under section 5315 of title 5, United States

24 Code, for each day (including travel time) dur25 ing which the member is engaged in the actual
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1 performance of duties vested in the Commis2 sion.

3 (B) CHAIRPERSON.—The chairperson of

4 the Commission shall be paid for each day re5 ferred to in subparagraph (A) at a rate equal

6 to the daily equivalent of the minimum annual

7 rate of basic pay payable for level III of the Ex8 ecutive Schedule under section 5314 of title 5,

9 United States Code.

10 (C) TRAVEL EXPENSES.—Members shall

11 receive travel expenses, including per diem in

12 lieu of subsistence, in accordance with sections

13 5702 and 5703 of title 5, United States Code.

14 (3) DIRECTOR OF STAFF.—

15 (A) IN GENERAL.—The Commission shall,

16 without regard to section 5311(b) of title 5,

17 United States Code, appoint a Director.

18 (B) PAY.—The Director shall be paid at

19 the rate of basic pay payable for level IV of the

20 Executive Schedule under section 5315 of title

21 5, United States Code.

22 (4) STAFF.—

23 (A) IN GENERAL.—Subject to subpara24 graphs (B) and (C), the Director, with the ap-
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1 proval of the Commission, may appoint and fix

2 the pay of additional personnel.

3 (B) PAY.—The Director may make such

4 appointments without regard to the provisions

5 of title 5, United States Code, governing ap6 pointments in the competitive service, and any

7 personnel so appointed may be paid without re8 gard to the provisions of chapter 51 and sub9 chapter III of chapter 53 of such title, relating

10 to classification and General Schedule pay

11 rates, except that an individual so appointed

12 may not receive pay in excess of 120 percent of

13 the annual rate of basic pay payable for GS–15

14 of the General Schedule.

15 (C) DETAILED PERSONNEL.—

16 (i) IN GENERAL.—Upon request of

17 the Director, the head of any Federal de18 partment or agency may detail any of the

19 personnel of that department or agency to

20 the Commission to assist the Commission

21 in carrying out its duties under this Act.

22 (ii) AGREEMENT WITH COMPTROLLER

23 GENERAL.—The Comptroller General of

24 the United States shall provide assistance,

25 including the detailing of employees, to the
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1 Commission in accordance with an agree2 ment entered into with the Commission.

3 (5) OTHER AUTHORITY.—

4 (A) CONTRACT SERVICES.—The Commis5 sion may procure by contract, to the extent

6 funds are available, the temporary or intermit7 tent services of experts or consultants pursuant

8 to section 3109 of title 5, United States Code.

9 (B) LEASES AND PROPERTY.—The Com10 mission may lease space and acquire personal

11 property to the extent funds are available.

12 SEC. 1314. CONGRESSIONAL CONSIDERATION OF COMMIS13 SION PROPOSALS.

14 (a) CONSIDERATION.—A legislative proposal submit15 ted to the Congress by the Commission (except in the case

16 of a proposal submitted pursuant to the second sentence

17 of section 1003(d)(5)(A)) shall be considered by the Con18 gress under the procedures described in this section.

19 (b) RULES OF HOUSE OF REPRESENTATIVES AND

20 SENATE.—This section is enacted by the Congress—

21 (1) as an exercise of the rulemaking power of

22 the House of Representatives and the Senate, re23 spectively, and as such is deemed a part of the rules

24 of each House, respectively, but applicable only with

25 respect to the procedure to be followed in that
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1 House in the case of approval resolutions described

2 in subsection (c), and supersedes other rules only to

3 the extent that such rules are inconsistent therewith;

4 and

5 (2) with full recognition of the constitutional

6 right of either House to change the rules (so far as

7 relating to the procedure of that House) at any time,

8 in the same manner and to the same extent as in

9 the case of any other rule of that House.

10 (c) TERMS OF THE RESOLUTION.—For purposes of

11 this part, the term ‘‘approval resolution’’ means only a

12 joint resolution of the two Houses of the Congress, provid13 ing in—

14 (1) the matter after the resolving clause of

15 which is as follows: ‘‘That the Congress approves the

16 recommendations of the Benefits Commission as

17 submitted by the Commission on

18 llllllllllllll’’, the blank space

19 being filled in with the appropriate date; and

20 (2) the title of which is as follows: ‘‘Joint Reso21 lution approving the recommendation of the Benefits

22 Commission’’.

23 (d) INTRODUCTION AND REFERRAL.—On the day on

24 which a recommendation of the Commission is transmitted

25 to the House of Representatives and the Senate, an ap-
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1 proval resolution with respect to such recommendation

2 shall be introduced (by request) in the House of Rep3 resentatives by the majority leader of the House, for him4 self or herself and the minority leader of the House, or

5 by Members of the House designated by the majority lead6 er and minority leader of the House; and shall be intro7 duced (by request) in the Senate by the majority leader

8 of the Senate, for himself or herself and the minority lead9 er of the Senate, or by Members of the Senate designated

10 by the majority leader and minority leader of the Senate.

11 If either House is not in session on the day on which such

12 recommendation is transmitted, the approval resolution

13 with respect to such recommendation shall be introduced

14 in the House, as provided in the preceding sentence, on

15 the first day thereafter on which the House is in session.

16 The approval resolution introduced in the House of Rep17 resentatives and the Senate shall be referred to the appro18 priate committees of each House.

19 (e) AMENDMENTS PROHIBITED.—No amendment to

20 an approval resolution shall be in order in either the

21 House of Representatives or the Senate; and no motion

22 to suspend the application of this subsection shall be in

23 order in either House, nor shall it be in order in either

24 House for the Presiding Officer to entertain a request to
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1 suspend the application of this subsection by unanimous

2 consent.

3 (f) PERIOD FOR COMMITTEE AND FLOOR CONSIDER4 ATION.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), if the committee or committees of either

7 House to which an approval resolution has been re8 ferred have not reported it at the close of the 30th

9 day after its introduction, such committee or com10 mittees shall be automatically discharged from fur11 ther consideration of the approval resolution and it

12 shall be placed on the appropriation calendar. A vote

13 on final passage of the approval resolution shall be

14 taken in each House on or before the close of the

15 30th day after the approval resolution is reported by

16 the committees or committee of that House to which

17 it was referred, or after such committee or commit18 tees have been discharged from further consideration

19 of the approval resolution. If prior to the passage by

20 one House of an approval resolution of that House,

21 that House receives the same approval resolution

22 from the other House then—

23 (A) the procedure in that House shall be

24 the same as if no approval resolution had been

25 received from the other House; but
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1 (B) the vote on final passage shall be on

2 the approval resolution of the other House.

3 (2) COMPUTATION OF DAYS.—For purposes of

4 paragraph (1), in computing a number of days in ei5 ther House, there shall be excluded any day on

6 which the House is not in session.

7 (g) FLOOR CONSIDERATION IN THE HOUSE OF REP8 RESENTATIVES.—

9 (1) MOTION TO PROCEED.—A motion in the

10 House of Representatives to proceed to the consider11 ation of an approval resolution shall be highly privi12 leged and not debatable. An amendment to the mo13 tion shall not be in order, nor shall it be in order

14 to move to reconsider the vote by which the motion

15 is agreed to or disagreed to.

16 (2) DEBATE.—Debate in the House of Rep17 resentatives on an approval resolution shall be lim18 ited to not more than 20 hours, which shall be di19 vided equally between those favoring and those op20 posing the bill or resolution. A motion further to

21 limit debate shall not be debatable. It shall not be

22 in order to move to recommit an approval resolution

23 or to move to reconsider the vote by which an ap24 proval resolution is agreed to or disagreed to.
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1 (3) MOTION TO POSTPONE.—Motions to post2 pone, made in the House of Representatives with re3 spect to the consideration of an approval resolution,

4 and motions to proceed to the consideration of other

5 business, shall be decided without debate.

6 (4) APPEALS.—All appeals from the decisions

7 of the chairperson relating to the application of the

8 Rules of the House of Representatives to the proce9 dure relating to an approval resolution shall be de10 cided without debate.

11 (5) GENERAL RULES APPLY.—Except to the ex12 tent specifically provided in the preceding provisions

13 of this subsection, consideration of an approval reso14 lution shall be governed by the Rules of the House

15 of Representatives applicable to other bills and reso16 lutions in similar circumstances.

17 (h) FLOOR CONSIDERATION IN THE SENATE.—

18 (1) MOTION TO PROCEED.—A motion in the

19 Senate to proceed to the consideration of an ap20 proval resolution shall be privileged and not debat21 able. An amendment to the motion shall not be in

22 order, nor shall it be in order to move to reconsider

23 the vote by which the motion is agreed to or dis24 agreed to.
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1 (2) GENERAL DEBATE.—Debate in the Senate

2 on an approval resolution, and all debatable motions

3 and appeals in connection therewith, shall be limited

4 to not more than 20 hours. The time shall be equally

5 divided between, and controlled by, the majority

6 leader and the minority leader or their designees.

7 (3) DEBATE OF MOTIONS AND APPEALS.—De8 bate in the Senate on any debatable motion or ap9 peal in connection with an approval resolution shall

10 be limited to not more than 1 hour, to be equally di11 vided between, and controlled by, the mover and the

12 manager of the approval resolution, except that in

13 the event the manager of the approval resolution is

14 in favor of any such motion or appeal, the time in

15 opposition thereto, shall be controlled by the Minor16 ity Leader or his designee. Such leaders, or either of

17 them, may, from time under their control on the

18 passage of an approval resolution, allot additional

19 time to any Senator during the consideration of any

20 debatable motion or appeal.

21 (4) OTHER MOTIONS.—A motion in the Senate

22 to further limit debate is not debatable. A motion to

23 recommit an approval resolution is not in order.
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1 SEC. 1315. IMPLEMENTATION.

2 The provisions of a legislative proposal approved

3 under section 1314 shall become effective and a part of

4 the certification process of each State (and the Secretary)

5 on January 1 of the year following the year of the date

6 of approval of such proposal (unless such period of time

7 is less than 3 months, in which case such provisions shall

8 become effective on January 1 of the second year following

9 the date of approval of such proposal).

10 Subtitle E—State and Federal Re11 sponsibilities in Relation to

12 Qualified Health Plans

13 PART I—STATE RESPONSIBILITIES

14 SEC. 1401. ESTABLISHMENT OF STATE INSURANCE MARKET

15 REFORM PROGRAMS.

16 (a) IN GENERAL.—Each State shall establish a pro17 gram (in this part referred to as a ‘‘State program’’) to

18 carry out State responsibilities specified in this part.

19 (b) SUMMARY OF RESPONSIBILITIES.—The State re20 sponsibilities under this subtitle include—

21 (1) the certification of insured health plans as

22 qualified insured health plans under section 1402,

23 including the enforcement of the insurance reform

24 standards;

25 (2) dissemination of information under section

26 1403;
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1 (3) establishment of procedures for establish2 ment and operation of purchasing groups under sec3 tion 1404;

4 (4) preparation of information concerning plans

5 and purchasing groups under section 1405;

6 (5) providing for a risk adjustment program

7 and adjustment for differences in nonpayments

8 among qualified insured health plans under section

9 1406;

10 (6) development of a binding arbitration process

11 under section 1407; and

12 (7) specification of an annual general enroll13 ment period under section 1408.

14 (c) DEADLINE.—

15 (1) IN GENERAL.—Each State shall establish a

16 State program under this section by not later than

17 the deadline specified in paragraph (2).

18 (2) DEADLINE.—The deadline specified in this

19 paragraph is the date that occurs 1 year after the

20 date of the insurance reform standards are estab21 lished under section 1102.

22 (d) PERIODIC SECRETARIAL REVIEW OF STATE PRO23 GRAMS.—

24 (1) IN GENERAL.—The Secretary may periodi25 cally review State programs established under sub-
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1 section (a) to determine if such programs continue

2 to meet the requirements of subsection (b).

3 (2) REPORTING REQUIREMENTS OF STATES.—

4 For purposes of paragraph (1), each State shall sub5 mit to the Secretary, at intervals established by the

6 Secretary, a report on the compliance of the State

7 with the requirements of subsection (b).

8 (3) FAILURE OF STATE.—If the Secretary finds

9 that a State has failed to establish a State program

10 under subsection (a) by the deadline specified in

11 subsection (c)(2) or its State program has failed to

12 meet the requirements of subsection (b), the Sec13 retary shall notify the State of such finding and

14 shall assume, with respect to insured health plans

15 and groups in the State, the responsibilities of the

16 State with such a program under this part.

17 SEC. 1402. CERTIFICATION OF INSURED HEALTH PLANS.

18 Each State program shall provide for the certification

19 of insured health plans as qualified insured health plans

20 if the appropriate certifying authority finds that the plan

21 meets the applicable requirements of subtitle B.

22 SEC. 1403. ESTABLISHMENT OF HEALTH CARE COVERAGE

23 AREAS.

24 (a) ESTABLISHMENT.—Each State program shall

25 provide, by not later than the deadline specified in section
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1 1401(c)(2), for the division of the State into 1 or more

2 health care coverage areas or HCCAs. The program may

3 revise the boundaries of such areas from time to time con4 sistent with this section.

5 (b) MULTIPLE AREAS.—With respect to a HCCA—

6 (1) no metropolitan statistical area in a State

7 may be incorporated into more than 1 HCCA in

8 such State;

9 (2) the number of individuals residing within a

10 HCCA may not be less than 250,000; and

11 (3) no area incorporated in a HCCA may be in12 corporated into another HCCA.

13 (c) INTERSTATE AREAS.—Two or more contiguous

14 States may provide for the establishment of a HCCA that

15 includes adjoining portions of the States so long as all por16 tions of any metropolitan statistical area within such

17 States are within the same HCCA.

18 SEC. 1404. PROCEDURES FOR PURCHASING GROUPS.

19 (a) PROCEDURES.—Consistent with part II of sub20 title B, each State program shall have procedures for the

21 establishment and operation of individual and small em22 ployer purchasing groups with respect to HCCAs within

23 such State.

24 (b) VOTING RIGHTS.—Such procedures shall specify

25 the voting rights of members of a purchasing group.
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1 SEC. 1405. PREPARATION OF INFORMATION CONCERNING

2 PLANS AND PURCHASING GROUPS.

3 Each State program shall prepare and make available

4 to purchasing groups and employers located in the State

5 (and to eligible individuals upon request) information, in

6 comparative form, concerning the qualified health plans

7 certified by such State and purchasing groups operating

8 in the State. Such information shall include a description

9 of the following:

10 (1) The prices, outcomes, enrollee satisfaction,

11 and other information pertaining to the quality of

12 such plans.

13 (2) The HCCAs in the State and the qualified

14 health plans available with respect to each HCCA.

15 (3) The existence of purchasing groups within

16 each such HCCA.

17 (4) Any other information determined appro18 priate by the State.

19 SEC. 1406. RISK ADJUSTMENT PROGRAM.

20 (a) IN GENERAL.—Each State program under this

21 part shall provide for a risk adjustment program using

22 the risk adjustment process and factors described in sec23 tion 1117(b) to adjust the premiums of qualified general

24 access plans to reflect the relative actuarial risk of eligible

25 employees and eligible individuals enrolled in the qualified

26 general access plans participating in the program. The
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1 program shall apply such risk-adjustment factors, in ac2 cordance with a methodology established under the stand3 ards under such section, so that the sum of such factors

4 is zero for all participating qualified general access plans,

5 within a class of family enrollment in each HCCA.

6 (b) ADJUSTMENT FOR DIFFERENCES IN

7 NONPAYMENT RATES.—In accordance with rules estab8 lished by the Secretary, each State program under this

9 part shall provide that if the rates of nonpayment of pre10 miums for qualified general access plans during grace pe11 riods (established under section 1142(b)(2) or otherwise)

12 vary appreciably among qualified general access plans, the

13 State program shall provide for such adjustments in the

14 payments made among such plans as will place each quali15 fied general access plan in the same position as if the rates

16 of nonpayment were the same.

17 SEC. 1407. DEVELOPMENT OF BINDING ARBITRATION

18 PROCESS.

19 Each State program shall establish an arbitration

20 process that—

21 (1) resolves in a timely manner disputes con22 cerning—

23 (A) a claim for payment or provision of

24 benefits under a qualified insured health plan;
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1 (B) a request for preauthorization of items

2 or services which is submitted to such a plan

3 prior to receipt of the items or services; or

4 (C) decisions by a plan relating to the cov5 erage of a particular item or service for enroll6 ees generally; and

7 (2) with respect to disputes involving a deter8 mination by a plan that an item or service is not

9 medically necessary or appropriate with respect to a

10 specific enrollee, requires a person who contests such

11 determination to demonstrate to an arbitrator by a

12 preponderance of the evidence that the determina13 tion is inappropriate based on the available scientific

14 evidence.

15 SEC. 1408. SPECIFICATION OF ANNUAL GENERAL ENROLL16 MENT PERIOD.

17 Each State program shall specify an annual period,

18 of not less than 30 days, during which eligible employees

19 and eligible individuals in the State may enroll in qualified

20 insured health plans or change the qualified insured health

21 plan in which the individual is enrolled.

22 Subpart B—Waiver of Requirements

23 SEC. 1421. ALTERNATE STATE SYSTEMS ALLOWED.

24 (a) WAIVER AUTHORITY.—
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1 (1) IN GENERAL.—In accordance with this sec2 tion, each State may submit an application to the

3 Secretary to waive the requirements specified in sub4 section (b) as they apply to the State (and to quali5 fied insured health plans and purchasing groups in

6 the State).

7 (2) ESTABLISHMENT OF CRITERIA.—The Sec8 retary shall establish criteria for the approval of

9 such waiver applications.

10 (3) EXPEDITED PROCEDURE.—The Secretary

11 shall establish an expedited procedure for the consid12 eration and disposition of waiver applications under

13 this subsection. The procedure established by the

14 Secretary shall provide that such consideration and

15 disposition shall be completed within 90 days.

16 (b) REQUIREMENTS SPECIFIED.—The requirements

17 specified in this subsection are as follows:

18 (1) AVAILABILITY.—The requirements of sec19 tion 1111(c) (relating to availability of qualified

20 health plans).

21 (2) MSA BOUNDARIES.—Subject to subsection

22 (c)(1), the requirements of paragraphs (1) and (3)

23 of section 1403(b) (relating to the treatment of met24 ropolitan statistical areas in drawing the boundaries

25 of HCCAs).
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1 (3) CORPORATE STRUCTURE OF PURCHASING

2 GROUPS.—The requirement of section 1141(a) (re3 lating to corporate structure of a purchasing group),

4 insofar as it prevents the establishment of a public

5 (or quasi-public) entity as a purchasing group.

6 (4) COVERED ITEMS AND SERVICES.—Subject

7 to subsection (c)(2), the items and services included

8 as covered items and services under the standard

9 and catastrophic packages under section 1301(b).

10 (c) LIMITATIONS ON WAIVERS.—

11 (1) ANTI-REDLINING.—In establishing bound12 aries for HCCAs, a State may not discriminate on

13 the basis of or otherwise take into account race, reli14 gion, national origin, socio-economic status, disabil15 ity, or perceived health status.

16 (2) SUBSTITUTION OF ACTUARIALLY EQUIVA17 LENT BENEFITS.—A State may not waive the re18 quirement described in subsection (b)(4) unless the

19 State provides for the inclusion of benefits that are

20 actuarially equivalent to the benefits not included.

21 (d) CONSTRUCTION.—Nothing in this section shall be

22 construed as allowing a State to waive all the requirements

23 of subtitle B in order to establish a single-payer system.
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1 SEC. 1422. STATE OPT-OUT.

2 Any State that applies to the Secretary and dem3 onstrates to the satisfaction of the Secretary that, because

4 of unique geographic and related features that inhibit a

5 competitive market, no more than two qualified general

6 access plans are made available in the State, the Secretary

7 may waive such requirements of this title as may be nec8 essary to assure the provision of covered items and serv9 ices to all eligible employees and eligible individuals.

10 SEC. 1423. WAIVER OF CERTAIN MEDICAID REQUIREMENTS.

11 For provisions authorizing States to waive certain

12 medicaid requirements, in order to permit managed care,

13 etc., see section 6001.

14 Subpart C—Preemption of Certain State Laws

15 SEC. 1431. PREEMPTION FROM STATE BENEFIT MANDATES.

16 Effective as of January 1, 1995, no State shall estab17 lish or enforce any law or regulation that—

18 (1) requires the offering, as part of a qualified

19 health plan, or any services, category of care, or

20 services of any class or type of provider that is dif21 ferent from the covered items and services specified

22 under subtitle C;

23 (2) specifies the individuals to be covered under

24 such a plan or the duration of such coverage; or
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1 (3) requires a right of conversion from a group

2 health plan that is a qualified health plan to an indi3 vidual health plan.

4 SEC. 1432. PREEMPTION OF STATE LAW RESTRICTIONS ON

5 NETWORK PLANS.

6 (a) LIMITATION ON RESTRICTIONS ON NETWORK

7 PLANS.—Effective as of January 1, 1995—

8 (1) a State may not prohibit or limit a network

9 plan from including incentives for enrollees to use

10 the services of participating providers;

11 (2) a State may not prohibit or limit a network

12 plan from limiting coverage of services to those pro13 vided by a participating provider;

14 (3) a State may not prohibit or limit the nego15 tiation of rates and forms of payments for providers

16 under a network plan;

17 (4) a State may not prohibit or limit a network

18 plan from limiting the number of participating pro19 viders;

20 (5) a State may not prohibit or limit a network

21 plan from requiring that services be provided (or au22 thorized) by a practitioner selected by the enrollee

23 from a list of available participating providers; and

24 (6) a State may not prohibit or limit the cor25 porate practice of medicine.
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1 (b) DEFINITIONS.—In this section:

2 (1) NETWORK PLAN.—The term ‘‘network

3 plan’’ means a qualified health plan—

4 (A) which—

5 (i) limits coverage of covered items

6 and services to those provided by partici7 pating providers, or

8 (ii) provides, with respect to such

9 services provided by persons who are not

10 participating providers, for cost-sharing

11 which are in excess of those permitted

12 under the standard or catastrophic pack13 age for participating providers;

14 (B) which has a sufficient number and dis15 tribution of participating providers to assure

16 that the uniform set of effective benefits (i) is

17 available and accessible to each enrollee, within

18 the area served by the plan, with reasonable

19 promptness and in a manner which assures con20 tinuity, and (ii) when medically necessary, is

21 available and accessible twenty-four hours a day

22 and seven days a week; and

23 (C) which provides benefits for covered

24 items and services not furnished by participat25 ing providers if the services are medically nec-
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1 essary and immediately required because of an

2 unforeseen illness, injury, or condition.

3 (2) PARTICIPATING PROVIDER.—The term

4 ‘‘participating provider’’ means an entity or individ5 ual which provides, sells, or leases health care serv6 ices under a contract with a network plan, which

7 contract does not permit—

8 (A) cost sharing in excess of the cost-shar9 ing permitted under a standard or catastrophic

10 package, and

11 (B) any enrollee charges (for covered items

12 or services) in excess of such cost sharing.

13 PART II—FEDERAL RESPONSIBILITIES

14 SEC. 1441. FEDERAL ROLE WITH RESPECT TO MULTI-STATE

15 EMPLOYER PLANS.

16 In the case of an insured health plan offered by an

17 employer which has employees who are employed in 2 or

18 more States, the Secretary shall carry out activities under

19 this section in the same manner as a State program would

20 carry out activities under part I with respect to a health

21 plan subject to such part.

22 SEC. 1442. FEDERAL ROLE IN THE CASE OF A DEFAULT BY

23 A STATE.

24 (a) FAILURE TO ESTABLISH STATE PROGRAM.—If a

25 State fails to establish a State program under part I or,
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1 having established such a program, the program fails to

2 continue to meet the requirements of such part, the Sec3 retary shall, after notice and opportunity for correction,

4 terminate such program and shall carry out activities

5 under part I in the same manner as a State program

6 would carry out activities under such part.

7 (b) FAILURE OF STATE TO DESIGNATE HCCAS.—

8 If a State fails to designate 1 or more HCCAs under sec9 tion 1403(a) by the deadline specified in section

10 1401(c)(2), the Secretary shall make such designation.

11 SEC. 1443. ESTABLISHMENT OF RESIDENCY RULES.

12 The Secretary shall establish rules relating to identi13 fying the State (and HCCA) in which individuals reside.

14 Such rules shall be based on the principal residence of

15 such an individual.

16 SEC. 1444. RULES DETERMINING SEPARATE EMPLOYER

17 STATUS.

18 Under rules of the Secretary, employers that are re19 lated (as defined under such rules) shall be treated under

20 this title as a single employer if a reason for their separa21 tion relates to the health risk characteristics of eligible em22 ployees of such employers.
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1 Subtitle F—Universal Coverage

2 SEC. 1501. REQUIREMENT OF COVERAGE.

3 (a) IN GENERAL.—Effective January 1, 2005, each

4 individual who is a citizen or lawful permanent resident

5 of the United States shall be covered under—

6 (1) a qualified health plan, or

7 (2) an equivalent health care program (as de8 fined in section 1601(7)).

9 (b) EXCEPTION.—Subsection (a) shall not apply in

10 the case of an individual who is opposed for religious rea11 sons to health plan coverage, including an individual who

12 declines health plan coverage due to a reliance on healing

13 using spiritual means through prayer alone.

14 Subtitle G—Definitions

15 SEC. 1601. DEFINITIONS.

16 Unless specifically provided otherwise, as used in this

17 Act:

18 (1) APPROPRIATE CERTIFYING AUTHORITY.—

19 The term ‘‘appropriate certifying authority’’

20 means—

21 (A) in the case of a health plan offered in

22 a State with a qualified health plan certification

23 program meeting the requirements of this Act,

24 the State commissioner or superintendent of in-
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1 surance or other State authority responsible for

2 regulation of health insurance; or

3 (B) in all other cases, the Secretary.

4 (2) COVERED ITEMS AND SERVICES.—The term

5 ‘‘covered items and services’’ means items and serv6 ices described in section 1301(b).

7 (3) DELIVERY SYSTEM.—Each of the following

8 is considered to be a distinct ‘‘delivery system’’ with

9 respect to a health plan:

10 (A) Fee-for-service.

11 (B) Use of preferred providers.

12 (C) Staff or group model health mainte13 nance organizations.

14 (D) Such other systems as the Secretary

15 may recognize.

16 (4) DEPENDENT.—The term ‘‘dependent’’

17 means, with respect to any individual, any person

18 who is—

19 (A) the spouse of such individual, or

20 (B) under regulations of the Secretary, a

21 child (including an adopted child) of such indi22 vidual and who—

23 (i) is under 19 years of age,

24 (ii) is under 25 years of age and a

25 full-time student, or
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1 (iii) regardless of age is incapable of

2 self-support because of mental or physical

3 disability.

4 (5) ELIGIBLE EMPLOYEE.—The term ‘‘eligible

5 employee’’ means, with respect to an employer, in

6 any month after the month which includes the hiring

7 date, an employee who normally performs at least 30

8 hours of service per week for that employer, and in9 cludes any dependent of such employee.

10 (6) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible

11 individual’’ means an individual who—

12 (A) is otherwise not eligible for coverage

13 under an employer-based qualified health plan

14 or 1 of the equivalent health care programs (as

15 defined in paragraph (7)), or

16 (B) in the case of eligible employee of a

17 small employer, has elected not to enroll in a

18 qualified health plan offered by such employer.

19 (7) EQUIVALENT HEALTH CARE PROGRAM.—

20 The term ‘‘equivalent health care program’’ means—

21 (A) part A or part B of the medicare pro22 gram under title XVIII of the Social Security

23 Act,

24 (B) the medicaid program under title XIX

25 of the Social Security Act,
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1 (C) the health care program for active

2 military personnel under title 10, United States

3 Code,

4 (D) the veterans health care program

5 under chapter 17 of title 38, United States

6 Code,

7 (E) the Civilian Health and Medical Pro8 gram of the Uniformed Services (CHAMPUS),

9 as defined in section 1073(4) of title 10, United

10 States Code,

11 (F) the Indian health service program

12 under the Indian Health Care Improvement Act

13 (25 U.S.C. 1601 et seq.), and

14 (G) any other plan recognized by the Sec15 retary the purpose of which is to provide retiree

16 health benefits.

17 (8) FAMILY.—The term ‘‘family’’ means as in18 dividual and includes the individual’s dependents (if

19 any), as defined in paragraph (4), but only if such

20 an individual or dependent is a citizen or lawful per21 manent resident of the United States.

22 (9) FIRST CERTIFICATION YEAR.—The term

23 ‘‘first certification year’’ means, with respect to a

24 qualified health plan in a State, the first year in

25 which the State has in effect a State program under
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1 part I of subtitle E as of January 1 of such year,

2 but not later than the first January 1 following the

3 deadline specified in section 1401(c)(2).

4 (10) GENERAL ACCESS PLAN.—The term ‘‘gen5 eral access plan’’ means an insured health plan of6 fered with respect to eligible employees of small em7 ployers and eligible individuals under subtitle B.

8 (11) HCCA.—The term ‘‘HCCA’’ means a

9 health care coverage area established under section

10 1403.

11 (12) HEALTH PLAN.—the term ‘‘health plan’’

12 means an insured health plan and a self-insured

13 health plan.

14 (13) HEALTH PLAN SPONSOR.—The term

15 ‘‘health plan sponsor’’ means, with respect to an in16 sured health plan or self-insured health plan, the in17 surer offering the plan or the self-insured sponsor

18 for the plan, respectively.

19 (14) INSURED HEALTH PLAN.—

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

21 subparagraph (B), the term ‘‘insured health

22 plan’’ means any hospital or medical service

23 policy or certificate, hospital or medical service

24 plan contract, or health maintenance organiza25 tion group contract offered by an insurer.
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1 (B) EXCEPTION.—Such term does not in2 clude any of the following—

3 (i) coverage only for accident, dental,

4 vision, disability income, or long-term care

5 insurance, or any combination thereof,

6 (ii) medicare supplemental health in7 surance,

8 (iii) coverage issued as a supplement

9 to liability insurance,

10 (iv) worker’s compensation or similar

11 insurance,

12 (v) automobile medical-payment insur13 ance,

14 (vi) coverage for a specified disease or

15 illness, or

16 (vii) a hospital or fixed indemnity pol17 icy (unless the Secretary determines that

18 such a policy provides sufficiently com19 prehensive coverage of a benefit so that it

20 should be treated as an insured health

21 plan),

22 or any combination thereof.

23 (15) INSURER.—The term ‘‘insurer’’ means—

24 (A) a licensed insurance company,
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1 (B) a prepaid hospital or medical service

2 plan,

3 (C) a health maintenance organization, or

4 (D) other entity providing a plan of health

5 insurance or health benefits,

6 with respect to which State regulation is not pre7 empted by reason of section 514(b)(2) of the Em8 ployee Retirement Income Security Act of 1974.

9 (16) LARGE EMPLOYER.—The term ‘‘large em10 ployer’’ means an employer that is not a small em11 ployer.

12 (17) LARGE EMPLOYER PLAN.—The term

13 ‘‘large employer plan’’ means a qualified health plan

14 which is made available by a large employer, wheth15 er the plan is insured or self-insured.

16 (18) MULTIPLE EMPLOYER WELFARE AR17 RANGEMENT.—The term ‘‘multiple employer welfare

18 arrangement’’ has the meaning given such term in

19 section 3(40) of the Employee Retirement Income

20 Security Act of 1974.

21 (19) PURCHASING GROUP.—The term ‘‘pur22 chasing group’’ means an individual and small em23 ployer purchasing group established under section

24 1141.
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1 (20) QUALIFIED HEALTH PLAN.—The term

2 ‘‘qualified’’ means—

3 (A) with respect to a insured health plan,

4 a health plan that is certified as qualified under

5 section 1402, or

6 (B) with respect to a self-insured health

7 plan, a health plan that meets the requirements

8 of a large employer plan under section 1201.

9 (21) SECRETARY.—The term ‘‘Secretary’’

10 means the Secretary of Health and Human Services.

11 (22) SELF-INSURED HEALTH PLAN.—The term

12 ‘‘self-insured health plan’’—

13 (A) means an employee welfare benefit

14 plan or other arrangement insofar as the plan

15 or arrangement provides health benefits and

16 that is funded in a manner other than through

17 the purchase of one or more insured health

18 plans, but

19 (B) does not include any coverage or insur20 ance described in paragraph (14)(B).

21 (23) SELF-INSURED SPONSOR.—The term ‘‘self22 insured sponsor’’ includes, with respect to a self-in23 sured plan, any entity which establishes or main24 tains the plan.

25 (24) SMALL EMPLOYER.—
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1 (A) IN GENERAL.—The term ‘‘small em2 ployer’’ means, with respect to a calendar year,

3 an employer that normally employs 1 or more

4 but less than 101 eligible employees on a typi5 cal business day.

6 (B) TREATMENT OF SELF-EMPLOYED.—

7 For the purposes of subparagraph (A), the term

8 ‘‘employee’’ includes a self-employed individual.

9 (C) TREATMENT OF LINES OF BUSINESS,

10 ETC.—For purposes of making a determination

11 under subparagraph (A), an employer may treat

12 each line of business or each geographic loca13 tion as a separate employer.

14 (25) STATE.—The term ‘‘State’’ means each of

15 the several States, the District of Columbia, the

16 Commonwealth of Puerto Rico, the United States

17 Virgin Islands, Guam, American Samoa, and the

18 Commonwealth of the Northern Mariana Islands.

19 TITLE II—TAX AND

20 ENFORCEMENT PROVISIONS

21 SEC. 2000. AMENDMENT OF 1986 CODE.

22 Except as otherwise expressly provided, whenever in

23 this title an amendment or repeal is expressed in terms

24 of an amendment to, or repeal of, a section or other provi25 sion, the reference shall be considered to be made to a
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1 section or other provision of the Internal Revenue Code

2 of 1986.

3 Subtitle A—General Tax Provisions

4 SEC. 2001. CERTAIN EMPLOYER HEALTH PLAN CONTRIBU5 TIONS INCLUDED IN INCOME.

6 (a) EXCLUSION FOR EMPLOYER HEALTH PLAN CON7 TRIBUTIONS LIMITED TO CONTRIBUTIONS TO QUALIFIED

8 HEALTH PLANS.—

9 (1) IN GENERAL.—Section 106 (relating to con10 tributions by employer to accident and health plans)

11 is amended to read as follows:

12 ‘‘SEC. 106. CONTRIBUTIONS BY EMPLOYER TO QUALIFIED

13 HEALTH PLANS.

14 ‘‘Except as provided in section 91, gross income of

15 an employee does not include employer-provided coverage

16 under a qualified health plan (as defined in section

17 1601(20) of the Health Equity and Access Reform Today

18 Act of 1993) or employer-provided contributions to such

19 employee’s medical savings account’’.

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

21 of part III of subchapter B of chapter 1 is amended by

22 striking the item relating to section 106 and inserting the

23 following new item:

‘‘Sec. 106. Contributions by employer to qualified health plans.’’

24 (b) INCLUSION IN INCOME.—
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1 (1) IN GENERAL.—Part II of subchapter B of

2 chapter 1 (relating to items specifically included in

3 gross income) is amended by adding at the end the

4 following new section:

5 ‘‘SEC. 91. EXCESS EMPLOYER CONTRIBUTIONS TO QUALI6 FIED HEALTH PLANS.

7 ‘‘(a) GENERAL RULE.—Notwithstanding section 106,

8 if—

9 ‘‘(1) an employee is covered by a qualified

10 health plan at any time during any month, and

11 ‘‘(2) there is an excess employer contribution

12 with respect to the employee to such plan for such

13 month,

14 the gross income of such employee for the taxable year

15 which includes such month shall include an amount equal

16 to such excess employer contribution for such month.

17 ‘‘(b) EXCESS EMPLOYER CONTRIBUTION DE18 FINED.—

19 ‘‘(1) IN GENERAL.—For purposes of this sec20 tion, the term ‘excess employer contribution’ means,

21 with respect to an employee enrolled in a qualified

22 health plan for any month, the excess of—

23 ‘‘(A) the employer contribution to such

24 plan for such month, over
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1 ‘‘(B) the applicable dollar limit for such

2 employee for such month.

3 ‘‘(2) APPLICABLE DOLLAR LIMIT.—For pur4 poses of paragraph (1)—

5 ‘‘(A) IN GENERAL.—The applicable dollar

6 limit for an employee for any month is equal to

1 7 ⁄12 of the average premium cost for the calendar year of the lowest priced 1 8 ⁄2 of standard

9 packages (within the meaning of section

10 1301(a)(1) of the Health Equity and Access

11 Reform Today Act of 1993) of qualified health

12 plans offered in such year in the HCCA (as de13 fined in section 1601(11) of such Act) within

14 which is offered the qualified health plan in

15 which the employee is enrolled.

16 ‘‘(B) DETERMINATION OF LIMIT.—

17 ‘‘(i) ANNUAL DETERMINATION.—The

18 applicable dollar limit shall be determined

19 annually by the Secretary, in consultation

20 with the Secretary of Health and Human

21 Services, from information submitted by

22 each State with respect to each HCCA.

23 ‘‘(ii) DETERMINATION BASED ON EN24 ROLLMENT AND AGE STATUS.—
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1 ‘‘(I) IN GENERAL.—The applica2 ble dollar limit shall be determined

3 with respect to individual and family

4 enrollments, and within each such en5 rollment status, determined with re6 spect to the age of the principal en7 rollee.

8 ‘‘(II) AGE BANDS ESTAB9 LISHED.—In carrying out subclause

10 (I), the Secretary shall establish rea11 sonable age bands (consistent with

12 such bands established under section

13 1116 of the Health Equity and Access

14 Reform Today Act of 1993) within

15 which premium amounts will not vary

16 for a type of enrollment.

17 ‘‘(c) SPECIAL RULE FOR MULTIEMPLOYER HEALTH

18 PLANS.—In the case of employer contributions with re19 spect to any employee made to a multiemployer health

20 plan on a basis other than per employee per month, the

21 Secretary may by regulations prescribe the method of de22 termining that portion of such contributions that is not

23 included in gross income of the employee.

24 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

25 For purposes of this section—
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1 ‘‘(1) QUALIFIED HEALTH PLAN.—The term

2 ‘qualified health plan’ shall have the meaning given

3 to such term by section 1601(20) of the Health Eq4 uity and Access Reform Today Act of 1993.

5 ‘‘(2) EMPLOYEE INCLUDES FORMER EM6 PLOYEE.—The term ‘employee’ includes a former

7 employee.

8 ‘‘(3) DETERMINATION OF EMPLOYER CON9 TRIBUTION.—

10 ‘‘(A) IN GENERAL.—The employer con11 tribution to any qualified health plan for any

12 month shall be that portion of the cost of such

13 plan for such month which is incurred by the

14 employer.

15 ‘‘(B) SELF-INSURED PLAN MAY USE AN16 NUAL ESTIMATES.—An employer who maintains

17 a self-insured health plan may elect (in such

18 manner and at such time as may be provided

19 in regulations) to determine the actual employer

20 contribution under subsection (b)(1)(A) for any

21 period of not more than 12 months on the basis

22 of a reasonable estimate of the cost of providing

23 coverage for such month. To the extent prac24 ticable, such estimate shall be made on an actu25 arial basis, and in the making of any such esti-
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1 mate, there shall be taken into account such

2 factors as may be required under regulations.

3 ‘‘(C) EMPLOYEES ONLY TAKEN INTO AC4 COUNT FOR PERIODS COVERED.—For purposes

5 of determining the employer contribution,

6 amounts shall be taken into account with re7 spect to an employee only for periods during

8 which such employee is covered by the plan.

9 ‘‘(4) COVERAGE FOR ONLY PART OF MONTH.—

10 If an employee is covered under a qualified health

11 plan for only a portion of a month, the amount re12 quired to be included under subsection (a) in the

13 gross income of such employee with respect to such

14 month shall be an amount which bears the same

15 ratio to the excess employer contribution for such

16 month as such portion bears to the entire month.

17 ‘‘(5) CERTAIN RELATED EMPLOYERS TREATED

18 AS 1 EMPLOYER.—Rules similar to the rules pro19 vided by subsections (b) and (c) of section 414 shall

20 apply.

21 ‘‘(6) MONTH.—The term ‘month’ means a cal22 endar month.

23 ‘‘(7) MULTIEMPLOYER HEALTH PLAN.—The

24 term ‘multiemployer health plan’ means a qualified

25 health plan which is part of an employee welfare
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1 benefit plan (within the meaning of section 3(1) of

2 the Employee Retirement Income Security Act of

3 1974)—

4 ‘‘(A) to which more than 1 employer is re5 quired to contribute, and

6 ‘‘(B) which is maintained pursuant to 1 or

7 more collective bargaining agreements between

8 1 or more employee organizations and more

9 than 1 employer.’’.

10 (2) CLERICAL AMENDMENT.—The table of sec11 tions for part II of subchapter B of chapter 1 is

12 amended by adding at the end the following:

‘‘Sec. 91. Excess employer contributions to qualified health plans.’’

13 (c) EMPLOYMENT TAX AMENDMENTS.—

14 (1) GENERAL RULE.—Chapter 25 (relating to

15 general provisions relating to employment taxes) is

16 amended by adding at the end the following new sec17 tion:

18 ‘‘SEC. 3510. TREATMENT OF EXCESS EMPLOYER CONTRIBU19 TIONS.

20 ‘‘(a) IN GENERAL.—For purposes of this subtitle and

21 section 209 of the Social Security Act, any amount re22 quired to be included in the gross income of an employee

23 under section 91(a) with respect to any month—

24 ‘‘(1) shall be treated as paid in cash to such

25 employee at the close of such month, and
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1 ‘‘(2) shall not be treated as paid under a health

2 or similar plan of the employer.

3 For purposes of paragraph (1), an employer may elect to

4 prorate any such amount to any payroll period (or portion

5 thereof) covering such month rather than treat it as being

6 paid at the close of such month.

7 ‘‘(b) SPECIAL RULES IN THE CASE OF SELF-IN8 SURED PLANS.—

9 ‘‘(1) SAFE HARBOR FOR EMPLOYEES WHOSE

10 ESTIMATES ARE AT LEAST 95 PERCENT OF ACTUAL

11 EMPLOYER CONTRIBUTIONS.—In the case of an em12 ployer who maintains a self-insured qualified health

13 plan, if for any calendar year the excess of—

14 ‘‘(A) the actual employer contributions de15 termined under section 91 with respect to all

16 employees for such year, over

17 ‘‘(B) the amount estimated by the em18 ployer under section 91(d)(3)(B) as the em19 ployer contributions with respect to all employ20 ees for such year,

21 is not greater than 5 percent of the amount deter22 mined under subparagraph (A) then, except as pro23 vided in paragraph (2), no penalty shall be imposed

24 under section 6672 on the employer for failure to
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1 pay, or to deduct and withhold, any tax imposed by

2 this subtitle on such excess.

3 ‘‘(2) EMPLOYER MUST PAY CERTAIN TAXES ON

4 EXCESS.—Paragraph (1) shall not apply to any tax

5 imposed, or required to be deducted and withheld,

6 under sections 3111, 3221, 3301, and 3402 on the

7 excess described in paragraph (1) unless the em8 ployer pays any such tax within the time prescribed

9 by the Secretary under regulations.

10 ‘‘(3) SPECIAL RULES FOR EMPLOYEE’S SOCIAL

11 SECURITY TAX AND CREDIT.—In the case of the ex12 cess described in paragraph (1)—

13 ‘‘(A) no tax shall be imposed by section

14 3101, and

15 ‘‘(B) the amount of such excess shall not

16 be taken into account for purposes of section

17 209 of the Social Security Act.

18 ‘‘(c) LIABILITY FOR WITHHOLDING AND PAYMENT

19 OF TAX.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), the applicable payor shall withhold, and

22 be liable for, payment of any tax required to be

23 withheld or paid under this subtitle on any amount

24 described in subsection (a).
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1 ‘‘(2) SPECIAL RULES FOR MULTIEMPLOYER

2 HEALTH PLANS.—In the case of any multiemployer

3 health plan, the plan administrator shall comply

4 with such rules with respect to the withholding of,

5 and liability for, any tax required to be withheld or

6 paid under this subtitle as the Secretary may require

7 by regulations.

8 ‘‘(d) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) APPLICABLE PAYOR.—The term ‘applica10 ble payor’ means the payor of remuneration for serv11 ices which qualifies the employee for coverage under

12 a multiemployer health plan.

13 ‘‘(2) EMPLOYEE.—The term ‘employee’ does

14 not include a former employee.

15 ‘‘(3) MULTIEMPLOYER HEALTH PLAN.—The

16 term ‘multiemployer health plan’ has the meaning

17 given such term by section 91(d)(7).’’.

18 (2) CLERICAL AMENDMENT.—The table of sec19 tions for chapter 25 is amended by adding at the

20 end the following new item:

‘‘Sec. 3510. Treatment of excess employer contributions.’’.

21 (d) EFFECTIVE DATES.—

22 (1) IN GENERAL.—The amendments made by

23 subsections (a) and (b) shall apply to taxable years

24 beginning after the first December 31 following the

25 deadline specified in section 1401(c)(2) of this Act.
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1 (2) EMPLOYMENT TAX.—The amendments

2 made by subsection (c) shall take effect on and after

3 the first January 1 following the deadline specified

4 in such section 1401(c)(2).

5 SEC. 2002. DEDUCTIONS FOR COSTS OF QUALIFIED HEALTH

6 PLANS.

7 (a) BUSINESS EXPENSE DEDUCTION FOR HEALTH

8 INSURANCE.—Section 162 (relating to trade or business

9 expenses) is amended by redesignating subsection (m) as

10 subsection (n) and by inserting after subsection (l) the fol11 lowing new subsection:

12 ‘‘(m) GROUP HEALTH PLANS.—The amount of ex13 penses paid or incurred by an employer for a group health

14 plan or as contributions to an employee’s medical savings

15 account shall not be allowed as a deduction under this sec16 tion—

17 ‘‘(1) unless the plan is a qualified health plan

18 (as defined in section 1601(20) of the Health Equity

19 and Access Reform Today Act of 1993), and

20 ‘‘(2) with respect to each employee, to the ex21 tent such amount exceeds the applicable dollar limit

22 for such employee (within the meaning of section

23 91(b)(2) and determined on an annual basis).’’.
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1 (b) PERMANENT EXTENSION AND INCREASE IN

2 HEALTH INSURANCE TAX DEDUCTION FOR SELF-EM3 PLOYED INDIVIDUALS.—

4 (1) PERMANENT EXTENSION OF DEDUCTION.—

5 (A) IN GENERAL.—Subsection (l) of sec6 tion 162 (relating to special rules for health in7 surance costs of self-employed individuals) is

8 amended by striking paragraph (6).

9 (B) EFFECTIVE DATE.—The amendment

10 made by this paragraph shall apply to taxable

11 years beginning after December 31, 1993.

12 (2) INCREASE IN AMOUNT OF DEDUCTION; IN13 SURANCE PURCHASED MUST MEET CERTAIN STAND14 ARDS.—

15 (A) INCREASE IN AMOUNT OF DEDUC16 TION.—Paragraph (1) of section 162(l) is

17 amended—

18 (i) by striking ‘‘25 percent of’’ and in19 serting ‘‘100 percent of’’, and

20 (ii) by striking ‘‘dependents.’’ and in21 serting ‘‘dependents, and only to the extent

22 such amount does not exceed the applica23 ble dollar limit for such taxpayer (within

24 the meaning of section 91(b)(2) and deter25 mined on an annual basis).’’
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1 (B) INSURANCE PURCHASED MUST MEET

2 CERTAIN STANDARDS.—Paragraph (2) of sec3 tion 162(l) is amended by adding at the end the

4 following new subparagraph:

5 ‘‘(C) INSURANCE MUST MEET CERTAIN

6 STANDARDS.—Paragraph (1) shall apply only to

7 insurance which is a qualified health plan (as

8 defined in section 1601(20) of the Health Eq9 uity and Access Reform Today Act of 1993).’’.

10 (C) TREATMENT OF MULTIEMPLOYER

11 HEALTH PLANS.—Subsection (l) of section 162

12 is amended by adding at the end the following

13 new paragraph:

14 ‘‘(6) TREATMENT OF MULTIEMPLOYER HEALTH

15 PLANS.—For purposes of this subsection, an amount

16 paid into a multiemployer health plan (as defined in

17 section 91(d)(7) shall be deemed to be an amount

18 paid for insurance which constitutes medical care.’’.

19 (c) RULES RELATING TO DEDUCTIONS FOR INDIVID20 UALS.—

21 (1) DEDUCTION FOR PREMIUMS LIMITED TO

22 QUALIFIED HEALTH PLANS.—Subparagraph (C) of

23 section 213(d)(1) (defining medical care) is amended

24 by striking ‘‘for insurance’’ and inserting ‘‘for a

25 qualified health plan (as defined in section 1601(20)
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•S 1770 PCS1S

1 of the Health Equity and Access Reform Today Act

2 of 1993).’’

3 (2) DEDUCTION NOT SUBJECT TO AGI LIMITA4 TION.—Section 213 (relating to medical, dental, etc.,

5 expenses) is amended by adding at the end the fol6 lowing new subsection:

7 ‘‘(f) SPECIAL RULES FOR QUALIFIED HEALTH CARE

8 PREMIUM EXPENSES.—

9 ‘‘(1) IN GENERAL.—In computing the deduction

10 under subsection (a) with respect to amounts paid

11 for premiums for coverage under a qualified health

12 plan (as defined in section 1601(20) of the Health

13 Equity and Access Reform Today Act of 1993)—

14 ‘‘(A) the limitation under subsection (a)

15 based on adjusted gross income shall not apply

16 to such amounts (and such amounts shall not

17 be taken into account in determining whether

18 such limitation applies to other amounts), and

19 ‘‘(B) no deduction shall be allowed to the

20 extent such amounts exceed the applicable dol21 lar limit for the taxpayer (within the meaning

22 of section 91(b)(2) and determined on an an23 nual basis).

24 ‘‘(2) LIMIT.—In computing the amount allowed

25 as a deduction under paragraph (1) with respect to
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1 the cost of providing coverage for any individual, the

2 applicable dollar limit shall be reduced by the aggre3 gate amount of payments to, or on behalf of, such

4 individual by—

5 ‘‘(A) the Secretary of Health and Human

6 Services under section 1003 of the Health Eq7 uity and Access Reform Today Act of 1993,

8 and

9 ‘‘(B) all other entities (including any em10 ployer or governmental agency),

11 for coverage of such individual under a qualified

12 health plan (as so defined).’’.

13 (3) DEDUCTION ALLOWED AGAINST GROSS IN14 COME.—Section 62(a) (defining adjusted gross in15 come) is amended by inserting after paragraph (15)

16 the following new paragraph:

17 ‘‘(16) DEDUCTION FOR QUALIFIED HEALTH

18 PLAN PREMIUMS.—The deduction allowed under sec19 tion 213(f).’’.

20 (d) EFFECTIVE DATE.—Except as provided in sub21 section (b)(1)(B), the amendments made by this section

22 shall apply to taxable years beginning after the first De23 cember 31 following the deadline specified in section

24 1401(c)(2) of this Act.
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1 SEC. 2003. MEDICAL SAVINGS ACCOUNTS.

2 (a) IN GENERAL.—Part VII of subchapter B of chap3 ter 1 (relating to additional itemized deductions for indi4 viduals) is amended by redesignating section 220 as sec5 tion 221 and by inserting after section 219 the following

6 new section:

7 ‘‘SEC. 220. MEDICAL SAVINGS ACCOUNTS.

8 ‘‘(a) DEDUCTION ALLOWED.—In the case of an eligi9 ble individual, there shall be allowed as a deduction the

10 amounts paid in cash during the taxable year by such indi11 vidual to a medical savings account for the benefit of such

12 individual or for the benefit of any spouse or dependent

13 of such individual who is an eligible individual.

14 ‘‘(b) LIMITATIONS.—

15 ‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as

16 provided in regulations prescribed by the Secretary,

17 no deduction shall be allowed under subsection (a)

18 for amounts paid to any medical savings account for

19 the benefit of an individual, such individual’s spouse,

20 or any dependent of such individual if such individ21 ual, spouse, or dependent is a beneficiary of any

22 other medical savings account.

23 ‘‘(2) DOLLAR LIMITATION.—The amount allow24 able as a deduction under subsection (a) with re25 spect to any individual for the taxable year shall not

26 exceed the excess of—
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1 ‘‘(A) the applicable dollar limit with re2 spect to such individual (within the meaning of

3 section 91(b)(2) and determined on an annual

4 basis), over

5 ‘‘(B) the sum of—

6 ‘‘(i) the aggregate amount paid by, or

7 on behalf of such individual, as a premium

8 for a catastrophic health plan covering

9 such eligible individual for such taxable

10 year, plus

11 ‘‘(ii) the aggregate amount contrib12 uted to the eligible individual’s medical

13 savings account by persons other than the

14 eligible individual.

15 ‘‘(c) DEFINITIONS.—For purposes of this section—

16 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible

17 individual’ means any individual who is covered

18 under a catastrophic health plan during any portion

19 of the calendar year with or within which the taxable

20 year begins.

21 ‘‘(2) CATASTROPHIC HEALTH PLAN.—For pur22 poses of paragraph (1), the term ‘catastrophic health

23 plan’ means a qualified health plan providing health

24 plan coverage through a catastrophic package. For

25 purposes of the preceding sentence, the terms ‘quali-
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1 fied health plan’ and ‘catastrophic package’ have the

2 meanings given to such terms by sections 1601(20)

3 and 1301(a)(2) of the Health Equity and Access Re4 form Today Act of 1993.

5 ‘‘(d) MEDICAL SAVINGS ACCOUNTS.—For purposes

6 of this section—

7 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—

8 ‘‘(A) IN GENERAL.—The term ‘medical

9 savings account’ means a trust created or orga10 nized in the United States exclusively for the

11 purpose of paying the medical expenses of the

12 beneficiaries of such trust, but only if the writ13 ten governing instrument creating the trust

14 meets the following requirements:

15 ‘‘(i) Except in the case of a rollover

16 contribution described in subsection (e)(4),

17 no contribution will be accepted unless it is

18 in cash, and, subject to subsection (e)(2),

19 contributions will not be accepted in excess

20 of the amount allowed as a deduction

21 under this section for the taxable year.

22 ‘‘(ii) The trustee is a bank (as defined

23 in section 408(n)) or another person who

24 demonstrates to the satisfaction of the Sec25 retary that the manner in which such per-
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1 son will administer the trust will be con2 sistent with the requirements of this sec3 tion.

4 ‘‘(iii) No part of the trust assets will

5 be invested in life insurance contracts.

6 ‘‘(iv) The assets of the trust will not

7 be commingled with other property except

8 in a common trust fund or common invest9 ment fund.

10 ‘‘(v) The interest of an individual in

11 the balance in his account is nonforfeit12 able.

13 ‘‘(vi) Under regulations prescribed by

14 the Secretary, rules similar to the rules of

15 section 401(a)(9) shall apply to the dis16 tribution of the entire interest of bene17 ficiaries of such trust.

18 ‘‘(B) TREATMENT OF COMPARABLE AC19 COUNTS HELD BY INSURANCE COMPANIES.—

20 For purposes of this section, an account held by

21 an insurance company in the United States

22 shall be treated as a medical savings account

23 (and such company shall be treated as a bank)

24 if—
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1 ‘‘(i) such account is part of a health

2 insurance plan that includes a catastrophic

3 health plan (as defined in subsection

4 (c)(2)),

5 ‘‘(ii) such account is exclusively for

6 the purpose of paying the medical expenses

7 of the beneficiaries of such account who

8 are covered under such catastrophic health

9 plan, and

10 ‘‘(iii) the written instrument govern11 ing the account meets the requirements of

12 clauses (i), (v), and (vi) of subparagraph

13 (A).

14 ‘‘(2) MEDICAL EXPENSES.—

15 ‘‘(A) IN GENERAL.—The term ‘medical ex16 penses’ means, with respect to an individual,

17 amounts paid or incurred by such individual

18 for—

19 ‘‘(i) medical care (as defined in sec20 tion 213), or

21 ‘‘(ii) long-term care (as defined in

22 paragraph (3)),

23 for such individual, the spouse of such individ24 ual, and any dependent (as defined in section

25 152) of such individual, but only to the extent
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•S 1770 PCS1S

1 such amounts are not compensated for by in2 surance or otherwise.

3 ‘‘(B) HEALTH PLAN COVERAGE MAY NOT

4 BE PURCHASED FROM ACCOUNT.—

5 ‘‘(i) IN GENERAL.—Such term shall

6 not include any amount paid for coverage

7 under a health plan.

8 ‘‘(ii) EXCEPTION.—Clause (i) shall

9 not apply—

10 ‘‘(I) in the case of coverage of an

11 individual under 65 years of age

12 under a catastrophic health plan or

13 under a long-term care insurance

14 plan, or

15 ‘‘(II) in the case of coverage of

16 an individual 65 years of age or older

17 under a medicare supplemental policy

18 or under a long-term care insurance

19 plan or for payment of premiums

20 under part A or part B of title XVIII

21 of the Social Security Act.

22 ‘‘(3) LONG-TERM CARE.—

23 ‘‘(A) IN GENERAL.—The term ‘long-term

24 care’ means diagnostic, preventive, therapeutic,

25 rehabilitative, maintenance, or personal care
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1 services which are required by, and provided to,

2 a functionally impaired individual, which have

3 as their primary purpose the direct provision of

4 needed assistance with 1 or more activities of

5 daily living (or the alleviation of the conditions

6 necessitating such assistance) that the individ7 ual is certified under subparagraph (B) as

8 being unable to perform, and which are pro9 vided in a setting other than an acute care unit

10 of a hospital pursuant to a continuing plan of

11 care prescribed by a physician or registered pro12 fessional nurse. Such term does not include

13 food or lodging provided in an institutional or

14 other setting, or basic living services associated

15 with the maintenance of a household or partici16 pation in community life, such as case manage17 ment, transportation or legal services, or the

18 performance of home maintenance or household

19 chores.

20 ‘‘(B) FUNCTIONALLY IMPAIRED INDIVID21 UAL.—The term ‘functionally impaired individ22 ual’ means an individual who is certified by a

23 physician or registered professional nurse as

24 being unable to perform at least 3 activities of

25 daily living without substantial assistance from
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1 another individual. For purposes of this para2 graph, the term ‘activities of daily living’ means

3 bathing, dressing, eating, toileting, transferring,

4 and walking.

5 ‘‘(4) TIME WHEN CONTRIBUTIONS DEEMED

6 MADE.—A contribution shall be deemed to be made

7 on the last day of the preceding taxable year if the

8 contribution is made on account of such taxable year

9 and is made not later than the time prescribed by

10 law for filing the return for such taxable year (not

11 including extensions thereof).

12 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.—

13 ‘‘(1) IN GENERAL.—Any amount paid or dis14 tributed out of a medical savings account shall be in15 cluded in the gross income of the individual for

16 whose benefit such account was established unless

17 such amount is used exclusively to pay the medical

18 expenses of such individual or the spouse or any de19 pendent of such individual.

20 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE21 FORE DUE DATE OF RETURN.—Paragraph (1) shall

22 not apply to the distribution of any contribution paid

23 during a taxable year to a medical savings account

24 to the extent that such contribution exceeds the
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1 amount allowable as a deduction under subsection

2 (a) if—

3 ‘‘(A) such distribution is received by the

4 individual on or before the last day prescribed

5 by law (including extensions of time) for filing

6 such individual’s return for such taxable year,

7 and

8 ‘‘(B) such distribution is accompanied by

9 the amount of net income attributable to such

10 excess contribution.

11 Any net income described in subparagraph (B) shall

12 be included in the gross income of the individual for

13 the taxable year in which it is received.

14 ‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED

15 FOR MEDICAL EXPENSES.—

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

17 this chapter for any taxable year in which there

18 is a payment or distribution from a medical

19 savings account which is not used to pay the

20 medical expenses of the individual for whose

21 benefit the account was established, shall be in22 creased by 10 percent of the amount of such

23 payment or distribution which is includible in

24 gross income under paragraph (1).
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1 ‘‘(B) ACCOUNT BALANCE LIMITATION.—

2 If—

3 ‘‘(i) the tax imposed by this chapter is

4 required to be increased under subpara5 graph (A) by reason of a distribution, and

6 ‘‘(ii) after such distribution, the bal7 ance of the medical savings account estab8 lished for the benefit of the individual, is

9 less than the amount of the deductible

10 under the catastrophic health plan covering

11 such individual,

12 subparagraph (A) shall be applied by substitut13 ing ‘50 percent’ for ‘10 percent’.

14 ‘‘(4) ROLLOVERS.—Paragraph (1) shall not

15 apply to any amount paid or distributed out of a

16 medical savings account to the individual for whose

17 benefit the account is maintained, if the entire

18 amount received (including money and any other

19 property) is paid into another medical savings ac20 count for the benefit of such individual not later

21 than the 60th day after the day on which the indi22 vidual received the payment or distribution.

23 ‘‘(5) PENALTY FOR MANDATORY DISTRIBU24 TIONS NOT MADE FROM ACCOUNT.—
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1 ‘‘(A) IN GENERAL.—If during any taxable

2 year—

3 ‘‘(i) there is a payment of a manda4 tory distribution expense incurred by a

5 beneficiary of a medical savings account,

6 and

7 ‘‘(ii) the person making such payment

8 is not reimbursed for such payment with a

9 distribution from such account before the

10 60th day after such payment,

11 the taxpayer’s tax imposed by this chapter for

12 such taxable year shall be increased by 100 per13 cent of the excess of the amount of such pay14 ment over the amount of reimbursement made

15 before such 60th day.

16 ‘‘(B) MANDATORY DISTRIBUTION EX17 PENSE.—For purposes of subparagraph (A),

18 the term ‘mandatory distribution expense’

19 means—

20 ‘‘(i) any expense incurred which may

21 be counted toward a deductible, or for a

22 copayment or coinsurance, under the cata23 strophic health plan covering such bene24 ficiary, and
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•S 1770 PCS1S

1 ‘‘(ii) in the case of a beneficiary who

2 has attained age 65, any expense for cov3 erage described in subsection

4 (d)(2)(B)(ii)(II) and any expense incurred

5 which may be counted toward a deductible,

6 or for a copayment or coinsurance, under

7 title XVIII of the Social Security Act.

8 ‘‘(f) TAX TREATMENT OF ACCOUNTS.—

9 ‘‘(1) EXEMPTION FROM TAX.—Any medical sav10 ings account is exempt from taxation under this sub11 title unless such account has ceased to be a medical

12 savings account by reason of paragraph (2) or (3).

13 Notwithstanding the preceding sentence, any such

14 account shall be subject to the taxes imposed by sec15 tion 511 (relating to imposition of tax on unrelated

16 business income of charitable, etc. organizations).

17 ‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN18 GAGES IN PROHIBITED TRANSACTION.—

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

20 year of the individual for whose benefit the

21 medical savings account was established, such

22 individual engages in any transaction prohibited

23 by section 4975 with respect to the account, the

24 account ceases to be a medical savings account

25 as of the first day of that taxable year.
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1 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

2 ALL ITS ASSETS.—In any case in which any ac3 count ceases to be a medical savings account by

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

5 any taxable year, paragraph (1) of subsection

6 (e) shall be applied as if there were a distribu7 tion on such first day in an amount equal to

8 the fair market value (on such first day) of all

9 assets in the account (on such first day) and no

10 portion of such distribution were used to pay

11 medical expenses.

12 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU13 RITY.—If, during any taxable year, the individual for

14 whose benefit a medical savings account was estab15 lished uses the account or any portion thereof as se16 curity for a loan, the portion so used is treated as

17 distributed to that individual and not used to pay

18 medical expenses.

19 ‘‘(g) CUSTODIAL ACCOUNTS.—For purposes of this

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

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

22 bank (as defined in section 408(n)) or another per23 son who demonstrates to the satisfaction of the Sec24 retary that the manner in which he will administer
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1 the account will be consistent with the requirements

2 of this section, and

3 ‘‘(2) the custodial account would, except for the

4 fact that it is not a trust, constitute a medical sav5 ings account described in subsection (d).

6 For purposes of this title, in the case of a custodial ac7 count treated as a trust by reason of the preceding sen8 tence, the custodian of such account shall be treated as

9 the trustee thereof.

10 ‘‘(h) REPORTS.—The trustee of a medical savings ac11 count shall make such reports regarding such account to

12 the Secretary and to the individual for whose benefit the

13 account is maintained with respect to contributions, dis14 tributions, and such other matters as the Secretary may

15 require under regulations. The reports required by this

16 subsection shall be filed at such time and in such manner

17 and furnished to such individuals at such time and in such

18 manner as may be required by those regulations.’’.

19 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI20 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

21 of section 62 (defining adjusted gross income), as amend22 ed by section 2002(c)(3), is amended by inserting after

23 paragraph (16) the following new paragraph:

24 ‘‘(17) MEDICAL SAVINGS ACCOUNTS.—The de25 duction allowed by section 220.’’.
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1 (c) DISTRIBUTIONS FROM MEDICAL SAVINGS AC2 COUNTS NOT ALLOWED AS MEDICAL EXPENSE DEDUC3 TION.—Section 213 (relating to medical, dental, etc., ex4 penses), as amended by section 2002(c)(2), is amended

5 by adding at the end the following new subsection:

6 ‘‘(g) COORDINATION WITH MEDICAL SAVINGS AC7 COUNTS.—The amount otherwise taken into account

8 under subsection (a) as expenses paid for medical care

9 shall be reduced by the amount (if any) of the distribu10 tions from any medical savings account of the taxpayer

11 during the taxable year which is not includible in gross

12 income by reason of being used for medical care.’’.

13 (d) EXCLUSION OF EMPLOYER CONTRIBUTIONS TO

14 MEDICAL SAVINGS ACCOUNTS FROM EMPLOYMENT

15 TAXES.—

16 (1) SOCIAL SECURITY TAXES.—

17 (A) Subsection (a) of section 3121 (defin18 ing wages) is amended by striking ‘‘or’’ at the

19 end of paragraph (20), by striking the period at

20 the end of paragraph (21) and inserting ‘‘; or’’,

21 and by inserting after paragraph (21) the fol22 lowing new paragraph:

23 ‘‘(22) remuneration paid to or on behalf of an

24 employee if (and to the extent that) at the time of

25 payment of such remuneration it is reasonable to be-
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1 lieve that a corresponding deduction is allowable

2 under section 220.’’.

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

4 Social Security Act (42 U.S.C. 409) is amended

5 by striking ‘‘or’’ at the end of paragraph (17),

6 by striking the period at the end of paragraph

7 (18) and inserting ‘‘; or’’, and by inserting after

8 paragraph (18) the following new paragraph:

9 ‘‘(19) remuneration paid to or on behalf of an

10 employee if (and to the extent that) at the time of

11 payment of such remuneration it is reasonable to be12 lieve that a corresponding deduction is allowable

13 under section 220 of the Internal Revenue Code of

14 1986.’’.

15 (2) RAILROAD RETIREMENT TAX.—Subsection

16 (e) of section 3231 (defining compensation) is

17 amended by adding at the end the following new

18 paragraph:

19 ‘‘(10) EMPLOYER CONTRIBUTIONS TO MEDICAL

20 SAVINGS ACCOUNTS.—The term ‘compensation’ shall

21 not include any payment made to or on behalf of an

22 employee if (and to the extent that) at the time of

23 payment of such remuneration it is reasonable to be24 lieve that a corresponding deduction is allowable

25 under section 220.’’.
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1 (3) UNEMPLOYMENT TAX.—Subsection (b) of

2 section 3306 (defining wages) is amended by strik3 ing ‘‘or’’ at the end of paragraph (15), by striking

4 the period at the end of paragraph (16) and insert5 ing ‘‘; or’’, and by inserting after paragraph (16) the

6 following new paragraph:

7 ‘‘(17) remuneration paid to or on behalf of an

8 employee if (and to the extent that) at the time of

9 payment of such remuneration it is reasonable to be10 lieve that a corresponding deduction is allowable

11 under section 220.’’.

12 (4) WITHHOLDING TAX.—Subsection (a) of sec13 tion 3401 (defining wages) is amended by striking

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

15 period at the end of paragraph (20) and inserting ‘‘;

16 or’’, and by inserting after paragraph (20) the fol17 lowing new paragraph:

18 ‘‘(21) remuneration paid to or on behalf of an

19 employee if (and to the extent that) at the time of

20 payment of such remuneration it is reasonable to be21 lieve that a corresponding deduction is allowable

22 under section 220.’’.

23 (e) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

24 (relating to tax on excess contributions to individual re-
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1 tirement accounts, certain section 403(b) contracts, and

2 certain individual retirement annuities) is amended—

3 (1) by inserting ‘‘MEDICAL SAVINGS AC4 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

5 such section,

6 (2) by striking ‘‘or’’ at the end of paragraph

7 (1) of subsection (a),

8 (3) by redesignating paragraph (2) of sub9 section (a) as paragraph (3) and by inserting after

10 paragraph (1) the following:

11 ‘‘(2) a medical savings account (within the

12 meaning of section 220(d)), or’’, and

13 (4) by adding at the end the following new sub14 section:

15 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

16 ACCOUNTS.—For purposes of this section, in the case of

17 a medical savings account (within the meaning of section

18 220(d)), the term ‘excess contributions’ means the amount

19 by which the amount contributed for the taxable year to

20 the account exceeds the amount deductible under section

21 220 for such taxable year. For purposes of this subsection,

22 any contribution which is distributed out of the medical

23 savings account in a distribution to which section

24 220(e)(2) applies shall be treated as an amount not con25 tributed.’’.
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1 (f) TAX ON PROHIBITED TRANSACTIONS.—Section

2 4975 (relating to prohibited transactions) is amended—

3 (1) by adding at the end of subsection (c) the

4 following new paragraph:

5 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC6 COUNTS.—An individual for whose benefit a medical

7 savings account (within the meaning of section

8 220(d)) is established shall be exempt from the tax

9 imposed by this section with respect to any trans10 action concerning such account (which would other11 wise be taxable under this section) if, with respect

12 to such transaction, the account ceases to be a medi13 cal savings account by reason of the application of

14 section 220(f)(2)(A) to such account.’’, and

15 (2) by inserting ‘‘or a medical savings account

16 described in section 220(d)’’ in subsection (e)(1)

17 after ‘‘described in section 408(a)’’.

18 (g) FAILURE TO PROVIDE REPORTS ON MEDICAL

19 SAVINGS ACCOUNTS.—Section 6693 (relating to failure to

20 provide reports on individual retirement accounts or annu21 ities) is amended—

22 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

23 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

24 such section, and
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1 (2) by adding at the end of subsection (a) the

2 following: ‘‘The person required by section 220(h) to

3 file a report regarding a medical savings account at

4 the time and in the manner required by such section

5 shall pay a penalty of $50 for each failure unless it

6 is shown that such failure is due to reasonable

7 cause.’’.

8 (h) CLERICAL AMENDMENTS.—

9 (1) The table of sections for part VII of sub10 chapter B of chapter 1 is amended by striking the

11 last item and inserting the following:

‘‘Sec. 220. Medical savings accounts.

‘‘Sec. 221. Cross reference.’’

12 (2) The table of sections for chapter 43 is

13 amended by striking the item relating to section

14 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.’’

15 (3) The table of sections for subchapter B of

16 chapter 68 is amended by inserting ‘‘or on medical

17 savings accounts’’ after ‘‘annuities’’ in the item re18 lating to section 6693.

19 (i) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to taxable years beginning after

21 the first December 31 following the deadline specified in

22 section 1401(c)(2) of this Act.
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1 SEC. 2004. ELIMINATING COMMONALITY OF INTEREST OR

2 GEOGRAPHIC LOCATION REQUIREMENT FOR

3 TAX EXEMPT TRUST STATUS.

4 (a) IN GENERAL.—Paragraph (9) of section 501(c)

5 (relating to exempt organizations) is amended—

6 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

7 (2) by adding at the end the following:

8 ‘‘(B) Any determination of whether a health

9 plan maintained by one or more large employers

10 (within the meaning of section 1601(16) of the

11 Health Equity and Access Reform Today Act of

12 1993) is a voluntary employees’ beneficiary associa13 tion meeting the requirements of this paragraph

14 shall be made without regard to any determination

15 of commonality of interest or geographic location if

16 the plan is a qualified health plan (as defined in

17 such section).’’.

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

19 subsection (a) shall apply with respect to determinations

20 made on or after January 1, 1994.

21 SEC. 2005. REVISION OF COBRA CONTINUATION COVERAGE

22 REQUIREMENTS.

23 (a) PERIOD OF COVERAGE.—Clause (iv) of section

24 4980B(f)(2)(B) (defining period of coverage) is amend25 ed—
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1 (1) by striking ‘‘or’’ at the end of subclause (I),

2 by striking the period at the end of subclause (II)

3 and inserting ‘‘, or’’, and by adding at the end the

4 following new subclause:

5 ‘‘(III) eligible for coverage under a qualified

6 health plan in accordance with title I of the Health

7 Equity and Access Reform Today Act of 1993.’’,

8 and

9 (2) by striking ‘‘OR MEDICARE ENTITLEMENT’’

10 in the heading and inserting ‘‘, MEDICARE ENTITLE11 MENT, OR QUALIFIED HEALTH PLAN ELIGIBILITY’’.

12 (b) QUALIFIED BENEFICIARY.—Section 4980B(g)(1)

13 (defining qualified beneficiary) is amended by adding at

14 the end the following new subparagraph:

15 ‘‘(E) SPECIAL RULE FOR INDIVIDUALS

16 COVERED BY HEALTH EQUITY AND ACCESS RE17 FORM TODAY ACT OF 1993.—The term ‘qualified

18 beneficiary’ shall not include any individual

19 who, upon termination of coverage under a

20 group health plan, is eligible coverage under a

21 qualified health plan in accordance with title I

22 of the Health Equity and Access Reform Today

23 Act of 1993.’’

24 (c) REPEAL UPON IMPLEMENTATION OF HEALTH

25 EQUITY AND ACCESS REFORM TODAY ACT OF 1993.—
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1 (1) IN GENERAL.—Section 4980B (relating to

2 failure to satisfy continuation coverage requirements

3 of group health care plans) is hereby repealed.

4 (2) CONFORMING AMENDMENTS.—

5 (A) Section 414(n)(3)(C) is amended by

6 striking ‘‘505, and 4980B’’ and inserting ‘‘and

7 505’’.

8 (B) Section 414(t)(2) is amended by strik9 ing ‘‘505, or 4980B’’ and inserting ‘‘or 505’’.

10 (C) The table of sections for chapter 43 is

11 amended by striking the item relating to section

12 4980B.

13 (d) EFFECTIVE DATE.—

14 (1) SUBSECTIONS (a) AND (b).—The amend15 ments made by subsections (a) and (b) shall take ef16 fect on the date of the enactment of this Act.

17 (2) SUBSECTION (c).—The amendments made

18 by subsection (c) shall take effect on the first Janu19 ary 1 following the deadline specified in section

20 1401(c)(2) of this Act.
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1 Subtitle B—Provisions Relating to

2 Acceleration of Death Benefits

3 SEC. 2101. TAX TREATMENT OF PAYMENTS UNDER LIFE IN4 SURANCE CONTRACTS FOR TERMINALLY ILL

5 INDIVIDUALS .

6 (a) GENERAL RULE.—Section 101 (relating to cer7 tain death benefits) is amended by adding at the end the

8 following new subsection:

9 ‘‘(g) TREATMENT OF AMOUNTS PAID WITH RESPECT

10 TO TERMINALLY ILL INDIVIDUALS.—

11 ‘‘(1) IN GENERAL.—For purposes of this sec12 tion, any amount paid to an individual under a life

13 insurance contract on the life of an insured who is

14 a terminally ill individual shall be treated as an

15 amount paid by reason of the death of such insured.

16 ‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur17 poses of this subsection, the term ‘terminally ill indi18 vidual’ means an individual who has been certified

19 by a licensed physician as having an illness or phys20 ical condition which can reasonably be expected to

21 result in death in 12 months or less.’’

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

23 subsection (a) shall apply to taxable years beginning after

24 December 31, 1993.
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1 SEC. 2102. TAX TREATMENT OF COMPANIES ISSUING

2 QUALIFIED TERMINAL ILLNESS RIDERS.

3 (a) QUALIFIED TERMINAL ILLNESS RIDER TREATED

4 AS LIFE INSURANCE.—Section 818 (relating to other defi5 nitions and special rules) is amended by adding at the end

6 the following new subsection:

7 ‘‘(g) QUALIFIED TERMINAL ILLNESS RIDER TREAT8 ED AS LIFE INSURANCE.—For purposes of this part—

9 ‘‘(1) IN GENERAL.—Any reference to life insur10 ance shall be treated as including a reference to a

11 qualified terminal illness rider.

12 ‘‘(2) QUALIFIED TERMINAL ILLNESS RIDER.—

13 For purposes of this subsection, the term ‘qualified

14 terminal illness rider’ means any rider or addendum

15 on, or other provision of, a life insurance contract

16 which provides for payments to an individual upon

17 the insured becoming a terminally ill individual (as

18 defined in section 101(g)(2)).’’

19 (b) DEFINITIONS OF LIFE INSURANCE AND MODI20 FIED ENDOWMENT CONTRACTS.—

21 (1) RIDER TREATED AS QUALIFIED ADDI22 TIONAL BENEFIT.—Paragraph (5)(A) of section

23 7702(f) is amended by striking ‘‘or’’ at the end of

24 clause (iv), by redesignating clause (v) as clause (vi),

25 and by inserting after clause (iv) the following new

26 clause:
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1 ‘‘(v) any qualified terminal illness

2 rider (as defined in section 818(g)(2)), or’’.

3 (2) TRANSITIONAL RULE.—For purposes of ap4 plying section 7702 or 7702A of the Internal Reve5 nue Code of 1986 to any contract (or determining

6 whether either such section applies to such con7 tract), the issuance of a qualified terminal illness

8 rider (as defined in section 818(g)(2) of such Code)

9 with respect to any contract shall not be treated as

10 a modification or material change of such contract.

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

12 this section shall apply to taxable years beginning before,

13 on, or after December 31, 1993.

14 Subtitle C—Long-Term Care Tax

15 Provisions

16 PART I—GENERAL PROVISIONS

17 SEC. 2201. QUALIFIED LONG-TERM CARE SERVICES TREAT18 ED AS MEDICAL CARE.

19 (a) GENERAL RULE.—Paragraph (1) of section

20 213(d) (defining medical care), as amended by section

21 2002(c)(1), is amended by striking ‘‘or’’ at the end of sub22 paragraph (B), by redesignating subparagraph (C) as sub23 paragraph (D), and by inserting after subparagraph (B)

24 the following new subparagraph:
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1 ‘‘(C) for qualified long-term care services

2 (as defined in subsection (g)), or’’.

3 (b) QUALIFIED LONG-TERM CARE SERVICES DE4 FINED.—Section 213 (relating to deduction for medical,

5 dental, etc. expenses), as amended by section 2002(c)(2),

6 is amended by adding at the end the following new sub7 section:

8 ‘‘(g) QUALIFIED LONG-TERM CARE SERVICES.—For

9 purposes of this section—

10 ‘‘(1) IN GENERAL.—The term ‘qualified long11 term care services’ means necessary diagnostic, pre12 ventive, therapeutic, rehabilitative, and maintenance

13 (including personal care) services—

14 ‘‘(A) which are required by an individual

15 during any period during which such individual

16 is a functionally impaired individual,

17 ‘‘(B) which have as their primary purpose

18 the provision of needed assistance with 1 or

19 more activities of daily living which a function20 ally impaired individual is certified as being un21 able to perform under paragraph (2)(A), and

22 ‘‘(C) which are provided pursuant to a con23 tinuing plan of care prescribed by a licensed

24 health care practitioner (other than a relative of

25 such individual).
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1 ‘‘(2) FUNCTIONALLY IMPAIRED INDIVIDUAL.—

2 ‘‘(A) IN GENERAL.—The term ‘functionally

3 impaired individual’ means any individual who

4 is certified by a licensed health care practitioner

5 (other than a relative of such individual) as

6 being unable to perform, without substantial as7 sistance from another individual (including as8 sistance involving verbal reminding, physical

9 cueing, or substantial supervision), at least 3

10 activities of daily living described in paragraph

11 (3).

12 ‘‘(B) SPECIAL RULE FOR HOME HEALTH

13 CARE SERVICES.—In the case of services which

14 are provided during any period during which an

15 individual is residing within the individual’s

16 home (whether or not the services are provided

17 within the home), subparagraph (A) shall be

18 applied by substituting ‘2’ for ‘3’. For purposes

19 of this subparagraph, a nursing home or similar

20 facility shall not be treated as a home.

21 ‘‘(3) ACTIVITIES OF DAILY LIVING.—Each of

22 the following is an activity of daily living:

23 ‘‘(A) Eating.

24 ‘‘(B) Transferring.

25 ‘‘(C) Toileting.
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1 ‘‘(D) Dressing.

2 ‘‘(E) Bathing.

3 ‘‘(4) LICENSED HEALTH CARE PRACTI4 TIONER.—

5 ‘‘(A) IN GENERAL.—The term ‘licensed

6 health care practitioner’ means—

7 ‘‘(i) a physician or registered profes8 sional nurse,

9 ‘‘(ii) a qualified community care case

10 manager (as defined in subparagraph (B)),

11 or

12 ‘‘(iii) any other individual who meets

13 such requirements as may be prescribed by

14 the Secretary after consultation with the

15 Secretary of Health and Human Services.

16 ‘‘(B) QUALIFIED COMMUNITY CARE CASE

17 MANAGER.—The term ‘qualified community

18 care case manager’ means an individual or en19 tity which—

20 ‘‘(i) has experience or has been

21 trained in providing case management

22 services and in preparing individual care

23 plans;
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1 ‘‘(ii) has experience in assessing indi2 viduals to determine their functional and

3 cognitive impairment;

4 ‘‘(iii) is not a relative of the individual

5 receiving case management services; and

6 ‘‘(iv) meets such requirements as may

7 be prescribed by the Secretary after con8 sultation with the Secretary of Health and

9 Human Services.

10 ‘‘(5) RELATIVE.—The term ‘relative’ means an

11 individual bearing a relationship to another individ12 ual which is described in paragraphs (1) through (8)

13 of section 152(a).’’.

14 (c) TECHNICAL AMENDMENTS.—

15 (1) Subparagraph (D) of section 213(d)(1) (as

16 redesignated by subsection (a)) is amended to read

17 as follows:

18 ‘‘(D) for a qualified health plan (as defined

19 in section 1601(20) of the Health Equity and

20 Access Reform Today Act of 1993) (including

21 amounts paid as premiums under part B of

22 title XVIII of the Social Security Act, relating

23 to supplementary medical insurance for the

24 aged)—
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1 ‘‘(i) covering medical care referred to

2 in subparagraphs (A) and (B), or

3 ‘‘(ii) covering medical care referred to

4 in subparagraph (C), but only if such cov5 erage is provided under a qualified long6 term care insurance contract (as defined in

7 section 7702B(b)).’’

8 (2) Paragraph (6) of section 213(d) is amend9 ed—

10 (A) by striking ‘‘subparagraphs (A) and

11 (B)’’ in the matter preceding subparagraph (A)

12 and inserting ‘‘subparagraphs (A), (B), and

13 (C)’’, and

14 (B) by striking ‘‘paragraph (1)(C)’’ in sub15 paragraph (A) and inserting ‘‘paragraph

16 (1)(D)’’.

17 (3) Paragraph (7) of section 213(d) is amended

18 by striking ‘‘subparagraphs (A) and (B)’’ and insert19 ing ‘‘subparagraphs (A), (B), and (C)’’.

20 SEC. 2202. TREATMENT OF LONG-TERM CARE INSURANCE

21 OR PLANS.

22 (a) GENERAL RULE.—Chapter 79 (relating to defini23 tions) is amended by inserting after section 7702A the fol24 lowing new section:
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1 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSURANCE

2 OR PLANS.

3 ‘‘(a) GENERAL RULE.—For purposes of this title—

4 ‘‘(1) a qualified long-term care insurance con5 tract shall be treated as an accident or health insur6 ance contract,

7 ‘‘(2) any plan of an employer providing cov8 erage of qualified long-term care services shall be

9 treated as an accident or health plan with respect to

10 such services,

11 ‘‘(3) amounts received under such a contract or

12 plan with respect to qualified long-term care services

13 shall be treated as amounts received for personal in14 juries or sickness, and

15 ‘‘(4) payments described in subsection (b)(5)

16 shall be treated as payments made with respect to

17 qualified long-term care services.

18 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE

19 CONTRACT.—

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

21 the term ‘qualified long-term care insurance con22 tract’ means any insurance contract if—

23 ‘‘(A) the only insurance protection pro24 vided under such contract is coverage of quali25 fied long-term care services,
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1 ‘‘(B) such contract meets the requirements

2 of paragraphs (2), (3), and (4), and

3 ‘‘(C) such contract is issued by a qualified

4 issuer.

5 ‘‘(2) PREMIUM REQUIREMENTS.—

6 ‘‘(A) IN GENERAL.—The requirements of

7 this paragraph are met with respect to a con8 tract if such contract provides that—

9 ‘‘(i) premium payments may not be

10 made earlier than the date such payments

11 would have been made if the contract pro12 vided for level annual payments over the

13 life of the contract (or, if shorter, 20

14 years), and

15 ‘‘(ii) all refunds of premiums, and all

16 policyholder dividends or similar amounts,

17 under such contract are to be applied as a

18 reduction in future premiums or to in19 crease future benefits.

20 A contract shall not be treated as failing to

21 meet the requirements of clause (i) solely by

22 reason of a provision providing for a waiver of

23 premiums if the policyholder becomes a func24 tionally impaired individual.
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1 ‘‘(B) REFUNDS UPON DEATH OR COM2 PLETE SURRENDER OR CANCELLATION.—Sub3 paragraph (A)(ii) shall not apply to any refund

4 on the death of the policyholder, or on any com5 plete surrender or cancellation of the contract,

6 if, under the contract, the amount refunded

7 may not exceed the amount of the premiums

8 paid under the contract. For purposes of this

9 title, any refund described in the preceding sen10 tence shall be includible in gross income to the

11 extent that any deduction or exclusion was al12 lowed with respect to the refund.

13 ‘‘(3) BORROWING, PLEDGING, OR ASSIGNING

14 PROHIBITED.—The requirements of this paragraph

15 are met with respect to a contract if such contract

16 provides that no money may be borrowed under such

17 contract and that such contract (or any portion

18 thereof) may not be assigned or pledged as collateral

19 for a loan.

20 ‘‘(4) PROHIBITION OF DUPLICATE PAYMENT.—

21 The requirements of this paragraph are met with re22 spect to a contract if such contract does not cover

23 expenses incurred to the extent that such expenses

24 are reimbursable under title XVIII of the Social Se25 curity Act.
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1 ‘‘(5) PER DIEM AND OTHER PERIODIC PAY2 MENTS PERMITTED.—

3 ‘‘(A) IN GENERAL.—For purposes of sub4 section (a)(4), and except as provided in sub5 paragraph (B), payments are described in this

6 paragraph for any calendar year if, under the

7 contract, such payments are made to (or on be8 half of) a functionally impaired individual on a

9 per diem or other periodic basis without regard

10 to the expenses incurred or services rendered

11 during the period to which the payments relate.

12 ‘‘(B) EXCEPTION WHERE AGGREGATE PAY13 MENTS EXCEED LIMIT.—If the aggregate pay14 ments under the contract for any period

15 (whether on a periodic basis or otherwise) ex16 ceed the dollar amount in effect for such pe17 riod—

18 ‘‘(i) subparagraph (A) shall not apply

19 for such period, and

20 ‘‘(ii) the requirements of paragraph

21 (1)(A) shall be met only if such payments

22 are made with respect to qualified long23 term care services provided during such

24 period.
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1 ‘‘(C) DOLLAR AMOUNT.—The dollar

2 amount in effect under this paragraph shall be

3 $100 per day (or the equivalent amount in the

4 case of payments on another periodic basis).

5 ‘‘(D) ADJUSTMENTS FOR INCREASED

6 COSTS.—

7 ‘‘(i) IN GENERAL.—In the case of any

8 calendar year after 1995, the dollar

9 amount in effect under subparagraph (C)

10 for any period occurring during such cal11 endar year shall be equal to the sum of—

12 ‘‘(I) the amount in effect under

13 subparagraph (C) for the preceding

14 calendar year (after application of this

15 subparagraph), plus

16 ‘‘(II) the applicable percentage of

17 the amount under subclause (I).

18 ‘‘(ii) APPLICABLE PERCENTAGE.—For

19 purposes of clause (i), the term ‘applicable

20 percentage’ means, with respect to any cal21 endar year, the greater of—

22 ‘‘(I) 5 percent, or

23 ‘‘(II) the cost-of-living adjust24 ment for such calendar year.
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1 ‘‘(iii) COST-OF-LIVING ADJUST2 MENT.—For purposes of clause (ii), the

3 cost-of-living adjustment for any calendar

4 year is the percentage (if any) by which

5 the cost index under clause (iv) for the

6 preceding calendar year exceeds such index

7 for the second preceding calendar year. In

8 the case of any calendar year beginning be9 fore 1997, this clause shall be applied by

10 substituting the Consumer Price Index (as

11 defined in section 1(f)(5)) for the cost

12 index under clause (iv).

13 ‘‘(iv) COST INDEX.—The Secretary, in

14 consultation with the Secretary of Health

15 and Human Services, shall before January

16 1, 1997, establish a cost index to measure

17 increases in costs of nursing home and

18 similar facilities. The Secretary may from

19 time to time revise such index to the extent

20 necessary to accurately measure increases

21 or decreases in such costs.

22 ‘‘(E) AGGREGATION RULE.—For purposes

23 of this paragraph, all contracts issued with re24 spect to the same policyholder by the same

25 company shall be treated as 1 contract.
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1 ‘‘(c) QUALIFIED ISSUER.—For purposes of this sec2 tion, the term ‘qualified issuer’ means any person which

3 at the time of the issuance of a long-term care insurance

4 contract—

5 ‘‘(1) uses a one year preliminary term method

6 for setting up reserves, and

7 ‘‘(2) maintains a capital ratio equal to not less

8 than 25 percent of long-term care insurance pre9 mium receivables.

10 ‘‘(d) SPECIAL RULES FOR TAX TREATMENT OF POL11 ICYHOLDERS.—For purposes of this title, solely with re12 spect to the policyholder under any qualified long-term

13 care insurance contract—

14 ‘‘(1) AGGREGATE PAYMENTS IN EXCESS OF

15 LIMITS.—If the aggregate payments under all quali16 fied long-term care insurance contracts with respect

17 to an policyholder for any period (whether on a peri18 odic basis or otherwise) exceed the dollar amount in

19 effect for such period under subsection (b)(5)—

20 ‘‘(A) subsection (b)(5) shall not apply for

21 such period, and

22 ‘‘(B) such payments shall be treated as

23 made for qualified long-term care services only

24 if made with respect to such services provided

25 during such period.
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1 ‘‘(2) ASSIGNMENT OR PLEDGE.—Such contract

2 shall not be treated as a qualified long-term care in3 surance contract during any period on or after the

4 date on which the contract (or any portion thereof)

5 is assigned or pledged as collateral for a loan.

6 ‘‘(e) TREATMENT OF COVERAGE AS PART OF A LIFE

7 INSURANCE CONTRACT.—Except as provided in regula8 tions, in the case of coverage of qualified long-term care

9 services provided as part of a life insurance contract, the

10 requirements of this section shall apply as if the portion

11 of the contract providing such coverage was a separate

12 contract.

13 ‘‘(f) QUALIFIED LONG-TERM CARE SERVICES.—For

14 purposes of this section—

15 ‘‘(1) IN GENERAL.—The term ‘qualified long16 term care services’ has the meaning given such term

17 by section 213(g).

18 ‘‘(2) RECERTIFICATION.—If an individual has

19 been certified as a functionally impaired individual

20 under section 213(g)(2)(A), services shall not be

21 treated as qualified long-term care services with re22 spect to the individual unless such individual is

23 recertified no less frequently than annually as a

24 functionally impaired individual in the same manner

25 as under such section, except that such
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1 recertification may be made by any licensed health

2 care practitioner (as defined in section 213(g)(4)),

3 other than a relative (as defined by section

4 213(g)(5)) of such individual.

5 ‘‘(g) CONTINUATION COVERAGE EXCISE TAX NOT

6 TO APPLY.—Section 4980B shall not apply to—

7 ‘‘(1) qualified long-term care insurance con8 tracts, or

9 ‘‘(2) plans described in subsection (a)(2).

10 ‘‘(h) REGULATIONS.—The Secretary shall prescribe

11 such regulations as may be necessary to carry out the re12 quirements of this section, including regulations to prevent

13 the avoidance of this section by providing qualified long14 term care services under a life insurance contract.’’.

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

16 for chapter 79 is amended by inserting after the item re17 lating to section 7702A the following new item:

‘‘Sec. 7702B. Treatment of long-term care insurance or plans.’’

18 SEC. 2203. EFFECTIVE DATES.

19 (a) SECTION 2201.—The amendments made by sec20 tion 2201 shall apply to taxable years beginning after De21 cember 31, 1994.

22 (b) SECTION 2202.—The amendments made by sec23 tion 2202 shall apply to contracts issued after December

24 31, 1994.
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1 (c) TRANSITION RULE.—If, after the date of the en2 actment of this Act and before January 1, 1995, a con3 tract providing coverage for services which are similar to

4 qualified long-term care services (as defined in section

5 213(g) of the Internal Revenue Code of 1986) and issued

6 on or before January 1, 1994, is exchanged for a qualified

7 long-term care insurance contract (as defined in section

8 7702B(b) of such Code), such exchange shall be treated

9 as an exchange to which section 1035 of such Code ap10 plies.

11 PART II—CONSUMER PROTECTION PROVISIONS

12 SEC. 2301. POLICY REQUIREMENTS.

13 (a) IN GENERAL.—Section 7702B (as added by sec14 tion 2202) is amended by redesignating subsection (h) as

15 subsection (i) and by inserting after subsection (g) the fol16 lowing new subsection:

17 ‘‘(h) CONSUMER PROTECTION PROVISIONS.—

18 ‘‘(1) IN GENERAL.—The requirements of this

19 subsection are met with respect to any contract if

20 any long-term care insurance policy issued under the

21 contract meets—

22 ‘‘(A) the requirements of the model regula23 tion and model Act described in paragraph (2),

24 ‘‘(B) the disclosure requirement of para25 graph (3),
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•S 1770 PCS1S

1 ‘‘(C) the requirements relating to

2 nonforfeitability under paragraph (4), and

3 ‘‘(D) the requirements relating to rate sta4 bilization under paragraph (5).

5 ‘‘(2) REQUIREMENTS OF MODEL REGULATION

6 AND ACT.—

7 ‘‘(A) IN GENERAL.—The requirements of

8 this paragraph are met with respect to any pol9 icy if such policy meets—

10 ‘‘(i) MODEL REGULATION.—The fol11 lowing requirements of the model regula12 tion:

13 ‘‘(I) Section 7A (relating to guar14 anteed renewal or noncancellability),

15 and the requirements of section 6B of

16 the model Act relating to such section

17 7A.

18 ‘‘(II) Section 7B (relating to pro19 hibitions on limitations and exclu20 sions).

21 ‘‘(III) Section 7C (relating to ex22 tension of benefits).

23 ‘‘(IV) Section 7D (relating to

24 continuation or conversion of cov25 erage).
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1 ‘‘(V) Section 7E (relating to dis2 continuance and replacement of poli3 cies).

4 ‘‘(VI) Section 8 (relating to unin5 tentional lapse).

6 ‘‘(VII) Section 9 (relating to dis7 closure), other than section 9F there8 of.

9 ‘‘(VIII) Section 10 (relating to

10 prohibitions against post-claims un11 derwriting).

12 ‘‘(IX) Section 11 (relating to

13 minimum standards).

14 ‘‘(X) Section 12 (relating to re15 quirement to offer inflation protec16 tion), except that any requirement for

17 a signature on a rejection of inflation

18 protection shall permit the signature

19 to be on an application or on a sepa20 rate form.

21 ‘‘(XI) Section 23 (relating to pro22 hibition against preexisting conditions

23 and probationary periods in replace24 ment policies or certificates).
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1 ‘‘(ii) MODEL ACT.—The following re2 quirements of the model Act:

3 ‘‘(I) Section 6C (relating to pre4 existing conditions).

5 ‘‘(II) Section 6D (relating to

6 prior hospitalization).

7 ‘‘(B) DEFINITIONS.—For purposes of this

8 paragraph—

9 ‘‘(i) MODEL PROVISIONS.—The terms

10 ‘model regulation’ and ‘model Act’ mean

11 the long-term care insurance model regula12 tion, and the long-term care insurance

13 model Act, respectively, promulgated by

14 the National Association of Insurance

15 Commissioners (as adopted in January of

16 1993).

17 ‘‘(ii) COORDINATION.—Any provision

18 of the model regulation or model Act listed

19 under clause (i) or (ii) of subparagraph

20 (A) shall be treated as including any other

21 provision of such regulation or Act nec22 essary to implement the provision.

23 ‘‘(3) TAX DISCLOSURE REQUIREMENT.—The re24 quirement of this paragraph is met with respect to
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1 any policy if such policy meets the requirements of

2 section 4980D(d)(1).

3 ‘‘(4) NONFORFEITURE REQUIREMENTS.—

4 ‘‘(A) IN GENERAL.—The requirements of

5 this paragraph are met with respect to any level

6 premium long-term care insurance policy, if the

7 issuer of such policy offers to the policyholder,

8 including any group policyholder, a

9 nonforfeiture provision.

10 ‘‘(B) REQUIREMENTS OF PROVISION.—The

11 nonforfeiture provision required under subpara12 graph (A) shall meet the following require13 ments:

14 ‘‘(i) The nonforfeiture provision shall

15 be appropriately captioned.

16 ‘‘(ii) The nonforfeiture provision shall

17 provide for a benefit available in the event

18 of a default in the payment of any pre19 miums and the amount of the benefit may

20 be adjusted subsequent to being initially

21 granted only as necessary to reflect

22 changes in claims, persistency, and interest

23 as reflected in changes in rates for pre24 mium paying policies approved by the Sec25 retary for the same policy form.
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1 ‘‘(iii) The nonforfeiture provision shall

2 provide at least one of the following:

3 ‘‘(I) Reduced paid-up insurance.

4 ‘‘(II) Extended term insurance.

5 ‘‘(III) Shortened benefit period.

6 ‘‘(IV) Other similar offerings ap7 proved by the Secretary.

8 ‘‘(5) RATE STABILIZATION.—

9 ‘‘(A) IN GENERAL.—The requirements of

10 this paragraph are met with respect to any

11 long-term care insurance policy, including any

12 group master policy, if—

13 ‘‘(i) such policy contains the minimum

14 rate guarantees specified in subparagraph

15 (B), and

16 ‘‘(ii) the issuer of such policy meets

17 the requirements specified in subparagraph

18 (C).

19 ‘‘(B) MINIMUM RATE GUARANTEES.—The

20 minimum rate guarantees specified in this sub21 paragraph are as follows:

22 ‘‘(i) Rates under the policy shall be

23 guaranteed for a period of at least 3 years

24 from the date of issue of the policy.
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1 ‘‘(ii) After the expiration of the 3-year

2 period required under clause (i), any rate

3 increase shall be guaranteed for a period of

4 at least 2 years from the effective date of

5 such rate increase.

6 ‘‘(iii) In the case of any individual age

7 75 or older who has maintained coverage

8 under a long-term care insurance policy for

9 10 years, rate increases under such policy

10 shall not exceed 10 percent in any 12-

11 month period.

12 ‘‘(C) INCREASES IN PREMIUMS.—The re13 quirements specified in this subparagraph are

14 as follows:

15 ‘‘(i) IN GENERAL.—If an issuer of any

16 long-term care insurance policy, including

17 any group master policy, plans to increase

18 the premium rates for a policy, such issuer

19 shall, at least 90 days before the effective

20 date of the rate increase, offer to each in21 dividual policyholder under such policy the

22 option to remain insured under the policy

23 at a reduced level of benefits which main24 tains the premium rate at the rate in effect
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1 on the day before the effective date of the

2 rate increase.

3 ‘‘(ii) INCREASES OF MORE THAN 50

4 PERCENT.—

5 ‘‘(I) IN GENERAL.—If an issuer

6 of any long-term care insurance pol7 icy, including any group master pol8 icy, increases premium rates for a pol9 icy by more than 50 percent in any 3-

10 year period—

11 ‘‘(aa) in the case of a group

12 master long-term care insurance

13 policy, the issuer shall dis14 continue issuing all group master

15 long-term care insurance policies

16 in any State in which the issuer

17 issues such policy for a period of

18 2 years from the effective date of

19 such premium increase; and

20 ‘‘(bb) in the case of an indi21 vidual long-term care insurance

22 policy, the issuer shall dis23 continue issuing all individual

24 long-term care policies in any

25 State in which the issuer issues
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•S 1770 PCS1S

1 such policy for a period of 2

2 years from the effective date of

3 such premium increase.

4 ‘‘(II) APPLICABILITY.—Subclause

5 (I) shall apply to any issuer of long6 term care insurance policies or any

7 other person that purchases or other8 wise acquires any long-term care in9 surance policies from another issuer

10 or person.

11 ‘‘(D) MODIFICATIONS OR WAIVERS OF RE12 QUIREMENTS.—The Secretary may modify or

13 waive any of the requirements under this para14 graph if—

15 ‘‘(i) such requirements will adversely

16 effect an issuer’s solvency;

17 ‘‘(ii) such modification or waiver is re18 quired for the issuer to meet other State or

19 Federal requirements;

20 ‘‘(iii) medical developments, new dis21 abling diseases, changes in long-term care

22 delivery, or a new method of financing

23 long-term care will result in changes to

24 mortality and morbidity patterns or as25 sumptions;
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•S 1770 PCS1S

1 ‘‘(iv) judicial interpretation of a pol2 icy’s benefit features results in unintended

3 claim liabilities; or

4 ‘‘(v) in the case of a purchase or other

5 acquisition of long-term care insurance

6 policies of an issuer or other person, the

7 continued sale of other long-term care in8 surance policies by the purchasing issuer

9 or person is in the best interests of individ10 ual consumers.

11 ‘‘(6) LONG-TERM CARE INSURANCE POLICY DE12 FINED.—For purposes of this subsection, the term

13 ‘long-term care insurance policy’ has the meaning

14 given such term by section 4980D(e).’’.

15 (b) CONFORMING AMENDMENT.—Section

16 7702B(b)(1)(B) (as added by section 2202) is amended

17 by inserting ‘‘and of subsection (h)’’ after ‘‘and (4)’’.

18 SEC. 2302. ADDITIONAL REQUIREMENTS FOR ISSUERS OF

19 LONG-TERM CARE INSURANCE POLICIES.

20 (a) IN GENERAL.—Chapter 43, as amended by sec21 tion 2403, is amended by adding at the end the following

22 new section:
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1 ‘‘SEC. 4980D. FAILURE TO MEET REQUIREMENTS FOR

2 LONG-TERM CARE INSURANCE POLICIES.

3 ‘‘(a) GENERAL RULE.—There is hereby imposed on

4 any person failing to meet the requirements of subsection

5 (c) or (d) a tax in the amount determined under sub6 section (b).

7 ‘‘(b) AMOUNT OF TAX.—

8 ‘‘(1) IN GENERAL.—The amount of the tax im9 posed by subsection (a) shall be $100 per policy for

10 each day any requirements of subsection (c), (d), or

11 (e) are not met with respect to each long-term care

12 insurance policy.

13 ‘‘(2) WAIVER.—In the case of a failure which is

14 due to reasonable cause and not to willful neglect,

15 the Secretary may waive part or all of the tax im16 posed by subsection (a) to the extent that payment

17 of the tax would be excessive relative to the failure

18 involved.

19 ‘‘(c) ADDITIONAL RESPONSIBILITIES.—The require20 ments of this subsection are as follows:

21 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.—

22 ‘‘(A) MODEL REGULATION.—The following

23 requirements of the model regulation must be

24 met:

25 ‘‘(i) Section 13 (relating to application

26 forms and replacement coverage).
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1 ‘‘(ii) Section 14 (relating to reporting

2 requirements), except that the issuer shall

3 also report at least annually the number of

4 claims denied during the reporting period

5 for each class of business (expended as a

6 percentage of claims denied), other than

7 claims denied for failure to meet the wait8 ing period or because of any applicable

9 pre-existing condition.

10 ‘‘(iii) Section 20 (relating to filing re11 quirements for marketing).

12 ‘‘(iv) Section 21 (relating to standards

13 for marketing), including inaccurate com14 pletion of medical histories, other than sec15 tion 21C(1) and 21C(6) thereof, except

16 that—

17 ‘‘(I) in addition to such require18 ments, no person shall, in selling or

19 offering to sell a long-term care insur20 ance policy, misrepresent a material

21 fact; and

22 ‘‘(II) no such requirements shall

23 include a requirement to inquire or

24 identify whether a prospective appli25 cant or enrollee for long-term care in-
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1 surance has accident and sickness in2 surance.

3 ‘‘(v) Section 22 (relating to appro4 priateness of recommended purchase).

5 ‘‘(vi) Section 24 (relating to standard

6 format outline of coverage).

7 ‘‘(vii) Section 25 (relating to require8 ment to deliver shopper’s guide).

9 ‘‘(B) MODEL ACT.—The following require10 ments of the model Act must be met:

11 ‘‘(i) Section 6F (relating to right to

12 return), except that such section shall also

13 apply to denials of applications and any re14 fund shall be made within 30 days of the

15 return or denial.

16 ‘‘(ii) Section 6G (relating to outline of

17 coverage).

18 ‘‘(iii) Section 6H (relating to require19 ments for certificates under group plans).

20 ‘‘(iv) Section 6I (relating to policy

21 summary).

22 ‘‘(v) Section 6J (relating to monthly

23 reports on accelerated death benefits).

24 ‘‘(vi) Section 7 (relating to incontest25 ability period).
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1 ‘‘(C) DEFINITIONS.—For purposes of this

2 paragraph, the terms ‘model regulation’ and

3 ‘model Act’ have the meanings given such terms

4 by section 7702B(h)(2)(B).

5 ‘‘(2) DELIVERY OF POLICY.—If an application

6 for a long-term care insurance policy (or for a cer7 tificate under a group long-term care insurance pol8 icy) is approved, the issuer shall deliver to the appli9 cant (or policyholder or certificate-holder) the policy

10 (or certificate) of insurance not later than 30 days

11 after the date of the approval.

12 ‘‘(3) INFORMATION ON DENIALS OF CLAIMS.—

13 If a claim under a long-term care insurance policy

14 is denied, the issuer shall, within 60 days of the date

15 of a written request by the policyholder or certifi16 cate-holder (or representative)—

17 ‘‘(A) provide a written explanation of the

18 reasons for the denial, and

19 ‘‘(B) make available all information di20 rectly relating to such denial.

21 ‘‘(d) DISCLOSURE.—The requirements of this sub22 section are met if either of the following statements,

23 whichever is applicable, is prominently displayed on the

24 front page of any long-term care insurance policy and in
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•S 1770 PCS1S

1 the outline of coverage required under subsection

2 (c)(1)(B)(ii):

3 ‘‘(1) A statement that: ‘This policy is intended

4 to be a qualified long-term care insurance contract

5 under section 7702B(b) of the Internal Revenue

6 Code of 1986.’.

7 ‘‘(2) A statement that: ‘This policy is not in8 tended to be a qualified long-term care insurance

9 contract under section 7702B(b) of the Internal

10 Revenue Code of 1986.’.

11 ‘‘(e) LONG-TERM CARE INSURANCE POLICY DE12 FINED.—For purposes of this section, the term ‘long-term

13 care insurance policy’ means any product which is adver14 tised, marketed, or offered as long-term care insurance.’’.

15 (b) CONFORMING AMENDMENT.—The table of sec16 tions for chapter 43, as amended by section 2403, is

17 amended by adding at the end the following new item:

‘‘Sec. 4980D. Failure to meet requirements for long-term care insurance policies.’’.

18 SEC. 2303. COORDINATION WITH STATE REQUIREMENTS.

19 Nothing in this subtitle shall be construed as prevent20 ing a State from applying standards that provide greater

21 protection of policyholders of long-term care insurance

22 policies (as defined in section 4980D(e) of the Internal

23 Revenue Code of 1986).
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1 SEC. 2304. UNIFORM LANGUAGE AND DEFINITIONS.

2 (a) IN GENERAL.—The National Association of In3 surance Commissioners shall not later than January 1,

4 1995, promulgate standards for the use of uniform lan5 guage and definitions in long-term care insurance policies

6 (as defined in section 4980D(e) of the Internal Revenue

7 Code 1986).

8 (b) VARIATIONS.—Standards under subsection (a)

9 may permit the use of nonuniform language to the extent

10 required to take into account differences among States in

11 the licensing of nursing facilities and other providers of

12 long-term care.

13 SEC. 2305. EFFECTIVE DATES.

14 (a) SECTION 2301.—The amendments made by sec15 tion 2301 shall apply to contracts issued after December

16 31, 1994. The provisions of section 2203(c) of this Act

17 shall apply to such contracts.

18 (b) SECTION 2302.—The amendments made by sec19 tion 2302 shall apply to actions taken after December 31,

20 1994.

21 Subtitle D—Enforcement

22 Provisions

23 PART I—GENERAL PROVISIONS

24 SEC. 2401. UNIVERSAL COVERAGE.

25 (a) REQUIRED REPORTING.—
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1 (1) IN GENERAL.—Section 1144 of the Social

2 Security Act (42 U.S.C. 1320b–14) is amended to

3 read as follows:

4 ‘‘HEALTH INSURANCE COVERAGE DATA BANK

5 ‘‘SEC. 1144. (a) ESTABLISHMENT OF DATA BANK.—

6 The Secretary shall establish a Health Insurance Coverage

7 Data Bank (hereafter in this section referred to as the

8 ‘Data Bank’) to—

9 ‘‘(1) further the purposes of subtitle F of title

10 I of the Health Equity and Access Reform Today

11 Act of 1993,

12 ‘‘(2) further the purposes of section 1862(b) in

13 the identification of, and collection from, third par14 ties responsible for payment for health care items

15 and services furnished to medicare beneficiaries, and

16 ‘‘(3) assist in the identification of, and the col17 lection from, third parties responsible for the reim18 bursement of costs incurred by any State plan under

19 title XIX with respect to medicaid beneficiaries,

20 upon request by the State agency described in sec21 tion 1902(a)(5) administering such plan.

22 ‘‘(b) INFORMATION IN DATA BANK.—

23 ‘‘(1) IN GENERAL.—The Data Bank shall con24 tain information obtained pursuant to section

25 6103(l)(12) of the Internal Revenue Code of 1986

26 and subsection (c).
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1 ‘‘(2) DISCLOSURE OF INFORMATION IN DATA

2 BANK.—The Secretary is authorized until September

3 30, 1998—

4 ‘‘(A) (subject to the restriction in subpara5 graph (D)(i) of section 6103(l)(12) of the Inter6 nal Revenue Code of 1986) to disclose any in7 formation in the Data Bank obtained pursuant

8 to such section solely for the purposes of such

9 section,

10 ‘‘(B) (subject to the restriction in sub11 section (c)(5)) to disclose any other information

12 in the Data Bank to any State agency described

13 in section 1902(a)(5), employer, or qualified

14 health plan solely for the purposes described in

15 subsection (a), and

16 ‘‘(C) to disclose any other information in

17 the Data Bank to the Secretary of the Treasury

18 for the purpose of carrying out the purposes of

19 section 5000A of the Internal Revenue Code of

20 1986.

21 ‘‘(c) REQUIREMENT TO REPORT INFORMATION.—

22 ‘‘(1) REPORTING REQUIREMENT.—

23 ‘‘(A) IN GENERAL.—Any employer de24 scribed in paragraph (2), any qualified health

25 plan in the case of individuals enrolling in non-
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1 employer-provided plans, and any governmental

2 or nongovernmental official responsible for any

3 equivalent health care program (as defined in

4 section 1601(7) of the Health Equity and Ac5 cess Reform Today Act of 1993 shall report to

6 the Secretary (in such form and manner as the

7 Secretary determines will minimize the burden

8 of such reporting) with respect to each individ9 ual the information required under paragraph

10 (3) for each applicable calendar year.

11 ‘‘(B) SPECIAL RULE.—To the extent a

12 qualified health plan provides information re13 quired under paragraph (3) in a form and man14 ner specified by the Secretary (in consultation

15 with the Secretary of Labor) on behalf of an

16 employer in accordance with section 101(f) of

17 the Employee Retirement Income Security Act

18 of 1974, the employer has complied with the re19 porting requirement under subparagraph (A)

20 with respect to the reporting of such informa21 tion.

22 ‘‘(C) APPLICABLE YEAR.—For purposes of

23 this paragraph, the term ‘applicable calendar

24 year’ means any calendar year beginning after

25 1994, and before the calendar year with respect
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1 to which the Secretary makes a determination

2 that the health care data interchange system

3 established under subtitle B of title III of the

4 Health Equity and Access Reform Today Act of

5 1993 is providing the information necessary to

6 meet the purposes described in subsection (a).

7 ‘‘(2) EMPLOYER DESCRIBED.—

8 ‘‘(A) IN GENERAL.—An employer is de9 scribed in this paragraph if such employer has,

10 or contributes to, a qualified health plan, with

11 respect to which at least 1 employee of such

12 employer is an electing individual.

13 ‘‘(B) ELECTING INDIVIDUAL.—For pur14 poses of this paragraph, the term ‘electing indi15 vidual’ means an individual associated or for16 merly associated with the employer in a busi17 ness relationship who elects coverage under the

18 employer’s qualified health plan.

19 ‘‘(C) CERTAIN INDIVIDUALS EXCLUDED.—

20 For purposes of this paragraph, an individual

21 providing service referred to in section

22 3121(a)(7)(B) of the Internal Revenue Code of

23 1986 shall not be considered an employee or

24 electing individual with respect to an employer.
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•S 1770 PCS1S

1 ‘‘(3) INFORMATION REQUIRED.—For purposes

2 of paragraph (1), each employer, qualified health

3 plan, or Secretary shall provide the following infor4 mation:

5 ‘‘(A) The name and TIN of the individual.

6 ‘‘(B) The type of qualified health plan cov7 erage (single or family) elected by the individ8 ual.

9 ‘‘(C) The name, address, and identifying

10 number of the qualified health plan elected by

11 such individual.

12 ‘‘(D) The name and TIN of each other in13 dividual covered under the qualified health plan

14 pursuant to such election.

15 ‘‘(E) The period during which such cov16 erage is elected.

17 ‘‘(F) The name, address, and TIN of the

18 employer or qualified health plan.

19 ‘‘(4) TIME OF FILING.—For purposes of deter20 mining the date for filing the report under para21 graph (1), such report shall be treated as a state22 ment described in section 6051(d) of the Internal

23 Revenue Code of 1986.

24 ‘‘(5) LIMITS ON DISCLOSURE OF INFORMATION

25 REPORTED.—
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•S 1770 PCS1S

1 ‘‘(A) IN GENERAL.—The disclosure of the

2 information reported under paragraph (1) shall

3 be restricted by the Secretary under rules simi4 lar to the rules of subsections (a) and (p) of

5 section 6103 of the Internal Revenue Code of

6 1986.

7 ‘‘(B) PENALTY FOR UNAUTHORIZED WILL8 FUL DISCLOSURE OF INFORMATION.—The un9 authorized disclosure of any information re10 ported under paragraph (1) shall be subject to

11 the penalty described in paragraph (1), (2), (3),

12 or (4) of section 7213(a) of such Code.

13 ‘‘(6) PENALTY FOR FAILURE TO REPORT.—In

14 the case of the failure of an employer (other than a

15 Federal or other governmental entity) or a qualified

16 health plan to report under paragraph (1)(A) with

17 respect to each individual, the Secretary shall impose

18 a penalty as described in part II of subchapter B of

19 chapter 68 of the Internal Revenue Code of 1986.

20 ‘‘(d) FEES FOR DATA BANK SERVICES.—The Sec21 retary shall establish fees for services provided under this

22 section which shall remain available, without fiscal year

23 limitation, to the Secretary to cover the administrative

24 costs to the Data Bank of providing such services.

25 ‘‘(e) DEFINITIONS.—In this section:
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1 ‘‘(1) MEDICARE BENEFICIARY.—The term

2 ‘medicare beneficiary’ means an individual entitled

3 to benefits under part A, or enrolled under part B,

4 of title XVIII, but does not include such an individ5 ual enrolled in part A under section 1818.

6 ‘‘(2) MEDICAID BENEFICIARY.—The term ‘med7 icaid beneficiary’ means an individual entitled to

8 benefits under a State plan for medical assistance

9 under title XIX (including a State plan operating

10 under a statewide waiver under section 1115).

11 ‘‘(3) QUALIFIED HEALTH PLAN.—The term

12 ‘qualified health plan’ shall have the meaning given

13 to such term by section 1601(20) of the Health Eq14 uity and Access Reform Today Act of 1993.

15 ‘‘(4) TIN.—The term ‘TIN’ shall have the

16 meaning given to such term by section 7701(a)(41)

17 of such Code.’’.

18 (2) MEDICAID CONFORMING AMENDMENTS.—

19 Section 1902(a)(25)(A)(i) of the Social Security Act

20 (42 U.S.C. 1396a(a)(25)(A)(i)) is amended by strik21 ing ‘‘Medicare and Medicaid Coverage Data Bank’’

22 and inserting ‘‘Health Insurance Coverage Data

23 Bank’’.

24 (3) CONFORMING AMENDMENTS TO ERISA.—

25 Section 101(f) of the Employee Retirement Income
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•S 1770 PCS1S

1 Security Act of 1974 (29 U.S.C. 1021(f)) is amend2 ed—

3 (A) by striking ‘‘(as added by section

4 13581 of the Omnibus Budget Reconciliation

5 Act of 1993)’’ in paragraph (1)(A), and

6 (B) by striking ‘‘Medicare and Medicaid

7 Coverage Data Bank’’ in paragraph (1)(A)(i)

8 and inserting ‘‘Health Insurance Coverage Data

9 Bank’’,

10 (4) EFFECTIVE DATE.—The amendments made

11 by this subsection shall take effect on and after the

12 first January 1 following the deadline specified in

13 section 1401(c)(2) of this Act.

14 (b) ENFORCEMENT.—

15 (1) IN GENERAL.—Chapter 47 (relating to ex16 cise taxes on qualified pension, etc. plans) is amend17 ed by inserting after section 5000 the following new

18 section:

19 ‘‘SEC. 5000A. FAILURE OF INDIVIDUALS WITH RESPECT TO

20 HEALTH INSURANCE.

21 ‘‘(a) GENERAL RULE.—There is hereby imposed a

22 tax on the failure of any individual to comply with the

23 requirements of section 1501 of the Health Equity and

24 Access Reform Today Act of 1993.
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•S 1770 PCS1S

1 ‘‘(b) AMOUNT OF TAX.—The amount of tax imposed

2 by subsection (a) with respect to any calendar year shall

3 be equal to 120 percent of the applicable dollar limit for

4 such year for such individual (within the meaning of sec5 tion 91(b)(2) and determined on an annual basis).

6 ‘‘(c) LIMITATION ON TAX.—

7 ‘‘(1) TAX NOT TO APPLY WHERE FAILURES

8 CORRECTED WITHIN 30 DAYS.—No tax shall be im9 posed by subsection (a) with respect to any failure

10 if—

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

12 cause and not to willful neglect, and

13 ‘‘(B) such failure is corrected during the

14 30-day period (or such period as the Secretary

15 may determine appropriate) beginning on the

16 1st date any of the individuals on whom the tax

17 is imposed knew, or exercising reasonable dili18 gence would have known, that such failure ex19 isted.

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

21 failure which is due to reasonable cause and not to

22 willful neglect, the Secretary may waive part or all

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

24 that the payment of such tax would be excessive rel25 ative to the failure involved.
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1 ‘‘(3) LOW-ASSISTANCE EXEMPTION.—No tax

2 shall be imposed by subsection (a) on any individual

3 who would have received a voucher for the calendar

4 year under section 1003, but for a decrease in the

5 phase-in eligibility percentage provided under sub6 section (d)(5)(B) thereof.’’.

7 (2) CLERICAL AMENDMENT.—The table of sec8 tions for such chapter 47 is amended by adding at

9 the end the following new item:

‘‘Sec. 5000A. Failure of individuals with respect to health insurance.’’.

10 (3) EFFECTIVE DATE.—The amendments made

11 by this section shall take effect on January 1, 2005.

12 SEC. 2402. ROLE OF EMPLOYERS AND LARGE EMPLOYER

13 PLANS.

14 (a) IN GENERAL.—Chapter 47 (relating to excise

15 taxes on qualified pension, etc. plans), as amended by sec16 tion 2401(b)(1), is amended by inserting after section

17 5000A the following new section:

18 ‘‘SEC. 5000B. FAILURE OF EMPLOYERS OR LARGE EM19 PLOYER PLANS WITH RESPECT TO HEALTH

20 INSURANCE.

21 ‘‘(a) GENERAL RULE.—There is hereby imposed a

22 tax on the failure of any person or plan to comply with

23 the requirements of section 1004 or section 1201 of the

24 Health Equity and Access Reform Today Act of 1993 with
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•S 1770 PCS1S

1 respect to any employee of the person or enrollee of the

2 plan.

3 ‘‘(b) AMOUNT OF TAX.—

4 ‘‘(1) IN GENERAL.—The amount of the tax im5 posed by subsection (a) on any failure with respect

6 to an employee or enrollee shall be $100 for each

7 day in the noncompliance period with respect to such

8 failure.

9 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

10 of this section, the term ‘noncompliance period’

11 means, with respect to any failure, the period—

12 ‘‘(A) beginning on the date such failure

13 first occurs, and

14 ‘‘(B) ending on the date such failure is

15 corrected.

16 ‘‘(3) CORRECTION.—A failure of a person or

17 plan to comply with the requirements of section

18 1004 or section 1201 of the Health Equity and Ac19 cess Reform Today Act of 1993 with respect to any

20 employee of the person or enrollee of the plan shall

21 be treated as corrected if—

22 ‘‘(A) such failure is retroactively undone to

23 the extent possible, and

24 ‘‘(B) the employee or enrollee is placed in

25 a financial position which is as good as such
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•S 1770 PCS1S

1 employee or enrollee would have been in had

2 such failure not occurred.

3 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

4 ‘‘(1) TAX NOT TO APPLY TO FAILURES COR5 RECTED WITHIN 30 DAYS.—No tax shall be imposed

6 by subsection (a) on any failure if—

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

8 cause and not to willful neglect, and

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

10 30-day period (or such period as the Secretary

11 may determine appropriate) beginning on the

12 first date any of the persons referred to in sub13 section (d) knew, or exercising reasonable dili14 gence would have known, that such failure ex15 isted.

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

17 failure which is due to reasonable cause and not to

18 willful neglect, the Secretary may waive part or all

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

20 that the payment of such tax would be excessive rel21 ative to the failure involved.

22 ‘‘(d) LIABILITY FOR TAX.—

23 ‘‘(1) IN GENERAL.—Except as otherwise pro24 vided in this subsection, the following shall be liable

25 for the tax imposed by subsection (a) on a failure:
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1 ‘‘(A) In the case of a health plan other

2 than a multiemployer plan, the employer.

3 ‘‘(B) In the case of a multiemployer plan,

4 the plan.

5 ‘‘(C) Each person who is responsible (other

6 than in a capacity as an employee) for admin7 istering or providing benefits under the health

8 plan and whose act or failure to act caused (in

9 whole or in part) the failure.

10 ‘‘(2) SPECIAL RULES FOR PERSONS DESCRIBED

11 IN PARAGRAPH (1)(C).—A person described in sub12 paragraph (C) (and not in subparagraphs (A) and

13 (B)) of paragraph (1) shall be liable for the tax im14 posed by subsection (a) on any failure only if such

15 person assumed (under a legally enforceable written

16 agreement) responsibility for the performance of the

17 act to which the failure relates.’’

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

19 for chapter 47, as amended by section 2401(b)(2), is

20 amended by adding at the end the following new item:

‘‘Sec. 5000B. Failure of employers and large employer plans with

respect to health insurance.’’.

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

22 this section shall take effect on or after the first January

23 1 following the deadline specified in section 1401(c)(2).
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•S 1770 PCS1S

1 SEC. 2403. ENFORCEMENT BEFORE STATE CERTIFICATION

2 PROGRAMS OR STANDARDS IN PLACE.

3 (a) ENFORCEMENT BY EXCISE TAX FOR INSUR4 ERS.—Chapter 43 (relating to qualified pension, etc.,

5 plans) is amended by adding at the end the following new

6 section:

7 ‘‘SEC. 4980C. FAILURE OF INSURER OR LARGE EMPLOYER

8 PLAN TO COMPLY WITH CERTAIN PLAN

9 STANDARDS.

10 ‘‘(a) IMPOSITION OF TAX.—

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

12 tax on the failure of an insurer or of a sponsor of

13 a large employer plan to comply with the require14 ments applicable to such insurer or plan under sec15 tion 1103(c) or subparagraph (A) or (B) of section

16 1202(a)(2) of the Health Equity and Access Reform

17 Today Act of 1993.

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

19 apply to a failure by an insurer in a State if the Sec20 retary of Health and Human Services determines

21 that the State has in effect a regulatory enforcement

22 mechanism that provides adequate sanctions with re23 spect to such a failure by such an insurer.

24 ‘‘(b) AMOUNT OF TAX.—

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

26 the amount of the tax imposed by subsection (a)
222

•S 1770 PCS1S

1 shall be $100 for each day during which such failure

2 persists for each individual to which such failure re3 lates. A rule similar to the rule of section

4 4980B(b)(3) shall apply for purposes of this section.

5 ‘‘(2) LIMITATION.—The amount of the tax im6 posed by subsection (a) for an insurer or plan spon7 sor with respect to a health plan shall not exceed 25

8 percent of the amounts received under the plan for

9 coverage during the period such failure persists.

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

11 section shall be paid by the insurer or plan sponsor.

12 ‘‘(d) LIMITATIONS ON AMOUNT OF TAX.—

13 ‘‘(1) TAX NOT TO APPLY TO FAILURES COR14 RECTED WITHIN 30 DAYS.—No tax shall be imposed

15 by subsection (a) on any failure if—

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

17 cause and not to willful neglect, and

18 ‘‘(B) such failure is corrected during the

19 30-day period (or such period as the Secretary

20 may determine appropriate) beginning on the

21 first date the insurer or plan sponsor knows, or

22 exercising reasonable diligence could have

23 known, that such failure existed.

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

25 failure which is due to reasonable cause and not to
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1 willful neglect, the Secretary may waive part or all

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

3 that the payment of such tax would be excessive rel4 ative to the failure involved.

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

6 terms ‘health plan’, ‘insurer’, and ‘self-insured health

7 plan’ have the meanings given such terms in section 1601

8 of the Health Equity and Access Reform Today Act of

9 1993.’’.

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

11 for chapter 43 is amended by adding at the end the follow12 ing new item:

‘‘Sec. 4980C. Failure of insurer or large employer plan to comply

with certain plan standards.’’.

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

14 this section shall take effect on the date of the enactment

15 of this Act.

16 SEC. 2404. DISCLOSURE OF INFORMATION REGARDING

17 RECONCILIATION OF ASSISTANCE.

18 Paragraph (7) of section 6103(l) (relating to disclo19 sure of return information to Federal, State, and local

20 agencies administering certain programs under the Social

21 Security Act, the Food Stamp Act of 1977, or title 38,

22 United States Code, or certain housing assistance pro23 grams) is amended—
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1 (1) by striking the semicolon at the end of

2 clauses (i), (ii), (iii), (iv), (v), and (vi) and inserting

3 a period,

4 (2) by striking ‘‘; and’’ at the end of the matter

5 following clause (viii) and inserting a period, and

6 (3) by adding at the end (following the matter

7 following clause (ix)) the following new clause:

8 ‘‘(x) voucher assistance provided

9 under section 1003 of the Health Equity

10 and Access Reform Today Act of 1993.’’

11 PART II—OTHER ENFORCEMENT PROVISIONS

12 SEC. 2411. CONFORMING ERISA CHANGES REGARDING EN13 FORCEMENT OF EMPLOYER FAILURES.

14 (a) IN GENERAL.—Section 502(a) of the Employee

15 Retirement Income Security Act of 1974 (29 U.S.C.

16 1132(a)) is amended by striking ‘‘or’’ at the end of para17 graph (5), by striking the period at the end of paragraph

18 (6) and inserting ‘‘; or’’, and by inserting at the end the

19 following new paragraph:

20 ‘‘(7) by an employee of any person, or by the

21 Secretary—

22 ‘‘(A) for the relief provided in subsection

23 (c)(4), or

24 ‘‘(B) to enjoin any act or practice which

25 violates section 1004 of the Health Equity and
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1 Access Reform Today Act of 1993, or to obtain

2 other appropriate equitable relief to redress

3 such violation or to enforce the provisions of

4 such section.’’.

5 (b) CIVIL PENALTY.—Section 502(c) of such Act (29

6 U.S.C. 1132(c)) is amended by adding at the end the fol7 lowing new paragraph:

8 ‘‘(4)(A) The Secretary may assess a civil pen9 alty against any employer who fails to meet the re10 quirements of section 1004 of the Health Equity

11 and Access Reform Today Act of 1993 in an amount

12 not to exceed $100 per day from the date of the fail13 ure. Such penalty shall not be assessed if a tax has

14 been imposed under section 5000B with respect to

15 the failure.

16 ‘‘(B) No penalty shall be imposed under sub17 paragraph (A) on any failure during any period for

18 which it is established to the satisfaction of the Sec19 retary that the employer did not know, or exercising

20 reasonable diligence would not have known, that

21 such failure existed.

22 ‘‘(C) No penalty shall be imposed by subpara23 graph (A) on any failure if—

24 ‘‘(i) such failure was due to reasonable

25 cause and not to willful neglect, and
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1 ‘‘(ii) such failure is corrected during the

2 30-day period beginning on the first date the

3 employer knew, or exercising reasonable dili4 gence would have known, that such failure ex5 isted.

6 ‘‘(D) In the case of a failure which is due to

7 reasonable cause and not to willful neglect, the Sec8 retary may waive part or all of the penalty imposed

9 by subparagraph (A) to the extent that the payment

10 of such penalty would be excessive relative to the

11 failure involved.’’.

12 SEC. 2412. EQUITABLE RELIEF REGARDING INSURERS FAIL13 ING TO COMPLY WITH QUALIFIED HEALTH

14 PLAN STANDARDS.

15 (a) IN GENERAL.—The Secretary of Labor may—

16 (1) assess a civil penalty against any insurer

17 who fails to comply with the requirements applicable

18 to the insurer under subtitle B of title I of the

19 Health Equity and Access Reform Today Act of

20 1993 in an amount not to exceed $100 for each day

21 during which the failure persists, except that the ag22 gregate amount of the penalty with respect to any

23 failure shall not exceed 25 percent of the amounts

24 received under the plan during the period during

25 which the failure persists, or
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1 (2) bring a civil action—

2 (A) to enjoin an insurer from any such

3 failure, or

4 (B) to obtain other appropriate equitable

5 relief to address any such failure or to enforce

6 the provisions of such subtitle.

7 (b) EXCEPTIONS TO PENALTY.—

8 (1) IN GENERAL.—The provisions of subpara9 graphs (B), (C), and (D) of section 502(c)(4) of the

10 Employee Retirement Income Security Act of 1974

11 shall apply to any failure to which subsection (a)(1)

12 applies.

13 (2) EXCEPTION.—Subsection (a)(1) shall not

14 apply to a failure by an insurer in a State if the Sec15 retary of Health and Human Services determines

16 that the State has in effect a regulatory enforcement

17 mechanism that provides adequate sanctions with re18 spect to such a failure by such an insurer.

19 (3) COORDINATION WITH TAX.—No penalty

20 shall be assessed under subsection (a)(1) if a tax has

21 been imposed under section 5000C with respect to

22 the failure.

23 (c) APPLICABLE RULES.—The provisions of part 5

24 of title I of the Employee Retirement Income Security Act

25 of 1974 shall apply to the extent necessary to effectively
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1 carry out, and enforce the requirements under, subsection

2 (a).

3 TITLE III—QUALITY ASSURANCE

4 AND SIMPLIFICATION

5 Subtitle A—Quality Assurance

6 PART I—STANDARDS AND MEASUREMENTS OF

7 QUALITY

8 SEC. 3001. STANDARDS FOR QUALITY ASSURANCE AND

9 PERFORMANCE MEASURES PROGRAMS.

10 (a) DEVELOPMENT.—The Secretary, in consultation

11 with relevant agencies (such as the Agency for Health

12 Care Policy and Research and other agencies determined

13 appropriate by the Secretary) and recognized private enti14 ties engaged in quality assurance activities related to

15 health insurance (such as the Joint Commission on Ac16 creditation of Health Care Organizations and the National

17 Committee for Quality Assurance), shall develop and pub18 lish in the Federal Register standards that quality assur19 ance programs must comply with. Such standards shall

20 apply to all facilities, including network providers. Such

21 standards may be annually modified if determined appro22 priate by the Secretary.

23 (b) QUALITY DATA.—

24 (1) REQUIREMENT.—The Secretary shall en25 sure that the standards developed under subsection
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1 (a) contain a requirement that a qualified health

2 plan annually provide quality data, including infor3 mation concerning treatment outcomes and effective4 ness under the plan, to the Secretary, the relevant

5 HCCA and to individuals enrolled in a qualified

6 health plan.

7 (2) FORMAT.—The Secretary shall develop and

8 publish in the Federal Register a quality data for9 mat that a qualified health plan must adhere to in

10 providing quality data as required under paragraph

11 (1).

12 (c) PERFORMANCE MEASURES.—In developing the

13 standards under subsection (a), the Secretary shall ensure

14 that appropriate performance measures are established.

15 Such measures shall be utilized by the Health Care Data

16 Panel established under section 3214 as the basis upon

17 which the specifications and requirements for information

18 under subtitle B of this title will be developed.

19 (d) PROVIDER RISK PROGRAMS.—The Secretary

20 shall ensure that the standards developed under sub21 section (a) contain a requirement that a qualified health

22 plan provide for a provider risk program to prevent or pro23 vide early warning of practices that may result in injury.

24 SEC. 3002. NATIONAL HEALTH DATA SYSTEM.

25 (a) STANDARDIZATION OF INFORMATION.—
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1 (1) IN GENERAL.—The Secretary, in consulta2 tion with the States, shall establish standards for

3 the periodic provision by qualified health plans of in4 formation under section 1118 to the States and the

5 auditing of the information so provided by the Sec6 retary.

7 (2) PATIENT CONFIDENTIALITY.—The stand8 ards developed under paragraph (1) shall be estab9 lished in a manner that protects the confidentiality

10 of individual enrollees, but may provide for the dis11 closure of information which discloses particular pro12 viders within a qualified health plan.

13 (b) ANALYSIS OF INFORMATION.—

14 (1) IN GENERAL.—The Secretary shall analyze

15 the information provided to the States under section

16 1118 with respect to qualified health plans.

17 (2) CENTRAL ACCESS.—The Secretary shall

18 make available, in a central location and consistent

19 with subsection (a)(2), all of such analyses.

20 (3) DISTRIBUTION OF ANALYSES.—The Sec21 retary shall distribute the analyses in a form, con22 sistent with subsection (a)(2), that reports, on a Na23 tional, State and community basis, the levels and

24 trends of health care expenditures, the rates and

25 trends in the provision of individual procedures, and
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1 (to the extent such procedures are priced separately)

2 the price levels and rates of price change for such

3 procedures. The reports shall include both aggregate

4 and per capita measures for areas and shall include

5 comparative data for different areas.

6 (c) DISTRIBUTION OF INFORMATION.—

7 (1) ANNUAL REPORT ON EXPENDITURES.—The

8 Secretary shall publish annually (beginning with

9 1997) a report on expenditures for procedures, vol10 umes of procedures, and, to the extent such proce11 dures are priced separately, the prices of procedures.

12 Such report shall be distributed to each qualified

13 health plan, each purchasing group, each Governor,

14 and each State legislature.

15 (2) ANNUAL REPORTS.—The Secretary shall

16 publish an annual report, based on analyses under

17 this section, that identifies—

18 (A) procedures for which, as reflected in

19 variations in use or rates of increase, there ap20 pear to be the greatest need to develop valid

21 clinical protocols for clinical decision-making

22 and review,

23 (B) procedures for which, as reflected in

24 price variations and price inflation, there ap-
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1 pear to be the greatest need for strengthening

2 competitive purchasing, and

3 (C) States and localities for which, as re4 flected in expenditure levels and rates of in5 crease, there appear to be the greatest need for

6 additional cost control measures.

7 (3) SPECIAL DISTRIBUTIONS.—The Secretary

8 may provide for the distribution to—

9 (A) a qualified health plan of such infor10 mation relating to the plan as may be appro11 priate in order to encourage the plan to improve

12 its delivery of care, and

13 (B) business, consumer, and other groups

14 and individuals of such information as may im15 prove their ability to effect improvements in the

16 outcomes, quality, and efficiency of health serv17 ices.

18 (4) ACCESS BY AGENCY FOR HEALTH CARE

19 POLICY AND RESEARCH.—The Secretary shall make

20 available to the Agency for Health Care Policy and

21 Research information obtained under this section in

22 a manner consistent with subsection (a)(2).
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1 SEC. 3003. MEASURES OF QUALITY OF CARE OF SPECIAL2 IZED CENTERS OF CARE.

3 (a) COLLECTION OF INFORMATION.—The Secretary

4 shall provide a process whereby a specialized center of care

5 (as defined in subsection (d)) may submit to the Sec6 retary, or such independent entity as the Secretary may

7 designate, such clinical and other information bearing on

8 the quality of care provided with respect to the covered

9 items and services under section 1301 at the center as

10 the Secretary may specify. Such information shall include

11 sufficient information to take into account outcomes and

12 the risk factors associated with individuals receiving care

13 through the center. Such information shall be provided at

14 such frequency (not less often than annually) as the Sec15 retary specifies.

16 (b) MEASURES OF QUALITY.—Using information

17 submitted under subsection (a) and information reported

18 under section 3002, the Secretary shall—

19 (1) analyze the performance of such centers

20 with respect to the quality of care provided,

21 (2) rate the performance of such a center with

22 respect to a class of services relative to the perform23 ance of other specialized centers of care and relative

24 to the performance of qualified health plans gen25 erally, and

26 (3) publish such ratings.
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1 (c) USE OF SERVICE MARK FOR SPECIALIZED CEN2 TERS OF CARE.—The Secretary may establish a service

3 mark for specialized centers of care the performance of

4 which has been rated under subsection (b). Such service

5 mark shall be treated as if registered under the Trade6 mark Act of 1946. For purposes of such Act, such service

7 mark shall be deemed to be used in commerce. For pur8 poses of this subsection, the ‘‘Trademark Act of 1946’’

9 refers to the Act entitled ‘‘An Act to provide for the reg10 istration and protection of trademarks used in commerce,

11 to carry out the provisions of international conventions,

12 and for other purposes’’, approved July 5, 1946 (15

13 U.S.C. 1051 et seq.).

14 (d) SPECIALIZED CENTER OF CARE DEFINED.—As

15 used in this section, the term ‘‘specialized center of care’’

16 means an institution or other organized system for the

17 provision of specific services, which need not be multi-dis18 ciplinary, and does not include (except as the Secretary

19 may provide) individual practitioners.

20 SEC. 3004. CLINICAL EVALUATIONS.

21 (a) ESTABLISHMENT.—The Secretary shall examine

22 the feasibility of creating an Agency for Clinical Evalua23 tions (to be headed by an Administrator) under which the

24 following responsibilities will be consolidated:
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1 (1) Responsibilities of the Administrator for

2 Health Care Policy and Research, under title IX of

3 the Public Health Service Act and under section

4 1142 of the Social Security Act.

5 (2) Responsibilities of the Director of the Na6 tional Center for Health Statistics (under section

7 306 of the Public Health Service Act).

8 (3) Responsibilities of the Director of the Office

9 of Medical Applications of Research at the National

10 Institutes of Health.

11 (4) Responsibilities of the Director of the Office

12 of Research and Demonstrations of the Health Care

13 Financing Administration, insofar as such respon14 sibilities relate to clinical evaluations.

15 (b) SPECIFIC DUTIES.—In addition to carrying out

16 subsection (a), the Secretary shall—

17 (1) set priorities for the research community to

18 strengthen the research base;

19 (2) support research and evaluation (both on a

20 contract and investigator-initiated basis) on medical

21 effectiveness through technology assessment, consen22 sus development, outcomes research practice guide23 lines, and other appropriate activities;
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1 (3) conduct effectiveness trials in collaboration

2 with medical specialty societies, medical educators,

3 and qualified health plans;

4 (4) maintain a clearinghouse and other reg5 istries on clinical trials and outcomes research data;

6 (5) assure the systematic evaluation of existing

7 as well as new treatments and diagnostic tech8 nologies in a constant, continuous effort to upgrade

9 the knowledge base for clinical decisionmaking and

10 policy choice; and

11 (6) design a computerized dissemination system

12 for providers to provide an interactive system of in13 formation on outcomes research, practice guidelines,

14 and other information.

15 (c) ASSISTANCE.—The Secretary shall provide the

16 Benefits Commission established under subtitle D of title

17 I with such information, on evaluations related to the cov18 ered items and services under section 1301 and any other

19 information developed in the scope of carrying out the re20 sponsibilities of the Secretary, as may be appropriate.

21 (d) COOPERATION WITH OTHER AGENCIES.—In car22 rying out responsibilities under this section, the Secretary

23 shall cooperate and consult with the Director of the Na24 tional Institutes of Health, the Commissioner of Food and
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1 Drugs, the Secretary of Veterans Affairs, and the heads

2 of any other interested Federal department or agency.

3 (e) ADDITIONAL AUTHORIZATION OF APPROPRIA4 TIONS.—For purposes of carrying out this section, there

5 are authorized to be appropriated $250,000,000 for each

6 fiscal year (beginning with fiscal year 1995).

7 SEC. 3005. REPORT AND RECOMMENDATIONS ON ACHIEV8 ING UNIVERSAL COVERAGE.

9 (a) FACTORS AFFECTING COVERAGE.—

10 (1) COLLECTION OF INFORMATION.—The Sec11 retary, on a continuing basis, shall collect informa12 tion concerning, and analyze the number and char13 acteristics of, eligible individuals (as defined in sub14 section (c)) who are not enrolled with qualified

15 health plans compared to such number and charac16 teristics of individuals so enrolled. Such characteris17 tics shall include age, sex, race, ethnicity, family sta18 tus, employment status, whether the individual is an

19 eligible employee, income, health status, health risk

20 factors, geography, whether the individual resides in

21 a rural or medically underserved area, and such

22 other factors as may affect the election of an eligible

23 individual to obtain health insurance coverage.

24 (2) REPORT.—Not later than April 1 of each

25 year (beginning with 1997), the Secretary shall pre-
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1 pare and submit to the appropriate committees of

2 Congress a report analyzing the information col3 lected under paragraph (1). Such report shall in4 clude an description of the primary factors contrib5 uting to lack of coverage of identifiable groups of eli6 gible individuals.

7 (b) RECOMMENDATIONS FOR INCREASING COV8 ERAGE.—

9 (1) IN GENERAL.—Not later than January 1,

10 1998, the Secretary shall prepare and submit to

11 Congress recommendations on the feasibility, cost-ef12 fectiveness, and the economic impact of using dif13 ferent voluntary and other methods for increasing

14 the coverage of eligible individuals.

15 (2) INDIVIDUAL MANDATE.—The Secretary

16 shall specifically make recommendations under para17 graph (1) regarding establishing a requirement that

18 all eligible individuals obtain health coverage

19 through enrollment with a qualified health plan.

20 (c) ELIGIBLE INDIVIDUAL DEFINED.—In this sec21 tion, the term ‘‘eligible individual’’ has the same meaning

22 given such term by section 1601(5).

23 SEC. 3006. MONITORING REINSURANCE MARKET.

24 (a) IN GENERAL.—The Secretary shall monitor the

25 reinsurance market for qualified health plans.
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1 (b) PERIODIC REPORTS.—The Secretary shall peri2 odically report to Congress respecting the availability of

3 reinsurance for qualified health plans at reasonable rates

4 and the impact of such availability on the establishment

5 of new plans and on the financial solvency of current

6 plans.

7 SEC. 3007. AUTHORIZATION OF APPROPRIATIONS.

8 There are authorized to be appropriated to the Bene9 fits Commission established under subtitle D of title I for

10 each of fiscal years 1995 through 2001 such sums as may

11 be necessary to carry out activities under this Act.

12 PART II—AGENCY FOR HEALTH CARE POLICY

13 AND RESEARCH

14 SEC. 3101. AGENCY FOR HEALTH CARE POLICY AND RE15 SEARCH.

16 Title IX of the Public Health Service Act (42 U.S.C.

17 299 et seq.) is amended—

18 (1) in section 902(a) (42 U.S.C. 299a(a))—

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

20 by inserting after ‘‘guideline development,’’ the

21 following: ‘‘effectiveness trials (in collaboration

22 with medical speciality societies and qualified

23 health plans under the Health Equity and Ac24 cess Reform Today Act of 1993),’’;
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1 (B) in paragraph (7), by striking ‘‘and’’ at

2 the end thereof;

3 (C) in paragraph (8), by striking the pe4 riod and inserting ‘‘; and’’; and

5 (D) by adding at the end thereof the fol6 lowing new paragraph:

7 ‘‘(9) priorities that would enable the research

8 community to strengthen and expand the health care

9 research base.’’;

10 (2) in section 902, by adding at the end thereof

11 the following new subsections:

12 ‘‘(f) CLEARINGHOUSE.—The Administrator shall es13 tablish within the Agency a clearinghouse, and such other

14 registries as the Administrator determines are appro15 priate, to compile and make available information and re16 search data concerning clinical trials undertaken under

17 this title.

18 ‘‘(g) FUND INVESTIGATOR.—The Administrator shall

19 appoint an individual to serve as the fund investigator of

20 the Agency. The fund investigator shall be responsible for

21 initiating research, through grants or contracts under this

22 title, with respect to the relationship between health care

23 treatments and outcomes. The fund investigator shall be

24 compensated in accordance with section 925(a)(2).’’; and
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1 (3) in section 911(b)(2) (42 U.S.C. 299b2 1(b)(2)), by striking ‘‘and medical review organiza3 tions’’ and inserting ‘‘, medical review organizations,

4 and qualified health plans under the Health Equity

5 and Access Reform Today Act of 1993’’.

6 PART III—NATIONAL FUND FOR MEDICAL

7 RESEARCH

8 SEC. 3201. NATIONAL FUND FOR MEDICAL RESEARCH.

9 (a) DESIGNATION OF OVERPAYMENTS AND CON10 TRIBUTIONS FOR THE NATIONAL FUND FOR MEDICAL

11 RESEARCH.—

12 (1) IN GENERAL.—Subchapter A of chapter 61

13 of the Internal Revenue Code of 1986 (relating to

14 returns and records) is amended by adding at the

15 end the following new part:

16 ‘‘PART IX—DESIGNATION OF OVERPAYMENTS

17 AND CONTRIBUTIONS FOR THE NATIONAL

18 FUND FOR MEDICAL RESEARCH

‘‘Sec. 6097. Amounts for the National Fund for Medical Research.

19 ‘‘SEC. 6097. AMOUNTS FOR THE NATIONAL FUND FOR MEDI20 CAL RESEARCH.

21 ‘‘(a) IN GENERAL.—Every individual (other than a

22 nonresident alien) may designate that—
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1 ‘‘(1) a portion (not less than $1) of any over2 payment of the tax imposed by chapter 1 for the

3 taxable year, and

4 ‘‘(2) a cash contribution (not less than $1),

5 be paid over to the National Fund for Medical Research.

6 In the case of a joint return of a husband and wife, each

7 spouse may designate one-half of any such overpayment

8 of tax (not less than $2).

9 ‘‘(b) MANNER AND TIME OF DESIGNATION.—Any

10 designation under subsection (a) may be made with re11 spect to any taxable year only at the time of filing the

12 original return of the tax imposed by chapter 1 for such

13 taxable year. Such designation shall be made either on the

14 1st page of the return or on the page bearing the tax15 payer’s signature.

16 ‘‘(c) OVERPAYMENTS TREATED AS REFUNDED.—For

17 purposes of this section, any overpayment of tax des18 ignated under subsection (a) shall be treated as being re19 funded to the taxpayer as of the last day prescribed for

20 filing the return of tax imposed by chapter 1 (determined

21 with regard to extensions) or, if later, the date the return

22 is filed.

23 ‘‘(d) DESIGNATED AMOUNTS NOT DEDUCTIBLE.—

24 No amount designated pursuant to subsection (a) shall be
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1 allowed as a deduction under section 170 or any other sec2 tion for any taxable year.

3 ‘‘(e) TERMINATION.—This section shall not apply to

4 taxable years beginning in a calendar year after a deter5 mination by the Secretary that the sum of all designations

6 under subsection (a) for taxable years beginning in the

7 second and third calendar years preceding the calendar

8 year is less than $5,000,000.’’.

9 (2) CLERICAL AMENDMENT.—The table of

10 parts for subchapter A of chapter 61 of such Code

11 is amended by adding at the end the following new

12 item:

‘‘Part IX. Designation of overpayments and contributions for the

National Fund for Medical Research.’’.

13 (3) EFFECTIVE DATE.—The amendments made

14 by this subsection shall apply to taxable years begin15 ning after December 31, 1993.

16 (b) ESTABLISHMENT OF THE NATIONAL FUND FOR

17 MEDICAL RESEARCH.—

18 (1) IN GENERAL.—Subchapter A of chapter 98

19 of the Internal Revenue Code of 1986 (relating to

20 the trust fund code) is amended by adding at the

21 end the following new section:

22 ‘‘SEC. 9512. NATIONAL FUND FOR MEDICAL RESEARCH.

23 ‘‘(a) CREATION OF FUND.—There is established in

24 the Treasury of the United States a fund to be known
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1 as the ‘National Fund for Medical Research’, consisting

2 of such amounts as may be credited or paid to such Fund

3 as provided in this section or section 9602(b).

4 ‘‘(b) TRANSFERS TO FUND.—There is hereby trans5 ferred to the National Fund for Medical Research

6 amounts equivalent to—

7 ‘‘(1) the amounts designated under section

8 6097 (relating to designation of overpayments and

9 contributions to the Fund), and

10 ‘‘(2) amounts equivalent to the civil penalties

11 imposed under section 502(c)(4) of the Employee

12 Retirement Income Security Act of 1974 (29 U.S.C.

13 1132(c)) and section 2412 of the Health Equity and

14 Access Reform Today Act of 1993.

15 ‘‘(c) EXPENDITURES FROM FUND.—

16 ‘‘(1) IN GENERAL.—The Secretary shall pay an17 nually, within 30 days after the President signs an

18 appropriations Act for the Departments of Labor,

19 Health and Human Services, and Education, and re20 lated agencies, or by the end of the first quarter of

21 the fiscal year, to the Secretary of Health and

22 Human Services on behalf of the National Institutes

23 of Health, an amount equal to the amount in the

24 National Fund for Medical Research at the time of

25 such payment, to carry out the purposes of section
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1 404F of the Public Health Service Act, less any ad2 ministrative expenses which may be paid under para3 graph (2).

4 ‘‘(2) ADMINISTRATIVE EXPENSES.—Amounts in

5 the National Fund for Medical Research shall be

6 available to pay the administrative expenses of the

7 Department of the Treasury directly allocable to—

8 ‘‘(A) modifying the individual income tax

9 return forms to carry out section 6097,

10 ‘‘(B) carrying out this chapter with respect

11 to such Fund, and

12 ‘‘(C) processing amounts received under

13 section 6097 and transferring such amounts to

14 such Fund.

15 ‘‘(d) BUDGET TREATMENT OF AMOUNTS IN FUND.—

16 The amounts in the National Fund for Medical Research

17 shall be excluded from, and shall not be taken into ac18 count, for purposes of any budget enforcement procedure

19 under the Congressional Budget Act of 1974 or the Bal20 anced Budget and Emergency Deficit Control Act of

21 1985.’’.

22 (2) CLERICAL AMENDMENT.—The table of sec23 tions for subchapter A of chapter 98 of the Internal

24 Revenue Code of 1986 is amended by adding at the

25 end the following new item:

‘‘Sec. 9512. National Fund for Medical Research.’’.
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1 (c) PURPOSES FOR EXPENDITURES FROM FUND.—

2 Part A of title IV of the Public Health Service Act is

3 amended by adding at the end the following new section:

4 ‘‘SEC. 404F. EXPENDITURES FROM THE NATIONAL FUND

5 FOR MEDICAL RESEARCH.

6 ‘‘(a) DISTRIBUTION OF AMOUNTS.—From amounts

7 received for any fiscal year from the National Fund for

8 Medical Research, the Secretary shall distribute—

9 ‘‘(1) 3 percent of such amounts to the Director

10 of NIH to be allocated at the Director’s discretion

11 for—

12 ‘‘(A) carrying out the responsibilities of the

13 Director of NIH, including the Office of Re14 search on Women’s Health, the Office of Re15 search on Minority Health, the Office on Alter16 native Medicine, and the Office of Rare Disease

17 Research;

18 ‘‘(B) construction of, and acquisition of

19 equipment for, facilities of or used by the Na20 tional Institutes of Health; and

21 ‘‘(C) transfer to the National Center for

22 Research Resources to carry out section 481A

23 concerning biomedical and behavioral research

24 facilities;
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1 ‘‘(2) 1 percent of such amounts for carrying out

2 section 301 and part D of this title with respect to

3 health information communications; and

4 ‘‘(3) the remainder of such amounts to member

5 institutes and centers of the National Institutes of

6 Health in the same proportion to the total amount

7 received under this subsection, as the amount of an8 nual appropriations under appropriations Acts for

9 each member institute or center for the fiscal year

10 bears to the total amount of appropriations under

11 appropriations Acts for all member institutes and

12 centers of the National Institutes of Health for the

13 fiscal year.

14 ‘‘(b) PLANS OF ALLOCATION.—The amounts trans15 ferred under subsection (a) shall be allocated by the Direc16 tor of NIH or the various directors of the institutes and

17 centers, as the case may be, pursuant to allocation plans

18 developed by the various advisory councils to such direc19 tors, after consultation with such directors.

20 ‘‘(c) GRANTS AND CONTRACTS FULLY FUNDED IN

21 FIRST YEAR.—With respect to any grant or contract

22 funded by amounts distributed under subsection (a), the

23 full amount of the total obligation of such grant or con24 tract shall be funded in the first year of such grant or

25 contract, and shall remain available until expended.
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1 ‘‘(d) MAINTENANCE OF EFFORT.—No amounts

2 transferred under subsection (a) shall replace or reduce

3 the amount of appropriations for the National Institutes

4 of Health under appropriations Acts.’’.

5 Subtitle B—Administrative

6 Simplification

7 SEC. 3301. ESTABLISHMENT OF HEALTH CARE DATA INTER8 CHANGE SYSTEM.

9 (a) IN GENERAL.—In accordance with the procedures

10 provided in this subtitle, there shall be established a health

11 care data interchange system the purpose of which is to

12 make health care data available on a uniform basis to all

13 participants in the health care system.

14 (b) GENERAL REQUIREMENTS FOR SYSTEM.—The

15 system described in subsection (a) shall ensure—

16 (1) the integration of all participants in the

17 health care system;

18 (2) the use of uniform processes which will per19 mit participants in the health care system to com20 municate electronically for the submission and re21 ceipt of health care data;

22 (3) the privacy of individuals who are patients

23 receiving health care services and the confidentiality

24 of information in the data interchange system;
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1 (4) that the data in the system is verifiable,

2 timely, accurate, reliable, useful, complete, relevant,

3 time and date stamped, and comparable; and

4 (5) an overall reduction in the administrative

5 burdens and costs of the health care system, an

6 overall increase in the productivity, effectiveness,

7 and efficiency of the system, and an overall increase

8 in the quality of care furnished by the system.

9 (c) GENERAL IMPLEMENTATION.—The system de10 scribed in subsection (a) shall be implemented through—

11 (1) the development of proposed regulations as

12 provided under section 3302 by the Health Care

13 Data Panel established under section 3313 (referred

14 to in this subtitle as the ‘‘Panel’’); and

15 (2) the development of final regulations through

16 the Office of Management and Budget (referred to

17 in this subtitle as ‘‘OMB’’) as provided under sec18 tion 3303.

19 SEC. 3302. DEVELOPMENT OF PROPOSED REGULATIONS BY

20 PANEL.

21 (a) IN GENERAL.—The Panel shall, in consultation

22 with the National Health Informatics Commission estab23 lished under section 3314, develop proposed regulations

24 for the implementation and ongoing operation of an inte25 grated electronic health care data interchange system that
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1 are based on the operating standards, conventions, re2 quirements, and procedures for the system established, se3 lected, or developed by the Panel under sections 3304

4 through 3310.

5 (b) REQUIREMENTS RELATING TO PROPOSED REGU6 LATIONS.—The proposed regulations developed under sub7 section (a) shall—

8 (1) be submitted to OMB not later than 30

9 days after the date on which the Panel is required

10 to establish, select, or develop any of such operating

11 standards, conventions, requirements, and proce12 dures for the system; and

13 (2) provide that the general requirements for

14 the system referred to in section 3301(b) are met.

15 (c) MODIFICATIONS.—The Panel shall continuously

16 monitor the implementation of the regulations promul17 gated by OMB under section 3303 and shall submit to

18 OMB any proposed modifications to such regulations de19 termined appropriate by the Panel. The requirements of

20 section 3303 shall apply to any such proposed modifica21 tions in the same manner as such requirements apply to

22 the proposed regulations initially submitted by the Panel.
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1 SEC. 3303. PROMULGATION AND IMPLEMENTATION OF

2 PROPOSED REGULATIONS BY OMB.

3 (a) PROMULGATION OF REGULATIONS.—OMB shall

4 promulgate regulations based on the proposed regulations

5 submitted under section 3302 within 90 days after the

6 date such proposed regulations are submitted.

7 (b) APPLICABILITY.—

8 (1) IN GENERAL.—The regulations promulgated

9 by OMB shall apply to all participants in the health

10 care system.

11 (2) SPECIAL RULE REGARDING THE MEDICARE

12 PROGRAM.—The Secretary may incorporate the ca13 pabilities of the common working file used in the

14 medicare program under title XVIII of the Social

15 Security Act into a uniform working file system de16 veloped and operated according to the regulations

17 referred to in subsection (a).

18 (c) COMPLIANCE WITH REGULATIONS.—

19 (1) IN GENERAL.—Not later than 1 year after

20 the date on which any regulations (other than the

21 regulations described in paragraph (2)) are promul22 gated by OMB, all participants in the health care

23 system shall be required to comply with such regula24 tions.

25 (2) COMPREHENSIVE QUALITY MEASUREMENT

26 DATA.—Not later than 2 years after the date on
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1 which any regulations relating to standards, conven2 tions, and requirements for comprehensive quality

3 measurement data (as described in subsection

4 3304(e)(3)) are promulgated by OMB, all partici5 pants in the health care system shall be required to

6 comply with such regulations.

7 SEC. 3304. SELECTION AND ESTABLISHMENT OF DATA AND

8 TRANSACTION STANDARDS, CONVENTIONS,

9 AND REQUIREMENTS FOR THE DATA INTER10 CHANGE SYSTEM.

11 (a) IN GENERAL.—The Panel, in consultation with

12 the American National Standards Institute (referred to in

13 this subtitle as ‘‘ANSI’’), shall select and establish data

14 and transaction standards, conventions, and requirements

15 that permit the electronic interchange of any health care

16 data the Panel determines necessary for the efficient and

17 effective administration of the health care system.

18 (b) MINIMUM REQUIREMENTS.—The data and trans19 action standards, conventions, and requirements selected

20 and established by the Panel under this section shall, at

21 a minimum—

22 (1) ensure that the data interchange system

23 shall have the capability to comply with such stand24 ards, conventions, and requirements; and
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1 (2) be based on any standards that are in use

2 and generally accepted on the date of the enactment

3 of this subtitle or that are recommended by nation4 ally recognized standard setting groups, including

5 ANSI, the National Uniform Billing Committee, the

6 Uniform Claim Form Task Force, the National

7 Committee for Prescription Drug Programs, and the

8 Healthcare Informatics Standards Planning Panel.

9 (c) APPLICABILITY.—The proposed regulations devel10 oped by the Panel shall provide that—

11 (1) any participant in the health care system

12 who has the capability to interchange data through

13 a uniform working file developed by the Panel under

14 section 3305 shall be required to transmit and re15 ceive such data using the standards, conventions,

16 and requirements developed by the Panel under this

17 section; and

18 (2) any participant in the health care system

19 who does not have such capability shall be required

20 to transmit and receive data through a health care

21 information clearinghouse or a health care value22 added network that is certified under the procedure

23 established pursuant to 3311.

24 (d) ADDITIONAL REQUIREMENTS.—
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1 (1) IN GENERAL.—The proposed regulations

2 developed by the Panel shall provide that no partici3 pant in the health care system shall be permitted to

4 establish data requirements in addition to such

5 standards, conventions, and requirements established

6 by the Panel and included in regulations promul7 gated by OMB—

8 (A) unless 2 or more participants volun9 tarily establish such additional requirements

10 and the requirements meet all of the privacy

11 and confidentiality standards developed by the

12 Panel under this subtitle and included in any

13 regulations promulgated by OMB; or

14 (B) unless a waiver is granted under para15 graph (2) to establish such additional require16 ments.

17 (2) CONDITIONS FOR WAIVERS.—

18 (A) IN GENERAL.—The proposed regula19 tions developed by the Panel shall provide that

20 any participant in the health care system may

21 request a waiver to establish additional data re22 quirements.

23 (B) CONSIDERATION OF WAIVER RE24 QUESTS.—The proposed regulations developed

25 by the Panel shall provide that no waiver shall
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1 be granted under this paragraph unless the en2 tity granting such waiver considers the value of

3 the additional data to be exchanged for re4 search or other purposes determined appro5 priate by the Panel, the administrative cost of

6 the additional data requirements, the burden of

7 the additional data requirements, and the bur8 den of the timing of the imposition of the addi9 tional data requirements.

10 (C) CERTAIN REQUESTS FOR WAIVERS.—

11 The proposed regulations developed by the

12 Panel shall provide that if a participant in the

13 health care system attempts to impose addi14 tional data requirements on any other such par15 ticipant, the participant on which such require16 ments are being imposed may contact the Sec17 retary. The Panel shall develop a procedure

18 under which any participant in the health care

19 system contacting the Secretary under the pre20 ceding sentence shall remain anonymous. The

21 Secretary shall notify the participant imposing

22 the additional data requirements that such re23 quirements may not be imposed on any other

24 participant unless such other participant volun-
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1 tarily agrees to such requirements or a waiver

2 is obtained under this paragraph.

3 (e) TIMETABLE FOR STANDARDS, CONVENTIONS,

4 AND REQUIREMENTS.—

5 (1) STANDARDS, CONVENTIONS, AND REQUIRE6 MENTS RELATING TO FINANCIAL AND ADMINISTRA7 TIVE TRANSACTIONS.—Not later than 9 months

8 after the date of the enactment of this subtitle, the

9 Panel shall develop data and transaction standards,

10 conventions, and requirements for the following

11 items relating to the financing and administration of

12 health care:

13 (A) Enrollment.

14 (B) Eligibility.

15 (C) Payment and remittance advice.

16 (D) Claims.

17 (E) Claims status.

18 (F) Coordination of benefits.

19 (G) Crossover billing.

20 (H) First report of injury.

21 (I) Standardized claim attachments.

22 (J) Any other items relating to the financ23 ing and administration of health care delivery.

24 (2) STANDARDS, CONVENTIONS, AND REQUIRE25 MENTS RELATING TO INITIAL QUALITY MEASURE-
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1 MENT INDICATORS.—Not later than 12 months after

2 the date of the enactment of this subtitle, the Panel

3 shall develop data and transaction standards, con4 ventions, and requirements for participants in the

5 health care system to transmit data derived from the

6 financial and administrative transactions data de7 scribed in paragraph (1) on quality measurement,

8 utilization monitoring, risk assessment, patient satis9 faction, outcomes, and access.

10 (3) STANDARDS, CONVENTIONS, AND REQUIRE11 MENTS RELATING TO COMPREHENSIVE QUALITY

12 MEASUREMENT DATA.—Not later than 24 months

13 after the date of the enactment of this subtitle, the

14 Panel shall develop standards, conventions, and re15 quirements for participants in the health care sys16 tem to transmit comprehensive data collected at the

17 site of care on quality measurement, utilization mon18 itoring, risk assessment, patient satisfaction, out19 comes, and access.

20 (4) STANDARDS, CONVENTIONS, AND REQUIRE21 MENTS RELATING TO DATA ON PATIENT CARE

22 RECORDS.—Not later than 36 months after the date

23 of the enactment of this subtitle, the Panel shall de24 velop standards, conventions, and requirements re25 lated to the inclusion of data from patient care
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1 records into the health care data interchange sys2 tem, including standards, conventions, and require3 ments on the identification of the origin of any data

4 from such records that is included in such system.

5 (5) STANDARDS, CONVENTIONS, AND REQUIRE6 MENTS FOR THE CENTERS FOR DISEASE CONTROL

7 AND PREVENTION.—Not later than 36 months after

8 the date of the enactment of this subtitle, the Panel,

9 in collaboration with the Centers for Disease Control

10 and Prevention (referred to in this subtitle as the

11 ‘‘CDCP’’) and in consultation with State depart12 ments of health, shall develop standards, conven13 tions, and requirements for the electronic inter14 change of data on vital health statistics collected by

15 CDCP or the States or any other such data as

16 CDCP determines appropriate.

17 (f) WAIVERS OF COMPLIANCE.—

18 (1) FINANCIAL AND ADMINISTRATIVE TRANS19 ACTIONS.—The proposed regulations developed by

20 the Panel shall provide that any of the data and

21 transaction standards, conventions, and require22 ments relating to financial and administrative trans23 actions developed by the Panel under subsection

24 (e)(1) may be waived until January 1, 1995, for a

25 health care provider that—
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1 (A) does not have access to a health care

2 information clearinghouse or a health care

3 value-added network, is in the process of devel4 oping a system that complies with such stand5 ards, conventions, and requirements, and exe6 cutes an agreement with the appropriate regu7 latory entity that such provider will meet such

8 standards, conventions, and requirements by a

9 specified date (not later than January 1, 1995);

10 or

11 (B) is a small rural hospital (as defined by

12 the Panel and included in regulations promul13 gated by OMB).

14 (2) COMPREHENSIVE QUALITY MEASUREMENT

15 DATA.—The proposed regulations developed by the

16 Panel shall provide that any of the data and trans17 action standards, conventions, and requirements re18 lating to comprehensive quality measurement data

19 developed by the Panel under subsection (e)(3) may

20 be waived until January 1, 1998, for a health care

21 provider that—

22 (A) does not have access to a health care

23 information clearinghouse or a health care

24 value-added network, is in the process of devel25 oping a system that complies with such stand-
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1 ards, conventions, and requirements, and exe2 cutes an agreement with the appropriate regu3 latory entity that such provider will meet such

4 standards and requirements by a specified date

5 (not later than January 1, 1998); or

6 (B) agrees to obtain from such provider’s

7 records the data elements that are needed to

8 meet the standards and requirements developed

9 under subsection (e)(3) and agrees to subject

10 the provider’s data transfer process to a quality

11 assurance program that is satisfactory to the

12 appropriate regulatory entity.

13 SEC. 3305. STANDARDS FOR OPERATION OF A UNIFORM

14 WORKING FILE.

15 Not later than 24 months after the date of the enact16 ment of this subtitle the Panel shall establish standards

17 for the development and operation of a uniform working

18 file system that is national in scope. Such standards shall

19 ensure—

20 (1) that all participants in the health care sys21 tem may be linked electronically (directly or indi22 rectly) to the uniform working file system;

23 (2) that any privacy and confidentiality stand24 ards established by the Panel under section 3308 are

25 satisfied;
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1 (3) that the uniform working file system im2 proves the efficiency and effectiveness of the admin3 istration of the health care system, including health

4 care quality measurement;

5 (4) the interoperability of the uniform working

6 file system by—

7 (A) supporting the data and transaction

8 standards, conventions, and requirements se9 lected and established by the Panel; and

10 (B) making use of such standards, conven11 tions, and requirements; and

12 (5) the support of any other requirements se13 lected or established by the Panel.

14 SEC. 3306. CODE SETS FOR SYSTEM.

15 Not later than 9 months after the date of the enact16 ment of this subtitle, the Panel shall select and establish

17 code sets that are maintained by private and public enti18 ties as the Panel’s official code sets for use in a national

19 uniform working file system. The proposed regulations de20 veloped by the Panel shall provide that any changes or

21 updates to such code sets that are established or requested

22 by the private or public entity which maintains the code

23 set—

24 (1) shall preserve the informational value of

25 data retained either within the uniform working file
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1 system or within the information systems of parties

2 making use of the data and transactions standards,

3 conventions, and requirements;

4 (2) shall include instructions on how existing

5 data containing such codes is to be converted or

6 translated so as to preserve its value;

7 (3) shall be incorporated into the official code

8 set in such a manner as to minimize the disruption

9 to the national uniform working file system and min10 imize the cost to all entities within the system for

11 reprogramming to accommodate such changes or up12 dates; and

13 (4) shall be implemented—

14 (A) only after at least 90 days advance no15 tice has been provided to participants in the

16 health care system; and

17 (B) no more frequently than on an annual

18 basis.

19 SEC. 3307. ESTABLISHMENT OF UNIQUE IDENTIFIERS.

20 (a) IN GENERAL.—Not later than 9 months after the

21 date of the enactment of this subtitle, the Panel shall de22 velop unique identifiers for each participant in the health

23 care system.

24 (b) SPECIAL RULES.—
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1 (1) INDIVIDUALS.—Each individual shall have a

2 unique identifier developed by the Panel.

3 (2) HEALTH PLANS OR PROVIDERS.—In devel4 oping unique identifiers for each health plan or pro5 vider, the Panel shall take into account multiple uses

6 for such identifiers and shall consider multiple phys7 ical locations and specialty classifications for provid8 ers. The unique identifiers for health plans or pro9 viders may be based on the system used under title

10 XVIII of the Social Security Act on the date of the

11 enactment of this subtitle.

12 SEC. 3308. PRIVACY AND CONFIDENTIALITY STANDARDS.

13 (a) IN GENERAL.—Not later than 9 months after the

14 date of the enactment of this subtitle, the Panel, after tak15 ing into consideration the Insurance Information and Pri16 vacy Protection Model Act of the National Association of

17 Insurance Commissioners, other model legislation, and

18 international guidelines, shall develop requirements that

19 protect the privacy of participants in the health care sys20 tem and ensure the confidentiality of information in the

21 data interchange system.

22 (b) PRINCIPLES CONSIDERED.—In developing the re23 quirements referred to in subsection (a), the Panel shall

24 take into consideration the following principles:
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1 (1) Information relating to an identifiable or

2 identified individual should be collected only to the

3 extent necessary to carry out the purpose for which

4 the information is collected.

5 (2) Information relating to an identifiable or

6 identified individual collected for a particular pur7 pose should generally not be used for another pur8 pose without the individual’s informed consent un9 less the pooling of information renders an individ10 ual’s data unidentifiable.

11 (3) Information relating to an identifiable or

12 identified individual should be disposed of when no

13 longer necessary to carry out the purpose for which

14 it was collected, unless the pooling of information

15 renders an individual’s data unidentifiable.

16 (4) Methods to ensure the verifiability, timeli17 ness, accuracy, reliability, utility, completeness, rel18 evance, and comparability of information relating to

19 an identifiable or identified individual should be in20 stituted.

21 (5) An individual should be notified in advance

22 of the collection of information relating to such indi23 vidual with regard to—

24 (A) whether the furnishing of information

25 is mandatory or voluntary;
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1 (B) the recordkeeping practices with re2 spect to any information provided; and

3 (C) the uses to be made of any information

4 provided.

5 (6) If informed consent is necessary for the in6 tended primary or secondary use of information re7 lating to an identifiable or identified individual, the

8 individual should be provided the opportunity to re9 ject such uses at the time the information is col10 lected, except where such uses are necessary to com11 ply with law.

12 (7) An individual should be permitted to inspect

13 and correct any information which concerns such in14 dividual and should be able to obtain information on

15 how such information is being used.

16 SEC. 3309. TRANSFER OF INFORMATION BETWEEN HEALTH

17 PLANS.

18 Not later than 9 months after the date of the enact19 ment of this subtitle, the Panel shall develop rules and

20 procedures—

21 (1) for determining the financial liability of

22 health plans when health care benefits are payable

23 under two or more health plans; and

24 (2) concerning the transfer among health plans

25 of appropriate official data sets needed to carry out
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1 the coordination of benefits, the sequential process2 ing of claims, and other health data as determined

3 necessary by the Panel for individuals who have

4 more than one health plan, according to the prior5 ities established under the rules and procedures es6 tablished under paragraph (1).

7 SEC. 3310. FINES AND PENALTIES FOR FAILURE TO COM8 PLY.

9 (a) DEVELOPMENT BY THE PANEL.—

10 (1) COMPLIANCE WITH STANDARDS FOR PRI11 VACY AND CONFIDENTIALITY.—Not later than 9

12 months after the date of the enactment of this sub13 title, the Panel shall develop civil fines and penalties,

14 as determined appropriate by the Panel, to enforce

15 any of the requirements developed by the Panel

16 under section 3308 relating to privacy and confiden17 tiality. The civil fines and penalties developed by the

18 Panel under this paragraph shall not be less than

19 $1,000 for each violation.

20 (2) COMPLIANCE WITH OTHER REQUIRE21 MENTS.—

22 (A) IN GENERAL.—Not later than 9

23 months after the date of the enactment of this

24 subtitle, the Panel shall develop civil fines and

25 penalties, as determined appropriate by the
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1 Panel, to enforce any of the requirements devel2 oped by the Panel under this subtitle other than

3 the requirements related to privacy and con4 fidentiality. The civil fines and penalties devel5 oped by the Panel under this paragraph shall

6 not exceed $100 for each violation.

7 (B) LIMITATIONS.—

8 (i) PENALTIES NOT TO APPLY WHERE

9 NONCOMPLIANCE NOT DISCOVERED EXER10 CISING REASONABLE DILIGENCE.—No civil

11 fine or penalty developed by the Panel

12 under this paragraph shall be imposed if it

13 is established that the person liable for the

14 fine or penalty did not know, and by exer15 cising reasonable diligence would not have

16 known, that such person failed to comply

17 with any of the requirements described in

18 subparagraph (A).

19 (ii) PENALTIES NOT TO APPLY TO

20 COMPLIANCE FAILURES CORRECTED WITH21 IN 30 DAYS.—No civil fine or penalty devel22 oped by the Panel under this paragraph

23 shall be imposed if—
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1 (I) the failure to comply was due

2 to reasonable cause and not to willful

3 neglect, and

4 (II) the failure to comply is cor5 rected during the 30-day period begin6 ning on the 1st date the person liable

7 for the fine or penalty knew, or by ex8 ercising reasonable diligence would

9 have known, that the failure to com10 ply occurred.

11 (iii) WAIVER.—In the case of a failure

12 to comply which is due to reasonable cause

13 and not to willful neglect, any civil fine or

14 penalty developed by the Panel under this

15 paragraph may be waived to the extent

16 that the payment of such fine or penalty

17 would be excessive relative to the compli18 ance failure involved.

19 (b) LEGISLATIVE PROPOSAL ON CERTAIN CRIMINAL

20 FINES AND PENALTIES.—Not later than 12 months after

21 the date of the enactment of this subtitle, the Panel shall

22 submit to Congress a legislative proposal relating to any

23 criminal fines and penalties determined appropriate by the

24 Panel to enforce any of the requirements developed by the
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1 Panel under section 3308 relating to privacy and confiden2 tiality.

3 SEC. 3311. OVERSIGHT OF UNIFORM WORKING FILE,

4 HEALTH CARE INFORMATION CLEARING5 HOUSES, AND VALUE-ADDED NETWORKS.

6 (a) PERIODIC REVIEWS.—Not later than 9 months

7 after the date of the enactment of this subtitle, the Sec8 retary shall establish a procedure for the periodic review

9 of business practices, performance, and fees with respect

10 to the uniform working file and each health care informa11 tion clearinghouse and value-added network to ensure that

12 such entities are not taking unfair advantage of partici13 pants in the health care system through the application

14 of any regulations promulgated by OMB.

15 (b) CERTIFICATION PROCEDURE.—Not later than 12

16 months after the date of the enactment of this subtitle,

17 the Panel shall establish a certification procedure for the

18 uniform working file, health care information clearing19 houses, and value-added networks. The requirements for

20 certification shall include—

21 (1) adherence to the data and transaction

22 standards and requirements and the privacy and

23 confidentiality standards included in any regulations

24 promulgated by OMB;
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1 (2) making public standardized indicators of

2 performance such as accessibility, transaction re3 sponsiveness, administrative efficiency, reliability,

4 dependability, and any other indicators determined

5 appropriate by the Secretary; and

6 (3) any other requirements determined appro7 priate by the Secretary.

8 SEC. 3312. ANNUAL REPORTS TO CONGRESS.

9 (a) IN GENERAL.—The Panel shall annually prepare

10 and submit to Congress a report on—

11 (1) the status of the data interchange system,

12 including the system’s ability to provide data on

13 cost, quality, and patient satisfaction;

14 (2) the savings and costs of implementing the

15 data interchange system; and

16 (3) any legislative recommendations related to

17 the data interchange system.

18 (b) AVAILABILITY TO THE PUBLIC.—Any informa19 tion in the report submitted to Congress under subsection

20 (a) shall be made available to the public unless such infor21 mation may not be disclosed by law.

22 SEC. 3313. HEALTH CARE DATA PANEL.

23 (a) ESTABLISHMENT.—There is established a panel

24 to be known as the Health Care Data Panel.

25 (b) MEMBERSHIP.—
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1 (1) IN GENERAL.—The Panel shall be composed

2 of the following members:

3 (A) The Secretary.

4 (B) The Secretary of Defense.

5 (C) The Secretary of Veterans Affairs.

6 (D) A representative of the Agency for

7 Health Care Policy and Research.

8 (E) A representative of the National Insti9 tute of Standards and Technology.

10 (F) A representative of the National Tele11 communication and Information Administra12 tion.

13 (G) Six additional Federal officers deter14 mined appropriate by the Secretary.

15 (2) CHAIR.—The Secretary shall be the Chair

16 of the Panel.

17 (c) MEETINGS.—

18 (1) IN GENERAL.—Except as provided in para19 graph (2), the Panel shall meet at the call of the

20 Chair.

21 (2) INITIAL AND SUBSEQUENT MEETINGS.—

22 The Panel shall hold a meeting not later than 30

23 days after the date of the enactment of this section

24 and at least annually thereafter.
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1 (3) QUORUM.—A majority of the members of

2 the Panel shall constitute a quorum, but a lesser

3 number of members may hold hearings.

4 (d) POWERS OF THE PANEL.—

5 (1) HEARINGS.—The Panel may hold such

6 hearings, sit and act at such times and places, take

7 such testimony, and receive such evidence as the

8 Panel considers advisable to carry out the purposes

9 of this section.

10 (2) INFORMATION FROM FEDERAL AGENCIES.—

11 The Panel may secure directly from any Federal de12 partment or agency such information as the Panel

13 considers necessary to carry out the provisions of

14 this section. Upon request of the Chair of the Panel,

15 the head of such department or agency shall furnish

16 such information to the Panel.

17 (3) POSTAL SERVICES.—The Panel may use the

18 United States mails in the same manner and under

19 the same conditions as other departments and agen20 cies of the Federal Government.

21 (4) GIFTS.—The Panel may accept, use, and

22 dispose of gifts or donations of services or property.

23 (e) PANEL PERSONNEL MATTERS.—

24 (1) COMPENSATION OF MEMBERS.—Members of

25 the Panel shall serve without compensation in addi-
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1 tion to that received for their services as officers or

2 employees of the Federal Government.

3 (2) STAFF.—

4 (A) DETAIL OF GOVERNMENT EMPLOY5 EES.—Upon the request of the Chair, any Fed6 eral Government employee may be detailed to

7 the Panel without reimbursement, and such de8 tail shall be without interruption or loss of civil

9 service status or privilege.

10 (B) CONTRACTS.—The Chair may enter

11 into contracts or other arrangements that may

12 be necessary for the Panel to perform its du13 ties.

14 (C) INTERNAL ORGANIZATION.—The Chair

15 may prescribe such rules as the Chair deter16 mines necessary with respect to the internal or17 ganization of the Panel.

18 SEC. 3314. NATIONAL HEALTH INFORMATICS COMMISSION.

19 (a) APPOINTMENT.—The Panel shall provide for ap20 pointment of a National Health Informatics Commission

21 (referred to in this section as the ‘‘Commission’’) to advise

22 the Panel on its activities.

23 (b) MEMBERSHIP.—
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1 (1) IN GENERAL.—The Commission shall con2 sist of 15 members. The Panel shall designate 1

3 member of the Commission as the Chair.

4 (2) EXPERTISE.—Members of the Commission

5 shall be individuals who—

6 (A) represent different professions and dif7 ferent geographic areas, including urban and

8 rural areas;

9 (B) represent Federal or State government

10 health programs;

11 (C) represent applicable standard-setting

12 groups, including the National Uniform Billing

13 Committee, the Uniform Claim Form Task

14 Force, American National Standards Institute,

15 and the Healthcare Informatics Standards

16 Planning Panel;

17 (D) represent consumers of health care

18 services; and

19 (E) have expertise in—

20 (i) electronic data interchange of

21 health care information and computerized

22 information systems associated with the

23 operation and administration of matters

24 relating to health care;
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1 (ii) the provision and financing of

2 health care;

3 (iii) conducting and interpreting

4 health economics research;

5 (iv) research and development of tech6 nological and scientific advances in health

7 care;

8 (v) health care eligibility, enrollment,

9 and claims administration;

10 (vi) health care financial management;

11 (vii) health care reimbursement; or

12 (viii) health care outcomes research.

13 (3) TERMS.—The Chair shall serve on the Com14 mission at the pleasure of the Panel. Each other

15 member of the Commission shall be appointed for a

16 term of 5 years, except with respect to the members

17 first appointed—

18 (A) 3 members shall be appointed for a

19 term of 1 year;

20 (B) 3 members shall be appointed for

21 terms of 2 years;

22 (C) 3 members shall be appointed for

23 terms of 3 years;

24 (D) 3 members shall be appointed for

25 terms of 4 years; and
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1 (E) 2 members shall be appointed for

2 terms of 5 years.

3 (4) VACANCIES.—

4 (A) IN GENERAL.—A vacancy on the Com5 mission shall be filled in the manner in which

6 the original appointment was made and shall be

7 subject to any conditions which applied with re8 spect to the original appointment.

9 (B) FILLING UNEXPIRED TERM.—An indi10 vidual chosen to fill a vacancy shall be ap11 pointed for the unexpired term of the member

12 replaced.

13 (C) EXPIRATION OF TERMS.—The term of

14 any member shall not expire before the date on

15 which the member’s successor takes office.

16 (c) MEETINGS.—

17 (1) IN GENERAL.—Except as provided in para18 graph (2), the Commission shall meet at the call of

19 the Chair.

20 (2) INITIAL MEETING.—No later than 30 days

21 after the date on which all members of the Commis22 sion have been appointed, the Commission shall hold

23 its first meeting.
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1 (3) QUORUM.—A majority of the members of

2 the Commission shall constitute a quorum, but a

3 lesser number of members may hold hearings.

4 (d) DUTIES.—

5 (1) IN GENERAL.—Not later than 60 days prior

6 to any date on which the Panel is required to select,

7 establish, or develop any requirements relating to

8 the data interchange system, the Commission shall

9 make recommendations to the Panel with respect to

10 the issues relating to such requirements.

11 (2) ADDITIONAL STUDIES AND PROJECTS.—As

12 directed by the Panel, the Commission shall under13 take such studies and projects as the Panel may

14 deem necessary.

15 (e) POWERS OF THE COMMISSION.—

16 (1) HEARINGS.—The Commission may hold

17 such hearings, sit and act at such times and places,

18 take such testimony, and receive such evidence as

19 the Commission considers advisable to carry out the

20 purposes of this section.

21 (2) INFORMATION FROM FEDERAL AGENCIES.—

22 The Commission may secure directly from any Fed23 eral department or agency such information as the

24 Commission considers necessary to carry out the

25 provisions of this section. Upon request of the Chair,
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1 the head of such department or agency shall furnish

2 such information to the Commission.

3 (3) POSTAL SERVICES.—The Commission may

4 use the United States mails in the same manner and

5 under the same conditions as other departments and

6 agencies of the Federal Government.

7 (4) GIFTS.—The Commission may accept, use,

8 and dispose of gifts or donations of services or prop9 erty.

10 (f) COMMISSION PERSONNEL MATTERS.—

11 (1) COMPENSATION OF MEMBERS.—Each mem12 ber of the Commission who is not an officer or em13 ployee of the Federal Government shall be com14 pensated at a rate equal to the daily equivalent of

15 the annual rate of basic pay prescribed for level IV

16 of the Executive Schedule under section 5315 of title

17 5, United States Code, for each day (including travel

18 time) during which such member is engaged in the

19 performance of the duties of the Commission. All

20 members of the Commission who are officers or em21 ployees of the United States shall serve without com22 pensation in addition to that received for their serv23 ices as officers or employees of the United States.

24 (2) TRAVEL EXPENSES.—The members of the

25 Commission shall be allowed travel expenses, includ-
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1 ing per diem in lieu of subsistence, at rates author2 ized for employees of agencies under subchapter I of

3 chapter 57 of title 5, United States Code, while

4 away from their homes or regular places of business

5 in the performance of services for the Commission.

6 (3) STAFF.—

7 (A) IN GENERAL.—The Chair may, with8 out regard to civil service laws and regulations,

9 appoint and terminate such personnel as may

10 be necessary to enable the Commission to per11 form its duties.

12 (B) COMPENSATION.—The Chair may fix

13 the compensation of personnel without regard

14 to the provisions of chapter 51 and subchapter

15 III of chapter 53 of title 5, United States Code,

16 relating to classification of positions and Gen17 eral Schedule pay rates, except that the rate of

18 pay for the personnel may not exceed the rate

19 payable for level V of the Executive Schedule

20 under section 5316 of such title.

21 (C) DETAIL OF GOVERNMENT EMPLOY22 EES.—Any Federal Government employee may

23 be detailed to the Commission without reim24 bursement, and such detail shall be without
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1 interruption or loss of civil service status or

2 privilege.

3 (D) PROCUREMENT OF TEMPORARY AND

4 INTERMITTENT SERVICES.—The Chair may

5 procure temporary and intermittent services

6 under section 3109(b) of title 5, United States

7 Code, at rates for individuals which do not ex8 ceed the daily equivalent of the annual rate of

9 basic pay prescribed for level V of the Executive

10 Schedule under section 5316 of such title.

11 (E) CONTRACTS.—The Chair may enter

12 into contracts or other arrangements that may

13 be necessary for the Commission to perform its

14 duties.

15 (F) INTERNAL ORGANIZATION.—The Chair

16 may prescribe such rules as the Chair deter17 mines necessary with respect to the internal or18 ganization of the Commission. The Commission

19 shall create such committees (composed of

20 Commission members and others as appointed

21 by the Chair) as necessary to enable the Com22 mission to meet its responsibilities and func23 tions.

24 (g) REPORTS.—The Commission shall submit to the

25 Panel such reports as may be requested by the Panel on
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1 each study or project conducted by the Commission. Such

2 reports shall contain such information as requested by the

3 Panel.

4 (h) TERMINATION OF COMMISSION.—The Commis5 sion shall terminate 20 years after the date of the enact6 ment of this title.

7 (i) AUTHORIZATION OF APPROPRIATIONS.—

8 (1) IN GENERAL.—There are authorized to be

9 appropriated such sums as may be necessary to

10 carry out the purposes of this section.

11 (2) AVAILABILITY.—Any sums appropriated

12 under the authorization contained in this subsection

13 shall remain available, without fiscal year limitation,

14 until expended.

15 SEC. 3315. DEFINITIONS.

16 For purposes of this subtitle:

17 (1) ADMINISTRATOR.—The term ‘‘adminis18 trator’’ has the meaning given that term in section

19 3(16)(A) of the Employee Retirement Income Secu20 rity Act of 1974.

21 (2) CODE SETS.—The term ‘‘code sets’’ means

22 any codes used for supplying specific data in a uni23 form data set, including tables of terms, medical di24 agnostic codes, medical procedure codes, identifica25 tion numbers, and any code sets of the National
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1 Uniform Billing Committee, the Health Care Fi2 nancing Administration, or ANSI.

3 (3) EMPLOYEE WELFARE BENEFIT PLAN.—The

4 term ‘‘employee welfare benefit plan’’ has the mean5 ing given that term in section 3(1) of the Employee

6 Retirement Income Security Act of 1974.

7 (4) HEALTH CARE INFORMATION CLEARING8 HOUSE.—The term ‘‘health care information clear9 inghouse’’ means a public or private entity that—

10 (A) processes data that cannot be sent di11 rectly due to lack of proper formatting or edit12 ing; and

13 (B) facilitates the translation of data to

14 the standardized data set and code sets between

15 persons who normally would send or receive the

16 transaction;

17 but does not store information processed beyond the

18 time required to complete its task and communicate

19 the information.

20 (5) HEALTH CARE VALUE-ADDED NETWORK.—

21 The term ‘‘health care value-added network’’ means

22 any entity that provides additional services beyond

23 the transmission of data or value, such as the stor24 age of electronic data or value and the transfer of

25 such data or value between health care entities.
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1 (6) INSURER.—The term ‘‘insurer’’ means any

2 entity that offers a health plan under which such en3 tity is at risk for all or part of the cost of benefits

4 under the plan, and includes any agent of such en5 tity.

6 (7) PARTICIPANT IN THE HEALTH CARE SYS7 TEM.—The term ‘‘participant in the health care sys8 tem’’ means any Federal health care program, State,

9 employee welfare benefit plan, health plan, adminis10 trator, insurer, or provider.

11 (8) PROVIDER.—The term ‘‘provider’’ means a

12 physician, hospital, pharmacy, laboratory, or other

13 person licensed or otherwise authorized under appli14 cable State laws to furnish health care items or serv15 ices.

16 TITLE IV—JUDICIAL REFORMS

17 Subtitle A—Medical Liability

18 Reform

19 SEC. 4001. DEFINITIONS.

20 For purposes of this subtitle:

21 (1) ALTERNATIVE DISPUTE RESOLUTION SYS22 TEM; ADR.—The term ‘‘alternative dispute resolution

23 system’’ or ‘‘ADR’’ means a system that provides

24 for the resolution of health care malpractice claims
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1 in a manner other than through health care mal2 practice actions.

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

4 any person who alleges a health care malpractice

5 claim, and any person on whose behalf such a claim

6 is alleged, including the decedent in the case of an

7 action brought through or on behalf of an estate.

8 (3) ECONOMIC LOSSES.—The term ‘‘economic

9 losses’’ means losses for hospital and medical ex10 penses, lost wages, lost employment, and other pecu11 niary losses incurred by an individual with respect to

12 which a health care malpractice claim or action is

13 pursued.

14 (4) HEALTH CARE PROFESSIONAL.—The term

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

16 provides health care services in a State and who is

17 required by State law or regulation to be licensed or

18 certified by the State to provide such services in the

19 State.

20 (5) HEALTH CARE PROVIDER.—The term

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

22 institution that is engaged in the delivery of health

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

24 or Federal law or regulation to be licensed or cer-
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1 tified by the State or Federal Government to engage

2 in the delivery of such services in a State.

3 (6) HEALTH CARE NEGLIGENCE.—The term

4 ‘‘health care negligence’’ means an act or omission

5 by a health care provider or a health care profes6 sional which deviates from the applicable State

7 standard of care and causes an injury.

8 (7) HEALTH CARE MALPRACTICE ACTION.—The

9 term ‘‘health care malpractice action’’ means a civil

10 action brought in a State or Federal court against

11 a health care provider, health care professional, or

12 other defendant joined in the action (regardless of

13 the theory of liability on which the claim is based)

14 in which the claimant alleges a health care mal15 practice claim.

16 (8) HEALTH CARE MALPRACTICE CLAIM.—The

17 term ‘‘health care malpractice claim’’ means a claim

18 brought against a health care provider, health care

19 professional, or other defendant joined in a claim al20 leging that an injury was suffered by the claimant

21 as the result of health care negligence or gross neg22 ligence, breach of express or implied warranty or

23 contract, or failure to discharge a duty to warn or

24 instruction to obtain consent arising from the provi25 sion of (or failure to provide) health care services.
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1 (9) INJURY.—The term ‘‘injury’’ means an in2 jury, illness, disease, or other harm suffered by an

3 individual as a result of the provision of health care

4 services by a health care provider or health care pro5 fessional.

6 (10) NONECONOMIC LOSSES.—The term ‘‘non7 economic losses’’ means losses for physical and emo8 tional pain, suffering, inconvenience, physical im9 pairment, mental anguish, disfigurement, loss of en10 joyment of life, and other nonpecuniary losses in11 curred by an individual with respect to which a

12 health care malpractice claim or action is pursued.

13 PART I—MEDIATION AND ALTERNATIVE DISPUTE

14 RESOLUTION

15 SEC. 4011. MEDIATION.

16 (a) REQUIREMENTS FOR QUALIFIED HEALTH

17 PLANS.—In accordance with section 1120, a qualified

18 health plan shall provide effective mediation procedures

19 for hearing and resolving health care malpractice claims.

20 (b) CERTIFICATION AND STANDARDS.—

21 (1) CERTIFICATION.—A qualified health plan

22 meets the requirement of subsection (a) if the medi23 ation procedures provided under the plan are cer24 tified by the State as being in compliance with the

25 standards developed under paragraph (2).
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1 (2) STANDARDS.—

2 (A) IN GENERAL.—The standards devel3 oped under subpart B of part I of subtitle B of

4 title I shall contain minimum mediation stand5 ards that qualified health plans must meet in

6 order to be certified by the State under para7 graph (1).

8 (B) MEDIATION SERVICES.—The stand9 ards developed under subparagraph (A) shall

10 require a qualified health plan to provide medi11 ation services through—

12 (i) the Federal Mediation and Concil13 iation Service; or

14 (ii) a private mediation service that

15 has been certified by the State as being eli16 gible to mediate health care malpractice

17 claims.

18 (c) NOTIFICATION.—A qualified health plan shall

19 provide notice to enrollees and potential enrollees concern20 ing the mediation procedures available under the plan and

21 the procedures under which an enrollee commences the

22 mediation process.

23 (d) PARTICIPATION.—

24 (1) REQUIREMENT.—A party to a dispute

25 brought to mediation under this section shall be re-
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1 quired to participate in the mediation if requested by

2 another party.

3 (2) PRIVILEGE.—All information disclosed in a

4 mediation procedure under this section shall be priv5 ileged and may not be used in any other proceeding

6 unless such information is discovered independently

7 of such mediation procedure.

8 SEC. 4012. FAILURE OF MEDIATION.

9 With respect to a claim submitted to mediation as

10 provided for in section 4011, if the mediation process fails

11 to resolve the dispute from which such claim arose, the

12 parties to such claim shall participate in an applicable al13 ternative dispute resolution method under section 4013.

14 SEC. 4013. ALTERNATIVE DISPUTE RESOLUTION.

15 (a) APPLICATION TO HEALTH CARE MALPRACTICE

16 CLAIMS UNDER PLANS.—In the case of any health care

17 malpractice claim, no health care malpractice action may

18 be brought with respect to such claim until the final reso19 lution of the claim under the alternative dispute resolution

20 method adopted by the State under subsection (b).

21 (b) ADOPTION OF MECHANISM BY STATES.—Each

22 State shall—

23 (1) adopt at least one of the alternative dispute

24 resolution methods specified under this part for the
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1 resolution of health care malpractice claims arising

2 from the provision of health care services; and

3 (2) require that health plans disclose to enroll4 ees (and potential enrollees), in accordance with

5 standards established by the Secretary, the availabil6 ity and procedures for consumer grievances under

7 the plan, including mediation and the alternative

8 dispute resolution method or methods adopted under

9 this section.

10 (c) SPECIFICATION OF PERMISSIBLE ALTERNATIVE

11 DISPUTE RESOLUTION METHODS.—

12 (1) IN GENERAL.—The Secretary shall, by reg13 ulation, develop alternative dispute resolution meth14 ods for the use by States in resolving health care

15 malpractice claims under subsection (a). Such meth16 ods shall include at least the following:

17 (A) BINDING ARBITRATION.—The use of

18 binding arbitration.

19 (B) FAULT-BASED SYSTEMS.—The use of

20 fault-based administrative systems, expedited

21 review and dismissal of claims when not ade22 quately supported.

23 (C) EARLY OFFERS OF SETTLEMENT.—

24 The use of a process under which parties have

25 the option to make early offers of settlement.
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1 (D) CATASTROPHIC SYSTEMS.—The use of

2 catastrophic injury compensation systems.

3 (2) STANDARDS FOR ESTABLISHING METH4 ODS.—In developing alternative dispute resolution

5 methods under paragraph (1), the Secretary shall

6 assure that the methods promote the resolution of

7 health care malpractice claims in a manner that—

8 (A) is affordable for the parties involved;

9 (B) provides for timely resolution of

10 claims;

11 (C) provides for the consistent and fair

12 resolution of claims; and

13 (D) provides for reasonably convenient ac14 cess to dispute resolution for individuals en15 rolled in qualified health plans.

16 (d) STATE INITIATED ALTERNATIVE.—A State will

17 be permitted to operate an alternative dispute resolution

18 method (other than a method described in subsection (c))

19 that otherwise complies with this part if such system—

20 (1) is determined by the Secretary to accom21 plish the purposes and otherwise meet the require22 ments of this part; and

23 (2) is certified by the Secretary as an appro24 priate alternative dispute resolution method.
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1 (e) FAILURE TO ESTABLISH SYSTEM.—If a State

2 fails to establish an alternative resolution system that

3 meets the requirements of this part, the Secretary shall

4 provide for the operation of an approved alternative dis5 pute resolution method in such State until such time as

6 a system under this part is adopted.

7 SEC. 4014. COURT ACTIONS.

8 (a) IN GENERAL.—The extent to which any party

9 seeks further redress (subsequent to a decision of an alter10 native dispute resolution method) concerning a health care

11 malpractice claim or action in a Federal or State court

12 shall be dependent upon the methods of alternative dispute

13 resolution adopted by the State. With respect to such fur14 ther redress, if the party initiating such court action re15 ceives a worse result, with respect to liability or level of

16 damages, under the decision of the court than under the

17 State alternative dispute resolution method, such party

18 shall bear the costs, including legal fees, incurred in the

19 court action by the other party or parties to such action.

20 (b) REQUIREMENT FOR PERFORMANCE BOND.—The

21 court in a health care malpractice action may require the

22 party that contested the ruling of the alternative dispute

23 resolution method with respect to the health care mal24 practice claim that is the subject of the action to post a

25 performance bond (in such amount and consisting of such
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1 funds and assets as the court determines to be appro2 priate), except that the court may waive the application

3 of such requirement to a party if the court determines that

4 the posting of such a bond is not necessary to ensure that

5 the party shall meet the requirements of this section to

6 pay the opposing party the costs incurred by the opposing

7 party under the action.

8 PART II—LIABILITY REFORM

9 SEC. 4021. APPLICABILITY

10 (a) IN GENERAL.—This part shall apply with respect

11 to any health care malpractice action brought in any State

12 or Federal court, except that this part shall not apply to

13 a claim or action for damages arising from a vaccine-relat14 ed injury or death to the extent that title XXI of the Pub15 lic Health Service Act applies to the claim or action.

16 (b) PREEMPTION.—The provisions of this part shall

17 preempt any State law to the extent such law is inconsist18 ent with the limitations contained in such provisions. The

19 provisions of this part shall not preempt any State law

20 that provides for liability defenses or places limitations on

21 a person’s liability for damages in addition to those con22 tained in this subtitle, places greater limitations on the

23 amount of attorneys’ fees that can be collected, or other24 wise imposes greater restrictions than those provided in

25 this part.
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1 (c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

2 OF LAW OR VENUE.—Nothing in subsection (b) shall be

3 construed to—

4 (1) waive or affect any defense of sovereign im5 munity asserted by any State under any provision of

6 law;

7 (2) waive or affect any defense of sovereign im8 munity asserted by the United States;

9 (3) affect the applicability of any provision of

10 the Foreign Sovereign Immunities Act of 1976;

11 (4) preempt State choice-of-law rules with re12 spect to claims brought by a foreign nation or a citi13 zen of a foreign nation; or

14 (5) affect the right of any court to transfer

15 venue or to apply the law of a foreign nation or to

16 dismiss a claim of a foreign nation or of a citizen

17 of a foreign nation on the ground of inconvenient

18 forum.

19 (d) FEDERAL COURT JURISDICTION NOT ESTAB20 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

21 this part shall be construed to establish any jurisdiction

22 in the district courts of the United States over health care

23 malpractice actions on the basis of section 1331 or 1337

24 of title 28, United States Code.
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1 SEC. 4022. LIMITATION ON AMOUNT OF ATTORNEY’S CON2 TINGENCY FEES.

3 (a) IN GENERAL.—An attorney who represents, on

4 a contingency fee basis, a plaintiff in a health care mal5 practice claim or action may not charge, demand, receive,

6 or collect for services rendered in connection with such ac7 tion (including the resolution of the claim that is the sub8 ject of the action under any alternative dispute resolution)

9 in excess of 25 percent of the total amount recovered by

10 judgment or settlement in such action.

11 (b) CALCULATION OF FEES IN THE EVENT OF PERI12 ODIC PAYMENTS.—In the event that a judgment or settle13 ment includes periodic or future payments of damages, the

14 amount recovered for purposes of computing the limitation

15 on the contingency fee under subsection (a) shall be based

16 on the cost of the annuity or trust established to make

17 the payments. In any case in which an annuity or trust

18 is not established to make such payments, such amount

19 shall be based on the present value of the payments.

20 (c) CONTINGENCY FEE DEFINED.—As used in this

21 section, the term ‘‘contingency fee’’ means any fee for pro22 fessional legal services which is, in whole or in part, con23 tingent upon the recovery of any amount of damages,

24 whether through judgment or settlement.
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1 SEC. 4023. REFORM OF DAMAGES.

2 (a) LIMITATION ON NONECONOMIC DAMAGES.—With

3 respect to a health care malpractice claim or action

4 brought in any forum, the total amount of damages that

5 may be awarded to an individual and the family members

6 of such individual for noneconomic losses resulting from

7 an injury alleged under such claim or action may not ex8 ceed $250,000, regardless of the number of health care

9 professionals, health care providers and other defendants

10 against whom the action is brought or the number of ac11 tions brought with respect to the injury. With respect to

12 actions heard by a jury, the jury may not be informed

13 of limitation contained in this subsection, and if necessary,

14 a reduction in the jury’s damage award shall be made by

15 the court.

16 (b) MANDATORY OFFSETS FOR DAMAGES PAID BY

17 A COLLATERAL SOURCE.—

18 (1) IN GENERAL.—With respect to a health

19 care malpractice claim or action, the total amount of

20 damages received by an individual under such action

21 shall be reduced, in accordance with paragraph (2),

22 by any other payment that has been, or will be,

23 made to an individual to compensate such individual

24 for the injury that was the subject of such action.

25 (2) AMOUNT OF REDUCTION.—The amount by

26 which an award of damages to an individual for an
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1 injury shall be reduced under paragraph (1) shall

2 be—

3 (A) the total amount of any payments

4 (other than such award) that have been made

5 or that will be made to such individual to pay

6 costs of or compensate such individual for the

7 injury that was the subject of the action; minus

8 (B) the amount paid by such individual (or

9 by the spouse, parent, or legal guardian of such

10 individual) to secure the payments described in

11 subparagraph (A).

12 (c) PERIODIC PAYMENTS.—With respect to a health

13 care malpractice action referred to in subsection (a), no

14 person may be required to pay more than $100,000 for

15 future damages in a single payment of a damages award,

16 but a person shall be permitted to make such payments

17 of the award on a periodic basis. The periods for such

18 payments shall be determined by the adjudicating body,

19 based upon projections of future losses and shall be re20 duced to present value.

21 (d) PUNITIVE DAMAGES.—

22 (1) FUND.—Each State shall establish a health

23 care education and disciplinary program, to be ap24 proved by the Secretary, and a fund consisting of
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1 such amounts as are transferred to the fund under

2 paragraph (2).

3 (2) TRANSFER OF AMOUNTS.—Each State shall

4 require that 75 percent of all awards of punitive

5 damages resulting from all health care malpractice

6 claims or actions in that State be transferred to the

7 fund established under paragraph (1) in the State.

8 (3) OBLIGATIONS FROM FUND.—The chief exec9 utive officer of a State shall obligate such sums as

10 are available in the fund established in that State

11 under paragraph (1) to provide additional resources

12 to State health care practitioner disciplinary boards

13 for the monitoring, education, and disciplining of

14 health care practitioners.

15 (e) ATTORNEY DISCLOSURE.—Attorneys hired to

16 represent any parties involved in a health care malpractice

17 action referred to in subsection (a) shall, at the time of

18 entering into the agreement with respect to such hiring,

19 disclose—

20 (1) the estimated probability of success on the

21 action;

22 (2) the number of hours the attorney estimates

23 will be needed to handle the action;
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1 (3) an estimate of the attorney fee required

2 (and whether any costs will be assessed outside the

3 contingency fee arrangement); and

4 (4) an alternative fee type or rate (hourly or

5 contingency) if available.

6 At the close of the action, an attorney shall provide to

7 the client, and the court if the action was litigated, a full,

8 documented disclosure of the hours spent, a description

9 of the work conducted during those hours, the total com10 pensation received and the calculated hourly fee concern11 ing such action. Failure to provide the information re12 quired in this subsection will result in a fee limit of 10

13 percent of the award.

14 SEC. 4024. REFORM OF PROCEDURES.

15 (a) STATUTE OF LIMITATIONS.—

16 (1) IN GENERAL.—Except as provided in para17 graph (2), no health care malpractice claim or action

18 may be initiated after the expiration of the 2-year

19 period that begins on the date on which the alleged

20 injury and its cause should reasonably have been

21 discovered, but in no event later than 6 years after

22 the date of the alleged occurrence of the injury.

23 (2) EXCEPTION FOR MINORS.—In the case of

24 an alleged injury suffered by a minor who has not

25 attained 6 years of age, no health care malpractice
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1 claim or action may be initiated after the expiration

2 of the 2-year period that begins on the date on

3 which the alleged injury and its cause should reason4 ably have been discovered, but in no event later than

5 6 years after the date of the alleged occurrence of

6 the injury and its cause or the date on which the

7 minor attains 12 years of age, whichever is later.

8 (b) JOINT AND SEVERAL LIABILITY.—

9 (1) IN GENERAL.—With respect to a health

10 care malpractice claim or action, the liability of each

11 defendant for noneconomic and punitive damages

12 shall be several only, and shall not be joint. Each de13 fendant shall be liable only for the amount of non14 economic and punitive damages allocated to such de15 fendant in direct proportion to such defendant’s per16 centage of responsibility as determined under para17 graph (2).

18 (2) PROPORTION OF RESPONSIBILITY.—For

19 purposes of this subsection, the trier of fact shall de20 termine the proportion of responsibility of each

21 party for the claimant’s harm.

22 (c) FRIVOLOUS ACTIONS.—

23 (1) BY ATTORNEY.—With respect to a health

24 care malpractice claim or action, if the court or the

25 adjudicating body determines that the claim or ac-
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1 tion, or any part thereof, was pursued by an attor2 ney where the attorney does not have reasonable

3 grounds to believe that the action was well grounded

4 in fact and was warranted by existing law, the court

5 shall impose an appropriate sanction, including the

6 reasonable costs and attorneys fees attributable to

7 the frivolous claims.

8 (2) BY CLAIMANT.—Sanctions under paragraph

9 (1) may apply against a claimant if the court deter10 mines that the frivolous nature of the action was a

11 result of the misrepresentation of facts by the claim12 ant to the attorney.

13 SEC. 4025. PRACTICE GUIDELINES.

14 (a) REBUTTABLE PRESUMPTION.—

15 (1) DEVELOPMENT.—Each State shall develop,

16 for certification by the Secretary, a set of specialty

17 clinical practice guidelines, based on recommended

18 guidelines developed by the Agency for Health Care

19 Policy and Research.

20 (2) PROVISION OF HEALTH CARE UNDER

21 GUIDELINES.—Notwithstanding any other provision

22 of law, in any claim or action brought in a Federal

23 or State court or other forum arising from the provi24 sion of a health care service to an individual, if the

25 service was provided to the individual in accordance
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1 with the guidelines developed by the State (that cer2 tified or regulates the health plan involved in the ac3 tion) and certified by the Secretary under paragraph

4 (1), the guidelines—

5 (A) may be introduced by a provider who

6 is a party to the claim or action;

7 (B) if introduced, shall establish a rebutta8 ble presumption that the service prescribed by

9 the guidelines is the appropriate standard of

10 medical care; and

11 (C) if used to establish a rebuttable pre12 sumption, may only be overcome by the presen13 tation of clear and convincing evidence on be14 half of the party against whom the presumption

15 operates.

16 (b) ABSOLUTE DEFENSE.—With respect to new or

17 experimental treatments that are part of approved re18 search trials (as defined in subsection (c)), no health care

19 provider may be required to provide or held liable for fail20 ing to provide such treatment until that treatment is

21 found to be safe and efficacious by the Agency for Health

22 Care Policy and Research.

23 (c) DEFINITIONS.—As used in this section—

24 (1) NEW OR EXPERIMENTAL TREATMENTS.—

25 The term ‘‘new or experimental treatments’’ means
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1 a treatment for which there is not sufficient evidence

2 to determine the health outcome of the treatment

3 compared with the best available alternative treat4 ment (or with no treatment if there is no alternative

5 treatment).

6 (2) APPROVED RESEARCH TRIALS.—The term

7 ‘‘approved research trial’’ means a trial—

8 (A) conducted for the primary purpose of

9 determining the safety, effectiveness, efficacy,

10 or health outcomes of a treatment, compared

11 with the best available alternative treatment,

12 and

13 (B) approved by the Secretary.

14 A trial is deemed to be approved under subpara15 graph (B) if it is approved by the National Insti16 tutes of Health, the Food and Drug Administration

17 (through an investigational new drug exemption),

18 the Department of Defense, the Department of Vet19 erans Affairs, or by a qualified nongovernmental re20 search entity (as identified in guidelines issued by

21 one or more of the National Institutes of Health).

22 SEC. 4026. DRUGS AND DEVICES.

23 (a) DEFINITIONS.—For purposes of this section:
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1 (1) DEVICE.—The term ‘‘device’’ has the mean2 ing given the term in section 201(h) of the Federal

3 Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)).

4 (2) DRUG.—The term ‘‘drug’’ has the meaning

5 given the term in section 201(g)(1) of the Federal

6 Food, Drug, and Cosmetic Act (21 U.S.C.

7 321(g)(1)).

8 (3) HEALTH CARE PRODUCER.—The term

9 ‘‘health care producer’’ means any firm or business

10 enterprise that designs, manufactures, produces, or

11 sells a drug or device that is the subject of a health

12 care malpractice claim or action.

13 (b) LIMITATION.—

14 (1) IN GENERAL.—Punitive damages otherwise

15 permitted by applicable law shall not be awarded in

16 a health care malpractice claim or action under this

17 Act against a health care producer of a drug or de18 vice (or other defendant joined in such claim or ac19 tion) that caused the harm complained of by the

20 claimant if—

21 (A) the drug or device—

22 (i) was subject to approval under sec23 tion 505 (21 U.S.C. 355) or premarket ap24 proval under section 515 (21 U.S.C. 360e),

25 respectively, of the Federal Food, Drug,
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1 and Cosmetic Act, by the Food and Drug

2 Administration, with respect to—

3 (I) the safety of the formulation

4 or performance of the aspect of the

5 drug or device that caused the harm;

6 or

7 (II) the adequacy of the packag8 ing or labeling of the drug or device;

9 and

10 (ii) was approved by the Food and

11 Drug Administration; or

12 (B) the drug or device is generally recog13 nized as safe and effective pursuant to condi14 tions established by the Food and Drug Admin15 istration and applicable regulations, including

16 packaging and labeling regulations.

17 (2) WITHHELD INFORMATION; MISREPRESEN18 TATION; ILLEGAL PAYMENT.—The provisions of

19 paragraph (1) shall not apply in any case in which

20 the defendant—

21 (A) withheld from or misrepresented to the

22 Food and Drug Administration or any other

23 agency or official of the Federal Government,

24 information that is material and relevant to the

25 performance of the drug or device; or
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1 (B) made an illegal payment to an official

2 of the Food and Drug Administration for the

3 purpose of securing approval of the drug or de4 vice.

5 (c) SEPARATE PROCEEDING.—

6 (1) CONSIDERATIONS.—At the request of the

7 health care producer, or other defendant joined, in

8 an action described in subsection (b), the trier of

9 fact shall consider in a separate proceeding—

10 (A) whether punitive damages are to be

11 awarded and the amount of the award; or

12 (B) the amount of punitive damages fol13 lowing a determination of punitive liability.

14 (2) EVIDENCE.—If a separate proceeding is re15 quested in accordance with paragraph (1), evidence

16 relevant only to the claim of punitive damages, as

17 determined by applicable State law, shall be inadmis18 sible in any proceeding to determine whether com19 pensatory damages are to be awarded.

20 (d) AMOUNT OF PUNITIVE DAMAGES.—In determin21 ing the amount of punitive damages in an action described

22 in subsection (b) or (c), the trier of fact shall consider

23 all relevant evidence, including—

24 (1) the financial condition of the health care

25 producer;
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1 (2) the severity of the harm caused by the con2 duct of the health care producer;

3 (3) the duration of the conduct or any conceal4 ment of the conduct by the health care producer;

5 (4) the profitability of the conduct to the health

6 care producer;

7 (5) the number of products sold by the health

8 care producer of the kind causing the harm com9 plained of by the claimant;

10 (6) awards of punitive or exemplary damages to

11 persons similarly situated to the claimant;

12 (7) prospective awards of compensatory dam13 ages to persons similarly situated to the claimant;

14 (8) any criminal penalties imposed on the

15 health care producer as a result of the conduct com16 plained of by the claimant; and

17 (9) the amount of any civil fines assessed

18 against the defendant as a result of the conduct

19 complained of by the claimant.

20 (e) STRICT LIABILITY DEFENSE.—In a civil action

21 brought by a claimant in a Federal or State court under

22 which the claimant alleges that a health care producer of

23 a drug or device is strictly liable to such claimant for inju24 ries sustained from the use of such drug or device, a show25 ing by the defendant that such drug or devices was subject
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1 to approval and was approved by the Food and Drug Ad2 ministration as described in subsection (b)(1)(A) shall be

3 an absolute defense to such strict liability claims.

4 SEC. 4027. REPORT.

5 The Secretary shall continuously monitor the oper6 ation of the provision of this subtitle. Not later than 3

7 years after the date of enactment of this Act, the Sec8 retary shall prepare and submit to the appropriate com9 mittees of Congress a report outlining the effects of this

10 subtitle on—

11 (1) access to health care;

12 (2) the costs of health care;

13 (3) the cost reductions passed on to the con14 sumers of health care;

15 (4) the number of health care malpractice ac16 tions filed;

17 (5) the time needed to resolve these claims;

18 (6) the numbers of claims resolved through al19 ternative dispute resolution; and

20 (7) the effect on the quality of health care.
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1 Subtitle B—Anti-Fraud and Abuse

2 Control Program

3 PART I—ALL-PAYER FRAUD AND ABUSE

4 CONTROL PROGRAM

5 SEC. 4101. ALL-PAYER FRAUD AND ABUSE CONTROL PRO6 GRAM.

7 (a) ESTABLISHMENT OF PROGRAM.—

8 (1) IN GENERAL.—Not later than January 1,

9 1995, the Secretary shall establish in the Office of

10 the Inspector General of the Department of Health

11 and Human Services a program—

12 (A) to coordinate Federal, State, and local

13 law enforcement programs to control fraud and

14 abuse with respect to the delivery of and pay15 ment for health care in the United States,

16 (B) to conduct investigations, audits, eval17 uations, and inspections relating to the delivery

18 of and payment for health care in the United

19 States, and

20 (C) to facilitate the enforcement of the

21 provisions of sections 1128, 1128A, and 1128B

22 of the Social Security Act and other statutes

23 applicable to health care fraud and abuse.

24 (2) COORDINATION WITH HEALTH CARE

25 PLANS.—In carrying out the program established
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1 under paragraph (1), the Secretary shall consult

2 with, and arrange for the sharing of data with, rep3 resentatives of health care plans.

4 (3) REGULATIONS.—

5 (A) IN GENERAL.—The Secretary shall by

6 regulation establish standards to carry out the

7 program under paragraph (1).

8 (B) INFORMATION STANDARDS.—

9 (i) IN GENERAL.—Such standards

10 shall include standards relating to the fur11 nishing of information by health care

12 plans, providers, and others to enable the

13 Secretary to carry out the program (in14 cluding coordination with health care plans

15 under paragraph (2)).

16 (ii) CONFIDENTIALITY.—Such stand17 ards shall include procedures to assure

18 that such information is provided and uti19 lized in a manner that appropriately pro20 tects the confidentiality of the information

21 and the privacy of individuals receiving

22 health care services and items.

23 (iii) QUALIFIED IMMUNITY FOR PRO24 VIDING INFORMATION.—The provisions of

25 section 1157(a) of the Social Security Act
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1 (relating to limitation on liability) shall

2 apply to a person providing information to

3 the Secretary under the program under

4 this section, with respect to the Secretary’s

5 performance of duties under the program,

6 in the same manner as such section applies

7 to information provided to organizations

8 with a contract under part B of title XI of

9 such Act, with respect to the performance

10 of such a contract.

11 (C) DISCLOSURE OF OWNERSHIP INFOR12 MATION.—

13 (i) IN GENERAL.—Such standards

14 shall include standards relating to the dis15 closure of ownership information described

16 in clause (ii) by any entity providing health

17 care services and items.

18 (ii) OWNERSHIP INFORMATION DE19 SCRIBED.—The ownership information de20 scribed in this clause includes—

21 (I) a description of such items

22 and services provided by such entity;

23 (II) the names and unique physi24 cian identification numbers of all phy25 sicians with a financial relationship
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1 (as defined in section 1877(a)(2) of

2 the Social Security Act) with such

3 entity;

4 (III) the names of all other indi5 viduals with such an ownership or in6 vestment interest in such entity; and

7 (IV) any other ownership and re8 lated information required to be dis9 closed by such entity under section

10 1124 or section 1124A of the Social

11 Security Act.

12 (4) AUTHORIZATION OF APPROPRIATIONS FOR

13 INVESTIGATORS AND OTHER PERSONNEL.—In addi14 tion to any other amounts authorized to be appro15 priated to the Secretary for health care anti-fraud

16 and abuse activities for a fiscal year, there are au17 thorized to be appropriated additional amounts as

18 may be necessary to enable the Secretary to conduct

19 investigations and audits of allegations of health

20 care fraud and abuse and otherwise carry out the

21 program established under paragraph (1) in a fiscal

22 year.

23 (5) ENSURING ACCESS TO DOCUMENTATION.—

24 (A) IN GENERAL.—The Inspector General

25 of the Department of Health and Human Serv-
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1 ices is authorized to exercise the authority de2 scribed in paragraphs (4) and (5) of section 6

3 of the Inspector General Act of 1978 (relating

4 to subpoenas and administration of oaths) with

5 respect to the activities under the all-payer

6 fraud and abuse control program established

7 under this subsection to the same extent as

8 such Inspector General may exercise such au9 thorities to perform the functions assigned by

10 such Act.

11 (B) PERMISSIVE EXCLUSION.—Section

12 1128(b) of the Social Security Act (42 U.S.C.

13 1320a–7(b)) is amended by adding at the end

14 the following new paragraph:

15 ‘‘(15) FAILURE TO SUPPLY REQUESTED INFOR16 MATION TO THE INSPECTOR GENERAL.—Any indi17 vidual or entity that fails fully and accurately to pro18 vide, upon request of the Inspector General of the

19 Department of Health and Human Services, records,

20 documents, and other information necessary for the

21 purposes of carrying out activities under the all22 payer fraud and abuse control program established

23 under section 4101 of the Health Equity and Access

24 Reform Today Act of 1993.’’.
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1 (6) HEALTH CARE PLAN DEFINED.—For the

2 purposes of this subsection, the term ‘‘health care

3 plan’’ shall have the meaning given such term in sec4 tion 1128(i) of the Social Security Act.

5 (b) ESTABLISHMENT OF ANTI-FRAUD AND ABUSE

6 TRUST FUND.—

7 (1) ESTABLISHMENT.—

8 (A) IN GENERAL.—There is hereby created

9 on the books of the Treasury of the United

10 States a trust fund to be known as the ‘‘Anti11 Fraud and Abuse Trust Fund’’ (in this section

12 referred to as the ‘‘Trust Fund’’). The Trust

13 Fund shall consist of such gifts and bequests as

14 may be made as provided in subparagraph (B)

15 and such amounts as may be deposited in, or

16 appropriated to, such Trust Fund as provided

17 in subsection (a)(5), and title XI of the Social

18 Security Act.

19 (B) AUTHORIZATION TO ACCEPT GIFTS.—

20 The Managing Trustee of the Trust Fund is

21 authorized to accept on behalf of the United

22 States money gifts and bequests made uncondi23 tionally to the Trust Fund, for the benefit of

24 the Trust Fund, or any activity financed

25 through the Trust Fund.
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1 (2) MANAGEMENT.—

2 (A) IN GENERAL.—The Trust Fund shall

3 be managed by the Secretary through a Manag4 ing Trustee designated by the Secretary.

5 (B) INVESTMENT OF FUNDS.—

6 (i) IN GENERAL.—It shall be the duty

7 of the Managing Trustee to invest such

8 portion of the Trust Fund as is not, in the

9 Managing Trustee’s judgment, required to

10 meet current withdrawals.

11 (ii) GENERAL FORM OF INVEST12 MENT.—Investments described in clause (i)

13 may be made only in interest-bearing obli14 gations of the United States or in obliga15 tions guaranteed as to both principal and

16 interest by the United States. For such

17 purpose such obligations may be ac18 quired—

19 (I) on original issue at the issue

20 price, or

21 (II) by purchase of outstanding

22 obligations at market price.

23 (iii) ISSUANCE OF PUBLIC-DEBT OBLI24 GATIONS.—The purposes for which obliga25 tions of the United States may be issued
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1 under chapter 31 of title 31, United States

2 Code, are hereby extended to authorize the

3 issuance at par of public-debt obligations

4 for purchase by the Trust Fund. Such obli5 gations issued for purchase by the Trust

6 Fund shall have maturities fixed with due

7 regard for the needs of the Trust Fund

8 and shall bear interest at a rate equal to

9 the average market yield (computed by the

10 Managing Trustee on the basis of market

11 quotations as of the end of the calendar

12 month next preceding the date of such

13 issue) on all marketable interest-bearing

14 obligations of the United States then form15 ing a part of the public debt which are not

16 due or callable until after the expiration of

17 4 years from the end of such calendar

18 month, except that where such average is

not a multiple of 1 19 ⁄8 of 1 percent, the rate

20 of interest on such obligations shall be the

multiple of 1 21 ⁄8 of 1 percent nearest such

22 market yield.

23 (iv) PURCHASES OF OTHER OBLIGA24 TIONS.—The Managing Trustee may pur25 chase other interest-bearing obligations of
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1 the United States or obligations guaran2 teed as to both principal and interest by

3 the United States, on original issue or at

4 the market price, only where the Managing

5 Trustee determines that the purchase of

6 such other obligations is in the public

7 interest.

8 (C) SALE OF OBLIGATIONS.—Any obliga9 tions acquired by the Trust Fund (except pub10 lic-debt obligations issued exclusively to the

11 Trust Fund) may be sold by the Managing

12 Trustee at the market price, and such public13 debt obligations may be redeemed at par plus

14 accrued interest.

15 (D) INTEREST ON OBLIGATIONS AND PRO16 CEEDS FROM SALE OR REDEMPTION OF OBLI17 GATIONS.—The interest on, and the proceeds

18 from the sale or redemption of, any obligations

19 held in the Trust Fund shall be credited to and

20 form a part of the Trust Fund.

21 (E) RECEIPTS AND DISBURSEMENTS NOT

22 INCLUDED IN UNITED STATES GOVERNMENT

23 BUDGET TOTALS.—The receipts and disburse24 ments of the Secretary in the discharge of the

25 functions of the Secretary under the all-payer
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1 fraud and abuse control program established

2 under subsection (a) shall not be included in

3 the totals of the budget of the United States

4 Government. For purposes of part C of the Bal5 anced Budget and Emergency Deficit Control

6 Act of 1985, the Secretary and the Trust Fund

7 shall be treated in the same manner as the

8 Federal Retirement Thrift Investment Board

9 and the Thrift Savings Fund, respectively. The

10 United States is not liable for any obligation or

11 liability incurred by the Trust Fund.

12 (3) USE OF FUNDS.—

13 (A) IN GENERAL.—Amounts in the Trust

14 Fund shall be used without regard to fiscal year

15 limitation to assist the Inspector General of the

16 Department of Health and Human Services in

17 carrying out the all-payer fraud and abuse con18 trol program established under subsection (a).

19 (B) OVERALL ADMINISTRATION.—The

20 Managing Trustee shall also pay from time to

21 time from the Trust Fund such amounts as the

22 Secretary certifies are necessary to carry out

23 the all-payer fraud and abuse control program

24 established under subsection (a).
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1 (4) ANNUAL REPORT.—The Managing Trustee

2 shall be required to submit an annual report to Con3 gress on the amount of revenue which is generated

4 and disbursed by the Trust Fund in each fiscal year.

5 Such report shall include an estimate of the amount

6 of additional appropriations authorized under sub7 section (a)(5) necessary for the Secretary to conduct

8 the all-payer fraud and abuse program established

9 under subsection (a) in the next fiscal year.

10 SEC. 4102. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD

11 AND ABUSE SANCTIONS TO ALL FRAUD AND

12 ABUSE AGAINST ANY HEALTH CARE PLAN.

13 (a) CIVIL MONETARY PENALTIES.—Section 1128A

14 of the Social Security Act (42 U.S.C. 1320a–7a) is

15 amended as follows:

16 (1) In subsection (a)(1), by inserting ‘‘or of any

17 health care plan (as defined in section 1128(i)),’’

18 after ‘‘subsection (i)(1)),’’.

19 (2) In subsection (b)(1)(A), by inserting ‘‘or

20 under a health care plan’’ after ‘‘title XIX’’.

21 (3) In subsection (f)—

22 (A) by redesignating paragraph (3) as

23 paragraph (4); and

24 (B) by inserting after paragraph (2) the

25 following new paragraph:
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1 ‘‘(3) With respect to amounts recovered arising

2 out of a claim under a health care plan, the portion

3 of such amounts as is determined to have been paid

4 by the plan shall be repaid to the plan, and the por5 tion of such amounts attributable to the amounts re6 covered under this section by reason of the amend7 ments made by subtitle B of title IV of the Health

8 Equity and Access Reform Today Act of 1993 (as

9 estimated by the Secretary) shall be deposited into

10 the Anti-Fraud and Abuse Trust Fund.’’.

11 (4) In subsection (i)—

12 (A) in paragraph (2), by inserting ‘‘or

13 under a health care plan’’ before the period at

14 the end, and

15 (B) in paragraph (5), by inserting ‘‘or

16 under a health care plan’’ after ‘‘or XX’’.

17 (b) CRIMES.—

18 (1) SOCIAL SECURITY ACT.—Section 1128B of

19 such Act (42 U.S.C. 1320a–7b) is amended as

20 follows:

21 (A) In the heading, by adding at the end

22 the following: ‘‘OR HEALTH CARE PLANS’’.

23 (B) In subsection (a)(1)—

24 (i) by striking ‘‘title XVIII or’’ and

25 inserting ‘‘title XVIII,’’, and
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1 (ii) by adding at the end the follow2 ing: ‘‘or a health care plan (as defined in

3 section 1128(i)),’’.

4 (C) In subsection (a)(5), by striking ‘‘title

5 XVIII or a State health care program’’ and in6 serting ‘‘title XVIII, a State health care pro7 gram, or a health care plan’’.

8 (D) In the second sentence of subsection

9 (a)—

10 (i) by inserting after ‘‘title XIX’’ the

11 following: ‘‘or a health care plan’’, and

12 (ii) by inserting after ‘‘the State’’ the

13 following: ‘‘or the plan’’.

14 (E) In subsection (b)(1), by striking ‘‘title

15 XVIII or a State health care program’’ each

16 place it appears and inserting ‘‘title XVIII, a

17 State health care program, or a health care

18 plan’’.

19 (F) In subsection (b)(2), by striking ‘‘title

20 XVIII or a State health care program’’ each

21 place it appears and inserting ‘‘title XVIII, a

22 State health care program, or a health care

23 plan’’.

24 (G) In subsection (b)(3), by striking ‘‘title

25 XVIII or a State health care program’’ each
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1 place it appears in subparagraphs (A) and (C)

2 and inserting ‘‘title XVIII, a State health care

3 program, or a health care plan’’.

4 (2) IDENTIFICATION OF COMMUNITY SERVICE

5 OPPORTUNITIES.—Section 1128B of such Act (42

6 U.S.C. 1320a–7b) is further amended by adding at

7 the end the following new subsection:

8 ‘‘(f) The Secretary may—

9 ‘‘(1) in consultation with State and local health

10 care officials, identify opportunities for the satisfac11 tion of community service obligations that a court

12 may impose upon the conviction of an offense under

13 this section, and

14 ‘‘(2) make information concerning such oppor15 tunities available to Federal and State law enforce16 ment officers and State and local health care

17 officials.’’.

18 (c) HEALTH CARE PLAN DEFINED.—Section 1128 of

19 such Act (42 U.S.C. 1320a–7) is amended by redesignat20 ing subsection (i) as subsection (j) and by inserting after

21 subsection (h) the following new subsection:

22 ‘‘(i) HEALTH CARE PLAN DEFINED.—For purposes

23 of sections 1128A and 1128B, the term ‘health care plan’

24 means a public or private program for the delivery of or

25 payment for health care items or services other than the
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1 medicare program, the medicaid program, or a State

2 health care program.’’.

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

4 this section shall take effect on January 1, 1995.

5 SEC. 4103. REPORTING OF FRAUDULENT ACTIONS UNDER

6 MEDICARE.

7 Not later than 1 year after the date of the enactment

8 of this Act, the Secretary shall establish a program

9 through which individuals entitled to benefits under the

10 medicare program may report to the Secretary on a con11 fidential basis (at the individual’s request) instances of

12 suspected fraudulent actions arising under the program by

13 providers of items and services under the program.

14 PART II—REVISIONS TO CURRENT SANCTIONS

15 FOR FRAUD AND ABUSE

16 SEC. 4111. MANDATORY EXCLUSION FROM PARTICIPATION

17 IN MEDICARE AND STATE HEALTH CARE PRO18 GRAMS.

19 (a) INDIVIDUAL CONVICTED OF FELONY RELATING

20 TO FRAUD.—

21 (1) IN GENERAL.—Section 1128(a) of the

22 Social Security Act (42 U.S.C. 1320a–7(a)) is

23 amended by adding at the end the following new

24 paragraph:
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1 ‘‘(3) FELONY CONVICTION RELATING TO

2 FRAUD.—Any individual or entity that has been con3 victed, under Federal or State law, in connection

4 with the delivery of a health care item or service or

5 with respect to any act or omission in a program

6 (other than those specifically described in paragraph

7 (1)) operated by or financed in whole or in part by

8 any Federal, State, or local government agency, of

9 a criminal offense consisting of a felony relating to

10 fraud, theft, embezzlement, breach of fiduciary re11 sponsibility, or other financial misconduct.’’.

12 (2) CONFORMING AMENDMENT.—Section

13 1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))

14 is amended—

15 (A) in the heading, by striking ‘‘CONVIC16 TION’’ and inserting ‘‘MISDEMEANOR CONVIC17 TION’’; and

18 (B) by striking ‘‘criminal offense’’ and in19 serting ‘‘criminal offense consisting of a mis20 demeanor’’.

21 (b) INDIVIDUAL CONVICTED OF FELONY RELATING

22 TO CONTROLLED SUBSTANCE.—

23 (1) IN GENERAL.—Section 1128(a) of the So24 cial Security Act (42 U.S.C. 1320a–7(a)), as amend-
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1 ed by subsection (a), is amended by adding at the

2 end the following new paragraph:

3 ‘‘(4) FELONY CONVICTION RELATING TO CON4 TROLLED SUBSTANCE.—Any individual or entity

5 that has been convicted, under Federal or State law,

6 of a criminal offense consisting of a felony relating

7 to the unlawful manufacture, distribution, prescrip8 tion, or dispensing of a controlled substance.’’.

9 (2) CONFORMING AMENDMENT.—Section

10 1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))

11 is amended—

12 (A) in the heading, by striking ‘‘CONVIC13 TION’’ and inserting ‘‘MISDEMEANOR CONVIC14 TION’’; and

15 (B) by striking ‘‘criminal offense’’ and in16 serting ‘‘criminal offense consisting of a mis17 demeanor’’.

18 SEC. 4112. ESTABLISHMENT OF MINIMUM PERIOD OF EX19 CLUSION FOR CERTAIN INDIVIDUALS AND

20 ENTITIES SUBJECT TO PERMISSIVE EXCLU21 SION FROM MEDICARE AND STATE HEALTH

22 CARE PROGRAMS.

23 Section 1128(c)(3) of the Social Security Act (42

24 U.S.C. 1320a–7(c)(3)) is amended by adding at the end

25 the following new subparagraphs:
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1 ‘‘(D) In the case of an exclusion of an individual or

2 entity under paragraph (1), (2), or (3) of subsection (b),

3 the period of the exclusion shall be 3 years, unless the

4 Secretary determines in accordance with published regula5 tions that a shorter period is appropriate because of miti6 gating circumstances or that a longer period is appro7 priate because of aggravating circumstances.

8 ‘‘(E) In the case of an exclusion of an individual or

9 entity under subsection (b)(4) or (b)(5), the period of the

10 exclusion shall not be less than the period during which

11 the individual’s or entity’s license to provide health care

12 is revoked, suspended, or surrendered, or the individual

13 or the entity is excluded or suspended from a Federal or

14 State health care program.

15 ‘‘(F) In the case of an exclusion of an individual or

16 entity under subsection (b)(6)(B), the period of the exclu17 sion shall be not less than 1 year.’’.

18 SEC. 4113. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

19 OWNERSHIP OR CONTROL INTEREST IN

20 SANCTIONED ENTITIES.

21 Section 1128(b) of the Social Security Act (42 U.S.C.

22 1320a–7(b)), as amended by section 4101(a)(6)(B), is fur23 ther amended by adding at the end the following new para24 graph:
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1 ‘‘(16) INDIVIDUALS CONTROLLING A SANC2 TIONED ENTITY.—Any individual who has a direct

3 or indirect ownership or control interest of 5 percent

4 or more, or an ownership or control interest (as de5 fined in section 1124(a)(3)) in, or who is an officer,

6 director, agent, or managing employee (as defined in

7 section 1126(b)) of, an entity—

8 ‘‘(A) that has been convicted of any of9 fense described in subsection (a) or in para10 graph (1), (2), or (3) of this subsection;

11 ‘‘(B) against which a civil monetary pen12 alty has been assessed under section 1128A; or

13 ‘‘(C) that has been excluded from partici14 pation under a program under title XVIII or

15 under a State health care program.’’.

16 SEC. 4114. CIVIL MONETARY PENALTIES.

17 (a) PROHIBITION AGAINST OFFERING INDUCEMENTS

18 TO INDIVIDUALS ENROLLED UNDER OR EMPLOYED BY

19 PROGRAMS OR PLANS.—

20 (1) INDUCEMENTS TO INDIVIDUALS ENROLLED

21 UNDER MEDICARE.—

22 (A) OFFER OF REMUNERATION.—Section

23 1128A(a) of the Social Security Act (42 U.S.C.

24 1320a–7a(a)) is amended—
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1 (i) by striking ‘‘or’’ at the end of

2 paragraph (1)(D);

3 (ii) by striking ‘‘, or’’ at the end of

4 paragraph (2) and inserting a semicolon;

5 (iii) by striking the semicolon at the

6 end of paragraph (3) and inserting ‘‘; or’’;

7 and

8 (iv) by inserting after paragraph (3)

9 the following new paragraph:

10 ‘‘(4) offers to or transfers remuneration to any

11 individual eligible for benefits under title XVIII of

12 this Act, or under a State health care program (as

13 defined in section 1128(h)) that such person knows

14 or should know is likely to influence such individual

15 to order or receive from a particular provider, practi16 tioner, or supplier any item or service for which pay17 ment may be made, in whole or in part, under title

18 XVIII, or a State health care program;’’.

19 (B) REMUNERATION DEFINED.—Section

20 1128A(i) is amended by adding the following

21 new paragraph:

22 ‘‘(6) The term ‘remuneration’ includes the waiv23 er of coinsurance and deductible amounts (or any

24 part thereof), and transfers of items or services for

25 free or for other than fair market value. The term
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1 ‘remuneration’ does not include the waiver of coin2 surance and deductible amounts by a person, if—

3 ‘‘(A) the waiver is not offered as part of

4 any advertisement or solicitation;

5 ‘‘(B) the person does not routinely waive

6 coinsurance or deductible amounts; and

7 ‘‘(C) the person—

8 ‘‘(i) waives the coinsurance and de9 ductible amounts after determining in good

10 faith that the individual is in financial

11 need;

12 ‘‘(ii) fails to collect coinsurance or de13 ductible amounts after making reasonable

14 collection efforts; or

15 ‘‘(iii) provides for any permissible

16 waiver as specified in section 1128B(b)(3)

17 or in regulations issued by the Secretary.’’.

18 (2) INDUCEMENTS TO EMPLOYEES.—Section

19 1128A(a) of such Act (42 U.S.C. 1320a–7a(a)), as

20 amended by paragraph (1), is further amended—

21 (A) by striking ‘‘or’’ at the end of para22 graph (3);

23 (B) by striking the semicolon at the end of

24 paragraph (4) and inserting ‘‘; or’’; and
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1 (C) by inserting after paragraph (4) the

2 following new paragraph:

3 ‘‘(5) pays a bonus, reward, or any other remu4 neration, directly or indirectly, to an employee to in5 duce the employee to encourage individuals to seek

6 or obtain covered items or services for which pay7 ment may be made under the medicare program, or

8 a State health care program where the amount of

9 the remuneration is determined in a manner that

10 takes into account (directly or indirectly) the value

11 or volume of any referrals by the employee to the

12 employer for covered items or services;’’.

13 (b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

14 OR CONTROL INTEREST IN PARTICIPATING ENTITY.—

15 Section 1128A(a) of such Act, as amended by subsection

16 (a), is further amended—

17 (1) by striking ‘‘or’’ at the end of paragraph

18 (4);

19 (2) by striking the semicolon at the end of

20 paragraph (5) and inserting ‘‘; or’’; and

21 (3) by inserting after paragraph (5) the follow22 ing new paragraph:

23 ‘‘(6) in the case of a person who is not an orga24 nization, agency, or other entity, is excluded from

25 participating in a program under title XVIII or a
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1 State health care program in accordance with this

2 subsection or under section 1128 and who, during

3 the period of exclusion, retains a direct or indirect

4 ownership or control interest of 5 percent or more,

5 or an ownership or control interest (as defined in

6 section 1124(a)(3)) in, or who is an officer, director,

7 agent, or managing employee (as defined in section

8 1126(b)) of, an entity that is participating in a pro9 gram under title XVIII or a State health care

10 program;’’.

11 (c) MODIFICATIONS OF AMOUNTS OF PENALTIES

12 AND ASSESSMENTS.—Section 1128A(a) of such Act (42

13 U.S.C. 1320a–7a(a)), as amended by subsections (a) and

14 (b), is amended in the matter following paragraph (6)—

15 (1) by striking ‘‘$2,000’’ and inserting

16 ‘‘$10,000’’;

17 (2) by inserting ‘‘; in cases under paragraph

18 (4), $10,000 for each such offer or transfer; in cases

19 under paragraph (5), $10,000 for each such pay20 ment; in cases under paragraph (6), $10,000 for

21 each day the prohibited relationship occurs; in cases

22 under paragraph (7), $10,000 per violation’’ after

23 ‘‘false or misleading information was given’’;

24 (3) by striking ‘‘twice the amount’’ and insert25 ing ‘‘3 times the amount’’; and
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1 (4) by inserting ‘‘(or, in cases under paragraphs

2 (4), (5), and (7), 3 times the amount of the illegal

3 remuneration)’’ after ‘‘for each such item or serv4 ice’’.

5 (d) CLAIM FOR ITEM OR SERVICE BASED ON INCOR6 RECT CODING OR MEDICALLY UNNECESSARY SERV7 ICES.—Section 1128A(a)(1) of such Act (42 U.S.C.

8 1320a–7a(a)(1)) is amended—

9 (1) in subparagraph (A) by striking ‘‘claimed,’’

10 and inserting the following: ‘‘claimed, including any

11 person who presents or causes to be presented a

12 claim for an item or service that is based on a code

13 that the person knows or should know will result in

14 a greater payment to the person than the code the

15 person knows or should know is applicable to the

16 item or service actually provided,’’;

17 (2) in subparagraph (C), by striking ‘‘or’’ at

18 the end;

19 (3) in subparagraph (D), by striking ‘‘; or’’ and

20 inserting ‘‘, or’’; and

21 (4) by inserting after subparagraph (D) the

22 following new subparagraph:

23 ‘‘(E) is for a medical or other item or serv24 ice that a person knows or should know is not

25 medically necessary; or’’.
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1 (e) PERMITTING PARTIES TO BRING ACTIONS ON

2 OWN BEHALF.—Section 1128A of such Act (42 U.S.C.

3 1320a–7a) is amended by adding at the end the following

4 new subsection:

5 ‘‘(m)(1) Subject to paragraphs (2) and (3), any per6 son (including an organization, agency, or other entity,

7 but excluding a beneficiary, as defined in subsection

8 (i)(5)) that suffers harm or monetary loss as a result of

9 any activity of an individual or entity which makes the

10 individual or entity subject to a civil monetary penalty

11 under this section may, in a civil action against the indi12 vidual or entity in the United States District Court, obtain

13 treble damages and costs including attorneys’ fees against

14 the individual or entity and such equitable relief as is

15 appropriate.

16 ‘‘(2) A person may bring a civil action under this sub17 section only if—

18 ‘‘(A) the person provides the Secretary with

19 written notice of—

20 ‘‘(i) the person’s intent to bring an action

21 under this subsection,

22 ‘‘(ii) the identities of the individuals or en23 tities the person intends to name as defendants

24 to the action, and
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1 ‘‘(iii) all information the person possesses

2 regarding the activity that is the subject of the

3 action that may materially affect the Sec4 retary’s decision to initiate a proceeding to im5 pose a civil monetary penalty under this section

6 against the defendants, and

7 ‘‘(B) one of the following conditions is met:

8 ‘‘(i) During the 60-day period that begins

9 on the date the Secretary receives the written

10 notice described in subparagraph (A), the Sec11 retary does not notify the person that the Sec12 retary intends to initiate an investigation to de13 termine whether to impose a civil monetary

14 penalty under this section against the defend15 ants.

16 ‘‘(ii) The Secretary notifies the person dur17 ing the 60-day period described in clause (i)

18 that the Secretary intends to initiate an inves19 tigation to determine whether to impose a civil

20 monetary penalty under this section against the

21 defendants, and the Secretary subsequently no22 tifies the person that the Secretary no longer

23 intends to initiate an investigation or proceed24 ing to impose a civil monetary penalty against

25 the defendants.
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1 ‘‘(iii) After the expiration of the 2-year pe2 riod that begins on the date written notice is

3 provided to the Secretary, the Secretary has not

4 initiated a proceeding to impose a civil mone5 tary penalty against the defendants.

6 ‘‘(3) If a person is awarded any amounts in an action

7 brought under this subsection that are in excess of the

8 damages suffered by the person as a result of the defend9 ant’s activities, 20 percent of such amounts shall be with10 held from the person for payment into the Anti-Fraud and

11 Abuse Trust Fund established under section 4101(b) of

12 the Health Equity and Access Reform Act of 1993.

13 ‘‘(4) No action may be brought under this subsection

14 more than 6 years after the date of the activity with re15 spect to which the action is brought.’’.

16 SEC. 4115. ACTIONS SUBJECT TO CRIMINAL PENALTIES.

17 (a) PERMITTING SECRETARY TO IMPOSE CIVIL MON18 ETARY PENALTY.—Section 1128A(b) of the Social Secu19 rity Act (42 U.S.C. 1320a–7a(a)) is amended by adding

20 the following new paragraph:

21 ‘‘(3) Any person (including any organization,

22 agency, or other entity, but excluding a beneficiary

23 as defined in subsection (i)(5)) who the Secretary

24 determines has violated section 1128(B)(b) of this

25 title shall be subject to a civil monetary penalty of
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1 not more than $10,000 for each such violation. In

2 addition, such person shall be subject to an assess3 ment of not more than twice the total amount of the

4 remuneration offered, paid, solicited, or received in

5 violation of section 1128B(b). The total amount of

6 remuneration subject to an assessment shall be cal7 culated without regard to whether some portion

8 thereof also may have been intended to serve a pur9 pose other than one proscribed by section

10 1128B(b).’’.

11 (b) RESTRICTION ON APPLICATION OF EXCEPTION

12 FOR AMOUNTS PAID TO EMPLOYEES.—Section

13 1128B(b)(3)(B) of such Act (42 U.S.C. 1320a–

14 7b(b)(3)(B)) is amended by striking ‘‘services;’’ and in15 serting the following: ‘‘services, but only if the amount of

16 remuneration under the arrangement is (i) consistent with

17 fair market value; (ii) not determined in a manner that

18 takes into account (directly or indirectly) the volume or

19 value of any referrals by the employee to the employer for

20 the furnishing (or arranging for the furnishing) of such

21 items or services; and (iii) provided pursuant to an ar22 rangement that would be commercially reasonable even if

23 no referrals were made;’’.
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1 SEC. 4116. SANCTIONS AGAINST PRACTITIONERS AND PER2 SONS FOR FAILURE TO COMPLY WITH STATU3 TORY OBLIGATIONS.

4 (a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI5 TIONERS AND PERSONS FAILING TO MEET STATUTORY

6 OBLIGATIONS.—

7 (1) IN GENERAL.—The second sentence of sec8 tion 1156(b)(1) of the Social Security Act (42

9 U.S.C. 1320c–5(b)(1)) is amended by striking ‘‘may

10 prescribe)’’ and inserting ‘‘may prescribe, except

11 that such period may not be less than 1 year)’’.

12 (2) CONFORMING AMENDMENT.—Section

13 1156(b)(2) of such Act (42 U.S.C. 1320c–5(b)(2)) is

14 amended by striking ‘‘shall remain’’ and inserting

15 ‘‘shall (subject to the minimum period specified in

16 the second sentence of paragraph (1)) remain’’.

17 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI18 TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)

19 of such Act (42 U.S.C. 1320c–5(b)(1)) is amended—

20 (1) in the second sentence, by striking ‘‘and de21 termines’’ and all that follows through ‘‘such obliga22 tions,’’; and

23 (2) by striking the third sentence.

24 (c) AMOUNT OF CIVIL MONEY PENALTY.—Section

25 1156(b)(3) of such Act (42 U.S.C. 1320c–5(b)(3)) is
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1 amended by striking ‘‘the actual or estimated cost’’ and

2 inserting the following: ‘‘up to $10,000 for each instance’’.

3 SEC. 4117. INTERMEDIATE SANCTIONS FOR MEDICARE

4 HEALTH MAINTENANCE ORGANIZATIONS.

5 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

6 ANY PROGRAM VIOLATIONS.—

7 (1) IN GENERAL.—Section 1876(i)(1) of the

8 Social Security Act (42 U.S.C. 1395mm(i)(1)) is

9 amended by striking ‘‘the Secretary may terminate’’

10 and all that follows and inserting the following: ‘‘in

11 accordance with procedures established under para12 graph (9), the Secretary may at any time terminate

13 any such contract or may impose the intermediate

14 sanctions described in paragraph (6)(B) or (6)(C)

15 (whichever is applicable) on the eligible organization

16 if the Secretary determines that the organization—

17 ‘‘(A) has failed substantially to carry out

18 the contract;

19 ‘‘(B) is carrying out the contract in a man20 ner inconsistent with the efficient and effective

21 administration of this section;

22 ‘‘(C) is operating in a manner that is not

23 in the best interests of the individuals covered

24 under the contract; or
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1 ‘‘(D) no longer substantially meets the ap2 plicable conditions of subsections (b), (c), (e),

3 and (f).’’.

4 (2) OTHER INTERMEDIATE SANCTIONS FOR

5 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

6 1876(i)(6) of such Act (42 U.S.C. 1395mm(i)(6)) is

7 amended by adding at the end the following new

8 subparagraph:

9 ‘‘(C) In the case of an eligible organization for which

10 the Secretary makes a determination under paragraph (1)

11 the basis of which is not described in subparagraph (A),

12 the Secretary may apply the following intermediate sanc13 tions:

14 ‘‘(i) Civil money penalties of not more than

15 $25,000 for each determination under paragraph (1)

16 if the deficiency that is the basis of the determina17 tion has directly adversely affected (or has the sub18 stantial likelihood of adversely affecting) an individ19 ual covered under the organization’s contract.

20 ‘‘(ii) Civil money penalties of not more than

21 $10,000 for each week beginning after the initiation

22 of procedures by the Secretary under paragraph (9)

23 during which the deficiency that is the basis of a de24 termination under paragraph (1) exists.
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1 ‘‘(iii) Suspension of enrollment of individuals

2 under this section after the date the Secretary noti3 fies the organization of a determination under para4 graph (1) and until the Secretary is satisfied that

5 the deficiency that is the basis for the determination

6 has been corrected and is not likely to recur.’’.

7 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

8 Section 1876(i) of such Act (42 U.S.C. 1395mm(i))

9 is amended by adding at the end the following new

10 paragraph:

11 ‘‘(9) The Secretary may terminate a contract with an

12 eligible organization under this section or may impose the

13 intermediate sanctions described in paragraph (6) on the

14 organization in accordance with formal investigation and

15 compliance procedures established by the Secretary under

16 which—

17 ‘‘(A) the Secretary provides the organization

18 with the opportunity to develop and implement a

19 corrective action plan to correct the deficiencies that

20 were the basis of the Secretary’s determination

21 under paragraph (1);

22 ‘‘(B) in deciding whether to impose sanctions,

23 the Secretary considers aggravating factors such as

24 whether an entity has a history of deficiencies or has
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1 not taken action to correct deficiencies the Secretary

2 has brought to their attention;

3 ‘‘(C) there are no unreasonable or unnecessary

4 delays between the finding of a deficiency and the

5 imposition of sanctions; and

6 ‘‘(D) the Secretary provides the organization

7 with reasonable notice and opportunity for hearing

8 (including the right to appeal an initial decision) be9 fore imposing any sanction or terminating the con10 tract.’’.

11 (4) CONFORMING AMENDMENTS.—

12 (A) IN GENERAL.—Section 1876(i)(6)(B)

13 of such Act (42 U.S.C. 1395mm(i)(6)(B)) is

14 amended by striking the second sentence.

15 (B) PROCEDURAL PROVISIONS.—Section

16 1876(i)(6) of such Act (42 U.S.C.

17 1395mm(i)(6)) is further amended by adding at

18 the end the following new subparagraph:

19 ‘‘(D) The provisions of section 1128A (other than

20 subsections (a) and (b)) shall apply to a civil money pen21 alty under subparagraph (A) or (B) in the same manner

22 as they apply to a civil money penalty or proceeding under

23 section 1128A(a).’’.

24 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA25 TIONS.—
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1 (1) REQUIREMENT FOR WRITTEN AGREE2 MENT.—Section 1876(i)(7)(A) of the Social Security

3 Act (42 U.S.C. 1395mm(i)(7)(A)) is amended by

4 striking ‘‘an agreement’’ and inserting ‘‘a written

5 agreement’’.

6 (2) DEVELOPMENT OF MODEL AGREEMENT.—

7 Not later than July 1, 1995, the Secretary shall de8 velop a model of the agreement that an eligible orga9 nization with a risk-sharing contract under section

10 1876 of the Social Security Act must enter into with

11 an entity providing peer review services with respect

12 to services provided by the organization under sec13 tion 1876(i)(7)(A) of such Act.

14 (3) REPORT BY GAO.—

15 (A) STUDY.—The Comptroller General

16 shall conduct a study of the costs incurred by

17 eligible organizations with risk-sharing con18 tracts under section 1876(b) of such Act of

19 complying with the requirement of entering into

20 a written agreement with an entity providing

21 peer review services with respect to services pro22 vided by the organization, together with an

23 analysis of how information generated by such

24 entities is used by the Secretary to assess the
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1 quality of services provided by such eligible or2 ganizations.

3 (B) REPORT TO CONGRESS.—Not later

4 than July 1, 1997, the Comptroller General

5 shall submit a report to the Committee on

6 Ways and Means and the Committee on Energy

7 and Commerce of the House of Representatives

8 and the Committee on Finance and the Special

9 Committee on Aging of the Senate on the study

10 conducted under subparagraph (A).

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

12 this section shall apply with respect to contract years be13 ginning on or after January 1, 1995.

14 SEC. 4118. EFFECTIVE DATE.

15 The amendments made by this part shall take effect

16 January 1, 1995.

17 PART III—ADMINISTRATIVE AND

18 MISCELLANEOUS PROVISIONS

19 SEC. 4121. ESTABLISHMENT OF THE HEALTH CARE FRAUD

20 AND ABUSE DATA COLLECTION PROGRAM.

21 (a) FINDINGS.—The Congress finds the following:

22 (1) Fraud and abuse with respect to the deliv23 ery of and payment for health care services is a sig24 nificant contributor to the growing costs of the

25 Nation’s health care.
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1 (2) Control of fraud and abuse in health care

2 services warrants greater efforts of coordination

3 than those that can be undertaken by individual

4 States or the various Federal, State, and local law

5 enforcement programs.

6 (3) There is a national need to coordinate infor7 mation about health care providers and entities that

8 have engaged in fraud and abuse in the delivery of

9 and payment for health care services.

10 (4) There is no comprehensive national data

11 collection program for the reporting of public infor12 mation about final adverse actions against health

13 care providers, suppliers, or licensed health care

14 practitioners that have engaged in fraud and abuse

15 in the deliver of and payment for health care

16 services.

17 (5) A comprehensive national data collection

18 program for the reporting of public information

19 about final adverse actions will facilitate the enforce20 ment of the provisions of the Social Security Act and

21 other statutes applicable to health care fraud and

22 abuse.

23 (b) GENERAL PURPOSE.—Not later than January 1,

24 1995, the Secretary shall establish a national health care

25 fraud and abuse data collection program for the reporting
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1 of final adverse actions (not including settlements where

2 no finding of liability has been made) against health care

3 providers, suppliers, or practitioners as required by sub4 section (c), with access as set forth in subsection (d).

5 (c) REPORTING OF INFORMATION.—

6 (1) IN GENERAL.—Each government agency

7 and health care plan shall report any final adverse

8 action (not including settlements where no finding of

9 liability has been made) taken against a health care

10 provider, supplier, or practitioner.

11 (2) INFORMATION TO BE REPORTED.—The in12 formation to be reported under paragraph (1)

13 includes:

14 (A) The name of any health care provider,

15 supplier, or practitioner who is the subject of a

16 final adverse action.

17 (B) The name (if known) of any health

18 care entity with which a health care provider,

19 supplier, or practitioner is affiliated or associ20 ated.

21 (C) The nature of the final adverse action.

22 (D) A description of the acts or omissions

23 and injuries upon which the final adverse action

24 was based, and such other information as the

25 Secretary determines by regulation is required
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1 for appropriate interpretation of information re2 ported under this section.

3 (3) CONFIDENTIALITY.—In determining what

4 information is required, the Secretary shall include

5 procedures to assure that the privacy of individuals

6 receiving health care services is appropriately pro7 tected.

8 (4) TIMING AND FORM OF REPORTING.—The

9 information required to be reported under this sub10 section shall be reported regularly (but not less often

11 than monthly) and in such form and manner as the

12 Secretary prescribes. Such information shall first be

13 required to be reported on a date specified by the

14 Secretary.

15 (5) TO WHOM REPORTED.—The information re16 quired to be reported under this subsection shall be

17 reported to the Secretary.

18 (d) DISCLOSURE AND CORRECTION OF INFORMA19 TION.—

20 (1) DISCLOSURE.—With respect to the informa21 tion about final adverse actions (not including settle22 ments where no findings of liability has been made)

23 reported to the Secretary under this section respect24 ing a health care provider, supplier, or practitioner,

25 the Secretary shall, by regulation, provide for—
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1 (A) disclosure of the information, upon re2 quest, to the health care provider, supplier, or

3 licensed practitioner, and

4 (B) procedures in the case of disputed ac5 curacy of the information.

6 (2) CORRECTIONS.—Each Government agency

7 and health care plan shall report corrections of in8 formation already reported about any final adverse

9 action taken against a health care provider, supplier,

10 or practitioner, in such form and manner that the

11 Secretary prescribes by regulation.

12 (e) ACCESS TO REPORTED INFORMATION.—

13 (1) AVAILABILITY.—The information in this

14 database shall be available to the public, Federal

15 and State government agencies, and health care

16 plans pursuant to procedures that the Secretary

17 shall provide by regulation.

18 (2) FEES FOR DISCLOSURE.—The Secretary

19 may establish or approve reasonable fees for the dis20 closure of information in this database. The amount

21 of such a fee may not exceed the costs of processing

22 the requests for disclosure and of providing such in23 formation. Such fees shall be available to the Sec24 retary or, in the Secretary’s discretion to the agency

25 designated under this section to cover such costs.
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1 (f) PROTECTION FROM LIABILITY FOR REPORT2 ING.—No person or entity, including the agency des3 ignated by the Secretary in subsection (c)(5) shall be held

4 liable in any civil action with respect to any report made

5 as required by this section, without knowledge of the fal6 sity of the information contained in the report.

7 (g) DEFINITIONS AND SPECIAL RULES.—For pur8 poses of this section:

9 (1) The term ‘‘final adverse action’’ includes:

10 (A) Civil judgments against a health care

11 provider in Federal or State court related to the

12 delivery of a health care item or service.

13 (B) Federal or State criminal convictions

14 related to the delivery of a health care item or

15 service.

16 (C) Actions by State or Federal agencies

17 responsible for the licensing and certification of

18 health care providers, suppliers, and licensed

19 health care practitioners, including—

20 (i) formal or official actions, such as

21 revocation or suspension of a license (and

22 the length of any such suspension), rep23 rimand, censure or probation,
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1 (ii) any other loss of license of the

2 provider, supplier, or practitioner, by oper3 ation of law, or

4 (iii) any other negative action or find5 ing by such State or Federal agency that

6 is publicly available information.

7 (D) Exclusion from participation in Fed8 eral or State health care programs.

9 (E) Any other adjudicated actions or deci10 sions that the Secretary shall establish by regu11 lation.

12 (2) The terms ‘‘licensed health care practi13 tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’

14 mean, with respect to a State, an individual who is

15 licensed or otherwise authorized by the State to pro16 vide health care services (or any individual who,

17 without authority holds himself or herself out to be

18 so licensed or authorized).

19 (3) The term ‘‘health care provider’’ means a

20 provider of services as defined in section 1861(u) of

21 the Social Security Act, and any entity, including a

22 health maintenance organization, group medical

23 practice, or any other entity listed by the Secretary

24 in regulation, that provides health care services.
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1 (4) The term ‘‘supplier’’ means a supplier of

2 health care items and services described in sections

3 1819 (a) and (b), and section 1861 of the Social

4 Security Act.

5 (5) The term ‘‘Government agency’’ shall in6 clude:

7 (A) The Department of Justice.

8 (B) The Department of Health and

9 Human Services.

10 (C) Any other Federal agency that either

11 administers or provides payment for the deliv12 ery of health care services, including, but not

13 limited to the Department of Defense and the

14 Department of Veterans Affairs.

15 (D) State law enforcement agencies.

16 (E) State medicaid fraud and abuse units.

17 (F) State or Federal agencies responsible

18 for the licensing and certification of health care

19 providers and licensed health care practitioners.

20 (6) The term ‘‘health care plan’’ has the mean21 ing given to such term by section 1128(i) of the

22 Social Security Act.

23 (7) For purposes of paragraph (2), the exist24 ence of a conviction shall be determined under para-
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1 graph (4) of section 1128(j) of the Social Security

2 Act.

3 (h) CONFORMING AMENDMENT.—Section 1921(d) of

4 the Social Security Act is amended by inserting ‘‘and sec5 tion 4121 of the Health Equity and Access Reform Today

6 Act of 1993’’ after ‘‘section 422 of the Health Care Qual7 ity Improvement Act of 1986’’.

8 SEC. 4122. QUARTERLY PUBLICATION OF ADVERSE AC9 TIONS TAKEN.

10 (a) IN GENERAL.—Part A of title XI of the Social

11 Security Act (42 U.S.C. 1301 et seq.) is amended by

12 adding at the end the following new section:

13 ‘‘QUARTERLY PUBLICATION OF ADVERSE ACTIONS TAKEN

14 ‘‘SEC. 1144. Not later than 30 days after the end

15 of each calendar quarter, the Secretary shall publish in

16 the Federal Register a listing of all final adverse actions

17 taken during the quarter under this part (including pen18 alties imposed under section 1107, exclusions under sec19 tion 1128, the imposition of civil monetary penalties under

20 section 1128A, and the imposition of criminal penalties

21 under section 1128B) and under section 1156.’’.

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

23 subsection (a) shall apply to calendar quarters beginning

24 on or after January 1, 1995.
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1 PART IV—AMENDMENTS TO CRIMINAL LAW

2 SEC. 4131. HEALTH CARE FRAUD.

3 (a) IN GENERAL.—

4 (1) FINES AND IMPRISONMENT FOR HEALTH

5 CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,

6 United States Code, is amended by adding at the

7 end the following:

8 ‘‘§ 1347. Health care fraud

9 ‘‘(a) Whoever knowingly executes, or attempts to exe10 cute, a scheme or artifice—

11 ‘‘(1) to defraud any health care plan or other

12 person, in connection with the delivery of or pay13 ment for health care benefits, items, or services; or

14 ‘‘(2) to obtain, by means of false or fraudulent

15 pretenses, representations, or promises, any of the

16 money or property owned by, or under the custody

17 or control of, any health care plan, or person in con18 nection with the delivery of or payment for health

19 care benefits, items, or services;

20 shall be fined under this title or imprisoned not more than

21 10 years, or both. If the violation results in serious bodily

22 injury (as defined in section 1365(g)(3) of this title), such

23 person shall be imprisoned for life or any term of years.

24 ‘‘(b) For purposes of this section, the term ‘health

25 care plan’ means a federally funded public program or pri-
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1 vate program for the delivery of or payment for health

2 care items or services.’’.

3 (2) CLERICAL AMENDMENT.—The table of sec4 tions at the beginning of chapter 63 of title 18,

5 United States Code, is amended by adding at the

6 end the following:

‘‘1347. Health care fraud.’’.

7 SEC. 4132. FORFEITURES FOR FEDERAL HEALTH CARE OF8 FENSES.

9 Section 982(a) of title 18, United States Code, is

10 amended by inserting after paragraph (5) the following:

11 ‘‘(6)(A) If the court determines that a Federal health

12 care offense is of a type that poses a serious threat to

13 the health of any person or has a significant detrimental

14 impact on the health care system, the court, in imposing

15 sentence on a person convicted of that offense, shall order

16 that person to forfeit property, real or personal, that—

17 ‘‘(i)(I) is used in the commission of the offense;

18 or

19 ‘‘(II) constitutes or is derived from proceeds

20 traceable to the commission of the offense; and

21 ‘‘(ii) is of a value proportionate to the serious22 ness of the offense.

23 ‘‘(B) For purposes of this paragraph, the term ‘Fed24 eral health care offense’ means a violation of, or a criminal

25 conspiracy to violate—
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1 ‘‘(i) section 1347 of this title;

2 ‘‘(ii) section 1128B of the Social Security Act;

3 ‘‘(iii) sections 287, 371, 664, 666, 1001, 1027,

4 1341, 1343, or 1954 of this title if the violation or

5 conspiracy relates to health care fraud;

6 ‘‘(iv) section 501 or 511 of the Employee Re7 tirement Income Security Act of 1974, if the viola8 tion or conspiracy relates to health care fraud; and

9 ‘‘(v) section 301, 303(a)(2), or 303 (b) or (e)

10 of the Federal Food, Drug and Cosmetic Act, if the

11 violation or conspiracy relates to health care fraud.’’.

12 SEC. 4133. INJUNCTIVE RELIEF RELATING TO FEDERAL

13 HEALTH CARE OFFENSES.

14 Section 1345(a)(1) of title 18, United States Code,

15 is amended—

16 (1) by striking ‘‘or’’ at the end of subparagraph

17 (A);

18 (2) by inserting ‘‘or’’ at the end of subpara19 graph (B); and

20 (3) by adding at the end the following:

21 ‘‘(C) committing or about to commit a

22 Federal health care offense (as defined in sec23 tion 982(a)(6)(B) of this title);’’.
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1 SEC. 4134. RACKETEERING ACTIVITY RELATING TO FED2 ERAL HEALTH CARE OFFENSES.

3 Section 1961 of title 18, United States Code, is

4 amended by inserting ‘‘section 982(a)(6) (relating to Fed5 eral health care offenses),’’ after ‘‘sections 891–894 (relat6 ing to extortionate credit transactions),’’.

7 PART V—AMENDMENTS TO CIVIL FALSE CLAIMS

8 ACT

9 SEC. 4141. AMENDMENTS TO CIVIL FALSE CLAIMS ACT.

10 Section 3729 of title 31, United States Code, is

11 amended—

12 (1) in subsection (a)(7), by inserting ‘‘or to a

13 health care plan,’’ after ‘‘property to the Govern14 ment,’’;

15 (2) in the matter following subsection (a)(7), by

16 inserting ‘‘or health care plan’’ before ‘‘sustains be17 cause of the act of that person,’’;

18 (3) at the end of the first sentence of sub19 section (a), by inserting ‘‘or health care plan’’ before

20 ‘‘sustains because of the act of the person.’’;

21 (4) in subsection (c)—

22 (A) by inserting ‘‘the term’’ after ‘‘sec23 tion,’’; and

24 (B) by adding at the end the following:

25 ‘‘The term also includes any request or demand,

26 whether under contract or otherwise, for money
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1 or property which is made or presented to a

2 health care plan.’’; and

3 (5) by adding at the end the following:

4 ‘‘(f) HEALTH CARE PLAN DEFINED.—For purposes

5 of this section, the term ‘health care plan’ means a feder6 ally funded public program for the delivery of or payment

7 for health care items or services.’’.

8 Subtitle C—Treatment of Certain

9 Activities Under the Antitrust

10 Laws

11 SEC. 4201. EXEMPTION FROM ANTITRUST LAWS FOR CER12 TAIN COMPETITIVE AND COLLABORATIVE

13 ACTIVITIES.

14 (a) EXEMPTION DESCRIBED.—An activity relating to

15 the provision of health care services shall be exempt from

16 the antitrust laws if—

17 (1) the activity is within one of the categories

18 of safe harbors described in section 4202;

19 (2) the activity is within an additional safe har20 bor designated by the Attorney General under sec21 tion 4203; or

22 (3) the activity is specified in and in compliance

23 with the terms of a certificate of review issued by

24 the Attorney General under section 4204 and the ac25 tivity occurs—
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1 (A) while the certificate is in effect, or

2 (B) in the case of a certificate issued dur3 ing the 2-year period beginning on the date of

4 the enactment of this Act, at any time on or

5 after the first day of the 2-year period that

6 ends on the date the certificate takes effect.

7 (b) AWARD OF ATTORNEY’S FEES AND COSTS OF

8 SUIT.—

9 (1) IN GENERAL.—If any person brings an ac10 tion alleging a claim under the antitrust laws and

11 the activity on which the claim is based is found by

12 the court to be exempt from such laws under sub13 section (a), the court shall, at the conclusion of the

14 action—

15 (A) award to a substantially prevailing

16 claimant the cost of suit attributable to such

17 claim, including a reasonable attorney’s fee, or

18 (B) award to a substantially prevailing

19 party defending against such claim the cost of

20 such suit attributable to such claim, including

21 reasonable attorney’s fee, if the claim, or the

22 claimant’s conduct during litigation of the

23 claim, was frivolous, unreasonable, without

24 foundation, or in bad faith.
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1 (2) OFFSET IN CASES OF BAD FAITH.—The

2 court may reduce an award made pursuant to para3 graph (1) in whole or in part by an award in favor

4 of another party for any part of the cost of suit (in5 cluding a reasonable attorney’s fee) attributable to

6 conduct during the litigation by any prevailing party

7 that the court finds to be frivolous, unreasonable,

8 without foundation, or in bad faith.

9 SEC. 4202. SAFE HARBORS.

10 The following activities are safe harbors for purposes

11 of section 4201(a)(1):

12 (1) COMBINATIONS WITH MARKET SHARE

13 BELOW THRESHOLD.—Activities relating to health

14 care services of any combination of health care pro15 viders if the number of each type or specialty of pro16 vider in question does not exceed 20 percent of the

17 total number of such type or specialty of provider in

18 the relevant market area.

19 (2) ACTIVITIES OF MEDICAL SELF-REGULATORY

20 ENTITIES.—

21 (A) IN GENERAL.—Subject to subpara22 graph (B), any activity of a medical self-regu23 latory entity relating to standard setting or

24 standard enforcement activities that are de-
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1 signed to promote the quality of health care

2 provided to patients.

3 (B) EXCEPTION.—No activity of a medical

4 self-regulatory entity may be deemed to fall

5 under the safe harbor established under this

6 paragraph if the activity is conducted for pur7 poses of financial gain.

8 (3) PARTICIPATION IN SURVEYS.—The partici9 pation of a provider of health care services in a writ10 ten survey of the prices of services, reimbursement

11 levels, or the compensation and benefits of employ12 ees and personnel, but only if—

13 (A) the survey is conducted by a third

14 party, such as a purchaser of health care serv15 ices, governmental entity, institution of higher

16 education, or trade association;

17 (B) the information provided by partici18 pants in the survey is based on prices charged,

19 reimbursements received, or compensation and

20 benefits paid prior to the third month preceding

21 the month in which the information is provided;

22 and

23 (C) if the results of the survey are dissemi24 nated, the results are aggregated in a manner

25 that ensures that no recipient of the results
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1 may identify the prices charged, reimbursement

2 received, or compensation and benefits paid by

3 any particular provider.

4 (4) JOINT VENTURES FOR HIGH TECHNOLOGY

5 AND COSTLY EQUIPMENT AND SERVICES.—Any ac6 tivity of a health care cooperative venture relating to

7 the purchase, operation, or marketing of high tech8 nology or other expensive medical equipment, or the

9 provision of high cost or complex services, but only

10 if the number of participants in the venture does not

11 exceed the lowest number needed to support the ven12 ture. Other providers may be included in the ven13 ture, but only if such other providers could not pur14 chase, operate, or market such equipment or provide

15 a competing service either alone or through the for16 mation of a competing venture.

17 (5) HOSPITAL MERGERS.—Activities relating to

18 a merger of 2 hospitals if, during the 3-year period

19 preceding the merger, one of the hospitals had an

20 average of 150 or fewer operational beds and an av21 erage daily inpatient census of less than 50 percent

22 of such beds.

23 (6) JOINT PURCHASING ARRANGEMENTS.—Any

24 joint purchasing arrangement among health care

25 providers if—
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1 (A) the purchases under the arrangement

2 represent less than 35 percent of the total sales

3 of the product or service purchased in the rel4 evant market; and

5 (B) the cost of the products and services

6 purchased jointly accounts for less than 20 per7 cent of the total revenues from all products or

8 services sold by each participant in the joint

9 purchasing arrangement.

10 (7) NEGOTIATIONS.—Activities consisting of

11 good faith negotiations to carry out any activity—

12 (A) described in this section,

13 (B) within an additional safe harbor des14 ignated by the Attorney General under section

15 4203,

16 (C) that is the subject of an application for

17 a certificate of review under section 4204, or

18 (D) that is deemed a submission of a noti19 fication under section 4205(a)(2)(B),

20 without regard to whether such an activity is carried

21 out.

22 SEC. 4203. DESIGNATION OF ADDITIONAL SAFE HARBORS.

23 (a) IN GENERAL.—

24 (1) SOLICITATION OF PROPOSALS.—Not later

25 than 30 days after the date of the enactment of this
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1 Act, the Attorney General shall publish a notice in

2 the Federal Register soliciting proposals for addi3 tional safe harbors.

4 (2) REVIEW AND REPORT ON PROPOSED SAFE

5 HARBORS.—Not later than 180 days after the date

6 of the enactment of this Act, the Attorney General

7 (in consultation with the Secretary of Health and

8 Human Services and the Chair of the Federal Trade

9 Commission) shall—

10 (A) review the proposed safe harbors sub11 mitted under paragraph (1); and

12 (B) submit a report to Congress describing

13 the proposals to be included in the publication

14 of additional safe harbors described in para15 graph (3) and the proposals that are not to be

16 so included, together with explanations there17 fore.

18 (3) PUBLICATION OF ADDITIONAL SAFE HAR19 BORS.—Not later than 180 days after the date of

20 the enactment of this Act, the Attorney General (in

21 consultation with the Secretary of Health and

22 Human Services and the Chair of the Federal Trade

23 Commission) shall publish in the Federal Register

24 proposed additional safe harbors for purposes of sec25 tion 4201(a)(2) for providers of health care services.
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1 Not later than 180 days after publishing such pro2 posed safe harbors in the Federal Register, the At3 torney General shall issue final rules establishing

4 such safe harbors.

5 (b) CRITERIA FOR SAFE HARBORS.—In establishing

6 safe harbors under subsection (a), the Attorney General

7 shall take into account the following:

8 (1) The extent to which a competitive or col9 laborative activity will accomplish any of the follow10 ing:

11 (A) An increase in access to health care

12 services.

13 (B) The enhancement of the quality of

14 health care services.

15 (C) The establishment of cost efficiencies

16 that will be passed on to consumers, including

17 economies of scale and reduced transaction and

18 administrative costs.

19 (D) An increase in the ability of health

20 care facilities to provide services in medically

21 underserved areas or to medically underserved

22 populations.

23 (E) An improvement in the utilization of

24 health care resources or the reduction in the in-
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1 efficient duplication of the use of such re2 sources.

3 (2) Whether the designation of an activity as a

4 safe harbor under subsection (a) will result in the

5 following outcomes:

6 (A) Health plans and other health care in7 surers, consumers of health care services, and

8 health care providers will be better able to ne9 gotiate payment and service arrangements

10 which will reduce costs to consumers.

11 (B) Taking into consideration the charac12 teristics of the particular purchasers and

13 providproviders involved, competition will not be

14 unduly restricted.

15 (C) Equally efficient and less restrictive al16 ternatives do not exist to meet the criteria de17 scribed in paragraph (1).

18 (D) The activity will not unreasonably

19 foreclose competition by denying competitors a

20 necessary element of competition.

21 SEC. 4204. CERTIFICATES OF REVIEW.

22 (a) ESTABLISHMENT OF PROGRAM.—In consultation

23 with the Secretary and the Chair, the Attorney General

24 shall (not later than 180 days after the date of the enact25 ment of this Act) issue certificates of review in accordance
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1 with this section for providers of health care services and

2 advise and assist any person with respect to applying for

3 such a certificate of review.

4 (b) PROCEDURES FOR APPLICATION FOR CERTIFI5 CATE.—

6 (1) FORM; CONTENT.—To apply for a certifi7 cate of review, a person shall submit to the Attorney

8 General a written application which—

9 (A) specifies the activities relating to the

10 provision of health care services which satisfy

11 the criteria described in section 4203(b) and

12 which will be included in the certificate; and

13 (B) is in a form and contains any informa14 tion, including information pertaining to the

15 overall market in which the applicant operates,

16 required by rule or regulation promulgated

17 under section 4207.

18 (2) PUBLICATION OF NOTICE IN FEDERAL REG19 ISTER.—Within 10 days after an application submit20 ted under paragraph (1) is received by the Attorney

21 General, the Attorney General shall publish in the

22 Federal Register a notice that announces that an

23 application for a certificate of review has been sub24 mitted, identifies each person submitting the appli-
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1 cation, and describes the conduct for which the ap2 plication is submitted.

3 (3) ESTABLISHMENT OF PROCEDURES FOR IS4 SUANCE OF CERTIFICATE.—In consultation with the

5 Chair and the Secretary, the Attorney General shall

6 establish procedures to be used in applying for and

7 in determining whether to approve an application for

8 a certificate of review under this subtitle. Under

9 such procedures the Attorney General shall approve

10 an application if the Attorney General determines

11 that the activities to be covered under the certificate

12 will satisfy the criteria described in section 4203(b)

13 for additional safe harbors designated under such

14 section and that the benefits of the issuance of the

15 certificate will outweigh any disadvantages that may

16 result from reduced competition.

17 (4) TIMING FOR DECISION ON APPLICATION.—

18 (A) IN GENERAL.—Within 90 days after

19 the Attorney General receives an application for

20 a certificate of review, the Attorney General

21 shall determine whether the applicant’s health

22 care market activities are in accordance with

23 the procedures described in paragraph (3). If

24 the Attorney General, with the concurrence of

25 the Secretary, determines that such procedures
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1 are met, the Attorney General shall issue to the

2 applicant a certificate of review. The certificate

3 of review shall specify—

4 (i) the health care market activities to

5 which the certificate applies,

6 (ii) the person to whom the certificate

7 of review is issued, and

8 (iii) any terms and conditions the At9 torney General or the Secretary deems nec10 essary to assure compliance with the appli11 cable procedures described in paragraph

12 (3).

13 (B) APPLICATIONS DEEMED APPROVED.—

14 If the Attorney General does not reject an ap15 plication before the expiration of the 90-period

16 beginning on the date the Attorney General re17 ceives the application, the Attorney General

18 shall be deemed to have approved the applica19 tion and to have issued a certificate of review

20 relating to the applicant’s health care market

21 activities covered under the application.

22 (5) EXPEDITED ACTION.—If the applicant indi23 cates a special need for prompt disposition, the At24 torney General and the Secretary may expedite ac25 tion on the application, except that no certificate of
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1 review may be issued within 30 days of publication

2 of notice in the Federal Register under subsection

3 (b)(2).

4 (6) ACTIONS UPON DENIAL.—

5 (A) NOTIFICATION.—If the Attorney Gen6 eral denies in whole or in part an application

7 for a certificate, the Attorney General shall no8 tify the applicant of the Attorney General’s de9 termination and the reasons for it.

10 (B) REQUEST FOR RECONSIDERATION.—

11 An applicant may, within 30 days of receipt of

12 notification that the application has been denied

13 in whole or in part, request the Attorney Gen14 eral to reconsider the determination. The Attor15 ney General, with the concurrence of the Sec16 retary, shall notify the applicant of the deter17 mination upon reconsideration within 30 days

18 of receipt of the request.

19 (C) RETURN OF DOCUMENTS.—If the At20 torney General denies an application for the is21 suance of a certificate of review and thereafter

22 receives from the applicant a request for the re23 turn of documents submitted by the applicant

24 in connection with the application for the cer25 tificate, the Attorney General and the Secretary
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1 shall return to the applicant, not later than 30

2 days after receipt of the request, the documents

3 and all copies of the documents available to the

4 Attorney General and the Secretary, except to

5 the extent that the information has been made

6 public under an exception to the rule against

7 public disclosure described in subsection

8 (g)(2)(B).

9 (7) FRAUDULENT PROCUREMENT.—A certifi10 cate of review shall be void ab initio with respect to

11 any health care market activities for which the cer12 tificate was procured by fraud.

13 (c) AMENDMENT AND REVOCATION OF CERTIFI14 CATES.—

15 (1) NOTIFICATION OF CHANGES.—Any appli16 cant who receives a certificate of review—

17 (A) shall promptly report to the Attorney

18 General any change relevant to the matters

19 specified in the certificate; and

20 (B) may submit to the Attorney General

21 an application to amend the certificate to re22 flect the effect of the change on the conduct

23 specified in the certificate.

24 (2) AMENDMENT TO CERTIFICATE.—An appli25 cation for an amendment to a certificate of review
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1 shall be treated as an application for the issuance of

2 a certificate. The effective date of an amendment

3 shall be the date on which the application for the

4 amendment is submitted to the Attorney General.

5 (3) REVOCATION.—

6 (A) GROUNDS FOR REVOCATION.—In ac7 cordance with this paragraph, the Attorney

8 General may revoke in whole or in part a cer9 tificate of review issued under this section. The

10 following shall be considered grounds for the

11 revocation of a certificate:

12 (i) After the expiration of the 2-year

13 period beginning on the date a person’s

14 certificate is issued, the activities of the

15 person have not substantially accomplished

16 the purposes for the issuance of the certifi17 cate.

18 (ii) The person has failed to comply

19 with any of the terms or conditions im20 posed under the certificate by the Attorney

21 General or the Secretary under subsection

22 (b)(4).

23 (iii) The activities covered under the

24 certificate no longer satisfy the criteria set

25 forth in section 4203(b).
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1 (B) REQUEST FOR COMPLIANCE INFORMA2 TION.—If the Attorney General or Secretary

3 has reason to believe that any of the grounds

4 for revocation of a certificate of review de5 scribed in subparagraph (A) may apply to a

6 person holding the certificate, the Attorney

7 General shall request such information from

8 such person as the Attorney General or the Sec9 retary deems necessary to resolve the matter of

10 compliance. Failure to comply with such request

11 shall be grounds for revocation of the certificate

12 under this paragraph.

13 (C) PROCEDURES FOR REVOCATION.—If

14 the Attorney General or the Secretary deter15 mines that any of the grounds for revocation of

16 a certificate of review described in subpara17 graph (A) apply to a person holding the certifi18 cate, or that such person has failed to comply

19 with a request made under subparagraph (B),

20 the Attorney General shall give written notice of

21 the determination to such person. The notice

22 shall include a statement of the circumstances

23 underlying, and the reasons in support of, the

24 determination. In the 60-day period beginning

25 30 days after the notice is given, the Attorney
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1 General shall revoke the certificate or modify it

2 as the Attorney General or the Secretary deems

3 necessary to cause the certificate to apply only

4 to activities that meet the procedures for the is5 suance of certificates described in subsection

6 (b)(2).

7 (D) INVESTIGATION AUTHORITY.—For

8 purposes of carrying out this paragraph, the

9 Attorney General may conduct investigations in

10 the same manner as the Attorney General con11 ducts investigations under section 3 of the Anti12 trust Civil Process Act, except that no civil in13 vestigative demand may be issued to a person

14 to whom a certificate of review is issued if such

15 person is the target of such investigation.

16 (d) REVIEW OF DETERMINATIONS.—

17 (1) AVAILABILITY OF REVIEW FOR CERTAIN AC18 TIONS.—If the Attorney General denies, in whole or

19 in part, an application for a certificate of review or

20 for an amendment to a certificate, or revokes or

21 modifies a certificate pursuant to paragraph (3), the

22 applicant or certificate holder (as the case may be)

23 may, within 30 days of the denial or revocation,

24 bring an action in any appropriate district court of

25 the United States to set aside the determination on
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1 the ground that such determination is erroneous

2 based on the preponderance of the evidence.

3 (2) NO OTHER REVIEW PERMITTED.—Except

4 as provided in paragraph (1), no action by the At5 torney General or the Secretary pursuant to this

6 subtitle shall be subject to judicial review.

7 (3) EFFECT OF REJECTED APPLICATION.—If

8 the Attorney General denies, in whole or in part, an

9 application for a certificate of review or for an

10 amendment to a certificate, or revokes or amends a

11 certificate, neither the negative determination nor

12 the statement of reasons therefore shall be admissi13 ble in evidence, in any administrative or judicial pro14 ceeding, concerning any claim under the antitrust

15 laws.

16 (e) PUBLICATION OF DECISIONS.—The Attorney

17 General shall publish a notice in the Federal Register on

18 a timely basis of each decision made with respect to an

19 application for a certificate of review under this section

20 or the amendment or revocation of such a certificate, in

21 a manner that protects the confidentiality of any propri22 etary information relating to the application.

23 (f) ANNUAL REPORTS.—Every person to whom a cer24 tificate of review is issued shall submit to the Attorney

25 General an annual report, in such form and at such time
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1 as the Attorney General may require, that contains any

2 necessary updates to the information required under sub3 section (b) and a description of the activities of the holder

4 under the certificate during the preceding year.

5 (g) RESTRICTIONS ON DISCLOSURE OF INFORMA6 TION.—

7 (1) WAIVER OF DISCLOSURE REQUIREMENTS

8 UNDER ADMINISTRATIVE PROCEDURE ACT.—Infor9 mation submitted by any person in connection with

10 the issuance, amendment, or revocation of a certifi11 cate of review shall be exempt from disclosure under

12 section 552 of title 5, United States Code.

13 (2) RESTRICTIONS ON DISCLOSURE OF COM14 MERCIAL OR FINANCIAL INFORMATION.—

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

16 subparagraph (B), no officer or employee of the

17 United States shall disclose commercial or fi18 nancial information submitted in connection

19 with the issuance, amendment, or revocation of

20 a certificate of review if the information is priv21 ileged or confidential and if disclosure of the in22 formation would cause harm to the person who

23 submitted the information.
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1 (B) EXCEPTIONS.—Subparagraph (A)

2 shall not apply with respect to information dis3 closed—

4 (i) upon a request made by the Con5 gress or any committee of the Congress,

6 (ii) in a judicial or administrative pro7 ceeding, subject to appropriate protective

8 orders,

9 (iii) with the consent of the person

10 who submitted the information,

11 (iv) in the course of making a deter12 mination with respect to the issuance,

13 amendment, or revocation of a certificate

14 of review, if the Attorney General deems

15 disclosure of the information to be nec16 essary in connection with making the de17 termination,

18 (v) in accordance with any require19 ment imposed by a statute of the United

20 States, or

21 (vi) in accordance with any rule or

22 regulation promulgated under subsection

23 (i) permitting the disclosure of the infor24 mation to an agency of the United States

25 or of a State on the condition that the
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1 agency will disclose the information only

2 under the circumstances specified in

3 clauses (i) through (v).

4 (3) PROHIBITION AGAINST USE OF INFORMA5 TION TO SUPPORT OR ANSWER CLAIMS UNDER ANTI6 TRUST LAWS.—Any information disclosed in an ap7 plication for a certificate of review under this section

8 shall only be admissible into evidence in a judicial or

9 administrative proceeding for the sole purpose of es10 tablishing that a person is entitled to the protections

11 provided by such a certificate.

12 SEC. 4205. NOTIFICATIONS PROVIDING REDUCTION IN CER13 TAIN PENALTIES UNDER ANTITRUST LAW

14 FOR HEALTH CARE COOPERATIVE VEN15 TURES.

16 (a) NOTIFICATIONS DESCRIBED.—

17 (1) SUBMISSION OF NOTIFICATION BY VEN18 TURE.—Any party to a health care cooperative ven19 ture, acting on such venture’s behalf, may, not later

20 than 90 days after entering into a written agreement

21 to form such venture or not later than 90 days after

22 the date of the enactment of this Act, whichever is

23 later, file with the Attorney General a written notifi24 cation disclosing—
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1 (A) the identities of the parties to such

2 venture,

3 (B) the nature and objectives of such ven4 ture, and

5 (C) such additional information as the At6 torney General may require by regulation.

7 (2) ACTIVITIES DEEMED SUBMISSION OF NOTI8 FICATION.—The following health care cooperative

9 ventures shall be deemed to have filed a written noti10 fication with respect to the venture under paragraph

11 (1):

12 (A) SUBMISSION OF APPLICATION FOR

13 CERTIFICATE OF REVIEW.—Any health care co14 operative venture for which an application for a

15 certificate of review is filed with the Attorney

16 General under section 4203.

17 (B) CERTAIN VENTURES.—Any health care

18 cooperative venture meeting the following re19 quirements:

20 (i) The venture consists of a network

21 of non-institutional providers not greater

22 than—

23 (I) in the case of a nonexclusive

24 network in which the participating

25 members are permitted to create or
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1 join other competing networks, 50

2 percent of the providers of health care

3 services in the relevant geographic

4 area and 50 percent of the members

5 of the provider specialty group in the

6 relevant market; or

7 (II) in the case of an exclusive

8 network in which the participating

9 members are not permitted to create

10 or join other competing networks, 35

11 percent of the providers of health care

12 services in the relevant geographic

13 area and 35 percent of the members

14 of the provider specialty group in the

15 relevant market.

16 (ii) Each member of the venture as17 sumes substantial financial risk for the op18 eration of the venture through risk-sharing

19 arrangements, including (but not limited

20 to)—

21 (I) the acceptance of capitation

22 contracts;

23 (II) the acceptance of contracts

24 with fee withholding mechanisms re25 lating to the ability to meet estab-
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1 lished goals for utilization review and

2 management; and

3 (III) the holding by members of

4 significant ownership or equity inter5 ests in the venture, where the capital

6 contributed by the members is used to

7 fund the operational costs of the ven8 ture such as administration, market9 ing, and computer-operated medical

10 information, if the venture develops

11 and operates comprehensive programs

12 for utilization management and qual13 ity assurance that include controls

14 over the use of institutional, special15 ized, and ancillary medical services.

16 (3) SUBMISSION OF ADDITIONAL INFORMA17 TION.—

18 (A) REQUEST OF ATTORNEY GENERAL.—

19 At any time after receiving a notification filed

20 under paragraph (1), the Attorney General may

21 require the submission of additional information

22 or documentary material relevant to the pro23 posed health care cooperative venture.

24 (B) PARTIES TO VENTURE.—Any party to

25 a health care cooperative venture may submit
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1 such additional information on the venture’s be2 half as may be appropriate to ensure that the

3 venture will receive the protections provided

4 under subsection (b).

5 (C) REQUIRED SUBMISSION OF INFORMA6 TION ON CHANGES TO VENTURE.—A health

7 care cooperative venture for which a notification

8 is in effect under this section shall submit infor9 mation on any change in the membership of the

10 venture not later than 90 days after such

11 change occurs.

12 (4) PUBLICATION OF NOTIFICATION.—

13 (A) INFORMATION MADE PUBLICLY AVAIL14 ABLE.—Not later than 30 days after receiving

15 a notification with respect to a venture under

16 paragraph (1), the Attorney General shall pub17 lish in the Federal Register a notice with re18 spect to the venture that identifies the parties

19 to the venture and generally describes the pur20 pose and planned activity of the venture. Prior

21 to its publication, the contents of the notice

22 shall be made available to the parties to the

23 venture.

24 (B) RESTRICTION ON DISCLOSURE OF

25 OTHER INFORMATION.—All information and
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1 documentary material submitted pursuant to

2 this section and all information obtained by the

3 Attorney General in the course of any investiga4 tion or case with respect to a potential violation

5 of the antitrust laws by the health care coopera6 tive venture (other than information and mate7 rial described in subparagraph (A)) shall be ex8 empt from disclosure under section 552 of title

9 5, United States Code, and shall not be made

10 publicly available by any agency of the United

11 States to which such section applies except in

12 a judicial proceeding in which such information

13 and material is subject to any protective order.

14 (5) WITHDRAWAL OF NOTIFICATION.—Any per15 son who files a notification pursuant to this section

16 may withdraw such notification before a publication

17 by the Attorney General pursuant to paragraph (4).

18 Any person who is deemed to have filed a notifica19 tion under paragraph (2)(A) shall be deemed to have

20 withdrawn the notification if the certificate of review

21 in question is revoked or withdrawn under section

22 4204.

23 (6) NO JUDICIAL REVIEW PERMITTED.—Any

24 action taken or not taken by the Attorney General
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1 with respect to notifications filed pursuant to this

2 subsection shall not be subject to judicial review.

3 (b) PROTECTIONS FOR VENTURES SUBJECT TO NO4 TIFICATION.—

5 (1) IN GENERAL.—

6 (A) PROTECTIONS DESCRIBED.—The pro7 visions of paragraphs (2), (3), (4), and (5) shall

8 apply with respect to any action under the anti9 trust laws challenging conduct within the scope

10 of a notification which is in effect pursuant to

11 subsection (a)(1).

12 (B) TIMING OF PROTECTIONS.—The pro13 tections described in this subsection shall apply

14 to the venture that is the subject of a notifica15 tion under subsection (a)(1) as of the earlier

16 of—

17 (i) the date of the publication in the

18 Federal Register of the notice published

19 with respect to the notification; or

20 (ii) if such notice is not published dur21 ing the period required under subsection

22 (a)(4), the expiration of the 30-day period

23 that begins on the date the Attorney Gen24 eral receives any necessary information re25 quired to be submitted under subsection
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1 (a)(1) or any additional information re2 quired by the Attorney General under sub3 section (a)(3)(A).

4 (2) APPLICABILITY OF RULE OF REASON

5 STANDARD.—In any action under the antitrust laws,

6 the conduct of any person which is within the scope

7 of a notification filed under subsection (a) shall not

8 be deemed illegal per se, but shall be judged on the

9 basis of its reasonableness, taking into account all

10 relevant factors affecting competition, including, but

11 not limited to, effects on competition in relevant

12 markets.

13 (3) LIMITATION ON RECOVERY TO ACTUAL

14 DAMAGES AND INTEREST.—Notwithstanding section

15 4 of the Clayton Act, any person who is entitled to

16 recovery under the antitrust laws for conduct that is

17 within the scope of a notification filed under sub18 section (a) shall recover the actual damages sus19 tained by such person and interest calculated at the

20 rate specified in section 1961 of title 28, United

21 States Code, for the period beginning on the earliest

22 date for which injury can be established and ending

23 on the date of judgment, unless the court finds that

24 the award of all or part of such interest is unjust

25 under the circumstances.
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1 (4) AWARD OF ATTORNEY’S FEES AND COSTS

2 OF SUIT.—

3 (A) IN GENERAL.—In any action under the

4 antitrust laws brought against a health care co5 operative venture for conduct that is within the

6 scope of a notification filed under subsection

7 (a), the court shall, at the conclusion of the ac8 tion—

9 (i) award to a substantially prevailing

10 claimant the cost of suit attributable to

11 such claim, including a reasonable attor12 ney’s fee, or

13 (ii) award to a substantially prevailing

14 party defending against such claim the

15 cost of such suit attributable to such claim,

16 including reasonable attorney’s fee, if the

17 claim, or the claimant’s conduct during

18 litigation of the claim, was frivolous, un19 reasonable, without foundation, or in bad

20 faith.

21 (B) OFFSET IN CASES OF BAD FAITH.—

22 The court may reduce an award made pursuant

23 to subparagraph (A) in whole or in part by an

24 award in favor of another party for any part of

25 the cost of suit (including a reasonable attor-
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1 ney’s fee) attributable to conduct during the

2 litigation by any prevailing party that the court

3 finds to be frivolous, unreasonable, without

4 foundation, or in bad faith.

5 (5) RESTRICTIONS ON ADMISSIBILITY OF IN6 FORMATION.—

7 (A) IN GENERAL.—Any information dis8 closed in a notification submitted under sub9 section (a)(1) and the fact of the publication of

10 a notification by the Attorney General under

11 subsection (a)(4) shall only be admissible into

12 evidence in a judicial or administrative proceed13 ing for the sole purpose of establishing that a

14 party to a health care cooperative venture is en15 titled to the protections described in this sub16 section.

17 (B) ACTIONS OF ATTORNEY GENERAL.—

18 No action taken by the Attorney General pursu19 ant to this section shall be admissible into evi20 dence in any judicial or administrative proceed21 ing for the purpose of supporting or answering

22 any claim under the antitrust laws.
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1 SEC. 4206. REVIEW AND REPORTS ON SAFE HARBORS AND

2 CERTIFICATES OF REVIEW.

3 (a) IN GENERAL.—The Attorney General (in con4 sultation with the Secretary and the Chair) shall periodi5 cally review the safe harbors described in section 4202,

6 the additional safe harbors designated under section 4203,

7 and the certificates of review issued under section 4204,

8 and—

9 (1) with respect to the safe harbors described in

10 section 4202, submit such recommendations to Con11 gress as the Attorney General considers appropriate

12 for modifications of such safe harbors;

13 (2) with respect to the additional safe harbors

14 under designated under section 4203, issue proposed

15 revisions to such activities and publish the revisions

16 in the Federal Register; and

17 (3) with respect to the certificates of review,

18 submit a report to Congress on the issuance of such

19 certificates, and shall include in the report a descrip20 tion of the effect of such certificates on increasing

21 access to high quality health care services at reduced

22 costs.

23 (b) RECOMMENDATIONS FOR LEGISLATION.—The

24 Attorney General shall include in the reports submitted

25 under subsection (a)(3) any recommendations of the At26 torney General for legislation to improve the program for
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1 the issuance of certificates of review established under this

2 subtitle.

3 SEC. 4207. RULES, REGULATIONS, AND GUIDELINES.

4 (a) SAFE HARBORS, CERTIFICATES, AND NOTIFICA5 TIONS.—The Attorney General, with the concurrence of

6 the Secretary, shall promulgate such rules, regulations,

7 and guidelines as are necessary to carry out sections 4202,

8 4203, 4204, and 4205, including guidelines defining or re9 lating to relevant geographic and product markets for

10 health care services and providers of health care services.

11 (b) GUIDANCE FOR PROVIDERS.—

12 (1) IN GENERAL.—To promote greater cer13 tainty regarding the application of the antitrust laws

14 to activities in the health care market, the Attorney

15 General, in consultation with the Secretary and the

16 Chair, shall (not later than 1 year after the date of

17 the enactment of this Act), taking into account the

18 criteria used to designate additional safe harbors

19 under section 4203 and grant certificates of review

20 under section 4204, publish guidelines—

21 (A) to assist providers of health care serv22 ices in analyzing whether the activities of such

23 providers may be subject to a safe harbor under

24 sections 4202 or 4203; and
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1 (B) describing specific types of activities

2 which would meet the requirements for a cer3 tificate of review under section 4204, and sum4 marizing the factual and legal bases on which

5 the activities would meet the requirements.

6 (2) PERIODIC UPDATE.—The Attorney General

7 shall periodically update the guidelines published

8 under paragraph (1) as the Attorney General consid9 ers appropriate.

10 (3) WAIVER OF ADMINISTRATIVE PROCEDURE

11 ACT.—Section 553 of title 5, United States Code,

12 shall not apply to the issuance of guidelines under

13 paragraph (1).

14 SEC. 4208. ESTABLISHMENT OF HHS OFFICE OF HEALTH

15 CARE COMPETITION POLICY.

16 (a) IN GENERAL.—There is established within the

17 Department of Health and Human Services an Office to

18 be known as the Office of Health Care Competition Policy

19 (hereafter in this section referred to as the ‘‘Office’’). The

20 Office shall be headed by a director, who shall be ap21 pointed by the Secretary.

22 (b) DUTIES.—The Office shall coordinate the respon23 sibilities of the Secretary under this subtitle and otherwise

24 assist the Secretary in developing policies relating to the
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1 competitive and collaborative activities of providers of

2 health care services.

3 SEC. 4209. DEFINITIONS.

4 In this subtitle, the following definitions shall apply:

5 (1) The term ‘‘antitrust laws’’—

6 (A) has the meaning given it in subsection

7 (a) of the first section of the Clayton Act (15

8 U.S.C. 12(a)), except that such term includes

9 section 5 of the Federal Trade Commission Act

10 (15 U.S.C. 45) to the extent such section ap11 plies to unfair methods of competition; and

12 (B) includes any State law similar to the

13 laws referred to in subparagraph (A).

14 (2) The term ‘‘Chair’’ means the Chair of the

15 Federal Trade Commission.

16 (3) The term ‘‘health care cooperative venture’’

17 means any activities, including attempts to enter

18 into or perform a contract or agreement, carried out

19 by 2 or more persons for the purpose of providing

20 health care services.

21 (4) The term ‘‘health care services’’ means any

22 services for which payment may be made under a

23 health plan, including services related to the delivery

24 or administration of such services.
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1 (5) The term ‘‘medical self-regulatory entity’’

2 means a medical society or association, a specialty

3 board, a recognized accrediting agency, or a hospital

4 medical staff, and includes the members, officers,

5 employees, consultants, and volunteers or commit6 tees of such an entity.

7 (6) The term ‘‘person’’ includes a State or unit

8 of local government.

9 (7) The term ‘‘provider of health care services’’

10 means any individual or entity that is engaged in the

11 delivery of health care services in a State and that

12 is required by State law or regulation to be licensed

13 or certified by the State to engage in the delivery of

14 such services in the State.

15 (8) The term ‘‘specialty group’’ means a medi16 cal specialty or subspecialty in which a provider of

17 health care services may be licensed to practice by

18 a State (as determined by the Secretary in consulta19 tion with the certification boards for such specialties

20 and subspecialties).

21 (9) The term ‘‘standard setting and enforce22 ment activities’’ means—

23 (A) accreditation of health care practition24 ers, health care providers, medical education in25 stitutions, or medical education programs,
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1 (B) technology assessment and risk man2 agement activities,

3 (C) the development and implementation of

4 practice guidelines or practice parameters, or

5 (D) official peer review proceedings under6 taken by a hospital medical staff (or committee

7 thereof) or a medical society or association for

8 purposes of evaluating the professional conduct

9 or quality of health care provided by a medical

10 professional.

11 TITLE V—SPECIAL ASSISTANCE

12 FOR FRONTIER, RURAL, AND

13 URBAN UNDERSERVED AREAS

14 Subtitle A—Frontier, Rural, and

15 Urban Underserved Areas

16 SEC. 5001. ESTABLISHMENT OF GRANT PROGRAM.

17 Subpart I of part D of title III of the Public Health

18 Service Act (42 U.S.C. 254b et seq.) is amended by adding

19 at the end the following new section:

20 ‘‘SEC. 330A. COMMUNITY-BASED PRIMARY HEALTH CARE

21 GRANT PROGRAM.

22 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab23 lish and administer a program to provide allotments to

24 States to enable such States to provide grants for the cre25 ation or enhancement of community-based primary health
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1 care entities that provide services to low-income or medi2 cally underserved populations.

3 ‘‘(b) ALLOTMENTS TO STATES.—

4 ‘‘(1) IN GENERAL.—From the amount available

5 for allotment under subsection (h) for a fiscal year,

6 the Secretary shall allot to each State an amount

7 equal to the product of the grant share of the State

8 (as determined under paragraph (2)) multiplied by

9 such amount available.

10 ‘‘(2) GRANT SHARE.—

11 ‘‘(A) IN GENERAL.—For purposes of para12 graph (1), the grant share of a State shall be

13 the product of the need-adjusted population of

14 the State (as determined under subparagraph

15 (B)) multiplied by the Federal matching per16 centage of the State (as determined under sub17 paragraph (C)), expressed as a percentage of

18 the sum of the products of such factors for all

19 States.

20 ‘‘(B) NEED-ADJUSTED POPULATION.—

21 ‘‘(i) IN GENERAL.—For purposes of

22 subparagraph (A), the need-adjusted popu23 lation of a State shall be the product of

24 the total population of the State (as esti25 mated by the Secretary of Commerce) mul-
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1 tiplied by the need index of the State (as

2 determined under clause (ii)).

3 ‘‘(ii) NEED INDEX.—For purposes of

4 clause (i), the need index of a State shall

5 be the ratio of—

6 ‘‘(I) the weighted sum of the geo7 graphic percentage of the State (as

8 determined under clause (iii)), the

9 poverty percentage of the State (as

10 determined under clause (iv)), and the

11 multiple grant percentage of the State

12 (as determined under clause (v)); to

13 ‘‘(II) the general population per14 centage of the State (as determined

15 under clause (vi)).

16 ‘‘(iii) GEOGRAPHIC PERCENTAGE.—

17 ‘‘(I) IN GENERAL.—For purposes

18 of clause (ii)(I), the geographic per19 centage of the State shall be the esti20 mated population of the State that is

21 residing in nonurbanized areas (as de22 termined under subclause (II)) ex23 pressed as a percentage of the total

24 nonurbanized population of all States.
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1 ‘‘(II) NONURBANIZED POPU2 LATION.—For purposes of subclause

3 (I), the estimated population of the

4 State that is residing in nonurbanized

5 areas shall be one minus the urban6 ized population of the State (as deter7 mined using the most recent decennial

8 census), expressed as a percentage of

9 the total population of the State (as

10 determined using the most recent de11 cennial census), multiplied by the cur12 rent estimated population of the

13 State.

14 ‘‘(III) STATE OF ALASKA.—Not15 withstanding subclause (I), the geo16 graphic percentage for the State of

17 Alaska shall be the relative population

18 density of the State expressed as the

19 ratio of—

20 ‘‘(aa) the average number of

21 individuals residing in Alaska per

22 square mile; to

23 ‘‘(bb) the average number of

24 individuals residing in the United

25 States per square mile.
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1 ‘‘(iv) POVERTY PERCENTAGE.—For

2 purposes of clause (ii)(I), the poverty per3 centage of the State shall be the estimated

4 number of people residing in the State

5 with incomes below 200 percent of the in6 come official poverty line (as adjusted for

7 actual costs and incomes in each State and

8 as determined by the Office of Manage9 ment and Budget) expressed as a percent10 age of the total number of such people re11 siding in all States.

12 ‘‘(v) MULTIPLE GRANT PERCENT13 AGE.—For purposes of clause (ii)(I), the

14 multiple grant percentage of the State

15 shall be the amount of Federal funding re16 ceived by the State under grants awarded

17 under sections 329, 330, and 340, ex18 pressed as a percentage of the total

19 amounts received under such grants by all

20 States. With respect to a State, such per21 centage shall not exceed twice the general

22 population percentage of the State under

23 clause (vi) or be less than one-half of the

24 States general population percentage.
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1 ‘‘(vi) GENERAL POPULATION PER2 CENTAGE.—For purposes of clause (ii)(II),

3 the general population percentage of the

4 State shall be the total population of the

5 State (as determined by the Secretary of

6 Commerce) expressed as a percentage of

7 the total population of all States.

8 ‘‘(C) FEDERAL MATCHING PERCENTAGE.—

9 ‘‘(i) IN GENERAL.—For purposes of

10 subparagraph (A), the Federal matching

11 percentage of the State shall be equal to

12 one, less the State matching percentage (as

13 determined under clause (ii)).

14 ‘‘(ii) STATE MATCHING PERCENT15 AGE.—For purposes of clause (i), the State

16 matching percentage of the State shall be

17 0.25 multiplied by the ratio of the total

18 taxable resource percentage (as determined

19 under clause (iii)) to the need-adjusted

20 population of the State (as determined

21 under subparagraph (B)).

22 ‘‘(iii) TOTAL TAXABLE RESOURCE

23 PERCENTAGE.—For purposes of clause (ii),

24 the total taxable resources percentage of

25 the State shall be the total taxable re-
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1 sources of a State (as determined by the

2 Secretary of the Treasury) expressed as a

3 percentage of the sum of the total taxable

4 resources of all States.

5 ‘‘(3) ANNUAL ESTIMATES.—

6 ‘‘(A) IN GENERAL.—If the Secretary of

7 Commerce does not produce the annual esti8 mates required under paragraph (2)(B)(iv),

9 such estimates shall be determined by multiply10 ing the percentage of the population of the

11 State that is below 200 percent of the income

12 official poverty line as determined using the

13 most recent decennial census by the most recent

14 estimate of the total population of the State.

15 Except as provided in subparagraph (B), the

16 calculations required under this subparagraph

17 shall be made based on the most recent 3-year

18 average of the total taxable resources of individ19 uals within the State.

20 ‘‘(B) DISTRICT OF COLUMBIA.—Notwith21 standing subparagraph (A), the calculations re22 quired under such subparagraph with respect to

23 the District of Columbia shall be based on the

24 most recent 3-year average of the personal in25 come of individuals residing within the District
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1 as a percentage of the personal income for all

2 individuals residing within the District, as de3 termined by the Secretary of Commerce.

4 ‘‘(C) STATE OF ALASKA.—Notwithstanding

5 subparagraph (A), the calculations required

6 under such subparagraph with respect to the

7 State of Alaska shall be based on the quotient

8 of—

9 ‘‘(i) the most recent 3-year average of

10 the per capita income of individuals resid11 ing in the State; divided by

12 ‘‘(ii) 1.25.

13 ‘‘(4) MATCHING REQUIREMENT.—A State that

14 receives an allotment under this section shall make

15 available State resources (either directly or indi16 rectly) to carry out this section in an amount that

17 shall equal the State matching percentage for the

18 State (as determined under paragraph (2)(C)(ii)) di19 vided by the Federal matching percentage (as deter20 mined under paragraph (2)(C)).

21 ‘‘(c) APPLICATION.—

22 ‘‘(1) IN GENERAL.—To be eligible to receive an

23 allotment under this section, a State shall prepare

24 and submit an application to the Secretary at such
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1 time, in such manner, and containing such informa2 tion as the Secretary may by regulation require.

3 ‘‘(2) ASSURANCES.—A State application sub4 mitted under paragraph (1) shall contain an assur5 ance that—

6 ‘‘(A) the State will use amounts received

7 under its allotment consistent with the require8 ments of this section; and

9 ‘‘(B) the State will provide, from non-Fed10 eral sources, the amounts required under sub11 section (b)(4).

12 ‘‘(d) USE OF FUNDS.—

13 ‘‘(1) IN GENERAL.—The State shall use

14 amounts received under this section to award grants

15 to eligible public and nonprofit private entities, or

16 consortia of such entities, within the State to enable

17 such entities or consortia to provide services of the

18 type described in paragraph (2) of section 329(h) to

19 low-income or medically underserved populations.

20 ‘‘(2) ELIGIBILITY.—To be eligible to receive a

21 grant under paragraph (1), an entity or consortium

22 shall—

23 ‘‘(A) prepare and submit to the admin24 istering entity of the State, an application at

25 such time, in such manner, and containing such
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1 information as such administering entity may

2 require, including a plan for the provision of

3 services of the type described in paragraph (3);

4 ‘‘(B) provide assurances that services will

5 be provided under the grant at fee rates estab6 lished or determined in accordance with section

7 330(e)(3)(F); and

8 ‘‘(C) provide assurances that in the case of

9 services provided to individuals with health in10 surance, such insurance shall be used as the

11 primary source of payment for such services.

12 ‘‘(3) SERVICES.—The services to be provided

13 under a grant awarded under paragraph (1) shall in14 clude—

15 ‘‘(A) one or more of the types of primary

16 health services described in section 330(b)(1);

17 ‘‘(B) one or more of the types of supple18 mental health services described in section

19 330(b)(2); and

20 ‘‘(C) any other services determined appro21 priate by the administering entity of the State.

22 ‘‘(4) TARGET POPULATIONS.—Entities or con23 sortia receiving grants under paragraph (1) shall, in

24 providing the services described in paragraph (3),

25 substantially target populations of low-income or
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1 medically underserved populations within the State

2 who reside in medically underserved or health pro3 fessional shortage areas, areas certified as under4 served under the rural health clinic program, or

5 other areas determined appropriate by the admin6 istering entity of the State, within the State.

7 ‘‘(5) PRIORITY.—In awarding grants under

8 paragraph (1), the State shall—

9 ‘‘(A) give priority to entities or consortia

10 that can demonstrate through the plan submit11 ted under paragraph (2) that—

12 ‘‘(i) the services provided under the

13 grant will expand the availability of pri14 mary care services to the maximum num15 ber of low-income or medically underserved

16 populations who have no access to such

17 care on the date of the grant award; and

18 ‘‘(ii) the delivery of services under the

19 grant will be cost-effective; and

20 ‘‘(B) ensure that an equitable distribution

21 of funds is achieved among urban and rural en22 tities or consortia.

23 ‘‘(e) REPORTS AND AUDITS.—Each State shall pre24 pare and submit to the Secretary annual reports concern25 ing the State’s activities under this section which shall be
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1 in such form and contain such information as the Sec2 retary determines appropriate. Each such State shall es3 tablish fiscal control and fund accounting procedures as

4 may be necessary to assure that amounts received under

5 this section are being disbursed properly and are ac6 counted for, and include the results of audits conducted

7 under such procedures in the reports submitted under this

8 subsection.

9 ‘‘(f) PAYMENTS.—

10 ‘‘(1) ENTITLEMENT.—Each State for which an

11 application has been approved by the Secretary

12 under this section shall be entitled to payments

13 under this section for each fiscal year in an amount

14 not to exceed the State’s allotment under subsection

15 (b) to be expended by the State in accordance with

16 the terms of the application for the fiscal year for

17 which the allotment is to be made.

18 ‘‘(2) METHOD OF PAYMENTS.—The Secretary

19 may make payments to a State in installments, and

20 in advance or by way of reimbursement, with nec21 essary adjustments on account of overpayments or

22 underpayments, as the Secretary may determine.

23 ‘‘(3) STATE SPENDING OF PAYMENTS.—Pay24 ments to a State from the allotment under sub25 section (b) for any fiscal year must be expended by
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1 the State in that fiscal year or in the succeeding fis2 cal year.

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

4 ‘administering entity of the State’ means the agency or

5 official designated by the chief executive officer of the

6 State to administer the amounts provided to the State

7 under this section.

8 ‘‘(h) FUNDING.—Notwithstanding any other provi9 sion of law, the Secretary shall use 50 percent of the

10 amounts that the Secretary is required to utilize under

11 section 330B(h) in each fiscal year to carry out this sec12 tion.’’.

13 SEC. 5002. ESTABLISHMENT OF NEW PROGRAM TO PRO14 VIDE FUNDS TO ALLOW FEDERALLY QUALI15 FIED HEALTH CENTERS AND OTHER ENTI16 TIES OR ORGANIZATIONS TO PROVIDE EX17 PANDED SERVICES TO MEDICALLY UNDER18 SERVED INDIVIDUALS.

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

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

21 (as amended by section 5001) is amended by adding at

22 the end the following new section:
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1 ‘‘SEC. 330B. ESTABLISHMENT OF NEW PROGRAM TO PRO2 VIDE FUNDS TO ALLOW FEDERALLY QUALI3 FIED HEALTH CENTERS AND OTHER ENTI4 TIES OR ORGANIZATIONS TO PROVIDE EX5 PANDED SERVICES TO MEDICALLY UNDER6 SERVED INDIVIDUALS.

7 ‘‘(a) ESTABLISHMENT OF HEALTH SERVICES AC8 CESS PROGRAM.—From amounts appropriated under this

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

10 Health Care Delivery Assistance, award grants under this

11 section to federally qualified health centers (hereinafter re12 ferred to in this section as ‘FQHC’s’) and other entities

13 and organizations submitting applications under this sec14 tion (as described in subsection (c)) for the purpose of

15 providing access to services for medically underserved pop16 ulations (as defined in section 330(b)(3)) or in high im17 pact areas (as defined in section 329(a)(5)) not currently

18 being served by a FQHC.

19 ‘‘(b) ELIGIBILITY FOR GRANTS.—

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

21 grants under this section to entities or organizations

22 described in this paragraph and paragraph (2) which

23 have submitted a proposal to the Secretary to ex24 pand such entities or organizations operations (in25 cluding expansions to new sites (as determined nec26 essary by the Secretary)) to serve medically under-
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1 served populations or high impact areas not cur2 rently served by a FQHC and which—

3 ‘‘(A) have as of January 1, 1991, been cer4 tified by the Secretary as a FQHC under sec5 tion 1905(l)(2)(B) of the Social Security Act;

6 or

7 ‘‘(B) have submitted applications to the

8 Secretary to qualify as FQHC’s under such sec9 tion 1905(l)(2)(B); or

10 ‘‘(C) have submitted a plan to the Sec11 retary which provides that the entity will meet

12 the requirements to qualify as a FQHC when

13 operational.

14 ‘‘(2) NON FQHC ENTITIES.—

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

16 also make grants under this section to public or

17 private nonprofit agencies, health care entities

18 or organizations which meet the requirements

19 necessary to qualify as a FQHC except, the re20 quirement that such entity have a consumer

21 majority governing board and which have sub22 mitted a proposal to the Secretary to provide

23 those services provided by a FQHC as defined

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

25 Act and which are designed to promote access
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1 to primary care services or to reduce reliance on

2 hospital emergency rooms or other high cost

3 providers of primary health care services, pro4 vided such proposal is developed by the entity

5 or organizations (or such entities or organiza6 tions acting in a consortium in a community)

7 with the review and approval of the Governor of

8 the State in which such entity or organization

9 is located.

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

11 provide in making grants to entities or organi12 zations described in this paragraph that no

13 more than 10 percent of the funds provided for

14 grants under this section shall be made avail15 able for grants to such entities or organizations.

16 ‘‘(c) APPLICATION REQUIREMENTS.—

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

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

19 entity or organization must submit an application in

20 such form and at such time as the Secretary shall

21 prescribe and which meets the requirements of this

22 subsection.

23 ‘‘(2) REQUIREMENTS.—An application submit24 ted under this section must provide—
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•S 1770 PCS1S

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

2 for the provision of the services provided by the

3 entity designed to cover its reasonable costs of

4 operations; and

5 ‘‘(ii) for a corresponding schedule of dis6 counts to be applied to such fees or payments,

7 based upon the patient’s ability to pay (deter8 mined by using a sliding scale formula based on

9 the income of the patient);

10 ‘‘(B) assurances that the entity or organi11 zation provides services to persons who are eli12 gible for benefits under title XVIII of the Social

13 Security Act, for medical assistance under title

14 XIX of such Act or for assistance for medical

15 expenses under any other public assistance pro16 gram or private health insurance program; and

17 ‘‘(C) assurances that the entity or organi18 zation has made and will continue to make

19 every reasonable effort to collect reimbursement

20 for services—

21 ‘‘(i) from persons eligible for assist22 ance under any of the programs described

23 in subparagraph (B); and

24 ‘‘(ii) from patients not entitled to ben25 efits under any such programs.
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1 ‘‘(d) LIMITATIONS ON USE OF FUNDS.—

2 ‘‘(1) IN GENERAL.—From the amounts award3 ed to an entity or organization under this section,

4 funds may be used for purposes of planning but may

5 only be expended for the costs of—

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

7 or proposed areas to be served;

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

9 needs identified will be met; and

10 ‘‘(C) development of an implementation

11 plan that addresses—

12 ‘‘(i) recruitment and training of per13 sonnel; and

14 ‘‘(ii) activities necessary to achieve

15 operational status in order to meet FQHC

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

17 Social Security Act.

18 ‘‘(2) RECRUITING, TRAINING AND COMPENSA19 TION OF STAFF.—From the amounts awarded to an

20 entity or organization under this section, funds may

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

22 recruiting, training and compensating staff (clinical

23 and associated administrative personnel (to the ex24 tent such costs are not already reimbursed under

25 title XIX of the Social Security Act or any other
408

•S 1770 PCS1S

1 State or Federal program)) to the extent necessary

2 to allow the entity to operate at new or expended ex3 isting sites.

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

5 amounts awarded to an entity or organization under

6 this section, funds may be expended for the purposes

7 of acquiring facilities and equipment but only for the

8 cost of—

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

10 extent that new construction is found to be the

11 most cost-efficient approach by the Secretary);

12 ‘‘(B) acquiring, expanding, and moderniz13 ing of existing facilities;

14 ‘‘(C) purchasing essential (as determined

15 by the Secretary) equipment; and

16 ‘‘(D) amortization of principal and pay17 ment of interest on loans obtained for purposes

18 of site construction, acquisition, modernization,

19 or expansion, as well as necessary equipment.

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

21 to an entity or organization under this section, funds

22 may be expanded for the payment of services but

23 only for the costs of—

24 ‘‘(A) providing or arranging for the provi25 sion of all services through the entity necessary
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•S 1770 PCS1S

1 to qualify such entity as a FQHC under section

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

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

4 service that a FQHC may provide and be reim5 bursed for under title XIX of such Act; and

6 ‘‘(C) providing any unreimbursed costs of

7 providing services as described in section 330(a)

8 to patients.

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

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

11 give priority in awarding grants under this section

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

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

14 the Social Security Act and which have submitted a

15 proposal to the Secretary to expand their operations

16 (including expansion to new sites) to serve medically

17 underserved populations for high impact areas not

18 currently served by a FQHC. The Secretary shall

19 give first priority in awarding grants under this sec20 tion to those FQHCs or other entities which propose

21 to serve populations with the highest degree of

22 unmet need, and which can demonstrate the ability

23 to expand their operations in the most efficient man24 ner.
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•S 1770 PCS1S

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

2 give second priority in awarding grants to entities

3 which have submitted applications to the Secretary

4 which demonstrate that the entity will qualify as a

5 FQHC under section 1905(l)(2)(B) of the Social Se6 curity Act before it provides or arranges for the pro7 vision of services supported by funds awarded under

8 this section, and which are serving or proposing to

9 serve medically underserved populations or high im10 pact areas which are not currently served (or pro11 posed to be served) by a FQHC.

12 ‘‘(3) EXPANDED SERVICES AND PROJECTS.—

13 The Secretary shall give third priority in awarding

14 grants in subsequent years to those FQHCs or other

15 entities which have provided for expanded services

16 and project and are able to demonstrate that such

17 entity will incur significant unreimbursed costs in

18 providing such expanded services.

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

20 REIMBURSED FROM OTHER SOURCES.—To the extent

21 that an entity or organization receiving funds under this

22 section is reimbursed from another source for the provi23 sion of services to an individual, and does not use such

24 increased reimbursement to expand services furnished,

25 areas served, to compensate for costs of unreimbursed
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•S 1770 PCS1S

1 services provided to patients, or to promote recruitment,

2 training, or retention of personnel, such excess revenues

3 shall be returned to the Secretary.

4 ‘‘(g) TERMINATION OF GRANTS.—

5 ‘‘(1) FAILURE TO MEET FQHC REQUIRE6 MENTS.—

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

8 entity that is receiving funds awarded under

9 this section and which subsequently fails to

10 meet the requirements to qualify as a FQHC

11 under section 1905(l)(2)(B) or is an entity that

12 is not required to meet the requirements to

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

14 of the Social Security Act but fails to meet the

15 requirements of this section, the Secretary shall

16 terminate the award of funds under this section

17 to such entity.

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

19 of funds under this section to an entity, the en20 tities shall be entitled to 60 days prior notice of

21 termination and, as provided by the Secretary

22 in regulations, an opportunity to correct any de23 ficiencies in order to allow the entity to con24 tinue to receive funds under this section.
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1 ‘‘(2) REQUIREMENTS.—Upon any termination

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

3 the extent practicable)—

4 ‘‘(A) sell any property (including equip5 ment) acquired or constructed by the entity

6 using funds made available under this section

7 or transfer such property to another FQHC,

8 provided, that the Secretary shall reimburse

9 any costs which were incurred by the entity in

10 acquiring or constructing such property (includ11 ing equipment) which were not supported by

12 grants under this section; and

13 ‘‘(B) recoup any funds provided to an en14 tity terminated under this section.

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

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

17 $400,000,000 for fiscal year 1995, $800,000,000 for fis18 cal year 1996, $1,200,000,000 for fiscal year 1997,

19 $1,600,000,000 for fiscal year 1998, and $1,600,000,000

20 for fiscal year 1999.’’.

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

22 subsection (a) shall become effective with respect to serv23 ices furnished by a federally qualified health center or

24 other qualifying entity described in this section beginning

25 on or after October 1, 1995.
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•S 1770 PCS1S

1 (c) STUDY AND REPORT ON SERVICES PROVIDED BY

2 COMMUNITY HEALTH CENTERS AND HOSPITALS.—

3 (1) IN GENERAL.—The Secretary of Health and

4 Human Services (hereinafter referred to in this sub5 section as the ‘‘Secretary’’) shall provide for a study

6 to examine the relationship and interaction between

7 community health centers and hospitals in providing

8 services to individuals residing in medically under9 served areas. The Secretary shall ensure that the

10 National Rural Research Centers participate in such

11 study.

12 (2) REPORT.—The Secretary shall provide to

13 the appropriate committees of Congress a report

14 summarizing the findings of the study within 90

15 days of the end of each project year and shall in16 clude in such report recommendations on methods to

17 improve the coordination of and provision of services

18 in medically underserved areas by community health

19 centers and hospitals.

20 (3) AUTHORIZATION.—There are authorized to

21 be appropriated to carry out the study provided for

22 in this subsection $150,000 for each of fiscal years

23 1995 and 1996.
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1 SEC. 5003. TAX INCENTIVES FOR PRACTICE IN FRONTIER,

2 RURAL, AND URBAN UNDERSERVED AREAS.

3 (a) NONREFUNDABLE CREDIT FOR CERTAIN PRI4 MARY HEALTH SERVICES PROVIDERS.—

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

7 of 1986 (relating to nonrefundable personal credits)

8 is amended by inserting after section 25 the follow9 ing new section:

10 ‘‘SEC. 25A. PRIMARY HEALTH SERVICES PROVIDERS.

11 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a

12 qualified primary health services provider, there is allowed

13 as a credit against the tax imposed by this chapter for

14 any taxable year in a mandatory service period an amount

15 equal to the product of—

16 ‘‘(1) the lesser of—

17 ‘‘(A) the number of months of such period

18 occurring in such taxable year, or

19 ‘‘(B) 36 months, reduced by the number of

20 months taken into account under this para21 graph with respect to such provider for all pre22 ceding taxable years (whether or not in the

23 same mandatory service period), multiplied by

24 ‘‘(2) $1,000 ($500 in the case of a qualified

25 primary health services provider who is a physician

26 assistant or a nurse practitioner).
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1 ‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO2 VIDER.—For purposes of this section, the term ‘qualified

3 primary health services provider’ means any physician,

4 physician assistant, or nurse practitioner who for any

5 month during a mandatory service period is certified by

6 the Bureau to be a primary health services provider who—

7 ‘‘(1) is providing primary health services—

8 ‘‘(A) full time, and

9 ‘‘(B) to individuals at least 80 percent of

10 whom reside in a health professional shortage

11 area (as defined in subsection (d)(2)),

12 ‘‘(2) is not receiving during such year a scholar13 ship under the National Health Service Corps Schol14 arship Program or a loan repayment under the Na15 tional Health Service Corps Loan Repayment Pro16 gram,

17 ‘‘(3) is not fulfilling service obligations under

18 such Programs, and

19 ‘‘(4) has not defaulted on such obligations.

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

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

22 the period of 60 consecutive calendar months beginning

23 with the first month the taxpayer is a qualified primary

24 health services provider.
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•S 1770 PCS1S

1 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section—

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

4 Bureau of Health Care Delivery and Assistance,

5 Health Resources and Services Administration of the

6 United States Public Health Service.

7 ‘‘(2) HEALTH PROFESSIONAL SHORTAGE

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

9 means—

10 ‘‘(A) a geographic area in which there are

11 6 or fewer individuals residing per square mile,

12 ‘‘(B) a health professional shortage area

13 (as defined in section 332(a)(1)(A) of the Pub14 lic Health Service Act),

15 ‘‘(C) an area which is determined by the

16 Secretary of Health and Human Services as

17 equivalent to an area described in subparagraph

18 (A) and which is designated by the Bureau of

19 the Census as not urbanized, or

20 ‘‘(D) a community that is certified as un21 derserved by the Secretary for purposes of par22 ticipation in the rural health clinic program

23 under title XVIII of the Social Security Act.
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1 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the

2 meaning given to such term by section 1861(r) or

3 the Social Security Act.

4 ‘‘(4) PHYSICIAN ASSISTANT; NURSE PRACTI5 TIONER.—The terms ‘physician assistant’ and ‘nurse

6 practitioner’ have the meanings given to such terms

7 by section 1861(aa)(5) of the Social Security Act.

8 ‘‘(5) PRIMARY HEALTH SERVICES PROVIDER.—

9 The term ‘primary health services provider’ means a

10 provider of primary health services (as defined in

11 section 330(b)(1) of the Public Health Service Act).

12 ‘‘(e) RECAPTURE OF CREDIT.—

13 ‘‘(1) IN GENERAL.—If, during any taxable year,

14 there is a recapture event, then the tax of the tax15 payer under this chapter for such taxable year shall

16 be increased by an amount equal to the product of—

17 ‘‘(A) the applicable percentage, and

18 ‘‘(B) the aggregate unrecaptured credits

19 allowed to such taxpayer under this section for

20 all prior taxable years.

21 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

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

23 subsection, the applicable recapture percentage

24 shall be determined from the following table:
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•S 1770 PCS1S

The applicable

‘‘If the recapture recapture

event occurs during: percentage is:

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

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

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

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

Months 61 and thereafter .......................... 0.

1 ‘‘(B) TIMING.—For purposes of subpara2 graph (A), month 1 shall begin on the first day

3 of the mandatory service period.

4 ‘‘(3) RECAPTURE EVENT DEFINED.—

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

6 subsection, the term ‘recapture event’ means

7 the failure of the taxpayer to be a qualified pri8 mary health services provider for any month

9 during any mandatory service period.

10 ‘‘(B) CESSATION OF DESIGNATION.—The

11 cessation of the designation of any area as a

12 rural health professional shortage area after the

13 beginning of the mandatory service period for

14 any taxpayer shall not constitute a recapture

15 event.

16 ‘‘(C) SECRETARIAL WAIVER.—The Sec17 retary may waive any recapture event caused by

18 extraordinary circumstances.

19 ‘‘(4) NO CREDITS AGAINST TAX.—Any increase

20 in tax under this subsection shall not be treated as

21 a tax imposed by this chapter for purposes of deter-
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•S 1770 PCS1S

1 mining the amount of any credit under subpart A,

2 B, or D of this part.’’.

3 (2) CLERICAL AMENDMENT.—The table of sec4 tions for subpart A of part IV of subchapter A of

5 chapter 1 of such Code is amended by inserting

6 after the item relating to section 25 the following

7 new item:

‘‘Sec. 25A. Primary health services providers.’’.

8 (3) EFFECTIVE DATE.—The amendments made

9 by this subsection shall apply to taxable years begin10 ning after the date of the enactment of this Act.

11 (b) NATIONAL HEALTH SERVICE CORPS LOAN RE12 PAYMENTS EXCLUDED FROM GROSS INCOME.—

13 (1) IN GENERAL.—Part III of subchapter B of

14 chapter 1 of the Internal Revenue Code of 1986 (re15 lating to items specifically excluded from gross in16 come) is amended by redesignating section 137 as

17 section 138 and by inserting after section 136 the

18 following new section:

19 ‘‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN RE20 PAYMENTS.

21 ‘‘(a) GENERAL RULE.—Gross income shall not in22 clude any qualified loan repayment.

23 ‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes

24 of this section, the term ‘qualified loan repayment’ means

25 any payment made on behalf of the taxpayer by the Na-
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•S 1770 PCS1S

1 tional Health Service Corps Loan Repayment Program

2 under section 338B(g) of the Public Health Service Act.’’.

3 (2) CONFORMING AMENDMENT.—Paragraph (3)

4 of section 338B(g) of the Public Health Service Act

5 is amended by striking ‘‘Federal, State, or local’’

6 and inserting ‘‘State or local’’.

7 (3) CLERICAL AMENDMENT.—The table of sec8 tions for part III of subchapter B of chapter 1 of

9 the Internal Revenue Code of 1986 is amended by

10 striking the item relating to section 136 and insert11 ing the following:

‘‘Sec. 137. National Health Service Corps loan repayments.

‘‘Sec. 138. Cross references to other Acts.’’.

12 (4) EFFECTIVE DATE.—The amendments made

13 by this subsection shall apply to payments made

14 under section 338B(g) of the Public Health Service

15 Act after the date of the enactment of this Act.

16 (c) EXPENSING OF MEDICAL EQUIPMENT.—

17 (1) IN GENERAL.—Section 179 of the Internal

18 Revenue Code of 1986 (relating to election to ex19 pense certain depreciable business assets) is amend20 ed—

21 (A) by striking paragraph (1) of subsection

22 (b) and inserting the following:

23 ‘‘(1) DOLLAR LIMITATION.—
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1 ‘‘(A) GENERAL RULE.—The aggregate cost

2 which may be taken into account under sub3 section (a) for any taxable year shall not exceed

4 $17,500.

5 ‘‘(B) RURAL HEALTH CARE PROPERTY.—

6 In the case of rural health care property, the

7 aggregate cost which may be taken into account

8 under subsection (a) for any taxable year shall

9 not exceed $32,500, reduced by the amount

10 otherwise taken into account under subsection

11 (a) for such year.’’; and

12 (B) by adding at the end of subsection (d)

13 the following new paragraph:

14 ‘‘(11) RURAL HEALTH CARE PROPERTY.—For

15 purposes of this section, the term ‘rural health care

16 property’ means section 179 property—

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

18 the screening, monitoring, observation, diag19 nosis, or treatment of patients in a laboratory,

20 medical, or hospital environment,

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

22 and used by a physician (as defined in section

23 1861(r) of the Social Security Act) in the active

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

25 business of providing primary health services
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1 (as defined in section 330(b)(1) of the Public

2 Health Service Act) in a rural health profes3 sional shortage area (as defined in section

4 25A(d)(5)), and

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

6 such area.’’.

7 (2) EFFECTIVE DATE.—The amendments made

8 by this subsection shall apply to property placed in

9 service in taxable years beginning after the date of

10 enactment of this Act.

11 (d) DEDUCTION FOR STUDENT LOAN PAYMENTS BY

12 MEDICAL PROFESSIONALS PRACTICING IN RURAL

13 AREAS.—

14 (1) INTEREST ON STUDENT LOANS NOT TREAT15 ED AS PERSONAL INTEREST.—Section 163(h)92) of

16 the Internal Revenue Code of 1986 (defining per17 sonal interest) is amended by striking ‘‘and’’ at the

18 end of subparagraph (D), by striking the period at

19 the end of subparagraph (E) and inserting ‘‘, and’’,

20 and by adding at the end thereof the following new

21 subparagraph:

22 ‘‘(F) any qualified medical education interest

23 (within the meaning of subsection (k)).’’.

24 (2) QUALIFIED MEDICAL EDUCATION INTEREST

25 DEFINED.—Section 163 of such Code (relating to in-
423

•S 1770 PCS1S

1 terest expenses) is amended by redesignating sub2 section (k) as subsection (l) and by inserting after

3 subsection (j) the following new subsection:

4 ‘‘(k) QUALIFIED MEDICAL EDUCATION INTEREST OF

5 MEDICAL PROFESSIONALS PRACTICING IN RURAL

6 AREAS.—

7 ‘‘(1) IN GENERAL.—For purposes of subsection

8 (h)(2)(F), the term ‘qualified medical education in9 terest’ means an amount which bears the same ratio

10 to the interest paid on qualified educational loans

11 during the taxable year by an individual performing

12 services under a qualified rural medical practice

13 agreement as—

14 ‘‘(A) the number of months during the tax15 able year during which such services were per16 formed, bears to

17 ‘‘(B) the number of months in the taxable

18 year.

19 ‘‘(2) DOLLAR LIMITATION.—The aggregate

20 amount which may be treated as qualified medical

21 education interest for any taxable year with respect

22 to an individual shall not exceed $5,000.

23 ‘‘(3) QUALIFIED RURAL MEDICAL PRACTICE

24 AGREEMENT.—For purposes of this subsection—
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•S 1770 PCS1S

1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 rural medical practice agreement’ means a writ3 ten agreement between an individual and an ap4 plicable rural community under which the indi5 vidual agrees—

6 ‘‘(i) in the case of a medical doctor,

7 upon completion of the individual’s resi8 dency (or internship if no residency is re9 quired), or

10 ‘‘(ii) in the case of a registered nurse,

11 nurse practitioner, or physician’s assistant,

12 upon completion of the education to which

13 the qualified education loan relates, to per14 form full-time services as such a medical

15 professional in the applicable rural commu16 nity for a period of 24 consecutive months.

17 An individual and an applicable rural com18 munity may elect to have the agreement

19 apply for 36 consecutive months rather

20 than 24 months.

21 ‘‘(B) SPECIAL RULE FOR COMPUTING PE22 RIODS.—An individual shall be treated as meet23 ing the 24- or 36-consecutive month require24 ment under subparagraph (A) if, during each

25 12-consecutive month period within either such
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1 period, the individual performs full-time services

2 as a medical doctor, registered nurse, nurse

3 practitioner, or physician’s assistant, whichever

4 applies, in the applicable rural community dur5 ing 9 of the months in such 12-consecutive

6 month period. For purposes of this subsection,

7 an individual meeting the requirements of the

8 preceding sentence shall be treated as perform9 ing services during the entire 12-month period.

10 ‘‘(C) APPLICABLE RURAL COMMUNITY.—

11 The term ‘applicable rural community’ means—

12 ‘‘(i) any political subdivision of a

13 State which—

14 ‘‘(I) has a population of 5,000 or

15 less, and

16 ‘‘(II) has a per capita income of

17 $15,000 or less, or

18 ‘‘(ii) an Indian reservation which has

19 a per capita income of $15,000 or less.

20 ‘‘(4) QUALIFIED EDUCATIONAL LOAN.—The

21 term ‘qualified educational loan’ means any indebt22 edness to pay qualified higher education expenses

23 (within the meaning of section 135(c)(2)) and rea24 sonable living expenses—

25 ‘‘(A) which are paid or incurred—
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•S 1770 PCS1S

1 ‘‘(i) as a candidate for a degree as a

2 medical doctor at an educational institu3 tion described in section 170(b)(1)(A)(ii),

4 or

5 ‘‘(ii) in connection with courses of in6 struction at such an institution necessary

7 for certification as a registered nurse,

8 nurse practitioner, or physician’s assistant,

9 and

10 ‘‘(B) which are paid or incurred within a

11 reasonable time before or after such indebted12 ness is incurred.

13 ‘‘(5) RECAPTURE.—If an individual fails to

14 carry out a qualified rural medical practice agree15 ment during any taxable year, then—

16 ‘‘(A) no deduction with respect to such

17 agreement shall be allowable by reason of sub18 section (h)(2)(F) for such taxable year and any

19 subsequent taxable year, and

20 ‘‘(B) there shall be included in gross in21 come for such taxable year the aggregate

22 amount of the deductions allowable under this

23 section (by reason of subsection (h)(2)(F)) for

24 all preceding taxable years.
427

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1 ‘‘(6) DEFINITIONS.—For purposes of this sub2 section, the terms ‘registered nurse’, ‘nurse practi3 tioner’, and ‘physician’s assistant’ have the meaning

4 given such terms by section 1861 of the Social Secu5 rity Act.’’.

6 (3) DEDUCTION ALLOWED IN COMPUTING AD7 JUSTED GROSS INCOME.—Section 62(a) of such

8 Code, as amended by sections 2002(c)(3) and

9 2003(b), is amended by inserting after paragraph

10 (17) the following new paragraph:

11 ‘‘(18) INTEREST ON STUDENT LOANS OF RURAL

12 HEALTH PROFESSIONALS.—The deduction allowable

13 by reason of section 163(h)(2)(F) (relating to stu14 dent loan payments of medical professionals practic15 ing in rural areas).’’.

16 (4) EFFECTIVE DATE.—The amendments made

17 by this subsection shall apply to taxable years begin18 ning after the date of the enactment of this Act.

19 SEC. 5004. RURAL EMERGENCY ACCESS CARE HOSPITALS.

20 (a) RURAL EMERGENCY ACCESS CARE HOSPITALS

21 DESCRIBED.—Section 1861 of the Social Security Act (42

22 U.S.C. 1395x) is amended by adding at the end the follow23 ing new subsection:
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•S 1770 PCS1S

1 ‘‘Rural Emergency Access Care Hospital; Rural

2 Emergency Access Care Hospital Services

3 ‘‘(oo)(1) The term ‘rural emergency access care hos4 pital’ means, for a fiscal year, a facility with respect to

5 which the Secretary finds the following:

6 ‘‘(A) The facility is located in a rural area (as

7 defined in section 1886(d)(2)(D)).

8 ‘‘(B) The facility was a hospital under this title

9 at any time during the 5-year period that ends on

10 the date of the enactment of this subsection.

11 ‘‘(C) The facility is in danger of closing due to

12 low inpatient utilization rates and negative operating

13 losses, and the closure of the facility would limit the

14 access of individuals residing in the facility’s service

15 area to emergency services.

16 ‘‘(D) The facility has entered into (or plans to

17 enter into) an agreement with a hospital with a par18 ticipation agreement in effect under section 1866(a),

19 and under such agreement the hospital shall accept

20 patients transferred to the hospital from the facility

21 and receive data from and transmit data to the facil22 ity.

23 ‘‘(E) There is a practitioner who is qualified to

24 provide advanced cardiac life support services (as de-
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1 termined by the State in which the facility is lo2 cated) on-site at the facility on a 24-hour basis.

3 ‘‘(F) A physician is available on-call to provide

4 emergency medical services on a 24-hour basis.

5 ‘‘(G) The facility meets such staffing require6 ments as would apply under section 1861(e) to a

7 hospital located in a rural area, except that—

8 ‘‘(i) the facility need not meet hospital

9 standards relating to the number of hours dur10 ing a day, or days during a week, in which the

11 facility must be open, except insofar as the fa12 cility is required to provide emergency care on

13 a 24-hour basis under subparagraphs (E) and

14 (F); and

15 ‘‘(ii) the facility may provide any services

16 otherwise required to be provided by a full-time,

17 on-site dietician, pharmacist, laboratory techni18 cian, medical technologist, or radiological tech19 nologist on a part-time, off-site basis.

20 ‘‘(H) The facility meets the requirements appli21 cable to clinics and facilities under subparagraphs

22 (C) through (J) of paragraph (2) of section

23 1861(aa) and of clauses (ii) and (iv) of the second

24 sentence of such paragraph (or, in the case of the

25 requirements of subparagraph (E), (F), or (J) of
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1 such paragraph, would meet the requirements if any

2 reference in such subparagraph to a ‘nurse practi3 tioner’ or to ‘nurse practitioners’ was deemed to be

4 a reference to a ‘nurse practitioner or nurse’ or to

5 ‘nurse practitioners or nurses’), except that in deter6 mining whether a facility meets the requirements of

7 this subparagraph, subparagraphs (E) and (F) of

8 that paragraph shall be applied as if any reference

9 to a ‘physician’ is a reference to a physician as de10 fined in section 1861(r)(1).

11 ‘‘(2) The term ‘rural emergency access care hospital

12 services’ means medical and other health services fur13 nished by a rural emergency access care hospital.’’.

14 (b) COVERAGE OF AND PAYMENT FOR SERVICES.—

15 Section 1832(a)(2) of the Social Security Act (42 U.S.C.

16 1395k(a)(2)) is amended—

17 (1) by striking ‘‘and’’ at the end of subpara18 graph (I);

19 (2) by striking the period at the end of sub20 paragraph (J) and inserting ‘‘; and’’; and

21 (3) by adding at the end the following new sub22 paragraph:

23 ‘‘(K) rural emergency access care hospital

24 services (as defined in section 1861(oo)(2)).’’.
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1 (c) PAYMENT BASED ON PAYMENT FOR OUTPATIENT

2 RURAL PRIMARY CARE HOSPITAL SERVICES.—

3 (1) IN GENERAL.—Section 1833(a)(6) of the

4 Social Security Act (42 U.S.C. 1395l(a)(6)) is

5 amended by striking ‘‘services,’’ and inserting ‘‘serv6 ices and rural emergency access care hospital serv7 ices,’’.

8 (2) PAYMENT METHODOLOGY DESCRIBED.—

9 Section 1834(g) of such Act (42 U.S.C. 1395m(g))

10 is amended—

11 (A) in the heading, by striking ‘‘SERV12 ICES’’ and inserting ‘‘SERVICES AND RURAL

13 EMERGENCY ACCESS CARE HOSPITAL SERV14 ICES’’;

15 (B) in paragraph (1), by striking ‘‘during

16 a year before 1993’’ and inserting ‘‘during a

17 year before the prospective payment system de18 scribed in paragraph (2) is in effect’’;

19 (C) in paragraph (1), by adding at the end

20 the following: ‘‘The amount of payment shall be

21 determined under either method without regard

22 to the amount of the customary or other

23 charge.’’;
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1 (D) in paragraph (2), by striking ‘‘Janu2 ary 1, 1993,’’ and inserting ‘‘January 1,

3 1996,’’; and

4 (E) by adding at the end the following new

5 paragraph:

6 ‘‘(3) APPLICATION OF METHODS TO PAYMENT

7 FOR RURAL EMERGENCY ACCESS CARE HOSPITAL

8 SERVICES.—The amount of payment for rural emer9 gency access care hospital services provided during

10 a year shall be determined using the applicable

11 method provided under this subsection for determin12 ing payment for outpatient rural primary care hos13 pital services during the year.’’.

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

15 this section shall apply to fiscal years beginning on or

16 after October 1, 1994.

17 SEC. 5005. GRANTS TO STATES REGARDING AIRCRAFT FOR

18 TRANSPORTING RURAL VICTIMS OF MEDICAL

19 EMERGENCIES.

20 Part E of title XII of the Public Health Service Act

21 (42 U.S.C. 300d–51 et seq.) is amended by adding at the

22 end thereof the following new section:
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1 ‘‘SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL

2 VICTIMS OF MEDICAL EMERGENCIES.

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

4 to States to assist such States in the creation or enhance5 ment of air medical transport systems that provide victims

6 of medical emergencies in rural areas with access to treat7 ments for the injuries or other conditions resulting from

8 such emergencies.

9 ‘‘(b) APPLICATION AND PLAN.—

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

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

12 and submit to the Secretary an application in such

13 form, made in such manner, and containing such

14 agreements, assurances, and information, including

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

16 Secretary determines to be necessary to carry out

17 this section.

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

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

20 shall—

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

22 grant proceeds and the geographic areas to be

23 served;

24 ‘‘(B) demonstrate that the geographic

25 areas to be served, as described under subpara26 graph (A), are rural in nature;
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1 ‘‘(C) demonstrate that there is a lack of

2 facilities available and equipped to deliver ad3 vanced levels of medical care in the geographic

4 areas to be served;

5 ‘‘(D) demonstrate that in utilizing the

6 grant proceeds for the establishment or en7 hancement of air medical services the State

8 would be making a cost-effective improvement

9 to existing ground-based or air emergency medi10 cal service systems;

11 ‘‘(E) demonstrate that the State will not

12 utilize the grant proceeds to duplicate the capa13 bilities of existing air medical systems that are

14 effectively meeting the emergency medical needs

15 of the populations they serve;

16 ‘‘(F) demonstrate that in utilizing the

17 grant proceeds the State is likely to achieve a

18 reduction in the morbidity and mortality rates

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

20 Secretary;

21 ‘‘(G) demonstrate that the State, in utiliz22 ing the grant proceeds, will—

23 ‘‘(i) maintain the expenditures of the

24 State for air and ground medical transport

25 systems at a level equal to not less than
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1 the level of such expenditures maintained

2 by the State for the fiscal year preceding

3 the fiscal year for which the grant is re4 ceived; and

5 ‘‘(ii) ensure that recipients of direct

6 financial assistance from the State under

7 such grant will maintain expenditures of

8 such recipients for such systems at a level

9 at least equal to the level of such expendi10 tures maintained by such recipients for the

11 fiscal year preceding the fiscal year for

12 which the financial assistance is received;

13 ‘‘(H) demonstrate that persons experienced

14 in the field of air medical service delivery were

15 consulted in the preparation of the State plan;

16 and

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

18 Secretary may determine appropriate.

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

20 determining whether to award a grant to a State under

21 this section, the Secretary shall—

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

23 be served with the grant proceeds and the services

24 to be provided with such proceeds, as identified in

25 the State plan submitted under subsection (b); and
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1 ‘‘(2) give preference to States with State plans

2 that demonstrate an effective integration of the pro3 posed air medical transport systems into a com4 prehensive network or plan for regional or statewide

5 emergency medical service delivery.

6 ‘‘(d) STATE ADMINISTRATION AND USE OF

7 GRANT.—

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

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

10 the State agrees that such grant will be adminis11 tered by the State agency with principal responsibil12 ity for carrying out programs regarding the provi13 sion of medical services to victims of medical emer14 gencies or trauma.

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

16 amounts received under a grant awarded under this

17 section to award subgrants to public and private en18 tities operating within the State.

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

20 The Secretary may not make a grant to a State

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

22 in developing and carrying out the State plan under

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

24 with respect to the plan (including any revisions
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1 thereto) and facilitate comments from interested

2 persons.

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

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

5 ‘‘(f) REPORTS.—

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

7 grant under this section shall annually (during each

8 year in which the grant proceeds are used) prepare

9 and submit to the Secretary a report that shall con10 tain—

11 ‘‘(A) a description of the manner in which

12 the grant proceeds were utilized;

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

14 the air medical transport programs assisted

15 with grant proceeds; and

16 ‘‘(C) such other information as the Sec17 retary may require.

18 ‘‘(2) TERMINATION OF FUNDINGS.—In review19 ing reports submitted under paragraph (1), if the

20 Secretary determines that a State is not using

21 amounts provided under a grant awarded under this

22 section in accordance with the State plan submitted

23 by the State under subsection (b), the Secretary may

24 terminate the payment of amounts under such grant

25 to the State until such time as the Secretary deter-
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1 mines that the State comes into compliance with

2 such plan.

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

4 ‘rural areas’ means geographic areas that are located out5 side of standard metropolitan statistical areas, as identi6 fied by the Secretary.

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

8 are authorized to be appropriated to make grants under

9 this section, $15,000,000 for fiscal year 1995, and such

10 sums as may be necessary for each for fiscal years 1996

11 and 1997.’’.

12 SEC. 5006. DEMONSTRATION PROJECTS TO ENCOURAGE

13 THE DEVELOPMENT AND OPERATION OF

14 RURAL HEALTH NETWORKS.

15 (a) IN GENERAL.—

16 (1) ESTABLISHMENT.—

17 (A) IN GENERAL.—The Secretary may

18 conduct a demonstration project under which

19 public and private entities may apply for waiv20 ers of any of the provisions of title XVIII and

21 XIX of the Social Security Act in order to oper22 ate rural health networks (as defined in sub23 section (d)(1)) which—

24 (i) improve the access of medicare

25 beneficiaries (as defined in subsection
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1 (d)(2)) and medicaid beneficiaries (as de2 fined in subsection (d)(3)) to health care

3 services;

4 (ii) improve the quality of health care

5 services furnished to such beneficiaries;

6 and

7 (iii) improve the outcomes of health

8 care services furnished to such bene9 ficiaries.

10 (B) NUMBER OF WAIVERS.—The Secretary

11 may grant waivers to operate rural health net12 works under the demonstration project con13 ducted under this section to a number of public

14 and private entities determined appropriate by

15 the Secretary.

16 (2) APPLICATIONS.—

17 (A) IN GENERAL.—In order to participate

18 in the demonstration project conducted under

19 this subsection, a public or private entity desir20 ing to operate a rural health network shall sub21 mit an application to the Secretary which meets

22 the requirements of subparagraph (B). Such

23 application shall be submitted in such manner

24 and at such time as the Secretary shall require.
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1 (B) REQUIREMENTS.—An application sub2 mitted by a public or private entity under this

3 subsection must provide—

4 (i) a description of the health care

5 providers participating in the rural health

6 network;

7 (ii) a description of the geographic

8 area served by the rural health networks;

9 (iii) information demonstrating that

10 the public or private entity has consulted

11 with interested parties with respect to the

12 operation of the rural health network, in13 cluding local government entities and com14 munity groups;

15 (iv) a description of the operational

16 structure of the rural health network, in17 cluding whether the network is a managed

18 care entity or a fee-for-service provider;

19 (v) a proposal for how payments

20 should be made to the rural health network

21 under titles XVIII and XIX of the Social

22 Security Act, including a statement as to

23 whether such payments should be made

24 pursuant to the provisions of such titles or
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1 pursuant to an alternative payment meth2 odology described in the application;

3 (vi) assurances that medicare bene4 ficiaries served by the rural health network

5 will receive care and services of the same

6 quality as the care and services received by

7 other beneficiaries under title XVIII of the

8 Social Security Act;

9 (vii) assurances that medicaid bene10 ficiaries served by the rural health network

11 will receive care and services of the same

12 quality as the care and services received by

13 other beneficiaries under title XIX of the

14 Social Security Act;

15 (viii) a description of how the rural

16 health network plans to handle any situa17 tion in which a medicare beneficiary or

18 medicaid beneficiary served by the network

19 receives health care services from providers

20 outside the network;

21 (ix) assurances that the rural health

22 network is furnishing health care services

23 to a significant number of individuals who

24 are not receiving benefits under titles

25 XVIII and XIX of the Social Security Act;
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1 (x) assurances that through sharing

2 of facilities, land, and equipment, the rural

3 health network will result in a reduction of

4 total capital costs for the area served by

5 the network;

6 (xi) a plan for cooperation in service

7 delivery by health care providers partici8 pating in the rural health network that

9 demonstrates the elimination of unneces10 sary duplication and, when appropriate,

11 the consolidation of specialized services

12 within the area served by the network;

13 (xii) evidence that the rural health

14 network furnishes services which address

15 the special access needs of the medicare

16 beneficiaries and medicaid beneficiaries

17 served by the network;

18 (xiii) evidence of capability and exper19 tise in network planning and management;

20 and

21 (xiv) such additional information as

22 the Secretary determines appropriate.

23 (C) APPROVAL OF APPLICATION.—

24 (i) INITIAL REVIEW.—Within 60 days

25 after an application is submitted by a pub-
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1 lic or private entity under this subsection,

2 the Secretary shall review and approve

3 such application or provide the entity with

4 a list of the modifications that are nec5 essary for such application to be approved.

6 (ii) ADDITIONAL REVIEW.—Within 60

7 days after a public or private entity resub8 mits any application under this subsection,

9 the Secretary shall review and approve

10 such application or provide the entity with

11 a summary of which items included on the

12 list provided to the State under clause (i)

13 remain unsatisfied. An entity may resub14 mit an application under this subpara15 graph as many times as necessary to gain

16 approval.

17 (3) COORDINATION WITH OTHER PROGRAMS.—

18 The Secretary shall coordinate the demonstration

19 project conducted under this subsection with any

20 other relevant Federal or State programs in order to

21 prevent duplication and improve the quality and de22 livery of health care services to medicare bene23 ficiaries and medicaid beneficiaries.

24 (4) PAYMENTS TO NETWORKS.—
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1 (A) IN GENERAL.—The Secretary shall de2 termine the amount of payments to be made

3 under titles XVIII and XIX to a rural health

4 network participating in a demonstration

5 project under this subsection based on historic

6 costs adjusted based on population and geo7 graphic area as the Secretary determines appro8 priate to take into account the costs of furnish9 ing health care services in the area served by

10 the network.

11 (B) BUDGET NEUTRALITY.—The Secretary

12 shall provide that in carrying out the dem13 onstration project under this section, the aggre14 gate payments under titles XVIII and XIX of

15 the Social Security Act to providers participat16 ing in a rural health network shall be no great17 er or lesser than what such payments would

18 have been if such providers were not participat19 ing in such network.

20 (5) DURATION OF WAIVERS.—Any waiver

21 granted under the demonstration project conducted

22 under this subsection shall be granted for a period

23 determined appropriate by the Secretary. The Sec24 retary may terminate such a waiver at any time if

25 the Secretary determines that the rural health net-
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1 work has failed to furnish health care services in ac2 cordance with the terms of the waiver.

3 (6) REPORTS.—

4 (A) IN GENERAL.—Each public or private

5 entity receiving a wavier to operate a rural

6 health network under the demonstration project

7 conducted under this subsection shall, through

8 an independent entity, evaluate the network and

9 submit interim and final reports to the Sec10 retary at such times and containing such infor11 mation as the Secretary shall require.

12 (B) REPORT TO CONGRESS.—Not later

13 than 60 days after the receipt of a final report

14 by a rural health network under subparagraph

15 (A) the Secretary shall submit a report to Con16 gress.

17 (b) GRANTS FOR THE DEVELOPMENT OF RURAL

18 HEALTH NETWORKS.—

19 (1) IN GENERAL.—The Secretary shall award

20 grants to public and private entities which have re21 ceived a wavier under the demonstration project con22 ducted under subsection (a) for the purpose of plan23 ning and developing rural health networks.

24 (2) APPLICATION PROCESS.—
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1 (A) SUBMISSION OF APPLICATION.—Each

2 public or private entity desiring to receive a

3 grant under this subsection shall submit an ap4 plication to the Secretary at such time and con5 taining such information as the Secretary deter6 mines appropriate.

7 (B) CONSIDERATION OF APPLICATIONS.—

8 The Secretary shall develop a system for deter9 mining the priority for distributing grants

10 under this subsection and such grants shall be

11 distributed in accordance with such system.

12 (3) USE OF GRANT FUNDS.—A State that is

13 awarded grant funds under this subsection may use

14 such funds for all costs associated with assisting

15 public or private entities in planning and developing

16 rural health networks.

17 (4) AUTHORIZATION OF APPROPRIATIONS.—

18 There are authorized to be appropriated such sums

19 as may be necessary for the purposes of awarding

20 grants under this subsection.

21 (c) GRANTS FOR THE OPERATION OF RURAL

22 HEALTH NETWORKS.—

23 (1) IN GENERAL.—The Secretary shall award

24 grants to public and private entities which have re25 ceived a waiver under the demonstration project con-
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1 ducted under subsection (a) for the operation of

2 rural health networks.

3 (2) APPLICATION PROCESS.—

4 (A) SUBMISSION OF APPLICATION.—Any

5 public or private entity which desires to receive

6 a grant under this subsection shall submit an

7 application of the Secretary at such time and

8 containing such information as the Secretary

9 determines appropriate.

10 (B) CONSIDERATION OF APPLICATIONS.—

11 The Secretary shall develop a system for deter12 mining the priority for distributing grants

13 under this subsection and such grants shall be

14 distributed in accordance with such priority.

15 (3) USE OF GRANT FUNDS.—A public or pri16 vate entity that is awarded grant funds under this

17 subsection may use such funds for all costs associ18 ated with operating a rural health network.

19 (4) AUTHORIZATION OF APPROPRIATIONS.—

20 There are authorized to be appropriated such sums

21 as may be necessary for the purposes of awarding

22 grants under this subsection.

23 (d) DEFINITIONS.—For purposes of this section:

24 (1) RURAL HEALTH NETWORK.—The term

25 ‘‘rural health network’’ means a formal cooperative
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1 arrangement between participating hospitals, physi2 cians, and other health care providers which—

3 (A) furnishes health care services to medi4 care beneficiaries and medicaid beneficiaries;

5 (B) is located in a rural area; and

6 (C) is governed by a board of directors se7 lected by participating health care providers.

8 (2) MEDICAID BENEFICIARY.—The term ‘‘med9 icaid beneficiary’’ means an individual receiving ben10 efits under this XIX of the Social Security Act who

11 resides in a rural area or who receives health care

12 services from a health care provider located in a

13 rural area.

14 (3) MEDICARE BENEFICIARY.—The term ‘‘med15 icare beneficiary’’ means an individual receiving ben16 efits under title XVIII of the Social Security Act

17 who resides in a rural area or who receives health

18 care services from a health care provider located in

19 a rural area.

20 (4) RURAL AREA.—The term ‘‘rural area’’

21 means a rural area as described in section

22 1886(d)(2)(D).
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1 SEC. 5007. STUDY ON EXPANDING BENEFITS UNDER QUALI2 FIED HEALTH PLANS FOR INDIVIDUALS RE3 SIDING IN RURAL AREAS.

4 (a) STUDY.—

5 (1) IN GENERAL.—The Secretary shall conduct

6 a study on the possible benefits of a program under

7 which issuers of qualified health plans covering indi8 viduals who reside in rural areas may—

9 (A) develop a package of benefits targeted

10 at improving access to health care services

11 which would supplement the benefits included

12 under such plan; and

13 (B) receive premium payments for such

14 package of benefits from the Secretary.

15 (2) CONSULTATION WITH CERTAIN ENTITIES.—

16 In conducting the study under paragraph (1), the

17 Secretary shall consult with the Office of Rural

18 Health Policy and private and public entities with

19 expertise in rural health issues.

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

21 of the enactment of this Act the Secretary shall submit

22 a report to Congress containing the results of the study

23 conducted under subsection (a) and any legislative rec24 ommendations determined appropriate by the Secretary.
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1 Subtitle B—Primary Care Provider

2 Education

3 SEC. 5101. GRADUATE MEDICAL EDUCATION DEMONSTRA4 TION PROJECTS.

5 Part C of title VII of the Public Health Service Act

6 (42 U.S.C. 293j et seq.) is amended by adding at the end

7 the following new section:

8 ‘‘SEC. 753. GRADUATE MEDICAL EDUCATION DEMONSTRA9 TION PROJECTS.

10 ‘‘(a) STATE DEMONSTRATION PROGRAM.—

11 ‘‘(1) IN GENERAL.—The Secretary of Health

12 and Human Services (hereafter referred to in this

13 section as the ‘Secretary’) acting through the Ad14 ministrator of the Health Resources and Services

15 Administration shall provide for the establishment of

16 demonstration projects in no more than 7 States for

17 the purpose of testing and evaluating mechanisms to

18 increase the number and percentage of medical stu19 dents entering primary care practice relative to those

20 entering nonprimary care practice through the use

21 of funds otherwise available for direct graduate med22 ical education costs under section 1886(h) of the So23 cial Security Act.

24 ‘‘(2) APPLICATIONS.—
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1 ‘‘(A) IN GENERAL.—Each State desiring to

2 conduct a demonstration project under this sub3 section shall prepare and submit to the Sec4 retary an application, at such time, in such

5 manner, and containing such information as the

6 Secretary may require, including—

7 ‘‘(i) information demonstrating that

8 the State has consulted with interested

9 parties with respect to conducting a dem10 onstration project under this subsection,

11 including State medical associations, State

12 hospital associations, and medical schools

13 located in the State;

14 ‘‘(ii) an assurance that in conducting

15 a demonstration project under this sub16 section no single teaching hospital located

17 in the State will lose more than 10 percent

18 of such hospital’s approved medical resi19 dency positions in any year; and

20 ‘‘(iii) an explanation of a plan for

21 evaluating the project.

22 ‘‘(B) APPROVAL OF APPLICATIONS.—A

23 State that submits an application under sub24 paragraph (A) may begin a demonstration

25 project under this subsection—
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1 ‘‘(i) upon approval of such application

2 by the Secretary; or

3 ‘‘(ii) at the end of the 60-day period

4 beginning on the date such application is

5 submitted, unless the Secretary denies the

6 application during such period.

7 ‘‘(C) NOTICE AND COMMENT.—A State

8 shall issue a public notice on the date it sub9 mits an application under subparagraph (A)

10 which contains a general description of the pro11 posed demonstration project. Any interested

12 party may comment on the proposed dem13 onstration project to the State or the Secretary

14 during the 30-day period beginning on the date

15 the public notice is issued.

16 ‘‘(3) FUNDING FOR DEMONSTRATION

17 PROJECTS.—

18 ‘‘(A) ALLOCATION OF GME FUNDS.—

19 ‘‘(i) IN GENERAL.—For each year a

20 State conducts a demonstration project

21 under this subsection the Secretary shall

22 pay to such State an amount equal to the

23 total amount available to hospitals located

24 in the State under section 1886(h) of the

25 Social Security Act. In the case of a State
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1 which establishes any health care training

2 consortium under clause (ii)(II), the State

3 shall designate a teaching hospital for each

4 resident assigned to such a consortium

5 which the Secretary shall use to calculate

6 the State’s payment amount under such

7 section. Such teaching hospital shall be the

8 hospital where the resident receives the

9 majority of the resident’s hospital-based,

10 nonambulatory training experience.

11 ‘‘(ii) USE OF FUNDS.—Each State

12 that receives a payment under clause (i)

13 shall use such funds to conduct activities

14 which test and evaluate mechanisms to in15 crease the number and percentage of medi16 cal students entering primary care practice

17 relative to those entering nonprimary care

18 practice as follows:

19 ‘‘(I) The State may apply

20 weighting factors that are different

21 than the weighting factors set forth in

22 section 1886(h)(4)(C) of the Social

23 Security Act for the purpose of mak24 ing direct graduate medical education

25 payments. In applying different
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1 weighting factors, the State may re2 quire entities receiving payments to

3 use a portion of such payments to in4 crease stipends paid to primary care

5 residents relative to nonprimary care

6 residents.

7 ‘‘(II) The State may use funds to

8 provide for the establishment and op9 eration of any health care training

10 consortium. The State shall make

11 payments to any such consortium

12 through an entity identified by the

13 consortium as appropriate for receiv14 ing payment on behalf of the consor15 tium. The consortium shall have dis16 cretion in determining the purposes

17 for which such payments may be used

18 and may direct such payments to con19 sortium medical schools for primary

20 care medical student education pro21 grams.

22 ‘‘(B) GRANTS FOR PLANNING AND EVAL23 UATIONS.—

24 ‘‘(i) IN GENERAL.—The Secretary

25 may award grants to States conducting
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1 demonstration projects under this sub2 section for the purpose of developing and

3 evaluating such projects. A State may con4 duct such an evaluation or contract with a

5 private entity to conduct the evaluation.

6 Each State desiring to receive a grant

7 under this subparagraph shall prepare and

8 submit to the Secretary an application, at

9 such time, in such manner, and containing

10 such information as the Secretary may re11 quire.

12 ‘‘(ii) AUTHORIZATION OF APPROPRIA13 TIONS.—There are authorized to be appro14 priated such sums as may be necessary to

15 carry out the purposes of this subpara16 graph for fiscal years 1995 through 2003.

17 ‘‘(4) MAINTENANCE OF EFFORT.—Any funds

18 available for the activities covered by a demonstra19 tion project conducted under this subsection shall

20 supplement, and shall not supplant, funds that are

21 expended for similar purposes under any State, re22 gional, or local program.

23 ‘‘(b) CONSORTIUM DEMONSTRATION PROGRAM.—

24 ‘‘(1) IN GENERAL.—The Secretary, acting

25 through the Administrator of the Health Resources
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1 and Services Administration, shall provide for the

2 establishment of demonstration projects for no more

3 than 7 health care training consortia which are lo4 cated in States that are not conducting a demonstra5 tion project under subsection (a) for the purpose of

6 testing and evaluating mechanisms to increase the

7 number and percentage of medical students entering

8 primary care practice relative to those entering

9 nonprimary care practice through the use of funds

10 otherwise available for direct graduate medical edu11 cation costs under section 1886(h) of the Social Se12 curity Act.

13 ‘‘(2) APPLICATIONS.—

14 ‘‘(A) IN GENERAL.—Each health care

15 training consortium desiring to conduct a dem16 onstration project under this subsection shall

17 prepare and submit to the Secretary an applica18 tion, at such time, in such manner, and con19 taining such information as the Secretary may

20 require, including an explanation of a plan for

21 evaluating the project.

22 ‘‘(B) APPROVAL OF APPLICATIONS.—A

23 consortium that submits an application under

24 subparagraph (A) may begin a demonstration

25 project under this subsection—
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1 ‘‘(i) upon approval of such application

2 by the Secretary; or

3 ‘‘(ii) at the end of the 60-day period

4 beginnning on the date such application is

5 submitted, unless the Secretary denies the

6 application during such period.

7 ‘‘(3) FUNDING FOR DEMONSTRATION

8 PROJECTS.—

9 ‘‘(A) ALLOCATION OF GME FUNDS.—

10 ‘‘(i) IN GENERAL.—For each year a

11 consortium conducts a demonstration

12 project under this subsection the Secretary

13 shall pay to such consortium an amount

14 equal to the total amount available to hos15 pitals that are members of the consortium

16 under section 1886(h) of the Social Secu17 rity Act. The consortium shall designate a

18 teaching hospital for each resident as19 signed to the consortium which the Sec20 retary shall use to calculate the consor21 tium’s payment amount under such sec22 tion. Such teaching hospital shall be the

23 hospital where the resident receives the

24 majority of the resident’s hospital-based,

25 nonambulatory training experience.
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1 ‘‘(ii) USE OF FUNDS.—

2 ‘‘(I) TESTING AND EVALUA3 TION.—Each consortium that receives

4 a payment under clause (i) shall use

5 such funds to conduct activities which

6 test and evaluate mechanisms to in7 crease the number and percentage of

8 medical students entering primary

9 care practice relative to those entering

10 nonprimary care practice.

11 ‘‘(II) ESTABLISHMENT AND OP12 ERATION.—Each consortium that re13 ceives a payment under clause (i) may

14 also use such funds for the establish15 ment and operation of the consortium.

16 The Secretary shall make payments to

17 the consortium through an entity

18 identified by the consortium as appro19 priate for receiving payment on behalf

20 of the consortium. The consortium

21 shall have discretion in determining

22 the purposes for which such payments

23 may be used and may direct such pay24 ments to consortium medical schools
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1 for primary care medical student edu2 cation programs.

3 ‘‘(B) GRANTS FOR PLANNING AND EVAL4 UATIONS.—

5 ‘‘(i) IN GENERAL.—The Secretary

6 may award grants to consortia conducting

7 demonstration projects under this sub8 section for the purpose of developing and

9 evaluating such projects. Each consortium

10 desiring to receive a grant under this sub11 paragraph shall prepare and submit to the

12 Secretary an application, at such time, in

13 such manner, and containing such infor14 mation as the Secretary may require.

15 ‘‘(ii) AUTHORIZATION OF APPROPRIA16 TIONS.—There are authorized to be appro17 priated such sums as may be necessary to

18 carry out the purposes of this subpara19 graph for fiscal years 1995 through 2003.

20 ‘‘(4) MAINTENANCE OF EFFORT.—Any funds

21 available for the activities covered by a demonstra22 tion project conducted under this subsection shall

23 supplement, and shall not supplant, funds that are

24 expended for similar purposes under any State, re25 gional, or local program.
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1 ‘‘(c) DURATION.—A demonstration project under this

2 section shall be conducted for a period not to exceed 8

3 years. The Secretary may terminate a project if the Sec4 retary determines that the State or consortium conducting

5 the project is not in substantial compliance with the terms

6 of the application approved by the Secretary under this

7 section.

8 ‘‘(d) EVALUATIONS AND REPORTS.—

9 ‘‘(1) EVALUATIONS.—Each State or consortium

10 that conducts a demonstration project under this

11 section shall submit to the Secretary a final evalua12 tion of such project within 360 days of the termi13 nation of such project and such interim evaluations

14 as the Secretary may require.

15 ‘‘(2) REPORTS TO CONGRESS.—Not later than

16 360 days after the first demonstration project under

17 this section begins, and annually thereafter for each

18 year in which a project is conducted under this sec19 tion, the Secretary shall submit a report to the ap20 propriate committees of the Congress which evalu21 ates the effectiveness of the demonstration projects

22 conducted under this section and includes any legis23 lative recommendations determined appropriate by

24 the Secretary.

25 ‘‘(e) DEFINITIONS.—For purposes of this section:
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1 ‘‘(1) AMBULATORY TRAINING SITES.—The term

2 ‘ambulatory training sites’ includes, but is not lim3 ited to, health maintenance organizations, federally

4 qualified health centers, community health centers,

5 migrant health centers, rural health clinics, nursing

6 homes, hospice, and other community-based provid7 ers, including private practices.

8 ‘‘(2) HEALTH CARE TRAINING CONSORTIUM.—

9 The term ‘health care training consortium’ means a

10 State, regional, or local entity which—

11 ‘‘(A) includes teaching hospitals, ambula12 tory training sites, and one or more schools of

13 medicine located in the same geographic region;

14 and

15 ‘‘(B) is operated in a manner intended to

16 ensure that by the end of the 8-year demonstra17 tion project at least 50 percent of the graduates

18 of the schools included in the entity will become

19 primary care providers during the 1-year period

20 immediately following the date such graduates

21 complete their residency training.

22 ‘‘(3) PRIMARY CARE.—The term ‘primary care’

23 means family practice, general internal medicine,

24 and general pediatrics, and may also include obstet25 rics and gynecology if such care is person-centered,
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1 comprehensive care that is not organ or problem

2 specific.’’.

3 SEC. 5102. FUNDING UNDER MEDICARE FOR TRAINING IN

4 NONHOSPITAL-OWNED FACILITIES.

5 (a) RESIDENCY TRAINING TIME IN NONHOSPITAL6 OWNED FACILITIES COUNTED IN DETERMINING FULL7 TIME-EQUIVALENT RESIDENTS FOR DIRECT GRADUATE

8 MEDICAL EDUCATION PAYMENTS.—Section

9 1886(h)(4)(E) of the Social Security Act (42 U.S.C.

10 1395ww(h)(4)(E)) is amended by striking ‘‘, if the hos11 pital incurs all, or substantially all, of the costs for the

12 training program in that setting’’.

13 (b) RESIDENCY TRAINING TIME IN NONHOSPITAL14 OWNED FACILITIES COUNTED IN DETERMINING FULL15 TIME-EQUIVALENT RESIDENTS FOR INDIRECT MEDICAL

16 EDUCATION PAYMENTS.—

17 (1) IN GENERAL.—Section 1886(d)(5)(B)(iv) of

18 the Social Security Act (42 U.S.C.

19 1395ww(d)(5)(B)(iv)) is amended to read as follows:

20 ‘‘(iv) In determining such adjustment,

21 the Secretary shall count interns and resi22 dents—

23 ‘‘(I) assigned to any patient serv24 ice environment which is part of the

25 hospital’s approved medical residency
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1 training program (as defined in sec2 tion 1886(h)(5)(A)), or

3 ‘‘(II) providing services at any

4 entity receiving a grant under section

5 330 of the Public Health Service Act

6 that is under the ownership or control

7 of the hospital (if the hospital incurs

8 all, or substantially all, of the costs of

9 the services furnished by such interns

10 and residents),

11 as part of the calculation of the full-time12 equivalent number of interns and resi13 dents.’’.

14 (2) ADJUSTMENT OF INDIRECT TEACHING AD15 JUSTMENT FACTOR TO ACHIEVE BUDGET NEUTRAL16 ITY.—Section 1886(d)(5)(B)(ii) of the Social Secu17 rity Act (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amend18 ed to read as follows:

19 ‘‘(ii)(I) For purposes of clause (i)(II),

20 the indirect teaching adjustment factor is

21 equal to 1.89 × (((1+r × t) to the nth

22 power)¥1).

23 ‘‘(II) For purposes of subclause (i)—
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1 ‘‘(aa) ‘r’ is the ratio of the hos2 pital’s full-time-equivalent interns and

3 residents to beds;

4 ‘‘(bb) ‘t’ is the ratio of the num5 ber of full-time-equivalent interns and

6 residents of all hospitals paid under

7 this paragraph and used in the cal8 culation of ‘r’ on June 1, 1993, to the

9 number of full-time-equivalent interns

10 and residents of all hospitals paid

11 under this paragraph and used in the

12 calculation of ‘r’ on June 1, 1994;

13 and

14 ‘‘(cc) ‘n’ equals .405.’’.

15 SEC. 5103. INCREASE IN NATIONAL HEALTH SERVICE

16 CORPS FUNDING.

17 (a) GENERAL AUTHORIZATION.—Section 338H(b)(1)

18 of the Public Health Service Act (42 U.S.C. 254q(b)(1))

19 is amended—

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

21 ‘‘1991,’’; and

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

23 1993, and 1994, $120,000,000 for fiscal year 1995,

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

25 fiscal years 1996 through 1998’’.
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1 (b) GRANTS FOR STATE LOAN REPAYMENT PRO2 GRAMS.—Section 338I(i)(1) of such Act (42 U.S.C. 254q–

3 1(i)(1)) is amended to read as follows:

4 ‘‘(1) IN GENERAL.—The Secretary shall ensure

5 that not less than one-third of the amounts appro6 priated under section 338H(b)(1) for each fiscal

7 year shall be made available for grants under this

8 section.’’.

9 SEC. 5104. INCREASE IN HEALTH PROFESSIONS FUNDING

10 FOR PRIMARY CARE PHYSICIANS.

11 (a) FAMILY MEDICINE.—Section 747(d)(1) of the

12 Public Health Service Act (42 U.S.C. 293k(d)(1)) is

13 amended by striking ‘‘for each of’’ and all that follows

14 through ‘‘1995’’ and inserting ‘‘for each of the fiscal years

15 1993 and 1994, $67,500,000 for fiscal year 1995, and

16 such sums as may be necessary for each of the fiscal years

17 1996 and 1997’’.

18 (b) GENERAL INTERNAL MEDICINE AND PEDIAT19 RICS.—Section 748(c) of the Public Health Service Act

20 (42 U.S.C. 293l(c)) is amended by striking ‘‘for each of’’

21 and all that follows through ‘‘1995’’ and inserting ‘‘for

22 each of the fiscal years 1993 and 1994, $31,250,000 for

23 fiscal year 1995, and such sums as may be necessary for

24 each of the fiscal years 1996 and 1997’’.
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1 SEC. 5105. HEALTH PROFESSIONS FUNDING FOR NURSE

2 PRACTITIONERS AND PHYSICIAN ASSISTANTS

3 PROGRAMS.

4 (a) PHYSICIAN ASSISTANTS.—Section 750(d)(1) of

5 the Public Health Service Act (42 U.S.C. 293n(d)(1)) is

6 amended by striking ‘‘for each of the fiscal years 1993

7 through 1995’’ and inserting ‘‘for each of the fiscal years

8 1993 and 1994, $11,250,000 for fiscal year 1995, and

9 such sums as may be necessary for each of the fiscal years

10 1996 and 1997.’’.

11 (b) NURSE PRACTITIONERS.—Section 822(d) of such

12 Act (42 U.S.C. 296m(d)) is amended by striking ‘‘1994.’’

13 and inserting ‘‘1994, $25,000,000 for fiscal year 1995,

14 and such sums as may be necessary for each of the fiscal

15 years 1996 and 1997’’.

16 (c) ADVANCED EDUCATION OR PROFESSIONAL

17 NURSES.—Section 830(f)(1) of the Public Health Service

18 Act (42 U.S.C. 297(f)(1)) is amended by striking ‘‘for

19 each of’’ and all that follows through ‘‘1995’’ and insert20 ing ‘‘for each of the fiscal years 1993 and 1994,

21 $25,000,000 for fiscal year 1995, and such sums as may

22 be necessary for each of the fiscal years 1996 and 1997’’.

23 (d) SCHOLARSHIP PROGRAM FOR PHYSICIAN ASSIST24 ANTS.—Part C of title VII of the Public Health Service

25 Act (42 U.S.C. 293j et seq.), as amended by section 511,
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1 is further amended by adding at the end thereof the fol2 lowing new section:

3 ‘‘SEC. 754. PHYSICIAN ASSISTANT SCHOLARSHIP PROGRAM.

4 ‘‘(a) IN GENERAL.—The Secretary may award grants

5 to public and nonprofit private entities to enable such enti6 ties to meet the cost of providing traineeships for individ7 uals in baccalaureate and advanced-degree programs in

8 order to educate such individuals to serve in and prepare

9 for practice as physician assistants.

10 ‘‘(b) SPECIAL CONSIDERATION IN MAKING

11 GRANTS.—In awarding grants for traineeships under sub12 section (a), the Secretary shall give special consideration

13 to entities submitting applications for the conduct of

14 traineeship programs that conform to the guidelines estab15 lished by the Secretary under section 750(b)(2).

16 ‘‘(c) PREFERENCES IN AWARDING GRANTS.—The

17 Secretary may award a grant under subsection (a) only

18 if the grant applicant involved agrees that, in providing

19 traineeships under such grant, the applicant will give pref20 erence to individuals who are residents of health profes21 sional shortage areas designated under section 332.

22 ‘‘(d) USE OF GRANT.—The Secretary may award a

23 grant under subsection (a) only if the grant applicant in24 volved agrees that traineeships provided with amounts re-
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1 ceived under the grant will pay all or part of the costs

2 of—

3 ‘‘(1) the tuition, books, and fees of the physi4 cian assistants’ program with respect to which the

5 traineeship is provided; and

6 ‘‘(2) amounts necessary to pay the reasonable

7 living expenses of the individual involved during the

8 period for which the traineeship is provided.

9 ‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—For the

10 purpose of carrying out this section, there are authorized

11 to be appropriated $25,000,000 for fiscal year 1995, and

12 such sums as may be necessary for each of the fiscal years

13 1996 and 1997.’’.

14 SEC. 5106. STATE GRANTS TO INCREASE THE NUMBER OF

15 PRIMARY CARE PROVIDERS.

16 Part B of title III of the Public Health Service Act

17 (42 U.S.C. 243 et seq.) is amended by adding at the end

18 thereof the following new section:

19 ‘‘SEC. 320A. PRIMARY CARE DEMONSTRATION GRANTS.

20 ‘‘(a) AUTHORIZATION.—The Secretary, acting

21 through the Health Resources and Services Administra22 tion, shall award grants to States or nonprofit entities to

23 fund not less than 10 demonstration projects to enable

24 such States or entities to evaluate one or more of the fol25 lowing:
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1 ‘‘(1) State mechanisms, including changes in

2 the scope of practice laws, to enhance the delivery of

3 primary care by nurse practitioners or physician as4 sistants.

5 ‘‘(2) The feasibility of, and the most effective

6 means to train subspecialists to deliver primary care

7 as primary care providers.

8 ‘‘(3) State mechanisms to increase the supply

9 or improve the distribution of primary care provid10 ers.

11 ‘‘(b) APPLICATION.—To be eligible to receive a grant

12 under this section a State or nonprofit entity shall prepare

13 and submit to the Secretary an application at such time,

14 in such manner, and containing such information as the

15 Secretary may require.

16 ‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—There

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

18 $9,000,000 for fiscal year 1995, and such sums as may

19 be necessary for each of the fiscal years 1996 through

20 1998.’’.
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1 Subtitle C—Programs Relating to

2 Primary and Preventive Care

3 Services

4 SEC. 5201. MATERNAL AND INFANT CARE COORDINATION.

5 (a) PURPOSE.—It is the purpose of this section to

6 assist States in the development and implementation of

7 coordinated, multidisciplinary, and comprehensive primary

8 health care and social services, and health and nutrition

9 education programs, designed to improve maternal and

10 child health.

11 (b) GRANTS FOR IMPLEMENTATION OF PROGRAMS.—

12 (1) AUTHORITY.—The Secretary of Health and

13 Human Services (hereafter referred to in this section

14 as the ‘‘Secretary’’) is authorized to award grants to

15 States to enable such States to plan and implement

16 coordinated, multidisciplinary, and comprehensive

17 primary health care and social service programs tar18 geted to pregnant women and infants.

19 (2) ELIGIBILITY.—To be eligible to receive a

20 grant under this section, a State shall—

21 (A) prepare and submit to the Secretary

22 an application at such time, in such manner,

23 and containing such information as the Sec24 retary may require;
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1 (B) as part of the State application, pro2 vide assurances that under the program estab3 lished with amounts received under a grant, in4 dividuals will have access to a broad range of

5 primary health care services, social services,

6 and health and nutrition programs designed to

7 improve maternal and child health and a de8 scription of how coordination of such services

9 will improve maternal and child health based

10 upon the goals of ‘‘Healthy People 2000: Na11 tional Health Promotion and Disease Preven12 tion Objectives’’;

13 (C) as part of the State application, sub14 mit a plan for the coordination of existing and

15 proposed Federal and State resources, as ap16 propriate, including amounts provided under

17 the medicaid program under title XIX of the

18 Social Security Act, the special supplemental

19 food program under section 17 of the Child Nu20 trition Act of 1966, family planning programs,

21 substance abuse programs, State maternal and

22 child health programs funded under title V of

23 the Social Security Act, community and mi24 grant health center programs under the Public
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1 Health Service Act, and other publicly, or where

2 practicable, privately supported programs;

3 (D) demonstrate that the major service

4 providers to be involved, including private non5 profit entities committed to improving maternal

6 and infant health, are committed to and in7 volved in the program to be funded with

8 amounts received under the grant;

9 (E) with respect to States with high infant

10 mortality rates among minority populations,

11 demonstrate the involvement of major health,

12 multiservice, professional, or civic group rep13 resentatives of such minority groups in the

14 planning and implementation of the State pro15 gram; and

16 (F) demonstrate that activities under the

17 State program are targeted to women of child18 bearing age, particularly those at risk for hav19 ing low birth weight babies.

20 (3) TERM OF GRANT.—A grant awarded under

21 this subsection shall be for a period of 5 years.

22 (4) USE OF AMOUNTS.—Amounts received by a

23 State under a grant awarded under this subsection

24 shall be used to establish a State program to provide

25 coordinated, multidisciplinary, and comprehensive
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1 primary health care and social services, and health

2 and nutrition education program services, that are

3 designed to improve maternal and child health. Such

4 amounts shall not be used for the construction of

5 buildings or the purchase of medical equipment.

6 (5) MAINTENANCE OF EFFORT.—Any funds re7 ceived by a State under this subsection shall supple8 ment, and shall not supplant, funds that are ex9 pended for similar purposes by the State.

10 (6) AUTHORIZATION OF APPROPRIATIONS.—

11 There are authorized to be appropriated such sums

12 as may be necessary to carry out the purposes of

13 this subsection for fiscal years 1995 through 1998.

14 SEC. 5202. COMPREHENSIVE SCHOOL HEALTH EDUCATION

15 PROGRAM.

16 Section 4605 of the Elementary and Secondary Edu17 cation Act of 1965 (20 U.S.C. 3155) is amended to read

18 as follows:

19 ‘‘SEC. 4605. COMPREHENSIVE SCHOOL HEALTH EDUCATION

20 PROGRAMS.

21 ‘‘(a) PURPOSE.—It is the purpose of this section to

22 establish a comprehensive school health education and pre23 vention program for elementary and secondary school stu24 dents.
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1 ‘‘(b) PROGRAM AUTHORIZED.—The Secretary,

2 through the Office of Comprehensive School Health Edu3 cation established in subsection (d), shall award grants to

4 States to enable such States to—

5 ‘‘(1) award grants to local or intermediate edu6 cational agencies, and consortia thereof, to enable

7 such agencies or consortia to establish, operate and

8 improve local programs of comprehensive health edu9 cation and prevention, early health intervention, and

10 health education, in elementary and secondary

11 schools (including preschool, kindergarten, inter12 mediate, and junior high schools); and

13 ‘‘(2) develop training, technical assistance and

14 coordination activities for the programs assisted pur15 suant to paragraph (1).

16 ‘‘(c) USE OF FUNDS.—Grant funds under this sec17 tion may be used to improve elementary and secondary

18 education in the areas of—

19 ‘‘(1) personal health and fitness;

20 ‘‘(2) prevention of chronic diseases;

21 ‘‘(3) prevention and control of communicable

22 diseases;

23 ‘‘(4) nutrition;

24 ‘‘(5) substance use and abuse;

25 ‘‘(6) accident prevention and safety;
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1 ‘‘(7) community and environmental health;

2 ‘‘(8) mental and emotional health; and

3 ‘‘(9) the effective use of the health services de4 livery system.

5 ‘‘(d) OFFICE OF COMPREHENSIVE SCHOOL HEALTH

6 EDUCATION.—The Secretary shall establish within the Of7 fice of the Secretary an Office of Comprehensive School

8 Health Education which shall have the following respon9 sibilities:

10 ‘‘(1) To recommend mechanisms for the coordi11 nation of school health education programs con12 ducted by the various departments and agencies of

13 the Federal Government.

14 ‘‘(2) To advise the Secretary on formulation of

15 school health education policy within the Depart16 ment of Education.

17 ‘‘(3) To disseminate information on the benefits

18 to health education of utilizing a comprehensive

19 health curriculum in schools.

20 ‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—

21 ‘‘(1) IN GENERAL.—There are authorized to be

22 appropriated such sums as may be necessary to

23 carry out the purposes of this subsection for fiscal

24 years 1995 through 1998.
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1 ‘‘(2) AVAILABILITY.—Funds appropriated pur2 suant to the authority of paragraph (1) in any fiscal

3 year shall remain available for obligation and ex4 penditure until the end of the fiscal year succeeding

5 the fiscal year for which such funds were appro6 priated.’’.

7 SEC. 5203. FRONTIER STATES.

8 (a) IN GENERAL.—Frontier States (including Alaska,

9 Wyoming and Montana) may implement proposals to offer

10 preventive services, including mobile preventive health cen11 ters which may include centers equipped with various pre12 ventive health services, such as mammography, eye care,

13 X-ray, and other advanced equipment, and which may be

14 located on aircraft, watercraft, or other forms of transpor15 tation.

16 (b) DEMONSTRATION PROJECTS.—Frontier States

17 may participate in demonstration projects under this or

18 any other Act to improve recruitment, retention, and

19 training of rural providers, including nurse practitioners

20 and physician assistants. Such demonstration projects

21 shall give special consideration to the diverse needs of

22 Frontier States, and shall involve cooperative agreements

23 with a range of service delivery systems and teaching hos24 pitals.
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1 TITLE VI—TREATMENT OF

2 EXISTING FEDERAL PROGRAMS

3 SEC. 6000. REFERENCES IN TITLE.

4 Except as otherwise specifically provided, whenever in

5 this title an amendment is expressed in terms of an

6 amendment to or repeal of a section or other provision,

7 the reference shall be considered to be made to that sec8 tion or other provision of the Social Security Act.

9 Subtitle A—Medicaid Program

10 PART I—OPTIONAL COVERAGE UNDER

11 QUALIFIED HEALTH PLANS

12 SEC. 6001. OPTIONAL COVERAGE UNDER QUALIFIED

13 HEALTH PLANS.

14 (a) STATE OPTION.—Section 1902(a) (42 U.S.C.

15 1396a(a)) is amended—

16 (1) by striking ‘‘and’’ at the end of paragraph

17 (61);

18 (2) by striking the period at the end of para19 graph (62) and inserting ‘‘; and’’; and

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

21 paragraph:

22 ‘‘(63) at the option of the State, provide that

23 an individual eligible for medical assistance under

24 the State plan has the option to receive medical as25 sistance consisting of the items or services covered
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1 under the standard benefit package required to be

2 offered by a qualified health plan (as defined in sec3 tion 1931(d)(2)) through enrollment with such a

4 qualified health plan offered in the health care cov5 erage area (as defined in section 1931(d)(1)) in

6 which such individual resides instead of through en7 rollment in the State plan, in accordance with the

8 requirements of section 1931.’’.

9 (b) REQUIREMENTS DESCRIBED.—Title XIX (42

10 U.S.C. 1396 et seq.) is amended by redesignating section

11 1931 as section 1932 and by inserting after section 1930

12 the following new section:

13 ‘‘REQUIREMENTS FOR STATES PROVIDING OPTIONAL

14 COVERAGE UNDER QUALIFIED HEALTH PLANS

15 ‘‘SEC. 1931. (a) IN GENERAL.—For purposes of sec16 tion 1902(a)(63), a State meets the requirements of this

17 section with respect to individuals eligible for medical as18 sistance under the State plan if the State meets the follow19 ing requirements:

20 ‘‘(1) CHOICE OF PLANS.—The State may not

21 restrict the individual’s choice of a qualified health

22 plan under such section, except that nothing in this

23 paragraph may be construed to waive any limits on

24 the capacity of a qualified health plan applicable

25 under title I of the Health Equity and Access Re26 form Today Act of 1993.
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1 ‘‘(2) INFORMED CHOICE.—The State shall en2 sure that each individual who is eligible for medical

3 assistance under the State plan is provided sufficient

4 information to make an informed choice about en5 rolling in a qualified health plan under such section

6 and selecting such a plan.

7 ‘‘(3) PAYMENTS TO QUALIFIED HEALTH PLANS

8 BY STATES.—

9 ‘‘(A) IN GENERAL.—Subject to subpara10 graph (B), the State shall make all necessary

11 payments of premiums, copayments, and

12 deductibles applicable under a qualified health

13 plan on behalf of an individual who enrolls in

14 a qualified health plan under such section.

15 ‘‘(B) LIMITATION ON AMOUNT OF PRE16 MIUM PAYMENTS.—With respect to an individ17 ual who is enrolled in a qualified health plan in

18 a health care coverage area under such section,

19 the State is not required to pay more than the

20 applicable dollar limit for such area (as deter21 mined under section 2001 of the Health Equity

22 and Access Reform Today Act of 1993).

23 ‘‘(4) ANNUAL STUDIES AND REPORTS.—

24 ‘‘(A) ANNUAL STUDY.—The State shall

25 provide for an annual study focusing on the
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1 health outcomes of individuals in the State who

2 have elected to enroll in qualified health plans

3 under such section.

4 ‘‘(B) ANNUAL REPORTS.—The results of

5 the studies conducted pursuant to paragraph

6 (1) shall be summarized in reports submitted to

7 the Secretary at such time and in such manner

8 as the Secretary determines appropriate.

9 ‘‘(b) TREATMENT OF PAYMENTS AS MEDICAL AS10 SISTANCE.—For purposes of determining the amount of

11 Federal financial participation for a State under section

12 1903 in a quarter, any payments made by a State under

13 subsection (a)(3) shall be treated as expenditures for med14 ical assistance under the State plan for such quarter.

15 ‘‘(c) LIMITATION ON NUMBER OF INDIVIDUALS PER16 MITTED TO MAKE ELECTION.—

17 ‘‘(1) IN GENERAL.—

18 ‘‘(A) LIMITATION.—The number of AFDC19 eligible and SSI-eligible individuals electing to

20 enroll in a qualified health plan under section

21 1902(a)(63) in a State during a year may not

22 exceed the applicable percentage of the Sec23 retary’s estimate of the number of such individ24 uals in the State who are eligible to enroll in
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1 qualified health plans under such section during

2 the year.

3 ‘‘(B) APPLICABLE PERCENTAGE DE4 SCRIBED.—In subparagraph (A), the ‘applicable

5 percentage’ with respect to a State for a year—

6 ‘‘(i) for each of the first 3 years for

7 which the State exercises the option de8 scribed in such section, 15 percent; and

9 ‘‘(ii) for each succeeding year for

10 which the State exercises such option, the

11 applicable percentage under this subpara12 graph for the preceding year, increased by

13 10 percent.

14 ‘‘(2) WAIVER OF LIMITATION.—The limit on

15 the number of individuals provided in paragraph (1)

16 may be waived by the Secretary with respect to a

17 State if the Secretary determines that such a waiver

18 is appropriate.

19 ‘‘(3) DEFINITIONS.—

20 ‘‘(A) AFDC RECIPIENT.—The term

21 ‘AFDC recipient’ means an individual who is

22 receiving aid or assistance under any plan of

23 the State approved under title I, X, XIV, or

24 XVI, or part A or part E of title IV.
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1 ‘‘(B) SSI RECIPIENT.—The term ‘SSI re2 cipient’ means an individual—

3 ‘‘(i) with respect to whom supple4 mental security income benefits are being

5 paid under title XVI,

6 ‘‘(ii) who is receiving a supplementary

7 payment under section 1616 or under sec8 tion 212 of Public Law 93–66, or

9 ‘‘(iii) who is receiving monthly bene10 fits under section 1619(a) (whether or not

11 pursuant to section 1616(c)(3)).

12 ‘‘(d) DEFINITIONS.—For purposes of this section:

13 ‘‘(1) HEALTH CARE COVERAGE AREA.—The

14 term ‘health care coverage area’ means a health care

15 coverage area established under section 1403 of the

16 Health Equity and Access Reform Today Act of

17 1993.

18 ‘‘(2) QUALIFIED HEALTH PLAN.—The term

19 ‘qualified health plan’ means a health plan that is

20 certified as a qualified health plan under section

21 1402 of the Health Equity and Access Reform

22 Today Act of 1993.’’.
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1 PART II—LIMITATION ON CERTAIN FEDERAL

2 MEDICAID PAYMENTS.

3 SEC. 6011. CAP ON FEDERAL PAYMENTS MADE FOR ACUTE

4 MEDICAL SERVICES FURNISHED UNDER THE

5 MEDICAID PROGRAM.

6 (a) IN GENERAL.—Title XIX (42 U.S.C. 1396 et

7 seq.) is amended by redesignating section 1932 as section

8 1933 and by inserting after section 1931 the following new

9 section:

10 ‘‘CAP ON FEDERAL PAYMENT MADE FOR ACUTE MEDICAL

11 SERVICES

12 ‘‘SEC. 1932. (a) ANNUAL FEDERAL CAP.—Federal

13 financial participation is not available under section

14 1903(a)(1) for expenditures for acute medical services (as

15 defined in subsection (c)(1)), including expenditures con16 sisting of payments to qualified health plans under section

17 1931(a)(3) on behalf of individuals enrolling in such plans

18 under section 1902(a)(63), for a class of medicaid categor19 ical individuals (as defined in subsection (c)(2)) for a

20 State for a quarter in a fiscal year, to the extent such

expenditures exceed 1 21 ⁄4 of the product of—

22 ‘‘(1) the per-capita limit determined under sub23 section (b) for the State for such fiscal year for such

24 class, multiplied by

25 ‘‘(2) the average number of medicaid categor26 ical individuals in such class entitled to receive medi-
484

•S 1770 PCS1S

1 cal assistance under the State plan in any month in

2 the quarter.

3 ‘‘(b) PER-CAPITA LIMIT.—

4 ‘‘(1) IN GENERAL.—For purposes of subsection

5 (a), the per-capita limit for a class of medicaid cat6 egorical individuals for a State for—

7 ‘‘(A) fiscal year 1996, is an amount equal

8 to the base per-capita funding amount (as de9 termined under paragraph (2)) for such class

10 for such State, increased by 18.8 percent; and

11 ‘‘(B) fiscal year 1997 and each succeeding

12 fiscal year, is an amount equal to the amount

13 determined under this paragraph for the pre14 vious fiscal year for the class updated by the

15 applicable percentage for such fiscal year (de16 scribed in paragraph (3)).

17 ‘‘(2) BASE PER-CAPITA FUNDING AMOUNT.—

18 ‘‘(A) IN GENERAL.—The base per-capita

19 funding amount for a State for a class is an

20 amount equal to the quotient of—

21 ‘‘(i) the total expenditures made

22 under the State plan with respect to medi23 cal assistance furnished for acute medical

24 services for individuals within such class

25 for calendar quarters in fiscal year 1994,
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•S 1770 PCS1S

1 but does not include such expenditures for

2 which no Federal financial participation is

3 provided under such plan; divided by

4 ‘‘(ii) the average total number of med5 icaid categorical individuals in such class

6 in the State in any month during fiscal

7 year 1994.

8 ‘‘(B) DISPROPORTIONATE SHARE PAY9 MENTS NOT INCLUDED.—In applying subpara10 graph (A), payments made under section 1923

11 shall not be counted in the gross amount of

12 payments.

13 ‘‘(C) TREATMENT OF DISALLOWANCES.—

14 The amount determined under this paragraph

15 shall take into account amounts (or an estimate

16 of amounts) disallowed.

17 ‘‘(3) APPLICABLE PERCENTAGE.—In paragraph

18 (1), the applicable percentage for a fiscal year is

19 equal to—

20 ‘‘(A) 6 percent, for each of fiscal years

21 1997 through 2000; and

22 ‘‘(B) 5 percent, for fiscal year 2001 and

23 each succeeding fiscal year.
486

•S 1770 PCS1S

1 ‘‘(4) ESTIMATIONS OF AND ADJUSTMENTS TO

2 STATE TOTAL FUNDING AMOUNT.—The Secretary

3 shall—

4 ‘‘(A) establish a process for estimating the

5 limit on expenditures for acute medical services

6 applicable under subsection (a) at the beginning

7 of each fiscal year and adjusting such amount

8 during such fiscal year; and

9 ‘‘(B) notifying each State of the esti10 mations and adjustments referred to in sub11 paragraph (A).

12 ‘‘(c) DEFINITIONS.—For purposes of this section and

13 section 1931:

14 ‘‘(1) ACUTE MEDICAL SERVICES.—The term

15 ‘acute medical services’ means items and services de16 scribed in section 1905(a) other than the following:

17 ‘‘(A) Nursing facility services (as defined

18 in section 1905(f)).

19 ‘‘(B) Intermediate care facility for the

20 mentally retarded services (as defined in section

21 1905(d)).

22 ‘‘(C) Personnel care services (as described

23 in section 1905(a)(24)).

24 ‘‘(D) Private duty nursing services (as re25 ferred to in section 1905(a)(8)).
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1 ‘‘(E) Home or community-based services

2 furnished under a waiver granted under sub3 section (c), (d), or (e) of section 1915.

4 ‘‘(F) Home and community care furnished

5 to functionally disabled elderly individuals

6 under section 1929.

7 ‘‘(G) Community supported living arrange8 ments services under section 1930.

9 ‘‘(H) Case-management services (as de10 scribed in section 1915(g)(2)).

11 ‘‘(I) Home health care services (as referred

12 to in section 1905(a)(7)), clinic services, and re13 habilitation services that are furnished to an in14 dividual who has a condition or disability that

15 qualifies the individual to receive any of the

16 services described in a previous subparagraph.

17 ‘‘(J) Hospice care.

18 ‘‘(2) MEDICAID CATEGORICAL INDIVIDUAL.—

19 The term ‘medicaid categorical individual’ means an

20 individual described in section 1902(a)(10)(A).

21 ‘‘(3) CLASS OF MEDICAID CATEGORICAL INDI22 VIDUALS.—The term ‘class’ means individuals within

23 each of the following classes:

24 ‘‘(A) SSI-RELATED INDIVIDUALS.—Medic25 aid categorical individuals—
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•S 1770 PCS1S

1 ‘‘(i) with respect to whom supple2 mental security income benefits are being

3 paid under title XVI of the Social Security

4 Act,

5 ‘‘(ii) who receiving a supplementary

6 payment under section 1616 of such Act or

7 under section 212 of Public Law 93–66, or

8 ‘‘(iii) who receiving monthly benefits

9 under section 1619(a) of such Act (wheth10 er or not pursuant to section 1616(c)(3) of

11 such Act).

12 ‘‘(B) OTHER INDIVIDUALS.—Medicaid cat13 egorical individuals not described in subpara14 graph (A).’’.

15 (b) REQUIRING STATE MAINTENANCE OF EFFORT.—

16 Section 1902(a) (42 U.S.C. 1369a(a)), as amended by sec17 tion 6001(a), is amended—

18 (1) by striking ‘‘and’’ at the end of paragraph

19 (62);

20 (2) by striking the period at the end of para21 graph (63) and inserting ‘‘; and ’’; and

22 (3) by adding at the end the following new

23 paragraph:

24 ‘‘(64) provided that the State will continue to

25 make eligible for medical assistance under section
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•S 1770 PCS1S

1 1902(a)(10)(A) any class or category of individuals

2 eligible for medical assistance under such section

3 during fiscal year 1994.’’.

4 (c) DISCONTINUATION OF REIMBURSEMENT STAND5 ARDS FOR INPATIENT HOSPITAL SERVICES.—Section

6 1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)) is amend7 ed—

8 (1) by striking ‘‘hospital services, nursing facil9 ity services, and’’ and inserting ‘‘nursing facilities

10 services and’’;

11 (2) by striking ‘‘, in the case of hospitals,’’ and

12 all that follows through ‘‘(v)(1)(G))) which’’;

13 (3) by striking ‘‘and to assure’’ and all that fol14 lows through ‘‘adequate quality’’; and

15 (4) by striking ‘‘each hospital, nursing facility,

16 and ’’ and inserting ‘‘each nursing facility and’’.

17 (d) REVISION OF FEDERAL MEDICAL ASSISTANCE

18 PERCENTAGE FOR CERTAIN STATES.—Section 1905(b)

19 (42 U.S.C. 1396d(b)) is amended—

20 (1) by redesignating clauses (1) and (2) as

21 clauses (2) and (3) and by inserting after ‘‘except

22 that’’ the following: ‘‘(1) for Alaska and Hawaii, the

23 State percentage shall be that percentage which

24 bears the same ratio to 45 per centum as the square

25 of the adjusted per capita income of such State
490

•S 1770 PCS1S

1 bears to the square of the per capita income of the

2 United States;’’; and

3 (2) by inserting after the first sentence the fol4 lowing: ‘‘The ‘adjusted per capita income’ for Alaska

5 shall be determined by dividing the State 3-year av6 erage per capita income by 1.25, and for Hawaii by

7 dividing the State 3-year average per capita income

8 by 1.15.’’.

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

10 this section shall become effective on October 1, 1995.

11 PART III—STATE ELIGIBILITY TO CONTRACT FOR

12 COORDINATED CARE SERVICES

13 SEC. 6021. MODIFICATION OF FEDERAL REQUIREMENTS TO

14 ALLOW STATES MORE FLEXIBILITY IN CON15 TRACTING FOR COORDINATED CARE SERV16 ICES UNDER MEDICAID.

17 (a) IN GENERAL.—

18 (1) PAYMENT PROVISIONS.—Section 1903(m)

19 (42 U.S.C. 1396b(m)) is amended to read as follows:

20 ‘‘(m)(1) No payment shall be made under this title

21 to a State with respect to expenditures incurred by such

22 State for payment to an entity which is at risk (as defined

23 in section 1933(a)(4)) for services provided by such entity

24 to individuals eligible for medical assistance under the

25 State plan under this title, unless the entity is a risk con-
491

•S 1770 PCS1S

1 tracting entity (as defined in section 1933(a)(3)) and the

2 State and such entity comply with the applicable provi3 sions of section 1933.

4 ‘‘(2) No payment shall be made under this title to

5 a State with respect to expenditures incurred by such

6 State for payment for services provided to an individual

7 eligible for medical assistance under the State plan under

8 this title if such payment by the State is contingent upon

9 the individual receiving such services from a specified

10 health care provider or subject to the approval of a speci11 fied health care provider, unless the entity receiving pay12 ment is a primary care case management entity (as de13 fined in section 1933(a)(2)) and the State and such entity

14 comply with the applicable provisions of section 1933.’’.

15 (2) REQUIREMENTS FOR COORDINATED CARE

16 SERVICES.—Title XIX (42 U.S.C. 1396 et seq.) is

17 amended by redesignating section 1933 as section

18 1934 and by inserting after section 1932 the follow19 ing new section:

20 ‘‘REQUIREMENTS FOR COORDINATED CARE SERVICES

21 ‘‘SEC. 1933. (a) DEFINITIONS.—For purposes of this

22 title—

23 ‘‘(1) PRIMARY CARE CASE MANAGEMENT PRO24 GRAM.—The term ‘primary care case management

25 program’ means a program operated by a State

26 agency under which such State agency enters into
492

•S 1770 PCS1S

1 contracts with primary care case management enti2 ties for the provision of health care items and serv3 ices which are specified in such contracts and the

4 provision of case management services to individuals

5 who are—

6 ‘‘(A) eligible for medical assistance under

7 the State plan,

8 ‘‘(B) enrolled with such primary care case

9 management entities, and

10 ‘‘(C) entitled to receive such specified

11 health care items and services and case man12 agement services only as approved and ar13 ranged for, or provided, by such entities.

14 ‘‘(2) PRIMARY CARE CASE MANAGEMENT EN15 TITY.—The term ‘primary care case management

16 entity’ means a health care provider which—

17 ‘‘(A) must be a physician, group of physi18 cians, a Federally qualified health center, a

19 rural health clinic, or an entity employing or

20 having other arrangements with physicians op21 erating under a contract with a State to provide

22 services under a primary care case management

23 program,

24 ‘‘(B) receives payment on a fee for service

25 basis (or, in the case of a Federally qualified
493

•S 1770 PCS1S

1 health center or a rural health clinic, on a rea2 sonable cost per encounter basis) for the provi3 sion of health care items and services specified

4 in such contract to enrolled individuals,

5 ‘‘(C) receives an additional fixed fee per

6 enrollee for a period specified in such contract

7 for providing case management services (includ8 ing approving and arranging for the provision

9 of health care items and services specified in

10 such contract on a referral basis) to enrolled in11 dividuals, and

12 ‘‘(D) is not an entity that is at risk (as de13 fined in paragraph (4)) for such case manage14 ment services.

15 ‘‘(3) RISK CONTRACTING ENTITY.—The term

16 ‘risk contracting entity’ means an entity which has

17 a contract with the State agency (or a health insur18 ing organization described in subsection (n)(2))

19 under which the entity—

20 ‘‘(A) provides or arranges for the provision

21 of health care items or services which are speci22 fied in such contract to individuals eligible for

23 medical assistance under the State plan, and

24 ‘‘(B) is at risk (as defined in paragraph

25 (4)) for part or all of the cost of such items or
494

•S 1770 PCS1S

1 services furnished to individuals eligible for

2 medical assistance under such plan.

3 ‘‘(4) AT RISK.—The term ‘at risk’ means an

4 entity which—

5 ‘‘(A) has a contract with the State agency

6 under which such entity is paid a fixed amount

7 for providing or arranging for the provision of

8 health care items or services specified in such

9 contract to an individual eligible for medical as10 sistance under the State plan and enrolled with

11 such entity, regardless of whether such items or

12 services are furnished to such individual, and

13 ‘‘(B) is liable for all or part of the cost of

14 furnishing such items or services, regardless of

15 whether such cost exceeds such fixed payment.

16 ‘‘(5) FEDERALLY QUALIFIED HEALTH CEN17 TER.—The term ‘Federally qualified health center’

18 means a Federally qualified health center as defined

19 in section 1905(l)(2)(B).

20 ‘‘(6) RURAL HEALTH CLINIC.—The term ‘rural

21 health clinic’ means a rural health clinic as defined

22 in section 1905(l)(1).

23 ‘‘(b) GENERAL REQUIREMENTS FOR RISK CON24 TRACTING ENTITIES.—
495

•S 1770 PCS1S

1 ‘‘(1) ORGANIZATION.—A risk contracting entity

2 meets the requirements of this section only if such

3 entity—

4 ‘‘(A)(i) is a qualified health maintenance

5 organization as defined in section 1310(d) of

6 the Public Health Service Act, as determined by

7 the Secretary pursuant to section 1312 of such

8 Act; or

9 ‘‘(ii) is described in subparagraph (C), (D),

10 (E), (F), or (G) of subsection (e)(4);

11 ‘‘(B) is a Federally qualified health center

12 or a rural health clinic which has made ade13 quate provision against the risk of insolvency

14 (pursuant to the guidelines and regulations is15 sued by the Secretary under this section), and

16 ensures that individuals eligible for medical as17 sistance under the State plan are not held liable

18 for such entity’s debts in case of such entity’s

19 insolvency; or

20 ‘‘(C) is an entity which meets all applicable

21 State licensing requirements and has made ade22 quate provision against the risk of insolvency

23 (pursuant to the guidelines and regulations is24 sued by the Secretary under this section), and

25 ensures that individuals eligible for medical as-
496

•S 1770 PCS1S

1 sistance under the State plan are not held liable

2 for such entity’s debts in case of such entity’s

3 insolvency.

4 ‘‘(2) GUARANTEES OF ENROLLEE ACCESS.—A

5 risk contracting entity meets the requirements of

6 this section only if—

7 ‘‘(A) the geographic locations, hours of op8 eration, patient to staff ratios, and other rel9 evant characteristics of such entity are suffi10 cient to afford individuals eligible for medical

11 assistance under the State plan access to such

12 entities that is at least equivalent to the access

13 to health care providers that would be available

14 to such individuals if such individuals were not

15 enrolled with such entity;

16 ‘‘(B) such entity has reasonable and ade17 quate hours of operation, including 24-hour

18 availability of—

19 ‘‘(i)(I) treatment for an unforeseen ill20 ness, injury, or condition of an individual

21 eligible for medical assistance under the

22 State plan and enrolled with such entity;

23 or

24 ‘‘(II) referral to other health care pro25 viders for such treatment; and
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•S 1770 PCS1S

1 ‘‘(ii) other information, as determined

2 by the Secretary or the State; and

3 ‘‘(C) such entity complies with such other

4 requirements relating to access to care as the

5 Secretary or the State may impose.

6 ‘‘(3) CONTRACT WITH STATE AGENCY.—A risk

7 contracting entity meets the requirements of this

8 section only if such entity has a written contract

9 with the State agency which provides—

10 ‘‘(A) that the entity will comply with all

11 applicable provisions of this section, that the

12 State has the right to penalize the entity for

13 failure to comply with such requirements and to

14 terminate the contract in accordance with sub15 section (j), and that the entity will be subject

16 to penalties imposed by the Secretary under

17 subsection (i) for failure to comply with such

18 requirements;

19 ‘‘(B) for a payment methodology based on

20 experience rating or another actuarially sound

21 methodology approved by the Secretary, which

22 guarantees (as demonstrated by such models or

23 formulas as the Secretary may approve) that—

24 ‘‘(i) payments to the entity under the

25 contract shall not exceed an amount equal
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•S 1770 PCS1S

1 to 100 percent of the costs (which shall in2 clude administrative costs and which may

3 include costs for inpatient hospital services

4 that would have been incurred in the ab5 sence of such contract) that would have

6 been incurred by the State agency in the

7 absence of the contract; and

8 ‘‘(ii) the financial risk for inpatient

9 hospital services is limited to an extent es10 tablished by the State;

11 ‘‘(C) that the Secretary and the State (or

12 any person or organization designated by ei13 ther) shall have the right to audit and inspect

14 any books and records of the entity (and of any

15 subcontractor) that pertain—

16 ‘‘(i) to the ability of the entity (or a

17 subcontractor) to bear the risk of potential

18 financial losses; or

19 ‘‘(ii) to services performed or deter20 minations of amounts payable under the

21 contract;

22 ‘‘(D) that in the entity’s enrollment,

23 reenrollment, or disenrollment of individuals eli24 gible for medical assistance under the State

25 plan and eligible to enroll, reenroll, or disenroll
499

•S 1770 PCS1S

1 with the entity pursuant to the contract, the en2 tity will not discriminate among such individ3 uals on the basis of such individuals’ health sta4 tus or requirements for health care services;

5 ‘‘(E)(i) individuals eligible for medical as6 sistance under the State plan who have enrolled

7 with the entity are permitted to terminate such

8 enrollment without cause as of the beginning of

9 the first calendar month (or in the case of an

10 entity described in subsection (e)(4), as of the

11 beginning of the first enrollment period) follow12 ing a full calendar month after a request is

13 made for such termination;

14 ‘‘(ii) that when an individual has relocated

15 outside the entity’s service area, and the entity

16 has been notified of the relocation, services

17 (within reasonable limits) furnished by a health

18 care provider outside the service area will be re19 imbursed either by the entity or by the State

20 agency; and

21 ‘‘(iii) for written notification of each such

22 individual’s right to terminate enrollment,

23 which shall be provided at the time of such indi24 vidual’s enrollment, and, in the case of a child

25 with special health care needs as defined in sub-
500

•S 1770 PCS1S

1 section (e)(1)(B)(ii), at the time the entity iden2 tifies such a child;

3 ‘‘(F) in the case of services immediately re4 quired to treat an unforeseen illness, injury, or

5 condition, of an individual eligible for medical

6 assistance under the State plan and enrolled

7 with the entity—

8 ‘‘(i) that such services shall not be

9 subject to a preapproval requirement; and

10 ‘‘(ii) where such services are furnished

11 by a health care provider other than the

12 entity, for reimbursement of such provider

13 either by the entity or by the State agency;

14 ‘‘(G) for disclosure of information in ac15 cordance with subsection (h) and section 1124;

16 ‘‘(H) that any physician incentive plan op17 erated by the entity meets the requirements of

18 section 1876(i)(8);

19 ‘‘(I) for maintenance of sufficient patient

20 encounter data to identify the physician who de21 livers services to patients;

22 ‘‘(J) that the entity will comply with the

23 requirement of section 1902(w) with respect to

24 each enrollee;
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•S 1770 PCS1S

1 ‘‘(K) that the entity will implement a

2 grievance system, inform enrollees in writing

3 about how to use such grievance system, ensure

4 that grievances are addressed in a timely man5 ner, and report grievances to the State at inter6 vals to be determined by the State;

7 ‘‘(L) that contracts between the entity and

8 each subcontractor of such entity will require

9 each subcontractor—

10 ‘‘(i) to cooperate with the entity in the

11 implementation of its internal quality as12 surance program under paragraph (4) and

13 adhere to the standards set forth in the

14 quality assurance program, including

15 standards with respect to access to care,

16 facilities in which patients receive care,

17 and availability, maintenance, and review

18 of medical records;

19 ‘‘(ii) to cooperate with the Secretary,

20 the State agency and any contractor to the

21 State in monitoring and evaluating the

22 quality and appropriateness of care pro23 vided to enrollees as required by Federal or

24 State laws and regulations; and
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•S 1770 PCS1S

1 ‘‘(iii) where applicable, to adhere to

2 regulations and program guidance with re3 spect to reporting requirements under sec4 tion 1905(r);

5 ‘‘(M) that, where the State deems it nec6 essary to ensure the timely provision to enroll7 ees of the services listed in subsection

8 (f)(2)(C)(ii), the State may arrange for the pro9 vision of such services by health care providers

10 other than the entity and may adjust its pay11 ments to the entity accordingly;

12 ‘‘(N) that the entity and the State will

13 comply with guidelines and regulations issued

14 by the Secretary with respect to procedures for

15 marketing and information that must be pro16 vided to individuals eligible for medical assist17 ance under the State plan;

18 ‘‘(O) that the entity must provide pay19 ments to hospitals for inpatient hospital serv20 ices furnished to infants who have not attained

21 the age of 1 year, and to children who have not

22 attained the age of 6 years and who receive

23 such services in a disproportionate share hos24 pital, in accordance with paragraphs (2) and

25 (3) of section 1902(s);
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•S 1770 PCS1S

1 ‘‘(P) that the entity shall report to the

2 State, at such time and in such manner as the

3 State shall require, on the rates paid for hos4 pital services (by type of hospital and type of

5 service) furnished to individuals enrolled with

6 the entity;

7 ‘‘(Q) detailed information regarding the

8 relative responsibilities of the entity and the

9 State, for providing (or arranging for the provi10 sion of), and making payment for, the following

11 items and services:

12 ‘‘(i) immunizations;

13 ‘‘(ii) the purchase of vaccines;

14 ‘‘(iii) lead screening and treatment

15 services;

16 ‘‘(iv) screening and treatment for tu17 berculosis;

18 ‘‘(v) screening and treatment for, and

19 preventive services related to, sexually

20 transmitted diseases, including HIV infec21 tion;

22 ‘‘(vi) screening, diagnostic, and treat23 ment services required under section

24 1905(r);

25 ‘‘(vii) family planning services;
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•S 1770 PCS1S

1 ‘‘(viii) services prescribed under—

2 ‘‘(I) an Individual Education

3 Plan or Individualized Family Service

4 Plan under part B or part H of the

5 Individuals with Disabilities Edu6 cation Act; and

7 ‘‘(II) any other individual plan of

8 care or treatment developed under

9 this title or title V;

10 ‘‘(ix) transportation needed to obtain

11 services to which the enrollee is entitled

12 under the State plan or pursuant to an in13 dividual plan of care or treatment de14 scribed in subclauses (I) and (II) of clause

15 (viii); and

16 ‘‘(x) such other services as the Sec17 retary may specify;

18 ‘‘(R) detailed information regarding the

19 procedures for coordinating the relative respon20 sibilities of the entity and the State to ensure

21 prompt delivery of, compliance with any appli22 cable reporting requirements related to, and ap23 propriate record keeping with respect to, the

24 items and services described in subparagraph

25 (Q); and
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1 ‘‘(S) such other provisions as the Secretary

2 may require.

3 ‘‘(4) INTERNAL QUALITY ASSURANCE.—A risk

4 contracting entity meets the requirements of this

5 section only if such entity has in effect a written in6 ternal quality assurance program which includes a

7 systematic process to achieve specified and measur8 able goals and objectives for access to, and quality

9 of, care, which—

10 ‘‘(A) identifies the organizational units re11 sponsible for performing specific quality assur12 ance functions, and ensures that such units are

13 accountable to the governing body of the entity

14 and that such units have adequate supervision,

15 staff, and other necessary resources to perform

16 these functions effectively,

17 ‘‘(B) if any quality assurance functions are

18 delegated to other entities, ensures that the risk

19 contracting entity remains accountable for all

20 quality assurance functions and has mecha21 nisms to ensure that all quality assurance ac22 tivities are carried out,

23 ‘‘(C) includes methods to ensure that phy24 sicians and other health care professionals

25 under contract with the entity are licensed or
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1 certified as required by State law, or are other2 wise qualified to perform the services such phy3 sicians and other professionals provide, and

4 that these qualifications are ensured through

5 appropriate credentialing and recredentialing

6 procedures,

7 ‘‘(D) provides for continuous monitoring of

8 the delivery of health care, through—

9 ‘‘(i) identification of clinical areas to

10 be monitored, including immunizations,

11 prenatal care, services required under sec12 tion 1905(r), and other appropriate clinical

13 areas, to reflect care provided to enrollees

14 eligible for medical assistance under the

15 State plan,

16 ‘‘(ii) use of quality indicators and

17 standards for assessing the quality and ap18 propriateness of care delivered, and the

19 availability and accessibility of all services

20 for which the entity is responsible under

21 such entity’s contract with the State,

22 ‘‘(iii) use of epidemiological data or

23 chart review, as appropriate, and patterns

24 of care overall,
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1 ‘‘(iv) patient surveys, spot checks, or

2 other appropriate methods to determine

3 whether—

4 ‘‘(I) enrollees are able to obtain

5 timely appointments with primary

6 care providers and specialists, and

7 ‘‘(II) enrollees are otherwise

8 guaranteed access and care as pro9 vided under paragraph (2),

10 ‘‘(v) provision of written information

11 to health care providers and other person12 nel on the outcomes, quality, availability,

13 accessibility, and appropriateness of care,

14 and

15 ‘‘(vi) implementation of corrective ac16 tions,

17 ‘‘(E) includes standards for timely enrollee

18 access to information and care which at a mini19 mum shall incorporate standards used by the

20 State or professional or accreditation bodies for

21 facilities furnishing perinatal and neonatology

22 care and other forms of specialized medical and

23 surgical care,

24 ‘‘(F) includes standards for the facilities in

25 which patients receive care,
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•S 1770 PCS1S

1 ‘‘(G) includes standards for managing and

2 treating medical conditions prevalent among

3 such entity’s enrollees eligible for medical as4 sistance under the State plan,

5 ‘‘(H) includes mechanisms to ensure that

6 enrollees eligible for medical assistance under

7 the State plan receive services for which the en8 tity is responsible under the contract which are

9 consistent with standards established by the ap10 plicable professional societies or government

11 agencies,

12 ‘‘(I) includes standards for the availability,

13 maintenance, and review of medical records

14 consistent with generally accepted medical prac15 tice,

16 ‘‘(J) provides for dissemination of quality

17 assurance procedures to health care providers

18 under contract with the entity, and

19 ‘‘(K) meets any other requirements pre20 scribed by the Secretary or the State.

21 ‘‘(c) GENERAL REQUIREMENTS FOR PRIMARY CARE

22 CASE MANAGEMENT PROGRAMS.—A primary care case

23 management program implemented by a State under this

24 section shall—
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1 ‘‘(1) provide that each primary care case man2 agement entity participating in such program has a

3 written contract with the State agency,

4 ‘‘(2) include methods for selection and monitor5 ing of participating primary care case management

6 entities to ensure—

7 ‘‘(A) that the geographic locations, hours

8 of operation, patient to staff ratio, and other

9 relevant characteristics of such entities are suf10 ficient to afford individuals eligible for medical

11 assistance under the State plan access to such

12 entities that is at least equivalent to the access

13 to health care providers that would be available

14 to such individuals if such individuals were not

15 enrolled with such entity,

16 ‘‘(B) that such entities and their profes17 sional personnel are licensed as required by

18 State law and qualified to provide case manage19 ment services, through methods such as ongo20 ing monitoring of compliance with applicable re21 quirements and providing information and tech22 nical assistance, and

23 ‘‘(C) that such entities—

24 ‘‘(i) provide timely and appropriate

25 primary care to such enrollees consistent
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1 with standards established by applicable

2 professional societies or governmental

3 agencies, or such other standards pre4 scribed by the Secretary or the State, and

5 ‘‘(ii) where other items and services

6 are determined to be medically necessary,

7 give timely approval of such items and

8 services and referral to appropriate health

9 care providers,

10 ‘‘(3) provide that no preapproval shall be re11 quired for emergency health care items or services,

12 and

13 ‘‘(4) permit individuals eligible for medical as14 sistance under the State plan who have enrolled with

15 a primary care case management entity to terminate

16 such enrollment without cause not later than the be17 ginning of the first calendar month following a full

18 calendar month after the request is made for such

19 termination.

20 ‘‘(d) EXEMPTIONS FROM STATE PLAN REQUIRE21 MENTS.—A State plan may permit or require an individ22 ual eligible for medical assistance under such plan to en23 roll with a risk contracting entity or a primary care case

24 management entity without regard to the requirements set

25 forth in the following paragraphs of section 1902(a):
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1 ‘‘(1) Paragraph (1) (concerning statewideness).

2 ‘‘(2) Paragraph (10)(B) (concerning com3 parability of benefits), to the extent benefits not in4 cluded in the State plan are provided.

5 ‘‘(3) Paragraph (23) (concerning freedom of

6 choice of provider), except with respect to services

7 described in section 1905(a)(4)(C) and except as re8 quired under subsection (e).

9 ‘‘(e) STATE OPTIONS WITH RESPECT TO ENROLL10 MENT AND DISENROLLMENT.—

11 ‘‘(1) MANDATORY ENROLLMENT.—

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

13 subparagraph (B), a State plan may require an

14 individual eligible for medical assistance under

15 such plan to enroll with a risk contracting en16 tity or a primary care case management entity

17 only if the individual is permitted a choice with18 in a reasonable service area (as defined by the

19 State)—

20 ‘‘(i) between or among 2 or more risk

21 contracting entities,

22 ‘‘(ii) among a risk contracting entity

23 and a primary care case management pro24 gram, or
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•S 1770 PCS1S

1 ‘‘(iii) among primary care case man2 agement entities.

3 ‘‘(B) SPECIAL NEEDS CHILDREN.—

4 ‘‘(i) IN GENERAL.—A State may not

5 require a child with special health care

6 needs (as defined in clause (ii)) to enroll

7 with a risk contracting entity or a primary

8 care case management entity.

9 ‘‘(ii) DEFINITION.—For purposes of

10 this subparagraph, the term ‘child with

11 special health care needs’ refers to an indi12 vidual eligible for supplemental security in13 come under title XVI, a child described

14 under section 501(a)(1)(D), or a child de15 scribed in section 1902(e)(3).

16 ‘‘(2) REENROLLMENT OF INDIVIDUALS WHO

17 REGAIN ELIGIBILITY.—In the case of an individual

18 who—

19 ‘‘(A) in a month is eligible for medical as20 sistance under the State plan and enrolled with

21 a risk contracting entity with a contract under

22 this section,

23 ‘‘(B) in the next month (or next 2 months)

24 is not eligible for such medical assistance, but
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•S 1770 PCS1S

1 ‘‘(C) in the succeeding month is again eli2 gible for such benefits,

3 the State agency (subject to subsection (b)(3)(E))

4 may enroll the individual for that succeeding month

5 with such entity, if the entity continues to have a

6 contract with the State agency under this sub7 section.

8 ‘‘(3) DISENROLLMENT.—

9 ‘‘(A) RESTRICTIONS ON DISENROLLMENT

10 WITHOUT CAUSE.—Except as provided in sub11 paragraph (C), a State plan may restrict the

12 period in which individuals enrolled with risk

13 contracting entities described in paragraph (4)

14 may terminate such enrollment without cause to

15 the first month of each period of enrollment (as

16 defined in subparagraph (B)), but only if the

17 State provides notification, at least once during

18 each such enrollment period, to individuals en19 rolled with such entity of the right to terminate

20 such enrollment and the restriction on the exer21 cise of this right. Such restriction shall not

22 apply to requests for termination of enrollment

23 for cause.
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1 ‘‘(B) PERIOD OF ENROLLMENT.—For pur2 poses of this paragraph, the term ‘period of en3 rollment’ means—

4 ‘‘(i) a period not to exceed 6 months

5 in duration, or

6 ‘‘ (ii) a period not to exceed 1 year in

7 duration, in the case of a State that, on

8 the effective date of this paragraph, had in

9 effect a waiver under section 1115 of re10 quirements under this title under which

11 the State could establish a 1-year mini12 mum period of enrollment with risk con13 tracting entities.

14 ‘‘(C) SPECIAL NEEDS CHILDREN.—A State

15 may not restrict disenrollment of a child with

16 special health care needs (as defined in para17 graph (1)(B)(ii)).

18 ‘‘(4) ENTITIES ELIGIBLE FOR DISENROLLMENT

19 RESTRICTIONS.—A risk contracting entity described

20 in this paragraph is—

21 ‘‘(A) a qualified health maintenance orga22 nization as defined in section 1310(d) of the

23 Public Health Service Act,

24 ‘‘(B) an eligible organization with a con25 tract under section 1876,
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1 ‘‘(C) an entity that is receiving (and has

2 received during the previous 2 years) a grant of

3 at least $100,000 under section 329(d)(1)(A)

4 or 330(d)(1) of the Public Health Service Act,

5 ‘‘(D) an entity that—

6 ‘‘(i) received a grant of at least

7 $100,000 under section 329(d)(1)(A) or

8 section 330(d)(1) of the Public Health

9 Service Act in the fiscal year ending June

10 30, 1976, and has been a grantee under ei11 ther such section for all periods after that

12 date, and

13 ‘‘(ii) provides to its enrollees, on a

14 prepaid capitation or other risk basis, all

15 of the services described in paragraphs (1),

16 (2), (3), (4)(C), and (5) of section 1905(a)

17 (and the services described in section

18 1905(a)(7), to the extent required by sec19 tion 1902(a)(10)(D)),

20 ‘‘(E) an entity that is receiving (and has

21 received during the previous 2 years) at least

22 $100,000 (by grant, subgrant, or subcontract)

23 under the Appalachian Regional Development

24 Act of 1965,
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1 ‘‘(F) a nonprofit primary health care en2 tity located in a rural area (as defined by the

3 Appalachian Regional Commission)—

4 ‘‘(i) which received in the fiscal year

5 ending June 30, 1976, at least $100,000

6 (by grant, subgrant, or subcontract) under

7 the Appalachian Regional Development Act

8 of 1965, and

9 ‘‘(ii) which, for all periods after such

10 date, either has been the recipient of a

11 grant, subgrant, or subcontract under such

12 Act or has provided services on a prepaid

13 capitation or other risk basis under a con14 tract with the State agency initially en15 tered into during a year in which the entity

16 was the recipient of such a grant,

17 subgrant, or subcontract,

18 ‘‘(G) an entity that had contracted with

19 the State agency prior to 1970 for the provi20 sion, on a prepaid risk basis, of services (which

21 did not include inpatient hospital services) to

22 individuals eligible for medical assistance under

23 the State plan,

24 ‘‘(H) a program pursuant to an undertak25 ing described in subsection (n)(3) in which at
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•S 1770 PCS1S

1 least 25 percent of the membership enrolled on

2 a prepaid basis are individuals who—

3 ‘‘(i) are not insured for benefits under

4 part B of title XVIII or eligible for medical

5 assistance under the State plan, and

6 ‘‘(ii) (in the case of such individuals

7 whose prepayments are made in whole or

8 in part by any government entity) had the

9 opportunity at the time of enrollment in

10 the program to elect other coverage of

11 health care costs that would have been

12 paid in whole or in part by any govern13 mental entity,

14 ‘‘(I) an entity that, on the date of enact15 ment of this provision, had a contract with the

16 State agency under a waiver under section 1115

17 or 1915(b) and was not subject to a require18 ment under this title to permit disenrollment

19 without cause, or

20 ‘‘(J) an entity that has a contract with the

21 State agency under a waiver under section

22 1915(b)(5).

23 ‘‘(f) STATE MONITORING AND EXTERNAL REVIEW.—

24 ‘‘(1) STATE GRIEVANCE PROCEDURE.—A State

25 contracting with a risk contracting entity or a pri-
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•S 1770 PCS1S

1 mary care case management entity under this sec2 tion shall provide for a grievance procedure for en3 rollees of such entity with at least the following ele4 ments:

5 ‘‘(A) A toll-free telephone number for en6 rollee questions and grievances.

7 ‘‘(B) Periodic notification of enrollees of

8 their rights with respect to such entity or pro9 gram.

10 ‘‘(C) Periodic sample reviews of grievances

11 registered with such entity or program or with

12 the State.

13 ‘‘(D) Periodic survey and analysis of en14 rollee satisfaction with such entity or program,

15 including interviews with individuals who

16 disenroll from the entity or program.

17 ‘‘(2) STATE MONITORING OF QUALITY AND AC18 CESS.—

19 ‘‘(A) RISK CONTRACTING ENTITIES.—A

20 State contracting with a risk contracting entity

21 under this section shall provide for ongoing

22 monitoring of such entity’s compliance with the

23 requirements of subsection (b), including com24 pliance with the requirements of such entity’s

25 contract under subsection (b)(3), and shall un-
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•S 1770 PCS1S

1 dertake appropriate followup activities to ensure

2 that any problems identified are rectified and

3 that compliance with the requirements of sub4 section (b) and the requirements of the contract

5 under subsection (b)(3) is maintained.

6 ‘‘(B) PRIMARY CARE CASE MANAGEMENT

7 ENTITIES.—A State electing to implement a

8 primary care case management program shall

9 provide for ongoing monitoring of the pro10 gram’s compliance with the requirements of

11 subsection (c) and shall undertake appropriate

12 followup activities to ensure that any problems

13 identified are rectified and that compliance with

14 subsection (c) is maintained.

15 ‘‘(C) SERVICES.—

16 ‘‘(i) IN GENERAL.—The State shall

17 establish procedures (in addition to those

18 required under subparagraphs (A) and

19 (B)) to ensure that the services listed in

20 clause (ii) are available in a timely manner

21 to an individual enrolled with a risk con22 tracting entity or a primary care case man23 agement entity. Where necessary to ensure

24 the timely provision of such services, the

25 State shall arrange for the provision of
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1 such services by health care providers

2 other than the risk contracting entity or

3 the primary care case management entity

4 in which an individual is enrolled.

5 ‘‘(ii) SERVICES LISTED.—The services

6 listed in this clause are—

7 ‘‘(I) prenatal care;

8 ‘‘(II) immunizations;

9 ‘‘(III) lead screening and treat10 ment;

11 ‘‘(IV) prevention, diagnosis and

12 treatment of tuberculosis, sexually

13 transmitted diseases (including HIV

14 infection), and other communicable

15 diseases; and

16 ‘‘(V) such other services as the

17 Secretary may specify.

18 ‘‘(iii) REPORT.—The procedures re19 ferred to in clause (i) shall be described in

20 an annual report to the Secretary provided

21 by the State.

22 ‘‘(3) EXTERNAL INDEPENDENT REVIEW.—

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

24 paragraph (4), a State contracting with a risk

25 contracting entity under this section shall pro-
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1 vide for an annual external independent review

2 of the quality and timeliness of, and access to,

3 the items and services specified in such entity’s

4 contract with the State agency. Such review

5 shall be conducted by a utilization control and

6 peer review organization with a contract under

7 section 1153 or another organization unaffili8 ated with the State government or with any

9 risk contracting entity and approved by the

10 Secretary.

11 ‘‘(B) CONTENTS OF REVIEW.—An external

12 independent review conducted under this para13 graph shall include the following:

14 ‘‘(i) A review of the entity’s medical

15 care, through sampling of medical records

16 or other appropriate methods, for indica17 tions of quality of care and inappropriate

18 utilization (including overutilization) and

19 treatment.

20 ‘‘(ii) A review of enrollee inpatient

21 and ambulatory data, through sampling of

22 medical records or other appropriate meth23 ods, to determine trends in quality and ap24 propriateness of care.
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•S 1770 PCS1S

1 ‘‘(iii) Notification of the entity and

2 the State when the review under this para3 graph indicates inappropriate care, treat4 ment, or utilization of services (including

5 overutilization).

6 ‘‘(iv) Other activities as prescribed by

7 the Secretary or the State.

8 ‘‘(C) AVAILABILITY.—The results of each

9 external independent review conducted under

10 this paragraph shall be available to the public

11 consistent with the requirements for disclosure

12 of information contained in section 1160.

13 ‘‘(4) DEEMED COMPLIANCE WITH EXTERNAL

14 INDEPENDENT QUALITY OF CARE REVIEW REQUIRE15 MENTS.—

16 ‘‘(A) IN GENERAL.—The Secretary may

17 deem the State to have fulfilled the requirement

18 for independent external review of quality of

19 care with respect to an entity which has been

20 accredited by an organization described in sub21 paragraph (B) and approved by the Secretary.

22 ‘‘(B) ACCREDITING ORGANIZATION.—An

23 accrediting organization described in this sub24 paragraph must—
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•S 1770 PCS1S

1 ‘‘(i) exist for the primary purpose of

2 accrediting coordinated care organizations;

3 ‘‘(ii) be governed by a group of indi4 viduals representing health care providers,

5 purchasers, regulators, and consumers (a

6 minority of which shall be representatives

7 of health care providers);

8 ‘‘(iii) have substantial experience in

9 accrediting coordinated care organizations,

10 including an organization’s internal quality

11 assurance program;

12 ‘‘(iv) be independent of health care

13 providers or associations of health care

14 providers;

15 ‘‘(v) be a nonprofit organization; and

16 ‘‘(vi) have an accreditation process

17 which meets requirements specified by the

18 Secretary.

19 ‘‘(5) FEDERAL MONITORING RESPONSIBIL20 ITIES.—The Secretary shall review the external inde21 pendent reviews conducted pursuant to paragraph

22 (3) and shall monitor the effectiveness of the State’s

23 monitoring and followup activities required under

24 subparagraph (A) of paragraph (2). If the Secretary

25 determines that a State’s monitoring and followup
524

•S 1770 PCS1S

1 activities are not adequate to ensure that the re2 quirements of paragraph (2) are met, the Secretary

3 shall undertake appropriate followup activities to en4 sure that the State improves its monitoring and fol5 lowup activities.

6 ‘‘(g) PARTICIPATION OF FEDERALLY QUALIFIED

7 HEALTH CENTERS AND RURAL HEALTH CLINICS.—

8 ‘‘(1) IN GENERAL.—Each risk contracting en9 tity shall, with respect to each electing essential

10 community provider (as defined in paragraph (5))

11 located within the plan’s service area, either—

12 ‘‘(A) enter into a written provider partici13 pation agreement (described in paragraph (2))

14 with the provider, or

15 ‘‘(B) enter into a written agreement under

16 which the plan shall make payment to the pro17 vider in accordance with paragraph (3).

18 ‘‘(2) PARTICIPATION AGREEMENT.—A partici19 pation agreement between a risk contracting entity

20 and an electing essential community provider under

21 this subsection shall provide that the entity agrees to

22 treat the provider in accordance with terms and con23 ditions at least as favorable as those that are appli24 cable to other participating providers with the risk
525

•S 1770 PCS1S

1 contracting entity with respect to each of the follow2 ing:

3 ‘‘(A) The scope of services for which pay4 ment is made by the entity to the provider.

5 ‘‘(B) The rate of payment for covered care

6 and services.

7 ‘‘(C) The availability of financial incentives

8 to participating providers.

9 ‘‘(D) Limitations on financial risk provided

10 to other participating providers.

11 ‘‘(E) Assignment of enrollees to participat12 ing providers.

13 ‘‘(F) Access by the provider’s patients to

14 providers in medical specialties or subspecialties

15 participating in the plan.

16 ‘‘(3) PAYMENTS FOR PROVIDERS WITHOUT PAR17 TICIPATION AGREEMENTS.—Payment in accordance

18 with this paragraph is payment based on payment

19 methodologies and rates used under the applicable

20 Medicare payment methodology and rates (or the

21 most closely applicable methodology under such pro22 gram as the Secretary of Health and Human Serv23 ices specifies in regulations).

24 ‘‘(4) ELECTION.—
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•S 1770 PCS1S

1 ‘‘(A) IN GENERAL.—In this subsection, the

2 term ‘electing essential community provider’

3 means, with respect to a risk contracting entity,

4 an essential community provider that elects this

5 subpart to apply to the entity.

6 ‘‘(B) FORM OF ELECTION.—An election

7 under this paragraph shall be made in a form

8 and manner specified by the Secretary, and

9 shall include notice to the risk contracting en10 tity involved. Such an election may be made an11 nually with respect to an entity, except that the

12 entity and provider may agree to make such an

13 election on a more frequent basis.

14 ‘‘(5) PROVIDERS DESCRIBED.—The categories

15 of providers and organizations described in this sub16 section are as follows:

17 ‘‘(A) MIGRANT HEALTH CENTERS.—A re18 cipient or subrecipient of a grant under section

19 329 of the Public Health Service Act.

20 ‘‘(B) COMMUNITY HEALTH CENTERS.—A

21 recipient or subrecipient of a grant under sec22 tion 330 of the Public Health Service Act.

23 ‘‘(C) HOMELESS PROGRAM PROVIDERS.—A

24 recipient or subrecipient of a grant under sec25 tion 340 of the Public Health Service Act.
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•S 1770 PCS1S

1 ‘‘(D) PUBLIC HOUSING PROVIDERS.—A re2 cipient or subrecipient of a grant under section

3 340A of the Public Health Service Act.

4 ‘‘(E) FAMILY PLANNING CLINICS.—A re5 cipient or subrecipient of a grant under title X

6 of the Public Health Service Act.

7 ‘‘(F) INDIAN HEALTH PROGRAMS.—A serv8 ice unit of the Indian Health Service, a tribal

9 organization, or an urban Indian program, as

10 defined in the Indian Health Care Improvement

11 Act.

12 ‘‘(G) AIDS PROVIDERS UNDER RYAN

13 WHITE ACT.—A public or private nonprofit

14 health care provider that is a recipient or sub15 recipient of a grant under title XXIII of the

16 Public Health Service Act.

17 ‘‘(H) MATERNAL AND CHILD HEALTH PRO18 VIDERS.—A public or private nonprofit entity

19 that provides prenatal care, pediatric care, or

20 ambulatory services to children, including chil21 dren with special health care needs, and that

22 receives funding for such care or services under

23 title V of the Social Security Act.

24 ‘‘(I) FEDERALLY QUALIFIED HEALTH CEN25 TER; RURAL HEALTH CLINIC.—A Federally-
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•S 1770 PCS1S

1 qualified health center or a rural health clinic

2 (as such terms are defined in section 1861(aa)).

3 ‘‘(6) SUBRECIPIENT DEFINED.—In this sub4 section, the term ‘subrecipient’ means, with respect

5 to a recipient of a grant under a particular author6 ity, an entity that—

7 ‘‘(A) is receiving funding from such a

8 grant under a contract with the principal recipi9 ent of such a grant, and

10 ‘‘(B) meets the requirements established to

11 be a recipient of such a grant.

12 ‘‘(7) SUNSET OF REQUIREMENT.—The require13 ments of this subsection shall only apply to risk con14 tracting entities during calendar years 1995 through

15 2000.

16 ‘‘(h) TRANSACTIONS WITH PARTIES IN INTEREST.—

17 ‘‘(1) IN GENERAL.—Each risk contracting en18 tity which is not a qualified health maintenance or19 ganization (as defined in section 1310(d) of the

20 Public Health Service Act) must report to the State

21 and, upon request, to the Secretary, the Inspector

22 General of the Department of Health and Human

23 Services, and the Comptroller General of the United

24 States a description of transactions between the en25 tity and a party in interest (as defined in section
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•S 1770 PCS1S

1 1318(b) of such Act), including the following trans2 actions:

3 ‘‘(A) Any sale or exchange, or leasing of

4 any property between the entity and such a

5 party.

6 ‘‘(B) Any furnishing for consideration of

7 goods, services (including management serv8 ices), or facilities between the entity and such

9 a party, but not including salaries paid to em10 ployees for services provided in the normal

11 course of their employment.

12 ‘‘(C) Any lending of money or other exten13 sion of credit between the entity and such a

14 party.

15 The State or the Secretary may require that infor16 mation reported with respect to a risk contracting

17 entity which controls, or is controlled by, or is under

18 common control with, another entity be in the form

19 of a consolidated financial statement for the risk

20 contracting entity and such entity.

21 ‘‘(2) AVAILABILITY OF INFORMATION.—Each

22 risk contracting entity shall make the information

23 reported pursuant to paragraph (1) available to its

24 enrollees upon reasonable request.

25 ‘‘(i) REMEDIES FOR FAILURE TO COMPLY.—
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1 ‘‘(1) IN GENERAL.—If the Secretary determines

2 that a risk contracting entity or a primary care case

3 management entity—

4 ‘‘(A) fails substantially to provide services

5 required under section 1905(r), when such an

6 entity is required to do so, or provide medically

7 necessary items and services that are required

8 to be provided to an individual enrolled with

9 such an entity, if the failure has adversely af10 fected (or has substantial likelihood of adversely

11 affecting) the individual;

12 ‘‘(B) imposes premiums on individuals en13 rolled with such an entity in excess of the pre14 miums permitted under this title;

15 ‘‘(C) acts to discriminate among individ16 uals in violation of the provision of subsection

17 (b)(3)(D), including expulsion or refusal to

18 reenroll an individual or engaging in any prac19 tice that would reasonably be expected to have

20 the effect of denying or discouraging enrollment

21 (except as permitted by this section) by eligible

22 individuals with the entity whose medical condi23 tion or history indicates a need for substantial

24 future medical services;
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•S 1770 PCS1S

1 ‘‘(D) misrepresents or falsifies information

2 that is furnished—

3 ‘‘(i) to the Secretary or the State

4 under this section; or

5 ‘‘(ii) to an individual or to any other

6 entity under this section; or

7 ‘‘(E) fails to comply with the requirements

8 of section 1876(i)(8),

9 the Secretary may provide, in addition to any other

10 remedies available under law, for any of the rem11 edies described in paragraph (2).

12 ‘‘(2) ADDITIONAL REMEDIES.—The remedies

13 described in this paragraph are—

14 ‘‘(A) civil money penalties of not more

15 than $25,000 for each determination under

16 paragraph (1), or, with respect to a determina17 tion under subparagraph (C) or (D)(i) of such

18 paragraph, of not more than $100,000 for each

19 such determination, plus, with respect to a de20 termination under paragraph (1)(B), double the

21 excess amount charged in violation of such

22 paragraph (and the excess amount charged

23 shall be deducted from the penalty and returned

24 to the individual concerned), and plus, with re25 spect to a determination under paragraph
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•S 1770 PCS1S

1 (1)(C), $15,000 for each individual not enrolled

2 as a result of a practice described in such para3 graph, or

4 ‘‘(B) denial of payment to the State for

5 medical assistance furnished by a risk contract6 ing entity or a primary care case management

7 entity under this section for individuals enrolled

8 after the date the Secretary notifies the entity

9 of a determination under paragraph (1) and

10 until the Secretary is satisfied that the basis for

11 such determination has been corrected and is

12 not likely to recur.

13 The provisions of section 1128A (other than sub14 sections (a) and(b)) shall apply to a civil money pen15 alty under subparagraph (A) in the same manner as

16 such provisions apply to a penalty or proceeding

17 under section 1128A(a).

18 ‘‘(j) TERMINATION OF CONTRACT BY STATE.—Any

19 State which has a contract with a risk contracting entity

20 or a primary care case management entity may terminate

21 such contract if such entity fails to comply with the terms

22 of such contract or any applicable provision of this section.

23 ‘‘(k) FAIR HEARING.—Nothing in this section shall

24 affect the rights of an individual eligible to receive medical
533

•S 1770 PCS1S

1 assistance under the State plan to obtain a fair hearing

2 under section 1902(a)(3) or under applicable State law.

3 ‘‘(l) DISPROPORTIONATE SHARE HOSPITALS.—Noth4 ing in this section shall affect any requirement on a State

5 to comply with section 1923.

6 ‘‘(m) REFERRAL PAYMENTS.—For 1 year following

7 the date on which individuals eligible for medical assist8 ance under the State plan in a service area are required

9 to enroll with a risk contracting entity or a primary care

10 case management entity, Federally qualified health cen11 ters and rural health centers located in such service area

12 or providing care to such enrollees, shall receive a fee for

13 educating such enrollees about the availability of services

14 from the risk contracting entity or primary care case man15 agement entity with which such enrollees are enrolled.

16 ‘‘(n) SPECIAL RULES.—

17 ‘‘(1) NONAPPLICABILITY OF CERTAIN PROVI18 SIONS TO CERTAIN RISK CONTRACTING ENTITIES.—

19 In the case of any risk contracting entity which—

20 ‘‘(A)(i) is an individual physician or a phy21 sician group practice of less than 50 physicians,

22 and

23 ‘‘(ii) is not described in paragraphs (A)

24 and (B) of subsection (b)(1), and
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•S 1770 PCS1S

1 ‘‘(B) is at risk only for the health care

2 items and services directly provided by such en3 tity,

4 paragraphs (3)(K), (3)(L), (3)(O), (3)(P), and (4)

5 of subsection (b), and paragraph (3) of subsection

6 (f), shall not apply to such entity.

7 ‘‘(2) EXCEPTION FROM DEFINITION OF RISK

8 CONTRACTING ENTITY.—For purposes of this sec9 tion, the term ‘risk contracting entity’ shall not in10 clude a health insuring organization which was used

11 by a State before April 1, 1986, to administer a por12 tion of the State plan of such State on a statewide

13 basis.

14 ‘‘(3) NEW JERSEY.—The rules under section

15 1903(m)(6) as in effect on the day before the effec16 tive date of this section shall apply in the case of an

17 undertaking by the State of New Jersey (as de18 scribed in such section 1903(m)(6)).

19 ‘‘(o) CONTINUATION OF CERTAIN COORDINATED

20 CARE PROGRAMS.—The Secretary may provide for the

21 continuation of any coordinated care program operating

22 under section 1115 or 1915 without requiring compliance

23 with any provision of this section which conflicts with the

24 continuation of such program and without requiring any

25 additional waivers under such sections 1115 and 1915 if
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•S 1770 PCS1S

1 the program has been successful in assuring quality and

2 containing costs (as determining by the Secretary) and is

3 likely to continue to be successful in the future.

4 ‘‘(p) GUIDELINES, REGULATIONS, AND MODEL CON5 TRACT.—

6 ‘‘(1) GUIDELINES AND REGULATIONS ON SOL7 VENCY.—At the earliest practicable time after the

8 date of enactment of this section, the Secretary shall

9 issue guidelines and regulations concerning solvency

10 standards for risk contracting entities and sub11 contractors of such risk contracting entities. Such

12 guidelines and regulations shall take into account

13 characteristics that may differ among risk contract14 ing entities including whether such an entity is at

15 risk for inpatient hospital services.

16 ‘‘(2) GUIDELINES AND REGULATIONS ON MAR17 KETING.—At the earliest practicable time after the

18 date of enactment of this section, the Secretary shall

19 issue guidelines and regulations concerning—

20 ‘‘(A) marketing undertaken by any risk

21 contracting entity or any primary care case

22 management program to individuals eligible for

23 medical assistance under the State plan, and

24 ‘‘(B) information that must be provided by

25 States or any such entity to individuals eligible
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1 for medical assistance under the State plan

2 with respect to—

3 ‘‘(i) the options and rights of such in4 dividuals to enroll with, and disenroll from,

5 any such entity, as provided in this section,

6 and

7 ‘‘(ii) the availability of services from

8 any such entity (including a list of services

9 for which such entity is responsible or

10 must approve and information on how to

11 obtain services for which such entity is not

12 responsible).

13 In developing the guidelines and regulations under

14 this paragraph, the Secretary shall address the spe15 cial circumstances of children with special health

16 care needs (as defined in subsection (e)(1)(B)(ii))

17 and other individuals with special health care needs.

18 ‘‘(3) MODEL CONTRACT.—The Secretary shall

19 develop a model contract to reflect the requirements

20 of subsection (b)(3) and such other requirements as

21 the Secretary determines appropriate.’’.

22 (b) WAIVERS FROM REQUIREMENTS ON COORDI23 NATED CARE PROGRAMS.—Section 1915(b) (42 U.S.C.

24 1396n) is amended—
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1 (1) in the matter preceding paragraph (1), by

2 striking ‘‘as may be necessary’’ and inserting ‘‘, and

3 section 1933 as may be necessary’’;

4 (2) in paragraph (1), by striking ‘‘a primary

5 care case management system or’’;

6 (3) by striking ‘‘and’’ at the end of paragraph

7 (3);

8 (4) by striking the period at the end of para9 graph (4) and inserting ‘‘, and’’; and

10 (5) by inserting after paragraph (4) the follow11 ing new paragraph:

12 ‘‘(5) to permit a risk contracting entity (as de13 fined in section 1933(a)(3)) to restrict the period in

14 which individuals enrolled with such entity may ter15 minate such enrollment without cause in accordance

16 with section 1933(e)(3)(A).’’.

17 (c) STATE OPTION TO GUARANTEE MEDICAID ELIGI18 BILITY.—Section 1902(e)(2) (42 U.S.C. 1396a(e)(2)) is

19 amended—

20 (1) in subparagraph (A), by striking all that

21 precedes ‘‘(but for this paragraph)’’ and inserting

22 ‘‘In the case of an individual who is enrolled—

23 ‘‘(i) with a qualified health maintenance

24 organization (as defined in title XIII of the

25 Public Health Service Act) or with a risk con-
538

•S 1770 PCS1S

1 tracting entity (as defined in section

2 1933(a)(3)), or

3 ‘‘(ii) with any risk contracting entity (as

4 defined in section 1933(a)(3)) in a State that,

5 on the effective date of this provision, had in ef6 fect a waiver under section 1115 of require7 ments under this title under which the State

8 could extend eligibility for medical assistance

9 for enrollees of such entity, or

10 ‘‘(iii) with an eligible organization with a

11 contract under section 1876,

12 and who would’’,

13 (2) in subparagraph (B), by striking ‘‘organiza14 tion or’’ each place it appears, and

15 (3) by adding at the end the following new sub16 paragraph:

17 ‘‘(C) The State plan may provide, notwith18 standing any other provision of this title, that

19 an individual shall be deemed to continue to be

20 eligible for benefits under this title until the end

21 of the month following the month in which such

22 individual would (but for this paragraph) lose

23 such eligibility because of excess income and re24 sources, if the individual is enrolled with a risk

25 contracting entity or primary care case manage-
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1 ment entity (as those terms are defined in sec2 tion 1933(a)).’’.

3 (d) ENHANCED MATCH RELATED TO QUALITY

4 REVIEW.—Section 1903(a)(3)(C) (42 U.S.C.

5 1396b(a)(3)(C)) is amended—

6 (1) by striking ‘‘organization or by’’ and insert7 ing ‘‘organization, by’’; and

8 (2) by striking ‘‘section 1152, as determined by

9 the Secretary,’’ and inserting ‘‘section 1152, as de10 termined by the Secretary, or by another organiza11 tion approved by the Secretary which is unaffiliated

12 with the State government or with any risk contract13 ing entity (as defined in section 1933(a)(3)),’’.

14 (e) ACCUMULATION OF RESERVES BY CERTAIN EN15 TITIES.—Any organization referred to in section 329, 330,

16 or 340, of the Public Health Service Act which has con17 tracted with a State agency as a risk contracting entity

18 under section 1933(g)(3)(A) of the Social Security Act

19 may accumulate reserves with respect to payments made

20 to such organization under section 1933(g)(3)(C) of such

21 Act.

22 (f) CONFORMING AMENDMENTS.—

23 (1) Section 1128(b)(6)(C)(i) (42 U.S.C. 1320a–

24 7(b)(6)(C)(i)) is amended by striking ‘‘health main-
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1 tenance organization’’ and inserting ‘‘risk contract2 ing entity’’.

3 (2) Section 1902(a)(23) (42 U.S.C.

4 1396a(a)(23)) is amended by striking ‘‘primary

5 care-case management system (described in section

6 1915(b)(1)), a health maintenance organization,’’

7 and inserting ‘‘primary care case management pro8 gram (as defined in section 1933(a)(1)), a risk con9 tracting entity (as defined in section 1933(a)(3)),’’.

10 (3) Section 1902(a)(30)(C) (42 U.S.C.

11 1396a(a)(30)(C)) is amended by striking ‘‘use a uti12 lization’’ and all that follows through ‘‘with the re13 sults’’ and inserting ‘‘provide for independent review

14 and quality assurance of entities with contracts

15 under section 1933, in accordance with subsection

16 (f) of such section 1933, with the results’’.

17 (4) Section 1902(a)(57) (42 U.S.C.

18 1396a(a)(57)) is amended by striking ‘‘or health

19 maintenance organization (as defined in section

20 1903(m)(1)(A))’’ and inserting ‘‘risk contracting en21 tity, or primary care case management entity (as de22 fined in section 1933(a))’’.

23 (5) Section 1902(a) (42 U.S.C. 1396a), as

24 amended by sections 6001(a) and 6011(b), is

25 amended—
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1 (A) by striking ‘‘and’’ at the end of para2 graph (63);

3 (B) by striking the period at the end of

4 paragraph (64) and inserting ‘‘; and’’; and

5 (C) by adding at the end the following new

6 paragraphs:

7 ‘‘(65) at State option, provide for a primary

8 care case management program in accordance with

9 section 1933; and

10 ‘‘(66) at State option, provide for a program

11 under which the State contracts with risk contract12 ing entities in accordance with section 1933.’’.

13 (6) Section 1902(p)(2) (42 U.S.C. 1396a(p)(2))

14 is amended by striking ‘‘health maintenance organi15 zation (as defined in section 1903(m))’’ and insert16 ing ‘‘risk contracting entity (as defined in section

17 1933(a)(3))’’.

18 (7) Section 1902(w) (42 U.S.C. 1396a(w)) is

19 amended—

20 (A) in paragraph (1), by striking ‘‘section

21 1903(m)(1)(A)’’ and inserting ‘‘section

22 1933(a)(3)’’, and

23 (B) in paragraph (2)(E)—
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1 (i) by striking ‘‘health maintenance

2 organization’’ and inserting ‘‘risk contract3 ing entity’’, and

4 (ii) by striking ‘‘organization’’ and in5 serting ‘‘entity’’.

6 (8) Section 1903(k) (42 U.S.C. 1396b(k)) is

7 amended by striking ‘‘health maintenance organiza8 tion which meets the requirements of subsection (m)

9 of this section’’ and inserting ‘‘risk contracting en10 tity which meets the requirements of section 1933’’.

11 (9) Section 1903(w)(7)(A)(viii) (42 U.S.C.

12 1396b(w)(7)(A)(viii)) is amended by striking ‘‘health

13 maintenance organizations (and other organizations

14 with contracts under section 1903(m))’’ and insert15 ing ‘‘risk contracting entities with contracts under

16 section 1933’’.

17 (10) Section 1905(a) (42 U.S.C. 1396d(a)) is

18 amended, in the matter preceding clause (i), by in19 serting ‘‘(which may be on a prepaid capitation or

20 other risk basis)’’ after ‘‘payment’’.

21 (11) Section 1916(b)(2)(D) (42 U.S.C.

22 1396o(b)(2)(D)) is amended by striking ‘‘health

23 maintenance organization (as defined in section

24 1903(m))’’ and inserting ‘‘risk contracting entity (as

25 defined in section 1933(a)(3))’’.
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1 (12) Section 1925(b)(4)(D)(iv) (42 U.S.C.

2 1396r–6(b)(4)(D)(iv)) is amended—

3 (A) in the heading, by striking ‘‘HMO’’

4 and inserting ‘‘RISK CONTRACTING ENTITY’’,

5 (B) by striking ‘‘health maintenance orga6 nization (as defined in section 1903(m)(1)(A))’’

7 and inserting ‘‘risk contracting entity (as de8 fined in section 1933(a)(3)’’, and

9 (C) by striking ‘‘health maintenance orga10 nization in accordance with section 1903(m)’’

11 and inserting ‘‘risk contracting entity in accord12 ance with section 1933’’.

13 (13) Paragraphs (1) and (2) of section 1926(a)

14 (42 U.S.C. 1396r–7(a)) are each amended by strik15 ing ‘‘health maintenance organizations under section

16 1903(m)’’ and inserting ‘‘risk contracting entities

17 under section 1933’’.

18 (14) Section 1927(j)(1) is amended by striking

19 ‘‘ * * * Health Maintenance Organizations, includ20 ing those organizations that contract under section

21 1903(m)’’ and inserting ‘‘risk contracting entities

22 (as defined in section 1933(a)(3))’’.

23 (g) EFFECTIVE DATE.—The amendments made by

24 this section shall become effective with respect to calendar

25 quarters beginning on or after January 1, 1995.
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1 PART IV—OTHER PROVISIONS

2 SEC. 6031. PHASED-IN ELIMINATION OF MEDICAID HOS3 PITAL DISPROPORTIONATE SHARE ADJUST4 MENT PAYMENTS.

5 (a) IN GENERAL.—Section 1923 (42 U.S.C. 1396r–

6 4) is amended by adding at the end the following new sub7 section:

8 ‘‘(g) PHASED-IN ELIMINATION OF FEDERAL FINAN9 CIAL PARTICIPATION FOR DISPROPORTIONATE SHARE

10 ADJUSTMENTS.—Notwithstanding any other provisions of

11 this section, the amount of payments under section

12 1903(a) with respect to any payment adjustment made

13 under this section for hospitals in a State for quarters—

14 ‘‘(1) in fiscal year 1996, shall not exceed 80

15 percent of the amount otherwise determined under

16 subsection (f);

17 ‘‘(2) in fiscal year 1997, shall not exceed 60

18 percent of the amount otherwise determined under

19 subsection (f);

20 ‘‘(3) in fiscal year 1998, shall not exceed 40

21 percent of the amount otherwise determined under

22 subsection (f);

23 ‘‘(4) in fiscal year 1999, shall not exceed 20

24 percent of the amount otherwise determined under

25 subsection (f); and
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1 ‘‘(5) in fiscal year 2000 and each succeeding

2 fiscal year, shall not exceed the amount otherwise

3 determined under subsection (f).’’.

4 (b) IN GENERAL.—The amendments made by sub5 section (a) shall be effective on the date of the enactment

6 of this Act.

7 Subtitle B—Medicare

8 PART I—ENROLLMENT OF MEDICARE

9 BENEFICIARIES IN QUALIFIED HEALTH PLANS

10 SEC. 6101. LEGISLATIVE PROPOSAL ON ENROLLING MEDI11 CARE BENEFICIARIES IN QUALIFIED HEALTH

12 PLANS.

13 (a) IN GENERAL.—

14 (1) LEGISLATIVE PROPOSAL.—Not later than 1

15 year after the date of the enactment of this Act, the

16 Secretary shall develop and submit to Congress a

17 proposal for legislation which provides for the enroll18 ment of medicare beneficiaries in qualified health

19 plans.

20 (2) MEDICARE BENEFICIARY.—For purposes of

21 this section, the term ‘‘medicare beneficiary’’ means

22 an individual who is eligible for benefits under part

23 A of title XVIII of the Social Security Act and is en24 rolled under part B of such title.
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1 (b) CONTENTS OF THE PROPOSAL.—A proposal for

2 legislation submitted under subsection (a) shall—

3 (1) provide for an appropriate methodology by

4 which the Secretary shall make payment to qualified

5 health plans for the enrollment of medicare bene6 ficiaries;

7 (2) provide individuals the opportunity to re8 main enrolled in a qualified plan without an inter9 ruption in coverage upon becoming medicare bene10 ficiaries; and

11 (3) provide medicare beneficiaries with the op12 portunity to enroll in a qualified health plan.

13 SEC. 6102. INTERIM ENROLLMENT OF MEDICARE BENE14 FICIARIES IN QUALIFIED HEALTH PLANS.

15 (a) INTERIM ENROLLMENT OF MEDICARE BENE16 FICIARIES IN QUALIFIED HEALTH PLANS.—

17 (1) IN GENERAL.—Notwithstanding title XVIII

18 of the Social Security Act, the Secretary shall pro19 vide for a monthly payment as provided under sub20 section (b)(1) to a qualified health plan on behalf of

21 enrolled medicare beneficiaries.

22 (2) MEDICARE BENEFICIARY.—For purposes of

23 this section, the term ‘‘medicare beneficiary’’ means

24 an individual who is eligible for benefits under part
547

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1 A of title XVIII of the Social Security Act and is en2 rolled under part B of such title.

3 (b) PAYMENT SPECIFIED.—

4 (1) FEDERAL PAYMENT.—

5 (A) IN GENERAL.—The amount of pay6 ment specified in this paragraph for an individ7 ual who is enrolled in a qualified health plan is

8 the lesser of—

9 (i) the applicable rate specified in sec10 tion 1876(a)(1)(C) of the Social Security

11 Act (but at 100 percent, rather than 95

12 percent, of the applicable amount); or

13 (ii) the monthly premium charged the

14 individual for coverage under the qualified

15 health plan.

16 (B) SOURCE OF PAYMENT.—The payment

17 to a qualified health plan under this paragraph

18 for individuals entitled to benefits under part A

19 and enrolled under part B of title XVIII of the

20 Social Security Act shall be made from the

21 Federal Hospital Insurance Trust Fund and

22 the Federal Supplementary Medical Insurance

23 Trust Fund, with the allocation to be deter24 mined by the Secretary.
548

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1 (2) INDIVIDUAL’S SHARE.—If the monthly pre2 mium for the qualified health plan in which the indi3 vidual is enrolled is greater than the amount speci4 fied under paragraph (1)(A)(i), the individual shall

5 be responsible for paying to the qualified health plan

6 the difference between the monthly premium charged

7 the individual for coverage under the qualified health

8 plan and the amount specified in paragraph

9 (1)(A)(i).

10 (c) PAYMENTS UNDER THIS SECTION AS SOLE MEDI11 CARE BENEFITS.—Payments made under this section

12 shall be instead of the amounts that would otherwise be

13 payable, pursuant to sections 1814(b) and 1833(a) of the

14 Social Security Act, for services furnished to medicare

15 beneficiaries.

16 PART II—ENHANCEMENT OF MEDICARE RISK

17 CONTRACTS

18 SEC. 6111. REVISIONS IN THE PAYMENT METHODOLOGY

19 FOR RISK CONTRACTORS.

20 Section 4204(b) of the Omnibus Budget Reconcili21 ation Act of 1990 is amended to read as follows:

22 ‘‘(b) REVISIONS IN THE PAYMENT METHODOLOGY

23 FOR RISK CONTRACTORS.—(1)(A) Not later than 1 year

24 after the date of the enactment of the Health Equity and

25 Access Reform Today Act of 1993, the Secretary of
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1 Health and Human Services (in this subsection referred

2 to as the ‘Secretary’) shall submit a proposal to the Con3 gress that provides for revisions to the payment method

4 to be applied in years beginning with 1996 for organiza5 tions with a risk-sharing contract under section 1876(g)

6 of the Social Security Act.

7 ‘‘(B) In proposing the revisions required under sub8 paragraph (A), the Secretary shall consider—

9 ‘‘(i) the difference in costs associated with med10 icare beneficiaries with differing health status and

11 demographic characteristics;

12 ‘‘(ii) the difference in costs associated with

13 medicare beneficiaries who receive health benefits

14 from a primary payer other than medicare; and

15 ‘‘(iii) the effects of using alternative geographic

16 classifications on the determinations of costs associ17 ated with beneficiaries residing in different areas.

18 ‘‘(2) Not later than 3 months after the date of sub19 mittal of the proposal under paragraph (1), the Physician

20 Payment Review Commission and the Prospective Pay21 ment Assessment Commission shall review the proposal

22 and shall report to Congress on the appropriateness of the

23 proposed modifications.’’.
550

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1 SEC. 6112. ADJUSTMENT IN MEDICARE CAPITATION PAY2 MENTS TO TAKE INTO ACCOUNT SECONDARY

3 PAYER STATUS.

4 (a) IN GENERAL.—In defining the classes to be used

5 in determining the annual per capita rate of payment

6 under section 1876(a)(1)(B) of the Social Security Act to

7 an eligible organization with a risk-sharing contract under

8 such section (for months beginning after June 1994), the

9 Secretary shall treat as a separate class individuals enti10 tled to benefits under title XVIII of such Act with respect

11 to whom there is a group health plan that is a primary

12 plan (within the meaning of section 1862(b)(2)(A) of such

13 Act).

14 (b) DEADLINE FOR ANNOUNCEMENT OF RATES.—

15 Not later than May 15, 1994, the Secretary shall an16 nounce annual per capita rates of payment for eligible or17 ganizations described in subsection (a) that take into ac18 count the separate treatment of individuals with respect

19 to whom there is a group health plan that is a primary

20 plan.

21 SEC. 6113. ESTABLISHMENT OF OUTLIER POOL.

22 (a) GENERAL RULE.—Section 1876(a)(1) (42 U.S.C.

23 1395mm(a)(1)) is amended by adding at the end the fol24 lowing new subparagraph:

25 ‘‘(G)(i) In the case of an eligible organization with

26 a risk-sharing contract, the Secretary may make addi-
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•S 1770 PCS1S

1 tional payments to the organization equal to not more

2 than 50 percent of reasonable cost above the threshold

3 amount of items and services covered under parts A and

4 B and provided (or paid for) in a year by the organization

5 to any individual enrolled with the organization under this

6 section.

7 ‘‘(ii) For purposes of clause (i), the ‘threshold

8 amount’ is an amount determined by the Secretary from

9 time to time, adjusted by the geographic factor utilized

10 in determining payments to the organization under sub11 paragraph (C) and rounded to the nearest multiple of

12 $100, such that the total amount to be paid under this

13 subparagraph for a year is estimated to be 5 percent or

14 less of the total amount to be paid under risk-sharing con15 tracts for services furnished for that year.

16 ‘‘(iii) An eligible organization shall submit a claim for

17 additional payments under subsection (i) within such time

18 as the Secretary may specify.’’.

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

20 subsection (a) applies to services furnished after 1994.

21 PART III—MEDICARE SELECT

22 SEC. 6121. MEDICARE SELECT.

23 (a) AMENDMENTS TO PROVISIONS RELATING TO

24 MEDICARE SELECT POLICIES.—
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1 (1) PERMITTING MEDICARE SELECT POLICIES

2 IN ALL STATES.—Subsection (c) of section 4358 of

3 the Omnibus Budget Reconciliation Act of 1990 is

4 hereby repealed.

5 (2) REQUIREMENTS OF MEDICARE SELECT

6 POLICIES.—Section 1882(t)(1) (42 U.S.C.

7 1395ss(t)(1)) is amended to read as follows:

8 ‘‘(1)(A) If a medicare supplemental policy meets the

9 requirements of the 1991 NAIC Model Regulation or 1991

10 Federal Regulation and otherwise complies with the re11 quirements of this section except that—

12 ‘‘(i) the benefits under such policy are re13 stricted to items and services furnished by certain

14 entities (or reduced benefits are provided when items

15 or services are furnished by other entities), and

16 ‘‘(ii) in the case of a policy described in sub17 paragraph (C)(i)—

18 ‘‘(I) the benefits under such policy are not

19 one of the groups or packages of benefits de20 scribed in subsection (p)(2)(A),

21 ‘‘(II) except for nominal copayments im22 posed for services covered under part B of this

23 title, such benefits include at least the core

24 group of basic benefits described in subsection

25 (p)(2)(B), and
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1 ‘‘(III) an enrollee’s liability under such pol2 icy for physician’s services covered under part

3 B of this title is limited to the nominal

4 copayments described in subclause (II),

5 the policy shall nevertheless be treated as meeting

6 those requirements if the policy meets the require7 ments of subparagraph (B).

8 ‘‘(B) A policy meets the requirements of this sub9 paragraph if—

10 ‘‘(i) full benefits are provided for items and

11 services furnished through a network of entities

12 which have entered into contracts or agreements

13 with the issuer of the policy,

14 ‘‘(ii) full benefits are provided for items and

15 services furnished by other entities if the services are

16 medically necessary and immediately required be17 cause of an unforeseen illness, injury, or condition

18 and it is not reasonable given the circumstances to

19 obtain the services through the network,

20 ‘‘(iii) the network offers sufficient access,

21 ‘‘(iv) the issuer of the policy has arrangements

22 for an ongoing quality assurance program for items

23 and services furnished through the network,
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1 ‘‘(v)(I) the issuer of the policy provides to each

2 enrollee at the time of enrollment an explanation

3 of—

4 ‘‘(aa) the restrictions on payment under

5 the policy for services furnished other than by

6 or through the network,

7 ‘‘(bb) out of area coverage under the pol8 icy,

9 ‘‘(cc) the policy’s coverage of emergency

10 services and urgently needed care, and

11 ‘‘(dd) the availability of a policy through

12 the entity that meets the 1991 Model NAIC

13 Regulation or 1991 Federal Regulation without

14 regard to this subsection and the premium

15 charged for such policy, and

16 ‘‘(II) each enrollee prior to enrollment acknowl17 edges receipt of the explanation provided under

18 subclause (I), and

19 ‘‘(vi) the issuer of the policy makes available to

20 individuals, in addition to the policy described in this

21 subsection, any policy (otherwise offered by the is22 suer to individuals in the State) that meets the 1991

23 Model NAIC Regulation or 1991 Federal Regulation

24 and other requirements of this section without re25 gard to this subsection.
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1 ‘‘(C)(i) A policy described in this subparagraph—

2 ‘‘(I) is offered by an eligible organization (as

3 defined in section 1876(b)),

4 ‘‘(II) is not a policy or plan providing benefits

5 pursuant to a contract under section 1876 or an ap6 proved demonstration project described in section

7 603(c) of the Social Security Amendments of 1983,

8 section 2355 of the Deficit Reduction Act of 1984,

9 or section 9412(b) of the Omnibus Budget Reconcili10 ation Act of 1986, and

11 ‘‘(III) provides benefits which, when combined

12 with benefits which are available under this title, are

13 substantially similar to benefits under policies of14 fered to individuals who are not entitled to benefits

15 under this title.

16 ‘‘(ii) In making a determination under subclause (III)

17 of clause (i) as to whether certain benefits are substan18 tially similar, there shall not be taken into account, except

19 in the case of preventive services, benefits provided under

20 policies offered to individuals who are not entitled to bene21 fits under this title which are in addition to the benefits

22 covered by this title and which are benefits an entity must

23 provide in order to meet the definition of an eligible orga24 nization under section 1876(b)(1).’’.
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1 (b) RENEWABILITY OF MEDICARE SELECT POLI2 CIES.—Section 1882(q)(1) (42 U.S.C. 1395ss(q)(1)) is

3 amended—

4 (1) by striking ‘‘(1) Each’’ and inserting

5 ‘‘(1)(A) Except as provided in subparagraph (B),

6 each’’;

7 (2) by redesignating subparagraphs (A) and

8 (B) as clauses (i) and (ii), respectively; and

9 (3) by adding at the end the following new sub10 paragraph:

11 ‘‘(B)(i) In the case of a policy that meets the

12 requirements of subsection (t), an issuer may cancel

13 or nonrenew such policy with respect to an individ14 ual who leaves the service area of such policy; except

15 that, if such individual moves to a geographic area

16 where such issuer, or where an affiliate of such is17 suer, is issuing medicare supplemental policies, such

18 individual must be permitted to enroll in any medi19 care supplemental policy offered by such issuer or

20 affiliate that provides benefits comparable to or less

21 than the benefits provided in the policy being can22 celed or nonrenewed. An individual whose coverage

23 is canceled or nonrenewed under this subparagraph

24 shall, as part of the notice of termination or

25 nonrenewal, be notified of the right to enroll in other
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1 medicare supplemental policies offered by the issuer

2 or its affiliates.

3 ‘‘(ii) For purposes of this subparagraph, the

4 term ‘affiliate’ shall have the meaning given such

5 term by the 1991 NAIC Model Regulation.’’.

6 (c) CIVIL PENALTY.—Section 1882(t)(2) (42 U.S.C.

7 1395ss(t)(2)) is amended—

8 (1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;

9 (2) by redesignating subparagraphs (A), (B),

10 (C), and (D) as clauses (i), (ii), (iii), and (iv), re11 spectively;

12 (3) in clause (iv), as redesignated—

13 (A) by striking ‘‘paragraph (1)(E)(i)’’ and

14 inserting ‘‘paragraph (1)(B)(v)(I); and

15 (B) by striking ‘‘paragraph (1)(E)(ii)’’ and

16 inserting ‘‘paragraph (1)(B)(v)(II)’’;

17 (4) by striking ‘‘the previous sentence’’ and in18 serting ‘‘this subparagraph’’; and

19 (5) by adding at the end the following new sub20 paragraph:

21 ‘‘(B) If the Secretary determines that an issuer of

22 a policy approved under paragraph (1) has made a mis23 representation to the Secretary or has provided the Sec24 retary with false information regarding such policy, the

25 issuer is subject to a civil money penalty in an amount
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1 not to exceed $100,000 for each such determination. The

2 provisions of section 1128A (other than the first sentence

3 of subsection (a) and other than subsection (b)) shall

4 apply to a civil money penalty under this subparagraph

5 in the same manner as such provisions apply to a penalty

6 or proceeding under section 1128A(a).’’.

7 (d) EFFECTIVE DATES.—

8 (1) NAIC STANDARDS.—If, within 6 months

9 after the date of the enactment of this Act, the Na10 tional Association of Insurance Commissioners

11 (hereafter in this subsection referred to as the

12 ‘‘NAIC’’) makes changes in the 1991 NAIC Model

13 Regulation (as defined in section 1882(p)(1)(A) of

14 the Social Security Act) to incorporate the additional

15 requirements imposed by the amendments made by

16 this section, section 1882(g)(2)(A) of such Act shall

17 be applied in each State, effective for policies issued

18 to policyholders on and after the date specified in

19 paragraph (3), as if the reference to the Model Reg20 ulation adopted on June 6, 1979, were a reference

21 to the 1991 NAIC Model Regulation (as so defined)

22 as changed under this paragraph (such changed

23 Regulation referred to in this subsection as the

24 ‘‘1994 NAIC Model Regulation’’).
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1 (2) SECRETARY STANDARDS.—If the NAIC

2 does not make changes in the 1991 NAIC Model

3 Regulation (as so defined) within the 6-month period

4 specified in paragraph (1), the Secretary of Health

5 and Human Services (hereafter in this subsection re6 ferred to as the ‘‘Secretary’’) shall promulgate a reg7 ulation and section 1882(g)(2)(A) of the Social Se8 curity Act shall be applied in each State, effective

9 for policies issued to policyholders on and after the

10 date specified in paragraph (3), as if the reference

11 to the Model Regulation adopted on June 6, 1979,

12 were a reference to the 1991 NAIC Model Regula13 tion (as so defined) as changed by the Secretary

14 under this paragraph (such changed Regulation re15 ferred to in this subsection as the ‘‘1994 Federal

16 Regulation’’).

17 (3) DATE SPECIFIED.—

18 (A) IN GENERAL.—Subject to subpara19 graph (B), the date specified in this paragraph

20 for a State is the earlier of—

21 (i) the date the State adopts the 1994

22 NAIC Model Regulation or the 1994 Fed23 eral Regulation, or

24 (ii) 1 year after the date the NAIC or

25 the Secretary first adopts such regulations.
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1 (B) ADDITIONAL LEGISLATIVE ACTION RE2 QUIRED.—In the case of a State which the Sec3 retary identifies, in consultation with the NAIC,

4 as—

5 (i) requiring State legislation (other

6 than legislation appropriating funds) in

7 order for medicare supplemental policies to

8 meet the 1994 NAIC Model Regulation or

9 the 1994 Federal Regulation, but

10 (ii) having a legislature which is not

11 scheduled to meet in 1995 in a legislative

12 session in which such legislation may be

13 considered,

14 the date specified in this paragraph is the first

15 day of the first calendar quarter beginning after

16 the close of the first legislative session of the

17 State legislature that begins on or after Janu18 ary 1, 1995. For purposes of the previous sen19 tence, in the case of a State that has a 2-year

20 legislative session, each year of such session

21 shall be deemed to be a separate regular session

22 of the State legislature.

23 PART IV—OTHER PROVISIONS

24 SEC. 6131. MEDICARE PART B PREMIUM.

25 Section 1839(e) (42 U.S.C. 1395r(e)) is amended—
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1 (1) in paragraph (1)(A)—

2 (A) by striking ‘‘(A)’’; and

3 (B) by striking ‘‘and prior to January

4 1999’’;

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

6 inserting ‘‘(2)’’; and

7 (3) by striking paragraph (2).

8 SEC. 6132. INCREASE IN MEDICARE PART B PREMIUM FOR

9 INDIVIDUALS WITH HIGH INCOME.

10 (a) IN GENERAL.—Subchapter A of chapter 1 of the

11 Internal Revenue Code of 1986 is amended by adding at

12 the end the following new part:

13 ‘‘PART VIII—MEDICARE PART B PREMIUMS FOR

14 HIGH-INCOME INDIVIDUALS

‘‘Sec. 59B. Medicare part B premium tax.

15 ‘‘SEC. 59B. MEDICARE PART B PREMIUM TAX.

16 ‘‘(a) IMPOSITION OF RECAPTURE AMOUNT.—In the

17 case of an individual, if the modified adjusted gross in18 come of the taxpayer for the taxable year exceeds the

19 threshold amount, such taxpayer shall pay (in addition to

20 any other amount imposed by this subtitle) a recapture

21 amount for such taxable year equal to the sum of the ag22 gregate of the medicare part B recapture amounts (if any)

23 for months during such year that a premium is paid under
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1 part B of title XVIII of the Social Security Act for the

2 coverage of the individual under such part.

3 ‘‘(b) MEDICARE PART B PREMIUM RECAPTURE

4 AMOUNT FOR MONTH.—For purposes of this section, the

5 medicare part B premium recapture amount for any

6 month is the amount equal to the excess of—

7 ‘‘(1) 150 percent of the monthly actuarial rate

8 for enrollees age 65 and over determined for that

9 calendar year under section 1839(b) of the Social

10 Security Act, over

11 ‘‘(2) the total monthly premium under section

12 1839 of the Social Security Act (determined without

13 regard to subsections (b) and (f) of section 1839 of

14 such Act).

15 ‘‘(c) PHASE-IN OF RECAPTURE AMOUNT.—If the

16 modified adjusted gross income of the taxpayer for any

17 taxable year exceeds the threshold amount by less than

18 $10,000, the recapture amount imposed by this section for

19 such taxable year shall be an amount which bears the

20 same ratio to the recapture amount which would (but for

21 this subsection) be imposed by this section for such tax22 able year as such excess bears to $10,000.

23 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

24 For purposes of this section—
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1 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh2 old amount’ means—

3 ‘‘(A) except as otherwise provided in this

4 paragraph, $90,000,

5 ‘‘(B) $115,000 in the case of a joint re6 turn, and

7 ‘‘(C) zero in the case of a taxpayer who—

8 ‘‘(i) is married (as determined under

9 section 7703) but does not file a joint re10 turn for such year, and

11 ‘‘(ii) does not live apart from his

12 spouse at all times during the taxable year.

13 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

14 The term ‘modified adjusted gross income’ means

15 adjusted gross income—

16 ‘‘(A) determined without regard to sections

17 135, 911, 931, and 933, and

18 ‘‘(B) increased by the amount of interest

19 received or accrued by the taxpayer during the

20 taxable year which is exempt from tax.

21 ‘‘(3) JOINT RETURNS.—In the case of a joint

22 return—

23 ‘‘(A) the recapture amount under sub24 section (a) shall be the sum of the recapture
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1 amounts determined separately for each spouse,

2 and

3 ‘‘(B) subsections (a) and (c) shall be ap4 plied by taking into account the combined modi5 fied adjusted gross income of the spouses.

6 ‘‘(4) COORDINATION WITH OTHER PROVI7 SIONS.—

8 ‘‘(A) TREATED AS TAX FOR SUBTITLE F.—

9 For purposes of subtitle F, the recapture

10 amount imposed by this section shall be treated

11 as if it were a tax imposed by section 1.

12 ‘‘(B) NOT TREATED AS TAX FOR CERTAIN

13 PURPOSES.—The recapture amount imposed by

14 this section shall not be treated as a tax im15 posed by this chapter for purposes of determin16 ing—

17 ‘‘(i) the amount of any credit allow18 able under this chapter, or

19 ‘‘(ii) the amount of the minimum tax

20 under section 55.’’.

21 (b) TRANSFERS TO SUPPLEMENTAL MEDICAL IN22 SURANCE TRUST FUND.—

23 (1) IN GENERAL.—There are hereby appro24 priated to the Supplemental Medical Insurance

25 Trust Fund amounts equivalent to the aggregate in-
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1 crease in liabilities under chapter 1 of the Internal

2 Revenue Code of 1986 that are attributable to the

3 application of section 59B(a) of such Code, as added

4 by this section.

5 (2) TRANSFERS.—The amounts appropriated

6 by paragraph (1) to the Supplemental Medical In7 surance Trust Fund shall be transferred from time

8 to time (but not less frequently than quarterly) from

9 the general fund of the Treasury on the basis of es10 timates made by the Secretary of the Treasury of

11 the amounts referred to in paragraph (1). Any quar12 terly payment shall be made on the first day of such

13 quarter and shall take into account the recapture

14 amounts referred to in such section 59B(a) for such

15 quarter. Proper adjustments shall be made in the

16 amounts subsequently transferred to the extent prior

17 estimates were in excess of or less than the amounts

18 required to be transferred.

19 (c) REPORTING REQUIREMENTS.—

20 (1)(A) Paragraph (1) of section 6050F(a) of

21 the Internal Revenue Code of 1986 (relating to re22 turns relating to social security benefits) is amended

23 by striking ‘‘and’’ at the end of subparagraph (B)

24 and by inserting after subparagraph (C) the follow25 ing new subparagraph:
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1 ‘‘(D) the number of months during the cal2 endar year for which a premium was paid under

3 part B of title XVIII of the Social Security Act

4 for the coverage of such individual under such

5 part, and’’.

6 (B) Paragraph (2) of section 6050F(b) of such

7 Code is amended to read as follows:

8 ‘‘(2) the information required to be shown on

9 such return with respect to such individual.’’.

10 (C) Subparagraph (A) of section 6050(c)(1) of

11 such Code is amended by inserting before the

12 comma ‘‘and in the case of the information specified

13 in subsection (a)(1)(D)’’.

14 (D) The heading for section 6050F of such

15 Code is amended by inserting ‘‘AND MEDICARE

16 PART B COVERAGE’’ before the period.

17 (E) The item relating to section 6050F in the

18 table of sections for subpart B of part III of sub19 chapter A of chapter 61 of such Code is amended by

20 inserting ‘‘and medicare part B coverage’’ before the

21 period.

22 (d) WAIVER OF ESTIMATED TAX PENALTIES FOR

23 1996.—No addition to tax shall be imposed under section

24 6654 of the Internal Revenue Code of 1986 (relating to

25 failure to pay estimated income tax) for any period before
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1 April 16, 1997, with respect to any underpayment to the

2 extent that such underpayment resulted from section

3 59B(a) of the Internal Revenue Code of 1986, as added

4 by this section.

5 (e) CLERICAL AMENDMENT.—The table of parts for

6 subchapter A of chapter 1 of such Code is amended by

7 adding at the end thereof the following new item:

‘‘Part VIII. Medicare Part B Premiums for High-Income Individuals.’’.

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

9 this section shall apply to periods after December 31,

10 1994, in taxable years ending after such date.

11 SEC. 6133. PERMANENT 10-PERCENT REDUCTION IN PAY12 MENTS FOR CAPITAL-RELATED COSTS OF

13 OUTPATIENT HOSPITAL SERVICES.

14 Section 1861(v)(1)(S)(ii)(I) (42 U.S.C.

15 1395x(v)(1)(S)(ii)(I)) is amended by striking ‘‘fiscal years

16 1992 through 1998’’ and inserting ‘‘fiscal year 1992, and

17 each subsequent fiscal year,’’.

18 SEC. 6134. PERMANENT REDUCTION IN PAYMENTS FOR

19 OTHER COSTS OF OUTPATIENT HOSPITAL

20 SERVICES.

21 Section 1861(v)(1)(S)(ii)(II) (42 U.S.C.

22 1395x(v)(1)(S)(ii)(II)) is amended by striking ‘‘fiscal

23 years 1991 through 1998’’ and inserting ‘‘fiscal year

24 1991, and each subsequent fiscal year’’.
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1 SEC. 6135. IMPOSITION OF COINSURANCE ON LABORATORY

2 SERVICES.

3 (a) IN GENERAL.—Paragraphs (1)(D) and (2)(D) of

4 section 1833(a) (42 U.S.C. 1395l(a)) are each amended—

5 (1) by striking ‘‘(or 100 percent’’ and all that

6 follows through ‘‘the first opinion))’’; and

7 (2) by striking ‘‘100 percent of such negotiated

8 rate’’ and inserting ‘‘80 percent of such negotiated

9 rate’’.

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

11 subsection (a) shall apply to tests furnished on or after

12 January 1, 1995.

13 SEC. 6136. IMPOSITION OF COPAYMENT FOR CERTAIN

14 HOME HEALTH VISITS.

15 (a) IN GENERAL.—

16 (1) PART A.—Section 1813(a) (42 U.S.C.

17 1395e(a)) is amended by adding at the end the fol18 lowing new paragraph:

19 ‘‘(5) The amount payable for home health services

20 furnished to an individual under this part shall be reduced

21 by a copayment amount equal to 20 percent of the average

22 of all per visit costs for home health services furnished

23 under this title determined under section 1861(v)(1)(L)

24 (as determined by the Secretary on a prospective basis for

25 services furnished during a calendar year), unless such

26 services were furnished to the individual during the 30-
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1 day period that begins on the date the individual is dis2 charged as an inpatient from a hospital.’’.

3 (2) PART B.—Section 1833(a)(2) (42 U.S.C.

4 1395l(a)(2)) is amended—

5 (A) in subparagraph (A), by striking ‘‘to

6 home health services,’’ and by striking the

7 comma after ‘‘opinion)’’;

8 (B) in subparagraph (D), by striking

9 ‘‘and’’ at the end;

10 (C) in subparagraph (E), by striking the

11 semicolon at the end and inserting ‘‘; and’’; and

12 (D) by adding at the end the following new

13 subparagraph:

14 ‘‘(F) with respect to home health serv15 ices—

16 ‘‘(i) the lesser of—

17 ‘‘(I) the reasonable cost of such

18 services, as determined under section

19 1861(v), or

20 ‘‘(II) the customary charges with

21 respect to such services,

22 less the amount a provider may charge as

23 described in clause (ii) of section

24 1866(a)(2)(A),
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1 ‘‘(ii) if such services are furnished by

2 a public provider of services, or by another

3 provider which demonstrates to the satis4 faction of the Secretary that a significant

5 portion of its patients are low-income (and

6 requests that payment be made under this

7 clause), free of charge or at nominal

8 charges to the public, the amount deter9 mined in accordance with section

10 1814(b)(2), or

11 ‘‘(iii) if (and for so long as) the condi12 tions described in section 1814(b)(3) are

13 met, the amounts determined under the re14 imbursement system described in such sec15 tion,

16 less a copayment amount equal to 20 percent of

17 the average of all per visit costs for home

18 health services furnished under this title deter19 mined under section 1861(v)(1)(L) (as deter20 mined by the Secretary on a prospective basis

21 for services furnished during a calendar year),

22 unless such services were furnished to the indi23 vidual during the 30-day period that begins on

24 the date the individual is discharged as an inpa25 tient from a hospital;’’.
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1 (3) PROVIDER CHARGES.—Section

2 1866(a)(2)(A)(i) (42 U.S.C. 1395cc(a)(2)(A)(i)) is

3 amended—

4 (A) by striking ‘‘deduction or coinsurance’’

5 and inserting, ‘‘deduction, coinsurance, or

6 copayment’’; and

7 (B) by striking ‘‘or (a)(4)’’ and inserting

8 ‘‘(a)(4), or (a)(5)’’.

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

10 subsection (a) shall apply to home health services fur11 nished on or after January 1, 1995.

12 SEC. 6137. PHASED-IN ELIMINATION OF MEDICARE HOS13 PITAL DISPROPORTIONATE SHARE ADJUST14 MENT PAYMENTS.

15 Section 1886(d)(5)(F) of the Social Security Act (42

16 U.S.C. 1395ww(d)(5)(F)) is amended—

17 (1) in clause (ii), by striking ‘‘The amount of

18 such payment’’ and inserting ‘‘Subject to clause (ix),

19 the amount of such payment’’; and

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

21 clause:

22 ‘‘(ix) The amount of the additional payment made

23 under this paragraph for a discharge shall be equal to—
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1 ‘‘(I) for discharges occurring during fiscal year

2 1996, 80 percent of the amount otherwise deter3 mined for the discharge under clause (ii);

4 ‘‘(II) for discharges occurring during fiscal year

5 1997, 60 percent of the amount otherwise deter6 mined for the discharge under clause (ii);

7 ‘‘(III) for discharges occurring during fiscal

8 year 1998, 40 percent of the amount otherwise de9 termined for the discharge under clause (ii);

10 ‘‘(IV) for discharges occurring during fiscal

11 year 1999, 20 percent of the amount otherwise de12 termined for the discharge under clause (ii); and

13 ‘‘(V) for discharges occurring during fiscal year

14 2000, and each subsequent fiscal year, 0 percent of

15 the amount otherwise determined for the discharge

16 under clause (ii).’’.

17 SEC. 6138. ELIMINATION OF BAD DEBT RECOGNITION FOR

18 HOSPITAL SERVICES.

19 (a) IN GENERAL.—Effective October 1, 1995, in

20 making any payment to hospitals under title XVIII of the

21 Social Security Act, the Secretary shall discontinue pay22 ments under title XVIII of such Act to providers of service

23 for reasonable costs relating to unrecovered costs associ24 ated with unpaid deductible and coinsurance amounts in25 curred under such title.
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1 (b) CONFORMING AMENDMENTS.—

2 (1) IN GENERAL.—(A) Subsection (c) of section

3 4008 of the Omnibus Budget Reconciliation Act of

4 1987 is repealed.

5 (B) Section 1833 (42 U.S.C. 1395l) is amend6 ed—

7 (i) in subsection (l)(5), by striking sub8 paragraph (C); and

9 (ii) in subsection (r), by striking paragraph

10 (4).

11 (2) EFFECTIVE DATE.—The amendments made

12 by paragraph (1) shall take effect on October 1,

13 1995.

14 SEC. 6139. MEDICARE AS SECONDARY PAYER.

15 (a) PERMANENT EXTENSION OF DATA MATCH PRO16 GRAM.—

17 (1) IN GENERAL.—Section 1862(b)(5)(C) (42

18 U.S.C. 1395y(b)(5)(C)) is amended by striking

19 clause (iii).

20 (2) PERMANENT EXTENSION OF CERTAIN TAX21 PAYER IDENTITY INFORMATION DISCLOSURE RE22 QUIREMENTS.—Section 6103(l)(12) of the Internal

23 Revenue Code of 1986 is amended by striking sub24 paragraph (F).
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1 (b) PERMANENT EXTENSION OF MEDICARE SECOND2 ARY PAYER TO DISABLED BENEFICIARIES.—Section

3 1862(b)(1)(B)(iii) (42 U.S.C. 1395y(b)(1)(B)(iii)), is

4 amended—

5 (1) in the heading, by striking ‘‘SUNSET’’ and

6 inserting ‘‘EFFECTIVE DATE’’; and

7 (2) by striking ‘‘, and October 1, 1998’’.

8 (c) PERMANENT EXTENSION OF 18-MONTH RULE

9 FOR ESRD BENEFICIARIES.—The second sentence of sec10 tion 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amend11 ed by striking ‘‘and on or before October 1, 1998,’’.

12 TITLE VII—PATIENT’S RIGHT TO

13 SELF-DETERMINATION RE14 GARDING HEALTH CARE

15 SEC. 7001. TREATMENT OF ADVANCE DIRECTIVES.

16 (a) IN GENERAL.—An advance directive that fails to

17 meet the formalities of execution, form, or language re18 quired by State law shall be given effect to the extent that

19 the treating health care provider in good faith believes that

20 such directive constitutes a reliable expression of the wish21 es of the individual executing such directive concerning

22 such individual’s health care.

23 (b) CONSTRUCTION.—Nothing in subsection (a) may

24 be construed to authorize the administration, withholding,
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1 or withdrawal of health care otherwise prohibited by the

2 laws of the State.

3 SEC. 7002. EFFECT ON OTHER LAWS.

4 Written policies and written information adopted by

5 health care providers pursuant to sections 4206 and 4751

6 of the Omnibus Budget Reconciliation Act of 1990 (Public

7 Law 101–508), shall be modified within 6 months of en8 actment of this title to conform to the provisions of this

9 title.

10 SEC. 7003. INFORMATION PROVIDED TO CERTAIN INDIVID11 UALS.

12 The Secretary shall provide on a periodic basis writ13 ten information regarding an individual’s right to consent

14 to, or to decline, medical treatment as provided in this

15 title to individual’s who are beneficiaries under titles II,

16 XVI, XVIII, and XIX of the Social Security Act.

17 SEC. 7004. RECOMMENDATIONS TO THE CONGRESS ON IS18 SUES RELATING TO A PATIENT’S RIGHT OF

19 SELF-DETERMINATION.

20 Not later than 180 days after the date of the enact21 ment of this Act the Secretary shall study the implementa22 tion of sections 4206 and 4751 of the Omnibus Budget

23 Reconciliation Act of 1990 (Public Law 101–508) and

24 provide recommendations to the Congress concerning the

25 results of the study and the medical, legal, ethical, social,
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1 and educational issues related to provisions of this title.

2 In developing recommendations under this section the Sec3 retary shall address the following issues:

4 (1) Issues pertaining to the education of the

5 public regarding their rights to execute advance di6 rectives.

7 (2) Issues pertaining to the education and

8 training of health care professionals concerning pa9 tients’ self-determination rights.

10 (3) Issues pertaining to health care profes11 sionals’ duties with respect to patients’ rights, and

12 health care professionals’ roles in identifying, assess13 ing, and presenting for patient consideration medi14 cally indicated treatment options.

15 (4) Such other issues as the Secretary may

16 identify.

17 SEC. 7005. EFFECTIVE DATE.

18 This title shall take effect on the date that is 6

19 months after the date of enactment of this Act.

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